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, 1998 --- TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _____ to _____ _______________ SALARY DEFERRAL SAVINGS PLAN OF ENGELHARD CORPORATION ----------------------------------------------------- (Full title of the plan) ENGELHARD CORPORATION (Exact name of issuer as specified in its charter) 101 WOOD AVENUE, ISELIN, NEW JERSEY 08830 - ----------------------------------- --------- (Address of principal executive offices) (Zip code) DELAWARE 22-1586002 - ------------------------------- ---------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 1 Salary Deferral Savings Plan of Engelhard Corporation Table of Contents Description Page ----------- ---- Report of Independent Accountants 3 Statements of Financial Condition 4-9 at December 31, 1998 and 1997 Statements of Income and Changes in Plan Equity 10-18 for each of the three years in the period ended December 31, 1998 Notes to Financial Statements 19-28 Supplemental Schedule Schedule of Investments at December 31, 1998 and 1997 29-30 Consent of Independent Public Accountants 31 2 Report of Independent Accountants --------------------------------- To the Pension and Employee Benefits Plans Committee of Engelhard Corporation: In our opinion, the financial statements of the Salary Deferral Savings Plan of Engelhard Corporation listed in the table of contents on page 2 of this Form 11-K present fairly, in all material respects, the financial condition of the Plan at December 31, 1998 and 1997, and the income and changes in plan equity for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule listed in the table of contents on page 2 of this Form 11-K is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is 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. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PRICEWATERHOUSECOOPERS L.L.P. New York, New York June 18, 1999 3 Salary Deferral Savings Plan of Engelhard Corporation Statement of Financial Condition at December 31, 1998 (Page 1 of 3) Company Fixed Windsor II Windsor Equity Stock Income Growth Growth Balanced Index Fund Fund Fund Fund Fund Fund ----------- ----------- ------------ ----------- ----------- ----------- Assets: Investments, at fair value (combined cost of $142,886,268) $45,391,121 $27,603,965 $4,907,253 $26,638,674 $14,624,519 $18,577,286 Contributions Receivable: Participants 148,215 115,885 50,738 152,035 84,517 117,023 Engelhard Corporation 264,995 - - - - - Promissory notes from participants 64,354 38,946 6,966 37,640 20,666 26,265 ----------- ----------- ----------- ----------- ---------- ---------- Total assets $45,868,685 $27,758,796 $4,964,957 $26,828,349 $14,729,702 $18,720,574 =========== =========== =========== =========== =========== =========== Plan equity: Plan equity $45,868,685 $27,758,796 $4,964,957 $26,828,349 $14,729,702 $18,720,574 =========== =========== =========== =========== =========== =========== See Accompanying Notes to Financial Statements 4 Salary Deferral Savings Plan of Engelhard Corporation Statement of Financial Condition at December 31, 1998 (Page 2 of 3) Life Life International Small Short-Term Prime Strategy Strategy Growth Cap Bond Cap Growth Income Fund Fund Fund Fund Fund Fund ------------- ---------- ---------- --------- --------- ---------- Assets: Investments, at fair value (combined cost of $142,886,268) $3,521,901 $2,894,830 $2,047,021 $2,589,252 $2,060,528 $483,341 Contributions receivable: Participants 28,877 24,964 14,792 29,990 35,867 3,172 Engelhard Corporation - - - - - - Promissory notes from participants 4,989 4,102 2,897 3,680 2,945 684 ---------- ---------- ---------- ---------- ---------- -------- Total assets $3,555,767 $2,923,896 $2,064,710 $2,622,922 $2,099,340 $487,197 ========== ========== ========== ========== ========== ======== Plan equity: Plan equity $3,555,767 $2,923,896 $2,064,710 $2,622,922 $2,099,340 $487,197 ========== ========== ========== ========== ========== ======== See Accompanying Notes to Financial Statements 5 Salary Deferral Savings Plan of Engelhard Corporation Statement of Financial Condition at December 31, 1998 (Page 3 of 3) Life Strategy Vanguard Life Strategy Conservative U.S. Moderate Growth Growth Growth Loan Fund Fund Fund Fund Combined ------------- ---------- ------------- ---------- ------------ Assets: Investments, at fair value (combined cost of 142,886,268) $891,549 $6,325,365 $1,649,482 $ - $160,206,087 Contributions receivable: Participants 10,265 66,474 23,419 - 906,233 Engelhard Corporation - - - - 264,995 Promissory notes from participants 1,267 8,980 2,350 7,493,128 7,719,859 -------- ---------- ---------- ---------- ------------ Total assets $903,081 $6,400,819 $1,675,251 $7,493,128 $169,097,174 ======== ========== ========== ========== ============ Plan equity: Plan equity $903,081 $6,400,819 $1,675,251 $7,493,128 $169,097,174 ======== ========== ========== ========== ============ See Accompanying Notes to Financial Statements 6 Salary Deferral Savings Plan of Engelhard Corporation Statement of Financial Condition at December 31, 1997 (Page 1 of 3) Company Fixed Equity Stock Income Growth Balanced Index Fund Fund Fund Fund Fund ----------- ----------- ------------ ----------- ----------- Assets: Investments, at fair value (combined cost of $118,907,680) $42,108,870 $24,554,164 $30,309,787 $10,364,961 $12,647,879 Contributions Receivable: Participants 164,965 119,868 164,487 68,990 90,669 Engelhard Corporation 218,522 - - - - Promissory notes from participants 77,085 57,939 51,091 16,574 24,558 ----------- ----------- ----------- ---------- ---------- Total assets $42,569,442 $24,731,971 $30,525,365 $10,450,525 $12,763,106 =========== =========== =========== =========== =========== Plan equity: Plan equity $42,569,442 $24,731,971 $30,525,365 $10,450,525 $12,763,106 =========== =========== =========== =========== =========== See Accompanying Notes to Financial Statements 7 Salary Deferral Savings Plan of Engelhard Corporation Statement of Financial Condition at December 31, 1997 (Page 2 of 3) Life Life International Small Short-Term Strategy Strategy Growth Cap Bond Growth Income Fund Fund Fund Fund Fund ------------- ---------- ---------- --------- ---------- Assets: Investments, at fair value (combined cost of $118,907,680) $3,007,483 $2,737,142 $820,740 $733,444 $270,823 Contributions receivable: Participants 31,145 26,599 10,918 20,854 2,580 Engelhard Corporation - - - - - Promissory notes from participants 3,919 2,386 1,941 2,162 - ---------- --------- -------- -------- -------- Total assets $3,042,547 $2,766,127 $833,599 $756,460 $273,403 ========== ========== ======== ======== ======== Plan equity: Plan equity $3,042,547 $2,766,127 $833,599 $756,460 $273,403 ========== ========== ======== ======== ======== See Accompanying Notes to Financial Statements 8 Salary Deferral Savings Plan of Engelhard Corporation Statement of Financial Condition at December 31, 1997 (Page 3 of 3) Life Strategy Vanguard Life Strategy Conservative U.S. Moderate Growth Growth Growth Loan Fund Fund Fund Fund Combined ------------- ---------- ------------- --------- ------------ Assets: Investments, at fair value (combined cost of 118,907,680) $219,418 $1,833,349 $754,984 $ - $130,363,044 Contributions receivable: Participants 3,388 36,408 12,270 - 753,141 Engelhard Corporation - - - - 218,522 Promissory notes from participants 350 3,110 997 7,024,068 7,266,180 -------- ---------- -------- ---------- ------------ Total assets $223,156 $1,872,867 $768,251 $7,024,068 $138,600,887 ======== ========== ======== ========== ============ Plan equity: Plan equity $223,156 $1,872,867 $768,251 $7,024,068 $138,600,887 ======== ========== ======== ========== ============ See Accompanying Notes to Financial Statements 9 Salary Deferral Savings Plan of Engelhard Corporation Statement of Income and Changes in Plan Equity for the Year Ended December 31, 1998 (Page 1 of 3) Company Fixed Windsor II Windsor Equity Stock Income Growth Growth Balanced Index Fund Fund Fund Fund Fund Fund ----------- ---------- ----------- ----------- ------------ ------------ Net investment income: Dividends $ 867,717 $ - $ 480,958 $ 2,348,860 $ 1,061,504 $ 893,993 Interest - 1,554,014 - - - - ----------- ---------- ---------- ----------- ------------ ------------ 867,717 1,554,014 480,958 2,348,860 1,061,504 893,993 Contributions and other receipts: Participants 1,985,958 2,192,249 1,104,066 2,722,046 1,579,287 2,414,546 Engelhard Corporation 2,737,289 - - - - - ----------- ---------- ---------- ----------- ------------ ------------ 4,723,247 2,192,249 1,104,066 2,722,046 1,579,287 2,414,546 Net realized gain on disposition of investments 1,296,766 - 36,947 688,133 369,087 442,270 Unrealized appreciation (depreciation) of investments 4,043,066 - (95,848) (2,683,638) 1,338,686 1,930,598 Distributions (2,137,372) (2,127,811) (145,165) (1,236,865) (619,478) (611,951) Transfers (5,494,181) 1,408,373 3,583,999 (5,535,552) 550,091 888,012 ------------ ------------ ---------- ----------- ------------ ------------ Change in net assets 3,299,243 3,026,825 4,964,957 (3,697,016) 4,279,177 5,957,468 Plan equity, beginning of year 42,569,442 24,731,971 - 30,525,365 10,450,525 12,763,106 ============ =========== ========== =========== ============ ============ Plan equity, end of year $45,868,685 $27,758,796 $4,964,957 $26,828,349 $14,729,702 $18,720,574 ============ =========== ========== =========== ============ ============ See Accompanying Notes to Financial Statements 10 Salary Deferral Savings Plan of Engelhard Corporation Statement of Income and Changes in Plan Equity for the Year Ended December 31, 1998 (Page 2 of 3) Life Life International Small Short-Term Prime Strategy Strategy Growth Cap Bond Cap Growth Income Fund Fund Fund Fund Fund Fund ------------- ---------- ---------- ----------- -------- -------- Net investment income: Dividends $ 68,741 $ 225,951 $ 85,641 $ 89,906 $ 66,175 $ 25,396 Interest - - - - - - ---------- ---------- ---------- ---------- ---------- -------- 68,741 225,951 85,641 89,906 66,175 25,396 Contributions and other receipts: Participants 616,111 577,338 396,887 593,467 1,015,800 141,292 Engelhard Corporation - - - - - - ---------- ---------- ---------- ---------- ---------- -------- 616,111 577,338 396,887 593,467 1,015,800 141,292 Net realized gain on disposition of investments 96,006 66,958 2,267 5,255 28,451 5,382 Unrealized appreciation (depreciation) of investments 336,936 (335,259) 1,825 259,756 163,107 6,386 Distributions (294,106) (129,823) (43,909) (1,705) (44,657) (845) Transfers (310,468) (247,396) 788,400 1,676,243 114,004 36,183 ---------- ---------- ---------- ---------- ---------- -------- Change in net assets 513,220 157,769 1,231,111 2,622,922 1,342,880 213,794 Plan equity, beginning of year 3,042,547 2,766,127 833,599 - 756,460 273,403 ---------- ---------- ---------- ---------- ---------- -------- Plan equity, end of year $3,555,767 $2,923,896 $2,064,710 $2,622,922 $2,099,340 $487,197 ========== ========== ========== ========== ========== ======== See Accompanying Notes to Financial Statements 11 Salary Deferral Savings Plan of Engelhard Corporation Statement of Income and Changes in Plan Equity for the Year Ended December 31, 1998 (Page 3 of 3) Life Life Strategy Vanguard Strategy Conservative U.S. Moderate Growth Growth Growth Loan Fund Fund Fund Fund Combined ------------ ---------- ----------- ---------- ------------ Net investment income: Dividends $ 35,267 $ 378,919 $ 65,440 $ - $ 6,694,468 Interest - - - 510,419 2,064,433 -------- ---------- ---------- ---------- ------------ 35,267 378,919 65,440 510,419 8,758,901 Contributions and other receipts: Participants 271,268 1,162,658 693,404 351,398 17,817,775 Engelhard Corporation - - - - 2,737,289 -------- ---------- ---------- ---------- ------------ 271,268 1,162,658 693,404 351,398 20,555,064 Net realized gain on disposition of investments 783 79,276 20,847 - 3,138,428 Unrealized appreciation (depreciation) of investments 39,509 750,006 109,325 - 5,864,455 Distributions (22,359) (56,102) (118,744) (229,669) (7,820,561) Transfers 355,457 2,213,195 136,728 (163,088) - -------- --------- ---------- ---------- ------------ Change in net assets 679,925 4,527,952 907,000 469,060 30,496,287 Plan equity, beginning of year 223,156 1,872,867 768,251 7,024,068 138,600,887 -------- ---------- ---------- ---------- ------------ Plan equity, end of year $903,081 $6,400,819 $1,675,251 $7,493,128 $169,097,174 ======== ========== ========== ========== ============ See Accompanying Notes to Financial Statements 12 Salary Deferral Savings Plan of Engelhard Corporation Statement of Income and Changes in Plan Equity for the Year Ended December 31, 1997 (Page 1 of 3) Company Fixed Equity Stock Income Growth Balanced Index Fund Fund Fund Fund Fund ----------- ---------- ----------- ------------ ------------ Net investment income: Dividends $ 819,447 $ - $ 4,880,851 $ 791,374 $ 1,558,580 Interest - 1,517,387 - - - ----------- ---------- ----------- ------------ ------------ 819,447 1,517,387 4,880,851 791,374 1,558,580 Contributions and other receipts: Participants 2,312,800 2,230,370 2,880,465 1,164,206 1,385,640 Engelhard Corporation 2,404,098 - - - - ----------- ---------- ----------- ------------ ------------ 4,716,898 2,230,370 2,880,465 1,164,206 1,385,640 Net realized gain (loss) on disposition of investments 1,299,661 - 703,758 252,369 249,513 Unrealized appreciation (depreciation) of investments (5,192,044) - (436,574) 1,030,888 1,239,613 Transaction fees - - - - - Distributions (2,077,923) (2,597,410) (1,466,096) (611,512) (536,238) Transfers (2,413,985) (1,799,344) 1,233,660 657,446 753,675 ------------ ------------ ----------- ------------ ------------ Change in net assets (2,847,946) (648,997) 7,796,064 3,284,771 4,650,783 Plan equity, beginning of year 45,417,388 25,380,968 22,729,301 7,165,754 8,112,323 ============ =========== =========== ============ ============ Plan equity, end of year $42,569,442 $24,731,971 $30,525,365 $10,450,525 $12,763,106 ============ =========== =========== ============ ============ See Accompanying Notes to Financial Statements 13 Salary Deferral Savings Plan of Engelhard Corporation Statement of Income and Changes in Plan Equity for the Year Ended December 31, 1997 (Page 2 of 3) Life Life International Small Short-Term Strategy Strategy Growth Cap Bond Growth Income Fund Fund Fund Fund Fund ------------- ---------- ---------- -------- -------- Net investment income: Dividends $ 128,390 $ 157,508 $ 56,581 $ 26,828 $ 8,018 Interest - - - - - ---------- ---------- -------- -------- -------- 128,390 157,508 56,581 26,828 8,018 Contributions and other receipts: Participants 563,616 473,715 209,656 259,086 22,287 Engelhard Corporation - - - - - ---------- ---------- -------- -------- -------- 563,616 473,715 209,656 259,086 22,287 Net realized gain (loss) on disposition of investments 102,799 70,631 436 4,505 (7,823) Unrealized appreciation (depreciation) of investments (150,130) 193,843 4,357 33,100 5,394 Transaction fees - (10,442) - - - Distributions (189,083) (253,681) (240,736) (39,348) (95,877) Transfers 139,613 381,406 70,174 312,348 232,468 ---------- ---------- -------- -------- -------- Change in net assets 595,205 1,012,980 100,468 596,519 164,467 Plan equity, beginning of year 2,447,342 1,753,147 733,131 159,941 108,936 ---------- ---------- -------- -------- -------- Plan equity, end of year $3,042,547 $2,766,127 $833,599 $756,460 $273,403 ========== ========== ======== ======== ======== See Accompanying Notes to Financial Statements 14 Salary Deferral Savings Plan of Engelhard Corporation Statement of Income and Changes in Plan Equity for the Year Ended December 31, 1997 (Page 3 of 3) Life Life Strategy Vanguard Strategy Conservative U.S. Moderate Growth Growth Growth Loan Fund Fund Fund Fund Combined ------------ ---------- --------- ---------- ------------ Net investment income: Dividends $ 13,432 $ 71,659 $ 31,473 $ - $ 8,544,141 Interest - - - 555,647 2,073,034 -------- ---------- -------- ---------- ------------ 13,432 71,659 31,473 555,647 10,617,175 Contributions and other receipts: Participants 130,609 435,224 295,982 - 12,363,656 Engelhard Corporation - - - - 2,404,098 -------- ---------- -------- ---------- ------------ 130,609 435,224 295,982 - 14,767,754 Net realized gain (loss) on disposition of investments 25,888 (22,168) 6,145 - 2,685,714 Unrealized appreciation (depreciation) of investments 415 173,795 49,959 - (3,047,384) Transaction fees - - - - (10,442) Distributions (261,176) (43,745) (32,252) (330,664) (8,775,741) Transfers 128,884 289,003 236,737 (222,085) - -------- -------- -------- ---------- ------------ Change in net assets 38,052 903,768 588,044 2,898 16,237,076 Plan equity, beginning of year 185,104 969,099 180,207 7,021,170 122,363,811 -------- ---------- -------- ---------- ------------ Plan equity, end of year $223,156 $1,872,867 $768,251 $7,024,068 $138,600,887 ======== ========== ======== ========== ============ See Accompanying Notes to Financial Statements 15 Salary Deferral Savings Plan of Engelhard Corporation Statement of Income and Changes in Plan Equity for the Year Ended December 31, 1996 (Page 1 of 3) Company Fixed Equity Stock Income Growth Balanced Index Fund Fund Fund Fund Fund ----------- --------- ---------- ----------- ---------- Net investment income: Dividends $ 727,600 $ - $ 2,162,237 $ 646,837 $ 737,991 Interest - 1,544,409 - - - ----------- ---------- ----------- ----------- ----------- 727,600 1,544,409 2,162,237 646,837 737,991 Contributions and other receipts: Participants 2,371,769 2,359,733 2,275,185 842,352 927,083 Engelhard Corporation 2,065,895 - - - - ----------- ---------- ----------- ----------- ----------- 4,437,664 2,359,733 2,275,185 842,352 927,083 Net realized gain (loss) on disposition of investments 2,624,826 - 372,423 221,899 204,365 Unrealized appreciation (depreciation) of investments (8,218,862) - 2,186,088 130,181 519,101 Transaction fees - - - - - Distributions (2,604,553) (2,550,656) (1,197,839) (518,181) (408,588) Transfers 1,819,595 (2,485,972) (824,155) (373,416) 15,874 ------------ ------------ ----------- ----------- ----------- Change in net assets (1,213,730) (1,132,486) 4,973,939 949,672 1,995,826 Plan equity, beginning of year 46,631,118 26,513,454 17,755,362 6,216,082 6,116,497 ============ =========== =========== =========== =========== Plan equity, end of year $45,417,388 $25,380,968 $22,729,301 $7,165,754 $8,112,323 ============ =========== =========== =========== =========== See Accompanying Notes to Financial Statements 16 Salary Deferral Savings Plan of Engelhard Corporation Statement of Income and Changes in Plan Equity for the Year Ended December 31, 1996 (Page 2 of 3) Life Life International Small Short-Term Strategy Strategy Growth Cap Bond Growth Income Fund Fund Fund Fund Fund ------------- -------- ---------- -------- --------- Net investment income: Dividends $ 104,764 $121,902 $34,004 $ 5,154 $ 3,910 Interest - - - - - ---------- ---------- ------- -------- -------- 104,764 121,902 34,004 5,154 3,910 Contributions and other receipts: Participants 410,564 296,101 157,291 34,200 109,788 Engelhard Corporation - - - - - ---------- ---------- ------- -------- -------- 410,564 296,101 157,291 34,200 109,788 Net realized gain (loss) on disposition of investments 105,158 42,347 1,221 (98) - Unrealized appreciation (depreciation) of investments 103,464 50,118 (6,977) 4,378 (4,762) Transaction fees - (9,650) - - - Distributions (269,098) (41,149) (60,471) - - Transfers 61,220 292,269 168,764 116,307 - ---------- ---------- ------- -------- -------- Change in net assets 516,072 751,938 293,832 159,941 108,936 Plan equity, beginning of year 1,931,270 1,001,209 439,299 - - ---------- ---------- ------- -------- -------- Plan equity, end of year $2,447,342 $1,753,147 $733,131 $159,941 $108,936 ========== ========== ======== ======== ======== See Accompanying Notes to Financial Statements 17 Salary Deferral Savings Plan of Engelhard Corporation Statement of Income and Changes in Plan Equity for the Year Ended December 31, 1996 (Page 3 of 3) Life Life Strategy Vanguard Strategy Conservative U.S. Moderate Growth Growth Growth Loan Fund Fund Fund Fund Combined ------------ -------- --------- -------- ------------ Net investment income: Dividends $ 7,478 $ 70,352 $ 6,622 $ - $ 4,628,851 Interest - - - 539,133 2,083,542 -------- -------- -------- ---------- ------------ 7,478 70,352 6,622 539,133 6,712,393 Contributions and other receipts: Participants 1,305 41,866 4,956 - 9,832,193 Engelhard Corporation - - - - 2,065,895 -------- -------- -------- ---------- ------------ 1,305 41,866 4,956 - 11,898,088 Net realized gain (loss) on disposition of investments - 28,588 - - 3,600,729 Unrealized appreciation (depreciation) of investments 1,466 (47,934) 3,383 - (5,280,356) Transaction fees - - - - (9,650) Distributions - - - (291,002) (7,941,537) Transfers 174,855 876,227 165,246 (6,814) - -------- -------- -------- ---------- ------------ Change in net assets 185,104 969,099 180,207 241,317 8,979,667 Plan equity, beginning of year - - - 6,779,853 113,384,144 -------- -------- -------- ---------- ------------ Plan equity, end of year $185,104 $969,099 $180,207 $7,021,170 $122,363,811 ======== ======== ======== ========== ============ See Accompanying Notes to Financial Statements 18 Notes to Financial Statements Note 1 - Description of the Plan The Salary Deferral Savings Plan of Engelhard Corporation (the Plan), as amended and restated as of June 5, 1997 is designed to provide eligible employees of Engelhard Corporation (the Company) an opportunity to save part of their income by having the Company reduce their compensation and contribute the amount of the reduction to the Plan on a tax deferred and/or post-tax basis. The following plan description is provided for general information purposes. Participants of the Plan should refer to the plan document for more detailed and complete information. Eligibility - ----------- Except as specifically included or excluded by the Board of Directors of the Company (the Board), United States salaried employees of the Company and its wholly-owned (directly or indirectly) domestic subsidiaries and all non- collectively bargained hourly employees are eligible to participate in the Plan. Contributions - ------------- The Plan permits eligible employees participating in the Plan the opportunity to defer up to 15 percent of their compensation, as defined, subject to certain restrictions and limitations, and to have that amount contributed to the Plan and the related taxes deferred. Effective January 1, 1995 employees may contribute, subject to certain restrictions and limitations, up to 10 percent of compensation to the Plan on a post-tax basis. Matching Contributions - ---------------------- The Company will contribute, on a monthly basis, subject to certain limitations and exclusions, either cash or common stock of the Company in an amount equal to 50 percent of the first 6 percent contributed by the Participants. Participants must have completed one year of service to be eligible for a matching contribution. Investments - ----------- All contributions to the Plan are held and invested by Vanguard Fiduciary Trust Company (the Trustee). The Trustee maintains 15 separate investment funds within the Plan: a) The Company Stock Fund consists of assets invested or held for investment in the common stock of the Company. In the event the assets cannot be immediately invested in Company common stock, the funds are invested in short-term securities pending investment in Company common stock. b) The Fixed Income Fund consists of assets invested in shares of the Vanguard Retirement Savings Trust. In the event the assets cannot be immediately invested in such shares or deposited as specified above, the assets are invested in direct obligations of the United States Government or agencies thereof or in obligations guaranteed as to the payment of principal and interest by the United States Government. 19 c) The Windsor II Fund consists of assets invested in the Vanguard Windsor II fund, which invests primarily in stocks which seeks long-term growth and income from dividends. d) The Growth Fund consists of assets invested in the Vanguard Windsor Fund, which invests primarily in common stocks for the purpose of realizing long-term growth of capital and income. e) The Balanced Fund consists of assets invested in the Vanguard Asset Allocation Fund, which invests in stocks, bonds and cash reserves for the purpose of maximizing long- term total return with less volatility than a portfolio of common stock. f) The Equity Index Fund consists of assets invested in the Vanguard Growth and Income Portfolio, which invests primarily in common stocks for the purpose of realizing a total return greater than the Standard & Poor's 500 Index while maintaining fundamental investment characteristics similar to such Index. g) The International Growth Fund consists of assets invested in shares of the Vanguard International Growth Portfolio or such other mutual fund or funds which invest primarily in common stocks of companies based outside the United States that have above-average growth potential for the purpose of realizing long-term capital growth. h) The Small Cap Fund consists of assets invested in shares of the Vanguard Index Trust - Small Cap Stock Portfolio or such other mutual fund or funds which invest primarily in common stocks of small-sized companies for the purpose of providing a comparatively low-cost method of passively capturing the investment returns of small-sized companies and attempting to provide investment results that parallel the performance of the unmanaged Russell 2000 Small Stock Index. i) The Short-Term Bond Fund consists of assets invested in shares of the Vanguard Fixed Income Fund or Short-Term Corporate Portfolio of the Vanguard Fixed Income Securities Fund or such other mutual fund or funds which invest primarily in relatively short maturity investment-grade bonds for the purpose of providing a level of current income consistent with a two to three year average maturity while helping to preserve capital. j) The Prime Cap funds consists of assets invested in the Vanguard Prime Cap fund and seeks long-term growth of capital. k) The Life Strategy Growth Fund consists of assets invested in the Vanguard Life Strategy Growth Portfolio. This fund invests in other Vanguard mutual funds representing a combination of stocks, bonds and reserves in order to provide growth of capital. 20 l) The Life Strategy Income Fund consists of assets invested in the Vanguard Life Strategy Income Portfolio. This fund invests in other Vanguard mutual funds representing a combination of stocks, bonds and reserves in order to provide current income. m) The Life Strategy Conservative Growth Fund consists of assets invested in the Vanguard Life Strategy Conservative Growth portfolio. This fund invests in other Vanguard mutual funds representing a combination of stocks, bonds, and reserves in order to provide current income and a low to moderate growth of capital. n) The Vanguard U.S. Growth portfolio seeks to provide long-term capital appreciation by investing in common stocks of companies with above-average growth potential for the purpose of seeking long-term capital growth. o) The Life Strategy Moderate Growth Fund consists of assets invested in the Vanguard Life Strategy Moderate Growth Fund. This fund invests in other Vanguard mutual funds representing a combination of stocks, bonds and reserves in order to provide growth of capital and a reasonable level of current income. Participants have the right to elect, subject to restrictions, the investment fund or funds in which their contributions are invested. All matching contributions are initially invested in the Company Stock Fund and participants are restricted from transferring these contributions to other funds for one year. Participants at their discretion may elect to transfer to another fund their unrestricted balance. Their unrestricted balance is determined as the sum of all prior year's unrestricted balances plus 25 percent of the prior year's restricted balance after the addition of the prior year's restricted matching contributions. The number of Participants in each fund was as follows at December 31: Participants 1998 1997 ------------ ----- ----- Company Stock Fund 2,598 2,281 Fixed Income Fund 1,070 1,091 Growth Fund (Windsor II) 398 - Growth Fund (Windor) 1,412 1,414 Balanced Fund 928 805 Equity Index Fund 1,137 896 International Growth Fund 507 475 Small Cap Fund 410 344 Short-Term Bond Fund 211 170 Prime Cap Fund 270 - Life Strategy Growth Fund 295 170 Life Strategy Income Fund 52 28 Life Strategy Conservative Growth Fund 92 43 Vanguard U.S. Growth Fund 578 335 Life Strategy Moderate Growth Fund 208 109 21 The total number of Participants in the Plan was less than the sum of the number of Participants shown above because many were participating in more than one fund. The number of units representing Participant interests in each fund and the related net asset value per unit were as follows at December 31: Participant Interests Company Fixed Windsor II Windsor Equity Int'l Small Stock Income Growth Growth Balanced Index Growth Cap Fund Fund Fund Fund Fund Fund Fund Fund --------- ---------- ---------- --------- --------- --------- -------- -------- 1998: Units 1,396,307 27,758,796 166,330 1,723,080 604,172 608,601 189,439 137,920 Value per unit $32.85 $1.00 $29.85 $15.57 $24.38 $30.76 $18.77 $21.20 1997: Units 1,449,913 24,731,971 - 1,797,725 496,462 487,327 185,634 116,469 Value per unit $29.36 $1.00 - $16.98 $21.05 $26.19 $16.39 $23.75 Life Life Life Life Strategy Vanguard Strategy Short-Term Prime Strategy Strategy Conservative U.S. Moderate Bond Cap Growth Income Growth Growth Growth Fund Fund Fund Fund Fund Fund Fund ---------- --------- --------- -------- ------------ -------- --------- 1998: Units 190,471 55,034 111,726 36,853 61,392 170,734 99,362 Value per unit $10.84 $47.66 $18.79 $13.22 $14.71 $37.49 $16.86 1997: Units 77,114 - 47,161 21,995 16,653 65,257 51,874 Value per unit $10.81 - $16.04 $12.43 $13.40 $28.70 $14.81 Vesting - ------- Participants at all times have a fully vested and non-forfeitable interest in their contributions and in the matching contributions allocated to their account. Loan Provision - -------------- The Plan allows Participants who have participated in the Plan for at least one year to borrow funds from their accounts, subject to certain terms and conditions, at a reasonable interest rate as determined by the Company in accordance with applicable laws and regulations. 22 Termination - ----------- The Company, although it expects and intends to continue the Plan indefinitely, has reserved the right of the Board to terminate or amend the Plan. Distributions and Withdrawals - ----------------------------- All distributions and withdrawals from the Plan are made to Participants in a lump sum cash payment except those amounts distributed from the Company Stock Fund which may, at the Participant's election, be paid in full shares of the Company's Common Stock with cash paid in lieu of fractional shares. Note 2 - Accounting Policies The accounts of the Plan are maintained on an accrual basis. Purchases and sales of investments are reflected on a trade date basis. Assets of the Plan are valued at fair value. Gains and losses on distributions to participants and sales of investments are based on average cost. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results may differ from those estimates. The Plan provides for various investment options in any combination of stocks or mutual funds. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participants' account balances and the amounts reported in the statement of financial condition and the statement of income and changes in plan equity. Certain 1997 amounts have been reclassified to conform to 1998 classifications. Note 3 - Income Tax Status The Plan and the Trust created thereunder are intended to qualify under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended (the Code) and the Plan includes a cash or deferred arrangement intended to meet the requirements of Section 401(k) of the Code. The Internal Revenue Service has issued a favorable determination letter as to the Plan's qualified status under the Code. Amounts contributed to and earned by the Plan are not taxed to the employee until a distribution from the Plan is made. In addition, the unrealized appreciation on any shares of common stock of the Company distributed to an employee is not taxed until the time of disposition of such shares. The Plan has been amended since receiving the determination letter. However, the plan administrator believes the Plan is designed and is currently operating in compliance with the Internal Revenue Code. Note 4 - Administrative Expenses All expenses of the Plan, with the exception of loan application and loan administration fees, are paid for by the Company. Investment advisory fees for portfolio management of the Vanguard funds are paid directly from fund earnings. 23 Advisory fees are included in the fund expense ratio and will not reduce the assets of the Plan. Brokerage commissions paid to purchase Engelhard Corporation common stock are being charged against each participant's fund unit value. Note 5 - Concentrations of Credit Risk Financial instruments which potentially subject the Plan to concentrations of credit risk consist principally of investment contracts with insurance and other financial institutions. The Plan places its investment contracts with high-credit quality institutions and, by policy, limits the amount of credit exposure to any one financial institution. Note 6 - Investments Investments in the Common Stock of the Company are valued at the readily-available, quoted market price as of the valuation date and investments in Vanguard Funds are valued based on the quoted net asset value (redemption value) of the respective investment fund as of the valuation date. The net realized gain (loss) on disposition of investments was computed as follows: Net realized gain (loss) Company Fixed Windsor II Windsor Equity Int'l Stock Income Growth Growth Balanced Index Growth Fund Fund Fund Fund Fund Fund Fund ----------- ----------- ----------- ----------- ---------- ----------- ---------- Year ended December 31, 1998 - Amount realized $20,045,192 $10,796,138 $1,764,356 $10,014,411 $2,503,355 $4,417,345 $4,716,648 Cost-average 18,748,426 10,796,138 1,727,409 9,326,278 2,134,268 3,975,075 4,620,642 Net realized gain (loss) 1,296,766 - 36,947 688,133 369,087 442,270 96,006 Life Life Life Strategy Vanguard Small Short-term Prime Strategy Strategy Conservative U.S. Cap Bond Cap Growth Income Growth Growth Fund Fund Fund Fund Fund Fund Fund ---------- ----------- ----------- ----------- ----------- ------------ ----------- Year ended December 31, 1998 - Amount realized $1,534,209 $2,644,925 $1,309,019 $357,992 $5,862,331 $373,171 $1,750,108 Cost-average 1,467,251 2,642,658 1,303,764 329,541 5,856,949 372,388 1,670,832 Net realized gain (loss) 66,958 2,267 5,255 28,451 5,382 783 79,276 Life Strategy Moderate Growth Fund Combined ----------- ----------- Year ended December 31, 1998 - Amount realized $359,160 $68,448,360 Cost-average 338,313 65,309,932 Net realized gain (loss) 20,847 3,138,428 24 Company Fixed Equity Int'l Small Stock Income Growth Balanced Index Growth Cap Fund Fund Fund Fund Fund Fund Fund ------------ ----------- ----------- --------- ------------ ----------- ----------- Year ended December 31, 1997 - Amount realized $39,601,904 $9,844,450 $18,957,239 $5,191,173 $10,324,840 $7,200,253 $3,786,809 Cost-average 38,302,243 9,844,450 18,253,481 4,938,804 10,075,327 7,097,454 3,716,178 Net realized gain (loss) 1,299,661 - 703,758 252,369 249,513 102,799 70,631 Life Life Life Life Strategy Vanguard Strategy Short-term Strategy Strategy Conservative U.S. Moderate Bond Growth Income Growth Growth Growth Fund Fund Fund Fund Fund Fund Combined ----------- ----------- ----------- ------------ ----------- ----------- ------------ Year ended December 31, 1997 - Amount realized $14,604,327 $1,241,894 $4,522,250 $1,189,027 $6,117,191 $837,015 $123,418,372 Cost-average 14,603,891 1,237,389 4,530,073 1,163,139 6,139,359 830,870 120,732,658 Net realized gain (loss) 436 4,505 (7,823) 25,888 (22,168) 6,145 2,685,714 Company Fixed Equity Int'l Small Stock Income Growth Balanced Index Growth Cap Fund Fund Fund Fund Fund Fund Fund ----------- ----------- ----------- ---------- ----------- ----------- ---------- Year ended December 31, 1996 - Amount realized $35,173,927 $9,360,463 $11,516,097 $7,588,654 $6,740,413 $2,201,845 $1,519,491 Cost-average 32,549,101 9,360,463 11,143,674 7,366,755 6,536,048 2,096,687 1,477,144 Net realized gain (loss) 2,624,826 - 372,423 221,899 204,365 105,158 42,347 Vanguard Life Short-term U.S. Strategy Bond Growth Growth Fund Fund Fund Combined ----------- ----------- ----------- ----------- Year ended December 31, 1996 - Amount realized $4,514,073 $5,022,468 $170,693 $83,808,124 Cost-average 4,512,852 4,993,880 170,791 80,207,395 Net realized gain (loss) 1,221 28,588 (98) 3,600,729 25 The net unrealized appreciation (depreciation) of investments held was computed as follows: Net unrealized appreciation (depreciation) Company Windsor II Windsor Equity Int'l Small Stock Growth Growth Balanced Index Growth Cap Fund Fund Fund Fund Fund Fund Fund ----------- ---------- ----------- ----------- ----------- ---------- ---------- Year ended December 31, 1998 - Balance, beginning of year $3,311,669 $ - $ 2,664,689 $2,077,311 $2,715,759 $112,832 $ 349,219 Net change 4,043,066 (95,848) (2,683,638) 1,338,686 1,930,598 336,936 (335,259) Balance, end of year 7,354,735 (95,848) (18,949) 3,415,997 4,646,357 449,768 13,960 Life Life Life Life Strategy Vanguard Strategy Short-term Prime Strategy Strategy Conservative U.S. Moderate Bond Cap Growth Income Growth Growth Growth Fund Fund Fund Fund Fund Fund Fund ----------- ----------- ---------- ---------- ------------ ----------- ---------- Year ended December 31, 1998 - Balance, beginning of year $4,691 $ - $ 37,478 $ 632 $ 1,881 $125,861 $ 53,342 Net change 1,825 259,756 163,107 6,386 39,509 750,006 109,325 Balance, end of year 6,516 259,756 200,585 7,018 41,390 875,867 162,667 Combined ------------ Year ended December 31, 1998 - Balance, beginning of year $11,455,364 Net change 5,864,455 Balance, end of year 17,319,819 Company Windsor Equity Int'l Small Short-term Stock Growth Balanced Index Growth Cap Bond Fund Fund Fund Fund Fund Fund Fund ----------- ---------- ---------- ----------- -------- ---------- ---------- Year ended December 31, 1997 - Balance, beginning of year $ 8,503,713 $3,101,263 $1,046,423 $1,476,146 $262,962 $155,376 $ 334 Net change (5,192,044) (436,574) 1,030,888 1,239,613 (150,130) 193,843 4,357 Balance, end of year 3,311,669 2,664,689 2,077,311 2,715,759 112,832 349,219 4,691 Life Life Life Life Strategy Vanguard Strategy Strategy Strategy Conservative U.S. Moderate Growth Income Growth Growth Growth Fund Fund Fund Fund Fund Combined ----------- ---------- ------------ ----------- -------- ------------ Year ended December 31, 1997 - Balance, beginning of year $ 4,378 $(4,762) $1,466 $(47,934) $ 3,383 $14,502,748 Net change 33,100 5,394 415 173,795 49,959 (3,047,384) Balance, end of year 37,478 632 1,881 125,861 53,342 11,455,364 26 Company Windsor Equity Int'l Small Short-term Stock Growth Balanced Index Growth Cap Bond Fund Fund Fund Fund Fund Fund Fund ----------- ---------- ---------- ----------- -------- --------- ----------- Year ended December 31, 1996 - Balance, beginning of year $16,722,575 $ 915,175 $ 916,242 $ 957,045 $159,498 $105,258 $ 7,311 Net change (8,218,862) 2,186,088 130,181 519,101 103,464 50,118 (6,977) Balance, end of year 8,503,713 3,101,263 1,046,423 1,476,146 262,962 155,376 334 Life Life Life Life Strategy Vanguard Strategy Strategy Strategy Conservative U.S. Moderate Growth Income Growth Growth Growth Fund Fund Fund Fund Fund Combined ----------- ---------- ------------ ----------- -------- ------------ Year ended December 31, 1996 - Balance, beginning of year $ - $ - $ - $ - $ - $19,783,104 Net change 4,378 (4,762) 1,466 (47,934) 3,383 (5,280,356) Balance, end of year 4,378 (4,762) 1,466 (47,934) 3,383 14,502,748 27 Note 7 - Related Party Transactions For the 1998 plan year, the Company transferred 141,420 treasury stock shares (representing a contribution dollar amount of $2,737,289) to Vanguard to fund the employer match. The number of shares transferred each month represented the employer matching contribution divided by the closing market price on the day the contribution was remitted. 28 Salary Deferral Savings Plan of Engelhard Corporation Schedule of Investments at December 31, 1998 Approximate Cost Market Value ------------ -------------- Common Stock of Engelhard Corporation $38,036,386 $ 45,391,121 (2,327,750 shares) Vanguard Retirement Savings Trust 27,603,965 27,603,965 Vanguard Windsor II Fund 5,003,101 4,907,253 Vanguard Windsor Fund 26,657,623 26,638,674 Vanguard Asset Allocation Fund 11,208,522 14,624,519 Vanguard Growth and Income Portfolio 13,930,929 18,577,286 Vanguard International Growth Portfolio 3,072,133 3,521,901 Vanguard Index Trust 2,880,870 2,894,830 Vanguard Fixed Income Securities Fund 2,040,505 2,047,021 Vanguard Life Strategy Growth Portfolio 1,859,943 2,060,528 Vanguard Prime Cap Fund 2,329,496 2,589,252 Vanguard Life Strategy Income Portfolio 476,323 483,341 Vanguard Life Strategy Conservative Growth Portfolio 850,159 891,549 Vanguard U.S. Growth Fund 5,449,498 6,325,365 Vanguard Life Strategy Moderate Growth Portfolio 1,486,815 1,649,482 ------------ ------------ Total $142,886,268 $160,206,087 29 Salary Deferral Savings Plan of Engelhard Corporation Schedule of Investments at December 31, 1997 Approximate Cost Market Value ----------- ------------ Common Stock of Engelhard Corporation $38,797,201 $ 42,108,870 (2,423,532 shares) Vanguard Retirement Savings Trust 24,554,164 24,554,164 Vanguard Windsor Fund 27,645,098 30,309,787 Vanguard Asset Allocation Fund 8,287,650 10,364,961 Vanguard Growth and Income Portfolio 9,932,120 12,647,879 Vanguard International Growth Portfolio 2,894,651 3,007,483 Vanguard Index Trust 2,387,923 2,737,142 Vanguard Fixed Income Securities Fund 816,049 820,740 Vanguard Life Strategy Growth Portfolio 695,966 733,444 Vanguard Life Strategy Income Portfolio 270,191 270,823 Vanguard Life Strategy Conservative Growth Portfolio 217,537 219,418 Vanguard U.S. Growth Fund 1,707,488 1,833,349 Vanguard Life Strategy Moderate Growth Portfolio 701,642 754,984 ------------ ------------ Total $118,907,680 $130,363,044 30 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- We consent to the incorporation by reference in the registration statements of Engelhard Corporation and Subsidiaries on Form S-8 (File Nos. 2-89747, 33-28540) of our report dated June 18, 1999, on our audits of the financial statements and financial statement schedules of Salary Deferral Savings Plan of Engelhard Corporation as of December 31, 1998 and 1997, and for the years ended December 31, 1998, 1997 and 1996, which appears in this Form 11-K. /s/ PRICEWATERHOUSECOOPERS L.L.P. New York, New York June 21, 1999 31 Signature --------- Form 11-K Salary Deferral Savings Plan of Engelhard Corporation Pursuant to the requirements of the Securities and Exchange Act of 1934, the Pension and Employee Benefit Plans Committee of Engelhard Corporation has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, in Iselin, New Jersey on this 28th day of June, 1999. /s/ John C. Hess ------------- By: John C. Hess Secretary to the Committee and Vice President of Human Resources 32