THE PROCTER & GAMBLE COMPANY
AND SUBSIDIARIES
====================
ANNUAL REPORT ON FORM 10-K
TO THE
SECURITIES AND EXCHANGE COMMISSION
FOR THE
YEAR ENDED JUNE 30, 1997
******************************************
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT ON FORM 10-K PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997 Commission File No. 1-434
--------------------------------------------------------
THE PROCTER & GAMBLE COMPANY One
Procter & Gamble Plaza, Cincinnati, Ohio 45202
Telephone (513) 983-1100
IRS Employer Identification No. 31-0411980
State of Incorporation: Ohio
-------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each Exchange on which registered
- ------------------------------- ---------------------------------------------
Common Stock, without Par Value New York, Cincinnati, Amsterdam, Paris, Basle,
Geneva, Lausanne, Zurich, Frankfurt, Antwerp,
Brussels, Tokyo
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
There were 1,350,318,252 shares of Common Stock outstanding as of August 8, 1997
(restated for two-for-one stock split effective August 22, 1997). The aggregate
market value of the voting stock held by non-affiliates amounted to $104 billion
on August 8, 1997.
Documents Incorporated By Reference
-----------------------------------
Portions of the Annual Report to Shareholders for the fiscal year ended June 30,
1997 are incorporated by reference into Part I and Part II of this report.
Portions of the Proxy Statement for the 1997 Annual Meeting of Shareholders are
incorporated by reference into Part III of this report.
PART I
------
Item 1. Business.
---------
General Development of Business
-----------------------------------------
The Procter & Gamble Company was incorporated in Ohio in 1905, having
been built from a business founded in 1837 by William Procter and James Gamble.
Today, the Company manufactures and markets a broad range of consumer products
in many countries throughout the world.
Unless the context indicates otherwise, the term the "Company" as used
herein refers to The Procter & Gamble Company (the registrant) and its
subsidiaries.
Additional information required by this item is incorporated herein by
reference to the Letter to Shareholders, which appears on pages 2-3, Management
Q&A on pages 4-5, Procter and Gamble at a Glance on pages 6-7, and We Make Every
Day Better, which appears on pages 8-17 of the Annual Report to Shareholders for
the fiscal year ended June 30, 1997.
Financial Information About Industry Segments
---------------------------------------------
The Company's products fall into five business segments: Laundry and
Cleaning, Paper, Beauty Care, Food and Beverage, and Health Care.
Additional information required by this item is incorporated herein by
reference to Note 11 Segment Information of the Notes to the Consolidated
Financial Statements, which appears on pages 43 and 44, and Financial Review,
which appears on pages 22-29 of the Annual Report to Shareholders for the fiscal
year ended June 30, 1997.
Narrative Description of Business
---------------------------------
The Company's business, represented by the aggregate of its Laundry and
Cleaning, Paper, Beauty Care, Food and Beverage, and Health Care segments, is
essentially homogeneous. For the most part, the factors necessary for an
understanding of these five segments are essentially identical. The markets in
which the Company's products are sold are highly competitive. The products of
the Company's business segments compete with many large and small companies, and
there is no dominant competitor or competitors. Advertising is used in
conjunction with an extensive sales force because the Company believes this
combination provides the most efficient method of marketing these types of
products. Product quality, performance, value and packaging are also important
competitive factors. Most of the Company's products in each of its segments are
distributed through grocery stores and other retail outlets.
The Laundry category and Diaper category constitute approximately 21%
and 12% of consolidated fiscal 1997 sales, respectively. These categories
constituted approximately the same percentages of consolidated sales in the
preceding two fiscal years. The creation of new products and the development of
new performance benefits for consumers on the Company's existing products are
vital ingredients in its continuing progress in the highly competitive markets
in which it does business. Basic research and product development activities
continued to carry a high priority during the past fiscal year. While many of
the benefits from these efforts will not be realized until future years, the
Company believes these activities demonstrate its commitment to future growth.
The Company has registered trademarks and owns or has licenses under
patents which are used in connection with its business in all segments. Some of
these patents or licenses cover significant product formulation and processing
of the Company's products. The trademarks of all major products in each segment
are registered. In part, the Company's success can be attributed to the
existence of these trademarks, patents and licenses.
Most of the raw materials used by the Company are purchased from
others. Additionally, some raw materials, primarily chemicals, are produced by
the Company for further use in the manufacturing process. The Company purchases
and produces a substantial variety of raw materials, no one of which is material
to the Company's business taken as a whole.
Expenditures in fiscal year 1997 for compliance with Federal, State and
local environmental laws and regulations were not materially different from such
expenditures in the prior year, and no material increase is expected in fiscal
year 1998.
Operations outside the United States are generally characterized by the
same conditions discussed in the description of the business above and may also
be affected by additional elements including changing currency values and
different rates of inflation and economic growth. The effect of these additional
elements is less significant in the Food and Beverage segment than in the
Company's other business segments.
The Company has approximately 106,000 employees.
The Company provides an Employee Stock Ownership Plan ("ESOP") which is
part of The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership
Plan. Convertible preferred stock of the Company and other assets owned by the
ESOP are held through a trust (the "ESOP Trust"). The ESOP Trust has issued
certain debt securities to the public. The Company has guaranteed payment of
principal and interest on these debt securities. Holders of these debt
securities have no recourse against the assets of the ESOP Trust except with
respect to cash contributions made by the Company to the ESOP Trust, and
earnings attributable to such contributions. Such cash contributions are made by
the Company only to the extent that dividends on the convertible preferred stock
are inadequate to fund repayment of the debt securities. Any such contributions
and subsequent payments to holders are made on a same-day basis and such
contributions would therefore not be held by the ESOP Trust unless there was a
default in payment on the debt securities by the ESOP Trust after having
received such contributions from the Company. Such a default is not likely to
occur and therefore there is little likelihood that there would not be assets
available to satisfy the claims of any holders of the debt securities. A summary
description of the liabilities of the ESOP Trust and of the dividends paid by
the Company on the convertible preferred stock and cash payments from the
Company to the ESOP Trust for the three years ended June 30, 1997 are
incorporated by reference to Note 7 Postretirement Benefits and Note 8 Employee
Stock Ownership Plan, which appear on pages 41-42 of the Annual Report to
Shareholders for the fiscal year ended June 30, 1997.
Additional information required by this item is incorporated herein by
reference to Note 11 Segment Information, which appears on pages 43 and 44, Note
1 Summary of Significant Accounting Policies - Major Customer on page 37,
Financial Highlights, which appears on page 45, and Financial Review, which
appears on pages 22-29 of the Annual Report to Shareholders for the fiscal year
ended June 30, 1997.
Financial Information About Foreign and Domestic Operations
-----------------------------------------------------------
The information required by this item is incorporated herein by
reference to Note 11 Segment Information, which appears on pages 43 and 44, and
Financial Review, which appears on pages 22-29 of the Annual Report to
Shareholders for the fiscal year ended June 30, 1997.
Item 2. Properties.
-----------
In the United States, the Company owns and operates manufacturing
facilities at 35 locations in 20 states. In addition, it owns and operates 85
manufacturing facilities in 43 other countries. Laundry and Cleaning products
are produced at 43 of these locations; Paper products at 38; Health Care
products at 23; Beauty Care products at 43; and Food and Beverage products at
13. Management believes that the Company's production facilities are adequate to
support the business efficiently and that the properties and equipment have been
well maintained.
Item 3. Legal Proceedings.
------------------
The Company is involved in clean-up efforts at off-site Superfund
locations, many of which are in the preliminary stages of investigation. The
amount accrued at June 30, 1997 representing the Company's probable future costs
that can be reasonably estimated was $9 million.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
Not applicable.
Executive Officers of the Registrant
------------------------------------
The names, ages and positions held by the executive officers of the
Company on August 8, 1997 are:
Elected to
Present
Name Position Age Position
- ----------------------- -------------------------------- ----- ---------
John E. Pepper Chairman of the Board and 59 1995
Chief Executive.
Director since June 12, 1984.
Durk I. Jager President and Chief 54 1995
Operating Officer.
Director since December 12, 1989.
Wolfgang C. Berndt Executive Vice President. 54 1995
Harald Einsmann Executive Vice President. 63 1995
Director since June 10, 1991.
Alan G. Lafley Executive Vice President. 50 1995
Jorge P. Montoya Executive Vice President. 51 1995
Benjamin L. Bethell Senior Vice President. 57 1991
Robert T. Blanchard Group Vice President. 52 1991
Gordon F. Brunner Senior Vice President. 58 1987
Director since March 1, 1991.
Bruce L. Byrnes Group Vice President. 49 1991
R. Kerry Clark Group Vice President. 45 1995
Larry G. Dare Group Vice President. 57 1990
Stephen P. Donovan, Jr. Group Vice President. 56 1986
Todd A. Garrett Senior Vice President. 55 1996
Jacobus Groot Group Vice President. 46 1995
James J. Johnson Senior Vice President and 50 1992
General Counsel.
Jeffrey D. Jones Group Vice President. 44 1992
Mark D. Ketchum Group Vice President. 47 1996
Fuad O. Kuraytim Group Vice President. 56 1995
Gary T. Martin Senior Vice President. 52 1991
Claude L. Meyer Group Vice President. 54 1995
Lawrence D. Milligan Senior Vice President. 61 1990
Erik G. Nelson Senior Vice President. 57 1993
Martin J. Nuechtern Group Vice President. 43 1997
John O'Keeffe Group Vice President. 47 1995
Charlotte R. Otto Senior Vice President. 43 1996
Dimitri Panayotopoulos Group Vice President. 45 1997
Herbert Schmitz Group Vice President. 60 1995
Robert L. Wehling Senior Vice President. 58 1994
Edwin H. Eaton, Jr. Vice President and Comptroller. 58 1987
All of the above Executive officers are members of the Executive Committee of
The Procter & Gamble Company and have been employed by the Company over five
years.
PART II
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Item 5. Market for the Common Stock and Related Stockholder Matters
-----------------------------------------------------------
The information required by this item is incorporated by reference to
Shareholder Information, which appears on page 48 of the Annual Report to
Shareholders for the fiscal year ended June 30, 1997.
Item 6. Selected Financial Data
-----------------------
The information required by this item is incorporated by reference to
Financial Highlights, which appears on page 45 of the Annual Report to
Shareholders for the fiscal year ended June 30, 1997.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
----------------------------------------------------------------
The information required by this item is incorporated by reference to
Financial Review, which appears on pages 22-29, Note 10 Commitments and
Contingencies, which appears on page 43, and Note 11 Segment Information, which
appears on pages 43 and 44 of the Annual Report to Shareholders for the fiscal
year ended June 30, 1997.
The Company has made certain forward-looking statements in the Annual
Report to Shareholders for the fiscal year ended June 30, 1997, and will make
such statements in other contexts, relating to volume growth, increases in
market shares, total shareholder return and cost reduction, among others.
These forward-looking statements represent challenging goals for the
Company and are based on certain assumptions and estimates regarding the
worldwide economy, technological innovation, competitive activity, interest
rates, pricing, currency movements, product introductions, governmental action,
and the development of certain markets. Some examples of key factors necessary
to achieve the Company's goals are: 1) the ability to improve results in the
face of strong competition, 2) the ability to reduce costs, in part via the
ongoing simplification and standardization porgram, funded within existing
budget targets, 3) the successful completion of the implementation of ECR and
the ability to maintain key customer relationships in the important developed
markets, 4) the continuation of substantial growth in significant developing
markets such as China, Mexico, the Southern Cone of Latin America and the
countries of Central and Eastern Europe, 5) obtaining successful outcomes in
regulatory and tax matters, 6) the ability to continue technological innovation,
7) the avoidance of adverse foreign currency movements. If the Company's
assumptions and estimates are incorrect or do not come to fruition, or if the
Company does not achieve all these key factors, then the Company's actual
performance could vary materially from the forward-looking statements made
herein.
Item 8. Financial Statements and Supplemental Data
------------------------------------------
The financial statements and supplemental data are incorporated by
reference to pages 31-45 of the Annual Report to Shareholders for the fiscal
year ended June 30, 1997.
Item 9. Disagreements on Accounting and Financial Disclosure
----------------------------------------------------
Not applicable.
PART III
--------
Item 10. Directors and Executive Officers
--------------------------------
The information required by this item is incorporated by reference to
pages 2-8 and 21 of the proxy statement filed since the close of the fiscal year
ended June 30, 1997, pursuant to Regulation 14A which involved the election of
directors. Pursuant to Item 401(b) of Regulation -K, Executive Officers of the
Registrant are reported in Part I of this report.
Item 11. Executive Compensation
----------------------
The information required by this item is incorporated by reference to
pages 9-16 of the proxy statement filed since the close of the fiscal year ended
June 30, 1997, pursuant to Regulation 14A which involved the election of
directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required by this item is incorporated by reference to
pages 18-20 of the proxy statement filed since the close of the fiscal year
ended June 30, 1997, pursuant to Regulation 14A which involved the election of
directors.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information required by this item is incorporated by reference to
page 21 of the proxy statement filed since the close of the fiscal year ended
June 30, 1997, pursuant to Regulation 14A which involved the election of
directors.
PART IV
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Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
-----------------------------------------------------------------
A. 1. Financial Statements:
The following consolidated financial statements of The
Procter & Gamble Company and subsidiaries and the report
of independent accountants are incorporated by reference
in Part II, Item 8.
- Report of independent accountants
- Consolidated statements of earnings -- for years
ended June 30, 1997, 1996 and 1995
- Consolidated balance sheets -- as of June 30, 1997
and 1996
- Consolidated statements of shareholders' equity --
for years ended June 30, 1997, 1996 and 1995
- Consolidated statements of cash flows -- for years
ended June 30, 1997, 1996 and 1995
- Notes to consolidated financial statements
2. Financial Statement Schedules:
These schedules are omitted because of the absence of the
conditions under which they are required or because the
information is set forth in the financial statements or
notes thereto.
3. Exhibits:
Exhibit (3-1) -- Amended Articles of
Incorporation (Incorporated by
reference to Exhibit (3-1) of the
Company's Annual Report on Form 10-K
for the year ended June 30, 1993).
(3-2) -- Regulations (Incorporated by
reference to Exhibit (3-2) of the
Company's Annual Report on Form 10-K
for the year ended June 30, 1993).
Exhibit (4) -- Registrant agrees to file a copy of
documents defining the rights of
holders of long-term debt upon request
of the Commission.
Exhibit (10-1) -- The Procter & Gamble 1992 Stock Plan
(as amended December 14, 1993) which
was adopted by the shareholders at the
annual meeting on October 13, 1992
(Incorporated by reference to
Exhibit (10-1) of the Company's
Annual Report on Form 10-K for the
year ended June 30, 1994).
(10-2) -- The Procter & Gamble 1983 Stock
Plan (as amended May 11, 1993) which
was adopted by the shareholders at
the annual meeting on October 11,
1983 (Incorporated by reference to
Exhibit (10-2) of the Company's
Annual Report on Form 10-K for the
year ended June 30, 1993).
(10-3) -- The Procter & Gamble Executive
Group Life Insurance Policy (each
executive officer is covered for an
amount equal to annual salary plus
bonus) (Incorporated by reference to
Exhibit (10-3) of the Company's
Annual Report on Form 10-K for the
year ended June 30, 1993).
(10-4) -- Additional Remuneration Plan (as
amended June 12, 1990) which was
adopted by the Board of Directors on
April 12, 1949 (Incorporated by
reference to Exhibit (10-4) of the
Company's Annual Report on Form 10-K
for the year ended June 30, 1993).
(10-5) -- The Procter & Gamble Deferred
Compensation Plan for Directors
which was adopted by the Board of
Directors on September 9, 1980
(Incorporated by reference to
Exhibit (10-5) of the Company's
Annual Report on Form 10-K for the
year ended June 30, 1993).
(10-6) -- The Procter & Gamble Board of
Directors Charitable Gifts Program
which was adopted by the Board of
Directors on November 12, 1991
(Incorporated by Reference to
Exhibit (10-7) of the Company's
Annual Report on Form 10-K for the
year ended June 30, 1993).
(10-7) -- The Procter & Gamble 1993
Non-Employee Directors' Stock Plan
which was adopted by the
shareholders at the annual meeting
on October 11, 1994 and which was
amended on January 10, 1995, by the
Board of Directors, and ratified by
the shareholders at the annual
meeting on October 10, 1995, and
which was further amended by the
Board of Directors on June 11, 1996
to be effective on January 1, 1997.
(10-8) -- Richardson-Vicks Inc. Special
Stock Equivalent Incentive Plan
which was authorized by the Board of
Directors of The Procter & Gamble
Company and adopted by the Board of
Directors of Richardson-Vicks Inc.
on December 31, 1985 (Incorporated
by reference to Exhibit (10-9) of
the Company's Annual Report on Form
10-K for the year ended June 30,
1994).
(10-9) -- The Procter & Gamble Executive
Group Life Insurance Policy
(Additional Policy) (Incorporated by
reference to Exhibit 10-10 of the
Company's Annual Report on Form 10-K
for the year ended June 30, 1996).
Exhibit (11) -- Computation of earnings per share.
Exhibit (12) -- Computation of ratio of earnings to
fixed charges.
Exhibit (13) -- Annual Report to Shareholders.
(Pages 2-17, 22-45, 48)
Exhibit (21) -- Subsidiaries of the registrant.
Exhibit (23) -- Consent of Deloitte & Touche LLP.
Exhibit (27) -- Financial Data Schedule.
Exhibit (99-1) -- Directors and Officers
Liability Policy (Incorporated by
reference to Exhibit 99-1 of the
Company's Annual Report on Form 10-K
for the year ended June 30, 1995)
(the "Policy Period" has been
extended to 6/30/00).
(99-2) -- Directors and Officers (First)
Excess Liability Policy (the "Policy
Period" has been extended to
6/30/98).
(99-3) -- Directors and Officers (Second)
Excess Liability Policy
(Incorporated by reference to
Exhibit 99-3 of the Company's Annual
Report on Form 10-K for the year
ended June 30, 1995) (the "Policy
Period" has been extended to
6/30/98).
(99-4) -- Directors and Officers (Third)
Excess Liability Policy (the "Policy
Period" has been extended to
6/30/98).
(99-5) -- Directors and Officers (Fourth)
Excess Liability Policy
(Incorporated by reference to
Exhibit 99-5 of the Company's Annual
Report on Form 10-K for the year
ended June 30, 1995) (the "Policy
Period" has been extended to
6/30/98).
(99-6) -- Fiduciary Responsibility
Insurance Policy (Incorporated by
reference to Exhibit 99-6 of the
Company's Annual Report on Form 10-K
for the year ended June 30, 1995)
(the "Policy Period" has been
extended to 6/30/98).
The exhibits listed are filed with the Securities and
Exchange Commission but are not included in this booklet.
Copies of these exhibits may be obtained by sending a
request to: Linda D. Rohrer, Assistant Secretary, The
Procter & Gamble Company, P. O. Box 599, Cincinnati, Ohio
45201
B. Reports on Form 8-K:
The Company filed Current Reports on Form 8-K containing
information pursuant to Item 9 entitled "Sales of Equity
Securities Pursuant to Regulations," dated May 15, 1997, May
29, 1997, June 16, 1997, June 27, 1997, July 11, 1997, July
22, 1997, August 27, 1997 and September 2, 1997 and an Amended
Form 8-K on December 3, 1996.
Also the Company filed a Current Report on Form 8-K pursuant
to Item 5 entitled "Other Events" and Item 7 "Financial
Statements and Exhibits" dated July 8, 1997 containing a press
release by the Company declaring a two-for-one stock split and
dividend increase.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized in the city of Cincinnati,
State of Ohio.
THE PROCTER & GAMBLE COMPANY
By /s/JOHN E. PEPPER
---------------------------------------
John E. Pepper
Chairman of the Board and Chief Executive
September 9, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ------ ----
/s/JOHN E. PEPPER Chairman of the Board and |
- ------------------------- Chief Executive and Director |
(John E. Pepper) (Principal Executive Officer) |
|
/s/ERIK G. NELSON Senior Vice President |
- ------------------------- (Principal Financial Officer) |
(Erik G. Nelson) |
|
/s/EDWIN H. EATON, JR. Vice President and Comptroller |
- ------------------------- Principal Accounting Officer) |
(Edwin H. Eaton, Jr.) September 9, 1997
|
/s/EDWIN L. ARTZT |
- ------------------------- Director |
(Edwin L. Artzt) |
|
/s/NORMAN R. AUGUSTINE |
- ------------------------- Director |
(Norman R. Augustine) |
|
/s/DONALD R. BEALL |
- ------------------------- Director |
(Donald R. Beall) |
|
/s/GORDON F. BRUNNER |
- ------------------------- Director |
(Gordon F. Brunner) |
|
/s/RICHARD B. CHENEY |
- ------------------------- Director |
(Richard B. Cheney) |
|
/s/HARALD EINSMANN |
- ------------------------- Director |
(Harald Einsmann) |
|
/s/RICHARD J. FERRIS |
- ------------------------- Director |
(Richard J. Ferris) |
|
/s/JOSEPH T. GORMAN |
- ------------------------- Director September 9, 1997
(Joseph T. Gorman) |
|
/s/DURK I. JAGER |
- ------------------------- Director |
(Durk I. Jager) |
|
/s/CHARLES R. LEE |
- ------------------------- Director |
(Charles R. Lee) |
|
/s/LYNN M. MARTIN |
- ------------------------- Director |
(Lynn M. Martin) |
|
/s/JOHN C. SAWHILL |
- ------------------------- Director |
(John C. Sawhill) |
|
/s/JOHN F. SMITH, JR. |
- ------------------------- Director |
(John F. Smith, Jr.) |
|
/s/RALPH SNYDERMAN |
- ------------------------- Director |
(Ralph Snyderman) |
|
/s/ROBERT D. STOREY |
- ------------------------- Director September 9, 1997
(Robert D. Storey) |
|
|
- ------------------------- Director |
(Marina v.N. Whitman) |
-----|
EXHIBIT INDEX
-----------------------
Exhibit (3-1) -- Amended Articles of Incorporation (Incorporated by reference
to Exhibit (3-1) of the Company's Annual Report on Form 10-K
for the year ended June 30, 1993).
(3-2) -- Regulations (Incorporated by reference to Exhibit (3-2) of
the Company's Annual Report on Form 10-K for the year ended
June 30, 1993).
Exhibit (4) -- Registrant agrees to file a copy of documents defining the
rights of holders of long-term debt upon request of the
Commission.
Exhibit (10-1) -- The Procter & Gamble 1992 Stock Plan (as amended December 14,
1993) which was adopted by the shareholders at the annual
meeting on October 13, 1992 (Incorporated by reference to
Exhibit (10-1) of the Company's Annual Report on Form 10-K for
the year ended June 30, 1994).
(10-2) -- The Procter & Gamble 1983 Stock Plan (as amended May 11, 1993)
which was adopted by the shareholders at the annual meeting on
October 11, 1983 (Incorporated by reference to Exhibit (10-2)
of the Company's Annual Report on Form 10-K for the year ended
June 30, 1993).
(10-3) -- The Procter & Gamble Executive Group Life Insurance Policy
(each executive officer is covered for an amount equal to
annual salary plus bonus) (Incorporated by reference to
Exhibit (10-3) of the Company's Annual Report on Form 10-K for
the year ended June 30, 1993).
(10-4) -- Additional Remuneration Plan (as amended June 12, 1990) which
was adopted by the Board of Directors on April 12, 1949
(Incorporated by reference to Exhibit (10-4) of the Company's
Annual Report on Form 10-K for the year ended June 30, 1993).
(10-5) -- The Procter & Gamble Deferred Compensation Plan for Directors
which was adopted by the Board of Directors on September 9,
1980 (Incorporated by reference to Exhibit (10-5) of the
Company's Annual Report on Form 10-K for the year ended
June 30, 1993).
(10-6) -- The Procter & Gamble Board of Directors Charitable Gifts
Program which was adopted by the Board of Directors on
November 12, 1991 (Incorporated by Reference to Exhibit (10-7)
of the Company's Annual Report on Form 10-K for the year ended
June 30, 1993).
(10-7) -- The Procter & Gamble 1993 Non-Employee Directors' Stock Plan
which was adopted by the shareholders at the annual meeting on
October 11, 1994 and which was amended on January 10, 1995,
by the Board of Directors, and ratified by the shareholders at
the annual meeting on October 10, 1995, and which was further
amended by the Board of Directors on June 11, 1996 to be
effective on January 1, 1997.
(10-8) -- Richardson-Vicks Inc. Special Stock Equivalent Incentive Plan
which was authorized by the Board of Directors of The Procter
& Gamble Company and adopted by the Board of Directors of
Richardson-Vicks Inc. on December 31, 1985 (Incorporated by
Reference to Exhibit (10-9) of the Company's Annual Report on
Form 10-K for the year ended June 30, 1994).
(10-9) -- The Procter & Gamble Executive Group Life Insurance Policy
(Additional Policy) (Incorporated by reference to Exhibit
10-10 of the Company's Annual Report on Form 10-K for the year
ended June 30, 1996).
Exhibit (11) -- Computation of earnings per share.
Exhibit (12) -- Computation of ratio of earnings to fixed charges.
Exhibit (13) -- Annual Report to Shareholders. (Pages 2-17, 22-45, 48)
Exhibit (21) -- Subsidiaries of the registrant.
Exhibit (23) -- Consent of Deloitte & Touche LLP.
Exhibit (27) -- Financial Data Schedule.
Exhibit (99-1) -- Directors and Officers Liability Policy (Incorporated by
reference to Exhibit 99-1 of the Company's Annual Report on
Form 10-K for the year ended June 30, 1995) (the "Policy
Period" has been extended to 6/30/00).
(99-2) -- Directors and Officers (First) Excess Liability Policy (the
"Policy Period" has been extended to 6/30/98).
(99-3) -- Directors and Officers (Second) Excess Liability Policy
(Incorporated by reference to Exhibit 99-3 of the Company's
Annual Report on Form 10-K for the year ended June 30, 1995)
(the "Policy Period" has been extended to 6/30/98).
(99-4) -- Directors and Officers (Third) Excess Liability Policy (the
"Policy Period" has been extended to 6/30/98).
(99-5) -- Directors and Officers (Fourth) Excess Liability Policy
(Incorporated by reference to Exhibit 99-5 of the Company's
Annual Report on Form 10-K for the year ended June 30, 1995)
(the "Policy Period" has been extended to 6/30/98).
(99-6) -- Fiduciary Responsibility Insurance Policy (Incorporated by
reference to Exhibit 99-6 of the Company's Annual Report on
Form 10-K for the year ended June 30, 1995) (the "Policy
Period" has been extended to 6/30/98).
EXHIBIT (11)
<TABLE>
<CAPTION>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
=============================================
Computation of Earnings Per
Share (Restated for two-for-one stock split
effective August 22, 1997)
-------------------------------------------
Dollars and Share Amounts in Millions
Years Ended June 30
---------------------------------------------
<S> <C> <C> <C> <C> <C>
NET EARNINGS PER SHARE 1993 1994 1995 1996 1997
- ---------------------- ------- ------- ------- -------- -------
Net Earnings/(Loss) $ (656) $ 2,211 $ 2,645 $ 3,046 $ 3,415
Deduct preferred stock dividends 102 102 102 103 104
-------- -------- -------- -------- --------
Net Earnings/(Loss) Applicable to Common Stock (758) 2,109 2,543 $ 2,943 $ 3,311
- ----------------------------------------------
Average number of common shares
outstanding 1,360.8 1,366.2 1,372.0 1,372.6 1,360.3
Per Share
- ---------
Net earnings before prior years' effect
of accounting changes $ 0.12
Prior year effect of accounting changes $ (.68)
Net Earnings/(Loss) per share $ (0.56) $ 1.54 $ 1.85 $ 2.14 $ 2.43
NET EARNINGS PER SHARE ASSUMING
FULL DILUTION
- -------------------------------
Net Earnings/(Loss) $ (656) $ 2,211 $ 2,645 $ 3,046 $ 3,415
Deduct differential -- preferred
vs. common dividends 57 51 45 39 32
-------- -------- -------- -------- --------
Net Earnings/(Loss) Applicable to Common Stock (713) 2,160 2,600 3,007 3,383
- ----------------------------------------------
Average number of common shares outstanding 1,360.8 1,366.2 1,372.0 1,372.6 1,360.3
Add potential effect of:
Exercise of options 14.4 12.0 17.0 19.8 24.8
Conversion of preferred stock 109.4 107.8 105.6 103.8 101.9
-------- -------- -------- -------- --------
Average number of common shares
outstanding, assuming full dilution 1,484.6 1,486.0 1,494.6 1,496.2 1,487.0
Per Share Assuming full dilution
- --------------------------------
Net earnings before prior years' effect
of accounting changes $ 0.15
Prior year effect of accounting changes $ (.63)
Net Earnings/(Loss) $ (0.48) $1.45 $ 1.74 $ 2.01 $ 2.28
</TABLE>
EXHIBIT (12)
<TABLE>
<CAPTION>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
=============================================
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------
Millions of Dollars
Years Ended June 30
---------------------------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
EARNINGS AS DEFINED
- -------------------
Earnings from operations before income taxes
after eliminating undistributed earnings
of equity method investees $ 294 $3,307 $4,022 $4,695 $5,274
Fixed charges, excluding capitalized interest 631 569 571 576 534
------ ------ ------ ------ ------
TOTAL EARNINGS, AS DEFINED $ 925 $3,876 $4,593 $5,271 $5,808
====== ====== ====== ====== ======
FIXED CHARGES, AS DEFINED
- -------------------------
Interest expense (including capitalized interest) $ 577 $ 501 $ 511 $ 493 $ 457
1/3 of rental expense 79 87 83 92 77
------ ------ ------ ------ ------
TOTAL FIXED CHARGES, AS DEFINED $ 656 $ 588 $ 594 $ 585 $ 534
====== ====== ====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES 1.4 6.6 7.7 9.0 10.9
</TABLE>
TO OUR SHAREHOLDERS:
(Top of page 2 - Picture of John E. Pepper and Durk I. Jager)
EVERY DAY in more than 70 countries around the world, P&G people ask themselves
how they can make life better for the billions of consumers who use and trust
our products. And every year, our Company's growth assures us that we are
answering that question with the quality, innovation and value that consumers
expect and deserve - and with results that benefit you, our shareholders.
This past year was no exception. We achieved record unit volume, sales and
net earnings. Operating cash flow reached a record $5.9 billion - an increase of
roughly 40% over the prior year. And our net earnings margin improved to its
highest level in 47 years.
The stock market recognized this strong performance, helping to push our
Total Shareholder return to 38% per year over the last three years. And we
finished the year by announcing a two-for-one stock split and a 12% increase in
the common share dividend.
FOCUSED ON THE FUTURE
Of course, past performance is only a foundation to build upon - and we are
focused on the future. One example is our recent acquisition of Tambrands and
its market-leading tampon brand, Tampax. The tampon category is a $2 billion
market - and a 44% global share, Tampax is by far the world leader. We're
confident we can apply the experience we've gained in feminine protection,
through our Always and Whisper feminine pad brands, and apply it to make Tampax
an even stronger global leader.
Our entry into new categories like this represents one of many ways in
which we are pursuing our ambitious growth goals:
- - To double our business in 10 years
- - To grow share sin categories representing the majority of our volume
- - To remain consistently among the top third of our peer companies in Total
Shareholder Return
THE MOST CHALLENGING GOALS EVER
These are the most challenging goals in our history - and they should be,
because our Company's growth potential has never been greater. To capture this
potential, we'll need to accelerate the pace of sales and volume growth, while
maintaining the double-digit earnings growth and strong cash flow performance
that we have delivered over the past several years.
PRIORITIES FOR GROWTH
We plan to meet this challenge by focusing on five priorities.
1. EXPANDING P&G'S LEADERSHIP IN CORE CATEGORIES. We are focusing on the
premium tier of our categories with products based on breakthrough,
consumer-preferred technologies. This makes sense: P&G's point of
distinction has long been our ability to bring truly superior products to
market.
2. EXPANDING P&G'S LEADERSHIP IN EMERGING MARKETS. Today, in North America and
Western Europe, for example, Procter & Gamble sells $40 worth of our brands
annually for every man, woman and child. This compares to $2 in the
remainder of the world. Clearly, the opportunity to grow in these markets
is extraordinary.
3. CREATING NEW GLOBAL BUSINESSES. We intend to build more new global brands
in the next decade than ever before. Some of these businesses will be in
categories in which we already have a strong foundation: Snacks, tissue/
towel and Health Care. Other new brands and categories are in development
and will start to reach the market in 1997/98.
4. CONTINUING TO CAPITALIZE ON THE SCALE OF OUR OPERATIONS. Our company-wide
efforts to simplify and standardize products and operations helped us save
more than $1 billion in costs in the last year along - and we will continue
to look for ways to operate more efficiently. But cost savings aren't the
only benefit. We also leverage our scale by sharing our best technologies
and ideas through our regional and global organizations - which helps us
build stronger brands around the world.
5. REMAINING THE CONCEPTUAL AND INTELLECTUAL LEADERS OF OUR INDUSTRY. For
example, P&G has redefined the way we work with retail customers.
Historically, retailers and manufacturers often approached each other as
adversaries. Today, we and our customers are pioneering the use of common
analytic systems, shared information resources and mutual business goals -
to better serve the one customer we both share: the consumer. This new way
of working is changing the way we go to market around the world.
WE MAKE EVERY DAY BETTER.
We're confident in these priorities, but we know we have our work cut out for
us. We have the organization to do it - an extraordinary group of 106,000
committed men and women around the world who feel an enormous sense of ownership
for the business and a passionate commitment to excel and to win...a commitment
to make every day better for as many people as possible, in every way we can.
/S/JOHN E. PEPPER
John E. Pepper
Chairman and
Chief Executive
/S/DURK I. JAGER
Durk I. Jager
President and
Chief Operating Officer
(Top of page 4 - Picture of John E. Pepper with caption "John Pepper
answers a couple of commonly asked questions." /S/JOHN E. PEPPER)
Q: Where do you anticipate your projected sales growth will come from over the
next decade?
A: We are setting out to double our business in the next decade. About 40% of
this growth will come from our strongest core businesses - Laundry, Hair
Care, Feminine Protection and Diapers. An additional 20-25% will be
generated by our growth in key developing markets, including Eastern Europe,
China and the Southern Cone of Latin America. The balance will come from
totally new categories, which we are working at record levels to create. The
balance will also come from the expansion of our strongest emerging global
categories, such as Snacks, Tissue/Towel and several areas in health Care.
Q: What role will acquisitions play in your growth strategies?
A: We expect acquisitions to be a factor in all of our growth areas: core
businesses, developing markets, new categories and new brands. For example,
our recent acquisition of Tambrands will certainly help stimulate continued
growth in Feminine Protection - in which P&G is already the world leader.
The addition of the Bombril laundry business will help achieve our growth
goals in the Southern Cone of Latin America. And the Baby Fresh baby wipes
brand we acquired in 1996 is helping us enter this important new category.
You can expect P&G to continue seeking acquisition opportunities like these.
(Middle of pages 4 and 5 the following caption: "How do you create value?
Increased consumer satisfaction leads to brand loyalty; brand loyalty
drives growth; growth creates value.")
(Top of page 4 - Picture of Durk I. Jager with caption "Durk Jager fields
two more inquiries." /S/DURK I. JAGER)
Q: Is it realistic to think that you can continue to build profit margins
during the come decade?
A: Absolutely. The greatest opportunities exist in our ability to leverage the
scale of our regional operations and global businesses. For example, we're
now in the midst of "regionalizing" our North American business: creating
common packages, products and marketing elements that can be used throughout
the United States and Canada. Nearly two-thirds of all our Canadian and
U.S. packages are now in common sizes. The diaper category alone
illustrates the kinds of benefits we can reap from this work. We've
achieved savings of several million dollars, reduced inventory and improved
customer service levels. We will pursue opportunities like this around the
world.
Q: What are you doing to accelerate the pace of breakthrough innovation needed
to build core and new businesses:
A: There is more innovative work underway at P&G today than at any time I can
remember. We are creating product advantages that are important and obvious
to consumers - and quickly globalizing those product ideas. We are
increasing our innovative capacity by simplifying and standardizing product
and package designs, which allows us to make better use of our worldwide
resources. Finally, we are filling the upstream product pipeline with truly
breakthrough ideas in existing businesses and in totally new categories.
PROCTER & GAMBLE AT A GLANCE
PRODUCT SECTORS - LAUNDRY & CLEANING
(Page 6 left-hand margin - Picture of a lady with hands resting on top of
a box of Tide.)
PRODUCT LINES - Laundry detergents and bleaches, fabric conditioners,
household cleaners and dishwashing detergents.
KEY BRANDS - Ace Bleach, Ariel, Bounce, Cascade, Cheer, Comet, Dawn, Downy,
Fairy, Joy, Lenor, Mr. Clean, Tide
PRODUCT NEWS - For the first time ever, P&G enhanced all of its major
U.S. laundry detergent brands at once, with new Ultra 2 power versions
of Tide, Cheer, Gain, Ivory Snow and Dreft, among others.
REVENUE CONTRIBUTION BY SECTOR - Pie chart showing $10.9 billion
revenue contribution by Laundry & Cleaning.
PRODUCT SECTORS - PAPER
(Page 6 left-hand margin - Picture of a young girl holding a box of
Always.)
PRODUCT LINES - Feminine protection products, diapers, facial tissue,
toilet tissue, paper towels, baby wipes and incontinence products.
KEY BRANDS - Always, Whisper, Bounty, Charmin, Pampers
PRODUCT NEWS - We introduced our new Pampers Premium diaper in the U.S.
and Europe. Revolutionary side panels allow air to pass through the
diaper, which keeps babies' skin drier.
REVENUE CONTRIBUTION BY SECTOR - Pie chart showing $10.1 billion
revenue contribution by Paper.
PRODUCT SECTORS - BEAUTY CARE
(Page 6 left-hand margin - Picture of a lady holding a bottle of Oil of
Olay.)
PRODUCT LINES - Facial cleansers and moisturizers, hand-and-body
lotions, personal cleansing products, color and skin care cosmetics,
deodorants, shampoos, hair conditioners, hair sprays, men's and women's
fragrances.
KEY BRANDS - Clearasil, Cover Girl, Head & Shoulders, Ivory, Max Factor,
Oil of Olay, Old Spice, Pantene Pro-V, Pert Plus, Rejoice, Safeguard,
Secret, SK-II, Vidal Sassoon, Zest
PRODUCT NEWS - P&G introduced its new Oil of Olay Age Defying Series in
North America, Europe and Asia. The new products use patented beta
hydroxy technology to gently remove older skin and reveal fresher skin.
REVENUE CONTRIBUTION BY SECTOR - Pie chart showing $7.1 billion revenue
contribution by Beauty Care.
PRODUCT SECTORS - FOOD & BEVERAGE
(Page 6 left-hand margin - Picture of a man with a can of Folgers Coffee.)
PRODUCT LINES - Coffee, snacks, baking mixes, juices, shortening,
cooking oil, peanut butter.
KEY BRANDS - Crisco, Duncan Hines, Folgers, Hawaiian Punch, Jif, Pringles,
Punica, Sunny Delight
PRODUCT NEWS - P&G expanded Sunny Delight into Canada and the U.K.
Sunny Delight, which currently sells more than one billion bottles per
year, is the #1 chilled juice drink in the U.S.
REVENUE CONTRIBUTION BY SECTOR - Pie chart showing $4.1 billion revenue
contribution by Food & Beverage.
PRODUCT SECTORS - HEALTH CARE
(Page 6 left-hand margin - Picture of a lady holding a box of Vicks
Noctyl.)
PRODUCT LINES - Cold, decongestant, allergy, sinus and stomach remedies,
dentifrice products, toothbrushes, mouthwash products, denture adhesives,
throat drops. Pharmaceuticals: anti-infective, bone, cardiac,
gastrointestinal, hormone replacement.
KEY BRANDS - Blend-A-Med, Crest, Didronel, NyQuil, Vicks Formula 44,
Vicks VapoRub
PRODUCT NEWS - P&G introduced Alora, a twice-a-week estrogen
replacement therapy patch for the treatment of moderate-to-severe
menopausal symptoms.
REVENUE CONTRIBUTION BY SECTOR - Pie chart showing $2.9 billion revenue
contribution by Health Care.
(Page 8 - Picture of a lady with a 12 oz. spray bottle of Pantene Pro-V
Flexible Hold with Elastesse Hairspray.)
(Top of page 9 - A blue/green circle with the caption "WORLD'S #1 Hair
CARE BRAND.")
Consumers told us they wanted a hair spray that wouldn't leave them with "helmet
head."
WE UNDERSTAND
We paid attention. And introduced Pantene Pro-V Flexible Hold with Elastesse.
The revolutionary hair spray provides a hold that bounces back, even after being
brushed or windblown.
(Top of page 10 - A blue/green object with the caption "#1 TOOTHPASTE
FOR 35 YEARS.")
Crest has been America's favorite toothpaste for more than three decades. And we
keep it that way by making it better and better.
WE INNOVATE
New Crest Multi-Care, for example. Its special formula helps protect teeth --
against cavities, the acids that cause them, and visible tartar.
And our new toothbrush, Crest Multi-Clean, helps to clean deep between and
around all teeth.
(Page 11 - Picture of a young boy with a toothbrush in his right hand
and a tube of Crest Multi-Care toothpaste in his left hand.)
(Page 12 - Picture of a lady holding a little boy and a box of Ariel
detergent.)
(Top of page 13 - A blue/green object with the caption "P&G BRANDS SOLD
IN 140 COUNTRIES.")
WE DELIVER
Consumers throughout China told us that they wanted P&G products like Tide and
Ariel detergent -- but couldn't find them. Getting our products into outlying
parts of a country that stretches across more than 3,000 miles was not easy. So,
we created an entirely new distribution system. Today, more than 60% of Chinese
consumers can find our products, and we are working hard to reach even more
people in the months and years ahead.
(Top of page 14 - A blue/green circle with the caption "PAMPERS
PARENTING INSTITUTE WWW.PAMPERS.COM.")
WE SHARE
Consumers want more than superior products. They also want to know what our
brands know. And we're eager to tell them. For example, at the pampers
Parenting Institute on the World Wide Web, a first-time mom with a newborn...or
an experienced dad with a three-year-old...can learn from the world's leading
parenting experts.
(Page 15 - Picture of a lady sitting in front of a desk holding a
toddler. On the desk is a computer with the screen showing a picture of
the World Wide Web regarding Pampers and also on the desk is a box of
Pampers Premiums.)
(Page 16 - Picture of a young couple sitting by a tree eating Pringles
Fat Free.)
(Top of page 17 - A blue/green circle with a Pringles Chip and the
caption "P&G'S #1 EXPORT BRAND.")
WE DO THE IMPOSSIBLE...just because our consumers ask us to. They told us, for
example, that they wanted great tasting potato chips. With no fat. We
discovered Olean, the first fat-and-calorie-free cooking oil. And then we
introduced new Fat Free Pringles with Olean. Consumers love them. In fact, one
consumer captured here enthusiasm in one word. She said, simply, "HALLELUJAH!"
FINANCIAL REVIEW
RESULTS OF OPERATIONS
The Company achieved record sales, unit volume, earnings and cash flows for the
year ended June 30, 1997. Earning per share, restated for the two-for-one stock
split effective on August 22, 1997, increased 14% to $2.43, while operating cash
flow was up 41% to $5,882 million. Worldwide net earnings for the year were
$3,415 million, a 12% increase over the prior year of $3,046 million. The
Company also achieved a net earnings margin of 9.5%, the highest in 47 years.
Return on equity for the year was 29%. These results were broad-based, with cost
reduction via global simplification and standardization being the key driver.
NET EARNINGS
(Billions of dollars)
(Middle of Page 22, left-hand margin, a bar/line graph with pictures of
eight boxes of Vicks Noctyl showing net earnings for 1997 - 3.4
billions of dollars, 1996 - 3.0 billions of dollars and 1995 - 2.6
billions of dollars.)
The prior year results included settlement of the Bankers Trust lawsuit,
profit from the sale of the Company's share of a health care joint venture, a
reserve for estimated losses on a supply agreement entered into as part of the
previous divestiture of the commercial pulp business, and adoption of FASB
Statement No. 121 covering recognition of impairment of long-lived assets. If
these items were excluded from the prior year earnings, the growth rate for the
current year would have been 13%.
RETURN ON EQUITY
(Bottom of Page 22, left-hand margin, a bar/line graph with pictures of
nine bottles of Pantene showing return on equity for 1997 - 29%, 1996 -
27% and 1995 - 27%.)
This year, the Company completed its $2.4 billion restructuring program
commenced in 1993, with annual cost savings in excess of $600 million after tax.
The Company will continue its ongoing program of simplification and
standardization, which includes consolidation of selected manufacturing
facilities across all regions, re-engineering of the manufacturing and
distribution processes, organization design projects, simplified product
line-ups and sales of non-strategic brands and assets. The net costs of these
activities in the current year was offset by increased licensing activity in the
Health Care segment.
NET SALES
(Billions of dollars)
(Middle of Page 22, right-hand margin, a bar/line graph with pictures
of four boxes of Always showing net sales for 1997 - 35.8 billions of
dollars, 1996 - 35.3 billions of dollars and 1995 - 33.5 billions of
dollars.)
Worldwide net sales for the current year were $35,764 million, up 1% on
worldwide unit volume growth of 3%. The difference between the sales and volume
growth rates was primarily due to weaker currencies in Europe and Asia.
Worldwide gross margin for the current year was 43.2% compared to 41.2% in
the prior year. The current year improvement reflects costs savings from the
Company's simplification and standardization efforts and the continuing benefits
of the restructuring project initiated in 1993.
Worldwide marketing, research, and administrative expenses were $9,960
million compared to $9,707 million in the prior year. This equates to 27.8% of
sales, compared with 27.5% in the prior year. The increase was primarily due to
increases in advertising and research.
Other income, net, which consists primarily of interest and investment
income, contributed $218 million in the current year. In the prior year, other
income, net was $338 million and contained a $120 million benefit from reversing
the reserve for two interest rate swap contracts following settlement of a
lawsuit against Bankers Trust; a $185 million gain on the sale of the Company's
50% share of a health care joint venture to its venture partner; and a $230
million charge to increase the reserve for estimated losses on a supply
agreement entered into as part of the previous sale of the Company's commercial
pulp business.
NET EARNINGS MARGIN %
(Middle of Page 23, left-hand margin, a bar/line graph with pictures of
eight bottles of Oil of Olay showing net earnings margin % for 1997 -
9.5%, 1996 - 8.5% and 1995 - 7.9%.)
Net earnings margin increased to 9.5% in the current year from 8.6% in the
prior year, reflecting unit volume growth and continued emphasis on cost control
through the Company's simplification and standardization programs.
THE FOLLOWING PROVIDES PERSPECTIVE ON THE YEAR ENDED JUNE 30, 1996 VERSUS THE
PRIOR YEAR.
Worldwide net earnings increased 15% to $3,046 million, including the 1996
unusual items previously noted. Net earnings for 1995 were $2,645 million and
included a $50 million after-tax charge for costs related to the earthquake in
Kobe, Japan. Excluding the unusual items in both years, net earnings for the
year ended June 30, 1996, grew 12%.
Worldwide net sales were $35,284 million, up 5%. Worldwide unit volume
increased 7%, with all geographic regions achieving record volume levels.
Worldwide gross margin declined to 41.2% from 41.6% in 1995, impacted by
difficult economic conditions in Mexico and the adoption of FASB Statement No.
121, which provided new guidance on recognition of impaired assets.
Worldwide marketing, research, and administrative expenses were 27.5% of
sales compared with 28.9% in 1995, reflecting cost control emphasis and benefits
of the 1993 restructuring program. The Company's expansion of its value pricing
and trade terms simplification initiatives reduced expenses in certain markets.
Other income, net was $338 million in 1996 and included the unusual items
previously noted. In 1995, other income, net was $244 million and contained a
$77 million charge related to the Kobe, Japan earthquake.
Net earnings margin increased to 8.6% in 1996 form 7.9% in 1995, including
the effects of unusual items in both years. Excluding the unusual items, net
earnings margin increased to 8.6% in 1996 form 8.0% in 1995.
FINANCIAL CONDITION
Cash flow from operations was $5,882 million, $4,158 million, and $3,568 million
in 1997, 1996, and 1995, respectively. Current year improvement was driven by
increased earnings, working capital control and the benefit of simplification
and standardization programs. Generally, operating cash flow provided the
primary source of funds to finance operating needs, capital expenditures,
acquisitions, and the shared repurchase programs.
OPERATING CASH FLOW
(Billions of dollars)
(Bottom of Page 23, right-hand margin, a bar/line graph with pictures
of eleven cans of Pringles showing operating cash flow for 1997 - 5.9
billions of dollars, 1996 - 4.2 billions of dollars and 1995 - 3.6
billions of dollars.)
Cash and cash equivalents were up $276 million from June 30, 1996. In
addition, investment securities increased $314 million.
The Company initiated a share repurchase program in 1995 which authorized
the purchase of up to 6 million shares annually to mitigate the dilutive impact
of management compensation programs. The Company also initiated a program to
repurchase additional outstanding shares of up to $1 billion during 1997, in
addition to purchases made under the 1995 program. Current year share purchases
totaled $1,652 million compared to $432 million in the prior year. The Company
has announced plans to continue the share repurchase programs in fiscal 1998.
Capital expenditures were $2,129 million in 1997, $2,179 million in 1996,
and $2,146 million in 1995. Current year expenditures reflected capacity
expansions in the Paper and Food businesses, primarily in tissue/towel,
Pringles, and Olean. Capital expenditures are expected to increase during the
upcoming year, reflecting completion of these capacity projects and other
planned capacity increases and technological advances. Funds for these
activities generally are provided from operations.
Common share dividends, restated for the August 1997 two-for-one stock
split, grew 13% to $.90 per share in 1997, compared to $.80 and $.70 in 1996 and
1995, respectively. For the coming year, the annual dividend rate will increase
to $1.01 per common share, marking the 42nd consecutive year of increased common
share dividend payments. Total dividend payments, to both common and preferred
shareholders, were $1,329 million, $1,202 million, and $1,062 million in 1997,
1996, and 1995, respectively.
Total debt was down $794 million. Exchange effects, primarily the Japanese
yen and German mark, reduced total debt by approximately $92 million.
Long-term borrowing available under the Company's shelf registration
statement filed in 1995, as amended in July 1997, was $2.0 billion.
Additionally, the Company has the ability to issue commercial paper at favorable
rates.
Cash used for acquisitions completed during the year totaled $150 million
and included laundry and cleaning businesses, primarily Bombril in Latin
America. Net cash required for acquisition activities was $358 million and $623
million in 1996 and 1995, respectively. During the current year, the Company
continued to divest certain non-strategic brands in order to focus
organizational resources on the Company's core businesses. The proceeds from
these sales, combined with other asset sales, generated $520 million in cash
flow in the current year, and $402 million and $310 million in 1996 and 1995,
respectively.
In April 1997, the Company entered into an agreement to acquire Tambrands,
Inc., a company in the feminine protection category, for approximately $1.85
billion in cash, funded by a combination of existing cash balances and the
issuance of commercial paper. The acquisition was completed on July 21, 1997.
RESTRUCTURING RESERVE STATUS
In the year ended June 30, 1993, a reserve of $2.4 billion was established to
cover a worldwide restructuring effort to consolidate manufacturing systems and
reduce overhead costs. The primary elements of this reserve were costs related
to fixed asset disposals and separation-related costs.
This restructuring program was completed during 1997. The costs of
completing the restructuring activities approximated the original estimate.
THE FOLLOWING PAGES PROVIDE PERSPECTIVE ON THE COMPANY'S GEOGRAPHIC SEGMENTS.
ADDITIONALLY, THE CORPORATE SEGMENT INCLUDES INTEREST INCOME AND EXPENSE,
SEGMENT ELIMINATIONS, AND OTHER GENERAL CORPORATE INCOME AND EXPENSE.
1997 NET SALES BY BUSINESS SEGMENT
(Bottom right-hand margin page 24 - Net Sales By Business Segment Pie
Chart -- 31% - Laundry & Cleaning; 28% - Paper; 20% - Beauty Care; 11%
- Food & Beverage; 8% - Health Care and 2% - Corporate)
1997 NET SALES BY GEOGRAPHIC SEGMENT
(Top left-hand margin page 25 - Net Sales By Geographic Segment Pie
Chart -- 50% - North America; 32% - Europe, Middle East and Africa; 10%
- Asia; 6% - Latin America and 2% - Corporate)
NORTH AMERICA REGION
The North America region achieved record sales, unit volume, net earnings and
net earnings margin, following a strong prior year.
Net sales for the year were $17,702 million, up 2% from the prior year
level of $17,303 million. Unit volume increased 4%. The difference between sales
and unit volume growth was primarily due to product mix, lower pricing in
laundry, and lower commodity-based paper pricing. Progress during the current
year compares to a strong 1996, when net sales and unit volume grew 5% over
1995.
NORTH AMERICA NET EARNINGS
(Millions of dollars)
(Middle left-hand margin page 25 - Bar/line graph with pictures of
eight Secret products showing North America net earnings for 1997 -
2,296 millions of dollars, 1996 - 2,239 millions of dollars, and 1995 -
1,914 millions of dollars.)
Net earnings for the region were up 3% to $2,296 million. Net earnings
increased 8% excluding the prior year's gain on the sale of the Company's share
of a health care joint venture. The region achieved this growth through unit
volume progress and a continued focus on cost control, simplification, and
standardization as well as an increase in health care licensing activity. Prior
year net earnings were $2,239 million, which represented a 17% increase over
1995 (11% excluding the gain on sale of the Company's share of a health care
joint venture). Net earnings margin for the region was 13.0%, compared to 12.2%
and 11.75 in 1996 and 1995, respectively, excluding the unusual item in 1996.
The Laundry and Cleaning segment continued to drive the region's current
year unit volume progress, with a 7% increase generating over one half of the
region's increase. The laundry and fabric conditioners categories contributed
heavily to the segment's unit volume and earnings increases. In the prior year,
the segment was also a key driver, delivering over 40% of the total region's
unit volume increase.
The strength of the Paper segment also contributed to the region's current
year volume progress, generating 5% unit volume growth. The diapers category
delivered increased unit volume following acquisition of baby wipes and the
introduction of Pampers Baby-Dry, a significant new diaper initiative. The
tissue/towel category also posted unit volume gains following a capacity
increase. The Paper segment's operating profit for the year was negatively
impacted by a reduction in the estimated lives of certain production lines to
support the global standardization of equipment to enable faster re-application
of global technology. In the prior year, operating results were driven by
product initiatives and more favorable pricing related to the pulp price
declines in the latter part of the year.
The Food and Beverage segment achieved 3% unit volume growth in the current
year, driven by the snacks category which achieved double digit unit volume
growth supported by new production capacity. Overall, the segment achieved
earnings progress in the current year due to increased volume and lower costs in
key categories. In 1996, unit volume growth was led by the coffee category.
Unit volume in the Beauty Care segment grew 1% during the year, led by the
hair care category. This growth followed solid results in the prior year. Net
earnings for the segment were comparable to the prior year. Excluding the
negative impact of the provisions for simplification and standardization
projects, the segment achieved double-digit earnings growth in both the current
and prior year.
Unit volume in the Health Care segment was flat, excluding the effect of
the prior year's divestiture of its share of a health care joint venture. This
compares to a 3% decline in 1996. Increased investment in key brand franchises
was aimed at regenerating growth. Excluding the prior year gain on the sale of
its share of a joint venture, earnings from the segment increased significantly,
benefiting from increased licensing activities, including a global alliance with
Hoechst Marion Roussel to market the Company's osteoporosis treatment drug
Actonel. A high level of investment in research and development in the
pharmaceuticals area continued in the current year and is expected to continue
into the coming year. The segment has also increased investments in agreements
with other health care companies for the co-development or co-promotion of
pharmaceutical and over-the-counter products, most notably an agreement entered
into in the current year with Regeneron Pharmaceuticals, Inc.
EUROPE, MIDDLE EAST, AND AFRICA REGION
Record unit volume, sales, earnings and net earnings margin in the Europe,
Middle East, and Africa region were driven by continued strong volume growth and
excellent cost control.
Net sales grew 1% to $11,581 million, on 7% unit volume growth. The
differential between sales and unit volume growth rates is due primarily to
unfavorable exchange rates and lower commodity-based paper pricing. During the
prior year, sales increased 7% to $11,458 million on comparable unit volume
growth.
EUROPE, MIDDLE EAST AND AFRICA NET EARNINGS
(Millions of dollars)
(Bottom left-hand margin page 26 - Bar/line graph with pictures of
eight Head & Shoulders products showing Europe, Middle East and Africa
Net Earnings for 1997 - 857 millions of dollars, 1996 - 711 millions of
dollars, and 1995 - 589 millions of dollars.)
The region's net earnings progress continued in the current year, growing
21% to $857 million. This follows 21% growth in the prior year with earnings of
$711 million. The net earnings margin progress also continued in the current
year to 7.4%, from 6.2% and 5.5%, in 1996 and 1995, respectively. The continued
effort of the region to reduce costs via simplification and standardization,
combined with strong volume growth, were the driving forces of the earnings
progress.
Central and Eastern Europe led the region's unit volume growth, with a 42%
increase. This follows a 66% growth rate in 1996. Leadership shares in laundry,
diapers and hair care grew by increasing distribution of these successful global
categories. Earnings increased, as a 1996, as a result of the unit volume growth
and economics of scale.
Middle East and Africa increased unit volume well above the region average,
as it did in the prior year. The progress is broadly based across countries and
in all key categories. This contributed to earnings growth, on top of improved
earnings in 1996.
Western Europe unit volume increased by 1%, comparable to the prior year's
growth rate. This growth continues to be impacted by the implementation of
Efficient Consumer Response (ECR). ECR introduced value pricing and simplified
trade terms to reward efficiency of trade customers and eliminate inefficient
promotional spending, thereby providing consumers with better value for the
Company's quality products. This strategic move followed experience in the
United States where a similar program had some negative short-term impacts
followed by significantly improved longer-term growth. Western Europe's earnings
increased strongly, after solid growth in the prior year, as a result of
significant progress in simplification and standardization projects.
ASIA REGION
Overall, Asia achieved record net earnings margins. Earnings results within the
region were mixed, with particularly strong earnings growth in China and other
developing markets being offset by competitive pressures in Japan, the impact of
the ECR roll out and exchange rate effects.
Net sales for the region were $3,572 million, 8% below the prior year on a
7% unit volume decline. Improved pricing and product mix were offset by the
impact of unfavorable exchange rate movements. Excluding adverse exchange
effects, sales were down 2%. In the prior year, net sales grew 5% on unit volume
growth of 15%. Exchange effects reduced 1996 sales by 3% versus 1995.
ASIA NET EARNINGS
(Millions of dollars)
(Middle left-hand margin page 27 - Bar/line graph with pictures of
three boxes of Tide showing Asia Net Earnings for 1997 - 274 millions
of dollars, 1996 - 254 millions of dollars, and 1995 - 245 millions of
dollars.)
The region's net earnings were $274 million, an 8% increase over the prior
year. Current year earnings benefited from gains on the sale of non-strategic
brands, which were partially offset by provisions for simplification and
standardization projects. The prior year net earnings of $254 million
represented a 4% increase over 1995. Net earnings margin for the current year
was 7.7%, compared to 6.5% in 1996 and 6.6% in 1995. Margin progress has been
achieved through lower costs, driven by strong focus on simplification,
standardization and cost control, partially offset by the reduction in estimated
lives of certain paper production lines as discussed earlier.
China's unit volume was down 1%, compared to an 39% increase in the prior
year. Higher pricing on local laundry brands led to a drop in unit volume but
significantly improved the sales mix for the category, where Tide is a leading
brand. Excluding laundry, unit volume in China was up 13% for the year. Net
sales and earnings showed significant improvement, driven by pricing and
improved product mix.
Japan was negatively impacted in 1997 by a competitive market environment
and the move to ECR, which has led to trade inventory draw downs and lower
merchandising levels in the trade. Sales and earnings were also negatively
impacted by unfavorable exchange rate movements.
LATIN AMERICA REGION
Latin America posted record sales and earnings, reflecting pricing and the
continuation of cost control efforts.
Net sales in the region grew 6% to $2,304 million as inflation-driven
pricing action has more than offset the effects of lower volume. Unit volume was
down 2%. In the prior year, unit volume grew 4%, while sales were flat,
reflecting the full-year impact of the Mexican peso devaluation.
LATIN AMERICA NET EARNINGS
(Millions of dollars)
(Middle right-hand margin page 27 - Bar/line graph with pictures of
four boxes of ARIEL showing Latin America Net Earnings for 1997 - 217
millions of dollars, 1996 - 209 millions of dollars, and 1995 - 207
millions of dollars.)
Net earnings for the region were $217 million, a 4% increase. Current year
earnings were affected by provisions for simplification and standardization
projects and the disposal of non-strategic brands. Prior year net earnings were
$209 million, a 1% increase over 1995. Net earnings margin for the current year
was 9.4% compared to 9.6% and 9.5% in 1996 and 1995 respectively, reflecting the
reduction in estimated lives of certain paper production lines as discussed
earlier, partially offset by pricing and the continuation of cost control
efforts.
In Mexico, the Company's largest operation in the region, the business
results were strong, despite economic difficulties and a slower than anticipated
recovery in consumption levels which has led to a 3% decline in unit volume. Net
sales increased, primarily affected by pricing, and earnings advanced to a
record level on increased margins and the divestiture of non-strategic brands.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to market risk, including changes in interest rates,
currency exchange rates, and certain commodity prices. To manage the volatility
relating to these exposures, the Company enters into various derivative
transactions pursuant to the Company's policies in areas such as counter-party
exposure and hedging practices. The Company does not hold or issue derivative
financial instruments for trading purposes.
Derivative positions are monitored using techniques including market value,
sensitivity analysis and a value at risk model. The tests discussed below for
exposure to interest rate and currency rate exposures are based on a
variance/co-variance value at risk model using a one-year horizon and a 95%
confidence level. The model assumes that financial returns are normally
distributed. For options and instruments with non-linear returns, the model uses
the delta/gamma method to approximate the financial return. The value at risk
model takes into account correlations and diversification across market factors,
including currencies and interest rates. Estimates of volatility and
correlations of market factors are drawn from the JP Morgan
RiskMetrics(TM)dataset as of June 30, 1997. In cases where data is unavailable
in RiskMetrics(TM), a reasonable approximation is included. The effect of these
estimates did not significantly change the total value at risk.
INTEREST RATE EXPOSURE
Interest rate swaps are used to hedge underlying debt obligations. For
qualifying hedges, the interest rate differential is reflected as an adjustment
to interest expense over the life of the swaps. Certain currency interest rate
swaps are designated as a hedge of the Company's related foreign net asset
exposure, and currency effects of these hedges are reflected in the currency
translation adjustments section of shareholders' equity, offsetting a portion of
the translation of the net assets.
Based on the Company's overall interest rate exposure at June 30, 1997,
including derivative and other interest rate sensitive instruments, a near-term
change in interest rates, within a 95% confidence level based on historical
interest rate movements, would not materially affect the consolidated financial
position, results of operations or cash flows of the Company.
CURRENCY RATE EXPOSURE
The primary purpose of the Company's foreign currency hedging activities is to
protect against the volatility associated with foreign currency purchase
transactions. Corporate policy prescribes the range of allowable hedging
activity. The Company primarily utilizes forward exchange contracts and
purchased options with durations of generally less than 12 months. In addition,
the Company enters into foreign currency swaps to hedge intercompany financing
transactions and purchases foreign currency options with durations of generally
less than 18 months to hedge against the effect of exchange rate fluctuations on
royalties and foreign source income.
Gains and losses related to qualifying hedges of foreign currency firm
commitments or anticipated transactions are deferred in prepaid expenses and are
included in the basis of the underlying transactions. To the extent that a
qualifying hedge is terminated or ceases to be effective as a hedge, any
deferred gains and losses up to that point continue to be deferred and are
included in the basis of the underlying transaction. All other foreign exchange
contracts are marked-to-market on a current basis generally to marketing,
research, and administration expense. To the extent that anticipated
transactions are no longer likely to occur, the related hedges are closed with
gains or losses charged to earnings on a current basis.
Based on the Company's overall currency rate exposure at June 30, 1997,
including derivative and other foreign currency sensitive instruments, a
near-term change in currency rates within a 95% confidence level based on
historical currency rate movements, would not materially affect the consolidated
financial position, results of operations, or cash flows of the Company.
COMMODITY PRICE EXPOSURE
Certain raw materials used primarily in food and beverage products are subject
to price volatility caused by weather and other unpredictable factors. The
Company uses futures and options contracts to manage the volatility related to
this exposure. Gains and losses relating to qualifying hedges of firm
commitments or anticipated inventory transactions are deferred in prepaid
expenses and are included in the basis of the underlying transactions. Commodity
activity is not material to the Company's consolidated financial position,
results of operations, or cash flow.
FORWARD-LOOKING STATEMENTS
The Company has made and will make certain forward-looking statements in the
Annual Report and in other contexts relating to volume growth, increases in
market shares, total shareholder return and cost reduction, among others.
These forward-looking statements represent challenging goals for the
Company and are based on certain assumptions and estimates regarding the
worldwide economy, technological innovation, competitive activity, interest
rates, pricing, currency movements, product introductions, governmental action,
and the development of certain markets. Some examples of key factors necessary
to achieve the Company's goals are: 1) the ability to improve results in the
face of strong competition, 2) the ability to reduce costs, in part via the
ongoing simplification and standardization program, funded within existing
budget targets, 3) the successful completion of the implementation of ECR and
the ability to maintain key customer relationship in important developed
markets, 4) the continuation of substantial growth in significant developing
markets such as China, Mexico, the Southern Cone of Latin America and the
countries of Central and Eastern Europe, 5) obtaining successful outcomes in
regulatory and tax matters, 6) the ability to continue technological innovation,
7) the avoidance of adverse foreign currency movements. If the Company's
assumptions and estimates are incorrect or do not come to fruition, or if the
Company does not achieve all of these key factors, then the Company's actual
performance could vary materially from the forward-looking statements made
herein.
YEAR 2000
The Company has developed preliminary plans to address the possible exposures
related to the impact on its computer systems of the Year 2000. Key financial,
information and operational systems have been assessed and detailed plans have
been developed to address systems modifications required by December 31, 1999.
The financial impact of making the required systems changes is not expected to
be material to the Company's consolidated financial position, results of
operations or cash flows.
RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The consolidated financial statements and the related financial information
included in this report are the responsibility of Company management. This
responsibility includes preparing the statements in accordance with generally
accepted accounting principles and necessarily includes estimates that are based
on management's best judgments.
To help insure the accuracy and integrity of Company financial data,
management maintains a system of internal controls that is designed to provide
reasonable assurance that transactions are executed as authorized and accurately
recorded and that assets are properly safeguarded. These controls are monitored
by an extensive and ongoing program of internal audits. These audits are
supplemented by a self-assessment program that enables individual organizations
to evaluate the effectiveness of their control structure. Careful selection of
employees and appropriate divisions of responsibility also are designed to
achieve our control objectives. The Company's "Worldwide Business Conduct
Manual" sets forth management's commitment to conducting its business affairs in
keeping with the highest ethical standards.
Deloitte & Touche LLP, independent public accountants, have audited and
reported on the Company's consolidated financial statements. Their audits were
performed in accordance with generally accepted auditing standards.
The Board of Directors, acting through its Audit Committee composed
entirely of outside directors, oversees the adequacy of the Company's internal
control structure. The Audit Committee meets periodically with representatives
of Deloitte & Touche LLP and internal financial management to review internal
control, auditing and financial reporting matters. The independent auditors and
the internal auditors also have full and free access to meet privately with the
Audit Committee.
/S/JOHN E. PEPPER /S/ERIK G. NELSON
John E. Pepper Erik G. Nelson
Chairman and Chief Executive Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
DELOITTE & 250 East Fifth Street
TOUCHE LLP Cincinnati, Ohio 45202
To the Board of Directors and Shareholders of The Procter & Gamble Company:
We have audited the accompanying consolidated balance sheets of The Procter &
Gamble Company and subsidiaries as of June 30, 1997 and 1996 and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended June 30, 1997. These financial
statements are the responsibility of the Company'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 audits 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 financial position of the Company at June 30, 1997
and 1996 and the results of its operations and cash flows for each of the three
years in the period ended June 30, 1997, in conformity with generally accepted
accounting principles.
/S/DELOITTE & TOUCHE LLP
July 31, 1997
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Millions Except Per Share Amounts)
<CAPTION>
Years Ended June 30 1997 1996 1995
<S> <C> <C> <C>
NET SALES $35,764 $35,284 $33,482
Cost of products sold 20,316 20,762 19,561
Marketing, research, and
administrative expenses 9,960 9,707 9,677
-------------------------------
OPERATING INCOME 5,488 4,815 4,244
Interest expense 457 484 488
Other income, net 218 338 244
-------------------------------
EARNINGS BEFORE INCOME TAXES 5,249 4,669 4,000
Income taxes 1,834 1,623 1,355
-------------------------------
NET EARNINGS $ 3,415 $ 3,046 $ 2,645
===============================
NET EARNINGS PER COMMON SHARE<F1> $ 2.43 $ 2.14 $ 1.85
FULLY DILUTED NET EARNINGS
PER COMMON SHARE<F1> $ 2.28 $ 2.01 $ 1.74
DIVIDENDS PER COMMON SHARE<F1> $ .90 $ .80 $ .70
AVERAGE COMMON SHARES OUTSTANDING<F1> 1,360.3 1,372.6 1,372.0
===============================
<FN>
<F1>Restated for two-for-one stock split effective August 22, 1997.
<FN>
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<TABLE>
Consolidated Balance Sheets
(Amounts in Millions Except Per Share Amounts
<CAPTION>
June 30 1997 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,350 $ 2,074
Investment securities 760 446
Accounts receivable 2,738 2,841
Inventories
Materials and supplies 1,131 1,254
Work in process 228 210
Finished goods 1,728 1,666
Deferred income taxes 661 598
Prepaid expenses and other current assets 1,190 1,718
------------------------
TOTAL CURRENT ASSETS 10,786 10,807
PROPERTY, PLANT, AND EQUIPMENT
Buildings 3,409 3,369
Machinery and equipment 14,646 14,174
Land 570 569
------------------------
18,625 18,112
Less accumulated depreciation 7,249 6,994
------------------------
TOTAL PROPERTY, PLANT, AND EQUIPMENT 11,376 11,118
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill 3,915 4,175
Trademarks and other intangible assets 1,085 1,095
------------------------
5,000 5,270
Less accumulated amortization 1,051 989
------------------------
TOTAL GOODWILL AND OTHER INTANGIBLE ASSETS 3,949 4,281
OTHER NON-CURRENT ASSETS 1,433 1,524
------------------------
TOTAL ASSETS $27,544 $27,730
========================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
June 30 1997 1976
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,203 $ 2,236
Accrued and other liabilities 3,802 3,981
Taxes payable 944 492
Debt due within one year 849 1,116
--------------------------
TOTAL CURRENT LIABILITIES 7,798 7,825
LONG-TERM DEBT 4,143 4,670
DEFERRED INCOME TAXES 559 638
OTHER NON-CURRENT LIABILITIES 2,998 2,875
--------------------------
TOTAL LIABILITIES 15,498 16,008
Shareholders' Equity<F1>
Convertible Class A preferred stock, stated
value $1 per share (600 shares authorized) 1,859 1,886
Non-Voting Class B preferred stock, stated
value $1 per share (200 shares authorized;
none issued) - -
Common stock, stated value $1 per share
(2,000 shares authorized; shares outstanding:
1997-1,350.8 and 1996-1,371.1) 1,351 1,371
Additional paid-in capital 559 294
Currency translation adjustments (819) (418)
Reserve for employee stock ownership
plan debt retirement (1,634) (1,676)
Retained earnings 10,730 10,265
--------------------------
TOTAL SHAREHOLDERS' EQUITY 12,046 11,722
--------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $27,544 $27,730
==========================
<FN>
<F1>Restated for two-for-one stock split effective August 22, 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in Millions/Shares in Thousands)
(Restated for two-for-one stock split effective August 22, 1997)
<CAPTION>
Common Additional Currency Reserve for
Shares Common Preferred Paid-in Translation ESOP Debt Retained
Outstanding Stock Stock Capital Adjustments Retirement Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE JUNE 30, 1994 1,368,696 $1,368 $1,942 $ - $ (63) $(1,787) $ 7,372 $ 8,832
----------------------------------------------------------------------------------------------
Net earnings 2,645 2,645
Dividends to shareholders:
Common (960) (960)
Preferred, net of tax benefit (102) (102)
Currency translation adjustments 128 128
Treasury purchases (3,416) (3) (112) (115)
Employee plan issuances 5,766 6 102 108
Preferred stock conversions 2,102 2 (29) 27 0
ESOP debt guarantee reduction 53 53
----------------------------------------------------------------------------------------------
BALANCE JUNE 30, 1995 1,373,148 1,373 1,913 129 65 (1,734) 8,843 10,589
----------------------------------------------------------------------------------------------
Net earnings 3,046 3,046
Dividends to shareholders:
Common (1,099) (1,099)
Preferred, net of tax benefit (103) (103)
Currency translation adjustments (483) (483)
Treasury purchases (10,468) (10) (422) (432)
Employee plan issuances 6,514 6 140 146
Preferred stock conversions 1,952 2 (27) 25 0
ESOP debt guarantee reduction 58 58
----------------------------------------------------------------------------------------------
BALANCE JUNE 30, 1996 1,371,146 1,371 1,886 294 (418) (1,676) 10,265 11,722
----------------------------------------------------------------------------------------------
Net earnings 3,415 3,415
Dividends to shareholders:
Common (1,225) (1,225)
Preferred, net of tax benefit (104) (104)
Currency translation adjustments (401) (401)
Treasury purchases (30,875) (31) (1,621) (1,652)
Employee plan issuances 8,801 9 240 249
Preferred stock conversions 1,771 2 (27) 25 0
ESOP debt guarantee reduction 42 42
----------------------------------------------------------------------------------------------
Balance June 30, 1997 1,350,843 $1,351 $1,859 $559 $(819) $(1,634) $10,730 $12,046
==============================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
<CAPTION>
Years Ended June 30 1997 1996 1995
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 2,074 $ 2,028 $ 2,373
------------------------------------------
OPERATING ACTIVITIES
Net earnings 3,415 3,046 2,645
Depreciation and amortization 1,487 1,358 1,253
Deferred income taxes (26) 328 181
Change in accounts receivable 8 17 (161)
Change in inventories (71) 202 (401)
Change in accounts payable, accrued and other liabilities 561 (948) 435
Change in other operating assets and liabilities 503 (134) (449)
Other 5 289 65
------------------------------------------
TOTAL OPERATING ACTIVITIES 5,882 4,158 3,568
------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (2,129) (2,179) (2,146)
Proceeds from asset sales 520 402 310
Acquisitions (150) (358) (623)
Change in investment securities (309) (331) 96
------------------------------------------
TOTAL INVESTING ACTIVITIES (2,068) (2,466) (2,363)
------------------------------------------
FINANCING ACTIVITIES
Dividends to shareholders (1,329) (1,202) (1,062)
Change in short-term debt (160) 242 (429)
Additions to long-term debt 224 339 449
Reductions of long-term debt (724) (619) (510)
Proceeds from stock options 134 89 67
Treasury purchases (1,652) (432) (115)
------------------------------------------
TOTAL FINANCING ACTIVITIES (3,507) (1,583) (1,600)
------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (31) (63) 50
------------------------------------------
CHANGE IN CASH AND CASH EQUIVALENTS 276 46 (345)
------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,350 $ 2,074 $ 2,028
==========================================
SUPPLEMENTAL DISCLOSURE Cash payments for:
Interest, net of amount capitalized $ 449 $ 459 $ 444
Income taxes 1,380 1,339 1,047
Liabilities assumed in acquisitions 42 56 575
==========================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of Dollars Except Per Share Amounts)
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements include The Procter
& Gamble Company and its controlled subsidiaries (the Company). Investments in
companies that are at least 20% to 50% owned, and over which the Company exerts
significant influence but does not control the financial and operating
decisions, are accounted for by the equity method. These investments are managed
as integral parts of the Company's segment operations, and the Company's share
of their results is included in net sales and in earnings for the related
segments.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying disclosures. Although these estimates are based on
management's best knowledge of current events and actions the Company may
undertake in the future, actual results ultimately may differ from the
estimates.
ACCOUNTING CHANGES: In 1996, the Company adopted FASB Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," which requires review for possible impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The effect of the adoption was not material. In 1997, the
FASB issued Statement No. 130, "Reporting Comprehensive Income," and Statement
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
These statements, which are effective for periods beginning after December 15,
1997, expand or modify disclosures and, accordingly, will have no impact on the
Company's reported financial position, results of operations or cash flows.
CURRENCY TRANSLATION: The financial statements of subsidiaries outside the U.S.
generally are measured using the local currency as the functional currency.
Translation adjustments are accumulated in a separate component of shareholders'
equity. For subsidiaries operating in highly inflationary economies, the U.S.
dollar is the functional currency. Remeasurement and other transactional
exchange gains/(losses) reflected in earnings were $1, $(28) and $(38) for 1997,
1996 and 1995, respectively.
CASH EQUIVALENTS: Highly liquid investments with maturities of three months or
less when purchased are considered cash equivalents.
INVENTORY VALUATION: Inventories are valued at cost, which is not in excess of
current market price. Cost is primarily determined by either the average cost or
the first-in, first-out method. The replacement cost of last-in, first-out
inventories exceeds carrying value by approximately $122.
GOODWILL AND OTHER INTANGIBLE ASSETS: The cost of intangible assets is
amortized, principally on a straight-line basis, over the estimated periods
benefited (not exceeding 40 years). The average remaining life is 30 years. The
realizability of goodwill and other intangibles is evaluated periodically as
events or circumstances indicate a possible inability to recover the carrying
amount. Such evaluation is based on various analyses, including cash flow and
profitability projections that incorporate the impact on existing Company
businesses. The analyses necessarily involve significant management judgment to
evaluate the capacity of an acquired business to perform within projections.
Historically, the Company has generated sufficient returns from acquired
businesses to recover the cost of the goodwill and other intangible assets.
PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment are recorded at
cost reduced by accumulated depreciation. Depreciation expense is provided based
on estimated useful lives using the straight-line method.
SELECTED OPERATING EXPENSES: Research and development costs are charged to
earnings as incurred and were $1,282 in 1997, $1,221 in 1996 and $1,148 in 1995.
Advertising costs are charged to earnings as incurred and were $3,468 in 1997,
$3,254 in 1996, and $3,284 in 1995.
NET EARNINGS PER COMMON SHARE: Net earnings less preferred dividends (net of
related tax benefits) are divided by the weighted average number of common
shares outstanding during the year to calculate net earnings per common share.
Fully diluted net earnings per common share are calculated to give effect to
stock options and convertible preferred stock. In 1997, the FASB issued
Statement No. 128, "Earnings Per Share," which revises the manner in which
earnings per share is calculated. The statement is effective for the reporting
period ending December 31, 1997 and is not expected to have a significant impact
on the Company's earnings per share.
STOCK SPLIT: In July 1997, the Company's board of directors approved a
two-for-one stock split that is effective for common and preferred shareholders
of record as of August 22, 1997. The financial statements, notes and other
references to share and per share data have been retroactively restated to
reflect the stock split for all periods presented.
FAIR VALUES OF FINANCIAL INSTRUMENTS: Fair values of cash equivalents, short and
long-term investments, and short-term debt approximate cost. The estimated fair
values of other financial instruments, including debt and risk management
instruments, have been determined using available market information and
valuation methodologies, primarily discounted cash flow analysis. These
estimates require considerable judgment in interpreting market data, and changes
in assumptions or estimation methods may significantly affect the fair value
estimates.
MAJOR CUSTOMER: The Company's largest customer, Wal-Mart Stores, Inc. and its
affiliates, accounted for 10% of consolidated net sales in 1997.
RECLASSIFICATIONS: Certain reclassifications of prior years' amounts have been
made to conform with the current year presentation, primarily related to the
segment information.
2. ACQUISITIONS
In April 1997, the Company entered into an agreement to acquire Tambrands, Inc.,
a company in the feminine protection category, for approximately $1.85 billion
in cash. The acquisition was completed on July 21,1997. In 1995, the Company
purchased the European tissue business of Vereinigte Papierwerke Schickedanz AG
and the prestige fragrance business of Giorgio Beverly Hills, Inc. These 1995
acquisitions had an aggregate purchase price of $598. Other acquisitions
accounted for as purchases totaled $150, $358, and $25 in 1997,1996, and 1995,
respectively.
3. SUPPLEMENTAL LIABILITY INFORMATION
<TABLE>
<CAPTION>
June 30 1997 1996
<S> <C> <C>
ACCRUED AND OTHER LIABILITIES
Marketing expenses $1,129 $ 990
Restructuring reserves - 748
Compensation expenses 461 437
Other 2,212 1,806
----------------------
3,802 3,981
OTHER NON-CURRENT LIABILITIES
Postretirement benefits $1,300 $1,347
Pension benefits 815 879
Other 883 649
----------------------
2,998 2,875
</TABLE>
4. SHORT-TERM AND LONG-TERM DEBT
<TABLE>
<CAPTION>
June 30 1997 1996
<S> <C> <C>
SHORT-TERM DEBT
U. S. obligations $ 235 $ 465
Foreign obligations 291 231
Current portion of long-term debt 323 420
---------------------
849 1,116
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Millions of Dollars Except Per Share Amounts)
The weighted average short-term interest rates were 6.9% and 7.4% as of
June 30, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Average
June 30 Rate Maturities 1997 1996
<S> <C> <C> <C> <C>
LONG-TERM DEBT
U.S. notes and
debentures 8.01% 1998-2029 $1,896 $1,982
ESOP Series B 9.36% 2021 1,000 1,000
ESOP Series A 8.29% 1998-2004 613 676
U.S. commercial
paper 601 772
Foreign obligations 356 660
Current portion of
long-term debt (323) (420)
-----------------
4,143 4,670
</TABLE>
The long-term weighted average interest rates are as of June 30, 1997 and
exclude the effects of related interest rate swaps, as discussed in Note 5
below. Certain commercial paper balances have been classified as long-term debt
based on the Company's intent and ability to renew the obligations on a
long-term basis. The Company has entered into derivatives that convert certain
of these commercial paper obligations into fixed-rate obligations.
The fair value of the long-term debt was $4,509 and $5,014 at June 30, 1997
and 1996, respectively. Long-term debt maturities during the next five years are
as follows: 1998-$323: 1999-$70; 2000-$226; 2001-$281 and 2002-$436.
5. RISK MANAGEMENT ACTIVITIES
The Company is exposed to market risk including changes in interest rates,
currency exchange rates, and certain commodity prices. To manage the volatility
relating to these exposures, the Company enters into various derivative
transactions pursuant to the Company's policies in areas such as counterparty
exposure and hedging practices. The Company does not hold or issue derivative
financial instruments for trading purposes.
INTEREST RATE MANAGEMENT
The Company's policy is to manage interest cost using a mix of fixed and
variable rate debt. To manage this mix in a cost-efficient manner, the Company
enters into interest rate swaps, in which the Company agrees to exchange, at
specified intervals, the difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional principal amount. These swaps
are designated to hedge underlying debt obligations. For qualifying hedges, the
interest rate differential is reflected as an adjustment to interest expense
over the life of the swaps.
Certain currency interest rate swaps are designated as a hedge of the
Company's related foreign net asset exposure. Currency effects of these hedges
are reflected in the currency translation adjustments section of shareholders'
equity, offsetting a portion of the translation of the net assets.
The following table presents information for all interest rate instruments,
including debt warrants. The notional amount does not necessarily represent
amounts exchanged by the parties and, therefore, is not a direct measure of the
exposure of the Company. The fair value approximates the cost to settle the
outstanding contracts. The carrying value includes the net amount due to
counterparties under swap contracts, currency translation associated with
currency interest rate swaps, and any marked-to-market value adjustments of
instruments.
<TABLE>
<CAPTION>
June 30 1997 1996
<S> <C> <C>
Notional amount $1,488 $1,872
-----------------------
Fair value $ (54) $ (165)
Carrying value (28) (121)
-----------------------
Unrecognized loss (26) (44)
</TABLE>
Although derivatives are an important component of the Company's interest
rate management program, their incremental effect on interest expense for 1997,
1996 and 1995 was not material.
CURRENCY RATE MANAGEMENT
The primary purpose of the Company's foreign currency hedging activities is to
protect against the volatility associated with foreign currency purchase
transactions. Corporate policy prescribes the range of allowable hedging
activity. The Company primarily utilizes forward exchange contracts and
purchased options with durations of generally less than 12 months. Because these
are entered into as a hedge of planned transactions, a change in the fair value
of the instruments is offset by a corresponding change in the related exposure.
In addition, the Company enters into foreign currency swaps to hedge
intercompany financing transactions and purchases foreign currency options with
durations of generally less than 18 months to hedge against the effect of
exchange rate fluctuations on royalties and foreign source income.
Gains and losses related to qualifying hedges of foreign currency firm
commitments or anticipated transactions are deferred in prepaid expense and are
included in the basis of the underlying transactions. To the extent that a
qualifying hedge is terminated or ceases to be effective as a hedge, any
deferred gains and losses up to that point continue to be deferred and are
included in the basis of the underlying transaction. All other foreign exchange
contracts are marked-to-market on a current basis, generally to marketing,
research and administration expense. To the extent that anticipated transactions
are no longer likely to occur, the related hedges are closed with gains or
losses charged to earnings on a current basis.
Currency exposure related to the net assets of subsidiaries is managed
primarily through local currency financing entered into by the subsidiaries and
foreign currency denominated financing instruments entered into by the parent.
Gains or losses on instruments designated as a hedge of net assets are offset
against the translation effects reflected in shareholders' equity.
The Company had foreign currency instruments and foreign currency
denominated debt that have been designated as hedges of the Company's net asset
exposure in certain foreign subsidiaries with notional amounts totaling $936 and
$1,458 at June 30, 1997 and 1996, respectively. These hedges resulted in gains
of $63 and $129 that are net of $38 and $80 in tax effects reflected in
shareholders' equity.
Currency instruments outstanding are as follows:
<TABLE>
<CAPTION>
June 30 1997 1996
<S> <C> <C>
Notional amount
Forward contracts $2,607 $2,586
Purchased options 1,643 1,726
Currency swaps 358 505
Fair value
Forward contracts $ (2) $ (23)
Purchased options 38 41
Currency swaps (1) (17)
</TABLE>
The deferred gains/losses on these instruments were not material.
CREDIT RISK
Credit risk arising from the inability of a counterparty to meet the terms of
the Company's financial instrument contracts is generally limited to the
amounts, if any, by which the counterparties' obligations exceed the obligations
of the Company. It is the Company's policy to only enter into financial
instruments with a diversity of creditworthy counterparties. Therefore, the
Company does not expect to incur material credit losses on its risk management
or other financial instruments.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Millions of Dollars Except Per Share Amounts)
6. STOCK OPTIONS
The Company has stock-based compensation plans under which stock options are
granted annually to key employees and directors at the market price on the date
of grant. The grants are fully exercisable after one year and have a ten-year
life.
Pursuant to FASB Statement No. 123 "Accounting for Stock-Based
Compensation," the Company has elected to account for its employee stock option
plan under APB Opinion No. 25 "Accounting for Stock Issued to Employees."
Accordingly, no compensation cost has been recognized for this plan. Had
compensation cost for the plan been determined based on the fair value at the
grant date consistent with FASB Statement No. 123, the Company's net earnings
and earnings per share would have been as follows:
<TABLE>
<CAPTION>
Years Ended June 30 1997 1996
<S> <C> <C>
Net earnings
As reported $3,415 $3,046
Pro forma 3,305 2,981
Net earnings per common share
As reported 2.43 2.14
Pro forma 2.35 2.10
Fully diluted net earnings per
common share
As reported 2.28 2.01
Pro forma 2.20 1.97
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Binomial option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
Years Ended June 30 1997 1996
<S> <C> <C>
Interest rate 6.6% 6.1%
Dividend yield 2% 2%
Expected volatility 22% 20%
Expected life in years 6 6
</TABLE>
Stock option activity was as follows:
<TABLE>
<CAPTION>
Options in Thousands 1997 1996 1995
<S> <C> <C> <C>
Outstanding, July 1 66,657 63,384 61,112
Granted 10,409 9,605 7,852
Exercised (8,357) (6,110) (5,278)
Canceled (195) (222) (302)
-----------------------------------------
Outstanding, June 30 68,514 66,657 63,384
Exercisable 58,098 57,048 55,554
Available for grant 28,538 24,418 19,510
Average price
Outstanding, beginning
of year $24.79 $21.36 $19.12
Granted 58.72 40.87 33.11
Exercised 16.02 14.52 12.59
Outstanding, end of year 31.00 24.79 21.36
Exercisable, end of year 26.03 22.09 19.70
Weighted average grant
date fair value of options 17.14 10.88
</TABLE>
The following table summarizes information about stock options outstanding
at June 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding
----------------------------------------------------
Number Weighted-Avg
Range of Outstanding Weighted-Avg Remaining
Prices (Thousands) Exercise Price Contractual Life
<S> <C> <C> <C>
$ 8 to 21 19,942 $15.92 2.4 years
25 to 30 21,511 26.56 5.5
33 to 46 17,645 37.85 8.1
57 to 69 9,416 60.24 9.5
</TABLE>
The following table summarizes information about stock options exercisable
at June 30, 1997:
<TABLE>
<CAPTION>
Options Exercisable
--------------------------------
Number
Range of Exercisable Weighted-Avg
Prices (Thousands) Exercise Price
<S> <C> <C>
$ 8 to 21 19,942 $15.92
25 to 30 21,498 26.56
33 to 46 16,658 37.46
57 to 69 - -
</TABLE>
7. POSTRETIREMENT BENEFITS
The Company offers various postretirement benefits to U.S. and international
employees.
PENSION BENEFITS
Within the U.S., the most significant retirement benefit is the defined
contribution profit sharing plan funded by an employee stock ownership plan
(ESOP) and Company contributions. Annual credits to participants' accounts are
based on individual base salaries and years of service, not exceeding 15% of
total participants' annual salaries and wages
<TABLE>
<CAPTION>
Years Ended June 30 1997 1996 1995
<S> <C> <C> <C>
Preferred shares allocated
at market value $247 $200 $155
Company contributions 35 75 112
---------------------------------------
Benefits earned 282 275 267
</TABLE>
Certain other employees, primarily outside the U.S., are covered by local
defined benefit pension plans, with summarized information as follows:
<TABLE>
<CAPTION>
June 30 1997 1996
<S> <C> <C>
Vested benefit obligations $ 1,366 $ 1,315
Non-vested benefit obligations 190 188
-------------------------
Accumulated benefit obligations 1,556 1,503
Effect of projected salaries 435 383
-------------------------
Projected benefit obligations 1,991 1,886
Plan assets at market value (1,229) (1,019)
-------------------------
Unfunded pension benefit
obligations 762 867
Unrecognized
Net transition obligations (35) (37)
Prior service costs (43) (43)
Net gains 95 32
-------------------------
Net accrued pension costs 779 819
</TABLE>
Plan assets are held in restricted trusts or foundations. The assets are in
stocks, bonds, insurance contracts, and other investments within the limits
prescribed by local laws and in line with local investment practices for pension
and retirement plans. Funding policies vary by country and consider such factors
as actuarial reports, tax regulations, and local practices. In the U.S., plan
assets exceeded the projected benefit obligation by $45 in 1997 and $27 in 1996.
<TABLE>
<CAPTION>
PENSION EXPENSE
Years Ended June 30 1997 1996 1995
<S> <C> <C> <C>
Benefits earned
during the year $ 100 $ 96 $ 89
Interest on projected
benefit obligations 131 131 116
Actual return on
plan assets (166) (132) (74)
Net amortization
and other 77 60 10
----------------------------------------
142 155 141
</TABLE>
The actuarial assumptions vary by country and consider such factors as
economic conditions and the nature of plan assets. The following is a summary of
assumptions, reflecting an average for the Company:
<TABLE>
<CAPTION>
ASSUMPTIONS
Years Ended June 30 1997 1996 1995
<S> <C> <C> <C>
Long-term rate of return
on plan assets 9% 9% 9%
Increase in compensation 5% 5% 6%
Discount rate 7% 7% 7%
</TABLE>
OTHER RETIREE BENEFITS
The Company provides certain health care and life insurance benefits for
substantially all U.S. employees and, to a lesser extent, certain foreign
employees who become eligible for these benefits when they meet minimum age and
service requirements. Generally, the health care plans require contributions
from retirees and pay a stated percentage of expenses, reduced by deductibles
and other coverages. Retiree contributions change annually in line with medical
cost trends. These benefits are partially funded by an ESOP, as well as certain
other assets contributed by the Company.
<TABLE>
<CAPTION>
ACCUMULATED BENEFIT OBLIGATION AND NET LIABILITY
June 30 1997 1996
<S> <C> <C>
Retirees $ 677 $ 613
Employees eligible to retire 112 125
Other active employees 671 667
------------------------
Accumulated benefit obligation 1,460 1,405
Unrecognized gain 1,708 821
Plan assets at market value (1,828) (838)
------------------------
Net liability 1,340 1,388
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Millions of Dollars Except Per Share Amounts)
<TABLE>
<CAPTION>
BENEFIT EXPENSE
Years Ended June 30 1997 1996 1995
<S> <C> <C> <C>
Benefits earned
during the year $ 45 $ 47 $ 43
Interest on accumulated
benefit obligation 109 102 98
Actual return on
plan assets (999) (377) (364)
Net amortization
and other 841 239 241
------------------------------
Gross benefit expense (4) 11 18
Dividends on ESOP
preferred stock (79) (79) (79)
------------------------------
(83) (68) (61)
</TABLE>
<TABLE>
<CAPTION>
ASSUMPTIONS
Years Ended June 30 1997 1996 1995
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 7.5%
Long-term rate of return
on plan assets 9% 9% 9%
Initial health care cost
trend rate<F1> 8.8% 9.5% 10.5%
<FN>
<F1>Assumed to decline gradually to 5% in 2006 and thereafter.
</FN>
</TABLE>
The pre-tax effect of a 1% increase in the assumed health care cost trend
rate would increase the accumulated benefit obligations at June 30, 1997 and
1996 by approximately $217 and $210 and increase the respective annual Costs by
$25 and $27.
8. EMPLOYEE STOCK OWNERSHIP PLAN
The Company maintains the Procter & Gamble Profit Sharing Trust and Employee
Stock Ownership Plan (ESOP) to provide funding for two primary postretirement
benefits described in Note 7: a defined contribution profit sharing plan and
certain U.S. postretirement health care benefits.
The ESOP borrowed $1,000 in 1989, which has been guaranteed by the Company.
The proceeds were used to purchase Series A ESOP Convertible Class A Preferred
Stock to fund a portion of the defined contribution plan. Principal and interest
requirements are $117 per year, paid by the trust from dividends on the
preferred shares and from cash contributions and advances from the Company. The
shares are convertible at the option of the holder into one share of the
Company's common stock. The liquidation value is equal to the issue price of
$13.75 per share.
In 1991 the ESOP borrowed an additional $1,000, also guaranteed by the
Company. The proceeds were used to purchase Series B ESOP Convertible Class A
Preferred Stock to fund a portion of retiree health care benefits. Debt service
requirements are $94 per year, funded by preferred stock dividends and cash
contributions from the Company. Each share is convertible at the option of the
holder into one share of the Company's common stock. The liquidation value is
equal to the issuance price of $26.12 per share.
<TABLE>
<CAPTION>
Shares in Thousands 1997 1996 1995
<S> <C> <C> <C>
Shares Outstanding
Series A 62,952 64,562 66,436
Series B 38,045 38,204 38,284
</TABLE>
Shares of the ESOP are allocated at original cost based on debt service
requirements, net of advances made by the Company to the trust. The fair value
of the Series A shares serves to reduce the Company's cash contribution required
to fund the profit sharing plan contributions earned. The Series B shares are
considered plan assets of the other retiree benefits plan. Dividends on all
preferred shares, net of related tax benefit, are charged to retained earnings.
The preferred shares held by the ESOP are considered outstanding from inception
for purposes of calculating fully diluted net earnings per common share.
9. INCOME TAXES
Earnings before income taxes consist of the following:
<TABLE>
<CAPTION>
Years Ended June 30 1997 1996 1995
<S> <C> <C> <C>
United States $3,232 $3,023 $2,683
International 2,017 1,646 1,317
----------------------------
5,249 4,669 4,000
</TABLE>
The income tax provision consists of the following
<TABLE>
<CAPTION>
Years Ended June 30 1997 1996 1995
<S> <C> <C> <C>
Current tax expense
U.S. Federal $ 967 $ 776 $ 718
International 805 413 399
U.S. State & Local 88 106 57
----------------------------------
1,860 1,295 1,174
Deferred tax expense
U.S. Federal 1 220 124
International & other (27) 108 57
----------------------------------
(26) 328 181
</TABLE>
Taxes credited to shareholders' equity for the years ended June 30,1997 and
1996 were $97 and $3. Undistributed earnings of foreign subsidiaries that are
considered to be reinvested indefinitely were $6,108 at June 30, 1997.
The effective income tax rate was 34.9%, 34.8% and 33.9% in 1997, 1996 and
1995, respectively, compared to the U.S. statutory rate of 35%.
Deferred income tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
June 30 1997 1996
<S> <C> <C>
Current deferred tax assets
Restructuring reserve $ - $ 267
Other 661 331
------------------------
661 598
Non-current deferred
tax assets (liabilities)
Depreciation (1,031) (1,005)
Postretirement benefits 475 492
Loss carryforwards 84 166
Other (87) (291)
------------------------
(559) (638)
</TABLE>
10. Commitments and Contingencies
The Company has various purchase commitments for materials, supplies, and
property, plant, and equipment incidental to the ordinary conduct of business.
In the aggregate, such commitments are not at prices in excess of current
market.
The Company is subject to various lawsuits and claims with respect to
matters such as governmental regulations, income taxes and other actions arising
out of the normal course of business. The Company is also subject to
contingencies pursuant to environmental laws and regulations that in the future
may require the Company to take action to correct the effects on the environment
of prior manufacturing and waste disposal practices. Accrued environmental
liabilities for remediation and closure costs at June 30,1997 were $62 and, in
management's opinion, such accruals are appropriate based on existing facts and
circumstances. Under more adverse circumstances, however, this potential
liability could be higher. Current year expenditures were not material.
While the effect on future results of these items is not subject to
reasonable estimation because considerable uncertainty exists, in the opinion of
management and Company counsel, the ultimate liabilities resulting from such
claims will not materially affect the consolidated financial position, results
of operations or cash flows of the Company.
11. SEGMENT INFORMATION
Geographic segments are aligned into four regions: North America - including the
United States and Canada; Europe, Middle East and Africa; Asia; and Latin
America.
Business segments are aligned as follows:
Laundry and Cleaning - laundry, dishcare, hard surface cleaners and fabric
conditioners. Representative brands include Ariel, Tide, Cascade, Dawn, Mr.
Proper, Downy.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Millions of Dollars Except Per Share Amounts)
Paper - tissue/towel, feminine protection, incontinence, diapers and wipes.
Representative brands include Bounty, Charmin, Always, Whisper, Pampers and
Attends.
Beauty Care - hair care, deodorants, personal cleansing, skin care and
cosmetics and fragrances. Representative brands include Pantene, Vidal Sassoon,
Secret, Safeguard, Oil of Olay, Cover Girl, Giorgio Beverly Hills.
Food and Beverage - coffee, peanut butter, juice, snacks, shortening and
oil, baking mixes and commercial services. Representative brands include
Folgers, Jif, Sunny Delight, Pringles, Crisco, Duncan Hines.
Health Care - oral care, gastro-intestinal, respiratory care, and
pharmaceuticals. Representative brands include Crest, Scope, Metamucil, Vicks.
Corporate items primarily include interest income and expense, segment
eliminations, and other general corporate income and expense.
The Company's operations are characterized by interrelated raw materials
and manufacturing facilities and centralized research and staff functions.
Accordingly, separate earnings determination by segment is dependent upon
assumptions regarding allocations.
<PAGE>
<TABLE>
<CAPTION>
SEGMENT INFORMATION
Europe,
North Middle East Latin
GEOGRAPHIC SEGMENTS America and Africa Asia America Corporate Total
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales 1997 $17,702 $11,581 $3,572 $2,304 $ 605 $35,764
1996 17,303 11,458 3,881 2,173 469 35,284
1995 16,408 10,696 3,689 2,178 511 33,482
-----------------------------------------------------------------------------------
Net Earnings 1997 2,296 857 274 217 (229) 3,415
1996<F1> 2,239 711 254 209 (367) 3,046
1995 1,914 589 245 207 (310) 2,645
-----------------------------------------------------------------------------------
Identifiable Assets 1997 11,569 6,438 2,634 1,581 5,322 27,544
1996 11,775 6,962 2,882 1,445 4,666 27,730
1995 11,334 7,501 3,311 1,305 4,674 28,125
-----------------------------------------------------------------------------------
<FN>
<F1>Includes a gain on the sale of the Company's share of a health care joint
venture: North America-$120 after tax, Health Care-$185 before tax.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Laundry and Beauty Food and Health
BUSINESS SEGMENTS Cleaning Paper Care Beverage Care Corporate Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales 1997 $10,933 $10,113 $7,108 $4,108 $2,897 $ 605 $35,764
1996 10,705 10,166 6,920 4,067 2,957 469 35,284
1995 10,157 9,278 6,569 3,979 2,988 511 33,482
----------------------------------------------------------------------------------------------
Earnings Before 1997 2,101 1,333 1,066 542 471 (264) 5,249
Income Taxes 1996<F1> 1,872 1,260 955 581 441 (440) 4,669
1995 1,686 1,144 735 515 358 (438) 4,000
----------------------------------------------------------------------------------------------
Identifiable Assets 1997 5,112 6,858 5,036 2,454 2,762 5,322 27,544
1996 5,355 6,859 5,359 2,054 3,437 4,666 27,730
1995 5,375 7,082 5,511 2,148 3,335 4,674 28,125
----------------------------------------------------------------------------------------------
Capital 1997 417 855 301 413 122 21 2,129
Expenditures 1996 541 804 344 288 175 27 2,179
1995 608 731 341 150 295 21 2,146
----------------------------------------------------------------------------------------------
Depreciation and 1997 294 689 216 108 164 16 1,487
Amortization 1996 317 520 213 102 167 39 1,358
1995 279 500 189 108 144 33 1,253
----------------------------------------------------------------------------------------------
<FN>
<F1>Includes a gain on the sale of the Company's share of a health care joint
venture: North America-$120 after tax, Health Care-$185 before tax.
</FN>
</TABLE>
12. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
Ouarters Ended
------------------------------------------- Total
Sept. 30 Dec. 31 Mar 31 Jun. 30 Year
<S> <C> <C> <C> <C> <C> <C>
Net Sales 1996-97 $8,903 $9,142 $8,771 $8,948 $35,764
1995-96 9,027 9,090 8,587 8,580 35,284
-------------------------------------------------------------------
Operating Income 1996-97 1,547 1,521 1,383 1,037 5,488
1995-96 1,435 1,352 1,193 835 4,815
-------------------------------------------------------------------
Net Earnings 1996-97 979 944 881 611 3,415
1995-96 896 836 760 554 3,046
-------------------------------------------------------------------
Net Earnings 1996-97 .70 .67 .63 .43 2.43
Per Common Share<F1> 1995-96 .63 .59 .54 .38 2.14
-------------------------------------------------------------------
Fully Diluted Net Earnings 1996-97 .65 .63 .59 .41 2.28
Per Common Share<F1> 1995-96 .59 .56 .50 .36 2.01
-------------------------------------------------------------------
<FN>
<F1>Restated for two-for-one stock split effective August 22,1997.
</FN>
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
(Millions of Dollars Except Per Share Amounts)
<CAPTION>
1997 1996 1995 1994 1993<F2><F3>
<S> <C> <C> <C> <C> <C>
Net Sales 35,764 35,284 33,482 30,385 30,498
Operating Income 5,488 4,815 4,244 3,670 521
Net Earnings/(Loss) 3,415 3,046 2,645 2,211 (656)
Net Earnings Margin 9.5% 8.6% 7.9% 7.3% -
Net Earnings/(Loss) Per Common Share<F1> 2.43 2.14 1.85 1.54 (.56)
Dividends Per Common Share<F1> .90 .80 .70 .62 .55
Research and Development Expense 1,282 1,221 1,148 964 868
Advertising Expense 3,468 3,254 3,284 2,996 2,973
Total Assets 27,544 27,730 28,125 25,535 24,935
Capital Expenditures 2,129 2,179 2,146 1,841 1,911
Long-Term Debt 4,143 4,670 5,161 4,980 5,174
Shareholders' Equity 12,046 11,722 10,589 8,832 7,441
Cash Flow from Operations 5,882 4,158 3,568 3,649 3,338
<FN>
<F1>Restated for two-for-one stock split effective August 22,1997.
<F2>Operating income includes a before-tax charge totaling $2,705 for
restructuring
<F3>Net earnings and net earnings per common share include an after-tax charge
totaling $1,746 or $1.28 per share for restructuring and an after-tax charge
of $925 or $.68 per share for the prior years' effect of accounting changes.
</FN>
</TABLE>
<PAGE>
DIRECTORS AND OFFICERS OF THE PROCTER & GAMBLE COMPANY
DIRECTORS
Edwin L. Artzt Retired Chairman of the Board and Chief Executive
Norman R. Augustine Chairman of the Board, Lockheed Martin Corporation-
aerospace, electronics, information management, materials
and energy systems and products
Donald R. Beall Chairman and Chief Executive Officer, Rockwell
International Corporation-automation, avionics and
communications, semiconductor systems and automotive
component systems
Gordon F. Brunner Senior Vice President
Richard B. Cheney Chairman of the Board and Chief Executive Officer,
Halliburton Company - energy services, engineering and
construction
Harald Einsmann Executive Vice President
Richard J. Ferris Co-Chairman, Doubletree Corporation
Joseph T. Gorman Chairman and Chief Executive Officer, TRW Inc.-electronic,
automotive, industrial and aerospace equipment
Durk I. Jager President and Chief Operating Officer
Charles R. Lee Chairman and Chief Executive Officer, GTE Corporation-
telecommunication services
Lynn M. Martin Professor, Davee Chair, J. L. Kellogg Graduate School of
Management, Northwestern University
John E. Pepper Chairman of the Board and Chief Executive
John C. Sawhill President and Chief Executive Officer, The Nature
Conservancy-an international conservation organization
John F. Smith, Jr. Chairman, Chief Executive Officer and President, General
Motors Corporation - automobile and related businesses
Ralph Snyderman Chancellor for Health Affairs, Dean, School of Medicine at
Duke University and Chief Executive Officer of Duke
University Health System
Robert D. Storey Partner in the law firm of Thompson, Hine & Flory P.L.L.
Marina v.N. Whitman Professor of Business Administration and Public Policy
University of Michigan
BOARD COMMITTEES
EXECUTIVE COMMITTEE COMPENSATION COMMITTEE BOARD ORGANIZATION AND
E. L. Artzt, Chairman N. R. Augustine, Chairman NOMINATING COMMITTEE
J. E. Pepper D. R. Beall M. v.N. Whitman, Chairman
N. R. Augustine R. B. Cheney R. J. Ferris
D. R. Beall J. T. Gorman C. R. Lee
R. J. Ferris M. v.N. Whitman L. M. Martin
J. T. Gorman J. C. Sawhill
J. F. Smith, Jr.
R. Snyderman
R. D. Storey
AUDIT COMMITTEE FINANCE COMMITTEE PUBLIC POLICY COMMITTEE
D. R. Beall, Chairman R. J. Ferris, Chairman R. D. Storey, Chairman
R. B. Cheney E. L. Artzt E. L. Artzt
C. R. Lee N. R. Augustine R. B. Cheney
J. C. Sawhill J. T. Gorman C. R. Lee
J. F. Smith, Jr. L. M. Martin L. M. Martin
R. Snyderman M. v.N. Whitman J. C. Sawhill
R. D. Storey J. F. Smith, Jr.
R. Snyderman
CORPORATE OFFICERS
John E. Pepper Chairman of the Board and Chief Executive
Durk I. Jager President and Chief Operating Officer
Wolfgang C. Berndt Executive Vice President (President-North America)
Harald Einsmann Executive Vice President (President-Europe, Middle
East and Africa)
Alan G. Lafley Executive Vice President (President-Asia)
Jorge P. Montoya Executive Vice President (President-Latin America)
Benjamin L. Bethell Senior Vice President (Human Resources)
Gordon F. Brunner Senior Vice President (Research and Development)
Todd A. Garrett Senior Vice President (Chief Information Officer)
James J. Johnson Senior Vice President and General Counsel
Gary T. Martin Senior Vice President (Product Supply)
Lawrence D. Milligan Senior Vice President (Customer Business Development)
Erik G. Nelson Senior Vice President (Chief Financial Officer)
Charlotte R. Otto Senior Vice President (Public Affairs)
Robert L. Wehling Senior Vice President (Advertising, Market Research
and Government Relations)
Robert T. Blanchard Group Vice President (President, Beauty Care
Products-North America, Procter & Gamble North
America)
Bruce L. Byrnes Group Vice President (President, Health Care
Products-North America, Procter & Gamble North
America)
R. Kerry Clark Group Vice President (President, Laundry and Cleaning
Products-North America, Procter & Gamble North
America)
Larry G. Dare Group Vice President (President, Paper and Beverage
Products - Europe, Procter & Gamble Europe, Middle
East and Africa)
Stephen P. Donovan, Jr. Group Vice President (President, Food and Beverage
Products-North America, Procter & Gamble North
America)
Jacobus Groot Group Vice President (President-Asia, North, and
President, Paper Products-Asia, Procter & Gamble
Asia)
Jeffrey D. Jones Group Vice President (President- Latin America,
South, Procter & Gamble Latin America)
Mark D. Ketchum Group Vice President (President, Paper Products-North
America, Procter & Gamble North America)
Fuad O. Kuraytim Group Vice President (President-Middle East, Africa
and General Export, Procter & Gamble Europe, Middle
East and Africa)
Claude L. Meyer Group Vice President (President, Laundry and Cleaning
Products - Europe, Procter & Gamble Europe, Middle
East and Africa)
Martin J. Nuechtern Group Vice President (President-ASEAN and
Australasia, Procter & Gamble Asia)
John O'Keeffe Group Vice President (President, Health and Beauty
Care Products-Europe, Procter & Gamble Europe, Middle
East and Africa)
Dimitri Panayotopoulos Group Vice President (President-China, Procter &
Gamble Asia)
Herbert Schmitz Group Vice President (President-Central and Eastern
Europe, Procter & Gamble Europe, Middle East and
Africa)
Edwin H. Eaton, Jr. Vice President and Comptroller
Clayton C. Daley, Jr. Vice President and Treasurer
David R. Walker Vice President-Finance
Terry L. Overbey Secretary and Associate General Counsel
ORGANIZATION CHANGES
The following changes in the senior management of the Company were announced
during the past year:
Todd A. Garrett was elected Senior Vice President
Charlotte R. Otto was elected Senior Vice President
Martin J. Nuechtern was elected Group Vice President
Dimitri Panayotopoulos was elected Group Vice President
SHAREHOLDER INFORMATION
If... CONTACT P&G'S SHAREHOLDER SERVICES
- - You need help with your account OFFICE IN CINCINNATI.
or if you need automated access Call: 1-800-742-6253
to your account 1-513-983-3034 (outside the U.S.)
- - You're interested in our Certifi- Write: The Procter & Gamble Company
cate Safekeeping service Shareholder Services Department
- - You need to change an address or P. O. Box 5572
discontinue duplicate mailings Cincinnati, Ohio 45201-5572
- - You want to arrange for direct
deposit of dividends Financial information is available 24
hours a day. Just call 1-800-764-7483.
A stock certificate is lost, stolen
or destroyed
You can also visit us on the World
You want to participate in our Wide Web. Our address is www.pg.com
Shareholder Investment Program ...
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK PRICE RANGE AND DIVIDENDS
(Restated for two-for-one stock split effective August 22. 1997)
Price Range Dividends
----------------------------------- -------------------
1996-97 1995-96 1996-97 1995-96
--------------- --------------- -------------------
Quarter Ended High Low High Low
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
September 30 $48.75 $41.19 $39.25 $33.07 $.225 $.20
December 31 55.50 45.75 44.75 38.25 .225 .20
March 31 64.81 51.81 45.32 40.57 .225 .20
June 30 71.94 56.63 46.94 39.69 .225 .20
</TABLE>
<PAGE>
CORPORATE HEADQUARTERS
The Procter & Gamble Company
P.O. Box 599
Cincinnati, Ohio 45201-0599
TRANSFER AGENT/SHAREHOLDER SERVICES
The Procter & Gamble Company
Shareholder Services Department
P.O. Box 5572
Cincinnati, Ohio 45701-5572
REGISTRAR
PNC Bank, Ohio, N.A.
P.O. Box 1198
Cincinnati, Ohio 45201-1198
EXCHANGE LISTING
New York, Cincinnati, Amsterdam, Paris, Basle, Geneva, Lausanne, Zurich,
Frankfurt, Antwerp, Brussels, Tokyo
SHAREHOLDERS OF COMMON STOCK
There were 242,216 Common Stock shareholders of record, including participants
in the Shareholder Investment Program, as of July 18,1997.
FORM 10-K
Beginning October 1997, shareholders may obtain a copy of the Company's 1997
report to the Securities and Exchange Commission on Form 10-K by sending a
request to Robert J. Thompson, Manager, Shareholder Services address, or by
calling the toll-free number above.
SHAREHOLDERS' MEETING
The next annual meeting of shareholders will be held on Tuesday, October 14,
1997, at the Company's General Office, Two P&G Plaza, Cincinnati, Ohio, 45202. A
full transcript of the meeting will be available from Linda D. Rohrer, Assistant
Secretary, at a cost of $10. Ms. Rohrer can be reached at One P&G Plaza,
Cincinnati, Ohio, 45202-3315.
EXHIBIT (21)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
=============================================
Subsidiaries of the Registrant
------------------------------
The Procter & Gamble Company [Ohio]
Arbora Capital, S.A. [Spain]
Arbora Holding, S.A. [Spain]
Ausonia Higiene, S.L. [Spain]
Ausonia Portuguesa-Productos de Higiene, S.A. [Portugal]
Richvest B.V. [Netherlands]
Cotonificio Medical S.A. [Spain]
The Dover Wipes Company [Ohio]
Fisher Nut Company [Ohio]
The Folger Coffee Company [Ohio]
P&G Consultoria E Servicos Ltda. [Brazil]
FPG Oleochemicals Sdn. Bhd. [Malaysia]
Giorgio Beverly Hills, Inc.[Delaware]
Giorgio Beverly Hills (Europe) Ltd. [United Kingdom]
Industria de Concentrados Crush Limitada [Uruguay]
Industrias Inextra, S.A. [Colombia]
Inversiones Procter & Gamble de Venezuela, C.A. [Venezuela]
Inversiones Industrias Mammi, C.A. [Venezuela]
Midway Holdings Ltd. [Cayman Islands]
Marcvenca Inversiones, C.A. [Venezuela]
Procter & Gamble de Venezuela, C.A. [Venezuela]
Jetco Chemicals, Inc. [Texas]
Karm, S.A. [Liechtenstein]
Millstone Coffee, Inc. [Washington]
Noxell Corporation [Maryland]
Max Factor & Co. [Delaware]
Noxell (Barbados) Limited [Barbados]
Noxell (Panama) S.A. [Panama]
Noxell (Thailand) Limited [Thailand]
Noxell de Venezuela, C.A. [Venezuela]
Procter & Gamble do Brasil S.A. [Brazil]
Procter & Gamble Quimica S.A. [Brazil]
Phebo do Nordeste S/A [Brazil]
P&G Holding B.V. [Netherlands]
P&G Tissues B.V. [Netherlands]
Richardson-Vicks B.V. [Netherlands]
Richardson-Vicks Overseas Finance N.V. [Netherlands Antilles]
Procter & Gamble A.G. [Switzerland]
Betrix (Schweiz) AG [Switzerland]
Detergent Products A.G. [Switzerland]
Modern Industries Company - Dammam [Saudi Arabia]
Modern Industries Company - Jeddah [Saudi Arabia]
Modern Products Company - Jeddah [Saudi Arabia]
Deurocos Cosmetic AG [Switzerland]
Moroccan Modern Industries [Morocco]
Comunivers sa [Morocco]
Pantene A.G. [Switzerland]
Procter & Gamble Austria GmbH [Austria]
Eurocos Cosmetic Warenvertrieb GmbH [Austria]
The Procter & Gamble Company of South Africa (Proprietary) Limited
[S. Africa]
Procter & Gamble South Africa Proprietary Limited [South Africa]
Procter & Gamble Development Company A.G. Glarus [Switzerland]
Procter & Gamble (East Africa) Limited [Kenya]
Procter & Gamble Egypt [Egypt]
Procter & Gamble (Egypt) Industrial and Commercial Company [Egypt]
Procter & Gamble (Egypt) Manufacturing Company [Egypt]
(Partnership)
Procter & Gamble Hellas A.E. (Chemical Industries) [Greece]
Procter & Gamble-Hutchison Ltd. [Hong Kong]
Procter & Gamble (Chengdu) Ltd. [PRC]
Procter & Gamble (China) Ltd. [PRC]
Procter & Gamble Detergent (Guangzhou) Ltd. [PRC]
Procter & Gamble (Guangzhou) Ltd. [PRC]
Procter & Gamble Oral Care (Guangzhou) [China]
Procter & Gamble Lonkey (Guangzhou) Ltd. [PRC]
Procter & Gamble Lonkey (Shaoguan) Ltd. [PRC]
Procter & Gamble Manufacturing (Tianjin) Co. Ltd. [PRC]
Procter & Gamble Manufacturing Detergent (Tianjin) Co. Ltd. [PRC]
Procter & Gamble Manufacturing Paper (Tianjin) Co. Ltd. [PRC]
Procter & Gamble Panda Detergent Co. Ltd Beijing [PRC]
Procter & Gamble Paper (Guangzhou) Ltd. [PRC]
Procter & Gamble Personal Cleansing (Tianjin) Ltd. [PRC]
Procter & Gamble Jamaica Ltd. [Jamaica]
The Procter & Gamble Manufacturing Company of Lebanon, S.A.L.[Lebanon]
Procter & Gamble Marketing A.G. [Switzerland]
Procter & Gamble Maroc [Morocco]
Procter & Gamble Nigeria Limited [Nigeria]
Procter & Gamble Pakistan (Private) Limited [Pakistan]
Procter & Gamble de Panama, S.A. [Panama]
Procter & Gamble Tissues AG [Switzerland]
Procter & Gamble (Yemen) Ltd [Yemen]
Societe Immobiliere Les Colombettes, S.A. [Switzerland]
Procter & Gamble Asia Pacific Ltd. [Hong Kong]
Procter & Gamble Asia Pacific Ltd. Manila Regional
Headquarters [Philippines]
Procter & Gamble do Brazil, Inc. [Delaware]
Procter & Gamble do Brasil & Cia [Brazil] (Partnership)
The Procter & Gamble Cellulose Company [Delaware]
Procter & Gamble Chile, Inc. [Ohio]
The Procter & Gamble Commercial Company [Ohio]
Procter & Gamble del Peru S.A. [Peru]
PROGAM Leasing, Inc. [Puerto Rico]
Procter & Gamble Commercial de Cuba, S.A. [Cuba]
The Procter & Gamble Distributing Company [Ohio]
Procter & Gamble FSC (Barbados) Inc. [Barbados]
Procter & Gamble Eastern Europe, Inc. [Ohio]
Detergenti SA Timisoara [Romania]
Hyginett KFT [Hungary]
Novomoskovskbytkhim [Russia]
P&G Balkans, Inc. [Ohio]
P&G C&CA, Inc. [Ohio]
Procter & Gamble Bulgaria Ltd. [Bulgaria]
Procter & Gamble Marketing and Services d.o.o. [Yugoslavia ]
Procter & Gamble Hungary Wholesale Trading Partnership (KKT) [Hungary]
Alvorada BT [Hungary]
Beta BT [Hungary]
Beauty-Care Beauty-Treatment Product Distribution Foreign Trade
Ltd. [Hungary]
Carlos BT [Hungary]
Cleveland Export-Import Trading Ltd. [Hungary]
Diego BT [Hungary]
Elysee BT [Hungary]
Ferraris BT [Hungary]
Frank BT [Hungary]
Helga BT [Hungary]
Olga BT [Hungary]
Pal BT [Hungary]
Pannonia Trading Ltd. [Hungary]
Shampoo-Trade Export Import Trading Ltd. [Hungary]
Stan BT [Hungary]
Transylvania Trading Ltd. [Hungary]
Varadi BT [Hungary]
Procter & Gamble Kereskedelmi BT [Hungary]
Procter & Gamble Marketing & Commercial Activities d.o.o. [Slovenia]
Procter & Gamble Marketing Latvia Ltd. [Latvia]
Procter & Gamble Marketing Romania SRL (Romania)
Procter & Gamble Manufacturing Romania SRL [Romania]
Procter & Gamble Operations Polska - Spolka Akcyjna [Poland]
Procter & Gamble Polska Sp. zo.o [Poland]
Procter & Gamble O.O.O. [Russia]
Procter & Gamble Spol. s.r.o. (Ltd) [Slovak Republic]
Procter & Gamble Ukraine (Ukraine)
Procter & Gamble Rakona Ltd. [Czech Republic]
Procter & Gamble European Technical Center N.V. [Belgium]
Procter & Gamble European Supply Company N.V. [Belgium]
Procter & Gamble Belgium BVBA [Belgium]
Procter & Gamble Eurocor N.V. [Belgium]
Procter & Gamble Europe BVBA[ Belgium]
Procter & Gamble Manufacturing Belgium BVBA [Belgium]
Procter & Gamble Nederland B.V. [Netherlands]
Procter & Gamble Services Company S.A. [Belgium]
Procter & Gamble Far East, Inc. [Ohio]
Max Factor K.K. [Japan]
American Cosmetics K.K. [Japan]
Betrix Japan K.K. [Japan]
Max Factor Hanbai K.K. [Japan]
P&G Indochina [Vietnam]
Procter & Gamble Asia Pte. Ltd. [Singapore]
Procter & Gamble Distribution Company Limited [India]
Procter & Gamble India Holdings, Inc. [Ohio]
Procter & Gamble Bangladesh Private Ltd. [Bangladesh]
Procter & Gamble Home Products (India) Limited [India]
Procter & Gamble Sri Lanka Private Ltd. [Sri Lanka]
Procter & Gamble Korea Inc. [Korea]
Procter & Gamble NPD, Inc. [Ohio]
Procter & Gamble Taiwan Limited [Taiwan]
Procter & Gamble Technology (Beijing) Co., Ltd. [PRC]
Procter & Gamble (Vietnam) Ltd. [Vietnam]
Procter & Gamble FED, Inc. [Delaware]
Procter & Gamble Finance Corporation [Canada]
The Procter & Gamble Global Finance Company [Ohio]
Procter & Gamble Inc. [Ontario, Canada]
Crest Toothpaste Inc. [Canada]
Procter & Gamble Financial Services [Ireland]
Procter & Gamble Industrial e Comercial Ltda. [Brazil]
Procter & Gamble Mississauga Real Estate Company [Canada]
Shulton de Venezuela, C.A. S.A.[Venezuela]
Procter & Gamble Inversiones S.A. [Chile]
Productos Sanitarios S.A. [Chile]
Procter & Gamble Investment Corporation [Canada]
Procter & Gamble Italia, S.p.A. [Italy]
Procter & Gamble Pescara Technical Center S.p.A. [Italy]
Rapik S.p.A. [Italy]
Procter & Gamble Limited [U.K.]
European Beauty Products (U.K.) Limited [U.K.]
Max Factor & Co. (U.K.) Ltd. [Bermuda]
Max Factor Limited [U.K.]
Gala Cosmetics & Fragrances Limited [U.K.]
Gala Cosmetics International Limited [U.K.]
Komal Manufacturing Chemists Ltd. [India]
Gala of London Limited [U.K.]
Girl Cosmetics Ltd. (U.K.)
Max Factor Manufacturing Ltd. [U.K.]
Procter & Gamble (Enterprise Fund) Limited [U.K.]
Procter & Gamble (Health & Beauty Care) Limited [U.K.]
Noxell Limited [U.K.] [453]
Procter & Gamble (Cosmetics and Fragrances) Limited [U.K.]
Shulton (Great Britain) Ltd. [U.K.]
Colfax Laboratories (India) Ltd. [India]
Procter & Gamble Laundry & Cleaning Products Limited [U.K.]
Procter & Gamble (NTC) Limited [U.K.]
Procter & Gamble Pharmaceuticals U.K., Limited [U.K.]
Procter & Gamble Product Supply (U.K.) Limited [U.K.]
Procter & Gamble (Properties) Ltd. [U.K.]
Procter & Gamble Technical Centers Limited [U.K.] (Partnership)
Procter & Gamble U.K. [U.K.] (Partnership)
Vidal Sassoon Holdings Ltd. [U.K.]
The Procter & Gamble Manufacturing Company [Ohio]
Procter & Gamble Manufacturing (Thailand) Limited [Thailand]
Procter & Gamble de Mexico, S.A. de C.V. [Mexico]
Max Factor Mexicana, S.A. de C.V. [Mexico]
The Procter & Gamble Paper Products Company [Ohio]
Procter & Gamble Philippines, Inc. [Philippines]
Progam Realty & Development Corporation [Philippines]
Procter & Gamble Productions, Inc. [Ohio]
Fountain Square Music Publishing Co., Inc. [Ohio]
Riverfront Music Publishing Co., Inc. [Ohio]
Sycamore Productions, Inc. [Ohio]
Procter & Gamble S.A. [France]
Fonciere des 96 et 104 Avenue Charles de Gaulle [France]
Laboratoire Lachartre SNC [France]
S. H. Equateur S.A.R.L. [France]
Procter & Gamble Amiens SNC [France]
Procter & Gamble France S.N.C.[France]
Procter & Gamble Hygiene Beaute France SNC [France]
Procter & Gamble Neuilly S.A.R.L. [France]
Procter & Gamble Pharmaceuticals France S.A. [France]
Procter & Gamble Tissues France
Laboratoires Sofabel S.A.R.L. [France]
Procter & Gamble Brionne S.N.C. [France]
Procter & Gamble Scandinavia, Inc. [Ohio]
Procter & Gamble Hygien AB [Sweden]
Procter & Gamble Hygien A/S [Norway]
Procter & Gamble Hygien OY [Finland]
Procter & Gamble S.p.A. [Italy]
Eczacibasi Yatirim Holding Ortakligi A.S. [Turkey]
Eurocos Italia S.p.A. [Italy]
Fater S.p.A. [Italy]
Fameccanica Data S.p.A. [Italy]
Procter & Gamble Distribution Company (Europe) N.V. [Belgium]
Procter & Gamble Holding S.p.A.[Italy]
Procter & Gamble Pharmaceuticals Italia S.p.A. [Italy]
Procter & Gamble Tissues Italia S.p.A. [Italy]
Progasud S.p.A. [Italy]
Procter & Gamble Portugal S.A. (Portugal)
Neoblanc-Produtos de Higiene e Limpeza Lda. [Portugal]
Procter & Gamble Tuketim Mallari Sanayii A.S. [Turkey]
Sanipak Saglik Urunleri Sanayi Ve Ticaret A.S. [Turkey]
Eczacibasi Procter & Gamble Dagitim Ve Satis AS [Turkey]
The Procter & Gamble U.K. Tissue Company [Ohio]
Productos Sanitarios S.A. [Argentina]
Eguimad S.A. [Argentina]
Topsy S.A. [Argentina]
Promotora de Bienes y Valores, S.A. de C.V. [Mexico]
P.T. Procter & Gamble Home Products Indonesia [Indonesia]
REVAC 2 Corp. [Delaware]
Richardson-Vicks Inc. [Delaware]
Celtic Insurance Company Limited [Bermuda]
Olay Company, Inc. [Delaware]
P&G do Brasil Comercial Ltda. [Brazil]
Procter & Gamble Australia Proprietary Limited [Australia]
Procter & Gamble (NBD) Pty. Ltd. [Australia]
Procter & Gamble Espana S.A. [Spain]
Procter & Gamble GmbH [Germany]
Beautycos Cosmetic GmbH [Germany]
Betrix Cosmetic GmbH [Germany]
Blendax Dental Vertriebs-GmbH [Germany]
Blendax GmbH [Germany]
Blendax Unterstutzungskasse GmbH [Germany]
Buscher GmbH [Germany]
Cover Girl Cosmetic GmbH [Germany]
Eurocos Cosmetic GmbH [Germany]
EURO-Juice G.m.b.H. Import und Vertrieb [Germany]
Euro-Juice y Compania, S. en C. [Spain]
HELIX Speditions-und Lagerei GmbH [Germany]
Medimas Media-und Marketing Service GmbH I.L. [Germany]
Procter & Gamble European Service GmbH [Germany]
Procter & Gamble GmbH & Co. Manufacturing OHG [Germany]
Noris Transport GmbH [Germany]
Papierhygiene GmbH [Germany]
Tempo AG [Switzerland]
Bess Hygiene AG [Switzerland]
Unterstutzungskasse der Vereinigte Papierwerke AG
Nurnberg e.V. [Germany]
Procter & Gamble Pharmaceuticals-Germany GmbH [Germany]
Rohm Pharma GmbH [Germany]
Egnaro Arzneimittel GmbH [Germany]
Rohm Pharma GmbH Wien [Austria]
Rolf H. Dittmeyer GmbH [Germany]
SCS Sales + Cosmetic Service GmbH [Germany]
Shulton GmbH [Germany]
TRAPOFA Leonhard-Speditions GmbH I.L. [Germany]
Procter & Gamble Health & Beauty Care-Europe Limited [U.K.]
Procter & Gamble Health Products, Inc. [Delaware]
Procter & Gamble Hong Kong Limited [Hong Kong]
Procter & Gamble India Limited [India]
Procter & Gamble Interamericas Inc. [Delaware]
Alejandro Llauro E Hijos S.A.I.C. [Argentina]
Compania Quimica S.A. [Argentina]
Procter & Gamble Ecuador Compania Anonima [Ecuador]
Procter & Gamble Interamericas de Costa Rica, S.A. [Costa Rica]
Procter & Gamble Interamericas de El Salvador, S.A. de C.V.
[El Salvador]
Procter & Gamble Interamericas de Guatemala, S.A. [Guatemala]
Procter & Gamble Interamericas de Nicaragua, S.A. [Nicaragua]
Surfac S.A. [Peru]
Procter & Gamble (Malaysia) Sdn. Berhad [Malaysia]
Procter & Gamble Pharmaceuticals, Inc. [Ohio]
Norwich Overseas, Inc. [Delaware]
Norwich Pharmacal Company del Peru [Peru]
Procter & Gamble Pharmaceuticals Australia Pty.
Limited [Australia]
Procter & Gamble Pharmaceuticals Canada, Inc. [Canada]
S.A. Procter & Gamble Pharmaceuticals N.V. [Belgium]
Procter & Gamble Pharmaceuticals Puerto Rico, Inc. [Delaware]
Procter & Gamble (Singapore) Pte. Ltd. [Singapore]
P. T. Procter & Gamble Indonesia [Indonesia]
Richardson-Vicks do Brasil Quimica e Farmaceutica S.A. [Brazil]
Richardson-Vicks Limited [Thailand]
Richardson-Vicks Real Estate Inc. [Ohio]
R-V Chemicals Holdings Ltd. [Ireland]
Procter & Gamble (Ireland) Limited [Ireland]
Procter & Gamble (Manufacturing) Ireland Limited [Ireland]
Vick International Corporation [Delaware]
Vick Nigeria Limited [Nigeria]
Rosemount Corporation [Delaware]
Anjali Corporation [Delaware]
Kangra Valley Enterprises Ltd. [Delaware]
The Mandwa Company, Inc. [Delaware]
Ramalayam Investments Company [Delaware]
Yamuna Investments Company [Delaware]
The Malabar Company [Delaware]
Temple Trees [India]
Sacoma, S.A. [Argentina]
Shulton, Inc. [New Jersey]
Shulton S.A. [Guatemala]
Shulton (New Zealand) Limited [New Zealand]
Shulton (Thailand) Ltd. [Thailand]
Sundor Brands Inc. [Florida]
Sundor Canada Inc. [Delaware]
Sundor Brands Limited [U.K.]
Sycamore Investment Company [Ohio]
Tambrands Inc. [Delaware]
Island Laboratories Inc. [Delaware]
Shenyang Tambrands Company Limited [PRC]
Talco, Inc. [Delaware]
Tambrands Industria e Comercia Ltda. [Brazil]
Tambrands PACE, Inc. [Delaware]
Tambrands de Venezuela, C.A. [Venezuela]
Tambrands Polska Sp.z.o.o. [ Poland]
Tambrands, Spol. s.r.o. [Czech Republic]
Tambrands Ukraine [Ukraine]
Tambrands S.A. [Brazil]
Tampax Corporation [Delaware]
Industrial Calentation Services (Pty.) Ltd. [S. Africa]
Tambrands South Africa (Pty.) Ltd. [S. Africa]
Tambrands Properties (Pty.) Ltd. [S. Africa]
Tambrands AG [Switzerland]
Tambrands Canada Inc. [Canada]
Tambrands France S.A. [France]
Tambrands GmbH [Germany]
Tambrands Limited [U.K.]
Tambrands (Continental) Ltd. [U.K.]
Tambrands Investments Ltd. (U.K.) [U.K.]
Tambrands Ireland Limited [Ireland]
Tambrands Manufacturing, Inc. [Delaware]
Tambrands Sales Corporation [Delaware]
ZAO Tambrands [Russia]
Tesco, Inc. [Delaware]
TIM International Investments, Inc. [Delaware]
Adminser S.A. [Mexico]
Tambrands Dosmil, S.A. de C.V. [Mexico]
Thomas Hedley & Co. Limited [U.K.]
[ ] Brackets indicate state or country of incorporation and do not form part
of corporate name.
Exhibit (23)
----------------
Consent of Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
250 East Fifth Street
Post Office Box 5340
Cincinnati, Ohio 45201-5340
Telephone: (513) 784-7100
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- ---------------------------------------------------
We consent to the incorporation by reference in the following documents of our
report dated July 31, 1997, incorporated by reference in this Annual Report on
Form 10-K of The Procter & Gamble Company for the year ended June 30, 1997.
1. Amendment No. 2, Post-Effective Amendment No. 2 to Registration Statement
No. 33-26514 on Form S-8 For The Procter & Gamble 1983 Stock Plan;
2. Amendment No. 1 on Form S-8 to Registration Statement No. 33-31855 on Form
S-4 (now S-8) for the 1982 Noxell Employees' Stock Option Plan and the 1984
Noxell Employees' Stock Option Plan;
3. Amendment No. 1, Post Effective Amendment No. 1 to Registration Statement
No. 33-49289 on Form S-8 for The Procter & Gamble 1992 Stock Plan;
4. Registration Statement No. 33-47656 on Form S-8 for The Procter & Gamble
International Stock Ownership Plan;
5. Registration Statement No. 33-49111 on Form S-3 for The Procter & Gamble
Stock Investment Program;
6. Registration Statement No. 33-50273 on Form S-8 for The Procter & Gamble
Commercial Company Employees' Savings Plan;
7. Registration Statement No. 33-51469 on Form S-8 for The Procter & Gamble
1993 Non-Employee Directors' Stock Plan;
8. Registration Statement No. 333-03821 on Form S-3 for The Procter & Gamble
Company Debt Securities and Warrants;
9. Registration Statement No. 333-05715 on Form S-8 for The Procter & Gamble
Profit Sharing Trust and Employee Stock Ownership Plan;
10. Amendment No. 1, Post-Effective Amendment No. 1 to Registration Statement
No. 33-59257 on Form S-3 for The Procter & Gamble Shareholder Investment
Program;
11. Registration Statement No. 333-14381 on Form S-8 for Profit Sharing
Retirement Plan of The Procter & Gamble Commercial Company;
12. Registration Statement No. 333-14387 on Form S-8 for Giorgio Employee
Savings Plan;
13. Registration Statement No. 333-14389 on Form S-8 for Procter & Gamble
Pharmaceuticals Savings Plan;
14. Registration Statement No. 333-14391 on Form S-8 for Richardson-Vicks
Savings Plan;
15. Registration Statement No. 333-14397 on Form S-8 for Procter & Gamble
Subsidiaries Savings Plan;
16. Registration Statement No. 333-14395 on Form S-8 for Procter & Gamble
Subsidiaries Savings and Investment Plan;
17. Registration Statement No. 333-21783 on Form-8 for The Procter & Gamble 1992
Stock Plan (Belgian Version); and
18. Registration Statement No. 333-30949 on Form S-3 for The Procter & Gamble
Company Debt Securities and Warrants.
DELOITTE & TOUCHE LLP
September 9, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE
FISCAL YEAR ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000080424
<NAME> THE PROCTER & GAMBLE COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,350
<SECURITIES> 760
<RECEIVABLES> 2,738
<ALLOWANCES> 0
<INVENTORY> 3,087
<CURRENT-ASSETS> 10,786
<PP&E> 18,625
<DEPRECIATION> 7,249
<TOTAL-ASSETS> 27,544
<CURRENT-LIABILITIES> 7,798
<BONDS> 4,143
0
1,859
<COMMON> 1,351
<OTHER-SE> 8,836
<TOTAL-LIABILITY-AND-EQUITY> 27,544
<SALES> 35,764
<TOTAL-REVENUES> 35,764
<CGS> 20,316
<TOTAL-COSTS> 9,960
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 457
<INCOME-PRETAX> 5,249
<INCOME-TAX> 1,834
<INCOME-CONTINUING> 3,415
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,415
<EPS-PRIMARY> 2.43
<EPS-DILUTED> 2.28
</TABLE>
Exhibit (99.2)
--------------
Directors and Officers (First) Excess Liability Policy
Form X.L. D&O-003B Policy No. XLD+O-00364-96
XL
X.L. INSURANCE COMPANY, LTD.
Producer: PARK INTERNATIONAL LIMITED
In favor of: THE PROCTER & GAMBLE COMPANY/
THE PROCTER AND GAMBLE FUND AND
OFFICERS OF OPERATING UNITS OF
PROCTER AND GAMBLE COMPANY
Address: ONE PROCTER & GAMBLE PLAZA
CINCINNATI, OHIO 45202-3314
U.S.A.
Type of Coverage: DIRECTORS AND OFFICERS LIABILITY
In the amount as stated in Item 2
of the Declarations.
Term: Beginning at 12:01 A.M. on the 30th day of June, 1996 prevailing time at
the address of the Named Insured and in accordance with terms and
conditions of the form(s) attached.
PREMIUM: $150,000
IN WITNESS WHEREOF, this Policy has been made,
entered into and executed by the undersigned
in Hamilton, Bermuda this 4th day of SEPTEMBER, 1996.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: VICE PRESIDENT
DATE: SEPTEMBER 20, 1996 POLICY NO: XLD+O-00364-96
X.L. INSURANCE COMPANY, LTD.
POLICY FOR DIRECTORS AND OFFICERS LIABILITY
IMPORTANT: THIS COVERAGE IS ON A CLAIMS MADE AND CLAIMS
REPORTED BASIS. PLEASE READ THIS POLICY CAREFULLY.
DECLARATIONS
Item 1: (a) Named Company: THE PROCTER & GAMBLE COMPANY/
THE PROCTER AND GAMBLE FUND
OFFICERS OF OPERATING UNITS OF
PROCTER AND GAMBLE COMPANY
(b) Address of Named Company: ONE PROCTER & GAMBLE PLAZA
CINCINNATI, OHIO 45202
U.S.A.
Item 2: Aggregate Limit of Liability:
$25,000,000 each policy period in excess of $25,000,000 each policy
year.
Item 3: Policy Period: JUNE 30, 1996 - JUNE 30, 1997
The Declarations along with the completed Application and this
Policy and any Schedules hereto shall constitute the contract
among the Named Company, the Designated Companies, the
Directors and Officers and the Company.
Item 4: Schedule of Current and Known Prospective Underlying Insurance:
Policy MM Policy
Carrier Number Limits Year
------- ------ ------ ------
i. Underlying Second Excess
ii. Underlying Excess. . . .
iii. Primary Insurer(s) . . . CODA PG-106C 25 JUNE
30,
1996 -
99
Uninsured Retention under Primary Insurance:
$NIL each Director or Officer each loss, but in no event
exceeding $NIL in the aggregate each loss all Directors and
Officers Liability.
Item 5: Policy to be followed: CODA - POLICY NO. PG-106C
Item 6: Representative of Named Company: THE PROCTER & GAMBLE COMPANY
Item 7: Notice: X.L. Insurance Company, Ltd., Cumberland House,
1 Victoria St., P.O. Box HM 2245, Hamilton,
Bermuda HM JX. Telex: 3626 XL BA
Item 8: (a) Discovery Coverage Premium: 100% of policy period premium
hereunder.
(b) Discovery Coverage Period: 365 days.
Item 9: Notice Cancellation Period: 60 days.
Said insurance is subject to the provisions, stipulations, exclusions and
conditions contained in this form and the representations and warranties
contained in the Named Company's application for this policy of insurance, which
is hereby made a part of said insurance, together with other provisions,
stipulations, exclusions and conditions as may be endorsed on said policy or
added thereto as therein provided (collectively hereinafter referred to as the
"Policy").
THE PROCTER & GAMBLE COMPANY/THE PROCTER & GAMBLE FUND AND
OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE COMPANY
DIRECTORS AND OFFICERS LIABILITY INSURANCE
Named Company: As stated in Item 1 of the Declarations forming a part hereof
(hereinafter called the "Named Company").
INSURING AGREEMENTS
I. COVERAGE
The X.L. Insurance Company, Ltd. (the "Company") hereby agrees with the
Directors and Officers of the Named Company and any other companies listed
in Schedule A hereto ("Designated Companies"), subject to the limitations,
terms, exclusions and conditions hereinafter mentioned that, if during the
policy period any claim or claims are made against any of the Directors and
Officers for a Wrongful Act, and reported to the Company, the Company in
accordance with its limits of liability shall pay on behalf of such
Directors and Officers all loss which such Directors and Officers shall
become legally obligated to pay, except for such loss which the Designated
Companies shall indemnify such Directors and Officers.
II. LIMIT OF LIABILITY
A. It is expressly agreed that liability for any loss shall attach to the
Company only after the Primary and Underlying Excess Insurers shall have
paid, admitted or been held liable to pay the full amount of their
respective liability and the Directors and Officers shall have paid the
full amount of self-insured retentions, if any, as set forth in Item 4
of the Declarations (hereinafter referred to as the "Schedule of
Underlying Insurance"), and the Company shall then be liable to pay only
additional amounts for any and all losses up to its Aggregate Limit of
Liability ("aggregate limit") as set forth in Item 2 of the
Declarations, which shall be the maximum liability of the Company for
all covered losses (with respect to Directors and Officers,
collectively) during the policy period irrespective of the time of
payment by the Company.
B. In the event and only in the event of the reduction or exhaustion of
the aggregate limits of liability under the said Primary and
Underlying Excess Policies and under self-insured retentions, if any
(as if such retentions were subject to the same terms, conditions,
exclusions and structure of limits of liability as said policies) by
reason of losses paid thereunder, this coverage shall: (i) in the
event of reduction, pay the excess of the reduced Primary and
Underlying Excess Limits, and (ii) in the event of exhaustion,
continue in force as Primary Insurance; provided always that in the
latter event this coverage shall only pay excess of the retention
applicable to such Primary Insurance for such policy year as set forth
in Item 4 (iii) of the Declarations, which shall be applied to any
subsequent loss in the same manner as specified in such Primary
Insurance. Except insofar as aggregate limits of liability under the
Primary and Underlying Excess Policies have been reduced or exhausted
by reason of losses paid thereunder and self-insured retentions, if
any, have been fully paid (as if such retentions were subject to the
same terms, conditions, exclusions and structure of limits of
liability as said policies), this coverage shall apply only as if all
Primary and Underlying Policies and self-insured retentions, if any,
listed on the Schedule of Underlying Insurance covered and were fully
collectable for any loss hereunder.
III. PRIMARY AND UNDERLYING INSURANCE
This Policy is subject to the same warranties, terms, conditions and
exclusions (except as regards the premium, the amount and limits of
liability, the policy period and except as otherwise provided herein) as
are contained in or as may be added to the policy set forth in Item 5 of
the Declarations or, if no policy is set forth therein, the policy of the
Primary Insurer(s) as respects coverage of the Directors and Officers.
It is a condition of this Policy that the policies of the Primary and
Underlying Excess Insurers shall be maintained in full effect during the
policy year(s) listed in the Schedule of Underlying Insurance except for
any reduction of the aggregate limits contained therein by reason of losses
paid thereunder (as provided for in Paragraph II(B) above).
This Policy shall automatically terminate upon the failure to satisfy this
condition (i.e., when any of such listed policies ceases to be in full
effect) unless otherwise agreed by the Company in writing. If the Named
Company notifies the Company in writing of cancellation of any of the
policies listed on the Schedule of Underlying Insurance at least thirty
(30) days prior to the effectiveness thereof, the Company agrees that
within twenty (20) days thereafter it will review the situation and
formulate a proposal for the terms, conditions, exclusions, underlying
amount, limit and premium for continuation of this Policy upon such
cancellation; provided, however, that (i) the underlying amount shall be at
least $20,000,000, (ii) the limit shall be a maximum of $25,000,000 and
(iii) this Policy shall not continue after such cancellation unless there
is an agreement in writing between the Named Company and the Company
providing therefor.
IV. COSTS, CHARGES AND EXPENSES
No costs, charges or expenses shall be incurred or settlements made without
the Company's consent, such consent not to be unreasonably withheld;
however, in the event of such consent being given, the Company will pay,
subject to the provisions of Article II, such costs, settlements, charges
or expenses.
V. NOTIFICATION
A. If during the policy period or extended discovery period any claim is
made against any Director or Officer, the Directors and Officers shall,
as a condition precedent to their right to be indemnified under this
Policy, give to the Company notice in writing as soon as practicable of
such claims.
B. If during the policy period or extended discovery period:
(1) the Directors and Officers shall receive written or
oral notice from any party that it is the intention
of any such party to hold the Directors and Officers,
or any of them, responsible for a Wrongful Act; or
(2) the Directors and Officers shall become aware of any
fact, circumstance or situation which may
subsequently give rise to a claim being made against
the Directors and Officers, or any of them, for a
Wrongful Act;
and shall in either case during such period give written
notice as soon as practicable to the Company of the receipt of
such written or oral notice under Clause (1) or of such fact,
circumstance or situation under Clause (2), then any claim,
which may subsequently be made against the Directors and
Officers, arising out of such Wrongful Act shall for the
purpose of this Policy be treated as a claim made during the
policy period.
C. Notice to the Company shall be given to the person or firm shown under
Item 7 of the Declarations. Notice shall be deemed to be received if
sent by prepaid mail properly addressed.
VI. GENERAL CONDITIONS
A. DEFINITIONS: The terms "Directors and Officers", "Wrongful Act",
"Loss", "Subsidiary", and "Policy Year" shall be deemed to have the same
meanings in this Policy as are attributed to them in the policy set
forth in Item 5 of the Declarations or, if no policy is set forth
therein, the policy of the Primary Insurer(s). The term "Company" shall
mean the X.L. Insurance Company, Ltd. The term "policy period" shall
mean the period stated in Item 3 of the
Declarations.
B. DISCOVERY CLAUSE: If the Company shall cancel or refuse to renew this
Policy, the Named Company or the Directors and Officers shall have the
right, upon payment of the additional premium set forth in Item 8(a) of
the Declarations to a continuation of the coverage granted by this
Policy in respect of any claim or claims which may be made against the
Directors and Officers during the period stated in Item 8(b) of the
Declarations after the date of cancellation or non-renewal, but only in
respect of any Wrongful Act committed before the date of cancellation
or non-renewal of this Policy. This right of extension shall terminate
unless written notice is given to the Company within ten (10) days after
the effective date of cancellation or non-renewal.
C. APPLICATION OF RECOVERIES: All recoveries or payments recovered or
received subsequent to a loss settlement under this Policy shall be
applied as if recovered or received prior to such settlement and all
necessary adjustments shall then be made between the Named Company or
the Directors and Officers and the Company, provided always that
nothing in this Policy shall be construed to mean that losses under
this Policy are not payable until the Directors' and Officers'
ultimate net loss has been finally ascertained.
D. CANCELLATION CLAUSE: This coverage may be cancelled by the Named
Company at any time by written notice or surrender of this Policy.
This coverage may also be cancelled by, or on behalf of, the Company
by delivering to the Named Company or by mailing to the Named Company
by registered, certified or other first class mail, at the Named
Company's address shown in Item 1 of the Declarations, written notice
stating when, not less than the number of days set forth in Item 9 of
the Declarations, the cancellation shall become effective. The mailing
of such notice as aforesaid shall be sufficient proof of notice, and
this Policy shall terminate at the date and hour specified in such
notice. If this Policy shall be cancelled by the Named Company, the
Company shall retain the customary short rate proportion of premium
hereon. If this Policy shall be cancelled by or on behalf of the
Company, the Company shall retain the pro rata proportion of the
premium hereon. Payment or tender of any unearned premium by the
Company shall not be a condition precedent to the effectiveness of
cancellation, but such payment shall be made as soon as practicable.
E. COOPERATION: The Named Company, the Designated Companies and the
Directors and Officers shall give the Company such information and
cooperation as it may reasonably require.
F. PREMIUM: The premium under this Policy is a flat premium and is not
subject to adjustment except as otherwise provided herein. The premium
shall be paid to the Company.
G. WRONGFUL ACT EXCLUSION: Notwithstanding any other provision of this
Policy, this Policy shall not apply with respect to a Wrongful Act by
any Director or Officer of the Company in his capacity as such.
H. NUCLEAR EXCLUSION: This Policy shall not apply to, and the Company
shall have no liability hereunder in respect of liability or alleged
liability for:
(1) personal injury, property damage or advertising liability in the
United States, its territories or possessions, Puerto Rico or the
Canal Zone (A) with respect to which the Named Company, the
Designated Companies and/or Officers and Directors (collectively,
the "Certain Parties") is also an insured under a nuclear energy
liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear
Insurance Association of Canada, or would be an insured under any
such policy but for its termination upon exhaustion of its limited
liability or (B) resulting from the hazardous properties of nuclear
material and with respect to which (i) any person or organization
is required to maintain financial protection pursuant to the Atomic
Energy Act of 1954 or any law amendatory thereof or (ii) a Certain
Party is, or had this Policy not been issued, would be entitled to
indemnity from United States of America or any agency thereof under
any agreement entered into by the United States of America or any
agency thereof with any person or organization;
(2) medical or surgical relief or expenses incurred with respect
to bodily injury, sickness, disease or death resulting from
the hazardous properties of nuclear material and arising out
of the operation of a nuclear facility by any person or
organization in the United States, its territories or
possessions, Puerto Rico or the Canal Zone;
(3) injury, sickness, disease, death or destruction resulting from
hazardous properties of nuclear material, if (A) the nuclear
material (i) is at any nuclear facility owned by or operated
by or on behalf of any of the Certain Parties in the United
States, its territories or possessions, Puerto Rico or the
Canal Zone or (ii) has been discharged or dispersed therefrom,
(B) such nuclear material is contained in spent fuel or waste
at any time possessed, handled, used, processed, stored,
transported or disposed by or on behalf of any of the Certain
Parties in the United States, its territories or possessions,
Puerto Rico or the Canal Zone or (C) the injury arises out of
the furnishing by any of the Certain Parties of services,
materials, parts or equipment in connection with the planning,
construction, maintenance, operation or use of a nuclear
facility, but if such facility is located within the United
States of America, its territories or possessions or Canada,
this clause (3)(C) applies only to injury to or destruction of
property at such nuclear facility;
(4) As used in this Section (H):
(A) "hazardous properties" included radioactive, toxic or
explosive properties; "nuclear material" means source
material, special nuclear material or by-product
material; "source material," "special nuclear
material" and "by-product material" have the meanings
given them by the Atomic Energy Act of 1954 or in law
amendatory thereof; "spent fuel" means any fuel
element or fuel component, solid or liquid which has
been used or exposed to radiation in a nuclear
reactor; "waste" means any waste material (i)
containing by-product materials and (ii) resulting
from the operation by a person or organization of
nuclear facility included within the definition of
nuclear facility under clauses (B)(i) or (B)(ii)
(below):
(B) "nuclear facility" means
(i) any nuclear reactor;
(ii) any equipment or device designed or used for
(x) separating the isotopes of uranium or plutonium,
(y) processing or utilizing spent fuel, or
(z) handling processing or packaging waste;
(iii) any equipment or device used for the processing,
fabricating or alloying of special nuclear
material if at any time the total amount of such
material in the custody of the Insured at such
premises where such equipment or device is located
consists of or contains more than 25 grams of
plutonium or uranium 233 or combination thereof
or more than 250 grams of uranium 235;
(iv) any structure, basin, excavation, premises or place
prepared for the storage or disposal of waste.
(C) "Nuclear facility" includes the site on which any of the
foregoing is located, all operations conducted on such site
and all premises used for such operations.
(D) "Nuclear reactor" means any apparatus designed or used to
sustain nuclear fission in a self-supporting chain reaction
or to contain critical mass of fissionable material.
(E) With respect to injury or destruction of property, the word
"injury" or "destruction" includes all forms of radioactive
contamination of property or loss of use thereof or liability
or alleged liability of whatsoever nature directly or
indirectly caused by or contributed to by or arising from
ionizing radiations or contamination by radioactivity outside
the United States, its territories or possessions, Puerto Rico
or the Canal Zone from any nuclear fuel or from any nuclear
waste from the combustion, fission or fusion of nuclear fuel.
I. EMPLOYEE BENEFITS PROGRAMS EXCLUSION: Notwithstanding any other
provision of this Policy, this coverage shall not apply with respect to:
(1) any liability or alleged liability arising out of or alleged to
arise out of any negligent act, error or omission of any Director
or Officer, or any other person for whose acts any Director or
Officer is legally liable, in the administration of Employee
Benefits Programs, as defined in subsection (2) below, including,
without limitation, liability or alleged liability under the
Employee Retirement Income Security Act of 1974, as amended.
(2) As used in this Section I, the term "Employee Benefits Programs"
means group life insurance, group accident or health insurance,
profit sharing plans, pension plans, employee stock subscription
plans, workers' compensation, unemployment insurance, social
benefits, disability benefits, and any other similar employee
benefits.
(3) As used in this Section I, the unqualified word "administration"
means:
(A) giving counsel to employees with respect to the Employee
Benefits Programs;
(B) interpreting the Employee Benefits Programs;
(C) handling of records in connection with the Employee
Benefits Programs; and/or
(D) effective enrollment, termination or cancellation of employees
under the Employee Benefits Programs.
J. INDEMNITY BY DESIGNATED COMPANIES: The Designated Companies agree with
the Company to indemnify their respective Directors and Officers to the
full extent permitted by applicable law. The Directors and Officers
agree that to the extent of any payment of loss on their behalf or
indemnification of them hereunder they will assign, convey, set over,
transfer and deliver to the Company any and all rights and claims they
may have to indemnification from the Designated Companies and will take
all further steps requested by the Company to assist in prosecution of
such rights and claims, and the Designated Companies hereby consent to
any such assignment, conveyance, set over, transfer or delivery and
agree that any payment by the Company on behalf of or to indemnify any
Director or Officer shall not be raised as a defense to the Director's
or Officer's right to indemnification from the Designated Companies as
asserted by the Company pursuant hereto.
K. OTHER CONDITIONS: This Policy is subject to the following additional
conditions:
(1) REPRESENTATION
Except as respects the giving of notice to exercise
extended discovery under Paragraph VI(B), the Named Company or
such other person as it shall designate in Item 6 of the
Declarations shall represent the Named Company, each of the
Designated Companies and each Officer and Director of the
Named Company and the Designated Companies in all matters
under this Policy, including, without limitation, payment of
premium, negotiation of the terms of renewal and/or
reinstatement and the adjustment, settlement and payment of
claims.
(2) CHANGES
Notice to or knowledge possessed by any person shall not effect
waiver or change in any part of this Policy or estop the Company
from asserting any right under the terms of this Policy; nor shall
the terms of this Policy be waived or changed, except by
endorsement issued to form a part hereof, signed by the Company or
its authorized representative.
(3) ASSIGNMENT
Assignment of interest under this Policy shall not bind the
Company unless and until consent is endorsed hereon.
(4) ARBITRATION
Any dispute arising under this Policy shall be finally and fully
determined in London, England under the provisions of the English
Arbitration Act of 1950, as amended and supplemented, by a Board
composed of three arbitrators to be selected for each controversy
as follows:
Any party to the dispute may, once a claim or demand on his part
has been denied or remains unsatisfied for a period of twenty (20)
calendar days by any other, notify the others of its desire to
arbitrate the matter in dispute and at the time of such
notification the party desiring arbitration shall notify any other
party or parties of the name of the arbitrator selected by it.
Any party or parties who have been so notified shall within ten
(10) calendar days thereafter select an arbitrator and notify the
party desiring arbitration of the name of such second
arbitrator. If the party or parties notified of a desire for
arbitration shall fail or refuse to nominate the second arbitrator
within ten (10) calendar days following the receipt of such
notification, the party who first served notice of a desire to
arbitrate will, within an additional period of ten (10) calendar
days, apply to a judge of the High Court of England for the
appointment of a second arbitrator and in such a case the
arbitrator appointed by such a judge shall be deemed to have been
nominated by the party or parties who failed to select the second
arbitrator. The two arbitrators, chosen as above provided, shall
within ten (10) calendar days after the appointment of the second
arbitrator choose a third arbitrator. In the event of the failure
of the first two arbitrators to agree on a third arbitrator within
said ten (10) calendar day period, any of the parties may within a
period of ten (10) calendar days thereafter, after notice to the
other party or parties, apply to a judge of the High Court of
England for the appointment of a third arbitrator and in such case
the person so appointed shall be deemed and shall act as the third
arbitrator. Upon acceptance of the appointment by said third
arbitrator, the Board of Arbitration for the controversy in
question shall be deemed fixed. All claims, demands, denials of
claims and notices pursuant to this Section (K)(iv) shall be deemed
made if in writing and mailed to the last known address of the
other party or parties.
The Board of Arbitration shall fix, by a notice in writing to the
parties involved, a reasonable time and place for the hearing and
may in said written notice or at the time of the commencement of
said hearing, at the option of said Board, prescribe reasonable
rules and regulations governing the course and conduct of said
hearing.
The Board shall, within ninety (90) calendar days following the
conclusion of the hearing, render its decision on the matter or
matters in controversy in writing and shall cause a coy thereof to
be served on all the parties thereto. In case the Board fails to
reach a unanimous decision, the decision of the majority of the
members of the Board shall be deemed to be the decision of the
Board and the same shall be final and binding on the parties
thereto, and such decision shall be a complete defense to any
attempted appeal or litigation of such decision in the absence
of fraud or collusion.
All costs of arbitration shall be borne equally by parties to such
arbitration.
The Company and the Insured agree that in the event that claims for
indemnity or contribution are asserted in any action or proceeding
against the Company by any of the Insured's other insurers in any
jurisdiction or forum other than that set forth in this Section
(K)(iv), the Insured will in good faith take all reasonable steps
requested by the Company to assist the Company in obtaining a
dismissal of these claims (other than on the merits) and will,
without limitation, undertake to the court or other tribunal to
reduce any judgment or award against such other insurers to the
extent that the court or tribunal determines that the Company would
have been liable to such insurers for indemnity or contribution
pursuant to this Policy. The Insured shall be entitled to assert
claims against the Company for coverage under this Policy,
including, without limitation, for amounts by which the Insured
reduced its judgment against such other insurers in respect of such
claims for indemnity or contribution in an arbitration between the
Company and the Insured pursuant to this Section (K)(iv); provided,
however, that the Company in such arbitration in respect of such
reduction of any judgment shall be entitled to raise any defenses
under this Policy and any other defenses (other than jurisdictional
defenses) as it would have been entitled to raise in the action or
proceeding with such insurers.
(5) GOVERNING LAW AND INTERPRETATION
This Policy shall be governed by and construed in accordance with
the internal laws of the State of New York, except insofar as such
laws may prohibit payment in respect of punitive damages hereunder;
provided, however, that the provisions, stipulations, exclusions
and conditions of this Policy are to be construed in an evenhanded
fashion as between the Insured and the Company; without limitation,
where the language of this Policy is deemed to be ambiguous or
otherwise unclear, the issue shall be resolved in the manner most
consistent with the relevant provisions, stipulations, exclusions
and conditions (without regard to authorship of the language,
without any presumption or arbitrary interpretation or construction
in favor of either the Insured or the Company and without reference
to parol evidence).
(6) LIABILITY OF THE COMPANY
The Named Company, the Designated Companies and the Directors and
Officers agree that the liability and obligations of the Company
hereunder shall be satisfied from the funds of the Company alone
and that the individual shareholders of the Company shall have no
liability hereunder.
(7) HEADINGS
The descriptions in the headings and subheadings of this Policy are
inserted solely for convenience and do not constitute any part of
the terms and conditions hereof.
X.L. INSURANCE COMPANY, LTD.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: VICE PRESIDENT
Date: SEPTEMBER 4, 1996
THE PROCTER & GAMBLE COMPANY/THE PROCTER & GAMBLE FUND AND
OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE COMPANY
SCHEDULE A
All Subsidiaries of the names Insured
Insured: THE PROCTER & GAMBLE COMPANY/THE PROCTER & GAMBLE FUND AND
OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE COMPANY
Policy No: XLD+O-00364-96
Endorsement No: 1
Effective Date: JUNE 30, 1996
- --------------------------------------------------------------------------
POLICY INTERPRETATION ENDORSEMENT
It is agreed that Condition K(5) is hereby deleted and the following is
substituted therefore:
"(5) Law of Construction and Interpretation
"This Policy shall be construed in accordance with the internal laws of
the State of New York, except insofar as such laws:
"(a) may prohibit indemnity in respect of punitive damages hereunder;
"(b) pertain to regulation under the New York Insurance Law, or
regulations issued by the Insurance Department of the State of New York
pursuant thereto, applying to insurers doing insurance business, or
issuance, delivery or procurement of policies of insurance, within the
State of New York or as respects risks or insureds situated in the
State of New York; or
"(c) are inconsistent with any provision of this Policy;
"provided, however, that the provisions, stipulations, exclusions and
conditions of this Policy are to be construed in an evenhanded fashion
as between the Insured and the Company; without limitation, where the
language of this Policy is deemed to be ambiguous or otherwise unclear,
the issue shall be resolved in the manner most consistent with the
relevant provisions, stipulations, exclusions and conditions (without
regard to authorship of the language, without any presumption or
arbitrary interpretation or construction in favor of either the Insured
or the Company and without reference to parol or other extrinsic
evidence)."
X.L. INSURANCE COMPANY, LTD.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: VICE PRESIDENT
Date: SEPTEMBER 4, 1996
Ref: OD247.01
XL
Insured: THE PROCTER & GAMBLE COMPANY/THE PROCTER & GAMBLE FUND
AND OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE
COMPANY
Policy No: XLD+O-00364-96
Endorsement No: 2
Effective Date: JUNE 30, 1996
- ---------------------------------------------------------------------------
DIRECTORS' AND OFFICERS' COVERAGE ENDORSEMENT
Notwithstanding any other provision of the Policy or this Endorsement,
if the Lead Policy provides coverage for any person acting in the capacity as a
Director or Officer of a company or entity which is not an Insured Company under
the Policy and this Endorsement, no such coverage shall be provided pursuant to
the Policy and/or this Endorsement unless (a) it is indicated below that
"Outside Positions" coverage is being afforded, (b) such coverage is subject to
a retention (whether self-insured and/or covered by underlying policy(ies)) in
the amount listed below which shall be deemed to be listed in Item 4 of the
Declarations, and such coverage in any event shall apply in excess of all
Primary and Underlying Excess Insurance listed in Item 4 of the Declarations,
and (c) such coverage is subject to an aggregate sublimit in the amount listed
below, which sublimit shall be the maximum liability of the Company for all
losses in respect of such coverage during the policy period irrespective of the
time of payment by the Company and shall be a sublimit included within and shall
not increase the Aggregate Limit of Liability stated in Item 2 of the
Declarations.
It is further understood and agreed that this extension of cover shall not apply
to any person acting as a Director or Officer of the following companies:
(a) Corporate Officers and Directors Assurance Ltd.
(b) Corporate Officers and Directors Assurance Holdings Ltd.
(c) Exel Ltd.
(d) X. L Insurance Company, Ltd.
Outside Positions Coverage: YES - As per schedule
provided by the Named
Insured
Outside Positions Coverage (Self-Insured) Retention: $25,000,000
Outside Positions Coverage Aggregate Sublimit: $25,000,000
X.L. INSURANCE COMPANY, LTD.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: VICE PRESIDENT
Date: SEPTEMBER 4, 1996
Ref: 0D234.01-R
XL
Insured: THE PROCTER & GAMBLE COMPANY/THE PROCTER & GAMBLE FUND
AND OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE
COMPANY
Policy No: XLD+O-00364-96
Endorsement No: 3
Effective Date: JUNE 30, 1996
- ---------------------------------------------------------------------------
DELETION OF GENERAL CONDITION I.
In consideration of the premium charged, it is hereby understood and agreed that
Paragraph I, EMPLOYEE BENEFITS PROGRAM EXCLUSION, of Section VI. General
Conditions of the Policy is deleted in its entirety.
All other terms and conditions of the Policy remain unchange.
X.L. INSURANCE COMPANY, LTD.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: VICE PRESIDENT
Date: SEPTEMBER 4, 1996
Ref: 0D999.01
XL
Exhibit (99.4)
--------------
Directors and Officers (Third) Excess Liability Policy
STARR EXCESS
Liability Insurance Company, Ltd.
---------------------------------
29 Richmond Road, Pembroke HM 08, Hamilton, Bermuda
EXCESS DIRECTORS AND OFFICERS INSURANCE POLICY
NOTICE: EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE PROVIDED HEREIN, THE COVERAGE
OF THIS POLICY IS LIMITED GENERALLY TO LIABILITY FOR ONLY THOSE CLAIMS THAT ARE
FIRST MADE AGAINST THE INSUREDS AND REPORTED TO THE INSURER DURING THE POLICY
PERIOD. PLEASE READ THE POLICY CAREFULLY AND DISCUSS THE COVERAGE THEREUNDER
WITH YOUR INSURANCE AGENT OR BROKER.
NOTICE: THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS SHALL
BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. AMOUNTS INCURRED FOR LEGAL
DEFENSE SHALL BE APPLIED AGAINST THE RETENTION AMOUNT.
NOTICE: THE INSURER DOES NOT ASSUME ANY DUTY TO DEFEND.
DECLARATIONS POLICY #: 700090
ITEM 1. NAMED CORPORATION: The Procter and Gamble Company
MAILING ADDRESS: One Procter & Gamble Plaza
Cincinnati
Ohio 45202-3314
STATE OF INCORPORATION
OF THE NAMED CORPORATION: Ohio
ITEM 2. FOLLOWED POLICY:
INSURER: CODA POLICY NO: PG-106C
ITEM 3. POLICY PERIOD: From: June 30, 1996 To: June 30, 1997
(12:01 A.M. standard time at the address stated in Item 1.)
ITEM 4. LIMIT OF LIABILITY: $50,000,000 aggregate for coverages
combined (including Defense Costs)
EXCESS OF TOTAL UNDERLYING LIMITS OF: $95,000,000
ITEM 5. RETENTIONS:
A. $N/A per Director or Officer each Loss, but not exceeding
B. $N/A in the aggregate each Loss
1 of 2
Date of Issuance - September 16, 1996
SELIC DOO(6/94)DEC
(sedoopol)
DECLARATIONS POLICY NO.: 700090
ITEM 6. SCHEDULE OF PRIMARY AND UNDERLYING EXCESS POLICIES:
POLICY POLICY
INSURER NUMBER LIMITS PERIOD
PRIMARY POLICY: CODA PG-106C $25,000,000 6/30/96 to 6/30/99
EXCESS POLICIES: X.L. XLD+O-00364-96 $25,000,000 6/30/96 to 6/30/97
ACE PG-8117D $45,000,000 6/30/96 to 6/30/97
ITEM 7. PREMIUM: $125,000
ITEM 8. A. DISCOVERY PERIOD PREMIUM: 100% of
Premium indicated in Item 7.
B. DISCOVERY PERIOD: One Year
ITEM 9. NOTICE OF CANCELLATION PERIOD: 60 days.
ITEM 10. ADDRESS OF INSURER FOR ALL NOTICES UNDER THIS POLICY:
STARR EXCESS LIABILITY INSURANCE COMPANY, LTD.
P.O. BOX HM 152
HAMILTON, HM AX
BERMUDA
ITEM 11. POLICY FORM: EXCESS DIRECTORS AND OFFICERS INSURANCE
POLICY SELIC DOO(6/94)
ENDORSEMENT(S): 1-2
BROKER: Park International Limited
44 Church Street
P.O. Box HM 2064
Hamilton HM HX
Bermuda
/s/ DAVID F. ALLEN
Authorized Representative
2 of 2
EXCESS DIRECTORS AND OFFICERS INSURANCE POLICY
In consideration of the payment of the premium, and in reliance upon the
statements made to the Insurer by application forming a part hereof and its
attachments and the material incorporated therein, STARR EXCESS LIABILITY
INSURANCE COMPANY, LTD. herein called the "Insurer", agrees as follows:
I. INSURING AGREEMENTS
This policy shall provide the Insured(s) with Excess Directors and Officers
Insurance coverage in accordance with the same warranties, terms, conditions,
exclusions and limitations of the Followed Policy identified in Item 2 of the
Declarations as they were in existence on the inception date of this policy
(except as regards the premium, the amount and limits of liability and the
policy period) subject to:
(a) the warranties, terms, conditions, exclusions and limitations of this
policy including any endorsement attached hereto, and
(b) provided always that this policy shall, in no event and notwithstanding
any other provision, provide coverage broader than that provided by the
Followed Policy unless such broader coverage is specifically agreed to by
the Insurer and identified as broader coverage in a written endorsement
attached hereto.
II. DEFINITIONS
(a) The term "Director(s) or Officer(s)" and the term "Insured(s)" shall
mean those directors, officers and other natural persons (if any) insured
under the Followed Policy.
(b) The term "Company" shall mean the Named Corporation designated in Item
1 of the Declarations.
(c) The term "Loss" shall have the same meaning in this policy as is
attributed to it in the Followed Policy except that the term "Loss" shall
in no event include civil or criminal fines or penalties, punitive or
exemplary damages, the multiplied portion of multiplied damages or any
amount for which the Insureds are not financially liable or which are
without legal recourse to the Insureds, or matters which may be deemed
uninsurable under the law pursuant to which this policy shall be construed.
(d) "Policy Period" shall mean the period of time from the inception date
shown in Item 3 of the Declarations to the earlier of the expiration date
shown in Item 3 of the Declarations or the effective date of cancellation
of this policy.
(e) The term "Underlying Policies" shall mean the Primary and Underlying
Excess Policies set forth in Item 6 of the Declarations. The term
"Underlying Insurer(s)" shall mean the insurer(s) of the Underlying
Policies The term "Underlying Limit" shall mean an amount equal to the
aggregate of all the limits of the Underlying Policies combined (excess of
their retentions).
(f) The term "Wrongful Act" and "Subsidiary" shall have the same meanings
in this policy as are attributed to them in the Followed Policy.
III. LIMIT OF LIABILITY
The limit of liability stated in Item 4 of the Declarations is the limit of the
Insurer's liability for all Loss under all Coverages combined, arising out of
all claims first made against the Insureds and reported to the Insurer during
the Policy Period and the Discovery period (if applicable); however, the limit
of liability for the Discovery Period shall be part of, and not in addition to,
the limit of liability for the Policy Period. Further ,any claim which is made
subsequent to the Policy Period or Discovery Period (if applicable) which
pursuant to Clause V(b) is considered made during the Policy Period or Discovery
Period shall also be subject to the one aggregate limit of liability stated in
item 4 of the Declarations.
It is expressly agreed that liability for any covered Loss with respect to
claims first made and reported during the Policy period shall attach to the
Insurer only after the Underlying Limit, and the Insureds shall have paid or
been held liable to pay the full amount of the Underlying Limit, and the
Insureds shall have paid or been held liable to pay the full amount of the
applicable Retention amount for such Policy Period. In the event and only in the
event of the reduction or exhaustion of the Underlying Limit by reason of the
Underlying Insurers, and/or the Insureds paying or being held liable to pay Loss
otherwise covered hereunder, this policy shall: (i) in the event of reduction,
pay excess of the reduced Underlying Limit, and (ii) in the event of exhaustion,
continue in force as primary insurance; provided always that in the latter event
this policy shall only pay excess of the Retention amounts set forth in Item 5
of the Declarations, which Retention amount shall be applied to any subsequent
Loss in the same manner as specified in the Followed Policy; provided however,
that the Retention amounts set forth in Item 5 shall not apply if the retention
amount of any Underlying Policy has been applied to such Loss.
This policy shall pay only in the event of reduction or exhaustion of the
Underlying Limit as described above and shall not drop down for any reason
including, but not limited to, uncollectability (in whole or in part) of the
Underlying Limit, existence of a sub-limit of liability in any Underlying
Policy, or any Excess Policy containing terms and conditions different from the
Followed Policy. The risk of uncollectability of such underlying insurance (in
whole or in part) whether because of financial impairment or insolvency of an
Underlying Insurer, the application of any underlying sub-limit of liability or
differing terms and conditions or for any other reason is expressly retained by
the Insureds and is not in any way or under any circumstances insured or assumed
by the Insurer.
IV. UNDERLYING LIMITS
It is a condition of this policy that the Underlying Policies shall be
maintained in full effect with solvent insurers during the Policy Period except
for any reduction or exhaustion of the aggregate limits contained therein by
reason of Loss paid thereunder (as provided for in Clause III above). Failure to
comply with the foregoing shall not invalidate this policy, but in the event of
such failure, the Insurer shall be liable only to the extent that it would have
been liable had the Insureds and the company complied with such condition.
Unless the Insurer otherwise agrees in writing, this policy shall immediately
and automatically terminate if the Company fails to notify the Insurer as set
forth in Clause V(c) of this policy that any of the Underlying Policies has
ceased to be in full effect. If such notification is made, then this policy
shall continue in effect but the Insured(s) (or an insurer providing replacement
coverage if such replacement coverage is obtained) shall be liable for the
amount of the underlying limit of such ceased Underlying Policy and the Insurer
shall be liable only to the extent that it would have been liable had the
Underlying Policy not ceased. Unless the Insurer otherwise agrees in writing,
this policy shall automatically terminate thirty (30) days following the date
any Underlying Insurer becomes subject to a receivership, liquidation,
dissolution, rehabilitation or any similar proceeding or is taken over by any
regulatory authority unless the Named Corporation obtains replacement coverage
for such Underlying Policy within such thirty (30) day period.
If during the Policy Period or any Discovery Period the terms, conditions,
exclusions or limitations of the Followed Policy are changed in any manner, the
Company or the Insureds shall as a condition precedent to the Insureds rights
under this policy give to the Insurer as soon as practicable written notice of
the full particulars thereof. This policy shall become subject to any such
changes upon the effective date of the changes in the Followed Policy, but only
upon the condition that the Insurer agrees to follow such changes by written
endorsement attached hereto and the Named Corporation agrees to any additional
premium and/or amendment of the provisions of this policy required by the
Insurer relating to such changes. Further, such new coverage is conditioned upon
the Named Corporation paying when due any additional premium required by the
Insurer relating to such changes.
V. NOTICES AND CLAIM REPORTING PROVISIONS
(a) The Company or the Insureds shall, as a condition precedent to the
obligations of the Insurer under this policy, give written notice to the
Insurer at the address indicated in Item 10 of the Declarations and all
Underlying Insurers as soon as practicable during the Policy Period, or
during the Discovery Period (if applicable), of any claim made against
the Insureds.
(b) If during the Policy period or during the Discovery Period (if
applicable) (i) written notice of a claim has been given to the Insurer
pursuant to Clause V(a) above, or (ii) to the extent permitted by the terms
and conditions of the Followed Policy, written notice of circumstances that
might reasonably be expected to give rise to a claim, has been given to the
Insurer and all Underlying Insurers, then any claim which is subsequently
made against the Insureds and reported to the Insurer and all Underlying
Insurers alleging, arising out of, based upon or attributable to the facts
alleged in the claim or circumstances of which such notice has been given,
or alleging any Wrongful Act which is the same as or related to any
Wrongful Act alleged in the claim or circumstances of which such notice has
been given, shall be considered made at the time such claim or
circumstances has been given to the Insurer.
(c) The Company or the Insureds shall, as a condition precedent to the
obligations of the Insurer under this policy, give written notice to the
Insurer of the following events as soon as practicable but in no event
later than thirty (30) days of an Insured or the Company becoming aware of
the event:
(i) The cancellation, nonrenewal of any Underlying Policy or any
Underlying Policy otherwise ceases to be in effect or uncollectible
(in part or in whole); or
(ii) Any insurer or any Underlying Policy becoming subject to a
receivership, liquidation, dissolution, rehabilitation or any similar
proceeding or being taken over by any regulatory authority; or
(iii) The Named Corporation consolidating with or merging into, or selling
all or substantially all of its assets to, any other person or entity
or group of persons and/or entities acting in concert; or
(iv) Any person or entity or group of persons and/or entities acting in
concert acquiring an amount of the outstanding securities
representing more than 50% of the voting power for the election of
Directors of the Named Corporation, or acquiring the voting rights of
such an amount of such securities.
VI. CLAIM PARTICIPATION
The Insurer shall have the right, in its sole discretion, but not the obligation
to effectively associate with the Company and the Insureds in the defense and
settlement of any claim that appears to the Insurer to be reasonably likely to
involve the Insurer, including but not limited to effectively associating in the
negotiation of a settlement. The Insureds shall defend and contest any such
claim. The Company and the Insureds shall give the Insurer full cooperation and
such information as it may reasonably require. The failure of the Insurer to
exercise any right under this paragraph at any point in a claim shall not act as
a waive or limit the right of the Insurer in any manner to exercise such rights
at any other point in a claim including the right to effectively associate in
the negotiation of a settlement.
The Insurer does not under this policy assume any duty to defend. The Insureds
shall not admit or assume any liability, enter into any settlement agreement,
stipulate to any judgment or incur any Defense Costs without the prior written
consent of the Insurer. Only those settlements, stipulated judgments and Defense
Costs which have been consented to by the Insurer shall be recoverable as Loss
under the terms of this policy. The Insurer's consent shall not be unreasonably
withheld, provided that the Insurer shall be entitled to effectively associate
in the defense and the negotiation of any settlement of any claim in order to
reach a decision as to reasonableness.
VII. DISCOVERY CLAUSE
If the Insurer shall cancel or refuse to renew this policy the Named Corporation
shall have the right, upon payment of the additional percentage set forth in
Item 8A of the Declarations of the full annual premium, to the period set forth
in Item 8B of the Declarations following the effective date of such cancellation
or nonrenewal (herein referred to as the Discovery Period) in which to give
written notice to the Insurer of claims first made against the Insureds during
said period for any Wrongful Act occurring prior to the end of the Policy Period
and otherwise covered by this policy. As used herein, "full annual premium"
means the premium level in effect immediately prior to the end of the Policy
Period.
The rights contained in this clause shall terminate, however, unless written
notice of such election together with the additional premium due is received by
the Insurer within the time period and in the manner set forth in the Followed
Policy. The Discovery Period is not available unless the Named Corporation has
elected the Discovery Period (or Extended Reporting Period) in all Underlying
Policies which have been canceled or non-renewed by their Underlying Insurers.
The additional premium for the Discovery period shall be fully earned at the
inception of the Discovery Period. The Discovery Period is not cancelable.
The offer by the Insurer of renewal terms, conditions, limits of liability
and/or premiums different from those of the expiring policy shall not constitute
refusal to renew.
VIII. CANCELLATION CLAUSE
This policy may be canceled by the Named Corporation only by mailing written
prior notice to the Insurer or by surrender of this policy to the Insurer or its
authorized agent at the address set forth in Item 10 of the Declarations and
within the time period and in the manner set forth in the Followed Policy. This
policy may also be canceled by or on behalf of the Insurer by delivering to the
Named Corporation or by mailing to the Named Corporation, by registered,
certified, or other first class mail, at the Named Corporation's address set
forth in the Declarations, written notice stating when, not less than the period
set forth in Item 9 of the Declarations, thereafter the cancellation shall be
effective. The mailing of such notice as aforesaid shall be sufficient proof of
notice. The Policy Period terminates at the date and hour specified in such
notice, or at the date and time of surrender.
If this policy shall be canceled by the Named Corporation, the Insurer shall
retain the customary short rate proportion of the premium hereon.
If this policy shall be canceled by the Insurer, the Insurer shall retain the
pro rata proportion of the premium hereon.
Payment or tender of any unearned premium by the Insurer shall not be a
condition precedent to the effectiveness of cancellation but such payment shall
be made as soon as practicable.
If the period of limitation relating to the giving of notice is prohibited or
made void by any law controlling the construction thereof, such period shall be
deemed to be amended so as to be equal to the minimum period of limitation
permitted by such law.
IX. OTHER CONDITIONS
(a) SUBROGATION
In the event of any payment under this policy, the Insurer shall be
subrogated to the extent of such payment to all the Insureds' rights of
recovery therefor, and the Company and the Insureds shall execute all
papers required and shall do everything that may be necessary to secure
such rights including the execution of such documents necessary to enable
the Insurer effectively to bring suit in the name of the Insureds.
(b) OTHER INSURANCE
Such insurance as is provided by this policy shall apply only as
excess over any other valid and collectible insurance. Provided, however,
that nothing in the foregoing shall be construed to compel the Insurer to
drop down in the event of the invalidity or uncollectibility of any
Underlying Policy.
(c) NOTICE AND AUTHORITY
It is agreed that the Named Corporation shall act on behalf of the
Insureds with respect to the giving and receiving of notice of claim or
cancellation, the payment of premiums and the receiving of any return
premiums that may become due under this policy, the receipt and
acceptance of any endorsements issued to form a part of this policy and
the exercising or declining to exercise any right to a Discovery Period.
(d) ASSIGNMENT
This policy and any and all rights hereunder are not assignable without
the written consent of the Insurer.
(e) PREMIUM
The premium under this policy is a flat premium and is not subject to
adjustment except as otherwise provided herein.
(f) CHANGES
Notice to or knowledge possessed by any person shall not effect a waiver
of or a change in any part of this policy or stop the Insurer from
asserting any right under the terms of this policy; nor shall the terms
of this policy be waived or changed, except by endorsement issued to
form a part hereof, signed by the Insurer or its authorized
representative.
(g) CURRENCY
The premiums and any Loss under this policy are payable in United States
currency.
(h) ARBITRATION
Any dispute arising under or relating to this policy, or the breach
thereof, shall be finally and fully determined in Hamilton, Bermuda
under the provisions of the Bermuda Arbitration Act of 1986, as amended
and supplemented, by an Arbitration Board composed of three arbitrators
who shall be disinterested and active or retired business executives
having knowledge relevant to the matters in dispute, and who shall be
selected for each controversy as follows:
Either party to the dispute, once a claim or demand on its part has been
denied or remains unsatisfied for a period of twenty (20) calendar days
by the other party, may notify the other party of its desire to
arbitrate the matter in dispute and at the time of such notification the
party desiring arbitration shall notify the other party of the name of
the arbitrator selected by it. The other party who has been so notified
shall within ten (10) calendar days thereafter select an arbitrator and
notify the party desiring arbitration o the name of such second
arbitrator. If the party notified of a desire for arbitration shall fail
or refuse to nominate the second arbitrator within ten (10) calendar
days following the receipt of such notification, the party who first
served notice of a desire to arbitrate will, within an additional period
of ten (10) calendar days, apply to the Supreme Court of Bermuda for the
appointment of the second arbitrator and in such a case the arbitrator
appointed by the Supreme Court of Bermuda shall be deemed to have been
nominated by the party who failed to select the second arbitrator. The
two arbitrators, chosen as above provided, shall within ten (10)
calendar days after the appointment of the second arbitrator choose a
third arbitrator. Upon acceptance of the appointment by said third
arbitrator, the Arbitration Board for he controversy in question shall
be deemed fixed.
The Arbitration Board shall fix, by a notice in writing to the parties
involved, a reasonable time and place for the hearing and may in said
written notice or at the time of the commencement of said hearing, at
the option of said Arbitration Board, prescribe reasonable rules and
regulations governing the course and conduct of said hearing.
The Board, shall, within ninety (90) calendar days following the
conclusion of the hearing, render decision on the matter or matters in
controversy in writing and shall cause a copy thereof to be served on
all parties thereto. In case the Board fails to reach a unanimous
decision, the decision of the majority of the members of the Board shall
be deemed to be the decision of the Board.
Each party shall bear the expense of its own arbitrator. The remaining
cost of the arbitration shall be borne equally by the parties to such
arbitration.
All awards made by the Arbitration Board shall be final and no right of
appeal shall lie from any award rendered by the Arbitration Board. The
parties agree that the Supreme Court of Bermuda: (i0 shall not grant
leave to appeal any award based upon a question of law arising out of
the award; (ii) shall not grant leave to make an application with
respect to an award; and (iii) shall not assume jurisdiction upon any
application by a party to determine any issue of law arising in the
course of the arbitration proceeding, including but not limited to
whether a party has been guilty of fraud.
All awards made by the Arbitration Board may be enforced in the same
manner as a judgment or order from the Supreme Court of Bermuda and
judgment may be entered pursuant to the terms of the award by leave from
the Supreme Court of Bermuda.
No person or organization shall have any right under this policy to join
the Insurer as a party to any action against the Insureds or the company
to determine the Insureds liability, nor shall the Insurer be impleaded
by the Insureds or the Company or their legal representatives. The
Insurer and the Insureds agree that in the event that claims for
indemnity or contribution are asserted in any action or proceeding
against the Insurer by any of the Insureds other insurers in a
jurisdiction or forum other than that set forth in this clause, the
Insureds will in good faith take all reasonable steps requested by the
Insurer to assist the Insurer in obtaining a dismissal of these claims
(other than on the merits). The Insureds and the Company will, without
limitation, undertake to the court or other tribunal to reduce any
judgment or award against such other insurers to the extent that the
court or tribunal determines that the Insurer would have been liable to
such insurers for indemnity or contribution pursuant to this policy. The
Insureds shall be entitled to assert claims against the Insurer for
coverage under this policy including, without limitation, for amounts by
which the Insureds reduced judgment against such other insurers in
respect of such claims for indemnity or contribution, in an arbitration
between the Insurer and the Insureds pursuant to this clause; provided,
however, that the Insurer in such arbitration in respect of such
reduction of any judgment shall be entitled to raise any defenses under
this policy and any other defenses (other than jurisdictional defenses)
as it would have been entitled to raise in the action or proceeding with
such insurers.
(i) CHOICE OF LAW
This policy shall be construed and enforced in accordance with the
internal laws of the State of New York (with the exception of the
procedural law set required by Clause IX(G), which shall be construed
and enforced in accordance with the laws of Bermuda), provided, however,
that, notwithstanding any legal principals to the contrary, the
warranties, terms, conditions, exclusions and limitations of this policy
are to be construed in an evenhanded fashion between the Insureds, the
Company and the Insurer. Without limitation, where the language of this
policy is deemed to be ambiguous or otherwise unclear, the issues shall
be resolved in the manner most consistent with the warranties, terms,
conditions, exclusions and limitations viewed as a whole (without regard
to authorship of the language, without any presumption or arbitrary
interpretation or construction in favor of either the Insureds, the
Company or the Insurer).
(j) HEADINGS
The descriptions in the headings and any subheadings of this policy
(including any titles given to any endorsement attached hereto) are
inserted solely for convenience and do not constitute any part of the
terms or conditions hereof.
IN WITNESSETH WHEREOF, the Company has caused this policy to be signed by its
President and a Secretary.
/s/L. M. MURPHY /s/JOSEPH C. H. JOHNSON
Secretary President
ENDORSEMENT NO: 1
This endorsement, effective: June 30, 1996
forms a part of policy number: 700090
Issued to: The Procter and Gamble Company
by: Starr Excess Liability Insurance Company, Ltd.
In consideration of the premium charged, it is hereby understood and
agreed that the Insurer shall not be liable for Loss in connection with any
claim or claims made against the Directors or Officers:
(a) alleging, arising out of, based upon or attributable to the facts
alleged, or to the same or related Wrongful Acts alleged or contained,
in any claim which has been reported, or in any circumstances of which
notice has been given, under any policy, whether excess or underlying,
of which this policy is a renewal or replacement or which it may succeed
in time;
(b) alleging, arising out of, based upon or attributable to any pending or
prior litigation prior to June 13, 1994, or alleging or derived from the
same or essentially the same facts as alleged in such pending or prior
litigation;
All other terms and conditions remain the same.
Authorized Representative:
/s/DAVID F. ALLEN
ENDORSEMENT NO: 2
This endorsement, effective: June 30, 1996
forms a part of policy number: 700090
Issued to: The Procter and Gamble Company
by: Starr Excess Liability Insurance Company, Ltd.
In consideration of the premium charged, it is hereby understood and
agreed that this Policy shall not be subject to the Clause 7 (Automatic
Extension) of the Followed Policy.
All other terms and conditions remain the same.
Authorized Representative:
/s/DAVID F. ALLEN
Excess Directors and Officers Insurance and Corporate Reimbursement
Renewal Application
NOTICE: THE POLICY PROVIDES THAT THE LIMIT OF LIABILITY AVAILABLE TO PAY
JUDGMENTS OR SETTLEMENTS SHALL BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE.
FURTHER NOTE THAT AMOUNTS INCURRED FOR LEGAL DEFENSE SHALL BE APPLIED AGAINST
THE RETENTION AMOUNT. IF A POLICY IS ISSUED, THE APPLICATION WILL BE ATTACHED TO
AND BECOME A PART OF THE POLICY, THEREFORE IT IS NECESSARY THAT ALL QUESTIONS BE
ANSWERED ACCURATELY AND COMPLETELY.
IF A POLICY IS ISSUED, IT WILL BE ON A CLAIMS-MADE BASIS.
--------------------------------------------------------
1. APPLICANT'S
(a) Corporation name The Procter & Gamble Company
(b) State of Incorporation Ohio
(c) Address One Procter & Gamble Plaza
Cincinnati, Ohio 45202-3314
2. Are any plans for merger, acquisition, consolidation, tender offer or
issuance of securities of or by the Applicant or any of its
Subsidiaries being considered? Yes X No (If yes, please provide
details) The Company's Board has approved a number of acquisitions,
none of which is material or required submission to the Company's
shareholders for approval.
3. Has the Applicant or any of its Subsidiaries filed any registration of
securities under the Securities Act of 1933 or any other offering of
securities within the last year? Yes X No Does it anticipate doing so
within the next year? Yes X No (If yes, give details and submit
offering materials if available)
4. Name of Risk Manager Harold L. Maxson, Director of Insurance
5. Loss experience for Directors & Officers Insurance or similar coverage
(If yes, attach full details. If no losses, check here: X
6. Has any insurance carrier refused, canceled or nonrenewed Directors &
Officers Insurance or similar coverage? Yes No X (If yes,
attach full details including when and reason)
7. Attach copies of the following for the Applicant and, to the extent
available, each of its Subsidiaries:
(a) Latest annual report and 10-K filed with the SEC
(b) Form 10-Q reports and interim financial statements for all
quarters since last 10-K Report
(c) All proxy statements and Notices of Annual Meeting of
Stockholders within the last twelve months
(d) All registration statements filed with the SEC within the last
twelve months and/or any private placement offerings
(e) Any Form 8-K filings made with the SEC within the last twelve
months
(f) If there has been a change since your last application, a
conformed copy of the indemnification provisions of the
charter and the by-laws. Also attach a copy of any corporate
indemnification agreement(s)
(g) Schedule of previous Directors & Officers Insurance, if not
previously insured with Starr Excess
(h) Schedule of current or proposed Directors & Officers Insurance
8. It is agreed that this renewal application is a supplement to the
application(s) which are part of the expiring policy, and that those
application(s) together with this renewal application, constitute the
complete application that shall be the basis of the contract and shall
form part of the policy should a policy be issued.
THE UNDERSIGNED AUTHORIZED OFFICER OF THE APPLICANT DECLARES THAT THE STATEMENTS
SET FORTH HEREIN ARE TRUE. THE UNDERSIGNED AUTHORIZED OFFICER AGREES THAT IF THE
INFORMATION SUPPLIED ON THIS APPLICATION CHANGES BETWEEN THE DATE OF THIS
APPLICATION AND THE EFFECTIVE DATE OF THE INSURANCE, HE/SHE (UNDERSIGNED) WILL,
IN ORDER FOR THE INFORMATION TO BE ACCURATE ON THE EFFECTIVE DATE OF THE
INSURANCE, IMMEDIATELY NOTIFY THE INSURER OF SUCH CHANGES, AND THE INSURER MAY
WITHDRAW OR MODIFY ANY OUTSTANDING QUOTATIONS AND/OR AUTHORIZATIONS OR
AGREEMENTS TO BIND THE INSURANCE.
SIGNING OF THIS APPLICATION DOES NOT BIND THE APPLICANT OR THE INSURER TO
COMPLETE THE INSURANCE, BUT IT IS AGREED THAT THIS APPLICATION SHALL BE THE
BASIS OF THE CONTRACT SHOULD A POLICY BE ISSUED, AND WILL BE ATTACHED TO AND
BECOME PART OF THE POLICY.
ALL WRITTEN STATEMENTS AND MATERIALS FURNISHED TO THE INSURER IN CONJUNCTION
WITH THIS APPLICATION ARE HEREBY INCORPORATED BY REFERENCE INTO THIS APPLICATION
AND MADE A PART HEREOF.
THE UNDERSIGNED AUTHORIZED OFFICER OF THE APPLICANT HEREBY ACKNOWLEDGES THAT
HE/SHE IS AWARE THAT THE LIMIT OF LIABILITY CONTAINED IN THIS POLICY SHALL BE
REDUCED, AND MAY BE COMPLETELY EXHAUSTED, BY THE COSTS OF LEGAL DEFENSE AND, IN
SUCH EVENT, THE INSURER SHALL NOT BE LIABLE FOR THE COSTS OF LEGAL DEFENSE OR
FOR THE AMOUNT OF ANY JUDGMENT OR SETTLEMENT TO THE EXTENT THAT SUCH EXCEEDS THE
LIMIT OF LIABILITY OF THIS POLICY.
THE UNDERSIGNED AUTHORIZED OFFICER OF THE APPLICANT HEREBY FURTHER ACKNOWLEDGES
THAT HE/SHE IS AWARE THAT LEGAL DEFENSE COSTS THAT ARE INCURRED SHALL BE APPLIED
AGAINST THE RETENTION AMOUNT.
Applicant: The Procter & Gamble Company
---------------------------------------------------------
By: /S/JOHN E. PEPPER
---------------------------------------------------------
(must be signed by the Chairman of the Board or President
Title: Chairman of the Board and Chief Executive
---------------------------------------------------------
Date: ---------------------------------------------------------
Corporation: --------------------------------------------------------
(Corporate seal)
Private or Foreign Company Supplement
(Companies outside the United States)
1. Stock Ownership
(a) Total number of voting shares outstanding: 737,933,312
(b) Total number of voting shareholders: 200,134
(c) Total number of voting shares owned by its Directors (direct
and beneficial): 375,774
(d) Total number of voting shares owned by its Officers (direct
and beneficial) who are not Directors: 1,376,147
(e) Does any shareholder own five percent or more of the voting
shares directly or beneficially? If so, designate name and
percentage of holdings. (If no such shareholders, check here
"none". )
P&G Profit Sharing Long Term Incentive Trust - 5.5%
(f) Are there any other securities convertible to voting stock.
If so, fully describe. (If none, check here "none". )
Preferred stock is not traded, but is held for retirees. These
shares are convertible to common stock upon retirement.
2. (a) Complete list of all Directors of the Corporation named in
1(a) of the application by name and affiliation with other
corporations. (If included as an attachment herein, check
here X )
See Annual Report.
3. Complete list of all Officers of the Corporation named in 1(a) of the
application by name and affiliation with other corporations. (If
included as an attachment herein, check here X )
4. List of all direct and indirect Subsidiary corporations:
Business Percentage Date Domestic or Foreign
or Type of of Acquired and Country of
Name Operation Ownership or Created Incorporation
- ---- ---------- ---------- ---------- ------------------
See Schedule I
Coverage to include all Subsidiaries? Yes X No . If yes, include complete list
of Directors and Officers of each Subsidiary. If no, include complete list of
Directors and Officers of each Subsidiary for which coverage is requested. If
included as an attachment herein, check here .
5. Attached complete copy of charter and by-laws
Schedule G
Schedule of Directors and Officers Insurance for previous policy period
(a) Policy expiration date 7/1/96
(b) Policy term 7/1/95-7/1/96
(c) Primary Insurance
Limit of
Name of Insurer Liability Retention Premium
--------------- --------- --------- -------
CODA $25 Million / / $355,000
(d) Excess Insurance (by layer)
Limit of
Name of Insurer Liability Premium
--------------- --------- -------
X. L. $25 Million xs $ 25 Million $150,000
ACE $45 Million xs $ 50 Million $140,000
Starr Excess $50 Million xs $100 Million $125,000
ACE $ 5 Million xs $145 Million Included Above
Schedule H
Schedule of underlying insurance:
List the underlying Directors and Officers insurance which will, or is proposed
to, be carried by the Company for the policy period being applied for:
(a) Primary Insurance
Limit of
Name of Insurer Liability Retention Premium
--------------- --------- --------- -------
CODA $25 Million / / $355,000
(b) Excess Insurance (by layer)
Limit of
Name of Insurer Liability Premium
--------------- --------- -------
X. L. $25 Million xs $ 25 Million $150,000
ACE $45 Million xs $ 50 Million $140,000
Starr Excess $50 Million xs $100 Million $125,000
ACE $ 5 Million xs $145 Million Included Above
(c) Does any policy of excess insurance contain any coverage restrictions or
exclusions which are not in the primary insurance? (If yes, attach full
details. If "no", check here X )
