Mainland China Opportunity Training

“Be the Difference”

Global Convention 2002

Overview of Mainland China Market

Mainland China Demographics

• 3rd largest country by land mass• 9.6 million kilometers2

• 1.3 billion people• 30 provinces

• Avg. GDP per capita 6,300 Rmb (US $770.00)

• Sixth largest economy in the world

Other Area 95%

Phase II 5%

Guandong 35%Jiangsu 26%

Shanghai 1%Zhejiang 19%

Fujian 12%

Mainland China DemographicsLand Mass

9,600,000 sq km

Guandong 34%

Jiangsu 29%

Shanghai 6%

Zhejiang 18%

Fujian 13%

Mainland China DemographicsPopulation

1.3 billion people Other Area 80%

Phase II 20%

Guandong 34%

Jiangsu 22%Shanghai 14%

Zhejiang 19%Fujian 11%

Mainland China DemographicsRetail Sales

2.86 Trillion Rmb

Phase II 42%

Other Area 58%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Guangdong Fujian Zhejiang Shanghai J iangsu

Mainland China DemographicsAnnual Urban per Capita Income

9,762 Rmb

(US $1,180)

7,432 Rmb

(US $910)

9,279 Rmb

(US $1,130)

11,718 Rmb

(US $1,430)

6,800 Rmb

(US $830)

Guangzhou1 Flagship Store30 TE Stores

Shenzhen5 TE Stores

Guandong Province

• Largest consumer market in China

• Developed retail sector

• Ranks #1 in foreign investment

• Population: 67.89 million people

• Land Area: 179,000 sq km

Shantou4 TE Stores

Foshan2 TE Stores

Nanhai2 TE Stores

Fujian Province

Fuzhou1 Flagship Store5 TE StoresXiamen

3 TE Stores

• Favorable economic policies

• Leading province for Twn, HK, and Macao compatriots

• Population: 31.83 million

•Land Area: 120,000 sq km

Quanzhou2 TE Stores

Zhejiang Province

Hangzhou1 Flagship Store5 TE Stores

• “Land of silk and Tea”

• Strongest non-state owned economy

• Retail sales jumped 10.7% in 2001

• Population: 43.64 million

• Land Area: 100,000 sq km

Ningbo1 TE Store

Jiangsu Province

Nanjing1 Flagship Store5 TE Stores

Wuxi5 TE Stores

• Second strongest economy in China

• Population: 70.21 million

• Land Area: 100,000 sq km

Suzhou2 TE Stores

Shanghai

Shanghai1 Flagship Store30 TE Stores

• Pearl of the Orient

• China’s center of economy, finance, and trade

• Excellent infrastructure

• High income and purchasing power

• Population: 14 million

• Land Area: 6,340 sq km

Direct Selling:

Analysts predict China’s direct selling market will be between $5 billion and $7 billion by 2005 making it the third largest direct selling market in the world.

Cosmetic and Toiletries:

By 2005 it is estimated that the China cosmetic and toiletry market will reach $8.9 billion in sales.

Mainland China Market Projections

Summary of Mainland China Development

Timeline

1990 Beginning of DS Industry

1996 DS Ind.

Est. $100 million

1998 Government imposed ban

2001 voted into WTO

2004 WTO Entry(New DS Regulations)2000 Nu Skin

Phase I

2003 Nu Skin Phase II

2002 DS Ind. Est. $1 billion

2005 DS Ind.

Est. $5 Billion

History of Direct Selling in China

1993 - Investigative trips to China

1993-1997 - Expansion throughout Asia and the World

1998 - PHASE I- 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 - PHASE II

- Retail store model with TE and Executive participation

* Total investment through 2002 is US $80 million

Nu Skin’s History in China

Shanghai Manufacturing Facility

Force for Good Construction of Primary School in Chun An County

• Provided funds for construction of school

• Donate textbooks and study materials

• To be finished in September, 2002

Mainland China Business Model

How to participate in Mainland China

• Maintain executive level outside of China

• Attend China specific training*

• Take and pass test on China rules and regulations

*Consult with your local office for regional training on China

Retail Sales Model

• All sales must occur at a Nu Skin retail store• Sales must occur from an employed sales force

China laws and regulations require:

Retail Store Layout

Guangzhou TE Store

Who can be referred as a Sales Representative?

• Resident of the People’s Republic of China

• Over 22 years of age

• No students

• No full-time military service

• No government employees

• Must first be a Preferred Customer

Sales Representative Application

• Referring ID number• Contact information of

potential Sales Rep• Date of birth• Personal ID #• Degree of education

Where to refer Sales Representatives?

• Flagship Stores

• Team Elite Stores

Sales Representative Applications can be found at:– each retail store– through the Chinese Business Center on the internet

SR Hiring Procedure

• First become a Preferred Customer

• Recommended by China Registered Executive or local preferred customer or sales representative.– Shanghai Nu Skin plans to begin receiving application on or about January 9th

• Interview with Branch Office

• Qualifications:– received sales training

– desire to learn about personal care products

– Willingness to be employed

Mainland China Commissions and Compensation Plan

• Attract customers

• Attract preferred customers

• Encourage preferred customer to apply to become a sales representative

• Product and sales training

All sales representatives and retail store employees are employed by Nu Skin

Nu Skin Executive Responsibilities within Mainland China

China Title Nu Skin Enterprises Title

Customer Customer

Preferred Customer (PC) Distributor

Sales Representative (SR) Executive

Team Sales Manager (TSM) Gold Executive

Senior Sales Manager (SSM) Lapis Executive

Fixed Retail Location Walk-in Center

Sales Bonus Commission

The China Phase II marketing plan is a store based retail model and is different than our global seamless marketing plan.

Mainland China Terminology

Similar to

Similar to

Similar to

Similar to

Similar to

Similar to

• No independent distributors

• All sales must occur at fixed retail locations through employee sales representatives

• All product and sales training meetings must be registered with Nu Skin

• Training is only for employee sales representatives and potential employee sales representatives

Mainland China Sales Plan

Customer

• Purchases at full retail price

• Not linked to Sales Representative

– Sales Representative is responsible for providing ID number to receive credit for purchase

Preferred Customer

Minimum 500 Rmb retail purchase Future purchases at 10% discount Linked to Sales Representative or executive

Preferred Customer Referral Form

• Referring ID number• Contact information• Personal ID number• SR name and ID #• TSM name and ID #

Preferred Customer card included in form

Qualifying Sales Representative

Month 1 Month 2 Month 3400 GSV 700 GSV 1,000 GSV

First become a preferred Customer Submit Sales Representative application form Obtain the following monthly volumes:

Purchase at 10% discount Work up to 20 hours per week as temporary employee 250 Rmb base pay plus up to 10% Service Bonus

Sales Representative

Permanent employee of Shanghai Nu Skin Purchase at 15% discount Work up to 20 hours per week at retail store Same compensation as QSR, plus 5-15% Retail Sales Bonus

on GSV

GSV* Commission700 GSV 5%800 GSV 6%

1,000 GSV 7%1,200 GSV 8%1,400 GSV 9%1,700 GSV 10%2,000 GSV 11%2,300 GSV 12%2,600 GSV 13%3,000 GSV 14%

4,000+ GSV 15%

Sales Representative

If minimum GSV benchmarks are not met, employee may be terminated at company’s discretion.

S.R.

C

P.C.

C

C

P.C.

CP.C.

Team Sales Manager

Meet Sales Representative qualifications Additional 1,000 G1 GSV Receive 2.5% or 5.0 % of G1 GSV

Team Sales Manager

GSV Commission*700 GSV 2.5%

1,000+ GSV 5%

*paid on personally trained SR and TSM GSV.

TSMC

P.C.

C

S.R.

S.R.

P.C.P.C.

C

C

C

C

Manager Training Bonus

Senior Sales Manager

Meet Sales Representative qualifications Additional 2,000 G1 GSV Receive 2.5% or 5.0 % on G1 GSV Receive 2.5% or 5% on G2 GSV

Senior Sales Manager

GSV Commission**700 GSV 2.5%

1,000 GSV 5%

Senior Manager Training Bonus

**paid on personally trained SR, TSM, and SSM GSV as well as Team Sales Manager’s personally trained SR and TSM

SSM

PC

P.C.

C

TSM

S.R.

S.R.

P.C.

C

C

C C

C

P.C.

C

C

International Volume Flow

Register for China activity- attend China specific training

- pass examination

Purchase at 15% discount Registered travel 15 days per quarter Refer preferred Customers and Sales Representatives Maintain pin title and volumes outside of China Receive Executive Bonus and Breakaway Bonus on China

activity

Products

Nu Skin Premium ProductsFace Care Retail Price* (Rmb) Price (US$) Point Value

Creamy Cleansing Lotion 150 $18.30 11.0Pure Cleansing Gel 150 $18.30 11.0Exfoliant Scrub 150 $18.30 11.0pH Balance Hydrating 120 $14.60 9.0pH Balance Mattefying 120 $14.60 9.0Celltrex Ultra Recovery Fluid 400 $48.80 30.0Moisture Restore Day Lotion n/d 320 $39.00 24.0Moisture Restore Day Lotion c/o 320 $39.00 24.0NaPCA Moisturizer 300 $36.60 22.0Enhancer Skin Conditioning Gel 120 $14.60 9.0Night Supply Lotion c/o 375 $45.70 28.0Night Supply Cream n/d 375 $45.70 28.0Rejuvenating Cream 350 $42.70 26.0NaPCA Moisture Mist 115 $14.00 8.5

*Retail price is VAT inclusive

Nu Skin Premium ProductsBody Care Retail Price* (Rmb) Price (US$) Point Value

Body Bar 125 $15.20 9.25ABC Gel 100 $12.20 7.5Body Smoother 155 $18.90 11.5Hand Lotion 115 $14.00 8.5Liquid Body Lufra 130 $15.90 9.5

TreatmentFace Lift - Sensitive 430 $52.40 32.0NSW Skin Lotion 315 $38.40 23.5NSW Skin Essence 470 $57.30 35.0NSW Milk Lotion 350 $42.70 26.0NSW Cream 400 $48.80 30.0

*Retail price is VAT inclusive

Face Care Price Comparison

0

100

200

300

400

500

600

700

Nu Skin

Rtl A

Rtl B

Rtl C

DS A

DS B

DS C

Treatment Price Comparison

0

100

200

300

400

500

600

700

800

White Skin Lotion White Essence White Milk Lotion White Cream

Nu Skin

Rtl A

Rtl B

Rtl C

DS A

DS B

DS C

Body Care Price Comparison

0

50

100

150

200

250

300

350

400

450

Body Bar ABC Gel Body Smoother Hand Lotion Body Lufra

Nu Skin

Rtl A

Rtl B

Rtl C

DS A

DS B

DS C

Locally Branded Products

Locally Branded Product Price List

Scion Retail Price* (Rmb) Price US$ Point ValueFacial Cleansing Gel 60 $7.30 4.5Refining Facial Toner 60 $7.30 4.5Polishing Cream 65 $7.90 4.8Moisture Light Cream 70 $8.50 5.2Moisture Rich Cream 80 $9.75 6.0Hydrating Peel-Off Masque 70 $8.50 5.2Deep Cleansing Clay Masque 70 $8.50 5.2Eye Gel 90 $11.00 6.7Pure Shampoo 35 $4.30 2.6Pure Conditioner 35 $4.30 2.6Scalp & Hair Treatment 30 $3.65 2.2Two-in-One Shampoo & Conditioner 35 $4.30 2.6Styling Gel 38 $4.60 2.8Hand & Body Moisture Lotion 50 $6.10 3.7Moisturizing Hand & Body Wash 35 $4.30 2.6

*Retail price is VAT inclusive

SP Pure for teen age skin Retail Price* (Rmb) Price US$ Point ValueCleansing Lotion 35 $4.25 2.6Refreshing Tonic 35 $4.25 2.6Facial Moisturizer 40 $4.90 3.0Facial Mask 40 $4.90 3.0

Everyday Toothpaste 135g 30 $3.65 2.2

Clean LandFeminine Wash 32 $3.90 2.4

Locally Branded Product Price List

*Retail price is VAT inclusive

Her Shades Retail Price *(Rmb) Price US$ Point ValueFoundation 100 $12.20 7.5Lipstick 75 $9.15 5.6Eye shadow 90 $11.00 6.7Blush 90 $11.00 6.7Lip Liner 40 $4.90 3.0Wet/Dry Powder 130 $15.85 9.7Finishing Powder 100 $12.20 7.5Waterproof Mascara 65 $7.90 4.8

Limited Time OffersTwinkling Lip Gloss 60 $7.30 4.5Beautyberry Lip Balm 25 $3.05 1.8

Locally Branded Product Price List

*Retail price is VAT inclusive

Policies and Procedures

Travel to Mainland China

• Only China trained Executives

• All business* travel must be registered

• Business travel limited to 15 days per quarter

*Business travel equates to meetings with more than 5 people

Travel Approval Form

• Name• Distributor ID• Date of travel• Location of travel• Duration of visit• Purpose of trip• Type of training

performed

Training Meetings

• Notification– Must notify Nu Skin 15 days in advance

• Location– only at company facilities or approved rented hotel meeting

rooms

• Duration– Meetings can last no longer than 3 hours

– No more than 1 meeting per day

Training Meetings

• Fees– No fees can be collected for meeting attendance

• Content– Meetings should be related to:

• Product Training

• Sales Training

• Customer Service

• Company Policies

Training Request Form

• Name• Distributor ID• Location of training• Date and time of

training• Number of attendees• Meeting agenda

Do:• Provide Critical training on

– Business model review– Local product training

Training Rules

Do Not:

• Promote get rich scenarios

• Discuss future finances and retirement

• Talk negative about government enterprises

• Talk about distributor groups

Additional Communication by China Business Center

China Business Center

• Latest information• Training material• View China compensation plan

China Business Center Phase II

Available November 2002

• Preferred Customer Referral Forms• Sales Representative Applications• Travel Approval Forms• Training Request Forms• Store Locator

Training Materials

• Copy of this presentation

• Compensation Plan Brochure

• Compensation Plan training material

• Draft Shanghai Nu Skin Product Catalog

• List of completed stores

• Video CD

China Opportunity Training

“Be the Difference”

Global Convention 2002