To Our Shareholders, Employees and Guests

We welcome this opportunity to review fiscal 2005 and share with you our outlook for fiscal 2006 and beyond. Fiscal 2005 was a milestone year for Darden. We implemented key leadership transitions, achieved outstanding financial performance and celebrated our tenth anniversary as a public company since our 1995 spin-off from General Mills – a period in which Darden delivered an annualized total shareholder return of over 16 percent, a top-quartile result as compared to other S&P 500 companies during the same period.

   As part of our leadership transition, we looked to both our past (the legacy we inherit) and our future (the legacy we will build), examining:

• Casual dining's evolution, with a focus on what has driven our success and the success of other industry leaders.
• The current state of our business.
• The long-term dynamics and growth opportunity for casual dining.
• What we must do to take full advantage of the opportunity the industry offers.

   Our review confirmed that casual dining continues to be a vibrant, thriving industry that offers strong operators like Darden the opportunity to achieve meaningful sales and earnings growth and create long-term shareholder value at top quartile S&P 500 levels. We also came away from this review with greater clarity about the appropriate long-term strategic direction and goals for Darden.

Fiscal 2005 Highlights

We begin fiscal 2006 with increased strategic clarity, focused priorities and strong operating momentum. This is reflected in our outstanding overall financial performance in fiscal 2005.

• Our sales increased 5.5 percent to $5.3 billion, driven primarily by new restaurant growth at Olive Garden and Smokey Bones and same-restaurant sales growth at Olive Garden.
  
  
• Net earnings for fiscal 2005 were $291 million, a 28 percent increase from fiscal 2004 net earnings of $227 million, and earnings per diluted share were $1.78 in fiscal 2005, a 33 percent increase from the earnings per diluted share of $1.34 in fiscal 2004. Excluding asset impairment and restructuring charges of $23.1 million, after tax, associated with the closing of six Bahama Breeze restaurants and the write-down of the carrying value of four other Bahama Breeze restaurants, one Olive Garden restaurant and one Red Lobster restaurant in fiscal 2004, net earnings were $250.2 million, or $1.47 per diluted share. After excluding these charges, our fiscal 2005 net earnings and net earnings per diluted share increased 16 percent and 21 percent, respectively.
  
  
• Red Lobster's total sales of $2.44 billion were equal to fiscal 2004. However, excluding sales of $41 million from the additional operating week in fiscal 2004, annual sales in fiscal 2005 increased 1.7 percent. Average annual sales per restaurant were $3.6 million, and U.S. same-restaurant sales growth for fiscal 2005 was 0.9 percent (on a 52-week basis), with increases in each of the last three quarters of the year. As a result of excellent progress behind its new "Simply Great" operating discipline, Red Lobster achieved record guest satisfaction for the year, while simultaneously improving its restaurant operating efficiency. This resulted in strong operating profit growth for the fiscal year.
  
  
• Olive Garden's total sales were a record $2.40 billion, up 8.5 percent from fiscal 2004 sales of $2.21 billion. Excluding sales of $41 million from the additional operating week in fiscal 2004, annual sales increased by 10.6 percent in fiscal 2005. This reflected record average annual sales per restaurant of $4.4 million, the addition of 20 net new restaurants and outstanding U.S. same-restaurant sales growth of 7.2 percent (on a 52–week basis). The strong financial results Olive Garden has delivered over many years and its 43 consecutive quarters of U.S. same-restaurant sales growth demonstrate the power of combining strong brand positioning, brilliance with the basics of in-restaurant operations, great restaurant support and compelling advertising.
  
  
• Bahama Breeze's total sales were $164 million, which was down 7.2 percent from fiscal 2004, due primarily to the closing of six underperforming restaurants in the fourth quarter of fiscal 2004. While same-restaurant sales decreased 1.6 percent (on a 52- week basis) in fiscal 2005, average annual sales per restaurant were $5.1 million, and Bahama Breeze's earnings results were significantly favorable to fiscal 2004.
  
  
• Smokey Bones' total sales were $269 million, a 54.6 percent increase from last year, as it added 35 new restaurants to its base of 69 and achieved same-restaurant sales growth of 1.1 percent (on a 52-week basis). Sales per restaurant averaged $3.1 million for the year with appreciable variation by region, while guest satisfaction remained strong overall and consistently high across regions.
  
  
• Seasons 52, the new concept we are testing, opened two more restaurants in fiscal 2005 and continued to post impressive early results. To further test the concept's viability, plans are in place to open three more restaurants in fiscal 2006. Seasons 52 pairs a wide selection of premium wines, including many by the glass, with seasonally inspired menus using fresh ingredients. The result is great tasting, nutritionally balanced meals that are lower in calories than comparable restaurant meals. We believe there is strong consumer interest in the type of dining occasion offered by Seasons 52.
  
  
• As a result of this year's outstanding financial results and our strong cash flow and balance sheet, we spent $312 million to repurchase 11.3 million shares of our common stock. Since beginning our share repurchase program in 1995, we have repurchased more than 120 million shares of our common stock for over $1.8 billion.

The Casual Dining Industry Opportunity

Our industry, casual dining, began 40 years ago when early entrepreneurs created restaurants that combined components of family restaurants (such as no reservations and multi-unit systems) with components of fine dining (such as full bar service and a more hand-crafted approach to food). Among these entrepreneurs were Bill Darden, our Company's namesake, and a team that included Joe Lee, our Chairman, who was a manager at the first Red Lobster restaurant that opened in Lakeland, Florida, in 1968.

Today, casual dining is a significant industry with $63 billion in sales and over 124,000 restaurants. It is also an industry that is expected to continue experiencing meaningful annualized sales growth of between 5 percent and 7 percent over the next five to 10 years, which is consistent with the industry's compound annual sales growth over the past decade. Multi-unit, or chain operators, which now account for over 50 percent of industry sales, have been growing at a faster rate than the industry overall. Chains are expected to continue to increase their market share going forward, with annualized sales growth of between 7 percent and 9 percent.

These casual dining sales growth projections are supported by the same economic and social dynamics that have driven growth over the past 10 years. These dynamics include expectations for solid growth in real disposable income, payroll employment, the number of people in the age groups (the 50s and 60s) that use casual dining restaurants with the greatest frequency and the percentage of women in the workforce. Casual dining has also benefited from lifestyle changes that, regardless of income level, age or family structure, put a premium on the time savings and social reconnection that come with dining out. We believe that should remain the case going forward.

Darden's Strategic Direction

Long-Term Financial Targets. Darden is a proven multi-unit operator with two established brands in Red Lobster and Olive Garden that are trusted and broadly appealing, two exciting emerging brands in Smokey Bones and Bahama Breeze and a track record of successfully addressing the challenges that arise in our dynamic industry. With our expertise and financial resources, our goal is to deliver the 7 percent to 9 percent long-term annualized sales growth projected for casual dining chains. We believe we can convert this level of sales growth into long-term diluted net earnings per share growth of between 10 percent and 15 percent.

A Multi-Brand Future. With established brands that already have meaningful national penetration, we believe Darden and similarly situated casual dining leaders will need additional brands to fully capture the chain growth opportunity ahead. We are convinced that for us the competitive frontier will involve mastering the complexity of developing and managing an even greater number of brands as part of our enterprise. With this view of the future, our strategy is to enhance and more consistently use our extensive restaurant support expertise so that we can fully realize the same-restaurant and new-restaurant potential of our existing brands while also developing or acquiring compelling new casual dining brands.

Success Pillars. Our success over time has come from combining strengths in five areas, and we believe this will continue to be the case. These five "success pillars" include:

• A strong culture that inspires and engages people in the organization and has at its core:
  • Firmly held values that guide our actions at the Company: integrity and fairness; respect and caring; diversity; always learning, always teaching; being of service; teamwork; and excellence.
  • A core purpose that focuses on making a meaningful difference in the lives of the people we touch: to nourish and delight everyone we serve.
  • A clear mission centered on lasting excellence: to be the best in casual dining now and for generations.
• Competitively superior leadership grounded in a commitment to professional development and a balanced emphasis on performance excellence (getting results) and positive leadership behaviors (getting results the right way).
• Brand management excellence that enables us to create and evolve brands that offer consumers well-defined, highly compelling and competitively differentiated guest experiences.
• Restaurant operating excellence that ensures we deliver on our brand promises with competitively superior guest experiences, while also delivering a strong bottom line.
• Restaurant support excellence in critical areas – such as Supply Chain, Human Resources and Information Technology – that facilitates achieving brand management and restaurant operating excellence.

The legacy we inherit, which includes pioneering casual dining and achieving sustained industry leadership over nearly 40 years, is a testament to the power of combining these strengths. We believe we cannot have lasting success if any one of them is not where it needs to be. As we work to pioneer the next frontier in casual dining, a multi-brand frontier, we remain committed to this winning combination.

We are proud of our fiscal 2005 results. We are also proud of our record of success since becoming a public company in 1995 – a record that includes sales growth of $2.1 billion, a 67 percent increase, and an annualized total shareholder return of over 16 percent. Still, the 7 percent to 9 percent long-term sales growth range we seek represents an acceleration from what we have delivered over the past several years. And, we believe successfully accelerating top-line growth requires significant work in each of our pillar areas. In some cases, we must strengthen long-standing capabilities, while in others we have to add new capabilities to respond to new dynamics.

Fiscal 2006 Priorities

Our fiscal 2006 priorities center on establishing a strong platform for accelerated profitable sales growth, and include the following. Progress on each of these priorities will position us for greater growth in our existing businesses and the successful addition of new businesses in fiscal 2007 and beyond.

Consistently Improving Business Performance. Our first priority is to achieve consistently improving business performance, because without that it is difficult to focus on the other things required to successfully increase growth. Each of our operating companies has a detailed performance plan, summarized as follows:

• Olive Garden – Maintain the current level of operating excellence while positioning the company for accelerated new restaurant growth.
  
  
• Red Lobster – Continue to strengthen the company's operations foundation while taking the steps necessary to sharpen its brand promise, align all guest touch points and prepare for faster growth.
  
  
• Smokey Bones – Balance the pace of new restaurant expansion with efforts to further strengthen same-restaurant sales and returns.
  
  
• Bahama Breeze – Accelerate progress in delivering the company's brand promise, simplifying operations and improving same-restaurant results on a path to renewed growth.

Strengthening Our Core. We plan to reinforce and build upon each of our success pillars, starting with our culture. We are working, for example, to drive better teamwork across operating companies and ensure we define excellence at a consistently high level across the Company.

With the transitions that took place in fiscal 2005, there is also an opportunity to strengthen leadership in all our core areas through stronger development of existing leaders and selected acquisition of talented leaders from outside the Company. And, to further enhance restaurant operations and restaurant support, we will continue developing and implementing several significant technology infrastructure projects. These include a next-generation point-of-sale system, an automated meal pacing system and an improved inventory, ordering and order reconciliation system.

Better Leveraging Our Core. To take full advantage of our core capabilities, whether long-standing or newly added, we intend to accelerate our transition to the use of common proven processes and practices among our operating companies, increase the focus on measured quality and productivity and identify high-impact restaurant support areas where we can achieve greater effectiveness or efficiency by adopting a more integrated approach.

The Legacy We Build

Over the past year, we have spent a great deal of time discussing our legacy – both the legacy we inherit and the one we are seeking to build. When challenged to succinctly describe what has made Darden the company it is today, we are convinced it is two things. First, Bill Darden, Joe Lee and the many, many people who helped build this Company were unwilling to place any limits on what they could accomplish. Put another way, they were willing to dream big dreams. Secondly, these leaders were committed to acting, in everything they did, with a big heart. To us this means with great values and in pursuit of a compelling core purpose.

Looking forward to all Darden can become and the continued market leadership and value creation we aspire to, we believe it is important to hold tightly to these aspects of the legacy we inherit – even as other elements change. True to our heritage, we are convinced that Darden has everything it takes to be the best in casual dining now and for generations – starting with the Company's 150,000 dedicated employees, our vendor and community partners and engaged shareholders who challenge us to continuously sharpen our thinking. We thank all of you for your passion and support. As a team, we can accomplish truly exceptional things.

Joe R. Lee Chairman	Clarence Otis, Jr. Chief Executive Officer	Andrew H. Madsen President and Chief Operating Officer