<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 11-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8940
---------
Kraft Foods Employee Thrift-Investment Plan
Three Lakes Drive, Northfield, Illinois 60093
(Full title and address of the plan)
PHILIP MORRIS COMPANIES INC.
120 Park Avenue
New York, New York 10017
(Name of issuer of the securities held pursuant to the plan
and address of its principal executive office.)
================================================================================
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
ANNUAL REPORT ON FORM 11-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Report of Independent Accountants..................... 3
Financial Statements:
Statements of Financial Condition as of December 31,
1996 and 1995...................................... 4-5
Statements of Income and Changes in Plan Equity for
the years ended December 31, 1996, 1995 and 1994... 6-8
Notes to Financial Statements....................... 9-19
Signatures............................................ 20
Schedules:
Schedule I - Investments as of December 31, 1996.... S-1-11
</TABLE>
Other schedules are omitted because the information required
is contained in the financial statements.
Exhibits:
23. Consent of Independent Accountants.
-2-
<PAGE>
REPORT of INDEPENDENT ACCOUNTANTS
To: The Corporate Employee Plans Investment
Committee of Philip Morris Companies Inc.,
the Corporate Employee Benefit Committee of
Philip Morris Companies Inc., the Management
Committee for Employee Benefits of Kraft
Foods, Inc., the Administrative Committee
and all Participants as a group (but not individually)
of the Kraft Foods Employee Thrift-Investment Plan:
We have audited the accompanying statements of financial condition of the
Kraft Foods Employee Thrift-Investment Plan (formerly known as the General Foods
Employee Thrift-Investment Plan and hereinafter referred to as the "Plan") as of
December 31, 1996 and 1995, and the related statements of income and changes in
plan equity for each of the three years in the period ended December 31, 1996
and the schedule of investments as of December 31, 1996. These financial
statements and the financial statement schedule are the responsibility of the
fiduciaries of the Plan appointed by Philip Morris Companies Inc. or Kraft
Foods, Inc. (or their delegates). Our responsibility is to express an opinion on
these financial statements and the financial statement schedule 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 the
fiduciaries, 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 financial position of the Plan as of December 31,
1996 and 1995, and the income and changes in plan equity for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The fund information in the
statements of financial condition and statements of income and changes in plan
equity is presented for purposes of additional information rather than to
present the financial condition and changes in income and plan equity of each
fund. The fund information has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 28, 1997
-3-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
STATEMENT OF FINANCIAL CONDITION
as of December 31, 1996
(in thousands of dollars)
---------
<TABLE>
<CAPTION>
Diversified
Equity Interest Government
Index Income Securities Philip Morris
Fund Fund Fund (GF) Stock Fund Total
----------- -------- ----------- -------------- --------
<S> <C> <C> <C> <C> <C>
ASSETS:
Allocated share of
Trust net assets $5,778 $13,373 $1,149 $127,059 $147,359
Employer contributions
receivable 1 1 1 221 224
Interfund receivables
(payables) 79 381 140 (600) -
------ ------- ------ -------- --------
Total assets 5,858 13,755 1,290 126,680 147,583
------ ------- ------ -------- --------
LIABILITIES:
Distributions and
withdrawals payable 57 247 14 3,742 4,060
General and administrative
expenses payable 1 5 1 33 40
------ ------- ------ -------- --------
Total liabilities 58 252 15 3,775 4,100
------ ------- ------ -------- --------
Plan equity $5,800 $13,503 $1,275 $122,905 $143,483
====== ======= ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
STATEMENT OF FINANCIAL CONDITION
as of December 31, 1995
(in thousands of dollars)
---------
<TABLE>
<CAPTION>
Diversified
Equity Interest Government
Index Income Securities Philip Morris
Fund Fund Fund (GF) Stock Fund Total
----------- -------- ----------- -------------- --------
<S> <C> <C> <C> <C> <C>
ASSETS:
Allocated share of
Trust net assets $4,228 $12,880 $1,151 $116,797 $135,056
Employer contributions
receivable 2 3 2 517 524
Interfund receivables
(payables) 151 824 3 (978) -
------ ------- ------ -------- --------
Total assets 4,381 13,707 1,156 116,336 135,580
------ ------- ------ -------- --------
LIABILITIES:
Distributions and
withdrawals payable 103 290 23 1,867 2,283
General and administrative
expenses payable 2 7 1 61 71
------ ------- ------ -------- --------
Total liabilities 105 297 24 1,928 2,354
------ ------- ------ -------- --------
Plan equity $4,276 $13,410 $1,132 $114,408 $133,226
====== ======= ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1996
(in thousands of dollars)
---------
<TABLE>
<CAPTION>
Diversified
Equity Interest Government
Index Income Securities Philip Morris
Fund Fund Fund (GF) Stock Fund Total
------------ --------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 10 $ 18 $ 12 $ 2,367 $ 2,407
Employee contributions 435 667 135 4,690 5,927
Allocated share of Trust
investment activities:
Interest income 786 63 147 996
Dividend income 5,127 5,127
Net appreciation
in fair value of
investments 1,089 25,050 26,139
------ ------- ------ -------- --------
1,089 786 63 30,324 32,262
------ ------- ------ -------- --------
Total additions 1,534 1,471 210 37,381 40,596
------ ------- ------ -------- --------
DEDUCTIONS:
Distributions and
withdrawals (1,292) (3,529) (189) (25,088) (30,098)
General and administrative
expenses (9) (30) (2) (200) (241)
------ ------- ------ -------- --------
Total deductions (1,301) (3,559) (191) (25,288) (30,339)
------ ------- ------ -------- --------
Net transfers among funds 1,291 2,181 124 (3,596) -
------ ------- ------ -------- --------
Net additions 1,524 93 143 8,497 10,257
PLAN EQUITY:
Beginning of year 4,276 13,410 1,132 114,408 133,226
------ ------- ------ -------- --------
End of year $5,800 $13,503 $1,275 $122,905 $143,483
====== ======= ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1995
(in thousands of dollars)
<TABLE>
<CAPTION>
Diversified
Equity Interest Government
Index Income Securities Philip Morris
Fund Fund Fund (GF) Stock Fund Total
----------- -------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 11 $ 21 $ 14 $ 3,054 $ 3,100
Employee contributions 379 743 154 4,577 5,853
Allocated share of Trust
investment activities:
Interest income 791 46 96 933
Dividend income 4,684 4,684
Net appreciation
in fair value of
investments 1,212 17 42,863 44,092
------ ------- ------ -------- --------
1,212 791 63 47,643 49,709
------ ------- ------ -------- --------
Total additions 1,602 1,555 231 55,274 58,662
------ ------- ------ -------- --------
DEDUCTIONS:
Distributions and
withdrawals (859) (2,221) (156) (17,748) (20,984)
General and administrative
expenses (11) (39) (3) (260) (313)
------ ------- ------ -------- --------
Total deductions (870) (2,260) (159) (18,008) (21,297)
------ ------- ------ -------- --------
Net transfers among funds 73 1,598 101 (1,772) -
Net transfers between plans (59) (112) (18) (1,159) (1,348)
------ ------- ------ -------- --------
Net additions 746 781 155 34,335 36,017
PLAN EQUITY:
Beginning of year 3,530 12,629 977 80,073 97,209
------ ------- ------ -------- --------
End of year $4,276 $13,410 $1,132 $114,408 $133,226
====== ======= ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1994
(in thousands of dollars)
-------
<TABLE>
<CAPTION>
Diversified
Equity Interest Government
Index Income Securities Philip Morris
Fund Fund Fund (GF) Stock Fund Total
----------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 11 $ 17 $ 13 $ 3,203 $ 3,244
Employee contributions 331 693 160 4,719 5,903
Allocated share of Trust
investment activities:
Interest income 853 53 27 933
Dividend income 4,406 4,406
Net appreciation
(depreciation) in
fair value of
investments 64 (3) 2,518 2,579
------ ------- ------ ------- --------
64 853 50 6,951 7,918
------ ------- ------ ------- --------
Total additions 406 1,563 223 14,873 17,065
------ ------- ------ ------- --------
DEDUCTIONS:
Distributions and
withdrawals (742) (3,695) (933) (16,227) (21,597)
General and administrative
expenses (8) (33) (3) (195) (239)
------ ------- ------ ------- --------
Total deductions (750) (3,728) (936) (16,422) (21,836)
------ ------- ------ ------- --------
Net transfers among funds 905 2,263 350 (3,518) -
Transfers from (to)
predecessor trusts 174 334 (21) (1,194) (707)
Participants' loan repayments 1 1 1 (3) -
------ ------- ------ ------- --------
Net additions
(deductions) 736 433 (383) (6,264) (5,478)
PLAN EQUITY:
Beginning of year 2,794 12,196 1,360 86,337 102,687
------ ------- ------ ------- --------
End of year $3,530 $12,629 $ 977 $80,073 $ 97,209
====== ======= ====== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
1. General Description of the Plan:
The Kraft Foods Employee Thrift-Investment Plan (formerly known as the
General Foods Employee Thrift-Investment Plan and hereinafter referred to as
the "Plan") is a defined contribution plan designed to encourage employees
to save for retirement by providing eligible employees with an opportunity
to invest a portion of their compensation and to share in the profits of
certain operating units of Kraft Foods, Inc. (formerly known as Kraft
General Foods, Inc. and hereinafter referred to as "Kraft Foods") by making
such contribution. Kraft Foods is a subsidiary of Philip Morris Companies
Inc. (the "Company").
Hourly and certain salaried employees of Kraft Foods and certain of its
domestic subsidiaries (the "Kraft Foods Companies") who are represented by
designated collective bargaining units are eligible to participate in the
Plan, provided they meet eligibility requirements. The benefits offered
under the Plan may vary, depending upon the job location of the employee and
the collective bargaining unit of which he or she is a member. After
completing one year of service, eligible employees generally may make
before-tax and/or after-tax contributions. Matching contributions by Kraft
Foods from certain operating unit profits (the "Kraft Foods Matching
Contributions") are contributed to the Plan in accordance with the formula
described in Note 3. The provisions of the Plan are detailed in the official
Plan document which legally governs the operation of the Plan.
The administration of the Plan has generally been delegated to the
Management Committee for Employee Benefits of Kraft Foods (the "Committee")
comprised of employees of Kraft Foods. The Committee has appointed the
Administrative Committee to handle certain Plan administration matters. The
Corporate Employee Plans Investment Committee of Philip Morris Companies
Inc. (the "Investment Committee") is responsible for the selection of the
investment options in which participants elect to invest their assets in the
Plan and monitors the performance of these investment options. The Committee
and the Investment Committee are hereinafter collectively referred to as the
"Fiduciaries".
The Plan's assets are co-invested with the assets of the Kraft Foods Thrift
Plan and other plans sponsored by Kraft Foods in a commingled investment
fund known as the Kraft Foods Master Defined Contribution Trust (hereinafter
referred to as the "Trust") for which Bankers Trust Company (the "Trustee")
serves as the trustee (see Note 6).
Participants have the option of investing their Plan Accounts (see Note 4)
in 25 percent increments in the four funds listed below. Except for
participants employed at the Naperville, Illinois facility of Kraft Foods (a
"Naperville Participant"), Kraft Foods Matching Contributions are initially
invested in the Philip Morris Stock Fund but may be allocated and invested
in the same manner as participant contributions in the month following the
month in which the Kraft Foods Matching Contributions are made.
-9-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
DIVERSIFIED EQUITY INDEX FUND (also referred to as the EQUITY INDEX FUND) -
This fund is invested primarily in an index fund of stocks on a weighted
average basis in approximately the same proportion as the Standard & Poor's
Composite Index of 500 Stocks ("S&P 500").
INTEREST INCOME FUND - This fund consists primarily of investment contracts
entered into by the Trustee with financial institutions, each of which
agrees to repay in full the amounts invested with the institution, plus
interest. The assets of the Interest Income Fund are also invested in pools
of mortgage-backed and asset-backed securities, corporate bonds, and
obligations of the United States Government and its agencies. As an integral
part of the purchase of each pool of these investments for the Interest
Income Fund, a financial institution agrees to protect the pool to the
extent its market value fluctuates from original cost, but not in the event
of a default of any security in the pool.
GOVERNMENT SECURITIES FUND (GF) - This fund includes primarily direct
obligations of the U.S. Government or its agencies, obligations guaranteed
by the U.S. Government or its agencies, and fully insured bank deposits. The
average maturity of the securities in this fund is less than two years.
PHILIP MORRIS STOCK FUND - This fund is invested in the common stock of the
Company (the "Common Stock") and short-term temporary investments.
None of the foregoing funds guarantees a return to the participant.
Participants may change their options once a month, except that amounts may not
be directly transferred between the Interest Income Fund and the Government
Securities Fund (GF).
Each participant may vote all the shares of Common Stock held in his or her
Plan Accounts and invested in the Philip Morris Stock Fund. The Trustee will
vote full and fractional shares of Common Stock in accordance with each
individual participant's instruction. The Trustee votes those shares of Common
Stock for which no or inadequate voting instructions have been received in the
same proportions as the shares for which instructions have been received.
At December 31, 1996 and 1995, there were 3,523 and 3,689 participants,
respectively, some of whom elected to invest in more than one fund. Set forth
below is the number of participants investing in each fund.
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
------ ------
<S> <C> <C>
Diversified Equity Index Fund 598 676
Interest Income Fund 1,052 1,265
Government Securities Fund (GF) 258 368
Philip Morris Stock Fund 3,331 3,574
</TABLE>
-10-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
Each participant is at all times fully vested in the balance of his or her
After-Tax Contributions Account, Before-Tax Contributions Account, and in
the balance of his or her Kraft Foods Matching Account attributable to
amounts contributed before January 1, 1986 or transferred from the General
Foods Employee Stock Ownership Plan ("ESOP") (see Note 4), and, in the case
of a Naperville Participant, in the balance of the employer contribution-
derived account transferred from the predecessor plan. A participant shall
be fully vested in the balance in his or her Kraft Foods Matching Account
upon attainment of age 55, permanent and total disability, or death while
employed by Kraft Foods or any of its affiliates. A participant who is
employed by Kraft Foods or any of its affiliates at other than the
Naperville, Illinois facility of Kraft Foods shall become vested in his or
her Kraft Foods Matching Account based on the number of years of vesting
service determined in accordance with the following schedule:
<TABLE>
<CAPTION>
Vested
Years of Service Percentage
---------------- -----------
<S> <C>
Less than 3 0%
3 but less than 4 50%
4 but less than 5 75%
5 or more 100%
</TABLE>
A Naperville Participant shall be fully vested in the entire balance in his
or her Kraft Foods Matching Account after two years of participation in the
Plan (and the predecessor plan) or the completion of five years of service.
Forfeitures:
Kraft Foods Matching Contributions forfeited by terminated participants
are used to reduce future Kraft Foods Matching Contributions to the Plan.
2. Summary of Significant Accounting Policies:
Valuation of Trust Investments:
Investments in common trust funds of the General Employee Benefit Common
Trust of Bankers Trust Company ("GEBT") are valued on the basis of the
relative interest of each participating investor (including each
participant) in the fair value of the underlying assets of each of the
respective GEBT common trust funds.
-11-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
Investment contracts and the pools of mortgaged-backed and asset-backed
securities and other investments held in the Interest Income Fund are
recorded at their contract values, which represent contributions and
reinvested income, less any withdrawals plus accrued interest, because these
investments have fully benefit-responsive features. For example,
participants may ordinarily direct the withdrawal or transfer of all or a
portion of their investment at contract value. However, withdrawals
influenced by employer-initiated events, such as in connection with the sale
of a business, may result in a distribution at other than contract value.
There are no reserves against contract values for credit risk of contract
issuers or otherwise. The fair value of the investment contracts and the
pools of mortgaged-backed and asset-backed securities and other investments
at December 31, 1996 and 1995 was $712,948,000 and $725,034,000,
respectively. The average yield and crediting interest rate of the Interest
Income Fund was approximately seven percent for 1996 and 1995. The crediting
interest rate for the pools of mortgaged-backed and asset-backed securities
and other investments is reset periodically by the issuer based on the
relationship between the contract value and the fair value of the underlying
securities, but cannot be less than zero. The crediting interest rate for
the investment contracts is either agreed-to in advance with the issuer or
varies based on an agreed-to formula, but cannot be less than zero.
Securities listed on an exchange are valued at the closing price on the last
business day of the year; listed securities for which no sale was reported
on that date are recorded at the last reported bid price. However, if
trading in Common Stock has been suspended on the New York Stock Exchange
and not resumed before the end of any trading day, the Trustee will use the
composite price listed in The Wall Street Journal on the next business day.
Securities that are not listed on an exchange are generally traded in active
markets and valued by the Trustee from quoted market prices.
Short-term temporary investments are generally carried at cost, which
approximates fair value.
Investment Transactions and Investment Income of the Trust:
Investment transactions are accounted for on the dates purchases or sales
are executed. Realized gains and losses are computed on the basis of average
cost of investments sold. Dividend income is recorded on the ex-dividend
date; interest income is recorded as earned on an accrual basis.
In accordance with the policy of stating investments at fair value, the net
appreciation (depreciation) in the fair value of investments reflects both
realized gains or losses and the change in the unrealized appreciation
(depreciation) of investments held at year-end (see Note 7).
-12-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
3. Contributions:
No contribution is required from any eligible employee under the Plan.
Eligible employees (other than Naperville Participants) may elect to
contribute from one percent to 10 percent of his or her base rate of
compensation, but contributions from base compensation over $15,000 may not
exceed six percent. A Naperville Participant may elect to contribute from
one percent to 16 percent of his or her compensation, but only contributions
not in excess of six percent of compensation are eligible for Kraft Foods
Matching Contributions described below.
Contributions by participants employed at certain operating unit locations
may be made on a before-tax basis, an after-tax basis, or in a combination
of the two, while contributions by participants employed at certain other
operating unit locations may be made only on an after-tax basis. The
percentage of compensation available for both before-tax and after-tax
contributions may vary from year-to-year. The aggregate contributions
actually made by participants may not cause the Plan to violate limitations
on such contributions set forth in the Internal Revenue Code of 1986, as
amended (the "Code"). The Code also imposes a dollar limitation on the
amount of before-tax contributions for a calendar year. For 1996, a
participant's before-tax contributions were limited to $9,500; for 1997, a
participant's before-tax contributions will be limited to $9,500.
Each year Kraft Foods Matching Contributions are based on the amount of each
participant's contributions to the Plan, subject to certain limitations
under the Code. Kraft Foods Matching Contributions on behalf of Naperville
Participants equal 25 percent of each Naperville Participant's contributions
not in excess of six percent of compensation.
The Kraft Foods Matching Contributions percentage is the greater of (i) 75
percent of the matching contribution rate under the Kraft Foods Thrift Plan
or (ii) from 30 percent to 65 percent of a participant's contributions,
depending on the annual percent change in earnings shown in the table below.
The Kraft Foods Matching Contributions percentage to the Plan for a Plan
year cannot exceed the percentage contributed by Kraft Foods to the Kraft
Foods Thrift Plan for the same year. The average annual percent change in
earnings is the percent change in earnings, before income taxes, goodwill
amortization, interest and Company assessments of certain operating units of
Kraft Foods, over the five-year period immediately preceding the Plan year
for which the Kraft Foods Matching Contributions are to be made.
<TABLE>
<CAPTION>
The Kraft Foods Matching
If Annual Percent Contribution as a Percentage of
Change in Earnings Is Participant Contributions Is
---------------------- -------------------------------
<S> <C>
+5% (or less) 30%
6-8% 35%
9-11% 40%
12-14% 45%
15-17% 50%
18-20% 55%
21-23% 60%
24% (or more) 65%
</TABLE>
-13-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
Currently, the Kraft Foods Matching Contributions percentage for the
following Plan year is announced before the end of the preceding year. The
Kraft Foods Matching Contributions percentage was 43 percent, 55 percent and
57 percent in 1996, 1995 and 1994, respectively.
Participants' contributions are recorded in the period in which they are
withheld by the Kraft Foods Companies. Kraft Foods Matching Contributions
for the year are accrued by the Plan based upon the amount to be funded each
year in accordance with the Plan's formula noted above.
Kraft Foods Matching Contributions are discretionary. While Kraft Foods has
not expressed any intent to discontinue making Kraft Foods Matching
Contributions, it is free to do so at any time. Kraft Foods Matching
Contributions and participant contributions are subject to specified
limitations as described in the Code and the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
The Plan provides, in the event of a Change of Control (as defined in the
Plan) of the Company, for the preservation of the Kraft Foods Matching
Contributions for all participants for the year in which the Change of
Control occurs and for two years thereafter.
4. Valuation of Participant Accounts:
The Trustee maintains Accounts for each participant to reflect the source
and the participant's share of the funds invested in the Trust:
<TABLE>
<CAPTION>
Account Source
------- ------
<S> <C>
Kraft Foods Matching Account Kraft Foods Matching Contributions and
amounts transferred from the ESOP and
other predecessor plans
Before-Tax Contributions Account Before-Tax Contributions
After-Tax Contributions Account After-Tax Contributions
</TABLE>
At the end of each month, the Trustee determines the current fair value of
each of the investment funds in the Trust described in Note 1. The fair
value of each participant's share in the Trust is determined with respect to
their Kraft Foods Matching Account, Before-Tax Contributions Account and
After-Tax Contributions Account, on the basis of their proportionate share
in each fund.
5. Withdrawals and Distributions:
Participants may make withdrawals against their Kraft Foods Matching,
Before-Tax Contributions and After-Tax Contributions Accounts under limited
circumstances in accordance with the provisions outlined in the Plan.
-14-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars)
(continued)
Upon termination of employment, including retirement, a participant has
several options available, as described in the Plan, with respect to the
distribution of his or her Accounts. Normally, distributions are made one
month after such termination.
In the event the Plan is terminated, distributions will be made in accordance
with the current value of participants' Accounts under the direction of the
Committee and in accordance with the Code.
6. Investments Held by the Trust:
The Plan's allocated share of the Trust's net assets and investment
activities is based upon the total of each individual participant's share of
the Trust. The Plan's approximate allocated share of the Trust and its
approximate allocated share of the net assets of each fund in the Trust at
December 31, 1996 and 1995, respectively, were:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Trust 6% 6%
Diversified Equity Index Fund 1% 1%
Interest Income Fund 2% 2%
Government Securities Fund (GF) 100% 100%
Philip Morris Stock Fund 11% 10%
</TABLE>
The Plan's approximate allocated share of the Trust's investment activities
for the years ended December 31, 1996, 1995 and 1994, was eight percent,
eight percent and seven percent, respectively.
Most expenses incurred in administering the Plan and paid to third parties
are borne by the Trust. The following expenses are paid from the Plan's
assets: investment management fees, brokerage commissions, trustee's fees,
audit fees, recordkeeping fees and legal fees. For 1996 and 1995, the
approximate amount of such expenses expressed as a percentage of the average
net assets of each fund under the Plan, are as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Diversified Equity Index Fund 0.18% 0.28%
Interest Income Fund 0.22% 0.30%
Government Securities Fund (GF) 0.17% 0.28%
Philip Morris Stock Fund 0.17% 0.27%
</TABLE>
Investments that represented five percent or more of total Trust assets as of
December 31, 1996 and 1995, were:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Philip Morris Stock Fund
Common Stock $1,055,822 $1,071,626
Equity Index Fund
GEBT Equity Index Fund $442,151 $312,179
</TABLE>
The GEBT Equity Index Fund currently includes Common Stock.
-15-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars)
(continued)
At December 31, 1996 and 1995, the financial position of the Trust was:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Assets:
Investments at fair value:
Equity Index Fund:
GEBT Equity Index Fund
(cost $296,077 and $230,148) $ 442,151 $ 312,179
Short-term temporary investments
(cost approximates fair value) 945 3,928
Interest Income Fund:
Investment contracts (at contract value)
(cost approximates contract value) 719,263 729,677
Short-term temporary investments
(cost approximates fair value) 31,250 74,111
Government Securities Fund:
Government securities
(cost $25,873 and $26,340) 25,693 27,129
Federal Agency Obligations
(cost $2,979) 2,911 -
Short-term temporary investments
(cost approximates fair value) 812 4,060
Government Securities Fund (GF):
Government securities
(cost approximates fair value) 1,184 1,198
Short-term temporary investments
(cost approximates fair value) 110 59
Philip Morris Stock Fund:
Common stock
(cost $439,309 and $478,175) 1,055,822 1,071,626
Short-term temporary investments
(cost approximates fair value) 28,613 26,940
International Equity Fund:
International Equity Fund
(cost $52,300 and $21,536) 56,401 22,713
Short-term temporary investments
(cost approximates fair value) 114 216
Balanced Fund:
Balanced Fund
(cost $72,891 and $28,863) 77,163 29,655
Short-term temporary investments
(cost approximates fair value) 189 152
Growth Equity Fund:
Growth Equity Fund
(cost $117,557 and $66,204) 122,194 65,591
Short-term temporary investments
(cost approximates fair value) 312 465
Other investments:
Participants' Loan Account:
Loans to participants 37,375 34,968
---------- ----------
Total investments 2,602,502 2,404,667
Receivables:
Interest income 1,063 1,052
Dividend income 11,308 11,926
Other receivables 2,980 -
---------- ----------
Total assets 2,617,853 2,417,645
Liabilities:
Other payables 1,264 1,240
---------- ----------
Net assets $2,616,589 $2,416,405
========== ==========
</TABLE>
-16-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars)
(continued)
The changes in the Trust net assets for the years ended December 31, 1996,
1995 and 1994, were:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Additions:
Employer contributions $ 35,823 $ 42,957 $ 45,559
Employee contributions 94,665 104,014 112,998
Transfers from predecessor trusts 300 (448) 54,833
Investment activities:
Interest 47,971 55,956 53,007
Dividends 56,586 51,225 40,029
Interest on participant loans 2,598 2,394 2,304
---------- ---------- ----------
107,155 109,575 95,340
Net appreciation
in fair value of investments 313,941 512,078 26,296
---------- ---------- ----------
Net investment activities 421,096 621,653 121,636
Deductions:
Distributions and withdrawals (348,908) (258,160) (150,932)
General and administrative
expenses (2,792) (3,133) (1,628)
---------- ---------- ----------
Increase in Trust net assets 200,184 506,883 182,466
Net assets:
Beginning of year 2,416,405 1,909,522 1,727,056
---------- ---------- ----------
End of year $2,616,589 $2,416,405 $1,909,522
========== ========== ==========
</TABLE>
The transfers from the predecessor trusts for the year ended December 31,
1994, includes the transfer of assets to the Trust of the assets of the former
Entenmann's Plan in the amount of $52,343.
-17-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars)
(continued)
7. Net Appreciation (Depreciation) in Fair Value of Trust Investments:
The realized gains and losses on disposals and changes in unrealized
appreciation or depreciation of investments in the Trust for the years ended
December 31, 1996, 1995, and 1994 were:
<TABLE>
<CAPTION>
Freihofer
Equitable
Equity Government Government Capital
Index Securities Securities Philip Morris Management
Fund Fund Fund (GF) Stock Fund Fund
------------ ------------ ------------ ------------- ------------
1996
- ----
<S> <C> <C> <C> <C> <C>
Realized gains (losses):
Proceeds $ 51,031 $ 9,262 $ 1,436 $ 373,172
Cost 37,037 9,271 1,436 172,650
-------- ------- ------- --------- -------
Net realized gains
(losses) 13,994 (9) - 200,522
-------- ------- ------- --------- -------
Unrealized appreciation
(depreciation):
Beginning of year 82,031 789 593,451
End of year 146,074 (248) 616,513
-------- ------- ------- --------- -------
Increase (decrease) 64,043 (1,037) - 23,062
-------- ------- ------- --------- -------
Net appreciation
(depreciation) in fair
value of investments $ 78,037 $(1,046) $ - $ 223,584
======== ======= ======= ========= =======
1995
----
Realized gains:
Proceeds $ 44,833 $16,505 $ 1,431 $ 173,058 $12,642
Cost 37,484 16,505 1,431 94,527 6,063
-------- ------- ------- --------- -------
Net realized gains 7,349 - - 78,531 6,579
-------- ------- ------- --------- -------
Unrealized appreciation
(depreciation):
Beginning of year 3,838 (109) 231,434 6,636
Transfer from Entenmann's 16,383
End of year 82,031 789 593,451
-------- ------- ------- --------- -------
Increase (decrease) 78,193 898 - 345,634 (6,636)
-------- ------- ------- --------- -------
Net appreciation
(depreciation) in fair
value of investments $ 85,542 $ 898 $ - $ 424,165 $ (57)
======== ======= ======= ========= =======
1994
----
Realized gains (losses):
Proceeds $194,914 $ 3,955 $ 1,860 $ 44,214 $ 1,455
Cost 135,224 3,969 1,867 31,833 659
-------- ------- ------- --------- -------
Net realized gains
(losses) 59,690 (14) (7) 12,381 796
-------- ------- ------- --------- -------
Unrealized appreciation
(depreciation):
Beginning of year 59,995 1 (5) 220,615 7,743
End of year 3,838 (109) 231,434 6,636
-------- ------- ------- --------- -------
(Decrease) increase (56,157) (110) 5 10,819 (1,107)
-------- ------- ------- --------- -------
Net appreciation
(depreciation) in fair
value of investments $ 3,533 $ (124) $ (2) $ 23,200 $ (311)
======== ======= ======= ========= =======
<CAPTION>
International Growth
Equity Balanced Equity
Fund Fund Fund Total
--------------- ----------- ------------ ------------
1996
- ----
<S> <C> <C> <C> <C>
Realized gains (losses):
Proceeds $ 15,309 $ 9,120 $25,847 $485,177
Cost 14,552 8,758 25,254 268,958
-------- ------- ------- --------
Net realized gains
(losses) 757 362 593 216,219
-------- ------- ------- --------
Unrealized appreciation
(depreciation):
Beginning of year 1,177 792 (613) 677,627
End of year 4,101 4,272 4,637 775,349
-------- ------- ------- --------
Increase (decrease) 2,924 3,480 5,250 97,722
-------- ------- ------- --------
Net appreciation
(depreciation) in fair
value of investments $ 3,681 $ 3,842 $ 5,843 $313,941
======== ======= ======= ========
1995
----
Realized gains:
Proceeds $ 2,036 $ 1,859 $2,514 $254,878
Cost 2,012 1,813 2,410 162,245
-------- ------- ------- --------
Net realized gains 24 46 104 92,633
-------- ------- ------- --------
Unrealized appreciation
(depreciation):
Beginning of year 241,799
Transfer from Entenmann's 16,383
End of year 1,177 792 (613) 677,627
-------- ------- ------- --------
Increase (decrease) 1,177 792 (613) 419,445
-------- ------- ------- --------
Net appreciation
(depreciation) in fair
value of investments $ 1,201 $ 838 $ (509) $512,078
======== ======= ======= ========
1994
----
Realized gains (losses):
Proceeds $246,398
Cost 173,552
-------- ------- ------- --------
Net realized gains
(losses) 72,846
-------- ------- ------- --------
Unrealized appreciation
(depreciation):
Beginning of year 288,349
End of year 241,799
-------- ------- ------- --------
(Decrease) increase (46,550)
-------- ------- ------- --------
Net appreciation
(depreciation) in fair
value of investments $ 26,296
======== ======= ======= ========
</TABLE>
-18-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(concluded)
8. Tax Status:
The U.S. Treasury Department has determined that the Plan, as amended and in
effect as of January 1, 1993, constitutes a qualified plan under Section
401(a) of the Code and the related Trust is, therefore, exempt from Federal
income taxes under the provisions of Section 501(a) of the Code. The
Fiduciaries believe that the Plan continues to be administered in accordance
with the applicable provisions of the Code.
Therefore, participants will not be subject to income tax on Kraft Foods
Matching Contributions, or before-tax contributions made on their behalf by
Kraft Foods when made to the Trust, nor on earnings credited to their
Accounts until withdrawn or distributed.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Management Committee for Employee Benefits of Kraft Foods, Inc., having
administrative responsibility of the Plan, has duly caused this annual report to
be signed by the undersigned thereunto duly authorized.
KRAFT FOODS EMPLOYEE
THRIFT-INVESTMENT PLAN
(Name of Plan)
By /s/ TERRY M. FAULK
----------------------------------
Terry M. Faulk, Chairman,
Management Committee for Employee
Benefits of Kraft Foods, Inc.
Date: March 28, 1997
-20-
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
--------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
EQUITY INDEX FUND -- 17.03%
GEBT Equity Index Fund -- 16.99% 259,974 $296,077,339 $442,150,965
Short-Term Investments -- 0.04%
GEBT Short-Term Investment Fund 944,612 944,612 944,612
------------ ------------
Total Equity Index Fund 297,021,951 443,095,577
------------ ------------
INTEREST INCOME FUND -- 28.84%
Investment Contracts -- 27.64%
(The amounts included in Column D for the
investment contracts represent contract value,
see Note 2.)
Participation Contracts with Institutions -- 17.22%
Connecticut General Ins.
No. 7771 4.55%
matures 1/1/1997 11,761,408 11,761,408 11,761,408
J P Morgan
No. 95-03 8.10%
matures 1/25/1997 25,877,500 25,877,500 25,877,500
Hartford Life Ins. Co.
No. 9108 8.74%
matures 5/1/1997 32,378,796 32,378,796 32,378,796
Confederation Life Ins.
No. 62325 0.00%
matures 5/1997 21,109,885 21,109,885 21,109,885
Provident Mutual
No. 008159-001 8.55%
matures 3/1/1998 1,004,095 1,004,095 1,004,095
Mass Mutual
No. 10223 8.25%
matures 4/30/1998 11,913,686 11,913,686 11,913,686
Provident National Assurance
No. 02705689 6.96%
matures 7/31/1998 23,799,860 23,799,860 23,799,860
Connecticut General Life Ins.
No. 25119 8.81%
matures 8/1/1998 21,756,995 21,756,995 21,756,995
Hartford Life Ins. Co.
No. 10225 5.68%
matures 1/31/1999 20,052,910 20,052,910 20,052,910
Allstate Life Insurance Company
No. 5428 6.15%
matures 4/30/1999 36,609,754 36,609,754 36,609,754
</TABLE>
S-1
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
Participation Contracts with Institutions (continued)
Allstate Life Ins. Co.
No. 5581 7.23%
matures 5/20/1999 1,943,201 $ 1,943,201 $ 1,943,201
CNA Insurance Co.
No. 24023 6.61%
matures 6/29/2001 20,017,544 20,017,544 20,017,544
Sun America Life
No. 4696 6.67%
matures 12/31/2001 20,017,698 20,017,698 20,017,698
Mass Mutual
No. 1040 6.21% 32,695,251 32,695,251 32,695,251
Prudential
No. 7269 6.16% 70,734,000 70,734,000 70,734,000
New York Life
No. 20013 6.39% 31,985,090 31,985,090 31,985,090
John Hancock
No. 6436 5.82% 64,373,330 64,373,330 64,373,330
--------------- ---------------
Total Contracts 448,031,003 448,031,003
--------------- ---------------
<CAPTION>
<S> <C> <C>
Financial Institution Pools -- 10.42%
National Westminster Bank
No. SAM 0104B 4.28%
GEBT Short-Term Investment Fund 668,903 668,903
Confederation Life Insurance GAC No. 62381
matured 11/30/1995 8.61% 8,108,070 8,108,070
Federal National Mortgage Association Remic
matures 6/25/2005 6.25% 2,367,771 2,367,771
Federal National Mortgage Association Remic
matures 8/25/2005 6.00% 514,937 514,937
Federal National Mortgage Association Remic
matures 8/25/2012 5.60% 1,576,665 1,576,665
Federal National Mortgage Association Remic
matures 8/25/2013 6.70% 4,044,382 4,044,382
Federal National Mortgage Association Remic
matures 9/25/2015 6.00% 2,353,243 2,353,243
Federal National Mortgage Association Remic
matures 6/25/2016 5.70% 4,366,089 4,366,089
Federal National Mortgage Association Remic
matures 7/25/2016 5.65% 2,341,523 2,341,523
Federal National Mortgage Association Remic
matures 1/25/2020 7.00% 854,086 854,086
Federal National Mortgage Association Pool
matures 7/1/2008 7.00% 1,041,452 1,041,452
Federal National Mortgage Association Pool
matures 8/1/2008 7.00% 1,030,303 1,030,303
</TABLE>
S-2
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- ------------ --------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ------------ ----------
<S> <C> <C> <C>
Financial Institution Pools (continued)
National Westminster Bank (continued)
Federal National Mortgage Association Pool
matures 1/1/2009 6.50% $ 171,619 $ 171,619
Federal National Mortgage Association Pool
matures 2/1/2009 6.50% 613,304 613,304
Federal National Mortgage Association Pool
matures 3/1/2009 6.50% 205,223 205,223
Federal National Mortgage Association Pool
matures 5/1/2009 6.50% 1,271,306 1,271,306
Government National Mortgage Association Pool
matures 12/15/2023 6.50% 284,287 284,287
Government National Mortgage Association Pool
matures 3/15/2024 6.50% 93,774 93,774
Government National Mortgage Association Pool
matures 4/15/2024 6.50% 1,776,787 1,776,787
Government National Mortgage Association Pool
matures 5/15/2024 6.50% 1,276,524 1,276,524
Federal Home Loan Mtg. Corporation
matures 8/15/2005 6.25% 1,184,252 1,184,252
Federal Home Loan Mtg. Corporation
matures 4/1/2008 7.00% 127,322 127,322
Federal Home Loan Mtg. Corporation
matures 8/15/2008 6.50% 1,692,931 1,692,931
Federal Home Loan Mtg. Corporation
matures 9/1/2008 6.50% 46,077 46,077
Federal Home Loan Mtg. Corporation
matures 12/1/2008 6.50% 48,731 48,731
Federal Home Loan Mtg. Corporation
matures 2/1/2009 6.50% 2,029,335 2,029,335
Federal Home Loan Mtg. Corporation
matures 6/1/2009 6.50% 88,055 88,055
Federal Home Loan Mtg. Corporation
matures 10/1/2010 7.00% 260,939 260,939
Federal Home Loan Mtg. Corporation
matures 2/1/2011 6.50% 138,688 138,688
Federal Home Loan Mtg. Corporation
matures 2/1/2011 7.00% 791,070 791,070
Federal Home Loan Mtg. Corporation
matures 3/1/2011 7.00% 1,271,320 1,271,320
Federal Home Loan Mtg. Corporation
matures 4/15/2011 5.00% 1,769,714 1,769,714
Federal Home Loan Mtg. Corporation
matures 12/15/2015 6.50% 2,887,649 2,887,649
Federal Home Loan Mtg. Corporation
matures 6/15/2016 7.00% 318,819 318,819
Federal Home Loan Mtg. Corporation
matures 1/15/2018 6.00% 4,415,122 4,415,122
----------------- ---------------
</TABLE>
S-3
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
--------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
Financial Institution Pools (continued)
National Westminster Bank (continued)
Total National Westminster Bank Contract $52,030,272 $52,030,272
----------- -----------
Trans America Life Insurance Company
No. 76594 6.82%
GEBT Short-Term Investment Fund 7,487,114 7,487,114
U. S. Treasury Note
matures 6/30/1998 6.25% 1,399,192 1,399,192
U. S. Treasury Note
matures 9/30/1998 6.00% 1,770,883 1,770,883
U. S. Treasury Note
matures 12/31/1998 5.75% 1,801,674 1,801,674
U. S. Treasury Note
matures 5/15/1999 6.38% 11,137,269 11,137,269
U. S. Treasury Note
matures 11/15/1999 5.88% 916,316 916,316
U. S. Treasury Note
matures 6/30/2001 6.63% 2,469,791 2,469,791
U. S. Treasury Note
matures 9/30/2001 6.38% 279,189 279,189
U. S. Treasury Note
matures 12/31/2001 6.13% 3,595,726 3,595,726
U. S. Treasury Note
matures 5/15/2006 6.88% 1,592,869 1,592,869
Federal National Mortgage Association Pool
matures 11/1/2002 7.00% 55,748 55,748
Federal National Mortgage Association Pool
matures 4/1/2003 7.00% 151,031 151,031
Federal National Mortgage Association Pool
matures 5/1/2003 7.00% 192,231 192,231
Federal National Mortgage Association Pool
matures 6/1/2003 7.00% 342,011 342,011
Federal National Mortgage Association Pool
matures 4/1/2026 7.00% 130,578 130,578
Federal National Mortgage Association Pool
matures 5/1/2026 7.00% 189,143 189,143
Federal National Mortgage Association Pool
matures 6/1/2026 7.00% 181,817 181,817
Federal National Mortgage Association Pool
matures 7/1/2026 7.00% 10,098 10,098
Federal National Mortgage Association Pool
matures 8/1/2026 7.00% 33,608 33,608
Federal National Mortgage Association Pool
matures 9/1/2026 7.00% 167,014 167,014
Federal National Mortgage Association Pool
matures 10/1/2026 7.00% 245,231 245,231
</TABLE>
S-4
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- --------------- ----------- ---------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- ---------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
Financial Institution Pools (continued)
Trans America Life Insurance Company (continued)
Federal National Mortgage Association Pool
matures 12/1/2026 7.00% $ 959,819 $ 959,819
Federal National Mortgage Association
matures 9/1/2021 8.00% 2,576,286 2,576,286
Government National Mortgage Association
matures 2/1/2021 9.00% 612,717 612,717
Federal Home Loan Mtg. Corporation
matures 5/1/2007 7.50% 1,128,692 1,128,692
Federal Home Loan Mtg. Corporation
matures 7/1/2026 6.50% 2,376,643 2,376,643
---------------- ---------------
Total Trans America Life Insurance Company Contract 41,802,690 41,802,690
---------------- ---------------
Commonwealth Life Insurance Company No. ADA00199TR, 6.22%,
Peoples Life Insurance Company No. BDA00291TR, 6.37% &
Trans America Life Insurance Company No. 76586, 5.62%
GEBT Short-Term Investment Fund 32,146,777 32,146,777
U. S. Treasury Note
matures 6/30/1998 6.25% 2,429,586 2,429,586
U. S. Treasury Note
matures 9/30/1998 6.00% 9,204,797 9,204,797
U. S. Treasury Note
matures 12/31/1998 5.75% 9,249,548 9,249,548
U. S. Treasury Note
matures 5/15/1999 6.38% 20,682,257 20,682,257
U. S. Treasury Note
matures 11/15/1999 5.88% 12,997,667 12,997,667
U. S. Treasury Note
matures 2/29/2000 7.13% 2,251,283 2,251,283
U. S. Treasury Note
matures 6/30/2001 6.63% 9,517,681 9,517,681
U. S. Treasury Note
matures 9/30/2001 6.38% 1,176,769 1,176,769
U. S. Treasury Note
matures 12/31/2001 6.13% 16,589,539 16,589,539
U. S. Treasury Note
matures 7/15/2006 7.00% 667,757 667,757
Federal National Mortgage Association
matures 11/23/2001 6.35% 341,296 341,296
Federal National Mortgage Association
matures 9/9/2003 5.97% 514,159 514,159
Federal National Mortgage Association
matures 10/25/2004 8.40% 665,643 665,643
Federal National Mortgage Association
matures 11/10/2004 8.63% 1,257,242 1,257,242
</TABLE>
S-5
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
Financial Institution Pools (continued)
Commonwealth Life Insurance Company, Peoples Life Insurance
Company & Trans America Life Insurance Company (continued)
Federal National Mortgage Association Pool
matures 6/1/2001 10.50% $ 1,169,781 $ 1,169,781
Federal National Mortgage Association Pool
matures 12/1/2002 6.00% 45,064 45,064
Federal National Mortgage Association Pool
matures 2/1/2003 6.00% 987,864 987,864
Federal National Mortgage Association Pool
matures 3/1/2003 6.00% 30,101 30,101
Federal National Mortgage Association Pool
matures 4/1/2003 6.00% 96,329 96,329
Federal National Mortgage Association Pool
matures 9/1/2007 7.00% 254,869 254,869
Federal National Mortgage Association Pool
matures 6/1/2008 7.00% 126,761 126,761
Federal National Mortgage Association Pool
matures 8/1/2008 7.00% 1,229,298 1,229,298
Federal National Mortgage Association Pool
matures 12/1/2008 6.00% 326,260 326,260
Federal National Mortgage Association Pool
matures 2/1/2009 6.00% 797,532 797,532
Federal National Mortgage Association Pool
matures 3/1/2009 6.00% 355,401 355,401
Federal National Mortgage Association Pool
matures 3/1/2011 6.50% 475,099 475,099
Federal National Mortgage Association Pool
matures 2/1/2023 7.00% 387,455 387,455
Federal National Mortgage Association Pool
matures 5/1/2023 8.00% 2,234,254 2,234,254
Federal National Mortgage Association Pool
matures 2/1/2024 6.50% 461,246 461,246
Federal National Mortgage Association Pool
matures 2/1/2024 7.00% 1,267,814 1,267,814
Federal National Mortgage Association Pool
matures 4/1/2024 6.50% 154,870 154,870
Federal National Mortgage Association Pool
matures 5/1/2024 6.50% 420,761 420,761
Federal National Mortgage Association Pool
matures 6/1/2024 6.50% 657,839 657,839
Federal National Mortgage Association Pool
matures 11/1/2024 9.00% 445,065 445,065
Federal National Mortgage Association Pool
matures 7/1/2025 7.00% 1,060,349 1,060,349
Federal National Mortgage Association Pool
matures 8/1/2025 7.00% 586,886 586,886
</TABLE>
S-6
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
Financial Institution Pools (continued)
Commonwealth Life Insurance Company, Peoples Life Insurance
Company & Trans America Life Insurance Company (continued)
Federal National Mortgage Association Pool
matures 4/1/2026 7.00% $1,772,204 $1,772,204
Federal National Mortgage Association Pool
matures 10/1/2026 7.00% 293,720 293,720
Government National Mortgage Association Pool
matures 11/15/2017 9.50% 1,640,665 1,640,665
Government National Mortgage Association Pool
matures 12/15/2019 9.00% 311,303 311,303
Government National Mortgage Association Pool
matures 1/15/2020 9.00% 157,022 157,022
Government National Mortgage Association Pool
matures 5/15/2020 9.00% 348,067 348,067
Government National Mortgage Association Pool
matures 11/15/2020 9.00% 284,443 284,443
Government National Mortgage Association Pool
matures 12/15/2020 9.00% 255,567 255,567
Government National Mortgage Association Pool
matures 8/15/2021 9.00% 438,442 438,442
Government National Mortgage Association Pool
matures 10/15/2021 9.00% 377,590 377,590
Government National Mortgage Association Pool
matures 10/20/2021 9.50% 1,052,170 1,052,170
Government National Mortgage Association Pool
matures 11/15/2021 9.00% 188,364 188,364
Government National Mortgage Association Pool
matures 1/15/2022 9.00% 51,323 51,323
Government National Mortgage Association Pool
matures 3/15/2024 6.50% 401,633 401,633
Government National Mortgage Association Pool
matures 4/15/2024 6.50% 390,394 390,394
Government National Mortgage Association Pool
matures 5/15/2024 6.50% 1,999,237 1,999,237
Government National Mortgage Association Pool
matures 7/15/2024 6.50% 1,361,039 1,361,039
Government National Mortgage Association Pool
matures 1/15/2025 9.00% 873,781 873,781
Federal Home Loan Mtg. Corporation
matures 11/1/2008 6.00% 3,640,485 3,640,485
Federal Home Loan Mtg. Corporation
matures 3/1/2009 6.50% 1,490,923 1,490,923
Federal Home Loan Mtg. Corporation
matures 4/1/2009 6.00% 109,466 109,466
Federal Home Loan Mtg. Corporation
matures 4/1/2009 6.50% 153,765 153,765
</TABLE>
S-7
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
--------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
Financial Institution Pools (continued)
Commonwealth Life Insurance Company, Peoples Life Insurance
Company & Trans America Life Insurance Company (continued)
Federal Home Loan Mtg. Corporation
matures 10/1/2011 6.50% $ 1,499,186 $ 1,499,186
Federal Home Loan Mtg. Corporation
matures 12/15/2019 6.00% 544,917 544,917
Federal Home Loan Mtg. Corporation
matures 4/15/2021 9.00% 1,369,729 1,369,729
Federal Home Loan Mtg. Corporation
matures 1/1/2026 6.00% 936,908 936,908
Federal Home Loan Mtg. Corporation
matures 7/1/2026 6.50% 519,682 519,682
Student Loan Marketing Association
matures 8/1/2007 7.13% 701,902 701,902
Banc One Auto TR
matures 11/15/1997 6.85% 163,478 163,478
Premier Auto TR
matures 2/4/1999 7.15% 1,894,195 1,894,195
Bayerische Landesbank Girozentrale
matures 7/19/1999 6.55% 2,297,149 2,297,149
MBNA Master Credit Card TR
matures 8/16/1999 6.20% 2,527,260 2,527,260
Standard Credit Card Master TR
matures 6/7/2000 6.75% 785,382 785,382
Standard Credit Card Master TR
matures 4/7/2001 6.80% 522,286 522,286
Asian Development Bank NTS
matures 5/2/2001 8.50% 1,473,645 1,473,645
American Express Master TR
matures 7/15/2001 5.38% 1,366,641 1,366,641
MBNA Master Credit Card TR
matures 1/15/2003 6.60% 1,014,626 1,014,626
Japan Fin Corp
matures 4/27/2005 7.38% 1,453,580 1,453,580
International BK for Recon & Dev
matures 7/21/2005 6.38% 1,620,393 1,620,393
Bayerische Landesbank Girozentrale
matures 2/1/2006 6.17% 1,663,401 1,663,401
KFW Int'l Fin Inc
matures 6/1/2006 8.20% 983,074 983,074
General Electric Cap Corp
matures 7/24/2008 8.50% 1,050,622 1,050,622
Landesbank Hessen
matures 11/10/2008 6.25% 1,607,286 1,607,286
International BK for Recon & Dev
matures 3/1/2026 8.88% 548,882 548,882
----------- -----------
</TABLE>
S-8
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
--------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
Commonwealth Life Insurance Company, Peoples Life Insurance
Company & Trans America Life Insurance Company (continued)
Total Commonwealth, Peoples & Trans America Contract $177,398,726 $177,398,726
------------ ------------
Total Pools 271,231,688 271,231,688
------------ ------------
Total Investment Contracts 719,262,691 719,262,691
------------ ------------
Short-Term Investments -- 1.20%
GEBT Short-Term Investment Fund 25,748,659 25,748,659 25,748,659
GEBT Stable Value Government Fund 5,501,801 5,501,801 5,501,801
------------ ------------
Total Short-Term Investments 31,250,460 31,250,460
------------ ------------
Total Interest Income Fund 750,513,151 750,513,151
------------ ------------
GOVERNMENT SECURITIES FUND -- 1.13%
Government Securities -- 0.99%
United States Treasury Notes
7.25% due 2/15/1998 1,650,000 1,666,601 1,677,076
United States Treasury Notes
7.125% due 9/30/1999 4,350,000 4,502,688 4,470,321
United States Treasury Notes
7.125% due 2/29/2000 4,350,000 4,510,313 4,478,456
United States Treasury Notes
5.875% due 6/30/2000 4,350,000 4,343,360 4,317,375
United States Treasury Notes
5.625% due 2/28/2001 750,000 736,582 735,120
United States Treasury Notes
6.375% due 8/15/2002 4,900,000 4,961,787 4,932,144
United States Treasury Notes
6.50% due 5/15/2005 3,000,000 3,060,541 3,020,160
United States Treasury Notes
6.50% due 8/15/2005 1,300,000 1,332,109 1,308,333
United States Treasury Notes
6.50% due 10/15/2006 750,000 759,023 754,103
------------ ------------
Total Government Securities 25,873,004 25,693,088
------------ ------------
Federal Agency Obligations -- 0.11%
Federal Home Loan Mtg. Corporation
SER A 5.5% due 2/2/2001 3,000,000 2,978,775 2,911,410
------------ ------------
</TABLE>
S-9
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
Total Federal Agency Obligations $ 2,978,775 $ 2,911,410
---------------- ---------------
Short-Term Investments -- 0.03%
BT Pyramid Government Securities Cash Fund 811,717 811,717 811,717
---------------- ---------------
Total Government Securities Fund 29,663,496 29,416,215
---------------- ---------------
GOVERNMENT SECURITIES FUND (GF) -- 0.05%
Government Securities -- 0.05%
United States Treasury Bills
due 5/01/1997 500,000 473,324 473,324
United States Treasury Bills
due 7/24/1997 500,000 472,400 472,400
United States Treasury Bills
due 11/13/1997 250,000 238,077 238,077
---------------- ---------------
Total Government Securities 1,183,801 1,183,801
---------------- ---------------
Short-Term Investments -- 0.00%
BT Pyramid Government Securities Cash Fund 109,585 109,585 109,585
---------------- ---------------
Total Government Securities Fund (GF) 1,293,386 1,293,386
---------------- ---------------
PHILIP MORRIS STOCK FUND -- 41.67%
Common Stock -- 40.57%
Tobacco -- 40.57%
Philip Morris Companies Inc. 9,343,555 * 439,309,053 1,055,821,715
Short-Term Investments -- 1.10%
GEBT Short-Term Investment Fund 28,613,393 28,613,393 28,613,393
---------------- ---------------
Total Philip Morris Stock Fund 467,922,446 1,084,435,108
---------------- ---------------
</TABLE>
* On February 26, 1997, Philip Morris
Companies Inc. announced a three-for-one
split of its Common Stock, to be effected
by a distribution on April 10, 1997, of two
shares for each share held of record at the
close of business on March 17, 1997.
S-10
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Number Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
--------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
INTERNATIONAL EQUITY FUND -- 2.17%
Japanese Equity Index Fund -- 0.57% 174,579 $ 16,928,012 $ 14,865,375
Non Japanese Equity Index Fund -- 1.60% 282,909 35,371,872 41,535,576
-------------- --------------
Total Equity Index Funds 52,299,884 56,400,951
-------------- --------------
Short-Term Investments -- 0.00%
GEBT Short-Term Investment Fund 114,499 114,499 114,499
-------------- --------------
Total International Equity Index Fund 52,414,383 56,515,450
-------------- --------------
BALANCED FUND -- 2.97%
Balanced Fund -- 2.96% 6,451,741 72,890,632 77,162,828
Short-Term Investments -- 0.01%
GEBT Short-Term Investment Fund 188,536 188,536 188,536
-------------- --------------
Total Balanced Fund 73,079,168 77,351,364
-------------- --------------
GROWTH EQUITY FUND -- 4.71%
Growth Equity Fund -- 4.70% 10,123,806 117,556,907 122,194,340
Short-Term Investments -- 0.01%
GEBT Short-Term Investment Fund 312,426 312,426 312,426
-------------- --------------
Total Growth Equity Fund 117,869,333 122,506,766
-------------- --------------
PARTICIPANTS' LOAN ACCOUNT -- 1.43%
Loans to Participants -- 1.43% 37,374,798 37,374,798 37,374,798
-------------- --------------
Total Participants' Loan Account 37,374,798 37,374,798
-------------- --------------
TOTAL INVESTMENTS $1,827,152,112 $2,602,501,815
============== ==============
</TABLE>
S-11
<PAGE>
Exhibit 23
CONSENT of INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Philip Morris Companies
Inc. registration statement on Form S-8 (File No. 33-1479) of the Kraft Foods
Employee Thrift-Investment Plan of our report dated March 28, 1997, on our
audits of the financial statements of the Kraft Foods Employee Thrift-Investment
Plan as of December 31, 1996 and 1995 and for the years ended December 31, 1996,
1995 and 1994, and the financial statement schedule as of December 31, 1996,
which report is included in this annual report on Form 11-K.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
April 14, 1997
