SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
\X\ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED] for the fiscal year ended June 30, 1998, or
\ \ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED] for the transition period from ________________
to ______________________
Commission file number 001-00434
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below: The Procter & Gamble Profit Sharing Trust and
Employee Stock Ownership Plan, The Procter & Gamble Company, Two Procter &
Gamble Plaza, Cincinnati, Ohio 45202.
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office: The Procter & Gamble Company, One
Procter & Gamble Plaza, Cincinnati, Ohio 45202.
REQUIRED INFORMATION
Item 4. Plan Financial Statements and Schedules Prepared in Accordance With the
Financial Reporting Requirements of ERISA
THE PROCTER & GAMBLE
PROFIT SHARING TRUST
AND EMPLOYEE STOCK
OWNERSHIP PLAN
Financial Statements for the Years Ended June 30,
1998 and 1997 and Supplemental Schedules for the
Year Ended June 30, 1998 and Independent
Auditors' Report
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
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PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits, June 30, 1998 and
1997 2
Statements of Changes in Net Assets Available for Benefits for the
Years Ended June 30, 1998 and 1997 3
Notes to Financial Statements for the Years Ended June 30, 1998 and
1997 4
SUPPLEMENTAL SCHEDULES:
Assets Held for Investment, Item 27a of Form 5500, June 30, 1998 15
Reportable Transactions, Item 27d of Form 5500, for the Year Ended
June 30, 1998 16
SCHEDULES OMITTED - The following schedules were omitted because
of the absence of conditions under which they are required:
Assets Acquired and Disposed Within the Plan Year
Party-In-Interest Transactions
Obligations In Default
Leases In Default
Deloitte & Touche LLP
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Logo
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250 East Fifth Street Telephone: (513) 784-7100
P.O. Box 5340
Cincinnati, Ohio 45201-5340
INDEPENDENT AUDITORS' REPORT
The Policy Committee of The Procter & Gamble Profit Sharing Trust and Employee
Stock Ownership Plan and The Trustees of The Procter & Gamble Profit Sharing
Trust and Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets available for benefits
of The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan
(Plan) as of June 30, 1998 and 1997, and the related statements of changes in
net assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at June 30, 1998 and
1997, and the changes in net assets available for benefits for the years then
ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
Table of Contents are presented for the purpose of additional analysis and are
not a required part of the basic financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These schedules are the responsibility of the Plan's management. Such
schedules have been subjected to the auditing procedures applied in the audit of
the basic 1998 financial statements and, in our opinion, are fairly stated in
all material respects when considered in relation to the basic 1998 financial
statements taken as a whole.
/s/DELOITTE & TOUCHE LLP
- ------------------------------
Deloitte & Touche LLP
September 10, 1998
- ----------------
Deloitte Touche
Tohmatsu
International
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THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
<TABLE>
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS,
JUNE 30, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1998 1997
<S> <C> <C>
INVESTMENTS, AT FAIR VALUE:
Short-term investments, plus accrued interest $ 54,835,506 $ 68,310,306
Money market funds 214,086,144 249,337,732
The Procter & Gamble Company common stock -
110,940,591 shares (cost, $1,972,553,463) at June 30, 1998;
125,427,360 shares (cost, $2,019,014,690) at June 30, 1997; 10,102,527,568 8,858,307,300
The Procter & Gamble Company ESOP Convertible
Class A Preferred Stock:
Series A - 60,634,659 shares (cost, $833,728,211) at June 30,
1998; 62,951,604 shares (cost, $865,586,945) at June 30, 1997 5,521,543,365 4,445,957,032
Series B - 37,804,836 shares (cost, $987,462,181) at June 30,
1998; 38,044,836 shares (cost, $993,730,724) at June 30, 1997 3,442,602,878 2,686,916,543
Mutual funds 68,754,023 22,304,586
Deferred annuities 45,187,081 101,518,979
Loans to participants 61,207,014 60,005,672
--------------- ---------------
Total investments 19,510,743,849 16,492,658,150
--------------- ---------------
ACCOUNTS RECEIVABLE:
Contribution from The Procter & Gamble Company
(Series A Preferred Stock) 35,096,882 11,436,240
Dividends receivable (preferred stock) 11,975,000 12,202,000
--------------- ---------------
Total accounts receivable 47,071,882 23,638,240
--------------- ---------------
Total assets 19,557,815,731 16,516,296,390
--------------- ---------------
LIABILITIES:
Interest payable on notes and debentures 61,456,613 64,092,873
Note payable to The Procter & Gamble Company
(Series A Preferred Stock) 69,000,000 19,995,826
Notes payable (Series A Preferred Stock) 545,473,839 613,309,444
Debentures (Series B Preferred Stock) 1,000,000,000 1,000,000,000
--------------- ---------------
Total liabilities 1,675,930,452 1,697,398,143
--------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS $17,881,885,279 $14,818,898,247
=============== ===============
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1998 1997
<S> <C> <C>
ADDITIONS:
Investment income:
Net appreciation in fair value of investments $ 4,431,432,881 $ 5,906,380,113
Dividends 261,232,059 263,985,801
Interest on investments 21,022,755 22,000,188
Interest on loans to participants 5,277,599 5,036,269
--------------- ---------------
Total investment income 4,718,965,294 6,197,402,371
--------------- ---------------
Contributions by The Procter & Gamble Company
(Net of forfeitures of $159,225 in 1998 and
$294,665 in 1997) 58,557,465 60,372,467
Employee automatic salary contributions 68,856,894 79,343,226
Employee contributions 25,212,112 5,750,603
--------------- ---------------
Total contributions 152,626,471 145,466,296
--------------- ---------------
Total additions 4,871,591,765 6,342,868,667
--------------- ---------------
DEDUCTIONS:
Distributions to participants:
The Procter & Gamble Company common stock -
12,457,508 shares (cost, $193,318,134) in 1998;
9,143,312 shares (cost, $130,612,406) in 1997; (983,314,268) (517,564,652)
Cash (594,514,444) (322,846,434)
Mutual funds (546,801) (319,562)
Deferred annuities (393,950)
Automatic dividends paid to participants (68,856,894) (79,343,226)
Interest expense (142,782,957) (147,503,638)
--------------- ---------------
Total deductions (1,790,015,364) (1,067,971,462)
--------------- ---------------
TRANSFERS TO OTHER TRUSTS - Transfer to
The Procter & Gamble Retiree Benefit Trust (18,589,369) (9,123,314)
--------------- ---------------
NET INCREASE IN NET ASSETS 3,062,987,032 5,265,773,891
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 14,818,898,247 9,553,124,356
--------------- ---------------
End of year $17,881,885,279 $14,818,898,247
=============== ===============
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
- ---------------------------------------------------------------------------
1. PLAN DESCRIPTION
GENERAL - The Procter & Gamble Profit Sharing Trust and Employee Stock
Ownership Plan (Plan) is a defined contribution plan covering substantially
all domestic employees of The Procter & Gamble Company and certain of its
subsidiaries (Company). The Plan is comprised of two trusts, the Retirement
Trust (RT) and the Employee Stock Ownership Trust (ESOT). These financial
statements include the RT and the ESOT. The Plan is funded through both
Company and employee contributions. It is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA). The Plan document
should be referred to for the complete text of the Plan agreement.
The ESOT was established by resolution of the board of directors of the
Company on January 10, 1989. During March 1989, the ESOT borrowed
$1,000,000,000 (see Note 7) and, with the proceeds from such borrowings,
purchased 9,090,909 shares of The Procter & Gamble Company Series A ESOP
Convertible Class A Preferred Stock (Series A Preferred Stock) (see Note
5). The number of shares initially issued increased to 72,727,272 as a
result of the two-for-one stock splits effective October 20, 1989, May 15,
1992, and August 22, 1997. The ESOT borrowed an additional $69,000,000 and
$19,995,826 as of June 30, 1998 and 1997, respectively, (see Note 8) from
the Company as a means of extending the benefits of the ESOP to
participants over a longer period. These shares of Series A Preferred Stock
are utilized to fund a portion of the Company's annual profit sharing
contribution to the Plan.
In May 1990, the Company's board of directors authorized an amendment to
the Plan to establish a separate account in accordance with Section 401(h)
of the Internal Revenue Code to fund a portion of the Company's
postretirement obligation for retired Plan participants satisfying certain
requirements specified in the Plan agreement. This amendment became
effective July 1, 1990. During November 1990, the ESOT borrowed
$1,000,000,000 (see Note 8) and with the proceeds from such borrowings,
purchased 9,571,209 shares of The Procter & Gamble Company Series B ESOP
Convertible Class A Preferred Stock (Series B Preferred Stock) (see Note
6). The number of outstanding shares increased to 38,284,836 as a result of
the two-for-one stock splits effective May 15, 1992 and August 22, 1997. In
June 1993 these shares were exchanged for an equal number of shares with
identical terms, except for amended restrictions on transfer (see Note 6).
These shares are only available to fund postretirement benefits and may not
be used for profit sharing purposes.
At June 30, 1998 and 1997, the net assets available to the ESOT to satisfy
a portion of the postretirement benefits were $2,442,580,308 and
$1,687,360,947, respectively. The related postretirement obligations are
not a component of this Plan's obligations but are included in the
financial statements of a separate health and welfare plan sponsored by the
Company.
<TABLE>
The balances in the investments and liabilities held in the ESOT related to
Series A and B Preferred Stock are summarized as follows for the years ended
June 30, 1998 and 1997.
<CAPTION>
June 30, 1998
---------------------------------------------------------
SERIES A SERIES B TOTAL
<S> <C> <C> <C>
Short-term investments, plus accrued interest $ 15,029,042 $ 39,523,430 $ 54,552,472
Series A Preferred Stock 5,521,543,635 5,521,543,635
Series B Preferred Stock 3,442,602,878 3,442,602,878
-------------- -------------- --------------
Total investments 5,536,572,677 3,482,126,308 9,018,698,985
Dividends receivable 4,721,000 7,254,000 11,975,000
-------------- -------------- --------------
Total assets 5,541,293,677 3,489,380,308 9,030,673,985
-------------- -------------- --------------
Interest payable on notes and debentures (14,656,613) (46,800,000) (61,456,613)
Note payable to The Procter & Gamble Company
(Series A Preferred Stock) (69,000,000) (69,000,000)
Notes payable (Series A Preferred Stock) (545,473,839) (545,473,839)
Debentures (Series B Preferred Stock) (1,000,000,000) (1,000,000,000)
-------------- -------------- --------------
Total liabilities (629,130,452) (1,046,800,000) (1,675,930,452)
-------------- -------------- --------------
ESOT Net assets $4,912,163,225 $2,442,580,308 $7,354,743,533
============== ============== ==============
<CAPTION>
June 30, 1997
----------------------------------------------------------
SERIES A SERIES B TOTAL
<S> <C> <C> <C>
Short-term investments, plus accrued interest $ 15,773,365 $ 39,944,404 $ 55,717,769
Series A Preferred Stock 4,445,957,032 4,445,957,032
Series B Preferred Stock 2,686,916,543 2,686,916,543
-------------- -------------- --------------
Total investments 4,461,730,397 2,726,860,947 7,188,591,344
Dividends receivable 4,902,000 7,300,000 12,202,000
-------------- -------------- --------------
Total assets 4,466,632,397 2,734,160,947 7,200,793,344
-------------- -------------- --------------
Interest payable on notes and debentures (17,292,873) (46,800,000) (64,092,873)
Note payable to The Procter & Gamble Company
(Series A Preferred Stock) (19,995,826) (19,995,826)
Notes payable (Series A Preferred Stock) (613,309,444) (613,309,444)
Debentures (Series B Preferred Stock) (1,000,000,000) (1,000,000,000)
-------------- -------------- --------------
Total liabilities (650,598,143) (1,046,800,000) (1,697,398,143)
-------------- -------------- --------------
ESOT Net assets $3,816,034,254 $1,687,360,947 $5,503,395,201
============== ============== ==============
</TABLE>
<TABLE>
The activity in the investments and activity held in the ESOT related to Series
A and B Preferred Stock are summarized as follows for the years ended June 30,
1998 and 1997.
<CAPTION>
SERIES A SERIES B TOTAL
<S> <C> <C> <C>
ESOT net assets June 30, 1996 2,252,943,483 731,750,642 2,984,694,125
Net appreciation in fair value of investments 1,609,445,416 964,883,044 2,574,328,460
Interest on investments and dividends 65,153,160 79,515,575 144,668,735
Contributions by The Procter & Gamble Company 31,813,174 13,935,000 45,748,174
Interest expense (53,903,638) (93,600,000) (147,503,638)
Distributions to participants - cash (419,468) (419,468)
Net transfers among trusts (88,997,873) (9,123,314) (98,121,187)
-------------- -------------- --------------
ESOT net assets June 30, 1997 3,816,034,254 1,687,360,947 5,503,395,201
Net appreciation in fair value of investments 1,257,760,737 774,036,392 2,031,797,129
Interest on investments and dividends 63,158,891 79,127,338 142,286,229
Contributions by The Procter & Gamble Company 8,926,589 14,245,000 23,171,589
Interest expense (49,182,957) (93,600,000) (142,782,957)
Distributions to participants - cash (2,599,469) (2,599,469)
Net transfers among trusts (181,934,820) (18,589,369) (200,524,189)
-------------- -------------- --------------
ESOT net assets June 30, 1998 $4,912,163,225 $2,442,580,308 $7,354,743,533
============== ============== ==============
</TABLE>
PARTICIPANT ACCOUNTS AND INVESTMENT OPTIONS - Each participant's account is
credited with the allocation of Company contributions (see Note 9), his or
her employee contributions (see Note 10) and Plan earnings. All such
participant accounts are maintained in the RT. Company contributions are
allocated based on participant base earnings and credit service years.
Effective July 1, 1996, a participant may choose to receive some or all of
the quarterly dividends earned on the shares of Plan common stock within
his or her account in cash. Additionally, the Plan began paying quarterly
dividends earned on the shares of Plan common stock held within a
participant's account, as elected by each participant, directly to the
participant (automatic dividends). The amount of automatic dividends paid
to a participant is subject to IRS limitations. A portion of a
participant's pre-tax compensation is deferred and contributed to his or
her Plan account to offset the automatic dividends (automatic salary
contribution). All automatic salary contributions to the Plan are invested
in Company common stock, unless otherwise directed by the participant.
Prior to July 1, 1996, common stock dividends received by vested
participants were maintained in their account and used to purchase common
stock or liquidated at the participant's discretion with the proceeds used
to purchase investments in the money market and money bond funds. The
benefit to which a participant is entitled is the vested benefit that can
be provided from the participant's account.
Vested participants may allocate the portion of the annual Company
contribution received in cash between the money market fund and short term
investments, and JP Morgan bond fund and common stock of the Company. In
addition, certain participants retain investments in group deferred
annuities; however, contributions and transfers to this fund are no longer
permitted. A description of the investment options are as follows:
COMMON STOCK FUND - A fund investing in shares of Company common
stock.
DEFERRED ANNUITIES FUND - A fund investing in guaranteed investment
contracts (Contracts) with Aetna Capital Management, Inc., The
Prudential Asset Management Company and Metropolitan Life Insurance
Company. These Contracts bear interest at rates ranging from 8.08% to
9.16% with various maturity dates through December 31, 1999.
MONEY MARKET FUND AND SHORT-TERM INVESTMENTS - Funds investing in
commercial paper, short-term U.S. Government securities and various
short-term bank funds.
JP MORGAN BOND FUND - The prospectus indicates that this fund invests
in a broad diversity of publicly traded and privately placed bonds.
Effective July 1, 1997, the "Retirement Plus" feature was added to the
Plan. This feature allows a retiree or a vested former employee with
account balances equal to or greater than $5,000 to maintain some or
all of his or her funds in the Plan. If a participant chooses this
option, he or she must maintain at least 50% of their account balance
invested in Company common stock. Also, all common and preferred stock
dividends are paid in cash to the participant. A participant may elect
to distribute all or a portion of his or her account balance at
anytime in accordance with the Plan agreement. Each participant's
account is credited with an allocation of Plan earnings. In addition
to the investment options described previously for vested
participants, this feature also offers the following investment
options:
JP MORGAN U.S. LARGE COMPANY STOCK FUND - The prospectus
indicates that this fund invests in equity securities of
approximately 300 domestic, large company stocks.
JP MORGAN PRE-MIXED FUND A - The prospectus indicates that
this fund invests in money market instruments (50%), bonds
(30%), U.S. large company stocks (10%), international stocks
(6%) and U.S. small company stocks (4%).
JP MORGAN PRE-MIXED FUND B - The prospectus indicates that
this fund invests in bonds (40%), U.S. large company stocks
(25%), international stocks (15%), U.S. small company stocks
(10%) and money market instruments (10%).
JP MORGAN PRE-MIXED FUND C - The prospectus indicates that
this fund invests in U.S. large company stocks (40%),
international stocks (24%), U.S. small company stocks (16%),
money market instruments (10%) and bonds (10%).
<TABLE>
The activity and balances in the investment funds, excluding the contribution
receivable from the Company, held in the RT are summarized as follows for the
years ended June 30, 1998 and 1997.
<CAPTION>
Money Market
Common Deferred Fund
Stock Loan Annuities Short-term JP Morgan
Fund Fund Fund Investments Mutual Funds Total
<S> <C> <C> <C> <C> <C> <C>
RT investment balances
at June 30, 1996 $ 6,228,183,731 $60,008,227 $124,704,573 $ 88,423,544 $11,736,122 $ 6,513,056,197
Investment income 3,452,794,770 5,036,269 9,637,014 10,037,017 900,106 3,478,405,176
Contributions by The Procter &
Gamble Company 345,973 (345,973) 143,655,916 143,655,916
Distributions to participants (517,564,652) (4,692,851) (393,950) (392,038,960) (5,357,943) (920,048,356)
Net interfund transfers (403,573,709) (32,428,658) 420,976,066 15,026,301
Net transfers between trusts 98,121,187 (9,123,314) 88,997,873
--------------- ----------- ------------ ------------ ----------- ---------------
RT investment balances
at June 30, 1997 8,858,307,300 60,005,672 101,518,979 261,930,269 22,304,586 9,304,066,806
Investment income 2,507,178,591 5,277,599 6,678,649 12,914,549 12,832,548 2,544,881,936
Contributions by The Procter &
Gamble Company (2,008,048) 2,008,048 105,794,240 105,794,240
Distributions to participants (983,314,268) (6,084,305) (654,687,564) (546,801) (1,644,632,938)
Net interfund transfers (478,160,196) (63,010,547) 507,007,053 34,163,690
Net transfers between trusts 200,524,189 (18,589,369) 181,934,820
--------------- ----------- ------------ ------------ ----------- ---------------
RT investment balances
at June 30, 1998 $10,102,527,568 $61,207,014 $ 45,187,081 $214,369,178 $68,754,023 $10,492,044,864
=============== =========== ============ ============ =========== ===============
</TABLE>
VESTING - A participant is fully vested in employee contributions and
automatic salary contributions plus actual earnings thereon in his or her
account regardless of years of service. Vesting in the Company contribution
portion of their accounts plus actual earnings thereon is based on years of
service. A participant is fully vested in Company contributions plus actual
earnings thereon in his or her account after five years of service.
PAYMENT OF BENEFITS - Effective July 1, 1996, retired or terminated
employees may maintain their accounts within the Plan until reaching the
federal mandatory distribution age (70 1/2). Upon election of a
distribution, a vested participant may elect to receive (1) all cash,
securities and annuities in his or her account or (2) an annuity purchased
for the value of his or her account. In addition to the above alternatives,
a retired vested participant electing a distribution may also elect to
receive annual distributions of cash and securities in his or her account
on a pro-rata basis not to exceed the lesser of 15 years or the
participant's life expectancy.
PLAN TERMINATION - Although it has not expressed any intent to do so, the
Company has the right under the Plan to discontinue its contributions at
any time and to terminate the Plan subject to the provisions of ERISA. In
the event of Plan termination, participants will become fully vested in
their entire account and the net assets of the Plan will be distributed to
the participants in an order of priority determined in accordance with
ERISA and its applicable regulations and the Plan document.
LOAN PROVISION - The Plan allows participants to borrow funds from their
accounts in certain circumstances up to maximum amounts specified in the
Plan agreement and at an interest rate equal to prime rate plus 1%. Loans
are repayable through payroll deductions of principal and interest over a
maximum term of 54 months (114 months if the loan is to purchase a primary
residence).
FORFEITURES - Participants who terminate service prior to vesting forfeit
their account balance. The Company applies forfeited amounts against the
annual contribution.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements are prepared on the accrual
basis of accounting and the Plan's net assets and transactions are recorded
at fair value. Fair value of the Company common stock is determined by
composite trading prices on the New York Stock Exchange. The Company's
common stock, included in the Plan's statements of net assets, is recorded
at $91.063 and $70.625 per share as of June 30, 1998 and 1997,
respectively. Fair value of Series A and Series B Preferred Stock is
determined as the greater of the fair value of the Company's common stock
as defined in the Plan agreement or $13.75 (Series A) and $26.12 (Series B)
per share (see Notes 5 and 6). The Series A and Series B Preferred Stock,
included in the Plan's statements of net assets, is recorded at $91.063 and
$70.625 per share as of June 30, 1998 and 1997, respectively. Deferred
annuities are recorded at contract value, which approximates fair value.
Mutual funds (funds) are valued by the fund manager, J.P. Morgan Investment
Management, Inc., based upon the fair value of the funds' underlying
investments. Loans to participants are valued at the unpaid principal
balance. The cost of securities sold, transferred or distributed is
determined by the weighted average cost of securities allocated to the
participant's account.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
STOCK SPLIT - In July 1997, the Company's board of directors approved a
two-for-one stock split that was effective for common and preferred
shareholders of record as of August 22, 1997. The financial statements and
notes reflect the stock split retroactively for 1997.
EXPENSES OF THE PLAN - All administrative expenses of the Plan are paid by
the Company, provided however, that investment expenses shall be paid by
the Plan to the extent that such expenses are not paid by the Company. Any
such expenses paid by the Plan are netted with investment income on the
financial statements and approximated $420,000 and $329,000 in 1998 and
1997, respectively.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified to
conform with 1998 classifications.
3. INCOME TAX STATUS
The Company has received a determination letter from the Internal Revenue
Service (IRS) stating that the Plan, as amended, is a qualified employer's
trust under Sections 401(a), 401(h) and 409 of the Internal Revenue Code
(IRC) and, as such, is exempt from federal income taxes under Section
501(a). The Plan has been amended since receiving the determination letter.
However, the plan administrator believes that the Plan is designed and
currently being operated in compliance with the applicable provisions of
the IRC.
4. PARTY-IN-INTEREST INVESTMENTS AND TRANSACTIONS
The Company is a party-in-interest, as defined by ERISA. During the Plan
years ended June 30, 1998 and 1997, the Company loaned the ESOT $69,000,000
and $19,995,286, respectively. This transaction qualifies as a
party-in-interest transaction; however, the plan administrator has not
identified any prohibited party-in-interest investments or transactions
during the years ended June 30, 1998 and 1997.
5. SERIES A PREFERRED STOCK
CONVERSION, DISTRIBUTION AND LIQUIDATION RIGHTS - The Series A Preferred
Stock is convertible by the holder (Plan trustee) at the rate of one share
of the Company's common stock for each share of Series A Preferred Stock
subject to the conditions described herein. Additionally, in order to make
a distribution to a participant, the Series A Preferred Stock can be "put"
to the Company at its liquidation value plus accrued dividends. Hence, upon
distribution, participants will receive $13.75 per Series A Preferred
Share, or one share of the Company's common stock, whichever has a higher
value. Participants must receive distributions of cash or common stock upon
election of a distribution from the Plan. Participants age 55 to 59 may
also elect to convert up to 25% of their Series A Preferred Shares to
alternative investments which are held by the RT. This conversion option
increases to 50% at age 60. The fair value of the Company's common stock as
of June 30, 1998 and 1997 was $91.063 and $70.625, respectively, per share.
During 1998 and 1997, respectively, 2,316,945 and 1,611,364 Series A
Preferred Shares were converted into common shares and the former preferred
shares were retired.
ELIGIBILITY - All participants are eligible for allocation of Series A
Preferred Stock.
DIVIDEND RIGHTS - Annual dividends of $1.015 per share are paid quarterly
at $0.25375 per share. In the event that dividends have not been paid when
due, payment or declaration of dividends on securities subordinated to the
Series A Preferred Stock generally is not permitted.
CALL PROVISIONS - The Series A Preferred Stock may be called at certain
premium amounts as described in the Company's amended articles of
incorporation.
VOTING RIGHTS - Each share is entitled to a number of votes equal to the
number of shares of the Company's common stock into which it is
convertible.
RESTRICTIONS ON TRANSFER - The ESOT or another employee benefit plan of the
Company are the only permissible holders of the Series A Preferred Stock.
Upon transfer to any other holder, shares automatically convert to shares
of the Company's common stock.
ALLOCATION OF SHARES TO PARTICIPANT ACCOUNTS - Shares of the Series A
Preferred Stock are released for allocation to participant accounts in
accordance with the Plan agreement as the borrowings are repaid (see Note
7). In 1998 and 1997, 2,894,890 and 4,017,772 Series A Preferred Shares
valued at $258,946,084 and $271,144,505, respectively, were released for
allocation to participant accounts of which $234,974,080 and $247,210,484,
respectively, was used to fund a portion of the annual profit sharing
contribution and $23,972,004 and $23,934,021, respectively, was used to
fund annual dividends on allocated shares. At June 30, 1998 and 1997,
respectively, 31,875,220 and 34,770,110 Series A Preferred Shares were
unallocated.
6. SERIES B PREFERRED STOCK
CONVERSION, DISTRIBUTION AND LIQUIDATION RIGHTS - The Series B Preferred
Stock is convertible at any time by the holder (Plan trustee) at the rate
of one share of the Company's common stock for each share of Series B
Preferred Stock. Additionally, in order to make a distribution to a
participant for retiree medical expenses, the Series B Preferred Stock can
be "put" to the Company at its liquidation price plus accrued dividends.
Hence, upon distribution, participants will receive $26.12 per Series B
Preferred Share, or one share of the Company's common stock, whichever has
a higher value. The fair value of the Company's common stock as of June 30,
1998 and 1997 was $91.063 and $70.625, respectively, per share. During 1998
and 1997, 240,000 and 160,004 shares of Series B Preferred Stock were
converted to common stock and the former preferred shares were retired for
retiree medical expenses. The proceeds from the conversion of shares were
transferred to The Procter & Gamble Retiree Benefit Trust to fund
postretirement benefits.
ELIGIBILITY - Active participants who are eligible to retire from the
Company and all participants who have retired under the terms of the PST
are eligible for allocation of Series B Preferred Stock.
DIVIDEND RIGHTS - Annual dividends of $2.06 per share are paid quarterly at
$0.515 per share. In the event that dividends have not been paid when due,
payment or declaration of dividends on securities subordinated to the
Series B Preferred Stock generally is not permitted.
CALL PROVISIONS - The Series B Preferred Stock may be called at certain
premium amounts as described in the Company's amended articles of
incorporation.
VOTING RIGHTS - Each share is entitled to a number of votes equal to the
number of shares of the Company's common stock into which it is
convertible.
RESTRICTIONS ON TRANSFER - Effective June 29, 1993, all shares of the
Series B Preferred Stock were exchanged for an equal number of shares of
Series B Preferred Stock with amended restrictions on transfer. Terms were
amended to lift the transfer restrictions and to provide the Company with
the right of first refusal on the purchase of Series B Preferred Stock. In
prior years, the ESOT or another employee benefit plan of the Company were
the only permissible holders of the Series B Preferred Stock. Upon transfer
to any other holder, shares automatically converted to shares of the
Company's common stock.
ALLOCATION OF SHARES TO PARTICIPANT ACCOUNTS - Shares of the Series B
Preferred Stock will be released for straight line allocation to
participant retiree health care fund accounts in accordance with the Plan
agreement as interest and/or principal are paid (see Note 8). In 1998 and
1997, 1,086,592 Series B Preferred shares valued at $123,018,260 and
$73,835,476, respectively, were released for allocation to participant
accounts. At June 30, 1998 and 1997, respectively, 30,597,200 and
31,683,792 and Series B Preferred shares were unallocated.
7. NOTES PAYBLE (SERIES A PREFERRED SHARES)
<TABLE>
Notes payable consist of the following at June 30:
<CAPTION>
PRINCIPAL
INTEREST ----------------------------
RATES SERIES MATURITY DATE 1998 1997
<S> <C> <C> <C> <C>
8.17% Series I September 3, 1997 $ 33,238,898
8.17% Series I March 3, 1998 34,596,707
8.17% Series J September 3, 1998 $ 36,009,983 36,009,983
8.17% Series J March 3, 1999 37,480,991 37,480,991
8.33% Series K September 3, 1999 39,012,089 39,012,089
8.33% Series K March 3, 2000 40,636,943 40,636,943
8.33% Series K September 3, 2000 42,329,471 42,329,471
8.33% Series K March 3, 2001 44,092,494 44,092,494
8.33% Series K September 3, 2001 45,928,946 45,928,946
8.33% Series K March 3, 2002 47,841,887 47,841,887
8.33% Series K September 3, 2002 49,834,501 49,834,501
8.33% Series K March 3, 2003 51,910,108 51,910,108
8.33% Series K September 3, 2003 54,072,164 54,072,164
8.33% Series K March 3, 2004 56,324,262 56,324,262
------------ ------------
Total $545,473,839 $613,309,444
============ ============
</TABLE>
These notes are guaranteed by the Company. Repayment of principal and
interest is funded through annual contributions by the Company and
dividends received on the Series A Preferred Stock. Interest on the notes
is payable semiannually on September 3 and March 3.
The note payable to the Company of $69,000,000 matures on March 3, 1999.
Repayment of principal and interest is also funded through annual
contributions by the Company and dividends received on the Series A
Preferred Stock. Interest on the notes is payable semiannually on September
3 and March 3.
The fair value of the total outstanding notes payable is estimated based on
current rates for debt of the same remaining maturities and approximated
$670,000,000 and $676,100,000, respectively, at June 30, 1998 and 1997.
8. DEBENTURES (SERIES B PREFERRED SHARES)
The debentures bear interest at a rate of 9.36% and are due on January 1,
2021. Mandatory sinking fund payments are required beginning July 1, 2006
and are payable semiannually thereafter. Interest is payable semiannually
on July 1 and January 1. The debentures are guaranteed by the Company.
Repayment of principal and interest is to be funded through annual
contributions by the Company and dividends received on the Series B
Preferred Stock. The fair value of the debentures is estimated based on
current rates for debt of the same remaining maturities and approximated
$1,333,700,000 and $1,222,300,000, respectively, at June 30, 1998 and 1997.
9. COMPANY CONTRIBUTION
Annual credits to participants' accounts are based on individual base
salary and years of service not exceeding 15% of total compensation of Plan
participants as defined in the Plan agreement. The Company's contribution
is reduced by the value of Series A Preferred Shares released and available
for allocation to ESOT participant accounts in accordance with terms
specified in the Plan agreement (see Note 5). The Company also funds a
portion of principal and interest payments on the notes payable and
debentures through contributions to the ESOT (see Notes 7 and 8).
During 1997, the Company granted one share of P&G Common Stock to all
employees who had completed a year of service. Beginning July 1, 1997, the
Company granted one share of P&G common stock to all new employees who
become participants in the Plan. The additional share was credited to each
participant's account. The amount contributed to these shares is reported
as contributions from the Company in the Plan's financial statements.
<TABLE>
Company contributions to the Plan for the years ended June 30 are as
follows:
<CAPTION>
1998 1997
<S> <C> <C>
Contribution for debt service $23,171,589 $45,748,174
Contribution for Annual Fund Credit 35,096,882 11,436,240
Contribution for one-share program 288,994 3,188,053
----------- -----------
Total $58,557,465 $60,372,467
=========== ===========
</TABLE>
10. EMPLOYEE CONTRIBUTIONS
In addition to the participant automatic salary contribution (see Note 1),
beginning April 1, 1997, a participant may also elect to contribute up to
25% of pre-tax compensation, as defined by the Plan. Contributions are
subject to IRS limitations.
11. INVESTMENTS
<TABLE>
The Plan's investments (at fair value) consist of the following at June 30.
Investments that represent five percent or more of the Plan's net assets
are separately identified.
<CAPTION>
1998 1997
<S> <C> <C>
Common stock:
The Procter & Gamble Company - 110,940,591 shares
at June 30, 1998; 125,427,360 shares at June 30, 1997; $10,102,527,568 $ 8,858,307,300
Preferred stocks:
The Procter & Gamble Company ESOP
Convertible Class A:
Series A - 60,634,659 shares at June 30, 1998;
62,951,604 shares at June 30, 1997 5,521,543,635 4,445,957,032
Series B - 37,804,836 shares at June 30, 1998;
38,044,836 shares at June 30, 1997 3,442,602,878 2,686,916,306
Short-term investments plus accrued interest 54,835,506 68,310,306
Money market fund 214,086,144 249,337,732
Deferred annuities 45,187,081 101,518,979
Mutual funds 68,754,023 22,304,586
Loans to participants 61,207,014 60,005,672
--------------- ---------------
Total $19,510,743,849 $16,492,658,150
=============== ===============
</TABLE>
12. SUBSEQUENT EVENTS
Effective July 1, 1998, The P&G/Noxell Transitional Profit Sharing Trust
was merged into the Plan and resulted in the transfer of assets to the RT
of approximately $216,000,000.
* * * * * *
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
<TABLE>
ASSETS HELD FOR INVESTMENT
ITEM 27a of FORM 5500,
JUNE 30, 1998
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FAIR
IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST VALUE
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS:
Citibank Cash $ 17,690 $ 17,690
Wachovia Bank Diversified Trust Fund 283,034 283,034
Block Financial Corporation Promissory Note, 5.52%, due September 3, 1998 14,840,002 14,900,012
Goldman Sachs Group LP Promissory Note, 5.48%, due September 3, 1998 123,478 123,771
Bavaria GLB Corporation Promissory Note, 5.52%, due July 1, 1998 19,631,297 19,905,982
Sheffield Receivables Corporation Promissory Note, 5.54%, due July 1, 1998 19,499,405 19,605,017
-------------- ---------------
TOTAL SHORT-TERM INVESTMENTS $ 54,394,906 $ 54,835,506
============== ===============
THE PROCTER & GAMBLE CO. COMMON STOCK, NO PAR VALUE, 110,940,591 SHARES $1,972,553,463 $10,102,527,568
============== ===============
THE PROCTER & GAMBLE CO. SERIES A ESOP CONVERTIBLE CLASS A
PREFERRED STOCK, NO PAR VALUE, 60,634,659 SHARES $ 833,728,211 $ 5,521,543,635
============== ===============
THE PROCTER & GAMBLE CO. SERIES B ESOP CONVERTIBLE CLASS A
PREFERRED STOCK, NO PAR VALUE, 37,804,836 SHARES $ 987,462,181 $ 3,442,602,878
============== ===============
VARIOUS INSURANCE COMPANIES Deferred Annuities $ 45,187,081 $ 45,187,081
============== ===============
WACHOVIA BANK Money Market Fund $ 214,086,144 $ 214,086,144
============== ===============
MUTUAL FUNDS:
JP Morgan Bond Fund $ 38,396,792 $ 41,703,533
JP Morgan Pre-Mix A Fund 2,200,470 2,324,875
JP Morgan Pre-Mix B Fund 10,036,925 10,769,348
JP Morgan Pre-Mix C Fund 8,599,144 9,331,224
JP Morgan U.S. Large Company Stock Fund 3,279,532 3,692,372
Merrill Lynch Government Series Bond Fund 932,671 932,671
-------------- ---------------
TOTAL MUTUAL FUNDS $ 63,445,534 $ 68,754,023
============== ===============
</TABLE>
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
<TABLE>
REPORTABLE TRANSACTIONS
ITEM 27d OF FORM 5500
FOR THE YEAR ENDED JUNE 30, 1998
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COST OF
DESCRIPTION OF ASSET PURCHASES (A) SALES SALES
<S> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS:
None
SERIES TRANSACTIONS (B):
Wachovia Bank Diversified
Trust Fund $1,219,507,621 (336) $1,209,866,260 (326) $1,209,866,260
Procter & Gamble Company
Common Stock 253,630,886 (272) 598,451,128 (477) 244,138,846
<FN>
NOTES:
(A) The market value of all assets acquired at the time of acquisition is equal
to the purchase price.
(B) The numbers in parentheses represent the number of transactions.
</FN>
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
TRUSTEES (OR OTHER PERSONS WHO ADMINISTER THE EMPLOYEE BENEFIT PLAN) HAVE DULY
CAUSED THIS ANNUAL REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED HEREUNTO
DULY AUTHORIZED.
The Procter & Gamble Profit Sharing
Trust and Employee Stock Ownership Plan
/S/WILLIAM J. O'NEIL
Date: December 18, 1998 ---------------------------------------
William J. O'Neil
Member, Policy Committee
EXHIBIT INDEX
Exhibit No. Page No.
23 Consent of Deloitte & Touche
DELOITTE &
TOUCHE
- ---------- ------------------------------------------------------
DELOITTE & TOUCHE LLP Telephone: (513) 784-7100
250 East Fifth Street
P.O. Box 5340
Cincinnati, Ohio 45201-5340
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement No.
33-49081 of The Procter & Gamble Company on Form S-8 of our report dated
September 10, 1998 appearing in this Annual Report on Form 11-K of The Procter &
Gamble Profit Sharing Trust and Employee Stock Ownership Plan for the year ended
June 30, 1998.
/S/DELOITTE & TOUCHE LLP
- --------------------------
Cincinnati, Ohio
December 15, 1998
- ---------------
DELOITTE TOUCHE
TOHMATSU
- ---------------
