The Walt Disney Retirement Savings Plan Changes to the Plan by richman6

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									                       The Walt Disney Retirement Savings Plan



Changes to the Plan’s investment options

Please see below the answers to some of the questions you might have regarding the forthcoming
changes to your investment choices under The Walt Disney Retirement Savings Plan. In addition to this
information the Trustees have arranged a number of presentations at Hammersmith and Chiswick Park
regarding these changes and you will have an opportunity to ask any further questions which you may
have.


In the meantime, please refer to the enclosed updated Investment Guide for details of the new
investment options available.


Why have the Trustees reviewed the Plan’s investment options?

One of the Trustees’ key responsibilities is to monitor the performance of the Plan’s administrators and
investment managers. Until recently, both of these functions have been carried out by Fidelity. The size
of the Plan now means that it is possible to separate the Plan’s investment and administration services.
In 2005, the Trustees decided to consider doing this to ensure that members receive the best possible
service from the administrators and to offer members a wider choice of investment managers and
investment options.


As a result of their review, the Trustees appointed Capita Hartshead as the Plan’s administrators with
effect from 1 April 2006. The Trustees are now introducing significant changes to the Plan’s investment
options.


What did the Trustees take into account during their review of the investment
options?

As you are aware, the Trustees introduced member fund choice from April 2004.                In a defined
contribution (DC) plan such as The Walt Disney Retirement Savings Plan, the amount of money in your
Pension Account when you retire and therefore your retirement income will depend on how much you pay
into the Plan and the investment returns you achieve.     Therefore, your investment decisions are very
important.


With the number of UK employees in DC plans increasing, the investment options available and the way
DC plans operate are evolving quickly.        By separating the functions of investment manager and
administrator, the Trustees were provided with an opportunity to build on the investment choice
introduced in April 2004 and ensure that the investment options offered to Plan members take account of
their needs and are in line with best practice.


In determining the investment options, the Trustees were aware of the need to:
             strike a balance between those members who wish to make their own investment decisions
             and those members who do not wish to regularly review their Pension Account or are
             concerned they do not have sufficient knowledge to make investment decisions.

             consider introducing fund options which produced investment performance in line with the
             markets at a lower cost to members (passive funds – see below for further explanation).



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What was the outcome of the Trustees’ review?

Following their review, the Trustees therefore decided to:
             replace Fidelity with alternative investment managers

             offer members access to passive (or index-tracking) investment options

             continue to offer access to active investment managers

             continue to offer Lifecycle strategies either on an actively or passively managed basis and to
             remove the cautious Lifecycle strategy

             offer members who wish to review their Pension Account and make their own investment
             choices an increased choice of UK equity, overseas equity, bond, gilt, cash and property funds


Why did the Trustees decide not to offer Fidelity’s funds?

The Trustees have had concerns regarding Fidelity’s investment performance, particularly in UK equities
and the way they have responded to this performance. Fidelity is carrying out a significant review of
their investment process and the Trustees are concerned that, at least in the short-term, this may result
in further issues with their investment performance.


One of the Trustees’ duties is to review the performance of the Plan’s investment managers on behalf of
the members and to replace investment managers if they feel this is necessary. The Trustees want to
offer members a range of funds from a number of investment managers. Therefore the new range of
funds has been carefully selected by the Trustees, in conjunction with their investment consultants,
Watson Wyatt.


The separation of the administration and investment manager roles and the way that the Plan will now
operate means that the Trustees will be able to add and remove investment options more easily than in
the past.


What is passive investment management?

A passive (sometimes referred to as index-tracking) manager seeks to achieve returns in line with their
chosen market. For example, a passive UK equity manager would seek to provide returns in line with the
FTSE All Share Index. One way of achieving this is by holding all of the individual equities quoted on the
FTSE All Share Index in exactly the same proportion (by market value) as the Index.


As passive managers do not incur the research costs involved in active management, their investment
managers’ fees are typically significantly lower than active managers. This means that lower investment
management charges are applied to members’ Pension Accounts. Although you would not expect a
passive manager to outperform their index, there is very little risk that they will underperform against
the index.


What is active investment management?

An active manager, on the other hand, will invest in particular stocks or shares which research suggests
are good investments with the aim of outperforming an index. There is, of course, the risk that the




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manager makes more wrong decisions than correct ones, and as a result, underperforms against the
index. A passive manager will not make judgements of this kind.


The investment management charges paid by members to active fund managers are considerably more
than those paid to passive managers. This is because the passive manager does not have to spend time
and money researching the prospects of individual companies.


What are the new funds?
       Equities – passive:

            BGI Global Equity 40/60 Index

            BGI UK Equity Index

            BGI World ex-UK Equity Index

       Equities – active:

            Prudential M&G Specialist UK Equity

            Newton International Growth

       Other funds:

            Prudential M&G Property

            BGI Over 5 Yr Index-Linked Gilts

            Prudential M&G Pre-Retirement

            Prudential M&G Cash

Further information about these funds is contained in the Fund Factsheets, which are enclosed in this
information pack.


What are the Plan’s Lifecycle strategies?

The aim of the Plan’s Lifecycle strategies is to achieve a reasonable level of long-term growth on your
investments over the majority of your working life. Then, over the seven-year period before your
expected retirement date, your investments are gradually switched into a greater proportion of bonds
and cash.


The Plan has three pre-determined Lifecycle strategies that you can choose. Under each of these
strategies, your Pension Account is invested in-line with the pre-determined strategy and your Pension
Account is automatically switched between funds depending on your age and planned retirement date. All
you need to do is choose one of the three Lifecycle strategies available:

    • Lifecycle Growth - Active

    • Lifecycle Growth - Passive

    • Lifecycle Balanced - Passive




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The difference between the Lifecycle strategies is the funds in which your Pension Account will be
invested during the majority of your working lifetime.     Before the switching period each strategy is
invested as follows:

    • Lifecycle Growth – Active: invested 100% in actively managed equities;

    • Lifecycle Growth – Passive: invested 100% in passively managed equities; and

    •   Lifecycle Balanced – Passive: invested 75% in passively managed equities, and 25% in bonds.

The equity component in each of these Lifecycle strategies will be invested 40% in the UK and 60%
overseas.


When you reach your expected retirement date, your Pension Account will be invested mainly in bonds
(75%) with the remainder invested in cash (25%) under each of the three Lifecycle strategies reflecting
the fact that 25% of your Pension Account can be taken as a lump sum with the remainder being used to
buy a pension. The aim of this approach is to reduce short-term volatility and to protect against potential
movements in the cost of buying a pension in the years closest to retirement.


Further information about the Lifecycle strategies is contained in the investment guide.


Why have the Trustees removed the Cautious Lifecycle fund?

Only a small number of members selected this strategy reflecting the fact that it does not necessarily
meet the aim of the Lifecycle strategies of achieving a reasonable level of long-term growth on your
investments over the majority of your working life.     On balance, it was therefore felt that this option
should be discontinued. If you wish to continue to invest your Pension Account in line with a “cautious
strategy” you can use the Plan’s self-select options, however your funds will not be automatically
switched when you approach your Selected Retirement Age.             You should remember to review your
investment decisions on a regular basis.


Why are there two “Growth” Lifecycle strategies?

The Trustees wanted to offer members choice within the Lifecycle strategies. The difference between the
two Growth strategies is that one allows members to invest in passively managed funds and the other
allows members to invest in actively managed funds.


What do I do now?

You must choose which new funds you wish to move your Pension Account balance into.            You should
carefully consider your own circumstances when making investment decisions. The Trustees would urge
you to read the investment guide and the fund factsheets thoroughly and to attend one of the
presentations prior to making your choice.     If after you have read all the information available and
attended one of the presentations you are still unsure of which investments to choose, you may wish to
consider speaking to an independent financial adviser (IFA). Details of how to obtain an IFA are given in
the enclosed investment guide.


It is important that you review your investment choices regularly.


The Trustees of The Walt Disney Retirement Savings Plan
September 2006



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