Walt Disney Company (DIS)

Annual bonuses for named executive officers

At the beginning of fiscal 2005, the Committee established performance goals for fiscal 2005 bonuses based upon the following four measures:

For fiscal year 2005, the Committee gave equal weight to each of the measures listed above. The Committee has also established goals using the same measures for fiscal 2006 and given each equal weight.

In setting these measures and determining the extent to which they were satisfied, the Committee excluded the impact of items (such as impairment of or gain or loss on sales of assets acquired in earlier periods) that it believed were not driven by the current performance of Company executives.

After the end of the fiscal year, the Committee determined that the performance target for Section 162(m) compliance set for the fiscal year under the 2002 Executive Performance Plan had been met. Bonuses were awarded based on the formula provided for in the bonus plan described above. Because Ms. McCarthy was not an executive officer at the beginning of the fiscal year, her bonus was determined as described under “Annual bonuses for other bonus eligible employees,” above. Mr. Murphy’s bonus was equal to a fixed amount negotiated with him after he was no longer an executive officer of the Company and was subject to downward adjustment in the event company-wide financial performance goals were not met for the fiscal year.

With respect to Mr. Iger, in evaluating the subjective component of his bonus, the Committee considered a variety of accomplishments by him during the fiscal year, including: the continued growth in the media networks business; his acceptance of enhanced responsibility for running the Company; and his focus on strategic initiatives to drive growth, including internal reorganizations, technology initiatives and international expansion.

14

Table of Contents

The Walt Disney Company Notice of 2006 Annual Meeting and Proxy Statement

In evaluating the subjective component of the bonus of Mr. Eisner, who served as CEO for all of fiscal 2005, the committee considered, among other factors, the successful opening of our theme park in Hong Kong and his substantial contribution to an effective and seamless CEO transition.

As a result of these determinations, the Committee awarded the bonus amounts set forth in the Summary Compensation Table.

Annual bonuses for named executive officers

Fiscal year 2004 bonuses for each of the executives named in the Summary Compensation Table in this proxy statement were granted under the Company’s 2002 Executive Performance Plan, which was approved by shareholders at the Company’s 2002 annual meeting. Under this plan, the Committee established, early in the fiscal year, an overall Company performance target based on the achievement of a specified level of “adjusted net income.” This measure allows for adjustments to reported net income to account for such factors as changes in accounting principles and extraordinary events reported in the Company’s public filings, although none of the permitted adjustments had a significant effect on the final determination of achievement of the performance target for fiscal year 2004.

After the end of the fiscal year, the Committee determined that the fiscal 2004 target had been achieved and that bonuses could be paid under the plan in accordance with Section 162(m). In determining the award amounts, the Committee took into account, among other factors, the Company’s greatly improved performance during fiscal 2004 as measured by, among other things, its 72% growth in earnings per share before the cumulative effect of an accounting change and improvements in segment operating income and free cash flow. The Committee also took into account a review of compensation paid for comparable positions at other large, publicly held corporations, with particular focus on major entertainment companies, and the recommendations of the Chief Executive Officer and the President and Chief Operating Officer (other than with respect to their own bonuses).

16

Table of Contents

In the case of Mr. Eisner, the Committee’s fiscal 2004 bonus determination took into account that his base salary remains lower than that of chief executives of comparable corporations and thus a greater proportion of his overall compensation is subject to the Company’s overall performance. In awarding Mr. Eisner’s bonus, the Committee also took into account the Company’s greatly improved performance in fiscal 2004, as noted above. Based upon these considerations, and with advice from the Committee’s independent consultant, the Committee awarded Mr. Eisner the bonus of $7,250,000 as set forth in the Summary Compensation Table.