Stories in this section:
Pre-Paid 3rd Quarter Recruiting Up 81%
New Regulations, Challenges and Opportunities in China
Esther Looks Forward: The First Step to Success
Direct Selling Industry Responds to a Nation in Crisis

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Pre-Paid 3rd Quarter
Recruiting Up 81%
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the total of memberships in force at the beginning of such period, plus new memberships sold during such period) has increased for eight out of the last nine quarters from 67.6 percent as of June 30, 2003 to 72.2 percent for the latest 12 month period ended September 30, 2005, down slightly from the previous quarter.

During the 3rd quarter, the company returned $52,000 to shareholders through the repurchase of 1,100 shares of common stock.

Pre-Paid Legal Services anticipates announcing 2005 third quarter financial results on October 24, 2005, after the market closes, and hosting a conference call to discuss such results on October 26, 2005. Due to the 19 percent increase in new membership fees written during the third quarter of 2005 vs. the comparable 2004 quarter, the company expects an increase in commission expense for the 2005 third quarter and a corresponding decline in earnings. Commission expense is recognized over the first month of a membership. There is no further commission expense recognized during the remainder of the advance period.

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New Regulations, Challenges and Opportunities in China
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regulations would be as published, so we have been building in anticipation of that outcome. As we move into China, we anticipate being a significant business presence in the marketplace."

However, the two sets of regulations that China published last month-one regulating direct selling, the other prohibiting pyramid schemes-include clauses that some see as problematic. Under the new regulations, multilevel compensation systems are prohibited and a pyramid scheme is defined as one in which uplines received compensation from the sales of downlines.

Neil Offen, President and CEO of the Direct Selling Association, expressed concern at the clauses in the September edition of News from Neil, the association's monthly newsletter. "DSA is doing everything possible to have the U.S. government intercede on our behalf. We intend to take these issues all the way to President Bush himself," said Offen. "We have already met with the Secretary of Commerce and the top staff at the office of the United States Trade Representative, and have their commitments to fight hard for us."

Nu Skin, which recently lowered its annual revenue forecast for China to $100 from $105 million, has already felt the impact of the new regulations. "Changes to the company's compensation plan in China resulted in a larger-than-expected decline in the number of sales representatives during the quarter," said President and Chief Executive Officer Truman Hunt in an update on third quarter operations. "Consumer uncertainty regarding the regulatory framework for direct selling in China is also negatively impacting sales. This uncertainty has increased following publication in September of the proposed direct selling regulations, which do not enable direct selling compensation programs typically employed outside of China."

Still, said Hunt, the changes in China represent a new opportunity for the direct selling industry. "We continue to believe that China will be a significant direct selling market," Hunt said. "Even within the proposed regulatory framework, we remain confident that we will be able to offer individuals interested in direct selling a compelling opportunity that will enable us to tap the potential of this enormous market."

Tapping that potential is the goal of other companies, as well. USANA recently purchased a manufacturing facility and company President Dave Wentz said in a press release, "This marks a significant first step for our long-term plan of developing the Chinese market."

Unicity also has an eye on a successful future in China. "Unicity's long term plans include establishing a significant local facility that will host its Chinese and Greater Asian manufacturing and packaging operations during 2006 and exporting our products throughout Asia," said Weber. "We are also fine-tuning plans for multiple large distribution facilities that will handle the significant volume and high growth that is expected going forward."

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Esther Looks Forward:
The First Step to Success

Beauty queen, mother, motivational speaker, author and now the creator of a new beauty business, former Miss America Heather Whitestone McCallum is using the determination that helped her win the crown in 1995 to create a beautiful beginning for her new direct selling company.

Heather and her husband John McCallum talked about starting a business for several years. The couple knew they wanted to help people and at the same time build a successful company. "Heather's been empowering people for the last decade," says John. And, that is the mission of their new company Esther Body . Spirit-to empower and inspire women on a personal level.

So, how did the couple move from the desire to start a family business to building a direct selling company? In the midst of sifting through several business options, including considering franchises, partnerships and spin-offs from other already successful companies, John came across a magazine article about the direct selling industry. Success stories about The Pampered Chef and Southern Living at Home, among other companies in the industry, were discussed in the article. It was then that the idea began to take shape that the unique model that direct selling offers could present the perfect opportunity to meet the couple's two main objectives: building a company and empowering people.

Through their own life experiences, John and Heather had learned that the personal touch is required to really make a difference in the lives of others. From the beginning, the McCallums recognized that retail situations offer very limited opportunities to touch people. Direct selling seemed to be the ideal model to fit what they had been thinking about for the last five or six years.

Heather and John met with Bill Shaw, who at that time was the general manager at Southern Living at Home. John says that Shaw, now president of a new direct selling company-Taste of Home Entertaining-became a mentor and helped guide them through the process of starting their company. After reading the article and talking with Shaw, John says he and Heather went to the Direct Selling Association's Great Ideas Convention determined "to throw ourselves into it."

From their very first interaction with the DSA, John says the organization "has been fabulous." The resources and the venues to network and learn from others in the industry have been a great asset to their venture. John also comments that he was "shocked by the openness of the industry." That openness, in the form of moral support and idea sharing, came even from companies that could be considered competition for the McCallums' new business. "People from Avon, Mary Kay and Southern Living at Home were all tremendously helpful," says John, "along with the entire team from the DSA." After attending their first DSA event, John says that he and his wife made up their minds. "It was a nobrainer that this was the industry we wanted for our business."

With that decision made, plans for the product line and the specifics of Esther's business plan began to take shape. The couple worked with partners to create excellent products and packaging. "We were lucky," says John, "that our personal tastes and preferences matched the type and quality of product and packaging that we want to deliver." The quality of both the packaging and the product itself are details that the company is using to set Esther apart in the marketplace.

When forming their business plan, the couple examined what they felt were the best opportunities available in the industry and analyzed aspects of direct selling businesses with which consultants become disenchanted. Esther's solution to a common frustration for consultants in the industry is to deliver its products directly to the consumer, thereby eliminating the need for consultants to carry inventory. "We do not want our consultants to feel obligated to buy any additional inventory," says Heather. "We designed our company, our starter kit and our distribution process to eliminate costly inventory requirements."

When consultants purchase starter kits from Esther they are given the entire product line in full-size packaging. Rather than having a consultant's first decision be about inventory, her very first step is scheduling appointments to show the product. The goal is to have consultants look outward immediately, rather than inward, to help eliminate the fears that set in after starting their own home business. "We wanted their first financial interaction after purchasing their starter kit to be with a customer," John says. "By looking out, they've taken the first step to being successful."

The team says this system encourages consultants to look forward to new appointments, instead of over their shoulder at parties they've already held. "The consultants and hostesses can go on accomplishing their goals," says Heather. With advances in technology, the process of shipping to customers is not only much more simplified than it would have been a decade ago, it also allows the company to capture information about, and build long-term relationships with, their customers. "The reality is that consultants don't stay around forever, but with this system we can still reach out and touch the customer," says John.

As for the logistics and the way costs of shipping are handled, Anne Frazier, Vice President and John's sister, says that it is really a time saver. "People are used to shopping online and paying shipping expenses," she says. "What women love is that they don't have to go to the mall, they don't have to clean their house for their consultant. When the FedEx truck comes, it's okay if you're in your workout clothes."

With their homework done, the business plan in place and the products and packaging selected, the time came to select and recruit consultants for the business. In the fall of 2004, Heather, Anne and John began meeting with women about the company and the opportunity. Heather's reputation played a part in finding the company's first consultants, or founders, as the company calls them. Before the products were even available, 17 women signed on to work with the company as consultants. "These women knew and trusted Heather and what she was about," says Anne.

The botanical skin care line, consisting of 14 products, became available for sale in March 2005. The plan is to build a customer base with the skin care products and in time introduce cosmetics and other products. From March to September the Esther sales force grew by almost 400 percent and includes consultants based in 18 states. John says that while there is always the desire to do more, they are pleased with their rate of growth, which has "enabled us to get our feet under us."

Heather's experience in motivating herself and others to stretch for goals that seem beyond reach has played a powerful role in the success of Esther. She says early on she used the S.T.A.R.S. program she developed during her pageant years to encourage consultants. The program, Success Through Action and Realization of your dreamS, is a five-point system consisting of creating a positive attitude, belief in a dream, and the willingness to work hard, face obstacles and build a strong support team, which has proven effective in helping people from all walks of life to reach their goals. While each member of the team at Esther continues to wear a variety of hats, the company's support system has grown and, Heather says, "We are fortunate to have wonderful software, an awesome consultant trainer and others who enable us to create a healthy balance between our families and the Esther business."

Beyond building a successful business, the company has created the Esther Foundation to help orphans throughout the world. "My goal for Esther is to become successful enough to reach our goals in helping orphaned children, as well as treating our customers, hostesses and consultants like princesses," says Heather. "The women of Esther Body . Spirit have no idea how powerfully they can influence children by introducing Queen Esther's story to them."

The company's name was inspired by the account of Queen Esther from the Old Testament. "Her story demonstrates that the world is full of beautiful women but those who have qualities such as strength, courage, love and faith rise above others," says Heather. "We hope to empower those characteristics in all women and children."

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Direct Selling Industry
Responds to a Nation in Crisis

In the wake of the devastation wrought by Hurricane Katrina, direct selling companies across the country presented a united front, offering immediate aid to those left homeless by the terrible storm. Companies throughout the industry have contributed millions in cash and in-kind donations through this unprecedented undertaking to help those in need. Many organizations continue donating through matching programs and fundraising efforts by earmarking profits from the sale of designated items to be distributed to the people working to rebuild their lives.

While there are those who question the response of local and federal governments, no one could debate the sincerity and the speed with which members of this industry responded. Whether it was working to locate and aid their own distributors or to provide money, food, clothing and shelter to anyone in need, the actions of this people-centered industry continue to serve those who need help most.

Home Interiors & Gifts is donating proceeds from this
Thomas Kinkade inspired candle to hurricane relief efforts.

Rallying Recruits
Several companies have developed programs that allowed their consultants and customers to be part of the relief effort. Many companies echo the sentiments expressed by Asha Morgan-Moran, President of Creative Memories. "We feel compelled to assist with the relief effort. As a company we know that the most costly natural disaster in our nation's history demands our attention-and our help." To that end, Creative Memories consultants are participating in the fundraising efforts through the sale of Premier Albums. For each Premier Album purchased through the end of October, Creative Memories will donate $1 to the relief fund. "Creative Memories consultants are committed to helping people share and preserve their memories," says Jeff Grong, Senior Vice President of U.S. Sales and Marketing, "We have more than 70,000 motivated U.S. and Canadian consultants ready to impact relief efforts with their album sales."

Through October 28, Tupperware is providing an easy way for consultants and customers to help by donating $9 to the American Red Cross for every $10 FlatOutT 4-Cup Container in blueberry sold. Avon is encouraging its team members to "Give the Gift of Hope from your Heart" with a Heart of America Key Chain. Avon will donate 75 percent (or 100 percent of the net proceeds) of each special key chain sold to Hurricane Katrina relief efforts through the Avon Foundation. AtHome America, through their HelpAmerica Foundation, is donating $1 for every Scentennial Candle purchased in September.

Home Interiors and Gifts is offering two ways for customers and consultants to help, either by purchasing a "Light in the Storm" candle with a replica of Thomas Kinkade's painting by the same name on the label or by hosting a "Light in the Storm" event. All profits from the candle sales and 20 percent of the net profits from the sales events will be distributed through the company's Hurricane Katrina Relief Fund to organizations working to assist those hurt by the storm.

Matching Their Efforts
In addition to the special sales efforts, several companies have set up matching programs. AdvoCare International, which initially sent $25,000 to the American Red Cross, arranged a program to match donations made through their corporate office by their members and employees up to $100,000.

Avon employee contributions to qualified relief agencies will be matched through the Avon Foundation Matching Gifts Program, which matched contributions on a 2:1 basis up to $250 and a 1:1 basis on gifts up to $7,500 per calendar year.

Customers and consultants can donate to the relief fund on Tupperware's Web site. Tupperware will match funds donated dollar for dollar up to $50,000 and 100 percent of the funds raised are being distributed to active Tupperware consultants and retirees through emergency grants up to $1,000 per request. Shaklee Corporation is matching the first $100,000 of donations through Shaklee Cares, the company's non-profit organization. Pampered Chef customers at Kitchen Shows are encouraged to round up their sales tickets to the nearest dollar (or more) for the Round Up from the Heart Campaign. Proceeds are donated to local food banks through America's Second Harvest. In addition, The Pampered Chef is matching donations dollar for dollar to benefit the America's Second Harvest Hurricane Katrina Relief and Recovery Fund.

Donating In-Kind
Sometimes it just makes sense to donate the products companies would normally sell. NBA All- Star Theo Ratliff, American Longevity and the World Basketball Association (WBA) teamed up to donate 12,000 bottles of Ratliff's ready-to-drink signature sports drink, Rebound fxT Tropical Tirade, to the disaster relief efforts for victims of Hurricane Katrina. The bottles were distributed through churches serving as relief centers following the storm.

Shaklee offered Hurricane Relief Packs for sale and donation. Through September 15 the company reports that more than $225,000 in product donations have been sent to aid in the relief effort in coordination with on-site partner, Feed the Children.

Avon encourages customers to "Give the Gift of Hope from Your Heart"
by purchasing this key chain to help Katrina victims.

Powerful Impact
So many companies have opened their hearts and have offered aid through financial donations, in-kind donations and even physical labor. Tahitian Noni, like several other companies, continues to facilitate donations by offering a link on its Web site to organizations such as the American Red Cross. "We have been inundated with requests from our distributors to know how they can help. We know that thousands of them are already donating money to support the relief efforts," says Shon Whitney, Vice President of Marketing Communications for Tahitian Noni International. "We hope that this amazing outpouring of goodwill will continue-not only with the current relief efforts, but with the tremendous rebuilding efforts that will be needed in the near future as well." Below are just a few more examples of how the direct selling industry has responded to this crisis:
. Alticor Corp has donated more than $1.3 million to the American Red Cross, International Aid and the Salvation Army.
. Mary Kay Inc. initially committed more than $1 million to aid in general Hurricane Katrina relief efforts. The American Red Cross and the Salvation Army have each received $125,000 for their initial hurricane relief efforts, and the remaining $750,000 is being distributed to charitable organizations as the relief effort continues.
. The Body Shop at Home is teaming up with Habitat for Humanity by collecting donations to help rebuild homes in the Gulf Coast region.
. Discovery Toys is matching donations made through its Web site to the American Red Cross with a $5 product donation for every $1 donated, up to $50,000 retail value.
. Entertain With Ease! is donating 10 percent of all party sales in September and October to the American Red Cross.
. The Oreck Corporation, whose operations were hit hard by this disaster, established the Oreck Employee Relief Fund, seeding the fund with $500,000 in a corporate donation.

It will take years to recover from the damage caused by Hurricane Katrina. But the powerful impact that the direct selling industry has made by its donations, and by empowering people to be a meaningful part of the response efforts, will leave an enduring mark on the lives of all of those involved.

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