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, 1999, 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,
1999 and 1998 and Supplemental Schedules for the
Year Ended June 30, 1999 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, 1999 and
1998 2
Statements of Changes in Net Assets Available for Benefits for the
Years Ended June 30, 1999 and 1998 3
Notes to Financial Statements for the Years Ended June 30, 1999 and
1998 4
SUPPLEMENTAL SCHEDULES:
Assets Held for Investment, Item 27a of Form 5500, June 30, 1999 14
Reportable Transactions, Item 27d of Form 5500, for the Year Ended
June 30, 1999 15
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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DELOITTE & TOUCHE LLP Telephone: (513) 784-7100
250 East Fifth Street
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, 1999 and 1998, 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, 1999 and
1998, 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 1999 financial statements and, in our opinion, are fairly stated in
all material respects when considered in relation to the basic 1999 financial
statements taken as a whole.
/s/DELOITTE & TOUCHE LLP
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Deloitte & Touche LLP
September 15, 1999
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DELOITTE TOUCHE
TOHMATSU
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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, 1999 AND 1998
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998
<S> <C> <C>
INVESTMENTS, AT FAIR VALUE:
Short-term investments, plus accrued interest $ 63,266,263 $ 54,835,506
Money market funds 289,942,332 214,086,144
The Procter & Gamble Company common stock -
97,955,320 shares (cost, $1,985,282,415) at June 30, 1999:
110,940,591 shares (cost, $1,972,553,463) at June 30, 1998; 8,742,512,310 10,102,527,568
The Procter & Gamble Company ESOP Convertible
Class A Preferred Stock:
Series A - 58,342,179 shares (cost $802,207,857) at June 30,
1999; 60,634,659 shares (cost, $833,728,211) at June 30, 1998 5,207,039,475 5,521,543,635
Series B - 37,484,836 shares (cost $979,104,439) at June 30,
1999; 37,804,836 shares (cost $987,462,181) at June 30, 1998 3,345,521,613 3,442,602,878
Mutual funds 260,580,029 68,754,023
Deferred annuities 2,885,903 45,187,081
Loans to participants 63,259,576 61,207,014
--------------- ---------------
Total investments 17,975,007,501 19,510,743,849
--------------- ---------------
ACCOUNTS RECEIVABLE:
Contribution from The Procter & Gamble Company 17,722,485 35,096,882
Dividends receivable (Preferred Stock) 15,393,000 11,975,000
--------------- ---------------
Total accounts receivable 33,115,485 47,071,882
--------------- ---------------
Total assets 18,008,122,986 19,557,815,731
--------------- ---------------
LIABILITIES:
Interest payable on notes and debentures 59,514,850 61,456,613
Note payable to The Procter & Gamble Company
(Series A Preferred Stock) 78,500,000 69,000,000
Notes payable (Series A Preferred Stock) 471,982,865 545,473,839
Debentures (Series B Preferred Stock) 1,000,000,000 1,000,000,000
--------------- ---------------
Total liabilities 1,609,997,715 1,675,930,452
--------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS $16,398,125,271 $17,881,885,279
=============== ===============
The accompanying notes are an integral part of these statements.
</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, 1999 AND 1998
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998
<S> <C> <C>
ADDITIONS:
Investment income:
Net (depreciation) appreciation in fair value of investments $ (367,182,578) $ 4,431,432,881
Dividends 266,721,486 261,232,059
Interest on investments 16,073,688 21,022,755
Interest on loans to participants 5,543,755 5,277,599
--------------- ---------------
Total investment income (78,843,649) 4,718,965,294
--------------- ---------------
Contributions by The Procter & Gamble Company
(Net of forfeitures of $197,303 in 1999 and
$159,225 in 1998) 85,844,550 58,557,465
Employee automatic salary contributions 65,058,873 68,856,894
Employee contributions 29,787,865 25,212,112
--------------- --------------
Total contributions 180,691,288 152,626,471
--------------- --------------
Total additions 101,847,639 4,871,591,765
--------------- --------------
DEDUCTIONS:
Distributions to participants:
The Procter & Gamble Company common stock -
11,898,467 shares (cost, $202,617,121) in 1999;
12,457,508 shares (cost, $193,318,134) in 1998; (1,046,086,176) (983,314,268)
Cash (536,311,335) (594,514,444)
Mutual funds (191,360) (546,801)
Deferred annuities (86,964) -
Automatic dividends paid to participants (65,058,873) (68,856,894)
Interest expense (140,670,115) (142,782,957)
--------------- --------------
Total deductions (1,788,404,823) (1,790,015,364)
--------------- --------------
TRANSFERS (TO) FROM OTHER TRUSTS AND PLANS:
Transfer to The Procter & Gamble Retiree Benefit Trust (28,499,410) (18,589,369)
Transfers from affiliated plans 231,296,586 -
--------------- --------------
Total net transfers 202,797,176 (18,589,369)
--------------- --------------
NET (DECREASE) INCREASE IN NET ASSETS (1,483,760,008) 3,062,987,032
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 17,881,885,279 14,818,898,247
--------------- ---------------
End of year $16,398,125,271 $17,881,885,279
===============
The accompanying notes are an integral part of these statements.
</TABLE>
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
- ---------------------------------------------------------------------------
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. Effective July 1, 1998 and November 1,
1998, the Board of Directors of the Company approved the mergers of The
P&G/Noxell Transitional Profit Sharing Trust (Noxell) and the Sundor Brands
Profit Sharing Plan, respectively, into the Plan. The total net assets
transferred to the Plan from these plans were $231,296,586 in 1999. The
Plan 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. As a means of extending the benefits of the ESOP
to participants over a longer period, the ESOT entered into a term loan
agreement with the Company under which outstanding borrowings were
$78,500,000 and $69,000,000 as of June 30, 1999 and 1998, respectively (see
Note 7). 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, 1999 and 1998, the net assets available to the ESOT to satisfy
a portion of the postretirement benefits were $2,345,075,330 and
$2,442,580,308, 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, 1999 and 1998.
<CAPTION>
June 30, 1999
----------------------------------------------------------
SERIES A SERIES B TOTAL
<S> <C> <C> <C>
Short-term investments, plus accrued interest $ 15,907,878 $ 39,160,717 $ 55,068,595
Series A Preferred Stock 5,207,039,475 5,207,039,475
Series B Preferred Stock 3,345,521,613 3,345,521,613
-------------- -------------- --------------
Total investments 5,222,947,353 3,384,682,330 8,607,629,683
Dividends receivable 8,200,000 7,193,000 15,393,000
-------------- -------------- --------------
Total assets 5,231,147,353 3,391,875,330 8,623,022,683
-------------- -------------- --------------
Interest payable on notes and debentures (12,714,850) (46,800,000) (59,514,850)
Note payable to The Procter & Gamble Company
(Series A Preferred Stock) (78,500,000) (78,500,000)
Notes payable (Series A Preferred Stock) (471,982,865) (471,982,865)
Debentures (Series B Preferred Stock) (1,000,000,000) (1,000,000,000)
-------------- -------------- --------------
Total liabilities (563,197,715) (1,046,800,000) (1,609,997,715)
-------------- -------------- --------------
ESOT Net assets $4,667,949,638 $2,345,075,330 $7,013,024,968
============== ============== ==============
<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
============== ============== ==============
</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,
1999 and 1998.
<CAPTION>
SERIES A SERIES B TOTAL
<S> <C> <C> <C>
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
Net appreciation in fair value of investments (113,134,456) (68,581,854) (181,716,310)
Interest on investments and dividends 68,549,588 78,501,286 147,050,874
Contributions by The Procter & Gamble Company 52,557,500 14,675,000 67,232,500
Interest expense (47,070,115) (93,600,000) (140,670,115)
Distributions to participants - cash (3,746,400) (3,746,400)
Net transfers among trusts (201,369,704) (28,499,410) (229,869,114)
-------------- -------------- --------------
ESOT net assets June 30, 1999 $4,667,949,638 $2,345,075,330 $7,013,024,968
============== ============== ==============
</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. The
benefit to which a participant is entitled is the vested benefit that can
be provided from the participant's account.
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 pays 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.
Vested participants may allocate the portion of the annual Company
contribution received in cash between the money market fund, 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 invests 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.
The "Retirement Plus" feature allows a retiree or a vested former employee
with account balances equal to or greater that $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 his or her 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%).
Effective with the merger of Noxell into the Plan, the former Noxell
participants may retain their balances in the Discretionary Contribution
Fund and the American Express Trust Income Fund investment options.
Effective July 1, 1998, all contributions to these funds were discontinued.
Former Noxell participants may transfer balances from the Discretionary
Contribution Fund into the American Express Trust Income Fund or any of the
other investment options offered by the Plan, as described above. Former
Noxell participants may also transfer balances from the American Express
Trust Income Fund into any of the investment options offered by the Plan,
as described above. Descriptions of the Discretionary Contribution Fund and
the American Express Trust Income Fund are as follows:
DISCRETIONARY CONTRIBUTION FUND - A fund investing in various equity
and debt funds with Barclays Global Investors, including the Extended
Market Fund, Equity Index Fund E, EAFE Index Fund and US Debt Index
Fund, and P&G common stock.
AMERICAN EXPRESS TRUST INCOME FUND - The prospectus indicates that
this fund invests in guaranteed interest contracts with varying
maturities, sizes and yields.
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 - 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 accounts 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 $89.25 and $91.063 per share as of June 30, 1999 and 1998, 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 $89.25 and $91.063 per
share as of June 30, 1999 and 1998, respectively. Deferred annuities are
recorded at contract value, which approximates fair value. Mutual funds
(funds) are valued by the fund managers, J.P. Morgan Investment Management,
Inc. and Barclays Global Investors, based upon the fair values 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.
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 $685,000 and $420,000 in 1999 and
1998, respectively.
RECLASSIFICATIONS - The Plan has adopted Statement of Position 99-3
"Accounting and Reporting of Certain Employee Benefit Plan Investments and
Other Disclosure Matters." As a result, the prior year financial statements
have been revised to eliminate the by-fund disclosures.
3. INCOME TAX STATUS
The Company has received a determination letter from the Internal Revenue
Service 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, 1999 and 1998, borrowings outstanding under the term
loan agreement (see Note 7) between the Company and the ESOT were
$78,500,000 and $69,000,000, 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, 1999 and 1998.
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, 1999 and 1998 was $89.25 and $91.063, respectively, per share.
During 1999 and 1998, respectively, 2,292,480 and 2,316,945 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 - In 1999 and 1998, annual dividends of $1.14 and $1.015
per share were paid quarterly at $0.285 and $0.25375 per share,
respectively. 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 1999 and 1998, 3,550,295 and 2,894,890 Series A Preferred Shares
valued at $305,640,071 and $258,946,084, respectively, were released for
allocation to participant accounts of which $279,667,663 and $234,974,080,
respectively, was used to fund a portion of the annual profit sharing
contribution and $25,972,438 and $23,972,004, respectively, was used to
fund annual dividends on allocated shares. At June 30, 1999 and 1998,
respectively, 28,324,925 and 31,875,220 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,
1999 and 1998 was $89.25 and $91.063, respectively, per share. During 1999
and 1998, 320,000 and 240,000 shares of Series B Preferred Stock were
converted to common stock and the former preferred shares were retired. 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 eligible
participant retiree health care fund accounts in accordance with the Plan
agreement as interest and/or principal are paid (see Note 8). In 1999 and
1998, 1,086,592 Series B Preferred shares valued at $91,306,189 and
$123,018,260, respectively, were released for allocation to participant
accounts. At June 30, 1999 and 1998, respectively, 29,510,608 and
30,597,200 and Series B Preferred shares were unallocated.
7. NOTES PAYABLE (SERIES A PREFERRED SHARES)
<TABLE>
Notes payable consist of the following at June 30:
<CAPTION>
PRINCIPAL
INTEREST ----------------------------
RATES SERIES MATURITY DATE 1999 1998
<S> <C> <C> <C> <C>
8.17% Series J September 3, 1998 $ 36,009,983
8.17% Series J March 3, 1999 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 $471,982,865 $545,473,839
============ ============
</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.
On March 3, 1999, the ESOT entered into a term loan agreement ("loan") with
the Company under which it may borrow a total principal amount up to
$365,500,000. Principal borrowings allowed for the years ended June 30,
2000 through 2004 are as follows: June 30, 2000 - $33,600,000; June 30,
2001 - $44,000,000; June 30, 2002 - $57,000,000; June 30, 2003 -
$69,600,000; June 30, 2004 - $82,800,000. Semiannual repayments of
principal and interest commence on September 3, 2004 and will be funded
through annual contributions by the Company and dividends received in the
Series A Preferred Stock. The loan bears an interest rate of 6% and
borrowings as of June 30, 1999 were $78,500,000.
The fair value of the total outstanding notes payable is estimated based on
current rates for debt of the same remaining maturities and approximated
$582,000,000 and $670,000,000, respectively, at June 30, 1999 and 1998.
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
$1,205,500,000 and $1,333,700,000, respectively, at June 30, 1999 and 1998.
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).
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>
1999 1998
<S> <C> <C>
Contribution for debt service $67,232,500 $23,171,589
Contribution for Annual Fund Credit 18,214,222 35,096,882
Contribution for one-share program 397,828 288,994
----------- -----------
Total $85,844,550 $58,557,465
=========== ===========
</TABLE>
10. EMPLOYEE CONTRIBUTIONS
In addition to the participant automatic salary contribution (see Note 1),
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
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.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Common stock:
The Procter & Gamble Company - 97,955,320 shares
at June 30, 1999; 110,940,591 shares at June 30, 1998; $ 8,742,512,310 $10,102,527,568
Preferred stocks:
The Procter & Gamble Company ESOP
Convertible Class A:
Series A - 58,342,179 shares at June 30, 1999;
60,634,659 shares at June 30, 1998 5,207,039,475 5,521,543,635
Series B - 37,484,836 shares at June 30, 1999;
37,804,836 shares at June 30, 1998 3,345,521,613 3,442,602,878
Short-term investments plus accrued interest 63,266,263 54,835,506
Money market fund 289,942,332 214,086,144
Deferred annuities 2,885,903 45,187,081
Mutual funds 260,580,029 68,754,023
Loans to participants 63,259,576 61,207,014
--------------- ---------------
Total $17,975,007,501 $19,510,743,849
=============== ===============
</TABLE>
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
<TABLE>
ASSETS HELD FOR INVESTMENT
ITEM 27a of FORM 5500,
JUNE 30, 1999
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FAIR
IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST VALUE
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS:
Citibank Cash $ 23,419 $ 23,419
State Street Bank Diversified Trust Fund 8,197,668 8,197,668
Atlantis One Funding Corporation Promissory Note, 4.87%, due July 1, 1999 19,389,626 19,715,000
Atlantis One Funding Corporation Promissory Note, 4.86%, due September 3, 1999 15,779,045 15,900,176
Compass Securitization LLC Promissory Note, 4.90%, due July 1, 1999 19,350,661 19,430,000
-------------- ---------------
TOTAL SHORT-TERM INVESTMENTS $ 62,740,419 $ 63,266,263
============== ===============
THE PROCTER & GAMBLE CO. COMMON STOCK, NO PAR VALUE, 97,955,320 SHARES $1,985,282,415 $ 8,742,512,310
============== ===============
THE PROCTER & GAMBLE CO. SERIES A ESOP CONVERTIBLE CLASS A
PREFERRED STOCK, NO PAR VALUE, 58,342,179 SHARES $ 802,207,857 $ 5,207,039,475
============== ===============
THE PROCTER & GAMBLE CO. SERIES B ESOP CONVERTIBLE CLASS A
PREFERRED STOCK, NO PAR VALUE, 37,484,836 SHARES $ 979,104,439 $ 3,345,521,613
============== ===============
VARIOUS INSURANCE COMPANIES Deferred Annuities $ 2,885,903 $ 2,885,903
============== ===============
JP MORGAN Money Market Fund $ 289,942,332 $ 289,942,332
============== ===============
MUTUAL FUNDS:
JP Morgan Bond Fund $ 68,197,959 $ 70,523,169
JP Morgan Pre-Mix A Fund 5,404,856 5,694,761
JP Morgan Pre-Mix B Fund 19,350,503 21,311,554
JP Morgan Pre-Mix C Fund 18,451,424 20,700,315
JP Morgan U.S. Large Company Stock Fund 7,005,293 8,730,523
Merrill Lynch Government Series Bond Fund 555,460 555,460
American Express Trust Income Fund 5,077,092 5,809,963
Discretionary Contribution Fund:
The Procter & Gamble Company Co.
common stock 480,549 shares 8,096,078 42,888,998
Barclays Global Investors Equity Index Fund E 29,834,818 39,259,360
Barclays Global Investors Extended Market Fund 3,650,125 13,474,642
Barclays Global Investors U.S. Debt Index Fund 16,887,250 18,966,587
Barclays Global Investors EAFE Index Fund 9,377,391 12,664,697
-------------- ---------------
TOTAL MUTUAL FUNDS $ 191,888,249 $ 260,580,029
============== ===============
LOANS TO PARTICIPANTS Various participants, interest rates ranging
from 6.5% to 11.5%, maturities ranging from
February 1999 through January 2009 $ 63,259,576
===============
</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, 1999
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COST OF GAIN ON
DESCRIPTION OF ASSET PURCHASES (A) SALES SALES SALE
<S> <C> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS:
None
SERIES TRANSACTIONS (B):
Wachovia Bank Diversified
Trust Fund $1,476,901,381 (796) $1,498,027,975 (678) $1,498,027,975 $ -
Procter & Gamble Company
Common Stock 318,984,793 (303) 719,559,168 (637) 360,011,023 359,548,145
<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/THOMAS J. MESS
Date: December 16, 1999 ---------------------------------------
Thomas J. Mess
Member, Policy Committee
EXHIBIT INDEX
Exhibit No. Page No.
23 Consent of Deloitte & Touche
DELOITTE &
TOUCHE
- ---------- ------------------------------------------------------
LOGO 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 15, 1999 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, 1999.
/S/DELOITTE & TOUCHE LLP
- --------------------------
Cincinnati, Ohio
December 14, 1999
- ---------------
DELOITTE TOUCHE
TOHMATSU
- ---------------
