DEAR FELLOW SHAREHOLDERS, At Herbalife, we have solutions to help address the global obesity epidemic and an opportunity for people seeking additional income, which uniquely positions our company at the intersection of health and wealth. In 2010, we had an outstanding year, ending with record net sales of $2.7 billion and diluted earnings per share of $4.67; record sales leader retention of 48.9 percent (up from 43 percent last year and 27 percent in 2002) and double-digit improvement in supervisor ordering activity. Our distributors continue to create long-term sustainable businesses with customers using our products every day to help support their healthy, active lives. In 2010, we made it easier for them to get products in many of our top markets by adding sales centers and new access points. We invested in technology; introduced our first mobile application software; upgraded and expanded the reach of our online distributor Web sites and coupled these investments with increased distributor training worldwide. And, as our distributors adopted the marketing plan enhancements of Qualified Producer and 5K cumulative sales leader qualification, it became easier than ever for them to bring new people into the business and move up the marketing plan. In the product area, we introduced a variety of new and enhanced products and strengthened our flagship Formula 1 shake line with the introduction of F1 Allergen-Free (non-soy, non-gluten) and the January 2011 introduction of our Prolessa™ Duo satiety and fat-burning F1 booster. We continued our commitment to be a global leader in nutrition and broke ground for our state-of-the art botanical extraction facility in Changsha, China, which will help us to maintain the highest quality levels on our key botanical ingredients. We also made industry-leading upgrades and significant renovations to our Herbalife Innovation and Manufacturing facilities in both Lake Forest, California, and Suzhou, China, to help us continue to support the growth in our business. We launched the Herbalife Nutrition Institute to encourage and support nutrition research and education and continued to attract top talent to our scientific leadership team, including Dr. Bill Frankos, former FDA director for dietary supplement programs, and new Nutrition Advisory Board members in Israel, China and Peru. Our brand and image kept getting stronger. Together with our distributors, we sponsor more than 180 teams, athletes and events worldwide, and our distributors are taking increasingly active roles in their local market sponsorships and community service activities. We built upon this success with our 2010 sponsorship announcements of both FC Barcelona and FIFA World Player of the Year Leo Messi, as well as with Pumas Club Universidad National A.C. in Mexico and the legendary Santos FC in Brazil. Our relationships with both FC Barcelona and Leo Messi include working together to enhance the lives of children through our combined non-profit foundation activities. And in 2010, thanks to the generosity of our distributors and employees, the Herbalife Family Foundation added 12 organizations and now helps bring good nutrition to more than 15,000 children worldwide at 62 Casa Herbalife programs. 2010 was a tremendous year of execution and performance, and our stock price reflects this success. It has increased more than 68 percent in the past year, more than six times that of the Dow Jones Industrial Average. We believe that our products and business model positions us well for continued success for the foreseeable future. Thank you for your continuing confidence and support, Michael O. Johnson Chairman and Chief Executive Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) ¥ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010 n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-32381 HERBALIFE LTD. (Exact Name of Registrant as Specified in Its Charter) Cayman Islands 98-0377871 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) P.O. Box 309GT (Zip Code) Ugland House, South Church Street Grand Cayman, Cayman Islands (Address of Principal Executive Offices) (213) 745-0500 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Shares, par value $0.002 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¥ No n Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes n No ¥ Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¥ No n Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¥ No n Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229,405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. n Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¥ Accelerated filer n Non-accelerated filer n Smaller reporting company n (Do not check if a smaller reporting company) Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes n No ¥ There were 59,051,900 common shares outstanding as of February 17, 2011. The aggregate market value of the Registrant’s common shares held by non-affiliates was approximately $2,101 million as of June 30, 2010, based upon the last reported sales price on the New York Stock Exchange on that date of $46.05. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s Definitive Proxy Statement to be filed with the Securities and Exchange Commission no later than 120 days after the end of the Registrant’s fiscal year ended December 31, 2010, are incorporated by reference in Part III of this Annual Report on Form 10-K. TABLE OF CONTENTS Page PART I Item 1. Business................................................................ 4 Item 1a. Risk Factors ............................................................. 25 Item 1b. Unresolved Staff Comments ................................................. 42 Item 2. Properties............................................................... 42 Item 3. Legal Proceedings ........................................................ 42 Item 4. (Removed and Reserved) ................................................... 43 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities ....................................................... 44 Item 6. Selected Financial Data .................................................... 48 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . 50 Item 7a. Quantitative and Qualitative Disclosures About Market Risk ......................... 79 Item 8. Financial Statements and Supplementary Data . ................................. 84 Item 9. Changes In and Disagreements With Accountants On Accounting and Financial Disclosure . 84 Item 9a. Controls and Procedures .................................................... 84 Item 9b. Other Information......................................................... 87 PART III Item 10. Directors, Executive Officers and Corporate Governance ............................ 87 Item 11. Executive Compensation .................................................... 87 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ................................................................ 87 Item 13. Certain Relationships and Related Transactions, and Director Independence .............. 87 Item 14. Principal Accountant Fees and Services......................................... 87 PART IV Item 15. Exhibits and Financial Statement Schedules ..................................... 88 Signatures ...................................................................... 131 2 FORWARD-LOOKING STATEMENTS This document contains “forward-looking statements” within