Ladies and Gentlemen, good morning and welcome to the Nestlé press conference.

Today, we will present the fully audited 2006 Group results. You have already seen the key facts and figures which went out this morning over the news agencies as well as over the Internet. A telephone conference with investors as well as several TV interviews have already taken place and I believe many investors already know the key facts and figures. Our press conference is an opportunity to go into more detail and to put the bare facts in a strategic context. We also like to seize the occasion of your presence here to present some important developments and milestones in our activities. And of course we'll gladly answer any question you might have and I would like to encourage you to make use of this possibility.

I will first comment on the full year figures in general terms and then let Paul Polman give you more detailed information. After a few remarks about specific aspects of our business, we will share with you our view of the business environment that will mark our performance in 2007. I then propose to open this press conference to your questions.

Before doing so, Ladies and Gentlemen, let me briefly introduce my colleagues on the Executive Board.

On my right, Mr. Paul Polman, Chief Financial Officer of the Group who in addition supervises the newly created Global Business Services, the Legal and the Intellectual Property Departments and the IS/IT Department. As of February 1st, he also assumed leadership of GLOBE.
On Paul's right, Mr. Frits van Dijk, who is running Zone AOA.
Sitting on his right is Mr. Paul Bulcke who is in charge of Zone Americas.
Next to him, we have Mr. Luis Cantarell, Head of Zone Europe.
To his right you have Mr. Carlo Donati who runs Nestlé Waters worldwide and next to him
Mr. Richard Laube, Deputy Executive Vice President, who leads the global Nestlé Nutrition business.

On my left, François Perroud of Corporate Communications.
Next to him we have Mr. Francisco Castañer, who supervises our pharmaceutical activities, liaises with L'Oréal and is in charge of Human Resources and Corporate Affairs.

On his left, Mr. Werner Bauer, newly appointed Chief Technology Officer. Corporate Research and Development, the Innovation Acceleration Teams, Technology Intellectual Property, and Innovation Partnership Management report to him, as do Packaging and Design and Regulatory Affairs. In addition, Werner chairs the International Nestlé Nutrition Council and the Corporate Issues Roundtable. In a company moving in the direction of Nutrition, Health and Wellness, it goes without saying that innovation is a key success factor. By bringing all these different elements together in one unit, we have created the right structure to make our R&D both more outward-looking and efficient.

Next to him you find Mr. Lars Olofsson who supervises the Strategic Business Units, the Demand Generation Unit and Nespresso.

On his left, you have Mr. José Lopez, recently appointed Executive Vice President, who will run our newly formed Operations Division. This unit will ensure a smooth interface between the Ensuring Supply function and our commercial activities. Supply Chain, Manufacturing, Quality Management, Safety, Health & Environment, Engineering, Agriculture and Operations Performance will all report to José. I believe that this streamlined, highly integrated Division constitutes a real competitive asset for Nestlé. José has an engineering background and has been with Nestlé since 1979. His career spans assignments in the USA, France, Australia, Malaysia/Singapore and Japan, where he was market head from 2003 until 2007.

On his left, finally, Mr. Marc Caira, Deputy Executive Vice President since April of last year, who leads the Strategic Foodservice Business Division.

Before handing the floor to Paul Polman, let me, Ladies and Gentlemen, quickly run you through the key figures for 2006.

As you can see, this was a very strong year and today's results clearly are a source of satisfaction. I want to draw your attention to one element that I think very important. I am referring to the exceptional quality of the results. Yes, the sharp improvement in our EBIT margin is striking. But I would like to point out that we did not achieve it at the cost of the future development of our business. Thus, support for our brands and marketing spending are up significantly. So are our expenditures for R&D.

Strong innovation leads to better, more competitive products. At this stage, all of our products are undergoing the stringent 60/40 + test and 70% of them have successfully passed it. This means that consumers prefer them over competition's products by a substantial margin and that they have a nutritional plus over competing products.

In parallel, we have made our cost base more competitive. The improvement is the result of the efficiencies carefully built into our business over the past years, of scale effects and of the roll-out of GLOBE and of the shared services which have reduced administrative overhead. The significant progress reflects stronger discipline, more focus and a management operating with a higher degree of accountability. Our savings programs, to a large extent enabled by GLOBE, have taught us how to better control the product flow from purchasing to distribution. We now have the tools that allow us to measure and compare and it helps us in managing our businesses and our processes with more precision.
Finally, as we move forward with our operational transformation both at the Center but above all in the markets, I am confident that we will be able to extend and broaden the progress made over the past years. In that sense, Ladies and Gentlemen, this is not a one off exceptional set of figures. Nestlé is now beginning to harvest what is has sown in the past.

And with that, Ladies and Gentlemen, I want to hand over to Paul Polman for a closer look at our results.

[Presentation Paul Polman]

Ladies and Gentlemen, I have already referred to what I see as the exceptional quality of our results. Let me point out some key features:

• growth that is three times higher than the market, based on Nestlé's strong strategic brands and on our core businesses
• a healthy and forward-looking innovation pipeline
• four new brands with sales over one billion Swiss francs (Dog Chow, Pure Life, Poland Spring, Nespresso)
• rigorous cost management as evidenced by the sharp reduction of working capital and the containment of the cost of goods sold
• the new operational structures implemented at the Center and in the markets
• GLOBE enabling and supporting the efficiency initiatives.

There is no doubt that the results of 2006 are the outcome of the many efforts undertaken during the past years to improve the way we are running our organization. They also stem from our relentless drive to become best in class in whatever we are doing.

Ensuring the safety of our employees at the workplace is of course part of it and I note with pleasure that we have again shown significant progress, driving the number of lost time injuries, already halved since 2001, to a new record low.

In the field of environmental performance, we are also on track. Nestlé, for obvious reasons, has always had an interest in preserving the environment around its factories. Long before environmental protection became a broad concern and the law, Nestlé understood that clean water and clean air are vital to preserve its ability to produce high quality products. In other words, taking care of the environment was also safeguarding a key long-term competitive factor which is a high priority for Werner Bauer.
In 1936 the first water purification plant went on-stream in Switzerland. It was in the Maggi factory in Kemptthal. In the 70 years since then, Nestlé also had vastly increased its insight and the efforts to find the most environment-compatible methods possible in production, as well as in distribution and packaging.
What has remained throughout is our determination to be a responsible steward of the environment, to learn and to do better. This is why we have established a series of audited Performance Indicators in that sector and we publish them regularly both in our Management Report as well as on our website.

In 2006, once more, we have made significant progress. Let's just take 4 measures: between 2002 and 2006 production volume went up 22.5%. In that same time, water use went down 20% and our waste water generation was reduced by 23%.

In those five years, we also burnt 12% less energy and our greenhouse gas production was 16% lower.

That's progress by any standard and we will continue our targeted efforts to improve our environmental performance even further.

I also note with pleasure that our ratings in sustainability indices now start reflecting our progress. As you can see, the efforts we are making with many different institutions and groups are beginning to pay off.

The term "sustainability" of course also covers the social reality. Fostering the conviction – already quite broadly established - that our continued existence and success is a positive force in society, certainly contributes to our long term license to operate. I am pleased to note that institutions such as the Methodist Church in the UK have now become an investor in Nestlé. We make considerable efforts in getting information about our activities and about our attitude to all interested organizations and groups and I note that our strong presence in developing and emerging countries remains of interest to most of them. It is in these countries, Ladies and Gentlemen, that Nestlé's contribution to overall development is the most visible and the most appreciated.

Thus, when, two weeks ago, Paul Bulcke and Nestlé Brazil inaugurated the first Group factory entirely dedicated to manufacturing and packaging popularly positioned products, the President of Brazil, Mr. Luiz Inácio Lula da Silva did us the honor of being present. We also had the pleasure of having Mrs. Doris Leuthard, the Swiss Economy Minister, attending the event.
The development of this category of products is of course an example of how Nestlé assumes its social responsibility.
But it is also important to see it in a broader, more strategic context. Nestlé has traditionally had a strong presence in developing and in emerging countries. This is where population growth and increasing purchasing power combine to generate growing demand for the Group's traditional products. A glance at the demographic evolution over 20 years confirms this.

Billions of young adults are getting into their productive years. They and their families thus represent a growing market for many of our staple products. These are needed to sustain an increasingly urbanized, active population. As incomes rise, the family consumption models change: families with an income of 4'000 dollars per year buy fewer and different products from families with incomes of 28'000 dollars and above. There is a great opportunity in being present as early as possible with appropriate and affordable products and then to accompany the consumer as he or she moves up the ladder.

This is what we are doing through our Popularly Positioned Products: products that in their formulation, size, packaging and distribution channels respond to the specific needs of the low income population. The process, which is led by Frits van Dijk, is geared to attaining two key objectives: nutritional quality and affordability. The approach requires a specific business model and a different set-up of production, marketing and sales forces that have to cover very small stores or even street vendors. Making our brands available and affordable at this level broadens our consumer base and starts building the trust and the brand familiarity that will sustain our business for the years to come.

As incomes rise, PPP products are then followed by our classical, more elaborate ranges where convenience, pleasure and diversity are key considerations. This is the traditional strong market for Nestlé's brands. Finally, we reach the domain of health, nutrition and wellness and ultimately, perhaps, well-being. These are the areas with the strongest growth prospects for the high-income bracket. Nestlé covers all income segments world-wide with differentiated strategies. This allows us to grow two to three times faster than the overall market and opens great sales perspectives for many years to come.

It is also important to say that all segments are profitable, including of course the PPP. This is what ensures its long-term viability. Additionally, the PPP approach underscores our long-term commitment to contribute to economic development in our host countries. Let's take the example of our newly established factory close to Salvador de Bahia. Its coming on stream created more than 2000 direct and indirect jobs, often occupied by people who never had formal employment before. Municipal and state revenue will collect 12 million US dollars in taxes. And as the business grows in the years to come, we certainly hope to extend the product range which right now is limited to pre-cooked pasta, cereals, chocolate beverages and soluble coffee. We see additional possibilities for yoghurt, biscuits, soups and stock cubes and even ice cream.

It furthermore has a nutrition dimension, in that it addresses the specific needs of a low-income population. The United Nations Food and Agriculture Organization has clearly identified the three main deficiencies that human beings suffer from, especially in developing countries: These are

• vitamin A,
• iron and
• iodine.

All of these dietary deficiencies can have tragic consequences for individuals, such as blindness or brain damage in children. We also know that there is a broad scientific consensus as to the necessity of providing elements such as folic acid, zinc and calcium in sufficient quantities. All of these deficiencies can be addressed through an appropriate diet, and PPPs are ideally suited to play that role.

There is indeed no more practical way of doing this than by providing affordable staple products to people. To succeed in such a venture, however, you have to have a very detailed understanding of the situation, the aspirations and the life-style of these consumers.

This in turn leads to the development of specific distribution networks. In Brazil, altogether 3800 women sell Nestlé products door to door. They get their supplies at small distribution centers placed in local communities and situated to reach urban outskirts and rural areas. This very simple infrastructure in turn provides an important contact point for educational programs and health initiatives.

There are many more examples of the successful implementation of our PPP strategy in a series of developing countries. Let me cite for example iodine-enriched Maggi cubes in Africa, iron-enriched Maggi Noodles in India and so on. It is fair to say that Nestlé has taken a strong leadership position in this very important business segment which truly allows sharing value with all stakeholders.

As I have mentioned before, in the industrialized world, and with the higher-income segments of the population in emerging and developing countries, Nestlé has to respond to different needs and to a different situation. Over and beyond caloric intake and occasional indulgence, consumers are increasingly looking to the food industry to come up with an offer that reduces or eliminates the negative consequences of an unbalanced diet and augments the positive effects of healthy nutrition. Nestlé is well placed to respond to that demand, thanks to the depth of its R&D and its nutritional know-how, as well as its unstinting efforts to understand the role of food and its components.

And there are very few areas in nutrition in which this understanding is more vital than in health care nutrition. I am pleased, Ladies and Gentlemen, that our meeting today gives me the opportunity to put the transaction with Novartis in context. Last December we made you aware of our intention to acquire Novartis Medical Nutrition for about three billion Swiss francs. I believe that there is a truly strategic dimension to this deal and I would like to describe it in some detail.

Nestlé has been active in health nutrition since 1989 when it agreed to a joint-venture with Baxter. Our Company's interest was clearly in the enteral sector, that is the nutrition delivered orally or by tube to the digestive system of the patient. In 1998, this joint-venture was dissolved and Nestlé continued, on its own, as a relatively modest player on this market. We have continued investing in it and we succeeded in establishing a number of well-respected brands such as Clinutren, Peptamen, Nutren and Sondalis. We realized, however, that we were lacking scale and that we suffered from an insufficient presence in key markets such as Germany, Spain and Japan and in key channels such as critical care hospitals and nursing homes.

Nestlé HealthCare Nutrition of course became part of Nestlé Nutrition under Richard Laube's leadership in 2005. With sales of under 500 million Swiss francs, it accounts for about 10% of total Nutrition sales. On several occasions, I have clearly said that we were actively looking to reinforce this business through acquisitions and when the opportunity came up, we did not hesitate.

As you know, Nestlé sets high standards for its acquisitions and I am happy to note that the present project fulfills every single requirement on that list.

The Novartis deal propels us in a strong number two position in an attractive category. The overall market is estimated at about 10 billion dollars. Ageing populations account for a fast growing market, as does the increasing recognition that enteral nutrition is a beneficial and cost-effective way to supply the patient with the required nutrients both in institutions as well as at home. It has high margins when certain conditions are fulfilled and its success depends essentially on three factors:

• strong R&D with a good pipeline of scientifically proven products and the ability to conduct meaningful clinical trials
• specialized health care marketing capabilities with specific databases, access to key decision makers, patient understanding
• capacity to distribute through all channels – institutions as well as retail (pharmacies and supermarket grocery sector)

The business we are in the process of acquiring brings us the scale we need. It has sales of almost 1.2 billion Swiss francs, a long history in this market, strong brands and an excellent R&D capability. Moreover, its brand portfolio covers the entire range of nutritional products and it has a presence in over 40 countries, covering the US, Europe and also Japan. With this acquisition, Nestlé HealthCare Nutrition will, so to speak, play in a different league, with a broader geographical presence, a larger product portfolio and a better presence in the relevant retail channels than anybody else.

This is once again a case of combining different skills and approaches resulting in better innovations and faster access to markets globally.

Ladies and Gentlemen, let me briefly pay tribute to two of our businesses who have done exceptionally well over the past years.

At the end of last year, Nespresso celebrated its 20. Birthday as well as reaching - and surpassing - its objective of one billion Swiss francs in sales for 2006. Let me emphasize that this was a pioneer venture in the true sense of the word. Nespresso created, 20 years ago, a novel way of preparing and consuming roast & ground coffee.

I will not go into the hard years between 1986 and the beginning of the 90ies, when sales started taking off. The seed for the evolution you see between 1996 and 2006 was planted much earlier, and I certainly want to acknowledge the dedication and the determination of all the people who made Nespresso into the undisputed success it now is. You will also allow me to point out that the owner of Nespresso showed true entrepreneurial grit by not conceding defeat in the course of the first difficult years. Nestlé stuck it out and is now earning the rewards of a truly long-term view of nurturing and developing its businesses.
Let me also point out that it is precisely in mature markets such as Switzerland and France that Nespresso reaches the highest market penetration and has the strongest presence. Between 2000 and 2006 Nespresso showed an annual average sales growth rate of 30% - I have not seen many consumer goods products reaching that kind of performance consistently over a period of five years!

Nespresso will continue to position itself as the super premium iconic coffee brand. It will do so through Its unique way of nurturing brand loyalty through club membership, a steady stream of innovations in the machine sector, but most of all, by offering to all coffee lovers the absolutely best there is. And let me remind you that all Nespresso capsules are and will be produced in Switzerland. Next year we are going to bring on stream the second fully dedicated Nespresso factory in Avenches, in the canton of Vaud.

I believe that Nespresso has the right approach and I do not doubt that it will reach the objective fixed for 2010 – namely two billion Swiss francs in sales under the guidance of Lars Olofsson and the remarkable management of Nespresso!

Let me now speak about another activity, totally different in both structure and nature.

Founded in 1989, our long-standing joint-venture with General Mills, Cereal Partners Worldwide, has since its inception known a very healthy, steady expansion.

It is a dynamic category, with a broad variety of products and flavors.

In a growing market, Cereal Partners Worldwide has done very well, expanding faster than the category and gaining market share steadily over the past years. The Uncle Tobys acquisition in Australia, that is also important for our Nutrition business, has given additional momentum to CPW in that important geography.

And I am happy to say, Cereal Partners Worldwide today is fully entitled to bear that name. What was an aspiration in 1995 now corresponds to a reality. With the exception of North America, excluded in the joint-venture agreement, CPW covers all continents.
The continued success of this operation shows that joint-ventures can indeed flourish when both partners are basically aligned on expectations, objectives and timing.

Ladies and Gentlemen, let me now briefly update you on the project of modernizing our Articles of Association. As you know, our goal is a set of Articles which are balanced, in line with the changed legal and corporate governance environment and in the best interest of all shareholders.

As I told you before, 70% of the capital is today in the hands of institutions, most of them pension funds from many parts of the world.

The year 2000 is also the moment when US shareholders started taking a very active interest in our stock. Their share in the Nestlé capital rose quickly and today, for the first time, the US owners' share outweighs the Swiss'.

As you may recall, at the Annual General Meeting 2005, we started the process of reviewing our corporate governance and Articles of Association. Numerous shareholders responded to our opinion survey about our Articles and gave us valuable input. While the survey showed that there are different views among two distinct groups of shareholders on specific issues, there was a broad consensus in favor of a modernization of the Articles.

Most comments focused on the following points: certain changes to the Articles can only be made with an attendance quorum of two thirds of the total share capital and a supermajority of three quarters of the shares represented. Other decisions require the presence of one half of the share capital. In 1989, when the relevant provisions were introduced, the Nestlé shareholder base was predominantly Swiss, and shareholders' meetings were attended by a large number of shareholders. Today, even if all shareholders with voting rights were to attend a meeting, it would factually not be possible to achieve such an attendance quorum.

The Board of Directors, therefore, proposed a resolution to our shareholders at the 2006 Annual General Meeting in order to enable shareholders to vote on specific proposals at future Annual General Meetings to update the Articles of Association. The Board's proposal won the support of 98% of the shares represented. Accordingly, the Articles were amended by a new Article 36, which mandates the Board to draft a proposal for a complete revision of the Articles and clarifies that the shareholders’ resolution on such revision will require a majority of two thirds of the votes represented at that meeting.

As we have communicated to the public, this clear decision of the shareholders at the 2006 Annual General Meeting was legally challenged by one shareholder. In order to respect minority rights and to minimize the legal uncertainties around the new Articles, the Board has to let the legal process take place. Later, it will submit the new Articles to the shareholders for approval once the court has decided. It is our hope that the court's decision will fall in 2007. The Board does believe that the gradual modernization of the Articles is in the best interest of all shareholders. As previously stated, the goal is a balanced set of Articles which take into account the interests of all the distinct groups of shareholders and reflect the changed legal and corporate governance environment.

In doing so, Nestlé will once again be combining change and continuity. Our Company, has done so successfully for 140 years. It was indeed in 1866 that George Page founded the Anglo-Swiss Condensed Milk Company in Cham and one year later, in Vevey, Henri Nestlé launched the Company that still proudly bears his name. We felt it appropriate to mark the event by updating our corporate history. I therefore asked our historian, Mr. Albert Pfiffner, together with Mr. Hans-Joerg Renk, to undertake the task of describing the strategies and events that marked the last 15 years of Nestlé. The book, under the title "Transformational Challenge Nestlé 1990 – 2005", will come out in time for our General Meeting and it will be available in English, French and German. It is our hope that this work will make it easier to understand the profound changes that occurred in these past 15 years and that form the base of our outstanding success of today. We also expect it to show how successful the Company was in preserving its proven values.

Ladies and Gentlemen, before opening this press conference to your questions, I would like to give you a brief outlook on the months to come. On the plus side, there is an improved economic mood in Europe with consumer confidence clearly improving. The USA should experience stronger economic growth during the second part of 2007 and most of the emerging and developing countries will see a positive economic climate during the entire year. So, all in all, I detect no negative influence on our growth perspectives from the macro-economic environment. But I also would be less than forthright if I did not mention that the industry overall will have to contend with continued high and volatile input costs, especially in the area of agricultural commodities. Furthermore, we will be investing in R&D, in capacity and in our brands to ensure the long-term growth of our Company. Despite these investments in the future, we are confident in our ability to once more, and for the 12th consecutive year, attain the Nestlé model targets and to deliver organic growth between 5 and 6 percent and a further improvement of the EBIT margin in constant currencies.

With that, Ladies and Gentlemen, we conclude our presentations and I now welcome your questions.

Thank you for interest and your participation. I now have the pleasure of inviting you to our apéritif and the buffet that will follow it.