OurStrategy Weintend to maintain our position as one of the leading developers and producers of CG animated feature films. To accomplish this goal, we are pursuing the major strategies described below. • Focus on Maintaining Broad Audience Appeal for Our Films Through the Unique Identity of DreamWorks Animation. Webelieve that DreamWorks has developed a unique identity that the public associates with innovative and popular movies such as the Shrek films. We intend to build on DreamWorks’ brand recognition by continuing to make unique, high quality, CG animated films that have a sophisticated tone and visual style and appeal to a broad-based audience of families, teens and adults. • Use Our Existing Scale of Operations to Release Two CG Animated Feature Films Per Year.We intend to release two CG animated feature films per year (excluding 2005, in which we expect to release one CGanimated film and one stop-motion animated film produced by Aardman Animations). Based on our knowledge of the industry and the announced release schedules of our competitors, we believe this exceeds the current production schedule of any other CG animation studio and allows us to leverage our infrastructure and spread overhead costs over a greater number of films than our current competitors. • Use Star Talent to Increase Popular Appeal. Our films feature the voice talent of some of the most celebrated actors in the entertainment industry. We believe that using their unique voices and talent enhances our films and helps bring our characters to life. • Take Advantage of Franchise Opportunities. Weintend to take advantage of our ownership rights and the broad marketability of animated films to create franchises that can generate prequels, sequels and other derivative works and licensing opportunities in several different markets, including theme park attractions, stage plays, interactive games and, in particular, direct-to-video films. • Continue Developing Superior CG Animation Skills. We have built a user-friendly production environment that allows our artists and animators to exploit fully the complex technologies used in CG animated filmmaking and have invested significant resources in the proper training and support of our creative staff. We intend to continue to invest in our technology and personnel to ensure that, from an artistic and technical perspective, our films remain state-of-the-art in CG animated filmmaking. • Maximize the Success of Our Films Through Promotional Partnerships. We believe that the strong relationships that we have developed with well-known retailers and consumer products companies throughout the world will help us promote our films in many valuable ways. We intend to continue developing new relationships with prominent companies and to continue utilizing existing relationships to ensure maximum consumer awareness for our films. OurChallenges We face a number of risks associated with our business and industry and must overcome a variety of challenges in implementing our operating strategy in order to be successful. For example: • The motion picture industry is highly competitive and any particular film’s success is primarily dependent on its popular acceptance. Whether a film will be successful is extremely difficult to predict, yet each film requires a substantial capital investment before it generates any receipts. To be successful, we must produce films that generate significant receipts to offset production and overhead costs, while also providing for a return on the investment. Because this success is predicated on popular acceptance, it cannot be predicted with certainty. • Unlike the major U.S. studios, which release an average of approximately 29 movies per year, we expect to release two CG animated films per year for the foreseeable future (excluding 2005, in which we expect to release one CG animated film and one stop-motion animated film produced by Aardman Animations). The commercial failure of any one of them could have a material adverse effect on our business. 5