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 December 31, 2003, or
\ \ 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: The Procter & Gamble Subsidiaries Savings Plan,
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 PROCTER & GAMBLE
SUBSIDIARIES SAVINGS PLAN
Financial Statements for the Years Ended
December 31, 2003 and 2002 and Supplemental
Schedule as of December 31, 2003 and Report of
Independent Registered Public Accounting Firm
THE PROCTER & GAMBLE SUBSIDIARIES 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
Statements of Changes in Net Assets Available for Benefits for
the Years Ended December 31, 2003 and 2002 3
Notes to Financial Statements for the Years Ended
December 31, 2003 and 2002 4-8
SUPPLEMENTAL SCHEDULE--
Form 5500, Schedule H, Part IV, Line 4i--Schedule of Assets
(Held at End of Year) as of December 31, 2003 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 Procter & Gamble Subsidiaries Savings Plan (the "Plan") as of December
31, 2003 and 2002, 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. 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 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. The schedule is the responsibility of the Plan's management. Such schedule
has been subjected to the auditing procedures applied in our audit of the basic
2003 financial statements, and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/S/DELOITTE & TOUCHE LLP
------------------------
DELOITTE & TOUCHE LLP
June 22, 2004
THE PROCTER & GAMBLE SUBSIDIARIES SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
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2003 2002
INVESTMENTS:
At fair value:
Procter & Gamble Common Stock Fund $ 52,329,627 $ 50,213,015
The J.M. Smucker Company common stock 459,551 448,825
Mutual funds 134,456,525 153,202,748
Loans to participants 2,587,237 3,216,982
------------ ------------
189,832,940 207,081,570
At contract value-
J.P. Morgan Stable Value Fund 37,258,521
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $227,091,461 $207,081,570
============ ============
See notes to financial statements.
THE PROCTER & GAMBLE SUBSIDIARIES SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2003 AND 2002
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2003 2002
ADDITIONS:
Investment income (loss):
Net appreciation (depreciation) in fair value of investments $ 31,435,851 $ (25,684,697)
Net appreciation in contract value of investments 667,335
Interest and dividend income 4,292,330 2,786,604
------------- -------------
Total investment income (loss) 36,395,516 (22,898,093)
The J.M. Smucker Company common stock received 364,742
------------- -------------
Total change 36,395,516 (22,533,351)
------------- -------------
DEDUCTIONS:
Distributions and withdrawals to participants 16,375,699 19,609,308
Administrative expenses 9,926 10,726
------------- -------------
Total deductions 16,385,625 19,620,034
------------- -------------
NET INCREASE (DECREASE) PRIOR TO TRANSFERS 20,009,891 (42,153,385)
TRANSFERS FROM AFFILIATED PLANS 148,511,237
------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 207,081,570 100,723,718
------------- -------------
End of year $ 227,091,461 $ 207,081,570
============= =============
See notes to financial statements.
THE PROCTER & GAMBLE SUBSIDIARIES SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002
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1. DESCRIPTION OF THE PLAN
The following brief description of The Procter & Gamble Subsidiaries
Savings Plan (the "Plan") is provided for general information only.
Participants should refer to the Plan agreement for more complete
information.
GENERAL--The Plan was established effective March 2, 1990 upon the
acquisition of the Hawaiian Punch Division of DelMonte by The Procter &
Gamble Company (the "Company"). Effective March 14, 1996, the Sundor
Brands Savings Plan, Max Factor Savings Plan and Speas Savings Plan were
merged into the Plan. Effective November 2, 2001, the Tambrands, Inc.
Savings Plan ("Tambrands") was merged into the Plan. Effective December 1,
2001, the Iams Company Savings Plan ("Iams") and Recovery Engineering,
Inc. Salary Savings Plan ("Pur") were merged into the Plan. Effective
February 28, 2002, the Richardson-Vicks Savings Plan ("Richardson-Vicks")
was merged into the Plan. Effective April 30, 2002, The Procter & Gamble
Subsidiaries Savings and Investment Plan ("Subsidiaries Savings and
Investment") and the Procter & Gamble Pharmaceuticals Savings Plan
("Pharmaceuticals") were merged into the Plan. Effective June 30, 2002,
the Millstone Coffee, Inc. 401(k) Savings and Profit Sharing Plan
("Millstone") was merged into the Plan.
The Plan is a voluntary defined contribution plan covering all eligible
employees of Sundor Group, Inc., including the Sundor Brands and Hawaiian
Punch divisions, Max Factor & Company, Speas Company, Tambrands Company,
Iams Company, Pur Company, Richardson-Vicks Company, Maryland Club Foods,
Inc., Shulton, Inc., Dover Baby Wipes Company, Giorgio Beverly Hills,
Inc., Millstone Coffee, Inc., Norwich Eaton, and former employees of
Fisher Nut Company who were members of the Twin Cities Bakery and
Confectionery Workers Union Local No. 22, all subsidiaries of the Company.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
CONTRIBUTIONS AND VESTING--Effective April 1996, all contributions to the
Plan were suspended and all participants became fully vested. Tambrands,
Iams, Pur, Richardson-Vicks, Subsidiaries Savings and Investment,
Pharmaceuticals, and Millstone Savings Plans were frozen prior to
conversion into the Plan.
DISTRIBUTIONS--The Plan provides for benefits to be paid upon retirement,
disability, death, or separation other than retirement as defined by the
Plan document. Plan benefits may be made in a lump sum of cash or shares
of Company common stock, in installments over not more than 120 months, or
variable amounts paid monthly. Retired or terminated employees shall
commence benefit payments upon attainment of age 70 1/2.
WITHDRAWALS--A participant may withdraw any portion of after-tax
contributions once in any three-month period. Participants who have
attained age 59 1/2 or have demonstrated financial hardship may withdraw
all or any portion of their before-tax contributions once in any six-month
period.
Account balances attributable to terminated employees are approximately
$102,000,000 and $89,000,000 as of December 31, 2003 and 2002,
respectively.
PLAN TERMINATION--Although the Company has not expressed any intent to do
so, it has the right under the Plan to terminate the Plan subject to the
provisions of ERISA.
ADMINISTRATION--The Plan is administered by the Master Savings Plan
Committee consisting of three members appointed by the Board of Directors
of the Company, except for duties specifically vested in the trustee,
Chase Manhattan Bank ("trustee"), and J.P. Morgan ("recordkeeper")
(formerly American Century), who are also appointed by the Board of
Directors of the Company.
LOANS--The Plan has a loan feature under which active participants may
borrow up to 50% of the current value of their vested account values
exclusive of amounts attributable to Company contributions (up to a
maximum of $50,000). Loans are repaid via payroll deduction over a period
of up to five years, except for loans used to purchase a primary
residence, which are repaid via payroll deduction over a period of up to
10 years. Principal and interest paid is credited to applicable funds in
the borrower's account. Former Company employees with balances may not
borrow against their accounts. Upon participant termination or retirement,
the outstanding loan balance is treated as a distribution to the
participant.
TRANSFERS FROM AFFILIATED PLANS--Transfers from affiliated plans in 2002
represent account balances of Richardson-Vicks, Maryland Club Foods,
Shulton, Fisher Nut, Dover, Giorgio, Millstone, and Norwich Eaton
employees transferred into the Plan during 2002.
PARTICIPANT ACCOUNTS--Individual accounts are maintained for each Plan
participant. Each participant's account is credited with an allocation of
the Plan's earnings or losses. The benefit to which a participant is
entitled is limited to the benefit that can be provided from their
account. Participants can allocate their account in one or all of the
investment options offered by 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 common
stock received one share of Smucker stock for each fifty shares of Company
common stock. The cost basis of the Company common stock prior to the
Smucker spin-off was allocated between the Company common stock held and
the Smucker common stock received. All grants related to common stock were
made in Smucker common stock; however, vested participants have the option
of selling the Smucker common stock and reinvesting the funds into other
investment options. Participants are not permitted to purchase additional
shares of Smucker.
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.
EXPENSES OF THE PLAN--Investment management expenses are paid by the Plan
and are netted against investment income. Effective July 1, 2002, loan
processing fees are paid by the participants through reduction in their
investment balances. Previously, these fees were paid by the Company
directly to the recordkeeper. All other fees are paid by the Company.
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 Company common stock, Smucker common stock, and in
various mutual funds which include investments in U.S. Government
securities, corporate debt instruments, corporate stocks, and investment
contracts. 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.
INVESTMENT VALUATION AND INCOME RECOGNITION--The Plan's investments are
stated at fair value except for its benefit-responsive investment
contract, which is valued at contract value (Note 5). Quoted market prices
are used to value investments. Shares of mutual funds are valued at quoted
market prices, which represent the net asset value of shares held by the
Plan at year end. Loans to participants are valued at the outstanding loan
balances.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis and dividends are
recorded on the ex-dividend date.
Management fees and operating expenses charged to the Plan for investments
in the 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 net appreciation (depreciation)
in fair market value of such investments.
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 $367,000 December
31, 2003. There were no such amounts at December 31, 2002.
3. FEDERAL INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Company by
letter dated March 7, 2002 that the Plan and related trust were designed
in accordance with the applicable regulations of the Internal Revenue Code
("IRC"). The Plan has been amended since receiving the latest
determination letter; however, the Plan administrator believes that the
Plan is currently designed and operated in compliance with the applicable
requirements of the IRC. Therefore, the Plan administrator believes that
the Plan and related trust were qualified and tax-exempt as of December
31, 2003 and 2002, and no provision for income taxes has been reflected in
the accompanying financial statements.
4. INVESTMENTS
The following is a summary of the Plan's investments for the years ended
December 31, 2003 and 2002. Investments that represent five percent or
more of the Plan's net assets are separately identified.
Description 2003 2002
At fair value:
Procter & Gamble Common Stock Fund $ 52,329,627 $ 50,213,015
American Century Equity Index Fund 76,100,627
Fidelity Low Price Fund 20,510,078
J.P. Morgan Bond Fund 20,358,333 20,663,124
J.P. International Equity Fund 11,760,990
J.P. Morgan Prime Money Market Fund ** 904,385 40,344,272
J.P. Morgan Disciplined Equity Fund 67,314,747
American Century Heritage Fund 15,136,788
Putnam International Growth Fund 9,743,817
Other 7,868,900 3,665,807
------------ ------------
189,832,940 207,081,570
------------ ------------
At contract value:
J.P. Morgan Chase Bank Public Bonds Fund 23,596,185
Other 13,662,336
------------ ------------
37,258,521
------------ ------------
Total $227,091,461 $207,081,570
============ ============
** 2003 balance is less than five percent of the Plan's net assets;
however, is maintained herein for comparability to the 2002 balance.
Interest and dividend income and changes in the Plan's investments, which
include investments bought and sold as well as held during the years ended
December 31, 2003 and 2002, consist of the following:
2003 2002
Net appreciation (depreciation) in fair value of:
Mutual funds $ 23,779,574 $(25,849,739)
The Procter & Gamble Company common stock 7,601,576 114,804
The J.M. Smucker Company common stock 54,701 50,238
------------ ------------
31,435,851 (25,684,697)
Net appreciation in contract value of
J.P. Morgan Stable Value Fund 667,335
------------ ------------
32,103,186 (25,684,697)
------------ ------------
Dividend income 4,058,976 2,412,847
Interest income 233,354 373,757
------------ ------------
4,292,330 2,786,604
------------ ------------
Total investment income (loss) $ 36,395,516 $(22,898,093)
============ ============
5. INVESTMENT CONTRACT WITH INSURANCE COMPANY
In 2003, the Plan entered into a benefit-responsive investment contract
with Monumental Life Insurance Co., Bank of America N.A. and State Street
Bank & Trust Company (collectively, the "issuers"). The issuers maintain
the contributions in a general account, which is credited with earnings on
the underlying investments and charged for participant withdrawals and
administrative expenses. The contracts are included in the financial
statements at contract value as reported to the Plan by the issuers.
Contract value represents contributions made under the contract, plus
earnings, less participant withdrawals and administrative expenses.
Participants may ordinarily direct the withdrawal or transfer of all or a
portion of their investment at contract value.
There are no reserves against contract value for credit risk of the
contract issuer or otherwise. The crediting interest rate was 4.26% at
December 31, 2003. The crediting interest rate is based on a formula
agreed upon with the issuer, but may not be less than zero percent. Such
interest rates are reviewed on a quarterly basis for resetting. The
average yield for the year ended December 31, 2003 was 1.7%.
6. RELATED-PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by J.P.
Morgan. J.P. Morgan is the recordkeeper as defined by the Plan and,
therefore, these transactions qualify as party-in-interest transactions.
Fees paid by the Plan for investment management services were included as
a reduction of the return earned on each fund.
At December 31, 2003 and 2002, the Plan held 523,822 and 584,188 shares,
respectively, of common stock of The Procter & Gamble Company, the
sponsoring employer, with a cost basis of $25,226,679 and $26,939,983,
respectively. During the years ended December 31, 2003 and 2002, the Plan
recorded dividend income of $967,000 and $709,000, respectively.
******
THE PROCTER & GAMBLE SUBSIDIARIES SAVINGS PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4i-
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2003
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Fair Value/
Identity of Issuer Description of Investment Contract Value
Investments at fair value:
* The Procter & Gamble Company Common stock, at par value $ 52,329,627
The J.M. Smucker Company Common stock, at par value 459,551
Mutual Funds:
American Century Equity Index Fund 76,100,627
Fidelity Low Price Fund 20,510,078
* J.P. Morgan Bond Fund 20,358,333
* J.P. Morgan International Equity Fund 11,760,990
Fidelity Diversified Growth Fund 4,822,112
* J.P. Morgan Prime Money Market Fund 904,385
* Loans to participants 465 loans with maturities ranging from
February 2004 to October 2016 and interest
rates ranging from 5% to 11.25% 2,587,237
------------
Total 189,832,940
------------
J.P. Morgan Stable Value Fund
at contract value:
US Treasury US Treasury Note 1.125%, due June 30, 2005 214,466
Common/Collective Trust Funds:
* J.P. Morgan Chase Bank Liquidity Fund 404,239
* J.P. Morgan Chase Bank Mortgage Private Placement Fund 11,009,647
* J.P. Morgan Chase Bank Public Bonds Fund 23,596,185
* J.P. Morgan Chase Bank Public Mortgage Fund 1,855,031
Monumental Life Insurance Company
Bank of America, N.A., State
Street Bank and Trust Company Wrapper Contract 178,953
------------
Total 37,258,521
------------
TOTAL INVESTMENTS $227,091,461
============
* Denotes party-in-interest.
THE PLAN. 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 PROCTER & GAMBLE
SUBSIDIARIES SAVINGS PLAN
/S/THOMAS J. MESS
Date: June 28, 2004 ------------------------------------------
Thomas J. Mess
Secretary for Trustees
EXHIBIT INDEX
Exhibit No. Page No.
23 Consent of Deloitte & Touche LLP