THE PROCTER & GAMBLE
COMMERCIAL COMPANY
EMPLOYEES' SAVINGS PLAN
Financial Statements as of December 31, 2003 and 2002 and
for the Year Ended December 31, 2003, and Supplemental
Schedules as of and for the Year Ended December 31, 2003
and Report of Independent Registered Public Accounting Firm
THE PROCTER & GAMBLE COMMERCIAL
COMPANY EMPLOYEES' SAVINGS 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 December 31, 2003 and 2002 2
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2003 3
Notes to Financial Statements 4 - 7
SUPPLEMENTAL SCHEDULES:
Form 5500,Schedule H, Part IV, Line 4i- Schedule of Assets
(Held at End of Year)as of December 31, 2003 8
Form 5500, Schedule H, Part IV, Line 4j- Schedule of
Reportable Transactions for the Year Ended December 31, 2003 9
All others schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 have been omitted because they are not
applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Retirement Committee of
The Procter & Gamble Commercial Company
Employees' Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of The Procter & Gamble Commercial Company Employees' Savings Plan (the "Plan")
as of December 31, 2003 and 2002 and the related statement of changes in net
assets available for benefits for the year ended December 31, 2003. 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 December 31,
2003 and 2002 and the changes in net assets available for benefits for the year
ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
listed in the Table of Contents are presented for the purpose of additional
analysis and are not a required part of the basic financial statements, but are
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. These schedules are the responsibility of the Plan's
management. Such schedules have been subjected to the auditing procedures
applied in our audit of the basic 2003 financial statements and, in our opinion,
are fairly stated in all material respects when considered in relation to the
basic financial statements taken as a whole.
/S/DELOITTE & TOUCHE LLP
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DELOITTE & TOUCHE LLP
San Juan, Puerto Rico
June 14, 2004
Stamp No. 1962177
affixed to original.
THE PROCTER & GAMBLE COMMERCIAL
COMPANY EMPLOYEES' SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
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ASSETS 2003 2002
INVESTMENTS-At fair value $10,214,580 $ 7,714,738
----------- -----------
RECEIVABLES:
Participants' contributions 14,001 30,225
Employers' contributions 4,606 8,649
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Total receivables 18,607 38,874
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Total assets 10,233,187 7,753,612
LIABILITIES-Excess contribution to be recognized next year 115,997 127,479
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NET ASSETS AVAILABLE FOR BENEFITS $10,117,190 $ 7,626,133
=========== ===========
See notes to financial statements.
THE PROCTER & GAMBLE COMMERCIAL
COMPANY EMPLOYEES' SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2003
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ADDITIONS:
Contributions:
Participants $ 1,007,667
Employer 280,466
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Total contributions 1,288,133
Investment income: -----------
Net appreciation in fair value of investments, including
gain on sale of investment of $34,229 1,471,054
Dividends 172,050
Interest 4,091
-----------
Total investment income 1,647,195
Total additions 2,935,328
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DEDUCTIONS-Benefits paid to participants 443,871
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INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 2,491,457
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 7,626,133
-----------
End of year $10,117,590
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See notes to financial statements.
THE PROCTER & GAMBLE COMMERCIAL
COMPANY EMPLOYEES' SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2003
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1. DESCRIPTION OF THE PLAN
The following description of The Procter & Gamble Commercial Company (the
"Company") Employees' Savings Plan (the "Plan") provides only general
information. Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
a. GENERAL--The Plan is a defined contribution plan covering all
full-time employees of the Company and of two affiliated
companies, Olay Company, Inc. and Procter & Gamble
Pharmaceuticals Puerto Rico, Inc. (the "Companies") who are
residents of Puerto Rico, have completed one year of service and
are age twenty-one or older. The Plan was established effective
November 1, 1993 and is sponsored by the Companies. In 2002, the
assets and liabilities of the Olay Company, Inc. Employees'
Savings Plan and the Procter & Gamble Pharmaceuticals CODA Profit
Sharing Plan, both qualified plans, were transferred into the
Plan (see Note 3). This Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
b. CONTRIBUTIONS--Each year, participants may contribute up to 10
percent of pretax annual compensation, as defined in the Plan,
not exceeding the maximum deferral amount specified by Puerto
Rico law. Participants may also contribute amounts representing
distributions from other qualified defined benefit or
contribution plans. Participants direct the investment of their
contributions into various investment options offered by the
Plan. The Plan currently offers seven mutual funds and a fund,
which invests in common stock of the Company, as investment
options for participants. The Companies contribute 40 percent of
the first 5 percent of base compensation that a participant
contributes to the Plan. The matching Companies' contributions
are invested directly in The Procter & Gamble Company common
stock. Contributions are subject to certain limitations.
c. PARTICIPANT ACCOUNTS--Each participant's account is credited with
the participant's contribution and allocations of (A) the
Companies' contributions and, (B) Plan earnings. 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.
d. VESTING--Participants are vested immediately in their
contributions plus actual earnings thereon. The Companies'
contributions portion of their accounts plus actual earnings
thereon is 100 percent vested upon the occurrence of any of the
following events: completion of three years of credited service;
attaining age 65; total disability while employed by the
Companies or death while employed by the Companies.
e. PAYMENT OF BENEFITS--Upon termination of service, a participant
may receive the value of the vested interest in his or her
account as a lump-sum distribution.
f. LOANS TO PARTICIPANTS--Loans to participants are not permitted.
g. FORFEITED ACCOUNTS--At December 31, 2003, forfeited nonvested
accounts totaled $839. These accounts will be used to reduce
future Companies contributions to the Plan.
h. PLAN TERMINATION--Although it has not expressed any intent to do
so, the Company has the right under the Plan to discontinue their
contributions at any time and to terminate the Plan subject to
the provisions of ERISA. In the event of plan termination,
participants will become 100% vested in their employer
contributions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. BASIS OF ACCOUNTING--The financial statements of the Plan are
prepared under the accrual basis of accounting and the Plan's net
assets and transactions are recorded at fair value. The Plan's
investment in the Procter & Gamble Company ("P&G") and the J.M.
Smucker Company ("Smucker") common stock is valued at the closing
price on an established security exchange.
b. USE OF ESTIMATES--The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires the Plan administrator to make
estimates and assumptions that affect the participant account
balances and the reported amounts of net assets available for
benefits and changes therein. Actual results could differ from
those estimates.
The Plan utilizes various investment instruments. Investment
securities, in general, are exposed to various risks, such as
interest rate, credit, and overall market volatility. Due to the
level of risk associated with certain investment securities, it
is reasonably possible that changes in the values of investment
securities will occur in the near term and that such changes
could materially affect the amounts reported in the statements of
net assets available for plan benefits.
c. INVESTMENTS VALUATION AND INCOME RECOGNITION--The Plan's
investments are stated at fair value. Quoted market prices are
used to value investments. Shares of mutual funds are valued at
the net asset value of shares held by the Plan at year-end.
Purchases and sales of securities are recorded on a trade-date
basis. Dividends are recorded on the ex-dividend date.
d. PAYMENT OF BENEFITS--Benefits are recorded when paid.
e. PLAN EXPENSES--All expenses incurred in administering the Plan
may be paid out of the invested assets unless paid by the
Company.
3. INVESTMENTS
The Plan's investments that represented five percent or more of the Plan's
net assets available for benefits are as follows:
2003 2002
The Procter & Gamble Company-common stock;
55,996.33 and 51,338.41 shares, respectively $5,592,914 $4,412,023
J.P. Morgan Disciplined Equity Institutional Fund,
125,902.18 units 1,328,268
ACI Equity Index - 421,540.47 units 1,871,640
J.P. Morgan Diversified Institutional Fund;
100,227.08 and 87,722.30 units, respectively 1,282,910 943,892
Fidelity Low Price Fund, 15,736.12 units 550,449
J.P. Morgan Prime Money Market Institutional Fund,
328,309.68 units 328,310
J.P. Morgan Bond Ultra Fund,
28,062.84 units 285,680
During 2003, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
in value as follows:
Common stock $ 1,068,584
Mutual funds 402,470
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Total $ 1,471,054
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The dividend and interest income of the Plan for the year ended December
31, 2003 were as follows:
Dividend income:
Common stock $ 93,610
Mutual funds 78,440
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Total $172,050
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Interest income-interest-bearing deposit $ 4,091
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4. INVESTMENT IN 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
Smucker. As a result of the spin-off, holders of The P&G common stock
received one share of the Smucker stock for each fifty shares of P&G
common stock. The cost basis of P&G common stock owned by the Plan at the
time of the Smucker spin-off was allocated between the P&G common stock
held and the Smucker common stock received. The Plan is not permitted to
purchase additional shares of the Smucker common stock. At December 31,
2003 and 2002, the Plan's investment in Smucker common stock consisted of
891.06 and 924.59 shares with a fair value of $40,356 and $36,808,
respectively.
5. NONPARTICIPANT-DIRECTED INVESTMENT
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed investment
(the common stock of The Procter & Gamble Company) is as follows:
2003 2002
Net assets at December 31, 2003 and 2002-Common stock $ 5,592,914 $ 4,412,023
=========== ===========
Changes in net assets for the years ended December 31,2003
and 2002:
Contributions $ 610,678 $ 665,791
Transfers in from predecessor qualified plans 708,384
Net appreciation in fair value of investment 1,022,425 311,793
Dividends 92,803 76,972
Benefits paid to participants (181,137) (97,750)
Net transfers to participant directed investments (318,027) (148,246)
Other disbursements (45,851) (87,245)
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Net increase in net assets $ 1,180,891 $ 1,429,699
=========== ===========
6. RELATED-PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by J.P. Morgan
and American Century and an interest bearing deposit with J.P. Morgan
Chase Bank. J.P. Morgan/American Century Retirement Plan Services, an area
of American Century Services Corporation, performs record keeping and
administrative services to the Plan and, therefore, these transactions
qualify as party-in-interest transactions.
7. INCOME TAXES
The Plan is exempt from Puerto Rico income taxes under the provisions of
the Puerto Rico Internal Revenue Code of 1994 ("PRIRC"), as amended. The
Plan is not qualified under Section 401(a) of the Internal Revenue Code,
but it is exempt from United States taxation under Section 1022 of the
Employee Retirement Income Security Act of 1974. The Plan is required to
operate in conformity with the PRIRC to maintain its qualification.
The Plan participants are not taxed on the income and contributions made
to their accounts until such time as the participant or the participant's
beneficiary receives distributions from the Plan.
******
SCHEDULE I
THE PROCTER & GAMBLE COMMERCIAL
COMPANY EMPLOYEES' SAVINGS PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4i-
SCHEDULE OF ASSETS (HELD AT END OF YEAR) AS OF DECEMBER 31, 2003
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Identity of Issue Description of Shares/Units/
Investment Par Value Cost Fair Value
-------------- -------------- ---- ----------
The Procter & Gamble Company Common stock 55,996.33 $ 4,570,489 $ 5,592,914
The J.M. Smucker Company Common stock 891.06 25,923 40,356
American Century Equity Index Institutional Fund * Mutual fund 421,540.47 N/A 1,871,640
J.P. Morgan Diversified Institutional Fund * Mutual fund 100,227.08 N/A 1,282,910
Fidelity Low Price * Mutual fund 15,736.12 N/A 550,449
J.P. Morgan Prime Money Market Institutional Fund * Mutual fund 337,084.43 N/A 337,080
J.P. Morgan Bond Ultra Fund * Mutual fund 33,659.62 N/A 332,555
J.P. Morgan International Equity Fund * Mutual fund 7,499.65 N/A 191,768
Fidelity Diversified Growth Fund * Mutual fund 314.09 N/A 8,575
J.P. Morgan Chase Bank deposit 6,333.00 6,333.00 6,333
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Total $ 10,214,580
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*Registered Investment Company.
N/A = Not applicable.
SCHEDULE II
THE PROCTER & GAMBLE COMMERCIAL
COMPANY EMPLOYEES' SAVINGS PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4j-
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
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SINGLE TRANSACTIONS-None.
SERIES OF TRANSACTIONS:
Current
Value of
Asset on Net
Number of Number of Purchase Sales Cost of Transaction Gain
Description of Asset Purchases Sales Amount Amount Asset Date on Sale
The Procter & Gamble
Company-common stock 3 2 $776,424 $352,633 $318,404 $352,633 $ 34,229
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