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Income statement Notes 2014 2013for the year ended 31 December 2014 2 3 6 616 8 089In millions of CHF 4 305 208Income 5 7 449 1 247Income from Group companies 6 100 128Financial income 7Profit on disposal of assets 14 470 9 672Other income 8Total income 21 (2 200) (1 376) (260) (249)Expenses (53) (52)Investment write-downsAdministration and other expenses (2 513) (1 677)Financial expenseTotal expenses before taxes 11 957 7 995Profit before taxes (457) (537) 11 500 7 458TaxesProfit for the year148th Financial Statements of Nestlé S.A. 153

Balance sheet Notes 2014 2013as at 31 December 2014 9 2 221 2 709before appropriations 10 1 007 1 026In millions of CHF 11 11 7 15 3 239 3 742Assets 16 47 867 41 620Current assets — 367Liquid assets 1 —ReceivablesPrepayments and accrued income 47 868 41 987Total current assets 51 107 45 729Non-current assetsFinancial assets 17 4 199 4 045Intangible assets 6 11Tangible fixed assets 18Total non-current assets 19 162 154 1 335 751Total assets 20/21 5 702 4 961 21Liabilities and equity 21 322 322 21 5 364 3 818Liabilities 21 27 683 29 165Short-term payablesAccruals and deferred income 536 5Long-term payables 11 500 7 458Provisions 45 405 40 768Total liabilities 51 107 45 729EquityShare capital 148th Financial Statements of Nestlé S.A.Legal reservesSpecial reserveProfit brought forwardProfit for the yearTotal equityTotal liabilities and equity154

Notes to the annual accounts1. Accounting policies Income statement Not currently transferable income is recognised only uponGeneral receipt.Nestlé S.A. (the Company) is the ultimate holding companyof the Nestlé Group which comprises subsidiaries, associated In accordance with Swiss law and the Company’scompanies and joint ventures throughout the world. The Articles of Association, dividends are treated as anaccounts are prepared in accordance with accounting appropriation of profit in the year in which they are ratifiedprinciples required by Swiss law. They are prepared under at the Annual General Meeting rather than as anthe historical cost convention and on an accrual basis. appropriation of profit in the year to which they relate.Foreign currency translation TaxesTransactions in foreign currencies are recorded at the rate of This caption includes taxes on profit, capital andexchange at the date of the transaction or, if hedged forward, withholding taxes on transfers from Group companies.at the rate of exchange under the related forward contract.Non-monetary assets and liabilities are carried at historical Financial assetsrates. Monetary assets and liabilities in foreign currencies The carrying value of participations and loans comprises theare translated at year-end rates. Any resulting exchange cost of investment, excluding the incidental costs ofdifferences are included in the respective income statement acquisition, less any write-downs.captions depending upon the nature of the underlyingtransactions. The aggregate unrealised exchange difference Participations located in countries where the political,is calculated by reference to original transaction date economic or monetary situation might be considered toexchange rates and includes hedging transactions. Where carry a greater than normal level of risk are carried atthis gives rise to a net loss, it is charged to the income a nominal value of one franc.statement whilst a net gain is deferred. Participations and loans are written down onHedging a conservative basis, taking into account the profitability ofThe Company uses forward foreign exchange contracts, the company concerned.options, financial futures and currency swaps to hedgeforeign currency flows and positions. Unrealised foreign Marketable securities are valued at the lower of cost andexchange differences on hedging instruments are matched market value.and accounted for with those on the underlying asset orliability. Long-term loans, in foreign currencies, used to Own shares held to cover option rights in favour offinance investments in participations are generally not members of the Group’s Management are carried athedged. exercise price if lower than cost. Own shares held for trading purposes are carried at the lower of cost and market The Company also uses interest rate swaps to manage value as are own shares earmarked to cover other Long-interest rate risk. The swaps are accounted for at fair value Term Incentive Plans. Own shares repurchased for theat each balance sheet date and changes in the market value Share Buy-Back Programme are carried at the lower of costare recorded in the income statement. and market value. All gains and losses on own shares are recorded in the income statement.148th Financial Statements of Nestlé S.A. 155

1. Accounting policiesIntangible assets Accruals and deferred incomeTrademarks and other industrial property rights are written Accruals and deferred income comprise expenses relatingoff on acquisition or exceptionally over a longer period, not to the current year which will not be paid until after theexceeding their useful lives. balance sheet date and income received in advance, relating to the following year. The negative fair values ofTangible fixed assets forward exchange contracts and interest rate swaps are alsoThe Company owns land and buildings which have been included in this caption.depreciated in the past. Office furniture and equipment arefully depreciated on acquisition.ProvisionsProvisions include present obligations as well ascontingencies. A provision for uninsured risks is constitutedto cover general risks not insured with third parties, such asconsequential loss. Provisions for Swiss taxes are made onthe basis of the Company’s taxable capital, reserves andprofit for the year. A general provision is maintained to coverpossible foreign tax liabilities.Employee benefitsIn Switzerland, Nestlé’s pension plan is a cash balance planwhere contributions are expressed as a percentage of thepensionable salary. The pension plan guarantees theamount accrued on the members’ savings accounts, as wellas a minimum interest on those savings accounts. Atretirement date, the savings accounts are converted intopensions. However, members may opt to receive a part ofthe pension as a lump sum. Increases of pensions inpayment are granted on a discretionary basis by the Boardof Trustees, subject to the financial situation of the plan. Tobe noted that there is also a defined benefit plan that hasbeen closed to new entrants in 2013 and whose membersbelow age 55 have been transferred to the cash balanceplan. This heritage plan is a hybrid between a cash balanceplan and a plan based on a final pensionable salary.Prepayments and accrued incomePrepayments and accrued income are comprised ofpayments made in advance relating to the following year,and income relating to the current year which will not bereceived until after the balance sheet date (such as interestreceivable on loans or deposits). The fair values of forwardexchange contracts and interest rate swaps are alsoincluded in this caption.156 148th Financial Statements of Nestlé S.A.

2. Income from Group companies 2014 2013 197 113This represents dividends of the current and prior years and other net income from 108 95Group companies. 305 2083. Financial income 2014 2013 1 700 939In millions of CHF 437Net result on loans to Group companies 500Other financial income 2 200 1 3764. Profit on disposal of assets 2014 2013 106 114This represents mainly the net gains realised on the sale of financial assets, trademarks 154 135and other industrial property rights previously written down. In 2014, the net gain of 260 249CHF 7181 million on the sale of L’Oréal shares is included. 2014 20135. Investment write-downs 52 52 1 —In millions of CHF 53 52Participations and loansTrademarks and other industrial property rights6. Administration and other expensesIn millions of CHFSalaries and welfare expensesOther expenses7. Financial expenseIn millions of CHFNet result on loans from Group companiesOther financial expenses148th Financial Statements of Nestlé S.A. 157

8. Taxes 2014 2013 2 221 2 709This includes withholding taxes on income from foreign sources, as well as Swiss taxesfor which adequate provisions have been established. — — 2 221 2 7099. Liquid assets 2014 2013In millions of CHF 955 963 52 63Cash and cash equivalentsMarketable securities 1 007 1 026Cash and cash equivalents include deposits with maturities of less than three months. 2014 2013Marketable securities consist of commercial paper with maturities from three to six 31 390 30 297months. 13 947 10 39110. Receivables 2 487 932 43 —In millions of CHF 47 867 41 620Amounts owed by Group companies (current accounts)Other receivables 2014 2013 30 297 28 61711. Financial assets Notes 12 1 643 1 971In millions of CHF 13 (550) (291) 14Participations in Group companies 31 390 30 297Loans to Group companiesOwn sharesOther investments12. Participations in Group companiesIn millions of CHFAt 1 JanuaryNet increase/(decrease)Write-downsAt 31 December158 148th Financial Statements of Nestlé S.A.

12. Participations in Group companiesThe carrying value of participations continues to represent a conservative valuationhaving regard to both the income received by the Company and the net assets of theGroup companies concerned. A list of the most important companies held, either directly by Nestlé S.A. or indirectlythrough other Group companies, with the percentage of the capital controlled is given inthe Consolidated Financial Statements of the Nestlé Group.13. Loans to Group companies 2014 2013 10 391 11 574In millions of CHF 5 932 1 638At 1 January (2 996) (2 625)New loansRepayments and write-downs 12 (70)Realised exchange differences 608 (126)Unrealised exchange differences 13 947 10 391At 31 December Number 2013Loans granted to Group companies are usually long-term to finance investments in — Amountparticipations. 6 768 355 —14. Own shares 8 259 480 335 481In millions of CHF Number 2014 403 945 23 742 030 Amount 1 603 644 23Share Buy-Back Programme 17 035 424 93Management Stock Option Plan 4 838 725 1 645 932Restricted Stock Unit Plan 5 098 060 247Performance Share Unit Plan 3 016 551 311 159Future Long-Term Incentive Plans 1 642 952 184 38 338 318 100 2 487During the year 23 742 030 shares were purchased as part of the Share Buy-BackProgramme for CHF 1645 million.The Company held 4 838 725 shares to cover management option rights and 9 757 563shares to cover the other incentive plans. The Management Stock Option Plan is valuedat strike price if lower than acquisition cost, while the shares held for the other plans arevalued at acquisition cost. During the year 5 241 243 shares were delivered as part of theNestlé Group remuneration plans for a total value of CHF 280 million.15. Intangible assetsIn 2013 this amount represents the balance of the trademarks and other industrialproperty rights capitalised in relation with the acquisition of Kraft Foods’ frozen pizzabusiness.148th Financial Statements of Nestlé S.A.

16. Tangible fixed assetsThese are principally the land and buildings at Cham. The “En Bergère” head officebuilding in Vevey is held by a service company, which is wholly owned by Nestlé S.A. The fire insurance value of buildings, furniture and office equipment at 31 December2014 amounted to CHF 9.5 million (2013: CHF 9.5 million).17. Short-term payables 2014 2013 4 010 3 992In millions of CHF 189 53Amounts owed to Group companies 4 199 4 045Other payables18. Long-term payablesAmounts owed to Group companies represent a long-term loan issued in 1989.19. Provisions 2014 2013In millions of CHF Uninsured Exchange Swiss and Other Total Total risks risks foreign 107 751 711At 1 January 475 — taxes 56 769 188Provisions made in the period — 550 (37) (116) (128)Amounts used — — 169 (5) (69) (20)Unused amounts reversed — — 121 1 335 751At 31 December 475 550 163 (79) (64) 18920. Share capitalIn millions of CHF 2014 2013 3 224 800 000 3 224 800 000Number of registered shares of nominal value CHF 0.10 eachIn millions of CHF 322 322According to article 5 of the Company’s Articles of Association, no person or entity shallbe registered with voting rights for more than 5% of the share capital as recorded in thecommercial register. This limitation on registration also applies to persons who holdsome or all of their shares through nominees pursuant to this article. In addition, article 11provides that no person may exercise, directly or indirectly, voting rights, with respect toown shares or shares represented by proxy, in excess of 5% of the share capital asrecorded in the commercial register. At 31 December 2014, the share register showed 151 489 registered shareholders. Ifunprocessed applications for registration, the indirect holders of shares under AmericanDepositary Receipts and the beneficial owners of shareholders registered as nominees160 148th Financial Statements of Nestlé S.A.

20. Share capitalare also taken into account, the total number of shareholders probably exceeds 250 000.The Company was not aware of any shareholder holding, directly or indirectly, 5% ormore of the share capital. Group companies were holding together 1.7% of the Nestlé S.A.share capital as at 31 December 2014.Conditional share capitalAccording to the Articles of Association, the share capital may be increased in an amountnot to exceed CHF 10 000 000 (ten million Swiss francs) by issuing up to 100 000 000registered shares with a nominal value of CHF 0.10 each, which shall be fully paid up,through the exercise of conversion rights and/or option rights granted in connection withthe issuance by Nestlé S.A. or one of its subsidiaries of newly or already issued convertibledebentures, debentures with option rights or other financial market instruments. Concerning the share capital in general, refer also to the Corporate Governance Report.21. Changes in equityIn millions of CHF Share General Reserve Special Retained Total capital reserve (a) for own reserve earnings 40 768At 1 January 2014 shares (a)(b) 29 165 11 500Profit for the year 322 1 913 7 463 (6 863)Dividend for 2013 — — 1 905 — 11 500Movement of own shares — — — (6 863) —Dividend on own shares held on the payment date of 2013 dividend — — — (1 546) —At 31 December 2014 — — 64 — 45 405 — 27 683 (64) 322 1 913 12 036 1 546 — 3 451(a) The general reserve and the reserve for own shares constitute the legal reserves.(b) Refer to Note 22.22. Reserve for own sharesAt 31 December 2013, the reserve for own shares amounting to CHF 1905 millionrepresented the cost of 17 035 424 shares earmarked to cover the Nestlé Groupremuneration plans and 18 188 445 shares held for trading purposes. During the year, an additional 23 742 030 shares have been acquired at a cost ofCHF 1645 million under the Share Buy-Back Programme. A total of 5 241 243 shareshave been delivered to the beneficiaries of the Nestlé Group remuneration plans. Inaddition, 2 802 107 shares have been acquired at a cost of CHF 190 million, to coverNestlé Group remuneration plans. 150 000 shares have been sold for a total amountof CHF 10 million. Another Group company holds 18 038 445 Nestlé S.A. shares. The total of own sharesof 56 376 763 held by Group companies at 31 December 2014 represents 1.7% of theNestlé S.A. share capital (35 223 869 own shares held at 31 December 2013, representing1.1% of the Nestlé S.A. share capital).148th Financial Statements of Nestlé S.A. 161

23. ContingenciesAt 31 December 2014, the total of the guarantees mainly for credit facilities granted to Groupcompanies and commercial paper programmes, together with the buy-back agreementsrelating to notes issued, amounted to CHF 19 177 million (2013: CHF 20 272 million).24. Risk assessmentNestlé Management considers that the risks for Nestlé S.A. are the same as the onesidentified at Group level, as the holding is an ultimate aggregation of all the entities of theGroup. Therefore, we refer to the Nestlé Group Enterprise Risk Management Framework (ERM)described in Note 22 of the Consolidated Financial Statements.162 148th Financial Statements of Nestlé S.A.

25. Additional information requested by the Swiss Code Number of Number ofof Obligations on remuneration shares held (a) options held (b)Shares and stock options ownership of the non-executive members of the 3 059 108 1 137 600Board of Directors and closely related parties as at 31 December 2014 88 144 — 87 627 —Peter Brabeck-Letmathe, Chairman 28 508 —Andreas Koopmann, 1st Vice Chairman —Rolf Hänggi, 2nd Vice Chairman 234 363 —Beat Hess 199 153 —Daniel Borel —Steven G. Hoch 21 687 —Naïna Lal Kidwai 12 165 —Titia de Lange 12 352 —Jean-Pierre Roth 10 396 —Ann M. VenemanHenri de Castries 9 161 1 137 600Eva Cheng 4 974Total as at 31 December 2014 3 767 638 1 707 600Total as at 31 December 2013 4 922 269(a) Including shares subject to a three-year blocking period.(b) The ratio is one option for one Nestlé S.A. share.148th Financial Statements of Nestlé S.A. 163

25. Additional information requested by the Swiss Code of Obligations on remunerationShares and stock options ownership of the members of the Executive Boardand closely related parties as at 31 December 2014Paul Bulcke Number of Number ofLuis Cantarell shares optionsJosé Lopez held (a) held (b)Laurent FreixeChris Johnson 637 173 1 392 000Patrice Bula 118 510 260 500Doreswamy (Nandu) Nandkishore 120 100Wan Ling Martello 80 791 108 700Stefan Catsicas 55 761 125 400Marco Settembri 30 298 101 800Peter R. Vogt 87 051 170 200Martial Rolland 62 381 121 100Heiko Schipper 43 937 —David P. Frick —Total as at 31 December 2014 — — 9 120 —Total as at 31 December 2013 26 201 — 23 632 —(a) Including shares subject to a three-year blocking period. 4 240(b) The ratio is one option for one Nestlé S.A. share. 48 828 2 399 800 1 227 923For the detailed disclosures regarding the remunerations of the Board of Directors and 3 165 550the Executive Board that are required by Swiss law, refer to the Compensation report of 1 043 026Nestlé S.A. with the audited sections highlighted with a blue bar.164 148th Financial Statements of Nestlé S.A.

Proposed appropriation of profitIn CHF 2014 2013Retained earnings 536 179 231 4 757 545Balance brought forward 11 500 096 775 7 457 959 285Profit for the year 12 036 276 006 7 462 716 830We propose the following appropriations: 7 038 568 229 6 926 537 599Dividend for 2014, CHF 2.20 per share 7 038 568 229 6 926 537 599on 3 199 349 195 shares (a)(2013: CHF 2.15 on 3 221 645 395 shares) (b) 4 997 707 777 536 179 231Balance to be carried forward(a) Depending on the number of shares issued as of the last trading day with entitlement to receive the dividend (17 April 2015). 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 63 565 399, representing the dividend on 29 565 302 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 GeneralMeeting, the gross dividend will amount to CHF 2.20 per share, representing a netamount of CHF 1.43 per share after payment of the Swiss withholding tax of 35%.The last trading day with entitlement to receive the dividend is 17 April 2015. The shareswill be traded ex-dividend as of 20 April 2015. The net dividend will be payable as from22 April 2015.The Board of DirectorsCham and Vevey, 18 February 2015148th Financial Statements of Nestlé S.A. 165

Report of the Statutory Auditorto the General Meeting of Nestlé S.A.As statutory auditor, we have audited the financial statements (income statement,balance sheet and notes to the annual accounts on pages 153 to 165) of Nestlé S.A. forthe year ended 31 December 2014.Board of Directors’ responsibilityThe Board of Directors is responsible for the preparation of the financial statements inaccordance with the requirements of Swiss law and the Company’s Articles ofAssociation. This responsibility includes designing, implementing and maintaining aninternal control system relevant to the preparation of financial statements that are freefrom material misstatement, whether due to fraud or error. The Board of Directors isfurther responsible for selecting and applying appropriate accounting policies andmaking accounting estimates that are reasonable in the circumstances.Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with Swiss law and Swiss AuditingStandards. Those standards require that we plan and perform the audit to obtainreasonable assurance whether the financial statements are free from materialmisstatement. An audit involves performing procedures to obtain audit evidence about the amountsand disclosures in the financial statements. The procedures selected depend on theauditor’s judgment, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments,the auditor considers the internal control system relevant to the entity’s preparation ofthe financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity’s internal control system. An audit also includes evaluating the appropriatenessof the accounting policies used and the reasonableness of accounting estimates made,as well as evaluating the overall presentation of the financial statements. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.OpinionIn our opinion, the financial statements for the year ended 31 December 2014 complywith Swiss law and the Company’s Articles of Association.166 148th Financial Statements of Nestlé S.A.

Report of the Statutory auditorReport on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the AuditorOversight Act (AOA) and independence (article 728 CO and article 11 AOA) and thatthere are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard890, we confirm that an internal control system exists, which has been designed for thepreparation of financial statements according to the instructions of the Board ofDirectors. We further confirm that the proposed appropriation of available earnings complieswith Swiss law and the Company’s Articles of Association. We recommend that thefinancial statements submitted to you be approved.KPMG SAScott Cormack Fabien LussuLicensed Audit Expert Licensed Audit ExpertAuditor in chargeGeneva, 18 February 2015148th Financial Statements of Nestlé S.A. 167

Notes168 148th Financial Statements of Nestlé S.A.