Mainland China Opportunity TrainingMay 2007

Overview of Mainland China Market

China Statistics

• Land Mass: 9,600,000 sq km

• Population: 1.3 billion

• Retail Sales: RMB5.395 trillion (2004)

Nu Skin (China) Retail Store Coverage

Direct Selling:

It is forecasted that revenue from direct selling in China will exceed

RMB100 billion by 2008.

Cosmetic:

In the next few years, cosmetic market in China will continue to

expand at an annual rate of about 10% with sales reaching RMB80 billion

by 2010.

Nutrition Products：

It is forecasted that by 2010, revenue from nutrition products in China

will exceed RMB120 billion.

Mainland China Market Forecast

Summary of Mainland China Development

Timeline

1990 Beginning of DS Industry

1996 DS Industry estimated revenue:

US$100 million

1998 Government imposed ban on

Chuan Xiao

2001 voted into WTO

2005 Direct Selling Regulations promulgated

2002 DS Industry estimated revenue:

US$1 billion

2005 DS Industry estimated revenue:

US$5 billion

History of Direct Selling in China

Nu Skin (China) obtained direct selling license

in July 2006

Nu Skin (China) started direct selling in Shanghai

in January 2007

1993 – Investigative trips to China

1993-1997 – Expansion throughout Asia and the world

1998 – Began investment in China

- Acquired Pharmanex assets

- Development stalled due to government imposed ban

1999 – Revised strategic plan based on government regulations

2000 – Acquired retail stores

2001 – Nu Skin manufacturing plant completed

2002 – Aggressive expansion plans announced

2003 – Launched Retail Store Model in mainland China

- with TE and Executive participation

2006 – Nu Skin (China) obtained direct selling license

2007 – Nu Skin (China) launched direct selling

By the end of 2006, investment in China reached US$100 million.

Nu Skin’s History in China

Shanghai Manufacturing Facility

Force for GoodConstruction of the First Hope School in

Chun An County

•Provided funds for construction of school

•Donated textbooks and study materials

•Completed in September 2002

Force for Good

Nu Skin has helped build 5 Hope Schools

• Nu Skin Hope School in Zhejiang Chun An County

• Nu Skin Hope School in Zhejiang An Ji County

• Nu Skin Hope School in Xing Hua City of Guangdong Mei Zhou

• Nu Skin Hope School in Jiangsu Si Yang County

• Nu Skin Hope School in Jiangxi Xin Yu City

In the next few years, Nu Skin will continue to help build Hope Schools in China. The total number of schools will be more than 60.

Force for Good 善的力量未来的 5年内，如新还将继续捐资协助建造所希望小学。

• Opened a VitaMeal Plant in Jixi, Heilongjiang in May 2005• Donate VitaMeal to the poor area of China through China Foundation for Poverty Alleviation

Mainland China Business Model

Retail Store + Sales Employee Model and Direct Selling Model

Preferred Customer

QSRSales

Employee

Prospects

Part-time Direct Seller

Nu Skin Retail Store

China Direct Selling Regulations

• To conduct direct selling, a direct selling company should establish branches and service centers in a province, autonomous region or municipality where it intends to conduct direct selling. A direct selling company can only conduct direct selling business in the approved area. • The categories of direct selling products are defined as follows:

Cosmetics (including personal care products and facial and hair beauty products) Health food (The “Health Food Approval Certificates” must be acquired from relevant departments.) Cleaning products (personal hygiene products and daily-use cleaning products) Health care equipment Small kitchen appliances

• The compensation that direct selling companies pay to their distributors may only be calculated based on the personal sales directly made by the distributors to the consumers. The total amount of the compensation (including commission, bonus, various incentives and other economic benefits) should not exceed 30% of the personal sales directly made by the direct selling distributors. Compensation should not be based on group volume.

China Remuneration Plan

Customer

Customers purchase products at full retail price, similar to any other retail establishment.

• Purchase products at full retail price• Direct Seller or Sales Representative is

responsible for providing their ID number so that the volume can be counted towards their sales volume.

China Remuneration Plan

Preferred Customer Individuals who become a Preferred Customer will enjoy a 10%

discount on product purchases.

• Requirements:

– Initial minimum RMB500 purchase or RMB800 ARO

commitment

– Future purchases at 10% discount

– Referred by Direct Seller/Sales Representative or Executive

China Remuneration Plan

Direct SellerDirect selling companies and their Branches should not recruit the following personnel:

• Younger than 18 years,

• Have no or limited civil capacity;

• Full time students;

• Teachers, doctors, government officials and military personnel in active service;

• Full time employees of direct selling companies;

• People from aboard; or

• Those who are forbidden by law and administrative regulations to do part-time jobs.

• Those who are forbidden by law and administrative regulations to do part-time

jobs.

China Remuneration Plan

Direct Seller Application Form

China Remuneration Plan

Direct Seller Bonus (DSB)• A new DS who maintains 2000 GNRSV for the first three months can receive

additional 5% bonus.• Direct seller who maintain 2000 volume and above in their previous three

months can obtain an extra 5% stability bonus added to their basic monthly compensation

Sales volume ( tax included) (%) Stability bonus

1,000 – 1,999 10% 0%

2,000 – 4,999 10% + 5%

5,000 – 9,999 15%

10,000 – 49,999 20%

50,000+ 25%

China Remuneration Plan

Direct Sellers will not get paid in any form on the sales volume of other Direct Sellers and Sales Employees.

The sales volume of Direct Sellers must come from their combined sales made directly to Preferred Customers and Retail Customers based on the products that the company is approved to sell through direct selling.

Once the Direct Seller has reached 30,000 from their past six months and has 10,000 in their current month, the Direct Seller may apply to become a full time SR of Nu Skin and be promoted to be a Sales Employee.

Sign a labor contract or agreement with the company

Submit Sales Representation Application Form

A QSR may become a SR if he meets the volume requirement of

RMB24,000 within six months and the minimum monthly Net Retail

Sales of RMB4,000.

Maximum number of work hours in retail store each week: 20

Base salary of RMB260, 10% sales bonus

Social benefits

Qualifying Sales Representative (QSR) （ Applicable to unapproved direct selling area ）

China Remuneration Plan

Sales Representative Sign a labor contract or agreement with the company

Pass Direct Seller or QSR qualification

Minimum monthly net retail sales: RMB10,000

Maximum number of work hours in retail store each week: 20

Base salary, 20-25% Retail Sales Bonus

Social benefits

China Remuneration Plan

Sales Representative Application Form

• ID Number

• Birth Date

• Education

• Affiliated retail store,

city of residence

• What does Net Retail Sales (NRS) refer to？ It refers to actual purchase price.

• What is bonus base?

Bonus base = NRS/1.17*0.9

Example:

• Assuming the retail price for product A is RMB500 and the NRS is RMB425 (15% discount with ARO commitment), then the bonus base = 425/1.17*0.9 = RMB327.

China Remuneration Plan

Retail Sales Bonus (RSB) 20%-25%

China Remuneration Plan

PGSV Bonus %

10,000-24,999 20%

25,000-49,999 21%

50,000-99,999 22%

100,000-149,999 23%

150,000-199,999 24%

200,000+ 25%

Remark: The RSB is calculated separately from the QSR volume.

China Remuneration Plan

Promotion

Sales Employee with outstanding performance and leadership ability will have the opportunity for advancement. Sales Leaders are responsible for guiding and conducting weekly training to their supervised Direct Seller, QSR and SR.

Sales Executive/Senior Sales Executive/Sales Manager/Senior

Sales Manager/Sales Director/National Sales Director

Quarterly Evaluation

• Occurred in every January/April/July/October

• Adjusts base salary and title position

• Adjusted base salary and title position will be reflected

to the next three months.

China Remuneration Plan

Quarterly Evaluation Process

Ability to abide by company policies

Ability to establish long-term relationships between customers and the

company

Total number of active Preferred Customers for the quarter

Number of new Preferred Customers for the quarter

Ability to sell company products

Leadership ability to supervise and train subordinate sales employees

China Remuneration Plan

International Participation

How to Participate in Mainland China

Maintain Executive level outside China

Participate in China training

Take and pass China Opportunity Qualification Test

Be familiar with and agree to China Policies and Procedures

Register for China activity

- Attend China specific training and pass examination

- Submit China Training Agreement (CTA)

Purchase products at 10% discount with China ID (CN03#) or at 15%/20% discount with ARO commitment

Refer Preferred Customers and Direct Seller/Sales Representative

Maintain pin title and maintenance requirements outside China

How to Participate in Mainland China

How An Overseas Distributor Becomes Qualified to Count His/Her China Volume

– Holds a Chinese passport or spends 80% of his/her time in the mainland China; submits application to the Nu Skin branch office he/she has registered with and gets approval from the branch office.

– Has 12 Breakaways (paid as BD) outside China in the current month

How to Participate in China

• Attract customers

• Attract Preferred Customers

• Encourage Preferred Customer to become a Direct Seller or a Sales

Representative

• Participate in product and sales training

• All sales activities must be done through company sales representatives or

contracted direct sellers of Nu Skin (China)

Nu Skin Executive’s Responsibilities in Mainland China

Training Meetings

All product and sales training meetings can only be held in public

establishment except for hotels.

The meeting attendees must be personal acquaintances (no more than five

attendees including the trainer).

All cold-calling techniques are strictly prohibited

The trainer must report to the company and obtain approval from the

company if attendees are more than five.

Nu Skin Executive’s Responsibilities in Mainland China

Training Meetings• Fees

– No fees can be collected for meeting attendance

• Content

– Only In-China training presentations approved by the company

can be used. Please refer to the China Business Center (CBC).

– Meetings should be related to:

• Product Training

• Sales Training

• Customer Service

• Company Policies

Do: • Provide critical training on

– local business model review

– local product training

Training Rules

Do Not: • Discuss Global Compensation Plan

• Promote get-rich scenarios

• Discuss future finances and retirement

• Talk negative about government enterprises

• Talk about distributor groups

Product Provided in China

• Nu Skin Personal Care Products

• Sicon

• Epoch

• Colour by Nu Skin

• Pharmanex Products

* Please refer to the online Product Catalog for details

“Chinese Business Center”A Good Communication Channel

China Business Center

The best source for China related information

• Latest update from China management

• Approved training material

• View China Remuneration Program

• View China catalog

• Download various application forms

• Access retail store location information