# DEAR FELLOW SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NYSE_HLF_2017/NYSE_HLF_2017.mmd` · pages 2-8_

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DEAR FELLOW SHAREHOLDERS:

At Herbalife Nutrition, our purpose is bold, yet simple – to make the world healthier and happier. We believe there has never been a better time to be part of our purpose-driven company, and the opportunity for our independent distributors has never been greater.

We have made significant investments in our seed to feed program and our technology platform over the last several years that have enabled us to efficiently support our business in over 90 countries around the world and become a recognized leader in the nutrition and direct selling industries. We believe we are well positioned for long-term growth due to global megatrends, such as the obesity epidemic, skyrocketing healthcare costs, aging populations, and a growing interest in entrepreneurship by people of all ages, coupled with current food trends.

We called 2017 the year of transition as we successfully implemented the FTC order in the U.S., which we believe has made us an even stronger company and has solidified our position as a leader in the direct selling industry. While the implementation of the order required significant investments, including the time and talent of our entire organization, our North American business pivoted in July and made a tremendous recovery by the end of the year. We experienced improvements in many key metrics, introduced innovative new products, and experienced an increase in the number of nutrition clubs opened in the second half of the year in the U.S.

Our business experienced growing momentum in the second half of the year, led by the recovery in the U.S., making it clear that our business is driven by strong consumer demand and the daily consumption of our nutrition products, coupled with the entrepreneurial leadership and engagement of our distributors. As a result, in the fourth quarter we reported a return to growth in net sales and introduced 70 new products that we believe will meet consumer needs and provide growth in 2018 and beyond.

With the successful transition in 2017, we are now implementing plans to globalize key elements of the changes made in the U.S. to transform our business around the world in the coming years. We are committed to creating a culture of innovation, accelerating the introduction of new products, leveraging technology to enhance consumer predictive analytics, and investing in education and training to strengthen our "Distributor Difference" – the one-on-one relationship between our distributors and their customers, which we believe is one of our strongest competitive advantages.

## Innovation, Education & Training

My top priorities as CEO of Herbalife Nutrition are to usher in a culture of innovation and increase our investments in education and training. Now more than ever, consumers around the world have a desire to live healthier and pursue more active lives, and we are ideally positioned to be the company they turn to for personalized nutrition and results.

In July, we created the new position of Chief Innovation Officer to focus on leveraging the company's vast network of dedicated employees and entrepreneurial distributors. In September, we rolled out an idea management and crowdsourcing tool that can harness the collective, diverse thinking of our employees and our distributors through specific innovation challenges. Leveraging the talents and distinct perspectives of our employees and global distributor network, along with our access to unique customer data and robust R&D capabilities, will enable us to bring new, creative ideas to all areas of our business.

We signaled our commitment to a digital transformation for our business through a multi-year agreement with Salesforce to bring CRM capabilities to our distributors and their customers. This technology provides us with a unique opportunity to leverage smart data to enhance the distributor-customer relationship. Additionally, by creating a more personalized experience through anticipating customer needs and making recommendations based on purchase history, there is an opportunity for our distributors to be more productive, more efficient, and more profitable. We believe this digital strategy, and the impact it will have on how distributors engage with their customers, will transform Herbalife Nutrition on a scale comparable to what we experienced with the global roll out of nutrition clubs from 2005 to 2010.

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As we invest more to innovate across our portfolio of leading health and nutrition products, we will increase the number of product introductions each year. This will be a key focus as we grow our customer base through new product formats, usage occasions and new product categories. Last year, our R&D employees created the "Concept Café," an exciting format to present new product prototypes for immediate evaluation by our internal experts, our distributors, and our ingredient partners. We will begin to see the results of this new process in the second half of 2018, and we believe it will significantly accelerate the timeline under which we bring new and innovative products to market.

Increasing our investment in education and training opportunities for our distributor sales force is vital to ensure they remain the most important element of the sales transaction with their customers. Unlike a typical retail transaction, our distributors don't just sell products; they sell results. With advances in nutrition science and the rising consumer demand for more personalization, we believe the increased focus on education and training will further leverage all the benefits of our direct selling business model and create a long-term competitive advantage for our company.

New products, leveraging technology, innovation, and increased investments in our "Distributor Difference" are all coming together in new and exciting ways and will provide a catalyst for growth for years to come.

## Poised for Growth

We are on our way toward building a larger, more resilient and more profitable company.

Our growth strategies and investments reflect our commitment to generating value for our shareholders in both the short- and long-term. We are grateful to our shareholders for their continued confidence in our management team and the future success of our company. Since we began our share repurchase strategy in 2007 to help accelerate returns to our shareholders, the company has repurchased approximately $4 billion in stock, buying back over 91 million shares (adjusted for splits) through February 21, 2018.

In closing, I'd be remiss if I didn't acknowledge that this year marked my 14 \( ^{th} \)  at Herbalife Nutrition, but my first as CEO. I'm tremendously inspired by all of the members of Team Herbalife around the world – including our distributors, management team and employees – and I want to thank everyone for their commitment and tireless efforts over the past 12 months that helped us navigate through this important transition period for the company.

We always do what's right, we work together, and we build it better. These are our core values, and they guide us every day as we do our part to make the world healthier and happier.

![](images/3_0.jpg)

Rich Goudis
Chief Executive Officer
Herbalife Nutrition

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