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Previous: PHILIP MORRIS COMPANIES INC, 11-K, 1998-05-22 |
Next: PHILIP MORRIS COMPANIES INC, 11-K, 1998-05-22 |
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM 11-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page (s)
--------
<S> <C>
Report of Independent Accountants....................... 3
Financial Statements:
Statements of Financial Condition as of December 31,
1997 and 1996........................................ 4-5
Statements of Income and Changes in Plan Equity for
the years ended December 31, 1997, 1996 and 1995..... 6-8
Notes to Financial Statements......................... 9-21
Signatures.............................................. 22
Schedules:
Schedule I - Investments as of December 31, 1997...... S-1-8
</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 (the "Plan") as of December 31, 1997
and 1996, and the related statements of income and changes in plan equity for
each of the three years in the period ended December 31, 1997 and the schedule
of investments as of December 31, 1997. 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. 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,
1997 and 1996, and the income and changes in plan equity for each of the three
years in the period ended December 31, 1997, 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.
/s/ COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 27, 1998
-3-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
STATEMENT OF FINANCIAL CONDITION
as of December 31, 1997
(in thousands of dollars)
______
<TABLE>
<CAPTION>
Diversified
Equity Interest Government Participants'
Index Income Securities Philip Morris Balanced Loan
Fund Fund Fund Stock Fund Fund Account Total
------------- ---------- ------------- ---------------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Allocated share of
Trust net assets $ 8,140 $ 12,672 $ 1,537 $ 130,747 $ 791 $ 2,186 $ 156,073
Interfund receivables
(payables) 36 392 (428) -
------------ ---------- ----------- ------------- --------- ------------ ---------
Total assets 8,176 13,064 1,537 130,319 791 2,186 156,073
------------ ---------- ----------- ------------- --------- ------------ ---------
LIABILITIES:
Distributions and
withdrawals payable 7 8 124 139
Undistributed
participants' loans 2 1 29 (32) -
General and administrative
expenses payable 8 15 2 85 1 111
------------ ---------- ----------- ------------- --------- ------------ ---------
Total liabilities 17 24 2 238 1 (32) 250
------------ ---------- ----------- ------------- --------- ------------ ---------
Plan equity $ 8,159 $ 13,040 $ 1,535 $ 130,081 $ 790 $ 2,218 $ 155,823
============ ========== =========== ============= ========= ============ =========
</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, 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.
-5-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1997
(in thousands of dollars)
_____
<TABLE>
<CAPTION>
Diversified
Equity Interest Government Government
Index Income Securities Securities Philip Morris Balanced
Fund Fund Fund Fund (GF) Stock Fund Fund
----------- ---------- ------------ ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Employer contributions $ 25 $ 20 $ 10 $ 3 $ 2,481 $ 4
Employee contributions 505 548 95 33 4,762 16
Allocated share of Trust
investment activities:
Interest income 773 70 21 187
Dividend income 5,114 22
Net appreciation in
fair value of investments 1,853 21 23,786 15
----------- ---------- ------------ ------------ -------------- ----------
1,853 773 91 21 29,087 37
----------- ---------- ------------ ------------ -------------- ----------
Total additions 2,383 1,341 196 57 36,330 57
----------- ----------- ------------ ------------ -------------- -----------
DEDUCTIONS:
Distributions and
withdrawals (1,262) (3,809) (231) (45) (22,069) (12)
General and administrative
expenses (30) (55) (11) (1) (558) (1)
----------- ---------- ------------ ------------ -------------- ----------
Total deductions (1,292) (3,864) (242) (46) (22,627) (13)
----------- ---------- ------------ ------------ -------------- ----------
Net transfers among funds 1,365 2,167 1,598 (1,286) (4,598) 754
Participants' loans (106) (120) (20) (2,129) (8)
Participants' loan repayments 9 13 3 200
----------- ---------- ------------ ------------ -------------- ----------
Net additions (deductions) 2,359 (463) 1,535 (1,275) 7,176 790
PLAN EQUITY:
Beginning of year 5,800 13,503 - 1,275 122,905 -
----------- ---------- ------------ ------------ -------------- ----------
End of year $ 8,159 $ 13,040 $ 1,535 $ - $ 130,081 $ 790
=========== ========== ============ ============ ============== ==========
<CAPTION>
Participants'
Loan
Account Total
------------ ----------
<S> <C> <C>
ADDITIONS:
Employer contributions $ 2,543
Employee contributions 5,959
Allocated share of Trust
investment activities:
Interest income $ 60 1,111
Dividend income 5,136
Net appreciation in
fair value of investments 25,675
------------ ----------
60 31,922
------------ ----------
Total additions 60 40,424
------------ ----------
DEDUCTIONS:
Distributions and
withdrawals (27,428)
General and administrative
expenses (656)
------------ ----------
Total deductions - (28,084)
------------ ----------
Net transfers among funds -
Participants' loans 2,383 -
Participants' loan repayments (225) -
------------ ----------
Net additions (deductions) 2,218 12,340
PLAN EQUITY:
Beginning of year - 143,483
------------ ----------
End of year $ 2,218 $ 155,823
============ ==========
</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, 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.
-7-
<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.
-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 (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 a matching contribution by Kraft Foods,
Inc. (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 may make before-tax
and/or after-tax contributions. Matching contributions by Kraft Foods (the
"Kraft Foods Matching Contributions") are contributed to the Plan (see Note
3). Prior to 1997, Kraft Foods Matching Contributions were based on profits
from certain of Kraft Foods' operating units. Currently, Kraft Foods
Matching Contributions are made at a fixed rate. 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".
Assets of the Plan are co-invested with the assets of the Kraft Foods Thrift
Plan and other defined contribution 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 7).
Prior to May 12, 1997, participants had the option of investing their Plan
Accounts (see Note 4) in 25 percent increments in each of the funds (except
the Balanced Fund) listed below. Effective May 12, 1997, participants have
the option of investing their Plan Accounts in five percent increments in
the five funds listed below. Except for participants employed at the
Naperville, Illinois facility of Kraft Foods (a "Naperville Participant"),
Kraft Foods Matching Contributions made prior to May 12, 1997 were initially
invested
-9-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
in the Philip Morris Stock Fund but could have been allocated and invested in
the same manner as participant contributions in the month following the month
in which the Kraft Foods Matching Contributions were made. Effective May 12,
1997, the participant may reallocate and invest Kraft Foods Matching
Contributions initially invested in the Philip Morris Stock Fund on any
business day.
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 - 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.
Prior to May 1, 1997, participants had the option of investing their Plan
Accounts in the Government Securities Fund (GF), which had the same
investment objective as the Government Securities Fund except that the
average maturity of the securities was less than two years. Effective May
1, 1997, the Government Securities Fund (GF) was merged into the
Government Securities Fund. The average maturity of the U.S. Government
securities in the Government Securities Fund is approximately five years.
Prior to May 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.
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.
None of the foregoing funds guarantees a return to the participant.
Participants may change their options once a month (effective May 12, 1997,
normally on any business day). Prior to May 12, 1997, participants could not
directly transfer amounts between the Interest Income Fund and the Government
Securities Fund (GF).
-10-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
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, 1997 and 1996, there were 3,384 and 3,523 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,
----------------
1997 1996
------- -------
<S> <C> <C>
Diversified Equity Index Fund 692 598
Interest Income Fund 966 1,052
Government Securities Fund 301 -
Government Securities Fund (GF) - 258
Philip Morris Stock Fund 3,297 3,331
Balanced Fund 70 -
</TABLE>
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, upon a change in control of the
Company (see Note 3), or upon a termination of the Plan (see Note 12).
Otherwise, 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.
-11-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
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.
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, 1997 and 1996 was $639,429,002 and
$712,947,862, respectively. The average yield and crediting interest rate
of the Interest Income Fund was approximately seven percent for 1997 and
1996. The crediting interest rate for the pools of mortgaged-backed and
asset-backed securities 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 on a trading day and not resumed before the end of the
trading day, the Trustee will use the composite price listed in The Wall
Street Journal on the next business day. Effective July 14, 1997, the
Trustee will use a weighted average sales price method for valuing the
portion of Participants' Accounts transferred from the Philip Morris
Stock Fund if using the closing price or composite price of Common Stock
results in a value of the Philip Morris Stock Fund which is at least one-
tenth of one percent (.1%) less than the value using the weighted average
sales price method. The weighted average sales price method uses the
average of all of the prices for which Common Stock is sold over one or
more business days as determined by the Trustee. 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.
-12-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
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:
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 may be made on a before-tax basis, an after-tax basis, or in a
combination of the two. 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 1997, a participant's before-tax contributions were limited to
$9,500; for 1998, a participant's before-tax contributions will be limited to
$10,000.
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. Beginning January 1, 1997, the
Kraft Foods Matching Contributions on behalf of all other participants will
equal 45 percent of each participants' contributions.
The Kraft Foods Matching Contributions percentage for years prior to 1997 was
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 could not 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,
-13-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
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 were 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>
The Kraft Foods Matching Contributions percentage was 43 percent and 55
percent in 1996 and 1995, 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.
Kraft Foods Matching Contributions are discretionary. 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 Committee 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
Rollover Account Amounts transferred (directly or
indirectly) from another plan
qualified under Section 401 (a) of the
</TABLE> Code
-14-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(continued)
At the end of each month (effective May 12, 1997, 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 Kraft Foods Matching Account,
Before-Tax Contributions Account, After-Tax Contributions Account and
Rollover 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.
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 within
two weeks after a distribution request is made.
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:
Effective May 12, 1997, participants may borrow from their Before-Tax
Contributions, After-Tax Contributions and Rollover Accounts 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 Kraft Foods 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:
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
-15-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars)
(continued)
in the Trust at December 31, 1997 and 1996, respectively, were:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Trust 5% 6%
Diversified Equity Index Fund 1% 1%
Interest Income Fund 2% 2%
Government Securities Fund 4% -
Government Securities Fund (GF) - 100%
Philip Morris Stock Fund 10% 11%
Balanced Fund 1% -
Participants' Loan Account 6% -
</TABLE>
The Plan's approximate allocated share of the Trust's investment activities for
the years ended December 31, 1997, 1996 and 1995, was six percent, eight percent
and eight 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 1997 and 1996, 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>
1997 1996
-------- -------
<S> <C> <C>
Diversified Equity Index Fund 0.43% 0.18%
Interest Income Fund 0.41% 0.22%
Government Securities Fund 1.43% -
Government Securities Fund (GF) 0.16% 0.17%
Philip Morris Stock Fund 0.44% 0.17%
Balanced Fund 0.25% -
</TABLE>
Investments that represented five percent or more of total Trust assets as of
December 31, 1997 and 1996, were:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Equity Index Fund
GEBT Equity Index Fund $606,132 $442,151
Interest Income Fund
BT GNMA Pooled Fund $205,335
Philip Morris Stock Fund
Common Stock $1,228,357 $1,055,822
Growth Equity Fund $166,407
</TABLE>
The GEBT Equity Index Fund currently includes Common Stock.
-16-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars)
(continued)
At December 31, 1997 and 1996, the financial position of the Trust was:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Assets:
Investments at fair value:
Equity Index Fund:
GEBT Equity Index Fund
(cost $345,425 and $296,077) $ 606,132 $ 442,151
Short-term temporary investments
(cost approximates fair value) 2,634 945
Interest Income Fund:
Investment contracts (at contract
value)
(cost approximates contract value) 630,012 719,263
Short-term temporary investments
(cost approximates fair value) 21,022 31,250
Government Securities Fund:
Government securities
(cost $28,343 and $25,873) 28,596 25,693
Federal Agency Obligations
(cost $3,976 and $2,979) 3,974 2,911
Short-term temporary investments
(cost approximates fair value) 929 812
Government Securities Fund (GF):
Government securities
(cost approximates fair value) - 1,184
Short-term temporary investments
(cost approximates fair value) - 110
Philip Morris Stock Fund:
Common stock
(cost $552,253 and $439,309) 1,228,357 1,055,822
Short-term temporary investments
(cost approximates fair value) 33,679 28,613
International Equity Fund:
International Equity Fund
(cost $55,014 and $52,300) 58,229 56,401
Short-term temporary investments
(cost approximates fair value) 222 114
Balanced Fund:
Balanced Fund
(cost $114,680 and $72,891) 125,303 77,163
Short-term temporary investments
(cost approximates fair value) 503 189
Growth Equity Fund:
Growth Equity Fund
(cost $174,420 and $117,557) 166,407 122,194
Short-term temporary investments
(cost approximates fair value) 586 312
Other investments:
Participants' Loan Account:
Loans to participants 41,995 37,375
---------- ----------
Total investments 2,948,580 2,602,502
Receivables:
Interest income 811 1,063
Dividend income 11,039 11,308
Other receivables 8,507 2,980
---------- ----------
Total assets 2,968,937 2,617,853
Liabilities:
Other payables 745 1,264
---------- ----------
Net assets $2,968,192 $2,616,589
========== ==========
</TABLE>
-17-
<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, 1997, 1996
and 1995, were:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Additions:
Employer contributions $ 37,225 $ 35,823 $ 42,957
Employee contributions 98,076 94,665 104,014
Transfers from predecessor trusts - 300 (448)
Investment activities:
Interest 47,603 47,971 55,956
Dividends 89,392 56,586 51,225
Interest on participant loans 2,980 2,598 2,394
---------- ---------- ----------
139,975 107,155 109,575
Net appreciation
in fair value of investments 354,618 313,941 512,078
---------- ---------- ----------
Net investment activities 494,593 421,096 621,653
Deductions:
Distributions and withdrawals (275,232) (348,908) (258,160)
General and administrative
expenses (3,059) (2,792) (3,133)
---------- ---------- ----------
Increase in Trust net assets 351,603 200,184 506,883
Net assets:
Beginning of year 2,616,589 2,416,405 1,909,522
---------- ---------- ----------
End of year $2,968,192 $2,616,589 $2,416,405
========== ========== ==========
</TABLE>
-18-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT 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, 1997, 1996, and 1995 were:
<TABLE>
<CAPTION>
Freihofer
Equitable
Equity Government Government Capital
Index Securities Securities Philip Morris Management
Fund Fund Fund (GF) Stock Fund Fund
---------- -------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
1997
- ----
Realized gains (losses):
Proceeds $ 89,418 $ 8,972 $ 475 $ 269,015
Cost 55,447 9,049 475 122,940
-------- ---------- ------------ --------- ------------
Net realized gains
(losses) 33,971 (77) - 146,075
-------- ---------- ------------ --------- ------------
Unrealized appreciation
(depreciation):
Beginning of year 146,074 (248) 616,513
End of year 260,707 251 676,104
-------- ---------- ------------ --------- ------------
Increase (decrease) 114,633 499 - 59,591
-------- ---------- ------------ --------- ------------
Net appreciation
(depreciation) in fair
value of investments $148,604 $ 422 $ - $ 205,666
======== ========== ============ ========= ============
1996
- ----
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)
======== ========== ============ ========= ============
<PAGE>
<CAPTION>
International Growth
Equity Balanced Equity
Fund Fund Fund Total
------------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
1997
- ----
Realized gains (losses):
Proceeds $ 23,172 $ 21,845 $ 32,533 $ 445,430
Cost 21,054 19,574 29,812 258,351
--------- -------- --------- ---------
Net realized gains
(losses) 2,118 2,271 2,721 187,079
--------- -------- --------- ---------
Unrealized appreciation
(depreciation):
Beginning of year 4,101 4,272 4,637 775,349
End of year 3,216 10,623 (8,013) 942,888
--------- -------- --------- ---------
Increase (decrease) (885) 6,351 (12,650) 167,539
--------- -------- --------- ---------
Net appreciation
(depreciation) in fair
value of investments $ 1,233 $ 8,622 $ (9,929) $ 354,618
========= ======== ========= =========
1996
- ----
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
========= ======== ========= =========
</TABLE>
-19-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars, except per unit data)
(continued)
9. Participation Units:
The number of employee participation units and the net asset value per unit for
the funds at December 31, 1997 was:
<TABLE>
<CAPTION>
Diversified
Equity Interest Government Participants'
Index Income Securities Philip Morris Balanced Loan
Fund Fund Fund Stock Fund Fund Account Total
----------- ----------- ------------ ------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997:
Net Assets $ 8,159 $ 13,040 $ 1,535 $ 130,081 $ 790 $ 2,218 $155,823
Number of
participation units 630 12,456 143 10,991 70
Net asset value
per unit $ 12.9508 $ 1.0469 $ 10.7343 $ 11.8352 $ 11.2857
</TABLE>
-20-
<PAGE>
KRAFT FOODS EMPLOYEE THRIFT-INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(concluded)
10. Transactions with Parties in Interest:
The Fiduciaries are not aware of any transaction between the Plan and a
party in interest (as defined in ERISA) or disqualified person (as defined
in the Code) to the Plan (1) which is prohibited under the fiduciary
responsibility provisions of ERISA or the prohibited transaction provisions
of the Code, or (2) which has not been exempted from such prohibitions
pursuant to a class exemption issued by the Department of Labor.
11. Tax Status:
By letter dated November 14, 1995, the Internal Revenue Service 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 Plan has been subsequently
amended and no determination as to the continued qualification of the Plan
under Section 401(a) of the Code and of the exemption of the related Trust
from Federal income taxes under Section 501(a) of the Code has been sought
from the Internal Revenue Service. The Fiduciaries believe that the Plan
continues to be designed and operated in accordance with the applicable
provisions of the Code. Therefore, no provision for income taxes has been
included in the Plan's financial statements. Accordingly, participants will
not be subject to income tax on Kraft Foods Matching Contributions and
before-tax contributions made on their behalf by Kraft Foods, on the making
of a timely rollover contribution to the Trust, nor on earnings credited to
their Accounts until withdrawn or distributed.
12. Plan Termination:
The Board of Directors of Kraft Foods has the right, subject to the
applicable provisions of ERISA and the Code, to amend (retroactively or
otherwise) the Plan, suspend making Kraft Foods Matching Contributions to
the Plan or to terminate the Plan. In the event the Plan is terminated or
partially terminated (within the meaning of the Code), each affected
participant will become fully vested in the balance in his or her Kraft
Foods Matching Account.
-21-
<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: May 21, 1998
-22-
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1997
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Nuumber Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
EQUITY INDEX FUND -- 20.65%
GEBT Equity Index Fund -- 20.56% 267,164 $ 345,424,848 $ 606,131,969
Short-Term Investments -- .09%
GEBT Short-Term Investment Fund 2,634,009 2,634,009 2,634,009
------------- -------------
Total Equity Index Fund 348,058,857 608,765,978
------------- -------------
INTEREST INCOME FUND -- 22.08%
Investment Contracts -- 21.37%
(The amounts included in Column D for the investment
contracts represent contract value, see Note 2.)
Participation Contracts with Institutions -- 5.19%
Confederation Life Ins.
No. 62381 8.61%
matured 11/30/1995 519,733 519,733 519,733
Confederation Life Ins.
No. 62325 0.00%
matured 5/1997 1,567,323 1,567,323 1,567,323
Provident Mutual
No. 008159-001 8.55%
matures 3/1/1998 363,316 363,316 363,316
Mass Mutual
No. 10223 8.25%
matures 4/30/1998 12,896,565 12,896,565 12,896,565
Provident National Assurance
No. 02705689 6.96%
matures 7/31/1998 25,456,330 25,456,330 25,456,330
Connecticut General Life Ins.
No. 25119 8.81%
matures 8/1/1998 12,087,717 12,087,717 12,087,717
Hartford Life Ins. Co.
No. 10225 5.70%
matures 1/31/1999 20,053,096 20,053,096 20,053,096
Allstate Life Insurance Company
No. 5428 6.15%
matures 4/30/1999 36,615,741 36,615,741 36,615,741
Allstate Life Ins. Co.
No. 5581 7.23%
matures 5/20/1999 1,942,458 1,942,458 1,942,458
CNA Insurance Co.
No. 24023 6.61%
matures 6/29/2001 21,340,704 21,340,704 21,340,704
</TABLE>
S-1
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1997
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Face Amount Cost
or Nuumber Basis of
Name of Issuer and Title of Issue of Shares/Units Investments Fair Value
- --------------------------------- --------------- ----------- ----------
<S> <C> <C> <C>
Participation Contracts with Institutions (continued)
Sun America Life
No. 4696 6.67%
matures 12/31/2001 20,003,538 $ 20,003,538 $ 20,003,538
------------- -------------
Total Participation Contracts 152,846,521 152,846,521
------------- -------------
Financial Institution Pools -- 16.18%
National Westminster Bank
No. SAM 0104B 6.93%
GEBT Short-Term Investment Fund 597,142 597,142
Federal Home Loan Mortgage Corporation
matures 8/15/2005 6.25% 1,103,454 1,103,454
Federal Home Loan Mortgage Corporation
matures 4/1/2008 7.00% 97,965 97,965
Federal Home Loan Mortgage Corporation
matures 8/15/2008 6.50% 1,055,529 1,055,529
Federal Home Loan Mortgage Corporation
matures 9/1/2008 6.50% 37,080 37,080
Federal Home Loan Mortgage Corporation
matures 12/1/2008 6.50% 40,138 40,138
Federal Home Loan Mortgage Corporation
matures 2/1/2009 6.50% 1,734,521 1,734,521
Federal Home Loan Mortgage Corporation
matures 6/1/2009 6.50% 73,991 73,991
Federal Home Loan Mortgage Corporation
matures 10/1/2010 7.00% 211,216 211,216
Federal Home Loan Mortgage Corporation
matures 2/1/2011 6.50% 115,640 115,640
Federal Home Loan Mortgage Corporation
matures 2/1/2011 7.00% 648,928 648,928
Federal Home Loan Mortgage Corporation
matures 3/1/2011 7.00% 1,139,803 1,139,803
Federal Home Loan Mortgage Corporation
matures 12/15/2015 6.50% 2,683,080 2,683,080
Federal Home Loan Mortgage Corporation
matures 1/15/2018 6.00% 4,126,809 4,126,809
Federal Home Loan Mortgage Corporation
matures 6/15/2018 7.00% 297,594 297,594
Federal National Mortgage Association
matures 6/25/2005 6.25% 2,207,587 2,207,587
Federal National Mortgage Association
matures 8/25/2005 6.00% 480,564 480,564
Federal National Mortgage Association
matures 7/1/2008 7.00% 819,882 819,882
Federal National Mortgage Association
matures 8/1/2008 7.00% 749,927 749,927
</TABLE>
S-2
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1997
<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
matures 1/1/2009 6.50% $ 151,198 $ 151,198
Federal National Mortgage Association
matures 2/1/2009 6.50% 496,822 496,822
Federal National Mortgage Association
matures 3/1/2009 6.50% 168,254 168,254
Federal National Mortgage Association
matures 5/1/2009 6.50% 1,047,816 1,047,816
Federal National Mortgage Association
matures 8/25/2012 5.60% 1,147,192 1,147,192
Federal National Mortgage Association
matures 8/25/2013 6.70% 1,935,791 1,935,791
Federal National Mortgage Association
matures 9/25/2015 6.00% 2,196,862 2,196,862
Federal National Mortgage Association
matures 6/25/2016 5.70% 2,187,150 2,187,150
Federal National Mortgage Association
matures 7/25/2016 5.65% 1,330,841 1,330,841
Government National Mortgage Association
matures 12/15/2023 6.50% 252,569 252,569
Government National Mortgage Association
matures 3/15/2024 6.50% 77,645 77,645
Government National Mortgage Association
matures 4/15/2024 6.50% 1,275,965 1,275,965
Government National Mortgage Association
matures 5/15/2024 6.50% 1,462,469 1,462,469
------------- -------------
Total National Westminster Bank Contract 31,951,424 31,951,424
------------- -------------
Commonwealth Life Insurance Company No. ADA00044TR, 6.29%,
Peoples Life Insurance Company No. BDA00059TR, 6.38%,
Trans America Life Insurance Company No. 76586, 5.94%,
Trans America Life Insurance Company No. 76594, 6.91%,
Trans America Life Insurance Company No. 76690, 6.28%,
National Westminster Bank No. 189M, 6.25% & J P Morgan No. AKRAFT1, 6.26%
GEBT Short-Term Investment Fund 570,752 570,752
BT GNMA Pooled Fund 7.27% 205,335,286 205,335,286
United States Treasury Note
matures 3/31/2002 6.63% 4,745,909 4,745,909
United States Treasury Note
matures 4/30/2002 6.63% 4,579,060 4,579,060
United States Treasury Note
matures 11/30/2002 5.75% 1,978,028 1,978,028
</TABLE>
S-3
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1997
<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, National
Westminster Bank & J P Morgan (continued)
United States Treasury Note
matures 7/15/2006 7.00% $ 68,603,938 $ 68,603,938
United States Treasury Note
matures 5/15/2007 6.63% 39,869,492 39,869,492
United States Treasury Note
matures 8/15/2007 6.13% 37,925,895 37,925,895
Federal National Mortgage Association
matures 11/23/2001 6.35% 337,233 337,233
Federal National Mortgage Association
matures 9/9/2003 5.97% 514,111 514,111
Federal National Mortgage Association
matures 10/25/2004 8.40% 648,692 648,692
Federal National Mortgage Association
matures 11/10/2004 8.63% 1,223,803 1,223,803
Student Loan Marketing Association
matures 8/1/2007 7.13% 718,654 718,654
Premier Auto TR
matures 2/4/1999 7.15% 286,603 286,603
Bayerische Landesbank Girozentrale
matures 7/19/1999 6.55% 2,225,377 2,225,377
MBNA Master Credit Card Trust
matures 8/15/1999 6.20% 410,918 410,918
Standard Credit Card Master Trust
matures 6/7/2000 6.75% 762,658 762,658
Standard Credit Card Master Trust
matures 4/7/2001 6.80% 509,087 509,087
Asian Development Bank NTS
matures 5/2/2001 8.50% 1,426,806 1,426,806
American Express Master Trust
matures 7/15/2001 5.38% 3,937,682 3,937,682
General Electric Cap Corp
matures 11/1/2001 5.50% 1,941,925 1,941,925
MBNA Master Credit Card Trust
matures 1/15/2003 6.60% 994,986 994,986
Ford Credit Auto Loan Master Trust
matures 2/15/2003 5.50% 3,553,594 3,553,594
First Bank Corporate Card Master Trust
matures 2/15/2003 6.40% 2,324,429 2,324,429
Outlet Broadcasting
matures 7/15/2003 10.88% 2,046,305 2,046,305
</TABLE>
S-4
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1997
<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, National
Westminster Bank & J P Morgan (continued)
Avis
matures 10/20/2003 6.40% $ 3,984,452 $ 3,984,452
Citibank Credit Card Master Trust
matures 2/15/2004 6.55% 6,340,501 6,340,501
MBNA Master Credit Card Trust
matures 11/15/2004 6.60% 8,053,929 8,053,929
First USA Credit Card Master Trust
matures 3/17/2005 6.42% 3,992,177 3,992,177
Japan Fin Corp
matures 4/27/2005 7.38% 1,452,918 1,452,918
International Bank for Recon & Dev
matures 7/21/2005 6.38% 1,638,975 1,638,975
NationsBank Credit Card Master Trust
matures 12/15/2005 6.00% 2,930,942 2,930,942
Bayerische Landesbank Girozentrale
matures 2/1/2006 6.17% 1,701,481 1,701,481
Bayerische Landesbank Girozentrale
matures 2/9/2006 6.20% 3,709,875 3,709,875
KFW Int'l Fin Inc
matures 6/1/2006 8.20% 2,007,445 2,007,445
General Electric Cap Corp
matures 3/1/2007 8.85% 6,873,148 6,873,148
General Electric Cap Corp
matures 7/24/2008 8.50% 1,062,868 1,062,868
First Plus Home Loan Trust
matures 3/12/2012 6.80% 3,977,355 3,977,355
International Bank for Recon & Dev
matures 3/1/2026 8.88% 572,654 572,654
Inter-American Development Bank
matures 7/15/2027 6.75% 6,385,881 6,385,881
Merck
matures 5/3/2037 5.76% 3,058,354 3,058,354
---------------- -----------------
Total Commonwealth, Peoples, Trans America, Nat West & J P Morgan Contracts 445,214,178 445,214,178
---------------- -----------------
Total Financial Institution Pools 477,165,602 477,165,602
---------------- -----------------
Total Investment Contracts 630,012,123 630,012,123
---------------- -----------------
</TABLE>
S-5
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1997
<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>
Short-Term Investments -- .71%
GEBT Short-Term Investment Fund 15,166,810 $ 15,166,810 $ 15,166,810
GEBT Stable Value Government Fund 5,854,964 5,854,964 5,854,964
------------- -------------
Total Short-Term Investments 21,021,774 21,021,774
------------- -------------
Total Interest Income Fund 651,033,897 651,033,897
------------- -------------
GOVERNMENT SECURITIES FUND -- 1.14%
Government Securities -- .97%
United States Treasury Notes
7.125% due 9/30/1999 2,375,000 2,436,231 2,431,406
United States Treasury Notes
7.125% due 2/29/2000 6,600,000 6,815,847 6,790,806
United States Treasury Notes
5.875% due 6/30/2000 3,700,000 3,695,980 3,716,761
United States Treasury Notes
5.625% due 2/28/2001 1,025,000 1,009,734 1,022,274
United States Treasury Notes
6.375% due 8/15/2002 5,625,000 5,695,005 5,770,013
United States Treasury Notes
6.50% due 5/15/2005 3,550,000 3,627,690 3,700,875
United States Treasury Notes
6.50% due 8/15/2005 3,000,000 3,089,781 3,130,320
United States Treasury Notes
6.875% due 5/15/2006 1,900,000 1,972,463 2,033,000
------------- -------------
Total Government Securities 28,342,731 28,595,455
------------- -------------
Federal Agency Obligations -- .14%
Federal National Mortgage Association
6.41% due 5/22/2000 1,000,000 997,344 1,013,750
Federal National Mortgage Association
5.5% due 2/2/2001 3,000,000 2,978,775 2,960,610
------------- -------------
Total Federal Agency Obligations 3,976,119 3,974,360
------------- -------------
</TABLE>
S-6
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1997
<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>
Short-Term Investments -- .03%
BT Pyramid Government Securities Cash Fund 928,671 $ 928,671 $ 928,671
------------- -------------
Total Government Securities Fund 33,247,521 33,498,486
------------- -------------
PHILIP MORRIS STOCK FUND -- 42.80%
Common Stock -- 41.66%
Tobacco -- 41.66%
Philip Morris Companies Inc. 27,146,005 552,253,198 1,228,356,726
Short-term Investments -- 1.14%
GEBT Short-Term Investment Fund 33,679,046 33,679,046 33,679,046
------------- -------------
Total Philip Morris Stock Fund 585,932,244 1,262,035,772
------------- -------------
INTERNATIONAL EQUITY FUND -- 1.98%
Japanese Equity Index Fund -- .45% 204,407 18,957,475 13,344,091
Non Japanese Equity Index Fund -- 1.52% 265,870 36,056,129 44,885,194
------------- -------------
Total Equity Index Funds 55,013,604 58,229,285
------------- -------------
Short-Term Investments -- .01%
GEBT Short-Term Investment Fund 221,545 221,545 221,545
------------- -------------
Total International Equity Fund 55,235,149 58,450,830
------------- -------------
BALANCED FUND -- 4.27%
Balanced Fund -- 4.25% 9,428,381 114,680,409 125,303,190
Short-Term Investments -- .02%
GEBT Short-Term Investment Fund 503,476 503,476 503,476
------------- -------------
Total Balanced Fund 115,183,885 125,806,666
------------- -------------
</TABLE>
S-7
<PAGE>
KRAFT FOODS MASTER DEFINED CONTRIBUTION TRUST
SCHEDULE I - INVESTMENTS as of December 31, 1997
<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>
GROWTH EQUITY FUND -- 5.66%
Growth Equity Fund -- 5.64% 14,470,210 $ 174,419,967 $ 166,407,417
Short-Term Investments -- .02%
GEBT Short-Term Investment Fund 585,573 585,573 585,573
--------------- ---------------
Total Growth Equity Fund 175,005,540 166,992,990
--------------- ---------------
PARTICIPANTS' LOAN ACCOUNT -- 1.42%
Loans to Participants -- 1.42% 41,995,421 41,995,421 41,995,421
--------------- ---------------
Total Participants' Loan Account 41,995,421 41,995,421
--------------- ---------------
TOTAL INVESTMENTS $ 2,005,692,514 $ 2,948,580,040
=============== ===============
</TABLE>
S-8
<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 27, 1998, on our
audits of the financial statements of the Kraft Foods Employee Thrift-Investment
Plan as of December 31, 1997 and 1996 and for the years ended December 31, 1997,
1996 and 1995, and the financial statement schedule as of December 31, 1997,
which report is included in this annual report on Form 11-K.
/s/ COOPERS & LYBRAND L.L.P.
Chicago, Illinois
May 21, 1998
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