<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------------- ---------------
COMMISSION FILE NO. 0-21526
A. FULL TITLE OF THE PLAN AND THE ADDRESS OF THE PLAN, IF DIFFERENT FROM
THAT OF ISSUER NAMED BELOW:
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
B. NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN AND THE
ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICES:
ZALE CORPORATION
901 WEST WALNUT HILL LANE
IRVING, TEXAS 75038-1003
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<PAGE> 2
ZALE CORPORATION
SAVINGS AND INVESTMENT PLAN
FINANCIAL STATEMENTS
AS OF JULY 31, 1998 AND 1997,
AND SUPPLEMENTAL SCHEDULES
AS OF JULY 31, 1998
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees of
Zale Corporation Savings and Investment Plan:
We have audited the accompanying statements of net assets available for benefits
of the Zale Corporation Savings and Investment Plan (the "Plan") as of July 31,
1998 and 1997, and the related statements of changes in net assets available for
benefits for the years ended July 31, 1998 and 1997. These financial statements
and supplemental schedules referred to below, are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
July 31, 1998 and 1997, and the changes in net assets available for benefits for
the years ended July 31, 1998 and 1997, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets Held
for Investment Purposes and Reportable Transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. The supplemental schedules have
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Dallas, Texas,
January 15, 1999
<PAGE> 4
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
INDEX
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Statements of Net Assets Available for Plan Benefits as of
July 31, 1998 and 1997 2
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended July 31, 1998 and 1997 3
Notes to Financial Statements 4 - 14
SUPPLEMENTAL SCHEDULES:
Item 27a - Schedule of Assets Held for Investment Purposes
as of July 31, 1998 15
Item 27d - Schedule of Reportable Transactions
for the Year Ended July 31, 1998 16 - 20
</TABLE>
<PAGE> 5
-2-
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF JULY 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS:
Investments, at fair market value-
Cash and Short Term Investments $ 2,012,585 $ --
Common Stock Mutual Funds 31,477,406 31,269,545
Bond Mutual Funds 8,596,636 23,397,466
Government Securities Mutual Funds 13,651,507 --
Zale Corporation Common Stock 6,911,636 3,566,281
Participants' loans 2,039,595 1,779,238
----------- -----------
Total investments 64,689,365 60,012,530
Receivables-
Employer's contributions 3,042,696 2,941,216
Participants' contributions 259,336 270,507
----------- -----------
Total receivables 3,302,032 3,211,723
----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $67,991,397 $63,224,253
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
-3-
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEARS ENDED JULY 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net appreciation in fair value of investments $ 2,344,582 $ 8,398,554
Interest and dividends 3,183,915 1,573,764
------------- -------------
5,528,497 9,972,318
Contributions-
Employer 3,042,696 2,941,216
Participants 5,486,336 6,470,837
------------ -------------
8,529,032 9,412,053
Total increases in net assets 14,057,529 19,384,371
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries 9,290,385 7,038,225
------------- -------------
Total decreases in net assets 9,290,385 7,038,225
------------- -------------
NET INCREASE IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS 4,767,144 12,346,146
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 63,224,253 50,878,107
------------ -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $67,991,397 $63,224,253
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
-4-
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 AND 1997
1. DESCRIPTION OF PLAN:
The Zale Corporation Savings and Investment Plan (the "Plan") is a defined
contribution retirement plan. The following description of the Plan provides
only general information. Participants should refer to the Summary Plan
Description for a more complete description of the Plan's provisions.
General
Substantially all employees who are at least age 21 are eligible to participate
in the Plan on the first day of the month after beginning employment. Employees
covered under a collective bargaining agreement and certain nonresident aliens
are excluded. See Note 7, Plan Amendments.
Contributions
Under the Plan, participants are permitted, subject to additional limitations
for highly compensated participants, to voluntarily contribute, on a pretax
basis, from 1% to 15% of their annual earnings to their Employee 401(k)
Contribution Account. All participants are subject to Internal Revenue Service
limitations on these elective deferrals. The maximum amount a participant can
contribute is $9,500 for the calendar year 1997 and $10,000 for calendar year
1998.
Prior to August 1, 1998, Zale Corporation (the "Company") could make
discretionary contributions to the Plan from its current and/or accumulated
earnings and profits in such amounts as its Board of Directors would determine.
This contribution was allocated to eligible participants based on the
proportionate share of their eligible compensation. The Plan also provided that
the Company make matching contributions ("Matching Contributions") to each
eligible participant who voluntarily contributed to the Plan. Under this
provision, the Company matches fifty cents in Zale Common Stock for every dollar
contributed by participants up to two percent of the participant's annual
earnings. To be eligible for these discretionary and matching contributions,
participants must have been employed by the Company on the last date of the Plan
year and must have completed 1,000 hours of service, as defined, during the Plan
year. Additionally, to be eligible for the discretionary contribution, an
employee must have worked twelve consecutive months for the Company. Effective
August 1, 1998 the Company amended the Plan. See Note 7, Plan Amendments.
<PAGE> 8
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Investment Options
Upon enrollment in the Plan, a participant may direct contributions in whole
percent increments in any of the first seven investment options provided by the
Plan through April 30, 1998. Due to amendments to the Plan structure, subsequent
to April 30, 1998, a participant may direct contributions in whole percentage
increments to investment options 8 through 13 below:
<TABLE>
<S> <C>
1) Crabbe Huson Special Fund Invests in stock of domestic and foreign companies.
2) Evergreen Foundation Trust Class A Fund Invests in a mix of fixed income securities and stock to maintain a
balance between stocks and bonds.
3) Janus Fund Invests primarily in common stocks and the risk will be that
associated with a fund fully vested in equities.
4) Morley Stable Value Fund Invests mainly in investment contracts issued by insurance companies
and other financial institutions.
5) Strong Advantage Fund Invests in a diversified portfolio of investment-grade fixed income
securities.
6) Vanguard Index 500 Portfolio Fund Invests to mirror the performance of the stock market as represented
by the S&P 500.
7) Warburg Pincus Growth & Income Fund Invests mainly in stocks of domestic and foreign companies, fixed
income securities, and money market securities.
8) Bond Investment Option This option seeks high current income, safety of principal and modest
capital appreciation by investing primarily in domestic fixed income
securities such as corporate bonds, U.S. government securities,
certificates of deposit, commercial paper and other fixed income
securities.
9) Growth and Income Investment Option This option seeks capital appreciation plus dividend and interest
income through domestic and international common stocks, other equity
securities, corporate and government bonds and short-term cash
equivalents.
10) Growth Investment Option This option seeks capital appreciation by investing primarily in
domestic common stocks and other equity securities, with a smaller
allocation to international securities.
</TABLE>
<PAGE> 9
-6-
<TABLE>
<S> <C>
11) Aggressive Growth Investment Option This option aggressively seeks long-term capital appreciation. The
funds in this option invest primarily in common stocks and other
equity securities of small, rapidly-growing companies and also, larger
companies with strong growth potential. This option invests primarily
in domestic and international securities.
12) Global Investment Option This option seeks long-term capital appreciation by investing
primarily in common stocks and other equity securities of companies
based outside of the United States.
13) Zale Corporation Common Stock Participants may directly invest up to 25% of their retirement plan
assets in Zale Corporation Common Stock.
</TABLE>
Participants may change their investment options daily. Earnings or losses of
the Plan are allocated to the participants based on their relative account
balances in the respective investment programs of the Plan.
Loan Provisions
The Plan allows eligible participants to borrow from their Employee 401(k)
Contribution and Rollover Accounts a minimum of $1,000 and a maximum equal to
the lesser of $50,000 or 50% of their account balance. Loan transactions are
treated as a transfer to (from) the investment fund from (to) the participant
loan fund. Loan terms range from one to five years or up to fifteen years for
the purchase of a primary residence. The loans are secured by the balance in the
participant's account and bear interest at the prime commercial lending rate at
the time the loan is made plus 2%, as determined by the Plan Committee. Interest
rates remained 10.5% through the Plan year. Principal and interest are paid
ratably through semimonthly payroll deductions.
Vesting
A participant is automatically fully vested in Employee contributions plus
actual earnings thereon. A participant becomes fully vested in the Employer
401(k) Matching Contributions after three years of service, and fully vested in
Employer discretionary Profit Sharing Contributions after seven years of
service. Additionally, full vesting occurs upon a participant's death, full and
permanent disability, or retirement. Participants vest in the Plan as follows:
<TABLE>
<CAPTION>
Vested Percent of Vested Percent of
Years of Active Service Employer 401(k) Matching Contributions Profit Sharing Contributions
----------------------- -------------------------------------- ----------------------------
<S> <C> <C>
Less than 1 year 0 0
1 year 33 1/3 0
2 years 66 2/3 0
3 years 100 20
4 years 40
5 years 60
6 years 80
7 or more years 100
</TABLE>
Participants are eligible to receive their vested interests in the Plan upon
termination from the Company.
<PAGE> 10
-7-
Distributions and Withdrawals
Upon retirement, a participant must withdraw the full value of their account in
a single, lump-sum distribution or a direct rollover to an IRA. Upon termination
of employment, a participant may withdraw the full value of their account, or if
a participant's vested account is at least $5,000 they may leave the balance in
the Plan until normal retirement age. Distribution of the participant's entire
balance also becomes due upon death or total disability. Participants may make
hardship withdrawals from their earned deferred contribution amounts or profit
sharing contribution (exclusive of matching contributions) at specific times,
subject to certain safe harbor restrictions.
Forfeited Accounts
Forfeited accounts may be used to reduce future employer contributions. At July
31, 1998 and 1997, forfeited nonvested accounts totaled $768,192 and $337,227,
respectively. Of the forfeited account balance at July 31, 1998 and 1997,
approximately $739,254 and $300,000, respectively, were used to reduce employer
contributions in accordance with the plan document.
Tax Status
The Plan has received a favorable determination letter dated January 12, 1995,
from the Internal Revenue Service stating that the Plan and the related trust
are designed in accordance with the applicable provisions of the Internal
Revenue Code (the "Code"). The Plan has been amended since receiving the letter;
however, the Company and the Plan's tax counsel believe the Plan is designed and
continues to operate in accordance with the provisions of the Code. The Plan is
currently being reviewed for further revisions. Upon completion of these
revisions, the Plan will submit an application for a new determination letter.
Plan Administration
The Plan is administered by the Plan Committee (the "Committee") which is
appointed by the Company's Chairman of the Board of Directors. Assisting the
Committee is a trustee appointed by the Board of Directors. Effective May 1,
1998, the Board of Directors of the Company appointed Wachovia Bank as the
trustee of the Plan and PricewaterhouseCoopers LLP as the Plan recordkeeper.
From August 1, 1995, to April 30, 1998, Charles Schwab Trust Company served as
the trustee of the Plan and KPMG Peat Marwick LLP served as Plan recordkeeper.
Additionally, the Committee retains the services of Capital Research &
Consulting, an investment advisory firm, to monitor the fund performances.
2. AMENDMENT OR TERMINATION OF THE PLAN:
The Company's Board of Directors has the right to amend or terminate the Plan or
to reduce or stop contributions either temporarily or permanently at its sole
discretion. If the Board exercised its right to stop contributions permanently
or to terminate the Plan, the entire amount in each participant's account would
be 100% vested and distributed under the direction of the Plan Committee. The
Company's Board of Directors has no intention to terminate the Plan. See Note 7,
Plan Amendments.
<PAGE> 11
-8-
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Investment Valuation and Income Recognition
Investments in mutual fund securities and the Company's common stock are valued
at fair market value based on quoted market prices as of the Plan's year-end.
Purchases and sales of securities are recorded on a trade-date basis. Through
April 30, 1998, the Plan allowed participants to direct their investments into
mutual fund securities among the Crabbe Huson Special Fund, Evergreen Foundation
Trust Class A Fund, Janus Fund, Morley Stable Value Fund, Strong Advantage Fund,
Vanguard Index 500 Portfolio Fund, and the Warburg Pincus Growth & Income Fund
offered through Charles Schwab Trust Company. Effective May 1, 1998, the Plan
offers five investment options, each a portfolio of mutual fund securities. The
investment options are: Bond Investment, Growth and Income Investment, Growth
Investment, Aggressive Growth Investment, and Global Investment. In addition,
participants can make direct investments of up to 25% of their retirement plan
assets in Zale Corporation Common Stock.
Administration Expenses
Administrative fees related to the Plan's investments are paid by the Company
with no liability to the Plan. Expenses for the Plan year ended July 31, 1998,
were approximately $330,000.
Basis of Accounting
The Plan uses the accrual method of accounting. The classifications in use at
July 31, 1998, have been applied to the financial statements for July 31, 1997.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Payment of Benefits
Distributions are recorded when paid.
4. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500:
At July 31, 1998 and 1997, the Plan had not paid $237,881 and $475,436,
respectively, of benefits to participants who had requested distribution prior
to year-end. These amounts are not included in liabilities in the accompanying
statements of net assets available for plan benefits at July 31, 1998 and 1997.
<PAGE> 12
-9-
The following is a reconciliation of net assets available for benefits per the
financial statements and the Form 5500:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net assets available for plan benefits per the financial statements $67,991,397 $63,224,253
Amounts allocated to withdrawing participants (237,881) (475,436)
----------- -----------
Net assets available for plan benefits per the Form 5500 $67,753,516 $62,748,817
=========== ===========
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Distributions to participants per the financial statements $9,290,385 $7,038,225
Amounts allocated to withdrawing participants at end of period 237,881 475,436
Less - Amounts allocated to withdrawing participants at
beginning of period (475,436) (345,023)
---------- ----------
Distributions to participants per the Form 5500 $9,052,830 $7,168,638
========== ==========
</TABLE>
5. INVESTMENTS:
The following investments are greater than 5% of ending net assets as of July
31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Crabbe Huson Special Fund $ -- $ 5,264,156
Evergreen Foundation Trust Class A Fund -- 12,761,195
Janus Fund -- 3,613,907
Morley Stable Value Fund -- 14,529,196
Strong Advantage Fund -- 8,868,270
Vanguard Index 500 Portfolio Fund -- 5,962,773
Warburg Pincus Growth and Income Fund -- 3,667,514
Zale Corporation Common Stock 6,911,636 3,566,281
Bond Fund of America 4,284,201 --
Oppenheimer Limited Term Government Fund 4,297,778 --
Franklin U.S. Government Securities Fund 4,306,348 --
Oppenheimer Strategic Income Fund 4,312,435 --
Putnam Equity Income Fund 4,969,008 --
Oppenheimer Equity Income Fund 5,036,356 --
Oppenheimer Quest Opportunity Value Fund 4,892,907 --
Income Fund of America 5,047,381 --
</TABLE>
As of July 31, 1998 and 1997, the Plan did not directly invest in any derivative
financial instruments; however, the Bond Investment Option, Growth and Income
Investment Option, Aggressive Growth Investment Option and the Global Investment
Option held by the Plan include mutual funds that invest in derivative financial
instruments. As described in the investments' prospectuses, futures, forwards
and
<PAGE> 13
-10-
options are used only for the purpose of managing the funds' exposure to
stock and bond markets and to fluctuations in interest rates and currency
values. The derivative instruments in these investment options are immaterial to
total Plan assets.
6. RELATED-PARTY TRANSACTIONS:
During 1998 and 1997, certain Plan investments were managed by Charles Schwab
Trust Company. Charles Schwab Trust Company was the trustee as defined by the
Plan through April 30, 1998; therefore, the transactions qualify as exempt
party-in-interest. During 1998 Wachovia Bank managed certain Plan investments.
Effective May 1, 1998, Wachovia Bank served as the trustee as defined by the
Plan; therefore, the transactions qualify as exempt party-in-interest.
7. PLAN AMENDMENTS
Effective August 1, 1998, the Plan requires new employees to complete twelve
months of continuous service before becoming eligible to join the Plan. For plan
years beginning after July 31, 1998 the Company will increase its matching
contribution to one dollar in Zale Corporation Common Stock for every dollar an
employee contributes up to 4% of annual earnings, subject to IRS limitations.
<PAGE> 14
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8. DISCLOSURES BY FUND:
The following financial statements contain the required disclosures by fund of
the activity of the Plan and are a part of the basic financial statements.
Statement by Fund of Net Assets Available for Plan Benefits as of July 31, 1998
<TABLE>
<CAPTION>
Participant-Directed Investment Program (Wachovia Bank)
---------------------------------------------------------------------------
Aggressive
Bond Growth & Income Growth Growth Global
Investment Investment Investment Investment Investment
Option Option Option Option Option
----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at fair market value-
Cash and Short-Term Investments $ 362,070 $ 604,952 $ 226,038 $ 237,350 $ 82,488
Common Stock Mutual Funds -- 14,898,271 7,562,163 7,004,607 2,012,365
Bond Mutual Funds 8,596,636 -- -- -- --
Government Securities Mutual Funds 8,604,126 5,047,381 -- -- --
Zale Corporation Common Stock -- -- -- -- --
Participants' loans 4,519 7,443 5,317 6,114 1,595
----------- ----------- ----------- ----------- -----------
Total investments 17,567,351 20,558,047 7,793,518 7,248,071 2,096,448
Receivables-
Employer's contributions 433,299 510,862 329,557 374,013 95,982
Participants' contributions 44,087 72,614 51,867 59,648 15,560
----------- ----------- ----------- ----------- -----------
Total receivables 477,386 583,476 381,424 433,661 111,542
----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $18,044,737 $21,141,523 $ 8,174,942 $ 7,681,732 $ 2,207,990
=========== =========== =========== =========== ===========
<CAPTION>
Participant
Directed and
Nonparticipant-
Directed
Investment
Program
----------------
Participant Zale Corporation Clearing Total
Loans Common Stock Account Investments
----------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at fair market value-
Cash and Short-Term Investments $ 29,937 $ 227,020 $ 242,730 $ 2,012,585
Common Stock Mutual Funds -- -- -- 31,477,406
Bond Mutual Funds -- -- -- 8,596,636
Government Securities Mutual Funds -- -- -- 13,651,507
Zale Corporation Common Stock -- 6,911,636 -- 6,911,636
Participants' loans 2,013,012 1,595 -- 2,039,595
----------- ----------- ----------- -----------
Total investments 2,042,949 7,140,251 242,730 64,689,365
Receivables-
Employer's contributions -- 1,298,983 -- 3,042,696
Participants' contributions -- 15,560 -- 259,336
----------- ----------- ----------- -----------
Total receivables -- 1,314,543 -- 3,302,032
----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 2,042,949 $ 8,454,794 $ 242,730 $67,991,397
=========== =========== =========== ===========
</TABLE>
<PAGE> 15
-12-
Statement by Fund of Net Assets Available for Plan Benefits as of July 31, 1997
<TABLE>
<CAPTION>
Participant-Directed Investment Program (Charles Schwab Trust Co.)
------------------------------------------------------------------
Evergreen
Crabbe Huson Foundation
Special Trust Janus Morley Stable
Fund Class A Fund Fund Value Fund
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at fair market value-
Common Stock Mutual Fund $ 5,264,156 $12,761,195 $ 3,613,907 $14,529,196
Bond Mutual Fund -- -- -- --
Zale Corporation Common Stock -- -- -- --
Participants' loans 2,939 6,504 3,420 5,999
----------- ----------- ----------- -----------
Total investments 5,267,095 12,767,699 3,617,327 14,535,195
Receivables-
Employer's contributions 170,000 391,000 136,000 459,000
Participants' contributions 31,000 57,680 27,374 54,917
----------- ----------- ----------- -----------
Total receivables 201,000 448,680 163,374 513,917
----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 5,468,095 $13,216,379 $ 3,780,701 $15,049,112
=========== =========== =========== ===========
<CAPTION>
Participant-Directed Investment Program (Charles Schwab Trust Co.)
------------------------------------------------------------------
Strong Vanguard Warburg Pincus
Advantage Index 500 Growth &
Fund Portfolio Fund Income Fund
----------- --------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments, at fair market value-
Common Stock Mutual Fund $ -- $ 5,962,773 $ 3,667,514
Bond Mutual Fund 8,868,270 -- --
Zale Corporation Common Stock -- -- --
Participants' loans 3,937 4,437 2,274
----------- ----------- -----------
Total investments 8,872,207 5,967,210 3,669,788
Receivables-
Employer's contributions 272,000 153,000 119,000
Participants' contributions 36,709 39,837 22,990
----------- ----------- -----------
Total receivables 308,709 192,837 141,990
----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 9,180,916 $ 6,160,047 $ 3,811,778
=========== =========== ===========
<CAPTION>
Nonparticipant-
Directed
Investment
Programs
-----------------
Total
Participant Zale Corporation Investment
Loans Common Stock Programs
----------- ----------------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at fair market value-
Common Stock Mutual Fund $ -- $ -- $31,269,545
Bond Mutual Fund -- -- 23,397,466
Zale Corporation Common Stock -- 3,566,281 3,566,281
Participants' loans 1,749,728 -- 1,779,238
----------- ----------- -----------
Total investments 1,749,728 3,566,281 60,012,530
Receivables-
Employer's contributions -- 1,241,216 2,941,216
Participants' contributions -- -- 270,507
----------- ----------- -----------
Total receivables -- 1,241,216 3,211,723
----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 1,749,728 $ 4,807,497 $63,224,253
=========== =========== ===========
</TABLE>
<PAGE> 16
-13-
Statement by Fund of Changes in Net Assets Available for Plan Benefits for the
Year Ended July 31, 1998
<TABLE>
<CAPTION>
Participant-Directed Investment Program (Schwab Trust Co.)
------------------------------------------------------------------
Crabbe Evergreen
Huson Foundation
Special Trust Janus Morley Stable
Fund Class A Fund Fund Value Fund
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net (depreciation) appreciation in fair
value of investments $ (789,530) $ 1,165,044 $ 52,350 $ 706,858
Interest and dividends 592,473 399,315 651,652 8,954
------------ ------------ ------------ ------------
Net investment income (197,057) 1,564,359 704,002 715,812
Contributions-
Employer -- -- -- --
Participant 395,952 762,239 410,225 760,298
Participants' loan payments 50,140 88,149 55,522 133,746
------------ ------------ ------------ ------------
Total contributions 446,092 850,388 465,747 894,044
------------ ------------ ------------ ------------
Total increases in net assets 249,035 2,414,747 1,169,749 1,609,856
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (646,456) (1,830,495) (435,376) (2,078,578)
Loans (94,976) (178,518) (67,131) (175,516)
------------ ------------ ------------ ------------
Total decreases in net assets (741,432) (2,009,013) (502,507) (2,254,094)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS (492,397) 405,734 667,242 (644,238)
------------ ------------ ------------ ------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds (4,975,698) (13,622,113) (4,447,943) (14,404,874)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS (5,468,095) (13,216,379) (3,780,701) (15,049,112)
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 5,468,095 13,216,379 3,780,701 15,049,112
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ -- $ -- $ -- $ --
============ ============ ============ ============
<CAPTION>
Participant-Directed Investment Program (Schwab Trust Co.)
----------------------------------------------------------
Vanguard Warburg
Strong Index 500 Pincus
Advantage Portfolio Growth &
Fund Fund Income Fund
------------ ------------ ------------
<S> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net (depreciation) appreciation in fair
value of investments $ (26,211) $ 1,094,617 $ (5,665)
Interest and dividends 390,125 134,492 623,789
------------ ------------ ------------
Net investment income 363,914 1,229,109 618,124
Contributions-
Employer -- -- --
Participant 460,112 773,996 313,791
Participants' loan payments 51,957 98,940 33,166
------------ ------------ ------------
Total contributions 512,069 872,936 346,957
------------ ------------ ------------
Total increases in net assets 875,983 2,102,045 965,081
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (1,303,587) (806,804) (538,556)
Loans (122,009) (106,967) (64,391)
------------ ------------ ------------
Total decreases in net assets (1,425,596) (913,771) (602,947)
------------ ------------ ------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS (549,613) 1,188,274 362,134
------------ ------------ ------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds (8,631,303) (7,348,321) (4,173,912)
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS (9,180,916) (6,160,047) (3,811,778)
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 9,180,916 6,160,047 3,811,778
------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ -- $ -- $ --
============ ============ ============
<CAPTION>
Participant-Directed Investment Program (Wachovia Bank)
-------------------------------------------------------
Growth &
Bond Income Growth
Investment Investment Investment
Option Option Option
------------ ------------ ------------
<S> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net (depreciation) appreciation in fair
value of investments $ (13,357) $ (610,763) $ (260,338)
Interest and dividends 226,942 105,560 45,022
------------ ------------ ------------
Net investment income 213,585 (505,203) (215,316)
Contributions-
Employer 433,299 510,862 329,557
Participant 279,263 452,033 318,754
Participants' loan payments 42,709 63,825 39,793
------------ ------------ ------------
Total contributions 755,271 1,026,720 688,104
------------ ------------ ------------
Total increases in net assets 968,856 521,517 472,788
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (471,512) (513,663) (15,054)
Loans (33,510) (66,723) (57,474)
------------ ------------ ------------
Total decreases in net assets (505,022) (580,386) (72,528)
------------ ------------ ------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS 463,834 (58,869) 400,260
------------ ------------ ------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds 17,580,903 21,200,392 7,774,682
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS 18,044,737 21,141,523 8,174,942
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year -- -- --
------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 18,044,737 $ 21,141,523 $ 8,174,942
============ ============ ============
<CAPTION>
Participant-Directed Investment Program (Wachovia Bank)
Aggressive
Growth Global
Investment Investment
Option Option
------------ ------------
<S> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net (depreciation) appreciation in fair
value of investments $ (472,779) $ (55,430)
Interest and dividends 7,640 11,396
------------ ------------
Net investment income (465,139) (44,034)
Contributions-
Employer 374,013 95,982
Participant 374,387 95,132
Participants' loan payments 53,240 12,314
------------ ------------
Total contributions 801,640 203,428
------------ ------------
Total increases in net assets 336,501 159,394
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (33,578) (1,578)
Loans (66,530) (18,246)
------------ ------------
Total decreases in net assets (100,108) (19,824)
------------ ------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS 236,393 139,570
------------ ------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds 7,445,339 2,068,420
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS 7,681,732 2,207,990
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year -- --
------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 7,681,732 $ 2,207,990
============ ============
<CAPTION>
Participant Directed
and
Nonparticipant-
Directed
Investment
Programs
----------------
Participant Zale Corporation Clearing Total
Loans Common Stock Account Investments
------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net (depreciation) appreciation in fair
value of investments $ -- $ 1,559,786 $ -- $ 2,344,582
Interest and dividends -- (13,445) -- 3,183,915
------------ ------------ ------------ ------------
Net investment income -- 1,546,341 -- 5,528,497
Contributions-
Employer -- 1,298,983 -- 3,042,696
Participant -- 90,154 -- 5,486,336
Participants' loan payments (734,232) 10,731 -- --
------------ ------------ ------------ ------------
Total contributions (734,232) 1,399,868 -- 8,529,032
------------ ------------ ------------ ------------
Total increases in net assets (734,232) 2,946,209 -- 14,057,529
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (26,266) (831,612) 242,730 (9,290,385)
Loans 1,065,496 (13,505) -- --
------------ ------------ ------------ ------------
Total decreases in net assets 1,039,230 (845,117) 242,730 (9,290,385)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS 304,998 2,101,092 242,730 4,767,144
------------ ------------ ------------ ------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds (11,777) 1,546,205 -- --
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS 293,221 3,647,297 242,730 4,767,144
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 1,749,728 4,807,497 -- 63,224,253
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 2,042,949 $ 8,454,794 $ 242,730 $ 67,991,397
============ ============ ============ ============
</TABLE>
<PAGE> 17
-14-
Statement by Fund of Changes in Net Assets Available for Plan Benefits for the
Year Ended July 31, 1997
<TABLE>
<CAPTION>
Participant-Directed Investment Program (Charles Schwab Trust Co.)
-----------------------------------------------------------------
Evergreen
Crabbe Huson Foundation Morley Stable
Special Trust Janus Value
Fund Class A Fund Fund Fund
------------ ------------ ----- -------------
<S> <C> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net appreciation in fair value of investments $ 1,003,440 $ 2,943,424 $ 445,978 $ 865,678
Interest and dividends 176,517 556,856 202,059 29,052
------------ ------------ ------------ ------------
Net investment income 1,179,957 3,500,280 648,037 894,730
Contributions-
Employer's 428,964 1,004,432 196,961 1,396,608
Participants' 870,257 1,361,570 439,520 1,815,445
Participants' loan payments 54,288 113,900 40,285 97,917
------------ ------------ ------------ ------------
Total contributions 1,353,509 2,479,902 676,766 3,309,970
------------ ------------ ------------ ------------
Total increases in net assets 2,533,466 5,980,182 1,324,803 4,204,700
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (642,418) (1,673,288) (40,330) (2,052,127)
Loans - fiscal year 1997 (167,532) (241,972) (70,243) (231,097)
------------ ------------ ------------ ------------
Total decreases in net assets (809,950) (1,915,260) (110,573) (2,283,224)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) PRIOR TO INTERFUND
TRANSFERS 1,723,516 4,064,922 1,214,230 1,921,476
------------ ------------ ------------ ------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds (1,448,008) (1,227,977) 2,566,471 (1,995,236)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS 275,508 2,836,945 3,780,701 (73,760)
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 5,192,587 10,379,434 -- 15,122,872
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 5,468,095 $ 13,216,379 $ 3,780,701 $ 15,049,112
============ ============ ============ ============
<CAPTION>
Participant-Directed Investment Program (Charles Schwab Trust Co.)
------------------------------------------------------------------
Vanguard
Strong Index 500 Warburg Pincus
Advantage Portfolio Growth &
Fund Fund Income Fund
--------- -=------- --------------
<S> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net appreciation in fair value of investments $ 87,263 $ 1,215,862 $ 974,411
Interest and dividends 554,404 64,962 34,673
------------ ------------ ------------
Net investment income 641,667 1,280,824 1,009,084
Contributions-
Employer's 841,601 238,624 342,810
Participants' 939,406 559,708 702,177
Participants' loan payments 64,512 52,680 56,164
------------ ------------ ------------
Total contributions 1,845,519 851,012 1,101,151
------------ ------------ ------------
Total increases in net assets 2,487,186 2,131,836 2,110,235
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (1,269,223) (89,922) (523,357)
Loans - fiscal year 1997 (151,934) (100,110) (74,408)
------------ ------------ ------------
Total decreases in net assets (1,421,157) (190,032) (597,765)
------------ ------------ ------------
NET INCREASE (DECREASE) PRIOR TO INTERFUND
TRANSFERS 1,066,029 1,941,804 1,512,470
------------ ------------ ------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds (491,469) 4,218,243 (1,622,024)
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS 574,560 6,160,047 (109,554)
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 8,606,356 -- 3,921,332
------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 9,180,916 $ 6,160,047 $ 3,811,778
============ ============ ============
<CAPTION>
Nonparticipant-
Directed
Investment
Program
---------------
Total
Participant Zale Corporation Investment
Loans Common Stock Unallocated Programs
----------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net appreciation in fair value of investments $ -- $ 862,498 $ -- $ 8,398,554
Interest and dividends -- -- (44,759) 1,573,764
------------ ------------ ------------ ------------
Net investment income -- 862,498 (44,759) 9,972,318
Contributions-
Employer's -- 2,476,689 (3,985,473) 2,941,216
Participants' -- -- (217,246) 6,470,837
Participants' loan payments (479,746) -- -- --
------------ ------------ ------------ ------------
Total contributions (479,746) 2,476,689 (4,202,719) 9,412,053
------------ ------------ ------------ ------------
Total increases in net assets (479,746) 3,339,187 (4,247,478) 19,384,371
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (167,913) (373,735) (205,912) (7,038,225)
Loans - fiscal year 1997 1,037,296 -- -- --
------------ ------------ ------------ ------------
Total decreases in net assets 869,383 (373,735) (205,912) (7,038,225)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) PRIOR TO INTERFUND
TRANSFERS 389,637 2,965,452 (4,453,390) 12,346,146
------------ ------------ ------------ ------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds -- -- -- --
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS 389,637 2,965,452 (4,453,390) 12,346,146
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 1,360,091 1,842,045 4,453,390 50,878,107
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 1,749,728 $ 4,807,497 $ -- $ 63,224,253
============ ============ ============ ============
</TABLE>
<PAGE> 18
-15-
SCHEDULE I
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF JULY 31, 1998
EIN: 75-0675400
PLAN #002
<TABLE>
<CAPTION>
(a) (b) (c)
Identity
of Issuer Shares Description of Investment
------------------------------------- --------- --------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS/CASH:
* Wachovia Bank 2,012,585 ST Investment Fund/Cash
MUTUAL FUNDS: Bond Investment Option:
Oppenheimer 420,938 Oppenheimer Ltd Term Government Fund
Oppenheimer 889,162 Oppenheimer Strategic Income Fund
American Funds 306,891 Bond Fund of America
Franklin Templeton 623,205 Franklin U.S. Government Securities Fund
Growth & Income Investment Option:
American Funds 276,569 Income Fund of America
Oppenheimer 328,529 Oppenheimer Equity Income Fund
Oppenheimer 130,061 Oppenheimer Quest Opportunity Value Fund
Putnam Mutual Funds 302,435 Putnam Equity Income Fund
Growth Investment Option:
Franklin Templeton 100,751 Mutual Qualified Fund
Massachusetts Financial Services 96,460 Massachusetts Investors Growth Stock Fund
Oppenheimer 84,831 Oppenheimer Quest Value Fund
American Funds 57,183 Washington Mutual Investors Fund
Aggressive Growth Investment Option:
Davis 74,106 Davis NY Venture Fund
Franklin Templeton 75,979 Franklin California Growth Fund
Franklin Templeton 75,868 Franklin Small Capital Growth Fund
Massachusetts Financial Services 72,593 MFS Research Fund
Global Investment Option:
American Funds 17,582 Europacific Growth Fund
Oppenheimer 10,801 Oppenheimer Global Fund
Franklin Templeton 24,690 Templeton Growth Fund
GAM Services 14,977 GAM International Fund
* ZALE CORPORATION 222,956 Zale Corporation Common Stock, par value $.01
* PARTICIPANT LOANS N/A Participant loans, interest rates at 10.5%
<CAPTION>
(a) (b) (d) (e)
Identity Current
of Issuer Cost Value**
------------------------------------- ---------- ---------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS/CASH:
* Wachovia Bank $2,012,585 2,012,585
MUTUAL FUNDS:
Oppenheimer 4,313,685 4,297,778
Oppenheimer 4,351,361 4,312,435
American Funds 4,300,047 4,284,201
Franklin Templeton 4,287,678 4,306,348
American Funds 5,192,921 5,047,381
Oppenheimer 5,107,897 5,036,356
Oppenheimer 5,129,046 4,892,907
Putnam Mutual Funds 5,141,028 4,969,008
Franklin Templeton 2,009,237 1,889,089
Massachusetts Financial Services 1,930,295 1,896,409
Oppenheimer 1,957,378 1,873,058
American Funds 1,933,970 1,903,607
Davis 1,859,229 1,801,523
Franklin Templeton 1,877,794 1,749,031
Franklin Templeton 1,928,970 1,666,818
Massachusetts Financial Services 1,818,722 1,787,235
American Funds 526,834 509,182
Oppenheimer 509,906 496,646
Franklin Templeton 530,588 488,624
GAM Services 502,732 517,913
* ZALE CORPORATION 4,347,748 6,911,636
* PARTICIPANT LOANS - 2,039,595
</TABLE>
* Column (a) indicates each identified person/entity known to be a
party-in-interest.
** Investments in mutual fund securities are stated at fair value based on
quoted market prices.
This supplemental schedule lists assets held for investment purposes
as of July 31, 1998, as required by the Department of Labor Rules and
Regulations for Reporting and Disclosure.
<PAGE> 19
-16-
SCHEDULE II
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED JULY 31, 1998
EIN: 75-0675400
PLAN #002
<TABLE>
<CAPTION>
(a) (b) (c) (d) (g)
Purchase Selling Cost of
Identity of Party Involved Description of Asset Price Price Asset
- -------------------------------- ---------------------------------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INDIVIDUAL TRANSACTIONS
Charles Schwab Trust Co. Crabbe Huson Special Fund
Sales $ - $ 4,467,230 $ 4,715,902
Charles Schwab Trust Co. Evergreen Foundation Trust Class A Fund
Sales - 13,446,015 10,157,901
Charles Schwab Trust Co. Janus Fund
Sales - 4,631,124 4,215,207
Charles Schwab Trust Co. Morley Stable Value Fund
Sales - 4,000,000 3,560,717
Charles Schwab Trust Co. Strong Advantage Fund
Sales - 8,295,822 8,277,164
Charles Schwab Trust Co. Vanguard Index 500 Portfolio Fund
Sales - 8,346,124 6,426,261
Charles Schwab Trust Co. Warburg Pincus Growth & Income Fund
Sales - 4,471,236 4,001,292
Wachovia Bank Income Fund of America
Purchase 3,818,541 - 3,818,541
<CAPTION>
(a) (h) (i)
Current
Value of
Asset on
Transaction Net
Identity of Party Involved Date Gain/(Loss)
- -------------------------------- ----------- -----------
<S> <C> <C>
INDIVIDUAL TRANSACTIONS
Charles Schwab Trust Co.
$ 4,467,230 $ (248,671)
Charles Schwab Trust Co.
13,446,015 3,288,113
Charles Schwab Trust Co.
4,631,124 415,917
Charles Schwab Trust Co.
4,000,000 439,283
Charles Schwab Trust Co.
8,295,822 18,658
Charles Schwab Trust Co.
8,346,124 1,919,863
Charles Schwab Trust Co.
4,471,236 469,944
Wachovia Bank
3,818,541 -
</TABLE>
Columns (e) and (f) do not apply to this schedule as there were no lease rental
or transaction expenses involved.
This supplemental schedule lists individual and series of transactions in
excess of 5% of the fair market value of plan assets at the beginning
of the year as required by the Department of Labor Rules and
Regulations for Reporting and Disclosure.
<PAGE> 20
-17-
SCHEDULE II
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED JULY 31, 1998
EIN: 75-0675400
PLAN #002
<TABLE>
<CAPTION>
(a) (b) (c) (d) (g)
Purchase Selling Cost of
Identity of Party Involved Description of Asset Price Price Asset
- -------------------------------- ---------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INDIVIDUAL TRANSACTIONS (Continued)
Wachovia Bank Morley Stable Value
Sales $ - $ 4,000,000 $ 3,560,717
Wachovia Bank Morley Stable Value
Sales - 9,848,127 8,690,932
Wachovia Bank Oppenheimer Equity Income Fund
Purchase 3,818,541 - 3,818,541
Wachovia Bank Oppenheimer Quest for Value Fund
Purchase 3,818,541 - 3,818,541
Wachovia Bank Putnam Equity Income Fund
Purchase 3,818,541 - 3,818,541
Wachovia Bank Short Term Investment Fund
Purchase 43,662,131 - 43,662,131
Purchase 13,032,918 - 13,032,918
Purchase 15,746,563 - 15,746,563
Purchase 9,848,217 - 9,848,217
Purchase 5,117,304 - 5,117,304
Purchase 5,257,899 - 5,257,899
<CAPTION>
(a) (h) (i)
Current
Value of
Asset on
Transaction Net
Identity of Party Involved Date Gain/(Loss)
- -------------------------------- ----------- -----------
<S> <C> <C>
INDIVIDUAL TRANSACTIONS (Continued)
Wachovia Bank
$ 4,000,000 $ 439,283
Wachovia Bank
9,848,127 1,157,195
Wachovia Bank
3,818,541 -
Wachovia Bank
3,818,541 -
Wachovia Bank
3,818,541 -
Wachovia Bank
43,662,131 -
13,032,918 -
15,746,563 -
9,848,217 -
5,117,304 -
5,257,899 -
</TABLE>
Columns (e) and (f) do not apply to this schedule as there were no lease rental
or transaction expenses involved.
This supplemental schedule lists individual and series of transactions in
excess of 5% of the fair market value of plan assets at the beginning
of the year as required by the Department of Labor Rules and
Regulations for Reporting and Disclosure.
<PAGE> 21
-18-
SCHEDULE II
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED JULY 31, 1998
EIN: 75-0675400
PLAN #002
<TABLE>
<CAPTION>
(a) (b) (c) (d) (g)
Purchase Selling Cost of
Identity of Party Involved Description of Asset Price Price Asset
- -------------------------------- ---------------------------------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
SERIES OF TRANSACTIONS
Charles Schwab Trust Co. Crabbe Huson Special Fund
Sales $ - $ 5,985,432 $ 6,218,526
Purchases 952,520 - 952,520
Charles Schwab Trust Co. Evergreen Foundation Trust Class A Fund
Sales - 16,304,898 12,410,483
Purchases 1,934,677 - 1,934,677
Charles Schwab Trust Co. Janus Fund
Sales - 5,815,290 5,318,274
Purchases 1,476,948 - 1,476,948
Charles Schwab Trust Co. Morley Stable Value Fund
Sales - 8,125,253 7,287,661
Purchases 2,568,458 - 2,568,458
Charles Schwab Trust Co. Strong Advantage Fund
Sales - 10,814,213 10,784,292
Purchases 1,635,857 - 1,635,857
Charles Schwab Trust Co. Vanguard Index 500 Portfolio Fund
Sales - 10,289,639 8,026,539
Purchases 3,400,877 - 3,400,877
<CAPTION>
(a) (h) (i)
Current
Value of
Asset on
Transaction Net
Identity of Party Involved Date Gain/(Loss)
- -------------------------------- ------------ -----------
<S> <C> <C>
SERIES OF TRANSACTIONS
Charles Schwab Trust Co.
$ 5,985,432 $ (233,094)
952,520 -
Charles Schwab Trust Co.
16,304,898 3,894,415
1,934,677 -
Charles Schwab Trust Co.
5,815,290 497,016
1,476,948 -
Charles Schwab Trust Co.
8,125,253 -
2,568,458 -
Charles Schwab Trust Co.
10,814,213 29,921
1,635,857 -
Charles Schwab Trust Co.
10,289,639 2,263,100
3,400,877 -
</TABLE>
Columns (e) and (f) do not apply to this schedule as there were no lease rental
or transaction expenses involved.
This supplemental schedule lists individual and series of transactions in
excess of 5% of the fair market value of plan assets at the beginning
of the year as required by the Department of Labor Rules and
Regulations for Reporting and Disclosure.
<PAGE> 22
-19-
SCHEDULE II
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED JULY 31, 1998
EIN: 75-0675400
PLAN #002
<TABLE>
<CAPTION>
(a) (b) (c) (d) (g)
Purchase Selling Cost of
Identity of Party Involved Description of Asset Price Price Asset
- -------------------------------- ---------------------------------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
SERIES OF TRANSACTIONS (Continued)
Charles Schwab Trust Co. Warburg Pincus Growth & Income Fund
Sales $ - $4,551,937 $ 4,074,217
Purchases 70,609 - 70,609
Wachovia Bank Income Fund of America
Sales - 188,000 190,592
Purchases 5,383,513 - 5,383,513
Wachovia Bank Bond Fund
Sales - 346,589 347,486
Purchases 4,647,533 - 4,647,533
Wachovia Bank Franklin US Government Fund
Sales - 342,381 341,211
Purchases 4,628,889 - 4,628,889
Wachovia Bank Morley Stable Value Fund
Sales - 9,848,127 8,690,932
Wachovia Bank Oppenheimer Equity Income Fund
Sales - 256,098 255,707
Purchases 5,363,604 - 5,363,604
<CAPTION>
(a) (h) (i)
Current
Value of
Asset on
Transaction Net
Identity of Party Involved Date Gain/(Loss)
- -------------------------------- ------------ -----------
<S> <C> <C>
SERIES OF TRANSACTIONS (Continued)
Charles Schwab Trust Co.
$ 4,551,937 $ 477,720
70,609 -
Wachovia Bank
188,000 (2,592)
5,383,513 -
Wachovia Bank
346,589 (897)
4,647,533 -
Wachovia Bank
342,381 1,170
4,628,889 -
Wachovia Bank
9,848,127 1,157,195
Wachovia Bank
256,098 391
5,363,604 -
</TABLE>
Columns (e) and (f) do not apply to this schedule as there were no lease rental
or transaction expenses involved.
This supplemental schedule lists individual and series of transactions in
excess of 5% of the fair market value of plan assets at the beginning
of the year as required by the Department of Labor Rules and
Regulations for Reporting and Disclosure.
<PAGE> 23
-20-
SCHEDULE II
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED JULY 31, 1998
EIN: 75-0675400
PLAN #002
<TABLE>
<CAPTION>
(a) (b) (c) (d) (g)
Purchase Selling Cost of
Identity of Party Involved Description of Asset Price Price Asset
- -------------------------------- ---------------------------------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
SERIES OF TRANSACTIONS (Continued)
Wachovia Bank Oppenheimer Ltd Term Government Fund
Sales $ - $ 337,585 $ 338,516
Purchases 4,652,201 - 4,652,201
Wachovia Bank Oppenheimer Quest for Value Fund
Sales - 199,360 202,217
Purchases 5,331,262 - 5,331,262
Wachovia Bank Oppenheimer Strategic Fund
Sales - 306,412 309,358
Purchases 4,660,719 - 4,660,719
Wachovia Bank Putnam Equity Income Fund
Sales - 205,717 207,442
Purchases 5,348,471 - 5,348,471
Wachovia Bank Short Term Investment Fund
Sales - 121,031,093 121,031,093
Purchases 123,055,981 - 123,055,981
<CAPTION>
(a) (h) (i)
Current
Value of
Asset on
Transaction Net
Identity of Party Involved Date Gain/(Loss)
- -------------------------------- ------------ -----------
<S> <C> <C>
SERIES OF TRANSACTIONS (Continued)
Wachovia Bank
$ 337,585 $ (931)
4,652,201 -
Wachovia Bank
199,360 (2,857)
5,331,262 -
Wachovia Bank
306,412 (2,946)
4,660,719 -
Wachovia Bank
205,717 (1,725)
5,348,471 -
Wachovia Bank
121,031,093 -
123,055,981 -
</TABLE>
Columns (e) and (f) do not apply to this schedule as there were no lease rental
or transaction expenses involved.
This supplemental schedule lists individual and series of transactions in
excess of 5% of the fair market value of plan assets at the beginning
of the year as required by the Department of Labor Rules and
Regulations for Reporting and Disclosure.
<PAGE> 24
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the Plan Committee for the Zale Corporation Savings and Investment Plan
has duly caused this annual report to be signed on its behalf by the
undersigned, thereunto duly authorized, as of the 25th day of January, 1999.
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
January 25, 1999 By: /s/ MARK R. LENZ
------------------------------
Mark R. Lenz
Senior Vice President,
Controller and Chairman,
Plan Committee
<PAGE> 25
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
23 Consent of Authur Andersen
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 11-K, into the Company's previously filed Form S-8
Registration Statement File No. 333-51607.
/s/ Arthur Andersen
Dallas, Texas
January 25, 1999
