WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa - WorldReginfo Annual Review 2015

Nestlé – Annual Review 2015 Our business

Nestlé has grown from a company founded 150 years ago to a global leader in Nutrition, Health and Wellness.

Wherever you are in What we sell (in CHF billion) the world we have safe, nutritious products to Powdered and Nutrition and Milk products Prepared dishes Liquid Beverages Health Science and Ice cream and cooking aids help you care for yourself and your family. Our product portfolio has seven categories, offering you 19.2 14.9 14.6 12.6 healthier and tastier choices at every stage of your life, at every time of the day. PetCare Confectionery Water

11.5 8.9 7.1

Our growth has enabled Where we sell (in CHF billion) us to help improve the lives of millions of people through the products EMENA and services we provide, 27.5 and through employment, our supplier networks and the contribution we make to economies around the world.

AMS AOA 39.1 22.2

Number of employees Number of countries we sell in 335 000 189

Total group salaries and social Corporate taxes paid in 2015 welfare expenses (in CHF) (in CHF) 16 billion 3.3 billion WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Our commitments

Our 39 commitments in the Nestlé in society report guide all of us at Nestlé in our collective efforts to meet specific objectives.

For a company to prosper Nutrition, health and wellness over the long term and create value for shareholders, it 192 billion 8041 must create value for society at the same time. We call Number of servings of fortified Number of products renovated for foods provided worldwide nutrition or health considerations this Creating Shared Value. On the right is a selection of key achievements from each CSV focus area. Rural development 760 000 10 950

Number of farmers supplying Total number of Tier 1 suppliers directly to Nestlé audited from 2010–2015

Water 41.2% 7.7 million m3

Cumulative reduction since 2005 Quantity of water in our operations of direct water withdrawals per tonne either recycled or reused of product in every product category

Environmental sustainability 42.7% 105

Cumulative reduction since 2005 Number of factories achieving of greenhouse gas (GHG) emissions zero waste for disposal

Our people, human rights and compliance 6049 34%

Number of work opportunities Percentage of women holding offered to young people by Nestlé leadership roles in Europe WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Contents

2 Letter to our shareholders

8 The strategy

12 The highlights

32 The future

38 Financial review 40 Group overview 44 Product category and operating segment review 51 Principal risks and uncertainties 52 Factories

54 Corporate Governance and Compliance 55 Corporate Governance 56 Board of Directors of Nestlé S.A. 58 Executive Board of Nestlé S.A. 60 Compliance 61 Shareholder information

Accompanying reports

Nestlé in society Corporate Governance Report 2015 Creating Shared Value and Compensation Report 2015 meeting our commitments 2015 Financial Statements 2015

Nestlé in society Corporate Governance Report 2015 Creating Shared Value Compensation Report 2015 and meeting our Financial Statements 2015 commitments 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Our performance

Our performance is driven by our Nutrition, Health and Wellness strategy, the engine of our value creation.

In 2015 we delivered Group sales (in CHF) Organic growth Real internal growth profitable growth at the higher end of the industry 88.8 billion 4.2% 2.2% in what is still a challenging environment. This profitable growth was on the back of consistent performances in previous years. On the right is a summary of the results we achieved during Trading operating Trading operating Trading operating the year. profit (in CHF) profit margin profit margin 13.4 billion 15.1% +10 basis points

Constant currencies

Earnings per share Underlying earnings (in CHF) per share 2.90 +6.5%

Constant currencies

Operating cash flow Free cash flow (in CHF) (in CHF) 14.3 billion 9.9 billion

92.7% of net financial debt

Proposed dividend Proposed dividend (in CHF) increase 2.25 +2.3%

Nestlé Annual Review 2015 1 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Letter to our shareholders

Dear fellow shareholder,

In 2015 we built on the consistent, sustainable performance of previous years, delivering growth in a difficult and volatile trading environment. Our 2015 performance was driven by the relevance of our Nutrition, Health and Wellness strategy, which represents our engine of value creation and which we continue to execute effectively.

We delivered organic growth of 4.2%, composed of real internal growth of 2.2% and pricing of 2.0%. Sales were CHF 88.8 billion, impacted by foreign exchange of –7.4%. The Group’s trading operating profit was CHF 13.4 billion with a margin of 15.1%, down 20 basis points on a reported basis affected by the strong Swiss Franc, up 10 basis points in constant currencies. This performance was achieved while we again increased substantially our investment in brand support, digital, research and development, and our new nutrition and health platforms. Net profit was CHF 9.1 billion. The reduction of CHF 5.4 billion versus last year was mostly due to the one-off impact from the disposal in 2014 of part of the L’Oréal stake combined with the revaluation of the Galderma stake. There was also some effect from foreign exchange. Earnings per share at CHF 2.90 were down 36.1% for the same reasons. Underlying earnings per share in constant currencies increased by 6.5%. The Group’s operating cash flow remained strong at CHF 14.3 billion and free cash flow was CHF 9.9 billion or 11.2% of sales. In view of this performance and the company’s strong financial position, the Board is proposing a dividend of ­ CHF 2.25 per share up from CHF 2.20 last year. During the year we completed a share buyback of CHF 8 billion. It is worth noting that since 1942 your company has never reduced the dividend paid to its shareholders. In fact, the dividend has increased every year since 1995.

Based on our solid and consistent record in delivering growth at the higher end of the industry, we are confident we can continue to deliver on our long-term commitment: organic growth of 5% to 6% with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency. There will be years when we exceed this ambition and years when we come close, but this is the profitable growth line we walk over time.

2016 marks the 150th anniversary of our company and we will celebrate 150 years of passion for Nutrition, Health and Wellness. Our founder Henri Nestlé’s determination, commitment and pioneering spirit have inspired our people around the world to develop and apply scientific and nutritional know-how to enhance the quality of life of our consumers and those they care for. This passion for nutrition

2 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Peter Brabeck-Letmathe, Chairman (left), and Paul Bulcke, Chief Executive Officer (right).

Nestlé Annual Review 2015 3 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Letter to our shareholders

will continue to guide the development of our company in the future and will further strengthen our determination to bring Good Food, Good Life to billions of consumers around the world. It is with this conviction that we have made public commitments to further improve the nutritional profile of our products by reducing the amount of salt, sugar and saturated fats, and remove trans fats completely. Thanks to our unique global Research and Development capabilities, we are on track to meet these promises.

In addition, we are extending the boundaries of our business beyond our food and beverages portfolio to fully realise our Nutrition, Health and Wellness ambitions. In 2011 we created Nestlé Health Science to exploit the therapeutic role of nutrition with an innovative pipeline of products designed to make a major contribution to the health of different populations. Then, in 2014 we created Nestlé Skin Health which is helping people meet the needs of their skin at every stage of life’s journey with products to protect, serve and enhance skin health. It is our size and our scale that allows us to invest heavily in these new areas that have the potential, over the long term, to offer great benefits to society.

For our business to prosper over the long term, we must deliver value to you, our shareholders, as well as to the communities in which we operate and to society as a whole. This is what we call Creating Shared Value. This is how we go about running and developing our business. This is how we build trust over time. Our full set of 39 public commitments provide the framework for our engagement with society.

We build trust by providing our consumers with products and services of the highest quality and safety. We build trust with every consumer contact we make as this is the basis of our future success, particularly as consumers and the public in a digital world enjoy full transparency on all aspects of the life of the company and are consequently more demanding. When trust is challenged, such as in India with Maggi or in the United States with Beneful, we act swiftly and decisively to deal with the issue. Maintaining the trust of consumers is a non-negotiable priority for our company.

In 2015 we continued our portfolio management, designed to ensure the right resource allocation and maximise the growth opportunities in every category. As part of this process we divested our Davigel frozen food business and announced our intention to build a strong player in the ice cream industry by setting up a joint venture with R&R Ice Cream, a leading European ice cream company. This and other developments were examined during the Board of Directors’ annual strategy review. The Board also examined the company’s R&D strategy and reviewed the

4 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa major acquisitions of the last few years as well as the company’s business in China. Reflecting our belief in the importance of our people, the Board also considered our progress in diversity and gender balance. For the first time in 2015 we sought the approval of the Annual General Meeting for the compensation of the Board of Directors and the Executive Board as the new Swiss ‘say on pay’ law required. All the proposals were passed with large majorities. We believe the approach we have taken in this area is in line with both the law and with the spirit of the law.

During the year Nandu Nandkishore, Executive Vice President in charge of Zone Asia, Oceania and sub-Saharan Africa, took early retirement after a long and distinguished career with Nestlé. The Board of Directors appointed Wan Ling Martello to succeed him in that role and François-Xavier Roger to succeed her as Chief Financial Officer. Also José Lopez, Executive Vice President in charge of Operations, took a well-deserved retirement after 36 years of dedicated service to the Group. He was succeeded by Magdi Batato who was most recently the Market Head of Pakistan. We would like to thank Nandu, José and all of those who retired during the year for their contributions and extend our best wishes for a long and happy retirement.

As we embark on our next 150 years of passion for nutrition, we thank you, our shareholders, for your continued trust in Nestlé. Thanks to your support, our clear strategic direction, our balanced portfolio, strong innovation pipeline and commitment to quality and to building trust, we continue to prosper. We would like to thank all our 335 000 employees whose hard work, alignment behind our Nutrition, Health and Wellness strategy and commitment to Nestlé enable us to deliver on our promises. By fulfilling the expectations of consumers in meaningful ways each day, they ensure that your company continues to generate the profitable growth that you, our shareholders, rightfully expect.

Peter Brabeck-Letmathe Paul Bulcke Chairman Chief Executive Officer

Nestlé Annual Review 2015 5 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 6 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa We are the leading Nutrition, Health and Wellness company.

We enhance lives with science‑based nutrition and health solutions for all stages of life, helping consumers care for themselves and their families.

Nestlé Annual Review 2015 7 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa The strategy

With our Nutrition, Health and Wellness strategy we support people who want to live a healthier lifestyle. Industry-leading research and development drives innovation and supports the constant renovation of our food and beverage portfolio. In addition, our researchers are exploring the role of nutritional therapies to maintain or improve health and investigating how we can help people look after their skin. By sharing our insights on global Nutrition, Health and Wellness challenges, by building partnerships and by engaging with policymakers, stakeholders and key opinion leaders we strive to have a positive impact on the societies in which we operate.

We empower people to make informed decisions when they choose what to eat. Through Start Healthy Stay Healthy, our interactive, science- based education programme, we help parents and caregivers provide their children with the nutrition they need in the crucial first 1000 days of life. Our United for Healthier Kids programme, takes this further, helping parents and caregivers establish healthier eating, drinking and lifestyle habits for children as they get older, and our Nestlé Healthy Kids programme is helping to

8 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Nestlé Annual Review 2015 9 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa The strategy

deliver a healthier lifestyle for children by teaching In addition, we have set out six strategic nutrition and encouraging physical activity. priorities. Firstly, Make Choices: put resources We are on track to deliver on our commitments behind the ideas, products and categories that to reduce the amount of salt, sugar and saturated help us on our journey to recognised Nutrition, fats in our products and remove trans fats, Health and Wellness leadership, and to deliver while maintaining consumer preference. We are sustained financial performance. Secondly, Grasp enhancing our portion guidance and improving Opportunities: see the opportunity in change our labelling, printing GDAs (Guideline Daily and trends, and translate them into concrete Amounts) on the front of packs, making it easier business opportunities. The third is Value What for people to read them. Consumers Value: all that we do should create In recent years we have reinforced and value for consumers and drive out waste. Fourth, expanded our Nutrition, Health and Wellness Engage with Stakeholders: we want to be trusted strategy with the creation of Nestlé Health by all consumers and stakeholders as a genuine Science and Nestlé Skin Health. Nestlé Health and responsible member of the community. Fifth, Science is advancing the role of nutritional Embrace Digital: deepen the connection with therapy to change the course of health for consumers through the growing e-commerce consumers, patients and for our partners in channel and through real-time listening, healthcare. With Nestlé Skin Health we are engagement and dialogue. Sixth is Win through entering the field of specialised medical skin People and Teams: we need the right people with treatment by offering science-based solutions for the right capabilities and effective leadership at all the health of skin, hair and nails over the course levels to engage, empower and enable everyone of people’s lives. to give their best. We strive to meet the fast-changing As we strive to become a more agile and expectations of our consumers because like higher-performing organisation we ensure that them, we care deeply about quality, food safety, we embed our strong culture and values across the environment and sustainability. Responsible all our operating companies, especially those behaviour wherever we operate is at the very that are newly acquired, all within the framework heart of what we do. It is our fundamental belief of compliance which governs all that we do. We that for a company to prosper over the long term take a long-term view, framed in a robust set of we need to create value for shareholders while at principles and values that are based on respect: the same time creating value for society. We call respect for people, respect for future generations, this Creating Shared Value. Trusted leadership respect for the environment and respect for the in Nutrition, Health and Wellness is our strategic diverse world we live in. ambition, Creating Shared Value is how we go about it. The inclusion of the Nestlé in society report, alongside this Annual Review and the Financial Statements in the 2015 Annual Report package, reflects how Creating Shared Value is fully embedded into internal management processes and the way we do business. The Nestlé Strategic Roadmap (illustrated opposite) is the compass that guides our organisation, driving internal alignment behind our goals. The roadmap shows how we deliver profitable growth, the competitive advantages that we leverage and the organisation we have chosen, in order to be effective and efficient. It is the framework that we use to establish priorities and drive execution.

10 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Operational Growth pillars drivers Nutrition, Health and Wellness Emerging markets and Innovation Popularly and renovation Positioned Products

Whenever, ty ili C Out-of-home wherever, b re a a consumption however n t i in ta g s u S S h a – r e e d c

n V

a a i l l u p

e

m

Operational o

C Premiumisation efficiency Our objective is to be the leader in Nutrition, Health and Wellness, and the industry reference for financial performance, trusted by all stakeholders

Unmatched Consumer product N s engagement es le and brand tlé ip c inc portfolio ultu pr re, values and

Unmatched People, research culture, values and development and attitude Unmatched capability geographic presence Competitive advantages

Nestlé Annual Review 2015 11 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa The highlights

‘Good Food, Good Life’ is the commitment we make every day, in every part of the world. We have more than 2000 brands in our portfolio, from global icons to local favourites. We help people live more enjoyable, healthier lives, leveraging 150 years of passion for nutrition to bring them products and services they can trust.

On the following pages we highlight the innovation and renovation of our portfolio over the past year. We begin with the two newest parts of our business. Nestlé Health Science champions the role of nutritional therapies that have proven clinical benefits. Nestlé Skin Health offers science-based solutions to care for the skin, hair and nails. These businesses build on the strong foundations of our food and beverage business, and in the following pages we also highlight the new ways we are engaging with consumers in these areas. In 2015 we reported sales of CHF 88.8 billion. We report our sales numbers by category, and the review of the food and beverage portfolio follows the same approach.

12 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Nestlé Annual Review 2015 13 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Nestlé Health Science

Nestlé Health Science was created with the bold ambition to seize opportunities in nutritional science and focus on advancing the role of nutritional therapy to change the course of health management for consumers and patients, and in the minds and practices of healthcare providers. It is supported by the Nestlé Institute of Health Sciences which researches how nutrition can empower people to improve and maintain their health.

Nestlé Health Science’s portfolio is focused on helping to address key challenges our society faces: how to age healthily, how to maintain brain health and gastrointestinal health, and how to support those born with inborn errors of metabolism. Its business is organised into three main areas. Consumer Care covers products people pay for themselves in a pharmacy, a retail outlet or via websites. In North America, the main brand is Boost, intended for consumers who want to live physically and mentally active lives but who struggle to get the right amount of nutrition. Two new additions to the range, Boost Compact and Boost Calorie Smart 100 calories, were launched during the year in the US. In Europe, the Meritene range of products, which addresses various health challenges from bone, muscle and joint health to helping to reduce tiredness and fatigue, was rolled out to new countries.

Boost products can be a mini meal or 40 a between-meal snack. They contain high‑quality protein and 26 vitamins and high-potential minerals, including calcium and vitamin D. projects give NHS a strong innovation pipeline

Medical Nutrition is Nestlé Health Science’s largest business and covers products recommended by healthcare professionals and mainly reimbursed by insurers or served in institutions. One key focus area is acute care with a range of nutritional solutions for critically-ill people and for older people suffering from disease-related malnutrition

14 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa or swallowing difficulties. Another key focus area is food allergy and intolerances. One range of products, Althéra, Alfaré and Alfamino, can be used to provide nutrition for infants who are allergic to cow’s milk protein. Another, Vitaflo, provides ‘diets for life’ for those suffering from inborn errors of metabolism who require specialised nutrition to survive and grow. Novel Therapeutic Nutrition is a business in the making, focused on gastrointestinal health and brain health. One area of focus is inflammatory bowel disease where the standard treatment involves either drug therapy or surgery. The company is developing two new nutritional therapies that can be used as an ‘add-on’ to standard drug treatment, developed as medical foods. Nestlé Health Science benefits from a strong innovation pipeline with forty high-potential projects on the way. As part of the Nestlé Group it can leverage Nestlé’s route to market, innovation capabilities and unrivalled Research and Development network. A new Nestlé Product Technology Centre will be established in New Jersey, United States, dedicated to accelerating innovation in Nestlé Health Science’s three main business areas. The company also has a strong external innovation network, allowing it to exploit the best scientific and technological know-how. It has invested in the most advanced microbiome Breastfeeding is best for babies, but for those technology company, Seres Therapeutics, and who are fed with infant formula, Nestlé Health in Lipid Therapeutics, a company developing a Science has a hypoallergenic range for the dietary management of cow’s milk allergy. novel therapy to address ulcerative colitis. It has also expanded its venture capital partnership with Flagship Ventures which helps launch transformative start-ups in therapeutics and health technologies.

Nestlé Annual Review 2015 15 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Nestlé Skin Health

Nestlé Skin Health’s mission is to enhance the quality of life by delivering science-based solutions for the health of skin, hair and nails. Nestlé Skin Health conducts ground-breaking research to provide both the healthcare community and the consumer with an ongoing progression of innovative technologies and products to protect, serve and enhance skin health.

The skin, our largest organ, protects us from harmful environmental factors, acts as an envelope for the body and can influence the way we interact with the world. Other people look at our skin and it shapes their perception of who we are. We look at our skin and it influences our view of ourselves and our sense of well-being. Today, as people live longer, their needs and expectations are changing. We all want to look and feel good, and to play an active role in society. To do this best, our skin needs to overcome the challenges of time as it ages. Nestlé Skin Health’s innovative products and solutions strive to protect, nourish and enhance healthy skin and, when needed, treat, correct and restore compromised skin. Some three thousand skin diseases have been identified, more than for any other organ of the body. Galderma is the Medical Solutions business of Nestlé Skin Health and works closely with the healthcare community to ensure it has a clear understanding of patients’ needs and can respond effectively. In acne, for example, Galderma can deliver drugs like Epiduo, the number one topical prescription drug treatment for acne worldwide. European Union approval was granted early Galderma is committed to partnering with in the year for Soolantra, a novel solution physicians to provide new and effective options to treat lesions of rosacea, further reinforcing the portfolio. while, where the market allows, increasing access to treatment by offering self-medication solutions available in pharmacies. This approach offers healthcare professionals a range of products that they can prescribe or recommend with total confidence. We are witnessing a significant shift in the mainstream perception of well-being. These trends are driving strong growth in the Aesthetic

16 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa and Corrective dermatology category and Galderma is well-positioned to meet this demand. Our portfolio consists of medical products used for minimally and non-invasive procedures to restore and enhance the appearance of the skin, administered by a qualified healthcare professional. Our Restylane product, the leader in its category, was launched nearly twenty years ago. Based on leading consumer brands such as our Cetaphil range of skincare products and our Daylong sun protection line, the newly formed Consumer Skin Health business aims to bring science-based innovation to the broader market, leveraging the company’s insights and scientific expertise. Healthcare needs will evolve and change as the global population of people over‑60 is predicted to grow to 1 billion by 2020, and this will impact the demands on and the role of healthcare professionals. As a response to this challenge, Nestlé Skin Health has launched several key initiatives to help contribute towards research, education and the development of solutions for life-long health.

Cetaphil Baby is a range of products that are hypoallergenic and formulated to protect and nourish the delicate skin of infants and young children.

Nestlé Annual Review 2015 17 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Nestlé Food and Beverage

We enhance lives by offering tastier and healthier food and beverage choices for all stages of life and at any time of the day, helping consumers care for themselves and their families. Our food and beverage portfolio is the core of our business, the essence of our strategy. The portfolio is wider than any other in the food industry and offers everything from Popularly Positioned Products for consumers on low incomes to premium products and services for those who want an indulgent moment of pleasure.

Powdered and Liquid Beverages

Milk products and Ice cream

18 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Prepared dishes and cooking aids

Nestlé Nutrition

PetCare

Confectionery

Water

Nestlé Annual Review 2015 19 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Powdered and Liquid Beverages

Sales CHF 19.2 billion Organic growth + 5 .4% Real internal growth + 3 .1% Trading operating profit margin 21.3% Trading operating profit margin – 180 basis points

Nestlé is the global leader in coffee, uniquely positioned with two strong brands Nescafé and Nespresso, offering consumers a complete range of products, systems and services across all channels. This is a category we have built and shaped over many years and which we will continue to shape in the future. Nescafé is the world’s favourite coffee brand. One fifth of the 30 000 cups of coffee served each second around the world today are cups of Nescafé. Meanwhile, our premium coffee brand Nespresso has redefined and revolutionised the way people enjoy espresso coffee and continues to grow globally, capitalising on the significant development of the portioned coffee segment. The Nescafé ‘REDvolution’ continues to build brand equity for the Nescafé brand, aligning and enhancing the brand communication in every market with the brand line ‘It all starts with a Nescafé’. The growth is supported by the global success of the Nescafé Dolce Gusto system (now in 84 countries around the world) and Nespresso’s Suluja ti South Sudan is the first the beverage business of Nestlé Professional coffee exported from the world’s newest which serves the out-of-home industry. A new nation, after a four year effort to revive production there. manufacturing facility making Nescafé Dolce Gusto capsules has opened in the south east of Brazil, the first outside of Europe, underscoring Nestlé’s confidence in the coffee market across Latin America. Nespresso inaugurated a new factory in Switzerland during the year to satisfy growing world demand for its capsules and 6000 support its expansion plan in North America cups of Nescafé coffee where its VertuoLine system is pioneering a new are served around segment of highest-quality, long-cup, freshly- the world each second brewed coffee. Worldwide demand for coffee continues to grow, and our coffee businesses are focused on ensuring that sustainably-sourced, good- quality supplies are available so that everyone, everywhere can enjoy a great cup of coffee. The

20 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Nescafé Plan, a global initiative bringing together Nestlé’s commitments and activities that support responsible farming, production and supply of coffee celebrated its five year anniversary during 2015. The Nespresso brand’s strong commitment to sourcing the highest-quality coffee in the world is evident in its project to revive the coffee industry in South Sudan. The first exports from the new nation, the result of a partnership with local farmers and a non-profit organisation, TechnoServe, led to the creation of a new Limited Edition addition to Nespresso’s Grand Cru range. Consumer demand continues to evolve with younger consumers in particular looking for greater variety and sophistication based on their out-of-home experience in coffee shops or bars. Nescafé is responding with innovations like the new flagship coffee houses Nescafé Harajuku in Tokyo and Nescafé Itaewon in Seoul that offer interactive displays and new coffee creations inspired by the local trendsetting communities. In the Austrian city of Vienna, Nespresso has opened the first Nespresso Café, combining a premium coffee shop and takeaway service with the Nespresso Cube that uses robotic technology to prepare an order from the Grand Crus or Nescafé Koumibaisen is a super premium Limited Edition range in a matter of seconds. range of coffee rejuvenated in 2015 with Innovation is helping to drive demand for the freshly brewed aroma and taste to appeal to drinkers who prefer ‘roast and ground’ coffee. creamer brand Coffee-mate with the all-natural variety of Natural Bliss, and Coffee-mate 2GO, a conveniently sized portable creamer for out‑of‑home usage. The creamer category had dipped slightly during the recession in the United States but has since made a strong comeback with more consumers opting for flavoured creamers than ever before. Meanwhile, the advanced technology of Nestlé’s premium- portioned capsule tea system Special.T, along with its range of more than 30 varieties of tea and herbal tea, are now available in Japan and seven European countries. Special.T was the company’s third major innovation in capsule beverage systems after Nespresso and Nescafé Dolce Gusto. The system offers a selection of fine teas sourced from the top 1% of the world’s tea farms.

More information about how Nespresso’s AAA Coffee-mate 2GO, a portable creamer that Sustainable Quality Program and also the Nescafé does not need refrigeration, is an opportunity Plan help farmers can be found on page 25 of the to align the brand with the ‘always on-the-go’ Nestlé in society report. attitude of millennials.

Nestlé Annual Review 2015 21 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Milk products and Ice cream

Sales CHF 14.6 billion Organic growth +1.7% Real internal growth +1.3% Trading operating profit margin 16.9% Trading operating profit margin +180 basis points

Across the globe, Nestlé’s heritage dairy brands, which are often children’s first experience of a Nestlé product, represent a strong foundation for the company’s continued growth. Dairy products are considered to be essential for good health in many cultures. At Nestlé, we leverage the best of our science and product expertise to provide families with both nutritionally enriched milk products and delicious dairy treats. Today, we offer dairy products to support healthy diets at all stages of life, from early childhood to old age. While our dairy products have many natural nutritional benefits, such as provision of calcium, sometimes they need to do more. At Nestlé, we are proud to offer affordable dairy products that also help to address local micronutrient deficiencies, particularly in developing countries. Milk is naturally rich in calcium and a good carrier of micronutrient fortification, making it a viable, long-term way to deliver more nutrition to large One glass of Nido Golden Start has all the segments of the population. essential breakfast nutrients needed to prepare children for an active day at school.

590 million bottles of Nestlé Milo Nutri G will be produced each year by our new factory in Malaysia

The Nestlé range of children’s milk brands has been developed to offer the energy, protein and micronutrients needed by growing children. To make these products accessible for lower-income groups, Nestlé makes these milks available in affordable formats. These products are also fortified with iron, zinc, vitamin A and other micronutrients as appropriate for the micronutrient deficiencies prevalent in each

22 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa area. Nido Golden Start was launched in Mexico to coincide with the start of the back-to-school season. Each glass contains milk, cereals and fruit, and provides proteins, calcium, vitamin C and fibre. It is designed for children who skip breakfast because they are in a rush, estimated to be one in five of the school age population in the country. Another innovation with strong Nutrition, Health and Wellness credentials, Nestlé Milo Nutri G, is a blend of four whole grains (oats, barley, brown rice and wheat) with malt, milk and cocoa in a ready-to-drink format newly launched in Malaysia. It is aimed at young adults who want the convenience of a ready-to-drink product and the Nestlé Milo taste they grew up with, and who recognise the health benefits of whole grain. In Brazil this year we launched new Nesfitnon ‑dairy beverages, including a whole grain rice and whole grain oat drink designed to be drunk plain or added to breakfast cereals. The range included an instant oatmeal, rich in whole grain and fibre, helping those watching their weight to stay motivated. We offer the best-tasting ice cream products and continually improve the nutritional profile Extrême ice creams are particularly popular in and benefits of our range. We build upon the France, and combine different flavours, textures wholesome milk at the heart of ice cream, to and colours to provide people with an indulgent, sophisticated treat. offer healthier options for you and your family. In addition, we have enhanced our nutritional labelling, portion size recommendations and the availability of smaller pack options. Our Outshine range, available in North America, has been expanded to include a 100% yoghurt bar, and in Europe we launched the Mövenpick 100% Natural stick ice cream during the year. We continue to work to ensure that our ice cream products are produced, packaged and distributed in ways that are environmentally sustainable.

Delicious ready-to-drink peanut More information about our commitment to milk from our joint-venture Yinlu encourage consumption of whole grains can be is popular in China and suitable for found on page 18 of the Nestlé in society report. those who are lactose intolerant.

Nestlé Annual Review 2015 23 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Prepared dishes and cooking aids

Sales CHF 12.6 billion Organic growth + 0.1% Real internal growth – 1 .3% Trading operating profit margin 13.7% Trading operating profit margin + 40 basis points

Our food portfolio offers products that form the core of healthy and nutritious meals. By making food tastier, more balanced and easier to prepare, we help improve eating habits and contribute to an enjoyable, healthy lifestyle. We continue to improve our products, enhance nutritional information and portion guidance. We want to empower consumers to make the right informed choices on food and nutrition, and constantly evolve our packaging and digital support for our brands to help achieve this. We are focused on deepening this engagement with consumers to ensure we can better serve their needs. Through innovation and renovation we are enhancing the ability of our brands to contribute to a healthy diet, while ensuring they are relevant to the changing demands of consumers. In the United States, Lean Cuisine has reintroduced itself as a modern eating brand. No longer focused on diet, the brand has evolved to reflect a shift in the way Americans, primarily women, are eating and shopping. The Lean Cuisine brand relaunched Stouffer’s Fit Kitchen frozen meals offer with ten new recipes within the Lean Cuisine big flavours and at least 25 g of protein Marketplace range, all offering modern benefits in each serving. The range is primarily aimed at male consumers. such as organic ingredients, gluten-free, high- protein options, no-preservative options, and products with no GMOs. Meanwhile, the new Stouffer’s Fit Kitchen range is primarily aimed at men, after research showed that many didn’t feel there were enough 10 nutritious and satisfying meals in the frozen new recipes were food aisle. Six varieties, each offering 25 or more introduced in the Lean Cuisine grams of protein, complex carbohydrates and Marketplace range vegetables, were successfully introduced in the summer. In Europe, the new Rustipani warm bread small meal from Wagner is baked in a traditional rustic oven with two variants, a naturally matured sourdough and a dark oven rye flour bread. The pizza meets the Nestlé Nutritional Foundation

24 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa criteria, based on nutrition science and public health dietary recommendations from bodies such as the World Health Organization and the Institute of Medicine. The Rustipani is topped with high-quality ingredients such as smoked cheese, marinated tomatoes, ham and asparagus. Innovation and renovation are key to success across our food portfolio and drive growth across the category. Maggi Tender cooking papers seasoned with herbs and spices such as coriander, muscat, black pepper and oregano, enable consumers to flavour meat in the pan, keeping it tender without adding any oil. The product has been rolled out across our European markets and in Latin America. We are leveraging what we call the ‘Kitchen Cupboard’ approach, renovating our portfolio with the aim of increasing the use of ingredients consumers recognise and are familiar with such as spices and herbs, while accelerating the removal of artificial additives. This is an important pillar of our efforts to build trust with the people who buy our products, providing transparency of what the product is made from with information that is easy to read and understand. We recognise we have a role to play in Maggi bouillon cubes and tablets fortified addressing the problems of under-nutrition, as with iron can play an important role well as certain non-communicable diseases. In in addressing micronutrient deficiencies in emerging markets. emerging markets, fortified products likeMaggi soups and bouillon cubes are contributing to efforts to counter the effects of micronutrient deficiencies in iron and iodine. In Central America, consumers use Maggi chicken noodle soups as a base to cook tasty and balanced meals. Maggi has renovated the entire range and each serving now provides 15% of the recommended daily amount of iron, is low in fat and made without artificial preservatives. We are also helping to address problems caused by over-nutrition like obesity. Throughout our portfolio we are helping families to improve their diets by reducing the amount of salt, sugar and saturated fats in our products and removing trans fats.

The Nestlé Professional Chef range has been More information about micronutrient fortification can created by chefs for chefs, saving them time be found on page 16 of the Nestlé in society report. and the cost of making the dishes from scratch.

Nestlé Annual Review 2015 25 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Nestlé Nutrition

Sales CHF 10.5 billion Organic growth + 3 .1% Real internal growth +1.4% Trading operating profit margin 22.6% Trading operating profit margin +110 basis points

Our nutrition business is dedicated to providing high-quality, innovative, science-based nutrition Appropriate protein supply in early life can for mothers and infants, helping to nurture shape long-term health outcomes. Nestlé healthier generations. Good nutrition and the Nutrition’s NAN Optipro offers protein composition and concentration closer to right feeding practices during the first 1000 days the gold standard of breast milk. of life, from conception to a child’s second birthday, are crucial for a child’s health, growth and development. Establishing the right feeding practices in early childhood also supports the establishment of good eating habits.

25 countries have Start Healthy Stay Healthy, our science-based education programme for parents

We promote and support breastfeeding which is the best start a baby can have in life. Where breastfeeding is not possible, we provide breast-milk substitutes. We have also developed science-based nutritional solutions for infants with specific medical needs, who are unable to absorb, digest or metabolise standard infant formulas and are at risk of death or abnormal development if left without access to the right nutrition support. In addition, we provide a range of complementary foods such as growing-up milks, infant cereals and meals and drinks. These products contain carefully selected high-quality ingredients and are fortified with nutrients to meet the specific needs of infants and young children. Our BabyNes system, now available in four countries, is the first advanced nutrition system for infants and toddlers that offers age- Wyeth Nutrition’s illuma brand helps to specific, single-serve formulas for children up to enhance infants’ absorption of key nutrients the age of three years. and supports their immune function.

26 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa PetCare

To encourage good nutrition in the first Sales CHF 11.5 billion 1000 days, we seek to support mothers through Organic growth + 5 .9% our extensive range of educational materials Real internal growth + 3 .5% and information. Start Healthy Stay Healthy, our Trading operating profit margin 20.8% interactive, science-based education programme Trading operating profit margin +100 basis points designed to help parents and caregivers provide nutritionally and developmentally adequate nutrition in the crucial first 1000 days of life, has now been rolled out to 25 countries. We market our breast-milk substitutes in line Petcare is a strong growth driver for Nestlé with the aims of the World Health Organization’s around the world. With a portfolio of many of International Code of Marketing of Breast-milk the world’s most popular and trusted dog and Substitutes as implemented by governments. cat food brands, Nestlé Purina is committed to Our marketing standards are the strictest in the enriching the lives of pets and the people who industry. We are the only breast-milk substitute love them. manufacturer to be included in the FTSE4Good responsible investment index. We implemented the new global Nestlé Maternity Protection 500+ Policy which is one of the most progressive nutritionists, scientists, veterinarians and animal programmes of its kind in the industry. This behaviourists worked policy gives employees a minimum of 14 weeks on the renovation and innovation of the paid maternity leave and the right to extend their Nestlé Purina portfolio maternity leave up to six months. It also includes flexible working arrangements and guaranteed access to breastfeeding rooms during working In 2015, Purina introduced ground-breaking hours in all sites with more than 50 employees. nutritional advances and product innovations. Nestlé currently has more than 190 breastfeeding The successful US launch of Purina Pro Plan rooms across its global working facilities. Bright Mind for adult dogs aged 7+ leveraged the company’s breakthrough research findings that a diet containing medium-chain triglycerides (MCTs) from enhanced botanical oils can help promote healthy aging and healthy cognition in senior dogs. In Europe, the Purina Pro Plan brand renovated formulas targeted to the changing nutritional needs of dogs in different life-stages, from building a growing puppy’s natural defences to helping adult dogs maintain a healthy weight. Our focus on product innovation can also help strengthen the bond between people and their pets. Friskies, a global brand of cat food and treats, in the US launched Friskies Pull ‘n Play, the first ever tender, edible strings for cats, as a new way for pet owners to treat and play with their cats. The treat may be fed alone or in conjunction with Wobbert, a wobbly cat toy that can accommodate two treats at once. Globally, Nestlé Purina employs 500+ More information about our commitment to market world‑class nutritionists, behaviorists, breast-milk substitutes responsibly can be found on page 21 of the Nestlé in society report. veterinarians, immunologists and other pet

Nestlé Annual Review 2015 27 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa experts who are working to improve the lives of pets. Nestlé Purina manufacturing facilities around the globe meet or exceed all regulatory requirements and use comprehensive food safety programs to ensure every Purina product meets our high standards for safety and quality. Nestlé Purina promotes responsible pet care, humane education and strengthening the bond between people and their pets. In Italy, an educational programme promoted in schools helps children learn the basics of pet care and nutrition through a kit distributed to teachers that includes contributions from veterinarians and other experts. Petfinder, Nestlé Purina’s searchable web database of pets in need of adoption, has helped over 24 million find homes so far. Guided by our passion for pets, we are committed to using our scale to support shelter pets, creating tools and resources to help them find new homes. In 2015, Nestlé Purina donated more than USD 8 million to pet-related causes and community organizations and civic groups across the Americas. Nestlé Purina is constantly working on opportunities to improve our environmental performance through designing smarter and more efficient systems. We work throughout our supply chain to ensure our high-quality ingredients are sourced responsibly. As a manufacturer, we are focused on reducing solid waste and greenhouse gas emissions and improving the efficiency of the Purina Beyond dog food provides healthy water and energy used at our facilities around the nutrition using only high-quality natural world. ingredients, so owners can be sure they are making the right choice for their pets.

Nestlé Purina science and expertise underpins Purina Pro Plan, a super-premium pet food range that delivers optimal nutrition for dogs and cats.

28 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Confectionery

Sales CHF 8.9 billion Organic growth + 6 .2% Real internal growth +1.8% Trading operating profit margin 14.0% Trading operating profit margin + 20 basis points

Nestlé’s involvement with chocolate goes back to François-Louis Cailler who started to make chocolate in Switzerland in 1819. Today Cailler is Switzerland’s oldest chocolate brand. Through various acquisitions, including Cailler in 1929, and more recently in 1988 with the purchase of the UK company Rowntree, Nestlé has Nestlé announced its entry into the dynamic become one of the world’s largest chocolate global super-premium chocolate category and confectionery producers. Chocolate is a with Cailler, a Swiss brand that is almost highly attractive category for Nestlé with growth 200 years old. increasingly fuelled by premiumisation. Around the globe it is the number one snack of choice and there is high potential for emerging market growth where the habit of chocolate consumption is starting to grow.

billion+ fingers ofKitKat are consumed around the world each year

With KitKat, Nestlé has a strong global player driving performance in both emerging and developed markets. KitKat will become the first global confectionery brand sourced from 100 percent certified sustainable cocoa, starting early in 2016. The brand already uses sustainably sourced cocoa, accredited by independent third- party bodies, in products sold in certain markets, but this new announcement extends the practice worldwide, including the United States. An essential element of Nestlé’s desire to enhance people’s lives is our commitment to KitKat is the world’s third biggest chocolate deliver healthier options which help you feel brand. More than 20 billion fingers ofKitKat better about enjoying a treat, for example by using are consumed around the world each year.

Nestlé Annual Review 2015 29 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Water

natural ingredients, removing artificial colours Sales CHF 7.1 billion and flavours, and making it easier to understand Organic growth + 7 .0% how many portions there are in a product through Real internal growth + 7 .0% clearer information on the packaging. A year ago Trading operating profit margin 11.2% we committed to stop marketing confectionery Trading operating profit margin + 90 basis points to children under the age of 12 years and this is recognised in the updated and strengthened Nestlé Marketing Communication to Children Policy which came into effect at the end of 2015. Our confectionery brands are using Bottled water is a healthy, convenient way to partnerships with major tech firms like Google stay hydrated. Nestlé Waters contributes to and Amazon to help build new relationships with consumers’ healthy hydration with its global consumers. KitKat worked closely with Google brand Nestlé Pure Life, local water brands in to launch a new global digital campaign to help different countries and premium international consumers find the top trending YouTube videos mineral waters S.Pellegrino and Perrier. A key on their mobile phones while having a KitKat component of Nestlé’s Nutrition, Health and break. When Nestlé began the transformation Wellness strategy, water is also a growing of the Swiss chocolate brand Cailler into a category, particularly in developed markets new global super-premium chocolate brand, as more consumers switch to water from it chose Amazon as its primary retailer. Cailler carbonated sugary drinks. More than half Nestlé is still produced at ‘Maison Cailler’, the original Waters’ sales are in North America where bottled factory in the Swiss town of Broc, using milk water is on track to become the top selling from local farms and high-quality cocoa from beverage by the end of the decade. There is also the Nestlé Cocoa Plan. The new products good growth in emerging markets, helped by can be bought through Amazon in the US, UK, growing urbanisation and the rise of the middle China and Germany. They are also sold in class in many parts of the world. travel retail outlets in major airports in Geneva, Zurich, Dubai and Singapore.

52 brands make up the Nestlé Waters portfolio

Nestlé Waters has a portfolio of 52 brands, enabling constant innovation to meet the different expectations of consumers all over the globe. The company is the world’s number one bottled water company by value and Nestlé Pure Life is the largest bottled water brand in the world. We make every effort to offer healthy bottled water that tastes good. Because quality is the foundation of what we do, consumers can ensure they are hydrated every day in complete confidence, using More information about our commitment on our bottled water. responsible marketing communication to Water is a precious resource. At Nestlé Waters, children can be found on page 21 of the Nestlé in society report. responsible water management does not stop

30 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa at being best-in-class within the walls of our factories, but extends to collective actions with other water stakeholders to ensure the long- term stability of shared watersheds. Since its creation the company has striven to be best in class in terms of protecting water sources and reducing the environmental impact of its activities. In the United States, investments in conservation measures in the state of California during the year are projected to save 55 million gallons (208 000 cubic metres) of water annually, a reduction of nearly 8%. In Switzerland, Nestlé Waters has built an agricultural biogas facility to provide renewable energy for the plant where its local brand Henniez is bottled. At the same time, the company continues to optimise its packaging and recycling efforts, so as to reduce the environmental impact of its business. Nestlé Waters reduced packaging weight per litre produced by 14% between 2009 and 2014. Nestlé has pledged to adopt sustainable water practices in areas where we operate, source our goods and where our suppliers, employees and consumers live. For example, in Pakistan Nestlé has established seven clean drinking water facilities near its facilities: the The new S.Pellegrino Magnum, a champagne- latest was inaugurated next to the Nestlé Waters style bottle, has been successfully introduced Sheikhupura factory. It is estimated that at least in various markets around the world. 5000 people living in the area will have access to drinking water each day from the facility.

Sold in more than 40 countries, Nestlé Pure More information about our commitments on water Life is a great-tasting water that is filtered and stewardship can be found on page 28 of the Nestlé enhanced with minerals to provide healthy in society report. hydration for the whole family.

Nestlé Annual Review 2015 31 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa The future

Our changing environment creates new challenges, for Nestlé and for society. The United Nations estimates there will be 9.6 billion people in the world by 2050, 70% of whom will live in urban areas. We believe we have a strong contribution to make as the world looks for ways to feed its growing population.

Even as competition for land, water and energy increases, the scale of the population growth predicted means the world will need to find enough sufficiently nutritious food to feed an additional 2.3 billion people over the next 35 years. In addition, provision has to be made for the 800 million people who do not have access to adequate nutrition today. That is approximately one in nine of the global population. Business has a role to play in both mitigating these issues and adapting our global food system. Companies like ours create value for consumers and the societies in which they live. Processing food enables us to deliver food to the consumer wherever they are in the world. These are products they can trust, manufactured to the highest specifications and completely safe. Our researchers deliver innovation we can apply throughout the value chain to the sourcing of ingredients, to manufacturing, packaging and distribution, and to offer consumers new types of product or service, or benefits through our brands. We are driving advances in agricultural practices and biotechnology to help to secure the food supply, from developing new preservation technology to contributing to better food safety. We are improving our ability to produce more with less environmental impact, reducing carbon emissions, water consumption and waste.

32 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Nestlé Annual Review 2015 33 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa The future

We are helping smallholders develop sustainable future generations. The jointly-funded public- farming practices. At the same time, we are private partnership we have with an international setting ourselves tough challenges to overcome. alliance of researchers known as the EpiGen What ingredients can we use with less Consortium is the largest of its kind. The environmental impact? How can we accelerate collaboration is helping us to better develop our the usage of plant proteins and reduce our understanding of the influence of nutrition and reliance on animal proteins which require more genetics at the beginning of life. It will enable us resources to produce? How can we further to create products that have a proven, positive expand our use of micronutrient fortification? impact on the health of mothers and their How can we contribute to the fight against children. We are already patenting breakthrough non-communicable diseases? discoveries so that we can build products and portfolios on a strong foundation. We publish more scientific papers, and these are cited more often, than any other company in the food and beverage industry. 5000 We use both nutritional and consumer insights scientists work at throughout our business to identify the right Nestlé Research Nutrition, Health and Wellness innovations that could evolve into platforms for future growth. So-called ‘millennial’ consumers in particular are more interested in artisanal and natural options focusing on new health trends like products For instance, today obesity is becoming a global that are free of genetically modified ingredients, problem. There are twice as many obese people organic or gluten-free. They want quick, in developing countries as in developed ones. We ready‑to‑eat solutions and guidance on servings have a role to play in helping to address this. We and portions to complement busy lifestyles. are renovating our portfolio to reduce the amount Meal occasions are fragmenting and snacking is of sugar, salt and saturated fats, and remove becoming more popular. Family structures are trans fats from our products, and have committed changing as single-parenting becomes more ourselves publicly to targets which allow people widespread in many societies and more people to follow our progress. Material science has the live alone. In addition, there is a growing gap potential to offer a much greater contribution between how people want to feel and what to this effort in the years ahead. For example, they actually achieve through their daily activity. much of the reduction today is achieved through Increasingly they value balance and look for meals renovation of a product recipe by replacing that offer positive health benefits. Our Nutrition, sugar with healthier ingredients. Our researchers Health and Wellness strategy ensures we are are working on new approaches to make these well-positioned to meet these needs. We can reductions even greater. expect consumers living longer, more active and We have the strongest Research and healthier lives to generate new opportunities for Development network in the food industry with our businesses and brands. more than 5000 scientists and researchers working Another area of focus is the ‘internet of across the world. We recognise the potential to things’, the growing ability for devices in our multiply this effort through collaboration with the lives to share data. This offers a company like best in each scientific field, from universities to ours opportunities to develop new products or biotech companies to start-ups. We are working systems that will allow people to personalise with partners in new areas like epigenetics: the the nutrition they receive more closely than ever science of how eating behaviours and other before. The challenge is finding ways to harness environmental factors can affect your genes, all the data produced, for example, by a sensor your health and that of your offspring, and for you wear to work out how many calories you

34 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa BabyNes is a smart nutrition system that caregivers can use to prepare formula, using capsules tailored to a baby’s specific developmental needs.

With people living longer lives, Nestlé Health Science is investing in research to develop nutritional solutions that support healthy and active aging.

Nestlé’s United for Healthier Kids initiative Nestlé’s R&D centre in Abidjan is developing unites schools, businesses, government better methods of cocoa plant propagation in and civil society to help caregivers raise partnership with the World Cocoa Foundation healthier children. and the Côte d’Ivoire government.

Nestlé Annual Review 2015 35 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa The future

have used in a day, to help you plan your next and teams. Here too we have made public meal in order to replace those calories and get commitments and publish data so that people can the nutrients you need while not over-eating. The see our progress towards achieving our goals. opportunities presented by digital are immense, We are confident about the future. We have and will grow in the years ahead, making it more demonstrated through our 150 years of existence important than ever that we have the right people that we are able to anticipate consumers’ needs with the right capabilities at Nestlé to enable us to and this has been a key enabler of our success. exploit them. Although the challenges faced by society are not Our people and the way we work together as a to be underestimated, we believe we will be team are critical if we are to achieve our targets. able to make a strong contribution, creating We recognise the importance of strengthening value for our shareholders and for the societies our global talent pipeline, while also playing a in which we operate. Many of the 17 new role to ensure that young people in the societies Sustainable Development Goals announced by where we operate have the right skills to find the United Nations during the year match directly employment with us, with our suppliers and our own Creating Shared Value focus on nutrition, throughout the industry. Our Global Youth water and rural development. We are part of Initiative is helping us develop the next generation the solution to these societal challenges, and of Nestlé leaders, filling the skills gap left by the ready to play our part. retirements of the ‘baby boomer’ generation. Almost a fifth of our workforce is over the age of 50.

200 business partners have been mobilised by Nestlé to create an ‘Alliance for YOUth’

So far in Europe we have hired more than 11 000 people as part of the Nestlé European Youth Employment Initiative and created more than 6000 apprenticeships and trainee positions. We have mobilised close to 200 business partners, creating an ‘Alliance for YOUth’. In the Americas, the Global Youth Initiative has now been launched in all markets with the aim of offering 24 000 job opportunities and 7000 apprenticeship, internship or traineeship opportunities across the Americas by 2018. And in Asia, Oceania and sub-Saharan Africa, our markets are partnering with governments and others to build capabilities and generate opportunities for young people. We continue to focus on developing strong leadership throughout the company as well as further improving the More information about our commitments to improve gender balance and diversity can be found diversity and gender balance of our talent pool on page 39 of the Nestlé in society report.

36 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa The Nestlé Milo Champions Band and app give parents personalised information on their child’s nutritional intake and physical activity, to help them lead healthier lives.

The Digital Acceleration Team (DAT) brings together future leaders from across Nestlé to build brands, innovate and engage with consumers in an increasingly digitally connected world.

A new global partnership with Amazon to Nestlé Japan is pioneering a new consumer drive e-commerce began with the launch of engagement model using the robot ‘Pepper’ historic Swiss super-premium chocolate brand – which responds to human emotions – to sell Cailler in the US, China, UK and Germany. Nescafé products.

Nestlé Annual Review 2015 37 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Financial review

38 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Key figures (consolidated)

In millions of CHF (except for data per share and employees) 2015 2014

Results Sales 88 785 91 612 Trading operating profit 13 382 14 019 as % of sales 15.1% 15.3% Profit for the year attributable to shareholders of the parent (Net profit) 9 066 14 456 as % of sales 10.2% 15.8%

Balance sheet and Cash flow statement Equity attributable to shareholders of the parent 62 338 70 130 Net financial debt 15 425 12 325 Ratio of net financial debt to equity (gearing) 24.7% 17.6% Operating cash flow 14 302 14 700 as % of net financial debt 92.7% 119.3% Free cash flow(a) 9 945 14 137 Capital expenditure 3 872 3 914 as % of sales 4.4% 4.3%

Data per share Weighted average number of shares outstanding (in millions of units) 3 129 3 188 Basic earnings per share CHF 2.90 4.54 Underlying earnings per share (b) CHF 3.31 3.44 Dividend as proposed by the Board of Directors of Nestlé S.A. CHF 2.25 2.20

Market capitalisation, end December 229 947 231 136

Number of employees (in thousands) 335 339

(a) Operating cash flow less capital expenditure, expenditure on intangible assets, investments (net of divestments) in associates and joint ventures, and other investing cash flows. (b) Profit per share for the year attributable to shareholders of the parent before impairments, restructuring costs, results on disposals and significant one-off items. The tax impact from the adjusted items is also adjusted for.

Principal key figures(c) (illustrative) in CHF, USD, EUR In millions (except for data per share) Total CHF Total CHF Total USD Total USD Total EUR Total EUR 2015 2014 2015 2014 2015 2014 Sales 88 785 91 612 92 143 99 961 83 153 75 431 Trading operating profit 13 382 14 019 13 889 15 296 12 533 11 543 Profit for the year attributable to shareholders of the parent (Net profit) 9 066 14 456 9 409 15 774 8 491 11 903 Equity attributable to shareholders of the parent 62 338 70 130 63 012 70 863 57 651 58 307 Market capitalisation, end December 229 947 231 136 232 434 233 553 212 658 192 170

Data per share Basic earnings per share 2.90 4.54 3.01 4.95 2.72 3.74

(c) Income statement figures translated at weighted average annual rate; Balance sheet figures at year-end rate.

Nestlé Annual Review 2015 39 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Group overview

Introduction Trading operating profit In 2015 we delivered profitable growth at the higher end of the industry in what is still a challenging environment. This profitable growth 14 000 14 019 15.3% 15.3% was on the back of consistent performances in previous years. Our organic growth of 4.2% 13 382 15.1% was supported by increased momentum in real internal growth combined with continued 13 000 15.0% margin improvement. Additionally, we grew or maintained market share in the majority of our categories and markets. 12 000 14.7% At the same time, we continued to invest for the future with increased support behind 2015 2014 our brands and further development of our P In millions of CHF new platforms in nutrition and health as well as P In % of sales e-commerce. We kept up the focus on portfolio management, turning around our frozen food business in the United States, disposing of non- core businesses and forging a new partnership to Operating segments: trading operating profit create a leading player in ice cream. In % of sales Our free cash flow generation was again at the top end of the food industry at 11.2% of sales, as Zone EMENA 15.7 a result of our focus on margins with discipline in Zone AMS 19.4 capital expenditure and working capital. Zone AOA 18.4 Nestlé Waters 10.8 Nestlé Nutrition 22.6 Other businesses (a) 15.7

(a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science and Nestlé Skin Health.

Following the changes in management responsibilities as from 1 January 2015, Zone Europe has been renamed Zone Europe, Middle East and North Africa (EMENA) and now includes the Maghreb, the Middle East, the North East Africa region, Turkey and Israel, which were formerly included in Zone Asia, Oceania and Africa. Zone Asia, Oceania and Africa has been renamed Zone Asia, Oceania and sub‑Saharan Africa (AOA). Nestlé Nutrition now includes Growing‑Up Milks business formerly included in the geographic Zones. Finally, Other businesses now includes the Bübchen business, formerly included in Nestlé Nutrition. Information by product has been modified following the main transfer of Growing‑Up Milks business in Milk products and Ice cream to Nutrition and Health Science. 2014 comparative information has been restated.

40 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Group results Sales by geographic areas In 2015 Nestlé’s organic growth was 4.2%, Differences 2015/2014 (in %) composed of 2.2% real internal growth and in local in CHF 2.0% pricing. Sales were CHF 88.8 billion, in CHF currency millions with a foreign exchange impact of –7.4%. By principal markets 2015 Acquisitions, net of divestitures, added 0.1% United States +7.7% + 2.4% 25 293 to sales. Organic growth was broad-based Greater China Region + 6.4% + 3.2% 7 060 across geographies and categories, 5.8% in France – 12.0% +0.1% 4 848 the Americas (AMS), 3.5% in Europe, Middle Brazil – 23.3% +2.9% 3 925 East and North Africa (EMENA) and 1.9% in Asia, United Kingdom + 0.6% +3.0% 3 006 Oceania and sub-Saharan Africa (AOA). Real Germany – 12.3% – 0.2% 2 929 internal growth was also broad-based, 2.4% Mexico – 7.1% +5.3% 2 749 in AMS, 2.8% in EMENA and 1.2% in AOA. Philippines + 6.2% +3.6% 2 645 We demonstrated our continued strength Italy – 11.4% + 0.8% 1 867 in developed markets with organic growth Canada – 5.9% + 3.8% 1 847 of 1.9% and in emerging markets with 7.0%. Spain – 10.1% + 2.2% 1 668 We increased or maintained market share in Switzerland – 1.0% – 1.0% 1 549 the majority of our categories and markets. Australia – 7.6% + 5.5% 1 498 Japan – 3.5% + 4.3% 1 440 Trading operating profit Russia – 23.1% +16.3% 1 330 (a) Trading operating profit was CHF 13.4 billion, Rest of the world – 6.1% 25 131 (a) with a margin of 15.1%, down 20 basis points Total – 3.1% 88 785 on a reported basis affected by the strong Swiss (a) Not applicable. Franc, up 10 basis points in constant currencies. We delivered this margin improvement while increasing substantially our investment in brand support, digital, research and development, and in our new nutrition and health platforms, and at Geographic sales and organic growth the same time absorbing the cost of exceptional OG (%) events like Maggi noodles in India. 6 P AMS +5.8% Net profit 4 CHF 39.1 billion Net profit was CHF 9.1 billion. The reduction of P EMENA +3.5% CHF 5.4 billion versus last year was mostly due 2 CHF 27.5 billion to the one-off impact from the disposal in 2014 of part of the L’Oréal stake combined with the P AOA +1.9% 0 CHF 22.2 billion revaluation of the Galderma stake. There was also some effect from foreign exchange. Reported Sales 22.5 27.5 32.5 37.5 CHF billion earnings per share at CHF 2.90 were down by Each region includes sales of the corresponding Zones as well as Nestlé Waters, Nestlé Nutrition, Nespresso, Nestlé Professional, 36.1%, for the same reasons. Underlying earnings Nestlé Health Science and Nestlé Skin Health. per share in constant currencies were up 6.5%.

Nestlé Annual Review 2015 41 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Sales by geographic area Employees by geographic area Factories by geographic area 4 4.1% 32.5% 161 AMS (2014: 43.0%) (2014: 32.7%) (2014: 163) 30.9% 34.7% 166 EMENA (a) (2014*: 32.5%) (2014*: 34.6%) (2014*: 170) 25.0% 32.8% 109 AOA (2014*: 24.5%) (2014*: 32.7%) (2014*: 109)

* 2014 figures have been restated – see note on page 40. (a) 10 885 employees in Switzerland in 2015.

Employees by activity In thousands 2015 2014 Factories 170 175 Administration and sales 165 164 Total 335 339

42 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Cash flow / Working capital Evolution of the Nestlé S.A. share in 2015 The Group’s operating cash flow remained in CHF strong at CHF 14.3 billion and free cash flow was CHF 9.9 billion or 11.2% of sales. This was the result of our focus on margins and our discipline 105.0% 75.00 in capital expenditure and working capital, 100.0% and shows Nestlé’s capability to deliver very 70.00 strong cash flow despite the challenging foreign 95.0% exchange environment. The average total working 65.00 capital has improved by 60 basis points from 90.0% 5.3% of sales to 4.7%. 60.00 85.0% Financial position

The Group’s net debt was in line with historic | | | | | | | | | | | | levels, increasing from CHF 12.3 billion to J F M A M J J A S O N D CHF 15.4 billion, driven by our completion of the P Nestlé S.A. share share buy-back, an investment of CHF 6.5 billion P Nestlé relative to Swiss Market Index in 2015. Our strong free cash flow during the year at CHF 9.9 billion more than offset the payment of dividends of CHF 6.9 billion. Earnings per share Operating cash flow in CHF in billions of CHF Return on invested capital The Group’s return on invested capital was 4.54 14.7 10.9% including goodwill and intangible assets, 14.3 up 10 basis points and it was 29.9% excluding 2.90 goodwill and intangible assets, down 50 basis points, impacted by unfavourable foreign exchange.

Dividend 2015 2014 2015 2014 The Board of Directors is proposing a dividend of CHF 2.25 per share, up from CHF 2.20 in 2014.

Outlook We anticipate that our trading environment Dividend per share in 2016 will be similar to previous years with in CHF 2.25 2.20 even softer pricing. As such we expect to 2.15 deliver organic growth in line with 2015, with 2.05 improvements in margins and underlying earnings per share in constant currencies, and capital 1.95 efficiency.

2011 2012 2013 2014 2015

Nestlé Annual Review 2015 43 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Product category and operating segment review

Leading positions in dynamic categories In millions of CHF 2014* 2015 Proportion of total sales (%) RIG (%) OG (%)

Powdered and Liquid Beverages Soluble coffee / coffee systems 9 328 8 880 46.1% Other 10 974 10 365 53.9% Total sales 20 302 19 245 100.0% +3.1% +5.4% Trading operating profit 4 685 4 100 21.3%

Water Total sales 6 875 7 112 +7.0% +7.0% Trading operating profit 710 796 11.2%

Milk products and Ice cream Milk products 11 073 10 686 73.0% Ice cream 4 117 3 951 27.0% Total sales 15 190 14 637 100.0% +1.3% +1.7% Trading operating profit 2 295 2 471 16.9%

Nutrition and Health Science Total sales 14 605 14 854 +2.3% +4.4% Trading operating profit 3 136 2 909 19.6%

Prepared dishes and cooking aids Frozen and chilled 7 302 6 984 55.5% Culinary and other 6 230 5 595 44.5% Total sales 13 532 12 579 100.0% – 1.3% +0.1% Trading operating profit 1 801 1 724 13.7%

Confectionery Chocolate 7 053 6 365 71.8% Sugar confectionery 1 148 1 130 12.7% Biscuits 1 568 1 375 15.5% Total sales 9 769 8 870 100.0% +1.8% +6.2% Trading operating profit 1 344 1 246 14.0%

PetCare Total sales 11 339 11 488 +3.5% +5.9% Trading operating profit 2 246 2 386 20.8%

* 2014 figures have been restated – see note on page 40.

44 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Zone Americas (AMS)

Sales CHF 25.8 billion In Latin America we saw good performances Organic growth + 5.5% in many countries in spite of the volatile Real internal growth +1.6% environment. In Brazil, our business achieved Trading operating profit margin 19.4% positive organic and real internal growth despite Trading operating profit margin + 80 basis points the challenging, recessionary environment. Nescafé soluble coffee and Nescafé Dolce Gusto, KitKat and Nesfit were the growth drivers. Mexico delivered good growth across the entire portfolio, helped by strong performances in creamers, Growth in the Zone picked up momentum Nescafé Dolce Gusto, Nescafé soluble coffee and through the year and market shares grew broadly ambient culinary. Other highlights were Chile, in both North and Latin America. driven by ice cream and biscuits, Colombia with In North America growth accelerated, led by ambient culinary, Peru with Nescafé, and the the turnaround in the frozen meals business. Plata Region and Ecuador with growth across Sales of the new ranges of Lean Cuisine and their portfolios. Petcare continued its very good Stouffer’s were strong, supported by positive growth momentum across Latin America, consumption trends. Pizza’s positive momentum benefiting from expanded capacity in Argentina also accelerated, driven by innovation. In ice and Mexico. cream, Häagen-Dazs and snacks continued to We increased investment in consumer facing drive growth with new product launches. Coffee- marketing support while improving the trading mate maintained its good momentum through operating profit margin thanks to a favourable constant innovation and renovation of flavours product mix, operational efficiencies, lower input and packaging as well as new distribution. costs and low restructuring and litigation costs. Petcare in North America continued to grow with strong performances from Fancy Feast, Purina One and cat litter. Increased brand support is helping the recovery of Beneful.

Zone AMS In millions of CHF 2014* 2015 Proportion of total sales (%) RIG (%) OG (%) United States and Canada 16 396 17 187 66.5% Latin America and Caribbean 10 229 8 657 33.5%

Powdered and Liquid Beverages 3 190 2 860 11.1% Milk products and Ice cream 7 025 6 609 25.6% Prepared dishes and cooking aids 4 744 4 833 18.7% Confectionery 3 972 3 454 13.3% PetCare 7 694 8 088 31.3% Total sales 26 625 25 844 100.0% +1.6% +5.5%

Trading operating profit 4 940 5 021 19.4% Capital expenditure 1 027 1 038 4.0%

* 2014 figures have been restated – see note on page 40.

Nestlé Annual Review 2015 45 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Zone Europe, Middle East and North Africa (EMENA)

Sales CHF 16.4 billion Petcare, Nescafé Dolce Gusto, Nescafé soluble Organic growth + 3.7% coffee and confectionery all delivered very good Real internal growth + 2.5% growth across the region, leveraging strong Trading operating profit margin 15.7% market positions. Despite the difficult business Trading operating profit margin + 50 basis points context, Russia had a good year with positive growth and market share gains, especially in premium coffee. In the Middle East and North Africa there was a solid performance despite the unstable The Zone continued to outperform the markets environment. There was good growth in Nescafé in its main categories with positive contributions soluble coffee, confectionery and petcare, that from all geographies, with good evolution of was partially offset by softer trading in ambient market shares despite the economic and political dairy. Saudi Arabia, Kuwait, Qatar and Iran volatility. contributed to an overall solid performance. The exceptional performance relative to the Nescafé soluble coffee and chocolate drove the environment in Western Europe was driven by strong growth in Turkey. The difficult conditions in successful innovation and renovation. Petcare Yemen, Libya and Syria had an impact. continued to deliver growth across the region The trading operating profit margin with Felix and Purina One dry cat food. Nescafé improvement was the result of careful pricing Dolce Gusto and frozen pizza with the Wagner and significant cost reductions which were partly and Buitoni brands were the other growth drivers. reinvested in promotional and marketing activities Culinary was impacted by the competitive retail to generate future growth. environment and softness in the category. Overall France, Germany and Benelux were the highlights, and Spain accelerated. Solid growth in Central and Eastern Europe was driven by Russia, Ukraine and Poland.

Zone EMENA In millions of CHF 2014* 2015 Proportion of total sales (%) RIG (%) OG (%) Western Europe 12 087 11 022 67.2% Eastern and Central Europe 3 088 2 629 16.0% Middle East and North Africa 2 790 2 752 16.8%

Powdered and Liquid Beverages 4 700 4 366 26.6% Milk products and Ice cream 2 356 2 171 13.2% Prepared dishes and cooking aids 4 382 3 853 23.6% Confectionery 3 446 3 124 19.0% PetCare 3 081 2 889 17.6% Total sales 17 965 16 403 100.0% +2.5% +3.7%

Trading operating profit 2 735 2 572 15.7% Capital expenditure 840 710 4.3%

* 2014 figures have been restated – see note on page 40.

46 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Zone Asia, Oceania and sub-Saharan Africa (AOA)

Sales CHF 14.3 billion The developed markets had another good year Organic growth + 0.5% with growth across most categories. In Japan, Real internal growth – 0.1% the main growth drivers in beverages were Trading operating profit margin 18.4% Nescafé Dolce Gusto and the barista machine Trading operating profit margin – 80 basis points for Nescafé soluble coffee. KitKat remained the highlight in confectionery, driven by innovation in novel flavours and formats. Growth in Oceania was driven by confectionery, mainly KitKat, and by Nescafé soluble coffee and Nescafé Dolce The Zone’s performance was seriously impacted by Gusto. Also, there were benefits from improved the Maggi noodles issue in India. management of trade terms. The emerging markets improved gradually, with The Zone’s trading operating profit margin China showing increased momentum towards remained strong and accretive to the Group, the end of the year. In China, our reinvestment in despite the withdrawal and destruction costs Nescafé soluble coffee and Nescafé ready-to-drink of noodles product in India. The evolution products led the growth together with Totole in in favourable input costs enabled increased culinary and Shark wafers in confectionery. Hsu Fu investment in consumer facing marketing Chi delivered a solid performance in a very difficult support. economic environment. Yinlu improved but needs more time. In India, we halted production and sales of Maggi noodles for five months while we dealt with allegations made against the product. We began the return to the market in November. Vietnam and Indonesia were the highlights among the other Asian markets. Sub-Saharan Africa delivered solid growth despite the pressure from lower oil prices in several countries. South Africa performed well.

Zone AOA In millions of CHF 2014* 2015 Proportion of total sales (%) RIG (%) OG (%) ASEAN markets 4 239 4 260 29.7% Oceania and Japan 2 713 2 494 17.4% Other Asian markets 5 761 5 692 39.7% Sub-Saharan Africa 2 079 1 892 13.2%

Powdered and Liquid Beverages 5 059 4 979 34.7% Milk products and Ice cream 4 957 4 932 34.4% Prepared dishes and cooking aids 2 244 1 969 13.7% Confectionery 1 969 1 947 13.6% PetCare 563 511 3.6% Total sales 14 792 14 338 100.0% – 0.1% +0.5%

Trading operating profit 2 834 2 632 18.4% Capital expenditure 586 482 3.4%

* 2014 figures have been restated – see note on page 40.

Nestlé Annual Review 2015 47 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Nestlé Waters

Sales CHF 7.6 billion Organic growth + 6.7% Real internal growth + 6.7% Trading operating profit margin 10.8% Trading operating profit margin +110 basis points

Nestlé Waters delivered good broad-based organic and real internal growth in all geographies, driven by category dynamics and innovation. There was a strong performance for our flagship brand for healthy hydration, Nestlé Pure Life. The premium international brands Perrier and S.Pellegrino continued their good growth momentum, creating additional value in the category. Complementing these performances, our strong local brands also contributed good growth, especially Poland Spring in the United States, Buxton in the United Kingdom, Erikli in Turkey, and Sta.María in Mexico. The improvement in the trading operating profit margin was due to a combination of volume growth, continuous cost improvement and lower input costs that also allowed for increased investment behind our brands.

Nestlé Waters In millions of CHF 2014 2015 Proportion of total sales (%) RIG (%) OG (%) Europe 2 190 1 949 25.5% United States and Canada 3 780 4 131 54.2% Other regions 1 420 1 545 20.3% Total sales 7 390 7 625 100.0% +6.7% +6.7%

Trading operating profit 714 825 10.8% Capital expenditure 308 432 5.7%

48 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Nestlé Nutrition

Sales CHF 10.5 billion The increase in trading operating profit margin Organic growth + 3.1% was driven by strict control of fixed costs, lower Real internal growth +1.4% input costs, the results of portfolio management Trading operating profit margin 22.6% and lower impairment charges. At the same Trading operating profit margin +110 basis points time, there was increased investment behind our brands.

Nestlé Nutrition’s solid organic growth was supported by an increased real internal growth momentum during the year. Infant formula including growing-up milks, delivered good growth. Wyeth Infant Nutrition remained the key driver with its premium brand illuma. There was a positive contribution from the emerging markets, in particular China and Mexico. In the developed markets, Spain and Germany were the highlights, helped by successful innovation in NAN. Baby food delivered broad-based growth. Infant cereals performed well, with share gains in particular in Latin America and the United States. Tough comparisons and softer pricing due to lower input costs and moderating category growth across Asia had an impact.

Nestlé Nutrition In millions of CHF 2014* 2015 Proportion of total sales (%) RIG (%) OG (%) EMENA 2 366 2 062 19.7% AMS 3 975 3 688 35.3% AOA 4 574 4 711 45.0% Total sales 10 915 10 461 100.0% +1.4% +3.1%

Trading operating profit 2 343 2 361 22.6% Capital expenditure 393 489 4.7%

* 2014 figures have been restated – see note on page 40.

Nestlé Annual Review 2015 49 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Other businesses

Sales CHF 14.1 billion good growth, notably from the allergy portfolio Organic growth + 5.3% (Alfaré, Althéra, Alfamino) across all geographies Real internal growth + 3.7% and particularly in China. Growth was also Trading operating profit margin 15.7% supported by Vitaflo’s geographic expansion and Trading operating profit margin – 330 basis points the continuing roll-out of the product range. Novel Therapeutic Nutrition made strategic investments in Seres Therapeutics, a leading microbiome therapeutics company, while generic competition impacted Lotronex. The growth for Nestlé Professional was driven by Nestlé Skin Health delivered good growth. emerging markets, particularly Turkey, the Middle There were very good results in Aesthetic & East Region, Russia, Mexico, the South Asia Corrective, driven by Restylane and Azzalure, and Region and China. Western Europe continued to in Self-medication, driven by Cetaphil cleansers face challenges in the out-of-home environment. and moisturisers, the acne treatment Benzac The strategic growth drivers, beverage solutions and by continued roll-out of line extensions. The and savoury flavours, continued to perform well. Prescription business successfully launched The divestment of Davigel was completed in the rosacea treatment Soolantra and the higher November. strength acne drug Epiduo Forte, but faced Nespresso delivered solid growth in all regions pressure from some generic entrants in the US in 2015, affirming its strong position in European and in Europe. There was an impact from the markets and continued to build momentum in business’ decision to take a more conservative Asia and the Americas. In the USA, sales of the approach to its prescription rebate policy in the recently launched VertuoLine system accelerated US which required a one-off charge in the third on the back of the new varieties of machine quarter. and Grands Crus, and the new communication The trading operating profit margin of the campaign. Global growth was supported by Other businesses was impacted by the rebate innovations and significant investments in the adjustments in Nestlé Skin Health, the effect of coffee, machine and service pipeline, as well the strong Swiss Franc on Nespresso and the as in sustainability activities, brand awareness generic competition on Lotronex. These impacts and geographic expansion in new and existing overshadow good underlying profit improvement markets. across the businesses. Nestlé Health Science reported good growth, driven by strong performances in Europe, AOA, and in the USA. Consumer Care was the growth engine, driven by Boost and Carnation Breakfast Essentials and the continuing roll-out of the Meritene range in Europe. Medical Nutrition saw

Other businesses (a) In millions of CHF 2014* 2015 RIG (%) OG (%) Total sales 13 925 14 114 +3.7% +5.3%

Trading operating profit 2 651 2 221 15.7% Capital expenditure 573 518 3.7%

* 2014 figures have been restated – see note on page 40. (a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science and Nestlé Skin Health.

50 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Principal risks and uncertainties

Group Risk Management food safety or other compliance issue could The Nestlé Group Enterprise Risk Management have a negative effect on Nestlé’s reputation or Framework (ERM) is designed to identify, brand image. The Group has policies, processes, communicate, and mitigate risks in order to controls and regular monitoring (dedicated minimise their potential impact on the Group. dashboard with relevant KPIs) in place to prevent Nestlé has adopted a dual approach in identifying such events. and assessing risks. A top-down assessment is The success of the Nestlé Group depends on its performed at Group level once a year to create ability to anticipate consumer preferences and to a good understanding of the company’s mega- offer high-quality, appealing products. The Group’s risks, to allocate ownership to drive specific business is subject to some seasonality, and actions around them and take any relevant steps adverse weather conditions may impact sales. to address them. A bottom-up assessment occurs The food industry as a whole is faced with the in parallel and focuses on the global risk portfolio global challenge of increasing obesity. The Group in the businesses/corporate functions. It involves makes all its products available in a range of sizes the aggregation of individual assessments by and varieties designed to meet all needs and the Zones, Globally Managed Businesses and all occasions. all markets. It is intended to provide a high-level Nestlé is dependent on the sustainable risk mapping and allows Group Management to supply of a number of raw materials, packaging make sound decisions on the future operations materials and services/utilities. Any major event of the company and ensure that any risk growing triggered by natural hazards (drought, flood, etc.), in importance within the organisation is captured change in macroeconomic environment (shift in and addressed in Nestlé’s ERM agenda. Nestlé production patterns, biofuels, excessive trading, engages with external stakeholders to better etc.), resulting in input price volatilities and/or understand issues that are of most concern to capacity constraints, could potentially impact them with the aim of assessing any potential Nestlé’s financial results. The Group has policies, gaps between internal and external perception processes, controls and regular monitoring in of risks and their impact on reputation. place to (if ever possible) anticipate such events Recommendations from stakeholders are and adequately mitigate against them. reported on in the Nestlé in society report along In particular, Nestlé manages risks and with the issues stakeholders consider to be opportunities related to climate change and water material to the company. resources proactively given the impact it may An annual compliance risk assessment is have on agriculture and food production systems. performed in the Group Compliance Committee. Details of the Group’s climate change and water Risk assessments are the responsibility of line strategies are available in Nestlé’s response to management; this applies equally to a business, the CDP Climate Change and Water Investor a market or a function, and any mitigating Information Requests and also in the Nestlé in actions identified in the assessments are the society report. responsibility of the individual line management. If The Group’s liquidities/liabilities (currency Group-level intervention is required, responsibility fluctuation, interest rate, derivatives, and/or for mitigating actions will generally be determined hedging, pension funding obligations/retirement by the Executive Board. benefits, banking/commercial credit, and cost The results of the Group ERM are presented of capital, etc.) could be impacted by any major annually to the Executive Board and to the Audit event in the financial markets. Again, Nestlé has Committee, and conclusions reported to the the appropriate risk mitigation measures in place. Board of Directors. Nestlé is dependent on sustainable manufacturing/supply of finished goods for Factors affecting results all product categories. A major event in one Nestlé’s reputation is based on consumers’ of Nestlé’s key plants, at a key supplier, trust. Any major event triggered by a serious contract manufacturer, co-packer, and/or

Nestlé Annual Review 2015 51 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Factories

warehouse facility could potentially lead to a Americas (AMS) supply disruption and impact Nestlé’s financial results. Business continuity plans are established Argentina 7 P L P P L P L P L L P L and regularly maintained in order to mitigate Bolivia 1 L L L L P L L against such an event. Brazil 23 P L P L P L P L P L P L P L The Group depends on accurate, timely Canada 10 P L P L P L P L P L P L P L information and numerical data from key software Chile 7 P L L P L P L P L P L L applications, without disruption, to enable Colombia 4 P L L P L P L P L P L P L day-to-day decision making. Costa Rica 1 L L L P L L L L The Group is subject to environmental regimes Cuba 3 L P L P L L L L applying in all countries where it operates and has Dominican Republic 2 L L P L L P L L L put controls in place to comply with legislation Ecuador 3 P L L P L P L P L P L L concerning the protection of the environment, Guatemala 3 P L L L L P L L L including the use of natural resources, release Mexico 11 P L P L P L P L P L P L P L of air emissions and waste water, and the Nicaragua 1 P L L P L L L L L generation, storage, handling, transportation, Panama 1 L L P L L P L L L treatment and disposal of waste materials. Peru 1 P L L P L P L P L P L L Nestlé is subject to health and safety regimes Trinidad and Tobago 1 P L L P L L L L L in all countries where it operates and has United States 76 P L P L P L P L P L P L P L procedures in place to comply with legislation Uruguay 1 P L L L L P L L L concerning the protection of the health and Venezuela 5 P L L P L P L P L P L P L welfare of employees and contractors. Our Group companies are party to a variety of legal proceedings arising out of the normal course of business. The relevant companies believe that there are valid defences for the claims, and such companies intend to defend any such litigation. Nestlé has factories in 85 countries and sales in 189 countries around the world. Security, political instability, legal and regulatory, fiscal, macroeconomic, foreign trade, labour and/or infrastructure risks could potentially impact Nestlé’s ability to do business in a country or region. Events such as infectious disease could also impact the Group’s ability to operate. Any of these events could lead to a supply disruption and impact Nestlé’s financial results. Regular monitoring and ad hoc business continuity plans are established in order to mitigate against such events. One of the most valuable assets of Nestlé is The figure in black after the P Powdered and Liquid Beverages the Group-wide geographical and product country denotes the number P Water category spreads, which represent a tremendous of factories. P Milk products and Ice cream natural hedge. P Local production (may P Nutrition and Health Science represent production P Prepared dishes and in several factories). cooking aids L Imports (may, in a few P Confectionery particular cases, P PetCare represent purchases from third parties in the market concerned).

52 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Europe, Middle East and North Africa (EMENA) Asia, Oceania and sub-Saharan Africa (AOA)

Algeria 2 P L P P L L L L Angola 1 L L P L L L L Austria 1 P L L P L L P L L L Australia 9 P L L P L P L P L P L P L Bahrain 1 L P L L L L L L Bangladesh 1 P L P P L P L P Belgium 1 L P L L L L L L Cameroon 1 P L P L L P L Bulgaria 2 L L P L L L P L L Côte d’Ivoire 2 P L L P L L P Czech Republic 3 L L L L P L P L L Democratic Republic Denmark 1 L L L L P L L L of Congo (DRC) 1 L L P L L P L L Egypt 3 P L P L P L P L P P L Ghana 1 P L L P L P L L L Finland 3 L L P L P L P L L L Greater China Region 30 P L P L P L P L P L P L P L France 21 P L P L P L P L P L L P L India 7 P L P P L P L P L Germany 17 P L P L P L P L P L P L P L Indonesia 4 P L L P L P L P L P L L Greece 3 P L P L P L L L L L Japan 3 P L L P L L P L P L L Hungary 2 P L L L L L P L P L Kenya 1 P L L P L P L P L L Iran 2 L P P L P L L L L Malaysia 7 P L L P L P L P L P L L Iraq 1 L P L L L L L New Zealand 2 L L L L P L P L P L Ireland 1 L L P L P L L L L Nigeria 3 P L P P L P L P L P Israel 9 P L L P L P L P P L L Pakistan 4 P L P P L P L L Italy 13 P L P L P L L P L P L P L Papua New Guinea 1 P L P L L P L L Jordan 1 L P L L L L L L Philippines 6 P L L P L P L P L L L Lebanon 2 L P L L L L L L Republic of Korea 1 L P L L L L L L Morocco 1 P L L P L P L P L L L Senegal 1 L L L L P L Netherlands 1 L L P L P L L L L Singapore 2 P L L P L P L P L L L Poland 8 P L P L P L P L P L P L P L South Africa 7 P L L P L P L P L P L P L Portugal 3 P L L P L P L L L L Sri Lanka 1 P L P L L P L L Qatar 1 L P L L L L L L Thailand 7 P L P L P L P L P L L P L Republic of Serbia 2 L L P L L P L P L L Vietnam 5 P L P L P L L P L Romania 1 P L L L L L P L L Zimbabwe 1 P L P L P L P L L Russia 7 P L L P L P L P L P L P L Saudi Arabia 7 L P L L L L L L Slovak Republic 1 L L L L P L L L Spain 11 P L P L P L P L P L P L P L Sweden 2 P L L L P L L L L Switzerland 12 P L P L P L P L P L P L L Syria 1 L L L L L Tunisia 1 P L P L L L Turkey 2 P L P L P L L P P L L Ukraine 3 P L L L L P L P L L United Arab Emirates 2 P L P L P L L P L P L L United Kingdom 9 P L P L P L P L L P L P L Uzbekistan 2 L P P L P L L L

Nestlé Annual Review 2015 53 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Corporate Governance and Compliance

54 NestléNestlé Annual Annual ReviewReview 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Corporate Governance

Our approach to Corporate Governance is built Our Annual Report includes both our financial upon a set of strong principles and values set and nonfinancial commitments. It gives insights by the Board of Directors for our management into how material issues affect our financial and employees. Our Board also provides our performance and how our long-term strategy long-term strategy and appropriate oversight. relates to our ability to create value. We recognize It establishes the appropriate tone at the that this is central to our business model and top; oversees management and long-term gives us our license to operate. For our company performance; reviews financial planning and audit to be successful over the long term and create process; ensures risk oversight and compliance; value for shareholders, we must also create value sets compensation and performance goals; and for society. manages director nomination, evaluation and succession planning. It oversees our economic, social and environmental sustainability. But good Corporate Governance is not an Share capital distribution by geography end in itself. It is a means to create market confidence and helps focus on the long term. Therefore, Nestlé has adopted best practices in P Switzerland 35.21% governance including an intense dialogue with P United States 26.80% our shareholders in our roadshows, investor P United Kingdom 5.78% meetings, shareholder surveys, analyst and P Germany 4.79% P Belgium 4.47% engagement calls, Chairman’s Roundtables and P Luxembourg 3.06% bilateral meetings. We actively engage with the P Japan 2.46% providers of capital and other stakeholders to P Canada 2.33% P China 2.02% ensure our sustainable long-term growth. P France 1.84% Our Chairman’s and Corporate Governance P Others 4.05% Committee liaises between the Chairman and the full Board, acts as a consultant body to the Chairman and CEO, and regularly reviews aspects of our Governance. It also advises on financial matters. Share capital by investor type, long-term evolution (a) Our Nomination Committee ensures our managerial sustainability and oversees the 100% long-term succession planning of the Board, its independence and self-evaluation. It 80% ensures an appropriately wide net is cast on key successions. 60% Our Compensation Committee sets our Institutions 79% remuneration principles and prepares the 40% proposals for remuneration. In 2015, we implemented the new Swiss ‘say on pay’ law both 20% in letter and in spirit. Our proposals were adopted Private Shareholders 21% with large majorities of our shareholders. Our 0% Compensation Report explains our compensation 1999 2003 2007 2011 2015 system and pay-outs. It is submitted annually to (a) Percentage derived from total number of registered shares. an advisory vote of our shareholders. Registered shares represent 57.6% of the total share capital. Our Audit Committee oversees internal and Statistics are rounded, as at 31.12.2015. external audit, financial reporting, compliance and risk management, and paid special attention to cyberlaw and quality this year.

Nestlé Annual Review 2015 55 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Board of Directors of Nestlé S.A.

Helmut O. Maucher Board of Directors Honorary Chairman of Nestlé S.A. at 31 December 2015 David P. Frick Secretary to the Board Peter Brabeck-Letmathe (1, 2, 4) Chairman KPMG SA Geneva branch (1) Paul Bulcke (1, 2) Independent auditors Chief Executive Officer Andreas Koopmann (1, 2, 3, 4) Vice Chairman Chairman, Georg Fischer AG Beat Hess (1, 2) Former Group Legal Director, Royal Dutch Shell plc. Peter Brabeck-Letmathe Renato Fassbind (1, 2, 5) Vice Chairman, Swiss Re AG Daniel Borel (1, 3) Co-founder, Logitech International S.A. Steven G. Hoch (1, 4) Partner, Brown Advisory, LLC Naïna Lal Kidwai (1, 5) Former Chairperson, HSBC Group of Companies in India Jean-Pierre Roth (1, 3) Chairman, Geneva Cantonal Bank Ann M. Veneman (1, 4) Former Executive Director, UNICEF, and Secretary, U.S. Department of Agriculture Paul Bulcke Henri de Castries (1, 5) Chairman and CEO, AXA Eva Cheng (1, 5) Former Chairwoman and CEO, Amway China & Southeast Asia Ruth K. Oniang’o (1) Professor of Food Science and Nutrition Patrick Aebischer (1) President of the Swiss Federal Institute of Technology Lausanne (EPFL)

(1) Term expires on the date of the For further information on the Board of Annual General Meeting 2016. Directors, please refer to the Corporate (2) Chairman’s and Corporate Governance Report 2015. Governance Committee. (3) Compensation Committee. (4) Nomination Committee. (5) Audit Committee.

56 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Andreas Koopmann Beat Hess Renato Fassbind

Daniel Borel Steven G. Hoch Naïna Lal Kidwai

Jean-Pierre Roth Ann M. Veneman Henri de Castries

Eva Cheng Ruth K. Oniang’o Patrick Aebischer

Nestlé Annual Review 2015 57 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Executive Board of Nestlé S.A.

Executive Board of Nestlé S.A. at 31 December 2015

1 Paul Bulcke 8 Marco Settembri Chief Executive Officer EVP, Nestlé Waters 9 François-Xavier Roger 2 Luis Cantarell EVP, Chief Financial Officer EVP, Europe, Middle East, 10 Magdi Batato North Africa EVP, Operations 3 Laurent Freixe 11 Peter Vogt EVP, United States of Deputy EVP, America, Canada, Latin Human Resources America, Caribbean 12 Martial Rolland 4 Chris Johnson Deputy EVP, EVP, Nestlé Business Nestlé Professional Excellence 13 Heiko Schipper 5 Patrice Bula Deputy EVP, EVP, Strategic Business Units, Nestlé Nutrition Marketing and Sales 14 David P. Frick 6 Wan Ling Martello SVP, Corporate Governance, EVP, Asia, Oceania, Compliance and Corporate sub-Saharan Africa Services 7 Stefan Catsicas EVP, Innovation Technology, Yves Philippe Bloch Research and Development Corporate Secretary

EVP: Executive Vice President For further information on the SVP: Senior Vice President Executive Board, please refer to the Corporate Governance Report 2015.

58 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 13 11

12 14 4

8 10 2

7

5 6 3 9 1

Nestlé Annual Review 2015 59 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Compliance

Quality and trust is the very foundation on which interactions with key stakeholders and taking we build our business. It includes our behaviour care of the Group’s interests as custodians of as a responsible company. Compliance at Nestlé Nestlé’s compliance and reputation across all includes following applicable laws and our own businesses in a Market. Specific focus areas of commitments in our principles and policies. the Corporate Compliance programme included Compliance helps us build trust, with our the roll-out of our enhanced anti-corruption employees, as well as with our shareholders and programme; emphasis on execution and our other stakeholders. This is what makes our efficiency of compliance processes and tools; efforts value adding and sustainable. renovated training tools for Code of Conduct, Our Corporate Business Principles, our anti-corruption, security and anti-bribery; and Management and Leadership Principles and improved internal and external communication. our Code of Business Conduct include our Our efforts were recognized by the joint best commitments to integrity. But we recognize that industry score for Compliance in this year’s Dow compliance is not a matter of ever more detailed Jones Sustainability Index. policies and checklists. We cannot regulate honesty, but we are convinced that people know what honesty is. We aim to provide guidance to our people to do the ‘right’ thing even in situations which are not specifically regulated. We provide the necessary training in our Management School in Rive-Reine, at in-person trainings in the Markets, as well as through our e-learning tools. We monitor compliance though our corporate functions, our internal audit function and our external auditors. Through our CARE programme, which relies on independent external auditors, we regularly assess specific aspects of our compliance. Our Integrity Reporting System and our ‘Tell Us’ system allow us to address complaints from employees and external stakeholders. In 2015, 250 CARE audits were conducted and gaps addressed. 1400 complaints from employees and 370 complaints from suppliers and other third parties were investigated and remedial action taken. While Compliance remains a leadership responsibility, management is supported by our dedicated Corporate Compliance function and all functions engaged in our holistic, risk and principles based compliance programme. Our Compliance Committee defines the framework, facilitates coordination and provides guidance and best practices. Market Compliance Officers and committees ensure a consistent approach across the Group and help identify local compliance priorities. In 2015, we reemphasized the role of our Market Heads to focus on increasing

60 Nestlé Annual Review 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Shareholder information

© 2016, Nestlé S.A., Cham and Vevey Stock exchange listing 7 April 2016 (Switzerland) At 31 December 2015, Nestlé S.A. shares 149th Annual General Meeting, are listed on the SIX Swiss Exchange, Zurich Beaulieu Lausanne, The Annual Report contains forward (ISIN code: CH0038863350). Lausanne (Switzerland) looking statements which reflect American Depositary Receipts (ISIN code: Management’s current views and US6410694060) representing Nestlé S.A. estimates. The forward looking statements involve certain risks and shares are offered in the USA by Citibank, 8 April 2016 uncertainties that could cause actual N.A., New York. Last trading day with entitlement to dividend results to differ materially from those contained in the forward looking statements. Potential risks and Registered Offices 11 April 2016 uncertainties include such factors as Nestlé S.A. Ex-dividend date general economic conditions, foreign Avenue Nestlé 55 exchange fluctuations, competitive CH-1800 Vevey (Switzerland) product and pricing pressures, and regulatory developments. tel. +41 (0)21 924 21 11 13 April 2016 Payment of the dividend This Annual Report is published in Nestlé S.A. (Share Transfer Office) German, English and French. The Zugerstrasse 8 English version is binding for the CH-6330 Cham (Switzerland) 14 April 2016 content of the Annual Report of tel. +41 (0)41 785 20 20 2016 First quarter sales figures Nestlé S.A.

For additional information, contact: The brands in italics are registered trademarks of the Nestlé Group. Nestlé S.A. 18 August 2016 Investor Relations 2016 Half-yearly Results Visual concept and design Avenue Nestlé 55 Nestec Ltd., Corporate Identity CH-1800 Vevey (Switzerland) & Design, with Gavillet & Cie tel. +41 (0)21 924 35 09 20 October 2016 fax +41 (0)21 924 48 00 2016 Nine months sales figures Photography e-mail: [email protected] Valérie Lhomme (products), Trevor Ray Hart (consumers), Alberto Venzago (boards), As to information concerning the share 16 February 2017 Harmen Hoogland, Bruno Jorge, register (registrations, transfers, 2016 Full Year Results Remo Nägeli, Franz Rindlisbacher dividends, etc.), please contact: Nestlé S.A. (Share Transfer Office) Illustrations Zugerstrasse 8 6 April 2017 Helge Hjorth Bentsen CH-6330 Cham (Switzerland) 150th Annual General Meeting, tel. +41 (0)41 785 20 20 Beaulieu Lausanne, Production fax +41 (0)41 785 20 24 Lausanne (Switzerland) brain’print GmbH (Switzerland) e-mail: [email protected] Paper This report is printed on Lessebo The Annual Review is available online Smooth White, a paper produced as a PDF in English, French and German. from well-managed forests and other The consolidated income statement, balance controlled sources certified by the sheet and cash flow statement are also Forest Stewardship Council (FSC). available as Excel files. www.nestle.com

Nestlé Annual Review 2015 61 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Financial Statements 2015

Consolidated Financial Statements of the Nestlé Group 2015

149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 59 Principal exchange rates 136 Report of the Statutory Auditor on the Consolidated Financial Statements 60 Consolidated income statement for the year ended 31 December 2015 138 Financial information – 5 year review

61 Consolidated statement of 140 Companies of the Nestlé Group, joint comprehensive income for the year arrangements and associates ended 31 December 2015

62 Consolidated balance sheet as at 31 December 2015

64 Consolidated cash fl ow statement for the year ended 31 December 2015

65 Consolidated statement of changes in equity for the year ended 31 December 2015

67 Notes 67 1. Accounting policies 70 2. Scope of consolidation, acquisitions and disposals of businesses, assets held for sale 74 3. Analyses by segment 82 4. Net other trading and operating income/ (expenses) 83 5. Net fi nancial income/(expense) 84 6. Inventories 7. Trade and other receivables 85 8. Property, plant and equipment 88 9. Goodwill and intangible assets 93 10. Employee benefi ts 102 11. Equity compensation plans 104 12. Provisions and contingencies 106 13. Financial instruments 118 14. Taxes 121 15. Associates and joint ventures 123 16. Earnings per share 124 17. Cash fl ow statement 127 18. Equity 130 19. Lease commitments 132 20. Transactions with related parties 133 21. Guarantees 134 22. Group exposure in Venezuela 23. Events after the balance sheet date

58 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Principal exchange rates

CHF per 2015 2014 2015 2014 Year ending rates Weighted average annual rates 1 US Dollar USD 0.989 0.990 0.964 0.916 1 Euro EUR 1.081 1.203 1.068 1.215 100 Chinese Yuan Renminbi CNY 15.239 15.957 15.325 14.875 100 Brazilian Reais BRL 25.337 37.262 29.004 38.898 1 Pound Sterling GBP 1.467 1.540 1.474 1.508 100 Mexican Pesos MXN 5.690 6.716 6.074 6.885 100 Philippine Pesos PHP 2.109 2.208 2.115 2.062 1 Canadian Dollar CAD 0.713 0.852 0.752 0.830 1 Russian Ruble RUB 0.013 0.017 0.016 0.024 1 Australian Dollar AUD 0.723 0.810 0.723 0.826 100 Japanese Yen JPY 0.822 0.827 0.798 0.862

Consolidated Financial Statements of the Nestlé Group 2015 59 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Consolidated income statement for the year ended 31 December 2015

In millions of CHF Notes 2015 2014 Sales 3 88 785 91 612

Other revenue 298 253 Cost of goods sold (44 730) (47 553) Distribution expenses (7 899) (8 217) Marketing and administration expenses (20 744) (19 651) Research and development costs (1 678) (1 628) Other trading income 4 78 110 Other trading expenses 4 (728) (907) Trading operating profi t 3 13 382 14 019

Other operating income 4 126 154 Other operating expenses 4 (1 100) (3 268) Operating profi t 12 408 10 905

Financial income 5 101 135 Financial expense 5 (725) (772) Profi t before taxes, associates and joint ventures 11 784 10 268

Taxes 14 (3 305) (3 367) Income from associates and joint ventures 15 988 8 003 Profi t for the year 9 467 14 904 of which attributable to non-controlling interests 401 448 of which attributable to shareholders of the parent (Net profi t) 9 066 14 456

As percentages of sales Trading operating profi t 15.1% 15.3% Profi t for the year attributable to shareholders of the parent (Net profi t) 10.2% 15.8%

Earnings per share (in CHF) Basic earnings per share 16 2.90 4.54 Diluted earnings per share 16 2.89 4.52

60 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Consolidated statement of comprehensive income for the year ended 31 December 2015

In millions of CHF Notes 2015 2014 Profi t for the year recognised in the income statement 9 467 14 904

Currency retranslations – Recognised in translation reserve (4 061) 2 660 – Reclassifi ed from translation reserve to income statement 102 1 003 Fair value adjustments on available-for-sale fi nancial instruments – Recognised in fair value reserve (134) 191 – Reclassifi ed from fair value reserve to income statement (75) (4) Fair value adjustments on cash fl ow hedges – Recognised in hedging reserve (5) 31 – Reclassifi ed from hedging reserve 83 (87) Taxes 14 237 5 Share of other comprehensive income of associates and joint ventures 15 – Recognised in the reserves 165 83 – Reclassifi ed from the reserves to income statement — (436) Items that are or may be reclassifi ed subsequently to the income statement (3 688) 3 446

Remeasurement of defi ned benefi t plans 10 (370) (1 745) Taxes 14 8 352 Share of other comprehensive income of associates and joint ventures 15 112 (153) Items that will never be reclassifi ed to the income statement (250) (1 546)

Other comprehensive income for the year 18 (3 938) 1 900

Total comprehensive income for the year 5 529 16 804 of which attributable to non-controlling interests 317 556 of which attributable to shareholders of the parent 5 212 16 248

Consolidated Financial Statements of the Nestlé Group 2015 61 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Consolidated balance sheet as at 31 December 2015 before appropriations

In millions of CHF Notes 2015 2014 Assets

Current assets Cash and cash equivalents 13/17 4 884 7 448 Short-term investments 13 921 1 433 Inventories 6 8 153 9 172 Trade and other receivables 7/13 12 252 13 459 Prepayments and accrued income 583 565 Derivative assets 13 337 400 Current income tax assets 874 908 Assets held for sale 2 1 430 576 Total current assets 29 434 33 961

Non-current assets Property, plant and equipment 8 26 576 28 421 Goodwill 9 32 772 34 557 Intangible assets 9 19 236 19 800 Investments in associates and joint ventures 15 8 675 8 649 Financial assets 13 5 419 5 493 Employee benefi ts assets 10 109 383 Current income tax assets 128 128 Deferred tax assets 14 1 643 2 058 Total non-current assets 94 558 99 489

Total assets 123 992 133 450

62 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Consolidated balance sheet as at 31 December 2015

In millions of CHF Notes 2015 2014 Liabilities and equity

Current liabilities Financial debt 13 9 629 8 810 Trade and other payables 13 17 038 17 437 Accruals and deferred income 3 673 3 759 Provisions 12 564 695 Derivative liabilities 13 1 021 757 Current income tax liabilities 1 124 1 264 Liabilities directly associated with assets held for sale 2 272 173 Total current liabilities 33 321 32 895

Non-current liabilities Financial debt 13 11 601 12 396 Employee benefi ts liabilities 10 7 691 8 081 Provisions 12 2 601 3 161 Deferred tax liabilities 14 3 063 3 191 Other payables 13 1 729 1 842 Total non-current liabilities 26 685 28 671

Total liabilities 60 006 61 566

Equity 18 Share capital 319 322 Treasury shares (7 489) (3 918) Translation reserve (21 129) (17 255) Retained earnings and other reserves 90 637 90 981 Total equity attributable to shareholders of the parent 62 338 70 130 Non-controlling interests 1 648 1 754 Total equity 63 986 71 884

Total liabilities and equity 123 992 133 450

Consolidated Financial Statements of the Nestlé Group 2015 63 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Consolidated cash fl ow statement for the year ended 31 December 2015

In millions of CHF Notes 2015 2014 Operating activities Operating profi t 17 12 408 10 905 Depreciation and amortisation 3 178 3 058 Impairment 576 2 067 Net result on disposal of businesses 422 509 Other non-cash items of income and expense 172 689 Cash fl ow before changes in operating assets and liabilities 16 756 17 228

Decrease/(increase) in working capital 17 741 (114) Variation of other operating assets and liabilities 17 (248) 85 Cash generated from operations 17 249 17 199

Net cash fl ows from treasury activities 17 (93) (356) Taxes paid (3 310) (2 859) Dividends and interest from associates and joint ventures 15 456 716 Operating cash fl ow 14 302 14 700

Investing activities Capital expenditure 8 (3 872) (3 914) Expenditure on intangible assets 9 (422) (509) Acquisition of businesses 2 (530) (1 986) Disposal of businesses 2 213 321 Investments (net of divestments) in associates and joint ventures (a) 15 (44) 3 958 Infl ows/(outfl ows) from treasury investments 521 (844) Other investing activities (19) (98) Investing cash fl ow (4 153) (3 072)

Financing activities Dividend paid to shareholders of the parent 18 (6 950) (6 863) Dividends paid to non-controlling interests (424) (356) Acquisition (net of disposal) of non-controlling interests — (49) Purchase (net of sale) of treasury shares (b) (6 377) (1 617) Infl ows from bonds and other non-current fi nancial debt 1 381 2 202 Outfl ows from bonds and other non-current fi nancial debt (508) (1 969) Infl ows/(outfl ows) from current fi nancial debt 643 (1 985) Financing cash fl ow (12 235) (10 637)

Currency retranslations (478) 42 Increase/(decrease) in cash and cash equivalents (2 564) 1 033

Cash and cash equivalents at beginning of year 7 448 6 415 Cash and cash equivalents at end of year 4 884 7 448

(a) In 2014, mainly relates to the partial disposal of L’Oréal shares. The Group sold part of its shares to L’Oréal for a price of CHF 7342 million (see Note 15) in exchange for the remaining 50% stake in Galderma for an equity value of CHF 3201 million (see Note 2) and cash of CHF 4141 million. (b) Mostly relates to the Share Buy-Back Programme launched in 2014.

64 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Consolidated statement of changes in equity for the year ended 31 December 2015

In millions of CHF Share capital Treasury shares Translation reserve Retained earnings and other reserves equity Total attributable to shareholders of the parent Non-controlling interests Total equity Equity as at 31 December 2013 322 (2 196) (20 811) 85 260 62 575 1 564 64 139

Profi t for the year — — — 14 456 14 456 448 14 904 Other comprehensive income for the year — — 3 556 (1 764) 1 792 108 1 900 Total comprehensive income for the year — — 3 556 12 692 16 248 556 16 804

Dividend paid to shareholders of the parent — — — (6 863) (6 863) — (6 863) Dividends paid to non-controlling interests ————— (356) (356) Movement of treasury shares — (1 943) — 204 (1 739) — (1 739) Equity compensation plans — 221 — (48) 173 — 173 Changes in non-controlling interests — — — (297) (297) (10) (307) Total transactions with owners — (1 722) — (7 004) (8 726) (366) (9 092)

Other movements — — — 33 33 — 33

Equity as at 31 December 2014 322 (3 918) (17 255) 90 981 70 130 1 754 71 884

Profi t for the year — — — 9 066 9 066 401 9 467 Other comprehensive income for the year — — (3 874) 20 (3 854) (84) (3 938) Total comprehensive income for the year — — (3 874) 9 086 5 212 317 5 529

Dividend paid to shareholders of the parent — — — (6 950) (6 950) — (6 950) Dividends paid to non-controlling interests ————— (424) (424) Movement of treasury shares — (6 322) — 39 (6 283) — (6 283) Equity compensation plans — 239 — (56) 183 — 183 Changes in non-controlling interests — — — (21) (21) 1 (20) Reduction in share capital (a) (3) 2 512 — (2 509) — — — Total transactions with owners (3) (3 571) — (9 497) (13 071) (423) (13 494)

Other movements ———67 67 — 67

Equity as at 31 December 2015 319 (7 489) (21 129) 90 637 62 338 1 648 63 986

(a) Reduction in share capital, see Note 18.1.

Consolidated Financial Statements of the Nestlé Group 2015 65 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 66 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Notes

1. Accounting policies Foreign currencies The functional currency of the Group’s entities is the currency Accounting convention and accounting standards of their primary economic environment. The Consolidated Financial Statements comply with In individual companies, transactions in foreign currencies International Financial Reporting Standards (IFRS) issued are recorded at the rate of exchange at the date of the by the International Accounting Standards Board (IASB) transaction. Monetary assets and liabilities in foreign and with Swiss law. currencies are translated at year-end rates. Any resulting They have been prepared on an accrual basis and under exchange differences are taken to the income statement, the historical cost convention, unless stated otherwise. All except when deferred in other comprehensive income as signifi cant consolidated companies, joint arrangements and qualifying cash fl ow hedges. associates have a 31 December accounting year-end. On consolidation, assets and liabilities of Group entities The Consolidated Financial Statements 2015 were approved reported in their functional currencies are translated into for issue by the Board of Directors on 17 February 2016 and Swiss Francs, the Group’s presentation currency, at year-end are subject to approval by the Annual General Meeting on exchange rates. Income and expense are translated into Swiss 7 April 2016. Francs at the annual weighted average rates of exchange or at the rate on the date of the transaction for signifi cant items. Accounting policies Differences arising from the retranslation of opening net Accounting policies are included in the relevant notes to assets of Group entities, together with differences arising the Consolidated Financial Statements and are presented from the restatement of the net results for the year of Group as text highlighted with a grey background. The accounting entities, are recognised in other comprehensive income. policies below are applied throughout the fi nancial The balance sheet and net results of Group entities statements. operating in hyperinfl ationary economies are restated for the changes in the general purchasing power of the local Key accounting judgements, estimates currency, using offi cial indices at the balance sheet date, and assumptions before translation into Swiss Francs. The preparation of the Consolidated Financial Statements When there is a change of control in a foreign operation, requires Group Management to exercise judgement and to exchange differences that were recorded in equity are make estimates and assumptions that affect the application recognised in the income statement as part of the gain of policies, reported amounts of revenues, expenses, assets or loss on disposal. and liabilities and disclosures. These estimates and associated assumptions are based on historical experience and various Valuation methods, presentation and defi nitions other factors that are believed to be reasonable under the Revenue circumstances. Actual results may differ from these estimates. Sales represent amounts received and receivable from third The estimates and underlying assumptions are reviewed parties for goods supplied to the customers and for services on an ongoing basis. Revisions to accounting estimates are rendered. Revenue from the sales of goods is recognised in recognised in the period in which the estimate is revised if the income statement at the moment when the signifi cant the revision affects only that period, or in the period of the risks and rewards of ownership of the goods have been revision and future periods if the revision affects both current transferred to the buyer, which is mainly upon shipment. and future periods. Those areas affect mainly provisions and It is measured at the list price applicable to a given distribution contingencies (see Note 12), goodwill and intangible assets channel after deduction of returns, sales taxes, pricing with indefi nite useful life impairment tests (see Note 9), allowances, other trade discounts and couponing and price employee benefi ts (see Note 10), allowance for doubtful promotions to consumers. Payments made to the customers receivables (see Note 7), taxes (see Note 14) and hyper- for commercial services received are expensed. infl ation (see Note 22). Other revenue is primarily license fees from third parties which have been earned during the period.

Consolidated Financial Statements of the Nestlé Group 2015 67 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 1. Accounting policies

Expenses In addition, intangible assets are attributed to the country Cost of goods sold is determined on the basis of the cost of their legal owner rather than being allocated to the of production or of purchase, adjusted for the variation of countries of the affi liated companies using these assets. inventories. All other expenses, including those in respect Finally, goodwill items which were presented as part of of advertising and promotions, are recognised when the unallocated items are attributed to the countries of the Group receives the risks and rewards of ownership of the affi liated companies where the related acquired business goods or when it receives the services. Additional details is operated. of specifi c expenses are provided in the respective notes. 2014 comparative information has been restated.

Changes in Consolidated cash fl ow statement Other changes in presentation The Group has enhanced the presentation of its cash fl ow Notes to the Consolidated Financial Statements have been statement by including additional details of some material restructured, with the accounting policy generally being items (e.g. depreciation and amortisation) on the face of the placed immediately before the respective Note. Information consolidated cash fl ow statement, while aggregating some by geographic area has been restated following the changes immaterial items. described under Changes in presentation – Analyses by 2014 comparatives have been restated. segment regarding countries under the geography EMENA and AOA. Changes in presentation – Analyses by segment For consistency with the annual accounts of Nestlé S.A., The scope of the operating segments has been modifi ed the Consolidated Financial Statements include the early following the changes in management responsibilities as adoption of the new provisions of the Swiss Law regarding from 1 January 2015. Zone Europe has been renamed Zone accounting and fi nancial reporting with regards of Europe, Middle East and North Africa (EMENA) and now consolidated accounts (application is mandatory for the includes the Maghreb, the Middle East, the North East Africa year beginning 1 January 2016). Only the Notes are impacted. region, Turkey and Israel, which were formerly included The main impact is the deletion of the Note on Group risk in Zone Asia, Oceania and Africa. Zone Asia, Oceania and management, which is discussed now only in the Annual Africa has been renamed Zone Asia, Oceania and sub- Review. Saharan Africa (AOA). Nestlé Nutrition now includes Growing-Up Milks business formerly included in the Changes in accounting policies geographic Zones. Finally, Other businesses now includes A number of standards have been modifi ed on miscellaneous the Bübchen business, formerly included in Nestlé Nutrition. points with effect from 1 January 2015. Such changes The amount of segment assets is no longer disclosed. include Defi ned Benefi t Plans: Employee Contributions Segment assets are not included in the measures used for (Amendments to IAS 19), as well as the Annual Improvements allocating resources and assessing segment performance. to IFRS 2010–2012 Cycle and the Annual Improvements to The Group discloses on a voluntary basis invested capital IFRS 2011–2013 Cycle. (as defi ned in Note 3) as well as goodwill and intangible None of these amendments had a material effect on the assets by segment for consistency with long-standing Group’s Financial Statements. practice. Goodwill and intangible assets are not included in invested capital since the amounts recognised are not Changes in IFRS that may affect the Group comparable between segments due to differences in the after 31 December 2015 intensity of acquisition activity and changes in accounting The following new standards, interpretations and standards which were applicable at various points in time amendments to existing standards have been published when the Group undertook signifi cant acquisitions. and are mandatory for the accounting period beginning Information by product has been modifi ed following the on 1 January 2016 or later. The Group has not early adopted main transfer of Growing-Up Milks business in Milk products them. and Ice cream to Nutrition and Health Science. Sales and non-current assets in Switzerland and countries IFRS 9 – Financial Instruments which individually represent at least 10% of the Group sales The standard addresses the accounting principles for the or 10% of the Group non-current assets are disclosed fi nancial reporting of fi nancial assets and fi nancial liabilities, separately, instead of the top ten countries and Switzerland. including classifi cation, measurement, impairment,

68 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 1. Accounting policies

derecognition and hedge accounting. The standard will affect the Group’s accounting for its available-for-sale fi nancial assets, as IFRS 9 only permits the recognition of fair value gains and losses in other comprehensive income under some circumstances and gains and losses on certain instruments with specifi c cash fl ow characteristics are never reclassifi ed to the income statement at a later date. There is no expected impact on the Group’s accounting for fi nancial liabilities, as the new requirements only affect the accounting for fi nancial liabilities that are designated at fair value through profi t or loss, and the Group does not have any such liabilities. The Group is currently assessing the impact of the new impairment and hedge accounting requirements. In particular it is expected that the new component hedge model may bring improved alignment between the risk management strategies and their accounting treatment. This standard is mandatory for the accounting period beginning on 1 January 2018.

IFRS 15 – Revenue from Contract with Customers This standard combines, enhances and replaces specifi c guidance on recognising revenue with a single standard. It defi nes a new fi ve-step model to recognise revenue from customer contracts. The Group is currently assessing the potential impact of this new standard. This standard is mandatory for the accounting period beginning on 1 January 2018.

IFRS 16 – Leases This standard will replace IAS 17 and sets out the principles for the recognition, measurement, presentation and disclosure of leases. The main effect on the Group is that IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for almost all leases and will therefore result in an increase of total assets and total liabilities. All things being equal, under the new standard higher trading operating profi t would be partially or entirely offset by higher interest expense. The Group is currently assessing the precise impact of this new standard. This standard is mandatory for the accounting period beginning on 1 January 2019.

Improvements and other amendments to IFRS/IAS A number of standards have been modifi ed on miscellaneous points. None of these amendments are expected to have a material effect on the Group’s Financial Statements.

Consolidated Financial Statements of the Nestlé Group 2015 69 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 2. Scope of consolidation, acquisitions and disposals of businesses, assets held for sale

Scope of consolidation The Consolidated Financial Statements comprise those of Nestlé S.A. and of its affi liated companies (the Group). Companies which the Group controls are fully consolidated from the date at which the Group obtains control, using the acquisition method. The Group controls a company when it is exposed to, or has rights to, variable returns from its involvement with the company and has the ability to affect those returns through its power over the company. Though the Group generally holds a majority of voting rights in the companies which are controlled, this applies irrespective of the percentage of interest in the share capital if control is obtained through agreements with other shareholders.

The list of the principal companies is provided in the section “Companies of the Nestlé Group, joint arrangements and associates”.

Business combinations Business combinations are accounted for using the acquisition method. Where not all of the equity of a subsidiary is acquired the non-controlling interests are recognised at the non-controlling interest’s share of the acquiree’s net identifi able assets. Upon obtaining control in a business combination achieved in stages, the Group remeasures its previously held equity interest at fair value and recognises a gain or a loss to the income statement.

2.1 Modifi cation of the scope of consolidation

Acquisitions In 2015, among others, the acquisitions during the year include: – Merrick Pet Care, USA, natural and organic pet food products, (PetCare) 100%, September. None of the acquisitions of the year were signifi cant. In 2014 , among others, the acquisitions included: – Remaining 50% of Galderma, worldwide, dermatology pharmaceuticals products (Nutrition and Health Science), July. – Aesthetic products business commercialisation rights from Valeant Pharmaceuticals International, USA and Canada, aesthetic dermatology products (Nutrition and Health Science), 100%, July. None of the other acquisitions of 2014 were signifi cant.

Disposals In 2015, the following has been disposed of, among others: – Davigel, France, Spain and Benelux, professional frozen prepared dishes and cooking aids (Prepared dishes and cooking aids), 100%, November. None of the disposals of the year were signifi cant. In 2014 , there were no signifi cant disposals.

70 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 2. Scope of consolidation, acquisitions and disposals of businesses, assets held for sale

2.2 Acquisitions of businesses The major classes of assets acquired and liabilities assumed at the acquisition date are:

In millions of CHF 2015 2014

Aesthetic business commercial rights Other Total Galderma Valeant acquisitions Total Property, plant and equipment 114 401 — 87 488 Intangible assets (a) 163 5 401 959 20 6 380 Inventories and other assets (b) 69 1 171 17 76 1 264 Financial debt (1) (179) — (50) (229) Employee benefi ts, deferred taxes and provisions (92) (1 015) — (19) (1 034) Other liabilities (25) (525) (17) (81) (623) Fair value of identifi able net assets 228 5 254 959 33 6 246

(a) In 2015, mainly trademarks and trade names. In 2014, mainly trademarks, trade names, patents, technology, research & development intangible assets and reacquired rights. (b) Galderma: including the fair value of trade receivables of CHF 434 million with a gross contractual amount of CHF 448 million and estimated cash fl ows of CHF 14 million not expected to be collected.

Since the valuation of the assets and liabilities of recently acquired businesses is still in process, the values are determined provisionally. The Galderma net assets fair value published in 2014 has been adjusted and recorded as part of the 2015 exercise. The adjustments being not material, the 2014 comparatives have not been restated.

The goodwill arising on acquisitions and the cash outfl ow are:

In millions of CHF 2015 2014

Aesthetic business commercial rights Other Total Galderma Valeant acquisitions Total Fair value of consideration transferred 529 3 907 1 240 99 5 246 Non-controlling interests (a) 1 — — 2 2 Fair value of pre-existing interests (b) — 3 923 — 47 3 970 Subtotal 530 7 830 1 240 148 9 218 Fair value of identifi able net assets (228) (5 254) (959) (33) (6 246) Goodwill 302 2 576 281 115 2 972

(a) Non-controlling interests have been measured based on their proportionate interest in the recognised amounts of net assets of the entities acquired. (b) See Note 15 for the 2014 revaluation gain on the 50% stake already held in Galderma. For 2014 other acquisitions, the remeasurement to fair value of pre-existing interests in one of the business acquisitions resulted in a gain of CHF 43 million and has been recognised under Other operating income in the income statement (see Note 4.2).

Consolidated Financial Statements of the Nestlé Group 2015 71 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 2. Scope of consolidation, acquisitions and disposals of businesses, assets held for sale

In millions of CHF 2015 2014

Aesthetic business commercial rights Other Total Galderma Valeant acquisitions Total Fair value of consideration transferred 529 3 907 1 240 99 5 246 Cash and cash equivalents acquired (6) (83) — (16) (99) Settled in L'Oréal shares (a) — (3 201) — — (3 201) Payment of consideration payable on prior years acquisitions 7 — — 40 40 Cash outfl ow on acquisitions 530 623 1 240 123 1 986

(a) In 2014, the Group sold part of its shares to L’Oréal for a price of CHF 7342 million (see Note 15) in exchange for the remaining 50% stake in Galderma for an equity value of CHF 3201 million and cash of CHF 4141 million.

The consideration transferred consists of payments made in cash. In 2014 , for Galderma, the consideration transferred consisted of payments made in L’Oréal shares and in cash to repay the loans granted by L’Oréal to Galderma.

2014 acquisitions

Galderma On 8 July 2014, the Group brought its ownership in Galderma to 100% by acquiring a 50% stake from L’Oréal (see Note 15.3). Galderma is a Swiss company, specialising in innovative medical solutions in dermatology pharmaceuticals products with an extensive product portfolio available in 70 countries. With this acquisition, the Group will pursue its strategic development in Nutrition, Health and Wellness, by expanding its activities to medical skin treatments.

Aesthetic dermatology products business commercialisation rights from Valeant Pharmaceuticals International On 10 July 2014, the Group acquired a business which exploits full rights to commercialise several key aesthetic dermatology products in USA and Canada from Valeant Pharmaceuticals International. The two markets together represent more than half of the fast-growing medical aesthetic market around the world. The acquisition of these key strategic assets will extend and reinforce the Group’s presence in the fi eld of specialised medical skin treatments.

Acquisition-related costs Acquisition-related costs have been recognised under Other operating expenses in the income statement (see Note 4.2) for an amount of CHF 11 million (2014 : CHF 29 million – mostly related to the acquisitions of Galderma and the Aesthetic business commercialisation rights from Valeant).

72 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 2. Scope of consolidation, acquisitions and disposals of businesses, assets held for sale

2.3 Assets held for sale

Assets held for sale and disposal groups Non-current assets held for sale and disposal groups are presented separately in the current section of the balance sheet when the following criteria are met: the Group is committed to selling the asset or disposal group, an active plan of sale has commenced, and the sale is expected to be completed within 12 months. Immediately before the initial classifi cation of the assets and disposal groups as held for sale, the carrying amounts of the assets (or all the assets and liabilities in the disposal groups) are measured in accordance with the applicable accounting policy. Assets held for sale and disposal groups are subsequently measured at the lower of their carrying amount and fair value less cost to sell. Assets held for sale are no longer amortised or depreciated.

As of 31 December 2015 , the main disposal group relates to the future creation of a joint venture with R&R Ice Cream, a leading European ice cream company. Nestlé would contribute to the new joint venture its ice cream business in Europe, Egypt, the Philippines, Brazil and Argentina as well as its European frozen food businesses, excluding pizza. The reclassifi ed assets (primarily fi xed assets, goodwill and inventories) and liabilities (primarily pension liabilities and accounts payables) related to the future joint venture are mainly part of the Zone EMENA and the Zone AMS operating segments. As of 31 December 2015, the related cumulative loss in other comprehensive income has been estimated at about CHF 400 million and will be recognised in the income statement at the date of the completion of the transaction. None of the other businesses classifi ed as held for sale are individually signifi cant. As of 31 December 2014 , assets held for sale were mainly composed of disposal groups related to frozen food and water businesses in Europe, respectively part of Other businesses and Nestlé Waters operating segments. They have been disposed during the year.

2.4 Disposals of businesses Cash infl ow on disposals of businesses relates mainly to the Davigel disposal and to several other non-signifi cant disposals. In 2015 , the loss on disposals (see Note 4.2) is mainly composed of impairments of various disposal groups held for sale which were not individually signifi cant and the recycling in the income statement of cumulative losses in other comprehensive income related to disposals. In 2014 , the loss on disposal (see Note 4.2) was mainly composed of a cumulative loss in other comprehensive income of CHF 322 million (mainly related to the Performance Nutrition business) that has been recycled in the income statement, of impairment of disposal groups held for sale and of various expenses incurred or accrued to fi nalise the disposals.

Consolidated Financial Statements of the Nestlé Group 2015 73 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 3. Analyses by segment

Segment reporting Operating segments refl ect the Group’s management structure and the way fi nancial information is regularly reviewed by the Group’s chief operating decision maker (CODM), which is defi ned as the Executive Board. The CODM considers the business from both a geographic and product perspective, through three geographic Zones and several Globally Managed Businesses (GMB). Zones and GMB that meet the quantitative threshold of 10% of total sales or trading operating profi t for all operating segments, are presented on a stand-alone basis as reportable segments. Even though it does not meet the reporting threshold, Nestlé Waters is reported separately for consistency with long-standing practice of the Group. Therefore, the Group’s reportable operating segments are: – Zone Europe, Middle East and North Africa (EMENA); – Zone Americas (AMS); – Zone Asia, Oceania and sub-Saharan Africa (AOA); – Nestlé Waters; – Nestlé Nutrition. Other business activities and operating segments, including GMB that do not meet the threshold, like Nestlé Professional, Nespresso, Nestlé Health Science and Nestlé Skin Health, are combined and presented in Other businesses. As some operating segments represent geographic Zones, information by product is also disclosed. The seven product groups that are disclosed represent the highest categories of products that are followed internally. Segment results represent the contribution of the different segments to central overheads, unallocated research and development costs and the trading operating profi t of the Group. Specifi c corporate expenses as well as specifi c research and development costs are allocated to the corresponding segments. Depreciation and amortisation includes depreciation of property, plant and equipment and amortisation of intangible assets. No segment assets and liabilities are regularly provided to the CODM to assess segment performance or to allocate resources and therefore segment assets and liabilities are not disclosed. However the Group discloses the invested capital, goodwill and intangible assets by segment and by product on a voluntary basis. Invested capital comprises property, plant and equipment, trade and other receivables, assets held for sale, inventories, prepayments and accrued income as well as specifi c fi nancial assets associated to the segments, less trade and other payables, liabilities directly associated with assets held for sale, non-current other payables as well as accruals and deferred income. Goodwill and intangible assets are not included in invested capital since the amounts recognised are not comparable between segments due to differences in the intensity of acquisition activity and changes in accounting standards which were applicable at various points in time when the Group undertook signifi cant acquisitions. Nevertheless, an allocation of goodwill and intangible assets by segment and product and the related impairment expenses are provided. Inter-segment eliminations represent inter-company balances between the different segments.

74 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 3. Analyses by segment

Invested capital and goodwill and intangible assets by segment represent the situation at the end of the year, while the fi gures by product represent the annual average, as this provides a better indication of the level of invested capital. Capital additions represent the total cost incurred to acquire property, plant and equipment, intangible assets and goodwill, including those arising from business combinations. Capital expenditure represents the investment in property, plant and equipment only. Unallocated items represent items whose allocation to a segment or product would be arbitrary. They mainly comprise: – corporate expenses and related assets/liabilities; – research and development costs and related assets/liabilities; and – some goodwill and intangible assets.

Consolidated Financial Statements of the Nestlé Group 2015 75 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 3. Analyses by segment

3.1 Operating segments Revenue and results

In millions of CHF 2015 (b) t (a) Net other trading income/(expenses) Sales Trading operating profi of which impairment of property, plant and equipment of which restructuring costs Depreciation and amortisation Zone EMENA (c) 16 403 2 572 (129) (33) (74) (521) Zone AMS 25 844 5 021 (120) (17) (31) (691) Zone AOA (c) 14 338 2 632 (127) (20) (13) (456) Nestlé Waters 7 625 825 (44) (9) (19) (402) Nestlé Nutrition 10 461 2 361 (33) (10) (7) (346) Other businesses (d) 14 114 2 221 (72) (10) (21) (620) Unallocated items (e) — (2 250) (125) (1) — (142) Total 88 785 13 382 (650) (100) (165) (3 178)

In millions of CHF 2014 * (b) t (a) Net other trading income/(expenses) Sales Trading operating profi of which impairment of property, plant and equipment of which restructuring costs Depreciation and amortisation Zone EMENA (c) 17 965 2 735 (164) (26) (83) (539) Zone AMS 26 625 4 940 (310) (40) (58) (672) Zone AOA (c) 14 792 2 834 (51) (11) (29) (430) Nestlé Waters 7 390 714 (34) (6) (28) (403) Nestlé Nutrition 10 915 2 343 (113) (46) (14) (353) Other businesses (d) 13 925 2 651 (33) (3) (4) (525) Unallocated items (e) — (2 198) (92) (4) (41) (136) Total 91 612 14 019 (797) (136) (257) (3 058)

* 2014 fi gures have been restated based on the following main transfers, effective as from 1 January 2015: – the Maghreb, the Middle East, the North East Africa region, Turkey and Israel in Zone Asia, Oceania and Africa (AOA) to Zone Europe; – Growing-Up Milks business in the geographic Zones to Nestlé Nutrition; – Bübchen business in Nestlé Nutrition to Other businesses.

(a) Inter-segment sales are not signifi cant. (b) Included in Trading operating profi t. (c) Renamed following the above mentioned reorganisation, see Note 1 – Accounting policies. (d) Mainly Nespresso, Nestlé Professional, Nestlé Health Science and Nestlé Skin Health. (e) Refer to the Segment reporting accounting policies above for the defi nition of unallocated items.

76 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 3. Analyses by segment

Invested capital and other information

In millions of CHF 2015 Invested capital Goodwill and intangible assets Impairment of goodwill Impairment of intangible assets Capital additions of which capital expenditure Zone EMENA (a) 5 338 1 595 (78) — 723 710 Zone AMS 7 675 7 843 — (6) 1 648 1 038 Zone AOA (a) 4 367 3 763 (222) — 485 482 Nestlé Waters 2 418 1 494 — — 448 432 Nestlé Nutrition 5 440 15 319 — — 626 489 Other businesses (b) 4 142 12 054 (38) (11) 665 518 Unallocated items (c) and inter-segment eliminations 1 097 9 940 — (121) 288 203 Total 30 477 52 008 (338) (138) 4 883 3 872

In millions of CHF 2014 * Invested capital Goodwill and intangible assets Impairment of goodwill Impairment of intangible assets Capital additions of which capital expenditure Zone EMENA (a) 5 616 2 386 — (2) 842 840 Zone AMS 8 477 7 776 (1 835) (18) 1 214 1 027 Zone AOA (a) 4 906 4 245 (52) — 692 586 Nestlé Waters 2 624 1 569 (1) (1) 327 308 Nestlé Nutrition 5 684 15 527 (4) (2) 532 393 Other businesses (b) 4 446 13 295 (16) — 10 398 573 Unallocated items (c) and inter-segment eliminations 1 574 9 559 — — 258 187 Total 33 327 54 357 (1 908) (23) 14 263 3 914

* 2014 fi gures have been restated based on the following main transfers, effective as from 1 January 2015: – the Maghreb, the Middle East, the North East Africa region, Turkey and Israel in Zone Asia, Oceania and Africa (AOA) to Zone Europe; – Growing-Up Milks business in the geographic Zones to Nestlé Nutrition; – Bübchen business in Nestlé Nutrition to Other businesses.

(a) Renamed following the above mentioned reorganisation, see Note 1 – Accounting policies. (b) Mainly Nespresso, Nestlé Professional, Nestlé Health Science and Nestlé Skin Health. (c) Refer to the Segment reporting accounting policies above for the defi nition of unallocated items.

Consolidated Financial Statements of the Nestlé Group 2015 77 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 3. Analyses by segment

3.2 Products Revenue and results

In millions of CHF 2015 (a) t

Net other trading income/(expenses) Sales Trading operating profi of which impairment of property, plant and equipment of which restructuring costs Powdered and Liquid Beverages 19 245 4 100 (89) (13) (31) Water 7 112 796 (43) (9) (19) Milk products and Ice cream 14 637 2 471 (85) (8) (31) Nutrition and Health Science 14 854 2 909 (59) (11) (16) Prepared dishes and cooking aids 12 579 1 724 (130) (18) (19) Confectionery 8 870 1 246 (84) (23) (39) PetCare 11 488 2 386 (35) (17) (10) Unallocated items (b) — (2 250) (125) (1) — Total 88 785 13 382 (650) (100) (165)

In millions of CHF 2014 * (a) t

Net other trading income/(expenses) Sales Trading operating profi of which impairment of property, plant and equipment of which restructuring costs Powdered and Liquid Beverages 20 302 4 685 (51) (23) (28) Water 6 875 710 (34) (6) (27) Milk products and Ice cream 15 190 2 295 (155) (17) (61) Nutrition and Health Science 14 605 3 136 (130) (45) (17) Prepared dishes and cooking aids 13 532 1 801 (146) (36) (29) Confectionery 9 769 1 344 (129) (4) (42) PetCare 11 339 2 246 (60) (1) (12) Unallocated items (b) — (2 198) (92) (4) (41) Total 91 612 14 019 (797) (136) (257)

* 2014 fi gures have been restated based on the following main transfer, effective as from 1 January 2015: Growing-Up Milks business in Milk products and Ice cream to Nutrition and Health Science.

(a) Included in Trading operating profi t. (b) Refer to the Segment reporting accounting policies above for the defi nition of unallocated items.

78 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 3. Analyses by segment

Invested capital and other information

In millions of CHF 2015 Invested capital Goodwill and intangible assets Impairment of goodwill Impairment of intangible assets Powdered and Liquid Beverages 5 830 642 (16) (11) Water 2 428 1 481 — — Milk products and Ice cream 4 831 3 933 (176) — Nutrition and Health Science 7 183 27 552 (22) — Prepared dishes and cooking aids 3 881 5 565 (49) (6) Confectionery 3 114 1 886 (46) — PetCare 3 488 9 626 — — Unallocated items (a) and intra-group eliminations 1 529 2 088 (29) (121) Total 32 284 52 773 (338) (138)

In millions of CHF 2014 * Invested capital Goodwill and intangible assets Impairment of goodwill Impairment of intangible assets Powdered and Liquid Beverages 6 161 598 (16) — Water 2 632 1 532 (1) (1) Milk products and Ice cream 5 265 4 777 (1 028) (2) Nutrition and Health Science 6 799 21 725 (4) (3) Prepared dishes and cooking aids 4 159 6 099 (807) — Confectionery 3 335 1 964 (52) — PetCare 3 159 9 182 — (17) Unallocated items (a) and intra-group eliminations 1 671 2 176 — — Total 33 181 48 053 (1 908) (23)

* 2014 fi gures have been restated based on the following main transfer, effective as from 1 January 2015: Growing-Up Milks business in Milk products and Ice cream to Nutrition and Health Science.

(a) Refer to the Segment reporting accounting policies above for the defi nition of unallocated items.

Consolidated Financial Statements of the Nestlé Group 2015 79 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 3. Analyses by segment

3.3a Reconciliation from trading operating profi t to profi t before taxes, associates and joint ventures

In millions of CHF 2015 2014 Trading operating profi t 13 382 14 019 Impairment of goodwill (338) (1 908) Net other operating income/(expenses) excluding impairment of goodwill (636) (1 206) Operating profi t 12 408 10 905 Net fi nancial income/(expense) (624) (637) Profi t before taxes, associates and joint ventures 11 784 10 268

3.3b Reconciliation from invested capital to total assets

In millions of CHF 2015 2014 Invested capital as per Note 3.1 30 477 33 327 Liabilities included in invested capital 21 197 21 593 Subtotal 51 674 54 920 Intangible assets and goodwill as per Note 3.1 52 008 54 357 Other assets 20 310 24 173 Total assets 123 992 133 450

3.4 Customers There is no single customer amounting to 10% or more of Group’s revenues.

80 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 3. Analyses by segment

3.5 Geography

Sales and non-current assets in Switzerland and countries which individually represent at least 10% of the Group sales or 10% of the Group non-current assets are disclosed separately. The analysis of sales is stated by customer location. Non-current assets relate to property, plant and equipment, intangible assets and goodwill. Property, plant and equipment and intangible assets are attributed to the country of their legal owner. Goodwill is attributed to the countries of the affi liated companies where the related acquired business is operated.

In millions of CHF 2015 2014 (a) Non-current Non-current Sales assets Sales assets USA 25 293 26 622 23 489 26 877 Greater China Region 7 060 9 073 6 638 9 731 Switzerland 1 549 14 263 1 566 14 133 Rest of the world 54 883 28 626 59 919 32 037 Total 88 785 78 584 91 612 82 778

(a) 2014 fi gures have been restated. Refer to the accounting policies, Change in presentation – Analyses by segment.

Consolidated Financial Statements of the Nestlé Group 2015 81 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 4. Net other trading and operating income/(expenses)

Other trading income/(expenses) These comprise restructuring costs, impairment of property, plant and equipment and intangible assets, litigations and onerous contracts, result on disposal of property, plant and equipment, and specifi c other income and expenses that fall within the control of operating segments. Restructuring costs are restricted to dismissal indemnities and employee benefi ts paid to terminated employees upon the reorganisation of a business. It does not include dismissal indemnities paid for normal attrition, poor performance, professional misconduct, etc.

Other operating income/(expenses) These comprise impairment of goodwill, results on disposals of businesses (including impairment and subsequent remeasurement of businesses classifi ed as held for sale, as well as other directly related disposal costs like restructuring costs directly linked to businesses disposed of and legal, advisory and other professional fees), acquisition-related costs, the effect of the hyperinfl ation accounting and other income and expenses that fall beyond the control of operating segments and relate to events such as natural disasters and expropriation of assets.

4.1 Net other trading income/(expenses)

In millions of CHF Notes 2015 2014 Other trading income 78 110

Restructuring costs (165) (257) Impairment of property, plant and equipment and intangible assets 8/9 (238) (159) Litigations and onerous contracts (a) (277) (411) Miscellaneous trading expenses (48) (80) Other trading expenses (728) (907)

Total net other trading income/(expenses) (650) (797)

(a) Mainly relates to numerous separate legal cases (for example labour, civil and tax litigations), liabilities linked to product withdrawals as well as several separate onerous contracts.

82 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 4. Net other trading and operating income/(expenses)

4.2 Net other operating income/(expenses)

In millions of CHF Notes 2015 2014 Profi t on disposal of businesses 40 83 Miscellaneous operating income 86 71 Other operating income 126 154

Loss on disposal of businesses 2 (462) (592) Impairment of goodwill 9 (338) (1 908) Miscellaneous operating expenses (a) (300) (768) Other operating expenses (1 100) (3 268)

Total net other operating income/(expenses) (974) (3 114)

(a) Includes the effect of hyperinfl ation in Venezuela (see Note 22).

5. Net fi nancial income/(expense)

Net fi nancial income/(expense) includes net fi nancing cost and net interest income/ (expense) on defi ned benefi t plans. Net fi nancing cost comprises the interest income earned on cash and cash equivalents and short-term investments, as well as the interest expense on fi nancial debt (collectively termed “net debt”). These headings also include other income and expense such as exchange differences on net debt and results on related foreign currency and interest rate hedging instruments. Certain borrowing costs are capitalised as explained under the section on Property, plant and equipment.

In millions of CHF Notes 2015 2014 Interest income 73 89 Interest expense (517) (521) Net fi nancing cost (444) (432)

Interest income on defi ned benefi t plans 10 28 46 Interest expense on defi ned benefi t plans 10 (205) (240) Net interest income/(expense) on defi ned benefi t plans (177) (194)

Other (3) (11) Net fi nancial income/(expense) (624) (637)

Consolidated Financial Statements of the Nestlé Group 2015 83 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 6. Inventories

Raw materials and purchased fi nished goods are valued at the lower of purchase cost calculated using the FIFO (fi rst-in, fi rst-out) method and net realisable value. Work in progress, sundry supplies and manufactured fi nished goods are valued at the lower of their weighted average cost and net realisable value. The cost of inventories includes the gains/losses on qualifi ed cash fl ow hedges for the purchase of raw materials and fi nished goods.

In millions of CHF 2015 2014 Raw materials, work in progress and sundry supplies 3 387 3 797 Finished goods 5 014 5 643 Allowance for write-down to net realisable value (248) (268) 8 153 9 172

Inventories amounting to CHF 280 million ( 2014: CHF 240 million) are pledged as security for fi nancial liabilities.

7. Trade and other receivables

7.1 By type

In millions of CHF 2015 2014 Trade receivables 9 696 10 283 Other receivables 2 556 3 176 12 252 13 459

The fi ve major customers represent 12% ( 2014: 11%) of trade and other receivables, none of them individually exceeding 7% ( 2014: 6% ).

7.2 Past due and allowance for doubtful receivables

Allowances for doubtful receivables represent the Group’s estimates of losses that could arise from the failure or inability of customers to make payments when due. These estimates are based on the ageing of customers’ balances, specifi c credit circumstances and the Group’s historical bad receivables experience.

84 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 7. Trade and other receivables

In millions of CHF 2015 2014 Not past due 10 811 11 801 Past due 1–30 days 791 851 Past due 31–60 days 196 254 Past due 61–90 days 115 108 Past due 91–120 days 68 60 Past due more than 120 days 595 737 Allowance for doubtful receivables (324) (352) 12 252 13 459

Based on the historic trend and expected performance of the customers, the Group believes that the above allowance for doubtful receivables suffi ciently covers the risk of default.

8. Property, plant and equipment

Property, plant and equipment are shown on the balance sheet at their historical cost. Depreciation is provided on components that have homogenous useful lives by using the straight-line method so as to depreciate the initial cost down to the residual value over the estimated useful lives. The residual values are 30% on head offi ces and nil for all other asset types. The useful lives are as follows: Buildings 20 – 40 years Machinery and equipment 10 – 25 years Tools, furniture, information technology and sundry equipment 3 – 10 years Vehicles 3 – 8 years Land is not depreciated. Useful lives, components and residual amounts are reviewed annually. Such a review takes into consideration the nature of the assets, their intended use including but not limited to the closure of facilities and the evolution of the technology and competitive pressures that may lead to technical obsolescence. Depreciation of property, plant and equipment is allocated to the appropriate headings of expenses by function in the income statement. Borrowing costs incurred during the course of construction are capitalised if the assets under construction are signifi cant and if their construction requires a substantial period to complete (typically more than one year). The capitalisation rate is determined on the basis of the short-term borrowing rate for the period of construction. Premiums capitalised for leasehold land or buildings are amortised over the length of the lease. Government grants are recognised as deferred income which is released to the income statement over the useful life of the related assets. Grants that are not related to assets are credited to the income statement when they are received.

Consolidated Financial Statements of the Nestlé Group 2015 85 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 8. Property, plant and equipment

In millions of CHF

Tools, Machinery furniture Land and and and other buildings equipment equipment Vehicles Total Gross value At 1 January 2014 15 988 28 433 7 817 880 53 118 Currency retranslations 359 590 174 31 1 154 Capital expenditure (a) 1 151 1 985 720 58 3 914 Disposals (219) (723) (495) (63) (1 500) Reclassifi ed as held for sale (266) (286) (161) (78) (791) Modifi cation of the scope of consolidation 220 4 (13) — 211 At 31 December 2014 17 233 30 003 8 042 828 56 106 Currency retranslations (1 285) (2 150) (458) (42) (3 935) Capital expenditure (a) 925 2 117 765 65 3 872 Disposals (81) (588) (492) (60) (1 221) Reclassifi ed as held for sale (491) (794) (582) (62) (1 929) Modifi cation of the scope of consolidation 58 (34) (21) 3 6 At 31 December 2015 16 359 28 554 7 254 732 52 899

Accumulated depreciation and impairments At 1 January 2014 (5 300) (15 098) (5 323) (502) (26 223) Currency retranslations (94) (410) (64) (11) (579) Depreciation (434) (1 424) (826) (98) (2 782) Impairments (15) (113) (8) — (136) Disposals 163 642 473 60 1 338 Reclassifi ed as held for sale 117 212 112 53 494 Modifi cation of the scope of consolidation 57 113 31 2 203 At 31 December 2014 (5 506) (16 078) (5 605) (496) (27 685) Currency retranslations 343 1 058 387 26 1 814 Depreciation (447) (1 519) (814) (81) (2 861) Impairments (18) (72) (10) — (100) Disposals 72 520 457 55 1 104 Reclassifi ed as held for sale 273 571 425 48 1 317 Modifi cation of the scope of consolidation 20 52 16 — 88 At 31 December 2015 (5 263) (15 468) (5 144) (448) (26 323)

Net at 31 December 2014 11 727 13 925 2 437 332 28 421 Net at 31 December 2015 11 096 13 086 2 110 284 26 576

(a) Including borrowing costs.

At 31 December 2015 , property, plant and equipment include CHF 551 million of assets under construction (2014 : CHF 1189 million). Net property, plant and equipment held under fi nance leases amount to CHF 127 million ( 2014: CHF 171 million). Net property, plant and equipment of CHF 328 million are pledged as security for fi nancial liabilities ( 2014: CHF 251 million).

At 31 December 2015 , the Group was committed to expenditure amounting to CHF 637 million ( 2014: CHF 520 million).

86 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 8. Property, plant and equipment

Impairment of property, plant and equipment Consideration is given at each balance sheet date to determine whether there is any indication of impairment of the carrying amounts of the Group’s property, plant and equipment. Indication could be unfavourable development of a business under competitive pressures or severe economic slowdown in a given market as well as reorganisation of the operations to leverage their scale. In assessing value in use, the estimated future cash fl ows are discounted to their present value, based on the time value of money and the risks specifi c to the country where the assets are located. The risks specifi c to the asset are included in the determination of the cash fl ows.

Impairment of property, plant and equipment arises mainly from the plans to optimise industrial manufacturing capacities by closing or selling ineffi cient production facilities.

Consolidated Financial Statements of the Nestlé Group 2015 87 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 9. Goodwill and intangible assets

Goodwill Goodwill is initially recognised during a business combination (see Note 2). Subsequently it is measured at cost less impairment.

Intangible assets This heading includes intangible assets that are internally generated or acquired, either separately or in a business combination, when they are identifi able and can be reliably measured. Internally generated intangible assets (essentially management information system software) are capitalised provided that there is an identifi able asset that will be useful in generating future benefi ts in terms of savings, economies of scale, etc. Indefi nite life intangible assets mainly comprise certain brands, trade marks and intellectual property rights. They are not amortised but tested for impairment annually or more frequently if an impairment indicator is triggered. The assessment of the classifi cation of intangible assets as indefi nite is reviewed annually. Finite life intangible assets are amortised over the shorter of their contractual or useful economic lives. They comprise mainly management information systems, patents and rights to carry on an activity (e. g. exclusive rights to sell products or to perform a supply activity). Finite life intangible assets are amortised on a straight-line basis assuming a zero residual value: management information systems over a period ranging from 3 to 5 years; other fi nite intangible assets over the estimated useful life or the related contractual period, generally 5 to 20 years or longer, depending on specifi c circumstances. Useful lives and residual values are reviewed annually. Amortisation of intangible assets is allocated to the appropriate headings of expenses by function in the income statement.

Research and development Internal research costs are charged to the income statement in the year in which they are incurred. Development costs are only recognised as assets on the balance sheet if all the recognition criteria set by IAS 38 – Intangible Assets are met before the products are launched on the market. Development costs are generally charged to the income statement in the year in which they are incurred due to uncertainties inherent in the development of new products because the expected future economic benefi ts cannot be reliably determined. As long as the products have not reached the market place, there is no reliable evidence that positive future cash fl ows would be obtained. Payments made to third parties in order to in-license or acquire intellectual property rights, compounds and products are capitalised as they are separately identifi able and are expected to generate future benefi ts. Capitalised development costs are subsequently accounted for as described in the section Intangible assets above.

88 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 9. Goodwill and intangible assets

In millions of CHF Goodwill Brands and intellectual property rights Operating rights and others Management information systems Total intangible assets of which internally generated Gross value At 1 January 2014 32 630 11 428 1 083 3 839 16 350 3 590 of which indefi nite useful life — 11 305 35 — 11 340 — Currency retranslations 2 693 552 100 74 726 61 Expenditure — 14 226 269 509 253 Disposals — — (36) (8) (44) — Reclassifi ed as held for sale (357) (30) (44) (57) (131) (51) Modifi cation of the scope of consolidation (a) 2 573 5 281 1 049 39 6 369 — At 31 December 2014 37 539 17 245 2 378 4 156 23 779 3 853 of which indefi nite useful life (b) — 16 103 37 — 16 140 — Currency retranslations (1 279) (502) 40 (243) (705) (235) Expenditure — 7 159 256 422 224 Disposals — (3) (49) (11) (63) (8) Reclassifi ed as held for sale (579) (204) (33) (40) (277) (39) Modifi cation of the scope of consolidation (a) 265 105 7 — 112 — At 31 December 2015 35 946 16 648 2 502 4 118 23 268 3 795 of which indefi nite useful life (b) — 15 418 32 — 15 450 —

Accumulated amortisation and impairments At 1 January 2014 (1 591) (77) (272) (3 328) (3 677) (3 112) Currency retranslations (123) (22) (10) (54) (86) (39) Amortisation — (49) (88) (139) (276) (124) Impairments (1 908) (18) (2) (3) (23) — Disposals — — 36 8 44 — Reclassifi ed as held for sale 304 — 4 30 34 26 Disposal of businesses 336 — 3 2 5 — At 31 December 2014 (2 982) (166) (329) (3 484) (3 979) (3 249) of which indefi nite useful life — (19) — — (19) — Currency retranslations 51 5 10 238 253 230 Amortisation — (99) (113) (105) (317) (83) Impairments (338) — — (138) (138) (138) Disposals — — 48 11 59 8 Reclassifi ed as held for sale 73 14 9 38 61 37 Disposal of businesses 22 29 — — 29 — At 31 December 2015 (3 174) (217) (375) (3 440) (4 032) (3 195) of which indefi nite useful life — (19) — — (19) —

Net at 31 December 2014 34 557 17 079 2 049 672 19 800 604 Net at 31 December 2015 32 772 16 431 2 127 678 19 236 600

(a) Goodwill: acquisition of businesses amounts to CHF 302 million (2014: CHF 2972 million) and disposal of businesses to CHF 37 million (2014: CHF 399 million). (b) Annual impairment tests are performed in connection with goodwill impairment tests. Depending on the items tested, the level at which the test is applied is the goodwill CGU or lower.

Consolidated Financial Statements of the Nestlé Group 2015 89 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 9. Goodwill and intangible assets

At 31 December 2015 , the Group was committed to expenditure amounting to CHF 75 million ( 2014: CHF 44 million).

Impairment of goodwill and intangible assets Goodwill and indefi nite life intangible assets are tested for impairment at least annually and upon the occurrence of an indication of impairment. Finite life intangible assets are tested when there is an indication of impairment. The annual impairment tests are performed at the same time each year and at the cash generating unit (CGU) level. The Group defi nes its CGU for goodwill impairment testing based on the way that it monitors and derives economic benefi ts from the acquired goodwill. For indefi nite life intangible assets, the Group defi nes its CGU as the smallest identifi able group of assets that generates cash infl ows that are largely independent of the cash infl ows from other assets or groups of assets. The impairment tests are performed by comparing the carrying value of the assets of these CGU with their recoverable amount, based on their value in use, which corresponds to their future projected cash fl ows discounted at an appropriate pre-tax rate of return. Usually, the cash fl ows correspond to estimates made by Group Management in fi nancial plans and business strategies covering a period of fi ve years after making adjustments to consider the assets in their current condition. They are then projected to perpetuity using a multiple which corresponds to a steady or declining growth rate. The Group assesses the uncertainty of these estimates by making sensitivity analyses. The discount rate refl ects the current assessment of the time value of money and the risks specifi c to the CGU (essentially country risk). The business risk is included in the determination of the cash fl ows. Both the cash fl ows and the discount rates include infl ation. An impairment loss in respect of goodwill is never subsequently reversed.

9.1 Impairment charge during the year There are various impairments of goodwill (predominantly in Zone AOA) and intangible assets in 2015 (predominantly in Unallocated items). None of them are individually signifi cant. In 2014 , an impairment of goodwill of CHF 1835 million was recorded with regards of the Direct Store Delivery system (DSD) CGU for Frozen Pizza and Ice Cream in the USA.

9.2 Annual impairment tests Impairment reviews have been conducted for more than 200 items of goodwill and intangible assets with indefi nite useful lives, allocated to more than 50 Cash Generating Units (CGU). The following fi ve CGUs have been considered as signifi cant either with regard to the total goodwill or to the total intangible assets with indefi nite useful life for which detailed results are presented hereafter: Wyeth Infant Nutrition, PetCare Zone AMS, Nestlé Skin Health, DSD for Frozen Pizza and Ice Cream – USA and Nestlé Infant Nutrition.

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In millions of CHF 2015 2014 nite nite Goodwill Intangible assets with indefi useful life Total Goodwill Intangible assets with indefi useful life Total Wyeth Infant Nutrition 4 661 4 593 9 254 4 951 4 509 9 460 PetCare Zone AMS 7 901 382 8 283 7 584 172 7 756 Nestlé Skin Health 2 946 4 020 6 966 3 037 4 098 7 135 DSD for Frozen Pizza and Ice Cream – USA (a) 2 517 1 771 4 288 2 518 1 772 4 290 Nestlé Infant Nutrition 3 748 1 315 5 063 3 660 1 316 4 976 Subtotal 21 773 12 081 33 854 21 750 11 867 33 617 as % of total carrying amount 66% 78% 70% 63% 74% 66%

Other CGUs 10 999 3 350 14 349 12 807 4 254 17 061 Total 32 772 15 431 48 203 34 557 16 121 50 678

(a) 2014: after impairment (see Note 9.1).

For all CGU, the recoverable amount is higher than its carrying amount. The recoverable amount has been determined based upon a value-in-use calculation. Cash fl ows have been projected over the next 5 years, except for Nestlé Skin Health for which a 10 year period has been used due to the product development cycle. They have been extrapolated using a steady or declining terminal growth rate and discounted at a pre-tax weighted average rate.

Consolidated Financial Statements of the Nestlé Group 2015 91 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 9. Goodwill and intangible assets

The following table summarises the key assumptions for each signifi cant CGU:

2015

Period of Annual Annual Terminal Pre-tax cash fl ow sales margin growth discount projections growth evolution rate rate Wyeth Infant Nutrition 5 years 9% to 10% Improvement 3.5% 7.5% PetCare Zone AMS 5 years 3% Stable 2.0% 7.3% Nestlé Skin Health 10 years 12% to 21% Improvement 2.4% 7.6% DSD for Frozen Pizza and Ice Cream – USA 5 years 0% to 1% Improvement 1.5% 7.7% Nestlé Infant Nutrition 5 years –4% to 5% Improvement 3.6% 10.7%

2014

Period of Annual Annual Terminal Pre-tax cash fl ow sales margin growth discount projections growth evolution rate rate Wyeth Infant Nutrition 5 years 5% to 15% Improvement 3.9% 7.4% PetCare Zone AMS 5 years 4% to 6% Stable 2.0% 7.6% Nestlé Skin Health 10 years 10% to 24% Improvement 2.4% 6.9% DSD for Frozen Pizza and Ice Cream – USA 5 years –2% to 1% Improvement 1.5% 7.7% Nestlé Infant Nutrition 5 years –1% to 7% Improvement 3.3% 11.3%

– The pre-tax discount rates have been computed based on external sources of information. – The cash fl ows for the fi rst fi ve years were based upon fi nancial plans approved by Group Management which are consistent with the Group’s approved strategy for this period. They are based on past performance and current initiatives. – The terminal growth rates have been determined to refl ect the long-term view of the nominal evolution of the business.

Management believes that no reasonably possible change in any of the above key assumptions would cause the CGU’s recoverable amount to fall below the carrying value of the CGUs except for the CGU DSD for Frozen Pizza and Ice Cream – USA. For this CGU, the following changes in the material assumptions lead to a situation where the value in use equals the carrying amount:

Sensitivity Sales growth (CAGR) Decrease by 390 basis points Margin improvement Decrease by 45 basis points Terminal growth rate Decrease by 90 basis points Pre-tax discount rate Increase by 120 basis points

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10.1 Salaries and welfare expenses The Group’s total salaries and welfare expenses amount to CHF 16 342 million ( 2014: CHF 15 978 million). They are allocated to the appropriate headings of expenses by function.

10.2 Post-employment benefi ts

The liabilities of the Group arising from defi ned benefi t obligations, and the related current service cost, are determined using the projected unit credit method. Actuarial advice is provided both by external consultants and by actuaries employed by the Group. The actuarial assumptions used to calculate the defi ned benefi t obligations vary according to the economic conditions of the country in which the plan is located. Such plans are either externally funded (in the form of independently administered funds) or unfunded. The defi cit or excess of the fair value of plan assets over the present value of the defi ned benefi t obligation is recognised as a liability or an asset on the balance sheet. Pension cost charged to the income statement consists of service cost (current and past service cost, gains and losses arising from settlement) and administration costs (other than costs of managing plan assets), which are allocated to the appropriate heading by function, and net interest expense or income, which is presented as part of net fi nancial income/(expense). The actual return less interest income on plan assets, changes in actuarial assumptions, and differences between actuarial assumptions and what has actually occurred are reported in other comprehensive income. Some benefi ts are also provided by defi ned contribution plans. Contributions to such plans are charged to the income statement as incurred. Certain disclosures are presented by geographic area. The three regions disclosed are Europe, Middle East and North Africa (EMENA), Americas (AMS) and Asia, Oceania and sub-Saharan Africa (AOA). Each region includes the corresponding Zones as well as Nestlé Waters, Nestlé Nutrition, Nespresso, Nestlé Professional, Nestlé Health Science and Nestlé Skin Health.

Pensions and retirement benefi ts Apart from legally required social security arrangements, the majority of Group employees are eligible for benefi ts through pension plans in case of retirement, death in service, disability and in case of resignation. Those plans are either defi ned contribution plans or defi ned benefi t plans based on pensionable remuneration and length of service. All pension plans comply with local tax and legal restrictions in their respective country, including funding obligations. The Group manages its pension plans by geographic area and the major plans, classifi ed as defi ned benefi t plans under IAS 19, are located in EMENA (Switzerland, UK and Germany) and in AMS (USA). In accordance with applicable legal frameworks, these plans have Boards of Trustees or General Assemblies which are generally independent from the Group and are responsible for the management and governance of the plans. In Switzerland, Nestlé’s pension plan is a cash balance plan where contributions are expressed as a percentage of the pensionable salary. The pension plan guarantees the amount accrued on the members’ savings accounts, as well as a minimum interest on those savings accounts. At retirement date, the savings accounts are converted into pensions.

Consolidated Financial Statements of the Nestlé Group 2015 93 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 10. Employee benefi ts

However, members may opt to receive a part of the pension as a lump sum. Increases of pensions in payment are granted on a discretionary basis by the Board of Trustees, subject to the fi nancial situation of the plan. To be noted that there is also a defi ned benefi t plan that has been closed to new entrants in 2013 and whose members below age 55 have been transferred to the cash balance plan. This heritage plan is a hybrid between a cash balance plan and a plan based on a fi nal pensionable salary. In the United Kingdom, Nestlé’s pension plan is a career average plan with salary revaluation. Members accrue a pension defi ned on the average of their salaries during their career at Nestlé since 2010. The salaries are automatically revalued according to infl ation subject to caps. Pensions earned before 2010 are also revalued according to infl ation subject to a cap and similarly, pensions in payment are mandatorily adjusted, as well. At retirement, there is a lump sum option. Members have the option to switch between the defi ned benefi t sections and a defi ned contribution section. Nestlé’s pension plan in Germany is a cash balance plan, where members benefi t from a guarantee on their savings accounts. Contributions to the plan are expressed as a percentage of the pensionable salary. Increases to pensions in payment are granted in accordance with legal requirements. There is also a heritage plan, based on fi nal pensionable salary, that has been closed to new entrants in 2006. In the USA, Nestlé’s primary pension plan is non-contributory for the employees. The plan is a pension equity design, under which members earn pension credits each year based on a schedule related to the sum of their age and service with Nestlé. A member’s benefi t is the sum of the annual pension credits earned multiplied by an average earning payable as a lump sum. However, in lieu of the lump sum, members have the option of converting the benefi t to a monthly pension annuity. The plan does not provide for automatic pension increases.

Post-employment medical benefi ts and other employee benefi ts Group companies, principally in AMS, maintain medical benefi t plans, classifi ed as defi ned benefi t plans under IAS 19, which cover eligible retired employees. The obligations for other employee benefi ts consist mainly of end of service indemnities, which do not have the character of pensions.

Risks related to defi ned benefi t plans The main risks to which the Group is exposed in relation to operating defi ned benefi t plans are: – mortality risk: the assumptions adopted by the Group make allowance for future improvements in life expectancy. However, if life expectancy improves at a faster rate than assumed, this would result in greater payments from the plans and consequently increases in the plans’ liabilities. In order to minimise this risk, mortality assumptions are reviewed on a regular basis. – market and liquidity risks: these are the risks that the investments do not meet the expected returns over the medium to long-term. This also encompasses the mismatch between assets and liabilities. In order to minimise the risks, the structure of the portfolios is reviewed and asset-liability matching analyses are performed on a regular basis.

Plan amendments and restructuring events Plans within the Group are regularly reviewed as to whether they are aligned with market practice in the local context. Should a review indicate that a plan needs to be changed, prior agreement with the local Board of Trustees or the General Assembly, the regulator and, if applicable, the members, is sought before implementing plan changes.

94 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 10. Employee benefi ts

During the year, there were minor plan amendments and restructuring events which have been recognised as past service costs and curtailments.

Asset-liability management and funding arrangement Plan trustees or General Assemblies are responsible for determining the mix of asset classes and target allocations of the Nestlé’s plans with the support of investment advisors. Period ical reviews of the asset mix are made by mandating external consultants to perform asset liability matching analyses. Such analyses aim at comparing dynamically the fair value of assets and the liabilities in order to determine the most adequate strategic asset allocation. The overall investment policy and strategy for the Group’s funded defi ned benefi t plans is guided by the objective of achieving an investment return which, together with the contributions paid, is suffi cient to maintain reasonable control over the various funding risks of the plans. As those risks evolve with the development of capital markets and asset management activities, the Group addresses the assessment and control process of the major investment pension risks. In order to protect the Group’s defi ned benefi t plans funding ratio and to mitigate the fi nancial risks, protective measures on the investment strategies are in force. To the extent possible, the risks are shared equally amongst the different stakeholders.

10.2a Reconciliation of assets and liabilities recognised in the balance sheet

In millions of CHF 2015 2014 ts ts ts ts t t ned benefi ned benefi retirement plans Post-employment medical benefi and other benefi Total retirement plans Post-employment medical benefi and other benefi Total Defi Defi Present value of funded obligations 26 411 52 26 463 27 971 56 28 027 Fair value of plan assets (22 353) (25) (22 378) (24 122) (27) (24 149) Excess of liabilities/(assets) over funded obligations 4 058 27 4 085 3 849 29 3 878

Present value of unfunded obligations 699 1 732 2 431 767 1 933 2 700 Unrecognised assets and minimum funding requirements 27 — 27 34 — 34 Net defi ned benefi t liabilities/(assets) 4 784 1 759 6 543 4 650 1 962 6 612

Liabilities from non-current deferred compensation and other 946 992 Liabilities from cash-settled share-based transactions (a) 93 94 Net liabilities 7 582 7 698

Refl ected in the balance sheet as follows: Employee benefi t assets (109) (383) Employee benefi t liabilities 7 691 8 081 Net liabilities 7 582 7 698

(a) The intrinsic value of liabilities from cash-settled share-based transactions that are vested amounts to CHF 49 million (2014: CHF 57 million).

Consolidated Financial Statements of the Nestlé Group 2015 95 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 10. Employee benefi ts

10.2b Funding situation by geographic area of defi ned benefi t plans

In millions of CHF 2015 2014 EMENA AMS AOA Total EMENA AMS AOA Total Present value of funded obligations 19 799 4 884 1 780 26 463 20 754 5 295 1 978 28 027 Fair value of plan assets (15 974) (4 766) (1 638) (22 378) (16 889) (5 396) (1 864) (24 149) Excess of liabilities/(assets) over funded obligations 3 825 118 142 4 085 3 865 (101) 114 3 878 Present value of unfunded obligations 386 1 810 235 2 431 448 2 017 235 2 700

10.2c Movement in the present value of defi ned benefi t obligations

In millions of CHF 2015 2014 ts ts ts ts t t ned benefi ned benefi retirement plans Post-employment medical benefi and other benefi Total retirement plans Post-employment medical benefi and other benefi Total Defi Defi At 1 January 28 738 1 989 30 727 24 463 1 768 26 231 of which funded defi ned benefi t plans 27 971 56 28 027 23 770 78 23 848 of which unfunded defi ned benefi t plans 767 1 933 2 700 693 1 690 2 383 Currency retranslations (1 264) (190) (1 454) 642 88 730 Service cost 813 48 861 700 (25) 675 of which current service cost 817 56 873 739 56 795 of which past service cost (4) (8) (12) (39) (81) (120) Interest expense 755 88 843 941 100 1 041 Actuarial (gains)/losses (189) (23) (212) 3 139 152 3 291 Benefi ts paid on funded defi ned benefi t plans (1 322) (4) (1 326) (1 164) (4) (1 168) Benefi ts paid on unfunded defi ned benefi t plans (50) (118) (168) (87) (118) (205) Modifi cation of the scope of consolidation (24) (3) (27) 154 28 182 Reclassifi ed as held for sale (259) (1) (260) — — — Transfer from/(to) defi ned contribution plans (88) (2) (90) (50) — (50) At 31 December 27 110 1 784 28 894 28 738 1 989 30 727 of which funded defi ned benefi t plans 26 411 52 26 463 27 971 56 28 027 of which unfunded defi ned benefi t plans 699 1 732 2 431 767 1 933 2 700

96 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 10. Employee benefi ts

10.2d Movement in fair value of defi ned benefi t plan assets

In millions of CHF 2015 2014 ts ts ts ts t t ned benefi ned benefi Defi retirement plans Post-employment medical benefi and other benefi Total Defi retirement plans Post-employment medical benefi and other benefi Total At 1 January (24 122) (27) (24 149) (21 551) (50) (21 601) Currency retranslations 1 053 1 1 054 (634) 9 (625) Interest income (667) (1) (668) (851) (1) (852) Actual return on plan assets, excluding interest income 590 — 590 (1 467) (1) (1 468) Employees’ contributions (136) — (136) (144) — (144) Employer contributions (665) (2) (667) (639) (2) (641) Benefi ts paid on funded defi ned benefi t plans 1 322 4 1 326 1 164 4 1 168 Administration expenses 19 — 19 24 — 24 Modifi cation of the scope of consolidation 7 — 7 (74) 14 (60) Reclassifi ed as held for sale 156 — 156 — — — Transfer (from)/to defi ned contribution plans 90 — 90 50 — 50 At 31 December (22 353) (25) (22 378) (24 122) (27) (24 149)

The major categories of plan assets as a percentage of total plan assets of the Group’s defi ned benefi t plans are as follows:

2015 2014 Equities 32% 32% of which US equities 13% 13% of which European equities 11% 10% of which other equities 8% 9% Debts 39% 38% of which government debts 26% 26% of which corporate debts 13% 12% Real estate 10% 9% Alternative investments 17% 18% of which hedge funds 10% 10% of which private equities 5% 6% of which commodities 2% 2% Cash/Deposits 2% 3%

Equity, government debts and commodities represent 60% ( 2014: 60% ) of the plan assets. Almost all of them are quoted in an active market. Corporate debts, real estate, hedge funds and private equities represent 38% ( 2014: 37%) of the plan assets. Almost all of them are either not quoted or quoted in a market which is not active. The plan assets of funded defi ned benefi t plans include property occupied by affi liated companies with a fair value of CHF 24 million ( 2014: CHF 11 million). Furthermore, funded

Consolidated Financial Statements of the Nestlé Group 2015 97 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 10. Employee benefi ts

defi ned benefi t plans are invested in Nestlé S.A. (or related) shares to the extent of CHF 43 million ( 2014: CHF 47 million). The Group’s investment management principles allow such investment only when the position in Nestlé S.A. (or related) shares is passive, i.e. in line with the weighting in the underlying benchmark. The Group expects to contribute CHF 703 million to its funded defi ned benefi t plans in 2016 .

10.2e Movement in unrecognised assets and minimum funding requirements

In millions of CHF 2015 2014 ts ts ts ts t t ned benefi ned benefi retirement plans Post-employment medical benefi and other benefi Total retirement plans Post-employment medical benefi and other benefi Total Defi Defi At 1 January 34 — 34 106 — 106 Currency retranslations (1) — (1) 1 — 1 Limitation of interest income 2 — 2 5 — 5 Changes due to asset ceiling (8) — (8) (78) — (78) At 31 December 27 — 27 34 — 34

10.2f Expenses recognised in the income statement

In millions of CHF 2015 2014 ts ts ts ts t t ned benefi ned benefi Defi retirement plans Post-employment medical benefi and other benefi Total Defi and other benefi Total retirement plans Post-employment medical benefi Service cost 813 48 861 700 (25) 675 Employees’ contributions (136) — (136) (144) — (144) Net interest (income)/expense 90 87 177 95 99 194 Administration expenses 19 — 19 24 — 24 Defi ned benefi t expenses 786 135 921 675 74 749 Defi ned contribution expenses 287 275 Total 1 208 1 024

The expenses for defi ned benefi t and defi ned contribution plans are allocated to the appropriate headings of expenses by function.

98 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 10. Employee benefi ts

10.2g Remeasurement of defi ned benefi t plans reported in other comprehensive income

In millions of CHF 2015 2014 ts ts ts ts t t ned benefi ned benefi Defi retirement plans Post-employment medical benefi and other benefi Total Defi retirement plans Post-employment medical benefi and other benefi Total Actual return on plan assets, excluding interest income (590) — (590) 1 467 1 1 468 Experience adjustments on plan liabilities (30) (51) (81) (109) 10 (99) Change in demographic assumptions on plan liabilities (67) (2) (69) 44 (35) 9 Change in fi nancial assumptions on plan liabilities 286 76 362 (3 074) (127) (3 201) Transfer from/(to) unrecognised assets and other 8 — 8 78 — 78 Remeasurement of defi ned benefi t plans (393) 23 (370) (1 594) (151) (1 745)

10.2h Principal fi nancial actuarial assumptions The principal fi nancial actuarial assumptions are presented by geographic area. Each item is a weighted average in relation to the relevant underlying component.

2015 2014 EMENA AMS AOA Total EMENA AMS AOA Total Discount rates 2.1% 5.2% 4.5% 3.0% 2.2% 5.1% 4.4% 3.1% Expected rates of salary increases 2.8% 2.8% 4.7% 3.0% 2.8% 2.9% 4.7% 3.0% Expected rates of pension adjustments 1.4% 0.4% 1.8% 1.2% 1.4% 0.6% 1.9% 1.3% Medical cost trend rates 6.1% 6.2% 5.7% 5.8%

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10.2i Mortality tables and life expectancies by geographic area for Group’s major defi ned benefi t pension plans

Expressed in years 2015 2014 2015 2014

Life expectancy at age 65 Life expectancy at age 65 for a male member for a female member Country Mortality table currently aged 65 currently aged 65 EMENA Switzerland LPP 2010 20.8 20.8 23.1 23.1 United Kingdom S1NA 21.5 21.8 23.0 23.2 Germany Heubeck Richttafeln 2005 G modifi ziert 20.1 20.1 23.6 23.6 AMS USA RP-2014 21.1 21.1 23.2 23.1

Life expectancy is refl ected in the defi ned benefi t obligations by using mortality tables of the country in which the plan is located. When those tables no longer refl ect recent experience, they are adjusted by appropriate loadings.

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10.2j Sensitivity analyses on present value of defi ned benefi t obligations by geographic area The table below gives the present value of the defi ned benefi t obligations when major assumptions are changed.

In millions of CHF 2015 2014 EMENA AMS AOA Total EMENA AMS AOA Total As reported 20 185 6 694 2 015 28 894 21 202 7 312 2 213 30 727 Discount rates Increase of 50 basis points 18 592 6 342 1 941 26 875 19 548 6 910 2 130 28 588 Decrease of 50 basis points 21 936 7 075 2 099 31 110 22 996 7 748 2 307 33 051 Expected rates of salary increases Increase of 50 basis points 20 346 6 752 2 049 29 147 21 390 7 386 2 249 31 025 Decrease of 50 basis points 20 037 6 642 1 986 28 665 21 027 7 243 2 181 30 451 Expected rates of pension adjustments Increase of 50 basis points 21 402 6 925 2 069 30 396 22 464 7 566 2 268 32 298 Decrease of 50 basis points 19 039 6 632 1 999 27 670 20 019 7 268 2 195 29 482 Medical cost trend rates Increase of 50 basis points 20 185 6 729 2 017 28 931 21 202 7 355 2 216 30 773 Decrease of 50 basis points 20 184 6 663 2 013 28 860 21 201 7 275 2 210 30 686 Mortality assumption Setting forward the tables by 1 year 19 514 6 568 1 989 28 071 20 504 7 174 2 182 29 860 Setting back the tables by 1 year 20 867 6 824 2 041 29 732 21 896 7 451 2 242 31 589

All sensitivities are calculated using the same actuarial method as for the disclosed present value of the defi ned benefi t obligations at year-end.

10.2k Weighted average duration of defi ned benefi t obligations by geographic area

Expressed in years 2015 2014 EMENA AMS AOA Total EMENA AMS AOA Total At 31 December 16.7 11.5 9.9 15.0 16.6 12.1 9.8 15.0

Consolidated Financial Statements of the Nestlé Group 2015 101 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 11. Equity compensation plans

Certain Group employees are eligible to receive long-term incentives in the form of equity compensation plans. Equity compensation plans are settled either by remittance of Nestlé S.A. shares (accounted for as equity-settled share-based payment transactions) or by the payment of an equivalent amount in cash (accounted for as cash-settled share-based payment transactions).

Equity-settled share-based payment transactions are recognised in the income statement with a corresponding increase in equity over the vesting period. They are fair valued at grant date and measured using generally accepted pricing models. The cost of equity-settled share-based payment transactions is adjusted annually by the expectations of vesting, for the forfeitures of the participants’ rights that no longer satisfy the plan conditions, as well as for early vesting. Liabilities arising from cash-settled share-based payment transactions are recognised in the income statement over the vesting period. They are fair valued at each reporting date and measured using generally accepted pricing models. The cost of cash-settled share-based payment transactions is adjusted for the forfeitures of the participants’ rights that no longer satisfy the plan conditions, as well as for early vesting.

Share-based payment cost recognised in the income statement

In millions of CHF 2015 2014 Equity-settled share-based payment costs (166) (156) Cash-settled share-based payment costs (53) (49) Total share-based payment costs (219) (205) of which RSUP (69) (137) of which PSUP (150) (66)

The share-based payment costs are allocated to the appropriate headings of expenses by function in the income statement.

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Restricted Stock Unit Plan (RSUP) Prior 2015, members of Group Management were awarded Restricted Stock Units (RSU) that entitled participants to receive freely disposable Nestlé S.A. shares (accounted for as equity-settled share-based payment transactions) or an equivalent amount in cash (accounted for as cash-settled share-based payment transactions) at the end of a three-year restriction period. In 2014, the grant was limited to members of the US affi liated companies.

Number of RSU in millions of units 2015 2014 Outstanding at 1 January 6.9 9.9 Granted — 0.5 Settled (3.4) (3.4) Forfeited (0.1) (0.1) Outstanding at 31 December 3.4 6.9 of which vested at 31 December 0.7 0.7 of which cash-settled at 31 December 1.2 2.0

The fair value of equity-settled RSU is determined on the basis of the market price of Nestlé S.A. shares at grant date, discounted at a risk-free interest rate and adjusted for the dividends that participants are not entitled to receive during the restricted period of three years. There were no equity-settled RSU granted in 2015 ( 2014: no equity-settled RSU granted). For cash-settled outstanding RSU, the liability is re-measured at each reporting date based on subsequent changes in the market price of Nestlé S.A. shares. The average fair value of the cash-settled RSU outstanding at 31 December 2015 is CHF 71.87 ( 2014: CHF 70.74 ).

Performance Share Unit Plan (PSUP) Members of the Executive Board and, as from 2014, members of Group Management are awarded Performance Share Units (PSU) that entitle participants to receive freely disposable Nestlé S.A. shares (accounted for as equity-settled share-based payment transactions) or an equivalent amount in cash (accounted for as cash-settled share-based payment transactions) at the end of a three-year restriction period. As from the 2015 PSU grant, shares received by members of the Executive Board are subject to an additional two-year blocking period. Upon vesting, the number of shares delivered ranges from 0% to 200% of the initial grant and is determined by the degree by which the performance measures of the PSUP have been met. These measures are the relative Total Shareholder Return of the Nestlé S.A. share in relation to the STOXX Europe 600 Food & Beverage Net Return Index (as from 2014 the STOXX Global 1800 Food & Beverage Net Return Index); and the growth of the underlying earnings per share in constant currencies. Each of the two measures has equal weighting in determining the vesting level of the initial PSU award.

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Number of PSU in millions of units 2015 2014 Outstanding at 1 January 3.0 0.4 Granted 3.2 2.8 Settled (0.3) (0.2) Forfeited (0.1) — Outstanding at 31 December 5.8 3.0 of which vested at 31 December — — of which cash-settled at 31 December 0.9 0.1

The fair value of the equity-settled PSU is determined using a valuation model which refl ects the probability of overachievement or underachievement on the Total Shareholder Return measure, which is a market condition, and based on fi ve-year historical data. The other inputs incorporated into the valuation model comprise the market price of Nestlé S.A. shares at grant date, discounted at a risk-free interest rate and adjusted for the dividends that participants are not entitled to receive during the restricted period of three years. The weighted average fair value of the equity-settled PSU granted in 2015 is CHF 71.03 ( 2014: CHF 63.70). For cash-settled outstanding PSU, the liability is re-measured at each reporting date based on subsequent changes in the market price of Nestlé S.A. shares. The average fair value of the cash-settled PSU outstanding at 31 December 2015 is CHF 75.46 ( 2014: CHF 74.28 ).

12. Provisions and contingencies

Provisions Provisions comprise liabilities of uncertain timing or amount that arise from restructuring plans, environmental, litigation and other risks. Provisions are recognised when there exists a legal or constructive obligation stemming from a past event and when the future cash outfl ows can be reliably estimated. Obligations arising from restructuring plans are recognised when detailed formal plans have been established and when there is a valid expectation that such plans will be carried out by either starting to implement them or announcing their main features. Obligations under litigation refl ect Group Management’s best estimate of the outcome based on the facts known at the balance sheet date.

Contingent assets and liabilities Contingent assets and liabilities are possible rights and obligations that arise from past events and whose existence will be confi rmed only by the occurrence or non-occurrence of one or more uncertain future events not fully within the control of the Group.

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12.1 Provisions

In millions of CHF Restructuring Environmental Litigation Other Total At 1 January 2014 521 15 2 246 455 3 237 Currency retranslations (4) 1 67 1 65 Provisions made during the year (a) 251 6 488 175 920 Amounts used (173) (1) (92) (86) (352) Reversal of unused amounts (54) — (94) (30) (178) Reclassifi ed as held for sale — — (4) — (4) Modifi cation of the scope of consolidation 1 — 59 108 168 At 31 December 2014 542 21 2 670 623 3 856 of which expected to be settled within 12 months 695 Currency retranslations (24) (1) (245) (18) (288) Provisions made during the year (a) 161 4 501 181 847 Amounts used (153) (3) (363) (81) (600) Reversal of unused amounts (39) — (475) (132) (646) Reclassifi ed as held for sale (28) — (2) (2) (32) Modifi cation of the scope of consolidation — — 1 27 28 At 31 December 2015 459 21 2 087 598 3 165 of which expected to be settled within 12 months 564

(a) Including discounting of provisions.

Restructuring Restructuring provisions arise from a number of projects across the Group. These include plans to optimise production, sales and administration structures, mainly in EMENA. Restructuring provisions are expected to result in future cash outfl ows when implementing the plans (usually over the following two to three years).

Litigation Litigation provisions have been set up to cover tax, legal and administrative proceedings that arise in the ordinary course of the business. These provisions cover numerous separate cases whose detailed disclosure could be detrimental to the Group interests. The Group does not believe that any of these litigation proceedings will have a material adverse impact on its fi nancial position. The timing of outfl ows is uncertain as it depends upon the outcome of the proceedings. In that instance, these provisions are not discounted because their present value would not represent meaningful information. Group Management does not believe it is possible to make assumptions on the evolution of the cases beyond the balance sheet date.

Other Other provisions are mainly constituted by onerous contracts and various damage claims having occurred during the year but not covered by insurance companies. Onerous contracts result from unfavourable leases, breach of contracts or supply agreements above market prices in which the unavoidable costs of meeting the obligations under the contracts exceed the economic benefi ts expected to be received or for which no benefi ts are expected to be received.

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12.2 Contingencies The Group is exposed to contingent liabilities amounting to a maximum potential payment of CHF 1350 million ( 2014: CHF 2012 million) representing potential litigations of CHF 1322 million ( 2014: CHF 1914 million) and other items of CHF 28 million ( 2014: CHF 98 million). Potential litigations relate mainly to labour, civil and tax litigations in Latin America. Contingent assets for litigation claims in favour of the Group amount to a maximum potential recoverable amount of CHF 149 million ( 2014: CHF 176 million).

13. Financial instruments

Financial assets Financial assets are initially recognised at fair value plus directly attributable transaction costs. However when a fi nancial asset at fair value to income statement is recognised, the transaction costs are expensed immediately. Subsequent remeasurement of fi nancial assets is determined by their categorisation that is revisited at each reporting date. In case of regular-way purchase or sale (purchase or sale under a contract whose terms require delivery within the time frame established by regulation or convention in the market place), the settlement date is used for both initial recognition and subsequent derecognition. At each balance sheet date, the Group assesses whether its fi nancial assets are to be impaired. Impairment losses are recognised in the income statement where there is objective evidence of impairment, such as where the issuer is in bankruptcy, default or other signifi cant fi nancial diffi culty. Financial assets are derecognised (in full or partly) when substantially all the Group’s rights to cash fl ows from the respective assets have expired or have been transferred and the Group has neither exposure to substantially all the risks inherent in those assets nor entitlement to rewards from them.

Classes and categories of fi nancial instruments The Group classifi es its fi nancial instruments into the following categories: loans and receivables, fi nancial assets designated at fair value through income statement, held-for-trading, available-for-sale assets and fi nancial liabilities at amortised cost.

Loans and receivables Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. This category includes the following classes of fi nancial assets: loans; trade and other receivables; and cash at bank and in hand. Subsequent to initial measurement, loans and receivables are carried at amortised cost using the effective interest rate method less appropriate allowances for doubtful receivables (see Note 7.2).

Financial assets designated at fair value through income statement Certain investments are designated at fair value through the income statement because this reduces an accounting mismatch which would otherwise arise due to the remeasurement of certain liabilities using current market prices as inputs.

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Held-for-trading assets and liabilities Held-for-trading assets and liabilities are derivative fi nancial instruments. Subsequent to initial measurement, items classifi ed as held-for-trading are carried at fair value and all their gains and losses, realised and unrealised, are recognised in the income statement unless they are part of a hedging relationship (refer to hedge accounting, see Note 13.2d).

Available-for-sale assets Available-for-sale assets are those non-derivative fi nancial assets that are either designated as such upon initial recognition or are not classifi ed in any of the other categories of fi nancial assets. This category includes the following classes of fi nancial assets: bonds and bond funds, equities and equity funds, commercial paper, time deposits and other investments. Subsequent to initial measurement, available-for-sale assets are stated at fair value with all unrealised gains or losses recognised against other comprehensive income until their disposal when such gains or losses are recognised in the income statement. Interest and dividends from available-for-sale assets are recognised in the income statement.

Financial liabilities at amortised cost Financial liabilities are initially recognised at the fair value of consideration received less directly attributable transaction costs. Subsequent to initial measurement, fi nancial liabilities are recognised at amortised cost. The difference between the initial carrying amount of the fi nancial liabilities and their redemption value is recognised in the income statement over the contractual terms using the effective interest rate method. This category includes the following classes of fi nancial liabilities: trade and other payables; commercial paper; bonds and other fi nancial liabilities. Financial liabilities at amortised cost are further classifi ed as current and non-current depending whether these will fall due within 12 months after the balance sheet date or beyond. Financial liabilities are derecognised (in full or partly) when either the Group is discharged from its obligation, they expire, are cancelled or replaced by a new liability with substantially modifi ed terms.

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13.1 Financial assets and liabilities 13.1a By class and by category

In millions of CHF 2015 2014 (a) (a)

Classes Loans, receivables and liabilities at amortised cost At fair value to income statement Available for sale Total categories Loans, receivables and liabilities at amortised cost At fair value to income statement Available for sale Total categories Cash at bank and in hand 1 906 — — 1 906 3 528 — — 3 528 Commercial paper — — 1 788 1 788 — — 2 000 2 000 Time deposits — — 1 242 1 242 — — 2 678 2 678 Bonds and debt funds — 346 3 121 3 467 — 338 3 187 3 525 Equity and equity funds — 376 184 560 — 394 199 593 Other fi nancial assets 1 281 41 939 2 261 1 028 44 978 2 050 Liquid assets (b) and non-current fi nancial assets 3 187 763 7 274 11 224 4 556 776 9 042 14 374 Trade and other receivables 12 252 — — 12 252 13 459 — — 13 459 Derivative assets (c) — 337 — 337 — 400 — 400 Total fi nancial assets 15 439 1 100 7 274 23 813 18 015 1 176 9 042 28 233

Trade and other payables (18 767) — — (18 767) (19 279) — — (19 279) Financial debt (21 230) — — (21 230) (21 206) — — (21 206) Derivative liabilities (c) — (1 021) — (1 021) — (757) — (757) Total fi nancial liabilities (39 997) (1 021) — (41 018) (40 485) (757) — (41 242)

Net fi nancial position (24 558) 79 7 274 (17 205) (22 470) 419 9 042 (13 009) of which at fair value — 79 7 274 7 353 — 419 9 042 9 461

(a) Carrying amount of these instruments is a reasonable approximation of their fair value. For bonds included in fi nancial debt, see Note 13.1c. (b) Liquid assets are composed of cash and cash equivalents and short-term investments. (c) Include derivatives held in hedge relationships and those that are undesignated (categorised as held-for-trading), see Note 13.2d.

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13.1b Fair value hierarchy of fi nancial instruments

The Group determines the fair value of its fi nancial instruments on the basis of the following hierarchy: i) The fair value of fi nancial instruments quoted in active markets is based on their quoted closing price at the balance sheet date. Examples include exchange-traded commodity derivatives and other fi nancial assets such as investments in equity and debt securities. ii) The fair value of fi nancial instruments that are not traded in an active market is determined by using valuation techniques using observable market data. Such valuation techniques include discounted cash fl ows, standard valuation models based on market parameters for interest rates, yield curves or foreign exchange rates, dealer quotes for similar instruments and use of comparable arm’s length transactions. For example, the fair value of forward exchange contracts, currency swaps and interest rate swaps is determined by discounting estimated future cash fl ows using a risk-free interest rate. iii) The fair value of fi nancial instruments that are measured on the basis of entity specifi c valuations using inputs that are not based on observable market data (unobservable inputs). When the fair value of unquoted instruments cannot be measured with suffi cient reliability, the Group carries such instruments at cost less impairment, if applicable.

In millions of CHF 2015 2014 Derivative assets 43 29 Bonds and debt funds 706 824 Equity and equity funds 254 280 Other fi nancial assets 30 25 Derivative liabilities (96) (116) Prices quoted in active markets (Level 1) 937 1 042

Commercial paper 1 788 2 000 Time deposits 1 242 2 678 Derivative assets 294 371 Bonds and debt funds 2 739 2 671 Equity and equity funds 272 279 Other fi nancial assets 800 852 Derivative liabilities (925) (641) Valuation techniques based on observable market data (Level 2) 6 210 8 210

Valuation techniques based on unobservable input (Level 3) 206 209

Total fi nancial instruments at fair value 7 353 9 461

There have been no signifi cant transfers between the different hierarchy levels in 2015 .

Consolidated Financial Statements of the Nestlé Group 2015 109 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 13. Financial instruments

13.1c Bonds

In millions of CHF

Issuer Face value in millions Coupon Effective interest rate Year of issue/ maturity Comments 2015 2014 Nestlé Holdings, Inc., USA AUD 275 5.50% 5.69% 2011–2016 (a) 203 232 USD 200 2.00% 2.06% 2011–2016 198 198 NOK 1 000 3.38% 3.59% 2011–2016 (a) 115 137 AUD 200 4.00% 4.11% 2012–2017 (b) 144 161 NOK 1 000 2.25% 2.31% 2012–2017 (b) 112 133 NOK 3 000 2.50% 2.66% 2012–2017 (b) 336 398 USD 900 1.38% 1.46% 2012–2017 889 889 GBP 250 1.63% 1.71% 2013–2017 (a) 365 385 CHF 250 2.63% 2.66% 2007–2018 (a) 267 271 USD 500 1.25% 1.32% 2012–2018 494 494 AUD 175 3.75% 3.84% 2013–2018 (a) 129 145 AUD 200 3.88% 4.08% 2013–2018 (b) 144 161 AUD 400 4.13% 4.33% 2013–2018 (c) 290 326 USD 400 1.38% 1.50% 2013–2018 394 394 USD 500 2.00% 2.17% 2013–2019 491 491 USD 500 2.25% 2.41% 2013–2019 492 492 USD 400 2.00% 2.06% 2014–2019 395 395 USD 650 2.13% 2.27% 2014–2020 639 639 AUD 250 4.25% 4.43% 2014–2020 (a) 191 215 AUD 175 3.63% 3.77% 2014–2020 (a) 132 148 NOK 1 000 2.75% 2.85% 2014–2020 (a) 118 139 GBP 400 1.75% 1.82% 2015–2020 (b) 585 — Nestlé Finance International Ltd., Luxembourg CHF 350 2.13% 2.20% 2009–2015 — 350 EUR 500 0.75% 0.83% 2012–2016 540 601 AUD 125 4.63% 4.86% 2012–2017 (b) 90 101 EUR 500 1.50% 1.61% 2012–2019 539 599 EUR 500 1.25% 1.30% 2013–2020 540 600 EUR 500 2.13% 2.20% 2013–2021 538 598 EUR 500 0.75% 0.90% 2014–2021 536 595 EUR 850 1.75% 1.89% 2012–2022 911 1 012 GBP 400 2.25% 2.34% 2012–2023 (d) 589 622 EUR 500 0.75% 0.92% 2015–2023 (e) 537 — Other bonds 278 336 Total carrying amount (*) 12 221 12 257 of which due within one year 1 062 409 of which due after one year 11 159 11 848

Fair value (*) of bonds, based on prices quoted (level 2) 12 501 12 651

(*) Carrying amount and fair value of bonds exclude accrued interest.

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Several bonds are hedged by currency and/or interest derivatives. The fair value of these derivatives is shown under derivative assets for CHF 78 million (2014 : CHF 87 million) and under derivative liabilities for CHF 708 million ( 2014: CHF 359 million).

(a) Subject to an interest rate and/or currency swap that creates a liability at fl oating rates in the currency of the issuer. (b) Subject to an interest rate and currency swap that creates a liability at fi xed rates in the currency of the issuer. (c) This bond is composed of: – AUD 300 million subject to an interest rate and currency swap that creates a liability at fi xed rates in the currency of the issuer; and – AUD 100 million subject to an interest rate and/or currency swap that creates a liability at fl oating rates in the currency of the issuer. (d) Subject to an interest rate swap. (e) Out of which EUR 375 million is subject to an interest rate swap.

13.2 Financial risks In the course of its business, the Group is exposed to a number of fi nancial risks: credit risk, liquidity risk, market risk (including foreign currency risk and interest rate risk, commodity price risk and equity price risk). This note presents the Group’s objectives, policies and processes for managing its fi nancial risk and capital. Financial risk management is an integral part of the way the Group is managed. The Board of Directors determines the fi nancial control principles as well as the principles of fi nancial planning. The Chief Executive Offi cer organises, manages and monitors all fi nancial risks, including asset and liability matters. The Asset and Liability Management Committee (ALMC), chaired by the Chief Financial Offi cer, is the governing body for the establishment and subsequent execution of the Nestlé Group’s Financial Asset and Liability Management Policy. It ensures implementation of strategies and achievement of objectives of the Group’s fi nancial asset and liabilities management, which are executed by the Centre Treasury, the Regional Treasury Centres and, in specifi c local circumstances, by the affi liated companies. The activities of the Centre Treasury and of the Regional Treasury Centres are supervised by an independent Middle Offi ce, which verifi es the compliance of the strategies proposed and/or operations executed within the approved guidelines and limits set by the ALMC. Approved Treasury Management Guidelines defi ne and classify risks as well as determine, by category of transaction, specifi c approval, execution and monitoring procedures. In accordance with the aforementioned policies, the Group only enters into derivative transactions relating to assets, liabilities or anticipated future transactions.

13.2a Credit risk Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in fi nancial loss to the Group. Credit risk arises on liquid assets, non-current fi nancial assets, derivative assets, trade and other receivables. The Group aims to minimise its fi nancial credit risk through the application of risk management policies. Credit limits are set based on a counterparty value and a probability of default. The methodology used to set the list of counterparty limits includes Enterprise Value (EV), counterparty Credit Ratings (CR) and Credit Default Swaps (CDS). Evolution of counterparties is monitored regularly, taking into consideration EV, CR and CDS evolution. As a result of this review, changes on credit limits and risk allocation are carried out. The Group avoids the concentration of credit risk on its liquid assets by spreading them over several institutions and sectors.

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Trade receivables are subject to credit limits, control and approval procedures in all the affi liated companies. Due to its large geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on its trade receivables (see Note 7). Nevertheless, commercial counterparties are constantly monitored following the similar methodology used for fi nancial counterparties. The maximum exposure to credit risk resulting from fi nancial activities, without considering netting agreements and without taking into account any collateral held or other credit enhancements, is equal to the carrying amount of the Group’s fi nancial assets.

Credit rating of fi nancial assets This includes liquid assets, non-current fi nancial assets and derivative assets.

In millions of CHF 2015 2014 Investment grade A– and above 7 719 11 895 Investment grade BBB+, BBB and BBB– 2 053 1 432 Non-investment grade (BB+ and below) 445 273 Not rated (a) 1 344 1 174 11 561 14 774

(a) Mainly equity securities and other investments for which no credit rating is available.

The source of the credit ratings is Standard & Poor’s; if not available, the Group uses other credit rating equivalents. The Group deals mainly with fi nancial institutions located in Switzerland, the European Union and North America.

13.2b Liquidity risk Liquidity risk management Liquidity risk is the risk that a company may encounter diffi culties in meeting its obligations associated with fi nancial liabilities that are settled by delivering cash or other fi nancial assets. Such risk may result from inadequate market depth or disruption or refi nancing problems. The Group’s objective is to manage this risk by limiting exposures in fi nancial instruments that may be affected by liquidity problems and by maintaining suffi cient back-up facilities. The Group does not expect any refi nancing issues and in 2015 successfully extended the tenor of both its revolving credit facilities by one year: – A new USD 4.9 billion and EUR 2.2 billion revolving credit facility with an initial maturity date of October 2016. The Group has the ability to convert the facility into a one year term loan. – A USD 4.3 billion and EUR 1.8 billion revolving credit facility with a new maturity date of October 2020. The facilities serve primarily as a backstop to the Group’s short-term debt.

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Contractual maturities of fi nancial liabilities and derivatives (including interest)

In millions of CHF fth year fth year rst year In the fi In the second year In the third to the fi After the fi Contractual amount Carrying amount Trade and other payables (17 038) (39) (77) (1 656) (18 810) (18 767)

2015 Commercial paper (a) (5 944) — — — (5 944) (5 942) Bonds (a) (1 309) (2 183) (6 276) (3 504) (13 272) (12 221) Other fi nancial debt (2 748) (214) (235) (69) (3 266) (3 067) Total fi nancial debt (10 001) (2 397) (6 511) (3 573) (22 482) (21 230) Financial liabilities (excluding derivatives) (27 039) (2 436) (6 588) (5 229) (41 292) (39 997)

Non-currency derivative assets 47 3 — (6) 44 44 Non-currency derivative liabilities (159) (25) (45) (9) (238) (235) Gross amount receivable from currency derivatives 12 555 1 133 1 923 — 15 611 15 452 Gross amount payable from currency derivatives (12 506) (1 437) (2 169) — (16 112) (15 945) Net derivatives (63) (326) (291) (15) (695) (684) of which derivatives under cash fl ow hedges (b) (13) (27) (45) (2) (87) (84)

Trade and other payables (17 437) (357) (60) (1 474) (19 328) (19 279)

2014 Commercial paper (a) (5 573) — — — (5 573) (5 569) Bonds (a) (672) (1 419) (6 403) (5 042) (13 536) (12 257) Other fi nancial debt (2 963) (203) (326) (115) (3 607) (3 380) Total fi nancial debt (9 208) (1 622) (6 729) (5 157) (22 716) (21 206) Financial liabilities (excluding derivatives) (26 645) (1 979) (6 789) (6 631) (42 044) (40 485)

Non-currency derivative assets 39 5 3 (6) 41 41 Non-currency derivative liabilities (215) (29) (42) (7) (293) (289) Gross amount receivable from currency derivatives 11 589 458 2 204 495 14 746 14 553 Gross amount payable from currency derivatives (11 370) (489) (2 435) (550) (14 844) (14 662) Net derivatives 43 (55) (270) (68) (350) (357) of which derivatives under cash fl ow hedges (b) (105) (29) (42) (7) (183) (180)

(a) Commercial paper of CHF 5822 million (2014: CHF 3571 million) and bonds of CHF 387 million (2014: CHF 76 million) have maturities of less than three months. (b) The periods when the cash fl ow hedges affect the income statement do not differ signifi cantly from the maturities disclosed above.

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13.2c Market risk The Group is exposed to risk from movements in foreign currency exchange rates, interest rates and market prices that affect its assets, liabilities and future transactions.

Foreign currency risk The Group is exposed to foreign currency risk from transactions and translation. Transactional exposures arise from transactions in foreign currency. They are managed within a prudent and systematic hedging policy in accordance with the Group’s specifi c business needs through the use of currency forwards, futures, swaps and options. Exchange differences recorded in the income statement represented a loss of CHF 156 million in 2015 ( 2014: loss of CHF 47 million). They are allocated to the appropriate headings of expenses by function. Translation exposure arises from the consolidation of the fi nancial statements of foreign operations in Swiss francs, which is, in principle, not hedged. Value at Risk (VaR) based on historic data for a 250-day period and a confi dence level of 95% results in a potential one-day loss for currency risk of less than CHF 10 million in 2015 and 2014. The Group cannot predict the future movements in exchange rates, therefore the above VaR number neither represents actual losses nor considers the effects of favourable movements in underlying variables. Accordingly, the VaR number may only be considered indicative of future movements to the extent the historic market patterns repeat in the future.

Interest rate risk The Group is exposed primarily to fl uctuation in USD and EUR interest rates. Interest rate risk on fi nancial debt is managed based on duration and interest management targets set by the ALMC through the use of fi xed rate debt and interest rate swaps. Taking into account the impact of interest derivatives, the proportion of fi nancial debt subject to fi xed interest rates for a period longer than one year represents 50% (2014 : 54% ). Based on the structure of net debt at year end, an increase of interest rates of 100 basis points would cause an additional expense in Net fi nancing cost of CHF 57 million ( 2014: CHF 39 million).

Price risk Commodity price risk Commodity price risk arises from transactions on the world commodity markets for securing the supplies of green coffee, cocoa beans and other commodities necessary for the manu facture of some of the Group’s products. The Group’s objective is to minimise the impact of commodity price fl uctuations and this exposure is hedged in accordance with the Nestlé Group policy on commodity price risk management. The regional Commodity Purchasing Competence Centres are responsible for managing commodity price risk on the basis of internal directives and centrally determined limits, generally through the use of exchange-traded commodity derivatives. The commodity price risk exposure of future purchases is managed using a combination of derivatives (mainly futures and options) and executory contracts. As a result of the short product business cycle of the Group, the majority of the anticipated future raw material transactions outstanding at the balance sheet date are expected to occur in the next year.

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Equity price risk The Group is exposed to equity price risk on investments. To manage the price risk arising from these investments, the Group diversifi es its portfolios in accordance with the Guidelines set by the Board of Directors.

13.2d Derivative assets and liabilities and hedge accounting

Derivative fi nancial instruments The Group’s derivatives mainly consist of currency forwards, futures, options and swaps; commodity futures and options; interest rate forwards, futures, options and swaps. Derivatives are mainly used to manage exposures to foreign exchange, interest rate and commodity price risk as described in section 13.2c Market risk. Derivatives are initially recognised at fair value. They are subsequently remeasured at fair value on a regular basis and at each reporting date as a minimum, with all their gains and losses, realised and unrealised, recognised in the income statement unless they are in a qualifying hedging relationship.

Hedge accounting The Group designates and documents certain derivatives and other fi nancial assets or fi nancial liabilities as hedging instruments against changes in fair values of recognised assets and liabilities (fair value hedges), highly probable forecast transactions (cash fl ow hedges) and hedges of net investments in foreign operations (net investment hedges). The effectiveness of such hedges is assessed at inception and verifi ed at regular intervals and at least on a quarterly basis, using prospective and retrospective testing.

Fair value hedges The Group uses fair value hedges to mitigate foreign currency and interest rate risks of its recognised assets and liabilities. Changes in fair values of hedging instruments designated as fair value hedges and the adjustments for the risks being hedged in the carrying amounts of the underlying transactions are recognised in the income statement.

Cash fl ow hedges The Group uses cash fl ow hedges to mitigate a particular risk associated with a recognised asset or liability or highly probable forecast transactions, such as anticipated future export sales, purchases of equipment and raw materials, as well as the variability of expected interest payments and receipts. The effective part of the changes in fair value of hedging instruments is recognised in other comprehensive income, while any ineffective part is recognised immediately in the income statement. When the hedged item results in the recognition of a non- fi nancial asset or liability, including acquired businesses, the gains or losses previously recognised in other comprehensive income are included in the measurement of the cost of the asset or of the liability. Otherwise the gains or losses previously recognised in other comprehensive income are removed and recognised in the income statement at the same time as the hedged transaction.

Consolidated Financial Statements of the Nestlé Group 2015 115 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 13. Financial instruments

Net investment hedges The Group uses net investment hedges to mitigate translation exposure on its net investments in affi liated companies. The changes in fair values of hedging instruments are taken directly to other comprehensive income together with gains or losses on the foreign currency translation of the hedged investments. All of these fair value gains or losses are deferred in equity until the investments are disposed of.

Undesignated derivatives Derivatives which are not designated in a hedging relationship are classifi ed as undesignated derivatives. They are acquired in the frame of approved risk management policies even though hedge accounting is not applied.

By type

In millions of CHF 2015 2014 Contractual or notional amounts Fair value assets Fair value liabilities Contractual or notional amounts Fair value assets Fair value liabilities Fair value hedges Currency forwards, futures and swaps 4 173 49 18 3 967 122 14 Interest rate forwards, futures and swaps 992 5 4 616 9 — Interest rate and currency swaps 3 193 74 704 2 892 77 359 Cash fl ow hedges Currency forwards, futures, swaps and options 6 912 167 59 6 556 152 82 Interest rate forwards, futures and swaps 1 385 — 107 1 534 — 122 Commodity futures and options 1 682 39 124 1 600 31 159 Undesignated derivatives Currency forwards, futures, swaps and options 1 143 3 5 1 212 8 13 Interest rate forwards, futures, swaps and options ———100 — 6 Commodity futures and options ——— 7 1 2 19 480 337 1 021 18 484 400 757

Conditional offsets (a) Derivative assets and liabilities (75) (75) (84) (84) Use of cash collateral received or deposited (10) (598) (5) (358) Balances after conditional offsets 252 348 311 315

(a) Represent amounts that would be offset in case of default, insolvency or bankruptcy of counterparties.

116 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 13. Financial instruments

Impact on the income statement of fair value hedges

In millions of CHF 2015 2014 on hedged items (189) (107) on hedging instruments 185 107

Ineffective portion of gains/(losses) of cash fl ow hedges and net investment hedges is not signifi cant.

13.2e Capital risk management The Group’s capital management is driven by the impact on shareholders of the level of total capital employed. It is the Group’s policy to maintain a sound capital base to support the continued development of its business. The Board of Directors seeks to maintain a prudent balance between different components of the Group’s capital. The ALMC monitors the capital structure and the net fi nancial debt by currency. Net fi nancial debt is defi ned as current and non-current fi nancial liabilities less cash and cash equivalents and short-term investments. The operating cash fl ow-to-net fi nancial debt ratio highlights the ability of a business to repay its debts. As at 31 December 2015 , the ratio was 92.7% ( 2014: 119.3%). The Group’s subsidiaries have complied with local statutory capital requirements as appropriate.

Consolidated Financial Statements of the Nestlé Group 2015 117 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 14. Taxes

The Group is subject to taxes in different countries all over the world. Taxes and fi scal risks recognised in the Consolidated Financial Statements refl ect Group Management’s best estimate of the outcome based on the facts known at the balance sheet date in each individual country. These facts may include but are not limited to change in tax laws and interpretation thereof in the various jurisdictions where the Group operates. They may have an impact on the income tax as well as the resulting assets and liabilities. Any differences between tax estimates and fi nal tax assessments are charged to the income statement in the period in which they are incurred, unless anticipated. Taxes include current and deferred taxes on profi t as well as actual or potential withholding taxes on current and expected transfers of income from Group companies and tax adjustments relating to prior years. Income tax is recognised in the income statement, except to the extent that it relates to items directly taken to equity or other comprehensive income, in which case it is recognised against equity or other comprehensive income. Deferred taxes are based on the temporary differences that arise when taxation authorities recognise and measure assets and liabilities with rules that differ from the principles of the Consolidated Financial Statements. They also arise on temporary differences stemming from tax losses carried forward. Deferred taxes are calculated under the liability method at the rates of tax expected to prevail when the temporary differences reverse subject to such rates being substantially enacted at the balance sheet date. Any changes of the tax rates are recognised in the income statement unless related to items directly recognised against equity or other comprehensive income. Deferred tax liabilities are recognised on all taxable temporary differences excluding non-deductible goodwill. Deferred tax assets are recognised on all deductible temporary differences provided that it is probable that future taxable income will be available.

118 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 14. Taxes

14.1 Taxes recognised in the income statement

In millions of CHF 2015 2014 Components of taxes Current taxes (a) (3 156) (3 148) Deferred taxes 93 132 Taxes reclassifi ed to other comprehensive income (245) (357) Taxes reclassifi ed to equity 3 6 Total taxes (3 305) (3 367)

Reconciliation of taxes Expected tax expense at weighted average applicable tax rate (2 848) (2 245) Tax effect of non-deductible or non-taxable items (135) (527) Prior years’ taxes 250 92 Transfers to unrecognised deferred tax assets (71) (136) Transfers from unrecognised deferred tax assets 27 12 Changes in tax rates (10) 9 Withholding taxes levied on transfers of income (304) (357) Other (214) (215) Total taxes (3 305) (3 367)

(a) Current taxes related to prior years represent a tax income of CHF 118 million (2014: tax income of CHF 133 million).

The expected tax expense at weighted average applicable tax rate is the result from applying the domestic statutory tax rates to profi ts before taxes of each entity in the country it operates. For the Group, the weighted average applicable tax rate varies from one year to the other depending on the relative weight of the profi t of each individual entity in the Group’s profi t as well as the changes in the statutory tax rates.

14.2 Taxes recognised in other comprehensive income

In millions of CHF 2015 2014 Tax effects relating to Currency retranslations 188 39 Fair value adjustments on available-for-sale fi nancial instruments 65 (48) Fair value adjustments on cash fl ow hedges (16) 14 Remeasurement of defi ned benefi t plans 8 352 245 357

Consolidated Financial Statements of the Nestlé Group 2015 119 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 14. Taxes

14.3 Reconciliation of deferred taxes by type of temporary differences recognised on the balance sheet

In millions of CHF ts Property, plant Property, and equipment Goodwill and intangible assets benefi Employee Inventories, receivables, and payables provisions Unused tax losses and unused tax credits Other Total At 1 January 2014 (1 499) (1 612) 1 456 857 430 (32) (400) Currency retranslations (96) (142) 81 29 (17) (81) (226) Deferred tax (expense)/income (63) 39 257 96 (82) (115) 132 Reclassifi ed as held for sale 12 13 — — (4) (3) 18 Modifi cation of the scope of consolidation (14) (811) 32 93 58 (15) (657) At 31 December 2014 (1 660) (2 513) 1 826 1 075 385 (246) (1 133) Currency retranslations 69 25 (116) (116) (92) (38) (268) Deferred tax (expense)/income (132) 39 6 57 17 106 93 Reclassifi ed as held for sale (7) 8 (9) (9) (18) 1 (34) Modifi cation of the scope of consolidation (25) (79) 2 6 17 1 (78) At 31 December 2015 (1 755) (2 520) 1 709 1 013 309 (176) (1 420)

In millions of CHF 2015 2014 Refl ected in the balance sheet as follows: Deferred tax assets 1 643 2 058 Deferred tax liabilities (3 063) (3 191) Net assets/(liabilities) (1 420) (1 133)

14.4 Unrecognised deferred taxes The deductible temporary differences as well as the unused tax losses and tax credits for which no deferred tax assets are recognised expire as follows:

In millions of CHF 2015 2014 Within one year 23 35 Between one and fi ve years 434 331 More than fi ve years 2 272 2 375 2 729 2 741

At 31 December 2015 , the unrecognised deferred tax assets amount to CHF 587 million ( 2014: CHF 629 million). In addition, the Group has not recognised deferred tax liabilities in respect of unremitted earnings that are considered indefi nitely reinvested in foreign subsidiaries. At 31 December 2015, these earnings amount to CHF 18.0 billion ( 2014: CHF 20.0 billion). They could be subject to withholding and other taxes on remittance.

120 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 15. Associates and joint ventures

Associates are companies where the Group has the power to exercise a signifi cant infl uence but does not exercise control. Signifi cant infl uence may be obtained when the Group has 20% or more of the voting rights in the investee or has obtained a seat on the board of directors or otherwise participates in the policy-making process of the investee. Joint ventures are contractual arrangements over which the Group exercises joint control with partners and where the parties have rights to the net assets of the arrangement. Associates and joint ventures are accounted for using the equity method. The net assets and results are adjusted to comply with the Group’s accounting policies. The carrying amount of goodwill arising from the acquisition of associates and joint ventures is included in the carrying amount of investments in associates and joint ventures.

In millions of CHF 2015 2014 Other Joint Other Joint L’Oréal associates ventures Total L’Oréal associates ventures Total At 1 January 7 191 1 001 457 8 649 9 525 1 156 1 634 12 315 Currency retranslations (727) (106) (19) (852) (160) (2) 13 (149) Investments — 105 28 133 — 154 200 354 Divestments (a) — (1) — (1) (2 585) — (167) (2 752) Share of results 820 26 49 895 934 (63) (43) 828 Impairment — (37) — (37) — (211) — (211) Share of other comprehensive income 290 1 (14) 277 (13) — (57) (70) Dividends and interest received (365) (34) (57) (456) (543) (58) (115) (716) Other (b) 66 — 1 67 33 25 (1 008) (950) At 31 December 7 275 955 445 8 675 7 191 1 001 457 8 649

(a) In 2014, relates to the 48.5 million of L’Oréal shares sold to L’Oréal (see Note 15.1). (b) In 2014, relates mainly to the derecognition of the joint venture Galderma when the Group brought its ownership from 50% to 100% (see Note 15.3).

Income from associates and joint ventures

In millions of CHF 2015 2014 Share of results 895 828 Impairment (a) (37) (211) Profi t on partial disposal of L’Oréal shares (b) — 4 569 Revaluation gain on the 50% shareholding already held in Galderma (c) — 2 817 Profi t on disposal of other associates 130 — 988 8 003

(a) A number of small associated companies have been impaired based on recent fi nancial information and developments in their business environments, none of which are individually signifi cant. (b) Includes a cumulative gain of CHF 436 million recognised by L’Oréal in its other comprehensive reserves and a cumulative loss of CHF 625 million recognised by the Group in its currency translation reserve that have been recycled to the income statement. (c) Includes a cumulative currency translation loss of CHF 56 million that has been recycled to the income statement.

Consolidated Financial Statements of the Nestlé Group 2015 121 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 15. Associates and joint ventures

15.1 L’Oréal The Group holds 129 881 021 shares in L’Oréal, the world leader in cosmetics, representing a 23.2% participation in its equity after elimination of its treasury shares ( 2014: 129 881 021 shares representing a 23.4% participation). On 8 July 2014, the Group sold 48 500 000 shares to L’Oréal for CHF 7342 million for cancellation. As a result, the participation in its equity after elimination of its treasury shares was reduced from 29.7% to 23.5%. At 31 December 2015 , the market value of the shares held amounts to CHF 21.8 billion ( 2014: CHF 21.8 billion).

Summarised fi nancial information of L’Oréal

In billions of CHF 2015 2014 Total current assets 10.0 10.6 Total non-current assets 26.4 28.0 Total assets 36.4 38.6

Total current liabilities 8.8 11.2 Total non-current liabilities 2.1 3.1 Total liabilities 10.9 14.3

Total equity 25.5 24.3

Total sales 27.0 27.4

Profi t from continuing operations 3.5 3.4 Profi t from discontinued operations (a) — 2.6 Other comprehensive income 1.2 (0.1) Total comprehensive income 4.7 5.9

(a) Relate mainly to the profi t on disposal of Galderma.

Reconciliation of the share of results

In billions of CHF 2015 2014 Share held by the Group in the profi t from continuing operations of L’Oréal 0.8 0.9 Share held by the Group in the profi t from discontinued operations of L’Oréal (a) — 0.6 Elimination of the profi t on disposal of Galderma — (0.6) Share of results of L’Oréal 0.8 0.9

(a) Relate mainly to the profi t on disposal of Galderma.

122 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 15. Associates and joint ventures

Reconciliation of the carrying amount

In billions of CHF 2015 2014 Share held by the Group in the equity of L’Oréal 5.9 5.7 Goodwill and other adjustments 1.4 1.5 Carrying amount of L’Oréal 7.3 7.2

15.2 Other associates The Group holds a number of other associates that are individually not material.

15.3 Joint ventures The Group holds 50% of a number of joint ventures operating in the food and beverages and in pharmaceutical activities. These joint ventures are individually not material for the Group, the main ones being Galderma (until July 2014) and Cereal Partners Worldwide. In July 2014, the Group brought its ownership in Galderma to 100% by acquiring the remaining 50% stake from L’Oréal. As from this date, Galderma is an affi liated company that is fully consolidated (see Note 2).

A list of the principal joint ventures and associates is provided in the section Companies of the Nestlé Group, joint arrangements and associates.

16. Earnings per share

2015 2014 Basic earnings per share (in CHF) 2.90 4.54 Net profi t (in millions of CHF) 9 066 14 456 Weighted average number of shares outstanding (in millions of units) 3 129 3 188

Diluted earnings per share (in CHF) 2.89 4.52 Net profi t, net of effects of dilutive potential ordinary shares (in millions of CHF) 9 066 14 456 Weighted average number of shares outstanding, net of effects of dilutive potential ordinary shares (in millions of units) 3 136 3 196

Reconciliation of weighted average number of shares outstanding (in millions of units) Weighted average number of shares outstanding used to calculate basic earnings per share 3 129 3 188 Adjustment for share-based payment schemes, where dilutive 7 8 Weighted average number of shares outstanding used to calculate diluted earnings per share 3 136 3 196

Consolidated Financial Statements of the Nestlé Group 2015 123 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 17. Cash fl ow statement

17.1 Operating profi t

In millions of CHF 2015 2014 Profi t for the year 9 467 14 904 Income from associates and joint ventures (988) (8 003) Taxes 3 305 3 367 Financial income (101) (135) Financial expense 725 772 12 408 10 905

17.2 Non-cash items of income and expense

In millions of CHF 2015 2014 Depreciation of property, plant and equipment 2 861 2 782 Impairment of property, plant and equipment 100 136 Impairment of goodwill 338 1 908 Amortisation of intangible assets 317 276 Impairment of intangible assets 138 23 Net result on disposal of businesses 422 509 Net result on disposal of assets 66 5 Non-cash items in fi nancial assets and liabilities (135) (34) Equity compensation plans 166 156 Other 75 562 4 348 6 323

17.3 Decrease/(increase) in working capital

In millions of CHF 2015 2014 Inventories (25) (534) Trade and other receivables (323) (892) Prepayments and accrued income (91) 268 Trade and other payables 988 912 Accruals and deferred income 192 132 741 (114)

124 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 17. Cash fl ow statement

17.4 Variation of other operating assets and liabilities

In millions of CHF 2015 2014 Variation of employee benefi ts assets and liabilities (125) (324) Variation of provisions (327) 324 Other 204 85 (248) 85

17.5 Net cash fl ows from treasury activities

In millions of CHF 2015 2014 Interest paid (522) (518) Interest and dividends received 70 73 Net cash fl ows from derivatives used to hedge foreign operations 361 75 Net cash fl ows from trading derivatives (2) 14 (93) (356)

Consolidated Financial Statements of the Nestlé Group 2015 125 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 17. Cash fl ow statement

17.6 Reconciliation of free cash fl ow and net fi nancial debt

In millions of CHF 2015 2014 Operating cash fl ow 14 302 14 700 Capital expenditure (3 872) (3 914) Expenditure on intangible assets (422) (509) Investments (net of divestments) in associates and joint ventures (44) 3 958 Other investing activities (19) (98) Free cash fl ow 9 945 14 137

Acquisition of businesses (530) (1 986) Financial liabilities and short-term investments acquired in business combinations (1) (229) Disposal of businesses 213 321 Financial liabilities and short-term investments transferred on disposal of businesses — 9 Acquisition (net of disposal) of non-controlling interests — (49) Dividend paid to shareholders of the parent (6 950) (6 863) Dividends paid to non-controlling interests (424) (356) Purchase (net of sale) of treasury shares (6 377) (1 617) Reclassifi cation of fi nancial investments from non-current fi nancial assets to net fi nancial debt 73 72 Outfl ows from non-current treasury investments (6) (137) Cash infl ows from hedging derivatives on net debt 226 155 Currency retranslations and exchange differences 724 (998) Other movements 7 (94) (Increase)/decrease of net fi nancial debt (3 100) 2 365

Net fi nancial debt at beginning of year (12 325) (14 690) Net fi nancial debt at end of year (15 425) (12 325)

17.7 Cash and cash equivalents at end of year

Cash and cash equivalents include cash at bank and in hand and other short-term highly liquid investments with maturities of three months or less from the initial recognition.

In millions of CHF 2015 2014 Cash at bank and in hand 1 906 3 528 Time deposits 1 191 2 513 Commercial paper 1 787 1 407 4 884 7 448

126 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 18. Equity

18.1 Share capital issued The share capital changed in 2015 as a consequence of the Share Buy-Back programme launched in 2014. The cancellation of shares was approved at the Annual General Meeting on 16 April 2015 . The share capital was reduced by 36 400 000 shares from CHF 322 million to CHF 319 million. As of 31 December 2015 , the ordinary share capital of Nestlé S.A. authorised, issued and fully paid is composed of 3 188 400 000 registered shares with a nominal value of CHF 0.10 each. Each share confers the right to one vote. No shareholder may be registered with the right to vote for shares which it holds, directly or indirectly, in excess of 5% of the share capital. Shareholders have the right to receive dividends.

18.2 Conditional share capital The conditional capital of Nestlé S.A. amounts to CHF 10 million as in the preceding year. It confers the right to increase the ordinary share capital, through the exercise of conversion or option rights in connection with debentures and other fi nancial market instruments, by a maximum of CHF 10 million by the issue of a maximum of 100 000 000 registered shares with a nominal value of CHF 0.10 each. Thus the Board of Directors has at its disposal a fl exible instrument enabling it, if necessary, to fi nance the activities of the Company through convertible debentures.

18.3 Treasury shares

Number of shares in millions of units 2015 2014 Purpose of holding Trading 18.1 18.1 Share Buy-Back Programme 76.2 23.7 Long-Term Incentive Plans 9.6 14.6 103.9 56.4

At 31 December 2015 , the treasury shares held by the Group represent 3.3% of the share capital (2014 : 1.7% ). Their market value amounts to CHF 7748 million (2014 : CHF 4113 million).

Consolidated Financial Statements of the Nestlé Group 2015 127 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 18. Equity

18.4 Number of shares outstanding

Number of shares in millions of units Shares Treasury Outstanding issued shares shares At 1 January 2014 3 224.8 (35.2) 3 189.6 Purchase of treasury shares — (26.5) (26.5) Sale of treasury shares — 0.1 0.1 Treasury shares delivered in respect of options exercised — 1.9 1.9 Treasury shares delivered in respect of equity compensation plans — 3.3 3.3 At 31 December 2014 3 224.8 (56.4) 3 168.4 Purchase of treasury shares — (88.9) (88.9) Sale of treasury shares ——— Treasury shares delivered in respect of options exercised — 1.7 1.7 Treasury shares delivered in respect of equity compensation plans — 3.3 3.3 Treasury shares cancelled (36.4) 36.4 — At 31 December 2015 3 188.4 (103.9) 3 084.5

18.5 Translation reserve The translation reserve comprises the cumulative gains and losses arising from translating the fi nancial statements of foreign operations that use functional currencies other than Swiss Francs. It also includes the changes in the fair value of hedging instruments used for net investments in foreign operations.

18.6 Retained earnings and other reserves Retained earnings represent the cumulative profi ts as well as remeasurement of defi ned benefi t plans attributable to shareholders of the parent. Other reserves comprise the fair value reserve and the hedging reserve attributable to shareholders of the parent. The fair value reserve includes the gains and losses on remeasuring available-for-sale fi nancial instruments. At 31 December 2015, the reserve is CHF 36 million positive ( 2014: CHF 250 million positive). The hedging reserve consists of the effective portion of the gains and losses on hedging instruments related to hedged transactions that have not yet occurred. At 31 December 2015 , the reserve is CHF 38 million negative (2014 : CHF 108 million negative).

18.7 Non-controlling interests The non-controlling interests comprise the portion of equity of subsidiaries that are not owned, directly or indirectly, by Nestlé S.A. These non-controlling interests are individually not material for the Group.

128 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 18. Equity

Acquisitions and disposals of non-controlling interests The Group treats transactions with non-controlling interests that do not result in loss of control as transactions with equity holders in their capacity as equity holders. For purchases of shares from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity. The same principle is applied to disposals of shares to non-controlling interests.

18.8 Other comprehensive income

In millions of CHF Translation Translation reserve Retained earnings and other reserves attributable Total to shareholders of the parent Non-controlling interests Total Currency retranslations (3 874) — (3 874) (85) (3 959)

2015 Fair value adjustments on available-for-sale fi nancial instruments — (209) (209) — (209) Fair value adjustments on cash fl ow hedges — 77 77 1 78 Remeasurement of defi ned benefi t plans — (370) (370) — (370) Taxes — 245 245 — 245 Share of other comprehensive income of associates and joint ventures — 277 277 — 277 Other comprehensive income for the year (3 874) 20 (3 854) (84) (3 938)

Currency retranslations 3 556 — 3 556 107 3 663

2014 Fair value adjustments on available-for-sale fi nancial instruments — 186 186 1 187 Fair value adjustments on cash fl ow hedges — (56) (56) — (56) Remeasurement of defi ned benefi t plans — (1 745) (1 745) — (1 745) Taxes — 357 357 — 357 Share of other comprehensive income of associates and joint ventures — (506) (506) — (506) Other comprehensive income for the year 3 556 (1 764) 1 792 108 1 900

Consolidated Financial Statements of the Nestlé Group 2015 129 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 18. Equity

18.9 Dividend

In accordance with Swiss law and the Company’s Articles of Association, dividend is treated as an appropriation of profi t in the year in which it is ratifi ed at the Annual General Meeting and subsequently paid.

The dividend related to 2014 was paid on 22 April 2015 in accordance with the decision taken at the Annual General Meeting on 16 April 2015 . Shareholders approved the proposed dividend of CHF 2.20 per share, resulting in a total dividend of CHF 6950 million. Dividend payable is not accounted for until it has been ratifi ed at the Annual General Meeting. At the meeting on 7 April 2016 , a dividend of CHF 2.25 per share will be proposed, resulting in a total dividend of CHF 7002 million. For further details, refer to the Financial Statements of Nestlé S.A. The Financial Statements for the year ended 31 December 2015 do not refl ect this proposed distribution, which will be treated as an appropriation of profi t in the year ending 31 December 2016.

19. Lease commitments

Leasing agreements which transfer to the Group substantially all the rewards and risks of ownership of an asset are treated as fi nance leases. All other leases are classifi ed as operating leases. Assets acquired under fi nance leases are capitalised and depreciated in accordance with the Group’s policy on property, plant and equipment unless the lease term is shorter. The associated fi nance lease obligations are included under fi nancial debt and the fi nance charge is presented as part of net fi nancing cost. Rentals under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

19.1 Operating leases

In millions of CHF 2015 2014 Minimum lease payments (Future value) Within one year 595 633 In the second year 476 530 In the third to the fi fth year 905 1 044 After the fi fth year 577 584 2 553 2 791

Lease commitments relate mainly to buildings, industrial equipment, vehicles and IT equipment. The operating lease charge for the year 2015 amounts to CHF 679 million ( 2014: CHF 692 million).

130 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 19. Lease commitments

19.2 Finance leases

In millions of CHF 2015 2014 Minimum lease payments Present value Future value Present value Future value Within one year 42 44 46 48 In the second year 38 42 44 50 In the third to the fi fth year 65 82 91 116 After the fi fth year 33 54 54 92 178 222 235 306

The difference between the future value of the minimum lease payments and their present value represents the discount on the lease obligations.

Consolidated Financial Statements of the Nestlé Group 2015 131 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 20. Transactions with related parties

20.1 Compensation of the Board of Directors and the Executive Board Board of Directors Members of the Board of Directors receive an annual compensation that varies with the Board and the Committee responsibilities as follows: – Board members: CHF 280 000; – members of the Chairman’s and Corporate Governance Committee: additional CHF 200 000 (Chair CHF 300 000); – members of the Compensation Committee: additional CHF 70 000 (Chair CHF 150 000); – members of the Nomination Committee: additional CHF 40 000 (Chair CHF 100 000); and – members of the Audit Committee: additional CHF 100 000 (Chair CHF 150 000). The Chairman and the CEO Committee fees are included in their total compensation. Half of the compensation is paid through the granting of Nestlé S.A. shares at the ex-dividend closing price. These shares are subject to a three-year blocking period. With the exception of the Chairman and the CEO, members of the Board of Directors also receive an annual expense allowance of CHF 15 000 each. This allowance covers travel and hotel accommodation in Switzerland, as well as sundry out-of-pocket expenses. For Board members from outside Europe, the Company reimburses additionally their airline tickets. When the Board meets outside of Switzerland, all expenses are borne and paid directly by the Company. The Chairman is entitled to a cash compensation, as well as Nestlé S.A. shares which are blocked for three years.

Executive Board The total annual remuneration of the members of the Executive Board comprises a salary, a bonus (based on the individual’s performance and the achievement of the Group’s objectives), equity compensation and other benefi ts. Members of the Executive Board can choose to receive part or all of their bonus in Nestlé S.A. shares at the average closing price of the last ten trading days of January of the year of the payment of the bonus. These shares are subject to a three-year blocking period.

In millions of CHF 2015 2014 Board of Directors (a) Chairman's compensation 6 7 Other Board members Remuneration – cash 3 3 Shares 2 2

Executive Board (a) Remuneration – cash 17 15 Bonus – cash 9 7 Bonus – shares 7 9 Equity compensation plans (b) 15 11 Pension 6 6

(a) For the detailed disclosures regarding the remunerations of the Board of Directors and the Executive Board that are required by Swiss law, refer to the Compensation report of Nestlé S.A. with the audited sections highlighted with a blue bar. (b) Equity compensation plans are equity-settled share-based payment transactions whose cost is recognised over the vesting period as required by IFRS 2.

132 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 20. Transactions with related parties

20.2 Transactions with associates and joint ventures There are no signifi cant transactions between the Group companies and associates. The main transactions with joint ventures are loans granted by the Group whose outstanding balances as at 31 December 2015 amount to CHF 240 million ( 2014: CHF 247 million) and dividends and interest received which represent an amount of CHF 57 million ( 2014: CHF 115 million).

20.3 Other transactions Nestlé Capital Advisers S.A. (NCA), one of the Group’s subsidiaries, is an unregulated investment and actuarial adviser, based in Switzerland. Further to actuarial advice, NCA renders investment consulting services to some of the Group’s pension funds, either directly or indirectly via the Robusta mutual fund umbrella, but NCA never executes trading and investment transactions. The fees received by NCA in 2015 for those activities amounted to CHF 12 million ( 2014: CHF 15 million). Nestlé Capital Management Ltd (NCM), a 100% subsidiary of NCA, is an asset manager authorised and regulated by the Financial Conduct Authority, in the United Kingdom. NCM manages some of the assets of the Group’s pension funds. In this function, NCM executes trading and investment transactions on behalf of these pension funds directly or for the Robusta mutual funds pension investment vehicles. The fees received by NCM in 2015 for those activities amounted to CHF 18 million ( 2014: CHF 21 million). The assets under direct management represented an amount of CHF 10.8 billion at 31 December 2015 ( 2014: CHF 11.4 billion). In addition, Robusta Asset Management Ltd (RAML), a 100% subsidiary of NCA, is in charge of selecting and monitoring investment managers for the Robusta mutual funds pension investment vehicles. RAML has delegated most of its activities to third-parties, including NCA and hence no fee income is generated by RAML. Any remaining expenses are covered by means of fees deducted from its assets under management. The assets under supervision of RAML amounted to CHF 9.7 billion at 31 December 2015 ( 2014: CHF 10.4 billion). Of this amount CHF 6.7 billion ( 2014: CHF 7.4 billion) of assets are under direct manage ment of NCM.

Furthermore, throughout 2015 , no director of the Group had a personal interest in any transaction of signifi cance for the business of the Group.

21. Guarantees

At 31 December 2015 , the Group has given guarantees to third parties for an amount of CHF 945 million ( 2014: CHF 603 million). The most signifi cant balance relates to the Nestlé UK pension fund (a related party).

Consolidated Financial Statements of the Nestlé Group 2015 133 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 22. Group exposure in Venezuela

Venezuela is a hyperinfl ationary economy where the government has established multiple foreign exchange rate systems, and strict exchange controls have been in place for many years. These systems have different exchange rates and are available for a relatively limited amount of currency. All of the Group’s foreign currency denominated transactions and balances of operations in Venezuela are translated into the local functional currency (VEF) at the rate they are expected to be settled, using the most appropriate offi cial rate available. For consolidation purposes only, the Group converts its Venezuelan operations using the Group’s best estimate of the rate which would have been applicable to capital and dividend repatriations if they could have been made at the balance sheet date. This rate is reviewed periodically depending on the economic and regulatory developments in the country. The Group applies hyperinfl ation accounting in Venezuela. As a result, the Group recognised during the period a re-measurement loss of CHF 75 million in the income statement (2014 : loss of CHF 606 million), within Other operating expenses. As at 31 December 2015 , the remaining carrying amount of cash and cash equivalents exposed to a loss through income statement due to decline of purchasing power amounts to CHF 12 million ( 2014: CHF 51 million). The Group will continue to monitor the situation closely in Venezuela and adjust its accounting treatment accordingly.

23. Events after the balance sheet date

The values of assets and liabilities at the balance sheet date are adjusted if there is evidence that subsequent adjusting events warrant a modifi cation of these values. These adjustments are made up to the date of approval of the Consolidated Financial Statements by the Board of Directors.

At 17 February 2016, the date of approval for issue of the Consolidated Financial Statements by the Board of Directors, the Group has no subsequent events which either warrant a modifi cation of the value of its assets and liabilities or any additional disclosure.

134 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Consolidated Financial Statements of the Nestlé Group 2015 135 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Report of the Statutory Auditor on the Consolidated Financial Statements to the General Meeting of Nestlé S.A., Cham & Vevey

As statutory auditor, we have audited the consolidated fi nancial statements (income statement, statement of comprehensive income, balance sheet, cash fl ow statement, statement of changes in equity and notes on pages 60 to 134) of Nestlé S.A. for the year ended 31 December 2015.

Board of Directors’ responsibility The Board of Directors is responsible for the preparation of the consolidated fi nancial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of the consolidated fi nancial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated fi nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated fi nancial statements for the year ended 31 December 2015 give a true and fair view of the fi nancial position, the results of operations and the cash fl ows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.

136 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Report of the Statutory Auditor on the Consolidated Financial Statements

Report on other legal requirements We confi rm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confi rm that an internal control system exists, which has been designed for the preparation of consolidated fi nancial statements according to the instructions of the Board of Directors. We recommend that the consolidated fi nancial statements submitted to you be approved.

KPMG SA

Scott Cormack Lukas Marty Licensed Audit Expert Licensed Audit Expert Auditor in charge

Geneva, 17 February 2016

Consolidated Financial Statements of the Nestlé Group 2015 137 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Financial information – 5 year review

In millions of CHF (except for data per share and employees) 2015 2014 Results Sales 88 785 91 612 Trading operating profi t 13 382 14 019 as % of sales 15.1% 15.3% Taxes 3 305 3 367 Profi t for the year attributable to shareholders of the parent (Net profi t) 9 066 14 456 as % of sales 10.2% 15.8% Total amount of dividend 7 002 (e) 6 950 Depreciation of property, plant and equipment 2 861 2 782

Balance sheet and Cash fl ow statement Current assets 29 434 33 961 Non-current assets 94 558 99 489 Total assets 123 992 133 450 Current liabilities 33 321 32 895 Non-current liabilities 26 685 28 671 Equity attributable to shareholders of the parent 62 338 70 130 Non-controlling interests 1 648 1 754 Net fi nancial debt 15 425 12 325 Ratio of net fi nancial debt to equity (gearing) 24.7% 17.6% Operating cash fl ow (a) 14 302 14 700 as % of net fi nancial debt 92.7% 119.3% Free cash fl ow (b) 9 945 14 137 Capital expenditure 3 872 3 914 as % of sales 4.4% 4.3%

Data per share Weighted average number of shares outstanding (in millions of units) 3 129 3 188 Basic earnings per share 2.90 4.54 Underlying earnings per share (c) 3.31 3.44 Dividend 2.25 (e) 2.20 Pay-out ratio based on basic earnings per share 77.6% (e) 48.5% Stock prices (high) 77.00 73.30 Stock prices (low) 64.55 63.85 Yield (d) 2.9/3.5 (e) 3.0/3.4

Market capitalisation 229 947 231 136

Number of employees (in thousands) 335 339

(a) 2011 restated following the changes in the cash fl ow statement described in Note 1 – Accounting policies (refer to Note 1 – Accounting Policies of the 2012 Consolidated Financial Statements). (b) Refer to Note 17.6 for defi nition. As from 2012, movements with non-controlling interests are no longer deducted. 2011 comparatives have been restated accordingly. (c) Profi t per share for the year attributable to shareholders of the parent before impairments, restructuring costs, results on disposals and signifi cant one-off items. The tax impact from the adjusted items is also adjusted for. (d) Calculated on the basis of the dividend for the year concerned, which is paid in the following year, and on high/low stock prices.

138 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Financial information – 5 year review

2013 2012 (f) 2011 Results 92 158 89 721 83 642 Sales 14 047 13 464 12 538 Trading operating profi t 15.2% 15.0% 15.0% as % of sales 3 256 3 259 3 112 Taxes 10 015 10 228 9 487 Profi t for the year attributable to shareholders of the parent (Net profi t) 10.9% 11.4% 11.3% as % of sales 6 863 6 552 6 213 Total amount of dividend 2 864 2 655 2 422 Depreciation of property, plant and equipment

Balance sheet and Cash fl ow statement 30 066 34 020 33 324 Current assets 90 376 91 857 80 767 Non-current assets 120 442 125 877 114 091 Total assets 32 917 38 597 35 232 Current liabilities 23 386 24 616 20 585 Non-current liabilities 62 575 61 007 56 797 Equity attributable to shareholders of the parent 1 564 1 657 1 477 Non-controlling interests 14 690 18 120 14 319 Net fi nancial debt 23.5% 29.7% 25.2% Ratio of net fi nancial debt to equity (gearing) 14 992 15 668 10 180 Operating cash fl ow (a) 102.1% 86.5% 71.1% as % of net fi nancial debt 10 486 9 905 4 757 Free cash fl ow (b) 4 928 5 273 4 779 Capital expenditure 5.3% 5.9% 5.7% as % of sales

Data per share 3 191 3 186 3 196 Weighted average number of shares outstanding (in millions of units) 3.14 3.21 2.97 Basic earnings per share 3.50 3.25 3.08 Underlying earnings per share (c) 2.15 2.05 1.95 Dividend 68.5% 63.9% 65.7% Pay-out ratio based on basic earnings per share 70.00 62.30 55.45 Stock prices (high) 59.20 52.50 43.50 Stock prices (low) 3.1/3.6 3.3/3.9 3.5/4.5 Yield (d)

208 279 190 038 171 287 Market capitalisation

333 333 328 Number of employees (in thousands)

(e) As proposed by the Board of Directors of Nestlé S.A. (f) 2012 restated following the implementation of IFRS 11 and IAS 19 revised, and adjusted following the fi nal valuation of the Wyeth Nutrition acquisition (refer to Note 1 – Accounting Policies and Note 2 – Acquisitions and disposals of businesses of the 2012 Consolidated Financial Statements).

Consolidated Financial Statements of the Nestlé Group 2015 139 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

In the context of the SIX Swiss Exchange Directive on Information relating to Corporate Governance, the disclosure criteria of the principal affi liated companies are as follows: – operating companies are disclosed if their sales exceed CHF 10 million or equivalent; – fi nancial companies are disclosed if either their equity exceeds CHF 10 million or equivalent and/or the total balance sheet is higher than CHF 50 million or equivalent.

Entities directly held by Nestlé S.A. that are below the disclosure criteria are listed with a °. Swiss based joint arrangements that are below the disclosure criteria are listed with a *. All companies listed below are fully consolidated except for: 1) Joint ventures accounted for using the equity method; 2) Joint operations accounted for in proportion to the Nestlé contractual specifi ed share (usually 50%); 3) Associates accounted for using the equity method.

Countries within the continents are listed according to the alphabetical order of the country names. Percentage of capital shareholding corresponds to voting powers unless stated otherwise. Δ Companies listed on the stock exchange ◊ Sub-holding, fi nancial and property companies

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Europe Austria Galderma Austria GmbH Linz 100% EUR 35 000 Nespresso Österreich GmbH & Co. OHG Wien 100% EUR 35 000 Nestlé Österreich GmbH Wien 34.4% 100% EUR 7 270 000

Azerbaijan Nestlé Azerbaijan LLC Baku 100% 100% USD 200 000

Belgium Centre de Coordination Nestlé S.A. ◊ Bruxelles 91.5% 100% EUR 4 298 971 818 Nespresso Belgique S.A. Bruxelles 100% 100% EUR 550 000 Nestlé Belgilux S.A. Bruxelles 56.9% 100% EUR 64 924 438 Nestlé Catering Services N.V. Bruxelles 100% EUR 14 035 500 Nestlé Waters Benelux S.A. Etalle 100% EUR 5 601 257

Bosnia and Herzegovina Nestlé Adriatic BH d.o.o. Sarajevo 100% 100% BAM 2 151

Bulgaria Nestlé Bulgaria A.D. Sofi a 100% 100% BGN 10 234 933

Croatia Nestlé Adriatic d.o.o. Zagreb 100% 100% HRK 14 685 500

140 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Czech Republic Cereal Partners Czech Republic 1) Praha 50% CZK 23 100 000 Nestlé Cesko s.r.o. Praha 100% 100% CZK 300 000 000

Denmark Glycom A/S 3) Copenhagen 35.7% 35.7% DKK 1 382 655 Nestlé Danmark A/S Copenhagen 100% 100% DKK 44 000 000 Oscar A/S Rønnede 100% DKK 12 000 000

Finland Puljonki Oy Juuka 100% EUR 85 000 Suomen Nestlé Oy Helsinki 100% 100% EUR 10 000 000

France Centres de Recherche et Développement Nestlé S.A.S. Beauvais 100% EUR 3 138 230 Cereal Partners France SNC 1) Noisiel 50% EUR 3 000 000 Galderma International S.A.S. Courbevoie 52.9% 100% EUR 940 020 Galderma Q-Med S.A.S. Nanterre 100% EUR 3 769 870 Galderma Research and Development SNC Biot 100% EUR 70 518 259 Herta S.A.S. Noisiel 100% EUR 12 908 610 L’Oréal S.A. (a) Δ3) Paris 23.1% 23.1% EUR 112 596 670 Listed on the Paris stock exchange, market capitalisation EUR 87.4 billion, quotation code (ISIN) FR0000120321 Laboratoires Galderma S.A.S. Alby-sur-Chéran 100% EUR 14 015 454 Lactalis Nestlé Produits Frais S.A.S. 3) Laval 40% 40% EUR 69 208 832 Nespresso France S.A.S. Paris 100% EUR 1 360 000 Nestlé Health Science France S.A.S. Noisiel 100% EUR 57 943 072 Nestlé Entreprises S.A.S. ◊ Noisiel 84% 100% EUR 739 559 392 Nestlé France M.G. S.A.S. Noisiel 100% EUR 50 000 Nestlé France S.A.S. Noisiel 100% EUR 130 925 520 Nestlé Grand Froid S.A. Noisiel <0.1% 100% EUR 3 120 000 Nestlé Purina PetCare France S.A.S. Noisiel 100% EUR 21 091 872 Nestlé Waters S.A.S. ◊ Issy-les-Moulineaux 100% EUR 254 893 080 Nestlé Waters France S.A.S. ◊ Issy-les-Moulineaux 100% EUR 44 856 149 Nestlé Waters Management & Technology S.A.S. Issy-les-Moulineaux 100% EUR 38 113 Nestlé Waters Marketing & Distribution S.A.S. Issy-les-Moulineaux 100% EUR 26 740 940 Nestlé Waters Services S.A.S. Issy-les-Moulineaux 100% EUR 1 356 796 Nestlé Waters Supply Centre S.A.S. Issy-les-Moulineaux 100% EUR 2 577 000 Nestlé Waters Supply Est S.A.S. Issy-les-Moulineaux 100% EUR 17 539 660 Nestlé Waters Supply Sud S.A.S. Issy-les-Moulineaux 100% EUR 7 309 106 Société de Bouchages Emballages Conditionnement Moderne S.A.S. 3) Lavardac 50% EUR 10 200 000 Société des Produits Alimentaires de Caudry S.A.S. Noisiel 100% EUR 1 440 000 Société Immobilière de Noisiel S.A. ◊ Noisiel 100% EUR 22 753 550 Société Industrielle de Transformation de Produits Agricoles S.A.S. Noisiel 100% EUR 9 718 000

(a) Voting powers amount to 23.2%

Consolidated Financial Statements of the Nestlé Group 2015 141 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Georgia Nestlé Georgia LLC ° Tbilisi 100% 100% CHF 700 000

Germany Bübchen-Werk Ewald Hermes Pharmazeutische Fabrik GmbH Soest 100% EUR 25 565 C.P.D. Cereal Partners Deutschland GmbH & Co. OHG 1) Frankfurt am Main 50% EUR 511 292 Erlenbacher Backwaren GmbH Darmstadt 100% EUR 2 582 024 Galderma Laboratorium GmbH Düsseldorf 100% EUR 800 000 Nestlé Deutschland AG Frankfurt am Main 100% EUR 214 266 628 Nestlé Product Technology Centre Lebensmittelforschung GmbH Singen 100% EUR 52 000 Nestlé Schöller Produktions GmbH Nürnberg 100% EUR 30 000 Nestlé Unternehmungen Deutschland GmbH ◊ Frankfurt am Main 100% EUR 60 000 000 Nestlé Waters Deutschland GmbH Frankfurt am Main 100% EUR 10 566 000 Trinks GmbH 3) Goslar 25% EUR 2 360 000 Trinks Süd GmbH 3) München 25% EUR 260 000

Greece C.P.W. Hellas Breakfast Cereals S.A. 1) Maroussi 50% EUR 201 070 Nespresso Hellas S.A. Maroussi 100% 100% EUR 500 000 Nestlé Hellas S.A. Maroussi 100% 100% EUR 39 119 726

Hungary Nestlé Hungária Kft. Budapest 100% 100% HUF 6 000 000 000

Italy Fastlog S.p.A. Assago 100% EUR 154 935 Galderma Italia S.p.A. Milano 100% EUR 612 000 Nespresso Italiana S.p.A. Assago 100% EUR 250 000 Nestlé ltaliana S.p.A. Assago 100% 100% EUR 25 582 492 Sanpellegrino S.p.A. San Pellegrino Terme 100% EUR 58 742 145

Kazakhstan Nestlé Food Kazakhstan LLP Almaty 100% 100% KZT 91 900

Lithuania UAB „Nestlé Baltics” Vilnius 100% 100% EUR 31 856

Luxembourg Compagnie Financière du Haut-Rhin S.A. ◊ Luxembourg 100% EUR 105 200 000 Nespresso Luxembourg Sàrl Luxembourg 100% 100% EUR 12 525 Nestlé Finance International Ltd ◊ Luxembourg 100% 100% EUR 440 000 Nestlé Treasury International S.A. ◊ Luxembourg 100% 100% EUR 1 000 000 NTC-Europe S.A. ◊ Luxembourg 100% 100% EUR 3 565 000

142 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Macedonia Nestlé Adriatik Makedonija d.o.o.e.l. Skopje-Karpos 100% 100% MKD 31 065 780

Malta Nestlé Malta Ltd Lija 99.9% 100% EUR 116 470

Moldova LLC Nestlé ° Chisinau 100% 100% USD 1 000

Netherlands East Springs International N.V. ◊ Amsterdam 100% EUR 25 370 000 Galderma BeNeLux B.V. Rotterdam 100% EUR 18 002 Nespresso Nederland B.V. Amsterdam 100% EUR 680 670 Nestlé Nederland B.V. Amstelveen 100% 100% EUR 11 346 000

Norway A/S Nestlé Norge Oslo 100% NOK 81 250 000

Poland Cereal Partners Poland Torun-Pacifi c Sp. Z o.o. 1) Torun 50% 50% PLN 14 572 838 Galderma Polska Z o.o. Warszawa 100% PLN 93 000 Nestlé Polska S.A. Warszawa 100% 100% PLN 50 000 000 Nestlé Waters Polska S.A. Warszawa 100% PLN 196 100 000

Portugal Cereal Associados Portugal A.E.I.E. 1) Oeiras 50% EUR 99 760 Nestlé Portugal S.A. Oeiras 100% EUR 30 000 000 Prolacto-Lacticínios de São Miguel S.A. Ponta Delgada 100% EUR 700 000

Republic of Ireland Nestlé (lreland) Ltd Dublin 100% EUR 41 964 052 Wyeth Nutritionals Ireland Ltd Askeaton 100% USD 885 599 990

Republic of Serbia Nestlé Adriatic S d.o.o., Beograd-Surcin Beograd-Surcin 100% 100% RSD 12 222 327 814

Romania Nestlé Romania S.R.L. Bucharest 100% 100% RON 132 906 800

Russia Cereal Partners Rus, LLC 1) Moscow 35% 50% RUB 28 730 860 Nestlé Kuban LLC Timashevsk 67.4% 100% RUB 11 041 793 Nestlé Rossiya LLC Moscow 84.1% 100% RUB 880 154 115 ooo Galderma LLC Moscow 100% RUB 25 000 000

Consolidated Financial Statements of the Nestlé Group 2015 143 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Slovak Republic Nestlé Slovensko s.r.o. Prievidza 100% 100% EUR 13 277 568

Slovenia Nestlé Adriatic Trgovina d.o.o. ° Ljubljana 100% 100% EUR 8 763

Spain Cereal Partners España A.E.I.E. 1) Esplugues de Llobregat (Barcelona) 50% EUR 120 202 Helados y Postres S.A. Vitoria (Alava) 100% EUR 50 900 001 Laboratorios Galderma, S.A. Madrid 100% EUR 432 480 Nestlé España S.A. Esplugues de Llobregat (Barcelona) 100% 100% EUR 100 000 000 Nestlé Purina PetCare España S.A. Castellbisbal (Barcelona) 100% EUR 12 000 000 Productos del Café S.A. Reus (Tarragona) 100% EUR 6 600 000

Sweden Galderma Holding AB ◊ Uppsala 100% SEK 50 000 Galderma Nordic AB Uppsala 100% SEK 31 502 698 Nestlé Sverige AB Helsingborg 100% SEK 20 000 000 Q-Med AB Uppsala 100% SEK 24 845 500

Switzerland Beverage Partners Worldwide (Europe) AG ◊ 1) Zürich 50% 50% CHF 1 000 000 CPW Operations Sàrl 1) Prilly 50% 50% CHF 20 000 CPW S.A. 1) Prilly 50% 50% CHF 10 000 000 DPA (Holding) S.A. ◊ ° Vevey 100% 100% CHF 100 000 Eckes-Granini (Suisse) S.A. 2) Henniez 49% CHF 2 000 000 Entreprises Maggi S.A. ◊ Cham 100% 100% CHF 100 000 Galderma Pharma S.A. ◊ Lausanne 40.2% 100% CHF 48 900 000 Galderma S.A. Cham 100% CHF 178 100 Galderma Schweiz AG Egerkingen 100% CHF 100 000 Intercona Re AG ◊ Châtel-St-Denis 100% CHF 35 000 000 Materna-Nestlé GmbH ° Zug 51% 51% CHF 20 000 Nespresso – DO & CO S.A. 1)* Lausanne 50% CHF 1 000 000 Nestec S.A. Vevey 100% 100% CHF 5 000 000 Nestlé Capital Advisers S.A. Vevey 100% 100% CHF 400 000 Nestlé Finance S.A. ◊ Cham 100% CHF 30 000 000 Nestlé Health Science S.A. ° Vevey 100% 100% CHF 100 000 Nestlé Institute of Health Sciences S.A. Ecublens 100% CHF 100 000 Nestlé International Travel Retail S.A. Vevey 100% 100% CHF 3 514 000 Nestlé Skin Health S.A. ° Lausanne 100% 100% CHF 100 000 Nestlé Nespresso S.A. Lausanne 100% 100% CHF 2 000 000 Nestlé Operational Services Worldwide S.A. Bussigny-près-Lausanne 100% 100% CHF 100 000 Nestlé Waters (Suisse) S.A. Henniez 100% CHF 5 000 000

144 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Switzerland (continued) Nestrade S.A. La Tour-de-Peilz 100% 100% CHF 6 500 000 Nutrition-Wellness Venture AG ◊ Vevey 100% 100% CHF 100 000 Provestor AG ◊° Cham 100% 100% CHF 2 000 000 Servcom S.A. ° La Tour-de-Peilz 100% 100% CHF 50 000 Société des Produits Nestlé S.A. Vevey 100% 100% CHF 54 750 000 Sofi nol S.A. Manno 100% CHF 3 000 000 Somafa S.A. ◊° Cham 100% 100% CHF 400 000 Spirig Pharma AG Egerkingen 100% CHF 600 000 Vetropa S.A. ◊° Fribourg 100% 100% CHF 2 500 000

Turkey Cereal Partners Gida Ticaret Limited Sirketi 1) Istanbul 50% TRY 25 020 000 Erikli Dagitim ve Pazarlama A.S. Bursa 100% TRY 3 849 975 Erikli Su ve Mesrubat Sanayi ve Ticaret A.S. Bursa 100% TRY 12 700 000 Nestlé Türkiye Gida Sanayi A.S. Istanbul 99.9% 99.9% TRY 35 000 000 Nestlé Waters Gida ve Mesrubat Sanayi Ticaret A.S. Bursa 100% TRY 8 000 000

Ukraine LLC Nestlé Ukraine Kyiv 100% 100% USD 150 000 PJSC „Lviv Confectionery Factory Svitoch” ° Lviv 97% 97% UAH 88 111 060 PRJSC Volynholding ° Torchyn 90.5% 100% UAH 100 000

United Kingdom Cereal Partners UK 1) Herts 50% GBP — Galderma (UK) Ltd Watford 100% GBP 1 500 000 Nespresso UK Ltd Gatwick 100% GBP 275 000 Nestec York Ltd Gatwick 100% GBP 500 000 Nestlé Capital Management Ltd Gatwick 100% GBP 2 000 000 Nestlé Holdings (UK) PLC ◊ Gatwick 93.7% 100% GBP 77 940 000 Nestlé Purina PetCare (UK) Ltd Gatwick 100% GBP 44 000 000 Nestlé UK Ltd Gatwick 100% GBP 129 972 342 Nestlé Waters UK Ltd Gatwick 100% GBP 640 Nestlé Waters (UK) Holdings Ltd ◊ Gatwick 100% GBP 6 500 000 Vitafl o (International) Ltd Liverpool 100% GBP 625 379

Consolidated Financial Statements of the Nestlé Group 2015 145 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Africa Algeria Nestlé Algérie SpA Alger 100% 100% DZD 2 600 000 000 Nestlé Industrie Algérie SpA ° Alger 70% 70% DZD 100 000 000 Nestlé Waters Algérie SpA Blida 60% DZD 377 606 250

Angola Nestlé Angola Lda Luanda 99% 100% AOA 24 000 000

Burkina Faso Nestlé Burkina Faso S.A. Ouagadougou 100% XOF 50 000 000

Cameroon Nestlé Cameroun S.A. Douala 100% 100% XAF 4 323 960 000

Chad Nestlé Chad S.A. N´Djamena 100% 100% XAF 50 000 000

Côte d´Ivoire Centre de Recherche et de Développement Nestlé Abidjan S.A. Abidjan 100% XOF 10 000 000 Nestlé Côte d’Ivoire S.A. Δ Abidjan 79.6% 86.5% XOF 5 517 600 000 Listed on the Abidjan stock exchange, market capitalisation XOF 55.2 billion, quotation code (ISIN) CI0009240728

Democratic Republic of the Congo Nestlé Congo S.A.R.L Kinshasa 99.5% 100% USD 33 200 000

Egypt Nestlé Egypt S.A.E. Giza 100% 100% EGP 80 722 000 Nestlé Waters Egypt S.A.E. Cairo 63.8% EGP 90 140 000

Gabon Nestlé Gabon, S.A. Libreville 90% 90% XAF 344 000 000

Ghana Nestlé Central and West Africa Ltd Accra 100% 100% GHS 46 000 Nestlé Ghana Ltd Accra 76% 76% GHS 20 100 000

Guinea Nestlé Guinée S.A. Conakry 99% 99% GNF 3 424 000 000

Kenya Nestlé Equatorial African Region Ltd Nairobi 100% 100% KES 132 000 000 Nestlé Kenya Ltd Nairobi 100% 100% KES 226 100 400

146 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Mali Nestlé Mali S.A.U. Bamako 100% XOF 10 000 000

Mauritius Nestlé’s Products (Mauritius) Ltd Port Louis 100% 100% BSD 71 500

Morocco Nestlé Maghreb S.A. Casablanca 100% 100% MAD 300 000 Nestlé Maroc S.A. El Jadida 94.5% 94.5% MAD 156 933 000

Mozambique Nestlé Moçambique Lda Maputo 87.5% 100% MZN 4 000

Niger Nestlé Niger S.A. Niamey 99.6% XOF 50 000 000

Nigeria Nestlé Nigeria Plc Δ Ilupeju 63.5% 63.5% NGN 396 328 126 Listed on the Nigerian Stock Exchange, market capitalisation NGN 682.0 billion, quotation code (ISIN) NGNESTLE0006

Senegal Nestlé Sénégal S.A. Dakar 100% 100% XOF 1 620 000 000

South Africa Galderma Laboratories South Africa (Pty) Ltd Bryanston 100% ZAR 375 000 Nestlé (South Africa) (Pty) Ltd Johannesburg 100% 100% ZAR 553 400 000

Togo Nestlé Togo S.A.U. Lome 100% XOF 50 000 000

Tunisia Nestlé Tunisie Distribution S.A. Tunis <0.1% 99.5% TND 100 000 Nestlé Tunisie S.A. Tunis 99.5% 99.5% TND 8 438 280

Zambia Nestlé Zambia Trading Ltd Lusaka 99.8% 100% ZMW 2 317 500

Zimbabwe Nestlé Zimbabwe (Private) Ltd Harare 100% 100% USD 2 100 000

Consolidated Financial Statements of the Nestlé Group 2015 147 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Americas Argentina Nestlé Waters Argentina S.A. Buenos Aires 100% ARS 18 791 615 Eco de Los Andes S.A. Buenos Aires 50.9% ARS 92 524 285 Galderma Argentina S.A. Buenos Aires 100% ARS 9 900 000 Nestlé Argentina S.A. Buenos Aires 100% 100% ARS 233 316 000

Bermuda Centram Holdings Ltd ◊ Hamilton 100% 100% USD 12 000

Bolivia Industrias Alimentícias Fagal S.R.L. Santa Cruz 98% 100% BOB 133 100 000 Nestlé Bolivia S.A. Santa Cruz 99% 100% BOB 191 900

Brazil Chocolates Garoto S.A. Vila Velha 100% BRL 161 450 000 CPW Brasil Ltda 1) Caçapava 50% BRL 7 885 520 Dairy Partners Americas Brasil Ltda 3) São Paulo 49% 49% BRL 27 606 368 Dairy Partners Americas Manufacturing Brasil Ltda São Paulo 100% BRL 39 468 974 Dairy Partners Americas Nordeste – Produtos Alimentícios Ltda 3) Garanhuns 49% BRL 100 000 Galderma Brasil Ltda São Paulo 100% BRL 39 741 602 Nestlé Brasil Ltda São Paulo 100% 100% BRL 452 985 643 Nestlé Nordeste Alimentos e Bebidas Ltda Feira de Santana 100% BRL 12 713 641 Nestlé Sudeste Alimentos e Bebidas Ltda São Paulo 100% BRL 109 317 818 Nestlé Sul – Alimentos e Bebidas Ltda Carazinho 100% BRL 73 049 736 Nestlé Waters Brasil – Bebidas e Alimentos Ltda São Paulo 100% 100% BRL 87 248 341 Ralston Purina do Brasil Ltda ° Ribeirão Preto 22.6% 100% BRL 79 473 771 SOCOPAL – Sociedade Comercial de Corretagem de Seguros e de Participações Ltda ° São Paulo 100% 100% BRL 2 155 600

Canada G. Production Canada Inc. Baie D´Urfé (Québec) 100% CAD 100 Galderma Canada Inc. New Brunswick 100% CAD 100 Nestlé Canada Inc. Toronto (Ontario) 65.7% 100% CAD 47 165 540 Nestlé Capital Canada Ltd ◊ Toronto (Ontario) 100% CAD 1 010

Cayman Islands Hsu Fu Chi International Limited ◊ Grand Cayman 60% 60% SGD 7 950 000

Chile Aguas CCU – Nestlé Chile S.A. 3) Santiago de Chile 49.8% CLP 49 799 375 321 Cereales CPW Chile Ltda 1) Santiago de Chile 50% CLP 3 026 156 114 Nestlé Chile S.A. Santiago de Chile 99.7% 99.7% CLP 11 832 926 000

148 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Colombia Comestibles La Rosa S.A. Bogotá 52.4% 100% COP 126 397 400 Dairy Partners Americas Manufacturing Colombia Ltda Bogotá 100% COP 200 000 000 Galderma de Colombia S.A. Bogotá 100% COP 2 250 000 000 Nestlé de Colombia S.A. Bogotá 100% 100% COP 1 291 305 400 Nestlé Purina PetCare de Colombia S.A. Bogotá <0.1% 100% COP 17 030 000 000

Costa Rica Compañía Nestlé Costa Rica S.A. Barreal de Heredia 100% 100% CRC 18 000 000 Gerber Ingredients, S.A. San José 100% 100% CRC 10 000

Cuba Coralac S.A. La Habana 60% USD 6 350 000 Los Portales S.A. La Habana 50% USD 24 110 000

Dominican Republic Nestlé Dominicana S.A. Santo Domingo 98.7% 99.9% DOP 1 657 445 000 Silsa Dominicana S.A. Santo Domingo 99.9% USD 50 000

Ecuador Ecuajugos S.A. Quito 100% 100% USD 521 583 Industrial Surindu S.A. Quito <0.1% 100% USD 3 000 000 Nestlé Ecuador S.A. Quito 100% 100% USD 1 776 760

El Salvador Nestlé El Salvador, S.A. de C.V. San Salvador 100% 100% USD 4 457 200

Guatemala Malher Export S.A. Guatemala 100% 100% GTQ 5 000 Malher S.A. Guatemala 100% 100% GTQ 100 000 000 Nestlé Guatemala S.A. Mixco 35% 100% GTQ 23 460 600 SERESA, Contratación de Servicios Empresariales, S.A. Guatemala 100% GTQ 5 000

Honduras Nestlé Hondureña S.A. Tegucigalpa 95% 100% PAB 200 000

Jamaica Nestlé Jamaica Ltd Kingston 100% 100% JMD 49 200 000

Mexico CPW México, S. de R.L. de C.V. 1) México, D.F. 50% MXN 43 138 000 Galderma México, S.A. de C.V. México, D.F. 100% MXN 2 385 000 Manantiales La Asunción, S.A.P.I. de C.V. (a) México, D.F. 40% MXN 1 035 827 492 Marcas Nestlé, S.A. de C.V. México, D.F. <0.1% 100% MXN 500 050 000

(a) Voting powers amount to 51%

Consolidated Financial Statements of the Nestlé Group 2015 149 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Mexico (continued) Nescalín, S.A. de C.V. ◊ México, D.F. 100% 100% MXN 445 826 740 Nespresso México, S.A. de C.V. México, D.F. <0.1% 100% MXN 10 050 000 Nestlé Holding México, S.A. de C.V. ◊° México, D.F. 100% 100% MXN 50 000 Nestlé México, S.A. de C.V. México, D.F. <0.1% 100% MXN 607 532 730 Nestlé Servicios Corporativos, S.A. de C.V. México, D.F. <0.1% 100% MXN 170 100 000 Nestlé Servicios Industriales, S.A. de C.V. México, D.F. 100% MXN 1 050 000 Productos Gerber, S.A. de C.V. Queretaro 100% MXN 5 252 440 Ralston Purina México, S.A. de C.V. México, D.F. <0.1% 100% MXN 9 257 112 Waters Partners Services México, S.A.P.I. de C.V. (a) México, D.F. 40% MXN 620 000

Nicaragua Compañía Centroamericana de Productos Lácteos, S.A. Managua 66.1% 92.6% NIO 10 294 900 Nestlé Nicaragua, S.A. Managua 95% 100% USD 150 000

Panama Garma Enterprises, S.A. ◊ Panamá City 100% 100% PAB 0 Lacteos de Centroamérica, S.A. Panamá City 100% USD 1 500 000 Nestlé Centroamérica, S.A. Panamá City 100% 100% USD 1 000 000 Nestlé Panamá, S.A. Panamá City 100% 100% PAB 17 500 000 Unilac, Inc. ◊ Panamá City 100% 100% USD 750 000

Paraguay Nestlé Paraguay S.A. Asunción 100% 100% PYG 100 000 000

Peru Nestlé Marcas Perú, S.A.C. Lima 50% 100% PEN 1 000 Nestlé Perú, S.A. Lima 99.5% 99.5% PEN 88 998 365

Puerto Rico Nestlé Puerto Rico, Inc. San Juan 100% 100% USD 500 000 Payco Foods Corporation Bayamon 100% USD 890 000

Trinidad and Tobago Nestlé Caribbean, Inc. Valsayn 95% 100% USD 100 000 Nestlé Trinidad and Tobago Ltd Valsayn 100% 100% TTD 35 540 000

United States Beverage Partners Worldwide (North America) 1) Wilmington (Delaware) 50% USD — Brand Direct Health, LLC Wilmington (Delaware) 100% USD — Checkerboard Holding Company, Inc. ◊ Wilmington (Delaware) 100% USD 1 001 Dreyer’s Grand Ice Cream Holdings, Inc. ◊ Wilmington (Delaware) 100% USD 10 Galderma Research and Development, LLC Delaware 100% USD 2 050 000 Gerber Life Insurance Company ◊ New York 100% USD 148 500 000

(a) Voting powers amount to 51%

150 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

United States (continued) Gerber Products Company Fremont (Michigan) 100% USD 1 000 Malher, Inc. Stafford (Texas) 100% USD 1 000 Merrick Pet Care, Inc. Dallas (Texas) 100% USD 1 000 000 Merrick Pet Care Holdings Corporation ◊ Wilmington (Delaware) 100% USD 100 Nespresso USA, Inc. Wilmington (Delaware) 100% USD 1 000 Nestlé Capital Corporation ◊ Wilmington (Delaware) 100% USD 1 000 000 Nestlé Dreyer´s Ice Cream Company Wilmington (Delaware) 100% USD 1 Nestlé HealthCare Nutrition, Inc. Wilmington (Delaware) 100% USD 50 000 Nestlé Health Science-Pamlab, Inc. Wilmington (Delaware) 100% USD 1 Nestlé Health Science US Holdings, Inc. ◊ Wilmington (Delaware) 100% USD 1 Nestlé Holdings, Inc. ◊ Wilmington (Delaware) 100% USD 100 000 Nestlé Insurance Holdings, Inc. ◊ Wilmington (Delaware) 100% USD 10 Nestlé Nutrition R&D Centers, Inc. Wilmington (Delaware) 100% USD 10 000 Nestlé Prepared Foods Company Philadelphia (Pennsylvania) 100% USD 476 760 Nestlé Purina PetCare Company St. Louis (Missouri) 100% USD 1 000 Nestlé Purina PetCare Global Resources, Inc. Wilmington (Delaware) 100% USD 1 000 Nestlé R&D Center, Inc. Wilmington (Delaware) 100% USD 10 000 Nestlé Regional GLOBE Offi ce North America, Inc. Wilmington (Delaware) 100% USD 1 000 Nestlé Skin Health U.S., Inc. Fort Worth (Texas) 100% USD 981 Nestlé Transportation Company Wilmington (Delaware) 100% USD 100 Nestlé USA, Inc. Wilmington (Delaware) 100% USD 1 000 Nestlé Waters North America Holdings, Inc. ◊ Wilmington (Delaware) 100% USD 10 000 000 Nestlé Waters North America, Inc. Wilmington (Delaware) 100% USD 10 700 000 NiMCo US, Inc. ◊ Wilmington (Delaware) 100% 100% USD 1 Prometheus Laboratories Inc. Los Angeles (California) 100% USD 100 Red Maple Insurance Company ◊ Williston (Vermont) 100% USD 1 200 000 Sweet Leaf Tea Company Austin (Texas) 100% USD 10 The Stouffer Corporation ◊ Cleveland (Ohio) 100% USD 0 Tradewinds Beverage Company Cincinnati (Ohio) 100% USD 0 TSC Holdings, Inc. ◊ Wilmington (Delaware) 100% USD 100 000 Vitality Foodservice, Inc. Dover (Delaware) 100% USD 1 240 Waggin´ Train LLC Wilmington (Delaware) 100% USD — Zuke´s LLC Wilmington (Delaware) 100% USD 0

Uruguay Nestlé del Uruguay S.A. Montevideo 100% 100% UYU 9 495 189

Venezuela Nestlé Cadipro, S.A. Caracas 100% VEF 50 633 501 Nestlé Venezuela, S.A. Caracas 100% 100% VEF 516 590

Consolidated Financial Statements of the Nestlé Group 2015 151 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Asia Bahrain Nestlé Bahrain Trading WLL Manama 49% 49% BHD 200 000

Bangladesh Nestlé Bangladesh Limited Dhaka 100% 100% BDT 100 000 000

Greater China Region Anhui Yinlu Foods Co., Limited Chuzhou 60% 60% CNY 303 990 000 Chengdu Hsu Chi Foods Co., Limited Chengdu 60% CNY 40 000 000 Chengdu Yinlu Foods Co., Limited ° Chengdu 60% 60% CNY 215 800 000 Dongguan Andegu Plastic Packaging Material Limited Dongguan 60% HKD 10 000 000 Dongguan Hsu Chi Food Co., Limited Dongguan 60% HKD 700 000 000 Galderma Hong Kong Limited Hong Kong 100% HKD 10 000 Galderma Trading (Shanghai) Co., Limited Shanghai 100% EUR 400 000 Guangzhou Refrigerated Foods Limited Guangzhou 95.5% 95.5% CNY 390 000 000 Henan Hsu Fu Chi Foods Co., Limited Zhumadian 60% CNY 210 000 000 Hsu Fu Chi International Holdings Limited ◊ Wanchai 60% USD 100 000 Hubei Yinlu Foods Co., Limited Hanchuan 60% 60% CNY 353 000 000 Nestlé (China) Limited Beijing 100% 100% CNY 250 000 000 Nestlé Dongguan Limited Dongguan 100% 100% CNY 536 000 000 Nestlé Hong Kong Limited Hong Kong 100% 100% HKD 250 000 000 Nestlé Hulunbeir Limited Hulunbeir 100% 100% CNY 158 000 000 Nestlé Nespresso Beijing Limited Beijing 100% 100% CNY 7 000 000 Nestlé Purina PetCare Tianjin Limited Tianjin 100% 100% CNY 40 000 000 Nestlé Qingdao Limited Laixi 100% 100% CNY 930 000 000 Nestlé R&D (China) Limited Beijing 100% CNY 40 000 000 Nestlé Shanghai Limited Shanghai 95% 95% CNY 200 000 000 Nestlé Shuangcheng Limited Shuangcheng 97% 97% CNY 435 000 000 Nestlé Sources Shanghai Limited Shanghai 100% 100% CNY 1 149 700 000 Nestlé Sources Tianjin Limited Tianjin 95% 95% CNY 204 000 000 Nestlé Taiwan Limited Taipei 100% 100% TWD 100 000 000 Nestlé Tianjin Limited Tianjin 100% 100% CNY 785 000 000 Q-Med International Trading (Shanghai) Limited Shanghai 100% USD 600 000 Shandong Yinlu Foods Co., Limited Jinan 60% 60% CNY 146 880 000 Shanghai Nestlé Product Services Limited Shanghai 100% CNY 83 000 000 Shanghai Totole First Food Limited Shanghai 80% 80% CNY 72 000 000 Shanghai Totole Food Limited Shanghai 80% 80% USD 7 800 000 Sichuan Haoji Food Co., Limited Puge 80% 80% CNY 80 000 000 Suzhou Hexing Food Co., Limited Suzhou 80% 80% CNY 40 000 000 The Waterman Co., Limited (Shanghai) ° Shanghai 100% 100% USD 25 414 500 Wyeth (Hong Kong) Holding Co., Limited ◊ Hong Kong 100% 100% HKD 100 010 Wyeth (Shanghai) Trading Co., Limited Shanghai 100% USD 1 000 000 Wyeth Nutritional (China) Co., Limited Suzhou 100% CNY 900 000 000 Xiamen Yinlu Foods Group Co., Limited Xiamen 60% 60% CNY 496 590 000 Yunnan Dashan Drinks Co., Limited Kunming 100% 100% CNY 35 000 000

152 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

India Galderma India Private Ltd Mumbai 100% INR 24 156 000 Nestlé R&D Centre India Private Ltd New Delhi 100% 100% INR 2 101 380 000 Nestlé India Ltd Δ New Delhi 34.3% 62.8% INR 964 157 160 Listed on the Bombay stock exchange, market capitalisation INR 562.0 billion, quotation code (ISIN) INE239A01016 SMA Nutrition India Private Limited ° New Delhi 97% 100% INR 22 000 000

Indonesia P. T. Nestlé Indofood Citarasa Indonesia 1) Jakarta 50% 50% IDR 200 000 000 000 P. T. Nestlé Indonesia Jakarta 90.2% 90.2% IDR 152 753 440 000 P. T. Wyeth Nutrition Sduaenam Jakarta 90% IDR 2 000 000 000

Iran Anahita Polour Industrial Mineral Water Company Tehran 100% IRR 35 300 000 000 Nestlé Iran (Private Joint Stock Company) Tehran 89.7% 89.7% IRR 358 538 000 000

Israel Nespresso Israel Ltd Tel Aviv 100% 100% ILS 1 000 OSEM Investments Ltd Δ Shoam 63.7% 63.7% ILS 110 644 444 Listed on the Tel Aviv stock exchange, market capitalisation ILS 7.4 billion, quotation code (ISIN) IL0003040149

Japan Galderma K.K. Tokyo 100% JPY 10 000 000 Nestlé Japan Ltd Kobe 100% 100% JPY 10 000 000 000 Nestlé Nespresso K.K. Kobe 100% JPY 10 000 000

Jordan Ghadeer Mineral Water Co. WLL Amman 75% JOD 1 785 000 Nestlé Jordan Trading Company Ltd Amman 77.8% 77.8% JOD 410 000

Kuwait Nestlé Kuwait General Trading Company WLL Safat 49% 49% KWD 300 000

Lebanon Société des Eaux Minérales Libanaises S.A.L. Hazmieh 100% LBP 1 610 000 000 Société pour l’Exportation des Produits Nestlé S.A. Baabda 100% 100% CHF 1 750 000 SOHAT Distribution S.A.L. Hazmieh 100% LBP 160 000 000

Malaysia Cereal Partners (Malaysia) Sdn. Bhd. 1) Petaling Jaya 50% 50% MYR 2 500 000 Nestlé (Malaysia) Bhd. Δ◊ Petaling Jaya 72.6% 72.6% MYR 234 500 000 Listed on the Kuala Lumpur stock exchange, market capitalisation MYR 17.2 billion, quotation code (ISIN) MYL4707OO005 Nestlé Asean (Malaysia) Sdn. Bhd. Petaling Jaya 72.6% MYR 42 000 000 Nestlé Manufacturing (Malaysia) Sdn. Bhd. Petaling Jaya 72.6% MYR 132 500 000 Nestlé Products Sdn. Bhd. Petaling Jaya 72.6% MYR 25 000 000 Nestlé Regional Service Centre (Malaysia) Sdn. Bhd. ° Petaling Jaya 100% 100% MYR 1 000 000

Consolidated Financial Statements of the Nestlé Group 2015 153 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Malaysia (continued) Purina PetCare (Malaysia) Sdn. Bhd. Petaling Jaya 100% 100% MYR 1 100 000 Wyeth Nutrition (Malaysia) Sdn. Bhd. Petaling Jaya 100% MYR 61 969 505

Myanmar Nestlé Myanmar Limited ° Yangon 95% 95% USD 5 000 000

Oman Nestlé Oman Trading LLC Muscat 49% 49% OMR 300 000

Pakistan Nestlé Pakistan Ltd Δ Lahore 59% 59% PKR 453 495 840 Listed on the Pakistan Stock Exchange (formerly Karachi and Lahore, merged on 15 January 2016), market capitalisation PKR 353.7 billion, quotation code (ISIN) PK0025101012

Palestinian Territories Nestlé Trading Private Limited Company Bethlehem 97.5% 97.5% JOD 200 000

Philippines CPW Philippines, Inc. 1) Makati City 50% 50% PHP 7 500 000 Galderma Philippines, Inc. Manila 100% PHP 12 500 000 Nestlé Business Services AOA, Inc. Bulacan 100% 100% PHP 70 000 000 Nestlé Philippines, Inc. Cabuyao 55% 100% PHP 2 300 927 400 Penpro, Inc. (a) ◊ Makati City 88.5% PHP 630 000 000 Wyeth Philippines, Inc. Manila 100% 100% PHP 610 418 100

Qatar Al Manhal Water Factory Co. Ltd WLL Doha 51% QAR 5 500 000 Nestlé Qatar Trading LLC Doha 49% 49% QAR 1 680 000

Republic of Korea Galderma Korea Ltd Seoul 100% KRW 500 000 000 LOTTE-Nestlé (Korea) Co., Ltd 1) Cheongju 50% 50% KRW 52 783 120 000 Nestlé Korea Yuhan Chaegim Hoesa Seoul 100% 100% KRW 10 100 000 000 Pulmuone Waters Co., Ltd Gyeonggi-Do 51% KRW 6 778 760 000

Saudi Arabia Al Anhar Water Factory Co. Ltd Jeddah 64% SAR 7 500 000 Al Manhal Water Factory Co. Ltd Riyadh 64% SAR 7 000 000 Nestlé Saudi Arabia LLC Jeddah 75% SAR 27 000 000 Nestlé Water Factory Co. Ltd Riyadh 64% SAR 15 000 000 Pure Water Factory Co. Ltd Madinah 64% SAR 5 000 000 SHAS Company for Water Services Ltd Riyadh 64% SAR 13 500 000 Springs Water Factory Co. Ltd Dammam 64% SAR 5 000 000

(a) Voting powers amount to 40%

154 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Singapore Galderma Singapore Private Ltd Singapore 100% SGD 1 387 000 Nestlé R&D Center (Pte) Ltd Singapore 100% SGD 20 000 000 Nestlé Singapore (Pte) Ltd Singapore 100% 100% SGD 1 000 000 Nestlé TC Asia Pacifi c Pte Ltd ◊ Singapore 100% 100% JPY 10 000 000 000 SGD 2 Wyeth Nutritionals (Singapore) Pte Ltd Singapore 100% 100% SGD 2 159 971 715

Sri Lanka Nestlé Lanka PLC Δ Colombo 90.8% 90.8% LKR 537 254 630 Listed on the Colombo stock exchange, market capitalisation LKR 110.1 billion, quotation code (ISIN) LK0128N00005

Syria Nestlé Syria S.A. Damascus 99.9% 100% SYP 800 000 000

Thailand Galderma (Thailand) Ltd Bangkok 100% THB 100 000 000 Nestlé (Thai) Ltd Bangkok 100% 100% THB 880 000 000 Nestlé Trading (Thailand) Ltd ° Bangkok 52% 52% THB 3 000 000 Perrier Vittel (Thailand) Ltd Bangkok 100% THB 235 000 000 Quality Coffee Products Ltd Bangkok 49% 50% THB 500 000 000

United Arab Emirates CP Middle East FZCO 1) Dubai 50% 50% AED 600 000 Nestlé Dubai Manufacturing LLC Dubai 49% 49% AED 300 000 Nestlé Middle East FZE Dubai 100% 100% AED 3 000 000 Nestlé Middle East Manufacturing LLC ° Dubai 49% 49% AED 300 000 Nestlé Treasury Centre-Middle East & Africa Ltd ◊ Dubai 100% 100% USD 2 997 343 684 Nestlé UAE LLC Dubai 49% 49% AED 2 000 000 Nestlé Waters Factory H&O LLC Dubai 48% AED 22 300 000

Uzbekistan Uzbek-Swiss JV Nestlé Uzbekistan LLC Namangan 96.4% 100% USD 38 715 463 Namangansut-Nafosat MCHJ LLC ° Namangan 53.9% 99.9% USZ 46 227 969

Vietnam La Vie Limited Liability Company Long An 65% USD 2 663 400 Nestlé Vietnam Ltd Bien Hoa 100% 100% USD 155 266 000

Consolidated Financial Statements of the Nestlé Group 2015 155 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

% capital % ultimate shareholdings capital Companies City by Nestlé S.A. shareholdings Currency Capital

Oceania Australia Cereal Partners Australia Pty Ltd 1) Sydney 50% AUD 107 800 000 Galderma Australia Pty Ltd Belrose 100% AUD 2 500 300 Nestlé Australia Ltd Sydney 100% 100% AUD 274 000 000

Fiji Nestlé (Fiji) Ltd Lami 33% 100% FJD 3 000 000

French Polynesia Nestlé Polynésie S.A.S. Papeete 100% 100% XPF 5 000 000

New Caledonia Nestlé Nouvelle-Calédonie S.A.S. Nouméa 100% 100% XPF 64 000 000

New Zealand CPW New Zealand 1) Auckland 50% NZD — Nestlé New Zealand Limited Auckland 100% 100% NZD 300 000

Papua New Guinea Nestlé (PNG) Ltd Lae 100% 100% PGK 11 850 000

156 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

All scientifi c research and technological development is undertaken in a number of dedicated centres, specialised as follows: Technical Assistance TA Research centres R Research & Development centres R&D Product Technology centres PTC

The Technical Assistance centre is Nestec S.A., a technical, scientifi c, commercial and business assistance company. The units of Nestec S.A., specialised in all areas of the business, supply permanent know-how and assistance to operating companies in the Group within the framework of licence and equivalent contracts. Nestec S.A. is also responsible for all scientifi c research and technological development, which it undertakes itself or through affi liated companies. The centres involved are listed below:

City of operations

Switzerland Clinical Development Unit Lausanne R CPW R&D Centre 1) Orbe R&D Galderma R&D Centre Egerkingen R&D Nestec S.A. Vevey TA Nestlé Institute of Health Sciences Ecublens R Nestlé Product Technology Centre Konolfi ngen PTC Nestlé Product Technology Centre Orbe PTC Nestlé R&D Centre Broc R&D Nestlé R&D Centre Orbe R&D Nestlé Research Centre Lausanne R Nestlé System Technology Centre Orbe PTC

Australia CPW R&D Centre 1) Rutherglen R&D

Chile Nestlé R&D Centre Santiago de Chile R&D

Côte d´Ivoire Nestlé R&D Centre Abidjan R&D

France Galderma R&D Centre Biot R&D Nestlé Product Technology Centre Beauvais PTC Nestlé Product Technology Centre Lisieux PTC Nestlé Product Technology Centre Vittel PTC Nestlé R&D Centre Aubigny R&D Nestlé R&D Centre Tours R&D

Consolidated Financial Statements of the Nestlé Group 2015 157 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Companies of the Nestlé Group, joint arrangements and associates

City of operations

Germany Nestlé Product Technology Centre Singen PTC

Greater China Region Nestlé R&D Centre Beijing R&D Nestlé R&D Centre Shanghai R&D

India Nestlé R&D Centre Gurgaon R&D

Israel Nestlé R&D Centre Sderot R&D

Italy Nestlé R&D Centre Sansepolcro R&D

Japan Galderma R&D Centre Tokyo R&D

Mexico Nestlé R&D Centre Queretaro R&D

Republic of Ireland Nestlé R&D Centre Askeaton R&D

Singapore Nestlé R&D Centre Singapore R&D

Sweden Galderma R&D Centre Uppsala R&D

United Kingdom Nestlé Product Technology Centre York PTC

United States Galderma R&D Centre Cranbury (New Jersey) R&D Nestlé Product Technology Centre Fremont (Michigan) PTC Nestlé Product Technology Centre Marysville (Ohio) PTC Nestlé Product Technology Centre St. Louis (Missouri) PTC Nestlé R&D Centre Bakersfi eld (California) R&D Nestlé R&D Centre Minneapolis (Minnesota) R&D Nestlé R&D Centre San Diego (California) R&D Nestlé R&D Centre Solon (Ohio) R&D Nestlé R&D Centre St. Joseph (Missouri) R&D Nestlé R&D Centre King of Prussia (Pennsylvania) R&D

158 Consolidated Financial Statements of the Nestlé Group 2015 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 161 Income statement for the year ended 31 December 2015

162 Balance sheet as at 31 December 2015

163 Notes to the annual accounts 163 1. Accounting policies 165 2. Income from Group companies 3. Profi t on disposal of assets 4. Financial income 5. Expenses recharged from Group companies 6. Write-downs and amortisation 166 7. Financial expense 8. Taxes 9. Cash and cash equivalents 10. Other current receivables 11. Financial assets 167 12. Shareholdings 13. Interest-bearing liabilities 14. Other current liabilities 15. Provisions 168 16. Share capital 17. Changes in equity 169 18. Reserve for treasury shares 19. Treasury shares 20. Contingencies 170 21. Performance Share Units and shares for members of the Board and employees granted during the year 22. Full-time equivalents 23. Events after the balance sheet date 171 24. Shares and stock options

173 Proposed appropriation of profi t

174 Report of the Statutory Auditor

160 149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Income statement for the year ended 31 December 2015

In millions of CHF Notes 2015 2014 Income from Group companies 2 12 315 8 977 Profi t on disposal of assets 3 59 7 449 Other income 107 100 Financial income 4 174 305 Total income 12 655 16 831

Expenses recharged from Group companies (a) 5 (2 470) (2 361) Personnel expenses (a) (122) (106) Other expenses (a) (322) (154) Write-downs and amortisation 6 (1 156) (2 200) Financial expense 7 (362) (53) Taxes 8 (398) (457) Total expenses (4 830) (5 331)

Profi t for the year 7 825 11 500

(a) 2014 comparative fi gures have been presented according to the new structure; refer to Note 1.

149th Financial Statements of Nestlé S.A. 161 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Balance sheet as at 31 December 2015 before appropriations

In millions of CHF Notes 2015 2014 Assets

Current assets Cash and cash equivalents 9 100 2 221 Other current receivables 10 875 1 007 Prepayments and accrued income 14 11 Total current assets 989 3 239

Non-current assets Financial assets (a) 11 8 459 13 990 Shareholdings (a) 12 32 488 31 390 Property, plant and equipment 1 1 Intangible assets 189 — Total non-current assets 41 137 45 381

Total assets 42 126 48 620

Liabilities and equity

Current liabilities Interest-bearing liabilities (a) 13 — 1 965 Other current liabilities (a) 14 4 224 2 234 Accruals and deferred income 3 6 Provisions (a) 15 827 837 Total current liabilities 5 054 5 042

Non-current liabilities Interest-bearing liabilities 13 154 162 Provisions (a) 15 498 498 Total non-current liabilities 652 660

Total liabilities 5 706 5 702

Equity Share capital 16/17 319 322 Legal retained earnings – General legal reserve 17 1 917 1 913 – Reserve for treasury shares 17/18 — 988 Voluntary retained earnings – Special reserve 17 28 711 30 146 – Profi t brought forward 17 4 998 536 – Profi t for the year 17 7 825 11 500 Treasury shares (a) 17/19 (7 350) (2 487) Total equity 36 420 42 918

Total liabilities and equity 42 126 48 620

(a) 2014 comparative fi gures have been presented according to the new structure; refer to Note 1.

162 149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Notes to the annual accounts

1. Accounting policies exchange rates and includes hedging transactions. Where this gives rise to a net loss, it is charged to the income General statement whilst a net gain is deferred. Nestlé S.A. (the Company) is the ultimate holding company of the Nestlé Group, domiciled in Cham and Vevey which Hedging comprises subsidiaries, associated companies and joint The Company uses forward foreign exchange contracts, ventures throughout the world. options, fi nancial futures and currency swaps to hedge The accounts are prepared in accordance with foreign currency fl ows and positions. Unrealised foreign accounting principles required by Swiss law (32nd title of exchange differences on hedging instruments are matched the Swiss Code of Obligations). They are prepared under the and accounted for with those on the underlying asset or historical cost convention and on an accrual basis. Where liability. Long-term loans, in foreign currencies, used to not prescribed by law, the signifi cant accounting and fi nance investments in shareholdings are generally not valuation principles applied are described below. hedged. The Company also uses interest rate swaps to manage First adoption of new accounting law interest rate risk. The swaps are accounted for at fair value The fi nancial statements for the year ended 31 December 2015 at each balance sheet date and changes in the market price have been prepared in accordance with the new provisions are recorded in the income statement. of the Swiss law regarding accounting and fi nancial reporting. To ensure the comparability of information, the comparative Income statement fi gures have been restated accordingly. The positions Not currently transferable income is recognised only upon concerned by this restatement are identifi ed by an (a). receipt. The following positions are concerned: In accordance with Swiss law and the Company’s – Expenses recharged from Group Companies are now Articles of Association, dividends are treated as an disclosed on a separate line of the income statement. appropriation of profi t in the year in which they are ratifi ed – Administration and other expenses are now divided into at the Annual General Meeting rather than as an two separate lines, personnel expenses and other appropriation of profi t in the year to which they relate. expenses. – The fi nancial assets are now divided into two separate Taxes lines, fi nancial assets and shareholdings. This caption includes taxes on profi t, capital and – Short-term payables are now divided into interest-bearing withholding taxes on transfers from Group companies. liabilities and other current liabilities. – Provisions have been split into current and non-current Shareholdings and fi nancial assets provisions. The carrying value of shareholdings and loans comprises – Treasury shares are now disclosed in deduction of the the cost of investment, excluding the incidental costs of shareholders’ equity. The reserve for treasury shares is acquisition, less any write-downs. therefore reclassifi ed except for the shares owned by Shareholdings located in countries where the political, another Group company. economic or monetary situation might be considered to carry a greater than normal level of risk are carried at Foreign currency translation a nominal value of one franc. Transactions in foreign currencies are recorded at the rate of Shareholdings and loans are written down on exchange at the date of the transaction or, if hedged forward, a conservative basis, taking into account the profi tability of at the rate of exchange under the related forward contract. the company concerned. Non-monetary assets and liabilities are carried at historical rates. Monetary assets and liabilities in foreign currencies Property, plant and equipment are translated at year-end rates. Any resulting exchange The Company owns land and buildings which have been differences are included in the respective income statement depreciated in the past. Offi ce furniture and equipment are captions depending upon the nature of the underlying fully depreciated on acquisition. transactions. The aggregate unrealised exchange difference is calculated by reference to original transaction date

149th Financial Statements of Nestlé S.A. 163 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 1. Accounting policies

Intangible assets Trademarks and other industrial property rights are written off on acquisition or exceptionally over a longer period, not exceeding their useful lives.

Provisions Provisions include present obligations as well as contingencies. A provision for uninsured risks is constituted to cover general risks not insured with third parties, such as consequential loss. Provisions for Swiss taxes are made on the basis of the Company’s taxable capital, reserves and profi t for the year. A general provision is maintained to cover possible foreign tax liabilities.

Prepayments and accrued income Prepayments and accrued income are comprised of payments made in advance relating to the following year, and income relating to the current year which will not be received until after the balance sheet date (such as interest accruals on loans or deposits). The positive fair values of forward exchange contracts and interest rate swaps are also included in this caption.

Accruals and deferred income Accruals and deferred income comprise expenses relating to the current year which will not be paid until after the balance sheet date and income received in advance, relating to the following year. The negative fair values of forward exchange contracts and interest rate swaps are also included in this caption.

164 149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 2. Income from Group companies

This represents dividends and other income from Group companies.

3. Profi t on disposal of assets

This represents mainly the net gains realised on the sale of fi nancial assets, trademarks and other industrial property rights previously written down. In 2014, the net gain of CHF 7181 million on the sale of L’Oréal shares is included.

4. Financial income

In millions of CHF 2015 2014 Result on loans to Group companies 151 197 Other fi nancial income 23 108 174 305

5. Expenses recharged from Group companies

Expenses of central service companies recharged to Nestlé S.A.

6. Write-downs and amortisation

In millions of CHF 2015 2014 Shareholdings and loans 1 082 1 700 Trademarks and other industrial property rights 74 500 1 156 2 200

149th Financial Statements of Nestlé S.A. 165 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 7. Financial expense

In millions of CHF 2015 2014 Result on loans from Group companies 7 52 Other fi nancial expenses 355 1 362 53

8. Taxes

In millions of CHF 2015 2014 Direct taxes 116 163 Prior year's adjustments (110) (64) Withholding taxes on income from foreign sources 392 358 398 457

9. Cash and cash equivalents

Cash and cash equivalents include deposits with maturities of less than three months.

10. Other current receivables

In millions of CHF 2015 2014 Amounts owed by Group companies (current accounts) 846 955 Other receivables 29 52 875 1 007

11. Financial assets

In millions of CHF 2015 2014 Loans to Group companies 8 416 13 947 Other investments 43 43 8 459 13 990

166 149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 12. Shareholdings

In millions of CHF 2015 2014 At 1 January 31 390 30 297 Net increase/(decrease) 1 950 1 643 Write-downs (852) (550) At 31 December 32 488 31 390

A list of direct and all signifi cant indirect companies held by Nestlé S.A., with the percentage of the capital controlled is included in the Consolidated Financial Statements of the Nestlé Group.

13. Interest-bearing liabilities Current and non-current interest-bearing liabilities are amounts owed to Group Companies.

14. Other current liabilities

In millions of CHF 2015 2014 Amounts owed to Group companies 4 189 2 044 Other liabilities 35 190 4 224 2 234

15. Provisions

In millions of CHF 2015 2014

Swiss and Uninsured Exchange foreign risks risks taxes Other Total Total At 1 January 475 550 189 121 1 335 751 Provisions made in the period — — 116 67 183 769 Amounts used — — (163) (36) (199) (116) Unused amounts reversed — (14) 24 (4) 6 (69) At 31 December 475 536 166 148 1 325 1 335 of which expected to be settled within 12 months 827 837

149th Financial Statements of Nestlé S.A. 167 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 16. Share capital

2015 2014 Number of registered shares of nominal value CHF 0.10 each 3 188 400 000 3 224 800 000 In millions of CHF 319 322

According to article 5 of the Company’s Articles of Association, no person or entity shall be registered with voting rights for more than 5% of the share capital as recorded in the commercial register. This limitation on registration also applies to persons who hold some or all of their shares through nominees pursuant to this article. In addition, article 11 provides that no person may exercise, directly or indirectly, voting rights, with respect to own shares or shares represented by proxy, in excess of 5% of the share capital as recorded in the commercial register. At 31 December 2015, the share register showed 157 422 registered shareholders. If unprocessed applications for registration, the indirect holders of shares under American Depositary Receipts and the benefi cial owners of shareholders registered as nominees are also taken into account, the total number of shareholders probably exceeds 250 000. The Company was not aware of any shareholder holding, directly or indirectly, 5% or more of the share capital.

17. Changes in equity

In millions of CHF

Reserve General for Share legal treasury Special Retained Treasury capital reserve shares (a) reserve earnings shares Total At 1 January 2015 322 1 913 988 30 146 12 036 (2 487) 42 918 Cancellation of 36 400 000 shares (ex-Share Buy-Back Programme) (4) 4 — (2 512) — 2 512 — Profi t for the year — — — — 7 825 — 7 825 Dividend for 2014 — — — — (6 950) — (6 950) Movement of treasury shares — — (988) 988 — (7 375) (7 375) Dividend on treasury shares held on the payment date of 2014 dividend — — — 89 (89) — — At 31 December 2015 319 1 917 — 28 711 12 823 (7 350) 36 420

(a) Refer to Note 18.

168 149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 18. Reserve for treasury shares

At 31 December 2014, the reserve for own shares amounting to CHF 988 million represented the cost of 18 038 445 shares held for trading purposes. These shares were held by another Group company. At 31 December 2015, no shares were held by another Group company.

19. Treasury shares

In millions of CHF 2015 2014 Number Amount Number Amount Share Buy-Back Programme 76 240 000 5 489 23 742 030 1 645 Long-term incentive plans 9 655 655 542 14 596 288 842 For trading purposes 18 038 445 1 319 — — 103 934 100 7 350 38 338 318 2 487

The share capital has been reduced by 36 400 000 shares from CHF 322 million to CHF 319 million through the cancellation of shares purchased as part of the Share Buy- Back Programme. The purchase value of those cancelled shares amounts to CHF 2512 million. During the year 88 897 970 shares were purchased as part of the Share Buy-Back Programme for CHF 6355 million. The Company held 9 655 655 shares to cover long-term incentive plans. During the year 4 940 633 shares were delivered as part of the Nestlé Group remuneration plans for a total value of CHF 276 million. All treasury shares are valued at acquisition cost. The total of own shares of 103 934 100 held by Nestlé S.A. at 31 December 2015 represents 3.3% of the Nestlé S.A. share capital (56 376 763 own shares held at 31 December 2014 by Group companies representing 1.7% of the Nestlé S.A. share capital).

20. Contingencies

At 31 December 2015, the total of the guarantees mainly for credit facilities granted to Group companies and commercial paper programmes, together with the buy-back agreements relating to notes issued, amounted to a maximum of CHF 41 057 million (2014: CHF 41 831 million).

149th Financial Statements of Nestlé S.A. 169 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 21. Performance Share Units and shares for members of the Board and employees granted during the year

In millions of CHF 2015 2014 Number Amount Number Amount Performance Share Units granted to Nestlé S.A. employees (a) 291 688 21 311 495 20 Share plan for short-term bonus Executive Board (b) 124 359 7 125 279 7 Share plan for Board members (c) 97 504 6 118 524 7 513 551 34 555 298 34

(a) Performance Share Units are disclosed at fair value at grant which corresponds to CHF 71.03 in 2015 (2014: CHF 63.70). Includes 216 708 Performance Share Units granted to Executive Board (2014: 215 125). (b) Shares are valued at the average closing price of the last ten trading days of January, discounted by 16.038% to account for the blocking period of three years. (c) Shares are valued at the closing price on the ex-dividend date, discounted by 16.038% to account for the blocking period of three years.

22. Full-time equivalents

For Nestlé S.A., the annual average number of full-time equivalents for the reporting year, as well as the previous year, did not exceed 250.

23. Events after the balance sheet date

There are no subsequent events which either warrant a modifi cation of the value of the assets and liabilities or any additonal disclosure.

170 149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 24. Shares and stock options

Shares and stock options ownership of the non-executive members of the Board of Directors and closely related parties

2015 2014

Number of Number of Number of Number of shares options shares options held (a) held (b) held (a) held (b) Peter Brabeck-Letmathe, Chairman 3 422 107 477 600 3 059 108 1 137 600 Andreas Koopmann, Vice Chairman 92 536 — 88 144 — Beat Hess 32 765 — 28 508 — Renato Fassbind (since 2015) 14 257 — — — Daniel Borel 236 728 — 234 363 — Steven G. Hoch 166 516 — 199 153 — Naïna Lal Kidwai 19 077 — 21 687 — Jean-Pierre Roth 9 717 — 12 352 — Ann M. Veneman 12 559 — 10 396 — Henri de Castries 11 729 — 9 161 — Eva Cheng 7 542 — 4 974 — Ruth K. Oniang’o (since 2015) 1 892 — — — Patrick Aebischer (since 2015) — — — — Members who retired from the Board during 2015 — — 99 792 — Total as at 31 December 4 027 425 477 600 3 767 638 1 137 600

(a) Including shares subject to a three-year blocking period. (b) The ratio is one option for one Nestlé S.A. share.

149th Financial Statements of Nestlé S.A. 171 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa 24. Shares and stock options

Shares and stock options ownership of the members of the Executive Board and closely related parties

2015 2014

Number of Number of Number of Number of shares options shares options held (a) held (b) held (a) held (b) Paul Bulcke 728 472 1 079 500 637 173 1 392 000 Luis Cantarell 169 510 143 170 118 510 260 500 Laurent Freixe 81 195 — 55 761 108 700 Chris Johnson 35 723 125 400 30 298 125 400 Patrice Bula 108 818 101 800 87 051 101 800 Wan Ling Martello 54 332 121 100 43 937 121 100 Stefan Catsicas — — — — Marco Settembri 16 810 — 9 120 — François-Xavier Roger (since 2015) — — — — Magdi Batato (since 2015) 6 765 — — — Peter R. Vogt 31 265 — 26 201 — Martial Rolland 33 803 — 23 632 — Heiko Schipper — — 4 240 — David P. Frick 44 157 — 48 828 — Members who retired from the Executive Board during 2015 — — 143 172 290 300 Total as at 31 December 1 310 850 1 570 970 1 227 923 2 399 800

(a) Including shares subject to a three-year blocking period. (b) The ratio is one option for one Nestlé S.A. share.

For the detailed disclosures regarding the remunerations of the Board of Directors and the Executive Board that are required by Swiss law, refer to the Compensation report of Nestlé S.A. with the audited sections highlighted with a blue bar.

172 149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Proposed appropriation of profi t

In CHF 2015 2014 Retained earnings Profi t brought forward 4 997 707 777 536 179 231 Profi t for the year 7 825 389 939 11 500 096 775 12 823 097 716 12 036 276 006

We propose the following appropriation: Dividend for 2015, CHF 2.25 per share on 3 112 160 000 shares (a) (2014: CHF 2.20 on 3 199 349 195 shares) (b) 7 002 360 000 7 038 568 229 7 002 360 000 7 038 568 229

Profi t to be carried forward 5 820 737 716 4 997 707 777

(a) Depending on the number of shares issued as of the last trading day with entitlement to receive the dividend (8 April 2016). No dividend is paid on own shares held by the Nestlé Group. The respective amount will be attributed to the special reserve. (b) The amount of CHF 88 947 650, representing the dividend on 40 430 750 own shares held at the date of the dividend payment, has been transferred to the special reserve.

Provided that the proposal of the Board of Directors is approved by the Annual General Meeting, the gross dividend will amount to CHF 2.25 per share, representing a net amount of CHF 1.4625 per share after payment of the Swiss withholding tax of 35%. The last trading day with entitlement to receive the dividend is 8 April 2016. The shares will be traded ex-dividend as of 11 April 2016. The net dividend will be payable as from 13 April 2016.

The Board of Directors

Cham and Vevey, 17 February 2016

149th Financial Statements of Nestlé S.A. 173 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Report of the Statutory Auditor to the General Meeting of Nestlé S.A., Cham & Vevey

As statutory auditor, we have audited the fi nancial statements (income statement, balance sheet and notes to the annual accounts on pages 161 to 172) of Nestlé S.A. for the year ended 31 December 2015.

Board of Directors’ responsibility The Board of Directors is responsible for the preparation of the fi nancial statements in accordance with the requirements of Swiss law and the Company’s Articles of Association. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of fi nancial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the fi nancial statements for the year ended 31 December 2015 comply with Swiss law and the Company’s Articles of Association.

174 149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Report of the Statutory auditor

Report on other legal requirements We confi rm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confi rm that an internal control system exists, which has been designed for the preparation of fi nancial statements according to the instructions of the Board of Directors. We further confi rm that the proposed appropriation of available earnings complies with Swiss law and the Company’s Articles of Association. We recommend that the fi nancial statements submitted to you be approved.

KPMG SA

Scott Cormack Lukas Marty Licensed Audit Expert Licensed Audit Expert Auditor in charge

Geneva, 17 February 2016

149th Financial Statements of Nestlé S.A. 175 WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa Notes

176 149th Financial Statements of Nestlé S.A. WorldReginfo - f65a79fa-dec3-4614-8df6-74077a403cfa