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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ü No

The aggregate market value of common stock held by non-affiliates (based on the closing price on the last business day of the registrant’s most recently completed second fiscal quarter as reported on the New York Stock Exchange-Composite Transactions) was $51.3 billion. All executive officers and directors of the registrant and all persons filing a Schedule 13D with the Securities and Exchange Commission in respect to registrant’s common stock have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.

Certain information required for Part III of this report is incorporated herein by reference to the proxy statement for the 2005 annual meeting of the Company’s shareholders.

The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in four business segments: Media Networks, Parks and Resorts, Studio Entertainment and Consumer Products. For convenience, the terms “Company” and “we” are used to refer collectively to the parent company and the subsidiaries through which our various businesses are actually conducted.

Information on revenues, operating income, identifiable assets and supplemental revenue of the Company’s business segments and by geographical area appears in Note 1 to the Consolidated Financial Statements included in Item 8 hereof. The Company employed approximately 129,000 people as of September 30, 2004.

The Media Networks segment is comprised of television broadcast, radio and cable operations. The television broadcast businesses include the ABC Television Network as well as ten owned stations. Radio operations consist of the ABC Radio Networks and 71 owned stations. Cable operations consist primarily of the ESPN and Disney Channel Networks.

Generally, the television network produces its own programs or acquires broadcast rights from other producers and rights holders for network programming, and pays varying amounts of compensation to affiliated stations for broadcasting the programs and commercial announcements included therein. Network operations derives substantially all of its revenues from the sale to advertisers of time in network programs for commercial announcements. The ability to sell time for commercial announcements and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand for time on network broadcasts.


⁽¹⁾	Based on Nielsen Media Research, U.S. Television Household Estimates, January 1, 2004

Generally, the cable networks produce their own programs or acquire programming rights from other producers and rights holders for network programming. Cable operations derive substantially all of their revenues from affiliate fees charged to cable service providers and/or the sale to advertisers of time in network programs for commercial announcements. The amounts that we can charge for our cable services are largely dependent on competition and the quality and quantity of programming that we can provide. The ability to sell time for commercial announcements and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand.

Cable properties, the Company’s ownership percentage and subscribers as of September 30, 2004 are set forth in the following table:

The Company has various other international investments in broadcast and cable properties in addition to those listed in the above table.

ESPN. ESPN, Inc. operates five domestic television sports networks: ESPN, ESPN2, ESPN Classic, ESPNEWS (which is a stand-alone network or a wraparound service for some regional sports networks) and ESPN Deportes (a Spanish language network launched in January 2004). ESPN also operates a high-definition television simulcast service, ESPN HD. ESPN, Inc. owns, has equity interests in, or has distribution agreements with 29 international networks, reaching households in more than 190 countries and territories. In addition, ESPN holds a 50% equity interest in ESPN STAR Sports, which delivers sports programming throughout most of Asia, a 70% equity interest in ESPN Classic Europe, LLC., which delivers classic sports programming throughout Europe, and a 29.92% equity interest in CTV Specialty Television, Inc., which owns The Sports Network, Le Réseau des Sports, ESPN Classic Canada, the NHL Network and Discovery Canada, among other media properties in Canada.

ESPN also operates several other brand extensions, including ESPN.com, an Internet sports content provider; ESPN Regional Television; ESPN Radio, which is distributed through the ABC Radio Networks; ESPN The Magazine; BASS, the largest fishing organization in the world; ESPN Enterprises, which develops branded licensing opportunities, and the ESPN Zone sports-themed dining and entertainment facilities which are included in the Parks and Resorts segment. ESPN also provides content for newer technologies such as broadband, wireless, and video-on-demand.

Disney Channel. Disney Channel is a cable and satellite television service. Shows developed for initial exhibition on Disney Channel include comedy series such as the live-action series That’s So Raven and Phil of the Future; animated programming including Brandy & Mr. Whiskers and Dave the Barbarian, both produced by Walt Disney Television Animation; and educational preschool series like Higglytown Heroes, JoJo’s Circus for the channel’s Playhouse Disney programming block, as well as projects for its popular Disney Channel Original Movie franchise. The balance of the programming consists of products acquired from third parties and products from our owned theatrical film and television programming library.

Disney Channel also reaches outside of the United States of America via its international operations. Programming on these operations consists primarily of the Company’s theatrical film and television programming library, products acquired from third parties and locally produced programming. We continue to explore the development of Disney Channel in other countries around the world.

International Disney Channels, and launch dates are set forth in the following table:


⁽¹⁾	Represents feed extensions from the Asia regional channel.

⁽²⁾	Represents feed extensions from the Latin America regional channel.

⁽³⁾	Represents feed extensions from the Scandinavian regional channel.

⁽⁴⁾	Represents feed extensions from the Australian regional channel.

Toon Disney. Toon Disney which was launched in 1998, is intended to appeal to children and features an array of family-friendly, predominantly animated programming from the Disney library and is the primetime home of JETIX. This year, Toon Disney added several new series in the JETIX block including Spider-Man, Power Rangers DinoThunder, Beyblade VForce, Digimon and the original animated series Super Robot Monkey Team Hyperforce Go!, produced by Walt Disney Television Animation.

SOAPnet. SOAPnet was launched in January 2000 and offers a wide variety of soap opera and related programming 24 hours a day, seven days a week. SOAPnet’s primetime schedule features same-day repeat telecasts of the top-rated daytime series including All My Children, Days of our Lives, One Life To Live and General Hospital. In addition, the network provides inside access to stars and storylines with original programs, including the Emmy-nominated one-hour talk show, Soap Talk and the biography show Soapography. SOAPnet also offers primetime classics including Melrose Place,

ABC Family. In October 2001, the Company acquired Fox Family Worldwide, Inc., which was renamed ABC Family Worldwide, Inc. ABC Family operates the ABC Family Channel, a television programming service, JETIX Europe (formerly known as Fox Kids Europe), and JETIX Latin America (formerly known as Fox Kids Latin America.) ABC Family Channel programming consists of product acquired from third parties and the ABC Television Network and products from our owned theatrical film library along with original programming. Original programming includes romantic comedy movies, reality series, scripted half-hour comedies, entertainment specials and action series.

A&E. The A&E Television Networks are television programming services devoted to cultural and entertainment programming. The networks include A&E, A&E International, The History Channel, History International, a network that provides viewers with a window into non-U.S. perspectives, and The Biography Channel, launched in 1998, which is dedicated to exploration of the lives of exceptional people.

Lifetime. Lifetime Entertainment Services owns Lifetime Television, which is devoted to women’s lifestyle programming. During 1998, Lifetime launched the Lifetime Movie Network, a 24-hour channel. Lifetime Real Women is Lifetime Television’s other sister channel.

E! Entertainment. E! Entertainment Television is a television programming service focused on the entertainment world. E! Entertainment Television also launched Style, in 1998, a 24-hour television service devoted to style, beauty and home design.

The Company’s share of the financial results of A&E, Lifetime, E! Entertainment as well as other broadcast and cable equity investments is reported under the heading “Equity in the income of investees” in the Company’s Consolidated Statements of Income.

We also develop and produce television programming for distribution to global broadcasters and cable and satellite operators, including the major television networks, Disney Channel and other cable and satellite networks, under the Buena Vista Television, Buena Vista Production, Touchstone Television and Walt Disney Television labels. Program development is carried out in collaboration with a number of independent writers, producers and creative teams, with a focus on the development, production and distribution of half-hour comedies and one-hour dramas for network primetime broadcast. The one-hour drama Alias and the half-hour comedies My Wife and Kids, According to Jim, Scrubs (for NBC), 8 Simple Rules, Less Than Perfect and Hope and Faith were all renewed for the 2004/2005 television season. In addition, According to Jim will enter the syndication market in 2006. New primetime series that premiered in the fall of 2004 included the half-hour comedy Rodney, and the one-hour dramas Kevin Hill (for UPN), Lost, Life As We Know It and Desperate Housewives. Planned midseason shows include the one-hour drama Grey’s Anatomy. For the ABC Family Channel, the Company produces the successful children’s program, Power Ranger Dino Thunder, the latest version of the popular Power Rangers franchise.

Under the Walt Disney Television and Buena Vista Television labels the Company develops and produces animated children’s television programming for distribution to global broadcasters, including Disney Channel, the ABC Television Network, and other cable broadcasters.

The fall 2004 season on Disney Channel sees the return of Disney’s Kim Possible and Disney’s Lilo & Stitch with new episodes. Upcoming Disney Channel series premieres include Disney’s American Dragon: Jake Long in early 2005. The 2004/2005 ABC Saturday morning television season returns under the name ABC Kids. ABC Kids is a line-up of animated and live-action series that include, Lizzie McGuire, Power Rangers, The Proud Family, Disney’s Lilo and Stitch, That’s So Raven, Disney’s Fillmore, Disney’s Kim Possible as well as Phil of the Future.

The Company also licenses its animated television properties in a number of foreign television markets. In addition, we syndicate certain of our television programs abroad, including The Disney Club, a weekly series produced for foreign markets.

The Company also produces original television movies for The Wonderful World of Disney, which the ABC network airs on Saturday evenings.

We also produce a variety of primetime specials for exhibition on network television, as well as live-action syndicated programming, which includes Live! with Regis and Kelly and The Tony Danza Show, daily talk shows, Ebert & Roeper, a weekly motion picture review program, and game shows, such as Who Wants to Be a Millionaire.

We also operate the ABC Radio Networks, which provide programming to nearly 4,800 affiliated radio stations reaching approximately 124 million domestic listeners weekly. We own 51 standard AM radio stations and 20 FM radio stations. The ABC Radio Networks produce and distribute to affiliates a variety of programs and formats, including ABC News Radio and other news network programming, syndicated talk and music programs, ABC Sports programming and 24-hour music formats. In addition, the ABC Radio Networks produce Radio Disney, a 24-hour music and talk format intended to appeal to children and their parents. Radio Disney is carried in 57 markets, covering more than 61 percent of the U.S. market. ABC Radio Networks also distributes the ESPN Radio format, which is carried on more than 700 stations, including 275 full-time (five of which are owned by the Company), making it the largest radio sports network in the United States.

Of the Company’s 41 owned radio stations located in the top 20 U.S. advertising markets, 23 carry predominantly locally originated music and talk programming, 13 carry the Radio Disney format and four carry the ESPN Radio format. Of the Company’s 30 radio stations in the non-top-20 markets, 27 carry the Radio Disney format. Our radio stations reach 16 million people weekly in the top 20 United States advertising markets.

The business model for the Radio Networks is substantially the same as the ABC Television Network.


⁽¹⁾	Based on 2004 Arbitron Radio Market Rank

⁽²⁾	The three radio signals are operated as a single station

The Internet operations of the Media Networks segment develop, publish and distribute content for online and wireless services intended to appeal to broad consumer interest in sports, news, family and entertainment. Internet Web sites and products include ABC.com, ABCNEWS.com, Disney.com, ESPN.com and Enhanced TV. The Company’s Internet operations derive revenue from a combination of advertising and sponsorships, subscription services and e-commerce.

ABC.com is the official Web site of the ABC Television Network, while ABCNEWS.com draws on the knowledge and expertise of ABC News correspondents throughout the world. ABCNEWS.com offers subscription broadband services that provide on-demand access to leading ABC News shows, such as World News Tonight with Peter Jennings and Nightline, through alliances with AOL Broadband, Comcast and Real Networks.

Disney.com is a centralized Disney web site which integrates many of the Company’s Disney-branded Internet sites including sites for the Disney Channel, The Disney Store Online, Walt Disney Parks and Resorts, and Walt Disney Pictures.

Enhanced TV provides interactive television programming and advertising services during ABC telecasts, such as Monday Night Football.

ESPN.com delivers comprehensive sports news, information and video to millions of fans each month. ESPN.com averages 16 million users per month.

The ABC Television Network, Disney Channel, ESPN, ABC Family Channel and our other broadcast and cable/satellite services compete for viewers primarily with other television networks, independent television stations and other video media, such as cable and satellite television programming services, videocassettes and DVDs and the Internet. In the sale of advertising time, the broadcasting operations compete with other television networks, independent television stations, suppliers of cable/satellite services and other advertising media such as newspapers, magazines, billboards and the Internet. The ABC Radio Networks likewise compete with other radio networks and radio programming services, independent radio stations and other advertising media.

The Company’s television and radio stations compete with other television and radio stations, cable and satellite programming services, videocassettes, DVDs and other advertising media such as newspapers, magazines, billboards and the Internet. Competition occurs primarily in individual market areas. A television or radio station in one market generally does not compete directly with stations in other market areas.

The growth in the cable/satellite industry’s share of viewers has resulted in increased competitive pressures for advertising revenues. The Company’s cable/satellite networks also face competition for carriage by cable and satellite service operators and distributors. The Company’s contractual agreements with cable and satellite operators are renewed or renegotiated from time to time in the ordinary course of business. Consolidation and other market conditions in the cable and satellite distribution industry and other factors may adversely affect the Company’s ability to obtain and maintain contractual terms for the distribution of its various cable and satellite programming services that are as favorable as those currently in place.

The Company’s Media Networks segment also competes for the acquisition of sports and other programming. The market for programming is very competitive, particularly the markets for sports programming. The Company currently has sports rights agreements with the four major professional sports organizations – NFL, NBA, MLB and NHL – as well as for other sporting events, including, the College Football Bowl Championship Series, various college football and basketball conferences, the PGA Tour, and the Indy Racing League including the Indianapolis 500. The current agreement with the NFL expires after the telecast of the 2006 Pro Bowl.

Events of this kind for which the Company secures rights from third parties are an integral part of our programming strategy and, when combined with news and information and original programming, enable us to deliver a full complement of sports assets to our fans, advertisers and distributors.


	•	Licensing of television and radio stations. Each of the television and radio stations we own must be licensed by the FCC. These licenses are granted for periods of up to eight years, and we must obtain renewal of licenses as they expire in order to continue operating the stations. We must also obtain FCC approval whenever we seek to have a license transferred in connection with the acquisition of a station. The FCC may decline to renew or approve the transfer of a license in certain circumstances. Although we have generally received such renewals and approvals in the past, there can be no assurance that we will always obtain necessary renewals and approvals in the future.

	•	Television and radio station ownership limits. The FCC imposes limitations on the number of television stations and radio stations we can own in a specific market, on the combined number of television and radio stations we can own in a single market and on the aggregate percentage of the national audience that can be reached by television stations we own. Currently:


	•	FCC regulations permit us to own an additional television station in all of the markets in which we have television stations except Toledo, Ohio, Flint, Michigan, and Raleigh – Durham, North Carolina. We do not own more than one television station in any of the ten markets in which we own a television station.

	•	Federal statutes permit our stations in the aggregate to reach a maximum of 39% of the national audience (and FCC regulations attribute UHF television stations with only 50% of the television households in their market). Our stations reached approximately 24 percent of the national audience, (approximately 23 percent when calculated using the FCC’s attribution rule).


	•	FCC regulations in some cases impose restrictions on our ability to acquire additional radio or television stations in the markets in which we own radio stations, but we do not believe any such limitations are material to our current business plans.

In July 2003, the FCC adopted revised limits on television and radio station ownership. The rules adopted in this order generally would relax existing ownership restrictions and would permit entities to own more television and radio stations in some markets, but would also eliminate the 50% discount for calculating households reached by UHF television stations operated by the top four broadcast television networks (including ABC). The effectiveness of the new rules, however, was stayed by a federal court order, and the FCC has been ordered to review the rules. As a result, most of the revised rules adopted by the FCC in July 2003 are not in effect. Although it is possible that the FCC may implement more liberal media ownership rules than those currently in effect (other than those governed by statute), we cannot predict whether the revised rules will be implemented and if so, when such rules will become effective.


	•	Dual networks. FCC rules currently prohibit any of the four major television networks – ABC, CBS, Fox and NBC – from being under common ownership or control. The new FCC rules, if implemented, would not modify this limitation.

	•	Regulation of programming. The FCC regulates programming by, among other things, banning “indecent” programming and imposing restrictions and commercial time limits on political advertising. Broadcasters face a heightened risk of being found in violation of the indecency prohibition because of recent FCC decisions, coupled with the spontaneity of live programming. Recently, the FCC has indicated that it is stepping up enforcement activities as they apply to indecency, and has indicated it would consider license revocation for serious violations. Moreover, legislation has been introduced in Congress that would increase penalties for broadcasting indecent programming.

Federal legislation and FCC rules also limit the amount of commercial matter that may be shown on broadcast or cable channels during programming designed for children 12 years of age and younger. In addition, broadcast channels are generally required to provide a minimum of three hours per week of programming that has as a “significant purpose” meeting the educational and informational needs of children 17 years of age and younger. FCC rules also give television station owners the right to reject or refuse network programming in certain circumstances or to substitute programming that the licensee reasonably believes to be of greater local or national importance.


	•	Cable and satellite carriage of broadcast television stations. With respect to cable systems operating within a television station’s Designated Market Area, FCC rules require that every three years each television station elect either “must carry” status, pursuant to which cable operators must carry a local television station in the station’s market, or “retransmission consent” status, pursuant to which the cable operator is required to negotiate with the television station to obtain the consent of the television station for carriage of its signal. Under the Satellite Home Improvement Act, satellite carriers are permitted to retransmit a local television station’s signal into its local market with the consent of the local television station. If a satellite carrier elects to carry one local station in a market, the satellite carrier must carry the signals of all local television stations that also request carriage. Certain of these satellite carriage provisions are set to expire on December 31, 2004; however, Congress is currently considering legislation that would extend this term to December 31, 2009. We cannot predict whether this legislation, or other similar legislation, will become law.

	•	Digital television. FCC rules currently require full-power analog television stations, such as ours, to provide digital service on a second broadcast channel granted specifically for the phase-in of digital broadcasting. FCC rules also regulate digital broadcasting to ensure continued quality carriage of mandated free over-the-air program service. All of the Com-


		pany’s stations have launched digital facilities, and we are evaluating various options with respect to use of digital channels. Under current law, all broadcasters are required to operate exclusively in digital mode and permanently surrender one of their two channels by December 31, 2006. However, the FCC has the authority in certain circumstances to extend this deadline in a particular market upon the request of a station. On September 7, 2004, the FCC established intermediate deadlines by which stations must proceed with the transition to digital, but deferred any determination as to how it would interpret its authority to extend the December 31, 2006 deadline in a particular market.

The foregoing is a brief summary of certain provisions of the Communications Act and other legislation and of specific FCC rules and policies. This summary focuses on provisions material to our business. Reference should be made to the Communications Act, other legislation, FCC rules and public notices and rulings of the FCC for further information concerning the nature and extent of the FCC’s regulatory authority.

FCC laws and regulations are subject to change, and the Company generally cannot predict whether new legislation, court action or regulations, or a change in the extent of application or enforcement of current laws and regulations, would have an adverse impact on our operations.

The Company owns and operates the Walt Disney World Resort and Disney Cruise Line in Florida, the Disneyland Resort in California, ESPN Zone facilities in several states and The Mighty Ducks of Anaheim. The Company manages and has ownership interests in the Disneyland Resort Paris in France (also referred to as Euro Disney) and Hong Kong Disneyland, which is under construction and scheduled to open in fiscal 2005. The Company’s ownership interests in Disneyland Resort Paris and Hong Kong Disneyland are 41% and 43%, respectively. The Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 46R Consolidation of Variable Interest Entities (FIN 46R) in fiscal 2004 and as a result, consolidated the balance sheets of Euro Disney and Hong Kong Disneyland as of March 31, 2004, and the income and cash flow statements beginning April 1, 2004 (see Notes 2 and 4 to the Consolidated Financial Statements for further discussion). The Company also licenses the operations of the Tokyo Disney Resort in Japan. The Company’s Walt Disney Imagineering unit designs and develops new theme park concepts and attractions as well as resort properties.

The businesses in the Parks and Resorts segment generate revenues predominately from the sale of admissions to the theme parks, room nights at the hotel and rentals at the resort properties. Costs consist primarily of the fixed cost base for physical properties and base level staffing necessary to operate the theme park and resort properties. In addition to the fixed cost base, there is a variable cost component that increases or decreases with the volume of business.

The Walt Disney World Resort is located 15 miles southwest of Orlando, Florida on approximately 30,500 acres of land owned by Company subsidiaries. The resort includes theme parks (the Magic Kingdom, Epcot, Disney-MGM Studios and Disney’s Animal Kingdom); hotels; vacation ownership units; a retail, dining and entertainment complex; a sports complex; conference centers; campgrounds; golf courses; water parks and other recreational facilities designed to attract visitors for an extended stay.

The entire Walt Disney World Resort is marketed through a variety of national, international and local advertising and promotional activities. Several attractions in each of the theme parks are sponsored by corporate participants.

Magic Kingdom – The Magic Kingdom, which opened in 1971, consists of seven themed lands: Main Street USA, Adventureland, Fantasyland, Frontierland, Liberty Square, Mickey’s Toontown Fair

Epcot – Epcot, which opened in 1982, consists of two major themed areas: Future World and World Showcase. Future World dramatizes certain historical developments and addresses the challenges facing the world today through major pavilions devoted to showcasing science and technology improvements, communication, energy, transportation, using your imagination, life and health, nature and food production, the ocean environment, and space. World Showcase presents a community of nations focusing on the culture, traditions and accomplishments of people around the world. Countries represented with pavilions include the United States, Canada, China, France, Germany, Italy, Japan, Mexico, Morocco, Norway and the United Kingdom. Both areas feature themed rides and attractions, restaurants and merchandise shops.

Disney-MGM Studios – The Disney-MGM Studios, which opened in 1989, consists of a theme park, a radio studio and a film and television production facility. The park centers on Hollywood as it was during the 1930’s and 1940’s and provides various attractions, themed food service and merchandise facilities. The production facility consists of three sound stages, merchandise shops and a back lot area and currently hosts both feature film and television productions. Disney-MGM Studios also features Fantasmic!, a nighttime entertainment spectacular.

Disney’s Animal Kingdom – Disney’s Animal Kingdom, which opened in 1998, consists of a 145-foot Tree of Life centerpiece surrounded by six themed areas: Dinoland U.S.A., Africa, Rafiki’s Planet Watch, Asia, Discovery Island and Camp Minnie — Mickey. Each themed area contains adventure attractions, entertainment shows, restaurants and merchandise shops. The park features more than 300 species of mammals, birds, reptiles and amphibians and 4,000 varieties of trees and plants on more than 500 acres of land.

Resort Facilities – As of September 30, 2004, the Company owned and operated 17 resort hotels at the Walt Disney World Resort, with a total of approximately 22,000 rooms and 318,000 square feet of conference meeting space. In addition, Disney’s Fort Wilderness camping and recreational area offers approximately 800 campsites.

The Disney Vacation Club (DVC) offers ownership interests in 7 resort facilities, located at the Walt Disney World Resort, as well as in Vero Beach, Florida, and Hilton Head Island, South Carolina. Available units at each facility are offered for sale under a vacation ownership plan and are operated as rental property until the units are sold. Disney’s Saratoga Spring Resort & Spa in Orlando, Florida opened its first phase of vacation ownership properties in May 2004. Upon the completion of Saratoga Springs, the Walt Disney World Resort will have nearly 2,100 vacation ownership units.

Recreational amenities and activities available at the Walt Disney World Resort include five championship golf courses, miniature golf courses, full-service spas, tennis, sailing, water skiing, swimming, horseback riding and a number of other noncompetitive sports and leisure time activities. The resort also includes two water parks: Blizzard Beach and Typhoon Lagoon.

We have also developed a 120-acre retail, dining and entertainment complex known as Downtown Disney, which consists of the Marketplace, Pleasure Island and West Side. In addition to more than 20 specialty retail shops and restaurants, the Downtown Disney Marketplace is home to the 50,000-square-foot World of Disney retail store featuring Disney-branded merchandise. Pleasure Island, a nighttime entertainment center adjacent to the Downtown Disney Marketplace, includes restaurants, nightclubs and shopping facilities. Downtown Disney West Side is situated on 66 acres on the west side of Pleasure Island and includes a DisneyQuest facility, Cirque du Soleil, House of Blues and several retail, dining and entertainment operations.

Disney’s Wide World of Sports, which opened in 1997, is a 220 acre sports complex providing professional caliber training and competition, festival and tournament events and interactive sports

activities. The complex’s venues accommodate more than 30 different sporting events, including baseball, tennis, basketball, softball, track and field, football and soccer. Its stadium is the spring training site for MLB’s Atlanta Braves and has a seating capacity of 9,000. Additionally, the complex is the pre-season training site of the NFL’s Tampa Bay Buccaneers, and the NBA’s Orlando Magic. The Amateur Athletic Union hosts approximately 30 championship events per year at the facility.

In the Downtown Disney Resort area, seven independently operated hotels are situated on property leased from the Company. These hotels have a capacity of approximately 3,700 rooms. Additionally, two hotels, the Walt Disney World Swan and the Walt Disney World Dolphin, with an aggregate capacity of approximately 2,300 rooms, are independently operated on property leased from the Company near Epcot.

The entire Disneyland Resort is marketed through international, national and local advertising and promotional activities as a destination resort. A number of the attractions and restaurants at each of the theme parks are sponsored by other corporations through long-term agreements.

Disneyland – Disneyland, which opened in 1955, consists of Main Street USA and seven principal areas: Adventureland, Critter Country, Fantasyland, Frontierland, New Orleans Square, Tomorrowland and Toontown. These areas feature themed rides and attractions, restaurants, refreshment stands and merchandise shops.

Disney’s California Adventure – Disney’s California Adventure, which opened in 2001, is adjacent to Disneyland and includes four principal areas: Golden State, Hollywood Pictures Backlot, Paradise Pier and “a bug’s land”. These areas include rides, attractions, shows, restaurants, merchandise shops and refreshment stands.

Resort Facilities – Disneyland Resort includes three Company-owned hotels: the 1,000-room Disneyland Hotel, 500-room Disney’s Paradise Pier Hotel and Disney’s Grand Californian Hotel, a deluxe 750-room hotel located adjacent to Disney’s California Adventure.

The Resort also includes Downtown Disney, a themed 310,000 square foot outdoor complex of entertainment, dining and shopping venues, located adjacent to both Disneyland Park and Disney’s California Adventure.

Disneyland Resort Paris is a 4,800 acre development located in Marne-la-Vallée, approximately 20 miles east of Paris, France. Euro Disney S.C.A. (Euro Disney) and its subsidiaries operate the Disneyland Resort Paris, which includes the Disneyland Park; the Walt Disney Studios Park; seven themed hotels with approximately 5,800 rooms; two convention centers; the Disney Village, a shopping, dining and entertainment center; and a 27-hole golf facility. Of the 4,800 acres comprising the site, 2,400 acres have been developed to date. The project is being developed pursuant to a 1987 master agreement with the French governmental authorities.

Disneyland Park, which opened in 1992, consists of Main Street and four principal themed areas: Adventureland, Discoveryland, Fantasyland and Frontierland. These areas include themed rides, attractions, shows, restaurants, merchandise shops and refreshment stands.

Walt Disney Studios Park opened in March 2002 adjacent to Disneyland Park. The park takes guests into the worlds of cinema, animation and television and includes four principal themed areas:

Development of the site also continues with the Val d’Europe project, a newly constructed planned community being built near Disneyland Resort Paris. The first two phases of the city of Val d’Europe include a town center, which consists of a shopping center; a 150 room hotel; office, commercial and residential space; and a regional train station. These new developments are operated by third parties on land leased or purchased from Euro Disney. In July 2003 Euro Disney signed an agreement with a third party developer beginning the third phase of Val d’Europe. Included in this phase will be expansion of Disney Village and projects aimed at increasing Val d’Europe’s capacity to welcome new residents.

In addition, there are several new on-site hotels which were opened in 2003 and 2004 that are owned and operated by third party developers that provide approximately 1,860 rooms. Agreements have been signed with additional third party developers to provide approximately 350 additional on-site hotel rooms and/or time share units over the next two years.

Euro Disney is currently in the process of a financial restructuring that, if completed, will provide for an increase in capital and refinancing of its borrowings. Subject to certain deferrals, Euro Disney is required to pay royalties and management fees to the Company. (See Note 4 to the Consolidated Financial Statements for further discussion).

The Company receives a royalty and management fee based on the performance of the operations of the park. Payment of the royalties and management fees were deferred during fiscal year 2004. The financial restructuring provides for payment of these fees on completion of the restructuring anticipated in fiscal year 2005.

In 1999, the Company and the Government of the Hong Kong Special Administrative Region signed a master project agreement for the development and operation of Hong Kong Disneyland. Phase I of the development, which will be located on 311 acres of land on Lantau Island, includes the Hong Kong Disneyland theme park and two hotels. Hong Kong Disneyland is currently targeted to open in fiscal 2005. The master project agreement permits further phased buildout of the development under certain circumstances.

Construction and operation of the project will be the responsibility of Hongkong International Theme Parks Limited, an entity in which the Hong Kong Government owns a 57% interest and a subsidiary of the Company owns the remaining 43%. A separate Hong Kong subsidiary of the Company is responsible for managing Hong Kong Disneyland. Based on the current exchange rate between the Hong Kong and U.S. dollars, the Company’s equity contribution obligation is limited to U.S. $314 million. As of September 30, 2004 the Company had contributed U.S. $168 million and the remaining $146 million is payable over the next two years. Once Hong Kong Disneyland commences operations, Company subsidiaries will be entitled to receive management fees and royalties in addition to the Company’s equity interest.

Tokyo Disney Resort is located on approximately 494 acres of land, six miles east of downtown Tokyo, Japan. The resort includes two theme parks (Tokyo Disneyland and Tokyo DisneySea); two Disney-branded hotels; five independently operated hotels; several merchandise shops; and Ikspiari, a retail, dining and entertainment complex. The Company earns royalties on revenues generated by the Tokyo Disney Resort, which is owned and operated by Oriental Land Co., Ltd. (OLC), a Japanese corporation in which the Company has no investment. OLC markets the Tokyo Disney Resort primarily through a variety of local, domestic and international advertising and promotional activities. Long-term corporate partners sponsor many of the theme park attractions.

Tokyo Disneyland, which opened in 1983, was the first Disney theme park to open outside the United States. Tokyo Disneyland consists of seven principal areas: Adventureland, Critter Country, Fantasyland, Tomorrowland, Toontown, Westernland and World Bazaar.

Tokyo DisneySea, adjacent to Tokyo Disneyland, opened in 2001. The park is divided into seven unique “ports of call,” including Mediterranean Harbor, American Waterfront, Port Discovery, Lost River Delta, Mermaid Lagoon, Mysterious Island and Arabian Coast. The resort includes the 502-room Tokyo Disney Sea Hotel MiraCosta, the 504-room Disney Ambassador Hotel, the Disney Resort Line monorail and the Bon Voyage merchandise location and Ikspiari, a retail, dining and entertainment complex.

Disney Cruise Line, which is operated out of Port Canaveral, Florida, is a cruise vacation line that includes two 85,000-ton ships, the Disney Magic and the Disney Wonder. Both ships cater to children, families and adults, with distinctly themed areas and activities for each group. Each ship features 877 staterooms, 71% of which are outside staterooms providing guests with ocean views. Cruise vacations often include a visit to Disney’s Castaway Cay, a 1,000-acre private Bahamian island. The Company packages three, four, and seven day cruise vacations with visits to the Walt Disney World Resort and also offers cruise-only options.

All of the theme parks and the associated resort facilities are operated on a year-round basis. Historically, the theme parks and resort business experiences fluctuations in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and local entertainment excursions. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early-winter and spring holiday periods.

The Company’s theme parks and resorts compete with all other forms of entertainment, lodging, tourism and recreational activities. The profitability of the leisure-time industry is influenced by various factors that are not directly controllable, such as economic conditions including business cycle and exchange rate fluctuations, travel industry trends, amount of available leisure time, oil and transportation prices and weather patterns.

The Studio Entertainment segment produces and acquires live-action and animated motion pictures, animated direct-to-video programming, musical recordings and live stage plays.

The Company distributes produced and acquired films (including its film and television library) to the theatrical, home entertainment, pay-per-view, video-on-demand, pay television and free-to-air television markets. Each of these markets is discussed in more detail below.

Walt Disney Pictures and Television, a subsidiary of the Company, produces and acquires live-action motion pictures that are distributed primarily under the Walt Disney Pictures and Touchstone Pictures banners. Another subsidiary, Miramax Film Corp., acquires and produces motion pictures that are distributed under the Miramax and Dimension banners. The Company also produces and distributes animated motion pictures under the banner Walt Disney Pictures, and co-finances and distributes animated motion pictures developed in conjunction with Pixar, Inc. The Company’s relationship with Pixar is discussed in more detail below in the section labeled “Relationship with Pixar”.

During fiscal 2005, we expect to distribute in domestic markets approximately 18 feature films under the Walt Disney Pictures and Touchstone Pictures banners and approximately 19 films under the Miramax and Dimension banners. These expected releases include several live-action family films and full-length animated films, with the remainder targeted to teenagers, families and/or adults. As of September 30, 2004, the Company had released 832 full-length live-action features (primarily color), 69 full-length animated color features, approximately 540 cartoon shorts and 53 live action shorts under the Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures, Miramax and Dimension banners.

We distribute and market our filmed products principally through our own distribution and marketing companies in the United States and major foreign markets. Films released theatrically in the U.S. can be released simultaneously theatrically in international territories or generally up to six months later.

The Company incurs significant marketing and advertising costs before and throughout the theatrical release of a film in an effort to generate public awareness of the film, to increase the public’s intent to view the film and to help generate significant consumer interest in the subsequent home entertainment and other ancillary markets. These costs are expensed as incurred, and therefore we typically incur losses in the theatrical markets on a film, including the quarters before the theatrical release of the film.

The domestic and international home entertainment window typically starts four to six months after each theatrical release with the issuance of DVD and VHS versions of each title. Domestically, most titles are sold simultaneously to both “rentailers,” such as Blockbuster Inc., and retailers, such as Best Buy Co., Inc. Upon a title’s home entertainment release, consumers are afforded the option to rent for a limited period of time typically, two to seven days, or purchase the titles outright (“sell-through”).

In the international home entertainment market, titles are either released simultaneously in the rental and sell-through channels or with a rental window before sell-through, depending on local market regulations, DVD hardware penetration and DVD software demand. The international market has experienced a trend in the compression of, or in some cases the disappearance of, the rental window.

As of September 30, 2004, under the banners Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures, Miramax and Dimension, 1,121 produced and acquired titles, including 937 live action titles and 184 cartoon shorts and animated features, were available to the domestic home entertainment marketplace and 2,481 produced and acquired titles, including 2,006 live action titles and 475 cartoon shorts and animated features, were available to the international home entertainment market.

Pay-Per-View: Generally about two months after the home entertainment window begins, the studio’s television distributor, Buena Vista Television, licenses titles to cable, satellite and internet platforms for showing on a pay-per-view basis (PPV). PPV services, such as iN DEMAND and DirecTV, deliver one-time rentals electronically to consumers’ televisions at a price comparable to that of physical media rentals. Video on Demand (VOD) is an augmentation of PPV, and currently shares the PPV window. The PPV/ VOD window lasts generally about three months.

Pay Television (Pay 1): Effective with theatrical releases beginning January 1, 2003, there are two pay television windows. The first window is generally fifteen months in duration and follows the PPV/ VOD window. The Company has licensed to the Encore pay television services, over a multi-year period, exclusive domestic pay television rights to certain films released under the Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures, Miramax and Dimension banners.

Free Television (Free 1): Following the Pay 1 window is a free television window wherein telecasts are accessible to consumers without charge. This free window may last up to 84 months. Motion pictures are usually sold in the first free window on an ad hoc basis to major networks and basic cable services. For films released theatrically prior to October 1st, 2004, the Company maintains only one output deal, with the ABC Television Network and its affiliates, covering branded live action and animated product broadcast in the Wonderful World of Disney slot. Films released after that date will be sold on an ad hoc basis to other networks besides ABC.

Pay Television 2 (Pay 2) and Free Television 2 (Free 2): In the U.S., Free 1 is generally followed by a twelve month Pay 2 window, included under our license arrangement with Encore, and finally by a second Free window (Free 2). The Free 2 window is a syndication window where films are licensed both to basic cable networks and to station groups, such as Tribune Co. Major packages of the Company’s feature films and animated television programming have been licensed for broadcast under multi-year agreements.

International Television: The Company also licenses its theatrical and television properties outside of the US. The typical windowing sequence is broadly consistent with the domestic cycle such that titles premiere on television in PPV/ VOD then air in pay TV before airing in free TV. Certain properties may then be re-licensed to one or more of the above windows. Windowing strategies are developed in response to local market practices and conditions, and the exact sequence and length of each window can vary country by country.

Walt Disney Records produces and distributes compact discs, audiocassettes and records, consisting primarily of soundtracks from animated films and read-along products, directed at the children’s market in the United States. We also license the creation of similar products throughout the rest of the world. Our Hollywood Records subsidiary, under the Hollywood Records and Buena Vista Records labels, develops, produces and markets recordings from new talent across the spectrum of popular music, as well as soundtracks from certain live-action motion pictures. We also own the Nashville-based music label Lyric Street Records.

In addition, each of our labels and our music publishing companies commission new music for the Company’s motion pictures and television programs, and records the songs and licenses the song

Disney Theatrical Productions develops, produces and licenses stage musicals worldwide. To date, the Company’s shows have included Beauty and the Beast, The Lion King and Elton John and Tim Rice’s Aida. The Company generally elects to produce its own shows in the United States, the United Kingdom and Australia and licenses its shows to local producers in other territories. As of September 30, 2004, Disney Theatrical Production had fourteen productions running worldwide. Three new productions opening in fiscal 2005 include: Mary Poppins in London (a co-production with Cameron Mackintosh) in December 2004; On The Record US Tour which premiered in Cleveland in November 2004; and Aida in Seoul, Korea in August 2005.

Disney Live Family Entertainment has eight different Disney on Ice shows touring in more than 40 countries worldwide. The newest Disney On Ice show, Disney/ Pixar’s Finding Nemo opened in September 2004 and will tour throughout the United States and in Mexico over the next two years. Disney Live! Winnie the Pooh’s Perfect Day launched in July 2004. Disney Live! is a new brand of live family entertainment which will perform in theaters and arenas. Both Disney On Ice and Disney Live! are licensed to Feld Entertainment.

The Company entered into a feature film agreement with Pixar in 1991, which resulted in the release of its first film with Pixar, Toy Story, in November 1995. In 1997, the Company extended its relationship with Pixar by entering into a co-production agreement, under which Pixar agreed to produce, on an exclusive basis, five original computer-animated feature films for distribution by the Company. Both parties agreed to co-finance and co-brand the films and share equally in the profits of each picture and any related merchandise or ancillary products, after the Company recovers all marketing costs and receives a distribution fee. The first four films under the extension were A Bug’s Life, Monsters, Inc., Finding Nemo and The Incredibles. Pixar is currently in production on the final film under the agreement which is Cars. The Company retains the right to produce sequels to the films that it co-produced with Pixar.

The Studio Entertainment businesses compete with all forms of entertainment. A significant number of companies produce and/or distribute theatrical and television films, exploit products in the home entertainment market, provide pay television programming services and sponsor live theater. We also compete to obtain creative and performing talents, story properties, advertiser support, broadcast rights and market share, which are essential to the success of our Studio Entertainment businesses.

The Company’s ability to exploit and protect rights in its content, including its motion pictures, television programs and sound recordings is affected by the strength and effectiveness of intellectual property laws in the United States and abroad. Inadequate laws or enforcement mechanisms to protect intellectual property in a country can adversely affect the results of the Company’s operations, despite the Company’s strong efforts to protect its intellectual property rights throughout the world.

The Company’s businesses are also subject to the risk of challenges by third parties claiming infringement of their proprietary rights. Regardless of their validity, such claims may result in substantial costs and diversion of resources which could have an adverse effect on the Company.

See further discussion under “Consumer Products – Competition, Seasonality and Intellectual Property Protection” below.

The Consumer Products segment partners with licensees, manufacturers, publishers and retailers throughout the world to design, promote and sell a wide variety of products based on existing and new Disney characters and other intellectual property. In addition to promoting the Company’s film and television programs, Consumer Products develops new intellectual property within its publishing and interactive gaming divisions with the potential of being leveraged across the company. The Company also engages in retail, direct mail and online distribution of products based on the Company’s characters and films through the Disney Stores, the Disney Catalog and DisneyDirect.com, respectively. As discussed in Note 14 to the Consolidated Financial Statements, the Company sold the Disney Store in North America in November 2004.

The Company’s worldwide merchandise licensing operations are divided among three lines of business: Disney Hardlines which includes product categories such as consumer electronics, home and infant, stationery, food and personal care products; Disney Softlines which includes apparel, accessories and footwear, and Disney Toys. Through these lines of business, the Company earns royalties, which are usually based on a fixed percentage of the wholesale or retail-selling price of the licensee’s products. The Company licenses characters from its film, television and other properties. Some of the major properties licensed by the Company include Mickey Mouse, Winnie the Pooh and Disney Princess. The Company partners, both globally and regionally, with key strategic licensees. The Company has also expanded its ability to design individual products across all categories and create exclusive themed and seasonal promotional campaigns for retailers based on characters, movies and TV shows. “Direct-to-retail” relationships have enabled the Company to offer Disney products at competitive prices with the world’s major retailers.

The Company publishes children’s books, magazines and continuity programs in 55 languages in 74 countries, reaching more than 100 million readers each month. During 2004, the Company’s U.S. children’s book group published several titles including Peter and the Starcatchers, a prequel to Peter Pan by Dave Barry and Ridley Pearson, The Golem’s Eye, by Jonathan Stroud and a second book in the Bartimaeus trilogy (co-published with Miramax), as well as Don’t Let the Pigeon Drive the Bus, by Mo Willems. The Company’s consumer magazine business includes such titles as Disney Magazine, Disney Adventures, Discover and FamilyFun. The comic magazine business includes titles such as W.I.T.C.H., which has 32 international editions and is published in almost 70 countries worldwide. Through its continuity programs, Disney offers language-learning products such as Disney’s Magic English.

The Company has marketed Disney-themed products directly through retail facilities operated under the Disney Store name. These facilities are generally located in leading shopping malls and other retail complexes. The stores carry a wide variety of Disney merchandise and promote other businesses of the Company. The total number of owned and operated stores was 423 as of September 30, 2004, after 58 stores were closed during fiscal 2004. Subsequently, in November 2004, 313 stores in North America were sold to a wholly owned subsidiary of The Children’s Place. The Company continues to own 107 stores primarily in Europe (See Note 14 to the Consolidated Financial Statements for discussion on the sale of the Disney Store chain in North America). The Company is currently considering options with respect to the stores in Europe, including a potential sale.

The Company competes in its character merchandising and other licensing, publishing, interactive and retail activities with other licensors, publishers and retailers of character, brand and celebrity names. Although public information is limited, we believe the Company is the largest worldwide licensor of character-based merchandise and producer/distributor of children’s film-related products based on retail sales. Operating results for the licensing and retail distribution business are influenced by seasonal consumer purchasing behavior and by the timing and performance of animated theatrical releases.

The Company’s licensing businesses, as well as its studio entertainment and theme park and resort operations, are affected by the Company’s ability to exploit and protect its intellectual property, including trademarks, trade names, copyrights, patents and trade secrets, throughout the world. As a result, domestic and foreign laws protecting intellectual property rights are important to the Company. The right and ability to enforce intellectual property rights against infringement are essential to the Company’s businesses. These businesses are also subject to the risk of challenges by third parties claiming infringement of their proprietary rights. Regardless of their validity, such claims may result in substantial costs and diversion of resources which could have an adverse effect on the Company’s licensing operations.

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available without charge on our website, www.disney.com/investors, as soon as reasonably practicable after they are filed electronically with the SEC. We are providing the address to our Internet site solely for the information of investors. We do not intend the address to be an active link or to otherwise incorporate the contents of the website into this report.

The Walt Disney World Resort, Disneyland Park and other properties of the Company and its subsidiaries are described in Item 1 under the caption Parks and Resorts. Film library properties are

The Company and its subsidiaries own and lease properties throughout the world. The table below provides a brief description of the significant properties and the related business segment.


⁽¹⁾	Corp – Corporate, CP – Consumer Products and TP&R – Theme Parks and Resorts

In re The Walt Disney Company Derivative Litigation. William and Geraldine Brehm and thirteen other individuals filed an amended and consolidated complaint on May 28, 1997 in the Delaware Court of Chancery seeking, among other things, a declaratory judgment against each of the Company’s directors as of December 1996 that the Company’s 1995 employment agreement with its former president Michael S. Ovitz, was void, or alternatively that Mr. Ovitz’s termination should be deemed a termination “for cause” and any severance payments to him forfeited. On October 8, 1998, the Delaware Court of Chancery dismissed all counts of the amended complaint. Plaintiffs appealed, and on February 9, 2000, the Supreme Court of Delaware affirmed the dismissal but ruled also that plaintiffs should be permitted to file an amended complaint in accordance with the Court’s opinion. The plaintiffs filed their amended complaint on January 3, 2002. On February 6, 2003, the Company’s directors’ motion to dismiss the amended complaint was converted by the Court to a motion for summary judgment and the plaintiffs were permitted to take discovery. The Company and its directors answered the amended complaint on April 1, 2003. On May 28, 2003, the Court (treating as a motion to dismiss the motion for summary judgment into which it had converted the original motion on February 6, 2003) denied the directors’ motion to dismiss the amended complaint. Trial commenced on October 20, 2004.

Similar or identical claims have also been filed by the same plaintiffs (other than William and Geraldine Brehm) in the Superior Court of the State of California, Los Angeles County, beginning with a claim filed by Richard and David Kaplan on January 3, 1997. On May 18, 1998, an additional claim was filed in the same California court by Dorothy L. Greenfield. On September 25, 2001, Ms. Greenfield sought leave to amend her claim, but withdrew her request to amend on January 3, 2002. All of the California claims have been consolidated and stayed pending final resolution of the Delaware proceedings.

Stephen Slesinger, Inc. v. The Walt Disney Company. In this lawsuit, filed on February 27, 1991 in the Los Angeles County Superior Court, the plaintiff claims that a Company subsidiary defrauded it

and breached a 1983 licensing agreement with respect to certain Winnie the Pooh properties, by failing to account for and pay royalties on revenues earned from the sale of Winnie the Pooh movies on videocassette and from the exploitation of Winnie the Pooh merchandising rights. The plaintiff seeks damages for the licensee’s alleged breaches as well as confirmation of the plaintiff’s interpretation of the licensing agreement with respect to future activities. The plaintiff also seeks the right to terminate the agreement on the basis of the alleged breaches. If each of the plaintiff’s claims were to be confirmed in a final judgment, damages as argued by the plaintiff could total as much as several hundred million dollars and adversely impact the value to the Company of any future exploitation of the licensed rights. The Company disputes that the plaintiff is entitled to any damages or other relief of any kind, including termination of the licensing agreement. On April 24, 2003, the matter was removed to the United States District Court for the Central District of California, which, on May 19, 2003, dismissed certain claims and remanded the matter to the Los Angeles Superior Court. The Company appealed from the District Court’s order to the Court of Appeals for the Ninth Circuit, but served notice that it was withdrawing its appeal in September 2004. On March 29, 2004, the Superior Court granted the Company’s motion for terminating sanctions against the plaintiff for a host of discovery abuses, including the withholding, alteration, and theft of documents and other information, and, on April 5, 2004, dismissed plaintiff’s case with prejudice. On May 6, 2004, the plaintiff moved to disqualify the judge who issued the March 29, 2004 decision, and on May 13, 2004, the plaintiff moved for a “new trial” on the issue of the terminating sanctions. On July 19, 2004, the plaintiff’s motion to disqualify the judge who issued the March 29, 2004 decision was denied, and on August 2, 2004, the plaintiff filed with the state Court of Appeal a petition for a writ of mandate to challenge the denial, which was also denied. In September 2004, plaintiffs moved a second time to disqualify the trial judge. That motion is pending.

Milne and Disney Enterprises, Inc. v. Stephen Slesinger, Inc. On November 5, 2002, Clare Milne, the granddaughter of A. A. Milne, author of the Winnie the Pooh books, and the Company’s subsidiary Disney Enterprises, Inc. filed a complaint against Stephen Slesinger, Inc. (“SSI”) in the United States District Court for the Central District of California. On November 4, 2002, Ms. Milne served notices to SSI and the Company’s subsidiary terminating A. A. Milne’s prior grant of rights to Winnie the Pooh, effective November 5, 2004, and granted all of those rights to the Company’s subsidiary. In their lawsuit, Ms. Milne and the Company’s subsidiary seek a declaratory judgment, under United States copyright law, that Ms. Milne’s termination notices were valid; that SSI’s rights to Winnie the Pooh in the United States terminated effective November 5, 2004; that upon termination of SSI’s rights in the United States, the 1983 licensing agreement that is the subject of the Stephen Slesinger, Inc. v. The Walt Disney Company lawsuit terminated by operation of law; and that, as of November 5, 2004, SSI was entitled to no further royalties for uses of Winnie the Pooh. In January 2003, SSI filed (a) an answer denying the material allegations of the complaint and (b) counterclaims seeking a declaration that (i) Ms. Milne’s grant of rights to Disney Enterprises, Inc. is void and unenforceable and (ii) Disney Enterprises, Inc. remains obligated to pay SSI royalties under the 1983 licensing agreement. SSI also filed a motion to dismiss the complaint or, in the alternative, for summary judgment. On May 8, 2003, the Court ruled that Milne’s termination notices are invalid and dismissed SSI’s counterclaims as moot. Following further motions, on August 1, 2003, SSI filed an amended answer and counterclaims and a third-party complaint against Harriet Hunt (heir to E. H. Shepard, illustrator of the original Winnie the Pooh stories), who had served a notice of termination and a grant of rights similar to Ms. Milne’s. By order dated October 27, 2003, the Court certified an interlocutory appeal from its May 8 order to the Court of Appeals for the Ninth Circuit, but on January 15, 2004, the Court of Appeals denied the Company’s and Milne’s petition for an interlocutory appeal. By order dated August 3, 2004, the Court granted SSI leave to amend its answer to assert counterclaims against the Company allegedly arising from the Milne and Hunt terminations and the grant of rights to the Company’s subsidiary for (a) unlawful and unfair business practices; and (b) breach of the 1983 licensing agreement. In October 2004, Milne, joined by the Company, moved to amend its complaint to dismiss its claim against SSI for the purpose of obtaining a final order of

Management believes that it is not currently possible to estimate the impact if any, that the ultimate resolution of these matters will have on the Company’s results of operations, financial position or cash flows.

The Company, together with, in some instances, certain of its directors and officers, is a defendant or co-defendant in various other legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses. Management does not expect the Company to suffer any material liability by reason of such actions.

SEC Proceeding. The U.S. Securities and Exchange Commission (the “SEC”) is conducting an investigation into an amendment of the Company’s Annual Report on Form 10-K for fiscal year 2001, certain related matters and other related party transactions that have been previously disclosed by the Company. The investigation does not relate to the Company’s financial statements but rather to the issue of disclosure of those relationships. The Company is in discussions with the staff of the SEC about a possible administrative resolution of these non-financial matters, which would allege disclosure deficiencies generally about these matters and cite violation under Sections 13(a) and 14(a) of the Exchange Act regarding the following relationships between the Company and certain directors: the employment of adult children of three directors by the Company and the wife of another director by a 50% owned joint venture (whose employment preceded the director’s tenure); the provision of an office, secretary and driver to one director following his retirement as Chief Executive Officer of Capital/ Cities ABC, Inc.; and the payments to Air Shamrock, Inc., a company controlled by a former director, in reimbursement for his business use of his private corporate jet. The settlement under discussion would involve the issuance of an administrative “cease and desist” order.

No matters were submitted to a vote of shareholders during the fourth quarter of the fiscal year covered by this report.

The executive officers of the Company are elected each year at the organizational meeting of the Board of Directors, which follows the annual meeting of the shareholders, and at other Board of Directors meetings as appropriate. Each of the executive officers has been employed by the Company in the position or positions indicated in the list and pertinent notes below. Messrs. Eisner, Staggs and Murphy have been employed by the Company as executive officers for more than five years.


⁽¹⁾	Mr. Eisner also served as Chairman of the Board from 1984 through March 2004.

⁽²⁾	Mr. Iger was appointed to his present position in January 2000, having served (from February 1999 until January 2000) as President of Walt Disney International and Chairman of the ABC Group. Mr. Iger previously held a number of increasingly responsible positions at ABC, Inc. and its predecessor Capital Cities/ ABC, Inc., culminating in service as President and Chief Operating Officer of ABC, Inc. from 1994 to 1999.

⁽³⁾	Mr. Braverman was named Executive Vice President and General Counsel of the Company in January 2003 and promoted to Senior Executive Vice President and General Counsel of the Company in October 2003. Prior to his appointment as General Counsel of the Company, Mr. Braverman had been Executive or Senior Vice President and General Counsel of ABC, Inc. since August 1996 and also Deputy General Counsel of the Company since August 2001.

The Company’s common stock is listed on the New York and Pacific stock exchanges under the ticker symbol “DIS”. The following table shows, for the periods indicated, the high and low sales prices per share of common stock as reported in the Bloomberg Financial markets services.

The Company declared a dividend of $0.24 per share on December 1, 2004 with respect to fiscal 2004, and a dividend of $0.21 per share on December 2, 2003, with respect to fiscal 2003.

As of September 30, 2004, the approximate number of common shareholders of record was 1,001,000.

The following table provides information about Company purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended September 30, 2004:


⁽¹⁾	477,065 shares were purchased on the open market to provide shares to participants in the Walt Disney Investment Plan (WDIP) and Employee Stock Purchase Plan (ESPP). These purchases were not made pursuant to a publicly announced repurchase plan or program.

⁽²⁾	During the fourth quarter of fiscal 2004, the Company repurchased 14,935,100 shares, including 1,350,0000 shares which were settled after September 30, 2004.

⁽³⁾	Under a share repurchase program most recently reaffirmed by the Company’s Board of Directors on April 21, 1998, and implemented effective June 10, 1998, the Company was authorized to repurchase up to 400 million shares of its common stock. The repurchase program does not have an expiration date.


⁽¹⁾	During fiscal 2004, the Company adopted FASB Interpretation No. 46R, Consolidation of Variable Interest Entities (FIN 46R) and as a result, consolidated the balance sheets of Euro Disney and Hong Kong Disneyland as of March 31, 2004 and the income and cash flow statements beginning April 1, 2004, the beginning of the Company’s fiscal third quarter. Under FIN 46R transition rules, Euro Disney and Hong Kong Disneyland’s operating results continued to be accounted for on the equity method for the six month period ended March 31, 2004. In addition, the 2004 results include a benefit from the settlement of certain tax issues of $120 million or $0.06 per diluted share, and restructuring and impairment charges totaling $64 million pre-tax or ($0.02) per diluted share.

⁽²⁾	The 2003 results include the write-off of an aircraft leveraged lease investment with United Airlines of $114 million pre-tax and a benefit from the favorable settlement of certain state tax issues of $56 million. See Notes 4 and 7 to the Consolidated Financial Statements. These items had a ($0.04) and $0.03 impact on diluted earnings per share, respectively. The amounts do not reflect the cumulative effect of adopting EITF 00-21 which was a charge of $71 million or ($0.03) per diluted share. See Note 2 to the Consolidated Financial Statements.

⁽³⁾	The 2002 results include a $216 million pre-tax gain on the sale of investments and a $34 million pre-tax gain on the sale of the Disney Stores in Japan. These items had a $0.06 and $0.01 impact on diluted earnings per share, respectively. See Notes 3 and 4 to the Consolidated Financial Statements. During fiscal 2002, the Company acquired Fox Family Worldwide, Inc. for $5.2 billion. See Note 3 to the Consolidated Financial Statements. Effective at the beginning of fiscal 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets and, accordingly, ceased amortization of goodwill and substantially all other intangible assets.

⁽⁴⁾	The 2001 results include restructuring and impairment charges totaling $1.5 billion pre-tax. The charges were primarily related to the closure of GO.com, investment write downs and a work force reduction. The diluted earnings per share impact of these charges was ($0.52). The amounts do not reflect the cumulative effect of required accounting changes related to film and derivative


	accounting which were charges of $228 million and $50 million, respectively or ($0.11) and ($0.02) per diluted share, respectively.

⁽⁵⁾	The 2000 results include pre-tax gains of $243 million, $93 million and $153 million from the sale of Fairchild Publications, Eurosport and Ultraseek, respectively. The impact of income taxes substantially offset certain of the gains. The diluted earnings per share impacts of these items were $0.00, $0.02 and $0.01, respectively. The results also include a $92 million pre-tax restructuring and impairment charge. The diluted earnings per share impact of the charge was ($0.01).


⁽¹⁾	The calculation of diluted earnings per share assumes the conversion of the Company’s convertible senior notes issued in April 2003 into 45 million shares of common stock, and adds back related after-tax interest expense of $21 million and $10 million for fiscal years 2004 and 2003, respectively.


	•	Consolidated Results
	•	Business Segment Results – 2004 vs. 2003
	•	Corporate Items – 2004 vs. 2003
	•	Business Segment Results – 2003 vs. 2002
	•	Corporate Items – 2003 vs. 2002
	•	Stock Option Accounting
	•	Liquidity and Capital Resources
	•	Contractual Obligations, Commitments and Off Balance Sheet Arrangements
	•	Accounting Policies and Estimates
	•	Accounting Changes
	•	Forward-Looking Statements

Net income for the year was $2.3 billion, which was $1.1 billion higher than the prior year. The increase in net income for the year was primarily the result of improvements in segment operating income in all of the operating segments (see Business Segment Results below for further discussion). Diluted earnings per share for the year were $1.12, an increase of $0.47 compared to the prior-year earnings per share of $0.65 before the cumulative effect of an accounting change. Results for the year included a benefit in the fourth quarter from the settlement of certain income tax issues of $120 million ($0.06 per share) and restructuring and impairment charges totaling $64 million ($0.02 per share) in connection with the sale of the Disney Stores in North America, the majority of which were recorded in the third quarter.

Results for the prior year included a $114 million ($0.04 per share) write-off of an aircraft leveraged lease investment during the first quarter and the favorable settlement of certain income tax issues of $56 million ($0.03 per share) in the fourth quarter. Additionally, we made an accounting change effective as of the beginning of fiscal 2003 to adopt a new accounting rule for multiple element revenue accounting (EITF 00-21, see Note 2 to the Consolidated Financial Statements) which resulted in an after-tax charge of $71 million for the cumulative effect of the change. Diluted earnings per share including this cumulative effect were $0.62 for the prior year.

Cash flow from operations has allowed us to continue to make necessary capital investments in our properties and to reduce our borrowings, which in turn is reducing our interest expense. During the year, we generated cash flow from operations of $4.4 billion and had net repayment of borrowings of $2.2 billion. As a result of our adoption of FIN 46R, we consolidated the balance sheets of Euro Disney and Hong Kong Disneyland as of March 31, 2004 and added their borrowings ($2.2 billion for Euro Disney and $545 million for Hong Kong Disneyland as of September 30, 2004) to our balance sheet, as well as their assets and other liabilities. Accordingly, our total borrowings at September 30, 2004 increased to $13.5 billion. We also used cash flow from operations to repurchase $335 million of our common stock in the fourth quarter.

Income before the cumulative effect of an accounting change was $1.3 billion in fiscal 2003, which was $102 million, or 8%, higher than in fiscal 2002. This represented diluted earnings per share before the cumulative effect of accounting change of $0.65, which was $0.05 higher than in fiscal 2002. We made an accounting change effective as of the beginning of fiscal 2003 to adopt a new accounting rule

Results for 2003 also included a write-off of an aircraft leveraged lease investment with United Airlines ($114 million pre-tax or $0.04 per share), a pre-tax gain of $16 million on the sale of the Anaheim Angels and restructuring and impairment charges of $16 million at The Disney Store. Additionally, fiscal 2003 included a benefit from the favorable settlement of certain state tax issues ($56 million or $0.03 per share). Results for fiscal 2002 included a pre-tax gain on the sale of shares of Knight-Ridder, Inc. ($216 million or $0.06 per share) and a pre-tax gain on the sale of the Disney Store business in Japan ($34 million or $0.01 per share).

The Company evaluates the performance of its operating segments based on segment operating income and management uses aggregate segment operating income as a measure of the overall performance of the operating businesses. The Company believes that aggregate segment operating income assists investors by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from factors other than business operations that affect net


⁽¹⁾	Represents 100% of Euro Disney and Hong Kong Disneyland’s depreciation expense beginning April 1, 2004.

Segment depreciation expense is included in segment operating income and corporate depreciation expense is included in corporate and unallocated shared expenses.

Increased Cable Networks revenues were driven by increases of $696 million in revenues from cable and satellite operators and $236 million in advertising revenues. Increased advertising revenue was primarily a result of the increases at ESPN due to higher advertising rates and at ABC Family due to higher ratings. Revenues from cable and satellite operators are largely derived from fees charged on a per subscriber basis, and the increases in the current year reflected both contractual rate adjustments and to a lesser extent subscriber growth. The Company’s contractual arrangements with cable and satellite operators are renewed or renegotiated from time to time in the ordinary course of business. A significant number of these arrangements will be up for renewal in the next 12 months. Consolidation in the cable and satellite distribution industry and other factors may adversely affect the Company’s ability to obtain and maintain contractual terms for the distribution of its various cable and satellite programming services that are as favorable as those currently in place. If this were to occur, revenues from Cable Networks could increase at slower rates than in the past or could be stable or decline.

Decreased Broadcasting revenues were driven primarily by a decrease of $147 million at the ABC Television Production and Distribution businesses partially offset by an increase of $63 million at the ABC Television Network. The decrease in television production and distribution revenues was primarily due to lower syndication revenue and license fees. The increase at the Network was driven by higher advertising revenues reflecting higher rates due to an improved advertising marketplace, partially offset by lower ratings and a decrease due to airing the Super Bowl in fiscal 2003.

Costs and expenses consist primarily of programming rights amortization, production costs, distribution and selling expenses and labor costs. Costs and expenses decreased 1%, or $119 million, to $9.6 billion. The decrease reflected lower costs at Broadcasting, partially offset by higher costs at Cable. The decrease at Broadcasting was due to lower programming costs partially offset by higher pension and other administrative costs as well as higher MovieBeam costs. Higher costs at Cable reflected increased programming, pension and administrative costs, partially offset by lower bad debt expense.

Lower programming costs at Broadcasting were driven by lower sports programming costs due primarily to the airing of the Super Bowl in the prior-year, lower license fees for primetime series and fewer primetime movies. Additionally, the prior year included higher news production costs due to the coverage of the military conflict in Iraq.

Higher programming costs at the Cable Networks were primarily due to higher rights and production costs at ESPN, partially offset by lower NFL amortization due to commencing the three year option period as described under “Sports Programming Costs” below. The decrease in bad debt expense at the Cable Networks reflected the favorable impact of a bankruptcy settlement with a cable operator in Latin America in the second quarter of the current year.

Segment operating income increased 79%, or $956 million, to $2.2 billion reflecting increases of $748 million at the Cable Networks and $208 million at Broadcasting. Growth at the Cable Networks reflected higher affiliate revenues, higher advertising revenue and lower NFL programming costs, partially offset by higher rights and production cost and higher administrative expenses. Increased segment operating income at Broadcasting reflected higher advertising revenues at the ABC Television Network and lower programming and production costs, partially offset by higher administrative expenses.

The initial five-year period of the Company’s contract to televise NFL games was non-cancelable and ended with the telecast of the 2003 Pro Bowl. In February 2003, the NFL did not exercise its renegotiation option and as a result, the Company’s NFL contract was extended for an additional three years ending with the telecast of the 2006 Pro Bowl. The aggregate fee for the three-year period is $3.7 billion. ESPN recognized its portion of the costs of the initial five-year term of the contract at levels that increased each year commensurate with expected increases in NFL revenues. As a result, ESPN experienced its highest level of NFL programming costs during fiscal 2003. The implementation of the contract extension resulted in a $180 million reduction in NFL programming costs at ESPN in fiscal 2004 as compared to fiscal 2003. The majority of this decrease was in the first quarter. These costs will be relatively level over the remaining two years of the contract extension.

Cost recognition for NFL programming at the ABC Television Network in fiscal 2004 decreased by $300 million as compared to fiscal 2003. The decrease at the ABC Television Network is primarily due to the absence of the Super Bowl, which was aired by the ABC Television Network in fiscal 2003, as well as fewer games in fiscal 2004. The absence of the Super Bowl and the lower number of games at the ABC Television Network also resulted in lower revenue from NFL broadcasts in fiscal 2004.

Due to the payment terms in the NFL contract, cash payments under the contract in fiscal 2004 totaled $1.2 billion as compared to $1.3 billion in fiscal 2003.

The Company has various contractual commitments for the purchase of television rights for sports and other programming, including the NFL, NBA, MLB, NHL and various college football conference and bowl games. The costs of these contracts have increased significantly in recent years. We enter into these contractual commitments with the expectation that, over the life of the contracts, revenue from advertising during the programming and affiliate fees will exceed the costs of the programming. While contract costs may initially exceed incremental revenues and negatively impact operating income, it is our expectation that the combined value to our sports networks from all of these contracts will result in long-term benefits. The actual impact of these contracts on the Company’s results over the term of the contracts is dependent upon a number of factors, including the strength of advertising markets, effectiveness of marketing efforts and the size of viewer audiences.

The Company launched MovieBeam, an on-demand electronic movie rental service in three domestic cities in October 2003. As of September 30, 2004, the Company’s recorded investment in MovieBeam and Dotcast, Inc., the third party licensor of the principal underlying technology, totaled $60 million. The Company has executed licensing arrangements under which it would pay an additional $55 million over the next three and one half years ($10 million of which was paid in October 2004) if the Company continues to pursue this business over that time frame. The Company is currently evaluating the go forward business model and is in discussion with potential strategic investors. The success of the venture in the initial markets as well as decisions with respect to strategic investors will determine the strategic direction of the business, its future rollout plans, and the ultimate recoverability of the investment.

Revenues at Parks and Resorts increased 21%, or $1.3 billion, to $7.8 billion. The increase was driven by increases of $715 million due to the consolidation, effective April 1, 2004, of Euro Disney and Hong Kong Disneyland (primarily Euro Disney), $609 million from the Walt Disney World Resort, and $95 million from the Disneyland Resort. These increases were partially offset by a decrease of $61 million resulting from the sale of the Anaheim Angels baseball team during the third quarter of fiscal 2003.

At the Walt Disney World Resort, increased revenues were primarily driven by higher theme park attendance, occupied room nights, and per capita spending at the theme parks, partially offset by lower per room guest spending at the hotels. Higher theme park attendance was driven by increased resident, domestic, and international guest visitation, reflecting the continued success of “Mission: SPACE”, Mickey’s PhilharMagic and Disney’s Pop Century Resort, and improvements in travel and tourism. Guest spending decreases at the hotels reflected a higher mix of hotel guest visitation at the lower priced value resorts.

At the Disneyland Resort, increased revenues were primarily due to higher guest spending at the theme parks and hotel properties.

Across our domestic theme parks, attendance increased 7% and per capita guest spending increased 6% compared to the prior year. Attendance and per capita guest spending at the Walt Disney World Resort increased 10% and 4%, respectively. Attendance at the Disneyland Resort remained flat while per capita guest spending increased 7%. Operating statistics for our hotel properties are as follows (unaudited):

The increase in available room nights reflected the opening of the value priced Disney’s Pop Century Resort in the first quarter of fiscal 2004. Per room guest spending consists of the average daily hotel room rate as well as guest spending on food, beverages, and merchandise at the hotels. The

Costs and expenses, which consist principally of labor, costs of merchandise, food and beverages sold, depreciation, repairs and maintenance, entertainment, marketing and sales expense, increased 21%, or $1.2 billion compared to fiscal 2003. The increase in costs and expenses was primarily due to the consolidation of Euro Disney and Hong Kong Disneyland, which increased costs and expenses by $651 million, as well as higher operating costs at both domestic resorts. Higher operating costs were driven by volume increases as well as higher employee benefits, marketing and sales costs, depreciation expense, and information technology costs. Higher employee benefits costs reflected increased pension and post-retirement medical costs, which grew $137 million at the domestic resorts. Higher marketing costs were driven by the opening of “Mission: SPACE” at Epcot and Disney’s Pop Century Resort at Walt Disney World, and by the Twilight Zone^TM Tower of Terror and the 50th Anniversary Celebration at Disneyland. Higher depreciation reflects new resort properties and theme park attractions as well as new information technology systems. These increases were partially offset by cost decreases due to the sale of the Anaheim Angels during the third quarter of fiscal 2003.

Higher worldwide home entertainment revenues reflected higher DVD unit sales in the current year, which included Disney/ Pixar’s Finding Nemo, Pirates of the Caribbean, The Lion King and Brother Bear compared to the prior year, which included Lilo & Stitch and Beauty and the Beast. Increased revenues in television distribution reflected higher pay television sales due to better performances of live-action titles. Worldwide theatrical motion picture distribution revenue decreases reflected the performance of current year titles, which included Home on the Range, The Alamo and King Arthur, which faced difficult comparisons to the strong performances of prior year titles, which included Finding Nemo (domestically) and Pirates of the Caribbean. Partially offsetting the decrease was the successful performance of Finding Nemo internationally in fiscal 2004.

Costs and expenses, which consist primarily of production cost amortization, distribution and selling expenses, product costs and participations costs, increased 19%, or $1.3 billion. Higher costs and expenses reflected increases in worldwide home entertainment and worldwide theatrical motion picture distribution. Higher costs in worldwide home entertainment reflected higher distribution costs and production cost amortization for current year titles, primarily due to the increased unit sales volume for Finding Nemo and Pirates of the Caribbean. In addition, participation expense was higher in the current year because of participation arrangements with Finding Nemo and Pirates of the Caribbean. Pixar receives an equal share of profits (after distribution fees) as co-producer of Finding Nemo. Higher costs in worldwide theatrical motion picture distribution reflected increased distribution costs for current year titles, which included King Arthur, Brother Bear and The Village, and increased production cost amortization, including higher film write-offs, for current year titles which included Home on the Range and The Alamo. These increases were partially offset by lower production and

The Company does not expect business at its subsidiary Miramax to continue at the same level beyond the September 30, 2005 date on which the current contractual relationship with the co-chairmen (Bob and Harvey Weinstein) will end. The Company is currently in negotiations with the Weinsteins regarding the future of our business relationship with them. At this time the Company is unable to determine whether projects currently in progress may be abandoned or otherwise impaired and whether there will be any material charges.

Higher merchandise licensing revenues were due to higher sales of hardlines, softlines and toys which were driven by the strong performance of Disney Princess and certain film properties. The increase at publishing primarily reflected the strong performance of Finding Nemo and other childrens books and W.I.T.C.H magazine and book titles across all regions.

On November 21, 2004, the Company sold substantially all of The Disney Store chain in North America under a long-term licensing arrangement to a wholly-owned subsidiary of The Children’s Place (“TCP”). Pursuant to the terms of the sale, The Disney Store North America will retain its lease obligations and will become a wholly-owned subsidiary of TCP. TCP will pay the Company a royalty on the physical retail store sales beginning on the second anniversary of the closing date of the sale.

During the year, the Company recorded $64 million of restructuring and impairment charges related to The Disney Store. The bulk of the charge ($50 million) was an impairment of the carrying value of the fixed assets related to the stores to be sold which was recorded in the third quarter based on the terms of sale. Additional charges recorded during the year related to the closure of stores that would not be sold and to transaction costs related to the sale.

The Company will record additional charges for working capital and other adjustments related to the close of this transaction during the first quarter of fiscal 2005. Additional restructuring costs will also be recognized later in fiscal 2005. We expect that the total costs that will be recorded in fiscal 2005 will range from $40 million to $50 million.

The Company is currently considering options with respect to the stores in Europe, including a potential sale. The carrying value of the fixed and other long-term assets of the chain in Europe totaled $36 million at September 30, 2004. Depending on the terms of a sale, an impairment of these assets is possible. The base rent lease obligations for the chain in Europe totaled $206 million at September 30, 2004.

The following table provides supplemental revenues and operating income detail for The Disney Stores:

Corporate and unallocated shared expenses decreased 3% for the year to $428 million. The current year reflected the favorable resolution of certain legal matters, partially offset by higher legal and other administrative costs.

Excluding an increase of $51 million due to the consolidation of Euro Disney and Hong Kong Disneyland for the year, interest expense decreased $88 million (or 13%) for the year. Lower interest expense for the year was primarily due to lower average debt balances.

Interest and investment income (loss) was income of $28 million compared to a loss of $13 million in the prior year. The current year reflected higher interest income while the prior year period included a loss on the early repayment of certain borrowings.

The increase in equity in the income of our investees reflected increases at Lifetime Television, due to lower programming and marketing expenses, as well as increases at A&E and E! Entertainment due to higher advertising revenues.

The effective income tax rate decreased from 35.0% in fiscal 2003 to 32.0% in fiscal 2004. The decrease in the fiscal 2004 effective income tax rate is primarily due to tax reserve adjustments including a $120 million reserve release as a result of the favorable resolution of certain federal income tax issues. As more fully disclosed in Note 7 to the Consolidated Financial Statements, the fiscal 2004 effective income tax rate reflects a $97 million benefit for certain income exclusions provided for under U.S. income tax laws. As discussed in Note 7 to the Consolidated Financial Statements, this exclusion has been repealed and will be phased out commencing fiscal 2005.

Increasing pension and post-retirement medical benefit plan costs have affected results in all of our segments, with the majority of these costs being borne by the Parks and Resorts segment. The costs increased from $131 million in fiscal 2003 to $374 million in fiscal 2004. The increase in fiscal 2004 was due primarily to decreases in the discount rate to measure the present value of plan obligations, the expected return on plan assets and the actual performance of plan assets. The discount rate assumption decreased from 7.20% to 5.85% reflecting the decline in overall market interest rates and the expected return on plan assets was reduced from 8.5% to 7.5% reflecting trends in the overall financial markets.

We expect pension and post-retirement medical costs to decrease in fiscal 2005 to $315 million. The decrease is due primarily to an increase in the discount rate assumption from 5.85% to 6.30%, reflecting increases in prevailing market interest rates.

Cash contributions to the plans are expected to decrease in fiscal 2005 to approximately $165 million from $173 million in fiscal 2004.

Due to plan asset performance and an increase in the present value of pension obligations, pension obligations exceed plan assets for certain of our pension plans. In this situation, the

The decrease in the additional minimum pension liability in fiscal 2004 was due to the increase in the discount rate from 5.85% to 6.30% and improved plan asset performance. The accounting rules do not require that changes in the additional minimum pension liability adjustment be recorded in current period earnings but rather are to be recorded directly to equity through accumulated other comprehensive income. Expense recognition under the pension accounting rules is based upon long-term trends over the expected life of the Company’s workforce. See Note 8 to the Consolidated Financial Statements for further discussion.

Increased Cable Networks revenues were driven by increases of $455 million in revenues from cable and satellite operators and $385 million in advertising revenues. Increased advertising revenue was primarily a result of the addition of NBA games. Revenues from cable and satellite operators increased due to contractual rate adjustments and subscriber growth.

Increased Broadcasting revenues were driven primarily by an increase of $196 million at the ABC Television Network, $60 million at the Company’s owned and operated television stations and $33 million at the radio networks and stations. The increases at the television network and stations were primarily driven by higher advertising revenues reflecting higher rates due to an improved advertising marketplace. The airing of the Super Bowl in the second quarter of fiscal 2003 also contributed to increased advertising revenues. Revenues at the radio networks and stations also increased due to the stronger advertising market.

Higher programming and production costs at the ABC Television Network were primarily due to the airing of the Super Bowl and the costs of coverage of the war in Iraq. Higher programming costs at the Cable Networks were primarily due to NBA and MLB telecasts and higher programming costs at ABC Family. Programming cost increases were partially offset by lower cost amortization for the NFL contract due to commencing the three year option period as described under “Sports Programming Costs” above. The decrease in bad debt expense at Cable Networks reflected negative impacts in fiscal 2002 related to financial difficulties of Adelphia Communications Company in the United States and KirchMedia & Company in Germany.

Segment operating income increased 23%, or $227 million, to $1.2 billion. The increase reflected increases of $74 million at Broadcasting and $153 million at the Cable Networks. Increased segment operating income at Broadcasting reflected higher advertising revenues, partially offset by increased programming and production costs. Growth at the Cable Networks reflected higher revenues from cable and satellite operators and higher advertising revenue, partially offset by increased sports programming costs.

Revenues at Parks and Resorts decreased 1%, or $53 million, to $6.4 billion, driven by decreases of $57 million due to the sale of the Anaheim Angels baseball team during the third quarter of fiscal 2003, $51 million from decreased revenues from Euro Disney, and $14 million from the Walt Disney World Resort. These decreases were partially offset by an increase of $83 million at the Disneyland Resort. The decrease in revenues from Euro Disney reflected the cessation of billing and recognition of revenues from royalties and management fees commencing with the second quarter of fiscal 2003 due to Euro Disney’s financial difficulties.

Revenues at the Walt Disney World Resort were down marginally, reflecting lower theme park attendance and hotel occupancy, partially offset by increased per capita guest spending at the theme parks and hotel properties. Decreased theme park attendance and hotel occupancy at the Walt Disney World Resort reflected continued softness in travel and tourism. Guest spending increases reflected ticket price increases during fiscal 2003.

At the Disneyland Resort, increased revenues were driven by higher theme park attendance and hotel occupancy. These increases were due primarily to the success of certain promotional programs offered during fiscal 2003, as well as the opening of new attractions and entertainment venues at Disneyland Park and Disney’s California Adventure during fiscal 2003.

Costs and expenses increased 3%, or $159 million compared to fiscal 2002. The increase in costs and expenses was primarily due to higher costs at the Walt Disney World and Disneyland Resorts, partially offset by cost decreases due to the sale of the Anaheim Angels during the third quarter of fiscal 2003. Higher costs at Walt Disney World and Disneyland were primarily driven by increases in employee benefits, repairs and maintenance, marketing, information systems, insurance, and depreciation expenses.

The worldwide theatrical motion picture distribution revenue increase reflected the strong performance of Pirates of the Caribbean, Finding Nemo, Chicago, Santa Clause 2, Bringing Down the House and Bruce Almighty, which the Company distributed internationally, compared to fiscal 2002, which included Disney/ Pixar’s Monsters, Inc., Signs and Lilo & Stitch. Worldwide home video

Costs and expenses increased 5%, or $326 million, reflecting increases in worldwide theatrical and international home entertainment and higher development and production write-offs, partially offset by decreases in television distribution and domestic home entertainment costs. Higher costs in worldwide theatrical reflected higher distribution costs for fiscal 2003 titles due to the promotion of high-profile releases, including Finding Nemo, Pirates of the Caribbean, Chicago and Gangs of New York, partially offset by lower production cost amortization due to the write-down of Treasure Planet in fiscal 2002. Cost increases in international home entertainment reflected higher distribution costs and production cost amortization for fiscal 2003 titles, which included Beauty & the Beast, Lilo & Stitch and Treasure Planet, partially offset by lower participation costs. Lower costs in television distribution reflected lower production cost amortization and participation costs related to the sale of film products to television networks, the pay television market and in domestic syndication. Lower costs in domestic home entertainment reflected higher participation costs for fiscal 2002 titles, which included Monsters, Inc. and Pearl Harbor.

The decline at the Disney Store is due primarily to the sale of the Disney Store business in Japan in fiscal 2002, as well as lower comparative store sales and fewer stores in North America. The increase in merchandise licensing primarily reflected higher revenues from toy licensees, due in part to higher contractually guaranteed minimum royalties in North America, strong performance across Europe and increased royalties from direct-to-retail licenses. Higher publishing revenues were driven by increases in Europe, reflecting the strong performance of the Topolino, W.I.T.C.H. and Art Attack titles.

Costs and expenses, which consist primarily of labor, product costs (including product development costs, distribution and selling expenses) and leasehold and occupancy expenses, decreased 4% or $86 million. The decrease was primarily driven by lower costs at the Disney Store due to the sale of the Japan business and closures of Disney Store locations domestically. These decreases were partially offset by volume increases at publishing and higher divisional administrative costs.

Corporate and unallocated shared expenses increased in fiscal 2003 reflecting additional costs associated with new finance and human resource information technology systems, partially offset by lower brand promotion and litigation costs. Fiscal 2002 also included gains on the sale of properties in the U.K.

Lower interest expense in fiscal year 2003 was primarily due to lower interest rates and average debt balances.

Interest and investment income (loss) in fiscal year 2003 included the $114 million write-off of our leveraged lease investment with United Airlines referred to above. Fiscal 2002 included a $216 million gain on the sale of shares of Knight-Ridder, Inc.

Higher equity in the income of our investees reflected increases at Lifetime Television, due to lower advertising expenses, as well as increases at A&E and E! Entertainment due to higher advertising revenues. In addition, in fiscal year 2002 a write-down of an investment in a Latin American cable operator negatively affected equity income.

The effective income tax rate decreased from 38.9% in fiscal 2002 to 35.0% in fiscal 2003. The decrease in the fiscal 2003 effective income tax rate is primarily due to a $56 million reserve release as a result of the favorable resolution of certain state income tax exposures.

The Company uses the intrinsic-value method of accounting for stock-based awards granted to employees and, accordingly, does not recognize compensation expense for the fair value of its stock-based awards to employees in its Consolidated Statements of Income.

The following table reflects pro forma net income and earnings per share had the Company elected to record an expense for the fair value of employee stock options.

These pro forma amounts may not be representative of future disclosures since the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted in future years.

Fully diluted shares outstanding and diluted earnings per share include the effect of in-the-money stock options calculated based on the average share price for the period and assumes


⁽¹⁾	Represents the incremental impact on fully diluted shares outstanding assuming the average share prices indicated, using the treasury stock method. Under the treasury stock method, the tax effected proceeds that would be received from the exercise of all in-the-money options are assumed to be used to repurchase shares.

⁽²⁾	Fully diluted shares outstanding for the year ended September 30, 2004 total 2,106 million and include the dilutive impact of in-the-money options at the average share price for the period of $23.72 and the assumed conversion of the convertible senior notes. At the average share price of $23.72, the dilutive impact of in-the-money options was 12 million shares for the year.

⁽³⁾	Based upon fiscal 2004 earnings of $2,345 million or $1.12 per share.

Cash and cash equivalents increased by $459 million during the year ended September 30, 2004. The change in cash and cash equivalents is as follows:


⁽¹⁾	Amount represents the cash balances of Euro Disney and Hong Kong Disneyland on March 31, 2004 when they were initially consolidated pursuant to FIN 46R. As previously discussed the Company adopted FIN 46R, and as a result, began consolidating the balance sheets of Euro Disney and Hong Kong Disneyland as of March 31, 2004, and the income and cash flow statements beginning April 1, 2004.


				Name of Each Exchange
Title of Each Class				on Which Registered

Common Stock, $.01 par value				New York Stock Exchange Pacific Stock Exchange


		Page

PART I

ITEM 1.	Business		1

ITEM 2	Properties		20

ITEM 3.	Legal Proceedings		21

ITEM 4.	Submission of Matters to a Vote of Security Holders		23
Executive Officers of the Company			23
PART II

ITEM 5.	Market for the Company’s Common Equity, Related Stockholder Matters and Issue Repurchases of Equity Securities		25

ITEM 6.	Selected Financial Data		26

ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28

ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk		55

ITEM 8.	Financial Statements and Supplementary Data		56

ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		57

ITEM 9A.	Controls and Procedures		57

ITEM 9B.	Other Information		57
PART III

ITEM 10.	Directors and Executive Officers of the Company		58

ITEM 11.	Executive Compensation		58

ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		58

ITEM 13.	Certain Relationships and Related Transactions		58

ITEM 14.	Principal Accountant Fees and Services		58
PART IV

ITEM 15.	Exhibits and Financial Statement Schedules		59
SIGNATURES			62
Consolidated Financial Information — The Walt Disney Company			64
EX-10.AA
EX-10.BB
EX-10.CC
EX-21
EX-23
EX-31.A
EX-31.B
EX-32.A
EX-32.B


					Television
			Analog		Market
Market	TV Station		Channel		Ranking⁽¹⁾

New York, NY		WABC-TV		7		1
Los Angeles, CA		KABC-TV		7		2
Chicago, IL		WLS-TV		7		3
Philadelphia, PA		WPVI-TV		6		4
San Francisco, CA		KGO-TV		7		5
Houston, TX		KTRK-TV		13		11
Raleigh-Durham, NC		WTVD-TV		11		29
Fresno, CA		KFSN-TV		30		57
Flint, MI		WJRT-TV		12		64
Toledo, OH		WTVG-TV		13		69


Channel	Launch Date

Taiwan		March 1995
UK		October 1995
Australia		June 1996
Malaysia⁽¹⁾		October 1996
France		March 1997
Middle East		April 1997
Spain		April 1998
Italy		October 1998
Germany		October 1999
Philippines⁽¹⁾		January 2000
Singapore⁽¹⁾		February 2000
Brunei⁽¹⁾		February 2000
North Latin America⁽²⁾		July 2000
South Latin America⁽²⁾		July 2000
Brazil		April 2001
Portugal		November 2001
South Korea⁽¹⁾		March 2002
Indonesia⁽¹⁾		July 2002
Sweden⁽³⁾		February 2003
Norway⁽³⁾		February 2003
Denmark⁽³⁾		February 2003
Japan		November 2003
New Zealand⁽⁴⁾		December 2003
Hong Kong⁽¹⁾		March 2004
India		December 2004


Location	Property/ Approximate Size	Use	Business Segment⁽¹⁾

Burbank, CA	Land (51 acres) & Building (1,900,000 ft²)	Office/Production/Warehouse	Corp/Studio/Media
Burbank, CA	Building (1,100,000 ft²)	Office/Warehouse	Corp/Studio/Media/CP
Glendale, CA	Land (115 acres) & Building (2,500,000 ft²)	Office/Warehouse	Corp/Studio/Media/CP/TP&R
Glendale, CA	Building (316,000 ft²)	Office/Warehouse	Corp/CP
Los Angeles, CA	Land (22 acres) & Building (567,000ft²)	Office/Production/Technical	Media
New York, NY	Land (6.5 acres) & Building (1,500,000 ft²)	Office/Production/Technical	Media
New York, NY	Building (750,000 ft²)	Office/Production/Warehouse	Corp/Studio/Media/CP
Bristol, CT	Land (68 acres) & Building (684,000ft²)	Office/Production/Warehouse	Media
USA & Canada	Buildings (Multiple sites and sizes)	Office/Production/Transmitter/ Retail/Warehouse	Studio/CP/Media
England	Building (330,000 ft²)	Office/Retail	Corp/Studio/Media/CP
Europe, Asia, Australia & Latin America	Buildings (Multiple sites and sizes)	Office/Retail/Warehouse	Corp/Studio/Media/CP


Incorporated in Delaware 500 South Buena Vista Street, Burbank, California 91521 (818) 560-1000		I.R.S. Employer Identification No. 95-4545390


			Subscribers
Property	Ownership %		(in millions)

ESPN		80.0		89
ESPN2		80.0		88
ESPN Classic		80.0		55
ESPNEWS		80.0		43
Disney Channel		100.0		85
International Disney Channels		100.0		31
Toon Disney		100.0		48
SOAPnet		100.0		39
ABC Family Channel		100.0		88
JETIX Europe		75.1		37
JETIX Latin America		100.0		11
A&E		37.5		89
The History Channel		37.5		87
The Biography Channel		37.5		31


ITEM 4.	Submission of Matters to a Vote of Security Holders


				Executive
Name	Age		Title	Officer Since

Michael D. Eisner		62	Chief Executive Officer⁽¹⁾		1984
Robert A. Iger		53	President and Chief Operating Officer⁽²⁾		2000
Thomas O. Staggs		43	Senior Executive Vice President and Chief Financial Officer		1998
Peter E. Murphy		42	Senior Executive Vice President and Chief Strategic Officer		1998
Alan N. Braverman		56	Senior Executive Vice President and General Counsel⁽³⁾		2003


ITEM 5.	Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



	Sales Price

	High		Low

2004
4th Quarter	$	25.50	$	20.88
3rd Quarter		26.65		21.39
2nd Quarter		28.41		22.90
1st Quarter		23.76		20.36

2003
4th Quarter	$	23.80	$	19.40
3rd Quarter		21.55		16.92
2nd Quarter		18.74		14.84
1st Quarter		20.24		13.90


				2004⁽¹⁾			2003⁽²⁾			2002⁽³⁾			2001⁽⁴⁾			2000⁽⁵⁾

Statements of income
	Revenues			$	30,752		$	27,061		$	25,329		$	25,172		$	25,325
	Income before the cumulative effect of accounting change				2,345			1,338			1,236			120			920
	Per common share
		Earnings before the cumulative effect of accounting change
			Diluted	$	1.12		$	0.65		$	0.60		$	0.11		$	0.57
			Basic		1.14			0.65			0.61			0.11			0.58
		Dividends			0.21			0.21			0.21			0.21			0.21
Balance sheets
	Total assets			$	53,902		$	49,988		$	50,045		$	43,810		$	45,027
	Borrowings				13,488			13,100			14,130			9,769			9,461
	Shareholders’ equity				26,081			23,791			23,445			22,672			24,100
Statements of cash flows
	Cash provided (used) by:
		Operating activities		$	4,370		$	2,901		$	2,286		$	3,048		$	3,755
		Investing activities			(1,484	)		(1,034	)		(3,176	)		(2,015	)		(1,091	)
		Financing activities			(2,701	)		(1,523	)		1,511			(1,257	)		(2,236	)


ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations



											% change

											2004			2003
											vs.			vs.
RESULTS OF OPERATIONS		2004			2003			2002			2003			2002

Revenues		$	30,752		$	27,061		$	25,329			14	%		7	%
Costs and expenses			(26,704	)		(24,348	)		(22,945	)		10	%		6	%
Gain on sale of business			—			16			34			nm			(53	)%
Net interest expense			(617	)		(793	)		(453	)		(22	)%		75	%
Equity in the income of investees			372			334			225			11	%		48	%
Restructuring and impairment charges			(64	)		(16	)		—			nm			nm

Income before income taxes, minority interests and the cumulative effect of accounting change			3,739			2,254			2,190			66	%		3	%
Income taxes			(1,197	)		(789	)		(853	)		52	%		(8	)%
Minority interests			(197	)		(127	)		(101	)		55	%		26	%

Income before the cumulative effect of accounting change			2,345			1,338			1,236			75	%		8	%
Cumulative effect of accounting change			—			(71	)		—			nm			nm

Net income		$	2,345		$	1,267		$	1,236			85	%		3	%

Earnings per share before the cumulative effect of accounting change
	Diluted⁽¹⁾	$	1.12		$	0.65		$	0.60			72	%		8	%

	Basic	$	1.14		$	0.65		$	0.61			75	%		7	%

Cumulative effect of accounting change per share		$	—		$	(0.03	)	$	—			nm			nm

Earnings per share:
	Diluted⁽¹⁾	$	1.12		$	0.62		$	0.60			81	%		3	%

	Basic	$	1.14		$	0.62		$	0.61			84	%		2	%

Average number of common and common equivalent shares outstanding:
	Diluted		2,106			2,067			2,044

	Basic		2,049			2,043			2,040


(in millions)		2004		2003		2002

Media Networks		$	172	$	169	$	180
Parks and Resorts
	Domestic		710		681		648
	International⁽¹⁾		95		—		—
Studio Entertainment			22		39		46
Consumer Products			44		63		58

Segment depreciation expense			1,043		952		932
Corporate			155		107		89

Total depreciation expense		$	1,198	$	1,059	$	1,021



							West Coast
							Resorts
	East Coast												Total Domestic
	Resorts												Resorts
							Twelve
							Months
	Twelve						Ended						Twelve
	Months Ended						September						Months Ended
	September 30,						30,						September 30,

	2004			2003			2004			2003			2004			2003

Occupancy		77	%		76	%		87	%		83	%		78	%		77	%
Available Room Nights (in thousands)		8,540			7,550			816			816			9,356			8,366
Per Room Guest Spending	$	198		$	202		$	253		$	245		$	204		$	206



										% change

										2004			2003
										vs.			vs.
(in millions)		2004		2003			2002			2003			2002

Revenues
	North America	$	628	$	644		$	721			(2	)%		(11	)%
	Europe		326		278			261			17	%		7	%
	Other		23		27			123			(15	)%		(78	)%

		$	977	$	949		$	1,105			3	%		(14	)%

Operating income:
	North America	$	6	$	(101	)	$	(37	)		nm			nm
	Europe		17		14			22			21	%		(36	)%
	Other		11		4			22			nm			(82	)%

		$	34	$	(83	)	$	7			nm			nm



	Minimum Liability
	at September 30,
					Decreased Liability
	2004		2003		in 2004

Pretax	$	415	$	969	$	(554	)
Aftertax	$	261	$	608	$	(347	)



		Year Ended
		September 30,

(in millions, except for per share data)		2004		2003		2002

Net income:
	As reported	$	2,345	$	1,267	$	1,236
	Pro forma after stock option expense		2,090		973		930
Diluted earnings per share:
	As reported		1.12		0.62		0.60
	Pro forma after stock option expense		1.00		0.48		0.45


Average		Total					Percentage of			Hypothetical
Disney		In-the-Money		Incremental			Average Shares			FY 2004 EPS
Share Price		Options		Diluted Shares⁽¹⁾			Outstanding			Impact⁽³⁾

$	23.72		106 million		—	⁽²⁾		—		$	0.00
	25.00		134 million		3 million			0.14	%		(0.00	)
	30.00		160 million		17 million			0.81	%		(0.01	)
	40.00		221 million		43 million			2.04	%		(0.02	)
	50.00		230 million		59 million			2.80	%		(0.03	)



	Year Ended September 30,

(in millions)	2004			2003			2002

Cash provided by operating activities	$	4,370		$	2,901		$	2,286
Cash used by investing activities		(1,484	)		(1,034	)		(3,176	)
Cash (used) provided by financing activities		(2,701	)		(1,523	)		1,511

		185			344			621
Consolidation of Euro Disney and Hong Kong Disneyland cash and cash equivalents⁽¹⁾		274			—			—

Increase in cash and cash equivalents	$	459		$	344		$	621