The following discussion of our financial condition and results of operations should be read in conjunction with the Con- solidated Financial Statements and related Notes thereto, which are included in this Annual Report. Management’s Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW We are a leading, global direct selling company with operations in approximately  40  countries throughout Asia, the Americas  and Europe. We develop and distribute premium quality, innovative personal care products and nutritional supplements that  are sold worldwide under the Nu Skin and Pharmanex brands. We also market technology-related products and services under  the Big Planet brand. We operate through a direct selling model in all of our markets except Mainland China (hereinafter  “China”), where we operate using a retail sales model with employed sales representatives because of current regulatory re- strictions on direct selling activities. In  2004 , we had revenue of $ 1 . 14  billion and a global network of approximately  820 , 000 active independent distributors and preferred customers who purchase our products for resale or for personal use. Approxi- mately  32 , 000  of these distributors were executive level distributors or full-time sales representatives, who play an important  leadership role in our distribution network and are critical to the growth and profitability of our business.  Our revenue depends on the number and productivity of our active independent distributors and executive distributor  leaders. We have been successful in attracting and motivating distributors by:  Our distributors market and sell our products and recruit other distributors based on the distinguishing benefits  and innovative characteristics of our products, the benefits of our compensation plans, and other initiatives. As a result,  it is vital to our business that we continuously leverage our research and development resources to develop and introduce  innovative products and provide our distributors with a differentiated portfolio of products and initiatives. If we expe- rience delays in introducing compelling products or attractive initiatives into a market, this can have a negative impact  on revenue. Additionally, it is important that we continually innovate our compensation plan to provide a vibrant earn- ings opportunity for our distributor force. We have experienced significant growth over the last year due in part to our efforts to expand into new markets,  including our expansion of operations in China. We are currently working on plans to commence operations in Indonesia  and Russia. Our global compensation plan, which we utilize in all of our markets except China, motivates our key  distributor leaders to assist in the recruitment and training of distributor leaders in new markets because they are com- pensated for global sales in their network of distributors. This has allowed us to generate rapid growth in our new  markets. Sometimes, however, the opening of a new market or the introduction of a key initiative such as the roll-out of  the Pharmanex ®  BioPhotonic Scanner (the “BioPhotonic Scanner”) in a market can have a temporary negative impact on  other markets if it attracts the attention and time of key executive distributor leaders from other markets.  We also have continued to expand and promote product subscription programs in many of our markets that provide  incentives for customers to commit to purchase a specific amount of products on a monthly basis. We believe these subscrip- tion programs have improved customer retention and helped drive revenue growth in many of our markets. Subscription  orders represented  29 % of our revenue in  2004  compared to  24 % in the prior year. In  2004 , we generated approximately  84 % of our revenue from our Asian markets, with sales in Japan representing  approximately  51 % of revenue. Because of the size of our foreign operations, operating results can be impacted negatively  or positively by factors such as foreign currency fluctuations, in particular fluctuations between the Japanese yen and the  U.S. dollar, and economic, political and business conditions around the world. In addition, our business is subject to various  laws and regulations, in particular regulations related to network marketing activities and nutritional supplements that  create certain risks for our business, including improper claims or activities by our distributors and potential inability  to obtain necessary product registrations. For more information about these risks and challenges we face, please refer to  “Note Regarding Forward-Looking Statements.” 34 • developing and marketing innovative, technologically advanced products;  • offering an attractive global compensation plan; and  • providing compelling initiatives, advanced technological tools, and strong distributor support.