PROCTER & GAMBLE
INTERNATIONAL STOCK OWNERSHIP PLAN
Financial Statements as of June 30, 2003 and
2002, and for the Years Ended June 30, 2003,
2002, and 2001, and Independent Auditors' Report
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
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INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
June 30, 2003 and 2002 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended June 30, 2003, 2002 and 2001 3
Notes to Financial Statements for the Years Ended
June 30, 2003, 2002 and 2001 4
INDEPENDENT AUDITORS' REPORT
To The Procter & Gamble Company:
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, 2003 and 2002, and the related statements of changes in net assets
available for benefits for the years ended June 30, 2003, 2002 and 2001. 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 auditing standards generally accepted
in the United States of America. 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, information regarding the Plan's net assets available for benefits as
of June 30, 2003 and 2002, and the changes therein for the years ended June 30,
2003, 2002 and 2001, in conformity with accounting principles generally accepted
in the United States of America.
/S/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP
September 19, 2003
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF JUNE 30, 2003 AND 2002
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2003 2002
ASSETS: ---- ----
Investments in The Procter & Gamble Company common stock,
at fair value $372,541,973 $367,245,357
Investments in The J.M. Smucker Company common stock,
at fair value 2,477,933 2,778,975
Cash 11,627 3,254
Employee contributions receivable 2,468,535 3,251,618
Employer contributions receivable 984,790 1,179,911
------------ -----------
NET ASSETS AVAILABLE FOR BENEFITS $378,484,858 $374,459,115
============ ============
See notes to financial statements.
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001
-----------------------------------------------------------------------------------------------------
2003 2002 2001
ADDITIONS: ---- ---- ----
Dividend income $ 5,603,887 $ 5,212,398 $ 4,658,108
Net appreciation (depreciation) in fair value of
investments (4,390,781) 103,807,889 21,109,631
------------- ------------- -------------
Total investment income 1,213,106 109,020,287 25,767,739
------------- ------------- -------------
Contributions:
Employee contributions 36,602,986 36,408,017 41,280,349
Employer contributions 13,464,567 12,562,875 13,675,494
------------- ------------- -------------
Total contributions 50,067,553 48,970,892 54,955,843
Proceeds from class action lawsuit 158,199 -- --
The J.M. Smucker Company common stock received -- 2,548,549 --
------------- ------------- -------------
Total changes 51,438,858 160,539,728 80,723,582
DEDUCTIONS -
Distributions and withdrawals to participants 47,413,115 57,615,129 33,486,463
------------- ------------- -------------
NET INCREASE 4,025,743 102,924,599 47,237,119
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 374,459,115 271,534,516 224,297,397
------------- ------------- -------------
End of year $ 378,484,858 $ 374,459,115 $ 271,534,516
============= ============= =============
See notes to financial statements.
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001
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1. DESCRIPTION OF THE PLAN
-----------------------
The following brief description of the Procter & Gamble International
Stock Ownership Plan (the "Plan") is provided for general information
only. Participants should refer to the Plan agreement and their country's
Plan supplement for more complete information.
GENERAL--The Plan is a defined contribution plan established in June of
1992 for international employees of The Procter & Gamble Company and
certain of its subsidiaries ("P&G"). The purpose of the Plan is to provide
eligible employees the opportunity to purchase common stock of P&G through
payroll deductions and contributions from P&G. The Plan is not subject to
the Employee Retirement Income Security Act of 1974, nor is it subject to
U.S. income taxation.
PARTICIPATION AND VESTING--Full-time employees are eligible to participate
in the Plan on the first day of the month following the completion of the
service requirements as defined in the plan document. Participants are
fully vested in all shares of P&G common stock credited to his or her
account under the plan, except for Switzerland and Saudi Arabia, which are
credited in accordance with their respective plan documents.
CONTRIBUTIONS--Participants may contribute up to 15% of their base pay
through payroll deductions. In addition, employees may elect to make a
"Special Additional Deposit" as a lump sum payment once per month.
Participants may change their contribution rate effective as of the first
day of any month.
P&G matches an amount equal to 50% of the first 5% of base pay contributed
by participants. Employees in their initial year of eligibility receive a
100% P&G matching contribution, up to 1% of his or her contributions.
INVESTMENTS--Participants are only permitted to invest in P&G common
stock. All employee and employer contributions are converted into U.S.
dollars and then invested in shares of P&G common stock on the 18th day of
each month (or the first business day immediately following the 18th).
Sales of P&G 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 P&G common stock are
invested in additional shares of P&G common stock.
WITHDRAWALS--Participants may withdraw any portion of their contributions
made in excess of 5% of their base pay at any time during the year, with
only two withdrawals per year. Contributions made up to 5% of base pay and
P&G matches are available to be withdrawn without penalty five years after
the end of the plan year in which the deposits are made. If a participant
withdraws these funds prior to the completion of five years, P&G will
suspend matching of employee contributions for one year. Withdrawals
payable to participants as of June 30, 2003 and 2002 were approximately
$2,098,000 and $4,386,000, respectively.
ADMINISTRATION--The Plan is administered by P&G. All Plan assets are held
by the trustee, Banque Internationale a Luxembourg (the "Trustee"). Buck
Consultants provides record keeping services for the Plan.
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 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
--------------------------------------------
BASIS OF ACCOUNTING--The accompanying financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America.
EXPENSES OF THE PLAN--Investment management, record keeping expenses, and
other administrative expenses are paid by P&G. 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.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
The Plan invests in P&G 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
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 P&G
and Smucker common stock are valued at the closing prices on an
established security exchange.
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 P&G common stock in the following month.
CONTRIBUTIONS RECEIVABLE--Contributions that are pending transfer to the
Trustee as of June 30, 2003 and 2002 are recorded as contributions
receivable to the Plan in the accompanying financial statements.
RECLASSIFICATION--Certain prior year amounts have been reclassified to
conform to current year presentation.
3. INVESTMENTS
-----------
Investments in P&G common stock represent five percent or more of the
Plan's net assets available for benefits. Investments in P&G common stock
held by the Plan at June 30, 2003 and 2002 were as follows:
2003 2002
---- ----
Number of shares 4,177,416 4,112,498
Market value $372,541,973 $367,245,357
Cost $288,834,969 $179,780,757
Investments in Smucker common stock held by the Plan at June 30, 2003 and
2002 were as follows:
2003 2002
---- ----
Number of shares 62,119 81,423
Market value $ 2,477,933 $ 2,778,975
Cost $ 1,507,439 $ 2,548,549
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:
2003 2002 2001
---- ---- ----
The Procter & Gamble Company
common stock $ (4,790,815) $103,577,463 $ 21,109,631
The J. M. Smucker Company
common stock 400,034 230,426 -
------------ ------------ ------------
Total $ (4,390,781) $103,807,889 $ 21,109,631
============ ============ ============
4. PLAN PARTICIPANTS
-----------------
As of June 30, 2003, the Plan had approximately 37,000 participants
employed at P&G's international locations in Argentina, Australia,
Austria, Belgium, Brazil, Canada, Chile, China, Columbia, Costa Rica,
Czech Republic, Denmark, Dubai, Egypt, El Salvador, Estonia, Finland,
Germany, Greece, Guatemala, Honduras, Hong Kong, Hungary, India,
Indonesia, Italy, Kenya, Korea, Latvia, Lebanon, Malaysia, Mexico,
Morocco, Netherlands, New Zealand, Nicaragua, Nigeria, Norway, Pakistan,
Panama, Peru, Philippines, Poland, Portugal, Romania, Russia, Saudi
Arabia, Singapore, Slovak Republic, South Africa, Spain, Sweden,
Switzerland, Taiwan, Thailand, Turkey, Venezuela, and Yemen.
5. PLAN TERMINATION
----------------
Although it has not expressed any intention 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 certain provisions set forth in the Plan
agreement.
6. TAX STATUS
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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. P&G 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 P&G 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 P&G 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 P&G 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 has been approved. The Plan joined the class of plaintiffs on
March 25, 2002. During 2003, the Plan received partial settlement proceeds
of $158,199, which were allocated to qualified participant accounts as of
June 30, 2003; the final portion, if any, of the settlement is expected to
be received in 2004.
* * * * *
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
30, 2003.
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