PROCTER & GAMBLE CO, DEFS14A, 1998-08-28

PROCTER & GAMBLE CO
DEFS14A, 1998-08-28
SOAP, DETERGENTS, CLEANG PREPARATIONS, PERFUMES, COSMETICS

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<PAGE>
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12

PROCTER & GAMBLE CO.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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[P&G LOGO]

THE PROCTER & GAMBLE COMPANY

------

NOTICE OF SPECIAL MEETING
AND
PROXY STATEMENT
AND
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT

-------------

SPECIAL MEETING OF SHAREHOLDERS
PROCTER & GAMBLE HALL AT
THE ARONOFF CENTER FOR THE ARTS
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 13, 1998
<PAGE>
[P&G LOGO]

THE PROCTER & GAMBLE COMPANY
PO BOX 599
CINCINNATI, OHIO 45201-0599

August 28, 1998

Fellow P&G Shareholders:

It is my pleasure to invite you to a special meeting of shareholders, and to
this year's annual meeting of shareholders, both of which will be held on
Tuesday, October 13.

THE SPECIAL MEETING WILL CONVENE AT 12:00 NOON, EASTERN DAYLIGHT TIME, ON
OCTOBER 13 IN THE PROCTER & GAMBLE HALL AT THE ARONOFF CENTER FOR THE ARTS, 650
WALNUT STREET, IN CINCINNATI. It WILL NOT be held at our traditional Cincinnati
General Offices location.

The purpose of the special meeting will be to vote on a resolution to amend
the Regulations of the Company to permit us to hold our annual meeting at a
location other than the Company's principal office. We are doing this to enable
more shareholders to more comfortably attend the meeting. Attendance at our
meeting has increased significantly over the past several years, and we have
outgrown the space available at the General Offices.

If this resolution is adopted, we will immediately convene the annual
meeting in the Procter & Gamble Hall. If it fails, which we believe is unlikely,
we would reassemble at the Company's General Offices for the annual meeting.
While this special meeting adds a small measure of complexity to this year's
annual meeting, we believe it is justified by the benefits of greater
convenience for our shareholders, and the ability to convene all attendees
together in a single auditorium rather than requiring separate "overflow" space,
as we have had to do at the General Offices in recent years.

We've just completed fiscal year 1997-98 and we can look back on a year of
solid progress toward the Company's growth objectives. At the annual meeting,
I'll review this progress as well as our strategies and plans for achieving our
leadership goals for the future. I hope you'll plan to join us.

We appreciate your continued confidence in the Company, and look forward to
seeing you on October 13.

Sincerely,

[SIG]
John E. Pepper
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE
<PAGE>
[P&G LOGO]

THE PROCTER & GAMBLE COMPANY
PO Box 599
Cincinnati, Ohio 45201-0599

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

August 28, 1998

A special meeting of shareholders of The Procter & Gamble Company will be
held at the Procter & Gamble Hall of The Aronoff Center for the Arts, 650 Walnut
Street, Cincinnati, Ohio 45202 on Tuesday, October 13, 1998 at 12 o'clock noon,
Eastern Daylight Time. Attendance at the meeting will be limited to
shareholders, those holding proxies from shareholders and representatives of the
press and financial community.

IF YOU WISH TO ATTEND THE MEETING BUT YOUR SHARES ARE HELD IN THE NAME OF A
BROKER, TRUST, BANK OR OTHER NOMINEE, YOU SHOULD BRING WITH YOU A PROXY OR
LETTER FROM THE BROKER, TRUSTEE, BANK OR NOMINEE CONFIRMING YOUR BENEFICIAL
OWNERSHIP OF THE SHARES.

The purposes of this meeting are:

A. To consider and act upon a proposal described at page 3 in the
accompanying proxy statement to amend the Company's Regulations to allow the
location of the annual meeting of shareholders to be held at a location
other than the principal office of the Company;

B. To hear the reading of the minutes of the annual meeting of
shareholders held October 14, 1997 and to act thereon if they are
incorrectly recorded; and

C. To consider such other matters as may properly come before the
meeting.

Shareholders of record at the close of business on Friday, July 31, 1998
will receive notice of and be entitled to vote at the meeting.

Shareholder attendees who are hearing-impaired should identify themselves on
registration at the meeting so they can be directed to a special section where
an interpreter will be available.

SHAREHOLDERS ARE URGED TO VOTE THEIR PROXY PROMPTLY, WHETHER OR NOT THEY
EXPECT TO ATTEND THE SPECIAL MEETING. SHAREHOLDERS CAN VOTE THEIR SHARES (1) VIA
A TOLL-FREE TELEPHONE CALL IN THE U.S. AND CANADA, (2) VIA THE INTERNET, OR (3)
BY MAILING THEIR SIGNED PROXY CARD IN THE ENCLOSED ENVELOPE. ANY PROXY NOT
DELIVERED AT THE MEETING SHOULD BE RECEIVED BY THE COMPANY'S PROXY TABULATOR,
BANKBOSTON, N.A. BY 9:00 A.M. ON TUESDAY, OCTOBER 13, 1998. SPECIFIC
INSTRUCTIONS TO BE FOLLOWED BY ANY REGISTERED SHAREHOLDER INTERESTED IN VOTING
VIA TELEPHONE OR THE INTERNET ARE SET FORTH ON THE ENCLOSED PROXY CARD.

By order of the Board of Directors,

TERRY L. OVERBEY

Secretary
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- --------------------------------------------------------------------------------

PROXY STATEMENT
THE PROCTER & GAMBLE COMPANY
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 13, 1998
- --------------------------------------------------------------------------------

SOLICITATION AND REVOCATION OF PROXIES

The enclosed proxy is being solicited by the Board of Directors of the
Company. In addition to the solicitation by mail, proxies may be solicited in
person or by telephone or telegraph; such solicitation on behalf of the Proxy
Committee of the Board may be made by Directors, officers and regular employees
of the Company and by representatives of Georgeson & Company Inc., a proxy
solicitation firm. Any proxy given pursuant to this solicitation may be revoked
by notice from the person giving the proxy at any time before it is exercised.
Any such notice of revocation should be provided in writing signed by the
shareholder in the same manner as the proxy being revoked and delivered to the
Company's proxy tabulator, BankBoston, N.A.

The expense of making the solicitation will consist of preparing and mailing
the proxies and proxy statements; any expenses incurred by Company
representatives in making the contacts referred to above; charges of brokerage
houses and other custodians, nominees or fiduciaries for forwarding documents to
security owners; costs of returning the proxies; and fees of BankBoston, N.A.
for tabulating the responses. These are the only contemplated expenses of
solicitation, and they will be paid by the Company.

VOTING RIGHTS

The holders of record of the Company's Common Stock and Series A and B ESOP
Convertible Class A Preferred Stock at the close of business on Friday, July 31,
1998 are entitled to vote on matters to come before the meeting. On that date,
1,338,186,222 shares of Common Stock, 60,379,596 shares of Series A ESOP
Convertible Class A Preferred Stock and 37,804,836 shares of Series B ESOP
Convertible Class A Preferred Stock were issued and outstanding. As provided in
the Amended Articles of Incorporation, each share of Common and Series A and B
ESOP Convertible Class A Preferred Stock is entitled to one vote.

Participants in The Procter & Gamble Shareholder Investment Program are
entitled to vote shares of the Company's Common Stock held for their account
under that Program pursuant to an omnibus proxy executed in their favor by the
Custodian of such Program.

Participants in The Procter & Gamble Profit Sharing Trust and Employee Stock
Ownership Plan have the right to instruct the Trustees of such Trust as to how
to vote shares of stock allocated to their accounts. The Plan also provides that
the Trustees shall vote any shares allocated to accounts of participants as to
which such instructions have not been received in direct proportion to the
voting of allocated shares as to which voting instructions have been received.
In addition, the Plan provides that the Trustees shall vote unallocated shares
of stock held in such Trust in direct proportion to the voting of allocated
shares in such Trust as to which voting instructions have been received.

It is the recommendation of the Board of Directors that the shareholders
approve the resolution, and it is the intention of the Proxy Committee to vote
all proxies received by it in favor of such resolution unless otherwise
indicated on the proxy.

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PURPOSE OF THE MEETING

The purpose of the meeting is to consider and take action on the following
resolution which would serve to amend ARTICLE II, SECTION 1 of the Regulations
of the Company:

RESOLVED, That ARTICLE II, SECTION 1 of the Regulations of The Procter &
Gamble Company are hereby amended, effective immediately, to read as
follows:

SECTION 1. PLACE OF MEETING. Meetings of shareholders shall be held
<#>at the principal office of the Company</#> in Cincinnati, Hamilton
County, Ohio, but the shareholders or the Board of Directors shall have
authority to provide for the holding of meetings of shareholders
elsewhere within or without the State of Ohio, except the annual meeting,
or a meeting to elect Directors.(1)

The Board of Directors recommends a vote FOR this resolution for the
following reasons:

As the number of the Company's shareholders has increased substantially
over the past several years, it has become increasingly difficult to hold
the annual meeting of shareholders at the General Offices of the Company. In
recent years the Company's auditorium has accommodated only modestly more
than 50% of the shareholders attending the annual meeting, resulting in
almost half of the shareholders not being able to attend the meeting in
person. The Board of Directors expects the trend of increasing attendance to
continue and believes it is now appropriate to amend the Regulations of the
Company to permit the annual meeting of shareholders to be held at locations
in Cincinnati other than the General Offices of the Company. This will allow
all of the Company's shareholders who desire to attend the annual meeting to
do so in person.

The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock and Series A and B ESOP Convertible Class A Preferred
Stock issued and outstanding, voting together as a class, is required to
adopt this resolution.

Proxies will be voted FOR the resolution unless the Proxy Committee is
instructed otherwise on a proxy returned to such Committee. Abstentions
indicated on such a proxy will be counted as a vote AGAINST this proposal.
"Broker non-votes" specified on proxies returned by brokers holding shares
for beneficial owners who have not provided instructions as to voting on
this issue will be treated as a vote AGAINST this proposal.

OTHER MATTERS

No action will be taken with regard to the minutes of the annual meeting of
shareholders held October 14, 1997 unless they have been incorrectly recorded.

The Board of Directors knows of no other matters which will come before this
special meeting of shareholders. However, if any matters other than those set
forth in the notice should be properly presented for action, the persons named
in the proxy intend to take such action as will be in harmony with the policies
of the Company and, in that connection, will use their discretion.

(1) Language to be deleted is lined out.

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[P&G LOGO]

THE PROCTER & GAMBLE COMPANY
PO Box 599
Cincinnati, Ohio 45201-0599

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

August 28, 1998

If the resolution presented at the special meeting of shareholders held at
12 o'clock noon, Eastern Daylight Time, on October 13, 1998, is adopted, the
annual meeting of shareholders of The Procter & Gamble Company will be held at
the Procter & Gamble Hall of The Aronoff Center for the Arts, 650 Walnut Street,
Cincinnati, Ohio 45202 on Tuesday, October 13, 1998 immediately following the
special meeting. If such resolution is not adopted, the annual meeting of
shareholders will be held at the General Offices of the Company, Two Procter &
Gamble Plaza, Cincinnati, Ohio 45202-3314 immediately following the special
meeting. Attendance at the annual meeting will be limited to shareholders, those
holding proxies from shareholders and representatives of the press and financial
community.

The purposes of this meeting are:

A. To hear the reading of the minutes of the special meeting of
shareholders held immediately prior to the annual shareholders' meeting on
October 13, 1998 and to act thereon if they are incorrectly recorded;

B. To receive reports of officers;

C. To elect five members of the Board of Directors with terms expiring
at the annual meeting in 2001, as described at pages 3-4 in the proxy
statement;

D. To consider and act upon a proposal described at page 22 in the proxy
statement to ratify the appointment of independent auditors;

E. To consider and act upon, if presented at the meeting, proposals
submitted by certain shareholders as described at pages 23-28 in the proxy
statement; and

F. To consider such other matters as may properly come before the
meeting.

Shareholders of record at the close of business on Friday, July 31, 1998
will receive notice of and be entitled to vote at the meeting.

Shareholder attendees who are hearing-impaired should identify themselves on
registration at the meeting so they can be directed to a special section where
an interpreter will be available.

A copy of the annual report of the Company for the fiscal year ended June
30, 1998 has been mailed to each shareholder of record as of July 31, 1998.

SHAREHOLDERS ARE URGED TO VOTE THEIR PROXY PROMPTLY, WHETHER OR NOT THEY
EXPECT TO ATTEND THE ANNUAL MEETING. SHAREHOLDERS CAN VOTE THEIR SHARES (1) VIA
A TOLL-FREE TELEPHONE CALL IN THE U.S. AND CANADA, (2) VIA THE INTERNET, OR (3)
BY MAILING THEIR SIGNED PROXY CARD IN THE ENCLOSED ENVELOPE. ANY PROXY NOT
DELIVERED AT THE MEETING SHOULD BE RECEIVED BY THE COMPANY'S PROXY TABULATOR,
BANKBOSTON, N.A. BY 9:00 A.M. ON TUESDAY, OCTOBER 13, 1998. SPECIFIC
INSTRUCTIONS TO BE FOLLOWED BY ANY REGISTERED SHAREHOLDER INTERESTED IN VOTING
VIA TELEPHONE OR THE INTERNET ARE SET FORTH ON THE ENCLOSED PROXY CARD.

By order of the Board of Directors,

TERRY L. OVERBEY

Secretary
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PROXY STATEMENT
THE PROCTER & GAMBLE COMPANY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 13, 1998
- --------------------------------------------------------------------------------

SOLICITATION AND REVOCATION OF PROXIES

The enclosed proxy is being solicited by the Board of Directors of the
Company. In addition to the solicitation by mail, proxies may be solicited in
person or by telephone or telegraph; such solicitation on behalf of the Proxy
Committee of the Board may be made by Directors, officers and regular employees
of the Company and by representatives of Georgeson & Company Inc., a proxy
solicitation firm. The Company has agreed to pay Georgeson & Company Inc. a fee
of $16,000, plus reasonable expenses, for its services in this regard. Any proxy
given pursuant to this solicitation may be revoked by notice from the person
giving the proxy at any time before it is exercised. Any such notice of
revocation should be provided in writing signed by the shareholder in the same
manner as the proxy being revoked and delivered to the Company's proxy
tabulator, BankBoston, N.A.

VOTING RIGHTS

The vote required for the election of Directors and approval of the other
proposals is set forth in the discussion of each item to be voted upon.

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<PAGE>
ELECTION OF DIRECTORS

The Regulations of the Company provide that the Board of Directors shall
consist of three classes of Directors with overlapping three-year terms. One
class of Directors is to be elected each year with terms extending to the third
succeeding annual meeting after such election. The Regulations provide that the
Board shall maintain the three classes so as to be as nearly equal in number as
the then total number of Directors permits.

Pursuant to the provisions of the Regulations described above, there are
five Directors of the Company whose terms expire at the annual meeting in 1998.
The five Directors whose terms are expiring in 1998 are described in the section
immediately below. It is the Board's intention that these five persons will be
nominated for new terms extending to the annual meeting in 2001 and until their
successors are duly elected. Proxies received in response to this solicitation
will be voted, unless such authority is withheld, in favor of the election of
these five nominees. In the election of members of the Board of Directors, the
five candidates receiving the most votes will be elected. While there is no
reason to believe that any of the nominees will, prior to the date of the
meeting, refuse or be unable to accept the nomination, should any nominee or
nominees so refuse or become unable to accept, it is the intention of the
persons named in the proxy to vote for such other person or persons as the
Directors may recommend.

Directors whose terms expire at the annual meetings in 1999 and 2000 are
described in separate sections below.

NOMINEES FOR ELECTION AS DIRECTORS WITH TERMS EXPIRING IN 2001

Joseph T. Gorman -- Chairman and Chief Executive Officer,
[PHOTO] TRW Inc. (automotive, space, defense and information
systems). Director of TRW Inc. and Aluminum Company of
America; Director of the Company since 1993; member of the
Compensation, Executive and Finance Committees; age 60.

Lynn M. Martin -- Professor, Davee Chair, J. L. Kellogg
[PHOTO] Graduate School of Management, Northwestern University.
Director of Ameritech Corporation, Ryder System, Inc., TRW
Inc., Dreyfus Funds and Harcourt General Inc.; Director of
the Company since 1994; member of the Finance, Board
Organization and Nominating and Public Policy Committees;
age 58.

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<PAGE>

John E. Pepper -- Chairman of the Board and Chief Executive.
[PHOTO] Director of Motorola, Inc. and Xerox Corporation; Director
of the Company since 1984; member of the Executive
Committee; age 60.

Ralph Snyderman, M.D. -- Chancellor for Health Affairs,
[PHOTO] Dean, School of Medicine at Duke University, and
President/CEO of Duke University Health System. Director of
Ariad, Inc.; Director of the Company since 1995; member of
the Audit, Board Organization and Nominating and Public
Policy Committees; age 58.

Robert D. Storey -- Partner in the law firm of Thompson,
[PHOTO] Hine & Flory, P.L.L., Cleveland, Ohio. Director of GTE
Corporation and The May Department Stores Company; Director
of the Company since 1988; Chairman of the Public Policy
Committee and member of the Audit and Board Organization and
Nominating Committees; age 62.

All of the nominees for election as Directors with terms expiring in 2001,
except Ms. Martin and Mr. Storey, have been executive officers of their
respective employers for more than the past five years. Ms. Martin has been a
Professor at Northwestern University since 1993. Prior to that, Ms. Martin
served as Secretary of Labor of the United States from January, 1991 to January,
1993, following service as a member of the U.S. House of Representatives. Mr.
Storey has been a partner in the law firm of Thompson, Hine & Flory since
January 1, 1993.

Each of the nominees for election as Directors with terms expiring in 2001
was elected a Director by the shareholders at the annual meeting in 1995.

DIRECTORS WITH TERMS EXPIRING IN 1999

Donald R. Beall -- Retired Chairman and Chief Executive
[PHOTO] Officer, Rockwell International Corporation (automation,
avionics and communications and semiconductor systems) and
Chairman of the Executive Committee. Director of Rockwell
International Corporation, Amoco Corporation, Meritor
Automotive, Inc. and Times-Mirror Company; Director of the
Company since 1992; Chairman of the Audit Committee and
member of the Compensation and Executive Committees; age 59.

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Gordon F. Brunner -- Senior Vice President. Director of the
[PHOTO] Company since 1991; age 59.

Richard B. Cheney -- Chairman of the Board and Chief
[PHOTO] Executive Officer, Halliburton Company (energy services,
engineering and construction). Director of Halliburton
Company, Electronic Data Systems Corporation and Union
Pacific Corporation; Director of the Company since 1993;
member of the Audit, Compensation and Public Policy
Committees; age 57.

Harald Einsmann -- Executive Vice President. Director of EMI
[PHOTO] plc and Stora Enso AB; Director of the Company since 1991;
age 64.

Durk I. Jager -- President and Chief Operating Officer.
[PHOTO] Director of Eastman Kodak Company; Director of the Company
since 1989; age 55.

Charles R. Lee -- Chairman and Chief Executive Officer, GTE
[PHOTO] Corporation (telecommunication services). Director of GTE
Corporation, United Technologies Corporation and USX
Corporation. Director of the Company since 1994; member of
the Audit, Board Organization and Nominating and Public
Policy Committees; age 58.

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<PAGE>
All of the Directors with terms expiring in 1999, except Mr. Cheney, have
been, or were prior to retirement, executive officers of their respective
employers for more than the past five years. Mr. Cheney has been an executive
officer of Halliburton Company since October 1, 1995. He was a Senior Fellow at
the American Enterprise Institute for Public Policy Research, Washington, DC,
from January, 1993 until September 30, 1995. Prior to that, Mr. Cheney was
Secretary of Defense of the United States from March 17, 1989 to January 20,
1993.

Each of the Directors with terms expiring in 1999 was elected a Director by
the shareholders at the annual meeting in 1996.

DIRECTORS WITH TERMS EXPIRING IN 2000

Edwin L. Artzt -- Retired Chairman of the Board and Chief
[PHOTO] Executive. Director of American Express Company, Barilla
G.eR.F.lli S.p.A. Italy, Delta Air Lines, Inc., Spalding
Holdings Corporation and GTE Corporation; Director of the
Company from 1972 to 1975 and since 1980; Chairman of the
Executive Committee and member of the Finance and Public
Policy Committees; age 68.

Norman R. Augustine -- Chairman of the Executive Committee,
[PHOTO] Lockheed Martin Corporation (aerospace, electronics,
information management, materials and energy systems and
products). Director of Lockheed Martin Corporation, The
Black and Decker Corporation and Phillips Petroleum Company;
Director of the Company since 1989; Chairman of the
Compensation Committee and member of the Executive and
Finance Committees; age 63.

Richard J. Ferris -- Retired Co-Chairman, Doubletree
[PHOTO] Corporation. Director of Amoco Corporation, Candlewood Hotel
Company, Inc. and Promus Hotel Corporation; Director of the
Company since 1979; Chairman of the Finance Committee and
member of the Executive and Board Organization and
Nominating Committees; age 62.

John C. Sawhill, Ph.D. -- President and Chief Executive
[PHOTO] Officer, The Nature Conservancy (an international
conservation organization). Director of Pacific Gas &
Electric Company, NAACO Industries, Newfield Exploration
Company and Vanguard Group of Mutual Funds; Director of the
Company since 1996; member of the Audit, Board Organization
and Nominating and Public Policy Committees; age 62.

6
<PAGE>

John F. Smith, Jr. -- Chairman, Chief Executive Officer and
[PHOTO] President, General Motors Corporation (automobile and
related businesses). Director of General Motors Corporation;
Director of the Company since 1995; member of the Audit,
Board Organization and Nominating and Public Policy
Committees; age 60.

Marina v.N. Whitman, Ph.D. -- Professor of Business
[PHOTO] Administration and Public Policy, University of Michigan.
Director of Aluminum Company of America, Browning-Ferris
Industries, Inc., Chase Manhattan Corporation and its
subsidiary Chase Manhattan Bank, and Unocal Corporation;
Director of the Company since 1976; Chairman of the Board
Organization and Nominating Committee, and member of the
Compensation and Finance Committees; age 63.

All of the Directors with terms expiring in 2000, except Mr. Ferris and Dr.
Whitman, have been, or were prior to retirement, executive officers of their
respective employers for more than the past five years. Prior to his association
with Doubletree Corporation (formerly Guest Quarters Hotels LP) in October,
1992, Mr. Ferris was a private investor for more than five years following his
resignation as Chairman and Chief Executive Officer of UAL Corporation (formerly
Allegis Corporation -- travel related services) in June, 1987. Prior to her
appointment at the University of Michigan effective September 1, 1992, Dr.
Whitman was Vice President and Group Executive, General Motors Corporation, for
more than five years.

Each of the Directors with terms expiring in 2000 was elected a Director by
the shareholders at the annual meeting in 1997.

COMMITTEES OF THE BOARD

The EXECUTIVE COMMITTEE (established in 1905). As prescribed by the
Regulations of the Company, the Committee has the authority of the Board of
Directors for the management of the business and affairs of the Company between
meetings of the Board.

The AUDIT COMMITTEE (established in 1940) met four times during the fiscal
year ended June 30, 1998 with representatives of Deloitte & Touche LLP and
financial management to review accounting, internal control, auditing and
financial reporting matters. The Committee is responsible, among other things,
for recommending to the Board the firm of independent auditors to be retained,
approving professional services rendered and reviewing the scope of the annual
audit and reports and recommendations submitted by the independent audit firm,
which regularly meets privately with the Committee.

The BOARD ORGANIZATION AND NOMINATING COMMITTEE (established in 1972) met
twice during the fiscal year ended June 30, 1998. The Board Organization and
Nominating Committee is responsible for establishing the criteria for and
reviewing the qualifications of individuals for election as members of the
Board. When a vacancy on the Board occurs or is anticipated, the Committee
presents its recommendation of a replacement Director to the Board. The
Committee makes recommendations as to exercise of the Board's authority to
determine the number of its members, within the limits provided by the
Regulations of the Company. The Committee also has responsibility for reviewing
issues of corporate governance and making recommendations thereon to the Board.
Shareholders wishing to communicate with

7
<PAGE>
the Board Organization and Nominating Committee concerning potential Director
candidates may do so by corresponding with the Secretary of the Company and
including the name and biographical data of the individual being suggested.

The COMPENSATION COMMITTEE met five times during the fiscal year ended June
30, 1998. The Compensation Committee (or its predecessor Committees, which
served the same function under different names and which were established
commencing in 1960) is responsible for fixing or agreeing to the salary and
other compensation of all principal officers of the Company elected by the
Board, and advising the Chief Executive on policy matters concerning officers'
compensation. The Compensation Committee is also responsible for administration
of The Procter & Gamble 1992 Stock Plan as approved at the annual meeting of
shareholders on October 13, 1992. The authority of the Committee under the Plan
includes selection of key employees for participation in the Plan and
determination of numbers of stock options and stock appreciation rights and
amounts of restricted and unrestricted stock to be awarded to such employees
pursuant to the Plan. The Committee is also charged with on-going administration
and interpretation of the Plan and of its predecessor plans, The Procter &
Gamble 1983 Stock Plan and the Plan for Use of Shares in Payment of
Remuneration, both of which have been superseded as to new grants by The Procter
& Gamble 1992 Stock Plan.

The FINANCE COMMITTEE (established in 1994) met three times during the
fiscal year ended June 30, 1998. The Finance Committee is responsible for
reviewing and making recommendations to the Board on the following matters: the
Company's annual financing plans; the Company's global financing objectives and
principles, financial strategies and capital structure; funding and oversight of
pension and benefit plans; the Company's insurance program; and, after
separately being cleared in principle with the full Board, the financial
implications of major investments, restructurings, joint ventures, acquisitions
and divestitures.

The PUBLIC POLICY COMMITTEE (established in 1994) met twice during the
fiscal year ended June 30, 1998. The Public Policy Committee is responsible for
reviewing activities of importance to the Company and its stakeholders,
including employees, consumers, customers, suppliers, shareholders, governments
and local communities. The Public Policy Committee reviews equal employment
opportunity and advancement, environmental quality, employee safety and health,
product safety, contributions and community relations.

CERTAIN ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS

During the fiscal year ended June 30, 1998 a total of ten meetings of the
Board and 17 meetings of Committees of the Board were held. Average attendance
at these meetings by nominees and incumbents serving as Directors during the
past year was in excess of 92%.

Last year, the Board elected to increase its alignment with the interests of
the Company's shareholders as well as to simplify the elements of the
compensation program for non-employee Directors. As a result, all Committee
membership fees, all Board and Committee attendance fees and the Board
retirement plan were eliminated. In their place, the Board increased the
retainer and the amount of stock-related compensation. At the time of this
change, the total compensation received by a typical Director remained about the
same.

Currently, Directors who are not employees receive a retainer of $55,000 per
year, paid quarterly. The last quarterly retainer payment is contingent upon the
Director's having attended at least 75% of the Board meetings held during the
fiscal year. The attendance requirement may be waived by the Compensation
Committee for reasons of health or other urgent personal circumstances.
Directors may also elect to convert a portion or all of their fees for services
as a Director into Common Stock of the Company pursuant to The Procter & Gamble
1993 Non-Employee Directors' Stock Plan.

Non-employee Directors also receive an annual grant of restricted stock on
the first business day in the calendar year with a value of approximately
$20,000 on the date of grant. Non-employee Directors were also granted a stock
option on February 27, 1998 with a term of ten years to purchase 2,000 shares of
the

8
<PAGE>
Company's Common Stock at an exercise price of $84.5938, the fair market value
of the Common Stock on the date of grant. The Company does not pay directors'
fees to Directors who are employees of the Company. Directors who are not
employees of the Company are also provided insurance coverage in the amount of
$750,000 payable in the event of accidental death or disability occurring while
traveling on Company business. Such Directors also receive reimbursement for
expenses of such travel.

Fees otherwise payable to a non-employee Director who has elected to come
under The Procter & Gamble Deferred Compensation Plan for Directors are credited
to such Director's account but not funded. Interest is credited to such an
account at the end of each month at the prime rate then in effect at Morgan
Guaranty Trust Company of New York. Such a deferred compensation account is
payable either upon the retirement of the Director or after a term of years
specified by the electing Director, at the Director's option, elected in advance
of being earned.

As part of its overall program of support for charitable institutions and as
an aid in attracting and retaining qualified Directors, the Board of Directors
has in place a Charitable Gifts Program funded by life insurance on the lives of
the non-employee members of the Board of Directors and the Chairman of the Board
and Chief Executive. Directors derive no financial benefit from the Program
since all insurance proceeds and charitable deductions accrue solely to the
Company. Under this Program the Company intends to make charitable contributions
of up to a total of $1 million following the death of any such participant with
such contribution to be allocated in accordance with each participant's
recommendations among up to five charitable organizations. The following current
and retired Directors of the Company are participants in this Program: David M.
Abshire, Edwin L. Artzt, Norman R. Augustine, Donald R. Beall, Theodore F.
Brophy, Richard B. Cheney, Richard J. Ferris, Joseph T. Gorman, Robert A.
Hanson, Joshua Lederberg, Charles R. Lee, Lynn M. Martin, John E. Pepper, David
M. Roderick, John C. Sawhill, John G. Smale, John F. Smith, Jr., Ralph
Snyderman, Robert D. Storey and Marina v.N. Whitman. Beneficiary organizations
designated under this Program must be tax-exempt under Section 501(c)(3) of the
Internal Revenue Code, and donations ultimately paid by the Company will be
deductible against federal and other income taxes payable by the corporation in
accordance with the tax laws applicable at the time. Because of such deductions
and use of insurance, the Program should result in little or no long-term cost
to the Company under present law.

REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION

OVERVIEW

The Compensation Committee of the Board of Directors (the "Committee")
consists entirely of outside, non-employee Directors. The Committee establishes
and regularly reviews executive compensation levels and policies, and authorizes
short- and long-term awards in the form of cash or stock. All awards are made
within the authority of the Additional Remuneration Plan, which dates back to
1949, and The Procter & Gamble 1992 Stock Plan.

Compensation for executives is based on the principles that compensation
must (a) be competitive with other quality companies in order to help attract,
motivate and retain the talent needed to lead and grow Procter & Gamble's
business; (b) provide a strong incentive for key managers to achieve the
Company's goals; and (c) make prudent use of the Company's resources.

Procter & Gamble has an enviable record of recruiting, training and
developing its executive talent from within -- an achievement few other
corporations have matched. In addition, the Company's long-term performance, as
measured by sales and earnings growth and other relevant measures, has been very
positive. This record suggests the principles that drive our compensation
program have, over time, delivered the desired results.

Executive compensation is based on performance against a combination of
financial and non-financial measures including business results and developing
organization capacity. In addition, employees are

9
<PAGE>
expected to uphold the fundamental principles embodied in the Company's
Statement of Purpose and Environmental Quality Policy. These include a
commitment to integrity, doing the right thing, maximizing the development of
each individual, developing a diverse organization, and continually improving
the environmental quality of our products and operations. In upholding these
financial and non-financial objectives, executives not only contribute to their
own success, but also help ensure our business, employees, shareholders and the
communities in which we live and work will prosper.

ELEMENTS OF EXECUTIVE COMPENSATION

It is the Company's long-standing policy that variable, at-risk
compensation, both annual and long-term, should make up a significant portion of
executive compensation. Depending upon the level of the executive, the Company
targets between 40% and 80% of executive compensation (other than retirement
credits) to be variable, at-risk elements. When the Company achieves solid
earnings growth and stock price appreciation, executive compensation levels will
be expected to equal or exceed the middle compensation range for a comparative
group of companies. This group includes a combination of leading consumer
products companies and other corporations of size and reputation comparable to
Procter & Gamble (and with which Procter & Gamble must compete in hiring and
retaining the employees it needs). The composition of this group is updated
periodically in order to assure its continued relevance.

The Committee believes the compensation levels of the Company's executive
officers are competitive and in line with those of comparable companies. This
conclusion is derived in part from consultations with independent outside
compensation consultants.

Annual compensation elements include base salary and two forms of
incentives, the Performance Bonus Award and the Profit Incentive Award.
Long-term incentive compensation includes stock options and a Long-Term
Incentive Plan award based on Total Shareholder Return relative to a peer group
of companies.

In addition, executives participating in The Procter & Gamble Profit Sharing
Trust and Employee Stock Ownership Plan receive retirement awards in the form of
stock restricted (non-transferable and subject to forfeiture) until retirement.
These awards make up the difference between the Internal Revenue Code limit on
contributions that can be made to that Plan and what would otherwise be
contributed by the Company to the executive's account. The Procter & Gamble
Profit Sharing Trust and Employee Stock Ownership Plan is a qualified plan
providing retirement benefits for U.S.-based employees.

ANNUAL COMPENSATION

Annual compensation consists of base salary and two forms of annual
incentives.

Executive pay ranges are established based on a careful examination of
survey data from a comparative group of companies gathered by a leading
consulting firm specializing in executive compensation. A number, but not all,
of these companies are included in the line of business index shown on the
performance graph. Executive compensation ranges are targeted to be in the
middle of this group of companies. Within the established range structure, the
Committee approves changes in amounts of executive compensation based on
individual performance evaluations and time in position.

One annual incentive award, the Performance Bonus Award, is based on an
evaluation of each executive's individual performance. A separate annual award,
the Profit Incentive Award, is tied to the net profit achievement of the Company
and/or certain business units as compared to preset goals. If these profits,
after any adjustments approved by the Compensation Committee for unusual items,
are not delivered, no awards are made.

Senior management and the Committee believe that differences in performance
should result in significantly different levels of annual cash compensation.

10
<PAGE>
LONG-TERM INCENTIVES

Long-term incentives consist of stock options and Long-Term Incentive Plan
(LTIP) awards. Both types of awards serve to focus executive attention on the
long-term performance of the business.

The Company makes stock option grants annually at no less than 100% of the
market price on the date of grant. Stock appreciation rights (SARs) are granted
instead of options in countries where the holding of foreign stock is
restricted. These grants and rights are fully exercisable after one year and
have a ten-year life. The number of shares normally awarded is based on the
individual's total short-term compensation and competitive grant values for that
level of compensation. Grants are performance-based in that they are tied to
individual compensation levels which are already performance-based. These awards
are designed to be competitive with awards made by companies in the survey
group. The number of option shares currently held by each executive is not
considered in determining awards. Grants are only made to employees who have
demonstrated a capacity for contributing in a substantial way to the success of
the Company. Stock options encourage these managers to become owners of the
business, which helps to further align their interests with the shareholders'
interests. Options have no value unless the price of the Company's stock
increases, and they are exercisable only by the employee and cannot be
transferred except in case of death.

The goal of the LTIP is to consistently deliver a Total Shareholder Return
(TSR) at least in the top half of a peer group of companies over the most recent
three-year period. When this occurs, awards ranging from 50% to 150% of the
Performance Bonus Award can be earned. No awards are paid for ranking in the
bottom one-third of the peer group. Awards are generally made in the form of
stock, stock restricted until retirement, or as stock options in accordance with
the terms of the 1992 Stock Plan.

The Company firmly believes the interests of the Company and its employees
are inseparable. One of the ways this is demonstrated is through share ownership
and ownership behavior. Globally, we estimate that our employees and retirees
currently own about one-fifth of Procter & Gamble's outstanding shares. We
believe this is significantly higher than most other major corporations and
serves to create a strong focus on the long-term growth of the Company and its
stock.

To support the Company's desire to increase management's stock ownership,
the Committee approved a share retention program for managers participating in
LTIP. Specific guidelines require participants to achieve and then retain a
multiple of their base salary in shares of Procter & Gamble stock. Higher level
managers are required to retain a larger multiple. The Chief Executive's
multiple is three times base salary. Shares held in The Procter & Gamble Profit
Sharing Trust and Employee Stock Ownership Plan are not counted towards the
achievement of these ownership targets.

Regarding the limitation of deductions available for compensation paid to
the Company's named executives under Internal Revenue Code Section 162(m), stock
option and SAR grants under the 1992 Stock Plan meet the requirements for
deductible compensation. The Committee granted some or all of the named
executives' Performance Bonus, Profit Incentive and Long-Term Incentive Plan
awards in the form of stock options or retirement restricted stock in order to
avoid the loss of deductibility related to such compensation. The Executive
Compensation Tables provide further details. With these adjustments, the
potential tax liability from any loss of deductibility is nominal.

COMPENSATION OF THE CHIEF EXECUTIVE

The compensation of John E. Pepper, Chairman of the Board and Chief
Executive, during fiscal year 1997-98, consists of the same elements as for
other senior executives, namely base salary, annual incentives, stock options,
and LTIP awards.

In determining Mr. Pepper's compensation package, the Committee reviewed the
Company's financial and business performance for 1997-98. This review was based
on a number of qualitative and quantitative factors including sales, earnings,
unit volume, market share, profit margins, return on equity, growth in earnings,
total shareholder return, innovation and human resource development. The
Committee does not assign relative weights or rankings to each of these factors,
but instead makes a subjective determination

11
<PAGE>
based on consideration of all such factors. In its review, the Committee noted
significant progress against the Company's long-term objectives. Fiscal year
1997-98 was a record year for unit volume, sales, earnings and cash flow. The
Company's profit margins reached their highest level in 57 years. The Company's
underlying strategy of offering consumers products providing better value
continues to build the business. There has been an increased emphasis on both
new product initiatives and strategic acquisitions while divesting non-strategic
brands. The Company's shareholder return remains strong. After ranking in the
top third among a group of peer companies during the past five and ten years,
P&G ranked near to the top third during the latest three year period by
averaging a 37% annualized return.

Mr. Pepper's base salary was established based on the Committee's evaluation
of his performance toward the achievement of the Company's financial, strategic
and other goals, his length of service as Chief Executive, and competitive chief
executive officer pay information derived from an independent consulting
organization. His Performance Bonus Award was based on the Committee's overall
evaluation of his individual performance. Although the final amount has not yet
been determined, it is expected that Mr. Pepper will qualify for a Profit
Incentive Award attributable to 1997-98 in the amount of approximately $376,000.

The Chief Executive's LTIP award reflecting the Company's relative TSR
performance over the most recent three fiscal years was calculated on the same
basis as for all other covered executives. This equaled 70% of Mr. Pepper's
Performance Bonus Award.

Mr. Pepper's regular award of stock options for 1998, as with other
optionees, was based on his total short-term compensation and competitive survey
data.

NORMAN R. AUGUSTINE, Chairman JOSEPH T. GORMAN
DONALD R. BEALL MARINA V.N. WHITMAN
RICHARD B. CHENEY

12
<PAGE>
EXECUTIVE COMPENSATION TABLES

The following tables and notes present the compensation provided by the
Company to its Chief Executive officer, and to each of the Company's four most
highly compensated executive officers, other than the Chief Executive, for
services rendered in all capacities to the Company for the fiscal years ended
June 30, 1998, 1997 and 1996.

SUMMARY COMPENSATION TABLE
(DOLLAR FIGURES SHOWN IN THOUSANDS)

<TABLE>
<CAPTION>
Long-Term Compensation
Awards
------------------------
Annual Compensation Securities
-------------------------------------------------- Restricted Underlying
Other Annual Stock Options/ All Other
Name and Principal Position Year Salary Bonus(1) Compensation(2) Awards(3) SARs(4) Compensation(5)
- --------------------------------- --------- --------- ----------- --------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
John E. Pepper 1997-98 $ 1,250.0 $ 0(6) $ 0 $ 1,974.0 134,917 $ 327.5
Chairman of the 1996-97 1,180.0 0(7) 0 1,661.0 142,691 306.8
Board and Chief Executive 1995-96 1,110.0 0(8) 0 480.0 206,610 284.5

Durk I. Jager 1997-98 1,185.0 0(9) 0 0 147,248 306.0
President and 1996-97 1,035.0 0(10) 0 0 166,212 265.9
Chief Operating Officer 1995-96 910.0 58.0(11) 0 0 183,256 230.5

Harald Einsmann 1997-98 730.0 755.4(12) 170.5(14) 0 66,448 216.0
Executive Vice 1996-97 706.3 0(13) 106.1(14) 558.9 82,136 293.2
President 1995-96 635.0 457.2(15) 403.3(14) 0 87,062 302.4

Wolfgang C. Berndt 1997-98 711.7 0(16) 122.1(14) 0 76,517 230.2
Executive Vice 1996-97 663.3 0(17) 345.0(14) 0 96,796 215.5
President 1995-96 620.0 378.6(18) 338.5(14) 0 79,496 295.4

A. G. Lafley 1997-98 635.0 336.6(19) 178.9(14) 0 61,962 742.2
Executive Vice 1996-97 555.0 0(20) 13.1(14) 478.8 57,676 1,093.6
President 1995-96 481.7 366.5(21) 15.4(14) 0 64,462 1,027.4
</TABLE>

(1) The Performance Bonus and Profit Incentive Awards may be made in the form
of cash, restricted stock or stock options and Long-Term Incentive Plan
Awards may be made in the form of stock, restricted stock or stock options
as approved by the Compensation Committee. Awards received in the form of
cash or stock are reported in this column. Awards received in the form of
restricted stock or stock options are reported under the appropriate
long-term compensation column. Although the final amount of the Profit
Incentive Award for fiscal year 1997-98 has not yet been determined, the
amount of the estimated award has been noted below in footnotes 6, 9, 12,
16 and 19.

(2) Any perquisites or other personal benefits received from the Company by any
of the named executives were substantially less than the reporting
thresholds established by the Securities and Exchange Commission (the
lesser of $50,000 or 10% of the individual's cash compensation).

(3) All restricted stock awarded to the named executives for 1997-98 will vest
on retirement. The number and value (in thousands of dollars) of aggregate
restricted stock holdings of each of the named executives on June 30, 1998
was: Mr. Pepper, 166,981 shares ($15,242); Mr. Jager, 36,270 shares
($3,311); Mr. Einsmann, 8,088 shares ($738); Mr. Berndt, 3,246 shares
($296); and Mr. Lafley, 12,366 shares ($1,129). The value of the restricted
stock is determined by multiplying the total shares held by each named
executive by the average of the high and low price on the New York Stock
Exchange on June 30, 1998 ($91.2813). Dividends are paid on all restricted
Common Stock at the same rate as paid on the Company's Common Stock.

13
<PAGE>
(4) For fiscal year 1997-98, in addition to the regular award of stock options,
these figures include options granted on July 1, 1998 to Messrs. Jager and
Berndt for the 1997-98 Performance Bonus Award and options granted on July
9, 1998 to Messrs. Jager, Berndt and Lafley for the 1997-98 Long-Term
Incentive Plan Award. See footnotes 9, 16, and 19 below. Options for the
1997-98 Profit Incentive Award will be granted on or about September 15,
1998 and reported in the proxy statement for the annual meeting of
shareholders on October 12, 1999.

(5) All Other Compensation (in thousands of dollars)--details for 1997-98:

<TABLE>
<CAPTION>
Profit Flexible International
Sharing and Compensation Assignment Total All
Related Program Imputed Equalization Other
Name Contributions Contributions Income Payments Compensation
- --------------------------------------- ------------- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
John E. Pepper $ 272.6 $ 47.2 $ 7.7 $ 0 $ 327.5
Durk I. Jager 258.5 41.4 6.1 0 306.0
Harald Einsmann 0 0 3.2 212.8 216.0
Wolfgang C. Berndt 0 0 1.9 228.3 230.2
A. G. Lafley 138.5 8.2 1.2 594.3 742.2
</TABLE>

(6) Mr. Pepper's Performance Bonus Award of $940,000 was paid in the form of
retirement restricted stock; his Long-Term Incentive Plan Award of $658,000
was paid in the form of retirement restricted stock; and his estimated
Profit Incentive Award of $376,000 will be paid in the form of retirement
restricted stock.

(7) In fiscal year 1996-97, Mr. Pepper's Performance Bonus Award of $790,030
was paid in the form of retirement restricted stock; his Long-Term
Incentive Plan Award of $687,300 was paid in the form of retirement
restricted stock ($515,475) and stock options ($171,825); and his Profit
Incentive Award of $474,000 was paid in the form of retirement restricted
stock ($355,500) and stock options ($118,500).

(8) In fiscal year 1995-96, Mr. Pepper's Performance Bonus Award of $640,041
was paid in the form of retirement restricted stock ($480,041) and stock
options ($160,000); his Long-Term Incentive Plan Award of $691,200 was paid
in the form of stock options; and his Profit Incentive Award of $371,200
was paid in the form of stock options.

(9) Mr. Jager's Performance Bonus Award of $640,000 was paid in the form of
stock options; his Long-Term Incentive Plan Award of $448,000 was paid in
the form of stock options; and his estimated Profit Incentive Award of
$256,000 will be paid in the form of stock options to be granted on or
about September 15, 1998.

(10) In fiscal year 1996-97, Mr. Jager's Performance Bonus Award of $565,000 was
paid in the form of stock options; his Long-Term Incentive Plan Award of
$491,550 was paid in the form of stock options; and his Profit Incentive
Award of $339,000 was paid in the form of stock options.

(11) In fiscal year 1995-96, Mr. Jager's Performance Bonus Award of $490,000 was
paid in the form of cash ($58,000) and stock options ($432,000); his
Long-Term Incentive Plan Award of $529,200 was paid in the form of stock
options; and his Profit Incentive Award of $309,925 was paid in the form of
stock options.

(12) Mr. Einsmann's Performance Bonus Award of $335,000 was paid in the form of
cash; his Long-Term Incentive Plan Award of $234,500 was paid in the form
of unrestricted stock; and his estimated Profit Incentive Award of $185,925
will be paid in the form of cash.

(13) In fiscal year 1996-97, Mr. Einsmann's Performance Bonus Award of $305,035
was paid in the form of retirement restricted stock; his Long-Term
Incentive Plan Award of $265,300 was paid in the form of stock options; and
his Profit Incentive Award of $253,913 was paid in the form of retirement
restricted stock.

(14) Tax equalization payments to cover incremental taxes required to be paid to
Belgium for Mr. Einsmann, to the United Kingdom for Mr. Berndt and to Japan
for Mr. Lafley, as paid in accordance with Company policies applicable
generally to managers assigned outside their home countries.

14
<PAGE>
(15) In fiscal year 1995-96, Mr. Einsmann's Performance Bonus Award of $275,000
was paid in the form of cash; his Long-Term Incentive Plan Award of
$297,000 was paid in the form of stock options; and his Profit Incentive
Award of $182,188 was paid in the form of cash.

(16) Mr. Berndt's Performance Bonus Award of $290,000 was paid in the form of
stock options; his Long-Term Incentive Plan Award of $203,000 was paid in
the form of stock options; and his estimated Profit Incentive Award of
$160,950 will be paid in the form of stock options to be granted on or
about September 15, 1998.

(17) In fiscal year 1996-97, Mr. Berndt's Performance Bonus Award of $260,000
was paid in the form of stock options; his Long-Term Incentive Plan Award
of $226,200 was paid in the form of stock options; and his Profit Incentive
Award of $243,750 was paid in the form of stock options.

(18) In fiscal year 1995-96, Mr. Berndt's Performance Bonus Award of $240,000
was paid in the form of cash; his Long-Term Incentive Plan Award of
$259,200 was paid in the form of stock options; and his Profit Incentive
Award of $148,000 was paid in the form of cash ($138,610) and stock options
($9,590).

(19) Mr. Lafley's Performance Bonus Award of $305,000 was paid in the form of
cash; his Long-Term Incentive Plan Award of $213,500 was paid in the form
of stock options; and his estimated Profit Incentive Award of $61,000 will
be paid in the form of cash ($31,600) and stock options ($29,400) to be
granted on or about September 15, 1998.

(20) In fiscal year 1996-97, Mr. Lafley's Performance Bonus Award of $255,000
was paid in the form of retirement restricted stock; his Long-Term
Incentive Plan Award of $221,850 was paid in the form of stock options; and
his Profit Incentive Award of $223,763 was paid in the form of retirement
restricted stock.

(21) In fiscal year 1995-96, Mr. Lafley's Performance Bonus Award of $210,000
was paid in the form of cash; his Long-Term Incentive Plan Award of
$226,800 was paid in the form of stock options; and his Profit Incentive
Award of $156,450 was paid in the form of cash.

OPTION GRANTS IN LAST FISCAL YEAR
(DOLLAR FIGURES SHOWN IN THOUSANDS)

<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Number of % of Total Price Appreciation
Securities Options for Option Term(2)
Underlying Granted to Exercise -------------------
Options Employees in or Base Expiration (a) (b)
Name Granted(1) Fiscal Year Price Date 5% 10%
- --------------------------------------------- ----------- ------------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
John E. Pepper(3) 134,917 1.2% $ 84.5938 2/27/08 $7,177.7 $18,189.6
Durk I. Jager(4) 111,482 1.0% 84.5938 2/27/08 5,930.9 15,030.1
21,015 0.2% 91.3750 7/1/08 1,207.6 3,060.4
14,751 0.1% 91.1250 7/9/08 845.4 2,142.3
Harald Einsmann 66,448 0.6% 84.5938 2/27/08 3,535.1 8,958.6
Wolfgang C. Berndt(5) 60,311 0.5% 84.5938 2/27/08 3,208.6 8,131.2
9,522 0.1% 91.3750 7/1/08 547.2 1,386.7
6,684 0.1% 91.1250 7/9/08 383.0 970.7
A. G. Lafley 54,933 0.5% 84.5938 2/27/08 2,922.5 7,406.1
7,029 0.1% 91.1250 7/9/08 402.8 1,020.8
</TABLE>

(1) All of these options, which were granted pursuant to The Procter & Gamble
1992 Stock Plan, were non-qualified, were granted at market value on the
date of grant, vest on the first anniversary of the date of grant, and have
a term of ten years. Stock options expiring on July 1, 2008 and July 9,
2008 are related to Performance Bonus and Long-Term Incentive Plan Awards,
respectively.

15
<PAGE>
(2) We recommend caution in interpreting the financial significance of these
figures. They are calculated by multiplying the number of options granted
by the difference between a future hypothetical stock price and the option
exercise price and are shown pursuant to rules of the Securities and
Exchange Commission. They assume the value of Company stock appreciates 5%
or 10% each year, compounded annually, for ten years (the life of each
option). They are not intended to forecast possible future appreciation, if
any, of such stock price or to establish a present value of options. Also,
if appreciation does occur at the 5% or 10% per year rate, the amounts
shown would not be realized by the recipients until the year 2008.
Depending on inflation rates, these amounts may be worth significantly less
in 2008, in real terms, than their value today.

(3) Mr. Pepper also received an award of 5,241 stock options on September 15,
1997 with an exercise price of $67.8594 and an expiration date of September
15, 2007 for a portion of his Profit Incentive Award earned in fiscal year
1996-97. This option award had potential realizable values of $223.7 and
$566.8 at assumed rates of appreciation of 5% and 10%, respectively.

(4) Mr. Jager also received an award of 14,988 stock options on September 15,
1997 with an exercise price of $67.8594 and an expiration date of September
15, 2007 for his Profit Incentive Award earned in fiscal year 1996-97. This
option award had potential realizable values of $639.6 and $1,621.0 at
assumed rates of appreciation of 5% and 10%, respectively.

(5) Mr. Berndt also received an award of 10,776 stock options on September 15,
1997 with an exercise price of $67.8594 and an expiration date of September
15, 2007 for his Profit Incentive Award earned in fiscal year 1996-97. This
option award had potential realizable values of $459.9 and $1,165.4 at
assumed rates of appreciation of 5% and 10%, respectively.

AGGREGATED OPTION/STOCK APPRECIATION RIGHT (SAR)
EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES(1)
(DOLLAR FIGURES SHOWN IN THOUSANDS)

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options/SARs at
Shares Options/SARs at FY End FY End(3)
Acquired on Value ------------------------- -------------------------
Name Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------- ----------- ----------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Pepper 0 $ 0 1,016,316 146,986 $ 59,061.5 $ 1,132.6
Durk I. Jager 45,000 2,875.1 716,450 170,144 39,951.6 1,913.5
Harald Einsmann 72,000 4,810.5 415,256 76,990 23,156.7 610.4
Wolfgang C. Berndt 0 0 373,414 42,067 20,760.5 1,031.7
A. G. Lafley 16,800 1,059.5 215,724 63,747 11,088.1 506.2
</TABLE>

(1) Optionees may satisfy the exercise price by submitting currently owned
shares and/or cash. Income tax withholding obligations may be satisfied by
electing to have the Company withhold shares otherwise issuable under the
option/stock appreciation right (SAR) with a fair market value equal to
such obligations.

(2) Options/SARs were granted for terms of up to ten years. The value realized
on options/SARs exercised during the last fiscal year represents the total
gain over the years the options/SARs were held by the executive. If this
total gain is divided by the average number of years the options/SARs were
held, a more relevant annualized gain is produced. The annualized gains (in
thousands of dollars) on these option/SAR exercises were as follows: Mr.
Jager, $357.1; Mr. Einsmann, $601.3; and Mr. Lafley, $151.4.

(3) Calculated based on the fair market value of the Company's Common Stock on
June 30, 1998 ($91.2813 per share) minus the exercise price.

16
<PAGE>
RETIREMENT BENEFITS

Retirement benefits for U.S.-based executive officers are provided primarily
by The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan.
These are defined contribution plans. Under the rules set by the Securities and
Exchange Commission, these Company contributions are included in the Summary
Compensation Table in the "All Other Compensation" column (see footnote (5) to
such Table). In addition, Mr. Einsmann is enrolled in the Pension Plan of
Procter & Gamble GmbH (Germany) and Mr. Jager is enrolled in the Pension Plan of
Procter & Gamble Benelux N.V. (Netherlands Branch), where they joined the
Company. Mr. Jager is also enrolled in the Supplemental Retirement Plan for
U.S.-based managers who previously participated in pension plans of
international subsidiaries. Mr. Berndt is enrolled in the Pension Plan of
Procter & Gamble GmbH (Germany). Mr. Berndt was a participant in the Austrian
pension plan and enrolled in the supplemental plan for Germans who previously
participated in other pension plans. These Plans are defined benefit plans
funded by book reserves or insurance contracts in order to pay retirement
benefits in cash. Given their age and service with the Company, their estimated
annual benefit, if payable in the form of a straight annuity upon retirement at
age 65, would be $909,655 for Mr. Einsmann, $365,883 for Mr. Jager, and $904,998
for Mr. Berndt.

17
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

The following graph compares the five-year cumulative total return of the
Company's Common Stock as compared with the S&P 500 Stock Index and a composite
of the S&P Household Products Index, the S&P Paper & Forest Products Index, the
S&P Personal Care Index, the S&P Health Care Diversified Index and the S&P Foods
Index weighted based on the Company's current fiscal year revenues.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
P&G COMPOSITE GROUP S&P 500
<S> <C> <C> <C>
1993 $100.00 $100.00 $100.00
1994 $106.49 $104.98 $101.41
1995 $144.78 $143.53 $127.84
1996 $187.31 $168.68 $161.08
1997 $291.35 $241.27 $216.98
1998 $386.27 $277.65 $282.42
</TABLE>

The graph assumes a $100 investment made on July 1, 1993 and the
reinvestment of all dividends, as follows:

<TABLE>
<CAPTION>
Dollar Value of $100 Investment at June 30
----------------------------------------------------------------
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
P&G Common............................ $ 100.00 $ 106.49 $ 144.78 $ 187.31 $ 291.25 $ 386.27

Composite Group....................... $ 100.00 $ 104.98 $ 143.53 $ 168.68 $ 241.27 $ 277.65

S&P 500............................... $ 100.00 $ 101.41 $ 127.84 $ 161.08 $ 216.98 $ 282.42
</TABLE>

18
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following tables give information concerning the beneficial ownership of
the Company's Common and Series A and B ESOP Convertible Class A Preferred Stock
by all Directors and nominees, each named executive, all Directors and executive
officers as a group, and the owners of more than five percent of the outstanding
Series A and B ESOP Convertible Class A Preferred Stock, on July 31, 1998:

COMMON STOCK

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP
----------------------------------------
DIRECT(1) AND
PROFIT TRUSTEESHIPS PERCENT
SHARING RIGHT TO AND FAMILY OF
OWNER PLAN(2) ACQUIRE(3) HOLDINGS(4) CLASS
- ------------------------------------------------------------- ------------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Edwin L. Artzt 477,763.0 674,000 -- (5)
Norman R. Augustine 11,247.0 6,000 -- (5)
Donald R. Beall 6,949.0 6,000 10,660 (5)
Wolfgang C. Berndt 65,132.0 393,516 -- (5)
Gordon F. Brunner 182,512.5 390,842 -- (5)
Richard B. Cheney 3,817.0 6,000 2,800 (5)
Harald Einsmann 21,241.0 425,798 -- (5)
Richard J. Ferris 90,461.0 6,000 -- (5)
Joseph T. Gorman 7,513.0 6,000 2,000 (5)
Durk I. Jager 118,585.5 760,124 -- (5)
A.G. Lafley 45,259.9 224,538 -- (5)
Charles R. Lee 10,291.0 6,000 -- (5)
Lynn M. Martin 3,235.0 6,000 -- (5)
John E. Pepper 782,439.7 1,023,144 3,164 (5)
John C. Sawhill 4,649.0 2,000 -- (5)
John F. Smith, Jr. 6,187.0 4,000 -- (5)
Ralph Snyderman 4,859.0 4,000 -- (5)
Robert D. Storey 5,097.0 2,000 -- (5)
Marina v.N. Whitman 8,207.0 6,000 1,600 (5)

44 Directors and executive officers, as a group 3,491,182.8 8,013,004 51,838 .864%
</TABLE>

(1) Sole discretion as to voting and investment of shares.

(2) Shares allocated to personal accounts of executive officers under the
Retirement Trust pursuant to The Procter & Gamble Profit Sharing Trust and
Employee Stock Ownership Plan. Plan participants have sole discretion as to
voting and, within limitations provided by the Plan, investment of shares.
Shares are voted by the Trustees of such Trusts in accordance with
instructions from participants. If instructions are not received by the
Trustees as to the voting of particular shares, shares are to be voted in
proportion to instructions actually received from other participants in the
Trust.

(3) If acquired, would have sole discretion as to voting and investment of
shares.

(4) The individuals involved share voting and/or investment powers with other
persons.

(5) Less than .136% for any one Director or executive officer.

19
<PAGE>
SERIES A ESOP CONVERTIBLE CLASS A PREFERRED STOCK

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
----------------------------
PROFIT
SHARING PERCENT
OWNER PLAN(1) TRUSTEESHIPS OF SERIES
- ------------------------------------------------------------------------- ---------- ---------------- ---------
<S> <C> <C> <C>
Edwin L. Artzt -- -- --
Norman R. Augustine -- -- --
Donald R. Beall -- -- --
Wolfgang C. Berndt -- -- --
Gordon F. Brunner 6,997.8 -- (2)
Richard B. Cheney -- -- --
Harald Einsmann -- -- --
Richard J. Ferris -- -- --
Joseph T. Gorman -- -- --
Durk I. Jager 6,948.0 -- (2)
A.G. Lafley 5,298.0 -- (2)
Charles R. Lee -- -- --
Lynn M. Martin -- -- --
John E. Pepper 6,997.8 -- (2)
John C. Sawhill -- -- --
John F. Smith, Jr. -- -- --
Ralph Snyderman -- -- --
Robert D. Storey -- -- --
Marina v.N. Whitman -- -- --

44 Directors and executive officers, as a group 124,164.6 -- .206%

Employee Stock Ownership Trust of The Procter & Gamble Profit Sharing
Trust and Employee Stock Ownership Plan,
PO Box 599, Cincinnati, Ohio 45201-0599 (G. V. Dirvin,
W. O. Coleman and C. C. Carroll, Trustees) -- 31,878,282.8(3) 52.8%
</TABLE>

(1) Shares allocated to personal accounts of executive officers under the
Employee Stock Ownership Trust pursuant to The Procter & Gamble Profit
Sharing Trust and Employee Stock Ownership Plan. Plan participants have sole
discretion as to voting and, within limitations provided by the Plan,
investment of shares. Shares are voted by the Trustees of such Trust in
accordance with instructions from participants. If instructions are not
received by the Trustees as to the voting of particular shares, shares are
to be voted in proportion to instructions actually received from other
participants in the Trust.

(2) Less than .013% for any one Director or executive officer; by the terms of
the stock, only persons who are or have been employees can have beneficial
ownership of these shares.

(3) Unallocated shares. The voting of these shares is governed by the terms of
the Plan, which provides that the Trustees shall vote unallocated shares
held by them in proportion to instructions received from Trust participants
as to voting of allocated shares. The disposition of these shares in
connection with a tender offer would be governed by the terms of the Plan,
which provides that the Trustees shall dispose of unallocated shares held by
them in proportion to instructions received from Trust participants as to
the disposition of allocated shares.

20
<PAGE>
SERIES B ESOP CONVERTIBLE CLASS A PREFERRED STOCK

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
---------------------------
PROFIT
SHARING PERCENT
OWNER PLAN(1) TRUSTEESHIPS OF SERIES
- --------------------------------------------------------------------------- --------- ---------------- ---------
<S> <C> <C> <C>
Edwin L. Artzt 611.8 -- (2)
Norman R. Augustine -- -- --
Donald R. Beall -- -- --
Wolfgang C. Berndt -- -- --
Gordon F. Brunner 412.8 -- (2)
Richard B. Cheney -- -- --
Harald Einsmann -- -- --
Richard J. Ferris -- -- --
Joseph T. Gorman -- -- --
Durk I. Jager 86.9 -- (2)
A.G. Lafley -- -- --
Charles R. Lee -- -- --
Lynn M. Martin -- -- --
John E. Pepper 412.8 -- (2)
John C. Sawhill -- -- --
John F. Smith, Jr. -- -- --
Ralph Snyderman -- -- --
Robert D. Storey -- -- --
Marina v.N. Whitman -- -- --

44 Directors and executive officers, as a group 2,985.9 -- .0079%

Employee Stock Ownership Trust of The Procter & Gamble Profit Sharing Trust
and Employee Stock Ownership Plan,
PO Box 599, Cincinnati, Ohio 45201-0599 (G. V. Dirvin,
W. O. Coleman and C. C. Carroll, Trustees) -- 30,614,229.4(3) 80.98%
</TABLE>

(1) Shares allocated to personal accounts of current and former executive
officers under the Employee Stock Ownership Trust pursuant to The Procter &
Gamble Profit Sharing Trust and Employee Stock Ownership Plan. Plan
participants have sole discretion as to voting and, within limitations
provided by the Plan, investment of shares. Shares are voted by the Trustees
of such Trust in accordance with instructions from participants. If
instructions are not received by the Trustees as to the voting of particular
shares, shares are to be voted in proportion to instructions actually
received from other participants in the Trust.

(2) Less than .0017% for any one Director or executive officer.

21
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Ownership of and transactions in Company stock by executive officers and
Directors of the Company are required to be reported to the Securities and
Exchange Commission pursuant to Section 16 of the Securities Exchange Act. All
executive officers and Directors complied with these requirements during the
past fiscal year.

TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND OTHERS

During the past fiscal year, the Company and its subsidiaries had no
transaction in which any Director, or any member of the immediate family of any
Director, had a material direct or indirect interest reportable under applicable
rules of the Securities and Exchange Commission. In the normal course of
business the Company had transactions with other corporations where certain
Directors are or were executive officers; and the Company utilized the services
of the law firm of Thompson, Hine & Flory in which Robert D. Storey, a Director,
is a partner. None of the aforementioned matters was material in amount as to
the Company, the corporations or the law firm.

During the past fiscal year, the Company and its subsidiaries had no
transactions in which any executive officer of the Company, or any member of the
immediate family of any such executive officer, had a material direct or
indirect interest reportable under applicable rules of the Securities and
Exchange Commission.

PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors, acting upon the recommendation of the Audit
Committee of the Board, has appointed the firm of Deloitte & Touche LLP as the
Company's independent auditors for fiscal year 1998-99. Although action by the
shareholders in this matter is not required, the Board believes that it is
appropriate to seek shareholder ratification of this appointment in light of the
critical role played by independent auditors in maintaining the integrity of
Company financial controls and reporting.

One or more representatives of Deloitte & Touche LLP will be in attendance
at the annual meeting on October 13, 1998. The representatives will have the
opportunity to make a statement, if desired, and will be available to respond to
appropriate questions from shareholders.

The following proposal will therefore be presented for action at the annual
meeting by direction of the Board of Directors:

RESOLVED, That action by the Board of Directors appointing Deloitte &
Touche LLP as the Company's independent auditors to conduct the annual audit
of the financial statements of the Company and its subsidiaries for the
fiscal year ending June 30, 1999 is hereby ratified, confirmed and approved.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS RESOLUTION.

The affirmative vote of a majority of shares participating in the voting on
this proposal is required for adoption of this resolution. Proxies will be voted
FOR the resolution unless the Proxy Committee is instructed otherwise on a proxy
returned to such Committee. Abstentions indicated on such a proxy will not be
counted as either "for" or "against" this proposal.

22
<PAGE>
SHAREHOLDER PROPOSALS

SHAREHOLDER PROPOSAL NO. 1

Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, DC 20037, owning 400 shares of Common Stock of the
Company, has given notice that she intends to present for action at the annual
meeting the following resolution:

RESOLVED: That the shareholders of P&G recommend that the Board of
Directors take the necessary steps to reinstate the election of directors
ANNUALLY, instead of the stagger system which was recently adopted.

Mrs. Davis has submitted the following statement in support of her
resolution:

REASONS: Until recently, directors of P&G were elected annually by all
shareholders.

The great majority of New York Stock Exchange listed corporations elect
all their directors each year.

This insures that ALL directors will be more accountable to ALL
shareholders each year and to a certain extent prevents the
self-perpetuation of the Board.

Last year the owners of 168,409,296 shares, representing approximately
32.6% of shares voting, voted FOR this proposal.

If you AGREE, please mark your proxy FOR this resolution.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS RESOLUTION FOR THE
FOLLOWING REASONS:

The shareholders of Procter & Gamble decided, by action at the annual
meeting of shareholders in 1985, that its Board of Directors shall be divided
into three classes with Directors elected to staggered three-year terms. This
was to insure continuity of experienced Board members.

This exercise by Procter & Gamble shareholders of their rightful role in
corporate governance has been challenged with this same resolution at every
annual meeting since 1986. On each of these occasions, the shareholders
confirmed that they wanted to retain the continuity of experienced Directors by
having a classified Board of Directors with staggered terms.

In each such year they defeated the proposal to return to annual election of
the entire Board, with over 67% voting against it at the most recent
shareholders meeting. We believe this affirms the Board's view that the current
system of election is working effectively.

This year's resolution and the arguments in support of it are identical to
those in prior years. The Board of Directors agrees with the results of previous
shareholder voting on this issue and again recommends a vote AGAINST the
proposal.

The affirmative vote of a majority of shares participating in the voting on
this proposal is required for adoption of this resolution. Proxies will be voted
AGAINST the resolution unless the Proxy Committee is instructed otherwise on a
proxy returned to such Committee. Abstentions indicated on such a proxy will not
be counted as either "for" or "against" this proposal. "Broker non-votes"
specified on proxies returned by brokers holding shares for beneficial owners
who have not provided instructions as to voting on this issue will be treated as
not present for voting on this issue.

SHAREHOLDER PROPOSAL NO. 2

Sisters of the Holy Names of Washington, 2911 West Fort Wright Drive,
Spokane, Washington 99224, owning 800 shares of Common Stock of the Company, in
conjunction with ten co-sponsoring organizations (the names of which
organizations, with shares of Common Stock of the Company beneficially held,
will be

23
<PAGE>
furnished promptly to any person upon request in writing to Ms. Linda D. Rohrer,
Assistant Secretary, The Procter & Gamble Company, PO Box 599, Cincinnati, Ohio
45201-0599 or by telephone at 513-983-8697), have given notice that they intend
to present for action at the annual meeting the following resolution:

WHEREAS: our company seeks to be an environmentally responsible
business, yet makes products using chlorine-bleached paper (whose production
creates dioxin and other persistent toxins proven to harm human and
environmental health, even in minute amounts);

Distinguished world bodies, including the:

- World Bank,

- American Public Health Association,

- International Joint Commission on the Great Lakes, and the

- Intergovernmental Forum on Chemical Safety (convened by the UN),

each publicly recognize the inherent dangers posed by chlorine-based
bleaching of pulp and paper. Important scientific and economic findings like
these reflect worldwide support for phasing-out the industrial use of
chlorine-containing compounds over time;

The International Joint Commission has concluded:

"[these] persistent toxic substances are too dangerous to the biosphere
and to humans to permit their release in any quantity. . . . the primary
means to achieve zero should be the prevention of their production, use and
release rather than their subsequent removal";

The Environmental Protection Agency (EPA) has found that dioxins are
linked to cancer and numerous other health disorders, including hormone
disruption and dysfunctioning immune systems;

These chlorine-based chemicals pass up the food chain to accumulate in
living organisms. In humans, they contribute to reproductive failure, birth
defects, and cancer;

In children, chlorinated compounds cause development impairment,
hormonal disruption, and behavioral disorders;

Every person living on earth now has measurable organochlorine
contamination, many at high levels;

Using chlorine dioxide to bleach paper DOES NOT entirely eliminate
dioxins or other chlorinated pollutants -- it only creates lower levels of
organochlorine contamination;

The demand of large paper users like P&G is critical to determining
whether industry uses healthier, cleaner, totally chlorine-free (TCF) bleach
technologies. These decisions will affect public health for generations to
come;

Our company can lead in capturing market share by moving toward TCF
products. Companies around the world are producing high-quality,
cost-effective paper products <*>without</*> dangerous poisons. In Europe,
market share for TCF (totally chlorine-free) has grown from 0% to 25% just
since 1991. In the US, there has been consideration by EPA of "an order
instructing federal agencies to purchase only chlorine-free paper." Several
states are developing TCF legislation;

RESOLVED: the shareholders request our company to report on steps it can
take to use chlorine-free pulp and paper, and its plans for a long-term
phase-out of chlorinated compounds in all its products. The report, to be
made available to all shareholders, will be completed within six months of
the 1998 annual meeting.

24
<PAGE>
The Sisters of the Holy Names of Washington have submitted the following
statement in support of their resolution:

P&G's use of chlorinated bleached paper perpetuates the release of
unnecessary toxins. Our company's environmental efforts are commendable, but
good science indicates that NO safe or "acceptable" level of exposure to
many organochlorine chemicals exists.

Our company prides itself on being an environmental innovator.
Therefore, P&G should support technology that completely eliminates
organochlorines from production and products, protects our customers,
captures an emerging market, and improves all life on the planet.

VOTE YES FOR THIS COMMON-SENSE PROPOSAL WHICH WILL IMPROVE OUR
CHILDREN'S HEALTH, OUR PRODUCTS' DESIRABILITY, AND OUR COMPANY'S REPUTATION
AND PROFITABILITY.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS RESOLUTION FOR THE
FOLLOWING REASONS:

The Company strongly agrees with the proponents of this resolution that
pollution prevention is a top priority for the pulp and paper industry. This
concern led P&G, in 1990, to be the first consumer products company to require
the use of Elemental Chlorine Free (ECF) bleaching for the pulp we purchase.
Where we differ with the proponents is the means to further advance the
environmental character of the pulp bleaching process.

P&G believes that a focus on a single process such as "Totally Chlorine
Free" technology does not recognize that ECF bleaching addresses the concerns
raised by the proponents. We are serious in our efforts to evaluate any emerging
science in this area, and will continue to push for improvements which are
supported by any new scientific data, just as we did in 1990.

Last November, the U. S. Environmental Protection Agency (EPA) issued new
guidelines that made Elemental Chlorine Free technology a basic standard for the
pulp and paper industry. During their review process, the EPA considered
"totally chlorine-free" (TCF) technology. However, the incremental benefits of
TCF in improving the quality of paper mill discharges did not justify the
estimated $2.9 billion expense to convert existing U. S. paper mills,
particularly given the scientific data that show that ECF bleaching effectively
eliminates concerns over dioxins or other chlorinated by-products.

P&G continues to evaluate any emerging science in this area and will
continue to push for environmental improvements, which are supported by sound
science. To that end, the Company supports the work being done by industry and
other stakeholders to continually improve the environmental aspects of paper
production, including the concept of a "minimum impact mill." The Company is
committed to continual discussion with interested stakeholders regarding the
steps it is taking to ensure on-going improvement in the environmental
performance of the pulp and paper industry.

The Board of Directors therefore recommends a vote AGAINST the proposal.

25
<PAGE>
SHAREHOLDER PROPOSAL NO. 3

In Defense of Animals, 131 Camino Alto, Suite E, Mill Valley, California
94941, owning 48 shares of Common Stock of the Company, have given notice that
they intend to present for action at the annual meeting the following
resolution:

WHEREAS, Procter & Gamble manufactures over-the-counter cosmetics and
non-medical household products such as make-up, shampoos, soaps and
detergents; and

WHEREAS, development and testing of some of these products contribute to
the company's harming and killing of thousands of innocent animals each
year; and

WHEREAS, these tests can cause severe pain and suffering to the animals
involved; and

WHEREAS, public opinion polls in the U.S. and abroad show a majority of
consumers are opposed to animal tests for cosmetics and related products;
and

WHEREAS, competing manufacturers continue to successfully market new
products in the U.S. and abroad without animal testing;

BE IT RESOLVED that it is recommended to the Board of Directors that
Procter & Gamble stop immediately all animal tests not explicitly required
by law for over-the-counter cosmetics and non-medical household products.

In Defense of Animals has submitted the following statement in support of
their resolution:

This resolution simply requests that Procter & Gamble eliminate all
animal testing not explicitly required by law. Animal testing of
over-the-counter cosmetics and non-medical household products is not
explicitly required by any federal regulatory agency. Over 500 manufacturers
of over-the-counter cosmetics and non-medical household products have
permanently eliminated animal tests. These include Revlon, Avon, Amway,
Estee Lauder, Chanel, Safeway and Bonne Bell. The Dial Corporation has
maintained a moratorium on animal tests since 1989. Gillette announced that
it used no animals in tests in the development of consumer household
products in 1996.

The success of these companies in developing new products and marketing
them internationally demonstrates that Procter & Gamble could maintain its
position in the global market without continued animal testing. PROCTER &
GAMBLE SPENDS MORE IN FIVE DAYS ON ADVERTISING THAN IT HAS IN FOURTEEN YEARS
ON DEVELOPING ALTERNATIVE TESTS. In our opinion, Procter & Gamble cannot
claim leadership in reducing animal usage when other major companies have
entirely eliminated all animal tests.

Eliminating animal tests makes good business sense. Public opinion polls
demonstrate that over 60 percent of consumers are opposed to animal tests of
cosmetic and related products (Associated Press, 11/10-14/95; National
Consumers League [NCL] poll conducted 7/95). Moreover, according to the NCL
survey, nearly 40 percent of female consumers hold a "negative" attitude
toward companies that conduct animal testing. The Wall Street Journal
(9/5/95) reported on the negative attitudes of children -- consumers of the
future -- toward companies that utilize animal tests.

Since Procter & Gamble is under no legal obligation to conduct these
tests that cause pain and suffering to animals, and because competitive
companies successfully develop and internationally market cosmetics and
non-medical household products without animal tests, and because animals
cannot advocate for themselves, we ask that you join us in supporting this
proposal.

PLEASE VOTE FOR THIS PROPOSAL.

26
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS RESOLUTION FOR THE
FOLLOWING REASONS:

P&G is committed to the ultimate elimination of animal testing. Until there
are sufficient alternatives, we must conduct a minimal amount of animal testing
to ensure our products are safe for people and so that Poison Control Centers
nationwide can provide parents with better, more reliable information on what to
do if a child accidentally ingests or gets into something they shouldn't.

Last year in the U. S. alone, Poison Control Centers received nearly a
quarter million calls from doctors and parents about accidents their young
children had involving a consumer product in the home. These numbers confirm
that human safety must be a top priority in the development of any new product.
Because thorough product safety evaluation is conducted before a product ever
reaches the market place, Poison Control Centers know how to counsel parents and
know that P&G brands, even if accidentally misused, won't cause serious health
problems.

It's our policy to continue to develop, validate and use new alternative
methods so we can reduce our need to do animal testing and someday eliminate it.
We've made tremendous progress developing alternative test methods to reduce our
need for animal testing. In fact, since 1984, we've reduced our animal testing
for non-drug products by 85%.

We don't use animals for quality control checks of ingredients or products
and we don't retest the safety of products on the market that have already been
proven to be safe. We don't conduct animal testing at all for many of our
non-drug consumer products.

While U.S. law doesn't strictly state that every new non-food and non-drug
product or ingredient must be tested on animals, the U. S. Food and Drug
Administration's regulations state: "Each ingredient used in a cosmetic product
and each finished cosmetic product shall be adequately substantiated for safety
prior to marketing." This means a minimal amount of animal testing is still
necessary to ensure new, never-before-used ingredients are safe for people.

In addition, P&G is a global company and we must adhere to regulations in
all parts of the world where we do business. We sell products in more than 140
countries around the world and many of these countries have laws that require
businesses to prove their consumer products are safe. Sometimes these laws
specifically require animal tests. For example, to sell our non-food, non-drug
products in many parts of the world, including Europe and Japan, we are legally
required to conduct a certain amount of animal testing to insure our products
are safe for people. As a global competitor, we can't ignore this fact.

Almost all ingredients in use today by any company have been tested on
animals at sometime, by someone to assess their safety. Most companies, like
P&G, don't do, and don't need to do animal testing when safety testing is
already available. When products contain only ingredients already known to be
safe, no new animal testing is needed.

When we must use animals, we ensure each animal is given the best
professional veterinary care. We always treat the animals we must use with care
and respect. All P&G animal facilities meet the highest professional standards
and comply with all government regulations on the care and use of animals in
research.

P&G is and will continue to be a leader in the development and advocacy of
alternatives to animal tests. In 1997, P&G invested an incremental $12 million
to develop and use alternative test methods bringing our total investment in
alternatives to more than $67 million.

We are productively working with many animal welfare organizations to
advance our joint efforts to develop and validate new alternative tests. For
example, P&G is leading the development of the new Alternatives to Animal
Testing Website (Altweb), a comprehensive, global resource for scientists
worldwide to get information on alternatives. Our partners include the Humane
Society of the U. S., the Center for Alternatives to Animal Testing at Johns
Hopkins, the National Institutes of Health's Office for Protection from Research
Risks, the USDA Animal Welfare Information Center and the FDA Office of Science.

27
<PAGE>
We've also provided initial funding for the San Diego Supercomputer Center
to develop the powerful new BioNOME (Biological Network of Modeling Efforts)
Resource that will allow scientists and researchers around the world to create
better biological models that can be used to predict how people and other
organisms might respond to drugs, chemicals and other physical factors.
Long-term, we believe the use of computer modeling will lead to a major
breakthrough in reducing our reliance on animal testing.

Additionally, we're working with the Doris Day Animal League, American
Humane Society and the Humane Society of the United States to get federal
legislation passed to establish a process for validating new alternative testing
methods. This will make acceptance of new, scientifically-proven methods easier.

Similar animal testing proposals have been overwhelmingly defeated because
the vast majority of our shareholders support our policy and understand we are
fulfilling our responsibility to ensure our products are safe. They understand
we only conduct a minimal amount of animal testing if other alternative methods
cannot assure us and the international regulatory authorists of that safety.
They understand that we use the smallest number of animals possible and treat
those animals with care and respect.

Therefore, to ensure our products are safe for our consumers during their
use and potential misuse, we ask that you join the Board of Directors in voting
AGAINST this proposal.

1999 ANNUAL MEETING DATE

It is anticipated that the 1999 annual meeting of shareholders will be held
on Tuesday, October 12, 1999. Pursuant to regulations issued by the Securities
and Exchange Commission, to be considered for inclusion in the Company's proxy
statement for presentation at that meeting, all shareholder proposals must be
received by the Company on or before the close of business on Friday, April 30,
1999.

OTHER MATTERS

No action will be taken with regard to the minutes of the special meeting of
shareholders held October 13, 1998 unless they have been incorrectly recorded.

The Board of Directors knows of no other matters which will come before the
meeting. However, if any matters other than those set forth in the notice should
be properly presented for action, the persons named in the proxy intend to take
such action as will be in harmony with the policies of the Company and, in that
connection, will use their discretion.

[LOGO]

PRINTED ON RECYCLED PAPER

#0038-7104

28
<PAGE>

[LOGO]

THE PROCTER & GAMBLE COMPANY

SHAREHOLDER'S PROXY AND CONFIDENTIAL VOTING INSTRUCTION CARD
SPECIAL MEETING OF SHAREHOLDERS-TUESDAY, OCTOBER 13, 1998

The undersigned hereby appoints John E. Pepper, Durk I. Jager and Harald
Einsmann, and each of them (with respect to any shares of Common Stock held by
the undersigned directly or via the Company's Shareholder Investment Program) as
proxies to attend the special meeting of shareholders of the Company to be held
on Tuesday, October 13, 1998 at 12 o'clock noon in Cincinnati, Ohio and any
adjournment thereof and vote all shares held by or for the benefit of the
undersigned as indicated on the reverse side of this card: to amend the
Company's Regulations to allow the location of the annual meeting of the
shareholders to be held at a location other than the principal office of the
Company.

This proxy also provides voting instructions for shares held by the
Trustees of the Retirement Trust and the Employee Stock Ownership Trust of The
Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan (as
applicable, with respect to shares of Common Stock and Series A and B ESOP
Convertible Class A Preferred Stock held for the benefit of the undersigned) and
directs such Trustees to vote as indicated on the reverse side of this card: to
amend the Company's Regulations to allow the location of the annual meeting of
the shareholders to be held at a location other than the principal office of the
Company. The Trustees will vote shares of the Company's Stock held by them for
which instructions are not received in direct proportion to the voting of shares
for which instructions have been received, provided that such voting is not
contrary to the Employee Retirement Income Security Act of 1974, as amended.
The Trustees will vote unallocated shares in direct proportion to voting by
allocated shares of the same Class in aggregate, for which instructions have
been received.

THIS PROXY/VOTING INSTRUCTION CARD IS SOLICITED JOINTLY BY THE BOARD OF
DIRECTORS OF THE PROCTER & GAMBLE COMPANY AND THE TRUSTEES OF THE PLAN TRUST
LISTED ABOVE PURSUANT TO A SEPARATE NOTICE OF SPECIAL MEETING AND PROXY
STATEMENT, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED. THIS CARD SHOULD BE MAILED
IN THE ENCLOSED ENVELOPE IN TIME TO REACH THE COMPANY'S PROXY TABULATOR,
BANKBOSTON, N.A., P.O. BOX 9375, BOSTON, MA 02205-9946 BY 9:00 A.M. ON TUESDAY,
OCTOBER 13, 1998 FOR COMMON SHARES TO BE VOTED AND 5:00 P.M. ON MONDAY, OCTOBER
12, 1998 FOR THE TRUSTEES TO VOTE THE PLAN SHARES. BANKBOSTON WILL REPORT
SEPARATELY TO THE PROXY COMMITTEE AND TO THE TRUSTEES AS TO PROXIES RECEIVED AND
VOTING INSTRUCTIONS PROVIDED, RESPECTIVELY. INDIVIDUAL PROXY VOTING AND VOTING
INSTRUCTIONS WILL BE KEPT CONFIDENTIAL BY BANKBOSTON AND NOT PROVIDED TO THE
COMPANY.

- --------------------------------------------------------------------------------
VOTE BY TELEPHONE OR INTERNET
VOTE BY INTERNET: POINT YOUR BROWSER TO THE WEB ADDRESS:
- ---------------- http://www.equiserve.com/proxy/pg
You will be asked to enter the 13-digit CONTROL NUMBER
located above your name and address in the lower left of
this form. Then simply follow the instructions. PLEASE
NOTE THAT EACH CARD HAS ITS OWN UNIQUE CONTROL NUMBER.
OR
VOTE BY MAIL: Simply mark, sign and date your proxy card and return it in
the postage-paid envelope.
IF YOU ARE VOTING BY TELEPHONE OR THE INTERNET, PLEASE DO
NOT MAIL YOUR PROXY CARD.
(continued on reverse)
- -------------------------------------------------------------------------------
THE PROCTER & GAMBLE COMPANY

[LOGO]

SHAREHOLDER'S PROXY AND CONFIDENTIAL VOTING INSTRUCTION CARD
ANNUAL MEETING OF SHAREHOLDERS-TUESDAY, OCTOBER 13, 1998

The undersigned hereby appoints John E. Pepper, Durk I. Jager and Harald
Einsmann, and each of them (with respect to any shares of Common Stock held by
the undersigned directly or via the Company's Shareholder Investment Program) as
proxies to attend the annual meeting of shareholders of the Company to be held
on Tuesday, October 13, 1998 immediately following the Special Meeting of
Shareholders at 12 o'clock noon in Cincinnati, Ohio and any adjournment thereof
and vote all shares held by or for the benefit of the undersigned as indicated
on the reverse side of this card: for the election of Directors; upon the Board
of Directors and shareholder proposals listed; and, finally, upon such other
matters as may properly come before the meeting.

This proxy also provides voting instructions for shares held by the
Trustees of the Retirement Trust and the Employee Stock Ownership Trust of The
Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan (as
applicable, with respect to shares of Common Stock and Series A and B ESOP
Convertible Class A Preferred Stock held for the benefit of the undersigned) and
directs such Trustees to vote as indicated on the reverse side of this card:
for the election of Directors; upon the Board of Directors and shareholder
proposals listed; and, finally, upon such other matters as may properly come
before the meeting. The Trustees will vote shares of the Company's Stock held
by them for which instructions are not received in direct proportion to the
voting of shares for which instructions have been received, provided that such
voting is not contrary to the Employee Retirement Income Security Act of 1974,
as amended. The Trustees will vote unallocated shares in direct proportion to
voting by allocated shares of the same Class in aggregate, for which
instructions have been received.

THIS PROXY/VOTING INSTRUCTION CARD IS SOLICITED JOINTLY BY THE BOARD OF
DIRECTORS OF THE PROCTER & GAMBLE COMPANY AND THE TRUSTEES OF THE PLAN TRUST
LISTED ABOVE PURSUANT TO A SEPARATE NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED. THIS CARD SHOULD BE MAILED
IN THE ENCLOSED ENVELOPE IN TIME TO REACH THE COMPANY'S PROXY TABULATOR,
BANKBOSTON, N.A., P.O. BOX 9375, BOSTON, MA 02205-9946 BY 9:00 A.M. ON TUESDAY,
OCTOBER 13, 1998 FOR COMMON SHARES TO BE VOTED AND 5:00 P.M. ON MONDAY, OCTOBER
12, 1998 FOR THE TRUSTEES TO VOTE THE PLAN SHARES. BANKBOSTON WILL REPORT
SEPARATELY TO THE PROXY COMMITTEE AND TO THE TRUSTEES AS TO PROXIES RECEIVED AND
VOTING INSTRUCTIONS PROVIDED, RESPECTIVELY. INDIVIDUAL PROXY VOTING AND VOTING
INSTRUCTIONS WILL BE KEPT CONFIDENTIAL BY BANKBOSTON AND NOT PROVIDED TO THE
COMPANY.

<PAGE>

PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE

- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the following proposal (as
described in the accompanying Proxy Statement). If you sign and return this
card without marking, this proxy card will be treated as being FOR this
proposal.
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
A. Amend the Company's Regulations to allow the location of the annual meeting
of shareholders to be held at a location other than the principal office of
the Company.

FOR AGAINST ABSTAIN
/ / / / / /
- -------------------------------------------------------------------------------

NOTE: Please sign exactly as name(s) appear
hereon. When signing as attorney, executor,
administrator, trustee, or guardian, please give
full name as such.

Signature Date 1998
-------------------- ---------
Signature Date 1998
-------------------- ---------

PLEASE SIGN THIS PROXY AS NAME(S) APPEAR ABOVE.
- -------------------------------------------------------------------------------
VOTE BY TELEPHONE OR INTERNET
Procter & Gamble encourages you to take advantage of two new cost-effective and
convenient ways to vote your shares. You may now vote your proxy 24 hours a
day, 7 days a week, using either a touch-tone telephone or through the Internet.
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed, and returned your proxy card.
VOTE BY PHONE: CALL TOLL-FREE ON A TOUCH-TONE TELEPHONE 1-888-807-7699
- ------------- ANYTIME IN THE U.S. OR CANADA. THERE IS NO CHARGE TO YOU
FOR THIS CALL. You will be asked to enter the 13-digit
CONTROL NUMBER located above your name and address in the
lower left of this form. Then simply follow the
instructions. PLEASE NOTE THAT EACH CARD HAS ITS OWN UNIQUE
CONTROL NUMBER.
- -------------------------------------------------------------------------------
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE

- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the following actions or proposals
(as described in the accompanying Proxy Statement). If you sign and return this
card without marking, this proxy card will be treated as being FOR each
proposal.
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
A. ELECTION OF DIRECTORS (terms expiring in 2001)
Nominees: Joseph T. Gorman, Lynn M. Martin, John E. Pepper, Ralph
Snyderman, Robert D. Storey

FOR WITHHELD
/ / / /
EXCEPTIONS:

------------------------------------------------
For all nominees except as noted above
- -------------------------------------------------------------------------------
B. Ratify Appointment of
Independent Auditors

FOR AGAINST ABSTAIN
/ / / / / /

- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST the following shareholder
proposals (as described in the accompanying Proxy Statement), if presented at
the annual meeting. If you sign and return this card without marking, this
proxy card will be treated as being AGAINST such proposal.
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
1. Board of Directors terms

FOR AGAINST ABSTAIN
/ / / / / /

- -------------------------------------------------------------------------------
2. Report on use of chlorine.

FOR AGAINST ABSTAIN
/ / / / / /

- -------------------------------------------------------------------------------
3. Animal testing.

FOR AGAINST ABSTAIN
/ / / / / /

- -------------------------------------------------------------------------------

NOTE: Please sign exactly as name(s) appear
hereon. When signing as attorney, executor,
administrator, trustee, or guardian, please give
full name as such.

Signature Date 1998
-------------------- ---------
Signature Date 1998
-------------------- ---------

PLEASE SIGN THIS PROXY AS NAME(S) APPEAR ABOVE.

<PAGE>

- -------------------------------------------------------------------------------

[LOGO]

Dear Shareholder:

On August 28, 1998 we sent you a notice and proxy statement plus proxy card for
the annual meeting of The Procter & Gamble Company to be held on Tuesday,
October 13, 1998.

As of September 29 your proxy vote has not been received by BankBoston, N.A.,
the Company's proxy tabulator. If you have in fact already voted your proxy,
we thank you. If not, we hope you will do so now.

In case you have lost the original card and need a new one to respond at this
time, we enclose a duplicate together with a return envelope, or you may now
vote your proxy 24 hours a day, seven days a week, using either a touch tone
telephone or through the Internet. Thank you for your attention to this
matter.

THE PROCTER & GAMBLE COMPANY
- -------------------------------------------------------------------------------