Disney's goal in conducting on-site factory assessments is to obtain an accurate and current evaluation of working conditions. To do this, we need access to several things: workers, management, relevant documentation and the physical premises. Since our monitors sometimes need to travel great distances to get to a factory, we historically have arranged for an assessment date with factory management beforehand in order to ensure that we can access everyone and all items we need to successfully complete our assessment. This ensures the best chance for our monitors to gain access to records, management, accountants and human resources personnel. It also ensures that monitors are able to locate the factory, in locations where street addresses are not common or change, or where the address is incomplete.

However, Disney know from experience that assessments can cause anxiety and may encourage factories to present the best possible and not always most accurate picture. Therefore, in 2006 we began to test unannounced assessments in China. Compared with scheduled factory assessments conducted in the same region during the same time frame,, unannounced assessments had a higher percentage of findings of violations in almost every Code category. We continued throughout 2007 to conduct more unannounced assessments, and in 2008 roughly half of the assessments we conducted ourselves in China were unannounced.

In 2009, Disney plan to conduct a larger number of unannounced factory assessments in China, and we will begin testing some unannounced assessments in other countries as well. We are increasing the number of unannounced assessments ?and we encourage our licensees and vendors to do the same depending on the nature of their relationships ?because we believe that we get a more accurate picture of the true working conditions of the factories. However, this approach also means that we will have a greater number of instances of factories denying us access to their staff or factories. In 2008, 10% of the assessments we arranged directly and scheduled in advance resulted in those factories denying us access at the time of the audit. For the same time period, unannounced assessments resulted in a 26% rate of denial of access. When a factory denies us access to their facility to conduct an assessment, we communicate to the licensee or vendor that their factory did not allow us entry to conduct a social compliance assessment. We expect the licensee or vendor to reinforce with their factory that access to the facility is a critical requirement in order to maintain authority to make Disney-branded product. We give them one additional opportunity on a different day to allow us access. If we are still denied access after that second chance, then we have no option but to terminate our authorization of work in the factory. Lastly, in cases where monitors will have to travel great distances to reach a factory, those factory assessments will remain scheduled.