# Year in
Review

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_IFF_2017/NYSE_IFF_2017.mmd` · pages 1-7_

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Year in
Review

8%
EAME

6%
LATIN AMERICA

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$264M

cash returned to shareholders in the form of dividends and share buybacks

1%
GREATER ASIA

FRéSH

Joined WBCSD's Food Reform for Sustainability and Health (FReSH) initiative to reduce food waste and loss in global food systems

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## Dear Fellow Shareholders,
Customers & Employees

Not too long ago, we honored the 50th anniversary of our Master Perfumer, Carlos Benaim. His story is a remarkable one due to its humble beginnings. In 1967, Carlos answered a simple ad in a newspaper and then went on to become one of the most celebrated perfumers in the world.

In his early years at IFF, he apprenticed with the legendary perfumer Ernest Shiftan – the "father of perfumery" – and trained with the renowned Bernard Chant. Over the course of his professional career, Carlos has created hundreds of iconic fragrances, received Lifetime Achievement Awards, mentored countless young perfumers and was named IFF's first-ever Master Perfumer.

Much has changed at IFF in the 50 years Carlos has been with us. Our portfolio has expanded, our innovation and technologies have grown stronger, and our commitment to corporate social responsibility has deepened.

Yet our fundamental nature has endured.
Creativity and passion energize our business.
Our people – empowered, diverse and expert
– transform dreams to reality. And our
customers continue to look to us as pioneers
of sensorial experiences that move the world.

## 2017 WAS A PIVOTAL AND PRODUCTIVE YEAR IN OUR VISION 2020 JOURNEY.

We strengthened our business, focused on meeting our consumers' evolving needs within a dynamic marketplace and reinforced our foundation to achieve long-term value creation for our shareholders.

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We grew currency neutral sales* 9 percent as both business units successfully delivered strong top-line growth. Improvements in volume, cost savings benefits and value-enhancing acquisitions led to currency neutral adjusted operating profit* and EPS* improving 5 and 9 percent, respectively. We also returned approximately $264 million – or 56% – of our adjusted net income* to you, our shareowners, through dividends and share repurchases. We increased our annual dividend 8 percent and announced an extension of our existing share repurchase authorization through 2022 with a total value of $300 million.

Along the way, we made considerable improvements across our key markets. In North America, we launched Tastepoint \( ^{SM} \) , a fully dedicated organization within IFF designed to service middle-market customers. This new and innovative go-to-market approach targets the unique needs of this customer-base, who call for speed, agility, and resourcefulness, powered by technologies that drive differentiation.

In the Middle East and Africa, our growth continued to be robust – improving mid-single-digits on a currency neutral basis for the year. To ensure we thrive in this exciting and dynamic region, we opened a fully renovated and expanded facility in Cairo to better serve our regional customers and strengthen our market presence.

In China, we commissioned a new fragrance ingredients plant in Jiande, located in the Zhejiang Province. This investment underscores IFF's commitment to the region and builds on our global presence in the sector. The plant was designed to help deliver on our strategic sustainability goals and to minimize its environmental impact with a special focus on areas of greatest sensitivity to the region. As a result, the facility has the lowest water consumption per kilo of production in IFF's operations network – making it one of our most resource-efficient manufacturing locations, globally.

## WE STRENGTHENED OUR
INNOVATION ACROSS OUR
MOST PREVALENT PLATFORMS.

To ensure we maintain the strong double-digit growth we achieved in our sweetness and savory modulation portfolio in 2017, we successfully launched three natural taste modulators. In delivery systems, encapsulation technology remained paramount – which is why we made strong advancements to extend this technology into even more categories. To ensure our perfumers have a stronger competitive advantage, we commercialized three new fragrance molecules offering unique and distinctive characteristics, exclusive to IFF. As we look ahead, we are excited that our pipeline of molecules is as strong as it has ever been.

We also launched our Re-Imagine program, which is a tangible expression of our commitment to advance taste and embed sustainable thinking. The program focuses on six key areas, inclusive of culinary, citrus, delivery systems, naturals, modulation and protein. It includes our approach to creation, called Taste Design, which is a hands-on, artisanal approach to making an iconic taste come to life.

We fortified our Fragrance business with the acquisition of Fragrance Resources – increasing our participation in specialty fine fragrances and strengthening our market

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position with regional customers in North America and Germany. We also purchased PowderPure to further expand our expertise in flavors by offering clean label solutions that do not compromise taste, nutrition and color. And we joined the MIT Media Lab to be a part of next generation research breakthroughs while championing open innovation.

And even as we expanded beyond the walls of our company, we made strides to grow internally through an array of employee development opportunities. Over the past year, we formalized IFF University, bringing together our entire learning architecture under one umbrella and providing an easy-to-use and convenient offering with something for every employee. At a time when the discussion about race, culture, age, and gender equality and identity is so pronounced, we felt it important to take a stand and unequivocally affirm our commitment to a diverse and inclusive workplace by establishing an empowered global employee resource group. To underscore this commitment to diversity and inclusion externally, I joined a group of similarly focused CEOs and signed the CEO Action for Diversity & Inclusion \( ^{™} \)  pledge. The group is made up of more than 350 CEOs of the world's leading companies and business organizations, whose goal is to leverage their individual and collective voices to advance diversity and inclusion in the workplace.

We are proud of Dr. Greg Yep, our Chief Scientific & Sustainability Officer, who was awarded FEMA's Excellence in Flavor Science, the most prestigious honor given globally to those who advance flavor science through original research and peer-reviewed publication. In addition, we are honored that Nicolas Mirzayantz, Group President, Fragrances, was inducted into the Fragrance Foundation's Circle of Champions, recognizing his passion for and impact on the fragrance industry.

Meanwhile, we kept making a positive impact in our communities, concentrating on embedding sustainable practices in all that we do. We joined the World Business Council on Sustainable Development's FReSH initiative to accelerate positive change in global food systems; and in line with our legacy of innovating firsts, our South Brunswick, New Jersey facility received the industry's first Zero Waste to Landfill certification. Additionally, we partnered with one of our customers to improve the long-term viability of mint farming in India and showed leadership in organic, ecological and social standards by obtaining our ninth For Life Certification by IMO (Institute of Market Ecology).

These efforts were globally recognized by our "gold" status designation by EcoVadis and "A" list acknowledgement by CDP, for the third year. We were also named to the Euronext Vigeo U.S. 50 Index.

In short, our strategy is yielding success. And I give my fellow colleagues around the world tremendous credit.

## NOW IT'S TIME TO LOOK
TOWARDS THE NEXT CHAPTER
OF OUR GROWTH STORY.

At a time when the global operating environment is more dynamic and the speed at which change occurs has accelerated, we are taking action to ensure our living legacy of strong sales growth, proven profitability and industry-leading returns continues well into the future.

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In 2018 and beyond, we will focus on four strategic imperatives aligned with Vision 2020:

1. Driving differentiation: making technology enhancements in core R&D platforms of naturals, modulation, delivery systems, ingredients, active cosmetics and health & nutrition;

2. Balancing our customer base: accelerating growth with regional & local customers, while strengthening our position with key large multinationals;

3. Maximizing our portfolio: executing superior management of category mix and proactively exploring additional growth opportunities beyond our core business; and

4. Generating return: driving continuous improvement with a focus on cost productivity and reallocation of resources to activities that drive greatest returns.

We look to achieve these in a sustainable manner – creating shared value for all of our stakeholders, and upholding our commitment to a circular economy.

It's clear that in this ever-changing world, we need to be faster and more agile. We will move with both the speed and thoughtfulness that our constituents rightly expect from us and we will deliver on our commitments.

Looking back to when Carlos first joined this great organization 50 years ago, I can say that we have never been more optimistic about our future — and with many good reasons. We're inspired by the world around us, competing – and winning – in a great industry filled with strong growth prospects and limitless possibilities. We create tremendous value for the constituents we serve, as we do our part to create a regenerative, healthy and abundant world. All of this is only possible because we have an amazing team of employees, who are catalysts for discoveries that spark the senses and transform the everyday.

Thank you for your support and partnership as we continue on this journey together.

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Andreas Fibig
Chairman and Chief Executive Officer

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