Summaries Annual Review 2015 Consolidated Financial Statements of the Nestlé Group 2015 149th Financial Statements of Nestlé S.A. Contents

3 Highlights 2015 4 Key figures (consolidated) 6 Financial Review 17 Extract from the Consolidated Financial Statements 18 Consolidated income statement for the year ended 31 December 2015 19 Consolidated statement of comprehensive income for the year ended 31 December 2015 20 Consolidated balance sheet as at 31 December 2015 22 Consolidated cash flow statement for the year ended 31 December 2015 24 Consolidated statement of changes in equity for the year ended 31 December 2015 25 Report of the Statutory Auditor on the Consolidated Financial Statements 26 Extract from the Financial Statements of Nestlé S.A. 26 Income statement for the year ended 31 December 2015 27 Balance sheet as at 31 December 2015 28 Proposed appropriation of profit 29 Report of the Statutory Auditor 30 Shareholder information

All sections should be read in connection with the Consolidated Financial Statements of the Nestlé Group 2015 and the 149th Financial Statements of Nestlé S.A.

In the Financial Review, the acronyms in the tables at the beginning of each operating segment have the following meaning: –– OG: organic growth –– RIG: real internal growth –– Margin: trading operating margin

Following the changes in management responsibilities as from 1 January 2015, Zone 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.

2 Nestlé Group I Summary of the full Annual Report 2015 Highlights 2015

Profitable growth at the higher end of the industry in a still challenging environment –– Sales of CHF 88.8 billion. –– 4.2% organic growth and 2.2% real internal growth. –– Trading operating profit of 15.1%, down 20 basis points on a reported basis affected by the strong Swiss Franc, up 10 basis points in constant currencies. –– Net profit of CHF 9.1 billion, decreasing by CHF 5.4 billion versus last year 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 stake, as well as some effect from foreign exchange. –– Underlying earnings per share were up 6.5% in constant currencies. –– Operating cash flow remained strong at CHF 14.3 billion and free cash flow of CHF 9.9 billion.

Strengthening the foundations of future growth –– Increased support behind our brands, research and development and innovation. –– Continuing focus on portfolio management. –– Nestlé Skin Health and Nestlé Health Science expanding our existing food and beverage business in line with our strategic ambition to be the world’s recognised leading Nutrition, Health and Wellness company. –– Further development of our platforms in E-Commerce. –– Full deployment of our Nestlé Business Excellence initiative, aggregating business support services to better leverage our scale and free up resources to deliver growth. –– On-going focus on capital discipline, including all elements of working capital, capital expenditure and a continuous focus on efficiencies and profitable growth.

Nestlé’s commitment to creating value for society and for shareholders –– Responsible and sustainable investments, expanding our manufacturing footprint while continuing to reduce the environmental impact of our business. –– Proposed dividend of CHF 7.0 billion for 2015, CHF 2.25 per share, an increase of 2.3%.

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

Nestlé Group I Summary of the full Annual Report 2015 3 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.

4 Nestlé Group I Summary of the full Annual Report 2015 Key figures (consolidated)

Principal key figures in USD (illustrative)

Income statement figures translated at weighted average annual rate; balance sheet figures at year-end rate

In millions of USD (except for data per share) 2015 2014 Sales 92 143 99 961 Trading operating profit 13 889 15 296 Profit for the year attributable to shareholders of the parent (Net profit) 9 409 15 774 Equity attributable to shareholders of the parent 63 012 70 863 Market capitalisation, end December 232 434 233 553

Data per share Basic earnings per share USD 3.01 4.95

Principal key figures in EUR (illustrative)

Income statement figures translated at weighted average annual rate; balance sheet figures at year-end rate

In millions of EUR (except for data per share) 2015 2014 Sales 83 153 75 431 Trading operating profit 12 533 11 543 Profit for the year attributable to shareholders of the parent (Net profit) 8 491 11 903 Equity attributable to shareholders of the parent 57 651 58 307 Market capitalisation, end December 212 658 192 170

Data per share Basic earnings per share EUR 2.72 3.74

Nestlé Group I Summary of the full Annual Report 2015 5 Financial Review

Group overview 2.4% in AMS, 2.8% in EMENA and 1.2% in AOA. Introduction We demonstrated our continued In 2015 we delivered profitable growth at strength in developed markets with organic the higher end of the industry in what is still growth of 1.9% and in emerging markets a challenging environment. This profitable with 7.0%. We increased or maintained growth was on the back of consistent market share in the majority of our performances in previous years. Our organic categories and markets. growth of 4.2% was supported by increased momentum in real internal growth combined Trading operating profit with continued margin improvement. Trading operating profit was CHF 13.4 billion, Additionally, we grew or maintained market with a margin of 15.1%, down 20 basis points share in the majority of our categories and on a reported basis affected by the strong markets. Swiss Franc, up 10 basis points in constant At the same time we continued to invest currencies. We delivered this margin for the future with increased support improvement while increasing substantially behind our brands and further development our investment in brand support, digital, of our new platforms in nutrition and health research and development, and in our new as well as E-commerce. We kept up the focus nutrition and health platforms and at the on portfolio management, turning around our same time absorbing the cost of exceptional frozen food business in the United States, events like noodles in . disposing of non-core businesses and forging a new partnership to create a leading player Net profit in ice cream. Net profit was CHF 9.1 billion. The reduction Our free cash flow generation was again of CHF 5.4 billion versus last year was mostly at the top end of the food industry at 11.2% due to the one-off impact from the disposal of sales, as a result of our focus on margins in 2014 of part of the L’Oréal stake combined with discipline in capital expenditure and with the revaluation of the Galderma stake. working capital. There was also some effect from foreign exchange. Reported earnings per share at Group results CHF 2.90 were down by 36.1%, for the same In 2015 Nestlé’s organic growth was 4.2%, reasons. Underlying earnings per share in composed of 2.2% real internal growth and constant currencies were up 6.5%. 2.0% pricing. Sales were CHF 88.8 billion, with a foreign exchange impact of –7.4%. Cash flow / Working capital Acquisitions, net of divestitures, added 0.1% The Group’s operating cash flow remained to sales. Organic growth was broad-based strong at CHF 14.3 billion and free cash flow across geographies and categories, 5.8% in was CHF 9.9 billion or 11.2% of sales. This the Americas (AMS), 3.5% in Europe, Middle was the result of our focus on margins and East and North Africa (EMENA) and 1.9% in our discipline in capital expenditure and Asia, Oceania and sub-Saharan Africa (AOA). working capital, and shows Nestlé’s capability Real internal growth was also broad-based, to deliver very strong cash flow despite the

6 Nestlé Group I Summary of the full Annual Report 2015 Financial Review

challenging foreign exchange environment. The average total working capital has improved by 60 basis points from 5.3% of sales to 4.7%.

Financial position The Group’s net debt was in line with historic levels, increasing from CHF 12.3 billion to CHF 15.4 billion, driven by our completion of the share buy-back, an investment of CHF 6.5 billion 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.

Return on invested capital The Group’s return on invested capital was 10.9% including goodwill and intangible assets, up 10 basis points and it was 29.9% excluding goodwill and intangible assets, down 50 basis points, impacted by unfavourable foreign exchange.

Dividend 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 in 2016 will be similar to previous years with even softer pricing. As such we expect to deliver organic growth in line with 2015, with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency.

Nestlé Group I Summary of the full Annual Report 2015 7 Financial Review

Sales by operating segment

In millions of CHF 2015 2014* Zone EMENA 16 403 17 965 Zone AMS 25 844 26 625 Zone AOA 14 338 14 792 Nestlé Waters 7 625 7 390 Nestlé Nutrition 10 461 10 915 Other businesses (a) 14 114 13 925 Total Group 88 785 91 612

* 2014 figures have been restated - see Note on page 2. (a) Mainly , Nestlé Professional, Nestlé Health Science and Nestlé Skin Health.

Trading operating profit by operating segment

In millions of CHF 2015 2014* Zone EMENA 2 572 2 735 Zone AMS 5 021 4 940 Zone AOA 2 632 2 834 Nestlé Waters 825 714 Nestlé Nutrition 2 361 2 343 Other businesses (a) 2 221 2 651 Unallocated items (b) (2 250) (2 198) Total Group 13 382 14 019

* 2014 figures have been restated - see Note on page 2. (a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science and Nestlé Skin Health. (b) Mainly corporate expenses as well as research and development costs.

8 Nestlé Group I Summary of the full Annual Report 2015 Financial Review

Sales by Employees by Factories by geographic area geographic area geographic area

44.1% 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 2. (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

Nestlé Group I Summary of the full Annual Report 2015 9 Financial Review

Zone Americas (AMS) Peru with , and the Plata Region and Ecuador with growth across their portfolios. Sales CHF 25.8 billion Petcare continued its very good growth OG +5.5% momentum across , benefiting RIG +1.6% from expanded capacity in Argentina and Margin 19.4% Mexico. +80 basis points We increased investment in consumer- facing marketing support while improving Growth in the Zone picked up momentum the trading operating profit margin thanks through the year and market shares grew to a favourable product mix, operational broadly in both North and Latin America. efficiencies, lower input costs and low In North America growth accelerated, restructuring and litigation costs. led by the turnaround in the frozen meals business. Sales of the new ranges of Zone Europe, Middle East and North and Stouffer’s were strong, Africa (EMENA) supported by positive consumption trends. Pizza’s positive momentum also accelerated, Sales CHF 16.4 billion driven by innovation. In ice cream, Häagen- OG +3.7% Dazs and snacks continued to drive growth RIG +2.5% with new product launches. Coffee-mate Margin 15.7% maintained its good momentum through +50 basis points constant innovation and renovation of flavours and packaging as well as new The Zone continued to outperform the distribution. Petcare in North America markets in its main categories with positive continued to grow with strong performances contributions from all geographies, with from , Purina One and cat litter. good evolution of market shares despite Increased brand support is helping the the economic and political volatility. recovery of Beneful. The exceptional performance relative In Latin America we saw good to the environment in Western Europe performances in many countries in spite was driven by successful innovation and of the volatile environment. In Brazil, our renovation. Petcare continued to deliver business achieved positive organic and real growth across the region with and internal growth despite the challenging, Purina One dry cat food. Nescafé Dolce recessionary environment. Nescafé soluble Gusto and frozen pizza with the Wagner coffee and Nescafé Dolce Gusto, KitKat and and brands were the other growth Nesfit were the growth drivers. Mexico drivers. Culinary was impacted by the delivered good growth across the entire competitive retail environment and softness portfolio, helped by strong performances in the category. Overall France, Germany in creamers, Nescafé Dolce Gusto, Nescafé and Benelux were the highlights, and Spain soluble coffee and ambient culinary. Other accelerated. highlights were Chile, driven by ice cream Solid growth in Central and Eastern and biscuits, Colombia with ambient culinary, Europe was driven by Russia, Ukraine and

10 Nestlé Group I Summary of the full Annual Report 2015 Financial Review

Poland. Petcare, Nescafé Dolce Gusto, growth together with Totole in culinary and Nescafé soluble coffee and confectionery Shark wafers in confectionery. all delivered very good growth across the delivered a solid performance in a very difficult region, leveraging strong market positions. economic environment. Yinlu improved Despite the difficult business context, Russia but needs more time. In India, we halted had a good year with positive growth and production and sales of Maggi noodles for market share gains, especially in premium five months while we dealt with allegations coffee. made against the product. We began the In the Middle East and North Africa there return to the market in November. Vietnam was a solid performance despite the unstable and were the highlights among environment. There was good growth in the other Asian markets. Sub-Saharan Africa Nescafé soluble coffee, confectionery and delivered solid growth despite the pressure petcare that was partially offset by softer from lower oil prices in several countries. trading in ambient dairy. Saudi Arabia, performed well. Kuwait, Qatar and Iran contributed to an The developed markets had another good overall solid performance. Nescafé soluble year with growth across most categories. In coffee and chocolate drove the strong Japan, the main growth drivers in beverages growth in Turkey. The difficult conditions in were Nescafé Dolce Gusto and the Yemen, Libya and Syria had an impact. machine for Nescafé soluble coffee. KitKat The trading operating profit margin remained the highlight in confectionery, improvement was the result of careful driven by innovation in novel flavours and pricing and significant cost reductions formats. Growth in Oceania was driven by which were partly reinvested in promotional confectionery, mainly KitKat, and by Nescafé and marketing activities to generate future soluble coffee and Nescafé Dolce Gusto. growth. Also, there were benefits from improved management of trade terms. Zone Asia, Oceania and sub-Saharan The Zone’s trading operating profit margin Africa (AOA) remained strong and accretive to the Group, despite the withdrawal and destruction costs Sales CHF 14.3 billion of noodles product in India. The evolution OG +0.5% in favourable input costs enabled increased RIG –0.1% investment in consumer-facing marketing Margin 18.4% support. –80 basis points

The Zone’s performance was seriously impacted by the Maggi noodles issue in India. The emerging markets improved gradually, with China showing increased momentum towards the end of the year. In China, our reinvestment in Nescafé soluble coffee and Nescafé ready-to-drink products led the

Nestlé Group I Summary of the full Annual Report 2015 11 Financial Review

Nestlé Waters was a positive contribution from the emerging markets, in particular China and Mexico. In the Sales CHF 7.6 billion developed markets, Spain and Germany were OG +6.7% the highlights, helped by successful innovation RIG +6.7% in NAN. Baby food delivered broad-based Margin 10.8% growth. Infant cereals performed well, with +110 basis points share gains in particular in Latin America and the United States. Tough comparisons and Nestlé Waters delivered good broad-based softer pricing due to lower input costs and organic and real internal growth in all moderating category growth across Asia had geographies, driven by category dynamics and an impact. innovation. There was a strong performance The increase in trading operating profit for our flagship brand for healthy hydration, margin was driven by strict control of fixed Nestlé Pure Life. The premium international costs, lower input costs, the results of brands and S.Pellegrino, continued their portfolio management and lower impairment good growth momentum, creating additional charges. At the same time, there was value in the category. Complementing these increased investment behind our brands. performances, our strong local brands also contributed good growth, especially Poland Other businesses Spring in the United States, Buxton in the United Kingdom, Erikli in Turkey, and Sta.María Sales CHF 14.1 billion in Mexico. OG +5.3% The improvement in the trading operating RIG +3.7% profit margin was due to a combination of Margin 15.7% volume growth, continuous cost improvement –330 basis points and lower input costs that also allowed for increased investment behind our brands. The growth for Nestlé Professional was driven by emerging markets, particularly Turkey, Nestlé Nutrition the Middle East Region, Russia, Mexico, the South Asia Region and China. Western Sales CHF 10.5 billion Europe continued to face challenges in the OG +3.1% out-of-home environment. The strategic RIG +1.4% growth drivers, beverage solutions and Margin 22.6% savoury flavours, continued to perform well. +110 basis points The divestment of Davigel was completed in November. Nestlé Nutrition’s solid organic growth was Nespresso delivered solid growth in all supported by an increased real internal growth regions in 2015, affirming its strong position momentum during the year. Infant formula, in European markets and continued to build including growing-up milks, delivered good momentum in Asia and the Americas. In growth. Wyeth Infant Nutrition remained the the USA, sales of the recently launched key driver with its premium brand illuma. There VertuoLine system accelerated on the back

12 Nestlé Group I Summary of the full Annual Report 2015 Financial Review

of the new varieties of machine and Grands adjustments in Nestlé Skin Health, the effect Crus, and the new communication campaign. of the strong Swiss Franc on Nespresso and Global growth was supported by innovations the generic competition on Lotronex. These and significant investments in the coffee, impacts overshadow good underlying profit machine and service pipeline, as well as in improvement across the businesses. sustainability activities, brand awareness and geographic expansion in new and existing markets. 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 Breakfast Essentials and the continuing roll-out of the Meritene range in Europe. Medical Nutrition saw good growth, notably from the allergy portfolio (Alfaré, Althéra, Alfamino) across all geographies and particularly in China. Growth was also supported by Vitaflo’s geographic expansion and 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. Nestlé Skin Health delivered good growth. There were very good results in Aesthetic & Corrective, driven by Restylane and Azzalure, and in Self-medication, driven by Cetaphil cleansers and moisturisers, the acne treatment Benzac and by continued roll-out of line extensions. The Prescription business successfully launched the rosacea treatment Soolantra and the higher strength acne drug Epiduo Forte, but faced pressure from some generic entrants in the US and in Europe. There was an impact from the business’ decision to take a more conservative approach to its prescription rebate policy in the US, which required a one-off charge in the third quarter. The trading operating profit margin of the Other businesses was impacted by the rebate

Nestlé Group I Summary of the full Annual Report 2015 13 Financial Review

Principal risks and uncertainties individual line management. If Group-level intervention is required, responsibility for Group Risk Management mitigating actions will generally be determined The Nestlé Group Enterprise Risk Management by the Executive Board. Framework (ERM) is designed to identify, The results of the Group ERM are presented communicate, and mitigate risks in order to annually to the Executive Board and to the minimise their potential impact on the Group. Audit Committee, and conclusions reported Nestlé has adopted a dual approach in to the Board of Directors. identifying and assessing risks. A top-down assessment is performed at Group level once Factors affecting results a year to create a good understanding of the Nestlé’s reputation is based on consumers’ company’s mega-risks, to allocate ownership trust. Any major event triggered by a serious to drive specific actions around them and food safety or other compliance issue could take any relevant steps to address them. have a negative effect on Nestlé’s reputation A bottom-up assessment occurs in parallel or brand image. The Group has policies, and focuses on the global risk portfolio in the processes, controls and regular monitoring businesses/corporate functions. It involves the (dedicated dashboard with relevant KPIs) aggregation of individual assessments by the in place to prevent such events. Zones, Globally Managed Businesses and all The success of the Nestlé Group depends markets. It is intended to provide a high-level on its ability to anticipate consumer risk mapping and allows Group Management preferences and to offer high-quality, to make sound decisions on the future appealing products. The Group’s business operations of the company and ensure that is subject to some seasonality, and adverse any risk growing in importance within the weather conditions may impact sales. organisation is captured and addressed in The food industry as a whole is faced with Nestlé’s ERM agenda. Nestlé engages with the global challenge of increasing obesity. external stakeholders to better understand The Group makes all its products available issues that are of most concern to them with in a range of sizes and varieties designed the aim of assessing any potential gaps to meet all needs and all occasions. between internal and external perception of Nestlé is dependent on the sustainable risks and their impact on reputation. supply of a number of raw materials, Recommendations from stakeholders are packaging materials and services/utilities. reported on in the Nestlé in society report Any major event triggered by natural hazards along with the issues stakeholders consider (drought, flood, etc.), change in macro­ to be material to the company. economic environment (shift in production An annual compliance risk assessment patterns, biofuels, excessive trading, etc.), is performed in the Group Compliance resulting in input price volatilities and/or Committee. Risk assessments are the capacity constraints, could potentially responsibility of line management; this impact Nestlé’s financial results. The Group applies equally to a business, a market or has policies, processes, controls and regular a function, and any mitigating actions identified monitoring in place to (if ever possible) in the assessments are the responsibility of the

14 Nestlé Group I Summary of the full Annual Report 2015 Financial Review

anticipate such events and adequately Nestlé is subject to health and safety mitigate against them. regimes in all countries where it operates In particular, Nestlé manages risks and and has procedures in place to comply with opportunities related to climate change and legislation concerning the protection of the water resources proactively given the impact it health and welfare of employees and may have on agriculture and food production contractors. systems. Details of the Group’s climate change Our Group companies are party to a variety and water strategies are available in Nestlé’s of legal proceedings arising out of the normal response to the CDP Climate Change and course of business. The relevant companies Water Investor Information Requests and also believe that there are valid defences for the in the Nestlé in society report. claims, and such companies intend to defend The Group’s liquidities/liabilities (currency any such litigation. fluctuation, interest rate, derivatives, and/or Nestlé has factories in 85 countries and hedging, pension funding obligations/ sales in 189 countries around the world. retirement benefits, banking/commercial Security, political instability, legal and credit, and cost of capital, etc.) could be regulatory, fiscal, macroeconomic, foreign impacted by any major event in the financial trade, labour and/or infrastructure risks could markets. Again, Nestlé has the appropriate potentially impact Nestlé’s ability to do risk mitigation measures in place. business in a country or region. Events such Nestlé is dependent on sustainable as infectious disease could also impact the manufacturing/supply of finished goods for Group’s ability to operate. Any of these all product categories. A major event in one events could lead to a supply disruption and of Nestlé’s key plants, at a key supplier, impact Nestlé’s financial results. Regular contract manufacturer, co-packer, and/or monitoring and ad hoc business continuity warehouse facility could potentially lead plans are established in order to mitigate to a supply disruption and impact Nestlé’s against such events. financial results. Business continuity plans One of the most valuable assets of are established and regularly maintained Nestlé is the Group-wide geographical and in order to mitigate against such an event. product category spreads, which represent The Group depends on accurate, timely a tremendous natural hedge. information and numerical data from key software applications, without disruption, to enable day-to-day decision making. The Group is subject to environmental regimes applying in all countries where it operates and has put controls in place to comply with legislation concerning the protection of the environment, including the use of natural resources, release of air emissions and waste water, and the generation, storage, handling, transportation, treatment and disposal of waste materials.

Nestlé Group I Summary of the full Annual Report 2015 15 16 Nestlé Group I Summary of the full Annual Report 2015 Extract from the Consolidated Financial Statements Principal exchange rates

CHF per 2015 2014 2015 2014 Weighted Year ending rates 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

Nestlé Group I Summary of the full Annual Report 2015 17 Extract from the Consolidated Financial Statements Consolidated income statement for the year ended 31 December 2015

In millions of CHF 2015 2014 Sales 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 78 110 Other trading expenses (728) (907) Trading operating profit 13 382 14 019

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

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

Taxes (3 305) (3 367) Income from associates and joint ventures 988 8 003 Profit 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 profit) 9 066 14 456

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

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

18 Nestlé Group I Summary of the full Annual Report 2015 Extract from the Consolidated Financial Statements Consolidated statement of comprehensive income for the year ended 31 December 2015

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

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

Remeasurement of defined benefit plans (370) (1 745) Taxes 8 352 Share of other comprehensive income of associates and joint ventures 112 (153) Items that will never be reclassified to the income statement (250) (1 546)

Other comprehensive income for the year (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

Nestlé Group I Summary of the full Annual Report 2015 19 Extract from the Consolidated Financial Statements Consolidated balance sheet as at 31 December 2015 before appropriations

In millions of CHF 2015 2014 Assets

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

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

Total assets 123 992 133 450

20 Nestlé Group I Summary of the full Annual Report 2015 Extract from the Consolidated Financial Statements Consolidated balance sheet as at 31 December 2015 before appropriations

In millions of CHF 2015 2014 Liabilities and equity

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

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

Total liabilities 60 006 61 566

Equity 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

Nestlé Group I Summary of the full Annual Report 2015 21 Extract from the Consolidated Financial Statements Consolidated cash flow statement for the year ended 31 December 2015

In millions of CHF 2015 2014 Operating activities Operating profit 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 flow before changes in operating assets and liabilities 16 756 17 228 Decrease/(increase) in working capital 741 (114) Variation of other operating assets and liabilities (248) 85 Cash generated from operations 17 249 17 199 Net cash flows from treasury activities (93) (356) Taxes paid (3 310) (2 859) Dividends and interest from associates and joint ventures 456 716 Operating cash flow 14 302 14 700 Investing activities Capital expenditure (3 872) (3 914) Expenditure on intangible assets (422) (509) Acquisition of businesses (530) (1 986) Disposal of businesses 213 321 Investments (net of divestments) in associates and joint ventures (a) (44) 3 958 Inflows/(outflows) from treasury investments 521 (844) Other investing activities (19) (98) Investing cash flow (4 153) (3 072)

22 Nestlé Group I Summary of the full Annual Report 2015 Extract from the Consolidated Financial Statements Consolidated cash flow statement for the year ended 31 December 2015 (continued)

In millions of CHF 2015 2014 Financing activities Dividend paid to shareholders of the parent (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) Inflows from bonds and other non-current financial debt 1 381 2 202 Outflows from bonds and other non-current financial debt (508) (1 969) Inflows/(outflows) from current financial debt 643 (1 985) Financing cash flow (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.

Nestlé Group I Summary of the full Annual Report 2015 23 Extract from the Consolidated Financial Statements Consolidated statement of changes in equity for the year ended 31 December 2015

In millions of CHF Total equity Total attributable to shareholders of the parent Non-controlling interests Total equity Equity as at 31 December 2013 62 575 1 564 64 139 Profit for the year 14 456 448 14 904 Other comprehensive income for the year 1 792 108 1 900 Total comprehensive income for the year 16 248 556 16 804 Dividend paid to shareholders of the parent (6 863) — (6 863) Dividends paid to non-controlling interests — (356) (356) Movement of treasury shares (1 739) — (1 739) Equity compensation plans 173 — 173 Changes in non-controlling interests (297) (10) (307) Total transactions with owners (8 726) (366) (9 092) Other movements 33 — 33 Equity as at 31 December 2014 70 130 1 754 71 884 Profit for the year 9 066 401 9 467 Other comprehensive income for the year (3 854) (84) (3 938) Total comprehensive income for the year 5 212 317 5 529 Dividend paid to shareholders of the parent (6 950) — (6 950) Dividends paid to non-controlling interests — (424) (424) Movement of treasury shares (6 283) — (6 283) Equity compensation plans 183 — 183 Changes in non-controlling interests (21) 1 (20) Total transactions with owners (13 071) (423) (13 494) Other movements 67 — 67 Equity as at 31 December 2015 62 338 1 648 63 986

24 Nestlé Group I Summary of the full Annual Report 2015 Extract from the Consolidated Financial Statements 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 statements, whether due to fraud or error. In making consolidated financial statements (income those risk assessments, the auditor considers the statement, statement of comprehensive income, internal control system relevant to the entity’s balance sheet, cash flow statement, statement of preparation of the consolidated financial statements changes in equity and notes on pages 60 to 134) of in order to design audit procedures that are Nestlé S.A. for the year ended 31 December 2015. appropriate in the circumstances, but not for the purpose of expressing an opinion on the Board of Directors’ responsibility effectiveness of the entity’s internal control system. The Board of Directors is responsible for the An audit also includes evaluating the preparation of the consolidated financial statements appropriateness of the accounting policies used and in accordance with International Financial Reporting the reasonableness of accounting estimates made, Standards (IFRS) and the requirements of Swiss law. as well as evaluating the overall presentation of the This responsibility includes designing, implementing consolidated financial statements. We believe that and maintaining an internal control system relevant the audit evidence we have obtained is sufficient and to the preparation of the consolidated financial appropriate to provide a basis for our audit opinion. statements that are free from material misstatement, whether due to fraud or error. The Board of Directors Opinion is further responsible for selecting and applying In our opinion, the consolidated financial statements appropriate accounting policies and making for the year ended 31 December 2015 give a true and accounting estimates that are reasonable in the fair view of the financial position, the results of circumstances. operations and the cash flows in accordance with International Financial Reporting Standards (IFRS) Auditor’s responsibility and comply with Swiss law. Our responsibility is to express an opinion on these consolidated financial statements based on our Report on other legal requirements audit. We conducted our audit in accordance with We confirm that we meet the legal requirements on Swiss law and Swiss Auditing Standards as well as licensing according to the Auditor Oversight Act International Standards on Auditing. Those (AOA) and independence (article 728 CO and article standards require that we plan and perform the audit 11 AOA) and that there are no circumstances to obtain reasonable assurance whether the incompatible with our independence. consolidated financial statements are free from In accordance with article 728a paragraph 1 item material misstatement. 3 CO and Swiss Auditing Standard 890, we confirm An audit involves performing procedures to that an internal control system exists, which has obtain audit evidence about the amounts and been designed for the preparation of consolidated disclosures in the consolidated financial statements. financial statements according to the instructions of The procedures selected depend on the auditor’s the Board of Directors. judgment, including the assessment of the risks of We recommend that the consolidated financial material misstatement of the consolidated financial 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

Nestlé Group I Summary of the full Annual Report 2015 25 Extract from the Financial Statements of Nestlé S.A. Income statement for the year ended 31 December 2015

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

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

Profit for the year 7 825 11 500

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

26 Nestlé Group I Summary of the full Annual Report 2015 Extract from the Financial Statements of Nestlé S.A. Balance sheet as at 31 December 2015 before appropriations

In millions of CHF 2015 2014 Assets Current assets Cash and cash equivalents 100 2 221 Other current receivables 875 1 007 Prepayments and accrued income 14 11 Total current assets 989 3 239 Non-current assets Financial assets (a) 8 459 13 990 Shareholdings (a) 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) — 1 965 Other current liabilities (a) 4 224 2 234 Accruals and deferred income 3 6 Provisions (a) 827 837 Total current liabilities 5 054 5 042 Non-current liabilities Interest-bearing liabilities 154 162 Provisions (a) 498 498 Total non-current liabilities 652 660 Total liabilities 5 706 5 702 Equity Share capital 319 322 Legal retained earnings – General legal reserve 1 917 1 913 – Reserve for treasury shares — 988 Voluntary retained earnings – Special reserve 28 711 30 146 – Profit brought forward 4 998 536 – Profit for the year 7 825 11 500 Treasury shares (a) (7 350) (2 487) Total equity 36 420 42 918 Total liabilities and equity 42 126 48 620

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

Nestlé Group I Summary of the full Annual Report 2015 27 Extract from the Financial Statements of Nestlé S.A. Proposed appropriation of profit

In CHF 2015 2014 Retained earnings Profit brought forward 4 997 707 777 536 179 231 Profit 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

Profit 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

28 Nestlé Group I Summary of the full Annual Report 2015 Extract from the Financial Statements of Nestlé S.A. Report of the Statutory Auditor to the General Meeting of Nestlé S.A., Cham & Vevey

As statutory auditor, we have audited the financial the financial statements in order to design audit statements (income statement, balance sheet and procedures that are appropriate in the notes to the annual accounts on pages 161 to 172) of circumstances, but not for the purpose of expressing Nestlé S.A. for the year ended 31 December 2015. an opinion on the effectiveness of the entity’s internal control system. An audit also includes Board of Directors’ responsibility evaluating the appropriateness of the accounting The Board of Directors is responsible for the policies used and the reasonableness of accounting preparation of the financial statements in estimates made, as well as evaluating the overall accordance with the requirements of Swiss law and presentation of the financial statements. We believe the Company’s Articles of Association. This that the audit evidence we have obtained is responsibility includes designing, implementing and sufficient and appropriate to provide a basis for our maintaining an internal control system relevant to audit opinion. the preparation of financial statements that are free from material misstatement, whether due to fraud or Opinion error. The Board of Directors is further responsible In our opinion, the financial statements for the year for selecting and applying appropriate accounting ended 31 December 2015 comply with Swiss law policies and making accounting estimates that are and the Company’s Articles of Association. reasonable in the circumstances. Report on other legal requirements Auditor’s responsibility We confirm that we meet the legal requirements on Our responsibility is to express an opinion on these licensing according to the Auditor Oversight Act financial statements based on our audit. We (AOA) and independence (article 728 CO and article conducted our audit in accordance with Swiss law 11 AOA) and that there are no circumstances and Swiss Auditing Standards. Those standards incompatible with our independence. require that we plan and perform the audit to obtain In accordance with article 728a paragraph 1 item reasonable assurance whether the financial 3 CO and Swiss Auditing Standard 890, we confirm statements are free from material misstatement. that an internal control system exists, which has An audit involves performing procedures to been designed for the preparation of financial obtain audit evidence about the amounts and statements according to the instructions of the disclosures in the financial statements. The Board of Directors. procedures selected depend on the auditor’s We further confirm that the proposed judgment, including the assessment of the risks of appropriation of available earnings complies with material misstatement of the financial statements, Swiss law and the Company’s Articles of whether due to fraud or error. In making those risk Association. We recommend that the financial assessments, the auditor considers the internal statements submitted to you be approved. control system relevant to the entity’s preparation of

KPMG SA

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

Geneva, 17 February 2016

Nestlé Group I Summary of the full Annual Report 2015 29 Shareholder information

Stock exchange listing Further information At 31 December 2015, Nestlé S.A. shares For additional information, contact: are listed on the SIX Swiss Exchange, Nestlé S.A. Zurich (ISIN code: CH0038863350). Investor Relations American Depositary Receipts (ISIN code: Avenue Nestlé 55 US6410694060) representing Nestlé S.A. CH-1800 Vevey (Switzerland) shares are offered in the USA by Citibank, tel. +41 (0)21 924 35 09 N.A., New York. fax +41 (0)21 924 48 00 e-mail: [email protected] Registered Offices Nestlé S.A. As to information concerning the share Avenue Nestlé 55 register (registrations, transfers, dividends, CH-1800 Vevey (Switzerland) etc.), please contact: tel. +41 (0)21 924 21 11 Nestlé S.A. (Share Transfer Office) Zugerstrasse 8 Nestlé S.A. (Share Transfer Office) CH-6330 Cham (Switzerland) Zugerstrasse 8 tel. +41 (0)41 785 20 20 CH-6330 Cham (Switzerland) fax +41 (0)41 785 20 24 tel. +41 (0)41 785 20 20 e-mail: [email protected]

The Annual Review is available online as a PDF in English, French and German. The consolidated income statement, balance sheet and cash flow statement are also available as Excel files.

www.nestle.com

30 Nestlé Group I Summary of the full Annual Report 2015 Shareholder information

Important dates 7 April 2016 149th Annual General Meeting, Beaulieu Lausanne, Lausanne (Switzerland)

8 April 2016 Last trading day with entitlement to dividend

11 April 2016 Ex-dividend date

13 April 2016 Payment of the dividend

14 April 2016 2016 First quarter sales figures

18 August 2016 2016 Half-yearly Results

20 October 2016 2016 Nine months sales figures

16 February 2017 2016 Full Year Results

6 April 2017 150th Annual General Meeting, Beaulieu Lausanne, Lausanne (Switzerland)

Nestlé Group I Summary of the full Annual Report 2015 31 © 2016, Nestlé S.A., Cham and Vevey (Switzerland) NES022E