P O L A R I S   W A T E R C R A F T   A T   A   G L A N C E [ BACK ] PWC Business Profile Polaris entered the personal watercraft market in 1992. We cover all market segments, including touring, performance and racing, with 2- and 3-passenger models renowned for their stability. Our average buyer is age 41 with a household income exceeding $95,000. It's still a young market with over 60 percent of customers being first-time buyers. 1997 Overview Sales of $73 million were down 61 percent from 1996, reflecting a significant production cutback triggered by softened North American demand. Worldwide sales went from 225,000 units in 1996 to approximately 200,000 units in 1997. We anticipated the industrywide decline, given that sales leveled last year following a four-year period of over-30 percent average annual growth. We reduced our 1997 build in an effort to clean out the pipeline, which resulted in about half the season-end field inventory of the prior year. We expect the inventory pipeline to be clean by the end of the 1998 season. Highlights of the year: Expanded use of all U.S.-built engines in numerous models. Improved product quality and durability. Introduced two-passenger design with new, built-in mirrors for improved aerodynamics and styling. Won 5 World Championships at International Jet Sports Boating Association (IJSBA) World Finals. Introduced new racing fiberglass "V" hull and sponsons for added stability and control. Outlook We expect it will be 1999 before the industry resumes a more normal growth rate. We believe the current softness in retail sales is partly attributable to uncertainty about potential regulatory or legislative limits on PWC operation. As happened with sleds and ATVs, sales growth should resume once these issues are clarified. We intend to use this slowdown period to realign our products and position ourselves as one of the strongest players in the market. We see Baby Boomers and their families as the growth end of the market, so we'll continue to focus on stability-oriented 3-passenger models. Our 1999 model lineup promises to be one of the most exciting and innovative yet.

Forward-looking statements made herein contain certain important factors that could cause results to differ materially from those anticipated. See Management's Discussion and Analysis and Results of Operations beginning on page 11.