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## DISTRIBUTOR INFORMATION 

The following table provides information concerning the number of active and executive distributors as of the dates indicated. Active distributors are those distributors and preferred customers who were resident in the countries in which we operated and purchased products for resale or personal consumption during the three months ended as of the date indicated. An executive distributor is an active distributor who has achieved required monthly personal and group sales volumes. 

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( 1 ) Following the opening of our retail business in China during 2003 , active distributors include 117 , 000  and 147 , 000  preferred customers in China and executive distributors include 3 , 100  and 5 , 437  employed, full-time sales representatives for the years ended December 31 , 2003 and 2004 , respectively. 

## QUARTERLY RESULTS 

The following table sets forth selected unaudited quarterly data for the periods shown: 

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## RECENT ACCOUNTING PRONOUNCEMENTS 

During the first quarter of 2004 , we adopted FASB Interpretation No. 46 R, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 .” This accounting standard became effective during the first quarter of 2004 . The adoption of this standard did not have a significant effect on our financial statements. 

In December 2004 , the FASB issued SFAS No. 123 R, “Share-Based Payment,” which requires the expensing of em- ployee options as of the beginning of the first interim reporting period that begins after June 15 , 2005 . Consequently, we will begin expensing employee options during the third quarter of 2005 . Until that time, we will continue to account for stock-based compensation granted to employees according to the provisions of APB Opinion No. 25 . We are currently evaluating the effect of this accounting standard on our financial statements. 

In November 2004 , the FASB issued SFAS No. 151 , “Inventory Costs” which requires certain inventory related costs to be expensed as incurred. This accounting standard is effective January 1 , 2006 . We are currently evaluating the effect of this accounting standard on our financial statements. 

## CURRENCY RISK AND EXCHANGE RATE INFORMATION 

A majority of our revenue and many of our expenses are recognized primarily outside of the United States, except for inven- tory purchases which are primarily transacted in U.S. dollars from vendors in the United States. The local currency of each of our subsidiary’s primary markets is considered the functional currency. All revenue and expenses are translated at weighted-average exchange rates for the periods reported. Therefore, our reported revenue and earnings will be positively impacted by a weakening of the U.S. dollar and will be negatively impacted by a strengthening of the U.S. dollar. Media reports have indicated that the Chinese government may begin to allow the RMB to float more freely against the U.S. 

