Vertical And Horizontal Analysis

Summaries

Annual Review 2016 Consolidated Financial Statements of the Nestlé Group 2016 150th Financial Statements of Nestlé S.A.

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Contents

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Highlights 2016 Key figures (consolidated) Financial review Extract from the Consolidated Financial Statements Consolidated income statement for the year ended 31 December 2016 Consolidated statement of comprehensive income for the year ended 31 December 2016 Consolidated balance sheet as at 31 December 2016 Consolidated cash flow statement for the year ended 31 December 2016 Consolidated statement of changes in equity for the year ended 31 December 2016 Extract from the Financial Statements of Nestlé S.A. Income statement for the year ended 31 December 2016 Balance sheet as at 31 December 2016 Proposed appropriation of profit Shareholder information

All sections should be read in connection with the Consolidated Financial Statements of the Nestlé Group 2016 and the 150th Financial Statements of Nestlé S.A. The Statutory Auditor’s Report on Financial Statements are available on page 136 and 178 of the Corporate Governance Report 2016, Compensation Report 2016, Financial Statements 2016. In the Financial Review, the acronyms in the tables at the beginning of each operating segment have the following meaning: – OG: organic growth – RIG: real internal growth – Margin: trading operating profit margin

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Highlights 2016

Organic growth at the high end of the industry but at the lower end of our expectations – Sales of CHF 89.5 billion. – 3.2% organic growth, continued strong real internal growth of 2.4%. – Trading operating profit margin up 30 basis points in constant currency, reported trading operating profit margin up 20 basis points to 15.3%. – Net profit of CHF 8.5 billion, impacted by several items, the largest one being a one-off non-cash adjustment to deferred taxes. – Underlying earnings per share in constant currency increased by 3.4%. – Operating cash flow improved by CHF 1.3 billion to CHF 15.6 billion (17.4% of sales) and free cash flow improved by CHF 200 million to CHF 10.1 billion (11.3% of sales). Continuing investing in future growth and operating efficiency – Targeting mid-single digit organic growth and significant structural cost savings by 2020. – Increase in restructuring costs. – Investment in brand support, digital marketing, Research and Development, and in the new nutrition and health platforms. – Maintaining a strong and resilient diversified portfolio. Nestlé’s commitment to creating value for society and for shareholders – Responsible and sustainable investments while continuing to reduce the environmental impact of our business. – Proposed dividend of CHF 7.2 billion for 2016, CHF 2.30 per share, an increase of 2.2%. 2017 Outlook In 2017, we expect organic growth between 2% and 4%. In order to drive future profitability, we plan to increase restructuring costs considerably in 2017. As a result, the trading operating profit margin in constant currency is expected to be stable. Underlying earnings per share in constant currency and capital efficiency are expected to increase.

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Key figures (consolidated)

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In millions of CHF (except for data per share and employees) Results Sales Trading operating profit as % of sales Profit for the year attributable to shareholders of the parent (Net profit) as % of sales Balance sheet and Cash flow statement Equity attributable to shareholders of the parent Net financial debt Ratio of net financial debt to equity (gearing) Operating cash flow as % of net financial debt Free cash flow (a) Capital expenditure as % of sales

2016

2015

89 469 13 693 15.3% 8 531 9.5%

88 785 13 382 15.1% 9 066 10.2%

64 590 13 913 21.5% 15 582 112.0% 10 108 4 010 4.5%

62 338 15 425 24.7% 14 302 92.7% 9 945 3 872 4.4%

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P Data per share Weighted average number of shares outstanding (in millions of units) Basic earnings per share CHF CHF Underlying earnings per share (b) Dividend as proposed by the Board of Directors of Nestlé S.A. CHF

3 091 2.76 3.40 2.30

3 129 2.90 3.31 2.25

Market capitalisation, end December

226 310

229 947

Number of employees (in thousands)

328

335

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

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Key figures (consolidated)

Principal key figures in USD (illustrative) Income statement figures translated at weighted average annual rate; balance sheet figures at year-end rate In millions of USD (except for data per share) Sales Trading operating profit Profit for the year attributable to shareholders of the parent (Net profit) Equity attributable to shareholders of the parent Market capitalisation, end December Data per share Basic earnings per share

USD

2016 90 796 13 896 8 658 63 156 221 287

2015 92 143 13 889 9 409 63 012 232 434

2.80

3.01

2016 82 055 12 558 7 824 60 075 210 490

2015 83 153 12 533 8 491 57 651 212 658

2.53

2.72

Principal key figures in EUR (illustrative) Income statement figures translated at weighted average annual rate; balance sheet figures at year-end rate In millions of EUR (except for data per share) Sales Trading operating profit Profit for the year attributable to shareholders of the parent (Net profit) Equity attributable to shareholders of the parent Market capitalisation, end December Data per share Basic earnings per share

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Financial review

Group overview Introduction Our 2016 organic growth was at the high end of the industry but at the lower end of our expectations. We saw a solid trading operating profit margin improvement and our cash flow grew significantly. In 2017, we expect organic growth between 2% and 4%. In order to drive future profitability, we plan to increase restructuring costs considerably in 2017. As a result, the trading operating profit margin in constant currency is expected to be stable. Underlying earnings per share in constant currency and capital efficiency are expected to increase.

Group results In 2016, sales increased by 0.8% to CHF 89.5 billion, with a foreign exchange impact of –1.6%. Acquisitions net of divestitures reduced sales by 0.8%. Organic growth was 3.2%, with real internal growth reaching a three-year high of 2.4%. Pricing was limited at 0.8%, with some improvement in the second half of the year and we expect pricing to improve further for the full year 2017. Organic and real internal growth were broad-based, highlighting the strength and resilience of our diversified portfolio. Innovation supported volume growth, with 30% of sales coming from products introduced or renovated in the last 3 years. E-commerce accounted for 5% of sales, up 18% year-on-year.

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Broad-based growth

Sales (in billions of CHF) RIG % Pricing % OG %

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Group

EMENA

AMS

AOA

Developed Markets

Emerging Markets

89.5 + 2.4% + 0.8% + 3.2%

26.8 + 2.4% – 0.5% + 1.9%

40.2 + 2.0% + 2.5% + 4.5%

22.5 + 3.0% – 0.2% + 2.8%

52.1 + 2.3% – 0.6% + 1.7%

37.4 + 2.4% + 2.9% + 5.3%

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Financial review

Trading operating profit Trading operating profit was CHF 13.7 billion with a margin of 15.3%, up 20 basis points on a reported basis and up 30 basis points in constant currency. We achieved this margin improvement while increasing investment in brand support, digital marketing, Research and Development, and in the new nutrition and health platforms. Consumer-facing marketing spend increased by 6.3% in constant currency. Restructuring costs doubled to CHF 300 million in 2016 to support structural cost-saving initiatives. Net profit Net profit of CHF 8.5 billion was impacted by several items, the largest one being a oneoff non-cash adjustment to deferred taxes. Reported earnings per share decreased by 4.8% to CHF 2.76, for the same reasons. Underlying earnings per share in constant currency increased by 3.4%. Cash flow and working capital Operating cash flow improved by CHF 1.3 billion to CHF 15.6 billion (17.4% of sales) due in part to the reduction of working capital. Free cash flow improved by CHF 200 million to CHF 10.1 billion (11.3% of sales). This demonstrates our ability to generate strong cash flow consistently even in a challenging foreign exchange environment. Average working capital decreased by 190 basis points from 4.7% to 2.8% of sales (average of last five quarters).

more than offset the payment of the dividend of CHF 6.9 billion. Return on invested capital The Group’s return on invested capital including goodwill and intangible assets improved by 30 basis points to 11.2%. Return on invested capital before goodwill and intangible assets improved by 180 basis points to 31.7%. Dividend The Board of Directors is proposing a dividend of CHF 2.30 per share, up from CHF 2.25 last year. Outlook In 2017, we expect organic growth between 2% and 4%. In order to drive future profitability, we plan to increase restructuring costs considerably in 2017. As a result, the trading operating profit margin in constant currency is expected to be stable. Underlying earnings per share in constant currency and capital efficiency are expected to increase.

Financial position The Group’s net debt decreased from CHF 15.4 billion to CHF 13.9 billion in 2016. Our strong free cash flow of CHF 10.1 billion

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Sales by operating segment In millions of CHF 2016 16 249 26 356 14 493 7 926 10 326 14 119 89 469

Zone EMENA Zone AMS Zone AOA Nestlé Waters Nestlé Nutrition Other businesses (a) Total Group

2015 16 403 25 844 14 338 7 625 10 461 14 114 88 785

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

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Trading operating profit by operating segment In millions of CHF 2016 2 712 5 074 2 756 946 2 342 2 144 (2 281) 13 693

Zone EMENA Zone AMS Zone AOA Nestlé Waters Nestlé Nutrition Other businesses (a) Unallocated items (b) Total Group

2015 2 572 5 021 2 632 825 2 361 2 221 (2 250) 13 382

(a) Mainly Nestlé Professional, Nespresso, Nestlé Health Science and Nestlé Skin Health. (b) Mainly corporate expenses as well as research and development costs.

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Financial review

Sales by geographic area

AMS

EMENA (a)

AOA

44.9%

(2015: 44.1%)

30.0%

(2015: 30.9%)

25.1%

(2015: 25.0%)

Employees by geographic area

33.2%

(2015: 32.5%)

33.2%

(2015: 34.7%)

33.6%

(2015: 32.8%)

Factories by geographic area

158

(2015: 161)

151

(2015: 166)

109

(2015: 109)

(a) 10 046 employees in Switzerland in 2016.

Employees by activity In thousands Factories Administration and sales Total

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2016 168 160 328

2015 170 165 335

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Zone Americas (AMS) Sales OG RIG Margin

CHF 26.4 billion + 4.2% + 1.3% 19.3% – 10 basis points

The Zone reported good and consistent organic growth. In North America growth accelerated yearon-year. In PetCare, innovation supported good growth across the cat food range. In dog food, the premium portfolio performed well as Merrick, Purina ONE and Pro Plan all delivered double-digit growth. Beneful stabilised as there was progress in restaging the brand. Coffee Mate sustained good momentum through innovations such as 64 oz. and new flavours in natural bliss. Lean Cuisine and Stouffer’s Fit Kitchen delivered strong organic growth supported by new line extensions. The performance of Confectionery in the US was disappointing, impacted by the competitive environment and low growth in the mainstream chocolate market. In Latin America strong organic growth was led by price increases following currency depreciation, as real internal growth slowed. In Brazil, we had high single-digit organic growth. Significant price increases at the end of the first half of the year impacted volumes in the short term. Nescafé Dolce Gusto and KitKat continued to grow in double digits. In Mexico, there was another year of good growth, which was broad-based across dairy, coffee creamers, soluble coffee, Nescafé Dolce Gusto and chocolate. PetCare continued to deliver strong growth across the region. The trading operating profit margin decreased by 10 basis points, due to an

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increase in restructuring costs. The profitability improved in North America, but Latin America was largely affected by high cost inflation caused by currency depreciation and commodity prices. Zone Europe, Middle East and North Africa (EMENA) Sales OG RIG Margin

CHF 16.2 billion + 2.0% + 2.7% 16.7% + 100 basis points

The Zone delivered strong real internal growth, accelerating for a fourth consecutive year and gaining market share, showing the ability to innovate. In Western Europe, positive organic growth was due to solid real internal growth. Pricing was negative, affected by sustained low commodity prices, trade pressure and intense competition. PetCare, Nescafé and pizza continued to be the key sources of growth across most markets. In Germany and France, we had solid real internal growth, while there was good organic and real internal growth in Southern Europe. In the UK, on the other hand, it was a particularly challenging year with both volume and pricing declining slightly. Central and Eastern Europe continued to deliver strong organic growth on the basis of good real internal growth and positive pricing. In Russia, we achieved double-digit organic growth with positive real internal growth. This included strong growth in Nescafé soluble coffee, especially Barista. Russia was Nestlé’s strongest performing market in PetCare globally, led by Felix cat food. Inflation in

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Russia and Ukraine drove positive pricing in the region, whilst all other markets experienced deflationary pricing. Business remained resilient in the Middle East and North Africa with positive organic growth, but the unstable environment and deflationary pressure slowed momentum. Events in Iraq, Yemen, Libya and Syria continued to have an effect. There was also deflationary pressure on dairy in the region. In Turkey, Nescafé and confectionery drove double-digit growth. The North Africa market also did well. The trading operating profit margin improved by 100 basis points even as restructuring costs and marketing investment increased. Profitability improved across most categories as a result of premiumisation, volume leverage, efficiency savings and favourable input costs. Portfolio management also contributed positively with the creation of the Froneri joint venture in ice cream. Zone Asia, Oceania and sub-Saharan Africa (AOA) Sales OG RIG Margin

CHF 14.5 billion + 3.2% + 2.9% 19.0% + 60 basis points

The Zone saw real internal growth and organic growth gain increasing momentum throughout the year, with market shares recovering and almost all markets contributing. The Zone’s emerging markets had a good year overall with growth accelerating in most businesses. Yinlu was the main exception, decreasing the Zone’s organic growth by

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260 basis points. In China, the double-digit decline of Yinlu affected overall growth. Several initiatives to turn around the business are in place and stabilisation is expected in 2017. Dairy (excluding Yinlu) and confectionery grew positively and Nescafé performed well. South East Asia was strong with double-digit growth in Vietnam and Indonesia, especially from dairy and Milo. The Philippines also performed well with high single-digit growth, particularly due to Bear Brand in dairy. There was good growth in sub-Saharan Africa. Real internal growth remained positive despite price increases to offset currency depreciation. There was double-digit growth in Central and West Africa (including Ghana, Côte d’Ivoire and Nigeria) and in Equatorial Africa (including Angola), with Maggi and Nido doing well. Our business in India grew strongly despite some disruptive impact from demonetisation at the end of the year. Maggi noodles continued to regain market share. Confectionery also did well with KitKat. There was also strong growth in Pakistan from dairy, ready-to-drink and other categories. In the developed markets there was good growth in Japan and solid real internal growth in Oceania. Japan’s organic growth was above the Zone and Group averages, balanced evenly between real internal growth and pricing. This was based on innovation and premiumisation across Nescafé and KitKat. In Oceania, there was solid real internal growth in line with the Group, which was largely offset by continuing deflationary pressure. The Zone improved its trading operating profit margin by 60 basis points while also increasing marketing investment. Positive gross margin development was helped by favourable input costs, particularly in dairy,

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as well as cost efficiencies and improved volumes and product mix. The effect of an increase in restructuring spend was more than offset by lower one-off costs related to Maggi in India. Nestlé Waters Sales OG RIG Margin

CHF 7.9 billion + 4.5% + 4.5% 11.9% + 110 basis points

Nestlé Waters maintained its good organic growth momentum based on real internal growth. Pricing remained flat. In the US, international premium brands saw another year of dynamic growth and there were contributions above the Group and Nestlé Waters averages from regional brands Poland Spring, Ice Mountain and Deer Park. The shutdown of a factory in Texas following a tornado in April had a negative impact. In Europe, the majority of markets maintained growth after 2015 had been a strong year due to the heatwave. There were good contributions from the UK, Spain and Germany. Of the other markets, South East Asia, Mexico and North Africa did well. Further strong growth came from the international premium sparkling brands Perrier and S.Pellegrino, which grew twice as fast as the mainstream portfolio. The flagship international brand Nestlé Pure Life made a good contribution, with organic growth above the Nestlé Waters average. There was a strong trading operating profit margin improvement of 110 basis points while marketing investment also increased. This was possible due to a combination of volume growth, positive product mix through 14

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premiumisation, operational cost efficiencies and favourable input costs. Nestlé Nutrition Sales OG RIG Margin

CHF 10.3 billion + 1.5% + 0.9% 22.7% + 10 basis points

Nestlé Nutrition grew in the context of changed category dynamics, particularly in China, and deflationary pressure owing to sustained low milk prices. Market dynamics in China were weak ahead of the implementation of new regulation, resulting in adjustments of trade inventory levels in both mainland China and Hong Kong. Low dairy prices and intense competition had an impact on pricing, particularly in the premium segment. At the same time, illuma had another strong year of growth, gaining share to become the leading brand in its category in China. We also strengthened our capabilities in e-commerce, winning market share in this important channel. Growth in the US was slow during the year. We started to renovate the Gerber brand and made improvements to product packaging and recipes, including many organic offerings. Latin America saw strong momentum led by innovations such as Mucilon Iron Plus cereals in Brazil and NAN Optipro in Mexico. Growth in South East Asia was also solid with the Philippines doing well. The improvement in trading operating profit margin was broad-based across infant formula, as well as baby food, due to sustained low dairy prices. At the same Nestlé Group I Summary of the Annual Report 2016

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Financial review

time, marketing investment behind brands increased. Other businesses Sales OG RIG Margin

CHF 14.1 billion + 3.7% + 3.4% 15.2% – 50 basis points

Nestlé Professional continued to grow, led by mid-single-digit growth in emerging markets with strong growth in Russia and Mexico, and solid growth in China. The US also had good organic growth while business in Canada and Western Europe declined. As from 2017, Nestlé Professional is integrated into the Zones due to increasing demand for more customised products and services on a local and regional basis. Nespresso continued to grow in its 30th year. The US and Canada saw strong momentum from the continued success of the VertuoLine system. Sales in France also benefitted from the launch of VertuoLine at the end of the year. The UK saw strong acceleration following brand investment and the launch of a subscription model. In Asia, both China and Korea performed well. Nestlé Health Science maintained a good pace of growth. Consumer Care was once again the key source of growth including the Boost range of products, Carnation Breakfast Essentials and, in Europe, Meritene. Medical Nutrition benefitted from strong contributions from the allergy portfolio (especially in China), Vitaflo and oral nutritional supplements in key markets. Nestlé Skin Health performed well in consumer care. However, we adjusted inventory levels in the trade at the end of Nestlé Group I Summary of the Annual Report 2016

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the year. Increased competition and pressure from generics affected the US prescription business. The trading operating profit margin of this segment was impacted by Nestlé Skin Health. Adjustment of trade inventories and higher restructuring and litigation costs affected profitability. Nestlé Health Science also absorbed higher restructuring costs. Nestlé Professional and Nespresso both improved their profitability, helped by favourable input costs.

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Nestlé Group I Summary of the Annual Report 2016

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Extract from the Consolidated Financial Statements Principal exchange rates

CHF per 2016

2015

Year ending rates 1 US Dollar 1 Euro 100 Chinese Yuan Renminbi 100 Brazilian Reais 100 Philippine Pesos 1 Pound Sterling 100 Mexican Pesos 1 Canadian Dollar 100 Japanese Yen 1 Australian Dollar 100 Russian Rubles

USD EUR CNY BRL PHP GBP MXN CAD JPY AUD RUB

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1.023 1.075 14.715 31.383 2.064 1.255 4.938 0.758 0.874 0.738 1.685

0.989 1.081 15.239 25.337 2.109 1.467 5.690 0.713 0.822 0.723 1.347

2016 2015 Weighted average annual rates 0.985 1.090 14.838 28.583 2.075 1.331 5.279 0.745 0.907 0.733 1.485

0.964 1.068 15.325 29.004 2.115 1.474 6.074 0.752 0.798 0.723 1.579

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Extract from the Consolidated Financial Statements

Consolidated income statement for the year ended 31 December 2016 In millions of CHF

I

Sales

2016 89 469

2015 88 785

Other revenue Cost of goods sold Distribution expenses Marketing and administration expenses Research and development costs Other trading income Other trading expenses Trading operating profit

317 (44 199) (8 059) (21 485) (1 736) 99 (713) 13 693

298 (44 730) (7 899) (20 744) (1 678) 78 (728) 13 382

Other operating income Other operating expenses Operating profit

354 (884) 13 163

126 (1 100) 12 408

Financial income Financial expense Profit before taxes, associates and joint ventures

121 (758) 12 526

101 (725) 11 784

Taxes Income from associates and joint ventures Profit for the year of which attributable to non-controlling interests of which attributable to shareholders of the parent (Net profit)

(4 413) 770 8 883 352 8 531

(3 305) 988 9 467 401 9 066

As percentages of sales Trading operating profit Profit for the year attributable to shareholders of the parent (Net profit)

15.3% 9.5%

15.1% 10.2%

2.76 2.75

2.90 2.89

Earnings per share (in CHF) Basic earnings per share Diluted earnings per share

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Extract from the Consolidated Financial Statements

Consolidated statement of comprehensive income for the year ended 31 December 2016 In millions of CHF Profit for the year recognised in the income statement

2016 8 883

2015 9 467

Currency retranslations, net of taxes Fair value adjustments on available-for-sale financial instruments, net of taxes Fair value adjustments on cash flow hedges, net of taxes Share of other comprehensive income of associates and joint ventures Items that are or may be reclassified subsequently to the income statement

1 033 16 (1) (154) 894

(3 771) (144) 62 165 (3 688)

Remeasurement of defined benefit plans, net of taxes Share of other comprehensive income of associates and joint ventures Items that will never be reclassified to the income statement

(143) (10) (153)

(362) 112 (250)

Other comprehensive income for the year

741

Total comprehensive income for the year of which attributable to non-controlling interests of which attributable to shareholders of the parent

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9 624 343 9 281

(3 938) 5 529 317 5 212

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Extract from the Consolidated Financial Statements

E

Consolidated balance sheet as at 31 December 2016

C

before appropriations

b

In millions of CHF

I 2016

2015

Assets Current assets Cash and cash equivalents Short-term investments Inventories Trade and other receivables Prepayments and accrued income Derivative assets Current income tax assets Assets held for sale Total current assets Non-current assets Property, plant and equipment Goodwill Intangible assets Investments in associates and joint ventures Financial assets Employee benefits assets Current income tax assets Deferred tax assets Total non-current assets Total assets

L

7 990 1 306 8 401 12 411 573 550 786 25 32 042

4 884 921 8 153 12 252 583 337 874 1 430 29 434

27 554 33 007 20 397 10 709 5 719 310 114 2 049 99 859

26 576 32 772 19 236 8 675 5 419 109 128 1 643 94 558

131 901

123 992

C F T A P D C L T

N F E P D O T

T

E S T T O R T N T

T

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Extract from the Consolidated Financial Statements

Consolidated balance sheet as at 31 December 2016 before appropriations

In millions of CHF 2016

2015

Current liabilities Financial debt Trade and other payables Accruals and deferred income Provisions Derivative liabilities Current income tax liabilities Liabilities directly associated with assets held for sale Total current liabilities

12 118 18 629 3 855 620 1 068 1 221 6 37 517

9 629 17 038 3 673 564 1 021 1 124 272 33 321

Non-current liabilities Financial debt Employee benefits liabilities Provisions Deferred tax liabilities Other payables Total non-current liabilities

11 091 8 420 2 640 3 865 2 387 28 403

11 601 7 691 2 601 3 063 1 729 26 685

Total liabilities

65 920

60 006

Equity Share capital Treasury shares Translation reserve Other reserves Retained earnings Total equity attributable to shareholders of the parent Non-controlling interests Total equity

311 (990) (18 799) 1 198 82 870 64 590 1 391 65 981

319 (7 489) (19 851) 1 345 88 014 62 338 1 648 63 986

Liabilities and equity

Total liabilities and equity

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131 901

123 992

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Extract from the Consolidated Financial Statements

E

Consolidated cash flow statement for the year ended 31 December 2016

C f

In millions of CHF

I 2016

Operating activities Operating profit Depreciation and amortisation Impairment Net result on disposal of businesses Other non-cash items of income and expense Cash flow before changes in operating assets and liabilities Decrease/(increase) in working capital Variation of other operating assets and liabilities Cash generated from operations Net cash flows from treasury activities Taxes paid Dividends and interest from associates and joint ventures Operating cash flow Investing activities Capital expenditure Expenditure on intangible assets Acquisition of businesses Disposal of businesses Investments (net of divestments) in associates and joint ventures Inflows/(outflows) from treasury investments Other investing activities Investing cash flow

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2015

13 163 3 132 640 — 35 16 970 1 801 54 18 825 (327) (3 435) 519 15 582

12 408 3 178 576 422 172 16 756 741 (248) 17 249 (93) (3 310) 456 14 302

(4 010) (682) (585) 271 (748) (335) (34) (6 123)

(3 872) (422) (530) 213 (44) 521 (19) (4 153)

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Extract from the Consolidated Financial Statements

Consolidated cash flow statement for the year ended 31 December 2016 (continued) In millions of CHF 2016 Financing activities Dividend paid to shareholders of the parent Dividends paid to non-controlling interests Acquisition (net of disposal) of non-controlling interests Purchase (net of sale) of treasury shares (a) Inflows from bonds and other non-current financial debt Outflows from bonds and other non-current financial debt Inflows/(outflows) from current financial debt Financing cash flow Currency retranslations Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

(6 937) (432) (1 208) 760 1 695 (1 430) 1 368 (6 184) (169) 3 106 4 884 7 990

2015 (6 950) (424) — (6 377) 1 381 (508) 643 (12 235) (478) (2 564) 7 448 4 884

(a) In 2015, mostly relates to the Share Buy-Back Programme launched in 2014.

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Extract from the Consolidated Financial Statements

Consolidated statement of changes in equity for the year ended 31 December 2016

Non-controlling interests

Total equity

I Total equity attributable to shareholders of the parent

In millions of CHF

70 130 9 066 (3 854) 5 212 (6 950) (6 283) 183 (21) (13 071) 67 62 338 8 531 750 9 281 (6 937) 776 180 (991) (6 972) (57) 64 590

1 754 401 (84) 317 (424) — — 1 (423) — 1 648 352 (9) 343 (432) — — (168) (600) — 1 391

71 884 9 467 (3 938) 5 529 (7 374) (6 283) 183 (20) (13 494) 67 63 986 8 883 741 9 624 (7 369) 776 180 (1 159) (7 572) (57) 65 981

Equity as at 31 December 2014 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Dividends Movement of treasury shares Equity compensation plans Changes in non-controlling interests Total transactions with owners Other movements Equity as at 31 December 2015 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Dividends Movement of treasury shares Equity compensation plans Changes in non-controlling interests (a) Total transactions with owners Other movements Equity as at 31 December 2016

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(a) Includes the impact of the acquisitions during the period (see Note 2.5) as well as a put option for the acquisition of non-controlling interests.

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Nestlé Group I Summary of the Annual Report 2016

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6

Extract from the Financial Statements of Nestlé S.A. Income statement for the year ended 31 December 2016

In millions of CHF Income from Group companies Profit on disposal of assets Other income Financial income Total income Expenses recharged from Group companies Personnel expenses Other expenses Write-downs and amortisation Financial expense Taxes Total expenses Profit for the year

Nestlé Group I Summary of the Annual Report 2016

Mini_Rapport_2016_en 25

2016 10 626 716 114 220 11 676

2015 12 315 59 107 174 12 655

(2 501) (120) (195) (1 835) (35) (542) (5 228)

(2 470) (122) (322) (1 156) (362) (398) (4 830)

6 448

7 825

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Extract from the Financial Statements of Nestlé S.A.

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Balance sheet as at 31 December 2016

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before appropriations

In millions of CHF

I 2016

Assets Current assets Cash and cash equivalents Other current receivables Prepayments and accrued income Total current assets Non-current assets Financial assets Shareholdings Property, plant and equipment Intangible assets Total non-current assets Total assets Liabilities and equity Current liabilities Interest-bearing liabilities Other current liabilities Accruals and deferred income Provisions Total current liabilities Non-current liabilities Interest-bearing liabilities Provisions Total non-current liabilities Total liabilities Equity Share capital Legal retained earnings – General legal reserve Voluntary retained earnings – Special reserve – Profit brought forward – Profit for the year Treasury shares Total equity Total liabilities and equity

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2015

1 115 737 77 1 929

100 875 14 989

8 763 31 175 1 142 40 081 42 010

8 459 32 488 1 189 41 137 42 126

2 050 1 645 48 760 4 503

— 4 224 3 827 5 054

132 501 633 5 136

154 498 652 5 706

311

319

1 924

1 917

23 288 5 821 6 448 (918) 36 874 42 010

28 711 4 998 7 825 (7 350) 36 420 42 126

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W D o

(

(

P M o d a

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Nestlé Group I Summary of the Annual Report 2016

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Extract from the Financial Statements of Nestlé S.A.

Proposed appropriation of profit

In CHF Retained earnings Profit brought forward Profit for the year

We propose the following appropriation: Dividend for 2016, CHF 2.30 per share on 3 112 160 000 shares (a) (2015: CHF 2.25 on 3 112 160 000 shares) (b)

Profit to be carried forward

2016

2015

5 820 737 716 6 448 462 989 12 269 200 705

4 997 707 777 7 825 389 939 12 823 097 716

7 157 968 000 7 157 968 000

7 002 360 000 7 002 360 000

5 111 232 705

5 820 737 716

(a) Depending on the number of shares issued as of the last trading day with entitlement to receive the dividend (7 April 2017). No dividend is paid on own shares held by the Nestlé Group. The respective amount will be attributed to the special reserve. (b) The amount of CHF 65 468 057, representing the dividend on 29 096 914 own shares held at the date of the dividend payment, has been transferred to the special reserve.

Provided that the proposal of the Board of Directors is approved by the Annual General Meeting, the gross dividend will amount to CHF 2.30 per share, representing a net amount of CHF 1.4950 per share after payment of the Swiss withholding tax of 35%. The last trading day with entitlement to receive the dividend is 7 April 2017. The shares will be traded ex-dividend as of 10 April 2017. The net dividend will be payable as from 12 April 2017.

The Board of Directors Cham and Vevey, 15 February 2017

Nestlé Group I Summary of the Annual Report 2016

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Notes

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Mini_Rapport_2016_en 28

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Nestlé Group I Summary of the Annual Report 2016

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Notes

Nestlé Group I Summary of the Annual Report 2016

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S

Shareholder information

Stock exchange listing At 31 December 2016, Nestlé S.A. shares are listed on the SIX Swiss Exchange, Zurich (ISIN code: CH0038863350). American Depositary Receipts (ISIN code: US6410694060) representing Nestlé S.A. shares are offered in the USA by Citibank, N.A., New York. Registered Offices Nestlé S.A. Avenue Nestlé 55 CH-1800 Vevey (Switzerland) tel. +41 (0)21 924 21 11 Nestlé S.A. (Share Transfer Office) Zugerstrasse 8 CH-6330 Cham (Switzerland) tel. +41 (0)41 785 20 20

Further information For additional information, contact: Nestlé S.A. Investor Relations Avenue Nestlé 55 CH-1800 Vevey (Switzerland) tel. +41 (0)21 924 35 09 fax +41 (0)21 924 48 00 e-mail: [email protected]

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As to information concerning the share register (registrations, transfers, dividends, etc.), please contact: Nestlé S.A. (Share Transfer Office) Zugerstrasse 8 CH-6330 Cham (Switzerland) tel. +41 (0)41 785 20 20 fax +41 (0)41 785 20 24 e-mail: [email protected]

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

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www.nestle.com

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Nestlé Group I Summary of the Annual Report 2016

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Shareholder information

Important dates 6 April 2017 150th Annual General Meeting, Beaulieu Lausanne, Lausanne (Switzerland) 7 April 2017 Last trading day with entitlement to dividend 10 April 2017 Ex-dividend date 12 April 2017 Payment of the dividend 20 April 2017 2017 First quarter sales figures 27 July 2017 2017 Half-yearly Results 19 October 2017 2017 Nine months sales figures 15 February 2018 2017 Full Year Results 12 April 2018 151st Annual General Meeting, Beaulieu Lausanne, Lausanne (Switzerland)

Nestlé Group I Summary of the Annual Report 2016

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© 2017, Nestlé S.A., Cham and Vevey (Switzerland)

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