A number of our fiscal 2005 “big propositions” will include well-established brands, which are backed by high profile intellectual property and/or highly anticipated motion picture releases. Examples of these brands are our superheroes and skateboarding brands. We have a long-term relationship with Marvel Enterprises through an exclusive licensing agreement that expires in 2009. This agreement grants us the exclusive rights to develop and publish video games based on Marvel’s comic book franchises Spider-Man, X-MEN, Fantastic Four and Iron Man. Through our long-term relationship with Spider-Man Merchandising, LLP, we have completed the development of the video game Spider-Man 2: The Movie , the sequel to the highly successful Spider-Man: The Movie , a key fiscal 2003 title release that has continued to perform strongly into fiscal 2004. The video game release of Spider-Man 2: The Movie is scheduled to coincide with the “Spider-Man 2” theatrical release in June 2004. We also recently announced that through our licensing agreement with Spider-Man Merchandising, LLP, we will be developing and publishing video games based on Columbia Pictures/Marvel Enterprises, Inc.’s upcoming feature film “Spider-Man 3,” which is expected to be released in May 2007. In addition, we have an exclusive licensing agreement with professional skateboarder Tony Hawk that continues until 2015. The agreement grants us exclusive rights to develop and publish video games using Tony Hawk’s name and his likeness. Through fiscal 2004, we have released five successful titles in the Tony Hawk franchise with cumulative net revenues of over $800.0 million, including the most recent, Tony Hawk’s Underground , which was released in the third quarter of fiscal 2004. We will continue to promote our skateboarding franchise with the release in fiscal 2005 of the sequel to the very successful Tony Hawk’s Underground . 

We will also continue to develop new intellectual properties such as True Crime: Streets of L.A. and Call of Duty , which were originally released in the third quarter of fiscal 2004. These highly successful titles were both ranked by third-party sales tracking agencies as among the top-five selling games for the holiday season. We expect to develop a variety of games on multiple platforms based on these two new original properties and hope to establish them as a source of recurring revenues. For example, in fiscal 2005, we are scheduled to release Call of Duty: Finest Hour which will be released on multiple console platforms. 

We will also continue to evaluate emerging brands that we believe have potential to become successful game franchises. For example, we have a multi-year, multi-property publishing agreement with DreamWorks SKG that grants us the exclusive rights to publish video games based on DreamWorks SKG’s theatrical release “Shrek 2,” as well as upcoming computer-animated films, “Shark Tale,” “Madagascar” and “Over the Hedge,” and their sequels. We also have an exclusive licensing agreement to develop and publish video games for the best-selling children’s book series, Lemony Snicket’s A Series of Unfortunate Events, which is being developed for a feature film by Paramount Pictures, Nickelodeon Movies and DreamWorks SKG. 

In addition to acquiring or creating high profile intellectual property, we have also continued our focus on establishing and maintaining relationships with talented and experienced software development teams. We have strengthened our internal development capabilities through the acquisition in prior fiscal years of a number of talented and experienced development companies. Most recently, in October 2003, we exercised our option to acquire the remaining 70% of the outstanding capital of Infinity Ward, the developer of our PC title, Call of Duty . We had acquired the initial 30% of Infinity Ward’s outstanding capital stock in May 2002. We also have development agreements with other top-level, third-party developers such as id Software, Valve Corporation, Spark Unlimited, Lionhead Studios and The Creative Assembly. 

We are utilizing these developer relationships, new intellectual property acquisitions, new original intellectual property creations and our existing library of intellectual property to further focus our game development on product lines that will deliver significant, lasting and recurring revenues and operating profits. 

