We continued to improve in all regions and, for the first time in years, we benefited from the effect of a weaker U.S. dollar. 

• In Europe, the Middle East & Africa, annual net sales increased 19% to $1.51 billion. In local currencies, sales in the region rose 8%. 

• In Asia/Pacific, annual net sales rose 8% to $657.8 million, while sales in local currency grew 3%. 

• In the Americas, annual net sales increased 3% to $2.95 billion. 

## RESULTS BY PRODUCT CATEGORY 

Our motto, “Bringing the Best to Everyone We Touch,” is imbedded in each of our more than 9,000 products. As a result, these products draw new consumers to our brands while building loyalty with our long-standing consumers. 

• In fiscal year 2003, skin care benefited from a heightened interest in treatment products. Thanks in part to the strong launches of Estée Lauder’s Perfectionist Correcting Serum for Lines/Wrinkles and Clinique’s Repairwear Intensive Night Cream and Repairwear Intensive Night Lotion, our skin care sales were $1.89 billion, up 11% on a reported basis and 7% on a constant currency basis. 

• Makeup sales continued to be a growth engine for the Company. Net sales of makeup products for the year were $1.91 billion, rising 7% on a reported basis and 4% on a constant currency basis. Both M . A . C and Bobbi Brown performed extraordinarily well during the fiscal year. 

• The fragrance industry as a whole was challenged as consumers made fewer impulse purchases given the economic environment and the challenging market climate. Nevertheless, in fiscal 2003, 

WE ARE ABLE TO INVEST AGGRESSIVELY IN NEW VENTURES, AS WELL AS GLOBAL EXPANSION, BECAUSE WE HAVE MANAGED OUR RESOURCES WISELY. 

our fragrance business grew to $1.06 billion, up 4% on a reported basis, but was relatively unchanged on a constant currency basis. We continue to believe in our ability to pick the winners in this category and have four of the top ten prestige fragrances for women sold in department stores in the United States. 

• Hair care continued to show growth. For fiscal year 2003, our reported hair care sales were up 6% to $228.9 million. We continue to see a vast opportunity in the estimated $4.6 billion worldwide prestige hair care and scalp treatment business. We are building our two hair care brands — Aveda and Bumble and bumble — to capitalize on this opportunity. 

## COMMUNICATING WITH CONSUMERS 

We are incredibly fortunate to have intensely loyal consumers who are passionate about our brands. Over the last year, we reached more consumers through more diverse and interconnected communications channels than ever before. For example, the Internet has proven to be an effective and efficient way to build rapport with customers. While our e-commerce business grew 44% last year, the real Internet revolution is communi- cation via on-line media. We are reaching consumers interested in our products on-line, telling them about new launches, servicing them more extensively and inviting them to the counter. 

