A SUMMER TRAINNING PROJECT REPORT

ON
(MANAGEMENT OF WORKING CAPITAL IN ONGC)

A report submitted to U.P.Technical University for the partial

Fulfillment of MBA Degree 2009-11

Submitted to :- Submitted by-

Dr. H.P. MAHESHWARI MOHAMMAD NAUSHAD
Director –MBA MBA- IIIrd Semester
Greater Noida Institute Technology Roll no. (0927270058)

Greater Noida Institute of Technology

(Management Institute) Code: 272
7, Knowledge Park-II, Greater Noida 2008-10
 CERTIFICATE

This is to certify that the SUMMER TRAINNING Project Report entitled

“MANAGEMENT OF WORKING CAPITAL IN ONGC” being submitted by
MOHAMMAD NAUSHAD fulfillment of the requirement of U.P.Technical University
is a record of an independent work done by his under my guidance and supervision.

Dr. H.P.MAHESHWARI Concerned Faculty

Director-MBA Ms. Smita Gupta
Greater Noida Institute of Technology GNIT, Greater Noida
(Management Institute)-Code: 272
 DECLARATION

I MOHAMMAD NAUSHAD to declare that the project report entitled

“MANAGEMENT OF WORKING CAPITAL IN ONGC” being submitted to the
U.P.TECHNICAL UNIVERSITY for the partial fulfillment of the requirement for
the degree of Master of Business Administration is my own endeavors and it has not
been submitted earlier to any institution/university for any degree.

Place: Greater Noida

Date: (
 ON

Submitted to: Submitted by:

Miss.Chitra Mehra Anisha Bhadauria
HR officer MBA
Nestle India, GNIT
Pantnagar Greater noida
INTRODUCTION OF NESTLE
Nestle was founded in 1867 on the shores of Lake Geneva in Vevey ,Switzerland

and its first product was an Infant cereal specially formulated by Henri Nestle to

provide and improve infant nutrition . From its first historic merge with the

Anglo-Swiss Condensed Milk Company in 1950, Nestle has grown to become the

world’s largest and most diversified food company and is abou t twice the size of

its nearest competitor in the food and beverages sector.

Nestlé’s trademark of birds in a nest derived from Henri Nestlé’s personal coat of

arms evokes the values upon which he founded his Company. Namely the values

of security, maternity and affection, nature and nourishment, family and tradition.

Today, it is not only the central element of Nestlé’s corporate identity but

serves to define the company’s products, responsibilities, business

practices, ethics and goals.

The company continuously focuses its efforts to better understand the

changing lifestyles of India and anticipate consumer needs in order to

provide Taste, Nutrition, Health and Wellness through its product

offerings. The culture of innovation and renovation within the company

and access to the Nestle’ Groun’s proprietary technology.

Nestle India manufactures product of truly international quality under internationally

famous brand names such as NESCAFE, MAGGI ,MILKYBAR ,MILO ,KITKAT,

BARONE, MILKMAID and NESTEA and in recent years the company has also
introduced products of daily consumption and use such as NESTLE MILK, NESTLE

SLIM MILK, NESTLE FRESH ‘N’ NATURAL DAHI and NESTLE ZEERA RAITA .

Nestlé with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestlé and

is today the world's leading nutrition, health and wellness company. Sales for 2009 were

CHF 108 bn. We employ around 280 000 people and have factories or operations in

almost every country in the world.

The Company's strategy is guided by several fundamental principles. Nestlé's existing

products grow through innovation and renovation while maintaining a balance in

geographic activities and product lines. Long-term potential is never sacrificed for short-

term performance. The Company's priority is to bring the best and most relevant products

to people, wherever they are, whatever their needs, throughout their lives.
NESTLE INDIA
Nestle India is a subsidiary of NESTLE S.A of Switzerland. With seven factories and a

large number of co-packers, Nestle India is a vibrant company that provides consumers in

India with product of global standards and is committed to long-term sustainable growth

and shareholder satisfaction.

It is a multinational company with its worldwide operations in over 70 countries. The

company insists on honesty, integrity and fairness in all aspect of its business and expects

the same in its relationships. This has earned it the trust and respect of every state of

society that it comes in contact with and is acknowledged amongst India’s Most

Respected Companies and amongst the Top Wealth Creators of India

Nestle is much decentralized in its operations and most of the markets are given

considerable autonomy in its operation. It is more of a people and products oriented

company. There are “unwritten guidelines” which are to be followed, based on common

senses and a strong set of moral principals emphasizing a lot of respect for fellow beings.

Nestle has always adapted to the local conditions and at the same time integrates its Swiss

heritage. It has always taken a long-term view in the countries in which it operates.

Therefore, one can see a lot of investment R&D and risk taken in new product areas.

There is a great emphasis placed on training by the company. It believe in rewarding and
promoting people from with in .Today its product brand name ‘Nestle’ is associated with

‘quality products’ in worldwide consumer markets

ACKNOWLEDGEMENT

I would like to pay thanks to Mr. Inder jeet Kahlon, who gave me such a wonderful

opportunity to be a part of Nestle India Limited as Summer Vocational Trainee.

My special thanks goes to Mr. Prabal Pratap Singh (HR Manager Nestle Pantnagar) who

gave me his support to make this project complete.

I express my sincere gratitude to Miss. Chitra Mehra who give her precious time to me

and always encouraged me to move ahead. Her valuable support and co-operation will

always be cherished by me in my heart.

I am greatly obliged to all other staff members Shekhar Sinha, Sreeram Venkiteswaran,

Dinesh Chandra Pant, Manvendra Singh, Ravi Ranjan, Romesh Sharma & Deepak

Tomer. Who always look after me and those who directly and indirectly helped me to do

my project work successfully.

Above all it is the grace of God, which has led and blessed me all the way in my life to

make this work a fruitful one.

Milestones
1867: Henri Nestle founded the company in vevey, Switzerland

1898: Nestle purchases its first factory outside of Switzerland- Viking Milk factory in

Norway

1905: Nestle merges with Anglo-Swiss condensed milk Company

1929: Nestle merges with Peter-Cailler-Kohler chocolates swisses S.A

1938: Nestle launches Nescafe-the world’s first instant coffee.

1947: Nestle merges with Alimentana S.A with the brand Maggi

1962: Nestle purchases Findus

1974: Nestle becomes a significant share holder in cosmetic company L’Oreal.

1977: Nestle purchases Alcon, manufacturer of eye care products and kits.

1895: Nestle purchases food company carnation.

1988: Nestle purchases Confectionary Company Rowntree Mackintosh and the pasta

Buitoni-Perugina.

1992: Nestle purchases mineral water company Perrier.

1998: Nestle purchases Spillers pet food business.

1999: Nestle acquires Preparados .y Cogelados Alimenticious LA,LA Cocinera, which

produces ready-made frozen meals,pizzas,snacks and refrigerated products under the La

Cocinera and Fricongel brand names.

2000: Nestle sells the Findus brand in all Countries except for Italy and Switzerland.

2001: Nestle merges with Ralston Purina, the premier pet food Company in North

America, and with unique expertise in dry dog food area.

CONTENTS

 Salient features of Nestle

 Nestlé’s Famous products
 Welfare Services
 What is Welfare
 Canteen
 Uniforms & laundry
 Staff sales
 Lockers & restrooms
 Loan scheme
 Medical scheme
 Leaves
 Aim & outcomes of welfare services
 Provident fund
 Gratuity
 ESIC scheme
 ESIC related forms
 Vision of nestle
 Rural development
 Operational efficiency
 Training & development
 Employees engagement
 Health & safety
 Articles of association
 Workers wellness

 Bibliography
Salient features about nestle India Ltd.
1. Year of establishment : 10 July 2006

2. Location : Pantnagar, Distt. -

U.S. nagar

3. Area : 25 Acres.

4. No. of Employees : 771

5. Production (per annum) : 90000 M.T.

6. Raw materials : Sugar, flour, enzymes,

salt

7. Types of Brand : Maggi Noodles

8. Market leader of Food Product : Maggi, Nescafe,

Nestea etc

_
FACTORY VISION: To create “taste bhi aur health bhi” for the nation.

FACTORY MISSION : To rapidly built Nestle as the respected and

trustworthy leading food , nutrition , health and wellness company in SAR outperforming

industry and ensuring long term sustainable and profitable growth .

FACTORY HR VISION: To make Nestle Pantnagar best place to work.

FACTORY HR MISSION: To be world class in HR practice enabling

employees to unleash their 100% potential.
NESTLE’S FAMOUS PRODUCTS
Ques: What is WELFARE?
Welfare includes anything that is done for the comfort and improvement of employees

and is provided over and above the wages. Welfare helps in keeping the morale and

motivation of the employees high so as to retain the employees for longer duration. The

welfare measures need not be in monetary term only it may be in any kind/forms.

Employee welfare includes monitoring of working conditions, creation of industrial

harmony through infrastructure for health, industrial relations and insurance against

disease, accident and unemployment for the workers and their families.

Objective behind providing Welfare services:

• To provide better life and health to the workers.

• To make the workers happy and satisfied.

• To relieve workers from industrial fatigue and to improve intellectual, cultural and

material conditions of living of the workers.

The basic features of labor welfare measures are as follows:

Labor welfare includes various facilities, services and amenities provided to workers for

improving their health, efficiency, economic betterment and social status.

Welfare measures are in addition to regular wages and other economic benefits available

to workers due to legal provisions and collective bargaining

Labor welfare schemes are flexible and ever-changing. New welfare measures are added

to the existing ones from time to time.

Welfare measures may be introduced by the employers, government, employees or by

any social or charitable agency.

The purpose of labor welfare is to bring about the development of the whole personality

of the workers to make a better workforce.

The very logic behind providing welfare schemes is to create efficient, healthy, loyal and

satisfied labor force for the organization. The purpose of providing such facilities is to

make their work life better and also to raise their standard of living. The important

benefits of welfare measures can be summarized as follows:

They provide better physical and mental health to workers and thus promote a healthy

work environment

Facilities like housing schemes, medical benefits, and education and recreation facilities

for workers’ families help in raising their standards of living. This makes workers to pay

more attention towards work and thus increases their productivity.

Employers get stable labor force by providing welfare facilities. Workers take active

interest in their jobs and work with a feeling of involvement and participation.

Employee welfare measures increase the productivity of organization and promote

healthy industrial relations thereby maintaining industrial peace.

The social evils prevalent among the labors such as substance abuse, etc are reduced to a

greater extent by the welfare policies.

Employee welfare services provided in Nestle Pantnagar:

1. Employees Welfare Measures

 Laundry services

 Social block

 Safety equipments

 Safety shoes

 Canteen services

Quality Audit

2. Medical Facilities

 Medical

 Hospitalization

 ESIC benefits

 First aid

 Accident handling procedure

3. Employees Engagement

 Committees numbers
  Sports Activities

Cricket members-401

Volleyball-65

 Safety day Celebration

 Quality day Celebration

 Family day

 DTBN

 Training

 Communication

WELFARE
Canteen facility :-

You will be provided with Canteen Facility at subsidized rates against a coupon. This

includes one time lunch/dinner. This rate may change from time to time. The effective

functioning of the canteen and fixation of daily menu is carried out by canteen

committee, which comprises of employees from cross-functional departments. Canteen

being self serviced, it is every body's responsibility to keep the place clean and hygienic.

Meals coupons as well as snacks coupons can be collected from a designated person in

Accounts department on alternate Wednesday between 2 pm to 3.30 pm. Breakfast and

lunch / dinner would be served at dining hall and all are requested to have it in the dining

hall during the specified period. Tea is served free of cost to employees during specific

Tea breaks. In case of any problem with regard to quantity and quality is concerned, you

will prefer to point out and discuss with members of Canteen committee / quality register

maintained in canteen and will not in any case argue with any of the Canteen Contract

Employees or with the Canteen Contracto

TIME SHEDULE

Shift Breaks From To Morning Shift (M) Tea 07.00 A.M. 07.50 A.M. Lunch 10.00

A.M. 12.00 P.M. Evening Shift (E) Tea 03.30 PM. 04.20 PM. Dinner 06.30 PM.

08.30 PM. Night Shift (N) Break 11.30 A.M. 12.20 A.M. Tea 02.30 A.M. 04.10

A.M.

General Shift Tea 09.00 A.M. 09.30 A.M. Lunch 01.00 PM. 02.00 PM. Tea 03.30 PM.

04.20 PM.
UNIFORMS & LAUNDRY:-

All employees, other than those working in the Administration Block are issued uniforms

each year. These employees are required to be in full uniform while in the workplace.

The uniform issued consists of two pairs of trousers, shirts, one pair of shoe once in a

year. Caps as and when required. When a new employee joins, he is issued a temporary

uniform or apron till full uniform is issued to him or her. Wearing Uniform is must for the

workman who is working in critical areas of the factory.

The Factory maintains a laundry for cleaning of employee’s uniforms and other textiles.

Employees can collect their cleaned and ironed uniforms before starting of every shift.

UNIFORM DISTRIBUTION TIMING

Shift From To Morning Shift (M) 05.15 A.M. 05.45 A.M. Evening Shift (E) 01.15 P.M.

01.45 P.M. Night Shift (N) 09.15 P.M. 09.45 P.M. General Shift (Plant) (G) 08.00 A.M.

08.15 A.M.

TIME MANAGEMENT:

Shift From To Morning Shift (M) 06:00a.m 02:15p.m Evening Shift (E) 02:00p.m

10:15p.m Night Shift (N) 10:00p.m 06:15a.m General Shift (G) 08:30p.m 04:45p.m
SHIFT TIMING:

There are four types of shift morning, evening, night, & general.

General shift for the officers & executives & rest for the trainees and workers. The

workers and all are free to come on at any shift but they have to inform the day before.

No employee will leave his workplace unless shift deliver reports for duty and takes

charges . Factory will operate 7 days a week and hence stagger off will be given to

employee

STAFF SALES:-

There are a wide range of possible benefits an organization can offer to its employees in

addition to normal wages/salaries. Nestlé believes in giving its employees the products

that they help manufacturing at a standard discount rate of 20% off on the wholesale

price. The STAFF SALE SHOP is located near the factory gate, stocks all the products

marketed by Nestlé India Ltd. The employees can make their purchases from the shop

after obtaining the staff sale card from the Human Resources dept. The staff sales shop

opens between fixed timings on all weekdays. There are limits imposed on purchases of

Ghee and bulk packs of Maggi Noodles.

LOCKERS AND REST ROOMS:-

Under section 45 of the Factory Act, 1948, in every factory where more than 150

workers are employed, there shall be adequate provisions for the shelters and rest rooms.

The company has six rest rooms for their employees both male and female employees,

which are sufficient, lighted and ventilated. Each employee is given a locker where he

can keep his uniform and other clothes. No money or valuables should be kept in lockers.

The Company will not assume any responsibility for any such loss. The lockers are

issued against the employee code. It is the responsibility of each employee to ensure that

no undesirable or objectionable goods or articles are placed in the locker. The locker

rooms are provided with Showers, lavatories and resting place during break timings.

There are separate lockers and rest rooms for female employees

LOAN SCHEME

In case of serious need develops because of certain uncontroable reasons or in case of any

contingencies, the employees can get loan under various schemes provided by the

company to its employees as follows:

TWO MONTH SALARY LOAN

Two month’s interest free salary loan is advanced to the employees on the basis of Basic

and Dearness Allowances which is deducted in 24 equal installments. He loan is given

under circumstances such as Self marriage or marriage in the family, Sickness in the

family, House construction/repair/purchase etc.

CONVENYANCE LOAN SCHEME

Basically the employees in the Officer cadre are entitled to scooter/Motor Cycle Loan.

The maximum amount of loan is Rs.45000/-, which is repaid, in 48 interest free

installments. From1989-90, the company has also given the vehicle loan to all its

permanent employees those are actually in need of the vehicles, through the bank. the

company has pad the 50% interest of the above said loan.

LOAN UNDER PROVIDANT FUND ACT

Employees (P.F. members) are entitled to get the loan under Provident Fund Scheme for

the purpose of House construction, Purchase of Plot/House, Marriage of self or

dependent, Children education, Payment of L.I.C premium, sickness Etc. There are some

statutory formalities, which should be completed before getting the loan under the

Provident Fund Act

MEDICAL SCHEME

The company covers the medical expenses of the permanent employees who are not

covered under the ESI scheme. Domiciliary benefits of eligible employees include

reimbursement of medical expenses incurred by the self, spouse and the dependent
children below 20 years of age. The other benefits include reimbursement of the

hospitalization expenses of all eligible employees, in case they are hospitalized, within

prescribed limits.

DISPENSARY AND HEALTH CARE:-

The Company has a Dispensary with a full time Pharmacist and a visiting Doctor.

1. The dispensary is open from 8 A.M. till 5 P.M.

2. It is equipped to provide for the treatment of minor ailments and First aid in case of

an accident.

3. The dispensary also performs an annual medical examination of all employees.

The health record of employees is maintained in the medical card kept in the Dispensary

including Blood Group.

ACCIDENT / FIRST-AID BOXES:-

All departments are equipped with First–Aid Boxes. In case of an accident or minor

ailment, the employee can take necessary medicine from the First-Aid Box. In case of

serious accident/emergency the employee is shifted to a near by hospital.

The main objective of the Nestle Dispensary is to provide free First Aid and health care

facilities to the employees who are prone to many hazards while working. The company
provides medical and health care facilities to its employees through a number of ways

which are stated as under:-

The stock for Dispensary is ordered for six months in advance and the monthly stock is

received on the first day of every month. More than 50 types of medicines are received

every month for the medical treatment of the employees. The monthly closing stock of

medicines is bought forward for the next coming month and is added to the fresh stock

received. The authorized persons are appointed to carry out the dispensary activities in

which a medical specialist visits daily on hourly basis to check up the ailment of the

employees.

TYPES OF LEAVES
Leaves
Employees will be eligible for the following kinds of leave.

PL (Privilege Leave)

EL (Earn Leave)

SL (Sick Leave)
CL (Casual Leaves)

PREVILEGE LEAVE (PL):

Privilege leave shall be granted for a minimum period of 3 days at a time .Privilege leave

shall not be joined to causal leave, but it can be joined to sick leave only if employee give

medical certificate .

Privilege leave can only be granted with prior permission of supervisor or departmental

head . Any leave with out prior written permission or intimation shall be treated as leave

without pay .

Privilege leave can be accumulated up to maximum of 30 days

Over and above 30 days the privilege leave will be lapse automatically

CASUAL LEAVE (CL):

Casual Leave will be granted only for urgent unforeseen reason.

Application should be made generally in advance whenever possible.

Causal leave can be taken minimum for ½ day & maximum for 3 days at a time.

Casual Leave cannot be joined to any other leave.

Leaves not taken during the year shall lapse.

If causal leave is taken prefixed or suffixed to a holiday than the holiday is also counted

as a leave.

Employees will be eligible for Causal Leave with full pay for a period not

exceeding 7 days

SICK LEAVE (SL):

Employees will be eligible for Sick Leave with full pay for a period not exceeding 10

days.

Anybody falling sick has to forward medical certificate in case the sickness is more than

2 days.

Employees have to submit fitness certificate while resuming duties.

In case of any doubt, company medical officer may ask for independence

investigation/medical exam.

Over and above 30 days the sick leave will be lapse automatically.

LEAVE WITH OUT PAY UNAUTHORISED ABSENCE:

a) Leave with out pay is not any kind of leave or the right of an employee.

b) It is an authorized absence and a gesture of the company to help an employee not to be

marked as absent, which is misconduct

c) In case of LWP, the employee has to apply in writing giving justification for so

granting the same along with his leave application form.

d) The case must be sanctioned by the HOD or any person authorized by him, in case of

HOD’s absences.

e) Any employee, if his leaves are exhausted, does not report on duty without prior

information or sanction of HOD shall be marked absent.

f) If LWP is applied for citing Medical grounds, Medical Certificate must accompany the

application

GUIDELINES:

CL not to be combined with SL/EL.

SL can be combined with EL with support of Medical Certificate.

EL should be applied before minimum 15 days in advance.

EL to be availed of minimum 3 days.

If any weekly off / a holiday comes between CL, SL & EL availed, it shall be considered

as continuation of leave.

Weekly off and holidays are to be excluded while calculating number of days of leaves

Aims & Outcome of Welfare services :

Aims:

To improve the working conditions of the employees.

To motivate the employees at work place.

To develop the satisfaction in the employees, so that they can give better results.

To provide comfort to the employees.

To built a sense of belonging in the employees.

Outcomes:

Organization gets motivated employees.

Employees develop a sense of belongingness for the company.

Company is able to attain better performance from the employees

PROVIDENT FUND

From the date of joining the company he/she become entitled to the benefits of

Employee’s Provident Funds (EPF) , Employee Pension Scheme (EPS) .

PF BIFURICATION:

A/C NO: 1 - 12% of Employee + rest of 3.67% of Employer.

A/C NO : 2 - 1.1% P.F charges.

A/C NO : 10 - 8.33% of Employer.

A/C NO : 21 - .50% E.D.L.I Expense (Employee Deposit Link Incentive)

A/C NO : 22 - .01 E.D.L.I Administration Charges .

Clearance of PF CHALLAN must be completed with in 15th of every month. Yearly

return (i.e. From March to February) of PF is submitted under the Form 6(A) & 3(A) in

PF Office. The grace period for return is 60 days.

Monthly PF challan is submitted with in 25th of every month. The

forms which are required to be submitted are:

Form 12 (A)

Photo copy of challan.

Form 5 - (New Joining)

Form 10 - (Left Employee)

Form 2 - (Nomination of PF)

Two set of documents are prepared one is submitted in PF office & one is for office

record .
GRATUITY:

Subject to the provision of the Gratuity Act 1972, every permanent employee who has

been in continues service with the company for more than five years become entitled to a

gratuity as per the company scheme. .

Any employee who has been dismissed from company service for any of the following

reasons shall not be entitled to gratuity :

1- Riotous & Disorderly conduct or for any other act or violence .

2- An offence involving moral turpitude provided that such offence is committed by

his/her in the course of his/her employment

3- An employee who has been dismissed from service for causing financial loss to the

company by an act of commission or omission shall not be entitled to a gratuity to the

extent of such loss .

EMPLOYEE’S STATE INSURANCE CORPORATION

(ESIC) (1948)

The employee’s whose salary doesn’t exceed Rs.10,000/- per month are covered under

this scheme . The scheme is primary funded by contribution raised from insured

employees & employers . The rate of contribution is 1.75% of the salary for the
employee’s and 4.75% of the salary is paid by the employer’s . A total of 6.50% of the

salary is collected and the same is deposited in a common pool known as ESI fund . It

will be used for providing medical facilities to covered employees under ESIC scheme .

Clearance of ESI CHALLAN must be completed with in 15th of every month. Half –

yearly return (ie. From October to March & then from April to September )of ESIC is

submitted to local ESIC office .The grace period for return is 60 days . The return is

submitted under Form -6 .

EMPLOYEES STATE INSURANCE ACT, 1948

1. Whether the establishment has been registered within the time frame and in the manner

specified in the regulations made under the Act?

Section 2 A *

2. Whether all the conditions under the Act with regard to contribution, to be paid by the

employer to the Corporation have been complied with.

• The contribution shall comprise contribution payable by the employer and contribution

payable by the employee

• The amount of contribution for a wage period shall be, in respect of:

(a) employer’s contribution, a sum (rounded to the next higher multiple of 1 Rupee) equal

to 4.75 percent of the wages payable to our employee; and

(b) employee’s contribution, a sum (rounded to the next higher multiple of 1 Rupee)

equal to 1.75 percent of the wages payable to an employee.

• average daily wages during a wage period for exemption from payment of employee’s

contribution under section 42 shall be upto and inclusive of Rs 40.

Section 39 *

3. Where the company is the principal employer*, whether the employer’s contribution

and employee’s contribution are being paid?

ESI RELATED FORMS!!!
FORM 0- EMPLOYERS’ REGISTRATION FORM

FORM 1- DECLARATION FORM

FORM 1 A- FAMILY DECLARATION FORM

FORM 1 B-CHANGES IN FAMILY DECLARATION FORM

FORM 3- RETURN OF DECLARATION FORMS

FORM 6- RETURN OF CONTRUBUTIONS

FORM 12- SICKNESS OF TEMPORARY BENEFITS

FORM 12 A- MATERNITY BENEFIT FOR SICKNESS

FORM 13 – SICKNESS OR TEMPORARY DISABLEMENT OR

MATERNITY BENEFIT FOR SICKNESS

FORM 13 A- MATERNITY BENEFIT FOR SICKNESS

FORM 14- SICKNESS OR TEMPORARY DISABLEMENT OR MATERNITY

BENEFIT FOR SICKNESS

FORM 14 A- MATERNITY BENEFIT FOR SICKNESS

FORM 16- ACCIDENT REPORT FROM EMPLOYER

FORM 17-DEPENDANT’S OR FUNERAL BENEFIT (DEATH

CERTIFICATE)

FORM 18- DEPENDANT’S BENEFIT (CLAIM FORM)

FORM 18 A- DEPENDANT’S BENEFIT (CLAIM FOR PERIODICAL
PAYMENTS)

FORM 19- MATERNITY BENEFIT (NOTICE OF PREGNANCY)

FORM 20- MATERNITY BENEFIT (CERTIFICATE OF PREGNANCY)

FORM 21- MATERNITY BENEFIT (CERTIFICATE OF EXPECTED

CONFINEMENT)

FORM 22- CLAIM FOR MATERNITY BENEFIT

FORM 23- MATERNITY BENEFIT (CERTIFICATE OF CONFINEMENT OR

MISCARRIAGE)

FORM 24- MATERNITY BENEFIT (NOTICE OF WORK)

FORM 25- CLAIM FOR PERMANENT DIABLEMENT BENEFIT

FORM 26- CERTIFICATE FOR PERMANENT DISABLEMENT BENEFIT

FORM 27- DECLARATION AND CERTIFICATE FOR DEPENDANT’S

BENEFIT
Results in millions of CHF.
2009 2008 2007 2006 2005(a)
109 90 107 55 98 45
Sales 107 618 91 115
8 2 8
EBIT (Earnings Before
Interest, Taxes, 13
15 699 15 676 15 024 11 876
restructuring and 302
impairments)
as % of sales 14.6% 14.3% 14.0% 13.5% 13.0%
Taxes 3 362 3 787 3 416 3 293 2 647

Net profit (Profit for the

period attributable to 10 428 18 039 10 649 9 197 8 081
shareholders of the parent)
as % of sales 9.7% 16.4% 9.9% 9.3% 8.9%

5
Total amount of dividend 5 127 4 691 4 004 3 471
608(b)
Depreciation of property,
2 713 2 625 2 620 2 581 2 382
plant and equipment
as % of sales 2.5% 2.4% 2.4% 2.6% 2.6%
Balance sheet and Cash flow statement in millions of CHF.
2009 2008(a) 2007(b) 2006 2005
Current assets 39 870 33 048 35 770 35 305 41 765
of which liquid assets 5 319 7 131 9 496 11 475 17 393
Non-current assets 71 046 73 167 79 591(c) 66 500 60 953
110 91 106 21 101 80 102 71
Total assets 115 361(c)
6 5 5 8
Current liabilities 36 083 33 223 43 326 32 479 35 854
Non-current liabilities 21 202 18 076 17 259(c) 16 478 17 796
Equity attributable to
shareholders of the 48 915 50 774 52 627(c) 50 991 47 498
parent
Non-controlling
4 716 4 142 2 149 1 857 1 570
interests
Balance sheet and Cash flow statement in millions of CHF.
2009 2008(a) 2007(b) 2006 2005
Operating cash flow 17 934 10 763 13 439 11 676 10 205
Free cash flow(d) 12 369 5 033 8 231 7 018 6 557
Capital expenditure 4 641 4 869 4 971 4 200 3 375
as % of sales 4.3% 4.4% 4.6% 4.3% 3.7%
Data per share (e).
2009 2008 2007 2006 2005
Weighted
average
number of
shares 3 572.0 3 704.6 3 828.8 3 848.0 3 888.1
outstanding
(in
millions)
Basic
earnings per2.92 4.87(f) 2.78 2.37 2.08
share
Equity
attributable
to
13.69 13.71 13.75(c) 13.25 12.22
shareholder
s of the
parent
Dividend 1.60(b) 1.40 1.22 1.04 0.90
Pay-out
ratio (based
on Total
54.8%(b) 28.7% 43.9% 43.5% 43.3%
basic
earnings per
share)
Stock
exchange 51.25/35.0 52.95/38.0 55.35/42.6 44.83/35.5 40.43/29.8
prices 4 2 5 0 3
(high/low)
Data per share (e).
2009 2008 2007 2006 2005
3.1/4.6%
Yield (g) 2.6/3.7% 2.2/2.9% 2.3/2.9% 2.2/3.0%
(b)
Market
capitalisatio 174 294 150 409 195 661 166 152 152 576
n
Number of
personnel
278 283 276 265 250
(in
thousands)
(a) 2005 comparatives have been restated following the first application of the option of

IAS 19 Employee Benefits 93A ss. and IFRIC 4. For full details please refer to 2006

Consolidated Financial Statements.

(b) As proposed by the Board of Directors of Nestlé S.A.

(c) 2007 comparatives have been restated following first application of IFRIC 14.

(d) Operating cash flow less capital expenditure, disposal of tangible assets, purchase and

disposal of intangible assets, movements with associates as well as with non-controlling

interests.

(e) 2007 and prior years comparatives have been restated following 1-for-10 share split

effective on 30 June 2008.

(f) Impacted by the profit on disposal of 24.8% of Alcon outstanding capital.

(g) Calculated on the basis of the dividend for the year concerned but which is paid in the

following year.
 Vision of Nestle

SETTING THE DIRECTION

Werner Bauer, Chief Technology Officer, Nestlé S.A.

Research and Development is a key competitive advantage for Nestlé. Without our R&D

Nestlé could not have become the food industry leader in nutrition, health and wellness.

With 29 research, development and technology facilities worldwide Nestlé has the largest

R&D network of any food company. Nestlé’s research, development and technology

network, together with local market application groups, employs over 5,000 people.

Nestlé further strengthens its R&D capability through Innovation Partnerships at each

stage of the product development process – from early stage collaborations with start up

and biotech companies to late stage partnerships with its key suppliers.
By bringing together all of its global R&D resources, Nestlé is able to provide high

quality, safe food solutions for consumers worldwide – whether this is in terms of

nutrition, health, wellness, taste, texture or convenience. Above all, Nestlé brings to

consumers products that are of the highest quality. And safety is non-negotiable.

R&D is also critical in ensuring regulatory compliance of all Nestlé products. Nestlé is

able to launch new products quickly and efficiently, in countries all over the world, by

integrating regulatory affairs in all its R&D activities, from start to finish.

Nestlé scientists also play their part in communicating the health and wellness benefits of

products to consumers. Nestlé nutritionists world-wide work to ensure that all nutrition

communication, both on and off pack, is locally relevant, as well as scientifically sound.

Beyond sound nutrition, the future of foods will increasingly be driven by science. Nestlé

scientists are looking ahead to the foods of the future. Nestlé R&D is translating nutrition

and food science in two ways:

From consumer needs into research priorities

From emerging science into consumer benefits, and services.

The vision of Nestlé R&D is long term. A glimpse of how Nestlé R&D is helping to

shape the future of foods is provided through these internet pages.

2009 consolidated
In millions of CHF
Sales 107
 2009 consolidated
In millions of CHF
618
EBIT (a) Group 15 699
as % of sales 14.6%
EBIT (a) (Food and Beverages) 13 083
as % of sales 13.1%
Net profit (b) 10 428
as % of sales 9.7%
as % of average equity attributable to shareholders of
20.9%
the parent
Capital expenditure 4 641
as % of sales 4.3%
Equity attributable to shareholders of the parent 48 915
174
Market capitalisation, end December
294
Operating cash flow 17 934
Free cash flow (c) 12 369
Net debt 18 085
Ratio of the debt to equity (gearing) 37.0%

(a) Earnings Before Interest, Taxes, Restructuring and Impairments

(b) 2008 comparatives benefited from the profit on disposal of 24.8% of Alcon

outstanding capital

(c) Operating cash flow less capital expenditure, disposal of tangible assets,

purchase and disposal of intangible assets, movement with associates as well as

with non-controlling interests.

Per share data (CHF)

 Total earning per share(a) 2.92
Underlying(b) 3.09
Equity attributable to shareholders of the parent 13.69
Dividend as proposed by the Board of Directors of Nestlé 1.60

(a) Earnings Before Interest, Taxes, Restructuring and Impairments

(b) Profit for the period attributable to shareholders of the parent from continuing

operations before impairments, restructuring costs, results on disposals and significant

one-off itmes. The tax impact from the adjusted items is also adjusted for.

Rural development

Context

Agriculture employs over one-third of the world’s working population and three-quarters

of the world’s poor people live in rural areas. Nestlé spends approximately CHF 20.4

billion a year on raw materials, and works directly with approximately 540 000 farmers to

help them to increase their productivity, protect the environment and climb out of

poverty. About 3.4 million people in developing countries earn their livelihoods from our

supply chain, so we can have a positive long-term impact on economic and environmental

development and standards of living, sometimes helping entire regions to increase

agricultural productivity and economic performance. Sourcing in ways that minimise

impact on climate change and long-standing social issues such as child labour in the rural

sector are among the challenges we face.

Our goals

The wellbeing of the communities from which we draw our agricultural raw materials

and local labour is vital to our success as a business and to our shareholder value.

Through rural development, providing local employment and encouraging sustainable

production practices, as well as purchasing directly from small-scale suppliers and

intermediaries, we not only seek to protect the supply and quality of our raw materials,

but also to have a positive, long-term impact on the local economy and standards of living

of rural people.

Our actions

In 2009, we supported direct suppliers through technical assistance and knowledge

transfer, and provided microfinance loans totalling CHF 30 million, and ensured they

operate responsibly and sustainably through the Nestlé Supplier Code. Our rural

development principle is to manufacture, wherever possible, in countries from which we

source commodities; today, about half our [456] manufacturing plants are in the

developing world, primarily in rural areas and directly provide local employment to over

200 000 people. We also actively participate in multi-stakeholder initiatives to promote

best practice.

Our performance

During the year, we enhanced our approach to supplier development and farmer training

and dveloped more Sustainable Agriculture Initiative Nestlé (SAIN) initiatives, which
were coupled with the ongoing communication of, and assessment against, our Supplier

Code of Conduct. We also consolidated our support for the cocoa industry under The

Cocoa Plan, committed 460 million to coffee and cocoa plant science and sustainable

initiatives over the next decade and developed our policy on palm oil.

CSV summary:

Value for Nestlé: More secure supply of better-quality raw materials; lower
procurement costs; consumer preference for our products; profitable growth.

Value for society: Advice and technical assistance; greater yields; higher quality
crops; lower resource use; increased income; wider employment and economic

development opportunities; consumers aware our products are safe, of high quality and

produced using sustainable practices.

Graphs
 Benchmark Table

Benchmark
Company Last 1 week 3 months 6 months 1 year Current year
NESTLE SA 54.15CHF +1.79 % +4.95 % +2.27 % +13.03 % +7.67 %
Index
SMI 6,527.77 -0.14 % +4.90 % -1.69 % +3.48 % -0.63 %
DJ Stoxx 50 2,548.47 -0.46 % +2.65 % +0.02 % +5.49 % -1.44 %
DJ Stoxx Food and Beverages 320.41 -1.09 % +4.34 % +4.13 % +16.88 % +8.03 %
Peer group
Unilever 21.35EUR -0.86 % -5.55 % -6.86 % +2.35 % -6.19 %
Groupe Danone 45.90EUR +0.09 % +6.20 % +3.00 % +11.61 % +6.72 %
Kraft Food 31.78USD -2.13 % +8.80 % +7.36 % +15.48 % +16.92 %

2009 highlights

2009 highlights

Nutrition

CHF 9963 million Nestlé Nutrition sales volume

71% of total sales Products meeting or exceeding Nutritional Foundation profiling criteria

7252 Products renovated for nutrition or health considerations

3950 Popularly Positioned Products (PPPs)

Rural development

165 553 Farmers trained through capacity-building programmes

35% Markets covered by Sustainable Agriculture Initiative Nestlé (SAIN) programmes

77% Direct procurement markets covered by SAIN programmes

3864 Suppliers audited for food safety, quality and processing

165 497 Suppliers who received the Nestlé Supplier Code

Water and Environmental sustainability

85.2 PJ Direct energy consumption

12.2% On-site energy generated from renewable sources

3.98 million tonnes Direct CO2 emissions

48% Reduction of greenhouse gas emissions per tonne of product since 2000

59% Reduction of water withdrawal per tonne of product since 2000

83% ISO 14001 /OHSAS 18001-certified factories

58 995 tonnes Reduction of total packaging materials weight

Our people

2.0 Lost time injuries among employees and contractors (per million hours worked)

5.1 Total injury rate among employees and contractors (per million hours worked)

27% Leadership positions held by women

93 146 Employees receiving formal classroom training in developing countries

42% Local Management Committee members native to country in developing countries

Operational efficiency
Nestlé Continuous Excellence (NCE), the core of our strategy to drive operational

efficiency throughout our business, aims to engage and empower all employees in a “zero

defect, zero waste” mentality across our value chain. The programme shares best practice

for manufacturing, leadership, people development, succession planning and performance

management, and has seen the integration of several hundred operational standards in our

factories.

By increasing the responsibility levels and skill sets of our employees, we have been able

to reduce accidents, waste, unplanned stoppages, quality defects and consumer

complaints, and improve productivity. For example, NCE has helped our Nanjangud

factory in India, where we produce instant coffee and health beverages, to reduce

laminate waste by 35% and powder waste by 87%; reduce shift-end cleaning times by

44%; increase mean time between operational failures by 68%; reduce minor operation

stoppages by 25%; and improve line performance by 8%.

 Training and learning

To build the capabilities required for future business success and ensure Nestlé people

have the right understanding, skills and behaviours to perform their jobs effectively, we

offer a wide range of training actions at local, regional and global level, including on-the-

job training, e-learning programmes and class-based tuition. During 2009, 93 146

employees from developing countries received formal classroom training [KPI],

compared to 83 928 in 2008. This figure includes the 42 931employees who undertook

classroom training as part of our Nutrition Quotient nutrition training programme.

Nestlé people from different backgrounds and cultures attend our global training

programmes on management and leadership development, as well as other intensive

courses and workshops on functional areas of expertise (Operations, Technology and

R&D, Marketing & Sales, Finance & Control and Human Resources). They live and

work together at our Rive-Reine International Training and Conference Centre in La Tour

de Peilz, near Vevey, Switzerland, which provides an open, inspiring and dynamic

environment, and helps to empower and inspire local talent when they return to their

individual markets.

Approximately 75% of the speakers at Rive-Reine are internal experts and top managers

from our corporate headquarters, including all members of the Executive Board. In 2009,

Rive-Reine offered 85 courses (2008: 90) attended by 2350 employees from around the

world (2008: 2539).

Through e-learning, emerging markets can access the same learning curricula and follow

the same pattern of education as their colleagues in other countries. Among hundreds of

general e-courses offered at a global level, more than 240 have been specially developed

for Nestlé. In 2009, a further 90 managers (96 including joint ventures) followed

executive programmes at IMD, our preferred business school in Lausanne, Switzerland.

Employee engagement

To help create an effective and efficient working environment, we listen and respond to

the views of our employees, and to enhance our efforts in this area, we have relaunched

the Nestlé & I global employee survey. All Nestlé people, at all levels of the business,

will be invited to participate by the end of 2010, and their feedback will be used to launch

initiatives to improve our performance around the world.

To maintain the spirit of localisation, we have updated the survey to have a very local

flavour. With a small core set of global questions, markets can select additional topics for

inclusion that best fit with their environment, as well as select the survey timing to suit

local circumstances. From 2009, the process will provide the possibility for managers

throughout Nestlé to access their individual results, to allow for improvement activities to

take place at all levels, and tools to be made available to support action planning.

This new, enhanced survey will ensure we measure not only employee engagement but

also alignment with our strategic roadmap, our leadership and how well we enable
employees to succeed. The relaunch process includes many more tools to enhance and

expand action on feedback throughout the organisation.

Health and safety performance

The Nestlé Occupational Health and Safety Management System reinforces our

commitment to a “zero accident” culture, while our efforts towards certifying all our

factories against OHSAS 18001 will help to create a common standard for health and

safety in our operations.

Our compliance with our Corporate Business Principles, with our Policy on Safety and

Health at Work and with local laws regarding health and safety is also assessed by our

independent audit programme CARE, which covers the areas of human resources, safety

and health, business integrity and environment. Read more about health and safety in our

manufacturing operations.
SAFETY FIRST: Employees undergo health and safety training at the Nestlé Lanka

Kurunagala factory, Sri Lanka.

Managing health and safety

Our approach to safety and health in the workplace is an essential part of Creating Shared

Value and one of the fundamental pillars of our Nestlé Principles and values. In the past

five years, Nestlé has achieved a significant reduction of workplace accidents, driven by a

major global effort that is endorsed by top management and cascaded down through the

Company.

Our new CEO, Paul Bulcke, has reiterated the commitment made by his predecessor in

2005 that “safety is non-negotiable”, by adding the statement that “one accident is one

too many”. Supported by posters and communications in all operating sites, this applies

to all our activities, helps us to achieve higher performance by engaging with our entire

workforce.

Our continuously updated Nestlé Safety Management System, together with modern

tracking and analysis tools, constant management focus, supporting further progress

through a factory manager coaching programme and external verification enabled us to

reduce our Lost Time Injury Frequency Rate (LTIFR) among employees and contractors

to 2.0 lost time injuries per million hours worked in 2009 [KPI]. This reflects a 29%

reduction from last year (2.8) and an 86% reduction since 2000. However lost time

injuries still translated into 37229 workdays lost. As this rate approaches a sector-leading
level, we are increasingly focused on the prevention of all types of injuries, helping to

improve our Total Recordable Injury Rate from 6.1 injuries per million hours worked by

employees and contractors in 2008 to 5.1 [KPI].

Listening to Nestlé employees on the shop floor, without any filtering system, through the

CARE confidential interviews is a mature way of perceiving how the workforce sees the

Company and its managers and, therefore, how Nestlé is actually managed in

practice.Paulo Silveira Ivo, Bureau Veritas, Brazil

Nestlé intends to become one of the leaders in workplace safety. On our journey to zero

injuries our

objective is to

reach the

milestone of
less than one lost time accident per million hours worked by 2012. 190 factories ended

2009 without any lost time injuries, compared to 139 factories the previous year. In

Pakistan, for example, 10 million working hours without lost time injuries were

completed at the Sheikhupura factory, while employees and construction contractors at

the Kejayan factory in Indonesia completed 5 million hours without lost time injuries.

To help protect our people and those we work with, safe driving programmes have been

implemented in most countries; Nestlé also extends these programmes to contractors,

such as those involved in milk collection in Brazil and Pakistan, making an important

contribution to the

safety of all road users, whether they work for Nestlé or are otherwise impacted by

Nestlé’s transport operations. Although reliable data is difficult to obtain, Nestlé has now

implemented a system for collecting safe driving data from contractors, which we plan to

improve in the next few years.

Despite all continuous efforts, we deeply regret four fatalities in 2009 due to accidents

while at work [KPI]. Three involved employees – of which two were traffic accidents and

one involved a contractor in a factory. We continuously strive towards the only

acceptable aspiration: zero accidents.

A fair workplace

The framework that guides employee relationships within Nestlé, including issues

regarding human rights, diversity and equality, is laid down in our Corporate Business

Principles and our Human Resources Policy. Our Business Principles reflect both the

Company’s commitment to long-term successful business development and the necessity

to improve short-term results. They create the foundation for Creating Shared Value,

linking the ambition to meet the needs of consumers and shareholders with the

commitment to respect people and the environment.

It is our policy to abide by national laws in all countries in which we have operations and

to comply with the Fundamental Conventions of the International Labour Organization

(ILO). Throughout our global operations, we also endorse voluntary self-regulation,

including the International Chamber of Commerce (ICC) Business Charter for

Sustainable Development, the OECD Guidelines for Multinational Enterprises and the

Organisation for Economic Co-operation and Development (OECD) Principles of

Corporate Governance. In Colombia, we are part of the Guidelines for Colombia process,

a local adaptation of the Voluntary Principles on Security and Human Rights, which

involves companies, NGOs, trade unions and government.

We support the UN Global Compact’s human rights and labour principles, joined the UN

Global Compact’s Human Rights Working Group in 2009, and we will join its more

informal Labour Working Group in 2010. We also work with and have just concluded a

human rights gap analysis of our corporate policies and systems.

Compliance with sustainable business practices

Throughout the CARE programme, we have built up the optimum working environment

by minimising the risk factors relating to working activities in four areas – Health and

Safety, Labour Standards, Business Integrity and Environment. The programme also

helped us to improve our systems for documenting, measuring and evaluating other issues

in advance. Sungjin Hong, Employee Relations, South Korea

Our support for such conventions, and compliance with local laws, is

monitored through our CARE (Compliance Assessment of Human Resources,

Occupational Health & Safety, Environment and Business Integrity) audit

programme.

This uses three independent external certification bodies to assess our

commitment to socially responsible and environmentally sustainable business

practices in four areas: occupational health and safety, labour standards, business

integrity and the environment. More than 950 audits have now been conducted
 since CARE was piloted in 2005, with 435 audits taking place in 2009.

During 2009, 1668 gaps were identified; 85% were minor (isolated, non-

repetitive) gaps, 15% were major (systematic, repetitive) gaps and none were

critical gaps requiring immediate remedial action [KPI].

We aim to extend CARE to all Nestlé employees and all sites owned or operated

by Nestlé by the end of 2010, and investigate those areas where we find

systematic recurrent gaps

Workplace relations

Nestlé is not just committed to the relevant International Labour Organization (ILO)

Conventions, international standards and initiatives through its Corporate Business

Principles, but also works permanently to improve the level of awareness and to ensure

compliance with those standards throughout the Company.

In several countries, Nestlé further developed local business practices fostering improved

relationships with employees and unions. For example:

• in the Philippines, HR managers and union officers are trained on ILO

Conventions;
 • in Colombia, all employees receive training on the Nestlé Corporate Business

Principles;

• in Europe, the first level of management meets regularly with the local unions and

the International Union of Food to exchange information and discuss workplace

matters.

Even with such strong commitments and hard work from our local managements, Nestlé

has faced a number of challenges and clearly sees opportunities for improvement.

Therefore, to make further progress, a new team was created at the corporate level in

2009, whose task it is to both educate employees about the Corporate Business Principles

throughout the Company and to ensure compliance via the CARE programme.

In addition, this team is presently reviewing Nestlé’s workplace policies and systems, and

will deploy a new Employee Relations Policy in 2010.

Workplace Wellness

Nestlé wants its employees to experience the Company’s vision as a daily reality.

Through the provision of a healthy diet and sporting activities, Nestlé follows the

principle of ‘healthy minds in healthy bodies’, knowing that a loyal and productive

workforce is the key driver of its success. Building Good Food, Good Life, Paul Bulcke,
Chief Executive Officer, Nestlé S.A. and Peter Brabeck-Letmathe, Chairman, Nestlé S.A.,

October 2009

Nestlé knows that sustaining and growing a successful business has always depended on

the fit and healthy employee. In the future, given the demographics of our societies,

future business will increasingly depend on the aging employee.

In January 2008, at the World Economic Forum, Peter Brabeck-Letmathe, Chairman of

Nestlé, joined the heads of several other companies in signed a call to action on

workplace wellness. And in December 2008, Nestlé signed a multi-company commitment

to the World Health Organization to fight chronic diseases including in the workplace.

Over 95% of surveyed Nestlé markets around the world either have workplace wellness

programmes in place or under development. These are diverse in nature, but in general,

they provide nutrition information (in 65%–80% of sites), fitness centres (about 50%) and

free water (90%). Nearly all sites (96%) have preventive medicine programmes, for

example vaccinations, blood glucose and lipid profiles.

In 2008, a review of employee health by Nestlé UK and Ireland revealed that many of our

employees were overweight or obese, and blood pressure rates were higher than the

national average. Nestlé UK has since introduced an extremely well-developed health and

safety programme and an additional employee wellness scheme that covers all of its 6000

employees in the UK and Ireland. The programme – built around engaging, empowering

and energising employees to “make healthy choices easy choices” – has four strands:
 • Nutrition – with minimum nutritional standards for our catering contracts,

healthier choices and nutritional information;

• Increased physical activity – employees are motivated to walk 10,000 steps per

day through the 14-week Global Corporate Challenge. Nestlé UK and Ireland was

named our “most active business’, with 22 teams in the top 100. The global daily

average was 11 400 steps, and the 651 participants from Nestlé Switzerland

averaged the most: 13 247 steps.

• Mental resilience – we have effective systems for both preventing and managing

mental health difficulties through manager training, effective communication and

good working relationships.

• Health screening – in collaboration with Nuffield Health, we provide subsidised

health assessments to employees and offer free basic health checks.

The programme is supported by a network of occupational health professionals,

nutritionists and rehabilitation experts, and tailored to individual work environments by

enthusiastic, motivated volunteers known as “Site Champions”. Other locations have

developed alternative approaches, such as Nestlé in Oceania, which held a WellNes4Life

Expo in September 2009. Employees were encouraged to boost their wellbeing through:

• store discounts, insurance offers and brain-training exercises (mind);

• eye tests, massages and Wii Sport challenges (body);

• exchange programmes, overseas volunteering and charity fundraising (soul).

 Gender balance

Nestlé’s success and culture are built on strong, multicultural diversity, and we believe

that this critical competitive advantage can be leveraged further. In 2008, we launched a

worldwide initiative to accelerate gender balance, a key to the future success of our

Company.

The objective is to guarantee that Nestlé provides the environment, culture and leadership

to achieve a more balanced gender mix, which optimises the talents of both men and

women.

The first steps have focused on leadership teams around the world, to create awareness

and provide management with the necessary background and best practice guidance to

increase gender balance. Some key human resources processes have also been reviewed.

Improving the gender balance is absolutely necessary for our ability to survive and

succeed as a company. Experience shows that building awareness, especially for

managers, is a critical first step of this long journey. This is our business imperative.

Chris Johnson, Chairman and CEO, Nestlé Japan Ltd.

In 2009, 27% of all leadership positions (people with management responsibilities) across

our global operations are held by women [KPI], up slightly from 25% in 2008, but
significantly improving this balance is a lengthy culture change process that will take

several years to realise.

In 2009, Nestlé businesses in all markets have defined locally adapted action plans that

are currently being deployed. Nestlé Japan, for example, has run Gender Balance

Awareness workshops with more than 250 participants, including its entire management

team and three taskforces (one for sales, one for factories, and one for women and

leadership) have been set up.

Water and environmental sustainability

Context

Globally, the combination of population growth, increasing affluence and lifestyle

patterns are outstripping the planet’s ability to bear the effects of human activity. We

believe that we are facing a serious water crisis in the coming years that will have serious

consequences for food security. The food chain, from agriculture to manufacturing and

consumption, contributes significantly to water quality and availability, climate change,

energy use, biodiversity and soil quality, and air quality – at the same time, it is heavily

dependent upon all of these environmental resources. As an example, the availability and

accessibility of fresh water already affects our business, and we also expect to see the

consequences of climate change on our operations over the next decades.

Our goals
Our ambition is to produce tasty and nutritious food and beverages that also have the

lowest environmental footprint, so we strive to continuously improve our operational

efficiency and environmental performance. We apply a life cycle approach to assess the

impacts of our own operations and those associated with the wider value chain, thereby

contributing to a better future and Creating Shared Value to both Nestlé and society.

Our actions
We invested over CHF 220 million in environmental sustainability programmes and

initiatives during 2009. We continue to identify and implement projects to reduce our use

of water, non-renewable energy and other natural resources, to reduce emissions of

greenhouse gases (GHGs), to eliminate waste and to improve the environmental

performance of our packaging. We also work alongside our suppliers to promote more

sustainable practices in our supply chain, including the promotion of water stewardship.

Our performance

We continued to make improvements in our water consumption and CO2 emissions

performance through reduced energy consumption following operational energy

efficiency measures and a move towards renewable energy sources. More waste is being
diverted from landfill and incinerators without energy recovery. A continued focus on

packaging weight reduction remains a priority.

CSV summary:

• Value for Nestlé: Continuously improving environmental performance;

productive factories; reduced risks; reduced costs; long-term availability of raw

materials and water; sustainable, profitable growth.

• Value for society: Raising of environmental standards; higher incomes; better

standards of living.

Compliance with sustainable business practices

Environmental management

The Nestlé Environmental Management System has been implemented throughout the

Company since 1996, helping us to achieve continuous performance improvement and

contribute towards sustainable development.

We have made major progress towards our goal of certifying our operations to the

internationally recognised standards for environmental management (ISO 14001) and for

occupational safety and health management (OHSAS 18001). By year-end 2009, 807
certificates (2008: 455) had been issued [KPI]; this helps drive our performance and

demonstrate compliance.

Our aim is to certify all our factories to both standards by year-end 2010. Having 83% of

our factories certified to both standards [KPI] represents significant progress, and we are

encouraging our business partners to apply similar standards.

The Operations Sustainability Council, chaired by Executive Vice President of

Operations José Lopez, has met monthly since 2007 and reports into the CSV Alignment

Board, as does the Brands and CSV Advisory Group, which guides best practice in

communicating our initiatives to consumers.

Driving operational excellence

Internally, we held the second Global Nestlé Safety, Health and Environment (SH&E)

Conference in October 2008 at which our commitment to safety, health and environment

was integrated into Nestlé Continuous Excellence (NCE), the core of our strategy to drive

operational efficiency across the entire value chain. Similar workshops, held in each of

our geographic zones during 2009, also integrated both SH&E and Quality Management

topics as part of our Nestlé Integrated Management System, one of the foundation

modules of NCE.

The overriding goal of NCE is to engage employees’ hearts and minds in a consumer-

driven war on waste. Its three main principles are:

 • Excelling in compliance: this includes complying with legal and mandatory

requirements at all times; and certifying our operations to ISO 14001 and OHSAS

18001 standards;

• Delighting our consumers: Creating Shared Value and sustainability are

increasingly becoming a driver for product development, and sharing our aims

and achievements with consumers through brand communications and product

claims;

• Driving competitive advantage: for example, making progress towards our

ambitions for zero waste and zero accidents, and improving water efficiency and

energy efficiency.

More details on NCE and operational efficiency can be found in Our people.

Engagement and leadership

We believe that it is our responsibility not only to engage with authorities and key

stakeholders about our SH&E performance, but also to take a leadership role. Our

Director of Environmental Sustainability, Pascal Gréverath, has been elected as the

Chairman of the Environment Committee of the Confederation of the Food and Drink

Industries (CIAA) in the European Union. Together with our Executive Vice-President

Operations & GLOBE, he has played a key role in the creation of the European Food

Sustainable Consumption and Production Round Table, which he co-chairs

Corporate Governance
Nestlé's commitment to sound Corporate Governance goes back to its very early days.

This commitment is reflected and explained in several publications, such as the Corporate

Governance Report, Articles of Association, Committee charters etc. It is also visible in

Nestlé's day-to-day business behavior.

The Corporate Governance Report covers the following areas:

• Group structure and shareholders

• Capital structure

• Board of Directors

• Executive Board

• Compensations, shareholdings and loans

• Shareholders’ participation

• Change of control and defence measures

• Auditors

• Information policy

Organizational Chart
 The Nestlé Group is managed by geographies (Zones Europe,

Americas and Asia/Oceania/Africa) for most of the food business, with the

exceptions of Nestlé Waters and Nestlé Nutrition which are managed on a

global basis. This is also the case of Nespresso, the Joint Ventures (CPW,

BPW), as well as for Pharmaceutical products

Zone EUR

Food & Beverages Europe

Zone AMS

Food & Beverages Americas: United States of America, Canada, Latin America and

Caribbean

Zone AOA

Food & Beverages Asia, Oceania, Africa and Middle East

Nestlé Waters

The Nutrition business is managed on a global basis.

Nestlé Nutrition

The water business is managed on a globalbasis.

Nestlé Professional

Nestlé Professional (the out of home business) is managed on a global basis.

Finance & Control

Group Control, Group Accounting & Reporting, Legal, Intellectual Property,

Acquisitions & Business Development, Pensions & Group Risk Services, Treasury,

Investor Relations, Audit, Tax, Global Nestlé Business Services (GNBS), F&C Business

Excellence

Strategic Business Units (SBUs) and Marketing

Strategic Generating Demand Unit, Business Excellence Generating Demand, Corporate

Wellness Unit, Dairy SBU, Coffee & Beverages SBU, Chocolate, Confectionery &

Biscuits SBU, Ice Cream SBU, Food (Culinary and Frozen food) SBU, PetCare SBU,

Nespresso, Nescafé RTD

Innovation, Technology, R&D

Science & Research, Regulatory, PTCs and R&DCs, Innovation Acceleration Teams,

Technology Intellectual Property, Innovation Partnership Management, Packaging &

Design, Business Excellence, R&D Nestlé Waters, R&D Nutrition, R&D Nestlé Purina
Operations

Procurement, Production, Supply Chain, Engineering, Quality Management, Safety,

Health & Environment, Agriculture, Operations performance, Business Excellence

Operations, Technical Personnel Coordination, GLOBE & Business Excellence.

Pharma / Cosmetics / Human Resources

Pharmaceutical and Cosmetic products, Liaison with L'Oréal, Human Resources

Corporate Communications

Corporate Media Relations, Public Affairs, Economic and International Relations

Corporate Governance, Compliance and Corporate Services

Center Counsel, Group Compliance, General Secretariat, Group Governance

Business Principles

June 2010

The Nestlé Corporate Business Principles are at the basis of our company’s culture,

which has developed over the span of 140 years.

Since Henri Nestlé first developed his successful infant cereal “Farine Lactée”, we have

built our business on the conviction that to have long-term success for our shareholders,

we not only have to comply with all applicable legal requirements and ensure that all our

activities are sustainable, but additionally we have to create significant value for society.

The new version of our Corporate Business Principles will be handed over to each of our

280’000 employees by the end of 2010 and accompanied by basic learning and training

tools.

As of 2011, a modular training programme will be rolled out on the various components

of the Corporate Business Principles. The depth and focus of the trainings will be

established in accordance with the materiality for the different functions within the

company. For example, the training on the human rights components will focus on

managers and employees in countries of higher human rights risks as a priority, with the

aim to having completed the first training cycle by the end of the year.

Our Corporate Business Principles will continue to evolve and adapt to a changing world,

our basic foundation is unchanged from the time of the origins of our Company, and

reflects the basic ideas of fairness, honesty, and a general concern for people.

Nestlé is committed to the following Business Principles in all countries, taking into

account local legislation, cultural and religious practices:

 1. Nutrition, Health and Wellness

Our core aim is to enhance the quality of consumers lives every day, everywhere by

offering tastier and healthier food and beverage choices and encouraging a healthy

lifestyle. We express this via our corporate proposition Good Food, Good Life.

2. Quality Assurance and product safety

Everywhere in the world, the Nestlé name represents a promise to the consumer that the

product is safe and of high standard.

3. Consumer Communication

We are committed to responsible, reliable consumer communication that empowers

consumers to exercise their right to informed choice and promotes healthier diets. We

respect consumer privacy.

4. Human rights in our business activities

We fully support the United Nations Global Compact’s (UNGC) guiding principles on

human rights and labour and aim to provide an example of good human rights’ and labour

practices throughout our business activities.

5. Leadership and personal responsibility

Our success is based on our people. We treat each other with respect and dignity and

expect everyone to promote a sense of personal responsibility. We recruit competent and

motivated people who respect our values, provide equal opportunities for their

development and advancement, protect their privacy and do not tolerate any form of
harassment or discrimination.

6. Safety and health at work

We are committed to preventing accidents, injuries and illness related to work, and to

protect employees, contractors and others involved along the value chain.

7. Supplier and customer relations

We require our suppliers, agents, subcontractors and their employees to demonstrate

honesty, integrity and fairness, and to adhere to our non-negotiable standards. In the same

way, we are committed towards our own customers.

8. Agriculture and rural development

We contribute to improvements in agricultural production, the social and economic status

of farmers, rural communities and in production systems to make them more

environmentally sustainable.

9. Environmental sustainability

We commit ourselves to environmentally sustainable business practices. At all stages of

the product life cycle we strive to use natural resources efficiently, favour the use of

sustainably-managed renewable resources, and target zero waste.

10. Water
We are committed to the sustainable use of water and continuous improvement in water

management. We recognise that the world faces a growing water challenge and that

responsible management of the world’s resources by all water users is an absolute

necessity.

Nestlé continues to maintain its commitment to follow and respect all applicable local

laws in each of its markets.

Code of business conduct

Since the Company was founded, Nestlé’s business practices have been governed by

integrity, honesty, fair dealing and full compliance with all applicable laws. Nestlé

employees worldwide have upheld and lived this commitment in their every day

responsibilities ever since, and Nestlé’s reputation remains one of the Company’s most

important assets today.

The Nestlé Corporate Business Principles prescribe certain values and principles which

Nestlé has committed to worldwide. This Code of Business Conduct specifies and helps

the continued implementation of the Corporate Business Principles by establishing certain

nonnegotiable minimum standards of behaviour in key areas.

The nature of the Code is not meant to cover all possible situations that may occur. It is

designed to provide a frame of reference against which to measure any activities.

Articles of Association

I. General

Artic

le 1 Corporate name; Registered offices; Duration

1 Nestlé S.A. (Nestlé AG) (Nestlé Ltd.) (hereinafter “Nestlé”) is a

company limited by shares incorporated and organised in accordance

with the Swiss Code of Obligations.

2 The registered offices of Nestlé are in Cham and Vevey,

Switzerland.

3 The duration of Nestlé is unlimited.

Art

icle 2 Purpose

1 The purpose of Nestlé is to participate in industrial, service, commercial

and financial enterprises in Switzerland and abroad, in

particular in the food, nutrition, health, wellness and related industries.

2 Nestlé may itself establish such undertakings or participate in,

finance and promote the development of undertakings already in

existence.

3 Nestlé may enter into any transaction which the business purpose

may entail. Nestlé shall, in pursuing its business purpose, aim for

long-term, sustainable value creation.

* This is an unofficial translation. In case of doubt or differences of interpretation,

the official French and German versions of the Articles of Association shall prevail

over the English text.

II. Share Capital

Article 3

Share capital

The share capital of Nestlé is CHF 346 500 000 (three hundred

forty six million five hundred thousand Swiss francs) divided into

3 465 000 000 fully paid up registered shares with a nominal value

of CHF 0.10 each.

Article 3

bis Conditional share capital

1 The share capital of Nestlé may be increased in an amount not

to exceed CHF 10 000 000 (ten million Swiss francs) by issuing

up to 100 000 000 registered 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

with the issuance by Nestlé or one of its subsidiaries of newly or

already issued convertible debentures, debentures with option

rights or other financial market instruments.

2 The shareholders have no preferential rights to subscribe for these

new shares. The current owners of conversion rights and/or option

rights shall be entitled to subscribe for the new shares.

3 The new shares shall be subject, as soon as they are issued following

the exercise of conversion and/or option rights, to the restrictions

set forth in art. 5.

4 The Board of Directors may limit or withdraw the right of the

shareholders to subscribe in priority to convertible debentures,

debentures with option rights or similar financial market instruments

when they are issued, if:

a) an issue by firm underwriting by a consortium with subsequent

offering to the public without preferential subscription rights

seems to be the most appropriate form of issue at the time,

particularly in terms of the conditions for issue; or

b) the financial market instruments with conversion or option

rights are issued in connection with the financing or refinancing

of the acquisition of an enterprise or parts of an enterprise or

participations or new investments.

5 Any financial market instruments with conversion or option rights

which the Board of Directors decides not to offer directly or indirectly

for prior subscription to the shareholders shall be subject to

the following conditions:

a) Conversion rights may be exercised only for up to 15 years,

and option rights only during 7 years from the date of issue of the

relevant financial market instruments.

b) The new shares shall be issued according to the applicable

conversion or option conditions. The respective financial

instruments must be issued at the relevant market conditions.

c) The issue of new shares upon exercise of option or conversion

rights shall be made at conditions taking into account the

market price of the shares and/or comparable instruments with

a market price at the time of issuance of the relevant convertible

debenture, debenture with option rights or similar financial market

instrument.

Article 4

Share certificates; Intermediated securities

Nestlé may issue its registered shares in the form of single

certificates, global certificates or uncertificated securities. Under

the conditions set forth by statutory law, Nestlé may convert its

registered shares from one form into another form at any time

and without the approval of the shareholders. Nestlé shall bear the

cost of any such conversion.

2 If registered shares are issued in the form of single certificates or

global certificates, they shall be signed by two members of the

Board of Directors. Both signatures may be affixed in facsimile.

3 The shareholder has no right to demand a conversion of the form

of the registered shares. Each shareholder may, however, at any

time request a written confirmation from Nestlé of the registered

shares held by such shareholder, as reflected in the share register.

4 Intermediated securities based on registered shares of Nestlé

cannot be transferred by way of assignment. A security interest

in any such intermediated securities cannot be granted by way of

assignment.

Article 4 Share register

1 Nestlé shall maintain a share register showing the name and

address of the holders or usufructuaries. Any change of address

must be reported to Nestlé.

2 Only persons entered in the share register as shareholders with

voting rights may exercise the voting rights or the other rights

related thereto.

3 After the acquisition of shares, upon request of the shareholder to

be recognised as such, any acquiring party shall be considered as

a shareholder without voting rights, until it is recognised by Nestlé

as a shareholder with voting rights. If Nestlé does not refuse the

request to recognise the acquiring party within twenty days, the

latter shall be deemed to be a shareholder with voting rights.

4 An acquirer of shares shall be recorded in the share register as

a shareholder with voting rights provided he expressly declares

to have acquired the shares in his own name and for his own

account.

5 No person or entity shall be registered with voting rights for

more than 5% of the share capital as recorded in the commercial

register. This limitation on registration also applies to persons who

hold some or all of their shares through nominees pursuant to this

article. All of the foregoing does not apply in the case of the acquisition

of an enterprise, or parts of an enterprise or participations

through exchange of shares or in the cases provided in art. 685d

par. 3 of the Swiss Code of Obligations.

6 The Board of Directors shall promulgate regulations relating to the

registration of fiduciaries or nominees to ensure compliance with

these Articles of Association.

7 Legal entities that are linked to one another through capital, voting

rights, management or in any other manner, as well as all natural

persons or legal entities achieving an understanding or forming a

syndicate or otherwise acting in concert to circumvent the regulations

concerning the limitation on registration or the nominees,

shall be counted as one person or nominee within the meaning of

paragraphs 4 and 5 of this article.

8 After hearing the registered shareholder or nominee, the Board

of Directors may cancel, with retroactive effect as of the date of

registration, the registration of such shareholder or nominee if the

registration was effected based on false information. The respective

shareholder or nominee shall be informed immediately of the

cancellation of the registration.

9 The Board of Directors shall specify the details and promulgate

the necessary regulations concerning the application of this art. 5.

Such regulations shall specify the cases in which the Board or a

corporate body designated by the Board may allow exemptions

from the limitation on registration or the regulation concerning

nominees.

10 The limitation on registration provided for in this article shall also

apply to shares acquired or subscribed by the exercise of subscription,

option or conversion rights.

III. Organisation of Nestlé

A. General Meeting

Article 6

Powers of the General Meeting

1 The General Meeting of shareholders is the supreme authority of

Nestlé.

2 The following powers shall be vested in the General Meeting:

a) to adopt and amend the Articles of Association;

b) to elect and remove the members of the Board of Directors

and the Auditors of Nestlé;

c) to approve the annual report and the consolidated financial

statements;

d) to approve the annual financial statements as well as the

resolution on the use of the balance sheet profit, in particular, the

declaration of dividends;

e) to grant release to the members of the Board of Directors and

the persons entrusted with management; and

f) to take all decisions which by law or under these Articles of

Association are within the powers of the General Meeting.

Article

7 Annual General Meeting

The Annual General Meeting shall be held each year within six

months of the close of the financial year of Nestlé. The meeting

shall be convened by the Board of Directors.

Article

8 Extraordinary General Meeting

1 Extraordinary General Meetings shall be convened by the Board of

Directors or, if necessary, by the Auditors, as well as in the other

cases foreseen by law.

2 The Board of Directors shall, if so requested by a General Meeting

or at the request in writing, specifying the items and proposals

to appear on the agenda, of one or more shareholders with voting

rights whose combined holdings represent at least one tenth

of the share capital as recorded in the commercial register, convene

an Extraordinary General Meeting. The Extraordinary General

Meeting shall be held as promptly as practicable following such

request.

Article

9 Notice of General Meetings; Agenda

1 Annual or Extraordinary General Meetings shall be convened by

notice in the “Swiss Official Gazette of Commerce” not less than

twenty days before the date fixed for the meeting. Shareholders

may in addition be informed by ordinary mail.

2 The notice of a meeting shall state the items on the agenda and

the proposals of the Board of Directors and of the shareholders

who requested that a General Meeting be convened (art. 8 par. 2)

or that items be included in the agenda (art. 9 par. 3).

3 One or more shareholders with voting rights whose combined

holdings represent at least 0.15% of the share capital of Nestlé as

recorded in the commercial register may request that an item be

included in the agenda of a General Meeting. Such a request must

be made in writing to the Board of Directors at the latest 45 days

before the meeting and shall specify the agenda items and the
proposals made.

4 No resolution shall be passed at a General Meeting on matters

which do not appear on the agenda except for:

a) a resolution convening an Extraordinary General Meeting; or

b) the setting up of a special audit.

Article 10

Presiding officer; Minutes

1 The Chairman or any member of the Board of Directors shall preside

at General Meetings and carry all procedural powers.

2 Minutes of General Meetings shall be kept by the Secretary of the

Board of Directors.

Article 11

Voting rights; Proxies

1 Each share recorded in the share register as share with voting

rights confers one vote on its holder.

2 At General Meetings no person may exercise, directly or indirectly,

voting rights, with respect to own shares or shares represented

by proxy, in excess of 5% of the share capital as recorded in the

commercial register. Legal entities that are linked to one another

through capital, voting rights, management or in any other manner,

as well as all natural persons or legal entities achieving an

understanding or forming a syndicate or otherwise acting in concert

to circumvent such a limit, shall be counted as one shareholder.

3 The foregoing limit does not apply to shares received and held by

a shareholder pursuant to an acquisition of an enterprise, or parts

of an enterprise or participations as referred in art. 5 par. 5.

4 In order to permit the exercise of voting rights in respect of shares

deposited with banks, the Board of Directors may by means of

regulations or agreements with banks depart from the limit foreseen

in this article. It may also depart from such a limit within the

framework of the regulations referred to in art. 5 par. 6 and par. 9.

In addition, this limit shall not apply to the exercise of voting rights

pursuant to the statutory rules on institutional shareholder representatives.

8 statutory law.

B. Board of Directors

Article

12 Quorum and decisions

1 General Meetings shall be duly constituted irrespective of the

number of shareholders present or of shares represented.

2 Unless provided otherwise by law or the Articles of Association,

shareholders’ resolutions and elections shall be decided by an

absolute majority of the shares represented.

3 Votes shall be taken either on a show of hands or by electronic

voting unless a vote by written ballot is ordered by the Presiding

officer of the meeting. The Presiding officer may at any time order

to repeat an election or resolution, if he doubts the results of the

vote. In this case, the preceding election or resolution is deemed

not having taken place.

4 If the first ballot fails to result in an election and more than one

candidate is standing for election, the Presiding officer shall order

a second ballot in which a relative majority shall be decisive.

Article 13

Special quorum

The approval of at least two thirds of the shares represented

and the absolute majority of the nominal value represented at a

General Meeting shall be required for resolutions with respect to:

a) a modification of the purpose of Nestlé;

b) the creation of shares with increased voting powers;

c) restrictions on the transfer of registered shares and the change

or removal of such restrictions;

d) an authorized or conditional increase in share capital;

e) an increase in share capital through the conversion of capital

surplus, through a contribution in kind or for the purpose of an

acquisition of assets, or a grant of special benefits upon a capital

increase;
f) the restriction or withdrawal of the right to subscribe;

g) a change of the registered offices of Nestlé;

h) the dissolution of Nestlé;

i) restrictions on the exercise of voting rights and the change or

removal of such restrictions;

j) the limitation on registration (art. 5 par. 4 to 7) and the limitation

on voting rights (art. 11 par. 2, 3 and 4) and the change or removal

of such limitations;

k) the change of the corporate name of Nestlé; and

l) other matters as provided byNumber of Directors

The Board of Directors shall consist of at least seven members.

Article 15

Term of office

1 The members of the Board of Directors shall be elected for a term

of office of three years by the General Meeting. Each year the

Board shall be renewed by rotation, to the extent possible in equal

numbers and in such manner that, after a period of three years, all

members will have been subject to re-election. Directors shall be

elected individually.

2 In the event of an increase or a decrease in the number of Directors,

the Board of Directors shall establish a new order of rotation. It follows

that the term of office of some members may be less than

three years.

3 Members of the Board of Directors whose term of office has

expired shall be immediately eligible for re-election.

4 A year shall mean the period running between one Annual General

Meeting and the next.

Article 16

Organisation of the Board; Remuneration

1 The Board of Directors shall elect its Chairman and one or two

Vice-Chairmen. It shall appoint a Secretary and his substitutes,

neither of whom need be members of the Board of Directors.

2 The Board of Directors shall define in the Board regulations pursuant

to art. 19 par. 2 its organisation and the assignment of responsibilities.

3 The members of the Board of Directors are entitled to a directors’

fee for their activities the amount of which is fixed by the Board of

Directors.

10

Article 17

Powers of the Board in general

The Board of Directors shall conduct all the business of Nestlé to

the extent that it is not within the powers of the General Meeting

or not delegated pursuant to the Board regulations as set forth in

art. 19 par. 2.
Article 18

Specific powers of the Board

The Board of Directors has the following non-transferable and

inalienable duties:

a) the ultimate direction of the business of Nestlé, in particular

the conduct, management and supervision of the business of

Nestlé, and the provision of necessary directions;

b) the determination of the organisation in the Board regulations

pursuant to art. 19 par. 2;

c) the determination of accounting and financial control

principles;

d) the appointment and removal of the persons entrusted with

the management and the granting of signatory powers to persons

representing Nestlé;

e) the ultimate supervision of the persons entrusted with the

management of Nestlé, ensuring in particular their compliance

with the law, the Articles of Association, regulations and

instructions given;

f) the preparation of the business report in accordance with the

provisions of the law;

g) the preparation of General Meetings and the carrying out of its

resolutions;

h) the determination of the manner in which the dividend shall be

paid;

i) the opening and closing of branch offices; and

j) the notification of the court in case of overindebtedness.

11

Article 19

Delegation of powers

1 The Board of Directors may appoint from amongst its members

standing or ad hoc committees entrusted with the preparation

and execution of its decisions or the supervision of specific parts

of the business. The Board of Directors shall ensure that it is kept

properly informed.

2 Unless otherwise provided by law, the Board of Directors may in

accordance with the Board regulations delegate all or part of the

management to one or more of its members, to one or more board

committees, or to third parties.

C. Auditors

Article 2

0 Number of Auditors; Term of office

The General Meeting shall appoint, for a term of one year, one or

more Auditors of the annual financial statements of Nestlé and

the consolidated financial statements of the Group, which shall

be independent from Nestlé and meet the special professional

standards required by law. The Auditors of Nestlé may be

re-elected.

Article 21

Rights and duties of Auditors

The Auditors shall verify the annual financial statements of

Nestlé and the consolidated financial statements of the Group.

The Auditors shall submit their reports to the General Meeting.

Their rights and duties shall be as set out in the Swiss Code of

Obligations.

12

IV. Business report and appropriation of

profit resulting from the balance sheet

Article 22

Financial year

The financial year shall commence on 1 January and shall end on

31 December.

Article

Business report

For every financial year the Board of Directors shall prepare a

business report consisting of the annual financial statements

of Nestlé, of the annual report and the consolidated financial

statements.

Article 24 Appropriation of profit resulting from the balance sheet

The profit shall be allocated by the General Meeting within the

limits set by applicable law. The Board of Directors shall submit its

proposals to the General Meeting.

V. Announcements, Communications

Article 25

Notices

All notices and communications to be made by Nestlé shall be

considered duly made if published in the “Swiss Official Gazette

of Commerce”, unless the law provides otherwise.

Articles of Association amended by the Annual General Meeting

of 15 April 2010

Annual General Meeting 2010

On Thursday April 15, 2010 we held our 143rd Annual General Meeting for

shareholders. The event took place at the Palais de Beaulieu in Lausanne, Switzerland.

2 640 shareholders attended the Nestlé S.A. Annual General Meeting today in Lausanne.

They represented 34.836 percent of the total capital and 56.762 percent of the shares
entitled to vote. The annual report and the accounts were approved and the shareholders

agreed to the release of the Board of Directors and the Management. The Nestlé

Compensation Report was accepted in a separate advisory vote, in line with the Swiss

Code of Best Practice for Corporate Governance. The shareholders further approved the

proposed dividend increase to CHF 1.60 per share, an increase of 14.3 percent over last

year, and agreed to the capital reduction. All proposals of the Board of Directors were

approved with strong majorities.

Shareholders re-elected Messrs. Peter Brabeck-Letmathe, Steven G. Hoch and André

Kudelski for further terms of three years. Mr Jean-René Fourtou, due to the age limit set

out in the Board Regulations, was re-elected for a two-year term. The Annual General

Meeting further elected Ms Titia de Lange and Mr Jean-Pierre Roth as new members of

the Board, each for a three-year term.

Some key questions

What is Nestlé's position on palm oil?

Nestlé views destruction of tropical rainforests and peatlands as one of the most serious

environmental issues facing us today. It is estimated that rainforest destruction

contributes to around 20% of carbon dioxide emissions – more than the entire transport
sector. The growing use of biofuels is a serious factor in this destruction – which we have

vigorously condemned.

What does Nestlé's commitment to nutrition health and wellness mean?

Food has entered a new phase. Once upon a time it was simply fuel to survive. Today's

consumer is looking for something more - an improved nutritional value. We aim to be

able to give consumers the products they need for a healthy lifestyle. We encourage a

balanced, healthy diet and make products that fit into this; we are committed to

increasing the nutritional value of our products while improving taste and pleasure. We

inform fully about the ingredients of our products to allow you to take the decisions

necessary to live a wellness lifestyle as you wish.

What is Nestlé's position on biofuels?

Nestlé supports sustainable energy use: over the last five years, Nestlé has reduced its

energy consumption per tonne of product by 28% and its greenhouse gas emissions by

32%. Nestlé believes that any decision on the use of energy sources must be based on a

systematic cost benefit and life cycle analysis, taking into consideration the social and

environmental impact, including the effects on food prices and water.

The current production of biofuel relies on the extensive use of crops such as maize and

wheat. This has already led to significant price increases and will, in the long term, create
food shortages for millions of consumers from lower-income groups for whom basic

foodstuffs need to be affordable.

The large scale expansion of these agricultural raw materials for biofuel production will

aggravate the problem of water scarcity, as every liter of biofuel made from irrigated

maize or soybeans requires between 500 and 5,000 liters of water. Agriculture already

uses 70% of available water sources. Furthermore, depending on crop type and

geography, CO2 savings compared to fossil fuel can be very small, insome cases only

10%.

What is the Nestlé policy on genetically modified organisms (GMO)?

From its inception more than 130 years ago, Nestlé has built its business on successfully

applying scientific breakthroughs and technological innovations while taking full

responsibility for the quality and the safety of its products. Throughout these years Nestlé

has been manufacturing and marketing products tailored to meet the diverse needs and

preferences of consumers all over the world. This broad experience has provided Nestlé

with thorough insight into and understanding of consumer demands, both in developing

and developed countries. Clearly, consumers' perceptions and opinions differ in the

various regions of the world. Hence Nestlé has always strived to respect these differences
and to take them into account in its activities.

Gene technology in food production

With this vast experience, Nestlé recognizes the potential gene technology has in the

longer term to improve the quality, availability and nutritional value of food. Gene

technology has the potential to increase food production and to support sustainable

agricultural practices. In some instances, positive health effects have been confirmed. For

those reasons, Nestlé supports a responsible application of gene technology for food

production based on sound scientific research.

Safety

The safety of our products and the integrity of the ingredients from which they are

manufactured are paramount to Nestlé. Genetically modified crops, as all raw materials

used by Nestlé, comply to strict regulatory and safety evaluations. WHO, FAO, OECD

and numerous independent scientific bodies have concluded that genetically modified

crops, including ingredients derived from them, that have passed food safety evaluation

procedures, can be registered as safe for use in food production. Nestlé concurs with their

shared opinion that such crops are as safe as their traditional counterparts.

Consumer information and labeling

Consumers' confidence in the food they are buying is supported by having access to

information. Nestlé's Consumer Services are well equipped to provide this access and

thus are the first source of information, including the use of ingredients, derived from

genetically modified crops, in Nestlé products. Many governments now have

implemented or are considering regulations for the use and labeling of these ingredients.

In the absence of a global agreement on the labeling of ingredients, derived from

genetically modified crops, and recognising governments responsibility for the regulatory

process, Nestlé strictly adheres to national laws and regulations regarding their labeling.

Consumer perceptions and the future needs of society

As a global food manufacturer and marketer, Nestlé takes into consideration local needs,

cultural differences and consumer preferences as well as attitudes concerning the use of

ingredients derived from genetically modified crops. In some regions of the world,

governments have expressed a keen interest in this technology as a potential tool to

address their country's future food requirements. Nestlé's long term experience in food

production can be a valuable resource in finding the right balance between these

elements. This may well result in different solutions in various regions of the world,

without jeopardizing in any way the safety and quality of its products. Provided their

safety is proven, as required for all ingredients, Nestlé will continue to use ingredients

derived from genetically modified crops wherever appropriate

Nestle's Growth Strategy and Business Development

As it can be derived from the text, Nestle generates operates worldwide with a focus on

European markets, which make up 70 percent of its sales. These markets are in the

mature state of life cycle of that industry and additionally demographic changes such as

the stagnation of population growth rates make it very hard companies like Nestle to

generate higher profits through higher sales. As a matter of fact the western economies
are actually facing a downturn in output and growth, thus influencing the consumption

patterns of customers, especially in the retail business. Consumer are becoming more

price aware and tend to spend less while demanding at the same time for customisation,

product differentiation and specialization. Another trend is the shift away from branded

food and beverages towards cheap non-branded foods and beverages. Nevertheless, the

introduction of non-brand own labelled products such as Food Lion offers only makes

sense in a large scale in order to achieve economies of scale. As a result of increasing

non-brand cheap products offered by rivals, Nestle find itself in an even more embattled

market and needs to develop a new strategy either away from branding or towards a

higher degree of international market penetration. Since Nestle stands for high quality

and has distinctive competencies in producing higher quality food, it would not make

sense to change the strategic group, because it would most likely get stuck in the middle.

The right strategy is to expand into new markets such as Asia, Eastern Europe and South

America. Logically, in these markets the consumer behaviour, macroeconomic

environment and cultural habits are different in contrast to western economies. Most of

these markets are yet in a growth cycle and this clearly generates an opportunity because

they are emerging markets and “untouched”. As mentioned in the text book China for

instances will inhabit 700 million people by 2010 who will have nearly the same income

levels as Spain has today. While income levels in these emerging markets will increase,

people will gain a higher purchasing power with unsatisfied demands. Serving this

demands is the right opportunity for Nestle to penetrate new markets, build up market

share while at the same time using its profits to defend its old markets in the western

economies through low prices. Concluding, I am strongly convinced that expanding into

new markets is necessary for Nestle if it wants to stay a global player in the 21st century.
2.) What is the company’s strategy with regard to business development in emerging

markets? Does it make sense?

Nestle follows the first mover advantage strategy which means that the company enters in

an early stage the emerging markets, in order to establish a network there before

competitors such as Unilever do so. The first step they make is to establish a substantial

position by selling basic products such as infant formula and condensed milk to the

customer with the goal to build up commending positions in each niche. In order to save

the costly process of establishing a brand name, Nestle simply purchases local brand

names which the consumer is accustomed to. This helps the company to overcome

cultural barriers and customer resentments to foreign brands. After these niches of basic

food supply are filled Nestle moves on into the more upscale segments such as chocolate,

soft drinks and the like. Their strategy is to establish a basis and then expand into more

niches as demand rises. Connected to the rising demand is the rising income level as the

population can afford to spend more money on food products. As mentioned in the book,

Nestle provides about 8500 brand names, but only 750 of them are registered in more

than one country and only 80 are registered in more than ten countries. This is due to the

fact that Nestle’s strategy is based on a broad range of local brand names which are not

entitled as “Nestle”. The company uses that approach in order to the convenient fact that

the consumer is easier to reached because he is accustomed to this brand name and they

think they know what they are buying. Consequently, marketing is easier and les costly

because a reputation, a distribution channel and customer loyalty already exits for that

product with that brand name. As a result Nestle can focus its distinctive competencies on
product improvement and technological aspects such as process innovation.

Concluding, the key to their success is customisation rather than exaggerated

globalisation. This strategy makes sense as the business success of the company proofs.

An example is Nestle’s success in the Chinese milk powder market. There was hardly any

infrastructure nor transportations systems in 1987 when the company entered the market.

Nevertheless, Nestle increased the output of powdered milk from 300 tons in 1990 to

10,000 tons in 1994. This refers to an increase in output of 790% per year. These figures

show the success of their strategy, as well as their flexibility, the steady learning

processes and the monitoring of the environment. In combination all these factors make

up a successful and sense full strategy.

3.) From an organizational perspective, what is required for this strategy to work

effectively?

As a matter of fact a good strategy is not the only necessary prerequisite for operating

successfully in foreign markets. In markets of transitory nations or even less developed

nations there could be a risk in terms of political instability harming the political

economy such as the security of property rights, macroeconomic and cultural

uncertainties are as well an issue. To a certain extent environmental changes occur with

the notion of endangering the basic strategy. In order to avoid these influences and to

counter react on these a company needs the ability of gaining steady learning process

which needs ultimately to be implemented with a cross-functional attitude among all

functional levels. Flexibility is another distinctive competencies a company must be able

to achieve to react as quickly as possible to changing environments. As a consequence,

the company must implement mechanisms allowing it to respond to changes in local

demand, cultural barriers and political fluctuation. Ethnocentric behaviour must be

avoided in any circumstances in order to approach the market in the appropriated way. A

company must as well learn to consider decisions under the long-run perspective, because

markets can be conquered within in short period, but the successful implementation of a

strategy needs more time than that. Entering a new market requires some pre-math. The

company must estimate the perspectives it has in that new market with regards to threats

and opportunities formulating the profile of that country. Basing on this profile the

company is able to figure out the strategical approach. One important part of the strategy

must be the cultural awareness, which means a company should employ locals in order

lower cultural barriers and resentments established by the foreigner. Hence, this results in

a better insight and handling of local demand conditions and knowledge about the

customer. In order to guarantee flexibility the functional level units must have their own

responsibility and must have freedom in decision making, which allows a quick response

towards market fluctuations. To relate these statements to this case Nestle’s business

process in Nigeria gives a good example. An entirely new marketing approach,

distribution channel and network had to be set up due to changing demands, lacking

infrastructure and a lack of security. Nestle managed these threats successfully by

understanding the culture and the being aware of the lack of essentials.

4.) How would you describe Nestlé’s strategic posture at the corporate level?

The ability to react and act on environmental changes is a crucial part of Nestle’s
strategy. Consequently, all subsidiaries have their freedom in decision making regarding

strategy issues. This allows them act independently from the headquarter. Hence, it

responds quicker to the local environment, conditions and demands with the result of a

more efficient approach to local distribution, employees, advertising, products and

marketing. To support this approach Nestle’s established its “expatriate army” which is a

group of about 700 managers who have a lot of experience in doing management

activities in foreign countries. These managers are highly educated and trained in order to

enable them a worldwide field of operations. Employee training is not the only distinctive

competency Nestle was able to establish. As mentioned earlier, Nestle has a sophisticated

R&D department. A steady stream of new inventions and product improvements allows

Nestle to keep up its competitive edge. Supporting this globally aware approach the

company is organized into seven worldwide strategic business units which are called

“SBUs”. These units formulate the high level strategic decisions on a worldwide basis,

while each of these SBUs focuses on a specific segment: chocolate, infant food, cereals,

coffee etc. . Engaging in the overall strategy development such as acquisition and market

entry strategy these SBUs form an important part of the company’s decision making and

operating process. Acquisition contributes about 2/3 to Nestle’s growth rate, hence this

emphasizes the importance of this functional part of the company. Additionally Nestle

established a structure of regional organization which divides the world into 5 major

geographical zones: North America, South America, Asia, Europe and Asia. These

organizations are assisting the SBUs and have the responsibility for developing strategies

within their region.

5.) Does this overall strategic posture make sense given the markets and countries

that Nestle participates in? Why?

This overall strategic posture makes sense which is proved by Nestle’s successful

worldwide expansion, the steady growth rate and the continuously generated profits.

Nestle’s approach of expanding into emerging markets clearly is highly functional

throughout the organizational structure (support of R&D, SBU, regional zones) and the

corporate level strategy. One of the main reasons for this successful expanding into new

markets is due to flexible responds to environmental changes and the ability to obtaining

a steady learning process. These two factors make up a large contribution to Nestle’s

operating performance, which is as well manifested in the credo of having “customisation

rather than globalisation”. Through this attitude the company was able to create a

functional and operational synergy among the corporate level strategy, the organizational

structure and the general strategy set up. Despite of recessional tendencies and high

market fluctuations in the western economies, Nestle was able to grow continuously into

new market segment through skilful market penetration. Clearly, this extraordinary

performance was only enabled through its strategy of avoiding an ethnocentric approach,

building up customer ties through local employees and managing the distribution channel

by an entirely unique approach. The company will continue to generate profits and

increase market share when it keeps up its strategy but has to be aware that

macroeconomic, social or cultural aspects have to be taken into account while pursuing

the strategy. Especially in the new emerging markets this strategy awareness makes a lot

of sense, because western economies are pretty much standardized in regards to cultural

or social economic aspects while Asian or South American markets are characterized by

different means. Nestle was already able to emerge into markets such as Africa and the

Middle East where long lasting formal and informal trade barriers were established by

local government. Lesser developed countries tend to raise trade barriers justifying it with
the infant industry protection argument. Nevertheless, food is needed all over the world

and with the product range and the distinctive competencies the company possesses a

decent platform is given to keep up that strategy. Finally, the approach makes sense from

that point of view, that these transitory and less developed economies have a high growth

potential over the next two decades. China, Southeast Asia, South America and Mexico

will be the future markets on this planet with a growing population and growing income

level. If Nestle would not take the opportunity of moving into these markets with these

incredible potentials, the company will lose its competitive edge and will lose its position

as a global player. Hence, I strongly recommend to pursue this strategy because it makes

sense of the highest degree.

Bibliography
www.google.com

www.nestle.co.in

Arun Monappa

Mirza S.Saiyadain

T.V.Rao
 Questionnaire

Q1. Are you satisfied with the welfare services in nestle?

Yes No

Q2. Is the canteen time appropriate according to workers?

Yes No

Q3.What kind of working environment is within the plant?

Excellent Good Not good

Q4. Is the hygiene care taken while preparation of food?

Yes No

Q5. Benefit of P.f & Esic is given within the concern?

Yes No

.
Q.2 Which System of performance appraisal iscarriedout by the company ?

( a ) bars ( b ) weighted average

( c )ranking method ( d ) 360 degree

Q7.According to you , which is the most important performance factor among the
following in performance appraisal ?

( a ) attendance ( b ) punctuality
( c ) productivity/output (d ) quality of output

CONCLUSION:

The working environment in the Nestle Pantnagar plant is healthy and

good.full care regarding the hygeine of the eatable items has been given and

all the facilities regarding the canteen,laundry,leaves,loans are provided to

all the employeee in the organization