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Walt Disney – Company View

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A statement by Robert A. Iger, President and Chief Executive Officer of the board of the Walt Disney Company is given below. The statement has been taken from the company’s 2007 annual report.

I’m delighted to share with you that fiscal 2007 was another outstanding year for your Company, enlivened by significant creative and financial achievements to make all of us proud. Disney’s strong performance — across business divisions and around the world — is a tribute to the men and women of The Walt Disney Company and the great experiences they deliver to consumers. Their passion to excel is admirable, and their commitment to quality is as consistent as it is remarkable.

In 2007, we advanced our strategic priorities, strengthening our financial results, growing the value of our brands, enhancing our ability to meet critical challenges and building a solid foundation for future growth.

Creativity and innovation are at the root of everything we do, and in 2007 the creativity on display across the Company was simply amazing.

Disney Channel was a big source of that great creative energy. High School Musical 2, which premiered in August, was the highest-rated cable movie of all time and extended what has in two years become a true global franchise. Hannah Montana has emerged as one of cable television’s most successful programs, with its star, Miley Cyrus, breaking out as a top Disney recording artist and concert performer.

At our Studios, Pirates of the Caribbean: At World’s End was the No. 1 movie of 2007 in global box office while Ratatouille was the best reviewed film of the year. Ratatouille earned more than $600 million in worldwide box office, making it the third-highest-grossing Pixar movie of all time. And, as I write this letter, Enchanted is enchanting critics and movie goers alike, and we are delighted with its initial success!

There’s nowhere the excitement and magic of Disney comes to life quite like at our Parks and Resorts and 2007 was no exception. The Year of a Million Dreams has been resonating strongly with our Cast Members and Guests, so much so we are extending it into this coming year. At Disneyland, Finding Nemo Submarine Voyage has been delighting Guests and stands as another great example of Pixar’s creative strength at our parks. Our next Pixar attraction, Toy Story Mania!, opens this year in California and Florida.

Our Consumer Products division continued to come up with new ways to showcase our characters and stories through quality products that appeal to a wide range of consumers. Last year, licensed merchandise sales posted solid growth, led by our Cars and High School Musical franchises.

Our non-Disney-branded businesses also displayed great dynamism. ESPN, the preeminent brand in sports media, sustained its high level of creative excellence, bolstering its connections with fans, whether they are watching television, listening to the radio or interacting online.

At ABC, our primetime schedule has a host of successful programs, from the returning series Grey’s Anatomy, Lost, Desperate Housewives, Dancing with the Stars, Brothers & Sisters and Ugly Betty, to new shows such as Samantha Who? At ABC News, we are proud that World News Tonight is now the nation’s most-watched evening news program while our local newscasts are leaders in such key markets as Chicago, Los Angeles and New York.

In 2007, we also strengthened our international operations, forging new bonds with consumers in some of the world’s most promising markets.We released our first original Disney film in China, The Magic Gourd, built up our management teams in Russia and India and continued to grow in other markets, including Europe and Latin America.

At Disney, we use technology to enhance our high-quality content and experiences and deliver them to more people, more places, more often.

Disney.com was already the Internet’s most popular entertainment site among kids and families when we re-launched it last year. The addition of a rich array of videos, as well as casual games and easy access to all Disney businesses, has made it even more so. We are hard at work on an even newer version, to be launched in 2008.

ABC.com provided viewers with a growing selection of programs and a higher-quality experience while ESPN.com is a sports fan’s paradise, with great personalization features and incredible dimensionality, allowing the viewer to watch games, check stats, get the latest news and participate in fantasy leagues all at the same time.

Our strategic focus on creativity and innovation translates directly into an impressive financial performance. For the 2007 fiscal year, Disney’s revenue hit an all time high of $35.5 billion, a 5 percent increase over the previous year. Net income rose 39 percent to $4.69 billion, driven by growth at our Media Networks, Studio Entertainment and Parks and Resorts segments. Earnings per share, excluding certain items, grew by 24 percent to $1.92. We also delivered $3.8 billion in free cash flow and repurchased over 200 million shares of Disney stock for approximately $6.9 billion.

While we are extremely gratified by our financial performance this past year, we are also focused on delivering long-term shareholder value and on making the right investments to sustain growth, as well as superior returns and our competitive advantage.

Maintaining a strong balance sheet will continue to allow us to take advantage of opportunities, but any acquisitions and their timing will be based on sound financial and strategic logic as well as the long-term value of the acquisition to Disney.

We don’t take our position for granted. We live in a challenging and dynamic environment and feel it is imperative to apply operational and financial discipline and to manage costs carefully. While we look forward to continued artistic success, we also continuously seek ways to manage our creative processes and our Company more efficiently.

The strengthening of our creative engines remains a priority. They give Disney its competitive advantage and build brand and shareholder value. I’m proud to say that no entertainment company has as many vibrant creative engines as Disney, or the ability to leverage success across so many businesses and in so many places.

We call this value creation dynamic the Disney Difference.To make the most of our creative content, our portfolio of Disney businesses combine to create a highly effective marketing engine that helps increase revenue while affording numerous efficiencies.

When the Disney name is on a product, it enhances our ability to enter new markets, whether they are technology platforms or geographic territories, while increasing the value-generating lifespan of that product.

The Disney Difference drove our decision to focus more on making Disney-branded movies at our Studios and on developing Disney-branded video games at Consumer Products, and it will continue to drive our creative and strategic focus across numerous other businesses.

We made a number of significant decisions this past year that are designed to reinforce the Disney Difference while increasing long term shareholder value.

We purchased Club Penguin, a vibrant and entertaining online world for kids and families that will help anchor our strategy to grow in this important and expanding space. We are proud to call Club Penguin our own, and believe that it is a great fit from a creative and a strategic perspective.

At Disney.com, we recently launched a richly detailed online Pirates world and are expanding the popular virtual universe built around Tinker Bell and her friends, where fans have already created 3.5 million fairies. We are also developing an exciting online version of Radiator Springs, making the world of Cars interactive, one of our most successful content and merchandising franchises.The creation of more such compelling immersive worlds, which feature a safe, entertaining way for kids to network and play games, is a key priority of ours.

We’ve also recently announced plans to expand and improve Disney’s California Adventure in celebration of the hope and optimism that attracted Walt Disney to California in the 1920s. The addition of new family attractions, entertainment and an entirely new land, Cars Land, should make our successful Disneyland Resort even more of a must-see destination.

Our decision last year to build two new cruise ships was an exciting one.This business has not only delivered impressive returns, but it has become an important brand builder for us. Guests love the experience and appreciate the way we’ve extended this family vacation offering. We have also unveiled plans to develop a new resort at a stunning location on the Hawaiian island of Oahu, expanding our successful Disney Vacation Club concept, as well as offering a great Disney family resort experience in Hawaii.

Efforts to build our video game business are encouraging, and we will continue to invest in this growth area. We believe it will become a significant growth driver for us and can be supported by our numerous businesses in order to maximize potential and create long-lasting value.

Our commitment to high-quality creative work, a persistent focus on new technologies and intelligent investment in international markets are the strategies we believe can continue to carry us forward. But in upholding the outstanding reputation afforded to the Disney name, we must also continuously enhance our commitment to social responsibility and particularly to the families and children who are our biggest fans.

In October 2006, we decided to put our brands and characters to work for families with a new healthy food program, including healthier food options for kids at our parks and resorts and in our licensed consumer products. This pioneering initiative has since been rolled out globally to enthusiasm on the part of our Guests and consumers.This past year we also made the decision to no longer allow the depiction of cigarette smoking in Disneybranded motion pictures.

Over the last year, we have also broadened some longstanding environmental and conservation initiatives. We appointed an Environment Council, made up of senior executives from across the Company, to analyze and implement sustainable strategies for minimizing Disney’s impact on the environment. We are taking a measured and comprehensive approach to this complex, important task and expect to start putting enhanced policies in place in the coming year.

The past year also brought changes to our Board of Directors. We said goodbye to one of our longstanding Board members and welcomed a new one. Father Leo O’Donovan, President Emeritus of Georgetown University and a professor of theology at that fine institution, retired after 11 years of dedicated and distinguished service. Father Leo’s wise counsel, scholarly insight and sense of fun will be missed.

We are delighted that Susan Arnold has joined Disney’s Board. Susan has had an illustrious career at Procter & Gamble,where she is President, Global Business Units. Her expertise in connecting with consumers and in producing consistent growth from a broad portfolio of brands fits perfectly with our own goals. We are really excited to have her on our team. Our Board represents a diverse group of people with a broad set of interests and experiences, which I value greatly.

In my two years as Chief Executive, I’ve come to appreciate the breadth and depth of The Walt Disney Company even more. We have passionate, committed, talented and experienced Cast Members. Nurturing the vibrancy of the creative process, taking full advantage of the opportunities offered in emerging markets and by new technology and building on the huge potential of this great Company and its fantastic legacy is a truly inspirational challenge. I’m both a little humbled and totally thrilled to be leading Disney at such a wonderful time in its history.

Everyday, the people of The Walt Disney Company wake up to the challenge of exceeding the lofty expectations of our Guests and consumers.That’s a huge responsibility, but one that we are honored and excited to live up to. So, on behalf of the 137,000 Cast Members and employees of Disney who work to create special memories and experiences that our consumers enjoy around the clock and around the world, I’d like to thank you personally for your continued support.