NU SKIN ASIA PACIFIC INC, 424B3, 1996-12-16

NU SKIN ASIA PACIFIC INC
424B3, 1996-12-16
DRUGS, PROPRIETARIES & DRUGGISTS' SUNDRIES

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<PAGE>

RULE NO. 424(b)(3)
REGISTRATION NO. 333-12073

PROSPECTUS

OPTIONS TO PURCHASE 1,605,000 SHARES OF CLASS A COMMON STOCK

2,964,000 SHARES OF CLASS A COMMON STOCK

[LOGO]

-------------------

This Prospectus relates to the offering by Nu Skin International, Inc.
("NSI"), an affiliate of Nu Skin Asia Pacific, Inc. (the "Company"), of
options (the "Distributor Options") to purchase 1,605,000 shares of Class A
Common Stock, the offering by the Company of 1,605,000 shares of Class A
Common Stock to be issued upon the exercise of the Distributor Options, the
offering by the Company to its employees of 109,000 shares of Class A Common
Stock in connection with the awarding of employee stock bonus awards, and the
offering by NSI and its affiliates (other than the Company) (the "Rule 415
Selling Stockholders") of 1,250,000 shares of Class A Common Stock to their
employees as employee stock bonus awards. The offering of the Distributor
Options, the shares of Class A Common Stock underlying the Distributor Options
and the employee stock bonus awards are collectively referred to as the "Rule
415 Offerings." See "Rule 415 Selling Stockholders" and "Plan of
Distribution." The Company will not receive any proceeds from the distribution
of shares by the Company and the Rule 415 Selling Stockholders in connection
with the employee stock bonus awards. The Company will receive the proceeds
from the issuance of shares in connection with the exercise of the Distributor
Options.

Each share of Class A Common Stock entitles its holder to one vote, and each
share of Class B Common Stock (the "Class B Common Stock", together with the
Class A Common Stock, the "Common Stock") of the Company entitles its holder
to ten votes. All of the shares of Class B Common Stock are held by the
existing stockholders (the "Existing Stockholders") of the Company prior to
the consummation of the Reorganization and certain of their affiliates. Each
share of Class B Common Stock is convertible into one share of Class A Common
Stock at the option of the holder of Class B Common Stock and in certain other
instances. See "Description of Capital Stock--Common Stock--Conversion."

In addition to the Distributor Options and the shares of Class A Common
Stock offered hereby, 10,465,000 shares of Class A Common Stock were issued
and sold by the Company and certain selling stockholders (the "Selling
Stockholders") in underwritten offerings (the "Offerings") which were
consummated on November 27, 1996. Of the 10,465,000 shares of Class A Common
Stock sold in the Offerings, 4,750,000 shares were offered and sold by the
Company, including 218,548 shares which were sold directly by the Company in
connection with its reserved share program, and 5,715,000 shares were offered
and sold by the Selling Stockholders, including 1,365,000 shares subject to
options granted by certain of the Selling Stockholders to certain of the
Underwriters solely to cover over-allotments. The Existing Stockholders and
certain of their affiliates beneficially own shares of Common Stock having
approximately 98.2% of the combined voting power of the outstanding shares of
Common Stock.

Prior to the Offerings, there was no public market for the Class A Common
Stock. See "Plan of Distribution" for information relating to the factors
considered in determining the exercise price of the Distributor Options
offered hereby.

The Class A Common Stock is traded on the New York Stock Exchange under the
symbol "NUS." On December 10, 1996, the last reported sale price of the Class
A Common Stock was $29 1/4 per share.

SEE "RISK FACTORS," BEGINNING ON PAGE 14, FOR A DISCUSSION OF CERTAIN
FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES
OFFERED HEREBY.

-------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2)(3) STOCKHOLDERS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Option(4).............................. -- -- -- --
- ----------------------------------------------------------------------------------------------
Per Share(4)............................... $5.75 -- $9,228,750 --
- ----------------------------------------------------------------------------------------------
Total...................................... $9,228,750 -- $9,228,750 --
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The Rule 415 Offerings are being made by the Rule 415 Selling Stockholders
and by the Company from time to time pursuant to Rule 415 under the
Securities Act of 1933 and are not being made in connection with an
underwritten distribution. Therefore, no underwriting commissions or
discounts will be paid in connection with the Rule 415 Offerings. See
"Rule 415 Selling Stockholders" and "Plan of Distribution."
(2) Before deducting expenses payable by the Company, which, together with the
expenses of the Offerings, are estimated to be $3,000,000.
(3) Includes proceeds from the exercise of the Distributor Options to purchase
shares of Class A Common Stock. The Company will not receive any proceeds
from the distribution of shares by the Company and the Rule 415 Selling
Stockholders in connection with the employee stock bonus awards. See "Rule
415 Selling Stockholders" and "Plan of Distribution."
(4) No consideration is being paid upon the issuance and grant of the
Distributor Options and the awarding of employee stock bonus awards by the
Rule 415 Selling Stockholders. See "Rule 415 Selling Stockholders" and
"Plan of Distribution."

-------------------

The date of this Prospectus is December 12, 1996.
<PAGE>

[COMPANY LOGO AND THE WORDS "SCIENCE," "NATURE" AND "BEST OF SCIENCE &
NATURE."]

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the financial statements
and notes thereto appearing elsewhere in this Prospectus. Unless otherwise
noted, all information in this Prospectus assumes no exercise of the
underwriters' over-allotment options and gives effect to the Reorganization (as
defined herein). As used herein, "Nu Skin Asia Pacific" or the "Company" means
Nu Skin Asia Pacific, Inc., including the Subsidiaries, giving effect to the
Reorganization. The "Subsidiaries" means Nu Skin Hong Kong, Inc. ("Nu Skin Hong
Kong"), Nu Skin Japan Company, Limited ("Nu Skin Japan"), Nu Skin Korea, Inc.
("Nu Skin Korea"), and Nu Skin Taiwan, Inc. ("Nu Skin Taiwan"), collectively,
and excludes Nu Skin Personal Care (Thailand) Limited ("Nu Skin Thailand"),
which has been formed, but has not commenced operations.
See "The Reorganization and S Corporation Distribution." Until September 30,
1994, the Company's fiscal year ended on September 30 of each year. As of
October 1, 1994, the Company changed its fiscal year end to December 31 of each
year, beginning with the fiscal year ended December 31, 1995.

THE COMPANY

Nu Skin Asia Pacific is a rapidly growing network marketing company involved
in the distribution and sale of premium quality, innovative personal care and
nutritional products. The Company is the exclusive distribution vehicle for Nu
Skin International, Inc. ("Nu Skin International" or "NSI") in the countries of
Japan, Taiwan, Hong Kong (including Macau) and South Korea, where the Company
currently has operations, and in Thailand, Indonesia, Malaysia, the
Philippines, the People's Republic of China ("PRC"), Singapore and Vietnam,
where operations have not commenced.

The Company believes it is one of the fastest growing network marketing
companies in Asia. Revenue increased 95.2% to $471.3 million for the nine
months ended September 30, 1996 from $241.4 million for the same period in
1995. Net income increased 117.7% to $60.3 million for the nine months ended
September 30, 1996 from $27.7 million for the same period in 1995. Revenue
increased 35.6% to $358.6 million for the year ended December 31, 1995 from
$264.4 million in 1994. Although operating expenses have increased with the
growth of the Company's revenue, such expenses have declined as a percentage of
revenue due to improved operating leverage. Net income increased 86.1% to $40.2
million for the year ended December 31, 1995 from $21.6 million in 1994. The
Company's network of independent distributors has grown since the Company's
inception in 1991 to more than 330,000 active distributors as of September 30,
1996. See "Risk Factors--Managing Growth."

The Company's product philosophy is to combine the best of science and nature
in developing premium quality, innovative personal care and nutritional
products which are specifically designed for the network marketing distribution
channel. The Company offers products in two distinct categories: personal care
products, marketed under the trademark "Nu Skin," and nutritional products,
marketed under the trademark "Interior Design Nutritionals" ("IDN"). The Nu
Skin personal care product lines include facial care, body care, hair care and
color cosmetics, as well as specialty products such as sun protection, oral
hygiene and fragrances. The IDN product lines include nutritional supplements,
weight management products and nutritious snacks, and sports nutrition
products.

In Japan, Taiwan and Hong Kong, the Company currently offers most of NSI's
personal care products and approximately one-third of NSI's nutritional
products. In South Korea, the Company currently offers one-third of NSI's
personal care products and none of the nutritional products. The Company
believes that it can significantly grow its business and attract new customers
by expanding its product offerings in each of its markets to include more of
NSI's existing personal care and nutritional products. In addition to expanding
its product offerings with existing NSI products, the Company intends to
introduce new products tailored to specific markets.

3
<PAGE>

The distribution of products through the network marketing and other direct
selling channels has grown significantly in recent years. The World Federation
of Direct Selling Associations ("WFDSA") reports that, since 1990, worldwide
direct distribution of goods and services to consumers has increased 65%,
resulting in the sale of over $75 billion of goods and services in 1995.
According to the WFDSA, $34 billion of goods and services were sold by its
members in 1995 through direct selling channels in the markets in which the
Company currently operates, which represents 45% of the global volume of direct
sales by its members.

OPERATING STRENGTHS AND GROWTH STRATEGY

The Company believes that its success to date is based upon its commitment to
provide a wide range of premium quality, innovative personal care and
nutritional products and an appealing global business opportunity for persons
interested in establishing a direct sales business. Specifically, the Company's
operating strengths include (i) its premium product offerings, (ii) a global
distributor compensation plan (the "Global Compensation Plan") which
compensates distributors for product sales in downline distribution networks in
any country in which NSI and its affiliates operate, (iii) a comparatively high
level of distributor incentives paid to independent distributors, (iv) a
systematic market development program, (v) individual distributor attention and
other distributor support programs and (vi) an experienced management team at
both the Company and the Subsidiaries. See "Business--Operating Strengths." Any
consideration of the Company's operating strengths must be tempered by
consideration of various risks which impact or may impact the Company and its
operations. See "Risk Factors."

The Company's primary objective is to capitalize on its operating strengths
to become a leading distributor of consumer products in each of its markets.
The Company intends to pursue this strategy by (i) introducing new products,
(ii) opening new markets, (iii) attracting new distributors and enhancing
distributor productivity and (iv) increasing consumption of its products. See
"Business--Growth Strategy." Any consideration of the Company's growth strategy
should be made in connection with a consideration of the risks associated with
such growth strategy. See "Risk Factors."

RELATIONSHIP WITH NSI

NSI, founded in 1984 and based in Provo, Utah, is engaged in selling personal
care and nutritional products and, together with its affiliates, compromises
one of the largest network marketing organizations in the world. NSI has
provided, and will continue to provide, a high level of support services to the
Company, including product development, marketing and other managerial support
services. Management believes that the Company's relationship with NSI has
allowed the Company to increase revenue and net income at rates that otherwise
may not have been possible. Since distributor agreements are entered into
between NSI and distributors, all of the distributors who generate revenue for
the Company are distributors of NSI. See "Risk Factors--Relationship with and
Reliance on NSI; Potential Conflicts of Interest." Because of this fact, the
Company cannot control who becomes a distributor.

4
<PAGE>

THE RULE 415 OFFERINGS

DISTRIBUTOR OPTIONS

Prior to the date of this Prospectus, the Existing Stockholders have
contributed to the Company 1,605,000 shares of the Company's Class A Common
Stock for use in implementing an NSI distributor equity incentive program. Also
prior to the date of this Prospectus, the Company has granted to NSI an option
to acquire such 1,605,000 shares of Class A Common Stock (the "Distributor
Options"). Each Distributor Option entitles the holder to purchase one share of
Class A Common Stock. Upon vesting, Distributor Options will be exercisable at
$5.75, which is 25% of the initial price per share to the public in the
Offerings (the "Exercise Price").

DISTRIBUTOR OPTION ALLOCATION. From January 1, 1997 until August 31, 1997
(the "Qualification Period"), existing and new distributors in each country
where NSI conducts business and where local laws may permit the issuance of
options hereunder will have the opportunity to qualify for an allocation of the
Distributor Options from NSI by achieving executive distributor levels
("Executive Pin Levels") of Gold or higher under the Global Compensation Plan
as of August 31, 1997 and by submitting a representation letter to NSI as
provided in the NSI 1996 Distributor Stock Option Plan, as amended (the "NSI
Stock Option Plan") (qualifying distributors are hereinafter referred to as
"Eligible Distributors"). Pursuant to NSI's policies and procedures, that
portion of sales volume for September 1997 which would be attributed to sales
volume for August 1997 will be included for purposes of determining commissions
paid during the Qualification Period, as well as whether a distributor
qualifies as an Eligible Distributor. Each allocation of Distributor Options
made to an Eligible Distributor that is an entity (such as a partnership or
corporation) shall be made by NSI solely to the entity, not to the owners of
the entity individually. NSI will notify Eligible Distributors of the results
of the allocation of the Distributor Options by October 31, 1997. Each Eligible
Distributor shall have the right to decline his or her Distributor Options by
notice to NSI no later than November 15, 1997. Each Eligible Distributor who
has not declined his or her Distributor Options on or before November 15, 1997
will be granted a number of Distributor Options determined in accordance with
the formula set forth below. Because there is a fixed number of Distributor
Options available for this program, the allocation formula and explanations are
rather complex.

<TABLE>
<C> <C> <C> <S>
s X (x/y) = number of Distributor Options to be
allocated to an Eligible Distributor;
</TABLE>

where

<TABLE>
<S> <C> <C>
s = fixed number of Distributor Options
available = 1,605,000
x = c X (p+g) = Weighted Individual Compensation
c = net commissions paid to the Eligible Distributor
on sales volume during the Qualification Period
p = Executive Pin Level Weighting Factor
g = Business Growth Weighting Factor
y = sum of Weighted Individual Compensation paid to
all Eligible Distributors during the Qualification
Period = Weighted Total Compensation.
</TABLE>

Thus, the number of Distributor Options to be allocated to an Eligible
Distributor will be determined by multiplying the total number of Distributor
Options available ("S" in the formula above) by the quotient obtained by
dividing the Eligible Distributor's Weighted Individual Compensation ("X" in
the formula above, and as defined below) under the Global Compensation Plan
during the Qualification Period by the sum of the Weighted Individual
Compensation paid to all Eligible Distributors under the Global Compensation
Plan on sales volume during the Qualification Period (the "Weighted Total
Compensation," and "Y" in the formula above). An Eligible Distributor's
Weighted Individual Compensation is equal to total commissions, net of any
withholdings, fines, penalties, or the like, paid to such Eligible Distributor
on sales volume during the

5
<PAGE>

Qualification Period ("C" in the formula above) multiplied by the sum of his or
her Executive Pin Level Weighting Factor ("P" in the formula above, and as
defined below) and his or her Business Growth Weighting Factor ("G" in the
formula above, and as defined below).

EXECUTIVE PIN LEVEL WEIGHTING FACTOR. An Eligible Distributor's Executive Pin
Level Weighting Factor is the percentage set forth in the table below opposite
the actual Executive Pin Level achieved by such Eligible Distributor as of
August 31, 1997. Allocations of Distributor Options shall generally be based on
the Executive Pin Level at which Eligible Distributors receive commissions,
giving consideration to any temporary exceptions which may be granted by NSI
from time to time.

<TABLE>
<CAPTION>
EXECUTIVE
EXECUTIVE PIN LEVEL PIN LEVEL
AS OF AUGUST 31, 1997 WEIGHTING FACTOR
--------------------- ----------------
<S> <C>
Hawaiian Blue Diamond..................................... 100%
Blue Diamond.............................................. 94%
Diamond................................................... 86%
Emerald................................................... 82%
Ruby...................................................... 78%
Lapis..................................................... 74%
Gold...................................................... 72%
</TABLE>

BUSINESS GROWTH WEIGHTING FACTOR. An Eligible Distributor's Business Growth
Weighting Factor is based on the increase in his or her average monthly net
commissions paid on sales volume during the Qualification Period. An Eligible
Distributor's Business Growth Weighting Factor is equal to one-third ( 1/3) of
1%, up to a maximum of 100%, for each 1% increase in average monthly net
commissions paid during the Qualification Period that is greater than actual
net commissions paid during September 1996 (the "Base Month"). The Base Month
for a distributor qualifying as an Eligible Distributor after September 1996 is
deemed to be his or her first month as an Eligible Distributor.

ILLUSTRATIONS. For purposes of illustration, for the eight-month period ended
on August 31, 1996 (the "Illustrative Qualification Period"), the Weighted
Total Compensation (Y) will be assumed to have been $200,000,000. An Emerald
level distributor who was paid net commissions (C) of $40,000 (or average
monthly net commissions of $5,000) during the Illustrative Qualification Period
and who had previously been paid net commissions of $1,000 during such
distributor's Base Month would apply a weighting factor of 182% to such net
commissions (computed using the 82% Executive Pin Level Weighting Factor (P)
for an Emerald level distributor plus a 100% Business Growth Weighting Factor
(G) based on the 400% increase in average net commissions during the
Illustrative Qualification Period over net commissions paid during such
distributor's Base Month), resulting in Weighted Individual Compensation (X) of
$72,800. Such distributor's allocation of Distributor Options at the end of the
Illustrative Qualification Period would be equal to the quotient of his or her
Weighted Individual Compensation (X = $72,800) divided by the Weighted Total
Compensation (Y = 200,000,000), multiplied by the total number of Distributor
Options (S = 1,605,000). Such distributor would therefore be allocated 584
Distributor Options.

To illustrate another example, the Weighted Total Compensation (Y) for the
Illustrative Qualification Period will be assumed to have been $300,000,000. A
Blue Diamond level distributor who was paid net commissions (C) of $520,000 (or
average monthly net commissions of $65,000) during the Illustrative
Qualification Period and who had previously been paid net commissions of
$50,000 during such distributor's Base Month would apply a weighting factor of
104% to such net commissions (computed using the 94% Executive Pin Level
Weighting Factor (P) for a Blue Diamond level distributor plus a 10% Business
Growth Weighting Factor (G) based on the 30% increase in average net
commissions over net commissions paid during such distributor's Base Month)
resulting in Weighted Individual Compensation (X) of $540,800. Such
distributor's allocation of Distributor Options at the end of the Illustrative
Qualification Period would be equal to the quotient of his or her Weighted
Individual Compensation (X = $540,800) divided by the Weighted Total
Compensation (Y = $300,000,000), multiplied by the total number of Distributor
Options (S = 1,605,000). Such distributor would therefore be allocated 2,893
Distributor Options.

6
<PAGE>

VESTING. For Distributor Options to vest, an Eligible Distributor will
generally be required to maintain, during the period from September 1, 1997
through December 31, 1997 (the "Vesting Period"), the Executive Pin Level he or
she achieved by the end of the Qualification Period (the "Qualifying Executive
Pin Level"). If an Eligible Distributor fails to maintain the Qualifying
Executive Pin Level for any month during the Vesting Period, the number of
Distributor Options vested in such Eligible Distributor will be recalculated at
the end of the Vesting Period to be that number of Distributor Options such
Eligible Distributor would have been allocated had he or she achieved, at the
end of the Qualification Period, the lowest Executive Pin Level held by him or
her during the Vesting Period (the "Recalculated Distributor Options"). For
example, if an Eligible Distributor ends the Qualification Period as a Diamond
level distributor with an Executive Pin Level Weighting Factor of 86% and a
Business Growth Weighting Factor of 15%, resulting in a combined weighting
factor for Weighted Individual Compensation of 101%, but during the Vesting
Period the lowest actual Executive Pin Level to which the distributor falls is
Ruby level, which carries an Executive Pin Level Weighting Factor of 78% (the
Business Growth Weighting Factor would remain unchanged), the combined
weighting factor for Weighted Individual Compensation would be reduced to 93%.
The difference between the number of Distributor Options allocated to an
Eligible Distributor at the end of the Qualification Period and the
Recalculated Distributor Options, if the amount of Recalculated Distributor
Options is lower, will be forfeited by such Eligible Distributor. If an
Eligible Distributor falls below the Gold Executive Pin Level at any time
during the Vesting Period, all Distributor Options held by such Eligible
Distributor will be immediately forfeited. Forfeited or declined options will
not vest but will revert to NSI.

EXERCISABILITY. Distributor Options vested in an Eligible Distributor will
become exercisable upon receipt of written notice from NSI of the number of
Distributor Options vested in such Eligible Distributor which is currently
estimated to be by January 31, 1998, and will remain exercisable for a four-
year period following December 31, 1997, provided the Eligible Distributor
maintains an Executive Pin Level of Gold or higher until the date of exercise.
No Distributor Options will be exercisable after December 31, 2001. In certain
jurisdictions, the exercise period may be shortened to comply with local
regulations. By exercising any portion of the Distributor Options, each
Eligible Distributor who is granted more than 3,000 Distributor Options agrees
not to resell in any given six-month period more than 33% of the shares of
Class A Common Stock issuable upon exercise of the Distributor Options
originally granted to such Eligible Distributor. Upon vesting, Distributor
Options will be exercisable at the Exercise Price of $5.75, which is 25% of the
initial price per share to the public in the Offerings.

CERTAIN FACTORS IMPACTING PROGRAM. The allocation examples presented above
are for illustrative purposes only. There can be no assurance that the number
of Eligible Distributors will remain constant during the Qualification Period.
Given the fixed number of Distributor Options available, the number of
Distributor Options allocable to an Eligible Distributor will decrease as the
total number of Eligible Distributors increases and conversely will increase as
the total number of Eligible Distributors decreases. NSI has historically
experienced periods of significant fluctuations in its total number of
executive distributors and may experience such fluctuations in the future. An
increase in the total number of Eligible Distributors during the Qualification
Period could result in a material reduction in the number of Distributor
Options allocable to an individual Eligible Distributor. The number of
Distributor Options allocable to an Eligible Distributor will also decrease as
the number of Eligible Distributors at higher Executive Pin Levels increases as
a proportion of all Eligible Distributors and conversely will increase as the
number of Eligible Distributors at higher Executive Pin Levels decreases as a
proportion of all Eligible Distributors. There can be no assurance that the
proportion of Eligible Distributors at each Executive Pin Level will remain
constant during the Qualification Period. In addition, the number of
Distributor Options allocable to an Eligible Distributor will decrease as such
Eligible Distributor's compensation decreases as a proportion of total
compensation paid to all Eligible Distributors and conversely will increase as
such Eligible Distributor's compensation increases as a proportion of total
compensation paid to all Eligible Distributors. There can be no assurance that
an Eligible Distributor's compensation will remain constant as a percentage of
total Eligible Distributor compensation during the Qualification Period.
Further, there can be no assurance that an Eligible Distributor will be able to
earn particular compensation amounts during the

7
<PAGE>

Qualification Period. In certain countries, including Japan, the formula used
in determining allocations among distributors may be modified to comply with
local regulations, which will impact the number of Distributor Options
allocated to all Eligible Distributors. The Distributor Option program is not
intended to be an Eligible Distributor's primary source of income. An Eligible
Distributor's primary income source, i.e., product sales and commissions, will
continue to be based on the efforts of the Eligible Distributor and his or her
downline organization.

REGULATORY REQUIREMENTS. The availability of the Distributor Options in each
country in which NSI distributors reside is entirely dependent upon and subject
to NSI's ability to secure any necessary regulatory approvals, qualifications
or exemptions in each such country. It is anticipated that necessary regulatory
approvals or qualifications will not be secured in certain countries until
sometime after January 1, 1997, the commencement of the Qualification Period,
and that in certain countries the exercisability of the Distributor Options may
be suspended after the commencement of the Qualification Period until further
regulatory approvals are secured. For example, South Korean officials have
indicated a preliminary willingness to allow NSI to implement the NSI Stock
Option Plan, but have reserved the right to rule on the details of the NSI
Stock Option Plan, including the exercise of the Distributor Options by South
Korean residents, at a later date. In addition, it is possible that NSI may not
be able to secure the necessary regulatory approvals or qualifications in
certain countries. In certain countries, including France, the United Kingdom,
Spain and possibly others, only existing distributors and/or existing executive
distributors will be allowed to participate in the NSI Stock Option Plan. In
the event the NSI Stock Option Plan is not implemented until after commencement
of the Qualification Period, or is suspended after commencement of such period,
in a given country (a "Deferred Qualification Country"), the formulas
referenced above will be modified as follows. For purposes of calculating
Weighted Individual Compensation and Weighted Total Compensation, a distributor
resident in a Deferred Qualification Country shall be deemed to have been paid
during each month during the Qualification Period for which the NSI Stock
Option Plan was not implemented or was suspended, net commissions equal to the
average monthly net commissions actually paid to such distributor during the
portion of the Qualification Period during which the NSI Stock Option Plan was
implemented in such Deferred Qualification Country.

PRODUCT RETURNS. By receiving an allocation of Distributor Options at the end
of the Qualification Period, each Eligible Distributor confirms his or her
agreement to continue to resell or personally consume at least 80% of all
products purchased by such Eligible Distributor per month. In addition, product
returns during the Qualification or Vesting Periods will reduce commission
levels and may affect distributor pin levels, consequently impacting the number
of Distributor Options received by an Eligible Distributor. In the event of
product returns occurring after the Qualification or Vesting Periods which
would have affected distributor pin levels or qualification for or vesting of
Distributor Options had such product returns been made during the Qualification
or Vesting Periods, NSI reserves the right to use any mechanism available to it
under the NSI distributor policies and procedures, as may be amended from time
to time, to recoup the value of the Distributor Options received by an Eligible
Distributor on the Vesting Date in excess of the value of Distributor Options
which would have vested had such returns been made prior to the Vesting Date.

EMPLOYEE STOCK BONUS AWARDS

Prior to the date of this Prospectus, the Existing Stockholders also
contributed an aggregate of 1,250,000 shares of the Company's Class A Common
Stock to NSI and its affiliates (other than the Company) for use in connection
with the employee stock bonus awards to be made by NSI and its affiliates
(other than the Company) to their respective employees in connection with the
Rule 415 Offerings. The shares of Class A Common Stock underlying each such
employee stock bonus award will be issued to the employee recipient at a rate
of 25% per year commencing one year following the date of the award, provided
the employee recipient is still employed by NSI or one of its affiliates (other
than the Company). The Company will also issue 109,000 shares of Class A Common
Stock to its employees in connection with employee stock bonus awards to be
made to the Company's employees, pursuant to the Nu Skin Asia Pacific, Inc.
1996 Stock Incentive Plan, as amended (the "1996 Stock

8
<PAGE>

Incentive Plan"), on terms substantially similar to those described above in
relation to the employee stock bonus awards to be made by NSI and its
affiliates (other than the Company).

REGULATORY AND TAX ISSUES

The Distributor Options, the shares of Class A Common Stock underlying the
Distributor Options and the employee stock bonus awards are included in this
Prospectus pursuant to Rule 415 under the Securities Act of 1933, as amended
(the "1933 Act"). The distribution of the Distributor Options will occur for
purposes of Rule 415 upon the assignment of the Distributor Options by NSI to
the distributors. The shares of Class A Common Stock will be issued by the
Company upon the exercise of the Distributor Options. The Company will not
receive any proceeds from the distribution of shares by the Company and the
Rule 415 Selling Stockholders in connection with the employee stock bonus
awards. The Company will receive the proceeds from the issuance of shares in
connection with the exercise of the Distributor Options. See "Rule 415 Selling
Stockholders."

<TABLE>
<S> <C>
Distributor Options offered by
NSI(1)........................... 1,605,000 Distributor Options
Common Stock underlying the
Distributor
Options(2) ...................... 1,605,000 shares of Class A Common Stock
Employee stock bonus awards
offered by the Rule 415 Selling
Stockholders(3).................. 1,250,000 shares of Class A Common Stock
Employee stock bonus awards
offered by the Company........... 109,000 shares of Class A Common Stock
Common Stock to be outstanding
after the Rule 415 Offerings:
Class A Common Stock(4)(6)(7)... 13,429,000 shares
Class B Common Stock(5)(7)...... 71,696,675 shares
Total Common Stock............ 85,125,675 shares
New York Stock Exchange symbol.... "NUS"
Voting rights..................... The Class A Common Stock and Class B Common
Stock vote as a single class on all mat-
ters, except as otherwise required by law,
with each share of Class A Common Stock en-
titling its holder to one vote and each
share of Class B Common Stock entitling its
holder to ten votes. In all other respects
the holders of Class A Common Stock and the
holders of Class B Common Stock have equal
rights. All of the shares of Class B Common
Stock are owned by the Existing Stockhold-
ers and certain of their affiliates. The
Existing Stockholders and certain of their
affiliates beneficially own shares of Com-
mon Stock having approximately 98.2% of the
combined voting power of the outstanding
shares of Common Stock.
</TABLE>

9
<PAGE>

<TABLE>
<S> <C>
Risk Factors........................ Prospective investors should consider cer-
tain risk factors and uncertainties rela-
tive to the Company, its business and the
Distributor Options and the Class A Common
Stock offered hereby including, without
limitation, risks related to the allocation
and vesting of the Distributor Options, the
decrease in the number of Distributor Op-
tions available, the effect of product re-
turns, restrictions on the resale of shares
underlying Distributor Options, regulatory
and taxation risks, the Company's reliance
on the independent distributors of NSI, the
potential effects of adverse publicity, the
potential negative impact of distributor
actions, government regulation of direct
selling activities, government regulation
of products and marketing, reliance on cer-
tain distributors and the potential diver-
gence of interests between distributors and
the Company, the Company's entry into new
markets, the management of the Company's
growth, the possible adverse effect on the
Company of a change in the status of Hong
Kong, the Company's relationship with and
reliance upon NSI and potential conflicts
of interest related thereto, control by the
Existing Stockholders and the anti-takeover
effect of dual classes of Common Stock, the
impact on income due to the Distributor Op-
tions, the Company's reliance on and con-
centration of outside manufacturers, the
Company's reliance on operations of and
dividends and distributions from its sub-
sidiaries, issues related to transfer pric-
ing and taxation, potential increases in
distributor compensation expense,
seasonality and cyclicality, product lia-
bility competition, operations outside the
United States, currency risks, import re-
strictions, duties and regulation of con-
sumer goods, the anti-takeover effects of
certain charter, contractual and statutory
provisions, the absence of a public market
for the Class A Common Stock, factors re-
lated to the determination of the offering
price, fluctuations in the price of the
Class A Common Stock, the existence of
shares eligible for future sale into the
Company's market for the Class A Common
Stock upon exercise of the Distributor Op-
tions, employee stock bonus awards and oth-
erwise, dilution and the absence of divi-
dends.
</TABLE>

- --------
(1) Consists of a divisible and assignable option granted by the Company to NSI
to purchase shares of Class A Common Stock contributed to the Company by
the Existing Stockholders prior to the Rule 415 Offerings, which option
will be divided among and assigned to distributors by NSI pursuant to the
NSI Stock Option Plan.
(2) Consists of shares of Class A Common Stock issuable upon the exercise of
the Distributor Options at the Exercise Price of $5.75, which is 25% of the
initial price per share to the public in the Offerings.
(3) Includes shares of Class A Common Stock contributed to the Rule 415 Selling
Stockholders prior to the Rule 415 Offerings by certain Existing
Stockholders.

10
<PAGE>

(4) Includes: (i) 2,964,000 shares of Class A Common Stock issued and sold in
the Rule 415 Offerings (assuming exercise of all 1,605,000 Distributor
Options); and (ii) 10,465,000 shares of Class A Common Stock sold in the
Offerings by the Company and the Selling Stockholders.
(5) Gives effect to the conversion by the Existing Stockholders prior to the
Rule 415 Offerings of: (a) 1,605,000 shares of Class B Common Stock into
shares of Class A Common Stock for issuance upon the exercise of the
Distributor Options; and (b) 1,250,000 shares of Class B Common Stock into
shares of Class A Common Stock for issuance pursuant to employee stock
bonus awards.
(6) Does not include: (i) 3,891,000 shares of Class A Common Stock reserved for
issuance pursuant to the 1996 Stock Incentive Plan; and (ii) 250,825 shares
of Class A Common Stock subject to a stock option which was granted to an
executive officer of the Company. See "Management--1996 Stock Incentive
Plan," "Certain Relationships and Related Transactions" and "Shares
Eligible for Future Sales."
(7) All shares of Class B Common Stock are currently held by the Existing
Stockholders and certain of their affiliates and each such share is
convertible at any time into one share of Class A Common Stock and converts
automatically into one share of Class A Common Stock (i) upon a transfer to
a person other than an Existing Stockholder, and (ii) if the number of
shares of Class B Common Stock becomes less than 10% of the aggregate
number of shares of Common Stock outstanding. See "Description of Capital
Stock--Common Stock--Conversion."

----------------

Nu Skin (R), Interior Design Nutritionals(TM), IDN (R), a logo consisting of
an image of a gold fountain with the words "Nu Skin" below it, and a logo
consisting of the stylized letters "IDN" in black and red are trademarks of NSI
which are licensed to the Company. The italicized product names used in this
Prospectus are product names and also, in certain cases, trademarks and are the
property of NSI. All other tradenames and trademarks appearing in this
Prospectus are the property of their respective holders. See "Business--
Relationship with NSI--Trademark/Tradename License Agreements" and "--Licensing
and Sales Agreements." The principal executive offices of the Company are
located at 75 West Center Street, Provo, Utah 84601, and the Company's
telephone number is (801) 345-6100.

In this Prospectus, references to "dollars" and "$" are to United States
dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, territories, possessions and all areas subject to its
jurisdiction, and references to "yen" and "(Yen)" are to Japanese yen.

11
<PAGE>

SUMMARY COMBINED FINANCIAL AND OTHER INFORMATION

The following tables set forth summary combined, pro forma and other
financial information of the Company.

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------- ------------------
1991 1992 1993 1994 1994(/1/) 1995 1995 1996
--------- -------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 677 $ 42,919 $110,624 $254,637 $264,440 $358,609 $241,412 $471,312
Cost of sales........... 462 14,080 38,842 86,872 82,241 96,615 64,110 133,592
--------- -------- -------- -------- -------- -------- -------- --------
Gross profit............ 215 28,839 71,782 167,765 182,199 261,994 177,302 337,720
Operating expenses:
Distributor incen-
tives................. 130 14,659 40,267 95,737 101,372 135,722 91,893 175,149
Selling, general and
administrative........ 1,249 10,065 27,150 44,566 48,753 67,475 44,099 69,970
--------- -------- -------- -------- -------- -------- -------- --------
Operating income........ (1,164) 4,115 4,365 27,462 32,074 58,797 41,310 92,601
Other income (expense),
net.................... 3 160 133 443 (394) 511 (408) 1,530
--------- -------- -------- -------- -------- -------- -------- --------
Income before provision
for income taxes....... (1,161) 4,275 4,498 27,905 31,680 59,308 40,902 94,131
Provision for income
taxes.................. -- 1,503 417 10,226 10,071 19,097 13,170 33,810
--------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ (1,161) $ 2,772 $ 4,081 $ 17,679 $ 21,609 $ 40,211 $ 27,732 $ 60,321
========= ======== ======== ======== ======== ======== ======== ========
</TABLE>

<TABLE>
<S> <C> <C> <C>
PRO FORMA INCOME STATEMENT DATA(/2/)(/3/):
Revenue........................................... $358,609 $241,412 $471,312
Cost of sales..................................... 96,615 64,110 133,592
-------- -------- --------
Gross profit...................................... 261,994 177,302 337,720
Operating expenses:
Distributor incentives........................... 135,722 91,893 175,149
Selling, general and administrative.............. 74,433 49,317 75,188
-------- -------- --------
Operating income.................................. 51,839 36,092 87,383
Other income (expense), net(/4/) ................. (2,298) (3,217) 1,997
-------- -------- --------
Income before provision for income taxes.......... 49,541 32,875 89,380
Provision for income taxes........................ 19,005 12,612 32,471
-------- -------- --------
Net income (loss)................................. $ 30,536 $ 20,263 $ 56,909
======== ======== ========
Net income per share.............................. $ .36 $ .24 $ .67
Weighted average common shares outstanding(/5/)... 85,377 85,377 85,377
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED(/6/)
-------- ----------------
BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................. $ 81,079 $170,200
Working capital....................................... 60,828 75,665
Total assets.......................................... 168,907 288,797
Short term notes payable to stockholders.............. -- 66,893
Short term note payable to NSI........................ -- 10,000
Long term note payable to NSI......................... -- 10,000
Stockholders' equity.................................. 78,259 111,256
</TABLE>

<TABLE>
<CAPTION>
AS AS
AS OF SEPTEMBER 30, OF DECEMBER 31, OF SEPTEMBER 30,
------------------------------ ---------------- ------------------
1991 1992 1993 1994 1994 1995 1995 1996
----- ------ ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER INFORMATION(/7/):
Number of active
distributors........... -- 33,000 106,000 152,000 170,000 236,000 224,000 331,000
Number of executive
distributors........... -- 649 2,788 5,835 6,083 7,550 7,519 17,809
</TABLE>

12
<PAGE>

- --------
(1) The information for the year ended December 31, 1994 is not included in the
Company's Combined Financial Statements included elsewhere in this
Prospectus. Such information has been presented for comparative purposes
only.

(2) The unaudited pro forma income statement data reflects the Reorganization,
the Offerings and the following adjustments as if such events had occurred
on January 1, 1995: (i) the amortization over a 20-year period of a $25.0
million payment, consisting of $5.0 million in cash and $20.0 million in
notes, to NSI for the exclusive rights to distribute NSI products in
Thailand, Indonesia, Malaysia, the Philippines, the PRC, Singapore and
Vietnam (the "License Fee"); (ii) the recognition by the Company of
additional management charges of $4.4 million per year relating to certain
support services provided to the Company by NSI and an NSI affiliate; (iii)
estimated annual compensation expense of $1.3 million related to the
employee stock bonus awards granted to employees of the Company, NSI and
its affiliates; (iv) adjustments for U.S. Federal and state income taxes as
if the Company had been taxed as a C corporation rather than as an S
corporation since inception; and (v) increased interest expense of $2.7
million relating to the issuance of $81.9 million of interest bearing S
distribution notes (the "S Distribution Notes"), $15.0 million of which has
been repaid from the proceeds of the Offerings, due and payable within six
months (8% interest per annum) to the Existing Stockholders in respect of
the earned and undistributed taxable S corporation earnings and capital at
September 30, 1996, that would have been distributed had the Company's S
corporation status been terminated on September 30, 1996.

(3) The unaudited pro forma income statement data does not reflect the
estimated non-cash compensation expense of $23.1 million in connection with
the one-time grant of the Distributor Options at the Exercise Price of
$5.75, which is 25% of the initial price per share to the public in the
Offerings. The granting and vesting of the Distributor Options will be
conditioned upon distributor performance under the Global Compensation Plan
and the NSI Stock Option Plan. The vesting of the Distributor Options is
scheduled to occur on December 31, 1997. The Company will record
distributor stock incentive expense for these non-employee stock options.
See "Certain Relationships and Related Transactions" and "Shares Eligible
for Future Sale."

(4) Other pro forma income and expense includes: (i) increased interest expense
of $2.7 million for the year ended December 31, 1995 and for the nine
months ended September 30, 1995, relating to the issuance of $81.9 million
of S Distribution Notes ($15.0 million of which has been repaid from the
proceeds of the Offerings); (ii) increased interest expense of $0.9
million, $0.7 million and $0.1 million for the year ended December 31, 1995
and for the nine months ended September 30, 1995 and 1996, respectively,
relating to the issuance of $20.0 million in notes as partial payment of
the License Fee payable to NSI; and (iii) increased interest income of $0.8
million, $0.6 million and $0.6 million for the year ended December 31, 1995
and for the nine months ended September 30, 1995 and 1996, respectively,
relating to an estimated $10.0 million note receivable from NSI as
consideration for the Distributor Options.

(5) Reflects 80,250,000 shares of Common Stock and Common Stock equivalents
outstanding after giving effect to the Reorganization, increased by the
sale of 4,750,000 shares of Class A Common Stock, the award of 109,000
shares of Common Stock to employees of the Company and an option granted to
an executive officer of the Company to purchase 267,500 shares of Class A
Common Stock (16,675 shares of which were issued upon partial exercise of
such option following the Reorganization and prior to the Offerings and
sold in connection with the Offerings). Supplemental income per share,
calculated as if $25.0 million of the proceeds from the Offerings were used
to repay notes payable, had a dilutive effect of less than 2%, and
therefore is not presented.

(6) The as adjusted balance sheet data as of September 30, 1996 reflects
estimated deferred compensation expense and additional paid-in capital of
$23.1 million in connection with the one-time grant of the Distributor
Options. The as adjusted balance sheet data also reflects: (i) the sale of
4,750,000 shares of Class A Common Stock pursuant to the Offerings and the
exercise by distributors of all 1,605,000 Distributor Options to purchase
shares of Class A Common Stock at the Exercise Price of $5.75; (ii) the
issuance of $81.9 million of S Distribution Notes to the Selling
Stockholders; (iii) a $15.0 million partial payment of the S Distribution
Notes from the proceeds of the Offerings; (iv) $20.0 million in notes
payable to NSI, consisting of a $10 million short-term note due on January
15, 1997 and a $10 million long-term note due on January 15, 1998, which
have been issued as partial payment of the $25.0 million License Fee to
NSI; (v) an estimated $10.0 million note receivable from NSI, issued by NSI
as partial consideration for the Distributor Options; (vi) estimated
deferred compensation and additional paid-in capital of $5.3 million, which
represents the estimated compensation expense related to the employee stock
bonus awards granted to employees of the Company, NSI and its affiliates
which vest over a period of four years; (vii) $9.2 million of cash and
additional paid-in capital in connection with the exercise of the
Distributor Options; and (viii) the recognition of a deferred tax asset of
$5.8 million relating to adjustments for U.S. Federal and state income
taxes as if the Company had been taxed as a C corporation rather than as an
S corporation since inception. No adjustment has been made to give effect
to the Company's earned and undistributed taxable S corporation earnings
for the period from October 1, 1996 through the S Termination Date (as
defined herein). The Company anticipates the S Distribution Notes to be
approximately $90.0 million as of the S Termination Date. See "The
Reorganization and S Corporation Distribution." The Company has reserved
$65.0 million of cash on hand for repayment of the S Distribution Notes.
The balance of the S Distribution Notes (approximately $10.0 million) will
be repaid from cash generated by operations.

(7) Active distributors are those distributors who are resident in the
countries in which the Company operates and who have purchased products
during the three months ended as of the date indicated, rounded to the
nearest thousand. An executive distributor is an active distributor who has
submitted a qualifying letter of intent to become an executive distributor,
achieved specified personal and group sales volumes for a four month period
and maintained such specified personal and group sales volumes thereafter.

13
<PAGE>

RISK FACTORS

An investment in the Distributor Options or the Class A Common Stock
involves special considerations and significant risks, including, but not
limited to, those discussed or referred to below. Prospective investors should
carefully consider the following risks and information in conjunction with the
other information contained in this Prospectus before acquiring Distributor
Options or shares of Class A Common Stock.

RISKS RELATED TO ALLOCATION AND VESTING OF DISTRIBUTOR OPTIONS; DECREASE IN
NUMBER OF DISTRIBUTOR OPTIONS AVAILABLE; EFFECT OF PRODUCT RETURNS

Each allocation of Distributor Options made to an Eligible Distributor that
is an entity (such as a partnership or corporation) shall be made by NSI
solely to the entity, not to the owners of the entity individually. For an
Eligible Distributor's Options to vest, such Eligible Distributor will
generally be required to maintain his or her Qualifying Executive Pin Level
during the Vesting Period. If an Eligible Distributor fails to maintain his or
her Qualifying Executive Pin Level for any month during the Vesting Period,
the number of Distributor Options vested in such Eligible Distributor will be
recalculated at the end of the Vesting Period. If an Eligible Distributor
falls below the Gold Executive Pin Level at any time during the Vesting
Period, all Distributor Options held by such Eligible Distributor will be
immediately forfeited. Forfeited or declined options will not vest but will
revert to NSI. Distributor Options vested in an Eligible Distributor will
become exercisable upon receipt of written notice from NSI of the number of
Distributor Options vested in such Eligible Distributor which is currently
estimated to be by January 31, 1998, and will remain exercisable for a four-
year period following December 31, 1997, provided the Eligible Distributor
maintains an Executive Pin Level of Gold or higher until the date of exercise.
No Distributor Options will be exercisable after December 31, 2001. In certain
jurisdictions, the exercise period may be shortened to comply with local
regulations. See "Plan of Distribution--Distributor Options--Vesting" and "--
Exercisability."

There can be no assurance that the number of Eligible Distributors will
remain constant during the Qualification Period. Given the fixed number of
Distributor Options available, the number of Distributor Options allocable to
an Eligible Distributor will decrease as the total number of Eligible
Distributors increases and conversely will increase as the total number of
Eligible Distributors decreases. NSI has historically experienced periods of
significant fluctuations in its total number of executive distributors and may
experience such fluctuations in the future. An increase in the total number of
Eligible Distributors during the Qualification Period could result in a
material reduction in the number of Distributor Options allocable to an
individual Eligible Distributor. The number of Distributor Options allocable
to an Eligible Distributor will also decrease as the number of Eligible
Distributors at higher Executive Pin Levels increases as a proportion of all
Eligible Distributors and conversely will increase as the number of Eligible
Distributors at higher Executive Pin Levels decreases as a proportion of all
Eligible Distributors. There can be no assurance that the proportion of
Eligible Distributors at each Executive Pin Level will remain constant during
the Qualification Period. In addition, the number of Distributor Options
allocable to an Eligible Distributor will decrease as such Eligible
Distributor's compensation decreases as a proportion of total compensation
paid to all Eligible Distributors and conversely will increase as such
Eligible Distributor's compensation increases as a proportion of total
compensation paid to all Eligible Distributors. There can be no assurance that
an Eligible Distributor's compensation will remain constant as a percentage of
total Eligible Distributor compensation during the Qualification Period.
Further, there can be no assurance that an Eligible Distributor will be able
to earn particular compensation amounts during the Qualification Period. In
certain countries, including Japan, the formula used in determining
allocations among distributors may be modified to comply with local
regulations, which will impact the number of Distributor Options allocated to
all Eligible Distributors. See "Plan of Distribution--Distributor Options--
Certain Factors Impacting Program."

Product returns during the Qualification or Vesting Periods will reduce
commission levels and may affect distributor pin levels, consequently
impacting the number of Distributor Options received by an Eligible

14
<PAGE>

Distributor. In the event of product returns occurring after the Qualification
or Vesting Periods which would have affected distributor pin levels or
qualification for or vesting of Distributor Options had such product returns
been made during the Qualification or Vesting Periods, NSI reserves the right
to use any mechanism available to it under the NSI distributor policies and
procedures, as may be amended from time to time, to recoup the value of the
Distributor Options received by an Eligible Distributor on the Vesting Date in
excess of the value of Distributor Options which would have vested had such
returns been made prior to the Vesting Date. There can be no assurance that
product returns will not affect the number of Distribution Options or the
value of Distribution Options received by an Eligible Distributor. See "Plan
of Distribution--Distributor Options--Product Returns."

NSI has granted in the past, and may continue to grant in the future,
exceptions under its Global Compensation Plan permitting various distributors
to receive compensation at higher levels than they would have been entitled to
receive based exclusively on their personal and group sales volumes. Although
exceptions are discouraged, management believes that this arrangement is
important in retaining the loyalty and dedication of distributors in certain
situations. However, allocations of Distributor Options shall generally be
based on the Executive Pin Level at which Eligible Distributors receive
commissions, giving consideration to any temporary exceptions which may be
granted by NSI from time to time. See "Plan of Distribution."

RESTRICTIONS ON RESALE OF SHARES UNDERLYING DISTRIBUTOR OPTIONS

By exercising any portion of his or her Distributor Options, each Eligible
Distributor who is granted more than 3,000 Distributor Options agrees not to
resell in any given six-month period more than 33% of the shares of Class A
Common Stock issuable upon exercise of the Distributor Options originally
granted to such Eligible Distributor. See "Plan of Distribution--Distributor
Options--Exercisability."

REGULATORY AND TAXATION RISKS

The availability of Distributor Options and employee stock bonus awards in
each country in which NSI distributors and/or employees reside is entirely
dependent upon and subject to NSI's ability to secure any necessary regulatory
approvals, qualifications or exemptions in each such country. There can be no
assurance that such qualifications will be secured or, once secured, will not
be suspended. It is possible that NSI may not be able to secure the necessary
regulatory approvals or qualifications in certain countries. The receipt of
Distributor Options and employee stock bonus awards will also subject the
recipient to potentially material income tax and capital gains tax
implications. The Company and its affiliates anticipate that the Distributor
Options, the shares of Class A Common Stock underlying the Distributor Options
and the employee stock bonus awards will be qualified in some form pursuant to
the securities laws of each jurisdiction in which the Company and its
affiliates operate. There can be no assurance, however, that NSI will be able
to qualify the Distributor Options and the employee stock bonus awards in each
jurisdiction or that, if qualified, the governmental authorities in such
jurisdictions will not suspend qualifications or require material
modifications to the terms of the programs as they are currently contemplated
to be implemented. In certain European countries, including France, the United
Kingdom, Spain and possibly others, only existing distributors and/or
executive distributors will be allowed to participate in the NSI Stock Option
Plan. No assurances can be given as to the timing of any governmental
approvals received in connection with the Distributor Options. In addition,
there can be no assurance that the laws and relevant regulations and judicial
and administrative interpretations in such jurisdictions will not change in a
manner that has a material impact on the ability of NSI to adopt or maintain
such programs in such jurisdictions. The NSI Stock Option Plan, as it is
implemented or administered in any given country where distributors of NSI
reside or act as independent distributors of NSI, may be amended or modified
by NSI's board of directors from time to time to comply with the legal
requirements and restrictions of such country. See "Plan of Distribution--
Distributor Options--Regulatory Requirements," "Rule 415 Selling
Stockholders--Regulatory and Tax Issues" and "Certain United States Tax
Consequences to Non-United States Holders."

15
<PAGE>

RELIANCE UPON INDEPENDENT DISTRIBUTORS OF NSI

The Company distributes its products exclusively through independent
distributors who have contracted directly with NSI to become distributors.
Consequently, the Company does not contract directly with distributors but
licenses its distribution system and distributor force from NSI. Distributor
agreements with NSI are voluntarily terminable by distributors at any time.
The Company's revenue is directly dependent upon the efforts of these
independent distributors, and any growth in future sales volume will require
an increase in the productivity of these distributors and/or growth in the
total number of distributors. As is typical in the direct selling industry,
there is turnover in distributors from year to year, which requires the
sponsoring and training of new distributors by existing distributors to
maintain or increase the overall distributor force and motivate new and
existing distributors. The Company experiences seasonal decreases in
distributor sponsoring and product sales in some of the countries in which the
Company operates because of local holidays and customary vacation periods. The
size of the distribution force can also be particularly impacted by general
economic and business conditions and a number of intangible factors such as
adverse publicity regarding the Company or NSI, or the public's perception of
the Company's products, product ingredients, NSI's distributors or direct
selling businesses in general. Historically, the Company has experienced
periodic fluctuations in the level of distributor sponsorship (as measured by
distributor applications). However, because of the number of factors that
impact the sponsoring of new distributors, and the fact that the Company has
little or no control over the level of sponsorship of new distributors, the
Company cannot predict the timing or degree of those fluctuations. There can
be no assurance that the number or productivity of the Company's distributors
will be sustained at current levels or increased in the future. In addition,
the number of distributors as a percent of the population in a given country
or market could theoretically reach levels that become difficult to exceed due
to the finite number of persons inclined to pursue a direct selling business
opportunity. This is of particular concern in Taiwan, where industry sources
have estimated that up to 10% of the population is already involved in some
form of direct selling.

Since distributor agreements are entered into between NSI and distributors,
all of the distributors who generate revenue for the Company are distributors
of NSI. See "--Relationship with and Reliance on NSI; Potential Conflicts of
Interest." Because of this fact, the Company cannot control who becomes a
distributor. In addition, because distributors are independent contractors of
NSI, neither NSI nor the Company is in a position to provide the same level of
direction, motivation and oversight as either would with respect to its own
employees. Although NSI has a compliance department responsible for the
enforcement of the policies and procedures that govern distributor conduct, it
can be difficult to enforce these policies and procedures because of the large
number of distributors and their independent status, as well as the impact of
certain resale price maintenance and other regulations that limit the ability
of NSI and the Company to monitor and control the sales practices of
distributors.

POTENTIAL EFFECTS OF ADVERSE PUBLICITY

The size of the distribution force and the results of the Company's
operations can be particularly impacted by adverse publicity regarding the
Company or NSI, including publicity regarding the legality of the Company's
distribution system, the quality of the Company's products and product
ingredients, regulatory investigations of the Company and its products,
distributor actions and the public's perception of NSI's distributors and
direct selling businesses generally.

In 1991 and 1992, NSI was the subject of investigations by various
regulatory agencies of eight states. All of the investigations were concluded
satisfactorily. However, the publicity associated with the investigations
resulted in a material adverse impact to NSI's results of operations. The
Company has not been subject to investigations in Asia, however, the denial by
the Malaysian government in 1995 of the Company's business permits due to
distributor action resulted in adverse publicity for the Company. There can be
no assurance that the Company will not be subject to adverse publicity in the
future as a result of similar regulatory investigations, similar distributor
actions or other factors or that such adverse publicity will not have a
material adverse effect

16
<PAGE>

on the Company's business or results of operations. See "--Government
Regulation of Direct Selling Activities," "--Government Regulation of Products
and Marketing" and "--Entering New Markets."

POTENTIAL NEGATIVE IMPACT OF DISTRIBUTOR ACTIONS

Distributor actions can negatively impact the Company and its products. For
example, in October 1995, the Company's business permit applications were
denied by the Malaysian government as the result of activities by certain NSI
distributors before required government approvals could be secured. NSI
subsequently terminated the distributorship rights of some of the distributors
involved and elected to withdraw from the Malaysian market for a period of
time. The denial by the Malaysian government of the Company's business permit
application resulted in adverse publicity for the Company. Distributor
activities in other countries in which the Company has not commenced
operations may similarly result in an inability to secure, or delay in
securing required regulatory and business permits. See "Business--New Market
Opportunities." In addition, the publicity resulting from such distributor
activities and other distributor activities such as inappropriate earnings
claims and product representations by distributors can make the sponsoring and
retaining of distributors more difficult, thereby negatively impacting sales.
See "--Potential Effects of Adverse Publicity." Furthermore, the Company's
business and results of operations could be adversely affected if NSI
terminates a significant number of distributors or certain distributors who
play a key role in the Company's distribution system. There can be no
assurance that these or other distributor actions will not have a material
adverse effect on the Company's business or results of operations.

GOVERNMENT REGULATION OF DIRECT SELLING ACTIVITIES

Direct selling activities are regulated by various governmental agencies.
These laws and regulations are generally intended to prevent fraudulent or
deceptive schemes, often referred to as "pyramid" or "chain sales" schemes,
that promise quick rewards for little or no effort, require high entry costs,
use high pressure recruiting methods and/or do not involve legitimate
products. In Japan, the Company's distribution system is regulated under the
"Door-to-Door" Sales Law, which requires the submission of specific
information concerning the Company's business and products and which provides
certain cancellation and cooling-off rights for consumers and new
distributors. Management has been advised by counsel that in some respects
Japanese laws are becoming more restrictive with respect to direct selling in
Japan. In Taiwan, the Fair Trade Law (and the Enforcement Rules and
Supervisory Regulations of Multi-Level Sales) requires the Company to comply
with registration procedures and also provides distributors with certain
rights regarding cooling-off periods and product returns. The Company also
complies with South Korea's strict Door-to-Door Sales Act, which requires,
among other things, the regular reporting of revenue, the registration of
distributors together with the issuance of a registration card, and the
maintaining of a current distributor registry. This law also limits the amount
of sponsoring bonuses that a registered multi-level marketing company can pay
to its distributors to 35% of revenue in a given month.

As is the case with most network marketing companies, NSI and the Company
have from time to time received inquiries from various government regulatory
authorities regarding the nature of their business and other issues such as
compliance with local business opportunity and securities laws. Although to
date none of these inquiries has resulted in a finding materially adverse to
the Company or NSI, adverse publicity resulting from inquiries into NSI's
operations by certain government agencies in the early 1990's, stemming in
part out of alleged inappropriate product and earnings claims by distributors,
materially adversely affected NSI's business and results of operations. There
can be no assurance that the Company or NSI will not face similar inquiries in
the future which, either as a result of findings adverse to the Company or NSI
or as a result of adverse publicity resulting from the instigation of such
inquiries, could have a material adverse effect on the Company's business and
results of operations. See "--Potential Effects of Adverse Publicity."

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respects with the laws and regulations relating to direct selling activities
of the countries in which the Company currently operates. Even though
management believes that laws governing direct selling are generally becoming
more permissive in certain Asian countries, many countries, including
Singapore, one of the Company's potential markets, currently have laws in
place that would prohibit the Company and NSI from conducting business in such
markets. There can be no assurance that the Company will be allowed to conduct
business in each of the new markets or continue to conduct business in each of
its existing markets licensed from NSI. See "--Entering New Markets."

GOVERNMENT REGULATION OF PRODUCTS AND MARKETING

The Company and NSI are subject to or affected by extensive governmental
regulations not specifically addressed to network marketing. Such regulations
govern, among other things, (i) product formulation, labeling, packaging and
importation, (ii) product claims and advertising, whether made by the Company,
NSI or NSI distributors, (iii) fair trade and distributor practices, and (iv)
taxes, transfer pricing and similar regulations that affect foreign taxable
income and customs duties.

The Japanese Ministry of Health and Welfare ("MOHW") requires the Company to
possess an import business license and to register each personal care product
imported into the country. Packaging and labeling requirements are also
specified. The Company has had to reformulate many products to satisfy MOHW
regulations. In Japan, nutritional foods, drugs and quasi-drugs are all
strictly regulated. The chief concern involves the types of claims and
representations that can be made regarding the efficacy of nutritional
products. In Taiwan, all "medicated" cosmetic and pharmaceutical products,
including PharmAssist, require registration. In Hong Kong and Macau,
"pharmaceutical" products are strictly regulated. In South Korea, the Company
is subject to and has obtained the mandatory certificate of confirmation as a
qualified importer of cosmetics under the Pharmaceutical Affairs Law and is
required to obtain additional product approvals for each of the 45 categories
of cosmetic products which it imports. Each new cosmetic product undergoes a
60-day post-customs inspection where, in addition to compliance with
ingredient requirements, each product is inspected for compliance with South
Korean labeling requirements. There can be no assurance that these or other
applicable regulations will not prevent the Company from introducing new
products into its markets or require the reformulation of existing products.

Based on the Company's experience and research (including assistance from
counsel) and the nature and scope of inquiries from government regulatory
authorities, the Company believes that it is in material compliance with all
regulations applicable to the Company. Despite this belief, either the Company
or NSI could be found not to be in material compliance with existing
regulations as a result of, among other things, the considerable
interpretative and enforcement discretion given to regulators or misconduct by
independent distributors. In 1994, NSI and three of its distributors entered
into a consent decree with the Federal Trade Commission (the "FTC") with
respect to its investigation of certain product claims and distributor
practices, pursuant to which NSI paid approximately $1 million to settle the
FTC investigation. NSI is currently in discussions with the FTC regarding its
compliance with such consent decree and other product issues raised by the
FTC. There can be no assurances that the Company will not be subject to
similar inquiries and regulatory investigations or disputes and the effects of
any adverse publicity resulting therefrom. Any assertion or determination that
either the Company, NSI or any NSI distributors are not in compliance with
existing laws or regulations could potentially have a material adverse effect
on the Company's business and results of operations. In addition, in any
country or jurisdiction, the adoption of new laws or regulations or changes in
the interpretation of existing laws or regulations could generate negative
publicity and/or have a material adverse effect on the Company's business and
results of operations. The Company cannot determine the effect, if any, that
future governmental regulations or administrative orders may have on the
Company's business and results of operations. Moreover, governmental
regulations in countries where the Company plans to commence or expand
operations may prevent, delay or limit market entry of certain products or
require the reformulation of such products. Regulatory action, whether or not
it results in a final determination adverse to the Company or NSI, has the
potential to create negative publicity, with detrimental effects on the
motivation and recruitment of distributors and, consequently, on the Company's

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<PAGE>

sales and earnings. See "--Potential Effects of Adverse Publicity," "--
Entering New Markets" and "Business--Government Regulation--Regulation of
Products and Marketing."

RELIANCE ON CERTAIN DISTRIBUTORS; POTENTIAL DIVERGENCE OF INTERESTS BETWEEN
DISTRIBUTORS AND THE COMPANY

The Company's Global Compensation Plan allows distributors to sponsor new
distributors. The sponsoring of new distributors creates multiple distributor
levels in the network marketing structure. Sponsored distributors are referred
to as " downline" distributors within the sponsoring distributor's "downline
network." If downline distributors also sponsor new distributors, additional
levels of downline distributors are created, with the new downline
distributors also becoming part of the original sponsor's "downline network."
As a result of this network marketing distribution system, distributors
develop relationships with other distributors, both within their own countries
and internationally. The Company believes that its revenue is generated from
thousands of distributor networks. However, the Company estimates that
approximately 520 distributorships worldwide comprise NSI's two highest
Executive Pin Levels. These distributorships have developed extensive downline
networks which consist of thousands of sub-networks. Together with such
networks, these distributorships account for substantially all of the
Company's revenue. Consequently, the loss of such a high-level distributor or
another key distributor together with a group of leading distributors in such
distributor's downline network, or the loss of a significant number of
distributors for any reason, could adversely affect sales of the Company's
products, impair the Company's ability to attract new distributors and
adversely impact earnings.

Under the Global Compensation Plan, a distributor receives commissions based
on products sold by the distributor and by participants in the distributor's
worldwide downline network, regardless of the country in which such
participants are located. The Company, on the other hand, receives revenues
based almost exclusively on sales of products to distributors within the
Company's markets. So, for example, if a distributor located in Japan sponsors
a distributor in Europe, the Japanese distributor could receive commissions
based on the sales made by the European distributor, but the Company would not
receive any revenue since the products would have been sold outside of the
Company's markets. The interests of the Company and distributors therefore
diverge somewhat in that the Company's primary objective is to maximize the
amount of products sold within the Company's markets, while the distributors'
objective is to maximize the amount of products sold by the participants in
the distributors' worldwide downline networks. The Company and NSI have
observed that the commencement of operations in a new country tends to
distract the attention of distributors from the established markets for a
period of time while key distributors begin to build their downline networks
within the new country. NSI is currently contemplating opening operations in
additional countries outside of the Company's markets. To the extent
distributors focus their energies on establishing downline networks in these
new countries, and decrease their focus on building organizations within the
Company's markets, the Company's business and results of operations could be
adversely affected. Furthermore, the Company itself is currently contemplating
opening new markets. In the event distributors focus on these new markets,
sales in existing markets might be adversely affected. There can be no
assurance that these new markets will develop or that any increase in sales in
new markets will not be more than offset by a decrease in sales in the
existing markets.

ENTERING NEW MARKETS

As part of its growth strategy, the Company has acquired from NSI the right
to act as NSI's exclusive distribution vehicle in Thailand, Indonesia,
Malaysia, the Philippines, the PRC, Singapore and Vietnam. The Company has
undertaken a preliminary review of the laws and regulations to which its
operations would be subject in Thailand, the Philippines, Indonesia, Malaysia,
the PRC, Vietnam and Singapore. Given existing regulatory environments and
economic conditions, the Company's entrance into Singapore and Vietnam is not
anticipated in the short to mid-term. The Company currently intends, subject
to receipt of government approvals, to commence operations in Thailand in the
near future and has conducted preliminary investigations into the feasibility
of opening the other markets in the countries for which the Company has the
right to act as NSI's exclusive distributor. The regulatory and political
climate in these other markets is such that a replication of the Company's
current operating structure cannot be guaranteed. Because the Company's
personal care and

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<PAGE>

nutritional product lines are positioned as premium product lines, the market
potential for the Company's product lines in relatively less developed
countries, such as the PRC and Vietnam, remains to be determined.
Modifications to each product line may be needed to accommodate the market
conditions in each country, while maintaining the integrity of the Company's
products. No assurance can be given that the Company will be able to
successfully reformulate its product lines in any of its new markets to
attract local consumers.

Each of the proposed new markets will present additional unique difficulties
and challenges. In Thailand, for example, businesses which are more than 50%
owned by non-citizens are not permitted to operate unless they have an Alien
Business Permit, which is frequently difficult to obtain. Under the Treaty of
Amity and Economic Relations between Thailand and the United States (the
"Treaty of Amity") an Alien Business Permit is not required if a Thailand
business is owned by an entity organized in the United States, a majority of
whose owners are U.S. citizens or entities. From time to time, it has been
reported that certain Thailand government officials have considered supporting
the termination of the Treaty of Amity. There can be no assurance that the
Company will ever be able to obtain all of the necessary permits and approvals
to commence operations in Thailand. The Company could face particular
difficulties in commencing operations in Thailand if the Treaty of Amity were
terminated and the Company were forced to obtain an Alien Business Permit.

The PRC has also proven to be a particularly difficult market for foreign
corporations due to its extensive government regulation and the historical
political tenants of the PRC government. In order to enter the market in the
PRC, the Company may be required to create a joint venture enterprise with a
Chinese entity and to establish a local manufacturing presence, which will
entail a significant investment on the Company's part. The Company will likely
have to apply for licenses on a province by province basis and the
repatriation of the Company's profits will be subject to restrictions on
currency conversion and the fluctuations of the government controlled exchange
rate. In addition, because distribution systems are greatly fragmented, the
Company may be forced to use business models significantly different from
those used by the Company in more developed countries. The lack of a
comprehensive legal system and the uncertain and sporadic enforcement of
existing legislation and laws could also have an adverse effect on the
Company's proposed business in the PRC.

The other potential new markets also present significant regulatory,
political and economic obstacles to the Company. In Singapore, for example,
network marketing is currently illegal and is not permitted under any
circumstances. Although the Company believes that this restriction will
eventually be relaxed or repealed, no assurance can be given that such
regulation will not remain in place and that the Company will not be
permanently prevented from initiating sales in Singapore. In addition,
Malaysia has governmental guidelines that have the effect of limiting foreign
ownership of companies operating in Malaysia. There can be no assurance that
the Company will be able to properly structure Malaysian operations to comply
with this policy. In October of 1995, the Company's business permit
applications were denied by the Malaysian government as a result of activities
by certain NSI distributors. Therefore, the Company believes that although
significant opportunities exist to expand its operations into new markets,
there can be no assurance that these or other difficulties will not prevent
the Company from realizing the benefits of this opportunity.

MANAGING GROWTH

The Company has experienced rapid growth since it commenced operations in
1991. The management challenges imposed by this growth include entry into new
markets, growth in the number of employees and distributors, expansion of
facilities necessary to accommodate growth and additions and modifications to
the Company's product lines. To manage these changes effectively, the Company
may be required to hire additional management and operations personnel and to
improve its operational, financial and management systems. If the Company is
unable to manage growth effectively or hire or retain qualified personnel, the
Company's business and results of operations could be adversely affected.

POSSIBLE ADVERSE EFFECT ON THE COMPANY OF A CHANGE IN THE STATUS OF HONG KONG

The Company has offices and a portion of its operations in the British Crown
Colony of Hong Kong. Effective July 1, 1997, the exercise of sovereignty over
Hong Kong will be transferred from the Government of

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<PAGE>

the United Kingdom of Great Britain and Northern Ireland (the "United
Kingdom") to the government of the PRC pursuant to the Sino-British Joint
Declaration on the Question of Hong Kong (the "Joint Declaration") and Hong
Kong will become a Special Administrative Region (SAR) of the PRC. The Joint
Declaration provides that Hong Kong will be directly under the authority of
the government of the PRC but Hong Kong will enjoy a high degree of autonomy
except in foreign and defense affairs, and that Hong Kong will be vested with
executive, legislative and independent judicial power. The Joint Declaration
also provides that the current social and economic systems in Hong Kong will
remain unchanged for 50 years after June 30, 1997 and that Hong Kong will
retain the status of an international financial center. Although sales in Hong
Kong accounted for less than 5% of the Company's revenues for the year ended
December 31, 1995, Hong Kong serves as the location for the Company's regional
offices and an important base of operations for many of the Company's most
successful distributors whose downline distributor networks extend into other
Asian markets. Any adverse effect on the social, political or economic systems
in Hong Kong resulting from this transfer could have a material adverse effect
on the Company's business and results of operations. Although the Company does
not anticipate any material adverse change in the business environment in Hong
Kong resulting from the 1997 transfer of sovereignty, the Company is
formulating contingency plans to transfer the Company's regional office to
another jurisdiction in the event that the Hong Kong business environment is
so affected.

RELATIONSHIP WITH AND RELIANCE ON NSI; POTENTIAL CONFLICTS OF INTEREST

Following the Reorganization, NSI has retained and will continue to retain
ownership and control of the NSI trademarks, tradenames, the Global
Compensation Plan, distributor lists and related intellectual property and
know-how (collectively, the "Licensed Property"), and licenses and will
continue to license to the Company rights to use the Licensed Property in
certain markets. NSI and its affiliates currently operate in 15 countries,
excluding the countries in which the Company currently operates, and following
the Rule 415 Offerings will continue to market and sell personal care and
nutritional products in these countries, as well as in additional countries
outside of the Company's markets, through the network marketing channel. Thus
the Company will not be able to use the Nu Skin name to expand into other
markets for which the Company does not currently have a license without first
obtaining additional licenses or other rights from NSI. There can be no
assurance that NSI will make any additional markets available to the Company
or that the terms of any new licenses from NSI will be acceptable to the
Company.

NSI has licensed to the Company, through the Subsidiaries, rights to
distribute NSI products and to use the Licensed Property in the Company's
markets, and an NSI affiliate, Nu Skin Management Group, Inc. ("NSIMG"), will
provide management support services to the Company and the Subsidiaries,
pursuant to distribution, trademark/tradename license, licensing and sales,
and management services agreements with the Subsidiaries (collectively, the
"Operating Agreements"). The Company relies on NSI for research, development,
testing, labeling and regulatory compliance for products sold to the Company
under the distribution agreements, and virtually all of the Company's revenues
are derived from products and sales aids purchased from NSI pursuant to these
agreements. NSIMG will provide the Company with a variety of management and
consulting services, including, but not limited to, management, legal,
financial, marketing and distributor support/training, public relations,
international expansion, human resources, strategic planning, product
development and operations administration services. Each of the Operating
Agreements is for a term ending December 31, 2016, and is subject to
renegotiation after December 31, 2001, in the event that the Existing
Stockholders, on a combined basis, no longer beneficially own a majority of
the combined voting power of the outstanding shares of common stock of the
Company or of NSI. The Company will be almost completely dependent on the
Operating Agreements to conduct its business, and in the event NSI is unable
or unwilling to perform its obligations under the Operating Agreements, or
terminates the Operating Agreements as provided therein, the Company's
business and results of operations will be adversely affected. See "Business--
Relationship with NSI."

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own 100% of the outstanding shares of NSI. As a result of this ownership,
these Existing Stockholders will consider the short-term and the long-term
impact of all stockholder decisions on the consolidated financial results of
NSI and the Company. See "--Control by Existing Stockholders; Anti-Takeover
Effect of Dual Classes of Common Stock."

The Operating Agreements were approved by the present Board of Directors of
the Company, which is composed entirely of officers and shareholders of NSI.
It is expected that, subsequent to the closing of the Offerings, the
composition of the Board of Directors of the Company will be changed so that
at least two of its members will be persons unaffiliated with NSI. In
addition, most of the executive officers of the Company are also executive
officers of NSI. It is expected that a number of the Company's executive
officers will continue to spend a portion of their time on the affairs of NSI,
for which they will continue to receive compensation from NSI.

Concurrently with the Offerings, the Company purchased from NSI for $25
million the exclusive rights to distribute NSI products in Thailand,
Indonesia, Malaysia, the Philippines, the PRC, Singapore and Vietnam. The
Company has paid $5 million of this amount, and will pay another $10 million
of this amount in January 1997, out of the proceeds of the Offerings.

In view of the substantial relationships between the Company and NSI,
conflicts of interest may exist or arise with respect to existing and future
business dealings, including, without limitation, the relative commitment of
time and energy by the executive officers to the respective businesses of the
Company and NSI, potential acquisitions of businesses or properties, the
issuance of additional securities, the election of new or additional
directors, the payment of dividends by the Company, including the use of $15
million of the proceeds of the Offerings to repay a portion of the S
Distribution Notes. See "The Reorganization and S Corporation Distribution."
There can be no assurance that any conflicts of interest will be resolved in
favor of the Company. Under Delaware and Utah law, a person who is a director
of both the Company and NSI owes fiduciary duties to both corporations and
their respective shareholders. As a result, persons who are directors of both
the Company and NSI are required to exercise their fiduciary duties in light
of what they believe to be best for each of the companies and its
shareholders. See "Certain Relationships and Related Transactions."

CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER EFFECT OF DUAL CLASSES OF
COMMON STOCK

Because of the relationship between the Company and NSI, management elected
to structure the capitalization of the Company in such a manner as to minimize
the possibility of a change in control of the Company without the consent of
the Existing Stockholders. Consequently, the shares of Class B Common Stock
enjoy ten to one voting privileges over the shares of Class A Common Stock
until the outstanding shares of Class B Common Stock constitute less than 10%
of the total outstanding shares of Common Stock. The Existing Stockholders and
certain of their affiliates collectively own 100% of the outstanding shares of
the Class B Common Stock, representing approximately 98.2% of the combined
voting power of the outstanding shares of Common Stock. Accordingly, the
Existing Stockholders and certain of their affiliates, acting fully or
partially in concert, are able to control the election of the Board of
Directors of the Company and thus the direction and future operations of the
Company without the supporting vote of any other stockholder of the Company,
including decisions regarding acquisitions and other business opportunities,
the declaration of dividends and the issuance of additional shares of Class A
Common Stock and other securities. NSI is a privately-held company, all of the
shares of which are owned by certain of the Existing Stockholders of the
Company. As long as the shareholders of NSI are majority stockholders of the
Company, assuming they act in concert, third parties will not be able to
obtain control of the Company through purchases of shares of Class A Common
Stock. See "Description of Capital Stock."

ADVERSE IMPACT ON COMPANY INCOME DUE TO DISTRIBUTOR OPTION PROGRAM

Prior to the date of this Prospectus, the Existing Stockholders converted
1,605,000 shares of Class B Common Stock to Class A Common Stock and
contributed such shares of Class A Common Stock to the Company. The Company
has granted to NSI the Distributor Options to purchase such shares of Class A
Common

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<PAGE>

Stock, and NSI will assign the Distributor Options to qualifying distributors
of NSI in connection with the Rule 415 Offerings. The Exercise Price for the
Distributor Options is $5.75, which is 25% of the initial price per share to
the public in the Offerings. The vesting of the Distributor Options is subject
to certain conditions, and the Distributor Options have been registered along
with the shares of Class A Common Stock underlying such Distributor Options
concurrently with the Offerings pursuant to Rule 415 under the 1933 Act. See
"Plan of Distribution."

The Company estimates a pre-tax non-cash compensation expense of $23.1
million in connection with the grant of the Distributor Options. This non-cash
compensation expense will result in a corresponding impact on net income and
net income per share, which may also result in a corresponding impact on the
market price of the Class A Common Stock. See "Shares Eligible for Future
Sale."

RELIANCE ON AND CONCENTRATION OF OUTSIDE MANUFACTURERS

Virtually all the Company's products are sourced through NSI and are
produced by manufacturers unaffiliated with NSI. The Company currently has
little or no direct contact with these manufacturers. The Company's profit
margins and its ability to deliver its existing products on a timely basis are
dependent upon the ability of NSI's outside manufacturers to continue to
supply products in a timely and cost-efficient manner. Furthermore, the
Company's ability to enter new markets and sustain satisfactory levels of
sales in each market is dependent in part upon the ability of suitable outside
manufacturers to reformulate existing products, if necessary to comply with
local regulations or market environments, for introduction into such markets.
Finally, the development of additional new products in the future will
likewise be dependent in part on the services of suitable outside
manufacturers.

The Company currently acquires products or ingredients from sole suppliers
or suppliers that are considered by the Company to be the superior suppliers
of such ingredients. The Company believes that, in the event it is unable to
source any products or ingredients from its current suppliers, the Company
could produce such products or replace such products or substitute ingredients
without great difficulty or prohibitive increases in the cost of goods sold.
However, there can be no assurance that the loss of such a supplier would not
have a material adverse effect on the Company's business and results of
operations.

With respect to sales to the Company, NSI currently relies on two
unaffiliated manufacturers to produce approximately 70% and 80% of its
personal care and nutritional products, respectively. NSI has a written
agreement with the primary supplier of the Company's personal care products
that expires at the end of 1997. An extension to such contract is currently
being negotiated. NSI does not currently have a written contract with the
primary supplier of the Company's nutritional products. The Company believes
that in the event that NSI's relationship with any of its key manufacturers is
terminated, NSI will be able to find suitable replacement manufacturers.
However, there can be no assurance that the loss of either manufacturer would
not have a material adverse effect on the Company's business and results of
operations.

RELIANCE ON OPERATIONS OF AND DIVIDENDS AND DISTRIBUTIONS FROM SUBSIDIARIES

The Company is a holding company without operations of its own or
significant assets other than ownership of 100% of the capital stock of each
of the Subsidiaries. Accordingly, an important source of the Company's income
will be dividends and other distributions from the Subsidiaries. Each of the
Subsidiaries has its operations in a country other than the United States, the
country in which the Company is organized. In addition, each of the
Subsidiaries receives its revenues in the local currency of the country or
jurisdiction in which it is situated. As a consequence, the Company's ability
to obtain dividends or other distributions is subject to, among other things,
restrictions on dividends under applicable local laws and regulations, and
foreign currency exchange regulations of the country or jurisdictions in which
the Subsidiaries operate. The Subsidiaries' ability to pay dividends or make
other distributions to the Company is also subject to their having sufficient
funds from their operations legally available for the payment of such
dividends or distributions that are not needed to fund their operations,
obligations or other business plans. Because the Company will be a stockholder
of each of the

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Subsidiaries, the Company's claims as such will generally rank junior to all
other creditors of and claims against the Subsidiaries. In the event of a
Subsidiary's liquidation, there may not be assets sufficient for the Company
to recoup its investment in such Subsidiary.

TAXATION RISKS AND TRANSFER PRICING

The Company is subject to taxation in the United States, where it is
incorporated, at a statutory corporate federal tax rate of 35.0% plus any
applicable state income taxes. In addition, each Subsidiary is subject to
taxation in the country in which it operates, currently ranging from a
statutory tax rate of 57.9% in Japan to 16.5% in Hong Kong. The Company will
be eligible for foreign tax credits in the U.S. for the amount of foreign
taxes actually paid in a given period. In the event that the Company's
operations in high tax jurisdictions such as Japan grow disproportionately to
the rest of the Company's operations, the Company will be unable to fully
utilize its foreign tax credits in the U.S., which could, accordingly, result
in the Company paying a higher overall effective tax rate on its worldwide
operations.

Because the Subsidiaries operate outside of the United States, the Company
is subject to the jurisdiction of numerous foreign tax authorities. In
addition to closely monitoring the Subsidiaries locally based income, these
tax authorities regulate and restrict various corporate transactions,
including intercompany transfers. The Company believes that the tax
authorities in Japan and South Korea are particularly active in challenging
the tax structures of foreign corporations and their intercompany transfers.
Although the Company believes that its tax and transfer pricing structures are
in compliance in all material respects with the laws of every jurisdiction in
which it operates, no assurance can be given that these structures will not be
challenged by foreign tax authorities or that such challenges will not have a
material adverse effect on the Company's business or results of operations.

INCREASE IN DISTRIBUTOR COMPENSATION EXPENSE

Under the Licensing and Sales Agreements (the "Licensing and Sales
Agreements") between each of the Subsidiaries and NSI, the Company has agreed
to incur a distributor commission expense of 42% of commissionable product
sales (with the exception of South Korea where, due to government regulations,
the Company uses a formula based upon a maximum payout of 35% of
commissionable product sales). The Licensing and Sales Agreements provide that
the Company is to satisfy this obligation by paying commissions owed to local
distributors. In the event that these commissions exceed 42% of commissionable
product sales, the Company is entitled to receive the difference from NSI. In
the event that the commissions paid are lower than 42%, the Company must pay
the difference to NSI. Under this formulation, the Company's total commission
expense is fixed at 42% of commissionable product sales in each country
(except for South Korea). The 42% figure has been set on the basis of NSI's
experience over the past seven years during which period actual commissions
paid in a given year together with the cost of administering the Global
Compensation Plan have ranged between 41% and 43% of commissionable product
sales for such year (averaging approximately 42%). In the event that actual
commissions payable to distributors from sales in the Company's markets vary
from these historical results, whether as a result of changes in distributor
behavior or changes to the Global Compensation Plan or in the event that NSI's
cost of administering the Global Compensation Plan increases or decreases, the
Licensing and Sales Agreements provide that the intercompany settlement figure
may be modified to more accurately reflect actual results. This could result
in the Company becoming obligated to make greater settlement payments to NSI
under the Licensing and Sales Agreements. Such additional payments could
adversely affect the Company's results of operations. Because the Company
licenses the right to use the Global Compensation Plan from NSI, the structure
of the plan, including commission rates, is under the control of NSI.

SEASONALITY AND CYCLICALITY

While neither seasonal nor cyclical variations have materially affected the
Company's results of operations to date, the Company believes that its rapid
growth may have overshadowed these factors. Accordingly, there can be no
assurance that seasonal or cyclical variations will not materially adversely
affect the Company's results of operations in the future.

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<PAGE>

The direct selling industry in Asia is impacted by certain seasonal trends
such as major cultural events and vacation patterns. For example, Japan,
Taiwan, Hong Kong and South Korea celebrate the local New Year in the
Company's first quarter. Management believes that direct selling in Japan is
also generally negatively impacted during August, when many individuals
traditionally take vacations.

Generally, the Company has experienced rapid revenue growth in each new
market from the commencement of operations. In Japan, Taiwan and Hong Kong,
the initial rapid revenue growth was followed by a short period of stable
revenue followed by renewed growth fueled by new product introductions, an
increase in the number of active distributors and increased distributor
productivity. In addition, the Company may experience variations on a
quarterly basis in its results of operations, as new products are introduced
and new markets are opened. No assurances can be given that the Company's
revenue growth rate in South Korea, which commenced operations in February
1996, or in new markets where operations have not commenced, will follow this
pattern.

PRODUCT LIABILITY

The Company may be subject, under applicable laws and regulations, to
liability for loss or injury caused by its products. The Company's
Subsidiaries are currently covered for product liability claims to the extent
of and under insurance programs maintained by NSI for their benefit and for
the benefit of its affiliates purchasing NSI products and will continue to be
so covered after the Offerings. Accordingly, NSI maintains a policy covering
product liability claims for itself and its affiliates with a $1 million per
claim and $1 million annual aggregate limit and an umbrella policy with a $40
million per claim and $40 million annual aggregate limit. Although the Company
has not been the subject of material product liability claims and the laws and
regulations providing for such liability in the Company's markets appear to
have been seldom utilized, no assurance can be given that the Company may not
be exposed to future product liability claims, and, if any such claims are
successful, there can be no assurance that the Company will be adequately
covered by insurance or have sufficient resources to pay such claims. The
Company does not currently maintain its own product liability policy.

COMPETITION

The markets for personal care and nutritional products are large and
intensely competitive. The Company competes directly with companies that
manufacture and market personal care and nutritional products in each of the
Company's product lines. The Company competes with other companies in the
personal care and nutritional products industry by emphasizing the value and
premium quality of the Company's products and the convenience of the Company's
distribution system. Many of the Company's competitors have much greater name
recognition and financial resources than the Company. In addition, personal
care and nutritional products can be purchased in a wide variety of channels
of distribution. While the Company believes that consumers appreciate the
convenience of ordering products from home through a sales person or through a
catalog, the buying habits of many consumers accustomed to purchasing products
through traditional retail channels are difficult to change. The Company's
product offerings in each product category are also relatively small compared
to the wide variety of products offered by many other personal care and
nutritional product companies. There can be no assurance that the Company's
business and results of operations will not be affected materially by market
conditions and competition in the future.

The Company also competes with other direct selling organizations, some of
which have longer operating histories and higher visibility name recognition
and financial resources. The leading network marketing company in the
Company's markets is Amway Corporation and its affiliates. The Company
competes for new distributors on the basis of the Global Compensation Plan and
its premium quality products. Management envisions the entry of many more
direct selling organizations into the marketplace as this channel of
distribution expands over the next several years. The Company has been advised
that certain large, well-financed corporations are planning to launch direct
selling enterprises which will compete with the Company in certain of its
product lines. There can be no assurance that the Company will be able to
successfully meet the challenges posed by this increased competition.

25
<PAGE>

The Company competes for the time, attention and commitment of its
independent distributor force. Given that the pool of individuals interested
in the business opportunities presented by direct selling tends to be limited
in each market, the potential pool of distributors for the Company's products
is reduced to the extent other network marketing companies successfully
recruit these individuals into their businesses. Although management believes
that the Company offers an attractive business opportunity, there can be no
assurance that other network marketing companies will not be able to recruit
the Company's existing distributors or deplete the pool of potential
distributors in a given market.

OPERATIONS OUTSIDE THE UNITED STATES; CURRENCY RISKS

Virtually all of the Company's assets and operations are located, and all of
its revenues are derived from, operations outside the United States. The
Company's operations may be materially and adversely affected by economic,
political and social conditions in the countries in which it operates. A
change in policies by any government in the Company's markets could adversely
affect the Company and its operations through, among other things, changes in
laws, rules or regulations, or the interpretation thereof, confiscatory
taxation, restrictions on currency conversion, currency repatriation or
imports, or the expropriation of private enterprises. Although the general
trend in these countries has been toward more open markets and trade policies
and the fostering of private business and economic activity, no assurance can
be given that the governments in these countries will continue to pursue such
policies or that such policies will not be significantly altered in future
periods. This could be especially true in the event of a change in leadership,
social or political disruption or upheaval, or unforeseen circumstances
affecting economic, political or social conditions or policies. The Company is
aware of news releases in South Korea, for example, reporting comments by
political figures proposing restrictions on foreign direct sellers designed to
protect the market share of local companies. There can be no assurance that
such activities, or other similar activities in the Company's markets, will
not result in passage of legislation or the enactment of policies which could
materially adversely affect the Company's operations in these markets. In
addition, the Company's ability to expand its operations into the new markets
for which it has received an exclusive license to distribute NSI products will
directly depend on its ability to secure the requisite government approvals
and comply with the local government regulations in each of those countries.
The Company has in the past experienced difficulties in obtaining such
approvals as a result of certain actions taken by its distributors, and no
assurance can be given that these or similar problems will not prevent the
Company from commencing operations in those countries. See "Risk Factors--
Entering New Markets."

The Company purchases virtually all of its products from NSI through Nu Skin
Hong Kong. Nu Skin Hong Kong pays for its purchases from NSI under a regional
distribution agreement in U.S. dollars, while the other Subsidiaries pay for
their purchases from Nu Skin Hong Kong under wholesale distribution agreements
in their local currency. Nu Skin Hong Kong therefore bears significant
currency exchange risk as a result of purchases from NSI on behalf of the
Subsidiaries. Fluctuations in currency exchange rates, particularly those
caused by an increase in the value of the U.S. dollar, could have a material
adverse effect on the Company's financial position, results of operations and
cash flows. The Company reduces its exposure to fluctuations in foreign
exchange rates by creating offsetting positions through the use of foreign
currency exchange contracts. The Company currently does not use such financial
instruments for trading or speculative purposes. The Company regularly
monitors its foreign currency risks and periodically takes measures to reduce
the impact of foreign exchange rate fluctuations on the Company's operating
results. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Currency Fluctuation and Exchange Rate Information."

IMPORT RESTRICTIONS, DUTIES AND REGULATION OF CONSUMER GOODS

With the exception of a small percentage of revenues in Japan, virtually all
of the Company's sales historically have been derived from products purchased
from NSI. All of those products historically have been imported into the
countries in which they were ultimately sold. The countries in which the
Company currently conducts business impose various legal restrictions on
imports. In Japan, the Japanese Ministry of Health and Welfare ("MOHW")
requires the Company to possess an import business license and to register
each personal care product imported into the country. Packaging and labeling
requirements are also specified. The Company

26
<PAGE>

has had to reformulate many products to satisfy MOHW regulations. In Japan,
nutritional foods, drugs and quasi-drugs are all strictly regulated. The chief
concern involves the types of claims and representations that can be made
regarding the efficacy of nutritional products. In Taiwan, all "medicated"
cosmetic and pharmaceutical products, including PharmAssist, require
registration. In Hong Kong and Macau,"pharmaceutical" products are strictly
regulated. In South Korea, the Company has obtained the mandatory certificate
of confirmation as a qualified importer of cosmetics under the Pharmaceutical
Affairs Law and is required to obtain additional product approvals for each of
the 45 categories of cosmetic products which it imports. Each new cosmetic
product undergoes a 60 day post-customs inspection where, in addition to
compliance with ingredient requirements, each product is inspected for
compliance with South Korean labeling requirements. There can be no assurance
that these or other applicable regulations will not prevent the Company from
introducing new products into its markets or require the reformulation of
existing products.

The Company has not experienced any difficulty maintaining its import
licenses but has experienced complications regarding health and safety and
food and drug regulations for nutritional products. Many products require
reformulation to comply with local requirements. In addition, new regulations
could be adopted or any of the existing regulations could be changed at any
time in a manner that could have a material adverse effect on the Company's
business and results of operations. Duties on imports are a component of
national trade and economic policy and could be changed in a manner that would
be materially adverse to the Company's sales and its competitive position
compared to locally-produced goods, in particular in countries such as Taiwan,
where the Company's products are already subject to high customs duties. In
addition, import restrictions in certain countries and jurisdictions limit the
Company's ability to import products from NSI. In some jurisdictions, such as
the PRC, regulators may prevent the importation of NSI products altogether.
Present or future health and safety or food and drug regulations could delay
or prevent the introduction of new products into a given country or
marketplace or suspend or prohibit the sale of existing products in such
country or marketplace.

ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER, CONTRACTUAL AND STATUTORY PROVISIONS

The Board of Directors is authorized, subject to certain limitations, to
issue without further consent of the stockholders up to 25,000,000 shares of
preferred stock with rights, preferences and privileges designated by the
Board of Directors. See "Description of Capital Stock--Preferred Stock." In
addition, the Company's Certificate of Incorporation requires the approval of
66 2/3% of the outstanding voting power of the Class A Common Stock and the
Class B Common Stock to authorize or approve certain change of control
transactions. See "Description of Capital Stock--Common Stock--Voting Rights"
and "--Mergers and Other Business Combinations." The Company's Certificate of
Incorporation and Bylaws also contain certain provisions that limit the
ability to call special meetings of stockholders and the ability of
stockholders to bring business before or to nominate directors at a meeting of
stockholders. See "Description of Capital Stock--Other Charter and Bylaw
Provisions." Pursuant to the Company's 1996 Stock Incentive Plan, in the event
of certain change of control transactions the Board of Directors has the
right, under certain circumstances, to accelerate the vesting of options and
the expiration of any restriction periods on stock awards. See "Management--
1996 Stock Incentive Plan." Finally, the Operating Agreements with NSI and
NSIMG are subject to renegotiation after December 31, 2001 upon a change of
control of the Company. Any of these actions, provisions or requirements could
have the effect of delaying, deferring or preventing a change of control of
the Company. See "Business--Relationship with NSI--General Provisions."

The Company is subject to the provisions of Section 203 of the General
Corporation Law of the State of Delaware (the "Anti-Takeover Law") regulating
corporate takeovers. The Anti-Takeover Law prevents certain Delaware
corporations, including those whose securities are listed on the New York
Stock Exchange, from engaging, under certain circumstances, in a "business
combination" (which includes a merger of not more than 10% of the
corporations' assets) with an "interested stockholder" (a stockholder who,
together with affiliates and associates, within the prior three years did own,
15% or more of the corporation's outstanding voting stock) for three years
following the date that such stockholder became an "interested stockholder,"
unless the "business combination" or "interested stockholder" is approved in a
prescribed manner. A Delaware corporation may "opt out" of the Anti-Takeover
Law with an express provision in its original certificate of incorporation or
an express provision in its certificate of incorporation or bylaws resulting
from a stockholders'

27
<PAGE>

amendment approved by at least a majority of the outstanding voting shares.
The Company has not "opted out" of the provisions of the Anti-Takeover Law.

ABSENCE OF PUBLIC MARKET FOR CLASS A COMMON STOCK; DETERMINATION OF OFFERING
PRICE; PRICE FLUCTUATIONS

Prior to the Offerings, there was no public market for the Class A Common
Stock and there can be no assurance that an active trading market for the
Class A Common Stock will develop or continue after the closing of the
Offerings. Accordingly, no assurance can be given as to the liquidity of the
market for the Class A Common Stock or the price at which any sales of shares
of Class A Common Stock may occur in the future, which price will depend upon
the number of holders thereof and other factors beyond the control of the
Company, including the liquidity of the market for the Common Stock, investor
perceptions of the Company, changes in conditions or trends in the Company's
industry or publicly traded comparable companies, adverse publicity which the
Company or NSI may suffer and general economic and other conditions. The
initial price per share to the public in the Offerings, upon which the
Exercise Price of the Distributor Options is based, was determined by
negotiation among the Company, the Selling Stockholders and representatives of
the Underwriters, and may not be indicative of the market price for the shares
of Class A Common Stock after the closing of the Offerings.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Class A Common Stock in the
public market following either the Offerings or the Rule 415 Offerings could
adversely affect the market price for the Class A Common Stock. See
"Description of Capital Stock" and "Shares Eligible for Future Sale."

DILUTION

The Exercise Price of the Distributor Options is $5.75. At this price,
investors exercising Distributor Options to purchase shares of Class A Common
Stock in the Rule 415 Offerings will incur immediate dilution of $4.74 per
share. See "Dilution."

ABSENCE OF DIVIDENDS

28
<PAGE>

THE REORGANIZATION AND S CORPORATION DISTRIBUTION

THE REORGANIZATION

Prior to the Offerings, the shareholders of Nu Skin Japan, Nu Skin Korea, Nu
Skin Taiwan, Nu Skin Hong Kong and Nu Skin Thailand contributed their shares
of capital stock to the capital of the Company in a transaction intended to
qualify under Section 351 of the Code in exchange for shares of the Company's
Class B Common Stock (the "Reorganization"). Prior to the Reorganization, all
of the outstanding shares of capital stock of the Subsidiaries and Nu Skin
Thailand were held by the Existing Stockholders. As a result of the
Reorganization, each of the Subsidiaries and Nu Skin Thailand became a wholly-
owned subsidiary of the Company.

Nu Skin Hong Kong and Nu Skin Taiwan are Utah corporations, each operating
through branches in Hong Kong and Taiwan, respectively. Nu Skin Japan and Nu
Skin Korea are Japanese and South Korean corporations, respectively, and both
are domesticated corporations in Delaware. Nu Skin Thailand, which currently
has no operations, is a Thailand corporation and also a Delaware domesticated
corporation. Nu Skin Japan, Nu Skin Korea and Nu Skin Thailand each has dual
residence in the U.S. and its respective foreign jurisdiction, and each is
treated as a U.S. corporation for U.S. tax purposes and a Japan, South Korea
or Thailand corporation, respectively, for tax purposes in each such
jurisdiction. Nu Skin Hong Kong and Nu Skin Taiwan continue to be viewed as
branches in Hong Kong and Taiwan, respectively, and Nu Skin Japan, Nu Skin
Korea and Nu Skin Thailand continue to be viewed as domestic corporations in
Japan, South Korea and Thailand, respectively.

The following chart illustrates the organizational structure of the Company
immediately after the Reorganization and the Offerings.

POST-REORGANIZATION AND THE OFFERINGS

[CHART]

S CORPORATION DISTRIBUTION

Prior to the Reorganization, each Subsidiary elected to be treated as an "S"
corporation under subchapter S of the Code and comparable state tax laws. As a
result of the Subsidiaries' S corporation status, the earnings of the
Subsidiaries since incorporation have been included in the taxable income of
the Existing Stockholders for Federal and certain state income tax purposes,
and the Subsidiaries have generally not been subject to U.S. Federal or state
income tax on such earnings. On November 19, 1996, the Subsidiaries' S
corporation status was terminated (the "S Termination Date"). Prior to the S
Termination Date, the Company declared a distribution to the Existing
Stockholders that included all of the Subsidiaries' previously earned and
undistributed S corporation earnings through the S Termination Date (the "S
Corporation Distribution"). As of September 30, 1996, the

29
<PAGE>

Subsidiaries' aggregate undistributed taxable S corporation earnings were
$81.9 million. The Company estimates that the Subsidiaries' aggregate
undistributed taxable S corporation earnings are approximately $90.0 million
as of the S Termination Date. The S Corporation Distribution is being
distributed in the form of promissory notes due within six months of the S
Termination Date bearing interest at 8% per annum (the "S Distribution
Notes"). $15.0 million of the proceeds from the Offerings has been used to pay
a portion of the S Distribution Notes. The Company reserved $65.0 million of
cash on hand for repayment of the S Distribution Notes. The balance of the S
Distribution Notes (approximately $10.0 million) will be repaid from cash
generated by operations. The Company is no longer treated as an S corporation
and, accordingly, is fully subject to Federal and state income taxes.

30
<PAGE>

USE OF PROCEEDS

The net proceeds from the sale of shares of Class A Common Stock by the
Company in the Offerings and from the issuance of shares of Class A Common
Stock in connection with the exercise of the Distributor Options pursuant to
the Rule 415 Offerings are estimated to be approximately $112 million after
deducting underwriting discounts and offering expenses payable by the Company.
The Company did not receive any of the proceeds from the sale of shares of
Class A Common Stock by the Selling Stockholders in the Offerings, including
from the exercise of the underwriters' over-allotment options. The Company
will not receive any proceeds from the distribution of shares by the Company
and the Rule 415 Selling Stockholders in connection with the employee stock
bonus awards. The Company has agreed to pay certain expenses on behalf of the
Selling Stockholders.

The Company anticipates applying the net proceeds of the Offerings as
follows: (i) approximately $45 million of such proceeds will be used, together
with operating income, to finance the planned entry of the Company into
Thailand, the Philippines, the PRC (where it is anticipated that the Company
will be required to invest in a manufacturing facility), Malaysia, Indonesia,
Vietnam and Singapore, which includes a $15 million payment to NSI (consisting
of $5 million paid upon the consummation of the Offerings and a $10 million
payment scheduled for January 15, 1997) as partial payment for the exclusive
rights to distribute NSI products in these countries, and which may include
organizational costs, the initial build-up of inventory and other start-up
expenses; (ii) $15 million has been used to repay a portion of the S
Distribution Notes; (iii) approximately $12 million of such proceeds will be
used for the introduction of new products in the Company's markets;
(iv) approximately $12 million of such proceeds will be used to enhance the
Company's technological infrastructure, including the expansion of information
systems hardware and support capabilities allowing the Company the ability to
better support distributors; (v) approximately $10 million of such proceeds
will be used to expand the Company's presence and operations in South Korea,
Japan and Taiwan, which will include the establishment of several additional
walk-in distributor centers in major cities; and (vi) the remainder of such
proceeds, approximately $18 million, will be used for general corporate
purposes, which may include additional capital expansion projects. Pending
such uses, the Company intends to invest the proceeds from the Offerings in
short-term, interest bearing, investment grade instruments.

DIVIDEND POLICY

The Company does not anticipate that any dividends will be declared on its
Common Stock in the immediate future. The Company intends from time to time to
re-evaluate this policy based on its net income and its alternative uses for
retained earnings, if any. Any future declaration of dividends will be subject
to the discretion of the Board of Directors of the Company and subject to
certain limitations under the General Corporation Law of the State of Delaware
(the "DGCL"). The timing, amount and form of dividends, if any, will depend,
among other things, on the Company's results of operations, financial
condition, cash requirements and other factors deemed relevant by the Board of
Directors of the Company. It is anticipated that any dividends, if declared,
will be paid in U.S. dollars. The Company, as a holding company, will be
dependent on the earnings and cash flow of, and dividends and distributions
from, the Subsidiaries to pay any cash dividends or distributions on the Class
A Common Stock that may be authorized by the Board of Directors of the
Company. See "Certain United States Tax Consequences to Non-United States
Holders." Holders of Class A Common Stock and holders of Class B Common Stock
will share equally in any dividends declared by the Board of Directors. See
"Risk Factors--Absence of Dividends" and "--Reliance on Operations of and
Dividends and Distributions from Subsidiaries" and "Description of Capital
Stock--Common Stock--Dividends" and "--Preferred Stock."

PRICE RANGE OF CLASS A COMMON STOCK

The Class A Common Stock is traded on the New York Stock Exchange under the
symbol "NUS." Prior to the Offerings, there was no public market for the Class
A Common Stock, and there is no public market for the Class B Common Stock.
The high and low intradaily prices per share of Class A Common Stock for the
period from the Offerings through December 10, 1996, as reported on the New
York Stock Exchange, were $30 7/8 and $26 5/8, respectively. The closing sale
price of the Class A Common Stock on a recent date as reported on the New York
Stock Exchange is set forth on the cover page of this Prospectus. As of
December 10, 1996, there were approximately 475 and 55 holders of record of
the Company's Class A Common Stock and Class B Common Stock, respectively. No
dividends have been paid on the Common Stock.

31
<PAGE>

CAPITALIZATION

The following table sets forth the cash and cash equivalents, the short-term
debt and capitalization of the Company on a combined basis as of September 30,
1996, and as adjusted as of that date to give effect to the Reorganization,
including (i) the S Corporation Distribution as if the Company's S corporation
status had terminated on such date, and (ii) $5.8 million of net deferred tax
assets that would have been recorded had the Company's S corporation status
been terminated on September 30, 1996, and as further adjusted to reflect the
sale by the Company of shares of Class A Common Stock in the Offerings and the
Rule 415 Offerings, and the application of the net proceeds therefrom. The
information below should be read in conjunction with the Combined Financial
Statements and the related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and pro forma
financial statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
---------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
AS AS FURTHER
ACTUAL ADJUSTED ADJUSTED (/1/)(/2/)(/3/)
------- -------- ------------------------
<S> <C> <C> <C>
Cash and cash
equivalents............ $81,079 $81,079 $170,200
======= ======= ========
Short-term notes
payable(/1/)(/4/)...... $ -- $81,893 $ 76,893
======= ======= ========
Long-term notes
payable(/1/)........... $ -- $ -- $ 10,000
Stockholders' equity:
Capital Stock of the
Subsidiaries prior to
the Reorganization.... 4,550(/5/) -- --
Preferred Stock, par
value $.001 per share,
25,000,000 shares
authorized,
no shares issued and
outstanding........... -- -- --
Class A Common Stock,
par value $.001 per
share, 500,000,000
shares
authorized, no, no and
13,429,000 shares
issued and outstanding
actual, as adjusted
and as further
adjusted,
respectively.......... -- -- 13
Class B Common Stock,
par value $.001 per
share, 100,000,000
shares authorized, no,
80,250,000 and
71,696,675 shares
issued and outstanding
actual, as adjusted
and as further
adjusted,
respectively.......... -- 80(/5/) 72
Additional paid in
capital............... -- -- 147,510
Cumulative foreign
currency translation
adjustment............ (3,714) (3,714) (3,714)
Retained earnings...... 77,423 5,769(/6/) 5,769
Deferred compensation.. -- -- (28,394)
Note receivable from
NSI................... -- -- (10,000)
------- ------- --------
Total stockholders'
equity.............. 78,259 2,135 111,256
------- ------- --------
Total
capitalization...... $78,259 $ 2,135 $121,256
======= ======= ========
</TABLE>

- --------
(1) Reflects the sale by the Company of 4,750,000 shares of Class A Common
Stock at an offering price of $23 per share, less estimated offering
expenses of $9.4 million, including the underwriting discount paid, and
the exercise by distributors of all 1,605,000 Distributor Options to
purchase shares of Class A Common Stock at the Exercise Price of $5.75. In
connection with the Offerings, the Company will pay the $25.0 million
License Fee to NSI, which consists of $5 million in cash which was paid
upon the consummation of the Offerings, a $10 million short-term note due
on January 15, 1997 and a $10 million long-term note due on January 15,
1998. The $5 million cash payment was paid from the proceeds of the
Offerings and the $10 million short-term note will be paid from the
proceeds of the Offerings. $15.0 million of the net proceeds of the
Offerings has been used to repay a portion of the S Distribution Notes.
The Company has reserved $65.0 million of cash on hand for repayment of
the S Distribution Notes. The balance of the S Distribution Notes
(approximately $10 million) will be repaid from cash generated by
operations.
(2) Reflects the conversion by the Existing Stockholders of 8,553,325 shares
of Class B Common Stock into Class A Common Stock. Of these shares,
2,855,000 shares were contributed by the Existing Stockholders, prior to
the Offerings, to the Company and NSI and its affiliates (other than the
Company) for issuance in connection with the Distributor Options and
employee stock bonus awards and 5,698,325 shares were sold in the
Offerings. Also reflects 16,675 shares of Class A Common Stock that were
issued immediately following the Reorganization and prior to the Offerings
upon the partial exercise of an option by an executive officer of the
Company and which shares were sold in the Offerings. Also reflects
estimated deferred compensation and additional paid-in capital of $28.4
million, $5.3 million of which represents the estimated compensation
expense related to the employee stock bonus awards granted to employees of
the Company, NSI and its affiliates which vest over a period of four years
and $23.1 million of which represents the estimated compensation expense
related to the one-time grant of the Distributor Options at the Exercise
Price of $5.75, which is 25% of the initial price per share to the public
in the Offerings, to independent distributors (non-employees) of the
Company immediately prior to the Offerings. See "Shares Eligible for
Future Sale."
(3) No adjustment has been made to give effect to the Company's earned and
undistributed taxable S corporation earnings for the period from October
1, 1996, through the S Termination Date. See "The Reorganization and S
Corporation Distribution."
(4) Reflects the issuance of $81.9 million of S Distribution Notes to the
Selling Stockholders in respect of the earned and undistributed taxable S
corporation earnings and capital at September 30, 1996, that would have
been distributed had the Subsidiaries' S corporation status been
terminated on September 30, 1996. $15.0 million of the net proceeds of the
Offerings has been used to repay a portion of the S Distribution Notes.
(5) Reflects the contribution by the Existing Stockholders of their interests
in the Subsidiaries in exchange for shares of Class B Common Stock.
(6) Reflects the recognition of a deferred tax asset of $5.8 million. In
connection with the Reorganization, the Company will record deferred tax
assets for U.S. Federal and state income taxes as if the Company had been
taxed as a C corporation rather than as an S corporation since inception.

32
<PAGE>

DILUTION

The net tangible book value of the Company at September 30, 1996 was
approximately $78.3 million, or $.98 per share of Common Stock. After giving
effect to the Reorganization and the S Corporation Distribution as if they had
occurred as of September 30, 1996 and the Company's S corporation status had
terminated at such date, the pro forma net tangible book value of the Company
at September 30, 1996 would have been approximately $2.1 million, or $.03 per
share of Common Stock. After giving effect to the sale of the 4,750,000 shares
of Class A Common Stock by the Company in the Offerings, the application of
the estimated net proceeds therefrom as set forth under "Use of Proceeds"
(after deducting estimated offering expenses and the underwriting discount),
the exercise by distributors of all 1,605,000 Distributor Options to purchase
shares of Class A Common Stock in the Rule 415 Offerings and the purchase of
the License Fee from NSI, the pro forma net tangible book value of the Company
as adjusted at September 30, 1996 would have been approximately $86.3 million,
or $1.01 per share. See "The Reorganization and S Corporation Distribution"
and "Use of Proceeds." This represents an immediate dilution of $4.74 per
share to purchasers of shares pursuant to the exercise of the Distributor
Options at the Exercise Price of $5.75 in the Rule 415 Offerings. Recipients
of the employee stock bonus awards will not incur any dilution in connection
with the Rule 415 Offerings. See "Risk Factors--Dilution." The following table
illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Exercise Price for the Distributor Options................... $5.75
Net tangible book value per share at September 30, 1996.... $ .98
Increase in net tangible book value per share attributable
to the establishment of deferred tax assets............... .07
Decrease in net tangible book value per share attributable
to S Corporation Distribution and Reorganization.......... (1.02)
-----
Adjusted net tangible book value per share before the
Offerings................................................. .03
Increase in net tangible book value per share attributable
to the Offerings.......................................... 1.19
Increase in net tangible book value per share attributable
to the Rule 415 Offerings................................. .09
Decrease in tangible book value per share attributable to
the purchase of the exclusive license from NSI............ (.30)
-----
Net tangible book value, as further adjusted, per share after
the Offerings and the Rule 415 Offerings.................... 1.01
-----
Dilution per share to individuals exercising Distributor
Options in the Rule 415 Offerings........................... $4.74
=====
</TABLE>

The following table summarizes on a pro forma basis as of September 30, 1996
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
the Existing Stockholders and by the recipients of the employee stock bonus
awards in the Rule 415 Offerings and individuals exercising the Distributor
Options in the Rule 415 Offerings.

<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
----------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockhold-
ers(/1/)............... 71,696,675(/2/) 96% $ --(/3/) --% $ --
Recipients of the em-
ployee stock bonus
awards(/4/)............ 1,359,000 2 -- -- --
Individuals exercising
the Distributor Op-
tions(/5/)............. 1,605,000 2 9,228,750 100 5.75
---------- --- ---------- ---
Total................. 74,660,675 100% $9,228,750 100%
========== === ========== ===
</TABLE>
-------
(1) The term Existing Stockholders does not include an executive
officer of the Company who exercised a portion of an option and
acquired 16,675 shares pursuant to such exercise following the
Reorganization and who sold such shares in the Offerings.
(2) Excludes 5,698,325 shares sold by the Existing Stockholders,
16,675 shares sold by an executive officer of the Company after
partial exercise of an option, and 4,750,000 shares sold by the
Company in connection with the Offerings.
(3) The cash consideration paid by the Existing Stockholders has been
reduced by distributions previously made to the Existing
Stockholders and certain distributions to be received by the
Existing Stockholders out of the net proceeds of the Offerings.
See "The Reorganization and S Corporation Distribution" and "Use
of Proceeds."
(4) Includes 1,250,000 shares which the Existing Stockholders
contributed to NSI and its affiliates (other than the Company)
for subsequent issuance in connection with employee stock bonus
awards and 109,000 shares to be issued by the Company to
employees as stock bonus awards.
(5) Includes 1,605,000 shares which the Existing Stockholders
contributed to the Company for issuance upon exercise of the
Distributor Options.

33
<PAGE>

SELECTED COMBINED FINANCIAL AND OTHER INFORMATION

The following selected combined financial and other data as of December 31,
1994 and 1995 and for the fiscal years ended September 30, 1993 and 1994 and
for the three month period ended December 31, 1994 and for the year ended
December 31, 1995 have been derived from the Company's Combined Financial
Statements, which have been audited by Price Waterhouse LLP, independent
accountants, included elsewhere in this Prospectus. The combined financial
data as of September 30, 1993 and 1994 are derived from the combined financial
statements of the Company, which have been audited but are not contained
herein. The financial data as of September 30, 1991 and 1992 and for the
fiscal years ended September 30, 1991 and 1992 and for the year ended December
31, 1994 and as of September 30, 1996 and for the nine months ended September
30, 1995 and 1996 are unaudited. Interim results, in the opinion of
management, include all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the financial information for such
periods; however, such results are not necessarily indicative of the results
which may be expected for any other interim period or for a full year. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Combined
Financial Statements and the related notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
THREE
MONTHS NINE MONTHS
ENDED YEAR ENDED ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
------------------------------------ ------------ ------------------- ------------------
1991 1992 1993 1994 1994 1994(/1/) 1995 1995 1996
-------- -------- -------- -------- ------------ --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. $ 677 $ 42,919 $110,624 $254,637 $ 73,562 $264,440 $358,609 $241,412 $471,312
Cost of sales........... 462 14,080 38,842 86,872 19,607 82,241 96,615 64,110 133,592
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit............ 215 28,839 71,782 167,765 53,955 182,199 261,994 177,302 337,720
Operating expenses:
Distributor incen-
tives................. 130 14,659 40,267 95,737 27,950 101,372 135,722 91,893 175,149
Selling, general and
administrative........ 1,249 10,065 27,150 44,566 13,545 48,753 67,475 44,099 69,970
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income........ (1,164) 4,115 4,365 27,462 12,460 32,074 58,797 41,310 92,601
Other income (expense),
net.................... 3 160 133 443 (813) (394) 511 (408) 1,530
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before provision
for income taxes....... (1,161) 4,275 4,498 27,905 11,647 31,680 59,308 40,902 94,131
Provision for income
taxes.................. -- 1,503 417 10,226 2,730 10,071 19,097 13,170 33,810
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ (1,161) $ 2,772 $ 4,081 $ 17,679 $ 8,917 $ 21,609 $ 40,211 $ 27,732 $ 60,321
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>

<TABLE>
<S> <C> <C> <C>
PRO FORMA INCOME STATEMENT DATA(/2/)(/3/):
Revenue........................................... $358,609 $241,412 $471,312
Cost of sales..................................... 96,615 64,110 133,592
-------- -------- --------
Gross profit...................................... 261,994 177,302 337,720
Operating expenses:
Distributor incentives........................... 135,722 91,893 175,149
Selling, general and administrative.............. 74,433 49,317 75,188
-------- -------- --------
Operating income.................................. 51,839 36,092 87,383
Other income (expense), net(/4/).................. (2,298) (3,217) 1,997
-------- -------- --------
Income before provision for income taxes.......... 49,541 32,875 89,380
Provision for income taxes........................ 19,005 12,612 32,471
-------- -------- --------
Net income (loss)................................. $ 30,536 $ 20,263 $ 56,909
======== ======== ========
Net income per share.............................. $ .36 $ .24 $ .67
Weighted average common shares outstanding(/5/)... 85,377 85,377 85,377
</TABLE>

34
<PAGE>

<TABLE>
<CAPTION>
AS
AS OF SEPTEMBER 30, OF DECEMBER 31,
------------------------------- ----------------
1991 1992 1993 1994 1994 1995
------ ------ ------- ------- ------- -------
BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equiva-
lents.................. $1,132 $1,553 $14,591 $18,077 $16,288 $63,213
Working capital......... (921) 1,026 (504) 15,941 26,680 47,863
Total assets............ 2,733 10,236 41,394 71,565 61,424 118,228
Stockholders' equity.... (656) 2,749 6,926 24,934 33,861 61,771
</TABLE>

<TABLE>
<CAPTION>
AS AS
AS OF SEPTEMBER 30, OF DECEMBER 31, OF SEPTEMBER 30,
--------------------------- --------------- -----------------
1991 1992 1993 1994 1994 1995 1995 1996
---- ------ ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER INFORMATION(/7/):
Number of active
distributors........... -- 33,000 106,000 152,000 170,000 236,000 224,000 331,000
Number of executive
distributors........... -- 649 2,788 5,835 6,083 7,550 7,519 17,809
</TABLE>
- -------
(1) The information for the year ended December 31, 1994 is not included in
the Company's Combined Financial Statements included elsewhere in this
Prospectus. Such information has been presented for comparative purposes
only.
(2) The unaudited pro forma income statement data reflects the Reorganization,
the Offerings and the following adjustments as if such events had occurred
on January 1, 1995: (i) the amortization over a 20-year period of a $25.0
million payment, consisting of $5.0 million in cash and $20.0 million in
notes, to NSI for the exclusive rights to distribute NSI products in
Thailand, Indonesia, Malaysia, the Philippines, the PRC, Singapore and
Vietnam (the "License Fee"); (ii) the recognition by the Company of
additional management charges of $4.4 million per year relating to certain
support services provided to the Company by NSI and an NSI affiliate;
(iii) estimated annual compensation expense of $1.3 million related to the
employee stock bonus awards granted to employees of the Company, NSI and
its affiliates; (iv) adjustments for U.S. Federal and state income taxes
as if the Company had been taxed as a C corporation rather than as an S
corporation since inception; and (v) increased interest expense of $2.7
million relating to the issuance of $81.9 million of interest bearing S
distribution notes (the "S Distribution Notes"), $15.0 million of which
has been repaid from the proceeds of the Offerings, due and payable within
six months (8% interest per annum) to the Existing Stockholders in respect
of the earned and undistributed taxable S corporation earnings and capital
at September 30, 1996, that would have been distributed had the Company's
S corporation status been terminated on September 30, 1996.
(3) The unaudited pro forma income statement data does not reflect the
estimated non-cash compensation expense of $23.1 million in connection
with the one-time grant of the Distributor Options at the Exercise Price
of $5.75, which is 25% of the initial price per share to the public in the
Offerings. The granting and vesting of the Distributor Options will be
conditioned upon distributor performance under the Global Compensation
Plan and the NSI Stock Option Plan. The vesting of the Distributor Options
is scheduled to occur on December 31, 1997. The Company will record
distributor stock incentive expense for these non-employee stock options.
See "Certain Relationships and Related Transactions" and "Shares Eligible
for Future Sale."
(4) Other pro forma income and expense includes: (i) increased interest
expense of $2.7 million for the year ended December 31, 1995 and for the
nine months ended September 30, 1995, relating to the issuance of $81.9
million of S Distribution Notes ($15.0 million of which has been repaid
from the proceeds of the Offerings); (ii) increased interest expense of
$0.9 million, $0.7 million and $0.1 million for the year ended December
31, 1995 and for the nine months ended September 30, 1995 and 1996,
respectively, relating to the issuance of $20.0 million in notes as
partial payment of the License Fee payable to NSI; and (iii) increased
interest income of $0.8 million, $0.6 million and $0.6 million for the
year ended December 31, 1995 and for the nine months ended September 30,
1995 and 1996, respectively, relating to an estimated $10.0 million note
receivable from NSI as consideration for the Distributor Options.
(5) Reflects 80,250,000 shares of Common Stock and Common Stock equivalents
outstanding after giving effect to the Reorganization, increased by the
sale of 4,750,000 shares of Class A Common Stock, the award of 109,000
shares of Common Stock to employees of the Company and an option granted
to an executive officer of the Company to purchase 267,500 shares of Class
A Common Stock (16,675 of which were issued upon partial exercise of such
option following the Reorganization and prior to the Offerings and sold in
connection with the Offerings). Supplemental income per share, calculated
as if $25.0 million of the proceeds from the Offerings were used to repay
notes payable, had a dilutive effect of less than 2%, and therefore, is
not presented.
(6) The as adjusted balance sheet data as of September 30, 1996 reflects
estimated deferred compensation expense and additional paid-in capital of
$23.1 million in connection with the one-time grant of the Distributor
Options. The as adjusted balance sheet data also reflects: (i) the sale of
4,750,000 shares of Class A Common Stock pursuant to the Offerings and the
exercise by distributors of all 1,605,000 Distributor Options to purchase
shares of Class A Common Stock at the Exercise Price of $5.75; (ii) the
issuance of $81.9 million of S Distribution Notes to the Selling
Stockholders; (iii) a $15.0 million partial payment of the S Distribution
Notes from the proceeds of the Offerings; (iv) $20.0 million in notes
payable to NSI, consisting of a $10 million short-term note due on January
15, 1997 and a $10 million long-term note due on January 15, 1998, which
have been issued as partial payment of the $25.0 million License Fee to
NSI; (v) an estimated $10.0 million note receivable from NSI, issued by
NSI as partial consideration for the Distributor Options; (vi) estimated
deferred compensation and additional paid-in capital of $5.3 million,
which represents the estimated compensation expense related to the
employee stock bonus awards granted to employees of the Company, NSI and
its affiliates which vest over a period of four years; (vii) $9.2 million
of cash and additional paid-in capital in connection with the exercise of
the Distributor Options; and (viii) the recognition of a deferred tax
asset of $5.8 million relating to adjustments for U.S. Federal and state
income taxes as if the Company had been taxed as a C corporation rather
than as an S corporation since inception. No adjustment has been made to
give effect to the Company's earned and undistributed taxable S
corporation earnings for the period from October 1, 1996 through the S
Termination Date (as defined herein). The Company anticipates the S
Distribution Notes to be approximately $90.0 million as of the S
Termination Date. See "The Reorganization and S Corporation Distribution."
The Company has reserved $65.0 million of cash on hand for repayment of
the S Distribution Notes. The balance of the S Distribution Notes
(approximately $10.0 million) will be repaid from cash generated by
operations.
(7) Active distributors are those distributors who are resident in the
countries in which the Company operates and who have purchased products
during the three months ended as of the date indicated, rounded to the
nearest thousand. An executive distributor is an active distributor who
has submitted a qualifying letter of intent to become an executive
distributor, achieved specified personal and group sales volumes for a
four month period and maintained such specified personal and group sales
volumes thereafter.

35
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the Combined Financial
Statements and the related notes thereto included elsewhere in this
Prospectus. See also "The Reorganization and S Corporation Distribution."

OVERVIEW

Nu Skin Asia Pacific is a rapidly growing network marketing company involved
in the distribution and sale of premium quality, innovative personal care and
nutritional products. The Company is the exclusive distribution vehicle for Nu
Skin International, Inc. ("Nu Skin International" or "NSI") in the countries
of Japan, Taiwan, Hong Kong (including Macau) and South Korea, where the
Company currently has operations, and in Thailand, Indonesia, Malaysia, the
Philippines, the PRC, Singapore and Vietnam, where operations have not
commenced. Additionally, the Company supplies certain products to NSI
affiliates in Australia and New Zealand. The Company's network of independent
distributors has grown since inception to more than 330,000 active
distributors as of September 30, 1996.

The Company has generated increased revenue each year since it commenced
operations in September 1991 and has operated profitably each year since 1992.
The Company's growth is primarily due to an increase in revenue from sales of
personal care products, the introduction of nutritional products, an increase
in the number of active distributors and the expansion of operations into new
geographic markets.

The Company's revenue is primarily dependent upon the efforts of a network
of independent distributors who purchase products and sales materials from the
Company in their local currency and who constitute the Company's customers.
The Company recognizes virtually all of its revenue when products are shipped
and title passes to these independent distributors after payment is received
by the Company. Revenue is net of returns, which have historically been less
than 1.5% of gross sales. Distributor incentives are paid to various
distributors on each product sale. The amount and recipient of the incentive
varies depending on the purchaser's position within the Global Compensation
Plan. These incentives are classified as operating expenses. The following
table sets forth revenue information for the time periods indicated. This
table should be reviewed in connection with the tables presented under
"Results of Operations" which disclose distributor incentives and other costs
associated with generating the aggregate revenue presented.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
DATE YEAR ENDED DECEMBER 31, SEPTEMBER 30,
OPERATIONS ----------------------- -----------------
COUNTRY COMMENCED 1993 1994 1995 1995 1996
------- -------------- ------- ------- ------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Japan................... April 1993 $ 101.2 $ 172.9 $ 231.5 $ 153.6 $ 265.1
Taiwan.................. January 1992 38.6 79.2 105.4 74.1 107.0
South Korea............. February 1996 -- -- -- -- 83.7
Hong Kong............... September 1991 14.3 10.9 17.1 10.7 12.1
Sales to NSI
affiliates(/1/)........ January 1993 8.5 1.4 4.6 3.0 3.4
------- ------- ------- -------- --------
Total revenue......... $ 162.6 $ 264.4 $ 358.6 $ 241.4 $ 471.3
======= ======= ======= ======== ========
</TABLE>
--------
(1) Includes revenue from the sale of certain products to NSI
affiliates in Australia and New Zealand.

Revenue generated in Japan and Taiwan represented 56.2% and 22.7%,
respectively, of total revenue generated during the nine months ended
September 30, 1996. Since the commencement of operations in February 1996, the
Company's South Korean operations generated $83.7 million of revenue, or 17.8%
of total revenue for the nine months ended September 30, 1996. Although
operating costs have increased in each country with the growth of the
Company's revenue, such costs have declined as a percentage of revenue due to
improved operating leverage. Revenue generated in Hong Kong during the nine
months ended September 30, 1996 represented 2.6% of total Company revenue.

36
<PAGE>

Cost of sales primarily consists of the cost of products purchased from NSI
(in U.S. dollars) as well as customs duties related to the importation of such
products. As the sales mix changes between product categories, cost of sales
and, accordingly, gross profit, may fluctuate to some degree. In general,
however, costs of sales move proportionate to revenue. Also, as currency
exchange rates fluctuate, the Company's gross margin will fluctuate.

Distributor incentives are the Company's most significant expense. Pursuant
to the Operating Agreements with NSI, the Company has agreed to incur a
distributor commission expense of 42% of commissionable product sales (with
the exception of South Korea, where, due to government regulations, the
Company uses a formula based upon a maximum payout of 35% of commissionable
product sales). The Licensing and Sales Agreements provide that the Company is
to satisfy this obligation by paying commissions owed to local distributors.
In the event that these commissions exceed 42% of commissionable product
sales, the Company is entitled to receive the difference from NSI. In the
event that the commissions paid are lower than 42%, the Company must pay the
difference to NSI. Under this formulation, the Company's total commission
expense is fixed at 42% of commissionable product sales in each country
(except for South Korea). Because the Company's revenue includes sales of both
commissionable and non-commissionable items, distributor incentives as a
percentage of total revenue have ranged from approximately 36.4% to 38.1%
since September 30, 1993. Non-commissionable items consist of sales materials
and starter kits as well as sales to NSI affiliates in Australia and New
Zealand.

Selling, general and administrative expenses include wages and benefits,
rents and utilities, travel and entertainment, promotion and advertising and
professional fees, as well as license and management fees paid to NSI and Nu
Skin International Management Group, Inc. ("NSIMG"). Pursuant to the Operating
Agreements, the Company contracts for management support services from NSIMG,
for which the Company pays a fee equal to an allocation of expenses plus 3%.
In addition, the Company pays to NSI a license fee of 4% of the Company's
revenues from sales to distributors (excluding sales of starter kits) for the
use of NSI's distributor lists, distribution system and certain related
intangibles.

Provision for income taxes is dependent on the statutory tax rates in each
of the countries in which the Company operates. Historically, each of the
Subsidiaries was only taxed in its local jurisdiction in accordance with
relevant tax laws. Statutory tax rates in the countries in which the Company
has operations are 16.5% in Hong Kong, 25.0% in Taiwan, 30.1% in South Korea
and 57.9% in Japan. The Company operates a regional business center in Hong
Kong, which bears inventory obsolescence and currency exchange risks. Any
income or loss incurred by the regional business center is not subject to
taxation in Hong Kong.

The Company is subject to taxation in the United States, where it is
incorporated, at a statutory corporate federal tax rate of 35%. In addition,
each Subsidiary is subject to taxation in the country in which it operates.
The Company will receive foreign tax credits for the amount of foreign taxes
actually paid in a given period, which may be utilized to reduce taxes paid in
the United States. In the event that the Company's operations in high tax
jurisdictions such as Japan grow disproportionately to the rest of the
Company's operations, the Company may be unable to fully utilize its foreign
tax credits in the U.S. which could, accordingly, result in the Company paying
a higher overall effective tax rate on its worldwide operations.

37
<PAGE>

RESULTS OF OPERATIONS

The following tables set forth (i) the results of operations and
supplemental data, and (ii) operating results and supplemental data as a
percentage of revenue, respectively, for the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
------------- -------------- ------------------
1993 1994 1994 1995 1995 1996
------ ------ ------ ------ -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenue....................... $110.6 $254.6 $264.4 $358.6 $ 241.4 $ 471.3
Cost of sales................. 38.8 86.8 82.2 96.6 64.1 133.6
------ ------ ------ ------ -------- --------
Gross profit.................. 71.8 167.8 182.2 262.0 177.3 337.7
Operating expenses:
Distributor incentives...... 40.3 95.7 101.4 135.7 91.9 175.1
Selling, general and admin-
istrative.................. 27.1 44.6 48.8 67.5 44.1 70.0
------ ------ ------ ------ -------- --------
Operating income.............. 4.4 27.5 32.0 58.8 41.3 92.6
Other income (expense), net... .1 .4 (.4) .5 (.4) 1.5
------ ------ ------ ------ -------- --------
Income before provision for
income taxes................. 4.5 27.9 31.6 59.3 40.9 94.1
Provision for income taxes.... .4 10.2 10.0 19.1 13.2 33.8
------ ------ ------ ------ -------- --------
Net income.................... $ 4.1 $ 17.7 $ 21.6 $ 40.2 $ 27.7 $ 60.3
====== ====== ====== ====== ======== ========
Unaudited supplemental da-
ta(/1/):
Net income before pro forma
provision for income taxes... $ 4.5 $ 27.9 $ 31.6 $ 59.3 $ 40.9 $ 94.1
Pro forma provision for income
taxes........................ 1.5 10.4 11.5 22.8 15.7 34.2
------ ------ ------ ------ -------- --------
Net income after pro forma
provision for income taxes... $ 3.0 $ 17.5 $ 20.1 $ 36.5 $ 25.2 $ 59.9
====== ====== ====== ====== ======== ========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
-------------- -------------- ------------------
1993 1994 1994 1995 1995 1996
------ ------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............. 35.1 34.1 31.1 26.9 26.6 28.3
------ ------ ------ ------ -------- --------
Gross profit.............. 64.9 65.9 68.9 73.1 73.4 71.7
------ ------ ------ ------ -------- --------
Operating expenses:
Distributor incentives... 36.4 37.6 38.4 37.8 38.1 37.2
Selling, general and ad-
ministrative............ 24.5 17.5 18.4 18.8 18.3 14.9
------ ------ ------ ------ -------- --------
Operating income.......... 4.0 10.8 12.1 16.5 17.0 19.6
Other income (expense),
net...................... .1 .2 (.1) .1 (.2) .3
------ ------ ------ ------ -------- --------
Income before provision
for income taxes......... 4.1 11.0 12.0 16.6 16.8 19.9
Provision for income
taxes.................... .4 4.0 3.8 5.3 5.5 7.2
------ ------ ------ ------ -------- --------
Net income................ 3.7% 7.0% 8.2% 11.3% 11.3% 12.7%
====== ====== ====== ====== ======== ========
Unaudited supplemental da-
ta(/1/):
Net income before pro
forma
provision for income tax-
es....................... 4.1% 11.0% 12.0% 16.6% 16.8% 19.9%
Pro forma provision for
income taxes............. 1.4 4.1 4.3 6.4 6.5 7.3
------ ------ ------ ------ -------- --------
Net income after pro forma
provision for income tax-
es....................... 2.7% 6.9% 7.7% 10.2% 10.3% 12.6%
====== ====== ====== ====== ======== ========
</TABLE>
- --------
(1) Reflects adjustment for Federal and state income taxes as if the Company
had been taxed as a C corporation rather than as an S corporation since
inception.

38
<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995

REVENUE was $471.3 million during the nine months ended September 30, 1996,
an increase of 95.2% from the revenue of $241.4 million recorded during the
same period in 1995. This increase is attributable to the following factors.
First, revenue in Japan increased by $111.5 million, or 72.6%. This increase
in revenue was primarily as a result of the continued success of nutritional,
color cosmetics and HairFitness products, which were introduced in October
1995 and was partially offset by the strengthening of the U.S. dollar relative
to the Japanese yen during the same period. Second, revenue in Taiwan
increased by $32.9 million, or 44.4%, primarily as a result of the
introduction of color cosmetics and other products, along with the opening of
a new distribution center in Taichung, Taiwan. Third, in February 1996, Nu
Skin Korea commenced operations and, through September 30, 1996, has generated
revenue of $83.7 million. Additionally, revenue in Hong Kong increased by $1.4
million during the nine months ended September 30, 1996 as compared to the
same period in 1995.

GROSS PROFIT as a percentage of revenue was 71.7% and 73.4% during the nine
months ended September 30, 1996 and 1995, respectively. This decline reflected
the strengthening of the U.S. dollar, the introduction of three nutritional
products in Japan in October 1995 and the commencement of operations in South
Korea in 1996. Nutritional products are generally subject to higher duties
than other products marketed by the Company, which yields lower gross profit
as a percentage of revenue. The commencement of operations in South Korea also
impacted gross profit as a percentage of revenue due to South Korean
regulations which result in higher prices on imported products than in other
markets.

DISTRIBUTOR INCENTIVES as a percentage of total revenue declined from 38.1%
for the nine months ended September 30, 1995 to 37.2% for the same period in
1996. The primary reason for this decline was increased revenue from South
Korea where local regulations limit the incentives which can be paid to South
Korean distributors.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES as a percentage of revenue
declined from 18.3% during the nine months ended September 30, 1995 to 14.9%
during the same period in 1996. This fluctuation was primarily due to
economies of scale gained as the Company's revenue increased.

OPERATING INCOME during the nine months ended September 30, 1996 increased
to $92.6 million, an increase of 124.2% from the $41.3 million of operating
income recorded during the same period in 1995. Operating income as a
percentage of revenue increased from 17.0% to 19.6%. This increase was caused
primarily by lower selling, general and administrative expenses as a
percentage of revenue.

OTHER INCOME increased by $1.9 million during the nine months ended
September 30, 1996 as compared to the same period in 1995. The increase was
primarily caused by an increase in interest income generated through the short
term investment of cash.

PRO FORMA PROVISION FOR INCOME TAXES increased to $34.2 million during the
nine months ended September 30, 1996 compared to $15.7 million during the same
period in 1995. The pro forma effective tax rate decreased to 36.3% in 1996 as
compared to 38.4% for the same period in 1995. The Company generated excess
foreign tax credits in 1995 which did not continue in 1996.

NET INCOME AFTER PRO FORMA PROVISION FOR INCOME TAXES increased by $34.7
million to $59.9 million during the nine months ended September 30, 1996
compared to the $25.2 million during the same period in 1995. Pro forma net
income as a percentage of revenue increased to 12.6% for the nine months ended
September 30, 1996 as compared to 10.3% for the same period in 1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER 31, 1994

REVENUE was $358.6 million during the year ended December 31, 1995, an
increase of 35.6% from the $264.4 million of revenue recorded during 1994.
This increase was due primarily to an increased number of active distributors
in each market, which was the primary factor contributing to a $58.6 million
increase in revenue in Japan, a $26.2 million increase in revenue in Taiwan
and a $6.2 million increase in revenue in Hong Kong. Nutritional products,
color cosmetics products and a new line of HairFitness products were
introduced in

39
<PAGE>

Japan in the fourth quarter of 1995, accounting for $25.0 million of the $58.6
million increase. Additionally, the Company benefitted by the strengthening of
the Japanese yen during 1995. Revenue in Taiwan and Hong Kong increased as a
result of a higher volume of sales of color cosmetics, which were introduced
in late 1994, and other personal care products. Additionally, certain new
product introductions by NSI affiliates in Australia and New Zealand led to a
$3.2 million increase in revenue.

GROSS PROFIT as a percentage of revenue increased from 68.9% in 1994 to
73.1% in 1995. The increase in gross profit resulted from a reduction in
product costs on purchases from NSI, the weakening of the U.S. dollar relative
to the Japanese yen and other cost savings related to inventory shipping and
handling.

DISTRIBUTOR INCENTIVES as a percentage of revenue decreased from 38.4% in
1994 to 37.8% in 1995. This decline was primarily attributable to an increase
in revenue in 1995 from non-commissionable sales materials and sales to NSI
affiliates.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES as a percentage of revenue
increased to 18.8% during the year ended December 31, 1995, from 18.4% during
1994. This increase was primarily due to a one-time cost incurred in February
1995 in connection with moving the Company's Japanese facilities into a
larger, more accessible office and distributor center in Tokyo, Japan.

OPERATING INCOME increased to $58.8 million in 1995 from $32.0 million in
1994, an increase of 83.8%. Operating income as a percentage of revenue
increased to 16.5% from 12.1%. The increase was primarily the result of the
product cost reductions discussed above.

OTHER INCOME increased by approximately $0.9 million during 1995 as compared
to 1994. This increase was primarily caused by the disposal of property and
equipment related to a move to new facilities during 1994, and an increase in
interest income generated through the short term investment of cash.

PRO FORMA PROVISION FOR INCOME TAXES increased to $22.8 million during the
year ended December 31, 1995 as compared to $11.5 million for the same period
in 1994. The effective tax rate was 38.4% in 1995 as compared to 36.4% in
1994.

NET INCOME AFTER PRO FORMA PROVISION FOR INCOME TAXES increased by $16.4
million to $36.5 million during the year ended December 31, 1995 as compared
to $20.1 million for the same period in 1994. Pro forma net income as a
percentage of revenue increased to 10.2% during the year ended December 31,
1995 as compared to 7.7% for the same period in 1994.

YEAR ENDED SEPTEMBER 30, 1994, COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1993

REVENUE for the year ended September 30, 1994, was $254.6 million, an
increase of 130.2% when compared to the $110.6 million of revenue reported in
1993. This increase was largely due to the following three factors: (i) a
$113.6 million increase in revenue reflecting a full year of operations in
Japan in fiscal year 1994 as compared to only six months of operations in
fiscal year 1993; (ii) a $33.2 million increase in revenue in Taiwan due to a
growing number of active distributors purchasing the Company's products; and
(iii) a $2.3 million increase in revenue in Hong Kong. These increases were
partially offset by a $5.1 million decrease in revenues from sales to NSI
affiliates in Australia and New Zealand.

GROSS PROFIT as a percentage of revenue increased slightly to 65.9% in
fiscal year 1994 from 64.9% in fiscal year 1993. The increase in gross profit
as a percentage of revenue was primarily due to changes in the sales mix.

DISTRIBUTOR INCENTIVES as a percentage of revenue increased to 37.6% during
the year ended September 30, 1994, from 36.4% during the year ended September
30, 1993. This increase was primarily due to a decrease in non-commissionable
sales to NSI affiliates in Australia and New Zealand which represented 6.7% of
total revenue in fiscal year 1993 compared to less than 1.0% of total revenue
in fiscal year 1994.

40
<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES as a percentage of revenue
decreased to 17.5% during the year ended September 30, 1994, from 24.5% during
the year ended September 30, 1993. This decrease in selling, general and
administrative expenses as a percentage of revenue was the result of economies
of scale obtained as revenue increased in Japan and Taiwan.

OPERATING INCOME during the year ended September 30, 1994, increased to
$27.5 million from $4.4 million recorded during the year ended September 30,
1993. This increase was the combination of an increase in revenue and a
decrease in selling, general, and administrative expenses.

OTHER INCOME increased by $0.3 million during the year ended September 30,
1994 as compared to the same period in 1993.

PRO FORMA PROVISION FOR INCOME TAXES increased to $10.4 million during the
year ended December 31, 1994, as compared to $1.5 million for the same period
in 1993. The effective tax rate was 37.3% in 1994 compared to 33.3% in 1993.

NET INCOME AFTER PRO FORMA PROVISION FOR INCOME TAXES increased by $14.5
million to $17.5 million during the year ended December 31, 1994 as compared
to $3.0 million for the same period in 1993. Pro forma net income as a
percentage of revenue increased to 6.9% for the year ended December 31, 1994
as compared to 2.7% for the same period in 1993.

UNAUDITED PRO FORMA COMBINED RESULTS OF OPERATIONS

As part of the Reorganization, the Offerings and the Rule 415 Offerings,
several actions have occurred or will occur which will impact the
comparability of the historical financial results for the Company with the
future results of the Company. The following adjustments are reflected in the
unaudited pro forma combined financial information set forth below and
included elsewhere in this Prospectus: (i) the amortization over a 20-year
period of a $25.0 million payment, consisting of $5.0 million in cash and
$20.0 million in notes, to NSI for the exclusive rights to distribute NSI
products in Thailand, Indonesia, Malaysia, the Philippines, the PRC, Singapore
and Vietnam, (ii) the recognition by the Company of additional management
charges of $4.4 million per year relating to certain support services provided
to the Company by NSI and an NSI affiliate, (iii) estimated annual
compensation expense of $1.3 million related to the employee stock bonus
awards granted to employees of the Company, NSI and its affiliates, (iv)
recording of U.S. Federal and state income taxes as if the Company had been
taxed as a C corporation rather than as an S corporation since inception, and
(v) increased interest expense of $2.7 million relating to the issuance of
$81.9 million of S Distribution Notes due and payable within six months (8%
interest per annum) to the Existing Stockholders in respect of the earned and
undistributed taxable S corporation earnings at September 30, 1996 that would
have been distributed had the Company's S corporation status been terminated
on September 30, 1996. The unaudited pro forma combined financial information
set forth below does not reflect the estimated non-cash compensation expense
of $23.1 million in connection with the one-time grant of the Distributor
Options at the Exercise Price of $5.75, which is 25% of the initial price per
share to the public in the Offerings. The Distributor Options will include
conditions related to the achievement of performance goals and will vest on
December 31, 1997. The Company will record distributor incentive stock expense
for these non-employee stock options.

41
<PAGE>

The following table sets forth the percentage of revenue represented by the
specific components of income and expense on a pro forma basis for the periods
presented. See "Unaudited Pro Forma Combined Financial Statements" and the
related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30,
FOR THE YEAR ENDED --------------
DECEMBER 31, 1995 1995 1996
------------------ ------ ------
<S> <C> <C> <C>
Revenue................................. 100.0% 100.0% 100.0%
Cost of sales........................... 26.9 26.6 28.3
----- ------ ------
Gross profit............................ 73.1 73.4 71.7
Operating expenses:
Distributor Incentives................. 37.8 38.1 37.2
Selling, general and administrative.... 20.8 20.4 15.9
----- ------ ------
Operating income........................ 14.5 14.9 18.6
Other income (expense), net............. (0.7) (1.3) 0.4
----- ------ ------
Income before provision for income
taxes.................................. 13.8 13.6 19.0
Provision for income taxes.............. 5.3 5.2 6.9
----- ------ ------
Net income.............................. 8.5% 8.4% 12.1%
===== ====== ======
</TABLE>

The Company is subject to taxation in the United States, where it is
incorporated, at a statutory corporate federal tax rate of 35%. In addition,
each Subsidiary is subject to taxation in the country in which it operates.
The Company will receive foreign tax credits for the amount of foreign taxes
actually paid in a given period, which may be utilized to reduce taxes paid in
the United States. In the event that the Company's operations in high tax
jurisdictions such as Japan grow disproportionately to the rest of the
Company's operations, the Company will be unable to fully utilize its foreign
tax credits in the U.S. which could, accordingly, result in the Company paying
a higher overall effective tax rate on its worldwide operations.

LIQUIDITY AND CAPITAL RESOURCES

The Company generates significant cash flow from operations. During the year
ended December 31, 1995, cash provided by operations totaled $66.0 million. As
of September 30, 1996, the Company had cash and cash equivalents of $81.1
million. As of September 30, 1996, the Subsidiaries' aggregate undistributed
taxable S corporation earnings were $81.9 million. The Company estimates that
the Subsidiaries' aggregate undistributed taxable S corporation earnings are
approximately $90.0 million as of the S Termination Date. The S Corporation
Distribution is being distributed in the form of promissory notes due within
six months of the S Termination Date bearing interest at 8% per annum ("S
Distribution Notes"). $15.0 million of the proceeds from the Offerings has
been used to pay a portion of the S Distribution Notes. The Company has
reserved $65.0 million of cash on hand for repayment of the S Distribution
Notes. The balance of the S Distribution Notes (approximately $10 million)
will be repaid from cash generated by operations. The Company is no longer
treated as an S corporation and, accordingly, is fully subject to Federal and
state income taxes. See "The Reorganization and S Corporation Distribution."

The Company is able to generate significant cash balances due to its rapid
growth, high margins and minimal capital requirements. As of September 30,
1996, working capital was $60.8 million compared to $47.9 million and $26.7
million at December 31, 1995 and 1994, respectively. Cash and cash equivalents
at September 30, 1996 were $81.1 million compared to $63.2 million and $16.3
million at December 31, 1995 and 1994, respectively.

42
<PAGE>

Historically, the Company's principal need for funds has been for
distributor incentives, working capital (principally inventory purchases),
capital expenditures and the development of new markets. The Company has
generally relied entirely on cash flow from operations to meet its business
objectives without incurring long term debt to unrelated third parties. The
Company did, however, rely upon borrowings from NSI in initially establishing
operations in Japan, Taiwan and Hong Kong. Regulations in South Korea preclude
borrowings from related entities, which led to the Company establishing an
$8.0 million line of credit to facilitate the opening of the South Korean
market. There were no outstanding borrowings under this credit facility as of
December 31, 1995, and it expired on July 1, 1996.

Capital expenditures, primarily for equipment, computer systems and
software, office furniture and leasehold improvements, were $4.0 million, $5.4
million and $1.7 million for the nine months ended September 30, 1996, and the
years ended December 31, 1995 and 1994, respectively. The Company anticipates
additional capital expenditures of $2.4 million to support growth through the
end of 1996. In addition, the Company anticipates capital expenditures over
the next two years of approximately $22.0 million to further enhance its
infrastructure, including computer systems and software, warehousing
facilities and distributor centers in order to accommodate future growth.

Under the Operating Agreements with NSI, the Company incurs related party
payables. The Company had related party payables of $36.1 million, $28.7
million and $10.6 million at September 30, 1996, and December 31, 1995 and
1994, respectively. In addition, the Company had related party receivables of
$7.8 million, $1.8 million and $17.9 million, respectively, at those dates.
NSI has the right to charge interest on balances outstanding in excess of 60
days at a rate of 2% above the U.S. prime rate. As of September 30, 1996, no
material related party payables or receivables had been outstanding for more
than 60 days.

Management considers the Company to be liquid and able to meet its
obligations on both a short and long-term basis. Management anticipates using
the proceeds of the Offerings as outlined in the Use of Proceeds section
within the next three years. Further, management believes that the proceeds
from the Offerings together with future cash flows from operations will be
adequate to fund cash needs relating to the implementation of the Company's
strategic plans, including opening new markets and funding the S Distribution
Notes.

SEASONALITY AND CYCLICALITY

The direct selling industry is impacted by certain seasonal trends such as
major cultural events and vacation patterns. For example, Japan, Taiwan, Hong
Kong and South Korea celebrate the local New Year in the Company's first
quarter. Management believes that direct selling in Japan is also generally
negatively impacted during August, when many individuals traditionally take
vacations.

43
<PAGE>

QUARTERLY RESULTS

The following table sets forth certain unaudited quarterly data for the
periods shown.

<TABLE>
<CAPTION>
1995 1996
------------------------------------ ----------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD
QUARTER QUARTER QUARTER QUARTER(/1/) QUARTER(/2/) QUARTER QUARTER
------- ------- ------- ------------ ------------ ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................... $77.7 $80.5 $83.2 $117.2 $124.2 $163.5 $183.6
Gross profit.............. 57.3 59.7 60.3 84.7 89.4 117.4 130.9
Operating income.......... 13.5 15.0 12.8 17.5 23.2 31.9 37.5
</TABLE>
--------
(1) LifePak, Nu Colour and HairFitness products were introduced in Japan
during October of 1995.
(2) The Company commenced operations in South Korea in February of 1996.

CURRENCY FLUCTUATION AND EXCHANGE RATE INFORMATION

The Company purchases inventory from NSI in U.S. dollars and assumes
currency exchange rate risk with respect to such purchases. Local currency in
Japan, Taiwan, Hong Kong and South Korea is generally used to settle non-
inventory transactions with NSI. It is anticipated that the Company will
transact its business in new markets with NSI in a similar manner, as
permitted by local regulations. Given the uncertainty of exchange rate
fluctuations, the Company cannot estimate the effect of these fluctuations on
its future business, product pricing, results of operations or financial
condition. However, because nearly all of the Company's revenue will continue
to be realized in local currencies and the majority of its cost of sales will
continue to be denominated in U.S. dollars, the Company's gross profits will
be positively affected by a weakening in the U.S. dollar and will be
negatively affected by a strengthening in the U.S. dollar. The Company reduces
its exposure to fluctuations in foreign exchange rates by creating offsetting
positions through the use of foreign currency exchange contracts. The Company
currently does not use such financial instruments for trading or speculative
purposes. The Company regularly monitors its foreign currency risks and
periodically takes measures to minimize the impact of foreign exchange
fluctuations on the Company's operating results.

INFLATION

In general, costs are affected by inflation and the effects of inflation may
be experienced by the Company in future periods. Management believes, however,
that such effects have not been material to the Company during the periods
presented. Certain of the countries in which the Company operates have
experienced significant inflation in the past. Although to date this inflation
has not had a material effect on the Company's results of operations, there
can be no assurance that inflation will not in the future so affect results of
operations.

44
<PAGE>

BUSINESS

GENERAL

The Company believes it is one of the fastest growing network marketing
companies in Asia. Revenue increased 95.2% to $471.3 million for the nine
months ended September 30, 1996 from $241.4 million for the same period in
1995. Net income increased 117.7% to $60.3 million for the nine months ended
September 30, 1996 from $27.7 million for the same period in 1995. Revenue
increased 35.6% to $358.6 million for the year ended December 31, 1995 from
$264.4 million in 1994. Although operating expenses have increased with the
growth of the Company's revenue, such expenses have declined as a percentage
of revenue due to improved operating leverage. Net income increased 86.1% to
$40.2 million for the year ended December 31, 1995 from $21.6 million in 1994.
The Company's network of independent distributors has grown since inception in
1991 to more than 330,000 active distributors as of September 30, 1996. See
"Risk Factors--Managing Growth."

The Company's product philosophy is to combine the best of science and
nature in developing premium quality, innovative personal care and nutritional
products which are specifically designed for the network marketing
distribution channel. The Company offers products in two distinct categories:
personal care products, marketed under the trademark "Nu Skin," and
nutritional products, marketed under the trademark "Interior Design
Nutritionals" (IDN). The Nu Skin personal care product lines include facial
care, body care, hair care and color cosmetics, as well as specialty products
such as sun protection, oral hygiene and fragrances. The IDN product lines
include nutritional supplements, weight management products and nutritious
snacks, and sports nutrition products.

In Japan, Taiwan and Hong Kong, the Company currently offers most of NSI's
personal care products and approximately one-third of NSI's nutritional
products. In South Korea, the Company currently offers one-third of NSI's
personal care products and none of the nutritional products. The Company
believes that it can significantly grow its business and attract new customers
by expanding its product offerings in each of its markets to include more of
NSI's existing personal care and nutritional products. In addition to
expanding its product offerings with existing NSI products, the Company
intends to introduce new products tailored to specific markets.

The distribution of products through the network marketing and other direct
selling channels has grown significantly in recent years. The WFDSA reports
that, since 1990, worldwide direct distribution of goods and services to
consumers has increased 65%, resulting in the sale of over $75 billion of
goods and services in 1995. According to the WFDSA, $34 billion of goods and
services were sold by its members in 1995 through direct selling channels in
the markets in which the Company operates, which represents 45% of the global
volume of direct sales by its members.

OPERATING STRENGTHS

The Company believes that its success is due to its commitment to provide a
wide range of premium quality, innovative personal care and nutritional
products and an appealing global business opportunity for persons interested
in establishing a direct sales business. The Company has been able to achieve
rapid, sustained and profitable growth by capitalizing on the following
operating strengths:

PREMIUM PRODUCT OFFERINGS. The Company is committed to building its brand
name and distributor and customer loyalty by selling premium quality,
innovative personal care and nutritional products that appeal to broad
markets. This commitment is illustrated by the Company's personal care
products slogan "All of the Good and None of the Bad" and its nutritional
products slogan "Adding Life to Years." The Company offers products

45
<PAGE>

designed for the direct selling channel by focusing on innovative consumable
products which build loyalty and lead to repeat purchases. Management believes
that the Company's focus on innovative products supports its distributors'
demonstrative and educational sales techniques.

GLOBAL DISTRIBUTOR COMPENSATION PLAN. The Company believes that one of the
strengths of the Global Compensation Plan is its seamless integration across
all markets in which NSI products are sold. By entering into international
sponsoring agreements with NSI, distributors are authorized to sponsor new
distributors in each country where NSI or the Company has operations. This
allows distributors to receive commissions for sales at the same rate for
sales in foreign countries as for sales in their home country. This is a
significant benefit to distributors because they are not required to establish
new distributorships or requalify for higher levels of commissions within each
new country in which they begin to operate. The seamless integration of the
Global Compensation Plan means that distributor knowledge and experience can
be used to rapidly build distributor leadership in new markets. See "Risk
Factors--Reliance Upon Independent Distributors of NSI."

HIGH LEVEL OF DISTRIBUTOR INCENTIVES. The Company believes that the Global
Compensation Plan is among the most financially rewarding plans offered to
distributors by network marketing companies. There are two fundamental ways in
which distributors can earn money: (i) through retail markups, for which the
Company recommends a range from 43% to 60%; and (ii) through a series of
commissions on each product sale which can result in commissions to
distributors aggregating up to 58% of such product's wholesale price. On a
global basis, however, commissions have averaged 42% of revenue from
commissionable sales over the last seven years. See "Risk Factors--Increase in
Distributor Compensation Expense."

NEW MARKET DEVELOPMENT PROGRAM. The Company has developed a low cost,
disciplined approach to opening new markets. Each market opening is preceded
by a thorough analysis of economic and political conditions, regulatory
standards and other business, tax and legal issues. Prior to a market opening,
the Company's management team, in conjunction with NSI support personnel,
local legal counsel and tax advisors, works to obtain all necessary regulatory
approvals and establish facilities capable of meeting distributor needs. This
market development approach, combined with the Global Compensation Plan, which
motivates distributors to train and sponsor other distributors to sell
products in new markets, has enabled the Company to quickly and successfully
open new markets. See "Risk Factors--Entering New Markets."

DISTRIBUTOR SUPPORT PROGRAMS. The Company is committed to providing a high
level of support services tailored to the needs of its distributors in each
market. The Company meets the needs and builds the loyalty of its distributors
with personalized distributor service, a support staff that assists
distributors as they build networks of downline distributors, and a liberal
product return policy. The Company provides walk-in, telephonic and
computerized product fulfillment and tracking services that result in user-
friendly, timely product distribution. Each walk-in center maintains meeting
rooms which distributors may utilize in training and sponsoring activities.

RELATIONSHIP WITH NSI. NSI, founded in 1984 and based in Provo, Utah, is
engaged in selling personal care and nutritional products and, together with
its affiliates, comprises one of the largest network marketing organizations
in the world. NSI has provided, and will continue to provide, a high level of
support services to the Company, including product development, marketing and
other managerial support services. Management believes that the Company's
relationship with NSI has allowed the Company to increase revenue and net
income at rates that otherwise may not have been possible. Since distributor
agreements are entered into between NSI and distributors, all of the
distributors who generate revenue for the Company are distributors of NSI. See
"Risk Factors--Relationship with and Reliance on NSI; Potential Conflicts of
Interest." Because of this fact, the Company cannot control who becomes a
distributor.

EXPERIENCED MANAGEMENT TEAM. The Company's senior management team, members
of which founded NSI, has been instrumental in successfully managing the
growth in revenue and net income experienced by the Company to date. The
Company has also attracted experienced local general managers to oversee
operations in Japan, Taiwan, Hong Kong and South Korea.

46
<PAGE>

Consideration of the Company's operating strengths should be made in
connection with various risks including, risks associated with the Company's
reliance on its independent distributors and the effect on the Company's
operations of adverse publicity regarding the Company and actions of
distributors, risks associated with product liability and government
regulation of the Company's products, marketing plan and direct selling
generally, the Company's reliance on NSI and on outside manufacturers,
competition and the adverse impact on net income of an increase in distributor
compensation expense. See "Risk Factors."

GROWTH STRATEGY

The Company's primary objective is to capitalize on its operating strengths
to become a leading distributor of consumer products in each of its markets.
Specifically, the Company's strategy to increase revenue and net income is as
follows:

INTRODUCE NEW PRODUCTS. Because new products tend to increase sales by
existing distributors and attract new distributors, the Company intends to
continue introducing existing and new NSI products. For example, LifePak, the
Company's most successful nutritional product was introduced in Japan in 1995,
where it has grown to represent approximately 17% of revenue. In October 1996,
the Company introduced LifePak in Taiwan and intends, subject to regulatory
approval, to introduce LifePak in Hong Kong in 1997. In addition, the Company
expects to launch Epoch, a new line of ethnobotanical personal care products,
in all markets by mid-1997. The Company also intends to introduce products
tailored to specific demographic and geographic market segments and will
consider introducing entirely new product categories in the future. See "Risk
Factors--Government Regulation of Products and Marketing."

OPEN NEW MARKETS. The Company will continue to pursue attractive new market
opportunities. Thailand is the next country in which the Company intends to
commence operations, subject to receipt of necessary government approvals. The
Company's preparatory work for Thailand is currently ongoing. In addition, the
Company has conducted preliminary investigations on the feasibility of
commencing operations in Indonesia, Malaysia, the Philippines, the PRC,
Singapore and Vietnam. The Company believes that these countries may represent
significant markets for the future expansion of its operations, provided that
the Company can secure the required regulatory and business permits. See "Risk
Factors--Entering New Markets," "--Potential Negative Impact of Distributor
Actions," "--Government Regulation of Direct Selling Activities" and "--
Government Regulation of Products and Marketing."

ATTRACT NEW DISTRIBUTORS AND ENHANCE DISTRIBUTOR PRODUCTIVITY. To date, the
Company has enjoyed significant growth in the number of its active
distributors (defined as those distributors which have purchased products from
the Company during the previous three months). By leveraging its operating
strengths, the Company intends to continue to create and maintain a business
climate to promote the growth in the number of active distributors and to
increase distributor retention, motivation and productivity. In addition, the
Company will pursue growth in the number of active distributors by continuing
to work with NSI to enhance the Global Compensation Plan, initiating an
innovative distributor equity incentive program, selectively opening new
distributor walk-in centers to provide a local presence in additional key
cities, enhancing distributor recognition programs, and targeting inactive
distributors who may still have an interest in the Company's business
opportunity or products. See "Shares Eligible for Future Sale."

INCREASE PRODUCT CONSUMPTION. The Company intends to increase sales to new
and existing consumers through (i) increasing product promotions in marketing
literature, (ii) increasing the availability of sample packages, (iii)
emphasizing product "systems," such as the HairFitness system of various
shampoos and conditioners, which leads to the purchase of multiple products
rather than a single product, and (iv) implementing an automatic reordering
system which is designed to result in convenient repeat purchases.

Consideration of the Company's growth strategy should be made in connection
with certain risks associated with such growth strategy including risks
related to opening new markets and managing growth, conducting operations
outside of the United States, managing currency risks and complying with
import restrictions and

47
<PAGE>

government regulations regarding the Company's products, marketing plan, and
direct selling generally. See "Risk Factors."

INDUSTRY OVERVIEW

The distribution of products through the network marketing and other direct
selling channels has grown dramatically in recent years. The WFDSA reports
that, since 1990, worldwide direct distribution of goods and services to
consumers has increased 65%, resulting in the sale of over $75 billion of
goods and services in 1995. According to the WFDSA, $34 billion of goods and
services were sold by its members in 1995 through direct selling channels in
the markets in which the Company currently operates, which represents 45% of
the global volume of direct sales. The Company believes that extended family
relationships, the family culture and the extended social networks common in
Asian countries are particularly well suited to the Company's network
marketing methods. The Company also believes that a variety of recent social
and economic changes which have occurred throughout Asia have had a positive
impact on the Company's revenues and net income. Trends that have benefited
the Company include the emergence of a greater interest on the part of some
Asians in pursuing more independent entrepreneurial activities outside
traditional business settings, an increase in the number of Asian women
joining the work force and an increase in the number of Asians seeking
supplemental income from alternative sources.

The Asian retail market is generally characterized by fragmented
distribution and numerous small retailers who may have only limited knowledge
of the products they sell and may not be able to effectively demonstrate their
products to customers. In Japan, these problems are further exacerbated by the
multi-tiered, traditional Japanese distribution system which has proven
difficult for many foreign manufacturers to penetrate. Outside of Japan, the
general lack of a developed distribution infrastructure throughout Asia has
fostered and encouraged the growth of direct selling as a significant
distribution channel. Given this environment, the Company believes that the
high level of personal service provided by direct selling companies, including
convenient in-home demonstrations, easy-access product ordering, timely
delivery and product return policies, provides additional value to consumers.
In addition, rapidly growing Asian economies and a growing demand in Asia for
Western brand name products has fueled the growth and demand for high quality
consumer products.

COUNTRY PROFILES

The following table sets forth the Company's revenue and the total number of
active distributors for each of the countries in which the Company currently
operates for the years ended December 31, 1994 and 1995 and for the nine
months ended September 30, 1996. This table should be reviewed in connection
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" which discusses the costs associated with generating the
aggregate revenue presented.

48
<PAGE>

<TABLE>
<CAPTION>
NINE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------- SEPTEMBER 30,
COUNTRY 1994 1995 1996
------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
Japan................................ $ 172,960 $ 231,540 $265,072
Taiwan............................... 79,219 105,415 107,023
Hong Kong............................ 10,880 17,046 12,133
South Korea(/1/)..................... -- -- 83,697
----------- ----------- --------
Total(/2/)......................... $ 263,059 $ 354,001 $467,925
=========== =========== ========
Active Distributors(/3/)(/4/):
Japan................................ 106,000 147,000 182,000
Taiwan............................... 53,000 75,000 81,000
Hong Kong............................ 11,000 14,000 12,000
South Korea(/1/)..................... -- -- 56,000
----------- ----------- --------
Total.............................. 170,000 236,000 331,000
=========== =========== ========
</TABLE>
--------
(1) The Company commenced operations in South Korea in February 1996.
(2) Operating expenses have increased with the growth of the Company's
revenue. However, as a percentage of revenue such expenses have
declined due to improved operating leverage. In addition, total
revenue does not include sales of certain products to NSI
affiliates in Australia and New Zealand of $1.4 million, $4.6
million and $3.4 million in 1994, 1995 and the first nine months
of 1996, respectively.
(3) "Active Distributors" include only those distributors who
purchased products from the Company during the three months ended
as of the date indicated.
(4) Numbers are rounded to the nearest thousand.

The following table sets forth certain estimated economic and demographic
data in each of the Company's markets. Although the Company believes that the
following table provides a useful basis for evaluating the relative size and
growth of the economies and populations of the countries in which the Company
operates, no assurance can be given that economic or population data in a
particular country will indicate what the Company's results of operations will
be in that country.

<TABLE>
<CAPTION>
REAL GDP
1995 POPULATION 1995 GDP 1995 GDP GROWTH
COUNTRY (IN MILLIONS) (IN BILLIONS OF $) PER CAPITA (IN $) 1995/1994(%)
------- --------------- ------------------ ----------------- ------------
<S> <C> <C> <C> <C>
Japan................... 125.3 $4,645.5 $37,672 0.9%
Taiwan.................. 21.2 259.9 13,403 6.1
Hong Kong............... 6.2 144.3 26,442 5.0
South Korea............. 44.9 446.4 11,422 8.1
</TABLE>
- --------
Source: World Information Services; Country Data Forecasts March, 1996.

JAPAN. The Company, through its subsidiary Nu Skin Japan, commenced
operations in Japan in April 1993. According to the WFDSA, the direct selling
channel in Japan generated sales of approximately $30 billion of goods and
services in 1995, making Japan the largest direct selling market in the world.
Management believes that as many as six million people are involved in direct
selling businesses in Japan. Network marketing activities and the sale of the
Company's products are subject to significant government regulation in Japan.
See "Risk Factors--Government Regulation of Direct Selling Activities" and "--
Government Regulation of Products and Marketing."

To date, the Company has experienced significant growth in Japan, where
revenue increased 34% in 1995 compared to 1994 and has continued to grow at
53% on an annualized basis for the nine months ended September 30, 1996.
Significant revenue was recognized from the outset of the Company's operations
in Japan due to the immediate attention given to the market by leading NSI
distributors from around the world. A great

49
<PAGE>

deal of the Company's success to date can be directly attributed to the growth
of its Japanese business in recent years. Furthermore, given the size of the
Japanese market, management believes that there is significant opportunity for
expansion of its market share. Nu Skin Japan currently offers 52 of the 80 NSI
personal care products and 10 of the 30 IDN products, including LifePak, the
core IDN product. Additionally, Nu Skin Japan offers 11 personal care products
that are manufactured in Japan and are specifically targeted to the Japanese
market.

In support of the Company's growth strategy, Nu Skin Japan intends to (i)
focus on internal country development by opening offices in additional
Japanese cities, thereby increasing consumer awareness and enhancing the
Company's image; (ii) expand development capacity to develop more products
that are particularly suited to the Japanese market; and (iii) enhance
corporate support of distributors by upgrading information technology
resources.

TAIWAN. The Company, through its subsidiary Nu Skin Taiwan, commenced
operations in Taiwan in January 1992. According to the WFDSA, the direct
selling channel in Taiwan generated approximately $2 billion in sales of goods
and services in 1995, of which 43% were nutritional products. Currently, two
million people (approximately 10% of the population) are estimated to be
involved in direct selling. Since a significant percentage of its population
is involved in direct selling activities, the Taiwanese government regulates
direct selling activities to a significant extent. For example, the Taiwan
government recently enacted tax legislation aimed at ensuring proper tax
payments by distributors on their transactions with end consumers. See "Risk
Factors--Government Regulations of Direct Selling Activities" and "--
Government Regulation of Products and Marketing."

Revenue growth in Taiwan has averaged 52% on an annualized basis since 1992.
The Company believes that the recent increase in sales is primarily due to (i)
the opening of walk-in centers in Kaohsiung and Taichung; (ii) increased
distributor training and recognition; and (iii) increased product offerings.
Based on information provided by the Taiwan Direct Selling Association, Nu
Skin Taiwan is the third largest direct selling business in Taiwan. Management
believes that Nu Skin Taiwan has captured approximately 31% and 1% of the
market for personal care products and nutritional supplements, respectively,
sold through the direct selling channel. Nu Skin Taiwan currently offers 60 of
the 80 NSI personal care products and 7 of the 30 IDN products.

In support of the Company's growth strategy, Nu Skin Taiwan intends to (i)
capitalize on the size of the nutritional supplements market by expanding the
current product offerings in Taiwan to include additional NSI products, in
particular LifePak, which, subject to regulatory approval, is scheduled for
introduction in Taiwan by the end of 1996, (ii) focus more resources on
product development specifically for the Taiwanese market, (iii) add
additional walk-in distribution and distributor support centers in additional
major cities, and (iv) enhance corporate support of distributors by upgrading
information technology resources.

HONG KONG. The Company, through its subsidiary Nu Skin Hong Kong, commenced
operations in Hong Kong in September 1991. According to the WFDSA, the direct
selling channel in Hong Kong generated approximately $78 million in sales of
goods and services in 1995. Hong Kong represents an important market in the
structure of the Asian region because it serves as the location of the
Company's regional office and is an important base of operations for many of
the Company's most successful distributors, whose downline distributor
networks extend into other Asian markets. Nu Skin Hong Kong currently offers
74 of the 80 NSI personal care products and 13 of the 30 IDN products.

Hong Kong is currently a British Crown Colony and is scheduled to become a
Special Administrative Region (SAR) of the PRC effective July 1, 1997. The
further integration of the Hong Kong economy and political system with the
economy and political system of the PRC could have an impact on the Company's
business in Hong Kong. See "Risk Factors--Possible Adverse Effect on the
Company of a Change in the Status of Hong Kong."

In February 1995, Macau, a Portuguese colony scheduled to become an SAR of
the PRC in 1999, was opened as a new market. Revenue figures for Macau are
combined with those of Hong Kong. Macau represents

50
<PAGE>

the smallest of the Company's markets in population, with just under 500,000
residents. The Company's Macau office works under the direction of Nu Skin
Hong Kong.

In support of the Company's growth strategy, Nu Skin Hong Kong intends to
(i) promote distributor growth, retention and leadership development through
local initiatives such as a recently opened "distributor business center,"
which provides offices for distributors to rent, at cost, from which they can
conduct business; (ii) seek regulatory approvals for the introduction of
LifePak; which is not yet available in Hong Kong, and (iii) stimulate
purchases from inactive distributors through direct mail campaigns.

SOUTH KOREA. The Company, through its subsidiary Nu Skin Korea, commenced
operations in South Korea in February 1996. According to the WFDSA, the direct
selling channel in South Korea generated approximately $1.7 billion in sales
of goods and services in 1995. South Korea's new direct sales legislation,
which went into effect in July 1995, requires companies to comply with
numerous provisions, such as local registration, reporting of certain
operating results and dissemination of certain information regarding the laws
to distributors. See "Risk Factors--Government Regulations of Direct Selling
Activities" and "--Government Regulation of Products and Marketing."

The Company's sales in South Korea exceeded $83 million through September
30, 1996, making the Company the second largest direct seller in the country.
Nu Skin Korea currently offers 27 of the 80 NSI personal care products and
none of the IDN products. Nu Skin Korea was among the first foreign-owned
firms to register and begin operations under the new direct selling
legislation. Management believes that significant competition will soon enter
the South Korean market. See "Risk Factors--Competition" and "--Competition."

In support of the Company's growth strategy, Nu Skin Korea intends to (i)
continue to add products from NSI's personal care product line to stimulate
new sales; (ii) seek regulatory approvals for the introduction of IDN
products; (iii) continue to develop an infrastructure to support a rapidly
growing distributor base, including, but not limited to, adding additional
walk-in centers in major South Korean cities; and (iv) promote the development
of local distributor leadership.

NEW MARKET OPPORTUNITIES

The Company has developed a low cost, disciplined approach to opening new
markets. Each market opening is preceded by a thorough analysis of economic
and political conditions, regulatory standards and other business, tax and
legal issues. Prior to a market opening, the Company's management team, in
conjunction with NSI support personnel, local legal counsel and tax advisors,
works to obtain all necessary regulatory approvals and establish facilities
capable of meeting distributor needs. This approach, combined with the Global
Compensation Plan, which motivates distributors to sponsor and train other
distributors to sell products in new markets, has enabled the Company to
quickly and successfully open new markets.

The Company, as a matter of policy, does not announce the timing of its
opening of new markets. However, the Company has announced that its next new
market expansion efforts will be in Thailand and anticipates opening this
market upon receipt of all final government approvals. In addition to
Thailand, the Company is the exclusive distributor of NSI products in
Indonesia, Malaysia, the Philippines, the PRC, Singapore and Vietnam. The
Company believes that these countries collectively represent significant
markets for future expansion. There are, however, significant risks and
uncertainties associated with this expansion. The regulatory and political
climate in these potential markets is such that a replication of the Company's
current operating structure cannot be guaranteed. In addition, because the
Company's personal care and nutritional product lines are positioned as
premium product lines, the market potential for the Company's product lines in
relatively less developed countries, such as the PRC and Vietnam, remains to
be determined. Modifications to each product line may be needed to accommodate
the market conditions in each country, while maintaining the integrity of the
Company's products. No assurances can be given that the Company will be able
to make such modifications. Given existing regulatory environments and
economic conditions, the Company's entrance into Singapore and Vietnam is not
anticipated in the short to mid-term. See "Risk Factors--Entering New Markets"
and "--Government Regulation of Products and Marketing."

51
<PAGE>

The following table sets forth certain estimated economic and demographic
data in each of the countries for which the Company has an exclusive license
but in which the Company has not commenced operations. Although the Company
believes that the following table provides a useful basis for evaluating the
relative size and growth of the economies and populations of the countries in
which the Company intends to operate, no assurance can be given that economic
or population data in a particular country will indicate what the Company's
results of operations will be in that country.

<TABLE>
<CAPTION>
1995 POPULATION 1995 GDP 1995 GDP REAL GDP GROWTH
COUNTRY (IN MILLIONS) (IN BILLIONS OF $) PER CAPITA (IN $) 1995/1994(%)
------- --------------- ------------------ ----------------- ---------------
<S> <C> <C> <C> <C>
Thailand................ 60.7 $ 162.7 $ 3,033 8.6%
Indonesia............... 203.1 196.4 1,066 8.0
Malaysia................ 20.0 86.5 4,826 9.6
Philippines............. 68.9 74.6 1,186 4.8
PRC..................... 1,227.0 673.5 680 10.2
Singapore............... 3.0 79.2 29,573 8.9
Vietnam................. 74.7 22.8 379 9.5
</TABLE>
--------
Source: World Information Services; Country Data Forecasts March, 1996.

THAILAND. According to the WFDSA, direct sales in 1995 totaled $562 million
in Thailand. This makes Thailand the sixteenth largest direct selling market
worldwide. In opening the Thailand market, the Company does not anticipate a
material departure from its traditional business model. See "--Government
Regulation--Regulation of Products and Marketing."

INDONESIA. Although historically not open to foreign investment
opportunities, Indonesia has experienced a recent emphasis on deregulation and
private enterprise and an average annual growth in GDP of 6% from 1985 to
1994. The Indonesian Direct Selling Association reports that there are 600,000
participants in direct selling in the country. Management believes that the
combination of the above factors creates an attractive opportunity for
expansion.

MALAYSIA. According to the WFDSA, more than $640 million in goods and
services were sold through the direct selling channel in Malaysia in 1995.
There are currently several direct selling companies operating in Malaysia. In
October 1995, the Company's business permit applications were denied by the
Malaysian government as the result of activities by certain NSI distributors
before required government approvals could be secured. See "Risk Factors--
Potential Negative Impact of Distributor Actions" and "--Potential Effects of
Adverse Publicity." Management is reevaluating the time frame in which it will
reapproach the Malaysian market.

PHILIPPINES. Even though the per capita GDP in the Philippines is low, the
Company believes that there is demand for premium personal care and nutrition
products, especially near Manila, the capital city, which, in 1995, had a
population of 11 million. Management believes that nearly $500 million of
goods and services are sold annually through the direct selling channel and
that more than 20 international direct selling companies currently operating
in the Philippines.

PRC. With the PRC's large population and the Company's success in the
neighboring and Chinese-speaking countries of Hong Kong and Taiwan, management
believes that the PRC will be an attractive market for the Company. The PRC
government and local jurisdictions have recently initiated rules and
regulations for network marketing companies. The Company believes that it will
be able to comply with these regulations in operating a network marketing
business in the PRC. See "--Government Regulation--Regulation of Products and
Marketing."

SINGAPORE. In Singapore, relatively high levels of GDP per capita indicate
that the country enjoys strong consumer buying power and a dynamic market
structure similar to Hong Kong. Although direct selling activities are
permitted, currently network marketing is not allowed in Singapore.
Accordingly, the Company's entrance

52
<PAGE>

into Singapore is not anticipated in the short to mid-term. See "--Government
Regulation--Regulation of Products and Marketing."

VIETNAM. The Company believes that there is little or no direct selling
activity in Vietnam. However, the country is moving towards a market-based
economy and has recently adopted a freely convertible currency. The Company
anticipates that the increase in free enterprise will help to develop the
direct selling channel. However, given existing regulatory environmental and
economic conditions, the Company's entrance into Vietnam is not anticipated in
the short to mid-term.

DISTRIBUTION SYSTEM

OVERVIEW OF DISTRIBUTION SYSTEM. The foundation of the Company's sales
philosophy and distribution system is network marketing. Under most network
marketing systems, distributors purchase products for retail sale or personal
consumption. Pursuant to the Global Compensation Plan, products are sold
exclusively to or through independent distributors who are not employees of
the Company or NSI. Distributors contract directly with NSI, and NSI makes
such distributors available to the Company through Licensing and Sales
Agreements. See "--Relationship with NSI" and "Certain Relationships and
Related Transactions."

Network marketing is an effective vehicle to distribute the Company's
products because (i) a consumer can be educated about a product in person by a
distributor, which is more direct than the use of television and print
advertisements; (ii) direct sales allow for actual product testing by a
potential consumer; (iii) the impact of distributor and consumer testimonials
is enhanced; and (iv) as compared to other distribution methods, distributors
can give customers higher levels of service and attention, by, among other
things, delivering products to a consumer's home and following up on sales to
ensure proper product usage, customer satisfaction, and to encourage repeat
purchases. Under most network marketing systems, independent distributors
purchase products either for resale or for personal consumption.

Direct selling as a distribution channel has been enhanced in the past
decade due to advancements in communications, including telecommunications,
and the proliferation of the use of videos and fax machines. Direct selling
companies can now produce high quality videos for use in product education,
demonstrations and sponsoring sessions that project a desired image for the
Company and the product line. Management believes that high quality sales aids
play an important role in the success of distributor efforts. For this reason,
NSI maintains an in-house staff of video production personnel and video and
audio cassette duplication equipment for timely and cost-effective production
of sales materials. These facilities and expertise are available for the
Company's use. Management is committed to fully utilizing current and future
technological advances to continue enhancing the effectiveness of direct
selling.

NSI's network marketing program differs from many other network marketing
programs in several respects. First, the Global Compensation Plan allows NSI
distributors to develop a seamless global network of downline distributors.
Second, NSI's order and fulfillment systems eliminate the need for
distributors to carry significant levels of inventory. Third, the Global
Compensation Plan is among the most financially rewarding plans offered to
distributors by network marketing companies, and can result in commissions to
distributors aggregating up to 58% of a product's wholesale price. On a global
basis, commissions have averaged 42% of revenue from commissionable sales over
the last seven years. Because the Company licenses the right to use the Global
Compensation Plan from NSI, the structure of the plan, including commission
rates, is under the control of NSI. See "Risk Factors--Increase in Distributor
Compensation Expense."

The Company's revenue is directly dependent upon the efforts of
distributors. Growth in sales volume requires an increase in the productivity
of distributors and/or growth in the total number of distributors. Because the
distributors have contracted directly with NSI, the Company has no control
over who becomes a distributor and little or no control over the level of
sponsorship of new distributors. There can be no assurance that the
productivity or number of distributors will be sustained at current levels or
increased in the future. See "Risk Factors--Reliance Upon Independent
Distributors of NSI." Furthermore, the Company estimates that approximately
520 distributorships worldwide comprise NSI's two highest executive
distributor levels and, together with their extensive downline networks,
account for substantially all of the Company's revenue.

53
<PAGE>

Consequently, the loss of such a high-level distributor or another key
distributor, together with a group of leading distributors in such
distributor's downline network, or the loss of a significant number of
distributors for any reason, could adversely affect the Company's results of
operations. See "Risk Factors--Reliance on Certain Distributors; Potential
Divergence of Interests between Distributors and the Company."

SPONSORING. The Company relies solely on its distributor force to sponsor
new distributors. While the Company provides, at cost, product samples,
brochures, magazines and other sales materials, distributors are primarily
responsible for educating new distributors with respect to products, the
Global Compensation Plan, and how to build a successful distributorship.

The sponsoring of new distributors creates multiple levels in the network
marketing structure. Persons whom a distributor sponsors are referred to as
"downline" or "sponsored" distributors. If downline distributors also sponsor,
they create additional levels in the structure, but their downline
distributors remain part of the same downline network as their original
sponsoring distributor. See "Risk Factors--Reliance on Certain Distributors;
Potential Divergence of Interests between Distributors and the Company."

Sponsoring activities are not required of distributors. However, because of
the financial incentives provided to those who succeed in building a
distributor network, the Company believes that most of its distributors
attempt, with varying degrees of effort and success, to sponsor additional
distributors. Generally, distributors invite friends, family members and
acquaintances to sales meetings where Company products are presented and where
the Global Compensation Plan is explained. People are often attracted to
become distributors after using Company products and becoming regular retail
customers. Once a person becomes a distributor, he or she is able to purchase
products directly from the Company at wholesale prices for resale to consumers
or for personal consumption. The distributor is also entitled to sponsor other
distributors in order to build a network of distributors and product users.

A potential distributor must enter into a standard distributor agreement
with NSI which obligates the distributor to abide by NSI's policies and
procedures. Additionally, in all countries except Japan, a new distributor is
required to enter into a product purchase agreement with the Company's local
Subsidiary, which governs product purchases. In Japan, Taiwan and Hong Kong,
distributors are also required to purchase a starter kit, which includes NSI's
policies and procedures, for between $55 and $85, which essentially represents
the cost of producing the starter kit, and active distributors are required to
pay the Company an Annual Materials Fee ("AMF") of up to $35 to cover the cost
of newsletters, magazines and updates that are mailed regularly to them. In
South Korea, due to local regulations, distributors are not required to
purchase a starter kit, and active distributors are not required to pay an
AMF.

GLOBAL COMPENSATION PLAN. Management believes that one of the Company's key
competitive advantages is the Global Compensation Plan, which it licenses from
NSI. The Global Compensation Plan is seamlessly integrated across all markets
in which NSI products are sold. This seamless integration means that the
Company's distributor base has global reach and that the knowledge and
experience resident in current distributors can be used to build distributor
leadership in new markets. By entering into international sponsoring
agreements with NSI, distributors are authorized to sponsor new distributors
in each country where NSI or the Company has operations. These countries
currently include the U.S., the United Kingdom, Puerto Rico, Canada, Taiwan,
Hong Kong (including Macau), Japan, South Korea, Australia, New Zealand,
Ireland, Germany, France, the Netherlands, Belgium, Italy, Spain, Mexico and
Guatemala. This allows distributors to receive commissions at the same rate
for sales in foreign countries as for sales in their home country. This is a
significant benefit to distributors because they are not required to establish
new distributorships or requalify for higher levels of commissions within each
new country in which they begin to operate. Under the Global Compensation
Plan, a distributor is paid consolidated monthly commissions in the
distributor's home country, in local currency, for product sales in that
distributor's global downline distributor network. Current and future
distributor lists have been licensed by NSI to the Company, pursuant to
Licensing and Sales Agreements. See "--Relationship with NSI" and "Certain
Relationships and Related Transactions."

54
<PAGE>

The Global Compensation Plan allows an individual the opportunity to develop
a business, the success of which is based upon that individual's level of
commitment, time, enthusiasm, personal skills, contacts, and motivation. For
many, a distributorship is a very small business, in which products may be
purchased primarily for personal consumption and for resale to relatively few
customers. For others, a distributorship becomes a full-time occupation.

HIGH LEVEL OF DISTRIBUTOR INCENTIVES. Based upon its knowledge of network
marketing distributor compensation plans, the Company believes that the Global
Compensation Plan is among the most financially rewarding plans offered to
distributors by network marketing companies. There are two fundamental ways in
which distributors can earn money: (i) through retail markups, for which the
Company recommends a range from 43% to 60%; and (ii) through a series of
commissions on product sales, which can result in commissions to distributors
aggregating up to 58% of such product's wholesale price. On a global basis,
however, commissions have averaged 42% of revenue from commissionable sales
over the last seven years. See "Risk Factors--Increase in Distributor
Compensation Expense."

Each product carries a specified number of sales volume points. Commissions
are based on total personal and group sales volume points per month. Sales
volume points are essentially based upon a product's wholesale cost, net of
any point of sale taxes. As a distributor's retail business expands and as he
or she successfully sponsors other distributors into the business who in turn
expand their own businesses, he or she receives a higher percentage of
commissions.

Once a distributor becomes an executive, the distributor can begin to take
full advantage of the benefits of commission payments on personal and group
sales volume. To achieve executive status, a distributor must submit a
qualifying letter of intent and achieve specified personal and group sales
volumes for a four-month period of time. To maintain executive status, a
distributor must generally also maintain specified personal and group sales
volumes each month. An executive's commissions increase substantially as
multiple downline distributors achieve executive status. In determining
commissions, the number of levels of downline distributors that can be
included in an executive's group increases as the number of executive
distributorships directly below the executive increases.

As of the dates indicated below, the Company had the following number of
executive distributors.

TOTAL NUMBER OF EXECUTIVE DISTRIBUTORS

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
--------------------------- SEPTEMBER 30,
EXECUTIVE DISTRIBUTORS 1992 1993 1994 1995 1996
---------------------- ----- ----- ----- ----- -------------
<S> <C> <C> <C> <C> <C>
Japan.............................. -- 2,459 3,613 4,017 8,937
Taiwan............................. 551 1,170 2,093 3,014 4,346
Hong Kong.......................... 164 275 377 519 520
South Korea........................ -- -- -- -- 4,006
----- ----- ----- ----- ------
Total............................ 715 3,904 6,083 7,550 17,809
===== ===== ===== ===== ======
</TABLE>

On a monthly basis, the Company and NSI evaluate requests for exemptions to
the Global Compensation Plan to determine whether technical exemptions should
be granted. While the general policy is to discourage exceptions, management
believes that the flexibility to grant such exceptions is critical in
retaining distributor loyalty and dedication. In each market, distributor
services personnel evaluate each such instance and appropriate recommendations
are made to NSI.

DISTRIBUTOR SUPPORT. The Company is committed to providing a high level of
support services tailored to the needs of its distributors in each market. The
Company meets the needs and builds the loyalty of its distributors with
personalized distributor service, a support staff that assists distributors as
they build networks of downline distributors, and a liberal product return
policy. Because many distributors have only a limited

55
<PAGE>

number of hours each week to concentrate on their Nu Skin business, management
believes that maximizing a distributor's efforts through effective support of
each distributor has been and will continue to be important to the success of
the Company.

Through training meetings, annual conventions, distributor focus groups,
regular telephone conference calls and personal contacts with distributors,
the Company seeks to understand and satisfy the needs of each distributor. The
Company provides walk-in, telephonic and computerized product fulfillment and
tracking services that result in user-friendly, timely product distribution.
In addition, the Company is committed to evaluating new ideas in technology
and services, such as automatic product reordering, that the Company can
provide to distributors. The Company currently utilizes voicemail,
teleconferencing and fax services. Global Internet access (including Company
and product information, ordering abilities and group and personal sales
volume inquiries) is anticipated to be provided to distributors in the future.
Each walk-in center maintains meeting rooms which distributors may utilize in
training and sponsoring activities.

RULES AFFECTING DISTRIBUTORS. NSI's standard distributor agreement, policies
and procedures, and compensation plan contained in every starter and/or
introductory kit outline the scope of permissible distributor marketing
activities. The Company's distributor rules and guidelines are designed to
provide distributors with maximum flexibility and opportunity within the
bounds of governmental regulations regarding network marketing. Distributors
are independent contractors and are thus prohibited from representing
themselves as agents or employees of NSI or the Company. Distributors are
obligated to present the Company's products and business opportunity ethically
and professionally. Distributors agree that the presentation of the Company's
business opportunity must be consistent with, and limited to, the product
claims and representations made in literature distributed by the Company. No
medical claims may be made regarding the products, nor may distributors
prescribe any particular product as suitable for any specific ailment. Even
though sponsoring activities can be conducted in many countries, distributors
are prohibited from conducting marketing activities outside of countries in
which NSI and the Company conduct business and are not allowed to export
products from one country to another. Prior to the commencement of Company
operations in a new country, distributor activity is restricted to discussions
of the product line and business opportunity with personal acquaintances. See
"Risk Factors--Potential Negative Impact of Distributor Actions."

Distributors must represent that the receipt of commissions is based on
substantial efforts. Exhibiting commission statements or checks is prohibited.
Sales aids such as videotapes, promotional clothing, pens, stationary and
other miscellaneous items must be produced or pre-approved by the Company or
NSI.

Distributors may not use any form of media advertising to promote products.
Products may be promoted only by personal contact or by literature produced or
approved by the Company. Generic business opportunity advertisements (without
using either the Company or the NSI names) may be placed in accordance with
certain guidelines in some countries. NSI logos and names may not be
permanently displayed on physical premises. Distributors may not use NSI
trademarks or other intellectual property of NSI without NSI's consent.

Products may not be sold, and the business opportunity may not be promoted,
in traditional retail environments such as food markets, pharmacies and
drugstores. Nor may business be conducted at conventions, trade shows, flea
markets, swap meets, and similar events. Distributors who own or are employed
by a service-related business such as a doctor's office, hair salon, or health
club, may make products available to regular customers as long as products are
not displayed visibly to the general public in such a way as to attract the
general public into the establishment to purchase products.

Generally, distributors can receive commission bonuses only if, on a monthly
basis (i) the distributor achieves at least 100 points (approximately U.S.
$100) in personal sales volume, (ii) the distributor documents retail sales to
at least five retail customers, (iii) the distributor sells and/or consumes at
least 80% of personal sales volume, and (iv) the distributor is not in default
of any material policies or procedures.

56
<PAGE>

NSI systematically reviews alleged reports of distributor misbehavior. If
NSI determines that a distributor has violated any of the distributor policies
or procedures, it may either terminate the distributor's rights completely or
impose sanctions such as warnings, probation, withdrawal or denial of an
award, suspension of privileges of a distributorship, fines or penalties,
withholding commissions until specified conditions are satisfied, or other
appropriate injunctive relief. Distributor terminations based on violations of
NSI's policies and procedures have aggregated less than 1% of the Company's
distributor force since inception. Distributors may voluntarily terminate
their distributorship at any time.

PAYMENT. Distributors pay for products prior to or shortly after shipment.
Accordingly, the Company carries minimal accounts receivable. Distributors pay
for products in one of several ways. Cash, which represents a large portion of
all payments, is received by order takers in the distribution center when
orders are personally picked up by a distributor. In addition, in Japan cash
is sent through the mail using a postal cash envelope. The Company also
accepts payment through the use of credit cards. This method of payment is
very popular in Hong Kong and Taiwan and is expected to increase in popularity
in South Korea. Another form of payment utilized in Japan is a Tososhin card,
which is essentially a distributor credit card utilized to place orders. Bank
wire transfers are also popular throughout Asia, particularly in Japan.

PRODUCT SUMMARY

The Company offers products in two distinct categories: personal care
products, marketed under the trademark "Nu Skin," and nutritional products,
marketed under the trademark "Interior Design Nutritionals" (IDN). The Company
is entitled to distribute NSI products in specified Asian countries pursuant
to a Regional Distribution Agreement. See "--Relationship with NSI" and "Risk
Factors--Relationship with and Reliance on NSI; Potential Conflicts of
Interest." NSI markets 80 different personal care and 30 different nutritional
products, of which 69 and 13, respectively, are available in the Company's
current markets. Nearly all products sold by the Company are purchased from
NSI, with the exception of a line of 11 personal care products which are
produced locally in Japan. In addition to products, the Company offers a
variety of sales aids, including items such as starter kits, introductory
kits, brochures, product catalogs, videotape and personal care accessories.
See "Risk Factors--Product Liability."

The following chart indicates how many of the NSI personal care and IDN
products available as of September 30, 1996, in each of the Company's current
markets.

PERSONAL CARE AND IDN PRODUCT OFFERINGS

<TABLE>
<CAPTION>
PRODUCT CATEGORIES /PRODUCT LINES TOTAL PRODUCTS OFFERED
- --------------------------------- PRODUCTS ---------------------------
OFFERED BY HONG SOUTH
NSI JAPAN TAIWAN KONG KOREA
---------- ----- ------ ---- -----
<S> <C> <C> <C> <C> <C>
Personal Care:
Facial Care............................... 17 10(/1/) 13 15 10
Body Care................................. 12 9 9 12 7
Hair Care................................. 14 13 13 13 10
Color Cosmetics........................... 11 11 10 10 -
Specialty................................. 26 9 15 24 -
--- --- --- --- ---
Total................................... 80 52 60 74 27
=== === === === ===
IDN:
Nutritional Supplements................... 18 8 5 10 -
Weight Management Products and Nutritious
Snacks................................... 8 1 2 3 -
Sports Nutrition.......................... 4 1 - - -
--- --- --- --- ---
Total................................... 30 10 7 13 -
=== === === === ===
</TABLE>
--------
(1) In Japan, the Company also sells 11 locally sourced facial care
products.

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Presented below are the dollar amount and percentage of revenue of each of
the two product categories and other sales aid revenue for the years ended
December 31, 1994 and 1995, and for the nine months ended September 30, 1996.

REVENUE BY PRODUCT CATEGORY

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995 SEPTEMBER 30, 1996
------------------- ------------------- --------------------
PRODUCT CATEGORY $ % $ % $ %
---------------- ---------- -------- ---------- -------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Personal care... $ 241,188 91.2% $ 303,387 84.6% $ 345,069 73.2%
Nutritional..... 5,464 2.1 23,959 6.7 92,241 19.6
Sales aids...... 17,788 6.7 31,263 8.7 34,002 7.2
---------- ------- ---------- ------- ---------- -------
Total......... $ 264,440 100.0% $ 358,609 100.0% $ 471,312 100.0%
========== ======= ========== ======= ========== =======
</TABLE>

PERSONAL CARE PRODUCTS

The Company's current personal care products category is divided into the
following lines: facial care, body care, hair care and color cosmetics, as
well as specialty products, such as sun protection, oral hygiene and
fragrances. Each of the Subsidiaries markets a variety of the 80 personal care
products currently offered by NSI. The Company also offers product sets that
include a variety of products in each product line as well as small, sample-
size packages to facilitate product sampling by potential consumers. The
product sets are especially popular during the opening phase of a new country,
where distributors and consumers are anxious to purchase a variety of
products, and during holiday and gift giving seasons in each market. The
Company anticipates the introduction of additional personal care products into
each market, based on the likelihood of the particular product's success in
the market as well as applicable regulatory approvals. See "Risk Factors--
Government Regulation of Products and Marketing."

The personal care products offered in Taiwan and Hong Kong are substantially
the same formulations of the products offered by NSI in the U.S. In Japan and
South Korea, however, most of the products have been reformulated to satisfy
certain regulatory requirements with respect to product ingredients and
preservatives and to meet the preferences of Japanese and South Korean
consumers.

The following is a brief description of each line within the personal care
product category offered by the Company as of September 30, 1996:

FACIAL CARE. The goal of the facial care line is to allow users to cleanse
thoroughly without causing dryness and to moisturize with effective humectants
that allow the skin to attract and retain vital water. The Company's facial
care line currently consists of 17 different products: Cleansing Lotion,
Facial Scrub, Exfoliant Scrub, Facial Cleansing Bar, Clay Pack, pH Balance
Facial Toner, NaPCA Moisturizer, Rejuvenating Cream, Celltrex (called Hylatrex
in Japan and South Korea), Intensive Eye Complex, HPX Hydrating Gel, Face Lift
and Activator (two formulas for sensitive and normal skin), Jungamals Lip
Balm, Clarifex Cleansing Scrub, Clarifex Mud, Alpha Extra Face and Nu Colour
Eye Makeup Remover.

BODY CARE. The Company's line of body care products relies on premium
quality ingredients to cleanse and condition skin. The cleansers are uniquely
formulated without soap, and the moisturizers contain light but effective
humectants and emollients. The Company's body care line currently consists of
12 products: Antibacterial Body Cleansing Gel, Liquid Body Lufra, Body
Smoother, Hand Lotion, NaPCA Moisture Mist, Body Bar, Body Cleansing Gel,
Enhancer, Glacial Marine Mud (Original), Jungamals Crazy Crocodile Cleaner,
Jungamals Rhino Ray Resister and Alpha Extra Body. Glacial Marine Mud
(Original) is exclusively licensed to NSI for sale in the direct selling
channel.

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<PAGE>

HAIR CARE. The Company's hair care line, HairFitness, is designed to meet
the needs of people with all types of hair and hair problems. Focusing on the
condition of the scalp and its impact on hair quality, the Company's hair care
products use water-soluble conditioners like panthenol to reduce build-up on
the scalp and to promote healthy hair. HairFitness includes 12 products
featuring ceregen, a revolutionary wheat hydrocolloid complex of conditioning
molecules that have been shown to have dramatic hair repair and moisture
control aspects: 3 in 1 Shampoo, Moisturizing Shampoo, Balancing Shampoo,
Vital Shampoo, Deep Clarifying Shampoo, Glacial Therapy, Weightless
Conditioner, Luxurious Conditioner, Conditioning Detangler Spray, Styling Gel,
Holding Spray and Mousse (Styling Foam). The Company also carries Dermanator
Shampoo and Jungamals Tiger Tangle Tamer Shampoo.

COLOR COSMETICS. In the latter part of 1995, the Company introduced Nu
Colour, a new line of color cosmetics, in Hong Kong, Taiwan and Japan. The Nu
Colour line consists of 11 products with 72 sku's including MoistureShade
Liquid Finish (10), MoistureShade Pressed Powder (4), Blush Duo (5), Eye
Shadow Trio (6), Mascara (2), Eyeliner (3), Lip Liner (5), Lipstick (20),
DraMATTEics Lip Pencils (6), Nu Colour Moisture Finish (10), and Lip Gloss.

SPECIALTY PRODUCTS. The Company recently introduced a product line labeled
Epoch, a unique line of ethnobotanical personal care products created in
cooperation with well known ethnobotanists. These products, which unite
natural compounds used by indigenous cultures with advanced scientific
ingredients, include Glacial Marine Mud, Deodorant with Citrisomes, Polishing
Bar, LeafClean Hand Wash, Everglide Foaming Shave Gel, Desert Breeze
Aftershave and Post Shave Lotion for Women. Epoch was launched in October of
1996 in Hong Kong and Taiwan and is currently expected to be launched, subject
to regulatory approval, in the spring of 1997 in Japan and South Korea.
Glacial Marine Mud is exclusively licensed to NSI for sale in the direct
selling channel.

Nutriol, a line of products exclusively licensed to NSI for sale in the
direct selling channel and manufactured in Europe, consists of five products:
Nutriol Hair Fitness Preparation, Nutriol Shampoo, Nutriol Mascara, Nutriol
Nail and Nutriol Eyelash. Nutriol represents a product designed to replenish
the hair's vital minerals and elements. Each Nutriol product uses
mucopolysaccharide, a patented ingredient.

The Company's line of Sunright products is designed to provide a variety of
sun screen protection with non-irritating and non-greasy products. The sun
protection line includes a sun preparation product that prepares the skin for
the drying impact of the sun, five sun screen alternatives with various levels
of SPF, and a sun screen lip balm. In the Asian market, the Company's sun care
line is currently available in Hong Kong and Japan. At present, Sunright Prime
Pre & Post Sun Moisturizer and Sunright Lip Balm are not available in Japan.

AP-24, a line of oral health care products which incorporates anti-plaque
technology designed to help prevent plaque build-up 24 hours a day, is
exclusively licensed to the Company, together with the associated trademark,
for sale in the direct selling channel under the trademark AP-24. This product
line includes AP-24 Anti-Plaque Toothpaste, AP-24 Anti-Plaque Mouthwash, AP-24
Triple Action Dental Floss and AP-24 Anti-Plaque Breath Spray. These products
are currently available in Hong Kong and Taiwan. The Company currently intends
to launch this product line, subject to regulatory approval, in South Korea
and Japan in 1997. The AP-24 oral health care products for kids offers
products designed to make oral care fun for children, including Jungamal's
Tough Tusk Toothpaste and Jungamal's Fluffy Flamingo Floss.

The Company offers a men's and a women's fragrance under the Nu Skin
trademark Safiro. The Company also offers a Nail Care Kit.

PRODUCT SETS. The Company currently offers product sets that include a
sampling of products from a given product line. These package configurations
are intended to encourage increased product trials.

INTERIOR DESIGN NUTRITIONALS

The IDN product category is comprised of 30 products in the following lines:
nutritional supplements, weight management products and nutritious snacks, and
sports nutrition. IDN is designed to promote healthy,

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<PAGE>

active lifestyles and general well-being through proper diet, exercise and
nutrition. Although less developed in the Asian market than the personal care
category, each of the Subsidiaries, except Nu Skin Korea, markets a variety of
the IDN products offered by NSI. In the United States, the IDN division is an
official licensee of the U.S. Olympic Committee.

The Company believes that the nutritional supplement market is expanding in
Asia because of changing dietary patterns, a health-conscious population and
recent reports supporting the benefits of using vitamin and mineral
nutritional supplements. This product line is particularly well suited to
network marketing because the average consumer is often uneducated regarding
nutritional products. The Company believes that network marketing is a more
efficient method than traditional retailing channels in educating consumers
regarding the benefits of nutritional products. Because of the numerous over-
the-counter vitamin and mineral supplements in Asia, the Company is confident
that individual attention and testimonials by distributors will provide
information and comfort to a potential consumer.

IDN products generally require reformulation to satisfy the strict
regulatory requirements of each Asian market. While each product's concept and
positioning are generally the same, regulatory differences between U.S. and
Asian markets result in some product ingredient differences. See "Risk
Factors--Government Regulation of Products and Marketing." In addition, Asian
preferences and regulations favor tablets instead of gel caps, which are
typically used in the U.S.

The following is a brief description of each of the IDN product lines:

NUTRITIONAL SUPPLEMENTS. LifePak, the core IDN nutritional supplement, is
designed to provide an optimum mix of nutrients including vitamins, minerals,
antioxidants and phytonutrients (natural chemical extracts from plants). The
introduction of LifePak in Japan in October 1995 resulted in a significant
increase in revenue and currently represents approximately 17% of the
Company's revenue in Japan. LifePak was launched in Taiwan in October of 1996.

Additional nutritional supplements include: Vitox, which incorporates beta
carotene and other important vitamins for overall health; Metabotrim, which
provides B vitamins necessary to convert food to energy and chromium chelate
which has been shown to help in the body's normal metabolic process; Optimum
Omega, a pure source of omega 3 fatty acids aimed to assist cardiovascular
health; Image HNS, an all-around vitamin and antioxidant supplement; and
Optigar Q, a blend of co-enzyme Q10 and deodorized garlic. The IDN Masters
Wellness Supplement provides nutrition specifically for an aging generation.
Jungamals Children's Chewables combine natural flavors and colors and contain
a unique blend of antioxidants, chelated minerals, and vitamins specifically
tailored for children. NutriFi contains four grams of soluble and insoluble
fibers per serving in a powder that can be added to liquids and foods to
supplement the recommended daily amounts of fiber.

The Company also offers a number of nutritional drinks. Hot & Healthy,
unlike traditional hot drinks, is 100% caffeine-free and contains beneficial
ingredients such as Korean Panax Ginseng and grape seed extract. Splash C with
juice crystals is a healthy beverage providing significant doses of vitamins C
and E as well as calcium in each serving. Real fruit juice crystals are added
to create orange or lemon flavor.

IDN's botanical line contains phytonutrients for those who seek natural
ingredients in dietary supplements and is designed to address specific areas
of need. The botanicals, offered in eight different dietary supplements,
provide natural ingredients without sugar, salt, wheat, dairy products,
artificial colors, chemicals or preservatives.

WEIGHT MANAGEMENT PRODUCTS AND NUTRITIOUS SNACKS. As part of the Company's
mission to promote a healthy lifestyle and long-term wellness, IDN includes a
HealthTrim Lifestyle System (which includes LifePak Trim, Fiberry Fat-Free
Snack Bars and Appeal Lite, a nutritional drink containing chelated minerals
and vitamins), and instructional assessment materials with a counseling
program. The Company also offers Breakbars, a nutritious snack which provides
carbohydrates, protein and fiber.

60
<PAGE>

SPORTS NUTRITION. To cater to health conscious individuals with active
lifestyles, the IDN Sports Nutrition System offers a comprehensive, flexible
program for individuals who desire to optimize performance on an individual
basis. The system includes LifePak, OverDrive, a sports supplement licensed by
the U.S. Olympic Committee that features antioxidants, B vitamins and chromium
chelate, GlycoBar energy bars, and SportaLyte performance drink to help supply
the necessary carbohydrates, electrolytes and chelated minerals to optimize
performance. AminoBuild is a low fat high protein drink mix that is designed
to replace nutrients before and after workouts.

SALES AIDS

The Company provides an assortment of sales aids to facilitate the sales of
its products. Sales aids include videotapes, promotional clothing, pens,
stationary, business cards, brushes, combs, cotton pads, tissues, and other
miscellaneous items to help create consumer awareness of the Company and its
products. Sales aids are priced at the Company's approximate cost and are not
commissionable items (i.e., distributors do not receive commissions on
purchases of sales aids).

PRODUCT GUARANTEES

The Company believes that it is among the most consumer protective companies
in the direct selling industry. For 30 days from the date of purchase, the
Company's product return policy allows a retail purchaser to return any
product to the distributor through whom the product was purchased for a full
refund. After 30 days from the date of purchase, the return privilege is in
the discretion of the distributor. Because distributors may return unused and
resalable products to the Company for a refund of 90% of the purchase price
for one year, they are encouraged to provide consumer refunds beyond 30 days.
In addition, the product return policy is a material aspect of the success of
distributors in developing a retail customer base. The Company's experience
with actual product returns to date has averaged approximately 1.5% of annual
revenue through 1995.

PRODUCT DEVELOPMENT AND PRODUCTION

PRODUCT DEVELOPMENT PHILOSOPHY. The Company is committed to building its
brand name and distributor and customer loyalty by selling premium quality,
innovative personal care and nutritional products that appeal to broad
markets. This commitment is illustrated by the Company's personal care
products slogan "All of the Good and None of the Bad" and its nutritional
products slogan "Adding Life to Years." The Company's product philosophy is to
combine the best of science and nature and to include in each of its products
the highest quality ingredients. For example, NSI avoids soaps and other harsh
cleansers that can dry and irritate skin, undesirable oils such as lanolin,
elements known to be irritating and pore clogging, volatile alcohols such as
ethyl alcohol, and conditioning agents that leave heavy residues. This
philosophy has led to the Company being one of the only personal care
companies in Japan to disclose every ingredient to consumers. This philosophy
has also led to the Company's commitment to avoid any ingredients in
nutritional supplements that are reported to have any long-term addictive or
harmful effects, even if short-term effects may be desirable. Independent
distributors need to have confidence that they are distributing the best
products available in order to have a sense of pride in their association with
the Company and to have products that are distinguishable from "off the shelf"
products. NSI and the Company are committed to developing and providing
quality products that can be sold at an attractive retail price and allow the
Company to maintain reasonable profit margins.

NSI is also committed to constantly improving its evolving product
formulations to incorporate innovative and proven ingredients into its product
line. Whereas many consumer product companies develop a formula and stay with
that formula for years, and sometimes decades, NSI believes that it must stay
current with product and ingredient evolution to maintain its reputation for
innovation to retain distributor and consumer attention and enthusiasm. For
this reason, NSI continuously evaluates its entire line of products for
possible enhancements and improvements.

In addition, the Company believes that timely and strategic product
introductions are critical to maintaining the growth of independent
distribution channels. Distributors become enthusiastic about new products and
are

61
<PAGE>

generally excited to share new products with their customer base. An expanding
product line helps to attract new distributors and generate additional
revenues.

NSI maintains a laboratory and a staff of approximately 90 individuals
involved in product development. NSI also relies on an advisory board
comprised of recognized authorities in various disciplines. In addition, NSI
and the Company evaluate a significant number of product ideas that are
presented by distributors and other outside sources. NSI believes that
strategic relationships with certain vendors also provide important access to
innovative product concepts. The Company will continue to develop products
tailored to appeal to the particular needs of the Company's markets.

Historically, one of the reasons for the success of the Company's personal
care product line has been its gender neutral positioning. This product
positioning substantially expands the size of the traditional skin and hair
care market. NSI's IDN line of products has historically been positioned to be
age neutral. However, with a substantial distributor and user base
established, the Company believes that it can further increase its market
share in both the personal care and the nutritional products categories by
introducing age and gender specific products, including LifePak for Women,
additional vitamin products targeted to seniors, and personal care products
targeted to either men or women.

PRODUCTION. Virtually all the Company's products are sourced through NSI and
are produced by manufacturers unaffiliated with NSI. The Company currently has
little or no direct contact with these manufacturers. The Company's profit
margins and its ability to deliver its existing products on a timely basis are
dependent upon the ability of NSI's outside manufacturers to continue to
supply products in a timely and cost-efficient manner. Furthermore, the
Company's ability to enter new markets and sustain satisfactory levels of
sales in each market is dependent in part upon the ability of suitable outside
manufacturers to reformulate existing products, if necessary to comply with
local regulations or market environments, for introduction into such markets.
Finally, the development of additional new products in the future will
likewise be dependent in part on the services of suitable outside
manufacturers.

With respect to sales to the Company, NSI currently relies on two
unaffiliated manufacturers to produce approximately 70% and 80% of its
personal care and nutritional products, respectively. NSI has a written
contract with the primary supplier of the Company's personal care products
that expires at the end of 1997. An extension to such contract is currently
being negotiated. NSI does not currently have a written contract with the
primary supplier of the Company's nutritional products. The Company believes
that in the event that NSI's relationship with any of its key manufacturers is
terminated, NSI will be able to find suitable replacement manufacturers.
However, there can be no assurance that the loss of either manufacturer would
not have a material adverse effect on the Company's business and results of
operations. See "Risk Factors--Reliance on and Concentration of Outside
Manufacturers."

RELATIONSHIP WITH NSI

Approximately 98.2% of the combined voting power of the outstanding shares
of Common Stock is beneficially owned by the Existing Stockholders and certain
of their affiliates. Certain of the Existing Stockholders also own 100% of the
outstanding shares of NSI. As a result, when acting as stockholders of the
Company, these shareholders of NSI will consider the short-term and long-term
impact of all stockholder decisions on the consolidated financial results of
NSI and the Company. See "Risk Factors--Relationship with and Reliance on NSI;
Potential Conflicts of Interest." In addition, the Company has entered into
the Operating

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<PAGE>

Agreements with NSI and with NSIMG, a Delaware corporation also controlled by
the shareholders of NSI, summary descriptions of which are set forth below.
Such summaries are qualified in their entirety by reference to the Operating
Agreements, which are filed as exhibits to the Registration Statement of which
this Prospectus forms a part. In the future the Company may enter into
amendments to the Operating Agreements or additional agreements with NSI or
NSIMG. The Company intends to seek the approval of a majority of its
independent directors for any amendment to the Operating Agreements and any
new agreement which the Company believes to be of material importance to the
Company and as to which the Company and NSI or NSIMG have conflicting
interests. The Company will be almost completely dependent on the Operating
Agreements to conduct its business, and in the event NSI is unable or
unwilling to perform its obligations under the Operating Agreements, or
terminates the Operating Agreements as provided therein, the Company's
business and results of operations will be adversely affected. See "Risk
Factors--Relationship with and Reliance on NSI; Potential Conflicts of
Interest."

DISTRIBUTION AGREEMENTS. The Company has entered into a regional
distribution agreement (the "Regional Distribution Agreement") with NSI,
through Nu Skin Hong Kong, pursuant to which NSI has granted to the Company
the exclusive right to sell and distribute NSI products and sales aids in the
Company's markets. Nu Skin Japan, Nu Skin Taiwan and Nu Skin Korea have each
entered into wholesale distribution agreements (the "Wholesale Distribution
Agreements") with Nu Skin Hong Kong, pursuant to which each such Subsidiary
has been granted the right to sell and distribute NSI products in its
respective country.

The Company has the right to purchase any of NSI's products, subject to
unavailability due to local regulatory requirements. See "--Government
Regulation." Purchases are made by submission of a purchase order to NSI,
which NSI must accept unless it has insufficient inventory to fill the order.
In determining whether it has sufficient inventory to fill a given order, NSI
is required to treat the Company on a parity basis with its other affiliates.

The prices for products are governed by a price schedule which is subject to
change by NSI from time to time upon at least 30 days advance notice. NSI pays
ordinary freight and the Company pays handling, excise taxes and customs
duties on the products the Company orders. In order to assist NSI in planning
its inventory and pricing, the Company is required to provide NSI with certain
business plans and reports of its sales and prices to independent
distributors.

The Company purchases virtually all of its products from NSI through Nu Skin
Hong Kong. Nu Skin Hong Kong pays for its purchases from NSI under the
Regional Distribution Agreement in U.S. dollars, while the other Subsidiaries
pay for their purchases from Nu Skin Hong Kong under the Wholesale
Distribution Agreements in their local currency. Nu Skin Hong Kong therefore
bears significant currency exchange risk as a result of purchases from NSI on
behalf of the other Subsidiaries. See "Risk Factors--Operations Outside the
United States; Currency Risks."

The Company is responsible for paying for and obtaining government approvals
and registrations necessary for importation of NSI's products into its
markets. In addition, the Company is responsible for obtaining any government
approvals, including any filings and notifications, necessary for the
effectiveness of the Regional Distribution Agreement and the Wholesale
Distribution Agreements or for the parties performance thereunder. See "Risk
Factors--Government Regulation of Products and Marketing."

NSI is generally responsible for paying for the research, development and
testing of the products sold to the Company, including any product
reformulations needed to comply with local regulatory requirements. NSI
warrants as to the merchantability of, and its title to, such products. NSI
has further indemnified the Company from losses and liability relating to
claims arising out of alleged or actual defects in the design, manufacture or
content of its products. NSI is required to maintain insurance covering claims
arising from the use of its products and to cause each Subsidiary to be a
named insured on such insurance policy. The Subsidiaries are also required to
maintain insurance policies covering the business to be conducted by them
pursuant to the Regional Distribution Agreement and the Wholesale Distribution
Agreements. See "Risk Factors--Product Liability."

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<PAGE>

The Company is prohibited from selling NSI products outside of the countries
for which it has an exclusive distribution license, except that the Company
may sell certain NSI products to NSI affiliates in Australia and New Zealand.
In addition, the Company is prohibited from selling products which directly or
indirectly compete with NSI products in any country without NSI's prior
consent, which consent will not be unreasonably withheld or delayed. The
Company may sell non-competing products without restriction.

The Company may manufacture products which do not compete with NSI products
without restriction but may not manufacture products which compete directly or
indirectly with NSI products without NSI's prior consent, which consent will
not be unreasonably withheld or delayed. Any products manufactured by the
Company carrying an NSI trademark will be subject to the Trademark/Tradename
License Agreements with NSI described below and will require the payment to
NSI of certain royalties as set forth therein. If NSI discontinues a product
that the Company would like to continue to sell, the Company may elect to
manufacture the product itself or through a third party manufacturer unless
NSI has a competing product. In this event, NSI has agreed to license the
product formulation and any associated trademarks and tradenames to the
Company pursuant to the Trademark/Tradename License Agreements described
below.

When the Company determines to commence operations in Thailand, Indonesia,
Malaysia, the Philippines, the PRC, Singapore or Vietnam, NSI has agreed under
the Regional Distribution Agreement to enter into new Trademark/Tradename
License Agreements and Licensing and Sales Agreements and to cause NSIMG to
enter into new Management Services Agreements, in each case substantially
similar to those described below, with the Company or subsidiaries operating
in such countries. See "Risk Factors--Entering New Markets."

TRADEMARK/TRADENAME LICENSE AGREEMENTS. Pursuant to the Trademark/Tradename
License Agreements, NSI has granted to each Subsidiary an exclusive license to
use in its market the NSI and IDN trademarks, the individual product
trademarks used on NSI products and any NSI tradenames. Each of the
Subsidiaries may thus use the licensed trademarks and tradenames on products
and commercial materials not purchased from NSI, including locally sourced
products and commercial materials and products and commercial materials
manufactured by such subsidiary and may grant a sub-license, with the consent
of NSI, for the licensed trademarks and tradenames in its market. In addition,
each Subsidiary has the right to export such products and commercial materials
into other Company markets with NSI's consent, which consent shall not be
unreasonably withheld or delayed.

The Company pays a royalty to NSI for use of the licensed trademarks and
tradenames on products, starter and introductory kits and commercial materials
not purchased from NSI, including locally sourced products and commercial
materials and products and commercial materials manufactured by the Company.
The royalty is paid monthly and is equal to 5% of the Company's revenues from
such products and commercial materials for such month generally and a total of
8% where NSI owns the formula or has exclusive rights in the subject market
for such products or commercial materials.

NSI has the right to inspect the premises where products using its
trademarks are manufactured in order to ensure that the products meet its
quality standards. The Company's labels, packaging, advertising and
promotional materials using NSI's trademarks must conform with NSI's published
standards and NSI has the right of prior approval. The Company is responsible
for correcting any manufacturing defects in locally sourced products or
products it manufactures that are brought to the Company's attention by NSI or
otherwise.

NSI is responsible for securing and maintaining trademark registrations in
the territory covered by each Trademark/Tradename Agreement. NSI has agreed to
take such actions as the Company may reasonably request to protect its and the
Company's rights to the licensed trademarks from infringement and related
claims and has indemnified the Company from losses and liability resulting
from such claims.

LICENSING AND SALES AGREEMENTS. Currently, all distributor agreements are
entered into between the distributor and NSI rather than with the Company.
Therefore, the Company does not own the distributor lists or the distribution
system, the Global Compensation Plan, copyrights and related intangibles.
Consequently, each

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of the Subsidiaries has entered into a Licensing and Sales Agreement with NSI
which includes a license to the Company to use the distributor lists, the
Global Compensation Plan, know how, distributor system and related
intellectual property exclusively in its markets. The Company pays a license
fee to NSI of 4% of the Company's revenue from product sales (excluding
starter and introductory kits) to NSI distributors for the use of such
licensed property. The Company may not grant a sublicense for the licensed
property.

The Company is required to use the Global Compensation Plan to distribute
any products, except as NSI may agree to modify the plan in accordance with
local requirements. The Company must comply with all policies implemented by
NSI under the Global Compensation Plan. This is necessary to ensure global
consistency in NSI's operations. The Company must also employ all NSI policies
relating to commissions payable to, and other relationships with, NSI
distributors.

The Company has agreed to incur a distributor commission expense of 42% of
commissionable product sales (with the exception of South Korea where, due to
government regulations, the Company satisfies this obligation by using a
formula based upon a maximum payout of 35% of commissionable product sales).
The Licensing and Sales Agreements provide that the Company is to satisfy this
obligation by paying commissions owed to local distributors. In the event that
these commissions exceed 42% of commissionable product sales, the Company is
entitled to receive the difference from NSI. In the event that the commissions
paid are lower than 42%, the Company must pay the difference to NSI. Under
this formulation, the Company's total commission expense is fixed at 42% of
commissionable product sales in each country (except for South Korea). The 42%
figure has been set on the basis of NSI's experience over the past seven years
which indicates that actual commissions paid in a given year together with the
cost of administering the Global Compensation Plan average approximately 42%
of commissionable product sales for such year. In the event that actual
commissions payable to distributors from sales in the Company's markets vary
from these historical results, whether as a result of changes in distributor
behavior or changes to the Global Compensation Plan or in the event that NSI's
cost of administering the Global Compensation Plan increases or decreases, the
Licensing and Sales Agreements provide that the intercompany settlement figure
may be modified to more accurately reflect actual results. See "Risk Factors--
Potential Increase in Distributor Compensation Expense."

In addition to payments to local distributors, the Company is generally
responsible for distributor support and relations within Japan, Taiwan, Hong
Kong and South Korea. The Company has agreed to use its best efforts to
support the development of NSI's distributor network in its markets by
purchasing starter or introductory kits from NSI and selling them to potential
NSI distributors.

NSI has agreed to take such actions as the Company may reasonably request to
protect its and the Company's rights to the property licensed under the
Licensing and Sales Agreements from infringement and related claims and has
indemnified the Company from losses and liability resulting from such claims.
Both NSI and the Company are required to maintain insurance coverage adequate
to insure their assets and financial stability. NSI is responsible for
ensuring that the property licensed under the Licensing and Sales Agreements
complies with local laws and regulations, including direct selling laws. See
"Risk Factors--Government Regulation of Direct Selling Activities."

MANAGEMENT SERVICES AGREEMENTS. The Subsidiaries have entered into
Management Services Agreements with NSIMG, pursuant to which NSIMG has agreed
to provide a variety of management and support services to each Subsidiary.
These services include management, legal, financial, marketing and distributor
support/training, public relations, international expansion, human resources,
strategic planning, product development and operations administration
services. Most of NSI's senior management personnel and most employees who
deal with international issues are employees of NSIMG.

Generally, the management and support services will be provided by employees
of NSI and NSIMG acting through NSIMG either (i) on a temporary basis in a
specific consulting role or (ii) on a full-time basis in a management position
in the country in which the services are required. The Management Services
Agreements do not cover the services of many of the Company's executive
officers. See "Management--Executive Compensation."

65
<PAGE>

GENERAL PROVISIONS. The Operating Agreements are each for a term ending on
December 31, 2016, and, after December 31, 2001, will be subject to
renegotiation in the event that members of the families of, or trusts or
foundations established by or for the benefit of the Existing Stockholders on
a combined basis no longer beneficially own a majority of the combined voting
power of the outstanding shares of common stock of the Company or of NSI. See
"Risk Factors--Anti-Takeover Effects of Certain Charter, Contractual and
Statutory Provisions." Each Operating Agreement is subject to termination by
either party in the event of: (i) a material breach by the other party which
remains uncured for a period of 60 days after notice thereof; (ii) the
bankruptcy or insolvency of the other party; or (iii) entry of a judgment by a
court of competent jurisdiction against the other party in excess of
$25,000,000. Each Operating Agreement is further subject to termination by NSI
upon 30 days notice in the event of a change of control of the Subsidiary
party thereto and by such subsidiary upon 30 days notice in the event of a
change of control of NSI. Each Operating Agreement provides that neither party
may assign its rights thereunder without the consent of the other party. Each
Operating Agreement is governed by Utah law. Any dispute arising under an
Operating Agreement is to be settled by arbitration conducted in Utah in
accordance with the applicable rules of the American Arbitration Association,
as supplemented by the commercial arbitration procedures for international
commercial arbitration.

MUTUAL INDEMNIFICATION AGREEMENT. Concurrently with the Offerings, the
Company and NSI entered into a mutual indemnification agreement pursuant to
which NSI has agreed to indemnify the Company for certain claims, losses and
liabilities relating to the operations of the Subsidiaries prior to the
Reorganization, and the Company has agreed to indemnify NSI for certain
claims, losses and liabilities relating to the operations of the Subsidiaries
after the Reorganization.

COMPETITION

PERSONAL CARE AND NUTRITIONAL PRODUCTS. The markets for personal care and
nutritional products are large and intensely competitive. The Company competes
directly with companies that manufacture and market personal care and
nutritional products in each of the Company's product categories. The Company
competes with other companies in the personal care and nutritional products
industry by emphasizing the value and premium quality of the Company's
products and the convenience of the Company's distribution system. Many of the
Company's competitors have much greater name recognition and financial
resources than the Company. In addition, personal care and nutritional
products can be purchased in a wide variety of channels of distribution. While
the Company believes that consumers appreciate the convenience of ordering
products from home through a sales person or through a catalog, the buying
habits of many consumers accustomed to purchasing products through traditional
retail channels are difficult to change. The Company's product offerings in
each product category are also relatively small compared to the wide variety
of products offered by many other personal care and nutritional product
companies. There can be no assurance that the Company's business and results
of operations will not be affected materially by market conditions and
competition in the future.

NETWORK MARKETING COMPANIES. The Company also competes with other direct
selling organizations, some of which have a longer operating history and
higher visibility, name recognition and financial resources. The leading
network marketing company in the Company's markets is Amway Corporation and
its affiliates. The Company competes for new distributors on the basis of the
Global Compensation Plan and its premium quality products. Management
envisions the entry of many more direct selling organizations into the
marketplace as this channel of distribution expands over the next several
years. The Company has been advised that certain large, well-financed
corporations are planning to launch direct selling enterprises which will
compete with the Company in certain of its product lines. There can be no
assurance that the Company will be able to successfully meet the challenges
posed by this increased competition. See "Risk Factors--Competition."

GOVERNMENT REGULATION

DIRECT SELLING ACTIVITIES. Direct selling activities are regulated by various
governmental agencies. These laws and regulations are generally intended to
prevent fraudulent or deceptive schemes, often referred to as "pyramid" or
"chain sales" schemes, that promise quick rewards for little or no effort,
require high entry costs, use high pressure recruiting methods and/or do not
involve legitimate products. In Japan, the Company's distribution system is
regulated under the "Door-to-Door" Sales Law, which requires the submission of
specific

66
<PAGE>

information concerning the Company's business and products and which provides
certain cancellation and cooling-off rights for consumers and new
distributors. In Taiwan, the Fair Trade Law (and the Enforcement Rules and
Supervisory Regulations of Multi-Level Sales) requires the Company to comply
with registration procedures and also provides distributors with certain
rights regarding cooling-off periods and product returns. The Company also
complies with South Korea's strict Door-to-Door Sales Act, which requires,
among other things, the regular reporting of revenue, the registration of
distributors together with the issuance of a registration card, and the
maintaining of a current distributor registry. This law also limits the amount
of sponsoring bonuses that a registered multi-level marketing company can pay
to its distributors to 35% of revenue in a given month. As is the case with
most network marketing companies, NSI and the Company have from time to time
received inquiries from various government regulatory authorities regarding
the nature of their business and other issues such as compliance with local
business opportunity and securities laws. Although to date none of these
inquiries has resulted in a finding materially adverse to the Company or NSI,
adverse publicity resulting from inquiries into NSI's operations by certain
government agencies in the early 1990's, stemming in part out of inappropriate
product and earnings claims by distributors, materially adversely affected
NSI's business and results of operations. There can be no assurance that the
Company or NSI will not face similar inquiries in the future which, either as
a result of findings adverse to the Company or NSI or as a result of adverse
publicity resulting from the instigation of such inquiries, could have a
material adverse effect on the Company's business and results of operations.
See "Risk Factors--Potential Effects of Adverse Publicity" and "--Government
Regulation of Direct Selling Activities."

Based on research conducted in opening its existing markets (including
assistance from local counsel), the nature and scope of inquiries from
government regulatory authorities and the Company and NSI's history of
operations in such markets to date, the Company and NSI believe that their
method of distribution is in compliance in all material respects with the laws
and regulations relating to direct selling activities of the countries in
which the Company and NSI currently operate. Even though management believes
that laws governing direct selling are generally becoming more permissive,
many countries, including Singapore, one of the Company's potential markets,
currently have laws in place that would prohibit the Company and NSI from
conducting business in such markets. There can be no assurance that the
Company will be allowed to conduct business in each of the new markets or
continue to conduct business in each of its existing markets licensed from
NSI. See "Risk Factors--Entering New Markets."

REGULATION OF PRODUCTS AND MARKETING. The Company and NSI are subject to or
affected by extensive governmental regulations not specifically addressed to
network marketing. Such regulations govern, among other things, (i) product
formulation, labeling, packaging and importation, (ii) product claims and
advertising, whether made by the Company, NSI or NSI distributors, (iii) fair
trade and distributor practices, and (iv) taxes, transfer pricing and similar
regulations that affect foreign taxable income and customs duties.

In Taiwan, all "medicated" cosmetic and pharmaceutical products, including
PharmAssist, require registration. Non-medicated cosmetic products, such as
shampoo and hair conditioner, require no registration.

In Hong Kong, cosmetic products not classified as "drugs" nor as
"pharmaceutical products" are not subject to statutory registrations,
packaging and labeling requirements apart from the Trade Descriptions
Ordinance. In Macau, "pharmaceutical" products are strictly regulated; general
products are not subject to registration requirements.

67
<PAGE>

In South Korea, the Company has obtained the mandatory certificate of
confirmation as a qualified importer of cosmetics under the Pharmaceutical
Affairs Law as well as additional product approvals for each of the 45
categories of cosmetic products which it imports. Each new cosmetic product
undergoes a 60 day post-customs inspection where, in addition to compliance
with ingredient requirements, each product is inspected for compliance with
South Korean labeling requirements.

Based on the Company and NSI's experience and research (including assistance
from counsel) and the nature and scope of inquiries from government regulatory
authorities, the Company and NSI believe that they are in material compliance
with all regulations applicable to them. Despite this belief, either the
Company or NSI could be found not to be in material compliance with existing
regulations as a result of, among other things, the considerable
interpretative and enforcement discretion given to regulators or misconduct by
independent distributors. In 1994, NSI and three of its distributors entered
into a consent decree with the Federal Trade Commission (the "FTC") with
respect to its investigation of certain product claims and distributor
practices, pursuant to which NSI paid approximately $1 million to settle the
FTC investigation. NSI is currently in discussions with the FTC regarding its
compliance with such consent decree and other product issues raised by the
FTC. There can be no assurances that the Company will not be subject to
similar inquiries and regulatory investigations or disputes and the effects of
any adverse publicity resulting therefrom. Any assertion or determination that
either the Company, NSI or any NSI distributors are not in compliance with
existing laws or regulations could have a material adverse effect on the
Company's business and results of operations. In addition, in any country or
jurisdiction, the adoption of new laws or regulations or changes in the
interpretation of existing laws or regulations could generate negative
publicity and/or have a material adverse effect on the Company's business and
results of operations. The Company cannot determine the effect, if any, that
future governmental regulations or administrative orders may have on the
Company's business and results of operations. Moreover, governmental
regulations in countries where the Company plans to commence or expand
operations may prevent, delay or limit market entry of certain products or
require the reformulation of such products. Regulatory action, whether or not
it results in a final determination adverse to the Company or NSI, has the
potential to create negative publicity, with detrimental effects on the
motivation and recruitment of distributors and, consequently, on the Company's
sales and earnings. See "Risk Factors--Potential Effects of Adverse Publicity"
and "--Entering New Markets."

REGULATION OF POTENTIAL MARKETS. Each of the proposed new markets will
present additional unique difficulties and challenges. In Thailand, for
example, businesses which are more than 50% owned by non-citizens are not
permitted to operate unless they have an Alien Business Permit, which is
frequently difficult to obtain. Under the Treaty of Amity and Economic
Relations between Thailand and the United States (the "Treaty of Amity") an
Alien Business Permit is not required if a Thailand business is owned by an
entity organized in the United States, a majority of whose owners are U.S.
citizens or entities. From time to time, it has been reported that certain
Thailand government officials have considered supporting the termination of
the Treaty of Amity. There can be no assurance that the Company will ever be
able to obtain all of the necessary permits and approvals to commence
operations in Thailand. The Company could face particular difficulties in
commencing operations in Thailand if the Treaty of Amity were terminated and
the Company were forced to obtain an Alien Business Permit.

68
<PAGE>

EMPLOYEES

As of September 30, 1996, the Company had approximately 825 full-time and
part-time employees. None of the employees is represented by a union or other
collective bargaining group. The Company believes its relationship with its
employees is good, and does not currently foresee a shortage in qualified
personnel needed to operate the business. Each Subsidiary is directed by an
experienced manager.

PROPERTIES

In each of its current markets, the Company has established a central office
for the local administrative staff who is directed by a general manager. These
offices also have a training room for distributor and employee use and an
adjoining distribution center where distributors can place, pay for, and pick
up orders. In Japan, Taiwan, and South Korea additional pick up centers have
been added to provide better service to distributors and meet the increasing
demand for product. In Hong Kong, the Company maintains a distributor business
center where established distributors can use office space for training and
sponsoring activities at cost.

In addition to the Company's corporate headquarters in Provo, Utah, the
following table summarizes, as of September 30, 1996, the Company's leased
office and distribution facilities in each country where the Company currently
has operations.

PROPERTIES LEASED

<TABLE>
<CAPTION>
LOCATION FUNCTION LEASE TOTAL
-------- -------- ------------------
<S> <C> <C>
Tokyo, Japan............ Central office/ distribution center 35,000 square feet
Osaka, Japan............ Distribution center/office 13,400 square feet
Taipei, Taiwan.......... Central office/distribution center 22,000 square feet
Kaohsiung, Taiwan....... Distribution center/office 9,500 square feet
Taichung, Taiwan........ Distribution center/office 17,000 square feet
Taoyuan, Taiwan......... Warehouse/distribution center 36,000 square feet
Causeway Bay, Hong Central office/distribution 19,000 square feet
Kong................... center/distributor business
center/regional office
Tsing Yi, Hong Kong..... Warehouse 10,000 square feet
Macau................... Distribution center/office 2,000 square feet
Seoul, South Korea...... Central office/distribution center 20,000 square feet
Seoul, South Korea...... Distribution center 7,000 square feet
Kyungki-Do, South Warehouse 16,000 square feet
Korea..................
Pusan, South Korea...... Distribution Center 10,000 square feet
</TABLE>

LEGAL PROCEEDINGS

The Company is not a party to any litigation or other legal proceedings or
investigations which is expected to have a material adverse effect on its
financial condition or results of operations, nor are any such proceedings
known to be contemplated.

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<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the Company's
directors and executive officers.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Blake M. Roney.......... 38 Chairman of the Board
Steven J. Lund.......... 42 President, Chief Executive Officer and Director
Renn M. Patch........... 46 Chief Operating Officer
Corey B. Lindley........ 32 Vice President of Finance
Michael D. Smith........ 50 Vice President of Operations
M. Truman Hunt.......... 37 Vice President of Legal Affairs and Investor Relations
Keith R. Halls.......... 38 Secretary and Director
Takashi Bamba........... 61 President, Nu Skin Japan
John Chou............... 50 President, Nu Skin Taiwan
S.T. Han................ 54 President, Nu Skin Korea
George Mak.............. 42 President, Nu Skin Hong Kong
Sandie N. Tillotson..... 39 Director
Brooke B. Roney......... 34 Director
Kirk V. Roney........... 42 Director
Max L. Pinegar.......... 65 Director
Max E. Esplin........... 53 Director
</TABLE>

Blake M. Roney has served as the Chairman of the Board since the Company's
inception and is a founder of NSI. He has also served as President, Chief
Executive Officer and Chairman of the Board of NSI and its affiliated entities
since their respective inceptions. He received a B.S. degree from Brigham
Young University. He is the brother of Kirk V. Roney and Brooke B. Roney.

Steven J. Lund has been the President, Chief Executive Officer and a
Director of the Company since its inception. Mr. Lund has also served as
Executive Vice President and a Director of NSI since its inception and as Vice
President and Secretary of certain NSI affiliated entities since their
respective inceptions. Mr. Lund previously worked as an attorney in private
practice. He received a B.A. degree from Brigham Young University and a J.D.
degree from Brigham Young University's J. Reuben Clark Law School.

Renn M. Patch has been the Chief Operating Officer of the Company since its
inception. Since 1992 he has been Vice President of Global Operations and
Assistant General Manager of NSI. From 1991 to 1992, he served as Director of
Government Affairs of NSI. Prior to joining NSI in 1991, Mr. Patch was
associated with the Washington, D.C. consulting firm of Parry and Romani
Associates. Mr. Patch earned a B.A. degree from the University of Minnesota, a
J.D. degree from Hamline University School of Law and an L.L.M. degree from
Georgetown University.

Corey B. Lindley has been the Vice President of Finance of the Company since
its inception. From 1993 to 1996, he served as Managing Director,
International of NSI. Mr. Lindley worked as the International Controller of
NSI from 1991 to 1994 and lived in Hong Kong and Japan during that time. From
1990 to 1991, he served as Assistant Director of Finance of NSI. Mr. Lindley
is a Certified Public Accountant. Prior to joining NSI in 1990, he worked for
the accounting firm of Deloitte and Touche. He earned a B.S. degree from
Brigham Young University and an M.B.A. degree from Utah State University.

Michael D. Smith has been the Vice President of Operations for the Company
since its inception. He has also served as Vice President of Asian Operations
of NSI since February 1996. Prior to that time, he served as General Counsel
of NSI from 1992 to 1996 and as Director of Legal Affairs of NSI from 1989 to
1992. He earned B.S. and M.A. degrees from Brigham Young University and a J.D.
degree from the University of Utah.

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<PAGE>

M. Truman Hunt has served as the Vice President of Legal Affairs and
Investor Relations since the Company's inception. He has also served as
Counsel to the President of NSI since 1994. From 1991 to 1994, Mr. Hunt served
as President and Chief Executive Officer of Better Living Products, Inc., an
NSI affiliate involved in the manufacture and distribution of houseware
products sold through traditional retail channels. Prior to that time, he was
a securities and business attorney in private practice. He received a B.S.
degree from Brigham Young University and a J.D. degree from the University of
Utah.

Keith R. Halls has served as the Secretary and a Director of the Company
since its inception. He has also served as General Vice President and a
Director of NSI since 1992. He served as Director of Finance of NSI from 1986
to 1992. Mr. Halls is a Certified Public Accountant. Mr. Halls received a B.A.
degree from Stephen F. Austin State University and a B.S. degree from Brigham
Young University.

Takashi Bamba has served as the President of Nu Skin Japan since 1993. Prior
to joining Nu Skin Japan in 1993, Mr. Bamba served five years as President and
CEO of Avon Products Co., Ltd., the publicly traded Japanese subsidiary of
Avon Products, Inc. Prior to working at Avon Products Co., Ltd., he spent 17
years at Avon Products, Inc. He received a B.A. degree from Yokohama National
University.

John Chou has served as the President of Nu Skin Taiwan since 1991. Prior to
joining Nu Skin Taiwan in 1991, he spent twenty-one years in international
marketing and management with 3M Taiwan Ltd., Amway Taiwan and Universal PR
Co. Mr. Chou is a standing director of the Taiwan ROC Direct Selling
Association. He is also a member of the Kiwanis International, and the Taiwan
American Chamber of Commerce. He received a B.A. degree from Tan Kang
University in Taipei, Taiwan.

S.T. Han has served as the President of Nu Skin Korea since 1995. Prior to
joining Nu Skin Korea in 1995, Mr. Han spent four years as the Executive
Managing Director of Woosung Film Co., the exclusive distributor of Konica
film in South Korea. He also worked for Amway Korea, Ltd. during that
company's start-up phase of operations in 1991. Mr. Han graduated with a B.A.
degree from ChungAng University.

George Mak has served as the President of Nu Skin Hong Kong since 1991.
Prior to joining Nu Skin Hong Kong in 1991, Mr. Mak worked for Johnson &
Johnson as a personnel and administration manager for Hong Kong and Shanghai
from 1989 to 1991. Prior to joining Johnson & Johnson he worked for 10 years
in the human resources and accounting fields. He earned an M.B.A. degree from
the University of East Asia, Macau.

Sandie N. Tillotson has served as a Director of the Company since its
inception. She was a founder of NSI and has also served as General Vice
President since 1992 and a Director of NSI since its inception. She served as
Vice President of Corporate Services of NSI from 1984 to 1992. She earned a
B.S. degree from Brigham Young University.

Brooke B. Roney has served as a Director of the Company since its inception.
He was a founder of NSI and has also served as General Vice President and a
Director of NSI since 1992. He served as Vice President of Distribution of NSI
from 1984 to 1992. He is the brother of Blake M. Roney and Kirk V. Roney.

Kirk V. Roney has served as a Director of the Company since its inception.
He has also served as General Vice President of NSI since 1992 and a Director
of NSI since 1984. He served as Vice President of Planning and Development of
NSI from 1984 to 1992. He earned an M.I.M. degree from the American Graduate
School of International Management. He earned an M.A. degree from Central
Michigan University and a B.A. from Brigham Young University. He is the
brother of Blake M. Roney and Brooke B. Roney.

Max L. Pinegar has served as a Director of the Company since September 1996.
He has also served as General Manager of NSI since 1989 and as Vice President
of NSI since 1992. He received a B.A. degree from Brigham Young University and
an M.B.A. degree from the University of Utah.

Max E. Esplin has served as a Director of the Company since September 1996.
He has also served as Vice President of Finance of NSI since 1993. He served
as Controller of NSI from 1989 until 1993. Mr. Esplin is a Certified Public
Accountant. He received a B.S. degree from Brigham Young University.

71
<PAGE>

The Company's Board of Directors intends to appoint at least two additional
directors who will not be officers or employees of NSI or the Company. It is
expected that these outside directors will receive annual retainer and per
meeting fees in connection with these directorships. See "--Compensation of
Directors."

COMMITTEES OF THE BOARD OF DIRECTORS

Within 90 days after the closing of the Offerings, the Company's Board of
Directors will establish an Audit Committee consisting of at least two
directors, none of whom will be an officer or employee of the Company or NSI.
The duties of the Audit Committee will be to recommend to the Company's Board
of Directors the selection of independent certified public accountants to
audit annually the books and records of the Company, to review the activities
and the reports of the independent certified public accountants and to report
the results of such review to the Company's Board of Directors. The Audit
Committee will also consider the adequacy of the Company's internal controls
and internal auditing methods and procedures. Within 90 days after the closing
of the Offerings, the Company's Board of Directors will establish a
Compensation Committee consisting of at least two directors, none of whom will
be an officer or employee of the Company, the duties of which are to make
recommendations to the Company's Board of Directors with respect to the
salaries, bonuses and other compensation to be paid to the Company's officers.
The Company's Board of Directors also intends to establish an Executive
Committee consisting of Messrs. Blake M. Roney, Steven J. Lund and Keith R.
Halls. The duties of the Executive Committee are, to the extent authorized by
the Company's Board of Directors, to exercise all the powers and authority of
the Company's Board of Directors with respect to the management of the
business and affairs of the Company.

COMPENSATION OF DIRECTORS

Directors who do not receive compensation as officers or employees of the
Company, NSI or its affiliates are paid an annual fee of $25,000 and a fee of
$1,000 for each meeting of the Company's Board of Directors or any committee
meeting thereof that they attend.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Board of Directors does not currently have a compensation
committee but anticipates establishing one within 90 days following the
closing of the Offerings. Several members of the Company's Board of Directors
are also directors of NSI and have set or will set compensation for certain
executive officers of the Company who have been, or will be following the Rule
415 Offerings, executive officers of NSI.

EXECUTIVE COMPENSATION

The Company was formed in September 1996, and consequently paid no
compensation to the executive officers named in the table below during the
year ended December 31, 1995. However, salary, bonus and other compensation is
presented in the table below for the year ended December 31, 1995 based on
payments by NSI and the Subsidiaries to the named executive officers as if the
Company had been in existence during that period. During 1995, Messrs. Bamba,
Chou, and Mak were employed full time as the Presidents of Nu Skin Japan,
Nu Skin Taiwan and Nu Skin Korea, respectively. During 1995, Messrs. Lund and
Patch were, and after the Rule 415 Offerings continue to be, executive
officers of NSI and the Company. The compensation presented in the table below
reflects an allocation of the time spent by Messrs. Lund and Patch providing
services to the Subsidiaries during 1995. During 1996, the Company will pay
Messrs. Lund and Patch annual salaries commensurate with their 1995 salaries
in return for their services to the Company. These salaries and bonuses will
be in addition to any amounts received by these officers from NSI in return
for their services to NSI. During 1996, the Company, through the Subsidiaries,
will pay Messrs. Bamba, Chou and Mak salaries of approximately $361,000,
$211,000 and $111,000, respectively. In addition, Messrs. Bamba, Chou and Mak
will be eligible to participate in the Bonus Incentive Plan which is intended
to be modeled after NSI's cash bonus long term incentive plan which was in
effect for these individuals in 1995. See "--Bonus Incentive Plan." It is
anticipated that Messrs. Bamba, Chou and Mak will continue to receive all of
their compensation from the Company through the Subsidiaries.

72
<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
OTHER ALL
ANNUAL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
--------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Steven J. Lund........... 1995 $236,364 $82,529(/1/) $ -- $ --
President and Chief
Executive Officer
Takashi Bamba............ 1995 361,028 105,563(/2/) 98,063(/3/) 3,297(/4/)
President, Nu Skin Japan
John Chou................ 1995 185,370 75,786(/2/) 63,730(/5/) --
President, Nu Skin
Taiwan
Renn M. Patch............ 1995 97,175 104,765(/6/) 18,750(/7/) --
Chief Operating Officer
George Mak............... 1995 102,564 17,535(/2/) 9,645(/8/) --
President, Nu Skin Hong
Kong
</TABLE>
--------
(1) Cash bonus paid to Mr. Lund not pursuant to a formal bonus plan.
(2) Cash bonus paid during 1995 pursuant to NSI's cash bonus long term
incentive plan for the Presidents of the Subsidiaries.
(3) Includes deferred portion of a bonus accrued during 1995 pursuant to
NSI's cash bonus long term incentive plan for the Presidents of the
Subsidiaries and annual lease payments for a Company-provided
automobile.
(4) Annual premium for disability and accidental death insurance policy.
(5) Includes deferred portion of a bonus accrued during 1995 pursuant to
NSI's cash bonus long term incentive plan for the Presidents of the
Subsidiaries and annual payments for a Company-provided automobile and
club dues.
(6) Noncash bonus paid to Mr. Patch, not pursuant to a formal bonus plan.
(7) Includes $16,500 of accrued deferred compensation and $2,250 of vested
deferred compensation awarded to Mr. Patch under NSI's deferred
compensation plan.
(8) Deferred portion of a bonus accrued during 1995 pursuant to NSI's cash
bonus long term incentive plan for the Presidents of the Subsidiaries.

EMPLOYMENT AGREEMENTS

Messrs. Bamba, Chou and Han have entered into employment agreements with Nu
Skin Japan, Nu Skin Taiwan and Nu Skin Korea, respectively. Under these
agreements, these individuals are paid an annual salary and receive various
other benefits. These individuals, together with Mr. Mak, are also entitled to
participate in the Bonus Incentive Plan adopted by the Company concurrently
with the Offerings. See "--Bonus Incentive Plan."

Mr. Bamba is employed as the President of Nu Skin Japan at an annual salary
of approximately $361,000. This salary is subject to annual review by Nu Skin
Japan. Under the terms of his employment agreement, Mr. Bamba is entitled to
reimbursement of business-related expenses, the use of an automobile provided
by Nu Skin Japan, and participation in any retirement plan offered by Nu Skin
Japan. Mr. Bamba also has the right under his employment agreement to have Nu
Skin Japan purchase a country club membership and pay related dues, although
he has not exercised this right. Mr. Bamba is also provided with a private
insurance plan paid for by Nu Skin Japan provided the premium for such private
insurance plan does not exceed (Yen)300,000 per year. Mr. Bamba has agreed to
certain confidentiality obligations. The term of Mr. Bamba's employment is
indefinite, subject to termination by Mr. Bamba or Nu Skin Japan upon three
months' notice.

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<PAGE>

Mr. Chou is employed as the President of Nu Skin Taiwan at an annual salary
of approximately $211,000. Under the terms of his employment agreement, Mr.
Chou is entitled to health insurance paid for in part by Nu Skin Taiwan. Nu
Skin Taiwan also provides Mr. Chou with a monthly car allowance. The term of
Mr. Chou's employment agreement currently extends until June 1997. Under his
employment agreement, Mr. Chou has agreed to certain confidentiality
obligations.

Mr. Han is employed as the President of Nu Skin Korea at an annual salary of
approximately $110,000. Under the terms of his employment agreement, Mr. Han
is entitled to the use of an automobile and driver provided by Nu Skin Korea,
as well as medical insurance and pension benefits. Mr. Han's employment is for
a three year term ending January 1, 1999, subject to the right of Nu Skin
Korea or Mr. Han to terminate the agreement on 60 days' advance notice. Once
Mr. Han has been employed by Nu Skin Korea for 12 months, he will become
entitled to receive, upon termination, severance pay equal to two months'
salary for each consecutive year of service. Mr. Han has agreed to certain
confidentiality and noncompetition obligations.

1996 STOCK INCENTIVE PLAN

The Board of Directors of the Company has adopted the Nu Skin Asia Pacific,
Inc. 1996 Stock Incentive Plan, as amended (the "1996 Stock Incentive Plan").
The purpose of the 1996 Stock Incentive Plan is to attract and retain
executives, other employees, independent consultants and directors who are
important to the success and growth of the Company and to ensure that their
interests are aligned with the interests of the stockholders of the Company.

ADMINISTRATION. The 1996 Stock Incentive Plan is administered by the 1996
Stock Incentive Plan Committee (the "Plan Committee"). Initially, the Plan
Committee will consist of the members of the Company's Board of Directors, and
later of the members of the Compensation Committee of the Board of Directors,
once the Compensation Committee has been established. The Plan Committee will
determine, from time to time, the individuals to whom awards shall be made,
the type of awards, and the amount, size and terms of each award. The Plan
Committee will make all other determinations necessary or advisable for the
administration of the 1996 Stock Incentive Plan.

AWARDS. Awards under the 1996 Stock Incentive Plan may be in the form of
options (both nonqualified stock options ("NQSOs") and incentive stock options
("ISOs")), contingent stock, restricted stock, and stock appreciation rights
("SARs"), or such other forms as the Plan Committee in its discretion may deem
appropriate. The maximum number of awards that may be issued to any one person
during the life of the 1996 Stock Incentive Plan shall be limited to 10% of
the shares reserved for issuance under the 1996 Stock Incentive Plan. The
number of shares which may be issued under the 1996 Stock Incentive Plan as
well as the terms of any outstanding awards may be equitably adjusted by the
Plan Committee in the event of a stock split, stock dividend,
recapitalization, merger, consolidation, combination or similar events. In
general, any shares subject to an option or right which for any reason expires
or is terminated unexercised shall again be available under the 1996 Stock
Incentive Plan. No awards may be granted more than ten years after the
effective date of the 1996 Stock Incentive Plan.

NUMBER OF SHARES. A total of 4,000,000 shares of the Class A Common Stock
have been authorized to be issued pursuant to the 1996 Stock Incentive Plan.
The Company issued stock bonus awards from these shares to executive officers
of the Company following the Offerings. Messrs. Takashi Bamba, John Chou, S.T.
Han and George Mak received stock bonus awards of 13,000, 13,000, 1,800 and
9,000 shares of Class A Common Stock, respectively. In addition, Messrs. Renn
M. Patch, Corey B. Lindley and Michael D. Smith have each received stock bonus
awards from NSI of 13,000 shares of Class A Common Stock. These awards vest
ratably over four years following the date of grant, provided the executive
officer remains in the employment of the Company.

PLAN AMENDMENT. The Board of Directors may amend the 1996 Stock Incentive
Plan, without stockholder approval, anytime in any respect unless stockholder
approval of the amendment in question is required under Delaware law, the
Code, certain exemptions from Section 16 of the Securities Exchange Act of
1934, as amended

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<PAGE>

(the "1934 Act"), any national securities exchange system on which the shares
are then listed or reported, by any regulatory body having jurisdiction with
respect to the 1996 Stock Incentive Plan, or other applicable laws, rules or
regulations. No amendment to the 1996 Stock Incentive Plan may alter or impair
any award granted under the 1996 Stock Incentive Plan without the consent of
the holders thereof. The 1996 Stock Incentive Plan may be terminated at any
time by the Board of Directors.

OPTIONS. The 1996 Stock Incentive Plan provides for the grant of ISOs to
employees and NQSOs to employees and independent consultants. In the case of
ISOs, the exercise price of an option may not be less than 100% of the fair
market value of a share of Class A Common Stock at the time of grant (or 110%
of such fair market value if the optionee owns more than 10% of the total
voting power of all classes of Company stock outstanding at the time of
grant). In the case of NQSOs, the exercise price of an option may not be less
than 85% of the fair market value of a share of Class A Common Stock at the
time of grant. The Plan Committee may provide for a reduction in the exercise
price of a NQSO by dividends paid on a share of Class A Common Stock while the
NQSO is outstanding. Options will be exercisable for a term determined by the
Plan Committee provided such exercise shall occur not earlier than six months
and not later than ten years (five years if the optionee owns more than ten
percent of the total voting power of all classes of Company Stock outstanding
at the time of grant) after the grant of the option. The aggregate fair market
value of ISO's (determined at the time of grant) granted to an employee which
may become first exercisable in any one calendar year shall not exceed
$100,000. If any option is not granted, exercised, or held pursuant to the
provisions applicable to an ISO, it will be considered to be an NQSO to the
extent that any or all of the grant is in conflict with such provisions. The
Plan Committee has the power to permit acceleration of previously determined
exercise terms under certain circumstances and upon such terms and conditions
as the Plan Committee deems appropriate. See "Risk Factors--Anti-Takeover
Effects of Certain Charter, Contractual and Statutory Provisions."

CONTINGENT STOCK. The Plan Committee will determine the amount of contingent
stock to be granted to a participant based on the past or expected impact the
participant has had or can have on the financial well being of the Company and
other factors determined by the Plan Committee to be appropriate. A
participant receiving an award of contingent stock will receive the stock upon
the satisfaction of certain objectives. Contingent stock awards made pursuant
to the 1996 Stock Incentive Plan will be subject to such terms, conditions and
restrictions, including obtainment of performance objectives, for such period
or periods as may be determined by the Plan Committee at the time of grant.
The Plan Committee in its discretion may permit acceleration of the expiration
of the applicable restriction period with respect to part or all of the award
to any participant. See "Risk Factors--Anti-Takeover Effects of Certain
Charter, Contractual and Statutory Provisions."

RESTRICTED STOCK. The Plan Committee will determine the amount of restricted
stock to be granted to a participant based on the past or expected impact the
participant has had or can have on the financial well being of the Company and
other factors deemed by the Plan Committee to be appropriate. Restricted stock
is issued to the participant subject to forfeiture if certain objectives are
not met. Restricted stock awards made pursuant to the 1996 Stock Incentive
Plan shall be subject to the terms, conditions and restrictions, including the
payment of performance objectives, and for such period or periods as will be
determined by the Plan Committee at the time of grant. The Plan Committee in
its discretion may permit acceleration of the expiration of the applicable
restriction period with respect to part or all of the award to any
participant. See "Risk Factors--Anti-Takeover Effects of Certain Charter,
Contractual and Statutory Provisions." Shares of restricted stock may not be
sold, assigned, transferred, pledged, hypothecated or otherwise disposed of,
except by will or the laws of descent and distribution, for such period
provided in the participant's award agreement.

SARS. SARs are rights to receive cash or shares of Company stock, or a
combination thereof, as the Plan Committee may determine in an amount equal to
the excess of (i) the fair market value of the stock with respect to which the
SAR is exercised, or (ii) 100% of the fair market value of such stock at the
time the SAR was granted, less any dividends paid on such shares while the SAR
was outstanding. No cash consideration will be received by the Company for the
grant of any SAR. No SAR may be granted for a period of less than one year or
greater than ten years. SARs may be exercised at such time and subject to such
terms and conditions as are

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<PAGE>

prescribed by the Plan Committee at the time of grant, subject to certain
limitations (including that no SAR shall be exercisable within one year after
the date of grant).

FEDERAL INCOME TAX CONSEQUENCES. The participant recognizes no taxable gain
or loss when an incentive stock option is granted or exercised. If the shares
acquired upon the exercise of an incentive stock option are held for at least
one year after exercise and two years after grant (the "Holding Period"), the
participant recognizes any gain or loss recognized upon such sale as long-term
capital gain or loss and the Company is not entitled to a deduction. If the
shares are not held for the Holding Period, the gain is ordinary income to the
participant to the extent of the difference between the exercise price and the
fair market value of the Class A Common Stock on the date the option is
exercised and any excess is capital gain. Also, in such circumstances, the
Company is entitled to a deduction equal to the amount of any ordinary income
recognized by the participant.

The participant recognizes no taxable income and the Company receives no
deduction when a nonqualified stock option is granted. Upon exercise of a
nonqualified stock option, the participant recognizes ordinary income and the
Company is entitled to a deduction equal to the difference between the
exercise price and the fair market value of the shares on the date of
exercise. The participant recognizes as a capital gain or loss any subsequent
profit or loss realized on the sale or exchange of any shares disposed of or
sold.

A participant granted restricted stock or contingent stock is not required
to include the value of such shares in income until the first time such
participant's rights in the shares are transferable or are not subject to
substantial risk of forfeiture, whichever occurs earlier, unless such
participant timely files an election under Code Section 83(b) to be taxed on
the receipt of the shares. In either case, the amount of such ordinary income
will be equal to the excess of the fair market value of the shares at the time
the income is recognized over the amount (if any) paid for the shares. The
Company is entitled to a deduction, in the amount of the ordinary income
recognized by the participant, for the Company's taxable year in which the
participant recognizes such income.

Upon the grant of an SAR, the participant recognizes no taxable income and
the Company receives no deduction. The participant recognizes ordinary income
and the Company is entitled to a deduction at the time of exercise equal to
the cash and the fair market value of shares payable upon such exercise.

Under certain circumstances, an accelerated vesting or cash out of stock
options, or accelerated lapse of restrictions on other awards, in connection
with a change in control of the Company might be deemed an "excess parachute
payment" for purposes of the golden parachute tax provisions of Code Section
280G. To the extent it is so considered, the participant may be subject to a
20% excise tax and the Company may be denied a tax deduction.

Code Section 162(m) limits to $1,000,000 per year the federal income tax
deduction available to a public company for compensation paid to any of its
chief executive officer and four other highest paid executive officers.
However, Section 162(m) provides an exception from its limitation for certain
"performance based" compensation if various requirements are satisfied. The
1996 Stock Incentive Plan contains provisions which are intended to satisfy
these requirements for awards made at the time the Company is considered a
public company and which otherwise are "performance based" compensation.

BONUS INCENTIVE PLAN

Concurrently with the Offerings, the Company adopted a bonus incentive plan
for the Presidents of the Subsidiaries. This bonus incentive plan is patterned
after a similar plan under which Messrs. Bamba, Chou, Han and Mak were
compensated by NSI prior to the Reorganization and the Offerings. Under the
new bonus incentive plan, Messrs. Bamba, Chou, Han and Mak are entitled to
receive an annual cash bonus based upon the prior year's operating results of
the Subsidiary for which they are responsible. Participants in this bonus
incentive plan are able to receive a bonus equal to 100% of their respective
salaries, conditioned on meeting certain performance criteria and subject to
cash availability and approval of the Board of Directors of the Company. One
half of this bonus is payable by February 15 of the year following the year in
which the bonus is earned and the remaining one half is deferred and vests
ratably over 10 years or at age 65, whichever occurs first.

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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Prior to the Offerings, the Existing Stockholders, who were also the
stockholders of Nu Skin Japan, Nu Skin Taiwan, Nu Skin Korea and Nu Skin Hong
Kong, contributed their shares of capital stock in such entities to the
Company in exchange for shares of Class B Common Stock. See "The
Reorganization and S Corporation Distribution."

Approximately 98.2% of the combined voting power of the outstanding shares
of Common Stock is held by the Existing Stockholders and certain of their
affiliates. Consequently, the Existing Stockholders and certain of their
affiliates have the ability, acting in concert, to elect all directors of the
Company and approve any action requiring approval by a majority of the
stockholders of the Company. Certain of the Existing Stockholders also own
100% of the outstanding shares of NSI. As a result of this ownership, these
Existing Stockholders will consider the short-term and the long-term impact of
all stockholder decisions on the consolidated financial results of NSI and the
Company. The interests of NSI, on the one hand, and of the Company, on the
other hand, may differ from time to time. See "Risk Factors--Relationship with
and Reliance on NSI; Potential Conflicts of Interest" and "--Control by
Existing Stockholders; Anti-Takeover Effect of Dual Classes of Common Stock."

Virtually all of the products sold by the Company are purchased from NSI
pursuant to distribution agreements with NSI. The Company also manufactures
itself, or through third-party manufacturers, certain products and commercial
materials which it then sells using NSI trademarks or tradenames licensed
under trademark/tradename license agreements with NSI. In addition, the
Company does not have its own sales or distribution network but licenses the
right to use NSI's distribution network and the Global Compensation Plan
pursuant to licensing and sales agreements with NSI. During 1995, the Company
paid NSI approximately $99.2 million for goods and services provided to the
Company under the Operating Agreements. NSIMG also provides a broad range of
management, administrative and technical support to the Company pursuant to
management services agreements with the Company. During 1995, the Company paid
NSIMG approximately $2.1 million for services provided to the Company under a
management service agreement. For a summary of the terms of these agreements,
see "Business--Relationship with NSI." See also Combined Financial Statements
and footnotes thereto.

During 1995, Nu Skin Japan paid NSI a royalty of 8% of the revenue from
sales of products manufactured by a third party manufacturer under a license
agreement between Nu Skin Japan and NSI. In fiscal 1995, Nu Skin Japan paid
NSI $2.3 million in royalties pursuant to this license agreement.

Pursuant to wholesale distribution agreements, Nu Skin Hong Kong distributes
certain NSI products to Nu Skin Personal Care Australia, Inc. and Nu Skin New
Zealand, Inc. Pursuant to these agreements, Nu Skin Hong Kong was paid
approximately $4.6 million in fiscal 1995 by Nu Skin Personal Care Australia,
Inc. and Nu Skin New Zealand, Inc.

Concurrently with the Offerings, the Company purchased from NSI for $25
million, the exclusive rights to distribute NSI products in Thailand,
Indonesia, Malaysia, the Philippines, the PRC, Singapore and Vietnam. See
"Risk Factors--Entering New Markets." The Company has paid $5 million of this
amount, and will pay another $10 million of this amount in January of 1997,
out of proceeds of the Offerings. See "Use of Proceeds." In addition the
Company and NSI have entered into a mutual indemnification agreement pursuant
to which NSI

77
<PAGE>

has agreed to indemnify the Company for certain claims, losses and liabilities
relating to the operations of the Subsidiaries prior to the Reorganization,
and the Company has agreed to indemnify NSI for certain claims, losses and
liabilities relating to the operations of the Subsidiaries after the
Reorganization. See "Business--Relationship with NSI."

Craig Bryson and Craig S. Tillotson are major stockholders of the Company
and have been NSI distributors since 1984. Messrs. Bryson and Tillotson are
partners in an entity (the "Partnership") which receives substantial
commissions from NSI, including commissions on sales generated within the
Company's markets. For the fiscal year ended December 31, 1995, total
commissions paid to the Partnership on sales originating in the Company's then
open markets (Japan, Taiwan and Hong Kong) was approximately $1.1 million. By
agreement, NSI pays commissions to the Partnership at the highest level of
commissions available to distributors. Management believes that this
arrangement allows Messrs. Bryson and Tillotson the flexibility of using their
expertise and reputations in network marketing circles to sponsor, motivate
and train distributors to benefit NSI's distributor force generally, without
having to focus solely on their own organizations.

The Existing Stockholders have entered into a stockholders agreement with
the Company (the "Stockholders' Agreement"). The Existing Stockholders and
certain of their affiliates beneficially own shares having approximately 98.2%
of the combined voting power of the outstanding shares of Common Stock. In
order to ensure the qualification of the Reorganization under Section 351 of
the Code, the Existing Stockholders have agreed not to transfer any shares
they own for 366 days after the Offerings without the consent of the Company
except for certain transfers relating to the funding of the Distributor
Options and the grant of the employee stock bonus awards. See "Shares Eligible
for Future Sale." After the expiration of this 366-day period and subject to
any volume limitations imposed by Rule 144, no such stockholder is permitted
to transfer in any one-year period a number of shares equal to the greater of
(i) 10% of the total number of shares of Common Stock originally issued to
such stockholder in connection with the Reorganization, or (ii) 1.25% of the
total Common Stock issued and outstanding at the time of such proposed
transfer. The Existing Stockholders have been granted registration rights by
the Company permitting each of such Existing Stockholder to register his or
her shares of Class A Common Stock, subject to certain restrictions, on any
registration statement filed by the Company until such Existing Stockholder
has sold a specified value of shares of Class A Common Stock. See "Description
of Capital Stock--Registration Rights."

Prior to the Offerings, the Company entered into indemnification agreements
with its officers and directors indemnifying them against liability incurred
by them in the course of their service to the Company. Following the
Offerings, the Company granted certain of its executive officers stock bonus
awards of shares of Class A Common Stock. See "Management--1996 Stock
Incentive Plan--Number of Shares." In January 1994, NSI shareholders agreed to
grant M. Truman Hunt an option to purchase 267,500 shares of Class A Common
Stock at an aggregate exercise price of $500,000, which reflects the agreed
upon fair market value of this equity interest in January 1994. This option
became immediately exercisable upon consummation of the Reorganization. Prior
to the Offerings, Mr. Hunt exercised a portion of this option and purchased
16,675 shares of Class A Common Stock, which he then sold in the Offerings.

Prior to the Offerings, the Existing Stockholders have converted 1,605,000
shares of Class B Common Stock into Class A Common Stock and contributed such
shares to the Company. The Company has granted to NSI the Distributor Options
to purchase such shares of Common Stock, and NSI will assign the Distributor
Options to qualifying distributors of NSI in connection with the Rule 415
Offerings. The Distributor Options will be subject to certain conditions
related to distributor performance and will vest on December 31, 1997. The
Company will record distributor incentive expense for the Distributor Options.
See "Shares Eligible for Future Sale."

The Company has employment agreements with certain of its executive
officers. See "Management--Employment Agreements."

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of September 30, 1996, certain
information regarding the beneficial ownership of the Class A Common Stock and
Class B Common Stock, after giving effect to (i) the Reorganization, (ii) the
Offerings (iii) the contribution to the Company by the Existing Stockholders
of 1,605,000 shares of Class A Common Stock which the Company has reserved for
issuance upon exercise of the Distributor Options, and (iv) the contribution
of 1,250,000 shares of Class A Common Stock by the Existing Stockholders to
NSI and its affiliates (other than the Company) for issuance in connection
with employee stock bonus awards, and as adjusted to give effect to the
exercise by distributors of all 1,605,000 Distributor Options, the issuance of
the shares of Class A Common Stock underlying the Distributor Options and the
issuance by the Company and NSI and its affiliates (other than the Company) of
all 1,359,000 shares of Class A Common Stock underlying the employee stock
bonus awards in the Rule 415 Offerings, by (a) each person known by the
Company to own beneficially more than 5% of either the outstanding shares of
Class A Common Stock or Class B Common Stock, (b) each of the Company's
directors, (c) each of the executive officers whose names appear in the
summary compensation table, and (d) all directors and executive officers as a
group. The business address of the 5% stockholders is 75 West Center Street,
Provo, Utah 84601.

<TABLE>
<CAPTION>
CLASS A CLASS B TOTAL
COMMON STOCK(/1/) COMMON STOCK(/1/) COMMON STOCK
------------------------------- ------------------------------
OWNED TO OWNED
PRIOR BE SOLD TO BE OWNED PRIOR TO AND VOTING POWER
TO THE IN THE AFTER THE AFTER THE RULE AFTER THE
RULE 415 RULE 415 RULE 415 415 RULE 415
OFFERINGS OFFERINGS OFFERINGS OFFERINGS(/2/) OFFERINGS
DIRECTORS, EXECUTIVE OFFICERS, --------- --------- ----------- ------------------------------
5% STOCKHOLDERS NUMBER NUMBER NUMBER % NUMBER % %
- ------------------------------ --------- --------- ------- --- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Blake M. Roney(/3/)....... -- -- -- -- 20,629,048 28.8 28.2
Nedra D. Roney(/4/)....... -- -- -- -- 14,213,895 19.8 19.5
Sandie N. Tillotson(/5/).. -- -- -- -- 8,559,510 11.9 11.7
Craig S. Tillotson(/6/)... -- -- -- -- 4,411,057 6.2 6.0
R. Craig Bryson(/7/)...... -- -- -- -- 4,925,736 6.9 6.7
Steven J. Lund(/8/)....... -- -- -- -- 4,244,653 5.9 5.8
Brooke B. Roney(/9/)...... -- -- -- -- 3,496,752 4.9 4.8
Kirk V. Roney(/1//0/)..... -- -- -- -- 3,246,752 4.5 4.5
Keith R. Halls(/1//1/).... -- -- -- -- 1,361,022 1.9 1.9
Max L. Pinegar(/1//2/).... 14,000 -- 14,000 * -- -- *
Max E. Esplin(/1//3/)..... 14,000 -- 14,000 * -- -- *
Renn M. Patch(/1//4/)..... 14,000 -- 14,000 * -- -- *
Takashi Bamba(/1//5/)..... 13,000 -- 13,000 * -- -- *
John Chou(/1//6/)......... 13,215 -- 13,215 * -- -- *
George Mak(/1//7/)........ 9,215 -- 9,215 * -- -- *
BNASIA, Ltd.(/1//8/)...... -- -- -- -- 20,452,884 28.5 28.1
RCKASIA, Ltd.(/1//9/)..... -- -- -- -- 4,850,736 6.8 6.7
All directors and officers
as a group (16
persons)(/2//0/)......... 358,373 -- 358,373 2.7 41,537,737 57.9 56.9
</TABLE>
- -------
* Less than 1%
(1) Each share of Class B Common Stock is convertible at any time at the
option of the holder into one share of Class A Common Stock and each share
of Class B Common Stock is automatically converted into one share of Class
A Common Stock upon the transfer of such share of Class B Common Stock to
any person who is not a Permitted Transferee as defined in the
Stockholders Agreement entered into by the Existing Stockholders and the
Company prior to the Offerings. See "Certain Relationships and Related
Transactions."
(2) Reflects the conversion prior to the Offerings by the Existing
Stockholders of 2,855,000 shares of Class B Common Stock into 2,855,000
shares of Class A Common Stock which were contributed by the Existing
Stockholders pro rata to the Company and NSI and its affiliates (other
than the Company) for distribution to distributors of NSI and employees of
NSI and its affiliates (other than the Company) pursuant to the
Distributor Options and employee stock bonus awards. See "Shares Eligible
For Future Sale."
(3) Includes shares beneficially owned or deemed to be owned beneficially by
Blake M. Roney prior to the Rule 415 Offerings as follows: 20,452,884
shares of Class B Common Stock as general partner of BNASIA, Ltd., a
limited partnership, and with respect to which he shares voting and
investment power with his wife Nancy L. Roney as set forth in footnote 18
below; and 176,165 shares of Class B Common Stock as trustee and with
respect to which he has sole voting and investment power. Blake M. Roney
is the Chairman of the Board of Directors of the Company and Chairman of
the Board of Directors, an executive officer and a shareholder of NSI.
(4) Includes shares beneficially owned or deemed to be owned beneficially by
Nedra D. Roney prior to the Rule 415 Offerings as follows: 14,213,895
shares of Class B Common Stock directly and with respect to which she has
sole voting and investment power. Nedra D. Roney is a Director and
shareholder of NSI.

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<PAGE>

(5) Includes shares beneficially owned or deemed to be owned beneficially by
Sandie N. Tillotson prior to the Rule 415 Offerings as follows: 7,634,743
shares of Class B Common Stock directly and with respect to which she has
sole voting and investment power; 424,767 shares of Class B Common Stock
as trustee and with respect to which she has sole voting and investment
power; and 500,000 shares of Class B Common Stock as manager of a limited
liability company and with respect to which she has sole voting and
investment power. Sandie N. Tillotson is a Director of the Company and a
Director, executive officer and shareholder of NSI.
(6) Includes shares beneficially owned or deemed to be owned beneficially by
Craig S. Tillotson prior to the Rule 415 Offerings as follows: 3,032,912
shares of Class B Common Stock directly and with respect to which he has
sole voting and investment power; 112,500 shares of Class B Common Stock
as trustee and with respect to which he has sole voting and investment
power; 265,645 shares of Class B Common Stock as co-trustee and with
respect to which he shares voting and investment power; and 1,000,000
shares of Class B Common Stock as manager of a limited liability company
and with respect to which he has sole voting and investment power. Craig
S. Tillotson is a shareholder of NSI.
(7) Includes shares beneficially owned or deemed to be owned beneficially by
R. Craig Bryson prior to the Rule 415 Offerings as follows: 4,850,736
shares of Class B Common Stock as general partner of RCKASIA, Ltd., a
limited partnership, and with respect to which he shares voting and
investment power with his wife Kathleen D. Bryson as set forth in footnote
19 below; and 75,000 shares of Class B Common Stock as co-trustee and with
respect to which he shares voting and investment power with Kathleen D.
Bryson. R. Craig Bryson is a shareholder of NSI.
(8) Includes shares beneficially owned or deemed to be owned beneficially by
Steven J. Lund prior to the Rule 415 Offerings as follows: 3,271,752
shares of Class B Common Stock as general partner of a limited partnership
and with respect to which he shares voting and investment power with his
wife Kalleen Lund; 897,901 shares of Class B Common Stock as trustee and
with respect to which he has sole voting and investment power; and 75,000
shares of Class B Common Stock as co-trustee and with respect to which he
shares voting and investment power with Kalleen Lund. Steven J. Lund is a
Director and President of the Company and a Director, executive officer
and shareholder of NSI.
(9) Includes shares beneficially owned or deemed to be owned beneficially by
Brooke B. Roney prior to the Rule 415 Offerings as follows: 3,496,752
shares of Class B Common Stock as general partner of a limited partnership
and with respect to which he shares voting and investment power with his
wife Denice R. Roney. Brooke B. Roney is a Director of the Company and a
Director, executive officer and shareholder of NSI.
(10) Includes shares beneficially owned or deemed to be owned beneficially by
Kirk V. Roney prior to the Rule 415 Offerings as follows: 3,171,752
shares of Class B Common Stock as general partner of a limited
partnership and with respect to which he shares voting and investment
power with his wife Melanie R. Roney; and 75,000 shares of Class B Common
Stock as co-trustee and with respect to which he shares voting and
investment power with Melanie K. Roney and Lee S. McCullough. Kirk V.
Roney is a Director of the Company and a Director, executive officer and
shareholder of NSI.
(11) Includes shares beneficially owned or deemed to be owned beneficially by
Keith R. Halls prior to the Rule 415 Offerings as follows: 593,758 shares
of Class B Common Stock as general partner of a limited partnership and
with respect to which he shares voting and investment power with his wife
Anna Lisa Massaro Halls; 50,000 shares of Class B Common Stock as the
manager of a limited liability company and with respect to which he has
sole voting and investment power; 704,764 shares of Class B Common Stock
as trustee and with respect to which he has sole voting and investment
power; and 12,500 shares of Class B Common Stock as co-trustee and with
respect to which he shares voting and investment power with Anna Lisa
Massaro Halls. Keith R. Halls is a Director and Secretary of the Company
and a Director, executive officer and shareholder of NSI.
(12) Includes shares beneficially owned or deemed to be owned beneficially by
Max L. Pinegar prior to the Rule 415 Offerings as follows: 1,000 shares
of Class A Common Stock directly and with respect to which he has sole
voting and investment power; and 13,000 shares of Class A Common Stock
issued to Mr. Pinegar as an employee stock bonus award which will vest
ratably, according to its terms, over four years following the date of
the award. Max L. Pinegar is a Director of the Company and an executive
officer of NSI.
(13) Includes shares beneficially owned or deemed to be owned beneficially by
Max E. Esplin prior to the Rule 415 Offerings as follows: 1,000 shares of
Class A Common Stock directly and with respect to which he has sole voting
and investment power; and 13,000 shares of Class A Common Stock issued to
Mr. Esplin as an employee stock bonus award which will vest ratably,
according to its terms, over four years following the date of the award. Max
E. Esplin is a Director of the Company and an executive officer of NSI.
(14) Includes shares beneficially owned or deemed to be owned beneficially by
Renn M. Patch prior to the Rule 415 Offerings as follows: 1,000 shares of
Class A Common Stock directly and with respect to which he has sole
voting and investment power; and 13,000 shares of Class A Common Stock
issued to Mr. Patch as an employee stock bonus award which will vest
ratably, according to its terms, over four years following the date of
the award. Renn M. Patch is Chief Operating Officer of the Company and an
executive officer of NSI.
(15) Includes shares beneficially owned or deemed to be owned beneficially by
Takashi Bamba prior to the Rule 415 Offerings as follows: 13,000 shares
of Class A Common Stock issued to Mr. Bamba as an employee stock bonus
award which will vest ratably, according to its terms, over four years
following the date of the award. Takashi Bamba is President of Nu Skin
Japan.
(16) Includes shares beneficially owned or deemed to be owned beneficially by
John Chou prior to the Rule 415 Offerings as follows: 215 shares of Class
A Common Stock directly and with respect to which he has sole voting and
investment power; and 13,000 shares of Class A Common Stock issued to Mr.
Chou as an employee stock bonus award which will vest ratably, according
to its terms, over four years following the date of the award. John Chou
is President of Nu Skin Taiwan.
(17) Includes shares beneficially owned or deemed to be owned beneficially by
George Mak prior to the Rule 415 Offerings as follows: 215 shares of
Class A Common Stock directly and with respect to which he has sole
voting and investment power; and 9,000 shares of Class A Common Stock
issued to Mr. Mak as an employee stock bonus award which will vest
ratably, according to its terms, over four years following the date of
the award. George Mak is President of Nu Skin Hong Kong.
(18) Includes 20,452,884 shares of Class B Common Stock owned by BNASIA, Ltd.,
a limited partnership of which Blake M. Roney and his wife Nancy L. Roney
are the general partners and who share voting and investment power.
(19) Includes 4,850,736 shares of Class B Common Stock owned by RCKASIA, Ltd.,
a limited partnership of which R. Craig Bryson and his wife Kathleen D.
Bryson are the general partners and who share voting and investment
power.
(20) Class A Common Stock owned prior to the Rule 415 Offerings includes:
250,825 shares subject to a stock option which has been granted to an
executive officer of the Company and which is exercisable within 60 days
of the Offerings; 5,748 shares owned directly by certain directors and
executive officers; and 101,800 shares issued to certain directors and
executive officers as employee stock bonus awards which will vest
ratably, according to their terms, over four years following the date of
the awards.

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<PAGE>

RULE 415 SELLING STOCKHOLDERS
DISTRIBUTOR OPTIONS

Prior to the date of this Prospectus, the Existing Stockholders have
contributed to the Company 1,605,000 shares of the Company's Class A Common
Stock for use in implementing an NSI distributor equity incentive program.
Also prior to the date of this Prospectus, the Company has granted to NSI an
option to acquire such 1,605,000 shares of Class A Common Stock (the
"Distributor Options"). Each Distributor Option entitles the holder to
purchase one share of Class A Common Stock. Upon vesting, Distributor Options
will be exercisable at $5.75, which is 25% of the initial price per share to
the public in the Offerings (the "Exercise Price").

DISTRIBUTOR OPTION ALLOCATION. From January 1, 1997 until August 31, 1997
(the "Qualification Period"), existing and new distributors in each country
where NSI conducts business and where local laws may permit the issuance of
options hereunder will have the opportunity to qualify for an allocation of
the Distributor Options from NSI by achieving executive distributor levels
("Executive Pin Levels") of Gold or higher under the Global Compensation Plan
as of August 31, 1997 and by submitting a representation letter to NSI as
provided in the NSI 1996 Distributor Stock Option Plan, as amended (the "NSI
Stock Option Plan") (qualifying distributors are hereinafter referred to as
"Eligible Distributors"). Pursuant to NSI's policies and procedures, that
portion of sales volume for September 1997 which would be attributed to sales
volume for August 1997 will be included for purposes of determining
commissions paid during the Qualification Period, as well as whether a
distributor qualifies as an Eligible Distributor. Each allocation of
Distributor Options made to an Eligible Distributor that is an entity (such as
a partnership or corporation) shall be made by NSI solely to the entity, not
to the owners of the entity individually. NSI will notify Eligible
Distributors of the results of the allocation of the Distributor Options by
October 31, 1997. Each Eligible Distributor shall have the right to decline
his or her Distributor Options by notice to NSI no later than November 15,
1997. Each Eligible Distributor who has not declined his or her Distributor
Options on or before November 15, 1997 will be granted a number of Distributor
Options determined in accordance with the formula set forth below. Because
there is a fixed number of Distributor Options available for this program, the
allocation formula and explanations are rather complex.

<TABLE>
<C> <C> <C> <S>
s X (x/y) = number of Distributor Options to be
allocated to an Eligible Distributor;
</TABLE>

where

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<PAGE>

EXECUTIVE PIN LEVEL WEIGHTING FACTOR. An Eligible Distributor's Executive
Pin Level Weighting Factor is the percentage set forth in the table below
opposite the actual Executive Pin Level achieved by such Eligible Distributor
as of August 31, 1997. Allocations of Distributor Options shall generally be
based on the Executive Pin Level at which Eligible Distributors receive
commissions, giving consideration to any temporary exceptions which may be
granted by NSI from time to time.

BUSINESS GROWTH WEIGHTING FACTOR. An Eligible Distributor's Business Growth
Weighting Factor is based on the increase in his or her average monthly net
commissions paid on sales volume during the Qualification Period. An Eligible
Distributor's Business Growth Weighting Factor is equal to one-third ( 1/3) of
1%, up to a maximum of 100%, for each 1% increase in average monthly net
commissions paid during the Qualification Period that is greater than actual
net commissions paid during September 1996 (the "Base Month"). The Base Month
for a distributor qualifying as an Eligible Distributor after September 1996
is deemed to be his or her first month as an Eligible Distributor.

ILLUSTRATIONS. For purposes of illustration, for the eight-month period
ended on August 31, 1996 (the "Illustrative Qualification Period"), the
Weighted Total Compensation (Y) will be assumed to have been $200,000,000. An
Emerald level distributor who was paid net commissions (C) of $40,000 (or
average monthly net commissions of $5,000) during the Illustrative
Qualification Period and who had previously been paid net commissions of
$1,000 during such distributor's Base Month would apply a weighting factor of
182% to such net commissions (computed using the 82% Executive Pin Level
Weighting Factor (P) for an Emerald level distributor plus a 100% Business
Growth Weighting Factor (G) based on the 400% increase in average net
commissions during the Illustrative Qualification Period over net commissions
paid during such distributor's Base Month), resulting in Weighted Individual
Compensation (X) of $72,800. Such distributor's allocation of Distributor
Options at the end of the Illustrative Qualification Period would be equal to
the quotient of his or her Weighted Individual Compensation (X = $72,800)
divided by the Weighted Total Compensation (Y = 200,000,000), multiplied by
the total number of Distributor Options (S = 1,605,000). Such distributor
would therefore be allocated 584 Distributor Options.

To illustrate another example, the Weighted Total Compensation (Y) for the
Illustrative Qualification Period will be assumed to have been $300,000,000. A
Blue Diamond level distributor who was paid net commissions (C) of $520,000
(or average monthly net commissions of $65,000) during the Illustrative
Qualification Period and who had previously been paid net commissions of
$50,000 during such distributor's Base Month would apply a weighting factor of
104% to such net commissions (computed using the 94% Executive Pin Level
Weighting Factor (P) for a Blue Diamond level distributor plus a 10% Business
Growth Weighting Factor (G) based on the 30% increase in average net
commissions over net commissions paid during such distributor's Base Month)
resulting in Weighted Individual Compensation (X) of $540,800. Such
distributor's allocation of Distributor Options at the end of the Illustrative
Qualification Period would be equal to the quotient of his or her Weighted
Individual Compensation (X = $540,800) divided by the Weighted Total
Compensation (Y = $300,000,000), multiplied by the total number of Distributor
Options (S = 1,605,000). Such distributor would therefore be allocated 2,893
Distributor Options.

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<PAGE>

VESTING. For Distributor Options to vest, an Eligible Distributor will
generally be required to maintain, during the period from September 1, 1997
through December 31, 1997 (the "Vesting Period"), the Executive Pin Level he
or she achieved by the end of the Qualification Period (the "Qualifying
Executive Pin Level"). If an Eligible Distributor fails to maintain the
Qualifying Executive Pin Level for any month during the Vesting Period, the
number of Distributor Options vested in such Eligible Distributor will be
recalculated at the end of the Vesting Period to be that number of Distributor
Options such Eligible Distributor would have been allocated had he or she
achieved, at the end of the Qualification Period, the lowest Executive Pin
Level held by him or her during the Vesting Period (the "Recalculated
Distributor Options"). For example, if an Eligible Distributor ends the
Qualification Period as a Diamond level distributor with an Executive Pin
Level Weighting Factor of 86% and a Business Growth Weighting Factor of 15%,
resulting in a combined weighting factor for Weighted Individual Compensation
of 101%, but during the Vesting Period the lowest actual Executive Pin Level
to which the distributor falls is Ruby level, which carries an Executive Pin
Level Weighting Factor of 78% (the Business Growth Weighting Factor would
remain unchanged), the combined weighting factor for Weighted Individual
Compensation would be reduced to 93%. The difference between the number of
Distributor Options allocated to an Eligible Distributor at the end of the
Qualification Period and the Recalculated Distributor Options, if the amount
of Recalculated Distributor Options is lower, will be forfeited by such
Eligible Distributor. If an Eligible Distributor falls below the Gold
Executive Pin Level at any time during the Vesting Period, all Distributor
Options held by such Eligible Distributor will be immediately forfeited.
Forfeited or declined options will not vest but will revert to NSI.

EXERCISABILITY. Distributor Options vested in an Eligible Distributor will
become exercisable upon receipt of written notice from NSI of the number of
Distributor Options vested in such Eligible Distributor which is currently
estimated to be by January 31, 1998, and will remain exercisable for a four-
year period following December 31, 1997, provided the Eligible Distributor
maintains an Executive Pin Level of Gold or higher until the date of exercise.
No Distributor Options will be exercisable after December 31, 2001. In certain
jurisdictions, the exercise period may be shortened to comply with local
regulations. By exercising any portion of the Distributor Options, each
Eligible Distributor who is granted more than 3,000 Distributor Options agrees
not to resell in any given six-month period more than 33% of the shares of
Class A Common Stock issuable upon exercise of the Distributor Options
originally granted to such Eligible Distributor. Upon vesting, Distributor
Options will be exercisable at the Exercise Price of $5.75, which is 25% of
the initial price per share to the public in the Offerings.

CERTAIN FACTORS IMPACTING PROGRAM. The allocation examples presented above
are for illustrative purposes only. There can be no assurance that the number
of Eligible Distributors will remain constant during the Qualification Period.
Given the fixed number of Distributor Options available, the number of
Distributor Options allocable to an Eligible Distributor will decrease as the
total number of Eligible Distributors increases and conversely will increase
as the total number of Eligible Distributors decreases. NSI has historically
experienced periods of significant fluctuations in its total number of
executive distributors and may experience such fluctuations in the future. An
increase in the total number of Eligible Distributors during the Qualification
Period could result in a material reduction in the number of Distributor
Options allocable to an individual Eligible Distributor. The number of
Distributor Options allocable to an Eligible Distributor will also decrease as
the number of Eligible Distributors at higher Executive Pin Levels increases
as a proportion of all Eligible Distributors and conversely will increase as
the number of Eligible Distributors at higher Executive Pin Levels decreases
as a proportion of all Eligible Distributors. There can be no assurance that
the proportion of Eligible Distributors at each Executive Pin Level will
remain constant during the Qualification Period. In addition, the number of
Distributor Options allocable to an Eligible Distributor will decrease as such
Eligible Distributor's compensation decreases as a proportion of total
compensation paid to all Eligible Distributors and conversely will increase as
such Eligible Distributor's compensation increases as a proportion of total
compensation paid to all Eligible Distributors. There can be no assurance that
an Eligible Distributor's compensation will remain constant as a percentage of
total Eligible Distributor compensation during the Qualification Period.
Further, there can be no assurance that an Eligible Distributor will be able
to earn particular compensation amounts during the Qualification Period. In
certain countries, including Japan, the formula used in determining
allocations among

83
<PAGE>

distributors may be modified to comply with local regulations, which will
impact the number of Distributor Options allocated to all Eligible
Distributors. The Distributor Option program is not intended to be an Eligible
Distributor's primary source of income. An Eligible Distributor's primary
income source, i.e., product sales and commissions, will continue to be based
on the efforts of the Eligible Distributor and his or her downline
organization.

REGULATORY REQUIREMENTS. The availability of the Distributor Options in each
country in which NSI distributors reside is entirely dependent upon and
subject to NSI's ability to secure any necessary regulatory approvals,
qualifications or exemptions in each such country. It is anticipated that
necessary regulatory approvals or qualifications will not be secured in
certain countries until sometime after January 1, 1997, the commencement of
the Qualification Period, and that in certain countries the exercisability of
the Distributor Options may be suspended after the commencement of the
Qualification Period until further regulatory approvals are secured. For
example, South Korean officials have indicated a preliminary willingness to
allow NSI to implement the NSI Stock Option Plan, but have reserved the right
to rule on the details of the NSI Stock Option Plan, including the exercise of
the Distributor Options by South Korean residents, at a later date. In
addition, it is possible that NSI may not be able to secure the necessary
regulatory approvals or qualifications in certain countries. In certain
countries, including France, the United Kingdom, Spain and possibly others,
only existing distributors and/or existing executive distributors will be
allowed to participate in the NSI Stock Option Plan. In the event the NSI
Stock Option Plan is not implemented until after commencement of the
Qualification Period, or is suspended after commencement of such period, in a
given country (a "Deferred Qualification Country"), the formulas referenced
above will be modified as follows. For purposes of calculating Weighted
Individual Compensation and Weighted Total Compensation, a distributor
resident in a Deferred Qualification Country shall be deemed to have been paid
during each month during the Qualification Period for which the NSI Stock
Option Plan was not implemented or was suspended, net commissions equal to the
average monthly net commissions actually paid to such distributor during the
portion of the Qualification Period during which the NSI Stock Option Plan was
implemented in such Deferred Qualification Country.

PRODUCT RETURNS. By receiving an allocation of Distributor Options at the
end of the Qualification Period, each Eligible Distributor confirms his or her
agreement to continue to resell or personally consume at least 80% of all
products purchased by such Eligible Distributor per month. In addition,
product returns during the Qualification or Vesting Periods will reduce
commission levels and may affect distributor pin levels, consequently
impacting the number of Distributor Options received by an Eligible
Distributor. In the event of product returns occurring after the Qualification
or Vesting Periods which would have affected distributor pin levels or
qualification for or vesting of Distributor Options had such product returns
been made during the Qualification or Vesting Periods, NSI reserves the right
to use any mechanism available to it under the NSI distributor policies and
procedures, as may be amended from time to time, to recoup the value of the
Distributor Options received by an Eligible Distributor on the Vesting Date in
excess of the value of Distributor Options which would have vested had such
returns been made prior to the Vesting Date.

EMPLOYEE STOCK BONUS AWARDS

Prior to the date of this Prospectus, the Existing Stockholders also
contributed an aggregate of 1,250,000 shares of the Company's Class A Common
Stock to NSI and its affiliates (other than the Company) for use in connection
with the employee stock bonus awards to be made by NSI and its affiliates
(other than the Company) to their respective employees in connection with the
Rule 415 Offerings. The shares of Class A Common Stock underlying each such
employee stock bonus award will be issued to the employee recipient at a rate
of 25% per year commencing one year following the date of the award, provided
the employee recipient is still employed by NSI or one of its affiliates
(other than the Company). The Company will also issue 109,000 shares of Class
A Common Stock to its employees in connection with employee stock bonus awards
to be made to the Company's employees, pursuant to the Nu Skin Asia Pacific,
Inc. 1996 Stock Incentive Plan, as amended (the "1996 Stock Incentive Plan"),
on terms substantially similar to those described above in relation to the
employee stock bonus awards to be made by NSI and its affiliates (other than
the Company).

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<PAGE>

RULE 415 SELLING STOCKHOLDERS

The following table sets forth the names of the Rule 415 Selling
Stockholders for whom Distributor Options and shares of Class A Common Stock
have been registered pursuant to Rule 415 under the 1933 Act, the number of
Distributor Options owned prior to and to be offered in the Rule 415
Offerings, the number of shares of Class A Common Stock owned and to be
offered in the Rule 415 Offerings and the total voting power of such Rule 415
Selling Stockholders after the Rule 415 Offerings.

<TABLE>
<CAPTION>
CLASS A
COMMON STOCK
-------------------------
TO BE
OWNED AND OWNED
DISTRIBUTOR DISTRIBUTOR TO BE SOLD IN AFTER THE
OPTIONS OPTIONS TO THE RULE 415 RULE 415
OWNED PRIOR TO BE OFFERED OFFERINGS(/3/) OFFERINGS
THE RULE 415 IN THE RULE 415 -------------- ----------
RULE 415 SELLING STOCKHOLDERS(/1/) OFFERINGS(/2/) OFFERINGS(/2/) NUMBER NUMBER %
- ---------------------------------- -------------- --------------- -------------- ------ ---
<S> <C> <C> <C> <C> <C>
Nu Skin International,
Inc.................... 1,605,000 1,605,000 1,136,524 -- --
Nu Skin Personal Care
Australia, Inc. ....... -- -- 25,148 -- --
Nu Skin New Zealand,
Inc. .................. -- -- 5,110 -- --
Nu Skin Mexico, Inc. ... -- -- 13,483 -- --
Nu Skin Guatemala, Inc.
....................... -- -- 1,500 -- --
Nu Skin Canada, Inc. ... -- -- 33,775 -- --
Nu Skin Netherlands,
B.V. .................. -- -- 3,398 -- --
Nu Skin U.K., Inc. ..... -- -- 5,755 -- --
Nu Skin Germany, Inc. .. -- -- 4,236 -- --
Nu Skin Belgium, Inc. .. -- -- 3,400 -- --
Nu Skin France, Inc. ... -- -- 6,193 -- --
Nu Skin Italy, Inc. .... -- -- 4,157 -- --
Nu Skin Spain, Inc. .... -- -- 4,894 -- --
Nu Skin Puerto Rico,
Inc.................... -- -- 2,427 -- --
</TABLE>
- --------
(1) Each of the Rule 415 Selling Stockholders is an affiliate of the Company
in that each Rule 415 Selling Stockholder is owned by the same individuals
who owned at least 99% of the Common Stock following consummation of the
Reorganization and prior to the Offerings.
(2) Consists of options that have been granted by the Company to NSI to
purchase 1,605,000 shares of Class A Common Stock.
(3) Includes 1,250,000 shares of Class A Common Stock to be awarded by the
Rule 415 Selling Stockholders in connection with employee stock bonus
awards.

REGULATORY AND TAX ISSUES

CERTAIN U.S. TAX CONSEQUENCES TO RECIPIENTS OF DISTRIBUTOR OPTIONS AND
EMPLOYEE STOCK BONUS AWARDS. For purposes of the Internal Revenue Code of
1986, as amended, (the "Code"), the Distributor Options will be considered
non-qualified stock options. A recipient (an "Option Recipient") of a non-
qualified stock option recognizes no taxable income and NSI and its
affiliates, other than the Company (the "Option Grantors"), receive no
deduction when a non-qualified stock option is granted. Upon exercise of a
non-qualified stock option, the Option Recipient recognizes ordinary income
and the Option Grantor is entitled to a deduction equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise. The Option Recipient recognizes as capital gain or loss any
subsequent profit or loss recognized on the sale or exchange of any shares
disposed of or sold. A recipient (an "Employee Stock Bonus Award Recipient")
of restricted stock or contingent stock is not required to include the value
of such shares in income until the first time such Employee Stock Bonus Award
Recipient's rights in the shares are transferable or not subject to
substantial risk of forfeiture, whichever occurs earlier. In the case of
restricted stock or contingent stock, the amount of such ordinary income will
be equal to the excess of the fair market value of the shares at the time the
income is recognized over the amount (if any) paid for the shares. The Company
and NSI and its affiliates, other than the Company (the "Employee Stock Bonus
Award Grantors"), are entitled to a deduction, in the amount of the ordinary
income recognized by the Employee Stock Bonus Award Recipient, for the tax
year in which the Employee Stock Bonus Award Recipient recognizes such income.
Recipients of Distributor Options and employee stock bonus awards should
consult their own tax advisers regarding the U.S. tax consequences of being
awarded a Distributor Option or an employee stock bonus award. Non-U.S.
recipients of Distributor Options and employee stock bonus awards should
consult with their tax advisers regarding the application of the tax laws of
their respective countries to the Distributor Options and employee stock bonus
awards.

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<PAGE>

NON-U.S. REGULATORY AND TAX CONSIDERATIONS. The Company and its affiliates
anticipate that the Distributor Options, the shares of Class A Common Stock
underlying the Distributor Options and the employee stock bonus awards will be
qualified in some form pursuant to the securities laws of each jurisdiction in
which the Company and its affiliates operate. There can be no assurance,
however, that NSI will be able to qualify the Distributor Options and the
employee stock bonus awards in each jurisdiction or that, if qualified, the
governmental authorities in such jurisdictions will not suspend such
qualifications or require material modifications to the terms of the programs
as they are currently contemplated to be implemented. In certain European
countries, including France, the United Kingdom, Spain and possibly others,
only existing distributors and/or existing executive distributors will be
allowed to participate in the NSI Stock Option Plan. No assurances can be
given as to the timing of any governmental approvals received in connection
with the Distributor Options. In addition, there can be no assurance that the
laws and relevant regulations and judicial and administrative interpretations
in such jurisdictions will not change in a manner that has a material impact
on the ability of NSI to adopt or maintain such programs in such
jurisdictions.

Receipt of the Distributor Options, exercise of such options and sale of the
shares of Class A Common Stock underlying such Distributor Options, and
receipt of employee stock bonus awards and the sale of the shares of Class A
Common Stock underlying such stock bonus awards, will have certain material
income tax and capital gains tax implications for the distributors of NSI and
the employees of the Company and NSI. Although this prospectus and related
documentation contains certain tax information relevant to distributors of NSI
and employees of the Company and NSI and its affiliates (other than the
Company), such information is only intended to be a summary of certain
relevant provisions and does not address all aspects of tax law that may be
relevant to each distributor and employee based on the individual
circumstances of such distributor and employee in each jurisdiction in which
they operate. Distributors and employees are urged to consult their own tax
advisors with respect to the particular tax consequences to them of the
exercise of the Distributor Options and the purchase, ownership and
disposition of the Class A Common Stock, including the applicability of any
federal, state, provincial or foreign tax laws to which they may be subject as
well as with respect to the possible effects of changes in tax laws in each
jurisdiction, including changes which may be applied retroactively in a manner
that could adversely affect holders of the Class A Common Stock.

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

GENERAL. Prior to the Offerings, there was no public market for the Common
Stock and no prediction can be made that an active trading market will develop
or as to the effect, if any, that market sales of shares or the availability
of such shares for sale will have on the market price of the Common Stock
prevailing from time to time. Future sales of substantial amounts of Common
Stock in the public market could adversely affect prevailing market prices.

Upon completion of the Rule 415 Offerings, assuming the exercise by
distributors of all the 1,605,000 Distribution Options, the Company will have
13,429,000 shares of Class A Common Stock issued and outstanding. This number
includes (i) 10,465,000 shares of Class A Common Stock sold in the Offerings
and (ii) 2,964,000 shares of Class A Common Stock issued and sold in the Rule
415 Offerings, and excludes (a) 3,891,000 shares of Class A Common Stock
reserved for issuance pursuant to the 1996 Stock Incentive Plan and (b)
250,825 shares of Class A Common Stock subject to a stock option which was
granted to an executive officer of the Company. In addition, upon completion
of the Rule 415 Offerings, the Company will have 71,696,675 shares of Class B
Common Stock issued and outstanding, each share of which is convertible at any
time into one share of Class A Common Stock. The 71,696,675 shares of Class B
Common Stock and the 250,825 shares of Class A Common Stock subject to the
aforementioned executive option are "restricted" shares within the meaning of
Rule 144 under the 1933 Act ("Rule 144"). Restricted shares may not be resold
in the public market except in compliance with the registration requirements
of the 1933 Act or pursuant to an exemption therefrom, including the exemption
provided by Rule 144. The 10,465,000 shares of Class A Common Stock sold in
the Offerings, the 1,605,000 shares underlying the Distributor Options and the
1,250,000 and 109,000 shares of Class A Common Stock to be issued as employee
stock bonus awards have been registered under the 1933 Act and are,
accordingly, freely tradeable without restriction or further registration
under the 1933 Act, unless held by "affiliates" of the Company, as that term
is defined in Rule 144. The shares underlying the Distributor Options and the
employee stock bonus awards are, however, subject to certain vesting and
resale limitations, as described below.

The Company has granted or anticipates granting stock bonus awards under the
1996 Stock Incentive Plan to certain of its executive officers and employees
for a total of 109,000 shares of Class A Common Stock. These awards will vest
ratably over four years following the date of grant. After such grants, an
aggregate of approximately 3,891,000 shares will remain available for future
option grants and other equity awards under the 1996 Stock Incentive Plan. See
"Management--1996 Stock Incentive Plan." Shares granted or issuable upon
exercise of options granted pursuant to the NSI Stock Option Plan are
"restricted" shares within the meaning of Rule 144. The Company intends to
file a registration statement on Form S-8 under the 1933 Act to register all
of the shares of Class A Common Stock reserved for issuance under the NSI
Stock Option Plan. Such registration statement is expected to be filed as soon
as practicable and will become automatically effective upon filing. Shares
issued under the NSI Stock Option Plan after such registration statement is
filed may thereafter be sold in the open market, subject to the Rule 144
volume limitations applicable to affiliates and any transfer restrictions
imposed on the date of the grant.

Generally, as currently in effect, Rule 144 provides that beginning 90 days
after the effective date of the Offerings, a person (or persons whose shares
are aggregated) who has beneficially owned "restricted" shares of the Common
Stock for at least two years will be entitled to sell on the open market in
broker's transactions within any three-month period a number of shares that
does not exceed the greater of (i) 1% of the then outstanding shares of the
Class A Common Stock (1% is expected to be equal to approximately 103,500
shares immediately following the Offerings) or (ii) the average weekly trading
volume in the Class A Common Stock on the open market during the four calendar
weeks preceding such sale. Sales under Rule 144, as currently in effect, are
also subject to certain notice requirements and the availability of current
public information about the Company. Under the provisions of Rule 144, the
Existing Stockholders will be deemed to have acquired beneficial ownership of
the shares of Common Stock currently held by them on the date of the issuance
of such shares by the Company in the Reorganization. The Commission has
recently proposed to reduce the Rule 144 holding periods. If enacted, such
modification will have a material effect on the timing of when shares of the
Common Stock become eligible for resale.

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<PAGE>

Upon completion of the Offerings, the Existing Stockholders will hold
71,696,675 shares of Class B Common Stock (which Class B shares are
convertible into Class A shares). See "Risk Factors--Control by Existing
Stockholders; Anti-Takeover Effect of Dual Classes of Common Stock." The
Existing Stockholders have entered into a stockholders agreement (the
"Stockholders Agreement") which restricts the extent to which any Existing
Stockholder can dispose of its shares of Common Stock following the Offerings.
Among other things, in order to ensure the qualification of the Reorganization
under Section 351 of the Code, such stockholders have agreed not to transfer
any shares they own for 366 days after the Offerings without the consent of
the Company except for certain transfers relating to the funding of the
Distributor Options and the grant of the employee stock bonus awards. After
the expiration of this 366-day period and subject too any volume limitations
imposed by Rule 144, no such stockholder is permitted to transfer in any one-
year period a number of shares equal to the greater of (i) 10% of the total
number of shares of Common Stock originally issued to such stockholder in
connection with the Reorganization, or (ii) 1.25% of the total Common Stock
issued and outstanding at the time of such proposed transfer. The Existing
Stockholders have been granted registration rights by the Company permitting
each of such Existing Stockholders to register his or her shares of Class A
Common Stock, subject to certain restrictions, on any registration statement
filed by the Company until such Existing Stockholder has sold a specified
value of shares of Class A Common Stock. See "Certain Relationships and
Related Transactions."

The Company, its directors and officers, and the Existing Stockholders of
NSI have agreed not to sell or otherwise dispose of any shares of Common Stock
or securities convertible into or exchangeable or exercisable for Common
Stock, without the prior consent of Merrill Lynch & Co., for a period of 180
days after the date of the prospectus for the Offerings, except that the
Company and the Existing Stockholders may, without such consent, grant options
or issue shares of Common Stock pursuant to certain equity incentives,
including, without limitation, the Distributor Options and the employee stock
bonus awards. See "Risk Factors--Shares Eligible for Future Sale."

DISTRIBUTOR OPTIONS AND EMPLOYEE STOCK BONUS AWARDS. Prior to the Offerings,
the Existing Stockholders converted 1,605,000 shares of Class B Common Stock
to Class A Common Stock and contributed such shares of Class A Common Stock to
the Company. The Company has granted to NSI the Distributor Options to
purchase such shares of Class A Common Stock, and NSI will assign these
Distributor Options to qualifying distributors of NSI in connection with the
Rule 415 Offerings. The vesting of and the right to exercise the Distributor
Options are subject to certain conditions, and the Distributor Options have
been registered along with the shares of Class A Common Stock underlying such
Distributor Options concurrently with the Offerings pursuant to Rule 415 under
the 1933 Act.

Prior to the date of this Prospectus, the Existing Stockholders have also
converted 1,250,000 shares of Class B Common Stock to Class A Common Stock and
have contributed such shares to NSI and its affiliates (other than the
Company) for issuance in connection with the employee stock bonus awards to be
made by NSI and its affiliates (other than the Company) to their respective
employees in connection with the Rule 415 Offerings. The shares of Class A
Common Stock underlying each such employee stock bonus award will be issued to
the employee recipient at a rate of 25% per year commencing one year following
the date of the award, provided the employee recipient is still employed by
NSI or one of its affiliates (other than the Company). The Company will also
issue 109,000 shares of Class A Common Stock to its employees in connection
with employee stock bonus awards to be made to the Company's employees,
pursuant to the 1996 Stock Incentive Plan, as amended, on terms substantially
similar to those described above in relation to the employee stock bonus
awards to be made by NSI and its affiliates (other than the Company).
Following the Offerings, the Company granted stock bonus awards to certain
executive officers of the Company for 36,800 shares of Class A Common Stock.
In addition, NSI has granted stock bonus awards to certain directors and
executive officers of the Company for 65,000 shares of Class A Common Stock on
terms substantially similar to those granted by the Company.

The Distributor Options, the shares of Class A Common Stock underlying the
Distributor Options and the employee stock bonus awards have been registered
pursuant to Rule 415 under the 1933 Act. The shares of Class A Common Stock
will be issued by the Company upon the exercise of the Distributor Options.
The Company will not receive any proceeds from the distribution of shares by
the Company and the Rule 415 Selling Stockholders in connection with the
employee stock bonus awards. The Company will receive the proceeds from

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the issuance of shares in connection with the exercise of the Distributor
Options. The Distributor Options will be issued at the Exercise Price of
$5.75, which is 25% of the initial price per share to the public in the
Offerings.

The Company and its affiliates anticipate that the Distributor Options, the
shares of Class A Common Stock underlying the Distributor Options and the
employee stock bonus awards will be qualified in some form pursuant to the
securities laws of each jurisdiction in which the Company and its affiliates
operate. There can be no assurance, however, that NSI will be able to qualify
the Distributor Options and the employee stock bonus awards in each
jurisdiction or that, if qualified, the governmental authorities in such
jurisdictions will not suspend such qualifications or require material
modifications to the terms of the programs as they are currently contemplated
to be implemented. In certain European countries, including France, the United
Kingdom, Spain and possibly others, only existing distributors and/or existing
executive distributors will be allowed to participate in the NSI Stock Option
Plan. South Korean officials, for example, have indicated a preliminary
willingness to allow NSI to implement the NSI Stock Option Plan, but have
reserved the right to rule on the details of the NSI Stock Option Plan,
including the exercise of the Distributor Options by South Korean residents,
at a later date. No assurances can be given as to the timing of any
governmental approvals received in connection with the Distributor Options. In
addition, there can be no assurance that the laws and relevant regulations and
judicial and administrative interpretations in such jurisdictions will not
change in a manner that has a material impact on the ability of NSI to adopt
or maintain such programs in such jurisdictions.

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PLAN OF DISTRIBUTION

DISTRIBUTOR OPTIONS

Prior to the date of this Prospectus, the Existing Stockholders have
contributed to the Company 1,605,000 shares of the Company's Class A Common
Stock for use in implementing an NSI distributor equity incentive program.
Also prior to the date of this Prospectus, the Company has granted to NSI an
option to acquire such 1,605,000 shares of Class A Common Stock (the
"Distributor Options"). Each Distributor Option entitles the holder to
purchase one share of Class A Common Stock. Upon vesting, Distributor Options
will be exercisable at $5.75, which is 25% of the initial price per share to
the public in the Offerings (the "Exercise Price").

DISTRIBUTOR OPTION ALLOCATION. From January 1, 1997 until August 31, 1997
(the "Qualification Period"), existing and new distributors in each country
where NSI conducts business and where local laws may permit the issuance of
options hereunder will have the opportunity to qualify for an allocation of
the Distributor Options from NSI by achieving executive distributor levels
("Executive Pin Levels") of Gold or higher under the Global Compensation Plan
as of August 31, 1997 and by submitting a representation letter to NSI as
provided in the NSI 1996 Distributor Stock Option Plan, as amended (the "NSI
Stock Option Plan") (qualifying distributors are hereinafter referred to as
"Eligible Distributors"). Pursuant to the NSI's policies and procedures, that
portion of sales volume for September 1997 which would be attributed to sales
volume for August 1997 will be included for purposes of determining
commissions paid during the Qualification Period, as well as whether a
distributor qualifies as an Eligible Distributor. Each allocation of
Distributor Options made to an Eligible Distributor that is an entity (such as
a partnership or corporation) shall be made by NSI solely to the entity, not
to the owners of the entity individually. NSI will notify Eligible
Distributors of the results of the allocation of the Distributor Options by
October 31, 1997. Each Eligible Distributor shall have the right to decline
his or her Distributor Options by notice to NSI no later than November 15,
1997. Each Eligible Distributor who has not declined his or her Distributor
Options on or before November 15, 1997 will be granted a number of Distributor
Options determined in accordance with the formula set forth below. Because
there is a fixed number of Distributor Options available for this program, the
allocation formula and explanations are rather complex.

<TABLE>
<C> <C> <C> <S>
s X (x/y) = number of Distributor Options to be
allocated to an Eligible Distributor;
</TABLE>

where

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Qualification Period ("C" in the formula above) multiplied by the sum of his
or her Executive Pin Level Weighting Factor ("P" in the formula above, and as
defined below) and his or her Business Growth Weighting Factor ("G" in the
formula above, and as defined below).

EXECUTIVE PIN LEVEL WEIGHTING FACTOR. An Eligible Distributor's Executive
Pin Level Weighting Factor is the percentage set forth in the table below
opposite the actual Executive Pin Level achieved by such Eligible Distributor
as of August 31, 1997. Allocations of Distributor Options shall generally be
based on the Executive Pin Level at which Eligible Distributors receive
commissions, giving consideration to any temporary exceptions which may be
granted by NSI from time to time.

BUSINESS GROWTH WEIGHTING FACTOR. An Eligible Distributor's Business Growth
Weighting Factor is based on the increase in his or her average monthly net
commissions paid on sales volume during the Qualification Period. An Eligible
Distributor's Business Growth Weighting Factor is equal to one-third ( 1/3) of
1%, up to a maximum of 100%, for each 1% increase in average monthly net
commissions paid during the Qualification Period that is greater than actual
net commissions paid during September 1996 (the "Base Month"). The Base Month
for a distributor qualifying as an Eligible Distributor after September 1996
is deemed to be his or her first month as an Eligible Distributor.

ILLUSTRATIONS. For purposes of illustration, for the eight-month period
ended on August 31, 1996 (the "Illustrative Qualification Period"), the
Weighted Total Compensation (Y) will be assumed to have been $200,000,000. An
Emerald level distributor who was paid net commissions (C) of $40,000 (or
average monthly net commissions of $5,000) during the Illustrative
Qualification Period and who had previously been paid net commissions of
$1,000 during such distributor's Base Month would apply a weighting factor of
182% to such net commissions (computed using the 82% Executive Pin Level
Weighting Factor (P) for an Emerald level distributor plus a 100% Business
Growth Weighting Factor (G) based on the 400% increase in average net
commissions during the Illustrative Qualification Period over net commissions
paid during such distributor's Base Month), resulting in Weighted Individual
Compensation (X) of $72,800. Such distributor's allocation of Distributor
Options at the end of the Illustrative Qualification Period would be equal to
the quotient of his or her Weighted Individual Compensation (X = $72,800)
divided by the Weighted Total Compensation (Y = 200,000,000), multiplied by
the total number of Distributor Options (S = 1,605,000). Such distributor
would therefore be allocated 584 Distributor Options.

To illustrate another example, the Weighted Total Compensation (Y) for the
Illustrative Qualification Period will be assumed to have been $300,000,000. A
Blue Diamond level distributor who was paid net commissions (C) of $520,000
(or average monthly net commissions of $65,000) during the Illustrative
Qualification Period and who had previously been paid net commissions of
$50,000 during such distributor's Base Month would apply a weighting factor of
104% to such net commissions (computed using the 94% Executive Pin Level
Weighting Factor (P) for a Blue Diamond level distributor plus a 10% Business
Growth Weighting Factor (G) based on the 30% increase in average net
commissions over net commissions paid during such distributor's Base Month)
resulting in Weighted Individual Compensation (X) of $540,800. Such
distributor's allocation of Distributor Options at the end of the Illustrative
Qualification Period would be equal to the quotient of his or her Weighted
Individual Compensation (X = $540,800) divided by the Weighted Total
Compensation (Y = $300,000,000), multiplied by the total number of Distributor
Options (S = 1,605,000). Such distributor would therefore be allocated 2,893
Distributor Options.

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VESTING. For Distributor Options to vest, an Eligible Distributor will
generally be required to maintain, during the period from September 1, 1997
through December 31, 1997 (the "Vesting Period"), the Executive Pin Level he
or she achieved by the end of the Qualification Period (the "Qualifying
Executive Pin Level"). If an Eligible Distributor fails to maintain the
Qualifying Executive Pin Level for any month during the Vesting Period, the
number of Distributor Options vested in such Eligible Distributor will be
recalculated at the end of the Vesting Period to be that number of Distributor
Options such Eligible Distributor would have been allocated had he or she
achieved, at the end of the Qualification Period, the lowest Executive Pin
Level held by him or her during the Vesting Period (the "Recalculated
Distributor Options"). For example, if an Eligible Distributor ends the
Qualification Period as a Diamond level distributor with an Executive Pin
Level Weighting Factor of 86% and a Business Growth Weighting Factor of 15%,
resulting in a combined weighting factor for Weighted Individual Compensation
of 101%, but during the Vesting Period the lowest actual Executive Pin Level
to which the distributor falls is Ruby level, which carries an Executive Pin
Level Weighting Factor of 78% (the Business Growth Weighting Factor would
remain unchanged), the combined weighting factor for Weighted Individual
Compensation would be reduced to 93%. The difference between the number of
Distributor Options allocated to an Eligible Distributor at the end of the
Qualification Period and the Recalculated Distributor Options, if the amount
of Recalculated Distributor Options is lower, will be forfeited by such
Eligible Distributor. If an Eligible Distributor falls below the Gold
Executive Pin Level at any time during the Vesting Period, all Distributor
Options held by such Eligible Distributor will be immediately forfeited.
Forfeited or declined options will not vest but will revert to NSI.

EXERCISABILITY. Distributor Options vested in an Eligible Distributor will
become exercisable upon receipt of written notice from NSI of the number of
Distributor Options vested in such Eligible Distributor which is currently
estimated to be by January 31, 1998, and will remain exercisable for a four-
year period following December 31, 1997, provided the Eligible Distributor
maintains an Executive Pin Level of Gold or higher until the date of exercise.
No Distributor Options will be exercisable after December 31, 2001. In certain
jurisdictions, the exercise period may be shortened to comply with local
regulations. By exercising any portion of the Distributor Options, each
Eligible Distributor who is granted more than 3,000 Distributor Options agrees
not to resell in any given six-month period more than 33% of the shares of
Class A Common Stock issuable upon exercise of the Distributor Options
originally granted to such Eligible Distributor. Upon vesting, Distributor
Options will be exercisable at the Exercise Price of $5.75, which is 25% of
the initial price per share to the public in the Offerings.

CERTAIN FACTORS IMPACTING PROGRAM. The allocation examples presented above
are for illustrative purposes only. There can be no assurance that the number
of Eligible Distributors will remain constant during the Qualification Period.
Given the fixed number of Distributor Options available, the number of
Distributor Options allocable to an Eligible Distributor will decrease as the
total number of Eligible Distributors increases and conversely will increase
as the total number of Eligible Distributors decreases. NSI has historically
experienced periods of significant fluctuations in its total number of
executive distributors and may experience such fluctuations in the future. An
increase in the total number of Eligible Distributors during the Qualification
Period could result in a material reduction in the number of Distributor
Options allocable to an individual Eligible Distributor. The number of
Distributor Options allocable to an Eligible Distributor will also decrease as
the number of Eligible Distributors at higher Executive Pin Levels increases
as a proportion of all Eligible Distributors and conversely will increase as
the number of Eligible Distributors at higher Executive Pin Levels decreases
as a proportion of all Eligible Distributors. There can be no assurance that
the proportion of Eligible Distributors at each Executive Pin Level will
remain constant during the Qualification Period. In addition, the number of
Distributor Options allocable to an Eligible Distributor will decrease as such
Eligible Distributor's compensation decreases as a proportion of total
compensation paid to all Eligible Distributors and conversely will increase as
such Eligible Distributor's compensation increases as a proportion of total
compensation paid to all Eligible Distributors. There can be no assurance that
an Eligible Distributor's compensation will remain constant as a percentage of
total Eligible Distributor compensation during the Qualification Period.
Further, there can be no assurance that an Eligible Distributor will be able
to earn particular compensation amounts during the Qualification Period. In
certain countries, including Japan, the formula used in determining
allocations among

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REGULATORY REQUIREMENTS. The availability of the Distributor Options in each
country in which NSI distributors reside is entirely dependent upon and
subject to NSI's ability to secure any necessary regulatory approvals,
qualifications or exemptions in each such country. It is anticipated that
necessary regulatory approvals or qualifications will not be secured in
certain countries until sometime after January 1, 1997, the commencement of
the Qualification Period, and that in certain countries the exercisability of
the Distributor Options may be suspended after the commencement of the
Qualification Period until further regulatory approvals are secured. For
example, South Korean officials have indicated a preliminary willingness to
allow NSI to implement the NSI Stock Option Plan, but have reserved the right
to rule on the details of the NSI Stock Option Plan, including the exercise of
the Distributor Options by South Korean residents, at a later date. In
addition, it is possible that NSI may not be able to secure the necessary
regulatory approvals or qualifications in certain countries. In certain
countries, including France, the United Kingdom, Spain and possibly others,
only existing distributors and/or existing executive distributors will be
allowed to participate in the NSI Stock Option Plan. In the event the NSI
Stock Option Plan is not implemented until after commencement of the
Qualification Period, or is suspended after commencement of such period, in a
given country (a "Deferred Qualification Country"), the formulas referenced
above will be modified as follows. For purposes of calculating Weighted
Individual Compensation and Weighted Total Compensation, a distributor
resident in a Deferred Qualification Country shall be deemed to have been paid
during each month during the Qualification Period for which the NSI Stock
Option Plan was not implemented or was suspended, net commissions equal to the
average monthly net commissions actually paid to such distributor during the
portion of the Qualification Period during which the NSI Stock Option Plan was
implemented in such Deferred Qualification Country.

PRODUCT RETURNS. By receiving an allocation of Distributor Options at the
end of the Qualification Period, each Eligible Distributor confirms his or her
agreement to continue to resell or personally consume at least 80% of all
products purchased by such Eligible Distributor per month. In addition,
product returns during the Qualification or Vesting Periods will reduce
commission levels and may affect distributor pin levels, consequently
impacting the number of Distributor Options received by an Eligible
Distributor. In the event of product returns occurring after the Qualification
or Vesting Periods which would have affected distributor pin levels or
qualification for or vesting of Distributor Options had such product returns
been made during the Qualification or Vesting Periods, NSI reserves the right
to use any mechanism available to it under the NSI distributor policies and
procedures, as may be amended from time to time, to recoup the value of the
Distributor Options received by an Eligible Distributor on the Vesting Date in
excess of the value of Distributor Options which would have vested had such
returns been made prior to the Vesting Date.

EMPLOYEE STOCK BONUS AWARDS

Prior to the date of this Prospectus, the Existing Stockholders also
contributed an aggregate of 1,250,000 shares of the Company's Class A Common
Stock to NSI and its affiliates (other than the Company) for use in connection
with the employee stock bonus awards to be made by NSI and its affiliates
(other than the Company) to their respective employees in connection with the
Rule 415 Offerings. The shares of Class A Common Stock underlying each such
employee stock bonus award will be issued to the employee recipient at a rate
of 25% per year commencing one year following the date of the award, provided
the employee recipient is still employed by NSI or one of its affiliates
(other than the Company). The Company will also issue 109,000 shares of Class
A Common Stock to its employees in connection with employee stock bonus awards
to be made to the Company's employees, pursuant to the Nu Skin Asia Pacific,
Inc. 1996 Stock Incentive Plan, as amended (the "1996 Stock Incentive Plan"),
on terms substantially similar to those described above in relation to the
employee stock bonus awards to be made by NSI and its affiliates (other than
the Company).

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distribution of the Distribution Options will occur for purposes of Rule 415
upon the assignment of the Distributor Options by NSI to the distributors. The
shares of Class A Common Stock will be issued by the Company upon exercise of
the Distributor Options. The Company will not receive any proceeds from the
distribution of shares in connection with the employee stock bonus awards. The
Company will receive the proceeds from the issuance of shares in connection
with the exercise of the Distributor Options. See "Principal Stockholders and
Rule 415 Selling Stockholders."

This Prospectus may be used from time to time by the holders who offer the
securities registered hereby pursuant to Rule 415 under the 1933 Act for sale
in connection with the Distributor Options and underlying Class A Common
Stock, the employee stock bonus awards or in transactions in which they are or
may be deemed to
be underwriters within the meaning of the 1933 Act. The Class A Common Stock
may be sold from time to time directly by the holders or pledgees, donees,
transferees or other successors in interest. Alternatively, the Class A Common
Stock may be offered from time to time by the holders or through brokers or
dealers who may act solely as agents, or may acquire shares as principals. The
distribution of the Class A Common Stock may be effected in one or more
transactions that may take place on the New York Stock Exchange, including
block trades, ordinary broker's transactions, privately negotiated
transactions or through sales to one or more broker/dealers for resale of such
securities as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by these holders in connection with such sales. In connection with such
sales, the holders and any participating brokers or dealers may be deemed
"underwriters" as such term is defined in the 1933 Act. The Company has agreed
to bear, except as hereinafter set forth, all expenses (other than
underwriting discounts and selling commissions, state and local transfer
taxes, and fees and expenses of counsel or other advisors to the Rule 415
Selling Stockholders) in connection with the registration of the offered
securities. The Registration Statement of which this Prospectus forms a part
must be current at any time during which a Rule 415 Selling Stockholder sells
Class A Common Stock.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

As of the date of this Prospectus, the authorized capital stock of the
Company consists of 500,000,000 shares of Class A Common Stock, par value
$.001 per share, and 100,000,000 shares of Class B Common Stock, par value
$.001 per share, and 25,000,000 shares of Preferred Stock, par value $.001 per
share ("Preferred Stock"). Upon completion of the Rule 415 Offerings, assuming
the exercise by distributors of all the 1,605,000 Distributor Options, the
Company will have 13,429,000 shares of Class A Common Stock issued and
outstanding. This number includes (i) 10,465,000 shares of Class A Common
Stock sold in the Offerings and (ii) 2,964,000 shares of Class A Common Stock
issued and sold in the Rule 415 Offerings, and excludes (a) 3,891,000 shares
of Class A Common Stock reserved for issuance pursuant to the 1996 Stock
Incentive Plan and (b) 250,825 shares of Class A Common Stock subject to a
stock option which was granted to an executive officer of the Company. In
addition, upon completion of the Rule 415 Offerings, the Company will have
71,696,675 shares of Class B Common Stock issued and outstanding, all of which
are held of record by the Existing Stockholders. Of the authorized shares of
Preferred Stock, no shares of Preferred Stock are outstanding. The following
description is a summary and is subject to and qualified in its entirety by
reference to the provisions of the Company's Amended and Restated Certificate
of Incorporation (the "Certificate of Incorporation") filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.

COMMON STOCK

The shares of Class A Common Stock and Class B Common Stock are identical in
all respects, except for voting rights and certain conversion rights and
transfer restrictions regarding the shares of the Class B Common Stock, as
described below.

VOTING RIGHTS. Each share of Class A Common Stock entitles the holder to one
vote on each matter submitted to a vote of the Company's stockholders and each
share of Class B Common Stock entitles the holder to ten votes on each such
matter, including the election of directors. There is no cumulative voting.
Except as required by applicable law, holders of Class A Common Stock and
holders of Class B Common Stock will vote together on all matters submitted to
a vote of the stockholders. With respect to certain corporate changes, such as
liquidations, reorganizations, recapitalizations, mergers, consolidations and
sales of substantially all of the Company's assets, holders of Class A Common
Stock and holders of Class B Common Stock will vote together as a single class
and the approval of 66 2/3% of the outstanding voting power is required to
authorize or approve such transactions. See "Risk Factors--Control by Existing
Stockholders; Anti-Takeover Effect of Dual Classes of Common Stock" and "--
Anti-Takeover Effects of Certain Charter, Contractual and Statutory
Provisions."

Any action that can be taken at a meeting of the stockholders may be taken
by written consent in lieu of a meeting if the Company receives consents
signed by stockholders having the minimum number of votes that would be
necessary to approve the action at a meeting at which all shares entitled to
vote on the matter were present. This could permit holders of Class B Common
Stock to take all actions required to be taken by the stockholders without
providing the other stockholders an opportunity to make nominations or raise
other matters at a meeting. The right to take action by less than unanimous
written consent expires at such time as there are no shares of Class B Common
Stock outstanding.

DIVIDENDS. Holders of Class A Common Stock and holders of Class B Common
Stock are entitled to receive dividends at the same rate if, as and when such
dividends are declared by the Board of Directors of the Company out of assets
legally available therefor after payment of dividends required to be paid on
shares of Preferred Stock, if any.

If a dividend or distribution payable in Class A Common Stock is made on the
Class A Common Stock, the Company must also make a pro rata and simultaneous
dividend or distribution on the Class B Common Stock payable in shares of
Class B Common Stock. Conversely, if a dividend or distribution payable in
Class B

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Common Stock is made on the Class B Common Stock, the Company must also make a
pro rata and simultaneous dividend or distribution on the Class A Common Stock
payable in shares of Class A Common Stock. See "Risk Factors--Absence of
Dividends" and "Dividend Policy."

RESTRICTIONS ON TRANSFER. If a holder of Class B Common Stock transfers such
shares, whether by sale, assignment, gift, bequest, appointment or otherwise,
to a person other than a permitted transferee (as defined in the Company's
Certificate of Incorporation) such shares will be converted automatically into
shares of Class A Common Stock. In the case of a pledge of shares of Class B
Common stock to a financial institution, such shares will not be deemed to be
transferred unless and until a foreclosure occurs.

CONVERSION. The Class A Common Stock has no conversion rights. The Class B
Common Stock is convertible into shares of Class A Common Stock, in whole or
in part, at any time and from time to time at the option of the holder, on the
basis of one share of Class A Common Stock for each share of Class B Common
Stock converted. In the event of a transfer of shares of Class B Common Stock
to any person other than a Permitted Transferee each share of Class B Common
Stock so transferred automatically will be converted into one share of Class A
Common Stock. Each share of Class B Common Stock will also automatically
convert into one share of Class A Common Stock if, on the record date for any
meeting of the stockholders, the number of shares of Class B Common Stock then
outstanding is less than 10% of the aggregate number of shares of Class A
Common Stock and Class B Common Stock then outstanding.

LIQUIDATION. In the event of liquidation, after payment of the debts and
other liabilities of the Company and after making provision for the holders of
Preferred Stock, if any, the remaining assets of the Company will be
distributable ratably among holders of Class A Common Stock and holders of
Class B Common Stock treated as a single class.

MERGERS AND OTHER BUSINESS COMBINATIONS. Upon the merger or consolidation of
the Company, holders of each class of Common Stock are entitled to receive
equal per share payments or distributions, except that in any transaction in
which shares of capital stock are distributed, such shares may differ as to
voting rights to the extent and only to the extent that the voting rights of
the Class A Common Stock and the Class B Common Stock differ at that time. The
Company may not dispose of all or any substantial part of the assets of the
Company to, or merge or consolidate with, any person, entity or "group" (as
defined in Rule 13-d-5 of the 1934 Act), which beneficially owns in the
aggregate 10% or more of the outstanding Common Stock of the Company (a
"Related Person") without the affirmative vote of the holders, other than such
Related Person, of not less that 66 2/3% of the voting power of outstanding
Class A Common Stock and Class B Common Stock voting as a single class. For
the sole purpose of determining the 66 2/3% vote, a Related Person will also
include the seller or sellers from whom the Related Person acquired, during
the preceding six months, at least 5% of the outstanding shares of Class A
Common Stock in a single transaction or series of related transactions
pursuant to one or more agreements or other arrangements (and not through a
brokers' transaction), but only if such seller or sellers have beneficial
ownership of shares of Common Stock having a fair market value in excess of
$10 million in the aggregate following such disposition to such Related
Person. This 66 2/3% voting requirement is not applicable, however, if (i) the
proposed transaction is approved by a vote of not less than a majority of the
directors of the Company who are neither affiliated nor associated with the
Related Person (or the seller of shares to the Related Person as described
above) or (ii) in the case of a transaction pursuant to which the holders of
Common Stock are entitled to receive cash, property, securities or other
consideration, the cash or fair market value of the property, securities or
other consideration to be received per share in such transaction is not less
than the higher of (A) the highest price per share paid by the Related Person
for any of its holdings of Common Stock within the two-year period immediately
prior to the announcement of the proposed transaction or (B) the highest
closing sale price during the 30-day period immediately preceding such date or
during the 30-day period immediately preceding the date on which the Related
Person became a Related Person, whichever is higher. See "Risk Factors--Anti-
Takeover Effects of Certain Charter, Contractual and Statutory Provisions."

OTHER PROVISIONS. Holders of the Class A Common Stock and holders of Class B
Common Stock are not entitled to preemptive rights. Neither the Class A Common
Stock nor the Class B Common Stock may be subdivided or combined in any manner
unless the other class is subdivided or combined in the same proportion.

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TRANSFER AGENT AND REGISTRAR. The Transfer Agent and Registrar for the Class
A Common Stock is American Stock Transfer and Trust Company.

LISTING. The Class A Common Stock is traded on the New York Stock Exchange
under the trading symbol "NUS."

PREFERRED STOCK

The Board of Directors is authorized, subject to any limitations prescribed
by the DGCL or the rules of the New York Stock Exchange or other organizations
on whose systems stock of the Company may be quoted or listed, to provide for
the issuance of additional shares of Preferred Stock in one or more series, to
establish from time to time the number of shares to be included in each such
series, to fix the rights, powers, preferences and privileges of the shares of
each wholly unissued series and any qualifications, limitations or
restrictions thereon, and to increase or decrease the number of shares of such
series, without any further vote or action by the stockholders. The approval
of the holders of at least 66 2/3% of the combined voting power of the
outstanding shares of Common Stock, however, is required for the issuance of
shares of Preferred Stock that have the right to vote for the election of
directors under ordinary circumstances or to elect 50% or more of the
directors under any circumstances. Depending upon the terms of the Preferred
Stock established by the Company's Board of Directors, any or all series of
Preferred Stock could have preference over the Common Stock with respect to
dividends and other distributions and upon liquidation of the Company or could
have voting or conversion rights that could adversely affect the holders of
the outstanding Common Stock. In addition, the Preferred Stock could delay,
defer or prevent a change of control of the Company. See "Risk Factors--Anti-
Takeover Effects of Certain Charter, Contractual and Statutory Provisions."
The Company has no present plans to issue any shares of Preferred Stock.

OTHER CHARTER AND BYLAW PROVISIONS

Special meetings of stockholders may be called only by the majority
stockholders, the Company's Board of Directors, the President or the
Secretary. Except as otherwise required by law, stockholders, in their
capacity as such, are not entitled to request or call a special meeting of the
stockholders.

Stockholders of the Company are required to provide advance notice of
nominations of directors to be made at, and of business proposed to be brought
before, a meeting of the stockholders. The failure to deliver proper notice
within the periods specified in the Company's Amended and Restated Bylaws (the
"Bylaws") will result in the denial of the stockholder of the right to make
such nominations or propose such action at the meeting. See "Risk Factors--
Anti-Takeover Effects of Certain Charter, Contractual and Statutory
Provisions."

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to the provisions of Section 203 of the DGCL (the
"Anti-Takeover Law") regulating corporate takeovers. The Anti-Takeover Law
prevents certain Delaware corporations, including those whose securities are
listed on the New York Stock Exchange, from engaging, under certain
circumstances, in a "business combination" (which includes a merger of not
more than 10% of the corporations' assets) with an "interested stockholder" (a
stockholder who, together with affiliates and associates, within the prior
three years did own, 15% or more of the corporation's outstanding voting
stock) for three years following the date that such stockholder became an
"interested stockholder," unless the "business combination" or "interested
stockholder" is approved in a prescribed manner. A Delaware corporation may
"opt out" of the Anti-Takeover Law with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or bylaws resulting from a stockholders' amendment approved by
at least a majority of the outstanding voting shares. The Company has not
"opted out" of the provisions of the Anti-Takeover Law. See "Risk Factors--
Anti-Takeover Effects of Certain Charter, Contractual and Statutory
Provisions."

INDEMNIFICATION AND LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS

To the fullest extent permitted by the DGCL, the Company's Certificate of
Incorporation and Bylaws provide that the Company shall indemnify and advance
expenses to each of its directors, officers, employees and

97
<PAGE>

agents. The Company believes the foregoing provisions are necessary to attract
and retain qualified persons as directors and officers. Prior to the
consummation of the Offerings, the Company intends to enter into separate
indemnification agreements with each of its directors and executive officers
in order to effectuate such provisions. See "Certain Relationships and Related
Transactions." The Company's Certificate of Incorporation also provides for,
to the fullest extent permitted by the DGCL, elimination or limitation of
liability of directors for breach of their fiduciary duty to the Company or
its stockholders.

REGISTRATION RIGHTS

The Existing Stockholders have been granted registration rights by the
Company permitting each of such Existing Stockholders to register his or her
shares of Class A Common Stock, subject to certain restrictions, on any
registration statement filed by the Company until such Existing Stockholder
has sold a specified value of shares of Class A Common Stock. See "Certain
Relationships and Related Transactions."

98
<PAGE>

CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Class A
Common Stock by a Non-U.S. Holder. For this purpose, a "Non-U.S. Holder" is
any person who is, for United States federal income tax purposes, a foreign
corporation, a non-resident alien individual, a foreign partnership or a
foreign estate or trust. This discussion does not address all aspects of
United States federal income and estate taxes and does not deal with foreign,
state and local consequences that may be relevant to such Non-U.S. Holders in
light of their personal circumstances. Furthermore, this discussion is based
on provisions of the Code, existing and proposed regulations promulgated
thereunder and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change (possibly with retroactive
effect). Each prospective purchaser of Class A Common Stock is advised to
consult a tax advisor with respect to current and possible future tax
consequences of acquiring, holding and disposing of Class A Common Stock as
well as any tax consequences that may arise under the laws of any U.S. state,
municipality or other taxing jurisdiction.

An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to a non-resident alien) by virtue of being present in the
United States on at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to U.S. federal tax as if they were U.S. citizens.

DIVIDENDS

Dividends paid to a Non-U.S. Holder of Class A Common Stock generally will
be subject to withholding of United States federal income tax either at a rate
of 30% of the gross amount of the dividends or at such lower rate as may be
specified by an applicable income tax treaty. However, dividends that are
effectively connected with the conduct of a trade or business by the Non-U.S.
Holder within the United States and, where a tax treaty applies, are
attributable to a United States permanent establishment of the Non-U.S.
Holder, are not subject to the withholding tax (provided the Non-U.S. Holder
files appropriate documentation, including, under current law, IRS Form 4224,
with the payor of the dividend), but instead are subject to United States
federal income tax on a net income basis at applicable graduated individual or
corporate rates. Any such effectively connected dividends received by a
foreign corporation may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.

Under current law, dividends paid to an address outside the United States
are presumed to be paid to a resident of such country (unless the payer has
knowledge to the contrary) for purposes of the withholding discussed above and
for purposes of determining the applicability of a tax treaty rate. However,
under proposed Treasury regulations not currently in effect, in the case of
dividends paid after December 31, 1997 (December 31, 1999 in the case of
dividends paid to accounts in existence on or before the date that is 60 days
after the proposed regulations are published as final regulations), a Non-U.S.
Holder of Class A Common Stock who wishes to claim the benefit of an
applicable treaty rate would be required to satisfy applicable certification
and other requirements either directly or through an intermediary. In
addition, backup withholding, as discussed below, may apply in certain
circumstances if applicable certification and other requirements are not met.

A Non-U.S. Holder of Class A Common Stock eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for
refund with the Internal Revenue Service (the "IRS").

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder will generally not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Class A Common Stock unless (i) the gain is effectively connected with a trade
or business of the Non-U.S. Holder in the United States, and, where a tax
treaty applies, is attributable to a United States permanent establishment of
the Non-U.S. Holder, (ii) in the case of a Non-U.S.

99
<PAGE>

Holder who is an individual and holds the Class A Common Stock as a capital
asset, such holder is present in the United States for 183 or more days in the
taxable year of the sale or other disposition and certain other conditions are
met, or (iii) the Company is or has been a "U.S. real property holding
corporation" for United States federal income tax purposes. The Company
believes it is not and does not anticipate becoming a "U.S. real property
holding corporation" for United States federal income tax purposes.

If an individual Non-U.S. Holder falls under clause (i) above, he will,
unless an applicable treaty provides otherwise, be taxed on his net gain
derived from the sale under regular graduated United States federal income tax
rates. If an individual Non-U.S. Holder falls under clause (ii) above, he will
be subject to a flat 30% tax on the gain derived from the sale, which may be
offset by certain United States capital losses.

If a Non-U.S. Holder that is a foreign corporation falls under clause (i)
above, it will be taxed on its gain under regular graduated United States
federal income tax rates and may be subject to an additional branch profits
tax at a 30% rate, unless it qualifies for a lower rate under an applicable
income tax treaty.

FEDERAL ESTATE TAX

Class A Common Stock held by an individual Non-U.S. Holder at the time of
death will be included in such holder's gross estate for United States federal
estate tax purposes, unless an applicable estate tax treaty provides
otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to such holder and the tax withheld with respect to
such dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides under the provisions of an applicable income tax treaty.

A backup withholding tax is imposed at the rate of 31% on certain payments
to persons that fail to furnish certain identifying information to the payor.
Under current law, backup withholding generally will not apply to dividends
paid to a Non-U.S. Holder at an address outside the United States (unless the
payer has knowledge that the payee is a U.S. person), but generally will apply
to dividends paid on Class A Common Stock at addresses inside the United
States to Non-U.S. Holders that fail to provide certain identifying
information in the manner required. However, under proposed Treasury
regulations not currently in effect, in the case of dividends paid after
December 31, 1997 (December 31, 1999 in the case of dividends paid to accounts
in existence on or before the date that is 60 days after the proposed
regulations are published as final regulations), a Non-U.S. Holder generally
would be subject to backup withholding at a 31% rate, unless certain
certification procedures (or, in the case of payments made outside the United
States with respect to an offshore account, certain documentary evidence
procedures) are complied with, directly or through an intermediary or a Non-
U.S. Holder otherwise establishes an exemption from backup withholding.

Payment of the proceeds of a sale of Class A Common Stock by or through a
United States office of a broker is subject to both backup withholding and
information reporting unless the beneficial owner provides the payor with its
name and address and certifies under penalties of perjury that it is a Non-
U.S. Holder, or otherwise establishes an exemption. In general, backup
withholding and information reporting will not apply to a payment of the
proceeds of a sale of Class A Common Stock by or through a foreign office of a
foreign broker. If, however, such broker is, for United States federal income
tax purposes a U.S. person, a controlled foreign corporation, or a foreign
person that derives 50% or more of its gross income for certain periods from
the conduct of a trade or business in the United States, such payments will be
subject to information reporting, but not backup withholding, unless (i) such
broker has documentary evidence in its records that the beneficial owner is a
Non-U.S. Holder and certain other conditions are met, or (ii) the beneficial
owner otherwise establishes an exemption.

Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against such holder's U.S. federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.

100
<PAGE>

EXPERTS

The combined financial statements of Nu Skin Asia Pacific, Inc. as of
December 31, 1994 and 1995 and for the fiscal years ended September 30, 1993
and 1994, for the three month period ended December 31, 1994 and for the year
ended December 31, 1995 and balance sheet of Nu Skin Asia Pacific, Inc. as of
September 6, 1996 included in this Prospectus have been so included in
reliance on the reports of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed a Registration Statement on Form S-1, of which this
Prospectus is a part, with the Securities and Exchange Commission (the
"Commission") under the 1933 Act with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, including the
financial schedules and exhibits filed therewith. Statements made in this
Prospectus as to the contents of any contract, agreement or other documents
are not necessarily complete, and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise with the Commission. Each such statement shall be deemed qualified
in its entirety by such reference. Copies of the Registration Statement,
including all exhibits and schedules thereto, may be obtained from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549 upon the payment of the fees prescribed by the Commission, or may be
examined without charge at the public reference facilities maintained at the
principal office of the Commission. The Commission maintains a Web site on the
Internet at http://www.sec.gov that contains reports, registration, proxy and
information statements and other information regarding registrants that file
with the Commission.

The Company intends to furnish holders of the Class A Common Stock with
annual reports containing audited consolidated financial statements and a
report thereon by its independent auditors, and quarterly reports containing
unaudited consolidated financial information. Such audited financial
statements and unaudited quarterly financial information will be prepared in
accordance with United States generally accepted accounting principles.

101
<PAGE>

NU SKIN ASIA PACIFIC, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMBINED FINANCIAL STATEMENTS:
Report of Independent Accountants..................................... F-2
Report of Independent Certified Public Accountants.................... F-3
Combined Balance Sheets at December 31, 1994 and 1995, and at
September 30, 1996 (unaudited)....................................... F-4
Combined Statements of Income for the years ended September 30, 1993
and 1994, the three months ended December 31, 1993 (unaudited) and
1994, the year ended December 31, 1995, and the nine months ended
September 30, 1995 (unaudited) and 1996 (unaudited).................. F-5
Combined Statements of Stockholders' Equity for the years ended Sep-
tember 30, 1993 and 1994, the three months ended December 31, 1994,
the year ended December 31, 1995, and the nine months ended September
30, 1996 (unaudited)................................................. F-6
Combined Statements of Cash Flows for the years ended September 30,
1993 and 1994, the three months ended December 31, 1993 (unaudited)
and 1994, the year ended December 31, 1995, and the nine months ended
September 30, 1995 (unaudited) and 1996 (unaudited).................. F-7
Notes to Combined Financial Statements................................ F-8
<CAPTION>
NU SKIN ASIA PACIFIC, INC.:
<S> <C>
Report of Independent Accountants..................................... F-16
Balance Sheet As of September 6, 1996................................. F-17
Notes to Balance Sheet As of September 6, 1996........................ F-18
<CAPTION>
UNAUDITED PRO FORMA DATA:
<S> <C>
Unaudited Pro Forma Consolidated Balance Sheet As of September 30,
1996................................................................. F-21
Unaudited Pro Forma Consolidated Statement of Income For the Year
Ended
December 31, 1995.................................................... F-22
Unaudited Pro Forma Consolidated Statement of Income For the Nine
Months Ended
September 30, 1996................................................... F-23
Notes to Unaudited Pro Forma Consolidated Balance Sheet and Statements
of Income............................................................ F-24
</TABLE>

All schedules are omitted because they are not applicable or the required
information is shown in the combined financial statements or notes thereto.

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Nu Skin Asia Pacific, Inc.

In our opinion, the accompanying combined balance sheets and the related
combined statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Nu Skin
Asia Pacific, Inc. at December 31, 1994 and 1995, and the results of its
operations and its cash flows for the years ended September 30, 1993 and 1994,
the three months ended December 31, 1994, and the year ended December 31,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Nu Skin Hong Kong,
Inc. --Hong Kong Branch for the year ended September 30, 1993, which
statements reflect 17% of revenue for the year then ended. Those statements
were audited by other independent accountants whose report dated April 14,
1994 (except for Notes 2 and 8, as to which the date is August 30, 1996)
expressed an unqualified opinion on those statements. Our opinion, as it
relates to data of Nu Skin Hong Kong, Inc. for the year ended September 30,
1993, is based solely on the report of other independent accountants. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/ Price Waterhouse LLP

Price Waterhouse LLP
Salt Lake City, Utah
September 10, 1996

F-2
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Nu Skin Hong Kong, Inc.

We have audited the accompanying balance sheet of Nu Skin Hong Kong, Inc. -
Hong Kong Branch as of September 30, 1993, and the related statements of
earnings, retained earnings, and cash flows for the year then ended. These
financial statements are the responsibility of the management of the branch.
Our responsibility is to express an opinion on these financial statements
based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nu Skin Hong Kong, Inc. -
Hong Kong Branch as of September 30, 1993, and the results of its operations
and its cash flows for the year then ended, in conformity with United States
generally accepted accounting principles.

/s/ Grant Thornton

Hong Kong

April 14, 1994 (except for Notes 2 and 8, as to which the date is August 30,
1996)

F-3
<PAGE>

NU SKIN ASIA PACIFIC, INC.

COMBINED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
AMOUNTS
DECEMBER 31, (NOTE 2)
---------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996
------- -------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents...... $16,288 $ 63,213 $ 81,079
Accounts receivable............ 1,068 3,242 8,151
Related parties receivable..... 17,870 1,793 7,840
Inventories, net............... 15,556 32,662 46,379
Prepaid expenses and other..... 3,461 3,410 8,027 $10,636
------- -------- --------
54,243 104,320 151,476
Property and equipment, net...... 3,850 6,904 8,672
Other assets..................... 3,331 7,004 8,759 11,919
------- -------- --------
Total assets................. $61,424 $118,228 $168,907
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQ-
UITY
Current liabilities
Accounts payable............... $ 3,630 $ 4,395 $ 5,019
Accrued expenses............... 13,377 23,313 49,514
Related parties payable........ 10,556 28,749 36,115
Notes payable to stockholders.. -- -- -- 81,893
------- -------- --------
27,563 56,457 90,648
------- -------- --------
Commitments and contingencies
(Notes 7 and 10)
Stockholders' equity
Capital stock.................. 1,300 4,550 4,550 80
Cumulative foreign currency
translation adjustment........ 441 (2,940) (3,714) (3,714)
Retained earnings.............. 32,120 60,161 77,423 5,769
------- -------- -------- -------
33,861 61,771 78,259 $ 2,135
------- -------- --------
Total liabilities and stock-
holders' equity............. $61,424 $118,228 $168,907
======= ======== ========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-4
<PAGE>

NU SKIN ASIA PACIFIC, INC.

COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
----------------- ------------------- ------------ -----------------------
1993 1994 1993 1994 1995 1995 1996
-------- -------- ----------- ------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $110,624 $254,637 $63,759 $73,562 $358,609 $241,412 $471,312
Cost of sales........... 38,842 86,872 24,238 19,607 96,615 64,110 133,592
-------- -------- ------- ------- -------- -------- --------
Gross profit............ 71,782 167,765 39,521 53,955 261,994 177,302 337,720
-------- -------- ------- ------- -------- -------- --------
Operating expenses
Distributor
incentives............ 40,267 95,737 22,315 27,950 135,722 91,893 175,149
Selling, general and
administrative........ 27,150 44,566 9,358 13,545 67,475 44,099 69,970
-------- -------- ------- ------- -------- -------- --------
Total operating
expenses............... 67,417 140,303 31,673 41,495 203,197 135,992 245,119
-------- -------- ------- ------- -------- -------- --------
Operating income........ 4,365 27,462 7,848 12,460 58,797 41,310 92,601
Other income (expense),
net.................... 133 443 24 (813) 511 (408) 1,530
-------- -------- ------- ------- -------- -------- --------
Income before provision
for income taxes....... 4,498 27,905 7,872 11,647 59,308 40,902 94,131
Provision for income
taxes (Note 8)......... 417 10,226 2,885 2,730 19,097 13,170 33,810
-------- -------- ------- ------- -------- -------- --------
Net income.............. $ 4,081 $ 17,679 $ 4,987 $ 8,917 $ 40,211 $ 27,732 $ 60,321
======== ======== ======= ======= ======== ======== ========
Pro forma historical net
income per share (Note
2)..................... $ .48 $ .71
======== ========
Pro forma weighted
average common shares
outstanding (Note 2)... 84,412 84,412
======== ========
Unaudited pro forma
data:
Income before pro forma
provision for income
taxes.................. 4,498 27,905 7,872 11,647 59,308 40,902 94,131
Pro forma provision for
income taxes (Note 8).. 1,511 10,391 2,931 4,041 22,751 15,690 34,196
-------- -------- ------- ------- -------- -------- --------
Income after pro forma
provision for income
taxes.................. $ 2,987 $ 17,514 $ 4,941 $ 7,606 $ 36,557 $ 25,212 $ 59,935
======== ======== ======= ======= ======== ======== ========
Pro forma net income per
share (Note 2)......... $ .43 $ .71
======== ========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-5
<PAGE>

NU SKIN ASIA PACIFIC, INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
CURRENCY TOTAL
CAPITAL TRANSLATION RETAINED STOCKHOLDERS'
STOCK ADJUSTMENT EARNINGS EQUITY
------- ----------- -------- -------------
<S> <C> <C> <C> <C>
Balance at October 1, 1992........ $1,300 $ 6 $ 1,443 $ 2,749
Net change in cumulative foreign
currency translation adjustment.. -- 96 -- 96
Net income........................ -- -- 4,081 4,081
------ ------- ------- -------
Balance at September 30, 1993..... 1,300 102 5,524 6,926
Net change in cumulative foreign
currency translation adjustment.. -- 329 -- 329
Net income........................ -- -- 17,679 17,679
------ ------- ------- -------
Balance at September 30, 1994..... 1,300 431 23,203 24,934
Net change in cumulative foreign
currency translation adjustment.. -- 10 -- 10
Net income........................ -- -- 8,917 8,917
------ ------- ------- -------
Balance at December 31, 1994...... 1,300 441 32,120 33,861
Contributed capital............... 3,250 -- -- 3,250
Dividends......................... -- -- (12,170) (12,170)
Net change in cumulative foreign
currency translation adjustment.. -- (3,381) -- (3,381)
Net income........................ -- -- 40,211 40,211
------ ------- ------- -------
Balance at December 31, 1995...... 4,550 (2,940) 60,161 61,771
Dividends (unaudited)............. -- -- (43,059) (43,059)
Net change in cumulative foreign
currency translation
adjustment (unaudited)........... -- (774) -- (774)
Net income (unaudited)............ -- -- 60,321 60,321
------ ------- ------- -------
Balance at September 30, 1996
(unaudited)...................... $4,550 $(3,714) $77,423 $78,259
====== ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-6
<PAGE>

NU SKIN ASIA PACIFIC, INC.

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
----------------- ------------------- ------------ -----------------------
1993 1994 1993 1994 1995 1995 1996
------- -------- ----------- ------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............. $ 4,081 $ 17,679 $ 4,987 $ 8,917 $ 40,211 $27,732 $ 60,321
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation........... 813 1,401 466 358 2,012 1,504 2,104
Loss on disposal of
property and
equipment............. 1 90 -- 1,093 12 4 --
Changes in operating
assets and
liabilities:
Accounts receivable.... 36 (1,006) (4,141) 165 (2,174) (2,595) (4,909)
Related parties
receivable............ (3,615) (25,288) 100 11,108 16,077 15,185 (6,047)
Inventories, net....... (9,301) 158 947 (939) (17,106) (6,502) (13,717)
Prepaid expenses and
other................. (587) (890) (3,530) (836) 51 758 (4,617)
Other assets........... (542) 277 195 (20) (2,994) 76 (1,542)
Accounts payable....... 1,544 884 1,928 279 765 3,004 624
Accrued expenses....... 2,216 13,106 3,457 (4,384) 9,936 3,976 26,201
Related parties
payable............... 19,398 3,475 (1,152) (16,442) 18,193 10,201 7,366
------- -------- ------- ------- -------- ------- --------
Net cash provided by
(used in) operating
activities............ 14,044 9,886 3,257 (701) 64,983 53,343 65,784
------- -------- ------- ------- -------- ------- --------
Cash flows from
investing activities:
Purchase of property
and equipment......... (4,061) (1,766) (500) (417) (5,422) (3,405) (3,967)
Proceeds from disposal
of property and equip-
ment.................. 20 25 -- 14 48 3 --
Payments for lease de-
posits................ (1,726) (614) (73) (677) (701) (295) (218)
Receipt of refundable
lease deposits........ 337 153 153 -- 22 3 5
------- -------- ------- ------- -------- ------- --------
Net cash used in
investing activities.. (5,430) (2,202) (420) (1,080) (6,053) (3,694) (4,180)
------- -------- ------- ------- -------- ------- --------
Cash flows from
financing activities:
Proceeds from related
party loans........... 4,350 -- -- -- -- -- --
Payments on related
party loans........... -- (4,350) -- -- -- -- --
Proceeds from capital
contributions......... -- -- -- -- 3,250 -- --
Dividends paid......... -- -- -- -- (12,170) (4,197) (43,059)
------- -------- ------- ------- -------- ------- --------
Net cash provided by
(used in) financing
activities............ 4,350 (4,350) -- -- (8,920) (4,197) (43,059)
------- -------- ------- ------- -------- ------- --------
Effect of exchange rate
changes on cash....... 74 152 (702) (8) (3,085) 963 (679)
------- -------- ------- ------- -------- ------- --------
Net increase (decrease)
in cash and cash
equivalents............ 13,038 3,486 2,135 (1,789) 46,925 46,415 17,866
Cash and cash
equivalents, beginning
of period.............. 1,553 14,591 14,591 18,077 16,288 16,288 63,213
------- -------- ------- ------- -------- ------- --------
Cash and cash
equivalents, end of
period................. $14,591 $ 18,077 $16,726 $16,288 $ 63,213 $62,703 $ 81,079
======= ======== ======= ======= ======== ======= ========
Supplemental cash flow
information:
Interest paid.......... $ 207 $ 81 $ 42 $ 6 $ 119 $ 79 $ 25
======= ======== ======= ======= ======== ======= ========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-7
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. THE COMPANY

Nu Skin Asia Pacific, Inc. (the "Company") is a network marketing company
involved in the distribution of premium quality, innovative personal care and
nutritional products in Asia. The Company is the exclusive distribution
vehicle for Nu Skin International, Inc. ("NSI") through the Company's
subsidiaries in the countries of Japan, Taiwan, Hong Kong (including Macau)
and South Korea (collectively referred to as the "Subsidiaries").
Additionally, the Company sells products to NSI affiliates in Australia and
New Zealand. NSI was founded in 1984 and is one of the largest network
marketing companies in the world. NSI owns the Nu Skin trademark and provides
the products and marketing materials to each of its affiliates. Nu Skin
Management Group, Inc. ("NSIMG"), an NSI affiliate, has provided, and will
continue to provide, a high level of support services to the Company,
including product development, marketing, legal, accounting and other
managerial services. The operations of the Company, of NSI, of NSIMG and of
other NSI affiliates are conducted by a variety of individual entities that
are under the control of a group of common stockholders.

Inasmuch as the Subsidiaries are under common control, and in accordance
with the planned reorganization discussed in Note 11, the Subsidiaries'
historical balance sheets and related statements of income, of stockholders'
equity and of cash flows are combined and presented as a single entity after
elimination of intercompany transactions.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CHANGE IN FISCAL YEAR

In October 1994, the Company's Board of Directors approved a change in the
Company's fiscal year end from September 30 to December 31. The change became
effective as of September 30, 1994.

USE OF ESTIMATES

The preparation of these financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include reserves for product returns,
obsolete inventory and taxes. Actual results could differ from these
estimates.

CASH AND CASH EQUIVALENTS

Cash equivalents are short-term, highly liquid instruments with original
maturities of 90 days or less.

INVENTORIES

Inventories consist of merchandise purchased for resale and are stated at
the lower of cost using the first-in, first-out method or market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated using the
straight-line method over the following estimated useful lives:

<TABLE>
<S> <C>
Furniture and fixtures........ 5 - 7 years
Computers and equipment....... 3 - 5 years
Leasehold improvements........ Shorter of estimated useful life or lease term
Vehicles...................... 3 - 5 years
</TABLE>

Expenditures for maintenance and repairs are charged to expense as incurred.

F-8
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

OTHER ASSETS

Other assets consist primarily of deposits for noncancelable operating
leases.

REVENUE RECOGNITION

Revenue is recognized when products are shipped and title passes to
independent distributors who are the Company's customers. A reserve for
product returns is accrued based on historical experience. The Company
generally requires cash payment at the point of sale. The Company has
determined that no allowance for doubtful accounts is necessary. Amounts
received prior to shipment to distributors are recorded as deferred revenue.

INCOME TAXES

Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes".
Under SFAS 109, the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
the differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

The Company elected to be taxed as an S corporation whereby the U.S. Federal
and state income tax effects of the Company's activities accrue directly to
its stockholders. The cumulative affect of adopting SFAS No. 109 as of
October 1, 1993 was not material to the Company's operations.

FOREIGN CURRENCY TRANSLATION

All business operations of the Company occur outside of the United States.
Each Subsidiary's local currency is considered the functional currency. Since
a substantial portion of the Company's inventories are purchased with U.S.
dollars from the United States and since the Company is incorporated in the
United States, its reporting currency is the U.S. dollar, and assets and
liabilities are translated into U.S. dollars at exchange rates existing at the
balance sheet dates. Revenues and expenses are translated at average exchange
rates and stockholders' equity is recorded at historical exchange rates. The
resulting foreign currency translation adjustments are recorded as a separate
component of stockholders' equity in the combined balance sheets, and
transaction gains and losses are included in other income in the combined
statements of income.

INDUSTRY SEGMENT AND GEOGRAPHIC AREA

The Company operates in a single industry, which is the direct selling of
personal care and nutritional products, and in a single geographic area, which
is the Asia Pacific Region.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments including cash and cash equivalents,
accounts receivable, related parties receivable, accounts payable, accrued
expenses and related parties payable approximate their recorded values.

PRO FORMA AMOUNTS

The pro forma amounts reflect the Company's planned reorganization of the
capital structure, the declaration of S Distribution Notes of $81.9 million in
connection with the Company's conversion from an S corporation to a C
corporation prior to the Company's planned public offerings and the
recognition of a deferred tax asset of $5.8 million relating to adjustments
for U.S. Federal and state income taxes as if the Company had been taxed as a
C corporation rather than an S corporation since inception.

F-9
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

PRO FORMA NET INCOME PER SHARE

Pro forma net income per share is computed based on the weighted average
number of common and common equivalent shares outstanding after the
Reorganization and is adjusted for the number of shares (3,894,000) to be
issued as if $81.9 million of the proceeds from the Company's planned public
offerings were used to pay S Distribution Notes (assuming net proceeds of
$21.03 per share). Supplemental pro forma income per share, calculated as if
$25.0 million of the proceeds from the Company's planned public offerings were
used to repay notes payable, have not been presented as they do not differ
materially from pro forma net income per share.

INTERIM RESULTS (UNAUDITED)

The accompanying balance sheet as of September 30, 1996, the statement of
stockholders' equity for the nine months ended September 30, 1996 and the
statements of income and of cash flows for the three months ended December 31,
1993 and the nine months ended September 30, 1995 and 1996 are unaudited. In
the opinion of management, these statements have been prepared on the same
basis as the audited financial statements and include all normal recurring
adjustments necessary for the fair statement of the results of interim
periods. The data disclosed in these notes to the combined financial
statements at such dates or for such periods are also unaudited.

3. RELATED PARTY TRANSACTIONS

SCOPE OF RELATED PARTY ACTIVITY

The Company has extensive and pervasive transactions with affiliated
entities that are under the control of a group of common stockholders. These
transactions are as follows: (1) The Company purchases virtually all of its
products from NSI through Nu Skin Hong Kong under the terms of the Regional
Distribution Agreement. The Company's purchase prices for NSI products and
commercial materials are governed by a price schedule which is subject to
negotiation between the Company and NSI. (2) The Company sells NSI products to
each of its Subsidiaries and to NSI affiliates in Australia and New Zealand
through Nu Skin Hong Kong under the terms of the Wholesale Distribution
Agreements. (3) The Company pays a royalty to NSI for use of licensed
trademarks and trade names on products and commercial materials not purchased
from NSI, including products and commercial materials manufactured or locally
sourced by each of the Subsidiaries under the terms of the Trademark/Tradename
License Agreements. (4) Distributor agreements are entered into between the
distributor and NSI rather than the Company. The Company pays license fees to
NSI for the right to use NSI's distributor lists, the distribution system and
other intangibles in the countries in which the Company maintains exclusive
distribution rights under the terms of the Licensing and Sales Agreements. (5)
The Company has agreed to incur a commission fee of 42% of commissionable
product sales (with the exception of South Korea, where, due to government
regulations, the Company satisfies this obligation by using a formula based
upon a maximum payout of 35% of commissionable product sales) to fulfill NSI's
obligation under the Global Compensation Plan as outlined in the Licensing and
Sales Agreements. Such payment is compensation to NSI for the commissions
which become payable by NSI to the independent distributors upon the Company's
sales of product and covers the costs of such commissions and the
administration of the Global Compensation Plan. The Company satisfies this
liability by paying directly the commissions owed to distributors resident in
the countries in which it operates and settling the difference with NSI. (6)
The Company pays fees to NSIMG for management and support services under the
terms of the Management Services Agreement. The Company's management believes
that the fees charged by NSI and NSIMG are reasonable and would not have been
materially different had the Company operated as a stand-alone entity during
the periods presented. In the event NSI and NSIMG are unable or unwilling to
perform their obligations under certain of the above agreements, or terminate
these agreements as provided therein, the Company's business and results of
operations will be adversely affected.

F-10
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Total commission fees (including those paid directly to distributors within
the Company's geographic territory) are recorded as distributor incentives in
the combined statements of income. Trademark royalty fees, license fees and
management fees are included in selling, general and administrative expenses
in the combined statements of income.

SUMMARY OF TRANSACTIONS

The following summarizes the Company's transactions with related parties (in
thousands):

Product purchases
<TABLE>
<CAPTION>
YEAR ENDED THREE NINE
SEPTEMBER 30, MONTHS ENDED YEAR ENDED MONTHS ENDED
----------------- DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1993 1994 1994 1995 1996
------- -------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Beginning inventories... $ 5,474 $ 14,775 $14,617 $ 15,556 $ 32,662
Inventory purchases from
affiliates............. 29,877 61,409 11,608 69,821 112,324
Other inventory
purchases, import
duties and value added
locally................ 18,266 25,305 8,938 43,900 34,985
------- -------- ------- -------- --------
Total products available
for sale............... 53,617 101,489 35,163 129,277 179,971
Less: Cost of sales..... (38,842) (86,872) (19,607) (96,615) (133,592)
------- -------- ------- -------- --------
Ending inventories...... $14,775 $ 14,617 $15,556 $ 32,662 $ 46,379
======= ======== ======= ======== ========
</TABLE>

Related parties payable transactions

<TABLE>
<CAPTION>
YEAR ENDED THREE NINE
SEPTEMBER 30, MONTHS ENDED YEAR ENDED MONTHS ENDED
------------------ DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1993 1994 1994 1995 1996
-------- -------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Beginning related
parties payable........ $ 4,125 $ 27,873 $ 26,998 $ 10,556 $ 28,749
Inventory purchases from
affiliates............. 29,877 61,409 11,608 69,821 112,324
Distributor incentives.. 40,267 95,737 27,950 135,722 175,149
Less: Distributor
incentives paid
directly to
distributors........... (13,256) (68,880) (19,837) (105,642) (134,865)
License fees............ 3,574 9,252 2,750 13,158 17,699
Trademark royalty fees.. -- -- 19 2,694 2,089
Management fees......... 794 1,449 499 2,066 2,225
Proceeds from (payments
for) related party
loans.................. 4,350 (4,350) -- -- --
Less: Payments to
related parties........ (41,858) (95,492) (39,431) (99,626) (167,255)
-------- -------- -------- --------- ---------
Ending related parties
payable................ $ 27,873 $ 26,998 $ 10,556 $ 28,749 $ 36,115
======== ======== ======== ========= =========
</TABLE>

F-11
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

RELATED PARTIES RECEIVABLE AND PAYABLE BALANCES

The Company has receivable and payable balances with affiliates in Australia
and New Zealand, and with NSI and NSIMG. Related parties balances outstanding
greater than 60 days bear interest at prime plus 2%. Since no significant
balances have been outstanding greater than 60 days, no related parties
interest income or interest expense has been recorded in the combined
financial statements. Sales to related parties were $7,426,000 and $2,288,000
for the years ended September 30, 1993 and 1994, respectively, $855,000 for
the three months ended December 31, 1994, $4,608,000 for the year ended
December 31, 1995 and $3,404,000 (unaudited) for the nine months ended
September 30, 1996.

Related parties receivable includes $15,746,000 due from NSI at December 31,
1994 for excess payments made during 1994 relating to overpayments on
inventory purchased from NSI during 1994. This balance was settled by amounts
due for shipments of inventory from NSI during 1995. The Company has
determined that no allowance is necessary for amounts due from related
parties.

CERTAIN RELATIONSHIPS WITH STOCKHOLDER DISTRIBUTORS

Two major stockholders of the Company have been NSI distributors since 1984.
These stockholders are partners in an entity which receives substantial
commissions from NSI, including commissions relating to sales within the
countries in which the Company operates. By agreement, NSI pays commissions to
this partnership at the highest level of distributor compensation to allow the
stockholders to use their expertise and reputations in network marketing to
further develop NSI's distributor force, rather than focusing solely on their
own distributor organizations. The commissions paid to this partnership
relating to sales within the countries in which the Company operates were
$1,100,000 and $1,100,000 for the years ended September 30, 1993 and 1994,
respectively, $270,000 for the three months ended December 31, 1994,
$1,100,000 for the year ended December 31, 1995 and $1,200,000 (unaudited) for
the nine months ended September 30, 1996.

4. PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures.......................... $ 982 $ 3,593 $ 4,734
Computers and equipment......................... 3,772 5,060 7,117
Leasehold improvements.......................... 1,240 2,221 2,588
Vehicles........................................ 156 152 223
------- ------- -------
6,150 11,026 14,662
Less: accumulated depreciation.................. (2,300) (4,122) (5,990)
------- ------- -------
$ 3,850 $ 6,904 $ 8,672
======= ======= =======
</TABLE>

Depreciation of property and equipment totaled $813,000 and $1,401,000 for
the years ended September 30, 1993 and 1994, respectively, $358,000 for the
three months ended December 31, 1994, $2,012,000 for the year ended December
31, 1995 and $2,104,000 (unaudited) for the nine months ended September 30,
1996.

F-12
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

5. ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------- SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Income taxes payable.............................. $ 7,577 $17,463 $37,118
Other taxes payable............................... 606 798 3,644
Other accruals.................................... 5,194 5,052 8,752
------- ------- -------
$13,377 $23,313 $49,514
======= ======= =======
</TABLE>

6. LINE OF CREDIT

During 1995, the Company entered into an $8,000,000 revolving credit
agreement with a financial institution in South Korea. Advances were available
under the agreement through July 1, 1996. The credit facility bears interest
at an annual rate of 12%. There were no outstanding balances under the credit
facility at December 31, 1995.

7. LEASE OBLIGATIONS

The Company leases office space and computer hardware under noncancelable
long-term operating leases. Most leases include renewal options of up to three
years. Minimum future operating lease obligations at December 31, 1995 are as
follows (in thousands):

<TABLE>
<S> <C>
Year ending December 31,
1996.............................................................. $ 7,189
1997.............................................................. 2,766
1998.............................................................. 1,088
-------
Total minimum lease payments........................................ $11,043
=======
</TABLE>

Rental expense for operating leases totaled $3,941,000 and $5,848,000 for
the years ended September 30, 1993 and 1994, respectively, $1,639,000 for the
three months ended December 31, 1994, $9,470,000 for the year ended December
31, 1995 and $6,165,000 (unaudited) for the nine months ended September 30,
1996.

8. INCOME TAXES

Combined income before provision for income taxes consists of income earned
solely from international operations. The provision for income taxes for the
years ended September 30, 1993 and 1994, for the three months ended December
31, 1994, for the year ended December 31, 1995 and for the nine months ended
September 30, 1996 (unaudited) primarily represents income taxes paid in or
payable to foreign countries.

F-13
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

PRO FORMA PROVISION FOR INCOME TAXES

The combined statements of income include a pro forma presentation for
income taxes which would have been recorded if the Company had not been an S
corporation based upon the U.S. Federal and state tax laws. The unaudited pro
forma provision for income taxes consists of the following (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED THREE NINE
SEPTEMBER 30, MONTHS ENDED YEAR ENDED MONTHS ENDED
--------------- DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1993 1994 1994 1995 1996
------ ------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal.......... $1,176 $ 870 $1,505 $ 5,113 $ 2,491
State............ -- -- -- -- --
Foreign.......... 944 11,176 2,779 19,500 37,061
Deferred:
Federal.......... (82) (705) (194) (1,459) (2,105)
State............ -- -- -- -- --
Foreign.......... (527) (950) (49) (403) (3,251)
------ ------- ------ ------- -------
$1,511 $10,391 $4,041 $22,751 $34,196
====== ======= ====== ======= =======
</TABLE>

The principal components of U.S. pro forma deferred tax assets are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1994 1995 1996
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Product return reserve........................ $ 54 $ 115 $ 933
Inventory reserve............................. 14 414 1,464
Depreciation.................................. 979 866 1,128
Exchange gains and losses..................... -- 389 --
Accrued expenses not deductible until paid.... 179 123 212
Uniform capitalization........................ 897 1,696 1,945
Minimum tax credit............................ -- -- 2,005
Valuation allowance........................... -- -- (2,005)
Other......................................... 82 61 87
------ ------ ------
$2,205 $3,664 $5,769
====== ====== ======
</TABLE>

A reconciliation of the Company's pro forma effective tax rate compared to
the statutory U.S. Federal tax rate is as follows:

<TABLE>
<CAPTION>
YEAR ENDED THREE NINE
SEPTEMBER 30, MONTHS ENDED YEAR ENDED MONTHS ENDED
-------------- DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1993 1994 1994 1995 1996
------ ------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income taxes at statu-
tory rate.............. 34.00% 35.00% 35.00% 35.00% 35.00%
Foreign tax credit limi-
tation (benefit)....... (0.60) 1.97 (0.42) 2.69 (0.84)
Alternative minimum
tax.................... -- -- -- -- 2.13
Non-deductible ex-
penses................. 0.26 0.27 0.11 0.67 0.04
Other................... (0.05) -- -- -- --
------ ------ ----- ----- -----
33.61% 37.24% 34.69% 38.36% 36.33%
====== ====== ===== ===== =====
</TABLE>

F-14
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

9. FINANCIAL INSTRUMENTS

The Subsidiaries enter into significant transactions with each other, NSI
and third parties which may not be denominated in the respective entity's
functional currency. The Company reduces its exposure to fluctuations in
foreign exchange rates by creating offsetting positions through the use of
foreign currency exchange contracts. The Company currently does not use such
financial instruments for trading or speculative purposes. The Company
regularly monitors its foreign currency risks and periodically takes measures
to reduce the impact of foreign exchange fluctuations on the Company's
operating results.

At December 31, 1994 and 1995, and September 30, 1996, the Company held
foreign currency forward contracts with amounts totaling $-0-, $1,000,000 and
$13,150,000 (unaudited), respectively, to hedge certain foreign currency
risks. These contracts all have maturities prior to December 31, 1996. At
December 31, 1995 and September 30, 1996 and for the periods then ended, there
were no significant unrealized gains or losses on these contracts.

10. COMMITMENTS AND CONTINGENCIES

The Company is subject to governmental regulations pertaining to product
formulation, labeling and packaging, product claims and advertising and to the
Company's direct selling system. The Company is also subject to the
jurisdiction of numerous foreign tax authorities. These tax authorities
regulate and restrict various corporate transactions, including intercompany
transfers. The Company believes that the tax authorities in Japan and South
Korea are particularly active in challenging the tax structures and
intercompany transfers of foreign corporations. Any assertions or
determination that either the Company, NSI or any of NSI's distributors is not
in compliance with existing statutes, laws, rules or regulations could
potentially have a material adverse effect on the Company's operations. In
addition, in any country or jurisdiction, the adoption of new statutes, laws,
rules or regulations or changes in the interpretation of existing statutes,
laws, rules or regulations could have a material adverse effect on the Company
and its operations. Although management believes that the Company is in
compliance, in all material respects, with the statutes, laws, rules and
regulations of every jurisdiction in which it operates, no assurance can be
given that the Company's compliance with applicable statutes, laws, rules and
regulations will not be challenged by foreign authorities or that such
challenges will not have a material adverse effect on the Company's financial
position or results of operations or cash flows.

11. SUBSEQUENT EVENTS

PLANNED REORGANIZATION

Prior to or concurrently with the initial public offerings, the stockholders
of the Subsidiaries will effectuate a tax-free reorganization whereby the
stockholders will contribute their shares of capital stock to the Company in
exchange for shares of the Company's Class B Common Stock intended to qualify
as a tax free transfer under Section 351 of the Internal Revenue Code of 1986
(the "Reorganization"). The Reorganization will result in each of the
Subsidiaries becoming a wholly-owned subsidiary of the Company. Prior to the
Reorganization, each Subsidiary elected to be treated as an S corporation. As
part of the Reorganization, each Subsidiary will terminate its S corporation
status.

Inasmuch as the separate entities that will be reorganized to constitute the
Company are under common control, the Reorganization will be accounted for in
a manner similar to a pooling of interests. Accordingly, the individual
Subsidiaries' historical balance sheets and related statements of income, of
stockholders' equity and of cashflows are combined and presented as a single
entity after elimination of intercompany transactions. The unaudited pro forma
statements included elsewhere in this registration statement reflect the
Reorganization and related accounting treatment.

F-15
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Nu Skin Asia Pacific, Inc.

In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of Nu Skin Asia Pacific, Inc. at
September 6, 1996, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Company's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this statement in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
balance sheet, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.

/s/ Price Waterhouse LLP

Price Waterhouse LLP
Salt Lake City, Utah
September 10, 1996

F-16
<PAGE>

NU SKIN ASIA PACIFIC, INC.

BALANCE SHEET

AS OF SEPTEMBER 6, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<S> <C>
ASSETS
Deferred offering costs.................................................. $1,676
------
Total assets......................................................... $1,676
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued expenses....................................................... $1,676
------
Total liabilities.................................................... 1,676
------
Stockholders' equity
Preferred Stock--25,000,000 shares authorized, $.001 par value......... --
Class A Common Stock--500,000,000 shares authorized, $.001 par value... --
Class B Common Stock--100,000,000 shares authorized, $.001 par value... --
------
Total stockholders' equity........................................... --
------
Total liabilities and stockholders' equity........................... $1,676
======
</TABLE>

The accompanying notes are an integral part of this balance sheet.

F-17
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO BALANCE SHEET

AS OF SEPTEMBER 6, 1996

NOTE 1--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nu Skin Asia Pacific, Inc. (the "Company") is a network marketing company
involved in the marketing, distribution and sale of premium quality,
innovative personal care and nutritional products. The Company is the
exclusive distribution vehicle of products produced by Nu Skin International,
Inc. ("NSI") in Japan, Taiwan, Hong Kong, and South Korea, where the Company
currently has operations, and in Thailand, Indonesia, Malaysia, the
Philippines, the People's Republic of China, Singapore and Vietnam, where
operations have not commenced. The Company belongs to a group of affiliated
entities that are under the control of a group of common stockholders (the "Nu
Skin Group"). The Nu Skin Group's affiliates include various entities that
have exclusive Nu Skin marketing rights, distribution rights and trademark
licenses in each of the markets in which the Company operates.

The Company was organized in September 1996 as a holding company in
anticipation of a tax-free reorganization of the distribution and marketing
entities operating in Japan, Taiwan, Hong Kong, and South Korea (collectively
referred to as the "Subsidiaries"). The Reorganization will be undertaken in
anticipation of the initial public offerings (the "Offerings").

The balance sheet should be read in conjunction with the historical Combined
Financial Statements of Nu Skin Asia Pacific, Inc. included elsewhere in this
registration statement.

USE OF ESTIMATES

The preparation of the balance sheet in conformity with generally accepted
accounting principles required management to make estimates and assumptions
that affect the reported amounts of certain assets and liabilities and
disclosures of contingent assets and liabilities at the date of the balance
sheet. Actual results could differ from those estimates. Management believes
that the estimates are reasonable.

INCOME TAXES

Income taxes are computed using the asset and liability method. Under the
asset and liability method, deferred income tax assets and liabilities are
determined based on the difference between the financial and tax bases of
assets and liabilities and are measured using the currently enacted tax rates
and laws in accordance with Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes.

STOCK-BASED COMPENSATION

The Company will adopt Statement of Financial Accounting Standards No. 123
(SFAS 123), Accounting for Stock-Based Compensation. SFAS 123 becomes
effective during 1996. The Company will measure compensation expense for its
stock-based employee compensation plans using the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"),
Accounting for Stock Issued to Employees, and will provide pro forma
disclosures of net income and net income per share as if the fair value-based
method prescribed by SFAS 123 had been applied in measuring compensation
expense.

NOTE 2--DEFERRED OFFERING COSTS

The Company has incurred costs totaling $1,676,000, as of September 6, 1996,
in connection with the Offerings. These costs have been reflected as deferred
offering costs in the accompanying balance sheet as of September 6, 1996. If
the Offerings are successful, the costs will be deducted from the proceeds
received from the Offerings. If the Offerings are not successful, the costs
will be charged to expense in the period in which a decision is made to
terminate the Offerings. In such event, the costs would be paid by NSI.

F-18
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO BALANCE SHEET--(CONTINUED)

AS OF SEPTEMBER 6, 1996
NOTE 3--CAPITAL STOCK

The Company's capital stock consists of Preferred Stock, Class A Common
Stock, and Class B Common Stock. The shares of Class A Common Stock and Class
B Common Stock are identical in all respects, except for voting rights and
certain conversion rights and transfer restrictions, as follows: (1) each
share of Class A Common Stock entitles the holder to one vote on matters
submitted to a vote of the Company's stockholders and each share of Class B
Common Stock entitles the holder to ten votes on each such matter; (2) stock
dividends of Class A Common Stock may be paid only to holders of Class A
Common Stock and stock dividends of Class B Common Stock may be paid only to
holders of Class B Common Stock; (3) if a holder of Class B Common Stock
transfers such shares to a person other than a permitted transferee, as
defined in the Company's' Certificate of Incorporation, such shares will be
converted automatically into shares of Class A Common Stock; and (4) Class A
Common Stock has no conversion rights; however, each share of Class B Common
Stock is convertible into one share of Class A Common Stock, in whole or in
part, at any time at the option of the holder.

STOCKHOLDER CONTROL

Subsequent to the Offerings, a group of common stockholders (the "Existing
Stockholders") will own all of the outstanding shares of Class B Common Stock,
which will represent approximately 99% of the combined voting rights of all
outstanding Common Stock. Accordingly, the Existing Stockholders, acting as a
group, will control the election of the entire Board of Directors and
decisions with respect to the Company's dividend policy, the Company's access
to capital, mergers or other business combinations involving the Company, the
acquisition or disposition of assets by the Company and any change in control
of the Company.

CERTAIN RELATIONSHIPS WITH STOCKHOLDERS

Prior to or concurrent with the Offerings of the Company's shares, all of
the Company's current stockholders will enter into a Stockholders' Agreement
with the Company which will contain certain limitations on the transfer of
shares of Class A Common Stock and Class B Common Stock. Additionally, each
Existing Stockholder who is a party to the Stockholders' Agreement will grant
the other parties (subject to certain exceptions) a right of first offer to
purchase a pro rata (based on ownership percentages) portion of shares to be
offered as well as any shares not purchased by the other parties.

DIVIDEND REPATRIATION

The Company will conduct all of its operations through the Subsidiaries.
Accordingly, an important source of the Company's income will be dividends and
other distributions from the Subsidiaries. The Company's ability to obtain
dividends or other distributions is subject to, among other things,
restrictions on dividends under applicable local statutes, laws, rules and
regulations, and foreign currency exchange regulations of the countries in
which the Subsidiaries operate. The Subsidiaries' ability to pay dividends or
make other distributions to the Company is also subject to the Subsidiaries
having sufficient funds from their operations which are legally available for
the payment of such dividends or distributions and which are not required to
fund future operations. Because the Company will be a stockholder of each of
the Subsidiaries, the Company's claims will generally rank junior to all other
creditors. Therefore, in the event of an entity's liquidation, there may not
be assets sufficient for the Company to recoup its investment in such entity.

NOTE 4--EQUITY INCENTIVE PLANS (UNAUDITED)

The Company has reserved 4,000,000 of the outstanding shares of the
Company's Class A Common Stock just prior to the Offerings for issuance as
equity incentives to employees and other eligible participants under the
Company's 1996 Stock Incentive Plan. The Company will account for employee
equity incentives in accordance with APB 25.

F-19
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO BALANCE SHEET--(CONTINUED)

AS OF SEPTEMBER 6, 1996

Prior to the Offerings, certain existing stockholders of the Company (the
"Selling Stockholders") intend to contribute to the Company an aggregate of up
to 1,605,000 of the outstanding shares of the Company's Class A Common Stock
on the date of such contribution. The Company intends to grant to NSI options
to purchase such shares of Common Stock, and NSI intends to assign these
options (the "Distributor Options") to qualifying distributors of NSI in
connection with the Offerings. The Distributor Options will vest subject to
certain conditions related to distributor performance on December 31, 1997.
The Company will record distributor incentive expense for the Distributor
Options, calculated in accordance with SFAS 123.

In addition, prior to the Offerings, the Selling Stockholders will
contribute to NSI and other members of the Nu Skin Group, shares equal to an
aggregate of up to 1,250,000 of the outstanding shares of the Company's Class
A Common Stock on the date of such contribution for issuance to employees of
NSI and employees of other members of the Nu Skin Group as part of an employee
equity incentive plan. Equity incentives granted or awarded under this plan
will vest over the four year period following the grant or award date.
Compensation expense related to equity incentives granted to employees of NSI
and other members of the Nu Skin Group will be recorded by the entity that
benefits from the employee's services.

In addition, in January 1994, NSI agreed to grant one of the Company's
executives an option to purchase 267,500 of the Company's Class A Common
Stock, to become exercisable upon the Reorganization. The exercise price of
this option was set at the estimated fair market value of this equity interest
in January 1994.

F-20
<PAGE>

NU SKIN ASIA PACIFIC, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA FOR THE
NU SKIN ADJUSTMENTS PRO FORMA ADJUSTMENTS REORGANIZATION
ASIA PACIFIC, COMBINED FOR THE FOR THE FOR THE AND THE
INC. SUBSIDIARIES REORGANIZATION REORGANIZATION OFFERINGS OFFERINGS
------------- ------------ -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents.......... $ -- $ 81,079 $ -- $ 81,079 $ 79,892 (g) $160,971
Accounts receivable... -- 8,151 -- 8,151 -- 8,151
Related parties
receivable........... -- 7,840 -- 7,840 -- 7,840
Inventories, net...... -- 46,379 -- 46,379 -- 46,379
Prepaid expenses and
other................ -- 8,027 2,609 (b) 10,636 -- 10,636
------ -------- ------- -------- -------- --------
-- 151,476 2,609 154,085 79,892 233,977
Property and equipment,
net.................... -- 8,672 -- 8,672 -- 8,672
Deferred offering
costs.................. 1,676 -- -- 1,676 (1,676)(g) --
Deferred tax assets..... -- -- 3,160 (b) 3,160 -- 3,160
Other assets............ -- 8,759 -- 8,759 25,000 (g) 33,759
------ -------- ------- -------- -------- --------
Total assets........ $1,676 $168,907 $ 5,769 $176,352 $103,216 $279,568
====== ======== ======= ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable...... $ -- $ 5,019 $ -- $ 5,019 $ -- $ 5,019
Accrued expenses...... 1,676 49,514 -- 51,190 (1,676)(g) 49,514
Related parties
payable.............. -- 36,115 -- 36,115 -- 36,115
Notes payable to
stockholders......... -- -- 81,893 (d) 81,893 (15,000)(g) 66,893
Note payable to NSI... -- -- -- -- 10,000 (g) 10,000
------ -------- ------- -------- -------- --------
1,676 90,648 81,893 174,217 (6,676) 167,541
------ -------- ------- -------- -------- --------
Note payable to NSI..... -- -- -- -- 10,000 (g) 10,000
------ -------- ------- -------- -------- --------
Stockholders' equity
Capital Stock of
Combined
Subsidiaries.......... -- 4,550 (4,550)(a) -- -- --
Preferred Stock--
25,000,000 shares
authorized, $.001 par
value................ -- -- -- -- -- --
Class A Common Stock--
500,000,000 shares
authorized, $.001 par
value, 10,350,000
shares issued and
outstanding.......... -- -- -- -- 10 (g) 10
Class B Common Stock--
100,000,000 shares
authorized, $.001 par
value, 73,059,500
shares issued and
outstanding.......... -- -- 80 (a) 80 (7)(g) 73
Additional paid-in
capital.............. -- -- -- -- 138,283 (g)(h) 138,283
Cumulative foreign
currency translation
adjustment........... -- (3,714) -- (3,714) -- (3,714)
Retained earnings..... -- 77,423 (77,423)(a)(d) 5,769 -- 5,769
5,769(b)
Deferred
compensation......... -- -- -- -- (28,394)(h) (28,394)
Note receivable from
NSI.................. -- -- -- -- (10,000)(f) (10,000)
------ -------- ------- -------- -------- --------
-- 78,259 (76,124) 2,135 99,892 102,027
------ -------- ------- -------- -------- --------
Total liabilities
and stockholders'
equity............. $1,676 $168,907 $ 5,769(b) $176,352 $103,216 $279,568
====== ======== ======= ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these unaudited pro forma
consolidated financial statements.

F-21
<PAGE>

NU SKIN ASIA PACIFIC, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA FOR THE
NU SKIN ADJUSTMENTS PRO FORMA ADJUSTMENTS REORGANIZATION
ASIA COMBINED FOR THE FOR THE FOR THE AND THE
PACIFIC, INC. SUBSIDIARIES REORGANIZATION REORGANIZATION OFFERINGS OFFERINGS
------------- ------------ -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenue................. $ -- $358,609 $ -- $358,609 $ -- $358,609
Cost of sales........... -- 96,615 -- 96,615 -- 96,615
---- -------- ------- -------- ------- --------
Gross profit............ -- 261,994 261,994 261,994
---- -------- ------- -------- ------- --------
Operating expenses
Distributor
incentives(f)......... -- 135,722 -- 135,722 -- 135,722
Selling, general and
administrative........ -- 67,475 4,391(c) 71,866 2,567(h) 74,433
---- -------- ------- -------- ------- --------
Total operating
expenses............... -- 203,197 4,391 207,588 2,567 210,155
---- -------- ------- -------- ------- --------
Operating income........ -- 58,797 (4,391) 54,406 (2,567) 51,839
Other income (expense).. -- 511 (2,676)(e) (2,165) (133)(i) (2,298)
---- -------- ------- -------- ------- --------
Income before provision
for income taxes....... -- 59,308 (7,067) 52,241 (2,700) 49,541
Provision for income
taxes.................. -- 19,097 944(b) 20,041 (1,036)(j) 19,005
---- -------- ------- -------- ------- --------
Net income.............. $ -- $ 40,211 $(8,011) $ 32,200 $(1,664) $ 30,536
==== ======== ======= ======== ======= ========
Net income per share.... $ .40 $ .36
======== ========
Weighted average common
shares outstanding..... 80,518 85,377
======== ========
</TABLE>

The accompanying notes are an integral part of these unaudited pro forma
consolidated financial statements.

F-22
<PAGE>

NU SKIN ASIA PACIFIC, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA FOR THE
NU SKIN ADJUSTMENTS PRO FORMA ADJUSTMENTS REORGANIZATION
ASIA PACIFIC, COMBINED FOR THE FOR THE FOR THE AND THE
INC. SUBSIDIARIES REORGANIZATION REORGANIZATION OFFERINGS OFFERINGS
------------- ------------ -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenue................. $ -- $471,312 $ -- $471,312 $ -- $471,312
Cost of sales........... -- 133,592 -- 133,592 -- 133,592
---- -------- ------- -------- ------ --------
Gross profit............ -- 337,720 -- 337,720 -- 337,720
---- -------- ------- -------- ------ --------
Operating expenses
Distributor
incentives (f)........ -- 175,149 -- 175,149 -- 175,149
Selling, general and
administrative........ -- 69,970 3,293(c) 73,263 1,925(h) 75,188
---- -------- ------- -------- ------ --------
Total operating
expenses............... -- 245,119 3,293 248,412 1,925 250,337
---- -------- ------- -------- ------ --------
Operating income........ -- 92,601 (3,293) 89,308 (1,925) 87,383
Other income (expense).. -- 1,530 -- 1,530 467(i) 1,997
---- -------- ------- -------- ------ --------
Income before provision
for income taxes....... -- 94,131 (3,293) 90,838 (1,458) 89,380
Provision for income
taxes.................. -- 33,810 (810)(b) 33,000 (529)(j) 32,471
---- -------- ------- -------- ------ --------
Net income.............. $ -- $ 60,321 $(2,483) $ 57,838 $ (929) $ 56,909
==== ======== ======= ======== ====== ========
Net income per share.... $ .72 $ .67
======== ========
Weighted average common
shares outstanding..... 80,518 85,377
======== ========
</TABLE>

The accompanying notes are an integral part of these unaudited pro forma
consolidated financial statements.

F-23
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME

NOTE 1--BASIS OF PRESENTATION

Prior to or concurrently with the initial public offerings (the
"Offerings"), the stockholders of Nu Skin Japan Company, Limited, Nu Skin
Taiwan, Inc., Nu Skin Hong Kong, Inc. and Nu Skin Korea, Inc. (the
"Subsidiaries") will contribute their shares of capital stock to the capital
of Nu Skin Asia Pacific, Inc. (the "Company") in a reorganization which is a
transaction intended to qualify under Section 351 of the Internal Revenue Code
of 1986 as a tax free transfer in exchange for shares of the Company's Class B
Common Stock (the "Reorganization"). The Reorganization will result in each of
the Subsidiaries becoming a wholly-owned subsidiary of the Company. Prior to
the Reorganization, each of the Subsidiaries elected to be taxed as an S
corporation whereby the income tax effects of the Company's activities accrued
directly to the stockholders.

Inasmuch as the Subsidiaries that will be reorganized are under common
control, the Reorganization will be accounted for in a manner similar to a
pooling of interests. Accordingly, the historical balance sheets and related
statements of income, of stockholders' equity and of cash flows are combined
and presented as a single entity after elimination of intercompany
transactions.

The unaudited pro forma financial data reflect the Reorganization and the
Offerings as if all conditions to these transactions had been completed as of
September 30, 1996 for pro forma combined balance sheet data purposes and as
of January 1, 1995 for pro forma combined statement of income data purposes.
These data do not necessarily reflect the results of operations or financial
position of the Company that would have resulted had such transactions
actually been consummated as of such dates. Also, these data are not
necessarily indicative of the future results of operations of future financial
position of the Company.

NOTE 2--PRO FORMA ADJUSTMENTS

The pro forma adjustments reflect the following:

REORGANIZATION

a) Reflects the contribution by the existing stockholders of their
interest in the Subsidiaries in exchange for all shares of the Class B
Common Stock. As a result, the Company will become the parent company and
the Subsidiaries will become wholly-owned subsidiaries of the Company. No
shares of Class A Common Stock will be issued in connection with the
Reorganization.

b) Reflects the recognition of a deferred tax asset of $5.8 million
relating to adjustments for U.S. Federal and state income taxes as if the
Company had been taxed as a C Corporation rather than an S Corporation
since inception.

c) Reflects incremental costs of $4.4 million per year related to
operating a public company. These costs include additional infrastructure,
operating and accounting systems, and business processes as well as the
additional outside services inherent in supporting a public entity.

d) Reflects the distribution of $81.9 million of notes (the "S
Distribution Notes") to the existing stockholders of the Company in respect
of the earned and undistributed taxable S corporation earnings at September
30, 1996 that would have been distributed had the Subsidiaries' S
corporation status been terminated on September 30, 1996.

The adjustments reflect the distribution and the related issuance of
promissory notes. The Company estimates that, at the Offerings, it will
reserve between $60.0 million and $70.0 million of cash on hand for
repayment of the S Distribution Notes. The balance of the S Distribution
Notes will be repaid from cash generated by operations.

F-24
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME--(CONTINUED)
e) Reflects the increase in interest expense for the promissory notes
issued in connection with the distribution to the stockholders of the
undistributed S corporation earnings, net of a $15.0 million payment of
such notes from the proceeds of the Offerings. The promissory notes will
bear interest at 8% per annum and are due and payable within six months
from the date of issuance.

OFFERING

f) Reflects an estimated $10.0 million note receivable in connection with
the sale of an option to purchase 481,500 shares of Class A Common Stock to
NSI. The pro forma statements of income do not reflect the estimated
compensation expense of $23.1 million in connection with the one-time grant
of stock options at 25% of the initial public offering price to independent
distributors (non-employees) of the Company immediately prior to the
Offerings. These options will include conditions related to the achievement
of performance goals and will vest on December 31, 1997. The Company will
record distributor stock incentive expense for these non-employee stock
options.

g) Reflects the net proceeds to the Company from the Offerings of
$99,892,000 less a $15.0 million payment of short term notes to the
stockholders, the $25.0 million purchase from NSI of the exclusive rights
to distribute products in Thailand, Indonesia, Malaysia, the Philippines,
the People's Republic of China, Singapore and Vietnam, which purchase
consists of $20.0 million in notes payable to NSI and a $5.0 million
payment to NSI, and the related adjustments to stockholders' equity. Also,
reflects the conversion of 7,190,500 shares of Class B Common Stock into
Class A Common Stock and the sale by the Company of 4,750,000 shares of
Class A Common Stock. 1,605,000 of the converted shares will be held by the
Company and reserved for issuance upon exercise of the distributor options.
Also reflects 14,500 shares of Class A Common Stock that will be issued
immediately following the Reorganization and prior to the Offerings upon
exercise of options by an executive officer of the Company and which shares
will be sold in the Offerings.

h) The pro forma statements of income reflect the amortization for the
distribution rights acquired from NSI. Amortization will be recorded on a
straight-line basis over the estimated useful life of twenty years. Also
reflects estimated annual compensation expense of $1.3 million related to
the employee stock bonus awards granted to employees of the Company, NSI
and its affiliates. The pro forma balance sheet reflects estimated deferred
compensation and additional paid-in capital of $28.4 million, $5.3 million
of which represents the estimated compensation expense related to the
employee stock bonus awards granted to employees of the Company, NSI and
its affiliates which will be amortized over a period of four years, and
$23.1 million in connection with the one-time grant of stock options at 25%
of the initial public offering price to independent distributors of the
Company immediately prior to the Offerings which will be amortized over a
period of approximately one year.

i) Reflects interest expense for the $20.0 million in notes payable to
NSI issued in connection with the purchase of exclusive distribution rights
in certain Asian countries. The notes will bear interest at 8% per annum
and are due and payable within 14 months from the date of issuance. Also
reflects interest income for the estimated $10.0 million note receivable
from NSI issued in connection with the sale of an option to purchase
481,500 shares of Class A Common Stock. The note will bear interest at 8%
per annum and is due and payable ten years from the date of issuance.

j) Reflects tax effect of pro forma adjustments on earnings.

NOTE 3--DEFERRED OFFERING COSTS

The Company has incurred costs totaling $1,676,000 as of September 6, 1996
in connection with the Offerings of the Class A Common Stock. These costs have
been reflected as deferred offering costs in the

F-25
<PAGE>

NU SKIN ASIA PACIFIC, INC.

NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME--(CONTINUED)
accompanying pro forma balance sheet as of September 30, 1996. If the
Offerings are successful, the costs will be deducted from the proceeds
received from the Offerings. If the Offerings are not successful, the costs
will be charged to expense in the period in which a decision is made to
terminate the Offerings. In such event, the costs would be paid by NSI.

NOTE 4--PRO FORMA NET INCOME PER SHARE

For the Reorganization, pro forma per share data is computed based on
80,250,000 (includes 1,605,000 shares and 1,250,000 shares of Common Stock
reserved for distributor options and employee stock bonus awards,
respectively) shares of Common Stock outstanding and Common Stock equivalents
after giving effect to the Reorganization and an option granted to an
executive officer of the Company to purchase 267,500 shares of Common Stock
(14,500 of which will be issued upon partial exercise of such options
following the Reorganization and prior to the Offerings and sold in connection
with the Offerings). For the Offerings, shares of Common Stock outstanding and
Common Stock equivalents are increased by the sale of 4,750,000 shares of
Common Stock at an offering price of $23 per share and by the award of 109,000
shares of Common Stock to employees of the Company. Supplemental income per
share, calculated as if $25.0 million of the proceeds from the Offerings were
used to pay down a note payable, had a dilutive effect of less than 2%, and
therefore, is not presented.

F-26
<PAGE>

[COMPANY LOGO WITH THE WORDS "BEAUTY, HEALTH & OPPORTUNITY" AND "BEAUTY,"
"HEALTH" AND "OPPORTUNITY."]

<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO NSI DISTRIBUTOR, DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHO-
RIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THE RULE 415 OFFERINGS OR THE OFFERINGS AS DESCRIBED HEREIN, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE RULE 415 SELLING STOCKHOLDERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, THE CLASS A COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIR-
CUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.

------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 14
The Reorganization and S Corporation Distribution........................ 29
Use of Proceeds.......................................................... 31
Dividend Policy.......................................................... 31
Price Range of Class A Common Stock...................................... 31
Capitalization........................................................... 32
Dilution................................................................. 33
Selected Combined Financial and Other Information........................ 34
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 36
Business................................................................. 45
Management............................................................... 70
Certain Relationships and Related Transactions........................... 77
Principal Stockholders................................................... 79
Rule 415 Selling Stockholders............................................ 81
Shares Eligible for Future Sale.......................................... 87
Plan of Distribution..................................................... 90
Description of Capital Stock............................................. 95
Certain United States Tax Consequences to Non-United States Holders...... 99
Experts.................................................................. 101
Additional Information................................................... 101
Index to Financial Statements............................................ F-1
</TABLE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

1,605,000 OPTIONS
2,964,000 SHARES
[LOGO]

OPTIONS TO PURCHASE
CLASS A COMMON STOCK
CLASS A COMMON STOCK

-----------------
PROSPECTUS
-----------------

DECEMBER 12, 1996

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------