**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 20-F**

 

**ANNUALREPORT PURSUANT TO SECTION 13OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the fiscal year ended September 30, 2005**

 

**Commission file number 33-79548**

 

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**Euro DisneyS.C.A.**

(Exact name of registrant as specified in itscharter)

 
| **N/A**                                               | ** ** | **Republic of France**                           |
|-------------------------------------------------------|------------|--------------------------------------------------|
| (Translation of registrant’s name into  English) |       | (Jurisdiction of incorporation or  organization) |

 

**ImmeublesAdministratifs**

**RouteNationale 34**

**77700Chessy**

**France**

(Address of principal executive offices)

 

Securities registered or to be registered pursuant to Section 12(b) ofthe Act: **None**

 

Securities registered or to be registered pursuant to Section 12(g) ofthe Act:

 
| **Title of each class**                | ** ** | **Name of each exchange on which registered** |
|-------------------------------------------------------|------------|-----------------------------------------------------------------------------|
| Ordinary Shares of Common Stock par value € 0.01 |       | Euronext Paris                                                              |

 

Securities for which there is a reporting obligation pursuant toSection 15(d) of the Act: **None**

 

Indicate the number of outstanding shares of each of the issuer’sclasses of capital or common stock as of the close of the period covered by theannual report: 3,897,649,046 shares of common stock, par value € 0.01.

 

Indicate bycheck mark if the registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities Act.

YES****o**   NO****ý.**

 

If this reportis an annual or transition report, indicate by check mark if the registrant isnot required to file reports pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934.   YES****o**   NO****ý.**

 

Note –Checking the box above will not relieve any registrant required to file reportspursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 fromtheir obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. **YES****ý.   **NOo

 

Indicate by check mark which financial statement item the registranthas elected to follow. Item 17 ýItem 18 o

 

If this is anannual report, indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act). YES****o**   NO****ý.**

 

 

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**TABLE OF CONTENTS**

 
| **PART I**   | ** **                                                 |
|--------------|------------------------------------------------------------|
| ** **   | **PRESENTATION OF INFORMATION AND ACCOUNTING  PRINCIPLES** | ** ** |
| ** **   | ** **                                                 | ** ** |
| ** **   | **ITEM 1.**                                                | ** ** | **IDENTITY OF  DIRECTORS, SENIOR MANAGEMENT AND ADVISERS** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 2.**                                                | ** ** | **OFFER STATISTICS AND EXPECTED TIMETABLE** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM  3.**                                               | ** ** | **KEY  INFORMATION** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 4.**                                                | ** ** | **INFORMATION ON THE COMPANY** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 5.**                                                | ** ** | **OPERATING AND FINANCIAL REVIEW AND  PROSPECTS** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 6.**                                                | ** ** | **DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 7.**                                                | ** ** | **MAJOR SHAREHOLDERS AND RELATED PARTY  TRANSACTIONS** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 8.**                                                | ** ** | **FINANCIAL INFORMATION** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 9.**                                                | ** ** | **THE OFFER AND LISTING** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 10.**                                               | ** ** | **ADDITIONAL INFORMATION** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 11.**                                               | ** ** | **QUANTITATIVE AND QUALITATIVE DISCLOSURES  ABOUT MARKET RISK** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 12.**                                               | ** ** | **DESCRIPTION  OF SECURITIES OTHER THAN EQUITY SECURITIES** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| **PART II**  | ** **                                                 |
| ** **   | ** **                                                 |
| ** **   | **ITEM 13.**                                               | ** ** | **DEFAULTS, DIVIDEND ARREARAGES AND  DELINQUENCIES** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 14.**                                               | ** ** | **MATERIAL  MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 15.**                                               | ** ** | **CONTROLS AND  PROCEDURES** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 16**                                                | ** ** | **OTHER** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| **PART III** | ** **                                                 |
| ** **   | ** **                                                 |
| ** **   | **ITEM 17.**                                               | ** ** | **FINANCIAL STATEMENTS** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 18**                                                | ** ** | **NA** | ** ** |
| ** **   | ** **                                                 | ** ** | ** ** | ** ** |
| ** **   | **ITEM 19.**                                               | ** ** | **FINANCIAL STATEMENTS AND EXHIBITS** | ** ** |

 

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**PART I**

 

**PRESENTATION OF INFORMATION AND ACCOUNTINGPRINCIPLES**

 

Euro Disney S.C.A. (the “Company”), including its legally controlled subsidiaries(the “Legally Controlled Group”) and consolidated special-purpose financingcompanies (the “Financing Companies”), together the “Group”, publishes itsconsolidated financial statements (“Consolidated Financial Statements”) ineuros. All currency amounts in this annual report on Form 20-F (“Annual Report”)are expressed in euros.

 

The Company prepares its Consolidated Financial Statements inaccordance with accounting principles generally accepted in France (“FrenchGAAP”), which differ in certain significant respects from generally accepted accountingprinciples in the United States of America (“U.S. GAAP”). Unless otherwisespecified, all financial information presented in this Annual Report has beenderived from or based on the Consolidated Financial Statements. For adiscussion of the principal differences between French GAAP and U.S. GAAP asthey relate to the Group’s consolidated results of operations and financialposition, see Note 29 to the Consolidated Financial Statements in Item 17 “FinancialStatements”.

 

The Company’s fiscal year begins on October 1 of a given year and endson September 30 of the following year. References in this annual report to anumbered fiscal year are to the twelve-month period ended on September 30 ofthe calendar year that bears such number (so that, for example, fiscal year2005 is the fiscal year that ends on September 30, 2005).

 

In February 2005, the Company implemented acomprehensive restructuring (the “Restructuring”) of the Group’s financialobligations. The Restructuring included amendments to the Group’s principalfinancing agreements as well as its license and management agreements with TheWalt Disney Company (“TWDC”); changes to the Group’s organizational structure;and a €253.3 million share capital increase. The effect of the Restructuringwas to provide new cash resources to the Group, to reduce or defer cash paymentobligations and to provide flexibility for investment and development.

 

# **ITEM 1.**                                                     IDENTITY OFDIRECTORS, SENIOR MANAGEMENT AND ADVISERS

# ** **

Not applicable.

 

# **ITEM 2.**                                                     OFFERSTATISTICS AND EXPECTED TIMETABLE

# ** **

Not applicable.

 

**ITEM 3.****                                                     KEYINFORMATION**

 

**A.****            SELECTEDFINANCIAL DATA**

 

***Five-Year Selected Financial Data***

 

The following table sets forth the Group’s selected consolidatedfinancial data for the five-year period ended September 30, 2005. This table isqualified by reference to, and should be read in conjunction with, theConsolidated Financial Statements and the related notes thereto included inItem 17 “Financial Statements” and Item 5 “Operating and Financial Review andProspects”.

 

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| ** **                                        | ** ** | **Year Ended September 30,** | ** ** |
|---------------------------------------------------|------------|------------------------------|------------|
| **(€ in millions, except per  share data)**  | ** ** | **2005**                     | ** ** | **2004****(1)** | ** ** | **Pro-Forma  2003****(1)** | ** ** | **As  reported  2003** | ** ** | **As  reported  2002** | ** ** | **As  reported  2001** | ** ** |
| **Income  Statement Data:**                       |       |                         |       |   |   |   |   |   |   |   |   |   |   |
|                                              |       |                         |       |   |   |   |   |   |   |   |   |   |   |
| ***In accordance with French GAAP:***             | * *   | * *                     | * *   | * * | * * | * * | * * | * * | * * | * * | * * | * * | * * |
| **Segment  Revenues**                             |       |                         |       |   |   |   |   |   |   |   |   |   |   |
| Resort  segment                                   | ** ** | **1,047.3**                  |       | 1,036.2 |   | 1,023.2 |   | 1,023.9 |   | 1,043.9 |   | 964.3 |   |
| Real estate  development segment                  | ** ** | **28.7**                     |       | 11.8 |   | 23.6 |   | 23.6 |   | 27.3 |   | 37.2 |   |
| **Total  Revenues**                               | ** ** | **1,076.0**                  |       | 1,048.0 |   | 1,046.8 |   | 1,047.5 |   | 1,071.2 |   | 1,001.5 |   |
|                                              |       |                         |       |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before lease and financial  charges | ** ** | **(26.9**                    | **)**      | (23.9 | ) | 32.1 |   | 132.4 |   | 175.7 |   | 185.2 |   |
| Income  (loss) before exceptional items           | ** ** | **(114.8**                   | **)**      | (129.6 | ) | (79.1 | ) | (67.9 | ) | 4.9 |   | 37.7 |   |
| Exceptional  income (loss)                        | ** ** | **0.4**                      | ** ** | (22.3 | ) | 12.0 |   | 11.9 |   | (38.0 | ) | (7.2 | ) |
| Income tax  (Expense)                             | ** ** | **(1.1**                     | **)**      | — |   | — |   | — |   | — |   | — |   |
| Minority  interests                               | ** ** | **20.6**                     | ** ** | 6.7 |   | 8.8 |   | — |   | — |   | — |   |
| Net income  (loss)  (3)                      | ** ** | **(94.9**                    | **)**      | (145.2 | ) | (58.3 | ) | (56.0 | ) | (33.1 | ) | 30.5 |   |
|                                              | ** ** | ** **                   | ** ** |   |   |   |   |   |   |   |   |   |   |
|                                              | ** ** | ** **                   | ** ** |   |   |   |   |   |   |   |   |   |   |
|                                              | ** ** | ** **                   | ** ** |   |   |   |   |   |   |   |   |   |   |

 
| **In accordance with U.S. GAAP:**    | ** ** | **2005**    | ** ** | **2004** | ** ** | ** ** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|--------------------------------------|------------|-------------|------------|----------|------------|------------|------------|----------|------------|----------|------------|----------|------------|
| Revenues                             | ** ** | **1,041.5** | ** ** | 1,015.9  |       | —     |       | 1,024.9  |       | 1,052.9  |       | 982.6    |       |
| Net loss (2)                         | ** ** | **(46.5**   | **)**      | (77.5    | )          | —     |       | (54.4    | )          | (67.3    | )          | (50.6    | )          |
| *Net loss  per share (in €)*(4) | ** ** | **(0.02**   | **)**      | (0.07    | )          | —     |       | (0.05    | )          | (0.06    | )          | (0.05    | )          |

 
| ** **                                            | ** ** | **Year Ended September 30,** | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|
| **(€ in millions, except per  share data)**      | ** ** | **2005**                     | ** ** | **2004** | ** ** | ** ** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| Pro-Forma  U.S. GAAP net loss (5)                     | ** ** | **(100.0**                   | **)**      | (130.0 | ) | — |   | (153.6 | ) | (144.5 | ) | (122.3 | ) |
|                                                  |       |                         | ** ** |   |   |   |   |   |   |   |   |   |   |
| *Pro-Forma  net loss per share (in €)*  (5) | ** ** | **(0.04**                    | **)**      | (0.12 | ) | — |   | (0.15 | ) | (0.14 | ) | (0.12 | ) |

 
| ** **                            | ** ** | **September 30,** | ** ** |
|---------------------------------------|------------|-------------------|------------|
| **(€ in millions)**              | ** ** | **2005**          | ** ** | **2004****(1)** | ** ** | **Pro-Forma  2003****(1)** | ** ** | **As reported  2003** | ** ** | **As reported  2002** | ** ** | **As reported  2001** | ** ** |
| **Balance  Sheet Data:**              |       |              |       |   |   |   |   |   |   |   |   |   |   |
|                                  |       |              |       |   |   |   |   |   |   |   |   |   |   |
| ***In accordance with French GAAP:*** | * *   | * *          | * *   | * * | * * | * * | * * | * * | * * | * * | * * | * * | * * |
| Total assets                          | ** ** | **2,894.1**       |       | 2,876.6 |   | 2,954.4 |   | 2,583.6 |   | 2,708.6 |   | 3,106.1 |   |
| Borrowings (6)                        | ** ** | **1,943.4**       |       | 2,052.8 |   | 2,448.4 |   | 867.5 |   | 821.3 |   | 1,141.2 |   |
| Equity and  quasi-equity              | ** ** | **295.7**         |       | (59.9 | ) | 85.6 |   | 1,237.2 |   | 1,397.6 |   | 1,430.7 |   |
| Minority  interests (6) (7)           | ** ** | **106.3**         |       | 339.6 |   | (41.3 | ) | — |   | — |   | — |   |

 
| **In accordance with U.S. GAAP:**        | ** ** | **2005**    | ** ** | **2004** | ** ** | ** ** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|------------------------------------------|------------|-------------|------------|----------|------------|------------|------------|----------|------------|----------|------------|----------|------------|
| Total assets                             | ** ** | **2,917.4** |       | 2,906.6  |       | —     |       | 2,946.8  |       | 3,076.5  |       | 3,539.0  |       |
| Borrowings *(Current and Long-term)*     | ** ** | **1,890.5** |       | 1,950.0  |       | —     |       | 2,208.9  |       | 2,218.6  |       | 2,565.1  |       |
| Shareholders’  equity               | ** ** | **366.8**   |       | (48.7    | )          | —     |       | 60.4     |       | 112.6    |       | 179.7    |       |
|                                     |       |        |       |     |       |       |       |     |       |     |       |     |       |
| Common  Shares Outstanding (in millions) | ** ** | **3,897.6** |       | 1,082.7  |       | —     |       | 1,055.9  |       | 1,055.9  |       | 1,055.8  |       |

 

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*Certain reclassifications havebeen made to the prior years comparative amounts in order to conform to the2005 presentation.*

 

*(1)**             **Effective October 1, 2003 (first day of fiscal year 2004), the Groupadopted new accounting rules mandated in France with respect to theconsolidation of special purpose financing companies that are not legallycontrolled by the Group (See Item 4.”Information on the Company” – Section C.3 “FinancingCompanies”). To enhance comparability, fiscal year 2003 French GAAP figures arepresented on a pro-forma basis as if this change in accounting principle was ineffect during all of fiscal year 2003. (See Item 5 “Operating and FinancialReview and Prospects” — Section B “Results of Operations”). French GAAP figuresreported in this table for fiscal years 2002 and 2001 are as reported and havenot been restated for this change.*

*(2)**             **Effective October 1, 2003 (first day of fiscal year 2004), the Groupimplemented FIN 46R, “Consolidation of Variable Interest**Entities”. As a result, fiscalyear 2004 U.S. GAAP net loss was reduced by € 36.3 million reflecting thecumulative impact of adopting this change in accounting principle. (See Note 29to the Consolidated Financial Statements in Item 17 “Financial Statements”).*

*(3)**             **French GAAP net loss for fiscal year 2003 includes the € 11.8 millionnet impact of a change in accounting principle for major fixed assetrenovations and the impact of a conditional waiver of royalties and managementfees for the last three quarters of the fiscal year (See Item 5 “Operating andFinancial Review and Prospects” — Section B “Results of Operations”).*

 

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*(4)**             **Per share data is based upon the weighted average number of commonshares outstanding of 2,772 million, 1,062 million, 1,056 million, 1,056million and 1,056 million for each of the years ended September 30, 2005, 2004,2003, 2002 and 2001, respectively, and does not give effect to the exercise ofany contingently issuable shares as they were anti-dilutive.*

*(5)**             **The Pro-Forma net loss and pro-forma net loss per share present theU.S. GAAP net loss that the Group would have had if royalties and managementfees to The Walt Disney Company had not been adjusted from their originalschedule for modifications agreed since the inception of the agreements (SeeNotes 19(b) and 29 to the Consolidated Financial Statements in Item 17 “FinancialStatements”).*

*(6)**             **Effective September 30, 2004, Euro Disney Associés, one of the Group’sconsolidated financing companies, was recapitalized resulting in a € 384.1million decrease in borrowings and a corresponding increase in minorityinterests*

*(7)**                **As a result of the Restructuring,substantially all of the Company’s assets and liabilities were contributed to EuroDisney Associés effective October 1, 2004. The Company’s increased interest inEDA was recorded as a reallocation between shareholders’ equity and minorityinterests for an amount of € 215.5 million.*

 

***Exchange Rates***

 

Since the principal market for the Company’scommon stock is the Euronext Paris exchange, fluctuations in the exchange ratebetween the euro and the U.S. dollar will affect the U.S. dollar value of aninvestment in its common stock and dividend and other distribution payments, ifany, thereon. The following tables set forth, for each of the periodsindicated, certain information related to the euro / U.S. dollar exchange ratebased on the noon buying rates in the city of New York for cable transfers ineuro as certified for customs purposes by the Federal Reserve Bank of New York(the “Noon Buying Rates”) expressed in dollars per € 1.00. Such rates areprovided solely for the convenience of the reader and are not necessarily therates that were used to prepare the Group’s Consolidated Financial Statementsnor the selected consolidated financial data included herein.

 
| **U.S. dollar per euro** | ** ** | **Low** | ** ** | **High** | ** ** |
|--------------------------|------------|---------|------------|----------|------------|
| February  2006           | ** ** | 1.19    | ** ** | 1.21     | ** ** |
| January 2006             | ** ** | 1.20    | ** ** | 1.23     | ** ** |
| December  2005           |       | 1.17    |       | 1.20     |       |
| November  2005           |       | 1.17    |       | 1.21     |       |
| October 2005             |       | 1.19    |       | 1.21     |       |
| September 2005           |       | 1.20    |       | 1.25     |       |

 
| **U.S. dollar per euro  Fiscal Year** | ** ** | **Low**  | ** ** | **High** | ** ** | **Average****(1)** | ** ** | **End of Period** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|--------------------|------------|-------------------|------------|
| **2005**                              | ** ** | **1.19** | ** ** | **1.36** | ** ** | **1.27**           | ** ** | **1.20**          | ** ** |
| 2004                                  |       | 1.14     |       | 1.28     |       | 1.22               |       | 1.23              |       |
| 2003                                  |       | 0.97     |       | 1.19     |       | 1.09               |       | 1.16              |       |
| 2002                                  |       | 0.86     |       | 1.02     |       | 0.92               |       | 0.99              |       |
| 2001                                  |       | 0.83     |       | 0.95     |       | 0.88               |       | 0.91              |       |
| 2000                                  |       | 0.85     |       | 1.09     |       | 0.95               |       | 0.88              |       |

 

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*(1)**             **The average of the Noon Buying Rates on the last business day of eachmonth during the relevant period.*

 

The Noon Buying Rate on March 29, 2006 for the euro against the U.S.dollar was $ 1.20 per € 1.00 (€ 0.83 per dollar). No representation is madethat the euro could have been converted into U.S. dollars at the rates shownherein or at any other rates for such periods or at such dates.

 

**B.****            CAPITALISATIONAND INDEBTEDNESS**

 

Not applicable.

 

**C.****            REASONSFOR THE OFFER AND USE OF PROCEEDS**

 

Not applicable.

 

5

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**D.****                                   ****RISK FACTORS**

 

***Risks Relating to the Group***

 

**The Group’s high level of borrowings requires theGroup to devote a large portion of its operating cash flow to service debt, andmay limit its operating flexibility**

 

The Group is highly leveraged. As ofSeptember 30, 2005, the Group had consolidated borrowings of € 1,943.4billion and shareholders’ equity of € 295.7 million. In addition, theGroup pays significant royalties and management fees to affiliates of TWDC. TheGroup’s high degree of leverage and the undertakings towards the Group’sLenders can have important consequences for its business, such as:

 

•                  limitingthe Group’s ability to invest operating cash flow in its business, because itsuses a substantial portion of these funds to pay debt service and because theGroup’s covenants restrict the amount of its investments;

 

•                  limitingthe Group’s ability to make capital investments in new attractions andmaintenance of the Theme Parks and Hotels, both of which are essential to itsbusiness;

 

•                  limitingthe Group’s ability to borrow additional amounts for working capital, capitalexpenditures, debt service requirements or other purposes; and

 

•                  limitingthe Group’s ability to withstand business and economic downturns, because ofthe high percentage of its operating cash flow that is dedicated to servicingits debt.

 

If the Group cannot pay its debt service,royalties and management fees and meet its other liquidity needs from operatingcash flow, the Group could have substantial liquidity problems. In thosecircumstances, the Group might have to sell assets, delay planned investments,obtain additional equity capital or restructure its debt. Depending on thecircumstances at the time, the Group may not be able to accomplish any of theseactions on favorable terms, or at all. The Group’s financing agreements limitits ability to take some actions that could generate additional cash proceeds.

 

**The Group mustimprove its earnings (excluding the impact of minority interest, income taxes,net financial charges, depreciation and amortization and certain non-cashcharges) in order to meet financial performance covenants under its debtagreements**

 

The Group’s strategic plan assumes earnings growth,from, among other things, the impact of the Group’s multi-year investment program.Absent such growth, the Group may not be able to meet its financial performancecovenants. In such a circumstance, if not cured by obtaining new subordinateddebt or other concessions from TWDC or other third parties, the relevantlenders could accelerate the maturity of the debt and take other actions thatcould adversely affect the Group.  Foradditional information regarding the financial performance covenants, see Item5 “Operating and Financial Review and Prospects” – C “Liquidity and CapitalResources”

 

**The Group hasrecently incurred losses, and expects to continue to incur a significantaggregate amount of losses over the next several years**

 

The Group’s net loss for fiscal year 2005totaled € 94.9 million, compared to a net loss of € 145.2 million infiscal year 2004. Management expects that even under its growth assumptions,the Group will incur a significant aggregate amount of net losses over the nextseveral fiscal years. Accordingly, the value of the Company’s shares could beadversely affected.

 

**The Group is subject tointerest rate risk**

** **

As ofSeptember 30, 2005, approximately 29% of the Group’s borrowings was tied tofloating interest rates, resulting in a weighted average interest rate of 4.47%(no hedges were outstanding as of September 30, 2005) on total borrowings of €1.9 billion. While the Group attempts to reduce interest rate risks in respectof a substantial portion of its borrowings and the borrowings of the FinancingCompanies through the use of interest rate swaps and other hedging techniques,an increase in interest rates could adversely affect the Group’s financialcondition.

 

**The Group is subject toexchange rate risks**

** **

Aportion of the Group’s purchases and capital investments are denominated inU.S. dollars and could be adversely affected by an increase in the relativevalue of the U.S. dollar against the euro. The Company attempts to reduce theforecasted dollar risk by purchasing hedging instruments, although it cannot becertain that its hedging techniques will be fully effective to insulate theGroup from the risk of changes in value of the U.S. dollar. A weakening of theU.S. dollar (such as that which has recently occurred) also makes touristdestinations in the United States relatively more attractive, increasingcompetitive pressures on the Group and potentially adversely affectingattendance at the Resort. In addition, a significant portion of the Group’sguests (20% in fiscal year 2005) come from the United Kingdom, which is notpart of the euro zone. An increase in the relative strength of the euro againstthe British pound would raise the price of a visit to the resort for guestsvisiting from the United Kingdom and could negatively affect their rates ofattendance, per-guest spending and hotel occupancy.

 

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**The Company has not paid anydividends in recent years, and does not expect to pay dividends for asubstantial period of time**

** **

TheCompany will pay no dividends in respect of fiscal year 2005 and does notexpect to pay dividends for a substantial period of time. The Company’s abilityto pay dividends is dependent on the availability of distributable profitsunder French law, which, in turn, depends on the Company’s operating results,liquidity and financial condition. In addition, certain of the Company’s loanagreements limit or prohibit the payment of dividends in certain circumstances.

 

**The Group’s relationship withTWDC – Potential conflicts of interest**

 

TWDCcurrently owns 39.78% of the Company’s shares and voting rights through anindirect, wholly-owned subsidiary, EDL Holding Company. In addition, TWDC owns18% of Euro Disney Associés S.C.A. (“EDA”) which is the Group’s principaloperating subsidiary. Under French law, the Company’s business (and that ofEDA) is managed by a management company (g*érant*) that isappointed by the Company’s general partner (*associé commandité*).The shareholders elect a Supervisory Board to oversee the Company, but the SupervisoryBoard does not have the power to remove the management company. Both theCompany’s management company and the Company’s general partner are wholly-ownedindirect subsidiaries of TWDC, and the same is true of EDA as regards themanagement company and two of its general partners. EDA incurs significantmanagement fees payable to the management company.

 

TheGroup also has several business relationships with TWDC that are important tothe Group’s operations. The Group uses Disney intellectual and industrialproperty rights, for which the Group pays royalties to an affiliate of TWDC. TheCompany’s management company provides and arranges for a variety of additionaltechnical and administrative services, for which it receives a fee and isreimbursed its direct and indirect costs. For example, the designer andconstruction manager for *Buzz LightyearLaser Blast***currentlyunder construction is an affiliate of TWDC. These relationships createpotential conflicts of interest.

 

Whilethe Group believes that its dealings with TWDC and its affiliates arecommercially reasonable, the Group has not solicited bids or independentevaluations of the terms of its commercial relationships with TWDC. All suchdealings must be authorized by the Company’s Supervisory Board to the extentthey involve the Company. Members of the Company’s Supervisory Board who areaffiliated with TWDC are not entitled to vote on such dealings.

 

**The Company will be obliged to adopt new accounting standards for fiscalyear 2006, which could materially affect its financial statements**

 

The Companyprepared its financial statements in accordance with French GAAP through fiscalyear 2005. In June 2002, the Council of Ministers of the European Unionapproved a new regulation proposed by the European Commission requiring allEU-listed companies, including our company, to apply International FinancialReporting Standards (“IFRS”) in preparing their financial statements for fiscalyears beginning on or after January 1, 2005 (the Company’s first fiscalyear that will be affected is fiscal year 2006, which began on October 1, 2005).Applying these standards to the Company’s financial statements may have aconsiderable impact on a number of important areas, including in particulardepreciation and amortization and the accrual of costs of major renovations. SeeItem 5 “Operating and Financial Review and Prospects” – Section E.4 *“New Accounting Pronouncements”.*Because the Group’sfinancial statements prepared in accordance with IFRS could differ, perhapsmaterially, from its financial statements prepared in accordance with FrenchGAAP, the financial community’s perception of the Group’s financial conditioncould be affected. Additionally, the Group’sagreements with its lenders will potentially need to be renegotiated as aresult of the adoption of IFRS. Currently all reporting and covenantcalculations are based upon the Group’s consolidated financial statements preparedin accordance with French GAAP.

 

***Risks of Investing in the Theme Park ResortBusiness***

 

**Demand for Theme Park Resorts is variable and can be impacted byseasonality as well as economic and geopolitical conditions**

 

DisneylandResort Paris is subject to significant seasonal and daily fluctuations inattendance and to the effects of general economic conditions. While the Grouphas implemented and continues to implement measures designed to alleviatefluctuations in attendance and to mitigate their impact, the Group cannot becertain that such measures will sufficiently offset fluctuations in demand. Inaddition, the effectiveness and timing of marketing campaigns can have asignificant impact on attendance levels. Given the discretionary nature ofvacation travel and the fact that travel and lodging expenses often represent asignificant expenditure for the average consumer, such expenditures may bereduced, deferred or cancelled by consumers during times of economic downturnor uncertainty.

 

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Inaddition, a certain number of events, such as international terrorist attacks,subsequent military actions and the current geopolitical climate can adverselyaffect travel related industries and precipitate sudden economic downturns. Althoughthe Group’s management closely monitors its operating trends and has developedcost-reduction strategies to address such risks, such steps, depending on theduration and intensity of the downturn, may be insufficient to prevent itsfinancial performance from being adversely affected.

 

**The Group needs to make significant, regular capital expenditures tocontinue to attract guests**

 

Aspart of the Restructuring, the Group obtained bank authorization and has theobligation to complete a € 240 million development plan over the next fewfiscal years. The development plan includes the construction of newattractions, as well as other investments, all designed to increase attendance.There can be no assurance, however, that the planned investments will in factresult in increased attendance at levels anticipated by the Group (or at all),or that, if attendance increases, the additional revenues will be sufficient topermit the recovery of the amounts invested, a return on such investments orthe payment of the Group’s other financial obligations.

 

**The theme park resort business is competitive,which could limit the Group’s ability to increase prices or to attract guests**

 

TheGroup competes for guests throughout the year with other European andinternational holiday destinations and also other leisure and entertainmentactivities in the Paris region. The parks operated by the Group also competewith other European theme parks. The Group also relies on convention business,which is highly competitive, for a portion of its revenues and to maintainhotel occupancy in off-peak periods.

 

TheGroup’s hotels are subject to competition from the third-party hotels locatedon the Resort Site (2,324 rooms/units as of the date of this Annual Report), incentral Paris and in the Seine-et-Marne area. The Group believes that itshotels are priced at a premium compared to the market, reflecting among otheradvantages, their proximity to Disneyland Park and Walt Disney Studios Park,their unique themes and the quality service they offer. The Group is aware,however, that a number of less costly alternatives exist.

 

Competitionlimits the Group’s ability to raise prices, and may require the Group to makesignificant new investments to avoid losing guests to competitors.

 

***Risks of investing in the Company’s shares***

 

**No U.S. Public Market**

 

There has been no public market in the United States for its shares,and the Company has no present intention to apply to list the shares on anyU.S. exchange. Therefore, the opportunity for U.S. holders to trade shares maybe limited.

 

# **ITEM 4.**                                                     INFORMATIONON THE COMPANY

# ** **

# **A.**            HISTORY ANDDEVELOPMENT OF THE COMPANY AND BUSINESS OVERVIEW

# ** **

# **Introduction**

# ** **

The Group is primarily engaged in the development and operation ofDisneyland Resort Paris (the “Resort”), formerly Euro Disneyland. The Resortcommenced operations on April 12, 1992 (“Opening Day”) on a 2,000 hectare site(the “Site”), located 32 kilometers (approximately 20 miles) east of Paris inMarne-la-Vallée, Seine-et-Marne, France. Disneyland Resort Paris principallyconsists of Disneyland Park, Walt Disney Studios Park, seven themed hotels,including two convention centers, the Disney Village entertainment centercomprising shopping and restaurant facilities, and a 27-hole golf course. TheGroup’s operating activities also include the management and development of theSite, which currently includes approximately 1,000 hectares of undeveloped land.Most of these facilities (with the exception of the Walt Disney Studios Parkfacilities, Additional Disneyland Park Assets (“ACP Assets”) two hotels and thegolf course, which are owned by the Legally Controlled Group) are leased from theFinancing Companies, which as of October 1, 2003 have been consolidated intothe reporting group. The Legally Controlled Group has no ownership interest inthe Financing Companies. Disneyland Resort Paris is modeled on the theme parkand resort concepts developed by The Walt Disney Company for its own themeparks and hotel infrastructure.

 

The Company’s principal executive offices are located at ImmeublesAdministratifs, Route Nationale 34, 77700 Chessy (Seine-et-Marne), France. Thepostal address is BP 100, 77777 Marne-la-Vallée Cedex 04, France. Its telephonenumber is (33) (1) 64 74 40 00.

 

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**A.1.****                          Historyof the Group**

 

In March 1987, TWDC entered into an agreement for the creation andoperation of Euro Disneyland in France (the “Master Agreement”) with theRepublic of France and certain other French public authorities. The Companybecame a party to the Master Agreement after its original signature. The MasterAgreement sets out a master land-use plan and general development programestablishing the type and size of facilities that the Company has the right,subject to certain conditions, to develop at the Resort Site over a 30-yearperiod ending in 2017.

 

The Resort, as it exists today, representsthe fulfillment of the following development phases, and is currently in theinitial stages of Phase III:

 
| **Phase**     | ** ** | **Development  period** | ** ** | **Development description**                                                                                                                                                                                                                                         |
|---------------|------------|-------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Phase IA |       | 1989 to 1992            |       | Disneyland Park, Disneyland Hotel,  Davy Crockett Ranch, golf course, infrastructure and support facilities.                                                                                                                                                             |
| Phase IB      |       | 1989 to 1992            |       | Five theme  hotels and the Disney Village, defined as the “Phase IB Facilities”.                                                                                                                                                                               |
| Phase IC      |       | 1992 to 1995            |       | Additional  Capacity Disneyland Park Assets which included among other attractions, *Space Mountain* and *Indiana Jones and the Temple of Peril*.                                                                                                                        |
|          |       | 1996 to 1997            |       | Disneyland  Park attraction *Honey, I Shrunk the  Audience!* and the Newport Bay Club Convention Center.                                                                                                                                                                 |
| Phase II      |       | 1998 to 2004            |       | Val d’Europe  new city development including an international mall, a second urban rail  station on the Resort Site, and the development of a downtown district  comprising offices and housing, the first phase of a business park, and Walt  Disney Studios Park. |
| Phase III     |       | 2004 to 2010            |       | Expansion of Disney Village,  continuation of Val d’Europe town center expansion, development of new public  services, continuation of the international business park development and  other residential developments                                              |

 

The Group experienced significant lossesduring the period from the Opening Day through September 30, 1994. Netoperating losses before the cumulative effect of an accounting change totaledapproximately € 625 million for the two-and-a-half-year period endingSeptember 30, 1994. In addition, the Group began to experience seriouscash flow difficulties in the course of fiscal year 1993.

 

In March 1994, the Group entered into amemorandum of agreement with major stakeholders outlining the terms of a majorrestructuring of the Group’s obligations and those of the Phase IFinancing Companies and of TWDC. The 1994 Financial Restructuring essentiallyprovided for concessions and contributions to be made by the Group’s lendersand by TWDC, and for the prepayment of certain outstanding loan indebtedness ofthe Group and the Phase I Financing Companies, using the proceeds of a sharecapital increase of the Company amounting to € 907.0 million.

 

In fiscal year 1999, the Company obtained theapproval of its lenders to obtain the financing necessary for the constructionof Walt Disney Studios Park, which opened on March 16, 2002 adjacent toDisneyland Park. The construction of Walt Disney Studios Park was financedusing the proceeds received from a share capital increase in the amount of € 219.5million in fiscal year 2000 and a new subordinated long-term loan from the *Caisse des Dépôts et Consignations* (“CDC”) of € 381.1 million.

 

In fiscal year 2003, the Group experienced reducedrevenues as a result of, in particular, a prolonged downturn in European traveland tourism combined with challenging general economic and geopoliticalconditions in key markets of the Group. While this was partially offset by theimpact of the opening of Walt Disney Studios Park, the number of visitors andthe revenues generated by the new park were below expectations. The Group alsorecorded increased losses as a result of reduced revenues, as well as higheroperating costs and higher marketing and sales expenses related to the openingof Walt Disney Studios Park.

 

In this context, the Company (on behalf of the Group) once againentered into negotiations with its various lenders with a view to restructuringall the credit agreements. After receiving successive waivers of covenants inits credit agreements, the Company (on behalf of the Group) implemented a newRestructuring in February 2005 that included amendments to the Group’sfinancing agreements and agreements with TWDC, changes to its organizationalstructure and a €253.3 million capital increase. For further information, seeItem 5 “Operating and Financial Review and Prospects” – Section F *“2005 Financial Restructuring”.*

 

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**A.2.****                          StrategicOverview**

 

The Restructuring was an important step in re-establishing the Group’sliquidity, and a necessary condition to allow the Group to pursue itsdevelopment strategy, described below. The impact of the Restructuring(including the impact on cash flows) is described in Item 5 “Operating andFinancial Review and Prospects” – Section F *“2005 FinancialRestructuring”.*

 

By reaching agreement on the Restructuring, the Group has theopportunity to pursue a strategy designed to attract new Theme Park visitorsand hotel guests, and to increase repeat visitation by enhancing guestsatisfaction and value perception. Coupled with what management hopes will be astrong rebound in the short break and theme park markets in Europe, the Groupbelieves that its development strategy has the potential to increase itsrevenues and improve its financial performance.

 

The Group has designed its development strategy to take advantage ofwhat management believes are significant opportunities to attract and retainvisitors. The Group’s market research shows that guests indicating they were “completelysatisfied” or “very satisfied” represented over 80% of the guests surveyed atDisneyland Park, and over 70% at Walt Disney Studios Park (a differentialconsistent with second parks in other Disney resorts). Market research alsoindicates that there are substantial numbers of European families that havenever visited the Resort, but have indicated that they might like to do so inthe future.

 

The Group’s strategy to take advantage of this opportunity includes theconstruction of three major new attractions scheduled to open in fiscal years2006, 2007 and 2008, and the enhancement of existing attractions and themagical atmosphere of the Theme Parks. The enhancements will includesignificant short-term improvements, designed to attract new visitors while thenew attractions are being constructed, most prominently the upgrade of *Space Mountain*, which occurred in fiscal year 2005. Theprincipal elements of the Group’s development strategy are the following:

 

•                  ***Revitalize the Disneyland Park experience and enhancethe Walt Disney Studios Park Experience***

 

With the increase in ongoing capital expenditure authorization providedby the Restructuring, the Group plans to reinvigorate its long-standing policyof continually upgrading Disneyland Park. In fiscal year 2005 the first exampleof this element of this strategy was the upgrade of *SpaceMountain*, which has been renamed *SpaceMountain: Mission 2*, creating a completely new experience in orderto provide its visitors with a new twist on this already popular roller coasterride.

 

For April 2006, the Group plans on opening in Disneyland Park *Buzz Lightyear Laser Blast* a ride-throughinteractive adventure featuring Buzz Lightyear and characters inspired by theWalt Disney Pictures presentation of the Pixar Animation Studios film, ToyStory 2. Buzz enlists guests to help him in the fight against the evil EmperorZurg. Boarding a space cruiser, the guests spin, twist and turn their waythrough the galaxy while shooting at Zurg’s bad toy forces with on-boardblasters. With each target hit, guests accumulate points that help them risethrough the ranks of Buzz Lightyear’s elite squadron and help save the toyuniverse.

 

Beginning with fiscal year 2007, new additionsare planned in the Walt Disney Studios Park. First, a new land consisting ofmultiple new attractions, preliminarily named *ToonStudios (* a new land inspired by the Walt Disney Pictures presentations of thePixar Animation Studios films *“Finding Nemo”* and *“Cars”*), is scheduled to open. *Toon Studios* will be followed by the *Tower of Terro**r*,scheduled to open in fiscal year 2008.

 

These attractions are designed to add to theappeal and capacity of Disneyland Resort Paris, further enhancing the core guestexperience.

 

•                  ***Expand seasonal events and popular shows***

 

Although the Group’s business is seasonal, the Group has successfullyemployed a strategy to reduce the impact of seasonality through the staging ofspecial promotional events in the off-peak season. The Group has added to itspopular Halloween and Christmas events with new seasonal features including a “*Magic Unlimited*” season in January (allowing repeat rides oncertain attractions without waiting in line), a Kids Carnival season and anEaster season. The Group has continued *The**Legend of the Lion King* show.

 

The Group intends to continue to engage in promotionalcampaigns designed to maximize the number of visitors. For example, in fiscalyear 2005, the Group implemented a promotional campaign around the re-launch of*Space Mountain* at the beginning of thehigh season. The Group also marked the 50th anniversary of theoriginal Disneyland Park in California with a fireworks celebration throughoutthe summer of 2005.

 

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•                  ***Focus on differentiation of the Disney Hotels***

 

The Group focuses visitors on the attractiveness of its own on-siteHotels in order to meet the challenges presented by the opening of the newon-site hotels operated by third-parties in fiscal years 2003, 2004 and 2005. Itsmarketing effort highlights the proximity of its hotels to the Theme Parks andspecial attractions such as Disney character breakfasts. In addition, duringfiscal year 2005 the Group modified its pricing policy with respect to thebalance between the Theme Parks and Hotel price components of its travelpackages to give more weight to the ticket prices. The objective was to achievea better competitive equilibrium and to improve the attractiveness of theDisney Hotels in packages booked through tour operators.

 

•                  ***Focus sales and marketing efforts on first-timevisitors and new distribution channels***

 

The Group has implemented sales and marketingefforts designed specifically to encourage attendance by first-time visitors, takingadvantage of the large untapped population base in Europe discussed in Item 4 “Informationon the Company” — Section A.4 “*Marketing and SalesStrategy*” .

 

The marketing effort includes a new communication strategy targeted byguest segment intended to familiarize European visitors with the theme parkexperience, while differentiating the Disneyland Resort Paris experience. TheGroup also is taking advantage of new distribution channels by establishingrelationships with low-cost airlines and internet travel sites, as well asdeveloping “calls to action” designed to trigger bookings when marketable newsis released (for example, the opening of *BuzzLightyear Laser Blast*).

 

**A.3.****                Operationsby Segment**

 

The Group operates in the following segments:

 

•                  **Resort activities**include theoperation of the Theme Parks, the Hotels and Disney Village, and the variousservices that are provided to guests visiting the Resort destination; and

 

•                  **Real Estate Development activities**include the conceptualization and planning of improvements and additions to theexisting Resort activity, as well as other commercial and residential realestate projects, whether financed internally or through third-party partners.

 

A breakdown of total revenues by major segment and activity during thepast five fiscal years is set forth in the table below:
| ** **                       | ** ** | ** **  | ** ** | ** ** | ** ** | **Pro-Forma**   | ** ** | **As-reported** | ** ** |
|----------------------------------|------------|-------------|------------|------------|------------|-----------------|------------|-----------------|------------|
| **(€ in millions)**         | ** ** | **2005**    | ** ** | **2004**   | ** ** | **2003****(1)** | ** ** | **2002**        | ** ** | **2001** | ** ** |
| Theme Parks                      |       | **549.7**   |       | 531.3      |       | 508.5           |       | 526.0           |       | 476.4 |   |
| Hotels and Disney Village        |       | **394.6**   |       | 405.2      |       | 416.7           |       | 411.7           |       | 386.5 |   |
| Other                            |       | **103.0**   |       | 99.7       |       | 98.0            |       | 106.2           |       | 101.4 |   |
| **Resort  Segment**              |       | **1,047.3** |       | 1,036.2    |       | 1,023.2         |       | 1,043.9         |       | 964.3 |   |
|                             |       | ** **  |       |       |       |            |       |            |       |   |   |
| Real Estate  Development Segment |       | **28.7**    |       | 11.8       |       | 23.6            |       | 27.3            |       | 37.2 |   |
|                             |       | ** **  |       |       |       |            |       |            |       |   |   |
| **Total  Revenues**              |       | **1,076.0** |       | 1,048.0    |       | 1,046.8         |       | 1,071.2         |       | 1,001.5 |   |

 

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*(1)**             **Reflecting the change in accounting principle related to theconsolidation of Financing Companies. See Notes 2 and 29 to the ConsolidatedFinancial Statements in Item 17 “Financial Statements”.*

 

**A.3.1.****                ResortSegment**

 

**A.3.1.1.****      *Theme Parks***

 

*Theme Parks*

 

Within the Resort segment, theme park activity includes all operationsof Disneyland Park and Walt Disney Studios Park, including merchandise, foodand beverage, special events and all other services provided to guests in theparks. Theme Parks revenue is determined primarily by two factors: the numberof guests and the total average spending per guest (which includes theadmission price and spending on food, beverage and merchandise).

 

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The Theme Parks are operated on a year-round basis. In the first yearsof operations, Disneyland Park experienced significant difficulties inaccommodating all prospective guests during peak days, which resulted in longwait times for attractions, guest dissatisfaction and lost revenues. Despiteprogress, operations continue to be subject to seasonal fluctuations.

 

Beginning in fiscal year 2004, seasonal theme park pricing has beeneliminated and replaced with stable year-round ticket pricing. However,specific packages are regularly offered for specific markets.

 

The Company began offering and promoting a “Park Hopper” ticket forone-day, two-day and three-day periods in October 2003 whereby for anadditional price of € 9 over a single-gate, one day admission price, a guestcan go back and forth freely between Disneyland Park and Walt Disney StudiosPark.

 

The following table summarizes the evolution of thesingle-gate, one-day theme park admission prices, attendance and average spendingper guest:

 
| **Fiscal Year** | ** ** | **Total Guests****(1)** | ** ** | **Total Average  Spending per  Guest****(2)** | ** ** | **Theme Park  Admission Price  High Season****(3)** | ** ** | **Theme Park  Admission Price  Low Season****(3)** | ** ** |
|-----------------|------------|-------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **      | ** ** | **(in millions)**       | ** ** | ** **                                    | ** ** | ** **                                          | ** ** | ** **                                         | ** ** |
| **2005**        | ** ** | **12.3**                | ** ** | **€**                                    | **44.3**   | ** **                                          | **€** | **41.0**                                           | ** ** | **€** | **41.0** | ** ** |
| 2004            |       | 12.4                    |       | €                                        | 42.7       |                                                | €     | 40.0                                               |       | € | 40.0 |   |
| 2003            |       | 12.4                    |       | €                                        | 40.7       |                                                | €     | 39.0                                               |       | € | 29.0 |   |
| 2002            |       | 13.1                    |       | €                                        | 40.1       |                                                | €     | 38.0                                               |       | € | 27.0 |   |
| 2001            |       | 12.2                    |       | €                                        | 38.9       |                                                | €     | 36.0                                               |       | € | 25.9 |   |

 

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*(1)**              Includes Disneyland Park and, fromMarch 16, 2002, Walt Disney Studios Park.*

*(2)**              Average daily admission price andspending for food, beverage, merchandise and other services sold in the ThemeParks, excluding value added tax.*

*(3)**              Represents at-gate park admissionprice for one adult including value added tax at the end of the fiscal year. Startingin fiscal year 2002, high season pricing generally applied to the whole yearwith the exception of the period from January to March inclusive. Since January2004, a single rate applies throughout the year.*

 

*Disneyland Park*

 

Disneyland Park is composed of five “themed lands”: *Main Street U.S.A.*, which transports guests to an Americantown at the turn of the 20th century, with its houses and shops, *Frontierland*, which takes guests on the path of the pioneerswho settled the American West, *Adventureland*,where guests dive into a world of intrigue and mystery, reliving Disney’s mostextraordinary legends and best adventure movies, *Fantasyland*,a magical land where guests find the fairy tale heroes brought to life inDisney’s animated films, and *Discoveryland*,which lets guests discover different “futures” through the works ofvisionaries, inventors, thinkers and authors of science fiction from allperiods.

 

There are 43 attractions in Disneyland Park,including upgraded versions of standard features of Disney theme parks aroundthe world such as: *Big Thunder Mountain*,a roller coaster which simulates a mining railway train; *Pirates of the Caribbean,* which reproducesa pirate attack on a Spanish fort of the 17th century; *Phantom Manor,* a haunted Victorianmansion; *It’s a small world*, themost popular attraction in *Fantasyland*,an exhibition of dolls from around the world, dressed in their nationalcostumes; and *Honey, I Shrunk the Audience!*,a three-dimensional film with interactive special effects during whichspectators participate in the illusion of being “shrunk”. Other popularattractions that are unique to Disneyland Park include: *Indiana Jones and the Temple of Peril*, afull-loop roller coaster ride through simulated ancient ruins; and *Space Mountain : Mission 2*, a rollercoaster ride themed to the work of Jules Verne in which guests board aspaceship and are catapulted by a giant canon into outer space.

 

Disneyland Park also has five permanenttheatres. Live stage shows are presented in these venues throughout the year.Examples from the past and present include*The Tarzan Encounter* and *Mickey’sWinter Wonderland*, and more recently *The Legend of the Lion King*. The entertainment in theDisneyland Park also includes parades and firework displays, such as the *Wonderful World of Disney Parade, Fantillusion Parade*and *Wishes*. As a result of thenumber of guests that they attract, shows and parades enable an increase in theguest capacity of Disneyland Park while at the same time increasing guestsatisfaction.

 

In addition to the permanent Disneyland Parkattractions, parades and live stage shows, there are numerous seasonal eventsthroughout the year which in the past have included the *Halloween Festival* in October, specialChristmas festivities in December and early January, and the *Kids Carnival*in February and March. The appearance of Disney characters and theirinteraction with guests is another important aspect of the entertainmentprovided in the Theme Parks.

 

In fiscal year 2000, an innovativereservation system called *Fastpass*was introduced in Disneyland Park. A free service available to all guests, *Fastpass* provides an alternative towaiting in line. Guests choosing *Fastpass*receive a ticket designating a specific window of time during which they mayreturn and enter directly into the pre-show or boarding area. The *Fastpass* system has been installed at fivemajor attractions: *Space Mountain: Mission 2,Indiana Jones and the Temple of Peril, Peter Pan’s Flight*, *Big Thunder Mountain* and *Star Tours.*

 

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*Walt Disney Studios Park*

 

Walt Disney Studios Park opened to the public on March 16, 2002. WaltDisney Studios Park is a live-action, animation and television studio, whereguests experience movies and television both from behind the scenes and infront of the camera. Guests discover the world of cinema, see how movies aremade today and step into the future of movie making. They also have theopportunity to be part of the action, and get hands-on experience in animationtechniques and special effects.

 

Walt Disney Studios Park is a full-day experience, designed for a six-or seven-hour stay and is one of three European parks with a cinema theme (thetwo others being the Warner Brothers Movie World Park in Germany and the WarnerBrothers Movie World Park in Spain). Walt Disney Studios Park coversapproximately 25 hectares, which is about half the size of Disneyland Park, andwill be expanded in the future. It is located in front of the TGV/RER trainstation, in walking distance from Disneyland Park and Disney Village.

 

Guests access Walt Disney Studios Park through a monumental gatedesigned to look like the entry gates of the major Hollywood studios in the1930s. The main gate provides access to a richly decorated central hub whereall the ticketing and guest welcome services are located.

 

Walt Disney Studios Park includes nine major attractions, several ofwhich were specifically developed for the park. Examples include: the *Stunt Show Spectacular*, a live show in which stuntmen,facing an audience of up to 3,200 guests, simulate the filming of an actionscene involving car and motorcycle chases and other special effects; *Cinemagique*, a lyrical and emotional salute to the classicsof international cinema; *Armageddon*, arevealing look into the world of film special effects while on board aspaceship hit by a meteorite shower; and *Animagique*,featuring some of the greatest moments of almost 80 years of Disney animation.

 

The park also features upgraded versions of attractions from DisneyMGM-Studios near Orlando, Florida such as *Rock’n’ Roller Coaster*,a roller coaster ride themed to the music of Aerosmith and a visit to a musicrecording studio, and *Catastrophe Canyon*,the highlight of the *Studio Tram Tour*,which allows guests to experience a simulated earthquake and the resultingexplosions and floods.

 

Since June 2002, the *Disney Cinema Parade*celebrates the steps in the life of a movie from A to Z featuring well-knownDisney characters. To add to the overall park ambience, this parade alsoincludes street entertainers (e.g. movie “look-alikes” and musicians), Disneycharacters centered around the world of animation and special entertainment.

 

As in Disneyland Park, the *Fastpass* systemreduces guest waiting-times at *Rock’n’ Roller Coaster*and the *Flying Carpets over Agrabah*.

 

**A.3.1.2.*****      Hotelsand Disney Village***

 

Also included in the Resort segment are the Group’s hotels and DisneyVillage operations. Revenues from these activities include room rental, foodand beverage, merchandise, dinner shows, convention revenues and fixed andvariable rent received from third-party partners operating within the Resort.

 

All****of the hotel and resort amenitiesare currently operated on a year-round basis. Hotel operations are subject tosignificant seasonal fluctuations, as well as significant fluctuations betweenweekdays and weekends especially in off-peak seasons. The second conventioncenter, the continued success of seasonal promotions such as *Halloween*, *Guy Fawkes* and *Christmas*, and the introduction of travel inclusive packageshave helped to reduce these fluctuations. The Company believes that thesuccessful implementation and marketing of these events is important tomaintaining high average occupancy levels at the Hotels.

 

*Hotels Operations*

 

Infiscal year 2005, approximately 27% of total hotel room-nights sold weregenerated in the three-month period from June through August, whileapproximately 24% were generated in the three-month period from Novemberthrough January, versus 36% and 14% respectively in fiscal year 1993 during thesame periods. The Group currently differentiates pricing according to theseason and the level of demand with a focus on yield optimization.

 

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Hotel revenues are measured primarily by two factors: the averageoccupancy rate and per-room spending.

 
| **Fiscal Year** | ** ** | **Average occupancy rate ****(1)** | ** ** | **Total average daily  Spending per occupied room ****(2)** | ** ** |
|----------------------|------------|---------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|
| **2005**             | ** ** | **80.7**                                          | **%**      | **€**                                                                                | **179.1**  | ** ** |
| 2004                 |       | 80.5                                              | %          | €                                                                                    | 186.6      |   |
| 2003                 |       | 85.1                                              | %          | €                                                                                    | 183.5      |   |
| 2002                 |       | 88.2                                              | %          | €                                                                                    | 175.1      |   |
| 2001                 |       | 86.0                                              | %          | €                                                                                    | 168.6      |   |
| 2000                 |       | 82.9                                              | %          | €                                                                                    | 165.4      |   |

 

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*(1)**             **Average number of rooms sold per night as a percentage of the totalnumber of rooms (total room inventory is approximately 5,800 rooms).*

*(2)**             **Average daily room price and spending on food, beverage and merchandiseand other services sold in the Hotels, excluding value added tax.*

 

The Group operates seven hotels at the Resort: the Disneyland Hôtel,the Hôtel New York, the Newport Bay Club, the Sequoia Lodge, the HôtelCheyenne, the Hôtel Santa Fe and the Davy Crockett Ranch (the “Hotels”). Together,the Hotels have a total capacity of approximately 5,800 rooms. Each of theHotels was designed and built with a specific theme and for a particular marketsegment. The Disneyland Hôtel, which is located at the entrance of DisneylandPark, and the Hôtel New York are positioned as deluxe hotels offering serviceequivalent to that of the best hotels in Paris. The Newport Bay Club and theSequoia Lodge are positioned as “first-class” hotels, while the Hôtel Cheyenneand the Hôtel Santa Fe were designed as “moderately-priced” hotels. The DavyCrockett Ranch campground is comprised of individual bungalows with privatekitchens, camping sites, sports and leisure facilities and a retail shop. Boththe Hôtel New York and the Newport Bay Club include convention facilities,which provide a total of approximately 10,500 square meters of meeting space. Resortamenities also include 12 restaurants, 9 cafés/bars, a 27-hole golf course, 5swimming pools, 4 fitness centers, tennis courts and an ice-skating rink.

 

A wide range of services is offered at the Hotels. Guestsare provided transportation between each of the Hotels (except the DavyCrockett Ranch) and the train station, and are given the option to check intothe Hotels directly from the Chessy-Marne-la-Vallée train station or from onboard the Eurostar (London) and Thalys (Brussels and Cologne) trains arrivingat Disneyland Resort Paris. As part of the check-in process, guests areprovided with room information and welcome booklets and for guests arriving bytrain, the Group also offers a luggage service, which allows them to godirectly to the parks and have their luggage delivered from the train stationto their rooms. Entertainment is also an integral part of the Hotel services,including Disney character breakfasts and dinners, character meet-and-greets inthe lobbies of certain Hotels, face-painting workshops, and live music in thebars of certain Hotels. Children’s activity corners have also been set up wherechildren can take part in various activities while allowing their parentsadditional leisure time.

 

In addition to the seven Disneyland Resort Paris Hotels describedabove, several third-party managed hotels having signed sales and marketingagreements with the Group are currently operating on the Resort Site. Thesehotels which benefit from the “Selected Hotel” or “Associated Hotel”designations, depending on their level of integration in the Resort, are asfollows:

 
| ** **                                | ** ** | **Designation** | ** ** | **Category** | ** ** | **Date opened** | ** ** | **Number of Units** | ** ** |
|-------------------------------------------|------------|-----------------|------------|--------------|------------|-----------------|------------|---------------------|------------|
| Hôtel Elysée  Val d’Europe |       | Associated      |       | 3            | *          | June 02         |       | 154                 |       |
| My Travel  Explorer                       |       | Selected        |       | 3            | *          | March 03        |       | 390                 |       |
| Kyriad                                    |       | Selected        |       | 2            | *          | March 03        |       | 300                 |       |
| Pierre et Vacances Tourist Residence      |       | Associated      |       | 3            | *          | April 03        |       | 291                 |       |
| Holiday Inn                               |       | Selected        |       | 4            | *          | June 03         |       | 396                 |       |
| Marriot  Vacation Club                    |       | Associated      |       | 4            | *          | June 03         |       | 138                 |       |
| Mövenpick  Dream Castle Hotel        |       | Selected        |       | 4            | *          | July 04         |       | 405                 |       |
| Radisson SAS  Hotel                       |       | Associated      |       | 4            | *          | December 05     |       | 250                 |       |
| **Total**                                 | ** ** | ** **      | ** ** | ** **   | ** ** | ** **      | ** ** | **2,324**           | ** ** |

 

These hotelsbenefit from transport shuttles to and from the theme parks as well as freeparking for their guests (Selected Hotels only), and are an important source ofguest attendance at the Theme Parks. For certain of these hotels, the Group hasaccess to blocks of rooms and receives commissions for selling those rooms toguests. Any revenues earned associated with these agreements is recorded in the“*Other Revenue*” line of the Resortsegment. See Item 4 “Information of the Company” - Section A.3.2. “*Real**Estate**Development**Segment*” for adiscussion of hotel capacity development projects currently in process.

 

*Disney Village Operations*

 

Disney Village consists of approximately 30,000 square meters of themeddining, entertainment and shopping facilities. It is a free-entrance venue(except for certain events), situated next to the Chessy-Marne-la-ValléeRER/TGV train station and between the Theme Parks and the Hotels.

 

14

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The over-riding themes of Disney Village are “AmericanPlaces” and “American Entertainment” in the spirit of a coast-to-coast tripfrom New York to Los Angeles. The largest of its facilities is an indoor arenaseating more than 1,000 guests for dinner and a performance of *Buffalo Bill’s Wild West Show*. Otherfacilities include themed bars with music, themed restaurants, including *Café Mickey*, *Planet Hollywood, Rainforest Café, Annette’s Diner, McDonald’s*,and *King Ludwig’s Castle*, retailshops and a 15-screen multiplex *Gaumont*cinema with one of the largest screens in Europe. The Group manages certain ofthe facilities in the Disney Village, such as the *Buffalo Bill’s Wild West Show*, merchandise boutiques andbars. Certain restaurants are managed on behalf of the Group by Groupe Flo, aFrench catering company. In addition, certain of the facilities, such as the *Planet Hollywood, McDonald’s, Rainforest Café*and *King Ludwig’s Castle*restaurants, and the *Gaumont*cinema, are owned and managed by third parties.

 

**A.3.1.3.*****      Food andbeverage***

 

The Group has 68 restaurants and bars throughout the Resort (four ofwhich are operated by Groupe Flo on behalf of the Group). Restaurants arethemed both in decoration and menu, based upon their location within theResort, and offer guests a wide variety of dining experiences including quickservice, cafeteria-style, table service (including convention catering), andsophisticated French cuisine. There are also food carts and kiosks locatedthroughout the Resort which offer fast-food. The Group offers guests the optionof a fixed-price menu in all of its table service restaurants. During fiscalyears 2001 and 2002, the capacity of three Disney Village facilities wasincreased: *Billy Bob’s Country Western Bar*(+94seats), *The Steakhouse* (+180 seats) and *Annette’s Diner* (+90 seats). In fiscal year 2003, the *Rock’n Roll America* was transformed into *King Ludwig’s Castle*, a 296-seat restaurant specializing inBavarian cuisine.

 

**A.3.1.4.*****      Merchandising***

 

The Group’s merchandising facilities include 54 boutiques, 4 kiosks anda large number of mobile carts strategically located throughout the Resort,which mainly offer a wide range of Disney-themed goods. The product mix isconstantly re-evaluated in an effort to better adapt to guest preferences andguest mix. New merchandise development focuses on Disney character products,such as the *Mickey Sorcerer* line and the *Princesses* line, which are popular with guests, and on morevariety for the repeat guest. Other innovative merchandising options includephoto locations at four attractions, *Big Thunder Mountain*,*Space Mountain: Mission 2*, *Pirates of the Caribbean* and *Rock’n’RollerCoaster,* which offer to its guests the opportunity to purchasecandid photos taken of them during their ride. During fiscal year 2005, theGroup completed major renovations at the *Emporium* and *Constellations* boutiques in Disneyland Park.

 

**A.3.2.****      RealEstate Development Segment**

 

*Real estate development segment*

 

The Group’sactivities include the planning and development of the 1,943 hectare site onwhich the Resort is located, in accordance with the Master Plan. Developmentactivities include the conceptualization and planning of improvements andadditions to the existing Resort, as well as other commercial and residentialreal estate projects to be located on the Resort Site, whether financedinternally or through third-party partners.

 

The Group’s principal real estate development revenues are derived fromconceptual design services related to third-party development projects on theResort Site and from the sale of land development rights or from ground leaseincome from third-party developers. Such transactions not only provide a sourceof up-front cash inflows but also contribute to improving the potential offuture Resort and real estate development projects and to increasing thepotential local clientele for Disneyland Resort Paris.

 

The followingtable summarizes the financial impact of real estate development activities onthe financial statements during the past five fiscal years:

 

 
| **(€ in millions)** | ** ** | **2005**   | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|--------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Revenues                 |       | ** ** | ** ** |     |       |     |       |     |       |     |       |
| Operating                | ** ** | **28.7**   | ** ** | 11.8     |       | 23.6     |       | 27.3     |       | 37.2     |       |
| Exceptional              |       | **—** | ** ** | —   |       | 0.1      |       | —   |       | 0.4      |       |
| Total  Revenues          | ** ** | **28.7**   | ** ** | 11.8     |       | 23.7     |       | 27.3     |       | 37.6     |       |
| Costs and  Expenses      | ** ** | **(22.0**  | **)**      | (10.1    | )          | (13.3    | )          | (15.2    | )          | (13.4    | )          |
| Net Income               | ** ** | **6.7**    | ** ** | 1.7      |       | 10.4     |       | 12.1     |       | 24.2     |       |

 

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Realestate development revenues are primarily related to the following projects:

 

The first phase of development between 1989 and 1997 was essentiallydevoted to the creation of the Resort destination. The second phase between1998 and 2003 focused on the emergence of the development of an urban centerlocated adjacent to the Resort (Val d’Europe). In addition to Walt DisneyStudios Park, this second phase of development resulted in:

 

•                  newinfrastructure such as a second RER train station (Val d’Europe) on the ResortSite and a new interchange on the A4 motorway;

 

•                  anInternational Shopping Mall at Val d’Europe*,* whichcomprises 103,000 square meters of retail space. The Group owns the land onwhich the mall is located and leases it to the developer under a 75-year groundlease;

 

•                  developmentof the Val d’Europe town center, which currently includes residential, retailand commercial developments and the Elysées**Val d’Europe**hotel, which opened in June 2002 on land leased from theGroup; and

 

•                  afirst phase of an international business park, which upon completion willcomprise an area of 40 hectares, strategically positioned near the motorway.Construction and commercialization of the first nine hectares is currentlybeing carried out by Arlington plc, a leading European developer of businessparks.

 

*Development plans for the coming years*

 

A third phase of development was signed with the French PublicAuthorities on July 9, 2003 and covers the period 2004 through 2010. In thisphase of development, the following is anticipated:

 

•                  theexpansion of Disney Village, the development of business tourism and additionalhotel capacity, when needed;

 

•                  thecontinuation of the Val d’Europe**town centerexpansion (residential and office development);

 

•                  thedevelopment of new public services such as the development of a high school (*Lycée*) in Serris with international sections, thedevelopment of an university center in Val d’Europe as well as a new module forthe TGV station;

 

•                  thecontinuation of the international business park development (second phase); and

 

•                  otherresidential developments in the area surrounding the Val d’Europe golf course.

 

*Hotel capacity developments*

 

With the development ofWalt Disney Studios Park, the Group also focused on the expansion of on-siteResort lodging capacity. A number of projects have been completed or are invarious stages of progress with third-party international hotel developers/touroperators for the creation of additional hotels and vacation units. Theseprojects have or will be constructed, owned and operated by third parties onland purchased from the Group or leased from the Group under long-term groundleases. In addition, the Group has and will earn conceptualization fees andother development service fees related to these transactions.

 

As a result of these projects, approximately 1,400 hotel/vacation unitswere opened on the Resort Site in fiscal year 2003, 457 units were opened infiscal year 2004, and 41 units were opened in fiscal year 2005 bringing thetotal on-site capacity to approximately 7,800 total room units.

 

The agreements and projects currently in place will result in a totalof approximately 300 hotel/vacation units being added on the Resort Site in thecourse of fiscal year 2006 (including 250 units at the Radisson SAS Hotel,which opened in December 2005).

 

*Residential developments*

 

The Group also sells land to third-party residential developers workingon projects in the areas surrounding the Resort, including the commerciallysuccessful middle and high-end housing developments near the golf course in thecommunities of Magny-le-Hongre and Bailly-Romainvilliers.

 

To date, this residential development has been financed by thirdparties. The Group’s role has been limited to overseeing the master planningand architectural design of each development, and to selling to selecteddevelopers the land development rights necessary to realize the projects. TheGroup does not anticipate significant changes in its role for futureresidential development projects.

 

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### ***A.4.***                          Marketing and Sales Strategy

### *** ***

**A.4.1.****                Marketing andSales**

 

*Product Offer*

 

Disneyland Paris Resort is the number one tourist destination in Europein terms of guest visitation with a product offer that currently includes twotheme parks, 7 themed Hotels (5,800 total rooms), two separate conventionfacilities (totaling 10,500 square meters), a dining, shopping andentertainment center and a 27-hole golf course.

 

With the opening of Walt Disney Studios Park, the Group’s packageoffers were modified to focus on 2-night, 3-day visits. During fiscal year 2003the Group re-introduced a widely distributed 1-night, 2-day package toaccommodate its guests desiring a shorter break. The Group’s Resort packagesinclude “Park Hopper” tickets whereby guests can go back and forth freelybetween Disneyland Park and Walt Disney Studios Park, which were introducedduring the course of fiscal year 2004.

 

*Strategic Location*

 

Disneyland Resort Paris is located approximately 32 kilometers (20miles) east of Paris, France and benefits from access to a highly developedtransportation network. In addition to service to Paris on the French suburbanrail system, Disneyland Resort Paris has access to an extensive highway networkthat links it in less than one hour to both Paris and the two internationalairports serving the Paris area, and also makes it easily accessible to mostother regions of France. In addition, the train station that is located on theResort Site is one of the most active in France, with about forty high speedtrains arriving per day and providing service to London in 3 hours by theEurostar train, and to Brussels in 1 hour and 30 minutes and Amsterdam in 4hours and 30 minutes by the Thalys train. The strategic geographic locationallows access to a market of 17 million potential guests less than 2 hours awayby road or rail transport and 320 million potential guests less than 2 hoursaway by plane.

 

 

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*Target Markets*

 

The Group has six key proximate markets: France, the United Kingdom,Benelux (Belgium, Luxembourg, the Netherlands) Germany, Italy and Spain. Withinthese markets, its primary target market is families with children from 3-15years old but secondary markets also include groups, young adults andconvention planners. Each year, its success in marketing to specific countriesand markets is impacted by a variety of strategic decisions, including itspricing policy and its package offers, as well as external factors such as thestrength of local economies, exchange rates, cultural interests, and holidayand vacation timing. The introduction of the euro has eliminated exchange rateconcerns in all key markets except the United Kingdom.

 

Based on internal surveys, during the past three Fiscal Years, thegeographical breakdown of the Company’s theme park guest attendance is asfollows:

 
| ** **                               | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| France                                   | ** ** | **39**   | **%**      | 40       | %          | 39       | %          |
| United  Kingdom                          | ** ** | **20**   | **%**      | 19       | %          | 22       | %          |
| Belgium,  Luxembourg and the Netherlands | ** ** | **15**   | **%**      | 16       | %          | 16       | %          |
| Spain                                    | ** ** | **9**    | **%**      | 8        | %          | 6        | %          |
| Germany                                  | ** ** | **5**    | **%**      | 6        | %          | 6        | %          |
| Italy                                    | ** ** | **3**    | **%**      | 3        | %          | 3        | %          |
| Other                                    | ** ** | **9**    | **%**      | 8        | %          | 8        | %          |
| **Total**                                | ** ** | **100**  | **%**      | 100      | %          | 100      | %          |

 

*Distribution*

 

The Group distributes its product offer through a wide variety ofchannels. Tour packages, which in many cases include transportation, lodging,food and theme park tickets are distributed through its call centers, on itsinternet site or through third-party distributors.

 

Theme park tickets are sold not only within these packages, but alsothrough tourism intermediaries, directly at the gate and by various retailoutlets (including the Disney Stores, FNAC, Virgin Megastores, Auchan, RATP,and at French, Belgian and Swiss railway stations, etc.).

 

Hotel bookings can be made by individual guests, either directly orthrough Euro Disney Vacances S.A.S., a French corporation (*société par actions simplifiée*), the Group’sin-house tour operator. The call centers, based at the Resort Site and in theUnited Kingdom, receive an average of approximately 6,100 calls per day fromall over Europe. Apart from the United Kingdom, all other markets are servicedfrom the central reservation office at the Resort Site in Paris, with country-specifictelephone numbers.

 

Euro Disney Vacances S.A.S. focuses on distribution of short-breakpackages, with offices in Paris and regional offices in Amsterdam, Brussels,Frankfurt, London, Milan and Madrid. These offices provide a local marketingpresence and the necessary travel industry trade support. The Group also workswith a select number of tour operators in its major markets.

 

In addition, the Group has established special travel alliancepartnerships with the principal European transporters. Travel allianceagreements have been completed with Air France on a pan-European basis and withEurostar and Thalys. These agreements provide carriers with the right to useDisneyland Resort Paris in their advertising campaigns and some with the rightto special joint promotional packages. In return, the Group has the right toprovide airline or train tickets in its short-break packages and to secureallotments. Guest visitation from the United Kingdom, Spain, Italy and Belgiumreflects its relationship with these partners.

 

The Group’s internet site at www.disneylandparis.com is available in 7languages and allows site visitors to learn about its Resort, order a brochureand make reservations. The Group is currently working on projects to expand itsability further to sell its products directly to guests on its internet site.

 

**A.4.2.****                Competition**

 

The Group competes for guests throughout the year with theme parks aswell as other European and international holiday destinations (including skiand seaside resorts) and with other leisure and entertainment activities(including museums and cultural activities) in the Paris region. The Group’s Hotelscompete with other hotels on the Site and in the Paris region and conventioncenters all over Europe. The Resort also competes with major internationaltourist-attracting events and major sporting events, such as the soccer WorldCup, the World Athletics Championships and the Olympic Games.

 

The theme park market in Europe has grown significantly over the lasttwo decades. The largest European theme parks attracted approximately 38.8million guests in 2005. The following table sets forth the attendance of eachof these ten destinations.

 

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**Theme Parks in Europe**(1)

**(in millions)**

 
| ** **                                                | ** ** | ** **      | ** ** | **Attendance** | ** ** | ** ** |
|-----------------------------------------------------------|------------|-----------------|------------|----------------|------------|------------|
| **Theme Park**                                            | ** ** | **Location**    | ** ** | **2005**       | ** ** | **2004**   | ** ** | **2003** | ** ** | **2002** | ** ** |
| Disneyland Resort Paris (fiscal year ended  September 30) |       | France          | ** ** | **12.3**       |       | 12.4       |   | 12.4 |   | 13.1 |   |
| Tivoli Gardens                                            |       | Denmark         | ** ** | **4.1**        |       | 4.2        |   | 3.3 |   | 3.8 |   |
| Europa Park                                               |       | Germany         | ** ** | **4.0**        |       | 3.7        |   | 3.6 |   | 3.3 |   |
| Port Aventura (formerly Universal’s  Mediterrania)   |       | Spain           | ** ** | **3.8**        |       | 3.5        |   | 3.0 |   | 3.2 |   |
| De Efteling                                               |       | Netherlands     | ** ** | **3.3**        |       | 3.3        |   | 3.2 |   | 3.0 |   |
| Lieseberg                                                 |       | Sweden          | ** ** | **3.2**        |       | 3.0        |   | 2.7 |   | 3.1 |   |
| Gardaland                                                 |       | Italy           | ** ** | **3.1**        |       | 3.1        |   | 3.0 |   | 2.9 |   |
| Bakken                                                    |       | Denmark         | ** ** | **2.6**        |       | 2.5        |   | 2.7 |   | 2.5 |   |
| Alton Towers                                              |       | United  Kingdom | ** ** | **2.4**        |       | 2.4        |   | 2.5 |   | 2.5 |   |
| ** **                                                |       | ** **      |       | **38.8**       |       | 38.1       |   | 36.4 |   | 37.4 |   |

 

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*(1)**             **Source: Amusement Business, PricewaterhouseCoopers, and individualcompany press releases. Excluding non-gated amusement parks.*

 

**A.5.**                          **Human Resources Management**

 

To entertain its guests,the Group employed an average of approximately 12,250 employees during fiscalyear 2005. The Group’s employees come from approximately 100 differentcountries and approximately 20% of them have been employed since Opening Day.The table below presents the average number of persons employed by the Group aswell as the associated employee costs for each of the last five fiscal years:

 
| **Fiscal Year** | ** ** | **Average Number  of   Employees** | ** ** | **Total Employee  Costs**     | ** ** |
|----------------------|------------|----------------------------------------------|------------|------------------------------------|------------|
| ** **           | ** ** | ** **                                   | ** ** | **(€ in millions)** | ** ** |
| **2005**             | ** ** | **12,249**                                   | ** ** | **392.0**                          | ** ** |
| 2004                 |       | 12,162                                       |       | 366.0                              |       |
| 2003                 |       | 12,223                                       |       | 365.7                              |       |
| 2002                 |       | 12,467                                       |       | 352.0                              |       |
| 2001                 |       | 11,109                                       |       | 307.0                              |       |

 

The seasonal nature of the business means that the need for employeesis, to a certain extent, also seasonal. Accordingly, the Group has developed asystem, used in both the theme parks and the Hotels, to optimize scheduling andautomate labor exchange between operations. The system improves efficiency byautomating both scheduling and the corresponding pay systems. In conjunctionwith this system, flexible working contracts have been negotiated with theemployee representatives. Special part-time contracts such as four-day workingweeks, 32-hour weeks or individually negotiated contracts, have beenimplemented. Over the past four fiscal years, many temporary jobs have beenturned into flexible long-term contracts with Disneyland Resort Paris,facilitating job security and better training for employees. This newflexibility has helped management to better match the number of employees tothe levels of customer demand.

 

In addition, based upon an assessment ofcurrent employment policies and practices within the Group, negotiations are inprogress with employee labor representatives for the purpose of proposing asolution for certain difficulties in the implementation of required changes inthe defined work hours, as well as the treatment of the working hours ofmanagement (*cadre*) employees. These negotiations areconsidered part of the normal evolution over time of the Group’s collectivebargaining agreements with employee labor representatives, taking into accountchanges in the legal environment and the business activities of the Group.

 

An internal university provides permanent training for all employees inmatters of service and entertainment. To improve quality, approximately 50,173training days were provided to employees in 2005. To enhance the diversity ofskills, training classes range from stress management to more specific subjectssuch as the welcoming of guests “Disney Style”. The Group is continuallyseeking to enhance its image as a “teaching” company, recognized foroutstanding training techniques. As an example, in November 2000, the Groupsigned an agreement with certain of its labor unions for the creation of a newprogram aimed at providing employees with a new professional status called “*Hôte**d’Accueil**Touristique*” and thus a wider recognition of their skills ona national scale. Its objective is to develop the competencies of approximately300 employees per year, over a period of fifteen months, through group trainingthat permits them to earn four different professional competency certificates.

 

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Seven Frenchlabor unions, the *Confédération**Générale**du**Travail* (C.G.T.), the *Confédération**Française**Démocratique**du**Travail*(C.F.D.T.), the *Confédération**Française**de**l’Encadrement* – *Confédération**Générale**des**Cadres* (C.F.E.- C.G.C.), *Force**Ouvrière* (F.O.), the *Confédération**des**Travailleurs**Chrétiens* (C.F.T.C.), the *Syndicat**Indépendant**du**Personnel**Euro**Disney* (S.I.P.) and the *Union**Nationale**des**Syndicats**Autonomes* (U.N.S.A.), are represented at Disneyland ResortParis. The Group complies with information and consultationrequirements with respect to the unions and holds other periodic consultationswith employee representatives. Since Opening day, there have been nosignificant strikes or work stoppages.

 

In June 1998, the French Government enacted alaw to reduce the official work week from 39 to 35 hours. For companies thatimplemented the 35-hour week before July 1, 1999, the French governmentprovided subsidies in the form of lower payroll taxes for each of the fiveyears following the date of implementation and has since initiated othersubsidy programs. The Group began operating on the basis of a 35-hour workweekon June 6, 1999 and is continuing to benefit from such subsidies, which aredecreasing progressively each year.

 

The Group has made no distributions under its statutory profit sharingplan. However, since October 1, 1995, the Group has provided employees asupplemental profit sharing plan. Under the latest plan amendment signed March10, 2003 applying to fiscal years 2003 and 2004, employees were eligible toreceive a bonus of between 0.2% to 3.0% of their annual salary, if incomebefore lease and net financial charges as presented in the ConsolidatedFinancial Statements of the Group reached certain pre-defined thresholds.

 

The following table summarizes amounts paid under this profit sharingplan for each of the last five fiscal years:

 
| ** **                    | ** ** | **Year ended September 30,** | ** ** |
|-------------------------------|------------|------------------------------|------------|
| **(€ in millions)**      | ** ** | **2005**                     | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| Total Profit  Sharing Expense | ** ** | **n/a**                      |       | — |   | — |   | — |   | 1.9 |   |

 

In addition, an employee savings plan exists in order to facilitate andencourage individual savings. The Company matches 30% of the first € 3,333 ofeach employee’s contribution to the plan each year.

 

In connection with the screening of new employees, criminal backgroundswere checked by an external firm to assist in ensuring the security of visitorsto the Resort. This practice came to the attention of executive management ofthe Company in December 2004 and because it may constitute a violation underFrench law, has been suspended. While the Company might face fines orlitigation based on these circumstances, the Company believes that these wouldnot have a material adverse effect on its financial condition.

 

**A.6.****                          SignificantOperating Contracts**

 

**A.6.1.****                Agreements withFrench Governmental Authorities**

 

On March 24, 1987, TWDC entered into a Master Agreement with theRepublic of France, the Region of Ile-de-France, the Department ofSeine-et-Marne, the EPA-Marne and the Suburban Paris Transportation Authority (“RATP”),for the development of the Resort and other various development phases for the1,943 hectares of undeveloped land located 32 kilometers east of Paris inMarne-la-Vallée, France. The Group and certain other parties became parties tothe Master Agreement after its signature by the original parties. In 1988, theEPA-France, which has responsibility for the development of the entirety of theResort, was created pursuant to the Master Agreement, and became a partythereto.

 

The Master Agreement, as amended from time to time, determines thegeneral outline of each phase of development as well as the legal and initialfinancial structure. It provides that loans with specific terms and conditionsshall be granted. The significant components thereof are summarized below.

 

*Development planning*

 

The Master Agreement sets out a master plan for the development of theland and a general development program defining the type and size of facilitiesthat the Group has the right to develop, subject to certain conditions, over a30-year period ending no sooner than 2017. Before beginning any new developmentphase, the Group must provide EPA-France and several French public authoritieswith a proposal and other relevant information for approval. On the basis ofthe information provided, the Group and the authorities involved developdetailed development programs.

 

After having concluded negotiations for a detailed program for thesecond phase of Val d’Europe urban development on December 9, 1997, the Group andEPA-France concluded negotiations for a detailed program for the third phase ofVal d’Europe urban development on July 9, 2003.

 

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*Financing of infrastructure*

 

The Master Agreement specifies the infrastructure to be provided by theFrench authorities to the Resort. The relevant French public authorities have acontinuing obligation to finance construction of the primary infrastructure,such as highway interchanges, primary roadways to access the Resort Site, waterdistribution and storage facilities, rain water and waste water treatmentinstallations, waste treatment facilities, gas and electricity distributionsystems, as well as telecommunication networks. The Master Agreement alsospecifies the terms and conditions of the Group’s contribution to the financingof certain infrastructure. Infrastructure provided by the French governmentalauthorities included the extension of the “A” line of the RER suburban raillink (which links Paris and its eastern and western suburbs to DisneylandResort Paris with two stations), the construction of two interchanges linkingthe Resort directly to the A4 motorway, a TGV (high speed train) stationlinking the Resort to other major cities of Europe and the completion of anaccess road around the Resort Site.

 

*Land rights*

 

The Master Agreement provides for the right of the Group, subject tocertain conditions, to acquire the land necessary for the expansion ofDisneyland Resort Paris on the Marne-la-Vallée site. The exercise by the Group ofthese acquisition rights is subject to certain development deadlines, which ifnot met would result in the expiration of these rights. To date, all minimumdevelopment deadlines have been met and no land rights have expired unused. Thenext deadline for the expiration of land right options will be December 31,2007. Management currently anticipates that this development deadline will bemet and no options will expire.

 

In order to maintain the Group’sland acquisition rights for the remaining undeveloped land around the Resort(approximately 1,000 hectares), the Group is required to pay annual fees toEPA-France of approximately € 0.6 million.

 

*Department of Seine-et-Marne tax guarantee*

 

Pursuant to the Master Agreement, the Company, certain entitiesconsolidated in the Company’s financial statements, and the Republic of Franceguaranteed a minimum level of tax revenues to the Department of Seine-et-Marne.If the Department’s tax revenues were less than the amount of charges borne bythe Department for primary and secondary infrastructure during the period from1992 to 2003 (which was the case), the Republic of France and the Group were eachrequired to reimburse, in equal shares to the Department, the differencebetween the tax revenues collected and the charges borne, up to an aggregateamount of approximately € 45.0 million (after adjustment for inflation from1986). Based upon the final assessment covering the entire period of theguarantee through December 31, 2003, the Group will be required to pay theDepartment € 20.3 million under the terms of the guarantee over a ten-yearperiod in eight installments, the first of which is due in fiscal year 2007.This liability is recorded in the Group’s consolidated financial statementsunder “Accounts payable and other liabilities” as of September 30, 2005.

 

**A.6.2.****                ParticipantAgreements**

 

The Group has entered into long-term participant agreements withcompanies that are leaders in their fields. 13 participant agreements with thefollowing companies are currently in force: Coca-Cola, Esso, France Télécom andits subsidiary Orange, General Motors, Hasbro Inc., Hertz, Kellogg’s, Kodak,McDonald’s, Nestlé and its subsidiary Perrier-Vittel, and Visa. Theseparticipant agreements provide the Disneyland Resort Paris participants withthe following rights in exchange for an individually negotiated fee: (i) apresence on the Resort Site through the sponsoring of one or more of DisneylandPark, Walt Disney Studios Park or Disney Village’s attractions, restaurants orother facilities; (ii) promotional and marketing rights with respect to thecategory of product that is covered by the participant agreement; and (iii) thestatus of privileged supplier of the Group. Each participant agreementterminates automatically in the event of termination of the License Agreementbetween The Walt Disney Company (Netherlands) B.V. and the Company (See Item 4 “Informationof the Company” - Section A.6.3. “*Undertaking**and**Agreements**with**The**Walt**Disney**Company**and**Subsidiaries* – *License**Agreement*”).

 

**A.6.3.****                Undertakings andAgreements with The Walt Disney Company and Subsidiaries**

 

*Undertakings*

 

In connection with the financing of WaltDisney Studios Park, TWDC has committed to the CDC to hold at least 16.67% ofthe common stock of the Company until 2027. In connection with theRestructuring, TWDC has agreed to hold directly or indirectly at least 39% ofthe common stock of the Company until 2016.

 

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The Company and Euro DisneylandParticipations S.A.S., an indirect wholly-owned subsidiary of TWDC (which isalso a partner of the Phase IA Financing Company), have agreed to indemnify thepartners of the Phase IA Financing Company as to all liabilities arising forthe Company and the Phase IA Financing Company under the Master Agreement. Tothe extent the resources of the Company and the Phase IA Financing Company areinsufficient to cover any such indemnity, TWDC, through a wholly-ownedsubsidiary, has agreed to indemnify the partners of the Phase IA FinancingCompany up to an additional € 76.2 million. In connection with the 1994Financial Restructuring, EDA also undertook certain indemnification obligationsin favor of the partners of the Phase IA Financing Company in respect ofcertain liabilities arising under the Master Agreement.  Excluding the amount relating to the taxguarantee given to the department of Seine-et-Marne (see above), the mainremaining obligations to be executed by the Company under the Master Agreementconsist in developing the Site. A non-fulfilment of these obligations for some parcelsor others would result in a loss of the land rights given to the Company forthese parcels.

 

Certain indirect, wholly owned subsidiariesof TWDC have liability as general partners of EDA, the Company’s operatingsubsidiary to which substantially all of the Company’s assets and liabilitieswere transferred as part of the Restructuring. These obligations consistnotably in the full amount of the indebtedness relating to the Disneyland Parklease.

 

*Development Agreement*

 

Pursuant to the development agreement datedFebruary 28, 1989 with the Group (the “Development Agreement”), Euro DisneyS.A.S. provides and arranges for other subsidiaries of TWDC to provide avariety of technical and administrative services to the Company. These servicesare in addition to the services Euro Disney S.A.S. is required to provide asthe Management Company and include, among other things, the development ofconceptual designs for existing Theme Parks and future facilities andattractions, the manufacture and installation of specialized show elements, theimplementation of specialized training for operating personnel, the preparationand updating of operations, maintenance and technical manuals, and thedevelopment of a master land use plan and real estate development strategy.Euro Disneyland Imagineering S.A.R.L., an indirect subsidiary of TWDC, wasresponsible for the management and administration of the overall design as wellas the construction of the Theme Parks, including the design and procurement ofthe show-and-ride equipment. Most of the other facilities of the Resort weredesigned under its supervision with the administrative and technical assistanceof affiliates of TWDC specialized in the development of hotels, resorts andother retail and commercial real estate projects in the United States, inaccordance with the related servicing agreements.

 

The Group reimburses Euro Disney S.A.S. for all of itsdirect and indirect costs incurred in connection with the provision of servicesunder the Development Agreement. These costs include, without limitation: (i)all operating expenses of Euro Disney S.A.S., including overhead and implicitfunding costs; (ii) all costs incurred directly by Euro Disney S.A.S. or billedto it by third parties; and (iii) certain costs plus 10% billed to Euro DisneyS.A.S. for services performed by TWDC or any of its affiliates. Such costs varyconsiderably from one fiscal year to another depending upon the projects underdevelopment.

 

The Development Agreement has an initial termof 30 years and can be renewed for up to three additional 10-year terms at theoption of either party. The Development Agreement may be terminated by EuroDisney S.A.S. or by the Group under certain conditions, in particular in caseof a change of control of the Company and of the Phase IA FinancingCompany, or in case either company were to be liquidated.

 

*Phase II Development Fee*

 

As part of the terms of the 1994 FinancialRestructuring, the payment of a one-time development fee of € 182.9 millionwill be required upon the satisfaction of certain conditions, includingconditions relating to Walt Disney Studios Park. In order to obtain theapproval of the financing of Walt Disney Studios Park by the Group’s lendersand the lenders of the Financing Companies from which a substantial portion ofthe Group’s operating assets is leased, TWDC agreed in September 1999 toamend the terms for the development fee so that it will not be due unless anduntil future events occur, including the repayment of existing bank debt (asdefined in the agreement) and the achievement of specified cash flow levels. Thedetermination as to whether the specified cash flow levels have been achievedwill be made on the date that the CDC loans for Walt Disney Studios Park willhave been repaid and, in any case, no later than November 1, 2029.

 

*License Agreement*

 

Under the License Agreement, between The WaltDisney Company (Netherlands) B.V. and the Company, the Company was granted alicense to use any present or future intellectual or industrial property rightsof TWDC that may be incorporated into attractions and facilities designed fromtime to time by TWDC and made available to the Company. In addition, theLicense Agreement authorizes the sale, at the Resort, of merchandiseincorporating or based on intellectual property rights owned by, or otherwiseavailable to TWDC. This license granted to the Company is essential to thepursuit of its business activities, as such rights are indispensable to thecontinued operation of the Group. These intellectual property rights areregistered in the name of TWDC, which is responsible for their protection inFrance. Royalties to be paid by the Company for the use of these rights wereoriginally equal to:

 

(i)                                     10%of gross revenues (net of taxes) from rides, admissions and related fees (suchas parking, tour guide and similar service fees) at all theme parks andattractions;

 

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(ii)                                  5%of gross revenues (net of taxes) from merchandise, food and beverage sales inor adjacent to any theme park or other attraction, or in any other facility(with the exception of the Disneyland Hôtel), whose overall design concept isbased predominantly on a TWDC theme;

 

(iii)                               10%of all fees paid by participants; and

 

 (iv)                           5%of gross revenues (net of taxes) from the exploitation of Hotel rooms andrelated revenues at certain Disney-themed accommodations. None of the Group’scurrently existing Hotels at the Disneyland Resort Paris are consideredDisney-themed as defined in the License Agreement, except the Disneyland Hotel,which is specifically excluded.

 

As part of the 1994Financial Restructuring, TWDC amended the License Agreement and, as a result,no royalties were due for fiscal years 1994 through 1998. Starting in fiscalyear 1999 until fiscal year 2003 (inclusive), the royalties payable by theCompany were calculated at rates equal to 50% of the initial rates stated above.On March 28, 2003, The Walt Disney Company (Netherlands) B.V. agreed toconditionally waive royalties with respect to the last three quarters of fiscalyear 2003 and to change the payment terms for fiscal year 2004 from quarterlyto annually in arrears. Beginning in fiscal year 2004, the Company was responsiblefor the payment of 100% of the original royalty rates as presented above.

 

As part of the 2005 Restructuring, TWDC onceagain amended the license agreement to provide the Group the followingunconditional and conditional payment deferrals (determined on an aggregatebasis with management fees, which are described in Item 10 “AdditionalInformation”, Section B.1. “*The Management Company*(the *Gérant*)”):

 

•                  € 25.0 millionof management fees and royalties due in respect of each of fiscal years 2005through 2009 were or will be unconditionally deferred and converted into asubordinated long-term debt obligation, bearing interest at an annual rate of12-month EURIBOR (capitalized through January 1, 2017), payable after theGroup’s senior debt and subordinated debt (other than the CDC Walt DisneyStudios Park Loans) have been repaid, starting in 2023; and

 

•                  additionalmanagement fees and, as necessary, royalties, in a maximum aggregate amount of €25.0 million per year with respect to fiscal years 2007 through 2014, willbe subject to a conditional deferral. For a full description of this deferralmechanism, see Item 5 “Operating and Financial Review and Prospects” – SectionF.5. “Performance Indicator”.

 

The table below sets out the amount ofroyalties paid by the Company with respect to fiscal years 1992 through 2005,as stated in the Consolidated Financial Statements of the Group *(in € millions)*:

 
| **Fiscal Year** | ** ** | **Royalties** | ** **   |
|----------------------|------------|---------------|--------------|
| 1992                 |       | 30.0          |         |
| 1993                 |       | 39.9          |         |
| 1994                 |       | —        | (1)          |
| 1995                 |       | —        | (1)          |
| 1996                 |       | —        | (1)          |
| 1997                 |       | —        | (1)          |
| 1998                 |       | —        | (1)          |
| 1999                 |       | 21.8          | (2)          |
| 2000                 |       | 21.5          | (2)          |
| 2001                 |       | 21.7          | (2)          |
| 2002                 |       | 23.9          | (2)          |
| 2003                 |       | 5.6           | (2) (3) |
| 2004                 |       | 47.2          | (4)          |
| 2005                 |       | 34.4          | (5)          |

 

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*(1)**              In accordance with the terms of the1994 Financial Restructuring, TWDC waived royalties in respect of fiscal years1994 through 1998.*

*(2)**              In accordance with the terms of the1994 Financial Restructuring, from fiscal year 1999 through fiscal year 2003,inclusive the amount of royalties due by the Company was 50% of the amountoriginally provided for under the License Agreement.*

*(3)**              In fiscal year 2003, €16.9 millionof royalties were conditionally waived.*

*(4)**              This amount was paid uponcompletion of the Share Capital Increase.*

*(5)**             **Total royalties expense recordedin fiscal year 2005 was € 48.7 million. Of this amount, € 34.4 million was paidin December 2005 and, in accordance with the terms of 2005 Restructuring, thepayment of € 14.3 million was deferred and transferred to subordinatedlong-term borrowings. See Note 14(f) to the Consolidated Financial Statementsin Item 17 “Financial Statements” for additional information.*

 

The License Agreement gives TWDC substantialrights and discretion to approve, monitor and enforce the use of TWDCintellectual properties within the Resort. The License Agreement has an initialterm of 30 years and can be renewed for up to three additional 10-year terms atthe option of either party. The License Agreement may be terminated by TWDCupon the occurrence of certain events, including the removal or replacement ofthe Management Company (*Gérant*), achange in control, directly or indirectly, of the Company, certain affiliatesand the Phase IA Financing Company, the liquidation of such companies, theimposition of laws or regulations that prohibit the Company, certain of itsaffiliates and the Phase IA Financing Company from performing any of theirmaterial obligations under the License Agreement or the imposition of taxes,duties or assessments that would materially impair the assets, surplus ordistributable earnings of the Company or certain of its affiliates.

 

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On March 28, 2003, the Group enteredinto agreements with the Management Company and The Walt Disney Company(Netherlands) B.V. to pay management fees and royalties on a fiscal year-endbasis rather than quarterly for the second, third and fourth quarters of fiscalyear 2003 and for all of fiscal year 2004. In addition, with respect to thelast three quarters of fiscal year 2003, the combined royalties and managementfees could not exceed the maximum amount that could be paid by the Companywhile maintaining compliance with the gross operating income covenant undercertain of the Company’s debt agreements.

 

Any portion of the royalties or managementfees not paid for fiscal year 2003 as a result of the foregoing may in thefuture become payable if and to the extent that income before lease and netfinancial charges excluding depreciation and amortization for any year from fiscalyear 2004 through fiscal year 2008 were to exceed € 450 million.

 

**B.****                                    BUSINESSOVERVIEW**

 

See above Section A. “History andDevelopment of the Company and Business Overview”.

 

**C.****                                    ORGANISATIONALSTRUCTURE**

 

**C.1.****                          HoldingCompany**

 

***Euro Disney S.C.A. (the “Company”)***

 

Euro DisneyS.C.A. is the holding company of the Group and is the listed company. The mainasset of the Company is its investment in 82% of the share capital of itssubsidiary, EDA. The general partner of the Company is EDL ParticipationsS.A.S., a subsidiary of TWDC and the Management Company of the Company is EuroDisney S.A.S., also a subsidiary of TWDC.

 

The Company is a *société encommandite par actions*(“SCA” - similar in certain respects to amaster limited partnership in the U.S.) organized under the laws of theRepublic of France. The Company was originally organized and incorporated inParis on December 17, 1985 under the name Mivas S.A., in the form of aFrench *société anonyme* (“SA” - similar to aU.S. corporation), which was closely held. In 1988, EDL Holding Company, aDelaware corporation wholly-owned by The Walt Disney Company and currentlyowner of approximately 39.8% of the shares of the Company’s common stock (40.6%at the end of fiscal year 2004), acquired 99% of the shares of Mivas S.A.,whose corporate name was changed to Société d’Exploitation d’Euro DisneylandS.A. At an extraordinary meeting held in February 1989, the shareholdersof Société d’Exploitation d’Euro Disneyland S.A. decided to modify itscorporate form from an SA**to an SCA**and to change its corporate name to Euro Disneyland S.C.A. InNovember 1989, Euro Disneyland S.C.A. became a publicly held company as aresult of a public offering of its common stock in France, the United Kingdomand Belgium. At the annual general meeting of shareholders on February 4,1991, the Company’s present corporate name, Euro Disney S.C.A., was adopted.

 

**C.2.****                          OperatingCompanies**

 

***Euro Disney Associés S.C.A. (“EDA”)***

 

Euro Disney Associés S.C.A. operatesDisneyland Park and Walt Disney Studios Park, the Disneyland Hôtel, the DavyCrockett Ranch and the golf course and manages the real estate segment of theGroup.

 

EDA is a direct subsidiary of the Company,which holds 82% of its share capital. The remaining 18% is held by two indirectsubsidiaries of TWDC: EDL Corporation S.A.S. and Euro Disney Investments S.A.S.The general partners of EDA are Euro Disney Commandité S.A.S., a wholly-ownedsubsidiary of the Company (the controlling general partner), and Euro DisneyInvestments S.A.S. and EDL Corporation S.A.S., two indirectly wholly-ownedsubsidiaries of TWDC. The Management Company is Euro Disney S.A.S.

 

***EDL Hôtels S.C.A.***

 

EDL Hôtels S.C.A., a wholly-owned subsidiaryof EDA, which operates all of the Hotels except the Disneyland Hôtel and theDavy Crockett Ranch, and also Disney Village, is structured as a French limitedpartnership (*société en commandite par actions)*governed by the same principles as EDA.

 

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The general partner of EDL Hôtels S.C.A. isEDL Hôtels Participations S.A.S., a French simplified corporation *(société par actions simplifiée)*wholly-owned by the Company.The Management Company of EDL Hôtels S.C.A. is Euro Disney S.A.S., which isalso the Management Company**of the Companyand EDA.

 

**C.3.****                          FinancingCompanies**

 

Effective October 1, 2003 (first day offiscal year 2004) the Financing Companies described below were included in theconsolidated reporting group. See Item 5 “Operating and Financial Review andProspects” – Section B.3. *“Results of Operations forfiscal year 2004 compared with fiscal year 2003”*.

 

*Phase IA Financing Company*

 

Euro Disneyland S.N.C. (the “Phase IAFinancing Company”), a company incorporated as a French partnership (*société en**nom collectif)*owns Disneyland Park and leases it to EDA.

 

The partners of the Phase IA FinancingCompany are various banks, financial institutions and companies holding anaggregate participation of 83%, and Euro Disneyland Participations S.A.S., aFrench simplified corporation *(société par actionssimplifiée)*and an indirect wholly-owned subsidiary of TWDC, holdinga participation of 17%. The Group has no ownership interest in the Phase IAFinancing Company. The Company is jointly liable for a significant portion ofthe indebtedness of the Phase IA Financing Company (approximately two-thirds ofthe outstanding indebtedness due under the Phase IA Credit Facility, asdescribed in Note 14b to the Consolidated Financial Statements in Item 17). Thepartners are subject to unlimited joint and several liabilities for thefinancial obligations of the Phase IA Financing Company. The banks that areparties to the Phase IA Credit Facility and the CDC with regards to CDC *Prêts Participatifs*, have effectively waived any recourseagainst the partners of the Phase IA Financing Company. The Phase IA FinancingCompany has generated tax losses due to interest charges during theconstruction period and depreciation expenses from Opening Day untilDecember 31, 1996. The legal structure of the Phase IA Financing Company enabledits partners to take these French tax losses directly into their own accountsfor French tax purposes. In return, the partners agreed to provide subordinatedpartner advances to the Phase IA Financing Company at an interest rate belowthe market rate.

 

The Phase IA Financing Company is managed bya management company, Société de Gérance d’Euro Disneyland S.A.S., a Frenchsimplified corporation (*société par actionssimplifiée)*and an indirect wholly–owned subsidiary of TWDC.

 

***Phase IBFinancing Companies***

** **

Hôtel New York Associés S.N.C., Newport BayClub Associés S.N.C., Sequoia Lodge Associés S.N.C., Cheyenne Hôtel AssociésS.N.C., Hôtel Santa Fe Associés S.N.C. and Centre de Divertissements AssociésS.N.C. are collectively the “Phase IB Financing Companies”, each of which: (i)rents the land on which the related hotel or Disney Village, as the case maybe, is located, from EDL Hôtels S.C.A.; (ii) owns the related hotel or DisneyVillage, as the case may be and (iii) leases the related hotel or Disney Village,to EDL Hôtels S.C.A.; and (iv) is structured as a French limited partnership (*société en nom collectif)*governed by the same principles asthe Phase IA Financing Company.

 

The partners of the Phase IB FinancingCompanies are various banks and financial institutions that are creditors ofthe Phase IB Financing Companies. The Group has no ownership interest in thePhase IB Financing Companies. EDL Hôtels S.C.A., an affiliate of the Companyhas guaranteed all the obligations of the Phase IB Financing Companies withrespect to the loans extended by their lenders and partners. The partners ofthe Phase IB Financing Companies are normally subject to unlimited joint andseveral liabilities for the obligations of the Phase IB Financing Companies. However,the creditors of the Phase IB Financing Companies have waived any recourseagainst the partners of the Phase IB Financing Companies. The Phase IBFinancing Companies have consistently generated tax losses primarily due tointerest charges during the construction period and depreciation expense fromOpening Day until December 31, 1995 with the exception of Centre deDivertissements Associés S.N.C., which generated tax losses untilDecember 31, 1998. The legal structure of the Phase IB Financing Companiesenabled their partners to take these French tax losses directly into their ownaccounts for French tax purposes. In return, the partners agreed to providesubordinated partner advances to the Phase IB Financing Companies at aninterest rate below the market rate.

 

Pursuant to the respective by-laws of thePhase IB Financing Companies, the Management Company**ofeach of the Phase IB Financing Companies is EDL Services S.A.S., a wholly–ownedsubsidiary of EDA.

 

*Centre deCongrès Newport S.A.S.*

 

Centre de Congrès Newport S.A.S., an indirectwholly-owned subsidiary of TWDC, entered into a ground lease with EDL HôtelsS.C.A. pursuant to which it financed and acquired the Newport Bay ClubConvention Center and, when completed, leased it back to EDL Hôtels S.C.A.. EDLHôtels S.C.A. has an option to repurchase such assets. See also Notes 1-2 and25-1 to the Consolidated Financial Statements in Item 17 “Financial Statements”.

 

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**C.4.****         OwnershipStructure of the Group**

 

The Group structure as of the date of this annual report on form 20-Fis illustrated in the diagram set forth below.

 

 

26

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**D.****            PROPERTY, PLANT ANDEQUIPMENT**

 

The Group’s resort-related facilities arecomprised of the two theme parks (including related support buildings), theseven themed Hotels, Disney Village and the Golf Course. The Group leases allof these facilities except Walt Disney Studios Park, Disneyland Hôtel, DavyCrockett Ranch and the golf course, which the Group owns. See Item 4 “Informationon the Company” -Section C.3. *“Financing Companies”*for additional information on the Group’s leases. These facilities are alllocated in Marne-la-Vallée, France. The Company believes that the Group’sfacilities are suitable and adequate for the conduct of its business.

 

The Master Agreement provides the Companywith the right, subject to certain conditions, to acquire the land necessaryfor the realization of the Resort and the general availability of the 1,943hectares Marne-la-Vallée site. The existing Resort facilities and relateddevelopments in progress, plus all associated public and private infrastructureworks, are located on approximately 1,000 hectares of this land.

 

For a description of the Group’s capitalexpenditures during the past three fiscal years, See Item 5 “Operating andFinancial Review and Prospects” – Section C *“Liquidityand Capital Resources — Capital Investment”*.

 

**ITEM 5. ****                OPERATINGAND FINANCIAL REVIEW AND PROSPECTS**

### *** ***

*The following discussion should be read inconjunction with the Consolidated Financial Statements, the related notesthereto included in Item 17 “Financial Statements” herein and Item 3 “KeyInformation” – Section D “Risk Factors”. The Group’s ConsolidatedFinancial Statements have been prepared in accordance with French GAAP, whichdiffer in certain respects from U.S. GAAP. For a discussion of the principaldifferences between French GAAP and U.S. GAAP as they relate to the consolidatedresults of operations and financial position, See Note 29 to the ConsolidatedFinancial Statements in Item 17 “Financial Statements”.*

 

**A.****            GENERAL**

 

Revenues increased 3% to a record € 1,076.0 million infiscal year 2005, reflecting increased spending by theme park visitors andhigher real estate development revenues, partially offset by reduced hotelguest spending. Hotel occupancy reached 80.7% and theme park attendance was12.3 million.

 

Net loss (after allocation to minority interests)decreased by € 50.3 million from € 145.2 million in fiscal year 2004 to € 94.9 million in fiscal year 2005, primarily as a result of the Restructuringand reduced exceptional charges. Exceptional charges decreased in fiscal year 2005due to a one-time gain from forgiveness of debt by TWDC in connection with theRestructuring compared to the prior-year write-off of equipment related to anattraction that is being replaced with *BuzzLightyear Laser Blast*. Minority interest in losses increased in thecurrent year due to TWDC’s increased investment in EDA under the terms of theRestructuring.

 

The Group’s loss before financial charges increasedfrom € 23.9 million in fiscal year 2004 to € 26.9 million, reflecting increasedoperating costs, primarily due to increased labor costs, partially offset byrevenue growth. Increased labor costs primarily reflected an increase in wages,including the impact of an increased French minimum wage and a reduction insubsidies related to the early implementation of the 35-hour work-week.

 

The Group generated € 18.4 million of operating cashflow in fiscal year 2005 despite the net loss, since a portion of the Group’soperating expenses consist of non-cash depreciation and amortization charges. Incomparison to the prior year, operating cash flow decreased € 106.2 million,reflecting the cash payment of fiscal year 2004 royalties and management fees,as well as the payment of 2004 accrued interest on the CDC loans for WaltDisney Studios, both of which had been contractually deferred to fiscal year2005.

 

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**B.****            RESULTSOF OPERATIONS**

 

# **FISCAL YEAR 2005 FINANCIAL RESULTS**

# ** **

# **CONSOLIDATED SUMMARY STATEMENTS OF INCOME**

# ** **

| ** **                                             | ** ** | **Fiscal Year** | ** ** | **Fiscal Year** | ** ** | **Variance** | ** ** |
|--------------------------------------------------------|------------|-----------------|------------|-----------------|------------|--------------|------------|
| **(€ in  millions)**                              | ** ** | **2005**        | ** ** | **2004**        | ** ** | **Amount**   | ** ** | **%** | ** ** |
| ** **                                             | ** ** | ** **      | ** ** | ** **      | ** ** | ** **   | ** ** | ** ** | ** ** |
| **Revenues**                                           | ** ** | **1,076.0**     | ** ** | 1,048.0         |       | 28.0         |       | 3 | % |
|                                                   |       |            | ** ** |            |       |         |       |   |   |
| **Costs and expenses**                                 | ** ** | **(1,102.9**    | **)**      | (1,071.9        | )          | (31.0        | )          | (3 | )% |
|                                                   |       |            | ** ** |            |       |         |       |   |   |
| **Loss before Financial Charges**                      | ** ** | **(26.9**       | **)**      | (23.9           | )          | (3.0         | )          | (13 | )% |
|                                                   |       |            | ** ** |            |       |         |       |   |   |
| Net financial charges                                  | ** ** | **(87.9**       | **)**      | (105.7          | )          | 17.8         |       | 17 | % |
|                                                   |       |            | ** ** |            |       |         |       |   |   |
| **Loss before Exceptional Items**                      | ** ** | **(114.8**      | **)**      | (129.6          | )          | 14.8         |       | 11 | % |
|                                                   |       |            | ** ** |            |       |         |       |   |   |
| Exceptional items, net                                 | ** ** | **0.4**         | ** ** | (22.3           | )          | 22.7         |       | 102 | % |
|                                                   |       |            | ** ** |            |       |         |       |   |   |
| Income tax                                             | ** ** | **(1.1**        | **)**      | —          |       | (1.1         | )          | n/m |   |
|                                                   |       |            | ** ** |            |       |         |       |   |   |
| **Net Loss (before Allocation to Minority Interests)** | ** ** | **(115.5**      | **)**      | (151.9          | )          | 36.4         |       | 24 | % |
|                                                   |       |            | ** ** |            |       |         |       |   |   |
| Minority interests                                     | ** ** | **20.6**        | ** ** | 6.7             |       | 13.9         |       | 207 | % |
|                                                   |       |            | ** ** |            |       |         |       |   |   |
| **Net Loss (after Allocation to Minority Interests)**  | ** ** | **(94.9**       | **)**      | (145.2          | )          | 50.3         |       | 35 | % |

 

**SEGMENTANALYSIS**

 
| ** **                        | ** ** | **Fiscal Year** | ** ** | **Variance** | ** ** |
|-----------------------------------|------------|-----------------|------------|--------------|------------|
| **(€ in  millions)**         | ** ** | **2005**        | ** ** | **2004**     | ** ** | **Amount** | ** ** | **%** | ** ** |
| Resort Segment                    | ** ** | **(33.6**       | **)**      | (25.6        | )          | (8.0 | ) | (31 | )% |
| Real Estate Segment               | ** ** | **6.7**         | ** ** | 1.7          |       | 5.0 |   | 294 | % |
| **Loss before Financial Charges** | ** ** | **(26.9**       | **)**      | (23.9        | )          | (3.0 | ) | (13 | )% |

 

**B.1.****         OperatingStatistics**

 

The following table provides information regarding the key operatingindicators of the Group:

 
| ** **                                                | ** ** | **Fiscal Year** | ** ** | **Variance** | ** ** |
|-----------------------------------------------------------|------------|-----------------|------------|--------------|------------|
| ** **                                                | ** ** | **2005**        | ** ** | **2004**     | ** ** | **Amount** | ** ** | **%** | ** ** |
| **Theme  Park attendance***(in millions)*(1)              | ** ** | **12.3**        |       | 12.4         |       | (0.1 | ) | (1 | )% |
| Theme Park  spending per guest (2) (in €)            | ** ** | **44.3**        |       | 42.7         |       | 1.6 |   | 4 | % |
| Hotel  occupancy rate (3)                                 | ** ** | **80.7**        | **%**      | 80.5         | %          |   |   | 0.2ppt |   |
| Hotel total  spending per room (4)  (in €) | ** ** | **179.1**       |       | 186.6        |       | (7.5 | ) | (4 | )% |

 

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*(1)*     *Theme Park attendance is recordedon a “first click” basis, meaning that a person visiting both parks in a singleday is counted as only one visitor.*

*(2)**      **Averagedaily admission price and spending on food, beverage and merchandise and otherservices sold in the Theme Parks, excluding VAT.*

*(3)*     *Average daily rooms sold as apercentage of total room inventory (total room inventory is approximately 5,800rooms).*

*(4)*     *Average daily room price andspending on food, beverage and merchandise and other services sold in hotels,excluding VAT.*

 

Theme Park spending per guest and hotel spending perroom were affected by a fiscal year 2005 change in the allocation of totalvacation package pricing between hotel rooms and theme park admissions, withthe greater allocation being made to theme park admissions.

 

28

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**B.2.****         Resultsof Operations for fiscal year 2005 compared with fiscal year 2004**

 

**Revenues**

 

Revenues of theGroup were generated from the following sources:

 
| ** **                | ** ** | **Fiscal Year** | ** ** | **Variance** | ** ** |
|---------------------------|------------|-----------------|------------|--------------|------------|
| **(€ in  millions)** | ** ** | **2005**        | ** ** | **2004**     | ** ** | **Amount** | ** ** | **%** | ** ** |
| Theme Parks               | ** ** | **549.7**       |       | 531.3        |       | 18.4 |   | 3 | % |
| Hotels and Disney Village | ** ** | **394.6**       |       | 405.2        |       | (10.6 | ) | (3 | )% |
| Other                     | ** ** | **103.0**       |       | 99.7         |       | 3.3 |   | 3 | % |
| **Resort Segment**        | ** ** | **1,047.3**     |       | 1,036.2      |       | 11.1 |   | 1 | % |
|                      |       |            |       |         |       |   |   |   |   |
| **Real Estate Segment**   | ** ** | **28.7**        |       | 11.8         |       | 16.9 |   | 143 | % |
| **Total Revenues**        | ** ** | **1,076.0**     |       | 1,048.0      |       | 28.0 |   | 3 | % |

 

**ThemePark**revenues increased 3 % to € 549.7 million from €531.3 million in the prior year, as a result of higher per guest spending. Therevenue growth reflected increased admissions, merchandise and food andbeverage spending. Admissions spending was favorably impacted by modest changesin admissions pricing, including an increased allocation of total revenues fromresort vacation packages.

 

**Hotels and Disney Village** revenues decreased 3 % to € 394.6 million from € 405.2 million in theprior year, reflecting a 4% decrease in average daily guest spending per room. Thereduction in average daily guest spending per room includes the impact of achange in the allocation of resort vacation package pricing between hotel roomsand theme park admissions.

 

**Other Revenues**(which primarily include participantsponsorships, transportation and other travel services sold to guests)increased over the prior year by € 3.3 million to € 103.0 million, reflectinghigher transportation and other travel services sold to guests, partiallyoffset by slightly lower participant sponsorship revenues.

 

**Real Estate Segment** revenues increased from the prior yeardue to planned land sales for both residential and commercial purposes,including sales of land to third parties for housing near the Company’s golfcourse and additions to existing time share and shopping centre properties.

 

**Costs and Expenses**

 

Costs and expenses of the Group were composed of:

 
| ** **                          | ** ** | **Fiscal Year** | ** ** | **Variance**    | ** ** |
|-------------------------------------|------------|-----------------|------------|-----------------|------------|
| **(€ in  millions)**           | ** ** | **2005**        | ** ** | **2004****(1)** | ** ** | **Amount** | ** ** | **%** | ** ** |
| Direct operating costs (2)          | ** ** | **697.6**       |       | 663.5           |       | 34.1 |   | 5 | % |
| Marketing and sales expenses        | ** ** | **104.0**       |       | 112.6           |       | (8.6 | ) | (8 | )% |
| General and administrative expenses | ** ** | **97.9**        |       | 91.3            |       | 6.6 |   | 7 | % |
| Depreciation and amortization       | ** ** | **144.0**       |       | 146.8           |       | (2.8 | ) | (2 | )% |
| Royalties and management fees       | ** ** | **59.4**        |       | 57.7            |       | 1.7 |   | 3 | % |
| **Total Costs and Expenses**        | ** ** | **1,102.9**     |       | 1,071.9         |       | 31.0 |   | 3 | % |

 

----

*(1)**      **Certainreclassifications* have been made to the fiscal year 2004 comparative amountsin order to conform to the fiscal year 2005 presentation.*

*(2)**      **Includes operating wages and employee benefits,cost of sales for merchandise and food and beverage, transportation servicesand real estate land sales and other costs such as utilities, maintenance,renovation expenses, insurance and operating taxes**.*

 

Costs and expenses forfiscal year 2005 increased 3%, reflecting higher direct operating costs andgeneral and administrative expenses, partially offset by reduced marketing andsales costs. Direct operating costs increased € 34.1 million from the prioryear, primarily reflecting the impact of higher labor costs and increased realestate cost of sales due to increased land sales, partially offset by aone-time benefit to business taxes due to the Restructuring.

 

General andadministrative expenses were also higher due to increased labor costs. Marketingand sales expenses decreased € 8.6 million, reflecting reduced media spendingprimarily in the first half of fiscal year 2005.

 

----

**        **These reclassifications are notsignificant.*

 

29

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Increased labor costsreflected an increase in wages, including the impact of an increased Frenchminimum wage and a reduction in subsidies related to the early implementationof the 35-hour workweek. In fiscal year 2005, labor costs and related costs totaled€ 427.3 million, an increase of 7% over the fiscal year 2004 amount of € 398.4million.

 

Excluding labor costs andthe cost of real estate sales, total operating costs decreased from the prioryear by € 8.7 million, or 1%.

 

**Net Financial Charges**

 

Net financialcharges were composed of:

* *
| ** **                      | ** ** | **Fiscal Year** | ** ** | **Variance** | ** ** |
|---------------------------------|------------|-----------------|------------|--------------|------------|
| **(€ in  millions)**       | ** ** | **2005**        | ** ** | **2004**     | ** ** | **Amount** | ** ** | **%** | ** ** |
|  Financial income          | ** ** | **3.9**         | ** ** | 2.8          |       | 1.1 |   | 39 | % |
|  Financial expense         | ** ** | **(91.8**       | **)**      | (108.5       | )          | 16.7 |   | 15 | % |
| ** Net Financial Charges** | ** ** | **(87.9**       | **)**      | (105.7       | )          | 17.8 |   | 17 | % |

 

Net financial charges decreased € 17.8 million to € 87.9 million infiscal year 2005. This decrease was primarily attributable to the conversion ofdebt owed by EDA to subsidiaries of TWDC into equity of EDA as part of theCompany’s Restructuring and reduced effective interest expense.

 

**Exceptional Income (Loss), net**

 

Exceptional Items, Net improved by € 22.7 million compared to the prioryear, reflecting a € 10.0 million gain relating to the portion of the line ofcredit from TWDC that was forgiven as part of the Company’s Restructuring and a€ 9.2 million loss related to the write-off of equipment within *Visionarium,*an attraction in Disneyland Park, which wasclosed in fiscal year 2004 so that the building can house *Buzz Lightyear Laser Blast*, expected toopen in April of 2006. The Group incurred costs in fiscal years 2005 and 2004associated with the restructuring of the Group’s debt of € 8.6 million and €12.6 million, respectively.

 

**Income Tax Expense**

 

Income tax expense reflects non-recurring taxes as aresult of changes in the Group’s tax consolidation arising from theRestructuring. The Group’s unused tax loss carry-forwards approximate € 1billion at September 30, 2005, and are available to be carried forwardindefinitely to offset the tax effect of future income.

 

**Minority Interests**

 

Minority interests reflect the ownership ofthird parties in the financial results of the Company’s subsidiaries. For fiscalyear 2004, the minority interests reflected the third-party ownership of theconsolidated financing companies. For fiscal year 2005, minority interestsreflect the ownership of the Financing Companies as well as the impact of theRestructuring.

 

As a result of the Company’s legal and financialrestructuring, substantially all of the Company’s assets and liabilities werecontributed to an 82% owned subsidiary, EDA. Subsidiaries of TWDC own theremaining 18% of EDA. The Restructuring was made effective October 1, 2004 inthe Company’s consolidated accounts. Accordingly, the income statement reflectsan allocation of 18% of the losses from EDA’s consolidated net results for thefiscal year 2005 to TWDC subsidiaries as the minority interests of EDA.

 

**B.3.****         Resultsof Operations for fiscal year 2004 compared with fiscal year 2003**

 

*Introduction*

 

In fiscal year 2004, revenues increasedslightly to total € 1,048.0 million, as increased spending by theme parkvisitors and Hotel guests was mostly offset by lower hotel occupancy rates, aswell as an anticipated decline in real estate development revenues. Attendanceat the theme parks in fiscal year 2004 remained stable compared to the prioryear at approximately 12.4 million visitors.

 

30

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The Group incurred an operating loss of €23.9 million in fiscal year 2004, which was € 56.0 million below the € 32.1million of pro-forma operating income recorded in the prior year (the pro-formapresentation reflects a change in accounting method that significantly affectedthe scope of consolidation in fiscal year 2004, as discussed below). Theincreased loss was primarily due to the resumption of accruing royalties atfull rates and management fees, following the waiver by TWDC of royalties andmanagement fees in the last three quarters of fiscal year 2003. Highermarketing and sales spending partially offset by reduced general andadministrative expenses also affected the operating margin. Net loss increasedfrom € 58.3 million (on a pro-forma basis, reflecting the change in accountingprinciple referred to below) in fiscal year 2003 to € 145.2 million in fiscalyear 2004, as a result of the lower operating margin as well as significantexceptional items.

 

The Group generated €124.6 million ofoperating cash flow in fiscal year 2004 despite the net loss, since a portionof the Group’s operating expenses consist of non-cash depreciation andamortization charges, and the Group’s working capital requirements decreased asthe increase in accrued royalties and management fees for fiscal year 2004(which were not payable until fiscal year 2005), as well as accrued interest onthe CDC loans for Walt Disney Studios Park (which was deferred under the termsof the relevant agreement), did not result in cash outlays. Under the terms ofthe Restructuring, the royalties and management fees for fiscal year 2004 werepaid when the Restructuring was implemented.

 

*Change in Accounting Principle*

 

Effective October 1, 2003 (the first dayof fiscal year 2004), the Group adopted new accounting rules mandated byArticle 133 of the French Financial Security Law (*Loi deSécurité Financière*) with respect to the consolidation of specialpurpose financing companies that are not legally controlled by the Group. Underthese new rules, the financing companies from which the Group leases asubstantial portion of its operating assets (the “Financing Companies”), havebeen included in the Group’s consolidated financial statements. Previously,lease payments to the Financing Companies were recorded as incurred, along withdisclosure by the Group of the leasing arrangements, contractual commitmentsfor lease rentals, and the related debt obligations of the Financing Companies.As a result of the application of new consolidation rules, these operatingassets are now consolidated, resulting in increased assets and borrowings. TheGroup’s receivables from the Financing Companies have been eliminated inconsolidation. In addition, shareholders’ equity has been reduced, reflectingprimarily past depreciation charges related to the operating assets owned bythe Financing Companies, which exceeded the lease payments expensed for thesame periods. The accounting change also affects the classification and amountof costs on the income statement, with increased operating expenses anddepreciation and reduced lease rental expense (consequently, the incomestatement line item formerly entitled “lease and net financial charges” hasbeen renamed “net financial charges”). The accounting change does not affectthe legal structure, financial position or cash flows of the members of theconsolidated Group.

 

To enhance comparability, the Group hasprovided financial information on a pro-forma basis in addition to itsas-reported results. The pro-forma information has been prepared as if thefiscal year 2004 change in accounting principle discussed above was in effectduring all of fiscal year 2003 (See also Notes 2 and 29 to the ConsolidatedFinancial Statements in Item 17 “Financial Statements”). The following tablesummarizes certain financial data derived from the Group’s historical andpro-forma consolidated financial statements.

 

31

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**CONSOLIDATED CONDENSED PRO-FORMA STATEMENTS OFINCOME**

 
| ** **                                  | ** ** | ** **            | ** ** | **Fiscal Year 2003** | ** ** | **Fiscal Year 2004/  Pro-Forma 2003** | ** ** |
|---------------------------------------------|------------|-----------------------|------------|----------------------|------------|---------------------------------------|------------|
| ** **                                  | ** ** | **Fiscal Year  2004** | ** ** | **Pro-  Forma**      | ** ** | **Accounting  Change**                | ** ** | **As  Reported** | ** ** | **Variance** | ** ** |
| **(€ in  millions)**                   | ** ** | **Amount**            | ** ** | **Percent**          | ** ** |
| **Revenues**                                | ** ** | **1,048.0**           | ** ** | 1,046.8              |       | (0.7                                  | )          | 1,047.5 |   | 1.2 |   | — |   |
|                                        |       |                  | ** ** |                 |       |                                  |       |   |   |   |   |   |   |
| **Costs and Expenses**                      | ** ** | **(1,071.9**          | **)**      | (1,014.7             | )          | (99.6                                 | )          | (915.1 | ) | (57.2 | ) | (6 | )% |
|                                        |       |                  | ** ** |                 |       |                                  |       |   |   |   |   |   |   |
| **Income (Loss) before  Financial Charges** | ** ** | **(23.9**             | **)**      | 32.1                 |       | (100.3                                | )          | 132.4 |   | (56.0 | ) | (175 | )% |
|                                        |       |                  | ** ** |                 |       |                                  |       |   |   |   |   |   |   |
| Net Financial Charges                       | ** ** | **(105.7**            | **)**      | (111.2               | )          | 89.1                                  |       | (200.3 | ) | 5.5 |   | 5 | % |
|                                        |       |                  | ** ** |                 |       |                                  |       |   |   |   |   |   |   |
| **Loss before Exceptional Items**           | ** ** | **(129.6**            | **)**      | (79.1                | )          | (11.2                                 | )          | (67.9 | ) | (50.5 | ) | (64 | )% |
|                                        |       |                  | ** ** |                 |       |                                  |       |   |   |   |   |   |   |
| Exceptional gain (loss), net                | ** ** | **(22.3**             | **)**      | 12.0                 |       | 0.1                                   |       | 11.9 |   | (34.3 | ) | (286 | )% |
|                                        |       |                  | ** ** |                 |       |                                  |       |   |   |   |   |   |   |
| Minority interests                          | ** ** | **6.7**               | ** ** | 8.8                  |       | 8.8                                   |       | — |   | (2.1 | ) | (24 | )% |
|                                        |       |                  | ** ** |                 |       |                                  |       |   |   |   |   |   |   |
| **Net Loss**                                | ** ** | **(145.2**            | **)**      | (58.3                | )          | (2.3                                  | )          | (56.0 | ) | (86.9 | ) | (149 | )% |

 

*Certain reclassifications have been made to the 2003 comparativeamounts in order to conform to the 2004 presentation.*

 

**Revenues**

 

Revenues of the Group were generated from thefollowing sources:

 
| ** **                          | ** ** | ** **            | ** ** | **Fiscal Year 2003** | ** ** | **Fiscal Year 2004/  Pro-Forma 2003** | ** ** |
|-------------------------------------|------------|-----------------------|------------|----------------------|------------|---------------------------------------|------------|
| ** **                          | ** ** | **Fiscal Year  2004** | ** ** | **Pro-  Forma**      | ** ** | **Accounting  Change**                | ** ** | **As-  Reported** | ** ** | **Variance** | ** ** |
| **(€ in  millions)**           | ** ** | **Amount**            | ** ** | **Percent**          | ** ** |
| Theme Parks                         | ** ** | **531.3**             |       | 508.5                |       | —                                |       | 508.5 |   | 22.8 |   | 5 | % |
| Hotels and Disney Village           | ** ** | **405.2**             |       | 416.7                |       | —                                |       | 416.7 |   | (11.5 | ) | (3 | )% |
| Other                               | ** ** | **99.7**              |       | 98.0                 |       | (0.7                                  | )          | 98.7 |   | 1.7 |   | 2 | % |
| **Resort Segment**                  | ** ** | **1,036.2**           |       | 1,023.2              |       | (0.7                                  | )          | 1,023.9 |   | 13.0 |   | 1 | % |
|                                |       |                  |       |                 |       |                                  |       |   |   |   |   |   |   |
| **Real Estate Development Segment** | ** ** | **11.8**              |       | 23.6                 |       | —                                |       | 23.6 |   | (11.8 | ) | (50 | )% |
|                                |       |                  |       |                 |       |                                  |       |   |   |   |   |   |   |
| **Total Revenues**                  | ** ** | **1,048.0**           |       | 1,046.8              |       | (0.7                                  | )          | 1,047.5 |   | 1.2 |   | — |   |

 

**Theme park revenues**increased 5 % to € 531.3 million in fiscal year 2004 from € 508.5 million inthe prior year as a result of higher per guest spending, coupled with stableattendance. The higher spending levels reflected three principal factors: anincrease in average park admission prices, the introduction of the “park hopper”ticket (which permits guests to visit both theme parks for a single price thatis € 9 higher than the single park price) and the elimination of low seasonreduced admission pricing. Merchandise and food and beverage revenues in the ThemeParks also increased.

 

**Hotel and Disney Village****revenues** decreased 3 % to € 405.2 million in fiscal year 2004 from € 416.7million in the prior year, reflecting the decrease in hotel occupancy due toincreased competition from new on-site capacity at hotels owned and operated bythird parties. These hotels are part of the Group’s overall development planfor the Resort, designed to increase overall hotel capacity to accommodate morevisitors of the theme parks without requiring the Group itself to utilizecapital to construct additional hotels. However, due to the soft demandenvironment, these new hotels had an adverse effect on occupancy at the Group’sHotels. The impact on revenues of the decline in occupancy was partially offsetby a 2 % increase in average daily guest spending per room.

 

**Other revenues** (which primarily include participant sponsorships, transportation andother travel services sold to guests) increased in fiscal year 2004 over thepro-forma prior year by € 1.7 million to € 99.7 million, reflecting an increasein transportation and other travel services sold to guests, partially offset byslightly lower participant sponsorship revenues.

 

32

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**Real Estate Development****revenues** decreased by € 11.8 million in fiscalyear 2004 compared to the prior year, reflecting a planned reduction indevelopment projects. Real Estate Development revenues in fiscal year 2004included primarily commercial and residential land sale transactions. Inaddition, revenues included ground lease income and fees for services providedto third-party developers that have signed contracts to either purchase orlease land on the Resort Site for development. Given the successful completionof most of the additional hotel capacity projects in fiscal year 2003, thedecrease reflected this planned reduction in development activity.

 

**Costs andexpenses**

 

Costs and expenses of the Group were composedof:

 
| ** **                          | ** ** | ** **            | ** ** | **Fiscal Year 2003** | ** ** | **Fiscal Year 2004/  Pro-Forma 2003** | ** ** |
|-------------------------------------|------------|-----------------------|------------|----------------------|------------|---------------------------------------|------------|
| ** **                          | ** ** | **Fiscal Year  2004** | ** ** | **Pro-  Forma**      | ** ** | **Accounting  Change**                | ** ** | **As-  Reported** | ** ** | **Variance** | ** ** |
| **(€ in  millions)**           | ** ** | **Amount**            | ** ** | **Percent**          | ** ** |
| Direct operating costs (1)          | ** ** | **664.8**             |       | 655.2                |       | 15.7                                  |       | 639.5 |   | 9.6 |   | 2 | % |
| Marketing and sales expenses        | ** ** | **112.6**             |       | 105.2                |       | —                                |       | 105.2 |   | 7.4 |   | 7 | % |
| General and administrative expenses | ** ** | **90.0**              |       | 96.7                 |       | —                                |       | 96.7 |   | (6.7 | ) | (7 | )% |
| Depreciation and amortization       | ** ** | **146.8**             |       | 149.5                |       | 83.9                                  |       | 65.6 |   | (2.7 | ) | (2 | )% |
| Royalties and management fees       | ** ** | **57.7**              |       | 8.1                  |       | —                                |       | 8.1 |   | 49.6 |   | 612 | % |
| **Total Costs and Expenses**        | ** ** | **1,071.9**           |       | 1,014.7              |       | 99.6                                  |       | 915.1 |   | 57.2 |   | 6 | % |

 

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*(1)**      **Includesoperating wages and employee benefits, costof sales for merchandise and food and beverage, transportation services andreal estate land sales and other costs such as utilities, maintenance,renovation expenses, insurance and operating taxes.*

 

Direct operating costs increased € 9.6million from the pro-forma prior year primarily reflecting the impact of higherlabor costs. Marketing and sales expenses during fiscal year 2004 increased € 7.4million from the prior year, reflecting increased advertising during the secondhalf of the fiscal year, associated largely with the promotion of the popularnew show, *The Legend of the Lion King*. General andadministrative expenses incurred during fiscal year 2004 decreased € 6.7million from the prior year, reflecting decreased labor expenses.

 

Royalties and management fees totaled € 57.7million in fiscal year 2004, € 49.6 million higher than the previous year,reflecting the October 1, 2003 (first day of fiscal year 2004) resumptionof royalties at full rates and management fees subsequent to the waiver by TWDCof these fees for the last three quarters of fiscal year 2003. In fiscal year2004, royalties totaled € 47.2 million after reinstatement to full contractualrates (fiscal year 1999 through 2003 rates were reduced to half of theiroriginal levels as a result of the 1994 financial restructuring). The fiscalyear 2004 charge reflects the accrual of the royalties and management fees forthe year, although cash payment of these amounts was not due until fiscal year2005.

 

**Net Financial charges**

 

Netfinancial charges were composed of:

 
| ** **                 | ** ** | ** **            | ** ** | **Fiscal Year 2003** | ** ** | **Fiscal Year 2004/  Pro-Forma 2003** | ** ** |
|----------------------------|------------|-----------------------|------------|----------------------|------------|---------------------------------------|------------|
| ** **                 | ** ** | **Fiscal Year  2004** | ** ** | **Pro-  Forma**      | ** ** | **Accounting  Change**                | ** ** | **As-  Reported** | ** ** | **Variance** | ** ** |
| ***(€ in millions)*** | ** ** | **Amount**            | ** ** | **Percent**          | ** ** |
| Lease rental expense       | ** ** | **—**            | ** ** | —               |       | 193.8                                 |       | (193.8 | ) | — |   | — |   |
| Financial income           | ** ** | **2.8**               | ** ** | 3.8                  |       | (45.1                                 | )          | 48.9 |   | (1.0 | ) | (26 | )% |
| Financial expense          | ** ** | **(108.5**            | **)**      | (115.0               | )          | (59.6                                 | )          | (55.4 | ) | 6.5 |   | 6 | % |
| **Net Financial Charges**  | ** ** | **(105.7**            | **)**      | (111.2               | )          | 89.1                                  |       | (200.3 | ) | 5.5 |   | (5 | )% |

 

Lease rental expense represents paymentsunder financial lease arrangements with the consolidated Financing Companiesand approximates the related debt service payments and operating expenses ofsuch Financing Companies. Upon consolidation of the Financing Companies, thisexpense is eliminated.

 

Financial income, before the consolidation ofthe Financing Companies, was principally composed of interest income earned onlong-term loans provided to the Financing Companies (See Note 4 to theConsolidated Financial Statements in Item 17 “Financial Statements”) andinterest income on cash and short-term investments, as well as net gainsarising from foreign currency transactions. Since the consolidation of theFinancing Companies, the interest income earned on the long-term loans to theFinancing Companies is eliminated. Financial expense is principally composed ofinterest charges on the long-term borrowings of the Group (including theFinancing Companies under the new consolidation method) and the net impact ofinterest rate hedging transactions.

 

33

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Net financial charges decreased € 5.5 millionto € 105.7 million in fiscal year 2004. This decrease was primarilyattributable to the impact of lower variable interest rates and related hedgingcosts, partially offset by the resumption of full interest charges followingthe end of the interest waiver provisions of the 1994 financial restructuringas of September 30, 2003.

 

**Exceptional Income (Loss), net**

 

The fiscal year 2004 exceptional loss of €22.3 million primarily includes € 12.6 million of fees and expenses incurred inconnection with the Restructuring negotiations and a € 9.2 million loss relatedto the write-off of equipment within *Visionarium*, anattraction in Disneyland Park, which has been closed so that the building canhouse a new attraction expected to open in fiscal year 2006.

 

Exceptional income totaled € 11.9 million infiscal year 2003. The Group sold three apartment developments used to providehousing to employees within close proximity to the site. The transactiongenerated € 34.1 million in net sale proceeds and a gain of € 11.0 million. TheGroup continues to operate the apartment developments under 9 to 14-year leaseswith the buyers, with the rental expense constituting part of the Group’soperating expenses.

 

**MinorityInterests**

 

Minority interests reflect the owernship ofthird parties in the financial results of the Company's subsidiaries. For fiscalyear 2004, the minority interests reflected the third-party ownership of theconsolidated financing companies. For fiscal year 2005, minority interestsreflect the ownership of the financing companies as well as the impact of theRestructuring.

 

As a result of the Company’s legal andfinancial restructuring substantially all of the Company’s assets andliabilities were contributed to an 82% owned subsidiary, EDA. Subsidiaries ofTWDC own the remaining 18% of EDA. The Restructuring was made effective October1, 2004 in the Company’s consolidated accounts. Accordingly, the incomestatement reflects an allocation of 18% of the losses from EDA’s consolidatednet results for the fiscal year 2005 to TWDC subsidiaries as the minorityinterests of EDA.

 

**C.****            LIQUIDITYAND CAPITAL RESOURCES**

 

**Capital Investment**

 
| ** **                   | ** ** | **Fiscal Year** | ** ** |
|------------------------------|------------|-----------------|------------|
| **(€ in millions)**     | ** ** | **2005**        | ** ** | **2004** | ** ** | **2003** | ** ** |
|  Resort Segment         | ** ** | **94.8**        |       | 28.7 |   | 23.0 |   |
|  Real Estate Segment    | ** ** | **—**      |       | 0.6 |   | 1.8 |   |
| ** Capital Investment** | ** ** | **94.8**        |       | 29.3 |   | 24.8 |   |

 

Note: The figures presented are the amounts recorded in theConsolidated Financial Statements on an accrual basis.

 

Resort segment capital expenditures included primarilyexpenditures associated with the Group’s € 240 million multi-year developmentplan approved during the Restructuring. During fiscal year 2005, € 39.4 millionwas spent on the development and construction of theme park improvementsincluding *Buzz Lightyear Laser Blast*attraction for Disneyland Park*, Toon Studios*and *Tower of Terror*for Walt Disney Studios. In addition, current year expenditures included thecompletion of *Space Mountain: Mission 2*and*Wishes*, which were the highlightof this summer’s celebration of the 50th anniversary of the openingof Disneyland Park in California and other improvements to the existing assetbase.

 

Fiscal year 2004 Resort segment capital expendituresincluded primarily the costs of developing and staging the new *Legend of The Lion King* stage show, which is presentedseveral times daily on the *Videopolis*stage in the Disneyland Park, improvements to the Halloween and Christmasfestivals and various other improvements to the existing asset base.

 

**Cash Flows and Liquidity**

 

 As presented inthe Group’s Consolidated Statements of Cash Flows, cash and cash equivalentsincreased by € 156.4 million from the prior year to € 287.7 million as ofSeptember 30, 2005. Specifically, this increase in cash and cash equivalentsresulted from:

 
| - Cash Flows from Operating Activities    |   | € |   | 18.4  |   | million |
|-------------------------------------------|--------|--------|--------|-------|--------|---------|
| - Cash Flows used in Investing Activities |   | € |   | (72.7 | )      | million |
| - Cash Flows from Financing Activities    |   | € |   | 210.7 |   | million |

 

Cash flows generated by operating activities decreased€ 106.2 million from the prior year to € 18.4 million, reflecting payment offiscal year 2004 royalties and management fees in fiscal year 2005 andincreased interest payments.

 

Cash flows used in investing activities totaled € 72.7million reflecting capital investment expenditures related primarily to theprojects discussed above under “Capital Investment”.

 

Cash flows generated by financing activities totaled €210.7 million reflecting € 253.3 million of gross proceeds from the Company’sFebruary 2005 equity rights offering, net of € 17.4 million of commissions andother equity raising costs paid to third-party financial institutions andadvisors. Additionally, the Group repaid € 114.8 million in debt, including €100.6 million paid through the transfer of debt security deposits held by theGroup’s lenders and € 5.0 million paid on the Company’s previous line of creditwith TWDC. The Group also paid € 14.4 million in costs related to therenegotiation of its debt agreements in connection with the Restructuring.

 

34

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As of September 30, 2005, the Group had cash and cashequivalents of € 287.7 million, including € 48.3 million belonging to theconsolidated financing companies. Based on existing cash, liquidity from theCompany’s undrawn € 150.0 million line of credit from TWDC, and provisions forthe unconditional and conditional deferral of certain royalties and managementfees and interest charges pursuant to the Restructuring, management believesthe Group has adequate cash and liquidity for the foreseeable future.

 

The Group has covenants under its debt agreements thatlimit its investment and financing activities. Beginning with fiscal year 2006,the Group must meet financial performance covenants that will necessitateearnings growth from, amoung other things, the impact of the Group's multi-yearinvestment program discussed below. If revenue growth is not sufficient, theGroup would have to appropriately reduce operating costs and/or curtail aportion of planned capital expenditures (outside those contained in themulti-year investment program). The Group could also seek assistance from TWDCor other parties as permitted under the loan agreements. While there can be noassurance that revenue growth, or abatement of operating costs or capitalexpenditure would be sufficient or that assistance would be available onacceptable terms, the Group currently anticipates that it will meet thecovenant requirements through one or more of these means.

 

See Item 3 "Key Information" – Section D"Risk Factors" for a further discussion of the impact of a contraventionof the financial performance covenants, including the consequences and coursesof action that would be available to the Group.

 

**Debt**

 

TheGroup’s borrowings as of September 30, 2005 are detailed below (the variousloans are presented in more detail in Item 4 “Operating and Financial Reviewand Prospects” – Section F.2 “*The Group’s FinancialObligations*”):

 
| ** **                             | ** ** | **September** | **Fiscal Year 2005** | **September** | ** ** |
|----------------------------------------|------------|---------------|----------------------|---------------|------------|
| **(€ in  millions)**              | ** ** | **2004**      | ** **           | **Increase**  | ** ** | **Decrease** | ** ** | **2005** | ** ** |
|  CDC Senior Loans                 |       | 127.5         |                 | 125.0         |       | (10.0 | ) | **242.5** | ** ** |
|  CDC Subordinated Loans           |       | 783.8         |                 | 59.8          |       | (125.0 | ) | **718.6** | ** ** |
|  Credit Facility – Phase IA  |       | 340.1         |                 | —        |       | (66.6 | ) | **273.5** | ** ** |
|  Credit Facility – Phase IB  |       | 150.5         |                 | —        |       | (29.5 | ) | **121.0** | ** ** |
|  Partner Advances – Phase IA |       | 304.9         |                 | —        |       | — |   | **304.9** | ** ** |
|  Partner Advances – Phase IB |       | 96.9          |                 | —        |       | (3.7 | ) | **93.2** | ** ** |
|  TWDC Loans                       |       | 17.3          |                 | 135.0         |       | — |   | **152.3** | ** ** |
|  TWDC Line of Credit              |       | 125.0         |                 | —        |       | (125.0 | ) | **—** | ** ** |
|  Sub-Total                        |       | 1,946.0       |                 | 319.8         |       | (359.8 | ) | **1,906.0** | ** ** |
|  Accrued Interest                 |       | 106.8         |                 | 23.8          |       | (93.2 | ) | **37.4** | ** ** |
| ** Total Borrowings**             |       | 2,052.8       |                 | 343.6         |       | (453.0 | ) | **1,943.4** | ** ** |

 

The Group’s principal indebtedness (excluding accruedinterest) decreased € 40.0 million to € 1,906.0 million as of September30, 2005 compared to € 1,946.0 million as of September 30, 2004, as a result of€ 114.8 million of principal repayments, the forgiveness by TWDC of € 10million of the expired € 167.7 million line of credit, partially offset by theincreased borrowings associated with the € 59.8 million conversion of CDC WaltDisney Studios Loan accrued interest into subordinated long-term debt and theconversion of € 25 million of management fees and royalties payable intosubordinated long-term debt.

 

**Equity**

 

Shareholders’ equity increased to € 295.7 million asof September 30, 2005 from a deficit of € 59.9 million as of September 30,2004, which reflects the impacts of the Restructuring, partially offset by thenet loss for the fiscal year.

 

As a result of the Restructuring, on February 23,2005, substantially all of the Company’s assets and liabilities werecontributed to EDA. As a result of this legal reorganization, Euro DisneyS.C.A.’s increased interest in EDA was recorded as a reallocation betweenshareholders’ equity and minority interests for an amount of € 215.5 million.

 

Also in conjunction with the Restructuring, theCompany completed an equity rights offering on February 23, 2005, whichresulted in the issuance of 2.8 billion new shares at a price of € 0.09 eachgenerating gross proceeds of € 253.3 million.

 

As of September 30, 2005, TWDC, through indirectwholly-owned subsidiaries, held 39.8 % of the Company’s shares  (40.6 % as of September 30, 2004), and 10 % of the Company’s shares were ownedby trusts for the benefit of Prince Alwaleed Bin Talal Bin Abdulaziz Al Saudand his family (15.9% as of September 30, 2004). No other shareholder hasindicated to the Group that it holds more than 5 % of the share capital of theCompany. No dividend payment is proposed with respect to fiscal year 2005, andno dividends were paid with respect to fiscal years 2004, 2003 and 2002.

 

35

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**D.****         OUTLOOK**

 

The Group believes that the implementation of its development andgrowth strategy and the improved financial flexibility from the Restructuring giveit a significant opportunity to improve its financial performance, in what theGroup hopes will be a growing European theme park market.

 

As a result of the Restructuring, the Group benefited from asubstantial improvement in its cash and liquidity position. In addition, theGroup’s strategy to increase the number of visitors is intended to boostrevenues, which should result in increased operating margin in the medium term.At the same time, the combined effect of full royalties, management fees and interestexpense (which will continue to accrue despite being partially deferred on acash basis) and depreciation and amortization resulting from the consolidationof the financing companies will continue to affect operating margin and netincome. The Group anticipates that it will record net losses for at least thenext several years.

 

In fiscal year 2006, management is seeking to improve both attendanceand occupancy. It believes that its seasonal events and new investments, suchas the addition in Disneyland Park of the new attraction *Buzz Lightyear Laser Blast*, as well as itsintegrated marketing, sales and pricing strategies, provide an opportunity toincrease volumes and grow revenues.

 

The Group’s targeted revenue growth in fiscal year 2006, if it is achieved,will be used partially to cover an anticipated increase in operating expensesresulting primarily from increased labor expenses due to continued wageincreases and reduction of subsidies related to the adoption of the 35-hourworkweek.

 

The Group’s development strategy will result in part of the Group’sincreased cash resources being devoted to increased capital expenditures andspending on major asset renovations. In fiscal year 2006, the Group expects torecord a substantial increase in capital expenditures, which could totalapproximately € 150 million based on the Group’s current budget (compared to € 94.8million in fiscal year 2005). The increase will result mainly from thecompletion of *Buzz Lightyear Laser*Blast**in Disneyland Park in 2006 and thecontinued construction of additional new attractions scheduled to open in thecoming years. The Group anticipates significant, but somewhat lower spending in2007. A portion of ongoing capital expenditures will continue to be focused onenhancements at the theme parks and the hotels.

 

The information, assumptions and estimates that the Group has used todetermine its objectives are subject to change or modification due to economic,financial and competitive uncertainties. In particular, attendance could beaffected by a number of factors, some of which are beyond the Group’s control,including the state of the European travel and tourism industry (including thepotential impact of increased oil prices), geopolitical considerations, factorsaffecting the French tourism market (such as weather conditions and the overalleconomy), the perceived attractiveness of the Resort compared to other traveldestinations, and whether the Group is successful in implementing its developmentstrategy and achieving the objectives of that strategy. Accordingly, the Groupcannot give any assurance as to whether it will achieve the objectivesdescribed in this section, and it makes no commitment or undertaking to updateor otherwise revise this information.

 

**E.****             OTHERMATTERS**

 

**E.1.****         TabularDisclosure of Contractual Obligations**

 

See Item 5 “Operating and Financial Reviewand Prospects” – Section F.2 *“2005 FinancialRestructuring”— The Group’s Financial Obligations”*and Note 24 to theConsolidated Financial Statements in Item 17 “Financial Statements”.

 

**E.2.****         Off-BalanceSheet Obligations — Contingent Commitments**

 

See Item 5 “Operating and Financial Reviewand Prospects” – Section F.2 *“2005 FinancialRestructuring”— The Group’s Financial Obligations”.*

 

**E.3.****         AccountingPolicies and Estimates**

 

The Group believes that the application ofthe following accounting policies are important to its financial position andresults of operations, and require judgments and estimates on the part ofmanagement. For a summary of all of its accounting policies, See Note 2 to theConsolidated Financial Statements in Item 17 “Financial Statements”.

 

36

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*Revenue Recognition*

 

The Company has revenue recognition policiesfor its operating segments, which are appropriate to the circumstances of eachbusiness or revenues flow. It records revenues for the Resort Segment as therelated service is provided to guests. In addition, the Resort Segment includesrevenues associated with long-term sponsorship contracts, which are recognizedpro-rata over the term of the contracts. In its Real Estate DevelopmentSegment, the Group recognizes revenue on land sales upon closing of eachtransaction, while revenues related to service contracts and ground leases arerecognized when the service is rendered.

 

*Contingencies and Litigation*

 

The Group is continually involved in certainlegal proceedings and tax audits and, as required, has accrued its estimate ofthe probable costs for the resolution of these claims. The Group’s estimatesare developed in consultation with outside counsel and are based upon ananalysis of potential results, assuming a combination of litigation andsettlement strategies. It is possible, however, that future results ofoperations for any particular annual period could be materially affected bychanges in assumptions or the effectiveness of the Group’s strategies relatedto these proceedings.

 

**E.4.****         NewAccounting Pronouncements**

 

*Implementation of International FinancialReporting Standards (“IFRS”) and other legal requirements*

 

The Group currently prepares its financialstatements in accordance with French GAAP and prepares a reconciliation ofstockholders’ equity, net income and certain other disclosures to U.S. GAAP. InJune 2002, the Council of Ministers of the European Union approved a newregulation proposed by the European Commission requiring all EU-listedcompanies, including the Group, to apply IFRS in preparing their financialstatements for fiscal years beginning on or after January 1, 2005 (this meansfiscal year 2006 for the Group).

 

As a result, the Groupadopted International Financial Reporting Standards (“IFRS”) as of thebeginning of fiscal year 2006. A transition report detailing the impact of theimplementation on the Group’s opening balance sheet in IFRS and the restatementof fiscal year 2005 financial statements in IFRS is included as atExhibit 15.2 in Item 19 “Financial Statements and Exhibits” to this 20F.

 

The adoption of IFRS will change certain lineitem classifications and disclosures in the Group’s financial statements.Additionally, the depreciation method for fixed assets will be changed toreflect the depreciable lives of predefined components. The Group will cease toaccrue and expense the costs of major renovations in advance, but will insteadrecognize the capitalisable fixed asset components and non-capitalisableexpenses of major renovations when incurred. With regard to the Group’s incomestatement for fiscal year 2006, the impact of the change to IFRS is notexpected to be material.

 

**F.****             2005Financial Restructuring**

 

*In this section, all financial statementitems and other figures are as determined under French GAAP*.

 

**F.1.****GeneralOverview**

 

The Company began negotiating in fiscal year2003 the Restructuring in light of reduced revenues and increased losses thatit incurred. The reduction in revenues was primarily the result of a prolongeddownturn in European travel and tourism combined with challenging generaleconomic and geopolitical conditions in key markets. While this was partiallyoffset by the impact of the opening of Walt Disney Studios Park, the number ofvisitors and revenues generated by the new park were below expectations. Theincreased losses were a result of reduced revenues, as well as higher operatingcosts and marketing expenses in connection with the opening of the Walt DisneyStudios Park.

 

As a result of this situation, the Companydetermined that it would not be able, in the absence of a new restructuring, torestore compliance with certain financial covenants contained in its creditagreements in the near term, or to meet certain of its financial obligations.The Company also determined that, absent such a restructuring, it would nothave the financial resources or the authority under its credit agreements toinvest in new attractions and improvements.

 

At the time it began negotiations with itslenders, the Company obtained limited waivers of certain covenant violations,which were successively renewed as the negotiations progressed.

 

37

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In September 2004, the Company andcertain companies of the Group signed a memorandum of agreement with the Group’slenders and TWDC on a comprehensive restructuring of the Group’s financialobligations. The final conditions necessary to implement the Restructuring werecompleted in February 2005. The Restructuring provided new cash resources,reduced or deferred certain of the Group’s cash payment obligations and gavethe Group more flexibility to invest in new attractions and in the developmentof the Resort and its surrounding areas.

 

The principal features of the Restructuringincluded the following:

 

•      A share capital increase with gross proceedsof € 253.3 million, before deduction of equity issuance costs. The Company issued2.8 billion new shares at a price of € 0.09 each.

 

•      A new € 150 million credit line madeavailable by TWDC to replace the expired € 167.7 million credit line. Inaddition, TWDC forgave € 10 million of the expired credit line and converted €110 million of the remaining balance to subordinated long-term debt.

 

•      Deferral of the Group’s debt serviceobligations partially on an unconditional basis and partially on a conditionalbasis (depending on the Company’s financial performance), and elimination ofthe obligation to maintain debt security deposits (the existing € 100.6 milliondebt security deposit was used to prepay debt), in exchange for which theCompany will pay increased interest rates on some of its debt.

 

•      Deferrals of a portion of the management feesand royalties payable to affiliates of TWDC over the coming years, partially onan unconditional basis (total € 125 million) and partially on a conditionalbasis (up to € 200 million), with the conditional portion depending on theCompany’s financial performance.

 

•      Avoidance of lease-related payments in theamount of € 292.1 million (plus € 16 million of interest that would have beenpayable) to EDA, to exercise the Company’s lease option to maintain its rightsto the Disneyland Park and certain of its key attractions (which werepreviously leased from EDA). Instead, the Company acquired 82% of the sharecapital of EDA in exchange for the contribution of substantially all of theCompany’s assets and liabilities (TWDC subsidiaries hold the remaining 18% ofEDA and held 100% of EDA before the contribution).

 

•      Bank authorization to implement a € 240million plan to develop new Theme Park attractions and to expend more than inthe previous years on maintaining and improving the existing asset base.

 

The Restructuring provided significantliquidity, including protective measures intended to mitigate the adverseimpact of business volatility (through conditional deferrals of expenditures),as well as capital to invest in new rides and attractions.

 

**F.2.****TheGroup’s Financial Obligations**

 

The operating assets of the Group arefinanced using equity, borrowings and financial lease contracts. The lessorsunder the financial lease contracts are special purpose financing companies,which have been consolidated in the Group’s consolidated financial statementssince October 1, 2003 (the first day of fiscal year 2004). As a result,the liabilities under the lease contracts themselves are eliminated in theconsolidation process, while the borrowings of the financing companies arereflected as debt in the Group’s consolidated balance sheet.

 

The Group’s financial obligations in respectof these borrowings were undertaken in several phases, corresponding generallyto those described in Item 4 “Information on the Company” – Section A.1 *“History of the Group”.*The *Caisse deDépôts et Consignations* (“CDC”) is one of the principal lenders tothe Group, holding both senior loans and subordinated loans (including loansextended in 1999 to finance the construction of Walt Disney Studios Park). Thecreditors in respect of other loans are bank syndicates. The Group also benefitsfrom advances made by the partners of the special purpose financing companiesfrom which the Group leases assets (those partners are mainly banks, as well asother financing entities). The Group also has use of a credit line granted byTWDC.

 

The Group’s obligations in respect of theseloans and other commitments are described in more detail in Note 13, 14, 19b,24 and 25 to the Group’s Consolidated Financial Statements in Item 17 “FinancialStatements”. The table below sets out the debt and lease structure as well asother long-term obligations as of September 30, 2005, giving full effectto the terms of the Restructuring.

 

38

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| ** **                                                          | ** ** | ** **          | ** ** | **Principal Payments Due** | ** ** |
|---------------------------------------------------------------------|------------|---------------------|------------|----------------------------|------------|
| **(€ in millions)**                                            | ** ** | **September  2005** | ** ** | **Less than  1 year**      | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **More than  5 years** | ** ** |
| *CDC Loans*                                                         |       |                |       |                       |       |   |   |   |   |   |   |
| Phase I Loans                                                       | ** ** | **520.2**           |       | —                     |       | 1.3 |   | 6.4 |   | 512.5 |   |
| Walt Disney Studios Park Loans -  Subordinated                      | ** ** | **440.9**           |       | —                     |       | — |   | — |   | 440.9 |   |
| ** **                                                          |       | **961.1**           |       | —                     |       | 1.3 |   | 6.4 |   | 953.4 |   |
| *Phase IA Asset Financing  (primarily Disneyland Park)*             |       |                |       |                       |       |   |   |   |   |   |   |
| Credit facility(1)                                                  | ** ** | **273.5**           |       | —                     |       | 48.7 |   | 126.2 |   | 98.6 |   |
| Partner advances                                                    | ** ** | **304.9**           |       | —                     |       | — |   | — |   | 304.9 |   |
| ** **                                                          |       | **578.4**           |       | —                     |       | 48.7 |   | 126.2 |   | 403.5 |   |
| *Phase IB Asset Financing  (Hotels and Disney Village)*             |       |                |       |                       |       |   |   |   |   |   |   |
| Credit facility(1)                                                  | ** ** | **121.0**           |       | —                     |       | 10.1 |   | 40.4 |   | 70.5 |   |
| Partner advances(1)                                                 | ** ** | **93.2**            |       | —                     |       | — |   | 3.2 |   | 90.0 |   |
| TWDC - Newport Bay Club Convention Centre                           | ** ** | **17.3**            |       | —                     |       | — |   | — |   | 17.3 |   |
| ** **                                                          |       | **231.5**           |       | —                     |       | 10.1 |   | 43.6 |   | 177.8 |   |
| *TWDC Loans*                                                        |       |                |       |                       |       |   |   |   |   |   |   |
| Subordinated loan – Deferral of expired  line of credit        | ** ** | **110.0**           |       | —                     |       | — |   | — |   | 110.0 |   |
| Subordinated loan – Deferral of management  fees and royalties | ** ** | **25.0**            |       | —                     |       | — |   | — |   | 25.0 |   |
| ** **                                                          |       | **135.0**           |       | —                     |       | — |   | — |   | 135.0 |   |
|                                                                |       |                |       |                       |       |   |   |   |   |   |   |
| **Total Borrowings**                                                | ** ** | **1,906.0**         | ** ** | **—**                 | ** ** | **60.1** | ** ** | **176.2** | ** ** | **1,669.7** | ** ** |
|                                                                |       |                |       |                       |       |   |   |   |   |   |   |
| Contingent obligations(2)                                           | ** ** | **207.5**           |       | —                     |       | — |   | 24.6 |   | 182.9 |   |
| Operating lease obligations(3)                                      | ** ** | **65.2**            |       | 11.2                       |       | 18.5 |   | 12.9 |   | 22.6 |   |
| Retirement indemnities obligation(4)                                | ** ** | **11.3**            |       | —                     |       | — |   | — |   | 11.3 |   |
| Purchase obligations(5)                                             | ** ** | **1.6**             |       | 1.1                        |       | 0.5 |   | — |   | — |   |
| Other long-term obligations(6)                                      | ** ** | **20.3**            |       | —                     |       | 1.4 |   | 3.5 |   | 15.4 |   |
|                                                                |       |                |       |                       |       |   |   |   |   |   |   |
| **Total Contractual Obligations****(7)**                            | ** ** | **2,211.9**         | ** ** | **12.3**                   | ** ** | **80.5** | ** ** | **217.2** | ** ** | **1,901.9** | ** ** |

 

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*(1)**      **UnderFrench law, the Legally Controlled Group (the Company and its subsidiaries) isjointly liable or has guaranteed these obligations under the terms of therelated credit agreements (see Note 24 to the Consolidated Financial Statements**in Item 17 “Financial Statements”).*

*(2)**    **Includes € 24.6 millioncorresponding to TWDC waiver of royalties and management fee in fiscal year2003  and € 182.9 millioncorresponding to TWDC development fees subject to conditions (see Notes 19b and24 to the Consolidated Financial Statements**in Item 17 “Financial Statements”).*

*(3)**    **Represents the operating leasecommitments as described in Note 25-2 to the Consolidated FinancialStatements**inItem 17 “Financial Statements”.*

*(4)**    **Represents the actuariallycalculated obligation for employee retirement indemnities. The entireobligation has been reported in the “More than 5 years” column as theGroup does not expect a significant number of retirements in the next fivefiscal years (see Notes 2 and 26 to the Consolidated Financial Statements inItem 17 “Financial Statements”).*

*(5)**    **Represents the maximum potentialrisk under purchase obligations with the Group’s sponsorship participants.*

*(6)**    **Represents a contractualobligation to the Seine-et-Marne Department (local governmental body) recordedon the line “Accounts payable and accrued liabilities” of the ConsolidatedBalance Sheet. (See Item 4 “Information on the Company”, A.6 SignificantOperating Contracts – Department of Seine-et-Marne tax guarantee.)*

*(7)**    **Comprised of the following (€ inmillions):*

* *

| *Liabilities recorded on the balance sheet* | * * | *1,926.3* |
|---------------------------------------------|----------|-----------|
| *Off-balance sheet obligations*             | * * | *285.6*   |
| * *                                    | * * | *2,211.9* |

 

In addition, the Group has provided certain other performanceguarantees to contractual partners, which, depending on future events, mayrequire the Group to pay an amount ranging from € 0 to € 31.5 million.

 

**F.3.*****        *Impactof the Restructuring on Group Cash Flow**

 

The Restructuring improved the Group’sliquidity situation significantly by providing new financial resources anddeferring payment obligations. The principal provisions impacting the Group’scash included the following:

 

•      theGroup had available € 385.0 million in new financial resources in fiscal year2005: € 235.0 million from the Share Capital Increase (after deductingunderwriting commissions and other costs linked to this Share Capital Increase)and € 150.0 million from the TWDC New Credit Line. The amount of the TWDC NewCredit Line will be reduced to € 100.0 million after September 30, 2009,and it will expire on  September 30,2014;

 

39

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•      theGroup has been authorized by its lenders to implement a multi-year developmentplan totaling € 240 million. During fiscal year 2005, development planexpenditures totaled € 39.4 million. Amounts budgeted for 2005 not used in 2005will be used in future periods;

 

•      thecash payments that the Group would have been required to make in fiscal year2005 in respect of its credit agreements and the expired TWDC Credit Line(whose maturity date was initially June 10, 2004 and has been deferred aspart of the Restructuring) were reduced by € 243.4 million (after taking intoaccount the increased interest that the Group will be required to pay). Inaddition, the Group will realize reductions in cash outflow from similardeferrals through fiscal year 2009, as shown in the table below;

 

•      theGroup’s cash payments in respect of management fees and royalties due to TWDCsubsidiaries will be reduced by € 25.0 million per year in fiscal years 2006and 2007, by between € 25.0 million and up to € 50.0 million per year in fiscalyears 2008, 2009 and 2010, depending on financial performance of the Group, andby up to € 25.0 million per year from fiscal years 2011 up to and including fiscalyear 2015, depending on the financial performance of the Group; and

 

•      asa result of legal restructuring under which EDA became a subsidiary of theCompany, the Group will realize significant cash savings in respect of amountsit otherwise would have had to pay to EDA to exercise its option to maintainits rights to the Disneyland Park and to certain of its key attractions. Thesesavings include € 78.7 million in cash that the Company would have had to payover approximately a two-year period starting in June 2006 to exercise theoption to maintain its rights in respect of the Disneyland Park. The cashsavings also relate to € 213.4 million of lease-related payments that theCompany would have had to make over an eight-year period starting inJuly 2007 to exercise the option to maintain its rights over the “ACPAssets,” which are certain attractions constructed after the opening ofDisneyland Park (including *Space Mountain*),which the Company previously leased from EDA.

 

The following table sets out the impact ofthe Restructuring on the cash flows of the Group in comparison to itspre-Restructuring contractual obligations. The table includes the impact ofincreased interest rates on debt service as described below included in Note 14to the Consolidated Financial Statements in Item 17 “Financial Statements”. Forthe sake of clarity, the table does not take into account the impact thatdeferrals of principal repayments, management fees and royalties and interestexpenses will have on interest payments and interest income on cash balances. Thesedeferrals will improve the Group’s liquidity situation and potentially createsupplementary financial income, but will also have the effect of increasing theGroup’s borrowings and interest expenses. In addition, the table does not takeinto account the capital investment expenditures in connection with the newdevelopment and investment plan, described in Item 5 *“Operatingand Financial Review and Prospects”* – Section F.6. *“Agreements with Lenders*”.

 

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**SIGNIFICANT IMPACTS OF THE RESTRUCTURING ON GROUP CASH FLOW**

 

Impacts: Positive / (Negative)

 
| ** **                                                         | ** ** | **Fiscal year ending September 30,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------------|------------|------------|------------|------------|------------|
| **(€ in millions)**                                           | ** ** | **2005**                             | ** ** | **2006**   | ** ** | **2007**   | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **2015** | ** ** | **Thereafter** | ** ** | **Net  Impact** | ** ** |
|                                                               |       |                                 |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **ADDITIONAL CAPITAL AND CREDIT RESOURCES:**                       |       |                                 |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share Capital Increase (1)                                    |       | 235.0                                |       | —     |       | —     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 235.0 |   |
| TWDC New Credit Line (2)                                           |       | 150.0                                |       | —     |       | —     |       | — |   | — |   | (50.0 | ) | — |   | — |   | — |   | — |   | (100.0 | ) | — |   | — |   |
| Payment of Exceptional Restructuring Costs                         |       | (14.5                                | )          | —     |       | —     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | (14.5 | ) |
| Sub-Total                                                          |       | 370.5                                |       | —     |       | —     |       | — |   | — |   | (50.0 | ) | — |   | — |   | — |   | — |   | (100.0 | ) | — |   | 220.5 |   |
|                                                               |       |                                 |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **CASH SAVINGS AND ADDITIONAL COSTS:**                             | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Savings on Obligations Pursuant to Legal Reorganization (3)        |       | —                               |       | 13.9       |       | 91.3       |       | 26.7 |   | 26.7 |   | 26.7 |   | 26.7 |   | 26.7 |   | 26.7 |   | 26.7 |   | — |   | — |   | 292.1 |   |
| Waiver by TWDC on Existing TWDC Credit Line                        |       | 10.0                                 |       | —     |       | —     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 10.0 |   |
| Waiver by CDC of certain Future Interest Expense                   |       | 2.5                                  |       | 2.5        |       | 2.5        |       | 2.5 |   | 2.5 |   | 2.5 |   | 2.5 |   | 2.5 |   | — |   | — |   | — |   | — |   | 20.0 |   |
| Impact of Increased Interest Rates (4)                             |       | (9.8                                 | )          | (9.7       | )          | (9.7       | )          | (9.3 | ) | (7.6 | ) | (5.7 | ) | (3.8 | ) | (1.8 | ) | (1.0 | ) | (0.9 | ) | (0.4 | ) | (3.5 | ) | (63.2 | ) |
| Sub-Total                                                          |       | 2.7                                  |       | 6.7        |       | 84.1       |       | 19.9 |   | 21.6 |   | 23.5 |   | 25.4 |   | 27.4 |   | 28.2 |   | 25.8 |   | (0.4 | ) | (3.5 | ) | 258.9 |   |
|                                                               |       |                                 |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **LONG-TERM DEFERRALS****(5)****:**                                |       |                                 |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rescheduling of Bank Debt Service Requirements                     |       | 129.8                                | (6)        | 76.0       |       | 93.4       |       | 47.5 |   | 8.5 |   | (35.1 | ) | (28.0 | ) | (54.3 | ) | (47.7 | ) | 2.2 |   | 7.3 |   | (199.6 | ) | — |   |
| Deferral of Repayment of Existing TWDC Credit Line                 |       | 110.0                                |       | —     |       | —     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | (110.0 | ) | — |   |
| Deferral of Management Fees and Royalties                          |       | —                               |       | 25.0       |       | 25.0       |       | 25.0 |   | 25.0 |   | 25.0 |   | — |   | — |   | — |   | — |   | — |   | (125.0 | ) | — |   |
| Deferral NBC Convention Center Lease Payments                      |       | 0.9                                  |       | 1.2        |       | 1.2        |       | 1.4 |   | 1.4 |   | 0.5 |   | 0.5 |   | 0.5 |   | 0.5 |   | 0.5 |   | 0.5 |   | (9.1 | ) | — |   |
| Sub-Total                                                          |       | 240.7                                |       | 102.2      |       | 119.6      |       | 73.9 |   | 34.9 |   | (9.6 | ) | (27.5 | ) | (53.8 | ) | (47.2 | ) | 2.7 |   | 7.8 |   | (443.7 | ) | — |   |
|                                                               |       |                                 |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total Unconditional Impacts**                                    | ** ** | **613.9**                            | ** ** | **108.9**  | ** ** | **203.7**  | ** ** | **93.8** | ** ** | **56.5** | ** ** | **(36.1** | **)** | **(2.1** | **)** | **(26.4** | **)** | **(19.0** | **)** | **28.5** | ** ** | **(92.6** | **)** | **(447.2** | **)** | **479.4** | ** ** |
|                                                               |       |                                 |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **MAXIMUM CONDITIONAL DEFERRALS OF CASH EXPENDITURES****(5)****:** | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                         | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Conditional Deferral of Management Fees and Royalties              |       | —                               |       | —     |       | —     |       | 25.0 |   | 25.0 |   | 25.0 |   | 25.0 |   | 25.0 |   | 25.0 |   | 25.0 |   | 25.0 |   | (200.0 | ) | — |   |
| Conditional Deferral of CDC Interest                               |       | —                               |       | 19.8       |       | 20.2       |       | 20.2 |   | 20.2 |   | 20.2 |   | 20.2 |   | 20.2 |   | 20.2 |   | 22.7 |   | 22.7 |   | (206.6 | ) | — |   |
| Sub-Total                                                          |       | —                               |       | 19.8       |       | 20.2       |       | 45.2 |   | 45.2 |   | 45.2 |   | 45.2 |   | 45.2 |   | 45.2 |   | 47.7 |   | 47.7 |   | (406.6 | ) | — |   |
|                                                               |       |                                 |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total Unconditional and Conditional Impacts**                    | ** ** | **613.9**                            | ** ** | **128.7**  | ** ** | **223.9**  | ** ** | **139.0** | ** ** | **101.7** | ** ** | **9.1** | ** ** | **43.1** | ** ** | **18.8** | ** ** | **23.7** | ** ** | **76.2** | ** ** | **(44.9** | **)** | **(853.8** | **)** | **479.4** | ** ** |

 

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*(1)**       After deduction of Share Capital Increase costsof € 18.3 million.*

*(2)**       As of the date of this annual report, noamount  is outstanding on this line.*

*(3)**       Excludes interest savings of approximately €16.0million.*

*(4)**       Represents cost of increased interest ratesnegotiated as part of the Restructuring using the post-restructuring maturityschedule, but excluding the impact that the creation of new debt from the deferralswill have on interest charges.*

*(5)**       Excludes impact of annual interest on thedeferred amounts, which will be added to borrowings and paid starting in fiscalyear 2023.*

*(6)**       Represents the net impact of the elimination ofthe debt security deposits (€ 100 million) and the deferrals of the debtrepayments (net of the € 110 million prepayments) and the deferral of € 58million of accrued interest.*

 

**F.4.*****        *Impactof the Restructuring on the Group’s Financial Statements**

 

The Restructuring significantly impacted thecash flows and financial position of the Group. Certain of the financialstatement impacts were recorded immediately upon the completion of theRestructuring while others will be realized over a period of several years asfollows:

 

•      theShare Capital Increase provided the Group’s € 235.0 million additional cash andshareholders’ equity in fiscal year 2005;

 

•      thedeferrals of principal repayments and increases in the effective interest rateson certain tranches of the Group’s debt will increase interest charges over theremaining term of this debt (i.e. until 2023);

 

•      thepayment deferrals of management fees and royalties due to TWDC subsidiaries andCDC interest expense, will increase long-term subordinated debt, which willalso increase annual interest expenses. However, these payment deferrals willnot reduce the annual expenses recorded in the Group’s consolidated incomestatement for management fees, royalties and CDC interest expense, as theamount corresponding to these deferred amounts, even though they will have beendeferred, will be accrued as expenses;

 

•      thewaiver of debts by certain creditors will increase the Group’s net results andcash flows; and

 

41

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•      thechanges in the Group’s organizational structure relating to EDA increasedretained earnings and resulted in a corresponding decrease in minorityinterests, in order to reflect the respective ownership interests of theCompany and TWDC in EDA’s share capital following the completion of thereorganization. On the statement of income, the share of the Group’s netresults attributable to minority interests will increase, reflecting TWDC’sownership interest in EDA’s share capital.

 

**F.5.****         Performance Indicator**

 

Certain of the financial obligations of theGroup following the Restructuring will be affected by the Group’s financialperformance as measured by a contractually defined performance indicator (the “PerformanceIndicator”) for each fiscal year, which is approximately equal to the Group’searnings before interest, taxes, depreciation and amortization, adjusted forcertain items. The Performance Indicator will be used to determine:

 

•      theamount of interest on the CDC Walt Disney Studios Park Loans that is to bedeferred in respect of each fiscal year;

 

•      the amount ofroyalties and management fees payable to affiliates of TWDC that is to bedeferred in respect of each fiscal year; and

 

•      the Group’scompliance with its financial covenant requirements.

 

In each case, the relevant determination willbe made by comparing the actual Performance Indicator for a given fiscal yearto a Reference Performance Indicator for that year (the “Reference PerformanceIndicator”). There are three separate Reference Performance Indicators, one foreach calculation. The Reference Performance Indicators have been establishedsolely for purposes of the contractual obligations to which they apply, and donot reflect a prediction or forecast of the future operating performance of theGroup.

 

The Performance Indicator for a given fiscalyear will be equal to the Group’s consolidated net income (loss), after profitor loss allocated to minority interests, as reported in the consolidatedaudited financial statements for such fiscal year determined in accordance withgenerally accepted accounting principles and rules in France, consistentlyapplied, after removing the effect of the following:

 

•      minorityinterests as reported in the consolidated statement of income;

 

•      income taxexpense or benefit (current and deferred);

 

•      income(loss) from affiliates accounted for under the equity method;

 

•      the netimpact of all waivers of debt or commercial or financial payables, etc. whichmay be granted by TWDC or its subsidiaries;

 

•      the netimpact (positive or negative) of depreciation and movements in reserves ontangible, intangible assets (including goodwill) and deferred charges as wellas exceptional reserves and impairment charges on these asset categories;

 

•      the netimpact (positive or negative) of movements in: (i) current asset reserves (forexample, receivables and inventories); (ii) provisions for risks and chargesand (iii) provisions recorded in exceptional earnings;

 

•      operatingexpenses related to actual expenditures for major fixed asset renovations;

 

•      net gainsand losses on the sale or abandonment of tangible or intangible assets;

 

•      financialincome net of financial charges, excluding charges related to bank cardcommissions;

 

•      managementfees and royalties payable to TWDC expensed for such fiscal year.

 

42

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CDC Walt Disney Studios Park Loans

 

If the Performance Indicator for a givenfiscal year is less than the Reference Performance Indicator set forth belowfor such fiscal year, then interest on the CDC Walt Disney Studios Park Loanswill be deferred in an amount for such fiscal year equal to the excess of theReference Performance Indicator over the Performance Indicator. For purposes ofthe conditional deferral of interest on the CDC Walt Disney Studio Park Loans,the Reference Performance Indicators are equal to € 230.6 million, € 263.9million, € 257.5 million, € 280.4 million, € 288.1 million, € 292.2 million, €315.6 million, € 327.7 million, € 340.8 million and € 355.6 million for each offiscal years 2005 through 2014, respectively.

 

For fiscal year 2005, the PerformanceIndicator was  € 184.3 million which wasless than the Reference Performance Indicator. Therefore, in accordance withthe Restructuring agreement, € 19.8 million of CDC Walt Disney Studios Parkloans interest payable on December 31, 2005 was deferred and converted tolong-term subordinated borrowings.

 

Royalties and Management Fees

 

If the Performance Indicator for a givenfiscal year (starting in fiscal year 2007) is less than the ReferencePerformance Indicator set forth below for such fiscal year, then royalties andmanagement fees otherwise due to affiliates of TWDC will be deferred in anamount equal to the excess (up to a maximum of € 25.0 million) of the ReferencePerformance Indicator over the Performance Indicator. For purposes of theconditional deferral of royalties and management fees, the ReferencePerformance Indicators are € 282.5 million, € 305.4 million, € 313.1 million, €317.2 million, € 340.6 million, € 352.7 million, € 365.8 million and € 380.6million for each of fiscal years 2007 through 2014, respectively.

 

Financial Covenants

 

If the Performance Indicator for a givenfiscal year from fiscal year 2006 through fiscal year 2014 is less than theReference Performance Indicator set forth below, then the Group will berequired to comply with the debt service coverage ratios described in Item 5 *“Operating and Financial Review and Prospects”* – Section F.6.*“Agreements with Lenders*”. For purposesof this financial covenant, the Reference Performance Indicators are €243.7million, €237.3 million, €260.2 million, €267.9 million, €272.0 million, €295.4million, €307.5 million, €318.1 million and €332.9 million for each of fiscalyears 2006 through 2014, respectively.

 

Changes in Accounting Principles

 

In the event of a change in accountingprinciples and rules (in particular in connection with the implementation ofIFRS beginning in fiscal year 2006) and/or changes in the scope ofconsolidation of the Group, the Performance Indicator and, if necessary, theReference Performance Indicator will be adjusted to reflect the accountingchange. The adjusted Performance Indicator in these situations (the “Pro-FormaPerformance Indicator”) will replace the Performance Indicator.

 

**F.6.****         Agreements with Lenders**

 

***Payment DeferralMechanism***

 

The Restructuring provides for significantdeferrals of payments in respect of the Group’s credit agreements. The debtrelated payment deferral mechanism put in place as a result of theRestructuring is as follows:

 

•      Interestaccrued from fiscal year 2005 through fiscal year 2014 under the CDC WaltDisney Studios Park Loans (in the aggregate, € 22.7 million of interestper fiscal year) will be subject to conditional deferral. The maximum amount ofsuch conditional deferral will be € 20.2 million per year from fiscalyears 2005 through 2012 (as € 2.5 million will be permanently forgiven ineach of such fiscal years) and € 22.7 million per year for fiscal years2013 and 2014.

 

•      Theamount of such conditional deferral will depend upon the Group’s operatingperformance as measured by a contractually defined Performance Indicator forthe relevant fiscal year. For a detailed description of this deferralmechanism, see Item 5. F.5. “Performance Indicator”.

 

•      Deferredinterest will be converted into a long-term subordinated debt obligation,bearing interest at 5.15% per annum (interest being capitalized throughJanuary 1, 2017 and payable annually thereafter), payable after the Group’ssenior debt and subordinated debt (other than the CDC Walt Disney Studios ParkLoans) have been repaid in full, starting in 2023. See Item 5.F.5.”PerformanceIndicator” for a detailed discussion of the Performance Indicator.

 

For Fiscal Year 2005, the PerformanceIndicator was less than the Reference Performance Indicator, therefore, inaccordance with the Restructuring agreement, € 19.8 million of interest payablein respect of the CDC Walt Disney Studios Park loans on December 31, 2005 wasdeferred and converted to long-term borrowings.

 

43

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***Debt Covenants***

 

The Group’s debt agreements include covenantsbetween the Group and the Lenders. These covenants primarily consist ofrestrictions on additional indebtedness and capital expenditures, the provisionof certain financial information and compliance with a financial ratiothreshold. In the case of non-compliance with these covenants, the Lenders candemand accelerated repayment of the debt (see Item 3 “Key Information” -Section “*Risk Factors*” ). Provided below is moredetailed information on the significant aspects of the Group’s debt covenants:

 

•      **Financial RatioCovenant**

As a result of the Restructuring, thefinancial ratio covenant of the Group changed. The gross operating profit ratiowas deleted and replaced by debt service coverage ratios (the DSCR and ForecastDSCR). From fiscal year 2006 through fiscal year 2014 inclusive, the debtservice coverage ratio requirement will apply only if the Performance Indicatorfor a given fiscal year is below its annual reference level for purposes ofthis covenant, as described below in paragraph “*Reference Performance Indicator for Financial Covenants*”.From fiscal year 2015, the debt service coverage ratio will apply withoutregard to the Performance Indicator until the repayment in full of the CDC WaltDisney Studios Park Loans.

 

The debt service coverage ratio is defined asthe ratio of: the Group’s Performance Indicator for a given fiscal year, lessany royalties and management fees payable to affiliates of TWDC that are notdeferred, less the amount of certain expenditures for majorrenovations and all other capital investments (excluding capitalized interestand the investments of the development plan described in item 4 “Information onthe Company” - Section “*Strategic Overview*”), lessany corporate income tax paid, plus certain financial investmentincome, to the Group’s total debt service obligations.

 

For any fiscal year inwhich the debt service coverage ratio applies, the Group will be required tomaintain a forecast ratio calculated on the basis of the projected debt serviceobligations for the immediately following year. The forecasted results used for the Forecast DSCR are the lower of theactual management forecast for the following year or the current fiscal yearresults escalated at 3%.

 

The agreed required levels of DSCR andForecast DSCR are set forth in the following table:

 

**Debtservice coverage ratios (DSCR and Forecast DSCR)**

*Minimum values charts to be achieved for each fiscal year*

 
| **Financial Year** | ** ** | **2005**   | ** ** | **2006**   | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009**   | ** ** | **2010**   | ** ** | **2011**   | ** ** | **2012**   | ** ** | **2013**   | ** ** | **2014**   | ** ** | **2015**   | ** ** | **2016**   | ** ** | **2017   and  there  after** | ** ** |
|--------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------------------------|------------|
| ** **         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **                   | ** ** |
| DSCR               |       | —     |       | 1.80       |       | 2.35       |       | 1.45       |       | 1.20       |       | 1.05       |       | 1.00       |       | 1.00       |       | 1.10       |       | 2.60       |       | 1.40       |       | 3.10       |       | 1.30                         |       |
|               |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |                         |       |
| Forecast DSCR      |       | —     |       | 2.45       |       | 1.30       |       | 1.20       |       | 1.00       |       | 1.00       |       | 1.00       |       | 1.05       |       | 2.50       |       | 1.05       |       | 2.90       |       | 1.30       |       | 1.30                         |       |

 

If the required debtservice coverage is not met in respect for a given fiscal year in which theratio applies, the Group’s lenders may require the immediate repayment of theGroup’s financial debt.

 

However, the Group mayrestore the ratio to its required level, by raising additional equity capitalor subordinated debt, or by obtaining forgivenesses or deferral of amounts thatwould otherwise be payable.

 

44

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*Reference Performance Indicator for FinancialCovenants*

 

For the purpose of the test triggering thecalculation of the DSCR and Forecast DSCR, it has been agreed to set theReference Performance Indicator as follows:

 
| **Fiscal Year** | ** ** | **Reference Performance Indicator (€ in millions)** | ** ** |
|----------------------|------------|-----------------------------------------------------------------------------------|------------|
| 2006                 |       | 243.7                                                                             |       |
| 2007                 |       | 237.3                                                                             |       |
| 2008                 |       | 260.2                                                                             |       |
| 2009                 |       | 267.9                                                                             |       |
| 2010                 |       | 272.0                                                                             |       |
| 2011                 |       | 295.4                                                                             |       |
| 2012                 |       | 307.5                                                                             |       |
| 2013                 |       | 318.1                                                                             |       |
| 2014                 |       | 332.9                                                                             |       |

 

For the purpose of determining the ReferencePerformance Indicator, accounting principles and rules applied by the Companyin the preparation of its consolidated financial statements for fiscal year2003, adjusted for the change in accounting principles related to theconsolidation of the Financing Companies in accordance with Article 133 ofthe Financial Security Law of August 1, 2003, have been used. In the eventof change in accounting principles and rules (in particular in connection withthe implementation of IFRS) and/or change in the consolidated group, the ReferencePerformance Indicator (which will then become the Pro-Forma ReferencePerformance Indicator) and the debt service coverage ratios will be adjustedaccordingly.

 

•      **Restrictions on Capital Expenditures**

 

TheGroup’s maximum authorized investments were also modified by the Restructuring.Recurring investments (meaning capital and major fixed assets renovationexpenditures, excluding development investment) were previously limited toapproximately 3% of consolidated revenues (excluding participant revenues).After the Restructuring, the maximum amount of the authorized recurringinvestments were  € 81.7 million infiscal year 2005, and will be € 62.3 million in fiscal year 2006, € 51.8million in fiscal year 2007, € 51.5 million in fiscal year 2008 and € 68.7 millionin fiscal year 2009, with the amounts potentially subject to adjustment upwardsor downwards depending on revenues recorded. After fiscal year 2009, if theGroup has not exhausted the cash flow benefit of the conditional deferral ofinterest under the CDC Walt Disney Studios Park Loans and the conditionaldeferral of management fees and royalties, these expenditures will continue tobe permitted up to 5% of prior fiscal year consolidated revenues (excludingparticipant revenues), within the limit of 25% of the Reference PerformanceIndicator for the prior fiscal year.

 

The agreements implementing the Restructuringprovide the Group with the necessary bank authorizations for a €240.0 million capital development program between fiscal years 2005 and2009 primarily consisting of investments in Theme Parks. These new investmentswill include a new attraction in the Disneyland Park and new attractionsfocused on families with small children as well as a major new attraction inthe Walt Disney Studios Park. The timing for completion of these expenditureswas originally planned as follows:

 
| **Fiscal Year** | ** ** | **(€ in millions)** | ** ** |
|----------------------|------------|------------------------------------|------------|
| 2005 (and  before)   |       | 75                                 | (1)        |
| 2006                 |       | 75                                 |       |
| 2007                 |       | 50                                 |       |
| 2008                 |       | 30                                 |       |
| 2009 (and  beyond)   |       | 10                                 |       |
| **Total**            | ** ** | **240**                            | ** ** |

 

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*(1)**        **As of September 30, 2005, € 39.4million of costs have been incurred in total. Amounts not spent in fiscal year2005 are expected to be used in future periods.*

 

•       **Restrictions on Additional Indebtedness**

 

The Group’s debt agreements limit the amountof new indebtedness the Group can incur. Authorization currently exists toallow the Group to incur a maximum of € 50 million of other new indebtedness(as defined), which includes financial leasing arrangements, certainguarantees, and purchases on credit.

 

Financing lease arrangements are limited to aprincipal amount of up to € 10.0 million per year.

 

45

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**G.****            FORWARD-LOOKINGSTATEMENTS**

 

The Private Securities Litigation Reform Act of 1995(the “Act”) provides a safe harbor for forward-looking statements made by or onbehalf of the Group. The Group and its representatives may from time to timemake written or oral statements that are “forward-looking”, includingstatements contained in this report and other filings with the Securities andExchange Commission and in reports to the Group’s shareholders. All statementsthat express expectations and projections with respect to future matters,including the launching or prospective development of new business initiatives;theme park and resort projects , are forward-looking statements within themeaning of the Act. These statements are made on the basis of management’sviews and assumptions, as of the time the statements are made, regarding futureevents and business performance. There can be no assurance, however, thatmanagement’s expectations will necessarily come to pass.

 

*Factors that  may affect forward-looking statements.*

 

A wide range of factors could materiallyaffect future developments and performance, including the following:

 

•      changes instrategies, which may result in changes in the types or mix of businesses inwhich the Group is involved or chooses to invest;

 

•      changes inEuropean and global or regional economic and political conditions, which mayaffect attendance and spending at the Group’s Theme Parks and hotels;

 

•      changes inEuropean and global financial and equity markets, including significantinterest rate fluctuations, which may impede the Group’s access to, or increasethe cost of, external financing for its operations and investments;

 

•      increasedcompetitive pressures, both domestically and internationally, which may, amongother things, affect the performance of the Group’s Theme Parks and hotels andlead to increased expenses in such areas as marketing;

 

•      labor disputes,which may lead to increased cost or disruption of operations; and

 

•      changing publicand consumer taste, which may affect the Group’s entertainment andmerchandising businesses.

 

This list of factors that may affect futureperformance and the accuracy of forward-looking statements is illustrative, butby no means exhaustive, and should be read in conjunction with Item 3 “KeyInformation” – Section D *“Risk Factors”*.Accordingly, all forward-looking statements should be evaluated with theunderstanding of their inherent uncertainty. Management does not undertake anyobligation to update these statements.

 

**ITEM 6.                  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**

### *** ***

**A.****         DIRECTORSAND SENIOR MANAGEMENT**

 

**Executive Officers of the Management Company**

 

As discussed in Item 10 “AdditionalInformation” – Section B.1 *“The Management Company (theGérant)”*, Euro Disney S.A.S. manages the Company.

 

Karl L. Holz is Chairman and Chief ExecutiveOfficer (*Président*) of the Management Company asof the date of this Annual Report on Form 20-F.

 

46

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The executive officers of the ManagementCompany are currently as follows:

 

**Executive committee**:

** **
| **Name**                                  | ** ** | **Age** | ** ** | **Position**                                                      |
|-------------------------------------------|------------|---------|------------|-------------------------------------------------------------------|
| Karl L. Holz                              |       | 54      |       | Chairman & Chief Executive Officer                            |
| Dominique Cocquet                         |       | 58      |       | Senior Vice President – Development and External Relations   |
| Philippe Gas                              |       | 42      |       | Senior Vice President – Human Resources                      |
| Ignace Lahoud                             |       | 40      |       | Senior Vice President – Chief Financial Officer              |
| Christian Perdrier                        |       | 54      |       | Senior Vice President – Parks, Security & Disney Village |
| Patrick Avice                             |       | 50      |       | Vice President – Hotels & Convention Centers             |
| Wendy Crudele                             |       | 45      |       | Vice-President – Human Resources                             |
| Andrew de Csilléry                   |       | 38      |       | Vice President – Strategic Planning & Pricing            |
| Federico J. Gonzalez                      |       | 41      |       | Vice President – Marketing                                   |
| Béatrice Mathieu-de Lacharrière |       | 47      |       | Vice President –Corporate Communications                     |
| François Pinon                       |       | 43      |       | Vice President – General Counsel                             |
| Norbert Stiekema                          |       | 41      |       | Vice President – Sales & Distribution                    |

 

•      **Karl L. Holz, Chairman & Chief Executive Officer**, wasappointed to this position in May 2005. Until this date, he was President &Chief Operating Officer. He spent eight years with TWDC, where he was VicePresident of Downtown Disney, and then Senior Vice President of Walt DisneyWorld Operations, before being promoted to President of Disney Cruise Line in2003. Prior to joining TWDC, he served in various positions as Regional VicePresident for Sky Chefs Airport Concession, Inc., and President and ChiefExecutive Officer of Concession Air, Inc., and also as Vice President of themepark operations at Knott’s Berry Farm in the United States.

 

•      **Dominique Cocquet**, Senior Vice President – Development andExternal Relations, joined Euro Disney in 1989 as Manager of Real EstateFinance. He was promoted in 1992 to the rank of Vice President in charge ofDevelopment and External Relations, and supervised the doubling of the capacityof Disney Village, the creation of Walt Disney Studios Park, the opening of2,200 additional hotel rooms, and the development of the Val d’Europecommunity.

 

•      **Philippe Gas**,****Senior VicePresident – Human Resources, was appointed in September 2003.****Previously he worked at Euro Disney from 1991 to 1997. SinceJune 2000, Philippe has served as Regional Vice President for Asia PacificHuman Resources for TWDC. Prior to this position, he was Director ofInternational Human Resources in Burbank, California.

 

•      **Ignace Lahoud**,****Senior VicePresident – Chief Financial Officer, was appointed to this position in January2006. He joined Euro Disney in 1991 as a Financial Analyst and then transferredto The Walt Disney Company’s Corporate Administration team in Burbank, CA in1997. Since July 2001, he served as Senior Vice President — CFO for The WaltDisney Company in Latin America.

 

•      **Christian Perdrier**,****Senior VicePresident – Parks, Security & Disney Village, joined the Euro Disney Groupin 1994 in the position of Vice President Hotel Operations after 20 years ofexperience with the Accor Group. He was promoted to Senior Vice PresidentOperations in 1997 where he supervised Operations in the Parks and Hotels. In1999, he took over the supervision of Supports and in 2002 the security atDisneyland Resort Paris. In 2005, he took the additional responsibility of themanagement of Disney Village.

 

•      **PatrickAvice**, Vice President – Hotels & ConventionCenters,who has more than 25 years of experience in the hospitality industry, joinedthe Euro Disney Group in 1990 for the opening of the Disneyland Park where hewas part of the Room Research and Development team. From 1992 to 1998 he heldvarious positions in the Resort including General Manager of *Disney’s Sequoia Lodge, Disney’s Hotel Santa Fe andDisney’s Hotel Cheyenne*as well as the position of Director of HotelOperations. In 1999, he left the Company to take the position of Vice PresidentOperations within the group Citadines with the mission of implementing theirnew “apart’hotels” product. In 2001, Patrick returned to the Company in hiscurrent position of Vice President, Hotels and Convention Centers.

 

•      **Wendy Crudele**, Vice President-Human Resources DLRP, wasappointed to this position in October 2005. She joined the Walt Disney Companyin 1985 and has held leadership positions in Hotel Operations and HumanResources. Prior to this position she has held the positions of Vice President,Segment Recruitment, and Vice President of Walt Disney World Casting, DisneyUniversity, Internal Cast Communications and Human Resource Generalists.

 

47

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•      **Andrew de Csilléry**, Vice President – Strategic Planning& Pricing, was appointed to thisposition in February 2004. Following a career as a consultant with Touche Rossand Gemini Consulting, he joined the Bass Plc Group (which became the SixContinents Plc group and is now the Intercontinental Hotels Group) as VicePresident of Operations, New Zealand and South Pacific region after holdingroles of increasing responsibility within the strategy division of that group.

 

•      **Federico J. Gonzalez**, Vice President – Marketing, was appointed to this position during Autumn2004. He spent sixteen years within The Procter & Gamble group, where heassumed various positions as Brand Manager (Spain) followed by three years atthe group’s European Headquarters in Brussels and two years as DirectorMarketing for Procter & Gamble Nordic, before being promoted to GeneralManager (Portugal).

 

•      **Béatrice Mathieu-deLacharrière**, VicePresident – Corporate Communications, joinedthe Euro Disney Group in 2005. Over the past 25 years, she has developed herexpertise in marketing and communication in the pharmaceutical industry workingfor major groups including Glaxo, Aventis and Pasteur since 1982. Her mostrecent position was Senior Director Corporate Affairs and Communications forthe French affiliate of Bristol-Myers Squibb.

 

•      **François Pinon**, Vice President – General Counsel, wasappointed in April 2004. From 1989 to 1995, he worked at Euro Disney. In 1995,he joined Solidere, a Lebanese company in charge of Beirut reconstruction, asSenior Counsel. In 1997, he became General Counsel of EDS France. He returnedto Euro Disney in 2000 as Deputy Legal Counsel.

 

•      **Norbert Stiekema**,Vice President – Sales & Distribution, was appointed to this position inMarch 2004. He has spent most of his professional life with KLM Royal DutchAirlines as Director General for Germany. Prior to that, he occupied various postsfor that company in France, The Netherlands and Italy.

 

See Item 10 “AdditionalInformation” – Section B.2. “*The Supervisory Board*”for information concerning the Company’s Supervisory Board.

 

**B.****         COMPENSATION**

 

Aggregate compensation paid by the Group tothe executive officers of the Management Company (see Section A “Directorsand Senior Management”) was approximately € 6.3 million in fiscal year 2005, €4.0 million in fiscal year 2004 and € 4.4 million in fiscal year 2003,excluding stock options. Included in the fiscal year 2005 amount are welcomeand departure packages, which totaled approximately € 1.5 million. Officers ofthe Management Company and certain other management employees are eligible forparticipation in the Group’s discretionary bonus programs at varying levels.The aggregate amount set aside or accrued by the Group to provide pension,retirement or similar benefits for the same executive officers and directors inrespect of fiscal year 2005 was € 0.4 million. As of September 30, 2005,these same officers held together a total of 34.5 million Euro Disney S.C.A.stock options. The Group bears the cost of all compensation paid to the executiveofficers of the Management Company. During the periods presented the size ofthe executive committee has varied as a result of management changes andreorganization of the composition of the executive committee.

 

The aggregate compensation paid by the Groupto members of the Supervisory Board during fiscal year 2005 was € 121,948. Compensation paid to each member is proportional to attendance atmeetings. The individual compensation paid to each member of the SupervisoryBoard is provided below in Item 10 “Additional Information” — Section B.2 “TheSupervisory Board”.

 

Under the disclosure requirements in France,the Group reported the following fiscal year 2005 stock options transactionswith certain members of the Board of Directors and executive officers of the Management**Company:

 

Euro Disney S.C.A Options Granted:

 
| **Name**             | ** ** | **Number of Options******* | ** ** | **Exercise Price** | ** ** | **Expiration Date** | ** **        |
|----------------------|------------|----------------------------|------------|--------------------|------------|---------------------|-------------------|
| Philippe Gas         |       | 5 953 847             |       | €             |  0.13 |                | September 6, 2013 |   |
| François  Pinon |       | 2 976 924             |       | €             |  0.13 |                | September 6, 2013 |   |
| Andrew de Csillery   |       | 2 232 693             |       | €             |  0.13 |                | September 6, 2013 |   |
| Norbert  Stiekema    |       | 2 000 000             |       | €             |  0.13 |                | September 6, 2013 |   |
| Patrick  Avice       |       | 800 000                    |       | €             |  0.13 |                | September 6, 2013 |   |
| Christian  Perdrier  |       | 800 000                    |       | €             | 0.13       |                | September 6, 2013 |   |

 

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****See Item 17 “Financial Statements”Note 22 to the Consolidated Financial Statements for a description of our stockoption plan.*

 

48

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TWDC Options Granted:

 
| **Name**             | ** ** | **Number of Options** | ** ** | **Exercise Price** | ** ** | **Expiration Date** | ** **      |
|----------------------|------------|-----------------------|------------|--------------------|------------|---------------------|-----------------|
| Thomas  Staggs       |       | 125 367               |       | $                  | 25.805     |                | June 27, 2012   |   |
| James Rasulo         |       | 20 000                |       | $                  | 25.805     |                | June 27, 2012   |   |
| James Rasulo         |       | 80 000                |       | $                  | 25.035     |                | January 3, 2012 |   |
| Philippe Gas         |       | 10 000                |       | $                  | 28.035     |                | January 3, 2012 |   |
| François  Pinon |       | 10 000                |       | $                  | 28.035     |                | January 3, 2012 |   |
| Andrew de  Csillery  |       | 13 000                |       | $                  | 28.035     |                | January 3, 2012 |   |
| Norbert  Stiekema    |       | 7 500                 |       | $                  | 28.035     |                | January 3, 2012 |   |

 

TWDC Options Exercised:

 
| **Name**       | ** ** | **Number of Options** | ** ** | **Exercise Price** | ** ** |
|----------------|------------|-----------------------|------------|--------------------|------------|
| Thomas  Staggs |       | 69 000                |       | $                  | 18.4167    |   |
| Thomas  Staggs |       | 90 000                |       | $                  | 19.1458    |   |
| James Rasulo   |       | 90 000                |       | $                  | 19.1458    |   |

 

**C.****         BOARDPRACTICES**

 

See discussion below in Item 10 “AdditionalInformation” — Section B.2 “*The Supervisory Board*”.

 

**D.****         EMPLOYEES**

 

See discussion above in Item 4 “Informationon the Company” — Section A.5 *“Human Resources Management”*.

 

**E.****         SHAREOWNERSHIP**

 

No executive officers of the ManagementCompany (*Gérant*) and no members of theSupervisory Board beneficially own 1% or more of the shares of the Company,either directly or potentially through the exercise of stock options.

 

**ITEM 7.****  MAJORSHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

 

**A.****            MAJORSHAREHOLDERS**

 

Set forth below as of September 30, 2005, arethe number of shares of common stock and percentages owned by each person that iscurrently known to the Company to own more than 2% of the outstanding shares ofthe Company’s common stock:

 
| **Title of Class** | ** ** | **Identity of Person or Group** | ** ** | **Amount Owned**   | ** ** | **Percent of Class ****(1)** | ** ** |
|------------------------------|------------|-----------------------------------------------------|------------|-------------------------|------------|---------------------------------------------|------------|
|                         |       |                                                |       |                    |       |                                        |       |
| Common Stock                 |       | EDL Holding  Company (2)                            |       | 1,550.5  million shares |       | 39.78                                       | %          |
|                         |       |                                                |       |                    |       |                                        |       |
| Common Stock                 |       | Kingdom  5-KR-135 Ltd. (3)                          |       | 389.8  million shares   |       | 10                                          | %(4)       |

 

----

*(1)**       Based on 3,897,649,046 shares of commonstock outstanding as of September 30, 2005.*

*(2)**       EDL Holding Company is an indirectwholly-owned subsidiary of The Walt Disney Company.*

*(3)**       A company whose shares are held by trustsfor the benefit of HRH Prince Alwaleed and his family.*

*(4)**       Kingdom 5-KR-135, Ltd. held 15.9%  of the Company’s common stock immediatelybefore the share capital increase in February 2005.*

 

Both major shareholders do not have differentvoting rights.

 

Other than indicated in the table above,except UBS AG which held 3.56% of the Company’s share capital from July 2005 toDecember 2005, no shareholder has indicated to the Management Company that itholds, directly or indirectly, alone or jointly, or in concert with otherentities, more than 2% of the share capital of the Company.

 

In connection with the financing of WaltDisney Studios Park, The Walt Disney Company has committed to the CDC to holdat least 16.67% of the Company’s common stock until 2027. In connection withthe Restructuring, TWDC has agreed to hold directly or indirectly at least 39%of the common stock of the Company until 2016. See also Item 4 “Information onthe Company” – Section A.7.3 - “Undertakings and Agreements with The WaltDisney Company and Subsidiaries” and Item 10 “Additional Information” Section B- “Memorandum and Articles of Association”.

 

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As of September 30, 2005, the totalnumber of shares of common stock held by the executive officers and members ofthe Supervisory Board as a group was, to the Group’s knowledge, 867,576 shares.

 

**B.****            RELATED- PARTY TRANSACTIONS**

 

During the four years endingSeptember 30, 2005, the following amounts were incurred under relatedparty transactions with The Walt Disney Company and its subsidiaries (See inItem 4 “Information on the Company” - Section A.7.3 *“Undertakingsand Agreements with The Walt Disney Company and Subsidiaries”* andItem 10 “Additional Information” — Section B.1 *“TheManagement Company (the Gérant)”* for a full description of thesecontracts and agreements):

 

 
| **(€ in millions)** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------------|------------|----------|------------|----------|------------|----------|------------|
| Development  Agreement   | ** ** | **51.8** |       | 26.2     |       | 30.6     |       |
| License  Agreement (1)   | ** ** | **48.7** |       | 47.2     |       | 5.6      |       |
| Management  Fees (1)     | ** ** | **10.8** |       | 10.5     |       | 2.5      |       |

 

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*(1)**      **SeeNote 19-b to the Consolidated Financial Statements in Item 17 – “FinancialStatements” for a description of amounts payable to TWDC which were deferred inaccordance with the terms of the Restructuring.*

 

Management companycompensation and the License Agreement were amended in the context of theRestructuring. See Item 5 “Operating and Financial Review and Prospects” –Section F *“2005 Financial Restructuring”*.

 

**C.****            INTERESTSOF EXPERTS AND COUNSEL**

 

Not applicable.

 

**ITEM 8.****  FINANCIAL INFORMATION**

 

**A.****         CONSOLIDATEDSTATEMENTS AND OTHER FINANCIAL INFORMATION**

 

**A.1.****         Financialstatements**

 

Please see Item 17 “*Financial**Statements*” for a list of all financialstatements filed as part of this Annual Report.

 

**A.2.****         Legalproceedings**

 

The Group is party to various legalproceedings in France involving some remaining claims related to theconstruction of Disneyland Resort Paris and certain other litigation arising inconnection with the operation of the Resort. Management believes that the Grouphas made appropriate provisions with respect to these legal proceedings, andthat such proceedings, either individually or in the aggregate,****will not have a material adverse impact on its financialposition business or results.

 

**A.3.****         Dividends**

 

The payment of dividends on common stock fromdistributable profits may be recommended by the Management Company for approvalby the shareholders at the annual general meeting, which must be held withinsix months after the end of the fiscal year. No dividends were declared or paidin respect of the fiscal years ended September 30, 1997 through 2005 andthe Company does not expect to pay dividends for a substantial period of time.

 

The ability of the Company to pay dividendsin the future is dependent upon the availability of distributable profits andliquidity of the Company. During the coming years, the Company’s priority willbe to implement the investment plan authorized by the Restructuring and toreduce the level of its debt via scheduled principal repayments. Additionally,under certain circumstances, including the event of payment default, certain ofthe Group’s debt agreements prohibit the payment of dividends.

 

The distributable profit consists of the profit forthe fiscal year, reduced by the prior losses together with the amounts that areto be allocated to the reserves required by law or the by-laws and increased bythe profits carried forward. At least 5% of net income each year, if any, mustbe put into a legal reserve. This transfer shall cease to be required when thecumulative legal reserve reaches one-tenth of the share capital. The legalreserve is distributable only upon the Company’s liquidation. The ManagementCompany may propose to the shareholders’ general meeting, prior to thedistribution of dividends to shareholders, the allocation of all or part of theprofits of a fiscal year to other reserve accounts, to the extent and under theconditions determined by law.

 

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Inaddition, the Company’s by-laws provide that 0.5% of net income each year bepaid to the General Partner. Thereafter, distributable profits shall beallocated in the following order:

 

(i)    the amount, ifany, that the annual ordinary general meeting, upon the proposal of theManagement Company, shall decide to allocate to reserves or to be carriedforward as retained earnings; and

 

(ii)   the balance ofdistributable profits remaining, if any, to the shareholders pro-rata inproportion to their respective holdings of shares of common stock.

 

Dividends must be paid within nine months of the endof the fiscal year and are payable to holders, on the date of payment, ofshares of common stock outstanding at the time such dividends were approved fordistribution by the shareholders. Dividends not claimed within five years ofthe date of payment are forfeited to the Republic of France. The shareholdershave the right in an ordinary general meeting to authorize the grant to eachshareholder of an option to receive all or part of any annual or interimdividends in either cash or shares of common stock.

 

**B.****            SIGNIFICANTCHANGES**

 

### ***Not applicable***.

### *** ***

| ***ITEM 9.*** | *** *** | ***THE OFFER AND LISTING*** |
|---------------|--------------|-----------------------------|

### *** ***

**A.****         OFFER ANDLISTING DETAILS**

 

Thetable below sets forth, for the period mentioned, the reported high and lowquoted prices for the common stock on Euronext Paris S.A. (formerly the Parisstock exchange).

 
| ** **      | ** **     | **Price Per Share** | ** ** |
|-----------------|----------------|---------------------|------------|
| **Fiscal Year** | ** **     | **High**            | ** ** | **Low** | ** ** |
| ** **      | ** **     | **€**          | ** ** | **€** | ** ** |
| *2001*          |           | 1.27                |       | 0.47 |   |
| *2002*          |           | 0.99                |       | 0.40 |   |
| *2003*          |           | 0.76                |       | 0.34 |   |
|            | First Quarter  |                | 0.58       |   | 0.40 |   |
|            | Second Quarter |                | 0.53       |   | 0.35 |   |
|            | Third Quarter  |                | 0.68       |   | 0.34 |   |
|            | Fourth Quarter |                | 0.76       |   | 0.47 |   |
| *2004*          |           | 0.64                |       | 0.22 |   |
|            | First Quarter  |                | 0.64       |   | 0.41 |   |
|            | Second Quarter |                | 0.62       |   | 0.42 |   |
|            | Third Quarter  |                | 0.51       |   | 0.31 |   |
|            | Fourth Quarter |                | 0.40       |   | 0.22 |   |
| *2005*          |           | 0.33                |       | 0.10 |   |
|            | First Quarter  |                | 0.33       |   | 0.23 |   |
|            | Second Quarter |                | 0.30       |   | 0.11 |   |
|            | Third Quarter  |                | 0.14       |   | 0.10 |   |
|            | Fourth Quarter |                | 0.16       |   | 0.11 |   |
| *2006*          |           |                |       |   |   |
|            | First Quarter  |                | 0.13       |   | 0.10 |   |
|            | January        |                | 0.12       |   | 0.11 |   |
|            | February       |                | 0.12       |   | 0.10 |   |
|                 |                |                     |            |  |  |  |  |

 

On February 28,2006, the closing price of the currently outstanding shares of common stock onEuronext Paris was € 0.11**,**equivalent toU.S. $ 0.13 per share, as calculated by using the Noon Buying Rates.

 

51

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**ReverseSplit**

 

At theshareholders’ meeting held on February 10, 2006, shareholders of theCompany approved a resolution giving the Management Company the power toimplement a consolidation of shares (i.e. a reverse stock split). Theauthorization provides that 100 shares with a current nominal value of € 0.01will be consolidated into 1 share with a nominal value of € 1.00 (meaning aconsolidation ratio of 100:1).

 

Underthe terms of the resolution, the Management Company will have the authority tolaunch this operation by publication of a notice in the BALO no later than thedate of the annual general meeting that will deliberate upon the financialstatements for the fiscal year ending September 30, 2006, at which timethis authorization expires.

 

**Authorizedunissued share capital**

 

Theordinary and extraordinary general meeting of the shareholders of the Companyheld on February 10, 2006 delegated to the Management Company the power todecide (i) an increase in the share capital of the Company, (ii) theissuance of securities giving rights to shares of the Company or (iii) theissuance of share warrants.

 

Theincrease(s) in share capital which are decided pursuant to this delegation may bein the form of an issuance of shares or other securities giving right, bysubscription for, conversion into, exchange for, reimbursement in, presentationof a warrant or other instrument, to shares.

 

TheCompany has an authorization allowing it to purchase or sell its own shares forthe purpose of stabilization of the share price, valid 18 months from the dateof the ordinary and extraordinary general meeting of the shareholders of theCompany held on February 10, 2006. No securities exist that are notrepresentative of the share capital, such as founders shares or votingcertificates.

 

**B.****            PLANOF DISTRIBUTION**

 

Notapplicable.

 

**C.****         MARKETS**

 

**C.1.****         CommonStock**

 

Since November 1989,the shares have been listed on the *PremierMarché* of Euronext Paris, on the London Stock Exchange (where theyare traded in pounds sterling in the form of depository receipts) and onEuronext Brussels. The shares of the Company were also listed on the SEAQInternational in London. In addition, options on the shares of the Company weretraded on the *Marché des Options Négociablesde Paris* (MONEP).

 

In July 2005, thecompany announced that its shares will be traded exclusively on Euronext Paris.Market trends and changes in the regulatory environment facilitating access forinvestors to trade in shares listed in European Union member states other thantheir own, combined with the high cost of maintaining separate listingsrelative to historical trading volumes have led to the Company’s decision tocancel its share listings on the London Stock Exchange and Euronext Brussels.These delistings were effective on September 30, 2005 and October 30,2005 for Brussels and London, respectively.

 

Basedon the most recent review by the Euronext Paris commission, Euro Disney sharesno longer qualify for inclusion in the SBF 120. In addition, on January 12,2006, Euronext Paris announced that Euro Disney shares will, effective March 28,2006, no longer qualify for the deferred settlement services (“SRD”) ofEuronext Paris.

 

UnderFrench Law, listed companies may purchase their own shares in certainlimited circumstances. French law also requires the Company to file a copy ofany shareholders’ resolution authorizing such transactions and an informationmemorandum regarding certain matters with the *Autorité desMarchés Financiers* (the “AMF”), the administrative agency of theFrench government responsible for overseeing the French securities markets,prior to engaging in such transactions, as well as a monthly report of anypurchases and sales thereafter. Purchases and sales of the shares of commonstock may not account for more than 25% of the total daily trading volumein such shares in any given period and, except during a public offering, may beperformed on the Company’s behalf by only one intermediary per stock exchangesession.

 

Commonstock held by the Company, if any, is deemed to be outstanding under French lawbut is not entitled to any dividends, voting rights or preferentialsubscription rights.

 

52

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**C.2.****         Warrants**

 

As part ofthe 1994 financial restructuring, the Group issued 290 million warrants,enabling the holders of such warrants to subscribe for 1.069 shares of itscommon stock at a price of € 6.10 for every three warrants held. The warrantshad a term of ten years and expired in July 2004.

 
| **D.** | ** ** | **SELLING  SHAREHOLDERS** |
|--------|------------|---------------------------|

 

Notapplicable

 
| **E.** | ** ** | **DILUTION** |
|--------|------------|--------------|

 

Notapplicable.

 
| **F.** | ** ** | **EXPENSES  OF THE ISSUE** |
|--------|------------|----------------------------|

 

Notapplicable.

 

**ITEM 10. ADDITIONAL INFORMATION**

 
| **A.** | ** ** | **SHARE CAPITAL** |
|--------|------------|-------------------|

 

Notapplicable.

 
| **B.** | ** ** | **MEMORANDUM  AND ARTICLES OF ASSOCIATION** |
|--------|------------|---------------------------------------------|

 

EuroDisney S.C.A. is organized as a limited partnership (s*ociété encommandite par actions or* “S.C.A.”) governed principally by ChapterII of the French Commercial Code and decree no. 67-236 of March 23,1967 on commercial companies. The Company was originally structured andincorporated in 1985 in the form of a French corporation (*société anonyme* or “S.A.”). In 1988, EDL Holding Company,currently the owner of approximately 39.8% of the share capital of the Company,acquired 99% of the share capital of the Company. An extraordinary generalmeeting of the shareholders of the Company held on February 24, 1989decided to modify its corporate form from an S.A. to an S.C.A. In November 1989,Euro Disneyland S.C.A. became a publicly held company as a result of a publicoffering of its common stock in France, the United Kingdom and Belgium. At theannual general meeting of the shareholders held on February 4, 1991, theCompany’s present corporate name, Euro Disney S.C.A., was adopted. In 1994, theCompany registered with the US Securities and Exchange Commission as anon-listed foreign private issuer.

 

Accordingto French law, the statutory management of the Company is the Manager or *Gérant* (in this case a company, Euro Disney S.A.S.) and themembers of the Supervisory Board.

 

Thefour primary participants in the Company’s legal and governance structure are:

 

•      the generalpartner (the “General Partner”);

 

•      the limitedpartners or shareholders;

 

•      the managementcompany (*gérant*); and

 

•      the SupervisoryBoard.

 

**B.1.****         TheManagement Company (the *Gérant*)**

 

UnderFrench law, the primary responsibility of the Management Company is to managethe Company at all times in the Company’s best interests.

 

EuroDisney S.A.S., a French simplified corporation, was appointed as soleManagement Company at the extraordinary shareholder’s meeting held on February 24,1989. Euro Disney S.A.S. was formed as a French corporation and was transformedinto a simplified corporation at the extraordinary shareholders’ meeting heldon August 6, 2004. The Management Company is an indirect 100% ownedsubsidiary of TWDC. Under the Company’s by-laws, the Management Company has thepower to take any and all action in the name of the Company within the scope ofthe Company’s corporate purpose and to bind the Company in all respects. In thecontext of the Restructuring, Euro Disney S.A.S. has been appointed asManagement Company of EDA, which is the Company’s principal subsidiary.

 

53

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If theManagement Company**ceases to hold office for anyreason, the General Partner, currently an indirect 100% owned subsidiary ofTWDC, has the exclusive right to appoint a successor. The Management Company**may resign on giving six-month notice to the SupervisoryBoard and otherwise may only be removed from office in the followingcircumstances:

 

•      for incapacity,including bankruptcy or judicial reorganization by the General Partner,

 

•      for any other reason with the consent of both theGeneral Partner and holders of a two-third majority of the share capital of theCompany in an extraordinary meeting; or

 

•      by a court onthe grounds of legitimate cause*(cause légitime)*.

 

Underthe by-laws of EDA, the Management Company is entitled to annual feesconsisting of a base management fee and a management incentive fee, and is alsoentitled to a fee payable on the sale of hotels, each as described below. Inaddition, the by-laws provide that the Management Company is entitled to bereimbursed by the Company for all its direct and indirect expenses incurred inthe execution of its responsibilities. No amendment may be made to theentitlements of the Management Company with respect to compensation orreimbursement of expenses except by amendment to the Company’s by-laws, whichwould require the approval of the General Partner and the shareholders.

 

TheCompany also pays the Management Company a fixed fee of € 25,000 under theterms of its by-laws.

 

***BaseManagement Fee***

 

Thebase management fee was originally equal to 3% (initially scheduled to increaseto 6% in 1997) of the total revenues of the Group, as defined in the by-laws ofthe Company, less 0.5% of the net income for the relevant fiscal year.

 

As part ofthe Restructuring, the Management Company granted the Group conditional andunconditional deferrals of the payment of base management fees as follows:

 

•      €25.0 million of management fees and royalties due in respect of each offiscal years 2005 through 2009 will be unconditionally deferred and convertedinto a subordinated long-term debt obligation, bearing interest at an annualrate of 12-month EURIBOR (capitalized through January 1, 2017), payableafter the Group’s senior debt and subordinated debt (other than the CDC WaltDisney Studios Park Loans) have been repaid, starting in 2023; and

 

•      additionalmanagement fees and, as necessary, royalties, in a maximum aggregate amount of€ 25.0 million per year with respect to fiscal years 2007 through 2014,will be subject to a conditional deferral. For a full description of thisdeferral mechanism, see Item 5 “ Operating and Financial Review and Prospects”– Section F.5 “Performance Indicator”.

Withrespect to fiscal year 2005, € 10.7 million of management fees wereunconditionally deferred.

 

***Reference Performance Indicators***

 

Forpurposes of the conditional deferral of management fees and, if necessary,royalties, the parties to the Memorandum of Agreement agreed to set theReference Performance Indicator as follows:

 
| **Fiscal Year** | *** *** | **Reference Performance Indicator  (€ in millions)** | *** *** |
|-----------------|--------------|-----------------------------------------------------------|--------------|
| 2007            |         | 282.5                                                     |         |
| 2008            |         | 305.4                                                     |         |
| 2009            |         | 313.1                                                     |         |
| 2010            |         | 317.2                                                     |         |
| 2011            |         | 340.6                                                     |         |
| 2012            |         | 352.7                                                     |         |
| 2013            |         | 365.8                                                     |         |
| 2014            |         | 380.6                                                     |         |

 

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Forthe purpose of determining such Reference Performance Indicator, accountingprinciples and rules applied by the Company in the preparation of itsconsolidated financial statements for fiscal year 2003, adjusted for the changein accounting principles related to the consolidation of the FinancingCompanies in accordance with Article 133 of the Financial Security Law of August 1,2003, have been used. In the event of change in accounting principles and rules (inparticular in connection with the implementation of IFRS) and/or change in theconsolidated group, the Performance Indicator (which will then become thePro-Forma Performance Indicator) and, if necessary, the Reference PerformanceIndicator (which will then become the pro-forma Reference PerformanceIndicator) will be adjusted accordingly.

 

As part ofthe 1994 Financial Restructuring, the Management Company permanently waived itsbase management fee for fiscal years 1992 through 1994. In addition, theCompany’s by-laws were amended, at an extraordinary general meeting of theshareholders held on June 8, 1994, such that the base management fee wouldequal the following percentages of the total revenues of the Group:

 

 
| - from October 1, 1993 to September 30,  1998: |   | 0   | % |
|----------------------------------------------------------|--------|-----|---|
| - from October 1,  1998 to September 30, 2008: |   | 1.0 | % |
| - from October 1,  2008 to September 30, 2013: |   | 1.5 | % |
| - from October 1,  2013 to September 30, 2018: |   | 3.0 | % |
| - and from October 1,  2018:                        |   | 6.0 | % |

 

Beginningon October 1, 2008, the right of the Management Company to receive paymentof that portion of the base management fee in excess of an amount equal to 1%of revenues, as defined, will be contingent upon (i) the Company’sachieving a positive consolidated net income before taxes for the fiscal yearto which such fee relates, after taking into account all of such compensation,and upon (ii) the Company’s legal ability to distribute dividends for suchfiscal year. In addition, that portion of the base management fee in excess ofan amount equal to 3% of the total revenues, as defined, for any fiscal yearwill not be due or payable until after certain indebtedness of the Company andthe Phase I Financing Companies has been repaid in full, and may not exceed40% of the Company’s consolidated after-tax profits for such fiscal year(calculated on the basis of the base management fee of 3%). Certain of theCompany’s debt agreements also provide for deferral of payment of the basemanagement fee under specified circumstances. Base management fees granted tothe Management Company by the Group were € 10.7 million for fiscalyear 2005.

 

***ManagementIncentive Fee***

 

Inconnection with the 1994 Financial Restructuring, the by-laws of the Companywere amended at a shareholders’ extraordinary general meeting held on June 8,1994 to provide that the management incentive fee for a given fiscal year befixed at 30% of any portion of pre-tax cash flow, as defined in the Company’sby-laws, in excess of 10% of the total consolidated gross fixed assets and thePhase I Financing Companies, as defined in the Company’s by-laws, for thatfiscal year. Certain of the debt agreements of the Company provide for deferralof the management incentive fee under specified circumstances. No fees havebeen payable in fiscal year 2005 under this agreement and the Company does notanticipate any liability for this fee in the foreseeable future.

 

***HotelSale Fee***

 

Thereis also payable to the Management Company, on the sale of any of the hotels, afee equal to 35% of pre-tax net revenue, as defined, received by EDA from anysuch sale. No amount is due since the Company did not sale any hotel.

 

**B.2.****         TheSupervisory Board**

 

Themembers of the Company’s Supervisory Board are elected by the shareholders. Theby-laws provide for a minimum of three members, each of whom must be ashareholder. The Supervisory Board requires, under its own charter, that eachof its members hold at least 1,000 shares of the Company. The Supervisory Boardmay be convened at any time for any purpose related to the Company’sinterests, either by the chairman of the Supervisory Board, the ManagementCompany, the General Partner, or at least one-half of the members of the SupervisoryBoard. The vote of a majority (and at least two) of the members present at ameeting where one-half of the members are present constitutes a valid action bythe Supervisory Board. In the event of a tie, the chairman of the Supervisory Boardhas the deciding vote.

 

The role of the Supervisory Board is to monitor thegeneral affairs and the management of the Company, in the best interest of theshareholders, as well as to monitor the transparency and quality of theinformation communicated to the shareholders. Pursuant to French law, the SupervisoryBoard is entitled to receive the same information and has the same rights asthe statutory auditors of the Company. The Supervisory Board must present tothe annual general meeting of the shareholders a report indicating anyirregularities or inaccuracies, if any, in the annual accounts.

 

55

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The SupervisoryBoard must approve all agreements between the Management Company and theCompany, as well as all related party contracts within the meaning of Article L.226-10 of the French Commercial Code and any amendments thereto, and mustreport on such agreements, contracts and amendments thereto at the next generalmeeting of the shareholders following their conclusion. In addition, theby-laws provide that Supervisory Board approval is required to enable theManagement Company to enter into any material agreements on behalf of theCompany with TWDC or any subsidiary thereof, or before deciding any materialamendment to such agreements. The by-laws also provide that any employees ofthe Management Company, of any person affiliated with the Management Company orof the Supervisory Board will be disqualified from voting on such agreements orany amendments thereto.

 

*SupervisoryBoard operations in fiscal year 2005*

 

Themembers of the Supervisory Board are elected for a term of three years, fromthe date of the annual general meeting of shareholders called to elect orre-elect them. The Supervisory Board currently consists of seven members, fiveof whom are independent of the Group and TWDC. The Supervisory Board met threetimes during fiscal year 2005 with an attendance rate of 71%. At these meetingsthe Supervisory Board received presentations of the Group’s earnings, strategyand operations.

 

*Financialaccounts committee*

 

On November 12,1997, the Supervisory Board created a financial accounts committee, whosepurpose is to optimize the work of the Supervisory Board in the following keyareas:

 

•      review ofannual and semi-annual financial communications;

 

•      review andmonitoring of significant accounting issues and disclosures;

 

•      review andmonitoring of the internal and external audit functions;

 

•      review andmonitoring of financial and liquidity risks; and

 

•      assisting the SupervisoryBoard in preparing its annual reports to shareholders.

 

Thecommittee is currently composed of three independent Supervisory Board members,with Antoine Jeancourt-Galignani serving as Chairman. Committee meetingsinclude the committee members, representatives from the Company’s financialmanagement, legal and internal audit functions, as well as the statutoryauditors. This committee met three times in fiscal year 2005 concerning theGroup’s financial accounting and disclosure issues and internal controls.

 

*Nominationscommittee*

 

On November 8,2002, the Supervisory Board created a nominations committee, whose role is topropose future candidates for approval as members of the Supervisory Board. Themembers of the nominations committee met during fiscal year 2005 to considerthe nomination of new members to the Supervisory Board.

 

**Compositionof the Supervisory Board**

 
| **Name**                             | ** ** | **Position** | ** ** | **Current term of office  will expire  during the annual general  shareholders’ meeting related to   Fiscal Year** | ** ** | **Fiscal Year 2005  Compensation****(3) (6)** | ** ** |
|--------------------------------------|------------|--------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                           | ** ** | ** **   | ** ** | ** **                                                                                                                                                           | ** ** | **(€)**                                                 | ** ** |
| Antoine Jeancourt-Galignani(1)       |       | Chairman     |       | 2007                                                                                                                                                                 |       | 45,735                                                       |       |
|                                 |       |         |       |                                                                                                                                                                 |       |                                                         |       |
| Michel Corbière                 |       | Member       |       | 2008                                                                                                                                                                 |       | n/a                                                          |       |
|                                 |       |         |       |                                                                                                                                                                 |       |                                                         |       |
| Philippe Labro(2)                    |       | Member       |       | 2007                                                                                                                                                                 |       | 22,866                                                       |       |
|                                 |       |         |       |                                                                                                                                                                 |       |                                                         |       |
| Jens Odewald(1)                      |       | Member       |       | 2008                                                                                                                                                                 |       | 22,856                                                       |       |
|                                 |       |         |       |                                                                                                                                                                 |       |                                                         |       |
| James A. Rasulo(4)                   |       | Member       |       | 2008                                                                                                                                                                 |       | —                                                       |       |
|                                 |       |         |       |                                                                                                                                                                 |       |                                                         |       |
| Anthony Martin  Robinson(1) (5) |       | Member       |       | 2007                                                                                                                                                                 |       | 7,622                                                        |       |
|                                 |       |         |       |                                                                                                                                                                 |       |                                                         |       |
| Thomas O. Staggs(2)  (4)             |       | Member       |       | 2007                                                                                                                                                                 |       | —                                                       |       |

 

----

*(1)**       Member of the financial accountscommittee.*

 

56

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*(2)**       Member of the nominations committee.*

*(3)**       Compensation allocated to each member isproportional to his attendance at Supervisory Board meetings. No fixedcompensation is paid to the members of the Supervisory Board.*

*(4)**       TWDC employees are not paid by the Groupfor serving on the Supervisory Board.*

*(5)**       Elected as a member of the Supervisory Boardon December 17, 2004.*

*(6)**       Laurence Parisot’s term of office expiredas of the shareholders’meeting related to fiscal year 2005. Her compensationfor fiscal year 2005 amounted to € 22,866.*

 

•      **Antoine Jeancourt-Galignani**, Chairman ofthe Supervisory Board, was elected to the Supervisory Board in 1989. He wasappointed Chairman in September 1995. He has presided the financialaccounts committee since its founding in November 1997 and is thedesignated financial expert of the committee. He is currently President of theboard of directors of SNA Holding (Bermuda) and member of the board ofdirectors Gecina.

 

•      **Michel Corbière** was elected to the Supervisory Board in2006. He is the founder of the group Forest Hill, specialized in sports andleisure activities as well as the hotel industry. He is also the founder of theFrench company Aquaboulevard de Paris.

 

•      **Philippe Labro** was elected as a member ofthe Supervisory Board in 1996 and has been a member of the nomination committeesince November 2002. He was Vice President and General Manager of the RTLFrance Radio. He is currently Project Director, Design and Operations ofPhLCommunication S.A.R.L. and Vice President of Direct 8.

 

•      **Jens Odewald** was elected as a member of theSupervisory Board in 1989 and has been a member of the financial accountscommittee since November 1997. He is currently Chairman and ManagingDirector of Odewald and Compagnie GmbH.

 

•      **James A. Rasulo** was elected as a member ofthe Supervisory Board on March 2003. He is currently Chairman Disney Parksand Resorts for TWDC.

 

•      **Anthony Martin Robinson** was elected as amember of the Supervisory Board in December 2004. He is currentlyExecutive President of Center Parks UK Plc.

 

•      **Thomas O. Staggs**, was elected as a memberof the Supervisory Board in March 2002 and has been a member of thenominations committee since November 2002. He is currently SeniorExecutive Vice President and Chief Financial Officer and Chairman of theInvestment and Administrative Committee of TWDC.

 

Theaggregate compensation paid by the Group to the members of the SupervisoryBoard during fiscal year 2005 was € 121,948. Compensation paid to eachmember is proportional to attendance at meetings.

 

Noneof the members of the Executive Committee or the Supervisory Board arebeneficiaries of a service contract with the Company or its subsidiariesproviding for benefits upon termination of employment.

 

**B.3.****         TheGeneral Partner**

 

The General Partner of theCompany has unlimited liability for all debts and liabilities of the Company.

 

The General Partner is EDLParticipations S.A.S. (“EDL Participations”), a French indirect wholly-ownedsubsidiary of TWDC. This company modified its corporate form from a *société anonyme*to a *société par actionssimplifiée*in August 2004. EDL Participations cannot be removedas General Partner without its consent and cannot dispose of any part ofits interest as General Partner without the prior approval of a vote of holdersof a simple majority of shares of common stock represented at a generalshareholders’ meeting. A unanimous vote of the shareholders is required toapprove a transfer of EDL Participations’ entire interest.

 

Any resolution submitted forthe vote of the shareholders at an ordinary or extraordinary meeting may bepassed only with the prior approval of the General Partner, except for thoserelating to the election, resignation or dismissal of the members of the SupervisoryBoard.

 

The General Partner is entitledto a distribution each year equal to 0.5% of the Company’s after-tax profits.

 

**B.4.****         TheShareholders**

 

Theshareholders are convened to the general meetings of shareholders anddeliberate in accordance with the legal and regulatory requirements in effect.During each general meeting, each shareholder is entitled to a number of votesequal to the number of shares that he or she holds or represents. In lieu ofattending a meeting in person, each shareholder may give a proxy toanother shareholder or his or her spouse, vote by mail, or send to the Companya blank proxy, under the conditions provided by law and regulations.

 

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Mattersrequiring a resolution passed by the holders of a simple majority of shares ofcommon stock at an ordinary general meeting include, without limitation:

 

•      electionto the Supervisory Board;

 

•      approvalof the consolidated an unconsolidated accounts of the Company, includingpayment of any dividend proposed by the Management Company; and

 

•      approvalof any agreement (other than agreements entered into in the ordinary course ofbusiness on normal commercial terms) or any amendment thereto, entered intodirectly or through intermediaries between the Company and the ManagementCompany or any member of the Supervisory Board or any Company’s shareholderholding more than 10% of the voting rights, or if this shareholder is acompany, the controlling company thereof within the meaning of Article L. 233-3 of the French Commercial Code, as well as any agreement into which anyone of these persons is indirectly interested or which is entered into betweenthe Company and a company in which the Management Company or a member of theCompany’s Supervisory Board or a member of the Management Company board ofdirectors has ownership or holds a position of general partner, manager,director, chief officer or member of the Supervisory Board. Shareholders withan interest in the contract or transaction are not prohibited from voting onsuch contract or transaction, unless they hold one of the positions set forthabove.

 

Anyresolution submitted for the vote of the shareholders at an ordinary orextraordinary meeting may be passed only with the prior approval of theGeneral Partner, except for those relating to the election, resignation ordismissal of the members of the Supervisory Board.

 

Aresolution passed by holders of a two-thirds majority of the shares of commonstock (together with any approval required of the General Partner, as describedabove) is required to approve any amendment to the by-laws, including anyincrease or reduction of the share capital of the Company, any merger ordemerger or any conversion to another form of corporate organization.

 

**B.5.****         OwnershipLevels Exceeding Certain Percentages**

 

TheCompany’s by-laws provide that any person or entity, acting alone or in concertwith others, who holds or ceases to hold, directly or indirectly, a portion ofthe share capital (or voting rights, if the number of shares does notcorrespond to the number of voting rights) equal to, or greater than, 2% or amultiple of such portion, must notify the Company by certified mail, returnreceipt requested, within fifteen days from the day any of such thresholds iscrossed, the total number of shares and voting rights it owns directly and inconcert, as well as the number of securities granting access in the future tothe capital of the Company and the voting rights potentially attached thereto.

 

Anyperson or entity that fails to comply with such notification requirements, uponthe request, recorded in the minutes of the shareholders’ meeting, of one ormore shareholders holding at least 2% of its share capital made at the generalshareholders’ meeting, will be deprived of voting rights with respect to the sharesin excess of the relevant threshold for all shareholders’ meetings untilexpiration of the time-period provided for by applicable law or regulationfollowing the date of notification.

 

**C.****            MATERIALCONTRACTS**

 

Seediscussion above in Item 4 “Information on the Company” — Section A.6 *“Significant Operating Contracts”.*

 

**D.****            EXCHANGECONTROLS**

 

Acquisitionsand disposals of shares of common stock and/or other rights to shares of commonstock (except for the acquisition of shares of common stock representing acontrolling interest) and the payment of dividends by the Company may, underregulations in force at the date hereof, be effected without exchange controlrestrictions in France. In addition, there is no limitation on the right ofnon-French residents or non-French shareholders to hold or vote common stock ofa French company. The remittance of all dividends to foreign shareholders mustbe effected through a French bank or other licensed financial intermediary.

 

Adeclaration must be filed, upon realization of the investment, with the Frenchauthorities for the acquisition, by any non-European Union person or group ofpersons acting in concert of a 10% or more of the share capital in the Company.

 

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**E.****             TAXATION**

 

**E.1.****         FrenchTaxation**

 

Thefollowing generally summarizes the material French tax consequences ofpurchasing, owning and disposing of the Company’s shares. The statementsrelating to French tax laws set forth below are based on the laws in force asof the date hereof, and are subject to any changes in applicable laws and taxtreaties after such date.

 

Thisdiscussion is intended only as a descriptive summary and does not purport to bea complete analysis or listing of all potential tax effects of the purchase,ownership or disposition of the Company’s shares.

 

Thefollowing summary does not address the treatment of shares that are held by aresident of France (except for purposes of describing related tax consequencesfor other holders) or in connection with a permanent establishment or fixedbase through which a holder carries on business or performs personal servicesin France, or by a person that owns, directly or indirectly, 5% or more of thestock of the Company.

 

## **Taxation ofDividends on Shares**

## ** **

#### **Withholding tax**

 

InFrance, dividends are paid out of after-tax income. Dividends paid tonon-residents normally are subject to a 25% French withholding tax. However,non-resident holders that are entitled to and comply with the procedures forclaiming benefits under an applicable tax treaty may be subject to areduced rate (generally 15%) of French withholding tax. If a non-residentholder establishes its entitlement to treaty benefits prior to the payment of adividend, then French tax generally will be withheld at the reduced rateprovided under the treaty.

 

#### **New Tax Credit**

 

TheFrench Finance Law for 2004 implemented a new tax treatment of dividends. Underthese new rules applicable from 2005 on, French resident individuals areonly taxed on 50% of the dividends they receive (the French Finance Law for2006 has increased this rate to 60% for dividends received from 2006 on) and,in addition to the annual allowance that is already applicable, are entitled toa tax credit equal to 50% of the dividend (the “Tax Credit”). The Tax Credithas a cap of €230 for married couples and members of a union agreement subjectto joint taxation and €115 for single persons, widows or widowers, divorcees ormarried persons subject to separate taxation.

 

Dividends paid tonon-residents are not normally eligible for the Tax Credit described above.However, qualifying non-resident individuals may, pursuant to the provisions ofan applicable tax treaty entered into between France and their country ofresidence, benefit from a refund of the Tax Credit (net of applicablewithholding tax) under certain conditions and subject to compliance with theprocedures for claiming benefits under the applicable treaty. The French taxauthorities have not yet issued guidance with respect to the refund of the TaxCredit to non-resident individuals.

 

# **Taxation on Sale or Disposition of Shares**

# ** **

Subjectto the more favorable provisions of a relevant tax treaty, holders that are notresidents of France for tax purposes, do not hold shares in connection with theconduct of a business or profession in France, and have not held more than 25%of the Company’s dividend rights (*droits aux bénéficessociaux*), directly or indirectly, at any time during the precedingfive years, are not subject to French income tax or capital gains tax on thesale or disposition of shares.

 

A 1%ad valorem registration duty (subject to a maximum of € 4,000 per transfer)applies to certain transfers of shares in French companies. This duty does notapply to transfers of shares in listed companies that are not evidenced by awritten agreement, or if any such agreement is executed outside France.

 

# **Estate and Gift Tax**

# ** **

Franceimposes estate and gift tax on shares of a French corporation that are acquiredby inheritance or gift. The tax applies without regard to the tax residence ofthe transferor. However, France has entered into estate and gift tax treatieswith a number of countries pursuant to which, assuming certain conditions aremet, residents of the treaty country may be exempted from such tax orobtain a tax credit.

 

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# **Wealth Tax**

# ** **

Individualswho are not residents of France for purposes of French taxation are not subjectto a wealth tax *(impôt de solidarité sur la fortune)*in France as a result of owning an interest in the share capital of a Frenchcorporation, provided that such ownership interest is less than 10% of thecorporation’s share capital and does not enable the shareholder to exerciseinfluence over the corporation. Double taxation treaties may provide for amore favorable tax treatment.

 

**E.2.****         Taxationof U.S. Investors**

 

Thefollowing is a summary of the material French and U.S. federal income taxconsequences of the purchase, ownership and disposition of the Company’s sharesif you are a holder that is a resident of the United States for purposes of theincome tax convention between the United States and France (the “Treaty”) andare fully eligible for benefits under the Treaty (a “U.S. holder”). Yougenerally will be entitled to Treaty benefits in respect of the Company’sshares if you are:

 

•      the beneficial owner of theshares (and the dividends paid with respect thereto);

•      an individual resident ofthe United States, a U.S. corporation, or a partnership, estate or trust to theextent its income is subject to taxation in the United States in its hands orin the hands of its partners or beneficiaries;

•      not also a resident ofFrance for French tax purposes;  and

•      not subject to ananti-treaty shopping article that applies in limited circumstances.

 

Specialrules apply to pension funds and certain other tax-exempt investors.

 

Thissummary does not purport to be a comprehensive description of all of the taxconsiderations that may be relevant to any particular investor, and doesnot discuss tax considerations that arise from rules of generalapplication or that are generally assumed to be known by investors. Inparticular, the summary does not deal with shares that are not held as capitalassets, and does not address the tax treatment of holders that are subject tospecial rules, such as banks, insurance companies, dealers in securities orcurrencies, regulated investment companies, persons that elect mark-to-markettreatment, persons holding shares as a position in a synthetic security,straddle or conversion transaction, persons that own, directly or indirectly,5% or more of the Company’s voting stock or 10% or more of its outstandingcapital and persons whose functional currency is not the U.S. dollar. Thesummary is based on laws, treaties, regulatory interpretations and judicialdecisions in effect on the date hereof, all of which are subject to change.

 

Thissummary does not discuss the treatment of shares that are held in connectionwith a permanent establishment or fixed base through which a holder carries onbusiness or performs personal services in France.

 

Youshould consult your own tax advisers regarding the tax consequences of thepurchase, ownership and disposition of shares in the light of your particularcircumstances, including the effect of any state, local or other national laws.

 

**Dividends**

** **

Asdiscussed in more detail above under “French Taxation”, the French Finance Lawfor 2004 significantly changed the French tax treatment of distributions anddividends paid by French companies.

 

Generally,dividend distributions to non-residents of France are subject to Frenchwithholding tax at a 25% rate and are not eligible for the benefit of the TaxCredit available to French resident individuals, as described above.

 

However,under the Treaty, you may claim the benefit of a reduced dividendwithholding tax rate of 15%.

 

Inaddition, if you are an individual U.S. holder, subject to the discussionabove, you will be entitled to a refund of the Tax Credit, less a 15%withholding tax, provided that you are subject to U.S. federal income tax onthe Tax Credit and the dividend to which it relates. The French tax authoritieshave not yet issued guidance with respect to the refund of the Tax Credit tonon-resident individuals.

 

U.S.holders that are legal entities, pension funds or other tax-exempt holders areno longer entitled to tax credit payments from the French Treasury.

 

Frenchwithholding tax will be withheld at the 15% Treaty rate if you have establishedbefore the date of payment that you are a resident of the United States underthe Treaty and, if you are not an individual, that you are the owner of all therights relating to the full ownership of the shares (including, but not limitedto, dividend rights).

 

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Thegross amount of dividend and Tax Credit payments that you receive (prior todeduction of French withholding tax) generally will be subject to U.S. federalincome taxation as foreign source dividend income. Subject to certainexceptions for positions that are hedged or held for less than 61 days, anindividual U.S. holder generally will be subject to U.S. taxation at a maximumrate of 15% in respect of dividends received before 2009 if the dividends are “qualifieddividends”. Dividends that the Company pays will be treated as qualifieddividends if the Company was not, in the year prior to the year in which thedividend was paid, and is not, in the year in which the dividend is paid, apassive foreign investment company (“PFIC”). Based on its audited financialstatements and relevant market and shareholder data, the Company believes thatit is not treated as a PFIC for U.S. federal income tax purposes with respectto its 2005 taxable year. In addition, based on the Company’s audited financialstatements and current expectations regarding the value and nature of itsassets, the sources and nature of its income, and relevant market andshareholder data, the Company does not anticipate becoming a PFIC for its 2006taxable year. Dividends will not be eligible for the dividends receiveddeduction generally allowed to U.S. corporations.

 

Frenchwithholding tax at the 15% Treaty rate will be treated as a foreign income taxthat, subject to generally applicable limitations under U.S. law, is eligiblefor credit against your U.S. federal income tax liability or, at your election,may be deducted in computing taxable income. Foreign tax credits will notbe allowed for withholding taxes imposed in respect of certain short-term orhedged positions in securities. You should consult your own tax advisersconcerning the implications of these rules in the light of your particularcircumstances.

 

Dividendspaid in euro will be included in your income in a U.S. dollar amount calculatedby reference to the exchange rate in effect on the date you receive thedividend, regardless of whether the payment is in fact converted into U.S.dollars. If such a dividend is converted into U.S. dollars on the date ofreceipt, you generally should not be required to recognize foreign currencygain or loss in respect of the dividend income.

 

### ***Procedures for Claiming Treaty Benefits***

### *** ***

TheFrench tax authorities issued new guidelines in the *Instruction* n° 4 J-1-05, dated February 25, 2005, thatsignificantly changed the formalities to be complied with by non-residentshareholders, including U.S. holders, in order to obtain the reducedwithholding tax rate on distributions made on or after January 1, 2005.

 

Pursuantto the new guidelines, U.S. holders can claim Treaty benefits either under a simplifiedprocedure or under the normal procedure. The procedure to be followed dependson whether the application for Treaty benefits is filed before or after thedividend payment.

 

Inorder to benefit from the lower rate of withholding tax applicable under theTreaty before the payment of the dividend, you must use the simplifiedprocedure and are no longer allowed to file a Form RF 1 A EU-No. 5052or a Form RF 1 B EU-No. 5053.

 

Thesimplified procedure entails completing and delivering, as set out in theInstruction n° 4 J-1-05 mentioned above, a certificate stating that:

 

•      you are a U.S. residentwithin the meaning of the Treaty;

•      the dividend is not derivedfrom a permanent establishment or a fixed base that you own in France;

•      the dividend received issubject to tax in the United States.

 

Inorder to be eligible for Treaty benefits, pension funds and certain othertax-exempt U.S. holders must comply with the simplified procedure describedabove, though they may be required to supply additional documentationevidencing their entitlement to those benefits.

 

If thecertificate is not filed prior to the dividend payment, a withholding tax willbe levied at the 25% rate, and you would have to claim a refund for the excessunder the normal procedure by filing an application for refund no later than December 31of the second year following the year in which the dividend is paid.

 

Theapplicable forms to claim a refund under the normal procedure are currently Form RF1 A EU-No. 5052 or Form RF 1 B EU-No. 5053. These forms willlikely be replaced by new forms in the near future.

 

Copiesof the simplified certificate and of the forms to be used in the normalprocedure are available from the U.S. Internal Revenue Service and from the *Centre des Impôts des Non-Résidents* (9 rued’Uzès, 75094 Paris Cedex 2).

 

### ***Capital Gains***

### *** ***

Underthe Treaty, you will not be subject to French tax on any gain derived from thesale or exchange of shares, unless the gain is effectively connected with apermanent establishment or fixed base maintained by you in France.

 

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ForU.S. federal income tax purposes, gain or loss you realize on the sale or otherdisposition of the shares will be capital gain or loss, and will be long-termcapital gain or loss if the shares were held for more than one year. The netamount of long-term capital gain recognized by an individual U.S. holder beforeJanuary 1, 2009 generally is subject to taxation at a maximum rate of 15%.Your ability to offset capital losses against ordinary income is limited.

 

### ***French Estate and Gift Tax***

### *** ***

Underthe estate and gift tax convention between the United States and France, atransfer of shares by gift or by reason of the death of a U.S. holder entitledto benefits under that convention will not be subject to French gift orinheritance tax, so long as the donor or decedent was not domiciled in Franceat the time of the transfer, and the shares were not used or held for use inthe conduct of a business or profession through a permanent establishment orfixed base in France.

 

### ***French Wealth Tax***

### *** ***

TheFrench wealth tax does not generally apply to shares of a U.S. holder if theholder is a resident of the United States for purposes of the Treaty.

 

### ***U.S. Information Reporting and Backup Withholding Rules***

### *** ***

Payments of dividends and sales proceeds that are madewithin the United States or through certain U.S.-related financialintermediaries are subject to information reporting and may be subject tobackup withholding unless the holder (i) is a corporation or other exemptrecipient or (ii) provides a taxpayer identification number and certifiesthat no loss of exemption from backup withholding has occurred. Holders thatare not U.S. persons generally are not subject to information reporting or backupwithholding. However, such a holder may be required to provide acertification of its non-U.S. status in connection with payments receivedwithin the United States or through a U.S.-related financial intermediary.

 

**F.****             DIVIDENDSAND PAYING AGENTS**

 

Notapplicable.

 

**G.****            STATEMENTSBY EXPERTS**

 

Not applicable.

 

**H.****            DOCUMENTSON DISPLAY**

 

TheGroup files reports, including annual reports on Form 20-F, with theSecurities and Exchange Commission pursuant to the rules and regulationsof the SEC that apply to the Group. You may read and copy any materialsfiled with the SEC at its public reference room in Washington, D.C., atOne Station Place, 100 F Street N.E., Washington, D.C. 20549. Please call theSEC at 1-800-SEC-0330 for further information on the public reference rooms.Any filings the Group makes electronically will be available to the public overthe internet at the SEC’s web site at http://www.sec.gov. You may alsoreview documents included as exhibits to this and previous filings at thecorporate headquarters, Immeubles Administratifs, Route Nationale 34, Chessy,Seine-et-Marne.

 

**I.****              SUBSIDIARYINFORMATION**

 

Notapplicable.

 

**ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

TheGroup is exposed to the impact of interest and foreign currency exchange ratechanges. In the normal course of business, the Group employs establishedpolicies and procedures to manage its exposure to changes in interest andforeign currency exchange rates using primarily swaps and forward rateagreements. It is its policy to enter into interest and foreign currency ratetransactions only to the extent considered necessary to meet its objectives.The Group does not enter into interest and foreign currency rate transactionsfor speculative purposes.

 

The Grouphas significant variable rate debt. With respect to these interest ratesensitive obligations, a hypothetical 10 % increase in interest rates, as of September 30,2005 and 2004, would have a € 1.2 million and € 1.0 million, respectively,unfavorable impact on annual interest expense and cash flows. This amountexcludes the positive cash flow impact such a change in interest rates wouldhave on short-term investment income.

 

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TheGroup’s exposure to foreign currency risk arises primarily from British pounddenominated sales and U.S. dollar denominated purchases. The Group primarilyutilizes foreign exchange forward contracts to hedge these expenditures. Withrespect to these foreign exchange rate sensitive instruments, a hypothetical 10% adverse change in the U.S. dollar and British pound exchange rates(correlation between currencies is not taken into account) as of September 30,2005 and 2004 would result in a € 7.6 million and € 1.1 million decrease intheir market value, respectively. No amount of this decrease would impactearnings since the loss on these instruments would be offset by an equal gainon the underlying exposure being hedged.

 

### ***ITEM 12.***               DESCRIPTION OF SECURITIESOTHER THAN EQUITY SECURITIES

### *** ***

Notapplicable

 

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##### **PART II**

#####  

**ITEM 13.****    DEFAULTS,DIVIDEND ARREARAGES AND DELINQUENCIES**

 

Not applicable

 

**ITEM 14.****    MATERIALMODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**

 

Not applicable

 

**ITEM 15.****    CONTROLSAND PROCEDURES**

 

The Group carried out an evaluation under thesupervision and with the participation of its management, including theManagement Company’s Chief Executive Officer and Chief Financial Officer, ofthe effectiveness of its disclosure controls and procedures. There are inherentlimitations to the effectiveness of any system of disclosure controls andprocedures, including the possibility of human error and the circumvention oroverriding of the controls and procedures. Accordingly, even effectivedisclosure controls and procedures can only provide reasonable assurance ofachieving their control objectives. Based upon its evaluation, the ChiefExecutive Officer and Chief Financial Officer of the Management Companyconcluded that, as of the end of the period covered by this report, thedisclosure controls and procedures were effective to provide reasonableassurance that information required to be disclosed in the reports the Groupfiles and submit under the Exchange Act is recorded, processed, summarized andreported as and when required.

 

Effective since the fiscal year ended September 30,2004, the French Financial Security Law issued in France requires the Group toprovide additional disclosures regarding internal controls. An Englishtranslation of these disclosures is included as an exhibit to this AnnualReport. These disclosures were prepared to meet the requirements of French law,and are not equivalent to a report on internal controls over financialreporting contemplated in Section 404 of the Sarbanes-Oxley Act of 2002(See Item 19 “Financial Statements and Exhibits” - Section B “*Exhibits*”- Section 15.1)

 

## **ITEM16.A.**           AUDIT COMMITTEEFINANCIAL EXPERT

## ** **

At itsJanuary 28, 2004 meeting, the Financial Accounts Committee designatedAntoine Jeancourt-Galignani as the “Committee Financial Expert”.

 

## **ITEM 16.B.**           CODEOF ETHICS

## ** **

TheGroup applies the “Standards of Business Conduct” required by The Walt DisneyCompany to its Chairman and Chief Executive Officer, Chief Financial Officerand Chief Accounting Officer. These standards include guidelines on bothethical and legal business conduct. A copy of this document can be found on theTWDC internet site at www.disney.com.

 

**ITEM16.C.****           PRINCIPAL ACCOUNTANTFEES AND SERVICES**

 

Fees incurred for the consolidated and statutoryaudits of the Group were:

 
| ** **                            | ** ** | **PricewaterhouseCoopers** | ** ** | **Caderas Martin** | ** ** |
|---------------------------------------|------------|----------------------------|------------|--------------------|------------|
| ** **                            | ** ** | **Fiscal Year**            | ** ** | **Percent**        | ** ** | **Fiscal Year** | ** ** | **Percent** | ** ** |
| **(€ in thousands)**             | ** ** | **2005**                   | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Consolidated and Statutory Audits (1) | ** ** | **680.0**                  |       | 691.0              | ** ** | **63** | **%** | 79 | % | **135.0** |   | 96.0 | ** ** | **52** | **%** | 100 | % |
| Audit Related Fees(2)                 | ** ** | **406.4**                  |       | 184.0              | ** ** | **37** | **%** | 21 | % | **126.2** |   | — | ** ** | **48** | **%** | — |   |
| Sub-total                             | ** ** | **1,086.4**                |       | 875.0              | ** ** | **100** | **%** | 100 | % | **261.2** |   | 96.0 | ** ** | **100** | **%** | 100 | % |
|                                  |       |                       |       |               |       |   | ** ** |   |   |   |   |   |   |   |   |   |   |
| Other Services                        | ** ** | **—**                 |       | —             | ** ** | **—** |   | — | ** ** | **—** |   | — | ** ** | **—** |   | — |   |
|                                  |       |                       |       |               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total**                             | ** ** | **1,086.4**                | ** ** | **875.0**          | ** ** | **100** | **%** | **100** | **%** | **261.2** | ** ** | **96.0** | ** ** | **100** | **%** | **100** | **%** |

 

----

*(1)**    **Includes € 115,000 and € 120,000of audit fees for fiscal years 2005 and 2004, respectively, related to theFinancing Companies and Management Company audits which are contractuallyre-invoiced to the Group.*

*(2)**    **Audit related fees represent feesincurred in connection with the Restructuring and fees incurred related to theimplementation of International Financial Reporting Standards (“IFRS”).*

 

64

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**ITEM16.D.****           EXEMPTIONS FROM THELISTING STANDARDS FOR AUDIT COMMITTEES**

 

Not applicable.

 

**ITEM16.E.****            PURCHASES OF EQUITYSECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS**

 

Not applicable.

 

65

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##### **PART III**

#####  

**ITEM 17.****    FINANCIALSTATEMENTS**

 

PleaseSee Item 19 “Financial Statements and Exhibits” for a list of all financialstatements filed as part of this Form 20-F.

 

**ITEM 18.****    FINANCIALSTATEMENTS**

 

Notapplicable

 

**ITEM 19.****    FINANCIALSTATEMENTS AND EXHIBITS**

 

**A.****            FINANCIALSTATEMENTS**

 

TheGroup is filing the following financial statements, together with the report ofPricewaterhouseCoopers Audit related to the statements, as part of thisAnnual Report:

 

 
| Report  of Independent Registered Public Accounting Firm                                           |
|----------------------------------------------------------------------------------------------------|
| Consolidated  Balance Sheets as of September 30, 2005 and 2004                                |
| Consolidated  Statements of Income for the Years Ended September 30, 2005, 2004 and  2003     |
| Consolidated  Statements of Cash Flows for the Years Ended September 30, 2005, 2004  and 2003 |
| Notes  to the Consolidated Financial Statements                                                    |

 

## **B.**            EXHIBITS

 
| 12.1 |   | Chairman and  Chief Executive Officer certification pursuant to Section 302 of the SOX  Act                         |
|------|--------|--------------------------------------------------------------------------------------------------------------------------|
| 12.2 |   | Chief Financial  Officer certification pursuant to Section 302 of the SOX Act                                       |
| 13.1 |   | Chairman and  Chief Executive Officer and Chief Financial Officer certification pursuant to  18 U.S.C. Section 1350 |
| 15.1 |   | Internal Control  Description pursuant to the French Financial Security Law                                              |
| 15.2 |   | IFRS Transition  Report                                                                                                  |

 

66

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**SIGNATURES**

 

Theregistrant certifies that it meets all of the requirements for filing on Form 20-Fand has duly caused this Annual Report to be signed on its behalf by theundersigned, thereunto duly authorized.

 

 
| Date: April 4,  2006 |                  |
|----------------------|-----------------------|
|                 |                  |
|                 | Euro Disney  S.C.A.   |
|                 |                  |
|                 | By: /S/ KARL L.  HOLZ |   |
|                 |                  | Karl L. Holz |
|                 |                  | The Management  Company, Euro Disney S.A.S |
|                 |                  | Chairman of the  Board and |
|                 |                  | Chief Executive  Officer |
|                      |                       |  |  |

 

67

----

 

**Report of Independent Registered Public AccountingFirm**

** **

To the Board of Directorsand Shareholders of Euro Disney S.C.A.:

 

We have audited theaccompanying consolidated balance sheets of Euro Disney S.C.A. and itssubsidiaries as of September 30 2005 and 2004, and the relatedconsolidated statements of income and of cash flows for each of the threefiscal years in the period ended September 30, 2005, all expressed ineuros and prepared in conformity with accounting principles generally acceptedin France. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

 

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Euro Disney S.C.A. and itssubsidiaries at September 30, 2005 and 2004, and the results of theiroperations and their cash flows for each of the three fiscal years in the periodended September 30, 2005 in conformity with accounting principlesgenerally accepted in France.

 

Accounting principles generally accepted in Francevary in certain significant respects from accounting principles generallyaccepted in the United States of America. Information relating to the natureand effect of such differences is presented in Note 29  to the consolidated financial statements.

 

Asdiscussed in Note 2 to the consolidated financial statements, the Group changedits method of consolidation for certain companies in which it is not a director indirect shareholder or partner, effective October 1, 2003.

 

PricewaterhouseCoopersAudit

 

Jean-Christophe Georghiou

 

Paris, France

November 15, 2005

 

68

----

 

**CONSOLIDATEDBALANCE SHEETS**

 
| ** **                                           | ** ** | ** ** | ** ** | **September** | ** ** |
|------------------------------------------------------|------------|------------|------------|---------------|------------|
| **(€ in millions)**                             | ** ** | **Notes**  | ** ** | **2005**      | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Fixed  Assets**                                    |       |       |       |          |       |   |   |   |   |
| Intangible assets                                    | ** ** | ** ** |       | **55.6**      |       | 52.4 |   | 57.6 |   |
| Tangible assets                                      |       | 3          | ** ** | **2,295.2**   |       | 2,343.9 |   | 928.0 |   |
| Financial assets                                     |       | 4          | ** ** | **11.3**      |       | 115.3 |   | 1,332.2 |   |
| ** **                                           |       | ** ** |       | **2,362.1**   |       | 2,511.6 |   | 2,317.8 |   |
| **Other  Assets**                                    |       |       |       |          |       |   |   |   |   |
| Inventories                                          |       | 5          | ** ** | **39.2**      |       | 41.5 |   | 41.8 |   |
| Accounts receivable:                                 |       |       |       |          |       |   |   |   |   |
| Trade                                                |       | 6          | ** ** | **74.0**      |       | 72.7 |   | 76.9 |   |
| Other                                                |       | 7          | ** ** | **79.8**      |       | 59.8 |   | 45.9 |   |
| Short-term investments                               |       | 8          | ** ** | **280.8**     |       | 120.8 |   | 34.9 |   |
| Cash                                                 | ** ** | ** ** |       | **10.1**      |       | 10.6 |   | 11.2 |   |
| ** **                                           |       | ** ** |       | **483.9**     |       | 305.4 |   | 210.7 |   |
|                                                 |       |       |       |          |       |   |   |   |   |
| **Deferred  Charges**                                |       | 9          | ** ** | **48.1**      |       | 59.6 |   | 55.1 |   |
|                                                 |       |       |       |          |       |   |   |   |   |
| **Total  Assets**                                    | ** ** | ** ** |       | 2,894.1       |       | 2,876.6 |   | 2,583.6 |   |
|                                                 |       |       |       |          |       |   |   |   |   |
| **Shareholders’  Equity (Deficit)**             |       |       |       |          |       |   |   |   |   |
| Share capital                                        |       | 10         | ** ** | **39.0**      |       | 10.8 |   | 802.5 |   |
| Share premium                                        |       | 10         | ** ** | **1,442.5**   |       | 1,235.7 |   | 291.4 |   |
| Accumulated deficits                                 |       | 10         | ** ** | **(1,185.8**  | **)**      | (1,306.4 | ) | (9.5 | ) |
| ** **                                           |       | ** ** |       | **295.7**     |       | (59.9 | ) | 1,084.4 |   |
|                                                 |       |       |       |          |       |   |   |   |   |
| **Minority  Interests**                              |       | 11         | ** ** | **106.3**     |       | 339.6 |   | — |   |
|                                                 |       |       |       |          |       |   |   |   |   |
| **Quasi-Equity**                                     |       | 12         | ** ** | **—**    |       | — |   | 152.8 |   |
|                                                 |       |       |       |          |       |   |   |   |   |
| **Provisions  for Risks and Charges**                |       | 13         | ** ** | **96.9**      |       | 98.2 |   | 120.1 |   |
|                                                 |       |       |       |          |       |   |   |   |   |
| **Borrowings**                                       |       | 14         | ** ** | **1,943.4**   |       | 2,052.8 |   | 867.5 |   |
|                                                 |       |       |       |          |       |   |   |   |   |
| **Current  Liabilities**                             |       |       |       |          |       |   |   |   |   |
| Payable to related companies                         |       | 15         | ** ** | **62.8**      |       | 73.3 |   | 56.9 |   |
| Accounts payable and accrued liabilities             |       | 16         | ** ** | **295.2**     |       | 284.3 |   | 214.3 |   |
| ** **                                           |       | ** ** |       | **358.0**     |       | 357.6 |   | 271.2 |   |
|                                                 |       |       |       |          |       |   |   |   |   |
| **Deferred  Revenues**                               |       | 17         | ** ** | **93.8**      |       | 88.3 |   | 87.6 |   |
|                                                 |       |       |       |          |       |   |   |   |   |
| **Total  Shareholders’ Equity and Liabilities** | ** ** | ** ** |       | **2,894.1**   |       | 2,876.6 |   | 2,583.6 |   |

 

***The accompanying footnotes are an integral part of these financialstatements.***

 

69

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**CONSOLIDATEDSTATEMENTS OF INCOME**

 
| ** **                                                 | ** ** | ** ** | ** ** | **Fiscal Year** | ** ** |
|------------------------------------------------------------|------------|------------|------------|-----------------|------------|
| **(€ in millions)**                                   | ** ** | **Notes**  | ** ** | **2005**        | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Revenues**                                               |       | 18         | ** ** | **1,076.0**     | ** ** | 1,048.0 |   | 1,047.5 |   |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Costs  and Expenses**                                    |       | 19         | ** ** | **(1,102.9**    | **)**      | (1,071.9 | ) | (915.1 | ) |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Income  (Loss) before Lease and Financial Charges**      | ** ** | ** ** |       | **(26.9**       | **)**      | (23.9 | ) | 132.4 |   |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Net  Financial Charges**                                 |       |       |       |            | ** ** |   |   |   |   |
| Lease rental expense                                       |       | 25         |       | —          | ** ** | — |   | (193.8 | ) |
| Financial income                                           | ** ** | ** ** |       | **3.9**         | ** ** | 2.8 |   | 49.0 |   |
| Financial expense                                          |       | 14         | ** ** | **(91.8**       | **)**      | (108.5 | ) | (55.5 | ) |
| ** **                                                 |       | ** ** |       | **(87.9**       | **)**      | (105.7 | ) | (200.3 | ) |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Loss  before Exceptional Items**                         | ** ** | ** ** |       | **(114.8**      | **)**      | (129.6 | ) | (67.9 | ) |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| Exceptional  income / (loss), net                          |       | 20         | ** ** | **0.4**         | ** ** | (22.3 | ) | 11.9 |   |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| Income tax                                                 |       | 21         | ** ** | **(1.1**        | **)**      | — |   | — |   |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Net  Loss (before Allocation to Minority Interests)**    | ** ** | ** ** |       | **(115.5**      | **)**      | (151.9 | ) | (56.0 | ) |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| Minority  interests                                        |       | 11         | ** ** | **20.6**        | ** ** | 6.7 |   | — |   |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Net  Loss (after Allocation to Minority Interests)**     | ** ** | ** ** |       | **(94.9**       | **)**      | (145.2 | ) | (56.0 | ) |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| Average number  of common shares outstanding (in millions) |       | 10         | ** ** | **2,771.7**     | ** ** | 1,062.0 |   | 1,056.0 |   |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Loss  per Share (in €)**                            |       | 2          | ** ** | **(0.03**       | **)**      | (0.14 | ) | (0.05 | ) |

 

***The accompanying footnotes are an integral part of these financialstatements.***

 

70

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**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

 
| ** **                                                 | ** ** | ** ** | ** ** | **Fiscal Year** | ** ** |
|------------------------------------------------------------|------------|------------|------------|-----------------|------------|
| **(€ in millions)**                         | ** ** | **Notes**  | ** ** | **2005**        | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Net  Loss (after Allocation to Minority Interests)**     | ** ** | ** ** |       | **(94.9**       | **)**      | (145.2 | ) | (56.0 | ) |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Minority  Interests**                                    |       | 11         | ** ** | **(20.6**       | **)**      | (6.7 | ) | — |   |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| *Operating  Items Not Requiring Cash Outlays:*             |       |       |       |            | ** ** |   |   |   |   |
| Depreciation and amortisation                              |       | 19         | ** ** | **144.0**       | ** ** | 146.8 |   | 65.6 |   |
| Loan repayments received from Phase I Financing  Companies | ** ** | ** ** |       | **—**      |       | — |   | 52.1 |   |
| Other                                                      | ** ** | ** ** |       | **1.0**         | ** ** | 24.2 |   | (10.6 | ) |
| *Changes  in:*                                             |       |       |       |            | ** ** |   |   |   |   |
| Receivables                                                | ** ** | ** ** |       | **(21.4**       | **)**      | (2.7 | ) | 48.6 |   |
| Inventories                                                | ** ** | ** ** |       | **2.3**         | ** ** | 0.3 |   | (3.1 | ) |
| Payables and other accrued liabilities                     | ** ** | ** ** |       | **8.0**         | ** ** | 107.9 |   | (8.5 | ) |
| **Cash  Flows from Operating Activities**                  | ** ** | ** ** |       | **18.4**        | ** ** | 124.6 |   | 88.1 |   |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| Proceeds from  the sale of fixed assets                    |       |       |       | —          | ** ** | — |   | 45.4 |   |
| Capital expenditures for tangible and intangible  assets   |       | 3          | ** ** | **(72.8**       | **)**      | (28.6 | ) | (72.9 | ) |
| Other                                                      | ** ** | ** ** |       | **0.1**         | ** ** | (0.2 | ) | (1.3 | ) |
| **Cash  Flows used in Investing Activities**               | ** ** | ** ** |       | **(72.7**       | **)**      | (28.8 | ) | (28.8 | ) |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| Gross proceeds  from equity offering                       |       | 10         | ** ** | **253.3**       | ** ** | — |   | — |   |
| Payment of  equity issuance costs                          |       | 10         | ** ** | **(17.4**       | **)**      | (0.4 | ) | — |   |
| Proceeds from  new borrowings                              | ** ** | ** ** |       | —          | ** ** | 22.5 |   | 40.0 |   |
| Repayments of  borrowings                                  | ** ** | ** ** |       | **(114.8**      | **)**      | (66.2 | ) | (15.0 | ) |
| (Increase) /  Decrease in debt security and other deposits |       | 4          | ** ** | **104.0**       | ** ** | (10.5 | ) | (59.6 | ) |
| Debt  restructuring costs paid                             | ** ** | ** ** |       | **(14.4**       | **)**      | (4.5 | ) | — |   |
| **Cash  Flows from / (used in) Financing Activities**      | ** ** | ** ** |       | **210.7**       | ** ** | (59.1 | ) | (34.6 | ) |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| Change in cash  and cash equivalents                       | ** ** | ** ** |       | **156.4**       | ** ** | 36.7 |   | 24.7 |   |
| Cash and cash  equivalents, beginning of period            | ** ** | ** ** |       | **131.3**       | ** ** | 94.6 |   | 21.3 |   |
| **Cash  and Cash Equivalents, end of period**              | ** ** | ** ** |       | **287.7**       | ** ** | 131.3 |   | 46.0 |   |
|                                                       |       |       |       |            | ** ** |   |   |   |   |
| **Supplemental  Cash Flow Information:**                   |       |       |       |            | ** ** |   |   |   |   |
| Interest paid                                              | ** ** | ** ** |       | **93.2**        | ** ** | 61.1 |   | 20.3 |   |
| Lease rental  expense paid, net                            | ** ** | ** ** |       | —          | ** ** | — |   | 95.0 |   |
|                                                       |       |       |       |            | ** ** |   |   |   |   |

 
| ** **                                                                  | ** ** | ** ** | ** ** | **Fiscal Year** | ** ** |
|-----------------------------------------------------------------------------|------------|------------|------------|----------------------|------------|
| ** **                                                                  | ** ** | ** ** | ** ** | **2005**             | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Non-Cash  Investment and Financing Transactions:**                        |       |       |       |                 | ** ** |   |   |   |   |
| Deferral into  borrowings of accrued interest under CDC subordinated loans  |       | 14         | (a)        | **59.8**             | ** ** | — |   | — |   |
| Deferral into  borrowings of fiscal year 2005 management fees and royalties |       | 19         | (b)        | **25.0**             | ** ** | — |   | — |   |
| Forgiveness by  TWDC on € 167.7 million line of credit                 |       | 14         | (g)        | **10.0**             | ** ** | — |   | — |   |
| Reallocation  between accumulated deficit and minority interests            |       | 10         | ** ** | **215.5**            | ** ** | — |   | — |   |
| Conversion of  bonds redeemable in shares into equity                       |       | 12         | ** ** | —               | ** ** | 152.5 |   | — |   |
| Transfer of EDA  borrowings and accrued interest to minority interest       | ** ** | ** ** |       | —               | ** ** | 384.1 |   | — |   |

 
| ** **                                                    | ** ** | **September** | ** ** |
|---------------------------------------------------------------|------------|---------------|------------|
| **Reconciliation to Balance Sheet:**                          | ** ** | **2005**      | ** ** | **2004** | ** ** | **2003** | ** ** |
| Cash                                                          | ** ** | **10.1**      |       | 10.6 |   | 11.2 |   |
| Short-term  investments                                       | ** ** | **280.8**     |       | 120.8 |   | 34.9 |   |
| Bank over-drafts  (recorded in accounts payable and accruals) | ** ** | **(3.2**      | **)**      | (0.1 | ) | (0.1 | ) |
| **Cash  and Cash Equivalents, end of period (1)**             | ** ** | **287.7**     |       | 131.3 |   | 46.0 |   |

 

----

*(1)**    **Includes € 48.3 million, and € 49.1 million of cash andshort-term investments of the consolidated financing companies as of September 30,2005, and September 30, 2004 respectively.*

 

***The accompanying footnotes are anintegral part of these financial statements*****.**

 

71

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**1****             ****DESCRIPTION OF THE BUSINESS ANDTHE FINANCIAL NEGOTIATIONS**

 

**1-1Description of the Business**

 

EuroDisney S.C.A. (the “Company”) and its subsidiaries (the “Legally ControlledGroup”) and consolidated financing companies (collectively, the “Group”)commenced operations with the official opening of Disneyland Resort Paris on April 12,1992 (“Opening Day”). The Group operates Disneyland Resort Paris which includestwo theme parks (collectively, the “Theme Parks”), Disneyland Park and WaltDisney Studios Park, which opened to the public on March 16, 2002, seventhemed hotels, two convention centers, the Disney Village entertainment centreand a golf course in Marne-la-Vallée, France. In addition, the Group managesthe real estate development and expansion of the related infrastructure of theproperty.

 

TheCompany, a publicly held French company, is 39.8% owned by an indirect,wholly-owned subsidiary of The Walt Disney Company (“TWDC”) and managed by EuroDisney S.A.S. (the Company’s *Gérant*), anindirect, wholly-owned subsidiary of TWDC. The General Partner is EDLParticipations S.A.S., also an indirect, wholly-owned subsidiary of TWDC. Thelegal reorganization within the Group transformed the Company into a holdingcompany. Substantially all the assets and liabilities of the Group weretransferred to Euro Disney Associés S.C.A. (“EDA”), which became the primaryoperating company for the Group. EDA is an 82% owned subsidiary of the Companyand is managed by Euro Disney S.A.S. The remaining 18% interest in EDA is heldequally by two indirect, wholly-owned subsidiaries of  TWDC. Entities included in the fiscal year2005 consolidated financial statements and their primary operating activitiesare as follows. Changes from the prior year are noted:

 
| **Company(1)**                                                   | ** **                                                         | **% of   Ownersip**                          | ** ** | **Primary Activity**                                                                                                    |
|------------------------------------------------------------------|--------------------------------------------------------------------|--------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------|
| Euro Disney S.C.A.                                               |                                                               | Parent Company                                         |       | Holding Company                                                                                                              |
| Euro Disney Commandité  S.A.S.                              |                                                               | 100                                                    |       | General Partner of EDA  S.C.A.                                                                                               |
| Euro Disney Associés S.C.A.  (“EDA”) (2) (3) |                                                               | 82                                                     |       | Operator of the Theme  Parks, Disneyland Hotel, Davy Crockett Ranch and golf course, and manager of  real estate development |
|                                                             | EDL Hôtels S.C.A.                                             |                                                   | 82         |                                                                                                                         | Operator of 5 of our 7 themed hotels plus the Disney  Village, collectively, the Phase IB Facilities |
|                                                             |                                                               | Hotel New-York Associés S.N.C. (2)                |       | 0                                                                                                                            |   | Financing company for Phase IB Facilities |
|                                                             |                                                               | Newport Bay Club Associés S.N.C. (2)              |       | 0                                                                                                                            |   | Financing company for Phase IB Facilities |
|                                                             |                                                               | Sequoia Lodge Associés S.N.C. (2)                 |       | 0                                                                                                                            |   | Financing company for Phase IB Facilities |
|                                                             |                                                               | Hotel Cheyenne Associés S.N.C. (2)                |       | 0                                                                                                                            |   | Financing company for Phase IB Facilities |
|                                                             |                                                               | Hotel Santa Fe Associés S.N.C. (2)                |       | 0                                                                                                                            |   | Financing company for Phase IB Facilities |
|                                                             |                                                               | Centre de Divertissements  Associés S.N.C. (2)    |       | 0                                                                                                                            |   | Financing company for Phase IB Facilities |
|                                                             |                                                               | Centre de Congrès Newport S.A.S.  (2)             |       | 0                                                                                                                            |   | Financing company for Newport Bay Club Convention  Centre assets |
|                                                             | EDL Hôtels Participations S.A.S                               |                                                   | 82         |                                                                                                                         | General Partner of EDL Hôtels S.C.A. |
|                                                             | EDL Services S.A.S.                                                |                                                   | 82         |                                                                                                                         | Management company of the Phase IB Financing Companies |
|                                                             | Euro Disneyland S.N.C. (“Phase IA Financing Company”)(2) |                                                   | 0          |                                                                                                                         | Financing company for Phase IA assets |
|                                                             | Euro Disney Vacances S.A.S                                         |                                                   | 82         |                                                                                                                         | Tour operator selling Disneyland Resort Paris holiday  packages |
|                                                             |                                                               | Euro Disney Vacaciones S.A.                            |       | 81.9                                                                                                                         |   | Spanish subsidiary of Euro Disney Vacances S.A.S.  (inactive) |
|                                                             | Val d’Europe Promotion S.A.S.                                 |                                                   | 82         |                                                                                                                         | Real estate developer |
|                                                             |                                                               | Les Villages Nature de Val d’Europe  S.A.R.L. (1) |       | 41                                                                                                                           |   | Joint venture with Pierre &Vacances to  establish a feasibility study |
|                                                             | S.E.T.E.M.O. Imagineering S.A.R.L.                                 |                                                   | 82         |                                                                                                                         | Provides studies and management of construction  projects |
|                                                             | ED Spectacles S.A.R.L.                                             |                                                   | 82         |                                                                                                                         | Operator of Buffalo Bill’s Wild West Show |
|                                                             | Débit de Tabac S.N.C.                                         |                                                   | 82         |                                                                                                                         | Tobacco retailer at Disney Village |
|                                                             | Convergence Achats S.A.R.L. (1)                                    |                                                   | 41         |                                                                                                                         | Joint venture with Groupe Flo to negotiate food  purchasing contracts |
|                                                             | ED Resort Services S.A.S.                                          |                                                   | 82         |                                                                                                                         | Company currently inactive |
|                                                             | ED Finances 1,2,3,4 S.N.C.                                         |                                                   | 82         |                                                                                                                         | Companies (4) currently inactive |

 

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*(1)**       Allentities are globally consolidated except for Convergence Achats S.A.R.L. andLes Villages Nature de Val d’Europe S.A.R.L. which are accounted for by theproportional consolidation method. All the companies except Convergence AchatsS.A.R.L. and Euro Disney Vacaciones S.A. are head-quarted in Chessy, Marne-la-Vallée,France.*

 

72

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*(2)**       EffectiveOctober 1, 2003 these entities were consolidated as a result of theadoption of new accounting rules related to financing companies (See Note2). Except for EDA and Centre de Congrès Newport S.A.S., these entities havecalendar year ends, however the balances consolidated are for the 12 monthsended September 30.*

*(3)**       FormerlyEuro Disney Associés S.N.C. was transformed into Euro Disney Associés S.C.A. onSeptember 30, 2004. The ownership interest in this entity increased from0% to 82% during fiscal year 2005 as a result of the change in Group structuredescribed in Note 1-4.*

 

**1-2 Disneyland Resort Paris Financing**

 

TheLegally Controlled Group owns Walt Disney Studios Park, the Disneyland Hotel,the Davy Crockett Ranch, the golf course, the underlying land thereof and theland on which the five other hotels and the Disney Village entertainment centreare located and leases substantially all the remaining operating assets as follows:

 

***Phase IA***

 

In1989, various agreements were signed between the Company and Euro DisneylandS.N.C. (the “Phase IA Financing Company”) for the development and financing ofDisneyland Park. Pursuant to the original sale/leaseback agreement, all of theassets of Disneyland Park and the underlying land, as of Opening Day, were soldby the Company to the Phase IA Financing Company and simultaneously leased backto the Company. In 1994, the original lease structure was modified such thatthe Company’s rights under this lease were transferred to Euro Disney AssociésS.N.C., an indirect, wholly-owned affiliate of TWDC, which in turn sub-leasedthose assets to the Company. In September 2004, Euro Disney AssociésS.N.C. was legally transformed into a limited partnership (S.C.A.) andfollowing the Restructuring, became an 82% owned subsidiary of the Company. Asa result of this legal reorganization, the sub-lease between the Company andEDA was terminated. EDA continues to lease these assets from the Phase IA FinancingCompany. The Group has no ownership interest in the Phase IA Financing Company.

 

***Phase IB***

 

In1991, various agreements were signed for the development and financing of fivehotels: Hotel New York, Newport Bay Club, Sequoia Lodge, Hotel Cheyenne and HotelSanta Fe, and the Disney Village entertainment centre  (collectively, the “Phase IB Facilities”).Pursuant to sale/leaseback agreements, the Phase IB Facilities were sold by theCompany to six special purpose companies that were established for the financingof Phase IB (the “Phase IB Financing Companies”) and are being leased back tothe operator, EDL Hôtels S.C.A. The Group has no ownership interest in thePhase IB Financing Companies.

 

Hereafter,reference to the “Phase I SNCs” includes the Phase IA Financing Company and thePhase IB Financing Companies.

 

***Additional Capacity Disneyland Park Assets***

 

In1994, the Company entered into a sale/leaseback agreement with EDA for certainDisneyland Park assets, which were constructed subsequent to Opening Day.Pursuant to this agreement, these assets were sold by the Company and the PhaseIA Financing Company to EDA and were leased back to the Company. In 2005, EDAbecame an 82% subsidiary of the Company and as a result this lease wasterminated. Therefore, these previously leased assets are now owned andoperated by the Legally Controlled Group.

 

***Newport Bay Club Convention Centre***

 

In1996, various agreements were signed with Centre de Congrès Newport S.A.S., anindirect, wholly-owned affiliate of TWDC for the development and financing of asecond convention centre located adjacent to the Newport Bay Club hotel.Pursuant to sale/leaseback agreements, the assets of the Newport Bay ClubConvention Centre were sold by EDL Hôtels S.C.A. to Centre de Congrès Newport S.A.S.and are leased back to the operator, EDL Hôtels S.C.A.

 

Hereafter,reference to the “Financing Companies” includes the Phase IA Financing Company,the Phase IB Financing Companies and Centre de Congrès Newport S.A.S.

 

**1-3 Legal and Financial Restructuring**

 

In September 2004,the Group reached final agreement with its lenders and TWDC on a comprehensiverestructuring of the Group’s financial situation (the “Restructuring”). TheRestructuring was finalized on February 23, 2005 upon completion of all requiredconditions of the agreement.

Theprincipal features of the Restructuring were the following:

 

•      Ashare capital increase with gross proceeds of € 253.3 million, before deductionof equity issuance costs. The Company issued 2.8 billion new shares at a priceof € 0.09 each (see Note 10).

 

•      Anew € 150 million credit line made available by TWDC to replace the expired €167.7 million credit line. In addition, TWDC forgave € 10 million of theexpired credit line and converted € 110 million of the remaining balance to subordinated long-term debt (see Note14).

 

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•      Deferralof the Group’s debt service obligations partially on an unconditional basis andpartially on a conditional basis (depending on the Company’s financialperformance), and elimination of the obligation to maintain debt securitydeposits (the existing € 100.6 million debt security deposit was used to prepaydebt), in exchange for which the Company will pay increased interest rates onsome of its debt (see Notes 4 and 14).

 

•      Deferralsof a portion of the management fees and royalties payable to affiliates of TWDCover the coming years, partially on an unconditional basis (total € 125million) and partially on a conditional basis (up to € 200 million), with theconditional portion depending on the Company’s financial performance (see Notes14 and 19).

 

•      Avoidanceof lease-related payments in the amount of € 292.1 million, (plus € 16 millionof interest that would have been payable) to EDA, to exercise  the Company’s lease option to maintain itsrights to the Disneyland Park and certain of its key attractions (which werepreviously leased from EDA), by instead acquiring 82% of the share capital ofEDA  in exchange for the contribution ofsubstantially all of the Company’s assets and liabilities (TWDC subsidiarieshold the remaining 18% of EDA) (see Notes 1-4, 10 and 11).

 

•      Bankauthorization to implement a € 240 million plan to develop new Theme Parkattractions and to expend more each year on maintaining and improving theexisting asset base.

 

Prospectively,the Group’s statement of income will be affected by the interest expense impactof debt and royalties and management fees deferrals partially offset by theinterest income impact on increased cash, as well as larger minority interests.Increased minority interests reflect the retained ownership in EDA by indirect,wholly-owned TWDC subsidiaries after the contribution of substantially all ofthe Company’s assets and liabilities.

 

**1-4****  Change in GroupStructure**

 

In conjunction with the legal reorganizationimplemented as part of the Restructuring described above, EDA became an82% owned subsidiary of the Legally Controlled Group. Until this legalreorganization was finalized, the Company had no ownership interest in EDA, awholly-owned affiliate of TWDC, which was already included in the LegallyControlled Group as a special purpose financing company, as its operatingactivity consisted of financing and leasing a significant portion of the Group’stheme park assets. As a result of the Restructuring, substantially all of theGroup’s assets and liabilities were contributed to EDA, which then became an82% owned subsidiary of the Company and the primary operating company for theGroup’s activities. Subsidiaries of TWDC own the remaining 18% of EDA. Forpurposes of financial reporting, the legal reorganization of the Group has notimpacted the effective control of the Company over EDA. As the change inownership in these two entities reflects a transaction between existingaffiliated interests under common control, it was recorded directly throughshareholders’ equity and minority interests. In addition, in view of thetiming, terms and conditions of the Restructuring, effect was given to the newallocation between the Legally Controlled Group and minority interests in theresults of the period as of October 1, 2004 (see Notes 10 and 11).

 

**2****     SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

 

***Basis of Preparation***

TheGroup’s consolidated financial statements are prepared in conformity withFrench accounting rules and regulations in accordance with the *Règlements n° 99-02 of the Comité de la Réglementation Comptable*(CRC-French Regulatory Board). Such principles have been consistently appliedin relation to those used in the preparation of the consolidated financialstatements for the fiscal year ended September 30, 2005, 2004 and 2003,except with respect to the change in accounting principle relating to theconsolidation in fiscal year 2004 of the Financing Companies described below,which affect the comparability of the years reported.

 

***Principles**of consolidation***

Effectivefrom the beginning of fiscal year 2004 (October 1, 2003), the Groupadopted new accounting rules mandated by Article 133 of the FinancialSecurity Law (*Loi de Sécurité Financière)*withrespect to the consolidation of financing companies that are not legallycontrolled by the Group. Under these new rules, the Financing Companies, fromwhich the Company leases a substantial portion of its operating assets, havebeen included in the Group’s consolidated accounts. In the past, lease paymentsto the Financing Companies were recorded as incurred, along with disclosure bythe Group of the leasing arrangements, contractual commitments for leaserentals, and the related debt obligations of the Financing Companies. As aresult of the new consolidation rules, these operating assets are nowconsolidated resulting in increased fixed assets and borrowings. The Group’sreceivables from the Financing Companies have been eliminated in consolidationand shareholders’ equity has been reduced. The reduction in the consolidatedshareholders’ equity primarily reflects past depreciation charges related tothe operating assets owned by the Financing Companies, which were greater thanthe lease payments expensed for the same periods. The accounting change alsoaffects the classification and amount of costs reported in the incomestatement, resulting in increased operating expenses and depreciation andreduced lease rental expense.

 

74

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Toenhance comparability, the Group has provided in Note 29 supplemental pro-formafinancial statements in addition to its as-reported financial statements forfiscal year 2003. The pro-forma information has been prepared assuming that thechange in accounting principles described above was in effect during fiscalyear 2003.

 

***Use of Estimates***

Thepreparation of these consolidated financial statements requires management tomake estimates and assumptions that affect the amounts presented in the consolidatedfinancial statements and footnotes thereto. Actual results could differ fromthose estimates. Certain reclassifications to the fiscal years 2004 and 2003comparative amounts have been made to conform to the 2005 presentation.

 

***Revenue Recognition***

TheGroup has revenue recognition policies for its operating segments, which areappropriate to the circumstances of each business or revenue flow. The Grouprecords revenues for the Resort Segment as the related service is provided toguests. In addition, the Resort Segment includes revenues associated withlong-term sponsorship contracts, which are recognized pro-rata over the term ofthe contracts. In the Real Estate Development Segment, revenue is recognized onland sales upon closing of each transaction, while revenues related to servicecontracts and ground leases are recognized when the service is rendered.

 

***Leased Assets***

TheGroup leases a significant portion of its operating assets from special purposeFinancing Companies. Until the required implementation of the accounting changedescribed above, pursuant to options available under French accountingprinciples, the Group accounted for these transactions as operating leases inthe statement of income on the line Lease Rental Expense. Effective as of October 1,2003, the Financing Companies were consolidated into the financial statementsof the Group. All other leasing contracts are reported as operating expensesusing operating lease accounting.

 

***Fixed Assets***

Tangibleand intangible assets are carried at cost. Depreciation is computed on thestraight-line method based upon estimated useful lives, as follows:

 
| **Estimated useful lives**                                 | ** ** | ** **     | ** ** |
|------------------------------------------------------------|------------|----------------|------------|
| Intangible  assets                                         |       | 2 to 20 years  |       |
| Secondary  infrastructure                                  |       | 40 years       |       |
| Buildings and  attractions                                 |       | 10 to 40 years |       |
| Leasehold  improvements, furniture, fixtures and equipment |       | 2 to 25 years  |       |

 

Intangibleassets consist of software costs, licensee rights and film production costs fortheme park attractions.

 

Thecosts of major fixed asset renovations are accrued in advance on astraight-line basis as operating expense during the period between plannedrenovations.

 

Interestcosts incurred for the construction of fixed assets and the acquisition anddevelopment of land are capitalized using the weighted average interest rate onthe Group’s borrowings. Projects under development are capitalized at the pointtechnical and economic feasibility has been established.

 

***Inventories***

Inventoriesare stated at the lower of cost or market value, with cost determined on aweighted-average cost basis.

 

***Income Taxes***

Due tothe Restructuring, the Group is not eligible to file a consolidated tax returnfor the entities in the Legally Controlled Group for fiscal year 2005. As aresult, each legal entity will make a separate tax filing. The Group providesfor deferred income taxes on temporary differences between financial and taxreporting. The Group uses the liability method under which deferred taxes arecalculated applying currently enacted tax rates expected to be in effect whenthe temporary differences will reverse. A net deferred tax asset is recognizedonly when it is probable that taxable profits will be available to absorbavailable temporary differences.

 

75

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***Debt Issue Costs***

Costsof the issuance of debt are capitalized and amortized on a straight-line basisover the life of the related debt. Upon repurchase and/or retirement of debt, apro-rata amount of the unamortized issue costs is expensed and included as part ofthe gain or loss resulting from the transaction. Costs of renegotiating ormodifying existing loans are recorded as exceptional expense as incurred.

 

***Pension and Retirement Benefits***

Contributionsto state funded retirement plans and the Group’s supplemental definedcontribution pension plan are expensed as incurred and no future commitmentsexist with respect to these plans. Retirement indemnities paid in accordancewith the Group’s collective bargaining agreement are expensed as paid. TheGroup has opted to disclose and not record the future commitment with respectto these indemnities (see Note 26).

 

***Risk Management Contracts***

In thenormal course of business, the Group employs a variety of off-balance sheetfinancial instruments to manage its exposure to fluctuations in interest andforeign currency exchange rates, including interest rate and cross-currencyswap agreements, forward and option contracts. The Group designates and assignsthe financial instruments as hedges for specific assets, liabilities oranticipated transactions. When hedged assets or liabilities are sold orextinguished or the anticipated transactions being hedged are no longerexpected to occur, the Group recognizes the gain or loss on the designatedhedging financial instruments. The Group accrues the differential for interestrate and cross-currency swaps to be paid or received under the agreements andshifts in exchange rates as interest income or expense over the lives of theswaps. Gains and losses on the termination of swap agreements, prior to theiroriginal maturity, are deferred and amortized over the remaining original termof the instruments. Gains and losses arising from foreign currency forward andoption contracts are recognized as offsets of gains and losses resulting fromthe items being hedged.

 

***Foreign Currency Transactions***

Transactionsdenominated in foreign currencies are recorded in euros at the exchange rateprevailing at the month-end prior to the transaction date. Assets andliabilities denominated in foreign currencies are stated at their equivalentvalue in euros at the exchange rate prevailing as of the balance sheet date.Net exchange gains or losses resulting from the translation of assets andliabilities in foreign currencies at the balance sheet date are disclosed as “Otherreceivables” or “Other payables”. Provision is made for all unrealized exchangelosses to the extent not hedged.

 

***Operating Subsidies***

Operatingsubsidies are recorded as operating income at the point the amount iscontractually due and definitive.

 

***Earnings per Share and Diluted Earnings per Share***

Earningsper share and diluted earnings per share of common stock are computed on thebasis of the weighted average number of shares outstanding during the fiscalyear. Diluted earnings per share exclude all potential shares that could becreated by outstanding instruments to issue future shares of common stock astheir effect on the calculation is anti-dilutive.

 

***Statement of Cash Flows***

Thestatement of cash flows measures changes in cash and cash equivalents. Cash andcash equivalents consist of cash on hand and short-term investments withoriginal maturities of three months or less. Short-term investments are statedat the lower of cost or market value.

 

Cashand cash equivalents include the cash of the consolidated Financing Companies,which the Legally Controlled Group cannot use for operating purposes.

 

***Transition to IFRS***

EffectiveOctober 1, 2005 (the first day of fiscal year 2006), the Group is requiredto prepare its consolidated financial statements under International FinancialReporting Standards (“IFRS”).

 

Up toand including fiscal year 2005, the Group applied French generally acceptedaccounting principles. The Group has completed its implementation of IFRS andhas prepared a special report on the transition, which will be included in theAnnual Report.

 

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**3****                 TANGIBLE  AND INTANGIBLE ASSETS**

 
| ** **                        | ** ** | ** **          | ** ** | **Fiscal Year 2005** | ** ** |
|-----------------------------------|------------|---------------------|------------|----------------------|------------|
| **(€ in millions*)***        | ** ** | **September  2004** | ** ** | **Additions**        | ** ** | **Deductions** | ** ** | **Transfers  Adjustments** | ** ** | **September  2005** | ** ** |
| Intangible assets                 |       | 108.2               |       | —               |       | — |   | 10.3 | ** ** | **118.5** | ** ** |
| Land and secondary infrastructure |       | 548.4               |       | —               |       | — |   | 0.3 | ** ** | **548.7** | ** ** |
| Buildings and attractions         |       | 2,946.5             |       | —               |       | (1.2 | ) | 9.2 | ** ** | **2,954.5** | ** ** |
| Furniture, fixtures and equipment |       | 611.5               |       | 1.1                  |       | (0.1 | ) | 20.9 | ** ** | **633.4** | ** ** |
| Construction in progress          |       | 23.7                |       | 94.2                 |       | — |   | (40.7 | ) | **77.2** | ** ** |
| Subtotal                          |       | 4,238.3             |       | 95.3                 |       | (1.3 | ) | — | ** ** | **4,332.3** | ** ** |
| ** **                        | ** ** | ** **          | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Accumulated depreciation          |       | (1,842.0            | )          | (140.0               | )          | 0.5 |   | — | ** ** | **(1,981.5** | **)** |
|                              |       | 2,396.3             |       | (44.7                | )          | (0.8 | ) | — | ** ** | **2,350.8** | ** ** |

 

Fixedassets with a net book value of € 1,514 million at September 30, 2005, areeither mortgaged or pledged as security under loan agreements includingsubstantially all the operating assets of the Group except Walt Disney StudiosPark. In fiscal year 2005, € 0.8 million of interest expense was capitalized aspart of the cost of assets under construction.

 

Thebook value and depreciation of leased assets, which are included in the balancesheet of the Group are summarized as follows (see Note 25-1 for a fulldescription of these leases):

 
| ** **                         | ** ** | **September 2005** | ** ** |
|------------------------------------|------------|-------------------------|------------|
| **(€ in millions)**           | ** ** | **Historical  Cost**    | ** ** | **Accumulated  Depreciation** | ** ** | **Net Book  Value** | ** ** |
| Intangible  assets                 |       | 2.6                     |       | (2.4 | ) | 0.2 |   |
| Land and  secondary infrastructure |       | 175.4                   |       | (86.4 | ) | 89.0 |   |
| Buildings and  attractions         |       | 2,051.9                 |       | (910.2 | ) | 1,141.7 |   |
| Furniture,  fixtures and equipment |       | 371.4                   |       | (370.6 | ) | 0.8 |   |
|                               |       | 2,601.3                 |       | (1,369.6 | ) | 1,231.7 |   |

 

Depreciationexpense, included in the Group’s income statement for the leased assets, was €80.5 million and € 75.2 million for the years ended September 30, 2005 and2004, respectively.

 

**4****                 FINANCIALASSETS**

 
| ** **                  | ** ** | **September  2004** | ** **    | **Fiscal Year 2005** | ** **     | **September  2005** | ** ** |
|-----------------------------|------------|---------------------|---------------|----------------------|----------------|---------------------|------------|
| **(€ in millions)**    | ** ** | ** **          | **Additions** | ** **           | **Deductions** | ** **          | ** ** |
| Debt Security  Deposits (a) |       | 100.6               |          | —               |           | (100.6              | )          | — | ** ** |
| Other                       |       | 14.7                |          | —               |           | (3.4                | )          | **11.3** | ** ** |
|                        |       | 115.3               |          | —               |           | (104.0              | )          | **11.3** | ** ** |

 

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*(a)**              BankSecurity Deposits*

As required by the Group’s debt agreements, debtsecurity deposits were maintained as pledges for the benefit of certain lendersas of September 30, 2004. Upon the completion of the Restructuring, the September 30,2004 balance of these debt security deposits was used to fund debt pre-paymentsduring fiscal year 2005 to the Group’s senior lenders. The Group is no longerrequired to maintain these deposits in the future (See Notes 1-3 and 14).

 

**5****                 INVENTORIES**

 

Inventories consist primarily of merchandise, food andbeverage and supplies. These amounts are stated net of allowance for obsoleteand slow moving items of € 3.7 million and € 3.9 million at September 30,2005 and 2004, respectively.

 

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**6****                 TRADEACCOUNTS RECEIVABLE**

 

Trade accounts receivable are due primarily from touroperators and travel agents (arising from sales of Theme Park entrance tickets,hotel and meeting rooms and other amenities) as well as billings forparticipant fees. As of September 30, 2005 and 2004, the reserve forpotentially uncollectible accounts was € 2.0 million. As of September 30,2005 and 2004, trade receivables included long-term receivables amounting to €0.6 million and € 2.2 million, respectively.

 

**7****                 OTHERACCOUNTS RECEIVABLE**

 
| ** **                         | ** ** | **September** | ** ** |
|------------------------------------|------------|---------------|------------|
| **(€ in millions)** | ** ** | **2005**      | ** ** | **2004** | ** ** |
| VAT                                | ** ** | **37.9**      |       | 38.0 |   |
| Other                              | ** ** | **41.9**      |       | 21.8 |   |
| ** **                         |       | **79.8**      |       | 59.8 |   |

 

Otherincludes advance payments to vendors and miscellaneous non-trade receivables.All amounts are due within one year.

 

**8****                 CASHAND SHORT-TERM INVESTMENTS**

 

TheGroup’s September 30, 2005 and 2004 cash and short-term investmentsinclude € 48.3 million and € 49.1 million, respectively, of cash and short-terminvestments of the consolidated Financing Companies, which are not available tothe Legally Controlled Group for operational uses.

 

Short-terminvestments consist primarily of cash equivalents such as money marketinstruments and certificates of deposit, carried at cost, which approximatedmarket value at September 30, 2005 and 2004.

 

**9****                 DEFERREDCHARGES**

 
| ** **                                            | ** ** | **September  2004** | ** **    | **Fiscal Year 2005** | ** **     | **September  2005** | ** ** |
|-------------------------------------------------------|------------|---------------------|---------------|----------------------|----------------|---------------------|------------|
| **(€ in millions)**                              | ** ** | ** **          | **Additions** | ** **           | **Deductions** | ** **          | ** ** |
| Financial  contributions to public infrastructure (a) |       | 47.6                |          | —               |           | (6.2                | )          | **41.4** | ** ** |
| Deferred debt  issue costs                            |       | 9.2                 |          | —               |           | (2.5                | )          | **6.7** | ** ** |
| Other (b)                                             |       | 2.8                 |          | 15.5                 |           | (18.3               | )          | — | ** ** |
|                                                  |       | 59.6                |          | 15.5                 |           | (27.0               | )          | **48.1** |   |

 

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*(a)**             **Financial contributions to publicinfrastructure*

Financial contributions topublic infrastructure consist primarily of a payment of  € 34.3 million made by the Group to S.N.C.F. *(Société Nationale des Chemins de Fer Français)*, the Frenchnational railway company, as part of its financial commitment to theconstruction of the T.G.V. (high speed train) railway station located withinDisneyland Resort Paris. This contribution is being amortized over a period oftwenty years (beginning on the opening of the T.G.V. station in 1994).Remaining amounts relate to various financial contributions paid or payable bythe Group for the construction of primary infrastructure, such as roadways andwater, gas and electricity distribution systems. These amounts are being amortizedover a period of twenty years. Contributions to public infrastructure arestated net of accumulated amortization of € 41.6 million and € 37.6 million at September 30,2005 and 2004, respectively.

 

*(b)**             **Other*

Fiscal year 2004 balance andfiscal year 2005 additions represent deferred equity issuance costs that wereoffset against the share premium generated by the proceeds of the share capitalincrease contemplated in the Restructuring (see Note 10).

 

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**10****          SHAREHOLDERS’EQUITY (DEFICIT)**

 
| ** **                                                                                                 | ** ** | **Number**                      | ** ** | **(€ in millions)** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|------------------------------------|------------|
| ** **                                                                                                 | ** ** | **of Shares****(in thousands)** | ** ** | **Share  Capital**                 | ** ** | **Share  Premium** | ** ** | **Retained  Deficit** | ** ** | **Total** | ** ** |
| ** **                                                                                                 | ** ** | ** **                      | ** ** | ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Balance at September 30, 2003**                                                                     | ** ** | **1,055,938**                   | ** ** | **802.5**                          | ** ** | **291.4** | ** ** | **(9.5** | **)** | **1,084.4** | ** ** |
| Cumulative effect of change in accounting principles                                                       |       | —                          |       | —                             |       | — |   | (1,151.7 | ) | **(1,151.7** | **)** |
| Reduction of nominal value per  share                                                                      |       |                            |       | (792.0                             | )          | 792.0 |   | — | ** ** | — | ** ** |
| Conversion of ORAs and  warrants                                                                           |       | 26,742                          |       | 0.3                                |       | 152.3 |   | — |   | **152.6** | ** ** |
| Net loss (after Allocation to  Minority Interests)                                                         | ** ** | **—**                      | ** ** | **—**                         | ** ** | **—** |   | (145.2 | ) | **(145.2** | **)** |
| **Balance at September 30, 2004**                                                                     | ** ** | **1,082,680**                   | ** ** | **10.8**                           | ** ** | **1,235.7** | ** ** | **(1,306.4** | **)** | **(59.9** | **)** |
| Reallocation between accumulated deficit and minority  interests in EDA based upon 82%/18% ownership split |       | —                          |       | —                             |       | — |   | 215.5 | ** ** | **215.5** | ** ** |
| Proceeds  from Equity Rights Offering, net of € 18.3 million in underwriting and  issuance costs      |       | 2,814,969                       |       | 28.2                               |       | 206.8 |   | — | ** ** | **235.0** | ** ** |
| Net loss (after Allocation to  Minority Interests)                                                         |       |                            |       | ** **                         | ** ** | ** ** | ** ** | (94.9 | ) | **(94.9** | **)** |
| **Balance at September 30, 2005**                                                                     | ** ** | **3,897,649**                   | ** ** | **39.0**                           | ** ** | **1,442.5** | ** ** | **(1,185.8** | **)** | **295.7** | ** ** |

 

•                  *Number of shares*

The number of shares above represents the Company’sissued, outstanding and fully paid shares, at the respective dates.

 

•                  *Share capital and sharepremium*

In accordance with Resolution 7 of the CombinedGeneral Shareholder’s Meeting held on March 25, 2004, the Company’s sharecapital was decreased in an amount of € 792 million by reducing from € 0.76 to€ 0.01 the nominal value of each of the shares existing on the effective dateof July 9, 2004.

 

On July 11, 2004, the Company issued 26,725,580new shares upon the maturity and conversion of the ORAs (see Note 12). Inaddition, 16,988 new shares were issued upon exercise of 47,826 warrants,during fiscal year 2004.

In connection with the Restructuring, the Companycompleted an equity rights offering in February 2005, which resulted inthe issuance of 2.8 billion new shares at a price of € 0.09 each generatinggross proceeds of € 253.3 million (see Note 1-3).

 

•                  *Retained earnings /(deficit)*

At September 30,2005 and 2004, the Company’s retained earnings included a legal reserve of €16.9 million, which is not available for distribution.

 

Effectiveas of October 1, 2002 (the first day of fiscal year 2003) the Groupadopted new accounting rules for major fixed asset renovationexpenditures. As of October 1, 2003 (the first day of fiscal year 2004),the Group implemented mandatory new accounting rules concerning theconsolidation of special purpose financing companies. The retroactive earningsimpact of these changes was recorded as an adjustment to retained earnings (seeNote 2).

 

As aresult of the Restructuring, substantially all of the Company’s assets andliabilities were contributed to EDA. As explained in Note 1-4, the impacts ofthe legal reorganization were recorded in the consolidated financial statementsof the Group as of October 1, 2004. The Company’s increased interest inEDA was recorded as a reallocation between shareholders’ equity and minorityinterests for an amount of € 215.5 million (see Note 11(a) below).

 

•                  *Warrants*

As part ofthe 1994 financial restructuring, the Company issued 290 million warrants,enabling the holders of such warrants to subscribe for 1.069 shares of theCompany’s common stock at a price of € 6.10 for every three warrants held. Thewarrants had a term of ten years and expired in July 2004.

 

**11 MINORITY INTERESTS**

 
| ** **                                | ** ** | ** **                | ** ** | **Fiscal Year 2005**      | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|---------------------------|------------|---------------------------|------------|------------|------------|
| **(€ in millions)**                  | ** ** | **September   2004** | ** ** | **Net Loss   Allocation** | ** ** | **Other**  |       | **September   2005** | ** ** |
| ** **                                |
| EDA (a)                                   |       | 294.7                     |       | (20.7                     | )          | (215.5     | )          | 58.5 | ** ** |
| Centre de Congrès Newport S.A.S. (b) |       | 7.8                       |       | 0.1                       |       | —     |       | 7.9 | ** ** |
| Phase I  Financing Companies (c)          |       | 37.1                      |       | —                    |       | 2.8        |       | 39.9 | ** ** |
|                                      |       | 339.6                     |       | (20.6                     | )          | (212.7     | )          | 106.3 | ** ** |

 

79

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Minority interests representthe portion of the consolidated Financing Companies equity for which theLegally Controlled Group has no rights or obligations:

 

----

*(a)**             **EDA*

 

Until the legalreorganization resulting from the Restructuring, the Company had no ownershipinterest in EDA, a wholly-owned affiliate of TWDC, which was included in theconsolidated Group as a special purpose financing company, as its operatingactivity consisted of financing and leasing Theme Park assets to the Group.

 

Upon finalization of the Restructuring,substantially all of the Group’s assets and liabilities were contributed toEDA, which then became an 82% owned subsidiary of the Company and the primaryoperating company for the Group’s activities. Subsidiaries of TWDC own theremaining 18% of EDA.

 

As explained in Note 10, in order to reflectthe new ownership interests in the Group resulting from the contribution, €215.5 million of accumulated minority interests were transferred to increasethe Group’s consolidated retained earnings.

 

The fiscal year 2005 allocation of lossesbetween the minority interests of EDA and the Group reflect the new ownershipinterest starting from October 1, 2004.

 

*(b)**              Centrede Congrès Newport S.A.S.*

 

As a result of theconsolidation of this special purpose lease financing entity 100% owned by TWDCat the beginning of fiscal year 2004, a minority interest balance of € 7.8million was recorded by the Group representing Centre de Congrès Newport S.A.S.’sshare capital and the portion of its net accumulated losses for which theLegally Controlled Group had no rights or obligations.

 

*(c)**             **Phase I Financing Companies*

 

Minority interests representsthe share capital and variable Phase I lease payments that are legally for thebenefit of the partners of the Phase IA Financing Company and are thereforereflected in operating expenses.

 

**12****          QUASI-EQUITY**

 

As part of the 1994 financial restructuring, theCompany issued 2,500,121 bonds redeemable in shares (“ORAs”) with a nominalvalue per bond of € 60.98, a coupon rate of 1% per annum and a ten-year term.The ORAs matured on July 11, 2004 and were redeemed by the issuance of26.7 million new shares of the Company.

 

**13****          PROVISIONSFOR RISKS AND CHARGES**

 

 
| **(€ in millions)**                          | ** ** | **September   2004** | ** ** | **Fiscal year 2005** | ** ** | **September   2005** | ** ** |
|---------------------------------------------------|------------|---------------------------|------------|----------------------|------------|---------------------------|------------|
| **Additions**                                     | ** ** | **Reversals**             | ** ** |
| Provisions for  major fixed asset renovations (a) |       | 87.8                      |       | 20.3                 |       | (22.3                     | )          | **85.8** | ** ** |
| Other provisions  (b)                             |       | 10.4                      |       | 7.2                  |       | (6.5                      | )          | **11.1** | ** ** |
|                                              |       | 98.2                      |       | 27.5                 |       | (28.8                     | )          | **96.9** | ** ** |

 

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*(a)**              Provisionfor major fixed asset renovations*

 

Fiscal year 2005 additions represent the adjustment ofthe provision based upon estimated future renovation expenditures as of September 30,2005. Fiscal year 2005 reversals represented the cost of major fixed assetrenovations completed during the fiscal year.

 

*(b)**              Otherprovisions*

 

At September 30, 2005, provisions for risks andcharges primarily included provisions for various charges, claims andlitigation. Reversals without costs were not significant.

 

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**14****          BORROWINGS**

 
| ** **                          | ** ** | **Stated**      | ** ** | **September 2005****(3)** | ** ** | ** **          | ** ** | ** **  | ** ** |
|-------------------------------------|------------|-----------------|------------|--------------------------------|------------|---------------------|------------|-------------|------------|
| ** **                          | ** ** | **Interest**    | ** ** | **Borrowings**                 | ** ** | **September  2004** | ** ** | ** **  | ** ** |
| **(€ in millions)**            | ** ** | **Rate****(1)** | ** ** | **Lease****(2)**               | ** ** | **Direct**          | ** ** | **Total**   | ** ** | ** ** | **Variance** | ** ** |
| CDC Senior Loans (a)                |       | 5.51            | %          | 211.9                          |       | 30.6                | ** ** | **242.5**   |       | 127.5 |   | 115.0 |   |
| CDC Subordinated Loans(a)           |       | 4.87            | %          | 149.4                          |       | 569.2               | ** ** | **718.6**   |       | 783.8 |   | (65.2 | ) |
| Credit Facility – Phase IA(b)  |       | 5.18            | %          | 188.7                          |       | 84.8                | ** ** | **273.5**   |       | 340.1 |   | (66.6 | ) |
| Credit Facility – Phase IB(c)  |       | 5.18            | %          | 103.0                          |       | 18.0                | ** ** | **121.0**   |       | 150.5 |   | (29.5 | ) |
| Partner Advances – Phase IA(d) |       | 3.00            | %          | 304.9                          |       | —              | ** ** | **304.9**   |       | 304.9 |   | — |   |
| Partner Advances – Phase IB(e) |       | 3.35            | %          | 93.2                           |       | —              | ** ** | **93.2**    |       | 96.9 |   | (3.7 | ) |
| TWDC Loans(f)                       |       | 2.33            | %          | 17.3                           |       | 135.0               | ** ** | **152.3**   |       | 17.3 |   | 135.0 |   |
| TWDC Line of Credit(g)              |       | 2.18            | %          | —                         |       | —              |       | **—**  |       | 125.0 |   | (125.0 | ) |
| Sub-total                           |       | 4.47            | %          | 1,068.4                        |       | 837.6               | ** ** | **1,906.0** |       | 1,946.0 |   | (40.0 | ) |
|                                |       |            |       |                           |       |                |       | ** **  |       |   |   |   |   |
| Accrued Interest                    |       |            |       | 17.0                           |       | 20.4                | ** ** | **37.4**    |       | 106.8 |   | (69.4 | ) |
|                                |       |            |       |                           |       |                |       | ** **  |       |   |   |   |   |
| **Total Borrowings**                |       |            |       | 1,085.4                        |       | 858.0               | ** ** | **1,943.4** |       | 2,052.8 |   | (109.4 | ) |

 

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*(1)**              Thestated interest rate represents the weighted average interest rate for eachborrowing. For variable rate borrowings, interest rates are based upon therates as of September 30, 2005, plus the applicable margin. These ratesare not necessarily an indication of future interest rates.*

*(2)**              Representsthe borrowings of the consolidated Financing Companies. These debt balancesunderlie the Group’s contractual lease commitments.*

*(3)**              Asof September 30, 2005, the Group had no interest rate hedging instrumentsoutstanding.*

 

*(a)**             **Caisse des Dépôts etConsignations (“CDC”) loans*

 

The Group’s loans with the CDC are listed below:

 
| **(€ in millions)**   | ** ** | **September 2005** | ** ** | **September  2004** | ** ** | **Variance** | ** ** |
|----------------------------|------------|-------------------------|------------|---------------------|------------|--------------|------------|
| **Senior**                 | ** ** | **Subordinated**        | ** ** | **Total**           |
| Phase I Loans              |       | 242.5                   |       | 277.7               | ** ** | **520.2**    |       | 530.2 |   | (10.0 | ) |
| Walt Disney  Studios Loans |       | —                  |       | 440.9               | ** ** | **440.9**    |       | 381.1 |   | 59.8 |   |
|                       |       | 242.5                   |       | 718.6               | ** ** | **961.1**    |       | 911.3 |   | 49.8 |   |

 

Underthe CDC Phase I Loan agreements with the Company and the Phase IA FinancingCompany, the senior debt is collateralized by the Disneyland Park, DisneylandHotel, Davy Crockett Ranch, other related facilities and the underlying landthereof. The subordinated debt is not collateralized. Debt service payments aredue semi-annually with principal repayments beginning in fiscal year 2008. Theloans originally bore interest at a fixed rate of 7.85%; however, effective asof September 30, 1999, the terms of these loans were modified so as toreduce the fixed interest rate to 5.15% and extend the final maturity date tofiscal year 2024. At September 30, 2005 and 2004, accrued interest relatedto the Phase I Loans was € 12.1 million and € 25.0 millionrespectively.

 

Theimpact of the Restructuring on the CDC Phase I Loan agreements includes thedeferral of principal payments falling between 2004 and 2016 by 3.5 years. Inreturn, the interest rate on € 48.3 million of principal was increasedfrom a fixed rate of 5.15% per annum to 7.15% payable semi-annually and € 10million of principal was pre-paid upon the effective date of the Restructuring.Also, pursuant to the terms of the Restructuring, € 125 million of subordinatedloans were converted into senior loans during fiscal year 2005.

 

Underthe Walt Disney Studios Park Loans, on September 30, 1999, the CDC grantedthe Company € 381.1 million of subordinated loans to finance a portion of theconstruction costs of Walt Disney Studios Park. The original credit agreementincluded four loan tranches, two of € 76.2 million each maturing in fiscalyears 2015 and 2021, respectively, and two of € 114.3 million, each maturing in fiscal years 2025 and 2028, respectively. Theloans bear interest at a fixed rate of 5.15% per annum, unless interest orprincipal payments were to be deferred under the provisions of the loans,during which time the interest rate on the deferred amounts is EURIBOR plus amargin of 200 basis points (4.15 % as of September 30, 2004) or 5.15%,whichever is greater.

 

81

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Underthe original terms of Walt Disney Studios Loans, the timing of annual debtservice payments depended on the size of the Group’s surpluses in cash andshort-term investments at each scheduled annual payment date (December 31).In accordance with the loan agreements, as of September 30, 2004, € 57.9million (including interest accrued on the deferred interest) was deferredrepresenting the annual interest payments due with respect to December 31,2001, 2002 and 2003. As a result of the Restructuring, the December 31,2004 interest payment was deferred until the effective date of theRestructuring and was paid in full on February 23, 2005. Pursuant to theRestructuring, the deferred interest payments with respect to 2001 through 2003of € 59.8 million (including accrued interest through February 23, 2005)were converted into subordinated long-term debt, bearing interest at a fixedrate of 5.15 %, repayable only after the repayment of the Phase IA and IBCredit Facilities and Partners Advances and the CDC Senior Loans. Goingforward, subject to the immediately following paragraph, interest payments willbe due annually on December 31.

 

Also,pursuant to the Restructuring, the CDC agreed to forgive € 2.5 million ofinterest on the Walt Disney Studios Park Loans per year starting in December,31 2004 and continuing through 2011 and to conditionally defer and convert tosubordinated long-term debt, interest payments up to a maximum amount of € 20.1million per year for each of the fiscal years 2005 through 2012 and € 22.6million per year for each of the fiscal years 2013 and 2014.

 

As aresult, during fiscal year 2005, unconditional waivers of € 4.2 million wererecorded. No conditional deferral was triggered with respect to fiscal year2005(1). At September 30, 2005 and 2004, accrued interestrelated to Walt Disney Studios Loans totaled € 14.6 million and € 73.4 million,respectively.

 

*(b)**              CreditFacility - Phase IA*

Pursuantto credit agreements with a syndicate of international banks, the Company andthe Phase IA Financing Company originally borrowed € 972.6 million (€ 504.0million of which was prepaid as part of the 1994 financial restructuring).The obligations under this credit facility are collateralized by DisneylandPark, Disneyland Hotel, Davy Crockett Ranch, other related facilities and theunderlying land thereof. The loans bear interest at EURIBOR plus a margin,which has varied over time. During fiscal year 2005 the interest rate applicableto these loans was EURIBOR plus 3% (5.18% as of September 30, 2005).

 

Theimpact of the Restructuring on the Phase IA Credit Facility agreements includedthe deferral of all principal payments for 3.5 years with the final maturity ofthe loan remaining unchanged on May 2012. In return for these concessions,the interest rate was increased to EURIBOR plus 3 percentage points and€ 66.6 million of principal was pre-paid upon the effective date of theRestructuring using the debt security deposits (See Note 4). At September 30,2005 and 2004, accrued interest related to this Credit Facility was € 1.2million and € 0.1 million, respectively.

 

*(c)**              CreditFacility - Phase IB*

Pursuantto the credit agreements with a syndicate of international banks, EDL HôtelsS.C.A. and the Phase IB Financing Companies borrowed € 410.1 million (€ 210.3million of which was prepaid as part of the 1994 financial restructuring).The obligations under this credit facility are collateralized by the Phase IBFacilities. Regular principal repayments commenced in fiscal year 1998 withfinal repayment scheduled in fiscal year 2012. The loans bear interest atEURIBOR plus a margin, which has varied over time. During fiscal year 2005 theinterest rate applicable to these loans was EURIBOR plus 3% (5.18% as of September 30,2005).

 

Theimpact of the Restructuring on the Phase IB Credit Facility agreements includedthe deferral of all principal payments for 3.5 years with final maturity of theloan no later than November 5, 2012. In return for these concessions, theinterest rate was increased to EURIBOR plus 3 percentage points and € 29.5million of principal was pre-paid upon the effective date of the Restructuringusing the debt security deposits (See Note 4). At September 30, 2005 and2004, accrued interest related to this Credit Facility was € 0.9 million and €0.7 million, respectively.

 

*(d)**             **Partner Advances - Phase IA*

Pursuantto loan agreements, the Phase IA Financing Company borrowed € 304.9 millionfrom the partners of the Phase IA Financing Company at a fixed rate of 3%.These advances are not collateralized and subordinated to the CDC Phase I Loansand the Credit Facility – Phase IA. Principal repayments will not begin untilthe Phase IA Financing Company realizes cumulative taxable income. Pursuant tothe 1994 financial restructuring, these loans were the subject of continuinginterest forgiveness through the end of fiscal year 2003 and thus bore interestat a fixed rate after forgiveness of 1.38%. As of October 1, 2003 (the firstday of fiscal year 2004) the interest rate on these advances returned to thecontractual fixed interest rate of 3%. The impact of the Restructuring on thePhase IA Partner Advances includes the deferral either directly or indirectlyof principal payments for 3.5 years. At September 30, 2005 and 2004,accrued interest related to these Partner Advances was € 1.6 million and € 2.0million, respectively.

----

(1) For clarity, note thatalthough no conditional deferral was recorded in fiscal year 2005, fiscal year2005 will serve as a basis to determine the conditional deferral for fiscal year2006.

 

82

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*(e)**              PartnerAdvances - Phase IB*

Pursuantto loan agreements, the Phase IB Financing Companies borrowed € 121.9 million(€ 25.0 million of which was prepaid as part of the 1994 financialrestructuring) from the partners of the Phase IB Financing Companies. The “PhaseIB Partners Advances” consist of € 18.8 million of bank borrowings bearinginterest at EURIBOR plus 3% (5.18% at September 30, 2005) and € 78.0million bearing interest at a fixed rate of 3%. These advances arecollateralized by the Phase IB Facilities. For the fixed-rate portion of thePartner Advances, principal repayments will not begin until the Phase IBFinancing Companies realize cumulative taxable income. Pursuant to the 1994financial restructuring, the fixed rate portion of these advances was thesubject of continuing interest forgiveness through the end of fiscal year 2003and thus bore interest at a fixed rate after forgiveness of 1.95%. As of October 1,2003 (the first day of fiscal year 2004) the interest rate on this portion ofthese advances returned to the contractual fixed interest rate of 3%. Theimpact of the Restructuring on the Phase IB Partner Advances includes the deferraleither directly or indirectly of principal payments for 3.5 years.

At September 30,2005 and 2004, accrued interest related to these Partner Advances was € 0.4million.

 

*(f)**                TWDCLoans*

TWDCLoans include subordinated long-term loans resulting from the terms of theRestructuring and amounts borrowed by Centre de Congrès Newport S.A.S., a 100%indirect subsidiary of TWDC, which since October 1, 2003 (the first day offiscal year 2004) has been included in the Group’s consolidated financialstatements, as special purpose financing company.

 

*Long-Term Subordinated Loan – Deferral of Expired Line ofCredit Balance*

Pursuantto the terms of the Restructuring, TWDC has granted the Group, a € 110.0million long-term subordinated loan bearing interest at 12-month EURIBOR,compounded annually and repayable only after the repayment of all Phase I debtand the CDC Senior Loans. This loan was granted as payment in full for thebalance of the existing TWDC € 167.7 million line of credit that expired February 23,2005, as described below. At September 30, 2005, accrued interest relatedto this loan was € 1.6 million.

 

*Long-TermSubordinated Loan – Unconditional Deferral of Management Fees and Royalties*

Also pursuant to the terms of the Restructuring,TWDC has agreed to unconditionally defer and convert into long-termsubordinated debt certain management fees and royalties payable, up to amaximum amount of € 25 million with respect to each of fiscal years 2005through 2009. The resulting long-term subordinated debt bears interest startingon December 31 of the fiscal year following the deferral at 12-monthEURIBOR, compounded annually. Principal will be payable after the Group’ssenior debt and subordinated debt (other than the CDC Walt Disney Studios ParkLoans) have been repaid, starting in 2023 and interest will begin to be paidannually from January 2017. As ofSeptember 30, 2005, there was no accrued interest due with respect to thisloan.

 

*Centre de Congrès Newport S.A.S.*

As aresult of the consolidation of this special purpose Financing Company, theGroup’s debt includes a loan made available by TWDC to *Centre de Congrès Newport S.A.S.* tofinance the construction of the Newport Bay Club Convention Centre, whichopened in fiscal year 1998. The outstanding balance under this loan as of September 30,2005 is € 17.3 million and bears interest at 6-month EURIBOR plus 0.20%. At September 30,2005 and 2004, accrued interest related to this loan was € 5.0 million and €4.6 million, respectively.

 

*(g)**              TWDCLine of Credit*

As part ofthe 1994 financial restructuring, TWDC agreed to make available, until June 2004,a subordinated unsecured € 167.7 million standby revolving credit facility to the Group, which boreinterest at EURIBOR (2.39% as of September 30, 2004). During fiscal year2004, TWDC agreed to extend this line of credit to accommodate the negotiationsfor the Restructuring.

 

During fiscal year2005, pursuant to the terms of the Restructuring, the Company repaid € 5.0million of the balance of the expiring line of credit in cash, TWDC forgave €10.0 million of the balance, and converted the remaining € 110.0 millionbalance into subordinated long-term debt as described above in Note 14.

Upon the effectivedate of the Restructuring, the existing € 167.7 million TWDC line of creditexpired and a new € 150 million line of credit took its place, bearing interestat EURIBOR. The new line of credit will be reduced to € 100 million on October 1,2009 and expires on September, 30 2014. The Company had not drawn on the newline of credit as of September 30, 2005.

 

83

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**FinancialExpense**

Fiscalyear 2005 financial expense totaled € 91.8 million and was composed of € 83.5million of interest expenses and € 8.3 million of various financial expensesincluding debt issue cost amortization and credit card commissions.

 

**DebtCovenants**

TheGroup’s debt agreements include covenants between the Group and the lenders,which were significantly modified as a result of the Restructuring. Therenegotiated covenants continue to include restrictions on additionalindebtedness and capital expenditures, the provision of certain financialinformation and compliance with a financial covenant based upon the ratios ofcertain actual and forecasted cash flows (as defined in our bank agreements) tothe Group’s debt service payment requirements. Compliance with the latter doesnot begin until fiscal year 2006.

 

**DebtMaturity Schedule**

The table below summarizes thescheduled principal maturities of the Group’s borrowings as of September 30,2005:

 
| **(€ in millions)** | *** *** | *** *** | *** *** |
|--------------------------|--------------|--------------|--------------|
| 2006                     | ** **   | **—**   | ** **   |
| 2007                     | ** **   | **—**   | ** **   |
| 2008                     |         | 60.1         |         |
| 2009                     |         | 86.2         |         |
| 2010                     |         | 93.7         |         |
| Thereafter               |         | 1,666.0      |         |
|                     |         | **1,906.0**  |         |

 

**15****          PAYABLETO RELATED COMPANIES**

 

Payables to related companies principally includepayables to wholly-owned subsidiaries of TWDC for royalties and management feesand other costs associated with the operation and development of the Resort.All amounts are due within one year.

 

**16****          ACCOUNTSPAYABLE AND ACCRUED LIABILITIES**

 

 
| ** **                     | ** ** | **September** | ** ** |
|--------------------------------|------------|---------------|------------|
| **(€ in millions)**       | ** ** | **2005**      | ** ** | **2004** | ** ** |
| Suppliers                      | ** ** | **143.7**     |       | 130.6 |   |
| Payroll and  employee benefits | ** ** | **68.4**      |       | 65.3 |   |
| VAT                            | ** ** | **19.3**      |       | 23.5 |   |
| Other                          | ** ** | **63.8**      |       | 64.9 |   |
| ** **                     |       | **295.2**     |       | 284.3 |   |

 

Asof September 30, 2005, payable and accrued liabilities includednon-current payables amounting to € 20.3 million.

 

**17****          DEFERREDREVENUES**

 

Deferredrevenues consist primarily of pre-paid rent income received on long-term groundlease contracts with third-party developers and participant revenues that arebeing recognized as income straight-line over the term of the related contract,as well as amounts received from guests in advance of their visit.

 

TheGroup’s deferred revenues as of September 30, 2005 have the followingscheduled revenue recognition:

 
| **(€ in millions)** | *** *** | *** *** | *** *** |
|--------------------------|--------------|--------------|--------------|
| 2006                     |         | 52.3         |         |
| 2007                     |         | 3.2          |         |
| 2008                     |         | 2.6          |         |
| 2009                     |         | 2.2          |         |
| 2010                     |         | 2.6          |         |
| Thereafter               |         | 30.9         |         |
| ** **               | ** **   | **93.8**     | ** **   |

 

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**18****          REPORTEDSEGMENTS**

 

TheGroup has two reportable segments: the Resort Segment, which includes theoperations of the Theme Parks, Hotels and Disney Village, and the Real EstateSegment. The Group evaluates the performance of its segments based primarily onincome before net financial charges, exceptional items and taxes and onearnings before interest, income taxes, depreciation, amortization, minorityinterest and exceptional items (“EBITDA”). The Group does not evaluate theperformance of its segments based upon their respective fixed asset values. Theaccounting policies of these segments are the same as those described in Note2.

 

Thetable below presents information by segment:

 
| ** **                                              | ** ** | **Fiscal Year** | ** ** |
|---------------------------------------------------------|------------|-----------------|------------|
| **(€ in millions)**                                | ** ** | **2005**        | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Segment  Revenues**                                   |       | ** **      |       |   |   |   |   |
| Resort Segment                                          | ** ** | **1,047.3**     |       | 1,036.2 |   | 1,023.9 |   |
| Real Estate Segment                                     | ** ** | **28.7**        |       | 11.8 |   | 23.6 |   |
| **Total**                                               | ** ** | **1,076.0**     |       | 1,048.0 |   | 1,047.5 |   |
|                                                    |       | ** **      |       |   |   |   |   |
| **Segment  Costs and Expenses**                         |       | ** **      |       |   |   |   |   |
| Resort Segment                                          | ** ** | **(1,080.9**    | **)**      | (1,061.8 | ) | (901.8 | ) |
| Real Estate Segment                                     | ** ** | **(22.0**       | **)**      | (10.1 | ) | (13.3 | ) |
| **Total  Costs and Expenses**                           | ** ** | **(1,102.9**    | **)**      | (1,071.9 | ) | (915.1 | ) |
|                                                    |       | ** **      |       |   |   |   |   |
| **Segment  Income (Loss) before Net Financial Charges** |       | ** **      |       |   |   |   |   |
| Resort Segment                                          | ** ** | **(33.6**       | **)**      | (25.6 | ) | 122.1 |   |
| Real Estate Segment                                     | ** ** | **6.7**         |       | 1.7 |   | 10.3 |   |
| **Total  Loss before Net Financial Charges**            | ** ** | **(26.9**       | **)**      | (23.9 | ) | 132.4 |   |

 

**19****          COSTSAND EXPENSES**

 

Thetable below presents costs and expenses of the Group by category:

 
| ** **                           | ** ** | **Fiscal Year** | ** ** |
|--------------------------------------|------------|-----------------|------------|
| **(€ in millions)**             | ** ** | **2005**        | ** ** | **2004****(1)** | ** ** | **2003** | ** ** |
| Direct operating  costs (a)          | ** ** | **697.6**       |       | 663.5 |   | 639.5 |   |
| Marketing and  sales expenses        | ** ** | **104.0**       |       | 112.6 |   | 105.2 |   |
| General and  administrative expenses | ** ** | **97.9**        |       | 91.3 |   | 96.7 |   |
| Depreciation and  amortization       | ** ** | **144.0**       |       | 146.8 |   | 65.6 |   |
| Royalties and  management fees (b)   | ** ** | **59.4**        |       | 57.7 |   | 6.1 |   |
| ** **                           |       | **1,102.9**     |       | 1,071.9 |   | 915.1 |   |

 

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(1)              *Certain reclassificationshave been made to the fiscal year 2004 comparative amounts in order to conform tothe fiscal year 2005 presentation.*

 

*(a)**              DirectOperating Costs*

Directoperating costs include operating wages and employee benefits, cost of salesfor merchandise and food and beverage, transportation services and real estateland sales and other costs such as utilities, maintenance, renovationsexpenses, insurance and operating taxes.

 

*(b)**              Royaltiesand Management Fees*

Royaltiesrepresent primarily payments to a wholly-owned indirect subsidiary of TWDCunder a license agreement that grants the Group the right to use any present orfuture intellectual or industrial property of TWDC incorporated in attractionsor other facilities including the right to sell merchandise incorporatingintellectual property rights owned by TWDC. Management fees are payable to EuroDisney S.A.S., the Company’s *Gérant*, asspecified in the Company’s by-laws. Royalties and management fees are basedprimarily upon operating revenues and are currently payable annually.

 

85

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Infiscal year 1999, after a five-year waiver resulting from the 1994 financialrestructuring, royalties were reinstated at half their original rate andmanagement fees were reinstated at a reduced rate. Royalties were fullyreinstated beginning October 1, 2003 (the first day of fiscal year 2004)and management fees will progressively increase through fiscal year 2018.

 

Pursuant to the Restructuring, TWDC agreed to defermanagement fees and royalties due by the Group to affiliates of TWDC, on anunconditional basis for a total amount of € 125 million and on a conditionalbasis for a total amount up to € 200 million as follows:

 

•                  TWDC has agreed to unconditionally defer andconvert into long-term subordinated debt certain management fees and royaltiespayable, up to a maximum amount of € 25 million with respect to each of fiscalyears 2005 through 2009. The resulting long-term subordinated debt bearsinterest starting on December 31 of the fiscal year following the deferralat 12-month EURIBOR, compounded annually. Principal will be payableafter the Group’s senior debt and subordinated debt (other than the CDC WaltDisney Studios Park Loans) have been repaid, starting in 2023 and interest willbegin to be paid annually from January 2017 (See Note 14).

 

Fiscalyear 2005 royalties totaled € 48.7 million and management fees totaled € 10.8million, of which payment of € 25 million has been deferred long-termin accordance with the unconditional deferral described above.

 

•                  TWDC agreed to conditionally defer andconvert into subordinated long-term debt, certain management fees and, asnecessary royalties, up to maximum annual amount of € 25 million due withrespect to each of fiscal years 2007 to 2014. The amount, if any, of thedeferral will be determined by reference to a performance indicator defined inthe deferral agreement and based upon the Group’s financial performance. If theGroup’s financial performance as reflected in the calculation of theperformance indicator is less than the reference amount reflected in thedeferral agreement for a given fiscal year, then the deferred amount for suchfiscal year will be equal to the difference (up to a maximum of € 25 million).Deferred amounts converted into long-term subordinated debt will have the sameinterest and repayment terms as those applicable to the unconditionallydeferred amounts described above. No amounts were conditionally deferred underthis agreement in fiscal year 2005.

 

Additionally,the Group has a contingent liability related to TWDC’s March 2003 waiverof royalties and management fees payable for the second, third and fourthquarters of fiscal year 2003. Fiscal year 2003 royalties and management feeswere reduced by the € 24.6 million waiver and totaled € 8.1 million (€ 5.6million for royalties and € 2.5 million for management fees). The waived amountmay in the future become payable if and to the extent that income beforelease and financial charges excluding depreciation and amortization for anyyear from fiscal year 2004 through fiscal year 2008 exceeds € 450 million. Asof September 30, 2005, no accrual for this contingent liability has beenrecorded.

 

**20****     EXCEPTIONALINCOME (LOSS)**

 
| ** **                                                           | ** ** | **Fiscal Year** | ** ** |
|----------------------------------------------------------------------|------------|-----------------|------------|
| **(€ in millions)**                                             | ** ** | **2005**        | ** ** | **2004** | ** ** | **2003** | ** ** |
| Restructuring  costs (a)                                             | ** ** | **(8.6**        | **)**      | (12.6 | ) | — |   |
| Fixed asset sales  / write-offs (b)                                  | ** ** | **(0.5**        | **)**      | (9.4 | ) | 11.6 |   |
| TWDC credit-line  forgiveness (see Note 14g)                         | ** ** | **10.0**        | ** ** | — |   | — |   |
| Movements in  provisions for risks and asset valuation reserves, net | ** ** | **(0.3**        | **)**      | (1.4 | ) | (0.5 | ) |
| Other                                                                | ** ** | **(0.2**        | **)**      | 1.1 |   | 0.8 |   |
| ** **                                                           |       | **0.4**         | ** ** | (22.3 | ) | 11.9 |   |

 

----

*(a)**              Restructuringcosts*

During fiscalyears 2005 and 2004, the Group incurred € 8.6 million and € 12.6 million,respectively of costs related to the negotiation of the Restructuring includingprimarily fees and expenses paid to its lenders and other third parties, inconnection with the negotiations of the Restructuring.

 

*(b)**              Fixedasset sales / write-offs*

Infiscal year 2004, the Group recorded a € 9.2 million write-off of equipmentwithin an attraction in Disneyland Park that is being replaced.

 

86

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**21****          INCOMETAXES**

 

Incometax expense is calculated using the statutory tax rate in effect in France asof the balance sheet date. For fiscal years 2005 and 2004, this rate was 34.9%and 35.4%, respectively.

 

Inconjunction with the Restructuring, the Group implemented a reorganizationwithin its legal structure, which made the Group ineligible to file aconsolidated tax return for fiscal year 2005. As a result, € 1.1 million ofincome tax is payable with respect to fiscal year 2005. No income tax waspayable with respect to fiscal year 2004 as no taxable income was generated bythe Group.

 

At September 30,2005, unused tax loss carryforwards were approximately € 1 billion and can becarried forward indefinitely. Due to the uncertainty of the ultimaterealization of these tax benefits, the Group has not recorded any deferred taxassets.

 

**22****          STOCKOPTIONS**

 

TheCompany’s shareholders have approved the implementation of four different stockoption plans since 1994 authorizing the issuance of stock options foracquisition of the Company’s outstanding common stock at a market exerciseprice calculated as the average closing market price over the preceding 20trading days preceeding a stock option grant. The options are valid for amaximum of 10 years from their issuance date and become exercisable over aminimum of 4 years in equal installments beginning one year from the date ofgrant. Upon termination of employment, any unvested options are cancelled aftera specified period of time.

 

Asummary of the Company’s stock option activity for the years ended September 30,2005 and 2004, is as follows:

 
| ** **                               | ** ** | **Number of Options** | ** ** | **Weight-average  Exercise Price** | ** ** |
|------------------------------------------|------------|-----------------------|------------|------------------------------------|------------|
| ** **                               | ** ** | **(in thousands)**    | ** ** | **(in €)**                    | ** ** |
| **Balance  at September 30, 2003**  | ** ** | **29,310**            | ** ** | **1.02**                           | ** ** |
|                                     |       |                  |       |                               |       |
| Options granted                          |       | —                |       | —                             |       |
| Options  exercised                       |       | —                |       | —                             |       |
| Options  cancelled                       |       | (2,761                | )          | 0.99                               |       |
| **Balance  at September 30, 2004**  | ** ** | **26,549**            | ** ** | **1.03**                           | ** ** |
|                                     |       |                  |       |                               |       |
| Options granted                          |       | 52,566                |       | 0.13                               |       |
| Options exercised                        |       | —                |       | —                             |       |
| Options  cancelled                       |       | (7,673                | )          | (1.13                              | )          |
| Options granted  dilution adjustment (1) |       | 26,791                |       | 0.39                               |       |
| **Balance  at September 30, 2005**  | ** ** | **98,233**            | ** ** | **0.26**                           | ** ** |

 

----

*(1)** Options granted pursuant to share capital increase.*

 

Thefollowing table summarizes information about stock options at September 30,2005:

 
| ** **                                            | ** ** | **Options Outstanding** | ** ** | **Options Exercisable**                          | ** ** |
|-------------------------------------------------------|------------|-------------------------|------------|--------------------------------------------------|------------|
| **Range of    Exercise Price**                   | ** ** | **Number of Shares**    | ** ** | **Weighted-average Remaining  Contractual Life** | ** ** | **Weighted-average  Exercise Price** | ** ** | **Number of   Shares** | ** ** | **Weighted-average  Exercise Price** | ** ** |
| ** **                                            | ** ** | **(in thousands)**      | ** ** | **(in years)**                                   | ** ** | ** ** | ** ** | **(in thousands)** | ** ** | ** ** | ** ** |
| €      0.13 – 0.40 |       | 76,630                  |       | 6.6                                              |       | € |  0.20 |   | 21,548 |   | € |  0.34 |   |
| €      0.40 – 0.80 |       | 21,354                  |       | 3.9                                              |       | € |  0.48 |   | 15,278 |   | € |  0.49 |   |
| €      0.80 – 0.84 |       | 249                     |       | 0.4                                              |       | € |  0.84 |   | 249 |   | € |  0.84 |   |
|                                                  |       | 98,233                  |       | 6.0                                              |       | € |  0.26 |   | 37,075 |   | € |  0.41 |   |

 

87

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**23****          FINANCIALINSTRUMENTS**

 

**23-1 Interest rate risk management transactions**

 

The Group uses interest rate swaps and otherinstruments to manage its exposure to changes in interest rates. The impact ofchanges in interest rates affects financial income and expense of the Group.

 

The following table summarizes the underlying notionalamounts of borrowings subject to interest rate hedging contracts during theyears ended September 30, 2005 and 2004.

 
| **(€ in millions)**                   | ** ** | **Underlying  Borrowings** | ** ** |
|--------------------------------------------|------------|----------------------------|------------|
| **Balance  at September 30, 2003**    | ** ** | **531.7**                  | ** ** |
|                                       |       |                       |       |
| Additions                                  |       | —                     |       |
| Maturities/Terminations                    |       | (471.7                     | )          |
| **Balance  at September 30, 2004**    | ** ** | **60.0**                   | ** ** |
|                                       |       |                       |       |
| Additions                                  |       | —                     |       |
| Maturities/Terminations                    |       | (60.0                      | )          |
| **Balance  at September 30, 2005**(1) | ** ** | **—**                 | ** ** |

 

During fiscal year 2003, theGroup entered into several interest rate swap agreements which became effectiveat or near September 30, 2003 and had a term of approximately one yearwith the last contracts expiring in November 2004. Those agreementsrequired the Group to pay fixed interest rates ranging from 2.05% to 3.56% andto receive interest payments based upon 3-month or 6-month Euribor on theoutstanding notional amounts.

 

The total interest rate differential resultingfrom interest rate hedging instruments was a loss of € 0.1 million and € 5.6million in fiscal year 2005 and fiscal year 2004, respectively. The fair valueof these contracts is estimated to be the same as the cost or gain to the Groupto terminate its interest rate hedging contracts. As at September 30, 2004taking into account the prevailing interest rate environment and creditworthiness of counterparties, this amount was nil.

 

**23-2Currency risk management transactions**

 

The Group’s exposure to foreign currency riskrelates principally to variations in the value of the U.S. dollar and Britishpound.

 

The Group’s objective is to reduce earningsand cash flow volatility associated with foreign exchange rate changes to allowmanagement to focus its attention on its core business issues and challenges.Accordingly, the Group enters into various contracts that change in value asforeign exchange rates change to protect the value of its existing foreigncurrency assets and liabilities, commitments and anticipated foreign currencyrevenues and expenses.

At September 30, 2005 and 2004, the Group had €78.3 million and € 17.2 million, respectively, of foreign currency hedgecontracts outstanding, consisting of forward exchange contracts and options.The fair value of these contracts is estimated to be the same as the cost orgain to the Group of terminating its foreign exchange contracts. This amountwas a profit of € 0.4 million and a loss of € 0.2 million at September 30,2005 and 2004 respectively.

 

**23-3 Concentrations of credit risk**

 

Management believes no significant concentration of credit risk exists withrespect to the Group’s financial instruments. The Group utilizes a variety ofoff-balance sheet instruments for hedging purposes. At September 30, 2005and 2004, the Group was not required to collateralize their respectiveobligations under the terms of these hedging contracts.

 

**24****          COMMITMENTSAND CONTINGENCIES**

 

Theoperating assets of the Group are financed using equity, borrowings andfinancial lease contracts. The lessors under the financial lease contracts are specialpurpose financing companies, which are included in the Group’s consolidatedfinancial statements. As a result, the liabilities under the lease contractsthemselves are eliminated in the consolidation process, while the borrowings ofthe Financing Companies are reflected as debt in the Group’s consolidatedbalance sheet.

 

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(1)     For the purpose of this Annual Report onForm 20-F. During the first semester of fiscal year 2005, the Group enteredinto new agreements to manage its exposure to change in interest rates.

 

88

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The Group’s financial obligations in respectof these borrowings were undertaken in several phases, corresponding generallyto those described in Note 1-2. The CDC is one of the principal lenders to theGroup, holding both senior loans and subordinated loans (including loansextended in 1999 to finance the construction of Walt Disney Studios Park). Thecreditors in respect of other loans are bank syndicates. The Group alsobenefits from advances made by the partners of the special purpose financingcompanies from which the Group leases assets (those partners are mainly banks,as well as other financing entities). The Group also has use of a credit linegranted by TWDC.

 

The Group’s obligations in respect of theseloans and other commitments are described in more detail in Notes 14, 19b and25. The table below sets out the Group’s borrowing as well as other contingentobligations and guarantees as of September 30, 2005.

 
| ** **                                                          | ** ** | **Principal Payments Due** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------|------------|
| **(€ in millions)**                                            | ** ** | **September  2005**        | ** ** | **Less than  1 year** | ** ** | **1-5  years** | ** ** | **More than  5 years** | ** ** |
| *CDC  Loans*                                                        |       |                       |       |   |   |   |   |   |   |
| Phase I Loans                                                       |       | 520.2                      |       | — |   | 7.7 |   | 512.5 |   |
| Walt Disney Studios Park Loans - Subordinated                       |       | 440.9                      |       | — |   | — |   | 440.9 |   |
|                                                                |       | 961.1                      |       | — |   | 7.7 |   | 953.4 |   |
| *Phase  IA Asset Financing (primarily Disneyland Park)*             |       |                       |       |   |   |   |   |   |   |
| Credit facility(1)                                                  |       | 273.5                      |       | — |   | 174.9 |   | 98.6 |   |
| Partner advances                                                    |       | 304.9                      |       | — |   | — |   | 304.9 |   |
|                                                                |       | 578.4                      |       | — |   | 174.9 |   | 403.5 |   |
| *Phase  IB Asset Financing (Hotels and Disney Village)*             |       |                       |       |   |   |   |   |   |   |
| Credit facility(1)                                                  |       | 121.0                      |       | — |   | 50.5 |   | 70.5 |   |
| Partner advances(1)                                                 |       | 93.2                       |       | — |   | 3.2 |   | 90.0 |   |
| TWDC - Newport Bay Club Convention Centre                           |       | 17.3                       |       | — |   | — |   | 17.3 |   |
|                                                                |       | 231.5                      |       | — |   | 53.7 |   | 177.8 |   |
| *TWDC  Loans*                                                       |       |                       |       |   |   |   |   |   |   |
| Subordinated  loan – Deferral of expired line of credit        |       | 110.0                      |       | — |   | — |   | 110.0 |   |
| Subordinated  loan – Deferral of management fees and royalties |       | 25.0                       |       | — |   | — |   | 25.0 |   |
|                                                                |       | 135.0                      |       | — |   | — |   | 135.0 |   |
|                                                                |       |                       |       |   |   |   |   |   |   |
| **Total  Borrowings**                                               | ** ** | **1,906.0**                | ** ** | — | ** ** | **236.3** | ** ** | **1,669.7** | ** ** |
|                                                                |       |                       |       |   |   |   |   |   |   |
| Contingent  obligations(2)                                          |       | 207.5                      |       | — |   | 24.6 |   | 182.9 |   |
| Operating lease  obligations(3)                                     |       | 65.2                       |       | 11.2 |   | 31.4 |   | 22.6 |   |
| Retirement  indemnities obligation(4)                               |       | 11.3                       |       | — |   | — |   | 11.3 |   |
| Purchase  obligations(5)                                            |       | 1.6                        |       | 1.1 |   | 0.5 |   | — |   |
| Other long-term  obligations(6)                                     |       | 20.3                       |       | — |   | 4.9 |   | 15.4 |   |
|                                                                |       |                       |       |   |   |   |   |   |   |
| **Total  Contractual Obligations****(7)**                           | ** ** | **2,211.9**                | ** ** | **12.3** | ** ** | **297.7** | ** ** | **1,901.9** | ** ** |

 

----

*(1)**             **Under French law, the legallycontrolled group (the Company and its subsidiaries) is jointly liable or hasguaranteed these obligations under the terms of the related credit agreements(see below).*

*(2)**             **Includes € 24.6 millioncorresponding to TWDC waiver of royalties and management fees (seeNote 19b) and € 182.9 million corresponding to TWDC development feessubject to conditions (see below).*

*(3)**             **Represents the operating leasecommitments as described in Note 25-2.*

*(4)**             **Represents the actuariallycalculated obligation for employee retirement indemnities. The entireobligation has been reported in the “More than 5 years” column as theGroup does not expect a significant number of retirements in the next fivefiscal years (see Notes 2 and 26).*

*(5)**             **Represents the maximum potentialrisk under purchase obligations with the Group’s sponsorship participants.*

*(6)**             **Represents a contractualobligation to the Seine-et-Marne Department (local governmental body) recordedon the line “Accounts payable and accrued liabilities” of the ConsolidatedBalance Sheet.*

*(7)**             **Comprised of the following (€ inmillions):*

 

| *Liabilities recorded on the balance sheet* | * * | *1,926.3* | * * |
|---------------------------------------------|----------|-----------|----------|
| *Off-balance  sheet obligations*            | * * | *285.6*   | * * |
| * *                                    | * * | *2,211.9* | * * |

 

Inaddition, the Group has provided certain other performance guarantees tocontractual partners, which, depending on future events, may require theGroup to pay an amount ranging from € 0 to € 31.5 million.

 

89

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TheCompany is jointly liable for all of Phase IA Financing Company’s obligationsunder the Phase IA Credit Facility until their scheduled maturity date in February 2012.These obligations total € 188.7 million as of September 30, 2005.

 

EDLHôtels S.C.A. has guaranteed all of Phase IB Financing Companies’ obligationsunder the Phase IB Credit Facility and the Phase IB Partner Advances untiltheir scheduled maturity date (2017 at the latest). These obligations total €196.2 million as of September 30, 2005.

 

As part ofthe terms of the 1994 financial restructuring, the Company was required to paya one-time development fee of € 182.9 million to TWDC upon the satisfaction ofcertain conditions, including conditions relating to the launch and financingof a second phase of development. In order to obtain the approval for thefinancing of Walt Disney Studios Park from the lenders, TWDC agreed to amendthe terms and conditions of the development fee so that it will not be dueuntil future events occur, including the repayment of the existing bank debt ofthe Company and of the CDC Walt Disney Studios Park Loans and the achievementby the Group of specified cash flow levels.

 

Thereare various legal proceedings and claims against the Group relating toconstruction and other activities incident to the conduct of its business.Management has established provisions for such matters and does not expect theGroup to suffer any material additional liability by reason of such actions,nor does it expect that such actions will have a material effect on itsliquidity or operating results.

 

**25****          LEASEDASSETS**

 

TheLegally Controlled Group owns Walt Disney Studios Park, Disneyland Hotel, theDavy Crockett Ranch, the golf course, the underlying land thereof and the landon which the other five hotels and Disney Village are located, and leasessubstantially all of the remaining operating assets. Prior to fiscal year 2004,pursuant to options available under French accounting principles, the Group didnot capitalize these leases, but rather accounted for them as operating leases.Starting in fiscal year 2004, the Group was required to consolidate theFinancing Companies that own the leased assets (see Note 2).

 

**25-1****                       DisneylandPark and Hotel Leases**

 

**Description**

TheGroup leases Disneyland Park, the Phase IB Facilities and the Newport Bay ClubConvention Centre, directly or indirectly, from seven special-purpose FinancingCompanies, all of which were consolidated into the financial statements of theGroup as of October 1, 2003 (the first day of fiscal year 2004) (see Note2). The following discussion summarizes the significant terms of each lease:

 

•**                  Disneyland Park- Phase IA Lease**

ThePhase IA lease structuring was modified in fiscal year 2005 as a result of thecompletion of the Restructuring. Under the lease structure in place since 1994,the Phase IA Financing Company leased Disneyland Park to Euro Disney AssociésS.N.C. (“EDA S.N.C.”), a 100% owned subsidiary of TWDC, under a financial lease(*crédit bail*). The lease paymentsdue each year under the financial lease were calculated to include the debtservice and other operating costs of the Phase IA Financing Company. Inaddition, the lease contained a variable rent calculated based upon the numberof paying guests visiting Disneyland Park. Under this structure, EDA S.N.C., inturn, sub-leased Disneyland Park to the Company for a term of 12 years,scheduled to end in 2006, with rent substantially equal to the amount invoicedby the Phase IA Financing Company to EDA S.N.C. At the end of the 12-yearsub-lease term, the Company had the option to acquire the leasehold position ofEDA S.N.C. upon payment of an option fee of approximately € 78.7 million. Ifthe Company did not exercise this option and thereby elected to discontinueleasing Disneyland Park under the financial lease, EDA S.N.C. could havecontinued to lease the assets, with an on-going option to purchase them for anamount approximating the balance of the Phase IA Financing Company’s thenoutstanding debt. Alternatively, EDA S.N.C. could have terminated the lease, inwhich case EDA S.N.C. would have paid the Phase IA Financing Company an amountequal to 75% of its then outstanding debt plus certain additional amountsdepending on the date of exercise, and could have then sold or leased theassets on behalf of the Phase IA Financing Company, in order to satisfy theremaining debt, with any excess proceeds payable to EDA S.N.C.

 

Pursuantto the terms of the Restructuring, EDA S.N.C. was transformed into a limitedpartnership (S.C.A.) in 2005 and became an 82% subsidiary of the Company. As aresult the sub-lease between EDA and the Company was terminated. EDA currentlycontinues to lease the Phase IA assets from the Phase IA Financing Companyunder the terms of the financial lease described above.

 

90

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•**                  Disneyland Park- Additional Capacity Assets Lease**

TheDisneyland Park – Additional Capacity Assets Lease was modified in fiscal year2005 as a result of the completion of the Restructuring. In 1994, EDA (at thattime an indirect wholly owned subsidiary of TWDC) purchased certain tangiblefixed assets, principally Disneyland Park attractions constructed subsequent toOpening Day, for their book value of € 213.4 million and subsequently leasedthe assets back to the Company for a period of 12 years for a fixed annuallease payment of  € 2.1 million. At theend of the lease term scheduled in 2006, the Company had the option to purchasethe assets for € 213.4 million. If this option was exercised, TWDC had agreedto provide financing over an eight-year term at an interest rate of 1% perannum. As an alternative to this purchase option, the Company had the option toenter into a new 12-year financial lease for these assets with EDA at the endof the original lease term, with terms substantially similar to those of thefinancing for the purchase option described above. At the end of this secondlease term, the Company had the option to purchase the leased assets for anominal amount.

 

Pursuantto the terms of the Restructuring, in 2005 EDA became an 82% subsidiary of theCompany and as a result this lease was terminated. As a result, thesepreviously leased assets are now owned and operated by the Legally ControlledGroup.

 

•**                  Hotel - Phase IBFacilities Leases**

EDL Hôtels S.C.A.leases the Phase IB Facilities from the six Phase IB Financing Companies. The leaseswill terminate in February 2011. The Group has the option to acquire atany time during the term of the lease the leased assets for an amountapproximating the balance of the Phase IB Financing Companies’ outstandingdebt.

 

•**                  Hotel - NewportBay Club Convention Centre Lease**

EDL Hôtels S.C.A.has sale-leaseback agreements with Centre de Congrès Newport S.A.S., for theNewport Bay Club Convention Centre. The lease began in November 1997 andhas a term of 20 years, at the end of which EDL Hôtels S.C.A. has the option torepurchase the convention centre for a nominal amount. Annual lease paymentsare based upon the construction costs of the asset and an interest rate of 6month EURIBOR + 20 basis points.

 

***Lease Payments, Commitments and Book Value of Leased Assets***

As theGroup consolidates the Financing Companies from which it leases the abovedescribed assets, the historical cost and depreciation of these assets (seeNote 3) and related collateralized indebtedness (see Note14) are included inthe Group’s consolidated financial statements.

 

**25-2Other Leases**

 

TheGroup has other operating leases, primarily for office and computer equipmentand vehicles, for which total rental expense was € 31.8 million and € 30.8million for the years ended****September 30,2005 and 2004, respectively. Future minimum rental commitments under thesenon-cancelable operating leases as of September 30, 2005 are as follows:

 
| **(€ in millions)** | ** ** | ** ** | ** ** |
|------------------------------------|------------|------------|------------|
| 2006                               |       | 11.2       |       |
| 2007                               |       | 9.9        |       |
| 2008                               |       | 8.6        |       |
| 2009                               |       | 6.6        |       |
| 2010                               |       | 6.3        |       |
| Thereafter                         |       | 22.6       |       |
| ** **                         | ** ** | **65.2**   | ** ** |

 

**26****          EMPLOYEES**

 

Theweighted-average number of employees employed by the Group was:

 
| ** **   | ** ** | **Fiscal Year** | ** ** |
|--------------|------------|-----------------|------------|
| ** **   | ** ** | **2005**        | ** ** | **2004** | ** ** | **2003** | ** ** |
| *Cadres*     | ** ** | **2,565**       |       | 2,376 |   | 2,328 |   |
| *Non-cadres* | ** ** | **9,684**       |       | 9,786 |   | 9,895 |   |
| ** **   |       | **12,249**      |       | 12,162 |   | 12,223 |   |

 

Total employee costs for the years ended September 30,2005 and 2004 were € 392.0 million and € 366.0 million, respectively.

All employees participate in state funded pensionplans in accordance with French laws and regulations. Certain employees alsoparticipate in a supplemental defined contribution plan. Contributions to allplans are based on gross wages and are shared between the employees and theGroup. Contributions paid by the Group are expensed as incurred.

 

91

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In addition, retirement indemnities are paid under theterms of the Group’s collective bargaining agreements. Under the currentagreement, a retirement indemnity ranging from one-half a month to 3 months ofgross wages is provided to employees who retire from the Group at the age of 60or older after completing at least 1 year of service.

 

The obligation for these employee retirementindemnities was actuarially calculated using an estimated inflation rate of1.5%, a discount rate of 4.0% and a labor inflation rate between 2.25% and2.75% and assuming that retirement dates are at the initiative of the employee.

As of September 30, 2005, the future commitmentwith respect to these retirement indemnities was estimated to be € 11.3 millioncompared to € 8.6 million as of September 30, 2004.

 

**27****          DIRECTORS’FEES**

 

Duringthe years ended September 30, 2005 and 2004, fees paid to members of theCompany’s Supervisory Board were € 121,948 and € 106,755, respectively. TWDCemployees are not paid for serving on the Company’s Supervisory Board.(2)

 

**28****          SUPPLEMENTALPRO-FORMA FINANCIAL INFORMATION**

 

Thereconciliation below presents consolidated financial information on a pro-formabasis as if the change in accounting principles described below was in effectduring all of fiscal year 2003.

 

**Consolidationof Financing Companies (effective from first day of fiscal year 2004)**

 

Effectivefrom the beginning of fiscal year 2004 (October 1, 2003), the Groupadopted new accounting rules mandated by the Financial Security Law (Article 133of the *Loi de Sécurité Financière)*with respectto the consolidation of financing companies that are not legally controlled bythe Group. Under these new rules, the Financing Companies, from which theCompany leases a substantial portion of its operating assets, have beenincluded in the Group’s consolidated accounts. In the past, lease payments tothe Financing Companies were recorded as incurred, along with disclosure by theGroup of the leasing arrangements, contractual commitments for lease rentals,and the related debt obligations of the Financing Companies. As a result of thenew consolidation rules, these operating assets are now consolidated resultingin increased fixed assets and borrowings. The Group’s receivables from theFinancing Companies have been eliminated in consolidation and shareholders’equity has been reduced. The reduction in the consolidated shareholders’ equityprimarily reflects past depreciation charges related to the operating assetsowned by the Financing Companies, which were greater than the lease paymentsexpensed for the same periods. The accounting change also affects theclassification and amount of costs reported in the income statement, resultingin increased operating expenses and depreciation and reduced lease rentalexpense.

----

(2)For the purpose of the present document, see Item 10 "AdditionalInformation" - Section B.2 *"The SupervisoryBoard"*

 

92

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**Reconciliation of As-Reported andPro-Forma**

**CONSOLIDATED BALANCE SHEETS**

 
| ** **                                          | ** ** | **September 2003** | ** ** |
|-----------------------------------------------------|------------|-------------------------|------------|
| **(€ in millions)**                            | ** ** | **As-****Reported**     | ** ** | **Accounting****Change** | ** ** | **Pro-****Forma** | ** ** |
| **Fixed Assets**                                    | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Intangible assets                                   |       | 57.6                    |       | 1.3 |   | 58.9 |   |
| Tangible assets                                     |       | 928.0                   |       | 1,533.0 |   | 2,461.0 |   |
| Financial assets                                    |       | 1,332.2                 |       | (1,227.7 | ) | 104.5 |   |
|                                                |       | 2,317.8                 |       | 306.6 |   | 2,624.4 | ** ** |
| **Other Assets**                                    | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Inventories                                         |       | 41.8                    |       | — |   | 41.8 |   |
| Accounts receivable:                                | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Trade                                               |       | 76.9                    |       | — |   | 76.9 |   |
| Other                                               |       | 45.9                    |       | 7.1 |   | 53.0 |   |
| Short-term investments                              |       | 34.9                    |       | 48.6 |   | 83.5 |   |
| Cash                                                |       | 11.2                    |       | — |   | 11.2 |   |
|                                                |       | 210.7                   |       | 55.7 |   | 266.4 | ** ** |
| ** **                                          | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Deferred Charges**                                |       | 55.1                    |       | 8.5 |   | 63.6 |   |
| ** **                                          | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total Assets**                                    |       | 2,583.6                 |       | 370.8 |   | 2,954.4 |   |
| ** **                                          | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Shareholders’ Equity (Deficit)**             | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Share capital                                       |       | 802.5                   |       | — |   | 802.5 |   |
| Share premium                                       |       | 291.4                   |       | — |   | 291.4 |   |
| Accumulated deficit                                 |       | (9.5                    | )          | (1,151.6 | ) | (1,161.1 | ) |
|                                                |       | 1,084.4                 |       | (1,151.6 | ) | (67.2 | ) |
|                                                |       |                    |       |   |   |   |   |
| **Minority Interests**                              |       | —                  |       | (41.3 | ) | (41.3 | ) |
| ** **                                          | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Quasi-Equity**                                    |       | 152.8                   |       | — |   | 152.8 |   |
| ** **                                          | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Provisions for Risks and Charges**                |       | 120.1                   |       | — |   | 120.1 |   |
| ** **                                          | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Borrowings**                                      |       | 867.5                   |       | 1,580.9 |   | 2,448.4 |   |
| ** **                                          | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Current Liabilities**                             | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Payable to related companies                        |       | 56.9                    |       | (43.3 | ) | 13.6 |   |
| Accounts payable and accrued  liabilities           |       | 214.3                   |       | 26.1 |   | 240.4 |   |
|                                                |       | 271.2                   |       | (17.2 | ) | 254.0 | ** ** |
| ** **                                          | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Deferred Revenues**                               |       | 87.6                    |       | — |   | 87.6 |   |
| ** **                                          | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total Shareholders’ Equity and Liabilities** |       | 2,583.6                 |       | 370.8 |   | 2,954.4 |   |

** **

93

----

 

**Reconciliation of As-Reported andPro-Forma**

**CONSOLIDATED STATEMENTS OF INCOME**

 
| ** **                                                       | ** ** | **Fiscal  Year 2003** | ** ** |
|------------------------------------------------------------------|------------|-----------------------|------------|
| **(€ in millions)**                                         | ** ** | **As-****Reported**   | ** ** | **Accounting  Change** | ** ** | **Pro-****Forma** | ** ** |
| **Revenues**                                                     |       | 1,047.5               |       | (0.7 | ) | 1,046.8 |   |
|                                                             |       |                  |       |   |   |   |   |
| **Costs and Expenses**                                           |       | (915.1                | )          | (99.6 | ) | (1,014.7 | ) |
|                                                             |       |                  |       |   |   |   |   |
| **Income (Loss) before Financial Charges**                       |       | 132.4                 |       | (100.3 | ) | 32.1 |   |
|                                                             |       |                  |       |   |   |   |   |
| **Net Financial Charges**                                        |       |                  |       |   |   |   |   |
| Lease rental expense                                             |       | (193.8                | )          | 193.8 |   | — |   |
| Financial income                                                 |       | 48.9                  |       | (45.1 | ) | 3.8 |   |
| Financial expense                                                |       | (55.4                 | )          | (59.6 | ) | (115.0 | ) |
|                                                             |       | (200.3                | )          | 89.1 |   | (111.2 | ) |
|                                                             |       |                  |       |   |   |   |   |
| **Loss before Exceptional Items**                                |       | (67.9                 | )          | (11.2 | ) | (79.1 | ) |
|                                                             |       |                  |       |   |   |   |   |
| Exceptional income, net                                          |       | 11.9                  |       | 0.1 |   | 12.0 |   |
|                                                             |       |                  |       |   |   |   |   |
| **Minority Interests**                                           |       | —                |       | 8.8 |   | 8.8 |   |
|                                                             |       |                  |       |   |   |   |   |
| **Net Loss (after Allocation of  Minority Interests)**           |       | (56.0                 | )          | (2.3 | ) | (58.3 | ) |
|                                                             |       |                  |       |   |   |   |   |
| Average number of common  shares outstanding  (in millions) |       | 1,056                 |       | — |   | 1,056 |   |
|                                                             |       |                  |       |   |   |   |   |
| **Loss per Share (in €)**                                   |       | (0.05                 | )          | — |   | (0.05 | ) |

 

**COSTS AND EXPENSES BY CATEGORY**

 
| ** **                          | ** ** | **Fiscal  Year 2003** | ** ** |
|-------------------------------------|------------|-----------------------|------------|
| **(€ in millions)**            | ** ** | **As****Reported**    | ** ** | **Accounting****Change** | ** ** | **Pro-****Forma** | ** ** |
| Direct operating costs              |       | 639.5                 |       | 15.7 |   | 655.2 |   |
| Marketing and sales expenses        |       | 105.2                 |       | — |   | 105.2 |   |
| General and administrative expenses |       | 96.7                  |       | — |   | 96.7 |   |
| Depreciation and amortization       |       | 65.6                  |       | 83.9 |   | 149.5 |   |
| Royalties and management fees       |       | 8.1                   |       | — |   | 8.1 |   |
| **Total Costs and Expenses**        |       | 915.1                 |       | 99.6 |   | 1,014.7 |   |

 

94

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**Reconciliation of As-Reported andPro-Forma**

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

 
| ** **                                                   | ** ** | **Fiscal  Year 2003**   | ** ** |
|--------------------------------------------------------------|------------|-------------------------|------------|
| **(€ in millions)**                                     | ** ** | **As-****Reported**     | ** ** | **Accounting****Change** | ** ** | **Pro-****Forma** | ** ** |
| **Net Loss (after Allocation to Minority Interests)**        |       | (56.0                   | )          | (2.3 | ) | (58.3 | ) |
|                                                         |       |                    |       |   |   |   |   |
| **Minority Interests**                                       |       | —                  |       | (8.8 | ) | (8.8 | ) |
|                                                         |       |                    |       |   |   |   |   |
| *Operating Items Not Requiring Cash Outlays:*                | * *   | * *                | * *   | * * | * * | * * | * * |
| Depreciation and amortization                                |       | 65.6                    |       | 83.8 |   | 149.4 |   |
| Loans repayments received from  Phase I Financing Cies       |       | 52.1                    |       | (52.1 | ) | **—** |   |
| Other                                                        |       | (10.6                   | )          | 2.3 |   | (8.3 | ) |
| *Changes in:*                                                | * *   | * *                | * *   | * * | * * | * * | * * |
| Receivables                                                  |       | 48.6                    |       | (2.2 | ) | 46.4 |   |
| Inventories                                                  |       | (3.1                    | )          | — |   | (3.1 | ) |
| Payables and other accrued  liabilities                      |       | (8.5                    | )          | 15.9 |   | 7.4 |   |
| **Cash Flows from Operating Activities**                     |       | 88.1                    |       | 36.6 |   | 124.7 |   |
|                                                         |       |                    |       |   |   |   |   |
| Proceeds from the sale of fixed assets                       |       | 45.4                    |       | — |   | 45.4 |   |
| Capital expenditures for tangible and intangible assets      |       | (72.9                   | )          | 0.2 |   | (72.7 | ) |
| Increase in deferred charges, net                            |       | —                  |       | — |   | — |   |
| Other                                                        |       | (1.3                    | )          | — |   | (1.3 | ) |
| **Cash Flows used in Investing Activities**                  |       | (28.8                   | )          | 0.2 |   | (28.6 | ) |
|                                                         |       |                    |       |   |   |   |   |
| Proceeds from new borrowings                                 |       | 40.0                    |       | — |   | 40.0 |   |
| Repayments of borrowings                                     |       | (15.0                   | )          | (36.6 | ) | (51.6 | ) |
| Increase in debt security deposits                           |       | (59.6                   | )          | — |   | (59.6 | ) |
| **Cash Flows used in Financing Activities**                  |       | (34.6                   | )          | (36.6 | ) | (71.2 | ) |
|                                                         |       |                    |       |   |   |   |   |
| Change in cash and cash equivalents                          |       | 24.7                    |       | 0.2 |   | 24.9 |   |
| Cash and cash equivalents, beginning of period               |       | 21.3                    |       | 48.4 |   | 69.7 |   |
| **Cash and Cash Equivalents, end of period**                 |       | 46.0                    |       | 48.6 |   | 94.6 |   |
|                                                         |       |                    |       |   |   |   |   |
| **Supplemental Cash Flow Information:**                      |       |                    |       |   |   |   |   |
| Interest paid                                                |       | 20.3                    |       | 36.9 |   | 57.2 |   |
| Lease rental expense paid, net                               |       | 95.0                    |       | (95.0 | ) | — |   |
|                                                         |       |                    |       |   |   |   |   |
| ** **                                                   | ** ** | **September 2003** | ** ** |
| ** **                                                   | ** ** | **As-  Reported**       | ** ** | **Accounting  Change** | ** ** | **Pro-  Forma** | ** ** |
| **Reconciliation to Balance Sheet:**                         |       |                    |       |   |   |   |   |
| Cash                                                         |       | 11.2                    |       | — |   | 11.2 |   |
| Short-term investments                                       |       | 34.9                    |       | 48.6 |   | 83.5 |   |
| Bank overdrafts (recorded in  accounts payable and accruals) |       | (0.1                    | )          | — |   | (0.1 | ) |
| **Cash and Cash Equivalents, end  of period****(1)**         |       | 46.0                    |       | 48.6 |   | 94.6 |   |

 

----

*(1)**  Includes € 48.6 million of cash andshort-term investments of the consolidated Financing Companies as September 30,2003.*

 

95

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**29****          DISCLOSURESCONCERNING THE GROUP’S RESULTS UNDER U.S. GENERALLY  ACCEPTED ACCOUNTING PRINCIPLES**

 

The Company files an annual report on Form 20-Fwith the Securities and Exchange Commission (“SEC”) in the United States withinsix months of September 30 each year. As explained in the summary ofsignificant accounting policies, the consolidated financial statements havebeen prepared in accordance with accounting principles generally accepted inFrance (“French GAAP”). French GAAP varies in certain significant respects fromaccounting principles generally accepted in the United States (“U.S. GAAP”)particularly in connection with the accounting for major fixed assetsrenovations and interest expenses.

 

The reconciliations of net income and equity betweenFrench and U.S. GAAP are shown below, followed by a condensed consolidatedbalance sheet prepared under U.S. GAAP. A description of the accountingprinciples which materially differ also follows:

 

**Reconciliation of Net Loss**

 
| ** **                               | ** ** | **Fiscal Year** | ** ** |
|------------------------------------------|------------|-----------------|------------|
| **(€ in millions)**                 | ** ** | **2005**        | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Net  Loss under French GAAP**          | ** ** | **(94.9**       | **)**      | (145.2 | ) | (56.0 | ) |
|                                     |       |            | ** ** |   |   |   |   |
| Gain on extinguishment of modified debt  | ** ** | **60.7**        | ** ** | — |   | — |   |
| TWDC credit line forgiveness             | ** ** | **(10.0**       | **)**      | — |   | — |   |
| Financial expense adjustments            | ** ** | **12.4**        | ** ** | 26.4 |   | 6.8 |   |
| Major fixed asset renovations adjustment | ** ** | **(0.2**        | **)**      | 4.7 |   | 7.6 |   |
| Other                                    | ** ** | **(0.4**        | **)**      | 0.3 |   | (12.8 | ) |
| Impact of change in accounting principle | ** ** | **—**      | ** ** | 36.3 |   | — |   |
| Minority Interests                       | ** ** | **(14.1**       | **)**      | — |   | — |   |
| **Net  Loss under U.S. GAAP**            | ** ** | **(46.5**       | **)**      | (77.5 | ) | (54.4 | ) |
|                                     |       |            | ** ** |   |   |   |   |
| **Comprehensive Income Items:**          |       |            | ** ** |   |   |   |   |
| Interest rate hedge*s*                   | ** ** | **—**      | ** ** | 5.2 |   | 2.1 |   |
|                                     |       |            | ** ** |   |   |   |   |
| **Comprehensive  Loss under U.S. GAAP**  | ** ** | **(46.5**       | **)**      | (72.3 | ) | (52.3 | ) |

 

**Reconciliationof Shareholders’ Equity**

 
| ** **                                                  | ** ** | **September** | ** ** |
|-------------------------------------------------------------|------------|---------------|------------|
| **(€ in millions)**                                    | ** ** | **2005**      | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Shareholders’  Equity under French GAAP**            | ** ** | **295.7**     | ** ** | (59.9 | ) | 1,084.3 |   |
|                                                        |       |          | ** ** |   |   |   |   |
| Cumulative restructuring and financial expense  adjustments | ** ** | **(3.1**      | **)**      | (76.2 | ) | (1,112.4 | ) |
| Cumulative major fixed asset renovations adjustment         | ** ** | **116.4**     | ** ** | 116.7 |   | 112.0 |   |
| Cumulative land investment grant adjustment                 | ** ** | **(12.0**     | **)**      | (11.9 | ) | (11.7 | ) |
| Other adjustments                                           | ** ** | **(13.9**     | **)**      | (17.4 | ) | (11.8 | ) |
| Portion of adjustments allocated to minority  interest      | ** ** | **(16.3**     | **)**      | — |   | — |   |
|                                                        |       |          | ** ** |   |   |   |   |
| *Shareholders’  Equity under U.S. GAAP*                | ** ** | **366.8**     | ** ** | (48.7 | ) | (60.4 | ) |

 

96

----

 

**Summary Balance Sheet under U.S. GAAP**

 
| ** **                        | ** ** | **September** | ** ** |
|-----------------------------------|------------|---------------|------------|
| **(€ in millions)**          | ** ** | **2005**      | ** ** | **2004** | ** ** |
| Current assets                    | ** ** | **484.6**     |       | 305.8 |   |
| Other assets                      | ** ** | **24.3**      |       | 135.6 |   |
| Fixed assets                      | ** ** | **2,408.5**   |       | 2,465.2 |   |
| **Total  Assets**                 | ** ** | **2,917.4**   |       | 2,906.6 |   |
|                              |       |          |       |   |   |
| Current  liabilities              | ** ** | **437.3**     |       | 2,457.4 |   |
| Non-current  liabilities          | ** ** | **100.8**     |       | 158.3 |   |
| Long-term  borrowings             | ** ** | **1,890.0**   |       | — |   |
| Shareholders’  equity        | ** ** | **366.8**     |       | (48.7 | ) |
| Minority  Interests               | ** ** | **122.5**     |       | 339.6 |   |
| **Total  Liabilities and Equity** | ** ** | **2,917.4**   |       | 2,906.6 |   |

 

**Reconciliationof Borrowings**

 
| ** **                                           | ** ** | **September** | ** ** |
|------------------------------------------------------|------------|---------------|------------|
| **(€ in millions)**                             | ** ** | **2005**      | ** ** | **2004** | ** ** |
| **Total  Borrowings under French GAAP***             | ** ** | **1,906.0**   | ** ** | 1,946.0 |   |
|                                                 |       |          | ** ** |   |   |
| Discount recorded on significantly modified loans    | ** ** | **(17.0**     | **)**      | — |   |
| Lease financing arrangements                         | ** ** | **1.5**       | ** ** | 4.0 |   |
| **Total  Borrowings under U.S. GAAP**                | ** ** | **1,890.5**   | ** ** | 1,950.0 |   |
|                                                 |       |          | ** ** |   |   |
| Current portion of long-term borrowings              | ** ** | **(0.5**      | **)**      | (1,950.0 | ) |
|                                                 |       |          | ** ** |   |   |
| **Total  Long-term Borrowings under U.S. GAAP******* | ** ** | **1,890.0**   | ** ** | — |   |

 

----

****excluding accrued interest*

 

**ConsolidatedStatements of Cash Flows**

 
| ** **                                            | ** ** | **Fiscal Year** | ** ** |
|-------------------------------------------------------|------------|-----------------|------------|
| **(€ in millions)**                    | ** ** | **2005**        | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                                  |       |            |       |   |   |   |   |
| **Cash  Flows from Operating Activities**             | ** ** | **32.0**        |       | 143.1 |   | 133.6 |   |
|                                                  |       |            |       |   |   |   |   |
| **Cash  Flows used in Investing Activities**          | ** ** | **(85.8**       | **)**      | **(41.2** | **)** | **(37.5** | **)** |
|                                                  |       |            |       |   |   |   |   |
| **Cash  Flows from / (used in) Financing Activities** | ** ** | **209.8**       | ** ** | **(60.5** | **)** | **(72.0** | **)** |
|                                                  |       |            |       |   |   |   |   |
| Change in cash  and cash equivalents                  | ** ** | **156.0**       |       | 41.4 |   | 24.1 |   |
| Cash and cash  equivalents, beginning of period       | ** ** | **131.3**       |       | 89.9 |   | 65.8 |   |
| **Cash  and Cash Equivalents, end of period**         | ** ** | **287.3**       |       | 131.3 |   | 89.9 |   |

 

**Description of U.S. GAAP Reconciling Items**

 

***Change in accounting principle in fiscal year 2004***

TheGroup leases substantially all of its operating assets under variousagreements. Under French GAAP until October 1, 2003 (the first day offiscal year 2004), the Group did not capitalize these leases but ratheraccounted for them as operating leases. Under U.S. GAAP, the underlying assetsand liabilities and related depreciation and interest expense were reflected inthe Group’s financial statements.

 

InJanuary 2003, the Financial Accounting Standards Board (FASB) issued FASBInterpretation No. 46, *Consolidation of VariableInterest Entities*(FIN 46) and amended it by issuing FIN 46R in December 2003.Variable interest entities (VIEs) are primarily entities that lack sufficientequity to finance their activities without additional financial support fromother parties or whose equity holders lack adequate decision making ability.All VIEs with which the Company is involved must be evaluated to determine theprimary beneficiary of the risks and rewards of the VIEs. The primarybeneficiary is required to consolidate the VIEs for financial reportingpurposes.

 

97

----

 

In connection with the adoption of FIN 46R, it wasconcluded that the Financing Companies from which the Group leasessubstantially all of its operating assets were VIEs and that the Group was theprimary beneficiary. Under previously existing U.S. GAAP, the principal assetsand liabilities of the Financing Companies were already consolidated under U.S.GAAP, except EDA and Centre de Congrès Newport S.A.S. As a result, EDA andCentre de Congrès Newport S.A.S. have been included in the U.S. GAAP consolidatedgroup beginning October 1, 2003 (the first day of fiscal year 2004). Thelease contracts with these two entities were reflected as capital leases beforethe implementation of FIN 46R. The cumulative effect of this change inaccounting principle as of October 1, 2003 was income of € 36.3 million.

 

***Restructuring adjustments***

In conjunction with theRestructuring, the terms of several of the Group’s loans were significantlymodified, as defined in EITF 96-19, *Debtor’sAccounting for a Modification or an Exchange of Debt Instruments*,and EITF 02-04, *Debtor’s Accounting for aModification or an Exchange of Debts Instruments in Accordance with FASBStatement No. 15*. In accordance with U.S. GAAP the significantlymodified loans were accounted for as an extinguishment of the existing debt,with the difference between the fair value of the new debt and the carryingvalue of the existing debt recorded as a € 60.7 million gain on theextinguishment of debt. The significantly modified loans were re-recorded attheir fair market value on the effective date of the Restructuring, reflectinga € 19.3 million discount from their nominal value. Under French GAAP, noadjustments were made to the book values of the modified loans.

 

Also in conjunction withthe Restructuring, the Group benefited from a € 10.0 million forgiveness byTWDC of amounts payable under the expired € 167.7 million credit line. UnderFrench GAAP, this waiver was recorded as exceptional income in fiscal year2005. Under US GAAP, the waiver was recorded in accordance with SAB Topic 5T asa capital contribution from a major shareholder.

 

***Financial expense adjustments***

UnderU.S. GAAP, all interest charges relating to debt instruments whose interestrates are scheduled to change or have interest “holidays” or forgivenessperiods, are required to be calculated in accordance with the “effectiveinterest method”. This method calculates the estimated interest charges overthe life of the debt, and allocates this amount evenly over the term of thedebt using an effective yield. As a result, fiscal year 2005 and 2004 interestexpense was reduced by € 4.9 million and € 17.5 million, respectively.

 

Financialexpense adjustments also include differences between French and US GAAP in theaccounting for debt issuance and modification costs. During fiscal years 2004and 2005, the Group incurred various costs linked to the negotiation of theRestructuring. Under French GAAP these costs were recorded as eitherexceptional expenses (€ 21.2 million) or as equity issuance costs (€ 18.3 million)during the two years ended September 30, 2005. Under U.S. GAAP, € 8.3million of costs expensed under French GAAP have been deferred as debt issuancecosts.

 

***Major fixed asset renovations adjustment***

Duringfiscal year 2003, the Group adopted new accounting rules in France relatedto major fixed asset renovations. Under French GAAP, the retroactive impact ofthis change was recorded as a € 104.4 million charge to shareholder’s equity asof October 1, 2002. Under U.S. GAAP, the Group continues to defer majorfixed asset renovation costs and amortizes them over a period of five years.

 

***Bonds redeemable in shares (“ORAs”)***

UnderFrench GAAP, the ORAs were originally recorded at face value as quasi-equity.Under U.S. GAAP, the ORAs were recorded at their discounted fair value uponissuance and included in the Group’s outstanding borrowings. The ORAs maturedon July 11, 2004 and were redeemed in shares of the Company (see Note 12)and their carrying value of € 38.2 was transferred to shareholders’ equity. Thedifference between the discounted fair value of the ORAs at their issuance andtheir maturity value was amortized to interest expense.

 

***Land investment grant subsidies adjustment***

UnderFrench GAAP, government subsidies received with respect to the purchase of theland on the Resort Site have been recorded as unearned revenue and recognizedas exceptional income over 10 years. Under U.S. GAAP these subsidies have beenrecorded as a reduction of the book value of the related land.

 

***Other adjustments***

Duringfiscal year 2003, the Group sold and leased back three employee housingdevelopments, which generated a € 11.0 million gain under French GAAP. UnderU.S. GAAP, this gain will be recognized straight-line over the terms of therelated leases. As a result, U.S. GAAP net results were increased by € 0.9million in fiscal year 2005 and 2004.

 

98

----

 

***Financial instruments***

U.S. GAAP requires that all derivative instruments berecorded on the balance sheet at their fair value. Changes in the fair value ofderivatives are recorded each period in current earnings or in othercomprehensive income, depending on whether a derivative is designated as part ofa hedging relationship and, if it is, depending on the type of hedgingrelationship. For fair-value hedges in which the Company is hedging changes inan asset’s, a liability’s, or a firm commitment’s fair value, changes in thefair value of the derivative instrument will generally be offset in the incomestatement by changes in the hedged item’s fair value. For cash flow hedges inwhich the Company is hedging the variability of cash flows related to avariable-rate asset, variable-rate liability, or a forecasted transaction, theeffective portion of the gain or loss on the derivative instrument will bereported in other comprehensive income. The gain or loss on the derivativeinstrument that is reported in other comprehensive income will be reclassifiedas earnings in the periods during which earnings are impacted by the variabilityof the cash flows of the hedged items. The ineffective portion of all hedgeswill be recognized in current-period earnings.

The Company records the change in the fair value ofits interest rate derivative financial instruments in comprehensive income. Forforeign exchange financial derivatives, the Company recorded a gain of € 0.5million representing the change in the market value of foreign exchangederivatives outstanding at the end of the year. In fiscal year 2004, there wasno change in the market value of foreign exchange outstanding at the end offiscal year 2004 when compared to fiscal year 2003.

 

***Extraordinary items***

Under French GAAP thedefinition of exceptional items differs significantly from the U.S. GAAPdefinition of extraordinary items. No exceptional items in the French GAAPStatement of Income would be classified as extraordinary or non-operating underU.S. GAAP during fiscal years 2005 and 2004.

 

***Comprehensive income***

Comprehensiveincome is a term used to define all non-owner changes in shareholders’ equity.Comprehensive income is a concept not addressed by French GAAP. Under U.S.GAAP, comprehensive income includes, in addition to net income:

 

•                  Movements in cumulative translationadjustments

•                  SFAS 133 mark to market adjustmentson derivative financial instruments designated as cash-flow hedges, and

•                  Minimum pension liabilityadjustments.

 

Includedin other comprehensive income in fiscal years 2005 and 2004 are zero and a gainof € 5.2 million, respectively, representing the change in value of interestrate derivatives designated as cash flow hedges.

 

***Employee stock options***

In December 2004,the FASB issued Statement of Financial Accounting Standards 123 (revised 2004) *Share-Based Payments*(“SFAS 123R”). Thestatement required that the Group record stock option expense in its financialstatements based on a fair value methodology beginning no later than the firstfiscal quarter beginning after June 15, 2005, the Group’s fourth quarter.The Group implemented SFAS 123R effective July 1, 2005 using the modified prospectiveapplication. Under this method, the Group was required to calculate and recordcompensation expense for the fair value of options whose vesting periodsincluded dates subsequent to September 30, 2004. As a result, the Grouprecorded € 0.9 million of stock option expense in fiscal year 2005 using aBlack Scholes-Merton valuation model.

 

Priorto fiscal year 2005, the Group followed Statement of Financial AccountingStandards 123, *Accounting for Stock-Based Compensation*,under which the Group had elected not to record compensation costs for stockoptions in its financial statements*.*

 

**AdditionalU.S. GAAP Disclosures**

 

***Earnings per share***

UnderU.S. GAAP, the Group follows Statement of Financial Accounting Standards 128, *Earnings per Share*, which requires the presentation of basicand diluted earnings per share (“EPS”). Basic EPS excludes all dilution and iscalculated using the weighted-average number of common shares outstandingduring the period. Diluted EPS reflects the potential dilution that would occurif securities or other contracts to issue common stock were exercised orconverted into common stock.

 

UnderU.S. GAAP, basic and diluted loss per share amounts for fiscal years 2005 and2004 were € 0.02 and € 0.07, respectively. As of September 30, 2005 and2004, 98 million and 27 million, respectively of potential shares were excludedfrom the computation of diluted earnings per share because their effect wouldhave been anti-dilutive.

 

***Royalties and management fees***

TheGroup is party to a licensing agreement under which the Group pays royalties toan indirect wholly-owned subsidiary of TWDC. In addition, the Company is boundby the terms of its by-laws to pay management fees to Euro Disney S.A.S., alsoan indirect wholly-owned subsidiary of TWDC. As part of the 1994 financialrestructuring, the terms of the licensing agreement and the terms of theCompany’s by-laws were modified to reduce the amounts of these fees. See Note19(b) for a full description. 

 

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Under both French andU.S. GAAP, royalties and management fees have been recorded as due inaccordance with the terms of the modified contracts.

 

The table below comparesthe total amount of the royalties and management fees recorded in theConsolidated Statements of Income to that which would have been recorded underthe original terms of the modified contracts. Pro- forma net loss and net lossper share reflect the loss for the periods as if the royalties and managementfees had not been reduced.

 
| ** **                                                                         | ** ** | **Fiscal Year** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------|------------|
| **(€ in millions, except per share data)**                                    | ** ** | **2005**        | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Pro-forma royalties and management fees under  terms of the original contracts** | ** ** | **112.9**       | ** ** | 110.2 |   | 107.3 |   |
|                                                                               |       |            | ** ** |   |   |   |   |
| Reduction due to 1994 financial restructuring                                      | ** ** | **(53.5**       | **)**      | (52.5 | ) | (74.6 | ) |
| Reduction due to 2003 waiver                                                       | ** ** | **—**      | ** ** | — |   | (24.6 | ) |
| **Royalties and management fees recorded**                                         | ** ** | **59.4**        | ** ** | 57.7 |   | 8.1 |   |
|                                                                               |       |            | ** ** |   |   |   |   |
| Pro-forma U.S. GAAP Net Loss                                                       | ** ** | **(100.0**      | **)**      | (130.0 | ) | (153.6 | ) |
|                                                                               |       |            | ** ** |   |   |   |   |
| Pro-forma U.S. GAAP Net Loss Per Share (in €)                                 | ** ** | **(0.04**       | **)**      | (0.12 | ) | (0.15 | ) |

 

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