Letter To Shareholders

Highlighting our financial achievements this year, revenue hit an all-time high of $34 billion, a 7% increase over the previous year. In addition, earnings per share for the year increased 34% to $1.64, reflecting growth in each of our businesses – Media Networks, Parks and Resorts, Studio Entertainment and Consumer Products.

As you can guess, everyone at Disney is excited and optimistic, but cautiously so. As an entertainment company, we face an ever-changing, often challenging environment; however, we know that nothing succeeds better or creates more value than quality. We are also aware that the dynamic nature of our business demands agility, adaptability and curiosity, the combination of which encourages active experimentation coupled with wise investment.

To exemplify this philosophy, consider Disney’s recent adoption of new distribution technologies. From iPods and cell phones to ABC.com, it is our intent to listen to consumers by making Disney entertainment available wherever, however and whenever they want it. We are among the first media companies to embrace exciting new technologies such as these, which puts us at the forefront in delivering first-rate entertainment that is, at the same time, consumer-friendly.

This approach is vital to the Company’s future growth. And clearly innovation and imagination continue to be the essential components required to get us there, as we seek to build our outstanding creative franchises across different businesses, platforms and markets, drawing in new and traditional audiences spanning multiple generations.

One such example can be seen in the continued, runaway success of Pirates of the Caribbean: Dead Man’s Chest, which was the number one movie of 2006 and the third biggest release in motion picture history, surpassing the $1 billion mark at the worldwide box office. But we didn’t stop there. Pirates books topped the best-seller lists, characters from the movie were added to the Pirates attractions at Disneyland and Walt Disney World, our Halloween costumes were the hit of the season and even adults got into the spirit with strong sales for our line of high-end Pirates-themed couture. And the Pirates DVD, released just before Christmas, broke records, selling five million units in its first day of release, while the iTunes downloadable version has also done remarkable business. We’re confident that Pirates fever will continue into this year as we await the release of our third installment of the franchise, Pirates of the Caribbean: At World’s End, which opens in May.

Disney’s strong presence in movie theaters didn’t end with Captain Jack. Cars was the number one domestic animated movie of the year, and our merchandise program captured the interest of kids around the world, producing $1 billion in retail sales for our licensees. We expect continued high performance from Cars following its holiday DVD release. We’re also excited about Pixar’s next animated movie, Ratatouille, which will be released this summer. And I’m pleased to give you an exclusive first look at the title character of their next movie, WALL• E (pictured here), which will be released the following year.