Letter To Shareholders

From the big screen to the TV screen, Disney’s creative strength was abundant. ABC has delivered three of the Top 5 series so far this season among the key Adults 18-49 demographic that advertisers pay a premium to reach. They included Desperate Housewives, Lost and the number one program in the demo, Grey’s Anatomy, which were joined by two of the most popular new shows of the season, Ugly Betty and Brothers & Sisters. All of these series, I might add, were produced by Disney-owned Touchstone Television, enabling us to continue reaping financial rewards for each of these hits well into the future. Add to the list the reality series that riveted the nation, Dancing With the Stars, and ABC is poised for continued success into the coming year and beyond.

Our cable group delivered equally impressive results, highlighted by the strong performance of ESPN, which delivered double-digit growth in both revenue and operating profit. ESPN’s ratings increased substantially this year, driven by Monday Night Football and NBA playoff coverage, among other events. In fact, last year, more people watched ESPN’s four domestic cable channels than ever before, a position of strength we expect will continue into 2007 with the return of America’s fastest growing spectator sport, NASCAR.

Disney Channel also made headlines with the cultural phenomenon High School Musical, which truly took the world by storm, setting records across multiple categories, including Billboard’s best-selling record of the year, the top-selling TV home entertainment title of the year, and a New York Times best seller, not to mention outstanding ratings on Disney Channel. Our millions of High School Musical fans can look forward to even more fun in the coming year as we debut a sequel to the movie, a national concert tour, thousands of licensed musical performances in local schools and drama clubs across the country and a new line of merchandise.

As an incubator of creativity and talent, Disney Channel is second to none, generating the kind of popular new characters and stories that have made it a top television destination for kids from toddlers to tweens. This year alone, Hannah Montana, Mickey Mouse Clubhouse and The Cheetah Girls 2 have joined the ranks of That’s So Raven, The Suite Life of Zack & Cody and Little Einsteins to make Disney Channel an undisputed leader in entertainment for kids and families.