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, 2005, 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, 2005 and
2004, and for the Years Ended June 30, 2005,
2004, and 2003, and Report of Independent
Registered Public Accounting Firm
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS:
Statements of Assets Available for Plan Benefits as of
June 30, 2005 and 2004 2
Statements of Changes in Assets Available for
Plan Benefits for the Years Ended June 30, 2005, 2004 and 2003 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 assets available for plan
benefits of the Procter & Gamble International Stock Ownership Plan (the "Plan")
as of June 30, 2005 and 2004, and the related statements of changes in assets
available for plan benefits for each of the three years in the period ended June
30, 2005. 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. The Plan is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purposes of expressing an opinion on the
effectiveness of the Plan's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also 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, 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 assets available for plan benefits of the Plan as of June 30, 2005
and 2004, and the changes in assets available for plan benefits for each of the
three years in the period ended June 30, 2005, in conformity with accounting
principles generally accepted in the United States of America.
/S/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP
September 26, 2005
Cincinnati, Ohio
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
STATEMENTS OF ASSETS AVAILABLE FOR PLAN BENEFITS
JUNE 30, 2005 AND 2004
------------------------------------------------------------------------------------------
2005 2004
ASSETS:
Investments, at fair value:
Cash $ 4,674 $ 8,414
The Procter & Gamble Company common stock-
8,861,469 shares (cost $342,666,410) at June 30, 2005;
8,511,915 shares (cost $272,122,892) at June 30, 2004 467,442,515 463,388,635
The J.M. Smucker Company common stock-
43,733 shares (cost $1,046,273) at June 30, 2005;
51,118 shares (cost $1,087,147) at June 30, 2004 2,052,820 2,354,830
------------ ------------
Total investments 469,500,009 465,751,879
------------ ------------
Receivables:
Participant contributions 4,765,218 3,712,498
Employer contributions 1,547,762 1,625,914
------------ ------------
Total receivables 6,312,980 5,338,412
------------ ------------
ASSETS AVAILABLE FOR PLAN BENEFITS $475,812,989 $471,090,291
============ ============
See notes to financial statements.
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED JUNE 30, 2005, 2004 AND 2003
-----------------------------------------------------------------------------------------------------------------------------------
2005 2004 2003
ADDITIONS:
Contributions:
Participant contributions $ 43,113,740 $ 41,511,924 $ 36,602,986
Employer contributions 20,342,480 15,372,231 13,464,567
------------- ------------- -------------
Total contributions 63,456,220 56,884,155 50,067,553
------------- ------------- -------------
Investment (loss) income:
Net (depreciation) appreciation in fair value of investments (14,365,012) 78,758,756 (4,390,781)
Dividends from The Procter & Gamble Company common stock 7,425,640 6,465,954 5,556,176
Dividends from The J.M. Smucker Company common stock 40,327 43,612 47,711
------------- ------------- -------------
Net investment (loss) income (6,899,045) 85,268,322 1,213,106
------------- ------------- -------------
Proceeds from class action lawsuit 158,199
------------- ------------- -------------
Total additions 56,557,175 142,152,477 51,438,858
DEDUCTION-Benefits paid to participants 51,834,477 49,547,044 47,413,115
------------- ------------- -------------
NET INCREASE 4,722,698 92,605,433 4,025,743
ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 471,090,291 378,484,858 374,459,115
------------- ------------- -------------
End of year $ 475,812,989 $ 471,090,291 $ 378,484,858
============= ============= =============
See notes to financial statements.
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2005, 2004, AND 2003
--------------------------------------------------------------------------------
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 are not residents of the United States of America. Generally,
employees must have completed one year of service to participate, however,
participation varies by subsidiary or country and eligibility can begin
immediately after employment and at various milestones up to one year. The
Board of Directors of the Company control and manage the operation and
administration of the Plan. The Dexia 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 (Note 6).
CONTRIBUTIONS--Each year, participants may contribute up to 15% of their
base compensation, as defined in the Plan. The Company contributes 50% of
the first 5% 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 1% 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.
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 within the Plan.
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.
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 financial statements and 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 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
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
$2,827,000 and $1,441,000 at June 30, 2005 and 2004, respectively.
RECLASSIFICATION--Certain 2004 and 2003 amounts have been reclassified to
conform to the 2005 presentation.
3. INVESTMENTS
The Plan's investments, including gains and losses on investments bought
and sold as well as held during the year, (depreciated) appreciated in
value as follows for the years ended June 30, 2005, 2004, and 2003:
2005 2004 2003
The Procter & Gamble Company
common stock $ (14,742,823) $ 78,385,449 $ (4,790,815)
The J. M. Smucker Company
common stock 377,811 373,307 400,034
------------- ------------ ------------
Total $ (14,365,012) $ 78,758,756 $ (4,390,781)
============= ============ ============
4. RELATED-PARTY TRANSACTIONS
At June 30, 2005 and 2004, the Plan held 8,861,469 and 8,511,915 shares,
respectively, of common stock of The Procter & Gamble Company, the
sponsoring employer, with a cost basis of $342,666,410 and $272,122,892,
respectively. During the years ended June 30, 2005, 2004 and 2003, the
Company contributed $20,342,480, $15,372,231, and $13,464,567,
respectively, to the Plan on behalf of participating employees.
During the years ended June 30, 2005, 2004 and 2003, the Plan recorded
dividend income from The Procter & Gamble Company common stock of
$7,425,640, $6,465,954, and $5,556,176, respectively.
During the years ended June 30, 2005, 2004 and 2003, the Plan's investment
in common stock of The Procter & Gamble Company, including gains and
losses on investments bought and sold as well as held during the year,
(depreciated) appreciated in value by $(14,742,823), $78,385,449, and
$(4,790,815), 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, 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
28, 2005.
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
By: BANQUE INTERNATIONALE A LUXEMBOURG, TRUSTEE
By: /S/ PHILIPPE MEYERS
-----------------------------
Philippe Meyers
Fonde de Pouvoir Principal
Trustee
By: /S/ PHILIPPE GILTAIRE
-----------------------------
Philippe Giltaire
Fonde de Pouvoir
Trustee