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Annual Report 2019

Amway Česká republika a Slovensko, s.r.o.

DocuSign Envelope ID: AAA10BC9-939D-4858-868F-EBC8ADC203A3

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1. Development entity

Amway

Česká republika a Slovensko, s.r.o. in 2019 sales are stable compared to 2018.

After 3 years of growth company is below last year about 2% (in 2019 499.172 thousands CZK and 501.854 housands CZK in 2018). Overall situation in the both markets of Czech cluster was good and stable. The Company's revenues amounted to CZK 500 millions. The Company in the Czech Republic cooperates with 28,500 Amway Business Owners (VPA) and the Slovak Republic to the 9,450 VPA.

Amway’s mission is “Helping people live better lives”. For over 60 years, Amway has offered a unique business opportunity, a working Sales and Marketing Plan and quality products.

The Company’s fundamentals include: Family, Hope, Recognition and Reward.

Amway’s Sales and Marketing Plan provides the opportunity to establish one’s own business without the need to obtain special skills and knowledge and without a sizable initial contribution The key tasks for management of Amway Česká republika a Slovensko, s.r.o. in 2019 included:

Ø

Implementation of a new model called Leader Growth Solution- LGS. This new model of work is mainly focused on the support of major trading partners, who in previous years had increased and therefore the Company Amway decided to prepare for them a special incentive programs. This model is valid worldwide and controlled by the parent Company in the ADA.

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Implementation of Core Plus+

All about profitability for ABOs by helping build a balance of business width and depth A key aspect of Core Plus+ is becoming more customer-centric, managing the customer experience and relationships to create more profitable and sustainable businesses.

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Digital Transformation

Digital is a crucial enabler for ABO success, making it easier to shop, recruit, train, learn and manage your business.

One way this will come to life is with a new modern website providing visitors with meaningful and innovative product experiences while providing ABOs comprehensive business tools.

Ø

Fostering of Amway’s Culture

Rich and Jay demonstrated growth mindset by taking risks and applying learnings to the business, adjusting how they built the business and adapting to accommodate changes in the marketplace.

We continue to bring this growth mindset into how we operate and grow as a company and how we support our ABOs to do the same.

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Ø

Company management also focused on stabilizing the services provided by the Call Center so that our trading partners have ensured adequate quality of service. Company management is also devoted to strengthening the distributor base and creating the best possible environment for business and creating appropriate programs for the second and the young generation.

Ø

In addition, the Company monitor legislative developments in the Czech Republic and Slovak Republic, mainly focusing on Consumer Law. In the Czech Republic we also watched the Law on Electronic records of revenues and the implementation of measures required by law.

Positive effects on Amway sales and enchancement of Amway brand awareness comprised:

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Amway presentation of the Company under the name EXPO. The meeting was aimed at presenting business opportunities, sales and marketing plan and Amway on the presentation of product lines the Company Amway. For presentations we have seen a very positive public response and new, potential customers.

Introduction of new products and upgrades to existing commercial products also have a very positive impact on sales development. Among the most successful product launch in 2019 included the launch in February of new NUTRILITE ™ DOUBLE X, which is a great source of vitamins, minerals and phytonutrients with improved composition.

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in Beauty segment Amway launched a new collection of ARTISTRY STUDIO what constitutes a new collection of decorative cosmetics. The first collection presented in 2018 was inspired by the city of New York. In 2019 we lauched new limited collections of ARTISTRY STUDIO™ Parisian Style in March and Bangkok edition in September. Artistry would like in the future offer ABOs and customers more personalized products and in 2019 we launched first 2 products lines – Artistry Signature Select serums and in October Artistry Signature Select Masks. Both products lines were very well accepted by ABOs and customers. Both lines were develop in close cooperation with Nutrilite.

This collection is also focused on the younger generation, U35, and we are very pleased to have found their fans.

Amway pays utmost attention to ABO education and training through the Amway Academy Project. In this area, we came up with several innovations and focused on more intensive training over the Weblive online platform, enabling distributors and business partners to attend training from home and to connect over the internet. This form of training is becoming increasingly popular and it can reach our broad distributor base.

In 2019, Amway has paid great attention to the increasing number of loyal customers, the number of newly registered customers increased number of U35 category. These markers are very important in the context of building a successful Amway business within the Czech Rep.

and the Slovak Republic and the region will pay a high priority in 2019.

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The Company is also in 2019 tried to put the news in context of IT technologies, especially new support programs for smartphones and tablets. For example, the update of Amway mobile applications.The purpose of this application is to provide business partners with easy access mobile business tool, allowing them to manage their business from anywhere.

The application called Mobile Amway and allows the ABO had on the road or in meetings with customers at hand all the necessary publications Amway. It is available both for iOS (for iPhone and iPad) and Android (for tablets only).

Also successfully developed the use of internet sales portal AMWAY.CZ. This allows both the purchase of all Amway products, but also offers customers purchase so. Partner stores, which may include a variety of companies operating on the Czech market. Currently, the portal through about 93% of total Company turnover and carried it thousands of distributors and customers.

AMWAY.CZ has also been a key channel of communication between the Company and its distributors, as well as between distributors themselves, and enhances the image of the Company. The overall functionality of the portal and its business-wide application is planned to be further expanded in the current year.

In conclusion, I would like to take this opportunity to thank all our staff for their excellent work throughout the year and Amway independent business partners for their relentless support and commitment to the Amway brand. I very much appreciate the contribution of each and every Amway Business Owner. I am excited that Amway has helped many people in the Czech Republic and in Slovakia to change their lives and the lives of their families.

Events after the balance sheet date:

The COVID-19 epidemic is currently causing unprecedented economic and social uncertainty around the world and its financial impact and duration cannot currently be reasonably estimated.

The first COVID-19 events took place in China at the end of 2019, but it was only in January 2020 that the World Health Organisation's Communication on global health threats from the spread of COVID-19 emerged, which inter alia provided the basis for the first countries to take measures to limit the spread of the disease.

After a strong performance in March 2020 driven by increased demand for our immunity products, company experienced stable Sales in April 2020 at comparable level vs. last year. April sales are only 0.6% lower than in 2018 and cumulative four months period of 2020 sales are above 2019 by 5.6% and 3.5% above budgeted level. Nutrition brands achieved higher Sales vs. last year, while other brands such as Home Care, Personal Care and Artistry delivered almost prior year Sales levels after four months of 2020.

The has taken a number of measures in connection with the COVID-19 epidemic: all office employees are working remotely and Company continues to operate.

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The Company is strongly committed to the market and customer orientation in order to minimise the negative effects of the epidemic. The main activities include strengthening communication with independent entrepreneurs (ABO), increasing the number of remote training courses covering new product topics and strengthening communication via social media. The company also undertakes a number of activities, constantly supporting the ABO to switch to online mode through campaigns „Amway Together At Home”.

Before the Covid-19 crisis, Amway Czech Republic sales happened online, so after government decided to close shops, this had not significantly impact overall revenue figures because all the clients still have the possibility to order online.

European and local Management constantly monitor and assess the situation with Covid-19 crisis, and if needed, additional business initiatives may be implemented to achieve 2020 Sales plan.

As the situation continues to evolve, management of the entity believes that it is not possible to provide quantitative estimates of the potential impact of the current situation on the entity.

Management considers such a situation as an unadjusting event in the financial statements for 2019, but as an event after the balance sheet date that requires additional disclosures.

Possible financial consequences of the epidemic will be reflected in the Company's financial statements for 2020.

2. Company Identification

Company name: Amway Česká republika a Slovensko, s.r.o.

Business registration No. (IČ): 45798575 VAT registration No.: CZ45798575

Registered office: Jankovcova 1596/14a, 171 00 Prague 7

Registered capital: CZK 1,600,000

Date of incorporation: 15 June 1992

Commercial Register: File No. 10366, maintained with the Municipal Court in Prague

Scope of business: Purchase of goods for resale and sale – with the exception of goods listed in the Annex to Act No. 455/1991 Coll. and goods excluded by this Act

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3. Company Bodies and Organizational Chart The Company operates from its Prague headquarters.

The Company is divided into the following sections:

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Marketing Communication

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PR/Corporate Affiars

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Sales/Account Management/ Back Office

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Business Conduct

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Technical Regulatory

4. Labor Relations

The Company pays increased attention to employee training. All employees have free access to an educational website called the Amway Academy; courses are classified by staff level and responsibility within the Company. In addition, the Company provides several employee benefits, such as subsistence allowance, free language courses, sporting and cultural events.

The Company complies with all applicable laws and regulations governing labor relations.

5. Environmental Protection

The Company complies with all law and regulations applicable for environmental protection.

6. Research & Development

With regard to the scope of business in The Czech Republic, the Company does not invest in research & development.

Prague on 30 June 2020

_____________________________

Jeffery Charles Tuori - Statutory Representative

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Amway Česká republika a Slovensko, s.r.o.

Financial Statements for the year ended 31 December 2019

(Translation of Financial Statements Originally Issued in Czech – See Note 2 to the Financial Statements)

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BALANCE SHEET

Current year Prior year

2018

Gross Allowances Net Net

TOTAL ASSETS 174,291 (10,702) 163,589 161,314

A. STOCK SUBSCRIPTION RECEIVABLE 0 0 0 0

B. FIXED ASSETS 9,335 (8,410) 925 1,477

B. I. Intangible fixed assets 3,891 (3,767) 124 273

B. I. 1. Development 0 0 0 0

2. Valuable rights 3,891 (3,767) 124 273

1. Software 3,891 (3,767) 124 273

2. Other valuable rights 0 0 0 0

3. Goodwill 0 0 0 0

4. Other intangible fixed assets 0 0 0 0

5.

Advances granted for intangible fixed assets and intangible

fixed assets in progress 0 0 0 0

1. Advances granted for intangible fixed assets 0 0 0 0

2. Intangible fixed assets in progress 0 0 0 0

B. II. Tangible fixed assets 5,444 (4,643) 801 1,204

B. II. 1. Land and structures 0 0 0 0

1. Land 0 0 0 0

2. Structures 0 0 0 0

2. Movable assets and sets of movable assets 5,352 (4,643) 709 1,112

3. Gain or loss on revaluation of acquired property 0 0 0 0

4. Other tangible fixed assets 92 0 92 92

1. Perennial crops 0 0 0 0

2. Livestock 0 0 0 0

3. Miscellaneous tangible fixed assets 92 0 92 92

5.

Advances granted for tangible fixed assets and tangible fixed

assets in progress 0 0 0 0

1. Advances granted for tangible fixed assets 0 0 0 0

2. Tangible fixed assets in progress 0 0 0 0

B. III. Long-term investments 0 0 0 0

B. III. 1. Interests – controlled or controlling entity 0 0 0 0

2. Loans and borrowings – controlled or controlling entity 0 0 0 0

3. Interests – significant influence 0 0 0 0

4. Loans and borrowings - significant influence 0 0 0 0

5. Other long-term securities and interests 0 0 0 0

6. Loans and borrowings - other 0 0 0 0

7. Other long-term investments 0 0 0 0

1. Miscellaneous long-term investments 0 0 0 0

2. Advances granted for long-term investments 0 0 0 0

C. CURRENT ASSETS 164,750 (2,292) 162,458 159,683

C. I. Inventories 0 0 0 0

C. I. 1. Materials 0 0 0 0

2. Work in progress and semi-finished production 0 0 0 0

3. Finished products and goods 0 0 0 0

1. Finished products 0 0 0 0

2. Goods 0 0 0 0

4. Livestock 0 0 0 0

5. Advances granted for inventories 0 0 0 0

C. II. Receivables 136,899 (2,292) 134,607 140,558

C. II. 1. Long-term receivables 5,767 0 5,767 8,189

1. Trade receivables 0 0 0 0

2. Receivables – controlled or controlling entity 0 0 0 0

3. Receivables – significant influence 0 0 0 0

4. Deferred tax asset 4,901 0 4,901 7,323

5. Other receivables 866 0 866 866

5.1. Receivables from partners 0 0 0 0

5.2. Long-term advances granted 866 0 866 866

5.3. Unbilled revenue 0 0 0 0

5.4. Miscellaneous receivables 0 0 0 0

Amway Česká republika a Slovensko, s.r.o. as at 31 December 2019 Czech Statutory Financial Statement Forms (in thousands of Czech crowns)

The accompanying income statement, cash flow statement, statement of changes in equity and notes are an integral part of the financial statements.

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BALANCE SHEET

2018

Gross Allowances Net Net

C. II. 2. Short-term receivables 131,132 (2,292) 128,840 132,369

1. Trade receivables 27,517 (2,292) 25,225 24,597

2. Receivables – controlled or controlling entity 101,722 0 101,722 105,503

3. Receivables – significant influence 0 0 0 0

4. Other receivables 1,893 0 1,893 2,269

4.1. Receivables from partners 0 0 0 0

4.2. Social security and health insurance 0 0 0 0

4.3. Due from government - tax receivables 309 0 309 579

4.4. Short-term advances granted 228 0 228 225

4.5. Unbilled revenue 1,264 0 1,264 1,436

4.6. Miscellaneous receivables 92 0 92 29

C. III. Short-term financial assets 0 0 0 0

1. Interests - controlled or controlling entity 0 0 0 0

2. Other short-term financial assets 0 0 0 0

C. IV. Cash 27,851 0 27,851 19,125

1. Cash in hand 17 0 17 31

2. Cash at bank 27,834 0 27,834 19,094

D. Prepaid expenses and accrued income 206 0 206 154

D. 1. Prepaid expenses 206 0 206 154

2. Prepaid expenses (specific-purpose expenses) 0 0 0 0

3. Accrued income 0 0 0 0

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BALANCE SHEET

2018

TOTAL EQUITY & LIABILITIES 163,589 161,314

A. EQUITY 8,667 4,640

A. I. Basic capital 1,600 1,600

A. I. 1. Registered capital 1,600 1,600

2. Own ownership interests (-) 0 0

3. Changes in basic capital 0 0

A. II. Share premium and revaluation reserve 123 123

A. II. 1. Share premium 0 0

2. Capital funds 123 123

1. Other capital funds 123 123

2. Gain or loss on revaluation of assets and liabilities (+/-) 0 0

3. Gain or loss on revaluation upon corporate transformation (+/-) 0 0

4. Differences arising on corporate transformation (+/-) 0 0

5.

Differences arising between balance sheet date and

transformation date (+/-) 0 0

A. III. Reserves from profit 160 160

A. III. 1. Other reserves 160 160

2. Statutory and other reserves 0 0

0 0

A. IV. Profit (loss) brought forward (+/-) 2,757 (2,340)

IV. 1. Retained earnings 2,757 (2,340)

2. Other profit (loss) brought forward (+/-) 0 0

A. V. Profit (loss) for the year (+/-) 4,027 5,097

A. VI. Approved decision on advances for profit distribution (-) 0 0

B. + C. PROVISIONS AND LIABILITIES 151,184 152,943

B. Provisions 52,351 60,861

B. 1. Provision for pensions and similar obligations 0 0

2. Provision for corporate income tax 0 0

3. Provisions recognized under special legislation 0 0

4. Other provisions 52,351 60,861

C. Liabilities 98,833 92,082

C. I. Long-term liabilities 0 0

1. Bonds payable 0 0

1. Convertible bonds 0 0

2. Other bonds 0 0

2. Amounts owed to credit institutions 0 0

3. Long-term advances received 0 0

4. Trade payables 0 0

5. Long-term notes payable 0 0

6. Liabilities – controlled or controlling entity 0 0

7. Liabilities – significant influence 0 0

8. Deferred tax liability 0 0

9. Other liabilities 0 0

1. Liabilities to partners 0 0

2. Unbilled deliveries 0 0

3. Miscellaneous liabilities 0 0

C. II. Current liabilities 98,833 92,082

1. Bonds payable 0 0

1. Convertible bonds 0 0

2. Other bonds 0 0

2. Amounts owed to credit institutions 0 0

3. Short-term advances received 562 397

4. Trade payables 71,875 73,355

5. Short-term notes payable 0 0

6. Liabilities – controlled or controlling entity 0 0

7. Liabilities – significant influence 0 0

8. Other liabilities 26,396 18,330

1. Liabilities to partners 0 0

2. Short-term borrowings 0 0

3. Liabilities to employees 650 549

4. Liabilities arising from social security and health insurance 346 298

5. Due to government – taxes and subsidies 6,583 7,102

6. Unbilled deliveries 18,817 10,381

7. Miscellaneous liabilities 0 0

D. Accruals and deferred income 3,738 3,731

D. 1. Accruals 0 0

2. Deferred income 3,738 3,731

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INCOME STATEMENT

2018

I. Revenue from sale of finished products and services 60,894 61,915

II. Revenue from sale of goods 438,818 439,937

A. Production-related consumption 479,905 468,570

A.1. Cost of goods sold 127,532 134,808

A.2. Consumption of material and energy 2,174 2,027

A.3. Services 350,199 331,735

B. Change in inventory produced internally (+/-) 0 0

C. Own work capitalized (-) 0 0

D. Personnel expenses 14,284 13,554

D.1. Wages and salaries 10,610 10,070

D.2. Social security and health insurance costs and other costs 3,674 3,484

D.2.1. Social security and health insurance costs 3,254 3,090

D.2.2. Other costs 420 394

E. Value adjustments in respect of operating activities (518) 1,667

E.1. Value adjustments in respect of intangible and tangible fixed assets 714 1,073

E.1.1. Value adjustments in respect of intangible and tangible fixed assets - permanent 714 1,073

E.1.2. Value adjustments in respect of intangible and tangible fixed assets - temporary 0 0

E.2. Value adjustments in respect of inventory 0 0

E.3. Value adjustments in respect of receivables (1,232) 594

III. Other operating income 281 504

III.1. Income from sale of fixed assets 140 0

III.2. Income from sale of materials 0 0

III.3. Miscellaneous operating income 141 504

F. Other operating expenses (6,593) 7,358

F.1. Net book value of fixed assets sold 10 78

F.2. Net book value of materials sold 0 0

F.3. Taxes and charges relating to operations 183 292

F.4. Provisions relating to operations and prepaid expenses (specific-purpose expenses) (8,511) 6,754

F.5. Miscellaneous operating expenses 1,725 234

* Profit or loss on operating activities (+/-) 12,915 11,207

IV. Income from long-term investments - interests 0 0

IV.1. Income from interests in subsidiaries or parents 0 0

IV.2. Other income from interests 0 0

G. Cost of interests sold 0 0

V. Income from other long-term investments 0 0

V.1. Income from other long-term investments - subsidiaries or parents 0 0

V.2. Other income from other long-term investments 0 0

H. Expenses relating to other long-term investments 0 0

VI. Interest receivable and similar income 700 98

VI.1. Interest receivable and similar income - subsidiaries or parents 700 98

VI.2. Other interest receivable and similar income 0 0

I. Value adjustments and provisions relating to financial activities 0 0

J. Interest payable and similar expenses 1 0

J.1. Interest payable and similar expenses - subsidiaries or parents 1 0

J.2. Other interest payable and similar expenses 0 0

VII. Other finance income 539 6,538

K. Other finance cost 2,720 8,300

* Profit or loss on financial activities (+/-) (1,482) (1,664)

** Profit or loss before taxation (+/-) 11,433 9,543

Amway Česká republika a Slovensko, s.r.o. for the year ended 31 December 2019 Czech Statutory Financial Statement Forms (in thousands of Czech crowns)

The accompanying balance sheet, cash flow statement, statement of changes in equity and notes are an integral part of the financial statements.

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INCOME STATEMENT

2018 Amway Česká republika a Slovensko, s.r.o. for the year ended 31 December 2019

Czech Statutory Financial Statement Forms (in thousands of Czech crowns)

L. Income tax 7,406 4,446

L.1. Income tax due 4,985 4,055

L.2. Income tax deferred (+/-) 2,421 391

** Profit or loss after taxation (+/-) 4,027 5,097

M. Transfer of share of profit or loss to partners (+/-) 0 0

*** Profit or loss for the year (+/-) 4,027 5,097

* Net turnover 501,232 508,992

The accompanying balance sheet, cash flow statement, statement of changes in equity and notes are an integral part of the financial statements.

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CASH FLOW STATEMENT

For the years ended 31 December 2019 and 2018

2018

Z. 11,433 9,543

A. 1. (9,202) 18,299

A. 1. 1. 714 1,073

A. 1. 2. (1,232) 594

A. 1. 3. (8,510) 6,753

A. 1. 4. 655 9,899

A. 1. 5. (130) 78

A. 1. 6. (699) (98)

A. 1. 7. 0 0

A * 2,231 27,842

A. 2. 9,248 3,401

A. 2. 1. 0 0

A. 2. 2. (51) (14,065)

A. 2. 3. 2,541 3,971

A. 2. 4. (1,480) 12,573

A. 2. 5. 8,238 922

A ** 11,479 31,243

A. 3. 1. (1) 0

A. 4. 1. (7,201) (9,310)

A *** 4,277 21,933

B. 1. 1. (172) (34)

B. 2. 1. 140 0

B. 3. 1. 3,781 (20,123)

B. 4. 1. 700 98

B. 5. 1. 0 0

B *** 4,449 (20,059)

C. 1. 0 0

C. 2. 1. 0 0

C. 2. 2. 0 0

C. 2. 3. 0 0

C *** 0 0

F. 8,726 1,874

P. 19,125 17,250

R. 27,851 19,125

Interest expense and interest income

Amway Česká republika a Slovensko, s.r.o. for the year ended 31 December 2019 Czech Statutory Financial Statement Forms (in thousands of Czech crowns)

Cash flows from operating activities

Profit or loss on ordinary activities before taxation (+/-)

Adjustments to reconcile profit or loss to net cash provided by or used in operating activities Depreciation and amortization of fixed assets and write-off of receivables

Change in allowances Change in provisions Foreign exchange differences (Gain)/Loss on disposal of fixed assets

Net cash provided by (used in) operating activities

Other non-cash movements (e.g. revaluation at fair value to profit or loss, dividends received) Net cash from operating activities before taxation, changes in working capital and extraordinary items

Change in non-cash components of working capital Change in inventory

Change in trade receivables

Change in other receivables and in prepaid expenses and unbilled revenue Change in trade payables

Change in other payables, and in accruals and deferred income

Net cash from operating activities before taxation, interest paid and extraordinary items Interest paid

Income Tax paid

Dividends received

Net cash provided by (used in) investing activities Cash flows from financing activities

Change in long-term liabilities, and long-term and short-term loans Cash flows from investing activities

Purchase of fixed assets Proceeds from sale of fixed assets Loans granted

Interest received

Effect of other changes in own capital on cash Net cash provided by (used in) financing activities Net increase (decrease) in cash

Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Profit shares paid

Effect of other changes in equity on cash

The accompanying balance sheet, income statement, statement of changes in equity and notes are an integral part of the financial statements.

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Amway Česká republika a Slovensko, s.r.o.

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The accompanying balance sheet, income statement and cash flow statement are an integral part of the financial statements.

1. DESCRIPTION OF THE COMPANY

Amway Česká republika a Slovensko, s.r.o. (“the Company”) is a limited liability company incorporated on 15 June 1992 in the Czech Republic. The Company’s registered office is located at Jankovcova 1596/14a, Holešovice, 170 00 Praha 7, Czech Republic and the business registration number (IČ) is 45798575.The Company is involved in the distribution of cleaners, laundry detergents, cosmetics products, food and nutritional supplements.

On 2 July 2019 the post Executive director Gabor Toth was terminated and Jeffery Charles Tuori was incorporated as Executive director. These changes were entered into Commercial register on 2 July 2019.

On 29 June 2019 the post Executive director Leszek Jaroslaw Krecielewski was terminated and Melodie Ann Nakhle was incorporated as Executive director.

AMWAY INTERNATIONAL DEVELOPMENT, Inc., with its registered office at Wilmington, New Castle, Delaware 19801, USA, The Corporation Trust Center, is the sole shareholder, its contribution totaling CZK 1,600,000 represents a 100 % shareholding.

Alticor Global Holdings, Inc, New Castle, Delaware, is the ultimate parent company.

The Company is included in the consolidated group of the parent company.

The consolidated financial statements prepared by the parent company are lodged with the parent company.

A statutory representative serves as the Company body. The Company has two statutory representatives as at 31 December 2019:

Board of Directors Member: Leszek Jaroslaw Krecielewski Member: Jeffery Charles Tuori

Company representation: Each statutory representative is authorized to represent the Company and sign on behalf of the Company independently.

2. BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS

The accompanying financial statements were prepared in accordance with the Czech Act on Accounting and the related guidelines as applicable for 2019 and 2018.

Explanation Added for Translation into English

These financial statements are presented on the basis of accounting principles and standards generally accepted in the Czech Republic. Certain accounting practices applied by the Company that conform with generally accepted accounting principles and standards in the Czech Republic may not conform with generally accepted accounting principles in other countries.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING METHODS AND DEPARTURES THEREFROM

The accounting policies applied by the Company in preparing the 2019 and 2018 financial statements are as follows:

a) Intangible Fixed Assets

Intangible fixed assets are recorded at their acquisition cost and related expenses.

Intangible fixed assets with a cost exceeding CZK 60 thousand in 2019 and 2018 are amortized over their useful economic lives.

Amortization

Amortization is calculated based on the acquisition cost and the estimated useful life of the related asset.

In the current and comparative periods, intangible fixed assets only included software. The useful economic life of software is three years.

The costs of technical improvements are capitalized. Repairs and maintenance expenses are expensed as incurred.

b) Tangible Fixed Assets

Tangible fixed assets are recorded at their acquisition cost, which consists of purchase price, freight, customs duties and other related costs.

Purchased tangible fixed assets with a cost exceeding CZK 20 thousand in 2019 and 2018 are depreciated over their useful economic lives.

The costs of technical improvements are capitalized. Repairs and maintenance expenses are expensed as incurred.

Depreciation

Depreciation is calculated based on the acquisition cost and the estimated useful life of the related asset.

The useful economic lives are as follows:

Years

Buildings 30 years

Machinery and equipment 3 - 8 years

Vehicles 4 - 5 years

Furniture and fixtures 3 – 12 years DocuSign Envelope ID: AAA10BC9-939D-4858-868F-EBC8ADC203A3

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c) Cash

Cash includes liquid valuables, cash in hand and at bank.

Within the AMWAY Group a system for utilization of idle money of individual group companies, i.e. cash pool, has been introduced. Cash deposited in, or used from, this system as at the balance sheet date is reported in ‘Short-term receivables – controlled or controlling entity’ or ‘Current liabilities – controlled or controlling entity’, as appropriate, in the accompanying balance sheet and the change in the deposited cash is reported in ‘Loans and borrowings granted’ in the accompanying cash flow statement.

d) Receivables

Receivables are initally measured at their nominal amount. Both long- and short-term receivables are carried at their realizable value after allowance for doubtful accounts. Additions to the allowance account are charged to income.

e) Equity

The basic capital of the Company is stated at the amount recorded in the Commercial Register maintained in the Municipal Court. Any increase or decrease in the basic capital made pursuant to the decision of the General Meeting which was not entered in the Commercial Register as at the balance sheet date is recorded through changes in basic capital. Contributions in excess of basic capital are recorded as share premium (agio). Other capital funds consist of monetary and non- monetary contributions in excess of basic capital, tangible assets donations, etc.

The Company conformed with Act No. 90/2012 Coll., on Business Corporations and Cooperatives (the Business Corporations Act), applying the procedure under Section 777(5) thereof. Under the original legislation, a limited liability company was required to allocate 10% of profit after tax (however, not more than 5% of basic capital) to the legal reserve fund in the first year in which profit was generated. In subsequent years, the legal reserve fund was allocated 5% of profit after tax until it reached 10% of basic capital. These funds are presented in the Company’s balance sheet as at 31 December 2019 and serve to offset losses.

f) Provisions and Liabilities

The Company creates provisions for losses and risks if the related purpose amount and timing can be reliably estimated and the accrual and matching principles are observed. These are in particular provisions for remuneration to distributors, returned goods, seminars for distributors, insurance of staff and accrued vacation.

Long-term liabilities and current liabilities are carried at their nominal values.

Any portion of long-term debt which is due within one year of the balance sheet date is classified as short-term debt.

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g) Foreign Currency Transactions

Assets and liabilities whose acquisition or production costs were denominated in foreign currencies are translated into Czech crowns at the exchange rate prevailing as at the transaction date.

On the balancesheet date monetary items are adjusted to the exchange rates as published by the Czech National Bank as at 31 December.

Realized and unrealized exchange rate gains and losses were charged or credited, as appropriate, to finance income for the year.

h) Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. The Company management prepared these estimates and predictions based on all available relevant information. These estimates and assumptions are based on information available as at the date of the financial statements and may differ from actual results.

i) Recognition of Revenues and Expenses

Revenues and expenses are recognized on an accrual basis, that is, they are recognized in the periods in which the actual flow of the related goods or services occurs, regardless of when the related monetary flow arises.

The Company generates revenue mainly from the sale of goods purchased within the group. Revenue from the sale of services includes, in particular, fees for registration renewals, commission and fees for services provided within the group.

j) Income Tax

The corporate income tax expense is calculated based on the statutory tax rate and book income before taxes, increased or decreased by the appropriate permanent and temporary differences (e.g. non- deductible provisions and allowances, entertainment expenses, differences between book and tax depreciation, etc.). In addition, the following items are taken into consideration: tax base decreasing items (donations), tax deductible items (tax loss) and income tax reliefs.

The deferred tax position reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for corporate income tax purposes, taking into consideration the period of realization.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.

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k) Subsequent Events

The impact of events that occurred between the balance sheet date and the date of the financial statements preparation is recognized in the financial statements provided these events provide additional evidence about conditions that existed at the date of the balance sheet.

If material events reflecting the facts occurring after the balance sheet date happened between the balance sheet date and the date of the financial statements preparation the consequences of these events are disclosed in the notes to the financial statements but not recognized in the financial statements.

l) Comparative figures

In 2019, the Company adjusted the reporting of advances provided.Advances provided in the amount of CZK 866 thousand were evaluated by the Company as long-term.

To ensure the comparability of these items with the previous accounting period, the related comparable data were adjusted. As at 31 December 2019, the Company reported these advances as Long-term advances provided.

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4. FIXED ASSETS

The Company’s fixed assets do not have attached any rights of other entities or any restrictions pertaining to disposition of the assets (pledges, easements, etc.). The Company does not have any assets with a market value significantly higher than the carrying amount.

a) Intangible Fixed Assets (in CZK thousands) COST

At beginning

of year Additions At end of year

Software 3,891 - 3,891

2019 Total 3,891 - 3,891

2018 Total 3,891 - 3,891

ALLOWANCES AND ACCUMULATED AMORTIZATION

At beginning of year

Amortization during year

At end of year

Net book value

Software 3,618 149 3,767 124

2019 Total 3,618 149 3,767 124

2018 Total 3,378 240 3,618 273

b) Tangible Fixed Assets (in CZK thousands) COST

At beginning

of year Additions Disposals At end of year Movable assets and sets of

movable assets 5,771 172 (591) 5,352

Other tangible fixed assets

(art works) 92 - - 92

2019 Total 5,863 172 (591) 5,444

2018 Total 6,051 34 (222) 5,863

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ALLOWANCES AND ACCUMULATED DEPRECIATION

At beginning of year

Depreciation during year

Net book value of the

sold asset

Disposals At end of year

Net book value Movable assets and sets

of movable assets 4,659 565 10 (591) 4,643 709

Other tangible fixed

assets (art works) - - - - - 92

2019 Total 4,659 565 10 (591) 4,643 801

2018 Total 3,970 829 - (140) 4,659 1,204

5. RECEIVABLES

Allowances against outstanding receivables that are considered doubtful were charged to income based on receivable ageing and their individual assessment in 2019 and 2018, respectively (see Note 6).

As at 31 December 2019 and 2018, receivables overdue for more than 181 days totaled CZK 2,379 thousand and CZK 3,014 thousand, respectively.

As at 31 December 2019 and 2018, long-term receivables included a deferred tax asset (see Note 12).

No additional long-term receivables were recorded as at the balance sheet date.

Unbilled revenue represents, in particular, unbilled services to group affiliates.

Receivables from related parties (see Note 15).

6. ALLOWANCES

Allowances reflect a temporary diminution in the value of assets (see Note 5).

Changes in the allowance accounts (in CZK thousands):

Allowances against

Balance as at

31/ 12/ 2017 Additions Deductions Balance as at

31/ 12/ 2018 Additions Deductions Balance as at 31/ 12/ 2019

Receivables 2,930 1,178 (584) 3,524 - (1,232) 2,292

7. PREPAID EXPENSES

Prepaid expenses include, in particular, prepaid purchases and insurance, which are charged to expenses for the year in which they were incurred.

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8. EQUITY

Statement of changes in equity (in CZK thousands):

Balance as at

31/ 12/ 2017 Tranfer Increase Balance as at

31/ 12/ 2018 Transfer Increase Balance as at 31/ 12/ 2019

Basic capital 1,600 - - 1,600 - - 1,600

Other capital

funds 123 - - 123 - - 123

Other

reserves 160 - - 160 - - 160

Retained earnings/

accumulated

loss (17,770) 15,430 - (2,340) 5,097 - 2,757

Profit (loss)

for the year 15,430 (15 430) 5,097 5,097 (5,097) 4,027 4,027

Total equity (457) - 5,097 4,640 - 4,027 8,667

The basic capital of the Company was fully paid as at 31 December 2019 and 2018, respectively.

Other reserves represent a reserve fund that is only intended to cover losses incurred by the Company.

The Annual General Meeting held on 28 June 2019 and 30 June 2018, approved the statutory financial statements as at 31 December 2018 and 31 December 2017 and the above profit distribution and loss compensation for 2018 and 2017 were approved. Profit will be distributed as a dividend.

9. PROVISIONS

The movements in the provision accounts were as follows (in CZK thousands):

Provisions Balance as at

31/ 12/ 2017 Additions Deductions Balance as at

31/ 12/ 2018 Additions Deductions Balance as at 31/ 12/ 2019

Other 54,108 11,066 (4,312) 60,861 8,140 (16,650) 52,351

Other provisions were created, in particular, for bonuses to distributors and for seminars. In addition, other provisions include provisions for returned goods and accrued vacation.

10. CURRENT LIABILITIES

As at 31 December 2019 and 2018, the Company had overdue current payables totaling CZK 14 thousand and CZK 28 thousand, respectively.

As at 31 December 2019 and 2018, the Company had liabilities of CZK 314 thousand and CZK 298 thousand, respectively, owing to social security and health insurance premiums.

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Unbilled deliveries represent, in particular, unbilled bonuses and other unbilled services.

Liabilities to related parties (see Note 15).

11. DEFERRED INCOME

Deferred income includes, in particular, distributors’ renewal fees for 2020 and 2019, which are recognized into income for the year in which they were earned.

12. INCOME TAXES

On the basis of preliminary calculation, the Company calculated tax expense as follows (in CZK thousands):

2019 2018

Profit before taxes 11,433 9,543

Release of reserves (16,650) (4,312)

Release of provisions (1,232) (584)

Other non-taxable revenues (308) (296)

Difference between book and tax depreciation (52) (120)

Creation of reserves 8,140 11,066

Creation of provisions - 1,178

Other non-deductible expenses (p.e. representation,

shortages and damages) 24,909 4,932

Taxable income 26,240 21,406

Donations - (65)

Adjusted taxable income 26,240 21,341

Tax base 26,240 21,341

Current income tax rate 19% 19%

Tax 4,985 4,055

Tax prepayments (5,294) (4,634)

Current tax liability ( receivable) (309) (579)