DISNEY SALARIED SAVINGS AND
INVESTMENT PLAN
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
DECEMBER 31, 1996 AND 1995
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Report of Independent Accountants F-2
Statements of Net Assets Available for Benefits F-3
Statement of Changes in Net Assets Available for Benefits F-4
Notes to Financial Statements F-5
Supplementary Schedules
Schedule I - Line 27a: Schedule of Assets Held for Investment Purposes F-13
Schedule II - Line 27d: Schedule of Reportable Transactions F-14
Other schedules required by Section 2520.103-10 of the Department of Labor Rules
and Regulations for Reporting and Disclosure under ERISA have been omitted
because they were not applicable.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
June 20, 1997
To the Participants and Investment and
Administrative Committee of
the Disney Salaried Savings and Investment Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Disney Salaried Savings and Investment Plan (the "Plan") at December 31,
1996 and 1995 and the changes in its net assets available for benefits for the
year ended December 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Plan's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
Schedules I and II is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is additional information
required by ERISA. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
PRICE WATERHOUSE, LLP
F-2
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(In thousands)
<TABLE>
<CAPTION>
December 31,
<S> <C> <C>
1996 1995
Assets
Investments
At fair value:
The Walt Disney Company Common Stock Fund $264,378 $204,999
Shares of registered investment companies:
Fidelity Inst. Short-Int. Gov't Portfolio Fund 29,775 27,418
Fidelity U.S. Equity Index Commingled Pool Fund 40,538 25,714
Fidelity U.S. Bond Index Portfolio Fund 6,156 4,068
Fidelity Balanced Fund 12,205 9,186
Fidelity Magellan Fund 68,046 54,582
Participant Loans 10,502 8,575
-------- --------
Total investments 431,600 334,542
-------- --------
Receivables:
Employer's contribution - 736
Participants' contributions - 2,905
-------- --------
Total receivables - 3,641
-------- --------
Total assets 431,600 338,183
-------- --------
Net assets available for benefits $431,600 $338,183
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(In thousands)
<TABLE>
<CAPTION>
<S> <C>
For the Year Ended
December 31,
1996
------------
Additions to net assets attributed to:
Investment income
Interest $ 757
Dividends 13,847
Net realized gain (loss) on sale of assets 681
-------
15,285
-------
Net unrealized appreciation
in fair value of investments 43,347
-------
Contributions:
Participants' 46,018
Employer's 11,277
-------
57,295
-------
Total additions 115,927
-------
Deductions from net assets attributed to:
Benefits paid to participants 22,510
-------
Increase in net assets 93,417
Net assets available for benefits:
Beginning of year 338,183
-------
End of year $431,600
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
1. Description of the Plan
General
The Walt Disney Company (the "Company") implemented the Disney Salaried Savings
and Investment Plan (the "Plan") on January 1, 1985. The Plan is a defined
contribution plan designed to provide participating employees the opportunity to
accumulate retirement funds through a tax-deferred contribution arrangement
pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code"). In addition to the Code, the Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA"). For further
information regarding the Plan, refer to the Summary Plan Description.
Administration of the Plan
The Board of Directors of the Company has appointed the Investment and
Administrative Committee of The Walt Disney Company Sponsored Qualified Benefit
Plans and Key Employees Deferred Compensation and Retirement Plan (the
"Committee" or "Plan Administrator") to administer the Plan, interpret its
provisions and resolve all issues arising in the administration of the Plan.
Administrative expenses of the Plan, such as benefit plan consultation fees
(exclusive of brokerage commissions on the purchase or sale of Company stock)
may be paid from the assets of the Plan unless the Company, at its discretion,
pays such expenses. Investment expenses incurred by the Investment Funds are
charged to the respective funds.
Participation
Participation in the Plan is available to all domestic salaried employees of the
Company and its subsidiaries participating in the Plan who are regularly
scheduled to work 1,000 hours or more during a year. To be eligible, employees
must be age 18 or older and have completed one year of employment during which
they must also work at least 1,000 hours.
Effective March 4, 1993, the Plan was amended to accept direct cash rollovers
from other qualified plans after the employee had met the one-year eligibility
requirement. On January 12, 1995, the Plan was further amended to accept direct
cash rollovers from other qualified plans regardless of whether the employee had
met the one-year eligibility requirement. However, such funds would not be
available for hardship distributions or loans until after the employee has met
the one-year eligibility requirement and has become a participant of the Plan.
Contributions
Participants are permitted to authorize income deferrals in whole percentages,
up to 10 percent of their base compensation on a pre-tax basis, through weekly
payroll deductions. A participant's total tax-deferred contributions and the
Company's matching contributions, in any Plan year, cannot exceed the limits
provided under Section 415 of the Code.
F-5
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
1. Description of the Plan (continued)
Contributions (continued)
Effective January 1, 1987, the Plan ceased to accept voluntary post-tax
contributions. Post-tax contributions made prior to January 1, 1987 may remain
in the Plan and continue to share in the Plan's investment results on a
tax-deferred basis. Income earned on voluntary contributions is not taxable for
Federal income tax purposes until withdrawal and such post-tax contributions are
recovered tax free when withdrawn or distributed.
The Company currently contributes a matching amount equal to 50 percent of a
participant's pre-tax contributions up to a maximum of 2 percent of such
participant's base compensation. The Company may make matching contributions
either in cash, which is invested exclusively in the Company's common stock, or
directly in shares of the Company's common stock and, at its discretion, the
Company may change the level of matching contributions or cease making matching
contributions.
Participants are fully vested immediately in all contributions including the
Company's matching contributions made to the Plan and all earnings thereon.
Investments
The assets of the Plan are administered under a trust agreement between
the Company and Fidelity Institutional Retirement Services Company
("Fidelity" or the "Trustee"). The trust agreement provides that assets of the
Plan may be invested in the following pooled investment funds (collectively the
six funds are referred to as the "Investment Funds"), which are established and
directed by Fidelity:
The Walt Disney Company Common Stock Fund
This fund invests entirely in The Walt Disney Company common stock.
Fidelity Institutional Short-Intermediate Government Portfolio Fund
This fund invests only in fixed income securities issued by the U.S.
government or issued by U.S. government agencies.
Fidelity U.S. Equity Index Commingled Pool Fund
This fund invests in a pool of equity securities that correspond to the
total return on the Standard and Poor's 500 Index.
Fidelity U.S. Bond Index Portfolio Fund
This fund invests in U.S. government, corporate, mortgage and asset-backed
fixed income securities in proportion to their representations in the
Lehman Brothers Aggregate Bond Index.
Fidelity Balanced Fund
This fund invests in a broadly diversified portfolio including U.S.
government fixed income securities, U.S. government corporate fixed income
securities and U.S. equity securities.
F-6
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
1. Description of the Plan (continued)
Investments (continued)
Fidelity Magellan Fund
This fund invests primarily in common stock and securities convertible into
common stock; however, up to 20 percent of the Fund may be invested in
fixed income securities. Additionally, the Fund may invest in foreign
securities, high-yield securities, and may buy and sell options and futures
contracts relating to securities in the Fund. The Walt Disney Company
common stock may be held in the Fund.
Participants may direct the investment of their contributions into one or more
investment funds established for the Plan. Participants may elect to change the
investment of their contributions or to transfer all or part of their account
balances among the various investment funds. Only four such elections may be
made in any year and must be made in multiples of 10 percent of the amounts in
an Investment Fund. All funds are immediately and fully invested in the
Investment Funds upon receipt by Fidelity.
Benefits, Distributions and Withdrawals
A participant's entire account balance, adjusted for investment gains or losses,
is available for immediate distribution upon termination of employment.
Participants' account balances under $3,500 are automatically distributed within
90 days following the participant's severance date. The participant has 60 days
following the participant's severance date to elect whether or not to rollover
the funds into an IRA or another qualified plan. If no election is made, the
funds will be dispersed to the participant less 20 percent for federal
withholding tax. Participants with account balances of $3,500 or more may elect
a distribution at anytime before age 65. All amounts must be distributed when
the participant reaches age 65.
Under Section 401(k) of the Code, in service withdrawals of tax-deferred
contributions by participants are available only in amounts necessary to satisfy
a financial hardship and will be made if the Committee determines that the
reason for the hardship complies with applicable requirements under the Code. A
participant may withdraw his or her post-tax contributions twice each Plan year.
The minimum amount of each post-tax contribution withdrawal is $500.
Loans
Participants are permitted to borrow from their accounts subject to certain
limitations and conditions established to comply with the current requirements
of the Code. All loans made to participants are secured by their accounts with a
right of set-off. Voluntary post-tax contributions and any earnings thereon are
not available for loans. Participants may borrow up to 50 percent of their
account balance not to exceed $50,000 in any consecutive twelve month period. A
participant may only have one loan outstanding.
F-7
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
1. Description of the Plan (continued)
Loans (continued)
Loans may have a term of up to four years. However, the term can be extended to
ten years if the loan is used to acquire or construct a principal residence of
the participant. The interest rate on loans is currently prime plus 1 percent.
Plan Amendment or Termination
The Company reserves the right to amend or modify, at any time, the provisions
of the Plan. Although the Company expects to continue the Plan indefinitely, the
Board of Directors of the Company may terminate the Plan for any reason. If the
Plan is terminated each participant will receive, as prescribed by ERISA and its
related regulations, and in the form and manner determined by the Committee, a
payment equal to the value of the participant's account at the time of
liquidation.
Related Party Transactions
Certain Plan investments are shares of mutual funds managed by Fidelity.
Fidelity is the trustee as defined by the Plan, and, therefore, these
transactions qualify as party-in-interest.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared using the accrual basis of
accounting.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying
disclosures. Actual results could differ from those estimates.
Contribution Policy
Contributions are recorded in the period during which the Company makes payroll
deductions from the employees' earnings. Matching company contributions are
recorded in the same period.
Investment Valuation and Income Recognition
Investments in securities traded on national security exchanges are valued on
the basis of the closing price on the last trading day of the year. Investments
in commingled funds are valued at the redemption prices established by the
Trustee, which are based on the market value of the fund assets. Participant
loans are valued at cost which approximates fair value. Purchases and sales of
securities are recorded on a trade-date basis. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date.
F-8
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
2. Summary of Significant Accounting Policies (continued)
Realized Gains and Losses on Security Transactions
Realized gains and losses on security transactions are computed based upon the
sales proceeds less the fair value of the investments at the beginning of the
year or the acquisition cost, if acquired during the year.
Unrealized Appreciation/Depreciation in Fair Value of Investments
The appreciation or depreciation in the fair value of investments held at year
end is based on values established at the most recent year-end valuation date as
compared to the previous year-end valuation or the purchase cost if the
investment was acquired within the year.
Payment of Benefits
Benefits are recorded when paid.
F-9
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
3. Summary of Changes in Net Assets Available for Benefits by
Investment Program
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
The
Walt Inst. U.S.
Disney Short- Equity U.S.
Company Inter Index Bond
Common Gov't Commingled Index
Stock Portfolio Pool Portfolio Balanced Magellan Loan
Fund Fund Fund Fund Fund Fund Fund Total
-------- ----------- ----------- ----------- -------- ---------- ------- ---------
Additions to net
assets attributed to:
Investment income
Interest $ 11 $ - $ - $ - $ - $ - $ 746 $ 757
Dividends 1,521 1,903 - 348 511 9,564 - 13,847
Net realized
gain(loss)on
sale of assets 1,489 (89) 246 (40) (19) (906) - 681
-------- ----------- ----------- --------- -------- --------- -------- --------
3,021 1,814 246 308 492 8,658 746 15,285
-------- ----------- ----------- --------- -------- --------- -------- --------
Net unrealized
appreciation
(depreciation)in
fair value of
investments 38,622 (514) 6,534 (109) 522 (1,708) - 43,347
-------- ----------- ----------- --------- -------- --------- ------- --------
Contributions
Participants 19,052 3,246 6,241 1,927 3,021 12,531 - 46,018
Employer 11,277 - - - - - - 11,277
-------- ----------- --------- -------- --------- --------- ------- --------
30,329 3,246 6,241 1,927 3,021 12,531 - 57,295
-------- ----------- --------- -------- --------- --------- ------- --------
Total additions 71,972 4,546 13,021 2,126 4,035 19,481 746 115,927
-------- --------- -------- -------- --------- --------- ------- --------
Deductions from net
assets attributed to:
-------- --------- -------- -------- --------- --------- ------- --------
Payments to
participants 14,153 1,740 1,557 242 834 3,480 504 22,510
-------- --------- -------- -------- --------- --------- ------- --------
Inter-fund transfers (682) (690) 3,052 102 (374) (3,472) 2,064 0
-------- --------- -------- -------- --------- --------- ------- --------
Increase (decrease)in
net assets for the
year 57,137 2,116 14,516 1,986 2,827 12,529 2,306 93,417
Net assets available
for benefits
Beginning of year 207,241 27,659 26,022 4,170 9,378 55,517 8,196 338,183
-------- --------- -------- -------- --------- -------- -------- ---------
End of year $264,378 $29,775 $40,538 $ 6,156 $ 12,205 $68,046 $10,502 $431,600
======== ========= ======== ======== ========= ======== ======== =========
</TABLE>
F-10
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
4. Income Taxes
The Company has received an Internal Revenue Service determination letter
stating that the Plan qualifies under Section 401(a) of the Code and is
therefore exempt from Federal income tax under Section 501(a) of the Code. Since
the Plan is qualified under Section 401(a) of the Code, under applicable state
law it is also exempt from state income taxes. The Plan Administrator and the
Plan's tax counsel believe that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the Code.
Accordingly, no provision for income taxes is made in the accompanying financial
statements.
5. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits according
to the financial statements to Form 5500:
<TABLE>
<CAPTION>
December 31,
<S> <C> <C>
1996 1995
------ ------
Net assets available for benefits per the
financial statements $431,600 $338,183
Amounts allocated to withdrawing
participants - (1,788)
-------- ---------
Net assets available for benefits per
Form 5500 $431,600 $336,395
======== ========
</TABLE>
The following is a reconciliation of benefits paid to participants according to
the financial statements to Form 5500:
<TABLE>
<CAPTION>
<S> <C>
Year Ended
December 31,
1996
Benefits paid to participants per the
financial statements $22,510
Less: Amounts allocated to withdrawing participants
at December 31, 1995 (1,788)
--------
Benefits paid to participants per Form 5500 $20,722
========
</TABLE>
Amounts allocated to withdrawing participants are recorded on Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31 but not yet paid as of that date.
F-11
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
6. Subsequent Events
Effective April 1, 1997, the Plan was amended as follows:
Applications for loans and certain distributions are now made via the
Disney 401(k) Service Line at Fidelity Investments.
The Disney Common Stock Fund was unitized, which allows for daily trading
for the purchase or sale of stock.
The PIMCO Total Return Fund, Fidelity Growth & Income Portfolio Fund,
Sequoia Fund, Fidelity Diversified International Fund and Putnam New
Opportunities Fund were added to the Plan.
The Fidelity U.S. Bond Index Portfolio Fund, Fidelity Balanced Fund and
Fidelity U.S. Equity Index Commingled Pool Fund were eliminated from the
Plan. Account balances in the Fidelity U.S. Bond Index Portfolio Fund as of
April 1, 1997 were transferred into the PIMCO Total Return Fund. Account
balances in the Fidelity Balanced Fund and Fidelity U.S. Equity Index
Commingled Pool Fund as of April 1, 1997 were transferred into the Fidelity
Growth & Income Portfolio Fund.
F-12
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
SCHEDULE I
LINE 27a: SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT
DECEMBER 31, 1996
(DOLLARS ARE NOT IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CURRENT
SHARE DESCRIPTION OF INVESTMENTS COSTS VALUE
- --------- ------------------------------------- ------------ ------------
3,790,368 *The Walt Disney Company Common Stock $146,151,979 $264,378,134
3,160,871 * Fidelity Inst. Short-Inter
Gov't Portfolio Fund 30,408,614 29,775,404
1,996,942 * Fidelity U.S. Equity Index
Commingled Pool Fund 26,873,388 40,537,922
582,912 * Fidelity U.S. Bond Index
Portfolio Fund 6,175,341 6,155,555
866,874 * Fidelity Balanced Fund 11,433,587 12,205,585
843,716 * Fidelity Magellan Fund 62,125,477 10,501,570
Participant Loans 10,501,570 10,501,570
------------ ------------
(Maturities go through 2006
Interest rate range from
7.00% to 10.00%)
$293,669,956 $431,599,895
============ ============
</TABLE>
* Parties-in-interest
F-13
<PAGE>
DISNEY SALARIED SAVINGS AND INVESTMENT PLAN
SCHEDULE II
LINE 27d: SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS ARE NOT IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current
Value of
Identity Number Cost of Asset on
of of Selling/ Assets Trans-
party Description Trans- Purchase Distribution Lease Expense Sold/ action
involved of Assets actions Price Price Rental Incurred Distributed Date Net gain
- --------- ------------ ------- ------------- ------------- ---------- ---------- ------------- ---------- -------------
The Walt * The Walt
Disney Disney
Company Company
Common
Stock 150 $40,390,276
94 $21,122,331 $12,652,438 $ 8,469,893
Fidelity * Magellan 228 25,896,502
Fund
171 9,818,405 9,266,857 551,548
* Parties-in-interest
</TABLE>
F-14
