UNITED STATES
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 [NO FEE REQUIRED] FOR THE FISCAL YEAR ENDED JUNE 30, 2005, OR
\ \ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED] 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: The Profit Sharing Retirement Plan of The
Procter & Gamble Commercial Company, the Procter & Gamble Company, Two
Procter & Gamble Plaza, Cincinnati, Ohio 45202.
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 4. Plan Financial Statements and Schedules Prepared in Accordance
with the Financial Reporting Requirements of ERISA
THE PROFIT SHARING
RETIREMENT PLAN OF THE
PROCTER & GAMBLE
COMMERCIAL COMPANY
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
JUNE 30, 2005 AND 2004 AND SUPPLEMENTAL SCHEDULE
AS OF JUNE 30, 2005, AND REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
THE PROFIT SHARING RETIREMENT PLAN OF
THE PROCTER & GAMBLE COMMERCIAL COMPANY
TABLE OF CONTENTS
--------------------------------------------------------------------------------
PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
June 30, 2005 and 2004 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended June 30, 2005 and 2004 3
Notes to Financial Statements as of and for the Years Ended
June 30, 2005 and 2004 4-7
SUPPLEMENTAL SCHEDULE-- 8
Form 5500, Schedule H, Part IV, Line 4i--Schedule of Assets
(Held at End of Year) as of June 30, 2005 9
All other 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 Procter & Gamble Master
Savings Plan Committee:
We have audited the accompanying statements of net assets available for benefits
of The Profit Sharing Retirement Plan of The Procter & Gamble Commercial Company
(the "Plan") as of June 30, 2005 and 2004, and the related statements of changes
in net assets available for benefits for the years then ended. 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 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, 2005
and 2004, and the changes in net assets available for benefits for the years
then ended 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 supplemental schedule listed in the
Table of Contents 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 schedule is the responsibility of the Plan's management. Such
schedule has been subjected to the auditing procedures applied in the audit of
the basic 2005 financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
/S/DELOITTE & TOUCHE LLP
------------------------
DELOITTE & TOUCHE LLP
December 21, 2005
THE PROFIT SHARING RETIREMENT PLAN OF
THE PROCTER & GAMBLE COMMERCIAL COMPANY
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
JUNE 30, 2005 AND 2004
--------------------------------------------------------------------------------
2005 2004
ASSETS:
Cash and cash equivalents $ 2,600,960 $ 2,353,942
Investments-at fair value:
The Procter & Gamble Company common stock 27,132,486 26,029,300
The J.M. Smucker Company common stock 163,283 164,211
Mutual funds 14,345,244 13,125,954
----------- -----------
Total cash equivalents and investments 44,241,973 41,673,407
Company contributions receivable 3,013,627 2,828,271
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $47,255,600 $44,501,678
=========== ===========
See notes to financial statements.
THE PROFIT SHARING RETIREMENT PLAN OF
THE PROCTER & GAMBLE COMMERCIAL COMPANY
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED JUNE 30, 2005 AND 2004
--------------------------------------------------------------------------------
2005 2004
ADDITIONS:
Investment income:
Net (depreciation) appreciation in fair value
of investments $ (450,940) $ 6,324,279
Interest and dividend income 1,048,667 454,491
----------- -----------
Net investment income 597,727 6,778,770
Company contributions (net of forfeitures) 2,999,813 3,112,826
----------- -----------
Total additions 3,597,540 9,891,596
----------- -----------
DEDUCTIONS-Benefits paid to participants 843,618 2,548,821
----------- -----------
NET INCREASE DURING THE YEAR 2,753,922 7,342,775
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 44,501,678 37,158,903
----------- -----------
End of year $47,255,600 $44,501,678
=========== ===========
See notes to financial statements.
THE PROFIT SHARING RETIREMENT PLAN OF
THE PROCTER & GAMBLE COMMERCIAL COMPANY
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
--------------------------------------------------------------------------------
1. PLAN DESCRIPTION
The following description of The Profit Sharing Retirement Plan of The
Procter & Gamble Commercial Company (the "Plan") is provided for general
information purposes only. Participants should refer to the Plan document
for more complete information.
GENERAL--The Plan is a defined contribution pension plan and is funded
through contributions by The Procter & Gamble Commercial Company, Procter
& Gamble Pharmaceuticals Puerto Rico, Inc. and Olay Company, Inc.
(hereinafter collectively referred to as the "Plan Sponsors"). The Plan
Sponsors are wholly-owned subsidiaries of The Procter & Gamble Company
("Company" or "P&G"). Substantially all employees of the Plan Sponsors are
eligible to participate in the Plan upon completion of one year of
service. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
CONTRIBUTIONS--The Plan Sponsors make contributions to the Plan each year
based upon the amount of compensation and the years of service credited
for each Plan participant, as defined by the Plan agreement, up to
specified limitations. The Plan Sponsors' contributions are calculated by
applying the relevant participation percentage to the total compensation,
both as defined by the Plan. Participants are not permitted to make
contributions to the Plan.
The following schedule details the participation percentages by years of
service.
Participation
Years of Service Percentage
1-3 8%
4-6 9%
7-8 10%
9-10 11%
11-12 12%
13-14 13%
15 or more 14%
PARTICIPANT ACCOUNTS--Individual accounts are maintained for each Plan
participant. Each participant's account is credited with an appropriate
allocation of the Company's contributions and Plan earnings or losses. The
benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested account.
INVESTMENTS--Participants direct the investment of their contributions
into various investment options offered by the Plan. The Plan currently
offers various mutual funds and Company common stock as investment options
for participants.
In May of 2002, certain of the Company's brands were spun-off to its
shareholders and subsequently merged into The J.M. Smucker Company
("Smucker"). As a result, participants holding P&G common stock received
one share of Smucker stock for each fifty shares of P&G common stock. The
cost basis of P&G common stock prior to the Smucker spin-off was allocated
between P&G common stock held and the Smucker common stock received.
Participants are not permitted to purchase additional shares of Smucker.
VESTING--Participants are vested 100% upon completion of five years of
service. Participants are also 100% vested in their accounts upon
termination for disability, early or normal retirement, death, and also
upon attainment of 65 years of age, regardless of years of service.
PAYMENT OF BENEFITS--On termination of service due to death, disability,
termination, or retirement, a participant may elect to receive either a
lump-sum amount equal to the value of the participant's vested interest in
his or her account, or annual installments over a period not to exceed ten
years after the date of death, termination, retirement, or disability.
FORFEITURES--Participants who terminate service prior to vesting forfeit
their account balance. Forfeited amounts are used to reduce the Company's
annual contributions.
STOCK SPLIT--In March 2004, the Company's Board of Directors approved a
two-for-one stock split effective for common and preferred shareholders of
record as of May 21, 2004. The financial statements, notes and other
references to share data 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 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
utilizes various investment securities including mutual funds and
corporate stock. Investment securities, in general, are exposed to various
risks, such as interest rate risk, credit risk, 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 financial statements.
INVESTMENT VALUATION AND INCOME RECOGNITION--The Plan's investments in
common stock are valued at the closing price on established security
exchanges. The Plan's investment funds (funds) are valued by the fund
manager, JP Morgan Investment Management, Inc., based upon the fair value
of the funds' underlying investments. Income from investments is
recognized when earned and is allocated to each participant's account by
the Plan's record keeper.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date.
Management fees and operating expenses charged to the Plan for investments
in mutual funds are deducted from income earned on a daily basis and are
not separately reflected. Consequently, management fees and operating
expenses are reflected as a reduction of investment return for such
investments.
ADMINISTRATIVE EXPENSES--Administrative expenses of the Plan are paid by
the Company as provided in the Plan document.
BENEFITS PAYABLE--Distributions of benefits are processed on a daily
basis; therefore, there were no benefits payable at June 30, 2005 and
2004.
3. INVESTMENTS
The Plan's investments at fair value that represented 5% or more of the
Plan's net assets as of June 30, 2005 and 2004, are as follows:
2005 2004
The Procter & Gamble Company common stock $27,132,486 $26,029,300
Oakmark Equity Income Fund 8,164,042
American Century Equity Index Fund 3,538,104 3,386,703
J.P. Morgan Chase Bank Money Market Fund 2,600,922 2,287,152
J.P. Morgan Chase Bank Diversified Fund 7,550,463
During the years ended June 30, 2005 and 2004, 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:
2005 2004
Net (depreciation) appreciation in fair value of:
Mutual funds $ 437,461 $1,772,239
Common stock (888,401) 4,552,040
---------- ----------
Net (depreciation) appreciation of investments $ (450,940) $6,324,279
4. EXEMPT PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by J.P. Morgan
Chase Bank. J.P. Morgan Chase Bank is the trustee as defined by the Plan
and, therefore, these transactions qualify as party-in-interest
transactions. Fees paid for the investment management services were
included as a reduction of the return earned on each fund.
At June 30, 2005 and 2004, the Plan held 514,360 and 478,128 shares,
respectively, of The Procter & Gamble Company common stock with a cost
basis of $17,236,539 and $15,070,316, respectively. During the years ended
June 30, 2005 and 2004, the Company contributed $2,999,813 and $3,112,826,
respectively, to the Plan on behalf of participating employees.
During the years ended June 30, 2005 and 2004, the Plan recorded dividend
income from The Procter & Gamble Company common stock of $522,845 and
$428,855, respectively.
During the years ended June 30, 2005 and 2004, 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 $(898,911) and $4,529,223,
respectively.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Plan Sponsors 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 ERISA. In
the event of Plan termination, participants will become fully vested and
the net assets of the Plan will be distributed to the participants in an
order of priority determined in accordance with ERISA and its applicable
regulations, and the Plan document.
6. FEDERAL INCOME TAX STATUS
The Plan is exempt from Puerto Rico income taxes under the provisions of
Section 165(a) of the Puerto Rico Income Tax Act of 1954, as amended. The
Internal Revenue Service has determined and informed the Company by a
letter dated February 2, 2004, that the Plan and related trust were
designed in accordance with applicable requirements of the Internal
Revenue Code ("IRC"). The Plan has been amended since receiving the latest
determination letters. However, the plan administrator believes that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Puerto Rico Income Tax Act of 1954 and the
IRC. Therefore, they believe that the Plan was qualified and tax-exempt as
of June 30, 2005 and 2004 and no provision for income taxes has been
reflected in the accompanying financial statements.
******
SUPPLEMENTAL SCHEDULE
THE PROFIT SHARING RETIREMENT PLAN OF THE
THE PROCTER & GAMBLE COMMERCIAL COMPANY
FORM 5500, SCHEDULE H, PART IV, LINE 4i-
SCHEDULE OF ASSETS (HELD AT END OF YEAR )
JUNE 30, 2005
--------------------------------------------------------------------------------------
Identity of Issue Description of Investment Fair Value
SHORT TERM INVESTMENTS:
J.P. Morgan Chase Bank* Liquified Cash $ 38
J.P. Morgan Chase Bank* Money Market Fund 2,600,922
THE PROCTER & GAMBLE COMPANY* Common stock, $1.00 stated value
514,360 shares (cost $17,236,539) 27,132,486
THE J.M. SMUCKER COMPANY Common stock, no par value
3,479 shares (cost $72,214) 163,283
MUTUAL FUNDS:
J.P. Morgan Chase Bank* Bond Fund 879,010
J.P. Morgan Chase Bank* International Equity Fund 478,693
American Century Equity Index Fund 3,538,104
Fidelity Dividend Growth Fund 107,335
Oakmark Equity Income Fund 8,164,042
Royce Low Price Stock Fund 1,178,060
-----------
TOTAL ASSETS $44,241,973
===========
* Party-in-interest.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, 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 HEREUNTO
DULY AUTHORIZED.
The Profit Sharing Retirement Plan
of The Procter & Gamble Commercial
Company
Date: December 21, 2005 /S/ THOMAS J. MESS
------------------------------------
Thomas J. Mess
Secretary, Trustees of The Profit
Sharing Retirement Plan of The
Procter & Gamble Commercial Company
EXHIBIT INDEX
Exhibit No. Page No.
23 Consent of Deloitte & Touche