**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**FORM 20-F**

 

**ANNUALREPORT PURSUANT TO SECTION 13**

**OFTHE SECURITIES EXCHANGE ACT OF 1934**

 

**For the fiscal year ended September 30, 2002**

 

**Commission file number 33-79548**

 

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| **Euro Disney  S.C.A.**                                 |
|---------------------------------------------------------|
| (Exact name of registrant as specified in  its charter) |
|                                                    |   |   |
| **N/A**                                                 |   | **Republic of France** |
| (Translation of registrant’s name into  English)   |   | (Jurisdiction of incorporation or  organisation) |

 

**ImmeublesAdministratifs**

**RouteNationale 34**

**77700Chessy**

**France**

(Address of principal executive offices)

 

Securities registered or to be registered pursuant to Section 12(b) ofthe Act: **None**

 

Securities registered or to be registered pursuant to Section 12(g) ofthe Act:

 

| **Title of each class**                                                                   |   | **Name of each exchange on which  registered**                                      |
|-------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|
| Ordinary Shares of Common Stock par value € 0.77                                     |   | Euronext Paris, London Stock Exchange, SEAQ International, Brussels  Stock Exchange |
|                                                                                      |   |                                                                                |
| Subordinated Bonds Redeemable in Shares of Common Stock, par value €  60.98 per bond |   | None                                                                                |

 

Securities for which there is a reporting obligation pursuant to Section15(d) of the Act: None

 

Indicate the number of outstanding shares of each of the issuer’sclasses of capital or common stock as of the close of the period covered by theannual report: 1,055,937,724 shares of common stock, par value € 0.77

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. **YES****ý.   **NO o

 

Indicate by check mark which financial statement item the registranthas elected to follow. Item 17 ýItem 18.

 

 

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**TABLEOF CONTENTS**

 
| **PART I**   |
|--------------|
|         |
|         | **PRESENTATION OF INFORMATION AND ACCOUNTING  PRINCIPLES** |
|         |   |
|         | **ITEM 1.** | **IDENTITY OF DIRECTORS, SENIOR MANAGEMENT  AND ADVISERS** |
|         |   |   |
|         | **ITEM 2.** | **OFFER STATISTICS AND EXPECTED TIMETABLE** |
|         |   |   |
|         | **ITEM 3.** | **KEY INFORMATION** |
|         |   |   |
|         | **ITEM 4.** | **INFORMATION ON THE COMPANY** |
|         |   |   |
|         | **ITEM 5.** | **OPERATING AND FINANCIAL REVIEW AND  PROSPECTS** |
|         |   |   |
|         | **ITEM 6.** | **DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES** |
|         |   |   |
|         | **ITEM 7.** | **MAJOR SHAREHOLDERS AND RELATED PARTY  TRANSACTIONS** |
|         |   |   |
|         | **ITEM 8.** | **FINANCIAL INFORMATION** |
|         |   |   |
|         | **ITEM 9.** | **THE OFFER AND LISTING** |
|         |   |   |
|         | **ITEM 10.** | **ADDITIONAL INFORMATION** |
|         |   |   |
|         | **ITEM 11.** | **QUANTITATIVE AND QUALITATIVE DISCLOSURES  ABOUT MARKET RISK** |
|         |   |   |
|         | **ITEM 12.** | **DESCRIPTION OF SECURITIES  OTHER THAN EQUITY SECURITIES** |
|         |   |   |
| **PART II**  |
|         |
|         | **ITEM 13.** | **DEFAULTS, DIVIDEND ARREARAGES AND  DELINQUENCIES** |
|         |   |   |
|         | **ITEM 14.** | **MATERIAL MODIFICATIONS TO THE RIGHTS  OF SECURITY HOLDERS AND USE OF PROCEEDS** |
|         |   |   |
|         | **ITEM 15.** | **CONTROLS AND PROCEDURES** |
|         |   |   |
| **PART III** |
|         |
|         | **ITEM 17.** | **FINANCIAL STATEMENTS** |
|         |   |   |
|         | **ITEM 19.** | **EXHIBITS** |

 

2

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### ***PART I***

 

**PRESENTATIONOF INFORMATION AND ACCOUNTING PRINCIPLES**

 

Euro DisneyS.C.A. (the “Company”), including its consolidated subsidiaries (together, the“Group”), publishes its consolidated financial statements (“ConsolidatedFinancial Statements”) in euros (“euro” or “€”).  However, the Consolidated Financial Statements for fiscal year1998 were originally prepared in French francs and have been translated intoeuros at the rate of 6.55957 French francs per euro, the official rateestablished on January 1, 1999. The euro did not exist prior to that date andthe conversion rate used may not reflect the French franc/euro exchange ratethat would have applied if the euro had existed at such times.  In addition, you should not assume that youcan accurately compare financial information thus translated from dates andperiods before January 1, 1999, with the financial information of othercompanies that have translated a non-French franc European currency into euro.  All currency amounts in this annual reporton Form 20-F (“Annual Report”) are expressed in euros.   In this Annual Report, “we”, “us” and “our”refer to the Group.

 

We prepare ourConsolidated Financial Statements in accordance with accounting principlesgenerally accepted in France (“French GAAP”), which differ in certainsignificant respects from generally accepted accounting principles in theUnited States of America (“U.S. GAAP”). Unless otherwise specified, all financial information presented in thisAnnual Report has been derived from or based on the Consolidated FinancialStatements.  For a discussion of theprincipal differences between French GAAP and U.S. GAAP as they relate to ourconsolidated results of operations and financial position, see Notes 2 and 27to the Consolidated Financial Statements in Item 17 - “Financial Statements”.

 

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# **ITEM 1**.              IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERS

 

Notapplicable.

 

# **ITEM 2**.            OFFER STATISTICS ANDEXPECTED TIMETABLE

 

Not applicable.

 

**ITEM 3****.****              KEYINFORMATION**

 

**A.****                          Selected financial data**

 

**Five-Year Selected Financial Data**

 

The following table sets forth our selected consolidated financial datafor the five-year period ended September 30, 2002.  This table is qualified by reference to, and should be read inconjunction with, our Consolidated Financial Statements and the related notesthereto included in Item 17 of this Annual Report, and Item 5 - “Operating andFinancial Review and Prospects” of this Annual Report. The balance sheet dataas of September 30, 2002, 2001, 2000, 1999 and 1998 and the income statementdata for each of the years then ended set forth below have been derived fromour audited Consolidated Financial Statements.

 

TheConsolidated Financial Statements from which the selected consolidatedfinancial data set forth below have been derived were prepared in accordancewith French GAAP, which differs in certain respects from U.S. GAAP. In certainareas these differences are significant. For a discussion of the principal differences between French GAAP andU.S. GAAP as they relate to our consolidated results of operations andfinancial position see Notes 2 and 27 to the Consolidated Financial Statementsin Item17 — “Financial Statements”.

 

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Five Year Financial Review

 
|                                              |   | **Year ended September 30,** |     |
|---------------------------------------------------|--------|------------------------------|----------|
| **(€ in millions, except per share  data)**  |   | **2002**                     |     | **2001** |   | **2000** |   | **1999** |   | **1998*** |   |
| **Income Statement Data**  :                      |   |                         |     |   |   |   |   |   |   |   |   |
|                                              |   |                         |     |   |   |   |   |   |   |   |   |
| ***Amounts in accordance with French GAAP:***     |   |                         | * * |   | * * |   | * * |   | * * |   | * * |
| Segment  Revenues                                 |   |                         |     |   |   |   |   |   |   |   |   |
| Resort  activities                                |   | 1 048.7                      |     | 968.0 |   | 944.7 |   | 911.7 |   | 880.8 |   |
| Real Estate  development activities               |   | 27.3                         |     | 37.2 |   | 14.5 |   | 8.5 |   | 17.1 |   |
| **Total Revenues**                                |   | 1 076.0                      |     | 1 005.2 |   | 959.2 |   | 920.2 |   | 897.9 |   |
|                                              |   |                         |     |   |   |   |   |   |   |   |   |
| Income  before Lease and Net Financial Charges    |   | 175.7                        |     | 185.2 |   | 175.8 |   | 166.2 |   | 176.5 |   |
| Income  before exceptional items                  |   | 4.9                          |     | 37.7 |   | 37.5 |   | 21.2 |   | 40.1 |   |
| Exceptional  income (loss)                        |   | (38.0                        | )        | (7.2 | ) | 1.2 |   | 2.4 |   | 4.1 |   |
| Net income  (loss)                                |   | (33.1                        | )        | 30.5 |   | 38.7 |   | 23.6 |   | 44.2 |   |
|                                              |   |                         |     |   |   |   |   |   |   |   |   |
| ***Amounts in accordance with U.S. GAAP :***      |   |                         |     |   |   |   |   |   |   |   |   |
| Revenues                                          |   | 1 078.3                      |     | 1 002.9 |   | 960.7 |   | 921.9 |   | 894.9 |   |
| Net  loss  (1)                               |   | (67.3                        | )        | (50.6 | ) | (66.2 | ) | (49.9 | ) | (93.0 | ) |
| Net loss per  share *(in  €)*  (1) (2): |   | (0.06                        | )        | (0.05 | ) | (0.07 | ) | (0.07 | ) | (0.12 | ) |

 
|                                             |   | **Year ended September 30,** |   |
|--------------------------------------------------|--------|------------------------------|--------|
| **(€ in millions, except per share  data)** |   | **2002**                     |   | **2001** |   | **2000** |   | **1999** |   | **1998** |   |
| Pro forma  U.S. GAAP net loss (3)                |   | (144.5                       | )      | (122.3 | ) | (135.7 | ) | (117.4 | ) | (186.3 | ) |
|                                             |   |                         |   |   |   |   |   |   |   |   |   |
| Pro forma  net loss per share *(in €)* (3)  |   | (0.14                        | )      | (0.12 | ) | (0.14 | ) | (0.15 | ) | (0.24 | ) |

 
|                                           |   | **September 30,** |       |
|------------------------------------------------|--------|-------------------|------------|
| **(€ in millions)**                       |   | **2002**          |       | **2001** |   | **2000** |   | **1999** |   | **1998*** |   |
| **Balance Sheet Data**:                        |   |              |       |   |   |   |   |   |   |   |   |
|                                           |   |              |       |   |   |   |   |   |   |   |   |
| ***Amounts in accordance with French GAAP :*** |   |              | * *   |   | * * |   | * * |   | * * |   | * * |
| Total assets                                   |   | 2 696.7           |       | 3 106.1 |   | 2 793.8 |   | 2 518.8 |   | 2 445.6 |   |
| Borrowings                                     |   | 821.3             |       | 1 141.2 |   | 916.8 |   | 983.3 |   | 978.3 |   |
| Shareholders’  equity and quasi-equity    |   | 1 397.6           |       | 1 430.7 |   | 1 400.3 |   | 1 141.9 |   | 1 118.5 |   |
|                                           |   |              |       |   |   |   |   |   |   |   |   |
| ***Amounts in accordance with U.S. GAAP :***   |   |              | * *   |   | * * |   | * * |   | * * |   | * * |
| Total assets                                   |   | 3 064.6           |       | 3 539.0 |   | 3 318.8 |   | 3 149.1 |   | 3 201.6 |   |
| Borrowings *(excluding  accrued interest)*     |   | 2 218.6           |       | 2 565.1 |   | 2 349.8 |   | 2 419.4 |   | 2 416.3 |   |
| Shareholders’  equity                     |   | 112.6             |       | 179.7 |   | 238.1 |   | 84.9 |   | 134.8 |   |
|                                           |   |              |       |   |   |   |   |   |   |   |   |
| **Common Shares Outstanding (in millions)**    |   | **1 055.9**       | ** ** | **1 055.8** | ** ** | **1 055.8** | ** ** | **767.8** | ** ** | **767.5** | ** ** |

 

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*(*)**           Balanceshave been restated from French francs into euro using the official fixedexchange rate established on January 1, 1999 (FF 6.55957 = € 1.00). The eurobecame the official currency in France as of January 1, 2002.*

 

(1)              The U.S. GAAP netloss for fiscal years 2002 and 2001 does not include a net unrealised gain of €0.7 million and a net unrealised loss of € 8.1 million, respectively, relatedto changes in fair value of certain interest rate derivatives, which arerecorded directly in equity.  The U.S.GAAP net loss for fiscal year 1999 reflects a one time

 

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net gain of € 52.1 million resulting from the reduction of the intereston, and extension of the maturity of, existing loans and lease financingprovided by the *Caisse des Dépôts et Consignations* (“CDC”).

 

(2)              Per share data isbased upon the weighted average number of common shares outstanding of 1,056million, 1,056 million, 992 million, 768 million and 767 million for each ofthe years ended September 30, 2002, 2001, 2000, 1999 and 1998, respectively,and does not give effect to the exercise of any contingently issuable shares asthey were anti-dilutive.

 

(3)              The proforma netloss and proforma net loss per share present the U.S. GAAP net loss that wewould have had if royalties and management fees to The Walt Disney Company hadnot been adjusted from their original schedule for modifications agreed duringthe Financial Restructuring. (See Notes 18(b) and 27 to the ConsolidatedFinancial Statements in Item 17 — “Financial Statements”).

 

**Exchange Rates**

 

On January 1, 1999, the eleven member statesof the European Union introduced a single currency, the euro, to replace theirnational currencies. Pursuant to the Treaty on European Union, fixed exchangerates against the euro were established for each of the currencies of theparticipating member states. The rate of conversion for the French franc wasfixed at FF 6.55957 per euro. Since the principal market for our common stockis the Euronext Paris exchange, fluctuations in the exchange rate between theeuro and the U.S. dollar will affect the U.S. dollar value of an investment inour common stock and dividend and other distribution payments, if any, thereon.

 

The following tables set forth, for each ofthe periods indicated, certain information related to the euro / U.S. dollarexchange rate for 1998 through 2003 based on the Noon Buying Rate expressed ineuro per U.S. $1.00. Such rates are provided solely for the convenience of thereader and are not necessarily the rates that were used to prepare ourConsolidated Financial Statements nor the selected consolidated financial dataincluded herein.

 
|                   |   | **High** |   | **Low** |   |
|------------------------|--------|----------|--------|---------|--------|
| **Euro / U.S. dollar** |   |     |   |    |   |
| February  2003         |   | 0.93     |   | 0.92    |   |
| January 2003           |   | 0.96     |   | 0.92    |   |
| December 2002          |   | 1.01     |   | 0.95    |   |
| November  2002    |   | 1.01     |   | 0.99    |   |
| October 2002           |   | 1.03     |   | 1.01    |   |
| September  2002        |   | 1.04     |   | 1.00    |   |

 
| **Fiscal Year**            |   | **High** |   | **Low** |   | **Average(*)** |   | **End of Period** |   |
|----------------------------|--------|----------|--------|---------|--------|----------------|--------|-------------------|--------|
| **Euro / U.S. dollar**(**) |   |     |   |    |   |           |   |              |   |
| 2002                       |   | 1.16     |   | 0.98    |   | 1.09           |   | 1.01              |   |
| 2001                       |   | 1.21     |   | 1.05    |   | 1.13           |   | 1.10              |   |
| 2000                       |   | 1.18     |   | 0.92    |   | 1.05           |   | 1.13              |   |
| 1999                       |   | 0.99     |   | 0.82    |   | 0.91           |   | 0.94              |   |
| 1998                       |   | 0.95     |   | 0.85    |   | 0.91           |   | 0.85              |   |

 

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(*)*             The average of theNoon Buying Rates on the last business day of each month during the relevantperiod.*

(**)*       Euro / U.S. dollar exchangerates for periods prior to the introduction of the euro, on January 1st1999, have been calculated by applying the fixed exchange rate of 6.55957French franc per euro to the French franc / U.S. dollar exchange rate based onthe Noon Buying Rate.*

 

The Noon Buying Rate on February 28, 2003 for the euro against the U.S.dollar was € 0.93 per $ 1.00 ($ 1.08 per euro). No representation is made thatthe French franc or the euro could have been converted into U.S. dollars at therates shown herein or at any other rates for such periods or at such dates. Inaddition, there can be no assurance that the exchange rate trend between theU.S. dollar and the French franc prior to the existence of the euro would havebeen the

 

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same as the exchange rate trendthat would have existed between the euro and the U.S. dollar during suchperiod, had the euro been in existence. See also Item 5 - “Operating andFinancial Review and Prospects”.

 

**B.****                          Capitalisation and indebtedness**

 

Not applicable.

 

**C.****                          Reasons for the offer and use of proceeds**

 

Not applicable.

 

**D.****                          Risk factors**

 

***Risksof Investing in Our Company***

 

**Our high level of borrowings requires us todevote a large portion of our operating cash flow to service debt, and maylimit our operating flexibility.**

 

We are highly leveraged.  UnderU.S. GAAP as of September 30, 2002, we had € 2.2 billion of borrowings and € 112.6 million of shareholders’ equity. In addition, we pay significant royalties (€ 24.0 million for fiscalyear 2002) and management fees (€ 11.5 million for fiscal year 2002) toaffiliates of The Walt Disney Company, and these amounts will increasesignificantly (to almost double) in fiscal year 2004.

 

Our high degree of leverage can have important consequences for ourbusiness, such as:

 

•             Limitingour ability to invest operating cash flow in our business, because we use asubstantial portion of these funds to pay debt service and because ourcovenants restrict the amount of our investments;

 

•             Limiting our abilityto make capital investments in new attractions and maintenance of the parks andhotels, both of which are essential to our business;

 

•             Limitingour ability to borrow additional amounts for working capital, capitalexpenditures, debt service requirements or other purposes; and

 

•             Limitingour ability to withstand business and economic downturns, because of the highpercentage of our operating cash flow that is dedicated to servicing our debt.

 

If we cannot pay our debt service, royalties and fees and meet ourother liquidity needs from operating cash flow, we could have substantialliquidity problems.  In thosecircumstances, we might have to sell assets, delay planned investments, obtainadditional equity capital or restructure our debt. Depending on thecircumstances at the time, we may not be able to accomplish any of theseactions on favourable terms, or at all. Our financing agreements limit our ability to take some actions thatcould generate additional cash proceeds. They also require that we meet certain financial covenants, which aremeasured quarterly in certain cases and annually in others.  If we default on any of our debt, therelevant lenders could accelerate the maturity of the debt and take otheractions that could adversely affect us. To avoid a default, we may need waivers from third parties, which mightnot be granted.

 

**We have recently incurred losses, andcontinuing losses might reduce the value of our shares.**

 

Under French GAAP, we had net income of € 38.7 million and € 30.5million for the fiscal years ended September 30, 2000 and 2001, respectivelyand a net loss of € 33.1 million for fiscal year 2002.  Because of differences in accounting methodsapplied under French GAAP and U.S. GAAP consisting primarily of timingdifferences in the recognition of depreciation and interest expenses, ourexpenses were higher under U.S. GAAP than under French GAAP and, as a result,we incurred net losses under U.S. GAAP of € 66.2 million, € 50.6 million and €67.3 million in fiscal years 2000, 2001 and 2002, respectively.  We expect to continue to experience lossesunder U.S. GAAP in the short-term.  Ifwe continue to experience losses under U.S. GAAP, this could reduce the valueof our shares.

 

The U.S. GAAP losses for the Company would have been  € 135.7 million, € 122.3 million and € 144.5million for fiscal years ended September 30, 2000, 2001 and 2002, respectively,had it not been for the waiver of royalties and

 

7

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management fees by The WaltDisney Company arising from the Financial Restructuring.  See Notes 18(b) and 27 to the ConsolidatedFinancial Statements in Item 17 – “Financial Statements”.

 

**We are subject to interest rate risk.**

 

As of September 30, 2002, approximately 32% of our borrowings and leasecommitments were tied to floating interest rates.  While we attempt to reduce interest rate risks in respect of asubstantial portion of our borrowings through the use of interest rate swapsand other hedging techniques, an increase in interest rates could adverselyaffect our financial condition and results of operations.

 

**We are subject to exchange rate risk.**

 

A significant portion of our purchases and investments are denominatedin U.S. dollars and could be adversely affected by an increase in the relativevalue of the U.S. dollar against the euro. In addition, a significant portion of our guests (21% in fiscal year2002) come from the United Kingdom, which is not part of the euro zone.  An increase in the relative strength of theeuro against the British pound would raise the price of a visit to the resortfor guests visiting from the United Kingdom and could negatively affect theirrates of attendance, per guest spending and hotel occupancy.

 

**We have not paid any dividends in recentyears, and we may not be able to pay dividends in the near future.**

 

We paid no dividends in respect of fiscal year 2002 and do not expectto pay dividends in the near future. Our ability to pay dividends is dependent on the availability ofdistributable profits under French law which, in turn, depends on our operatingresults, liquidity and financial condition. In addition, certain of our loan agreements limit or prohibit thepayment of dividends in certain circumstances.

 

**Our relationship with The Walt Disney Companylimits the rights of our public shareholders and could generate conflicts ofinterest.**

 

The Walt Disney Company currently owns 39.1% of our shares and votingrights through an indirect, wholly-owned subsidiary.  Under French law, our business is managed by a management company(*Gérant*)that is appointed by our general partner (*associé commandité*).  The shareholders elect a supervisory boardto oversee the management company, but the supervisory board does not have thepower to remove the management company. Both our Management Company and our General Partner are wholly-ownedindirect subsidiaries of The Walt Disney Company.

 

We also have several business relationships with The Walt DisneyCompany that are important to our operations. We use Disney intellectual and industrial property rights, for which wepay royalties to affiliates of The Walt Disney Company.  Our Management Company provides and arrangesfor a variety of additional technical and administrative services, for which itis reimbursed its direct and indirect costs. For example, the designer and construction manager for Walt DisneyStudios Park was an affiliate of The Walt Disney Company.  These relationships create potentialconflicts of interest.  We believe thatour dealings with The Walt Disney Company and its affiliates are commerciallyreasonable.  Although all such dealingsmust be approved by our Supervisory Board, we have not solicited bids orindependent evaluations of the terms of our commercial relationships with TheWalt Disney Company.

 

***Risksof Investing in the Theme Park Resort Business***

 

**Demand for theme park resorts is variable,and can be impacted by economic and geopolitical conditions.**

 

Disneyland Resort Paris is subject to significant seasonal and dailyfluctuations in attendance and to the effects of general economic conditions.While we have implemented and continue to implement measures designed toalleviate fluctuations in attendance and to mitigate their impact, we cannot becertain that such measures will sufficiently offset fluctuations indemand.  In addition, the effectivenessand timing of marketing campaigns can have a significant impact on attendancelevels.  Given the discretionary natureof vacation travel and the fact that travel and lodging expenses oftenrepresent a significant expenditure for the average consumer, such expendituresmay be reduced, deferred or cancelled by consumers during times of economicdownturn or uncertainty.

 

In addition, the international terrorist attacks of September 11, 2001,the subsequent military actions and the current geopolitical climate areexamples of item that can adversely affect travel-related industries andprecipitate sudden economic downturns. See Item 4, Section A.4.2 – “Competition”.  Although our management closely monitors our operating trends andhas developed

 

8

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cost-reduction strategies toaddress such risks, such steps, depending on the duration and intensity of thedownturn, may be insufficient to prevent our financial performance from beingadversely affected.

 

**We need to make significant, regular capitalexpenditures to continue to attract guests.**

 

In order to continue to attract guests, we need to add new theme parkattractions on a regular basis, which requires significant capitalexpenditures.  If we do not make thesecapital expenditures (for example, if our creditors do not permit us to makethem pursuant to our financing agreements), this could result in a decrease inattendance, particularly from repeat guests, which could adversely affect ourresults of operations.

 

**The theme park resort business iscompetitive, which could limit our ability to increase prices or to attract guests.**

 

We compete for guests throughout the year with other European andinternational holiday destinations as well as other leisure and entertainmentactivities in the Paris region.  Otherlarge European theme parks include Parc Asterix and Futuroscope in France, PortAventura and Terra Mitica in Spain and Warner Brothers Movie World Parks inGermany and Spain.  In addition, newtheme parks are scheduled to open in France and elsewhere in Europe in the nextfew years.  We also rely on conventionbusiness, which is highly competitive, for a portion of our revenues, and tomaintain hotel occupancy in off-peak periods.

 

Our hotels are subject to competition from hotels in central Paris andthe Seine-et-Marne area.  We believethat our hotels are priced at a premium compared to the market, reflectingamong other advantages, their proximity to the resort, their unique themes andthe quality service that they offer.  Weare aware, however, that a number of less costly alternatives exist.

 

Competition limits our ability to raise prices, and may require us tomake significant new investments to avoid losing guests to our competitors.

 

***Risksof investing in our shares***

 

**No U.S. Public Market.**

 

There has been no public market in the United States for our shares andwe have no present intention to apply to list the shares on any U.S.exchange.  Therefore, the opportunityfor U.S. holders to trade shares may be limited.

# ** **

# **ITEM 4**.              INFORMATION ON THECOMPANY

 

# **A.         Historyand development of the company and business overview**

# ** **

# **Introduction**

 

We are primarily engaged in the development and operation of theDisneyland Resort Paris (the “Resort”), formerly Euro Disneyland.  The Resort commenced operations on April 12,1992 (“Opening Day”) on a 1,943 hectares (approximately 4,800 acres) sitelocated 32 kilometers (approximately 20 miles) east of Paris inMarne-la-Vallée, Seine-et-Marne, France. Disneyland Resort Paris principally consists of Disneyland Park, WaltDisney Studios Park, seven themed hotels, including two convention facilities,an entertainment center (“Disney Village”), and a 27-hole golf facility (the“Golf Course”). Most of these facilities are leased, directly or indirectly, bythe Group from special-purpose financing companies (collectively, the “Phase IFinancing Companies”).  We have noownership interest in these entities. Disneyland Resort Paris is modelled on the theme park and resortconcepts developed by The Walt Disney Company.

 

Our principal executive offices are located at ImmeublesAdministratifs, Route Nationale 34, 77700 Chessy (Seine-et-Marne), France.  The postal address is BP 100, 77777Marne-la-Vallée Cedex 04, France.  Ourtelephone number is (33) (1) 64 74 40 00.

 

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**A.1          Breakdown of Revenues by Segmentand Activity**

 

The Group operates in the following segments:

 

•                  **Resortactivities**include the operation of Disneyland Park and WaltDisney Studios Park (together, the “Theme Parks”), hotels and Disney Villageand the various services that are provided to guests visiting our resortdestination.

 

•                  **RealEstate Development activities** include the conceptualisation andplanning of improvements and additions to our existing Resort activity, as wellas other commercial and residential real estate projects, whether financedinternally or through third-party partners.

 

A breakdown of total revenues by major segment and activities duringthe past five fiscal years is set forth in the table below:

 
| **(€ in millions)**            |   | **Year ended  September 30,** |   |
|-------------------------------------|--------|-------------------------------|--------|
| **Category**                        |   | **2002**                      |   | **2001** |   | **2000** |   | **1999** |   | **1998** |   |
| Theme Parks                         |   | 526.0                         |   | 476.4 |   | 459.5 |   | 460.2 |   | 443.8 |   |
| Hotels and Disney Village           |   | 411.7                         |   | 386.5 |   | 370.3 |   | 352.0 |   | 344.2 |   |
| Other                               |   | 111.0                         |   | 105.1 |   | 114.9 |   | 99.5 |   | 92.8 |   |
| **Resort Segment**                  |   | 1 048.7                       |   | 968.0 |   | 944.7 |   | 911.7 |   | 880.8 |   |
|                                |   |                          |   |   |   |   |   |   |   |   |   |
| **Real Estate Development Segment** |   | 27.3                          |   | 37.2 |   | 14.5 |   | 8.5 |   | 17.1 |   |
|                                |   |                          |   |   |   |   |   |   |   |   |   |
| **Total Revenues**                  |   | 1 076.0                       |   | 1 005.2 |   | 959.2 |   | 920.2 |   | 897.9 |   |

 

**A.2      Operations from Opening Day throughFiscal Year 1994**

 

In March 1987, The Walt Disney Company entered into an agreement on thecreation and the operation of Euro Disneyland in France (the “MasterAgreement”) with the Republic of France and certain other French publicauthorities.  The Master Agreement setsout a master land-use plan and general development program (the “Master Plan”)establishing the type and size of facilities that the Company has the right,subject to certain conditions, to develop at the Resort site over a 30-year periodending in 2017.  The Resort, as itexists today, represents the total fulfilment of the first phase of the MasterPlan development of approximately 600 hectares of land (including allassociated public and private infrastructure). See Item 4, Section A.6.1 - “Agreements with French GovernmentalAuthorities”.

 

We experienced significant losses during the period from Opening Daythrough September 30, 1994. Net operating losses before the cumulative effectof an accounting change totalled approximately € 625 million underFrench GAAP and € 1.2 billion under U.S. GAAP for thetwo-and-a-half-year period ending September 30, 1994.  In addition, we began to experience serious cash flowdifficulties during fiscal year 1993.

 

During this period, The Walt Disney Company undertook to fund ourliquidity needs through March 31, 1994. Had The Walt Disney Company not funded our liquidity needs during thiscritical period, we would not have had sufficient cash flow to continue operations.

 

In May 1994, our Company, the Phase I Financing Companies, The WaltDisney Company and certain financial institutions and companies that werecreditors of our Company and the Phase I Financing Companies entered into amemorandum of agreement outlining the terms of a major restructuring of ourobligations and those of the Phase I Financing Companies to such creditors, tocertain partners of the Phase I Financing Companies and to The Walt DisneyCompany (the “Financial Restructuring”).  The agreement enabled us to meet our operating cash flow needs and toimprove our overall financial condition. The memorandum of agreement essentially provided for concessions andcontributions, to be made by such creditors and The Walt Disney Company, andfor the prepayment of certain outstanding loan indebtedness of the Group andthe Phase I Financing Companies with the proceeds of a rights issue.

 

In the second half of fiscal year 1994, the Group implemented theFinancial Restructuring, which included a € 907 million rights issue,prepayment of certain outstanding loan indebtedness of our Company and thePhase I Financing

 

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Companies, forgiveness ofinterest and deferral of principal repayments by our creditors, waivers ofroyalties and management fees by The Walt Disney Company and a sale andleaseback of certain assets and other financing arrangements with The WaltDisney Company and/or certain of its affiliates.

 

For further information relating to the Financial Restructuring, seeNotes 1-3, 11, 13, 24-1 and 27 to the Consolidated Financial Statements in Item17 – “Financial Statements” and Item 5 - “Operating and Financial Review andProspects”.

 

**A.3****                   Operationsby Segment**

 

**A.3.1.****      ResortSegment**

 

**A.3.1.1 *Theme Parks***

 

Within our Resort Segment, theme park activity includes all operationsof Disneyland Park and Walt Disney Studios Park, including merchandise, foodand beverage, special events and all other services provided to our guests inthe parks. Theme park revenue is determined primarily by two factors: thenumber of guests and the total average spending per guest.

 

Our theme parks are operated on a year-round basis.  In the first years of operations, DisneylandPark experienced significant difficulties in accommodating all prospectiveguests during peak days, which resulted in long wait times for attractions,guest dissatisfaction and lost revenues. Despite progress, operations continue to be subject to seasonalfluctuations.

 

Progress in reducing the severity of seasonality has been achieved primarilyas a result of the use of special events and a more focused marketing strategyas described in Item 4, Section A.4 - “Marketing and Sales Strategy”.

 

The following table summarizes the evolution of our theme parkadmission prices, attendance and average spending per guest.

 
| **Period**             |   | **Total  Guests  (in millions)** |   | **Total  Average  Spending per Guest (1)** |   | **Theme Park  Admission Price  High Season(2)** |   | **Theme Park  Admission Price  Low Season (2)** |   |
|------------------------|--------|----------------------------------|--------|--------------------------------------------|--------|-------------------------------------------------|--------|-------------------------------------------------|--------|
| Fiscal Year 2002 *(3)* |   | 13.1                             |   | € 44.4                                |   | € 38.0                                     |   | € 27.0                                     |   |
| Fiscal Year 2001       |   | 12.2                             |   | € 43.1                                |   | € 36.0                                     |   | € 25.9                                     |   |
| Fiscal Year 2000       |   | 12.0                             |   | € 42.2                                |   | € 33.5                                     |   | € 25.2                                     |   |
| Fiscal Year 1999       |   | 12.5                             |   | € 40.7                                |   | € 33.5                                     |   | € 24.4                                     |   |
| Fiscal Year 1998       |   | 12.5                             |   | € 39.3                                |   | € 32.0                                     |   | € 24.4                                     |   |

 

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*(1)**           Averagedaily admission price and spending for food, beverage and merchandise sold inthe Theme Parks, including value added tax.*

*(2)**           Representsat-gate park admission price for one adult, including value added tax at theend of the fiscal year. High season pricing generally applies to the periodbetween April 1 and October 31 and the two weeks over Christmas and New Year’s.*

*(3)    Includes Disneyland Parkand, from March 16, 2002, Walt Disney Studios Park.*

 

*Disneyland Park*

 

Disneyland Park is composed of five “themed lands”: *Main StreetU.S.A.*, which transports guests to an American town at the turn ofthe 20th century, with its houses and shops, *Frontierland*, which takesguests on the path of the pioneers who settled the American West, *Adventureland*,where guests dive into a world of intrigue and mystery, reliving Disney’s mostextraordinary legends and best adventure movies, *Fantasyland*, a magical landwhere guests find the fairy tale heroes brought to life in Disney’s animatedfilms, and *Discoveryland*,which lets guests discover different “futures” through the works ofvisionaries, inventors, thinkers and authors of science fiction from allperiods.

 

There are 45 attractions in Disneyland Park, including upgradedversions of standard features of Disney theme parks around the world such as: *Big ThunderMountain*, a roller coaster which simulates a mining railway train, *Pirates ofthe*

 

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*Caribbean,* whichreproduces a pirate attack on a Spanish fort of the 17th century, *PhantomManor,* a haunted Victorian mansion, *It’s a Small World*, the mostpopular attraction in *Fantasyland*, an exhibition of dolls fromaround the world, dressed in their national costumes, and *Honey, I Shrunk the Audience!*,a three-dimensional film with interactive special effects during whichspectators participate in the illusion of being “shrunk”.  Other popular attractions that are unique toDisneyland Park include: *Visionarium*, a 360-degree “circle-vision”film theatre complex with “Audio-Animatronics” robotic figures, *IndianaJones and the Temple of Peril: Backwards!*, a full-loop rollercoaster ride through simulated ancient ruins, which underwent a full renovationin fiscal year 2000 that provided our guests with the opportunity to experiencethe attraction backwards and at the same time substantially increased thecapacity per day, and *Space Mountain, From the Earth to the Moon*,a roller coaster ride themed to the work of Jules Verne in which guests board aspaceship and are catapulted by a giant canon into outer space.

 

Disneyland Park also includes five permanent theatres, including two,the Chaparral Theatre and Videopolis, which have recently been renovated.  We present live stage shows in these venuesthroughout the year. Examples from the past and present include*Mulan, theLegend; The Tarzan Encounter;* and *Mickey’s Winter Wonderland*.* *In addition, we have parades andfirework displays, such as the *Wonderful World of Disney Parade; the Main StreetElectrical Parade;* and*Tinkerbell’s Fantasy in the Sky Fireworks*.  As a result of the number of guests thatthey attract, our shows and parades enable us to increase the guest capacity ofDisneyland Park while at the same time increasing guest satisfaction.

 

In addition to the permanent Disneyland Park attractions, parades andlive stage shows, we hold numerous special events throughout the year which inthe past have included a *Festival of Flowers* in April and *theCalifornia Dream Festival* in September, and that currently includethe *HalloweenFestival* in October, *Guy Fawkes Night* in November, specialChristmas festivities in December and early January and *the Jungle Book Carnival* inFebruary and March. The appearance of Disney characters and their interactionwith our guests is another important aspect of the entertainment provided inour theme parks.

 

In fiscal year 2000, an innovative reservation system called *FastPass*was introduced in Disneyland Park.  Afree service available to all guests, *FastPass* provides an alternative towaiting in line.  Guests choosing *FastPass*receive a ticket designating a specific window of time during which they mayreturn and enter directly into the pre-show or boarding area. The *Fastpass*system has been installed at five major attractions:  *Space Mountain, Indiana Jones and the Temple of Peril, Backwards!*,*PeterPan’s Flight*, *Big Thunder Mountain* and *Star Tours.*

 

*Walt Disney Studios Park*

 

Walt Disney Studios Park opened to the public on March 16, 2002.  Walt Disney Studios Park is a live-action,animation and television studio, where guests experience movies and televisionboth from behind the scenes and in front of the camera.  Guests to the park discover the world ofcinema, see how movies are made today and step into the future of moviemaking.  They also have the opportunityto be part of the action, and get hands-on experience in animation techniquesand special effects.

 

Walt Disney Studios Park is a full-day experience, designed for a sixor seven-hour stay and is one of three European parks with a cinema theme (thetwo others being the Warner Brother Movie World Park in Germany and the WarnerBrother Movie World Park in Spain, that opened in April 2002). Walt DisneyStudios Park covers approximately 25 hectares (62 acres), which is about halfthe size of  Disneyland Park, and may beexpanded in the future.  It is locatedin front of the TGV/RER train station, in walking distance from Disneyland Parkand Disney Village.

 

Guests access Walt Disney Studios Park through a monumental gatedesigned to look like the entry gates of the major Hollywood studios in the1930’s.  The main gate provides accessto a richly decorated central hub where all the ticketing and guest welcomeservices are located.

 

Walt Disney Studios Park includes eight major attractions, several ofwhich were specifically developed for our park.  Examples include the *Stunt Show Spectacular*, a live show inwhich stuntmen, facing an audience of up to 3,000 guests, simulate the filmingof an action scene involving car and motorcycle chases and other specialeffects, *Cinemagique*,a lyrical and emotional salute to the classics of international cinema; *Armageddon*,a revealing look into the world of film special effects while on board a spaceship hit by a meteorite shower and *Animagique*, featuring some of the greatestmoments of almost 80 years of Disney animation.

 

The park also features upgraded versions of attractions from DisneyMGM-Studios near Orlando, Florida such as *Rock’n’Roller Coaster*, a roller coasterride themed to the music of Aerosmith and a visit to a music recording studio,

 

12

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and *Catastrophe Canyon*, thehighlight of our *Studio Tram Tour*, which allows guests to experience asimulated earthquake and the resulting explosions and floods.

 

Since June 2002, the *Disney Cinema Parade* celebrates the stepsinvolved in movie making from A to Z, featuring well-known Disney characters.To add to the overall park ambience, Walt Disney Studios Park also includesstreet entertainers (*e.g.*, movie “look-alikes” and musicians),Disney characters centered around the world of animation and specialentertainment such as *Sister Act*.

 

As in Disneyland Park, the *FastPass* system reduces guest waitingtimes at *Rock’nRoller Coaster* and the *Flying Carpets over Agrabah*.

 

**A.3.1.2*   Hotels and Disney Village***

 

Also included in the Resort Segment are our hotels and Disney Villageoperations. Revenues from this activities include room rental, food andbeverage, merchandise, dinner shows, convention revenues and fixed and variablerent received from third-party partners operating within our Resort.

 

All****of the hotel and resort amenities are currently operated on ayear-round basis.  Hotel operations aresubject to significant seasonal fluctuations, as well as significant fluctuationsbetween weekdays and weekends in off-peak seasons. The fiscal year 1998 openingof a second convention center, the continued success of seasonal promotionssuch as *Halloween*,*GuyFawkes* and *Christmas*, and the introduction of travelinclusive packages have helped to reduce these fluctuations.  Management believes that the successfulimplementation and marketing of these events is important to maintaining highaverage occupancy levels at our hotels.

 

In fiscal year 2002, approximately 28% of total hotel room-nights soldwere generated in the three-month period from June through August, whileapproximately 21% were generated in the three-month period from Novemberthrough January, versus 36% and 14%, respectively, in fiscal year 1993. Wecurrently differentiate pricing according to the season and the level of demandwith a focus on yield optimisation.

 

*Hotel Operations*

 

Hotel revenue is determinedprimarily by two factors: the average occupancy rate and per room spending.

 

| **Period**       |   | **Average  Occupancy Rate (1)** |   | **Total  Average Daily  Spending per Occupied Room (2)** |   |
|------------------|--------|---------------------------------|--------|----------------------------------------------------------|--------|
| Fiscal Year 2002 |   | 88.2                            | %      | € 193.3                                             |   |
| Fiscal Year 2001 |   | 86.0                            | %      | € 186.3                                             |   |
| Fiscal Year 2000 |   | 82.9                            | %      | € 183.0                                             |   |
| Fiscal Year 1999 |   | 82.6                            | %      | € 177.3                                             |   |
| Fiscal Year 1998 |   | 80.9                            | %      | € 173.8                                             |   |

 

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*(1) Number of rooms occupied pernight divided by the number of rooms available during the relevant period.*

*(2)**  Averagedaily room price and spending on food, beverage and merchandise and othermiscellaneous items sold in hotels, including value added tax.*

 

We operate seven hotels at the Resort: the Disneyland Hôtel, the Hôtel New York, the Newport Bay Club, theSequoia Lodge, the Hôtel Cheyenne, the Hôtel Santa Fe and the Davy CrockettRanch.  Together, the hotels have atotal capacity of approximately 5,800 rooms. Each of the hotels was designed and built with a specific theme and fora particular market segment.  TheDisneyland Hôtel, which is located at the entrance of Disneyland Park, and theHôtel New York are positioned as deluxe hotels offering service equivalent tothat of the best hotels in Paris.  TheNewport Bay Club and the Sequoia Lodge are positioned as “first-class” hotels,while the Hôtel Cheyenne and the Hôtel Santa Fe were designed as“moderately-priced” hotels.  The DavyCrockett Ranch campground is comprised of individual bungalows with privatekitchens, camping sites, sports and leisure facilities and a retail shop.  Both the Hôtel New York and the Newport BayClub include convention facilities, which provide a total of approximately10,500 square meters of meeting space. Resort amenities also include 12 restaurants, 9 bars, a 27-hole golfcourse, 5 swimming pools, 4 fitness centres, a tennis facility and anice-skating rink.

 

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We offer a wide range of services at our hotels.  We provide transportation between each ofthe hotels and the train station and give guests the option to check into thehotels directly from the Chessy-Marne-la-Vallée train station or from on boardthe Eurostar (London) and Thalys (Brussels) trains arriving at DisneylandResort Paris.  As part of our check-inprocess, we provide guests with room information and welcome booklets and alsoprovide a luggage service for guests arriving by train, which allows them to godirectly to the parks and have their luggage delivered from the train stationto their rooms.  Entertainment is alsoan integral part of our hotel services, including Disney character breakfastsand dinners, character meet-and-greets in the lobbies of certain hotels,face-painting workshops, and live music in the bars of certain hotels.Children’s activity corners have also been set up where children can take partin various activities while allowing their parents additional leisure time.

 

*Disney Village Operations*

 

Disney Village consists of approximately 60,000 square meters of themeddining, entertainment and shopping facilities. It is a free-entrance venue (except for certain events), situated nextto the Chessy-Marne la Vallée RER/TGV train station and between the Theme Parksand the hotels.

 

The common themes of Disney Village are “American Places” and “AmericanEntertainment” in the spirit of a coast-to-coast trip from New York to LosAngeles.  The largest of its facilitiesis an indoor arena seating more than 1,000 guests for dinner and a performanceof*Buffalo Bill’s Wild West Show*. Other facilities include themed bars with music, themed restaurants,including *CafeMickey*, *Planet Hollywood, Rainforest Café* and*Annette’sDiner,*a*McDonald’s* restaurant, retail shops and a15-screen multiplex Gaumont cinema with one of the largest screens in Europe.

 

We manage certain of the facilities in the Disney Village, such as the *BuffaloBill’s Wild West Show*, merchandise boutiques and bars,**whileothers are managed by third parties on our behalf.  For example, certain of our restaurants are operated by Flo, aFrench catering company.  In addition,certain of the facilities, such as the *Planet Hollywood* and *McDonald’s* restaurants andthe Gaumont cinema, are owned and managed by third parties.

 

**A.3.1.3*   Food and Beverage***

 

We have 68 restaurants and bars throughout the Resort. Restaurants arethemed both in decoration and menu, based upon their location within theResort, and offer guests a wide variety of dining experiences including quickservice, cafeteria-style, table service (including convention catering), andsophisticated French cuisine.  There arealso approximately 120 food carts and 12 kiosks throughout the Resort whichoffer fast-food. We offer guests the option of a fixed-price menu in all of ourtable service restaurants.  Duringfiscal years 2001 and 2002, the capacity of three Disney Village facilitieswere increased: *Billy Bob’s Country Western Bar*(+94 seats), *TheSteakhouse* (+180 seats) and *Annette’s Diner* (+ 90 seats).

 

**A.3.1.4*   Merchandising***

 

Our merchandising facilities include 45 boutiques, 2 kiosks and 19carts located throughout the Resort, which offer a wide range of bothDisney-themed and non-Disney-themed goods. The product mix is constantly re-evaluated in an effort to better adaptto guest preferences and guest mix.  Newmerchandise development focuses on Disney character products, such as the *MickeySorcerer* line, which is popular with guests, and on more variety forthe repeat guest.  Other innovativemerchandising options include photo locations at four attractions, *Big ThunderMountain*, *Space Mountain, From the Earth to the Moon*,*Piratesof the Caribbean* and *Rock’n’Roller Coaster,* which offer to ourguests the opportunity to purchase candid photos taken of them during theirride.

 

**A.3.2*  *Real Estate Development Segment**

 

Our activities include the planning and development of the 1,943hectare site on which the Resort is located, in accordance with the MasterPlan.  Development activities includethe conceptualisation and planning of improvements and additions to theexisting Resort activity, as well as other commercial and residential realestate projects to be located on the site, whether financed internally orthrough third-party partners.

 

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Our principal real estate development revenues are derived fromconceptual design services related to third party development projects on thesite and to the sale of land development rights or from ground lease incomefrom third party developers.  Suchtransactions not only provide a source of up-front cash inflows but alsocontribute to improving the potential of future resort and real estatedevelopment projects and to increasing the potential local clientele forDisneyland Resort Paris.

 

The following table summarises the financial impact of real estatedevelopment activities on our financial statements:

 
|                        |   | **Year ended  September 30,** |   |
|-----------------------------|--------|-------------------------------|--------|
| **(€ in millions)**    |   | **2002**                      |   | **2001** |   | **2000** |   | **1999** |   | **1998** |   |
| Revenues:                   |   |                          |   |   |   |   |   |   |   |   |   |
| Operating                   |   | 27.3                          |   | 37.2 |   | 14.5 |   | 8.5 |   | 17.1 |   |
| Exceptional                 |   | —                        |   | 0.4 |   | 0.6 |   | — |   | 5.5 |   |
|                        |   | 27.3                          |   | 37.6 |   | 15.1 |   | 8.5 |   | 22.6 |   |
|                        |   |                          |   |   |   |   |   |   |   |   |   |
| Costs and Expenses          |   | (15.2                         | )      | (13.4 | ) | (11.6 | ) | (8.5 | ) | (7.6 | ) |
| Net Income Statement Impact |   | 12.1                          |   | 24.2 |   | 3.5 |   | — |   | 15.0 |   |

 

Our real estate development activity revenuesare primarily related to the following projects:

 

*Val d’Europe Urban Development*

 

On December 9, 1997, we agreed on a programfor a new phase of development with the French public authorities, whichofficially launched the urban development of Val d’Europe, an undeveloped areabordering the current Resort and situated on our site.  Construction began in July 1998.  Our role in this development includes masterplanning and conceptualisation, marketing and sales efforts to attractthird-party developers, and negotiation of land sales or ground leases.

 

Upon completion, the Val d’Europe developmentwill represent a total investment, primarily by third parties, of € 533.6million.  With the exception of theinternational shopping mall and the hotels as described below, our financialinterest in these development projects is primarily limited to the net gain wegenerate from the sale of the land development rights to the third partydeveloper.

 

The project consists of four major components:

 

1)              Creation of thebasic infrastructure required for the development.  Examples include construction of roads and utilities (rain waterand waste water treatment facilities) as well as a second RER train station(Val d’Europe) which are already completed.

 

2)              Construction of alarge international shopping mall, which opened in October 2000.  The mall currently comprises approximately83,000 square meters of retail space including an Auchan hypermarket, as wellas 70 boutiques covering 15,000 square meters, offering prestigious brand namesat discount prices.  Our role in theproject included the master planning and conceptual design of the project.  In addition, we own the land on which themall is located and are leasing it to the developer under a 75-year groundlease.  In March 2003, the mall wasexpanded to include a 6,000 square meter garden shop.

 

3)              Development andcommercialisation of the urban centre of Val d’Europe, which includesresidential housing units, retail space and commercial office space.  In addition, the development includes the150 room *ElyséesVal d’Europe* hotel, which opened in June 2002 on land leased fromus.  The hotel was financed by athird-party, but is managed by us.

 

Through September 30, 2002, approximately1,500 of the total 3,500 residential housing units planned for constructionbefore 2007 had been completed.  A totalof 141,200 square meters of retail and commercial space had been completed outof a total planned development of 267,800 square meters.

 

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4)              An internationalbusiness park, which in its first phase (between now and 2007) will comprise anarea of 40 hectares, strategically positioned near the motorway.  Construction and commercialisation of thefirst 3 hectares is currently being carried out by Arlington PLC, a leadingEuropean developer of business parks.

 

*Hotel Capacity Developments*

 

In order to expand the on-site resort lodging capacity, severalprojects are in various stages of progress with third party international hoteldevelopers/tour operators for the creation of additional hotels and vacationunits.    These projects will beconstructed, owned and operated by third-parties on land purchased from us orleased from under long-term ground leases. In addition, we have and will earn conceptualisation fees and otherdevelopment service fees related to these transactions.

 

The agreements currently in place will result in a total ofapproximately 2,200 additional hotel/vacation units on the resort site betweenfiscal years 2003 and 2006 (1,450 of which will open in fiscal year 2003).

 

*Other Residential Developments*

 

We are also involved in other residential developments in the areassurrounding the Resort, including commercially successful middle and high-endhousing developments near our golf course in the communities of Magny-le-Hongreand Bailly-Romainvilliers.

 

To date, this residential development has been financed by thirdparties.  Our role has been limited tooverseeing the master planning and architectural design of each development,and to selling to selected developers the land development rights necessary torealise the projects.  We do not anticipatesignificant changes in our role for future residential development projects,although we may expand our role in a certain number of these projects toinclude an equity participation on our part via joint ventures with the thirdparty-developers.

 

# **A.4      Marketingand Sales Strategy**

 

**A.4.1   Marketing and Sales**

 

# ***Product Offer***

 

Disneyland Paris Resort is the number one tourist destination in Europein terms of guest visitation with a product offer that currently includes twotheme parks, 7 themed hotels (5,800 total rooms), two separate conventionfacilities (totalling 10,500 square meters), a dining, shopping andentertainment center and a 27-hole golf course.

 

With the opening of Walt Disney Studios Park, we anticipated that ourguests would extend the length of their stay at the Resort.  As a result, our package offers have beenmodified to focus on 2 night, 3 day visits.

 

*Strategic Location*

 

Disneyland Resort Paris is located approximately 32 kilometres (20miles) east of Paris, France and benefits from access to a highly developedtransportation network.  In addition toservice to Paris on the French suburban rail system, Disneyland Resort Parishas access to an exceptional highway network that links it in less than onehour to both Paris and the two international airports serving the Paris area,and also makes it easily accessible to most other regions of France.  In addition, the train station that islocated on the site of the Resort is one of the most active in France, withabout forty high speed trains arriving per day and providing service to Londonin three hours by the Eurostar, and to Brussels in 1 hour and 30 minutes andAmsterdam in 4 hours and 30 minutes by the Thalys train.  The strategic geographic location allowsaccess to a market of 17 million potential guests less than 2 hours away byroad or rail transport and 320 million potential guests less than 2 hours awayby plane.

 

# ***Target Markets***

 

We have seven key proximate markets: France, the United Kingdom,Germany, the Netherlands, Belgium, Italy and Spain.  Within these markets, our primary target market is families withchildren from 3-15 years old but secondary markets also include groups, youngadults and convention planners.  Eachyear, our success in marketing to specific countries and markets is impacted bya variety of strategic decisions, including our pricing policy and our package

 

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offers, as well as externalfactors such as the strength of local economies, exchange rates, culturalinterests, and holiday and vacation timing. The introduction of the euro has eliminated exchange rate concerns inall key markets except the United Kingdom.

 

Based on internal surveys, the geographical breakdown of our guests isas follows:

 

|                                    |   | **2002** |   | **2001** |   | **2000** |   |
|-----------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| France                                  |   | 40       | %      | 40       | %      | 40       | %      |
| United Kingdom                          |   | 21       | %      | 18       | %      | 15       | %      |
| Belgium, Luxembourg and the Netherlands |   | 15       | %      | 16       | %      | 18       | %      |
| Italy / Spain                           |   | 9        | %      | 8        | %      | 8        | %      |
| Other                                   |   | 8        | %      | 10       | %      | 11       | %      |
| Germany                                 |   | 7        | %      | 8        | %      | 8        | %      |
| **Total**                               |   | 100      | %      | 100      | %      | 100      | %      |

 

# ***Distribution***

 

We distribute our product offer through a wide variety ofchannels.  Tour packages, which in manycases include transportation, lodging, food and theme park tickets aredistributed through our call centres, on our internet site or throughthird-party distributors.

 

Theme park tickets are sold not only within these packages, but alsothrough tourism intermediaries, directly at the gate and by various retailoutlets (the Disney Stores, FNAC, Virgin Mega-Stores, and at French, Belgianand Swiss railway stations and others).

 

Hotel bookings made with us by individual guests, either directly orthrough Euro Disney Vacances S.A. accounted for approximately 56% of totalreservations for fiscal year 2002.  Thecall centres, based at the Resort site and in the United Kingdom, receive approximately7,100 calls per day from all over Europe. Apart from the United Kingdom, all other markets are serviced from thecentral reservation office at the Resort site in Paris, with country-specifictelephone numbers.  Third-partydistributors, including tour operators with their own packages and group sales,currently account for the remaining hotel reservations.

 

Our in-house tour operator, Euro Disney Vacances S.A., focuses ondistribution of short-break packages, with offices in Paris and other Frenchcities as well as regional offices in Amsterdam, Brussels, Copenhagen,Frankfurt, London, Madrid and Milan. These offices provide a local marketing presence and the necessarytravel industry trade support. We also work with a select number of tour operatorsin our major markets.

 

In addition, we have established special travel alliance partnershipswith the principal European transporters. Travel alliance agreements have been completed with Air France on apan-European basis and with Eurostar and Thalys.  These agreements provide carriers with the right to useDisneyland Resort Paris in their advertising campaigns and some with the rightto special joint promotional packages. In return, we have the right to provide airline or train tickets in ourshort-break packages and to secure allotments. Guest visitation from the UnitedKingdom, Spain, Italy and Belgium reflects our relationship with thesepartners.

 

Our internet site at www.disneylandparis.com is available in 6languages and allows site visitors to learn about our Resort, order a brochure,e-mail reservation requests directly to our reservation center, and to bookcertain packages or purchase theme park tickets on-line.  We currently receive approximately 1,600on-line bookings and sell approximately 3,000 tickets on-line each month.

 

**A.4.2   *Competition***

 

We compete for guests throughout the year with theme parks as well asother European and international holiday destinations (including ski andseaside resorts) and with other leisure and entertainment activities (includingmuseums and cultural activities) in the Paris region.  Our hotels compete with other hotels in the Paris region andconvention centres all over Europe.  OurResort also competes with major international tourist-attracting events such asthe festivities that were organised in connection with the 1999 “Millennium”celebrations (the Universal Exposition of

 

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Hanover, the Jubilee of Romeand the Millennium Dome of London) and major sporting events, such as thesoccer World Cup and the Olympic Games.

 

The theme park market in Europe has grown significantly over the lasttwo decades.  According to thepublication *AmusementBusiness*, the ten largest European theme parks attracted approximately44 million guests in 2002. The following table sets forth the attendance ofeach of these ten destinations.

 

**ThemeParks in Europe***(1)*

**(inmillions)**

** **

|                           |   |           |   | **Attendance** |   |
|--------------------------------|--------|----------------|--------|----------------|--------|
| **Theme Park**                 |   | **Location**   |   | **2002**       |   | **2001** |   |
| Disneyland Resort Paris        |   | France         |   | 13.1           |   | 12.2 |   |
| Blackpool Pleasure Beach(2)    |   | United Kingdom |   | 6.4            |   | 6.5 |   |
| Tivoli Gardens                 |   | Denmark        |   | 3.8            |   | 3.9 |   |
| Europa Park                    |   | Germany        |   | 3.3            |   | 3.1 |   |
| Universal’s Port Aventura |   | Spain          |   | 3.2            |   | 3.3 |   |
| Lieseberg                      |   | Sweden         |   | 3.1            |   | 3.1 |   |
| De Efteling                    |   | Netherlands    |   | 3.0            |   | 3.1 |   |
| Gardaland                      |   | Italy          |   | 2.9            |   | 2.9 |   |
| Bakken                         |   | Denmark        |   | 2.5            |   | 2.5 |   |
| Alton Towers                   |   | United Kingdom |   | 2.5            |   | 2.3 |   |
|                           |   |           |   | 43.8           |   | 42.9 |   |

* *

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*(1)    Source:Amusement Business*

*(2)    Freeadmission and paid attractions*

 

**A.5          Human Resource Management**

 

To entertain approximately 13 million guests per year coming from allover Europe, we employ an average of approximately 12,500 employees on afull-time equivalent basis.  Ouremployees come from approximately 100 different countries and more thanone-half of them have been employed by us since Opening Day.  The table below presents the average numberof persons employed by the Group as well as the associated employee costs foreach of the last five fiscal years:

 

| **Period**       |   | **Average  Number of  Employees** |   | **Total  Employee Costs  (€ in millions)** |   |
|------------------|--------|----------------------------------------|--------|-------------------------------------------------|--------|
| Fiscal year 2002 |   | 12 467                                 |   | 352.0                                           |   |
| Fiscal year 2001 |   | 11 109                                 |   | 307.0                                           |   |
| Fiscal year 2000 |   | 11 432                                 |   | 297.6                                           |   |
| Fiscal year 1999 |   | 10 574                                 |   | 283.6                                           |   |
| Fiscal year 1998 |   | 10 637                                 |   | 280.2                                           |   |

 

The seasonal nature of our business means that the need for employeesis, to a certain extent, also seasonal. Accordingly, we have developed a system, used in both the theme parksand the hotels, to optimise scheduling and automate labour exchange betweenoperations.  The system improvesefficiency by automating both scheduling and the corresponding paysystems.  In conjunction with thissystem, flexible working contracts have been negotiated with the employeerepresentatives.  Special part-timecontracts such as four-day working weeks, 32-hour weeks or individuallynegotiated contracts, have been implemented. As a result, over the past threefiscal years, many temporary jobs have been turned into flexible long-termcontracts with Disneyland Resort Paris, facilitating job security and bettertraining for employees. This new flexibility has helped management to bettermatch the number of employees to the levels of customer demand.

 

An internal university provides permanent training for all employees inmatters of service and entertainment. To improve quality, approximately 42,600training days were provided to employees in 2002.  To enhance the diversity of skills, training classes range fromfinance to more specific subjects such as the welcoming of guests “DisneyStyle”.  We are continually seeking toenhance our image as a “teaching” company, recognised for outstanding trainingtechniques.  As an example, in November2000, we signed an agreement with certain of our labour unions for the creationof a new

 

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program aimed at providingemployees with a new professional status called “*Hôte d’Accueil Touristique*”and thus a wider recognition of their skills on a national scale.  Our objective is to develop the competenciesof approximately 800 employees, over a period of fifteen months, through grouptraining that permits them to earn four different state recognized professionalcompetency certificates.

 

Seven French labour unions, the *Confédération Générale du Travail*(C.G.T.), the *Confédération Française Démocratique du Travail* (C.F.D.T.),the *ConfédérationGénérale de l’Encadrement* (C.F.E./C.G.E.), *Force Ouvrière*(C.G.T./F.O.), the *Confédération des Travailleurs Chrétiens*(C.F.T.C.), the *Syndicat Indépendant du Personnel Euro Disney* (S.I.P.) andthe *UnionNationale des Syndicats Autonomes* (U.N.S.A.), are represented atDisneyland Resort Paris.  We comply withinformation and consultation requirements with respect to the unions and holdother periodic consultations with employee representatives.  Since Opening day, there have been nosignificant strikes or work stoppages.

 

In June 1998, the French Government enacted a law to reduce theofficial work week from 39 to 35 hours. For companies that implemented the 35-hour week before July 1, 1999, theFrench government is providing subsidies in the form of lower payroll taxes foreach of the five years following the date of implementation.  We began operating on the basis of a 35-hourwork week on June 6, 1999 and benefit from such subsidies, which have helped tooffset the costs of additional employees.

 

We have made no distributions under our statutory profit sharingplan.  However, since October 1, 1995,the Group has provided employees a supplemental profit sharing plan. Under thelatest plan signed March 27, 2002 applying to fiscal years 2002 through 2004,employees are eligible to receive a bonus of between 0.2% to 3.2% of theirannual salary, if Income before Lease and Net Financial Charges as presented inthe Consolidated Financial Statements of the Group reaches certain pre-definedthresholds.

 

The following table summarises amounts paid under this profit sharingplan for each of the last five fiscal years: 

 
|                           |   | **Year ended  September 30,** |   |
|--------------------------------|--------|-------------------------------|--------|
| **(€ in  millions)** |   | **2002**                      |   | **2001** |   | **2000** |   | **1999** |   | **1998** |   |
| Total Profit Sharing Expense   |   | **—**                    |   | 1.9 |   | — |   | 1.7 |   | 1.2 |   |

 

In addition, an employee savings plan exists in order to facilitate andencourage individual savings.  TheCompany matches 30% of the first € 3,050 of each employees’ contribution to theplan each year.

 

**A.6      Significant Operating Contracts**

 

**A.6.1   Agreements with French GovernmentalAuthorities**

 

On March 24, 1987, The Walt Disney Company entered into the MasterAgreement with the Republic of France, the Region of Ile-de-France, theDepartment of Seine-et-Marne, the Public Establishment for the Development ofthe new region of Marne-la-Vallée (*l’Etablissement Public d’Aménagement de la VilleNouvelle de Marne-la-Vallée - EPAMarne*) and the Suburban ParisTransportation Authority (RATP), for the development of the Resort and othervarious development phases for the 1,943 hectares of undeveloped land located32 kilometres east of Paris in Marne-la-Vallée, France.  Immediately after, The Walt Disney Companyassigned its rights and obligations under the Master Agreement to Euro DisneyCorporation, a wholly-owned subsidiary incorporated in Delaware.  The French governmental authorities party tothe Master Agreement have subsequently waived all rights of recourse againstThe Walt Disney Company under the Master Agreement.  In addition, in 1988 a new governmental authority named thePublic Establishment for the Development of Sector IV of Marne-la-Vallée (“EPAFrance”), with responsibility for the development of the entirety of theResort, was created pursuant to the Master Agreement and became a partythereto.  The Company and EuroDisneyland S.N.C. (“the Phase IA Financing Company”) became parties to theMaster Agreement in April 1989, and Euro Disney Associés S.N.C. (“EDA SNC”)became a party in January 1995 following the Financial Restructuring.  While the Company, the Phase IA FinancingCompany and EDA SNC are severally responsible to the French public authoritiesfor the performance of the Master Agreement, the Company, in its capacity asmain partner and the main beneficiary of the undertakings of the MasterAgreement, has ultimate responsibility for the performance obligations underthe Master Agreement.  See Item 4 -Section C.2 “Financing Companies” for additional information on the Phase IAFinancing Company and EDA SNC.

 

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The Master Agreement, as amended from time to time, determines thegeneral outline of each phase of development as well as the legal and initialfinancial structure.  It provides thatloans with specific terms and conditions shall be granted.   The significant components thereof aresummarised below.

 

### ***Development planning***

 

The Master Agreement sets out a master plan for the development of theland and a general development program defining the type and size of facilitiesthat we have the right to develop, subject to certain conditions, over a30-year period ending in 2017. Before beginning any new development phase, wemust provide EPA France and several other French public authorities a proposaland other relevant information for approval. On the basis of the information provided, the Company and theauthorities involved develop detailed development programmes.

 

On December 9, 1997, we and EPA France concluded a detailed program fora new phase of the Val d’Europe urban development. (see Item 4, Section A.3.6 -“Development Activities”).

 

### ***Financing of infrastructure***

 

The Master Agreement specifies the infrastructure to be provided by theFrench authorities to the Resort. The relevant French public authorities have acontinuing obligation to finance construction of the primary infrastructure,such as highway interchanges, primary roadways to access the site, waterdistribution and storage facilities, rain water and waste water treatmentfacilities, waste treatment installations, gas and electricity distributionsystems as well as telecommunication networks. The Master Agreement also specifies the terms and conditions of ourcontribution to the financing of certain infrastructure.

 

Infrastructure provided by the French governmental authorities includedthe extension on the “A” line of the RER suburban rail link (which links Parisand its eastern and western suburbs to the Resort site with two stations), theconstruction of two interchanges linking the Resort directly with the A4motorway, a TGV (high speed train) station linking the Resort to other majorcities of Europe and the completion of an access road around the Resort site.

 

### ***Land rights***

 

The Master Agreement provides for our right, subject to certainconditions, to acquire the land necessary for the expansion of the DisneylandResort Paris on the Marne-la-Vallée site. Our exercise of these acquisition rights is subject to certaindevelopment deadlines, which if not met would result in the expiration of theserights.  Through the date of this AnnualReport, all minimum development deadlines have been met and no land rights haveexpired unused.  The next deadline forthe expiration of land right options will be December 31, 2007.

 

In order to maintain our land acquisition rights for the remainingundeveloped land around the Resort (approximately 1,100 hectares), we arerequired to pay annual fees to EPA France. For fiscal year 2002, these fees totalled € 0.8 million.  As of September 30, 2002, approximately 900hectares of land had been developed or were the subject of undertakings fordevelopment.

 

### ***Department of Seine-et-Marne tax guarantee***

 

Pursuant to the Master Agreement, our Company, the Phase IA FinancingCompany, EDA SNC and the Republic of France guaranteed a minimum level of taxrevenues to the Department of Seine-et-Marne. If the Department’s tax revenuesare less than the amount of charges borne by the Department for primary andsecondary infrastructure during the period from 1992 to 2003, the Republic ofFrance and our Company will each reimburse, in equal shares to the Department,the difference between the tax revenues collected and the charges borne, up toan aggregate amount of approximately € 45.0 million (adjusted for inflationfrom 1986). No amounts were due with respect to this tax guarantee as of theend of the first measurement period on December 31, 1998. A second and lastassessment, covering the entire period, will be made on December 31, 2003.

 

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**A.6.2      Participant Agreements**

 

Our Company has entered into long-term participant agreements withcompanies that are leaders in their fields. As of the close of fiscal year 2002, 14 participant agreements were ineffect, with the following companies: American Express, Coca-Cola, Esso, FranceTelecom, General Motors, Hasbro Inc., Hertz, IBM, Kellogg’s, Kodak, McDonald’s,Nestlé, Perrier-Vittel and Orange. These participant agreements provide the Disneyland Resort Parisparticipants with the following rights in exchange for an individuallynegotiated fee: (i) a presence on site through the sponsorship of one or moreof Disneyland Park, Walt Disney Studios Park or Disney Village’s attractions,restaurants or other facilities, (ii) promotional and marketing rights withrespect to the category of product which is covered by the participantagreement, and (iii) the status of privileged supplier of our Company.  Each participant agreement terminatesautomatically in the event of termination of the License Agreement between TheWalt Disney Company (Netherlands) B.V. and the Company.  (See “License Agreement” discussion in Item4, Section A.6.3 — “Undertakings and Agreements with The Walt Disney Companyand Subsidiaries”).

 

During fiscal year 2002, our Company signed a participant agreementwith Visa, which replaced as of January 1, 2003, the expired American Expresscontract.

 

**A.6.3   Undertakings and Agreements with The WaltDisney Company and Subsidiaries**

 

*Undertakings*

 

In connection with the Financial Restructuring, The Walt Disney Companyagreed, so long as certain indebtedness is outstanding to our major creditors,to hold at least 34% of the common stock of our Company until June 10, 1999, atleast 25% until June 10, 2004 and at least 16.67% thereafter.  In connection with the financing of WaltDisney Studios Park, The Walt Disney Company has committed to the CDC to holdat least 16.67% of our common stock until 2027.

 

In addition, pursuant to a separate letter to the creditors under oneof our principal debt agreements, The Walt Disney Company has agreed that if itopens, or licenses a third party to open, a Disney-type park within 2,500kilometers of the Resort prior to the earlier of January 1, 2004 and the timethat we meet certain financial conditions, then The Walt Disney Company willguarantee the repayment of amounts outstanding under such debt agreement untilJanuary 1, 2004 or such time as the financial conditions have been satisfied.

 

Our Company and Euro Disneyland Participations S.A., an indirect99.9%-owned subsidiary of The Walt Disney Company (which is also a partner ofthe Phase IA Financing Company) have agreed to indemnify the partners of the PhaseIA Financing Company as to all liabilities arising under the Master Agreementof our Company and the Phase IA Financing Company.  To the extent the resources of our Company and the Phase IAFinancing Company are insufficient to cover any such indemnity, The Walt DisneyCompany, through a wholly-owned subsidiary, has agreed to indemnify thepartners of the Phase IA Financing Company up to an additional € 76.2 million.   In connection with theFinancial Restructuring, EDA SNC also undertook certain indemnificationobligations in favour of the partners of the Phase IA Financing Company inrespect of certain liabilities arising under the Master Agreement.

 

*DevelopmentAgreement*

 

Pursuant to the Development Agreement dated February 28, 1989 (the“Development Agreement”) with our Company, Euro Disney S.A. provides andarranges for other subsidiaries of The Walt Disney Company to provide a varietyof technical and administrative services to the Company.  These services are in addition to theservices Euro Disney S.A. is required to provide as Management Company**(seeItem 10, Section B.1- The Management Company) and include, among other things,the development of conceptual designs for our existing theme park and futurefacilities and attractions, the manufacture and installation of specialisedshow elements, the implementation of specialised training for operatingpersonnel, the preparation and updating of operations, maintenance and othertechnical manuals and the development of a master land use plan and real estatedevelopment strategy.  As theDevelopment Agreement concerns the entire Resort, the services provided by EuroDisney S.A. pursuant to the Development Agreement extend to all theinstallations of Walt Disney Studios Park, primarily for the design andconstruction of said installations. Euro Disneyland Imagineering S.A.R.L. (“EDLI”), an indirect subsidiaryof The Walt Disney Company, was responsible for management and administrationof the overall design as well as the construction of our theme parks, includingthe design and procurement of the show-and-ride equipment.  Most of the other facilities of the Resortwere designed under our supervision with the administrative and technicalassistance of affiliates of The Walt Disney Company specialised in

 

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the development of hotels,resorts and other retail and commercial real estate projects in the UnitedStates, in accordance with the related servicing agreements.

 

We reimburse Euro Disney S.A. for all of its direct and indirect costsincurred in connection with the provision of services under the DevelopmentAgreement.  These costs include, withoutlimitation, (i) all operating expenses of Euro Disney S.A., including overheadand implicit funding costs, (ii) all costs incurred directly by Euro DisneyS.A. or billed to it by third parties and (iii) certain costs plus 10% billedto Euro Disney S.A. for services performed by The Walt Disney Company or any ofits affiliates.  Such costs varyconsiderably from one fiscal year to another depending upon the projects underdevelopment.

 

The Development Agreement has an initial term of 30 years and can berenewed for up to three additional 10-year terms at the option of eitherparty.  The Development Agreement may beterminated by Euro Disney S.A. and us under certain conditions, in particularin case of a change of control of our Company and of the Phase IA FinancingCompany, or in case either company were to be liquidated.

 

*Phase II DevelopmentFee*

 

As part of the terms of the Financial Restructuring, we are required topay a one-time development fee of  €182.9 million upon the satisfaction of certain conditions, including conditionsrelating to Walt Disney Studios Park.  In order to obtain the approval of the financing of Walt Disney StudiosPark by our lenders and the lenders of the Financing Companies from which welease a substantial portion of our operating assets, The Walt Disney Companyagreed in September 1999 to amend the terms for the development fee so that itwill not be due unless and until future events occur, including the repaymentof existing bank debt (as defined in the agreement) and the achievement ofspecified cash flow levels.  Thedetermination as to whether the specified cash flow levels have been achievedwill be made on the date that the CDC loans for Walt Disney Studios Park arerepaid and, in any case, no later than November 1, 2029.

 

*License Agreement*

 

Under the License Agreement, dated February 28, 1989 between The WaltDisney Company (Netherlands) B.V. (a subsidiary of The Walt Disney Company) andour Company (the “License Agreement”), we were granted a license to use anypresent or future intellectual and industrial property rights of The WaltDisney Company that may be incorporated into attractions and facilitiesdesigned from time to time by The Walt Disney Company and made available tous.  In addition, the License Agreementauthorises the sale, at the Resort, of merchandise incorporating or based onintellectual property rights owned by or otherwise available to The Walt DisneyCompany.  These intellectual propertyrights are registered in the name of The Walt Disney Company, which isresponsible for the control of their protection in France.  Royalties to be paid by our Company for theuse of these rights were originally equal to:

 

(i)                 10% of grossrevenues (net of value-added tax (“VAT”) and other similar taxes) from rides,admissions and related fees (such as parking, tour guide and similar servicefees) at all theme parks and attractions;

 

(ii)              5% of gross revenues(net of VAT and other similar taxes) from merchandise, food and beverage salesin or adjacent to any theme park or other attraction or in any other facility(with the exception of the Disneyland Hôtel) whose overall design concept isbased predominantly on a The Walt Disney Company theme;

 

(iii)           10% of all fees duefrom participants; and

 

(iv)          5% of all gross revenues(net of VAT and other similar taxes) from the exploitation of hotel rooms andrelated revenues at certain Disney-themed accomodations. None of our currentlyexisting hotels at Disneyland Resort Paris are considered Disney-themed asdefined in the Licence Agreement, except the Disneyland Hôtel which isspecifically excluded.

 

As part of the Financial Restructuring, The Walt Disney Company amendedthe license agreement and, as a result, no royalties were due for fiscal years1994 through 1998.   Starting in fiscalyear 1999 and until fiscal year 2003 (inclusive), the royalties payable by usare being calculated at rates equal to 50% of the rates stated above.  In addition, the Walt Disney Company(Netherlands) B.V. has agreed to a revised payment schedule for the royaltiesfor the last three quarters of fiscal year 2003 and for all of fiscal year2004  and to a reduction under certaincircumstances of a portion of the fiscal year 2003 royalties.  See Item 5, Section D -"Liquidity".  Beginning infiscal year 2004, we will be responsible for the payment of 100% of theroyalties stated above.

 

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The License Agreement has an initial term of 30 years and can berenewed for up to three additional 10-year terms at the option of eitherparty.  The License Agreement gives TheWalt Disney Company substantial rights and discretion to approve, monitor andenforce the use of The Walt Disney Company intellectual properties within theResort.  The License Agreement may beterminated by The Walt Disney Company upon the occurrence of certain events,including the removal or replacement of the Management Company (*Gérant*),a change in control, directly or indirectly, of our Company, certain affiliatesand the Phase IA Financing Company, the liquidation of our Company or certainaffiliates, certain assignments of our interests in the License Agreement, theimposition of laws or regulations that prohibit us or certain affiliates fromperforming their material obligations under the License Agreement or theimposition of taxes, duties or assessments that would materially impair ourassets, surplus or distributable earnings of the Company or those of certain ofour affiliates.

 

**B.         Businessoverview**

 

See Item 4, Section A. “History AndDevelopment Of The Company And Business Overview”.

 

**C.         Organisationalstructure**

 

Our Company is a *société en commandite par actions*(“SCA” -similar in certain respects to a master limited  partnership in the U.S.) organised under the laws of the Republicof France.  Our Company was originallyorganised and incorporated in Paris on December 17, 1985 under the name MivasS.A., in the form of a French *société anonyme* (“SA” - similar to a U.S. corporation), which was closelyheld.  In 1988, EDL Holding Company, aDelaware corporation wholly-owned by The Walt Disney Company and currently ownerof approximately 39% of the shares of our common stock, acquired 99% of theshares of Mivas S.A., whose corporate name was changed to Sociétéd’Exploitation d’Euro Disneyland S.A. At an extraordinary meeting held in February 1989, the shareholders ofSociété d’Exploitation d’Euro Disneyland S.A. decided to modify our corporateform from an SA**to an SCA**and to change our corporate name to EuroDisneyland S.C.A.  In November 1989,Euro Disneyland S.C.A. became a publicly held company as a result of a publicoffering of its common stock in France, the United Kingdom and Belgium.  At the annual general meeting ofshareholders on February 4, 1991, the Company’s present corporate name, EuroDisney S.C.A., was adopted.

 

**C.1****                   OperatingCompanies**

 

*Euro Disney S.C.A.*

 

Our Company operates Disneyland Park and WaltDisney Studios Park, the Disneyland Hôtel, the Davy Crockett Ranch and the GolfCourse.

 

*EDL Hôtels S.C.A.*

 

EDL Hôtels S.C.A. (“EDL Hotels”), our99.9%-owned subsidiary which operates Disney Village and all of the hotels, otherthan the Disneyland Hôtel and the Davy Crockett Ranch, is organised as ageneral partnership**governed by the same principles as ourCompany.

 

The general partner of EDL Hotels is EDLHôtels Participations S.A., a French SA and our 99.9%-owned subsidiary.  The Management Company of EDL Hotels is EuroDisney S.A., which is also our Management Company.

 

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**C.2          Financing Companies**

 

*Phase IA Financing Company and Euro Disney Associés S.N.C.*

 

The Phase IA Financing Company ownsDisneyland Park and leases it to EDA SNC pursuant to a leasing structureentered into in connection with the Financial Restructuring. Both are organisedas French *sociétésen**nom collectif*(“SNC” - which is similar in certain respectsto a general partnership in the U.S.). EDA SNC in turn subleases the park to us. Also, as part of the FinancialRestructuring, we and the Phase IA Financing Company sold to EDA SNC certainDisneyland Park assets for € 213.4 million, which are leased back to us by EDASNC at a nominal interest rate of 1%. We have an option to repurchase such assets.  See Notes 1-2 and 24-1 to the ConsolidatedFinancial Statements in Item 17 - “Financial Statements”.

 

The partners of the Phase IA Financing Company are various banks,financial institutions and companies that hold 83% of the Phase IA FinancingCompany’s shares, and Euro Disneyland Participations S.A., a French SA and anindirect 99%-owned subsidiary of The Walt Disney Company, that holds 17% ofsuch shares.  We have no ownershipinterest in the Phase IA Financing Company. For a description of the financing arrangements of the Phase IAFinancing Company with us and related future lease commitments, see Notes 1-2and 24-1 to the Consolidated Financial Statements in Item 17 - “FinancialStatements”. We are jointly liable for a significant portion of the indebtednessof the Phase IA Financing Company (approximately two-thirds of the outstandingindebtedness due under the Phase IA Credit Facility).  The partners are subject to unlimited joint and several liabilityfor the financial obligations of the Phase IA Financing Company.  Certain of the creditors of the Phase IAFinancing Company, however, have effectively waived recourse against thepartners of the Phase IA Financing Company. The Phase IA Financing Company hasconsistently generated tax losses primarily due to interest charges during theconstruction period and depreciation expense from Opening Day until December31, 1996. The legal structure of the Phase IA Financing Company enabled itspartners to take these French tax losses directly into their own accounts forFrench tax purposes.  In return, thepartners agreed to provide subordinated partners’ advances to the Phase IAFinancing Company at an interest rate below the market rate.

 

The Phase IA Financing Company is managed by a Management Company, Sociétéde Gérance d’Euro Disneyland S.A., a French SA**and an indirect 99.8%-ownedaffiliate of The Walt Disney Company.

 

*Phase IB Financing Companies*

 

Hôtel New York Associés S.N.C., Newport BayClub Associés S.N.C., Sequoia Lodge Associés S.N.C., Cheyenne Hotel AssociésS.N.C., Hôtel Santa Fe Associés S.N.C. and Centre de Divertissements AssociésS.N.C. (collectively, the “Phase IB Financing Companies”), each of which (i)rents the land on which the related hotel or Disney Village, as the case maybe, is located, from EDL Hotels, (ii) owns the related hotel or Disney Village,as the case may be, and (iii) leases the related hotel or Disney Village, asthe case may be, to EDL Hotels S.C.A., and (iv) is organised as a French SNC**governedby the same principles as the Phase IA Financing Company.

 

The partners of the Phase IB FinancingCompanies are various banks and financial institutions that are creditors ofthe Phase IB Financing Companies.  Wehave no ownership interest in the Phase IB Financing Companies.  For a description of the financialarrangements of the Phase IB Financing Companies with us and related futurelease commitments, see Notes 1-2 and 24-1 to the Consolidated FinancialStatements in Item 17 - “Financial Statements”.  EDL Hotels has guaranteed all of the loan repayment obligationsof the Phase IB Financing Companies to their creditors and partners.  The partners of the Phase IB FinancingCompanies are subject to unlimited joint and several liability for thefinancial obligations of the Phase IB Financing Companies.  Nevertheless, the creditors of the Phase IBFinancing Companies have waived recourse against the partners of the Phase IBFinancing Companies.  The Phase IBFinancing Companies have consistently generated tax losses primarily due tointerest charges during the construction period and depreciation expense fromOpening Day until December 31, 1995 (with the exception of Centre deDivertissements Associés S.N.C. which generated tax losses until December 31,1998). The legal structure of the Phase IB Financing Companies enabled theirpartners to take these French tax losses directly into their own accounts forFrench tax purposes.  In return, thepartners agreed to provide subordinated partners’ advances to the Phase IBFinancing Companies at an interest rate below the market rate.

 

Pursuant to the respective by-laws of thePhase IB Financing Companies, the Management Company**of each of the Phase IBFinancing Companies is EDL Services S.A., a French**SA**and a 99.8%-ownedsubsidiary of the Company.

 

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*Centre de CongrèsNewport S.A.S.*

 

Centre de Congrès Newport S.A.S. (“SAS” - asimplified SA), which is an indirect 99.9%-owned affiliate of The Walt DisneyCompany, a *sociétépar actions simplifiée* entered into sale/leaseback agreements withEDL Hotels pursuant to which the SAS financed and acquired the Newport Bay ClubConvention Center (opened to the public in September 1997) and, whenconstructed, leased it back to EDL Hotels. EDL Hotels has an option torepurchase such assets.  See also Notes1-2 and 24-1 to the Consolidated Financial Statements in Item 17 - “FinancialStatements”.

 

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**C.3          Ownership Structure of the Group**

 

**C.3.1   Overview of Group Legal Structure**

 

 

 

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**D.            PROPERTY,PLANT AND EQUIPMENT**

 

Our resort-related facilities are comprised of the two theme parks(including related support buildings), the seven themed hotels, Disney Villageand the Golf Course.  We lease all ofthese facilities except Walt Disney Studios Park, Disneyland Hôtel, DavyCrockett Ranch and the golf course, which we own.  We also own three employee housing buildings.  These facilities are all located inMarne-la-Vallée, France.  We believethat our facilities are suitable and adequate for the conduct of our business.

 

The Master Agreement provides us for theright, subject to certain conditions, to acquire the land necessary for therealisation of the Resort and the general availability of the 1,943 hectares(approximately 4,800 acres) Marne-la-Vallée site.  The existing Resort facilities and related developments inprogress, plus all associated public and private infrastructure works, arelocated on approximately 900 hectares of this land.

 

# **ITEM5.**           OPERATING AND FINANCIALREVIEW AND PROSPECTS

 

*The following discussion should be read in conjunction with ourConsolidated Financial Statements, the related notes thereto included in Item17 “Financial Statements” herein and Item 3.D “Key Information — RiskFactors”.  Our Consolidated FinancialStatements have been prepared in accordance with French GAAP, which differs incertain respects from U.S. GAAP.  Incertain areas, particularly accounting for leases and interest expenserecognition, these differences are significant.  For a discussion of the principal differences between French GAAPand U.S. GAAP as they relate to our consolidated results of operations and financialposition, see Note 27 to the Consolidated Financial Statements in Item 17“Financial Statements”.*

 

**A.         General**

 

Fiscal year 2002 was highlighted by the opening of our second themepark, Walt Disney Studios.  For the fullfiscal year, and particularly since the opening of Walt Disney Studios Park,record attendance, occupancy and per guest spending have been achieved despitethe weak tourism environment.  The netresults for fiscal year 2002 were impacted by the exceptional pre-opening costslinked to the new theme park.

 

Our net result for the fiscal year 2002 decreased significantly fromthat of fiscal year 2001.  Fiscal year2002 net loss was € 33.1 million compared to a net income of € 30.5 million infiscal year 2001.  This decrease was dueto the fact that the operating margin declined from the prior year level, whileat the same time, we incurred significant pre-opening expenses related to WaltDisney Studios Park (€ 37.2 million) and, as planned, we had to face increasedlease and net financial charges.  Thepre-opening charges related to Walt Disney Studios Park were recorded asexceptional expenses as incurred.

 

**B.         Financial Restructuring**

 

Our results of operations have been significantly affected by therestructuring of our financial obligations in 1994, which followed significantoperating losses that we incurred after the Resort opened in 1992.  The restructuring included an agreement byour banks and financial institution creditors to temporarily forgive interestand defer principal payments on our loans, an agreement by The Walt DisneyCompany to waive royalties and management fees that we otherwise would haveowed to it, and a sale/leaseback of certain assets and other financialarrangements with The Walt Disney Company and its affiliates.  The Financial Restructuring has had a significantimpact on our results of operations and net cash flow over the last eightfiscal years, as we have prepaid borrowings, paid lower interest and principaland paid significantly reduced royalties and management fees to The Walt DisneyCompany.

 

The impact of the Financial Restructuring is declining.  The rate of interest forgiveness was at itspeak during the second half of fiscal year 1994 and has progressively decreasedsince that time.  Beginning in fiscalyear 1998, materially all interest charges were reinstated to their normallevels, although approximately € 6.1 million of interest forgiveness willcontinue in effect through fiscal year 2003. Our principal payment obligations, and the principal portion of ourlease payments to special purpose finance companies that have borrowed frombanks and financial institutions, were deferred for three years from theiroriginal due date and, as a result, principal payments began in fiscal year1998.  Management fees will continue tobe progressively reinstated through fiscal year 2018, while royalties will befully reinstated from half their normal rates beginning in fiscal year2004.  See Item 4, Section A.6.3 –“License

 

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Agreement” and Item 10, SectionB.1 – “The Management Company”.  As aresult, in fiscal year 2004 expenses related to these obligations will increaseto a level of approximately double their fiscal year 2002 total of € 35.5million.

 

**C.         Results of operations**

 

Certainreclassifications have been made to the fiscal year 2001 amounts to conform tothe fiscal year 2002 presentation.

 

**C.1      Results of Operations for Fiscal Year2002 compared with Fiscal Year 2001**

 

The following table provides informationregarding our key operating indicators over the past five years:

* *
|             |   | **Theme  Parks (1)**             |   | **Hotels**                  |   |
|------------------|--------|----------------------------------|--------|-----------------------------|--------|
| **Fiscal years** |   | **Total  guests  (in millions)** |   | **Spending  Per guest (2)** |   | **Occupancy  Rate (3)** |   | **Spending  Per room (4)** |   |
| 2002             |   | 13.1                             |   | € 44.4                 |   | 88.2 | % | € 193.3 |   |
| 2001             |   | 12.2                             |   | € 43.1                 |   | 86.0 | % | € 186.3 |   |
| 2000             |   | 12.0                             |   | € 42.2                 |   | 82.9 | % | € 183.0 |   |
| 1999             |   | 12.5                             |   | € 40.7                 |   | 82.6 | % | € 177.3 |   |
| 1998             |   | 12.5                             |   | € 39.3                 |   | 80.9 | % | € 173.8 |   |

 

----

*(1) Includes Disneyland Park and,from March 16, 2002, Walt Disney Studios Park.*

*(2)**  Averagedaily admission price and spending for food, beverage and merchandise sold inthe Theme Parks, including value added tax.*

*(3) Average daily rooms sold as apercentage of total room inventory (total room inventory is approximately 5,800rooms).*

*(4) Average daily room price andspending on food, beverage and merchandise sold in hotels, including valueadded tax.*

 

***Revenues***

 

Our revenues were generated from the following sources:

 
|                                |   | **Year ended September 30,** |   | **Variation** |   |
|-------------------------------------|--------|------------------------------|--------|---------------|--------|
| **(€ in millions)**            |   | **2002**                     |   | **2001**      |   | **Amount** |   | **Percent** |   |
| Theme Parks                         |   | **526.0**                    |   | 476.4         |   | 49.6 |   | 10.4 | % |
| Hotels and  Disney Village          |   | **411.7**                    |   | 386.5         |   | 25.2 |   | 6.5 | % |
| Other                               |   | **111.0**                    |   | 105.1         |   | 5.9 |   | 5.6 | % |
| **Resort Segment**                  |   | **1 048.7**                  |   | 968.0         |   | 80.7 |   | 8.3 | % |
|                                |   |                         |   |          |   |   |   |   |   |
| **Real Estate Development Segment** |   | **27.3**                     |   | 37.2          |   | (9.9 | ) | (26.6% | ) |
|                                |   |                         |   |          |   |   |   |   |   |
| **Total Revenues**                  |   | **1 076.0**                  |   | 1 005.2       |   | 70.8 |   | 7.0 | % |

 

**ThemePark** revenues increased 10.4 % to € 526.0 millionfrom € 476.4 million in the prior year as a result of increased admission revenueslinked to the opening of our second theme park, Walt Disney Studios, on March16, 2002, and higher park admission prices. Merchandise and food and beverage revenues in the Theme Parks alsoincreased as a result of higher total theme park attendance.

 

**Hotelsand Disney Village** revenues increased 6.5 % to €411.7 million from € 386.5 million in the prior year driven by strong occupancy(especially during the third and fourth quarters) and higher guest spending perroom.  As planned, Disney Villagerevenues benefited from increased guest flow to the restaurants as a result ofthe opening of Walt Disney Studios Park.

 

**Otherrevenues** (which primarily includes participantsponsorships, transportation and other travel services sold to guests)increased € 5.9 million to reach € 111.0 million.

 

Walt Disney Studios Park did not begin to impact operating revenuesuntil the second half of our fiscal year. During the second half of our fiscal year, revenue growth at our ThemeParks was 13.1%, a substantial improvement which,

 

28

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however, did not meet ourexpectations.  Revenue growth at ourHotels and Disney Village was 9.9%, which modestly exceeded our expectations.

 

**RealEstate Development** revenues decreased from € 37.2million in the prior year to € 27.3 million in fiscal year 2002, as planned.Real Estate Development revenues in fiscal year 2002 included primarilycommercial and residential land sale transactions at our Val d’Europe town centreproject.  In addition, revenues includedfees earned related to conceptualisation and development assistance servicesprovided to third-party developers that have signed contracts to eitherpurchase or lease land on Disneyland Resort Paris site for development.

 

*Costs and expenses*

 

Our costs and expenses were composed of:

 
|                                            |   | **Year ended September 30,** |   | **Variation** |   |
|-------------------------------------------------|--------|------------------------------|--------|---------------|--------|
| **(€ in millions)**                        |   | **2002**                     |   | **2001**      |   | **Amount** |   | **Percent** |   |
| Direct  operating costs*                        |   | **617.2**                    |   | 551.3         |   | 65.9 |   | 12.0 | % |
| Marketing,  general and administrative expenses |   | **183.5**                    |   | 183.0         |   | 0.5 |   | 0.3 | % |
| Depreciation  and amortisation                  |   | **64.1**                     |   | 54.0          |   | 10.1 |   | 18.7 | % |
| Royalties  and management fees                  |   | **35.5**                     |   | 31.7          |   | 3.8 |   | 12.0 | % |
| ***Total costs and  expenses***                 |   | **900.3**                    |   | 820.0         |   | 80.3 |   | 9.8 | % |

 

----

****  Includesoperating wages and employee benefits, cost of sales for merchandise and foodand beverage, transportation services and real estate land sales and othercosts such as utilities, maintenance, insurance and operating taxes.*

 

Operating margin for fiscal year 2002 decreased € 9.5 million,resulting from increased Resort Segment margin of € 2.2 million, offset by an anticipated decrease of  € 11.7 million in the Real Estate Development Segment margin.

 

Total costs and expenses were € 900.3 million in fiscal year 2002compared to € 820.0 million in the prior year, an increase of € 80.3million.  This increase in costs andexpenses related primarily to increased direct operating costs (+ € 65.9million) and increased depreciation and amortisation charges (+ € 10.1million).   These cost increases relateprimarily to the operations of Walt Disney Studios Park.  Direct operating costs were also impacted byincreases in safety, security and insurance costs totalling approximately € 6.8million following the events of September 11, 2001.

 

Additionally, as of October 1, 2001, the Group revised the estimateduseful lives of certain long-lived assets in order to more appropriatelyreflect their intended use, which had the impact of decreasing fiscal year 2002depreciation expense on these assets by € 5.7 million.

 

*Lease rental expenseand net financial charges*

 

Lease rental expense and net financial charges were composed of:

* *
|                     |   | **Year ended September 30,** |   | **Variation** |   |
|--------------------------|--------|------------------------------|--------|---------------|--------|
| **(€ in millions)** |   | **2002**                     |   | **2001**      |   | **Amount** |   | **Percent** |   |
| Lease rental  expense    |   | **188.8**                    |   | 185.8         |   | 3.0 |   | 1.6 | % |
| Financial  income        |   | **(59.1**                    | )      | (89.8         | )      | 30.7 |   | (34.2 | )% |
| Financial  expense       |   | **41.1**                     |   | 51.5          |   | (10.4 | ) | (20.2 | )% |
| ***Total***              |   | **170.8**                    |   | 147.5         |   | 23.3 |   | 15.8 | % |

 

Lease rental expense represents payments under financial leasearrangements with the unconsolidated financing companies and approximates therelated debt service payments of such financing companies.  Financial income is principally composed ofthe interest income earned on long-term loans provided to the financingcompanies and interest income on cash and short-term investments, as well asnet gains arising from foreign currency transactions. Financial expense isprincipally composed of interest charges on long-term borrowings and the netimpact of interest rate hedging transactions.

 

The rate ofinterest forgiveness resulting from the 1994 Financial Restructuring was at itspeak during the second half of fiscal year 1994 and has progressively decreasedsince that time.  In fiscal year 1998,substantially all interest charges were reinstated to normal levels; however,approximately € 6.1 million of interest forgiveness per year will continue ineffect and favourably impact lease rental expense through the end of fiscalyear 2003.

 

29

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Lease rental expense and net financial charges analysed by nature ofexpense was composed of:

 
|                                                 |   | **Year ended September 30,** |   | **Variation** |   |
|------------------------------------------------------|--------|------------------------------|--------|---------------|--------|
| **(€ in  millions)**                            |   | **2002**                     |   | **2001**      |   | **Amount** |   | **Percent** |   |
| Interest based  expenses, debt and lease related (1) |   | **87.0**                     |   | 106.8         |   | (19.8 | ) | (18.5 | )% |
| Interest  income on cash and deposit balances        |   | **(2.7**                     | )      | (18.9         | )      | 16.2 |   | (85.7 | )% |
| Loan  repayments included in lease expenses:         |   |                         |   |          |   |   |   |   |   |
| - Due to  external third parties                     |   | **30.3**                     |   | 13.1          |   | 17.2 |   | 131.3 | % |
| - Due to Euro  Disney Group                          |   | **41.1**                     |   | 34.3          |   | 6.8 |   | 19.8 | % |
|                                                 |   | **71.4**                     |   | 47.4          |   | 24.0 |   | 50.6 | % |
|                                                 |   |                         |   |          |   |   |   |   |   |
| Other                                                |   | **15.1**                     |   | 12.2          |   | 2.9 |   | 23.8 | % |
| Total Lease  and Net Financial Charges               |   | **170.8**                    |   | 147.5         |   | 23.3 |   | 15.8 | % |

 

----

*(1) Net of capitalised interest charges of €9.2 million and € 15.2 million in fiscal years 2002 and 2001, respectively.*

 

Lease and net financial chargesincreased to € 170.8 million from € 147.5 million.  This increase was primarily attributable to:

 

•                  Plannedincreases in lease rental expense related to principal repayments on the debtof the financing companies from which the Group leases a significant portion ofits operating assets (€ 24.0 million),

 

•                  Decreasedinterest income on cash, short-term investments and deposits (€ 16.2 million)resulting primarily from lower average cash balances during the year linked tolarge debt reimbursements and cash outflows associated with the constructionand opening of Walt Disney Studios Park,

 

These negative factors werepartially offset by:

 

•                  Decreasedinterest based expenses of € 19.8 million, primarily resulting from thereimbursement of € 373.7 million of Convertible Bonds on October 1, 2001 andlower variable interest rates, partially offset by the additional interestcharges associated with the new CDC loans for the construction of Walt DisneyStudios Park.

 

During fiscal year 2002, thecomponent of lease rental expense related to the financing companies loanrepayments was € 71.4 million.  Forfiscal years 2003 and 2004, the equivalent amounts are scheduled to increase to€ 89.7 million and € 108.1 million, respectively.   Of these amounts, third- party loan principal repayments(requiring a net cash outflow from the Group) were € 30.3 million in fiscalyear 2002, and will be approximately € 37.5 million and € 40.9 million infiscal years 2003 and 2004, respectively.

 

*Exceptional loss,net*

 

For fiscal year 2002,exceptional loss, net totalled € 38.0 million, primarily reflecting € 37.2million of Walt Disney Studios Park pre-opening costs, € 1.0 million of euroimplementation costs and € 1.0 million of reorganisation charges.  These exceptional charges were partiallyoffset by € 0.7 million of net adjustments to provisions for risks and charges.  The exceptional pre-opening costs incurredduring the year included the costs of hiring and training of Walt DisneyStudios Park employees during the pre-opening period as well as the costs ofthe pre-opening advertising campaigns and the media events that took placethroughout February and March 2002.

 

For fiscal year 2001,exceptional losses, net totalled € 7.2 million, primarily reflecting € 5.3million of Walt Disney Studios Park pre-opening costs, € 2.3 million of losseson the early repurchase of a portion of the Company’s 6.75% Convertible Bonds,€ 1.5 million of euro implementation costs, € 1.4 million of fixed assetwrite-offs and  € 0.8 million of netadjustments to provisions for risks and charges.  These exceptional charges were partially offset by an adjustmentto the provision for storm repairs resulting in a net exceptional income of €2.3 million.

 

30

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*Net loss*

 

Net loss for fiscal year 2002 was € 33.1 million, reflectingexceptional charges related to the pre-opening costs of Walt Disney StudiosPark and lower income before exceptional items.

 

**C.2      Results of Operations for Fiscal Year2001 Compared with Fiscal Year 2000**

 

***Revenues***

 

Our revenues were generated from the following sources:

 
|                                |   | **Year ended September 30,** |   | **Variation** |   |
|-------------------------------------|--------|------------------------------|--------|---------------|--------|
| **(€ in millions)**            |   | **2001**                     |   | **2000**      |   | **Amount** |   | **Percent** |   |
| Theme Park                          |   | **476.4**                    |   | 459.5         |   | 16.9 |   | 3.7 | % |
| Hotels and  Disney Village          |   | **386.5**                    |   | 370.3         |   | 16.2 |   | 4.4 | % |
| Other                               |   | **105.1**                    |   | 114.9         |   | (9.8 | ) | (8.5 | )% |
| **Resort Segment**                  |   | **968.0**                    |   | 944.7         |   | 23.3 |   | 2.5 | % |
|                                |   |                         |   |          |   |   |   |   |   |
| **Real Estate Development Segment** |   | **37.2**                     |   | 14.5          |   | 22.7 |   | 156.6 | % |
|                                |   |                         |   |          |   |   |   |   |   |
| **Total Revenues**                  |   | **1 005.2**                  |   | 959.2         |   | 46.0 |   | 4.8 | % |

 

**ThemePark** revenues increased to € 476.4 million, animprovement of 3.7% over the prior year, driven by an increase of 184,000 themepark guests and moderate increases in spending per guest.  Spending per guest increased € 0.9 as aresult of moderately higher admissions prices (+0.9%), higher merchandisespending (+3.8%) and food and beverage spending (+2.4%).

 

**Hotelsand Disney Village** revenues increased to € 386.5million, an improvement of 4.4% over the prior year.  Hotel occupancy increased 3.1 ppt from the prior year to reach anew record level of 86.0%, accounting for a majority of the improvement inrevenues.  Guest spending per room alsoincreased moderately during the year (+1.8%).

 

**Otherrevenues** (which primarily includes participantsponsorships and transportation and other travel services sold to guests)decreased € 9.8 million to € 105.1 million, due to an insurance reimbursementreceived in the prior year.  The prioryear insurance reimbursement of € 19.7 million was received as compensation forthe operating losses incurred as a result of the December 26, 1999 storm, whichdisrupted prior year operations at Disneyland Park and the Davy CrockettRanch.  The decrease in other revenuescan be primarily attributed to this insurance reimbursement, partially offsetby improvements in the remaining components of other revenues.

 

**RealEstate Development** revenues increased to € 37.2million from € 14.5 million in the prior year, an improvement of € 22.7million, the result of several projects which have been in progress over recentyears.  Fiscal year 2001 developmentrevenues related primarily to conceptualisation and development assistanceservices provided to third-party developers that have signed contracts toeither purchase or lease land on the Disneyland Resort Paris site for newhotels and an international business park. In addition, revenues include land sales to third-party developers forvarious residential and commercial projects currently underway in Val d’Europeand elsewhere on the site.

 

31

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*Costs and expenses*

 

Our costs and expenses were composed of:

 
|                                            |   | **Year ended September 30,** |   | **Variation** |   |
|-------------------------------------------------|--------|------------------------------|--------|---------------|--------|
| **(€ in millions)**                        |   | **2001**                     |   | **2000**      |   | **Amount** |   | **Percent** |   |
| Direct  operating costs*                        |   | **551.3**                    |   | 531.4         |   | 19.9 |   | 3.7 | % |
| Marketing,  general and administrative expenses |   | **183.0**                    |   | 171.0         |   | 12.0 |   | 7.0 | % |
| Depreciation  and amortisation                  |   | **54.0**                     |   | 49.9          |   | 4.1 |   | 8.2 | % |
| Royalties  and management fees                  |   | **31.7**                     |   | 31.1          |   | 0.6 |   | 1.9 | % |
| **Total  Costs and Expenses**                   |   | **820.0**                    |   | 783.4         |   | 36.6 |   | 4.7 | % |

 

----

****  Includesoperating wages and employee benefits, cost of sales for merchandise and foodand beverage, transportation services and real estate land sales and othercosts such as utilities, maintenance, insurance and operating taxes.*

 

Operating costs increased 4.7% to € 820.0million in fiscal year 2001, an increase of € 36.6 million over the prioryear.  This increase primarily reflectshigher labour, cost of sales and marketing costs.  Marketing costs increased significantly primarily due to highermedia spending designed to heighten awareness of the Disneyland Resort Parisproduct offer in anticipation of the launch of Walt Disney Studios Park inspring 2002.

 

Operating margin grew by 5.3% to € 185.2million, an improvement of € 9.4 million, driven by the increase in real estatedevelopment activities.  Real estatedevelopment activities contributed € 23.8 million to the operating margin infiscal year 2001 compared to € 2.9 million in the prior year.

 

*Lease rental expenseand net financial charges*

 

Lease rental expense and net financial charges were composed of:

* *
|                     |   | **Year ended September 30,** |   | **Variation** |   |
|--------------------------|--------|------------------------------|--------|---------------|--------|
| **(€ in millions)** |   | **2001**                     |   | **2000**      |   | **Amount** |   | **Percent** |   |
| Lease rental  expense    |   | **185.8**                    |   | 151.1         |   | 34.7 |   | 23.0 | % |
| Financial  income        |   | **(89.8**                    | )      | (74.8         | )      | (15.0 | ) | (20.1 | )% |
| Financial  expense       |   | **51.5**                     |   | 62.0          |   | (10.5 | ) | (16.9 | )% |
| **Total**                |   | **147.5**                    |   | 138.3         |   | 9.2 |   | 6.7 | % |

 

Lease rental expense represents payments under financial leasearrangements with the unconsolidated financing companies and approximates therelated debt service payments of such financing companies.  Financial income is principally composed ofthe interest income earned on long-term loans provided to the financingcompanies and interest income on cash and short-term investments, as well asnet gains arising from foreign currency transactions. Financial expense isprincipally composed of interest charges on long-term borrowings and the netimpact of interest rate hedging transactions.

 

The rate ofinterest forgiveness resulting from the Financial Restructuring was at its peakduring the second half of fiscal year 1994 and has progressively decreasedsince that time.  In fiscal year 1998,substantially all interest charges were reinstated to normal levels; however,approximately € 6.1 million of interest forgiveness per year will continue ineffect through fiscal year 2003.

 

Lease and net financial chargesincreased by € 9.2 million in fiscal year 2001 when compared to the prior year.This increase is primarily attributable to scheduled increases in lease rentalexpense related to principal repayments on the debt of the financing companies(€ 20.6 million) and higher variable interest rates than in the prior year (€6.9 million).  These increases werepartially offset by savings on interest charges related to the early repurchaseand retirement of a portion of the Company’s 6.75% Convertible Bonds (€ 10.7million) and increased interest income on cash and short-term investments (€4.1 million), resulting primarily from the proceeds of the financing for WaltDisney Studios Park and higher returns on variable rate investments.

 

The impact of additionalinterest expenditures (€ 10.8 million) associated with the new credit agreementwith the CDC, which is being used to partially finance the construction of WaltDisney Studios Park, was entirely offset by the impact of additional interestcapitalisation on the project.

 

32

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During fiscalyear 2001, the component of lease rental expense related to the financingcompanies loan repayments was € 47.4 million. For fiscal years 2002 and 2003, the equivalent amounts are scheduled toincrease to € 71.5 million and € 89.6 million, respectively.   Of these amounts, third- party loanprincipal repayments (requiring a net cash outflow from the Group) were € 13.1million in fiscal year 2001, and will be approximately € 30.3 million and €37.5 million in fiscal years 2002 and 2003, respectively.

 

*Exceptional income(loss), net*

 

For fiscalyear 2001, exceptional losses, net totalled € 7.2 million, primarily reflecting€ 5.3 million of Walt Disney Studios Park pre-opening costs, € 2.3 million oflosses on the early repurchase of a portion of the Company’s 6.75% ConvertibleBonds, € 1.5 million of euro implementation costs, € 1.4 million of fixed assetwrite-offs and € 0.8 million of net adjustments to provisions for risks andcharges.  These exceptional charges werepartially offset by an adjustment to the provision for storm repairs resultingin a net exceptional income of € 2.3 million.

 

For fiscalyear 2000, exceptional income, net totalled € 1.2 million, primarily reflecting€ 10.1 million of net adjustments to provisions (excluding the storm) and assetvaluation reserves, partially offset by fixed asset write-offs of € 3.4million, € 2.6 million of Walt Disney Studios Park pre-opening costs and € 1.7million of net losses related to the storm.

 

*Net income*

 

Despite an improvement in the operatingmargin, net income during fiscal year 2001 decreased € 8.2 million, reflectinghigher lease and net financial charges as well as higher net exceptionalcharges of € 8.4 million.

 

**D.         Liquidityand Capital resources**

 

*Capital Investment*

 

The following table sets forth our capital investments:

 
|                            |   | **Year ended September 30,** |   |
|---------------------------------|--------|------------------------------|--------|
| **(€ in millions)**        |   | **2002**                     |   | **2001** |   | **2000** |   |
| Resort Segment                  |   | **270.4**                    |   | 239.5 |   | 205.9 |   |
| Real Estate Development Segment |   | **7.1**                      |   | 4.4 |   | 0.6 |   |
|                            |   | **277.5**                    |   | 243.9 |   | 206.5 |   |

 

Fiscal year 2002 capital expenditures for the Resort Segment primarilyrelate to the construction of Walt Disney Studios Park (€ 228.6 million) and to investments related to the renovation and improvementof our existing resort assets. Investments in our Real Estate Development Segment represent thepurchase of land that the Group has leased to third-parties under long-termground leases.

 

*Liquidity*

 

As of September 30, 2002, cash and short-term investments totalled €22.4 million, a decrease of € 530.4 million from the prior year-endbalance.  The decreased cash balancereflects the impact of the construction and pre-opening costs for Walt DisneyStudios Park, as well as a significant debt reimbursement during the fiscalyear.  Specifically, the decrease incash resulted from:

 
| • |   | Cash Flows from Operating Activities    |   | € |   | 48.7   million |   |
|--------|--------|-----------------------------------------|--------|--------|--------|---------------------|--------|
| • |   | Cash Flows used in Investing Activities |   | € |   | (269.7) million     |   |
| • |   | Cash Flows used in Financing Activities |   | € |   | (306.1) million     |   |

 

Cash flows from operating activities decreased to € 48.7 million from €143.6 million in the prior year primarily as a result of lower net earnings andchanges in working capital.  The lowernet earnings for the year reflected exceptional pre-opening costs of € 37.2 million, which will not recur in the coming years.  In addition, real estate developmentactivities generated approximately € 24 million less in cash flows in fiscal year 2002 than in 2001.

 

33

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Cash flows used in investing activities totalled € 269.7 million andrelated primarily to construction costs of Walt Disney Studios Park andinvestments related to renovations and improvements to the existing asset base.

 

Cash flows used in financing activities included the repayment of our6.75% Convertible Bond issue upon maturity on October 1, 2001 in the amount of€ 373.7 million and other scheduled debt repayments in the amount of € 8.1million, offset by € 62.5 million of drawings under our € 167.7 million standbyrevolving credit facility with The Walt Disney Company and a € 12.4 milliondecrease in debt and other security deposits.

 

On March 28, 2003, Euro Disney S.A. agreed that all management feespayable to it for the second, third and fourth quarters of fiscal year 2003 andfor all of fiscal year 2004 will be paid on a fiscal year-end basis rather thanquarterly.  A wholly-owned indirectsubsidiary of TWDC agreed to the same payment arrangement for royalties.  Euro Disney S.A. and the other indirectsubsidiary of TWDC furthur agreed that due to a slow-down in tourism and thepotential impact of ongoing geopolitical uncertainties, with respect to thelast three quarters of fiscal year 2003, their combined royalties andmanagement fees will not exceed the maximum amount that could be paid by theGroup while maintaining compliance with the gross operating income covenantunder certain of the Group's debt agreements. Subject to the approval of the Supervisory Board, any portion of theroyalties or managment fees not paid for fiscal year 2003 as a result of theforegoing may in the future become payable if and to the extent that incomebefore lease and financial charges excluding depreciation and amortisation forany year from fiscal year 2004 through fiscal year 2008 exceeds € 450 million.

 

Based upon available cash and short-term investments, the remainingavailability on our € 167.7 million revolving credit facility and currentforecasts of operating performance, we believe that the Group will have theresources necessary to meet funding requirements arising in the foreseeablefuture.  Due to repayment of ourConvertible Bond issue and our substantial investment in Walt Disney StudiosPark, we depend on continued growth in the Resort Segment operating margin toprovide for our cash needs.

 

*Debt*

 

Our principal indebtedness (excluding accrued interest) decreased to €781.4 million as of September 30, 2002 compared to € 1,099.9 million as of September 30, 2001 primarily as a result of thereimbursement of € 373.7 million of the Company’s 6.75% Convertible Bonds upontheir maturity and € 8.1 million of scheduled principal repayments, offset by €62.5 million of new drawings on the TWDC credit facility.  Including the unconsolidated financingcompanies, our principal indebtedness was € 2,219.8 million as of September 30,2002 compared to € 2,569.1 million as of September 30, 2001.

 

Our principal payment obligations, and the principal portion of ourlease payments to the unconsolidated financing companies, recommenced in fiscalyear 1998 pursuant to the terms of the 1994 Financial Restructuring.  We paid € 172.0 million and € 412.1 million(including the Convertible Bond repurchases and maturities) of principal infiscal years 2001 and 2002, respectively (net of principal payments we receivefrom the subordinated loans we made to the financing companies).  On the same basis, we will be required topay € 47.6 million and € 66.9 million (excluding the TWDC credit facility) ofnet principal in fiscal years 2003 and 2004, respectively.

 

On September 30, 1999, the Company executed a credit agreement with theCDC to provide € 381.1 million of subordinated loans to finance a portion ofthe construction costs of Walt Disney Studios Park.  The loans were fully drawn during fiscal year 2001.  The loans bear interest at a fixed rate of5.15% per annum, unless interest or principal payments were to be deferredunder the provisions of the loans, during which time the interest rate on thedeferred amounts is EURIBOR plus 2% or 5.15%, whichever is greater, plus amargin (as defined).  The timing ofinterest payments depends on the size of the Company’s surpluses in cash andshort-term investments at each scheduled annual repayment date.  The annual interest payments due as ofDecember 31, 2001 and 2002 in the total amount of  € 35.0 million have been deferred in accordance with theprovisions of the loans and are accruing interest until the deferred interestis paid.

 

Additionally, the Financial Restructuring agreements include covenantswith respect to our financing arrangements. These covenants include restrictions on additional indebtedness andcapital expenditures, the provision of certain financial information andcompliance with certain financial thresholds. In October 2002, our lenders agreed to lower the required threshold forthe gross operating income financial covenant for fiscal year 2002.  As part of this modification, we will submitto a new gross operating income covenant for fiscal years 2003 and 2004, thelevel of which is based upon our annual operating plans.  During March 2003, the Company agreed towaive its rights to the potential reduction in quarterly bank debt securitydeposits with its Lenders, see Notes 13 and 28 to the Consolidated FinancialStatements in Item 17 "Financial Statements".  Our forecasts indicate that we will be ableto meet the new financial covenant and debt security deposit requirements.

 

*Equity*

 

Shareholders’ equity decreased to € 1,244.8 million at September 30,2002 from € 1,277.9 million at September 30, 2001, as a result of the net lossfor fiscal year 2002.

 

34

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As of September 30, 2002, TWDC, through indirect wholly-ownedsubsidiaries, held 39.1% of the Company’s shares and approximately 16.3% of theCompany’s shares were owned by trusts for the benefit of Prince Alwaleed BinTalal Bin Abdulaziz Al Saud and his family. No other shareholder has indicated to the Company that it holds morethan 5% of the share capital of the Company. No dividend allocation is proposed with respect to fiscal year 2002, andno dividends were paid with respect to fiscal years 2001, 2000 and 1999.

 

**E.         Prospects**

 

**E.1       Outlook – Fiscal Year 2003**

 

•                  **For theTheme Parks, Hotels and Disney Village:**

 

•                  **An importantinvestment cycle nearly complete.**

 

On March 16, 2002 a significant step in thedevelopment of Disneyland Resort Paris was accomplished with the opening of oursecond theme park, Walt Disney Studios. Our new park opened on-time and on-budget and with high attractionoperational reliability from the start. Guest satisfaction levels are high and currently exceed ourexpectations.  Over the next 18 months,we will see the lodging capacity of our site expand by an additional 1,900third-party rooms.  This expansion ofcapacity was always and continues to be an important part of our strategy forincreasing theme park attendance over the coming years.

 

Including the developments currently inprocess, the total third-party and governmental investment in our resort sitewill total € 1.7 billion.  We believethat our recent investments as well as those of our development partners arewell positioned to take advantage of the trends we see in the tourism andleisure industries in Europe.  In thenear term, however, our operations may be impacted by the on-going war in Iraq,and other geopolitical uncertainties.

 

Since opening, Disneyland Resort Paris hasbecome the most popular and most visited family tourist destination inEurope.  The uniqueness of the Disneyfranchise and our product offer, the exceptional transportation networksavailable to guests visiting our resort, and the high quality partners investingin our development add to our unmatched competitive advantage.  Our business model is one of long-termrevenue growth through the leveraging of these advantages.

 

During fiscal year 2003, we will continue tofocus on fundamentals, namely the quality of our product and higher theme parkattendance.  We believe the opening ofthe 1,450 additional third-party hotel rooms before our peak summer season andthe extension of the average guest length of stay at the Resort are critical toour plan to increase theme park attendance in fiscal year 2003.  Success on these fundamentals coupled withcarefully managed cost controls should lead to improvements in our operatingmargin in the Resort Segment.

 

•                  **A focus onthe heart of our product offer – Quality Family Entertainment**

 

Our entertainment offer in fiscal year 2003is filled with new and exciting elements as well as our tried and true Disneyclassics.   The year will again include*TheWonderful World of Disney Parade*, *the Main Street Electrical Parade,*the*DisneyCinema Parade* and *The TarzanTM Encounter*stageshow.  Seasonal events such as *HalloweenFestival*, *Christmas Season* and, new this year, the *Jungle BookCarnival* will continue to reinforce our product offer during thefall and winter seasons.  For summer2003, *Disney’sFantillusion Parade* will make its debut in Disneyland Park.  This night-time spectacular will allow ourguests to discover their favourite *Disney* characters in a fantasy setting andsparkling showers of light.

 

•                  **In the RealEstate Development segment,** we are on track with our strategy toleverage the investments of third parties in the development of our resort.During fiscal year 2002, we finalised a fourth hotel agreement for 400additional rooms to be constructed on our site and saw the opening of a 150room third-party hotel in Val d’Europe (a new city on our development site). Wecurrently have signed agreements for the opening of approximately 1,900additional third-party hotel rooms/vacation units over the next 18 months(1,450 of which will open before summer 2003), after which the on-site hotelroom/vacation unit capacity will total 7,800.

 

Fiscal year 2002 financial results for ourReal Estate Development Segment were in line with our expectations.  The segment generated € 27.3 million ofrevenues, which contributed  € 12.1million to our operating margin.   Infiscal year 2003, we anticipate a significantly lower level of contributionfrom this segment than in fiscal year 2002.

 

35

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**F.         OtherMatters**

 

*Accounting Policiesand Estimates*

 

We believe that the application of the following accounting policiesare important to our financial position and results of operations, and requirejudgements and estimates on the part of management.  For a summary of all of our accounting policies, see Note 2 tothe Consolidated Financial Statements in Item 17 “Financial Statements”.

 

# **French GAAP LeaseAccounting - We lease a significant portion of our operating assets.  Pursuant to options available under Frenchaccounting principles, we account for these transactions as operating leasesand as a result, the leased assets and the related lease obligation areexcluded from our balance sheet. Payments under these leases are recorded as Lease Rental Expense as theybecome due.**

 

Revenue Recognition – The Company has revenue recognition policies forits operating segments, which are appropriate to the circumstances of eachbusiness or revenues flow.  We recordrevenues for our Resort Segment as the related service is provided to ourguests.  In addition, the Resort Segmentincludes revenues associated with long-term sponsorship contracts, which arerecognized pro-rata over the term of the contracts.  In our Real Estate Development Segment, we recognize revenue onland sales upon closing of each transaction, while revenues related to servicecontracts and ground leases are recognized when the service is rendered.

 

Contingencies and Litigations - We are continually involved in certainlegal proceedings and tax audits and, as required, have accrued our estimate ofthe probable costs for the resolution of these claims.  Our estimates are developed in consultationwith outside counsel and are based upon an analysis of potential results,assuming a combination of litigation and settlement strategies.  It is possible, however that future resultsof operations for any particular annual period could be materially affected bychanges in our assumptions or the effectiveness of our strategies related tothese proceedings.

 

*Forward-Looking Statements*

 

The Private Securities Litigation Reform Act of 1995 (the “Act”)provides a safe harbour for forward-looking statements made by or on behalf ofthe Group.  The Group and itsrepresentatives may from time to time make written or oral statements that are“forward-looking”, including statements contained in this report and otherfilings with the Securities and Exchange Commission and in reports to theGroup’s shareholders.  All statementsthat express expectations and projections with respect to future matters,including the launching or prospective development of new business initiatives;theme park and resort projects; and the implementation of the euro, areforward-looking statements within the meaning of the Act.  These statements are made on the basis ofmanagement’s views and assumptions, as of the time the statements are made,regarding future events and business performance.  There can be no assurance, however, that management’sexpectations will necessarily come to pass.

 

*Factors that may affect forward-looking statements. *A wide range offactors could materially affect future developments and performance, includingthe following:

 

•                  changesin strategies, which may result in changes in the types or mix of businesses inwhich the Group is involved or chooses to invest;

 

•                  changesin European and global or regional economic and political conditions, which mayaffect attendance and spending at the Group’s Theme Parks and hotels;

 

•                  changesin European and global financial and equity markets, including significant interestrate fluctuations, which may impede the Group’s access to, or increase the costof, external financing for its operations and investments;

 

•                  increasedcompetitive pressures, both domestically and internationally, which may, amongother things, affect the performance of the Group’s Theme Parks and hotels andlead to increased expenses in such areas as marketing;

 

•                  labourdisputes, which may lead to increased cost or disruption of operations; and

 

36

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•                  changingpublic and consumer taste, which may affect the Group’s entertainment andmerchandising businesses.

 

This list of factors that may affect future performance and theaccuracy of forward-looking statements is illustrative, but by no means exhaustive,and should be read in conjunction with Item 3.D. Risk Factors.  Accordingly, all forward-looking statementsshould be evaluated with the understanding of their inherent uncertainty.

 

# **ITEM 6.**  DIRECTORS,SENIOR MANAGEMENT AND EMPLOYEES

 

**A.****                          Directors and senior management**

 

**members of the ManagementCompany’s Board of Directors and Executive Officers**

 

As discussed in Item 10, Section B.1 - “Memorandum and Articles ofAssociation - The Management Company (*Gérant* )”, Euro Disney S.A. manages ourCompany. The Board of Directors of the Management Company is currently composedas follows:

 
| **Name**          |   | **Age** |   | **Position**                         |   |
|-------------------|--------|---------|--------|--------------------------------------|--------|
|              |   |    |   |                                 |   |
| James A. Rasulo   |   | 47      |   | Chairman and Chief Executive Officer |   |
|              |   |    |   |                                 |   |
| Rosemary Bloom    |   | 40      |   | Member                               |   |
|              |   |    |   |                                 |   |
| Dominique Cocquet |   | 55      |   | Member                               |   |
|              |   |    |   |                                 |   |
| Philippe Laco     |   | 47      |   | Member                               |   |

 

The term of office for each member of the Board of Directors of theManagement Company is one year, subject to renewal.

 

The executive officers of the Management Company are currently asfollows:

 
| **Name**            |   | **Age** |   | **Position**                                                         |   |
|---------------------|--------|---------|--------|----------------------------------------------------------------------|--------|
|                |   |    |   |                                                                 |   |
| James A. Rasulo     |   | 47      |   | Chairman, Chief Executive Officer and Acting Chief Financial Officer |   |
|                |   |    |   |                                                                 |   |
| Yann Caillère  |   | 49      |   | Senior Vice-President – Operations                              |   |
|                |   |    |   |                                                                 |   |
| Dominique Cocquet   |   | 55      |   | Senior Vice-President – Development   and External Affairs |   |
|                |   |    |   |                                                                 |   |
| Jean-Claude Olivier |   | 52      |   | Senior Vice-President – Human Resources                         |   |

 

**Rosemary Bloom**was elected to the Board of Directors of the Management Company**inMarch 2001.  She was appointed SeniorVice-President and European General Counsel of Walt Disney International inNovember 2000.  In 1994, she joinedBuena Vista Home Entertainment as Vice-President, Business & LegalAffairs.  Prior to this, she was apartner with various law firms in New York and London.

 

**Yann Caillère**joinedthe Management Company**in March 1995 and became Vice-Presidentof Hotels and Disney Village Operations in September 1997.  He was promoted to Senior Vice-President –Operations in April 2000.  He previouslyspent 15 years in various management positions with the Pullman Hotels and theAccor group in France and abroad.

 

37

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**Dominique Cocquet**became Senior Vice-President of Real Estate and General Secretary in July 1994,a member of the Board of Directors in June 1993 and a Vice-President in1992.  He joined the Management Company**asManager of Real Estate Finance in 1989 and became Director of ExternalRelations in 1991.  He was previouslyGeneral Manager of Forest Hill Development and Urbaclub Development from 1987through 1989.

 

**Philippe Laco**was appointed as member of the Board of Directors of the Management Company inJanuary 2001. He joined The Walt Disney Company in 1996 as Vice-President andManaging Director of Disney Channel France, a subsidiary of Walt DisneyTelevision International, before being promoted Country Manager, The WaltDisney Company, France & Benelux, responsible within the region forcoordinating The Walt Disney Company activities, developing new business andoptimising the Disney brand. Prior to joining The Walt Disney Company, M. Lacospent over 20 years in various management positions within the entertainmentbusiness, including Warner Music France as Managing Director, and Polygram.

 

**Jean-Claude Olivier**joined the Management Company as Senior Vice-President Human Resources  in September 2002.  He was previously Vice-President Human Resources of Etam from1992 to 2002, Vice-President Human Resources of Prime Computervision from 1988through 1992 and spent over 15 years in various management positions with RankXerox.

 

**James A. Rasulo**joined the Management Company as Executive Vice-President in August 1998 andwas named President and Chief Operating Officer in January 1999. He joined TheWalt Disney Company in 1986 and held positions of increasing responsibility inStrategic Planning. From 1993 to 1995, he served as Senior Vice-President,Corporate Alliances, and then was named Senior Vice-President and GeneralManager of Club Disney in 1996. Prior to joining The Walt Disney Company, healso worked on the Corporate Staff at the Marriott Corporation and ChaseManhattan Bank. He has been recently appointed within TWDC as Chairman of WaltDisney Parks and Resorts, which includes worldwide Parks and Resorts of DisneyGroup, the Disney Cruise Line, professional sport teams and Walt DisneyImagineering.

 

The current members of our Supervisory Boardare:

 
| **Name**                        |   | **Position** |   | **Expiration  of current  term of office** |   |
|---------------------------------|--------|--------------|--------|--------------------------------------------|--------|
|                            |   |         |   |                                       |   |
| Antoine Jeancourt-Galignani (*) |   | Chairman     |   | 2005                                       |   |
|                            |   |         |   |                                       |   |
| Sir David Paradine Frost        |   | Member       |   | 2005                                       |   |
|                            |   |         |   |                                       |   |
| Philippe Labro (**)             |   | Member       |   | 2005                                       |   |
|                            |   |         |   |                                       |   |
| Sanford M. Litvack              |   | Member       |   | 2003                                       |   |
|                            |   |         |   |                                       |   |
| Jens Odewald (*)                |   | Member       |   | 2003                                       |   |
|                            |   |         |   |                                       |   |
| Laurence Parisot (*)            |   | Member       |   | 2003                                       |   |
|                            |   |         |   |                                       |   |
| Thomas O. Staggs (**)           |   | Member       |   | 2005                                       |   |

 

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*(*)    Memberof the Financial Accounts Committee.*

*(**)  Memberof the Nomination Committee.*

 

**AntoineJeancourt-Galignani**, Chairman of Gecina, was electedto the Supervisory Board in 1989, and was appointed as Chairman in September1995.  He has also served as Chairman ofour Financial Accounts Committee since its creation in 1997.

 

**Sir David ParadineFrost** was elected as a member of the Supervisory Boardin 1999.  He is currently Chairman andChief Executive Officer**of David Paradine, Ltd. and co-founder ofLondon Weekend Television.

 

**Philippe Labro**was elected as a member of the Supervisory Board in 1996. He was Vice-Presidentand General Manager of RTL France radio station.

 

38

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**Sanford M. Litvack**was appointed as a member of the Supervisory Board in 1995. Mr. Litvackpreviously was Vice Chairman of the Board of Directors of The Walt DisneyCompany and previously served as The Walt Disney Company’s Senior ExecutiveVice-President and Chief of Corporate Operations from 1994 to 1999. He alsoserved as The Walt Disney Company’s Executive Vice-President, Law and HumanResources, and earlier as Senior Vice-President and General Counsel.  He is an attorney at law and is currently aconsultant of The Walt Disney Company.

 

**Jens Odewald**,Chairman of the Supervisory Board, Tchibo Holding AG, Eurobike AG andSystematics AG was elected as a member of the Supervisory Board on September1989.

 

**Laurence Parisot**,Chairman and Chief Executive Officer of IFOP, was elected as a member of theSupervisory Board in February 2000.

 

**Thomas O. Staggs**,Senior Executive Vice-President Finance and Chief Financial Officer of TWDC waselected as a member of the Supervisory Board in March 2002.

 

The following is a complete list of positions and directorships held byeach member of the Supervisory Board in French and Foreign companies:

 
| **Members of the Supervisory Board**                                      |                                                                                                                 | **Other positions and directorships held in French and  Foreign Companies**                                                                                                                                                                                                                                                                                                                                |
|---------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Antoine  Jeancourt-Galignani**,*President*Compensation *: € 53,357 |                                                                                                                 | Gecina  SNA Holding (Bermuda) Ltd                                                                                                                                                                                                                                                                                                                                                                          |   | *President of the  Board of Directors* |
|                                                                      | AGF  Kaufman & Broad  Société Générale  SNA SAL, Liban  SNA-Re (Bermuda) Ltd  Total Fina Elf |                                                                                                                                                                                                                                                                                                                                                                                                       | *Member of the  Board of Directors*

  |
|                                                                      | Fox Kids Europe NV, Pays-Bas                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                       | *Member of the Supervisory  Board* |
| **Sir David Paradine  Frost**  Compensation*: € 19,056               |                                                                                                                 | 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  Hotcourses Ltd  Paradine Co-Productions Ltd  Paradine Documentaries Ltd  Paradine Castle Communications Ltd  Rogue Trader Production Ltd  Newsplayer Group Plc  Tele-circuit Ltd  Wellbeing  West 175 Media Group |   | *President / Member  of the Board of Directors* |
| **Philippe Labro**Compensation*: € 26,679                            |                                                                                                                 | PhLCommunication S.A.R.L.**                                                                                                                                                                                                                                                                                                                                                                                |   | *Project Director,  Design and Operations* |
| **Sanford M. Litvack**  Compensation*: None                               |                                                                                                                 | Antigenics  Amateur Athletic Foundation  Hewlett-Packard Company  PacifiCare Health Systems, Inc.  UCLA Medical Center                                                                                                                                                                                                                                                                                     |   | *Member of the Board  of Directors*

  |
|                                                                      | California Institute of the Arts                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                       | *Member of the  Board of Trustees* |
|                                                                      | The Walt Disney Company                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                       | *Consultant* |
| **Dr Jens Odewald**  Compensation*: € 11,434                         |                                                                                                                 | Eurobike AG, Düsseldorf  Systematics AG, Hamburg  Tchibo Holding AG, Hamburg                                                                                                                                                                                                                                                                                                                          |   | *President of the  Supervisory Board* |
|                                                                      | Odewald & Companies GmbH, Berlin                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                       | *Chairman of the  Administrative Board and Managing Director* |

 

39

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| **Members of the Supervisory Board**             |                                                                                                                                     | **Other positions and directorships held in French and  Foreign Companies**                                                       |
|--------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|
| **Laurence Parisot**Compensation*: € 19,056 |                                                                                                                                     | Ifop-Asecom Latin America (Argentine)  Ifop International SA  Ifop Participations SA  Ifop SA  Ifop Westwego (Canada)  Optimum SA |   | *President*

  |
|                                             | Ubi France                                                                                                                               |                                                                                                                              | *Member of the  Board of Directors* |
|                                             | Gradiva SARL  MP3                                                                                                                        |                                                                                                                              | *Gérant* |
| **Thomas O. Staggs**Compensation*: None          |                                                                                                                                     | Disney Enterprises, Inc.                                                                                                          |   | *Senior Executive  Vice-President and Chief Financial Officer* |
|                                             | The Walt Disney Company                                                                                                                  |                                                                                                                              | *Senior Executive  Vice-President and Chief Financial Officer Chairman, Investment and  Administrative Committee* |
|                                             | Disney Worldwide Services, Inc.                                                                                                          |                                                                                                                              | *Executive  Vice-President* |
|                                             | ABC News Online Investments, Inc.

ABC, Inc.  Anaheim Angels Baseball Club, Inc.  Disney Media Ventures, Inc.  Disney TeleVentures, Inc. |                                                                                                                              | *Vice-President* |
|                                             | Allemand Subsidiary, Inc.  B.V. Film Finance Co. II  Steamboat Ventures, LLC                                                             |                                                                                                                              | *Director* |
|                                             | EDL Holding Company                                                                                                                      |                                                                                                                              | *Chairman and  President, Director* |
|                                             | EDL S.N.C. Corporation  Euro Disney Investments, Inc.  WDW Services II, Inc.                                                             |                                                                                                                              | *President /  Director* |
|                                             | Larkspur International Sales, Inc.  WDT Services, Inc.  WDWH&R Services, Inc.                                                        |                                                                                                                              | *President* |
|                                             | ABC Family Worldwide, Inc.                                                                                                               |                                                                                                                              | *Chief Financial  Officer* |
|                                             | Fox Kids Europe N.V.                                                                                                                     |                                                                                                                              | *Chairman* |

 

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| ***    |   | *Compensation paid  by the Group in connection with fiscal year 2002.  The aggregate compensation of Supervisory Board during fiscal  year 2002 also includes € 3,811 paid to Francis Veber, member of the  Supervisory Board until March 26, 2002.* |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                           |
| ****   |   | *In fiscal year 2001, the Group granted a  one-year consulting contract to PhLCommunication S.A.R.L.  Amounts due to PhLCommunication S.A.R.L.  under this contract in fiscal year 2002 were € 90,000.*                                              |

 

At its meeting on March 26, 2002, the Supervisory Board decided thatthe portion of future compensation allocated to each member of the SupervisoryBoard would be proportional to their attendance at meeting of the SupervisoryBoard.

 

**B.****                          Compensation**

 

Aggregate compensation paid by us to the members of the Board ofDirectors and the officers of the Management Company as a group (including theexecutive officers and Board members mentioned in item 6.A “Directors andSenior Management” above, provided they held the same positions last year orwho were directors and/or officers of the Management Company for all or part offiscal year 2002) was approximately € 2.6 million in fiscal year 2002,excluding the exercise of stock options. Officers of the Management Company andcertain other management employees are eligible for participation in ourdiscretionary bonus programs at varying levels. The aggregate amount set asideor accrued by us to provide pension, retirement or similar benefits for thesame executive officers and directors in respect of fiscal year 2002 was € 0.2million. As of September 30, 2002, these same officers held together a total of3.7 million Euro Disney S.C.A. stock options. We bear the cost of all compensation paid to the executive officers ofthe Management Company.

 

40

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The aggregate compensation paid by us to the members of the SupervisoryBoard during fiscal year 2002 was  €133,393. In accordance with the disclosure requirements in France, we disclosein our management report the individual compensation paid to each of themembers of our Supervisory Board (see table above).

 

In accordance with the disclosure requirements in France, the Groupreported the following fiscal year 2002 stock option transactions with certainmembers of the Board of Directors and executive officers of the ManagementCompany:

 

Euro Disney S.C.A. Options Granted:

** **
| **Name**           |   | **Number of  Options *** |   | **Exercise  Price** |   | **Expiration  Date** |   |
|--------------------|--------|--------------------------|--------|---------------------|--------|----------------------|--------|
|               |   |                     |   |                |   |                 |   |
| Yann Caillère |   | 150 000                  |   | € 1.10         |   | 01/31/2010           |   |
|               |   |                     |   |                |   |                 |   |
| Serge Naïm    |   | 80 000                   |   | € 1.10         |   | 01/31/2010           |   |
|               |   | 70 000                   |   | € 1.12         |   | 02/13/2010           |   |

 

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** See Note 21 to the Consolidated Financial Statements in Item 17“Financial Statements” for a description of our stock option plan.*

 

No stock options in The Walt Disney Company were granted to members ofthe Board of Directors or executive officers of the Management Company duringfiscal year 2002.

 

**C.****                          Board practices**

 

See discussion below in Item 10, Section B.2 – “Memorandum and Articlesof Association – the Supervisory Board”.

 

**D.****                          Employees**

 

See discussion above in Item 4, Section A.5 - “Human ResourceManagement”.

 

**E.****                            Share ownership**

 

No member of the Board of Directors orexecutive officers of the Management Company (*Gérant*) and no members ofthe Supervisory Board beneficially own 1% or more of the shares of the Company,either directly or potentially through the exercise of stock options.

 

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**ITEM 7.****  MAJORSHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

 

**A.         Majorshareholders**

 

Set forth below as of February 28, 2003, are the number of shares ofcommon stock and percentages owned by each person that is known to us to ownmore than 5% of the outstanding shares of our common stock:

 
| **Title of Class** |   | **Identity  of  Person or Group** |   | **Amount  Owned**    |   | **Percent of  Class (*)** |   |
|--------------------|--------|----------------------------------------|--------|----------------------|--------|---------------------------|--------|
|               |   |                                   |   |                 |   |                      |   |
| Common Stock       |   | EDL Holding Company (**)               |   | 412.8 million shares |   | 39.1                      | %      |
|               |   |                                   |   |                 |   |                      |   |
| Common Stock       |   | Kingdom 5-KR-135 Ltd. (***)            |   | 172.5 million shares |   | 16.3                      | %      |

 

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(*)                       Based on 1,055,937,724 shares ofcommon stock outstanding as of February 28, 2003.

(**)                EDL Holding Company is wholly-owned byThe Walt Disney Company.

(***)         A company whose shares are held by trusts forthe benefit of Prince Alwaleed and his family.

 

In connection with the Financial Restructuring, The Walt Disney Companyhas agreed, so long as certain indebtedness is outstanding to our majorcreditors, to hold at least 25% of our common stock until June 2004 and atleast 16.67% until 2016.  In connectionwith the financing of Walt Disney Studios Park, The Walt Disney Company hascommitted to the CDC to hold at least 16.67% of our common stock until2027.  See also Item 4, Section A.6.3 -“Undertakings and Agreements with The Walt Disney Company and Subsidiaries”, Item4, Section C - “Organisational Structure” and Item 10, Section B -“Memorandum and Articles of Association”.

 

As of February 28, 2003, the total number of shares of common stockheld by our executive officers and members of the Supervisory Board as a groupwas, to our knowledge, 13,062 shares.

 

**B.         Relatedparty transactions**

 

During the three years ending September 30, 2002, the following amountswere incurred under related party transactions with The Walt Disney Company andits subsidiaries (see in Item 4, Section A.6.3 - “Undertakings and Agreementswith The Walt Disney Company and Subsidiaries” and Item 10, Section B.1 – “TheManagement Company” for a full description of these contracts and agreements):

 

| **(€ in millions)** |   | **2002** |   | **2001** |   | **2000** |   |
|--------------------------|--------|----------|--------|----------|--------|----------|--------|
|                     |   |     |   |     |   |     |   |
| Development Agreement    |   | **92.4** |   | 48.7     |   | 132.2    |   |
| License Agreement *      |   | **24.0** |   | 21.8     |   | 21.5     |   |
| Management Fee ***       |   | **11.5** |   | 9.9      |   | 9.6      |   |

 

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** See Note 18-b to the Consolidated Financial Statements in Item 17“Financial Statements”.*

 

On July 3, 2001, the Group granted a one-year consulting contract toPhLCommunication S.A.R.L., a company affiliated with Mr. Philippe Labro, amember of our Supervisory Board. Amounts due to PhLCommunication S.A.R.L. underthis contract in fiscal year 2002 were € 90,000.  (See Item 6, Section A - “Directors and Senior Management”).

 

On March 28, 2003, the Group entered into agreements with theManagement Company and The Walt Disney (Netherlands) B.V. to pay managementfees and royalties on a fiscal year-end basis rather than quarterly for thesecond, third and fourth quarters of fiscal year 2003 and for all of fiscalyear 2004.  In addition, with respect tothe last three quarters of fiscal year 2003, their combined royalties andmanagement fees will not exceed the maximum amount that could be paid by theCompany while maintaining compliance with the gross operating income covenantunder certain of the Company's debt agreements.  Subject to the approval of the Supervisory Board, any portion ofthe royalties or management fees not paid for fiscal year 2003 as a result ofthe foregoing may in the future become payable if and to the extent that incomebefore lease and net financial charges excluding depreciation and amortisationfor any year from fiscal year 2004 through fiscal 2008 exceeds € 450 million.

 

**C.         Interestsof experts and counsel**

 

Not applicable.

 

42

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**ITEM 8.****  FINANCIALINFORMATION**

 

**A.****                          Consolidated Statements and Other FinancialInformation**

 

**Financial statements**

 

Please see Item 19, Section A – “Financial Statements” for a list ofall financial statements filed as part of this Annual Report.

 

**Legal proceedings**

 

We are party to various legal proceedings inFrance involving some remaining claims related to the construction of the DisneylandResort Paris and certain other litigation arising in connection with theoperation of the Resort.  Managementbelieves that we have made appropriate provisions with respect to these legalproceedings, and that  such proceedings,either individually or in the aggregate,****will not have a material adverse impact onour financial position.

 

**Dividends**

 

The payment of dividends on common stock fromdistributable profits may be recommended by the Management Company for approvalby the shareholders at our annual general meeting, which must be held withinsix months after the end of the fiscal year. We did not declare or pay any dividends in respect of the fiscal yearsended September 30, 1996 through 2001, and have not proposed to declare or payany dividend in respect of the fiscal year ended September 30, 2002.

 

Our ability to pay dividends in the future isdependent upon the availability of distributable profits on the basis of theunconsolidated financial statements of Euro Disney S.C.A. and the Company’soperating results, liquidity and financial condition. Additionally, ourprincipal debt agreements related to the financing of Disneyland Park,Disneyland Hotel and Davy Crockett Ranch with a syndicate of internationalbanks, prohibits us from paying dividends if we are in default with respect toloan payments due under our debt agreements with the CDC and IA Bank loan, aswell as if any taxes become overdue and remain unpaid (unless payment of suchoverdue tax is being contested in good faith and adequate provision in cash hasbeen set aside).

 

Increase or reduction in our net income ineach fiscal year (after deduction for reserves), by any profit or loss carriedforward from prior years, as the case may be, is available for distribution tothe Shareholders of the Company as dividends.

 

We are, however, required to designate atleast 5% of accumulated profits, if any, as a legal reserve.  This transfer shall cease to be requiredwhen the cumulative legal reserve reaches one-tenth of the share capital.  The legal reserve is distributable only uponour Company’s liquidation.

 

Our by-laws provide that 0.5% of net incomeavailable for distribution as dividends be paid to the General Partner,irrespective of any payment of dividends to the Shareholders and that,thereafter, distributable profits shall be allocated in the following order:

 

(i)      ifnecessary, 5% to the legal reserve,

(ii)              theamount, if any, that the annual ordinary general meeting, upon the proposal ofthe Management Company, shall decide to allocate to reserves or to be carriedforward as retained earnings, and

(iii)           thebalance of distributable profits remaining, if any, to the shareholders prorata in proportion to their respective holdings of shares of common stock.

 

Dividends must be paid within nine months ofthe end of our fiscal year and are payable to holders, on the date of payment,of shares of common stock outstanding at the time such dividends were approvedfor distribution by the shareholders.  Dividendsnot claimed within five years of the date of payment revert to the Republic ofFrance.  The shareholders have the rightin an ordinary general meeting to authorise the grant to each shareholder of anoption to receive all or part of any annual or interim dividends in either cashor shares of common stock.

 

43

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**B.            Significant changes**

 

No significant change has occurred since thedate of the annual financial statements.

 

# **ITEM 9.**     THEOFFER AND LISTING

 

**A.****                          Offer and listing details**

 

The table below sets forth, for the periodmentioned, the reported high and low quoted prices for the common stock onEuronext Paris S.A. (formerly the Paris stock exchange).

 
| **Fiscal Year** |   | **Price Per  Share** |     |
|-----------------|--------|----------------------|----------|
|            |   | **High**             |     | **Low** |   |
|            |   | **€**           |     | **€** |   |
| *1998*          |   | 1.80                 |     | 0.95 |   |
| *1999*          |   | 1.47                 |     | 0.96 |   |
| *2000*          |   | 1.27                 |     | 0.56 |   |
| *2001*          |   |                 |     |   |   |
| First Quarter   |   | 0.67                 |     | 0.47 |   |
| Second Quarter  |   | 0.83                 |     | 0.54 |   |
| Third Quarter   |   | 1.21                 |     | 0.74 |   |
| Fourth Quarter  |   | 1.10                 |     | 0.51 |   |
| *2002*          |   |                 | * * |   | * * |
| First Quarter   |   | 0.99                 |     | 0.75 |   |
| Second Quarter  |   | 1.21                 |     | 0.89 |   |
| Third Quarter   |   | 1.03                 |     | 0.59 |   |
| Fourth Quarter  |   | 0.82                 |     | 0.40 |   |
|            |   |                 |     |   |   |
| September 2002  |   | 0.65                 |     | 0.40 |   |
| October 2002    |   | 0.55                 |     | 0.40 |   |
| November 2002   |   | 0.52                 |     | 0.43 |   |
| December 2002   |   | 0.58                 |     | 0.42 |   |
| January 2003    |   | 0.53                 |     | 0.42 |   |
| February 2003   |   | 0.47                 |     | 0.39 |   |

 

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(1)          Share price informationfor periods prior to January 1, 1999 was published in French francs and hasbeen translated into euro using the official exchange rate of 6.55957 Frenchfrancs per euro.

(2)          Share price informationfor periods prior  to November 17, 1999has been adjusted to take into account the dilution effect of the 1999 rightsoffering.

 

On February 28, 2003, the closing price of the currently outstandingshares of common stock on Euronext Paris was 0.42 euro**,**equivalent to U.S. $ 0.45per share, as calculated by using the noon buying rates in the city of New Yorkfor cable transfers in euros as certified for customs purposes by the FederalReserve Bank of New York (the “Noon Buying Rates”).

 

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**B.****                          Plan of Distribution**

 

Not applicable.

 

**C.****                          Markets**

 

**C.1      CommonStock**

 

The principal trading market for the common stock is EuronextParis.  In addition, the common stock islisted and traded on the Brussels Stock Exchange and is traded on SEAQInternational in London.  SterlingDepository Receipts, each representing one share of common stock, are listedand traded on the London Stock Exchange. The Sterling Depository Receipts currently settle through the ResidualSettlement in the Crest system.  Thereis no active public market in the United States for the common stock, and thecommon stock is not listed on any U.S. securities exchange.

 

Under French Law, as amended as of July 2, 1998, listed companies maypurchase their own shares in certain limited circumstances. French law alsorequires us to file a copy of any shareholders’ resolution authorising suchtransactions and an information memorandum regarding certain matters with the *Commissiondes Opérations de Bourse* (the “COB”), the administrative agency ofthe French government responsible for overseeing the French securities markets,prior to engaging in such transactions, as well as a monthly report of anypurchases and sales thereafter.  Purchasesand sales of the shares of common stock may not account for more than 25% ofthe total daily trading volume in such shares in any given period and, exceptduring a public offering, may be performed on our behalf by only oneintermediary per stock exchange session. The Company has not made and has no plans to make any such purchases andthere is currently no authorisation granted by the shareholders for suchpurchases.  Common stock held by us, ifany, is deemed to be outstanding under French law but is not entitled to anydividends, voting rights or preferential subscription rights.

 

**C.2      Warrants**

 

As part of the Financial Restructuring, we issued 290 million warrants,enabling the holders of such warrants to subscribe for 1.069 shares of our commonstock at a price of € 6.10 for every three warrants held.  The warrants have a term of ten years andmay be exercised between January 1996 and July 2004.  The warrants are listed on the official list of Euronext ParisS.A.

 

**C.3      SubordinatedBonds Redeemable in Shares of Common Stock**

 

In connection with the Financial Restructuring and pursuant to theauthorisation granted by the extraordinary general meeting of shareholders ofJune 8, 1994, we issued € 152.4 million of Subordinated Bonds Redeemable in Sharesof Common Stock (“*Obligations Subordonnées Remboursables en Actions*”, or“ORAs”) in July 1994, for a total of 2,500,121 ORAs at an issue price of €60.98 per ORA.  Pursuant to variousundertakings in connection with the Financial Restructuring, EDL HoldingCompany acquired and presently holds approximately 99.3% of the ORAs.

 

During fiscal year 1998, EDL Holding Company and certain other holdersof the remaining 0.7% offered to conditionally waive the interest and capitalredemption rights of their ORAs in return for an option exercise price of €0.49 per ORA. Management accepted the offers and exercised these options inSeptember 1998. As a result, the rights of approximately 2.5 million ORAs wereconditionally waived.  Based upon thefiscal year 1999 results, the conditions for the reinstatement of the waivedrights were met and effective October 1, 1999, the waived rights werereinstated. For further information, see Notes 11 and 27 to the ConsolidatedFinancial Statements in Item 17 — “Financial Statements”.

 

The ORAs are not listed on any securities exchange.  There is no market for the ORAs in France,the United States or elsewhere, and we do not expect any market to develop.

 

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**D.****                          Selling shareholders**

 

Not applicable

 

**E.****                            Dilution**

 

Not applicable.

 

**F.         Expensesof the issue**

 

Not applicable.

 

**ITEM 10.****ADDITIONALINFORMATION**

 

**A.****                          Share capital**

 

Not applicable.

 

**B.         Memorandumand articles of association**

 

We are a *société en commandite par actions* (general partnership) dulyorganised and existing under the laws of France and registered under number334-173-887 with the *Registre du Commerce et des Sociétés* inMeaux, France.  Our legal structureconsists of a *Gérant* (the Management Company), which is vested withmanagement authority, an *associé commandité* (the General Partner),which bears unlimited liability for our actions, shareholders, which do nothave management authority and which have limited liability and a SupervisoryBoard, which is elected by the shareholders and that advises the ManagementCompany.  Our general purpose is todevelop and operate entertainment parks such as the Disneyland Resort Paris andall other commercial activities or operations that we may see fit to developand operate, including on the property granted to us by the Republic of Franceby an agreement dated March 24, 1987 or relating to the Disneyland ResortParis.  The four primary components ofour legal structure are:

 

•             the ManagementCompany (*Gérant*),appointed to manage our Company;

**•**             the Supervisory Board;

•             the**GeneralPartner; and

**•**             the limited partners or Shareholders.

 

**B.1      The Management Company (the *Gérant)***

 

Euro Disney S.A., a French corporation*,*is our sole manager.  The “Management Company” is an indirect,wholly-owned subsidiary of The Walt Disney Company.  Under our by-laws, Euro Disney S.A. in its capacity as managerhas the power to take any and all action in the name of the Company within thescope of our corporate purpose and to bind us in all respects. Under Frenchlaw, the primary responsibility of the Management Company is to manage ouraffairs at all times in our best interests.

 

If Euro Disney S.A. ceases to be our Gérant for any reason, the GeneralPartner (currently an indirect subsidiary of The Walt Disney Company) has theexclusive right to appoint a successor. The Management Company may resign on giving six months notice to theSupervisory Board and otherwise may only be removed from office:

 

•                  forincapacity, including bankruptcy or judicial reorganisation, by the GeneralPartner;

•                  forany other reason with the consent of both the General Partner and holders of atwo-thirds majority of the shares of our common stock at an extraordinarygeneral meeting; or

•                  bya court on the grounds of fraud or gross mismanagement.

 

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Under the by-laws, the Management Company is entitled to annual feesconsisting of a base management fee and a management incentive fee, and is alsoentitled to a fee payable on the sale of hotels, each as described below.  In addition, the by-laws provide that theManagement Company is entitled to be reimbursed by us for all its direct andindirect expenses incurred in fulfilling its role.  The Management Company has agreed to a revised payment schedulefor the base management fee for the last three quarters of fiscal year 2003 andfor all of fiscal year 2004 and to a reduction, under certain conditions, of aportion of these fees for year 2003. See Item 5, Section D – “Liquidity”. No amendment may be made to the entitlement of the Management Companywith respect to remuneration or reimbursement of expenses except by amendmentto the by-laws, which requires the approval of the General Partner and theshareholders as described below.

 

***Base Management Fee***

 

The by-laws of the Company originally provided that the base managementfee was equal to 3% (initially scheduled to increase to 6% in 1997) of ourtotal revenues, as defined, less 0.5% of net income for the relevant fiscalyear.  As part of the FinancialRestructuring, our by-laws were amended, at an extraordinary general meeting ofthe shareholders on June 8, 1994, such that the base management fee will equalthe following percentages of our revenues, as defined, for the relevant fiscalyear:

 
| (i)   |   | from October  1, 1993 to September 30, 1998: |   | 0.0%      |
|-------|--------|----------------------------------------------|--------|-----------|
| (ii)  |   | from October  1, 1998 to September 30, 2008: |   | 1.0%      |
| (iii) |   | from October  1, 2008 to September 30, 2013: |   | 1.5%      |
| (iv)  |   | from October  1, 2013 to September 30, 2018: |   | 3.0%; and |
| (v)   |   | from October  1, 2018 on:                    |   | 6.0%      |

 

Beginning on October 1, 2008, the right of the Management Company toreceive payment of that portion of the base management fee in excess of anamount equal to 1% of revenues, as defined, will be contingent upon ourachieving a positive net consolidated income before taxes for the fiscal yearto which such fee relates, after taking into account all of such remuneration,and upon our legal ability to distribute dividends for such fiscal year.  In addition, that portion of the basemanagement fee in excess of an amount equal to 3% of total revenues for anyfiscal year will not be due or payable until after certain of our indebtednessand the Phase I Financing Companies has been repaid in full, and may not exceed40% of our consolidated after-tax profits for such fiscal year (net of the basemanagement fee of 3%). ** **Certainof our debt agreements also provide for deferral of the base management feeunder specified circumstances.

 

***Management Incentive Fee***

 

In connection with the Financial Restructuring, our by-laws were amendedat a shareholders’ extraordinary general meeting held on June 8, 1994 toprovide that the management incentive fee for a given fiscal year be fixed at30% of any portion of adjusted pre-tax cash flow, as defined,  in excess of 10% of our total gross fixedassets and the Phase I Financing Companies, as defined, for that fiscalyear.  Certain of our debt agreementsprovide for deferral of the management incentive fee under specifiedcircumstances.  No fees have beenpayable to date under this agreement and management does not anticipate anyliability for this fee in the near future.

 

***Hotel Sale Fee***

 

There is also payable to the Management Company, on the sale of any ofthe hotels, a fee equal to 35% of pre-tax net revenue, as defined, received byus from any such sale.  This fee was notchanged by the Financial Restructuring.

 

**B.2      The Supervisory Board**

 

Our corporate form under Frenchlaw provides a clear distinction between the management team (the ManagementCompany), responsible for operating the Company, and the Supervisory Board,responsible for overseeing our management.  Specifically the role of the Supervisory Board is to monitor our generalaffairs and management of our Company in the best interest of the shareholders,as well as to monitor the transparency and quality of the informationcommunicated to the shareholders. Pursuant to French law, the Supervisory Board is entitled to receive thesame information and has the same rights as our statutory auditors.  The Supervisory Board must present, at theannual general meeting of the shareholders, a report indicating anyirregularity or inaccuracy, if any, in the parent company and consolidatedaccounts.

 

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The members of the Supervisory Board are elected by theshareholders.  The by-laws provide for aminimum of three members, each of whom must be a shareholder.  Our Supervisory Board may be convened at anytime for any purpose related to our best interests, either by the chairman ofour Supervisory Board, the Management Company, the General Partner, or at leastone-half of the members of our Supervisory Board.  The vote of a majority (and at least two) of the members presentat a meeting where one-half of the members are present constitutes a validaction by our Supervisory Board.  In theevent of a tie, the chairman or our Supervisory Board has the deciding vote.

 

The members of the Supervisory Board are elected for a term of 3 years,from the date of the annual general meeting of shareholders called to elect orre-elect them.  See Item 6, Section A. -“Directors and Senior Management”.

 

In response tothe recommendations of the Viénot Report regarding corporate governance ofFrench companies, published in July 1995, the members of our Supervisory Boardunanimously agreed, in 1996, to adopt a Supervisory Board Member’sCharter.  This Charter sets forth thefundamental obligations with which all members of the Board must comply. Inparticular, the text provides for several obligations that go beyond thedemands of our by-laws.  A member of theSupervisory Board must personally own at least 1,000 of our shares.  Each Board member has a moral obligation todedicate sufficient time and energy to member responsibilities, and therefore,should avoid an excess of directorships that might prevent the Board memberfrom exercising their responsibilities under the best conditions. Each membermust make a best effort to attend the annual general shareholders’ meetings andBoard meetings.  The Supervisory Board hasadopted the principle that a part of the remuneration allocated to each membershould be proportional to attendance at the Board meetings.

 

The Supervisory Board must approve all contracts, agreements andtransactions between us and the Management Company, as well as all agreementsdiscussed below in Item 10, Section B.4 - “The Shareholders” or any amendmentsthereto, and must report on such transactions at the next general meeting ofshareholders following their conclusion. In addition, the by-laws provide that the approval of the SupervisoryBoard is required to enable the Management Company to enter into any materialagreements on our behalf with any affiliate of the Management Company.  The by-laws also provide that any employeesof the Management Company or any person affiliated with the Management Companyon the Supervisory Board will be disqualified from voting on such agreements orany amendments thereto.

 

On November 12, 1997, the Supervisory Board created a FinancialAccounts Committee composed of three Board members to review financialreporting and management audit and external audit issues. This Committee, whichmet three times in fiscal year 2002, reports to the Board.  The Supervisory Board has not created aremuneration committee.

 

On November 8, 2002, the Supervisory Board created a NominationCommittee, whose role will be to propose future candidates for approval asmembers of the Supervisory Board.

 

**B.3          The General Partner**

 

The General Partner has unlimited liability for all of our debts andliabilities.

 

Our General Partner is EDL Participations S.A. (“EDL Participations”),a French corporation that is a 99.8%-owned subsidiary of EDL Holding Company,an indirect wholly-owned subsidiary of The Walt Disney Company.  EDL Participations cannot be removed asGeneral Partner without its consent and cannot dispose of any part of itsinterest as General Partner without the approval of a vote of holders of asimple majority of shares of common stock represented at a generalshareholders’ meeting.  A unanimous voteof the shareholders is required to approve a transfer of EDL Participations’entire interest.

 

Except with regard to the election or removal of members of theSupervisory Board by the shareholders, a resolution may only be adopted by theshareholders in a general meeting with the prior approval of the GeneralPartner.  The General Partner isentitled to a distribution each year equal to 0.5% of the Company’s netafter-tax profits (after deduction of losses carried forward).  The General Partner received distributionsin the amounts of approximately € 0.2 million with respect to both fiscal years2000 and 2001.  There will be nodistribution for fiscal year 2002 due to the net loss incurred in that fiscalyear.

 

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**B.4          The Shareholders**

 

Shareholders have the right to attend general meetings and vote inperson, by proxy or by mail.  Eachshareholder is entitled to cast one vote for each share of common stock held.

 

The following matters require a resolution passed by the holders of asimple majority of the shares of common stock (together with any approvalrequired of the General Partner, as described above):

 

•                  electionsto the Supervisory Board;

 

•                  approvalof the consolidated and parent company financial statements, including paymentof any dividend proposed by the Management Company; and

 

•                  approvalof any contract or transaction (other than contracts or transactions enteredinto in the ordinary course of business on normal commercial terms), or anyamendment thereto, between us and (i) the Management Company or (ii) any memberof the Supervisory Board or (iii) any shareholder of the Company holding morethan 5% of the voting rights or if such shareholder is a company any companythat controls such shareholder within the meaning of Article L. 233-3 of theFrench Commercial Code (*Code of commerce)*.  These requirements also apply to anycontract or transaction into which any one of the persons named above isindirectly interested or which is entered into between the Company and acompany in which the Management Company or a member of the Company’sSupervisory Board or a member of the Management Company board of directors has(i) an ownership interest or (ii) holds a position of general partner, manager,director, chief officer or supervisory board member. Shareholders with aninterest in the contract or transaction generally are not prohibited fromvoting on such contract or transaction, unless they hold one of the positionsset forth above.

 

A resolution passed by holders of atwo-thirds majority of the shares of common stock (together with any approvalrequired of the General Partner, as described above) is required to approve anyamendment to the by-laws, including any increase or reduction of the equitycapital of the Company, any merger or spin-off or any conversion to anotherform of corporate organisation.  Ourshareholders must vote unanimously to increase their liabilities asshareholders.  Shareholders, as such,have no liability for our debts.  Forinformation regarding rights to dividends, see Item 8, Section A. –“Dividends”.

 

Both ordinary and extraordinary generalmeetings of shareholders may be called by the Management Company.  At least 30 days before the date set for anymeeting, preliminary notice is given to shareholders by publication in Francein the *Bulletindes Annonces Légales Obligatoires* (the “BALO”).  Within 10 days after such publication,holders of a minimum percentage of shares (determined on the bases of a formularelated to capitalisation) may propose resolutions to be voted on at suchmeeting.  Unless otherwise set forth inthe preliminary notice, at least 15 days before the date set for the meeting,(i) all shareholders are notified of the date and place thereof by publicationin the BALO and any newspaper entitled to publish legal announcements in theregion where our headquarters are located, and (ii) those shareholders thathave held their share in “registered” form for at least one month are notifiedby mail.  French law also requires othernotices of interest to shareholders which must be published in the BALO.  United Kingdom Shareholders holdingregistered shares are notified by mail at least 21 days before the date set forthe meeting.

 

In addition, both ordinary and extraordinarygeneral meetings may be called by (i) the Supervisory Board, (ii) our statutoryauditors or (iii) an agent appointed by a court at the request of either theholder or holders of shares representing 5% or more of our registered capitalor any interested party in cases of urgency. The person or persons calling a meeting must set forth, in the notice ofmeeting, the matters to be considered at such meeting.

 

Attendance and exercise of voting rights atordinary meetings and extraordinary general meetings are subject to certainconditions.  A holder of registeredshares must have its shares registered in its name in a shareholder accountmaintained by us or on our behalf at least five days prior to the meeting.  Similarly, at least five days before themeeting, a holder of bearer shares must produce a certificate evidencing theholding of shares until the time fixed for the meeting.

 

**C.         Materialcontracts**

 

See discussion above in Item 4, Section A.6“Significant Operating Contracts”.

 

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**D.            Exchange controls**

 

Acquisitions and disposals of shares of common stock and/or otherrights to shares of common stock (except for the acquisition of shares ofcommon stock representing a controlling interest) and ORAs and the payment ofdividends by the Company may, under regulations in force at the date hereof, beeffected without exchange control restrictions in France.  In addition, there is no limitation on theright of non-French residents or non-French shareholders to vote common stockof a French company.  The remittance ofall dividends to foreign shareholders must be effected through a French bank orother licensed financial intermediary.

 

A declaration must be filed, upon realisation of the investment, withthe French authorities for the acquisition, by any non-European Union person orgroup of persons acting in concert, of a controlling interest (normally 20% ormore of the share capital) in our Company. Prior exchange control consent is nolonger required in France.

 

**E.         Taxation**

 

The following summary does not purport to be a comprehensivedescription of all of the tax considerations applicable to all categories ofinvestors in common stock or ORAs, some of which may be subject to specialrules (such as United States expatriates, banks, dealers in securities, lifeinsurance companies and tax-exempt organisations).  In particular, the summary deals only with U.S. Owners who holdshares of common stock or ORAs as a capital asset and whose functional currencyis the U.S. dollar. It does not address the tax treatment of an owner that ownsdirectly or indirectly 5% or more of the Company’s stock or the treatment ofcommon stock that is held in connection with a permanent establishment or fixedbase through which an owner carries on business or performs personal servicesin France.

 

The summary is based upon tax laws and practice of the United Statesand France as in effect on the date of this Annual Report, which are subject tochange.  Individuals or entities shouldconsult their own advisors as to the United States, French or other taxconsequences of the purchase, ownership and disposition of shares of commonstock or ORAs, including, in particular, the application to their particularsituation of the tax considerations discussed below, as well as the effect ofany state or local tax laws.

 

For purposes of this summary, “U.S. Owners” are owners of shares ofcommon stock (i) that are considered residents of the United States forpurposes of the current income tax convention between the United States andFrance (the “Income Tax Convention”), without being considered residents ofFrance (ii) that are not subject to the anti-treaty shopping provision of theIncome Tax Convention that applies in limited circumstances, (iii) that arebeneficial owners of the shares (and of the dividends paid with respectthereto), (iv) that hold such shares of common stock or ORAs as capital assetsand (v) that are individual residents of the United States, U.S. Corporations orotherwise subject to tax on a net income basis in respect of their shares ofcommon stock or ORAs.  For purposes ofthe Income Tax Convention, owners generally will be considered to be residentsof the United States to the extent that they are liable to tax in the UnitedStates by reason of their domicile, residence, place of management, place ofincorporation or any other criterion of a similar nature.

 

**E.1       CommonStock**

 

**E.1.1*       Taxation of Dividends***

 

*French TaxConsiderations*

 

In France, dividends are paid out of after-tax income.  However, French residents are generallyentitled to a tax credit, known as the tax credit, in respect of dividends theyreceive from French companies. Individuals are entitled to an tax credit equal to 50% of thedividend.  The tax credit applicable tonon individual investors generally is equal to 10% of the dividend. Inaddition, if dividends are subject to the *précompte,*shareholders entitled to thetax credit at the 10% rate are generally entitled to an additional amount oftax credit equal to 80% of any such  *précompte*effectively paid in cash by the distributing company.

 

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The *précompte*is a tax that is paid by French companies to the French tax authorities whenthey distribute dividends out of profits that have not been taxed at theordinary corporate income tax rate or that have been earned and taxed more thanfive years before the distribution. The *précompte*is generally equal to one-halfof the dividend paid to shareholder prior to deduction of withholding tax.

 

Dividends paid to non-residents normally are subject to a 25% Frenchwithholding tax and are not eligible for the benefit of the tax credit.

 

Under the Income Tax Convention, subject to certain filing requirements,the withholding tax is reduced to 15% where the U.S. Owner owns directly andindirectly less than 5% of the Company’s stock and does not hold such stock inconnection with a permanent establishment or fixed base through which suchowner carries on business or performs personal services in France.

 

The Income Tax Convention also provides for a refund by the FrenchTreasury of whole or part of the tax credit (less the applicable withholdingtax) to certain U.S. Owners, under the conditions set forth below.  The French Government announced in September2002 a reform of the French tax treatment of distributions, which should beincluded in the draft Finance Law for 2004 that will be submitted to theParliament.  Such reform would result inthe implementation of a new mechanism aimed at avoiding the double taxation ondividend distributions and therefore in the withdrawal of the tax creditmechanism.  As a result, the eligibleholders currently entitled to a tax credit payment from the French Treasurypursuant to the Income Tax Convention would not longer be entitledthereto.  Such reform, if adopted, mayaffect the right of eligible holders to obtain a tax credit payment withrespect to dividend distributions decided in year 2003.

 

Under the current legislation, pursuant to the Income Tax Convention,Eligible U.S. Owners, as defined below are entitled to a payment equal to thetax credit, less a 15% withholding tax. As noted below, the payment of the taxcredit less a 15% withholding tax on that amount will not be received untilafter the close of the calendar year in which the dividend was paid.

 

An “Eligible U.S. Owner” is a U.S. Owner whose ownership of shares ofcommon stock is not attributable to a permanent establishment or fixed basethrough which a U.S. Owner carries on business or performs personal services inFrance, who does not own, directly or indirectly, 5% or more of the Company’sstock and who is, for purposes of the Income Tax Convention, (i) an individualor other non-corporate person, (ii) a United States corporation, other than aregulated investment company, (iii) a United States corporation that is aregulated investment company, but only if less than 20% of its shares are ownedby persons who are not citizens or residents of the United States or (iv) apartnership or trust but only to the extent that its partners, beneficiaries orgrantors would qualify as Eligible U.S. Owners under point (i) or (ii)above.  In addition, such an EligibleU.S. Owner may receive a payment of the tax credit only if such owner (or itspartners, beneficiaries or grantors, if generally the owner is a partnership,estate or trust) is subject to United States federal income tax on the paymentof the tax credit and the related dividend.

 

An Eligible U.S. Owner who is an individual generally will be entitledto an tax credit refund at the 50% rate. An Eligible U.S. Owner who is acorporation will be entitled to a tax credit refund**of 10% of the dividend(generally increased by 80% of any *précompte* paid in cash by the Company).

 

Subject to certain filing requirements, dividends paid to certain U.S.pension trusts and other tax-exempt entities (including certain state-ownedinstitutions, not-for-profit organisations and individuals with respect todividends beneficially-owned by such individuals and derived from an investmentretirement account) that are U.S. Owners where they directly and indirectly ownless than 5% of the Company’s stock and do not hold such stock in connectionwith a permanent establishment or fixed base through which such owner carrieson business or performs personal services in France, will be subject to the 15%withholding tax provided for by the Income Tax Convention and will be entitledto a partial tax credit payment equal to 30/85 of the gross tax credit, underdeduction of the 15% withholding tax.

 

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Thus, for example, provided that the filing requirements are satisfied,if the Company pays a dividend of 100:

 

•                 anEligible U.S. Owner, who is an individual, will initially receive 85, and willbe entitled to an additional payment of 42.50, consisting of the tax credit of50 (assuming such Eligible U.S. Owner is entitled to the tax credit at suchrate), less a 15% withholding tax on that amount (equal to 7.5).

 

•                 anEligible U.S. Owner who is a corporation, will initially receive 85, but willgenerally be entitled to an additional payment of 8.5, consisting of the taxcredit of 10, less a 15% withholding tax on that amount (equal to 1.5); in theevent that the dividend distribution triggers payment by the Company of the *précompte*,such Eligible U.S. Owner generally may also obtain from the French taxauthorities an additional payment equal to 80% of the *précompte*that the Companyactually pays in cash, less a 15% withholding tax.

 

•                 toa U.S. Owner  who is a U.S. pensionfund, such U.S. pension fund initially will receive 85, but will generally beentitled to an additional payment of 3 consisting of the partial tax credit of3.53, less a 15% withholding tax on that amount; in the event that the dividenddistribution triggers payment by the Company of the *précompte*, such U.S. pensionfund may also obtain from the French tax authorities an additional paymentequal to 30/85 of 80% of the *précompte* the Company actually pays incash, less a 15% withholding tax.

 

U.S. Owners that are not entitled to any tax credit payment generallymay obtain from the French tax authorities a refund of any *précompte*paid in cash bythe Company in respect of the dividends, net of a 15% French withholding tax.U.S. Owners that are entitled to the partial payment (30/85) of the tax creditare also entitled to a refund of the *précompte*paid in cash, but only up to theamount exceeding the partial payment in respect of the tax credit, and net ofFrench withholding tax.

 

To benefit from the reduced withholding tax rate of 15% immediatelyupon payment of a dividend and to receive the payment of the tax credit lessthe 15% withholding tax on that amount, an Eligible U.S. Owner must completeand file a French Treasury form RF 1 A EU-N° 5052, entitled “Application forRefund,” before the date of payment of the relevant dividend together with, ifsuch Eligible U.S. Owner is not an individual, an affidavit attesting that itis the beneficial owner of all the rights attached to the full ownership of theshares of common stock.  The form,together with instructions, is available from the U.S. Internal RevenueService.  However, should an EligibleU.S. Owner not be able to complete and file such form before the date ofpayment of such dividend, such Eligible U.S. Owner could benefit from thefavourable treatment provided by the Income Tax Convention if he or shecompletes and provides the French tax authorities with a simplified certificateform before the date of payment of such dividend.  The form must state that (i) such Eligible U.S. Owner is a U.S.resident as defined pursuant to the provisions of the Income Tax Convention,(ii) such Eligible U.S. Owner’s ownership of the shares of common stock is noteffectively connected with a permanent establishment or fixed base in France,(iii) such Eligible U.S. Owner owns all the rights attached to the fullownership of the shares of common stock, and (iv) such Eligible U.S. Ownermeets all the requirements of the Income Tax Convention for obtaining thebenefit of the reduced rate of withholding tax and the right to payment of theFrench tax credit. For Eligible U.S. Owners who have not completed form RF 1 AEU-N° 5052 or the simplified certificate before the dividend payment date, thewithholding tax will be deducted at a 25% rate.

 

An Eligible U.S. Owner may also claim withholding tax and tax creditrefunds by completing French Treasury form RF 1 A EU-N° 5052 and sending it tothe French tax authorities at the latest by December 31 of the second yearfollowing the year in which the withholding tax is paid.

 

For partnerships or trusts, claims for Income Tax Convention benefitsand related attestations are made by the partners, beneficiaries or grantorswho also have to supply certain additional documentation.

 

To be eligible for Income Tax Convention benefits, pension funds andother tax-exempt entities referred to above have to comply with the same filingrequirements as Eligible U.S. Owners, except that they may have to supplyadditional documentation evidencing their entitlement to those benefits.

 

The tax credit or partial tax credit and any French withholding taxrefund are generally expected to be paid within 12 months after the holder ofshares files form FR 1 A EU-N°5052. However, they will not be paid before January 15 following the end ofthe calendar year in which the dividend is paid.

 

52

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To benefit from the reduced withholding tax rate of 15% immediatelyupon payment of a dividend, a U.S. Owner that is not an Eligible U.S. Owner ora qualifying pension fund or other tax exempt entity must complete and file aFrench Treasury form RF 1 B EU-N° 5053, entitled “Application for Reduction,” beforethe date of payment of the relevant dividend. Otherwise the French withholdingtax will be deducted at a 25% rate and the U.S. Owner will have to claimwithholding tax refund by filing a French Treasury form RF 1 B EU-N° 5053at the latest by December 31 of the second year following the year in which thewithholding tax is paid.

 

If the U.S. Owner is not entitled to a refund of the tax credit but isentitled to a full refund of the*précompte*, or if the U.S. Owner is a U.S.pension fund or other tax-exempt U.S. owner that is entitled to a partialrefund of the *précompte*,**such an owner must apply for the refundof the *précompte*by filing French Treasury form RF 1B EU-No. 5053 before the end ofthe year following the year in which the dividend was paid.  This form, together with instructions, isavailable from the U.S. Internal Revenue Service or at the *Centre des Impôts des Non-Résidents*(9, rue d’Uzès, 75094 Paris Cedex 2).

 

*U.S. TaxConsiderations*

 

The gross amount (that is, before reductionfor French withholding tax) of any dividends paid to a U.S. Owner generallywill be subject to United States federal income taxation as foreign sourcedividend income in the year received to the extent paid out of the Company’scurrent or accumulated earnings and profits, as determined for U.S. taxpurposes.  Tax credit payments (such asthe tax credit) will be considered dividends to the same extent.  Such dividends will not be eligible for thedividends received deduction allowed with respect to certain dividends paid bydomestic corporations.  Dividends paidin euros and refunds of the tax credit**must be included  in the income of such a U.S. Owner in a U.S.dollar amount calculated by reference to the exchange rate in effect on the daythey are received by the holder.

 

If the U.S. Owner converts the euros into U.S. dollars on the day itreceives them, it generally will not be required to recognise foreign currencygain or loss in respect of the dividend income (including the tax credit).  A U.S. Owner receiving the partial refund ofFrench withholding tax may recognise foreign currency gain or loss if therefund is converted into dollars at an exchange rate different than the rateused to translate the holder’s dividend income.

 

The French withholding tax (at a rate of 15% for a U.S. Owner eligiblefor such reduced rate) will be treated as a foreign income tax that U.S. Ownersmay credit against their United States income tax liability, subject togenerally applicable limitations and conditions.  Foreign tax credit generally will not be allowed for withholdingtaxes imposed in respect of certain short-term or hedged positions insecurities or in respect of arrangements in which a U.S. Owner’s expectedeconomic profit, after non-U.S. taxes, is insubstantial.  U.S. Owners should consult their ownadvisers concerning the implications of these rules in light of theirparticular circumstances. Alternatively, a U.S. Owner may elect to deduct all foreign taxes thatit has paid in computing its taxable income, in lieu of taking credits for suchamounts.

 

The United States Treasury has proposed to implement a new regime fortaxing dividends that would have the effect of reducing or eliminating taxes oncertain dividends paid to United States persons by corporations that pay U.S.federal income taxes.  Treasury’sproposal is subject to the uncertainties inherent in the legislative processand it is impossible to predict whether and in what form the proposal will beenacted.  If enacted in its currentform, it is unlikely that the proposal would significantly affect U.S. Ownersthat receive dividends from us.

** **

**E.1.2*    Taxation of Capital Gains***

 

*French TaxConsiderations*

 

In general, a U.S. Owner will not be subject to French tax on anycapital gain derived from the sale or exchange of shares of common stock,except where such gain is effectively connected with a permanent establishmentmaintained by the U.S. Owner in France, or, in certain instances, where anindividual U.S. Owner maintains a fixed base in France with which the commonstock is effectively connected.

 

53

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*U.S. TaxConsiderations*

 

For U.S. federal income tax purposes, gain or loss realised by you onthe sale or disposition of shares will be capital gain or loss, and will belong-term capital gain or loss if the shares were held for more than oneyear.  The net amount of long-termcapital gain realised by an individual generally is subject to taxation at amaximum rate of 20%.  Any such gaingenerally would be treated as income arising from sources within the UnitedStates; any such loss would generally be allocated against U.S. sourceincome.  Your ability to offset capitallosses against ordinary income is subject to limitations.

 

**E.1.3       *Other French Taxes***

 

*French TransferTaxes*

 

Transfers of shares of listed common stock will not be subject toFrench registration or transfer taxes, unless the transfer is effected by meansof a written agreement that is executed or enforced within France.  A stock exchange stamp tax may be due insome cases.

 

*Estate and Gift Tax*

 

A transfer of shares of common stock by gift or by reason of the deathof a U.S. Owner that would otherwise be subject to French gift or inheritancetax, respectively, will not be subject to such French tax by reason of theestate and gift tax convention in force between the United States and France,unless the donor or the transferor is domiciled in France at the time of makingthe gift, or of his or her death, or the common stock was used in, or held foruse in, the conduct of a business or profession through a permanentestablishment or fixed base in France.

 

*Wealth Tax*

 

The French wealth tax does not apply to U.S. Owners owning, alone andwith related persons, directly and indirectly, shares giving right to less than25% of the corporate earnings of the Company.

 

**E.2       ORAs**

 

**E.2.1    *French Tax Considerations***

 

*Taxation of CouponPayments*

 

Coupon payments on the ORAs made to a U.S. Owner will be exempt fromFrench income or withholding tax, provided that the ORAs are not attributableeither to a permanent establishment situated in France through which the U.S.Owner carries on business or to any fixed base situated in France from whichthe U.S. Owner performs independent personal services in France.

 

*Taxation of CapitalGains*

 

A disposition of the ORAs by a U.S. Owner, including the repayment ofthe principal of the ORAs in shares of common stock, generally will not besubject to French capital gains tax. However, such a disposition may in certain circumstances be subject toFrench capital gains tax if the ORAs form part of the business property of apermanent establishment situated in France or pertain to a fixed base in Franceavailable to the U.S. Owner.

 

*Stamp Duty*

 

Holders of ORAs who are not residents of France for French tax purposesgenerally will be exempt from French stamp duty.

 

54

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**E.2.2       *United States Tax Considerations***

 

*Characterisation ofORAs*

 

In the opinion of U.S. counsel to the Company, Cleary, Gottlieb, Steen& Hamilton, the ORAs will constitute equity of the Company for U.S. federalincome tax purposes.  However, anopinion of counsel is not binding upon the Internal Revenue Service, which mayseek to analyse the ORAs as debt or in some other manner that is unfavourableto holders of the ORAs.  The remainderof the discussion under “United States Tax Considerations” assumes that theORAs will be treated as an equity interest in the Company.

 

*Treatment of CouponPayments*

 

The coupon payments of the ORAs will be treated as foreign sourcedividend income to a U.S. Owner in the year received to the extent paid out ofthe Company’s current or accumulated earnings and profits, as determined forU.S. tax purposes.  Such dividends willnot be eligible for the dividends received deduction allowed with respect tocertain dividends paid by domestic corporations.  Amounts paid in euros will be includible in the income of such aU.S. Owner in a U.S. dollar amount calculated by reference to the exchange ratein effect on the day they are received by the holder.  If the U.S. Owner converts the euros into dollars on the day itreceives them, it generally will not be required to recognise foreign currencygain or loss in respect of such dividend income.

 

*Treatment of CapitalGains*

 

For U.S. federal income tax purposes, gain or loss realised by you onthe sale or disposition of ORAs will be capital gain or loss, and will belong-term capital gain or loss if the ORAs were held for more than oneyear.  The net amount of long-termcapital gain realised by an individual generally is subject to taxation at amaximum rate of 20%.  Any such gaingenerally would be treated as income arising from sources within the UnitedStates; any such loss would generally be allocated against U.S. sourceincome.  Your ability to offset capitallosses against ordinary income is subject to limitations.

 

**F.         Dividendsand paying agents**

 

Not applicable.

 

**G.         Statementsby experts**

 

Not applicable.

 

**H.         Documentson display**

 

We file reports, including annual reports on Form 20-F, with theSecurities and Exchange Commission pursuant to the rules and regulations of theSEC that apply to us. You may read and copy any materials filed with the SEC atits public reference rooms in Washington, D.C., at 450 Fifth Street, N.W.,Washington, D.C. 20549 and in Chicago, at 500 West Madison Street, Chicago,Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further informationon the public reference rooms. Any filings we make electronically will beavailable to the public over the Internet at the SEC’s web site athttp://www.sec.gov.  You may also reviewdocuments included as exhibits to this and previous filings at our corporateheadquarters, Immeubles Administratifs, Route Nationale 34, Chessy,Seine-et-Marne.

 

**I.          Subsidiaryinformation**

 

Not applicable.

 

55

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**ITEM 11.****QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK**

 

We are exposed to the impact of changes in interest and foreigncurrency exchange rates.  In the normalcourse of business, we employ established policies and procedures to manage ourexposure to changes in interest and foreign currency exchange rates, primarilyby using swaps and forward rate agreements. It is our policy to enter into interest and foreign currency ratetransactions only to the extent considered necessary to meet ourobjectives.  We do not enter intointerest and foreign currency rate transactions for speculative purposes.

 

We have significant variable rate short-term investments, long-termreceivables and debt.  We also haveinterest rate risk associated with lease obligations, as amounts due underthese contracts are tied to variable interest rates.  With respect to these interest rate sensitive instruments andobligations, a hypothetical 10% increase in interest rates, as of September 30,2002 and 2001, would have had a € 0.6 million unfavourable impact on ournear-term annual cash flows.  Thisamount excludes the positive cash flow impact such a change in interest rateswould have on short-term investment income.

 

The Group’s exposure to foreign currency risk relates primarily fromBritish pound, denominated sales and U.S. dollar, denominated exposures.  The Group primarily utilises foreignexchange forward contracts to hedge these risks.  With respect to these foreign exchange rate sensitiveinstruments, a hypothetical 10% adverse change in the U.S. dollar and Britishpound exchange rates (correlation between currencies is not taken into account)as of September 30, 2002 and 2001 would have resulted in a € 5.2 million and €11.6 million decrease in their market value, respectively.  No amount of this decrease would haveimpacted earnings since the loss on these instruments would have been offset byan equal gain on the underlying exposure being hedged.

 

# **ITEM12.**DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

Not applicable

 

### ***PART II***

 

# **ITEM 13**.        DEFAULTS, DIVIDENDARREARAGES AND DELINQUENCIES

 

Not applicable

 

**ITEM 14****.****       MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**

 

Not applicable

 

**ITEM 15****.****       CONTROLS AND PROCEDURES**

 

Within the 90 days prior to the date of this report, we carried out anevaluation under the supervision and with the participation of our management,including the Management Company’s Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of the design and operation of our disclosurecontrols and procedures. Based upon and as of the date of that evaluation, theChief Executive Officer and Chief Financial Officer concluded that thedisclosure controls and procedures are effective to ensure that informationrequired to be disclosed in the reports we file and submit under the ExchangeAct is recorded, processed, summarized and reported as and when required.  No significant changes were made in ourinternal controls or in other factors that could significantly affect thesecontrols subsequent to the date of their evaluation.

 

56

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### ***PART III***

 

**ITEM 17****. FINANCIALSTATEMENTS**

 

Please see Item 19 - “Financial Statementsand Exhibits” for a list of all financial statements filed as part of this Form20-F.

 

**ITEM18.****       FINANCIAL STATEMENTS**

 

Not applicable

 

**ITEM 19****.  FINANCIAL STATEMENTS AND EXHIBITS**

 

**A.         FinancialStatements**

 

We are filingthe following financial statements, together with the report ofPricewaterhouseCoopers Audit related to the statements, as part of this AnnualReport:

 
|                                                                                         | **Page** |
|----------------------------------------------------------------------------------------------|----------|
| Report of Independent Accountants                                                            | 60       |
| Consolidated Statements of Income for the  Years Ended September 30, 2002, 2001 and 2000     | 61       |
| Consolidated Balance Sheets at September 30, 2002 and 2001                                   | 62       |
| Consolidated Statements of Cash Flows for  the Years Ended September 30, 2002, 2001 and 2000 | 63       |
| Notes to the Consolidated Financial Statements                                               | 64       |

** **

**B.****            Exhibits**

** **
|   |   |                                                                                                                                                     | **Page** |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| 4.1    |   | Letter relating to Request for Derogation dated September 30, 2002,  from Euro Disney to the various creditors named therein *(translation from french)* | 86-93    |
| 4.2    |   | Letter dated October 11, 2002, from the Caisse des Dépôts et  Consignations *(translation from French)*                                        | 94       |
| 4.3    |   | Letter dated October 16, 2002, from BNP Paribas *(translation from French)*                                                                              | 95       |
| 4.4    |   | Letter dated October 17, 2002 from Crédit Agricole Indosuez *(translation  from French)*                                                            | 96       |
|   |   |                                                                                                                                                     |     |
| 4.5    |   | Amendment to the CDC Walt Disney Studios Park Loans dated November  18, 2002 *(translation  from French)*                                                | 97-104   |
|   |   |                                                                                                                                                     |     |
| 4.6    |   | Royalties Letter from Euro Disney S.A. to Euro Disney SCA (Management  fee) dated March 28,2003                                                          | 105-107  |
|   |   |                                                                                                                                                     |     |
| 4.7    |   | Memo from The Walt Disney Company (Netherlands) B.V. to Euro Disney  SCA (License Agreement) dated March 28, 2003                                        | 108-110  |
|   |   |                                                                                                                                                     |     |
| 10.1   |   | Chairman of the Board, Chief Executive Officer and Acting Chief  Financial Officer certification pursuant to 18 U.S.C. Section 1350                      | 111      |

 

57

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**SIGNATURES**

 

Pursuant to the requirements of Section 12 of the Securities ExchangeAct of 1934, the registrant certifies that it meets all of the requirements forfiling on Form 20-F and has duly caused this Annual Report to be signed on itsbehalf by the undersigned, thereunto duly authorised.

 

 
| Date: March 28, 2003 |                |                                     |   |
|----------------------|---------------------|------------------------------------------|--------|
|                 |                |                                     |   |
|                 |                |                                     |   |
|                 |                |                                     |   |
|                 |                | Euro Disney S.C.A.                       |   |
|                 |                |                                     |   |
|                 |                |                                     |   |
|                 | /s/ James A. Rasulo |                                     |
|                 | By:                 | The Management Company, Euro Disney S.A. |   |
|                 | By:                 | James A. Rasulo                          |   |
|                 |                | Chairman of the Board and                |   |
|                 |                | Chief Executive Officer                  |   |
|                      |                     |                                          |        |  |  |  |

 

58

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**CERTIFICATION**

** **

 

I, James A. Rasulo, Chairman of the Board, Chief Executive Officer andActing Chief Financial Officer of Euro Disney S.A. (the “Management Company”),certify that:

 

1.               I have reviewed this annual report onForm 20-F of Euro Disney S.C.A. (the “Company”);

 

2.               Based on my knowledge, this annualreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this annual report;

 

3.               Based on my knowledge, the financialstatements, and other financial information included in this annual report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this annual report;

 

4.               I am responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and have:

 

a)              designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this annual report isbeing prepared;

 

b)             evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 days priorto the filing date of this annual report ( the “Evaluation Date”); and

 

c)              presented in this annual report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.               I have disclosed, based on my mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunctions):

 

a)              all significant deficiencies in thedesign or operation of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

 

b)             any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.               I have indicated in this annual reportwhether there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 

 

Date: March 28, 2003

 

 
|   | By:    | /s/ James  A.Rasulo             |   |
|--------|--------|---------------------------------|--------|
|   |   | James A.  Rasulo                |
|   |   | Chairman of  the Board,         |
|   |   | Chief  Executive Officer and    |
|   |   | Acting Chief  Financial Officer |

 

59

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**REPORT OF INDEPENDENT ACCOUNTANTS**

 

To theShareholders of Euro Disney S.C.A.

 

We have audited the accompanying consolidated balance sheets of EuroDisney S.C.A. and its subsidiaries as of September 30, 2002 and 2001, and therelated consolidated statements of income and of cash flows for each of thethree years in the period ended September 30, 2002, all expressed in euros andprepared in conformity with accounting principles generally accepted in France.These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements basedon our audits.

 

We conducted our audits in accordance with auditing standards generallyaccepted in the United States of America. Those standards require that we planand perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position of Euro DisneyS.C.A. and its subsidiaries at September 30, 2002 and 2001, and the results oftheir operations and their cash flows for each of the three years in the periodended September 30, 2002 in conformity with accounting principles generallyaccepted in France.

 

Accountingprinciples generally accepted in France vary in certain significant respectsfrom accounting principles generally accepted in the United States of America.The application of the latter would have affected the determination ofconsolidated net income (loss) for each of the three years in the period endedSeptember 30, 2002 and the determination of consolidated shareholders’ equityat September 30, 2002 and 2001 to the extent summarized in Note 27 to theconsolidated financial statements.

# ** **

# **We draw your attention to Note 2 tothe financial statements, which includes a description of changes in theestimated useful lives of certain long-lived assets.**

 

 

PricewaterhouseCoopers Audit

 

 

Jean-Christophe Georghiou

 

 

Paris, France

November 19, 2002, except for Note 28, for which the date is March 28,2003.

 

 

60

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**EURO DISNEYS.C.A. AND SUBSIDIARIES**

** **

**CONSOLIDATEDSTATEMENTS OF INCOME**

 
|                                                           |   |       |       | **Year ended September 30,** |   |
|----------------------------------------------------------------|--------|------------|------------|------------------------------|--------|
| **(€ in  millions)**                                      |   | **Notes*** |       | **2002**                     |   | **2001** |   | **2000** |   |
|                                                           |   |       |       |                         |   |   |   |   |   |
| **Revenues**                                                   |   | 17         | ** ** | **1 076.0**                  |   | 1 005.2 |   | 959.2 |   |
|                                                           |   |       |       |                         |   |   |   |   |   |
| **Costs and Expenses**                                         |   | 18         | ** ** | **(900.3**                   | **)**  | (820.0 | ) | (783.4 | ) |
|                                                           |   |       |       |                         |   |   |   |   |   |
| **Income before Lease and Financial Charges**                  |   |       |       | **175.7**                    |   | 185.2 |   | 175.8 |   |
|                                                           |   |       |       |                         |   |   |   |   |   |
| Lease rental expense                                           |   | 24         | ** ** | **(188.8**                   | )      | (185.8 | ) | (151.1 | ) |
| Financial income                                               |   |       |       | **59.1**                     |   | 89.8 |   | 74.8 |   |
| Financial expense                                              |   |       |       | **(41.1**                    | **)**  | (51.5 | ) | (62.0 | ) |
|                                                           |   |       |       | **(170.8**                   | **)**  | (147.5 | ) | (138.3 | ) |
|                                                           |   |       |       |                         |   |   |   |   |   |
| **Income before Exceptional Items**                            |   |       |       | **4.9**                      |   | 37.7 |   | 37.5 |   |
|                                                           |   |       |       |                         |   |   |   |   |   |
| Exceptional income / (loss), net                               |   | 19         | ** ** | **(38.0**                    | )      | (7.2 | ) | 1.2 |   |
|                                                           |   |       |       |                         |   |   |   |   |   |
| **Net Income (loss)**                                          |   |       |       | **(33.1**                    | **)**  | 30.5 |   | 38.7 |   |
|                                                           |   |       |       |                         |   |   |   |   |   |
| Average number of common shares outstanding (in millions)      |   | 10         | ** ** | **1 056**                    |   | 1 056 |   | 992 |   |
|                                                           |   |       |       |                         |   |   |   |   |   |
| **Earnings per Share and Diluted Earnings per Share (€)** |   | 2          | ** ** | **(0.03**                    | **)**  | 0.03 |   | 0.04 |   |

 

----

**See Notes toConsolidated Financial Statements*

 

61

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**EURO DISNEY S.C.A. AND SUBSIDIARIES**

** **

**CONSOLIDATED BALANCE SHEETS**

 
|                                                |   |       |       | **September 30,** |       |
|-----------------------------------------------------|--------|------------|------------|-------------------|------------|
| **(€ in  millions)**                           |   | **Notes*** |       | **2002**          |       | **2001** |   |
|                                                |   |       |       |              |       |   |   |
| **Fixed Assets**                                    |   |       | ** ** |              | ** ** |   | ** ** |
| Intangible assets                                   |   |       |       | **61.7**          |       | 14.9 |   |
| Tangible assets                                     |   | 3          | ** ** | **1,004.3**       |       | 839.7 |   |
| Financial Assets                                    |   | 4          | ** ** | **1,323.5**       |       | 1,378.9 |   |
|                                                |   |       |       | **2,389.5**       |       | 2,233.5 |   |
| **Current Assets**                                  |   |       | ** ** |              | ** ** |   | ** ** |
| Inventories                                         |   | 5          | ** ** | **38.7**          |       | 37.0 |   |
| Accounts receivable:                                |   |       |       |              |       |   |   |
| Trade                                               |   | 6          | ** ** | **91.7**          |       | 73.5 |   |
| Other                                               |   | 7          | ** ** | **67.7**          |       | 121.2 |   |
| Short-term investments                              |   | 8          | ** ** | **14.2**          |       | 422.9 |   |
| Cash                                                |   |       |       | **8.2**           |       | 129.9 |   |
|                                                |   |       |       | **220.5**         |       | 784.5 |   |
|                                                |   |       |       |              |       |   |   |
| **Deferred Charges**                                |   | 9          | ** ** | **86.7**          |       | 88.1 |   |
|                                                |   |       | ** ** |              | ** ** |   | ** ** |
| **Total Assets**                                    |   |       |       | **2,696.7**       |       | 3,106.1 |   |
|                                                |   |       |       |              |       |   |   |
| **Shareholders’ Equity**                       |   |       | ** ** |              | ** ** |   | ** ** |
| Share capital                                       |   | 10         | ** ** | **804.9**         |       | 804.8 |   |
| Share premium                                       |   | 10         | ** ** | **289.0**         |       | 288.9 |   |
| Retained earnings                                   |   | 10         | ** ** | **150.9**         |       | 184.2 |   |
|                                                |   |       |       | **1,244.8**       |       | 1,277.9 |   |
|                                                |   |       |       |              |       |   |   |
| **Quasi-Equity**                                    |   | 11         | ** ** | **152.8**         |       | 152.8 |   |
|                                                |   |       |       |              |       |   |   |
| **Provisions for Risks and Charges**                |   | 12         | ** ** | **35.5**          |       | 35.8 |   |
|                                                |   |       |       |              |       |   |   |
| **Borrowings**                                      |   | 13         | ** ** | **821.3**         |       | 1,141.2 |   |
|                                                |   |       |       |              |       |   |   |
| **Current Liabilities**                             |   |       | ** ** |              | ** ** |   | ** ** |
| Payable to related companies                        |   | 14         | ** ** | **80.6**          |       | 90.9 |   |
| Accounts payable and accrued liabilities            |   | 15         | ** ** | **291.8**         |       | 330.2 |   |
|                                                |   |       |       | **372.4**         |       | 421.1 |   |
|                                                |   |       |       |              |       |   |   |
| **Deferred Revenues**                               |   | 16         | ** ** | **69.9**          |       | 77.3 |   |
|                                                |   |       | ** ** |              | ** ** |   | ** ** |
| **Total Shareholders’ Equity and Liabilities** |   |       |       | **2,696.7**       |       | 3,106.1 |   |

 

----

**See Notes toConsolidated Financial Statements*

 

 

62

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**EURO DISNEYS.C.A. AND SUBSIDIARIES**

 

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

** **
|                                                    |   |       |       | **Year ended September 30,** |         |
|---------------------------------------------------------|--------|------------|------------|------------------------------|--------------|
| **(€ in  millions)**                               |   | **Notes*** |       | **2002**                     |         | **2001** |   | **2000** |   |
|                                                    |   |       |       |                         |         |   |   |   |   |
| **Net Income (loss)**                                   |   |       |       | **(33.1**                    | **)**        | 30.5 |   | 38.7 |   |
|                                                    |   |       |       |                         | ** **   |   |   |   |   |
| *Operating Items Not Requiring Cash Outlays:*           |   |       | * *   |                         | *** *** |   | * * |   | * * |
| Depreciation and amortisation                           |   | 18         | ** ** | **64.0**                     | ** **   | 54.0 |   | 49.8 |   |
| Other                                                   |   |       |       | **42.0**                     | ** **   | 41.7 |   | 20.0 |   |
| *Changes in:*                                           |   |       |       |                         | *** *** |   | * * |   | * * |
| Receivables                                             |   |       |       | **35.3**                     | ** **   | 7.0 |   | (20.1 |   |
| Inventories                                             |   |       |       | **(1.7**                     | **)**        | (0.9 | ) | (2.3 |   |
| Payables and other accrued liabilities                  |   |       |       | **(57.8**                    | **)**        | 11.3 |   | 82.8 |   |
| **Cash Flows from Operating Activities**                |   |       |       | **48.7**                     | ** **   | 143.6 |   | 168.9 |   |
|                                                    |   |       |       |                         | ** **   |   | ** ** |   | ** ** |
| Proceeds from the sale of fixed assets                  |   |       |       | **1.4**                      | ** **   | — |   | 0.8 |   |
| Capital expenditures for tangible and intangible assets |   | 3          | ** ** | **(262.5**                   | **)**        | (205.4 | ) | (197.2 | ) |
| Increase in deferred charges                            |   |       |       | **(10.5**                    | **)**        | (12.0 | ) | (9.3 | ) |
| Other                                                   |   |       |       | **1.9**                      | ** **   | — |   | 0.5 |   |
| **Cash Flows used in Investing Activities**             |   |       |       | **(269.7**                   | **)**        | (217.4 | ) | (205.2 | ) |
|                                                    |   |       |       |                         | ** **   |   |   |   |   |
| Proceeds from new borrowings                            |   | 13         | ** ** | **63.3**                     | ** **   | 381.1 |   | — |   |
| Repayments and repurchases of borrowings                |   | 13         | ** ** | **(381.8**                   | **)**        | (164.1 | ) | (75.8 | ) |
| Net proceeds from equity offering                       |   |       |       | **—**                   | ** **   | — |   | 219.5 |   |
| (Increase)/Decrease in debt security deposit            |   |       |       | **12.4**                     | ** **   | 1.5 |   | (2.1 | ) |
| Other                                                   |   |       |       | **—**                   | ** **   | — |   | (4.1 | ) |
| **Cash Flows from / (used in) Financing Activities**    |   |       |       | **(306.1**                   | **)**        | 218.5 |   | 137.5 |   |
|                                                    |   |       |       |                         | ** **   |   |   |   |   |
| Change in cash and cash equivalents                     |   |       |       | **(527.1**                   | **)**        | 144.7 |   | 101.2 |   |
| Cash and cash equivalents, beginning of period          |   |       |       | **548.4**                    | ** **   | 403.7 |   | 302.5 |   |
| **Cash and Cash Equivalents, end of period**            |   |       |       | **21.3**                     | ** **   | 548.4 |   | 403.7 |   |
|                                                    |   |       |       |                         | ** **   |   |   |   |   |
| **Supplemental Cash Flow Information:**                 |   |       |       |                         | ** **   |   | ** ** |   | ** ** |
| Interest paid                                           |   |       |       | **42.7**                     | ** **   | 59.3 |   | 50.6 |   |
| Lease rental expense paid                               |   |       |       | **92.9**                     |         | 85.4 |   | 65.6 |   |

 
|                                                         |   | **September 30,** |       |
|--------------------------------------------------------------|--------|-------------------|------------|
|                                                         |   | **2002**          |       | **2001** |   | **2000** |   |
|                                                         |   |              |       |   |   |   |   |
| **Reconciliation to  Balance Sheet:**                        |   |              | ** ** |   | ** ** |   | ** ** |
| Cash                                                         |   | **8.2**           |       | 129.9 |   | 20.4 |   |
| Short-term  investments                                      |   | **14.2**          |       | 422.9 |   | 387.7 |   |
| Bank  overdrafts (recorded in accounts payable and accruals) |   | **(1.1**          | **)**      | (4.4 | ) | (4.4 | ) |
| **Cash and Cash  Equivalents, end of period**                |   | **21.3**          |       | 548.4 |   | 403.7 |   |

 

----

** See Notes toConsolidated Financial Statements*

 

63

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**1****            Descriptionof the Business and theFinancial Restructuring**

 

**1-1Description of the Business**

 

Euro Disney S.C.A. (the “Company”) and its wholly-owned subsidiaries(collectively, the “Group”) commenced operations with the official opening ofthe Disneyland Resort Paris on April 12, 1992 (“Opening Day”).  The Group operates the Disneyland ResortParis, which includes two theme parks (collectively, the “Theme Parks”), DisneylandPark and Walt Disney Studios Park, which opened to the public on March 16,2002, seven themed hotels, two convention centres, the Disney Villageentertainment centre and a golf course in Marne-la-Vallée, France.  In addition, the Group manages the realestate development and expansion of the related infrastructure of the property.

 

The Company, a publicly held French company, is owned 39% by indirect,wholly-owned subsidiaries of The Walt Disney Company (“TWDC”) and managed byEuro Disney S.A. (the Company’s *Gérant*), an indirect, 99%-owned subsidiaryof TWDC.  The General Partner is EDLParticipations S.A., also an indirect, wholly-owned subsidiary of TWDC.  Entities included in the fiscal year 2002consolidated financial statements and their primary operating activities are asfollows:

 
| **Company**                         |   | **% of Control and Ownership** |   | **Primary Operating Activity**                                                                                                              |
|-------------------------------------|--------|--------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
| Euro Disney S.C.A.                  |   |                           |   | Operator of the Theme Parks, Disneyland Hotel, Davy Crockett Ranch  and golf course, and manager of real estate development                 |
|                                |   |                           |   |                                                                                                                                        |
| EDL Hôtels S.C.A.              |   | 99.9                           |   | Operator of 5 of our 7 themed hotels plus the Disney Village,  collectively, the Phase IB Facilities (see terms defined below).             |
|                                |   |                           |   |                                                                                                                                        |
| EDL Services S.A.                   |   | 99.8                           |   | Management company of the Phase IB Financing Companies (see terms  defined below)                                                           |
|                                |   |                           |   |                                                                                                                                        |
| EDL Hôtels Participations S.A. |   | 99.9                           |   | General Partner of EDL Hôtels S.C.A., ED Resort S.C.A. and  ED Resort Services S.C.A.                                             |
|                                |   |                           |   |                                                                                                                                        |
| Euro Disney Vacances S.A.           |   | 99.9                           |   | Tour operator selling Disneyland Resort Paris holiday packages,  principally to guests from Germany, Benelux, the United Kingdom and Italy. |
|                                |   |                           |   |                                                                                                                                        |
| Euro Disney Vacaciones S.A.         |   | 99.9                           |   | Spanish subsidiary of Euro Disney Vacances S.A. (company currently  inactive)                                                               |
|                                |   |                           |   |                                                                                                                                        |
| Val d’Europe Promotion S.A.    |   | 99.8                           |   | Real estate developer                                                                                                                       |
| S.E.T.E.M.O. Imagineering S.A.R.L.  |   | 100.0                          |   | Provides studies and supervision of construction for theme parks  attractions                                                               |
|                                |   |                           |   |                                                                                                                                        |
| ED Spectacles S.A.R.L.              |   | 100.0                          |   | Operator of Buffalo Bill’s Wild West Show                                                                                              |
|                                |   |                           |   |                                                                                                                                        |
| Débit de Tabac S.N.C.          |   | 100.0                          |   | Tobacco retailer at Disney Village                                                                                                          |
| ED Resort S.C.A.                    |   | 99.9                           |   | Company currently inactive                                                                                                                  |
| ED Resort Services S.C.A.           |   | 99.9                           |   | Company currently inactive                                                                                                                  |
| ED Finances 1 S.N.C.                |   | 100.0                          |   | Company currently inactive                                                                                                                  |
| ED Finances 2 S.N.C.                |   | 100.0                          |   | Company currently inactive                                                                                                                  |
| ED Finances 3 S.N.C.                |   | 100.0                          |   | Company currently inactive                                                                                                                  |
| ED Finances 4 S.N.C.                |   | 100.0                          |   | Company currently inactive                                                                                                                  |

 

During fiscal year 2002, six 100%-owned subsidiaries of EDL Hotels SCA,that had been created in connection with the original leasing and financingstructure of the Phase IB Facilities, were merged into EDL Hotels S.C.A.  The merger became effective on July 31,2002, and was retroactively implemented from October 1, 2001.

 

64

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**1-2 Disneyland ResortParis Financing**

 

The Group owns Walt Disney Studios Park, the Disneyland Hotel, the DavyCrockett Ranch, the golf course, the underlying land thereof and the land onwhich the five other hotels and the Disney Village entertainment centre arelocated and leases substantially all the remaining operating assets as follows:

*** ***

***Phase IA***

In 1989, various agreements were signed between the Company and EuroDisneyland S.N.C. (the “Phase IA Financing Company”) for the development andfinancing of Disneyland Park.  Pursuantto the original sale/leaseback agreement, all of the assets of Disneyland Parkand the underlying land, as of Opening Day, were sold by the Company to thePhase IA Financing Company and simultaneously leased back to the Company.  In 1994, the Company cancelled its originalagreement with the Phase IA Financing Company and established certain newagreements.  Under this new leasestructure, the Phase IA Financing Company is leasing substantially all ofDisneyland Park assets to Euro Disney Associés S.N.C. (“EDA SNC”), an indirect,wholly-owned affiliate of TWDC, which is in turn subleasing those assets to theCompany.  The Group has no ownershipinterest in the Phase IA Financing Company or EDA SNC.

 

***Phase IB***

In 1991, various agreements were signed for the development andfinancing of five hotels: Hotel New York, Newport Bay Club, Sequoia Lodge,Hotel Cheyenne and Hotel Santa Fe, and the Disney Village entertainmentcentre  (collectively, the “Phase IBFacilities”).  Pursuant tosale/leaseback agreements, the Phase IB Facilities were sold by the Company tosix special purpose companies that were established for the financing of PhaseIB (the “Phase IB Financing Companies”) and are being leased back to theoperator, EDL Hôtels S.C.A.  The Grouphas no ownership interest in the Phase IB Financing Companies.

 

Hereafter, reference to the “Phase I SNCs” includes the Phase IA Financing Company and the Phase IBFinancing Companies.

 

***Additional CapacityDisneyland Park Assets***

In 1994, the Company entered into a sale/leaseback agreement with EDASNC for certain Disneyland Park assets which were constructed subsequent toOpening Day.  Pursuant to thisagreement, these assets were sold by the Company and the Phase IA FinancingCompany to EDA SNC and are being leased back to the Company.

 

***Newport Bay ClubConvention Centre***

In 1996, various agreements were signed with Centre de Congrès NewportS.A.S., an indirect, wholly-owned affiliate of TWDC for the development andfinancing of a second convention centre located adjacent to the Newport BayClub hotel.  Pursuant to sale/leasebackagreements, the assets of the Newport Bay Club Convention Centre were sold asthey were constructed by EDL Hôtels S.C.A. to Centre de Congrès Newport S.A.S.and are leased back to the operator, EDL Hôtels S.C.A.

 

Hereafter, reference to the “Financing Companies” includes the Phase IAFinancing Company, the Phase IB Financing Companies, EDA SNC and Centre deCongrès Newport S.A.S.

 

**1-3Financial Restructuring**

 

In 1994, the Company, TWDC, the Phase I SNCs and certain of thefinancial institutions and companies that are creditors of the Group and thePhase I SNCs (the “Lenders”) executed agreements related to a financialrestructuring (the “Financial Restructuring”). The Financial Restructuring was essentially comprised of concessions andcontributions made by the Lenders and TWDC and the prepayment of certainoutstanding loan indebtedness of the Group and the Phase I SNCs with the €880.5 million net proceeds of a rights offering.  The Financial Restructuring continues to have  a significant positive impact on the Group’snet income mainly due to the partial waiver of royalties and management fees byTWDC and remaining interest forgiveness.

 

65

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**2****            Summary of Significant Accounting Policies**

 

**Basisof Preparation and Use of Estimates**

The Group’s consolidated financial statements are prepared inconformity with accounting principles generally accepted in France.  The preparation of these financialstatements requires management to make estimates and assumptions that affectthe amounts presented in the financial statements and footnotes thereto. Actualresults could differ from those estimates. Certain reclassifications to the 2001 and 2000 comparative amounts havebeen made to conform to the 2002 presentation.

 

***Principles ofConsolidation***

The Group’s consolidated financial statements include the accounts ofthe Company and its subsidiaries.  Allsignificant intercompany accounts and transactions have been eliminated.

 

***Leased Assets***

The Group leases a significant portion of its operating assets.Pursuant to options available under French accounting principles, the Groupaccounts for these transactions as operating leases.

 

***Fixed Assets***

Intangible assets consist of software costs, licensee rights and themepark attraction  film production costsand are carried at cost.  Amortisationis computed on the straight-line method over two to twenty years.  Tangible assets are carried at cost.  Depreciation is computed on thestraight-line method based upon estimated useful lives, as follows:

 
|                                                       |   | **Estimated useful lives** |
|------------------------------------------------------------|--------|----------------------------|
|                                                       |   |                       |
| Secondary  infrastructure                                  |   | 10 to 40 years             |
|                                                       |   |                       |
| Buildings                                                  |   | 20 to 40 years             |
|                                                       |   |                       |
| Leasehold  improvements, furniture, fixtures and equipment |   | 2 to 25 years              |

 

Interest costs incurred for the construction of fixed assets and theacquisition and development of land are capitalised using the weighted averageinterest rate incurred on the Company’s borrowings.  Projects under development are capitalised at the point technicaland economic feasibility has been established.

 

Effective October 1, 2001, the Group revised the estimated useful livesof certain long-lived assets in the secondary infrastructure and buildingscategories.  This revision was basedupon a full review of the existing asset base in light of the operatingexperience to date of the Group and the intended use of the asset.  Management believes the new estimated usefullives will more appropriately reflect its financial results by allocating thecosts of these assets over a useful life that more closely conforms to theirintended use and with practices prevalent in the industry.  As required, these changes will impactdepreciation expense prospectively and had the impact of decreasing fiscal year2002 depreciation expense by € 5.7 million.

 

**Inventories**

Inventories are stated at the lower of cost or market value, on aweighted-average cost basis.

 

**Income Taxes**

The Group files a consolidated tax return.  The Group provides for deferred income taxes on temporarydifferences between financial and tax reporting.  The Group uses the liability method under which deferred taxesare calculated applying currently enacted tax rates expected to be in effectwhen the temporary differences will reverse.

 

**Debt Issue Costs**

Direct costs of the issuance of debt are capitalised and amortised on astraight-line basis over the life of the related debt. Upon repurchase and/orretirement of debt, a prorata amount of the unamortised issue costs is expensedand included as part of the gain or loss resulting from the transaction.

 

66

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***Pension andRetirement Benefits***

Contributions to state funded retirement plans and the Group’ssupplemental defined contribution pension plan are expensed as incurred and nofuture commitments exist with respect to these plans.  Retirement indemnities paid under the Group’s collective bargainingagreement are expensed as paid.  The futurecommitment with respect to these indemnities is disclosed (see Note 25).

 

***Risk ManagementContracts***

In the normal course of business, the Group employs a variety ofoff-balance-sheet financial instruments to manage its exposure to fluctuationsin interest and foreign currency exchange rates, including interest rate andcross-currency swap agreements, forward, and option contracts.  The Group designates and assigns thefinancial instruments as hedges for specific assets, liabilities or anticipatedtransactions. When hedged assets or liabilities are sold or extinguished or theanticipated transactions being hedged are no longer expected to occur, theGroup recognises the gain or loss on the designated hedging financialinstruments.  The Group accrues thedifferential for interest rate and cross-currency swaps to be paid or receivedunder the agreements as interest and exchange rates shift as adjustments tointerest income or expense over the lives of the swaps. Gains and losses on thetermination of swap agreements, prior to their original maturity, are deferredand amortised over the remaining original term of the instruments.  Gains and losses arising from foreigncurrency forward and option contracts are recognised as offsets of gains andlosses resulting from the items being hedged.

*** ***

***Foreign CurrencyTransactions***

Transactions denominated in foreign currencies are recorded in euros atthe exchange rate prevailing at the month-end prior to the transactiondate.  Assets and liabilitiesdenominated in foreign currencies are stated at their equivalent value in eurosat the exchange rate prevailing as of the balance sheet date.  Net exchange gains or losses resulting fromthe translation of assets and liabilities in foreign currencies at the balancesheet date are deferred as translation adjustments.  Provision is made for all unrealised exchange losses to theextent not hedged.

*** ***

***Participant Revenue***

Fees billed to companies ("Participants") that enter intolong-term marketing agreements with the Group for the sponsorship ofattractions are recognized as revenue rateably over the period of theapplicable agreements.

 

***Operating Subsidies***

Operating subsidies are recorded as operating income at the point theamount is contractually due and definitive.

 

***Earnings per Shareand Diluted Earnings per Share***

Earnings per share and diluted earnings per share of common stock arecomputed on the basis of the weighted average number of shares outstandingduring the fiscal year.  Dilutedearnings per share excludes all potential shares that could be created byoutstanding instruments to issue future shares of common stock as their effecton the calculation is anti-dilutive.

 

***Statement of CashFlows***

The statement of cash flows measures changes in cash and cashequivalents.  Cash and cash equivalentsconsist of cash on hand and short-term investments with original maturities ofthree months or less.  Short-terminvestments are stated at the lower of cost or market value.

 

67

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# **3**            TANGIBLE FIXED ASSETS

 
| **(€ in millions)**                                   |   | **Sept. 30,  2001** |       | **Additions** |       | **Deductions** |       | **Transfers/    Adjustments** |       | **Sept. 30,  2002** |       |
|------------------------------------------------------------|--------|---------------------|------------|---------------|------------|----------------|------------|-------------------------------|------------|---------------------|------------|
| Land and secondary infrastructure                          |   | 264.5               |       | 2.5           |       | (0.1           | )          | 85.8                          | ** ** | **352.7**           | ** ** |
| Buildings                                                  |   | 313.3               |       | (0.1          | )          | (0.9           | )          | 258.8                         | ** ** | **571.1**           | ** ** |
| Leasehold improvements, furniture, fixtures  and equipment |   | 207.0               |       | 2.4           |       | (14.1          | )          | 200.3                         | ** ** | **395.6**           | ** ** |
| Subtotal                                                   |   | 784.8               |       | 4.8           |       | (15.1          | )          | 544.9                         | ** ** | **1,319.4**         | ** ** |
|                                                       |   |                |       |          |       |           |       |                          |       |                |       |
| Construction in progress                                   |   | 372.6               |       | 238.8         |       | —         |       | (576.3                        | **)**      | **35.1**            | ** ** |
| Accumulated depreciation                                   |   | (317.7              | )          | (45.3         | )          | 12.8           |       | —                        | ** ** | **(350.2**          | **)**      |
|                                                       |   | 839.7               | ** ** |          | ** ** |           | ** ** |                          | ** ** | **1,004.3**         | ** ** |

 

Fixed assets with a net book value of € 166.8 million at September 30, 2002, are either mortgaged or pledgedas security under loan agreements.  Infiscal years 2002 and 2001, interest capitalised on assets during theirconstruction period amounted to € 9.2 million and € 15.1 million, respectively.

 

# **4**    FINANCIAL ASSETS

 
|                                               |   | **September  30,** |   |
|----------------------------------------------------|--------|--------------------|--------|
| **(€ in millions)**                           |   | **2002**           |   | **2001** |   |
| Phase IA Financing Company loans receivable  (a)   |   | **926.9**          |   | 958.6 |   |
| Phase IB Financing Companies loans  receivable (b) |   | **358.3**          |   | 367.7 |   |
| Other (c)                                          |   | **38.3**           |   | 52.6 |   |
|                                               |   | **1,323.5**        |   | 1,378.9 |   |

 

*(a)    Phase IA Financing Companyloans receivable*

Pursuant to the original Disneyland Park financing agreements and theFinancial Restructuring, the Company provided long-term subordinated loans of €1,010.1 million to the Phase IA Financing Company.  The loans bear interest at EURIBOR. However, pursuant to theFinancial Restructuring, the applicable interest rate on the outstandingbalance has been temporarily reduced and will return to the contractual ratebeginning in fiscal year 2004. In addition, effective October 1st,1999, the Phase IA Financing Company and the Company agreed to certainmodifications of the terms of the loans, including an acceleration of theprincipal reimbursement schedule and a modification of the contractual interestrate. Under the revised terms, the applicable rate is EURIBOR plus a variablemargin. Accordingly, the effective rates on the loans for fiscal years 2002 and2001 were  4.12 % and 5.34 %, respectively.Principal repayments commenced in fiscal year 1998 and will continue throughfiscal year 2013. Principal repayments in fiscal years 2002 and 2001 were €31.6 million and € 25.9 million, respectively. Scheduled principal repayments in fiscal year 2003 are € 40.5 million.Under the new lease structure established in 1994 (see Notes 1-2 and 24-1),these long-term subordinated loans are pledged as security.

 

*(b)    Phase IB FinancingCompanies loans receivable*

Pursuant to the original Phase IB financing agreements and theFinancial Restructuring, EDL Hôtels S.C.A. provided long-term subordinatedloans of € 390.4 million to the Phase IB Financing Companies. The loans bearinterest at a fixed rate of 6%. However, pursuant to the FinancialRestructuring, the applicable interest rate on the outstanding balance was temporarily reduced to 4% and willreturn, beginning in fiscal year 2004, to the contractual rate. Principalrepayments commenced in fiscal year 1998 and are scheduled to continue throughfiscal year 2016. Principal repayments in fiscal years 2002 and 2001 were € 9.5million and € 8.4 million, respectively. Scheduled principal repayments infiscal year 2003 are € 11.7 million.

 

*(c)    Other*

Other consists primarily of long-term bank guarantee deposits. Inaccordance with certain conditions stipulated in connection with the FinancialRestructuring, the Group is required to maintain a security deposit as a pledgefor the benefit of the Phases IA and IB Lenders until all of the senior debtpursuant to the financing agreements has been paid and other obligations byboth the Lenders and the Group have been satisfied. The deposited amounts areadjusted quarterly and bear interest in favour of the Group.

 

68

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# **5**            Inventories

 

Inventories consist primarily of merchandise, food and beverage andsupplies. These amounts are stated net of allowance for obsolete and slowmoving items of € 1.9 million and € 1.8 million at September 30, 2002 and 2001,respectively.

 

# **6**            TradeAccounts Receivable

 

Trade accounts receivable are due primarily from tour operators andtravel agents (arising from sales of Theme Park entrance tickets, hotel andmeeting rooms and other amenities) as well as billings for participantfees.  As of September 30, 2002 and2001, the reserve for potentially uncollectible accounts was € 3.0 million and€ 4.4 million, respectively.  As ofSeptember 30, 2002 and 2001, trade receivables included non-current receivablesamounting to € 3.5 million and € 1.2 million, respectively.

 

# **7**            OtherAccounts Receivable

** **
|                     |   | **September  30,** |   |
|--------------------------|--------|--------------------|--------|
| **(€ in millions)** |   | **2002**           |   | **2001** |   |
| VAT                      |   | **37.6**           |   | 92.7 |   |
| Other                    |   | **30.1**           |   | 28.5 |   |
|                     |   | **67.7**           |   | 121.2 |   |

** **

All amounts are due within one year.

 

# **8**            Short-termInvestments

 

Short-term investments consist primarily of cash equivalents such asmoney market instruments and certificates of deposit, carried at cost, whichapproximated market value at September 30, 2002 and 2001.

 

# **9**            DeferredCharges

 
|                                                  |   | **September  30,** |   |
|-------------------------------------------------------|--------|--------------------|--------|
| **(€ in millions)**                              |   | **2002**           |   | **2001** |   |
| Financial contributions to public  infrastructure (a) |   | **56.2**           |   | 60.5 |   |
| Other (b)                                             |   | **30.5**           |   | 27.6 |   |
|                                                  |   | **86.7**           |   | 88.1 |   |

 

*(a)    Financial contributions topublic infrastructure*

Financial contributions to public infrastructure consist primarily of apayment of  € 34.3 million made by theGroup to the S.N.C.F. *(Société Nationale des Chemins de Fer Français)*,the French national railway company, as part of its financial commitment to theconstruction of the T.G.V. (high speed train) railway station located withinDisneyland Resort Paris. This contribution is being amortised over a period oftwenty years (beginning on the opening of the T.G.V. station in 1994).  Remaining amounts relate to various financialcontributions to the construction of primary infrastructure, such as roadwaysand water, gas and electricity distribution systems. Contributions to publicinfrastructure are stated net of accumulated amortisation of € 29.1 million and€ 24.7 million at September 30, 2002 and 2001, respectively.

 

*(b)    Other*

Other consists primarily of the cost of major renovations performed onDisneyland Resort Paris assets. As of September 30, 2002 and 2001, these coststotalled € 42.6 million and € 34.8 million, respectively and are reported netof accumulated amortisation of € 15.4 million and € 10.8 million, respectively.

 

69

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# **10**     Shareholders’Equity

** **
|                                            |   |                  |       | **(€ in  millions)** |       |
|-------------------------------------------------|--------|-----------------------|------------|---------------------------|------------|
|                                            |   | **Number of  Shares** |       | **Share  Capital**        |       | **Share  Premium** |   | **Reinstatement    of ORAs** |   | **Retained  Earnings** |   |
|                                            |   | **(in  thousands)**   |       |                      |       |   |   |   |   |   |   |
| **Balance at September 30, 1999**               |   | **767 834**           | ** ** | **585.3**                 | ** ** | **288.9** | ** ** | **151.4** | ** ** | **115.3** | ** ** |
| Issuance of new shares (net of issuance  costs) |   | 287,938               |       | 219.5                     | ** ** |   | ** ** |   |   |   | ** ** |
| Reinstatement of ORAs                           |   |                  |       |                      | ** ** |   | ** ** | (151.4 | ) |   | ** ** |
| Allocation to General Partner                   |   |                  |       |                      |       |   |   |   |   | (0.2 | ) |
| Net income                                      |   |                  |       |                      | ** ** |   | ** ** |   | ** ** | 38.7 | ** ** |
| **Balance at September 30, 2000**               |   | **1 055 772**         | ** ** | **804.8**                 | ** ** | **288.9** | ** ** | **—** | ** ** | **153.8** | ** ** |
| Issuance of new shares                          |   | 15                    |       | —                    |       |   |   |   |   |   |   |
| Allocation to General Partner                   |   |                  |       |                      |       |   |   |   |   | (0.2 | ) |
| Net income                                      |   |                  |       |                      |       |   |   |   |   | 30.5 |   |
| **Balance at September 30, 2001**               |   | **1 055 787**         | ** ** | **804.8**                 | ** ** | **288.9** | ** ** | **—** | ** ** | **184.2** | ** ** |
|                                            |   |                  |       |                      |       |   |   |   |   |   |   |
| Issuance of new shares                          |   | 151                   |       | 0.1                       |       | 0.1 |   | — |   | — |   |
| Allocation to General Partner                   |   |                  |       |                      |       |   |   |   |   | (0.2 | ) |
| Net loss                                        |   |                  |       |                      |       |   |   |   |   | (33.1 | ) |
| **Balance at September 30, 2002**               |   | **1 055 938**         | ** ** | **804.9**                 | ** ** | **289.0** | ** ** | **—** | ** ** | **150.9** | ** ** |

 

•        *Number of shares*

The number of shares above represent the Company’s issued, outstandingand fully paid shares, at the respective dates.

 

*•        Share capital*

In December 1999, the Company completed an equity offering, whichresulted in the issuance of 287.9 million of new shares at a price of € 0.8.Gross proceeds from the issuance were € 230.3 million.

 

*•        Reinstatement of ORAs*

The conditions for a reinstatement of the interest and capital rightsof the ORAs, which had been conditionally waived in fiscal year 1998, were metas of September 30, 1999. Thus, on October 1, 1999, the waived rights werereinstated and the carrying value of the ORAs was reclassified to quasi-equity (seeNote 11).

 

•        *Retained earnings*

At September 30, 2002 and 2001, the Company’s retained earnings includea legal reserve of  € 16.9 million and € 15.4 million, respectively, which is not available for distribution.

 

*Warrants*

As part of the Financial Restructuring, the Company issued 290 millionwarrants, enabling the holders of such warrants to subscribe for 1.069 share ofthe Company’s common stock at a price of € 6.10 for every three warrants held. The warrants have a term of ten years and may be exercised betweenJanuary 1996 and July 2004.

 

# **11  Quasi-equity**

 

In 1994, as part of the Financial Restructuring, the Company issued2,500,121 bonds redeemable in shares (“ORAs”) with a nominal value of  € 60.98, a coupon rate of 1% per annum and aten-year term.  Upon maturity, each  ORA will be redeemable by the issuance of10,691 shares of the Company’s common stock.

 

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# **12**     Provisionsfor Risks and Charges

** **
| **(€ in millions)**          |   | **September  30,  2001** |   | **Additions** |   | **Reversals** |   | **September  30,  2002** |   |
|-----------------------------------|--------|--------------------------|--------|---------------|--------|---------------|--------|--------------------------|--------|
| Provisions  for risks and charges |   | 35.8                     |   | 4.0           |   | (4.3          | )      | 35.5                     |   |

** **

At September 30, 2002 and 2001, provisions for risks and chargesprimarily included provisions for various charges, claims and litigation.  The additions and reversals in fiscal year2002 related to individually insignificant items.

** **

# **13**     Borrowings

** **
|                                   |   | **September  30,** |   |
|----------------------------------------|--------|--------------------|--------|
| **(€ in millions)**               |   | **2002**           |   | **2001** |   |
| Convertible bonds (a)                  |   | **—**         |   | 373.7 |   |
| CDC Phase I loans (b)                  |   | **168.9**          |   | 168.9 |   |
| CDC Walt Disney Studios Park loans (c) |   | **381.1**          |   | 381.1 |   |
| Phase IA credit facility (d)           |   | **122.1**          |   | 128.3 |   |
| Phase IB credit facility (e)           |   | **26.0**           |   | 27.3 |   |
| TWDC Line of Credit (f)                |   | **62.5**           |   | — |   |
| Other                                  |   | **20.8**           |   | 20.6 |   |
|                                   |   | **781.4**          |   | 1,099.9 |   |
| Accrued interest                       |   | **39.9**           |   | 41.3 |   |
|                                   |   | **821.3**          |   | 1,141.2 |   |

 

*(a)    Convertible bonds*

In 1991, the Company issued 28,350,000unsecured 6.75% fixed rate convertible bonds with an aggregate face value of € 605.1 million.  Each convertible bondhad a face value of € 21.34 and was convertible into 1.455 share of theCompany’s common stock.  As of September30, 2001, 15,916,670 bonds remained outstanding in the amount of  € 373.7 million, including a bond redemptionpremium due upon maturity of  € 34.0million.  On October 1, 2001, thesebonds matured and cash was made available to reimburse the outstandingobligation plus accrued interest payable of € 22.9 million.

 

*(b)    Caisse des Dépôts etConsignations (“CDC”) Phase I loans*

Pursuant to the original credit agreement andthe Financial Restructuring, the Company borrowed from the CDC € 40.6 million senior debt and € 128.3 million subordinated debt.  The senior debt is secured by the DisneylandPark, Disneyland Hotel, Davy Crockett Ranch, and other related facilities andthe underlying land thereof.  Thesubordinated debt is unsecured.  Theloans originally bore interest at a fixed rate of 7.85%; however, effective asof September 30, 1999, the terms of these loans were modified so as to reducethe fixed interest rate to 5.15%, defer principal repayments and extend thefinal maturity date from fiscal year 2015 to fiscal year 2024.  At September 30, 2002 and 2001, accrued interestrelated to these loans was € 8.0 million.

 

*(c)    CDC Walt Disney StudiosPark loans*

On September 30, 1999, the Company executed acredit agreement with the CDC to provide € 381.1 million of subordinated loansto finance a portion of the construction costs of Walt Disney StudiosPark.  The credit agreement includesfour loan tranches, two of € 76.2 million each maturing in fiscal years 2015and 2021, respectively and two of € 114.3 million, each maturing in fiscalyears 2025 and 2028, respectively. The loans were fully drawn during fiscalyear 2001 in connection with the construction of Walt Disney Studios Park.  The loans bear interest at a fixed rate of5.15% per annum, unless interest or principal payments were to be deferredunder the provisions of the loans, during which time the interest rate on thedeferred amounts is EURIBOR plus 2% or 5.15%, whichever is greater.  The timing of interest payments depends onthe size of the Company’s surpluses in cash and short-term investments at eachscheduled annual repayment date.  Theannual interest payment due as of December 31, 2001 in the amount of € 14.5million has been deferred in accordance with the provisions of the loans andwill accrue interest at the greater of 5.15% or EURIBOR plus 2% (5.30% as ofSeptember 30, 2002) until the deferred interest is paid.  At September 30, 2002, accrued interestrelated to these loans was € 29.9 million, including the above describeddeferred amount.  At September 30, 2001,accrued interest related to these loans was € 9.6 million.

 

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*(d)    Phase IA credit facility*

Pursuant to the original credit agreementwith a syndicate of international banks and the Financial Restructuring, theCompany borrowed € 148.6 million under the Phase IA credit facility.  The obligations under this credit facilityare secured by Disneyland Park, Disneyland Hotel, Davy Crockett Ranch, otherrelated facilities and the underlying land thereof.  Principal repayments commenced in fiscal year 2000 with finalrepayment in fiscal year 2010.  FromOctober 1, 1996 to September 30, 2003, the loans bear interest at EURIBOR plus1.28% (4.58% at September 30, 2002). From October 1, 2003, the margin willdecrease and the applicable rate will be EURIBOR plus 1%.  At September 30, 2002 and 2001, accruedinterest related to this facility was immaterial.

 

*(e)    Phase IB credit facility*

Pursuant to the original credit agreementwith a syndicate of international banks and the Financial Restructuring, EDLHôtels S.C.A. borrowed € 29.7 million under the Phase IB credit facility.  The obligations under this credit facilityare secured by the Phase IB Facilities. Principal repayments commenced infiscal year 1998 with final repayment in fiscal year 2012.  From October 1, 1997 to September 30, 2003,the loans bear interest at EURIBOR plus 1.33% (4.63% at September 30,2002).  From October 1, 2003, the marginwill decrease and the applicable rate will be EURIBOR plus 1%.  At September 30, 2002 and 2001, accruedinterest related to this loan amounted to € 0.2 million and € 0.3 million,respectively.

 

*(f)     TWDC Line of Credit*

As part of the Financial Restructuring, TWDCmade available, until 2004, a subordinated unsecured € 167.7 million standbyrevolving credit facility to the Group, which bears interest at EURIBOR (3.30%as of September 30, 2002).  At September30, 2002, accrued interest related to this facility amounted to € 0.2 million.

 

**DebtCovenants**

The Financial Restructuring agreements include covenants with respectto the restructured financing arrangements between the Group and theLenders.  These covenants primarilyconsist of restrictions on additional indebtedness and capital expenditures,the provision of certain financial information and compliance with certainfinancial ratio thresholds, which were most recently modified by subsequentagreements with the Lenders in October 2002. In conjunction with Walt Disney Studios Park, the Lenders agreed toauthorise the capital investment for the project and to modify these covenantsduring the construction period, including the approval of an increase of  € 15.2 million per year in the maximum levelof recurring capital expenditures for fiscal years 2000 through 2002.  In October 2002, our lenders agreed to lowerthe required threshold for the gross operating income financial covenant forfiscal year 2002.  As part of thismodification, we will submit to a new gross operating income covenant forfiscal years 2003 and 2004, the level of which is based upon our annualoperating plans.  In addition, we willincrease (up to double) our quarterly debt security deposits, unless certaintargeted levels of operating income are achieved.

 

The Group’s borrowings at September 30, 2002 have the followingscheduled maturities:

 
| **(€ in millions)** |   |
|--------------------------|--------|
| 2003                     |   | 10.1 |   |
| 2004                     |   | 88.5 |   |
| 2005                     |   | 31.9 |   |
| 2006                     |   | 16.3 |   |
| 2007                     |   | 19.9 |   |
| Thereafter               |   | 614.7 |   |
|                     |   | 781.4 |   |

 

# **14**     Payableto Related Companies

 

Payables to related companies principally include payables to theFinancing Companies for rent payable pursuant to Disneyland Park and HotelLeases and sub-leases (see Note 24) and payables to wholly-owned subsidiariesof TWDC for royalties and management fees (see Note 18) and costs associatedwith the construction of Walt Disney Studios Park.  All amounts are due within one year.

 

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# **15**     AccountsPayable and Accrued Liabilities

** **
|                          |   | **September  30,** |   |
|-------------------------------|--------|--------------------|--------|
| **(€ in millions)**      |   | **2002**           |   | **2001** |   |
| Suppliers                     |   | **183.8**          |   | 157.1 |   |
| Payroll and employee benefits |   | **55.8**           |   | 53.0 |   |
| VAT                           |   | **6.3**            |   | 65.1 |   |
| Other                         |   | **45.9**           |   | 55.0 |   |
|                          |   | **291.8**          |   | 330.2 |   |

 

All amounts are due within one year.

 

# **16**     DeferredRevenues

 

Deferred revenues consist primarily of pre-paid rent income received onlong-term ground lease contracts and participant revenues that are beingrecognised as income straight-line over the term of the related contract.

 

# **17**     ReportedSegments

 

The Group has two reportable segments: the Resort, which includes theoperations of the Theme Parks, Hotels and Disney Village and Real EstateDevelopment. The Group evaluates the performance of its segments basedprimarily on income before lease, net financial charges and exceptional items.The Group does not evaluate the performance of its segments based upon theirrespective fixed asset values.  Theaccounting policies of these segments are the same as those described in Note 2“Summary of Significant Accounting Policies”.

 

The table below presents information about reported segments for fiscalyears 2002, 2001 and 2000:

 
|                                                       |   | **Year ended  September 30,** |       |
|------------------------------------------------------------|--------|-------------------------------|------------|
| **(€ in millions)**                                   |   | **2002**                      |       | **2001** |   | **2000** |   |
| **Segment Revenues**                                       |   |                          | ** ** |   | ** ** |   | ** ** |
| Resort activities                                          |   | **1,048.7**                   |       | 968.0 |   | 944.7 |   |
| Real estate development activities                         |   | **27.3**                      |       | 37.2 |   | 14.5 |   |
| **Total**                                                  |   | **1,076.0**                   |       | 1,005.2 |   | 959.2 |   |
|                                                       |   |                          |       |   |   |   |   |
| **Segment Costs and Expenses**                             |   |                          |       |   |   |   |   |
| Resort activities                                          |   | **(885.1**                    | **)**      | (806.6 | ) | (771.8 | ) |
| Real estate development activities                         |   | **(15.2**                     | **)**      | (13.4 | ) | (11.6 | ) |
| **Total Costs and Expenses**                               |   | **(900.3**                    | **)**      | (820.0 | ) | (783.4 | ) |
|                                                       |   |                          | ** ** |   | ** ** |   | ** ** |
| **Segment Income before Lease and Net  Financial Charges** |   |                          | ** ** |   | ** ** |   | ** ** |
| Resort activities                                          |   | **163.6**                     |       | 161.4 |   | 172.9 |   |
| Real estate development activities                         |   | **12.1**                      |       | 23.8 |   | 2.9 |   |
| **Total Income before Lease and Net Financial  Charges**   |   | **175.7**                     |       | 185.2 |   | 175.8 |   |

 

# **18**     costs andexpenses

** **
|                                            |   | **Year ended  September 30,** |   |
|-------------------------------------------------|--------|-------------------------------|--------|
| **(€ in millions)**                        |   | **2002**                      |   | **2001** |   | **2000** |   |
| Direct operating costs (a)                      |   | **617.2**                     |   | 551.3 |   | 531.4 |   |
| Marketing, general and administrative  expenses |   | **183.5**                     |   | 183.0 |   | 171.0 |   |
| Depreciation and amortisation                   |   | **64.1**                      |   | 54.0 |   | 49.9 |   |
| Royalties and management fees (b)               |   | **35.5**                      |   | 31.7 |   | 31.1 |   |
|                                            |   | **900.3**                     |   | 820.0 |   | 783.4 |   |

 

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*(a)**       DirectOperating Costs*

Direct operating costs include operatingwages and employee benefits, cost of sales for merchandise and food andbeverage, transportation services and real estate land sales and other costssuch as utilities, maintenance, insurance and operating taxes.

 

*(b)**       Royaltiesand Management Fees*

Royalties represent primarily payments towholly-owned indirect subsidiaries of TWDC under a licence agreement thatgrants the Group the right to use any present or future intellectual orindustrial property of TWDC incorporated in attractions or other facilitiesincluding the right to sell merchandise incorporating intellectual propertyrights owned by TWDC.  Management feesare payable to Euro Disney S.A., the Company’s *Gérant*,as specified in the Company’s by-laws. Royalties and management fees are based primarily upon operatingrevenues.

 

In fiscal year 1999, after a five year waiverresulting from the Financial Restructuring, royalties were reinstated at halftheir original rate and management fees were reinstated at a reduced rate.  Royalties will be fully reinstated beginningin fiscal year 2004 and management fees will progressively increase throughfiscal year 2018.  During both fiscalyears 2002 and 2001, the rates applicable to each revenue category wereconsistent and ranged from zero to five percent resulting in fiscal year 2002in royalties and management fees of  €24.0 million and € 11.5 million, respectively. During fiscal year 2001, royalties and management fees were € 21.8million and € 9.9 million respectively.

 

# **19  ExceptionalIncome (Loss)**

** **
|                                                                |   | **Year ended  September 30,** |   |
|---------------------------------------------------------------------|--------|-------------------------------|--------|
| **(€ in millions)**                                            |   | **2002**                      |   | **2001** |   | **2000** |   |
| Pre-opening costs – Walt Disney Studios  Park (a)              |   | **(37.2**                     | )      | (5.3 | ) | (2.6 | ) |
| Movements in provisions for risks and asset  valuation reserves (b) |   | **0.7**                       |   | (0.8 | ) | 10.1 |   |
| Euro implementation costs                                           |   | **(1.0**                      | )      | (1.5 | ) | (0.6 | ) |
| Loss on early repurchase of 6.75%  Convertible Bonds (c)            |   | **—**                    |   | (2.3 | ) | (0.5 | ) |
| Fixed assets write-offs                                             |   | **(0.6**                      | )      | (1.4 | ) | (3.4 | ) |
| Other (d)                                                           |   | **0.1**                       |   | 4.1 |   | (1.8 | ) |
|                                                                |   | **(38.0**                     | **)**  | (7.2 | ) | 1.2 |   |

 

*(a)**  Pre-opening costs – Walt DisneyStudios Park*

During fiscal years 2002, 2001 and 2000, theGroup incurred € 37.2 million, € 5.3 million and € 2.6 million, respectively,of pre-opening expenses related to Walt Disney Studios Park. These expensesinclude the costs of hiring and training employees for the Park during thepre-opening period, costs of the pre-opening advertising campaign and the mediaevents which took place in February and March 2002.

 

*(b)**  Movements in provisions forrisks and asset valuation reserves*

These amounts are principally due toadjustments of provision for construction claims and other litigation offset bythe reserval of certain asset valuation reserves.

 

*(c)**   Loss on early repurchase of6.75% Convertible Bonds*

During fiscal years 2001 and 2000, the Group made early repurchases ofa portion of its 6.75% Convertible Bonds. The exceptional losses represent the difference between the book valuefor the bonds on the Company’s books on the date of these repurchases and thecash paid for the bonds.

 

*(d)**  Other*

The fiscal year 2001 amount included a € 2.3million reversal of a portion of the provision for repairs necessitated by theDecember 26th Storm.

 

 

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# **20  IncomeTaxes**

 

Income tax expense is calculated using the statutory tax rate in effectas of the balance sheet date.  Forfiscal years 2002,  2001 and 2000, thisrate was approximately 35.4%, 36.4% and 37.8%, respectively. During fiscalyears 2002, 2001 and 2000, no income tax was payable by the Group as a resultof the utilisation of tax  loss  carryforwards.  Accordingly,  the Group’seffective tax rate for these periods was 0%.

 

At September 30, 2002, unused tax loss carryforwards were approximately€ 640 million, of which, approximately € 240 million, if not utilised, willexpire before fiscal year 2007.  Theremaining tax losses can be carried forward indefinitely; however, due to theuncertainty of the ultimate realisation of these tax benefits, the Group hasnot recorded any deferred tax assets.

 

# **21  StockOptions**

 

In 1994, the Company’s shareholders approved the implementation of anemployee stock option plan (the “1994 Plan”) authorising the issuance of stockoptions for acquisition of up to 2.5% of the Company’s outstanding commonstock.   Through September 30, 2002, theCompany had granted a total of 8,266,371 options, net of cancellations and exercises, (to acquire oneshare of common stock each) to certain managers and employees at a marketexercise price which represented the average closing market price over thepreceding 20 trading days.  The optionsare valid for 10 years from their issuance date and become exercisable over 5years in equal instalments beginning one year from the date of grant. Upontermination of employment, any unvested options are cancelled. However, optionsthat are exercisable as of the date of termination, may be exercised within aspecified period of time or else they are cancelled.

 

In March 1999, the Company’s shareholders approved the implementationof a second employee stock option plan, with substantially the same terms asthe 1994 Plan, authorising the issuance of stock options for acquisition of upto 2.5 % of the Company’s outstanding common stock.  The options granted under that plan are valid for 8 years fromtheir issuance date.  Through September30, 2002, the Company had granted a total of 25,080,800 options, net of cancellations and exercices, under this plan.

 

A summary of the Company’s stock option activity for the years endedSeptember 30, 2002 and 2001, is as follows:

 
|                               |   | **Number of Options (in thousands)** |       | **Weighted-average  Exercise Price(in €)** |   |
|------------------------------------|--------|--------------------------------------|------------|-------------------------------------------------|--------|
|                               |   |                                 |       |
| **Balance at  September 30, 2000** |   | 20,020                               |       | 1.09                                            |   |
|                               |   |                                 |       |                                            |   |
| Options granted                    |   | 9,395                                |       | 0.77                                            |   |
| Options exercised                  |   | (14                                  | )          | 0.83                                            |   |
| Options cancelled                  |   | (4,076                               | )          | 1.06                                            |   |
| **Balance at  September 30, 2001** |   | 25,325                               |       | 0.98                                            |   |
|                               |   |                                 |       |                                            |   |
| Options granted                    |   | 9,893                                |       | 1.10                                            |   |
| Options exercised                  |   | (142                                 | )          | 0.81                                            |   |
| Options cancelled                  |   | (1,729                               | )          | 0.96                                            |   |
| **Balance at September 30, 2002**  |   | **33,347**                           | ** ** | **1.02**                                        |   |

 

 

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The following table summarises information about stock options atSeptember 30, 2002:

 
|                         |   | **Options  Outstanding**              |   | **Options  Exercisable**                                      |   |
|------------------------------|--------|---------------------------------------|--------|---------------------------------------------------------------|--------|
| **Range of  Exercise Price** |   | **Number of  Shares (in  thousands)** |   | **Weighted-average  Remaining  Contractual Life  (in years)** |   | **Weighted-average  Exercise Price** |   | **Number of  Shares (in  thousands)** |   | **Weighted-average  Exercise Price** |   |
| € 0.77 – 1.00      |   | 15,495                                |   | 6                                                             |   | €0.80 |   | 4,438 |   | €0.81 |   |
| € 1.01 – 2.00      |   | 17,189                                |   | 6                                                             |   | €1.16 |   | 6,895 |   | €1.24 |   |
| € 2.01 – 2.50      |   | 663                                   |   | 3                                                             |   | €2.32 |   | 663 |   | €2.32 |   |
|                         |   | 33,347                                |   | 6                                                             |   | €1.02 |   | 11,996 |   | €1.14 |   |

 

# **22  Financialinstruments**

 

**22-1Interest rate risk management transactions**

 

The Group uses interest rate swaps and other instruments to manage itsexposure to changes in interest rates and to lower its overall borrowingcosts.  The impact of changes ininterest rates affects financial income and expense as well as lease rentalexpense of the Group.

 

The following table summarises, by notional amounts, the activity forinterest rate contracts outstanding during the years ended September 30, 2002and 2001.  Roll-forward activity, whichrepresents renewal of existing positions, is excluded.

 
| **(€ in millions)**           |   | **Forward  Agreements /  Swaps** |   |
|------------------------------------|--------|---------------------------------------|--------|
| **Balance at September 30, 2000**  |   | —                                |   |
|                               |   |                                  |   |
| Additions                          |   | 563.8                                 |   |
| Maturities/Terminations            |   | —                                |   |
| **Balance at September 30, 2001**  |   | 563.8                                 |   |
|                               |   |                                  |   |
| Additions                          |   | —                                |   |
| Maturities/Terminations            |   | —                                |   |
| **Balance  at September 30, 2002** |   | 563.8                                 |   |

 

During fiscal year 2001, the Company entered into several interest rateswap agreements which became effective at or near September 30, 2001 and have aterm of 2 years.  These agreementsrequire the company to pay fixed interest rates ranging from 3.79% to 4.69% andto receive interest payments calculated based upon 3-month EURIBOR on theoutstanding notional amounts, which total € 563.8 million as of September 30,2002.

The total interest rate differential resulting from interest ratehedging instruments was a loss of  € 5.4million in fiscal year 2002.  There wasno material impact in fiscal year 2001. The fair value of these contracts is estimated to be the same as thecost or gain to the Group to terminate its interest rate hedgingcontracts.  At September 30, 2002 takinginto account the prevailing interest rate environment and credit worthiness ofcounterparties, this amount would represent a loss of € 7.4 million (€ 8.1million at September 30, 2001).

 

**22-2 Currency risk management transactions**

 

The Group’s exposure to foreign currency risk relates principally tovariations in the value of the U.S. dollar and certain European currencies.

 

 

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The Group’s objective is to reduce earnings and cash flow volatilityassociated with foreign exchange rate changes to allow management to focus itsattention on its core business issues and challenges.  Accordingly, the Group enters into various contracts that changein value as foreign exchange rates change to protect the value of its existingforeign currency assets and liabilities, commitments and anticipated foreigncurrency revenues and expenses.

 

At September 30, 2002 and 2001, the Group had € 54.3 million and €103.4 million, respectively, of foreign currency hedge contracts outstanding,consisting of forward exchange contracts and options.  The fair value of these contracts is estimated to be the same asthe cost or gain to the Group of terminating its foreign exchangecontracts.  This amount was a loss of €0.1 million and € 2.0 million at September 30, 2002 and 2001, respectively.

 

**22-3 Concentrations of credit risk**

 

Management believes no significant concentration of credit risk existswith respect to the Group’s financial instruments. The Group utilises a varietyof off-balance sheet instruments for hedging purposes.  At September 30, 2002 and 2001, neither theGroup nor the counterparties were required to collateralise their respectiveobligations under the terms of these hedging contracts.

** **

# **23  Commitmentsand Contingencies**

 

There are various legal proceedings and claims against the Grouprelating to construction and other activities incident to the conduct of itsbusiness.  Management has establishedprovisions for such matters and does not expect the Group to suffer anymaterial additional liability by reason of such actions, nor does it expectthat such actions will have a material effect on its liquidity or operatingresults.

 

The Company is jointly liable for all Phase IA Financing Companyobligations under the  Phase  IA credit  facility until theirschedule maturity date in 2009. These obligations total € 290.8 million as ofSeptember 30, 2002.

 

EDL Hôtels S.C.A. has guaranteed all Phase IB Financing Companies’obligations under the Phase IB credit facility and Phase IB partner’s advancesuntil scheduled maturity date (2016 at the latest). These obligations total €245.6 million as of September 30, 2002.

 

As part of the terms of the Financial Restructuring, the Company wasrequired to pay a one-time development fee of € 182.9 million to TWDC upon the satisfaction of certain conditions, includingconditions relating to the launch and financing of a second phase ofdevelopment.  In order to obtain theapproval for the financing of Walt Disney Studios Park from the Lenders, TWDCagreed to amend the terms and conditions of the development fee so that it willnot be due until future events occur, including the repayment of the existingbank debt of the Company and of the CDC Walt Disney Studios Park loans and theachievement by the Group of specified cash flow levels.

 

# **24  Leased Assets**

 

The Group owns Walt Disney Studios Park, Disneyland Hotel, the DavyCrockett Ranch, the golf course, the underlying land thereof and the land onwhich the other five hotels and Disney Village are located, and leasessubstantially all of the remaining operating assets.  Pursuant to options available under French accounting principles,the Group has not capitalised these leases and has accounted for them asoperating leases.

 

 

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**24-1Disneyland Parkand Hotel Leases**

 

**Description**

The Group leases Disneyland Park, the Phase IB Facilities and theNewport Bay Club Convention Centre, directly or indirectly, from eight specialpurpose financing companies.  Thefollowing discussion summarises the significant terms of each lease:

 

**•****             DisneylandPark - Phase IA Lease**

Originally, pursuant to the Phase IA financing agreements, the Companyleased Disneyland Park directly from the Phase IA Financing Company under a *crédit-bail*(financial lease) which commenced Opening Day and was to end when the underlyingborrowings and interest were repaid in full by the Phase IA FinancingCompany.  Pursuant to the terms of theFinancial Restructuring, a new leasing structure for Disneyland Park assets wasimplemented.

 

Under the new lease structure, effective June 30, 1994, the originalfinancial lease was cancelled and a new financial lease established whereby thePhase IA Financing Company leases Disneyland Park to EDA SNC with terms similarto the original financial lease*.*The Company, in turn, is subleasing DisneylandPark from EDA SNC for a term of 12 years with rent substantially equal to theamount invoiced by the Phase IA Financing Company to EDA SNC.  At the end of the sublease term, the Companywill have the option to acquire the leasehold position of EDA SNC upon paymentof an option fee of approximately € 78.7 million. If the Company does notexercise this option and thereby elects to discontinue leasing Disneyland Park,EDA SNC may continue to lease the assets, with an ongoing option to purchasethem for an amount approximating the balance of the Phase IA FinancingCompany’s  then  outstanding debt. Alternatively, EDA SNCcould terminate the lease, in which case EDA SNC would pay the Phase IAFinancing Company an amount equal to 75% of its then outstanding debt, andcould then sell or lease the assets on behalf of the Phase IA FinancingCompany, in order to satisfy the remaining debt, with any excess proceedspayable to the benefit of EDA SNC.

 

**•****             DisneylandPark - Additional Capacity Attractions Lease**

As part of the Financial Restructuring, EDA SNC purchased certaintangible fixed assets, principally Disneyland Park attractions constructedsubsequent to Opening Day, for their book value of € 213.4 million andsubsequently leased the assets back to the Company for a period of 12 years fora fixed annual lease payment of  € 2.1million.  At the end of the lease term,the Company will have the option to purchase the assets for  € 213.4 million.  If this option is exercised, TWDC has agreed to provide financingover an eight-year term at an interest rate of 1% per annum.  As an alternative to this purchase option,the Company may enter into a new 12-year financial lease for these assets withEDA SNC at the end of the original lease term, with terms substantially similarto those of the financing for the purchase option described above.  At the end of this second lease term, theCompany will have the option of purchasing the leased assets for a nominalamount.

 

**•****             Hotel- Phase IB Facilities Leases**

EDL Hôtels S.C.A. leases the Phase IBFacilities from the six Phase IB Financing Companies. The leases will terminatein February 2011. Beginning in fiscal year 1998, the Group has the option toacquire at any time during the term of the lease the leased assets for anamount approximating the balance of the Phase IB Financing Companies’outstanding debt.

 

**•****             Hotel- Newport**Bay**Club Convention Centre Lease**

EDL Hôtels S.C.A. has sale-leasebackagreements with Centre de Congrès Newport S.A.S., for the Newport Bay ClubConvention Centre. The lease began in November 1997 and has a term of 20 years,at the end of which EDL Hôtels S.C.A. has the option to repurchase theconvention centre for a nominal amount. Annual lease payment amounts are based upon the construction costs ofthe asset and an interest rate of 6 months EURIBOR + 20 basis points.

 

Lease rental expense was € 188.8****million and € 185.8 million for the yearsended September 30, 2002 and 2001, respectively.  The rental expense under these leases consists of the lessor’sdebt service payments (principal and interest), including those related to thelong-term loans granted by the Group (as described in Note 4), and anyoperating costs (primarily property taxes) incurred by the lessor.  Thus, lease rental expense fluctuatesprincipally with the lessor’s interest expense variations, due to variableinterest rates and interest forgiveness rate changes, and the timing ofprincipal repayments on the leasing entities’ debt.

 

 

78

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***Lease Commitments***

 

The following table summarises the gross amount of future minimumrental commitments (excluding operating costs) due to the Financing Companies,under non-cancellable operating leases. The future commitments calculation is based upon the followingassumptions:

 

•                       Averagefuture EURIBOR of 6%.

 

•                       The Groupwill exercise its purchase options on the Phase IB Facilities at the end of thePhase IB lease terms in February 2011 for an estimated amount of € 280million.  This option fee is included inthe following commitment table in the line Thereafter.

 

•                       The Companywill exercise its option at the end of the 12th year of  Disneyland Park Phase IA lease.  In this event, the Company will pay anoption fee of € 78.7 million and will continue to lease the assets.  The option fee and the resulting leaseobligations are reflected in the following commitment table in fiscal year 2006and thereafter.

 

•                       The Companywill exercise its option under Disneyland Park — Additional CapacityAttractions Lease — and will purchase the leased assets for € 213.4million.  The purchase price of theleased assets is included in the following commitment table in fiscal year2006.

 

Lease commitments as of September 30, 2002 are as follows:

 
|                     |   |                                    |   | **Loans  granted by the Group to Lessors  (see Note 4)** |   |                      |   |
|--------------------------|--------|-----------------------------------------|--------|----------------------------------------------------------|--------|---------------------------|--------|
| **(€ in millions)** |   | **Lease  Commitments  (Gross amounts)** |   | **Interest   Payments**                                  |   | **Principal  Repayments** |   | **Lease  Commitments  (Net amounts)** |   |
| 2003                     |   | 226.2                                   |   | (75.6                                                    | )      | (52.2                     | )      | 98.4 |   |
| 2004                     |   | 253.9                                   |   | (82.9                                                    | )      | (67.3                     | )      | 103.7 |   |
| 2005                     |   | 263.6                                   |   | (78.1                                                    | )      | (74.7                     | )      | 110.8 |   |
| 2006                     |   | 571.3                                   |   | (72.9                                                    | )      | (90.0                     | )      | 408.4 |   |
| 2007                     |   | 291.7                                   |   | (66.7                                                    | )      | (101.6                    | )      | 123.4 |   |
| Thereafter               |   | 2,413.1                                 |   | (237.5                                                   | )      | (899.2                    | )      | 1,276.4 |   |
|                     |   | 4,019.8                                 |   | (613.7                                                   | )      | (1,285.0                  | )      | 2,121.1 |   |

 

Lease rental commitments include principal and interest amounts due tothe Group as repayment of the long-term loans granted by the Group to the PhaseI SNCs.  However, the portion of therental commitments related to principal and interest amounts on the long-termloans granted by the Group to the Phase I SNCs has no cash flow impact on theGroup as the cash outflow for this portion of lease rental expense is exactlyoffset by the cash inflow of interest and principal repayments.  Therefore, the portion of the gross rentalcommitment related to the repayment of these long-term loans is separatelyidentified to arrive at a total net lease commitment.

 

***Book value of leasedassets***

As the Group accounts for these transactions as operating leases, thehistorical cost and depreciation of the assets, and related securedindebtedness are not included in the Group’s consolidated financialstatements.  The book value anddepreciation of the assets, which are carried by the Financing Companies, aresummarised as follows:

 
|                                                       |   | **September  30, 2002** |   |                          |   |
|------------------------------------------------------------|--------|-------------------------|--------|-------------------------------|--------|
| **(€ in millions)**                                   |   | **Historical  Cost**    |   | **Accumulated  Depreciation** |   | **Net Book  Value** |   | **Estimated  Useful Lives** |   |
| Intangible assets                                          |   | 15.6                    |   | (12.9                         | )      | 2.7 |   | 10 years |   |
| Land and secondary infrastructure                          |   | 302.6                   |   | (122.4                        | )      | 180.2 |   | 10 to 25 years |   |
| Buildings                                                  |   | 1,852.1                 |   | (775.6                        | )      | 1,076.5 |   | 25 to 33 years |   |
| Leasehold improvements, furniture, fixtures  and equipment |   | 405.9                   |   | (333.5                        | )      | 72.4 |   | 5 to 25 years |   |
|                                                       |   | 2,576.2                 |   | (1,244.4                      | )      | 1,331.8 |   |   |   |

 

 

79

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Depreciation expense using the straight-line method, as reported by theFinancing Companies, was  € 105.9million,  € 122.6 million and € 122.6million for the years ended September 30, 2002, 2001 and 2000, respectively.

 

**24-2Other Leases**

 

The Group has other operating leases, primarily for office and computerequipment and vehicles, for which total rental expense was € 27.4 million, €26.7 million and € 24.4 million for the years ended****September 30, 2002, 2001 and2000, respectively.  Future minimumrental commitments under these non-cancellable operating leases as of September30, 2002 are as follows:

 
| **(€ in millions)** |   |   |   |
|--------------------------|--------|--------|--------|
| 2003                     |   | 9.4    |   |
| 2004                     |   | 8.2    |   |
| 2005                     |   | 7.2    |   |
| 2006                     |   | 6.2    |   |
| 2007                     |   | 1.7    |   |
| Thereafter               |   | 3.2    |   |
|                     |   | 35.9   |   |

 

# **25**     Employees

 

The weighted-average number of employees employed by the Group was:

 
|       |   | **Year ended  September 30,** |   |
|------------|--------|-------------------------------|--------|
|       |   | **2002**                      |   | **2001** |   | **2000** |   |
| Cadres     |   | **2,287**                     |   | 1,997 |   | 1,854 |   |
| Non-cadres |   | **10,180**                    |   | 9,112 |   | 9,578 |   |
|       |   | **12,467**                    |   | 11,109 |   | 11,432 |   |

 

Total employee costs for the years ended September 30, 2002, 2001 and2000 were € 352.0 million, € 307.0 million and 297.6 million, respectively.

All employees participate in state funded pension plans in accordancewith French laws and regulations. Certain employees also participate in a supplemental definedcontribution plan.  Contributions to allplans are based on gross wages and are shared between the employees and theGroup. Contributions paid by the Group are expensed as incurred.  In addition, retirement indemnities are paidunder the terms of the Group’s collective bargaining agreement.

 

A new collective bargaining agreement became effective in April 2001,which among other things increased the retirement benefits provided by theGroup to its employees.  Under theagreement, a retirement indemnity ranging from one-half a month to 3 months ofgross wages is provided to employees who retire from the Group at the age of 60or older after completing at least 1 year of service.

 

As of September 30, 2002, the future commitment with respect to theseretirement indemnities was estimated to be  € 6.4 million compared to € 5.8 million as of September 30, 2001.

 

# **26**     Directors’Fees

 

During the years ended September 30, 2002, 2001 and 2000, fees paid tomembers of the Company’s Supervisory Board were € 133,393, € 201,995 and 190,561 respectively**.**

 

 

80

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# **27**      Summaryof Differences Between Accounting Principles Adopted by the Group and GenerallyAccepted AccountingPRINCIPLES IN THE U.S. AND SUPPLEMENTAL DISCLOSURES

 

As a result of the 1994 rights offering referred to in Note 1-3, EuroDisney S.C.A. is required to file an annual report on Form 20-F with theSecurities and Exchange Commission (“SEC”) in the United States within sixmonths of September 30 each year.  Asexplained in the summary of significant accounting policies, the consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in France (“French GAAP”).  French GAAP varies in certain significantrespects from accounting principles generally accepted in the United States(“U.S. GAAP”) particularly for leases of operating assets, which are accountedfor as operating leases in accordance with one of the options allowed by FrenchGAAP, rather than being capitalised. Additionally, in connection with theFinancial Restructuring, the Company’s computation of interest expense underFrench GAAP differs significantly from U.S. GAAP.

 

The reconciliations of net income and equity between French and U.S.GAAP are shown below, followed by a condensed consolidated balance sheetprepared under U.S. GAAP.  A descriptionof the accounting principles which materially differ also follows:

 

**Reconciliationof Net Income (Loss)**

 
|                                              |   | **Year ended  September 30,** |   |
|---------------------------------------------------|--------|-------------------------------|--------|
| **(€ in millions)**                          |   | **2002**                      |   | **2001** |   | **2000** |   |
| Net Income (Loss), as reported under French  GAAP |   | **(33.1**                     | )      | 30.5 |   | 38.7 |   |
| Lease and interest adjustments                    |   | **(35.7**                     | )      | (78.4 | ) | (106.0 | ) |
| Other                                             |   | **1.5**                       |   | (2.7 | ) | 1.1 |   |
| ***Net  Loss under U.S. GAAP***                   |   | **(67.3**                     | )      | (50.6 | ) | (66.2 | ) |
|                                              |   |                          |   |   |   |   |   |
| *Comprehensive Income Items:*                     |   |                          |   |   |   |   |   |
| *Interest rate hedges*                            |   | **0.7**                       |   | (8.1 | ) | — |   |
| ***Comprehensive  Loss under U.S. GAAP***         |   | **(66.6**                     | **)**  | (58.7 | ) | (66.2 | ) |

** **

**Reconciliationof Shareholders’ Equity**

 
|                                                          |   | **September  30,** |   |
|---------------------------------------------------------------|--------|--------------------|--------|
| **(€ in millions)**                                      |   | **2002**           |   | **2001** |   |
| Shareholders’ Equity, as reported under  French GAAP     |   | **1,244.8**        |   | 1,277.9 |   |
| Cumulative lease and interest adjustments                     |   | **(1,287.0**       | )      | (1,251.3 | ) |
| Effect of revaluing the ORAs and  sale/leaseback transactions |   | **178.1**          |   | 178.1 |   |
| Other                                                         |   | **(23.3**          | )      | (25.0 | ) |
| ***Shareholders’  Equity under U.S. GAAP***              |   | **112.6**          |   | 179.7 |   |

 

**BalanceSheet under U.S. GAAP**

 
|                                |   | **September  30,** |   |
|-------------------------------------|--------|--------------------|--------|
| **(€ in millions)**            |   | **2002**           |   | **2001** |   |
| Current assets                      |   | **259.4**          |   | 830.9 |   |
| Other assets                        |   | **144.6**          |   | 157.0 |   |
| Fixed assets                        |   | **2,660.6**        |   | 2,551.1 |   |
| ***Total  Assets***                 |   | **3,064.6**        |   | 3,539.0 |   |
|                                |   |               |   |   |   |
| Current liabilities                 |   | **536.7**          |   | 568.7 |   |
| Non current liabilities             |   | **196.7**          |   | 225.5 |   |
| Borrowings*                         |   | **2,218.6**        |   | 2,565.1 |   |
| Shareholders’ Equity           |   | **112.6**          |   | 179.7 |   |
| ***Total  Liabilities and Equity*** |   | **3,064.6**        |   | 3,539.0 |   |

 

----

* (excluding accrued interest)

 

 

81

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***Lease and interestadjustments***

The Group leases substantially all of its operating assets undervarious agreements. Under French GAAP, the Group has not capitalised theseleases and is accounting for them as operating leases. Under U.S. GAAP, theunderlying assets and liabilities and related depreciation and interest expenseare reflected in the Group’s financial statements.

 

Under U.S. GAAP, all interest charges relating to debt instrumentswhose interest rates are scheduled to change or have interest “holidays” orforgiveness periods are required to be calculated in accordance with the“effective interest method”.  Thismethod calculates the estimated interest charges over the life of the debt, andallocates this amount evenly over the term of the debt using an effectiveyield.  During fiscal years 2002, 2001and 2000, this adjustment resulted in less interest expense under U.S. GAAPthan that reported under French GAAP, as interest expense calculated using thismethod differs from actual interest paid.

 

**FinancialInstruments**

 

In 1998, the Financial Accounting Standards Board (“the FASB”) issuedStatement of Financial Accounting Standards 133, *Accounting for Derivative Instrumentsand Hedging Activities*. This statement was subsequently amended bythe issuance of Statement of Financial Accounting Standards 137 (“SFAS 137”)and Statement of Financial Accounting Standards 138 (“SFAS 138”).  The Group adopted Statement of FinancialAccounting Standards 133 as amended by SFAS 137 and SFAS 138 (“SFAS 133”),effective October 1, 2000.  SFAS 133requires that all derivative instruments be recorded on the balance sheet attheir fair value.  Changes in the fairvalue of derivatives are recorded each period in current earnings or in othercomprehensive income, depending on whether a derivative is designated as partof a hedging relationship and, if it is, depending on the type of hedgingrelationship.  For fair-value hedges inwhich the Company is hedging changes in an asset’s, a liability’s, or a firmcommitments’ fair value, changes in the fair value of the derivative instrumentwill generally be offset in the income statement by changes in the hedgeditem’s fair value.  For cash flow hedgesin which the Company is hedging the variability of cash flows related to avariable-rate asset, variable-rate liability, or a forecasted transaction, theeffective portion of the gain or loss on the derivative instrument will bereported in other comprehensive income. The gain or loss on the derivative instrument that is reported in othercomprehensive income will be reclassified as earnings in the periods duringwhich earnings are impacted by the variability of the cash flows of the hedgeditems.  The ineffective portion of allhedges will be recognised in current-period earnings.

 

As a result of adopting SFAS 133 on October 1, 2000 and in accordancewith the transition provisions, the Company recorded a one-time gain of € 4.7million related to its foreign currency derivative instruments representing thecumulative effect of the adoption.

 

During fiscal years 2002 and 2001, the Company recorded the change inthe fair value of its interest rate derivative financial instruments incomprehensive income.  For foreignexchange financial derivatives, the Company recorded a gain of € 2.0 millionand a loss of € 6.7 million in financial results for fiscal years 2002 and2001, respectively, representing the change in the market value of all foreignexchange derivative outstanding at the end of each period.

 

**Extraordinaryitems**

 

Under French GAAP the definitionof exceptional items differs significantly from the U.S. GAAP definition ofextraordinary items. No exceptional items in the French GAAP Statement ofIncome would be classified as extraordinary or non-operating under U.S. GAAPduring fiscal years 2002, 2001 and 2000.

 

**ComprehensiveIncome**

 

Comprehensive income is a term used to define all non-owner changes inshareholders’ equity.  Comprehensiveincome is a concept not addressed by French GAAP.  Under U.S. GAAP, comprehensive income includes, in addition tonet income:

 

**•****                      **Netunrealised holding gains/losses arising during the period on available for salesecurities

**•****                      **Movementsin cumulative translation adjustments

**•****                      **SFAS133 mark to market adjustments on derivative financial instruments designatedas hedge, and

**•****                      **Minimumpension liability adjustments.

 

 

82

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Included in other comprehensive income in fiscal years 2002 and 2001are a gain of € 0.7 million and a loss of € 8.1 million, respectively, representing the change in value of interestrate derivatives designated as cash flow hedges.

 

**Employeestock options**

 

Under U.S. GAAP, the Group follows Statement of Financial AccountingStandards 123, *Accounting for Stock-Based Compensation* (“SFAS 123”). TheGroup has elected under the provisions of SFAS 123 to continue to measurecompensation costs using the method of accounting prescribed by AccountingPrinciples Board Opinion 25,  *Accountingfor Stock Issued to Employees.*

 

**Earningsper share**

 

Under U.S. GAAP, the Group follows Statement of Financial AccountingStandards 128, *Earnings per Share*, which requires the presentation of basicand diluted earnings per share (“EPS”). Basic EPS excludes all dilution and iscalculated using the weighted-average number of common shares outstandingduring the period. Diluted EPS reflects the potential dilution that would occurif securities or other contracts to issue common stock were exercised orconverted into common stock.

 

Under U.S. GAAP, basic and diluted loss per share amounts for fiscalyears 2002, 2001 and 2000 were € 0.06, € 0.05 and € 0.07, respectively.  As of September 30, 2002, 2001 and 2000, 163million, 179 million and 183 mllion, respectively of potential shares wereexcluded from the computation of diluted earnings per share because their effectwould have been anti-dilutive.

 

**Borrowings**

 

**Reconciliationof Borrowings**

 
|                                                                    |   | **September  30,** |   |
|-------------------------------------------------------------------------|--------|--------------------|--------|
| **(€ in millions)**                                                |   | **2002**           |   | **2001** |   |
| Total Borrowings, as reported under French  GAAP*                       |   | **781.4**          |   | 1,099.9 |   |
| Unconsolidated Phase I SNCs debt and lease  financing arrangements      |   | **1,438.4**        |   | 1,469.2 |   |
| Borrowings including unconsolidated  Financing Companies                |   | **2,219.8**        |   | 2,569.1 |   |
|                                                                    |   |               |   |   |   |
| U.S. GAAP adjustments to revalue lease  financing arrangements and ORAs |   | **(1.2**           | )      | (4.0 | ) |
| **Total U.S. GAAP Borrowings***                                         |   | **2,218.6**        |   | 2,565.1 |   |

 

----

* (excluding accrued interest)

 

**DescriptionUnconsolidated Phase I SNC’s debt and Lease Financing Arrangements**

As described in Note 24, the Group has not capitalised the leases ofits operating assets but has accounted for them as operating leases. Under U.S.GAAP, the underlying assets and liabilities are reflected in the Group’sbalance sheet.  The underlying assetsassociated with these leases are set out in Note 24 above. Set out below is aschedule of U.S. GAAP obligations associated with these leases:

 
|                                                            |   | **September  30,** |   |
|-----------------------------------------------------------------|--------|--------------------|--------|
| **(€ in millions)**                                        |   | **2002**           |   | **2001** |   |
| CDC Phase I loans (a)                                           |   | **361.3**          |   | 361.3 |   |
| Phase IA credit facility (b)                                    |   | **290.8**          |   | 312.7 |   |
| Phase IB credit facility (c)                                    |   | **148.7**          |   | 156.6 |   |
| Phase IA partners’ advances (d)                            |   | **304.9**          |   | 304.9 |   |
| Phase IB partners’ advances (e)                            |   | **96.9**           |   | 96.8 |   |
| EDA SNC lease financing arrangement (f)                         |   | **213.4**          |   | 213.4 |   |
| Newport Bay Club Convention Centre lease  financing arrangement |   | **22.4**           |   | 23.5 |   |
|                                                            |   | **1,438.4**        |   | 1,469.2 |   |
|                                                            |   |               |   |   |   |
| Discount on EDA SNC lease financing  arrangement (f)            |   | **(42.8**          | )      | (47.4 | ) |
|                                                            |   | **1,395.6**        |   | 1,421.8 |   |

 

 

83

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*(a)**       CDC Phase I loans*

Pursuant to the original credit agreement andthe Financial Restructuring, the Company borrowed from the CDC € 86.9 million senior debt and € 274.4 million subordinated debt.  The senior debt is secured by DisneylandPark, Disneyland Hotel, Davy Crockett Ranch, and other related facilities andthe underlying land thereof.  Thesubordinated debt is unsecured.  Theloans bear interest at a fixed rate of 7.85%; however, effective as ofSeptember 30, 1999, the terms of these loans were modified so as to reduce theinterest rate to 5.15%, defer principal repayments and to extend the finalmaturity date from fiscal year 2014 to fiscal year 2024.  At September 30, 2002 and 2001, accruedinterest related to these loans was € 16.9 million.

 

*(b)**       Phase IA credit facility*

The Phase IA credit facility consists of severaltranches and is collateralised by a mortgage on Disneyland Park, DisneylandHotel, Davy Crockett Ranch, other related facilities and the underlying landthereof.  The Company is a co-obligor onthis facility with the Phase IA Financing Company. The loan bears interest atEURIBOR plus 1.03% (4.33% at September 30, 2002).  Principal repayments commenced in fiscal year 2001.  At September 30, 2002 and 2001, accruedinterest related to this loan amounted to € 0.4 million and € 0.6 million,respectively.

 

*(c)**        Phase IB credit facility*

The Phase IB credit facility is secured bythe Phase IB Facilities. The loan bears interest at EURIBOR plus 1.33% (4.63%at September 30, 2002). Principal repayments commenced in fiscal year1998.  At September 30, 2002 and 2001,accrued interest related to this loans amounted to € 1.1 million and € 1.4million, respectively.

 

*(d)**       Phase IA partners’ advances*

These advances are related to Phase IA assetsand bear interest at a fixed rate of 3.0%, however, pursuant to the terms ofthe Financial Restructuring, the applicable interest rate was reduced by 54% inboth fiscal years 2002 and 2001. Principal repayments are scheduled to commence in fiscal year 2010.  At September 30, 2002 and 2001, accrued interestrelated to these advances was € 0.8 million.

 

*(e)**        Phase IB partners’advances*

These advances currently consist of twotranches, including € 18.8 million of bank borrowings, and are collateralisedby Phase IB assets.  The bank borrowingstotalling € 18.8 million bear interest at EURIBOR plus 1.46% (4.76% atSeptember 30, 2002).  The remainingadvances totalling € 78.0 million bear interest at a fixed rate of 3.0%,however, pursuant to the terms of the Financial Restructuring, the applicableinterest rate was reduced by approximately 35% in both fiscal years 2002 and2001.  Principal repayments arescheduled to commence in fiscal year 2006. At September 30, 2002 and 2001, accrued interest related to theseadvances was € 0.2 million.

 

*(f)**           EDA SNC lease financingarrangement*

Represents the Company’s obligation underDisneyland Park-Additional Capacity Attractions lease with EDA SNC (asdescribed in Notes 1-2 and 24). Under U.S. GAAP, this transaction is considereda financing arrangement at a rate below market levels; therefore, theobligation was discounted to reflect current market rates of interest at theinception of the lease. The discounted obligation is being accreted and willarrive at its maturity  value in June2006.  As of September 30, 2002 and 2001,the discounted value of this obligation was € 170.6 million and € 166.0million, respectively.

 

These outstanding borrowings have the following scheduled maturities asof September 30, 2002:

 
| **(€ in millions)** |   |
|--------------------------|--------|
| 2003                     |   | 37.5 |   |
| 2004                     |   | 40.9 |   |
| 2005                     |   | 50.9 |   |
| 2006                     |   | 61.1 |   |
| 2007                     |   | 101.7 |   |
| Thereafter               |   | 1,103.5 |   |
|                     |   | 1,395.6 |   |

 

 

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**Bondsredeemable in shares (“ORAs”)**

 

Under French GAAP, the ORAs were originally recorded at face value asquasi-equity.  In fiscal year 1998, thecarrying value of the waived ORAs was transferred to shareholders’ equity, as aresult of a waiver of ORA rights. In fiscal year 2000, this amount wastransferred back to quasi-equity, following the reinstatement of the waivedrights.  Under U.S. GAAP, the ORAs wererecorded at their discounted fair value upon issuance and included in theCompany’s outstanding borrowings.  Uponmaturity in 2004, these bonds will be redeemed in shares of the Company and  € 38.1 million will be transferred to shareholders’equity.  The difference between thediscounted fair value of the ORAs at their issuance and their maturity value isbeing amortised to interest expense.  Asof September 30, 2002 and 2001, the carrying value of the ORAs included in U.S.GAAP borrowings was € 41.6 million and € 43.6 million, respectively.

 

**Royaltiesand Management Fees**

 

The Group is party to a licensing agreement under which the Group paysroyalties to an indirect wholly-owned subsidiary of TWDC.  In addition, the Company is bound by theterms of its by-laws to pay management fees to Euro Disney S.A., also anindirect wholly-owned subsidiary of TWDC. As part of the Financial Restructuring, the terms of the licensingagreement and the terms of the Company’s by-laws were modified to reduce theamounts of these fees.  See Note 18(b)for a full description.  Under bothFrench and U.S. GAAP, royalties and management fees have been recorded as duein accordance with the terms of the modified contracts.

 

The table below compares the total amount of the royalties andmanagement fees recorded in the Consolidated Statements of Income to that whichwould have been recorded under the original terms of the modifiedcontracts.  Pro forma net loss and net lossper share reflect the loss for the periods as if the royalties and managementfees had not been reduced as part of the Financial Restructuring.

 

 
|                                                                           |   | **Year ended  September 30,** |   |
|--------------------------------------------------------------------------------|--------|-------------------------------|--------|
| **(€ in millions, except per share data)**                                |   | **2002**                      |   | **2001** |   | **2000** |   |
| Pro-forma royalties and management fees  under terms of the original contracts |   | **111.9**                     |   | 103.4 |   | 100.6 |   |
| Reduction due to 1994 Financial  Restructuring                                 |   | **(77.2**                     | )      | (71.7 | ) | (69.5 | ) |
| Royalties and management fees recorded                                         |   | **34.7**                      |   | 31.7 |   | 31.1 |   |
|                                                                           |   |                          |   |   |   |   |   |
| Pro forma U.S. GAAP Net Loss                                                   |   | **(144.5**                    | )      | (122.3 | ) | (135.7 | ) |
|                                                                           |   |                          |   |   |   |   |   |
| Pro forma U.S. GAAP Net Loss Per Share (in  €)                            |   | **(0.14**                     | )      | (0.12 | ) | (0.14 | ) |

 

# **28  SUBSEQUENT EVENTS**

 

On March 28, 2003Euro Disney S.A. agreed that all management fees payable to it for the second,third and fourth quarters of fiscal year 2003 and for all of fiscal year 2004will be paid on a fiscal year-end basis rather than quarterly.  A wholly-owned indirect subsidiary of TWDCagreed to the same payment arrangement for royalties.  Euro Disney S.A. and the other indirect subsidiary of TWDCfurthur agreed that due to a slow-down in tourism and the potential impact ofongoing geopolitical uncertainties, with respect to the last three quarters offiscal year 2003, their combined royalties and management fees will not exceedthe maximum amount that could be paid by the Group while maintaining compliancewith the gross operating income covenant under certain of the Group's debtagreements.  Subject to the approval ofthe Supervisory Board, any portion of the royalties or management fees not paidfor 2003 as a result of the foregoing may in the future become payable if andto the extent that income before lease and net financial charges excluding depreciationand amortisation for any year from fiscal year 2004 through fiscal year 2008exceeds € 450 million.

 

Also during March 2003, the Company agreed to waive its rights to thepotential reduction in quarterly bank debt security deposits with its Lenders(see Note 13).

 

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