WALT DISNEY CO/, PRE 14A, 1997-12-19

WALT DISNEY CO/
PRE 14A, 1997-12-19
MISCELLANEOUS AMUSEMENT & RECREATION

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

THE WALT DISNEY COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

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PRELIMINARY COPY

[LOGO OF THE WALT DISNEY COMPANY APPEARS HERE]

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 24, 1998

----------------

To our Stockholders:

The 1998 annual meeting of stockholders of The Walt Disney Company will be
held at the Hyatt Regency Crown Center, 2345 McGee Street, Kansas City,
Missouri, on Tuesday, February 24, 1998, beginning at 10:00 a.m. local time.
At the meeting, stockholders will act on the following matters:

(1) Election of six directors, each for a term of three years;

(2) Approval of an amendment to the Company's certificate of
incorporation to provide for the annual election of directors;

(3) Ratification of the appointment of Price Waterhouse LLP as the
Company's independent accountants for fiscal 1998;

(4) Consideration of three stockholder proposals; and

(5) Any other matters that properly come before the meeting.

Stockholders of record at the close of business on December 29, 1997 are
entitled to vote at the meeting or any postponement or adjournment.

IF YOU PLAN TO ATTEND:

PLEASE NOTE THAT SPACE LIMITATIONS MAKE IT NECESSARY TO LIMIT ATTENDANCE TO
STOCKHOLDERS AND ONE GUEST. ADMISSION TO THE MEETING WILL BE ON A FIRST-COME,
FIRST-SERVED BASIS. REGISTRATION WILL BEGIN AT 8:00 A.M., AND SEATING WILL BE
AVAILABLE AT APPROXIMATELY 9:00 A.M. CAMERAS AND RECORDING DEVICES WILL NOT BE
PERMITTED AT THE MEETING. "STREET NAME" HOLDERS WILL NEED TO BRING A COPY OF A
BROKERAGE STATEMENT REFLECTING STOCK OWNERSHIP AS OF THE RECORD DATE.

By order of the Board of Directors,

/s/ Marsha L. Reed

Marsha L. Reed
Corporate Secretary

January 2, 1998
Burbank, California
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE MEETING......................................................... 1
What is the purpose of the annual meeting?.............................. 1
Who is entitled to vote?................................................ 1
Who can attend the meeting?............................................. 1
What constitutes a quorum?.............................................. 1
How do I vote?.......................................................... 1
Can I vote by telephone or electronically?.............................. 2
Can I change my vote after I return my proxy card?...................... 2
How do I vote my 401(k) shares?......................................... 2
What are the Board's recommendations?................................... 2
What vote is required to approve each item?............................. 2
STOCK OWNERSHIP........................................................... 3
Who are the largest owners of the Company's stock?...................... 3
How much stock do the Company's directors and officers own?............. 3
ITEM 1--ELECTION OF DIRECTORS............................................. 5
Directors Standing for Election......................................... 5
Directors Continuing in Office.......................................... 6
Certain Legal Proceedings............................................... 10
Executive Compensation.................................................. 11
Report of the Compensation Committee and the Executive Performance
Subcommittee on Executive Compensation............................... 11
Compensation Committee Interlocks and Insider Participation........... 13
Employment Agreement with Michael D. Eisner........................... 14
Executive Compensation Summary Table.................................. 16
Option Grants for Fiscal 1997......................................... 17
Option Exercises and Values for Fiscal 1997........................... 18
Retirement Plans...................................................... 18
Comparison of Five-Year and Thirteen-Year Cumulative Total Returns...... 19
ITEM 2--AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO PROVIDE FOR
ANNUAL ELECTION OF DIRECTORS............................................. 21
ITEM 3--RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS............ 23
ITEM 4--STOCKHOLDER PROPOSALS............................................. 23
Proposal 1--Shareholder Rights Plan..................................... 23
Proposal 2--Corporate Governance........................................ 24
Proposal 3--Contract Supplier Standards................................. 26
OTHER MATTERS............................................................. 29
ADDITIONAL INFORMATION.................................................... 29
</TABLE>
<PAGE>

PRELIMINARY COPY
[LOGO OF THE WALT DISNEY COMPANY APPEARS HERE]
500 SOUTH BUENA VISTA STREET
BURBANK, CALIFORNIA 91521

----------------

PROXY STATEMENT

----------------

This proxy statement contains information related to the annual meeting of
stockholders of The Walt Disney Company to be held on Tuesday, February 24,
1998, beginning at 10:00 a.m., at the Hyatt Regency Crown Center, 2345 McGee
Street, Kansas City, Missouri, and at any postponements or adjournments
thereof.

ABOUT THE MEETING

WHAT IS THE PURPOSE OF THE ANNUAL MEETING?

At the Company's annual meeting, stockholders will act upon the matters
outlined in the accompanying notice of meeting, including the election of
directors, the amendment of the Company's certificate of incorporation,
ratification of the Company's independent auditors and consideration of three
proposals submitted by stockholders. In addition, the Company's management
will report on the performance of the Company during fiscal 1997 and respond
to questions from stockholders.

WHO IS ENTITLED TO VOTE?

Only stockholders of record at the close of business on the record date,
December 29, 1997, are entitled to receive notice of the annual meeting and to
vote the shares of common stock that they held on that date at the meeting, or
any postponement or adjournment of the meeting. Each outstanding share
entitles its holder to cast one vote on each matter to be voted upon.

WHO CAN ATTEND THE MEETING?

All stockholders as of the record date, or their duly appointed proxies, may
attend the meeting, and each may be accompanied by one guest. Seating,
however, is limited. Admission to the meeting will be on a first-come, first-
served basis. Registration will begin at 8:00 a.m., and seating will be
available at approximately 9:00 a.m. Cameras and recording devices will not be
permitted at the meeting.

Please note that if you hold your shares in "street name" (that is, through
a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in
at the registration desk at the meeting.

WHAT CONSTITUTES A QUORUM?

The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, shares of common stock of the Company were
outstanding. Proxies received but marked as abstentions and broker non-votes
will be included in the calculation of the number of shares considered to be
present at the meeting.

HOW DO I VOTE?

If you complete and properly sign the accompanying proxy card and return it
to the Company, it will be voted as you direct. If you attend the meeting, you
may deliver your completed proxy card in person.
<PAGE>

CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?

If you are a registered stockholder (that is, if you hold your stock in your
own name), you may vote by telephone, or electronically through the Internet,
by following the instructions included with your proxy card.

If your shares are held in "street name," you will need to contact your
broker or other nominee to determine whether you will be able to vote by
telephone or electronically.

CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?

Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of the
Company either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not
by itself revoke a previously granted proxy.

HOW DO I VOTE MY 401(K) SHARES?

If you participate in the Disney Savings and Investment Plan or the ABC,
Inc. Savings and Investment Plan (i.e., the Company's "401(k)" plans), you may
vote shares of common stock of the Company equivalent to the value of the
interest credited to your account by instructing Fidelity Management Trust
Company, the trustee of both plans, pursuant to the instruction card being
mailed with this proxy statement to plan participants. The trustee will vote
your shares in accordance with your duly executed instructions received by
February 17, 1998. If you do not send instructions, the share equivalents
credited to your account will be voted by the trustee in the same proportion
that it votes share equivalents for which it did receive timely instructions.

You may also revoke previously given voting instructions by February 17,
1998 by filing with the trustee either a written notice of revocation or a
properly completed and signed voting instruction card bearing a later date.

WHAT ARE THE BOARD'S RECOMMENDATIONS?

Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board's recommendation is set
forth together with the description of each item in this proxy statement. In
summary, the Board recommends a vote:

. for election of the nominated slate of directors (see pages 5-6);

. for the amendment of the Company's certificate of incorporation to
provide for the annual election of directors (see pages 20-21);

. for ratification of the appointment of Price Waterhouse LLP as the
Company's independent auditors (see page 22); and

. against approval of each of the stockholder proposals (see pages 22-27).

With respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.

WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?

. ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of one
or more directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether
there is a quorum.

. AMENDMENT OF CERTIFICATE OF INCORPORATION. Approval of the proposed
amendment of the Company's certificate of incorporation to provide for the
annual election of directors requires the affirmative vote of the holders of
an absolute majority of the outstanding common stock.

2
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. OTHER ITEMS. For each other item, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote
on the item will be required for approval. A properly executed proxy marked
"ABSTAIN" with respect to any such matter will not be voted, although it will
be counted for purposes of determining whether there is a quorum. Accordingly,
an abstention will have the effect of a negative vote.

If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.

STOCK OWNERSHIP

WHO ARE THE LARGEST OWNERS OF THE COMPANY'S STOCK?

The Company knows of no single person or group that is the beneficial owner
of more than 5% of the Company's common stock.

HOW MUCH STOCK DO THE COMPANY'S DIRECTORS AND OFFICERS OWN?

The following table shows the stock ownership of the Company's directors,
the executive officers of the Company named in the Summary Compensation Table
below and the directors and executive officers of the Company as a group, in
each case as of December 29, 1997.

STOCK OWNERSHIP
---------------

<TABLE>
<CAPTION>
AGGREGATE NUMBER ACQUIRABLE PERCENT OF
OF SHARES WITHIN 60 SHARES
NAME BENEFICIALLY OWNED(1)(2) DAYS(3) OUTSTANDING(4)
<S> <C> <C> <C>
Reveta F. Bowers.......... 100 1,100 *
Roy E. Disney............. 6,161,729 120,000 *
Michael D. Eisner......... 3,602,915(5) -- *
Stanley P. Gold........... 3,516 1,200 *
Sanford M. Litvack........ 11,290 300,000 *
Ignacio E. Lozano, Jr..... 5,588 1,200 *
George J. Mitchell........ 1,700 -- *
Lawrence P. Murphy........ 21,227 272,000 *
Thomas S. Murphy.......... 1,089,043 400 *
Richard D. Nanula......... 3,553 114,000 *
Richard A. Nunis.......... 103,661 260,000 *
Leo J. O'Donovan, S.J..... -- -- --
Sidney Poitier............ -- 1,200 *
Irwin E. Russell.......... 4,000 1,200 *
Robert A.M. Stern......... 260 1,200 *
E. Cardon Walker.......... 155,245 1,200 *
Raymond L. Watson......... 14,040 1,200 *
Gary L. Wilson............ 1,000 1,200 *
All directors and execu-
tive officers as a group
(19 persons)............. 11,182,376 1,147,100 1.8%
</TABLE>

* Represents less than 1% of the Company's outstanding common stock.

3
<PAGE>

(1) The number of shares shown includes shares that are individually or
jointly owned, as well as shares over which the individual has either sole
or shared investment or voting authority. Certain of the Company's
directors and executive officers disclaim beneficial ownership of some of
the shares included in the table, as follows:

. Mr. Eisner--29,600 shares held by his wife directly and as custodian for
their children, 12,000 shares held in a trust for his children, 8,799
shares held in trusts of which Mr. Eisner is a trustee and 3,200 shares
held in a trust of which Mr. Eisner is the income beneficiary;

. Mr. Disney--256,320 shares held in trusts for the benefit of his children
or grandchildren, of which Mr. Disney is the trustee; and 416 shares
beneficially owned by Shamrock Holdings, Inc., of which both Mr. Disney
and his wife are officers and directors and the shares of which are held
by Mr. Disney, his wife, certain of his children, trusts for the benefit
of his children and custodial accounts for the benefit of certain of his
children and grandchildren;

. Mr. Gold--1,440 shares held by his wife and 416 shares beneficially owned
by Shamrock Holdings, Inc., of which he is an officer and director;

. Mr. Litvack--150 shares held by a trust of which he is a co-trustee;

. Mr. Lozano--440 shares that he holds as custodian for the benefit of his
child;

. Thomas Murphy--17,390 shares held in trust for the benefit of a non-
family member and 440 shares owned by Mr. Murphy's wife; and

. Mr. Nunis--4,380 shares held by a trust of which Mr. Nunis is trustee for
the benefit of his son and 815 shares held by his wife as trustee for her
children.

All current directors and executive officers as a group disclaim beneficial
ownership of an aggregate of 335,806 shares.

(2) Includes interests in shares held in the Disney Salaried Savings and
Investment Plan, with respect to which the officers have sole voting power
but no investment rights: Mr. Eisner--8,474 shares; Mr. Litvack--
790 shares; Mr. Nanula--3,304 shares; Lawrence Murphy--1,175 shares; Mr.
Nunis--10,019 shares; and all current directors and executive officers as
a group--27,271 shares.

(3) Reflects the number of shares that could be purchased by exercise of
options available at December 29, 1997 or within 60 days thereafter under
the Company's stock option plans.

(4) Based on the number of shares outstanding at, or acquirable within 60 days
of, December 29, 1997.

(5) Does not include 550,000 shares held by The Eisner Foundation, Inc., a
charitable not-for-profit corporation in which Mr. Eisner has no pecuniary
interest.

Based upon a review of filings with the Securities and Exchange Commission
and written representations that no other reports were required, the Company
believes that all of the Company's directors and executive officers complied
during fiscal 1997 with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, with the exception of one filing with respect
to a sale of shares pursuant to an option exercise by Mr. Nunis, which was
made after the applicable deadline. The delay was the result of an
administrative error on the Company's part in processing the filing on behalf
of Mr. Nunis.

4
<PAGE>

ITEM 1--ELECTION OF DIRECTORS

DIRECTORS STANDING FOR ELECTION

The Board of Directors is currently divided into three classes, having
three-year terms that expire in successive years. The term of office of
directors in Class II expires at the 1998 annual meeting. The Board of
Directors proposes that the nominees described below, all of whom are
currently serving as Class II directors, be re-elected to Class II for a new
term of three years and until their successors are duly elected and qualified.

Each of the nominees has consented to serve a three-year term. If any of
them should become unavailable to serve as a director, the Board may designate
a substitute nominee. In that case, the persons named as proxies will vote for
the substitute nominee designated by the Board.

Approval by the Company's stockholders of Item 2 on the agenda for the
annual meeting--the proposed amendment to the certificate of incorporation of
the Company to provide for the annual election of directors --will not affect
the term of the Class II directors, who, if elected, will continue in office
until the Company's annual meeting in 2001.

CLASS II DIRECTORS. The directors standing for election are:

MICHAEL D. EISNER Director since 1984

Mr. Eisner, 55, has served as Chairman of the Board and Chief Executive
Officer of the Company since 1984. Prior to joining the Company, Mr. Eisner
was President and Chief Operating Officer of Paramount Pictures Corp.,
which was then a wholly owned subsidiary of Gulf+Western Industries, Inc.
Prior to joining Paramount in 1976, Mr. Eisner was Senior Vice President,
Prime Time Programming, for ABC Entertainment, a division of the American
Broadcasting Company, Inc., with responsibility for the development and
supervision of all prime-time series programming, limited series movies
made for television and the acquisition of talent.

STANLEY P. GOLD Director since 1987;
also from June to September 1984

For more than the past five years, Mr. Gold, 55, has served as President
and Chief Executive Officer of Shamrock Holdings, Inc. Since 1990, Mr. Gold
has been President of Trefoil Investors, Inc., the general partner of
Trefoil Capital Investors, L.P., an investment partnership, as well as
President of Shamrock Capital Advisors, Inc., which acts as manager of the
partnership.

THOMAS S. MURPHY Director since 1996

Mr. Murphy, 72, was Chairman of the Board and Chief Executive Officer of
Capital Cities/ABC, Inc. for 24 years from 1966 to 1990 and from February
1994 until his retirement in February 1996. Mr. Murphy is also a director
of Johnson & Johnson and Texaco Inc.

LEO J. O'DONOVAN, S.J. Director since 1996

Fr. O'Donovan, 63, has served as President of Georgetown University in
Washington, D.C. since 1989. He is a member of the National Council on the
Arts of the National Endowment for the Arts and serves on the boards of
directors of the Association of Catholic Colleges and Universities and the
Consortium of Universities of the Washington Metropolitan Area.

IRWIN E. RUSSELL Director since 1987

Mr. Russell, 71, is an attorney presently engaged in private practice, who
has served as an attorney and executive in the entertainment industry for
many years. He serves as an independent member of the Board

5
<PAGE>

of Directors of The Lipper Funds, Inc., a mutual fund group, and of the
Southern California Tennis Association, a nonprofit association. He also
serves as an ad hoc arbitrator for the Federal Mediation and Conciliation
Service and the American Arbitration Association.

RAYMOND L. WATSON Director since 1974

Mr. Watson, 71, has served as Chairman of the Executive Committee of the
Company's Board of Directors since 1984 and was Chairman of the Board of
the Company from May 1983 to September 1984. Since 1986, Mr. Watson has
been Vice Chairman of the Board of The Irvine Company, a land development
company. From 1985 to 1986, he was Regents Professor in the Graduate School
of Management at the University of California, Irvine. Mr. Watson is also a
director of Pacific Mutual Holding Company and its subsidiaries Pacific
LifeCorp and Pacific Life Insurance Company; Mitchell Energy & Development
Co., a company engaged in oil and gas exploration, production, distribution
and land development; The Tejon Ranch Company; and the Public Policy
Institute of California, a non-profit public policy research institute.

DIRECTORS CONTINUING IN OFFICE

CLASS III DIRECTORS. The following Class III directors were elected at the
Company's 1996 annual meeting for terms ending in 1999:

SANFORD M. LITVACK Director since 1995

Mr. Litvack, 61, is Senior Executive Vice President and Chief of Corporate
Operations of the Company, having served as Senior Vice President and
General Counsel from April 1991 through June 1992 and as Executive Vice
President Law and Human Resources from June 1992 to August 1994. Mr.
Litvack was a litigation partner with the law firm of Dewey Ballantine from
1987 until joining the Company in 1991.

RICHARD A. NUNIS Director since 1981

Mr. Nunis, 65, is Chairman of Walt Disney Attractions, which encompasses
the Company's theme parks and resorts, and has been a senior executive of
the Company or its subsidiaries for more than the past five years. He is
also a member of the Board of Directors of SunTrust Bank and of Florida
Progress Corporation, a diversified holding company whose interests include
an electric utility. Mr. Nunis is a member of the Board of the University
of Central Florida Foundation, Inc.

SIDNEY POITIER Director since 1994

Mr. Poitier, 70, is an actor, director and writer, serving as Chief
Executive Officer of Verdon-Cedric Productions, a film production company.
He is also a member of the Board of Directors of Sarah Lawrence College.
Mr. Poitier has won many awards, including the Academy Award(R) for Best
Actor, the American Film Institute's Lifetime Achievement Award and the
Kennedy Center Honors. He belongs to numerous civic organizations,
including the Children's Defense Fund, the NAACP Legal Defense and
Education Fund and the Natural Resources Defense Council. In addition, he
is the Ambassador to Japan from the Commonwealth of the Bahamas.

ROBERT A.M. STERN Director since 1992

Mr. Stern, 58, is a practicing architect, teacher and writer. He is Senior
Partner of Robert A.M. Stern Architects of New York, which he founded, and
a Fellow of the American Institute of Architects. Mr. Stern is also a
professor at the Graduate School of Architecture, Planning and Preservation
at Columbia University in New York, where he is Director of the Historic
Preservation Program. Mr. Stern was the design architect of the Yacht and
Beach Club hotels, the Boardwalk Hotel and the Casting Center at the Walt
Disney World Resort and the Newport Bay Club and the Cheyenne Hotel at
Disneyland Paris. He is also the design architect of the Feature Animation
Building at the Company's headquarters in Burbank, California.

6
<PAGE>

E. CARDON WALKER Director since 1960

Mr. Walker, 81, was a senior executive of the Company for more than 25
years until 1984, serving as President from 1971 to 1977 and Chairman of
the Board and Chief Executive Officer from 1980 to 1983. From 1984 through
1989, he provided consulting and other services to the Company.

CLASS I DIRECTORS. The following Class I directors were elected at the
Company's 1997 annual meeting for terms ending in 2000:

REVETA F. BOWERS Director since 1993

Mrs. Bowers, 49, has been the Head of School for the Center for Early
Education, an independent school for pre-school through sixth grade located
in Los Angeles, since 1976. Mrs. Bowers is a member of the Board of
Directors of several non-profit educational organizations, including the
National Association of Independent Schools, Educational Records Bureau,
Inc., The Fulfillment Fund and the Coalition for Justice.

ROY E. DISNEY Director since June 1984;
also from 1967 to March 1984

Mr. Disney, 67, has been Vice Chairman of the Board of Directors of the
Company since 1984, and since November 1985 has also served as head of the
Company's animation department. In addition, Mr. Disney is Chairman of the
Board of Shamrock Holdings, Inc., which, through its subsidiaries, is
engaged in real estate development and the making of investments. Mr.
Disney is a nephew of the late Walt Disney.

IGNACIO E. LOZANO, JR. Director since 1981

Mr. Lozano, 70, is Chairman of Lozano Enterprises, which publishes La
Opinion, the largest Spanish-language newspaper in the Los Angeles
metropolitan area. Mr. Lozano was Publisher and Editor of La Opinion from
1953 to 1986, except for the period from 1976 through 1977 when he was the
United States Ambassador to El Salvador. Mr. Lozano is a member of the
Boards of Directors of Pacific Enterprises, a holding company, and its
subsidiary Southern California Gas Co., a natural gas public utility;
Pacific Mutual Holding Company and its subsidiaries Pacific LifeCorp and
Pacific Life Insurance Company; and a number of public service and
charitable organizations.

GEORGE J. MITCHELL Director since 1995

Mr. Mitchell, 64, is special counsel to the law firm of Verner, Liipfert,
Bernhard, McPherson & Hand in Washington, D.C. He served as a United States
Senator for fifteen years commencing in 1980, and was Senate Majority
Leader from 1989 to 1995. Mr. Mitchell is a member of the Board of
Directors of UNUM Corporation, Federal Express Corp., Starwood Lodging
Corp. and Xerox Corporation. He also serves as Chairman of the Peace
Negotiations in Northern Ireland, the International Crisis Group, the
Ethics Committee of U.S. Olympic Committee and the National Health Care
Commission.

GARY L. WILSON Director since 1985

Mr. Wilson, 57, is Chairman of the Board of Northwest Airlines Corporation.
From July 1985 through December 1989, he was Executive Vice President and
Chief Financial Officer of the Company. Prior to joining the Company, Mr.
Wilson was Executive Vice President and Chief Financial Officer of Marriott
Corporation, a diversified company involved in lodging, food service and
related businesses.

HOW ARE DIRECTORS COMPENSATED?

CASH COMPENSATION. During the Company's fiscal year ending September 30,
1997, each nonemployee director received a retainer fee based upon an
annualized amount of $30,000 through April 30, 1997 and $35,000 thereafter,
together with a fee of $1,000 per Board or Committee meeting attended.
Nonemployee directors may defer payment of all or part of their fees under the
Company's Deferred Compensation Plan for Outside Directors. Such deferrals are
generally until termination of the director's service with the Company or
until he or she reaches a specified age. Ms. Bowers, Mr. Mitchell and Mr.
Murphy are currently participating in this plan. Directors who are also
employees of the Company receive no additional compensation for service as
directors.

7
<PAGE>

In December 1997, the Company adopted a new stock and deferred compensation
plan for non-employee directors, under which non-employee directors may elect
to receive all or part of their retainer and meeting fees either in common
stock or in cash or stock unit accounts. Any such deferrals are effective
until termination of the participating director's service as a director.

OPTIONS. Each nonemployee director receives an automatic grant, on March 1
of each year, of options to purchase 2,000 shares of common stock. For fiscal
1997, Ms. Bowers, Fr. O'Donovan and Messrs. Gold, Lozano, Mitchell, Murphy,
Poitier, Russell, Stern, Walker, Watson and Wilson received grants under this
plan. Each option grant, vesting in equal installments over five years and
having a ten-year term, permits the holder to purchase shares at their fair
market value on the date of grant, which was $73.82 in the case of options
granted in 1997.

OTHER COMPENSATION. During fiscal 1997, Mr. Walker received payments
totalling $675,406 with respect to motion pictures in which he invested
between 1963 and 1979 under a former incentive program of the Company.

During fiscal 1997, Company subsidiaries retained the firm of Robert A.M.
Stern Architects, of which Mr. Stern is Senior Partner, for architectural
services relating to the Celebration project in Florida and the Anaheim
Stadium in California. Payments to Mr. Stern's firm for these services
aggregated $546,905 during fiscal 1997. Mr. Stern's firm also provided
architectural services during the year to Oriental Land Co., Ltd., the
Japanese corporation that owns and operates Tokyo Disneyland under license
from the Company's subsidiary Disney Enterprises, Inc., and Euro Disney
S.C.A., the French company that owns and operates the Disneyland Paris Resort
under license from Disney Enterprises. The Company indirectly owns 39% of Euro
Disney S.C.A., which is managed by a Company subsidiary. Payments to Mr.
Stern's firm by Oriental Land Co. and Euro Disney S.C.A. during fiscal 1997
totalled $968,369.

Senator Mitchell provides consulting services to the Company with respect to
a variety of matters affecting the Company's international business operations
and development efforts. During fiscal 1997, the Company paid Senator Mitchell
an aggregate of $50,000 for these services.

HOW OFTEN DID THE BOARD MEET DURING FISCAL 1997?

The Board of Directors met six times during fiscal 1997. Each director
attended more than 75% of the total number of meetings of the Board and
Committees on which he or she served with the exception of Mr. Gold, who
attended less than 75% of the meetings of the Board of Directors and the
Executive Performance Plan Committee.

8
<PAGE>

WHAT COMMITTEES HAS THE BOARD ESTABLISHED?

The Board of Directors has standing Executive, Compensation, Audit Review
and Nominating Committees. In addition, the Board has created an Executive
Performance Subcommittee within the Compensation Committee.

BOARD COMMITTEE MEMBERSHIP

<TABLE>
<CAPTION>
EXECUTIVE AUDIT
EXECUTIVE COMPENSATION PERFORMANCE REVIEW NOMINATING
NAME COMMITTEE COMMITTEE SUBCOMMITTEE COMMITTEE COMMITTEE
<S> <C> <C> <C> <C> <C>
Reveta F. Bowers........ * * * *

Roy E. Disney........... *

Michael D. Eisner....... *

Stanley P. Gold......... * ** **

Sanford M. Litvack......

Ignacio E. Lozano, Jr... * * **

George J. Mitchell...... * *

Thomas S. Murphy........ * **

Richard A. Nunis........

Leo J. O'Donovan, S.J... *

Sidney Poitier.......... * *

Irwin E. Russell........ *

Robert A.M. Stern.......

E. Cardon Walker........ *

Raymond L. Watson....... ** * *

Gary L. Wilson.......... *
</TABLE>
* Member.

** Chairperson.

EXECUTIVE COMMITTEE. The Executive Committee possesses all of the powers of
the Board except the power to issue stock, approve mergers with nonaffiliated
corporations or declare dividends (except at a rate or in a periodic amount or
within a price range established by the Board), and certain other powers
specifically reserved by Delaware law to the Board. In fiscal 1997, the
Executive Committee held no meetings, but took action by unanimous written
consent ten times.

COMPENSATION COMMITTEE. The Compensation Committee is charged with reviewing
the Company's general compensation strategy (except with respect to matters
entrusted to the Executive Performance Subcommittee as described below);
establishing salaries and reviewing benefit programs (including pensions) for
the Chief Executive Officer and those persons who report directly to him;
reviewing, approving, recommending and administering the Company's incentive
compensation and stock option plans and certain other compensation plans; and
approving certain employment contracts. In fiscal 1997, the Compensation
Committee met eight times.

EXECUTIVE PERFORMANCE SUBCOMMITTEE. During fiscal 1997, the Board of
Directors formed the Executive Performance Subcommittee of the Compensation
Committee. The Subcommittee succeeded to the principal functions previously
carried out by a separate committee of the Board, the Executive Performance
Plan Committee. The Subcommittee's principal responsibility is to review and
advise the Board with respect to performance-based compensation of corporate
officers who are, or who are likely to become, subject to Section 162(m) of
the Internal Revenue Code. (Section 162(m) limits the deductibility of
compensation in excess of

9
<PAGE>

$1,000,000 paid to a corporation's chief executive officer and four other most
highly compensated executive officers, unless certain conditions are met.) The
Subcommittee did not meet during fiscal 1997, but its predecessor Committee
held a total of eight meetings.

AUDIT REVIEW COMMITTEE. The Audit Review Committee met three times during
fiscal 1997. Its functions are to recommend the appointment of independent
accountants; review the arrangements for and scope of the audit by independent
accountants; review the independence of the independent accountants; consider
the adequacy of the system of internal accounting controls and review any
proposed corrective actions; review and monitor the Company's policies
relating to ethics and conflicts of interests; discuss with management and the
independent accountants the Company's draft annual financial statements and
key accounting and/or reporting matters; and review the activities and
recommendations of the Company's management audit department.

NOMINATING COMMITTEE. The Nominating Committee is responsible for soliciting
recommendations for candidates for the Board of Directors; developing and
reviewing background information for candidates; making recommendations to the
Board regarding such candidates; and reviewing and making recommendations to
the Board with respect to candidates for directors proposed by stockholders.
Any stockholder wishing to propose a nominee should submit a recommendation in
writing to the Company's Secretary, indicating the nominee's qualifications
and other relevant biographical information and providing confirmation of the
nominee's consent to serve as a director. The Nominating Committee did not
meet during fiscal 1997.

CERTAIN LEGAL PROCEEDINGS

On January 3, 1997, two purported stockholders, Richard and David Kaplan,
filed a putative derivative action in the Superior Court of the State of
California, Los Angeles County (the "California Court"), alleging that certain
current and former directors of the Company breached their fiduciary duties of
loyalty and care and wasted corporate assets in connection with entering into
and terminating the Company's employment agreement with its former president,
Michael S. Ovitz. On January 7, 1997, two other purported stockholders,
William and Geraldine Brehm, filed a substantially identical complaint in the
Court of Chancery for the State of Delaware, New Castle County (the "Delaware
Court"), and another purported stockholder, Michael Grening, filed a similar
complaint in the Delaware Court. On January 14, 1997, Mr. Grening, together
with other purported stockholders Michelle De Benedictis, Peter Lawrence and
Judith B. Wohl, filed a similar complaint in the California Court. On February
7, 1997, other purported stockholders, Thomas Malloy, Richard Kaser, Carol
Kaser, Melvyn Zupnick, Michael Caesar, Robert S. Goldberg and Michael Shores,
filed a similar claim in the California Court.

On May 28, 1997, all these claimants together filed an amended complaint in
the Delaware Court, which names as defendants all of the Company's current
directors, together with Mr. Ovitz and Stephen F. Bollenbach, the Company's
former Chief Financial Officer and a former director. The complaint seeks,
among other things, a declaratory judgment that Mr. Ovitz's employment
agreement was void or, alternatively, that Mr. Ovitz's termination should be
deemed a termination "for cause" and any severance payments to him forfeited,
and compensatory or rescissory damages and injunctive and other equitable
relief from the named defendants. It also seeks class action status to pursue
a claim for damages and invalidation of the 1997 election of directors, based
upon allegations of insufficient disclosures concerning, among other things,
Mr. Ovitz's termination and Mr. Eisner's compensation.

The Company believes that the allegations in the complaint are without
merit.

10
<PAGE>

EXECUTIVE COMPENSATION

The following Report of the Compensation Committee and the Executive
Performance Subcommittee and the performance graphs included elsewhere in this
proxy statement do not constitute soliciting material and should not be deemed
filed or incorporated by reference into any other Company filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent the Company specifically incorporates this Report or the performance
graphs by reference therein.

REPORT OF THE COMPENSATION COMMITTEE AND THE EXECUTIVE PERFORMANCE
SUBCOMMITTEE ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for fiscal 1997. Because certain of
the functions of the Compensation Committee have been transferred to the
Executive Performance Subcommittee, the Subcommittee joins in the report.

WHAT IS THE COMPANY'S PHILOSOPHY OF EXECUTIVE COMPENSATION?

The Company's compensation program for executives consists of three key
elements:

. a base salary,

. a performance-based annual bonus, and

. periodic grants of stock options.

The Committee believes that this three-part approach best serves the interests
of the Company and its stockholders. It enables the Company to meet the
requirements of the highly competitive environment in which the Company
operates while ensuring that executive officers are compensated in a way that
advances both the short-and long-term interests of stockholders. Under this
approach, compensation for these officers involves a high proportion of pay
that is "at risk"--namely, the annual bonus and stock options. The variable
annual bonus permits individual performance to be recognized on an annual
basis, and is based, in significant part, on an evaluation of the contribution
made by the officer to Company performance. (Bonus arrangements applicable to
the Company's Chief Executive Officer beginning in fiscal 1999 are described
below.) Stock options relate a significant portion of long-term remuneration
directly to stock price appreciation realized by all of the Company's
stockholders.

BASE SALARY. Base salaries for the Company's executive officers, as well as
changes in such salaries, are based upon recommendations by the Chief
Executive Officer, taking into account such factors as competitive industry
salaries; a subjective assessment of the nature of the position; the
contribution and experience of the officer, and the length of the officer's
service. Under the Chief Executive Officer's direction, the Chief of Corporate
Operations reviews all salary recommendations with the Compensation Committee,
which then approves or disapproves such recommendations. The Chief Executive
Officer reviews any salary recommendations for the Chief of Corporate
Operations with the Compensation Committee.

ANNUAL BONUS. Annual bonuses for fiscal 1997 paid to executive officers of
the Company were granted under the Company's Annual Bonus Performance Plan.
This plan, which was previously designated the 1997 Cash Bonus Performance
Plan and approved by the Company's stockholders in 1997, was amended in
December 1997 to permit the payment of awards in stock as well as cash. The
plan is administered by the Executive Performance Subcommittee and provides
for performance-based bonuses for executives who are "covered employees" under
Section 162(m) of the Internal Revenue Code.

Under the plan, the Subcommittee establishes specific annual "performance
targets" for each covered executive officer for performance periods of one or
more years from October 1, 1996 through September 30, 2001. The performance
targets may be based on one or more of the following business criteria: net
income, return on equity, return on assets or earnings per share (in each case
as defined in the plan), or on any combination thereof, and must be
established while actual performance relative to the target remains
substantially uncertain

11
<PAGE>

within the meaning of Section 162(m). At the same time, the Subcommittee
establishes an objective formula or standard for calculating the maximum bonus
payable to each participating executive officer. The maximum bonus for any
fiscal year may not exceed $10,000,000 or, if less, ten times the executive's
base salary ($15,000,000 or, if less, 20 times base salary, in the case of the
Chief Executive Officer) or $50,000,000 ($75,000,000 in the case of the Chief
Executive Officer) over the five-year term of the plan. These maximum bonus
amounts were set above the Company's historical bonus levels for executives
other than the Chief Executive Officer because the Section 162(m) regulations
allow only "negative discretion" in respect of this type of plan, and the
Subcommittee wanted flexibility to recognize exceptional individual
performance when warranted.

Within these limits, the Subcommittee has sole discretion to determine the
actual amount of each bonus, and whether payment or vesting of a bonus will be
deferred, subject in each case to the plan's terms and any other written
commitment authorized by the Subcommittee. The Subcommittee may also exercise
"negative discretion" by establishing additional conditions or terms for the
payment of bonuses, such as the establishment of other financial, strategic or
individual goals, which may be objective or subjective.

For fiscal 1997, the Subcommittee established an overall Company performance
target based upon the achievement of a specified level of net income for the
Company as a whole. After the end of the fiscal year, the Subcommittee
confirmed that the 1997 target had been achieved and the annual bonuses could
therefore be paid under the plan. In arriving at an actual bonus amount for
each executive, the Subcommittee then considered several specific factors,
including overall Company performance as compared to both budgeted and prior
fiscal year performance; the extent to which the Company achieved its overall
financial goals of growth in earnings and return on stockholders' equity; the
amount of the Company-wide bonus pool, as described below; and each
executive's individual achievements. Based upon these factors, the
Subcommittee awarded the bonuses set forth below in the Summary Compensation
Table.

For bonus-eligible executives who are not covered by the Annual Bonus
Performance Plan, the Company's Chief Executive Officer, working with the
Chief of Corporate Operations, develops a Company-wide bonus pool following
each fiscal year. The size of the bonus pool is based upon a subjective
assessment of overall Company and individual business unit performance as
compared to both budgeted and prior fiscal year performance and the extent to
which the Company achieved its overall financial goals of growth in earnings
and return on stockholders' equity. The amount of the bonus pool is subject to
the approval of both the Compensation Committee and the Board of Directors as
a whole. Once the overall bonus pool is approved, the Company's senior
management makes individual bonus recommendations to the Compensation
Committee, within the limits of the pool, for eligible employees based upon an
evaluation of their individual performance and contribution to the Company's
overall performance.

STOCK OPTIONS. Under the stock option guidelines adopted by the Compensation
Committee, stock option grants may be made to executive officers upon initial
employment, upon promotion to a new, higher level position that entails
increased responsibility and accountability, in connection with the execution
of a new employment agreement, and/or when all previously granted stock
options have either fully vested or are within twelve months of full vesting.
Using these guidelines, the Chief of Corporate Operations, under the direction
of the Chief Executive Officer, recommends the number of options to be
granted, within a range associated with the individual's salary level, and
presents this to the Compensation Committee (or to the Executive Performance
Committee, in the case of executive officers subject to Section 162(m)) for
review and approval. The Chief Executive Officer and/or the Chief of Corporate
Operations may make recommendations that deviate from the guidelines where
they deem it appropriate. While options typically vest over a minimum five-
year period, options granted to certain executive officers have longer vesting
periods.

HOW IS THE COMPANY'S CHIEF EXECUTIVE OFFICER COMPENSATED?

As Chief Executive Officer, Mr. Eisner was compensated during most of fiscal
1997 pursuant to an employment agreement entered into in January 1997, which
replaced his prior 1989 employment agreement. The new agreement, which extends
through September 30, 2006, subject to earlier termination under certain

12
<PAGE>

circumstances, provides for an annual base salary of $750,000, the same base
salary that Mr. Eisner has received since 1984. Bonuses for fiscal 1997 and
1998 are determined under the Annual Bonus Performance Plan described above,
and thereafter pursuant to a formula tied to a compounded earnings growth rate
of the Company above a specified level (see "Employment Agreement with Michael
D. Eisner" below). This formula, which was approved by the Company's
stockholders in 1997, adopts as its performance criterion growth in earnings
per share ("EPS"), because the Company believes that EPS provides an efficient
measure of performance and creates an incentive directly related to the
Company's growth in the years ahead.

In connection with the new employment agreement, the Compensation Committee
granted Mr. Eisner options to acquire an aggregate of 8,000,000 shares of
Company common stock, with vesting of the earliest options delayed for seven
years (except in the event of early termination of his employment under
certain circumstances described below) and with a significant portion vesting
later (subject to the same exception) and bearing exercise prices at 125%,
150%, and 200% of fair market value at the date of grant.

HOW IS THE COMPANY ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?

Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to the corporation's chief executive officer and four other most
highly compensated executive officers as of the end of any fiscal year.
However, the statute exempts qualifying performance-based compensation from
the deduction limit if certain requirements are met. The Executive Performance
Subcommittee currently intends to structure performance-based compensation,
including stock option grants and annual bonuses, to executive officers who
may be subject to Section 162(m) in a manner that satisfies those
requirements. To meet the stockholder approval requirements of Section 162(m),
the Company submitted the Annual Bonus Performance Plan and the bonus formula
in Mr. Eisner's employment agreement to stockholders for approval at the 1997
annual meeting. Both were approved at that meeting.

The Board, the Compensation Committee and the Executive Performance
Subcommittee reserve the authority to award non-deductible compensation in
other circumstances as they deem appropriate. Further, because of ambiguities
and uncertainties as to the application and interpretation of Section 162(m)
and the regulations issued thereunder, no assurance can be given,
notwithstanding the Company's efforts, that compensation intended by the
Company to satisfy the requirements for deductibility under Section 162(m)
does in fact do so.

Members of the Compensation Members of the Executive Performance
Committee Subcommittee

Thomas S. Murphy (Chairman) Stanley P. Gold
Reveta F. Bowers Reveta F. Bowers (Chairman)
Stanley P. Gold Ignacio E. Lozano
Ignacio E. Lozano, Jr. Sidney Poitier o, Jr.
Sidney Poitier
Irwin E. Russell
Raymond L. Watson

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the Board's Compensation Committee is or has been an
officer or employee of the Company, except Mr. Watson, who was Chairman of the
Board of Directors of the Company from May 1983 to September 1984. Mr. Murphy
was Chairman of the Board and Chief Executive Officer of Capital Cities/ABC,
Inc. prior to its acquisition by the Company, but has not held any office with
the Company or its subsidiaries since the acquisition.

None of the members of the Executive Performance Subcommittee is or has been
an officer or employee of the Company.

13
<PAGE>

EMPLOYMENT AGREEMENT WITH MICHAEL D. EISNER

The Company and Mr. Eisner executed a new employment agreement on January 8,
1997, which provides for Mr. Eisner's employment through September 30, 2006
(subject to earlier termination in certain circumstances as described below),
at his current base salary of $750,000 per year, which has been in effect
since 1984. Under the agreement, bonus compensation for fiscal years 1997 and
1998 is determined pursuant to the terms of the Company's 1997 Cash Bonus
Performance Plan. Starting with fiscal 1999, Mr. Eisner's bonus compensation
will be determined through the bonus formula set forth in the Chief Executive
Officer Bonus Compensation Plan, which was approved by the Company's
stockholders in 1997. This formula ties Mr. Eisner's bonus each year to the
growth of the Company's earnings per share ("EPS") above an annual growth rate
of 7.5%. The threshold EPS for fiscal 1999 will be an amount 7.5% above the
average EPS of the Company for fiscal 1997 and 1998 (subject to a maximum of
$3.25 and a minimum of $2.75 for such average). For each subsequent fiscal
year, the threshold EPS will be 7.5% more than the prior year's threshold EPS.
The bonus for each year will be determined by multiplying the amount, if any,
by which the Company's reported EPS exceeds the specified threshold level by a
specified "Bonus Percentage," which declines each year, and then multiplying
the resulting amount by the number of outstanding shares used by the Company
in calculating its reported EPS for the fiscal year in question.

In connection with the new employment agreement, the Committee also granted
to Mr. Eisner, on September 30, 1996, stock options with respect to a total of
8,000,000 shares of common stock of the Company under the Company's 1995 Stock
Incentive Plan. Of this total, an option with respect to 5,000,000 shares
bears an exercise price of $63.31, the fair market value of the Company's
common stock on September 30, 1996 as determined under the Plan, and vests on
September 30, 2003, with an expiration date of September 30, 2008. Three
additional options, each with respect to 1,000,000 shares, bear exercise
prices in excess of fair market value on the date of grant one, with an
exercise price of $79.14 (125% of fair market value), vests on September 30,
2004; the second, with an exercise price of $94.97 (150% of fair market
value), vests on September 30, 2005; and the third, with an exercise price of
$126.62 (200% of fair market value), vests on September 30, 2006. The three
additional options expire on September 30, 2011.

Mr. Eisner's employment agreement provides that either the Company or Mr.
Eisner may at any time request a renegotiation of the bonus formula if
circumstances arise that cause the results of the bonus formula to be "unfair
and inequitable." These circumstances include a combination with another
company, capital restructuring, material changes in accounting rules or tax
laws, severe or prolonged recession or inflation or any other circumstances,
whether intrinsic or extrinsic to the Company, that would materially affect
the formula results. If in such circumstances the parties are unable to reach
agreement on a substitute formula, the matter may be submitted to arbitration.
In all cases, the Company will be permitted to seek stockholder approval or
take such other steps as are reasonably required in order for the Company to
claim the deductibility of any bonus paid pursuant to a substitute formula.
Any change in the bonus formula may be made only on a prospective basis (i.e.,
only with respect to future years or a year as to which the deadline under
federal tax law for establishing a performance-based plan has not passed) and
could increase (or decrease) the cost to the Company.

Mr. Eisner is entitled to receive the bonuses referred to above for each
year in which he is employed under the new agreement and, in the event of
termination of his employment by the Company in a manner that is a breach of
the agreement or termination by him for "good reason" as described below, for
the full remaining term of the employment agreement and the 24-month period
thereafter, subject to reduction to twelve months if he takes employment with
another major entertainment company (other than as an independent producer)
within twelve months of termination. In the event of termination of employment
as a result of death or disability or upon normal termination of the agreement
in September 2006, Mr. Eisner will receive such bonuses for the year in which
the termination occurs and for the 24 months following such fiscal year. The
employment agreement also provides for a death benefit to Mr. Eisner's estate
in the event of his death during the term of the agreement, in an after-tax
amount equal to $3,000,000.

The Company has the right to terminate Mr. Eisner's employment upon his
death; illness or disability that has incapacitated him for six consecutive
months; or "good cause," which is defined as gross negligence,

14
<PAGE>

malfeasance or resignation without approval of the Company. Mr. Eisner has the
right to terminate the agreement for "good reason" in the event he is not
elected or retained as Chairman and Chief Executive Officer and a director of
the Company, or the Company acts to reduce his duties and responsibilities
materially or to change the location of the performance of his duties from the
Los Angeles area. In the event of any termination of Mr. Eisner's employment
by the Company without "good cause" or by Mr. Eisner for "good reason," or in
the event his death or disability, all of Mr. Eisner's options granted in
connection with his new employment agreement vest immediately and remain
exercisable until the earlier of five years thereafter or their scheduled
expiration dates, and he or his estate is entitled to a cash payment equal to
the present value of the remainder of the salary and to the bonus payments
provided for in his agreement as described above.

The agreement also provides for Mr. Eisner to serve as a consultant to the
Company after expiration of the agreement at a fee to be mutually agreed
(which may be nominal), plus continuation of his benefits and perquisites
under the agreement, other than salary, bonus, stock options and group health,
pension and employee welfare plan coverage. Any such consulting agreement
would be terminable by the Company if Mr. Eisner were to accept employment
with a third party, render any services to a competitor or become disabled.

Prior to the effectiveness of the current employment agreement on January 8,
1997, Mr. Eisner served the Company pursuant to an employment agreement dated
as of January 11, 1989. Mr. Eisner's base salary under that agreement was
$750,000 per year and he was entitled to a nondiscretionary annual bonus equal
to 2% of the amount by which the Company's net income for each fiscal year
exceeded the amount representing a return on stockholder's equity of 11% (9%
for 1989 and 1990). In November 1996, the application of the formula was
adjusted pursuant to a provision in the employment agreement providing for
adjustments in the event of mergers or other corporate combinations. The
former agreement provided for a single stock option grant (made on January 11,
1989) with respect to 8,000,000 shares of common stock. Of the options
granted, 25% were granted at an exercise price $10 above the then current fair
market value of the common stock, with the remaining 75% granted at a price
equal to fair market value.

15
<PAGE>

EXECUTIVE COMPENSATION SUMMARY TABLE

The following table sets forth information concerning total compensation
earned or paid to the Chief Executive Officer and the four other most highly
compensated executive officers of the Company who served in such capacities as
of September 30, 1997 (the "named executive officers") for services rendered
to the Company during each of the last three fiscal years.

EXECUTIVE COMPENSATION SUMMARY TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------ ---------------------
NUMBER OF
STOCK RESTRICTED
NAME AND PRINCIPAL FISCAL OTHER ANNUAL OPTIONS STOCK ALL OTHER
POSITIONS YEAR SALARY BONUS(1) COMPENSATION(2) GRANTED AWARDS(1) COMPENSATION(3)
<S> <C> <C> <C> <C> <C> <C> <C>
Michael D. Eisner 1997 $750,000 $9,900,000 -- -- -- $3,820
Chief Executive Officer 1996 750,000 7,900,000 -- 8,000,000 -- 3,520
and Chairman of the 1995 750,000 8,024,707 -- -- $5,996,552 6,877
Board

Roy E. Disney 1997 $500,000 $ 700,000 -- -- -- $ 620
Vice Chairman of the 1996 459,614 700,000 -- -- -- 3,520
Board 1995 350,000 500,000 -- 200,000 -- 3,820

Sanford M. Litvack 1997 $749,616 $1,475,000 -- 200,000 -- $3,820
Senior Executive Vice 1996 650,000 1,100,000 -- -- -- 3,520
President and Chief of 1995 647,115 1,600,000 -- -- -- 6,820
Corporate Operations

Richard D. Nanula(4) 1997 $632,692 $1,300,000 $78,752 -- -- $3,820
Senior Executive Vice 1996 552,577 750,000 73,510 212,000 -- 3,520
President and Chief 1995 450,000 500,000 108,297 -- -- 3,550
Financial Officer

Lawrence P. Murphy 1997 $566,346 $ 800,000 -- -- -- $3,820
Executive Vice 1996 522,308 650,000 -- -- -- 3,520
President and Chief 1995 475,769 550,000 -- 150,000 -- 6,828
Strategic Officer

</TABLE>
(1) Mr. Eisner's bonuses for fiscal years 1995 and 1996 were calculated
pursuant to the bonus formula in his 1989 employment agreement (see
"Employment Agreement with Michael D. Eisner" above). He received 97,445
shares of restricted stock as part of his fiscal 1995 bonus, based upon
the average closing price for the Company's common stock ($61.538)
during a "window period" following the release of the year's financial
results. The value of the restricted shares represents the aggregate
bonus amount, less the cash portion (i.e., the bonus payable if net
income were .175 times stockholders equity) under the terms of the 1989
agreement. The restrictions on the restricted shares lapse on September
30, 1998, and may lapse earlier upon certain events (including death,
disability, a termination by the Company without "good cause," a
termination by Mr. Eisner for "good reason" or an agreement for the
combination or sale of the Company that would, or could reasonably be
expected to, eliminate or materially impair the market for public
trading of the Company's common stock). The restricted shares will be
forfeited if Mr. Eisner's employment is terminated by the Company for
"good cause." At the end of fiscal 1997, the restricted shares had a
market value of $7,854,067 (without giving effect to any diminution in
value attributable to the restrictions). Dividends are paid on the
restricted shares at the same rate payable to common stockholders and
thus are not reflected in the amounts reported under applicable S.E.C.
rules.
(2) In accordance with S.E.C. rules, amounts totaling less than $50,000 have
been omitted. The only portions of the amounts for Mr. Nanula that
represent more than 25% of the totals shown are interest payment
reimbursements in the amount of $50,584 for fiscal 1997, $52,460 for
fiscal 1996 and $63,468 for fiscal 1995.
(3) The Company provides the named executive officers with certain group
life, health, medical and other non-cash benefits generally available to
all salaried employees and not included this column pursuant to the
S.E.C.'s rules. The amounts shown in this column include the following:
. Matching contributions by the Company under the Disney Salaried Savings
and Investment Plan, all of which are invested in common stock of the
Company. During fiscal 1997, the Company's matching contributions were
$3,200 for each of Messrs. Eisner, Litvack, Nanula and Murphy. Mr.
Disney did not participate in the plan.
. Insurance premiums under personal liability insurance plans that the
Company provides for certain key employees with coverage up to
$5,000,000. Benefits under the plan supplement each employee's personal
homeowner's and automobile liability insurance coverage. During fiscal
1997, the Company paid $620 in premiums on behalf of each of the named
executive officers.

16
<PAGE>

(4) Mr. Nanula assumed his current position in February 1996. From November
1994 to February 1996, he served as President of The Disney Store
Worldwide, and from August 1991 to February 1994 he was Senior Vice
President and Chief Financial Officer of the Company and from February
1994 to April 1995, Executive Vice President and Chief Financial Officer
of the Company.

OPTION GRANTS FOR FISCAL 1997

The following table sets forth information with respect to option grants to
the named executive officers during fiscal 1997 and the potential realizable
value of such option grants:

. the number of shares of common stock underlying options granted during
the year;

. the percentage that such options represent of all options granted to
employees during the year;

. the exercise price;

. the expiration date; and

. the hypothetical present value, as of the grant date, of the options
under the option pricing model discussed below.

The hypothetical value of the options as of their date of grant has been
calculated below, using the Black-Scholes option pricing model, as permitted
by the rules of the Securities and Exchange Commission, based upon a set of
assumptions set forth in the footnote to the table. It should be noted that
this model is only one method of valuing options, and the Company's use of the
model should not be interpreted as an endorsement of its accuracy. The actual
value of the options may be significantly different, and the value actually
realized, if any, will depend upon the excess of the market value of the
common stock over the option exercise price at the time of exercise.

OPTION GRANTS DURING FISCAL 1997

<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OPTIONS HYPOTHETICAL
OF GRANTED TO EXERCISE VALUE AT
OPTIONS EMPLOYEES IN PRICE EXPIRATION GRANT
NAME GRANTED FISCAL YEAR ($/SHARE) DATE(1) DATE(2)
<S> <C> <C> <C> <C> <C>
Michael D. Eisner..... -- -- -- -- --

Roy E. Disney......... -- -- -- -- --

Sanford M. Litvack.... 200,000 1.8% $72.50 11/25/06 $4,952,000

Richard D. Nanula..... -- -- -- -- --

Lawrence P. Murphy.... -- -- -- -- --
</TABLE>

(1) The Compensation Committee and the Executive Performance Subcommittee,
which administer the Company's stock option and incentive plans, have
general authority to accelerate, extend or otherwise modify benefits
under option grants in certain circumstances within overall plan
limits, and, with the consent of the affected optionee, to change the
exercise price to a price not less than 100% of the market value of
the stock on the effective date of the amendment. The Committee and
the Subcommittee have no current intention to exercise that authority
with respect to these options.
(2) The estimated present value at grant date of options granted during
fiscal year 1997 has been calculated using the Black-Scholes option
pricing model, based upon the following assumptions: estimated time
until exercise of 6.0 years; a risk-free interest rate of 6.0%,
representing the interest rate on a U.S. Government zero-coupon bond
on the date of grant with a maturity corresponding to the estimated
time until exercise; a volatility rate of 23.0%; and a dividend yield
of 0.71%, representing the current $0.1325 per share annualized
dividends divided by the fair market value of the common stock on the
date of grant. The approach used in developing the assumptions upon
which the Black-Scholes valuation was done is consistent with the
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation."

17
<PAGE>

OPTION EXERCISES AND VALUES FOR FISCAL 1997

The table below sets forth the following information with respect to option
exercises during fiscal 1997 by each of the named executive officers and the
status of their options at September 30, 1997:

. the number of shares of common stock acquired upon exercise of options
during fiscal 1997;

. the aggregate dollar value realized upon the exercise of such options;

. the total number of exercisable and non-exercisable stock options held at
September 30, 1997, and

. the aggregate dollar value of in-the-money exercisable options at
September 30, 1997.

AGGREGATED OPTION EXERCISES DURING FISCAL 1997
AND
OPTION VALUES ON SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED IN-
SHARES VALUE NUMBER OF UNEXERCISED THE-MONEY OPTIONS
ACQUIRED UPON REALIZED OPTIONS 9/30/97 9/30/97(1)
EXERCISE OF UPON ------------------------- --------------------------
NAME OPTION EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Michael D. Eisner....... -- -- 7,333,336 8,666,664 $460,790,162 $129,789,837

Roy E. Disney........... -- -- 80,000 120,000 2,273,200 4,084,800

Sanford M. Litvack...... -- -- 450,000 350,000 22,241,500 8,288,500

Richard D. Nanula....... 50,000 $2,651,608 170,000 444,000 7,599,780 14,558,860

Lawrence P. Murphy...... 80,000 5,183,200 312,000 210,000 16,788,400 7,051,500
</TABLE>
(1) In accordance with the S.E.C.'s rules, values are calculated by
subtracting the exercise price from the fair market value of the
underlying common stock. For purposes of this table, fair market value
is deemed to be $80.60, the average of the high and low common stock
price reported for the New York Stock Exchange on September 30, 1997.

RETIREMENT PLANS

The Company maintains a tax-qualified, noncontributory retirement plan,
called the Disney Salaried Retirement Plan, for salaried employees who have
completed one year of service. Benefits are based primarily on the
participant's credited years of service and average base compensation (base
compensation excludes other compensation such as bonuses) for the highest five
consecutive years of compensation during the ten-year period prior to
termination or retirement, whichever is earlier. In addition, a portion of
each participant's retirement benefit is comprised of a flat dollar amount
based solely on years and hours of credited service. Retirement benefits are
non-forfeitable after five years of vesting service, and actuarially reduced
benefits are available for participants who retire on or after age 55 after
five years of vesting service.

In addition, the Company maintains a nonqualified, unfunded plan, the
Amended and Restated Key Plan, which provides retirement benefits for key
salaried employees. This plan provides retirement benefits in excess of the
compensation limitations and maximum benefit accruals for tax-qualified plans.
In calendar year 1997, the maximum compensation limit under a tax-qualified
plan was $160,000 and the maximum annual benefit accruable under a tax-
qualified defined benefit plan was $125,000. Benefits under this plan are
provided by the Company on a noncontributory basis.

18
<PAGE>

The table below illustrates the total combined estimated annual benefits
payable under these retirement plans to eligible salaried employees for years
of service assuming normal retirement at age 65. The table illustrates
estimated benefits payable determined on a straight-life annuity basis. There
is no offset in benefits under either plan for Social Security benefits.

RETIREMENT PLAN AND RESTATED KEY PLAN

<TABLE>
<CAPTION>
AVERAGE ANNUAL BASE YEARS OF CREDITED SERVICE
COMPENSATION HIGHEST --------------------------------------------
FIVE CONSECUTIVE YEARS 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 150,000................... $ 45,444 $ 60,621 $ 75,906 $ 91,050 $104,925

300,000................... 88,757 118,371 148,094 177,675 205,988

450,000................... 132,069 176,121 220,281 264,300 307,050

600,000................... 175,382 233,871 292,469 350,925 408,113

750,000................... 218,694 291,621 364,656 437,550 509,175

1,000,000................... 290,882 387,871 484,969 581,925 677,613
</TABLE>

As of December 1, 1997, the estimated annual payments for services under the
Company's retirement plans would be based upon an average compensation of
$750,000 for Mr. Eisner, $408,461 for Mr. Disney, $619,539 for Mr. Litvack,
$481,285 for Mr. Nanula and $490,004 for Mr. Murphy. Messrs. Eisner and Disney
each have thirteen years, Mr. Litvack has seven years and Messrs. Nanula and
Murphy each have twelve years of credited service.

COMPARISON OF FIVE-YEAR AND THIRTEEN-YEAR CUMULATIVE TOTAL RETURNS

The following two graphs compare the performance of the Company's common
stock with the performance of the Standard & Poor's 500 Composite Stock Price
Index and two peer group indices over two periods extending through the end of
fiscal 1997. The first period covers the five fiscal years beginning on
October 1, 1992, while the second period covers the thirteen fiscal years
beginning on October 1, 1984, shortly after Mr. Eisner became the Company's
Chairman and Chief Executive Officer. The graphs assume that $100 was invested
on, respectively, October 1, 1992 and October 1, 1984 in the Company's common
stock, the S&P 500 Index and each of the peer group indices, and that all
dividends were reinvested.

The first of the two peer groups in the graphs (the "Custom Composite Index
(Old)") is a specially constructed group that the Company used prior to this
year for comparative purposes. This group included the common stocks of
Capital Cities/ABC, Inc., Club Med, Inc., Hasbro, Inc., Hilton Hotels Corp.,
King World Productions, Inc., Mattel, Inc., Paramount Communications Inc.,
Time Warner Inc., Turner Broadcasting System, Inc. and Viacom Inc. Many of the
companies in this index have, however, undergone significant changes in recent
years, and some no longer exist as domestic public companies. Thus, Paramount
Communications Inc. became a subsidiary of Viacom Inc. in July 1994; Capital
Cities/ABC, Inc. became a subsidiary of the Company February 1996; and Turner
Broadcasting System, Inc. became a subsidiary of Time Warner Inc. in October
1997. Club Med, Inc. was acquired by a French corporate entity in 1995. In
addition, the Company's 1996 acquisition of Capital Cities/ABC, Inc.
significantly altered the overall mix of the Company's businesses, making the
inclusion of certain of the companies in the old index, such as Hasbro, Inc.,
Mattel, Inc. and Hilton Hotels, Inc., less meaningful for comparative
purposes.

These changes have made the old peer group less relevant for comparative
purposes, and the Company has accordingly adopted a new composite peer group
index (the "Custom Composite Index (New)"), which includes the corporations
(other than the Company) that make up the Standard & Poor's Entertainment
Index, a published industry index, together with The News Corporation Limited,
which is not included in the Standard and Poor's Entertainment Index but is
engaged in many of the same businesses as the Company. The Company believes
this new composite index provides a better basis for performance comparisons
than the old index.

19
<PAGE>

PERFORMANCE GRAPHS
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
THE CUSTOM CUSTOM
Measurement Period WALT DISNEY S&P 500 COMPOSITE COMPOSITE
(Fiscal Year Covered) COMPANY INDEX INDEX (NEW) INDEX (OLD)
- ---------------------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Measurement Pt: Sep-84 $100 $100 $100 $100
Sep-85 $145 $114 $134 $138
Sep-86 $275 $151 $187 $186
Sep-87 $543 $216 $287 $270
Sep-88 $456 $189 $295 $251
Sep-89 $855 $252 $379 $397
Sep-90 $644 $228 $210 $255
Sep-91 $815 $300 $279 $300
Sep-92 $1,043 $333 $304 $357
Sep-93 $1,092 $376 $531 $523
Sep-94 $1,128 $390 $448 $489
Sep-95 $1,682 $506 $531 $620
Sep-96 $1,867 $608 $446 $678
Sep-97 $2,397 $854 $548 $890
</TABLE>

20
<PAGE>

COMPARISON OF THIRTEEN-YEAR CUMULATIVE TOTAL RETURN

ITEM 2--AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO PROVIDE FOR ANNUAL
ELECTION OF DIRECTORS

In 1987, the Company's stockholders approved a proposal to reincorporate the
parent company, which was then a California corporation, in the State of
Delaware. The certificate of incorporation of the reincorporated company
provided, among other things, for a classified Board of Directors; that is, a
system under which one-third of the directors are elected annually, each for a
three-year term. The adoption by the Company--and many other major
corporations--of a classified board reflected widespread concern at the time
over the use of abusive techniques by corporate "raiders" and others who
engaged in hostile and non-negotiated attempts to acquire corporations to the
disadvantage of stockholders. The Company itself had been the subject of such a
takeover attempt in 1984. A classified board was widely viewed as discouraging
proxy contests for the election of directors, or acquisitions of substantial
blocks of stock, by a person or group seeking to acquire control of a company,
because the extended term of directors could operate to prevent the acquisition
of control of the board in a relatively short period of time. A classified
board was also viewed as promoting stability and continuity among a
corporation's directors.

In 1998, eleven years later, the Company's market value has grown by more
than ten times. In addition, corporate acquisition techniques have evolved, and
the ability of boards of directors to exercise their fiduciary responsibilities
to stockholders in the context of proposed acquisitions has been substantially
strengthened through the use of shareholder rights plans and the continuing
development of basic principles of corporate law and practice.

21
<PAGE>

Against this background, some investors have come to view classified boards
as having the effect of insulating directors from a corporation's
stockholders, and a number of major corporations have determined that,
regardless of the merits of a classified board in deterring coercive takeover
attempts, principles of good corporate governance dictate that all directors
of a corporation be elected annually. The Board of Directors of the Company
agrees with this conclusion.

Accordingly, the Board of Directors has unanimously approved, and recommends
to stockholders that they consider and approve, a proposal to amend the
Company's certificate of incorporation to phase out the current division of
the Board of Directors into three classes, with one class elected each year
for a three-year term, and to provide instead for the annual election of
directors commencing with the class of directors standing for election in
1999. In order to ensure a smooth transition to the new system, the proposed
amendment would not shorten the terms of directors elected prior to its
effectiveness, including those elected at the 1998 annual meeting, each of
whom would serve for the full term for which he or she was elected. The new
procedure would, however, apply to all directors as their current terms
expire. Thus, the current Class III directors, who were elected at the 1996
annual meeting for three-year terms, would stand for election at the 1999
annual meeting for a one-year term. At the annual meeting in 2000, those
directors, together with the current Class I directors, whose terms expire in
2000, would stand for election for a one-year term. Beginning with the annual
meeting in 2001, the classification of the Board would terminate and all
directors would be subject to annual election.

If the proposed amendment is approved, the fifth article of the Company's
current certificate of incorporation would be deleted and replaced by the
following:

"FIFTH: The business and affairs of the Corporation shall be managed by
or under the direction of a Board of Directors consisting of not less than
nine directors or more than twenty-one directors, the exact number of
directors to be determined from time to time solely by resolution adopted
by the Board of Directors. Until the annual meeting of stockholders in
2001, the directors shall be divided into three classes, consisting
initially of five, six and five directors and designated Class I, Class II
and Class III, respectively. Each director elected prior to the effective
date of this Article FIFTH shall serve for the full term for which he or
she was elected, such that the term of each director elected at the 1996
annual meeting (Class III) shall end at the annual meeting in 1999, the
term of each director elected at the 1997 annual meeting (Class I) shall
end at the annual meeting in 2000, and the term of each director elected at
the 1998 annual meeting (Class II) shall end at the annual meeting in 2001.
The term of each director elected after the 1998 annual meeting, whether at
an annual meeting or to fill a vacancy in the Board of Directors arising
for any reason, including an increase in the size of the Board of
Directors, shall end at the first annual meeting following his or her
election. Commencing with the annual meeting in 2001, the foregoing
classification of the Board of Directors shall cease, and all directors
shall be of one class and serve for a term ending at the annual meeting
following the annual meeting at which the director was elected. In no case
shall a decrease in the number of directors shorten the term of any
incumbent director. Each director shall hold office after the annual
meeting at which his or her term is scheduled to end until his or her
successor shall be elected and shall qualify, subject, however, to prior
death, resignation, disqualification or removal from office. Any newly
created directorship resulting from an increase in the number of directors
may be filled by a majority of the Board of Directors then in office,
provided that a quorum is present, and any other vacancy on the Board of
Directors may be filled by a majority of the directors then in office, even
if less than a quorum, or by a sole remaining director.

"SIXTH: Notwithstanding the provisions of Article FIFTH, whenever the
holders of any one or more classes or series of Preferred Stock issued by
the Corporation shall have the right, voting separately by class or series,
to elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Restated Certificate
of Incorporation or the resolution or resolutions adopted by the Board of
Directors pursuant to Article FOURTH applicable thereto."

The proposed amendment would also delete the existing sixth article of the
Company's current certificate of incorporation, which provides, in accordance
with the provisions of Delaware law applicable to classified

22
<PAGE>

boards of directors, that directors may be removed only for cause. Under
Delaware law, directors of companies that do not have classified boards may be
removed by stockholders with or without cause, by the affirmative vote of the
holders of a majority of the outstanding shares then entitled to vote
generally in the election of directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE
ANNUAL ELECTION OF DIRECTORS.

ITEM 3--RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

The Company has appointed Price Waterhouse LLP as the Company's independent
accountants for the fiscal year ending September 30, 1998. Price Waterhouse
LLP has served as the Company's independent accountants since the
incorporation of Walt Disney Productions in 1938. Services provided to the
Company and its subsidiaries by Price Waterhouse LLP in fiscal 1997 included
the examination of the Company's consolidated financial statements, limited
reviews of quarterly reports, services related to filings with the Securities
and Exchange Commission, services in connection with the monitoring of
compliance with the Company's codes of conduct for licensees and manufacturers
and consultations on various tax and information services matters.

Representatives of Price Waterhouse LLP will be present at the annual
meeting to respond to appropriate questions and to make such statements as
they may desire.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR FISCAL 1998. In the event stockholders do not ratify the
appointment, the appointment will be reconsidered by the Audit Review
Committee and the Board of Directors.

ITEM 4--STOCKHOLDER PROPOSALS

The Company has been notified that the following stockholders of the Company
intend to present the proposals set forth below for consideration at the
annual meeting.

The address and stock ownership of each of the proponents will be furnished
by the Corporate Secretary of the Company to any person, orally or in writing
as requested, promptly upon receipt of any oral or written request therefor.

PROPOSAL 1--SHAREHOLDER RIGHTS PLAN

Mr. Joseph Puleo has submitted the following proposal:

"Resolved, that the shareholders of the Walt Disney Company request the
Board of Directors to refrain from adopting any future shareholders
rights plan, rights agreement, or other device commonly known as a
`poison pill' without the prior approval of the stockholders at an
Annual or Special meeting, and to redeem or terminate any such plan,
agreement or device which may be in effect at the adoption of this
resolution.

"Statement of Support

"A poison pill is an anti-takeover device, which effectively prevents a
change in control of a Company without the approval of the Board of
Directors. It forces potential acquirers to negotiate acquisitions with
management, instead of making an offer directly to the stockholders.

"The stockholders, who own the Company, should have the right to decide
what is a fair price for their holdings. The directors and managers,
who serve as our agents, should not usurp that right.

23
<PAGE>

"In addition, by forcing potential acquirers to negotiate with the
Board, poison pills have a tendency to entrench management, to insulate
it from accountability, and to make management less responsive to the
views of stockholders. Stockholders should have the right to decide
whether the risk of such consequences may be warranted by special
circumstances that might make it appropriate to adopt a poison pill.

"In this regard, proposals to redeem or allow shareholder votes on
poison pills have received the support of a majority of the
shareholders at fourteen publicly traded American companies within the
last two years. According to the Investor Responsibility Research
Center (IRRC), these include CSX, Wallman, the Fleming Companies,
Columbia/HCA, Flour, Bausch & Lomb, J.C. Penney, Lukens, Consolidated
Natural Gas, Harrah's Entertainment, Baker Hughes, Weyerhaeuser and
Rowan.

"Of the proposals to redeem or allow votes on poison pills within the
IRRC research universe, the proponents won 53% of the votes cast during
1996 and 1997. And the results do not take account of the many
companies that have decided to redeem or allow votes on poison pills
without action by their shareholders."

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL FOR THE FOLLOWING REASONS.

The Board of Directors adopted the Company's shareholder rights plan in 1989
to protect the Company's shareholders against abusive takeover tactics and to
ensure that each shareholder is treated fairly in any transaction involving an
acquisition of control of the Company. Plans similar to the Company's plan
have been adopted by a majority of the corporations included in the Standard &
Poors 500.

The purpose of the rights plan is to strengthen the Board's ability, in the
exercise of its fiduciary duties, to protect and maximize the value of
shareholders' investment in the Company in the event of an attempt to acquire
control of the Company. The Plan is not intended to, and does not, preclude
unsolicited, non-abusive offers to acquire the Company at a fair price. It is
designed, instead, to encourage any potential acquiror to negotiate directly
with the Board, which the Company believes is in the best position to evaluate
the adequacy and fairness of proposed offers, to negotiate on behalf of
shareholders and to protect shareholders against abusive tactics during a
takeover process, such as partial or two-tiered tender offers that do not
treat all shareholders fairly and equally. The rights do not affect any
takeover proposal which the Board believes is in the best interests of the
Company's shareholders. The overriding objective of the Board in adopting the
Rights Plan was, and continues to be, the preservation and maximization of the
Company's value for all shareholders.

The Board believes that the adoption of a shareholder rights plan is
appropriately within the scope of responsibilities of the Board of Directors,
acting on behalf of shareholders. The adoption of such a plan is in accord
with the Board's responsibilities for the management of the Company's affairs
and the issuance of securities and does not require shareholder approval.
Redeeming the rights would remove an important tool that the Board should have
for the protection of shareholders. The Board therefore believes that any
decision to redeem the rights should be made in the context of a specific
acquisition proposal.

ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS
PROPOSAL, AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS PRESENTED UNLESS
YOU SPECIFY OTHERWISE.

PROPOSAL 2--CORPORATE GOVERNANCE

The College Retirement Equities Fund has submitted the following proposal:

"WHEREAS, the Board of Directors' practices in governing the Company's
affairs can significantly affect the value of the shareholders' investment;

"WHEREAS, shareholders have a legitimate interest in evaluating the
composition of the Company's Board, in order to assess the Board's ability
to represent shareholders' interests;

24
<PAGE>

"WHEREAS, the Company's and shareholders' interests can best be served by
a Board with the majority of directors who are independent of management;
and

"WHEREAS, the Company's current Board structure raises serious questions
about the capacity of the Board to act independently of management if
necessary;

"RESOLVED, that the shareholders request that the Company adopt a policy
to move as rapidly as possible to reconfigure the Board of Directors so
that a majority of the directors are independent directors, and that the
Audit, Compensation, and Nominating committees of the Board of Directors
consist entirely of independent directors. For these purposes, an
"independent director" is one who has no present or former employment by
the Company or any significant financial or personal ties to the Company or
its management.

"SUPPORTING STATEMENT

"We are a long-term shareholder with investments in some 2,000 U.S.
corporations, including a major investment in Disney. It is our view that
the primary responsibility of a board of directors is to foster a company's
long-term success consistent with the board's fiduciary obligation to
shareholders. We believe that to best fulfill that responsibility and
thereby enhance a company's ability to produce shareholder value, a
majority of the board should be independent directors, and certain key
committees should be composed entirely of independent directors. An
independent director should be someone without ties to management or the
company that could interfere or appear to interfere with the director's
loyalty to the shareholders or ability to exercise independent judgment in
the shareholders' best interests.

"The Company's governance practices raise serious questions about this
Board's independence. We note that a majority of the Board are not
independent and that key Board committees including the Audit,
Compensation, and Nominating Committees each have at least one member with
significant business or personal ties to the Company's management.

"We believe an independent board is an essential component of any
effective governance system because such a board does not have even the
appearance of conflicts of interest and is best able to represent the
shareholders and inspire shareholder confidence in the impartiality of its
decisions. While we acknowledge the importance of input from people with
intimate knowledge of a company in board or committee deliberations, key
management executives can take an active part in board discussions without
being board members. However, we believe that companies have greater
credibility when critical decisions relating to such issues as executive
compensation, company audits, management changes, corporate control
contests, and major lawsuits, are made by an independent board. Because
having an independent board and independent key board committees is
integral to shareholder confidence, and, ultimately, to enhancing the long-
term value of a company, and, ultimately, to enhancing the long-term value
of a company, we ask that this resolution be adopted."

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL FOR THE FOLLOWING REASONS.

The Company agrees fully with the two basic principles set forth in the
proposed resolution: that a majority of the Company's directors should be
independent and that certain key committees of the Board should consist only
of independent directors. These are principles already embodied in the
Company's corporate governance practices and reflected in the Corporate
Governance Guidelines adopted by the Board of Directors in 1996.

With respect to the composition of the Board of Directors as a whole, the
Guidelines contemplate that at least 60 percent of the full Board of Directors
should be independent. With respect to Committee membership, the Guidelines
provide that the members of each Committee are to be selected from among the
independent directors, with the sole exception of the Executive Committee,
which includes the Chief Executive Officer and may include one or more other
non-independent directors.

The Company's disagreement with the proposed resolution arises out of
proponents' definition of "independent," which the Company believes is
excessively restrictive. The Company's view, as set forth in the

25
<PAGE>

Corporate Governance Guidelines, is that a director will not be considered
independent if he or she is presently, or during the preceding three years has
been, an employee of the Company, or if he or she acts on a regular basis
either individually or as a representative of an organization that supplies
goods or services to the Company, if the relationship is considered material
to the individual or organization. The Guidelines also provide for a formal
annual review of the independent status of all outside directors. During
fiscal 1997, this review was conducted during the annual organization meeting
of the Board following the Company's 1997 stockholder meeting. As a result of
that review, which took into consideration the extent of any business
relationships between the Company and individual directors or entities with
which they are affiliated, the Board concluded that more than 60 percent of
the Board's members satisfied the definition of "independent" set forth in the
Guidelines.

The Company believes that the principles articulated in the Corporate
Governance Guidelines provide an effective framework for ensuring Board
independence without adopting restrictions that are so rigid that they would
deprive the Board, and the Company's stockholders, of the benefits resulting
from the active participation of directors with a deep understanding of the
Company's history, practices and objectives. In addition, the Company believes
that the proposed adoption of procedures for the annual election of all
directors will enhance the ability of stockholders to monitor Board
performance.

ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS
PROPOSAL, AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS PRESENTED UNLESS
YOU SPECIFY OTHERWISE.

PROPOSAL 3--CONTRACT SUPPLIER STANDARDS

The Adrian Dominican Sisters, the Burke-Lazarus 1995 Trust, the Catholic
Society of Religious and Literary Education, the General Board of Pension and
Health Benefits of the United Methodist Church, the Maryknoll Sisters, the
Medical Mission Sisters, the Oregon Province of the Society of Jesus, the
Sisters of St. Dominic of Caldwell, NJ and the Sisters of Saint Joseph have
submitted the following proposal:

"WHEREAS: The public is concerned about the conditions under which the
goods they purchase and the clothing they wear are produced. More companies
are contracting with independent producers for goods and services outside
the United States. A Marymount University survey conducted in 1996
indicates 79% of respondents stated they would avoid shopping in stores if
they were aware that stores sold goods made under sweatshop conditions.
Eighty-three percent said they would be willing to pay a dollar more for a
$20 garment not made in sweatshops.

"Disturbing information has surfaced about independent producers with
regard to abuse of worker rights. In July 1997, a human rights group
released information indicating that workers at Gilanex factories in Haiti,
where shirts are sewn for Disney, receive as little as 28 cents an hour,
which does not allow for workers to meet their basic needs. Recent press
reports indicate that one producer of Disney products may relocate from
Haiti to Southeast Asia, which we believe would place unnecessary hardship
on Haitian workers (The Grand Rapids Press. 7/9/97)

"Disney should take actions to ensure it does not and will not do business
with foreign suppliers who manufacture items for sale in the United States
using forced labor, convict labor, or illegal child labor, or who fail to
satisfy all applicable standards and laws protecting their employees'
wages, benefits, working conditions, freedom of association and other
rights.

"We commend Disney for publishing its Code of Conduct and translating it
into the languages of employees where the company has contracts. Disney
should demonstrate enforcement of its code by developing independent
monitoring programs with local non-governmental groups and policies for a
sustainable living wage system for contract employees, which would add
little to production costs.

"In receiving the White House Apparel Industry Partnership report in April
1997, President Clinton said, it is not enough to establish tough rules. We
must ensure that they are enforced, and that American consumers know that
they are being followed. That is why the apparel industry is forming a
special association to make

26
<PAGE>

sure companies and contractors live up to the Code of Conduct, using
independent monitors. Through the use of independent monitoring (a system
used by The Gap in El Salvador), there can be greater assurance of
adherence to the company's code.

"Resolved: Shareholders request the Board of Directors to report on its
Code of Conduct compliance mechanisms for vendors, subcontractors and
buying agents in the countries where it sources. A summary of the results
should be reported to shareholders by September 1998. The report should
include:

"1. Summary of current company practices enforcing the company's Code of
Conduct for its manufacturers and licensees.

"2. Establishment of independent monitoring programs in conjunction with
local respected religious and human rights groups.

"3. Policies to implement ongoing wage adjustments, ensuring adequate
purchasing power and a sustainable living wage.

"4. Establishment of incentives to encourage suppliers to raise standards
rather than terminate contracts.

"5. Public disclosure of contract supplier reviews on a regular basis."

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL FOR THE FOLLOWING REASONS.

The proposed resolution is substantially similar to one considered at the
Company's 1997 annual meeting, which was submitted by some of the same
proponents. The 1997 resolution was not approved, by a vote of 411,501,241
"against" to 43,522,642 "for," with 25,383,772 abstentions.

The Company opposes adoption of the resolution because of some of its
specific components, although in general the company is in full agreement with
the proponents with respect to the importance of strengthening its efforts in
the area of international labor practices. At the 1997 annual meeting, the
Company reported on a number of steps it had taken toward this end, including
the organization of an International Labor Standards Group composed of senior
executives from the Company's corporate and business operations. The Group was
given responsibility for conducting an in-depth review of the Company's
existing practices and developing strengthened policies and procedures on a
Company-wide basis.

An early result of the Group's efforts was the adoption of a standard Code
of Conduct for all of the Company's licensees and for manufacturers used by
licensees for the production of licensed merchandise, as well as manufacturers
producing such merchandise directly for the Company and its subsidiaries.
Following the publication in April 1997 of the Workplace Code of Conduct
developed by the White House Apparel Industry Partnership, the Company revised
its Code of Conduct in order to bring it into substantial conformity with the
labor standards set forth in the Workplace Code. As revised, the Company's
Code:

. prohibits any use of child labor, or forced or involuntary labor;

. requires that employees be treated with dignity and respect, without use
of corporal punishment, threats of violence or other forms of harassment
or abuse;

. prohibits discrimination in hiring and employment practices;

. requires respect for the rights of employees to associate, organize and
bargain collectively in a lawful and peaceful manner;

. requires maintenance of the workplace (and any employer-provided housing)
in a safe and healthy condition in compliance with all applicable laws
and regulations, ensuring at a minimum reasonable access to potable water
and sanitary facilities;

. recognizes that wages are essential to meeting employees' basic needs,
and requires manufacturers, at a minimum, to comply with all applicable
wage and hour laws and regulations. Except in extraordinary

27
<PAGE>

business circumstances, manufacturers may not require employees to work
more than 48 hours per week and 12 hours overtime or, if less, the
maximum allowed by local law or, where local law does not limit hours of
work, the regular work week plus 12 hours overtime, and must provide
employees at least one day off in every seven-day period. Where local
industry standards are higher than applicable legal requirements, the
Company expects manufacturers to meet the higher standards;

. requires compliance with all applicable laws and regulations, including
environmental laws and regulations and those pertaining to the
manufacture, pricing, sale and distribution of merchandise;

. requires manufacturers to authorize the Company and its agents (including
third parties) to engage in monitoring activities to confirm compliance
with the Code, including unannounced on-site inspections, reviews of
employment-related books and records and private interviews with
employees; and

. requires the prominent posting of a copy of the Code of Conduct, in the
local language and in a place readily accessible to employees, at all
times.

The Code imposes the same requirements on any subcontractors retained by
manufacturers. (The full text of the Code of Conduct may be obtained by
interested stockholders from the Corporate Secretary of the Company.)

Since the 1997 annual meeting, the Company has further expanded its efforts
in the international labor arena. Among other things, the Company has:

. translated the Code of Conduct into more than 50 languages and undertaken
its distribution to all of the Company's licensees and to all
manufacturers engaged in the manufacture of Disney-branded products for
the Company or its licensees for posting in the workplace;

. convened regional meetings between the Company's licensing and monitoring
executives and more than 5,100 licensees and manufacturers in fourteen
Asian countries, Latin America, Europe and the United States to review
the Code and the Company's monitoring efforts and to enlist their
cooperation in ensuring that the Company's standards are fully met;

. substantially expanded the Company's monitoring program, completing more
than 1,400 manufacturer audits around the world (including follow-up
reaudits where appropriate), conducted by the Company's independent
auditors, as well as its internal auditors, in the United States and
internationally;

. formed regional consumer products task forces with specific
responsibilities for ensuring maintenance of the Company's labor
standards;

. created and filled a new senior position within the Consumer Products
group dedicated to the implementation and enforcement of the Company's
labor standards, and extended the mandate of the Company's International
Labor Standards Group to continue supervising the Company's activities in
this area; and

. developed a sophisticated Company-wide databank and software programs to
consolidate information relating to licensees and manufacturers around
the world, enabling the Company to monitor more closely the identities of
all manufacturers and licensees and to respond expeditiously to reports
of problems.

These ongoing efforts reflect the Company's continuing commitment to
strengthening the labor practices of its international licensees and
manufacturers. Against this background, the Company believes its activities
are substantially consistent with the objectives of the proposed resolution,
with two exceptions.

First, the Company believes that its current approach to monitoring, which
relies on both internal auditors and independent professional monitoring and
inspection firms retained by the Company, is best suited to ensure compliance
with its standards on a global basis. While the Company agrees that there may
be a role for local nongovernmental organizations in special circumstances,
there is neither an existing network of organizations to carry out such
monitoring on a global basis nor a consensus on monitoring standards or
methods. Under these circumstances, the Company believes it would be both
difficult and inefficient to approach this issue as an abstract, global
principle, rather than a targeted mechanism for addressing specific problems.

28
<PAGE>

Second, the Company does not believe that the proponents' call for the
implementation of "ongoing wage adjustments, ensuring adequate purchasing
power and a sustainable living wage" is feasible or realistic. The Company's
Code of Conduct addresses this issue in the same manner as the Workplace Code
of Conduct developed by the Apparel Industry Partnership, requiring licensees
and manufacturers to recognize that wages are essential to meeting employees'
basic needs and to comply, at a minimum, with all applicable wage and hour
laws and regulations. The Code further states the Company's expectation that,
where local industry standards are higher than applicable legal requirements,
manufacturers will meet the higher standards. This, too, is consistent with
the Workplace Code of Conduct.

ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS
PROPOSAL, AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS PRESENTED UNLESS
YOU SPECIFY OTHERWISE.

OTHER MATTERS

As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the annual meeting other than the
items referred to above. In the event that any other matter is properly
brought before the meeting for action by stockholders, proxies in the enclosed
form returned to the Company will be voted in accordance with the
recommendation of the Board of Directors or, in the absence of such a
recommendation, in accordance with the judgment of the proxy holder.

ADDITIONAL INFORMATION

STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING. Stockholders interested
in presenting a proposal for consideration at the Company's annual meeting of
stockholders in 1999 may do so by following the procedures prescribed in Rule
14a-8 under the Securities Exchange Act of 1934 and the Company's by-laws. To
be eligible for inclusion, stockholder proposals must be received by the
Company's Corporate Secretary no later than September 8, 1998.

PROXY SOLICITATION COSTS. The proxies being solicited hereby are being
solicited by the Company. The cost of soliciting proxies in the enclosed form
will be borne by the Company. The Company has retained Georgeson & Co., 100
Wall Street, New York, New York 10005, to aid in the solicitation. For these
services, the Company will pay Georgeson & Co. a fee of $15,000 and reimburse
it for certain out-of-pocket disbursements and expenses. Officers and regular
employees of the Company may, but without compensation other than their
regular compensation, solicit proxies by further mailing or personal
conversations, or by telephone, telex, facsimile or electronic means. The
Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial
owners of stock.

By order of the Board of Directors,

LOGO
Marsha L. Reed
Corporate Secretary

January 2, 1998

LOGO

29
<PAGE>

PRELIMINARY
COPY

- --------------------------------------------------------------------------------

PROXY FORM The Walt Disney Company PROXY FORM

Annual Meeting of Stockholders -- To Be Held February 24, 1998
THE BOARD OF DIRECTORS SOLICITS THIS PROXY

The undersigned hereby appoint(s) SANFORD M. LITVACK, RICHARD D. NANULA, and
DAVID K. THOMPSON, and each of them, attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all shares of common stock
of The Walt Disney Company that the undersigned would be entitled to cast if
personally present at the 1998 Annual Meeting of Stockholders of the Company,
and at any postponement or adjournment thereof.

THIS PROXY WILL BE VOTED AS SPECIFIED BY THE UNDERSIGNED. IF NO CHOICE IS
SPECIFIED, THE PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR
LISTED ON THE REVERSE SIDE, FOR PROPOSAL NUMBERS 2 AND 3, AGAINST PROPOSAL
NUMBERS 4 THROUGH 6, AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS ON ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR
ADJOURNMENT THEREOF.

Please date, sign exactly as your name appears on the form and mail the proxy
promptly. When signing as an attorney, executor, administrator, trustee or
guardian, please give your full title as such. If shares are held jointly, both
owners must sign.

CONTINUED AND TO BE VOTED AND SIGNED ON REVERSE
<PAGE>
- -------------------------------------------------------------------------------
IF YOU WISH TO VOTE BY TELEPHONE OR INTERNET,
PLEASE READ THE INSTRUCTIONS BELOW
- -------------------------------------------------------------------------------

The Walt Disney Company encourages you to take advantage of new and convenient
ways to vote your shares for matters to be covered at the 1998 ANNUAL MEETING OF
STOCKHOLDERS. Please take the opportunity to use one of the three voting
methods outlined below to cast your ballot. We've made it easier than ever.

John Doe
51 Mercedes Way
Edgewood, NY 11717

VOTE BY PHONE - 1-800-868-3237

Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week.
Have your proxy card in hand when you call. You will be prompted to enter your
12-digit Control Number which is located below and then follow the simple
instructions the Vote Voice provides you.

VOTE BY INTERNET - WWW.PROXYVOTE.COM

Use the Internet to vote your proxy 24 hours a day, 7 days a week. Have your
proxy card in hand when you access the web site. You will be prompted to enter
your 12-digit Control Number which is located below to obtain your records and
create an electronic ballot.

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to The Walt Disney Company, c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
- -------------------------------------------------
CONTROL NUMBER:
- -------------------------------------------------
IF YOU VOTE BY PHONE OR VOTE USING THE INTERNET, PLEASE DO NOT MAIL YOUR PROXY.
THANK YOU FOR VOTING

===============================================================================
Fold & Tear Here Fold & Tear Here
- -------------------------------------------------------------------------------

THE BOARD RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3 AND AGAINST ITEMS 4, 5 AND 6
- -------------------------------------------------------------------------------
(1) ELECTION OF DIRECTORS:
(01) Michael D. Eisner, (02) Stanley P. Gold, (03) Thomas S. Murphy,
(04) Leo J. O'Donovan, S.J., (05) Irwin E. Russell, (06) Raymond L. Watson

FOR WITHHOLD
all nominees (except as marked authority to vote for
to the contrary) all nominees
[_] [_]

WITHHOLD authority to vote for the individual nominee(s) identified in the
space provided below

______________________________________________

FOR AGAINST ABSTAIN
(2) To approve an amendment to the Company's [_] [_] [_]
certificate of incorporation to provide for
annual election of directors

(3) To ratify the appointment of Price [_] [_] [_]
Waterhouse LLP as the Company's
independent accountants for 1998.

(4) To approve a stockholder proposal with [_] [_] [_]
respect to the shareholder rights plan

(5) To approve a stockholder proposal with [_] [_] [_]
respect to corporate governance

(6) To approve a stockholder proposal with [_] [_] [_]
respect to contract supplier standards

- -------------------------------------------------------------------------------

7777777777 888,888,888 PLEASE MARK ALL
CHOICES LIKE THIS [X]

SIGNATURE__________________ DATE____________

1234567890 422786049257

JOHN DOE
51 MERCEDES WAY
EDGEWOOD, NY 11717