Dear Fellow Stockholders:

I am particularly proud of our Company's performance in Fiscal Year 2007. Our results speak for themselves. Our sales were over $7 billion, breaking all previous records. We achieved respectable growth in the difficult U.S. market and delivered spectacular results in many international markets, particularly China and Russia. We are growing quickly and gaining market share in many countries around the world.

In March of this year, we held a conference for investors and analysts. They were given an in-depth look at our strategy and had an opportunity to interact with many of our senior managers. The participants responded positively to our plans and were impressed with our people.

Of course, we face many challenges and overall market conditions are uncertain. What encourages me is the way our management team is responding. In tough times, we don't run for cover. We are investing in overseas markets, which will give us a broader and better base of business. We are committed to the highest quality and are upgrading our infrastructure. We are always on the watch for the best brands and the best talent. Simply, we are investing today for the success of our business tomorrow.

As William Lauder, our President and Chief Executive Officer, says in his letter to you, our goal is to "remain the preeminent leader in global prestige cosmetics." We have grand ambitions - all of which are achievable.

I look forward to writing to you next year to report on our progress and to thank you for your continued support and trust.

Sincerely,

Leonard A. Lauder
Chairman