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 for the fiscal year ended December 31, 2001, or
\ \ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 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: Procter & Gamble Pharmaceuticals Savings 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
PROCTER & GAMBLE
PHARMACEUTICALS SAVINGS PLAN
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2001 AND 2000 AND INDEPENDENT AUDITORS' REPORT
PROCTER & GAMBLE PHARMACEUTICALS SAVINGS PLAN
TABLE OF CONTENTS
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PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 31, 2001 and 2000 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 2001 and 2000 3
Notes to Financial Statements for the Years Ended
December 31, 2001 and 2000 4
SUPPLEMENTAL SCHEDULES OMITTED - The following supplemental schedules were
omitted because of the absence of conditions under which they are required
or due to their inclusion in information filed by The Procter & Gamble
Master Savings Trust:
Reportable Transactions
Assets Held for Investment Purposes
Assets Acquired and Disposed of Within the Plan Year
Party-in-Interest Transactions
Obligations in Default
Leases in Default
INDEPENDENT AUDITORS' REPORT
To The Procter & Gamble Master Savings Plan Committee:
We have audited the accompanying statements of net assets available for benefits
of the Procter & Gamble Pharmaceuticals Savings Plan (the "Plan") as of December
31, 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 as of December 31,
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.
/s/DELOITTE & TOUCHE LLP
----------------------------
DELOITTE & TOUCHE
June 10, 2002
PROCTER & GAMBLE PHARMACEUTICALS SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2001 AND 2000
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2001 2000
---- ----
ASSETS - Investment in The Procter & Gamble
Master Savings Trust, at fair value $55,063,552 $62,954,417
LIABILITIES - Accrued administrative expenses 49,720 57,322
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $55,013,832 $62,897,095
=========== ===========
See notes to financial statements.
PROCTER & GAMBLE PHARMACEUTICALS SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
2001 2000
---- ----
ADDITIONS -
Investment income (loss):
Equity in net losses of The Procter and
Gamble Master Savings Trust $ (3,913,324) $ (5,394,450)
------------ ------------
DEDUCTIONS:
Distributions and withdrawals to participants 3,774,726 3,548,668
Administrative expenses 195,213 229,821
------------ ------------
Total deductions 3,969,939 3,778,489
------------ ------------
NET DECREASE (7,883,263) (9,172,939)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 62,897,095 72,070,034
------------ ------------
End of year $ 55,013,832 $ 62,897,095
============ ============
See notes to financial statements.
PROCTER & GAMBLE PHARMACEUTICALS SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
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1. DESCRIPTION OF THE PLAN
The following brief description of the Procter & Gamble Pharmaceuticals
Savings Plan (the "Plan") is provided for general information only.
Participants should refer to the Plan agreement for more complete
information.
GENERAL - The Norwich Eaton Employee Savings Plan began on August 1, 1982
and was modified effective July 1, 1985 to meet the requirements under
Internal Revenue Code Section 401(k). Norwich Eaton is a wholly-owned
subsidiary of The Procter & Gamble Company ("Company"). During 1986, the
assets and liabilities of the Norwich Eaton Employee Savings Plan were
transferred to create three plans, one for salaried employees, one for
hourly employees and one for Norwich Eaton's Greenville location
employees. Effective July 1, 1987, the Greenville plan was terminated in
connection with a corporate reorganization. Effective June 30, 1994, the
hourly plan was merged into the salary plan which created the Plan. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
CONTRIBUTIONS AND VESTING - In connection with the cessation of
contributions to the Plan effective July 1, 1991, all participants became
fully vested and no new participants were allowed in the Plan. Plan
participants became eligible to participate in The Procter & Gamble Profit
Sharing Trust and Employee Stock Ownership Plan effective July 1, 1991.
DISTRIBUTIONS - The Plan provides for benefits to be paid upon retirement,
disability, death, or separation other than retirement as defined by the
Plan document. Plan benefits may be made in a lump sum of cash or shares
of common stock or in installment payments over a period not to exceed 120
months. Retired or terminated employees shall commence benefit payments
upon attainment of age 70 1/2.
WITHDRAWALS - A participant may withdraw any portion of after-tax
contributions once in any six-month period. Participants who have attained
age 59 1/2 or have demonstrated financial hardship may withdraw all or any
portion of their before-tax contributions once in any six-month period.
PLAN TERMINATION - Subsequent to December 31, 2001, the Company terminated
the Plan subject to the provisions of ERISA (Note 6).
ADMINISTRATION - The Plan is administered by the Master Savings Plan
Committee consisting of four members appointed by the Board of Directors
of the Company, except for duties specifically vested in the trustee, PNC
Bank, Ohio, N.A. ("PNC Bank"), who is also appointed by the Board of
Directors of the Company.
PARTICIPANT ACCOUNTS AND INVESTMENT OPTIONS - Each participant's account
is credited with an allocation of the Plan's earnings. The benefit to
which a participant is entitled is limited to the benefit that can be
provided from the participant's account. Participants may allocate their
account in one or all of the following investment options offered by the
Plan:
ENHANCED CASH FUND - The prospectus indicates that this fund invests in
short to medium length maturity, interest-bearing instruments.
COMPANY STOCK FUND - A fund that invests in shares of The Procter &
Gamble Company common stock.
ACTIVE FIXED-INCOME CORE FUND - The prospectus indicates that this fund
invests in a diversified portfolio of publicly and privately traded
corporate, government, international and mortgage backed bonds.
DISCIPLINED EQUITY FUND - The prospectus indicates that this fund
invests in equity securities of approximately 300 domestic, large
company stocks.
DIVERSIFIED FUND - The prospectus indicates that this fund invests in a
balanced portfolio consisting of both equity and fixed securities.
SMALL COMPANY EQUITY II FUND - The prospectus indicates that this fund
invests in a portfolio of equity securities issued by small companies.
INTERNATIONAL EQUITY FUND - The prospectus indicates that this fund
invests in a diversified portfolio of equity securities of foreign
corporations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BASIS OF ACCOUNTING - The accompanying financial statements have been
prepared on the accrual basis of accounting and the Plan's net assets and
transactions are recorded at fair value. The Plan's investment in The
Procter & Gamble Company common stock is valued at the closing price on an
established security exchange. The Plan's investment funds (funds) are
valued by the fund manager, J.P. Morgan Investment Management, Inc., based
upon the fair value of the funds' underlying investments. Income from
investments is recognized when earned and is allocated to each plan
participating in The Procter & Gamble Master Savings Trust (Master Trust)
by PNC Bank and to each participant's account by the Plan's recordkeeper.
EXPENSES OF THE PLAN - Investment management expenses were paid by the
Plan in 2001 and 2000. All other expenses are paid by the Company.
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.
The Plan invests in Company common stock and in various mutual funds which
include investments in U.S. Government securities, corporate debt
instruments, and corporate stocks. Investment securities, in general, are
exposed to various risks, such as interest rate, credit, and overall
market volatility. Due to the level of risk associated with certain
investment securities, it is reasonably possible that changes in the
values of investment securities will occur in the near term and that such
changes could materially affect the amounts reported in the statements of
net assets available for plan benefits.
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 accounting for changes in the fair value of derivatives
depends on their intended use and designation. The adoption of this
standard did not have a material effect on the Plan's financial statement.
3. TAX STATUS
The Internal Revenue Service has determined and informed the Company by
letter dated March 7, 2002, that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code (IRC).
The Plan has been amended since receiving the latest determination letter.
However, the plan administrator believes that the Plan is designed and is
currently being operated in compliance with the applicable provisions of
the IRC at December 31, 2001 and 2000. Therefore, they believe that the
Plan was qualified and tax-exempt as of December 31, 2001 and 2000 and no
provision for income taxes has been reflected in the accompanying
financial statements.
4. INTEREST IN MASTER TRUST
Effective January 1, 1993, the Company formed the Master Trust in
accordance with a master trust agreement with PNC Bank.
Use of a master trust permits the commingling of investments that fund
various Company-sponsored defined contribution plans for investment and
administrative purposes. Although assets are commingled in the Master
Trust, PNC Bank maintains records for the purpose of allocating
contributions and changes in net assets of the Master Trust to
participating Plans based upon each plan's proportionate interest in the
Master Trust. The following represents the 2001 and 2000 audited financial
information regarding the net assets and investment income of the Master
Trust.
Investments, at fair value, held by the Master Trust at December 31,
2001 are summarized as follows:
Company JP Morgan
Stock Fund Funds Total
---------- --------- -----
The Procter & Gamble Company common
stock $ 64,337,834 $ 64,337,834
Mutual Funds $123,901,015 123,901,015
Short-term investments 4,291 8,264 12,555
Accrued interest and dividends 39,992 39,992
------------ ------------ ------------
Total investments at fair value $ 64,342,125 $123,949,271 $188,291,396
============ ============ ============
Plan's investment in Master Trust $ 4,788,933 $ 50,274,619 $ 55,063,552
Plan's percentage ownership interest in ============ ============ ============
Master Trust 7 % 41 % 29 %
============ ============ ============
Investment income (loss) from the Master Trust for the year ended
December 31, 2001 is summarized as follows:
Company JP Morgan
Stock Fund Funds Total
---------- ---------- -----
Net appreciation (depreciation) in
fair value of investments $ 221,329 $ (9,489,678) $ (9,268,349)
Dividends 1,258,927 1,258,927
Interest 2,848 110,122 112,970
------------ ------------ ------------
Total $ 1,483,104 $ (9,379,556) $ (7,896,452)
============ ============ ============
Plan's equity in net earnings of
Master Trust $ 102,980 $ (4,016,304) $ (3,913,324)
============ ============ ============
Investments, at fair value, held by the Master Trust at December 31,
2000 are summarized as follows:
Company JP Morgan
Stock Fund Funds Total
---------- ---------- -----
The Procter & Gamble Company common
stock $ 70,010,072 $ 70,010,072
Mutual funds $147,674,640 147,674,640
Short-term investments 1,799 3,796 5,595
Accrued interest and dividends 139 1,912 2,051
------------ ------------ ------------
Total investments at fair value $ 70,012,010 $147,680,348 $217,692,358
============ ============ ============
Plan's investment in Master Trust $ 4,999,503 $ 57,954,914 $ 62,954,417
Plan's percentage ownership interest in ============ ============ ============
Master Trust 7 % 40 % 29 %
============ ============ ============
Investment loss from the Master Trust for the year ended December 31,
2000 is summarized as follows:
Company JP Morgan
Stock Fund Funds Total
---------- ---------- -----
Net appreciation (depreciation) in fair
value of investments $(25,585,173) $ (8,079,528) $(33,664,701)
Dividends 1,183,956 1,183,956
Interest 4,967 10,478 15,445
------------ ------------ ------------
Total $(24,369,250) $ (8,069,050) $(32,465,300)
============ ============ ============
Plan's equity in net earnings (losses) of
Master Trust $ (1,866,711) $ (3,527,739) $ (5,394,450)
============ ============ ============
5. DISTRIBUTIONS PAYABLE
Distributions payable to participants at December 31, 2001 and 2000 are
approximately $119,000 and $86,000, respectively.
6. SUBSEQUENT EVENT
Effective May 1, 2002, the Plan was converted from the Master Trust at PNC
Bank to American Century and merged into The Procter and Gamble
Subsidiaries Savings Plan.
******
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.
PROCTER & GAMBLE PHARMACEUTICALS
SAVINGS PLAN
/S/THOMAS J. MESS
Date: June 28, 2002 ---------------------------------------
Thomas J. Mess
Secretary for Trustees
EXHIBIT INDEX
Exhibit No. Page No.
23 Consent of Deloitte & Touche