<PAGE> 1
- --------------------------------------------------------------------------------
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, 1999
[ ] 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. 1-04129
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
- --------------------------------------------------------------------------------
<PAGE> 2
ZALE CORPORATION
SAVINGS AND INVESTMENT PLAN
FINANCIAL STATEMENTS
AS OF JULY 31, 1999 AND 1998,
AND SUPPLEMENTAL SCHEDULES
AS OF JULY 31, 1999
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 plan
benefits of the Zale Corporation Savings and Investment Plan (the "Plan") as of
July 31, 1999 and 1998, and the related statements of changes in net assets
available for plan benefits for the years ended July 31, 1999 and 1998. 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 plan benefits of the Plan as
of July 31, 1999 and 1998, and the changes in net assets available for plan
benefits for the years ended July 31, 1999 and 1998, in conformity with
generally accepted accounting principles.
Our audits were made 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 purposes
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's 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 7, 2000
<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, 1999 and 1998 1
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended July 31, 1999 and 1998 2
Notes to Financial Statements 3 - 13
SUPPLEMENTAL SCHEDULES:
Item 27a - Schedule of Assets Held for Investment Purposes
as of July 31, 1999 14
Item 27d - Schedule of Reportable Transactions
for the Year Ended July 31, 1999 15
</TABLE>
<PAGE> 5
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF JULY 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ASSETS:
Investments, at fair market value-
Cash and Short Term Investments $ 2,151,358 $ 2,012,585
Common Stock Mutual Funds 37,478,376 31,477,406
Bond Mutual Funds 7,898,047 8,596,636
Government Securities Mutual Funds 12,739,222 13,651,507
Zale Corporation Common Stock 10,967,170 6,911,636
Participants' loans 2,133,055 2,039,595
------------ ------------
Total investments 73,367,228 64,689,365
Receivables-
Employer's contributions 2,603,800 3,042,696
Participants' contributions 254,750 259,336
------------ ------------
Total receivables 2,858,550 3,302,032
------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 76,225,778 $ 67,991,397
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 6
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEARS ENDED JULY 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net appreciation in fair value of investments $ 3,143,538 $ 2,344,582
Interest and dividends 4,400,550 3,183,915
------------ ------------
7,544,088 5,528,497
Contributions-
Employer 2,603,800 3,042,696
Participants 6,421,783 5,486,336
------------ ------------
9,025,583 8,529,032
------------ ------------
Total increases in net assets 16,569,671 14,057,529
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries 8,335,290 9,290,385
------------ ------------
Total decreases in net assets 8,335,290 9,290,385
------------ ------------
NET INCREASE IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS 8,234,381 4,767,144
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 67,991,397 63,224,253
------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 76,225,778 $ 67,991,397
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 7
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 AND 1998
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
Prior to August 1, 1998, substantially all employees who were at least age 21
were eligible to participate in the Plan on the first day of the month after
beginning employment. Effective August 1, 1998, participants are eligible to
participate in the Plan on the first day of the month following the later of the
date the employee reaches the age 21 or the date in which the employee completes
one year of active service. One year of active service is defined by the Plan as
1,000 or more hours of service completed in one year. Employees covered under a
collective bargaining agreement and certain nonresident aliens are excluded from
participation. See Note 7, Plan Amendments.
Employee Contributions
Under the Plan, participants are permitted 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 $10,000 for the calendar years 1998 and 1999. Effective August 1,
1999, highly compensated employees are no longer subject to additional
limitations.
Employer Contributions
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 matched fifty cents in Zale Corporation Common Stock for
every dollar contributed by participants up to two percent of the participant's
annual earnings. To be eligible for the discretionary and matching
contributions, the participant had to complete 1,000 hours of service for the
Company and must have been employed on July 31 of the year (except under certain
circumstances). Effective August 1, 1998, the Company terminated discretionary
contributions while increasing its matching contribution to one dollar in Zale
Corporation Common Stock for every dollar that an employee contributes, up to
four percent of the participant's annual earnings, subject to IRS limitations.
See Note 7, Plan Amendments.
3
<PAGE> 8
Investment Options
Upon enrollment in the Plan, a participant could have directed 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.
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 Invests 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 Invests in domestic and international common
stocks, other equity securities, corporate and
government bonds and short-term cash equivalents.
10) Growth Investment Option Invests primarily in domestic common stocks and
other equity securities, with a smaller allocation
to international securities.
</TABLE>
4
<PAGE> 9
<TABLE>
<S> <C>
11) Aggressive Growth Investment 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 also invests in domestic
and international securities.
12) Global Investment Option Invests 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
salary deferral contributions 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 (the
"Committee"). Interest rates ranged between 9.75% and 10.50% during the Plan
year. Principal and interest are paid ratably through semimonthly or biweekly
payroll deductions.
Vesting
A participant is automatically fully vested in Employee contributions plus
actual earnings thereon. Prior to August 1, 1999, participants became 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 occurred upon a
participant's death, full and permanent disability, or retirement. Participants
vested 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>
Effective August 1, 1999, Employer 401(k) Matching Contributions will
immediately vest one hundred percent for active participants. Participants are
eligible to receive their vested interests in the Plan upon termination from the
Company. See Note 7, Plan Amendments.
5
<PAGE> 10
Distributions and Withdrawals
Upon retirement, a participant may 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, 1999 and 1998, forfeited nonvested accounts totaled approximately $681,000
and $768,000, respectively. Of the forfeited account balance at July 31, 1999
and 1998, approximately $681,000 and $739,000, 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 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 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.
6
<PAGE> 11
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. See Note 1 for detail of investment
options.
Administration Expenses
Administrative expenses 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,
1999 and 1998, were approximately $197,000 and $330,000, respectively. The
Company has a revenue sharing agreement with the Plan recordkeeper, in which
administrative expenses are offset against 12B-1 and Sub Transfer Agent
revenues.
Basis of Accounting
The Plan uses the accrual method of accounting. The classifications in use at
July 31, 1999 have been applied to the financial statements for July 31, 1998.
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, 1999 and 1998, the Plan had not paid $216,984 and $237,881,
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, 1999 and 1998.
7
<PAGE> 12
The following is a reconciliation of net assets available for benefits per the
financial statements and the Form 5500:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Net assets available for plan benefits per the financial statements $ 76,225,778 $ 67,991,397
Amounts allocated to withdrawing participants (216,984) (237,881)
------------- -------------
Net assets available for plan benefits per the Form 5500 $ 76,008,794 $ 67,753,516
============= =============
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Payments to participants and beneficiaries per the
financial statements $ 8,335,290 $ 9,290,385
Amounts allocated to withdrawing participants at
end of period 216,984 237,881
Less- Amounts allocated to withdrawing participants at
beginning of period (237,881) (475,436)
------------ ------------
Distributions to participants per the Form 5500 $ 8,314,393 $ 9,052,830
============ ============
</TABLE>
5. INVESTMENTS:
The following investments are greater than 5% of ending net assets as of July
31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Oppenheimer Limited Term Government Fund $ 3,953,262 $ 4,297,778
Oppenheimer Strategic Income Fund 3,956,725 4,312,435
Bond Fund of America 3,941,322 4,284,201
Franklin U.S. Government Fund 3,925,558 4,306,348
Income Fund of America 4,860,434 5,047,381
Oppenheimer Equity Income Fund 4,769,371 5,036,356
Oppenheimer Quest Opportunity Value Fund 4,790,626 4,892,907
Putnam Equity Fund 4,748,164 4,969,008
Zale Corporation Common Stock 10,967,170 6,911,636
</TABLE>
As of July 31, 1999 and 1998, 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 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.
8
<PAGE> 13
6. RELATED-PARTY TRANSACTIONS:
During 1998, 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 transactions. During 1999 and 1998 Wachovia Bank managed
certain Plan investments. Wachovia Bank served as the trustee as defined by the
Plan; therefore, the transactions qualify as exempt party-in-interest
transactions.
7. PLAN AMENDMENTS
Effective August 1, 1998, the Plan required new employees to complete one year
of active service in which they work at least 1,000 hours for the Company before
becoming eligible to participate in the Plan. For plan years beginning after
July 31, 1998, the Company increased Employer 401(k) Matching Contributions to
one dollar in Zale Corporation Common Stock for every one dollar an employee
contributes up to 4% of annual earnings, subject to IRS limitations.
Effective August 1, 1999, the Plan was amended to eliminate the 1,000 hours
service requirement and the requirement of employment on the last day of the
Plan year for participants to be eligible to receive Employer 401(k) Matching
Contributions. Employer 401(k) Matching Contributions will be funded monthly and
participants will vest immediately one hundred percent. Active participants as
of August 1, 1999, will be one hundred percent vested in prior unvested Employer
401(k) Matching Contributions.
9
<PAGE> 14
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, 1999
<TABLE>
Participant-Directed Investment Program (Wachovia Bank)
------------------------------------------------------------------------
Bond Growth & Income Growth Aggressive 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 $ 77,918 $ 469,973 $ 328,804 $ 583,245 $ 89,123
Common Stock Mutual Funds -- 14,308,161 9,572,534 10,895,126 2,702,555
Bond Mutual Funds 7,898,047 -- -- -- --
Government Securities Mutual Funds 7,878,818 4,860,404 -- -- --
Zale Corporation Common Stock -- -- -- -- --
Participants' loans 5,677 8,763 5,782 7,154 1,895
------------ ------------ ------------ ------------ ------------
Total investments 15,860,460 19,647,301 9,907,120 11,485,525 2,793,573
------------ ------------ ------------ ------------ ------------
Receivables-
Employer's contributions -- -- -- -- --
Participants' contributions 38,698 66,138 51,482 62,207 16,242
------------ ------------ ------------ ------------ ------------
Total receivables 38,698 66,138 51,482 62,207 16,242
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 15,899,158 $ 19,713,439 $ 9,958,602 $ 11,547,732 $ 2,809,815
============ ============ ============ ============ ============
<CAPTION>
Participant-Directed Investment Program (Wachovia Bank)
---------------------------------------------------------
Cash and Participant Zale Corporation Total
Equivalents Loans Common Stock Investments
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at fair market value-
Cash and Short-Term Investments $ 288,887 $ 12,382 $ 301,026 $ 2,151,358
Common Stock Mutual Funds -- -- -- 37,478,376
Bond Mutual Funds -- -- -- 7,898,047
Government Securities Mutual Funds -- -- -- 12,739,222
Zale Corporation Common Stock -- -- 10,967,170 10,967,170
Participants' loans -- 2,101,618 2,166 2,133,055
------------ ------------ ------------ ------------
Total investments 288,887 2,114,000 11,270,362 73,367,228
------------ ------------ ------------ ------------
Receivables-
Employer's contributions -- -- 2,603,800 2,603,800
Participants' contributions -- -- 19,983 254,750
------------ ------------ ------------ ------------
Total receivables -- -- 2,623,783 2,858,550
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 288,887 $ 2,114,000 $ 13,894,145 $ 76,225,778
============ ============ ============ ============
</TABLE>
10
<PAGE> 15
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 Cash and
Investment Investment Investment Investment Investment Cash
Option Option Option Option Option Equivalents
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <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 $ 242,730
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 2,096,448 242,730
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 $ 242,730
============ ============ ============ ============ ============ ============
<CAPTION>
Participant-Directed Investment Program (Wachovia Bank)
-------------------------------------------------------
Participant Zale Corporation Total
Loans Common Stock Investments
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments, at fair market value-
Cash and Short-Term Investments $ 29,937 $ 227,020 $ 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 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 $ 67,991,397
============ ============ ============
</TABLE>
11
<PAGE> 16
Statement by Fund of Changes in Net Assets Available for Plan Benefits for the
Year Ended July 31, 1999
<TABLE>
<CAPTION>
Participant-Directed Investment Program (Wachovia Bank)
---------------------------------------------------------------------------------
Growth & Aggressive
Bond Income Growth Growth Global
Investment Investment Investment Investment Investment
Option Option Option Option Option
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net (depreciation) appreciation in
fair value of investments $ (915,426) $ (366,295) $ 198,965 $ 1,517,833 $ 11,571
Interest and dividends 1,264,033 2,008,660 682,164 264,236 151,520
------------- ------------- ------------- ------------- -------------
Net investment income 348,607 1,642,365 881,129 1,782,069 163,091
------------- ------------- ------------- ------------- -------------
Contributions-
Employer -- -- -- -- --
Participant 1,139,777 1,741,079 1,279,498 1,532,818 376,871
Participants' loan payments 129,818 188,287 113,323 158,996 41,208
------------- ------------- ------------- ------------- -------------
Total contributions 1,269,595 1,929,366 1,392,821 1,691,814 418,079
------------- ------------- ------------- ------------- -------------
Total increases in net assets 1,618,202 3,571,731 2,273,950 3,473,883 581,170
------------- ------------- ------------- ------------- -------------
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (2,883,616) (2,663,349) (638,598) (634,914) (133,345)
Loans (245,638) (365,218) (202,367) (281,480) (78,278)
------------- ------------- ------------- ------------- -------------
Total decreases in net assets (3,129,254) (3,028,567) (840,965) (916,394) (211,623)
------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS (1,511,052) 543,164 1,432,985 2,557,489 369,547
------------- ------------- ------------- ------------- -------------
INTERFUND TRANSFERS:
Total interfund transfers (634,527) (1,971,248) 350,675 1,308,511 232,278
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS (2,145,579) (1,428,084) 1,783,660 3,866,000 601,825
------------- ------------- ------------- ------------- -------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 18,044,737 21,141,523 8,174,942 7,681,732 2,207,990
------------- ------------- ------------- ------------- -------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 15,899,158 $ 19,713,439 $ 9,958,602 $ 11,547,732 $ 2,809,815
============= ============= ============= ============= =============
<CAPTION>
Participant-Directed Investment Program (Wachovia Bank)
----------------------------------------------------------------
Cash and
Cash Participant Zale Corporation Total
Equivalents Loans Common Stock Investments
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net (depreciation) appreciation in
fair value of investments $ -- $ -- $ 2,696,890 $ 3,143,538
Interest and dividends 7,017 -- 22,920 4,400,550
------------- ------------- ------------- -------------
Net investment income 7,017 -- 2,719,810 7,544,088
------------- ------------- ------------- -------------
Contributions-
Employer -- -- 2,603,800 2,603,800
Participant -- (66,189) 417,929 6,421,783
Participants' loan payments -- (670,635) 39,003 --
------------- ------------- ------------- -------------
Total contributions -- (736,824) 3,060,732 9,025,583
------------- ------------- ------------- -------------
Total increases in net assets 7,017 (736,824) 5,780,542 16,569,671
------------- ------------- ------------- -------------
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries 39,140 (448,184) (972,424) (8,335,290)
Loans -- 1,256,059 (83,078) --
------------- ------------- ------------- -------------
Total decreases in net assets 39,140 807,875 (1,055,502) (8,335,290)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS 46,157 71,051 4,725,040 8,234,381
------------- ------------- ------------- -------------
INTERFUND TRANSFERS:
Total interfund transfers -- -- 714,311 --
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS 46,157 71,051 5,439,351 8,234,381
------------- ------------- ------------- -------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 242,730 2,042,949 8,454,794 67,991,397
------------- ------------- ------------- -------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 288,887 $ 2,114,000 $ 13,894,145 $ 76,225,778
============= ============= ============= =============
</TABLE>
12
<PAGE> 17
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 Strong
Special Trust Janus Morley Stable Advantage
Fund Class A Fund Fund Value Fund Fund
------------- ------------- ------------- ------------- -------------
<S> <C> <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 $ (26,211)
Interest and dividends 592,473 399,315 651,652 8,954 390,125
------------- ------------- ------------- ------------- -------------
Net investment income (197,057) 1,564,359 704,002 715,812 363,914
Contributions-
Employer -- -- -- -- --
Participant 395,952 762,239 410,225 760,298 460,112
Participants' loan payments 50,140 88,149 55,522 133,746 51,957
------------- ------------- ------------- ------------- -------------
Total contributions 446,092 850,388 465,747 894,044 512,069
------------- ------------- ------------- ------------- -------------
Total increases in net assets 249,035 2,414,747 1,169,749 1,609,856 875,983
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (646,456) (1,830,495) (435,376) (2,078,578) (1,303,587)
Loans (94,976) (178,518) (67,131) (175,516) (122,009)
------------- ------------- ------------- ------------- -------------
Total decreases in net assets (741,432) (2,009,013) (502,507) (2,254,094) (1,425,596)
------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS (492,397) 405,734 667,242 (644,238) (549,613)
------------- ------------- ------------- ------------- -------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds (4,975,698) (13,622,113) (4,447,943) (14,404,874) (8,631,303)
------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS (5,468,095) (13,216,379) (3,780,701) (15,049,112) (9,180,916)
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 5,468,095 13,216,379 3,780,701 15,049,112 9,180,916
------------- ------------- ------------- ------------- -------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ -- $ -- $ -- $ -- $ --
============= ============= ============= ============= =============
<CAPTION>
Participant-Directed Investment Participant-Directed Investment
Program (Schwab Trust Co.) Program (Wachovia Bank)
------------------------------ -----------------------------------------------
Vanguard Warburg Growth &
Index 500 Pincus Bond Income Growth
Portfolio Growth & Investment Investment Investment
Fund Income Fund Option Option Option
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net (depreciation) appreciation in fair
value of investments $ 1,094,617 $ (5,665) $ (13,357) $ (610,763) $ (260,338)
Interest and dividends 134,492 623,789 226,942 105,560 45,022
------------- ------------- ------------- ------------- ------------
Net investment income 1,229,109 618,124 213,585 (505,203) (215,316)
Contributions-
Employer -- -- 433,299 510,862 329,557
Participant 773,996 313,791 279,263 452,033 318,754
Participants' loan payments 98,940 33,166 42,709 63,825 39,793
------------- ------------- ------------- ------------- ------------
Total contributions 872,936 346,957 755,271 1,026,720 688,104
------------- ------------- ------------- ------------- ------------
Total increases in net assets 2,102,045 965,081 968,856 521,517 472,788
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (806,804) (538,556) (471,512) (513,663) (15,054)
Loans (106,967) (64,391) (33,510) (66,723) (57,474)
------------- ------------- ------------- ------------- ------------
Total decreases in net assets (913,771) (602,947) (505,022) (580,386) (72,528)
------------- ------------- ------------- ------------- ------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS 1,188,274 362,134 463,834 (58,869) 400,260
------------- ------------- ------------- ------------- ------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds (7,348,321) (4,173,912) 17,580,903 21,200,392 7,774,682
------------- ------------- ------------- ------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS (6,160,047) (3,811,778) 18,044,737 21,141,523 8,174,942
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 6,160,047 3,811,778 -- -- --
------------- ------------- ------------- ------------- -------------
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 Cash and
Investment Investment Cash Participant Zale Corporation
Option Option Equivalents Loans Common Stock
------------ ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
INCREASES IN NET ASSETS:
Investment income-
Net (depreciation) appreciation in fair
value of investments $ (472,779) $ (55,430) $ -- $ -- $ 1,559,786
Interest and dividends 7,640 11,396 -- -- (13,445)
------------ ------------ ------------ ------------ ------------
Net investment income (465,139) (44,034) -- -- 1,546,341
Contributions-
Employer 374,013 95,982 -- -- 1,298,983
Participant 374,387 95,132 -- -- 90,154
Participants' loan payments 53,240 12,314 -- (734,232) 10,731
------------ ------------ ------------ ------------ ------------
Total contributions 801,640 203,428 -- (734,232) 1,399,868
------------ ------------ ------------ ------------ ------------
Total increases in net assets 336,501 159,394 -- (734,232) 2,946,209
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (33,578) (1,578) 242,730 (26,266) (831,612)
Loans (66,530) (18,246) -- 1,065,496 (13,505)
------------ ------------ ------------ ------------ ------------
Total decreases in net assets (100,108) (19,824) 242,730 1,039,230 (845,117)
------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS 236,393 139,570 242,730 304,998 2,101,092
------------ ------------ ------------ ------------ ------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds 7,445,339 2,068,420 -- (11,777) 1,546,205
------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS 7,681,732 2,207,990 242,730 293,221 3,647,297
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year -- -- -- 1,749,728 4,807,497
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 7,681,732 $ 2,207,990 $ 242,730 $ 2,042,949 $ 8,454,794
============ ============ ============ ============ ============
<CAPTION>
Participant-Directed Investment
Program (Wachovia Bank)
-------------------------------
Total
Investments
------------
<S> <C>
INCREASES IN NET ASSETS:
Investment income-
Net (depreciation) appreciation in fair
value of investments $ 2,344,582
Interest and dividends 3,183,915
------------
Net investment income 5,528,497
Contributions-
Employer 3,042,696
Participant 5,486,336
Participants' loan payments --
------------
Total contributions 8,529,032
------------
Total increases in net assets 14,057,529
DECREASES IN NET ASSETS:
Payments to participants and beneficiaries (9,290,385)
Loans --
------------
Total decreases in net assets (9,290,385)
------------
NET INCREASE (DECREASE) PRIOR TO
INTERFUND TRANSFERS 4,767,144
------------
INTERFUND TRANSFERS:
Net transfers into (out of) funds --
------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS 4,767,144
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 63,224,253
------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 67,991,397
============
</TABLE>
13
<PAGE> 18
SCHEDULE I
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF JULY 31, 1999
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 2,151,358 ST Investment Fund/Cash
MUTUAL FUNDS: Bond Investment Option:
Oppenheimer 401,201 Oppenheimer Ltd Term Government Fund
Oppenheimer 917,167 Oppenheimer Strategic Income Fund
American Funds 305,713 Bond Fund of America
Franklin Templeton 607,162 Franklin U.S. Government Securities Fund
Growth & Income Investment Option:
American Funds 282,209 Income Fund of America
Oppenheimer 344,154 Oppenheimer Equity Income Fund
Oppenheimer 125,947 Oppenheimer Quest Opportunity Value Fund
Putnam Mutual Funds 290,140 Putnam Equity Income Fund
Growth Investment Option:
Franklin Templeton 133,730 Mutual Qualified Fund
Massachusetts Financial Services 116,680 Massachusetts Investors Growth Stock Fund
Oppenheimer 106,791 Oppenheimer Quest Value Fund
American Funds 69,289 Washington Mutual Investors Fund
Aggressive Growth Investment Option:
Davis 95,684 Davis NY Venture Fund
Franklin Templeton 98,328 Franklin California Growth Fund
Franklin Templeton 104,430 Franklin Small Capital Growth Fund
Massachusetts Financial Services 101,070 MFS Research Fund
Global Investment Option:
American Funds 20,841 Europacific Growth Fund
Oppenheimer 13,969 Oppenheimer Global Fund
Franklin Templeton 34,685 Templeton Growth Fund
GAM Services 25,549 GAM International Fund
* ZALE CORPORATION 257,523 Zale Corporation Common Stock, par value $.01
* PARTICIPANT LOANS N/A Participant loans, interest rates ranging from 9.75%-10.50%
<CAPTION>
(a) (b) (d) (e)
Identity Current
of Issuer Cost Value**
--------------------------------------------- -------------- ---------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS/CASH:
* Wachovia Bank $2,151,358 $2,151,358
MUTUAL FUNDS:
Oppenheimer 4,112,229 3,953,262
Oppenheimer 4,437,091 3,956,725
American Funds 4,266,494 3,941,322
Franklin Templeton 4,175,620 3,925,558
American Funds 5,241,074 4,860,434
Oppenheimer 5,286,511 4,769,371
Oppenheimer 4,908,432 4,790,626
Putnam Mutual Funds 4,879,149 4,748,164
Franklin Templeton 2,537,537 2,434,190
Massachusetts Financial Services 2,332,793 2,405,618
Oppenheimer 2,418,325 2,329,669
American Funds 2,333,936 2,403,057
Davis 2,400,167 2,649,596
Franklin Templeton 2,406,747 2,800,141
Franklin Templeton 2,503,362 2,759,066
Massachusetts Financial Services 2,527,523 2,686,324
American Funds 618,113 694,453
Oppenheimer 636,669 682,709
Franklin Templeton 691,307 677,010
GAM Services 794,291 648,383
* ZALE CORPORATION 5,264,707 10,967,170
* PARTICIPANT LOANS -- 2,133,055
</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, 1999, as required by the Department of Labor's Rules and Regulations
for Reporting and Disclosure.
14
<PAGE> 19
SCHEDULE II
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED JULY 31, 1999
EIN: 75-0675400
PLAN #002
<TABLE>
<CAPTION>
(a) (b) (c) (d) (g) (h) (i)
Current
Value of
Asset on
Purchase Selling Cost of Transaction Net
Identity of Party Involved Description of Asset Price Price Asset Date Gain/(Loss)
- -------------------------- -------------------- -------- ------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INDIVIDUAL TRANSACTIONS
NONE
SERIES OF TRANSACTIONS
Wachovia Bank Short Term Investment Fund
Sales $ - $41,431,298 $41,431,298 $41,431,298 $ -
Purchases 41,549,598 - 41,549,598 41,549,598 -
</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's Rules and Regulations
for Reporting and Disclosure.
15
<PAGE> 20
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 24th day of January, 2000.
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
January 24, 2000 By: /s/ Mark R. Lenz
---------------------------------
Mark R. Lenz
Senior Vice President,
Controller and Chairman,
Plan Committee
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
23 Consent of Arthur 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 24, 2000
