Selected Consolidated Financial Data  34 Management’s Discussion and Analysis  36 Consolidated Balance Sheets  47 Consolidated Statements of Income  48 Consolidated Statements of Stockholders’ Equity  49 Consolidated Statements of Cash Flows  50 Notes to Consolidated Financial Statements  51 Report of Independent Accountants  62 Additional Information  63 The following selected consolidated financial data as of December 31, 1997, 1998, 1999 and 2000 and for the years ended December 31, 1996, 1997, 1998, 1999 and 2000 have been derived from the audited consolidated financial statements. The financial data as of December 31, 1996 is unaudited but, in management’s opinion, includes all necessary information to present fairly the information included therein. The Company’s consolidated financial statements for all periods presented before December 31, 1998 have been combined and restated for the acquisition of Nu Skin International, Inc. (“NSI”) and certain other related affiliates in March 1998 (the “NSI Acquisition”). NU SKIN ENTERPRISES  34 (1) Minority interest represents the ownership interests in NSI held by individuals prior to the NSI Acquisition in 1998 who are not immediate family members of the majority-interest holders. The Company purchased the minority interest as part of the NSI Acquisition. (2) 1999 results include transactions during the year which are discussed in detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations. INCOME STATEMENT DATA December 31,  December 31, December 31, December 31, December 31, (U.S. dollars in thousands, except per share data) Year ended 1996 1997 1998  1999 (2) 2000 Revenue $ 761,638 $ 953,422 $ 913,494 $ 894,249 $ 879,758 Cost of sales 171,187 191,218 188,457 151,681 149,342 Cost of sales—amortization of inventory step-up — — 21,600 — — Gross profit 590,451 762,204 703,437 742,568 730,416 Operating expenses: Distributor incentives 282,588 362,195 331,448 346,951 345,259 Selling, general and administrative 168,706 201,880 202,150 265,770 294,744 Distributor stock expense 1,990 17,909 — — — In-process research and development — — 13,600 — — Total operating expenses 453,284 581,984 547,198 612,721 640,003 Operating income 137,167 180,220 156,239 129,847 90,413 Other income (expense), net 10,771 8,973 13,599 (1,411) 5,993 Income before provision for income taxes and minority interest 147,938 189,193 169,838 128,436 96,406 Provision for income taxes 49,526 55,707 62,840 41,742 34,706 Minority interest (1) 13,700 14,993 3,081 — — Net income $  84,712 $ 118,493 $ 103,917 $ 86,694 $ 61,700 Net income per share: Basic $ 1.07 $ 1.42 $ 1.22 $ 1.00 $ 0.72 Diluted 1.02 1.36 1.19 0.99 0.72 Weighted average common shares outstanding (in 000s): Basic 79,194 83,331 84,894 87,081 85,401 Diluted 83,001 87,312 87,018 87,893 85,642 SELECTED CONSOLIDATED FINANCIAL DATA FINANCIAL REVIEW