<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, 1998
Registration numbers 33-9495, 33-56218 and 33-59125
A. Full title of the plan:
THE GILLETTE COMPANY EMPLOYEES' SAVINGS 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 THE GILLETTE COMPANY EMPLOYEES' SAVINGS 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, 1998 and 1997.
2. Statements of Changes in Net Assets Available for Plan
Benefits for each of the years in the two -year period ended
December 31, 1998.
EXHIBIT
23.2 Independent Auditor's Consent
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Savings Plan Committee has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
By ROBERT E. DICENSO
Robert E. DiCenso
Date: June 29, 1999
<PAGE> 3
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Financial Statements
December 31, 1998 and 1997
With Independent Auditors' Report Thereon
<PAGE> 4
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Financial Statements
December 31, 1998 and 1997
Table of Contents
Page(s)
-------
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits 2
Statements of Changes in Net Assets Available for Plan Benefits 3
Notes to Financial Statements 4-17
Note: Supplemental schedules required by the Employee Retirement Income
Security Act of 1974, as amended (ERISA), have not been included due to
their inclusion in master trust information filed with the Department
of Labor for The Gillette Company Savings Plan Trust.
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
The Savings Plan Committee
The Gillette Company:
We have audited the statements of net assets available for plan benefits of The
Gillette Company Employees' Savings Plan as of December 31, 1998 and 1997, 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
Gillette Company Employees' Savings Plan at December 31, 1998 and 1997, and the
changes in net assets available for plan benefits for the years then ended, in
conformity with generally accepted accounting principles.
May 21, 1999
1
<PAGE> 6
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
Assets:
Investment in the Savings Plan Trust $2,331,576,711 2,163,135,513
-------------- -------------
Net assets available for plan benefits $2,331,576,711 2,163,135,513
============== =============
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 7
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Additions to net assets attributed to:
Net investment income from the Savings Plan Trust $ 33,550,314 446,036,833
Contributions:
Employee contributions 49,713,107 47,123,387
Employer contributions 18,585,652 17,481,384
Transfer of assets from Duracell Inc. Thrift Plan 235,469,789 --
--------------- ---------------
Total additions 337,318,862 510,641,604
--------------- ---------------
Deductions from net assets attributed to:
Benefit payments (168,706,201) (129,979,418)
Forfeitures (171,463) (120,065)
--------------- ---------------
Total deductions (168,877,664) (130,099,483)
--------------- ---------------
Net increase in assets 168,441,198 380,542,121
Net assets available for plan benefits:
Beginning of year 2,163,135,513 1,782,593,392
--------------- ---------------
End of year $ 2,331,576,711 2,163,135,513
=============== ===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 8
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(1) DESCRIPTION OF THE PLAN
The Gillette Company Employees' Savings Plan (the "Plan") is a defined
contribution plan sponsored by The Gillette Company (the "Company"). The
following provides only general information and participants should refer
to the Plan document for a more complete description of the Plan's
provisions.
(a) GENERAL
The Plan is a defined contribution plan subject to the provisions
of the Employee Retirement Income Security Act of 1974 ("ERISA").
Effective January 1, 1993 regular employees of the Company and its
participating subsidiaries became eligible to join the Plan on
date of hire.
(b) PARTICIPANT CONTRIBUTIONS
Eligible employees may voluntarily contribute from 2% to 10% of
their compensation as matched savings, and from 1% to 5% of their
compensation as unmatched savings. All contributions must be in
even 1% increments.
All matched savings contributed by an employee are divided equally
between tax deferred and taxed savings. Unmatched savings may be
designated by an employee to be either tax deferred or taxed, but
not both. Tax deferred contributions made by an employee in any
plan year may not exceed the annual limit set by law, which was
$10,000 and $9,500 for 1998 and 1997, respectively.
(c) EMPLOYER CONTRIBUTIONS
For all employee contributions designated as matched savings, the
Company will contribute $1 for every $2 contributed by the
employee. All matching contributions provided by the Company are
invested in the Gillette Company Stock Fund.
(d) VESTING
Participants are immediately vested in their own employee
contributions plus the actual earnings thereon. Matching
contributions from the Company vest after the participant has
completed the earliest of five years of service, two years from
date of entry into the Plan, or the attainment of age 65.
Participants are also 100% vested in the Company contributions
credited to their accounts upon death, retirement, total and
permanent disability, or layoff for lack of work when it is not
probable that the participant will be recalled to work within one
year of the layoff.
(e) 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 following Funds:
Gillette Company Stock Fund
Invests primarily in shares of The Gillette Company common
stock.
(Continued)
4
<PAGE> 9
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
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.
Fidelity Retirement Government Money Market Portfolio
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 U.S. Equity Index Portfolio
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.
INVESCO Total Return Fund
Seeks to provide high total return through capital growth
and current income by investing in stocks and in fixed and
variable income securities.
Fidelity Diversified International Fund
Seeks capital growth by investing primarily in equity
securities of companies located outside the U.S. Seeks
stocks that are undervalued compared to industry norms in
their countries.
Fidelity U.S. Bond Index Fund
Invests in investment grade (medium to high quality) or
above with maturities of at least one year.
Fidelity Growth & Income Fund
Seeks high total return through a combination of current
income and capital appreciation. Invests primarily in U.S.
and foreign stocks.
Fidelity Emerging Markets Fund
Seeks capital appreciation from emerging markets around the
world.
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.
(Continued)
5
<PAGE> 10
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(f) 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. Repayment of the loan must be made over a period not to
exceed five years.
(g) 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.
With respect to the Gillette Company Stock Fund, the trustee is
responsible for determining the participants' accounts entitled to
receive each quarterly dividend and the number of shares to be
credited to each account, as of the quarterly ex-dividend date. On
the dividend payment date, the trustee also makes all necessary
adjustments to each participant account to reflect any differences
between the value of such Company stock credited to participants'
accounts and the actual purchase and sales price of such shares,
along with any interest or other income earned by the Fund since
the preceding dividend payment date. Such adjustments are included
in the dividend credited to participants' accounts.
(h) 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 $5,000 at such time, he/she may elect
to defer payment or receive periodic installments. If the
termination of employment is due to retirement, total and
permanent disability or death, a participant (or surviving spouse)
may also elect to have the proceeds of the distribution used to
purchase an annuity contract for his/her benefit.
Early withdrawals may also be made in the event of financial
hardship and other circumstances, based upon special guidelines
detailed in the Plan documents.
(i) FORFEITURES
Forfeitures by Plan participants are used to reduce Company
contributions.
(Continued)
6
<PAGE> 11
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(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 Savings Plan 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 is 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, 1998
is 6.40% and the crediting interest rate as of December 31, 1998
is 6.19% for these investment contracts.
(c) PAYMENT OF BENEFITS
Benefits are recorded when paid.
(Continued)
7
<PAGE> 12
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(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
The Company expects the Plan to continue indefinitely, but reserves the
right to amend or terminate the Plan at its discretion. If the Plan is
terminated or if contributions are completely discontinued, each
participant's interest in that portion of his or her account balance
attributable to Company contributions shall become fully vested. Upon
termination of the Plan, the Trust may continue in existence at the
direction of the Board of Directors of the Company, subject to the
provisions of the Plan and the Trust agreement, or the Trust may be
terminated and the assets distributed to participants.
(Continued)
8
<PAGE> 13
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements, Continued
(5) CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY FUND FOR THE YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIDELITY
RETIREMENT
GILLETTE GOVERNMENT
COMPANY FIXED MONEY FIDELITY
STOCK INCOME MARKET MAGELLAN
FUND FUND PORTFOLIO FUND
--------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Net investment income from the Savings
Plan Trust $ (51,898,771) 20,681,897 914,554 15,699,499
Contributions:
Employee contributions 29,401,274 3,648,815 525,388 4,465,169
Employer contributions 18,585,652 -- -- --
Transfer of assets from Duracell Inc. Thrift Plan 34,167,806 40,444,609 834,060 37,965,425
--------------- ------------ ----------- -------------
Total additions 30,255,961 64,775,321 2,274,002 58,130,093
Deductions from net assets attributed to:
Benefit payments (88,497,123) (52,366,984) (5,889,927) (3,911,054)
Forfeitures (171,463) -- -- --
--------------- ------------ ----------- -------------
Total deductions (88,668,586) (52,366,984) (5,889,927) (3,911,054)
Net increase (decrease) prior to interfund transfers (58,412,625) 12,408,337 (3,615,925) 54,219,039
Net interfund transfers in (out):
Loans issued (9,504,386) (1,990,504) (137,092) (1,061,351)
Loans repaid 10,015,645 1,396,543 159,538 1,178,208
Other transfers (72,543,682) 36,752,749 13,316,911 3,482,295
--------------- ------------ ----------- -------------
(72,032,423) 36,158,788 13,339,357 3,599,152
Net increase (decrease) (130,445,048) 48,567,125 9,723,432 57,818,191
Net assets available for plan benefits:
Beginning of year 1,549,661,593 334,260,831 10,268,170 45,900,999
--------------- ------------ ----------- -------------
End of year $ 1,419,216,545 382,827,956 19,991,602 103,719,190
=============== ============ =========== =============
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
U.S. FIDELITY
EQUITY GROWTH
INDEX COMPANY
PORTFOLIO FUND
------------ ------------
<S> <C> <C>
Additions to net assets attributed to:
Net investment income from the Savings
Plan Trust 25,972,224 10,563,466
Contributions:
Employee contributions 3,133,989 3,854,165
Employer contributions -- --
Transfer of assets from Duracell Inc. Thrift Plan 67,858,802 --
------------ ------------
Total additions 96,965,015 14,417,631
Deductions from net assets attributed to:
Benefit payments (6,217,745) (3,853,017)
Forfeitures --
------------ ------------
Total deductions (6,217,745) (3,853,017)
Net increase (decrease) prior to interfund transfers 90,747,270 10,564,614
Net interfund transfers in (out):
Loans issued (684,864) (607,246)
Loans repaid 482,671 620,192
Other transfers 5,880,572 (4,821,617)
------------ ------------
5,678,379 (4,808,671)
Net increase (decrease) 96,425,649 5,755,943
Net assets available for plan benefits:
Beginning of year 89,336,684 41,376,961
------------ ------------
End of year 185,762,333 47,132,904
============= ============
</TABLE>
(Continued)
9
<PAGE> 14
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements, Continued
(5) CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY FUND FOR THE YEAR ENDED
DECEMBER 31, 1998, CONTINUED:
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY INVESCO
EMERGING DIVERSIFIED GROWTH & TOTAL
MARKETS INTERNATIONAL INCOME RETURN
FUND FUND FUND FUND
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Net investment income from the Savings
Plan Trust $ (741,864) 744,282 6,924,933 3,446,953
Contributions:
Employee contributions 226,121 530,680 1,615,262 1,677,795
Employer contributions -- -- -- --
Transfer of assets from Duracell Inc. Thrift Plan -- 10,091,698 -- 37,828,701
-------------- -------------- -------------- --------------
Total additions (515,743) 11,366,660 8,540,195 42,953,449
Deductions from net assets attributed to:
Benefit payments (185,042) (836,860) (2,105,375) (2,069,119)
Forfeitures -- -- -- --
-------------- -------------- -------------- --------------
Total deductions (185,042) (836,860) (2,105,375) (2,069,119)
Net increase (decrease) prior to interfund transfers (700,785) 10,529,800 6,434,820 40,884,330
Net interfund transfers in (out):
Loans issued (26,935) (32,564) (205,227) (321,191)
Loans repaid 16,265 56,993 231,198 367,076
Other transfers 361,832 231,166 8,146,126 3,096,523
-------------- -------------- -------------- --------------
351,162 255,595 8,172,097 3,142,408
Net increase (decrease) (349,623) 10,785,395 14,606,917 44,026,738
Net assets available for plan benefits:
Beginning of year 1,215,697 6,232,661 21,123,017 24,125,244
-------------- -------------- -------------- --------------
End of year $ 866,074 17,018,056 35,729,934 68,151,982
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
U.S.
BOND PARTICIPANT
INDEX LOAN
FUND FUND TOTAL
-------------- -------------- --------------
<S> <C> <C> <C>
Additions to net assets attributed to:
Net investment income from the Savings
Plan Trust 1,243,141 -- 33,550,314
Contributions:
Employee contributions 634,449 -- 49,713,107
Employer contributions -- -- 18,585,652
Transfer of assets from Duracell Inc. Thrift Plan -- 6,278,688 235,469,789
-------------- -------------- --------------
Total additions 1,877,590 6,278,688 337,318,862
Deductions from net assets attributed to:
Benefit payments (1,005,585) (1,768,370) (168,706,201)
Forfeitures -- -- (171,463)
-------------- -------------- --------------
Total deductions (1,005,585) (1,768,370) (168,877,664)
Net increase (decrease) prior to interfund transfers 872,005 4,510,318 168,441,198
Net interfund transfers in (out):
Loans issued (125,413) 14,696,773 --
Loans repaid 161,835 (14,686,164) --
Other transfers 6,097,125 -- --
-------------- -------------- --------------
6,133,547 10,609 --
Net increase (decrease) 7,005,552 4,520,927 168,441,198
Net assets available for plan benefits:
Beginning of year 10,727,980 28,905,676 2,163,135,513
-------------- -------------- --------------
End of year 17,733,532 33,426,603 2,331,576,711
============== ============== ==============
</TABLE>
(Continued)
10
<PAGE> 15
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements, Continued
(5) CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY FUND FOR THE YEAR ENDED
DECEMBER 31, 1997
<TABLE>
<CAPTION>
FIDELITY
RETIREMENT
GILLETTE FIDELITY GOVERNMENT
COMPANY INTERMEDIATE FIXED MONEY
STOCK BOND INCOME MARKET
FUND FUND FUND PORTFOLIO
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Net investment income from the Savings
Plan Trust $ 382,295,874 135,362 19,748,355 439,278
Contributions:
Employee contributions 26,899,546 -- 4,307,341 644,933
Employer contributions 17,481,384 -- -- --
--------------- --------------- --------------- ---------------
Total additions 426,676,804 135,362 24,055,696 1,084,211
Deductions from net assets attributed to:
Benefit payments (71,917,356) (729,362) (40,701,584) (4,717,505)
Forfeitures (120,065) -- -- --
--------------- --------------- --------------- ---------------
Total deductions (72,037,421) (729,362) (40,701,584) (4,717,505)
Net increase (decrease) prior to interfund transfers 354,639,383 (594,000) (16,645,888) (3,633,294)
Net interfund transfers in (out):
Loans issued (10,332,596) (31,040) (2,834,569) (178,374)
Loans repaid 8,557,304 -- 1,673,673 180,682
Other transfers (108,628,945) (8,491,508) 62,274,277 8,001,778
--------------- --------------- --------------- ---------------
(110,404,237) (8,522,548) 61,113,381 8,004,086
Net increase (decrease) 244,235,146 (9,116,548) 44,467,493 4,370,792
Net assets available for plan benefits:
Beginning of year 1,305,426,447 9,116,548 289,793,338 5,897,378
--------------- --------------- --------------- ---------------
End of year $ 1,549,661,593 -- 334,260,831 10,268,170
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
U.S. FIDELITY
FIDELITY FIDELITY EQUITY GROWTH
MAGELLAN BALANCED INDEX COMPANY
FUND FUND PORTFOLIO FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Net investment income from the Savings
Plan Trust 8,678,247 1,187,143 21,059,474 6,238,947
Contributions:
Employee contributions 4,383,711 -- 2,979,719 4,296,784
Employer contributions -- -- -- --
--------------- --------------- --------------- ---------------
Total additions 13,061,958 1,187,143 24,039,193 10,535,731
Deductions from net assets attributed to:
Benefit payments (1,857,129) (350,578) (4,907,432) (1,939,117)
Forfeitures -- -- -- --
--------------- --------------- --------------- ---------------
Total deductions (1,857,129) (350,578) (4,907,432) (1,939,117)
Net increase (decrease) prior to interfund transfers 11,204,829 836,565 19,131,761 8,596,614
Net interfund transfers in (out):
Loans issued (1,354,083) (156,736) (957,461) (749,634)
Loans repaid 1,171,217 -- 532,214 774,517
Other transfers 996,278 (16,095,622) 8,766,229 (2,222,080)
--------------- --------------- --------------- ---------------
813,412 (16,252,358) 8,340,982 (2,197,197)
Net increase (decrease) 12,018,241 (15,415,793) 27,472,743 6,399,417
Net assets available for plan benefits:
Beginning of year 33,882,758 15,415,793 61,863,941 34,977,544
--------------- --------------- --------------- ---------------
End of year 45,900,999 -- 89,336,684 41,376,961
=============== =============== =============== ===============
</TABLE>
(Continued)
11
<PAGE> 16
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements, Continued
(5) CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY FUND FOR THE YEAR ENDED
DECEMBER 31, 1997, CONTINUED:
<TABLE>
<CAPTION>
FIDELITY
FIDELITY FIDELITY FIDELITY INVESCO
EMERGING DIVERSIFIED GROWTH & TOTAL
MARKETS INTERNATIONAL INCOME RETURN
FUND FUND FUND FUND
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Net investment income from the Savings
Plan Trust $ (846,361) 480,528 2,803,389 3,077,360
Contributions:
Employee contributions 222,804 340,774 816,379 1,696,966
Employer contributions -- -- -- --
-------------- -------------- -------------- --------------
Total additions (623,557) 821,302 3,619,768 4,774,326
Deductions from net assets attributed to:
Benefit payments (164,157) (295,525) (438,684) (548,897)
Forfeitures -- -- -- --
-------------- -------------- -------------- --------------
Total deductions (164,157) (295,525) (438,684) (548,897)
Net increase (decrease) prior to interfund transfers (787,714) 525,777 3,181,084 4,225,429
Net interfund transfers in (out):
Loans issued (12,648) (25,605) (89,550) (202,097)
Loans repaid 34,071 34,484 76,943 428,823
Other transfers 1,981,988 5,698,005 17,954,540 19,673,089
-------------- -------------- -------------- --------------
2,003,411 5,706,884 17,941,933 19,899,815
Net increase (decrease) 1,215,697 6,232,661 21,123,017 24,125,244
Net assets available for plan benefits:
Beginning of year -- -- -- --
-------------- -------------- -------------- --------------
End of year $ 1,215,697 6,232,661 21,123,017 24,125,244
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
U.S.
BOND PARTICIPANT
INDEX LOAN
FUND FUND TOTAL
-------------- -------------- --------------
<S> <C> <C> <C>
Additions to net assets attributed to:
Net investment income from the Savings
Plan Trust 739,237 -- 446,036,833
Contributions:
Employee contributions 534,430 -- 47,123,387
Employer contributions -- -- 17,481,384
-------------- -------------- --------------
Total additions 1,273,667 -- 510,641,604
Deductions from net assets attributed to:
Benefit payments (619,122) (792,970) (129,979,418)
Forfeitures -- -- (120,065)
-------------- -------------- --------------
Total deductions (619,122) (792,970) (130,099,483)
Net increase (decrease) prior to interfund transfers 654,545 (792,970) 380,542,121
Net interfund transfers in (out):
Loans issued (124,480) 17,048,873 --
Loans repaid 105,944 (13,569,872) --
Other transfers 10,091,971 -- --
-------------- -------------- --------------
10,073,435 3,479,001 --
Net increase (decrease) 10,727,980 2,686,031 380,542,121
Net assets available for plan benefits:
Beginning of year -- 26,219,645 1,782,593,392
-------------- -------------- --------------
End of year 10,727,980 28,905,676 2,163,135,513
============== ============== ==============
</TABLE>
(Continued)
12
<PAGE> 17
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(6) INVESTMENTS
Investments of the Savings Plan Trust 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 Gillette
Company Savings Plan for Arrow Park Employees. 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, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Investments, at fair value:
Marketable securities:
Gillette common stock $1,421,628,142 1,551,947,454
Registered investment companies:
Fidelity Short-term Investment Fund 54,284,783 23,695,057
Fidelity Retirement Government Money
Market Portfolio 22,247,679 10,344,002
Fidelity Magellan Fund 104,133,549 46,585,401
Fidelity U.S. Equity Index Portfolio 188,119,328 91,919,213
Fidelity Growth Company Fund 47,723,974 41,787,957
Fidelity Emerging Markets Fund 869,866 1,220,995
Fidelity Diversified International Fund 16,836,592 6,256,456
Fidelity Growth & Income Fund 35,977,890 21,222,508
INVESCO Total Return Fund 66,763,014 24,955,015
Fidelity U.S. Bond Index Fund 17,783,501 10,760,825
Investment contracts 330,165,797 312,826,658
Participant loans 33,652,383 29,104,490
-------------- --------------
Total investments 2,340,186,498 2,172,626,031
Receivable from Duracell Inc. Thrift Plan 2,890,395 --
-------------- --------------
Total investments and net assets $2,343,076,893 2,172,626,031
============== ==============
Assets allocated to The Gillette Company
Savings Plan for Arrow Park Employees $ 11,500,182 9,490,518
Assets allocated to The Gillette Company
Employees' Savings Plan $2,331,576,711 2,163,135,513
============== ==============
</TABLE>
(Continued)
13
<PAGE> 18
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
The statements of changes in net assets of the Savings Plan Trust for the
years ended December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Employee contributions $ 50,400,338 47,855,615
Employer contributions 18,776,685 17,683,710
Investment income:
Net appreciation (depreciation) on fair value of investments:
Gillette common stock (68,234,619) 368,245,796
Fidelity Intermediate Bond Fund -- (89,828)
Fidelity Magellan Fund 12,773,190 5,830,143
Fidelity Balanced Fund -- 1,100,411
Fidelity U.S. Equity Index Portfolio 24,256,268 19,620,590
Fidelity Growth Company Fund 7,200,486 2,204,172
Fidelity Emerging Markets Fund (745,082) (881,794)
Fidelity Diversified International Fund 476,479 246,019
Fidelity Growth & Income Fund 5,136,757 2,048,113
INVESCO Total Return Fund 1,974,014 2,287,046
Fidelity U.S. Bond Index Fund 294,579 315,599
Dividends 28,572,861 24,656,455
Interest 23,120,340 22,065,612
--------------- ---------------
Net investment income 34,825,273 447,648,334
Transferred from Duracell Inc. Thrift Plan 235,469,789 --
--------------- ---------------
Total additions 339,472,085 513,187,659
Benefit payments 168,845,644 130,062,739
Forfeitures 175,579 120,990
--------------- ---------------
Total deductions 169,021,223 130,183,729
--------------- ---------------
Net increase 170,450,862 383,003,930
Net assets:
Beginning of year 2,172,626,031 1,789,622,101
--------------- ---------------
End of year $ 2,343,076,893 2,172,626,031
=============== ===============
</TABLE>
(Continued)
14
<PAGE> 19
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(7) UNIT VALUATION
Participants' accounts are maintained on a "unit value" basis. The total
units used in valuing participants' accounts and the per unit values at
December 31, 1997 and the four quarters ended December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
FIDELITY RETIREMENT
GILLETTE COMPANY GOVERNMENT MONEY
STOCK FUND FIXED INCOME FUND MARKET PORTFOLIO
---------- ----------------- ----------------
UNITS VALUE UNITS VALUE UNITS VALUE
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 15,429,114 $ 100.44 334,260,831 $ 1.00 10,268,170 $ 1.00
March 31, 1998 14,926,657 118.68 336,309,811 1.00 13,397,776 1.00
June 30, 1998 29,731,324 56.87 320,108,787 1.00 17,025,922 1.00
September 30, 1998 29,271,537 30.25 328,177,181 1.00 33,287,340 1.00
December 31, 1998 29,682,960 47.81 382,827,956 1.00 19,157,542 1.00
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FIDELITY U.S. FIDELITY GROWTH
MAGELLAN FUND EQUITY INDEX PORTFOLIO COMPANY FUND
------------- ---------------------- ------------
UNITS VALUE UNITS VALUE UNITS VALUE
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 481,799 $ 95.27 2,553,936 $ 34.98 955,147 $ 43.32
March 31, 1998 481,707 108.81 2,661,332 39.69 914,162 48.38
June 30, 1998 514,803 109.63 2,629,750 40.49 917,420 49.14
September 30, 1998 514,849 97.52 2,674,750 36.33 887,474 45.04
December 31, 1998 858,460 120.82 4,225,713 43.96 923,812 51.02
</TABLE>
<TABLE>
<CAPTION>
FIDELITY GROWTH & FIDELITY EMERGING FIDELITY DIVERSIFIED
INCOME FUND MARKET FUND INTERNATIONAL FUND
----------- ----------- ------------------
UNITS VALUE UNITS VALUE UNITS VALUE
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 554,410 $ 38.10 126,635 $ 9.60 386,402 $ 16.13
March 31, 1998 708,854 42.84 213,922 10.21 429,890 18.28
June 30, 1998 712,506 44.01 220,369 8.06 439,763 18.72
September 30, 1998 704,790 38.62 111,344 6.09 394,802 16.01
December 31, 1998 779,449 45.84 122,847 7.05 960,387 17.72
</TABLE>
<TABLE>
<CAPTION>
FIDELITY U.S. BOND INVESCO TOTAL
INDEX FUND RETURN FUND
---------- -----------
UNITS VALUE UNITS VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
December 31, 1997 994,252 $ 10.79 829,331 $ 29.09
March 31, 1998 1,247,098 10.78 900,326 31.43
June 30, 1998 1,291,087 10.85 906,466 31.34
September 30, 1998 1,473,370 11.15 897,621 29.47
December 31, 1998 1,609,213 11.02 2,173,214 31.36
</TABLE>
c
15
<PAGE> 20
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(8) PARTICIPATION BY FUND
The total number of plan participants in each of the investment funds on
December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Gillette Company Stock Fund 12,148 9,346
Fixed Income Fund 6,415 4,095
Fidelity Retirement Government Money Market Portfolio 644 651
Fidelity Magellan Fund 5,643 3,087
Fidelity U.S. Equity Index Portfolio 6,163 3,021
Fidelity Growth Company Fund 2,471 2,543
Fidelity Growth & Income Fund 1,001 629
Fidelity Emerging Markets Fund 250 205
Fidelity Diversified International Fund 1,932 380
Fidelity U.S. Bond Index Fund 837 778
INVESCO Total Return Fund 3,879 1,422
</TABLE>
The numbers shown above reflect the fact that participants may elect to
invest in more than one fund.
(9) ADMINISTRATIVE EXPENSES
The Company bears all trustee and 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.
(10) INCOME TAXES
A favorable tax determination letter was received from the Internal
Revenue Service on July 19, 1994 stating that the existing Plan and its
underlying trust qualified under section 401(a) of the Internal Revenue
Code of 1986 (the "Code") as a profit sharing plan, and is exempt from
federal income taxes. Further, the features of the Plan relating to tax
deferred savings qualified under section 401(k) of the 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.
(11) PLAN MERGER AND TERMINATION OF DURACELL INC. PLANS
Effective December 31, 1998, the Duracell Inc. Thrift Plan ("Duracell
Plan") was merged into The Gillette Company Employees' Savings Plan. The
financial statements reflect the plan merger as of December 31, 1998, the
effective date of the transaction. On the effective date, $232,579,430 of
the $235,469,789 of the net assets attributable to the participants of
the Duracell Plan was transferred into the Gillette Employees' Savings
Plan. The remaining $2,890,359 of net assets from the Duracell Plan was
transferred in January, 1999 and is a receivable from the Duracell Plan
at December 31, 1998.
(Continued)
16
<PAGE> 21
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
Additionally, the Duracell Inc. Cash Balance Plan was terminated
effective December 31, 1998. During the first quarter of 1999, rollover
contributions of certain Duracell Inc. Cash Balance Plan participants
totaling $84,824,210 were made to the Gillette Company Employees' Savings
Plan.
(12) CASH ADVANCE TO THE PLAN TRUSTEE
The Company has deposited with the Plan trustee a cash advance to provide
liquidity to the Gillette Company Stock Fund in order to make
distributions, loans and transfers from the Fund on a timely basis. Any
interest earned on the balance is allocated to participant accounts
within the Gillette Company Stock Fund. The outstanding balance of the
cash advance to the trustee as of December 31, 1998 was $1,500,000.
17
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Advisory Committee
The Gillette Company Employee's Savings Plan:
We consent to the incorporation by reference in registration statement No.
33-63707 on Form S-8 of The Gillette Company Employee's Savings Plan of our
report dated May 21, 1999, relating to the statements of net assets available
for plan benefits of The Gillette Company Employee's Savings Plan as of December
31, 1998 and 1997, and the related statements of changes in net assets available
for plan benefits for each of the years in the three-year period ended December
31, 1998, which report appears in the December 31, 1998 annual report on Form
11-K of The Gillette Company Employee's Savings Plan.
KPMG LLP
--------
Kpmg llp
Boston, Massachusetts
June 29, 1999
