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 JUNE 30, 2004, OR
\ \ FOR 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 International Stock Ownership
Plan, P&G AG, 1 Rue du Pre De La Bichette, P.O. Box 2696, 1211 Geneva 2,
Switzerland.
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 1. Audited statement of financial condition as of the end of the latest two
fiscal years of the plan (or such lesser period as the plan has been in
existence). (See Page 2)
Item 2. Audited statement of income and changes in plan equity for each of the
latest three fiscal years of the plan (or such lesser period as the plan
has been in existence). (See Page 3)
PROCTER & GAMBLE
INTERNATIONAL STOCK
OWNERSHIP PLAN
Financial Statements as of June 30, 2004
and 2003, and for the Years Ended
June 30, 2004, 2003, and 2002, and
Report of Independent Registered Public
Accounting Firm
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
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PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
June 30, 2004 and 2003 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended June 30, 2004, 2003 and 2002 3
Notes to Financial Statements 4-7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Procter & Gamble Company
Cincinnati, Ohio:
We have audited the accompanying statements of net assets available for benefits
of the Procter & Gamble International Stock Ownership Plan (the "Plan") as of
June 30, 2004 and 2003, and the related statements of changes in net assets
available for benefits for each of the three years in the period ended June 30,
2004. 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 standards of the Public Company
Accounting Oversight Board (United States). 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 June 30, 2004
and 2003, and the changes in net assets available for benefits for each of the
three years in the period ended June 30, 2004, in conformity with accounting
principles generally accepted in the United States of America.
/S/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP
Cincinnati, OH
September 22, 2004
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
JUNE 30, 2004 AND 2003
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2004 2003
ASSETS:
Investments, at fair value:
Cash $ 8,414 $ 11,627
The Procter & Gamble Company common stock 463,388,635 372,541,973
The J.M. Smucker Company common stock 2,354,830 2,477,933
------------ ------------
Total investments 465,751,879 375,031,533
------------ ------------
Receivables:
Participant contributions 3,712,498 2,468,535
Employer contributions 1,625,914 984,790
------------ ------------
Total receivables 5,338,412 3,453,325
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $471,090,291 $378,484,858
============ ============
See notes to financial statements.
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED JUNE 30, 2004, 2003 AND 2002
------------------------------------------------------------------------------------------------------
2004 2003 2002
ADDITIONS:
Contributions:
Participant contributions $ 41,511,924 $ 36,602,986 $ 36,408,017
Employer contributions 15,372,231 13,464,567 12,562,875
------------- ------------- -------------
Total contributions 56,884,155 50,067,553 48,970,892
------------- ------------- -------------
Investment income (loss):
Net appreciation (depreciation) in fair value of
investments 78,758,756 (4,390,781) 103,807,889
Dividends 6,509,566 5,603,887 5,212,398
------------- ------------- -------------
Net investment income 85,268,322 1,213,106 109,020,287
------------- ------------- -------------
Proceeds from class action lawsuit 158,199
The J.M. Smucker Company common stock received 2,548,549
------------- ------------- -------------
Total additions 142,152,477 51,438,858 160,539,728
DEDUCTION--
Benefits paid to participants 49,547,044 47,413,115 57,615,129
------------- ------------- -------------
INCREASE IN NET ASSETS 92,605,433 4,025,743 102,924,599
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 378,484,858 374,459,115 271,534,516
------------- ------------- -------------
End of year $ 471,090,291 $ 378,484,858 $ 374,459,115
============= ============= =============
See notes to financial statements.
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2004, 2003, AND 2002
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1. DESCRIPTION OF THE PLAN
The following description of the Procter & Gamble International Stock
Ownership Plan (the "Plan") is provided for general information purposes
only. Participants should refer to the Plan Document and their country's
Plan Supplement for more complete information.
GENERAL--The Plan is a defined contribution plan established in June of
1992 covering substantially all full-time international employees of The
Procter & Gamble Company (the "Company") and certain of its subsidiaries
who have one year of service. The Board of Directors of the Company
control and manage the operation and administration of the Plan. The
Banque Internationale a Luxembourg serves as the trustee of the Plan. The
Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"), nor is it subject to U.S. income taxation.
CONTRIBUTIONS--Each year, participants may contribute up to 15 percent of
their base compensation, as defined in the Plan. The Company contributes
50 percent of the first five percent of the base compensation that a
participant contributes to the Plan. However, participants in their
initial year of eligibility receive a 100% Company contribution, up to one
percent of the base compensation that the participant contributes to the
Plan. Participants may also contribute a "Special Additional Deposit" as a
lump sum payment once per month.
PARTICIPANT ACCOUNTS--Individual accounts are maintained for each Plan
participant. Each participant's account is credited with the participant's
contribution, the Company's matching contribution, allocations of Company
discretionary contributions, if any, and Plan earnings, and charged with
withdrawals and an allocation of Plan losses. Allocations are based on
participant earnings or account balances, as defined. The benefit to which
a participant is entitled is the benefit that can be provided from the
participant's vested account.
INVESTMENTS--Participants are only permitted to invest in the Company's
common stock. All employee and Company contributions are converted into
U.S. dollars and then invested in shares of the Company's common stock on
the 18th day of each month (or the first business day immediately
following the 18th). Sales of the Company's common stock occur once per
week and are subsequently converted into the applicable local currencies,
where required, for payment to employees. Any dividends on shares of the
Company's common stock are invested in additional shares of the Company's
common stock.
VESTING--Participants are fully vested in all shares of Company common
stock credited to their accounts under the Plan, except for Switzerland
and Saudi Arabia, which are credited in accordance with their respective
Plan Supplement.
PAYMENT OF BENEFITS--Participants may withdraw any portion of their
contributions made in excess of 5% of their base compensation at any time
during the year, with only two withdrawals permitted per year.
Contributions made up to 5% of base compensation and Company matches are
available to be withdrawn without penalty five years after the end of the
plan year in which the contributions are made. If a participant withdraws
these funds prior to the completion of five years, the Company will
suspend matching of employee contributions for one year.
THE J.M. SMUCKER COMPANY COMMON STOCK--In May of 2002, the Jif peanut
butter and Crisco shortening brands were spun-off to the Company's
shareholders and subsequently merged into the J.M. Smucker Company
("Smucker"). As a result of the spin-off, participants holding Company
common stock received one share of Smucker stock for each fifty shares of
Company common stock. The cost basis of Company common stock prior to the
Smucker spin-off was allocated between Company common stock held and the
Smucker common stock received. Participants are not permitted to purchase
additional shares of Smucker stock.
STOCK SPLIT--In March 2004, the Company's Board of Directors approved a
two-for-one stock split effective for common shareholders of record as of
May 21, 2004. The notes to the financial statements have been restated to
reflect the stock split for all periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING--The accompanying financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America.
USE OF ESTIMATES--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires Plan management to make estimates and assumptions that
affect the reported amounts of net assets available for benefits and
changes therein. Actual results could differ from those estimates. The
Plan invests in Company and Smucker common stock. 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
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 financial
statements.
INVESTMENT VALUATION AND INCOME RECOGNITION--The Plan's investments in
Company and Smucker common stock are stated at fair value. Quoted market
prices are used to value these investments.
Purchases and sales of securities are recorded on a trade-date basis.
Dividends are recorded on the ex-dividend date.
CASH--Amounts shown as cash are uninvested funds held by the Trustee that
are to be invested in Company common stock in the following month.
ADMINISTRATIVE EXPENSES--Administrative expenses (i.e. investment
management and record keeping expenses) of the Plan are paid by the Plan
Sponsor as provided in the Plan Document. Brokerage commissions are paid
by the participant, and other costs related to the purchase or sale of
shares are reflected in the price of the shares and borne by the
participant.
PAYMENT OF BENEFITS--Benefit payments to participants are recorded upon
distribution. Amounts allocated to accounts of persons who have elected to
withdraw from the plan but have not yet been paid were approximately
$1,441,000 and $2,098,000 at June 30, 2004 and 2003, respectively.
3. INVESTMENTS
The Plan's investment in Company common stock, which represented more than
five percent of the Plan's net assets available for benefits at June 30,
2004 and 2003, is as follows:
2004 2003
Number of shares 8,511,915 8,354,832
Market value $463,388,635 $372,541,973
Cost $272,122,892 $288,834,969
The Plan's investment in Smucker common stock at June 30, 2004 and 2003,
is as follows:
2004 2003
Number of shares 51,118 62,119
Market value $ 2,354,830 $2,477,933
Cost $ 1,087,147 $1,507,439
The Plan's investments (including gains and losses on investments bought
and sold, as well as held during the year) appreciated (depreciated) in
value as follows for the years ended June 30:
2004 2003 2002
The Procter & Gamble Company
common stock $ 78,385,449 $(4,790,815) $103,577,463
The J. M. Smucker Company
common stock 373,307 400,034 230,426
------------ ----------- ------------
Total $ 78,758,756 $(4,390,781) $103,807,889
============ =========== ============
4. RELATED-PARTY TRANSACTIONS
At June 30, 2004 and 2003, the Plan held 8,511,915 and 8,354,832 shares,
respectively, of common stock of The Procter & Gamble Company, the
sponsoring employer, with a cost basis of $272,122,892 and $288,834,969,
respectively. During the years ended June 30, 2004, 2003 and 2002, the
Plan recorded dividend income from The Procter & Gamble Company common
stock of $6,465,954, $5,556,176, and $5,212,398, respectively.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions set forth in the Plan
agreement.
6. FEDERAL INCOME TAX STATUS
The Plan is not qualified under Section 401(a) of the Internal Revenue
Code, and is exempt from the provisions of Title I of ERISA pursuant to
Section 4(b)(4) thereof. The Company believes that the Trustee should be
viewed as a direct custodian, and that, for U.S. tax purposes, the
participating employees should be treated as the owners of the shares of
Company common stock held for their account under the Plan.
Plan management believes that the participating employees should be
treated as the beneficial owners of the shares of Company common stock
held for their account under the Plan for U.S. tax purposes and that,
subject to certain procedural conditions, the information provided by the
employees may be relied upon in determining the applicable U.S. tax
withholding rate on dividends paid by the Company with respect to these
shares.
7. CLASS ACTION LAWSUIT
During March of 2000, a class action lawsuit was filed against The Procter
& Gamble Company by shareholders of common stock. The class was certified
on October 29, 2001 by the United States District Court for the Southern
District of Ohio, Western Division (the "Court"), and a settlement of
$49,000,000 was approved. The Plan joined the class of plaintiffs on March
25, 2002. During 2003, the Plan received settlement proceeds of $158,199,
which were allocated to qualified participant accounts as of June 30,
2003.
****
THE PLAN. Pursuant to the requirements of the Securities Act of 1933, 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,
thereunto duly authorized, in the City of Luxembourg, Luxembourg, on September
_____, 2004.
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
By: BANQUE INTERNATIONALE A LUXEMBOURG, TRUSTEE
By: /S/ PHILIPPE MEYERS
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Philippe Meyers
Fonde de Pouvoir Principal
Trustee
By: /S/ PHILIPPE GILTAIRE
-----------------------------
Philippe Giltaire
Fonde de Pouvoir
Trustee