In Studio Entertainment, our results for the year were unsatisfactory and below what we delivered in 2004. There were several reasons for this underperformance. First, in our fourth fiscal quarter, we released a significantly greater number of films than we did in the prior-year quarter. Absorbing both the production cost expense of these film releases and the associated promotional and advertising costs significantly pressured our operating profit. This cost pressure was exacerbated by the disappointing box office performance of several of our titles. Our Studio performance also reflected a challenging theatrical and home video marketplace.

Our management team is aggressively focused on returning Studio results to a markedly higher level of performance. We continue to employ tactics designed to improve the returns and temper the volatility associated with the hit-driven film business, tactics that include controlling our overall spending on new films, shifting our investment in live-action films toward Disney-branded titles (which have historically generated higher rates of return than our non-Disney films) and focusing resources on projects with franchise potential. Fundamentally, we recognize that our Studio must deliver compelling films that audiences love. If we accomplish that, improved financial performance will follow. Our success so far in fiscal 2006 with Chicken Little and The Chronicles of Narnia: The Lion, the Witch and the Wardrobe indicates that we are on the right track.