To Everyone Who Contributes to Nutraceutical:

Our business strategy includes a strong commitment to the Healthy Foods Channel and a focus on product innovation, quality, loyalty, education and service. Our management’s understanding of this strategy has helped us reach our current position as a leader in this channel. We are passionate about what we do and the customers we serve and will be persistent in the execution of our strategy.

During fiscal 2006, we focused on a number of important business issues, including operational improvements, brand positioning and product innovations, as well as making capital improvements for our future. We also continued our focus on increasing market share in domestic health and natural food stores through marketing and sales programs with our retail store customers. Additionally, we amended and increased our credit facility to provide for future growth. Moving forward, acquisitions and development of various product categories will remain an integral part of our growth strategy as nutritional supplement growth rates continue to be relatively flat and competitive.

We are proud of our financial results for fiscal 2006. Our net sales were $150.4 million compared to $148.2 million for fiscal 2005. Our net income for fiscal 2006 was $14.9 million compared to $12.5 million during the prior year. Operating cash flow was approximately $16.1 million in fiscal 2006 and proceeds from the sale of our Park City building generated an additional $4.5 million. This aggregate cash of $20.6 million was used primarily for purchases of property and equipment of $14.5 million and stock repurchases of $6.8 million. We believe that our operating cash flows and strong banking relationships have positioned us to respond to opportunities to grow our business—especially through acquisitions—as we move forward in fiscal 2007.

One of our most important goals is to continue to improve our manufacturing and distribution facilities and processes while we seek ways to reduce expenses. During 2007, we will continue to focus on construction and technological enhancements, which we believe will help ensure the long-term health of our business. We remain optimistic about our long-term opportunities and about our industry. We appreciate the confidence our stockholders and employees have placed in us, and we will continue to focus on building a great company based on values, passion and excellence.