The global direct selling market provides substantial sales opportunity and has robust growth prospects. The World Federation of Direct Selling Associations estimates that in 2002, global direct selling was an $85.6 billion industry, as measured by the retail value of all products and services sold. Globally, direct selling increased at a compound annual growth rate of approximately 5% from 1991 to 2002. In 2002, total consumer goods direct sales in Mexico and the United States, were $1.2 billion and $28.6 billion, respectively. These markets ranked fourth and first, respectively, in terms of largest markets for total direct sales in 2002.

The Company sells personalized skin programs in a free matrix skincare system that allows individuals to select a regimen to meet individual needs. Skin care products include cleansers, skin fresheners, masks, and moisturizers for day and night. In addition to basic skin care products, the Company offers specialty products to enhance skin texture and encourage cell revitalization and products for maturing skin, eye care and elasticity. Many of these special care products use the most recent advances in ingredient technology.

The Company’s range of color cosmetics for the face, eyes, lips, cheeks and nails contribute significantly to the Company’s results. The Company internally develops lipstick formulas, foundations and mascaras.

The Company markets a broad selection of body, bath, sun and personal care products, including deodorants and shampoos. The Company’s premier body care product contains “royal jelly” (a substance produced by queen bees) in an oil-free deep moisturizing formula with natural botanical extracts and vitamins. Other offerings in the body care line include sunscreens, hand care lotions, revitalizing sprays, and bath products.

The Company is considering expanding its product line to include nutritional and wellness products. Any decision to offer such products will include consideration of the attendant risks, including potential products liability.

The Company positions its products to appeal to a relatively wide range of market categories, demographic groups and lifestyles. The Company’s products generally price at the higher end of the mass market category, but slightly below prestige brands.

The Company’s product strategy is to provide customers with exciting and prestige quality product lines that fit into the Company’svalue-added demonstration sales techniques and promote the sale of multiple products per home visit. To that end, the Company develops integrated products and actively promote cross-selling among categories, thus encouraging multi-product sales and repeat purchases. Product variety and modernization are keys to the Company’s success. The Company continues to look for ways to expand product offerings and broaden the Company’s appeal in the marketplace.

The Company supports its identity and corporate image through its energetic network of consultants and word-of-mouth. The Company uses a sophisticated and integrated promotional approach that includes meetings, marketing literature, and the Internet to create strong corporate imagery and support corporate identity.

Consolidated gross profit for the nine months ended September 30, 2003 decreased to $212.9 million from $219.2 million for the nine months ended September 30, 2002, a decrease of $6.3 million, or 2.9%.

Selling, general and administrative expenses for the nine months ended September 30, 2003 increased to $188.5 million, compared to $174.9 million for the nine months ended September 30, 2002, an increase of $13.6 million, or 7.8%.

Income tax expense decreased to $1.2 million for the nine months ended September 30, 2003 from $9.7 million for the nine months ended September 30, 2002, a decrease of $8.5 million, or 87.6%.