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, 2002, 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 FOR THE YEARS ENDED
JUNE 30, 2002 AND 2001 AND
SUPPLEMENTAL SCHEDULE AS OF JUNE 30, 2002
AND INDEPENDENT AUDITORS' REPORT
THE PROFIT SHARING RETIREMENT PLAN OF
THE PROCTER & GAMBLE COMMERCIAL COMPANY
TABLE OF CONTENTS
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PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits, June 30, 2002 and 2001 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended June 30, 2002 and 2001 3
Notes to Financial Statements for the Years Ended
June 30, 2002 and 2001 4
SUPPLEMENTAL SCHEDULE:
Schedule of Assets Held at End of Year, Schedule H, Line 4i
of Form 5500, June 30, 2002 10
SUPPLEMENTAL SCHEDULES OMITTED - The following schedules were omitted
because of the absence of conditions under which they are required:
Reportable Transactions
Assets Acquired and Disposed of Within Plan Year
Party-in-Interest Transactions
Obligations in Default
Leases in Default
INDEPENDENT AUDITORS' REPORT
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, 2002 and 2001, 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 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, the net assets available for benefits of the Plan as of June 30, 2002
and 2001 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
2002 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
Cincinnati, Ohio
November 22, 2002
THE PROFIT SHARING RETIREMENT PLAN OF
THE PROCTER & GAMBLE COMMERCIAL COMPANY
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
JUNE 30, 2002 AND 2001
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2002 2001
ASSETS:
Cash equivalent $ 2,330,192
Investments, at fair value:
The Procter & Gamble Company common stock 21,848,413
The J.M. Smucker Company common stock 165,110
Mutual funds 12,321,722
Investment in The Procter & Gamble Master Savings Trust $30,723,506
Company contributions receivable 2,577,657 2,725,775
----------- -----------
Total assets 39,243,094 33,449,281
LIABILITIES - Accrued administrative expenses 32,475
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $39,243,094 $33,416,806
=========== ===========
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
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
----------------------------------------------------------------------------------------------
2002 2001
ADDITIONS:
Investment income:
Net appreciation in fair value of investments $ 4,974,809
Interest and dividend income 210,347
Equity in net income (losses) of the Procter & Gamble
Master Savings Trust (119,394) $ 718,944
----------- -----------
Total investment income 5,065,762 718,944
Company contributions (net of forfeitures) 2,581,505 2,744,525
---------- -----------
Total changes 7,647,267 3,463,469
---------- -----------
DEDUCTIONS:
Distributions to participants 1,805,986 3,566,677
Administrative expenses 14,993 51,413
----------- -----------
Total deductions 1,820,979 3,618,090
----------- -----------
NET INCREASE (DECREASE) 5,826,288 (154,621)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 33,416,806 33,571,427
----------- -----------
End of year $39,243,094 $33,416,806
=========== ===========
See notes to financial statements.
THE PROFIT SHARING RETIREMENT PLAN OF
THE PROCTER & GAMBLE COMMERCIAL COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
--------------------------------------------------------------------------------
1. PLAN DESCRIPTION
The following brief description of The Profit Sharing Retirement Plan of
The Procter & Gamble Commercial Company (Plan) is provided for general
information purposes only. Participants should refer to the Plan document
for more complete information.
GENERAL - The Plan is funded through contributions by The Procter & Gamble
Commercial Company, Procter & Gamble Pharmaceuticals, 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 AND VESTING - The Plan Sponsors make contributions to the
Plan each year based upon the amount of compensation and number of credit
service years of 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%
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.
DISTRIBUTIONS - Distributions of Plan benefits may be made in a lump sum
or in installment payments over a period not to exceed ten years after the
date of death, termination, retirement, or disability. Prior to April 1,
2001, participants could elect to receive installment payments over a
period not to exceed fifteen years. Distributions payable to participants
as of June 30, 2001 were approximately $123,700.
FORFEITURES - Participants who terminate service prior to vesting forfeit
their account balance. If the participant is rehired prior to a five-year
break in service, as defined by the Plan, the amount that was forfeited is
restored to the participant's account. Forfeited amounts are used to
reduce the Plan Sponsors' annual contributions.
PARTICIPANT ACCOUNTS - As described in the Plan document, participants may
allocate contributions made to their account. As of January 1, 2002, and
after conversion to the current trustee from the prior trustee,
participants can allocate their account in one or all of the following
investment options offered by the plan:
AMERICAN CENTURY HERITAGE FUND - The prospectus states that this fund
invests in a portfolio of equity securities issued by small to medium
companies.
J.P. MORGAN PRIME MONEY MARKET FUND - The prospectus states that this
fund invests in short length maturity, interest-bearing instruments.
J.P. MORGAN BOND FUND - The prospectus states that this fund invests in
a diversified portfolio of publicly and privately traded corporate,
government, private placement, asset backed, and mortgage backed bonds.
PUTNAM INTERNATIONAL GROWTH FUND - The prospectus for this fund
indicates that it invests in a diversified portfolio of equity
securities of foreign corporations.
J.P. MORGAN DISCIPLINED EQUITY FUND - The prospectus states that this
fund invests in equity securities of approximately 300 domestic large
company stocks.
COMPANY STOCK FUND - This fund invests in shares of The Procter &
Gamble Company common stock.
J.P. MORGAN DIVERSIFIED FUND - The prospectus states that this fund
invests in both equity and fixed-income securities.
Prior to January 1, 2002 and until conversion to the current trustee from
the prior trustee, participants could allocate their account in one or all
of the following investment options offered by the Plan:
ENHANCED CASH FUND - The prospectus states that this fund invests in
short to medium length maturity interest-bearing instruments.
COMPANY STOCK FUND - This fund invests in shares of The Procter &
Gamble Company common stock.
ACTIVE FIXED-INCOME CORE FUND - The prospectus states that this fund
invests in a diversified portfolio of publicly and privately traded
corporate, government, international and mortgage backed bonds.
DISCIPLINED EQUITY FUND - The prospectus states that this fund invests
in equity securities of approximately 300 domestic, large company
stocks.
DIVERSIFIED FUND - The prospectus states that this fund invests in both
equity and fixed-income securities.
SMALL COMPANY FUND - The prospectus states that this fund invests in a
portfolio of equity securities issued by small companies.
EAFE EQUITY CORE FUND - The prospectus states that this fund invests in
a diversified portfolio of equity securities of foreign corporations.
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
("Smuckers"). As a result of the spin-off, participants holding P&G common
stock received one share of Smuckers stock for each fifty shares of P&G
common stock. The cost basis of P&G common stock prior to the Smuckers
spin-off was allocated between P&G common stock held and the Smuckers
common stock received. Participants are not permitted to purchase
additional shares of Smuckers.
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 of ERISA. If the Plan is terminated, participants will become
fully vested in their accounts and the net assets of the Plan will be
distributed in an order of priority determined in accordance with ERISA
and its applicable regulations and the Plan document.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The accompanying financial statements are prepared
on the accrual basis of accounting and the Plan's net assets and
transactions are recorded at fair value. The Plan's investment in the
Company common stock is 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 plan participating in the
Master Trust by PNC Bank, Ohio, N.A., (PNC Bank), the trustee of the Plan
and to each participant's account by the Plan's record keeper.
EXPENSES OF THE PLAN - Fees charged by the investment manager are paid by
the Plan, while 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 various securities including U.S. Government
securities, corporate debt instruments, and corporate stocks. 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.
ACCOUNTING POLICIES - On July 1, 2000, the Plan adopted Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities". SFAS No. 133 establishes accounting and reporting standards
for derivative instruments and for hedging activities. It requires that
all derivatives, including those embedded in other contracts, be
recognized as either assets or liabilities and that those financial
instruments be measured at fair value. The adoption of this standard did
not have a material effect on the Plan's financial statements.
3. 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
Plan is also a qualified employees' trust under Section 401(a) of the
Internal Revenue Code (IRC) and, as such, is exempt from federal income
taxes under Section 501(a). 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, 2002 and 2001 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 year ended
June 30, 2002. Investments that represent five percent or more of the
Plan's net assets are separately identified.
Description 2002
Company common stock** $ 21,848,413
J.P. Morgan Diversified Fund** 8,577,000
J.P. Morgan Disciplined Equity Fund** 2,694,649
J.P. Morgan Money Market Fund** 2,330,192
J.P. Morgan Bond Fund 452,917
American Century Heritage Fund 411,158
Putnam International Growth Fund 185,998
The J.M. Smucker Company common stock 165,110
------------
Total $ 36,665,437
============
**Denotes investments representing five percent or more of the Plan's net
assets.
Interest and dividend income and changes in the Plan's investments after
January 1, 2002, which include investments bought and sold as well as held
during the year ended June 30, 2002, consist of the following:
2002
Dividend income $ 189,309
Interest income 21,038
-----------
$ 210,347
===========
Net appreciation (depreciation) in fair value of:
Mutual funds $(1,348,603)
Common stock 6,323,412
-----------
$ 4,974,809
===========
5. INTEREST IN MASTER TRUST
Effective January 1, 1993, the Company formed the Master Trust in
accordance with a master trust agreement with PNC Bank. Effective January
1, 2002 and upon conversion to American Century, the Plan no longer
participates in the Master Trust.
Use of a master trust permitted the commingling of various
Company-sponsored defined contribution plans for investment and
administrative purposes. Although assets were commingled in the Master
Trust, PNC Bank maintained records for the purpose of allocating
contributions and changes in net assets of the Master Trust to
participating plans based upon each plan's proportionate interest in the
Master Trust. The following represents the plan fiscal year 2002 and 2001
audited financial information regarding the net assets and investment
income of the Master Trust:
Investment income (loss) from the Master Trust for the six-month period
ended December 31, 2001 is summarized as follows:
COMPANY JP MORGAN
STOCK FUND FUNDS TOTAL
Net appreciation (depreciation) in fair value
of investments $ 10,804,881 $ (5,127,681) $ 5,677,200
Dividends 648,023 648,023
Interest 27,336 52,643 79,979
------------ ------------ ------------
Total $ 11,480,240 $ (5,075,038) $ 6,405,202
============ ============ ============
Plan's equity in net earnings (losses) of $ 3,834,194 $ (3,953,588) $ (119,394)
Master Trust ============ ============ ============
Assets of the Master Trust at June 30, 2001 are summarized as follows:
COMPANY JP MORGAN
STOCK FUND FUNDS TOTAL
Investments, at fair value $ 54,559,876 $138,296,264 $192,856,140
Accrued interest and dividends 22 54 76
------------ ------------ ------------
Total $ 54,559,898 $138,296,318 $192,856,216
============ ============ ============
Plan's investment in Master Trust $ 14,291,021 $ 16,432,485 $ 30,723,506
============ ============ ============
Plan's percentage ownership interest in
Master Trust 26 % 12 % 16 %
============ ============ ============
Investments, at fair value, held by the Master Trust at June 30, 2001 are
summarized as follows:
COMPANY JP MORGAN
STOCK FUND FUNDS TOTAL
The Procter & Gamble Company common
stock $ 54,559,876 $ 54,559,876
Mutual Funds 138,292,253 138,292,253
Short-term investments 4,011 4,011
------------ ------------ ------------
Total investments at fair value $ 54,559,876 $138,296,264 $192,856,140
============ ============ ============
Investment income(loss) from the Master Trust for the year ended June 30,
2001 is summarized as follows:
COMPANY JP MORGAN
STOCK FUND FUNDS TOTAL
Net appreciation (depreciation) in fair value
of investments $ 6,471,911 $(12,145,773) $ (5,673,862)
Dividends 1,234,104 1,234,104
Interest 3,044 3,044
------------ ------------ ------------
Total $ 7,709,059 (12,145,773) $ (4,436,714)
============ ============ ============
Plan's equity in net earnings (losses) of $ 1,717,684 $ (998,740) $ 718,944
============ ============ ============
Master Trust
6. 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. Once the allocation of the settlement is determined and
approved by the Court, the Plan will receive its portion of the settlement
to allocate to participant accounts.
* * * * *
THE PROFIT SHARING RETIREMENT PLAN OF THE
THE PROCTER & GAMBLE COMMERCIAL COMPANY
SCHEDULE OF ASSETS HELD AT END OF YEAR (SCHEDULE H, LINE 4I OF FORM 5500)
JUNE 30, 2002
--------------------------------------------------------------------------------
INVESTMENT FAIR VALUE
Procter & Gamble common stock $ 21,848,413
J.P. Morgan Diversified Fund 8,577,000
J.P. Morgan Disciplined Equity Fund 2,694,649
J.P. Morgan Money Market Fund 2,330,192
American Century Heritage Fund 411,158
Putnam International Growth Fund 185,998
J.P. Morgan Bond Fund 452,917
The J.M. Smucker Company common stock 165,110
------------
$ 36,665,437
============
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 20, 2002 /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