SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: December 31, 1996
___ TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ___________.
Commission file number: 1-9813
GENENTECH, INC. TAX REDUCTION INVESTMENT PLAN
(Full title of the Plan)
GENENTECH, INC.
(Name of issuer of the securities held pursuant to the Plan)
460 Point San Bruno Boulevard
South San Francisco, California 94080
(address of principal executive office)
Genentech, Inc. Tax Reduction Investment Plan
Index to Financial Statements
Item Page No.
__________________________________________________________ _________
Statement Of Net Assets Available For Benefits With Fund
Information At December 31, 1996 and 1995 3-4
Statement Of Changes In Net Assets Available
For Benefits With Fund Information for Years Ended
December 31, 1996 and 1995 5-8
Notes To Financial Statements 9-14
Report Of Ernst & Young LLP, Independent Auditors 15
Signatures 16
Page 2
Genentech, Inc. Tax Reduction Investment Plan
Statement Of Net Assets Available For Benefits With Fund Information
December 31, 1996
FIDELITY
GENENTECH FIDELITY GROWTH FIDELITY FIDELITY
COMMON MAGELLAN COMPANY GROWTH & INTERMEDIATE
STOCK FUND FUND FUND INCOME FUND BOND FUND
___________ ___________ ___________ ___________ ___________
ASSETS:
Investments, at
fair value $ 8,403,851 $33,142,803 $17,360,152 $27,078,832 $ 2,933,257
Contribution
receivable from
Genentech, Inc. 375,407 1,351,091 943,834 1,225,961 159,902
___________ ___________ ___________ __________ __________
Net assets
available for
benefits $ 8,779,258 $34,493,894 $18,303,986 $28,304,793 $ 3,093,159
=========== =========== =========== =========== ===========
FIDELITY FIDELITY FIDELITY
FIDELITY FIDELITY ASSET ASSET ASSET
OVERSEAS BALANCED MANAGER MANAGER: MANAGER:
FUND FUND FUND GROWTH FUND INCOME FUND
___________ ___________ ___________ ___________ ___________
ASSETS:
Investments, at
fair value $ 4,783,884 $14,115,444 $ 1,305,895 $ 1,396,410 $ 466,683
Contribution
receivable from 303,851 563,957 87,305 128,964 33,340
Genentech, Inc.
___________ ___________ ___________ ___________ ___________
Net assets
available for
benefits $ 5,087,735 $14,679,401 $ 1,393,200 $ 1,525,374 $ 500,023
=========== =========== =========== =========== ===========
FIDELITY
RETIREMENT FIDELITY
MONEY U.S. EQUITY PARTICIPANT
MARKET FUND INDEX FUND LOANS TOTAL
___________ ___________ ___________ ____________
ASSETS:
Investments, at
fair value $10,593,850 $ 5,680,716 $ 3,326,576 $130,588,353
Contribution
receivable from
Genentech, Inc. 537,155 340,828 0 6,051,595
___________ ___________ ___________ ____________
Net assets
available for
benefits $11,131,005 $ 6,021,544 $ 3,326,576 $136,639,948
=========== =========== =========== ============
<FN>
See accompanying notes.
</FN>
Page 3
Genentech, Inc. Tax Reduction Investment Plan
Statement Of Net Assets Available For Benefits With Fund Information
December 31, 1995
FIDELITY
GENENTECH FIDELITY GROWTH FIDELITY FIDELITY
COMMON MAGELLAN COMPANY GROWTH & INTERMEDIATE
STOCK FUND FUND FUND INCOME FUND BOND FUND
___________ ___________ ___________ ___________ ___________
ASSETS:
Investments, at
fair value $ 9,153,498 $30,153,976 $11,291,205 $18,106,286 $ 2,428,446
Contribution
receivable from
Genentech, Inc. 459,360 1,493,479 719,731 994,786 159,680
___________ ___________ ___________ ___________ ___________
Net assets
available for
benefits $ 9,612,858 $31,647,455 $12,010,936 $19,101,072 $ 2,588,126
=========== =========== =========== =========== ===========
FIDELITY FIDELITY FIDELITY
FIDELITY FIDELITY ASSET ASSET ASSET
OVERSEAS BALANCED MANAGER MANAGER: MANAGER:
FUND FUND FUND GROWTH FUND INCOME FUND
___________ ___________ __________ ___________ ___________
ASSETS:
Investments, at
fair value $ 3,238,236 $13,340,101 $ 719,994 $ 576,120 $ 193,856
Contribution
receivable from
Genentech, Inc. 272,473 646,863 63,926 66,657 20,398
___________ ___________ __________ ___________ ___________
Net assets
available for
benefits $ 3,510,709 $13,986,964 $ 783,920 $ 642,777 $ 214,254
=========== =========== ========== =========== ===========
FIDELITY
RETIREMENT FIDELITY
MONEY U.S. EQUITY PARTICIPANT
MARKET FUND INDEX FUND LOANS TOTAL
___________ ___________ ___________ ____________
ASSETS:
Investments, at
fair value $ 9,077,890 $ 2,653,009 $ 2,439,890 $103,372,507
Contribution
receivable from
Genentech, Inc. 526,864 166,368 - 5,590,585
___________ ___________ ___________ ____________
Net assets
available for
benefits $ 9,604,754 $ 2,819,377 $ 2,439,890 $108,963,092
=========== =========== =========== ============
<FN>
See accompanying notes.
</FN>
Page 4
Genentech, Inc. Tax Reduction Investment Plan
Statement Of Changes In Net Assets Available For Benefits With Fund Information
Year Ended December 31, 1996
FIDELITY
GENENTECH FIDELITY GROWTH FIDELITY FIDELITY
COMMON MAGELLAN COMPANY GROWTH & INTERMEDIATE
STOCK FUND FUND FUND INCOME FUND BOND FUND
___________ ___________ ___________ ___________ ___________
Investment income:
Interest and
dividends $ 0 $ 5,213,751 $ 750,272 $ 1,296,172 $ 183,192
Realized/unrealized
gain(loss), net 88,550 (1,673,186) 1,481,322 2,943,030 (86,751)
___________ ___________ ___________ ___________ ___________
Total investment
income 88,550 3,540,565 2,231,594 4,239,202 96,441
Contributions:
Basic 830,540 3,258,021 2,003,675 2,453,471 332,688
Rollover 38,368 271,323 359,704 504,153 95,272
Employer match 375,407 1,351,843 943,927 1,226,146 159,902
___________ ___________ ___________ ___________ ___________
Total contributions 1,244,315 4,881,187 3,307,306 4,183,770 587,862
Distributions (517,198) (2,229,268) (906,200) (1,708,484) (88,385)
Administrative fees (3,200) (3,823) (1,000) (1,563) (538)
Transfers between funds (1,646,067) (3,342,222) 1,661,350 2,490,796 (90,347)
___________ ___________ ___________ ___________ ___________
Net change
during the year (833,600) 2,846,439 6,293,050 9,203,721 505,033
Net assets available
for benefits:
Beginning of year 9,612,858 31,647,455 12,010,936 19,101,072 2,588,126
___________ ___________ ___________ ___________ ___________
End of year $ 8,779,258 $34,493,894 $18,303,986 $28,304,793 $ 3,093,159
=========== =========== =========== =========== ===========
FIDELITY FIDELITY FIDELITY
FIDELITY FIDELITY ASSET ASSET ASSET
OVERSEAS BALANCED MANAGER MANAGER: MANAGER:
FUND FUND FUND GROWTH FUND INCOME FUND
___________ ____________ ___________ ___________ ___________
Investment income:
Interest and dividends $ 287,003 $ 655,819 $ 96,361 $ 116,370 $ 30,819
Realized/unrealized
gain, net 216,397 558,546 33,525 44,844 735
___________ ____________ ___________ ___________ ___________
Total investment
income 503,400 1,214,365 129,886 161,214 31,554
Contributions:
Basic 668,507 1,292,258 176,278 266,531 67,465
Rollover 104,656 183,831 46,839 147,071 33,493
Employer match 303,851 564,230 87,305 128,963 33,340
___________ ____________ ___________ ___________ ___________
Total contributions 1,077,014 2,040,319 310,422 542,565 134,298
Distributions (462,876) (566,746) (15,720) (25,929) (33,219)
Administrative fees (100) (1,825) (12) (37) 0
Transfers between funds 459,588 (1,993,676) 184,704 204,784 153,136
___________ ____________ ___________ ___________ ___________
Net change during the year 1,577,026 692,437 609,280 882,597 285,769
Net assets available
for benefits:
Beginning of year 3,510,709 13,986,964 783,920 642,777 214,254
___________ ____________ ___________ ___________ ___________
End of year $ 5,087,735 $ 14,679,401 $ 1,393,200 $ 1,525,374 $ 500,023
=========== ============ =========== =========== ===========
Page 5
Genentech, Inc. Tax Reduction Investment Plan
Statement Of Changes In Net Assets Available For Benefits With Fund Information
Year Ended December 31, 1996
FIDELITY
RETIREMENT FIDELITY
MONEY U.S. EQUITY PARTICIPANT
MARKET FUND INDEX FUND LOANS TOTAL
___________ ___________ ___________ ____________
Investment income:
Interest and dividends $ 504,185 $ 118,579 $ 278,216 $ 9,530,739
Realized/unrealized
gain, net 0 735,934 0 4,342,946
___________ ___________ ___________ ____________
Total investment
income 504,185 854,513 278,216 13,873,685
Contributions:
Basic 1,066,131 601,080 0 13,016,645
Rollover 183,294 236,167 0 2,204,171
Employer Match 537,758 341,013 0 6,053,685
___________ ___________ ___________ ____________
Total contributions 1,787,183 1,178,260 0 21,274,501
Distributions (510,852) (265,711) (123,808) (7,454,396)
Administrative fees (4,448) (388) 0 (16,934)
Transfers between funds (249,817) 1,435,493 732,278 0
___________ ___________ ___________ ____________
Net change during the year 1,526,251 3,202,167 886,686 27,676,856
Net assets available
for benefits:
Beginning of year 9,604,754 2,819,377 2,439,890 108,963,092
___________ ___________ ___________ ____________
End of year $11,131,005 $ 6,021,544 $ 3,326,576 $136,639,948
=========== =========== =========== ============
<FN>
See accompanying notes.
</FN>
Page 6
Genentech, Inc. Tax Reduction Investment Plan
Statement Of Changes In Net Assets Available For Benefits With Fund Information
Year Ended December 31, 1995
FIDELITY
GENENTECH FIDELITY GROWTH FIDELITY FIDELITY
COMMON MAGELLAN COMPANY GROWTH & INTERMEDIATE
STOCK FUND FUND FUND INCOME FUND BOND FUND
___________ ___________ ___________ ___________ ___________
Investment income:
Interest and
dividends $ - $ 1,715,515 $ 502,859 $ 850,049 $ 132,127
Realized/unrealized
gain, net 1,344,329 5,870,835 1,972,702 3,470,977 118,389
___________ ___________ ___________ ___________ ___________
Total investment
income 1,344,329 7,586,350 2,475,561 4,321,026 250,516
Contributions:
Basic 1,143,846 2,910,678 1,273,734 1,946,677 310,787
Rollover 261,754 333,612 216,167 229,046 34,878
Employer match 459,360 1,493,959 720,374 995,699 159,680
___________ ___________ ___________ ___________ ___________
Total contributions 1,864,960 4,738,249 2,210,275 3,171,422 505,345
Distributions (423,696) (1,801,816) (541,503) (619,711) (56,264)
Administrative fees - (483) (312) (837) (388)
Transfers between funds (2,823,235) 1,402,969 2,707,495 1,608,971 191,113
___________ ___________ ___________ ___________ ___________
Net change
during the year (37,642) 11,925,269 6,851,516 8,480,871 890,322
Net assets available
for benefits:
Beginning of year 9,650,500 19,722,186 5,159,420 10,620,201 1,697,804
___________ ___________ ___________ ___________ ___________
End of year $ 9,612,858 $31,647,455 $12,010,936 $19,101,072 $ 2,588,126
=========== =========== =========== =========== ===========
FIDELITY FIDELITY FIDELITY
FIDELITY FIDELITY ASSET ASSET ASSET
OVERSEAS BALANCED MANAGER MANAGER: MANAGER:
FUND FUND FUND GROWTH FUND INCOME FUND
___________ ___________ ___________ ___________ ___________
Investment income:
Interest and dividends $ 75,747 $ 591,831 $ 18,933 $ 8,503 $ 7,705
Realized/unrealized
gain, net 227,256 1,308,728 82,033 95,392 15,324
___________ ___________ ___________ ___________ ___________
Total investment
income 303,003 1,900,559 100,966 103,895 23,029
Contributions:
Basic 701,074 1,497,445 137,436 172,501 41,767
Rollover 46,623 72,763 53,228 51,973 16,076
Employer match 272,473 647,176 63,926 66,657 20,398
___________ ___________ ___________ ___________ ___________
Total contributions 1,020,170 2,217,384 254,590 291,131 78,241
Distributions (198,043) (789,539) (15,891) (1,712) (1,239)
Administrative fees - (1,938) - (25) -
Transfers between funds (995,915) (2,869,930) 34,101 (277,403) 3,245
___________ ___________ ___________ ___________ ___________
Net change during the year 129,215 456,536 373,766 115,886 103,276
Net assets available
for benefits:
Beginning of year 3,381,494 13,530,428 410,154 526,891 110,978
___________ ___________ ___________ ___________ ___________
End of year $ 3,510,709 $13,986,964 $ 783,920 $ 642,777 $ 214,254
=========== =========== =========== =========== ===========
Page 7
Genentech, Inc. Tax Reduction Investment Plan
Statement Of Changes In Net Assets Available For Benefits With Fund Information
Year Ended December 31, 1995
FIDELITY
RETIREMENT FIDELITY
MONEY U.S. EQUITY PARTICIPANT
MARKET FUND INDEX FUND LOANS TOTAL
___________ ___________ ___________ ____________
Investment income:
Interest and dividends $ 499,820 $ 52,206 $ 202,900 $ 4,658,195
Realized/unrealized
gain, net - 442,105 - 14,948,070
___________ ___________ ___________ ____________
Total investment
income 499,820 494,311 202,900 19,606,265
Contributions:
Basic 1,167,442 289,759 - 11,593,146
Rollover 32,259 78,812 - 1,427,191
Employer match 536,574 166,368 - 5,602,644
___________ ___________ ___________ ____________
Total contributions 1,736,275 534,939 - 18,622,981
Distributions (643,106) (37,321) (57,769) (5,187,610)
Administrative fees (3,450) (213) - (7,646)
Transfers between funds (156,472) 988,470 186,591 -
___________ ___________ ___________ ____________
Net change during the year 1,433,067 1,980,186 331,722 33,033,990
Net assets available
for benefits:
Beginning of year 8,171,687 839,191 2,108,168 75,929,102
___________ ___________ ___________ ____________
End of year $ 9,604,754 $ 2,819,377 $ 2,439,890 $108,963,092
=========== =========== =========== ============
<FN>
See accompanying notes.
</FN>
Page 8
Genentech, Inc. Tax Reduction Investment Plan
Notes to Financial Statements
(1) Description of the Plan:
The following description of the Genentech, Inc. Tax Reduction Investment
Plan (Plan) provides only general information. Participants should refer to
the Plan document for a more complete description of the Plan's provisions.
The Plan was established, effective January 1, 1985, by Genentech, Inc. (the
Company) for the benefit of eligible employees of the Company in order to
provide them with a means of supplementing their retirement income on a tax-
favored basis, an incentive to continue and increase their efforts to
contribute to the success of the Company, and an opportunity to acquire an
equity interest in the Company. The Plan accomplishes this through a savings
program which is based on systematic salary reductions. The employee's salary
is reduced by the amount elected to be saved on a pre-tax basis. The
"deferred" part of the employee's salary is then invested in the Plan. An
individual employee's account is credited with earnings or losses on a pro
rata basis as the actual investment funds report their earnings performance.
Individuals eligible to participate under the Plan must be employees of the
Company or employees of an affiliate of the Company that adopts the Plan with
the approval of the Board of Directors. However, the following employees or
classes of employees are not eligible to participate: (i) any employee who is
classified as temporary by the Company, unless such employee has completed at
least 1,000 hours of service in a 12-month period; (ii) any part-time employee
normally scheduled to work less than 20 hours per week, unless such employee
has completed at least 1,000 hours of service in a 12-month period; (iii) any
employee who is a member of a collective bargaining unit and who is covered by
a collective bargaining agreement where retirement benefits were the subject
of good faith bargaining; (iv) any individual employed by any corporation or
other business entity that is merged or liquidated into the Company, unless
the Company designates such employees as eligible employees; (v) any employee
paid from a non-U.S. payroll; or (vi) any leased employee as defined under the
Internal Revenue Code of 1986, as amended (Code).
The Board of Directors of the Company has the right under the Plan to alter,
amend or terminate the Plan, or any part thereof, in such a manner as it may
determine. If the Plan is terminated, the interests of all Plan members
remain fully (100%) vested and nonforfeitable. The balances credited to their
accounts shall remain with the Plan trustee until they become distributable in
accordance with the Plan.
The Company matches a portion of employee contributions, up to a maximum of
4% of a participant's eligible compensation (Match). The Match is effective
December 31st of each year (Effective Date) and contributions under the Match
are fully vested at that time. The Match is funded in the first quarter of
the subsequent year. In the first quarter of 1997 and 1996, the Company
contributed approximately $6.1 million and $5.6 million, respectively, to the
Plan in accordance with the terms of the Plan.
The Plan trustee is Fidelity Management Trust Company (Plan Trustee). All
amounts contributed to the Plan are deposited in a trust account with the Plan
Trustee. The Plan Trustee's fees and expenses are paid by the Company and are
not charged to the Plan. Accounts of terminated employees who continue to
hold an account under the Plan as non-employee participants are charged an
annual fee of $50.00 by the Company. The Plan Trustee has blanket bond
insurance covering the full market value of the securities and investments of
which it has custody.
Effective as of May 8, 1996, the Company changed the mechanics of its
Genentech Common Stock Fund (Stock Fund) to a unitized fund which assigns
units to participants rather than shares of the Company's stock. These units
represent a proportionate interest in all of the assets of the Stock Fund,
which includes shares of the Company's common stock and a small percentage
(approximately 2%, although the percentage may vary over time) in short-term
investments. A net asset value per unit will be determined daily for each
unit outstanding in
Page 9
Genentech, Inc. Tax Reduction Investment Plan
Notes to Financial Statements
the Stock Fund. The return earned by the Stock Fund will represent a
combination of the dividends paid on the shares of the Company's common stock
(the Company's common stock currently does not pay a dividend) held by the
Stock Fund, gains or losses realized on sales of the Company's common stock,
appreciation or depreciation in the market price of those shares owned, and
interest on the short-term investments held by the Stock Fund.
The outstanding units and net asset values for the Stock Fund are calculated
at the end of each month by the Plan Trustee. The monthly Stock Fund units
and net asset value per unit for the period ending May 31, 1996 through
December 31, 1996 are as follows:
Number Net Net Asset
of Asset Value
Units Value Per Unit
------- ------------- -----------
May 31, 1996:
Genentech Common Stock 170,901 $ 8,993,665 $52.62
Fidelity Institutional Cash Portfolio:
Money Market Fund 122,580 122,580 1.00
June 30, 1996:
Genentech Common Stock 169,001 8,851,427 52.37
Fidelity Institutional Cash Portfolio:
Money Market Fund 45,181 45,181 1.00
July 31, 1996:
Genentech Common Stock 164,601 8,662,128 52.63
Fidelity Institutional Cash Portfolio:
Money Market Fund 127,632 127,632 1.00
August 31, 1996:
Genentech Common Stock 162,080 8,509,200 52.50
Fidelity Institutional Cash Portfolio:
Money Market Fund 49,181 49,181 1.00
September 30, 1996:
Genentech Common Stock 158,380 8,374,343 52.88
Fidelity Institutional Cash Portfolio:
Money Market Fund 120,408 120,408 1.00
October 31, 1996:
Genentech Common Stock 156,780 8,446,523 53.88
Fidelity Institutional Cash Portfolio:
Money Market Fund 108,720 108,720 1.00
November 30, 1996:
Genentech Common Stock 155,268 8,403,881 54.13
Fidelity Institutional Cash Portfolio:
Money Market Fund 84,407 84,407 1.00
December 31, 1996:
Genentech Common Stock 154,568 8,292,400 53.65
Fidelity Institutional Cash Portfolio:
Money Market Fund 111,451 111,451 1.00
In 1996 and 1995, each participant in the Plan could elect to defer up to the
lower of $9,500 ($9,240 in 1995) or 12% of his or her eligible compensation,
subject to limitations of the Code. For the plan years 1996 and 1995, each
participant directed the investment of his or her contributions in any of the
following twelve investment funds of the Plan (or any combination thereof):
Page 10
Genentech, Inc. Tax Reduction Investment Plan
Notes to Financial Statements
Genentech Common Stock Fund
This fund invests primarily in the callable putable common stock of the
Company, which is purchased at full market price. In addition, a small
percentage of this fund (approximately 2%, although the percentage may vary
over time) invests in the Fidelity Institutional Cash Portfolio: Money Market
Fund to provide liquidity for the timely settlement of trades. The callable
putable common stock of the Company does not currently pay dividends;
therefore the return on this fund is largely dependent on the performance of
the stock and to a lesser degree, the interest received on the short-term
investments. See above for information on the unitization of this fund.
Fidelity Magellan, registered trademark, Fund
The Fidelity Magellan Fund is a mutual fund managed by Fidelity Management
and Research Company (FMR). The fund invests in the common stocks, and
securities convertible into common stocks, of all types of domestic and
foreign companies.
Fidelity Growth Company Fund
The Fidelity Growth Company Fund is a mutual fund managed by FMR. It
invests primarily in common stock of companies which it believes have the
potential for above-average growth.
Fidelity Growth & Income Portfolio
The Fidelity Growth & Income Portfolio is managed by FMR and invests
primarily in securities of U.S. and foreign companies that offer growth of
earnings potential while paying current dividends. The Portfolio may also
invest in bonds.
Fidelity Intermediate Bond Fund
The Fidelity Intermediate Bond Fund is a mutual fund managed by FMR. The
fund invests in all types of U.S. and foreign bonds, including corporate or
U.S. government issues. The fund selects bonds considered medium to high
quality and normally maintains an average maturity of 3-10 years.
Fidelity Overseas Fund
The Fidelity Overseas Fund is a mutual fund managed by FMR. The fund
invests in foreign securities including common stock, securities convertible
to common stock and debt instruments of foreign businesses and governments.
Fidelity Balanced Fund
The Fidelity Balanced Fund is a mutual fund managed by FMR that invests in a
broad variety of high yielding U.S. and foreign securities. The fund
maintains at least 25% of its assets in fixed income securities (bonds) and
preferred stocks.
Fidelity Asset Manager, trademark, Fund
The Fidelity Asset Manager Fund is a mutual fund managed by FMR. The Asset
Manager Fund allocates its assets among domestic and foreign equities, bonds
and short-term instruments, aiming for an investment mix of 40% stocks, 40%
bonds and 20% short-term investments.
Fidelity Asset Manager: Growth Fund
The Fidelity Asset Manager: Growth Fund, managed by FMR, invests in domestic
and foreign stocks, bonds and short-term instruments, aiming for an investment
mix of 65% stocks, 30% bonds and 5% short-term investments.
Page 11
Genentech, Inc. Tax Reduction Investment Plan
Notes to Financial Statements
Fidelity Asset Manager: Income Fund
The Fidelity Asset Manager: Income Fund is a mutual fund managed by FMR
which invests in domestic and foreign stocks, bonds and short-term
instruments, aiming for an investment mix of 20% stocks, 30% bonds and 50%
short-term investments.
Fidelity Retirement Money Market Portfolio
The Fidelity Retirement Money Market Portfolio is a mutual fund managed by
FMR. It invests in high-quality U.S. dollar-denominated money market
instruments of U.S. and foreign issuers, including short-term corporate
obligations and certificates of deposit.
Fidelity U.S. Equity Index Portfolio
The Fidelity U.S. Equity Index Portfolio, managed by FMR, invests mostly in
the common stocks of the 500 companies that make up the Standard & Poor's
Composite Index.
Participant Loans
Loans are made only to Plan participants, at fixed interest rates (presently
2% above the then current bank prime interest rate), subject to certain
restrictions, principally related to a participant's account balance,
permissible loan amount, and repayment through payroll withholding. Loans are
repaid through monthly payroll deductions over three or five years, or fifteen
years if the purpose of the loan is to purchase a participant's principal
residence.
Conditions of Withdrawal
Distributions under the Plan will be made upon a participant's death,
disability, retirement or other termination of employment with the Company,
attainment of age 70-1/2, or authorized exercise of his or her withdrawal
rights under the Plan. Participants must consent to a distribution unless he
or she has attained age 62 or the balance credited to his or her account under
the Plan does not exceed and has not exceeded $3,500). Distributions are made
upon receipt of the participant's or beneficiary's election directing the
method of distribution.
Prior to termination of employment with the Company, the Plan administrator
may grant a participant's request for a withdrawal if the Plan administrator
makes a determination that such withdrawal is necessary in light of the
immediate and heavy financial needs of the participant and is in accordance
with the requirements of the Code and regulations promulgated thereunder. In
addition, Plan participants may withdraw up to the entire balance of Plan
accounts if over age 59-1/2 at the time of withdrawal.
(2) Summary of Significant Accounting Policies:
Investment Valuation
Investments are stated at market value at year end. The Genentech Common
Stock Fund, Fidelity Magellan Fund, Fidelity Growth Company Fund, Fidelity
Growth & Income Portfolio, Fidelity Intermediate Bond Fund, Fidelity Overseas
Fund, Fidelity Balanced Fund, Fidelity Asset Manager Fund, Fidelity Asset
Manager: Growth Fund, Fidelity Asset Manager: Income Fund, and Fidelity U.S.
Equity Index Portfolio securities are valued at the last reported sales price
on the last business day of the year, which for the mutual funds represents
the net asset values of shares held by the Plan at year end; the Fidelity
Retirement Money Market Portfolio instruments and Participant Loans are valued
on the basis of historical cost which approximates fair value.
Page 12
Genentech, Inc. Tax Reduction Investment Plan
Notes to Financial Statements
Contributions
Basic contributions are accrued and vested when deducted from employee pay;
the Match is accrued and vested on the Effective Date; and qualified rollover
contributions are vested when received by the Plan Trustee. Contributions are
invested pursuant to participants' directions to the Plan Trustee after
receipt of contributions by the Plan Trustee. Participants may change the
amount of contributions (as a percentage reduction of pre-tax eligible
compensation) at any time by contacting the Plan Trustee. Transfers between
funds and changes in investment allocations can be made at any time, up to ten
times per year, effective upon request by the participant to the Plan Trustee.
Distributions
Distributions are recorded when paid.
Other
All security transactions are recorded on the trade date. Gains and losses
on the disposals of investments are determined based on the average cost of
all securities. Dividend income is recorded on the effective date of a
declared dividend. Income from other investments is recorded as earned on an
accrual basis.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
(3) Income Tax Status:
The Internal Revenue Service ruled on April 29, 1988 that the December 21,
1984 Plan, as amended, qualified in form under Section 401(a) of the Code and
the underlying trust is, therefore, exempt from federal income taxes under
Section 501(a) of the Code. The Plan was subsequently audited and accepted by
the Internal Revenue Service with no change through December 31, 1990.
In December 1990, an amended and restated Plan, effective as of January 1,
1991, was adopted by the Board of Directors of the Company. Effective as of
June 30, 1991 and October 7, 1993, the first and second amendments,
respectively, to the amended and restated Plan were adopted. In January 1994,
the second restatement of the Plan was adopted effective January 1, 1994. The
Internal Revenue Service has determined and informed the Company by letter
dated September 25, 1995, that the Plan and related trust are designed in
accordance with applicable sections of the Code.
Effective as of May 8, 1996, the Plan was again amended and restated. In May
1997, the amended and restated Plan was amended. The changes made in the May
8, 1996 amendment and restatement and the May 1997 amendment were technical in
nature, and in the opinion of the Company and its legal counsel, did not
require another determination from the Internal Revenue Service concerning the
Plan's tax exempt status.
The Company believes that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the Code.
(4) Related Party Transactions:
Certain of the investment funds are managed by FMR, an affiliate of the Plan
Trustee. Because of this relationship, transactions involving these funds
qualify as party-in-interest transactions, as well as transactions in
Genentech Common Stock and Participant Loans.
Page 13
Genentech, Inc. Tax Reduction Investment Plan
Notes to Financial Statements
(5) Assets held for investment at December 31, 1996 were as follows:
Number of
Name of Issuer Shares, Units Fair
and Title of Principal or Amount Cost Value
_______________________________________________ _____________ ____________ ____________
GENENTECH COMMON STOCK FUND
Genentech, Inc. -
Callable Putable Common Stock.............. 154,568 $ 6,165,697 $ 8,292,400
Fidelity Institutional Cash Portfolio:
Money Market Fund.......................... 111,451 111,451 111,451
FIDELITY MAGELLAN, registered trademark, FUND
Fidelity Magellan Fund....................... 410,946 30,098,708 33,142,803
FIDELITY GROWTH COMPANY FUND
Fidelity Growth Company Fund ................ 429,070 14,555,751 17,360 152
FIDELITY GROWTH & INCOME PORTFOLIO
Fidelity Growth & Income Portfolio........... 881,185 21,372,588 27,078,832
FIDELITY INTERMEDIATE BOND FUND
Fidelity Intermediate Bond Fund.............. 290,998 2,989,960 2,933,257
FIDELITY OVERSEAS FUND
Fidelity Overseas Fund ...................... 155,119 4,430,398 4,783,884
FIDELITY BALANCED FUND
Fidelity Balanced Fund ...................... 1,002,517 12,861,795 14,115,444
FIDELITY ASSET MANAGER, trademark, FUND
Fidelity Asset Manager Fund.................. 79,289 1,217,772 1,305,895
FIDELITY ASSET MANAGER: GROWTH FUND
Fidelity Asset Manager: Growth Fund ......... 85,407 1,304,373 1,396,410
FIDELITY ASSET MANAGER: INCOME FUND
Fidelity Asset Manager: Income Fund ........ 40,197 460,029 466,683
FIDELITY RETIREMENT MONEY MARKET PORTFOLIO
Retirement Money Market Portfolio............ 10,593,850 10,593,850 10,593,850
FIDELITY U.S. EQUITY INDEX PORTFOLIO
Fidelity U.S. Equity Index Portfolio......... 210,787 4,610,577 5,680,716
PARTICIPANT LOANS
Loans receivable from participants .......... $ 3,326,576 3,326,576 3,326,576
____________ ____________
TOTAL INVESTMENTS ............................. $114,099,525 $130,588,353
============ ============
Page 14
Report of Ernst & Young LLP, Independent Auditors
To the Participants and Plan Administration Committee of the
Genentech, Inc. Tax Reduction Investment Plan
We have audited the accompanying statements of net assets available for
benefits of the Genentech, Inc. Tax Reduction Investment Plan as of December
31, 1996 and 1995, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Genentech,
Inc. Tax Reduction Investment Plan at December 31, 1996 and 1995, and the
changes in its net assets available for benefits for the years then ended, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental
schedules of assets held for investment purposes as of December 31, 1996 and
of reportable transactions for the year then ended are presented for purposes
of complying with the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974, and are not a required part of the basic financial statements. The Fund
Information in the statement of net assets available for benefits and the
statement of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the net assets
available for benefits and changes in net assets available for benefits of
each fund. The supplemental schedules and Fund Information have been
subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
ERNST & YOUNG LLP
San Jose, California
June 5, 1997
Page 15
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Plan administrator has duly caused this annual report to be signed by the
undersigned hereunto duly authorized.
Genentech, Inc. Tax Reduction Investment Plan
by Genentech, Inc., Plan Administrator
By: /S/LOUIS J. LAVIGNE, JR. Date: June 25, 1997
___________________________________
Louis J. Lavigne, Jr.
Executive Vice President and
Chief Financial Officer
and Plan Administration Committee
Member for Genentech, Inc.
Tax Reduction Investment Plan
By: /S/JUDY HEYBOER Date: June 25, 1997
___________________________________
Judy Heyboer
Senior Vice President - Human Resources
and Plan Administration Committee
Member for Genentech, Inc.
Tax Reduction Investment Plan
By: /S/MARTY GLICK Date: June 25, 1997
___________________________________
Marty Glick
Vice President - Finance - Tax and Treasury
and Plan Administration Committee
Member for Genentech, Inc.
Tax Reduction Investment Plan
Page 16
Index of Supplemental Schedules Filed with Form 11-K
For the Year Ended December 31, 1996
Sequential
Schedule Description Page Numbers
________ _______________________________________________ ____________
I Schedule of Assets Held for Investment Purposes 18
II Schedule of Reportable Transactions 19
Page 17
SCHEDULE I
Genentech, Inc. Tax Reduction Investment Plan
Item 27a
Schedule of Assets Held For Investment Purposes
December 31, 1996
Description Current
Identity of Issue of Investment Cost Value
________________________________________ _________________ ____________ ____________
* GENENTECH COMMON STOCK FUND
Genentech, Inc. - Common stock -
Callable Putable Common Stock ....... 154,568 units $ 6,165,697 $ 8,292,400
Fidelity Institutional Cash Portfolio: Mutual Fund
Money Market Fund .................. 111,451 units 111,451 111,451
* FIDELITY MAGELLAN, registered trademark, FUND
Mutual fund -
Fidelity Magellan Fund................ 410,946 shares 30,098,708 33,142,803
* FIDELITY GROWTH COMPANY FUND
Mutual fund -
Fidelity Growth Company Fund ......... 429,070 shares 14,555,751 17,360,152
* FIDELITY GROWTH & INCOME PORTFOLIO
Mutual fund -
Fidelity Growth & Income Portfolio ... 881,185 shares 21,372,588 27,078,832
* FIDELITY INTERMEDIATE BOND FUND
Mutual fund -
Fidelity Intermediate Bond Fund ...... 290,998 shares 2,989,960 2,933,257
* FIDELITY OVERSEAS FUND
Mutual fund -
Fidelity Overseas Fund ............... 155,119 shares 4,430,398 4,783,884
* FIDELITY BALANCED FUND
Mutual fund -
Fidelity Balanced Fund ............... 1,002,517 shares 12,861,795 14,115,444
* FIDELITY ASSET MANAGER, trademark, FUND
Mutual fund -
Fidelity Asset Manager Fund........... 79,289 shares 1,217,772 1,305,895
* FIDELITY ASSET MANAGER: GROWTH FUND
Mutual fund -
Fidelity Asset Manager: Growth Fund .. 85,407 shares 1,304,373 1,396,410
* FIDELITY ASSET MANAGER: INCOME FUND
Mutual fund -
Fidelity Asset Manager: Income Fund .. 40,197 shares 460,029 466,683
* FIDELITY RETIREMENT MONEY MARKET PORTFOLIO
Mutual fund -
Retirement Money Market Portfolio..... 10,593,850 shares 10,593,850 10,593,850
* FIDELITY U.S. EQUITY INDEX PORTFOLIO
Mutual fund -
Fidelity U.S. Equity Index Portfolio . 210,787 shares 4,610,577 5,680,716
* PARTICIPANT LOANS
Loans receivable from participants ... (1) 3,326,576 3,326,576
____________ ____________
TOTAL INVESTMENTS ...................... $114,099,525 $130,588,353
============ ============
<FN>
(1) Maturing at various dates through 2011 at interest rates ranging from 8.00% to 12.25%.
* Party-in-interest.
</FN>
Page 18
SCHEDULE II
Genentech, Inc. Tax Reduction Investment Plan
Item 27d
Schedule of Reportable Transactions
For the Year ended December 31, 1996
Purchases Sales
_________________________ _________________________________________________
Number of Purchase Number of Selling Net
Description Transactions Price Transactions Cost Price Gain/Loss
of Asset
____________________________ ___________ ___________ ___________ ___________ _________
Genentech
Common Stock 146 $10,918,480 116 $11,218,964 $11,756,676 $ 537,712
Fidelity
Magellan Fund 220 11,819,577 187 6,818,123 7,157,565 339,442
Fidelity Growth
Company Fund 211 6,669,203 141 1,756,130 2,081,578 325,448
Fidelity Growth
& Income Fund 213 8,847,141 146 2,298,512 2,817,626 519,114
Fidelity
Balanced Fund 179 3,145,155 146 2,788,893 2,928,358 139,465
Fidelity Retirement
Money Market Fund 176 4,550,684 168 3,034,724 3,034,724 -
<FN>
Reportable transactions include any series of transactions that in the aggregate exceed five
percent of the fair market value of Plan assets at the beginning of the year. The transactions
can occur on a daily basis. These transactions represent Category (iii) reportable
transactions in accordance with Department of Labor regulations. There were no other
reportable transactions during 1996.
</FN>
Page 19
Genentech, Inc. Tax Reduction Investment Plan
Index of Exhibits Filed with Form 11-K
For the Year Ended December 31, 1996
Sequential
Exhibit Number Description Page Numbers
________________ ______________________________________________ ____________
23 Consent of Ernst & Young LLP, Independent Auditors,
filed with this document 21
Page 20
SKELETON DRAFT
5-14-97