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, 2001, 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, 2001 and 2000
and Supplemental Schedules
for the Year Ended June 30,2001
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, 2001 and 2000 2
Statements of Changes in Net Assets Available for Benefits for
the Years Ended June 30, 2001 and 2000 3
Notes to Financial Statements for the Years Ended June 30, 2001 and 2000 4
SUPPLEMENTAL SCHEDULES:
Schedule of Assets Held for Investment, Schedule H, Part IV, Line 4i
of Form 5500, June 30, 2001 15
Schedule of Reportable Transactions, Schedule H, Part IV, Line 4j
of Form 5500, for the Year Ended June 30, 2001 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
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, 2001 and 2000, 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 auditing standards generally accepted
in the United States of America. 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, 2001 and
2000, and the changes in net assets available for benefits for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
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 2001 financial statements and, in our opinion, are fairly stated in
all material respects when considered in relation to the basic 2001 financial
statements taken as a whole.
September 7, 2001
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
JUNE 30, 2001 and 2000
-------------------------------------------------------------------------------------------------------------
2001 2000
---- ----
INVESTMENTS, AT FAIR VALUE:
Short-term investments, plus accrued interest $ 54,669,505 $ 41,219,992
Money market funds 222,257,974 212,425,641
The Procter & Gamble Company common stock -
79,113,403 shares (cost $1,909,679,878) at June 30, 2001;
88,210,651 shares (cost $2,023,520,638) at June 30, 2000; 5,047,435,111 5,050,059,770
The Procter & Gamble Company ESOP Convertible
Class A Preferred Stock:
Series A - 54,219,605 shares (cost $745,521,346) at June 30, 2001;
55,925,072 shares (cost $768,972,865) at June 30, 2000 3,459,210,799 3,201,710,372
Series B - 36,604,836 shares (cost $956,118,886) at June 30, 2001;
37,084,836 shares (cost $968,656,445) at June 30, 2000 2,335,388,537 2,123,106,861
Mutual funds 396,222,034 219,097,659
Deferred annuities 132,410 143,058
Loans to participants 48,345,681 55,687,129
--------------- ---------------
Total investments 11,563,662,051 10,903,450,482
--------------- ---------------
ACCOUNTS RECEIVABLE:
Contribution from The Procter & Gamble Company 271,709,026 998,359
Dividends receivable (Preferred Stock) 16,382,000 16,841,000
--------------- ---------------
Total accounts receivable 288,091,026 17,839,359
--------------- ---------------
Total assets 11,851,753,077 10,921,289,841
--------------- ---------------
LIABILITIES:
Interest payable on notes and debentures 56,351,839 57,826,064
Note payable to The Procter & Gamble Company
(Series A Preferred Stock) 67,600,000 23,600,000
Notes payable (Series A Preferred Stock) 305,911,868 392,333,833
Debentures (Series B Preferred Stock) 1,000,000,000 1,000,000,000
--------------- ---------------
Total liabilities 1,429,863,707 1,473,759,897
--------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS $10,421,889,370 $ 9,447,529,944
=============== ===============
The accompanying notes are an integral part of these statements.
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
--------------------------------------------------------------------------------------------------------------
2001 2000
---- ----
ADDITIONS:
Investment income (loss):
Net appreciation (depreciation) in fair value of investments $ 1,211,045,041 $(5,731,954,162)
Dividends 271,246,366 269,187,152
Interest on investments 14,194,308 18,948,623
Interest on loans to participants 4,977,604 5,276,323
--------------- ---------------
Total investment income (loss) 1,501,463,319 (5,438,542,064)
--------------- ---------------
Contributions by The Procter & Gamble Company
(Net of forfeitures of $124,852 in 2001 and
$267,893 in 2000) 321,039,540 110,683,533
Employee automatic salary contributions - 58,983,698
Employee contributions 40,080,272 29,871,970
--------------- ---------------
Total contributions 361,119,812 199,539,201
--------------- ---------------
Total changes 1,862,583,131 (5,239,002,863)
--------------- ---------------
DEDUCTIONS:
Distributions to participants:
The Procter & Gamble Company common stock -
5,685,491 shares (cost $110,971,247) in 2001;
10,374,956 shares (cost $185,717,518) in 2000; (376,142,333) (923,902,997)
Cash (270,425,550) (557,549,167)
Mutual funds (126,097) -
Deferred annuities - (25,000)
Automatic dividends paid to participants (83,971,959) (58,983,698)
Interest expense (125,120,160) (134,816,533)
---------------- ---------------
Total deductions (855,786,099) (1,675,277,395)
---------------- ---------------
TRANSFERS TO THE PROCTER & GAMBLE
RETIREE BENEFIT TRUST (32,437,606) (36,315,069)
---------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS 974,359,426 (6,950,595,327)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 9,447,529,944 16,398,125,271
--------------- ---------------
End of year $10,421,889,370 $ 9,447,529,944
=============== ===============
The accompanying notes are an integral part of these statements.
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
--------------------------------------------------------------------------------
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). Effective July 1, 2000 and January
1, 2001, employees of Recovery Engineering, Inc. and IAMS, respectively,
are eligible to participate in the Plan. 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 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
$67,600,000 and $23,600,000 as of June 30, 2001 and 2000, 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 available to fund postretirement benefits
and may not be used for profit sharing purposes, except as permitted under
certain provisions in the Plan document.
At June 30, 2001 and 2000, the net assets available to the ESOT to satisfy
a portion of the postretirement benefits were $1,333,829,932 and
$1,122,282,872, 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.
The balances in the investments and liabilities held in the ESOT related to Series A and
B Preferred Stock and other are summarized as follows for the years ended June 30, 2001
and 2000.
June 30, 2001
---------------------------------------------------------------------
SERIES A SERIES B OTHER TOTAL
Short-term investments, plus accrued interest $ 13,926,001 $ 38,217,395 $ $ 52,143,396
Common stock 135,256 135,256
Loans to participants 854,154 854,154
Series A Preferred Stock 3,459,210,799 3,459,210,799
Series B Preferred Stock 2,335,388,537 2,335,388,537
-------------- -------------- ---------- --------------
Total investments 3,473,136,800 2,373,605,932 989,410 5,847,732,142
Dividends receivable 9,358,000 7,024,000 16,382,000
-------------- -------------- ---------- --------------
Total assets 3,482,494,800 2,380,629,932 989,410 5,864,114,142
-------------- -------------- ---------- --------------
Interest payable on notes and debentures (9,551,839) (46,800,000) (56,351,839)
Note payable to The Procter & Gamble Company
(Series A Preferred Stock) (67,600,000) (67,600,000)
Notes payable (Series A Preferred Stock) (305,911,868) (305,911,868)
Debentures (Series B Preferred Stock) (1,000,000,000) (1,000,000,000)
-------------- -------------- ---------- --------------
Total liabilities (383,063,707) (1,046,800,000) (1,429,863,707)
-------------- -------------- ---------- --------------
ESOT net assets $3,099,431,093 $1,333,829,932 $ 989,410 $4,434,250,435
============== ============== ========== ==============
June 30, 2000
-----------------------------------------------------
SERIES A SERIES B TOTAL
Short-term investments, plus accrued interest $ 10,200 $ 38,860,011 $ 38,870,011
Common stock
Loans to participants
Series A Preferred Stock 3,201,710,371 3,201,710,372
Series B Preferred Stock 2,123,106,861 2,123,106,861
-------------- -------------- --------------
Total investments 3,201,720,572 2,161,966,872 5,363,687,444
-------------- -------------- --------------
Dividends receiveable 9,725,000 7,116,000 16,841,000
-------------- -------------- --------------
Total assets 3,211,445,572 2,169,082,872 5,380,528,444
-------------- -------------- --------------
Interest payable on notes and debentures (11,026,064) (46,800,000) (57,826,064)
Note payable to The Procter & Gamble Company
(Series A Preferred Stock) (23,600,000) (23,600,000)
Notes payable (Series A Preferred Stock) (392,333,833) (392,333,822)
Debentures (Series B. Preferred Stock) (1,000,000,000)
-------------- -------------- --------------
Total liabilities (426,959,897) (1,046,800,000) (1,473,759,897)
-------------- -------------- --------------
ESOT net assets $2,784,485,675 $1,122,282,872 $3,906,768,547
============== ============== ==============
The activity in the investments and liabilities held in the ESOT related to Series
A and B Preferred Stock and other are summarized as follows for the years ended
June 30, 2001 and 2000.
SERIES A SERIES B OTHER TOTAL
ESOT net assets June 30, 1999 4,667,949,638 2,345,075,330 7,013,024,968
Net depreciation in fair value of investments (1,788,156,238) (1,186,099,683) (2,974,255,921)
Interest on investments and dividends 74,514,780 77,802,294 152,317,074
Contributions by The Procter & Gamble Company 93,984,942 15,420,000 109,404,942
Interest expense (41,216,533) (93,600,000) (134,816,533)
Distributions to participants - cash (5,418,048) - (5,418,048)
Net transfers among trusts (217,172,866) (36,315,069) (253,487,935)
--------------- --------------- ---------- _--------------
ESOT net assets June 30, 2000 2,784,485,675 1,122,282,872 3,906,768,547
Net appreciation (depreciation) in fair value of
investment 370,048,957 244,719,283 (5,804) 614,762,436
Interest on investments and dividends 78,275,502 76,866,383 521 155,142,406
Interest on loans to participants 38,329 38,329
Contributions by The Procter & Gamble Company 33,062,000 15,999,000 49,061,000
Interest expense (31,520,160) (93,600,000) (125,120,160)
Automatic dividends paid to participants (17,532,647) (17,532,647)
Distributions to participants - cash (4,841,571) (4,841,571)
Net transfers among trusts (112,546,663) (32,437,606) 956,364 (144,027,905)
--------------- --------------- ---------- ---------------
ESOT net assets June 30, 2001 $ 3,099,431,093 $ 1,333,829,932 $ 989,410 $ 4,434,250,435
=============== =============== ========== ===============
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 Plan credit years, as
defined in the Plan document. The benefit to which a participant is
entitled is the vested benefit that can be provided from the participant's
account.
Prior to July 1, 2000, a participant could choose to receive directly some
or all of the quarterly dividends earned on the shares of Company common
stock within his or her account in cash. Additionally, the Plan paid
quarterly dividends earned on the shares of Company common stock held
within a participant's account, as elected by each participant, directly
to the participant (automatic dividends). Because the automatic dividends
paid to the participant correspond with the amount of the automatic salary
contribution by the participant, the amount of automatic dividends paid is
subject to IRS limitations. A portion of a participant's pre-tax
compensation was deferred and contributed to their Plan account to offset
the automatic dividends (automatic salary contribution). All automatic
salary contributions to the Plan were invested in Company common stock.
Effective July 1, 2000, dividends earned on the shares of Company common
stock within a participant's account will automatically be distributed to
the participant as part of his or her compensation, subject to IRS
limitations. Dividends earned on the shares of Company preferred stock
within a participant's account will automatically be distributed to the
participant as part of his or her compensation, subject to IRS limitations
and will only ocurr to non-highly compensated participants. Any dividend
not distributed to a participant will be reinvested in the Plan. At the
same time the dividend is distributed, the Company will reduce the
participant's wages by the amount of the dividend. The Company will then
allocate a discretionary contribution consisting of Series A Preferred
Stock to the participant's account that is equal to the amount of the
dividend. The discretionary contribution will be used to prepay debt on
the Plan's note payable (Series A Preferred Stock), resulting in the
release of Series A Preferred Stock equal to the aggregate dividend.
Vested participants may allocate the portion of the annual Company
contribution received in cash between the money market fund, short-term
investments, 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. Effective July 1, 2000, employee contributions and account
balances of vested participants that have reached the age of fifty may be
allocated to the investment options that were previously only available to
Retirement Plus participants as well as to the investments options
previously described. A description of the investment options is as
follows:
COMMON STOCK FUND - A fund investing in shares of Company common stock.
DEFERRED ANNUITIES FUND - A fund investing in guaranteed investment
contracts with various insurance companies.
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, 2001, the Plan has added the JP Morgan International
Equity Fund and the JP Morgan Small Company Fund as investment options to
participants. In addition to the previously described changes effective
July 1, 2000, the Retirement Plus feature allows a retiree or a vested
former employee with account balances equal to or greater than $3,500 to
maintain some or all of his or her funds in the Plan. If a participant
chooses the Retirement Plus option, he or she must maintain at least 50%
(40% effective July 1, 2000) of his or her account balance invested in
Company common stock. Also, all common and Series A 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 document. 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 could retain their balances in the Discretionary Contribution
Fund and American Express Trust Income Fund investment options. Effective
July 1, 1998, all contributions to these funds were discontinued.
Effective March 19, 2001, the assets of the Discretionary Contribution
Fund were liquidated and reallocated to the investment options available
under the Plan. Former Noxell participants may transfer balances from the
American Express Trust Income Fund into any of the other investment
options offered by the Plan, as described above. Descriptions of the
American Express Trust Income Fund is as follows:
AMERICAN EXPRESS TRUST INCOME FUND - The prospectus indicates that this
fund invests in guaranteed investment 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, but with the Company's additional preferred
contributions, the participant is immediately 100% vested.
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 or a partial amount in 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 20 years or the participant's
life expectancy. Effective July 1, 2000, active participants are permitted
to receive annual in-service withdrawals up to 2% of their account
balance.
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, provided that the Company's $300 million guarantee described in
footnote nine is satisfied, 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 the prime rate plus 1%.
Loans are repayable through payroll deductions of principal and interest
over a maximum term of 60 months (120 months if the loan is to purchase a
primary residence). Effective March 19, 2001, participants may take loans
against Convertible Class A Preferred Stock.
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 $63.80 and $57.25 per share as of June 30, 2001 and 2000,
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
$63.80 and $57.25 per share as of June 30, 2001 and 2000, 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 accounting principles generally accepted in the United States of
America 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 $1,467,000 and $1,072,000 in 2001
and 2000, respectively.
ACCOUNTING POLICIES - On January 1, 2001, the Plan adopted Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting
for Certain Derivative Instruments and Certain Hedging Activities. SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that all derivatives,
including those embedded in other contracts, be recognized as either
assets or liabilities and that those financial instruments be measured at
fair value. The adoption of this standard did not have a material effect
on the Plan's financial statements.
3. INCOME TAX STATUS
The Plan is intended to qualify under the Internal Revenue Code (`IRC") as
exempt from Federal income taxes. The Plan received a favorable
determination letter from the IRS dated November 14, 2000, in which the
IRS stated the Plan was in compliance with the applicable requirements of
the IRC. 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, 2001 and 2000, borrowings outstanding under the term
loan agreement (see Note 7) between the Company and the ESOT were
$67,600,000 and $23,600,000, 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, 2001 and 2000.
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 share of Series A
Preferred Stock plus accrued dividends, 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 shares of Series A Preferred Stock 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, 2001 and 2000 was
$63.80 and $57.25, respectively, per share. During 2001 and 2000,
respectively, 1,705,467 and 2,417,107 shares of Series A Preferred Stock
were converted into shares of Company common stock and the former Series A
Preferred Stock was retired.
ELIGIBILITY - All participants are eligible for allocation of Series A
Preferred Stock.
DIVIDEND RIGHTS - In 2001 and 2000, annual dividends of $1.40 and $1.28
per share were paid quarterly at $0.35 and $0.32 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 2001 and 2000, 2,554,087 and 6,009,754 shares of Series A Preferred
Stock valued at $167,014,812 and $342,800,203, respectively, were released
for allocation to participant accounts, of which $63,334,406 and
$313,219,537, respectively, was used to fund a portion of the annual
profit sharing contribution and $103,680,406 and $29,580,666 respectively,
was used to fund annual dividends on allocated shares. At June 30, 2001
and 2000, respectively, 19,761,084 and 22,315,171 shares of Series A
Preferred Stock 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 share of
Series B Preferred Stock plus accrued dividends, 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, 2001 and 2000 was $63.80 and
$57.25, respectively, per share. During 2001 and 2000, respectively,
480,000 and 400,000 shares of Series B Preferred Stock were converted to
Company common stock and the former Series B Preferred Stock was 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 Plan
are eligible for allocation of Series B Preferred Stock. Additionally,
former participants that have retired from the Company and are currently
participating in a Company sponsored retiree healthcare plan are also
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 each of
2001 and 2000, 1,086,592 shares of Series B Preferred Stock valued at
$69,100,272 and $59,039,594, respectively, were released for allocation to
participant accounts. At June 30, 2001 and 2000, respectively, 27,337,424
and 28,424,016 shares of Series B Preferred Stock were unallocated.
7. NOTES PAYABLE (SERIES A PREFERRED STOCK)
Notes payable consist of the following at June 30:
Interest Principal
Rates Series Maturity Date 2001 2000
8.33% Series K September 3, 2000 $ 42,329,471
8.33% Series K March 3, 2001 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 $305,911,868 $392,333,833
============ ============
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 could borrow a total principal amount up
to $365,500,000. Under the terms of the loan agreement, the Plan elected
to make a prepayment of $88,500,000 during 2000 that was applied against
the unpaid loan balance. The Plan, which borrowed $44,000,000 during 2001,
may borrow a total principal amount up to $277,000,000. Principal
borrowings allowed for the years ended June 30, 2002 through 2004 are as
follows: 2002 - $57,000,000; 2003 - $69,600,000; 2004 - $82,800,000.
Mandatory semiannual repayments of principal and interest commence on
September 3, 2004 and will be funded through annual contributions by the
Company and dividends received on the Series A Preferred Stock. The loan
bears an interest rate of 6% and borrowings as of June 30, 2001 and 2000
were $67,600,000 and $23,600,000, respectively.
The fair value of the total outstanding notes payable is estimated based
on current rates for debt of the same remaining maturities and
approximated $293,655,000 and $336,537,000, respectively, at June 30, 2001
and 2000.
8. DEBENTURES (SERIES B PREFERRED STOCK)
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
$1,222,600,000 and $1,173,000,000, respectively, at June 30, 2001 and
2000.
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 Stock 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 in 1997 and subsequently modified in 1999, the Company's cash
contribution is guaranteed up to $300 million above and beyond the benefit
funded by the shares released by the ESOT as specified in the Plan
document.
Beginning July 1, 1997, the Company granted one share of Company 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. Effective July 1, 2000 new Plan
participants no longer receive one share of Company common stock.
Company contributions to the Plan for the years ended June 30 are
as follows:
2001 2000
Contribution for debt service $ 49,061,000 $109,404,942
Contribution for Annual Fund Credit 271,978,540 998,359
Contribution for one-share program 280,232
------------ ------------
Total $321,039,540 $110,683,533
============ ============
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.
2001 2000
Common stock (A):
The Procter & Gamble Company $ 5,047,435,111 $ 5,050,059,770
Preferred stocks:
The Procter & Gamble Company ESOP
Convertible Class A:
Series A 3,459,210,799 3,201,710,372
Series B 2,335,388,537 2,123,106,861
Other investments 721,627,604 528,573,479
--------------- ---------------
Total $11,563,662,051 $10,903,450,482
=============== ===============
(A) Represents nonparticipant-directed investments under the guidance
of SOP 99-3.
For the years ended June 30, 2001 and 2000, the Plan's investments,
including gains and losses on investments bought and sold as well as held
during the year, appreciated (depreciated) as follows:
2001 2000
Net appreciation (depreciation) in fair value of:
Procter & Gamble common stock $ 613,596,525 (2,760,326,016)
Procter & Gamble Series A preferred stock 370,047,676 (1,788,156,238)
Procter & Gamble Series B preferred stock 244,719,283 (1,186,099,683)
Mutual funds (17,318,443) 2,627,775
--------------- ---------------
Total $ 1,211,045,041 $(5,731,954,162)
=============== ===============
12. NONPARTICIPANT-DIRECTED INVESTMENTS
The Procter & Gamble Common Stock Fund is considered to be
nonparticipant-directed under the guidance of SOP 99-3 because Retirement
Plus participants are required to maintain at least 40% (50% prior to July
1, 2000) of their account balances in Company common stock.
The significant components of the changes in net assets of The Procter &
Gamble Common Stock Fund as of June 30 are as follows:
2001 2000
Net assets - Common Stock Fund $ 5,047,435,111 $ 5,050,059,770
=============== ===============
The significant components of the changes in net asssets of the Common
Stock Fund consist of the following for the years ended June 30, 2001 and
2000:
2001 2000
Net appreciation (depreciation) in fair value $ 613,595,244 $(2,760,326,016)
Dividends 117,472,456 118,491,515
Contributions 21,958,390 107,026,334
Distributions to participants (466,823,283) (1,050,947,977)
Net interfund transfers (433,952,274) (360,184,331)
Transfers from ESOT 145,124,808 253,487,935
-------------- ---------------
Total changes in net assets (2,624,659) (3,692,452,540)
Net assets, beginning of year 5,050,059,770 8,742,512,310
-------------- ---------------
Net assets, end of year $5,047,435,111 $ 5,050,059,770
============== ===============
* * * * * *
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
ASSETS HELD FOR INVESTMENT
SCHEDULE H, PART IV, LINE 4i OF FORM 5500
JUNE 30, 2001
------------------------------------------------------------------------------------------------------------------
IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT FAIR VALUE
SHORT-TERM INVESTMENTS:
Citibank JP Morgan Liquified $ 52,143,037
State Street Bank Diversified Trust Fund 2,526,468
--------------
TOTAL SHORT-TERM INVESTMENTS $ 54,669,505
==============
THE PROCTER & GAMBLE CO. COMMON STOCK, NO PAR VALUE, 79,113,403 SHARES
(cost basis, $1,909,679,898) $5,047,435,111
==============
THE PROCTER & GAMBLE CO. SERIES A ESOP CONVERTIBLE CLASS A
PREFERRED STOCK, NO PAR VALUE, 54,219,605 SHARES $3,459,210,799
==============
THE PROCTER & GAMBLE CO. SERIES B ESOP CONVERTIBLE CLASS A
PREFERRED STOCK, NO PAR VALUE, 36,604,836 SHARES $2,335,388,537
==============
VARIOUS INSURANCE COMPANIES Deferred Annuities $ 132,410
==============
JP MORGAN Money Market Fund $ 222,257,974
==============
MUTUAL FUNDS:
JP Morgan Bond Fund $ 65,646,742
JP Morgan Pre-Mix A Fund 11,062,617
JP Morgan Pre-Mix B Fund 90,337,810
JP Morgan Pre-Mix C Fund 118,483,904
JP Morgan U.S. Large Company Stock Fund 107,872,718
Merrill Lynch Government Series Bond Fund 141,708
American Express Trust Income Fund 2,676,525
--------------
TOTAL MUTUAL FUNDS $ 396,222,024
==============
LOANS TO PARTICIPANTS Various participants, interest rates ranging
from 6.5% to 11% maturities ranging from
July 2001 through December 2009 $ 48,345,681
==============
THE PROCTER & GAMBLE PROFIT SHARING TRUST
AND EMPLOYEE STOCK OWNERSHIP PLAN
REPORTABLE TRANSACTIONS
SCHEDULE H, PART IV, LINE 4j OF FORM 5500
FOR THE YEAR ENDED JUNE 30, 2001
COST OF GAIN ON
DESCRIPTION OF ASSET PURCHASES (A) SALES SALES SALE
SINGLE TRANSACTIONS -
None
SERIES OF TRANSACTIONS (B) -
The Procter & Gamble Company
Common Stock $ 198,417,401 (351) $ 583,401,534 (2,320) $226,518,229 $356,883,305
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.
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
Date: December 18, 2001 /S/ THOMAS J. MESS
------------------------------------
Thomas J. Mess
Secretary, Trustees of The Procter
& Gamble Profit Sharing Trust and
Employee Stock Ownership Plan
EXHIBIT INDEX
Exhibit No. Page No.
23 Consent of Deloitte & Touche