Nature’s Sunshine Products, Inc. Tax Deferred Retirement Plan

Date: June 27, 2012

By:

/s/ Stephen M. Bunker

Executive Vice President, Chief Financial Officer
and Treasurer of Nature’s Sunshine Products, Inc.,
and Member of the Governing Board which is the
Plan Administrator

Report of Independent Registered Public Accounting Firm

1

Financial Statements

Statements of Net Assets Available for Benefits

2

Statement of Changes in Net Assets Available for Benefits

3

Notes to Financial Statements

4

Supplementary Schedule*

Schedule H, Part IV, Item 4i - Schedule of Assets (Held at End of Year)

14

2011

2010

Assets

Investments at fair value

$

34,553,181

$

34,896,551

Receivables:

Employee contributions

52,046

55,247

Employer contributions

20,549

20,807

Total receivables

72,595

76,054

Net assets available for benefits at fair value

34,625,776

34,972,605

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

(102,340

)

(82,372

)

Net assets available for benefits, at contract value

$

34,523,436

$

34,890,233

Additions:

Investment income:

Net appreciation in fair value of investments

$

250,040

Interest and dividends

462,798

Total investment income

712,838

Contributions:

Employee

1,455,771

Employer

435,096

Employee rollover

11,378

Total contributions

1,902,245

Total additions

2,615,083

Deductions:

Benefits paid to participants

2,980,543

Plan expenses

1,337

Total deductions

2,981,880

Net decrease in net assets available for benefits

(366,797

)

Net assets available for benefits:

Beginning of the year

34,890,233

End of the year

$

34,523,436

1.

Description of the Plan

The following brief description of the Nature’s Sunshine Products, Inc. Tax Deferred Retirement Plan (the “Plan”) provides only general information. Participants, and other users of the financial statements, should refer to the Plan document and summary plan description for a more complete description of the Plan’s provisions.

General

The Plan is a defined contribution plan established to provide retirement benefits to eligible employees of Nature’s Sunshine Products, Inc. (the “Company” or the “Employer”) and its domestic subsidiaries, Synergy Worldwide, Inc. and Nature’s Sunshine Products Direct, Inc., collectively. Employees that are 18 years of age or older are eligible to participate in the Plan immediately upon hire. The Plan is intended to be a qualified retirement plan under the Internal Revenue Code (“IRC”) and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended.

Contributions

Eligible employees automatically become a participant and are enrolled into the Plan at a 5% deferral rate, unless the employee elects otherwise. Participants may change their deferral percentage of their eligible compensation up to 100%, not to exceed the IRC limits. Contributions are limited by the IRC, which established a maximum contribution of $16,500 ($22,000 for participants age 50 and older) for the year ended December 31, 2011. Employee contributions by highly compensated employees, as defined in the IRC, may be limited by the Plan Administrator. In 2011, highly compensated employees could contribute a percentage of their eligible compensation, not to exceed 5%.

The Company matches the participants’ contributions to the Plan at 50% up to a maximum of 5% of their eligible compensation.

The Plan permits rollovers to the Plan from certain types of retirement plans.

Participant Accounts

Individual accounts are maintained for each Plan participant. Each participant’s account is credited with the participant’s contributions, the Company’s matching contributions, and an allocation of investment earnings, and is charged with withdrawals, an allocation of investment losses and its share of any expenses of the Plan. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

1.

Description of the

Participant-Directed Options for Investments

Plan Continued

Participants direct the investment of their contributions and the Company matching contributions into various investment options offered by the Plan.  Investment options include mutual funds and a common/collective trust fund. Participants may change their election or transfer monies between funds at any time.

Since March 2006, purchases of Company common stock under the Plan have been suspended. Participants with common stock of the Company in their accounts may direct the sale of the stock and the investment of the resulting monies into other investment options offered by the Plan.

Vesting

Participants are immediately vested in their contributions to the Plan plus actual earnings thereon.  A participant is 100% vested in the employer contributions and related earnings after three years of qualifying service, upon attaining the Plan’s normal retirement age of 59½, or upon death or certain types of disability while an employee.

Payment of Benefits

The Plan provides for benefit distributions (either in installments or as a lump sum) to Plan participants or their beneficiaries of their vested account balance upon termination of employment, certain types of disability or attainment of age 59½ (retirement age) while employed by the Company.  Vested benefits may also be rolled over into another eligible retirement plan.

If the value of a vested account is not greater than $1,000 when employment is terminated, the benefit will be distributed to the participant following the date of termination.

If the value of a vested account is not more than $5,000 and the participant does not elect to receive the distribution or roll it over to an eligible retirement plan, the Plan Administrator will automatically initiate a distribution to a Principal Financial Group Individual Retirement Rollover Account when employment is terminated.

The Plan provides that the remaining vested account balance of a Plan participant at death will be distributed in a lump sum to the beneficiary.

Hardship Withdrawals

Participants may withdraw all or part of their vested account balances, including voluntary contributions (but none of the income earned on such contributions after December 31, 1988), upon demonstration of a financial hardship subject to the requirements of the Plan.  Hardship withdrawals are permitted based on the safe harbor rules.

1.

Description of the

Forfeitures

Plan Continued

Forfeitures are first used to pay Plan administrative expenses and then used to reduce employer contributions. During the year ended December 31, 2011, the forfeiture account had investment gains of $37,417 and forfeitures utilized to reduce Company contributions totaled $131,667. Additional forfeitures that became available for general use for the year ended December 31, 2011 totaled $48,257.  As of December 31, 2011 and 2010, the balance in the forfeiture account was $24 and $46,017, respectively.

Nature’s Sunshine Products, Inc. Common Stock Voting Rights

Each participant is entitled to exercise voting rights attributable to shares of Nature’s Sunshine Products, Inc. common stock allocated to his or her account and is notified prior to the time that such rights are to be exercised.

2.

Summary of Significant Accounting Policies

Basis of Accounting
The financial statements of the Plan are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) — Fair Value Measurement (ASU 2011-04), to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 is effective for the Plan prospectively for the year ending December 31, 2012.  The adoption of ASU 2011-04 is not expected to have a material impact on the Plan’s financial statements.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires Plan management to make estimates and assumptions that affect certain reported amounts of net assets available for benefits at the date of the financial statements, the changes in net assets available for benefits during the reporting period and, when applicable, the disclosure of contingent assets and liabilities at the date of the financial statements.  Actual results may differ from those estimates.

Investment Contracts

Fully benefit-responsive investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan.

The Plan invests in investment contracts through a common/collective trust in the Union Bond & Trust Company Principal Stable Value Fund (the “Stable Value Fund”).  The statements of net assets available for benefits present the fair value of the investments in the collective trust as well as the adjustment of the investments in the common/collective trust from fair value to contract value

2.

Summary of Significant Accounting Policies Continued

Investment Contracts - Continued
relating to the investment contracts. The statement of changes in net assets available for benefits is prepared on a contract value basis.

Investment Valuation and Income Recognition

Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 5 for disclosure of fair value measurements.

The Plan utilizes market data or assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally observable. The Plan primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Plan uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Plan is able to classify fair value balances based on the observance of those inputs into the fair value hierarchy levels as set forth in the fair value accounting guidance.

Net appreciation (depreciation) in the fair value of investments includes both realized and unrealized gains and losses.  Purchases and sales of securities are recorded on a trade-date basis.  Dividend income is recorded on the ex-dividend date.  Investment earnings are automatically reinvested into the fund from which they were derived.

Following is a description of the valuation methodologies used for the Plan’s investment assets measured at fair value. There have been no changes in the methodologies used at December 31, 2011 and 2010.

·

Common stock: Valued at the closing price reported on the active market on which the individual securities are traded.

·

Mutual funds: Valued at the net asset value (“NAV”) of shares held by the Plan at year end.

·

Common collective trust fund: Valued based on information provided by the trustee and using the audited financial statements of the common collective trust at year end.

Level 1 inputs are quoted prices (unadjusted) or NAVs in active markets that the Plan has the ability to access as of the reporting date and consist of investments in common stock and mutual funds. Level 2 inputs, which are inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly corroborated or observable as of the reporting date and generally use valuation methodologies, consist of a common/collective trust fund as discussed in “Investment contracts” above. The common/collective trust fund is a Level 2 input as participants have the ability to redeem their investments at the contract value at that point in time. Level 3 inputs include significant pricing inputs that are generally less observable from objective sources.  The Plan holds no Level 3 investments as of December 31, 2011 and 2010.

2.

Summary of Significant Accounting Policies Continued

Investment Valuation and Income Recognition - Continued
The preceding described methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Payment of Benefits

Benefits are recorded when paid by the Plan.

Administrative Costs

Principal Financial Group (“Principal”) direct expenses, some professional fees and certain administrative fees for participant communication and services, recordkeeping and benefit payment services are paid by the Plan.  These expenses are borne by participants based on their investments in the Plan’s investment funds.  Other administrative expenses and some professional fees are paid by the Company and are not reflected within these financial statements.

3.

Risks and Uncertainties

The Plan invests in various investment securities that are exposed to various risks, such as interest rate, market and credit risks.  Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits.

As of December 31, 2011 and 2010, approximately 9% and 6%, respectively, of total Plan investments were held in Company common stock.  This investment is exposed to market risk from changes in the fair market value of such shares.

4.

Investments

The Plan’s investments that represented 5% or more of the total Plan’s net assets available for benefits as of December 31, 2011 and 2010 are as follows:

* The America Funds Growth Fund of America R4 Fund did not exceed 5% of total net assets available for benefits as of December 31, 2011.

During 2011, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated/(depreciated) in fair value as follows:

2011

Common stock

Nature’s Sunshine Products, Inc.

$

1,468,719

Common/collective trust

Union Bond & Trust Company Principal Stable Value Fund (at contact value)

76,069

Mutual Funds

Equity

(343,294

)

Balanced

(547,806

)

Fixed income

(27,976

)

International equity

(375,672

)

$

250,040

The Plan invests in a fully benefit-responsive investment contract through the stable value fund.  Union Bond & Trust Company, the trustee of the stable value fund, maintains the contributions in a general account. The account is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The objective of the stable value fund is to provide a diversified group of investments offering competitive levels of yield consistent with a stable fixed-income methodology. The stable value fund seeks to achieve this objective by investing in conventional, synthetic and separate account investment contracts issued by life insurance companies, banks and other financial institutions.

4.

Investments Continued

Market value events may limit the ability of the stable value fund to transact at contract value with the issuer. Such events may include but are not limited to: changes or amendments in fund administration, merger or consolidation of investors, group terminations or layoffs, implementation of an early retirement program, termination or partial termination of the fund, and failure to meet certain tax qualifications. Under the terms of agreement to participate in the stable value fund, withdrawals can be delayed up to 12 months upon request.  The stable value fund may grant withdrawal from the fund if there are sufficient cash assets to satisfy the request.  As of December 31, 2011, 10% of the stable value fund was in cash.

The contract value of the stable value fund at December 31, 2011 and 2010 was $4,401,445 and $4,067,762, respectively. The average yield earned based on actual earnings was 2% at December 31, 2011.

5.

Fair Value Measurements

U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).  For disclosures, U.S. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels described below:

Level 1 -

Unadjusted quoted prices in active markets for identical assets.

Level 2 -

Inputs to the valuation methodology include:

·

Quoted prices for similar assets or liabilities in active markets;

·

Quoted prices for identical or similar assets or liabilities in inactive markets;

·

Inputs other than quoted prices that are observable for the asset or liability;

·

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 -

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following tables summarize the Plan’s financial assets that were accounted for at fair value on a recurring basis as of December 31, 2011 and 2010, and the fair value calculation input hierarchy level that the Plan has determined applies to each asset category:

5.

Fair Value Measurements Continued

Assets Measured at Fair Value on a recurring basis
as of December 31, 2011

Level 1

Level 2

Level 3

Total

Mutual funds

Equity

$

8,230,057

$

¾

$

¾

$

8,230,057

Balanced

14,306,631

¾

¾

14,306,631

Fixed income

2,647,397

¾

¾

2,647,397

International equity

1,828,893

¾

¾

1,828,893

Common/collective trust

¾

4,503,785

¾

4,503,785

Common stock

3,036,418

¾

¾

3,036,418

Total assets at fair value

$

30,049,396

$

4,503,785

$

¾

$

34,553,181

Assets Measured at Fair Value on a recurring basis
as of December 31, 2010

Level 1

Level 2

Level 3

Total

Mutual funds

Equity

$

8,092,986

$

¾

$

¾

$

8,092,986

Balanced

15,645,541

¾

¾

15,645,541

Fixed income

2,948,833

¾

¾

2,948,833

International equity

2,002,547

¾

¾

2,002,547

Common/collective trust

¾

4,150,134

¾

4,150,134

Common stock

2,056,510

¾

¾

2,056,510

Total assets at fair value

$

30,746,417

$

4,150,134

$

¾

$

34,896,551

6.

Plan Termination

Although it has not expressed any intention to do so, the Company has the right under the Plan document to amend or terminate the Plan subject to the terms of the Plan agreement and the provisions of ERISA.  In the event of Plan termination, participants will become 100% vested in their employer matching contributions and these contributions become non-forfeitable.

7.

Tax Status

The Company received a determination letter dated April 27, 2010, from the Internal Revenue Service (“IRS”), informing the Company that the Plan is designed in accordance with applicable sections of the IRC. The Company believes that the Plan continues to be designed and operated in compliance with the applicable requirements of the IRC and the trust established under the Plan is tax-exempt under the IRC.  Accordingly, an income tax provision is not recorded by the Plan.

Management evaluates tax positions taken by the Plan and recognizes a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would be sustained upon examination by taxing authorities.  Plan management has concluded that as of December 31, 2011, there are no uncertain tax positions that require either recognition or disclosure in the financial statements.  The Plan is subject to routine audits by taxing authorities for tax years for which the applicable statutes of limitations have not expired.  There are currently no audits of for any tax periods in progress.  Plan management believes it is no longer subject to income tax examinations for years prior to 2008.

8.

Party-in- Interest Transactions

Certain Plan investments include mutual funds and a common/collective trust fund managed by Principal. Principal has acted as the Plan trustee, and therefore is a party-in-interest.  While transactions involving Plan assets with a party-in-interest are usually prohibited, these transactions are exempt under ERISA Section 408(b)(8).

Transactions associated with the shares of common stock of the Company are also considered exempt party-in-interest transactions. The Plan sold 33,365 shares of the Company’s common stock during the year ended December 31, 2011, and sold 49,600 shares of the Company’s common stock during the year ended December 31, 2010.  As of December 31, 2011 and 2010, the Plan held 195,645 and 229,010 shares, respectively, of common stock of the Company.

9.

Contingencies

The Company’s U.S. federal income tax returns for 2003 through 2010 are open to examination for federal tax purposes. The Company has several foreign tax jurisdictions that have open tax years from 2004 through 2010. The IRS is currently conducting an audit of the Company’s U.S. federal income tax returns for the 2009 through 2010 tax years.

In October 2009, the IRS issued an examination report formally proposing adjustments with respect to the 2003 through 2005 taxable years, which primarily relate to the prices that were charged in intra-group transfers of property and the disallowance of related deductions. The Company challenged the IRS proposals, and took the matter before the Office of Appeals of the Internal Revenue Service.  A settlement was reached with IRS Appeals and a proposed settlement agreement was signed by NSP in early January 2012.

Also during 2011, the IRS issued an examination report formally proposing adjustments with respect to the 2006 through 2008 taxable years.  As with the previous examination cycle discussed above, the adjustments relate primarily to the prices that were charged in intra-group transfers of property and the disallowance of related deductions.  The Company reached a settlement of the issues with the IRS examination team and an agreement was signed by the Company in January 2012.  On March 7, 2012, the Company received a letter from the IRS examination team stating that they accepted the examination report and do not plan to make additional changes.

10.

Reconciliation of Financial Statements to Form 5500

The financial statements are prepared on the accrual basis of accounting and the Form 5500 is prepared on the cash basis of accounting.  In addition the stable value fund holds fully benefit-responsive investment contracts. The stable value fund is reported at contract value in the statement of changes in net assets available for benefits and fair value in the Form 5500.  The following is a reconciliation of assets available for benefits of the financial statements to the Form 5500 as of and for the years ended December 31:

2011

2010

Net assets available for benefits as presented in the financial statements

$

34,523,436

$

34,890,233

Employee contributions receivable

(52,046

)

(55,247

)

Employer contributions receivable

(20,549

)

(20,807

)

Adjustment from contract value to fair value for fully benefit- responsive investment contracts

102,340

82,372

Net assets available for benefits as presented in Form 5500

$

34,553,181

$

34,896,551

The following is a reconciliation of the net increase in net assets available for benefits per the financial statements to Form 5500 for the year ended December 31, 2011:

Net decrease in net assets available for benefits per the financial statements

$

 (366,797)

Change in adjustment from fair value to contract value for fully benefit responsive investment contract

19,968

Employee contributions receivable not recorded on the Form 5500 at December 31, 2010

55,247

Employer contributions receivable not recorded on the Form 5500 at December 31, 2010

20,807

Employee contributions receivable not recorded on the Form 5500 at December 31, 2011

(52,046

)

Employer contributions receivable not recorded on the Form 5500 at December 31, 2011

(20,549

)

Net income per the Form 5500

$

 (343,370

)

(a)

(b)

(c)

(d)

(f)

Party in

Identity of

Description of

Number of

(e)

Current

Interest

Issue

Investment

Units

Cost

Value

Common/ Collective Trust:

*

Morley Financial Services, Inc.

Union Bond & Trust Company Principal Stable Value Fund (contract value of $4,401,445)

241,604

**

$

 4,503,785

Mutual Funds:

*

Principal Global Investors

Principal LifeTime 2020 R5 Fund

468,607

**

5,262,462

*

Principal Global Investors

Principal LifeTime 2030 R5 Fund

359,255

**

3,973,360

*

Principal Global Investors

Principal LifeTime 2040 R5 Fund

202,490

**

2,249,659

Capital Research and Management

T. Rowe Price/Brown LargeCap Growth I R5 Fund

248,232

**

2,164,580

PIMCO

PIMCO Total Return A Fund

145,546

**

1,582,080

*

Principal Global Investors

Principal LifeTime 2010 R5 Fund

130,705

**

1,435,146

Columbia Management Advisors

Columbia Value & Restructuring R Fund

28,819

**

1,281,292

*

Edge Asset Management, Inc.

Columbia Acorn A Fund

44,415

**

1,182,773

*

Principal Global Investors

Principal LargeCap S&P 500 Index R5 Fund

105,881

**

941,281

Harbor Capital Advisors

Harbor International Inv Fund

14,862

**

772,810

*

Principal Global Investors

Principal Real Estate Securities R5 Fund

41,067

**

699,780

*

Principal Global Investors

Principal International Emerging Markets R5 Fund

28,060

**

611,151

*

Principal Global Investors

Principal LifeTime 2050 R5 Fund

56,415

**

598,566

*

Principal Global Investors

Principal LifeTime Strategic Income R5 Fund

54,425

**

579,627

Franklin Advisers, Inc.

Templeton Global Bond R Fund

42,493

**

527,334

*

Principal Global Investors

Principal MidCap S&P 400 Index R5 Fund

34,862

**

465,410

*

Principal Global Investors

Principal Diversified International R5 Fund

49,769

**

444,932

Capital Research and Management

American Funds Growth Fund of America R4 Fund

12,103

**

427,588

Fidelity Research & Management Co.

Fidelity Advisor Government Income T Fund

30,608

**

329,960

*

Principal Global Investors

Principal SmallCap 600 Index R5 Fund

18,820

**

304,699

Goldman Sachs / LA Capital Management

Goldman Sachs MidCap Value I R5 Fund

24,189

**

300,423

Heartland Mutual Funds

Heartland Value Plus Fund

9,318

**

258,305

Fidelity Research & Management Co.

Fidelity Advisor High Income Advantage T Fund

22,071

**

206,141

Lord Abbett & Co, LLC

Lord Abbett Dev Growth R3 Fund

10,452

**

203,926

*

Edge Asset Management, Inc.

SAM Flexible Income R5 Portfolio

10,851

**

121,426

*

Edge Asset Management, Inc.

SAM Balanced R5 Portfolio

3,865

**

47,854

*

Edge Asset Management, Inc.

SAM Conservative Growth R5 Portfolio

1,533

**

19,884

*

Edge Asset Management, Inc.

SAM Strategic Growth R5 Portfolio

1,141

**

16,079

*

Edge Asset Management, Inc.

SAM Conservative Balanced R5 Portfolio

249

**

2,568

Capital Research and Management

American Funds Capital World Bond R4 Fund

92

**

1,882

Total Mutual Funds

27,012,978

Common Stock:

*

Nature’s Sunshine Products Inc.

Common Stock

195,645

**

3,036,418

Total Investments

$

34,553,181

Exhibit Number

Description

23.1

Consent of Independent Registered Public Accounting Firm — Tanner LLC