<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Registration number 33-63707
A. Full title of the plan:
PARKER PEN 401(K) PLAN
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
The Gillette Company
Prudential Tower Building
Boston, MA 02199
<PAGE> 2
FINANCIAL STATEMENTS OF PARKER PEN 401(k) PLAN
The following audited financial statements with independent auditors'
report thereon are enclosed with this report:
1. Statements of Net Assets Available for Plan Benefits as of
December 31, 1996 and 1995.
2. Statements of Changes in Net Assets Available for Plan Benefits
for each of the years in the three-year period ended December 31,
1996.
EXHIBIT
23.2 Independent Auditor's Consent
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Advisory Committee has duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
PARKER PEN 401(k) PLAN
By /s/ CHARLES W. CRAMB
-----------------------
Charles W. Cramb
Date: June 24, 1997
<PAGE> 3
PARKER PEN 401(K) PLAN
Financial Statements
December 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
<PAGE> 4
Independent Auditors' Report
----------------------------
The Savings Plan Committee
The Gillette Company Employees' Savings Plan:
We have audited the statements of net assets available for plan benefits of the
Parker Pen 401(k) Plan as of December 31, 1996 and 1995 and the related
statements of changes in net assets available for plan benefits for the years
then ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Parker
Pen 401(k) Plan as of December 31, 1996 and 1995 and the changes in assets
available for plan benefits for the years then ended in conformity with
generally accepted accounting principles.
May 23, 1997
<PAGE> 5
<TABLE>
PARKER PEN 401(K) PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1996 and 1995
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Assets:
Investments at fair value:
Investment in the Savings Plan Trust $7,028,709 -
Guaranteed Investment Contract Fund - 3,193,135
Balanced Fund - 1,706,131
Equity Fund - 3,882,421
Payment Reserve Account - 250,774
---------- ---------
Total investments 7,028,709 9,032,461
---------- ---------
Contribution receivable:
Employee - 37,961
Employer - 119,715
Accrued investment income - 20,557
---------- ---------
Net assets available for plan benefits $7,028,709 9,210,694
========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
<TABLE>
PARKER PEN 401(K) PLAN
Statement of Changes in Net Assets Available for Plan Benefits
For the year ended December 31, 1996
<CAPTION>
Guaranteed Gillettte Fidelity
Investment Payment Company Intermediate Fixed
Contract Balanced Equity Reserve Stock Bond Income
Fund Fund Fund Account Fund Fund Fund
----------- --------- --------- ------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net asset attributed to:
Net investment income from the
Savings Plan Trust $ - - - - 342,697 301 149,500
Contributions
Employee contributions - - - - 205,507 7,689 112,485
Employer contributions - - - - 59,594 2,529 34,394
Total additions - - - - 607,798 10,519 296,379
----------- --------- --------- ------- --------- ------ ---------
Deductions from net assets attributed to:
Benefit payments - - - - (73) (70) (44,051)
Forfeitures - - - - (15) (14) (106)
Transfer of assets to The
Gillette Company
Employees' Savings Plan (837,945) (807,218) (2,160,876) (141,374) - - -
----------- --------- --------- ------- --------- ------ ---------
Total deductions (837,945) (807,218) (2,160,876) (141,374) (88) (84) (44,157)
Net increase (decrease) prior to
interfund transfers (837,945) (807,218) (2,160,876) (141,374) 607,710 10,435 252,222
Net transfers in (out)
Loans issued - - - - (11,565) (269) (45,711)
Loans repaid - - - - 13,677 46 8,575
Other transfers (2,392,998) (933,384) (1,827,499) (109,400) 778,231 - 1,994,733
----------- --------- --------- ------- --------- ------ ---------
(2,392,998) (933,384) (1,827,499) (109,400) 780,343 (223) 1,957,597
Net increase(decrease) (3,230,943) (1,740,602) (3,988,375) (250,774) 1,388,053 10,212 2,209,819
Net assets available for plan benefits
Beginning of year 3,230,943 1,740,602 3,988,375 250,774 - - -
----------- --------- --------- ------- --------- ------ ---------
End of year $ - - - - 1,388,053 10,212 2,209,819
=========== ========= ========= ======= ========= ====== =========
<CAPTION>
Fidelity
Retirement Fidelity Fidelity
Gov't Money Fidelity Fidelity U.S. Equity Growth Participant
Market Magellan Balanced Index Company Loan
Portfolio Fund Fund Portfolio Fund Fund Total
----------- -------- -------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net asset attributed to:
Net investment income from the
Savings Plan Trust 599 31,118 73,961 337,237 17,984 - 953,397
Contributions
Employee contributions 15,462 141,423 82,815 83,074 69,187 - 717,642
Employer contributions 4,176 39,662 24,066 21,820 17,402 - 203,643
------ ------- ------- --------- ------- ------- ---------
Total additions 20,237 212,203 180,842 442,131 104,573 - 1,874,682
Deductions from net assets attributed to:
Benefit payments (2,089) (989) (7,142) (6,682) - (48,066) (109,162)
Forfeitures 57 - (14) - - - (92)
Transfer of assets to The
Gillette Company
Employees' Savings Plan - - - - - - (3,947,413)
------ ------- ------- --------- ------- ------- ---------
Total deductions (2,032) (989) (7,156) (6,682) - (48,066) (4,056,667)
Net increase (decrease) prior to
interfund transfers 18,205 211,214 173,686 435,449 104,573 (48,066) (2,181,985)
Net transfers in (out)
Loans issued (468) (11,097) (12,196) (23,130) (1,144) 105,580 -
Loans repaid 951 7,871 4,650 2,283 972 (39,025) -
Other transfers (2,131) 196,549 705,377 1,327,563 153,559 109,400 -
------ ------- ------- --------- ------- ------- ---------
(1,648) 193,323 697,831 1,306,716 153,387 175,955 -
Net increase(decrease) 16,557 404,537 871,517 1,742,165 257,960 127,889 (2,181,985)
Net assets available for plan benefits
Beginning of year - - - - - - 9,210,694
------ ------- ------- --------- ------- ------- ---------
End of year 16,557 404,537 871,517 1,742,165 257,960 127,889 7,028,709
====== ======= ======= ========= ======= ======= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
PARKER PEN 401(K) PLAN
Statement of Changes in Net Assets Available for Plan Benefits
For the year ended December 31, 1995
<TABLE>
<CAPTION>
Guaranteed
Investment Payment
Contract Balanced Equity Reserve
Fund Fund Fund Account Total
---- ---- ---- ------- -----
Additions to net assets attributed to:
<S> <C> <C> <C> <C> <C>
Investment income
Interest income $ 207,923 128,758 240,779 28,177 605,637
Net appreciation (depreciation) in
fair value of investments 3 168,259 341,082 -- 509,344
----------- --------- --------- ------- ---------
207,926 297,017 581,861 28,177 1,114,981
Contributions:
Employee contributions 382,171 211,779 371,844 -- 965,794
Employer contributions 127,594 71,676 121,813 -- 321,083
----------- --------- --------- ------- ---------
Total additions 717,691 580,472 1,075,518 28,177 2,401,858
Deductions from net assets attributed to:
Benefit payments -- -- -- (803,856) (803,856)
Transfer of assets to The
Gillette Company
Employees' Savings Plan (208,457) (146,027) (221,063) (31,160) (606,707)
----------- --------- --------- ------- ---------
(208,457) (146,027) (221,063) (835,016) (1,410,563)
Net increase (decrease) prior to
interfund transfers 509,234 434,445 854,455 (806,839) 991,295
Net transfers in (out) (767,394) (347,792) 270,752 844,434 --
----------- --------- --------- ------- ---------
Net increase (decrease) (258,160) 86,653 1,125,207 37,595 991,295
Net assets available for plan benefits
Beginning of year 3,489,103 1,653,949 2,863,168 213,179 8,219,399
----------- --------- --------- ------- ---------
End of year $ 3,320,943 1,740,602 3,988,375 250,774 9,210,694
=========== ========= ========= ======= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 8
PARKER PEN 401(K) PLAN
Notes to Financial Statements
December 31, 1996 and 1995
(1) DESCRIPTION OF THE PLAN
The following brief description of the Parker Pen 401(k) Plan (the "Plan")
is provided for general information purposes only. Participants should
refer to the Plan agreement for more complete informatioNn
(a) General
The Plan became effective on July 1, 1988 and is a contributory defined
contribution plan covering all eligible employees of Parker Pen USA
Limited who are covered by a collective bargaining agreement and who
have completed six full months of employment. The Plan was amended and
restated in its entirety effective January 1, 1996 and The Gillette
Company (the "Company") assumed sponsorship and administration of the
Plan as of such date. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(b) Contributions
Participants may elect to contribute in whole percentage increments up to
17% of their annual base compensation. The Company will make matching
contributions on behalf of a participant equal to 50% of the
participant's contribution limited to a maximum match of 6% of the
participants' annual compensation.
(c) Vesting
Participants immediately vest in their voluntary contributions and actual
earnings thereon. Vesting in company contributions is 25% per year
with full vesting after four years of service, upon attainment of age
65, or termination of employment due to death or disability. Nonvested
Company contributions will be forfeited by participants who terminate
employment and will be used to reduce future Company matching
contributions.
(d) Participants' Accounts
A separate account is established for each participant at the time of
enrollment in the Plan. The balance in each account is invested in
accordance with the directions given by the participant in one or more
of the Plan's investment fund offerings. The following funds were
available for investment beginning January 1, 1996:
Gillette Company Stock Fund
---------------------------
Invests primarily in shares of The Gillette Company common stock.
Fidelity Intermediate Bond Fund
-------------------------------
Invests primarily in intermediate maturity foreign and domestic bonds and
seeks a high level of current income.
Fixed Income Fund
-----------------
Seeks to preserve principal as well as generate interest income through
investment in high quality short and intermediate term investment contracts
as well as other instruments issued by insurance companies and banks.
(Continued)
<PAGE> 9
PARKER PEN 401(K) PLAN
Notes to Financial Statements
Fidelity Retirement Government Money Market Fund
------------------------------------------------
Seeks to keep invested principal stable while generating current interest
or income by investing in high quality money market instruments issued or
guaranteed by the U.S. government or its agencies.
Fidelity Magellan Fund
----------------------
Seeks long-term capital appreciation by investing primarily in common
stocks and other securities of all types of domestic and international
companies in all industries.
Fidelity Balanced Fund
----------------------
Seeks to provide the highest amount of income possible consistent with the
preservation of capital by investing primarily in common and preferred
stocks, and bonds.
Fidelity U.S. Equity Index Fund
-------------------------------
Seeks to provide investment results that correspond to a recognized index
of stock market performance, and invests primarily in the common stocks of
the companies that make up the designated stock index.
Fidelity Growth Company Fund
----------------------------
Seeks long-term capital appreciation by investing primarily in securities
of domestic and foreign growth-oriented companies.
Each of the Funds may also hold a portion of its assets in short-term
investments in order to meet liquidity needs for transfers, loans, and
withdrawals.
(e) Participant Loans
The maximum loan available to each participant is the lesser of (1) $50,000
reduced by the highest outstanding loan balance due from the participant
during the preceding twelve months, or (2) 50% of the participant's vested
account balance, reduced by the current outstanding loan balance due from
the participant. The minimum loan amount available to participants is $500.
Each loan shall bear interest at a rate determined by the Savings Plan
Committee. A participant must make a payment of principal and interest to
the Plan on at least a quarterly basis. Repayment of the loan must be made
over a period not to exceed five years.
(f) Plan Earnings
As of the close of each business day, the Plan trustee is responsible for
determining the fair market value of each of the investment options, which
would include all accrued earnings. The increase or decrease in the fair
market value of each investment fund since the preceding business day is
allocated among the participant accounts invested in each fund based on the
proportionate number of shares or units of the fund held by each
participant at the close of the preceding business day.
(g) Benefit Payments
Upon termination of employment, the participant or his or her surviving spouse
or beneficiary, will receive a lump sum distribution of the participant's
vested account balance, or if the account balance exceeds $3,500 at such
time, he/she may elect to defer payment.
(Continued)
<PAGE> 10
PARKER PEN 401(K) PLAN
Notes to Financial Statements
Early withdrawals may also be made in the event of financial hardship and
other circumstances, based upon special guidelines detailed in the
Plan documents.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Accounting
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses. Actual results could differ from those estimates.
The accompanying financial statements are presented on the accrual basis
of accounting. Benefits payable at year end are not accrued for as
they are considered to be a component of the net assets available for
plan benefits.
(b) Investments
Investments are allocations of the assets of The Gillette Company Master
Savings Plan Trust ("Savings Plan Trust") based upon the proportionate
interest of the Plan in the trust.
Investments of the trust are stated at fair value, which for shares of
Company stock held in the trust is defined as the composite closing
price of the stock on the New York Stock Exchange. Guaranteed
investment contracts and synthetic investment contracts are valued at
contract value. The fair value for all other investments are
determined daily by the trustee on a per share basis using security
prices quoted on national exchanges, and amortized cost in the case of
any short-term and money market securities held. Participant notes
receivable are valued at cost, which approximates fair value.
Security transactions received prior to 4:00 pm Eastern time by Fidelity
are recognized on that business day. Transactions received after 4:00
pm Eastern time are valued as of the next business day. Interest
income is recorded on the accrual basis and dividend income is
recorded on the ex-dividend date.
Net appreciation (depreciation) in the fair value of investments includes
both realized and unrealized gains and losses.
The Savings Plan Trust's investments in guaranteed and synthetic
investment contracts are valued at contract value which approximates
fair value. Contract value represents contributions made under the
contract plus interest at the contract rate. The crediting interest
rate is variable for the synthetic contracts and is reset quarterly
based upon the fair value of the underlying securities. The crediting
interest rate is fixed for guaranteed contracts. The average yield for
the year ended December 31, 1996 is 6.77% and the crediting interest
rate as of December 31, 1996 is 5.76% for these investment contracts.
(c) Payment of Benefits
Benefits are recorded when paid.
(Continued)
<PAGE> 11
PARKER PEN 401(K) PLAN
Notes to Financial Statements
(3) FUNDING POLICY
The Company's funding policy is to make contributions to the Plan in
accordance with the manner described in note 1.
(4) PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and
to terminate the Plan subject to the provisions set forth in ERISA. In
the event of Plan termination, participants will become fully vested
in their accounts.
(5) INVESTMENTS
Investments of the Plan are held in trust by Fidelity Management Trust
Company. The Plans participating in the Savings Plan Trust are The
Gillette Company Employees' Savings Plan and the Parker Pen 401(k)
Plan. Trust income is allocated ratably between the plans in
accordance with the assets of each Plan invested in the trust. The net
assets of the Savings Plan Trust at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Investments, at fair value:
Marketable securities:
Gillette common stock $ 1,306,814,500 881,824,305
Registered investment companies:
Fidelity Intermediate Bond Fund 9,126,760 9,354,053
Fidelity Short-Term Investment Fund 31,916,887 933,848
Fidelity Retirement Government
Money Market Portfolio 5,913,935 3,220,569
Fidelity Magellan Fund 34,287,295 36,325,915
Fidelity Balanced Fund 16,287,310 15,132,881
Fidelity U.S. Equity Index Portfolio 63,606,106 44,600,059
Fidelity Growth Company Fund 35,235,504 25,058,209
Investment contracts 260,086,270 273,957,250
Participant loans 26,347,534 22,371,994
--------------- -------------
Total investments and net assets $ 1,789,622,101 1,312,779,083
=============== =============
Assets allocated to The Gillette Company
Employees' Savings Plan $ 1,782,593,392 1,312,779,083
Assets allocated to the Parker Pen 401(k) Plan $ 7,028,709 --
=============== =============
</TABLE>
(Continued)
<PAGE> 12
PARKER PEN 401(K) PLAN
Notes to Financial Statements
The statements of change in net assets of the Savings Plan Trust for
the years ended December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Employee contributions $ 41,325,185 37,954,226
Employer contributions 16,121,454 14,665,668
Investment income:
Net appreciation (depreciation)
on fair value of investments:
Gillette common stock 431,024,386 248,897,067
Fidelity Intermediate Bond Fund (317,625) 506,504
Fidelity Magellan Fund (2,198,991) 6,136,423
Fidelity Balanced Fund 567,308 1,372,542
Fidelity U.S. Equity Index Portfolio 9,906,298 10,832,516
Fidelity Growth Company Fund 2,726,460 3,760,024
Dividends 22,259,897 15,461,620
Interest 20,569,869 19,882,628
-------------- -------------
Net investment income 484,537,602 306,849,324
Transferred from prior trustee 10,698,627 606,707
-------------- -------------
Total additions 552,682,868 360,075,925
Benefit payments 75,766,746 55,638,394
Forfeitures 73,104 135,743
-------------- -------------
Total deductions 75,839,850 55,774,137
-------------- -------------
Net increase 476,843,018 304,301,788
Net assets:
Beginning of year 1,312,779,083 1,008,477,295
-------------- -------------
End of year $1,789,622,101 1,312,779,083
============== =============
</TABLE>
(6) ADMINISTRATIVE EXPENSES
The Company bears administrative costs of maintaining the Plan and
investment expenses associated with the Fixed Income Fund and the
Gillette Company Stock Fund. Investment expenses associated with the
Fidelity funds offered as investment options under the Plan are
deducted from the assets of each of those funds.
(7) INCOME TAXES
The Plan obtained its latest determination letter on April 18, 1996, in
which the Internal Revenue Service stated that the Plan was in
compliance with the applicable requirements of the Internal Revenue
Code. In the opinion of the Plan administrator and the Plan's tax
advisor, the Plan and its underlying trust have operated within the
terms of the Plan document and remain qualified under the applicable
provisions of the Internal Revenue Code.
(Continued)
<PAGE> 13
PARKER PEN 401(K) PLAN
Notes to Financial Statements
(8) PLAN TRANSFERS
On September 18, 1995, Parker Pen USA Limited's Board of Directors
approved a change in Trustees of the Plan from the Trustee to Fidelity
Management Trust Company (Successor Trustee) effective January 1,
1996.
During 1995, the account balances of certain participants ($606,707) were
transferred into The Gillette Company (parent company of Parker Pen
USA Limited) Employees' Savings Plan ("Gillette Plan"). These
participants are now participating in the Gillette Plan. The account
balances of all remaining non-bargaining unit participants of the Plan
totaling $3,806,039 were transferred to The Gillette Plan on
January 2, 1996 along with their payment reserve account balances
which totaled $141,374.
Effective January 1, 1996, the Gillette Company assumed sponsorship and
administration of the Plan which was redesigned to replicate the
investment options, including Gillette common stock, and
administrative features of the Gillette Plan.
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Savings Plan Committee
The Gillette Company Employees' Savings Plan:
We consent to the incorporation by reference in registration statement No.
33-63707 or Form S-8 of the Parker Pen 401(k) Plan of our report dated May 23,
1997, relating to the statements of net assets available for plan benefits of
the Parker Pen 401(k) Plan as of December 31, 1996 and 1995, and the related
statements of changes in net assets available for plan benefits for the years
then ended, which report appears in the December 31, 1996 annual report on Form
11-K of the Parker Pen 401(k) Plan.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG Peat Marwick LLP
Boston, Massachusetts
June 24, 1997
