Walt Disney Company (DIS)

Six-Month Results

Diluted earnings per share decreased 36% for the six months primarily due to lower operating results driven by a decline in worldwide sales of DVD units, lower advertising sales at the ABC Television Network, owned television stations and ESPN, decreased volumes and guest spending at our domestic parks, and lower performing theatrical titles. These decreases were partially offset by the benefit of higher rates on affiliate fees from Cable Service Providers, principally at ESPN. The current six months also included the restructuring and impairment charges described above, partially offset by a gain in the first quarter on the sale of our investment in two pay television services in Latin America. Collectively, these items adversely affected EPS by $0.07.

Six-Month Results

Net income for the six months decreased by $249 million while diluted earnings per share decreased 2% to $1.21 per share. Revenue and segment operating income increased in each business segment.

Results for the prior-year six months included the net favorable impact of the items summarized below (amounts in millions, except per share data):

In the Media Networks segment, continued growth at ESPN, higher advertising revenue at the ABC Television Network and increased sales of our productions in international, domestic syndication and DVD markets contributed to the increase in segment operating income.

In the Parks and Resorts segment, growth in revenues at the Walt Disney World Resort and Disneyland Resort Paris due to higher guest spending and theme park attendance and increases at Disney Vacation Club contributed to the increase in segment operating income. The increase in attendance was affected by the fact that the Easter holiday period fell in the second quarter of fiscal 2008 but in the third quarter of fiscal 2007.

19

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (continued)

In the Studio Entertainment segment, increases in operating income were driven by an improvement in the worldwide theatrical business, partially offset by a decrease in the worldwide home entertainment business. In the worldwide theatrical business, titles in release in the current six months performed well compared to titles in release in the prior-year period. The decrease in the worldwide home entertainment business reflected the strong performance of prior-year titles in the domestic market which included Pirates of the Caribbean: Dead Man’s Chest and Cars.

In the Consumer Products segment, continued growth of earned Merchandise Licensing royalties and improvements at Disney Interactive Studios from the transition of licensed product towards self-published titles contributed to higher segment operating income.

Six-Month Results

Revenues for the six months increased 5%, or $917 million, to $17.8 billion. The increase was primarily due to the following:

These increases were partially offset by the absence of Monday Night Football and the Super Bowl and three fewer College Bowl games at the ABC Television Network and lower worldwide theatrical distribution revenues reflecting the strong performance of The Chronicles of Narnia: The Lion, The Witch and The Wardrobe and Chicken Little in the prior six-month period.

Net income for the six months increased by $1.2 billion to $2.6 billion due to gains on sales of equity investments, growth in worldwide home entertainment and growth at ESPN and the international Disney Channels.

Diluted earnings per share increased to $1.24 from $0.74 in the six-month period. Results for the current and prior-year six months included the net favorable impact of the items summarized in the following tables (amounts in millions, except for per share data):

16

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(continued)