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, 2006, OR
\ \ FOR TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO
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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: Employee Stock Purchase Plan (Japan),
17, Koyo-cho Naka 1-chome, Higashinada-ku, Kobe, Hyogo 658-0032, Japan
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)
EMPLOYEE STOCK
PURCHASE PLAN (JAPAN)
Statements of Net Assets Available for Benefits as of
June 30, 2006 and 2005, Statements of Changes in
Net Assets Available for Benefits for the Years Ended
June 30, 2006, 2005 and 2004 and
Independent Auditor's Report
EMPLOYEE STOCK PURCHASE PLAN (JAPAN)
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TABLE OF CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
June 30, 2006 and 2005 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended June 30, 2006, 2005, and 2004 3
Notes to Financial Statements for the Years Ended
June 30, 2006, 2005, and 2004 4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
the Employee Stock Purchase Plan (Japan)
We have audited the accompanying statements of net assets available for benefits
of the Employee Stock Purchase Plan (Japan) (the "Plan") as of June 30, 2006 and
2005, and the related statements of changes in net assets available for benefits
for the years ended June 30, 2006, 2005 and 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. The Plan is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit 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 purpose 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 net assets available for benefits of the Plan as of June 30, 2006
and 2005 and the changes in net assets available for benefits for the years
ended June 30, 2006, 2005 and 2004 in conformity with accounting principles
generally accepted in the United States of America.
Our audits also comprehended the translation of Japanese yen amounts into U.S.
dollar amounts and, in our opinion, such translation has been made in conformity
with the basis stated in Note 7. The translation of the financial statement
amounts into U.S. dollars has been made solely for convenience.
/S/ C.L. MANABAT & CO.
Makati City, Philippines
August 31, 2006
EMPLOYEE STOCK PURCHASE PLAN (JAPAN)
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STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
June 30, 2006 and 2005
Japanese Yen U.S. Dollars
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2006 2005 2006
ASSETS, At fair value:
Cash (Y)237,049 (Y)278,273 $2,062
The Procter & Gamble Company common stock
2006: 1,468,807 shares, cost (Y)7.2
billion [$63 million]; 2005:
1,347,629 shares, cost
(Y)6.2 billion [$56 million] 9,411,151,718 7,863,691,479 81,864,577
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Total assets 9,411,388,767 7,863,969,752 81,866,639
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NET ASSETS AVAILABLE FOR BENEFITS (Y)9,411,388,767 (Y)7,863,969,752 $81,866,639
=================================================================
See Notes to Financial Statements.
EMPLOYEE STOCK PURCHASE PLAN (JAPAN)
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STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Years Ended June 30, 2006, 2005, and 2004
Japanese Yen U.S.
Dollars
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2006 2005 2004 2006
ADDITIONS:
Investment income (loss):
Net appreciation (depreciation) in fair
value of investments (Y)757,913,890 (Y 106,429,414) Y 586,250,575 $6,592,849
Dividend income 141,414,388 87,568,307 85,293,447 1,230,118
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Total investment income (loss) 899,328,278 (18,861,107) 671,544,022 7,822,967
Contributions by Procter & Gamble Far East, Inc.
and Max Factor K.K. 232,341,000 210,436,400 198,128,983 2,021,059
Participant contributions 1,241,486,000 1,122,154,000 986,031,000 10,799,287
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Total additions 2,373,155,278 1,313,729,293 1,855,704,005 20,643,313
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DEDUCTIONS:
Distributions and withdrawals to participants (823,410,881) (699,065,052) (1,075,751,362) (7,162,586)
Bank and administrative charges (2,325,382) (2,460,109) (2,328,675) (20,228)
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Total deductions (825,736,263) (701,525,161) (1,078,080,037) (7,182,814)
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NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 1,547,419,015 612,204,132 777,623,968 13,460,499
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 7,863,969,752 7,251,765,620 6,474,141,652 68,406,140
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End of year (Y)9,411,388,767 (Y)7,863,969,752 (Y)7,251,765,620 $81,866,639
============================================================================
See Notes to Financial Statements.
EMPLOYEE STOCK PURCHASE PLAN (JAPAN)
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NOTES TO FINANCIAL STATEMENTS
For the Years Ended June 30, 2006, 2005, and 2004
1. PLAN DESCRIPTION
The following brief description of the Employee Stock Purchase Plan
(Japan) (the "Plan") is provided for general information purposes only.
Participants should refer to the Plan agreement for more complete
information.
General - Prior to April 1, 2001, the Plan included the Employee's
Shareholding Association of Procter & Gamble Far East, Inc., Japan Branch,
established May 1986, and the Employee's Shareholding Association of Max
Factor K.K., established January 1994, for employees and executives of
Procter & Gamble Far East, Inc., Japan Branch and Max Factor K.K.
(collectively the "Companies") as a union under the provisions of Article
667 paragraph 1 of the Japanese Civil Law. Effective April 1, 2001, the
Employee's Shareholding Association of Max Factor K.K. was merged with the
Employee's Shareholding Association of Procter & Gamble Far East, Inc.,
Japan Branch, to create the Employees' Shareholding Association of P&G
Group. The purpose of the Plan is to contribute to the formation of assets
by its participants by facilitating their acquisition of the common stock
of The Procter & Gamble Company (the "Stock"), the Companies' parent
company. The Plan is administered by IBM Business Services (IBM) as
subcontractor for employee services. Daiwa Securities SMBC Co., Ltd.
serves as recordkeeper for the Plan.
Contributions - Participants may contribute a portion of their base pay in
units of 1,000 yen, up to 100 units monthly, and three times the monthly
base pay contributions limit from bonus pay. The Companies match 20% of
participants' contributions up to 30 units monthly (90 units of bonus pay
contributions). Effective January 1, 2005, general office employees may
contribute a portion of their base pay up to 150 units monthly and the
Companies match 20% of those employees' contributions up to 45 units. All
contributions are invested in Stock.
Participant Accounts - Individual accounts are maintained for each Plan
participant. Each participant's account is credited with the participant's
contribution and allocations of (a) the Companies' contributions and (b)
realized earnings of the Plan. 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.
Vesting - Participants are immediately vested in their contributions, the
Companies' matching contributions and realized earnings.
Withdrawal - Participants may withdraw the allotted shares of Stock in
multiples of 100 shares at any time. In the event that participants
withdraw from the Plan on termination of service or by their request, the
allotted shares of Stock in multiples of one share plus cash at the amount
of the residual share at fair value shall be returned to them.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The accompanying financial statements have been
prepared on the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America.
Investment Valuation and Income Recognition - The Plan's investment in
Stock is valued at fair value, which is based on the closing price on an
established security exchange. Dividend and interest income from
investments are recognized when earned and are allocated to each
participant's account by the Plan's recordkeeper.
Purchases and sales of securities are recorded on a trade-date basis.
Dividends are recorded on the ex-dividend date.
Expenses of the Plan - Investment management expenses are paid by the
Companies.
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 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 Stock, it is
reasonably possible that changes in the value of Stock will occur in the
near term and that such changes could materially affect the amount
reported in the financial statements.
3. DISTRIBUTIONS PAYABLE
These are no distributions payable to participants who have elected to
withdraw from the Plan at June 30, 2006 and 2005.
4. TAX STATUS
The Plan is not subject to taxation in the United States, nor the
provisions of the Employee Retirement Income Security Act of 1974
("ERISA"). Companies' contributions and administrative charges paid by the
Companies' on behalf of participants in the Plan are taxable to the
participants.
5. RELATED PARTY TRANSACTIONS
At June 30, 2006 and 2005, the Plan held 1,468,807 and 1,347,629 shares,
respectively, of common stock of The Procter & Gamble Company, the
sponsoring employer, with a cost basis of (Y)7.2 billion and (Y)6.2
billion were held by the Plan, respectively. During the years ended June
30, 2006, 2005 and 2004, the Plan recorded dividend income of
(Y)141,414,388, (Y)87,568,307, and (Y)85,293,447, respectively.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the Companies have the
right under the Plan to discontinue their contributions at any time and to
terminate the Plan subject to the provisions set forth in the Plan
agreement.
7. U.S. DOLLAR AMOUNTS
U.S. dollar amounts presented in the financial statements are included
solely for the convenience of the reader. These translations should not be
construed as representations that the yen amounts have been, could have
been or could in the future be, converted into U.S. dollars. As the
amounts shown in U.S. dollars are for convenience only, the rate of
(Y)114.96 = US$1, the approximate current rate at June 30, 2006, has been
used for the purpose of presentation of the U.S. dollar amounts in the
accompanying statements of net assets available for benefits and changes
in net assets available for benefits.
* * *
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 the Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized, on September 21, 2006.
EMPLOYEE STOCK PURCHASE PLAN (JAPAN)
By: P&G GROUP EMPLOYEE'S SHAREHOLDING ASSOCIATION
By: /S/ CECILIA UEDA
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Cecilia Ueda
Chairman
EXHIBIT INDEX
Exhibit No. Page No.
23 Consent of C.L. Manabat & Co.