Swot Analysis

CORPORATE INFORMATION MANAGEMENT COMMITTEE Martial G. Rolland – Chairman & Managing Director Shobinder Duggal – Finance & Control Pascal Fournier – Human Resources A. Ganesan – Sales Shivani Hegde – Food B. Kannan – Chocolates & Confectionery Roel Keus – Technical Sanjay Khajuria – Corporate Affairs Vineet Khanna – Supply Chain Virat Mehta – Communications B. Murli – Legal & Company Secretary G. G. Pillai – Additional Channels Rajkamal Sharma – Exports Gary Tickle – Infant Nutrition Ajoy Titus – Coffee & Beverages Mayank Trivedi – Shelf Stable & Chilled Dairy

REGISTERED OFFICE M-5A, Connaught Circus, New Delhi – 110 001 HEAD OFFICE Nestle House, Jacaranda Marg, ‘M’ Block, DLF City, Phase II, Gurgaon – 122 002 (Haryana) BRANCH OFFICES Spencer Plaza, 6th Floor, 769, Anna Salai, Chennai – 600 002 (Tamil Nadu) Tower “C”, 12th Floor, DLF IT Park, 08, Major Arterial Road, Block – AF New Town, Rajarhat, Kolkata – 700 156 (West Bengal) 1st Floor, ICC Chambers, Near Saki Vihar Telephone Exchange, Saki Vihar Road, Powai, Mumbai – 400 072 (Maharashtra) M-5A, Connaught Circus, New Delhi – 110 001

BANKERS Citibank NA HDFC Bank Limited ICICI Bank Limited Standard Chartered Bank Punjab National Bank Deutsche Bank ABN Amro Bank N. V. State Bank of Hyderabad FACTORIES Village Maulinguem (North), Bicholim Taluka – 403 504 (Goa) Ludhiana-Ferozepur Road, Near Kingwah Canal, Moga – 142 001 (Punjab) Industrial Area, Nanjangud – 571 301 Mysore District (Karnataka) P. O. Cherambadi – 643 205 District Nilgiris (Tamil Nadu) Patti Kalyana, Kiwana Road, Samalkha – 132 101 District Panipat (Haryana) AUDITORS A. F.

Ferguson & Co. , Chartered Accountants, 9, Scindia House, Kasturba Gandhi Marg, New Delhi 110 001 WEBSITE www. nestle. in Plot No. 294-297, Usgao Industrial Area, Ponda – 403 406 (Goa) Plot No. – 1, Sector No. -1A, Integrated Industrial Estate, SIDCUL, Pantnagar- 263145, District Udhamsingh Nagar (Uttarakhand) ANNUAL GENERAL MEETING INVESTOR EMAIL ID. [email protected] nestle. com LISTING OF EQUITY SHARES (Listing Fees paid) The Bombay Stock Exchange Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai – 400 001

Tuesday, 5th May, 2009 at 10. 00 A. M. at Air Force Auditorium, Subroto Park, New Delhi – 110 010 Shareholders attending the AGM are requested to bring with them the enclosed ATTENDANCE SLIP. 9 NESTLE INDIA LIMITED DIRECTORS’ REPORT (Rs. in Million) TOTAL INCOME Dear Members, Your Directors have pleasure in submitting their report and the statement of accounts for the year ended 31st December, 2008. Financial Results and Operations (Rs. in Million) 2008 2007 43,351 35,131 Revenue from Operations# 7,822 6,302

Profit from [email protected] Net interest/financing income 214 159 Impairment Loss on Fixed Assets (Net) 3 12 Additional Employee Cost 753 Provision for Contingencies (Net) 305 (590) Provision for Tax 2,387 2,148 Net Profit 5,341 4,138 Profit Brought Forward 125 105 Amount transferred from 432 Share Premium Account* Amount transferred from 431 General Reserve* Balance Available for Appropriation 6,329 4,243 Interim Dividends 2,218 2,941 723 Special Dividend* Final Dividend Proposed 1157 241 Corporate Dividend Tax 696 522 Transfer to General Reserve 534 414 Surplus carried in Profit and Loss Account 1001 125 Key Ratios Earnings per Share (Rs. 55. 39 42. 92 Dividend per Share (Rs. ) 42. 50** 33. 00 # Excludes interest/financing income @ before impairments, additional Employee Cost, contingencies and net interest/financing income * Pursuant to the Scheme of Arrangement. ** Includes special dividend of Rs. 7. 50 per share, paid under the Scheme of Arrangement. The Profit from Operations for the year 2008 increased by 24. 1% with margin improving to 18% from 17. 9%, due to scale. Staggered price increases and cost optimisation initiatives contributed to offset steep increase in commodity prices like milk solids, green coffee, fuels and vegetable fat. Net Profit increased by 29. % over 2007 with margin improvement to 12. 3% from 11. 8%. This has been positively influenced by the tax holiday of the Pantnagar Factory for the full fiscal year ended 31. 03. 2008. Your Company continued to lay emphasis on cash generation and delivered strong operating cash flow during the year. Surplus funds have been prudently invested after ensuring that such investments satisfy the Company’s criteria of security and liquidity. The Company supplemented the Provision for Contingencies with further amount of Rs. 305 Million (net) for contingencies resulting mainly from issues, which are under litigation/ dispute.

This was after the write back of Rs. 21 Million provision, due to satisfactory settlement of certain disputes and other matters for which provision was no longer required. The year 2008 was a mixed one, marked by tremendous uncertainties. Most part of the year was characterised by high commodity prices and other costs, whilst growing inflation was a concern. Corrective FIXED ASSETS Net Sales for the year 2008 increased by 23. 4% over the previous year. With increased volumes as well as better realisations, Domestic Sales for the year increased by 25. 6%.

Exports for the year increased by 2. 6% mainly due to depreciation of the Indian Rupee. 10 Fixed Assets Turn (times) (Rs. in Million) EBIT as a % of Net Sales action by the Government and the Reserve Bank of India managed to contain the inflationary spiral but during the second half, the global economic environment was in virtual turmoil. With an unprecedented and unexpected economic crisis that affected the entire world, business confidence and sentiments suddenly ebbed. The growth rate in the Indian economy slowed down and the Indian Rupee depreciated.

Stock markets are now hovering at much lower levels, and the pressure to improve productivity has increased. Despite the slowing down of the economy during the second half of 2008, most policy makers believe that the fundamentals of emerging India’s growth story are intact. Your Company continues to have potential for growth. During 2008, your Company has continued to deliver strong turnover and profits. While the positive economic environment in the first part of the year played a role, this continuing growth largely reflects the increased people engagement within the Company.

This growth has also been possible because of your Company’s strong and continued focus on understanding the consumer, increasing awareness of health and wellness amongst consumers and on the demographics of India. “Good Food, Good Life” is our corporate proposition and your Company has always understood that good food is central to health and wellness. Your Company has a distinct competitive advantage. Nestle S. A. is the foremost Food, Nutrition, Health and Wellness Company in the world and your Company has access to their immense nutritional expertise, extensive Research and Development, latest food technology and brands, to elp consumers navigate the road to Health and Wellness through proper scientific nutrition. Nutritional products that support healthy growth of infants and children have been in the market since the inception of the Company, while health and wellness has continuously driven the innovation and renovation in the product portfolio. Today SHAREHOLDERS’ FUNDS your Company takes pride that it has Nutrition, Health, and Wellness (NHW) embedded in all its businesses, developing products for consumers from infancy to adulthood and making NHW affordable and part of daily diet.

During 2007 your Company had experimented with a unique concept of “Nestle Nutricorners” to bring nutritional knowledge closer to the consumers. During 2008, “Nestle Nutricorners” consumer contact programme was rolled out more extensively, counselling and guiding consumers and empowering them with basic knowledge on how to make healthier food choices in general. All your Company products carry the NUTRITIONAL COMPASS that provides the consumers with the relevant information on nutritional ingredients to help them make healthier choices on the nutritional ingredients in the product and the benefits resulting from those ingredients.

Many of the initiatives that your Company has implemented in recent years in all areas of operations have made your Company more efficient and robust and will certainly further enhance the trust that consumers place in your Company’s products. Success of these initiatives depends on positive employee engagement and your Company has a culture of positive and strong mindset EARNINGS Earnings Per Share (in Rupees) Years 2004 and 2008 includes Special Dividend of Rs. 4. 50 and Rs. 7. 50 per share, respectively. (Rs. in Million) 11 Return on Equity (%) (Rs. in Million) NESTLE INDIA LIMITED

CASH FLOW Arrangement (hereinafter referred to as “Scheme”) between the Company and its Shareholders and Creditors, for utilisation of the balance in the Share Premium Account (Rs. 432. 4 Million) and a part of the balance in the General Reserve Account formed by excess transfer of surplus profit in earlier years (Rs. 430. 8 Million), for payment to the shareholders, subject to applicable taxes. The Scheme became effective on 31st October, 2008 with the filing of the certified copy of the High Court Order sanctioning the Scheme, with the Registrar of Companies, NCT of Delhi & Haryana.

Consequently, a Special Dividend at the rate of Rs. 7. 50 per share, arrived at after taking into account applicable corporate dividend tax and rounding off to nearest half a Rupee, was paid to all the shareholders on 26th November, 2008. (Rs. in Million) that is helping everyone understand their potential and take pride in achieving more, with greater efficiency. The current year has commenced as per plan. In the year 2009, the economic environment is going to be more challenging and will require innovative thinking, agility and speed in anticipating changes.

Your Company will continue to direct its efforts on product innovation and renovation, to control costs, improve penetration and manage price-value relationship for its brands, in increasingly difficult market conditions. We are positive with regard to the future and remain confident of the longterm business prospects of the Company and its ability to sustain fair returns to the shareholders. it offset the nascent development activity achieved by your Company in other markets. Instant Tea exports remained depressed, with global competition burgeoning. Efforts are on to widen the customer base and develop more customer-specific variants.

Initiatives to develop products for the Indian ethnic community abroad are continuing. Business Development Your Company continued its focus on understanding consumer needs and providing relevant products whenever, wherever and however the consumer may need them. Today as ‘Health and Wellness’ is becoming the underlying consumer criteria for choice, your Company has the expertise to innovate and renovate its food and beverage products and bring NHW to consumers in all stages of life while providing superior taste, quality and convenience. The ‘Milk Products and Nutrition’ business continued to perform well as per expectations.

Driving innovation in the market based on the process of combining local consumer insights with the Nestle Group research and development competence remained in strategic focus. After the pioneering work to bring probiotics in Dahi to Indian consumers, your Company pioneered the concept of Milk with Omega-3, and launched NESTLE NESVITA PRO-HEART Milk with Omega-3 in Mumbai. NESTLE NESVITA PRO-HEART is part of daily diet and has Omega-3 heart friendly nutrients scientifically known to help Dividends The Board of Directors has recommended a final dividend of Rs. 12. 00 per equity share of the face value of Rs. 0/- each for the year 2008. This is in addition to the Interim Dividend at the rate of Rs. 8. 50 per share paid on 9th May, 2008. Further, Second Interim Dividend at the rate of Rs. 14. 50 per share alongwith Special Dividend (distribution under the Scheme of Arrangement) of Rs. 7. 50, aggregating Rs. 22. 00 per share was paid on 26 th November, 2008. Therefore, dividends aggregating to Rs. 30. 50 per equity share have been already paid during the year 2008. The total payout for 2008 would be Rs. 4,794 Million (including the corporate dividend tax). Exports During the year, Export Sales at Rs. ,384 Million, grew by 2. 6%. Exports of culinary products, continued to grow steadily notwithstanding the economic slowdown in some of the importing markets. Sales of noodles particularly grew impressively. The performance was negatively impacted due to lower exports of beverages. Instant Coffee exports fell mainly due to a substantial reduction in imports by the traditionally major market of Russia. Though Coffee exports to Russia have a much lower weightage in the Company’s export basket, 12 Scheme of Arrangement During the year 2008, the Hon’ble High Court sanctioned the Scheme of manage cholestrol.

NESTLE EVERYDAY Dairy Whitener and NESTLE MILKMAID Sweetened Condensed Milk continued to grow market share with good volume growths. During the year 2007, your Company also activated the category of Growing Up Milks with the relaunch of the world’s largest selling milk powder brand NESTLE NIDO which is a nutritious milk for growing children above the age of 2 years providing calcium, vitamin D and 25 other essential nutrients. The performance of NESTLE NIDO has been as per expectations and the product will be rolled out selectively to more geographies in India. The portfolio in the Chilled Dairy segment continued to grow well.

It also helped strengthen the credibility of your Company as the pioneer in science based nutrition, as well as in reinforcing it’s Nutrition, Health and Wellness credentials. Regular consumption of probiotic culture used in NESTLE NESVITA Dahi benefits digestion. NESTLE NESVITA 98% fat free dahi with probiotics continued to expand its reach and volumes. It is widely accepted by nutritionists and scientists that the foundation for good health starts forming during infancy. Your Company actively supports and promotes breast feeding as being the best possible source of nutrition for the developing infant.

Recognising that there are circumstances where the mother is unable to feed, Nestle continues to build on its heritage in providing suitable alternatives to meet the needs of the infant. Science based innovation and renovation remains central to the ongoing development of products in the Infant Nutrition category. While the existing product portfolio continues to be appreciated by doctors and health workers, as part of our ongoing commitment to offering best in class nutrition products to Indian consumers, your Company launched NESTLE NAN 3, a follow-up formula for older infants.

MAGGI, the pioneer of the ‘TASTE BHI HEALTH BHI’ concept, has been a favourite with generations of consumers who have grown up relishing MAGGI 2-Minute Noodles, enjoying the MAGGI range of Ketchups and Sauces, and savouring MAGGI Healthy Soups. The business for ‘Prepared Dishes and Cooking Aids’ continued to lead the market with rapid growth through strong consumer centric innovation and renovation, enhanced availability and new offerings that improved affordability.

The concept of ‘TASTE BHI HEALTH BHI’ now extends across the portfolio, with offerings like MAGGI 2-Minute Noodles (containing protein and calcium), MAGGI Vegetable Atta Noodles (offering the dietary fibre of whole wheat and the goodness of vegetables), MAGGI Healthy Soups (with the goodness of vegetables, low in fat and cholesterol, and no added MSG or synthetic colours), and MAGGI Sanjeevni Soups (with traditional ingredients like Amla and Badam). Your Company understands that many in the younger generation today are continuously on the go and facing busier lifestyles.

To provide them a tasty, convenient and wholesome light meal on the go, the business launched MAGGI Cuppa Mania, delicious Instant Noodles in a cup, with the power of calcium and the goodness of real vegetables. During the year, MAGGI PICHKOO Tomato Ketchup was launched in a unique easy to handle day pack to drive affordability, taste and convenience for a larger number of consumers. Your Company also launched another pioneering product, MAGGI Bhuna Masala, to cook tasty and healthy everyday meals, more conveniently.

It enables the housewife to prepare delicious dishes, yet bypass the process of preparing the base/gravy. It is ready to use and does not compromise on the fresh taste, nutrition and health aspects of cooking. The MAGGI Noodles Chotu Pack continued to drive distribution and extended the reach of MAGGI Noodles to another 300,000 new outlets in one single year. MAGGI continued to be recognised as a very strong brand. This was again highlighted in the annual survey compiled by Brand Equity where MAGGI moved up in the rankings as one of India’s Top 5 Most Trusted Food Brands.

This was also brought out in another independent survey by NCAER (National Council for Applied Economic Research), wherein MAGGI ranked as the Number 1 Most Valuable FMCG Brand. During 2008, the ‘Chocolate and Confectionery’ business remained buoyant. Consumers are increasingly seeking to balance indulgence with health and wellness while choosing products. Your Company has continuously leveraged its insights and the global expertise in nutrition and technology to innovate and create new segments that help consumers increase the wellness dimension.

This has made your Company the leader in ‘lighter eating’ with NESTLE KITKAT and NESTLE MUNCH by balancing indulgence with lighter eating. During the year, the ‘Chocolate and Confectionery’ business further consolidated leadership in the light-waferchocolayer segment and focused on improving distribution and penetration. NESTLE KITKAT Mini and NESTLE BAR ONE Mini, at Rs. 3/- price point were launched to expand the repertoire of offerings. Similarly, the launch of the NESTLE KITKAT CHUNKY at Rs. 15/- is another innovative concept to strengthen the range of wellness oriented Nestle products that consumers can choose from.

NESTLE MILKYBAR enriched with calcium has made your Company the leader in white confectionery and the calcium rich proposition was extended to the unique NESTLE MILKYBAR CHOO. NESTLE POLO continued to build strong brand equity with its consumers through its unique proposition “THE MINT WITH THE HOLE”. Your Company is the value leader in Instant Coffee with NESCAFE and believes that there is potential to grow the market further. The ‘Coffee and Beverages’ business focused on strengthening consumer insights to improve marketing-sales activities, enabling it to accelerate growth momentum on NESCAFE products. 3 NESTLE INDIA LIMITED The NESCAFE product range now includes Cappuccino, a perfect combination of thick froth, rich aroma and great coffee taste. Your Company’s access to the latest Instant Coffee manufacturing technology resulted in distinct superiority in quality and taste of NESCAFE products and this will further drive competitive advantage. In addition, during the year a NESTLE MILO “Ready to Drink” [RTD] beverage was introduced for test marketing in key metros through modern retail stores. NESTEA Iced Tea Premix with Vitamin C was also launched in select markets in Lemon and Peach flavours.

The continuing initiatives in the ‘Out-OfHome’ segment delivered satisfactory results. Your Company accelerated its presence through ‘NESTLE Consumption Zones’, Cafe NESCAFE outlets and vending machines in offices, colleges and other locations that experience high footfall. Your Company has by far the largest number of vending machines installed in the market, and a significant presence in Out-Of-Home, selling over 7. 7 Million cups of hot and cold beverages per day. and commitment to quality is an integral part of the manufacturing process.

This commitment to product quality is supported by state-of-the-art technology and a high degree of automation. In view of the fact that your Company has very stringent specifications, including those for raw materials, it is continuously working with local suppliers to help them develop capabilities for supply of high quality raw materials. During the year, your Company has made significant progress in developing suppliers at par with international quality which will help it become less reliant on imports for these raw materials.

During the year, three more factories were awarded the internationally recognised external certification ISO 14001 for adherence to environmental processes and OSHAS 18001 for Health and Safety. With this, all the seven factories of your Company now have ISO 14001 and ISO 18001 certifications. You can be proud that our factories not only create world class products delivering Nutrition, Health and Wellness but also provide economic prosperity to farmers by processing agricultural products in a sustainable manner. teams to reinforce skills and impart best practices. Human Resources

People are key to driving the performance of the company and your Company has continuously focused its efforts to empower them more effectively. Significant resources and efforts continue to be devoted to people engagement initiatives that support a performance driven culture and enhance the passion to win mindset. During the year, the focus was on unlocking the people potential and further developing their functional and behavioural competencies. The Mini Business Unit concept initiated in the previous year was extended across the Company and further enhanced the commitment and engagement of people through goal alignment.

This was supported by increased sharing of information on people and the Company through an integrated internal communication framework, cross functional activities and team building activities and initiatives. The development of its people and performance culture is a priority for your Company and it continued to support the development of people to ensure commitment and superior performance. Focus on coaching and development activities, continuous learning, and launch of new learning initiatives in partnership with top business schools, all enhanced employment value for the employees.

This motivated people to participate with superior performance and commitment and contributed to your Company’s achievements. During the year, repositioned campus activities in targeted business schools also enhanced the visibility for your Company as a preferred employer. Technology and Quality Nestle touches the lives of millions of people every day and is amongst the most trusted companies in India with a strong corporate culture and constant innovation and renovation to provide science-based nutrition.

You can be justifiably proud that the factories are amongst the ‘Best in Class’ within the Nestle Group. Each factory uses its people, processes and state-of-the-art automated manufacturing facilities to create safe and nutritious products and impact the community around it positively. The Company has a General Licence Agreement with the Nestle Group, Switzerland, that enables access to their continuing investments in Research and Development and the latest food technologies that support development of products relevant to our market.

Your Company continuously upgrades and implements best practices at its factories 14 Sales The focus on continuous business excellence extends across the Company. While your Company has an efficient distribution system, it has consistently pushed itself over the recent years to further improve its service levels and to help consumers easier access to the Company’s products. During the year, there was further improvement in the distribution network and availability of fresh, high quality Nestle products.

The specialised teams for Key Account Management, Channel and Category Sales Development, Route-to-market and the existing trade channels continued to improve availability and visibility of products. The quality and capabilities of the people are key to this and, during the year, your Company maintained focus on training and development of the sales SWOT Analysis for the Company Strengths: • Access to the Nestle Group’s proprietary technology / brands, expertise and the extensive centralised Research and Development facilities under the General Licence Agreement. High quality and safe food products at affordable prices, endorsed by the Nestle Seal of Guarantee. • Strong and well differentiated brands with leading market shares. • Ongoing product innovation and renovation, based on feedback on consumer insights. • Well diversified product portfolio. • Efficient supply chain. • Multi focal business structure. • Distribution structure that allows wide reach and coverage in the target markets. • Capable and committed human resources. Weakness: • Complex supply chain configuration. Export of coffee to Russia, still constitutes significant part of overall exports. Threat: • Prices of raw materials and fuels. • Slow down in environment . Opportunities: • Potential for expansion in smaller towns and other geographies. • Growing trend for ‘Out-of-Home’ consumption. • Leverage Nestle Technology to develop more products that provide Nutrition, Health and Wellness. efficient use of resources. Your Company ensures that, while resources are used optimally, inefficiencies or leakages that could cause wastage are eliminated.

Ways to minimize the usage of these resources are looked at continuously. Using waste heat of one process as input for another, recovering steam condensate to substitute fresh water, utilising coconut shells and process waste to replace fuels with high sulphur content to reduce green house gases, using waste cashew shells and coffee husk as additional alternative fuel in boilers, and reusing water after reverse osmosis treatment are some examples of how carefully your Company approaches this responsibility.

During the last 10 years even as sales have increased substantially, the Company has reduced the generation of waste water by around 70%, usage of water by 65%, usage of energy by 60% and has reduced the generation of greenhouse gases by around 65%, all per tonne of production. enable people in the community to participate in economic prosperity. On the other hand, it is continuously working with them to understand what is needed to improve their quality of life in a sustainable manner.

Continuing initiatives include the extensive work with dairy farmers, providing access to clean drinking water and sanitation facilities in village schools, enhancing awareness of scarce resources like water, and empowering village women. Your Company is continuing to do extensive work at Moga to develop dairy farmers. Dedicated Nestle agronomists and veterinarians are providing international knowledge and best practices for dairy farming. This has increased productivity, improved yields of their herd and focused them on the quality of milk.

By investing in installation of farm coolers and chillers, your Company has improved the supply chain infrastructure for milk collection. While all this directly benefits close to 100,000 farmers and has been recognised by the State Government, your Company is playing another significant role in the community by helping women play a much more productive role in the villages. This will have a lasting impact on the lives of the village community though the impact will only be realised over a period of time.

For the past few years, your Company has been conducting dairy development programs amongst village women to train them in good dairy practices as well as spread awareness about personal health, hygiene, water conservation and economic independence. As of today, nearly 35,000 women and 25,000 men from 700 villages benefit from this initiative. Access to clean drinking water is necessary to improve quality of life and over the past few years, your Company has been setting up clean drinking water facilities in village schools around its factories.

Clean and hygienic drinking water has been found to reduce illnesses amongst children and the community is able to better appreciate the water education that your Company provides to the children. The unique clean 15 Community Development The phrase ‘inclusive growth’ can be said to be of recent origin but it reflects what your Company has always believed in and worked towards, that our business must be good for society, improving the quality of life of the people we touch and in the communities where we operate.

The business objective is to create value that can be sustained over the long term for the economy and society, using natural resources in a sustainable manner, creating growth opportunities and prosperity. Your Company also endorses the United Nations Global Compact and the Millennium Development Goals to promote prosperity in society. The ‘Nestle in the community’ model is simple. As ‘Partners in Growth’ the Company has followed a two-fold approach while creating economic prosperity over the years.

On the one hand, it is creating direct and indirect employment and, through transfer of technology, knowledge, and training programs continuing to empower and Environment At the factories, efficiency and controlling costs extends beyond the commercial to minimising consumption of natural resources and reducing waste and emissions. Energy and water management practices are being continuously upgraded and specific water usage in manufacturing has been further reduced. All waste water is treated, and as much as possible, recycled within the factory with focus on zero waste water discharge.

The emphasis is on NESTLE INDIA LIMITED drinking water facilities are directly benefiting over 45,000 school children every year, who then become more aware of the role they can play as ambassadors for water conservation. Award for 2008 from the Ministry of Commerce and Industry in recognition of it’s outstanding export performance in the export of Instant Tea during the year 2006-07. regulations. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances.

Directors In accordance with Article 119 of the Articles of Association, Mr. Michael W. O. Garrett retires by rotation and being eligible offers himself for re-appointment. The term of Mr. Shobinder Duggal, as Whole-time Director, designated as ‘Director –Finance & Control’, which was for a period of 5 years from 10th May, 2004, is expiring on 9th May, 2009. The Directors are seeking re-appointment of Mr. Duggal for a further period of 5 years with effect from 10th May, 2009.

Details of his proposal for re-appointment are mentioned in the Explanatory Statement under Section 173(2) of the Companies Act, 1956 covered under Item no. 5 of the Notice of the 50th Annual General Meeting. Contributions to the Exchequer Your Company has been a leading taxpayer of the country and over the years has been contributing significantly to various taxes. During the year 2008, the Company through its operations, enabled tax collections at Central and State level of close to Rs. 10. 5 Billion in the aggregate. Directors’ Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that: – in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same; – they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits for that period; – they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; – they have prepared the annual accounts on a going concern basis. Awards and Recognitions In this dynamic year of volatile business environment, your Company continued to be recognised for its efficient operations and as a stable and healthy Company.

During the year, your Company was honoured with the NDTV PROFIT Business Leadership Award in the FMCG Food category. Later in the year, Standard & Poor announced that Nestle India was one of only two Indian Companies on their Global Challengers List for 2008. This list consists of 300 mid-size companies worldwide that are expected to emerge as challengers to the world’s leading companies and show the highest growth characteristics. In another study by TNS TRI*M Index, your Company was rated “Best in Class” in FMCG in terms of overall performance. TNS TRI*M Index is an annual barometer of Corporate Reputation and seeks to measure goodwill in both business and social contexts. As in the past, Nestle India was again awarded for export excellence.

Your Company received awards from the Coffee Board for being the Highest Exporter of Coffee to Russia and CIS during the year 2007-08 and was also recognised for being the Second Highest Exporter of Instant Coffee during the year 2007-08. Your Company also received a prestigious Export Auditors The Statutory Auditors of the Company, M/s. A. F. Ferguson & Co. , Chartered Accountants, New Delhi, retire in accordance with the provisions of the Companies Act, 1956 and are eligible for re-appointment. M/s. A. F. Ferguson & Co. , Chartered Accountants, New Delhi have sought re-appointment and have confirmed that their re-appointment if made, shall be within the limits of Section 224(1) (B) of the Companies Act, 1956. The Audit Committee and the Board recommends the reappointment of M/s. A. F. Ferguson & Co. Chartered Accountants, as the Auditors of the Company. Complying with the provisions of Section 233-B of the Companies Act, 1956, the Board of Directors have appointed M/s. Ramanath Iyer and Co. , Cost Accountants, New Delhi, to carry out an audit of cost accounts of the Company in respect of Milk Foods for the year 2009. This appointment has been approved by the Central Government. Corporate Governance In compliance with the requirements of Clause 49 of the Listing Agreement with the Stock Exchange, a separate report on Corporate Governance along with Auditors certificate on its compliance is attached as Annexure –1 to this Report. Cautionary Statement

Statements in this Report, particularly those which relate to Management Discussion and Analysis as explained in the Corporate Governance Report, describing the Company’s objectives, projections, estimates and expectations may constitute “forward looking statements” within the meaning of applicable laws and 16 Information regarding Conservation of Energy etc. and Employees Information required under Section 217 (1) (e) of the Companies Act, 1956 (hereinafter referred to as “the Act”) read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure – 2 forming part of this Report.

Information as per Section 217(2A) of the Act, read with the Companies (Particulars of Employees) Rules, 1975, as amended from time to time, forms part of this Report. However, as per the provisions of Section 219 (1) (b) (iv) of the Act, the Report and Accounts are being sent to all the members excluding the statement containing the particulars of employees to be provided under Section 217(2A) of the Act. Any member interested in obtaining such particulars may inspect the same at the Registered Office of the Company or write to the Company Secretary for a copy. Trade Relations The Company maintained healthy, cordial and harmonious industrial relations at all levels.

Despite severe competition, the enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the forefront of the Industry. Your Company continued to receive cooperation and unstinted support from the distributors, retailers, stockists, suppliers and others associated with the Company as its trading partners. The Directors wish to place on record their appreciation for the same and your Company will continue in its endeavour to build and nurture strong links with trade, based on mutuality, respect and co-operation with each other and consistent with consumer interest. continuous improvement in all functions and areas as well as the efficient utilisation of the Company’s resources for sustainable and profitable growth.

The Directors wish to hereby place on record their appreciation of the efficient and loyal services rendered by each and every employee, without whose wholehearted efforts, the overall very satisfactory performance would not have been possible. Your Directors look forward to the future with confidence. On behalf of the Board of Directors Appreciation Your Company has been able to operate efficiently because of the culture of professionalism, creativity, integrity and 6th March, 2009 Gurgaon MARTIAL G. ROLLAND CHAIRMAN 17 NESTLE INDIA LIMITED AUDITORS’ REPORT TO THE MEMBERS OF NESTLE INDIA LIMITED 1. We have audited the attached balance sheet of Nestle India Limited as at December 31, 2008, the profit and loss account and also the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3.

As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the annexure referred to in paragraph 3 above, we report that : a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; b) in our opinion, proper books of account as required by law have been kept by the Company, so far as appears from our examination of the books; 18 c) the balance sheet, the profit and loss account and cash flow statement dealt ith by this report are in agreement with the books of account; d) in our opinion, the balance sheet, profit and loss account and the cash flow statement dealt with by this report comply with the mandatory accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; e) on the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors of the Company is disqualified as on December 31, 2008 from being appointed as director of the Company under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; f) in our opinion and to the best of our information and according to the explanations given to us, the accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India : i. in the case of the balance sheet, of the state of affairs of the Company as at December 31, 2008; ii. in the case of the profit and loss account, of the profit of the Company for the year ended on that date; and iii. n the case of cash flow statement, of the cash flows for the year ended on that date. For A. F. FERGUSON & CO. , Chartered Accountants (MANJULA BANERJI) Partner (Membership No. 86423) March 6, 2009 New Delhi ANNEXURE REFERRED TO IN PARAGRAPH ‘3’ OF THE AUDITORS’ REPORT TO THE MEMBERS OF NESTLE INDIA LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2008. (i) (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. (b) In our opinion, the management has physically verified most of the fixed assets of the Company during the year at reasonable intervals, having regard to the size of the Company and nature of its assets.

The discrepancies noticed on such verification were not material and have been properly dealt with in the books of account. (c) In our opinion and according to the information and explanations given to us, the Company has not disposed off a substantial part of its fixed assets during the year. (ii) (a) During the year, the inventories have been physically verified by the management. In our opinion, the frequency of verification is reasonable. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. c) On the basis of our examination of the records of inventories, we are of the opinion that the Company is maintaining proper records of inventories. The discrepancies noticed on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account. (iii) (a) According to the information and explanations given to us, the Company has, during the year, not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4 (iii) (a), (b), (c) and (d) of the Companies (Auditor’s Report) Order, 2003 (hereinafter referred to as the Order) are not applicable. b) According to the information and explanations given to us, the Company has, during the year, not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4 (iii) (e), (f) and (g) of the Order, are not applicable. (iv) In our opinion and according to information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to the purchase of inventories, fixed assets and with regard to sale of goods. There is no sale of services.

Further, on the basis of our examination and according to the information and explanations given to us, no major weaknesses in the aforesaid internal control system, has been noticed. (v) (a) According to the information and explanations given to us, we are of the opinion that, the particulars of the contracts/arrangements referred to in Section 301 of the Companies Act, 1956, were entered in the register required to be maintained under that Section. (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of Rupees five lacs in respect f any party were made at prices which were reasonable having regard to prevailing market prices at the relevant times. (vi) As, the Company has not accepted any deposits from the public, paragraph 4 (vi) of the Order is not applicable. (vii) In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business. (viii) We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government, the maintenance of cost records have been prescribed under 209 (1) (d) of the Companies Act, 1956 and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained.

We have not, however, made a detailed examination of records with a view to determining whether they are accurate or complete. (ix) (a) According to the information and explanations given to us and the records of the Company examined by us, the Company has been regular in depositing undisputed statutory dues including provident fund, employees’ state insurance dues, income-tax, Investor 19 NESTLE INDIA LIMITED Education and Protection Fund, wealth tax, customs duty, excise duty, cess and other material statutory dues applicable to it and has generally been regular in depositing undisputed statutory dues including sales tax and service tax with the appropriate authorities. We are informed that there are no Name of the Statute Nature of the Dues ndisputed statutory dues as at the year end, outstanding for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us and the records of the Company examined by us, there are no disputed dues of customs duty and wealth tax, which have not been deposited. The details of disputed dues as at December 31, 2008 in respect of excise duty, sales tax, service tax, cess and income-tax that have not been deposited by the Company, are as follows :- Amount * (Rs. ) Period to which the amount (’000s) relates (various years covering the period) 44,170 3,132 376 342 3,698 330 133,106 4,242 118,558 59,787 1996 – 2003 2000 – 2006 2006 2005 1996 – 2004 1999 – 2004 1992 – 2007 2001 – 2008 1992 – 1994 2004 – 2005 Forum where dispute is pending Central Excise Laws Excise Duty Sales Tax Laws Service Tax Sales Tax Local State Act Income Tax Act, 1961 Cess Income tax Supreme Court Customs, Excise and Service Tax Appellate Tribunal Appellate authority upto Commissioners’ level Customs, Excise and Service Tax Appellate Tribunal High Court Appellate Tribunal Appellate authority upto Commissioners’ level Appellate authority upto Commissioners’ level High Court Commissioner of Income-tax (Appeals) * Amount as per demand orders including interest and penalty wherever indicated in the Order.

The following matters, which have been excluded from the table above, have been decided in favour of the Company but the department has preferred appeals at higher levels. The details are given below :Name of the Statute Nature of the Dues Amount (Rs. ) (’000s) 8,526 36,982 14,591 148 35,401 316,890 419,751 Period to which the amount relates (various years covering the period) 2000 – 2005 1996 – 2004 2004 – 2006 2005 1997 – 2003 1996 – 2000 1993 – 2004 Forum where department has preferred appeals Supreme Court High Court Customs, Excise and Service Tax Appellate Tribunal High Court High Court High Court Income-tax Appellate Tribunal Central Excise Laws

Excise Duty Sales Tax Laws Income Tax Act, 1961 Service Tax Sales Tax Income tax (x) The Company does not have accumulated losses at the end of the financial year December 31, 2008. Further, the Company has not incurred cash losses during the financial year ended December 31, 2008 and in the immediately preceding financial year ended December 31, 2007. According to the records of the Company examined by us and on the basis of information and explanations given to us, the Company has not defaulted in repayment of dues to banks during the year. The Company has not taken any loans from financial institutions and has not issued debentures during the year. xii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities, accordingly paragraph 4 (xii) of the Order is not applicable. (xiii) The Company is not a chit fund / nidhi / mutual benefit fund / society to which the provisions of special statute relating to chit fund are applicable, accordingly paragraph 4 (xiii) of the Order, is not applicable. (xiv) As the Company is not dealing or trading in shares, securities, debentures and other investments, (xi) 20 paragraph 4 (xiv) of the Order is not applicable. (xv) According to the information and explanations given to us, the Company has not given any guarantee during the year for loans taken by others from banks or financial institutions. xvi) In our opinion and according to the information and explanations given to us, the Company has not taken any term loans during the year. (xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that, during the year, short term funds have not been used to finance long term investments. (xviii) The Company has not made any preferential allotment of shares during the year. (xix) The Company has not issued any debentures during the year. (xx) The Company has not raised any money by way of public issue during the year. (xxi) Based upon the audit procedures performed and information and xplanations given by the management, we report that no material fraud on or by the Company has been noticed or reported during the year ended December 31, 2008. For A. F. FERGUSON & CO. , Chartered Accountants March 6, 2009 New Delhi (MANJULA BANERJI) Partner (Membership No. 86423) 21 NESTLE INDIA LIMITED BALANCE SHEET OF NESTLE INDIA LIMITED AS AT DECEMBER 31, 2008 2008 (Rs. in thousands) 964,157 3,769,340 964,157 3,220,084 2007 (Rs. in thousands) SOURCES OF FUNDS SHAREHOLDERS’ FUNDS Share Capital Reserves and surplus LOAN FUNDS Secured Loans DEFERRED TAX LIABILITIES/(ASSETS) (NET) SCHEDULE A B 4,733,497 4,184,241 C D 8,177 368,810 5,110,484 28,711 286,974 4,499,926

APPLICATION OF FUNDS FIXED ASSETS Gross block Less:Depreciation Net block Capital work-in-progress INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Inventories Sundry debtors Cash and bank balances Loans and advances Less: CURRENT LIABILITIES AND PROVISIONS Liabilities Provisions NET CURRENT ASSETS/(LIABILITIES) E 14,048,460 6,518,538 7,529,922 1,091,689 F G 4,349,117 455,933 1,936,893 1,237,589 7,979,532 H 5,066,494 6,773,157 11,839,651 (3,860,119) 5,110,484 O 4,599,744 4,977,949 9,577,693 (3,199,152) 4,499,926 4,012,153 534,901 377,604 1,453,883 6,378,541 11,797,711 5,779,626 6,018,085 736,979 8,621,611 348,992 6,755,064 944,014 NOTES TO THE ACCOUNTS March 6, 2009 Gurgaon MARTIAL G. ROLLAND Chairman & Managing Director SHOBINDER DUGGAL Director – Finance & Control Per our report attached For A. F. FERGUSON & CO. , Chartered Accountants (MANJULA BANERJI) Partner Membership No. 86423 B. MURLI Sr. VP – Legal & Company Secretary March 6, 2009 New Delhi 22

PROFIT AND LOSS ACCOUNT OF NESTLE INDIA LIMITED FOR THE YEAR ENDED DECEMBER 31, 2008 SCHEDULE INCOME Sales Domestic Export Gross Less: Excise Duty Net Sales Other Income EXPENDITURE Materials consumed and purchase of goods Manufacturing and other expenses Interest Depreciation Adjustment due to decrease / (increase) in stock of finished goods and work-in-progress PROFIT BEFORE ADDITIONAL EMPLOYEE COST, IMPAIRMENT, CONTINGENCIES AND TAXATION Additional employee cost Impairment loss/(gain) on fixed assets (Refer Note 1 – Schedule O) Provision for contingencies (Refer Note 2 – Schedule O) PROFIT BEFORE TAXATION Income tax expense Current tax Deferred tax Fringe benefit tax PROFIT AFTER TAXATION Balance brought forward Add : Transferred from Share Premium Account (Refer Note 22- Schedule O) Add : Transferred from General Reserve (Refer Note 22 – Schedule O) BALANCE AVAILABLE FOR APPROPRIATION Appropriations: Dividends: Interim Final proposed Special (Refer Note 22 – Schedule O) Corporate dividend tax General reserve SURPLUS CARRIED TO THE BALANCE SHEET BASIC AND DILUTED EARNINGS PER SHARE (IN RUPEES) NOTES TO THE ACCOUNTS O O 41,326,718 3,383,907 44,710,625 1,468,175 I 43,242,450 338,852 43,581,302 21,386,673 13,563,778 16,430 923,601 (345,448) 35,545,034 8,036,268 3,084 304,916 7,728,268 2,223,114 81,836 82,496 1,939,000 166,948 42,068 2008 (Rs. in thousands) 33,174,093 3,297,739 36,471,832 1,428,300 35,043,532 254,405 35,297,937 17,522,681 11,231,159 8,545 747,432 (673,059) 28,836,758 6,461,179 753,650 11,758 (590,367) 6,286,138 2007 (Rs. in thousands) J K L E M E N ,387,446 5,340,822 125,159 432,363 430,857 6,329,201 2,217,561 1,156,989 723,118 696,398 534,082 1,001,053 55. 39 2,148,016 4,138,122 104,689 4,242,811 2,940,680 241,040 522,120 413,812 125,159 42. 92 March 6, 2009 Gurgaon MARTIAL G. ROLLAND Chairman & Managing Director SHOBINDER DUGGAL Director – Finance & Control B. MURLI Sr. VP – Legal & Company Secretary March 6, 2009 New Delhi Per our report attached to the balance sheet For A. F. FERGUSON & CO. , Chartered Accountants (MANJULA BANERJI) Partner Membership No. 86423 23 NESTLE INDIA LIMITED CASH FLOW STATEMENT OF NESTLE INDIA LIMITED FOR THE YEAR ENDED DECEMBER 31, 2008 2008 (Rs. in thousands)

A CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax Adjustments for : Depreciation Unrealised exchange differences Deficit/(surplus) on fixed assets sold/scrapped/written off/written back Interest expense Impairment loss/(reversal) on fixed assets Interest on inter corporate deposits Operating profit before working capital changes Adjustments for : Decrease/(increase) in trade and other receivables Decrease/(increase) in inventories Increase/(decrease) in trade payables Increase/(decrease) in provision for contingencies Increase/(decrease) in provision for Employee Benefits Cash generated from operations Direct taxes paid Net cash from operating activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets (adjusted for suppliers payables and capital work in progress) Sale of fixed assets Interest received on inter corporate deposits Net cash used in investing activities CASH FLOW FROM FINANCING ACTIVITIES Proceeds/(Repayments) of borrowings Interest paid Dividends paid Corporate dividend tax Capital subsidy received Net cash outflow from financing activities Net increase / (decrease) in cash and cash equivalents (A+B+C) Cash and bank balances Current investments Cash and cash equivalents as at opening Cash and bank balances Current investments Cash and cash equivalents as at closing NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 7,728,268 923,601 10,867 27,260 16,430 3,084 8,709,510 9,547 (336,964) 153,187 304,916 418,677 9,258,873 (2,023,216) 7,235,657 (2,549,937) 30,765 (2,519,172) (20,534) (16,430) (3,177,021) (540,733) 2,500 (3,752,218) 964,267 377,604 944,014 1,321,618 1,936,893 348,992 2,285,885 964,267 2007 (Rs. in thousands) 6,286,138 747,432 6,895 27,114 8,545 11,758 (796) 7,087,086 (87,064) (1,249,968) 828,613 (549,822) 1,217,100 7,245,945 (2,054,013) 5,191,932 (1,696,394) 8,466 796 (1,687,132) (133,965) (8,545) (3,080,525) (501,439) (3,724,474) (219,674) 763,560 777,732 1,541,292 377,604 944,014 1,321,618 (219,674) B C March 6, 2009 Gurgaon MARTIAL G. ROLLAND Chairman & Managing Director

SHOBINDER DUGGAL Director – Finance & Control B. MURLI Sr. VP – Legal & Company Secretary March 6, 2009 New Delhi 24 Per our report attached to the balance sheet For A. F. FERGUSON & CO. , Chartered Accountants (MANJULA BANERJI) Partner Membership No. 86423 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT DECEMBER 31, 2008 SCHEDULE A SHARE CAPITAL Authorised 100,000,000 Equity shares of Rs. 10 each (Previous year 100,000,000) 1,000,000 1,000,000 2008 (Rs. in thousands) 2007 (Rs. in thousands) Issued, subscribed and paid-up 96,415,716 Equity shares of Rs. 10 each fully paid up (Previous year 96,415,716) Of the above: 73,413,626 964,157 964,157 Shares of Rs. 0 each (Previous year 73,413,626) were allotted as fully paid-up bonus shares by capitalisation of general reserves Rs. 73,897 thousands (Previous year Rs. 73,897 thousands) and share premium Rs. 660,239 thousands (Previous year Rs. 660,239 thousands). Shares of Rs. 10 each (Previous year 736,331) were allotted as fully paid up pursuant to a contract without payment being received in cash. Shares of Rs. 10 each (Previous year 32,166,274) are held by Nestle S. A. Shares of Rs. 10 each (Previous year 27,463,680) are held by Maggi Enterprises Limited, the ultimate holding company being Nestle S. A. 736,331 Of the above: 32,166,274 27,463,680 SCHEDULE B

RESERVES AND SURPLUS Share premium account As per last balance sheet Less : Transferred to profit and loss account (Refer Note 22- Schedule O) 432,363 432,363 432,363 432,363 Capital subsidy As per last balance sheet Add : Received during the year General reserve As per last balance sheet Less : Transferred to profit and loss account (Refer Note 22 – Schedule O) Less : Liability for Employee cost upto December 31, 2006 Add : Transferred from profit and loss account Surplus, being balance in profit and loss account (undistributed profits) 2,500 2,500 5,000 2,660,062 430,857 534,082 2,763,287 1,001,053 3,769,340 2,500 2,500 2,385,170 138,920 413,812 2,660,062 125,159 3,220,084 SCHEDULE C SECURED LOANS Loans from Banks Secured by a first pari passu charge on all ovable assets (excluding plant and machinery), finished goods, work-in-progress, raw materials and book debts. 8,177 8,177 28,711 28,711 25 NESTLE INDIA LIMITED 2008 (Rs. in thousands) 2007 (Rs. in thousands) SCHEDULE D DEFERRED TAX LIABILITIES AND ASSETS Deferred tax liabilities Difference between book and tax depreciation Other temporary differences Deferred tax assets Provision for contingencies Provision for employee costs Other items deductible on payment or deposit of withholding taxes Other temporary differences 739,574 18,303 757,877 269,093 68,847 27,653 23,474 389,067 695,371 695,371 211,528 128,969 44,481 23,419 408,397 Deferred tax liabilities/(assets) (net) 368,810 286,974 SCHEDULE E FIXED ASSETS (Rs. in thousands)

GROSS BLOCK Cost as at December 31, 2007 Tangible Assets (A) Freehold land Leasehold land Buildings Railway siding Plant and machinery Furniture and fixtures Information technology equipment Vehicles Sub Total Intangible Assets (B) Management information systems Total (A+B) Previous year 536,259 11,797,711 10,582,749 2,496,547 1,394,886 245,798 179,924 536,259 14,048,460 11,797,711 286,004 5,779,626 5,164,780 107,252 923,601 747,432 3,084 11,758 187,773 144,344 393,256 6,518,538 5,779,626 1,091,689 8,621,611 Notes: (a) Buildings include Rs. 500 (Previous year Rs. 500) being the cost of share in a Co-operative Housing Society. (b) Buildings and plant and machinery include Rs. 53,998 thousands (Previous year Rs. 53,998 thousands) being the cost of leasehold improvements. Refer Note 1 – Schedule O 143,003 7,529,922 6,018,085 736,979 6,755,064 250,255 56,026 94,657 1,661,687 11,733 8,423,102 545,574 420,425 48,248 11,261,452 338 411,738 1,875,167 162,302 47,002 2,496,547 11,482 169,810 15,161 39,118 10,227 245,798 56,026 94,995 2,061,943 11,733 10,128,459 692,715 428,309 38,021 13,512,201 1,905 496,642 9,680 4,231,018 357,773 363,690 32,914 5,493,622 1,056 58,281 557 648,378 66,664 35,041 6,372 816,349 3,084 3,084 567 124,702 14,385 39,100 9,019 187,773 2,961 554,356 10,237 4,757,778 410,052 359,631 30,267 6,125,282 56,026 92,034 1,507,587 1,496 5,370,681 282,663 68,678 7,754 7,386,919 56,026 92,752 1,165,045 2,053 4,192,084 187,801 56,735 15,334 5,767,830 Additions Deletions/ adjustments Cost as at December 31, 2008 As at December 31, 2007 DEPRECIATION For the year Impairement loss# On Deletions/ adjustments As at December 31, 2008 NET BLOCK As at December 31, 2008 As at December 31, 2007 Capital work -in-progress including capital advances and machinery-in-transit 26 SCHEDULE F INVESTMENTS (NON TRADE, UNQUOTED) CURRENT (at cost or fair value, whichever is lower) GOVERNMENT SECURITIES Treasury bills 1,000,000 2008 (Rs. in thousands) 2007 (Rs. in thousands) Face value of Rs. 1,598,400 thousands (previous year Rs. 1,600,000 thousands) purchased and Rs. 1,498,400 thousands (previous year Rs. ,600,000 thousands) sold during the year 98,340 – MUTUAL FUNDS – DEBT [Units of face value Rs. 10 each, unless otherwise stated] TATA Mutual Fund 134,900 Units (previous year 142,431) of Tata Liquid Super High Investment Fund – Daily Dividend Reinvestment Plan (3,225,463 Units of face value of Rs. 1000 each purchased and 3,232,994 Units sold during the year) Units (previous year 11,344,009) of Birla Cash Plus Institutional Premium – Daily Dividend Reinvestment Plan (218,430,678 Units purchased and 219,763,896 Units sold during the year) Units (previous year 52,197) of Standard Chartered Liquidity Manager Plus– Daily Dividend Reinvestment Plan (250,386 Units of face value of Rs. 000 each purchased and 302,583 Units sold durig the year) Units (previous year 13,873,012) of Principal Cash Management Fund Liquid Option Institutional –Daily Dividend Reinvestment Plan ( 236,982,836 Units purchased and 250,855,848 Units sold during the year) Units (previous year 2,760,241) of Kotak Liquid Institutional Premium Plan – Daily Dividend Reinvestment Plan (20,154,550 Units purchased and 22,914,791 Units sold during the year) Units (previous year 19,128,755) of ING Vysya Liquid Fund Super Institutional – Daily Dividend Reinvestment Plan (3,058,979 Units purchased and 22,187,734 Units sold during the year) Units (previous year 14,145,446) of Sundaram BNP Paribas Money Fund Super Institutional – Daily Dividend Reinvestment Plan (158,421,119 Units purchased and 172,566,565 Units sold during the year) Units (previous year 11,246,017) of Sundaram BNP Paribas Liquid Plus Super Institutional Daily Dividend Reinvestment Plan (123,938,594 Units purchased and 135,184,611 Units sold during the year) Rs. 349,887 thousands (previous year Rs. 944,014 thousands) 150,349 158,742 Birla Sun Life Mutual Fund 10,010,791 100,303 113,661 Standard Chartered Mutual Fund – – 52,208 Principal Mutual Fund – – 138,740 Kotak Mahindra Mutual Fund – – 33,753 ING Vysya Mutual Fund – – 191,379 Sundaram BNP Paribas – – 142,803 – – 348,992 112,728 944,014 Repurchase price as at December 31, 2008 During the year, the following current investments were purchased and sold : MUTUAL FUNDS – DEBT ( UNQUOTED) (Units of face value of Rs. 0 each) 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 18,151,249 Units of Prudential ICICI Floating Rate – Daily Dividend Reinvestment Plan 181,991,254 Units of ICICI Prudential Liquid Plan – Super Institutional – Daily Dividend Reinvestment Plan 5,001,535 Units of IPMRD ICICI Prudential Interval Fund 1 Month Plan A – Retail Dividend-Reinvestment Plan 38,107,606 Units of Birla Sun Life Liquid Plus – Institutional Premium – Daily Dividend – Reinvestment Plan 134,127,712 Units of HSBC Cash Fund Institutional Plus – Daily Dividend Reinvestment Plan 20,141,189 Units of ABN AMRO Money Plus Institutional – Daily Dividend Reinvestment Plan 78,975,603 Units of JM High Liquidity Fund – Super Institutional Plan – Daily Dividend (92) Reinvestment Plan 18,002,407 Units of JM Money Manager Fund Super Plus Plan – Daily Dividend (171) Reinvestment Plan 52,075,739 Units of Reliance Liquid Fund – Treasury Plan Instituitional Option – Daily Dividend Reinvestment Plan 7,505,213 Units of Reliance Liquidity Fund – Daily Dividend Reinvestment Plan 10,225,540 Units of SBI Debt Fund Series 90 days-29 – Dividend COMMERCIAL PAPERS ( UNQUOTED) (Units of face value of Rs. 500,000 each) 1) 2) 200 Units of GE Capital Service India Ltd Commercial Paper 100 Units of RABO India Finance (P) Ltd Commercial Paper DEBENTURE ( QUOTED) (Units of face value of Rs. 1,000,000 each) 1) 250 Units of Citi Financial- Non Convertible Debenture 27 NESTLE INDIA LIMITED

SCHEDULE G CURRENT ASSETS, LOANS AND ADVANCES Inventories Stores and spare parts * Stock-in-trade ** : Finished goods Work-in-progress Raw materials Packing materials * At cost ** At cost or net realisable value, whichever is lower Sundry debtors (Unsecured) Considered good Over six months Others Considered doubtful Over six months Others Less: Provision for doubtful debts Cash and bank balances Cash in hand Cheques in hand With scheduled banks – on current accounts – on deposit accounts Loans and advances (Unsecured, considered good – unless otherwise stated) Advances recoverable in cash or in kind or for value to be received* Considered good Secured Unsecured Considered doubtful Less: Provision for doubtful advances Taxation (payments less provisions) 2008 (Rs. in thousands) 2007 (Rs. in thousands) 248,931 2,327,186 385,378 1,213,980 173,642 4,349,117 210,460 1,977,141 424,279 1,240,513 159,760 4,012,15