Our hair care business increased during the year as a result of our acquisition of Aveda, a leader in the U.S. quality hair care industry. Aveda's distribution through professional hair salons marks a new channel of distribution for us. The brand is also distributed in more than 130 Aveda Environmental Lifestyle Stores worldwide. Its unique market position complements our other brands. Adding Aveda to our portfolio of quality brands, combined with Origins' continuing strength in hair care, creates an exciting platform for growth.

AVEDA PRODUCTS AND PHILOSOPHY Aveda is a premium manufacturer and marketer of pure plant- and flower-based hair, skin, makeup and body products, with approximately 50% of its sales in hair care. Aveda products are sold primarily through distributors to more than 25,000 professional hair salons worldwide. More than 2,000 salons in the U.S. are Aveda concept salons, which carry Aveda products exclusively and promote Aveda's philosophy of beauty, wellness and environmental awareness. Predominantly marketed in the U.S., Aveda products are also available in certain international markets, including the U.K., Germany, Australia, Italy, Singapore, Korea, Taiwan and Hong Kong. Aveda's potential for expansion into additional international markets is very promising.

AVEDA TOP HAIR PRODUCTS Nine of Aveda's top 10 products are in the hair care category. Its top selling shampoo, Shampure, a pure and gentle regular shampoo made with 25 flower and plant essences, was named "best shampoo" by Allure magazine. Other best-sellers include Rosemary Mint Conditioner, Aveda's lightest conditioner, made with organically grown rosemary and peppermint; Confixor, a lightweight styling gel that conditions and controls hair; and Witch Hazel Hairspray, a light- to medium-hold hairspray for all hairstyles.

AVEDA'S FIRST PROFESSIONAL HAIR COLOR LINE Aveda launched its first professional hair color line, Shades of Enlightenment, which contains 97% naturally derived ingredients. Containing sunflower, castor, and jojoba oils, and available in five colors, Shades of Enlightenment emulates the natural lightening process of the sun. Aveda Full Spectrum, a line of hair color products for all shades of hair, which is based on advanced Shades of Enlightenment technology, and also made from 97% naturally derived ingredients, was launched in July 1998. The Full Spectrum line offers 19 colors that can be custom blended to produce more than 50 shades. Shades of Enlightenment is available in the U.S., the U.K., Italy, Germany and Australia; Full Spectrum is available in the U.S. and will be introduced internationally during the coming year.

The Origins brand is sold in over 500 doors worldwide. Of these, more than 200 are stores-within-stores. This very successful concept showcases Origins' comprehensive line of cosmetics and lifestyle products for men and women. In addition, Origins operates approximately 30 freestanding retail stores in the U.S.

ORIGINS LEADING HAIR PRODUCTS Origins, our "home-grown" line of technologically advanced and botanically based products, is the number one hair care line in department stores where it is sold. In those department stores with Origins store-within-a-store formats, hair product sales are particularly strong. Best-selling hair care products from Origins include Clear Head Mint Shampoo, Knot Free Conditioning Rinse, Happy Endings Conditioner, and this year's very successful new entry, The Last Straw Conditioning Shampoo.