Dear Members,
 
 The Directors are plessed to submit their report and statement of
 accounts for the year ended 31st December 2010
 
 The Government continued with its strenuous efforts to steer the
 economy. With continued focus on reforms and a comb nation of stimulus
 packages, rural Income generation schemes and monetary policy amongst
 others the government was successful In keeping the GDP growth Largely
 on track especially when many parts of the word struggled on this front
 
 This past year highlighted the increasing complexity and volatility of
 the economic environment While the Government staking action and new
 food regulation is being put In place, faster Implementation could
 sustain the growth momentum
 
 Against this background, your companys success can be measured on
 three dimensions - Growth inclusion. Leadership,
 
 Your Company has alwaya reiterated that good food Is essential for
 ensuring productivity and good life. With economic growth, the
 lifestyles in India ana evolving and changing People need to eat better
 and stay healthy to keep pace with their aspirations but the evolving
 scenario is complex On the one hand a very largo population does not
 have access to affordable nutrition, and on the other hand there is an
 Increasing problem of diabetes, obesity and heart diseases, The need
 for better nutrition is a chalenge across the income pyramid. Your
 Company has access to the Nestle Groups immense nutritional expertise
 and food technology for developing products that provide taste and
 science-based nutrition With strong consumer centric innovation and
 Renovation supported by the Nestley R&D network, your Company remained
 focused on developing Indian concepts and relevant products that help
 people manage their need for taste and nutrition and enabled the
 Company to grow.
 
 Your Directors believe the Company remained sensitive to the need for
 efficient and sustainable utilisation of resources and following Its
 basic approach to business to Create Shared Value. It continued to
 inspire happiness for Its shareholders and the communities where It
 operates With the own sphere of activities your Company continued to
 utilise its expertise and knowledge and consciously implemented
 Initiatives to ensure that while its core business continued to grow,
 the impact of Its business on the communities, rasults In a better
 quality of life for them and is in their interest. Your Company
 continued to Invest resources both in terms of talent and capital In
 the areas of water, nutrition and rural development because these are
 also the areas where shareholders interest and the interests of society
 strongly intersect and where your Company can create significant value
 for both, in an inclusive manner
 
 The factories Invested in state-of-the-art technology and equipment to
 process and add value to agricultural produce, worked closely with the
 farmers, suppliers and communities, transferring technology and
 knowledge to help them upgrade the quality of their raw materials.
 
 Your Director* are pleased to inform that during 2010 your Company
 delivered a strong performance Net Sate for the year 2010 increased by
 21 9% over the previous year Domostic Sales increased by 22.9% on
 Increased volumes and realisations, Export Sales increased by 7.6%
 Overall, the businesses continued to grow the market while retaining
 leadership in most businesses
 
 The consistent performance of your Company over the years, reflects the
 strength of the brands, the trust in Its products and the strong
 support coming from Nestle Group, Switzerland It also demonstrates the
 continuous engagement and performance of the people and business
 partners.
 
 
 Financial Results and Operations
 
                                                       (Rs In Millions)
 
                                                        2010      2009
 
 Gross Revenue                                        62,974    51f672
 Profit before Interest Impairment.
 contingencies and taxation                           11,646     9,610
 Interest                                                 11        14
 Impairment Loans on Fixed Assets (Net)                    -       103
 Provision for Contingencies (Net)                       164       323
 Provision for Tax                                     3,264     2,620
 Net Profit                                            8,187     6,560
 Profit Brought Forward                                1,425     1,001
 Balance Available for Appropriation                   9,612     7,551
 Interim Dividends                                     3,471     3,471
 Final Dividend Proposed                               1,205     1,205
 Corporate Dividend Tax                                  772       795
 Transfer to General Reserve                             619       655
 Surplus carried in Profit and
 Lose Account                                          3,345     1,425
 Key Rates
 Earnings per Share (Rs.)                              84.91     67.94
 Dividend per Share (Rs )                              48.50     48.50
 
 Total Income
 
 Net Profit for the Year 2010 increased by 25% The operating margins
 Improved due to better absorption of fixed cost end Improved product /
 channel mix- The Impact of Increase In cost of materials was largely
 offset by the one-off Cost In 2009 relating to actuarial losses on
 retirement benefits The improvement in
 
 FIXED ASSETS
 
 Net Profit Margin is due to the Increase In operating margin as the
 effect of lowering lncome tax rates has been offset by tower
 contribution of the income tax
 
 SHAREHOLDERS FUNDS
 
 holiday at Pantnagar factory Your Company continued to emphasise on
 cash generation and delivered strong operating cash flow during the
 year. Surplus Funds have been prudenlly invested after ensuring that
 such Investments satisfy the Companys criteria of safety.  liquidity
 end returns.
 
 Cash Flow
 
 The Company supplemented the Provision for Contingencies with further
 amount of Rs 184 million (net) for contingencies resulting mainly from
 issues, which are under litigation/dlspute and other uncertainties
 requiring management judgment This was after the reversal/utilisation
 of Rs 250 million provision, due to settlement of certain dtsputes for
 which provision was no longer required
 
 While the current year has also commenced as per plan, the beginning
 has been with a number of uncertainties. Including the Intensity of
 cost Increases specially the volatile raw material prices. Your Company
 will focus efforts to overcome these challenges and is hopeful that the
 Government would continue to support the food processing sector. Your
 Directors are confident of the long-term business prospects of the
 Company.
 
 Exports
 
 During the year, Export Sales at Rs 3,537 million was higher by 7 6%.
 At constant exchange raise the same would be 10.3%.
 
 The Increase in exports was largely on account of new exports of Coffee
 to South Africa and Egypt which wore started during the year There was
 also a significant Increase in exports of instant Tee to certain
 European markets and to the Far East and a broadened customer base has
 now been established This was offset by the discontinuation of exports
 of Infant nutribon products to Sri Lanka and Bangladesh due to capacity
 constraints, and the Lower exports of cuinary products.
 
 Your Company continued Rs efforts to develop more products for the
 Indian athnic community abroad and certain new products were shipped
 out during the year.  Some new grades of instant Tea have also been
 developed and these will add variety and value to the portfolio.
 
 Dividends
 
 The Board of Directors has recommended a final dividend of Rs. 12.50
 per equity share of the face value of Rs. 10/- each for the year 2010,
 amounting to Rs, 1,205 Million. This is in addition to the two Interim
 Dividends for 2010, aggregating to Rs 36.00 per equity share, paid in
 May 2010 end November 2010 (amounting to Rs 3,471 million) The total
 dividend payout for 2010 would be Rs. 4,676 million (excluding the
 corporate dividend tax), and maintain the total dividend payout for
 2009, and is in keeping with the financing needs for capital
 expenditure
 
 Business Development
 
 India is evolving rapidly and people are becoming more health conscious
 and eat bettor. Nutrition plays a key role In enhancing Health and
 Wellness in our lives and India will be challenged by the need for
 better nutrition across the income pyramid Your Company intends to play
 a definitave role in providing consumers with Good Food, Good Life
 Nestle products are trusted for their high quality and this drives your
 Company to Innovate and renovate products to further strengthen its
 bonds with consumers.
 
 The business of Prepared Dishes and Coolding Aids grow rapidly MAGGI
 continued to strengthen its wide portfolio at an accelerated pace.
 Being one of the top Most Trusted Food Brands in the country, MAGGI has
 gone beyond offering products, to building emotional relationships with
 consumers. MAGGI products provide Taste and Health and bring Happiness
 to every home, delivering Taste Bhi Health Bhi Khushiyan Bhi.
 
 With the support of Nestley global network of R&D centres applying
 knowledge in science based nutrition.  MAGGI products were innovated
 and renovated In accordance with the changing needs of all members of
 the family During the year, an Innovative range of Me & Meri MAGGI
 testes were introduced In Noodles.
 
 The Me & Man MAGGI campaign started in 2009. to celebrate 25 years of
 the emotional relationship of MAGGI wtth Its consumers The overwhelming
 response to the campaign brought out some very distinct experiences and
 emotions that consumers associate with MAGGI, and the cullinary
 experts worked extensively on concepts that capture these experiences
 In the taste of the Noodles. Three flavour launched were Me & Meri
 THRILLIN CURRY. Me & Meri TRICKY TOMATO and Me & Meri ROMANTIC
 CAPSICA Soon after. MAGGI Vegetable Multigralnz Noodles was raited out
 MAGGI Vegetable Multigralnz Noodles is a combination of traditional
 Ingredients, known for their goodness, such as Ragi, Com, Jowar.  and
 Wheat with real vegetables, and are a source of Fibre, Calcium and
 Protein MAGGI Masala-ac-Magic and MAGGI NUTRI-LICIOUS PAZZTA launched
 in Late 2009 established themselves during the last year MAGGI
 NLTRI-LICIOUS PAZZTA is already the market leader and continues to grow
 the market for light meals MAGGI Masala-ac-Magic, fortifed with Iron,
 Iodine end Vitamin A, is helping housewives In kitchens across the
 income pyramid, to provide tasty and nutritious food to their families
 everyday.
 
 MAGGI continued to connect with consumers. In innovative and Impactful
 ways MAGGI Sauces advertising acknowledged the increasing stress on
 consumers and advocated Hasaon, Khushi Phaolao lndia ko Heatthy Banaol
 It promoted happiness and spontaneous joy for a healthy living and
 encouraged a dialogue with the consumer. The campaign for MAGGI
 Vegetable Multigralnz Noodles revived another dimension In consumers
 lives. It brought alive the strong emotional bonds within the family
 and rested the multi-benefits of MAGGI Multigralnz to the multi-
 benefits In every motherl Marketing Taste Bhi Health Bhi solutions to
 consumers at the bottom of the pyramid has its own challenges These
 are Inherent in the lifestyle of these consumers that is driven by
 traditional values, lack of education and limited affordabillty. While
 the solutions have to be affordable, most people may lack the basic
 understanding of nutrition Since MAGGI Masala-ae-Magic is an affordable
 product that even low income families can use, the challenge Is to
 spread nutrition education.  Starting out with the first programme in
 Dharavi in Mumbai, MAGGI has been sending out people to Increase
 nutrition awareness In association with a social organisation Drishtee
 it is also organising heath camps in rural areas. These camps create
 awareness, amongst others, about micronutrient deficiencies, while the
 organisation also develops retail entrepreneurs for products like MAGGI
 Masala-ae- Magic With all these Initiatives, MAGGI continued to be
 ranked as the No. 1 Most valuable Food Brand1 and amongst the Top 10
 Buzziest Brands; in the country
 
 The Chocolate and Confectionery business continued to drive growth in
 the newer segments that are more relevant to emerging consumer needs
 and wellness preferences. Driven primarily by better understanding of
 consumers and extending the portfolio Innovatively your Companys
 chocolate and confectionery business has grown faster than Industry.
 White the overal penetration for the chocolate category is still in
 single digits and has a long way to go, the consumption is impulse led
 and driven largely by convenient price points. As economic growth
 creates more disposable income with more people the consumption is
 expected to increase. The challenge is to manage the correct colnage
 for these products man Inflationary enviornment. Your Company has grown
 this business steadily and it is now the leader in the chocolaty water
 segment for lighter eating1 with NESTLE KIT KAT and NESTLE MUNCH and
 Whites (goodness of milk) with NESTLE MILKYBAR, During the year this
 business continued to Innovate and renovate brands to increase
 relevance to the consumers Some of the more recent and successful
 launches were NESTLE MILKYBAR Choo Choko at Rs.5/- NESTLE MILKY BAR
 Crispy at Rs.5/- NESTLE MUNCH Guru pack at Rs.10/- and NESTLE KIT KAT
 single finger at Rs 5/-.
 
 During the year your Company re-launched NESTLE BARONE Rigorous work
 with the R&D Centres has enabled us to develop taste superiority in
 NESTLE BARONE, which is supported by consumer research It was
 re-launched as the companion for the confident young Indian and the
 re-launch campaign goes beyond the product benefit to strengthen the
 emotional experience of the consumer NESTLE BARONE is available at
 price points of Rs 5/- and Rs 10/-. and this new thrust is further
 strengthened by revamped packaging which is fresh, youthful and
 premium.
 
 Your Company continues to believe that sweet snacking is an Intrinsic
 part of peoples lives and with in this category the commitment is to
 offer teste as well as balance to consumers. The NESTLE KIT KAT
 squirrels communication is an Illustration of this where it
 Innovativety brings alive the importance of breaks in routine.
 
 In the sugar sub-segment your company continued to focus on the two
 need states of indulgence and refreshment with success While it grew
 the overall Eclairs portfolio to make your Company the largest player,
 volume gains by NESTLE POLO has now made your Company the biggest
 NESTLE POLO market In the world.
 
 Your Company is the value leader in Instant Coffee with NESCAFE. During
 the year, the Coffee and Beverages business not only strengthened Its
 market position but also strengthened its bonding with consumers. The
 business continued to focus its efforts on the value chain and
 leveraged Nestles world class proprietary aroma recovery technology to
 further Improve the aroma and taste of NESCAFE CLASSIC.
 
 NESCAFE is a brand with a progressive world view and reflects the
 thinking that we can reach our destination when we have a sense of
 purpose it talks to the youth of todays progressive India and sees the
 world as they see it During the year it engaged with consumers with the
 Simple message Switch on your purpose. Switch on the best In you The
 business associated with the successful and vibrant Deepika Padukone as
 the brand ambassador and to further engage with the youth, a digital
 page Know your neighbours was created. This page is today the biggest
 fan page for NESCAFE in the world with more than three and a half lakh
 fans, and is continuing to grow These initiatives along with the ones
 already planned are expected to move NESCAFE to a new growth
 trajectory.  During the year Milk Products and Nutrition- business
 performed well and continued to consolidate and grow. Science based
 nutrition, stringent quality standards end innovation and renovations
 are strong pillars for the business which is focused on enhancing the
 quality of life During the year your Company launched the NESTLE START
 HEALTHY STAY HEALTHY educational initiative in partnership with
 doctors, with the aim of making good nutrition a way of life. It
 emphasises the fact thai the nutrition that children get in the early
 years of life can affect their health forever. And It all starts with
 mothers milk. As we progress through different stages of life, we have
 different nutritional needs and we need to understand and balance our
 nutritional requirements to stay healthy. While your Company actively
 supports and promotes breastfeeding as being the best possible source
 of nutrition for the developing Infant it recognises that there are
 circumstances where the mother to unable to feed Your Company continued
 to build on the heritage that Nestle has of quality. trust and science
 based nutrition to meet the needs of infants, as they grow up, and in
 later life. NESLAC Nutritious Milk Drink for children was launched
 towards the end of the year in select geographies
 
 Your Company has a portfolio of high quality UHT milks that pass
 stringent quality checks and are preferred by discerning consumers who
 demand the confidence of good taste and putty. The range comprises
 NESTLE MILK (Rich and Creamy). NESTLE MILK (Half Fat) and NESTLE SLIM
 [Skimmed Milk], and NESTLE PRO-HEART MILK with Omega 3 Your Company
 continued to strengthen the business and also extended the range of
 NESTLE DAHl to include dahi in pouches. In the dairy whitener category
 NESTLE EVERYDAY continued to leed volume and value growth and
 introduced affordable price formats to Improve accessibility for lower
 income users. The brand was renovated and research shows that 8 out of
 every 10 consumers prefer NESTLE EVERYDAY making it Indias most
 preferred Dairy Whitener During the year there was greater emphasis on
 activations and sampling to bring the brand experience closer to
 consumers MILKMAID sweetened condensed milk has in the past
 successfully introduced a new generation of home cooks to easy 3 step
 recipes. Your Company continued to strengthen this activity and
 scale-up business
 
 The Healthcare Nutrition Business that was acquired from Specially
 Foods India Private Limited, with products for consumers with special
 nutritional requirements performed satisfactorily Work to underway to
 develop ft further. The products In this portfolio are marketed under
 brands like RESOURCE, OPTIFAST and SPERT. RESOURCE is specially
 formulated for the management of malnutrition and other medical
 conditions associated with increased nutritional needs. It has a range
 of formulations Including, amongst others, RESOURCE Diabetic, a ready
 to use, fibre rich diet for better nutritional management of diabetics
 and RESOURCE High Protein that provides easily digestible whey protein.
 OPTIFAST is a Nutrition supplement In overweight condition and SPERT is
 a Protein supplement to address the Increased protein needs of the
 fanny With mom women entering the workforce and Increasing disposable
 Incomes, there la growing opportunity In the Out or Home segment Your
 Company is well placed to tap this During the year as the economic
 environment Improved and hiring by corporates Increased the business
 was positively benefited Your Company successfully launched vending
 machines taking into account the specific needs of the customers in the
 large as well as small establishments.
 
 Sales
 
 Your Company is aware that the emerging and the Increasing competitive
 Intensity, requires us to be even more efficient, as we go forward. The
 process of back- end sales automation that was initiated earlier is
 now, fully implemented and provides a robust and integrated distributor
 management solution that supports our efficiency In primary and
 secondary sales This also facilitates a more transparent record of the
 transactions from distributors, to retailers We strive to improve the
 avaliability of our products with a clear focus on building distributon
 by going deep & wide across urban and rural geographies This has
 resulted In Improving our reach to more than 400,000 outlets In the
 last year alone Your Company Is committed to continuous excellence in
 the operations.  During the year the focus was on building capacity
 through the wiling and able distributors who are long term partners of
 your Company, and provided the front lino field force, the support and
 know-how to improve their capability.
 
 Technology and Quality
 
 Your Companys products touch the lives of millions every day and
 Nestle is amongst the most trusted companies in India. The commitment
 to high integrity Nestle products is supported by stringent quality
 assurance norms, state-of-the-art technology and high degree of
 automation The access to Nestles globel R&D and emphasis on science
 based innovation and renovation to develop high quality products are
 significant competitive advantages Your Company Is also working on a
 robust and comprehensive Improvement programme Nestle Continuous
 Excellence (NCE) that is based on LEAN mindset for war on waste and
 Total Performance Management concepts The initial results from prior
 areas Indicated that bettor efficiencies have been achieved from the
 same assets while also reducing costs
 
 Nestle R&D Centre in India
 
 Your Directors are extremely pleased to inform that at the request of
 your Company, Nestle S. A. Switzerland has agreed to the setting up of
 a R&D Centre In India as a part of its global network of R&DCentres
 Nestle R&D Centre India Pvt Ltd. Is a wholly owned subsidiary of Nestle
 S A and at the request of your Company, the RAD facility has been
 located In the proximity of your Companys Head Office The foundation
 stone for the R&D Centre was laid by the Honble Minister for Food
 Processing Industries In September, 2010 and It is expected to be
 operational in 2012.
 
 Nestles decision to establish an R&D centre In India will be an
 additional competitive advantage in the future and well further
 strengthen the benefits of technology and know-how received by your
 Company from Nestle Group. The research at this Centre will provide
 exerting opportunities for Innovation and will focus on Popularly
 Positioned Products (PPPe), especially for India but also worldwide
 PPPs meet the specific needs of consumers with lower income levels by
 offering them high-quality, nutritionally enhanced products at
 affordable prices it should help to accelerate your Companys growth
 and contribute towards reducing nutritional deficiencies in lndia.
 
 Environment
 
 Your Company is sensitive to the fragility of non- renewable resources
 and continues to work towards creating and Increasing awareness for
 environmental sustainabllity Emphasis on conservation of resources is a
 priority within the factories and in the manageable areas there is a
 continuous effort to minimise consumption of natural resources and
 reduce waste and emission. while maximising production All processes
 follow the Nestle Environment Management System and business practices
 comply with government policies, environmental laws and regulations
 using state-of-the-art technology and equipment You writ bo proud to
 know that as production volume has been increasing, during the past ten
 years, there has been a significant reduction in usage of energy and
 water and reduction in emission of green house gases per tonne of
 production Water consumption per tonne of production has reduced
 substantially and water use efficiency has improved by almost 60% by
 employing efficient methods and technologies Energy consumption per
 tonne of produce has reduced by almost 51% through investments in
 energy efficient systems and processes and cutting down on energy
 losses At the same time waste water discharge per tonne of produce
 reduced by almost 70% as a result of the reusing of water and more
 efficient processes that reduce water DMA The carbon footprint has been
 significantly reducing through focus on technologies that improve
 combustion and emphasis on utilising renewable fuels such as coconut
 shells and process waste to replace non-renewable fuels
 
 Capacity and Funding
 
 Your Company has boon growing at a healthy rate In recent years with
 continuing Leadership across its businesses. This market leadership
 position and Indias positive economic environment coupled with a
 progressive population provides opportunities for growth Your Company
 is therefore, accelerating Investment in capacities to provide
 consumers a wide product range, from Popularty Positioned Products far
 low income consumers to premium offerings In the recent past some
 significant investments have already been initiated Your Directors are
 hopeful that the Government continues to support the Food Processing
 Sector so that your Company can continue to expand manufacturing and
 employment to provide consumers with affordable products Over the Last
 three years, Nestle India has spent over Rs 650 crones In capital
 Investments, but the Investments during 2010 atone were In excess of Rs
 480 crores and additional commitments of around Rs 680 crores already
 existed at the year end. Current plans foreses a further acceleration
 in 2011 and beyond This capital expenditure will go into expanding
 facilities at Bhichogm, Moga, Nanjangud, Porda, Samakha and in new
 Greenfield fecilities while a new plant for MAGGl products is getting
 ready for commissioning at the Nanjangud Factory, work has been
 initiated for a green field project at Tahliwal In Himachal Pradesh
 
 In order to finance this accelerated capital expenditure trajectory
 your Company would have a Judicious mix of Internal Accruals and
 Debt The Borrowings Free balance sheet of your Company and the
 strong credit ratings of Nestle should facilitate this strategy Your
 Directors are pleased that the Reserve Bank of India has approved
 availment of External Commercial Borrowing from the foreign equity
 holders of upto US$ 450 million for the sourcing of capital goods,
 expansion/modernisation of facilities and new projects. The drawdown of
 the loan would be based on the funding requirements from time to time
 
 Supply Chain
 
 The current volatile and complex economic environment requires
 efficient and cost effective processes. During 2010 your Company has
 ensured timely and efficient supply of materials to run the factories,
 according the development of local suppliers The distribution of
 finished goods to consumers across the country continues to be cost
 effective and mora environmental friendly with Increasing share of rail
 deliveries.
 
 During the year, your Company also delivered sustainable coat
 optimisation Initiatives as part of Nestle Continuous Excellence (NCE)
 to eliminate waste and manage input coils This year the NCE programme
 will be expanded further to cover all supply chain processes and select
 distribution centres.
 
 In line with the philosophy of Greeting Shared Value, Nestle India
 rolled out Its Responsible Sourcing programme in 2010. All the key
 vendors were engaged on this initiative through procurement tod vendor
 meets at the Companys Head office and factories Vendors were supported
 through a pre-assessment process, consultant visits, dedicated help
 desk and continuous engagement and education AH vendors were registered
 on the SEDEX platform and Independent Audits by internationally
 approved agendas were conducted on the key vendors shortlisted A these
 vendors were found complaint with minor gape for which road maps have
 been agreed mutually
 
 Human Resources and Trade Relations
 
 Your Company strongly believes that people are its assets and they are
 key to drive competitive advantage With the vision given to employees
 to Seek the Peak in all endeavours, the emphasis has been on
 alignment of company goals with individual objectives and than
 empowering employees to give their beat with the mindset of Dream Dare
 Deliver, Recognising the importance of Human Resources, an efforts
 have been put by your Company to ensure that best talent is recruited,
 continuously developed and retained During the year, your Company has
 put heavy emphasis on performance driven culture and appropriate HR
 tools and processes have been deployed to ensure clear linkage with
 rewards. Strong recognition platforms have been crested to encourage
 people to deliver stretched goals. There has been a lot of emphasis on
 training and development including self learning, manager inspired
 learning through coaching and censer development opportunities.
 
 All these efforts have ensured that your Company retains Its position
 as a preferred employer and an employer of choice. Your Company
 believes in fostering trust end mutual respect In employee rotations
 Your Company engaged employees with trust and respect by continuously
 transparently sharing Information through various forums, dialogues and
 other communication means. These efforts have received excellent
 redprocation from employees and in its Industrial Relations.
 
 SWOT Analysis of the Company
 
 Strengths:
 
 * Being NESTLE
 
 * General Licence Agreement which gives access to the Nestle Groups
 proprietary technology/ brands, expertise and the extensive centralised
 Research and Development facilities
 
 * High quality and safe food products at affordable prices, and trust
 in Nestle.
 
 * Understanding of Nutrition, Health and Wellness
 
 * Strong end well differentiated brands with market share leadership.
 
 * Product innovation and renovation, based on consumer insights.
 
 * Well diversified product portfolio across categories and income
 strata
 
 * Efficient supply chain
 
 * Responsive Organisation Structure and strong Management Team
 
 * Distribution structure that allows wide reach and coverage in the
 target markets.
 
 * Capable and engaged human resources
 
 * Participation in Global Business Excellence (GLOBE)
 
 * Strong financial position
 
 Weakness:
 
 * Complex supply chain configuration.
 
 * Cascading indirect taxes.
 
 * Price point portfolio
 
 Threat:
 
 * Price volatility of key raw, packaging materials and fuels
 
 * Availability of agro based commodities
 
 * Food Inflation
 
 * While-collar talent
 
 Opportunity*:
 
 * Potential for further expansion In smaller towns and other
 geographies
 
 * Growing demand for premium products
 
 * Introduction of GST to simply the taxation and distribution
 
 * Recovery of Our of Home Segment
 
 * Leverage Nestle Technology to cave op more products that provide
 Nutrition. Health and Wellness at affordable prices
 
 Working with Communities
 
 Evan as growth and soda! change accelerate the desire to move up the
 income pyramid, the issues of rural development, conservation of water
 and environmental resources, access to nutrition and food security are
 potential challenges Your Company believes that our response to these
 common issues will not only have a bearing on our own progress but also
 the ability to create sustainable inclusive growth
 
 Nestles approach to business is Creating Shared Value or Saajhapan
 as we call it in Nestle India and it la about the impact of our
 business and engagement through it In colloquial thinking Saanjhapan
 refects joint benefit Your company is focused on the three ansae of
 Nutrition, Water and Rural Development where it has the greatest
 potential for Joint value with the communities.
 
 Understanding of nutrition, knowledge of balanced diets and access to
 good nutrition is essential for a good life in a survey conducted by
 your Company around Its factories in 2009 lack of knowledge and even
 awareness about balanced nutrition had emerged as a major concern Your
 Company has expertise and understanding of nutrition and Intends to use
 this to help people Improve the quality of their lives. It has
 developed a simple but engaging programme In partnership with
 Universities that have knowledge of food habits and availability in
 their areas The programme modules are structured in a way that students
 absorb the basic knowledge relating to foods In a practical manner it
 helps them understand the role of food in our bodies, the manner in
 which food is digested and how we can improve the balance of nutrients
 in diet The module specifically devotes time to explaining how cooking
 practices can improve nutrition, as well as the need for food hygiene,
 sanitation, and physical exercise to improve health and wellness
 
 This programme was rolled out nationally from April and during the year
 around 5000 students in village schools have already participated The
 Universities also help to ensure that the programme Is being
 implemented in the beat interest of the community.
 
 The well being of the communities from where we draw our agricultural
 raw materials are important for us.  Consequently your Company
 continues to do extensive work with fanners and other suppliers,
 transferring technology and knowledge to the communities and helping
 them build their capabilities so that they can participate more
 effectively in business and build on progress through economic
 prosperity.
 
 During the year your Company continued to extend its Clean Drinking
 Water Projects that Improve access to dean drinking water in village
 schools and increase awareness for water conservation in the
 communities around our factories During the year, 17 Clean Drinking
 Water Projects were constructed to benefit 6300 more students, As a
 result the number of these projects around our factories has increased
 to 156 and 66,000 students in village school are directly benefitting
 every year
 
 Your Company has been working extensively to develop dairy fanning and
 to make It a sustainable income source even for small and marginal
 farmers, This effort continued in the Moga region with your companys
 veterinarians and agronomists providing support, expertise and
 knowledge that benefits over 110,000 farmers directly Your Company also
 continued with the Village Women Dairy Development Programmes that
 train them in good dairy practices as well as spread awareness about
 personal hearth, hygiene, water conservation and economic independence.
 160 more programmes helped to reach out to 5300 additional women during
 the year, cumulatively benefitting over 45,000 village women
 
 During recent years your Company has also been working with chicory
 farmers Transfer of technology, education and better knowledge of
 roasting and processing has increased yields and quality During the
 past 10 years the number of chicory farmers benefitting from this has
 increased from 1000 to 7500
 
 Contribution to Exchequer
 
 Your Company has been a leading taxpayer of the country and over the
 years has been enabling significant contribute to various taxes During
 the year 2010, the Company through Its business, enabled tax
 collections at Central and State Law of close to Rs 13.98 billion in
 the aggregate
 
 Awards and Recognitions
 
 While your Companys products continued to be trusted for their high
 quality, your Company has Increasingly emphasised better consumer
 engagement The success is reflecting in the awards and recognitions
 that your brands received during the year They are also a strong
 indication of the hard work and sustainable initiatives being
 implemented to delight consumers. Soma of the key awards and
 recognitions:
 
 * Conferred Marketing Company of the Year award at PITCH Indias Top
 50 Marketers Awards 2010 to recognise excellence in Marketing
 
 * Pitch Magazine recognised MAGGI amongst the top 3 Ageless Brands
 and adjudged MAGGI Masala-ae-Magic amongst the top 3 for innovative
 work at the Bottom of the Pyramid.
 
 * NESTEA Voted Product of the Year In the powdered beverages category
 by Nielsens Consumer Survey of product innovation 2010.
 
 * KIT KAT adjudged Master Brand by the World Brand Congress
 
 * MAGGI Masala-ae-Magic; recognised amongst The Chartbusters of 2010
 by The Economic Times
 
 * NESCAFE Know Your Neighbours campaign amongst Top 5 Most Liked
 Digital Campaigns of 2010 listing by AFAQS
 
 * MAGGI again rated the No 1 Food Brand in India by an ICMR consumer
 study.
 
 * Me and Med MAGGI campaign recognised by Campaign India Digital
 Media Awards - Silver for Best Website (FMCG) and Bronze for Beet
 Loyally Campaign.
 
 * MAGGI rated amongst Indias Top 10 Buzziest Brands by AFAQS Survey
 2010
 
 * Me and Mart MAGGI advertising campaign received Silver and Bronze
 Awards at 2010 ABBYS,
 
 * Coffee Board Awards for Best Exporter of Coffee to Russia and C S.
 and Second Best Exporter of instant Coffee (2009-2010)
 
 * In a survey by Business Today and indicus Analytics to understand
 external perceptions Nestle India amongst the section toppers for FMCG
 on Best Companies to Work for 2010.
 
 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 tho assets of the Company and tor
 preventing and detecting fraud end other irregularities.
 
 * They have prepared the annual accounts on a going concern basis.
 
 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 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 Companys objectives, projections,
 estimates and expectations may constitute forward looking statements
 within the meaning of applicable laws and regulations Actual results
 might differ materially from those either expressed or Implied In the
 statement depending on the circumstances
 
 Directors
 
 Mr Rajendra S Pawar resigned as a Director of the Company with effect
 from 22nd April 2010. The Directors wish to place on record their
 appreciation for the contributions made by Mr Pawar during his tenure;
 
 Dr. Rakesh Mohan, appointed in the casual vacancy. is currently
 Professor in the Practice of international Economics and Finance at the
 School of Management and Senior Fellow in the Jeckson Institute for
 Gobal Affairs at Yale University He is also Non Resident Senior
 Research fellow of Stanford Centre for international Development,
 Stanford University He has been Deputy Governor of the Reserve Bank of
 India for many years (2005-2009 and 2002-2004) and held senior
 positions In the Government of India Including Secretary, Department of
 Economic Affairs (2004-2005) as well as Chief Economic Advisor to the
 Government of Ends (2001-2002), Director General of National Council
 for Applied Economic Research, and Chief Executive of Indian Council
 for Research and international Economic Rotations Dr Mohan is well
 known and respected internationally for his extensive work in the areas
 of economic reforms and liberalisation. Industrial economics, urban
 economics, Infrastructure studies, economic regulation, monetary policy
 and the financial sector
 
 His experience would be of Immense benefit to your Company and adds a
 valuable perspective in the Board of Director Dr Rakesh Mohan holds
 office till the Annual General Meeting and is eligible for
 re-appointment.
 
 In terms of the Articles of Association of the Company, your Directors
 appointed Dr (Mrs ) Swati A Piramal and Mr Christian Schmid as
 additions directors of the Company effective from 2nd August 2010
 Further, Mr. Christian Schmid was also appointed as the Whole- bme
 Director of the Company designated as  Director - Technical, for a
 period of five years with effect from 2nd August, 2010
 
 Dr. Swati A. Piramal is Vice Chairperson of Piramal Life Sciences
 Limited She is the past President of ASSOCHAM. She has completed her
 MBBS Medical Degree from University of Bombay. Industrial Medicine from
 DIM College of Physicians & Surgeons, Bombay and Master of Public
 Health from Harvard. USA Her contribution to the Industry,
 achievements, membership of prestigious organisations and her
 directorship in other companies are mentioned In detail in the
 Explanatory Statement under Section 173(2) of the Companies Act, 1936
 covered under item no. 5 of the Notice of the 52nd Annual General
 Meeting. Your Company will be immensely benefitted with her appointment
 on the Board Dr Piramal holds office All the Annual General Meeting and
 is eligible for re-appointment.
 
 Mr Schmid took over as Executive Vice President Technical in August
 2009 and comes with Immense expertise in technology and process
 efficiencies. He is responsible far, amongst others, the manufacturing
 operations, cost optimisations, quality end safety standards, as of
 which have a critical role in ensuring a competitive advantage for the
 Company Mr Schmid is a process engineer from the Swiss Federal
 Institute of Technology and Joined Nestle in 1991 as a Productivity
 Specialist and has had a distinguished career with varied International
 experience and his last assignment was Group Technical Director at
 Nestle United Kingdom Details of his proposal are mentioned in the
 Explanatory Statement under Section 173(2) of the Companies Act, 1956
 covered under Item no 6&7 of the Notice of the 52 nd Annual General
 Meeting.  Mr Schmid holds office till the Annual General Meeting & is
 eligible for re-appointment.
 
 In accordance wih Article 119 of the Articles of Association, Mr Pradip
 Baijal retires by rotation and due to personal commitments has not
 sought re-appointment The Directors wish to place on record their
 appreciation tor the contributions made by Mr Baijal during his tenure
 
 Auditors
 
 The Statutory Auditors of the company, M/s. A.F Ferguson & Co,
 Chartered Accountants. Now Delhi, retire in accordance with the
 provisions of the Companies Act, 1956 and are eligible for
 reappointment M/s A F. Ferguson & Co.. Chartered Accountants. New Delhi
 have sought the reappointment 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 re-appointment 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 2011. This appointment has also been
 subsequantly approved by the Central Government
 
 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 the Annexuro * 2 forming part of
 this Report Information as per Section 217(2A) of the Act road with the
 Companies (Particulars of Employees) Rules, 1975, as emended 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
 sen! 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 fore front of the Industry Your Company continued to receive
 co-operation 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 to the same and your Company will continue in Its
 endeavour to bulid end nurture strong links with trade, based on
 mutuality.  respect and co-operation with each other and consistent
 with consumer interest.
 
 Appreciation
 
 Your Company has been able to operate efficiently because of the
 culture of professionalism, creativity integrity and continuous
 improvement in all functions and areas as well as the efficient
 utilisation of the Companys resources for sustainable and profitable
 growth
 
 The Directors wish hereby to place on record their appreciation of the
 efficient and loyal services rendered by each and every employee,
 without whose whole-hearted 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
 
 Date:  18th February 2011                         Antonio Helio Waszyk
 Place: Gurgaon                                                Chairman