EURO DISNEY S.C.A. Combined General Meeting March 25, 2004

Transcription

1 EURO DISNEY S.C.A. Combined General Meeting March 25, 2004

2 Summary Management Report on Euro Disney S.C.A. Fiscal Year General Report of the Supervisory Board on Euro Disney S.C.A General Report of the Statutory Auditors on the Financial Statements Resolutions of the Combined General Meeting Special report of the Gérant 27 Statutory Auditors Special Report on Reducing the Company s Share Capital 28 Special Report of the Supervisory Board 29 Statutory Auditors Special Report on Related-Party Agreements year Financial Review of Euro Disney S.C.A. 35 Condensed Financial Statements of Euro Disney S.C.A. 36 Management Report on the Group Euro Disney S.C.A. Fiscal Year Consolidated Financial Statements Fiscal Year General Report of the Supervisory Board on the Group Euro Disney S.C.A General Report of the Statutory Auditors on the Consolidated Financial Statements Significant Operating Contracts Legal Structure Corporate organisation of the Group Euro Disney S.C.A Ownership Structure of the Group 92-93

3 Euro Disney S.C.A. Management Report on the Company Fiscal Year Ended September 30, 2003 INTRODUCTION Revenues generated by the Company and its subsidiaries (the Group ) for the year decreased 2.1% to total 1,053.1 million. The reduced revenues reflect a prolonged downturn in European travel and tourism, strikes and work stoppages throughout France during the year combined with challenging general economic conditions in its key markets, partially offset by the impact of a full year of Walt Disney Studios Park. Excluding the impact of the Group s fiscal year 2003 change in accounting principle for major fixed asset renovations discussed below (the Accounting Change ), operating margin (earnings before lease and financial charges and exceptional items) for the year declined 18.6% to million and the net loss increased from 33.1 million to 45.4 million. On an as-reported basis, operating margin generated by the Group decreased 24.6% to million from million in the prior year. After lease and net financial charges and exceptional items, the Group s net loss totalled 56.0 million. The increased loss reflects disappointing revenues, higher direct operating costs due to the full year operations of Walt Disney Studios Park, and higher advertising costs during the first semester, partially offset by lower royalties and management fees following the waiver of the payment of these fees by The Walt Disney Company ( TWDC ) for the last three quarters of fiscal year FINANCIAL NEGOTIATIONS On November 3, 2003, the Group obtained waivers from its lenders, effective through March 31, 2004, with respect to certain financial covenants and other obligations, including a reduction in certain security deposit requirements. The waivers are subject to compliance with certain conditions which are under the control of the Group. The purpose of this agreement is to give management, the lenders and TWDC time to find resolution regarding the Group s financial situation. Absent such a timely resolution, the waivers would expire and management believes the Group would then be unable to meet all of its debt obligations. In addition, TWDC agreed to provide the Group a new 45 million subordinated credit facility, which can be drawn upon through March 31, 2004, but only after the existing million standby facility provided by TWDC is fully drawn. If amounts were drawn, repayment would be subject to the Group s meeting certain financial thresholds or to the prior repayment of all of the Group s existing debt to its lenders.

4 MANAGEMENT REPORT ON EURO DISNEY S.C.A. 2/3 The Group s management believes that the waivers will allow time for the parties to develop a mutually acceptable resolution to the Group s future financing needs. In preparing the Company's financial statements, management has used the going-concern assumption based on management s belief that it is in the best interest of all stakeholders, including the lenders and TWDC to successfully resolve the Group s financial situation. This resolution would likely include modifying the Group s existing obligations and obtaining additional financing. If the principle of going concern had not been assumed, it would likely have had a significant impact on the valuation of assets and liabilities as of September 30, OPERATING STATISTICS The following table provides information regarding the key operating indicators of the Group: THEME PARKS (1) HOTELS Fiscal years Total guests (in millions) Spending Per guest (2) Occupancy Rate (3) Spending Per room (4) % % % % % (1) Includes Disneyland Park and, from March 16, 2002, Walt Disney Studios Park. (2) Average daily admission price and spending for food, beverage and merchandise sold in the Theme Parks, excluding VAT. (3) Average daily rooms sold as a percentage of total room inventory (total room inventory is approximately 5,800 rooms). (4) Average daily room price and spending on food, beverage and merchandise sold in hotels, excluding VAT. FISCAL YEAR 2003 FINANCIAL RESULTS Financial information related to the Group is provided in the Management Report on the Group activities. Key financial data related to individual subsidiaries are presented in the schedule of subsidiaries and equity affiliates. Financial information described below relates exclusively to the Company. Change in Accounting Principle: Under the Company s new policy, effective October 1, 2002, the costs of major fixed asset renovations are no longer capitalised and amortised over five years, but are instead accrued in advance on a straight-line basis as operating expense during the period between planned renovations. The Company adopted this change in accounting as a result of a change in generally accepted accounting principles in France. As a result of this change, 16.9 million of unamortised deferred charges as of September 30, 2002 were charged to equity as of October 1, 2002 and fiscal year 2003 operating expenses increased by 53.6 million, reflecting the opening provision for major fixed asset renovations as of October 1, 2002 of 48.1 million and the increase in the provision for major renovations during fiscal year 2003 of 11.0 million, offset by 5.5 million reduced amortisation expenses related to deferred fixed asset renovation costs.

5 To enhance comparability between fiscal periods, the Statement of Income for the year ending September 30, 2003 is presented below showing balances without the impact of the Accounting Change, and reconciling those balances to the as-reported Statement of Income: STATEMENTS OF INCOME Year ended September 30, Variation (before Accounting Change) Before Accounting Accounting As Reported Change Change ( in millions) 2003 Impact Amount % Revenues (203.5) (17.2) Costs and Expenses ( ) 53.6 ( ) ( ) (13.7) Loss from Operations (119.7) 53.6 (66.1) (28.6) (37.5) (131.1) Net Financial Income (Loss) (8.1) (8.1) 16.6 (24.7) - Loss before Exceptional Items and Income Tax Benefit (127.8) 53.6 (74.2) (12.0) (62.2) - Exceptional Income (Loss), net (36.9) Income Tax Benefit Net Loss (110.2) 53.6 (56.6) (46.1) (10.5) 22.8 Certain reclassifications have been made to the 2002 comparative amounts in order to conform to the 2003 presentation. Revenues Revenues of the Company were generated from the following sources: Year ended September 30, Variation ( in millions) Amount % Theme Parks (17.5) (3.3) Real Estate Development Activities (6.6) (58.4) Services to subsidiaries and other revenues Other (180.7) (80.3) Total Revenues (203.5) (17.2) Theme park revenues decreased 3.3% to million from million in the prior year as a result of lower admissions revenues driven by a 5.3% decrease in theme park guests, partially offset by higher park admission prices. Merchandise and food and beverage revenues in the Theme Parks also decreased primarily as a result of lower total theme park attendance, partially offset by higher food and beverage spending per guest. Real Estate Development revenues decreased from the prior year, as planned. Real Estate Development revenues in fiscal year 2003 related primarily to ground lease income and fees earned related to conceptualisation and development assistance services provided to third-party developers that have signed contracts to either purchase or lease land on Disneyland Resort Paris site for development.

6 MANAGEMENT REPORT ON EURO DISNEY S.C.A. 4/5 Services to subsidiaries and other revenues consist principally of billings of operating expenses incurred by the Company on behalf of subsidiaries, revenues of the Disneyland Hotel and Davy Crockett Ranch and participant fees. These revenues were stable compared to last year, increasing 0.3% to million in fiscal year 2003 from million in fiscal year 2002 mainly due to an increase in the operating costs incurred by the Company on behalf of EDL Hotels S.C.A., partially offset by decrease in participant fees. Other revenues consists of the capitalisation of project costs, reversals of provisions and reserves and transfers of costs to exceptional charges. Other revenues decreased to 44.2 million in fiscal year 2003 from million in fiscal year 2002, primarily due to the impact of project cost capitalisations ( 25.1 million in fiscal year 2003 compared to million in the prior year) which mainly related to Walt Disney Studios Park and to a decrease in costs transferred to exceptional charges ( 40.8 million decrease related to Walt Disney Studios Park pre-opening expenses transferred to exceptional in the prior year). Costs and expenses Costs and expenses for the Company consist of lease expense and other operating costs (which include wages and employee benefits, cost of sales for merchandise and food and beverage, utilities, maintenance, renovation expenses, insurance, operating taxes, depreciation and amortisation, royalties and management fees). Costs and expenses decreased from 1,214.2 million in fiscal year 2002 to 1,101.8 million in fiscal year This decrease reflects primarily lower costs relating to Walt Disney Studios Park including construction costs, which have been capitalised, partially offset by higher provisions, due to the Accounting Change. Fiscal year 2002 costs and expenses also included pre-opening costs, which were transferred to exceptional charges. Royalties paid to TWDC and the base management fees paid to Euro Disney S.A., a wholly-owned indirect subsidiary of TWDC are recorded in other costs and expenses and amounted to 8.1 million in fiscal year 2003 compared to 34.7 million in fiscal year 2002, reflecting the March 28, 2003 waiver by TWDC of these fees for the last three quarters of fiscal year In fiscal year 2004, royalties will be reinstated to their full contractual rates (fiscal year 1999 through 2003 rates were reduced to half of their original levels as a result of the 1994 financial restructuring); however, payment for 2004 royalties will not be due until the first quarter of fiscal year 2005 due to the waiver agreement. Lease rental expense increased 3.2 million to million and is included in Services and other costs. Lease rental expense primarily represents payments under financial lease arrangements with Euro Disneyland S.N.C. and an affiliate of TWDC, Euro Disney Associés S.N.C., and approximates the related debt service payments of Euro Disneyland S.N.C. The debt service payments fluctuate with variable interest rates and interest forgiveness changes, as well as the timing of principal repayments made by Euro Disneyland S.N.C. The rate of interest forgiveness resulting from the 1994 financial restructuring was at its peak during the second half of fiscal year 1994 and has progressively decreased since that time. In fiscal year 1998, substantially all interest charges were reinstated to normal levels; however, approximately 5.0 million of interest forgiveness per year favourably impacted lease rental expense through the end of fiscal year 2003.

7 During fiscal years 2003 and 2002, the component of lease rental expense related to Euro Disneyland S.N.C. loan repayments was 67.6 million and 53.3 million, respectively. For fiscal years 2004 and 2005, equivalent amounts are scheduled to increase to 81.2 million and 96.3 million, respectively. Of these amounts, third party loan principal repayments (requiring a net cash flow from the Company) were 27.1 million in fiscal year 2003 and will be approximately 28.9 million and 38.0 million in fiscal years 2004 and 2005, respectively. Depreciation and amortisation increased 4.7 million, primarily reflecting additional depreciation related to Walt Disney Studios Park, partially offset by reduced amortisation expenses related to deferred renovation costs charged to equity as of October 1, Loss from operations Loss from operations amounted to million in fiscal year 2003 compared to a loss from operations of 28.6 million in fiscal year 2002, reflecting lower operating margin and the impact of the Accounting Change. Net financial income (loss) Financial income is principally composed of interest earned on long term loans provided to Euro Disneyland S.N.C. and EDL Hôtels S.C.A., interest income on cash and short-term investments, gains arising from foreign currency transactions, interest capitalised on projects and reversals of financial accruals. Financial expense is principally composed of interest charges on long-term borrowings, losses arising from foreign currency exchange transactions and interest rate hedging transactions. Net financial result was a loss amounting to 8.1 million in fiscal year 2003 from a financial income of 16.6 million in fiscal year This decrease resulted primarily from: Lower interest earned on long-term loans provided to Euro Disneyland S.N.C. and EDL Hôtels S.C.A. ( 8.8 million) due primarily to lower variable interest rates, Increased interest based expenses of 14.6 million as compared to the prior year, during which 9.2 million of interest costs were capitalised and included in the construction costs of Walt Disney Studios Park. Exceptional income (loss), net Exceptional income totalled 12.5 million in fiscal year The Company sold three apartment developments used to provide housing to employees within close proximity to the site. The transaction generated 34.1 million in net sale proceeds and a gain of 11.0 million. The Company continues to operate the apartment developments under leases with the buyers.

8 MANAGEMENT REPORT ON EURO DISNEY S.C.A. 6/7 For fiscal year 2002, exceptional loss, net totalled 36.9 million, primarily reflecting 37.2 million of Walt Disney Studios Park pre-opening costs, 1.0 million of euro implementation costs, and 1.0 million of reorganisation charges. These exceptional charges were partially offset by 0.6 million of net adjustments to provisions for risks and charges. The exceptional pre-opening costs incurred during fiscal year 2002 included the costs of hiring and training Walt Disney Studios Park employees during the pre-opening period as well as the costs of the pre-opening advertising campaigns and the media events that took place throughout February and March Income tax credit The Company has elected to file consolidated income tax returns for itself and all wholly owned subsidiaries (the Tax Group ) and to pay all taxes related to the Tax Group. Effective October 1, 1994, a tax agreement was signed which provides that tax benefits will be recovered from the related subsidiaries. The tax benefits recoverable from the subsidiaries amounted to 5.1 million in fiscal year 2003 compared to 2.8 million in fiscal year Income expense for corresponding amounts were recorded in the financial statements of the related subsidiaries. CAPITAL INVESTMENT, LIQUIDITY AND FINANCING Capital investment ( in millions) Resort Activities Real Estate Development Activities Fiscal year 2003 capital expenditures for the Resort relate primarily to completion of the Fantillusion parade, which had its debut at Disneyland Park this year, and various improvements to the existing asset base. Investments in the Real Estate Development represent the purchase of land that the Company has subsequently leased to third-parties under long-term ground leases. Debt The Company s principal indebtedness (excluding accrued interest) increased to million as of September 30, 2003 compared to million as of September 30, 2002 primarily as a result of 40.0 million of new drawings on the million TWDC credit facility, partially offset by 13.3 million of principal repayments. The principal payment obligations of the Company, and the principal portion of its lease payments to the unconsolidated financing companies, recommenced in fiscal year 1998 pursuant to the terms of the 1994 financial restructuring. The Company paid million (including the convertible bond repurchases and maturities) and 40.4 million of principal in fiscal years 2002 and 2003, respectively (net of principal payments the Company receive from the subordinated loans the Company made

9 to the financing companies). On the same basis, the Company will be required to pay 52.9 million (excluding the TWDC credit facility) and 67.6 million of net principal in fiscal years 2004 and 2005, respectively. The Company's debt agreements include covenants with respect to its financing arrangements. These covenants include restrictions on additional indebtedness and capital expenditures, the provision of certain financial information and compliance with certain financial thresholds. In November 2003, the lenders agreed to waive, effective through March 31, 2004, certain of these covenants (see discussion under Financial Negotiations above). Liquidity As of September 30, 2003, cash and short-term investments totalled 40.0 million, an increase of 24.5 million from the prior year end balance, primarily as a result of changes in working capital, partially offset by lower net results. Based upon available cash and short-term investments, the remaining availability on the Company's lines of credit with TWDC ( million existing line expiring in June 2004, plus the 45 million new line available until March 31, 2004), management believes the Company will have in the normal course of business the resources necessary to meet funding requirements arising during the waiver period with the lenders and TWDC, which ends on March 31, Absent a resolution to the Company's liquidity issues as a result of the negotiations, management believes the Company would be unable to meet all of its debt obligations following the end of the negotiation period. Equity Shareholders equity decreased to 1,165.4 million at September 30, 2003 from 1,292.9 million at September 30, 2002, as a result of the net loss for fiscal year 2003 and the 16.9 million cumulative effect of the Accounting Change related to major fixed asset renovation expenditures (see discussion under Change in Accounting Principle described above). As of September 30, 2003, TWDC, through indirect wholly-owned subsidiaries, held 39.1% of the Company s shares and approximately 16.3% of the Company s shares were owned by trusts for the benefit of Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud and his family. No other shareholder has indicated to the Company that it holds more than 5% of the share capital of the Company. No dividend allocation is proposed with respect to fiscal year 2003, and no dividends were paid with respect to fiscal years 2002, 2001 and Market risk and financial instruments The Company is exposed to the impact of interest and foreign currency exchange rate changes. In the normal course of business, the Company employs established policies and procedures to manage its exposure to changes in interest and foreign currency exchange rates using primarily swaps and forward rate agreements. It is the Company s policy to enter into interest and foreign currency rate transactions only to the extent considered necessary to meet our objectives. The Company does not enter into interest and foreign currency rate transactions for speculative purposes.

10 MANAGEMENT REPORT ON EURO DISNEY S.C.A. 8/9 The Company has significant variable rate short-term investments, long-term receivables and debt. It also has interest rate risk associated with lease obligations, as amounts due under these contracts are tied to variable interest rates. With respect to these interest rate sensitive instruments and obligations, a hypothetical 10% increase in interest rates, as of September 30, 2003 and 2002, would have a 0.4 million and 0.6 million, respectively, unfavourable impact on our near-term annual cash flows. This amount excludes the positive cash flow impact such a change in interest rates would have on shortterm investment income. The Company s exposure to foreign currency risk relates primarily from British pound denominated sales and U.S. dollar denominated purchases. The Company primarily utilises foreign exchange forward contracts to hedge these expenditures. With respect to these foreign exchange rate sensitive instruments, a hypothetical 10% adverse change in the U.S. dollar and British pound exchange rates (correlation between currencies is not taken into account) as of September 30, 2003 and 2002 would result in a 6.9 million and 5.2 million decrease in their market value, respectively. No amount of this decrease would impact earnings since the loss on these instruments would be offset by an equal gain on the underlying exposure being hedged. Management Compensation and Corporate Positions and Directorships Held The statutory management of the Company is the Euro Disney S.A., a French corporation, and the members of the Supervisory Board. Compensation of the Statutory Management (Gérant), Euro Disney S.A.: Euro Disney S.A., the Statutory Management of the Company (Gérant) is responsible for the statutory management of three other companies within the Euro Disney S.C.A. Group: EDL Hôtels S.C.A., ED Resort S.C.A. and ED Resort Services S.C.A. Management fees due to Euro Disney S.A. by the Company were 2.5 million for fiscal year Compensation of the Supervisory Board and Corporate Positions and Directorship Held: The aggregate compensation of the Supervisory Board during fiscal year 2003 was 160,071. For disclosure of the compensation paid to each member of the Supervisory Board individually as well as a complete list of the other corporate positions and directorships that each holds, see Exhibit 1. TWDC employees are not paid by the Company for serving on the Supervisory Board. Compensation of the members of the Executive Committee of the Euro Disney Group: The composition and number of members on the Executive Committee of the Company varied during fiscal year Aggregate compensation paid to the members during the period of their tenure on the Committee totalled 4.4 million. As of September 30, 2003, these same officers held together a total of 3.0 million of the Company s stock options. Human Resources and Environmental Activities See Exhibit 2

11 CONCLUSION - For the Group Fiscal year 2003 was a particularly difficult year for the tourism industry. As the leader in the destination resort market in Europe, our Group was not immune to the difficulties that all operators experienced, and our results reflect this year's unusual circumstances. Disneyland Resort Paris remains without a doubt the number one tourist destination in Europe, due to our unique product offer and high guest satisfaction rates. Growth in the theme park market should continue to provide Disneyland Resort Paris significant opportunity. Fiscal year 2004 will be impacted by two major factors: the implementation of a new European marketing strategy that is innovative and adapted to changing consumer behaviour, and the negotiations for a new financial structure designed to meet our long-term objectives. We believe in our future. Disneyland Resort Paris is and will remain the only truly magical destination in Europe. Chessy, November 14, 2003 The Gérant, Euro Disney S.A. André Lacroix, Chairman and Chief Executive Officer

12 MANAGEMENT REPORT ON EURO DISNEY S.C.A. 10/11 Exhibit 1 Euro Disney S.C.A. Management report on the company THE MEMBERS OF THE SUPERVISORY BOARD ARE: Members of the Supervisory Board ANTOINE JEANCOURT-GALIGNANI, Other positions and directorships held in French and Foreign Companies GECINA PRESIDENT SIMCO PRESIDENT OF THE BOARD OF DIRECTORS COMPENSATION: 60,980 SNA HOLDING (BERMUDA) LTD AGF KAUFMAN & BROAD SNA-RE (BERMUDA) LTD SNA SAL, LIBAN MEMBER OF THE BOARD OF DIRECTORS SOCIÉTÉ GÉNÉRALE TOTAL FINA ELF FOX KIDS EUROPE NV, PAYS-BAS MEMBER OF THE SUPERVISORY BOARD SIR DAVID PARADINE FROST COMPENSATION: 15,245 DAVID FROST ENTERPRISES LTD DAVID PARADINE FILMS LTD DAVID PARADINE LTD DAVID PARADINE PLAYS LTD DAVID PARADINE PRODUCTIONS LTD DISCOVERY PRODUCTIONS LTD GLEBE MUSIC COMPANY LTD PRESIDENT / HOTCOURSES LTD MEMBER OF THE BOARD OF DIRECTORS NEWSPLAYER GROUP PLC PARADINE CO-PRODUCTIONS LTD PARADINE DOCUMENTARIES LTD PARADINE CASTLE COMMUNICATIONS LTD ROGUE TRADER PRODUCTION LTD TELE-CIRCUIT LTD WELLBEING WEST 175 MEDIA GROUP PHILIPPE LABRO PHL COMMUNICATION S.A.R.L. PROJECT DIRECTOR, DESIGN AND OPERATIONS COMPENSATION: 30,490 SOCIÉTÉ POUR L'ÉDITION MEMBER OF THE BOARD OF DIRECTORS RADIOPHONIQUE (EDIRADIO) DR JENS ODEWALD ODEWALD & COMPANIE GMBH, BERLIN COMPENSATION: 22,866 ODEWALD & COMPAGNIE GESELLSCHAFT CHAIRMAN AND MANAGING DIRECTOR FÜR BETEILIGUNGEN GMBH, BERLIN TCHIBO HOLDING AG, HAMBURG CHAIRMAN (UNTIL JULY 2003) FIEGE MERLIN LTD, UK CHAIRMAN OF THE SUPERVISORY BOARD TCHIBO HOLDING AG, HAMBURG WAVE MANAGEMENT AG, HAMBURG MEMBER OF THE SUPERVISORY BOARD LAURENCE PARISOT COMPENSATION: 30,490 IFOP-ASECOM LATIN AMERICA (ARGENTINA) IFOP CMR (TORONTO) IFOP INTERNATIONAL SA IFOP PARTICIPATIONS SA CHAIRMAN AND CHIEF EXECUTIVE OFFICER IFOP SA IFOP WESTWEGO (CANADA) OPTIMUM SA UBI FRANCE MEMBER OF THE BOARD OF DIRECTORS GRADIVA SARL GÉRANT MP3

13 Management report on the company Management report Members of the Supervisory Board Other positions and directorships held in French and Foreign Companies JAMES RASULO CHAIRMAN & CHIEF EXECUTIVE OFFICER EURO DISNEY S.A. COMPENSATION: NONE (1) (UNTIL MAY 2003) ANAHEIM ANGELS BASEBALL CLUB, INC (UNTIL MAY 2003) ANAHEIM SPORT, INC. (UNTIL MAY 2003) ARDC-OCALA 201, LLC CHARACTER CONCEPTS (DIVISION OF WALT DISNEY WORLD CO.) CHAIRMAN DISNEY BUSINESS PRODUCTIONS, LLC MIGHTY DUCKS HOCKEY CLUB, INC. W.D. ATTRACTIONS, INC, WALT DISNEY PARKS AND RESORTS, LLC CLUB 33 COMPASS ROSE CORPORATION DCSR, INC. DISNEY ENTERTAINMENT PRODUCTIONS DISNEYLAND, INC. DISNEY MAGIC CORPORATION DISNEY REGIONAL ENTERTAINMENT, INC. DISNEY WONDER CORPORATION DSM INTERNATIONAL, INC. PRESIDENT / DIRECTOR EURO DISNEY CORPORATION MAGIC KINGDOM, INC. VISTA TITLE INSURANCE AGENCY, INC. WALT DISNEY ENTERTAINMENT WALT DISNEY IMAGINEERING RESEARCH & DEVELOPMENT, INC. WALT DISNEY PARKS AND RESORTS ONLINE WALT DISNEY TOURING PRODUCTIONS WCO PARENT CORPORATION WCO LAND CORPORATION VICE-PRESIDENT WCO LEISURE, INC. & DIRECTOR DISNEY WORLDWIDE SERVICES, INC BVCC, INC. DISNEY INCORPORATED DISNEYLAND INTERNATIONAL WALT DISNEY TRAVEL CO., INC. WALT DISNEY WORLD CO. WALT DISNEY WORLD HOSPITALITY & RECREATION CORPORATION WCO HOTELS, INC. SENIOR VICE-PRESIDENT DIRECTOR

14 MANAGEMENT REPORT ON EURO DISNEY S.C.A. 12/13 Members of the Supervisory Board Other positions and directorships held in French and Foreign Companies THOMAS O. STAGGS DISNEY ENTERPRISES, INC. SENIOR EXECUTIVE VICE-PRESIDENT AND COMPENSATION: NONE CHIEF FINANCIAL OFFICER THE WALT DISNEY COMPANY ANAHEIM ANGELS BASEBALL CLUB, INC. ABC, INC. ABC NEWS ONLINE INVESTMENTS, INC. DISNEY MEDIA VENTURES, INC. DISNEY TELEVENTURES, INC. DISNEY WORLDWIDE SERVICES, INC. ALLEMAND SUBSIDIARY, INC. B.V. FILM FINANCE CO. II STEAMBOAT VENTURES, LLC EDL HOLDING COMPANY EDL S.N.C. CORPORATION EURO DISNEY INVESTMENTS, INC. WDW SERVICES II, INC. FOX KIDS EUROPE N.V. LARKSPUR INTERNATIONAL SALES, INC. WDT SERVICES, INC. WDWH&R SERVICES, INC. ABC FAMILY WORLDWIDE, INC. SENIOR EXECUTIVE VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER CHAIRMAN, INVESTMENT AND ADMINISTRATIVE COMMITTEE (UNTIL MAY 2003) VICE- PRESIDENT/ EXECUTIVE VICE-PRESIDENT DIRECTOR CHAIRMAN/PRESIDENT AND DIRECTOR PRESIDENT/CHAIRMAN CHIEF FINANCIAL OFFICER (1) James Rasulo was chairman and chief executive officer of Euro Disney S.A. until May 5, 2003, before being appointed on this same date as a member of the Supervisory Board. His remuneration as a member of the Executive Committee of the Euro Disney Group is included in the aggregate compensation paid to the Executive Committee members. No compensation was paid to James Rasulo as a member of Supervisory Board. Compensation disclosed above represents compensation paid by the Group in fiscal year Supervisory Board compensation is proportional to attendance at meetings.

15 Exhibit 2 Human resources and environmental activities Human resources information This report is based on the social data issued by the Company and Euro Disney S.A. and is consistent with data produced for French social requirements ( Bilan Social ). In partnership with local authorities, Euro Disney assumes an active part in the economic development of Ile de France region. Euro Disney is the largest employer in the Department of Seine-et-Marne and has generated more than 43,000 jobs (directly and indirectly). More than 80% of the employees working on the site live in the area. The National Collective Bargaining Agreement of the French Amusement Parks ( Branche des Espaces de Loisirs, d'attractions et Culturels ) is applicable to the Company, according to an agreement signed April 26, 2001, with six trade unions out of the seven represented in the Company. The Company complies with all information and consultation requirements with respect to the unions and representatives of the employees. Data concerning our human resource management is presented below: Total employees as of September 30, 2003 Hirings (annual average) (1) Problems in recruiting Dismissal reasons 11,353 employees, including 10,476 permanent contracts, 757 fixed-term contracts and 120 temporary contracts Permanent contracts: 2,085 employees Fixed-term contracts: 3,809 employees Temporary: 1,649 employees Regarding the activity on the resort, the major problems in recruiting employees are: Availability of employees for certain jobs (night shift, work on weekends and public holidays), Linguistic competence of employees. Real and serious cause: 163 employees Professional misconduct: 322 employees Other: None Overtime 117,586 overtime hours during fiscal year Temporary work Working hours During fiscal year 2003, 6.7 million paid to the temporary employment agencies. For the 10,476 permanents contracts, working hours can be split as follows: Full-time, 35 hours: 9,757 Contracts for less than 16 hours: 487 employees Contracts between 16 and 28 hours: 183 employees Contracts more than 28 hours and less than 35: 49 employees.

16 MANAGEMENT REPORT ON EURO DISNEY S.C.A. 14/15 Absenteeism The main reasons for absenteeism are: Illness: 22% Occupational or work-related travel accidents: 5% Maternity leave: 5% Authorized leave: 1.5% Paid and unpaid holidays: 42% Other reasons (including days off relating to the 35 hour-week): 23% Annual wage increase The average wage increase for fiscal year 2003 is 3.48%. Payroll Taxes Average payroll tax rate paid by the Company was approximately 41% and 39% of the gross salaries during fiscal years 2003 and 2002, respectively. Equity in the workplace (equal opportunities) Relations with Trade Unions and collective agreements Health and safety conditions Training program The total labour force under permanent contracts can be broken down as follows: Women: 45% Men: 55% 18 meetings of the Workers Council and 189 meetings of the Staff Representatives were held during fiscal year Major agreements signed during the year were: Collective agreements on night work, Company-level agreement based collective guarantee system: refunding of medical expenses. Since 1997, Disneyland Resort Paris has chosen to develop a global and integrated strategy within an internal Quality -Health, Safety and Working Conditions- Environnement chart. The social security contribution rate for accident at work is 1.84% for Euro Disney SCA and 1.10% for Euro Disney SA. 93 meetings of the Health and Safety council called CHSCT have been held during fiscal year Regarding our training programs, fiscal year 2003 was marked by the set up of the new Management Program, at Disney University. This program applies to new executives in order to give them a global vision on the strategy, organization, core-business and specificity of Disney. In 2001, Euro Disney set up a program called Hôte d Accueil Touristique (HAT) which offers employees the possibility to acquire different professional competency certificates recognised by the Ministry of Employment. This program has been expanded this year to include specialised certificates. At the language laboratory open to the entire staff, fical year 2003 was also marked by the set up of an e-learning program in order to facilitate acquisition of language skills. Work and training program Euro Disney employs a total of 256 disabled workers and 11 have for disabled employees been hired during Moreover, Euro Disney collaborates with 12 C.A.T. (work centers for disabled workers).

17 Community relations Subcontracting The Works Council budget is equal to 0.73% of the total gross salaries paid by the Company. The Company is engaged in a sponsorship program, children in need, that includes three major programs: hospital visit by Disney characters, the Children's Wishes program that allows seriously ill children to spend time at Disneyland Resort Paris, and the actions of the Volunteers' Club. In addition, the Company supports some charity associations through its collection and donation programs. The main subcontracting agreements relate to: Security, Room cleaning, Maintenance of green spaces. (1) The number of hirings corresponding to the number of person who have signed at least one employment contract during the period. Environmental information From the beginning, Disneyland Resort Paris commitment to environment matters is illustrated by the diversity and the abundance of vegetal species on the Resort, as well as our high standards of cleanliness. This focus results from the involvement of employees whose daily responsibilities at the Resort are characterized by the Company s spirit of Environmentality, which is a way of thinking, acting and operating with a constant care for environment. Environmental data for Disneyland Resort Paris activity are as follows: Water and energy consumption In October 1997 a management program was set up for utilities with the aim of achieving the control and economy of water, electricity and natural gas with respect to the product and quality of Disney services. This program has permitted a significant reduction in energy consumption over the last six years. Consumption increased in 2002 as a result of the opening of Walt Disney Studios Park. Energy consumption Water (Km 3 /year) Electricity (MWH/year) Gas (MWH/year) Consumption of raw The creation of an approval committee (consisting of 5 members) for materials chemical products in 1994 has allowed the study of more than 1,000 products, of which 828 have been agreed and 180 rejected. One of the major objectives of this committee is to promote the selection of substitute products, which are less toxic and/or less dangerous for health and environment. Soil use Since 1987, the development project consists in bringing more vegetation on the site and putting phone and electricity cables underground. Our horticulture department uses environmentally friendly products to the extent possible, and privileges those which protect pollen producing plants.

18 MANAGEMENT REPORT ON EURO DISNEY S.C.A. 16/17 Soil contamination Wastewater Air quality Noise pollution Odors Waste Preventive measures for energy improvement and renewable energies Resort activities do not generate risks of soil contamination. From the outset, the quality of the water in Disneyland resort is tested and controlled regularly. A group, especially dedicated to follow water quality with the help of an internal laboratory equipped for self-control, allowed the Company to process to more than 8,000 tests in 2003 with the aim of following and improving water quality in swimming pools, ornamental lakes and waste waters. Preventive measures have been implemented to limit consequences of accidental water pollution at the Resort. Heat for the two parks and Disneyland Hotel is generated using natural gas. In year 2002, the atmospheric emissions calculated on a correlation base were equal to tone of oxide sulphur (SO 2 ) and other sulphurbased composite and tons of oxide nitrogen (No 2 ). Specific measures have been issued in order to take into account noise pollution. Thus, in 1996, a soundproof wall was built around the fireworks launching area. Since 1998, less-noisy fireworks have been used in order to preserve the magic of the spectacles and at the same time be sensitive to the comfort of persons living near the resort. Resort activities do not generate any unpleasant odors. The annual waste production for the whole site reached 14,568 metric tons in fiscal year Nearly 250 activities and 800 jobs are done on the site, producing numerous waste to manage: Non-hazardous industrial waste and household and similar waste totalled 12,366 metric tons for 2003, For hazardous industrial waste a separate collection and sort is done. Waste production amounted to 178 metric tons for 2003, Gardens waste produced by landscaping maintenance totalled 2,023 metric tons. From the outset, the Company has encouraged the progress of collective transport means and the use of vehicles using less polluting fuel in order to reduce air emissions on short local travels. In addition, we have developed bike paths in the backstage for our employees and since 1996 have set up a car-pooling program. Assessment or certification We are not externally certified but have preferred to develop, since 2001, processes a systemic and integrated strategy within an internal Quality Health, Safety and Working conditions Environment chart. This global approach of the goals and risks gives a new dimension and a better consistency to the environment management. In 2003, the Resort won the Oscar from the Fédération Française du materiel d incendie for our commitment to fire preventive measures. Environmental expenditure In addition to the operating expenses incurred by our environmental teams, the Company regularly invests in the equipment necessary to support its environmental program.

19 Environmental organization A Methods and Quality dedicated department exists whose aim is to develop an environment management system integrating the follow-up of listed installations classified for environmental protection, within which eight activities are subjected to a formal approval program and 45 to declarative obligations. A number of internal groups directly concerned with environmental subjects exist (ie Operational Environment, Energy Efficiency) and are involved in the implementation of different programs. Raising the environmental awareness of employees Provisions and guarantees for environmental risks Amount of environment penalties paid following legal proceedings Since 1996, specific actions are carried out by the Company to celebrate the Earth Day (April 22nd) in collaboration with other Disney Resorts. In 2003, a moving exhibition was organised to communicate on several programs such as: waste recycling and minimization efforts, car-pooling etc. No provisions or guarantees for environmental risks are recorded as of September 30, 2003, as no significant environmental risk has been identified. No penalty has been paid following legal proceedings in respect to environmental matters. Moreover, there are no legal actions outstanding.

20 18/19 General Report of the Supervisory Board on Euro Disney S.C.A. Ladies and Gentlemen, We are pleased to present to you our general report on the management of Euro Disney S.C.A. (the Company ) for the fiscal year ended September 30, 2003 ( Fiscal Year 2003 ). We do not have any particular comments on the Gérant s Report on the activity of your Company during Fiscal Year 2003, nor on its financial statements, which we have reviewed and which have been submitted to you. The result of Fiscal Year 2003 for your Company is a net loss of million, which includes:. a loss before exceptional items and income tax benefit of million,. an exceptional income of 12.5 million, and. an income tax benefit of 5.1 million under the tax group régime of the Company and its subsidiaries (collectively, the Group ). The results of the Group for Fiscal Year 2003 show a net loss of 56.0 million, as compared to a net loss of 33.1 million reported for the previous fiscal year. We inform you that following a change in generally accepted accounting principles in France and in accordance with the applicable transition rules, the Group elected, effective October 1 st, 2002, to modify its accounting policy for major fixed asset renovations, which are now accrued in advance on a straight-line basis as operating expense instead of being capitalized and amortized over five years. The Supervisory Board reviewed this modification in liaison with the Company s statutory auditors and has no particular comment on the adoption of this modification. Excluding the impact of this modification, which resulted in a 10.6 million net increase in operating expenses reported for Fiscal Year 2003, the Group s net loss is in the amount of 45.4 million. The total revenues of the Group for Fiscal Year 2003 amounted to 1,053.1 million, a decrease of 2.1% as compared to the prior fiscal year. This decrease reflects the impact on the Group s activities and performance of the economic downturn prevailing in the overall European tourism industry, as well as the negative effect of other factors such as social unrest in France during the Fiscal Year. Revenues generated by the Theme Parks decreased by 3.3% as compared to the previous fiscal year, due to a lower attendance at 12.4 million guests partially offset by higher admission prices and per cap spending in merchandises and food & beverages. During Fiscal Year 2003, the average hotel occupancy reached 85.1% while the average spending per room slightly increased to reach

21 The revenues generated by real-estate activities represented 23.6 million, as compared to 27.3 million for the prior year. On March 28, 2003, the Gérant and The Walt Disney Company (Netherlands) B.V. agreed to renounce to the base management fees and the license fees in relation to the last three quarters of Fiscal Year 2003 and to receive payment of these fees for fiscal year 2004 on a year-end rather than quarterly basis. As a result of these agreements, which were submitted to the Supervisory Board as described in our special report on related party agreements, the license fees and the management fees paid by the Company amounted to 8.1 million in Fiscal Year 2003, a 27.4 million decrease as compared to the fees paid for fiscal year 2002 ( 35.5 million). Lease and net financial charges increased to million, as compared to million in fiscal year 2002, primarily as a result of scheduled increases in lease rental expense related to principal repayments on the debt of the financing companies. As of September 30, 2003, the principal indebtedness of the Group (excluding accrued interests) totaled million and amounted 2,207.3 million including the debt of the unconsolidated financial companies, as compared to million and 2.219,8 million, respectively, as of September 30, The exceptional income is in the amount of 11.9 million, reflecting mainly the gain generated by the sale of three apartment developments used to provide housing to Group s employees and which the Group continues to operate under lease agreements. On November 5, 2003 the Group announced that it had obtained waivers from its lenders, effective through March 31, 2004, with respect to certain financial covenants and other obligations, including a reduction in certain deposit requirements, and that The Walt Disney Company («TWDC») agreed to provide the Group with a new 45 million subordinated credit facility which can be drawn until March 31, 2004 but only after full drawing of the existing million standby facility provided by TWDC. The purpose of the foregoing is to give the management of the Group, the lenders and TWDC time to find a satisfactory resolution regarding the Group s financial situation. Since absent such a resolution the Group would not be able to meet its debt obligations, your attention is being drawn to the uncertainty about the Group s ability to continue as a going concern. We inform you that the Supervisory Board met four times during Fiscal Year 2003 to review the financial situation of the Group, its activities, and the outlook and strategy being pursued. We also inform you that the Audit Committee met four times during Fiscal Year 2003 to review on behalf of the Supervisory Board the financial reporting process and the audit thereof, the internal control environment and the review thereof. The Committee reviewed also the internal and external audit functions. In consideration of the above, we propose that you approve the Company's financial statements as of September 30, 2003, as they are presented to you, including the operations that they record and the management of the Gérant that they reflect. We also propose that you approve the proposed allocation of the net loss. We further propose that you approve the Group s consolidated accounts as of September 30, 2003, as they are presented to you, including the operations that they record.

22 GENERAL REPORT OF THE SUPERVISORY BOARD ON EURO DISNEY S.C.A. 20/21 Finally, we inform you that you are requested to approve during this Meeting, deciding as an extraordinary general meeting, a proposed decrease in the Company s share capital by reducing the nominal value of the Company s share without any modification to the number of existing shares. To date, in light of the fact that the nominal value of the Company s share is higher than its market value, your Company is de facto not in a position to take advantage of the financial markets, should the need or the opportunity arise. The amount of the proposed decrease in capital has been determined in such a manner that the new nominal value will be as low as possible ( 0.01) in order to provide maximum flexibility irrespective of the fluctuations of the market value of the Company s shares. We inform you that this proposed decrease in capital, which includes a proportional reduction of the maximum nominal amount of increases in capital which may be carried out pursuant to the authorization granted to the Gérant under the 13 th and 14 th resolutions voted during the shareholders general meeting held on May 5, 2003, does not modify the conditions for a possible increase in capital pursuant to said authorization. In particular, we remind you that the amount received by the Company for each of the shares which shall be issued in relation to an issuance of securities without preferential subscription rights, if any, must be at least equal to the average of the closing prices recorded for the shares of the Company during ten (10) consecutive stock exchange days chosen among the last twenty (20) stock exchange days preceding the commencement of the issuance of said securities. We also inform you that in connection with this reduction in capital you are requested to approve a subsequent modification of Article 2.1. of the Company s by-laws related to the share capital. In conclusion, we would propose that you vote in favor of the resolutions submitted to the meeting. Yours sincerely, Paris, February 9, 2004 The Supervisory Board Antoine Jeancourt-Galignani

23 Statutory Auditor s Report on the Financial Statements - Translated from French (Year ended September 30, 2003) To the shareholders of EURO DISNEY S.C.A. Chessy Dear Sirs, In compliance with the assignment entrusted to us by your Shareholders Annual General Meeting, we hereby report to you, for the year ended September 30, 2003 on: - the audit of the accompanying financial statements of Euro Disney S.C.A., expressed in Euros, - the specific verifications and information required by the law. These financial statements have been approved by Euro Disney S.A., Gérant of Euro Disney S.C.A. Our responsibility is to express an opinion on these financial statements based on our audit. 1. OPINION ON THE FINANCIAL STATEMENTS We conducted our audit in accordance with the professional standards applied in France. 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 statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements give a true and fair view of the company's financial position and its assets and liabilities as of September 30, 2003 and of the results of its operations for the year then ended in accordance with French accounting principles and regulations. Without qualifying the opinion expressed above, we draw your attention to the existence of a significant uncertainty about the company s ability to continue as a going concern. As described in Note 1-3, on November 3, 2003, the company obtained waivers from its lenders, effective through March 31, 2004, with respect to the application of certain conditions of the financing agreements. The purpose of the agreement is to give the parties involved the time necessary to develop a long-term solution to the financial needs of the company. Absent such an agreement as of March 31, 2004, the company would be unable to meet all of its debt obligations.