<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
--------------------
Philip Morris Deferred Profit-Sharing Plan
(Full title 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>
PHILIP MORRIS DEFERRED PROFIT-SHARING 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...................................... 9-21
Signatures............................................................ 22
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 Administrator,
and all Participants as a group (but not individually)
of the Philip Morris Deferred Profit-Sharing Plan:
We have audited the accompanying statements of financial condition of
the Philip Morris Deferred Profit-Sharing Plan (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 its delegate). 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.
New York, New York
April 11, 1997
-3-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
STATEMENT OF FINANCIAL CONDITION
as of December 31, 1996
(in thousands of dollars)
--------
<TABLE>
<CAPTION>
U.S.
Equity Interest Government International
Index Income Obligations Philip Morris Equity
Fund Fund Fund Stock Fund Fund
---------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Allocated share of
Trust net assets $ 724,192 $ 686,005 $ 50,722 $ 757,242 $ 27,550
Employer contributions
receivable 28,434 24,072 8,865 24,789 1,175
---------- ------------ ------------ ------------- -------------
Total assets 752,626 710,077 59,587 782,031 28,725
---------- ------------ ------------ ------------- -------------
Plan equity $ 752,626 $ 710,077 $ 59,587 $ 782,031 $ 28,725
========== ============ ============ ============= =============
<CAPTION>
Growth Participants'
Balanced Equity Loan
Fund Fund Account Total
---------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
ASSETS:
Allocated share of
Trust net assets $ 50,572 $ 36,719 $ 64,645 $ 2,397,647
Employer contributions
receivable 1,577 1,559 90,471
---------- ------------ ------------ -------------
Total assets 52,149 38,278 64,645 2,488,118
---------- ------------ ------------ -------------
Plan equity $ 52,149 $ 38,278 $ 64,645 $ 2,488,118
========== ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
STATEMENT OF FINANCIAL CONDITION
as of December 31, 1995
(in thousands of dollars)
---------
<TABLE>
<CAPTION>
U.S.
Equity Interest Government International
Index Income Obligations Philip Morris Equity
Fund Fund Fund Stock Fund Fund
----------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Allocated share of
Trust net assets $ 570,188 $ 607,329 $ 43,672 $ 672,808 $ 9,072
Employer contributions
receivable 27,119 24,166 7,235 20,915 673
Interfund receivables
(payables) (386) 447 716 (753) 16
----------- ---------- ---------- ------------- -----------
Total assets 596,921 631,942 51,623 692,970 9,761
----------- ---------- ---------- ------------- -----------
LIABILITIES:
Distributions and
withdrawals payable 641 1,010 65 812 1
Undistributed
participants' loans 14 3 11
----------- ---------- ---------- ------------- -----------
Total liabilities 655 1,010 68 823 1
----------- ---------- ---------- ------------- -----------
Plan equity $ 596,266 $ 630,932 $ 51,555 $ 692,147 $ 9,760
=========== ========== ========== ============= ===========
Growth Participants'
Balanced Equity Loan
Fund Fund Account Total
--------- --------- ------------ ----------
<C> <C> <C> <C>
ASSETS:
Allocated share of
Trust net assets $ 22,520 $ 17,592 $ 61,924 $2,005,105
Employer contributions
receivable 892 897 81,897
Interfund receivables
(payables) (23) (17) -
-------- -------- -------- ----------
Total assets 23,389 18,472 61,924 2,087,002
-------- -------- -------- ----------
LIABILITIES:
Distributions and
withdrawals payable 4 2 76 2,611
Undistributed
participants' loans (28) -
-------- -------- -------- ----------
Total liabilities 4 2 48 2,611
-------- -------- -------- ----------
Plan equity $ 23,385 $ 18,470 $ 61,876 $2,084,391
======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1996
(in thousands of dollars)
--------
<TABLE>
<CAPTION>
U.S.
Equity Interest Government International
Index Income Obligations Philip Morris Equity
Fund Fund Fund Stock Fund Fund
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 28,433 $ 24,068 $ 8,864 $ 24,783 $ 1,175
Employee contributions 9,201 7,076 1,440 8,414 813
Allocated share of Trust
investment activities:
Interest income 5 41,640 2,923 875 1
Dividend income 31,315
Net appreciation
(depreciation) in
fair value of investments 134,965 (1,363) 143,433 1,743
------------- ------------- ------------- ------------- -------------
134,970 41,640 1,560 175,623 1,744
------------- ------------- ------------- ------------- -------------
Total additions 172,604 72,784 11,864 208,820 3,732
------------- ------------- ------------- ------------- -------------
DEDUCTIONS:
Distributions and
withdrawals (23,813) (32,396) (2,101) (21,486) (404)
General and administrative
expenses (284) (408) (89) (260) (67)
------------- ------------- ------------- ------------- -------------
Total deductions (24,097) (32,804) (2,190) (21,746) (471)
------------- ------------- ------------- ------------- -------------
Net transfers among funds 8,157 37,808 (1,282) (96,589) 15,728
Net transfers between plans 160 442 47 379 (5)
Participants' loans (8,368) (6,586) (1,157) (7,645) (224)
Participants' loan repayments 7,904 7,501 750 6,665 205
------------- ------------- -------------- ------------- -------------
Net additions 156,360 79,145 8,032 89,884 18,965
PLAN EQUITY:
Beginning of year 596,266 630,932 51,555 692,147 9,760
------------- ------------- ------------- ------------- -------------
End of year $ 752,626 $ 710,077 $ 59,587 $ 782,031 $ 28,725
============= ============= ============= ============= =============
<CAPTION>
Growth Participants'
Balanced Equity Loan
Fund Fund Account Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 1,577 $ 1,559 $ 90,459
Employee contributions 759 1,264 28,967
Allocated share of Trust
investment activities:
Interest income 3 2 $ 4,490 49,939
Dividend income 2,665 2,251 36,231
Net appreciation
(depreciation) in
fair value of investments 2,627 1,424 282,829
------------- ------------- ------------- -------------
5,295 3,677 4,490 368,999
------------- ------------- ------------- -------------
Total additions 7,631 6,500 4,490 488,425
------------- ------------- ------------- -------------
DEDUCTIONS:
Distributions and
withdrawals (924) (697) (2,735) (84,556)
General and administrative
expenses (24) (24) (1,156)
------------- ------------- ------------- -------------
Total deductions (948) (721) (2,735) (85,712)
------------- ------------- ------------- -------------
Net transfers among funds 22,148 14,030 -
Net transfers between plans (51) 42 1,014
Participants' loans (296) (324) 24,600 -
Participants' loan repayments 229 374 (23,628) -
------------- ------------- ------------- -------------
Net additions 28,764 19,808 2,769 403,727
PLAN EQUITY:
Beginning of year 23,385 18,470 61,876 2,084,391
------------- ------------- ------------- -------------
End of year $ 52,149 $ 38,278 $ 64,645 $ 2,488,118
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1995
(in thousands of dollars)
--------
<TABLE>
<CAPTION>
U.S.
Equity Interest Government International
Index Income Obligations Philip Morris Equity
Fund Fund Fund Stock Fund Fund
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 27,105 $ 24,142 $ 7,253 $ 20,929 $ 673
Employee contributions 7,375 7,305 1,261 6,038 112
Allocated share of Trust
investment activities:
Interest income 2 41,513 2,302 501
Dividend income 1 27,216
Net appreciation
(depreciation) in
fair value of investments 158,624 1,578 247,136 301
------------- ------------- ------------- ------------- -------------
158,627 41,513 3,880 274,853 301
------------- ------------- ------------- ------------- -------------
Total additions 193,107 72,960 12,394 301,820 1,086
------------- ------------- ------------- ------------- -------------
DEDUCTIONS:
Distributions and
withdrawals (28,843) (42,878) (3,400) (28,406) (6)
General and administrative
expenses (256) (395) (76) (234) (8)
------------- ------------- ------------- ------------- -------------
Total deductions (29,099) (43,273) (3,476) (28,640) (14)
------------- ------------- ------------- ------------- -------------
Net transfers among funds (6,174) (3,701) 2,975 (40,432) 8,705
Net transfers between plans 47 271 3 300
Participants' loans (8,072) (7,757) (997) (6,674) (40)
Participants' loan repayments 6,644 7,227 609 5,388 23
------------- ------------- ------------- ------------- -------------
Net additions 156,453 25,727 11,508 231,762 9,760
PLAN EQUITY:
Beginning of year 439,813 605,205 40,047 460,385 -
------------- ------------- ------------- ------------- -------------
End of year $ 596,266 $ 630,932 $ 51,555 $ 692,147 $ 9,760
============= ============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Growth Participants'
Balanced Equity Loan
Fund Fund Account Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 892 $ 897 $ 81,891
Employee contributions 131 203 22,425
Allocated share of Trust
investment activities:
Interest income $ 3,426 47,744
Dividend income 856 978 29,051
Net appreciation
(depreciation) in
fair value of investments 406 (825) 407,220
------------- ------------- ------------- -------------
1,262 153 3,426 484,015
------------- ------------- ------------- -------------
Total additions 2,285 1,253 3,426 588,331
------------- ------------- ------------- -------------
DEDUCTIONS:
Distributions and
withdrawals (163) (38) (2,724) (106,458)
General and administrative
expenses (969)
------------- ------------- ------------- -------------
Total deductions (163) (38) (2,724) (107,427)
------------- ------------- ------------- -------------
Net transfers among funds 21,335 17,292 -
Net transfers between plans 10 631
Participants' loans (120) (100) 23,760 -
Participants' loan repayments 48 63 (20,002) -
------------- ------------- ------------- -------------
Net additions 23,385 18,470 4,470 481,535
PLAN EQUITY:
Beginning of year - - 57,406 1,602,856
------------- ------------- ------------- -------------
End of year $ 23,385 $ 18,470 $ 61,876 $ 2,084,391
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1994
(in thousands of dollars)
---------
<TABLE>
<CAPTION>
U.S.
Equity Interest Government Participants'
Index Income Obligations Philip Morris Loan
Fund Fund Fund Stock Fund Account Total
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 25,514 $ 25,342 $ 5,365 $ 18,127 $ 74,348
Employee contributions 7,463 7,670 1,077 6,363 22,573
Allocated share of Trust
investment activities:
Interest income 3 39,718 1,434 153 $ 3,892 45,200
Dividend income 31 23,427 23,458
Net appreciation
(depreciation) in
fair value of investments 6,005 (567) 12,136 17,574
------------- ------------- ------------- ------------- ------------- -------------
6,039 39,718 867 35,716 3,892 86,232
------------- ------------- ------------- ------------- ------------- -------------
Total additions 39,016 72,730 7,309 60,206 3,892 183,153
------------- ------------- ------------- ------------- ------------- -------------
DEDUCTIONS:
Distributions and
withdrawals (37,150) (60,486) (4,190) (38,379) (5,370) (145,575)
General and administrative
expenses (206) (341) (67) (174) (788)
------------- ------------- ------------- ------------- ------------- -------------
Total deductions (37,356) (60,827) (4,257) (38,553) (5,370) (146,363)
------------- ------------- ------------- ------------- ------------- -------------
Net transfers among funds 3,184 25,329 (1,334) (27,179) -
Net transfers between plans 66 108 5 35 5 219
Participants' loans (6,178) (6,473) (759) (4,535) 17,945 -
Participants' loan repayments 7,442 8,021 587 6,058 (22,108) -
------------- ------------- ------------- ------------- ------------- -------------
Net additions (deductions) 6,174 38,888 1,551 (3,968) (5,636) 37,009
PLAN EQUITY:
Beginning of year 433,639 566,317 38,496 464,353 63,042 1,565,847
------------- ------------- ------------- ------------- ------------- -------------
End of year $ 439,813 $ 605,205 $ 40,047 $ 460,385 $ 57,406 $ 1,602,856
============= ============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
1. General Description of the Plan:
The Philip Morris Deferred Profit-Sharing Plan (the "Plan") is a defined
contribution plan maintained for the benefit of eligible non-union salaried
and hourly employees of Philip Morris Companies Inc. (the "Company"), and
certain of its domestic subsidiaries, including Philip Morris Incorporated
and certain of its subsidiaries ("Philip Morris"), Miller Brewing Company
and certain of its subsidiaries ("Miller"), Philip Morris Capital
Corporation, Philip Morris Management Corp., and certain headquarters
employees of Philip Morris International Inc. (collectively, the
"Participating Companies"). The Plan is designed to provide eligible
employees with an opportunity to share in the profits of their respective
Participating Companies and to invest certain of their funds in a tax-
advantaged manner. Employees of Kraft Foods, Inc. and its subsidiaries are
not eligible to participate in the Plan.
Eligible employees generally may make before-tax and after-tax
contributions beginning on or after the January 1 following their
respective dates of hire. Eligible employees who complete twenty-four
months of accredited service are eligible to share in their Participating
Company's contribution (the "Contribution") as 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
Corporate Employee Benefit Committee of the Company (the "Committee") and
the Senior Vice President, Human Resources and Administration of the
Company (the "Administrator"). The Corporate Employee Plans Investment
Committee of the Company (the "Investment Committee") is responsible for
the selection of the investment options set forth below in which
participants elect to invest their assets in the Plan and monitors the
performance of these investment options. The Committee, the Administrator,
and the Investment Committee are hereinafter collectively referred to as
the "Fiduciaries".
Assets of the Plan are co-invested with the assets of the Philip Morris
Incorporated Deferred Profit-Sharing Plan (the "PMI Plan") and the assets
of the Philip Morris Incorporated Deferred Profit-Sharing Plan for Craft
Employees (the "PMI Craft Plan") in a commingled investment fund known as
the Philip Morris Deferred Profit-Sharing Trust Fund (the "Trust") (see
Note 7).
Prior to June 20, 1995, participants had the option of investing their Plan
Accounts (see Note 4) in ten percent increments in four funds. Effective
July 10, 1995, participants have the option of investing their Plan
Accounts in one percent increments in the following seven funds:
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").
-9-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
INTEREST INCOME FUND - This fund consists primarily of investment
contracts entered into by Bankers Trust Company (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.
U.S. GOVERNMENT OBLIGATIONS FUND - 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 U.S. Government securities
in the U.S. Government Obligations Fund is approximately five years.
Prior to July 15, 1995, the average maturity of the securities in this
fund was 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.
INTERNATIONAL EQUITY FUND - This fund is invested primarily in common
stocks of the foreign companies that make up the Europe, Australia, and
Far East (EAFE) index. The approximate allocation of stocks in the fund
is 62 percent in Europe, three percent in Australia, and 35 percent in
the Far East (including 26 percent in Japan).
BALANCED FUND - This fund is invested primarily in a diversified mix of
domestic and foreign stocks, investment grade bonds, international
bonds, and investment grade money market funds. In general, the assets
of the Balanced Fund may be invested according to the following mix: 40
percent to 70 percent in stocks, 20 percent to 55 percent in bonds, and
zero percent to 25 percent in money market instruments.
GROWTH EQUITY FUND - This fund is invested primarily in stocks of
domestic and foreign companies considered to have better-than-average
prospects for long term growth and with a history of, or commitment to,
regular dividend payments.
None of the foregoing funds guarantees a return to the participant. Prior to
June 1, 1994, participants could change their investment elections three
times during each calendar year. From June 1, 1994 to June 20, 1995,
participants could change their investment elections once each month.
Effective July 10, 1995, participants can change their investment elections
daily.
-10-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
Any Contribution and participant contributions made to a Plan Account
established on and after January 1, 1992, for which no investment
direction has been given are invested in the U.S. Government Obligations
Fund. In all other cases, the Contribution and any participant
contributions made to a Plan Account for which no investment direction
has been given are invested in the Equity Index Fund.
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 13,049 and 14,864 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>
Equity Index Fund 9,085 8,878
Interest Income Fund 7,551 8,041
U.S. Government Obligations Fund 2,468 2,416
Philip Morris Stock Fund 10,171 10,336
International Equity Fund 1,394 544
Balanced Fund 1,355 613
Growth Equity Fund 1,582 752
</TABLE>
Each participant is at all times fully vested in the balance of all of
his or her Accounts, which includes a Company Account and may include
Personal Before-Tax, Personal After-Tax, Rollover and PAYSOP Accounts.
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>
PHILIP MORRIS DEFERRED PROFIT-SHARING 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
$1,027,592,000 and $910,649,000, 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 8).
3. Contributions:
The Contribution for the year is accrued by the Plan based upon the amount
to be funded each year in accordance with the defined contribution formula
noted below. Participants' contributions are recorded in the period in
which they are withheld by the Participating Companies.
-12-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
The Contribution on behalf of eligible employees of Philip Morris who
have met the twenty-four month service requirement is an amount equal to
the lesser of (1) three percent of the Operating Profit (defined below)
of Philip Morris, less the amounts allocated for participants in the PMI
Plan and the PMI Craft Plan or (2) 15 percent of the aggregate
participant compensation for such year of the participants employed by
Philip Morris among whom the Contribution is to be allocated. The
Contribution on behalf of eligible employees of Miller who have met the
twenty-four month service requirement is an amount equal to the lesser of
(1) three percent of the Operating Profit of Miller, or (2) 15 percent of
the aggregate participant compensation for such year of the participants
employed by Miller among whom the Contribution is to be allocated.
The Contribution by Philip Morris, expressed as a uniform percentage of
aggregate participant compensation, is allocated ratably among
participants (the "Philip Morris Contribution Percentage") according to
their individual compensation. The Contribution by Miller, expressed as a
uniform percentage of aggregate participant compensation, is allocated
ratably among participants (the "Miller Contribution Percentage")
according to their individual compensation.
The Contribution on behalf of eligible employees of any other of the
Participating Companies is the greater of (1) the Philip Morris
Contribution Percentage, or (2) the Miller Contribution Percentage,
multiplied in either case by aggregate participant compensation for such
year of the participants of these other Participating Companies among
whom the contribution is to be allocated. The aggregate of the
Contribution to the Plan and the contributions to the PMI Plan and the
PMI Craft Plan may not be more than three percent of consolidated
earnings of the Company and its subsidiaries before income taxes and
cumulative effect of any accounting change and provisions for deferred
profit-sharing and incentive compensation plans.
Operating Profit is defined as the earnings of Philip Morris or Miller,
as the case may be, before cumulative effect of any accounting changes,
discontinued operations and extraordinary items, interest and other debt
expense, income taxes, amortization of goodwill, minority interest,
unallocated corporate expenses, the amount of any deduction used in
computing such earnings for the Contribution to the Plan and the
contributions to the PMI Plan and the PMI Craft Plan and contributions to
any incentive compensation plan.
However, due to limitations under the Internal Revenue Code of 1986, as
amended (the "Code"), certain amounts for highly compensated employees
are not contributed to the Trust but are instead recorded as liabilities
of the Participating Companies.
No contribution is required from any participant under the Plan.
Participants may make contributions on a before-tax and after-tax basis
to the Plan. If a participant has not made the maximum after-tax
contribution, he or she may make an additional lump sum contribution,
subject to certain statutory limits. The percentage of compensation
available for these contributions may vary from year-to-year and by
Participating Company. The
-13-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
aggregate contributions actually made by participants may not cause the
Plan to violate limitations on such contributions set forth in 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
contribution was limited to $9,500; for 1997, a participant's before-tax
contribution will be limited to $9,500, with a limitation in each year of
eight percent of compensation (11 percent in the case of employees of
Miller) on the total amount of before-tax and after-tax contributions.
While the Participating Companies have not expressed any intent to
discontinue making the Contribution, they are free to do so at any time.
The Contribution 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 a Contribution for the year in which the Change
of Control occurs and for two years thereafter at least equal to the
lesser of (a) the percentage of participants' compensation that was
contributed to the Plan for the year prior to the year in which the
Change of Control occurs or (b) 10 percent of the participants'
applicable annual compensation.
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>
Company Account Contributions
Personal Before-Tax Account Before-tax contributions
Personal After-Tax Account After-tax contributions
Rollover Account Amounts transferred,
directly or indirectly, from
another plan qualified under
Section 401(a) of the Code
PAYSOP Account The account balance
transferred from the Philip
Morris Employee Stock
Ownership Plan
Loan Account Outstanding loans obtained
from the Plan
</TABLE>
At the end of each month (effective July 10, 1995, each business day),
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
Company, Personal Before-Tax, Personal After-Tax, Rollover and PAYSOP
Accounts on the basis of their proportionate share in each investment
fund.
-14-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
5. Withdrawals and Distributions:
Participants may make withdrawals against their Company, Personal
Before-Tax, Personal After-Tax, Rollover and PAYSOP Accounts in
accordance with the provisions outlined in the Plan.
All withdrawals by participants are subject to approval of the Committee
(or other administrator of the Plan acting pursuant to the Committee's
delegated authority) and will not be permitted if they would have the
effect of disqualifying the Plan and the related Trust from exemption
from taxation.
Distributions are made only in the event that a person ceases to be a
participant. Upon termination of employment, including retirement, a
participant has numerous options available, as described in the Plan,
with respect to his or her Company, Personal Before-Tax, Personal
After-Tax, Rollover and PAYSOP Accounts. Normally, distributions are made
within 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. Participants' Loans:
The loan program permits participants to borrow from their Company,
Personal Before-Tax, Personal After-Tax, Rollover and PAYSOP Accounts
under the Plan in accordance with the provisions outlined in the Plan.
A participant's Loan Account equals the principal amount of his or her
loans outstanding. The principal amount of loan repayments reduce the
Loan Account and are added back to the participant's Accounts originally
used as the source of the loan. The repaid amount (including interest) is
reinvested in the funds according to the participant's current investment
authorization.
Participants' loans are carried at the original principal amount less
principal repayments. Participants' loan repayments receivable represent
amounts withheld by the Participating Companies from participants'
compensation and not yet remitted to the Plan. Amounts to be disbursed
under employee loan agreements are recorded as undistributed
participants' loans as of the loan agreement date.
7. Investments Held by the Trust:
In 1996 and 1995, $1,014,000 and $631,000 were transferred into the Plan,
net of transfers out of the Plan, respectively, from the PMI Plan and the
PMI Craft Plan as a result of employees being transferred between hourly
and salaried status.
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, were:
-15-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars)
(continued)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Trust 68% 68%
Equity Index Fund 70% 70%
Interest Income Fund 65% 66%
U.S. Government Obligations Fund 44% 45%
Philip Morris Stock Fund 72% 73%
International Equity Fund 87% 89%
Balanced Fund 91% 90%
Growth Equity Fund 87% 90%
Participants' Loan Account 51% 53%
</TABLE>
The Plan's approximate allocated share of the Trust's investment
activities for the years ended December 31, 1996, 1995 and 1994, was 70
percent, 71 percent and 70 percent, respectively.
Taxes and fees incurred by the Trust and most of the costs of
administering the Plan and Trust paid to third parties are paid 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>
Equity Index Fund 0.04% 0.05%
Interest Income Fund 0.06% 0.06%
U.S. Government Obligations Fund 0.16% 0.17%
Philip Morris Stock Fund 0.04% 0.04%
International Equity Fund 0.35% 0.08%
Balanced Fund 0.06% 0.00%
Growth Equity Fund 0.08% 0.00%
</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 $1,017,594 $896,063
Equity Index Fund
GEBT Equity Index Fund $1,035,144 $819,834
Interest Income Fund
Commonwealth Life Insurance Co. $149,205
</TABLE>
The GEBT Equity Index Fund currently includes Common Stock.
-16-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING 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 $663,661 and $595,002) $ 1,035,144 $ 819,834
Interest Income Fund:
Investment contracts (at contract value)
(cost approximates contract value) 998,637 878,131
Short-term temporary investments
(cost approximates fair value) 58,829 45,557
U.S. Government Obligations Fund:
Federal agency obligations
(cost $12,392 and $2,026) 12,212 2,048
Government securities
(cost $100,977 and $81,944) 100,773 84,574
Short-term temporary investments
(cost approximates fair value) 1,040 8,532
Philip Morris Stock Fund:
Common stock
(cost $517,740 and $413,322) 1,017,594 896,063
Short-term temporary investments
(cost approximates fair value) 24,282 14,433
International Equity Fund:
International Equity Fund
(cost $29,618 and $9,831) 31,548 10,194
Balanced Fund:
Balanced Fund
(cost $53,125 and $24,452) 55,832 24,865
Growth Equity Fund:
Growth Equity Fund
(cost $41,359 and $20,349) 42,018 19,431
Other investments:
Participants' Loan Account:
Loans to participants 126,525 117,604
-------------- --------------
Total investments 3,504,434 2,921,266
Receivables:
Investments sold 8,388 149
Interest income 9,211 7,741
Dividend income 10,826 10,040
-------------- --------------
Total assets 3,532,859 2,939,196
Liabilities:
Investments purchased 6,116 5,013
Other payables 1,527 118
-------------- --------------
Net assets $ 3,525,216 $ 2,934,065
============== ==============
</TABLE>
-17-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING 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 $ 144,224 $ 127,873 $ 156,080
Employee contributions 38,823 33,393 29,484
Investment activities:
Interest 72,270 69,274 63,760
Dividends 48,968 39,053 31,039
Interest on participant loans 8,642 7,005 6,379
---------- ---------- ----------
129,880 115,332 101,178
Net appreciation
in fair value of investments 394,208 563,777 22,530
---------- ---------- ----------
Net investment activities 524,088 679,109 123,708
Deductions:
Distributions and withdrawals (114,236) (149,624) (267,720)
General and administrative
expenses (1,748) (1,466) (1,194)
---------- ---------- ----------
Increase in Trust net assets 591,151 689,285 40,358
Net assets:
Beginning of year 2,934,065 2,244,780 2,204,422
---------- ---------- ----------
End of year $3,525,216 $2,934,065 $2,244,780
========== ========== ==========
</TABLE>
-18-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars, except per unit data)
(continued)
The number of employee participation units and the net asset value per unit for
the funds at December 31, 1996 and 1995, were:
<TABLE>
<CAPTION>
U.S.
Equity Interest Government International Growth
Index Income Obligations Philip Morris Equity Balanced Equity
Fund Fund Fund Stock Fund Fund Fund Fund
------------ ------------ ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996: Net Assets $ 1,035,144 $ 1,057,368 $ 116,520 $ 1,059,496 $ 31,548 $ 55,832 $ 42,018
Number of
participation units 146,462 309,144 44,421 138,398 28,324 44,725 34,944
Net asset value
per unit $ 7.0677 $ 3.4203 $ 2.6231 $ 7.6554 $ 1.1138 $ 1.2483 $ 1.2024
1995:
Net Assets $ 819,809 $ 923,894 $ 96,953 $ 920,488 $ 10,195 $ 25,000 $ 19,433
Number of
participation units 142,492 287,928 38,587 156,242 10,047 23,140 18,627
Net asset value
per unit $ 5.7534 $ 3.2088 $ 2.5126 $ 5.8914 $ 1.0147 $ 1.0804 $ 1.0433
<CAPTION>
Participants'
Loan
Account Total
------------- ------------
<S> <C> <C>
1996: Net Assets $ 127,290 $ 3,525,216
Number of
participation units
Net asset value
per unit
1995:
Net Assets $ 118,293 $ 2,934,065
Number of
participation units
Net asset value
per unit
</TABLE>
-19-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars)
(continued)
8. 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>
U.S.
Equity Government International Growth
Index Obligations Philip Morris Equity Balanced Equity
Fund Fund Stock Fund Fund Fund Fund Total
---------- ----------- -------------- ------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996
- ----
Realized gains:
Proceeds $ 154,267 $ 90,198 $ 912,475 $ 13,482 $ 17,103 $ 19,723 $ 1,207,248
Cost 107,599 90,187 732,182 13,036 16,517 19,686 979,207
---------- ----------- -------------- ------------- ---------- ---------- -----------
Net realized gains 46,668 11 180,293 446 586 37 228,041
---------- ----------- -------------- ------------- ---------- ---------- -----------
Unrealized appreciation
(depreciation):
Beginning of year 224,832 2,652 482,740 364 413 (919) 710,082
End of year 371,483 (384) 499,853 1,930 2,708 659 876,249
---------- ----------- -------------- ------------- ---------- ---------- -----------
Increase (Decrease) 146,651 (3,036) 17,113 1,566 2,295 1,578 166,167
---------- ----------- -------------- ------------- ---------- ---------- -----------
Net appreciation
(depreciation) in fair
value of investments $ 193,319 $ (3,025) $ 197,406 $ 2,012 $ 2,881 $ 1,615 $ 394,208
========== =========== ============== ============= ========== ========== ===========
1995
- ----
Realized gains (losses):
Proceeds $ 86,846 $ 170,836 $ 237,900 $ 1,592 $ 1,848 $ 2,211 $ 501,233
Cost 73,684 170,697 200,477 1,616 1,817 2,205 450,496
---------- ----------- -------------- ------------- ---------- ---------- -----------
Net realized gains
(losses) 13,162 139 37,423 (24) 31 6 50,737
---------- ----------- -------------- ------------- ---------- ---------- -----------
Unrealized appreciation
(depreciation):
Beginning of year 9,957 (753) 187,838 - - - 197,042
End of year 224,832 2,652 482,740 364 413 (919) 710,082
---------- ----------- -------------- ------------- ---------- ---------- -----------
Increase (Decrease) 214,875 3,405 294,902 364 413 (919) 513,040
---------- ----------- -------------- ------------- ---------- ---------- -----------
Net appreciation
(depreciation) in fair
value of investments $ 228,037 $ 3,544 $ 332,325 $ 340 $ 444 $ (913) $ 563,777
========== =========== ============== ============= ========== ========== ===========
1994
- ----
Realized gains (losses):
Proceeds $ 712,663 $ 195,232 $ 161,885 - - - $ 1,069,780
Cost 481,914 195,625 142,757 - - - 820,296
---------- ----------- -------------- ------------- ---------- ---------- -----------
Net realized gains
(losses) 230,749 (393) 19,128 - - - 249,484
---------- ----------- -------------- ------------- ---------- ---------- -----------
Unrealized appreciation
(depreciation):
Beginning of year 232,189 78 191,729 - - - 423,996
End of year 9,957 (753) 187,838 - - - 197,042
---------- ----------- -------------- ------------- ---------- ---------- -----------
(Decrease) (222,232) (831) (3,891) - - - (226,954)
---------- ----------- -------------- ------------- ---------- ---------- -----------
Net appreciation
(depreciation) in fair
value of investments $ 8,517 $ (1,224) $ 15,237 - - - $ 22,530
========== =========== ============== ============= ========== ========== ===========
</TABLE>
-20-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(concluded)
9. Tax Status:
The U.S. Treasury Department has determined that the Plan, as amended and
in effect as of June 1, 1994, 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 the
Contribution and before-tax contributions made on their behalf by the
Participating Companies, nor on earnings credited to their Accounts until
withdrawn or distributed.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporate Employee Benefit Committee of Philip Morris Companies Inc., having
administrative responsibility of the Plan, has duly caused this annual report to
be signed by the undersigned thereunto duly authorized.
PHILIP MORRIS DEFERRED
PROFIT-SHARING PLAN
(Name of Plan)
By /s/ TIMOTHY A. SOMPOLSKI
--------------------------------------
Timothy A. Sompolski, Chairman,
Corporate Employee Benefit Committee
of Philip Morris Companies Inc.
Date: April 14, 1997
-22-
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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 -- 29.54%
GEBT Equity Index Fund -- 29.54% 608,639 $ 663,660,884 $1,035,143,779
-------------- --------------
Total Equity Index Fund 663,660,884 1,035,143,779
-------------- --------------
INTEREST INCOME FUND -- 30.18%
Investment Contracts -- 28.50%
(The amounts included in Column D for the
investment contracts represent contract value,
see Note 2.)
Participation Contracts with Institutions -- 18.00%
Prudential Life Insurance Company
No. 5905-211 8.29%
matures 2/1/1997 436,696 436,696 436,696
Bank of America
No. SP1 212 9.47%
matures 7/31/1997 20,874,552 20,874,552 20,874,552
Hartford Life Insurance Company
No. 9067 8.60%
matures 9/30/1997 13,612,945 13,612,945 13,612,945
Prudential Life Insurance Company
No. 5905-216 9.45%
matures 9/30/1997 10,230,209 10,230,209 10,230,209
Commonwealth Life Insurance Company
No. 00343 FR 8.68%
matures 2/28/1998 23,596,288 23,596,288 23,596,288
New York Life Insurance Company
No. 06121 8.50%
matures 3/1/1998 55,054,606 55,054,606 55,054,606
Principal Mutual Life Insurance Company
No. 74811-2 8.87%
matures 5/1/1998 73,704,208 73,704,208 73,704,208
J P Morgan
No. 95-06 8.10%
matures 9/25/1998 16,561,600 16,561,600 16,561,600
Allstate Life Insurance Company
No. 5421 6.47%
matures 4/7/1999 26,448,877 26,448,877 26,448,877
New York Life Insurance Company
No. 06989 7.33%
matures 7/31/1999 23,866,538 23,866,538 23,866,538
Principal Mutual Life Insurance Company
No. 3-74811-4 5.82%
matures 9/6/1999 35,644,859 35,644,859 35,644,859
</TABLE>
S-1
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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
- --------------------------------- --------------- ----------- ----------
Participation Contracts with Institutions (continued)
<S> <C> <C> <C>
Jackson National Life Insurance Company
No. G-1036 6.91%
matures 2/29/2000 20,482,189 $ 20,482,189 $ 20,482,189
Security Life of Denver
No. FA 0147 9.10%
matures 8/1/2000 1,785,076 1,785,076 1,785,076
Continental Assurance Company
No. GP 24024 6.63%
matures 8/31/2001 25,021,994 25,021,994 25,021,994
Sun America Life Insurance Company
No. 4697 6.67%
matures 12/31/2001 25,022,123 25,022,123 25,022,123
New York Life Insurance Company
No. 20012 6.47% 32,251,867 32,251,867 32,251,867
Metropolitan Life Insurance Company
No. 12861 5.92% 67,985,706 67,985,706 67,985,706
Massachusetts Mutual Life Insurance
No. 10403 6.38% 102,493,740 102,493,740 102,493,740
John Hancock Mutual Life Insurance
No. 6435 5.76% 55,531,615 55,531,615 55,531,615
---------------- ----------------
Total Contracts 630,605,688 630,605,688
---------------- ----------------
Financial Institution Pools -- 10.50%
National Westminster Bank
No. SAM 0104A 6.09%
GEBT Short-Term Investment Fund 510,395 510,395
Federal National Mortgage Association Remic
matures 6/25/2005 6.25% 1,806,687 1,806,687
Federal National Mortgage Association Remic
matures 8/25/2005 6.00% 392,914 392,914
Federal National Mortgage Association Remic
matures 8/25/2012 5.60% 1,203,048 1,203,048
Federal National Mortgage Association Remic
matures 8/25/2013 6.70% 3,085,997 3,085,997
Federal National Mortgage Association Remic
matures 9/25/2015 6.00% 1,795,603 1,795,603
Federal National Mortgage Association Remic
matures 6/25/2016 5.70% 3,331,471 3,331,471
Federal National Mortgage Association Remic
matures 7/25/2016 5.65% 1,786,660 1,786,660
Federal National Mortgage Association Remic
matures 1/25/2020 7.00% 651,696 651,696
Federal National Mortgage Association Pool
matures 7/1/2008 7.00% 794,663 794,663
Federal National Mortgage Association Pool
matures 8/1/2008 7.00% 786,155 786,155
</TABLE>
S-2
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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
- --------------------------------- --------------- ----------- ----------
Financial Institution Pools (continued)
<S> <C> <C> <C>
National Westminster Bank (continued)
Federal National Mortgage Association Pool
matures 1/1/2009 6.50% $ 130,951 $ 130,951
Federal National Mortgage Association Pool
matures 2/1/2009 6.50% 467,971 467,971
Federal National Mortgage Association Pool
matures 3/1/2009 6.50% 156,592 156,592
Federal National Mortgage Association Pool
matures 5/1/2009 6.50% 970,049 970,049
Government National Mortgage Association Pool
matures 12/15/2023 6.50% 216,921 216,921
Government National Mortgage Association Pool
matures 3/15/2024 6.50% 71,552 71,552
Government National Mortgage Association Pool
matures 4/15/2024 6.50% 1,355,747 1,355,747
Government National Mortgage Association Pool
matures 5/15/2024 6.50% 974,030 974,030
Federal Home Loan Mtg. Corporation
matures 8/15/2005 6.25% 903,623 903,623
Federal Home Loan Mtg. Corporation
matures 4/1/2008 7.00% 97,151 97,151
Federal Home Loan Mtg. Corporation
matures 8/15/2008 6.50% 1,291,763 1,291,763
Federal Home Loan Mtg. Corporation
matures 9/1/2008 6.50% 35,158 35,158
Federal Home Loan Mtg. Corporation
matures 12/1/2008 6.50% 37,183 37,183
Federal Home Loan Mtg. Corporation
matures 2/1/2009 6.50% 1,548,450 1,548,450
Federal Home Loan Mtg. Corporation
matures 6/1/2009 6.50% 67,189 67,189
Federal Home Loan Mtg. Corporation
matures 10/1/2010 7.00% 199,105 199,105
Federal Home Loan Mtg. Corporation
matures 2/1/2011 6.50% 105,824 105,824
Federal Home Loan Mtg. Corporation
matures 2/1/2011 7.00% 603,612 603,612
Federal Home Loan Mtg. Corporation
matures 3/1/2011 7.00% 970,059 970,059
Federal Home Loan Mtg. Corporation
matures 4/15/2011 5.00% 1,350,351 1,350,351
Federal Home Loan Mtg. Corporation
matures 12/15/2015 6.50% 2,203,372 2,203,372
Federal Home Loan Mtg. Corporation
matures 6/15/2016 7.00% 243,269 243,269
Federal Home Loan Mtg. Corporation
matures 1/15/2018 6.00% 3,368,886 3,368,886
---------- ----------
</TABLE>
S-3
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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 $ 33,514,097 $ 33,514,097
---------------- ----------------
Trans America Life Insurance Company
No. 76595 6.82%
GEBT Short-Term Investment Fund 18,717,784 18,717,784
U. S. Treasury Note
matures 6/30/1998 6.25% 3,497,979 3,497,979
U. S. Treasury Note
matures 9/30/1998 6.00% 4,427,208 4,427,208
U. S. Treasury Note
matures 12/31/1998 5.75% 4,504,186 4,504,186
U. S. Treasury Note
matures 5/15/1999 6.38% 27,843,172 27,843,172
U. S. Treasury Note
matures 11/15/1999 5.88% 2,290,790 2,290,790
U. S. Treasury Note
matures 6/30/2001 6.63% 6,174,477 6,174,477
U. S. Treasury Note
matures 9/30/2001 6.38% 697,972 697,972
U. S. Treasury Note
matures 12/31/2001 6.13% 8,989,315 8,989,315
U. S. Treasury Note
matures 5/15/2006 6.88% 3,982,173 3,982,173
Federal National Mortgage Association Pool
matures 11/1/2002 7.00% 139,371 139,371
Federal National Mortgage Association Pool
matures 4/1/2003 7.00% 377,578 377,578
Federal National Mortgage Association Pool
matures 5/1/2003 7.00% 480,579 480,579
Federal National Mortgage Association Pool
matures 6/1/2003 7.00% 855,028 855,028
Federal National Mortgage Association Pool
matures 4/1/2026 7.00% 326,446 326,446
Federal National Mortgage Association Pool
matures 5/1/2026 7.00% 472,857 472,857
Federal National Mortgage Association Pool
matures 6/1/2026 7.00% 454,543 454,543
Federal National Mortgage Association Pool
matures 7/1/2026 7.00% 25,244 25,244
Federal National Mortgage Association Pool
matures 8/1/2026 7.00% 84,020 84,020
Federal National Mortgage Association Pool
matures 9/1/2026 7.00% 417,536 417,536
Federal National Mortgage Association Pool
matures 10/1/2026 7.00% 613,078 613,078
</TABLE>
S-4
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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% $ 2,399,547 $ 2,399,547
Federal National Mortgage Association
matures 9/1/2021 8.00% 6,440,714 6,440,714
Government National Mortgage Association
matures 2/1/2021 9.00% 1,531,792 1,531,792
Federal Home Loan Mtg. Corporation
matures 5/1/2007 7.50% 2,821,730 2,821,730
Federal Home Loan Mtg. Corporation
matures 7/1/2026 6.50% 5,941,607 5,941,607
--------------- ---------------
Total Trans America Life Insurance Company Contract 104,506,726 104,506,726
--------------- ---------------
Commonwealth Life Insurance Company No. ADA00201TR, 6.14%,
Peoples Life Insurance Company No. BDA00292TR, 6.37% &
Trans America Life Insurance Company No. 76587, 5.62%
GEBT Short-Term Investment Fund 42,861,135 42,861,135
U. S. Treasury Note
matures 6/30/1998 6.25% 2,103,528 2,103,528
U. S. Treasury Note
matures 9/30/1998 6.00% 10,531,318 10,531,318
U. S. Treasury Note
matures 12/31/1998 5.75% 10,263,234 10,263,234
U. S. Treasury Note
matures 5/15/1999 6.38% 23,492,434 23,492,434
U. S. Treasury Note
matures 11/15/1999 5.88% 16,671,271 16,671,271
U. S. Treasury Note
matures 2/29/2000 7.13% 2,751,748 2,751,748
U. S. Treasury Note
matures 6/30/2001 6.63% 12,891,773 12,891,773
U. S. Treasury Note
matures 9/30/2001 6.38% 1,625,724 1,625,724
U. S. Treasury Note
matures 12/31/2001 6.13% 21,116,267 21,116,267
U. S. Treasury Note
matures 5/15/2006 6.88% 577,092 577,092
U. S. Treasury Note
matures 7/15/2006 7.00% 866,963 866,963
Federal National Mortgage Association
matures 1/1/2000 6.00% 811,411 811,411
Federal National Mortgage Association
matures 11/23/2001 6.35% 413,409 413,409
Federal National Mortgage Association
matures 9/9/2003 5.97% 252,085 252,085
</TABLE>
S-5
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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
matures 10/25/2004 8.40% $ 1,041,722 $ 1,041,722
Federal National Mortgage Association
matures 11/10/2004 8.63% 946,427 946,427
Federal National Mortgage Association
matures 9/1/2021 8.00% 13,038,238 13,038,238
Federal National Mortgage Association
matures 10/1/2021 9.50% 509,047 509,047
Federal National Mortgage Association
matures 12/1/2002 6.00% 890,285 890,285
Federal National Mortgage Association Pool
matures 2/1/2003 6.00% 83,751 83,751
Federal National Mortgage Association Pool
matures 3/1/2003 6.00% 611,686 611,686
Federal National Mortgage Association Pool
matures 4/1/2003 6.00% 290,350 290,350
Federal National Mortgage Association Pool
matures 1/1/2009 6.00% 384,227 384,227
Federal National Mortgage Association Pool
matures 2/1/2009 6.00% 452,169 452,169
Federal National Mortgage Association Pool
matures 7/1/2009 6.00% 697,749 697,749
Federal National Mortgage Association Pool
matures 5/1/2023 8.00% 3,168,661 3,168,661
Federal National Mortgage Association Pool
matures 12/1/2023 6.50% 500,889 500,889
Federal National Mortgage Association Pool
matures 2/1/2024 6.50% 228,556 228,556
Federal National Mortgage Association Pool
matures 2/1/2024 7.00% 2,737,974 2,737,974
Federal National Mortgage Association Pool
matures 4/1/2024 6.50% 137,943 137,943
Federal National Mortgage Association Pool
matures 5/1/2024 6.50% 510,452 510,452
Federal National Mortgage Association Pool
matures 6/1/2024 6.50% 571,249 571,249
Federal National Mortgage Association Pool
matures 7/1/2025 7.00% 654,547 654,547
Federal National Mortgage Association Pool
matures 8/1/2025 7.00% 2,727,673 2,727,673
Federal National Mortgage Association Pool
matures 4/1/2026 7.00% 505,887 505,887
Federal National Mortgage Association Pool
matures 5/1/2026 7.00% 98,491 98,491
</TABLE>
S-6
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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 6/1/2026 7.00% $ 817,690 $ 817,690
Federal National Mortgage Association Pool
matures 9/1/2026 7.00% 93,053 93,053
Federal National Mortgage Association Pool
matures 10/1/2026 7.00% 317,589 317,589
Government National Mortgage Association Pool
matures 11/15/2017 9.50% 4,516,642 4,516,642
Government National Mortgage Association Pool
matures 9/15/2019 9.00% 110,643 110,643
Government National Mortgage Association Pool
matures 11/15/2019 9.00% 147,676 147,676
Government National Mortgage Association Pool
matures 1/15/2020 9.00% 344,423 344,423
Government National Mortgage Association Pool
matures 6/15/2020 9.00% 209,849 209,849
Government National Mortgage Association Pool
matures 9/15/2020 9.00% 129,279 129,279
Government National Mortgage Association Pool
matures 4/15/2021 9.00% 111,113 111,113
Government National Mortgage Association Pool
matures 5/15/2021 9.00% 238,682 238,682
Government National Mortgage Association Pool
matures 8/15/2021 9.00% 337,372 337,372
Government National Mortgage Association Pool
matures 9/15/2021 9.00% 228,213 228,213
Government National Mortgage Association Pool
matures 10/20/2021 9.50% 792,202 792,202
Government National Mortgage Association Pool
matures 8/15/2022 9.00% 196,819 196,819
Government National Mortgage Association Pool
matures 5/15/2024 6.50% 1,505,405 1,505,405
Government National Mortgage Association Pool
matures 7/15/2024 6.50% 2,004,744 2,004,744
Government National Mortgage Association Pool
matures 1/15/2025 9.00% 657,857 657,857
Government National Mortgage Association
matures 2/1/2021 9.00% 495,665 495,665
Government National Mortgage Association
matures 2/1/2021 9.50% 101,751 101,751
Federal Home Loan Mtg. Corporation
matures 11/15/2003 5.50% 5,647,444 5,647,444
Federal Home Loan Mtg. Corporation
matures 6/1/2008 7.00% 1,804,435 1,804,435
</TABLE>
S-7
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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 11/1/2008 6.00% $ 3,051,663 $ 3,051,663
Federal Home Loan Mtg. Corporation
matures 3/1/2009 6.50% 1,122,434 1,122,434
Federal Home Loan Mtg. Corporation
matures 4/1/2009 6.50% 115,718 115,718
Federal Home Loan Mtg. Corporation
matures 10/1/2011 6.50% 1,756,797 1,756,797
Federal Home Loan Mtg. Corporation
matures 12/15/2019 6.00% 408,951 408,951
Federal Home Loan Mtg. Corporation
matures 4/15/2021 9.00% 1,261,712 1,261,712
Federal Home Loan Mtg. Corporation
matures 3/1/2026 6.50% 448,551 448,551
Federal Home Loan Mtg. Corporation
matures 7/1/2026 6.50% 1,105,502 1,105,502
Banc One Auto TR
matures 11/15/1997 6.85% 211,669 211,669
Premier Auto TR
matures 2/4/1999 7.15% 2,303,900 2,303,900
Bayerische Landesbank Girozentrale
matures 7/19/1999 6.55% 2,778,472 2,778,472
Standard Credit Card Master TR
matures 6/7/2000 6.75% 959,468 959,468
Standard Credit Card Master TR
matures 4/7/2001 6.80% 479,178 479,178
Asian Development Bank NTS
matures 5/2/2001 8.50% 1,796,214 1,796,214
American Express Master TR
matures 7/15/2001 5.38% 1,029,802 1,029,802
MBNA Master Credit Card TR
matures 1/15/2003 6.60% 1,937,553 1,937,553
Japan Fin Corp
matures 4/27/2005 7.38% 1,767,718 1,767,718
International BK for Recon & Dev
matures 7/21/2005 6.38% 1,965,011 1,965,011
Bayerische Landesbank Girozentrale
matures 2/1/2006 6.17% 2,019,112 2,019,112
KFW Int'l Fin Inc
matures 6/1/2006 8.20% 1,554,384 1,554,384
General Electric Cap Corp
matures 7/24/2008 8.50% 988,841 988,841
Landesbank Hessen
matures 11/10/2008 6.25% 831,268 831,268
</TABLE>
S-8
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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)
International BK for Recon & Dev
matures 3/1/2026 8.88% $ 1,290,359 $ 1,290,359
----------------- ----------------
Total Commonwealth, Peoples & Trans America Contracts 230,010,188 230,010,188
----------------- ----------------
Total Pools 368,031,011 368,031,011
----------------- ----------------
Total Investment Contracts 998,636,699 998,636,699
----------------- ----------------
Short-Term Investments -- 1.68%
GEBT Short-Term Investment Fund 58,828,795 58,828,795 58,828,795
----------------- ----------------
Total Interest Income Fund 1,057,465,494 1,057,465,494
----------------- ----------------
U.S. GOVERNMENT OBLIGATIONS FUND -- 3.25%
Government Securities -- 2.88%
United States Treasury Notes
7.25% due 2/15/1998 9,000,000 9,078,693 9,147,690
United States Treasury Notes
7.125% due 9/30/1999 16,125,000 16,723,613 16,571,018
United States Treasury Notes
7.125% due 2/29/2000 16,625,000 17,272,480 17,115,936
United States Treasury Notes
5.875% due 6/30/2000 16,700,000 16,570,570 16,574,750
United States Treasury Notes
5.625% due 2/28/2001 3,000,000 2,961,094 2,940,480
United States Treasury Notes
6.375% due 8/15/2002 18,550,000 18,577,805 18,671,688
United States Treasury Notes
6.50% due 5/15/2005 11,750,000 11,836,940 11,828,960
United States Treasury Notes
6.50% due 8/15/2005 5,000,000 5,046,563 5,032,050
United States Treasury Notes
6.50% due 10/15/2006 2,875,000 2,909,590 2,890,726
----------------- ----------------
Total Government Securities 100,977,348 100,773,298
----------------- ----------------
Federal Agency Obligations -- 0.35%
Federal Home Loan Mtg. Corporation
SER B 7.75% due 1/27/1997 10,520,000 2,025,938 2,002,500
Federal Home Loan Mtg. Corporation
SER A 5.50% due 2/2/2001 2,000,000 10,366,174 10,209,344
----------------- ----------------
</TABLE>
S-9
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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 $ 12,392,112 $ 12,211,844
----------------- -----------------
Short-Term Investments -- 0.02%
GEBT Short-Term Investment Fund 1,040,405 1,040,405 1,040,405
----------------- -----------------
Total U.S. Government Obligations Fund 114,409,865 114,025,547
----------------- -----------------
PHILIP MORRIS STOCK FUND -- 29.73%
Common Stock -- 29.04%
Tobacco -- 29.04%
Philip Morris Companies Inc. 9,005,254 * 517,740,367 1,017,593,702
Short-Term Investments -- 0.69%
GEBT Short-Term Investment Fund 24,281,628 24,281,628 24,281,628
----------------- -----------------
Total Philip Morris Stock Fund 542,021,995 1,041,875,330
----------------- -----------------
* 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.
INTERNATIONAL EQUITY FUND -- 0.90%
Japanese Equity Index Fund -- 0.24% 97,655 9,511,364 8,315,278
Non Japanese Equity Index Fund -- 0.66% 158,244 20,106,362 23,232,728
----------------- -----------------
Total International Equity Index Fund 29,617,726 31,548,006
----------------- -----------------
BALANCED FUND -- 1.59%
Balanced Fund -- 1.59% 4,668,274 53,124,737 55,832,553
----------------- -----------------
Total Balanced Fund 53,124,737 55,832,553
----------------- -----------------
GROWTH EQUITY FUND -- 1.20%
Growth Equity Fund -- 1.20% 3,481,201 41,358,537 42,018,091
----------------- -----------------
Total Growth Equity Fund 41,358,537 42,018,091
----------------- -----------------
</TABLE>
S-10
<PAGE>
PHILIP MORRIS DEFERRED PROFIT-SHARING TRUST FUND
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>
PARTICIPANTS' LOAN ACCOUNT -- 3.61%
Loans to Participants -- 3.61% 126,524,962 $ 126,524,962 $ 126,524,962
---------------- ----------------
Total Participants' Loan Account 126,524,962 126,524,962
---------------- ----------------
TOTAL INVESTMENTS $ 2,628,184,200 $ 3,504,433,762
================ ================
</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. 33-10218) of the
Philip Morris Deferred Profit-Sharing Plan of our report dated April 11, 1997,
on our audits of the financial statements of the Philip Morris Deferred
Profit-Sharing 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.
New York, New York
April 14, 1997
