midterm essay

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2001 F inan cial st a t e m e n ts C onsolid a t e d a c c ou n ts of t h e N estl é Grou p 135t h A n n ual re p ort of N estl é S. A .

2001 F inan cial st at e m e n ts

Consolidated accounts of the Nestlé Group

5 C o n s o l i d a t e d i n c o m e s t a t e m e n t f o r t h e y e a r e n d e d 31 s t D e c e m b e r 2001

6 C o n s o l i d a t e d b a l a n c e s h e e t a s a t 31 s t D e c e m b e r 2001

8 C o n s o l i d a t e d c a s h f l o w s t a t e m e n t f o r t h e y e a r e n d e d 31 s t D e c e m b e r 2001

10 Co n s o l i d a t e d s t a t e m e n t o f c h a n g e s i n e q u i t y

12 A n n e x

12 A ccountin g policies

13 Valuation m ethods and definitions

17 C han ges in accountin g policies and m odification of the scope of consolidation

18 N otes

40 Principal exchan ge rates

41 R e p o r t o f t h e G r o u p a u d i t o r s

42 F i n a n c i a l i n f o r m a t i o n – te n y e a r r e v i e w

44 Co m p a n i e s o f t h e N e s t l é Gr o u p

135th Annual report of Nestlé S.A.

47 I n c o m e s t a t e m e n t f o r t h e y e a r 2001

48 B a l a n c e s h e e t a s a t 31 s t D e c e m b e r 2001

49 A n n e x t o t h e a n n u a l a c c o u n t s o f N e s t l é S. A .

49 A ccountin g policies

51 N otes to the annual accounts

59 P r o p o s e d a p p r o p r i a t i o n o f p r o f i t

60 R e p o r t o f t h e s t a t u t o r y a u d i t o r s

61 A g e n d a f o r t h e 135 t h O r d i n a r y G e n e r a l M e e t i n g o f N e s t l é S. A .

62 I m p o r t a n t d a t e s

63 S h a r e h o l d e r i n f o r m a t i o n

2001 F inan cial st at e m e n ts

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

C onsolid at e d in co m e st at e m e n t for t h e y e ar e n d e d 31st D e c e m b er 2001

In m illions of C H F N o t es 2001 2000

Sales to customers 1 84'698 81'422 C ost of g oods sold (37'756) (38'121) D istrib u tio n e xp e nses (6'421) (5'884) M ark e tin g a n d a d m inistra tio n e xp e nses (29'372) (26'467) Rese arc h a n d d e v e lo p m e n t c osts (1'162) (1'038) Restru c t urin g c osts (275) (312) A m ortisa tion of g oo d w ill (494) (414)

Trading profit 1 9'218 9'186 N e t fin a n cin g c ost 2 (407) (746) N e t n o n-tra din g it e m s 3 (44) (99)

Profit before taxes 4 8'767 8'341 Tax es 5 (2'429) (2'761)

Net profit of consolidated companies 6'338 5'580 Sh are o f pro fit a t trib u t a bl e t o m in ority in t erests (192) (212) Sh are of results of asso cia t es 6 535 395

Net profit 6'681 5'763

As percentages of sales Tra din g profit 10.9% 11 . 3 % N e t profit 7.9% 7 . 1 %

Earnings per share (a) (in C H F) B asic e arnin gs p er sh are 7 17.25 14 . 91 F ully dilu t e d e arnin gs p er sh are 7 17.14 14 . 78

(a) R e st a t e d fo ll o w i n g sh are sp lit.

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

C onsolid at e d b alan c e sh e e t as at 31st D e c e m b er 2001 b e fore a p pro pri a ti o ns

In m illions of C H F N o t es 2001 2000

Assets

Current assets Liq uid asse ts 8

C ash a n d c ash e q uival e n ts 7'617 5'451 O t h er liq uid asse ts 8'425 4'680

16'042 10'131 Tra d e a n d o t h er re c e iva bl es 9 14'074 12'685 Inv e n t ori es 10 7'691 7'168 D eriva tiv e asse ts 11 609 (a) Pre p ay m e n ts a n d a c cru e d in c o m e 629 763 Total current assets 39'045 30'747

Non-current assets Pro p erty , pla n t a n d e q uip m e n t 12

Gross valu e 45'093 43'519 A c c u m ula t e d d e pre cia tio n (25'195) (24'894)

19'898 18'625

Inv est m e n ts in asso cia t es 13 2'497 2'173 D e f erre d t ax asse ts 23 1'918 2'569 F in a n cial asse ts 14 2'885 2'386 E m ploy e e b e n e fit asse ts 21 1'392 306 G oo d w ill 15 25'253 7'902 In t a n g ibl e asse ts 16 898 816 Total non-current assets 54'741 34'777

Total assets 93'786 65'524

(a) 2000 fi g ures w ere n o t pre p are d in a c c ord a n c e w it h IA S 39. W h e n c arri e d t o t h e b ala n c e sh e e t , d eriva tiv es w ere in clu d e d u n d er a c cru e d asse ts a n d lia b iliti es.

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

In m illions of C H F N o t es 2001 2000

Liabilities, minority interests and equity

Current liabilities Tra d e a n d o t h er p aya bl es 17 10'504 10'001 F in a n cial lia b ilit i es 18 25'486 8'376 Tax p aya b l e 854 1'035 D eriva tiv e lia b iliti es 19 383 (a) A c cru als a n d d e f erre d in c o m e 4'265 3'762 Total current liabilities 41'492 23'174

Non-current liabilities F in a n cial lia b ilit i es 20 9'946 4'768 E m ploy e e b e n e fit lia biliti es 21 3'786 2'860 D e f erre d t ax lia biliti es 23 1'301 1'550 Tax p aya b l e 40 53 O t h er p aya bl es 497 402 Provisions 24 2'495 2'204 Total non-current liabilities 18'065 11'837

Total liabilities 59'557 35'011

M inority interests 576 609

Equity Sh are c a pit al 25 404 404 Sh are pre m iu m a n d reserv es

Sh are pre m iu m 5'926 5'926 Reserv e for tre asury sh ares 2'588 2'232 Tra nsla tio n reserv e 12 571 Re t ain e d e arnin gs 27'517 23'388

36'043 32'117 36'447 32'521

Less: Tre asury sh ares 26 (2'794) (2'617) Total equity 33'653 29'904

Total liabilities, minority interests and equity 93'786 65'524

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

C onsolid at e d cash flo w st at e m e n t for t h e y e ar e n d e d 31st D e c e m b er 2001

In m illions of C H F N o t es 2001 2000

Operating activities N e t profit of c onsolid a t e d c o m p a ni es 6'338 5'580 D e pre cia tio n o f pro p erty , pla n t a n d e q uip m e n t 12 2'581 2'737 Im p airm e n t o f pro p erty , pla n t a n d e q uip m e n t 12 222 223 A m ortisa tion of g oo d w ill 15 494 414 D e pre cia tio n o f in t a n g ibl e asse ts 16 150 179 Im p airm e n t of g oo d w ill 15 184 230 In cre ase/(d e cre ase) in provisio ns a n d d e f erre d t ax es (92) (4) D e cre ase/(in cre ase) in w orkin g c a pit al 27 (870) (368) O t h er m ov e m e n ts (393) (140)

Operating cash flow (a) 8'614 8'851

Investing activities C a pit al e x p e n dit ure 12 (3'611) (3'305) E xp e n dit ure o n in t a n g ibl e asse ts 16 (288) (188) Sal e o f pro p erty , pla n t a n d e q uip m e n t 263 355 A c q uisitio ns 28 (18'766) (2'846) D isp osals 29 484 780 In co m e fro m associa t es 133 107 O t h er m ov e m e n ts 143 39

Cash flow from investing activities (21'642) (5'058)

(a) T a x e s p a i d a m o u n t t o C H F 2 7 8 2 m illi o n (2 0 0 0: C H F 2 7 1 4 m illi o n). In t erest re c e i v e d/p a i d d o es n ot d iff er m a t eri a ll y fro m i n t erest sh o w n u n d er n o t e 2 “ N e t fi n a n c i n g c ost ” .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

In m illions of C H F N o t es 2001 2000

Financing activities D ivid e n d for t h e pre vio us y e ar (2'127) (1'657) Purc h ase o f tre asury sh ares (1'133) (765) Sal e o f tre asury sh ares a n d o p tio ns 880 1'837 Pre m iu m o n w arra n ts issu e d 209 81 M ov e m e n ts w it h m in ority in t erests (172) (221) B o n ds issu e d 3'338 1'016 B o n ds re p aid (380) (1'143) In cre ase/(d e cre ase) in o t h er m e diu m/ lo n g t erm fin a n cial lia b iliti es (71) (155) In cre ase/(d e cre ase) in sh ort t erm fin a n cial lia b iliti es 16'754 921 D e cre ase/(in cre ase) in m ark e t a b l e se c uriti es a n d o t h er liq uid asse ts (2'330) (2'788) D e cre ase/(in cre ase) in sh ort t erm inv est m e n ts 216 1'452

Cash flow from financing activities 15'184 (1'422)

Tra nsla tio n diff ere n c es o n flo w s 60 (175)

Increase/(decrease) in cash and cash equivalents 2'216 2'196

C ash a n d c ash e q uival e n ts a t b e g in nin g o f y e ar 5'451 3'322 E ff e c ts o f e xc h a n g e ra t e c h a n g es o n o p e nin g b ala n c e (29) (67) C ash a n d c ash e q uival e n ts re tra nsla t e d a t b e g in nin g o f y e ar 5'422 3'255 F air-valu e a djust m e n t o n c ash a n d c ash e q uival e n ts (21) —

Cash and cash equivalents at end of year 8 7'617 5'451

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

C onsolid at e d st at e m e n t of c han g es in e q uity

In m illions of C H F Share

pre m iu m

Reserv e for tre asury

sh ares Tra nsla tion

reserv e Re t ain e d e arnin gs

Total reserves

Share c a pit al

Less: Tre asury

sh ares Total

equity

Equity as at 31st December 1999 5'926 2'873 839 17'439 27'077 404 (3'028) 24'453

A djust m e n t for t h e in tro d u c tio n of IA S 37 - Provisions 132 132 132 - Re la t e d d e f erre d t ax es (21) (21) (21)

Equity restated as at 31st December 1999 5'926 2'873 839 17'550 27'188 404 (3'028) 24'564

Gains and losses N e t profit 5'763 5'763 5'763 C urre n cy re tra nsla tio n (268) (268) (268) Re cov ery of g oo d w ill on disp osals c h arg e d t o e q uity prior t o 1st Ja n u ary 1995 51 51 51

Distributions to and transactions with shareholders

D ivid e n d for t h e pre vio us y e ar (1'657) (1'657) (1'657) M ov e m e n t o f tre asury sh ares (n e t) (641) 641 — 641 641 Result o n o p tio ns a n d tre asury sh ares h e ld for tra din g p urp oses 959 959 (230) 729 Pre m iu m o n w arra n ts issu e d 81 81 81

Equity as at 31st December 2000 5'926 2'232 571 23'388 32'117 404 (2'617) 29'904

A djust m e n t for t h e in tro d u c tio n of IA S 39 - F in a n cial instru m e n ts (55) (55) (55) - Re la t e d d e f erre d t ax es 6 6 6 A djust m e n t o f a c c o u n tin g p olici es of asso cia t es (161) (161) (161)

Equity restated as at 31st december 2000 5'926 2'232 571 23'178 31'907 404 (2'617) 29'694

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

In m illions of C H F Share

pre m iu m

Reserv e for tre asury

sh ares Tra nsla tion

reserv e Re t ain e d e arnin gs

Total reserves

Share c a pit al

Less: Tre asury

sh ares Total

equity

Equity restated as at 31st december 2000 5'926 2'232 571 23'178 31'907 404 (2'617) 29'694

Gains and losses N e t profit 6'681 6'681 6'681 C urre n cy re tra nsla tio n (559) (559) (559) Tax es o n e q uity it e m s (3) (3) (3) F air valu e a djust m e n ts o f availa bl e-for-sal e fin a n cial instru m e n ts a n d o f c ash flo w h e d g es - U nre alise d results 55 55 55 - Re c o g nitio n o f re alise d results in t h e in c o m e st a t e m e n t (44) (44) (44)

Distributions to and transactions with shareholders

D ivid e n d for t h e pre vio us y e ar (2'127) (2'127) (2'127) M ov e m e n t o f tre asury sh ares (n e t) 356 (356) — (356) (356) Result o n o p tio ns a n d tre asury sh ares h e ld for tra din g p urp oses (76) (76) 179 103 Pre m iu m o n w arra n ts issu e d 209 209 209

Equity as at 31st December 2001 5'926 2'588 12 27'517 36'043 404 (2'794) 33'653

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

A nn ex

A c c o u n t i n g p o l i c i e s

Accounting convention and accounting standards T h e C o nso li d a t e d a c c o u n ts c o m p l y w it h In t ern a ti o n a l A c c o u n ti n g St a n d ards (I A S) issu e d b y t h e In t ern a ti o n a l A c c o u n ti n g St a n d ards B o ard (I A S B) a n d w it h t h e St a n d i n g In t erpre t a ti o ns issu e d b y t h e St a n d i n g In t erpre t a ti o ns C o m m itt e e o f t h e I A S B (SIC).

T h e a c c o u n ts h a v e b e e n pre p are d o n a n a c cru a l b asis a n d u n d er t h e h ist ori c a l c ost c o n v e n ti o n , e x c e p t t h a t t h e f o ll o w i n g ass e ts a n d li a b iliti e s are st a t e d a t t h e ir f a ir v a l u e: d eri v a ti v e fi n a n c i a l i nstru m e n ts, h e l d f or tra d i n g i n v e st m e n ts, a v a il a b l e-f or-sa l e i n v e st m e n ts, re c o g n is e d ass e ts a n d li a b iliti e s su b j e c t t o f a ir v a l u e h e d g e s. A ll si g n ifi c a n t c o nso li d a t e d c o m p a n i e s h a v e a 3 1st D e c e m b er a c c o u n ti n g y e ar e n d . A ll d isc l osure s re q u ire d b y t h e 4t h a n d 7t h E uro p e a n U n i o n c o m p a n y l a w d ire c ti v e s are pro v i d e d .

Scope of consolidation T h e C o nso li d a t e d a c c o u n ts c o m pris e t h os e o f N e stl é S . A . a n d o f its a ffili a t e d c o m p a n i e s, i n c l u d i n g j o i n t v e n t ure s, a n d asso c i a t e s (t h e G ro u p). T h e list o f t h e pri n c i p a l c o m p a n i e s is pro v i d e d i n s e c ti o n " C o m p a n i e s o f t h e N e stl é G ro u p " .

Consolidated com panies C o m p a n i e s i n w h i c h t h e G ro u p h as a p arti c i p a ti o n , usu a ll y a m a j orit y , a n d w h ere it e x erc is e s c o n tro l , are f u ll y c o nso li d a t e d . T h is a p p li e s irre sp e c ti v e o f t h e p erc e n t a g e o f t h e p arti c i p a ti o n i n t h e sh are c a p it a l . C o n tro l re f ers t o t h e p o w er t o g o v ern t h e fi n a n c i a l a n d o p era ti n g p o li c i e s o f a n a ffili a t e d c o m p a n y so as t o o b t a i n t h e b e n e fits fro m its a c ti v iti e s. M i n orit y i n t ere sts are sh o w n as a s e p ara t e c a t e g ory a p art fro m e q u it y a n d l i a b i l iti e s i n t h e b a l a n c e sh e e t a n d t h e sh are o f t h e pro fit a ttri b u t a b l e t o m i n orit y i n t ere sts is sh o w n as a s e p ara t e l i n e i n t h e i n c o m e st a t e m e n t .

Pro p orti o n a l c o nso li d a ti o n is a p p li e d f or c o m p a n i e s o v er w h i c h t h e G ro u p e x erc is e s j o i n t c o n tro l w it h p art n ers. T h e i n d i v i d u a l ass e ts, li a b iliti e s, i n c o m e a n d e x p e n d it ure are c o nso li d a t e d i n pro p orti o n t o t h e N e stl é p arti c i p a ti o n i n t h e e q u it y (usu a ll y 5 0 %).

N e w l y a c q u ire d c o m p a n i e s are c o nso li d a t e d fro m t h e e ff e c ti v e d a t e o f a c q u isiti o n , usi n g t h e p urc h as e m e t h o d .

Associates C o m p a n i e s w h ere t h e G ro u p h as a p arti c i p a ti o n o f 2 0 % or m ore a n d a si g n ifi c a n t i n fl u e n c e b u t d o e s n o t e x erc is e m a n a g e m e n t c o n tro l are a c c o u n t e d f or b y t h e e q u it y m e t h o d . T h e n e t ass e ts a n d re su lts are re c o g n is e d o n t h e b asis o f t h e asso c i a t e s’ o w n a c c o u n ti n g p o li c i e s, w h ere it is i m pra c ti c a l t o m a k e a d j ust m e n ts w it h t h e G ro u p's a c c o u n ti n g p o li c i e s.

Foreign currencies In i n d i v i d u a l c o m p a n i e s, tra nsa c ti o ns i n f ore i g n c urre n c i e s are re c ord e d a t t h e ra t e o f e x c h a n g e a t t h e d a t e o f t h e tra nsa c ti o n . M o n e t ary ass e ts a n d li a b iliti e s i n f ore i g n c urre n c i e s are tra nsl a t e d a t y e ar e n d ra t e s. A n y re su lti n g e x c h a n g e d iff ere n c e s are t a k e n t o t h e i n c o m e st a t e m e n t .

O n c o nso li d a ti o n , ass e ts a n d li a b iliti e s o f G ro u p c o m p a n i e s d e n o m i n a t e d i n f ore i g n c urre n c i e s are tra nsl a t e d i n t o S w iss fra n cs a t y e ar e n d ra t e s. In c o m e a n d e x p e ns e it e m s are tra nsl a t e d i n t o S w iss fra n cs a t t h e a n n u a l a v era g e ra t e s o f e x c h a n g e or, w h ere k n o w n or d e t er m i n a b l e , a t t h e ra t e o n t h e d a t e o f t h e tra nsa c ti o n f or si g n ifi c a n t it e m s.

D iff ere n c e s arisi n g fro m t h e re tra nsl a ti o n o f o p e n i n g n e t ass e ts o f G ro u p c o m p a n i e s, t o g e t h er w it h d iff ere n c e s arisi n g fro m t h e re st a t e m e n t o f t h e n e t re su lts f or t h e y e ar o f G ro u p c o m p a n i e s fro m a v era g e or a c t u a l ra t e s t o y e ar e n d ra t e s, are t a k e n t o e q u it y .

T h e b a l a n c e sh e e t a n d n e t re su lts o f G ro u p c o m p a n i e s o p era ti n g i n h y p eri n fl a ti o n ary e c o n o m i e s are re st a t e d f or t h e c h a n g e s i n t h e g e n era l p urc h asi n g p o w er o f t h e l o c a l c urre n c y , usi n g o ffi c i a l i n d i c e s a t t h e b a l a n c e sh e e t d a t e , b e f ore tra nsl a ti o n i n t o S w iss fra n cs a t y e ar e n d ra t e s.

Derivative financial instruments D eri v a ti v e fi n a n c i a l i nstru m e n ts are m a i n l y us e d t o m a n a g e o p era ti o n a l e x p osure s t o f ore i g n e x c h a n g e , i n t ere st ra t e a n d c o m m o d it y pri c e risks. S o m e d eri v a ti v e s are a lso a c q u ire d w it h t h e a i m o f g e n era ti n g sh ort t er m pro fit . A ll d eri v a ti v e s are e n t ere d i n t o w it h h i g h cre d it q u a lit y fi n a n c i a l i nstit u ti o ns, c o nsist e n t w it h sp e c ifi c a p pro v a l , li m it a n d m o n it ori n g pro c e d ure s.

A l l d eri v a ti v e fi n a n c i a l i nstru m e n ts are c arri e d a t f a ir v a l u e , b e i n g t h e m ark e t v a l u e f or list e d i nstru m e n ts or v a l u a ti o n b as e d o n m a t h e m a ti c a l m o d e ls, su c h as o p ti o n pri c i n g m o d e ls a n d d isc o u n t e d c ash fl o w c a l c u l a ti o ns f or u n list e d i nstru m e n ts.

T h e i nstru m e n ts c o nsist m a i n l y o f c urre n c y f or w ards a n d o p ti o ns, c o m m o d it y f u t ure s a n d o p ti o ns, i n t ere st for w ards a n d o p ti o ns, i n t ere st ra t e s w a ps as w e ll as i n t ere st ra t e a n d c urre n c y s w a ps.

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

H e d g e a c c o u n ti n g is a p p li e d t o d eri v a ti v e fi n a n c i a l i nstru m e n ts t h a t are e ff e c ti v e i n o ffs e tti n g t h e c h a n g e s i n f a ir v a l u e or i n c ash fl o w s o f t h e h e d g e d it e m s. T h e e ff e c ti v e n e ss o f su c h h e d g e s is v erifi e d a t re g u l ar i n t erv a ls b u t a t l e ast o n a q u art erl y b asis.

F a ir v a l u e h e d g e s are d eri v a ti v e fi n a n c i a l i nstru m e n ts t h a t h e d g e t h e c urre n c y risk o f b a l a n c e sh e e t ass e ts a n d li a b iliti e s or t h e i n t ere st pri c e risk o n fi n a n c i a l li a b iliti e s. T h e c h a n g e s i n f a ir v a l u e o f f a ir v a l u e h e d g e s are re c o g n is e d i n t h e i n c o m e st a t e m e n t . T h e h e d g e d it e m a lso is st a t e d a t f a ir v a l u e i n re sp e c t o f t h e risk b e i n g h e d g e d , w it h a n y g a i n or l oss b e i n g re c o g n is e d i n t h e i n c o m e st a t e m e n t .

C ash fl o w h e d g e s are d eri v a ti v e fi n a n c i a l i nstru m e n ts t h a t h e d g e t h e c urre n c y risks o f a n ti c i p a t e d f u t ure e x p ort sa l e s, c ash fl o w risks o f a n ti c i p a t e d f u t ure p urc h as e s o f i n d ustri a l e q u i p m e n t , t h e c urre n c y a n d/or c o m m o d it y risk o f f u t ure p urc h as e s o f ra w m a t eri a ls as w e ll as t h e i n t ere st c ash fl o w risk . T h e e ff e c ti v e p art o f t h e c h a n g e s i n f a ir v a l u e o f c ash fl o w h e d g e s are re c o g n is e d i n e q u it y , w h il e a n y i n e ff e c ti v e p art is re c o g n is e d i m m e d i a t e l y i n t h e i n c o m e st a t e m e n t . W h e n t h e h e d g e d it e m re su lts i n a n ass e t or i n a li a b ilit y , t h e g a i ns a n d l oss e s pre v i o usl y re c o g n is e d i n e q u it y are i n c l u d e d i n t h e m e asure m e n t c ost o f t h e ass e t or o f t h e li a b ilit y . O t h er w is e t h e g a i ns a n d l oss e s pre v i o usl y re c o g n is e d i n e q u it y are re m o v e d fro m e q u it y a n d re c o g n is e d i n t h e i n c o m e st a t e m e n t a t t h e sa m e ti m e as t h e h e d g e d tra nsa c ti o n .

H e d g e s o f t h e n e t i n v e st m e n t i n a f ore i g n e n tit y are c urre n c y d eri v a ti v e fi n a n c i a l i nstru m e n ts t h a t h e d g e t h e c urre n c y e x p osure o n t h e n e t i n v e st m e n t i n a ffili a t e d c o m p a n i e s. T h e c h a n g e s i n f a ir v a l u e o f su c h d eri v a ti v e s are re c o g n is e d i n e q u it y u n til t h e n e t i n v e st m e n t is so l d or o t h er w is e d isp os e d o f .

Tra d i n g d eri v a ti v e s are t h os e fi n a n c i a l i nstru m e n ts t h a t are i n e ff e c ti v e as h e d g i n g i nstru m e n ts or t h a t are a c q u ire d w it h t h e a i m o f a c h i e v i n g b e n c h m ark o b j e c ti v e s o f i n v e st m e n t p ortfo li os.

Segmental information S e g m e n t a l i n f or m a ti o n is b as e d o n t w o s e g m e n t f or m a ts: t h e pri m ary f or m a t re fl e c ts t h e G ro u p ’s m a n a g e m e n t stru c t ure , w h ere as t h e s e c o n d ary f or m a t is pro d u c t ori e n t e d .

T h e pri m ary s e g m e n t f or m a t – b y m a n a g e m e n t re sp o nsi b ilit y a n d g e o gra p h i c are a – re pre s e n ts t h e G ro u p ’s m a n a g e m e n t stru c t ure . T h e pri n c i p a l a c ti v it y o f t h e G ro u p is t h e f o o d b usi n e ss, w h i c h is m a n a g e d t hro u g h t hre e g e o gra p h i c z o n e s. T h e o t h er a c ti v iti e s, m a i n l y p h ar m a c e u ti c a l pro d u c ts a n d w a t er, are m a n a g e d o n a w orl d w i d e b asis. T h e s e c o n d ary s e g m e n t f or m a t re pre s e n ti n g pro d u c ts is d i v i d e d i n t o fi v e c a t e g ori e s (s e g m e n ts).

S e g m e n t re su lts re pre s e n t t h e c o n tri b u ti o n o f t h e d iff ere n t s e g m e n ts t o c e n tra l o v erh e a ds, re s e arc h a n d d e v e l o p m e n t c osts a n d t h e pro fit o f t h e G ro u p . U n a ll o c a t e d it e m s c o m pris e m a i n l y c orp ora t e e x p e ns e s, re s e arc h a n d d e v e l o p m e n t c osts, a m ortisa ti o n o f g o o d w ill a n d , for t h e pro d u c t s e g m e n ts, re stru c t uri n g a n d o t h er c osts. S p e c ifi c c orp ora t e a n d re s e arc h a n d d e v e l o p m e n t e x p e ns e s are a ll o c a t e d t o t h e c orre sp o n d i n g s e g m e n ts.

S e g m e n t ass e ts c o m pris e pro p ert y , p l a n t a n d e q u i p m e n t , tra d e a n d o t h er re c e i v a b l e s, i n v e n t ori e s a n d pre p a y m e n ts a n d a c cru e d i n c o m e . U n a l l o c a t e d it e m s re pre s e n t m a i n l y c orp ora t e a n d re s e arc h a n d d e v e l o p m e n t ass e ts, i n c l u d i n g g o o d w ill . Li a b iliti e s c o m pris e tra d e a n d o t h er p a y a b l e s, a c cru a ls a n d d e f erre d i n c o m e . E li m i n a ti o ns re pre s e n t i n t er- c o m p a n y b a l a n c e s b e t w e e n t h e d iff ere n t s e g m e n ts.

S e g m e n t ass e ts a n d l i a b i l iti e s b y m a n a g e m e n t re sp o nsi b iliti e s a n d g e o gra p h i c are a re pre s e n t t h e sit u a ti o n a t t h e e n d o f t h e y e ar. A ss e ts b y pro d u c t gro u p re pre s e n t t h e a n n u a l a v era g e as t h is pro v i d e s a b e tt er i n d i c a ti o n o f t h e l e v e l o f i n v e st e d c a p it a l f or m a n a g e m e n t p urp os e s.

V a l u a t i o n m e t h o d s a n d d e f i n i t i o n s

Sales to customers S a l e s t o c ust o m ers re pre s e n t t h e sa l e s o f pro d u c ts a n d s erv i c e s re n d ere d t o t h ird p arti e s, n e t o f g e n era l pri c e re d u c ti o ns a n d sa l e s t a x e s. S a l e s are re c o g n is e d i n t h e i n c o m e st a t e m e n t a t t h e m o m e n t t h e si g n ifi c a n t risks a n d re w ards o f o w n ersh i p o f t h e g o o ds h a v e b e e n tra nsf erre d t o t h e b u y er.

Net financing cost T h is it e m i n c l u d e s t h e i n t ere st e x p e ns e o n b orro w i n g s fro m t h ird p arti e s as w e ll as t h e i n t ere st i n c o m e e arn e d o n f u n ds i n v e st e d o u tsi d e t h e G ro u p . E x c h a n g e d iff ere n c e s o n fi n a n c i a l ass e ts a n d li a b iliti e s a n d t h e re su lts o n i n t ere st h e d g i n g i nstru m e n ts t h a t are re c o g n is e d i n t h e i n c o m e st a t e m e n t are a lso pre s e n t e d i n n e t fi n a n c i n g c ost .

Taxes T h is h e a d i n g i n c l u d e s c urre n t t a x e s o n pro fit a n d o t h er t a x e s su c h as t a x e s o n c a p it a l . A lso i n c l u d e d are a c t u a l or p o t e n ti a l w it h h o l d i n g t a x e s o n c urre n t a n d e x p e c t e d tra nsf ers o f i n c o m e fro m G ro u p c o m p a n i e s a n d t a x a d j ust m e n ts re l a ti n g t o pri or y e ars. In c o m e t a x is re c o g n is e d i n t h e i n c o m e st a t e m e n t , e x c e p t t o t h e e xt e n t t h a t it re l a t e s t o it e m s d ire c tl y t a k e n t o e q u it y , i n w h i c h c as e it is re c o g n is e d i n e q u it y .

D e f erre d t a x a ti o n is t h e t a x a ttri b u t a b l e t o t h e t e m p orary d iff ere n c e s t h a t a p p e ar w h e n t a x a ti o n a u t h oriti e s re c o g n is e a n d m e asure ass e ts a n d li a b iliti e s w it h ru l e s t h a t d iff er fro m t h os e o f t h e c o nso li d a t e d a c c o u n ts.

D e f erre d t a x e s are c a l c u l a t e d u n d er t h e li a b ilit y m e t h o d a t t h e ra t e s o f t a x e x p e c t e d t o pre v a il w h e n t h e t e m p orary d iff ere n c e s re v ers e . A n y c h a n g e s o f t h e t a x ra t e s are re c o g n is e d t o t h e i n c o m e st a t e m e n t . D e f erre d t a x li a b iliti e s are re c o g n is e d o n a ll t a x a b l e t e m p orary d iff ere n c e s e x c l u d i n g n o n-d e d u c ti b l e g o o d w ill . D e f erre d t a x ass e ts are re c o g n is e d o n a ll d e d u c ti b l e t e m p orary d iff ere n c e s pro v i d e d t h a t it is pro b a b l e t h a t f u t ure t a x a b l e i n c o m e w i l l b e a v a i l a b l e .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

Current financial assets C urre n t fi n a n c i a l ass e ts i n c l u d e li q u i d ass e ts a n d re c e i v a b l e s. R e c e i v a b l e s are c l assifi e d u n d er I A S 3 9 as ori g i n a t e d b y t h e e n t erpris e a n d m e asure d a t c ost l e ss a p pro pri a t e b a d d e b t a ll o w a n c e s.

Li q u i d ass e ts e n c o m p ass c ash a t b a n k a n d i n h a n d , c ash e q u i v a l e n ts, m ark e t a b l e s e c uriti e s, o t h er li q u i d f u n ds a n d c urre n t i n v e st m e n ts. C ash e q u i v a l e n ts c o nsist o f b a n k d e p osits a n d fi x e d t er m i n v e st m e n ts w h os e m a t uriti e s are t hre e m o n t hs or l e ss fro m t h e d a t e o f a c q u isiti o n . C urre n t i n v e st m e n ts c o nsist o f b a n k d e p osits a n d fi x e d t er m i n v e st m e n ts w h os e m a t uriti e s are h i g h er t h a n t hre e m o n t hs fro m t h e d a t e o f a c q u isiti o n . Li q u i d ass e ts are g e n era ll y c l assifi e d as a v a il a b l e-f or-sa l e . Li q u i d ass e ts are st a t e d a t f a ir v a l u e w it h a ll u nre a lis e d g a i ns a n d l oss e s re c o g n is e d i n e q u it y u n til t h e d is p osa l o f t h e i n v e st m e n t a n d , a t su c h ti m e , g a i ns a n d l oss e s pre v i o usl y c arri e d t o e q u it y are re c o g n is e d i n t h e i n c o m e st a t e m e n t .

S o m e m ark e t a b l e s e c uriti e s p ortf o li os t h a t are m a n a g e d w it h t h e a i m o f g e n era ti n g sh ort t er m pro fit are c l assifi e d as tra d i n g . T h e y are c arri e d a t f a ir v a l u e a n d a ll t h e ir g a i ns a n d l oss e s, re a lis e d a n d u nre a lis e d , are re c o g n is e d i n t h e i n c o m e st a t e m e n t .

F i n a n c i a l ass e ts t h a t are a c q u ire d i n m ark e t p l a c e s t h a t re q u ire t h e d e li v ery w it h i n a ti m e fra m e e st a b lish e d b y a c o n v e n ti o n are a c c o u n t e d f or i n a c c ord a n c e w it h t h e s e ttl e m e n t d a t e .

F a ir v a l u e is d e t er m i n e d o n t h e b asis o f m ark e t pri c e s a t t h e b a l a n c e sh e e t d a t e f or list e d i nstru m e n ts a n d o n t h e b asis o f d isc o u n t e d c ash fl o w t e c h n i q u e s f or t h e o t h er fi n a n c i a l i nstru m e n ts.

Inventories R a w m a t eri a ls a n d p urc h as e d fi n ish e d g o o ds are v a l u e d a t p urc h as e c ost . W ork i n pro gre ss a n d m a n u f a c t ure d fi n ish e d g o o ds are v a l u e d a t pro d u c ti o n c ost . Pro d u c ti o n c ost i n c l u d e s d ire c t pro d u c ti o n c osts a n d a n a p pro pri a t e pro p orti o n o f pro d u c ti o n o v erh e a ds a n d f a c t ory d e pre c i a ti o n .

M o v e m e n ts i n ra w m a t eri a ls i n v e n t ori e s a n d p urc h as e d fi n ish e d g o o ds are a c c o u n t e d f or usi n g t h e FIF O (first i n , first o u t) m e t h o d . T h e w e i g h t e d a v era g e c ost m e t h o d is us e d f or o t h er i n v e n t ori e s.

A pro v isi o n is e st a b lish e d w h e n t h e n e t re a lisa b l e v a l u e o f a n y i n v e n t ory it e m is l o w er t h a n t h e v a l u e c a l c u l a t e d a b o v e .

Property, plant and equipment Pro p ert y , p l a n t a n d e q u i p m e n t are sh o w n i n t h e b a l a n c e sh e e t a t t h e ir h ist ori c a l c ost . D e pre c i a ti o n is pro v i d e d o n t h e stra i g h t li n e m e t h o d so as t o d e pre c i a t e t h e i n iti a l c ost o v er t h e e sti m a t e d us e f u l li v e s, w h i c h are as f o ll o w s:

B u il d i n g s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5-5 0 y e ars M a c h i n ery a n d e q u i p m e n t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0-1 5 y e ars T o o ls, f urn it ure , i n for m a ti o n t e c h n o l o g y a n d su n dry e q u i p m e n t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-8 y e ars V e h i c l e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 y e ars

F i n a n c i n g c osts i n c urre d d uri n g t h e c o urs e o f c o nstru c ti o n are e x p e ns e d . L a n d is n o t d e pre c i a t e d . Pre m i u m s c a p it a lis e d f or l e as e h o l d l a n d or b u il d i n g s are a m ortis e d o v er t h e l e n g t h o f t h e l e as e .

D e pre c i a ti o n o f pro p ert y , p l a n t a n d e q u i p m e n t is a ll o c a t e d t o t h e a p pro pri a t e h e a d i n g s o f e x p e ns e s b y f u n c ti o n i n t h e i n c o m e st a t e m e n t .

Leased assets A ss e ts a c q u ire d u n d er l o n g t er m fi n a n c e l e as e s are

c a p it a lis e d a n d d e pre c i a t e d i n a c c ord a n c e w it h t h e G ro u p ’s p o li c y o n pro p ert y , p l a n t a n d e q u i p m e n t . T h e asso c i a t e d o b li g a ti o ns are i n c l u d e d i n fi n a n c i a l li a b il iti e s.

R e n t a ls p a y a b l e u n d er o p era ti n g l e as e s are c h arg e d t o t h e i n c o m e st a t e m e n t as i n c urre d .

Non-current financial assets N o n-c urre n t fi n a n c i a l ass e ts i n c l u d e n o t e s re c e i v a b l e s a n d o t h er fi n a n c i a l i nstru m e n ts su c h as i n v e st m e n ts i n c o m p a n i e s w h ere t h e G ro u p e x erc is e s n e it h er m a n a g e m e n t c o n tro l n or a si g n ifi c a n t i n fl u e n c e . N o n i n t ere st-b e ari n g n o t e s re c e i v a b l e are d isc o u n t e d t o t h e ir pre s e n t v a l u e usi n g t h e ra t e a t t h e d a t e o f i n c e p ti o n . M ost n o n-c urre n t fi n a n c i a l ass e ts are c l assifi e d as a v a il a b l e-f or-sa l e a n d m e asure d a t f a ir v a l u e w it h u nre a lis e d g a i ns a n d l oss e s re c o g n is e d i n e q u it y u n til t h e d isp osa l o f t h e fi n a n c i a l ass e t a n d , a t su c h ti m e , g a i ns a n d l oss e s pre v i o usl y c arri e d t o e q u it y are re c o g n is e d t o t h e i n c o m e st a t e m e n t .

N o t e s re c e i v a b l e a n d o t h er d e b t i nstru m e n ts t h e re-sa l e o f w h i c h is pro h i b it e d i n a c c ord a n c e w it h t h e c l a us e s o f t h e ir a gre e m e n ts are c l assifi e d as h e l d-t o- m a t urit y a n d re c o g n is e d a t a m ortis e d c ost l e ss i m p a ir m e n t l oss e s.

I m p a ir m e n t l oss e s are re c o g n is e d w h ere t h ere is o b j e c ti v e e v i d e n c e o f u n c o ll e c t a b ilit y .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

Good w ill A s fro m 1st J a n u ary 1 9 9 5 , t h e e x c e ss o f t h e c ost o f a n a c q u isiti o n o v er t h e f a ir v a l u e o f t h e n e t i d e n tifi a b l e ass e ts is c a p it a lis e d . Pre v i o usl y t h e s e a m o u n ts h a d b e e n w ritt e n o ff t hro u g h e q u it y . T h is v a l u e a lso i n c l u d e s t h os e i n t a n g i b l e ass e ts a c q u ire d t h a t are n o t s e p ara t e l y i d e n tifi a b l e , i n p arti c u l ar tra d e m arks a n d i n d ustri a l pro p ert y ri g h ts.

G a i ns o n t h e d isp osa l o f b usi n e ss e s a c q u ire d pri or t o 1st J a n u ary 1 9 9 5 are t a k e n t o e q u it y t o t h e e xt e n t o f t h e g o o d w ill pre v i o usl y w ritt e n o ff . A n y e x c e ss is t a k e n t o t h e i n c o m e st a t e m e n t .

G o o d w ill is a m ortis e d o n a stra i g h t li n e b asis o v er its a n ti c i p a t e d us e f u l lif e . T h e m a j orit y o f g o o d w ill is a m ortis e d o v er 2 0 y e ars. W h ere a p eri o d i n e x c e ss o f 2 0 y e ars is us e d t h is is s e p ara t e l y d isc l os e d f or e a c h e l e m e n t o f g o o d w ill t o g e t h er w it h t h e pri n c i p l e f a c t ors d e t er m i n i n g t h a t us e f u l lif e . T h e re c o v era b l e a m o u n t , as w e ll as a m ortisa ti o n p eri o d a n d a m ortisa ti o n m e t h o d are re v i e w e d a n n u a ll y .

G o o d w ill is usu a ll y re c ord e d i n t h e c urre n c y o f t h e a c q u iri n g e n tit y .

Intangible assets T h is h e a d i n g i n c l u d e s s e p ara t e l y p urc h as e d i n t a n g i b l e

ass e ts su c h as m a n a g e m e n t i n f or m a ti o n syst e m s, i n t e ll e c t u a l pro p erty ri g h ts a n d ri g h ts t o c arry o n a n a c ti v ity (i . e . e x c l usi v e ri g h ts t o s e ll pro d u c ts or t o p erfor m a su p p l y a c ti v ity). In t a n g i b l e ass e ts are d e pre c i a t e d o n a stra i g h t li n e b asis, m a n a g e m e n t i n f or m a ti o n syst e m s o v er a p eri o d ra n g i n g b e t w e e n t hre e t o fi v e y e ars, o t h er i n t a n g i b l e ass e ts o v er fi v e t o t w e n t y y e ars. W h ere a p eri o d i n e x c e ss o f t w e n t y y e ars is us e d , t h is is s e p ara t e l y d isc l os e d f or e a c h e l e m e n t o f i n t a n g i b l e ass e t t o g e t h er w it h t h e pri n c i p l e f a c t ors d e t er m i n i n g t h a t us e f u l lif e . T h e re c o v era b l e a m o u n t , as w e ll as d e pre c i a ti o n p eri o d a n d d e pre c i a ti o n m e t h o d are re v i e w e d a n n u a ll y . T h e d e pre c i a ti o n is a ll o c a t e d t o t h e re l e v a n t h e a d i n g s i n t h e i n c o m e st a t e m e n t .

In t ern a ll y g e n era t e d i n t a n g i b l e ass e ts are re c o g n is e d o n l y u n d er rare c irc u m st a n c e s, pro v i d e d t h a t a g i v e n pro j e c t a n d its c ost are w e ll i d e n tifi e d . T h e y c o nsist m a i n l y o f m a n a g e m e n t i n f or m a ti o n syst e m s.

Research and develop ment R e s e arc h a n d d e v e l o p m e n t c osts are c h arg e d t o t h e i n c o m e st a t e m e n t i n t h e y e ar i n w h i c h t h e y are i n c urre d .

D e v e l o p m e n t c osts re l a t e d t o n e w pro d u c ts are n o t c a p it a lis e d b e c a us e t h e a v a il a b ilit y o f f u t ure e c o n o m i c b e n e fits is e v i d e n t o n l y o n c e t h e pro d u c ts are o n t h e m ark e t p l a c e .

Im pairment of assets C o nsi d era ti o n is g i v e n a t e a c h b a l a n c e sh e e t d a t e t o d e t er m i n e w h e t h er t h ere is a n y i n d i c a ti o n o f i m p a ir m e n t o f t h e c arry i n g a m o u n ts o f t h e G ro u p's ass e ts. If a n y i n d i c a ti o n e x ists, a n ass e t's re c o v era b l e a m o u n t is e sti m a t e d . A n i m p a ir m e n t l oss is re c o g n is e d w h e n e v er t h e c arry i n g a m o u n t o f a n ass e t e x c e e ds its re c o v era b l e a m o u n t . T h e re c o v era b l e a m o u n t is t h e gre a t er o f t h e n e t s e lli n g pri c e a n d v a l u e i n us e . In ass e ssi n g v a l u e i n us e , t h e e sti m a t e d f u t ure c ash fl o w s are d isc o u n t e d t o t h e ir pre s e n t v a l u e b as e d o n t h e a v era g e b orro w i n g ra t e o f t h e c o u n try w h ere t h e ass e ts are l o c a t e d , a d j ust e d f or risks sp e c ifi c t o t h e ass e t .

Current and non-current liabilities In t ere st-b e ari n g c urre n t a n d n o n-c urre n t li a b iliti e s are st a t e d a t a m ortis e d c ost w it h a n y d iff ere n c e b e t w e e n t h e c ost a n d re d e m p ti o n v a l u e b e i n g re c o g n is e d i n t h e i n c o m e st a t e m e n t o v er t h e p eri o d o f t h e b orro w i n g s o n a n e ff e c ti v e i n t ere st ra t e b asis.

C urre n t l i a b i l iti e s i n c l u d e c urre n t or re n e w a b l e l i a b i l iti e s d u e w it h i n a m a x i m u m p eri o d o f o n e y e ar.

Provisions T h e s e i n c l u d e li a b iliti e s o f u n c ert a i n ti m i n g or a m o u n ts t h a t aris e fro m re stru c t uri n g , e n v iro n m e n t , liti g a ti o n a n d o t h er risks. Pro v isi o ns are re c o g n is e d w h e n t h ere e x ists a l e g a l or c o nstru c ti v e o b li g a ti o n st e m m i n g fro m a p ast e v e n t a n d w h e n t h e f u t ure c ash o u tfl o w s c a n b e re li a b l y e sti m a t e d . O b li g a ti o ns arisi n g fro m re stru c t uri n g p l a ns are re c o g n is e d o n l y u p o n t h e ir a n n o u n c e m e n t .

Em ployee benefits

Post-e m p loy m e n t b e n e fits T h e li a b iliti e s o f t h e G ro u p arisi n g fro m d e fi n e d b e n e fit

o b li g a ti o ns, a n d t h e re l a t e d c urre n t s erv i c e c ost , are d e t er m i n e d usi n g t h e pro j e c t e d u n it cre d it m e t h o d . V a l u a ti o ns are c arri e d o u t a n n u a ll y f or t h e l arg e st p l a ns a n d o n a re g u l ar b asis f or o t h er p l a ns. A c t u ari a l a d v i c e is pro v i d e d b o t h b y e xt ern a l c o nsu lt a n ts a n d b y a c t u ari e s e m p l o y e d b y t h e G ro u p . T h e a c t u ari a l assu m p ti o ns us e d t o c a l c u l a t e t h e b e n e fit o b li g a ti o ns v ary a c c ord i n g t o t h e e c o n o m i c c o n d iti o ns o f t h e c o u n try i n w h i c h t h e p l a n is l o c a t e d .

S u c h p l a ns are e it h er e xt ern a ll y f u n d e d , w it h t h e ass e ts o f t h e sc h e m e s h e l d s e p ara t e l y fro m t h os e o f t h e G ro u p i n i n d e p e n d e n tl y a d m i n ist ere d f u n d s, or u n f u n d e d w it h t h e re l a t e d l i a b i l iti e s c arri e d i n t h e b a l a n c e sh e e t .

F or t h e f u n d e d d e fi n e d b e n e fit p l a ns, t h e d e fi c it or e x c e ss o f t h e f a ir v a l u e o f p l a n ass e ts o v er t h e pre s e n t v a l u e o f t h e d e fi n e d b e n e fit o b li g a ti o n is re c o g n is e d as a li a b ilit y or a n ass e t i n t h e b a l a n c e sh e e t , t a k i n g i n t o a c c o u n t a n y u nre c o g n is e d a c t u ari a l g a i ns or l oss e s a n d p ast s erv i c e c ost . H o w e v er, a n e x c e ss o f ass e ts is re c o g n is e d o n l y t o t h e e xt e n t t h a t it re pre s e n ts a f u t ure e c o n o m i c b e n e fit w h i c h is a c t u a l l y a v a il a b l e t o t h e G ro u p , f or e x a m p l e i n t h e f or m o f re f u n ds fro m t h e p l a n or re d u c ti o ns i n f u t ure c o n tri b u ti o ns t o t h e p l a n . W h e n su c h a n e x c e ss is n o t a v a il a b l e or d o e s n o t re pre s e n t a f u t ure e c o n o m i c b e n e fit , it is n o t re c o g n is e d b u t is d isc l os e d i n t h e n o t e s.

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

A c t u ari a l g a i ns a n d l oss e s aris e m a i n l y fro m c h a n g e s i n a c t u ari a l assu m p ti o ns a n d d iff ere n c e s b e t w e e n a c t u ari a l assu m p ti o ns a n d w h a t h as a c t u a ll y o c c urre d . T h e y are re c o g n is e d i n t h e i n c o m e st a t e m e n t , o v er t h e re m a i n i n g w ork i n g li v e s o f t h e e m p l o y e e s, o n l y t o t h e e xt e n t t h a t t h e ir n e t c u m u l a ti v e a m o u n t e x c e e d s 1 0 % o f t h e gre a t er o f t h e pre s e n t v a l u e o f t h e o b li g a ti o n or o f t h e f a ir v a l u e o f p l a n ass e ts. U nre c o g n is e d a c t u ari a l g a i ns a n d l oss e s are re fl e c t e d i n t h e b a l a n c e sh e e t .

F or d e fi n e d b e n e fit p l a ns t h e a c t u ari a l c ost c h arg e d t o t h e i n c o m e st a t e m e n t c o nsists o f c urre n t s erv i c e c ost , i n t ere st c ost , e x p e c t e d re t urn o n p l a n ass e ts a n d p ast s erv i c e c ost as w e ll as a c t u ari a l g a i ns or l oss e s t o t h e e xt e n t t h a t t h e y are re c o g n is e d . T h e p ast s erv i c e c ost f or t h e e n h a n c e m e n t o f p e nsi o n b e n e fits is a c c o u n t e d f or w h e n su c h b e n e fits v e st or b e c o m e a c o nstru c ti v e o b li g a ti o n .

S o m e b e n e fits are a lso pro v i d e d b y d e fi n e d c o n tri b u ti o n p l a ns; c o n tri b u ti o ns t o su c h p l a ns are c h arg e d t o t h e i n c o m e st a t e m e n t as i n c urre d .

P e nsio ns a n d re tire m e n t b e n e fits T h e m a j orit y o f G ro u p e m p l o y e e s are e li g i b l e f or re tire m e n t b e n e fits u n d er d e fi n e d b e n e fit sc h e m e s b as e d o n p e nsi o n a b l e re m u n era ti o n a n d l e n g t h o f s erv i c e , c o nsisti n g m a i n l y o f fi n a l sa l ary p l a ns.

Post re tire m e n t h e a lt h c are a n d ot h er e m p loy e e b e n e fits G ro u p c o m p a n i e s, pri n c i p a ll y i n N ort h A m eri c a , m a i n t a i n h e a lt h c are b e n e fit p l a ns w h i c h c o v er e li g i b l e re tire d e m p l o y e e s.

T h e o b li g a ti o ns f or o t h er e m p l o y e e b e n e fits c o nsist m a i n l y o f e n d o f s erv i c e i n d e m n iti e s, w h i c h d o n o t h a v e t h e c h ara c t er o f p e nsi o ns.

Equity com pensation plans

M e m b ers of t h e Grou p's M a n a g e m e n t M e m b ers o f t h e G ro u p's M a n a g e m e n t are e n titl e d t o p arti c i p a t e e a c h y e ar i n a sh are o p ti o n p l a n w it h o u t p a y m e n t . T h e b e n e fits c o nsist o f t h e ri g h t t o b u y N e stl é sh are s a t a pre- d e t er m i n e d fi x e d pri c e .

A s fro m 1st J a n u ary 1 9 9 9 , t h is p l a n h as a ro lli n g s e v e n y e ar d ura ti o n a n d t h e ri g h ts are v e st e d a ft er t hre e y e ars (pre v i o usl y fi v e y e ars a n d t w o y e ars re sp e c ti v e l y).

In ord er t o h e d g e t h e re l a t e d e x p osure , t h e G ro u p b u ys – or tra nsf ers fro m e x isti n g tre asury sh are s p ortfo li os - t h e n u m b er o f sh are s n e c e ssary t o sa tisfy a ll p o t e n ti a l o u tst a n d i n g o b li g a ti o ns u n d er t h e p l a n w h e n t h e b e n e fit is a w ard e d a n d h o l ds t h e m u n til t h e m a t urit y o f t h e p l a n or t h e e x erc is e o f t h e ri g h ts. N o a d d iti o n a l sh are s are issu e d as a re su lt o f t h e e q u it y c o m p e nsa ti o n p l a n . W h e n t h e o p ti o ns are e x erc is e d , e q u it y is i n cre as e d b y t h e a m o u n t o f t h e pro c e e ds re c e i v e d .

T h e G ro u p is n o t e x p os e d t o a n y a d d iti o n a l c ost a n d t h ere is n o d il u ti o n o f t h e ri g h ts o f t h e sh are h o l d ers.

B o ard of D ire c tors T h e a n n u a l re m u n era ti o n o f t h e M e m b ers o f t h e B o ard o f D ire c t ors is p artl y p a i d i n k i n d t hro u g h t h e d e li v ery t o t h e m o f N e stl é sh are s. T h e s e sh are s are su b j e c t t o a 2-y e ar b l o c k i n g p eri o d .

T h e G ro u p is n o t e x p os e d t o a n y a d d iti o n a l c ost a n d t h ere is n o d il u ti o n o f t h e ri g h ts o f t h e sh are h o l d ers.

Dividends In a c c ord a n c e w it h S w iss l a w a n d t h e C o m p a n y ’s A rti c l e s o f A sso c i a ti o n , d i v i d e n ds are tre a t e d as a n a p pro pri a ti o n o f pro fit i n t h e y e ar i n w h i c h t h e y are ra tifi e d a t t h e A n n u a l G e n era l M e e ti n g a n d su bs e q u e n tl y p a i d , ra t h er t h a n as a n a p pro pri a ti o n o f t h e pro fit i n t h e y e ar t o w h i c h t h e y re l a t e .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

Contingent assets and liabilities C o n ti n g e n t ass e ts a n d li a b iliti e s aris e fro m c o n d iti o ns or sit u a ti o ns, t h e o u t c o m e o f w h i c h d e p e n ds o n f u t ure e v e n ts. T h e y are d isc l os e d i n t h e n o t e s t o t h e a c c o u n ts.

Events occurring after the balance sheet date T h e v a l u e s o f ass e ts a n d l i a b i l iti e s a t t h e b a l a n c e sh e e t d a t e are a d j ust e d if t h ere is e v i d e n c e t h a t su b s e q u e n t a d j usti n g e v e n ts w arra n t a m o d ifi c a ti o n o f t h e s e v a l u e s.

T h e s e a d j ust m e n ts are m a d e u p t o t h e d a t e o f a p pro v a l o f t h e a c c o u n ts b y t h e B o ard o f D ire c t ors.

O t h er n o n-a d j usti n g e v e n ts are d isc l os e d i n t h e n o t e s.

C h a n g e s i n a c c o u n t i n g p o l i c i e s a n d m o d i f i c a t i o n o f t h e s c o p e o f c o n s o l i d a t i o n

Changes in accounting policies T h e G ro u p h as i m p l e m e n t e d t h e f o ll o w i n g st a n d ard as fro m 1st J a n u ary 2 0 0 1: • I A S 3 9 F i n a n c i a l Instru m e n ts: R e c o g n iti o n a n d

M e asure m e n t . T h e i m p a c t o f t h e i m p l e m e n t a ti o n o f t h is st a n d ard is d isc l os e d o n t h e c o nso li d a t e d st a t e m e n t o f c h a n g e s i n e q u it y .

M odification of the scope of consolidation T h e sc o p e o f c o nso li d a ti o n h as b e e n a ff e c t e d b y t h e a c q u isiti o ns a n d d isp osa ls m a d e i n 2 0 0 1 . T h e pri n c i p a l b usi n e ss e s are d e t a il e d b e l o w .

Fully consolidated N e w l y i n c l u d e d: R a lst o n P uri n a , U S A , p e t c are , 1 0 0 % (D e c e m b er) Ic e C re a m P art n ers, U S A , a c q u isiti o n o f t h e 5 0 % Pillsb ury

st a k e (D e c e m b er); t h is b usi n e ss w as pro p orti o n a ll y c o nso li d a t e d u n til D e c e m b er 2 0 0 1

A q u a c o o l , U S A , U K a n d F ra n c e , h o m e a n d o ffi c e w a t er d e li v ery b usi n e ss, 1 0 0 % (D e c e m b er)

D isp osa ls: D avid & Sons, U S A , sn a cks (D e c e m b er) G e br. Ju n g , G erm a ny , b ak ery in gre di e n ts (Ju n e)

Equity accounted In cre as e i n p arti c i p a ti o n: D re y er's, U S A , i c e cre a m , fro m 2 1 . 8 % t o 2 4 % ( A u g ust)

D isp osa l: M i n era l bru n n e n Ü b erk i n g e n-T e i n a c h , G er m a n y , m i n era l

w a t er ( A u g ust)

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

N o t e s

1. Segmental information

By m anage m ent responsibility and geographic area In m illions of C H F 2001 2000 2001 2000

Zon e E uro p e 26'742 26'285 2'783 2'753 Zon e A m eric as 26'598 25'524 3'531 3'503 Zo n e A sia , O c e a nia a n d A fric a 15'458 15'710 2'598 2'673 O t h er a c tiviti es (a) 15'900 13'903 2'149 2'015

84'698 81'422 11'061 10'944 U n allo c a t e d it e m s (b) (1'843) (1'758) Tra din g profit 9'218 9'186

Sal es Results

T h e a n a l ysis o f sa l e s b y g e o gra p h i c are a is st a t e d b y c ust o m er d e sti n a ti o n . In t er-s e g m e n t sa l e s are n o t si g n ifi c a n t .

In m illions of C H F 2001 2000 2001 2000

Zon e E uro p e 12'508 12'913 5'384 5'279 Zon e A m eric as 10'991 10'503 3'675 3'460 Zo n e A sia , O c e a nia a n d A fric a 6'895 6'897 2'453 2'591 O t h er a c tiviti es (a) 8'749 7'860 3'216 2'896 39'143 38'173 14'728 14'226 U n allo c a t e d it e m s (c) 30'419 10'635 1'160 386 E li m in a tio ns (1'119) (849) (1'119) (849) 68'443 47'959 14'769 13'763

A sse ts Lia b iliti es

In m illions of C H F 2001 2000 2001 2000

Zon e E uro p e 954 946 806 890 Zon e A m eric as 747 766 695 767 Zo n e A sia , O c e a nia a n d A fric a 626 550 438 481 O t h er a c tiviti es (a) 1'169 949 558 519 3'496 3'211 2'497 2'657 U n allo c a t e d it e m s (d) 115 94 84 80 3'611 3'305 2'581 2'737

C a pit al e x p e n d it ure

D e pre cia tion o f pro p erty, p la n t a n d e q ui p m e n t

(b) M a i n l y c orp ora t e e x p e ns e s, re s e arc h a n d d e v e l o p m e n t c osts as w e ll as a m ortisati o n of g o o d w ill .

(c) C orp ora t e a n d re s e arc h a n d d e v e l o p m e n t ass e ts/li a b iliti e s, i n c l u d i n g g o o d w ill p l us, i n 2 0 0 1 , asse ts/li a b iliti es of R a lsto n P uri n a .

(d) C orp ora t e a n d re s e arc h a n d d e v e l o p m e n t fi x e d ass e ts.

(a) M a i n l y P h ar m a c e u ti c a l pro d u c ts a n d W a t er, m a n a g e d o n a w orl d w i d e b asis.

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

By product group

In m illions of C H F 2001 2000 2001 2000

B e v era g es 24'023 23'044 4'259 4'318 M ilk pro d u c ts, n u tritio n a n d ic e cre a m 22'953 21'974 2'572 2'620 Pre p are d dish es, c ookin g aids a n d p e t c are 21'324 20'632 2'026 1'948 C h o c ola t e , c o n f e c tio n ery a n d bisc uits 11'244 10'974 1'234 1'166 Ph arm a c e u tic al pro d u c ts 5'154 4'798 1'255 1'212 84'698 81'422 11'346 11'264 U n allo c a t e d it e m s (a) (2'128) (2'078) Tra din g profit 9'218 9'186

Sal es Results

I n mi l l i o n s o f CHF 2001 (b) 2000

B e v era g es 11'086 10'654 M ilk pro d u c ts, n u tritio n a n d ic e cre a m 11'127 11'215 Pre p are d dish es, c ookin g aids a n d p e t c are 8'620 8'980 C h o c ola t e , c o n f e c tio n ery a n d bisc uits 6'347 6'685 Ph arm a c e u tic al pro d u c ts 2'859 2'589 40'039 40'123

A sse ts

In m illions of C H F 2001 2000

B e v era g es 1'062 936 M ilk pro d u c ts, n u tritio n a n d ic e cre a m 573 530 Pre p are d dish es, c ookin g aids a n d p e t c are 460 390 C h o c ola t e , c o n f e c tio n ery a n d bisc uits 249 250 Ph arm a c e u tic al pro d u c ts 99 113 2'443 2'219 A d m inistra tio n , distrib u tio n , rese arc h a n d d e v e lo p m e n t 1'168 1'086 3'611 3'305

C a pit al e x p e n d it ure

(a) M a i n l y c orp ora t e e x p e ns e s, re s e arc h a n d d e v e l o p m e n t c osts, a m ortisa ti o n of g o o d w ill as w e ll as re stru c t uri n g c osts.

(b) W it h o u t asse ts of R a lst o n P uri n a .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

2. Net financing cost

In m illions of C H F 2001 2000

In t erest in c o m e 890 614 In t erest e xp e nse (1'297) (1'360)

(407) (746)

In t erest in c o m e in clu d es C H F 41 m illio n (2000: C H F 31 m illio n) o f g ains arisin g o n se c uriti es h e ld for tra din g p urp oses.

3. Net non-trading items

In m illions of C H F 2001 2000

N on-tradin g expenses Loss o n disp osal o f pro p erty, pla n t a n d e q uip m e n t (31) (19) Loss on disp osal of a c tiviti es (25) (32) Provisions for liti g a tion a n d o t h er risks (59) (205) Im p airm e n t o f pro p erty , pla n t a n d e q uip m e n t (222) (223) Im p airm e n t of g oo d w ill (184) (230) O t h er (235) (450)

(756) (1'159)

N on-tradin g inco m e Pro fit o n disp osal o f pro p erty, pla n t a n d e q uip m e n t 26 57 Profit on disp osal of a c tiviti es 343 546 Re l e ase of provisions for liti g a tion a n d o t h er risks 34 73 O t h er 309 384

712 1'060

N e t n o n-tra din g it e m s (44) (99)

4. Expenses by nature Th e follo w in g it e m s are allo c a t e d t o t h e a p pro pria t e h e a din gs o f e xp e nses by f u n c tio n in t h e in c o m e st a t e m e n t:

In m illions of C H F 2001 2000

D e pre cia tio n o f pro p erty , pla n t a n d e q uip m e n t 2'581 2'737 Salari es a n d w e lfare e xp e nses 13'081 12'774 A u dit ors’ re m u n era tio n 28 26 O p era tin g l e ase c h arg es 450 362 E xc h a n g e diff ere n c es 61 (55)

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

5. Taxes

In m illions of C H F 2001 2000

C o m ponents of tax expense C urre n t t ax 2'167 2'395 D e f erre d t ax (100) (44) Tra nsf ers (fro m)/t o u nre c o g nise d t ax asse ts 15 2 C h a n g es in d e f erre d t ax ra t es 12 (13) Prior y e ars’ t ax (79) 18 Tax es o n e q uity it e m s (3) — O t h er t ax (a) 417 403

2'429 2'761

D eferred tax by types Pro p erty , pla n t a n d e q uip m e n t 9 20 G oo d w ill a n d in t a n g ibl e asse ts 38 33 E m ploy e e b e n e fits lia biliti es (51) (68) Inv e n t ori es, re c e iva bl es, p aya bl es a n d provisio ns (126) (148) U n use d t ax losses a n d t ax cre dits (56) 44 O t h er 86 75

(100) (44)

Reconciliation of tax expense Tax a t t h e t h e ore tic al d o m estic ra t es a p plic a bl e t o pro fits o f t axa bl e e n titi es in t h e c o u n tri es c o n c ern e d 2'235 2'390 Tax e ff e c t o n n o n-d e d u c tibl e a m ortisa tio n o f g oo d w ill 183 165 Tax e f f e c t o n n o n-d e d u c tibl e or n o n-t axa bl e it e m s (299) (168) Tra nsf ers (fro m)/t o u nre c o g nise d t ax asse ts 15 2 D if f ere n c e in t ax ra t es (43) (49) O t h er t ax (a) 338 421

2'429 2'761

6. Share of results of associates

In m illions of C H F 2001 2000

Sh are of profit b e fore t ax es 763 605 Less sh are of t ax es (228) (210) Sh are of profit a ft er t ax es 535 395

7. Earnings per share

2001 2000 (b)

Basic earnin gs per share in C H F 17.25 14 . 91 N e t pro fit p er in c o m e st a t e m e n t (in m illio ns o f C H F) 6'681 5'763 W e i g h t e d av era g e n u m b er o f sh ares o u tst a n din g 387'369'846 386'527'830

F ully diluted earnin gs per share in C H F 17.14 14 . 78 Th e ore tic al n e t pro fit assu m in g t h e e x ercise o f all o u tst a n din g o p tio ns a n d sal e o f all tre asury sh ares (in m illio ns o f C H F) 6'918 5'963 N u m b er o f sh ares 403'520'000 403'520'000

(a) In c l u d e s w it h h o l d i n g t a x l e v i e d o n tra nsf er of i n c o m e .

(b) R e st a t e d fo ll o w i n g sh are sp lit.

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

8. Liquid assets

In m illions of C H F 2 0 0 1 2000

C ash and cash eq uivalents C ash a t b a nk a n d in h a n d 2 ' 0 9 4 1'778 C ash e q uival e n ts 5 ' 5 2 3 3'673

7 ' 6 1 7 5'451

O ther liq uid assets C urre n t inv est m e n ts 1 0 6 326 M ark e t a bl e se c uriti es a n d o t h er 8 ' 3 1 9 4'354

8 ' 4 2 5 4'680

Liq uid asse ts 1 6 ' 0 4 2 10'131

Li q u i d ass e ts are m a i n l y d e n o m i n a t e d in follo w in g c urre n ci es: In m illions of C H F 2001 2000

U S D 7'028 3'307 E U R 2'898 2'779 C H F 4'471 2'756 O t h er 1'645 1'289

16'042 10'131

In t ere st ra t e s are as fo ll o w s: 2001 2000

on U S D 3.2% 6 . 7 % on E U R 3.9% 4 . 8 % on C H F 2.8% 2 . 8 %

A ll li q u i d ass e ts h a v e m a t uriti e s o f l e ss t h a n o n e y e ar.

Li q u i d ass e ts are c l assifi e d as f o ll o w s: In m illions of C H F 2001 2000

(a) A vaila bl e-for-sal e 15'382 Tra d in g 660

16'042

9. Trade and other receivables

In m illions of C H F 2001 2000

Tra d e re c e iva bl es 11'011 10'361 O t h er re c e iva bl es 3'063 2'324

14'074 12'685

A ft er d e d u c tion of allo w a n c es for d ou b t ful re c e iva bl es of 514 515

A m o u n ts in clu d e d a b ov e w hic h are d u e a f t er m ore t h a n o n e y e ar 37 85

(a) In for m a ti o n n ot a v a il a b l e .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

10. Inventories

In m illions of C H F 2001 2000

Ra w m a t erials, w ork in pro gress a n d su n dry su p pli es 2'965 2'806 F inish e d g oo ds 4'909 4'556 Provisions (183) (194)

7'691 7'168

In v e n t ori e s a m o u n ti n g t o C H F 7 4 m illi o n (2 0 0 0: C H F 7 3 m illi o n) are p l e d g e d as s e c urit y f or fi n a n c i a l li a b iliti e s.

11. Derivative assets

In m illions of C H F

F air valu es

C o n tra c t u al or n o tio n al

a m o u n ts F air valu es

C o n tra c t u al or n o tio n al

a m o u n ts

F air valu e h e d g es C urre n cy for w ards, fu t ures a n d s w a ps 41 2'256 175 8'100 In t erest ra t e s w a ps 34 677 80 1'852 In t erest ra t e a n d c urre n cy s w a ps 293 2'548 157 1'972

C ash flo w s h e d g es C urre n cy for w ards, fu t ures a n d s w a ps 70 926 31 921 C urre n cy o p tio ns 1 40 2 192 In t erest ra t e s w a ps 11 644 — — In t erest ra t e a n d c urre n cy s w a ps 3 294 — — In t erest for w ards a n d fu t ures — — 1 45 In t erest o p tio ns 1 37 — — C o m m o dity fu t ures 47 286 3 126 C o m m o dity o p tions 3 66 — —

H e d g es o f t h e n e t inv est m e n t in a fore i g n e n tity (lo a ns) 33 172 — —

Tra d in g C urre n cy d eriva tiv es 28 642 5 2'001 In t erest d eriva tiv es 42 2'246 — — C o m m o dity d eriva tiv es 2 64 — —

609 10'898 454 15'209

2001 2000 (a)

D eriva tiv e asse ts are d e n o m in a t e d in t h e follo w in g c urre n ci es: In m illions of C H F 2001 2000

(b) U S D 162 E U R 56 G BP 99 JPY 88 A U D 92 O t h er 112

609

(a) 2 0 0 0 fi g ure s are n ot re st a t e d i n a c c ord a n c e w it h I A S 3 9 . F a ir v a l u e h e d g es w ere g e n era ll y c arri e d to t h e b a l a n c e sh e e t w h ere as c ash fl o w h e d g e s w ere d isc l os e d off b a l a n c e sh e e t .

(b) N ot a v a il a b l e .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

D eriva tiv e asse ts re la t e d t o c ash flo w h e d g es h av e t h e follo w in g m a t uriti es: In m illions of C H F 2001 2000

(a) W it hin o n e y e ar 66 In t h e se c o n d y e ar 9 In t h e t hird t o t h e fif t h y e ar in clusiv e 56 A f t er t h e fif t h y e ar 5

136

O t h er d eriva tiv e asse ts h av e t h e follo w in g m a t uriti es: In m illions of C H F 2001 2000

(a) W it hin o n e y e ar 104 In t h e se c o n d y e ar 91 In t h e t hird t o t h e fif t h y e ar in clusiv e 275 A f t er t h e fif t h y e ar 3

473

12. Property, plant and equip ment

In m illions of C H F 2001 2000

La n d a n d b uildin gs

M a c hin ery a n d

e q uip m e n t

Tools, f urnit ure

a n d o t h er e q uip m e n t V e hicl es To t al To t al

Gross value A t 1st Ja n u ary 11'977 24'261 6'471 810 43'519 44'014

C urre n cy re tra nsla tio n a n d in fla tio n a d just m e n t (406) (899) (241) (33) (1'579) (1'346) E xp e n dit ure 754 1'913 826 118 3'611 3'305 D isp osals (248) (940) (474) (127) (1'789) (1'962) M o dific a tion of t h e sc o p e of consolid a tion 413 787 84 47 1'331 (492) A t 31st D e c e m b er 12'490 25'122 6'666 815 45'093 43'519

A ccu m ulated depreciation A t 1st Ja n u ary (4'292) (15'558) (4'503) (541) (24'894) (24'796)

C urre n cy re tra nsla tio n a n d in fla tio n a d just m e n t 173 642 184 26 1'025 885 D e pre cia tio n (354) (1'449) (683) (95) (2'581) (2'737) Im p airm e n t (94) (120) (8) — (222) (223) D isp osals 77 835 445 108 1'465 1'556 M o dific a tion of t h e sc o p e of consolid a tion (10) 43 3 (24) 12 421 A t 31st D e c e m b er (4'500) (15'607) (4'562) (526) (25'195) (24'894)

N e t a t 31st D e c e m b er 7'990 9'515 2'104 289 19'898 18'625

A t 3 1st D e c e m b er 2 0 0 1 , pro p ert y , p l a n t a n d e q u i p m e n t i n c l u d e C H F 2 9 7 m illi o n (2 0 0 0: C H F 1 5 8 m illi o n) o f ass e ts u n d er c o nstru c ti o n . N e t pro p ert y , p l a n t a n d e q u i p m e n t h e l d u n d er fi n a n c e l e as e s a t 3 1st D e c e m b er 2 0 0 1 a m o u n t t o C H F 3 1 3 m illi o n (2 0 0 0: C H F 2 5 5 m illi o n). N e t pro p ert y , p l a n t a n d e q u i p m e n t o f C H F 1 2 0 m illi o n (2 0 0 0: C H F 1 4 7 m illi o n) are p l e d g e d as s e c urit y f or fi n a n c i a l li a b iliti e s. T h e fire risks, re aso n a b l y e sti m a t e d , are i nsure d i n a c c ord a n c e w it h d o m e sti c re q u ire m e n ts.

(a) N ot a v a il a b l e .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

13. Investments in associates T h is it e m pri m aril y i n c l u d e s t h e G ro u p's i n d ire c t (2 6 . 3 %) p arti c i p a ti o n i n t h e e q u it y o f L ’ O ré a l , P aris f or C H F 2 1 3 6 m illi o n (2 0 0 0: C H F 1 9 8 6 m illi o n). Its m ark e t v a l u e a t 3 1st D e c e m b er 2 0 0 1 a m o u n ts t o C H F 2 1 2 7 5 m illi o n (2 0 0 0: C H F 2 4 6 8 9 m illi o n).

14. Non-current financial assets

In m illions of C H F 2001 2000 (a)

A vaila bl e-for-sal e 2'642 H e ld-t o-m a t urity 243

2'885 2'386

N o n-c urre n t fi n a n c i a l ass e ts are d e n o m i n a t e d i n t h e f o ll o w i n g c urre n c i e s: In m illions of C H F 2001 2000

(a) U S D 2'312 E U R 80 C H F 355 O t h er 138

2'885 2'386

N o n-c urre n t fi n a n c i a l ass e ts h a v e t h e f o ll o w i n g m a t uriti e s: In m illions of C H F 2001 2000

(a) In t h e se c o n d y e ar 353 In t h e t hird t o t h e fif t h y e ar in clusiv e 193 A f t er t h e fif t h y e ar 862 E q uity instru m e n ts 1'477

2'885 2'386

15. Good w ill

In m illions of C H F 2001 2000

Gross value A t 1st Ja n u ary 9'674 6'472

C urre n cy re tra nsla tio n (73) (126) G oo d w ill fro m a c q uisitions 18'193 3'395 D isp osals (116) — O t h er (45) (67) A t 31st D e c e m b er 27'633 9'674

A ccu m ulated a m ortisation A t 1st Ja n u ary (1'772) (1'214)

C urre n cy re tra nsla tio n 25 19 A m ortisa tion (494) (414) Im p airm e n t (184) (230) O t h er 45 67 A t 31st D e c e m b er (2'380) (1'772)

N e t a t 31st D e c e m b er 25'253 7'902

(a) In for m a ti o n n ot a v a il a b l e .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

16. Intangible assets

In m illions of C H F 2001 2000

In t e ll e c t u al pro p erty

ri g h ts

O p era tin g ri g h ts a n d

ot h ers

M ana g e- m e nt

in form a tion syst e m s To t al To t al

Gross value A t 1st Ja n u ary 107 809 389 1'305 1'066

C urre n cy re tra nsla tio n 5 — (1) 4 (6) E xp e n dit ure 95 7 186 288 188 D isp osals (7) (54) (11) (72) (2) M o dific a tion of t h e sc o p e of c onsolid a tion (12) 2 1 (9) 59 O t h er 195 (160) 4 39 — A t 31st D e c e m b er 383 604 568 1'555 1'305

A ccu m ulated depreciation A t 1st Ja n u ary (20) (259) (210) (489) (324)

C urre n cy re tra nsla tio n (1) (4) 2 (3) (17) D e pre cia tio n (23) (63) (64) (150) (179) D isp osals 1 13 8 22 — M o dific a tion of t h e sc o p e of c onsolid a tion — — — — 31 O t h er (33) — (4) (37) — A t 31st D e c e m b er (76) (313) (268) (657) (489)

N e t a t 31st D e c e m b er 307 291 300 898 816

17. Trade and other payables

In m illions of C H F 2001 2000

Tra d e p aya bl es 6'667 6'170 O t h er p aya bl es 3'837 3'831

10'504 10'001

18. Current financial liabilities

In m illions of C H F 2001 2000

C o m m ercial p a p er 19'861 3'106 Lin e o f cre dit fa ciliti es 1'270 1'751 O t h er c urre n t fin a n cial lia b iliti es 3'888 2'821

25'019 7'678 C urre n t p ortio n o f m e diu m a n d lo n g t erm fin a n cial lia biliti es 467 698

25'486 8'376

T h e a b o v e fi n a n c i a l li a b iliti e s are d e n o m i n a t e d i n t h e f o ll o w i n g c urre n c i e s: In m illions of C H F 2001 2000

U S D 19'572 2'848 E U R 1'024 1'759 G BP 436 419 O t h er 4'454 3'350

25'486 8'376

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

In t erest ra t es are as follo w s: 2001 2000

on U S D 4.1% 6. 5% on E U R 4.5% 5. 0% on G BP 4.9% 5. 9%

Th e fair valu es o f c urre n t fin a n cial lia biliti es are n o t m a t erially dif f ere n t fro m t h e ir c arryin g a m o u n ts.

19. Derivative liabilities

In m illions of C H F

F air valu es

C o n tra c t u al or n o tio n al

a m o u n ts F air valu es

C o n tra c t u al or n o tio n al

a m o u n ts

F air valu e h e d g es C urre n cy for w ards, fu t ures a n d s w a ps 27 1'752 85 2'814 C urre n cy o p tio ns — 42 6 1'712 In t erest ra t e s w a ps 44 851 123 5'161 In t erest ra t e a n d c urre n cy s w a ps 80 459 228 1'402

C ash flo w s h e d g es C urre n cy for w ards, fu t ures a n d s w a ps 46 1'105 14 795 C urre n cy o p tio ns — 1 1 70 In t erest ra t e s w a ps 56 3'762 — — In t erest ra t e a n d c urre n cy s w a ps 1 — — — In t erest for w ards a n d fu t ures 2 635 2 1'769 In t erest o p tio ns 4 217 1 227 C o m m o dity fu t ures 44 210 13 186 C o m m o dity o p tions 5 29 1 19

H e d g es o f t h e n e t inv est m e n t in a fore i g n e n tity (lo a ns) 36 1'673 — —

Tra d in g C urre n cy d eriva tiv es 12 1'331 2 183 In t erest d eriva tiv es 21 1'942 2 402 C o m m o dity d eriva tiv es 5 30 1 21

383 14'039 479 14'761

2001 2000 (a)

D eriva tiv e lia biliti es are d e n o m in a t e d in t h e follo w in g c urre n ci es: In m illions of C H F 2001 2000

(b) U S D 185 E U R 51 G BP 15 O t h er 132

383

(a) 2 0 0 0 fi g ure s are n o t re st a t e d i n a c c ord a n c e w it h I A S 3 9 . F a ir v a l u e h e d g es w ere g e n era ll y c arri e d to t h e b a l a n c e sh e e t w h ere as c ash fl o w h e d g e s w ere d isc l os e d off b a l a n c e sh e e t .

(b) In for m a ti o n n ot a v a il a b l e

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

D eriva tiv e lia biliti es re la t e d t o c ash flo w h e d g es h av e t h e follo w in g m a t uriti es: In m illions of C H F 2001 2000

(a) W it hin o n e y e ar 84 In t h e se c o n d y e ar 12 In t h e t hird t o t h e fif t h y e ar in clusiv e 62

158

O t h er d eriva tiv e lia biliti es h av e t h e follo w in g m a t uriti es: In m illions of C H F 2001 2000

(a) W it hin o n e y e ar 163 In t h e se c o n d y e ar — In t h e t hird t o t h e fif t h y e ar in clusiv e 55 A f t er t h e fif t h y e ar 7

225

20. Non-current financial liabilities

In m illions of C H F 2001 2000

Lo a ns fro m fin a n cial instit u tio ns 1'315 1'442 B on ds 8'783 3'783 O bli g a tio ns u n d er fin a n c e l e ases 315 241

10'413 5'466 C urre n t p ortion (467) (698)

9'946 4'768

Th e a b ov e n o n-c urre n t fin a n cial lia biliti es are re p aya bl e as follo w s:

In m illions of C H F 2001 2000

In t h e se c o n d y e ar 900 575 In t h e t hird t o t h e fif t h y e ar in clusiv e 5'432 4'080 A f t er t h e fif t h y e ar 3'614 113

9'946 4'768

T h e a b o v e fi n a n c i a l li a b iliti e s are d e n o m i n a t e d i n t h e f o ll o w i n g c urre n c i e s: In m illions of C H F 2001 2000

U S D 7'917 3'045 E U R 1'523 778 C H F 15 364 G BP — 303 O t h er 491 278

9'946 4'768

In t ere st ra t e s are as fo ll o w s: 2001 2000

on U S D 3.8% 7. 0% on E U R 4.8% 4. 5% on G BP 5.0% 5. 9%

T h e f a ir v a l u e o f n o n-c urre n t fi n a n c i a l li a b iliti e s a m o u n ts t o C H F 9 9 7 0 m illi o n . T h e e ff e c ti v e i n t ere st ra t e o f b o n ds is d isc l os e d b e l o w . T h e e ff e c ti v e i n t ere st ra t e o f o t h er n o n-c urre n t fi n a n c i a l li a b iliti e s is n o t m a t eri a ll y d iff ere n t fro m t h e ir n o m i n a l i n t ere st ra t e s.

(a) In for m a ti o n n ot a v a il a b l e

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

B o n d issu e s su b j e c t t o f a ir v a l u e h e d g e s are c arri e d a t f a ir v a l u e , w h il e t h os e t h a t are n o t h e d g e d are c arri e d a t c ost .

In m illions of C H F 2001 2000 F a c e valu e in m illio ns

Ye ar of issu e/ m a t urity

N o m in al E ff e c tiv e

Bond Issues of Nestlé Holdings, Inc., USA C H F 300 6 . 75 % 6 . 62 % 1992-2002 Su bj e c t t o in t erest ra t e a n d c urre n cy

s w a ps t h a t cre a t e a U S D lia bility a t floa tin g ra t es. 304 374

U S D 250 7 . 38 % 7 . 38 % 1995-2005 419 409 D E M 500 5 . 13 % — 1996-2001 W as su bj e c t t o in t erest ra t e a n d

c urre n cy s w a ps t h a t cre a t e d a U S D lia bility a t flo a tin g ra t es. — 543

U S D 250 5 . 63 % 5 . 64 % 1998-2003 Su bj e c t t o a n in t erest ra t e s w a p t h a t cre a t es a lia bility a t flo a tin g ra t es.

433 410 U S D 300 3 . 00 % 7 . 48 % 2000-2005 St o ck W arra n ts a n d A p plic a bl e

N o t e S e c uriti es (S W A N S). Th e issu e h as a t t a c h e d w arra n ts w hic h g iv e t h e ri g h t t o a c q uire N estl é S. A . sh ares.

Th e d e b t c o m p o n e n t (issu e o f t h e no t es) w as re c o g nise d u n d er b on ds for U S D 249 m illio n a t in c e p tio n , w hil e t h e e q uity c o m p o n e n t (pre m iu m o n w arra n ts issu e d) w as re c o g nise d u n d er e q uity for U S D 51 m illio n .

439 412 U S D 700 0 . 00 % 6 . 15 % 2001-2008 Turb o Z ero E q uity-Link issu e w it h

w arra n ts o n N estl é S. A . sh ares. Th e d e b t c o m p o n e n t (issu e o f t h e no t es) is re c o g nise d u n d er b on ds for U S D 451 m illio n a t in c e p tio n , w hil e t h e e q uity c o m p o n e n t (pre m iu m o n w arra n ts issu e d) is re c o g nise d u n d er e q uity for U S D 123 m illio n . Th e inv est ors h av e t h e o p tio n t o p u t t h e n o t es t o N estl é H oldin gs, In c . a n d t h e w arra n ts t o N estl é S. A . a g ainst t h e ir a c cre t e d valu e a t t h e e n d o f 2003 a n d 2006 . 796 —

U S D 650 3 . 50 % 3 . 79 % 2001-2005 Partially su bj e c t t o a n in t erest ra t e s w a p t h a t cre a t es a lia bility a t flo a tin g ra t es. 1'055 —

U S D 300 5 . 13 % 5 . 19 % 2001-2007 501 —

In t erest ra t es

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

In m illions of C H F 2001 2000 F a c e valu e in m illio ns

Ye ar of issu e/ m a t urity

N o m in al E ff e c tiv e

Bond Issues of Nestlé Purina Petcare Company, USA (a) U S D 128 9 . 25 % 9 . 50 % 1989-2009 263 — U S D 170 7 . 75 % 7 . 84 % 1995-2015 326 — U S D 141 9 . 30 % 9 . 42 % 1991-2021 315 — U S D 208 8 . 63 % 8 . 72 % 1992-2022 439 — U S D 147 8 . 13 % 8 . 27 % 1993-2023 298 — U S D 196 7 . 88 % 8 . 05 % 1995-2025 388 —

Bond Issues of Nestlé Finance-France S.A., France Z A R 100 12 . 50 % 13 . 07 % 2000-2005 Su bj e c t t o a n in t erest ra t e s w a p

t h a t cre a t es a lia bility a t flo a tin g ra t es. Th e pro c e e ds h av e b e e n re-l e n t t o a So u t h A fric a n a ffilia t e d c o m p a ny.

14 25 Z A R 100 11 . 00 % 11 . 52 % 2001-2006 Su bj e c t t o a n in t erest ra t e s w a p

t h a t cre a t es a lia bility a t flo a tin g ra t es. Th e pro c e e ds h av e b e e n re-l e n t t o a So u t h A fric a n a ffilia t e d c o m p a ny.

14 —

Bond Issues of Nestlé Holdings (U.K.) PLC, United Kingdom U S D 250 5 . 00 % 5 . 07 % 1998-2003 Su bj e c t t o a n in t erest ra t e a n d c urre n cy

s w a p t h a t cre a t es a G B P lia bility a t floa tin g ra t es. 431 367

E U R 300 4 . 75 % 4 . 75 % 2001-2005 Su bj e c t t o a n in t erest ra t e a n d c urre n cy s w a p t h a t cre a t es a G B P lia bility a t floa tin g ra t es. 462 —

U S D 300 5 . 25 % 5 . 35 % 2001-2006 Su bj e c t t o a n in t erest ra t e a n d c urre n cy s w a p t h a t cre a t es a G B P lia bility a t floa tin g ra t es. 518 —

Bond Issue of Nestlé Australia Ltd., Australia U S D 250 1 . 25 % 6 . 07 % 1998-2005 C o nv ertibl e in t o N estl é S. A . sh ares, b u t

su b j e c t t o a n e q uity a n d in t erest ra t e a n d c urre n cy s w a p t h a t h e d g es t h e issu er a g ainst its e q uity a n d c urre n cy e xp osures a n d cre a t es a strai g h t A U D lia bility a t flo a tin g ra t es.

415 342

Bond Issue of Nestlé Capital Canada Ltd., Canada U S D 200 5 . 50 % 5 . 47 % 1999-2004 Su bj e c t t o a n in t erest ra t e a n d c urre n cy

s w a p t h a t cre a t es a C A D lia bility a t floa tin g ra t es. 346 325

Bond Issue of Nestlé Japan Ltd., Japan E U R 350 5 . 25 % 5 . 31 % 2000-2004 Su bj e c t t o a n in t erest ra t e a n d c urre n cy

s w a p t h a t cre a t es a JPY lia bility a t floa tin g ra t es. 537 505

Other bonds 70 71

To t al 8'783 3'783 D u e w it hin o n e y e ar (323) (545)

D u e a f t er o n e y e ar 8'460 3'238

In t erest ra t es

B o n ds su b j e c t t o f a ir v a l u e h e d g e s are c arri e d a t f a ir v a l u e f or C H F 4 5 2 9 m illi o n a n d t h e re l a t e d d eri v a ti v e s are c arri e d t o d eri v a ti v e ass e ts f or C H F 3 1 8 m illi o n a n d t o d eri v a ti v e li a b iliti e s f or C H F 1 1 0 m illi o n .

(a) F a c e v a l u e s are sh o w n a ft er p arti a l re p a y m e n ts.

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

21. Em ployee benefits

R e c o n c i l i a t i o n o f a s s e t s a n d l i a b i l i t i e s r e c o g n i s e d i n t h e b a l a n c e s h e e t

In m illions of C H F 2001 2000

D e fin e d b e n e fit re tire m e n t pla ns

Post-e m ploy m e n t m e dic al b e n e fits

an d ot h er b e n e fits To t al To t al

Prese n t valu e o f fu n d e d o bli g a tio ns 18'547 849 19'396 16'725 F air valu e o f pla n asse ts (19'507) (166) (19'673) (19'201)

E xc ess o f lia biliti es/(asse ts) o f fu n d e d o bli g a tio ns (960) 683 (277) (2'476) Prese n t valu e o f u n fu n d e d o bli g a tio ns 1'254 743 1'997 1'785 U nre c o g nise d p ast servic e c ost of non-v est e d b e n e fits — (7) (7) (7) N e t u nre c o g nise d a c t u arial g ains/(losses) (1'338) (28) (1'366) 65 U nre c o g nise d asse ts 1'198 — 1'198 2'566 D e fin e d b e n e fits n e t lia b iliti es 154 1'391 1'545 1'933 Lia biliti es fro m d e fin e d c o n trib u tio n pla ns 849 621 N e t lia b ilit i es 2'394 2'554

Re fl e c t e d in t h e b ala n c e sh e e t as follo w s: E m ploy e e b e n e fits asse ts (1'392) (306) E m ploy e e b e n e fits lia biliti es 3'786 2'860 N e t lia b ilit i es 2'394 2'554

T h e p l a n ass e ts i n c l u d e pro p ert y o c c u p i e d b y a ffili a t e d c o m p a n i e s w it h a f a ir v a l u e o f C H F 3 2 m illi o n (2 0 0 0: C H F 2 0 m illi o n). A t t h e e n d o f 2 0 0 0 , p l a n ass e ts i n c l u d e d N e stl é sh are s f or a n a m o u n t o f C H F 6 m illi o n .

T h e d e cre as e o f t h e e x c e ss o f ass e ts is m a i n l y d u e t o t h e l o w er e ff e c ti v e re t urn o n ass e ts.

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

Expenses recog nised in the inco m e state m ent

In m illions of C H F 2001 2000

D e fin e d b e n e fit re tire m e n t pla ns

Post-e m ploy m e n t m e dic al b e n e fits

an d ot h er b e n e fits To t al To t al

C urre n t servic e c ost 585 52 637 692 E m ploy e es' c o n trib u tio ns (101) — (101) (111) In t erest c ost 969 63 1'032 1'025 E xp e c t e d re t urn o n pla n asse ts (1'421) (15) (1'436) (1'507) N e t a c t u arial g ains/(losses) re c o g nise d in y e ar 3 — 3 (1) E arly re tire m e n ts, c urt ail m e n ts, se t tl e m e n ts (12) — (12) (5) Past servic e c ost 34 6 40 21 Tra nsf er (fro m)/t o u nre c o g nise d asse ts 336 — 336 322 To t al d e fin e d b e n e fit e xp e nses 393 106 499 436

To t al d e fin e d c o n trib u tio n e xp e nses 310 281

A c t u al g ain/(loss) o n pla n asse ts (1'448) 134

Th e e xp e nses for d e fin e d b e n e fit a n d d e fin e d c o n trib u tio n pla ns are allo c a t e d t o t h e a p pro pria t e h e a din gs o f e xp e nses by fu n c tio n .

Tra nsf er t o u nre c o g nise d asse ts re prese n ts e xc ess o f re t urn o f ov erfu n d e d d e fin e d b e n e fit pla ns t h a t c a n n o t b e re c o g nise d as asse ts as w e ll as c o n trib u tio ns p aid t o su c h pla ns in e xc ess o f t h e ir a n n u al c ost .

M ove m ent of defined benefits net liabilities recog nised in the balance sheet

In m illions of C H F 2001 2000

D e fin e d b e n e fit re tire m e n t pla ns

Post-e m ploy m e n t m e dic al b e n e fits

an d ot h er b e n e fits To t al To t al

A t 1st Ja n u ary 1'206 727 1'933 2'143

C urre n cy re tra nsla tio n (72) 2 (70) (83) E xp e nse re c o g nise d in t h e in c o m e st a t e m e n t 393 106 499 436 C o n trib u tio ns (387) — (387) (308) B e n e fits p aid (93) (44) (137) (195) M o dific a tion of t h e sc o p e of c onsolid a tion (912) 595 (317) 35 Tra nsf er fro m/(t o) d e fin e d c o n trib u tio n pla ns 19 5 24 (95) A t 31st D e c e m b er 154 1'391 1'545 1'933

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

Principal actuarial assu m ptions

A t 31st D e c e m b er 2001 2000

D isc o u n t ra t es E uro p e 4 - 6 % 4 - 6 . 25 % A m eric as 3 - 15.5 % 7 - 18 . 5 % A sia , O c e a nia a n d A fric a 3 - 15 % 3 - 14 %

E xp e c t e d lo n g t erm ra t es o f re t urn o n pla n asse ts E uro p e 6 - 7.25 % 5 . 3 - 8 % A m eric as 6 - 13 % 8 - 13 . 5 % A sia , O c e a nia a n d A fric a 4 - 14 % 4 - 14 %

E xp e c t e d ra t es o f salary in cre ases E uro p e 2 - 4 % 2 - 4 . 5 % A m eric as 1 - 12 % 3 . 5 - 13 % A sia , O c e a nia a n d A fric a 1 - 13 % 0 . 5 - 11 %

E xp e c t e d ra t es o f p e nsio n a djust m e n ts E uro p e 1.25 - 2.5 % 1 . 25 - 3 . 5 % A m eric as 1 - 12 % 1 - 13 % A sia , O c e a nia a n d A fric a 0.5 - 9 % 0 . 5 - 9 %

M e dic al c ost tre n d ra t es A m eric as 5 - 10 % 4 - 5 %

A v era g e re m ainin g w orkin g lif e o f e m ploy e es (in y e ars) E uro p e 11 - 22 11 - 23 A m eric as 9 - 30 9 - 26 A sia , O c e a nia a n d A fric a 11 - 27 11 - 27

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

22. Equity com pensation plan and remuneration of the Board of Directors and of the Executive M anagement

Equity com pensation plan F o ll o w i n g are t h e m o v e m e n ts a n d e x p iry d a t e s o f t h e o p ti o ns h e l d b y m e m b ers o f t h e G ro u p's M a n a g e m e n t (i n c l u d i n g E x e c u ti v e M a n a g e m e n t):

M ove m ent of options In m illions of C H F

N u m b er of o p tions

V alu e o f sh ares

N u m b er of o p tions

V alu e o f sh ares

O u tst a n din g a t 1st Ja n u ary 939'310 243 93'009 178

o f w hic h v est e d 179'220 47'478

N e w ri g h ts 1'338'806 459 43'150 122 Ri g h ts e x ercise d (b) (79'930) (13) (41'403) (55) Ri g h ts e xpire d (6'720) (2) (825) (2)

O u tst a n din g a t 31st D e c e m b er 2'191'466 687 93'931 243

o f w hic h v est e d 427'260 17'922

2001 2000 (a)

T h e ri g h ts are e x erc is e d t hro u g h o u t t h e y e ar i n a c c ord a n c e w it h t h e ru l e s o f t h e p l a n . In cre as e o f n e w ri g h ts gra n t e d i n 2 0 0 1 re su lts fro m t h e e xt e nsi o n o f t h e b e n e fi c i ari e s o f t h e p l a n (fro m 1 9 9 t o 8 7 9 p arti c i p a n ts).

Expiry dates of options

N u m b er E x ercise

pric e N u m b er E x ercise

pric e

O n e y e ar 8'640 CHF 149.80 70 C H F 1'261 T w o y e ars 90'650 CHF 230.30 7'193 C H F 1'498 Thre e y e ars — — 10'659 C H F 2'303 F our y e ars 327'970 CHF 260.90 — — F iv e y e ars 425'400 CHF 281.90 — — Six y e ars — — 33'019 C H F 2'609 S e v e n y e ars 1'338'806 CHF 343.20 42'990 C H F 2'819 To t al 2'191'466 93'931

2001 2000 (a)

Th e e x ercise pric e c orresp o n ds t o t h e av era g e pric e o f t h e last 10 tra din g d ays o f Ja n u ary o f t h e y e ar o f allo c a tio n .

Remuneration of the Board of Directors and of the Executive M anagement

N u m b er C H F m illio ns N u m b er C H F m illio ns

B oard of D ire c t ors Re m u n era tio n 4 5 W arra n ts — 1'341'500 (c) 2 Sh ares 5'842 2 — — O p tio ns — 95'590 (d)

E x e c u tiv e M a n a g e m e n t Re m u n era tio n 9 8 B o n us 7 4 O p tio ns 91'370 61'240 (d)

To t al 22 19

2001 2000

(b) A v era g e e x erc ise pri c e: C H F 1 6 5 . 6 5 (2 0 0 0 C H F 1 3 2 3 . 6 2).

(a) B e fore sh are sp lit .

(c) E q u i v a l e n t to 2 6 8 3 0 sh are s a t a n e x erc is e pri c e of C H F 3 6 0 .— (d). (d) A ft er sh are sp lit .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

Board of Directors M e m b ers o f t h e B oard o f D ire c t ors re c e iv e a n a n n u al re m u n era tio n o f C H F 263 000 e a c h , m e m b ers o f t h e C o m m it t e e o f t h e B oard re c e iv e a n a d ditio n al C H F 200'000 e a c h . M e m b ers o f t h e A u dit C o m m it t e e re c e iv e a n a d ditio n al C H F 25'000 e a c h . D ire c t ors also re c e iv e a n a n n u al e x p e nse allo w a n c e o f C H F 15'000 e a c h . Th e C h airm a n is also e n titl e d t o a salary a n d a b o n us. 50% o f t h e re m u n era tio n o f t h e m e m b ers o f t h e B oard o f D ire c t ors a n d t h e t o t al a d ditio n al re m u n era tio n o f t h e m e m b ers o f t h e C o m m it t e e o f t h e B oard are p aid t hro u g h t h e gra n tin g o f N estl é S. A . sh ares a t t h e e x-divid e n d closin g pric e o f t h e d ay o f p ay m e n t o f t h e divid e n d . Th ese sh ares are su bj e c t t o a 2-y e ar blo ckin g p erio d .

Executive M anagement Th e t o t al a n n u al c o m p e nsa tio n o f e a c h m e m b er o f t h e E x e c u tiv e M a n a g e m e n t c o m prises a salary , a b o n us (b ase d o n t h e in divid u al's p erform a n c e a n d t h e a c hi e v e m e n t o f t h e Gro u p's o bj e c tiv es) a n d sh are o p tio ns.

23. Deferred taxes

In m illions of C H F 2001 2000

Tax assets by types of te m porary differences Pro p erty , pla n t a n d e q uip m e n t 154 40 In t a n g ibl e asse ts 157 190 E m ploy e e b e n e fits 1'044 957 Inv e n t ori es, re c e iva bl es, p aya bl es a n d provisio ns 1'433 894 U n use d t ax losses a n d u n use d t ax cre dits 89 71 O t h er 596 300

3'473 2'452

In m illions of C H F 2001 2000

Tax liabilities by types of te m porary differences Pro p erty , pla n t a n d e q uip m e n t 1'068 907 In t a n g ibl e asse ts 94 44 E m ploy e e b e n e fits 499 105 Inv e n t ori es, re c e iva bl es, p aya bl es a n d provisio ns 110 130 O t h er 1'085 247

2'856 1'433

N e t asse ts 617 1'019

Re fl e c t e d in t h e b ala n c e sh e e t as follo w s: D e f erre d t ax asse ts 1'918 2'569 D e f erre d t ax lia biliti es 1'301 1'550 N e t asse ts 617 1'019

Te m p orary diff ere n c es for w hic h no d e f erre d t ax is re c o g nise d: o n inv est m e n ts in a f filia t e d c o m p a ni es (t axa bl e t e m p orary diff ere n c e) 7'357 5'815 o n u n use d t ax losses, t ax cre dits a n d o t h er it e m s 1'467 1'118

U n use d t ax losses e xpire m ainly w it hin 2 t o 5 y e ars.

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

24. Provisions

In m illions of C H F 2001 2000

Restru c t urin g E nviron m e nt Liti g a tion O t h er To t al To t al

A t 1st Ja n u ary 2'204 2'289

In tro d u c tion of IA S 37 — (132)

Rest a t e d fi g ures a t 1st Ja n u ary 194 70 1'797 143 2'204 2'157

C urre n cy re tra nsla tio n — 2 28 (6) 24 (1) Provisio ns m a d e in t h e p erio d 129 3 75 78 285 445 M o dific a tion of t h e sc o p e of consolid a tion 346 — (8) — 338 168 A m ou n ts use d (104) (3) (173) (38) (318) (456) U n use d a m o u n ts re v erse d (11) (1) (19) (7) (38) (109)

A t 31st D e c e m b er 554 71 1'700 170 2'495 2'204

25. Share capital of Nestlé S.A.

2001 2000

N u m b er o f re g ist ere d sh ares o f n o m in al valu e C H F 1.- e a c h (2000: C H F 10.-) 403'520'000 40'352'000 In m illions of C H F 404 404

O n 1 1 t h J u n e 2 0 0 1 , t h e re g ist ere d sh are s w ere sp lit i n a t e n-f or-o n e re l a ti o nsh i p . A d d iti o n a l i n f or m a ti o n is g i v e n i n t h e a n n e x t o t h e a n n u a l a c c o u n ts o f N e stl é S . A . , n o t e 1 8 . T h e sh are c a p it a l i n c l u d e s t h e n o m i n a l v a l u e o f tre asury sh are s (s e e n o t e 2 6).

26. Treasury shares This it e m re prese n ts t h e tre asury sh ares h e ld in N estl é S. A .:

N u m b er of shares 2001 2000 (a)

Purp ose of holdin g

Fre e ly availa bl e sh ares 6'513'814 785'262 M a n a g e m e n t o p tio n ri g h ts 2'191'466 93'931 W arra n ts on S W A N S a n d Turb o b on d issu es of N estl é H oldin gs In c . , U S A 3'527'680 129'419 Tra d in g 3'631'494 490'415 To t al a t 31st D e c e m b er 15'864'454 1'499'027

In m illions of C H F 2001 2000

B ook valu e a t 31st D e c e m b er 2'794 2'617 M ark e t valu e a t 31st D e c e m b er 5'616 5'666

T h e m o v e m e n t o f t h e s e sh are s is d e scri b e d i n t h e a n n e x t o t h e a n n u a l a c c o u n ts o f N e stl é S . A . , n o t e 2 0 .

(a) B e fore sh are sp lit .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

27. Decrease/(increase) in w orking capital D isre g ard i n g e x c h a n g e d iff ere n c e s a n d e ff e c t o f a c q u isiti o ns a n d d isp osa ls. In m illions of C H F 2001 2000

Inv e n t ori es (448) (165) Tra d e re c e iva bl es (540) (604) Tra d e p aya bl es 274 544 O t h er p aya bl es 202 (270) N e t a c cru als a n d d e f errals 64 40 O t h er (422) 87

(870) (368)

28. Acquisitions

In m illions of C H F 2001 2000

F air valu e o f n e t asse ts a c q uire d Pro p erty , pla n t a n d e q uip m e n t 1'431 359 F in a n cial asse ts 834 93 In t a n g ibl e asse ts 4 93 M in ority in t erests (17) (19) Purc h ase o f m in ority in t erests in e xistin g p articip a tio ns 33 49 N e t w orkin g c a pit al 246 (76) F in a n cial lia b ilit i es (2'785) (210) E m ploy e e b e n e fits, d e f erre d t ax es a n d provisio ns (846) (179) Liq uid asse ts 1'787 37

687 147 G oo d w ill 18'193 3'395

To t al a c q uisitio n c ost 18'880 3'542 l ess:

C ash a n d c ash e q uival e n ts a c q uire d (92) (37) O w n sh ares re m it t e d — (298) C o nsid era tio n p aya bl e (22) (361)

C ash o u t flo w o n a c q uisitio ns 18'766 2'846

Th e fair valu es o f t h e id e n tifia bl e asse ts a n d lia biliti es a c q uire d w it h Ralst o n Purin a h av e b e e n d e t erm in e d o n a provisio n al b asis, d u e t o t h e ti m in g o f t h e a c q uisitio n . Th ese w ill b e su bj e c t t o a djust m e n t in 2002.

29. Disposals

In m illions of C H F 2001 2000

N e t asse ts disp ose d of Pro p erty , pla n t a n d e q uip m e n t 88 430 G oo d w ill a n d in t a n g ibl e asse ts 129 3 M in ority in t erests (29) 7 N e t w orkin g c a pit al 154 247 F in a n cial lia b ilit i es (46) (147) E m ploy e e b e n e fits, d e f erre d t ax a n d provisio ns 14 (78) Liq uid asse ts 7 5

317 467 Re c ov ery of g oo d w ill on disp osals c h arg e d t o e q uity prior t o 1st Ja n u ary 1995 — 51 Profit/(loss) on disp osals 318 513

To t al sal e c o nsid era tio n 635 1'031 l ess:

C ash a n d c ash e q uival e n ts disp ose d o f (7) (5) C o nsid era tio n re c e iva bl e (144) (246)

C ash in flo w on disp osals 484 780

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

30. Dividends D i v i d e n ds p a y a b l e are n o t a c c o u n t e d f or u n til t h e y h a v e b e e n ra tifi e d a t t h e A n n u a l G e n era l M e e ti n g . A t t h e m e e ti n g o n 1 1t h A pril 2 0 0 2 , t h e f o ll o w i n g d i v i d e n d i n re sp e c t o f 2 0 0 1 w ill b e pro p os e d:

D i v i d e n d p er sh are . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C H F 6 . 4 0 re su lti n g i n a t o t a l d i v i d e n d o f (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C H F 2 5 2 9 5 4 8 6 7 2 .--

T h e a c c o u n ts f or t h e y e ar e n d e d 3 1st D e c e m b er 2 0 0 1 d o n o t re fl e c t t h is pro p os e d d istri b u ti o n , w h i c h w ill b e tre a t e d as a n a p pro pri a ti o n o f pro fit i n t h e y e ar e n d i n g 3 1st D e c e m b er 2 0 0 2 .

31. Guarantees In t h e n or m a l c o urs e o f b usi n e ss, t h e G ro u p h as gra n t e d g u ara n t e e s t o t h ird p arti e s, t o t a lli n g C H F 3 5 7 m illi o n (2 0 0 0: C H F 4 3 6 m illi o n) o n 3 1st D e c e m b er 2 0 0 1 .

32. Com mitments for expenditure on property, plant and equipment A t 3 1st D e c e m b er 2 0 0 1 , t h e G ro u p w as c o m m itt e d t o e x p e n d it ure a m o u n ti n g t o C H F 1 3 0 m illi o n (2 0 0 0: C H F 1 8 0 m illi o n).

33. Lease com mitments T h e f o ll o w i n g c h arg e s aris e fro m t h e s e c o m m it m e n ts:

O peratin g leases

In m illions of C H F 2001 2000

W it hin o n e y e ar 390 346 In t h e se c o n d y e ar 348 291 In t h e t hird t o t h e fif t h y e ar in clusiv e 746 648 A f t er t h e fif t h y e ar 1'278 1'196

2'762 2'481

M ini m u m l e ase p ay m e n ts

F u t ure valu e

Finance leases

In m illions of C H F 2001 2000

Prese n t valu e

F u t ure valu e

Prese n t valu e

F u t ure valu e

W it hin o n e y e ar 63 78 22 24 In t h e se c o n d y e ar 59 75 29 33 In t h e t hird t o t h e fif t h y e ar in clusiv e 82 113 157 177 A f t er t h e fif t h y e ar 111 149 33 43

315 415 241 277

M ini m u m l e ase p ay m e n ts

Th e d if f ere n c e b e t w e e n t h e f u t ure valu e o f t h e m ini m u m l e ase p ay m e n ts a n d t h e ir prese n t valu e re prese n ts t h e disc o u n t o n t h e l e ase o bli g a tio ns.

34. Contingent assets and liabilities T h e G ro u p is e x p os e d t o c o n ti n g e n t li a b iliti e s a m o u n ti n g t o a b o u t C H F 4 4 0 m illi o n (2 0 0 0: C H F 4 0 0 m illi o n) re pre s e n ti n g v ari o us p o t e n ti a l liti g a ti o n . A n a m o u n t o f a b o u t C H F 2 2 0 m illi o n (2 0 0 0: C H F 2 8 0 m illi o n) c o u l d re su lt i n li a b iliti e s. C o n ti n g e n t ass e ts f or liti g a ti o n c l a i m s i n f a v o ur o f t h e G ro u p a m o u n t t o a b o u t C H F 2 3 0 m illi o n (2 0 0 0: C H F 2 6 0 m illi o n).

(a) N u m b er o f sh are s w it h ri g h t t o d i v i d e n d: se e A n n u a l re p ort of N e stl é S . A .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

35. Events after the balance sheet date

Sc höll er H ol d in g T h e n e g o ti a ti o ns i n iti a t e d w it h t h e sh are h o l d ers o f t h e S c h ö ll er G ro u p i n J u n e 2 0 0 1 h a v e b e e n su c c e ssf u ll y c o m p l e t e d . N e stl é w ill a c q u ire 1 0 0 % o f t h e S c h ö ll er G ro u p c o m prisi n g t h e ir i c e cre a m a n d fro z e n f o o d b usi n e ss. T h e E uro p e a n C o m m issi o n a n n o u n c e d its a p pro v a l o f t h e p urc h as e o n 2 5 t h F e bru ary 2 0 0 2 .

A lcon O n 2 2 n d F e bru ary 2 0 0 2 , A l c o n , In c . , t h e w h o ll y o w n e d e y e c are b usi n e ss o f N e stl é S . A . , a n n o u n c e d t h a t it h a d fil e d a re g istra ti o n st a t e m e n t w it h t h e U n it e d St a t e s S e c uriti e s a n d E x c h a n g e C o m m issi o n w it h re sp e c t t o a n i n iti a l p u b li c o ff eri n g o f n e w l y issu e d A l c o n c o m m o n sh are s re pre s e n ti n g a p pro x i m a t e l y 2 5 % o f A l c o n's c o m m o n sh are s, i n c l u d i n g a n o v er-a ll o t m e n t o p ti o n t o b e gra n t e d t o t h e u n d er w rit ers. N e stl é e x p e c ts t h is o ff eri n g t o b e c o m p l e t e d a t t h e e n d o f t h e first q u art er o f 2 0 0 2 , a n d A l c o n h as a p p li e d t o list its c o m m o n sh are s o n t h e N e w Y ork St o c k E x c h a n g e u n d er t h e ti c k er sy m b o l " A C L " . It is e sti m a t e d t h a t t h e i n iti a l p u b li c o ff eri n g pri c e w ill b e b e t w e e n U S D 3 1 . 0 0 a n d U S D 3 5 . 0 0 p er c o m m o n sh are . A l c o n i n t e n ds t o us e t h e n e t pro c e e ds fro m t h is o ff eri n g (o t h er t h a n pro c e e ds o f t h e o v er-a ll o t m e n t o p ti o n) t o re d e e m sh are s o f n o n-v o ti n g pre f erre d st o c k o f A l c o n o w n e d b y N e stl é S . A . a n d t o us e t h e n e t pro c e e ds fro m a n e x erc is e o f t h e o v er-a ll o t m e n t o p ti o n , if a n y , t o re p a y sh ort-t er m i n d e b t e d n e ss.

F IS O n 1 8 t h J a n u ary 2 0 0 2 , N e stl é a n n o u n c e d t h a t it h a d re a c h e d a n a gre e m e n t w it h G i v a u d a n S . A . o n t h e sa l e o f F o o d In gre d i e n ts S p e c i a liti e s S . A . (FIS). N e stl é w ill t a k e a n e q u it y i n t ere st i n G i v a u d a n S . A . . T h e tra nsa c ti o n , v a l u e d a t C H F 7 5 0 m illi o n , a n d su b j e c t t o t h e usu a l re g u l a t ory a p pro v a ls, w ill b e p a i d i n G i v a u d a n sh are s a n d c ash .

O t h er su bse q u e n t e v e n ts A t 2 7 t h F e bru ary 2 0 0 2 , d a t e o f t h e a p pro v a l o f t h e c o nso li d a t e d a c c o u n ts b y t h e B o ard o f D ire c t ors, t h e G ro u p h a d n o su bs e q u e n t a d j usti n g e v e n ts t h a t w arra n t a m o d ifi c a ti o n o f t h e v a l u e s o f ass e ts a n d li a b iliti e s.

36. Transactions w ith related parties T h e G ro u p h as n o t e n t ere d i n t o a n y m a t eri a l tra nsa c ti o n w it h re l a t e d p arti e s. F urt h er m ore , t hro u g h o u t 2 0 0 1 , n o d ire c t or h a d a p erso n a l i n t ere st i n a n y tra nsa c ti o n o f si g n ifi c a n c e f or t h e b usi n e ss o f t h e G ro u p .

37. Nestlé Group Com panies T h e list o f c o m p a n i e s a p p e ars i n t h e s e c ti o n “ C o m p a n i e s o f t h e N e stl é G ro u p ” .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

P r i n c i p a l e x c h a n g e r a t e s

C H F p er 2001 2000 2001 2000

1 U S D ollar U S D 1.68 1 . 64 1.68 1 . 69 1 E uro E U R 1.48 1 . 52 1.51 1 . 56 1 Po u n d St erlin g G BP 2.43 2 . 44 2.43 2 . 56 100 Brazilia n Re ais BRL 71.90 83 . 90 72.21 92 . 40 100 Ja p a n ese Y e n JPY 1.28 1 . 43 1.39 1 . 57 100 M e xic a n Pesos M X N 18.30 17 . 10 18.09 17 . 90 1 C a n a d ia n D ollar C A D 1.05 1 . 09 1.09 1 . 14 1 A ustralia n D ollar A U D 0.86 0 . 91 0.87 0 . 98 100 Philip pin e Pesos P H P 3.24 3 . 27 3.30 3 . 82

Y e ar e n d ra t es A v era g e a n n u al ra t es

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

Re p ort of t h e Grou p au ditors t o t h e G e n era l M e e ti n g o f N e stl é S . A .

A s G ro u p a u d it ors w e h a v e a u d it e d t h e C o nso li d a t e d a c c o u n ts (b a l a n c e sh e e t , i n c o m e st a t e m e n t , c ash fl o w st a t e m e n t , st a t e m e n t o f c h a n g e s i n e q u it y a n d a n n e x) o f t h e N e stl é G ro u p f or t h e y e ar e n d e d 3 1st D e c e m b er 2 0 0 1 .

T h e s e C o nso li d a t e d a c c o u n ts are t h e re sp o nsi b ilit y o f t h e B o ard o f D ire c t ors. O ur re sp o nsi b ilit y is t o e x pre ss a n o p i n i o n o n t h e s e C o nso li d a t e d a c c o u n ts b as e d o n o ur a u d it . W e c o n fir m t h a t w e m e e t t h e l e g a l re q u ire m e n ts c o n c ern i n g pro f e ssi o n a l q u a l ifi c a ti o n a n d i n d e p e n d e n c e .

O ur a u d it w as c o n d u c t e d i n a c c ord a n c e w it h a u d iti n g st a n d ards pro m u l g a t e d b y t h e S w iss pro f e ssi o n , a n d w it h In t ern a ti o n a l St a n d ards o n A u d iti n g issu e d b y t h e In t ern a ti o n a l F e d era ti o n o f A c c o u n t a n ts (IF A C), w h i c h re q u ire t h a t a n a u d it b e p l a n n e d a n d p erf or m e d t o o b t a i n re aso n a b l e assura n c e a b o u t w h e t h er t h e C o nso li d a t e d a c c o u n ts are fre e fro m m a t eri a l m isst a t e m e n t . W e h a v e e x a m i n e d o n a t e st b asis e v i d e n c e su p p orti n g t h e a m o u n ts a n d d isc l osure s i n t h e C o nso li d a t e d a c c o u n ts. W e h a v e a lso ass e ss e d t h e a c c o u n ti n g pri n c i p l e s us e d , si g n ifi c a n t e sti m a t e s m a d e a n d t h e o v era ll C o nso li d a t e d a c c o u n ts pre s e n t a ti o n . W e b e li e v e t h a t o ur a u d it pro v i d e s a re aso n a b l e b asis f or o ur o p i n i o n .

In o ur o p i n i o n , t h e C o nso li d a t e d a c c o u n ts g i v e a tru e a n d f a ir v i e w o f t h e fi n a n c i a l p ositi o n , t h e n e t pro fit a n d c ash fl o w s a n d c o m p l y i n a ll re sp e c ts w it h In t ern a ti o n a l A c c o u n ti n g St a n d ards (I A S) a n d S w iss l a w .

W e re c o m m e n d t h a t t h e C o nso li d a t e d a c c o u n ts su b m itt e d t o y o u b e a p pro v e d .

S . R . C or m a c k B . A . M a t h ers C h art ere d a c c o u n t a n t C h art ere d a c c o u n t a n t

A u d it ors i n c h arg e L o n d o n a n d Z uri c h , 2 7t h F e bru ary 2 0 0 2

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

F inancial inform ation – t e n ye ar re vie w

In m illions of C H F (e xc e p t for p er sh are d a t a) 2001 2000 (e) 1999 (f)

Results C o nsolid a t e d sal es 84 698 81 422 74 660 Tra din g profit 9 218 9 186 7 914 as % of sal es 10.9% 11 . 3 % 10 . 6 % Tax es 2 429 2 761 2 314 C onsolid a t e d n e t pro fit 6 681 5 763 4 724 as % of sal es 7.9% 7 . 1 % 6 . 3 % as % of av era g e e q uity 21.0% 21 . 2 % 20 . 0 % To t al a m o u n t o f divid e n d 2 530 2 127 1 657 D e pre cia tio n o f pro p erty , pla n t a n d e q uip m e n t 2 581 2 737 2 597 as % of sal es 3.0% 3 . 4 % 3 . 5 % A m ortisa tion of g oo d w ill 494 414 384

Balance sheet C urre n t asse ts 39 045 30 747 27 169

of w hic h li q ui d asse ts 16 042 10 131 6 670 N o n-c urre n t asse ts 54 741 34 777 31 770 To t al asse ts 93 786 65 524 58 939 C urre n t lia b iliti es 41 492 23 174 22 182 N o n-c urre n t lia biliti es a n d m in ority in t erests 18 641 12 446 12 304 E q uity 33 653 29 904 24 453 C a p it al e x p e n d it ure 3 611 3 305 2 806 as % of sal es 4.3% 4 . 1 % 3 . 8 %

Data per share W e i g h t e d av era g e n u m b er o f sh ares o u tst a n din g 387 369 846 386 527 830 386 772 130 C onsolid a t e d n e t pro fit (b) 17.25 14 . 91 12 . 21 E q uity (b) 86.88 77 . 40 63 . 20 D ivid e n d (b) 6.40 5 . 50 4 . 30 Pay-o u t ra tio 37.1% 36 . 9 % 35 . 2 % St o ck e xc h a n g e pric es (hi g h/lo w ) (b) 386.5/289.0 389 . 3/254 . 0 310 . 7/250 . 8 Yi e ld (c) 1.7/2.2 1 , 4/2 , 2 1 , 4/1 , 7

Number of personnel 229 765 224 541 230 929

(d)

(a)

(j)

(a) A s pro p ose d by t h e B oard of D ire c t ors of N estl é S. A . . This a m o u n t in clu d es divid e n ds p aya bl e in resp e c t o f sh ares w it h ri g h t t o d ivid e n d a t t h e b ala n c e sh e e t d a t e (C H F 2481 m illio n) as w e ll as t h ose p o t e n tially p aya bl e o n t h e sh ares c ov erin g o p tio ns a n d sh ares h e ld for tra din g p urp oses (C H F 49 m illio n).

(b) F i g ures prior t o 2001 a djust e d in ord er t o m ak e c o m p ara bl e t h e d a t a p er sh are , follo w in g t h e t e n-for-o n e 2001 split . F i g ures prior t o 1993 also a djust e d in ord er t o m ak e c o m p ara bl e t h e d a t a p er sh are , follo w in g a ri g h ts issu e in Ju n e 1993. c) C alc ula t e d o n t h e b asis o f t h e divid e n d for t h e y e ar c o n c ern e d b u t w hic h is p aid o u t in t h e follo w in g y e ar.

(d) A s pro p ose d by t h e B oard of D ire c t ors of N estl é S. A . . e) F i g ures prior t o 2001 h av e n o t b e e n rest a t e d follo w in g t h e first a p plic a tion of IA S 39 " F in a n cial Instru m e n ts" . (f) F i g ures prior t o 2000 h av e n o t b e e n rest a t e d follo w in g t h e first a p plic a tio n o f IA S 37 " Provisio ns, C o n tin g e n t Lia biliti es a n d C o n tin g e n t A sse ts" .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

1998 1997 (g) 1996 (h) 1995 1994

(i) 1993 1992

71 747 69 998 60 490 56 484 56 894 57 486 54 500 7 081 7 057 6 053 5 658 5 628 5 591 5 384

9 . 9 % 10 . 1 % 10 . 0 % 10 . 0 % 9 . 9 % 9 . 7 % 9 . 9 % 2 000 1 842 1 552 1 561 1 647 1 669 1 745 4 205 4 182 3 592 3 078 3 250 2 887 2 698

5 . 9 % 6 . 0 % 5 . 9 % 5 . 4 % 5 . 7 % 5 . 0 % 5 . 0 % 19 . 5 % 21 . 9 % 22 . 9 % 23 . 3 % 19 . 9 % 19 . 5 % 18 . 4 %

1 469 1 376 1 180 1 043 1 040 972 870 2 609 2 677 2 305 2 103 2 321 2 283 2 038

3 . 6 % 3 . 8 % 3 . 8 % 3 . 7 % 4 . 1 % 4 . 0 % 3 . 7 % 301 140 102 42 — — —

26 467 25 671 23 070 20 927 21 420 20 982 20 670 7 963 8 102 5 860 5 124 5 132 5 084 4 688

30 236 25 910 23 605 19 189 23 807 24 178 23 803 56 703 51 581 46 675 40 116 45 227 45 160 44 473 22 567 20 985 19 859 17 410 17 297 18 166 20 019 11 321 9 990 9 239 8 862 10 986 11 334 10 524 22 815 20 606 17 577 13 844 16 944 15 660 13 930

3 061 3 261 3 054 3 056 3 029 3 093 3 191 4 . 3 % 4 . 7 % 5 . 0 % 5 . 4 % 5 . 3 % 5 . 4 % 5 . 9 %

392 936 650 393 311 260 393 636 370 392 207 560 388 383 760 377 598 260 369 383 740 10 . 70 10 . 63 9 . 13 7 . 85 8 . 37 7 . 65 7 . 22 58 . 10 52 . 40 55 . 70 45 . 90 43 . 60 41 . 50 37 . 30

3 . 80 3 . 50 3 . 00 2 . 65 2 . 65 2 . 50 2 . 32 35 . 5 % 32 . 9 % 32 . 9 % 33 . 8 % 31 . 7 % 32 . 7 % 32 . 2 %

349 . 8/212 . 2 219 . 2/142 . 1 148 . 7/125 . 0 129 . 8/109 . 0 143 . 7/106 . 3 129 . 4/101 . 5 116 . 2/85 . 7 1 , 1/1 , 8 1 , 6/2 , 5 2 , 0/2 , 4 2 , 0/2 , 4 1 , 8/2 , 5 1 , 9/2 , 5 2 , 0/2 , 7

231 881 225 808 221 144 220 172 212 687 209 755 218 005

(g) F i g ures prior t o 1998 h av e n o t b e e n rest a t e d follo w in g t h e first a p plic a tio n o f IA S 19 (re vise d 1998) " E m ploy e e B e n e fits" . (h) F i g ures prior t o 1997 h av e n o t b e e n rest a t e d follo w in g t h e first a p plic a tio n o f IA S 12 (re vise d 1996) “In c o m e t ax ” . (i) F i gures prior t o 1995 h av e n o t b e e n rest a t e d t o re fl e c t t h e c h a n g e fro m n e t re pla c e m e n t valu es o f pro p erty , pla n t a n d e q uip m e n t t o hist oric al c ost a c c o u n tin g .

(j) 2001 e xclu d es Ralst o n Purin a .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

C o m p anies of t h e N estlé Grou p

O p e r a t i n g c o m p a n i e s

Principal affiliated co m panies w hich operate in the food an d w ater sectors, w ith the exception of those m arked w ith an asterisk (*) w hich are en gaged in the pharm aceutical sector. C ountries w ithin the continents are listed according to the alphabetical order of the French na m es.

1. A ffiliat e d co m p anies for w hic h full consolid ation tre a t m e n t is a p plie d (se e “ Sco p e of consolid a tion ”).

E u r o p e

Germany N estlé D e u tsc hlan d A G Frankfurt 97.34% • B lau e Q u elle n M in eral- u n d H e ilbru n n e n A G Rhens a m Rhein 96.8% • Trinks G m b H Goslar 96.8% • San Pelle grino D e u tsc hlan d G m b H M ainz 100% • N espresso D e u tsc hlan d G m b H D üsseldorf 100% • Po w erb ar E uro p e G m b H M ünc hen 100% • A lcon Pharm a G m b H * Freiburg / Breisgau 100% • Austria N estl é Ö st erre ic h G m b H W ien 100% • Belgium N estl é B e l g ilux S. A . Bruxelles 100% • Perri er V it t e l B e l g ilux S. A . E t alle 100% • N espresso B e lg ilux N . V . Bruxelles 100% • A lcon- C ouvre ur S. A .* Puurs 100% • S. A . Friskies B e lg ilux N . V . Bruxelles 100% • Bulgaria N estl é Sofia A . D . Sofia 99.86% • Denmark N estl é D an m ark A /S Copenhagen 100% • Friskies D an m ark A /S Copenhagen 100% • Spain N estl é Esp a ñ a S. A . B arc elona 100% • Pro d u c t os d e l C af é S. A . Reus 100% • D avig el Esp aña S. A . Pal m a d e M allorc a 100% • La C ocin era A li m e n t acion S. A . B arc elona 100% • A q uare l Ib eric a S. A . B arc elona 100% • E Y C A M Perrier S. A . B arc elona 100% • A lcon-C usi S. A .* B arc elona 100% • H e la d os M iko S. A . Vitoria 100% • C o m p añía A vid esa S. A . A lzira 100% • Friskies Esp aña S. A . B arc elona 100% • Finland Suo m e n N estlé O y H elsinki 100% • Friski es F inla n d O y H elsinki 100% • France N estlé Fran c e S. A . N oisiel 100% • N estlé Gran d Froid S. A . N oisiel 100% • N estl é C linic al N u trition S. A . N oisiel 100% • N estl é Pro d uits Laiti ers Frais N oisiel 99.9% • H erta S. A . N oisiel 100% • D avig el S. A . M artin- E glise 100% • F oo d In gre di e n ts Sp e cialiti es Fra n c e S. A . N oisiel 100% • Perri er V it t e l Franc e Paris 100% • S. A . d es E a ux M in éral es d e Rib e a uvill é Rib e auvillé 99.5% • A q uarel Franc e Issy-les- M ouline aux 100% • E au M in éral e N a t ure ll e d e Plan co ë t “ Sourc e Sassay ” S. A . Plancoë t 100% • N espresso Fran c e S. A . Paris 100% • La boratoires A lcon S. A .* Rueil- M al m aison 100% • Friskies Fran c e Rueil- M al m aison 100% • Greece N estl é H e llas S. A . M aroussi 100% • A lcon La b ora t ories H e llas C o m m ercial a n d In d ustrial S. A .* M aroussi 100% • Italy N estl é lt alia n a S. p . A . M ilano 100% • San Pelle grino S. p . A . M ilano 100% • A lcon It alia S. p . A .* M ilano 100% • Friski es It alia S. p . A . C astiglion e d elle Stiviere 100% • Hungary N estlé H u n g aria Kft B u d ap est 100% • K e kku ti A sva nyviz Rt . Ke k kut 87% • Lithuania U A B N estl é B altics V ilnius 100% • Norway A /S N estl é N org e San dvika 100% • A lcon N org e A .S.* Splepend en 100% • Netherlands N estl é N e d erla n d B . V . A mst erd a m 100% • A lcon N e d erlan d B . V .* Gorinc he m 100% • Friski es N e t h erla n ds B . V . A mst erd a m 100% • N espresso N e d erlan d B . V . A mst erd a m 100% • Poland N estl é Polska S. A . W arsa w 99.2% • N al e czo w ia nka Sp olka z. o . o . N ale czov 33.3% • E SI D istrib u tion N . V . W arsa w 50% • Portugal N estl é Port u g al S. A . Lind a-a-V elha 100% • Lon g a V id a S. A . M a tosinhos 100% • Soci e d a d e d as A g u as d e Piso es M oura S. A . Lisboa 100% • A lcon Port u g al Pro d u t os e E q uip a m e n t os O ft al m olo gicos, Lt d a .* Lisboa 100% • Republic of Ireland N estl é (lre la n d) Lt d Tallaght- D ublin 100% • Friski es Pe t c are (Ire la n d) Lt d D ublin 100% • Czech Republic N estl é C esko s.r. o . Prague 100% • Romania N estl é Ro m ania SRL B uc arest 100% • United Kingdom N estl é U K Lt d Croydon 100% • Perri er V it t e l U K Lt d Ric k m ans w orth 100% • B uxton M in eral W at er C o m p any Lt d Ric k m ans w orth 100% • A lcon La b ora t ories (U K) Lt d* H erts 100% • Friski es Pe t c are (U K) Lt d N e w M ald en 100% • Russia JS C C on f e c tion ery U nion Rossiya Sa m ara 99.7% • N estlé Zh ukovsky Ic e Cre a m LL C Zhukovsky 87.5% • N estl é F oo d LL C M osco w 100% • O JS C C on f e c tion ery F irm A lt ai B arnaul 94.3% • O JS C Ka m skaya Perm 86.5% • JS C Khla d o pro d u c t Ti m ashevsk 93.2% • Slovakia N estl é Slov e nsko s.r. o . Prievidza 100% • Sweden N estl é Sv eri g e A B H elsingborg 100% • Zo e g as Kaff e A B H elsingborg 100% • Je d e A B M ariest a d 100% • A lcon Sv erig e A B*

Brom m a 100% • Friski es Sv eri g e A B M al m ö 100% • Switzerland So ci é t é d es Pro d uits N estl é S. A . V evey 100% • N estlé Suisse S. A . V evey 100% • Perri er V it t e l Suisse S. A . Glan d 100% • A lcon Pharm a c e u tic als Lt d* H ünenb erg 100% • N estl é W orld Tra d e C orp ora tion La Tour-d e-Peilz 100% • F oo d In gre di e n ts Sp e cialiti es S. A . Villars-sur-Glâne 100% • N estlé N espresso S. A . Paud ex 100% • N estl é In t ern a tion al Trav e l Re t ail S. A . C hât el-St- D enis 100% • Turkey N estl é G id a Sanayi A .S. Ist anbul 100% • A lcon La b ora t uvarlari Tic . A .S.* Ist anbul 100% • Sansu G id a V e M esru b a t Sanayi Tic are t A .S. G aziant e p 50% • Ukraine JS C Lviv C on f e c tion ery F irm Svit o c h Lviv 93% .

A f r i c a

South Africa N estlé (Sou t h A fric a) (Pty) Lt d Ran d burg-Johannesburg 100% • Friski es Pe t c are (Pty) Lt d Pre toria 100% • V alvit a (Pty) Lt d Ran d burg 100% • D airy m aid-N estlé (Pty) Lt d Johannesburg 100% • A lcon La b ora t ories (Sou t h A fric a) Pty Lt d* Ran d burg 100% • Cameroon N estl é C a m erou n D ouala 99.8% • Côte d'Ivoire N estl é C ô t e d ’Ivoire A bi djan 85.8% • Egypt N estlé E g yp t S. A . E . C airo 100% • D olc e S. A . E . C airo 100% • Socié t é d es e aux m in érales V it t or S. A . E . C airo 98.6% • Gabon N estl é G a b on Libreville 90% • Ghana N estl é G hana Lt d Te m a- A c cra 51% • Guinea N estl é G uin é e Cona kry 99% • Kenya N estl é F oo ds K e nya Lt d N airobi 100% • M auritius N estl é ’s Pro d u c ts ( M a uritius) Lt d Port Louis 100% • M orocco N estl é M aro c S. A . E l J a di d a 94.5% • Nigeria N estl é N i g eria PL C Ilup eju-Lagos 61.6% • Senegal N estl é S é n é g al D a kar 100% • Tunisia N estl é Tu nisi e Tunis 59.2% • Zimbabwe N estl é Zi m b a b w e (Pv t) Lt d H arare 100% .

A m e r i c a s

Argentina N estlé Arg e n tina S. A . B uenos A ires 100% • E co d e Los A n d es S. A . B uenos A ires 50.9% • A lcon La b oratorios Arg e n tina S. A .* B uenos A ires 100% • Bolivia N estl é B olivia S.r. l. La Paz 100% • Brazil N estl é Brasil Lt d a . São Paulo 100% • In d ustrias A li m e n ticias It acolo m y S/ A M ont es C laros 100% • C o m p anhia Pro d u t ora d e A li m e n t os It abuna 100% • Perri er V it t e l d o Brasil Lt d a . Rio d e J aneiro 100% • A lcon La b ora t orios d o Brasil Lt d a .* São Paulo 100% • Canada N estlé C ana d a , In c . N orth York-Toronto ( O nt ario) 100% • M id w est F oo d Pro d u c ts, In c . Toronto ( O nt ario) 50% • A lcon C ana d a , Inc .* M ississauga ( O nt ario) 100% • Chile N estl é C hil e S. A . Santiago d e C hile 99.5% • A lcon La b ora t orios C hile Li m it a d a* Santiago 100% • Colombia N estl é d e C olo m bia S. A . B ogot á 100% • C icolac Lt d a . B ogot á 100% • La b ora t orios A lcon d e C olo m bia S. A .* Sant afé d e B ogot á 100% • Costa Rica N estl é C ost a Ric a S. A . San José 100% • Cuba Los Port ales S. A . G uan e 50% • El Salvador N estl é E l Salva d or S. A . San Salva dor 100% • Ecuador N estlé E c ua d or S. A . Q uito 85% • N eslan dina S. A . Q uito 74.7% • United States N estlé U S A , In c . Los A ngeles (C alifornia) 100% • N estl é U S A - Pre p are d F oo ds D ivision , Inc . Solon ( O hio) 100% • N estlé U S A - B e v era g e D ivision , In c . Los A ngeles (C alifornia) 100% • N estlé Purina Pe t C are C o m p any St . Louis ( M issouri) 100% • FIS - N ort h A m erica , Inc . W il m ington (D ela w are) 100% • Th e Perrier Grou p of A m erica , In c . Gre en w ic h (Conne c tic ut) 100% • Gre at Sprin g W at ers of A m erica , In c . W il m ington (D ela w are) 100% • Po w erB ar, Inc . N e w J ersey 100% • Ic e Cre a m Part n ers U S A , LL C W il m ington (D ela w are) 100% • N estlé Pu erto Rico , In c . San J uan (Puerto Rico) 100% • A lcon La boratories, Inc .* F ort W orth (Texas) 100% • A lcon (Pu erto Rico), Inc .* San J uan (Puerto Rico) 100% • Guatemala N estl é G ua t e m ala S. A . Guat e m ala 100% • Honduras N estlé H on d ure ña S. A . Teguc igalpa 100% • Jamaica N estl é-J M P Ja m aic a Lt d Kingston 100% • Cre m o Lt d Kingston 100% • M exico N estl é M e xic o S. A . d e C . V . M éxico 100% • M anan tiales La A sun cion , S. A . d e C . V . M éxico 100% • A lcon La b oratorios S. A . d e C . V .* M éxico 100% • Nicaragua Pro d u c t os N estlé (N ic ara g ua) S. A . M anagua 100% • Panama N estlé Pana m á S. A . Pana m á C ity 100% • N estlé C arib b e an , In c . Pana m á C ity 100% • Paraguay N estlé Para g uay S. A . Asun c ión 100% • Peru N estl é Perú S. A . Li m a 93.1% • Dominican Republic N estlé D o m inic ana S. A . Santo D o m ingo 97% • Trinidad and Tobago N estl é Trinid a d a n d To b a g o Lt d Port of Spain 100% • Uruguay N estlé d e l Uru g uay S. A . M ont evid eo 100% • Venezuela N estl é V e n ezu e la S. A . C ara c as 100% • A lcon V e n ezu ela S.R.L.* C ara c as 100% .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

A s i a

Saudi Arabia Sa u di F oo d In d ustri es C o . Lt d J e d d ah 51% • A l M anhal W a t er F ac t ory C o . Lt d Riya d h 51% • Socié t é p our l'e xp ort a tio n d es pro d uits N estl é J e d d ah 100% • Bangladesh N estl é B an g la d esh Lt d D ha k a 100% • Cambodia N estl é D airy (C a m b o dia) Lt d Phno m Penh 80% • United Arab Emirates N estl é M id d l e E ast F Z E D ubai 100% • So ci é t é p our l'e xp ort a tion d es pro d uits N estl é D ubai 100% • India N estl é In dia Lt d N e w D elhi 54% • Indonesia P.T. N estl é In d on esia J a kart a 90.2% • Israel O S E M Inv est m e n ts Lt d Pe t a c h-Tikva 50.1% • Japan N estl é Ja p a n Lt d Kobe 100% • N estlé Ja p a n H oldin g Lt d Ibaragi 100% • N estlé In t erna tional F oo ds K.K. Kobe 100% • N estlé C onf e c tion ery K.K. Kobe 100% • Friskies K.K. Kobe 100% • FIS Ja p an K.K. Tokyo 100% • N estlé B e v era g e K.K. Kobe 100% • N estlé Sno w K.K. Tokyo 50% • N estlé Ja p an A d m inistra tion Lt d Kobe100% • A lcon Ja p an Lt d* Tokyo 100% • Jordan N estl é Jord a n Tra din g C o . Lt d A m m an 49% • Kuwait N estl é Ku w ait G e n eral Tra din g C o . W .L.L. Ku w ait 49% • Lebanon So ci é t é p our l’ E xp ort a tion d es Pro d uits N estl é S. A . B eyrouth 100% • Socié t é d es E a ux M in éral es Lib a n aises S. A .L. H azm ieh 100% • S O H A T D istrib u tion S. A .L. H azm ieh 49% • M alaysia N estl é ( M alaysia) B h d . Pe t aling J aya 60.7% • N estlé F oo ds ( M alaysia) Sd n . B h d . Pe t aling Jaya 60.7% • N estlé Pro d u c ts Sd n . B h d . Pe t aling J aya 60.7% • N estl é A se a n ( M alaysia) Sd n . B h d . Pe t aling J aya 57.7% • N estl é C old St ora g e ( M alaysia) Sd n . B h d . Pe t aling J aya 60.7% • Pakistan N estl é M ilk p ak Lt d Lahore 59.1% • Philippines N estl é Philip pin es, In c . C abuyao 100% • G oya, Inc . M anila 99.8% • H id d e n Sprin gs & Perrier, Inc . M a k ati C ity 100% • A lcon La b ora t ories (Philip pin es) In c .* M anila 100% • Republic of Korea N estl é Kore a Lt d C h eongju 100% • A lcon Kore a Lt d* Seoul 100% • FIS Kore a Lt d Seoul 100% • People’s Republic of China N estlé Shuan g c h e n g Lt d Shuangc h e ng 97% • N estlé D on g g uan Lt d D ongguan 100% • In t ernational F oo d C orp ora tion Lt d G uangzhou 100% • N estl é Tianjin Lt d Tianjin 100% • N estl é Q in g d ao Lt d Q ing d ao 100% • N estlé Shan g hai Lt d Shanghai 95% • N estl é D airy F arm Tianjin Lt d Tianjin 100% • N estlé D airy F arm Q in g d ao Lt d Q ing d ao 100% • N estlé D airy F arm G uan gzhou Lt d G uangzhou 95% • G uan gzhou Re frig erat e d F oo ds Lt d G uangzhou 90% • Shan g hai F uller F oo ds C o . Lt d Shanghai 100% • Shan g hai N estl é Pro d u c t S ervic es Lt d Shanghai 97% • Shan g hai Totole F lavourin g F oo d C o . Lt d Shanghai 80% • Shan g hai Jiale F lavourin g F oo d Sal es C o . Lt d Shanghai 80% • N estlé Sourc e Shan g hai Lt d Shanghai 100% • N estlé H on g Kon g Lt d H ong Kong 100% • N estlé D istrib u t ors Lt d H ong Kong 100% • A lcon (C hina) O p h t hal m ic Pro d u c t C o . , Lt d* B eijing 100% • A lcon H on g Kon g Lt d* H ong Kong 100% • Singapore N estl é Sin g a p ore (Pt e) Lt d Singapore 100% • FIS A sia Pa cific S ervic es (Pt e) Lt d Singapore 100% • A lcon Pt e . Lt d* Singapore 100% • Sri Lanka N estl é La nka Lt d Colo m bo 90.2% • Syria N estl é Syria S. A . D a m as 100% • Socié t é p our l'e xp ort a tion d es pro d uits N estl é S. A . D a m as 100% • Taiwan N estl é Tai w a n Lt d Taipei 100% • A lcon Pharm ac e u ticals Lt d* Taip ei 100% • Thailand N estl é Pro d u c ts (Thailan d), In c . B angkok (Branc h) 100% • Q uality C off e e Pro d u c ts Lt d B angkok 49% • N estl é F oo ds (Th aila n d) Lt d B angkok 100% • N estl é Tra din g (Th aila n d) Lt d B angkok 49% • N estlé M an u fa c t urin g (Thailan d) Lt d B angkok 100% • N estlé (Thai) Lt d B angkok 100% • N estlé D airy (Thailan d) Lt d B angkok 100% • Perrier V it t e l (Th aila n d) Lt d B angkok 100% • A lcon La b ora t ories (Thailan d) Lt d* B angkok 100% • Vietnam N estl é V i e t n a m Lt d B ien H oa 100% • La V i e Join t V e n t ure C o m p a ny Long A n 65% .

O c e a n i a

Australia N estl é A ustralia Lt d Sydney 100% • Pe t ersvill e A ustralia Lt d M elbourne 100% • N estlé E c hu ca Pty Lt d M elbourne 100% • FIS A ustralia Pty Lt d Sydney 100% • A lcon La b ora t ories (A ustralia) Pty Lt d* Frenc hs F orest ( N S W ) 100% • Fiji N estl é (F iji) Lt d B a 74% • Ne w Caledonia N estl é N ouv e ll e-C al é d oni e S. A . N ou m é a 100% • Ne w Zealand N estl é N e w Z e ala n d Lt d A uc klan d 100% • Papua- New Guinea N estl é (P N G) Lt d Lae 100% • French Polynesia N estl é Polyn esia S. A . Pap e e t e 100% .

2. A ffilia t e d co m p anies for w hic h t h e m e t ho d of pro p ortiona t e consolid a tion is use d (se e “ Sco p e of consolid ation ”).

E u r o p e

Germany C .P. D . C ere al Part n ers D e u tsc hlan d G m b H & C o . O H G Frankfurt 50% • G ald erm a La b oratoriu m G m b H * Freiburg / Breisgau 50% • Spain C ere al Part n ers Esp a ñ a A EIE Esplugas d e Llobregat 50% • La b oratorios G ald erm a S. A .* M a dri d 50% • France C ere al Part n ers Fran c e S N C N oisiel 50% • La b ora t oires G ald erm a S. A .* La D é fense 50% • Italy G ald erm a It alia S. p . A .* M ilano 50% • Poland Toru n-Pa cific C ere al Part n ers Polan d Sp . z. o . o . Torun 50% • Portugal C ere al A sso cia d os Port u g al A EIE O eiras 50% • Sweden G ald erm a N ordic A B* Brom m a 50% • United Kingdom C ere al Part n ers U K W el w yn G ard en C ity 50% • G ald erm a (U .K.) Lt d* A m ersha m 50% • Switzerland C C N R E uro p e S. A . Brüt tisellen 50% .

A m e r i c a s

Argentina G ald erm a Arg e n tina S. A .* B uenos A ires 50% • Brazil G ald erm a Brasil Lt d a* São Paulo 50% • Canada G ald erm a C a n a d a Inc .* M arkha m 50% • Chile C ere al es C P W C hil e Lt d a Santiago d e C hil e 50% • United States C o c a-C ola N estl é Re fresh m e n ts C o m p any, U S A A tlant a (G eorgia) 50% • G ald erm a La b oratories, In c .* F ort W orth (Texas) 50% • M exico C P W M é xic o S. d e R.L. d e C . V . M éxico 50% • G ald erm a M exico S. A . d e C . V .* M éxico 50% .

A s i a

People's Republic of China C o c a-C ola N estl é Re fresh m e n ts Pa cific H ong Kong 50% • Republic of Korea C o c a-C ola N estl é Re fresh m e n ts Kore a Seoul 50% • Thailand C o c a-C ola N estl é B e v era g es Th aila n d Lt d B angkok 33.7% .

Principal associated co m panies w hich operate in the food an d w ater sectors, w ith the exception of those m arked w ith an asterisk (*) w hich are en gaged in the cos m etics and derm atology sectors. For w hich the equity m ethod is used – see “ Scope of consolidation ” .

E u r o p e

Germany A lois D all m ayr Kaff e e O H G M ünc hen 50% • France L’ Oré al S. A .* Paris 26.3% • H ou d e bin e S. A . N oyal-Pontivy 50% • S. B . E . C . M . Socié t é d e B ou c ha g es E m b alla g es C on dition n e m e n t M o d ern e S. à .r.l. Lavard a c 50% .

A m e r i c a s

United States F loridian Grov es, In c . Ta m pa (F lorid a) 40% • Dreyer's Gran d Ic e Cre a m , In c . W il m ington (D ela w are) 24% .

A s i a

M alaysia Pre m i er M ilk ( M alaysia) Sd n . B h d . Kuala Lu m pur 25% .

C onsolid a t e d a c cou n ts of t h e N estlé Grou p

S u b - h o l d i n g , f i n a n c i a l a n d p r o p e r t y c o m p a n i e s

Germany N estlé U n t ern e h m un g e n D e u tsc hlan d G m b H Frankfurt 100% • Bahamas N estl é ’s H oldin gs Lt d N assau 100% • F ood Pro d u c ts (H oldin gs) Lt d N assau 100% • Belgium C e n tre d e C oordin a tion N estl é S. A . Bruxelles 100% • United States N estl é H oldin gs, In c . N or w alk (Conne c tic ut) 100% • N estl é C a pit al C orp ora tion N or w alk (Conne c tic ut) 100% • A lcon H oldin gs, Inc .* W il m ington (D ela w are) 100% • France N estl é E n tre prises S. A . N oisiel 100% • N estlé F inanc e Fran c e S. A . N oisiel 100% • Perrier V it t e l S. A . Paris 100% • So ci é t é Im m o bili ère d e N oisi e l N oisiel 100% • Panama U nilac , Inc . Pana m á C ity 100% • Portugal N estl é Port u g al S GPS, Ld a . Lind a-a-V elha 100% • United Kingdom N estl é H oldin gs (U . K.) PL C Croydon 100% • Friski es H oldin g (U K) Lt d Croydon 100% • Switzerland E n tre prises M a g g i S. A . Ke m pt thal 100% • N estlé F inan c e S. A . C ha m 100% • Riv e-Rein e S. A . La Tour- d e-Peilz 100% • S.I. E n B erg ère V e v ey S. A . V evey 100% • A lcon , Inc .* H ünenb erg 100% • G ald erm a Pharm a S. A .* Lausann e 50% .

T e c h n i c a l a s s i s t a n c e , r e s e a r c h a n d d e v e l o p m e n t c o m p a n i e s

N e s t e c L t d . , V e v e y ( S w i t z e r l a n d )

Te c h nic al, sci e n tifc , c o m m ercial a n d b usin ess assist an c e co m p any w h ose u nits, sp e cialise d in all are as o f t h e b usin ess, su p ply p erm an e n t kno w -ho w a n d assist a n c e t o o p era tin g co m p ani es in t h e Grou p w it hin t h e fra m e w ork of lic e n c e a n d e q uival e n t con tra c ts. It is also resp onsibl e for all sci e n tific rese arc h a n d t e c h nolo g ic al d e v e lo p m e n t , w hic h it u n d ert ak es itse lf or h as d on e on its b e h alf by its su bsidiary co m p anies. Th e co m p ani es an d u nits involv e d are:

R e s e a r c h c e n t r e s

France N estl é Rese arc h C e n tre Pla n t Sci e n c e Tours • Switzerland N estl é Rese arc h C e n t er Lausann e.

P r o d u c t T e c h n o l o g y C e n t r e s a n d R e s e a r c h & D e v e l o p m e n t c e n t r e s

Germany N estlé R&D C e n t er Le b e ns m it t e lforsc h u n g G m b H W ei ding • Côte d'Ivoire C e n tre R&D N estl é A bi djan • People’s Republic of China N estlé R&D C e n t er Shan g hai Lt d Shanghai • United States N estl é Pro d u c t Te c h nolo g y C e n t er N e w M ilford (Conne c tic ut) • N estlé R&D C e n t er, In c . M arysville (O hio) • N estlé R&D C e n t er, In c . Solon ( O hio) • Friski es Pro d u c t Te c h nolo g y C e n t er St . Jose ph ( M issouri) • A lcon Rese arc h Lt d* F orth W orth (Texas) • G ald erm a R&D Inc .* City of D over ( N e w J ersey) • France N estl é Pro d u c t Te c hnolo g y C e n tre B e auvais • N estl é Pro d u c t Te c h nolo g y C e n tre Lisieux • C e n tre R&D Friski es A m iens • G ald erm a R&D S. n . c .* Sophia A ntipolis • United Kingdom N estl é Pro d u c t Te c h nolo g y C e n tre York • Singapore N estl é R&D C e n t er (Pt e) Lt d Singapore • Switzerland N estl é Pro d u c t Te c h nolo g y C e n tre Ke m pt thal • N estl é Pro d u c t Te c hnolo g y C e n tre Konolfingen • N estl é Pro d u c t Te c h nolo g y C e n tre Orbe .

135t h A nnual re p ort of N estlé S. A .

In co m e st at e m e n t for t h e ye ar 2001

In m illions of C H F N o t es 2001 2000

Income In c o m e fro m Grou p c o m p a ni es 1 3'815 4'761 In t erest in co m e 2 765 550 Profit on disp osal of fix e d asse ts 3 837 1'460 O t h er In co m e 21 22 Tot al In co m e 5'438 6'793

Expenses Inv est m e n t w rit e d o w ns 4 791 887 A d m inistra tion an d ot h er e xp e nses 5 157 135 In t erest e xp e nse 6 44 26 To t al e xp e nses b e fore t ax es 992 1'048

Profit before taxes 4'446 5'745 Tax es 7 298 380 Profit for the year 19 4'148 5'365

135t h A nnual re p ort of N estlé S. A .

B alan c e sh e e t as at 31st D e c e m b er 2001 b e fore a p pro pria tions

In m illions of C H F N o t es 2001 2000

Assets

Current assets Liq uid asse ts 8 5'519 2'523 Re c eiva bles 9 489 405 Pre p ay m e n ts an d a c cru e d in co m e 45 66 Tot al c urre n t asse ts 6'053 2'994

Fixed assets F inan cial asse ts 10 18'520 19'258 In t an gible asse ts 13 - - Tan g ible fix e d asse ts 14 - - Tot al fix e d asse ts 18'520 19'258

Total assets 24'573 22'252

Liabilities and equity

Liabilities Short t erm p aya bles 15 654 213 A c cruals an d d e f erre d in co m e 177 233 Lon g t erm p aya bl es 16 255 256 Provisions 17 789 873 Total liabilities 1'875 1'575

Equity Share c a pit al 18/19 404 404 Le g al reserv es 19 6'392 6'392 Sp e cial reserv e 19 11'752 8'512 Re t ain e d e arnin gs 19 4'150 5'369 Tot al e q uity 22'698 20'677

Total liabilities and equity 24'573 22'252

135t h A nnual re p ort of N estlé S. A .

A nn ex to t h e annual ac counts of N estlé S. A .

Accounting policies

General N estlé S. A . (t h e C o m p any) is t h e ulti m at e holdin g co m p any of t h e N estlé Grou p w hic h co m prises su bsidiaries, associa t e d co m p anies an d join t v e n t ures t hrou g hou t t h e w orld . Th e ac coun ts are pre p are d in a c cord an c e w it h a c cou n tin g prin cipl es re q uire d by S w iss la w . Th e y are also pre p are d un d er t h e hist orical cost conv e n tion an d on t h e a c cruals b asis. A s fro m 1st Jan uary 2001, all loans a d van c e d t o Grou p co m p anies are consid ere d as lon g t erm inv est m e n ts an d are prese n t e d in F inan cial asse ts. Th e co m p ara tiv e fig ures for 2000 hav e b e e n rest a t e d .

Foreign currency translation Transa c tions in fore i g n c urre n ci es are re cord e d a t t h e ra t e of e xc han g e a t t h e d a t e of t h e transa c tion or, if h e d g e d for w ard , a t t h e ra t e of e xc han g e u n d er t h e re la t e d for w ard con tra c t . A sse ts an d lia bilities in foreig n c urre n cies are transla t e d a t y e ar e n d ra t es. A ny resultin g exc han g e diff ere n c es are in clu d e d in t h e resp e c tiv e in co m e st at e m e n t ca p tions d e p e n din g u p on t h e nat ure of t h e un d erlyin g transac tions. Th e a g gre g a t e unre alise d exc han g e diff ere n c e is calc ulat e d by re f ere n c e to original transac tion d a t e e xc han g e ra t es an d in clu d es h e d g in g transac tions. W h ere t his giv es rise to a n e t loss, it is c harg e d to t h e in co m e st at e m e n t w hilst a n e t g ain is d e f erre d .

Hedging Th e C o m p a ny uses for w ard fore i g n e xc h a n g e con trac ts, o p tions, finan cial fu t ures an d c urre n cy s w a ps t o h e d g e fore i g n c urre n cy flo w s an d p ositions. U nre alise d foreig n exc han g e diff ere n c es on h e d gin g instru m e n ts are m a t c h e d an d ac coun t e d for w it h t hose on t h e un d erlyin g asse t or lia bility. Lon g t erm loans, in foreig n c urre n cies, use d to finan c e inv est m e n ts in p articip a tions are g e n erally not h e d g e d . Th e C o m p any also uses in t erest ra t e s w a ps t o m ana g e in t erest ra t e risk . Th e s w a ps are a c cou n t e d for a t fair valu e a t e a c h b alan c e sh e e t d a t e an d c han g es in t h e m ark e t valu e are re cord e d in t h e in co m e st at e m e n t .

Income statement In co m e d u e a t t h e b alan c e sh e e t d a t e , b u t not c urre n tly transf era ble is re co g nise d only u p on re c e ip t . D ivid e n ds p aid ou t of pre-a c q uisition profits are not in clu d e d u n d er in co m e fro m Grou p co m p anies; inst e a d t h e y are cre dit e d a g ainst t h e carryin g valu e of t h e p articip ation . In a c cord an c e w it h S w iss la w an d t h e C o m p any's articles of associa tion , divid e n ds are tre a t e d as an a p pro pria tion of profit in t h e y e ar in w hic h t h e y are ra tifie d a t t h e A n n ual G e n eral M e e tin g an d su bse q u e n tly p aid , ra t h er t han as an a p pro pria tion of profit in t h e y e ar t o w hic h t h e y relat e .

Taxes This ca p tion in clu d es t axes on profit , ca pit al an d w it h holdin g t ax es on transf ers fro m Grou p co m p anies.

Financial assets Th e carryin g valu e of p articip a tions an d loans co m prises t h e cost of inv est m e n t , exclu din g t h e in cid e n t al costs of ac q uisition , less any w rit e d o w ns. Particip ations locat e d in coun tries w h ere t h e p olitical, e cono m ic or m on e t ary sit uation m ig h t b e consid ere d t o c arry a gre a t er t han norm al le v e l of risk are c arrie d a t a no m inal valu e of on e fran c . Particip ations an d loans are w rit t e n d o w n on a conservativ e b asis, t akin g in to ac coun t t h e profit a bility of t h e co m p any con c ern e d . M ark e t a ble se c urities are valu e d a t t h e lo w er of cost an d m ark e t valu e . O w n shares h eld to cov er o p tion rig h ts in favour of m e m b ers of t h e Grou p's M a n a g e m e n t are c arri e d a t e x ercise pric e if lo w er t han cost . O w n sh ares h e ld for tra din g p urp oses are c arri e d a t c ost as are o w n sh ares e arm ark e d t o c ov er w arra n ts a t t a c h e d t o a b on d issu e of an affilia t e d co m p any.

Intangible assets Tra d e m arks an d ot h er in d ustrial pro p erty rig h ts are w rit t e n off on ac q uisition or exc e p tionally ov er a lon g er p erio d . In t h e consolid a t e d a c cou n ts of t h e Grou p t his it e m has a diff ere n t tre a t m e n t .

Tangible fixed assets Th e C o m p any o w ns lan d an d b uildin gs w hic h hav e b e e n d e pre cia t e d in t h e p ast t o on e fran c . O ffic e furnit ure an d e q uip m e n t is fully d e pre cia t e d on ac q uisition .

135t h A nnual re p ort of N estlé S. A .

Provisions Provisions re co g nise con tin g e n cies w hic h m ay arise a n d w hic h h av e b e e n pru d e n tly provid e d . A provision for uninsure d risks is constit u t e d to cov er g e n eral risks not insure d w it h t hird p arties, su c h as conse q u e n tial loss. Provision for S w iss t ax es is m a d e on t h e b asis of t h e C o m p any's t axa bl e c a pit al, reserv es a n d profit for t h e y e ar. A g e n eral provision is m ain t ain e d to cov er p ossible foreig n taxes lia bilities.

Employee benefits E m ploy e es are eligible for re tire m e n t b e n e fits u n d er a d e fin e d b e n e fit plan provid e d t hrou g h se p ara t e fu n ds.

Prepayments and accrued income Pre p ay m e n ts an d a c cru e d in co m e co m prise p ay m e n ts m a d e in a dvan c e relatin g to t h e follo w in g y e ar, an d in co m e relatin g to t h e c urre n t ye ar w hic h w ill not b e re c eiv e d un til aft er t h e b alan c e sh e e t d a t e (su c h as in t erest re c eiva ble on loans or d e p osits). Re valua tion g ains on o p e n for w ard e xc h a n g e c on tra c ts a t y e ar e n d ra t es, as w ell as t h e result of t h e valuation of in t erest rat e s w a ps, are also in clu d e d in t his c a p tion .

Accruals and deferred income A c cru als a n d d e f erre d in c o m e c o m prise e xp e nses relatin g to t h e c urre n t ye ar w hic h w ill not b e p aid un til aft er t h e b alan c e sh e e t d at e an d in co m e re c eiv e d in a dvan c e , relatin g to t h e follo w in g y e ar. Re valua tion losses on o p e n for w ard e xc han g e con tra c ts a t y e ar e n d ra t es, as w e ll as t h e result of t h e valua tion of in t erest ra t e s w a ps, are also inclu d e d in t his ca p tion .

135t h A nnual re p ort of N estlé S. A .

N ot es to t h e annual ac coun ts

1. Income from Group companies This re prese n ts divid e n ds of t h e c urre n t an d prior y e ars an d ot h er n e t in co m e fro m Grou p co m p anies.

2. Interest income In m illions of C H F 2001 2000

N e t result on loans t o Grou p co m p anies 634 456 O t h er 131 94

765 550

Th e i m prov e m e n t is m ainly d u e to t h e favoura ble e volu tion of foreig n exc han g e h e d g e instru m e n ts as co m p are d w it h last y e ar. In co m e re c e iv e d in 2001, b ot h on t h e loans an d on inv est m e n ts, has also in cre ase d .

3. Profit on disposal of fixed assets This re prese n ts m ainly t h e n e t g ains re alise d on t h e sale of p articip a tions t o Grou p co m p anies as p art of re org anisa tion pro gra m m es, as w e ll as on t h e sale of tra d e m arks an d ot h er in d ustrial pro p erty rig h ts pre viously w rit t e n d o w n .

4. Investment write downs In m illions of C H F 2001 2000

Particip ations an d loans 389 664 Tra d e m arks an d ot h er in d ustrial pro p erty rig h ts 402 223

791 887

Th e w rit e d o w ns of p articip a tions an d loans in 2001 d eriv e fro m a conserva tiv e p olicy of valua tion , b ase d on t h e p olitical, e cono m ic an d m on e t ary sit uation of t h e coun tries w h ere t h e p articip ations are loc a t e d , as w e ll as on t h e profit a bility of t h e co m p anies con c ern e d . Th e w rit e d o w ns of tra d e m arks an d ot h er in d ustrial pro p erty rig h ts in 2001 re f er m ainly t o tra d e m arks a c q uire d fro m Grou p co m p anies.

135t h A nnual re p ort of N estlé S. A .

5. Administration and other expenses In m illions of C H F 2001 2000

Salari es a n d w e lfare e xp e nses 53 41 O t h er e xp e nses 104 94

157 135

6. Interest expense In m illions of C H F 2001 2000

In t erest on lon g t erm d e b e n t ure 15 17 O t h er in t erest 29 9

44 26

7. Taxes In clu d es w it h holdin g t ax es on in co m e fro m fore ig n sourc es, as w e ll as S w iss t ax es for w hic h a d e q ua t e provisions hav e b e e n est a blish e d .

8. Liquid assets In m illions of C H F 2001 2000

C ash an d c ash e q uivale n ts 3'350 1'331 Short t erm inv est m e n ts 155 - M ark e t a ble se c urities 2'014 1'192

5'519 2'523

135t h A nnual re p ort of N estlé S. A .

9. Receivables In m illions of C H F 2001 2000

A m ou n ts o w e d by Grou p c o m p a ni es C urre n t a c cou n ts 396 374 Provision for a m oun ts not c urre n tly transf era ble - -

396 374 O t h er re c eiva bles (in clu din g w it hholdin g t ax) 93 31

489 405

Th e a m ou n t o w e d t o t h e C o m p any in resp e c t of S w iss w it h holdin g t ax w as re c e iv e d aft er t h e y e ar- e n d .

10. Financial assets In m illions of C H F 2001 2000

Particip a tions in Grou p co m p anies (se e not e 11) 10'848 10'900 Loans t o Grou p co m p ani es (se e no t e 12) 6'343 7'114 O w n sh ares 1'014 1'029 O t h er inv est m e n ts 315 215

18'520 19'258

O w n sh ares of t h e C o m p a ny are: - h e ld in ord er t o allo w t h e e x ercise of o p tion rig h ts by m e m b ers of t h e Grou p ’s M ana g e m e n t

(852 660 o p tions w ere ou tst an din g a t t h e close of 2001, of w hic h 427 260 m ay b e e x ercise d in t h e y e ar 2002);

- e arm ark e d t o cov er w arran ts a t t a c h e d t o a b on d issu e of an affilia t e d co m p any (1 294 190 sh ares);

- a c q uire d for tra din g p urp oses (1 306 988 sh ares).

O t h er inv est m e n ts in clu d e t h e su bscrip tion of C H F 100 m illion to t h e ca pit al of Crossair A G , of w hic h 30% hav e b e e n p aid-u p in 2001. Th e b alan c e of C H F 70 m illion is sho w n u n d er Short t erm p aya bles an d w ill b e p aid by t h e e n d of M arc h 2002.

135t h A nnual re p ort of N estlé S. A .

11. Participations in Group companies In m illions of C H F 2001 2000

A t 1st January 10'900 7'373 In cre ase 325 4'191 W rit e d o w ns (377) (664) A t 31st D e c e m b er 10'848 10'900

Th e in cre ase in p articip a tions re prese n ts in p artic ular: - a d ditional fun din g , t hrou g h ca pit al in cre ases, of a nu m b er of Grou p co m p anies m ainly in Turk e y

an d Pe o ple's Re p u blic of C hina; - t h e p urc hase , on t h e st ock e xc han g e or fro m t hird p arties, of shares of so m e of our affilia t e d

co m p anies, to in cre ase t h e p articip ations alre a dy h eld , m ainly in In d on esia , In dia , Thailan d an d M alaysia;

- t h e p urc hase fro m affiliat e d co m p anies of c ert ain existin g p articip ations.

Th e carryin g valu e of p articip ations con tinu es to re prese n t a conservativ e valuation havin g re g ard to b ot h t h e in co m e re c e iv e d by t h e C o m p any an d t h e n e t asse ts of t h e Grou p co m p anies con c ern e d .

A list of t h e m ost i m p ort an t co m p anies h eld , eit h er dire c tly by N estlé S. A . or in dire c tly t hrou g h ot h er Grou p co m p anies, w it h t h e p erc e n t a g e of t h e ca pit al con trolle d , is giv e n in t h e se c tion “ C onsolid at e d a c cou n ts of t h e N estlé Grou p ” .

A C ana dian affilia t e has b e e n gran t e d o p tions t o p urc hase shares in c ert ain Grou p co m p anies sit uat e d ou tsid e C on tin e n t al E uro p e .

12. Loans to Group companies In m illions of C H F 2001 2000

A t 1st January 7'114 7'854 N e w loa ns 1'799 1'920 Re p ay m e n ts a n d w rit e d o w ns (2'575) (2'434) Re alise d e xc han g e diff ere n c es 57 28 U nre alise d e xc han g e diff ere n c es (52) (254) A t 31st D e c e m b er 6'343 7'114

A s fro m 1st Jan uary 2001, all loans a d van c e d t o Grou p co m p anies are consid ere d as lon g t erm inv est m e n ts an d are prese n t e d in F inan cial asse ts. Th e co m p ara tiv e fig ures for 2000 hav e b e e n rest a t e d for t h e re classific a tion of it e m s pre viously prese n t e d as short t erm loans t o Grou p co m p anies (C H F 2 832 m illion).

135t h A nnual re p ort of N estlé S. A .

13. Intangible assets A ll in t an gible asse ts hav e b e e n fully w rit t e n off.

14. Tangible fixed assets Th ese are prin cip ally t h e lan d an d b uildin gs a t C ha m an d a t La Tour-d e-Peilz. N estlé Suisse S. A . , t h e prin cip al o p eratin g co m p any in t h e S w iss m ark e t , is t h e t e nan t of t h e b uildin g at La Tour-d e-Peilz. Th e " E n B erg ère " h e a d offic e b uildin g in V e v e y is h e ld by a pro p erty co m p any, w hic h is w holly o w n e d by N estl é S. A . Th e fire insuran c e valu e of b uildin gs, furnit ure an d offic e e q uip m e n t a m oun t e d to C H F 22 m illion at 31st D e c e m b er 2001 an d 2000.

15. Short term payables In m illions of C H F 2001 2000

A m ou n ts o w e d t o Grou p c o m p a ni es 559 183 O t h er p aya bl es 95 30

654 213

16. Long term payables In m illions of C H F 2001 2000

A m ou n ts o w e d t o Grou p c o m p a ni es 255 256 O t h er p aya bl es - -

255 256

A m ou n ts o w e d t o Grou p co m p ani es re prese n t a lon g-t erm b on d issu e d in 1989, w hose c arryin g valu e d e cre ase d by C H F 1 m illion t o C H F 255 m illion as a result of an u nre alise d e xc han g e diff ere n c e arisin g in 2001.

135t h A nnual re p ort of N estlé S. A .

17. Provisions In m illions of C H F 2001 2000

Provision for uninsure d risks 475 475 Provision for exc han g e risks 53 162 Provision for S w iss an d fore ig n t ax es 229 203 O t h er provisions 32 33

789 873

In t h e consolid a t e d a c cou n ts of t h e Grou p t h e provisions are re co g nise d in a c cord an c e w it h In t ernational A c coun tin g St an d ards (IA S). Th e provision for exc han g e risks in clu d es t h e unre alise d n e t exc han g e g ains on t h e re valuation of fore i g n e xc han g e p ositions an d any associa t e d for w ard cov er a t t h e y e ar-e n d .

18. Share capital 2001 2000

O n 11t h Ju n e , t h e re g ist ere d shares w ere split in a t e n-for- on e relationship . A s a result , t h e share ca pit al of N estlé S. A . is no w stru c t ure d as follo w s:

N u m b er of re g ist ere d shares of no m inal valu e C H F 1 e a c h (C H F 10 in 2000) 403'520'000 40'352'000

In m illions of C H F 404 404

A c cordin g to article 6 of t h e C o m p any’s articles of association , no nat ural p erson or le g al e n tity can b e re g ist ere d as a share hold er w it h votin g rig h ts for shares h e ld dire c tly or in dire c tly for m ore t han 3% of t h e share ca pit al. In a d dition , article 14 provid es t hat , on exercisin g t h e votin g rig h ts, no share hold er, t hrou g h shares o w n e d or re prese n t e d , m ay a g gre g a t e , dire c tly or in dire c tly, m ore t han 3% of t h e t ot al share ca pit al. A t 31st D e c e m b er 2001, t h e Share Re g ist er sho w e d 176 631 re g ist ere d share hold ers. If u n proc esse d a p plic a tions for re g istra tion an d t h e in dire c t hold ers of shares u n d er A m eric an d e p osit ary re c e ip ts are also t ak e n in t o a c cou n t , t h e t ot al n u m b er of share hold ers pro b a bly e xc e e ds 250 000. Th e C o m p any w as not a w are of any share hold er holdin g , dire c tly or in dire c tly, 3% or m ore of t h e share ca pit al.

Conditional increase in share capital A c cordin g t o t h e articles of associa tion , t h e share c a pit al c an b e in cre ase d , by t h e e x ercise of conv ersion or o p tion rig h ts, by a m axi m u m of C H F 10 000 000 t hrou g h t h e issu e of a m axi m u m of 10 000 000 re g ist ere d shares w it h a no m inal valu e of C H F 1 e a c h , fully p aid-u p . Th us t h e B oard of D ire c tors has at its disp osal a flexible instru m e n t e na blin g it , if n e c essary, to finan c e t h e ac tivities of t h e C o m p any t hrou g h conv ertible or o p tion loans.

135t h A nnual re p ort of N estlé S. A .

19. Changes in equity In m illions of C H F

Sh are c a p it al

G e n eral reserv e (a)

Reserv e for o w n sh ares (a)(b)

Sp e cial reserv e

Re t ain e d e arnin gs To t al

A t 1st January 2001 404 4'160 2'232 8'512 5'369 20'677 A p pro pria tion of profit t o sp e cial reserv e 3'195 (3'195) Profit for t h e y e ar 4'148 4'148 D ivid e n d for 2000 (2'127) (2'127) M ov e m e n t of o w n shares (356) 356

D ivid e n d on o w n shares h e ld on t h e p ay m e n t d a t e of 2000 divid e n d 37 (37)

D ivid e n d on o w n shares in resp e c t of w hic h t h e corresp on din g o p tion rig h ts w ere no t e x ercise d by t h e p ay m e n t d a t e of 2000 divid e n d

8 (8) A t 31st D e c e m b er 2001 404 3'804 2'588 11'752 4'150 22'698

(a) Th e g e n eral reserv e a n d t h e reserv e for o w n sh ares c onstit u t e t h e l e g al reserv es.

(b) S e e n o t e 20

135t h A nnual re p ort of N estlé S. A .

20. Reserve for own shares A t 31st D e c e m b er 2000, t h e reserv e for o w n shares a m ou n tin g t o C H F 2 232 m illion , re prese n t e d t h e cost of 7 852 620 fre e ly availa bl e shares a c q uire d by a Grou p co m p any, as w e ll as 939 310 shares reserv e d t o cov er o p tion rig h ts in favour of m e m b ers of t h e Grou p's M ana g e m e n t , 1 294 190 shares e arm ark e d t o cov er w arran ts a t t a c h e d t o a b on d issu e of an affilia t e d co m p any an d 4 904 150 shares h e ld for tra din g p urp oses.

O n 11t h Ju n e 2001, t h e re g ist ere d shares w ere split in a t e n-for-on e re la tionship . Th e n u m b er of o w n shares, u p t o t his d a t e , has b e e n rest a t e d .

D urin g t h e y e ar, a t ot al of 3 299 300 shares hav e b e e n a c q uire d a t a cost of C H F 1 133 m illion (of w hic h 2 233 490 shares are t o cov er w arran ts a t t a c h e d t o a n e w b on d issu e of an affilia t e d co m p any) an d 2 425 116 shares hav e b e e n sold for a t ot al a m ou n t of C H F 875 m illion (of w hic h 79 930 shares re la t e d t o o p tions e x ercise d d urin g t h e y e ar).

A t 31st D e c e m b er 2001, t h e share holdin g of a Grou p co m p any w as u n c han g e d (7 852 620 shares a t an a c q uisition cost of C H F 31.7 m illion). Th e B oard of D ire c t ors, has d e cid e d t ha t t h ese shares w ill b e use d t o cov er o p tion rig h ts in favour of t h e Grou p's M ana g e m e n t fro m 2001 (1 338 806 o p tions hav e b e e n gran t e d in 2001). A s lon g as t h ese shares are h e ld by t h e Grou p co m p any, t h e y w ill b e re cord e d in t h e Share Re gist er as b ein g w it hou t votin g rig h ts an d w ill not rank for divid e n ds. In a d dition , 3 631 494 sh ares w ere h e ld for tra din g p urp oses, 852 660 sh ares w ere reserv e d t o c ov er o p tion ri g h ts gran t e d in pre vious y e ars an d 3 527 680 shares w ere e arm ark e d t o cov er w arran ts a t t a c h e d t o b on d issu es of an affilia t e d co m p any. A s lon g as t h e o p tions an d w arran ts are not e x ercise d , or t h e shares sold , t h ese shares are also re cord e d in t h e Share Re gist er as b ein g w it hou t votin g rig h ts an d d o not rank for divid e n ds.

Th e t ot al of 15 864 454 o w n shares h e ld a t 31st D e c e m b er 2001 re prese n ts 3.9% of N estlé S. A . share ca pit al.

21. Contingencies A t 31st D e c e m b er 2001 an d 2000, t h e t ot al of t h e g uaran t e es for cre dit facilities gran t e d t o Grou p co m p anies, t o g e t h er w it h t h e b uy-b a ck a gre e m e n ts re la tin g t o not es issu e d , a m ou n t e d t o C H F 6 444 m illion an d C H F 5 031 m illion , resp e c tiv ely.

135t h A nnual re p ort of N estlé S. A .

Pro p ose d a p pro pria tion of profit

In C H F 2001 2000

Retained earnings B ala n c e brou g h t for w ard 2'358'697 4'188'706 Profit for t h e y e ar 4'148'374'076 5'365'160'086

4'150'732'773 5'369'348'792

W e propose the following appropriations: A llocation to t h e sp e cial reserv e 1'620'000'000 3'195'000'000

D ivid e n d for 2001, C H F 6.40 p er sh are on 387 655 546 shares (2000: C H F 55.- on 38 852 973 shares) 2'480'995'494 2'136'913'515

D ivid e n d for 2001, C H F 6.40 p er sh are on 427 260 shares reserv e d for t h e o p tion rig h ts w hic h m ay b e exercise d in t h e y e ar 2002, on 3 527 680 shares t o cov er w arra n ts a t t a c h e d t o b on d issu es a n d on 3 631 494 sh ares h e ld for tra din g p urp oses (a) (2000: C H F 55.- on 637 756 sh ares) 48'553'178 35'076'580 (b)

4'149'548'672 5'366'990'095

Balance to be carried forward 1'184'101 2'358'697

If you a c c e p t t his pro p osal, t h e gross divid e n d w ill a m ou n t t o C H F 6.40 p er share . A ft er d e d u c tion of t h e f e d eral w it h holdin g t ax of 35% , a n e t a m ou n t of C H F 4.16 p er share w ill b e p aya ble as fro m W e d n esd ay, 17t h A pril 2002, by b ank transf er t o t h e share hold er's a c cou n t or by c h e q u e , in a c cord an c e w it h instru c tions re c e iv e d fro m t h e share hold er.

C ha m and V evey, 27th F ebruary 2002 Th e B oard of D ire c t ors

(a) Th e d ivid e n ds o n t h ose sh ares for w hic h t h e o p tio n ri g h ts w ill n o t h av e b e e n e x er- cise d by t h e d a t e o f t h e divid e n d p ay m e n t w ill b e tra nsf erre d t o t h e sp e cial reserv e . D ivid e n ds o n sh ares h e ld for tra din g p ur- p oses a n d t o c ov er w arra n ts issu e d , a n d w hic h are still h e ld a t t h e d a t e o f t h e divid e n d p ay m e n t w ill also b e tra nsf erre d t o t h e sp e cial reserv e .

(b) O f t h e t o t al o f C H F 35 076 580, C H F 31 680 w ere a c t u ally p aid as divi- d e n ds, w hilst t h e b ala n c e o f C H F 35 044 900 has b e e n tra nsf erre d t o t h e sp e cial reserv e .

135t h A nnual re p ort of N estlé S. A .

Re p ort of t h e st a t u t ory au dit ors to t h e G e n eral M e e tin g of N estlé S. A .

A s st a t u t ory au dit ors, w e hav e au dit e d t h e ac coun tin g re cords an d t h e finan cial st a t e m e n ts (b alan c e sh e e t , in co m e st a t e m e n t an d an n e x) of N estlé S. A . for t h e y e ar e n d e d 31st D e c e m b er 2001. Th ese finan cial st a t e m e n ts are t h e resp onsibility of t h e B oard of D ire c tors. O ur resp onsibility is to e xpress an o pinion on t h ese finan cial st a t e m e n ts b ase d on our au dit . W e con firm t ha t w e m e e t t h e le g al re q uire m e n ts con c ernin g prof essional q ualific a tion an d in d e p e n d e n c e . O ur au dit w as con d u c t e d in a c cord an c e w it h au ditin g st an d ards pro m ulg a t e d by t h e S w iss prof ession , w hic h re q uire t ha t an au dit b e plan n e d an d p erform e d t o o b t ain re asona bl e assuran c e a b ou t w h e t h er t h e finan cial st a t e m e n ts are fre e fro m m a t erial m isst a t e m e n t . W e hav e e xa m in e d on a t est b asis e vid e n c e su p p ortin g t h e a m oun ts an d disclosures in t h e finan cial st at e m e n ts. W e hav e also assesse d t h e ac coun tin g prin ciples use d , sig nifican t esti m at es m a d e an d t h e ov erall finan cial st a t e m e n t prese n t a tion . W e b e lie v e t ha t our au dit provid es a re asona ble b asis for our o pinion . In our o pinion , t h e a c cou n tin g re cords, finan cial st a t e m e n ts an d t h e pro p ose d a p pro pria tion of re t ain e d e arnin gs co m ply w it h S w iss la w an d t h e co m p any’s articles of in corp ora tion . W e re co m m e n d t ha t t h e finan cial st a t e m e n ts su b m it t e d t o you b e a p prov e d .

S.R. C orm ack B . A . M a t h ers C hart ere d a c cou n t an t C hart ere d a c cou n t an t

A u ditors in c harg e Lon d on an d Zuric h , 27t h F e bruary 2002

135t h A nnual re p ort of N estlé S. A .

A g e n d a for t h e 135t h Ordinary G e n eral M e e tin g of N estlé S. A .

Th ursd ay 11t h A pril 2002 a t 3.00 p . m . a t t h e “ Palais d e B e aulie u ” , Lausann e

1 A n n ual re p ort , re p ort of t h e au dit ors 1a 2001 an n ual re p ort an d a c cou n ts of N estlé S. A .;

re p ort of t h e au dit ors 1b 2001 consolid a t e d a c cou n ts of t h e N estlé Grou p;

re p ort of t h e N estl é Grou p au dit ors

2 Re l e ase of t h e B oard of D ire c t ors an d of t h e M ana g e m e n t

3 D e cision on t h e a p pro pria tion of profits resultin g fro m t h e b alan c e sh e e t of N estlé S. A .

4 E le c tions t o t h e B oard of D ire c t ors Pe t er Bra b e ck-Le t m a t h e (t erm of offic e for 5 y e ars) Vre ni Sp o erry (t erm of offic e for 2 y e ars) Prof . V ernon R. You n g (t erm of offic e for 5 y e ars)

5 E le c tion of t h e au ditors (annual ac coun ts of N estlé S. A . an d consolid a t e d a c cou n ts of t h e N estlé Grou p): KP M G Klyn f e ld Pe a t M ar w ick G o erd e l er S. A . , Lon d on a n d Zurich (t erm of offic e for 3 y e ars)

Elections to the Board of Directors A t t h e G e n eral M e e tin g of 11t h A pril 2002, t h e t erm s as dire c t ors of M r. Pe t er Bra b e ck-Le t m a t h e an d M rs. Vre ni Sp o erry w ill e xpire . B ot h dire c t ors are e lig ible for re-e le c tion for a n e w t erm of fiv e y e ars. M r. Pe t er Bra b e ck-Le t m a t h e is st an din g for a n e w t erm of fiv e y e ars, w h ere as M rs. Vre ni Sp o erry h as e xpresse d t h e w ish t o st a n d for a n e w t erm of only t w o y e ars.

F urt h erm ore , t h e B oard of D ire c t ors is re co m m e n din g t hat t h e G e n eral M e e tin g ele c t as n e w dire c t or, also for a fiv e-y e ar t erm , Prof . V ernon R. Youn g , of British an d A m erican nationalities, Prof essor of N u tritional B ioc h e m estry a t t h e M assac huse t ts Instit u t e of Te c hnolo g y ( M IT) in B ost on/C a m brid g e , U S A .

N e xt Ordinary G e n eral M e e tin g: Th ursd ay 3rd A pril 2003 a t t h e “ Palais d e B e aulie u ” , Lausann e

135t h A nnual re p ort of N estlé S. A .

Im p ort an t d a t es

11t h A pril 2002 A n nou n c e m e n t of first q uart er 2002 sales fig ures 11t h A pril 2002 135t h Ordinary G e n eral M e e tin g , “ Palais d e B e aulie u ” , Lausan n e 17t h A pril 2002 Pay m e n t of t h e divid e n d 21st A u g ust 2002 Pu blica tion of t h e half-y e arly re p ort January/Jun e 2002 24t h O c t o b er 2002 A nnoun c e m e n t of first nin e m on t hs 2002 sales fig ures; A u t u m n press

con f ere n c e (V e v e y) 27t h F e bruary 2003 A nnoun c e m e n t of 2002 sales fig ures an d results; Sprin g press con f ere n c e

(V e v e y) 3rd A pril 2003 136t h Ordinary G e n eral M e e tin g , “ Palais d e B e aulie u ” , Lausan n e 16t h A pril 2003 A n nou n c e m e n t of first q uart er 2003 sales fig ures

135t h A nnual re p ort of N estlé S. A .

Share hold er in form a tion

Stock exchange listings A s of 31st D e c e m b er 2001, t h e re g ist ere d shares of N estlé S. A . w ere list e d on t h e follo w in g stock e xc han g es: S W X S w iss E xc han g e , Frankfurt , Lon d on a n d Paris.

A m eric an D e p osit ary Re c e ip ts (A D Rs) re prese n tin g N estl é S. A . shares are off ere d in t h e U S A by JP M org an C hase B ank.

Registered Offices N estlé S. A . , av e nu e N estlé 55, C H-1800 V e v e y (S w itzerlan d), t el. 021 924 21 11.

N estlé S. A . (Share Transf er O ffic e), Zu g erstrasse 8, C H-6330 C ha m (S w itzerlan d), t el. 041 785 20 20.

Further information F or any a d ditional in form a tion a b ou t t h e m ana g e m e n t re p ort , ple ase con t a c t N estlé S. A . , Inv estor Relations, av e nu e N estlé 55, C H-1800 V e v e y (S w itzerlan d), t el. 021 924 27 42, fax 021 924 28 13;

e-m ail: inv estor.relations@n estle . co m or visit t h e inv estor relations w e b sit e w w w .ir. n estle . co m

A s to inform ation con c ernin g t h e share re gist er (re g istra tions, transf ers, a d dress c han g es, divid e n ds, e t c .), ple ase con t ac t N estlé S. A . , Share Transf er O ffic e , Zu g erstrasse 8, C H-6330 C ha m (S w itzerlan d), t el. 041 785 20 20, fax 041 785 20 24.

Th e C o m p any off ers t h e p ossibility of d e p ositin g fre e of c harg e N estl é S. A . shares tra d e d on t h e S W X S w iss E xc han g e a t its Share Transf er O ffic e in C ha m .

N estlé U RL: h t t p:// w w w . n estle . co m