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
EMPLOYEES' SAVINGS 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
Employees' Savings Plan
The following audited financial statements are enclosed with this report:
1. Statement of Net Assets Available for Plan Benefits as of December 31, 2005
and December 31, 2004.
2. Statement of Changes in Net Assets Available for Plan Benefits for the
years ended December 31, 2005 and December 31, 2004.
Exhibits:
23 Consents of the Independent Registered Public Accounting Firms
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrative Committee of The Gillette Company Employees' Savings Plan has
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
THE GILLETTE COMPANY
EMPLOYEES' SAVINGS PLAN
By: /S/ DAVID A. TIERSCH
---------------------------------
David A. Tiersch
June 28, 2006
THE GILLETTE COMPANY
EMPLOYEES' SAVINGS PLAN
-------------------------------
FINANCIAL REPORT
DECEMBER 31, 2005
THE GILLETTE COMPANY EMPLOYEES' SAVINGS 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 5-13
SCHEDULE OF ASSETS HELD AT END OF YEAR Schedule 1
Report of Independent Registered Public Accounting Firm
To the Savings Plan Committee
The Gillette Company
Employees' Savings Plan
We have audited the accompanying financial statements of net assets available
for plan benefits of The Gillette Company Employees' Savings 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 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 as of December 31, 2005, and the changes
in net assets for the year ended December 31, 2005 in conformity with accounting
principles generally accepted in the United States of America.
Our audit was performed for the purpose of forming an opinion on the 2005 basic
financial statements taken as a whole. The supplemental schedule of assets held
at end of year as of December 31, 2005 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 supplemental schedule has been subjected to the
auditing procedures applied in the audit of the basic 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/ Plante & Moran, PLLC
Southfield, Michigan
June 16, 2006
Report of Independent Registered Public Accounting Firm
The Savings Plan Committee
The Gillette Company Employees' Savings Plan:
We have audited the statement of net assets available for plan benefits of The
Gillette Company Employees' Savings Plan (the Plan) as of December 31, 2004, and
the related statements of changes in net assets available for plan benefits for
each of the years in the two-year period 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 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 net assets available for plan benefits of The
Gillette Company Employees' Savings Plan at December 31, 2004, and the changes
in net assets available for plan benefits for each of the years in the two-year
period then ended in conformity with U.S. generally accepted accounting
principles.
/S/ KPMG LLP
Boston, Massachusetts
June 29, 2005
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
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STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31
----------------------------------
2005 2004
--------------- ---------------
Assets
Participant Directed Investments
Plan interest in The Gillette Company
Master Savings Plan Trust $ 2,171,755,485 $ 2,032,988,369
Participant Loans 26,947,830 28,532,224
--------------- ---------------
Net assets available for plan benefits $ 2,198,703,315 $ 2,061,520,593
=============== ===============
See Notes to Financial Statements.
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
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STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31
--------------------------------------
2005 2004
--------------- ---------------
Additions to Net Assets Attributed to
Net investment gain from The Gillette Company
Master Savings Plan Trust $ 335,131,328 $ 277,883,685
Interest on participant loans 1,476,580 1,471,737
Contributions:
Employee 52,256,536 52,533,210
Employer 27,111,948 26,704,156
--------------- ---------------
Total contributions 79,368,484 79,237,366
--------------- ---------------
Total additions 415,976,392 358,592,788
Deductions from Net Assets Attributed to
Benefit payments paid directly to participants (280,477,841) (191,235,402)
--------------- ---------------
Net Increase Prior to Transfers 135,498,551 167,357,386
Transfer from The Gillette Company ESOP 1,684,171 20,098,544
Transfer from Zooth, Inc. - 849,838
--------------- ---------------
Net Increase in net assets available for plan benefit 137,182,722 188,305,768
Net assets available for plan benefits -
Beginning of year 2,061,520,593 1,873,214,825
--------------- ---------------
End of year $ 2,198,703,315 $ 2,061,520,593
=============== ===============
See Notes to Financial Statements.
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 1 - DESCRIPTION OF PLAN
The Gillette Company Employees' Savings Plan (the Plan) is sponsored
by The Gillette Company, a subsidiary of The Procter & Gamble Company
(collectively, the Company). The following provides only general
information and participants should refer to the plan document for a
more complete description of the Plan's provisions.
GENERAL - The Plan is a defined contribution plan subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA), as amended. Regular employees of The Gillette Company and
its participating subsidiaries are eligible to join the Plan on their
date of hire.
PARTICIPANT CONTRIBUTIONS - Eligible employees may voluntarily
contribute from 2 percent to 10 percent of their compensation as
matched savings and from 1 percent to 5 percent of their compensation
as unmatched savings. All contributions must be in 1 percent
increments.
All matched savings contributed by an employee are divided equally
between tax deferred and taxed savings. Unmatched savings may be
designated by an employee to be either tax deferred or taxed, but not
both. Tax deferred contributions made by an employee in any plan year
may not exceed the annual limit set by law.
EMPLOYER CONTRIBUTIONS - The Company contributes $1.00 for every
$1.00 of each participant's matched savings for the first 5 percent
of each participant's contribution and $0.20 for every $1.00 of the
next 5 percent of each participant's contribution.
VESTING - Participants are immediately vested in their own employee
contributions plus the actual earnings thereon. Matching
contributions from the Company vest after the participant has
completed the earliest of three years of service, two years from date
of entry into the Plan, or the attainment of age 65. Participants are
also 100 percent vested in the Company contributions credited to
their accounts upon death, retirement, total and permanent disability
or Company-initiated termination (other than for cause as determined
by the Company).
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 1 - DESCRIPTION OF PLAN (CONTINUED)
PARTICIPANT'S ACCOUNTS - A separate account is established for each
participant at the time of enrollment in the Plan. The balance in
each account is invested, in accordance with the directions given by
the participant, in one or more of the Plan's investment fund
offerings (the Funds). Participants may direct their account balance
in any of the various funds offered by the plan.
PARTICIPANT LOANS - The maximum loan available to each participant is
the lesser of (1) $50,000 reduced by the highest outstanding loan
balance due from the participant during the preceding twelve months
or (2) 50 percent of the participant's vested account balance,
reduced by the current outstanding loan balance due from the
participant. The minimum loan amount available to participants is
$500. Each loan shall bear interest at a rate determined by the
Savings Plan Committee. Repayment of the loan must be made over a
period not to exceed five years.
PLAN EXPENSES - The Company bears most trustee and administrative
costs of maintaining the Plan and investment expenses associated with
the Company's stock fund. Investment expenses associated with all
other funds offered as investment options under the Plan are deducted
from the assets of each of those funds.
PLAN EARNINGS - As of the close of each business day, the plan
trustee is responsible for determining the fair market value of each
of the investment options, which includes all accrued earnings. The
increase or decrease in the fair market value of each investment fund
since the preceding business day is allocated among the participant
accounts invested in each fund based on the proportionate number of
shares or units of the fund held by each participant at the close of
the preceding business day.
With respect to the Company's stock fund, the trustee is responsible
for determining the participants' accounts entitled to receive each
quarterly dividend and the number of shares to be credited to each
account, as of the quarterly ex-dividend date. Any interest or other
income earned by the Fund, other than dividends, is allocated
quarterly to participant accounts on a proportionate basis.
BENEFIT PAYMENTS - A participant, surviving spouse or other
beneficiary may elect to receive their account balance as a partial
or total withdrawal or may elect to have the proceeds of the
distribution used to purchase an annuity contract for his or her
benefit through an insurer of his/her choice.
Early withdrawals may also be made in the event of financial hardship
and other circumstances, based upon special guidelines detailed in
the plan document.
FORFEITURES - Forfeitures by plan participants are used to reduce
Company contributions.
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING -The preparation of financial statements in
conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of net assets available for plan benefits at the
date of the financial statements, and the reported amounts of
additions to and deductions from net assets available for plan
benefits. Actual results could differ from those estimates.
The accompanying financial statements are prepared on the accrual
basis of accounting.
INVESTMENTS - Investments are allocations of the assets of The
Gillette Company Master Savings Plan Trust (the Savings Plan Trust)
based upon the proportionate interest of the Plan in the Savings Plan
Trust. See Note 4 for a detailed description of the Savings Plan
Trust.
Investments of the Savings Plan Trust are stated at fair value except
for guaranteed and synthetic investment contracts which are valued at
contract value which approximates fair value. Contract value
represents contributions made under the contract plus interest at the
contract rate. The crediting interest rate is variable for the
synthetic contracts and is reset quarterly based upon the fair value
of the underlying securities. The crediting interest rate is fixed
for guaranteed contracts. The average yield for the years ended
December 31, 2005 and 2004 is 4.21 percent and 4.49 percent,
respectively. The crediting interest rate for these investment
contracts as of December 31, 2005 and 2004 is 4.03 percent and 4.20
percent, respectively. Fair value for shares of The Procter & Gamble
Company common stock, formerly The Gillette Company common stock (the
Company Common Stock) held in the Savings Plan Trust is defined as
the closing price of the common stock as reported by the New York
Stock Exchange. The fair value for all other investments is
determined daily by the trustee on a per-share basis using security
prices quoted on national exchanges, and amortized cost in the case
of any short-term and money market securities held. The fair value of
the commingled funds is based on the fair value of the underlying
investments held in the fund. Participant loans receivable are valued
at their outstanding balances, which approximates fair value.
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net appreciation (depreciation) in the fair value of investments
includes both realized and unrealized gains and losses.
PAYMENT OF BENEFITS - Benefits are recorded when paid.
NEW ACCOUNTING PRONOUNCEMENTS - In December 2005, the Financial
Accounting Standards Board (FASB) issued FASB Staff Position AAG
INV-1 and SOP 94-4-1, REPORTING OF FULLY BENEFIT-RESPONSIVE
INVESTMENT CONTRACTS HELD BY CERTAIN INVESTMENT COMPANIES SUBJECT TO
THE AICPA INVESTMENT COMPANY GUIDE AND DEFINED-CONTRIBUTION HEALTH
AND WELFARE AND PENSION PLANs (FSP). This FSP makes the definition of
benefit-responsive more restrictive so that certain investment
contracts currently reported at contract value may need to be
reported at fair value. Management has not yet determined the impact
this standard, which is effective for the plan year ending December
31, 2006, will have on the Plan's financial statements.
RECLASSIFICATION - Certain prior year amounts have been reclassified
to conform to current year presentation.
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 3 - PLAN TERMINATION
The Company expects the Plan to continue indefinitely, but reserves
the right to amend or terminate the Plan, subject to restrictions, at
its discretion (see Note 10).
If the Plan is terminated or if contributions are completely
discontinued, each participant's interest in that portion of their
account balance attributable to Company contributions shall become
fully vested. Upon termination of the Plan, the Savings Plan Trust
may continue in existence at the direction of the board of directors
of the Company, subject to the provisions of the Plan and the Savings
Plan Trust agreement, or the Savings Plan Trust may be terminated and
the assets distributed to participants. Further, in the event the
Plan was terminated after the Merger, the Plan's Trust would be
continued so long as it held Plan assets, and distributions would be
made to participants by the Trustee as if the Plan had not been
terminated.
NOTE 4 - MASTER TRUST
Investments of the Savings Plan Trust are held in trust by Fidelity
Management Trust Company. The plans participating in the Savings Plan
Trust are The Gillette Company Employees' Savings Plan and The
Gillette Company Employee Stock Ownership Plan (the ESOP). Trust
income is allocated ratably between the plans in accordance with the
assets of each plan invested in the Savings Plan Trust. The net
assets of the Savings Plan Trust at December 31, 2005 and 2004 are as
follows:
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
-------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 4 - MASTER TRUST (CONTINUED)
2005 2004
-------------- --------------
Investments, at fair value:
Marketable securities:
The Gillette Company Common Stock Fund $ -- $1,313,225,222
The Procter & Gamble Company Common Stock Fund 1,462,022,494 --
Registered investment companies:
AF Washington Mutual Investors Fund - Class R-5 23,114,690 21,745,761
Allianz CCM Mid Cap - Institutional Class 35,903,078 --
Fidelity Diversified International Fund 66,496,380 47,784,867
Fidelity Emerging Markets Fund 29,249,677 11,624,220
Fidelity Growth & Income Portfolio 39,044,610 38,352,347
Fidelity Growth Company Fund 105,686,067 100,586,611
Fidelity Magellan Fund 88,825,973 95,737,637
Fidelity Retirement Government Money Market Portfolio 38,003,023 40,118,056
Fidelity Short Term Investment Fund 1,826,533 9,292,631
Fidelity U.S. Bond Index Fund 32,561,552 29,608,990
John Hancock Small Cap Growth Fund - Class A 10,432,723 10,529,221
PIMCO Mid Cap Fund -- 21,293,506
Vanguard Balanced Index - Institutional Class 47,702,080 42,597,426
Vanguard Total Stock Market Index Fund - Admiral Class -- 9,238,832
Vanguard Total Stock Market Issue - Institutional Class 15,800,355 --
Commingled Pool:
Fidelity U.S. Equity Index Commingled Fund 114,725,786 124,075,886
Investment contracts, at contract value 430,806,297 425,462,397
-------------- --------------
Total investments $2,542,201,318 $2,341,273,610
============== ==============
Assets allocated to The Gillette Company Employees'
Savings Plan $2,171,755,485 $2,032,988,369
Assets allocated to The Gillette Company Employees Stock
Ownership Plan 370,445,833 308,285,241
The aggregate fair value of investment contracts was $429,258,799
and $439,968,129 at December 31, 2005 and 2004, respectively.
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
-------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 4 - MASTER TRUST (CONTINUED)
The statements of changes in net assets of the Savings Plan Trust
for the years ended December 31, 2005 and 2004 are as follows:
2005 2004
-------------- --------------
Investment income (loss):
Net appreciation (depreciation) on fair value of investments:
The Gillette Company Common Stock fund $ 378,634,487 $ 248,793,435
The Procter & Gamble Company Common Stock fund (48,327,087) -
AF Washington Mutual Investors Fund - Class R-5 25,554 1,282,136
Allianz CCM Mid Cap - Institutional Class 3,686,033 -
Fidelity Diversified International Fund 7,344,747 6,822,788
Fidelity Emerging Markets Fund 6,939,778 1,773,141
Fidelity Growth & Income Portfolio (4,005,957) 2,421,569
Fidelity Growth Company Fund 12,309,220 10,833,201
Fidelity Magellan Fund 2,184,937 5,647,664
Fidelity U.S. Bond Index Fund (698,620) (255,635)
John Hancock Small Cap Growth Fund - Class A (143,825) 1,095,853
PIMCO Mid Cap Fund - 2,928,611
Vanguard Balanced Index - Institutional Class 895,789 2,565,833
Vanguard Total Stock Market Index Fund - Admiral Class (281,018) 731,644
Vanguard Total Stock Market Index Fund - Institutional Class 919,612 -
Fidelity U.S. Equity Index Commingled Pool 5,437,462 12,241,283
Dividends 36,558,919 26,608,838
Interest 17,916,614 18,332,461
-------------- --------------
Net investment gain $ 419,396,645 $ 341,822,822
============== ==============
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 5 - INCOME TAXES
A favorable tax determination letter was received from the Internal
Revenue Service on March 13, 2002 stating that the existing Plan and
its underlying trust qualified under Section 401(a) of the Internal
Revenue Code of 1986 (the Code) as a profit sharing plan, and is
exempt from Federal income taxes. Further, the features of the Plan
relating to tax-deferred savings qualified under Section 401(k) of
the Code. The Plan has been amended since receiving the determination
letter. However, the Company believes the Plan is designed and is
currently being operated in compliance with the applicable provisions
of the Code.
NOTE 6 - ESOP TRANSFERS
During 2003, The Gillette Company Employee Stock Ownership Plan (the
ESOP) was amended to require the transfer of former participant
account balances not paid out within one full fiscal quarter from
their date of termination to The Gillette Company Employees' Savings
Plan.
In 2004, transfers totaling $20,098,544 consisted primarily of
accumulated ESOP assets of participants terminated in prior years who
did not elect payout of their ESOP balances.
In the future, transfers from ESOP will occur if participants are
terminated and do not elect payout of their ESOP balances within one
full fiscal quarter from the date of their termination. Current year
transfers from the ESOP consisted of such amounts.
NOTE 7 - PLAN TRANSFER
On August 2, 2004, $849,838 was transferred to the Plan from Zooth,
Inc.'s 401(k) Plan as part of the acquisition of Zooth, Inc. Zooth,
Inc. was acquired by the Company as of June 4, 2004.
NOTE 8 - PARTY-IN-INTEREST TRANSACTIONS
Fidelity Investments, a wholly owned subsidiary of FMR Corp.,
manages several of the Plan's investment options. Fidelity Management
Trust Company and Fidelity Investments Institutional Operations
Company, both wholly owned subsidiaries of FMR Corp., are the
Plan's trustee and record keeper, respectively. Therefore,
transactions between Fidelity Investments and both the trustee and
the record keeper qualify as party-in-interest transactions.
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
NOTE 9 - PLAN AMENDMENTS
Effective December 1, 2003 through November 2004, terminated
participants or beneficiaries with accounts of $5,000 or less
automatically received a distribution of their total account balance.
Subsequent to November 2004, balances are distributed as disclosed in
Note 1.
NOTE 10 - 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 shares of P&G for each Gillette share) that was applied
to all other Gillette stockholders. .
As a result of the Merger, the Plan may not be amended to impose
vesting periods longer than those in effect immediately prior to the
Merger or to impose withdrawal provisions more stringent than those
in effect immediately prior to the Merger.
THE GILLETTE COMPANY EMPLOYEES' SAVINGS PLAN
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SCHEDULE OF ASSETS HELD AT END OF YEAR
FORM 5500, SCHEDULE H, ITEM 4i
EIN 04-1366970, PLAN NO. 002
DECEMBER 31, 2005
(a)(b) (c)
Identity of Issuer, Borrower, Description of (d) (e)
Lessor, or Similar Party Investment Cost Current Value
----------------------------- ------------------- ---- -------------
Participants Participant Loans
bearing interest at
5.50% to 10.50% $ - $ 26,947,830