flavor suppliers were named defendants in a lawsuit by 1 plaintiff brought in the Court of Common Pleas, Hamilton Count, Ohio (Mitchell case). In June 2004, the Company and 3 other flavor suppliers were named defendants in a lawsuit by 1 former worker at a Northlake, Illinois facility in an action brought in the Circuit Court of Cook County, Illinois (Lopez case). In August 2004, the Company and another flavor supplier were named defendants in a lawsuit by 16 former workers at a Marion, Ohio factory in an action brought in the Court of Common Pleas, Marion County, Ohio (Williams case). In March 2005, the Company and 10 other companies were named defendants in a lawsuit by 1 former employee of one of the defendants in an action brought in the Circuit Court of Cook County, Illinois (Robinson case). In July 2005, the Company and 9 other flavor and chemical suppliers were named defendants in a lawsuit by 1 former worker of a Chicago area facility alleging respiratory injuries due to alleged exposure in the workplace of such facility (Campbell case). In August 2005, the Company and 8 other companies were named defendants in a lawsuit by 3 former employees of the Gilster-Mary Lee facility in McBride, Missouri in the City of St. Louis Circuit Court (Fults case). In September 2005, the Company and 9 other companies were named defendants in a lawsuit by 2 former employees of the Gilster-Mary Lee facility in McBride, Missouri in the Circuit Court of St. Louis County (Bowling case). In November 2005, the Company, a flavor trade association and a consulting agency were named defendants in a lawsuit by 1 former employee of a popcorn facility in Breda, Iowa brought in U.S. District Court for the Northern District of Iowa, Western Division (Weimer case). In January 2006, the Company, three other flavor suppliers, a flavor trade association and a consulting agency were named defendants in a lawsuit by one worker at a Sioux City, Iowa facility filed in U.S. District Court for the Northern District of Iowa (Kuiper case). All these cases remain in the pretrial stage.

The Company believes that all IFF and BBA flavors at issue in these matters meet the requirements of the U.S. Food and Drug Administration and are safe for handling and use by workers in food manufacturing plants when used according to specified safety procedures. These procedures are detailed in instructions that IFF and BBA provided to all their customers for the safe handling and use of their flavors. It is the responsibility of IFF’s customers to ensure that these instructions, which include the use of appropriate engineering controls, such as adequate ventilation, proper handling procedures and respiratory protection for workers, are followed in the workplace.

At each balance sheet date, or more frequently as conditions warrant, the Company reviews the status of each pending claim, as well as its insurance coverage for such claims with due consideration given to potentially applicable deductibles, retentions and reservation of rights under its insurance policies, and the advice of its outside legal counsel and a third party expert in modeling insurance deductible amounts with respect to all these matters. While the ultimate outcome of any litigation cannot be predicted, management believes that adequate provision has been made with respect to all known claims. Based on information presently available and in light of the merits of its defenses and the availability of insurance, the Company does not expect the outcome of the above cases, singly or in the aggregate, to have an adverse effect on the Company’s financial condition, results of operations or liquidity. There can be no assurance that future events will not require the Company to increase the amount it has accrued for any matter or accrue for a matter that has not been previously accrued. See Note 17 of the Notes to the Consolidated Financial Statements.

Over the past 20 years, various federal and state authorities and private parties have claimed that the Company is a potentially responsible party as a generator of waste materials for alleged pollution at a number of waste sites operated by third parties located principally in New Jersey and seek to recover costs incurred and to be incurred to clean up the sites.

The waste site claims and suits usually involve million dollar amounts, and most of them are asserted against many potentially responsible parties. Remedial activities typically consist of several phases carried out over a period of years. Most site remedies begin with investigation and feasibility studies, followed by physical removal, destruction, treatment or containment of contaminated soil and debris, and sometimes by groundwater monitoring and treatment. To date, the Company’s financial responsibility for some sites has been settled through agreements granting the Company, in exchange for one or more cash payments made or to be made, either complete release of liability or, for certain sites, release from further liability for early and/or later remediation phases, subject to certain

12

‘‘re-opener’’ clauses for later-discovered conditions. Settlements in respect of some sites involve, in part, payment by the Company and other parties of a percentage of the site’s future remediation costs over a period of years.

The Company believes that the amounts it has paid and anticipates paying in the future for clean-up costs and damages at all sites are not and will not be material to the Company’s financial condition, results of operations or liquidity, because of the involvement of other large potentially responsible parties at most sites, because payment will be made over an extended time period and because, pursuant to an agreement reached in July 1994 with three of the Company’s liability insurers, defense costs and indemnity amounts payable by the Company in respect of the sites will be shared by the insurers up to an agreed amount.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

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PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

(a) Market Information.

The Company's common stock is traded principally on the New York Stock Exchange. The high and low stock prices for each quarter during the last two years were:

				2005								2004
Quarter				High				Low				High				Low
First				$	42.90			$	38.82			$	38.40			$	32.77
Second					41.29				34.90				37.87				34.37
Third					38.85				34.34				39.97				35.24
Fourth					35.72				31.19				43.20				36.12

(b) Approximate Number of Equity Security Holders.

				(B)
(A) Title of Class				Number of record holders as of December 31, 2005
Common stock, par value 12 ½¢ per share					3,207

(c) Dividends.

Cash dividends declared per share for each quarter since January 2004 were as follows:

				2006				2005				2004
First				$	0.185			$	0.175			$	0.160
Second									0.185				0.175
Third									0.185				0.175
Fourth									0.185				0.175

(e) Issuer Purchases of Equity Securities.

				Total Number of Shares Purchased(1)				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Programs(2)				Maximum Dollar Value of Shares that may yet be Purchased under the Programs(3)
October     1-31, 2005					425,000			$	34.60				425,000			$	177,223,565
November 1-30, 2005					—			$	—				—			$	177,223,565
December 1-31, 2005					—			$	—				—			$	177,223,565

(1)	An aggregate of 2,587,000 shares of common stock were repurchased during 2005; 1,941,482 and 645,518 shares of common stock were purchased under repurchase programs announced in July 2004 and May 2005, respectively.

(2)	In July 2004, the Board of Directors approved the repurchase of up to $100.0 million of the Company’s common stock. This program was completed in August 2005.

(3)	In May 2005, the Board of Directors approved the repurchase of up to $200.0 million of the Company’s common stock.

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ITEM 6.    SELECTED FINANCIAL DATA.

INTERNATIONAL FLAVORS & FRAGRANCES INC.
QUARTERLY FINANCIAL DATA (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

																												Net Income Per Share(b)
				Net Sales								Gross Profit								Net Income(a)								Basic								Diluted
Quarter				2005				2004				2005				2004				2005				2004				2005				2004				2005				2004
First				$	523,052			$	535,015			$	214,655			$	228,229			$	52,543			$	56,358			$	0.56			$	0.60			$	0.55			$	0.59
Second					515,578				524,177				216,513				228,461				56,713				56,502				0.60				0.60				0.60				0.59
Third					493,118				506,229				206,406				217,177				68,572				42,305				0.73				0.45				0.72				0.44
Fourth					461,645				468,232				186,827				199,551				15,238				40,906				0.16				0.43				0.16				0.43
				$	1,993,393			$	2,033,653			$	824,401			$	873,418			$	193,066			$	196,071			$	2.06			$	2.08			$	2.04			$	2.05

(a)

Net income in the 2005 third quarter includes a tax benefit of $23,290 relating to the repatriation of $242,000 of dividends from foreign subsidiaries under the provisions of the American Jobs Creation Act of 2004; see Note 10 of the Notes to the Consolidated Financial Statements for further discussion. Net income in the 2005 fourth quarter includes the after-tax effects of certain charges of $15,857. Net income for the 2004 second, third and fourth quarters includes the after-tax effects of certain charges of $5,015, $12,690 and $2,665, respectively. See Note 2 of the Notes to the Consolidated Financial Statements for further discussion.

(b)	The sum of the 2005 quarters’ net income per share does not equal the earnings per share for the full year 2005 due to changes in average shares outstanding.

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INTERNATIONAL FLAVORS & FRAGRANCES INC.
FIVE-YEAR SUMMARY
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

				2005				2004				2003				2002				2001
Consolidated Statement of Income Data
Net sales				$	1,993,393			$	2,033,653			$	1,901,520			$	1,809,249			$	1,843,766
Cost of goods sold					1,168,992				1,160,235				1,092,456				1,035,835				1,063,433
Research and development expenses					179,812				175,173				159,286				144,027				135,248
Selling and administrative expenses					339,323				341,306				308,951				305,156				313,335
Amortization of goodwill and other intangibles					15,071				14,830				12,632				12,632				46,089
Restructuring and other charges(a)					23,319				31,830				42,421				11,737				30,069
Interest expense					23,956				24,002				28,477				37,036				70,424
Other (income) expense, net					(3,268	)			5,275				5,437				(3,591	)			(2,609	)
					1,747,205				1,752,651				1,649,660				1,542,832				1,655,989
Income before taxes on income					246,188				281,002				251,860				266,417				187,777
Taxes on income					53,122				84,931				79,263				90,473				71,775
Net income				$	193,066			$	196,071			$	172,597			$	175,944			$	116,002
Percentage of net sales					9.7				9.6				9.1				9.7				6.3
Percentage of average shareholders' equity					21.1				23.7				26.2				32.0				20.1
Net income per share – basic				$	2.06			$	2.08			$	1.84			$	1.86			$	1.21
Net income per share – diluted				$	2.04			$	2.05			$	1.83			$	1.84			$	1.20
Average number of shares (thousands)					93,584				94,143				93,718				94,511				95,770
Consolidated Balance Sheet Data
Cash and short-term investments				$	272,897			$	32,995			$	12,555			$	15,165			$	48,905
Receivables, net					368,519				358,361				339,725				338,607				340,358
Inventories					430,794				457,204				454,631				421,603				415,984
Property, plant and equipment, net					499,145				501,334				510,612				520,499				532,473
Goodwill and intangible assets, net					772,651				789,676				799,413				794,079				795,920
Total assets					2,638,196				2,363,294				2,306,892				2,232,694				2,268,051
Bank borrowings, overdrafts and
current portion of long-term debt					819,392				15,957				194,304				49,663				227,945
Long-term debt					131,281				668,969				690,231				1,007,085				939,404
Shareholders' equity					915,347				910,487				742,631				574,678				524,170
Other Data
Current Ratio					1.0				2.4				1.7				2.4				1.6
Gross additions to property, plant and equipment				$	93,433			$	70,607			$	65,955			$	81,815			$	52,016
Depreciation and amortization expense					91,928				90,996				86,721				84,458				123,493
Cash dividends declared					68,397				64,789				59,032				56,749				57,219
per share				$	0.730			$	0.685			$	0.630			$	0.600			$	0.600
Number of shareholders of record at year-end					3,207				3,419				3,655				3,875				3,394
Number of employees at year-end					5,160				5,212				5,454				5,728				5,929

(a)	Restructuring and other charges ($15,857 after tax) in 2005, ($20,370 after tax) in 2004, ($27,514 after tax) in 2003,

($7,745 after tax) in 2002 and ($19,101 after tax) in 2001 as a result of various reorganization programs of the Company.

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ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

Organization of Information

Management's Discussion and Analysis provides a narrative on the Company's operating performance, financial condition and liquidity and should be read in conjunction with the accompanying financial statements. It includes the following sections:

•	Executive Overview

•	Sales Commentary

•	Operating Results

•	Acquisitions and Divestitures

•	Restructuring and Other Charges

•	Financial Condition

•	Market Risk

•	Critical Accounting Policies and Use of Estimates

•	New Accounting Standards

•	Non-GAAP Financial Measures

•	Cautionary Statement Under the Private Securities Litigation Reform Act of 1995

Executive Overview

The Company is a leading creator and manufacturer of flavor and fragrance compounds used to impart or improve the flavor or fragrance in a wide variety of consumer products. The precise size of the global market for flavors and fragrances is difficult to determine because the industry is highly fragmented, both geographically and along product lines; there are few publicly traded companies in the industry; certain customers maintain in-house capabilities fulfilling a portion of their flavor or fragrance needs; and the quality and depth of market information in developing regions of the world is limited. Analysts generally estimate the global market to be $11 - $12 billion of which IFF represents 16 - 18%; the Company's nearest sized competitor is of similar size. The five largest companies in the industry combined represent approximately 65 - 70% of the global market.

Fragrance compounds are used in perfumes, cosmetics, toiletries, hair care products, deodorants, soaps, detergents and softeners as well as air care products. Major fragrance customers include the cosmetics industry, including perfume and toiletries manufacturers, and the household products industry, including manufacturers of soaps, detergents, household cleaners and air fresheners. Flavor products are sold to the food and beverage industries for use in consumer products such as prepared foods, beverages, dairy, food and confectionery products. The Company is also a leading manufacturer of synthetic ingredients used in making fragrances. Approximately 60% of the Company's ingredient production is consumed internally; the balance is sold to third party customers.

Changing social habits resulting from such factors as increases in personal income and dual-earner households, leisure time, health concerns, urbanization and population growth stimulate demand for consumer products utilizing flavors and fragrances. These developments expand the market for products with finer fragrance quality, as well as the market for colognes and toiletries. Such developments also stimulate demand for convenience foods, soft drinks and low-fat food products that must conform to expected tastes. These developments necessitate the creation and development of flavors and fragrances and ingredients that are compatible with newly introduced materials and methods of application used in consumer products.

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Flavors and fragrances are generally:

	•	created for the exclusive use of a specific customer;

	•	sold in solid or liquid form, in amounts ranging from a few pounds to several tons depending on the nature of the end product in which they are used;

	•	a small percentage of the volume and cost of the end product sold to the consumer; and

	•	a major factor in consumer selection and acceptance of the product.

Flavors and fragrances have similar economic and operational characteristics, including research and development, the nature of the creative and production processes, the manner in which products are distributed and the type of customer; many of the Company’s customers purchase both flavors and fragrances.

A breakdown of sales by principal product category is depicted in the graph below.

2005 Sales by Category

The Company's five largest customers comprise 32% of consolidated sales and its top thirty customers 56%; these percentages have remained fairly constant for several years. No customer accounts for 10% or more of sales. A key factor for success is inclusion on major customers' core supplier lists opening opportunities to win new business. The Company is currently on the majority of core supplier lists of its major customers; participation in such lists is key to the Company’s strategy for growth.

The flavor and fragrance industry is impacted by macroeconomic factors in all product categories and geographic regions. In addition, pricing pressure placed on the Company's customers by large and powerful retailers and distributors is inevitably passed along to the Company and its competitors. Leadership in innovation and creativity mitigates, to an extent, the impact of pricing pressure. Success and growth in the industry is dependent upon creativity and innovation in meeting the many and varied needs of the customers' products in a cost-efficient and effective manner, and with a consistently high level of timely service and delivery.

The Company produces more than 33,000 unique compounds, of which approximately 60% are flavors and 40% fragrances. The Company continually creates new compounds to meet the changing characteristics and needs of its customers' end products. No single compound represents more than 1.5% of net sales. Development of fragrances and flavors is a complex artistic and technical process calling upon the combined knowledge and talents of creative perfumers and flavorists, and application and research chemists. An important contribution to the creation of new fragrances and flavors is the development of new ingredients. The Company bears essentially all costs incurred in connection with the creation and development of new flavors and fragrances and such formulae are generally protected under trade secrecy. The Company is not materially dependent on any patents, trademarks or licenses.

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The Company's recent strategic focus has been:

	•	To integrate Bush Boake Allen Inc. (‘‘BBA’’), acquired in November 2000, and to reorganize the integrated organization under two global umbrellas of Business Development and Operations. Business Development encompasses consumer and market research, product category strategy, product development, global sales and marketing and technical application. Operations are responsible for the customer supply chain.

	•	To improve customer service, in terms of both on-time deliveries and responsiveness to new product development initiatives, and to improve the win rate for new business with the Company's customers.

	•	To critically evaluate the profitability and growth potential of the Company's product portfolio, and to focus on those categories and customers considered to be the best opportunities for long-term profitable growth.

	•	To focus research and development initiatives on those areas considered to be most likely, in the long-term, to yield the greatest value to the Company's customers and shareholders.

In the Company’s view, considerable progress against these strategic initiatives has been achieved. The BBA integration was completed quickly and associated savings exceeded those anticipated at the time the acquisition was announced. Customer service levels have improved to the point where on time deliveries exceed the 95% level, with further improvement targeted. The Company has exited certain non-core businesses, the last of which was sold in 2004. The quality and depth of the Company's research and development efforts have improved significantly. In the period 2003 - 2005, the Company patented numerous new, commercially-viable ingredients for use in flavors and fragrances; fifteen were patented in 2003, nine in 2004 and fifteen in 2005. A number of these newly developed ingredients have been used in flavor and fragrance compounds, and in 2006 new ingredients and technologies are expected to play an important role in meeting the Company’s growth objectives.

Moving forward, the Company is committed to:

	•	Research and development efforts in those aspects of flavors and fragrances and associated delivery mechanisms which the Company has identified as most likely to drive profitable future growth. The Company anticipates that much of this research will be conducted internally, but such efforts may be augmented by joint research undertakings and through acquisition of technology. An essential aspect of the overall research efforts is the Company’s continued leadership in sensory science and consumer insight, enabling the creation of consumer-preferred flavors and fragrances.

	•	The quality, safety and suitability of its products for inclusion in its customers’ end products; an essential element is the consistent assurance of the quality and safety of raw materials through a combination of steps including but not limited to vendor certification and quality assurance testing.

	•	Continuous improvement in operations and customer service supported by the global implementation of the enterprise requirements planning software package (‘‘SAP’’), and related initiatives.

As implementation of the strategy progresses, setting strategic initiatives requires regular establishment and reassessment of identified priorities and necessitates choices in order to provide the best opportunity for continuous improvement in shareholder value.

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Sales Commentary

Net sales for 2005, 2004 and 2003 were as follows:

								Percent Change								Percent Change
Net Sales				2005								2004								2003
Flavors				$	857.7				(6	)%		$	910.6				5	%		$	866.5
Fragrances					1,135.7				1	%			1,123.1				9	%			1,035.0
Total net sales				$	1,993.4				(2	)%		$	2,033.7				7	%		$	1,901.5

The Company manages its operations by major geographical region and considers destination sales a key performance measure. Although reported sales and earnings are affected by the weakening or strengthening of the U.S. dollar, this has not had a long-term effect on the underlying strength of the Company's business.

2005 Sales by Destination

The Company acquired BBA effective November 3, 2000. In conjunction with the integration of BBA, and as part of restructuring the Company, certain non-core businesses (hereinafter referred to as the ‘‘non-core businesses’’) were disposed of including the fruit preparations businesses in Europe, North and Latin America; the North American concentrates business and a portion of the aroma chemicals business acquired in the BBA transaction. The non-core businesses were disposed of in a series of transactions with third parties; disposal of these businesses did not materially impact the Company's operating results. The North American concentrates business was disposed of in 2002 and the European fruit preparation business in 2004; the other non-core businesses were disposed of in 2001.

The following table summarizes reported sales on a geographic basis and reflects adjustments, as appropriate, to exclude sales attributable to the non-core businesses; adjusted sales are the basis on which the Company measures its operating performance:

								Percent Change								Percent Change
Sales by Destination				2005								2004								2003
North America				$	571.7				(4	)%		$	598.6				9	%		$	550.1
Europe					739.0				(6	)%			790.3				4	%			761.7
Asia Pacific					348.1				2	%			342.9				10	%			311.9
Latin America					262.4				10	%			238.6				7	%			223.6
India					72.2				14	%			63.3				17	%			54.2
Total net sales, as reported				$	1,993.4				(2	)%		$	2,033.7				7	%		$	1,901.5
Less: European fruit preparations					—				—				(58.3	)			—				(92.3	)
Total net sales, as adjusted				$	1,993.4				1	%		$	1,975.4				9	%		$	1,809.2

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Net sales below are adjusted to exclude all sales associated with the non-core businesses:

				As Adjusted 2005				Percent Change				As Adjusted 2004				Percent Change				As Adjusted 2003
Net Sales
Flavors				$	857.7				1	%		$	852.3				10	%		$	774.2
Fragrances					1,135.7				1	%			1,123.1				9	%			1,035.0
Total net sales, as adjusted				$	1,993.4				1	%		$	1,975.4				9	%		$	1,809.2

2005 in Comparison to 2004

In 2005, reported sales declined 2% in dollars and 3% in local currency compared to 2004. The sales performance was led by strong growth in fine fragrances driven mainly by new product wins. Flavor sales comparisons in 2005 were impacted by the disposition, in the second half of 2004, of the Company’s European fruit preparations business. On an as-adjusted basis, excluding sales attributable to the fruit business from 2004 results, both 2005 consolidated sales and flavor sales would have increased 1% in dollars and been flat in local currency. Flavor sales, most notably in North America and Europe, were also unfavorably impacted by lower selling prices for naturals, mainly vanilla.

Regional sales performance for 2005 was as follows:

	•	North America fragrance and flavor sales declined 1% and 7%, respectively; in total, regional sales declined 4%. Fine fragrance and aroma chemical sales increased 4% and 3%, respectively, while functional fragrance sales declined 8%. Fine fragrance growth resulted from $14.5 in new wins, although this growth was partially offset by erosion of existing products of $10.2. Functional fragrance sales realized new wins of $10.2 though such growth was offset by erosion in existing products of $20.5. Flavors reported new product introductions of $21.3 partially offset by erosion in existing products of $18.6.

	•	Europe sales declined 6% in dollars and 8% in local currency; reported dollar sales benefited from the strength of the Euro and the Pound Sterling versus the U.S. dollar. Fragrance sales increased 2% in dollars and were flat in local currency. Local currency fine fragrance sales increased 13%, driven primarily by new wins, while functional fragrances and aroma chemicals declined 6% and 7%, respectively. Flavor sales declined 18% in dollars and 19% in local currency, mainly as a result of the disposition of the fruit preparations business. On an as-adjusted basis, excluding sales attributable to the fruit business from 2004 results, 2005 flavor sales would have been flat in dollars and decreased 1% in local currency.

	•	Asia Pacific sales increased 2% in dollars and 1% in local currency; flavor sales increased 4% in dollars and 3% in local currency, while fragrance sales declined 2% in both dollars and local currency. Flavor sales were strongest in Greater China, Indonesia and Vietnam, with respective local currency increases of 15%, 7% and 46%; flavor growth was driven by new wins of $4.5. Fragrance sales growth was strongest in Taiwan, South Korea, Vietnam and the Philippines with respective local currency increases of 16%, 16%, 56% and 8%; this growth was offset by local currency sales declines in Australia, Thailand and Singapore/Malaysia of 12%, 17% and 16%, respectively. Fragrance wins in the region totaled $2.9.

	•	Latin American sales increased 10% with fragrance and flavor sales increasing 7% and 21%, respectively. Flavor sales were strongest in Mexico, Brazil and Argentina, which grew 33%, 27% and 22%, respectively, while fragrances were led by an 8% increase in Mexico and increases of 12% in Argentina and 7% in Brazil. Fragrance sales grew in all categories with functional fragrance sales increasing 7% while fine fragrance and aroma chemicals increased 4% and 7%, respectively. The performance was driven mainly by new wins of $17.7 in fragrances and $9.2 in flavors.

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	•	India sales increased 14% in both local currency and reported dollars. This performance was led by a 16% local currency increase in flavor sales with fragrance sales increasing 12%. In both flavors and fragrances, the sales performance reflected the benefit of new wins and continued strong economic conditions.

2004 in Comparison to 2003

In 2004, reported sales increased 7%. Reported sales benefited from the strengthening of various currencies in relation to the U.S. dollar; had exchange rates remained constant, sales would have increased 2% in comparison to the prior year. Reported sales were strongest in fragrances, led by a 13% increase in fine fragrance sales; sales of aroma chemicals and fragrances used in functional products each increased 7%. The sales performance was impacted by the disposition of the Company’s European fruit preparations business, which was sold to Frutarom Industries Ltd. (‘‘Frutarom’’) in the second half of the year. On an as-adjusted basis, excluding sales attributable to the European fruit businesses from the 2004 and 2003 results, consolidated sales would have increased 5% in local currency and 9% in reported dollars.

Flavor and fragrance sales increased in all geographic regions, although growth in Europe resulted from currency translation; sales performance by region was as follows:

	•	North America fragrance sales grew 9% while flavor sales increased 8%; the region grew 9%, mainly driven by new wins. Fragrance sales increased in all categories, led by a 20% increase in aroma chemical sales, while fine and functional fragrance sales increased 6% and 7%, respectively. The aroma chemical sales increase was volume driven while growth in fine fragrances resulted from $7.0 in new wins. Functional fragrance sales realized new wins of $16.0, partially offset by erosion in existing products of $6.0. Flavors reported new product introductions of $30.0, partially offset by volume and erosion in existing products.

	•	European fragrance sales increased 8%, although this performance was partially offset by a 2% decline in flavor sales; in total, regional sales increased 4%. Reported sales benefited from the strength of the Euro and Pound Sterling; local currency sales declined 5%. Local currency fragrance sales declined 2%; fine fragrance sales increased 5% offset by a 1% decrease in sales of functional fragrances and a 10% decline in aroma chemical sales. The fine fragrance performance was driven by a number of new product wins. Fine and functional fragrances reported new product introductions of $40.0, partially offset by the effects of erosion in existing products. Local currency flavor sales declined 10%, mainly as a result of the disposition of the fruit preparations business. On an as-adjusted basis, excluding sales attributable to the fruit business for 2004 and 2003, flavor sales would have increased 11% in dollars and 2% in local currency, mainly due to new wins.

	•	Reported sales in Asia Pacific increased 10%, based on 6% sales growth in local currency; the currency benefit was mainly attributable to the strength of the Japanese Yen and the Australian dollar. Local currency fragrance sales increased 3% in comparison to the prior year, resulting in a 7% increase in reported dollars, driven mainly by new wins of $6.0. Local currency flavor sales increased 7%, resulting in a 13% increase in reported dollars. The performance reflects the benefit of both new wins and volume increases in existing products. For the region, sales growth was strongest in Greater China, Vietnam, Indonesia and Taiwan, with respective local currency increases of 17%, 47%, 9% and 8%, while Japan sales grew 3%.

	•	Latin American sales increased 7%; fragrance and flavor sales increased 9% and 3%, respectively. Sales growth was strongest in Venezuela, Central America, Argentina and Colombia which grew 33%, 15%, 12% and 9%, respectively. Fragrance sales were led by a 23% increase in aroma chemicals, while sales of fine and functional fragrances increased 12% and 6%, respectively. Fragrance sales were driven by new wins and volume increases while the flavor increase was mainly volume driven.

	•	India sales increased 15% in local currency and 17% in reported dollars. Local currency fragrance sales increased 12%, resulting in a 16% increase in reported dollars. Flavor sales increased 18% in local currency, resulting in a 19% increase in reported dollars. In both flavors and fragrances, the sales performance reflected the benefit of new wins.

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Operating Results

The percentage relationship of cost of goods sold and other operating expenses to reported sales is detailed in the following table.

				2005				2004				2003
Cost of goods sold					58.6	%			57.1	%			57.5	%
Research and development expenses					9.0	%			8.6	%			8.4	%
Selling, general and administrative expenses					17.0	%			16.8	%			16.2	%

Cost of goods sold includes the cost of materials and manufacturing expenses; raw materials generally constitute 70% of the total. Research expenses are for the development of new and improved products, technical product support, compliance with governmental regulations, and help in maintaining relationships with customers who are often dependent on technological advances. Selling, general and administrative expenses support the Company's sales and operating levels.

Segment profit, which excludes the effect of restructuring and other charges, was $290.2 in 2005, $342.1 in 2004 and $328.2 in 2003. The Company recorded restructuring and other charges of $23.3, $31.8 and $42.4 in 2005, 2004 and 2003, respectively. Operating profit totaled $266.9, $310.3 and $285.8 in 2005, 2004 and 2003, respectively.

2005 in Comparison to 2004

Cost of goods sold, as a percentage of sales, increased 150 basis points compared with 2004, mainly due to higher raw material costs which the Company was not able to fully recover through increased selling prices; overall, the average cost of raw materials purchased by the Company increased 5% – 6% in comparison to the prior year. Gross margin was also negatively impacted by costs attributable to a vendor-supplied raw material contamination issue; cost of sales include $3.0 in related costs, comprised mainly of associated testing costs and the write-off of affected materials. Cost of goods sold was also impacted by lower expense absorption attributable to the facility closure in Dijon and the cost of transfer of related production to other manufacturing locations; production at the Dijon facility ceased in March 2005.

Research and Development (‘‘R&D’’) expenses increased to 9.0% of sales, consistent with the Company’s stated intention to expand its research initiatives; spending in 2006 is expected to remain at approximately 9.0% of sales.

Selling, General and Administrative (‘‘SG&A’’) expenses, as a percentage of sales, increased to 17.0% from 16.8%. SG&A expenses include $8.5 million related to the cost of customer damages attributable to the raw material contamination issue. The Company is seeking full indemnification from its supplier, the supplier’s insurers and, to the extent necessary, its own insurers, but no related insurance receivable has been recorded. SG&A expenses also include $5.1 in equity compensation expense compared to $5.0 million in the prior year. These costs were partially offset by lower accruals under the Company’s various incentive plans.

In 2005, cost of goods sold and SG&A include $2.2 and $4.5, respectively, incurred in connection with the implementation of SAP; these costs relate to training and data conversion and are charged to operating expenses as incurred. Implementation of SAP is essentially complete at December 31, 2005.

2004 in Comparison to 2003

Cost of goods sold, as a percentage of sales, declined 40 basis points compared with 2003. The improvement resulted from a combination of improved sales performance, and better product mix from improved fine fragrance sales and the disposition of the lower margin European fruit business. The Company benefited from the elimination of 48 manufacturing positions in North America and Europe which resulted in savings of approximately $2.1. The above benefits were partially offset by poor operating performance by the European fruit business for the period of time owned by the Company, and by weak absorption of expenses resulting from the transfer of production from the Company’s facility in Dijon, France to other manufacturing plants.

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R&D expenses increased to 8.6% of sales, as the Company continued to expand its research initiatives. This increase is mainly as a result of the elimination of the fruit preparations business; relative to other parts of the Company’s business, fruit preparations required less R&D as a percentage of sales.

SG&A expenses, as a percentage of sales, increased to 16.8% from 16.2%; mainly from inclusion of $5.0 in equity compensation expense for which there was no comparable amount in the 2003 results, and higher expense accruals under the Company’s incentive compensation plans, based on sales and operating performance. The increase in Global Expenses, as reported in Note 13 of the Notes to the Consolidated Financial Statements, mainly related to these expenses. In May 2004, the Company began using Restricted Stock Units (‘‘RSU’s’’), rather than stock options, as an element of the Company’s incentive compensation plans for all eligible U.S. - based employees and a majority of eligible overseas employees; previously, options had not been expensed as permitted under applicable accounting guidance. Vesting of the RSU’s for senior management is performance and time based; for the remainder of eligible employees, vesting is time based (generally over a three-year period).

In 2004, cost of goods sold and SG&A include $1.4 and $3.8, respectively, incurred in connection with the implementation of SAP.

Interest Expense

Interest expense totaled $24.0, $24.0 and $28.5 in 2005, 2004 and 2003, respectively. The average interest rate was 3.3%, 3.2% and 3.0% in 2005, 2004 and 2003, respectively. Gross borrowings at December 31, 2005 increased in comparison to the prior year in connection with repatriation of foreign earnings under the American Jobs Creation Act of 2004 (‘‘AJCA’’). More information on debt and interest rate management is contained in Note 9 and Note 15 of the Notes to the Consolidated Financial Statements.

Other (Income) Expense, Net

Other (income) expense, net was $3.3 income in 2005, $5.3 expense in 2004 and $5.4 expense in 2003. In 2005, income resulted primarily from exchange gains and higher levels of interest income earned on higher cash balances. Exchange gains or (losses) were $2.8, ($2.9) and $1.6 in 2005, 2004 and 2003, respectively. The exchange losses in 2004 were mainly the result of the Company having U.S. dollar positions in Europe and Latin America which resulted in exchange losses upon the weakening of the U.S. dollar in comparison to the Euro and other currencies. In 2003, the Company repurchased $200.7 of long-term notes otherwise scheduled to mature in May 2006; purchases were made through a series of open market transactions, funded with commercial paper. As a result, the Company incurred a net loss of $4.2 which is included in Other (income) expense, net.

Income Taxes

The effective tax rate for 2005 was 21.6%, compared to 30.2% for 2004 and 31.5% for 2003. The 2005 rate was significantly reduced as a result of a tax benefit associated with the AJCA. The AJCA, enacted on October 22, 2004, provided for a special one-time tax deduction of 85% of dividends received on eligible repatriated foreign earnings; the deduction resulted in an approximate 5.25% federal tax rate on these earnings. Full year 2005 results include a net tax benefit of $24.7 relating to the Company's repatriation of $242.0 million of dividends from foreign subsidiaries under the provisions of AJCA. Excluding the benefit of AJCA, the effective tax rate for 2005 would have been 31.6%.

The fluctuating rate over the three-year period is primarily the result of tax planning initiatives and the benefit of combining various IFF and BBA legal entities into a single tax structure. In the period 2003 - 2005, the tax rate also benefited from restructuring and other charges, most of which were incurred in higher tax jurisdictions.

Acquisitions and Divestitures

In 2004, the Company sold its European fruit preparations business which manufactured processed fruit and other natural product preparations used in a variety of food products. Sales of

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fruit preparations in 2004, 2003 and 2002 were $58.3, $92.3 and $72.2; operating profit was $5.6, $12.4 and $6.3, respectively. Proceeds from the sale were $40.0, including assumption of certain liabilities; cash proceeds were used to reduce borrowings.

In 2003, the Company acquired 70% of the outstanding shares of Celessence International Ltd. (‘‘Celessence’’), a company engaged in the development and distribution of encapsulation and delivery systems for use in fragrance and other applications, for $6.4. The acquisition was accounted for as a purchase business combination. The principal Celessence asset is a process technology patent included in other intangible assets that is being amortized over its estimated remaining useful life. Celessence results, which are not material, are included in the consolidated results of the Company from acquisition date.

Movements in acquisition accounting accruals were:

				Employee- Related				Asset-Related and Other				Total
Balance January 1, 2003				$	6.0			$	1.1			$	7.1
Cash and other costs					(3.6	)			(1.1	)			(4.7	)
Balance December 31, 2003					2.4				—				2.4
Cash and other costs					(2.4	)			—				(2.4	)
Balance December 31, 2004				$	—			$	—			$	—

At December 31, 2005 and 2004, goodwill and other intangible assets, net of accumulated amortization, totaled $772.7 and $789.7, respectively. The Company completed its annual assessments in 2005, 2004 and 2003, concluding that it has no impairment of goodwill or other intangible assets. Additional details are contained in Note 5 of the Notes to the Consolidated Financial Statements.

Restructuring and Other Charges

Since 1999, the Company has undertaken a series of actions associated with the closure of Company facilities and elimination of various employee positions. As an element of this program, the Company offered a voluntary early retirement incentive to certain U.S. - based employees in the fourth quarter of 1999 with notification of acceptance in the first quarter of 2000; 71 employees accepted, resulting in pre-tax charges of $9.3 in 2000.

In mid-2000, senior management changed, after which the Company conducted a comprehensive analysis of its business development, research and development, and operating activities and associated staffing levels. In October 2000, the Company announced a significant reorganization entailing the elimination of multiple layers of management, closure of certain manufacturing facilities to improve capacity utilization, and the intended disposal of certain non-core businesses. The integration of BBA into IFF and the reorganization proceeded concurrently.

An element of the reorganization was a second voluntary early retirement program extended to U.S. - based employees, which 85 employees accepted, resulting in pre-tax charges of $14.5. An additional 41 employees were terminated by eliminating duplicate management positions at corporate, regional and affiliate locations, resulting in the Company recording pre-tax charges of $17.5. In 2000, a total of 197 employees were severed and the Company recorded pre-tax charges totaling $41.3, comprised of:

	•	The first early retirement plan – $9.3;

	•	The second early retirement plan – $14.5; and

	•	Other reorganization costs – $17.5.

During 2001, the Company sold its fruit preparation business in the United States and Brazil and closed IFF operations in Hong Kong, South Africa, Chile, Venezuela, Kenya, Texas and Oregon. As a result, 465 employees were severed and the Company recorded pre-tax charges totaling $30.1; $10.1 related to employee terminations and $20.0 related to location closures and asset write-downs.

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During 2002, the Company closed IFF operations in Australia, discontinued fragrance compounding in Japan and sold its fruit concentrate business. As a result, 148 employees were severed and the Company recorded pre-tax charges of $11.7; $4.3 related to employee severance and $7.4 related to location closures and asset write-downs.

In 2003, the Company further eliminated duplicate employment functions and processes, including several senior corporate positions as well as at global, regional and local levels. The Company eliminated 321 positions and recorded pre-tax charges of $42.4; $38.0 related to employee terminations and $4.4 related to location closures and asset write-downs. The 2003 asset-related charges related principally to final quantification of costs for previous actions taken.

In 2004, the Company disposed of its European fruit preparations business. In addition, the Company closed its Canadian manufacturing facility and committed to the closure of its manufacturing facility in Dijon, France; the Dijon facility closed in 2005, on completion of transfer of production to other plants. As a result, the Company eliminated 302 positions, and recognized pre-tax charges of $31.8, of which $25.8 related to employee terminations and $6.0 to location closures and asset write-downs, and other related reorganization actions; the asset-related charges were net of gains of $16.3 related to the sale of the fruit businesses and Canadian facility. An additional 129 employees left the Company in 2005 on closure of the Dijon facility.

In 2005, the Company undertook to eliminate approximately 300 positions in manufacturing, selling, research and administration functions, principally in its European and North American operating regions. The majority of affected positions involve employee separation while the balance relates to open positions that will not be filled. As a result of these actions, the Company anticipates recording pre-tax restructuring charges of $25 million to $30 million relating primarily to employee separation expenses; $23.3 million was recognized in 2005. The remaining charges are expected to be recognized in 2006. Annual savings from these actions are expected to approximate $16 million to $18 million.

With respect to all restructuring and other charges:

	•	Separation costs for the employees relate primarily to severance, outplacement and other benefit costs;

	•	Asset write-down charges relate to establishment of the new carrying value for assets held for sale or disposal; and

	•	Other costs include lease termination costs and other reorganization expenses incurred to affect either the employee separation or location closure.

The charges above exclude all charges associated with the integration of BBA where such costs were incurred in connection with the closure of BBA facilities or the elimination of BBA employees.

In Europe, the total reductions include 194 positions eliminated with the sale of the Fruit business in 2004 and, in 2005 the elimination of 129 positions related to the closure of the Dijon facility. Positions eliminated by region in each of the three years in the period ended December 31, 2005 were as follows.

				2005				2004				2003
North America					140				56				81
Europe					261				234				97
Asia Pacific					22				11				120
Latin America					4				1				19
India					2				—				4
Total					429				302				321

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Charges by region in each of the three years in the period ended December 31, 2005 were:

				2005				2004				2003
North America				$	10.0			$	7.6			$	20.2
Europe					10.6				23.5				16.9
Asia Pacific					1.2				0.7				3.6
Latin America					0.5				—				1.3
India					1.0				—				0.4
Total				$	23.3			$	31.8			$	42.4

Movements in related accruals in each of the three years in the period ended December 31, 2005 were:

				Employee- Related				Asset-Related and Other				Total
Balance January 1, 2003				$	3.4			$	0.4			$	3.8
Additional charges					38.0				4.4				42.4
Cash and other costs					(21.8	)			(3.3	)			(25.1	)
Balance December 31, 2003					19.6				1.5				21.1
Additional charges					25.8				22.3				48.1
Cash and other costs					(17.2	)			(8.9	)			(26.1	)
Balance December 31, 2004					28.2				14.9				43.1
Additional charges					22.0				1.3				23.3
Cash and other costs					(20.7	)			(11.3	)			(32.0	)
Balance December 31, 2005				$	29.5			$	4.9			$	34.4

The 2004 asset-related charges exclude gains of $16.3 arising on the sale of the fruit businesses and Canadian facility; such gains were accounted for in determining Restructuring and other charges of $31.8 reported in 2004.

The employee-related liabilities are expected to be utilized by 2008 as obligations are satisfied; asset-related charges are expected to be utilized in 2007 on final decommissioning and disposal of affected equipment.

Financial Condition

Cash, cash equivalents and short-term investments totaled $272.9 at December 31, 2005 compared to $33.0 and $12.6 at December 31, 2004 and 2003, respectively. The cash balance at December 31, 2005 increased as a result of the repatriation of funds under AJCA. Working capital totaled ($11.4) at year-end 2005, compared to $561.8 and $376.6 at December 31, 2004 and 2003, respectively. The change in 2005 relates primarily to an increase in current debt due to the maturity in May 2006 of the $499.3 in 6.45% Notes. Gross additions to property, plant and equipment were $93.4, $70.6 and $66.0 in 2005, 2004 and 2003, respectively, and are expected to approximate $70.0 in 2006.

At December 31, 2005, the Company had $950.7 of debt outstanding, including $7.9 in deferred gains and mark-to-market adjustments on interest rate swap transactions. Debt, excluding the deferred swap gains, includes $499.2 of 6.45% Notes maturing in May 2006, $314.6 in bank borrowings and overdrafts and $129.0 in long-term Japanese Yen denominated debt. The Company is developing plans for both short-term financing and the potential issuance of additional long-term instruments on maturity of the Notes.

In 2005, the Company and certain of its subsidiaries entered into a revolving credit agreement (the "Agreement" or the ‘‘Facility’’) with certain banks which replaced existing credit facilities. The Agreement provides for a five-year US $350,000,000 (‘‘Tranche A’’) and Euro 400,000,000 (‘‘Tranche B’’) multi-currency revolving credit facility. Tranche A is available for commercial paper backstop and general corporate purposes; Tranche B is available to European subsidiaries for general corporate

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purposes. Borrowings under the Facility bear interest at an annual rate of LIBOR (London Inter Bank Offer Rate) (or in relation to any Euro-denominated loans, EURIBOR, European Inter Bank Offer Rate) plus a margin, currently 20 basis points, linked to the credit rating of the Company. The Company pays a commitment fee on the aggregate unused commitments and a utilization fee based on amounts outstanding under the Facility; such fees are not material. The Facility contains various affirmative and negative covenants customary in a facility of this type, including a covenant requiring the Company to maintain, at the end of each fiscal quarter, a ratio of net debt for borrowed money to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) in respect of the previous 12-month period of not more than 3.25 to 1. The Company has complied with this covenant at all times.

Unless extended, the Agreement will expire on November 22, 2010. The Company may request an extension of the Facility for up to two years beyond the original term. In the event of default, the lenders may terminate the Agreement and declare any principal amount then outstanding and all accrued interest, fees and other amounts payable under the Agreement to be immediately due and payable. Defaults under the Agreement which could result in the acceleration by the lenders of the obligations of the Company Parties include a change of control of the Company (as defined in the Facility Agreement) and certain acquisitions made in contemplation of a merger where, as a direct result of the acquisition, the public debt rating of the Company quoted by Moody’s or S&P (including any change in terms of its outlook) is a lower rating than its public debt rating immediately prior to such acquisition.

In July 2004 and May 2005, the Company’s Board of Directors authorized share repurchase programs of $100.0 and $200.0, respectively. Under various programs, the Company repurchased 2.6 million shares in 2005 and 1.8 million shares in each of 2004 and 2003, at a cost of $98.3, $66.5 and $55.4, respectively. Average per share cost of shares acquired in 2005, 2004 and 2003 was $38.01, $36.89 and $31.66, respectively. The Company completed the July 2004 repurchase plan in August 2005 and as of December 31, 2005 had repurchased approximately 0.6 million shares under the May 2005 plan. At December 31, 2005, the Company had $177.2 remaining under the May 2005 plan, representing approximately 5.1 million shares based on a stock price of $35.00 per share. Repurchased shares will be available for use in connection with the Company’s employee benefit plans and for other general corporate purposes.

The dividend paid per share in 2005, 2004 and 2003 was $.72, $.67 and $.62, respectively. In January and April 2005, the Company paid a quarterly cash dividend of $.175 per share to shareholders. In May 2005, the Board of Directors increased the annual dividend by 5.7% to $.74 per share effective with the dividend paid in July 2005. The Company paid dividends totaling $67.8, $63.2 and $58.2 in 2005, 2004 and 2003. The Company's current intention is to pay dividends approximating 30 - 35% of yearly earnings; however, the payment of dividends is determined by the Board in its discretion based on various factors.

The cumulative translation adjustment component of Accumulated other comprehensive income was ($47.4) at December 31, 2005, compared to $8.2 at December 31, 2004. The change results principally from the strengthening of the U.S. dollar against the Euro, the Japanese Yen and the Australian dollar during 2005. The Minimum pension liability adjustment component of Accumulated other comprehensive income was ($100.4) at December 31, 2005, compared to ($110.7) at December 31, 2004. The accumulated loss on derivatives qualifying as hedges was ($2.6) at December 31, 2005 compared to ($5.7) at December 31, 2004.

Compliance with existing governmental requirements regulating the discharge of materials into the environment has not materially affected the Company's operations, earnings or competitive position. In 2005, the Company spent $20.4 on capital projects and $14.7 in operating expenses and governmental charges for the purpose of complying with such regulations. Expenditures for these purposes will continue for the foreseeable future. In addition, the Company is party to a number of proceedings brought under the Comprehensive Environmental Response, Compensation and Liability Act or similar state statutes. It is expected that the impact of any judgments in or voluntary settlements of such proceedings will not be material to the Company's financial condition, results of operations or liquidity.

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At December 31, 2005, the Company has contractual payment obligations due within the time periods as specified in the following table:

				Payments Due
Contractual Obligations				Total				2006				2007-2008				2009-2010				2011 and thereafter
Borrowings(1)				$	680.0			$	551.0			$	113.4			$	—			$	15.6
Interest on borrowings(1)					31.5				24.2				6.0				0.9				0.4
Operating leases(2)					309.6				21.7				38.2				30.8				218.9
Purchase commitments(3)					13.9				13.7				0.2				—				—
Pension funding obligations(4)					49.1				24.8				5.4				5.4				13.5
Post-retirement obligations(4)					48.8				3.9				8.3				9.1				27.5
Total				$	1,132.9			$	639.3			$	171.5			$	46.2			$	275.9

(1)	See Note 9 of the Notes to the Consolidated Financial Statements for a further discussion of the Company’s various borrowing facilities.

(2)	Operating leases include facility and other lease commitments executed in the normal course of the business. Additional details concerning the United States facilities are contained in Note 8 of the Notes to the Consolidated Financial Statements and further details concerning worldwide aggregate operating leases are contained in Note 17 of the Notes to the Consolidated Financial Statements.

(3)	Purchase obligations and capital project commitments not recorded on the Company’s consolidated balance sheet.

(4)	See Note 14 of the Notes to the Consolidated Financial Statements for a further discussion of the Company’s retirement plans. Anticipated funding obligations are based on current actuarial assumptions. Funding requirements reported in the above table do not extend beyond 2015.

The Company anticipates that all financing requirements will be funded from operations and credit facilities currently in place. Cash flows from operations or credit facilities are currently expected to be sufficient to fund the Company's anticipated capital spending, dividends and other requirements for the next 12 - 18 months. The Company currently anticipates reducing borrowings by approximately $200.0 in 2006. In comparison, borrowings were reduced by approximately $185.0 and $145.0 in 2004 and 2003, respectively.

Market Risk

The Company is exposed to market risk from foreign currency exchange rates, interest rates and commodity price fluctuations. The Company evaluates and manages volatility relating to these exposures on a global basis to take advantage, where applicable, of netting opportunities that may exist. Identified net exposures are managed employing a number of techniques including, but not limited to, borrowings in local currencies and the use of certain derivative instruments.

The Company operates on a global basis and is exposed to currency fluctuation related to the manufacture and sale of its products in currencies other than the U.S. dollar. The major foreign currencies involve the markets in the European Union, Mexico, Brazil, China, Indonesia, Australia and Japan, although all regions are subject to foreign currency fluctuations versus the U.S. dollar. The Company actively monitors its foreign currency exposures in all major markets in which it operates, and employs a variety of techniques to mitigate the impact of exchange rate fluctuations, including foreign currency hedging activities. The Company enters into foreign currency forward contracts with the objective of reducing exposure to cash flow volatility associated with foreign currency receivables and payables, and with anticipated purchases of certain raw materials used in operations. These contracts, the counterparties to which are major international financial institutions, generally involve the exchange of one currency for a second currency at a future date, and have maturities not exceeding six months. The notional amount and maturity dates of such contracts match those of the underlying transactions. The gain or loss on the hedging instrument is recorded in earnings at the same time as the transaction being hedged is recorded in earnings. The associated asset or liability on the open hedge instrument is recorded in Current Assets or Current Liabilities, as applicable.

The Company employs various interest rate swaps and debt issuances with the objective of managing and optimizing its interest rate exposure. In 2001, the Company entered into certain interest

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swap agreements effectively converting the fixed coupon rate on its 6.45% Notes to a variable short-term rate based on the LIBOR plus an interest markup. In response to changes in market conditions and the value of the swaps, and in 2003, in connection with the Company's debt repurchase, the Company periodically amended the swap agreements, changing the related interest spread. As a result of these amendments, the counterparty paid the Company $11.6 and $56.5 in 2003 and 2002, respectively, including accrued interest of $3.7 and $6.5, respectively. The net realized gains on the swaps have been deferred, classified as a separate component of debt, and are amortized as a reduction in interest expense over the remaining term of the Notes. In 2003, the Company terminated all such swap agreements; as a result, the interest rate on the Notes, including amortization of the deferred swap gains, was fixed at 3.4% through maturity.

The Company has executed a 10-year Yen - U.S. dollar currency swap related to the monthly sale and purchase of products between the U.S. and Japan. The annual notional value of this swap is approximately $5.0. Gains and losses related to this swap are recorded currently, and the mark-to-market adjustment related to the value of the swap is reflected as a component of Accumulated other comprehensive income.

In 2002, the Company entered into certain interest rate swap agreements effectively converting the fixed rate on its long-term Japanese Yen borrowings to a variable short-term rate based on the Japanese Yen LIBOR rate plus an interest markup. These swaps are designated as qualified fair value hedges. During 2003 and 2005, the Company amended the swaps and the counterparty paid the Company $3.0 and $0.8, respectively, including accrued interest of $0.5 and $0.1, respectively. In both cases, these net gains have been deferred, are classified as a separate component of debt and are being amortized over the remaining term of the debt. To the extent the Company has not received cash or otherwise amended or settled any swap agreements, any applicable mark-to-market adjustment relating to that swap is included as a separate component of debt. The Company had no ineffective interest rate swaps at December 31, 2005.

Critical Accounting Policies and Use of Estimates

Preparation of financial statements in accordance with accounting principles generally accepted in the United States (‘‘GAAP’’) requires management to make estimates and assumptions that affect reported amounts and accompanying disclosures. These estimates are based on management’s best judgment of current events and actions that the Company may undertake in the future. Actual results may ultimately differ from estimates, although management does not believe such changes will materially affect the financial statements in any individual year.

Those areas requiring the greatest degree of management judgment or deemed most critical to the Company’s financial reporting involve:

The periodic assessment of potential impairment of intangible assets acquired in business combinations.    The Company currently has net intangible assets, including goodwill, of $772.7. Goodwill is evaluated for impairment annually. In assessing its intangible assets, management uses the most current actual and forecasted operating data available, current market based assumptions and independent valuation experts. A two step approach is employed. The first step involves estimating the value of reporting units based on the present value of estimated future cash flows. The second step, if necessary, is to measure the value of the impairment loss, if any. Management’s most subjective assumptions relate to the estimated/projected sales and operating growth values employed in the forecast.

The analysis and evaluation of collectibility of accounts receivable.    The Company sells to large global and regional firms. The majority of sales are either made-to-order or products that the Company also employs in its own manufacturing process as a raw material. Judgment is required in assessing the realization of receivable balances, including assessment of the creditworthiness of the customers, and in evaluating varying circumstances that may impact the financial stability of a customer. Allowances for loss on collection are established based on currently available relevant facts, and are reevaluated and adjusted as additional information becomes available. The Company’s historical experience indicates the allowance recorded has been sufficient to cover any reasonably expected potential loss.

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The analysis and evaluation of income taxes.    The Company accounts for taxes in accordance with Statement of Financial Accounting Standard No. 109 (‘‘FAS 109’’), Accounting for Income Taxes. Under FAS 109, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, based on tax laws as currently enacted. The provision for income taxes is based on domestic and international statutory income taxes rates and planning opportunities available in the various tax jurisdictions where the Company operates. Significant judgment is required in determining income tax provisions and tax positions. The Company may be challenged upon review by the applicable taxing authority and positions taken by the Company may not be sustained. The Company regularly updates these accruals in light of changing facts and circumstances.

The evaluation of potential legal and environmental liabilities, where changing circumstances, rules and regulations require regular reassessment of related practices and anticipated costs.    The Company is subject to certain legal claims regarding products and other matters, as well as environmental-related matters. Significant management judgment is involved in determining when it is probable that a liability has been incurred and the extent to which it can be reasonably estimated.

The Company regularly assesses potential liabilities with respect to all legal claims based on the most recent available information, in consultation with outside counsel handling the defense of such matters, and other relevant independent experts. To the extent a liability is deemed to have been incurred and can be reasonably estimated, the Company recognizes a corresponding liability; if the reasonably estimated liability is a range, the Company recognizes that amount considered most likely, or in the absence of such a determination, the minimum reasonably expected liability. To the extent such claims are covered by various insurance policies, the Company separately evaluates the likelihood of recovery and accounts for any related insurance receivable. Management judgments involve determination as to whether a liability has been incurred, the reasonably estimated amount of that liability, and any potential insurance recovery.

The Company regularly evaluates its potential environmental exposure in terms of total estimated cost and with respect to the viability of other potentially responsible parties (‘‘PRP’s’’) associated with its exposure. Recorded liabilities are adjusted periodically as remediation efforts progress and additional information becomes available. Critical management assumptions relate to expected total costs to remediate and the financial viability of PRP’s to share such costs.

Determination of the various assumptions employed in the valuation of pension and retiree health care expense and associated obligations.    Amounts recognized in the Consolidated Financial Statements related to pension and other postretirement benefits are determined from actuarial valuations. Inherent in such valuations are assumptions including expected return on plan assets, discount rates at which the liabilities could be settled, rates of increase in future compensation levels, mortality rates and health care cost trend rates. These assumptions are updated annually and are disclosed in Note 14 of the Notes to the Consolidated Financial Statements. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, affect expense recognized and obligations recorded in future periods.

With respect to the U.S. plans, the expected return on plan assets was determined based on an asset allocation model using the current benchmark allocation, real rates of return by asset class and an anticipated inflation rate. The benchmark asset allocation was: 10 - 20% in cash and fixed income investments expected to yield 1.1%; 10 - 20% employed in corporate and government bonds expected to yield 1.7 - 2.8%; and 65 - 75% in equity investments with a long-term expected yield of 8.5 - 9.1%. The inflation rate assumed in the model was 2.5%. The plan has achieved a compound annual rate of return of 9.2% over the previous 15 years. The expected annual rate of return for the non-U.S. plans employs a similar set of criteria adapted for local investments, inflation rates and in certain cases specific government requirements. The discount rate used for determining future pension obligations for each individual plan is based on a review of long-term bonds that receive a high rating from a recognized rating agency. Additionally, for the U.S. Plan,

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the discount rate was based on the internal rate of return for a portfolio of Moody’s Aa3-rated high quality bonds with maturities that are consistent with the projected future benefit payment obligations of the plan. The rate of compensation increase for all plans and the medical cost trend rate for the applicable U.S. plans are based on plan experience.

Management establishes the assumptions concerning discount rates and actuarial assumptions based on current market conditions, including asset returns and other factors applicable under the circumstances. Changes in pension and other post-employment benefits, and associated expenses, may occur in the future due to changes in these assumptions. The impact that a .25% decrease in the discount rate or a 1% change in the medical cost trend rate would have on the Company’s pension and other post-employment benefit expense, as applicable, is discussed in Note 14 of the Notes to the Consolidated Financial Statements.

The ongoing assessment of the valuation of inventory, given the large number of natural ingredients employed, the quality of which may be diminished over time.    The Company maintains between 40% and 55% of its inventory as raw materials, providing the greatest degree of flexibility in manufacture and use. Materials are evaluated based on shelf life, known uses and anticipated demand based on forecasted customer order activity and changes in product/sales mix. Management policy provides for an ongoing assessment of inventory with adjustments recorded when an item is deemed to be slow moving or obsolete.

Management believes that it has considered relevant circumstances that the Company may be currently subject to, and the financial statements accurately reflect management’s best estimate of the results of operations, financial condition and cash flows of the Company for the years presented. Management has discussed the decision process and selection of these critical accounting policies with the Audit Committee of the Board of Directors.

New Accounting Standards

Statement of Financial Accounting Standards (‘‘SFAS’’) No. 123(R) Share-Based Payment (‘‘FAS 123R’’) was issued in December 2004. FAS 123R is effective for the first reporting period beginning after December 15, 2005. FAS 123R supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (‘‘APB 25’’) and establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Under FAS 123R, the Company must determine the fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The Company will adopt the new requirements using the modified prospective transition method in the first quarter which ends March 31, 2006. Adoption of the standard is currently expected to reduce 2006 annual earnings by $2.0- $3.0 million based on unvested options currently outstanding. This impact does not contemplate awards to be issued, cancelled or forfeited in 2006 or the potential tax impact related to the initial adoption of this standard.

SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4 ("FAS 151"), was issued in November 2004. FAS 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted materials. Additionally, FAS 151 requires that allocation of fixed production overheads to the costs of conversion be based on normal capacity of production facilities. This statement is effective January 1, 2006 and the Company believes its adoption will not have a material impact on reported results.

In March 2005, the Financial Accounting Standards Board (‘‘FASB’’) issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, which clarifies that a conditional asset retirement obligation, as used in SFAS No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the Company. This Statement was effective for 2005 and did not have a material impact on reported results.

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Non-GAAP Financial Measures

The discussion of the Company's historical results include and, where indicated, exclude the impact of sales and operating results attributable to certain non-core businesses disposed of in 2004, the impact of certain restructuring and other charges recorded in 2004, the impact of the Company repatriatization of certain dividends from foreign subsidiaries under the AJCA, as well as the effects of exchange rate fluctuations. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. In discussing its historical and expected future results and financial condition, the Company believes it is meaningful for investors to be made aware of and to be assisted in a better understanding of, on a period-to-period comparative basis, the relative impact of restructuring and other charges, the impact of sales and operating results attributable to certain non-core businesses disposed of, the impact of such restructuring charges and repatriatization of dividends, as well as the impact of exchange rate fluctuations on operating results and financial condition. The Company believes such additional non-GAAP information provides investors with an overall perspective of the period-to-period performance of the Company’s core business. In addition, management internally reviews each of these non-GAAP measures to evaluate performance on a comparative period-to-period basis in terms of absolute performance, trends and expected future performance with respect to its core continuing business.

Cautionary Statement Under the Private Securities Litigation Reform Act of 1995

Statements in this Annual Report, which are not historical facts or information, are ‘‘forward-looking statements’’ within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements which may be identified by such words as ‘‘expect,’’ ‘‘believe,’’ ‘‘anticipate,’’ ‘‘outlook,’’ ‘‘may,’’ and similar forward-looking terminology, involve significant risks and uncertainties. Actual results of the Company may be materially different from any future results or conditions expressed or implied by such forward-looking statements. Actual results may differ materially from management’s expectations. Such factors include, among others, the following: general economic and business conditions in the Company's markets, including economic, population health and political uncertainties; weather; geopolitical and region specific uncertainties; interest rates; the price and availability of raw materials; the Company's ability to implement its business strategy, including the achievement of anticipated cost savings, profitability and growth targets; the impact of currency fluctuation or devaluation in the Company's principal foreign markets and the success of the Company's hedging and risk management strategies; the impact of possible pension funding obligations and increased pension expense on the Company's cash flow and results of operations; and the effect of legal and regulatory proceedings, as well as restrictions imposed on the Company, its operations or its representatives by foreign governments; and the fact that the outcome of litigation is highly uncertain and unpredictable and there can be no assurance that the triers of fact or law, at either the trial level or at any appellate level, will accept the factual assertions, factual defenses or legal positions of the Company or its factual or expert witnesses in any such litigation or other proceedings. The Company intends its forward-looking statements to speak only as of the time of this report and does not undertake to update or revise any such statements as more information becomes available or to reflect changes in expectations, assumptions or results.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company enters into foreign currency forward contracts with the objective of reducing exposure to cash flow volatility associated with foreign currency receivables and payables, and with anticipated purchases of certain raw materials used in operations. These contracts, the counterparties to which are major international financial institutions, generally involve the exchange of one currency for a second currency at a future date, and have maturities not exceeding six months.

The Company also uses derivative financial instruments to hedge foreign currency exposures resulting from forecasted purchase commitments. The Company enters into these hedge contracts generally for periods ranging from one to three months. The gain or loss on the hedging instrument is

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recorded in earnings at the same time as the transaction being hedged is recorded in earnings. The associated asset or liability related to the open hedge instrument is recorded in Current Assets or Current Liabilities, as applicable.

The Company has executed a 10-year Yen - U.S. dollar currency swap related to the monthly sale and purchase of products between the U.S. and Japan. The annual notional value of this swap is approximately $5.0 million. Gains and losses related to this swap are recorded currently, and the mark-to-market adjustment related to the value of the swap is reflected as a component of Accumulated other comprehensive income.

In 2002, the Company entered into certain interest rate swap agreements effectively converting the fixed rate on its long-term Japanese Yen borrowings to a variable short-term rate based on the Japanese Yen LIBOR rate plus an interest markup. These swaps are designated as qualified fair value hedges. During 2003 and 2005, the Company amended the swaps and the counterparty paid the Company $3.0 million and $0.8 million, respectively, including accrued interest of $0.5 million and $0.1 million, respectively. In both cases, these net gains have been deferred, are classified as a separate component of debt and are being amortized over the remaining term of the debt. To the extent the Company has not received cash or otherwise amended or settled any swap agreements, any applicable mark-to-market adjustment relating to that swap is included as a separate component of debt. The Company had no ineffective interest rate swaps at December 31, 2005.

The Company uses foreign currency-rate and interest rate-sensitive instruments to hedge a certain portion of its existing and forecasted transactions. The Company expects that any change in value for the hedging instrument would be offset by a change in value related to the underlying transaction.

The Company’s hedges of its foreign currency exposure are not designed to and therefore cannot entirely eliminate the effect of changes in foreign exchange rates on the Company’s consolidated financial position, results of operations and cash flows. The Company’s foreign currency swaps were analyzed at year-end to determine their sensitivity to exchange rate changes. Based on the outstanding balance of these financial instruments at December 31, 2005, a hypothetical 10% change (either an increase or a decrease) in rates prevailing at that date, sustained for up to a year, would not represent a material potential change in fair value, earnings or cash flows.

At December 31, 2005, the Company had $950.7 million of debt outstanding, including $7.9 million in deferred gains and mark-to-market adjustments on interest rate swap transactions. Debt, excluding the deferred swap gains, includes $499.2 million of 6.45% Notes maturing in May 2006, $314.6 million in bank borrowings and overdrafts and $129.0 million in long-term Japanese Yen denominated debt. The Company’s borrowings and interest rate swaps were analyzed at year-end to determine their sensitivity to interest rate changes. Based on the outstanding balance of all these financial instruments at December 31, 2005, a hypothetical 10% change (either an increase or a decrease) in interest rates prevailing at that date, sustained for one year, would not represent a material potential change in fair value, earnings or cash flows.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See index to Consolidated Financial Statements on page 37. See Item 6 for supplemental quarterly data on page 15.

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.    CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting.

The Company's Chief Executive Officer and Chief Financial Officer, with the assistance of other members of the Company's management, have evaluated the effectiveness of the Company's

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disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective.

The Company’s Chief Executive Officer and Chief Financial Officer have concluded that there have not been any changes in the Company’s internal control over financial reporting during the Company’s fourth quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report of Management is contained in Part IV of this Annual Report on Form 10-K and is incorporated herein by reference.

    Management’s Report on Internal Control Over Financial Reporting.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’) in Internal Control – Integrated Framework.

Based on this assessment, management determined that, as of December 31, 2005, the Company’s internal control over financial reporting was effective.

PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, has audited management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 as stated in their report which is included herein.

The Company's Chief Executive Officer certification was timely filed with the NYSE as required by NYSE Rule 303A(12). The Company's Chief Executive Officer and Chief Financial Officer have each filed with the Securities and Exchange Commission the required certifications regarding the quality of the Company's public disclosures.

ITEM 9B.    OTHER INFORMATION.

None.

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information relating to directors and nominees of the Company is set forth under the caption ‘‘Election of Directors’’ in the IFF 2006 Proxy Statement and is incorporated by reference herein. The information under the caption ‘‘Section 16(a) Beneficial Ownership Reporting Compliance’’ that appears in the IFF 2006 Proxy Statement is also incorporated by reference herein. See Part I, Item 1 of this Form 10-K for information relating to the Company's Executive Officers.

The Company has adopted a Code of Business Conduct and Ethics (the ‘‘Code of Ethics’’) that applies to the Company's chief executive officer, principal financial officer, principal accounting officer, and to all other Company directors, officers and employees. The Code of Ethics is available on the Company's website www.iff.com. A waiver from any provision of the Code of Ethics in favor of a director or Executive Officer may only be granted by the Board and any such waiver will be publicly disclosed. The Company will disclose substantive amendments to, and any waivers from, the Code of Ethics provided to the Company's chief executive officer, principal financial officer or principal accounting officer, as well as any other executive officer or director, on the Company's Internet website: www.iff.com.

The information regarding the Company's Audit Committee and its designated audit committee financial expert is set forth under the caption ‘‘Board and Committee Meetings’’ in the IFF 2006 Proxy Statement and such information is incorporated by reference herein.

ITEM 11.    EXECUTIVE COMPENSATION.

The information relating to executive compensation is set forth under the captions ‘‘Summary Compensation Table’’, ‘‘Option/SAR Grants in 2005’’, ‘‘Aggregated Option Exercises in 2005 and Option/SAR Values at December 31, 2005’’, ‘‘Directors' Compensation’’, ‘‘Employment Contracts and Termination of Employment and Change-in-Control Arrangements’’, ‘‘Compensation Committee Interlocks and Insider Participation’’ and ‘‘Related Party Matters’’, ‘‘Executive Separation Policy’’ and ‘‘Pension Plans’’ in the IFF 2006 Proxy Statement and such information is incorporated by reference herein.

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information relating to security ownership of management and certain beneficial owners is set forth under the caption ‘‘Security Ownership of Management, Directors and Certain Other Persons’’ in the IFF 2006 Proxy Statement and such information is incorporated by reference herein. The information relating to the Company's equity plans is set forth under the caption ‘‘Equity Compensation Plans’’ in the IFF 2006 Proxy Statement and such information is incorporated by reference herein.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information regarding certain relationships and related party transactions is set forth under the caption ‘‘Compensation Committee Interlocks and Insider Participation’’ and ‘‘Related Party Matters’’ in the IFF’s 2006 Proxy Statement and such information is incorporated by reference herein.

ITEM 14.	INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES.

The information regarding the independent registered public accounting firm (‘‘independent accountant’’) fees and services and the Company's pre-approval policies and procedures for audit and non-audit services provided by the Company's independent accountant are set forth under the captions ‘‘Principal Accountant Fees and Services’’ and ‘‘Audit Committee Pre-Approval Policies and Procedures’’ in the IFF 2006 Proxy Statement and such information is incorporated by reference herein.

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1) FINANCIAL STATEMENTS:    The following consolidated financial statements, related notes, management's report and independent registered public accounting firm’s report are included in this report on Form 10-K:

Report of Independent Registered Public Accounting Firm					38-39
Consolidated Statement of Income for the three years ended December 31, 2005					40
Consolidated Balance Sheet – December 31, 2005 and 2004					41
Consolidated Statement of Cash Flows for the three years ended December 31, 2005					42
Consolidated Statement of Shareholders' Equity for the three years ended December 31, 2005					43
Notes to Consolidated Financial Statements					44-64
(a)(2) FINANCIAL STATEMENT SCHEDULES					65

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of International Flavors & Fragrances Inc.:

We have completed integrated audits of International Flavors & Fragrances Inc.’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005 and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the consolidated financial statements listed in the index appearing under item 15(a)(1) present fairly, in all material respects, the financial position of International Flavors & Fragrances Inc. and its subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. 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 audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide

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reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP New York, New York March 13, 2006

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International Flavors & Fragrances Inc.

CONSOLIDATED STATEMENT OF INCOME