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 FOR THE FISCAL YEAR ENDED December 31, 2005, OR
\ \ FOR TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO
____________
Registration number 333-128859
A. Full title of the plan:
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
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.
Financial Statements of The Gillette Company
Global Employee Stock Ownership Plan
The following audited financial statements are enclosed with this report:
1. Statement of Assets Available for Plan Benefits as of December 31, 2005 and
December 31, 2004.
2. Statement of Changes in Assets Available for Plan Benefits for the years
ended December 31, 2005, 2004 and 2003.
Exhibits:
23 Consent of the Independent Registered Public Accounting Firm
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrative Committee of The Gillette Company Global Employee Stock Ownership
Plan has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
By: /S/ EDWARD E. GUILLET
---------------------------------
Edward E. Guillet
April 12, 2006
THE GILLETTE COMPANY
GLOBAL EMPLOYEE
STOCK OWNERSHIP PLAN
------------------------
FINANCIAL REPORT
DECEMBER 31, 2005
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
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Contents
Report Letters 1-2
Statement of Net Assets Available for Plan Benefits 3
Statement of Changes in Net Assets Available for Plan Benefits 4
Notes to Financial Statements 5-10
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
To the Administrative Committee
The Gillette Company Global Employee
Stock Ownership Plan
We have audited the statement of net assets available for plan benefits of The
Gillette Company Global Employee Stock Ownership Plan (the "Plan") as of
December 31, 2005 and the related statement of changes in net assets available
for plan benefits for the year then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on the 2005 financial statements based on our audit.
We conducted our audit in accordance with the 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of December
31, 2005 and the changes in net assets available for plan benefits for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.
/S/ PLANTE & MORAN, PLLC
Southfield, Michigan
March 24, 2006
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Administrative Committee
The Gillette Company Global Employee Stock Ownership Plan:
We have audited the accompanying statements of assets available for plan
benefits of The Gillette Company Global Employee Stock Ownership Plan as of
December 31, 2004 and the related statements of changes in assets available for
plan benefits for each of the years in the two-year period ended December 31,
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 the 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, the financial statements referred to above present fairly, in
all material respects, the assets available for plan benefits as of December 31,
2004 and the changes in assets available for plan benefits for each of the years
in the two-year period ended December 31, 2004, in conformity with U.S.
generally accepted accounting principles.
/S/ KPMG LLP
Boston, Massachusetts
March 30, 2005
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
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STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31
-----------
2005 2004
---- ----
ASSETS
The Procter & Gamble Company common stock - At
market value (cost $67,524,564 in 2005) $88,777,883 $ --
The Gillette Company common stock - At market value
(cost $69,920,114 in 2004) -- 78,649,039
Receivables:
Proceeds from sales of common stock 653,589 278,221
Employees' contributions 1,077,173 1,058,068
Employer's contributions 255,429 269,229
----------- -----------
Total receivables 1,986,191 1,605,518
Cash 56,715 52,968
----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $90,820,789 $80,307,525
=========== ===========
See Notes to Financial Statements.
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
----------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Year Ended December 31
----------------------
2005 2004 2003
---- ---- ----
ADDITIONS TO ASSETS ATTRIBUTED
Investment income:
Dividends on common stock $ 1,086,178 $ 950,581 $ 874,997
Realized gain on investments sold
7,578,683 3,876,319 1,013,472
Decrease in unrealized depreciation
-- 1,261,018 9,174,236
Increase in unrealized appreciation
12,524,394 8,728,925 --
----------- ----------- -----------
Total investment income 21,189,255 14,816,843 11,062,705
Contributions:
Employee 10,614,942 10,415,957 9,556,804
Employer 3,140,143 3,106,925 2,836,421
----------- ----------- -----------
Total contributions 13,755,085 13,522,882 12,393,225
----------- ----------- -----------
Total additions 34,944,340 28,339,725 23,455,930
DEDUCTIONS FROM ASSETS ATTRIBUTED
Distributions 24,426,898 11,191,021 7,486,061
Forfeitures 4,178 3,402 5,472
----------- ----------- -----------
Total deductions 24,431,076 11,194,423 7,491,533
----------- ----------- -----------
NET INCREASE IN NET ASSETS AVAILABLE FOR PLAN BENEFITS 10,513,264 17,145,302 15,964,397
NET ASSETS AVAILABLE FOR PLAN BENEFITS - Beginning
of year 80,307,525 63,162,223 47,197,826
----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS - End of year $90,820,789 $80,307,525 $63,162,223
=========== =========== ===========
See Notes to Financial Statements.
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
--------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 2005, 2004 and 2003
NOTE 1 - DESCRIPTION OF PLAN
The Gillette Company Global Employee Stock Ownership Plan (the "Plan")
is a defined contribution plan sponsored by The Gillette Company (the
"Sponsor"), a subsidiary of The Procter & Gamble Company. The following
provides only general information. Participants should refer to the
plan document for a more complete description of the Plan's provisions.
GENERAL - The Plan was adopted by the board of directors of the Sponsor
on December 16, 1993 to become effective June 1, 1994 and is not
subject to the provisions of the Employee Retirement Income Security
Act of 1974. The Plan is not subject to income taxation. The Plan's
goal is to provide eligible Gillette employees the opportunity to
purchase common stock of the Sponsor through payroll deductions and
contributions from the Sponsor. All plan assets are held by the plan
fiduciary, RBC Dexia Investor Services Bank S.A., formerly known as
Banque Internationale a Luxembourg (the "Fiduciary"). ACS Buck Consults
LLC, formerly known as Mellon Human Resources & Investor Solutions, is
the recordkeeper for the Plan.
ELIGIBILITY - Employees eligible to participate in the Plan include all
regular employees of participating subsidiaries of the Sponsor with the
exception of employees considered to be an executive, officer,
director, or 10 percent stockholder of the Sponsor and employees
eligible for a savings plan maintained in the United States, Canada, or
Puerto Rico. Eligible employees may enroll in the Plan on the first day
of each month and on the initial participation date for each
participating subsidiary.
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
--------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 2005, 2004 and 2003
NOTE 1 - DESCRIPTION OF PLAN (CONTINUED)
CONTRIBUTIONS - Eligible employees may contribute 1 percent to 10
percent of their compensation to the Plan through payroll deductions. A
participating employee may change the contribution rate effective as of
the first day of any month. Employer contributions are made to the
accounts of participants who are contributing to the Plan in amounts
equal to 50 percent of the participant's contributions, up to 1 percent
of each participant's eligible pay.
INVESTMENTS - All employee and employer contributions are converted
into U.S. dollars and then invested in shares of the Sponsor's common
stock generally on the 15th day of each month (or if that date is not a
business day, the preceding business day). Sales of the Sponsor's
common stock for distributions generally are made on two specified
dates in each month and subsequently converted into the applicable
local currencies for payment to employees. Any dividends on shares of
the Sponsor's common stock are invested in additional shares of the
Sponsor's common stock.
VESTING - In general, participants are immediately vested in all shares
of the Sponsor's common stock credited to their respective plan
accounts.
BENEFIT PAYMENTS - Distributions of account balances will be made when
the employment of a participant ceases, unless upon retirement the
participant's account is credited with at least 100 shares of the
Sponsor's common stock, and the participant elects to defer payment. If
an election is made to defer the distribution, retirees may make up to
two requests a year for distributions of all or a portion of their
account balance.
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
--------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 2005, 2004 and 2003
NOTE 1 - DESCRIPTION OF PLAN (CONTINUED)
For those retirees who do not elect to defer payment and for all other
participants who terminate employment for reasons other than
retirement, a distribution of the participant's account is made in the
form of a lump-sum payment.
All distributions are made in cash, unless the participant (or
beneficiary, in the event of a participant's or retiree's death) elects
to receive the account balance in the form of shares of the Sponsor's
common stock.
While employed, participants may elect to take up to two in-service
withdrawals from their account balances during a calendar year. Shares
purchased with the Sponsor's contributions and dividends thereon are
not eligible for in-service withdrawal until 24 months from their date
of purchase. Effective July 1, 2002, this 24-month withdrawal
restriction was removed in the case of participants who are permanently
transferred to countries that do not participate in the Plan.
Effective October 1, 2005, upon a change in control of the plan
sponsor, all shares in the GESOP plan became mature and immediately
available for sale. There is no longer a 24 month waiting period for
company shares. Participants can elect cash, share certificate or
electronic transfer of shares to Procter & Gamble's SIP program for
both in-service and termination withdrawals. Only whole shares are
processed for in-service withdrawals.
PLAN EXPENSES - Brokerage commissions, fees, and other investment
transaction costs are paid by participants as part of the purchase and
sale of the Sponsor's common stock.
Costs relating to the administration of the Plan are paid by the
Sponsor.
FORFEITURES - Forfeitures by plan participants are used to reduce
company contributions.
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
--------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 2005, 2004 and 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - 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 reported amounts in the financial
statements and accompanying notes. Such estimates and assumptions are
subject to inherent uncertainties, which may result in actual amounts
differing from reported amounts.
The accompanying financial statements are prepared on the accrual basis
of accounting.
INVESTMENTS - Investments in the Sponsor's common stock are stated at
market value, based on the composite closing price of the common stock
on the New York Stock Exchange as reported by Reuters. Purchases and
sales of the Sponsor's common stock are recorded on the trade date (the
date the order to buy or sell is executed).
The cost of the investments in the Sponsor's common stock is determined
on a first-in, first-out basis.
Dividend income is recorded on the ex-dividend date, net of any U.S.
withholding taxes. Realized gains and losses are based upon the
identified cost method.
CASH - Amounts shown as cash are held by the Fiduciary and will be
invested in the Sponsor's common stock, used to pay future plan
expenses, or distributed to participants as benefit payments in the
following month.
CONTRIBUTIONS RECEIVABLE - Contributions held at the participating
subsidiaries and pending transfer to the Fiduciary have been translated
into U.S. dollars using the effective exchange rates as of December 31,
2005 and 2004.
BENEFITS - Benefits are recorded when paid.
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
--------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 2005, 2004 and 2003
NOTE 3 - INVESTMENT IN COMPANY COMMON STOCK
Investment in common stock held by the Plan at December 31, 2005 and
2004 was as follows:
2005 2004
---- ----
Number of shares - The Procter & Gamble Company 1,533,827 --
Number of shares - The Gillette Company -- 1,756,343
Cost $67,524,564 $69,920,114
Market value 88,777,883 78,649,039
Market value per share 57.88 44.78
Unrealized appreciation in company common stock 21,253,319 8,728,925
Decrease in unrealized depreciation -- 1,261,018
Increase in unrealized appreciation 12,524,394 8,728,925
The realized gain on sales of company common stock for the years ended
December 31, 2005, 2004, and 2003 was determined as follows:
2005 2004 2003
---- ---- ----
Proceeds from sales of shares $24,792,607 $11,245,202 $ 7,551,275
Forfeitures 4,178 3,402 5,472
----------- ----------- -----------
Total 24,796,785 11,248,604 7,556,747
Cost 17,218,102 7,372,285 6,543,275
----------- ----------- -----------
Realized gain $ 7,578,683 $ 3,876,319 $ 1,013,472
=========== =========== ===========
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
--------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 2005, 2004 and 2003
NOTE 4 - PLAN PARTICIPANTS
As of December 31, 2005, the Plan had 7,718 participants employed at
the Sponsor's subsidiaries located in Argentina, Australia, Austria,
Belgium, Brazil, Chile, Colombia, Costa Rica, Czech Republic, Denmark,
Dominican Republic, Dubai, Ecuador, Egypt, El Salvador, Finland,
France, Germany, Guatemala, Hong Kong, Hungary, India, Indonesia,
Ireland, Italy, Japan, Korea, Malaysia, Mexico, Netherlands, Norway,
Peru, Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia,
Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, United Kingdom, Uruguay, and Venezuela.
NOTE 5 - PLAN AMENDMENT AND TERMINATION
Although the Sponsor intends to continue the Plan indefinitely, it
reserves the right on behalf of itself and its participating
subsidiaries to modify or terminate the Plan at any time (see merger
discussion in Note 7). However, the Plan may not be amended to
adversely affect the rights of participants with respect to shares
previously credited to their accounts.
In the event of termination, the assets held by the Fiduciary may
continue to be held subject to the provisions of the Plan, or at the
direction of the board of directors of the Sponsor, the assets of the
Plan may be distributed to the participants.
NOTE 6 - TAX STATUS
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. The Sponsor believes that the Fiduciary should
be viewed as a directed custodian and that, for U.S. tax purposes, the
participating employees should be treated as the owners of the shares
of the Sponsor's common stock held for their account under the Plan.
The Sponsor has received a private letter ruling from the Internal
Revenue Service confirming that the participating employees should be
treated as the beneficial owners of the shares of the Sponsor's 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 the Sponsor
with respect to these shares.
THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
--------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 2005, 2004 and 2003
NOTE 7 - MERGER
During 2005, The Procter & Gamble Company, an Ohio corporation (P&G),
Aquarium Acquisition Corp., a wholly owned subsidiary of P&G and a
Delaware corporation (Merger Sub), and the Sponsor, a Delaware
corporation, entered into an Agreement and Plan of Merger (the "Merger
Agreement"). The Merger Agreement provides that, upon the terms and
subject to the conditions set forth in the Merger Agreement, Merger Sub
will merge with and into the Sponsor (the "Merger"), continuing as the
surviving corporation. The Merger was completed in 2005.
As of the close of the Merger, plan participants' shares of Gillette
common stock were converted into P&G common stock using the same ratio
(0.975 share of P&G for each Gillette share) that was applied to all
other Gillette stockholders. Following the completion of the Merger,
all shares held in the Plan became available for sale or withdrawal,
and the twice per year restriction was waived.