We believe that Disney's long-term prosperity fundamentally rests on our ability to create exceptional content that audiences around the world embrace, to deliver that content, to the greatest extent possible, to consumers when, how and where they want it, and to do so in a way that delivers economic value to our shareholders over the long term. Allocating capital profitably and managing our day to day operations in a way that maximizes Disney's opportunity for both creative and financial success are the most important ways that we serve the owners of our Company.

To measure how we are doing as we seek to sustain robust financial performance over time, we track three major financial metrics: 1) earnings, 2) free cash flow and 3) return on investment. We believe that we must deliver strong results on all three of these metrics over time. None of them, taken alone, is a sufficient indicator of value creation, but we believe delivering attractive results for all three of these metrics over the long run will drive long-term economic prosperity for our Company.

As we target these long-term financial goals, we will continually fortify our established businesses and brands because they remain a vital part of our future. At the same time, we will embrace and seek to capitalize on the changes that are transforming the media business. Across the Company, we are pioneering new distribution opportunities and investing in a wide variety of initiatives to position Disney as a preeminent player in the rapidly evolving media marketplace.

Two primary factors guide how we allocate capital both internally and to new ventures; first, the potential size and strategic relevance of the market opportunity an initiative offers and, second, whether or not we can capture and sustain a competitive advantage in that business we are considering entering. Sustainable competitive advantages – such as the tremendous strength of our Company's brands, Disney's spectacular library, our fundamental storytelling and creative capabilities, our ability to monetize creative success across many businesses, and our experienced front-line management teams – can deliver enhanced financial performance. These advantages can be realized in many ways, such as the ability to charge a higher price for the differentiated experience we offer, the ability to cut through the clutter of products vying for consumer attention, or a more efficient cost structure. We constantly seek to translate these benefits into enhanced profitability, growth potential and, ultimately, attractive returns on investment.

Delivering attractive returns that are comfortably above our Company's weighted average cost of capital is the basis by which we can create value for shareholders. Since strategic investment can sometimes pressure near-term returns, even while creating the foundation for future performance, we assess trends in financial metrics over time rather than looking only at short-term results. While we still have room for further improvement, we are pleased that our return on invested capital increased for the third consecutive year in 2005 even as we continued throughout that timeframe to invest for the long term.