Procter & Gamble Annual Report 2012

FY2012 Annual Report · Procter & Gamble

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2012 Annual

Report

CONTENTS
1
Letter to Shareholders
7
Leadership Brands
13
Form 10-K Index
Form 10-K
14
Reconciliation of Non-GAAP Financial Measures 85
86
Global Leadership Council
86
Board of Directors
87
Recognition
88
Company & Shareholder Information

FINANCIAL HIGHLIGHTS
(unaudited)

Amounts in millions, except per share amounts

2012

2011

2010

2009

2008

Net Sales
Operating Income
Net Earnings attributable to Procter & Gamble
Net Earnings Margin from Continuing Operations
Diluted Net Earnings per Common Share from Continuing Operations(1)
Diluted Net Earnings per Common Share
Dividends per Common Share

$83,680
13,292
10,756
11.1%
$ 3.12
3.66
2.14

$81,104
15,495
11,797
14.4%
$ 3.85
3.93
1.97

$77,567
15,732
12,736
14.0%
$ 3.47
4.11
1.80

$75,295
15,188
13,436
14.1%
$ 3.35
4.26
1.64

$77,714
15,743
12,075
14.4%
$ 3.36
3.64
1.45

(1) Diluted net earnings per share are calculated on net earnings attributable to Procter & Gamble.

NET SALES
($ billions)

OPERATING CASH FLOW
($ billions)

DILUTED NET EARNINGS
(per common share)

$83.7

$81.1

$77.6
$75.3
$77.7

12
11
10
09
08

$13.3
$13.3

$16.1

$14.9
$15.0

12
11
10
09
08

$3.66

$3.93

$4.11

$4.26

$3.64

12
11
10
09
08

2012 NET SALES

BY BUSINESS SEGMENT(2)

BY GEOGRAPHIC REGION

BY MARKET MATURITY

19%

24%

32%

10%

15%

Beauty
Grooming
Health Care
Fabric Care &
Home Care
Baby Care &
Family Care

39%

18%

10%

14%

19%

North America
Western Europe
Central & Eastern
Europe, Middle East
& Africa
Latin America
Asia

Developed
Developing

38%

62%

(2) These results exclude net sales in Corporate.

Robert A. McDonald

Chairman of the Board, President
and Chief Executive Ofﬁ cer

Dear
Shareholders:

P&G is the world’s largest and most proﬁ table

consumer packaged goods company, with nearly

$84 billion in sales and more than $10 billion in net

earnings. We have built a portfolio of 25 billion-dollar

brands — each of which generates from $1 billion

to more than $10 billion of sales per year. They span

a broad range of product categories — including

household care, beauty, grooming, and personal health
care — and are household names around the world,
including Pampers, Gillette, Tide, Ariel, Downy, Pantene,

Head & Shoulders, Olay, Oral-B, Crest, Dawn, Fairy

and Always. We have three times more billion-dollar

brands in our categories than our next-largest

competitor and more than most of our remaining

competitors combined.

Focusing Our
Growth Strategy

WE ARE FOCUSING P&G’S growth strategy on
our biggest opportunities:

We are focusing on our 40 largest and
most proﬁ table product categories in the most
important geographic markets. These 40
businesses represent about 50% of sales and
nearly 70% of operating proﬁ t.

We are focusing resources on winning
with our 20 largest innovations.

We are maintaining strong momentum in
developing markets, targeting the 10 developing
markets with the highest potential for growth.

2 The Procter & Gamble Company

We’re celebrating P&G’s 175th anniversary this year, a milestone
that very few companies have achieved. Our long track record of
success is based on a time-tested business model — we discover
meaningful insights into what consumers need and want; we
translate those insights into noticeably superior products focused on
those needs; we communicate that superiority through advertising
that includes compelling claims, performance demonstrations,
and superior beneﬁ t visuals; and we price our products at a point
where consumers experience superior overall value. All of this
drives leadership market share, higher sales and lower costs,
which enable us to reinvest in our business and win on a sustained
basis. This model is simple and clear — and when we execute it
consistently, we win.

We have used this model to build a company
with nearly $84 billion in sales and more than
$10 billion in net earnings.

This model has also enabled P&G to deliver reliable and meaningful
growth over long periods of time, outperforming the market and
performing among the very best in our industry. Measuring from
the end of each quarter starting in 1980, rolling 10-year returns have
exceeded both the S&P 500 and the Dow Jones Industrial Average
in 82 out of 88 periods, or 93% of the time. And rolling 20-year
returns have exceeded both the S&P 500 and the Dow Jones
Industrial Average in 46 out of 48 periods, or 96% of the time.

Within this longer-term track record, there have been shorter periods
of underperformance, as we’ve experienced the past couple of
years. These have typically been followed by periods of strong out-
performance. This past track record does not in any way guarantee
future success. It does reﬂ ect, however, the strength of our time-
tested business model.

P&G’s Long-Term Growth Targets

Organic Sales Growth

1 – 2% above global market growth rates

Core EPS Growth

High single to low double digits

Free Cash Flow

90% of net earnings

The model works. Funding it with productivity savings and executing
it broadly and consistently with discipline is the proven way for
P&G to deliver the business and ﬁ nancial results to which we’ve
committed. This is what we are doing.

Fiscal Year 2012 Financial Results

Developing-market organic sales growth and cash ﬂ ow productivity
were both strong in 2012. Developed-market organic sales growth
and earnings progress were not.

In ﬁ scal 2012, we delivered 3% organic
sales growth overall. P&G has averaged
4% organic sales growth over the past
three years, achieving 3% to 5% organic
sales growth for 11 consecutive quarters.

In just three years, we’ve added organic sales of $8.5 billion,
the equivalent of adding a Fortune 300 company to our portfolio.

Growth continues to be very strong in developing markets, which
now generate 38% of P&G’s sales and 44% of our unit volume.
It’s a $32 billion business for P&G, the largest developing-market
business of any consumer products company. We see signiﬁ cant
remaining growth opportunities as our business in developing
markets is still smaller as a percent of sales than the developing
market businesses of some of our competitors, and we will continue
to focus on growing our business in the largest and most important
of these markets.

Our growth in developed markets has been weaker, resulting from
slower market growth and declining market shares. The share
declines in these markets were driven primarily by consumer value
issues on key brands in several large categories due to a combina-
tion of price increases taken to recover higher commodity costs,
which our competitors did not take, and increased promotional
activity by competitors. Developed markets represent about 60%
of our sales and 70% of operating proﬁ ts, so it’s essential that
they are healthy and growing. Consequently, developed-market
businesses — including fabric care and baby care in the United States
and the largest markets in Western Europe, as well as the United
States oral care, skin care, hair care, shave care and feminine care
categories — are a disproportionate focus of strengthened plans
that we began to implement earlier this year. We are ensuring we
have product offerings from each of these businesses that provide
superior value — at the right price and with innovation that is
strong — supported by marketing that effectively communicates the
superiority of our products.

Strong Growth in
Developing Markets

OUR DEVELOPING-MARKET SALES growth has been
very strong over the past ten years. Three years ago,
we made an intervention to expand further in these
markets, and we’re growing at nearly double the rate
of the underlying markets. Developing markets are
now a $32 billion business for P&G, generating 38%
of sales and 44% of our unit volume.

We’re focused on our top 10 developing markets
where growth prospects are highest, including the
important “BRIC” markets of Brazil, Russia, India and
China, where sales have grown an average of 20%
over the past decade.

>14%

P&G has a strong track record
of successful developing-
market growth — averaging
>14% growth over the
past decade.

developing market
net sales*

2012
2007
2002

bric markets net sales*
brazil

2012
2007
2002

russia

2012
2007
2002

india

2012
2007
2002

china

2012
2007
2002

23%

compound
annual growth

25%

compound
annual growth

27%

compound
annual growth

17%

compound
annual growth

* Bars represent net sales in U.S. dollars.

The Procter & Gamble Company 3

Core earnings per share for ﬁ scal year 2012 were $3.85, which
is 1% below the prior-year level. The EPS beneﬁ ts from sales
growth, cost savings and share repurchase this past year were
more than offset by a combination of headwinds from higher raw
material costs, geographic mix, a higher effective core tax rate
and increased investments to support our accelerated portfolio
expansion into developing markets.

Free cash ﬂ ow for the ﬁ scal year was $9.3 billion. Adjusted free
cash ﬂ ow productivity was 90%, consistent with our target. During
the ﬁ scal year, we returned $10 billion of cash to shareholders
through $6 billion of dividends and $4 billion of share repurchase.

We paid a dividend for the 122nd consecutive
year, making P&G one of only nine publicly
traded companies headquartered in the U.S.
to have delivered uninterrupted dividends
for 120 years or more.

We also increased the dividend by 7%. This was the 56th
consecutive year we have increased the dividend, one of only six
companies to have done this.

Over the last 10 years, P&G has paid out $42 billion in dividends.
Excluding $20 billion of share repurchase associated with the
Gillette acquisition, we have repurchased $46 billion of stock.
In total, through dividends and share repurchase, we have returned
$88 billion of cash to our shareholders, which is 90% of reported
net earnings.

Returning capital to shareholders, through
both dividends and share repurchase,
remains a central pillar of our efforts to
create superior shareholder value.

I’m proud of the extraordinary efforts P&G people have made to
keep our Company growing through a very demanding economic
period. We know, however, that we have not delivered sufﬁ cient
growth to rank among the best performers in our industry.
To do this, we must get back on a path toward our long-term
annual objective of high single-digit to low double-digit EPS growth
and total shareholder return in the top third of our competitive
peer group.

more than

2/3

of the
unit dose
laundry
segment

Innovation that
Sets New Standards

TIDE PODS IS AN EXAMPLE OF P&G innovation
that obsoletes existing products or creates entirely
new product categories. The innovative, three-
chamber, pre-measured packet can simply be dropped
in the wash — no measuring, no worrying — and it
even dissolves in cold water.

Since launching in the U.S. in February 2012, Tide PODS
has had a very strong performance — ahead of our
expectations. Since we began shipping PODS, the unit
dose laundry segment has more than doubled to 6%
of total laundry share — and Tide PODS is over two-
thirds of this segment.

It’s an innovation that’s making laundry day easier —
and is saving consumers loads of time.

4 The Procter & Gamble Company

To accelerate progress down this path and address our shortfalls,
we have implemented three meaningful changes: strengthening
our core business, renewing our focus on discontinuous innovation,
and implementing a $10 billion productivity program.

Focusing on Our Core

The ﬁ rst change is our 40/20/10 focus — focusing resources on
the 40 largest and most proﬁ table businesses, many of which are
in developed markets; on our 20 largest innovations; and on the
10 most important developing markets.

Our 40 largest businesses generate more than 50% of sales and
nearly 70% of operating proﬁ t. They are disproportionately in the
U.S. and China, which are P&G’s ﬁ rst and second largest, most
proﬁ table markets, respectively.

Our 20 most important innovations are
nearly 10 times larger on average than the
rest of the initiatives. This is the core of
our innovation pipeline.

Our 10 most important developing markets are critical to P&G’s
future growth. Between 2010 and 2020, the world’s population
will grow by 700 million people, and 95% of this population
growth will be in developing markets. During that same period,
the world’s middle class will increase by 1.4 billion people, 98%
in developing markets. Population growth and household income
growth are the primary drivers of our business growth, so these
trends are highly encouraging for P&G’s future. We are maintain-
ing strong momentum in developing markets, targeting the 10
developing markets with the highest potential for growth.

We will innovate and execute with excellence across all our busi-
nesses, but this sharp focus on core businesses, our biggest
innovations and developing markets will have the greatest impact
on getting P&G back on track to leadership levels of growth and
shareholder value.

Winning with Innovation

The second change we’ve made is a deliberate refocus
on discontinuous innovation — innovation that obsoletes current
products and creates new categories and new brands. Examples
are products such as Tide PODS, Swiffer, and Crest Whitestrips.

We will maintain our commitment to ongoing innovation
in our base business (i.e., the innovations that enable P&G’s brands
to maintain superior performance and value between more

Driving Productivity
and Cost Savings

PRODUCTIVITY IS THE GREAT ENABLER that
allows us to invest in leadership levels of consumer
understanding and innovation, ensure our
brands are priced competitively, overcome macro
headwinds and deliver bottom-line growth…
simultaneously.

Earlier this year, we announced our objective of
delivering $10 billion* in cost savings by the end
of ﬁ scal year 2016. This program includes $6 billion
of savings in cost of goods sold, $1 billion from
marketing efﬁ ciencies, and $3 billion from non-
manufacturing overhead.

cost reduction progress
We’re making good progress in all these areas.

$6B

cost of goods

$3B

overhead

$1B

marketing

$10 these productivity plans

will help P&G ﬁ nance top-line
growth, ensure our consumer value
propositions are superior, overcome
macro headwinds and deliver better
bottom-line growth.

billion

* Based on projected revenue and costs growing at
a 5% annual rate through 2016.

The Procter & Gamble Company 5

Time-Tested
Business Model

P&G’S LONG TRACK RECORD OF SUCCESS is
based on a time-tested business model:

disruptive innovations), but some of our fastest periods of
growth — and some of our largest and most proﬁ table present-
day businesses — were driven by discontinuous innovation:
disposable diapers, liquid laundry detergents, home care
items like Swiffer and Febreze. We need to get back to this
level of innovation in a meaningful way.

• We discover meaningful

insights into what consumers
need and want.

• We translate those insights into
noticeably superior products.

• We communicate product

superiority through advertising
that includes compelling claims,
performance demonstrations
and superior beneﬁ t visuals.

• We price our products so that

consumers experience superior
overall value.

This drives leadership market shares, higher
sales and lower costs, enabling us to reinvest
in our business.

The model is simple and clear — and when
we execute it consistently, we win.

We have an increasingly promising
pipeline of category- and brand-creating
innovations. It will take some time to
get these innovations ready for launch,
but I am conﬁ dent they will make a
meaningful and sustainable difference
as they enter the market.

Improving Productivity

The third change is the $10 billion productivity program
we announced in February. This is critical because
productivity is the great enabler. It enables us to fund top-
line growth, to ensure our consumer value propositions are
superior, to overcome macro headwinds, and to deliver
better bottom-line growth.

6 The Procter & Gamble Company

Leadership Brands
Brands with strong equities in the minds of consumers.
Brands that retailers want in their stores.
Brands that are platforms for innovation.

P&G’s 50 Leadership
Brands are some of the
world’s most well-known
household names.

90%

These 50 brands
represent 90% of P&G
sales and more than
90% of our proﬁ ts.

25 of these 50 brands
are our Billion-Dollar
Brands, each generating
more than $1 billion in
annual sales.

see p&g’s
50 leadership
brands

Companies that deliver leadership levels of growth
over long periods of time, through favorable and
unfavorable economic conditions alike, are almost always
companies with strong productivity cultures.

since

1837

P&G has been
innovating to improve
consumers’ lives

Our productivity program includes $6 billion of savings in
cost of goods sold, $3 billion from non-manufacturing
overhead, and $1 billion from marketing efﬁ ciencies. We have
already identiﬁ ed and staffed $1 billion of the $1.2 billion in
cost-of-goods-sold savings that we need in ﬁ scal year 2013.
We’re ahead of our targets to reduce non-manufacturing
enrollment. In addition, manufacturing enrollment remained
essentially ﬂ at, as signiﬁ cant productivity improvements
offset the added stafﬁ ng required to operate several new
manufacturing facilities which went into operation during
the past year. And while we are continuing to increase
marketing spending, we are also leveraging efﬁ ciencies that
enable our brands to increase reach and improve effective-
ness — essentially doing more with less.

In addition to these three changes, we are improving execu-
tion in all parts of the Company. Better execution will help
us to overcome macro challenges, manage competitive
threats and get the maximum beneﬁ t from our innovation,
marketing and productivity programs.

We are also maintaining accountability — at all levels. On
average across the Company, short-term bonus awards will
be below target for the 2012 ﬁ scal year. Three-year perfor-
mance awards for senior executives are currently tracking, in
aggregate, to less than 50% of target. We all acknowledge
this reﬂ ects the level and quality of our results.

We have the right metrics to incent results that are aligned
with shareholder objectives. Our long-term bonus metrics
are simple: organic sales growth relative to competition,
operating earnings growth, EPS growth and free cash ﬂ ow
productivity — all of which drive total shareholder return.

We’ve aligned the entire Company next year on short-term
metrics of volume and sales growth, market share, operating
proﬁ t growth, productivity (which is delivering against the
$10 billion plan), cash ﬂ ow and internal controls. These are
the metrics that we will measure ourselves against and that
you can measure our progress by.

175 Years of Growth

P&G IS CELEBRATING A MILESTONE in 2012
that very few companies have achieved: its 175th
anniversary.

william procter

james gamble

The Company was founded in Cincinnati in 1837
by William Procter and James Gamble — a candle
maker and a soap maker who started a small
business that has grown into one of the world’s
most admired companies and includes brands
that have become household names, used and
trusted by consumers every day in nearly every
part of the world.

Today, P&G is the world’s largest and most
proﬁ table consumer packaged goods company.

The Procter & Gamble Company 11

Committed to Shareholder
Value Creation

THE WHOLE P&G ORGANIZATION is committed
to shareholder value creation, and our objective is
to consistently rank among the top third of our
competitive peer group in Total Shareholder Return
(TSR). Over the last 10 years, we have paid out
$42 billion in dividends, and we have repurchased
$46 billion* in stock. In total, we have returned
$88 billion of cash to our shareholders, which is
90% of reported net earnings. Cash yield to
shareholders has averaged 5% over this period.

And over appropriately long periods of time —
rolling 3-year, 5-year and 10-year periods — P&G has
frequently outperformed the S&P 500 & Dow Jones
Industrial Average since 1980.

This performance has made P&G an excellent
long-term investment.

CONSECUTIVE YEARS OF
DIVIDEND INCREASES
(one of only six companies to do this)

$88 billion

OF CASH RETURNED TO
SHAREHOLDERS over 10 years

122

CONSECUTIVE YEARS OF DIVIDENDS
(one of only nine companies to do this)

* Excludes $20 billion of share repurchase
associated with the Gillette acquisition.

12 The Procter & Gamble Company

With these changes, we should be poised to seize meaningful
opportunities for top- and bottom-line growth. We have signiﬁ cant
opportunity for revenue growth through increased market share in
our established businesses, by expanding our portfolio of superior
branded products into the most promising markets and price tiers,
and by innovating to expand product categories and create new
ones. On the bottom line, our productivity opportunity is substan-
tive and the program is in place. This will help ﬁ nance top-line
growth, ensure our consumer value propositions are superior,
overcome macro headwinds and deliver better earnings growth.

We have taken decisive action, but this Company wasn’t built
overnight. It will take some time to restart growth in developed
markets and to get the savings program to full run-rate levels.
It will take some investment to restart innovation where it has
been lacking, to ensure our brands are priced appropriately,
and to ensure that our marketing plans are sufﬁ cient to generate
consumer awareness, trial and loyalty. We are committed to
make those investments, fueled by improvements in productivity
and costs.

We are moving forward with urgency, but with balance — balancing
developing- and developed-market growth, balancing the top and
bottom lines, and balancing short- and long-term returns.

I am conﬁ dent we will deliver.

175 Years of Growth

In its 175-year history, P&G has weathered economic downturns
and crises, wars and unprecedented change in virtually every
aspect of our business. We’ve gone through some rough patches,
but we have stayed focused on the fundamentals of our business,
learned from our mistakes, and preserved the core of our Company
while being willing to change everything else necessary to win
with consumers and retail customers.

We’ve been able to do this so consistently over time because of the
quality of P&G people. They are P&G’s most important competitive
advantage. Along with our time-tested business model, we have
a successful and equally tested model of hiring the best people and
building them into the best leaders in our industry. The character
and caliber of P&G people remain my greatest sources of conﬁ dence
in our Company’s future.

Robert A. McDonald
Chairman of the Board, President and Chief Executive Ofﬁ cer

The Procter & Gamble Company 13

Page

Form 10-K Index

Item 1.

Business

Item 1A.

Risk Factors

Item 1B.

Unresolved Staff Comments

Item 2.

Item 3.

Item 4.

Properties

Legal Proceedings

Mine Safety Disclosure

Part I

Part II

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer

Item 6.

Item 7.

Purchases of Equity Securities

Selected Financial Data

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Management's Reports and Auditor's Reports

Consolidated Statements of Earnings

Consolidated Balance Sheets

Consolidated Statements of Shareholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A.

Controls and Procedures

Item 9B.

Other Information

Item 10.

Directors, Executive Officers and Corporate Governance

Item 11.

Executive Compensation

Part III

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 76

Item 13.

Certain Relationships and Related Transactions and Director Independence

Item 14.

Principal Accounting Fees and Services

Item 15.

Exhibits and Financial Statement Schedules

Part IV

14 The Procter & Gamble Company

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark one)

[x]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

For the Fiscal Year Ended June 30, 2012

1934

For the transition period from to

Commission File No. 1-434

THE PROCTER & GAMBLE COMPANY
One Procter & Gamble Plaza, Cincinnati, Ohio 45202
Telephone (513) 983-1100
IRS Employer Identification No. 31-0411980
State of Incorporation: Ohio

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Stock, without Par Value

Name of each exchange on which registered
New York Stock Exchange, NYSE Euronext-Paris

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer

Smaller reporting company

Non-accelerated filer

Accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes

The aggregate market value of the voting stock held by non-affiliates amounted to $184 billion on December 31, 2011.

There were 2,754,274,536 shares of Common Stock outstanding as of July 31, 2012.

Documents Incorporated by Reference
Portions of the Proxy Statement for the 2012 Annual Meeting of Shareholders which will be filed within one hundred and twenty days
of the fiscal year ended June 30, 2012 (2012 Proxy Statement) are incorporated by reference into Part III of this report to the extent
described herein.

Item 1. Business.

unusually high demand for batteries.

PART I

The Procter & Gamble Company 15

Additional information required by this item is

incorporated herein by reference to Management's
Discussion and Analysis (MD&A); Note 1 of our
Consolidated Financial Statements, Summary of Significant
Accounting Policies; and Note 11 of our Consolidated
Financial Statements, Segment Information. Unless the
context indicates otherwise, the terms the "Company,"
"P&G," "we," "our" or "us" as used herein refer to The
Procter & Gamble Company (the registrant) and its
subsidiaries.

The Procter & Gamble Company is focused on
providing branded consumer packaged goods of superior
quality and value to improve the lives of the world's
consumers. The Company was incorporated in Ohio in 1905,
having been built from a business founded in 1837 by
William Procter and James Gamble. Today, we market our
products in more than 180 countries.

Throughout this Form 10-K, we incorporate by

reference information from other documents filed with the
Securities and Exchange Commission (SEC).

The Company's annual report on Form 10-K,

quarterly reports on Form 10-Q and current reports on Form
8-K, and amendments thereto, are filed electronically with
the SEC. The SEC maintains an internet site that contains
these reports at: http://www.sec.gov. You can also access
these reports through links from our website at:
www.pg.com/investors.

Copies of these reports are also available, without

charge, by contacting The Procter & Gamble Company,
Shareholder Services Department, P.O. Box 5572,
Cincinnati, Ohio 45201-5572.

Financial Information about Segments

As of June 30, 2012, the Company is organized into

two Global Business Units (GBUs): Beauty and Grooming
and Household Care. We have five reportable segments
under U.S. GAAP: Beauty; Grooming; Health Care; Fabric
Care and Home Care; and Baby Care and Family Care.
Many of the factors necessary for understanding these
businesses are similar. Operating margins of the individual
businesses vary due to the nature of materials and processes
used to manufacture the products, the capital intensity of the
businesses and differences in selling, general and
administrative expenses as a percentage of net sales. Net
sales growth by business is also expected to vary slightly due
to the underlying growth of the markets and product
categories in which they operate. While none of our
reportable segments are highly seasonal, components within
certain reportable segments, such as Batteries (Fabric Care
and Home Care), Appliances (Grooming) and Prestige
Fragrances (Beauty) are seasonal. In addition, anticipation or
occurrence of natural disasters, such as hurricanes, can drive

Additional information about our reportable
segments can be found in MD&A and Note 11 of our
Consolidated Financial Statements, Segment Information.

Narrative Description of Business

Business Model. Our business model relies on the

continued growth and success of existing brands and
products, as well as the creation of new products. The
markets and industry segments in which we offer our
products are highly competitive. Our products are sold in
more than 180 countries around the world primarily through
mass merchandisers, grocery stores, membership club stores,
drug stores, department stores, salons and in high-frequency
stores, the neighborhood stores which serve many consumers
in developing markets. We work collaboratively with our
customers to improve the in-store presence of our products
and win the "first moment of truth" - when a consumer is
shopping in the store. We must also win the "second moment
of truth" - when a consumer uses the product, evaluates how
well it met his or her expectations and decides whether it
was a good value. We believe we must continue to provide
new, innovative products and branding to the consumer in
order to grow our business. Research and product
development activities, designed to enable sustained organic
growth, continued to carry a high priority during the past
fiscal year. While many of the benefits from these efforts
will not be realized until future years, we believe these
activities demonstrate our commitment to future growth.

Key Product Categories. Information on key

product categories can be found in Note 11 of our
Consolidated Financial Statements, Segment Information.

Key Customers. Our customers include mass

merchandisers, grocery stores, membership club stores, drug
stores and high-frequency stores. Sales to Wal-Mart Stores,
Inc. and its affiliates represent approximately 14%, 15% and
16% of our total revenue in 2012, 2011 and 2010,
respectively. No other customer represents more than 10% of
our net sales. Our top ten customers account for
approximately 31% of our total unit volume in 2012, and
32% of our total unit volume in 2011 and 2010. The nature
of our business results in no material backlog orders or
contracts with the government. We believe our practices
related to working capital items for customers and suppliers
are consistent with the industry segments in which we
compete.

Sources and Availability of Materials. Almost all
of the raw and packaging materials used by the Company are
purchased from others, some of whom are single-source
suppliers. We produce raw materials, primarily chemicals,
for further use in the manufacturing process. In addition,
fuel, natural gas and derivative products are important
commodities consumed in our manufacturing process and in

16 The Procter & Gamble Company

the distribution of input materials and finished product to
customers. The prices we pay for materials and other
commodities are subject to fluctuation. When prices for
these items change, we may or may not pass the change to
our customers, depending on the magnitude and expected
duration of the change. The Company purchases a
substantial variety of other raw and packaging materials,
none of which is material to our business taken as a whole.

Trademarks and Patents. We own or have licenses

under patents and registered trademarks which are used in
connection with our activity in all businesses. Some of these
patents or licenses cover significant product formulation and
processes used to manufacture our products. The trademarks
are important to the overall marketing and branding of our
products. All major products and trademarks in each
business are registered. In part, our success can be attributed
to the existence and continued protection of these
trademarks, patents and licenses.

Competitive Condition. The markets in which our

products are sold are highly competitive. Our products
compete against similar products of many large and small
companies, including well-known global competitors. In
many of the markets and industry segments in which we sell
our products, we compete against other branded products as
well as retailers' private-label brands. We are well positioned
in the industry segments and markets in which we operate -
often holding a leadership or significant market share
position. We support our products with advertising,
promotions and other vehicles to build awareness of our
brands in conjunction with an extensive sales force. We
believe this combination provides the most efficient method
of marketing for these types of products. Product quality,
performance, value and packaging are also important
competitive factors.

Research and Development Expenditures.
Research and development expenditures enable us to
develop technologies and obtain patents across all categories
in order to meet the needs and improve the lives of our
consumers. Total research and development expenses were
$2.0 billion in 2012 and 2011, and $1.9 billion in 2010.

Expenditures for Environmental Compliance.
Expenditures for compliance with federal, state and local
environmental laws and regulations are fairly consistent
from year to year and are not material to the Company. No
material change is expected in fiscal year 2013.

Employees. Total number of employees is an

estimate of total Company employees excluding interns, co-
ops and employees of joint ventures. Historical numbers
include employees of discontinued operations.

2012

2011

2010

2009

2008

2007

Total Number of Employees

126,000

129,000

127,000

132,000

135,000

Financial Information about Foreign and Domestic
Operations

Net sales in the United States account for
approximately 35% of total net sales. No other individual
country exceeded 10% of total net sales. Operations outside
the United States are generally characterized by the same
conditions discussed in the description of the business above
and may be affected by additional factors including changing
currency values, different rates of inflation, economic
growth and political and economic uncertainties and
disruptions. Our sales by geography for the fiscal years
ended June 30 were as follows:

North America (1)
Western Europe

Asia

2012
2011
39% 41% 42%

2010

19% 20% 20%

18% 16% 15%

Latin America
CEEMEA (2)
(1) North America includes results for the United States and

10%

14% 14% 14%

Canada only.

(2) CEEMEA includes Central and Eastern Europe, Middle East

and Africa.

Net sales and assets in the United States and internationally
were as follows (in billions):

United States

International

Net Sales (for the year ended June 30)
2012

$29.5

2011

2010

Assets (as of June 30)
2012

2011

2010

Item 1A. Risk Factors.

$29.9

$29.5

$68.0

$70.3

$70.1

$54.2

$51.2

$48.1

$64.2

$68.1

$58.1

The following discussion of “risk factors” identifies

the most significant factors that may adversely affect our
business, operations, financial position or future financial
performance. This information should be read in conjunction
with MD&A and the consolidated financial statements and
related notes incorporated by reference into this report. The

The Procter & Gamble Company 17

following discussion of risks is not all inclusive but is
designed to highlight what we believe are important factors
to consider when evaluating our expectations. These factors
could cause our future results to differ from those in the
forward-looking statements and from historical trends.

A material change in consumer demand for our products
could have a significant impact on our business.

our ability to correctly anticipate customer and consumer
acceptance, to obtain and maintain necessary intellectual
property protections, and to avoid infringing the intellectual
property rights of others. We must also be able to
successfully respond to technological advances by and
intellectual property rights granted to competition, and
failure to do so could compromise our competitive position
and impact our results.

We are a consumer products company and rely on

continued global demand for our brands and products. To
achieve business goals, we must develop and sell products
that appeal to consumers. This is dependent on a number of
factors including our ability to develop effective sales,
advertising and marketing programs. We expect to achieve
our financial targets, in part, by shifting our portfolio
towards faster growing, higher margin businesses and by
focusing on the most profitable businesses, biggest
innovations and most important emerging markets. We
expect to achieve our financial targets, in part, by achieving
disproportionate growth in developing regions. If demand
for our products and/or market growth rates in either
developed or developing markets fall substantially below
expected levels or our market share declines significantly in
these businesses, our volume, and consequently our results,
could be negatively impacted. This could occur due to,
among other things, unforeseen negative economic or
political events, changes in consumer trends and habits, or
negative consumer responses to pricing actions.

The ability to achieve our business objectives is
dependent on how well we can compete with our local
and global competitors in new and existing markets and
channels.

The consumer products industry is highly

competitive. Across all of our categories, we compete
against a wide variety of global and local competitors. As a
result, there are ongoing competitive pressures in the
environments in which we operate, as well as challenges in
maintaining profit margins. This includes, among other
things, increasing competition from mid- and lower-tier
value products in both developed and developing markets.
To address these challenges, we must be able to successfully
respond to competitive factors, including pricing,
promotional incentives and trade terms. In addition, the
emergence of new sales channels, such as sales made
through the Internet directly to consumers, may affect
customer and consumer preferences, as well as market
dynamics. Failure to effectively compete in these new
channels could negatively impact results.

Our ability to meet our growth targets depends on
successful product and operations innovation and our
ability to successfully respond to competitive innovation.

Achieving our business results depends, in part, on
the successful development, introduction and marketing of
new products and improvements to our equipment and
manufacturing processes. Successful innovation depends on

Our businesses face cost fluctuations and pressures which
could affect our business results.

Our costs are subject to fluctuations, particularly
due to changes in commodity prices, raw materials, labor
costs, energy costs, pension and healthcare costs, foreign
exchange and interest rates. Therefore, our success is
dependent, in part, on our continued ability to forecast and
manage these fluctuations through pricing actions, cost
savings projects (including outsourcing projects) and
sourcing decisions, while maintaining and improving
margins and market share. In addition, our financial
projections include cost savings described in our announced
productivity plan. Failure to deliver these savings could
adversely impact our results.

There are risks inherent in global manufacturing which
could negatively impact our business results.

In the manufacturing and general overhead areas,

we need to maintain key manufacturing and supply
arrangements, including any key sole supplier and sole
manufacturing plant arrangements, to achieve our targets on
cost. While we have business continuity and contingency
plans for key manufacturing sites and the supply of raw
materials, significant disruption of manufacturing, such as
labor disputes, loss or impairment of key manufacturing
sites, natural disasters, acts of war or terrorism, and other
external factors over which we have no control, could
interrupt product supply and, if not remedied, have an
adverse impact on our business.

We face risks associated with having significant
international operations.

We are a global company, with manufacturing
operations in more than 40 countries, and a significant
portion of our revenue is outside the U.S. Our international
operations are subject to a number of risks, including, but
not limited to:

•

•
•

compliance with U.S. laws affecting operations
outside of the United States, such as the Foreign
Corrupt Practices Act;
compliance with a variety of local regulations and
laws;
changes in tax laws and the interpretation of those
laws;
sudden changes in foreign currency exchange
controls;
discriminatory or conflicting fiscal policies;
difficulties enforcing intellectual property and

18 The Procter & Gamble Company

•

contractual rights in certain jurisdictions;
greater risk of uncollectible accounts and longer
collection cycles;
effective and immediate implementation of control
environment processes across our diverse
operations and employee base; and
imposition of more or new tariffs, quotas, trade
barriers and similar restrictions on our sales outside
the United States.

We have sizable businesses and maintain local

currency cash balances in a number of foreign countries with
exchange controls, including, but not limited to, Venezuela,
China and India. In addition, some countries where we have
businesses, such as Argentina, have introduced import
restrictions. Our results of operations and/or financial
condition could be adversely impacted if we are unable to
successfully manage these and other risks of international
operations in an increasingly volatile environment.

Fluctuations in exchange rates may have an adverse
impact on our business results or financial condition.

We hold assets and incur liabilities, earn revenues

and pay expenses in a variety of currencies other than the
U.S. dollar. Because our consolidated financial statements
are presented in U.S. dollars, the financial statements of our
subsidiaries outside the United States are translated into U.S.
dollars. Our operations outside of the U.S. generate a
significant portion of our net revenue. Fluctuations in
exchange rates may therefore adversely impact our business
results or financial condition. See also the Financial
Condition and Results of Operations section of the MD&A
and Note 5 to our Consolidated Financial Statements.

We face risks related to changes in the global and
political economic environment, including the global
capital and credit markets.

Our business is impacted by global economic

conditions, which have recently been volatile. Our products
are sold in more than 180 countries around the world. If the
global economy experiences significant disruptions, our
business could be negatively impacted by reduced demand
for our products related to a slow-down in the general
economy, supplier or customer disruptions resulting from
tighter credit markets, temporary interruptions in our ability
to conduct day-to-day transactions through our financial
intermediaries involving the payment to or collection of
funds from our customers, vendors and suppliers and/or
liquidity issues resulting from an inability to access credit
markets to obtain cash to support operations.

Our objective is to maintain credit ratings that
provide us with ready access to global capital and credit
markets. Any downgrade of our current credit ratings by a
credit rating agency could increase our future borrowing
costs and impair our ability to access capital and credit
markets on terms commercially acceptable to us.

We could also be negatively impacted by political

crises in individual countries or regions, including sovereign
risk related to a deterioration in the credit worthiness or a
default by local governments. For example, we could be
adversely impacted by continued instability in the banking
and governmental sectors of certain countries in the
European Union such as Greece, or the negative impact on
economic growth resulting from the combination of federal
income tax increases and government spending restrictions
potentially occurring at the end of calendar year 2012 in the
United States (commonly referred to as the “fiscal cliff”).

Consequently, our success will depend, in part, on

our ability to manage continued global and/or economic
uncertainty, especially in our significant geographical
markets, as well as any political or economic disruption.
These risks could negatively impact our overall liquidity and
financing and borrowing costs, as well as our ability to
collect receipts due from governments, including refunds of
value added taxes, and/or create significant credit risks
relative to our local customers and depository institutions.

If the reputation of the Company or one or more of our
brands erodes significantly, it could have a material
impact on our financial results.

The Company's reputation is the foundation of our
relationships with key stakeholders and other constituencies,
such as customers and suppliers. In addition, many of our
brands have worldwide recognition. This recognition is the
result of the large investments we have made in our products
over many years. The quality and safety of our products is
critical to our business. Our Company also devotes
significant time and resources to programs designed to
protect and preserve our reputation, such as social
responsibility and environmental sustainability. If we are
unable to effectively manage real or perceived issues,
including concerns about safety, quality, efficacy, or similar
matters, these issues could negatively impact sentiments
toward the Company or our products, our ability to operate
freely could be impaired and our financial results could
suffer. Our financial success is directly dependent on the
success of our brands, and the success of these brands can
suffer if our marketing plans or product initiatives do not
have the desired impact on a brand's image or its ability to
attract consumers. Our results could also be negatively
impacted if one of our brands suffers a substantial
impediment to its reputation due to a significant product
recall, product-related litigation, allegations of product
tampering, or the distribution and sale of counterfeit
products.
In addition, given the association of our
individual products with the Company, an issue with one of
our products could negatively affect the reputation of our
other products, or the Company as a whole, thereby
potentially hurting results.

Our ability to successfully manage ongoing
organizational change could impact our business results.

We have executed a number of significant business

and organizational changes including acquisitions,
divestitures and workforce optimization projects to support
our growth strategies. We expect these types of changes to
continue for the foreseeable future. Successfully managing
these changes, including retention of key employees, is
critical to our business success. Further, ongoing business
and organizational changes are likely to result in more
reliance on third parties for various services, and that
reliance may increase reputational, operational, and
compliance risks, including the risk of corruption. We are
generally a build-from-within company, and our success is
dependent on identifying, developing and retaining key
employees to provide uninterrupted leadership and direction
for our business. This includes developing organization
capabilities in key growth markets where the depth of skilled
employees is limited and competition for these resources is
intense. Finally, our financial targets assume a consistent
level of productivity improvement. If we are unable to
deliver expected productivity improvements, while
continuing to invest in business growth, our financial results
could be adversely impacted.

Our ability to successfully manage ongoing acquisition,
joint venture, and divestiture activities could impact our
business results.

As a company that manages a portfolio of consumer

brands, our ongoing business model involves a certain level
of acquisition, joint venture and divestiture activities. We
must be able to successfully manage the impacts of these
activities, while at the same time delivering against our
business objectives. Specifically, our financial results could
be adversely impacted if: 1) we are not able to deliver the
expected cost and growth synergies associated with our
acquisitions and joint ventures, 2) changes in the cash flows
or other market-based assumptions cause the value of
acquired assets to fall below book value, or 3) we are unable
to offset the dilutive impacts from the loss of revenue
associated with divested brands. Additionally, joint ventures
inherently involve a lesser degree of control over business
operations, thereby potentially increasing the financial, legal,
operational, and/or compliance risks associated with each
joint venture we enter into.

Our business is subject to changes in legislation,
regulation and enforcement, and our ability to manage
and resolve pending legal matters in the United States
and abroad.

Changes in laws, regulations and related
interpretations, including changes in accounting standards,
taxation requirements and increased enforcement actions and
penalties may alter the environment in which we do
business. As a U.S. based multinational company we are
subject to tax regulations in the United States and multiple
foreign jurisdictions, some of which are interdependent. For
example, certain income that is earned and taxed in countries
outside the United States is not taxed in the United States,
provided those earnings are indefinitely reinvested outside

The Procter & Gamble Company 19

the United States. If these or other tax regulations should
change, our financial results could be impacted.

In addition, our ability to manage regulatory,

environmental, tax and legal matters (including product
liability, patent, and other intellectual property matters), and
to resolve pending legal matters without significant liability
may materially impact our results of operations and financial
position. Furthermore, if pending legal matters, including the
competition law and antitrust investigations described in
Item 3 of this Form 10-K and Note 10 of our Consolidated
Financial Statements, Commitments and Contingencies,
result in fines or costs in excess of the amounts accrued to
date, that could materially impact our results of operations
and financial position.

There are increasing calls in the United States from

members of leadership in both major U.S. political parties
for “comprehensive tax reform” which may significantly
change the income tax rules that are applicable to U.S.
domiciled corporations, such as P&G. It is very difficult to
assess whether the overall effect of such potential legislation
would be cumulatively positive or negative for P&G's
earnings and cash flows.

A material change in customer relationships or in
customer demand for our products could have a
significant impact on our business.

We sell most of our products via retail customers,
which consist of mass merchandisers, grocery stores, club
stores, drug stores and high-frequency stores. Our success is
dependent on our ability to successfully manage
relationships with our retail trade customers. This includes
our ability to offer trade terms that are acceptable to our
customers and are aligned with our pricing and profitability
targets. Our business could suffer if we cannot reach
agreement with a key customer based on our trade terms and
principles. Our business would be negatively impacted if a
key customer were to significantly reduce the range or
inventory level of our products.

Consolidation among our retail customers could

create significant cost and margin pressure and lead to more
complex work across broader geographic boundaries for
both us and our key retailers. This would be particularly
challenging if major customers are addressing local trade
pressures, local law and regulation changes, or financial
distress.

A failure of one or more key information technology
systems, networks, processes, associated sites or service
providers could have a material adverse impact on our
business or reputation.

We rely extensively on information technology (IT)
systems, networks, and services, including internet sites, data
hosting and processing facilities and tools, and other
hardware, software and technical applications and platforms,
some of which are managed, hosted, provided and/or used by

20 The Procter & Gamble Company

third-parties or their vendors, to assist in conducting our
business. The various uses of these IT systems, networks,
and services include, but are not limited to:

antitrust and trade regulation, product liability, advertising,
contracts, environmental issues, patent and trademark
matters, labor and employment matters and tax.

As previously reported, the Company has had a

number of antitrust cases in Europe. The Company's policy
is to comply with all laws and regulations, including all
antitrust and competition laws, and to cooperate with the
relevant regulatory authorities, which the Company is doing.
In response to the actions of the regulatory authorities, the
Company launched its own internal investigations into
potential violations of competition laws. The Company
identified violations in certain European countries and
appropriate actions were taken.

As a result of certain investigations that were

previously disclosed, several authorities issued separate
complaints alleging that the Company, along with several
other companies, engaged in violations of competition laws
in the past. The Company resolved several of these matters
prior to or during fiscal year 2012.

The Company has remaining antitrust matters at

various stages of the regulatory process in Belgium, France,
Germany and Greece, while other countries have issued
decisions, many of which are on appeal. All of these matters
involve a number of other consumer products companies
and/or retail customers. Competition and antitrust violations
often continue for several years and, if violations are found,
can result in substantial fines. No non-monetary sanctions
are being sought in these matters.

For certain of the remaining matters listed above,
we have established accruals for potential fines and we do
not expect any significant incremental fines or costs in
excess of amounts accrued for these matters. For other
remaining matters, we cannot reasonably estimate any fines
to which the Company may be subject as a result of the
investigations. Please refer to the Company's Risk Factors in
Part I, Item 1A of this Form 10-K for additional information.

Item 4. Mine Safety Disclosure

Not Applicable.

ordering and managing materials from suppliers;
converting materials to finished products;
shipping product to customers;

•
•
•
• marketing and selling products to consumers;
collecting and storing customer, consumer,
•
employee, investor, and other stakeholder
information and personal data;
processing transactions;
summarizing and reporting results of operations;
hosting, processing, and sharing confidential and
proprietary research, business plans, and financial
information;
complying with regulatory, legal or tax
requirements;
providing data security; and
handling other processes necessary to manage our
business.

•
•
•

•
•

•

Increased IT security threats and more sophisticated
computer crime, including advanced persistent threats, pose
a potential risk to the security of our IT systems, networks,
and services, as well as the confidentiality, availability, and
integrity of our data. If the IT systems, networks, or service
providers we rely upon fail to function properly, or if we
suffer a loss or disclosure of business or stakeholder
information, due to any number of causes, ranging from
catastrophic events to power outages to security breaches,
and our business continuity plans do not effectively address
these failures on a timely basis, we may suffer interruptions
in our ability to manage operations and reputational,
competitive and/or business harm, which may adversely
impact our results of operations and/or financial condition.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

In the U.S., we own and operate 33 manufacturing

facilities located in 21 different states or territories. In
addition, we own and operate 103 manufacturing facilities in
41 other countries. Many of the domestic and international
facilities produce products for multiple businesses. Beauty
products are manufactured at 41 of these locations;
Grooming products at 16; Fabric Care and Home Care
products at 61; Baby Care and Family Care products at 31;
and Health Care products at 33. Management believes that
the Company's production facilities are adequate to support
the business efficiently and that the properties and equipment
have been well maintained.

Item 3. Legal Proceedings.

The Company is subject, from time to time, to
certain legal proceedings and claims arising out of our
business, which cover a wide range of matters, including

The Procter & Gamble Company 21

The names, ages and positions held by the Executive Officers of the Company on August 8, 2012, are:

Executive Officers of the Registrant

Name

Robert A. McDonald

Position

Chairman of the Board, President and
Chief Executive Officer

Director since July 1, 2009

Jon R. Moeller

Chief Financial Officer

Werner Geissler

Vice Chairman-Global Operations

E. Dimitri Panayotopoulos

Vice Chairman-Global Business Units

Bruce Brown

Chief Technology Officer

Robert L. Fregolle, Jr.

Global Customer Business Development Officer

Deborah P. Majoras

Chief Legal Officer and Secretary

Moheet Nagrath

Global Human Resources Officer

Filippo Passerini

Group President-Global Business Services and
Chief Information Officer

Marc S. Pritchard

Global Brand Building Officer

Valarie L. Sheppard

Senior Vice President & Comptroller

Ioannis Skoufalos

Global Product Supply Officer

Age

First Elected to
Officer Position

1999

2009

2007

2008

2009

2010

2008

2003

2008

2005

2011

All of the Executive Officers named above, excluding Ms. Majoras, have been employed by the Company for more than five
years. Ms. Majoras held the following positions within the Company during the past five years: Chief Legal Officer and
Secretary (February 1, 2010 - present), Vice President and General Counsel (June 24, 2008 - January 31, 2010). Ms. Majoras
was Chairman of the Federal Trade Commission from 2004 until joining the Company in 2008.

22 The Procter & Gamble Company

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

ISSUER PURCHASES OF EQUITY SECURITIES

Period
4/1/2012 - 4/30/2012

5/1/2012 - 5/31/2012

6/1/2012 - 6/30/2012

Total Number of
Shares Purchased (1)
235

Average Price
Paid per Share (2)
$66.95

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (3)
0

Approximate Dollar Value of
Shares That May Yet be
Purchased Under our Share
Repurchase Program
0

(1) The total number of shares purchased was 235 for the quarter. This represents shares acquired by the Company under various
compensation and benefit plans. This table excludes shares withheld from employees to satisfy minimum tax withholding
requirements on option exercises and other equity-based transactions. The Company administers cashless exercises through an
independent, third party broker and does not repurchase stock in connection with cashless exercise.

(2) Average price paid per share is calculated on a settlement basis and excludes commission.
(3) On April 27, 2012, the Company stated that fiscal year 2011-12 share repurchases were estimated to be approximately $4.0 billion,

notwithstanding any purchases under the Company's compensation and benefit plans. The share repurchases were authorized pursuant
to a resolution issued by the Company's Board of Directors and were financed by issuing a combination of long-term and short-term
debt. The total dollar value of shares purchased under the share repurchase plan was $4.0 billion. The share repurchase plan expired
on June 30, 2012.

Additional information required by this item can be found in Part III, Item 12 of this Form 10-K.

Shareholder Return Performance Graphs

Market and Dividend Information

P&G has been paying a dividend for 122 consecutive years since its incorporation in 1890 and has increased its dividend for 56
consecutive years at an annual compound average rate of approximately 9.5%.

(in dollars; split-adjusted)

1956

1970

1984

1998

2012

Dividends per Share

0.01

0.04

0.15

0.51

2.14

The Procter & Gamble Company 23

QUARTERLY DIVIDENDS

Quarter Ended

September 30

December 31

March 31

June 30

2011 - 2012

2010 – 2011

0.5250

0.5620

0.4818

0.5250

COMMON STOCK PRICE RANGE

Quarter Ended

September 30

December 31

March 31

June 30

2011 - 2012

2010 – 2011

High

Low

High

Low

65.14

57.56

63.36

58.92

66.98

67.95

67.92

61.00

62.56

59.08

65.38

66.95

67.72

59.68

59.70

61.47

SHAREHOLDER RETURN

The following graph compares the cumulative total return of P&G’s common stock for the 5-year period ending June 30, 2012,
against the cumulative total return of the S&P 500 Stock Index (broad market comparison) and the S&P 500 Consumer Staples
Index (line of business comparison). The graph and table assume $100 was invested on June 30, 2007, and that all dividends
were reinvested.

Cumulative Value of $100 Investment, through June 30

Company Name/Index

2007

2008

2009

2010

2011

2012

P&G

S&P 500 Index

S&P 500 Consumer Staples Index

100 $

102 $

88 $

106 $

116 $

100

101

103

130

116

101

149

24 The Procter & Gamble Company

Item 6. Selected Financial Data.

The information required by this item is incorporated by reference to Note 1 of our Consolidated Financial Statements,

Summary of Significant Accounting Policies and Note 11 of our Consolidated Financial Statements, Segment Information.

Financial Summary (Unaudited)

Amounts in millions, except per share amounts
Net Sales

2012
$ 83,680

2011
$ 81,104

2010
$ 77,567

2009
$ 75,295

2008
$ 77,714

2007
$ 71,095

Gross Profit

Operating Income

Net Earnings from Continuing Operations

Net Earnings from Discontinued Operations

41,289

13,292

9,317

1,587

41,245

15,495

11,698

229

Net Earnings attributable to Procter & Gamble

10,756

11,797

40,525

15,732

10,851

1,995

12,736

37,644

15,188

10,645

2,877

13,436

39,534

15,743

11,224

930

36,607

14,236

9,562

847

12,075

10,340

Net Earnings Margin from Continuing
Operations
Basic Net Earnings per Common Share (1):
Earnings from continuing operations

Earnings from discontinued operations

Basic Net Earnings per Common Share
Diluted Net Earnings per Common Share (1):
Earnings from continuing operations

Earnings from discontinued operations

Diluted Net Earnings per Common Share

Dividends per Common Share

11.1%

14.4%

14.0%

14.1%

14.4%

13.4%

3.24

0.58

3.82

3.12

0.54

3.66

2.14

4.04

0.08

4.12

3.85

0.08

3.93

1.97

3.63

0.69

4.32

3.47

0.64

4.11

1.80

3.51

0.98

4.49

3.35

0.91

4.26

1.64

3.56

0.30

3.86

3.36

0.28

3.64

1.45

2.95

0.27

3.22

2.79

0.25

3.04

1.28

Research and Development Expense

$ 2,029

$ 1,982

$ 1,931

$ 1,844

$ 1,927

$ 1,809

Advertising Expense

Total Assets

Capital Expenditures

Long-Term Debt

9,345

9,210

8,475

7,453

8,426

7,714

132,244

138,354

128,172

134,833

143,992

138,014

3,964

21,080

3,306

22,033

3,067

21,360

3,238

20,652

3,046

23,581

2,945

23,375

Shareholders' Equity
(1) Basic net earnings per share and diluted net earnings per share are calculated based on net earnings attributable to Procter & Gamble.

61,439

63,382

68,001

69,784

64,035

67,012

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The Procter & Gamble Company 25

Management's Discussion and Analysis

Forward-Looking Statements

Certain statements in this report, other than purely historical
information, including estimates, projections, statements
relating to our business plans, objectives, and expected
operating results, and the assumptions upon which those
statements are based, are “forward-looking statements”
within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking statements may appear throughout
this report, including, without limitation, in the following
sections: “Management's Discussion and Analysis” and
“Risk Factors.” These forward-looking statements generally
are identified by the words “believe,” “project,” “expect,”
“anticipate,” “estimate,” “intend,” “strategy,” “future,”
“opportunity,” “plan,” “may,” “should,” “will,” “would,”
“will be,” “will continue,” “will likely result” and similar
expressions. Forward-looking statements are based on
current expectations and assumptions that are subject to risks
and uncertainties which may cause actual results to differ
materially from the forward-looking statements. A detailed
discussion of risks and uncertainties that could cause actual
results and events to differ materially from such forward-
looking statements is included in the section titled
"Economic Conditions, Challenges and Risks" and the
section titled “Risk Factors” (Item 1A of this Form 10-K).
Forward-looking statements are made as of the date of this
report and we undertake no obligation to update or revise
publicly any forward-looking statements, whether because of
new information, future events or otherwise.

The following Management's Discussion and Analysis
(MD&A) is intended to provide the reader with an
understanding of P&G's financial condition, results of
operations and cash flows by focusing on changes in certain
key measures from year to year. MD&A is provided as a
supplement to, and should be read in conjunction with, our
Consolidated Financial Statements and accompanying notes.
MD&A is organized in the following sections:

•

Overview

Summary of 2012 Results

Economic Conditions, Challenges and Risks

Results of Operations

Segment Results

Cash Flow, Financial Condition and Liquidity

Significant Accounting Policies and Estimates

Other Information

Throughout MD&A, we refer to measures used by
management to evaluate performance, including unit volume
growth, net sales and net earnings. We also refer to a number

of financial measures that are not defined under accounting
principles generally accepted in the United States of
America (U.S. GAAP), including organic sales growth, core
earnings per share (Core EPS), free cash flow and free cash
flow productivity. Organic sales growth is net sales growth
excluding the impacts of foreign exchange, acquisitions and
divestitures. Core EPS is diluted net earnings per share from
continuing operations excluding certain specified charges.
Free cash flow is operating cash flow less capital spending.
Free cash flow productivity is the ratio of free cash flow to
net earnings. We believe these measures provide investors
with important information that is useful in understanding
our business results and trends. The explanation at the end of
MD&A provides more details on the use and the derivation
of these measures.

Management also uses certain market share and market
consumption estimates to evaluate performance relative to
competition despite some limitations on the availability and
comparability of share and consumption information.
References to market share and market consumption in
MD&A are based on a combination of vendor-reported
consumption and market size data, as well as internal
estimates. All market share references represent the
percentage of sales in dollar terms on a constant currency
basis of our products, relative to all product sales in the
category and are measured on an annual basis versus the
prior 12 month period. References to competitive activity
includes promotional and product initiatives from our
competitors.

OVERVIEW

P&G is a global leader in retail goods focused on providing
branded consumer packaged goods of superior quality and
value to our consumers around the world. Our products are
sold in more than 180 countries primarily through mass
merchandisers, grocery stores, membership club stores, drug
stores, department stores, salons and in high-frequency
stores. We continue to expand our presence in other
channels, including department stores, perfumeries,
pharmacies, salons and e-commerce. We have on-the-ground
operations in approximately 75 countries.

Our market environment is highly competitive with global,
regional and local competitors. In many of the markets and
industry segments in which we sell our products, we
compete against other branded products as well as retailers'
private-label brands. Additionally, many of the product
segments in which we compete are differentiated by price
(referred to as super-premium, premium, mid-tier and value-
tier products). We are well positioned in the industry
segments and markets in which we operate - often holding a
leadership or significant market share position.

26 The Procter & Gamble Company

ORGANIZATIONAL STRUCTURE

Our organizational structure is comprised of Global Business Units (GBUs), Global Operations, Global Business Services
(GBS) and Corporate Functions (CF).

Global Business Units

Under U.S. GAAP, the business units comprising the GBUs are aggregated into five reportable segments: Beauty; Grooming;
Health Care; Fabric Care and Home Care; and Baby Care and Family Care. The GBUs are responsible for developing overall
brand strategy, new product upgrades and innovations and marketing plans. The following provides additional detail on our
reportable segments, businesses and the key product and brand composition within each.

Reportable Segment

Beauty

% of
Net Sales*
24%

Grooming

10%

% of Net
Earnings*

Categories

22% Antiperspirant and Deodorant, Cosmetics, Hair
Care, Hair Color, Personal Cleansing, Prestige
Products, Salon Professional, Skin Care

16% Blades and Razors, Electronic Hair Removal
Devices, Hair Care Appliances, Pre and Post
Shave Products

Health Care

15%

17% Feminine Care, Gastrointestinal, Incontinence,

Rapid Diagnostics, Respiratory, Toothbrush,
Toothpaste, Other Oral Care, Other Personal
Health Care, Vitamins/Minerals/Supplements

Fabric Care and Home Care

32%

26% Bleach and Laundry Additives, Air Care,

Batteries, Dish Care, Fabric Enhancers, Laundry
Detergents, Pet Care, Professional, Surface Care

Baby Care and Family Care

19%

19% Baby Wipes, Diapers and Pants, Paper Towels,

Tissues, Toilet Paper

Billion Dollar Brands
Head & Shoulders,
Olay, Pantene, SK-II,
Wella

Braun, Fusion,
Gillette, Mach3

Always, Crest, Oral-
B, Vicks

Ace, Ariel, Dawn,
Downy, Duracell,
Febreze, Gain, Iams,
Tide
Bounty, Charmin,
Pampers

* Percent of net sales and net earnings from continuing operations for the year ended June 30, 2012 (excluding results held in Corporate).

Recent Developments: In May 2012, we completed the
divestiture of our snacks business to The Kellogg Company.
In accordance with the applicable accounting guidance for
the disposal of long-lived assets, the results of our snacks
business are presented as discontinued operations and, as
such, have been excluded from continuing operations and
from segment results for all periods presented. As a result of
this change, the pet care business is now included in the
Fabric Care and Home Care segment.

Effective during the quarter ending December 31, 2011, we
implemented a number of changes to our organization
structure within the Beauty and Grooming Global Business
Unit (GBU), which resulted in changes to the components of
the Beauty reportable segment and the Grooming reportable
segment. We now manage these businesses based on the
nature of the product rather than the consumer of the
product. As a result, female blades and razors transitioned
from Beauty to Grooming, while male personal care
products, such as Old Spice and Gillette, moved from
Grooming to Beauty. The GBU and segment discussions in
MD&A and the accompanying Consolidated Financial
Statements have been retrospectively revised to reflect the
new organizational structure.

Beauty: We are a global market leader in the beauty
category. Most of the beauty markets in which we compete
are highly fragmented with a large number of global and

local competitors. We compete in beauty, hair care and
prestige. In beauty care, we offer a wide variety of products,
ranging from deodorants to cosmetics to skin care, such as
our Olay brand, which is the top facial skin care brand in the
world with approximately 10% of the global market share.
In hair care, we compete in both the retail and salon
professional channels. We are the global market leader in the
retail hair care market with over 20% of the global market
share behind our Pantene and Head & Shoulders brands. In
the prestige channel, we compete primarily with our prestige
fragrances and the SK-II brand. We are one of the global
market leaders in prestige fragrances, primarily behind our
Dolce & Gabbana, Gucci and Hugo Boss fragrance brands.

Grooming: We are the global market leader in the blades
and razors market and in nearly all of the geographies in
which we compete. Our global blades and razors market
share is approximately 70%, primarily behind the Gillette
franchise including Fusion and Mach3. Our electronic hair
removal devices, such as electric razors and epilators, are
sold under the Braun brand in a number of markets around
the world where we compete against both global and
regional competitors. We hold approximately 30% of the
male shavers market and over 40% of the female epilators
market.

Health Care: We compete in oral care, feminine care and
personal health. In oral care, there are several global
competitors in the market, and we have the number two
market share position with over 20% of the global market.
We are the global market leader in the feminine care
category with over 30% of the global market share. In
personal health, we are the global market leader in
nonprescription heartburn medications behind our Prilosec
OTC brand and in respiratory treatments behind our Vicks
brand. Certain of our sales outside the U.S in personal
health are generated through the PGT Healthcare
partnership.

Fabric Care and Home Care: This segment is comprised of
a variety of fabric care products, including laundry
detergents, additives and fabric enhancers; home care
products, including dishwashing liquids and detergents,
surface cleaners and air fresheners; batteries; and pet care. In
fabric care, we generally have the number one or number
two share position in the markets in which we compete and
are the global market leader, with over 25% of the global
market share, primarily behind our Tide, Ariel and Downy
brands. Our global home care market share is over 15%
across the categories in which we compete. In batteries, we
have over 25% of the global battery market share, behind
our Duracell brand. In pet care, we compete in several
markets in the premium pet care segment, with the Iams and
Eukanuba brands. The vast majority of our pet care business
is in North America, where we have approximately a 10%
share of the market.

Baby Care and Family Care: In baby care, we compete
mainly in diapers and baby wipes, with approximately 35%
of the global market share. We are the number one or
number two baby care competitor in most of the key markets
in which we compete, primarily behind Pampers, the
Company's largest brand, with annual net sales of
approximately $10 billion. Our family care business is
predominantly a North American business comprised largely
of the Bounty paper towel and Charmin toilet paper brands.
U.S. market shares are over 40% for Bounty and over 25%
for Charmin.

Global Operations

Global Operations is comprised of our Market Development
Organization (MDO), which is responsible for developing
go-to-market plans at the local level. The MDO includes
dedicated retail customer, trade channel and country-specific
teams. It is organized along five geographic units: North
America, Western Europe, Central & Eastern Europe/Middle
East/Africa (CEEMEA), Latin America and Asia, which is
comprised of Japan, Greater China and ASEAN/Australia/
India/Korea (AAIK). Throughout MD&A, we reference
business results in developing markets, which we define as
the aggregate of CEEMEA, Latin America, AAIK and
Greater China, and developed markets, which are comprised
of North America, Western Europe and Japan.

The Procter & Gamble Company 27

Global Business Services

GBS provides technology, processes and standard data tools
to enable the GBUs and the MDO to better understand the
business and better serve consumers and customers. The
GBS organization is responsible for providing world-class
solutions at a low cost and with minimal capital investment.

Corporate Functions

CF provides Company-level strategy and portfolio analysis,
corporate accounting, treasury, external relations,
governance, human resources and legal, as well as other
centralized functional support.

STRATEGIC FOCUS

We are focused on strategies that we believe are right for the
long-term health of the Company with the objective of
delivering total shareholder return in the top one-third of our
peer group. The Company's long-term financial targets are:

•

Grow organic sales 1% to 2% faster than the market
grows in the categories and geographies in which
we compete,

Deliver Core EPS growth of high single digits to
low double digits, and

Generate free cash flow productivity of 90% or
greater.

In order to achieve these targets, we are prioritizing the
strategies and resources that will make P&G more focused
and fit to win over the near- and long-term.

Strengthening our Core Business

We are prioritizing resources on our biggest, most profitable
businesses and on the innovations and developing markets
that offer the greatest opportunity for growth.

•

Top 40 Businesses: We define our core business as
the top 40 country/category combinations, 20 in
Household Care and 20 in Beauty & Grooming,
which generate the highest level of annual sales and
profit.
Top 20 Innovations: Our 20 most important
innovations offer significantly higher growth
potential than the balance of the innovation
portfolio. Therefore, the growth of the Company
depends substantially on the success of our biggest
innovations.
Top 10 Developing Markets: Maintaining the
strong growth momentum we have established in
developing markets is critical to delivering our
near- and long-term growth objectives. We are
focusing resources first on the markets that offer the
greatest growth opportunity. We will assess the
potential for further portfolio expansions beyond
the top 10 developing markets based on the top-
and bottom-line growth progress of the core
business.

28 The Procter & Gamble Company

Improving Productivity and Creating a Cost Savings Culture

We have taken significant steps to accelerate cost savings
and create a more cost-focused culture within the Company,
including a five-year, $10 billion cost savings initiative,
which was announced in February 2012. The cost savings
program is based on:

•

Reduction in overhead spending, with a target of
approximately 5,700 non-manufacturing overhead
positions by the end of fiscal year 2013.
Annual savings planned in cost of goods across raw
materials, manufacturing and transportation and
warehousing expenses.
Generating efficiencies to enable us to grow
marketing costs at a slightly slower rate than sales
growth while still increasing consumer reach and
effectiveness, saving approximately $1 billion over
the five year period.

SUMMARY OF 2012 RESULTS

Amounts in millions, except per share amounts
Net Sales

Operating Income

Net Earnings from Continuing Operations

Net Earnings from Discontinued Operations

Net Earnings attributable to Procter & Gamble

Diluted Net Earnings per Common Share

Diluted Net Earnings per Share from Continuing Operations

Core Earnings per Common Share

•

Net sales increased 3% to $83.7 billion.

Organic sales increased 3%.
Unit volume was consistent with the prior year
period as mid-single digit growth in developing
regions was offset by a low single-digit decline in
developed regions.

•

Net earnings attributable to Procter & Gamble were
$10.8 billion, a decrease of $1.0 billion or 9% versus
the prior year period.

The decrease in net earnings attributable to Procter
& Gamble was due to impairment charges,
incremental restructuring charges and gross margin
contraction, partially offset by net sales growth and
the gain on the sale of the snacks business. The
impairment charges included $1.6 billion of before-
tax non-cash goodwill and intangible asset
impairment charges associated with the Appliances
and Salon Professional businesses. The
incremental restructuring charges totaled $721
million before tax, resulting from the Company's
productivity and cost savings plan announced
during the year. A 160-basis point decline in gross
margin was driven primarily by higher commodity

Strengthening our Upstream Innovation Program and
Pipeline

Innovation has always been - and continues to be - P&G's
lifeblood. To consistently win with consumers around the
world across price tiers and preferences, and to consistently
win versus our best competitors, each P&G product category
must have a full portfolio of innovation. The innovation
portfolios must include a mix of commercial programs,
incremental product improvements and discontinuous
innovations. We have made the creation of more
discontinuous innovation a top priority, dedicating R&D
resources and funding to develop new innovations aimed at
changing the game in existing product categories and
creating new ones.

2012
$ 83,680

Change vs.
Prior Year
3%

2011
$ 81,104

Change vs.
Prior Year
5%

2010
$ 77,567

13,292

9,317

1,587

10,756

3.66

3.12

3.85

(14)%

(20)%

593%

(9)%

(7)%

(19)%

(1)%

15,495

11,698

(2)%

229

(89)%

11,797

3.93

3.85

3.87

(7)%

(4)%

11%

15,732

10,851

1,995

12,736

4.11

3.47

3.61

costs and negative mix, partially offset by price
increases and manufacturing cost savings.
Net earnings from discontinued operations
increased $1.4 billion due to the gain on the sale of
the snacks business.

•

Diluted net earnings per share from continuing
operations decreased 19% to $3.12.

Diluted net earnings per share decreased 7% to
$3.66, including earnings from discontinued
operations of $0.54 per share.
Core EPS decreased 1% to $3.85.

•

Cash flow from operating activities was $13.3 billion.

Free cash flow was $9.3 billion.
Free cash flow productivity was 85%.

ECONOMIC CONDITIONS, CHALLENGES AND
RISKS

We discuss expectations regarding future performance,
events and outcomes, such as our business outlook and
objectives, in annual and quarterly reports, press releases
and other written and oral communications. All such
statements, except for historical and present factual

information, are "forward-looking statements" and are based
on financial data and our business plans available only as of
the time the statements are made, which may become out-of-
date or incomplete. We assume no obligation to update any
forward-looking statements as a result of new information,
future events or other factors. Forward-looking statements
are inherently uncertain and investors must recognize that
events could be significantly different from our expectations.
For more information on risks that could impact our results,
refer to Item 1A Risk Factors in this 10-K.

Ability to Achieve Business Plans. We are a consumer
products company and rely on continued demand for our
brands and products. To achieve business goals, we must
develop and sell products that appeal to consumers and retail
trade customers. Our continued success is dependent on
leading-edge innovation with respect to both products and
operations, on the continued positive reputations of our
brands and our ability to successfully maintain trademark
protection. This means we must be able to obtain patents and
trademarks, and respond to technological advances and
patents granted to competition. Our success is also
dependent on effective sales, advertising and marketing
programs. Our ability to innovate and execute in these areas
will determine the extent to which we are able to grow
existing sales and volume profitably, especially with respect
to the product categories and geographic markets (including
developing markets) in which we have chosen to focus.
There are high levels of competitive activity in the
environments in which we operate. To address these
challenges, we must respond to competitive factors,
including pricing, promotional incentives, trade terms and
product initiatives. We must manage each of these factors, as
well as maintain mutually beneficial relationships with our
key customers, in order to effectively compete and achieve
our business plans.

As a company that manages a portfolio of consumer brands,
our ongoing business model involves a certain level of
ongoing acquisition, divestiture and joint venture activities.
We must be able to successfully manage the impacts of these
activities, while at the same time delivering against base
business objectives.

Daily conduct of our business also depends on our ability to
maintain key information technology systems, including
systems operated by third-party suppliers, and to maintain
security over our data.

Cost Pressures. Our costs are subject to fluctuations,
particularly due to changes in commodity prices, raw
materials, labor costs, foreign exchange and interest rates.
Therefore, our success is dependent, in part, on our
continued ability to manage these fluctuations through
pricing actions, cost savings projects, sourcing decisions and
certain hedging transactions, as well as consistent
productivity improvements. We also must manage our debt
and currency exposure, especially in certain countries with
currency exchange controls, such as Venezuela, China, and
India. We need to maintain key manufacturing and supply

The Procter & Gamble Company 29

arrangements, including sole supplier and sole
manufacturing plant arrangements, and successfully manage
any disruptions at Company manufacturing sites. We must
implement, achieve and sustain cost improvement plans,
including our outsourcing projects and those related to
general overhead and workforce optimization. Successfully
managing these changes, including identifying, developing
and retaining key employees, is critical to our success.

Global Economic Conditions. Demand for our products has
a correlation to global macroeconomic factors. The current
macroeconomic factors remain dynamic. Economic changes,
terrorist activity, political unrest and natural disasters may
result in business interruption, inflation, deflation or
decreased demand for our products. Our success will
depend, in part, on our ability to manage continued global
political and/or economic uncertainty, especially in our
significant geographic markets, due to terrorist and other
hostile activities or natural disasters. We could also be
negatively impacted by a global, regional or national
economic crisis, including sovereign risk in the event of a
deterioration in the credit worthiness of, or a default by local
governments, resulting in a disruption of credit markets.
Such events could negatively impact our ability to collect
receipts due from governments, including refunds of value
added taxes, create significant credit risks relative to our
local customers and depository institutions and/or negatively
impact our overall liquidity.

Regulatory Environment. Changes in laws, regulations and
the related interpretations may alter the environment in
which we do business. This includes changes in
environmental, competitive and product-related laws, as well
as changes in accounting standards and tax laws. Our ability
to manage regulatory, tax and legal matters (including
product liability, patent, intellectual property, competition
law matters and tax policy) and to resolve pending legal
matters within current estimates may impact our results.

RESULTS OF OPERATIONS

The key metrics included in our discussion of our
consolidated results of operations include net sales, gross
margin, selling, general and administrative expenses
(SG&A), other non-operating items and income taxes. The
primary factors driving year over year changes in net sales
include overall market growth in the categories in which we
compete, product initiatives and geographic expansion, all of
which drive changes in our underlying unit volume, as well
as pricing actions (which can also indirectly impact volume),
changes in product mix and foreign currency impacts on
sales outside the United States. Most of our cost of products
sold and SG&A expenses are to some extent variable in
nature. Accordingly, our discussion of these operating costs
focus primarily on relative margins rather than the absolute
year over year changes in total costs. The primary drivers of
changes in gross margin are input costs (energy and other
commodities), pricing impacts, product and geographic mix
(for example, gross margins in developed markets are

30 The Procter & Gamble Company

generally higher than in developing markets for similar
products), the impacts of manufacturing savings projects and
to a lesser extent scale impacts (for costs that are fixed or
less variable in nature). The primary drivers of SG&A are
marketing-related costs and overhead costs. Marketing-
related costs are primarily variable in nature, although we do
achieve some level of scale benefit over time due to overall
growth and other marketing efficiencies. Overhead costs are
also variable in nature, but on a relative basis, less so than
marketing costs due to our ability to leverage our
organization and systems infrastructures to support business
growth. Accordingly, we generally experience more scale-
related impacts for these costs.

In February 2012, the Company announced a $10 billion
productivity and cost savings plan to reduce costs in the
areas of supply chain, research and development, marketing
and overhead expenses. The plan is designed to accelerate
cost reductions by streamlining management decision
making, manufacturing and other work processes in order to
help fund the Company's growth strategy. The Company
expects to incur approximately $3.5 billion in before-tax
restructuring costs over a four-year period as part of this
plan.

Net Sales

Fiscal year 2012 compared with fiscal year 2011

Net sales increased 3% to $83.7 billion in 2012 on unit
volume that was consistent with the prior year period.
Difficult macroeconomic conditions have caused a
slowdown in market growth, particularly in developed
markets. In addition, we have initiated a number of price
increases across each reportable segment, in large part to
recover the rising cost of commodities and currency
devaluations. These factors have negatively impacted
volume growth in 2012, but the price increases have led to
higher overall sales. Volume grew low single digits in
Beauty, Grooming, Health Care, and Baby Care and Family
Care. Fabric Care and Home Care volume decreased low
single digits. Volume grew mid-single digits in developing

Operating Costs

Comparisons as a percentage of net sales; Years ended June 30
Gross margin

Selling, general and administrative expense

Operating margin

Earnings from continuing operations before income taxes

Net earnings from continuing operations
Net earnings attributable to Procter & Gamble

regions and was down low single digits in developed
regions. The impact of overall global market growth was
partially offset by market share declines in certain
categories. Price increases added 4% to net sales, driven by
price increases across all business segments and regions,
primarily to help offset commodity costs and devaluing
currencies in certain developing markets. Mix reduced net
sales by 1% due to unfavorable geographic mix across the
Beauty, Grooming, Health Care, and Fabric Care and Home
Care reportable segments and unfavorable product mix.
Foreign exchange was neutral to net sales. Organic sales
growth was 3% driven by price increases.

Fiscal year 2011 compared with fiscal year 2010

Net sales increased 5% in 2011 to $81.1 billion on a 6%
increase in unit volume. Volume grew behind market and
share growth. Global market growth, in categories that we
compete, grew 3% on a constant currency basis. Volume
increased low single digits in developed regions and double
digits in developing regions. All geographic regions
contributed to volume growth, led by double-digit growth in
Asia, high single-digit growth in Latin America and mid-
single-digit growth in CEEMEA and Western Europe. All
five of the business segments contributed to volume growth
with high single-digit growth in the Baby Care and Family
Care and Fabric Care and Home Care segments, mid-single-
digit growth in the Beauty and Health Care segments, and a
low single-digit growth in the Grooming segment. Organic
volume, which excludes acquisitions and divestitures, was
up 5%. Mix reduced net sales by 2% due mainly to
disproportionate growth in developing regions and mid-tier
products, both of which have lower than Company average
selling prices, and declines in the premium-priced
professional salon and prestige categories. Pricing added
1% to net sales behind price increases to offset higher
commodity costs and foreign exchange. Foreign exchange
was neutral to net sales. Organic sales were up 4%, led by
high single-digit growth in the Baby Care and Family Care
segment, as well as mid-single-digit growth across the
Grooming and Health Care segments.

2012
49.3%

31.5%

15.9%

15.3%

11.1%
12.9%

Basis Point
Change

(160)
(30)
(320)
(320)
(330)
(170)

2011
50.9%

31.8%

19.1%

18.5%

14.4%
14.6%

Basis Point
Change

(140)
(20)
(120)
(70)
40
(180)

2010
52.3%

32.0%

20.3%

19.2%

14.0%
16.4%

Fiscal year 2012 compared with fiscal year 2011

Gross margin contracted 160 basis points in 2012 to 49.3%
of net sales. The reduction in gross margin was driven
mainly by a 230-basis point impact from higher commodity
and energy costs. Gross margin was also negatively
impacted by 200 basis points from negative geographic and
product mix and by 30 basis points from the impact of
increased restructuring spending due to the productivity and
cost savings plan. The negative mix resulted from
disproportionate growth in developing regions, as
developing regions have lower relative gross margins than
developed regions. These impacts were partially offset by a
200-basis point impact from increased pricing and a 140-
basis point impact from manufacturing cost savings.

Total SG&A increased 3% to $26.4 billion in 2012, driven
by higher marketing spending to support initiative activity
and a $510 million increase in restructuring spending from
our productivity and cost savings plan, partially offset by a
reduction in competition law fines (see Item 3 of this Form
10-K and Note 10 of our Consolidated Financial Statements,
Commitments and Contingencies), which were $303 million
in the prior year compared to $75 million in the current year.
SG&A as a percentage of net sales decreased 30 basis points
to 31.5%, as reduced competition law fines and the impact
of increased scale leverage on marketing and overhead costs
from higher sales were partially offset by 60 basis points of
incremental restructuring costs.

We incurred impairment charges of $1.6 billion ($1.5 billion
after tax) in 2012 related to the carrying values of goodwill
in our Appliances and Salon Professional businesses and our
Koleston Perfect and Wella indefinite lived intangible assets,
which are part of our Salon Professional business. See Note
2 of our Consolidated Financial Statements for more details,
including factors leading to the impairment charges. Since
goodwill is included in Corporate for internal management
and segment reporting, the goodwill impairment charges are
included in the Corporate segment. The indefinite lived
intangible asset impairments are also included in the
Corporate segment for management and segment reporting.

Fiscal year 2011 compared with fiscal year 2010

Gross margin contracted 140 basis points in 2011 to 50.9%
of net sales. The reduction in gross margin was driven
mainly by a 225-basis point increase in commodity and
energy costs, along with negative product mix from
disproportionate growth in developing regions and mid-tier
products. These impacts were partially offset by
manufacturing cost savings and the favorable impact of
volume scale leverage.

Total SG&A increased 4% to $25.8 billion in 2011 behind
higher marketing and overhead spending, which was
partially offset by the impact of lower foreign currency
exchange costs. SG&A as a percentage of net sales
decreased 20 basis points to 31.8% due to a reduction in
overhead and other operating expenses as a percentage of net
sales, partially offset by increased marketing investments.

The Procter & Gamble Company 31

Marketing spending as a percentage of net sales increased 60
basis points due to additional marketing investments to
support innovation and expansion plans. Overhead spending
as a percentage of net sales decreased 50 basis points due to
sales leverage, partially offset by added spending to support
growth. Other operating expenses as a percentage of net
sales decreased 30 basis points mainly due to a decrease in
Venezuela-related foreign currency exchange costs of $548
million (see further discussion below in "Venezuela
Currency Impacts"). Charges for competition law fines
increased to $303 million versus the prior year charge of
$283 million.

Non-Operating Items

Fiscal year 2012 compared with fiscal year 2011

Interest expense decreased 7% in 2012 to $769 million, due
to lower interest rates on floating rate debt and a decrease in
average debt outstanding. Other non-operating income, net
primarily includes divestiture gains, interest and investment
income. Other non-operating income decreased $71 million
to $262 million in 2012 mainly behind the impact of minor
brand divestitures. A divestiture gain from the sale of our
PUR water filtration brand in the current year was less than
the Zest and Infasil divestiture gains in the prior year.

Fiscal year 2011 compared with fiscal year 2010

In 2011, interest expense decreased 12% to $831 million due
primarily to a reduction in interest rates on floating rate debt
partially offset by an increase in debt outstanding. Other
non-operating income was a net benefit of $333 million in
2011 versus $82 million in 2010. This $251 million increase
was primarily due to the impact of gains on divestitures in
2011 (Zest brand in North America and Infasil brand in
Western Europe) and incremental costs in the 2010
associated with exercising the call option on an outstanding
bond, partially offset by a gain due to the acquisition of
MDVIP in 2010.

Income Taxes

Fiscal year 2012 compared with fiscal year 2011

The effective tax rate on continuing operations increased 510
basis points to 27.1% in 2012 primarily due to a 250-basis
point impact from the non-deductibility of impairment
charges in the current year period and the net impact of
favorable discrete adjustments related to uncertain income
tax positions, which drove 250 basis points of the tax rate
difference. The net benefit on the current year was $165
million, which netted to 130 basis points, versus 380 basis
points of net benefits in the prior year.

Fiscal year 2011 compared with fiscal year 2010

In 2011, the effective tax rate on continuing operations
decreased 500 basis points to 22.0%. This was primarily
driven by net favorable discrete adjustments (primarily
driven by favorable audit and litigation settlements for
uncertain tax positions in multiple jurisdictions relating to

32 The Procter & Gamble Company

prior periods), which drove 410 basis points of the effective
tax rate difference. Net adjustments to tax balances for
uncertain tax positions in a number of jurisdictions resulted
in a benefit of approximately $535 million in 2011,
including a $252 million benefit from the settlement of U.S.
tax litigation primarily related to the valuation of technology
donations. The 2011 tax rate also benefited from the
geographic mix of current year sales and earnings, which
drove a 50-basis point reduction as an increased proportion
of earnings were generated in foreign markets with lower tax
rates versus the United States.

net sales growth and a lower effective tax rate, partially
offset by operating margin contraction. Operating margin
decreased 120 basis points due to a decrease in gross margin,
partially offset by a decrease in SG&A spending as a
percentage of net sales. Gross margin declined behind
higher commodity costs, partially offset by manufacturing
cost savings. SG&A as a percentage of net sales declined
due to reduced foreign currency exchange costs and a
reduction in overhead spending as a percentage of net sales
due to productivity improvements, partially offset by
increased marketing investments.

Net Earnings

Fiscal year 2012 compared with fiscal year 2011

Net earnings from continuing operations decreased 20% to
$9.3 billion in 2012 as an increase in net sales was more than
offset by the impact of impairment charges, incremental
restructuring charges and an increase in income taxes.
Operating margin declined 320 basis points due primarily to
a 190-basis point impact from goodwill and intangible
impairment charges in our Appliances and Salon
Professional businesses and an 85-basis point impact from
incremental restructuring charges. The impact of higher
commodity costs and negative product mix were largely
offset by higher pricing, manufacturing cost savings and
increased scale leverage.

Net earnings from discontinued operations increased $1.4
billion in 2012 due to the gain on the divestiture of the
snacks business.

Diluted net earnings per share decreased 7% from the prior
year to $3.66 in fiscal 2012 behind a decrease in net earnings
from continuing operations, partially offset by an increase in
net earnings from discontinued operations and a reduction in
shares outstanding. Diluted net earnings per share from
continuing operations in 2012 decreased 19% to $3.12.
Diluted net earnings per share from discontinued operations
increased $0.46 due to the gain on the divestiture of the
snacks business, partially offset by a decrease in the earnings
of the snacks business prior to the divestiture. The reduction
in the number of shares outstanding was driven by treasury
share repurchases of $4.0 billion, which were made under
our publicly announced share repurchase program.

Core EPS in 2012 decreased 1% to $3.85. Core EPS
represents diluted net earnings per share from continuing
operations excluding current-year impairment charges for
goodwill and indefinite lived intangible assets, current year
incremental restructuring charges due to the productivity and
cost savings plan, charges in both 2012 and 2011 for
European legal matters and a 2011 benefit from the
settlement of U.S. tax litigation primarily related to the
valuation of technology donations.

Fiscal year 2011 compared with fiscal year 2010

In 2011, net earnings from continuing operations were $11.7
billion, an increase of 8% versus the prior year due mainly to

In 2011, net earnings from discontinued operations
decreased $1.8 billion mainly due to the impact of the gain
on the divestiture of the global pharmaceuticals business in
2010.

Diluted net earnings per share from continuing operations in
2011 increased 11% to $3.85 behind higher net earnings
from continuing operations and the reduction in shares
outstanding. Diluted net earnings per share from
discontinued operations declined $0.56. Diluted net
earnings per share declined 4% to $3.93 driven by lower net
earnings from discontinued operations, partially offset by
higher net earnings from continuing operations and a
reduction in weighted average shares outstanding resulting
from share repurchase activity. The reduction in the number
of shares outstanding was driven by treasury share
repurchases of $7.0 billion, nearly all of which were made
under our publicly announced share repurchase program.
Core EPS increased 7% in 2011 to $3.87.

Venezuela Currency Impacts

Venezuela was determined to be a highly inflationary
economy under U.S. GAAP during fiscal 2010 and as a
result, the U.S. dollar is the functional currency for our
subsidiaries in Venezuela. Currency remeasurement
adjustments for non-dollar denominated monetary assets and
liabilities held by these subsidiaries and other transactional
foreign exchange gains and losses are reflected in earnings.
During fiscal 2010, the Venezuelan government devalued the
Bolivar Fuerte relative to the U.S. dollar. The
remeasurement of our local balance sheets in fiscal 2010 to
the new official exchange rate (4.3 Bolivares Fuertes to the
U.S. dollar) did not materially impact our results. This was
due to the relatively small non-dollar denominated net
monetary asset position in Venezuela. Our overall results in
Venezuela are reflected in our Consolidated Financial
Statements at the 4.3 rate, which is also expected to be
applicable to dividend repatriations.

Foreign currency transactions in Venezuela are subject to an
official government currency exchange rate. Transactions at
the official exchange rate are subject to CADIVI (Venezuela
government's Foreign Exchange Administrative
Commission). During recent years, in addition to the official
exchange rate used for qualifying dividends and imports of
goods and services, the Venezuelan government has had a
number of currency controls for companies operating in

Venezuela. Through most of fiscal 2010, payments for
certain imported goods and services that did not qualify for
the official exchange rate had been satisfied by exchanging
Bolivares Fuertes for U.S. dollars through securities
transactions in the parallel market rather than at the more
favorable official exchange rate. In fiscal 2010, the
Venezuelan government enacted regulations that reduced the
availability of foreign currency at the official exchange rate.
That and an increased spread between the official and
parallel exchange rates during most of fiscal 2010 resulted in
increased costs for exchange transactions executed using
securities transactions in the parallel market during fiscal
2010. The parallel market is now controlled by The Central
Bank of Venezuela as the only legal intermediary to execute
foreign exchange transactions outside of CADIVI. This is
done through the SITME rate, which was approximately 5.3
as of June 30, 2012. The notional amount of transactions that
run through this foreign exchange rate for non-essential
goods is restrictive, which has essentially eliminated our
ability to access any foreign exchange rate other than
through the official CADIVI rate to pay for imported goods
and/or manage our local monetary asset balances. Finally,
the Venezuelan government enacted a price control law
during the second half of fiscal 2012 that negatively
impacted the net selling prices of certain products sold in
Venezuela. This impact was not significant for the fiscal
year.

As of June 30, 2012, we had net monetary assets
denominated in local currency of approximately $1.1 billion.
Approximately $338 million of this balance has been
remeasured using the SITME parallel rate because we plan
to use this amount of the net monetary assets (largely cash)
to satisfy U.S. dollar denominated liabilities that do not
qualify for official rate dollars. However, as noted in the
preceding paragraph, the availability of the parallel market
to settle these transactions is uncertain. The remaining net
monetary asset balances are currently reflected within our
Consolidated Financial Statements at the 4.3 official
exchange rate. Depending on the future availability of U.S.
dollars at the official rate, our local U.S. dollar needs, our
overall repatriation plans and the creditworthiness of the

The Procter & Gamble Company 33

local depository institutions and other creditors, we have
exposure for our local monetary assets. We also have
devaluation exposure for the differential between the current
and potential future official and parallel exchange rates.

Our ability to effectively manage sales and profit levels in
Venezuela will be impacted by several factors. These include
the Company's ability to mitigate the effect of the recently
enacted price controls, any potential future devaluation, any
further Venezuelan government price or exchange controls,
economic conditions and availability of raw materials and
utilities.

SEGMENT RESULTS

Segment results reflect information on the same basis we use
for internal management reporting and performance
evaluation. The results of these reportable segments do not
include certain non-business unit specific costs such as
interest expense, investing activities and certain restructuring
and asset impairment costs. These costs are reported in our
Corporate segment and are included as part of our Corporate
segment discussion. Additionally, as described in Note 11 to
the Consolidated Financial Statements, we have investments
in certain companies over which we exert significant
influence, but do not control the financial and operating
decisions and, therefore, do not consolidate these companies
for U.S. GAAP purposes ("unconsolidated entities"). Given
that certain of these investments are managed as integral
parts of the Company's business units, they are accounted for
as if they were consolidated subsidiaries for management
and segment reporting purposes. This means pre-tax
earnings in the business units include 100% of each pre-tax
income statement component. In determining after-tax
earnings in the business units, we eliminate the share of
earnings applicable to other ownership interests, in a manner
similar to noncontrolling interest, and apply the statutory tax
rates. Eliminations to adjust each line item to U.S. GAAP
are included in our Corporate segment. All references to net
earnings throughout the discussion of segment results refer
to net earnings from continuing operations attributable to
Procter & Gamble.

Net Sales Change Drivers vs. Year Ago (2012 vs. 2011)
Beauty

Grooming

Health Care

Fabric Care and Home Care
Baby Care and Family Care
TOTAL COMPANY

Volume with
Acquisitions
& Divestitures
2%

Volume
Excluding
Acquisitions
& Divestitures
2%

-1%
1%
0%

0%
-1%
1%
0%

Foreign
Exchange
0%
-1%
0%

0%
0%
0%

Price

Mix/Other

Net Sales
Growth

5%
5%
4%

-3%
-1%
-1%
-1%
0%
-1%

3%
6%
3%

Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.

34 The Procter & Gamble Company

BEAUTY

($ millions)
Volume

Net sales

2012

n/a

$ 20,318

Net earnings

$ 2,390

Change vs.
Prior Year
+2%

2011

n/a

Change vs.
Prior Year
+4%

+2% $ 19,937

-6% $ 2,542

+4%

-1%

Fiscal year 2012 compared with fiscal year 2011

Beauty net sales increased 2% to $20.3 billion in 2012 on
unit volume growth of 2%. Organic sales also grew 2% on
2% organic volume growth. Price increases contributed 3%
to net sales growth. Mix negatively impacted net sales by
3% behind a decrease in Salon Professional and a
disproportionate growth in developing regions, which have
lower than segment average selling prices. Global market
share of the Beauty segment decreased 0.3 points. Volume
increased mid-single digits in developing regions while
developed region volume decreased low single digits.
Volume in Retail Hair Care grew mid-single digits behind
high single-digit growth in developing regions led by
Pantene initiatives and Head & Shoulders geographic
expansion. Volume in developed regions was down low
single digits due to competitive activity. Global market
share of the hair care category was unchanged. Volume in
Beauty Care decreased mid-single digits due to the Zest and
Infasil divestitures and the impact of competitive activity in
North America and Western Europe which contributed to
about half a point of global share loss. Volume in Salon
Professional was down high single digits mainly due to
market contraction in Europe and the impact of competitive
activity. Volume in Prestige Products increased mid-single-
digits driven by initiative activity, partially offset by minor
brand divestitures.

Net earnings decreased 6% to $2.4 billion as higher net sales
were more than offset by a 100-basis point decrease in net
earnings margin. Net earnings margin decreased due to
gross margin contraction partially offset by lower SG&A as
a percentage of net sales. Gross margin decreased primarily
due to an increase in commodity costs and unfavorable
geographic and product mix, partially offset by
manufacturing cost savings and higher pricing. SG&A as a
percentage of net sales decreased due to scale leverage from
increased sales.

Fiscal year 2011 compared with fiscal year 2010

Beauty net sales increased 4% in 2011 to $19.9 billion on
unit volume growth of 4%. Organic sales grew 3% on
organic volume of 5%. Mix negatively impacted net sales
by 2% behind disproportionate growth in developing
regions, which have lower than segment average selling
prices and declines in the premium-priced Prestige Products
and Salon Professional categories. Favorable foreign
exchange positively impacted net sales growth by 1%.
Volume in developing regions increased double digits, while
volume in developed regions declined low single digits.
Volume in Retail Hair Care grew mid-single digits behind
growth in all regions except North America. Developing

regions grew double digits behind initiative activity on
Pantene, Head & Shoulders and Rejoice, distribution
expansions and market growth, which were partially offset
by a mid-single-digit decline in North America due to
competitive activity. Global market share of the hair care
category was up slightly. Volume in Beauty Care was up
mid single digits primarily due to higher shipments of Olay
and Safeguard behind initiative activity and distribution
expansion and market growth in developing markets.
Volume in Salon Professional was down high single digits
mainly due to the planned exit of non-strategic businesses
and market size contractions in developed regions. Volume
in Prestige Products declined low single digits primarily due
to the divestiture of minor brands and lower shipments in
Western Europe. Excluding the minor brand divestitures,
volume increased low single digits due to growth of Dolce &
Gabbana and Gucci fragrance brands behind initiative
activity.

Net earnings decreased 1% in 2011 to $2.5 billion as higher
net sales were more than offset by a 60-basis point decrease
in net earnings margin. Net earnings margin decreased due
to gross margin contraction and higher SG&A as a
percentage of net sales. Gross margin decreased primarily
due to an increase in commodity costs, partially offset by
manufacturing cost savings and higher pricing. SG&A as a
percentage of net sales increased due to higher marketing
spending, partially offset by lower overhead spending as a
percentage of net sales and reduced foreign currency
exchange costs.

GROOMING

($ millions)
Volume

$
Net sales
Net earnings $

2012

n/a

8,339

1,807

Change vs.
Prior Year
+1%

2011

n/a

Change vs.
Prior Year
+3%

+1% $ 8,245

+2% $ 1,775

+5%

+10%

Fiscal year 2012 compared with fiscal year 2011

Grooming net sales increased 1% to $8.3 billion in 2012 on
a 1% increase in unit volume. Organic sales were up 2%.
Price increases contributed 2% to net sales growth.
Unfavorable geographic and product mix decreased net sales
by 1% mainly due to disproportionate growth in developing
markets, which have lower than segment average selling
prices. Unfavorable foreign exchange decreased net sales
growth by 1%. Global market share of the Grooming
segment decreased 0.2 points. Volume grew mid-single
digits in developing regions due to initiative activity and
market growth and decreased low single digits in developed
regions primarily due to competitive activity. Volume in
Shave Care was up low single digits due to mid-single-digit
growth in developing regions behind initiatives, Fusion
ProGlide geographic expansion and market growth, partially
offset by a low single-digit decrease in developed regions
due to market contraction and the impact of competitive
activity. Global market share of the blades and razors
category was unchanged. Volume in Appliances decreased

mid-single digits due to market contraction in Western
Europe and the impact of competitive activity. Global
market share of the dry shave category was down over 2
points.

Net earnings increased 2% to $1.8 billion due to higher net
sales and a 10-basis point increase in net earnings margin.
The net earnings margin increase was driven by a decrease
in SG&A as a percentage of net sales, largely offset by gross
margin contraction. SG&A as a percentage of net sales
decreased due to reductions in both overhead and marketing
spending. Gross margin decreased primarily due to an
increase in commodity costs and unfavorable geographic and
product mix, partially offset by price increases.

Fiscal year 2011 compared with fiscal year 2010

Grooming net sales increased 5% in 2011 to $8.2 billion on
volume growth of 3%. Organic sales were up 5%. Price
increases, taken primarily across blades and razors in Latin
America and developed regions, contributed 2% to net sales
growth. Volume grew high single digits in developing
regions and decreased low single digits in developed
regions. Volume for blades and razors was up low single
digits due to market growth in developing regions, partially
offset by reduced volume in the developed regions. Gillette
Fusion and Venus shipments increased double digits behind
distribution expansion and initiative activity; while Mach3
shipments increased low single digits due to growth in
developing regions, partially offset by decreases in
developed markets. Global market share of the blades and
razors category was down about half a point. Volume in
Appliances decreased low single digits due to competitive
activity and a shift from low-tier, high volume products to
higher-tier product offerings. Global market share of the dry
shave category was down half a point.

Net earnings increased 10% to $1.8 billion behind higher net
sales and a 90-basis point increase in net earnings margin.
Net earnings margin increased due to gross margin
expansion, a lower effective tax rate and a decrease in
SG&A as a percentage of net sales. Gross margin increased
due to price increases, the favorable impact of volume scale
leverage and manufacturing cost savings. The tax rate
decrease was due to a shift in the geographic mix of earnings
to countries with lower statutory tax rates. SG&A as a
percentage of net sales was down due to lower foreign
currency exchange costs and lower overhead spending as a
percentage of net sales due to sales leverage, partially offset
by higher marketing spending.

HEALTH CARE

($ millions)
Volume
Net sales
Net earnings

2012

n/a
$ 12,421
$ 1,826

2011

Change vs.
Prior Year
n/a
+1%
+3% $ 12,033
+2% $ 1,796

Change vs.
Prior Year
+5%
+5%
-3%

The Procter & Gamble Company 35

Fiscal year 2012 compared with fiscal year 2011

Health Care net sales increased 3% to $12.4 billion in 2012
on 1% growth in unit volume. Organic sales were up 2% on
flat organic volume. Price increases contributed 3% to net
sales growth. Mix negatively impacted net sales by 1% due
to disproportionate growth in certain developing countries
and products with lower than segment average selling prices.
Global market share of the Health Care segment decreased
0.1 points. Volume increased mid-single digits in
developing regions and decreased low single digits in
developed regions. Oral Care volume was in line with the
prior year period as the expansion of Oral-B toothpaste in
Western Europe and Latin America were offset by the
impact of competitive activity in developed markets and
Asia and the lost volume following the price increases in
Asia. Global market share of the oral care category was
down slightly. Volume in Personal Health Care increased
low single digits driven by the addition of the PGT
Healthcare partnership. Organic volume was down low
single digits as the benefits from market growth were more
than offset by lower shipments of Prilosec OTC in North
America. All-outlet value share of the U.S. personal health
care market was down slightly. Volume in Feminine Care
was up low single digits driven by mid-single digit growth in
developing markets due to market growth and initiative
activity in India, Brazil and CEEMEA. Feminine Care
global market share was down about half a point.

Net earnings increased 2% to $1.8 billion behind higher net
sales partially offset by a 20-basis point decrease in net
earnings margin. Net earnings margin decreased due to
gross margin contraction, partially offset by lower SG&A as
a percentage of net sales. Gross margin declined due to
higher commodity costs and unfavorable product and
geographic mix, partially offset by manufacturing cost
savings and price increases. SG&A as a percentage of net
sales decreased primarily due to scale leverage from
increased sales.

Fiscal year 2011 compared with fiscal year 2010

Health Care net sales increased 5% in 2011 to $12.0 billion
on 5% growth in unit volume. Organic sales were up 5%.
Volume increased high single digits in developing regions
and low single digits in developed regions. Volume in Oral
Care grew mid-single digits behind initiative activity and
incremental merchandising support of Crest and Oral-B.
Global market share of the oral care category was up over
half a point. Volume in Personal Health Care grew low
single digits behind higher shipments of Vicks in North
America and the developing regions, partially offset by
continuing decline of Prilosec OTC in North America due to
competitive activity. All-outlet value share of the U.S.
personal health care market increased about half a point.
Volume in Feminine Care was up mid-single digits mainly
due to higher shipments of Naturella, behind expansion into
developing regions, and Always, behind initiative activity in
developing regions. Global market share of the feminine
care category was down less than half a point.

36 The Procter & Gamble Company

Net earnings decreased 3% to $1.8 billion as higher net sales
were more than offset by a 130-basis point decrease in net
earnings margin. Net earnings margin decreased due to
lower gross margin, higher SG&A as a percentage of net
sales and a higher effective tax rate. Gross margin declined
due to higher commodity costs and unfavorable mix due to
disproportionate growth in developing regions, partially
offset by manufacturing cost savings. SG&A as a
percentage of net sales increased behind higher marketing
spending to support growth, partially offset by lower foreign
currency exchange costs. The tax rate increase was due to a
shift in the geographic mix of earnings to countries with
higher statutory tax rates.

FABRIC CARE AND HOME CARE

($ millions)
Volume

2012

n/a

Change vs.
Prior Year
-1%

2011

n/a

Change vs.
Prior Year
+6%

Net sales
Net earnings $

$ 27,254

2,915

+3% $ 26,536

-6% $

3,109

+4%

-12%

Fiscal year 2012 compared with fiscal year 2011

Fabric Care and Home Care net sales increased 3% to $27.3
billion in 2012. Unit volume decreased 1%. Organic sales
were up 3%. Price increases contributed 5% to net sales
growth. Mix negatively impacted net sales growth by 1%
due to disproportionate growth of mid-tier product lines and
developing regions, which have lower than segment average
selling prices. Global market share of the Fabric Care and
Home Care segment decreased 0.3 points. Volume in
developing regions grew mid-single digits, while volume in
developed regions decreased mid-single digits. Fabric Care
volume decreased low single digits mainly due to the impact
of price increases in North America, partially offset by
growth in Asia. Global market share of the fabric care
category decreased half a point. Home Care volume
increased low single digits driven by initiative activity and
distribution expansion in developing regions, partially offset
by a low-single-digit decline in developed regions due to the
impact of price increases. Global market share of the home
care category was unchanged. Batteries volume decreased
low single digits due to market contraction and distribution
losses in developed markets, partially offset by market
growth and distribution expansion in developing regions.
Global market share of the batteries category increased
about half a point. Pet Care volume decreased high single
digits due mainly to market contraction and customer
inventory reductions. Global market share of the pet care
category was down about half a point.

Net earnings decreased 6% to $2.9 billion as net sales
growth was more than offset by an 100-basis point decrease
in net earnings margin. Net earnings margin decreased
primarily due to gross margin contraction. Gross margin
decreased mainly due to higher commodity costs and
unfavorable product and geographic mix, partially offset by
manufacturing cost savings and higher pricing. SG&A as a

percentage of net sales decreased nominally as higher
marketing costs were largely offset by overhead scale
leverage from increased sales.

Fiscal year 2011 compared with fiscal year 2010

Fabric Care and Home Care net sales increased 4% in 2011
to $26.5 billion on a 6% increase in unit volume. Organic
sales were up 2%. Organic volume, which excludes the
impact of the Ambi Pur and Natura acquisitions, increased
5%. Mix negatively impacted net sales growth by 2% due to
disproportionate growth of mid-tier product lines and
powdered laundry detergents, which have lower than
segment average selling prices. Volume in developing
regions was up high single digits, while volume in
developed regions grew mid-single digits. Fabric Care
volume increased mid-single digits, led by high single-digit
growth in developing regions behind initiative activity,
increased distribution and market growth. Global market
share of the fabric care category increased slightly. Home
Care volume increased double digits due, in part, to the
Ambi Pur acquisition. Organic volume in Home Care was up
high single digits driven mainly by initiative activity,
including launches of Gain hand dishwashing liquid and
Febreze Set & Refresh in North America, and geographic
expansion of dish and air care product lines. Global market
share of the home care category was up nearly 1 point.
Batteries volume grew mid-single digits primarily due to
price reductions executed through pack count increases in
North America, which were implemented in January 2010,
initiative activity in Western Europe and market growth and
distribution expansion in Asia. Global market share of the
batteries category increased more than half a point. Pet Care
volume was down mid-single digits mainly due to the
impacts of the recall of select dry pet food products and the
supply constraints resulting from restructuring the supply
chain following the recalls, partially offset by the impact of
the Natura acquisition in June 2010. Excluding the Natura
acquisition, Pet Care volume decreased double digits.
Global market share of the pet care category was down half
a point.

Net earnings decreased 12% to $3.1 billion as net sales
growth was more than offset by a 220-basis point decrease
in net earnings margin. Net earnings margin decreased
mainly due to gross margin contraction. SG&A as a
percentage of net sales and the effective tax rate also
increased. Gross margin decreased mainly due to higher
commodity costs and unfavorable product mix behind
disproportionate growth of developing regions and mid-tier
products, partially offset by manufacturing cost savings.
SG&A as a percentage of net sales increased behind higher
overhead spending to support growth and due to costs
related to the select dry pet food products recall. The tax
rate increased due to a shift in the geographic mix of
earnings to countries with higher statutory tax rates.

BABY CARE AND FAMILY CARE

($ millions)
Volume

2012

n/a

Change vs.
Prior Year
+1%

2011

n/a

Change vs.
Prior Year
+8%

$ 16,493
Net sales
Net earnings $ 2,123

+6% $ 15,606

+7% $ 1,978

+6%

-3%

Fiscal year 2012 compared with fiscal year 2011

Baby Care and Family Care net sales increased 6% to $16.5
billion in 2012 on 1% volume growth. Organic sales were up
6%. Pricing added 5% to net sales growth. Global market
share of the Baby Care and Family Care segment increased
0.2 points. Volume grew double digits in developing regions
and decreased low single digits in developed regions.
Volume in Baby Care was up mid-single digits behind
market size growth and distribution expansion in developing
regions, partially offset by declines in North America and
Western Europe from diaper market contraction. Global
market share of the baby care category increased more than
half a point. Volume in Family Care decreased low single
digits primarily due to competitive activity and the impact of
a price increase in North America. In the U.S., all-outlet
share of the family care category was down half a point.

Net earnings increased 7% to $2.1 billion due to sales
growth and a 20-basis point increase in net earnings margin.
Net earnings margin increased mainly due to a decrease in
SG&A as a percentage of net sales, partially offset by a
lower gross margin. The reduction in gross margin was
driven primarily by higher commodity costs and unfavorable
geographic and product mix, partially offset by the impact of
higher pricing. SG&A as a percentage of net sales decreased
due to scale leverage from increased sales.

Fiscal year 2011 compared with fiscal year 2010

Baby Care and Family Care net sales increased 6% in 2011
to $15.6 billion on 8% volume growth. Organic sales were
up 7%. Mix reduced net sales by 2% driven mainly by
disproportionate growth of mid-tier product lines, larger
package sizes and developing regions, all of which have
lower than segment average selling prices. Pricing added 1%
to net sales growth primarily due to price increases executed
in Baby Care to offset higher commodity costs and foreign
exchange. Unfavorable foreign exchange negatively
impacted net sales by 1%. Volume grew double digits in
developing regions and mid-single digits in developed
regions. Volume in Baby Care was up high single digits
primarily due to double-digit growth in developing regions
behind initiative activity, market growth and distribution
expansion. Global market share of the baby care category
increased over 1 point. Volume in Family Care increased
high single digits driven by the continued impact of
initiatives launched in prior periods, with high single-digit
growth in North America. In the U.S., all-outlet share of the
family care category increased half a point.

Net earnings decreased 3% to $2.0 billion as net sales
growth was more than offset by a 120-basis point reduction

The Procter & Gamble Company 37

in net earnings margin. Net earnings margin declined
mainly due to a lower gross margin, partially offset by a
decrease in SG&A as a percentage of net sales. The
reduction in gross margin was driven by higher commodity
costs and unfavorable product mix, behind disproportionate
growth of mid-tier product lines, larger package sizes and
developing regions, which were only partially offset by the
favorable impact of volume scale leverage and
manufacturing cost savings. SG&A as a percentage of net
sales declined due to lower foreign currency exchange costs.

CORPORATE

Corporate includes certain operating and non-operating
activities not allocated to specific business units. These
include: the incidental businesses managed at the corporate
level; financing and investing activities; other general
corporate items; the historical results of certain divested
brands and categories; certain asset impairment charges; and
certain restructuring-type activities to maintain a competitive
cost structure, including manufacturing and workforce
optimization. Corporate also includes reconciling items to
adjust the accounting policies used in the segments to U.S.
GAAP. The most significant reconciling items include
income taxes (to adjust from statutory rates that are reflected
in the segments to the overall Company effective tax rate),
adjustments for unconsolidated entities (to eliminate net
sales, cost of products sold and SG&A for entities that are
consolidated in the segments but accounted for using the
equity method for U.S. GAAP) and noncontrolling interest
adjustments for subsidiaries where we do not have 100%
ownership. Since certain unconsolidated entities and less
than 100%-owned subsidiaries are managed as integral parts
of the related segments, they are accounted for similar to a
wholly-owned subsidiary for management and segment
purposes. This means our segment results recognize 100% of
each income statement component through before-tax
earnings in the segments, with eliminations for
unconsolidated entities and noncontrolling interests in
Corporate. In determining segment net earnings, we apply
the statutory tax rates (with adjustments to arrive at the
Company's effective tax rate in Corporate) and eliminate the
share of earnings applicable to other ownership interests, in
a manner similar to noncontrolling interest.

Corporate net sales primarily reflect the adjustment to
eliminate the sales of unconsolidated entities included in
business segment results. Accordingly, Corporate net sales
are generally negative. Negative net sales in Corporate
decreased by $108 million due to adjustments required to
eliminate the lower net sales of unconsolidated entities. Net
Corporate expenses increased $2.2 billion primarily due to
the net after tax goodwill and intangibles impairment
charges of $1.5 billion, incremental after-tax restructuring
charges of $587 million and the impact of lower net discrete
tax adjustments in the current year. Additional discussion of
the items impacting net earnings in Corporate are included in
the Results of Operations section.

38 The Procter & Gamble Company

In 2011, negative net sales in Corporate were down $101
million due to adjustments required to eliminate lower sales
of unconsolidated entities. Net income from continuing
operations increased $1.3 billion to $498 million. The
increase was due to net discrete adjustments to reverse
reserves for uncertain tax positions, lower interest expense, a
reduction in restructuring-type charges, divestiture gains and
prior-period charges for the taxation of certain future retiree
prescription drug subsidy payments in the U.S. Additional
discussion of the items impacting net income in Corporate
are included in the Results of Operations section above.

Productivity and Cost Savings Plan

In February 2012, the Company announced a $10 billion
productivity and cost savings plan to reduce costs and better
leverage scale in the areas of supply chain, research and
development, marketing and overheads. The program was
designed to accelerate cost reductions by streamlining
management decision making, manufacturing and other
work processes to fund the Company's growth strategy.

As part of this plan the Company expects to incur
approximately $3.5 billion in before-tax restructuring costs
over a four-year period (from fiscal 2012 through fiscal
2015). More than half of the costs will be incurred by the
end of fiscal 2013 and the remainder in fiscal years 2014 and
2015. Savings generated from the restructuring costs are
difficult to estimate, given the nature of the activities, the
corollary benefits achieved, the timing of the execution and
the degree of reinvestment. Overall, the costs are expected
to deliver approximately $2 billion in before-tax annual
savings. The before-tax savings in the current year are not
material due to the timing of the plan.

Restructuring accruals of $343 million as of June 30, 2012
are classified as current liabilities. Approximately 62% of
the restructuring charges incurred during 2012 either have
been or will be settled with cash. Consistent with our
historical policies for ongoing restructuring-type activities,
the resulting charges will be funded by and included within
Corporate for segment reporting.

Refer to Note 3 in our Consolidated Financial Statements for
more details on the productivity and cost savings plan.

CASH FLOW, FINANCIAL CONDITION AND
LIQUIDITY

We believe our financial condition continues to be of high
quality, as evidenced by our ability to generate substantial
cash from operations and ready access to capital markets at
competitive rates.

Operating cash flow provides the primary source of funds to
finance operating needs and capital expenditures. Excess
operating cash is used first to fund shareholder dividends.
Other discretionary uses include acquisitions and share
repurchases to complement our portfolio of businesses,
brands and geographies. As necessary, we may supplement

operating cash flow with debt to fund these activities. The
overall cash position of the Company reflects our strong
business results and a global cash management strategy that
takes into account liquidity management, economic factors
and tax considerations.

Operating Cash Flow

Fiscal year 2012 compared with fiscal year 2011

Operating cash flow was $13.3 billion in 2012, in line with
the prior year. Operating cash flows resulted primarily from
net earnings, adjusted for non-cash items (depreciation and
amortization, stock based compensation, asset impairments,
deferred income taxes, and gains on sale of businesses),
partially offset by working capital increases. Increased
accounts receivable used $427 million of cash to fund
growth. However, accounts receivable days sales
outstanding were down 2 days primarily due to the impact of
foreign exchange. Inventory generated $77 million of cash,
mainly due to an increase in inventory management
improvement efforts, partially offset by inventory to support
product initiatives and to build stock to support capacity
expansions and manufacturing sourcing changes. Inventory
days on hand declined by 10 days primarily due to inventory
management improvement efforts and the impact of foreign
exchange. Accounts payable, accrued and other liabilities
used $22 million of cash, due primarily to the payment of
fines related to violations of the European competition laws.
Cash flow from discontinued operations contributed
approximately $200 million to operating cash flow.

Fiscal year 2011 compared with fiscal year 2010

Operating cash flow was $13.3 billion in 2011, a 17%
decrease versus the prior year. Operating cash flow resulted
primarily from net earnings adjusted for non-cash items
(depreciation and amortization, stock-based compensation,
deferred income taxes and gain on the sale of businesses),
partially offset by an increase in working capital. The net of
accounts receivable, inventory and accounts payable
consumed $569 million of operating cash flow in 2011
mainly due to increases in inventories and accounts
receivables. Inventory consumed $501 million driven by
higher commodity costs, business growth and increased
stock levels in advance of initiatives and sourcing changes.
Inventory days on hand increased by five days due to the
impact of foreign exchange, higher commodity costs and
increased safety stock levels. Accounts receivable used
$426 million primarily to support business growth.
Accounts receivable days sales outstanding were up three
days due to timing of sales and the impact of foreign
exchange. Inventory and accounts receivable increases were
partially offset by accounts payable, accrued and other
liabilities, which increased by $358 million to support
business growth. Other operating assets and liabilities were
also a significant use of operating cash flow due primarily to
net reductions in reserves for uncertain tax positions and an
increase in the amount of value added taxes due from
various governmental authorities. In the prior year, working

capital was a net source of cash.

Free Cash Flow. We view free cash flow as an important
measure because it is a factor impacting the amount of cash
available for dividends and other discretionary investment. It
is defined as operating cash flow less capital expenditures
and is one of the measures used to evaluate senior
management and determine their at-risk compensation.

Fiscal year 2012 compared with fiscal year 2011

Free cash flow was $9.3 billion in 2012, a decrease of 7%
versus the prior year. Free cash flow decreased primarily
due to higher capital spending to support geographic
expansion. Free cash flow productivity, defined as the ratio
of free cash flow to net earnings, was 85% in 2012.

Fiscal year 2011 compared with fiscal year 2010

In 2011, free cash flow was $10.0 billion, a decrease of 23%
versus the prior year. Free cash flow decreased due to lower
operating cash flow and higher capital spending. Free cash
flow productivity was 84% in 2011.

Investing Cash Flows

Fiscal year 2012 compared with fiscal year 2011

Net investing activities consumed $1.1 billion in cash in
2012 mainly due to capital spending, partially offset by
proceeds from asset sales of $2.9 billion. These proceeds
were primarily related to cash received from the sale of our
snacks business in 2012.

Fiscal year 2011 compared with fiscal year 2010

In 2011, net investing activities consumed $3.5 billion of
cash due to capital spending and acquisitions, partially offset
by proceeds from asset sales.

Capital Spending. We view capital spending efficiency as a
critical component of our overall cash management strategy.
We manage capital spending to support our business growth
plans and have cost controls to deliver our cash generation
targets. Capital expenditures, primarily to support capacity
expansion, innovation and cost savings, were $4.0 billion in
2012 and $3.3 billion in 2011. The increase in capital
spending resulted primarily from capacity expansions.
Capital spending as a percentage of net sales increased 60
basis points to 4.7% in 2012. Capital spending for our
discontinued snacks business was approximately $60 million
in 2012. As we continue to support growth, capital spending
in total and as a percentage of net sales is expected to
increase in fiscal 2013. Capital spending as a percentage of
net sales increased 10 basis points to 4.1% in 2011.

Acquisitions. Acquisitions used $134 million of cash in 2012
primarily for the acquisition of New Chapter, a vitamins
supplement business. In 2011, acquisitions used $474
million of cash primarily for the acquisition of Ambi Pur, an
air freshener business.

The Procter & Gamble Company 39

Proceeds from Divestitures and Other Asset Sales. Proceeds
from asset sales contributed $2.9 billion to cash in 2012
mainly due to the sale of our snacks business. In 2011,
proceeds from asset sales contributed $225 million to cash
mainly due to the sale of our Infasil brand in Western Europe
and Zest brand in North America.

Financing Cash Flows

Dividend Payments. Our first discretionary use of cash is
dividend payments. Dividends per common share increased
8% to $2.14 per share in 2012. Total dividend payments to
common and preferred shareholders were $6.1 billion in
2012 and $5.8 billion in 2011. The increase in dividend
payments resulted from increases in our quarterly dividends
per share, partially offset by a reduction in the number of
shares outstanding. In April 2012, the Board of Directors
declared an increase in our quarterly dividend from $0.525
to $0.562 per share on Common Stock and Series A and B
ESOP Convertible Class A Preferred Stock. This represents a
7% increase compared to the prior quarterly dividend and is
the 56th consecutive year that our dividend has increased.
We have paid a dividend in every year since our
incorporation in 1890.

Long-Term and Short-Term Debt. We maintain debt levels
we consider appropriate after evaluating a number of factors,
including cash flow expectations, cash requirements for
ongoing operations, investment and financing plans
(including acquisitions and share repurchase activities) and
the overall cost of capital. Total debt was $29.8 billion as of
June 30, 2012 and $32.0 billion as of June 30, 2011. Our
total debt decreased in 2012 mainly due to bonds reaching
maturity and a reduction in commercial paper outstanding,
partially offset by debt issuances.

Treasury Purchases. Total share repurchases were $4.0
billion in 2012 and $7.0 billion in 2011.

Liquidity

At June 30, 2012 our current liabilities exceeded current
assets by $3.0 billion, largely due to short-term borrowings
under our commercial paper program. We anticipate being
able to support our short-term liquidity and operating needs
largely through cash generated from operations. We utilize
short- and long-term debt to fund discretionary items, such
as acquisitions and share repurchases. We have strong short-
and long-term debt ratings, which have enabled and should
continue to enable us to refinance our debt as it becomes due
at favorable rates in commercial paper and bond markets. In
addition, we have agreements with a diverse group of
financial institutions that, if needed, should provide
sufficient credit funding to meet short-term financing
requirements.

On June 30, 2012, our short-term credit ratings were P-1
(Moody's) and A-1+ (Standard & Poor's), while our long-
term credit ratings are Aa3 (Moody's) and AA- (Standard &
Poor's), both with a stable outlook.

40 The Procter & Gamble Company

We maintain bank credit facilities to support our ongoing
commercial paper program. These facilities can be extended
for certain periods of time as specified in, and in accordance
with, the terms of each credit agreement. The current facility
is an $11.0 billion facility split between a $7.0 billion 5-year
facility and a $4.0 billion 364-day facility, which expire in
August 2017 and August 2013, respectively. These facilities
are currently undrawn and we anticipate that they will
remain largely undrawn for the foreseeable future. These
credit facilities do not have cross-default or ratings triggers,
nor do they have material adverse events clauses, except at

the time of signing. In addition to these credit facilities, we
have an automatically effective registration statement on
Form S-3 filed with the SEC that is available for registered
offerings of short- or long-term debt securities.

Guarantees and Other Off-Balance Sheet Arrangements

We do not have guarantees or other off-balance sheet
financing arrangements, including variable interest entities,
which we believe could have a material impact on financial
condition or liquidity.

Contractual Commitments

The following table provides information on the amount and payable date of our contractual commitments as of June 30, 2012.

($ millions)
RECORDED LIABILITIES

Total debt

Capital leases
Uncertain tax positions(1)
OTHER

Interest payments relating to long-term debt
Operating leases(2)
Minimum pension funding(3)
Purchase obligations(4)
TOTAL CONTRACTUAL COMMITMENTS

Total

Less Than
1 Year

1-3 Years

3-5 Years

After
5 Years

$ 29,490

8,672

6,927

3,356

$ 10,535

45
33

8,866

1,817

1,032

2,187

16
33

909

289

352

1,094

14
—

1
—

1,546

1,170

5,241

498

680

596

393

—

215

637

—

282

$ 43,470

$ 11,365

$ 10,261

5,148

$ 16,696

(1) As of June 30, 2012, the Company's Consolidated Balance Sheet reflects a liability for uncertain tax positions of $2.3 billion, including
$505 million of interest and penalties. Due to the high degree of uncertainty regarding the timing of future cash outflows of liabilities for
uncertain tax positions beyond one year, a reasonable estimate of the period of cash settlement beyond twelve months from the balance
sheet date of June 30, 2012 cannot be made.

(4)

(2) Operating lease obligations are shown net of guaranteed sublease income.
(3) Represents future pension payments to comply with local funding requirements. These future pension payments assume the Company
continues to meet its future statutory funding requirements. Considering the current economic environment in which the Company
operates, the Company believes its cash flows are adequate to meet the above future statutory funding requirements. The projected
payments beyond fiscal year 2015 are not currently determinable.
Primarily reflects future contractual payments under various take-or-pay arrangements entered into as part of the normal course of
business. Commitments made under take-or-pay obligations represent future purchases in line with expected usage to obtain favorable
pricing. Approximately 22% relates to service contracts for information technology, human resources management and facilities
management activities that have been outsourced. While the amounts listed represent contractual obligations, we do not believe it is
likely that the full contractual amount would be paid if the underlying contracts were canceled prior to maturity. In such cases, we
generally are able to negotiate new contracts or cancellation penalties, resulting in a reduced payment. The amounts do not include
obligations related to the put of our Spanish joint venture discussed further in Note 10 to the Consolidated Financial Statements
(approximately $1 billion) and other contractual purchase obligations that are not take-or-pay arrangements. Such contractual purchase
obligations are primarily purchase orders at fair value that are part of normal operations and are reflected in historical operating cash
flow trends. We do not believe such purchase obligations will adversely affect our liquidity position.

SIGNIFICANT ACCOUNTING POLICIES AND
ESTIMATES

In preparing our financial statements in accordance with
U.S. GAAP, there are certain accounting policies that may
require a choice between acceptable accounting methods or
may require substantial judgment or estimation in their
application. These include income taxes, certain employee
benefits and acquisitions, goodwill and intangible assets. We
believe these accounting policies, and others set forth in
Note 1 to the Consolidated Financial Statements, should be
reviewed as they are integral to understanding the results of
operations and financial condition of the Company.

The Company has discussed the selection of significant
accounting policies and the effect of estimates with the Audit
Committee of the Company's Board of Directors.

Income Taxes

Our annual tax rate is determined based on our income,
statutory tax rates and the tax impacts of items treated
differently for tax purposes than for financial reporting
purposes. Tax law requires certain items be included in the
tax return at different times than the items are reflected in
the financial statements. Some of these differences are
permanent, such as expenses that are not deductible in our
tax return, and some differences are temporary, reversing
over time, such as depreciation expense. These temporary
differences create deferred tax assets and liabilities.

Deferred tax assets generally represent the tax effect of items
that can be used as a tax deduction or credit in future years
for which we have already recorded the tax benefit in our
income statement. Deferred tax liabilities generally represent
tax expense recognized in our financial statements for which
payment has been deferred, the tax effect of expenditures for
which a deduction has already been taken in our tax return
but has not yet been recognized in our financial statements
or assets recorded at fair value in business combinations for
which there was no corresponding tax basis adjustment.

Inherent in determining our annual tax rate are judgments
regarding business plans, planning opportunities and
expectations about future outcomes. Realization of certain
deferred tax assets is dependent upon generating sufficient
taxable income in the appropriate jurisdiction prior to the
expiration of the carryforward periods. Although realization
is not assured, management believes it is more likely than
not that our deferred tax assets, net of valuation allowances,
will be realized.

We operate in multiple jurisdictions with complex tax policy
and regulatory environments. In certain of these
jurisdictions, we may take tax positions that management
believes are supportable, but are potentially subject to
successful challenge by the applicable taxing authority.
These interpretational differences with the respective
governmental taxing authorities can be impacted by the local
economic and fiscal environment. We evaluate our tax
positions and establish liabilities in accordance with the

The Procter & Gamble Company 41

applicable accounting guidance on uncertainty in income
taxes. We review these tax uncertainties in light of changing
facts and circumstances, such as the progress of tax audits,
and adjust them accordingly. We have a number of audits in
process in various jurisdictions. Although the resolution of
these tax positions is uncertain, based on currently available
information, we believe that the ultimate outcomes will not
have a material adverse effect on our financial position,
results of operations or cash flows.

Because there are a number of estimates and assumptions
inherent in calculating the various components of our tax
provision, certain changes or future events such as changes
in tax legislation, geographic mix of earnings, completion of
tax audits or earnings repatriation plans could have an
impact on those estimates and our effective tax rate. For
additional details on the Company's income taxes, see Note
9 to the Consolidated Financial Statements.

Employee Benefits

We sponsor various post-employment benefits throughout
the world. These include pension plans, both defined
contribution plans and defined benefit plans, and other post-
employment benefit (OPEB) plans, consisting primarily of
health care and life insurance for retirees. For accounting
purposes, the defined benefit pension and OPEB plans
require assumptions to estimate the projected and
accumulated benefit obligations, including the following
variables: discount rate; expected salary increases; certain
employee-related factors, such as turnover, retirement age
and mortality; expected return on assets and health care cost
trend rates. These and other assumptions affect the annual
expense and obligations recognized for the underlying plans.
Our assumptions reflect our historical experiences and
management's best judgment regarding future expectations.
As permitted by U.S. GAAP, the net amount by which actual
results differ from our assumptions is deferred. If this net
deferred amount exceeds 10% of the greater of plan assets or
liabilities, a portion of the deferred amount is included in
expense for the following year. The cost or benefit of plan
changes, such as increasing or decreasing benefits for prior
employee service (prior service cost), is deferred and
included in expense on a straight-line basis over the average
remaining service period of the employees expected to
receive benefits.

The expected return on plan assets assumption impacts our
defined benefit expense, since many of our defined benefit
pension plans and our primary OPEB plan are partially
funded. The process for setting the expected rates of return is
described in Note 8 to the Consolidated Financial
Statements. For 2012, the average return on assets
assumptions for pension plan assets and OPEB assets were
7.4% and 9.2%, respectively. A change in the rate of return
of 100 basis points for both pension and OPEB assets would
impact annual after-tax benefit expense by approximately
$90 million.

Since pension and OPEB liabilities are measured on a

42 The Procter & Gamble Company

discounted basis, the discount rate impacts our plan
obligations and expenses. Discount rates used for our U.S.
defined benefit pension and OPEB plans are based on a yield
curve constructed from a portfolio of high quality bonds for
which the timing and amount of cash outflows approximate
the estimated payouts of the plan. For our international
plans, the discount rates are set by benchmarking against
investment grade corporate bonds rated AA or better. The
average discount rate on the defined benefit pension plans
and OPEB plans of 4.2% and 4.3% respectively, represents a
weighted average of local rates in countries where such
plans exist. A 100-basis point change in the pension discount
rate would impact annual after-tax defined benefit pension
expense by approximately $160 million. A change in the
OPEB discount rate of 100 basis points would impact annual
after-tax OPEB expense by approximately $70 million. For
additional details on our defined benefit pension and OPEB
plans, see Note 8 to the Consolidated Financial Statements.

Acquisitions, Goodwill and Intangible Assets

We account for acquired businesses using the acquisition
method of accounting. Under the purchase method, our
Consolidated Financial Statements reflect the operations of
an acquired business starting from the completion of the
acquisition. In addition, the assets acquired and liabilities
assumed are recorded at the date of acquisition at their
respective estimated fair values, with any excess of the
purchase price over the estimated fair values of the net assets
acquired recorded as goodwill.

Significant judgment is required in estimating the fair value
of intangible assets and in assigning their respective useful
lives. Accordingly, we typically obtain the assistance of
third-party valuation specialists for significant tangible and
intangible assets. The fair value estimates are based on
available historical information and on future expectations
and assumptions deemed reasonable by management, but are
inherently uncertain.

We typically use an income method to estimate the fair value
of intangible assets, which is based on forecasts of the
expected future cash flows attributable to the respective
assets. Significant estimates and assumptions inherent in the
valuations reflect a consideration of other marketplace
participants, and include the amount and timing of future
cash flows (including expected growth rates and
profitability), the underlying product or technology life
cycles, economic barriers to entry, a brand's relative market
position and the discount rate applied to the cash flows.
Unanticipated market or macroeconomic events and
circumstances may occur, which could affect the accuracy or
validity of the estimates and assumptions.

Determining the useful life of an intangible asset also
requires judgment. Certain brand intangibles are expected to
have indefinite lives based on their history and our plans to
continue to support and build the acquired brands. Other
acquired intangible assets (e.g., certain trademarks or brands,
customer relationships, patents and technologies) are

expected to have determinable useful lives. Our assessment
as to brands that have an indefinite life and those that have a
determinable life is based on a number of factors including
competitive environment, market share, brand history,
underlying product life cycles, operating plans and the
macroeconomic environment of the countries in which the
brands are sold. Our estimates of the useful lives of
determinable-lived intangibles are primarily based on these
same factors. All of our acquired technology and customer-
related intangibles are expected to have determinable useful
lives.

The costs of determinable-lived intangibles are amortized to
expense over their estimated life. The value of indefinite-
lived intangible assets and residual goodwill is not
amortized, but is tested at least annually for impairment. Our
impairment testing for goodwill is performed separately
from our impairment testing of indefinite-lived intangibles.
We test goodwill for impairment by reviewing the book
value compared to the fair value at the reportable unit level.
We test individual indefinite-lived intangibles by reviewing
the individual book values compared to the fair value. We
determine the fair value of our reporting units and indefinite-
lived intangible assets based on the income approach. Under
the income approach, we calculate the fair value of our
reporting units and indefinite-lived intangible assets based
on the present value of estimated future cash flows.
Considerable management judgment is necessary to evaluate
the impact of operating and macroeconomic changes and to
estimate future cash flows to measure fair value.
Assumptions used in our impairment evaluations, such as
forecasted growth rates and cost of capital, are consistent
with internal projections and operating plans. We believe
such assumptions and estimates are also comparable to those
that would be used by other marketplace participants. When
certain events or changes in operating conditions occur,
indefinite-lived intangible assets may be reclassified to a
determinable life asset and an additional impairment
assessment may be performed.

During the second quarter of fiscal 2012, we changed our
annual goodwill impairment testing date from July 1 to
October 1 of each year. This change was made to better align
the timing of our annual impairment testing with the timing
of the Company's annual strategic planning process. We
tested goodwill for impairment as of July 1, 2011 (the testing
date under our previous policy) and no impairments were
indicated. The results of our impairment testing during the
quarter ended December 31, 2011, indicated that the
estimated fair values of our Appliances and Salon
Professional reporting units were less than their respective
carrying amount therefore we recorded a non-cash before
and after tax impairment charge of $1.3 billion.
Additionally, our impairment testing for indefinite lived
intangible assets during the quarter ended December 31,
2011 indicated a decline in the fair value of our Koleston
Perfect and Wella trade name intangible assets below their
respective carrying values. This resulted in a non-cash
before tax impairment charge of $246 million ($173 million

after tax) to reduce the carrying amounts of these assets to
their respective fair values.

The Appliances business was acquired as part of the Gillette
acquisition and is a stand-alone goodwill reporting unit. The
Salon Professional business consists primarily of operations
acquired in the Wella acquisition in 2004. These businesses
represent some of our more discretionary consumer spending
categories. As of June 30, 2012, the Appliances business has
remaining goodwill of $586 million, while the Salon
Professional business has remaining goodwill of $397
million. As a result of the current year impairments, the
estimated fair values of our Appliances and Salon
Professional businesses approximate their carrying values.
Because purchases in these categories are more discretionary
in nature, their operations and underlying fair values were
disproportionately impacted by the economic downturn that
began in fiscal 2009, which led to a reduction in home and
personal grooming appliance purchases and in visits to hair
salons. Our valuation of the Appliances and Salon
Professional businesses has them returning to sales and
earnings growth rates consistent with our long-term business
plans. Failure to achieve these business plans or a further
deterioration of the macroeconomic conditions could result
in a valuation that would trigger an additional impairment of
the goodwill and intangible assets of these businesses. For
additional details on the timing and results of our goodwill
impairment testing, see Note 2 to the Consolidated Financial
Statements.

Other than as discussed in the preceding paragraphs, our
annual impairment testing for both goodwill and indefinite-
lived intangible assets indicated that all other reporting unit
and indefinite-lived intangible asset fair values significantly
exceeded their respective recorded values. However, future
changes in the judgments, assumptions and estimates that are
used in our impairment testing for goodwill and indefinite-
lived intangible assets, including discount and tax rates or
future cash flow projections, could result in significantly
different estimates of the fair values. A significant reduction
in the estimated fair values could result in additional
impairment charges that could materially affect the financial
statements in any given year. The recorded value of goodwill
and intangible assets from recently impaired businesses and
recently acquired businesses are derived from more recent
business operating plans and macroeconomic environmental
conditions and therefore are more susceptible to an adverse
change that could require an impairment charge.

For example, the Gillette intangible and goodwill amounts
represent values as of a relatively more recent acquisition
date and, as such, the amounts are more susceptible to an
impairment risk if business operating results or
macroeconomic conditions deteriorate. Gillette indefinite-
lived intangible assets represent approximately 90% of the
$26.7 billion of indefinite-lived intangible assets at June 30,
2012. Goodwill allocated to stand-alone reporting units
consisting primarily of businesses purchased as part of the
Gillette acquisition represents 43% of the $53.8 billion of

The Procter & Gamble Company 43

goodwill at June 30, 2012. This includes the Shave Care and
Appliance businesses, which are components of the
Grooming segment, and the Batteries business, which is part
of the Fabric Care and Home Care segment.

New Accounting Pronouncements

There are no new accounting pronouncements issued or
effective that will have a material impact on our
Consolidated Financial Statements. However, we will be
presenting Comprehensive Income in a new format
beginning with the first quarter of fiscal year 2013, in
accordance with new accounting guidance that will eliminate
the option of presenting components of other comprehensive
earnings as part of the statement of shareholders' equity. For
additional details, see Note 1 to the Consolidated Financial
Statements.

OTHER INFORMATION

Hedging and Derivative Financial Instruments

As a multinational company with diverse product offerings,
we are exposed to market risks, such as changes in interest
rates, currency exchange rates and commodity prices. We
evaluate exposures on a centralized basis to take advantage
of natural exposure correlation and netting. Except within
financing operations, we leverage the Company's broadly
diversified portfolio of exposures as a natural hedge and
prioritize operational hedging activities over financial
market instruments. To the extent we choose to further
manage volatility associated with the net exposures, we enter
into various financial transactions which we account for
using the applicable accounting guidance for derivative
instruments and hedging activities. These financial
transactions are governed by our policies covering
acceptable counterparty exposure, instrument types and
other hedging practices. Note 5 to the Consolidated
Financial Statements includes a detailed discussion of our
accounting policies for financial instruments.

Derivative positions can be monitored using techniques
including market valuation, sensitivity analysis and value-at-
risk modeling. The tests for interest rate, currency rate and
commodity derivative positions discussed below are based
on the CorporateManager™ value-at-risk model using a one-
year horizon and a 95% confidence level. The model
incorporates the impact of correlation (the degree to which
exposures move together over time) and diversification
(from holding multiple currency, commodity and interest
rate instruments) and assumes that financial returns are
normally distributed. Estimates of volatility and correlations
of market factors are drawn from the RiskMetrics™ dataset
as of June 30, 2012. In cases where data is unavailable in
RiskMetrics™, a reasonable proxy is included.

Our market risk exposures relative to interest rates, currency
rates and commodity prices, as discussed below, have not
changed materially versus the previous reporting period. In
addition, we are not aware of any facts or circumstances that

44 The Procter & Gamble Company

would significantly impact such exposures in the near term.

Interest Rate Exposure on Financial Instruments. Interest
rate swaps are used to hedge exposures to interest rate
movement on underlying debt obligations. Certain interest
rate swaps denominated in foreign currencies are designated
to hedge exposures to currency exchange rate movements on
our investments in foreign operations. These currency
interest rate swaps are designated as hedges of the
Company's foreign net investments.

Based on our interest rate exposure as of and during the year
ended June 30, 2012, including derivative and other
instruments sensitive to interest rates, we believe a near-term
change in interest rates, at a 95% confidence level based on
historical interest rate movements, would not materially
affect our financial statements.

Currency Rate Exposure on Financial Instruments.
Because we manufacture and sell products and finance
operations in a number of countries throughout the world,
we are exposed to the impact on revenue and expenses of
movements in currency exchange rates. Corporate policy
prescribes the range of allowable hedging activity. To
manage the exchange rate risk associated with our financing
operations, we primarily use forward contracts with
maturities of less than 18 months. In addition, we enter into
certain currency swaps with maturities of up to five years to
hedge our exposure to exchange rate movements on
intercompany financing transactions.

Based on our currency rate exposure on derivative and other
instruments as of and during the year ended June 30, 2012,
we believe, at a 95% confidence level based on historical
currency rate movements, the impact of a near-term change
in currency rates would not materially affect our financial
statements.

Commodity Price Exposure on Financial Instruments. We
use raw materials that are subject to price volatility caused
by weather, supply conditions, political and economic
variables and other unpredictable factors. In addition to fixed
price contracts, we may use futures, options and swap
contracts to manage the volatility related to the above
exposures.

As of and during the year ended June 30, 2012, we did not
have material commodity hedging activity.

Measures Not Defined By U.S. GAAP

Our discussion of financial results includes several "non-
GAAP" financial measures. We believe these measures
provide our investors with additional information about our
underlying results and trends, as well as insight to some of
the metrics used to evaluate management. When used in
MD&A, we have provided the comparable GAAP measure
in the discussion. These measures include:

Organic Sales Growth. Organic sales growth is a non-
GAAP measure of sales growth excluding the impacts of
acquisitions, divestitures and foreign exchange from year-
over-year comparisons. We believe this provides investors
with a more complete understanding of underlying sales
trends by providing sales growth on a consistent basis.
Organic sales is also one of the measures used to evaluate
senior management and is a factor in determining their at-
risk compensation.

The following tables provide a numerical reconciliation of
organic sales growth to reported net sales growth:

Year ended
June 30, 2012
Beauty

Grooming

Health Care

Fabric Care
and Home
Care

Baby Care
and Family
Care
TOTAL
P&G

Year ended
June 30, 2011
Beauty

Grooming

Health Care

Fabric Care
and Home
Care

Baby Care
and Family
Care
TOTAL
P&G

Net Sales
Growth

Foreign
Exchange
Impact

Acquisition/
Divestiture
Impact*

Organic
Sales
Growth

-1%

Net Sales
Growth

Foreign
Exchange
Impact

Acquisition/
Divestiture
Impact*

Organic
Sales
Growth

4 %

5 %

-1 %

0 %

3 %

5 %

4 %

0 %

-2 %

2 %

6 %

5 %

1 %

0 %

-1 %

7 %

4 %

* Acquisition/Divestiture Impact includes rounding impacts
necessary to reconcile net sales to organic sales.

Core EPS. This is a measure of the Company's diluted net
earnings per share from continuing operations excluding
certain items that are not judged to be part of the Company's
sustainable results or trends. This includes current year
impairment charges for goodwill and indefinite lived
intangible assets, current year charges related to incremental
restructuring charges due to increased focus on productivity
and cost savings, a significant benefit in 2011 from the
settlement of U.S. tax litigation primarily related to the
valuation of technology donations, charges in 2012, 2011
and 2010 related to pending European legal matters, and a
2010 charge related to a tax provision for retiree healthcare
subsidy payments in the U.S. healthcare reform legislation.

The Procter & Gamble Company 45

Item 7A. Quantitative and Qualitative Disclosures About
Market Risk.

The information required by this item is

incorporated by reference to the section entitled Other
Information under Management's Disclosure and Analysis,
and Note 5 of the Consolidated Financial Statements, Risk
Management Activities and Fair Value Measurements.

We do not view these items to be part of our sustainable
results. We believe the Core EPS measure provides an
important perspective of underlying business trends and
results and provides a more comparable measure of year-on-
year earnings per share growth. Core EPS is also one of the
measures used to evaluate senior management and is a factor
in determining their at-risk compensation. The table below
provides a reconciliation of reported diluted net earnings per
share from continuing operations to Core EPS:

Years ended June 30
Diluted Net Earnings Per
Share - Continuing
Operations

Impairment Charges

Incremental Restructuring
Charges

Settlement from U.S. Tax
Litigation

Charges for Pending
European Legal Matters

Charge for Taxation of
Retiree Healthcare Subsidy

Rounding
CORE EPS

2012

2011

2010

$ 3.12

$ 3.85

3.47

0.51

0.20

—

(0.08)

0.03

0.10

—

(0.01)

—

0.09

0.05

—

$ 3.85

$ 3.87

3.61

Core EPS Growth

(1)%

Note - All reconciling items are presented net of tax. Tax
effects are calculated consistent with the nature of the
underlying transaction. The significant adjustment to an
income tax reserve was tax expense. There was no tax
impact on EPS due to the charges for pending European
legal matters.

Free Cash Flow. Free cash flow is defined as operating cash
flow less capital spending. We view free cash flow as an
important measure because it is one factor in determining the
amount of cash available for dividends and discretionary
investment. Free cash flow is also one of the measures used
to evaluate senior management and is a factor in determining
their at-risk compensation.

Free Cash Flow Productivity. Free cash flow productivity is
defined as the ratio of free cash flow to net earnings. Free
cash flow productivity is also one of the measures used to
evaluate senior management and is a factor in determining
their at-risk compensation.

The following table provides a numerical reconciliation of
free cash flow and free cash flow productivity ($ millions):

Net
Operating
Cash Flow
Earnings
$ 13,284 $ (3,964) $ 9,320 $ 10,904

Free
Cash Flow

Capital
Spending

Free
Cash Flow
Productivity
85%

13,330

(3,306)

10,024

11,927

16,131

(3,067)

13,064

12,846

84 %

102 %

2012

2011

2010

46 The Procter & Gamble Company

Item 8. Financial Statements and Supplementary Data

MANAGEMENT'S RESPONSIBILITY FOR
FINANCIAL REPORTING

At The Procter & Gamble Company, we take great pride in
our long history of doing what's right. If you analyze what's
made our Company successful over the years, you may focus
on our brands, our marketing strategies, our organization
design and our ability to innovate. But if you really want to
get at what drives our Company's success, the place to look is
our people. Our people are deeply committed to our Purpose,
Values and Principles. It is this commitment to doing what's
right that unites us.

This commitment to doing what's right is embodied in our
financial reporting. High-quality financial reporting is our
responsibility-one we execute with integrity, and within both
the letter and spirit of the law.

High-quality financial reporting is characterized by accuracy,
objectivity and transparency. Management is responsible for
maintaining an effective system of internal controls over
financial reporting to deliver those characteristics in all
material respects. The Board of Directors, through its Audit
Committee, provides oversight. We have engaged Deloitte &
Touche LLP to audit our Consolidated Financial Statements,
on which they have issued an unqualified opinion.

Our commitment to providing timely, accurate and
understandable information to investors encompasses:

Communicating expectations to employees. Every
employee-from senior management on down-is required to
be trained on the Company's Worldwide Business Conduct
Manual, which sets forth the Company's commitment to
conduct its business affairs with high ethical standards. Every
employee is held personally accountable for compliance and
is provided several means of reporting any concerns about
violations of the Worldwide Business Conduct Manual,
which is available on our website at www.pg.com.

Maintaining a strong internal control environment. Our
system of internal controls includes written policies and
procedures, segregation of duties and the careful selection
and development of employees. The system is designed to
provide reasonable assurance that transactions are executed
as authorized and appropriately recorded, that assets are
safeguarded and that accounting records are sufficiently
reliable to permit the preparation of financial statements
conforming in all material respects with accounting
principles generally accepted in the United States of
America. We monitor these internal controls through control
self-assessments conducted by business unit management. In
addition to performing financial and compliance audits
around the world, including unannounced audits, our Global
Internal Audit organization provides training and
continuously improves internal control processes.
Appropriate actions are taken by management to correct any
identified control deficiencies.

Executing financial stewardship. We maintain specific
programs and activities to ensure that employees understand
their fiduciary responsibilities to shareholders. This ongoing
effort encompasses financial discipline in strategic and daily
business decisions and brings particular focus to maintaining
accurate financial reporting and effective controls through
process improvement, skill development and oversight.

Exerting rigorous oversight of the business. We
continuously review business results and strategic choices.
Our Global Leadership Council is actively involved-from
understanding strategies to reviewing key initiatives,
financial performance and control assessments. The intent is
to ensure we remain objective, identify potential issues,
continuously challenge each other and ensure recognition and
rewards are appropriately aligned with results.

Engaging our Disclosure Committee. We maintain
disclosure controls and procedures designed to ensure that
information required to be disclosed is recorded, processed,
summarized and reported timely and accurately. Our
Disclosure Committee is a group of senior-level executives
responsible for evaluating disclosure implications of
significant business activities and events. The Committee
reports its findings to the CEO and CFO, providing an
effective process to evaluate our external disclosure
obligations.

Encouraging strong and effective corporate governance
from our Board of Directors. We have an active, capable and
diligent Board that meets the required standards for
independence, and we welcome the Board's oversight. Our
Audit Committee comprises independent directors with
significant financial knowledge and experience. We review
significant accounting policies, financial reporting and
internal control matters with them and encourage their
independent discussions with external auditors. Our
corporate governance guidelines, as well as the charter of the
Audit Committee and certain other committees of our Board,
are available on our website at www.pg.com.

P&G has a strong history of doing what's right. Our
employees embrace our Purpose, Values and Principles. We
take responsibility for the quality and accuracy of our
financial reporting. We present this information proudly, with
the expectation that those who use it will understand our
Company, recognize our commitment to performance with
integrity and share our confidence in P&G's future.

/s/ Robert A. McDonald

Robert A. McDonald
Chairman of the Board, President and Chief Executive
Officer

/s/ Jon R. Moeller

Jon R. Moeller
Chief Financial Officer

MANAGEMENT'S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

The Procter & Gamble Company 47

Management is responsible for establishing and maintaining
adequate internal control over financial reporting of The
Procter & Gamble Company (as defined in Rule 13a-15(f)
under the Securities Exchange Act of 1934, as amended). Our
internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles in the United States of America.

Strong internal controls is an objective that is reinforced
through our Worldwide Business Conduct Manual, which sets
forth our commitment to conduct business with integrity, and
within both the letter and the spirit of the law. The
Company's internal control over financial reporting includes
a Control Self-Assessment Program that is conducted
annually for critical financial reporting areas of the Company
and is audited by the internal audit function. Management
takes the appropriate action to correct any identified control
deficiencies. Because of its inherent limitations, any system
of internal control over financial reporting, no matter how
well designed, may not prevent or detect misstatements due
to the possibility that a control can be circumvented or
overridden or that misstatements due to error or fraud may
occur that are not detected. Also, because of changes in
conditions, internal control effectiveness may vary over time.

Management assessed the effectiveness of the Company's
internal control over financial reporting as of June 30, 2012,
using criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) and
concluded that the Company maintained effective internal
control over financial reporting as of June 30, 2012, based on
these criteria.

Deloitte & Touche LLP, an independent registered public
accounting firm, has audited the effectiveness of the
Company's internal control over financial reporting as of
June 30, 2012, as stated in their report which is included
herein.

/s/ Robert A. McDonald

Robert A. McDonald
Chairman of the Board, President and Chief Executive
Officer

/s/ Jon R. Moeller

Jon R. Moeller
Chief Financial Officer

August 8, 2012

To the Board of Directors and Stockholders of
The Procter & Gamble Company

We have audited the accompanying Consolidated Balance
Sheets of The Procter & Gamble Company and subsidiaries
(the "Company") as of June 30, 2012 and 2011, and the
related Consolidated Statements of Earnings, Shareholders'
Equity, and Cash Flows for each of the three years in the
period ended June 30, 2012. These financial statements are
the responsibility of the Company'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, such Consolidated Financial Statements
present fairly, in all material respects, the financial position
of the Company at June 30, 2012 and 2011, and the results of
its operations and cash flows for each of the three years in
the period ended June 30, 2012, in conformity with
accounting principles generally accepted in the United States
of America.

We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United
States), the Company's internal control over financial
reporting as of June 30, 2012, based on the criteria
established in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated August 8, 2012
expressed an unqualified opinion on the Company's internal
control over financial reporting.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio
August 8, 2012

48 The Procter & Gamble Company

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board of Directors and Stockholders of
The Procter & Gamble Company

We have audited the internal control over financial reporting
of The Procter & Gamble Company and subsidiaries (the
"Company") as of June 30, 2012, based on criteria
established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company's management is
responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in
Management's Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the
Company's internal control over financial reporting 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
effective internal control over financial reporting was
maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A company's internal control over financial reporting is a
process designed by, or under the supervision of, the
company's principal executive and principal financial
officers, or persons performing similar functions, and
effected by the company's board of directors, management,
and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A
company's internal control over financial reporting includes

those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of
the company are being made only in accordance with
authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material
effect on the financial statements.

Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material
misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk
that the controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of June 30, 2012, based on the criteria established in Internal
Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United
States), the Consolidated Financial Statements of the
Company as of and for the year ended June 30, 2012 and our
report dated August 8, 2012 expressed an unqualified opinion
on those financial statements.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio
August 8, 2012

Consolidated Statements of Earnings

Amounts in millions except per share amounts; Years ended June 30

NET SALES

Cost of products sold

Selling, general and administrative expense

Goodwill and indefinite lived intangible asset impairment charges

OPERATING INCOME

Interest expense

Other non-operating income, net

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

Income taxes on continuing operations

NET EARNINGS FROM CONTINUING OPERATIONS

NET EARNINGS FROM DISCONTINUED OPERATIONS

NET EARNINGS

Less: Net earnings attributable to noncontrolling interests

The Procter & Gamble Company 49

2012

2011

2010

83,680

81,104

77,567

42,391

26,421

1,576

13,292

769

262

12,785

3,468

9,317

1,587

39,859

25,750

—

37,042

24,793

—

15,495

15,732

831

333

14,997

3,299

11,698

229

946

14,868

4,017

10,851

1,995

12,846

110

10,904

11,927

148

130

NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE

10,756

11,797

12,736

BASIC NET EARNINGS PER COMMON SHARE (1):

Earnings from continuing operations

Earnings from discontinued operations

BASIC NET EARNINGS PER COMMON SHARE
DILUTED NET EARNINGS PER COMMON SHARE (1):

Earnings from continuing operations

Earnings from discontinued operations

DILUTED NET EARNINGS PER COMMON SHARE

DIVIDENDS PER COMMON SHARE

3.24

0.58

3.82

3.12

0.54

3.66

2.14

4.04

0.08

4.12

3.85

0.08

3.93

1.97

3.63

0.69

4.32

3.47

0.64

4.11

1.80

(1) Basic net earnings per share and diluted net earnings per share are calculated on net earnings attributable to Procter & Gamble.

See accompanying Notes to Consolidated Financial Statements.

50 The Procter & Gamble Company

Consolidated Balance Sheets

Amounts in millions; June 30

Assets
CURRENT ASSETS

Cash and cash equivalents

Accounts receivable

INVENTORIES

Materials and supplies

Work in process

Finished goods

Total inventories

Deferred income taxes

Prepaid expenses and other current assets

TOTAL CURRENT ASSETS

PROPERTY, PLANT AND EQUIPMENT

Buildings

Machinery and equipment

Land

Total property, plant and equipment

Accumulated depreciation

NET PROPERTY, PLANT AND EQUIPMENT

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Trademarks and other intangible assets, net

NET GOODWILL AND OTHER INTANGIBLE ASSETS

OTHER NONCURRENT ASSETS

TOTAL ASSETS

Liabilities and Shareholders' Equity
CURRENT LIABILITIES

Accounts payable

Accrued and other liabilities

Debt due within one year

TOTAL CURRENT LIABILITIES

LONG-TERM DEBT

DEFERRED INCOME TAXES

OTHER NONCURRENT LIABILITIES

TOTAL LIABILITIES

SHAREHOLDERS' EQUITY

Convertible Class A preferred stock, stated value $1 per share (600 shares authorized)

Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized)

Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2012 - 4,008.4, 2011 - 4,007.9)

Additional paid-in capital

Reserve for ESOP debt retirement

Accumulated other comprehensive income/(loss)

Treasury stock, at cost (shares held: 2012 - 1,260.4, 2011 - 1,242.2)

Retained earnings

Noncontrolling interest

TOTAL SHAREHOLDERS' EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

See accompanying Notes to Consolidated Financial Statements.

2012

2011

4,436
6,068

2,768
6,275

1,740
685
4,296
6,721
1,001
3,684
21,910

7,324
32,029
880
40,233
(19,856)
20,377

53,773
30,988
84,761
5,196
$ 132,244

2012

7,920
8,289
8,698
24,907
21,080
10,132
12,090
68,209

1,195
—
4,008
63,181
(1,357)
(9,333)
(69,604)
75,349
596
64,035
$ 132,244

2,153
717
4,509
7,379
1,140
4,408
21,970

7,753
32,820
934
41,507
(20,214)
21,293

57,562
32,620
90,182
4,909
138,354

2011

8,022
9,290
9,981
27,293
22,033
11,070
9,957
70,353

1,234
—
4,008
62,405
(1,357)
(2,054)
(67,278)
70,682
361
68,001
138,354

Consolidated Statements of Shareholders' Equity

The Procter & Gamble Company 51

Dollars in millions/
Shares in thousands
BALANCE JUNE 30, 2009
Net earnings
Other comprehensive income:

Financial statement translation
Hedges and investment
securities, net of $520 tax
Defined benefit retirement
plans, net of $465 tax
Total comprehensive income
Dividends to shareholders:

Common
Preferred, net of tax benefits

Treasury purchases
Employee plan issuances
Preferred stock conversions
ESOP debt impacts
Noncontrolling interest, net
BALANCE JUNE 30, 2010
Net earnings
Other comprehensive income:

Financial statement translation
Hedges and investment
securities, net of $711 tax
Defined benefit retirement
plans, net of $302 tax
Total comprehensive income
Dividends to shareholders:

Common
Preferred, net of tax benefits

Treasury purchases
Employee plan issuances
Preferred stock conversions
ESOP debt impacts
Noncontrolling interest, net
BALANCE JUNE 30, 2011
Net earnings
Other comprehensive income:

Financial statement translation
Hedges and investment
securities, net of $438 tax
Defined benefit retirement
plans, net of $993 tax
Total comprehensive income
Dividends to shareholders:

Common
Preferred, net of tax benefits

Treasury purchases
Employee plan issuances
Preferred stock conversions
ESOP debt impacts
Noncontrolling interest, net

BALANCE JUNE 30, 2012

Addition
al
Paid-In
Capital

Reserve
for
ESOP
Debt
Retirement

Accumula
ted
Other
Compreh
ensive
Income/
(loss)

Common
Stock

Common
Shares
Total
Outstanding
2,917,035 $ 4,007 $1,324 $61,118 $ (1,340) $ (3,358) $(55,961) $57,309 $ 283 $63,382
12,846

Preferr
ed
Stock

Retained
Earnings

Treasury
Stock

12,736

110

Non-
controlli
ng
Interest

(4,194)

867

(1,137)

(96,759)
17,616
5,579

574
7

(47)

2,843,471

4,008

1,277

(2)
61,697

(5,239)
(219)

(6,004)
616
40

(10)

(1,350)

(7,822)

(61,309) 64,614
11,797

(69)
324
130

6,493

(1,178)

453

(112,729)
29,729
5,266

702
6

(43)

(5,534)
(233)

(7,039)
1,033
37

(7)

2,765,737

4,008

1,234

62,405

(1,357)

(2,054)

(67,278) 70,682
10,756

(93)
361
148

(5,990)

721

(2,010)

(4,194)

867

(1,137)
$ 8,382

(5,239)
(219)
(6,004)
1,191
—
17
(71)
61,439
11,927

6,493

(1,178)

453
$17,695

(5,534)
(233)
(7,039)
1,735
—
31
(93)
68,001
10,904

(5,990)

721

(2,010)
$ 3,625

(61,826)
39,546
4,576

(5,883)
(256)
(4,024)
2,215
—
50
307
2,748,033 $ 4,008 $1,195 $63,181 $ (1,357) $ (9,333) $(69,604) $75,349 $ 596 $64,035

(4,024)
1,665
33

(5,883)
(256)

550
6

(39)

220

See accompanying Notes to Consolidated Financial Statements.

52 The Procter & Gamble Company

Consolidated Statements of Cash Flows

Amounts in millions; Years ended June 30

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

2012

2011

2010

2,768

2,879

4,781

OPERATING ACTIVITIES

Net earnings

Depreciation and amortization

Share-based compensation expense

Deferred income taxes

Gain on sale of businesses

Goodwill and indefinite lived intangible asset impairment charges

Change in accounts receivable

Change in inventories

Change in accounts payable, accrued and other liabilities

Change in other operating assets and liabilities

Other

TOTAL OPERATING ACTIVITIES

INVESTING ACTIVITIES

Capital expenditures

Proceeds from asset sales

Acquisitions, net of cash acquired

Change in investments

TOTAL INVESTING ACTIVITIES

FINANCING ACTIVITIES

Dividends to shareholders

Change in short-term debt

Additions to long-term debt

Reductions of long-term debt

Treasury stock purchases

Impact of stock options and other

TOTAL FINANCING ACTIVITIES

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

CHANGE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, END OF YEAR

SUPPLEMENTAL DISCLOSURE

Cash payments for:

Interest

Income taxes

Assets acquired through non-cash capital leases

10,904
3,204
377
(65)
(2,106)
1,576
(427)
77
(22)
(444)
210
13,284

(3,964)
2,893
(134)
112
(1,093)

(6,139)
(3,412)
3,985
(2,549)
(4,024)
1,729
(10,410)
(113)
1,668
4,436

740
4,348
24

11,927
2,838
414
128
(203)
—
(426)
(501)
358
(1,221)
16
13,330

(3,306)
225
(474)
73
(3,482)

(5,767)
151
1,536
(206)
(7,039)
1,203
(10,122)
163
(111)
2,768

806
2,992
13

12,846
3,108
453
36
(2,670)
—
(14)
86
2,446
(356)
196
16,131

(3,067)
3,068
(425)
(173)
(597)

(5,458)
(1,798)
3,830
(8,546)
(6,004)
662
(17,314)
(122)
(1,902)
2,879

1,184
4,175
20

See accompanying Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Nature of Operations

The Procter & Gamble Company's (the "Company," "we" or
"us") business is focused on providing branded consumer
packaged goods of superior quality and value. Our products
are sold in more than 180 countries primarily through retail
operations including mass merchandisers, grocery stores,
membership club stores, drug stores, department stores,
salons and high-frequency stores. We have on-the-ground
operations in approximately 75 countries.

Basis of Presentation

The Consolidated Financial Statements include the
Company and its controlled subsidiaries. Intercompany
transactions are eliminated.

Use of Estimates

Preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America (U.S. GAAP) requires management to make
estimates and assumptions that affect the amounts reported
in the Consolidated Financial Statements and accompanying
disclosures. These estimates are based on management's best
knowledge of current events and actions the Company may
undertake in the future. Estimates are used in accounting for,
among other items, consumer and trade promotion accruals,
restructuring reserves, pensions, post-employment benefits,
stock options, valuation of acquired intangible assets, useful
lives for depreciation and amortization of long-lived assets,
future cash flows associated with impairment testing for
goodwill, indefinite-lived intangible assets and other long-
lived assets, deferred tax assets, uncertain income tax
positions and contingencies. Actual results may ultimately
differ from estimates, although management does not
generally believe such differences would materially affect
the financial statements in any individual year. However, in
regard to ongoing impairment testing of goodwill and
indefinite-lived intangible assets, significant deterioration in
future cash flow projections or other assumptions used in
estimating fair values, versus those anticipated at the time of
the initial valuations, could result in impairment charges that
may materially affect the financial statements in a given
year.

Revenue Recognition

Sales are recognized when revenue is realized or realizable
and has been earned. Revenue transactions represent sales of
inventory. The revenue recorded is presented net of sales and
other taxes we collect on behalf of governmental authorities.
The revenue includes shipping and handling costs, which
generally are included in the list price to the customer. Our
policy is to recognize revenue when title to the product,

The Procter & Gamble Company 53

ownership and risk of loss transfer to the customer, which
can be on the date of shipment or the date of receipt by the
customer. A provision for payment discounts and product
return allowances is recorded as a reduction of sales in the
same period that the revenue is recognized.

Trade promotions, consisting primarily of customer pricing
allowances, merchandising funds and consumer coupons, are
offered through various programs to customers and
consumers. Sales are recorded net of trade promotion
spending, which is recognized as incurred, generally at the
time of the sale. Most of these arrangements have terms of
approximately one year. Accruals for expected payouts
under these programs are included as accrued marketing and
promotion in the accrued and other liabilities line item in the
Consolidated Balance Sheets.

Cost of Products Sold

Cost of products sold is primarily comprised of direct
materials and supplies consumed in the manufacture of
product, as well as manufacturing labor, depreciation
expense and direct overhead expense necessary to acquire
and convert the purchased materials and supplies into
finished product. Cost of products sold also includes the cost
to distribute products to customers, inbound freight costs,
internal transfer costs, warehousing costs and other shipping
and handling activity.

Selling, General and Administrative Expense

Selling, general and administrative expense (SG&A) is
primarily comprised of marketing expenses, selling
expenses, research and development costs, administrative
and other indirect overhead costs, depreciation and
amortization expense on non-manufacturing assets and other
miscellaneous operating items. Research and development
costs are charged to expense as incurred and were $2,029 in
2012, $1,982 in 2011 and $1,931 in 2010. Advertising costs,
charged to expense as incurred, include worldwide
television, print, radio, internet and in-store advertising
expenses and were $9,345 in 2012, $9,210 in 2011 and
$8,475 in 2010. Non-advertising related components of the
Company's total marketing spending include costs associated
with consumer promotions, product sampling and sales aids,
all of which are included in SG&A, as well as coupons and
customer trade funds, which are recorded as reductions to
net sales.

Other Non-Operating Income, Net

Other non-operating income, net, primarily includes net
divestiture gains, interest and investment income.

Currency Translation

Financial statements of operating subsidiaries outside the
U.S. generally are measured using the local currency as the
functional currency. Adjustments to translate those

Amounts in millions of dollars except per share amounts or as otherwise specified.

54 The Procter & Gamble Company

statements into U.S. dollars are recorded in other
comprehensive income (OCI). Currency translation
adjustments in accumulated OCI were a loss of $357 at
June 30, 2012 and a gain of $5,633 at June 30, 2011. For
subsidiaries operating in highly inflationary economies, the
U.S. dollar is the functional currency. Remeasurement
adjustments for financial statements in highly inflationary
economies and other transactional exchange gains and losses
are reflected in earnings.

Cash Flow Presentation

The Consolidated Statements of Cash Flows are prepared
using the indirect method, which reconciles net earnings to
cash flow from operating activities. The reconciliation
adjustments include the removal of timing differences
between the occurrence of operating receipts and payments
and their recognition in net earnings. The adjustments also
remove cash flows arising from investing and financing
activities, which are presented separately from operating
activities. Cash flows from foreign currency transactions and
operations are translated at an average exchange rate for the
period. Cash flows from hedging activities are included in
the same category as the items being hedged. Cash flows
from derivative instruments designated as net investment
hedges are classified as financing activities. Realized gains
and losses from non-qualifying derivative instruments used
to hedge currency exposures resulting from intercompany
financing transactions are also classified as financing
activities. Cash flows from other derivative instruments used
to manage interest, commodity or other currency exposures
are classified as operating activities. Cash payments related
to income taxes are classified as operating activities. Cash
flows from the Company's discontinued operations are
included in the Consolidated Statements of Cash Flows.

Cash Equivalents

Highly liquid investments with remaining stated maturities
of three months or less when purchased are considered cash
equivalents and recorded at cost.

Investments

Investment securities consist of readily marketable debt and
equity securities. Unrealized gains or losses are charged to
earnings for investments classified as trading. Unrealized
gains or losses on securities classified as available-for-sale
are generally recorded in shareholders' equity. If an
available-for-sale security is other than temporarily
impaired, the loss is charged to either earnings or
shareholders' equity depending on our intent and ability to
retain the security until we recover the full cost basis and the
extent of the loss attributable to the creditworthiness of the
issuer. Investments in certain companies over which we
exert significant influence, but do not control the financial
and operating decisions, are accounted for as equity method
investments. Other investments that are not controlled, and
over which we do not have the ability to exercise significant
influence, are accounted for under the cost method. Both

Amounts in millions of dollars except per share amounts or as otherwise specified.

equity and cost method investments are included as other
noncurrent assets in the Consolidated Balance Sheets.

Inventory Valuation

Inventories are valued at the lower of cost or market value.
Product-related inventories are primarily maintained on the
first-in, first-out method. Minor amounts of product
inventories, including certain cosmetics and commodities,
are maintained on the last-in, first-out method. The cost of
spare part inventories is maintained using the average-cost
method.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost reduced by
accumulated depreciation. Depreciation expense is
recognized over the assets' estimated useful lives using the
straight-line method. Machinery and equipment includes
office furniture and fixtures (15-year life), computer
equipment and capitalized software (3- to 5-year lives) and
manufacturing equipment (3- to 20-year lives). Buildings are
depreciated over an estimated useful life of 40 years.
Estimated useful lives are periodically reviewed and, when
appropriate, changes are made prospectively. When certain
events or changes in operating conditions occur, asset lives
may be adjusted and an impairment assessment may be
performed on the recoverability of the carrying amounts.

Goodwill and Other Intangible Assets

Goodwill and indefinite-lived brands are not amortized, but
are evaluated for impairment annually or more often if
indicators of a potential impairment are present. Our
impairment testing of goodwill is performed separately from
our impairment testing of indefinite-lived intangibles. The
annual evaluation for impairment of goodwill and indefinite-
lived intangibles is based on valuation models that
incorporate assumptions and internal projections of expected
future cash flows and operating plans. We believe such
assumptions are also comparable to those that would be used
by other marketplace participants.

We have acquired brands that have been determined to have
indefinite lives due to the nature of our business. We
evaluate a number of factors to determine whether an
indefinite life is appropriate, including the competitive
environment, market share, brand history, product life
cycles, operating plans and the macroeconomic environment
of the countries in which the brands are sold. When certain
events or changes in operating conditions occur, an
impairment assessment is performed and indefinite-lived
brands may be adjusted to a determinable life.

The cost of intangible assets with determinable useful lives
is amortized to reflect the pattern of economic benefits
consumed, either on a straight-line or accelerated basis over
the estimated periods benefited. Patents, technology and
other intangibles with contractual terms are generally
amortized over their respective legal or contractual lives.
Customer relationships, brands and other non-contractual

The Procter & Gamble Company 55

intangible assets with determinable lives are amortized over
periods generally ranging from 5 to 30 years. When certain
events or changes in operating conditions occur, an
impairment assessment is performed and remaining lives of
intangible assets with determinable lives may be adjusted.

New Accounting Pronouncements and Policies

Other than as described below, no new accounting
pronouncement issued or effective during the fiscal year has
had or is expected to have a material impact on the
Consolidated Financial Statements.

Fair Values of Financial Instruments

Certain financial instruments are required to be recorded at
fair value. Changes in assumptions or estimation methods
could affect the fair value estimates; however, we do not
believe any such changes would have a material impact on
our financial condition, results of operations or cash flows.
Other financial instruments, including cash equivalents,
other investments and short-term debt, are recorded at cost,
which approximates fair value. The fair values of long-term
debt and financial instruments are disclosed in Note 5.

In June 2011, the Financial Accounting Standards Board
(FASB) issued authoritative guidance that will eliminate the
option of presenting components of OCI as part of the
statement of shareholders' equity. The guidance will instead
require the reporting of OCI in a single continuous statement
of comprehensive earnings or in a separate statement
immediately following the statement of earnings. The
standard is effective for the Company as of July 1, 2012 and
will impact our financial statement presentation, but will not
impact our results of operations, cash flows or financial
condition.

NOTE 2

GOODWILL AND INTANGIBLE ASSETS

The change in the net carrying amount of goodwill by reportable segment was as follows:

GOODWILL at JUNE 30, 2010

Acquisitions and divestitures

Translation and other

GOODWILL at JUNE 30, 2011

Acquisitions and divestitures

Goodwill impairment charges

Translation and other

GOODWILL at JUNE 30, 2012

Health
Care

Fabric Care
and Home
Care

Baby Care
and Family
Care

Beauty

Grooming
$ 16,631 $ 21,328 $ 7,859 $

(7)

1,415

18,039
(3)

(431)

(1,176)

16,429

(7)
1,329

22,650
(12)
(899)
(1,059)
20,680

(7)
327

8,179
474

—
(314)
8,339

6,360 $

115

260

6,735
34

—
(212)
6,557

1,445 $
(1)
109

1,553
—

—
(94)
1,459

Corporate

Total
Company
389 $ 54,012

104

3,446

57,562
406
(92)
401
— (1,330)
(2,860)
(5)
53,773
309

On May 31, 2012, the Company sold the global snacks
business. As a result, the Snacks and Pet Care segment was
eliminated. The snacks goodwill prior to the divestiture date
is included in the Corporate segment and the pet care
goodwill is included in the Fabric Care and Home Care
segment for all periods presented.

beginning on October 1, 2011; retrospective application to
prior periods was impracticable as the Company was unable
to objectively determine, without the use of hindsight, the
assumptions that would have been used in those earlier
periods. We test our indefinite-lived intangibles for
impairment during the second fiscal quarter of each year,
and accordingly performed this testing during the quarter
ended December 31, 2011.

We tested goodwill for impairment as of July 1, 2011 (the
testing date under our previous policy) and no impairments
were indicated. Our goodwill impairment testing as of
October 1, 2011 (the testing date under our new policy)
determined that certain goodwill was impaired. Specifically,
the results of our impairment testing during the quarter
ended December 31, 2011 indicated that the estimated fair
values of our Appliances and Salon Professional reporting
units were less than their respective carrying amounts. The
test to evaluate goodwill for impairment is a two-step
process. In the first step, we compare the estimated fair

Amounts in millions of dollars except per share amounts or as otherwise specified.

56 The Procter & Gamble Company

value of each reporting unit to its carrying value. If the
estimated fair value of any reporting unit is less than its
carrying value, we perform a second step to determine the
implied fair value of the reporting unit's goodwill. The
second step of the impairment analysis requires a valuation
of a reporting unit's tangible and intangible assets and
liabilities in a manner similar to the allocation of purchase
price in a business combination. If the resulting implied fair
value of the reporting unit's goodwill is less than its carrying
value, that difference represents an impairment. The second
step of the goodwill impairment evaluations for the
Appliances and Salon Professional reporting units were
finalized during the quarter ended March 31, 2012. As a
result of our impairment testing, we recorded a non-cash
before and after tax impairment charge of $1.3 billion to
reduce the carrying amount of goodwill to estimated fair
value - $899 of the impairment related to Appliances and
$431 related to Salon Professional. As of June 30, 2012, the
carrying values of the Appliances and Salon Professional
goodwill were $586 and $397, respectively.

Our impairment testing for indefinite lived intangible assets
during the quarter ended December 31, 2011 also indicated a
decline in the fair value of our Koleston Perfect and Wella
trade name intangible assets below their respective carrying
values. This resulted in a non-cash before tax impairment
charge of $246 ($173 after tax) to reduce the carrying
amounts of these assets to their respective fair values. As of
June 30, 2012, the carrying values of the Koleston Perfect
and Wella trade names were $280 and $554, respectively. All
of the goodwill and indefinite-lived intangible asset
impairment charges are included in Corporate for segment
reporting.

To estimate the fair value of our reporting units and
indefinite-lived intangibles, we use a discounted cash flow
approach, which we believe is the most reliable indicator of
fair value of the businesses, and is most consistent with the
approach a marketplace participant would use. Under this
approach, we estimate the future cash flows of the respective
reporting units and indefinite-lived intangible assets and
discount those cash flows at a rate of return that reflects the
relative risk of each business.

The declines in the fair value of the Appliances and Salon
Professional reporting units and the underlying Koleston
Perfect and Wella trade name intangibles were driven by a
combination of similar competitive and economic factors,
which resulted in a reduction in the forecasted growth rates
and cash flows used to estimate fair value. These factors
include: (1) a more prolonged and deeper deterioration of the
macroeconomic environment than was previously expected
which, due to the more discretionary nature of the
Appliances and Salon Professional businesses, led to a
reduction in the overall market size in the short term and a
more significant and prolonged reduction in the expected
underlying market growth rates and resulting sales levels in
the longer term. This is particularly evident in Europe,
which is where we have historically generated a majority of

Amounts in millions of dollars except per share amounts or as otherwise specified.

the Appliances and Salon Professional sales; (2) increasing
competitive levels of innovation in Salon Professional
negatively impacting our current and nearer-term projected
market share progress; and, (3) an increasing level of
competitive pricing activities negatively impacting pricing
levels and lowering overall category profitability. As a
result of these factors, we reduced our current and longer-
term sales and earnings forecasts for these businesses.

The goodwill and intangible asset valuations are dependent
on a number of significant estimates and assumptions,
including macroeconomic conditions, overall category
growth rates, competitive activities, cost containment and
margin expansion and Company business plans. We believe
these estimates and assumptions are reasonable. However,
actual events and results could differ substantially from
those used in our valuations. To the extent such factors
result in a failure to achieve the level of projected cash flows
used to estimate fair value, we may need to record additional
non-cash impairment charges in the future.

In addition to the impairment charge discussed above,
goodwill also decreased from June 30, 2011 primarily as a
result of currency translation across all reportable segments,
partially offset by the establishment of goodwill related to
the business combination with Teva Pharmaceuticals
Industries Ltd. in our Health Care reportable segment.

Identifiable intangible assets were comprised of:

2012

2011

Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization

June 30
INTANGIBLE ASSETS WITH DETERMINABLE
LIVES

Brands

$ 3,297 $

1,687 $ 3,392 $

1,553

Patents and
technology

Customer
relationships

Other
TOTAL

3,164

2,021

3,195

1,840

2,048

352

8,861

642

218

2,121

335

602

217

4,568

9,043

4,212

INTANGIBLE ASSETS WITH INDEFINITE LIVES

Brands
TOTAL

$26,695 $

35,556

— $27,789 $
36,832

4,568

—

4,212

The amortization of intangible assets was as follows:

Years ended June 30
Intangible asset amortization

2012
$ 500

2011
$ 546

2010
$ 601

The Procter & Gamble Company 57

Estimated amortization expense over the next five fiscal
years is as follows:

incurred in fiscal years 2014 and 2015.

Years ended June 30
Estimated
amortization
expense

2013

2014

2015

2016

2017

$ 481 $ 448 $ 419 $ 381 $ 345

Such estimates do not reflect the impact of future foreign
exchange rate changes.

NOTE 3

SUPPLEMENTAL FINANCIAL INFORMATION

Selected components of current and noncurrent liabilities
were as follows:

June 30
ACCRUED AND OTHER
LIABILITIES - CURRENT

2012

2011

Marketing and promotion

2,880

Compensation expenses

Restructuring reserves

Taxes payable

Legal and environmental

Other
TOTAL

1,660

343

414

264

2,728

8,289

OTHER NONCURRENT
LIABILITIES

Pension benefits

5,684

Other postretirement benefits

Uncertain tax positions

Other
TOTAL

3,270

2,245

891

12,090

RESTRUCTURING PROGRAM

3,058

1,753

151

786

885

2,657

9,290

4,388

1,887

2,326

1,356

9,957

The Company has historically incurred an ongoing annual
level of restructuring-type activities to maintain a
competitive cost structure, including manufacturing and
workforce optimization. Before tax costs incurred under the
ongoing program have generally ranged from $250 to $500
annually. In February 2012, the Company announced a
productivity and cost savings plan to reduce costs in the
areas of supply chain, research and development, marketing
and overheads. The program was designed to accelerate
cost reductions by streamlining management decision
making, manufacturing and other work processes in order to
help fund the Company's growth strategy. The Company
expects to incur approximately $3.5 billion in before-tax
restructuring costs over a four year period, including costs
incurred as part of this plan and the ongoing plan. The
Company expects to incur more than half of the costs under
this plan by the end of fiscal 2013, with the remainder

The restructuring activities will be executed across the
Company's centralized organization as well as across
virtually all of its MDO and GBU organizations. These
restructuring activities include a plan for a net reduction in
non-manufacturing overhead personnel of approximately
5,700 by the end of fiscal 2013. This is being done via the
elimination of duplicate work, simplification through the use
of technology, and the optimization of the various functional
organizations, the number of business units and of the
Company's global footprint. In addition, the plan includes
integration of newly acquired companies, optimization of the
supply chain and other manufacturing processes.

Costs incurred under the plan will consist primarily of costs
to separate employees and asset-related costs to exit
facilities. The Company will also incur other types of costs
outlined below as a direct result of the plan. For the year
ended June 30, 2012, the Company incurred charges of $1.1
billion. Approximately $746 of these charges were recorded
in selling, general and administrative expense. The
remainder is included in cost of products sold.

The following table presents accrued restructuring activity
for the year ended June 30, 2012:

Separations

Asset
Related
Costs

Other

Total

Reserve Balance
June 30, 2011

Charges

Cash Spent

Charges against
Assets

Reserve Balance
June 30, 2012

121
495

$ — $
378

30
179

$ 151
1,052

(300)

— (182)

(482)

—

(378)

— (378)

316

—

343

Separation Costs
Employee separation charges for the year ended June 30,
2012 relate to severance packages for approximately 3,300
employees, of which 1,600 will exit the Company after June
30, 2012. These severance packages include approximately
2,250 related to non-manufacturing overhead personnel,
occurring primarily in North America and Western Europe.
The packages are predominantly voluntary and the amounts
are calculated based on salary levels and past years of
service. Severance costs related to voluntary separations are
generally charged to earnings when the employee accepts the
offer.

Asset-Related Costs
Asset-related costs consist of both asset write downs and
accelerated depreciation. Asset write downs relate to the
establishment of a new fair value basis for assets held-for-
sale or disposal. These assets were written down to the
lower of their current carrying basis or amounts expected to
be realized upon disposal, less minor disposal costs.

Amounts in millions of dollars except per share amounts or as otherwise specified.

58 The Procter & Gamble Company

Charges for accelerated depreciation relate to long-lived
assets that will be taken out of service prior to the end of
their normal service period. These shortened-lived assets
relate primarily to manufacturing consolidations and
technology standardization. The asset-related charges will
not have a significant impact on future depreciation charges.
The majority of asset-related charges for the year ended June
30, 2012 are related to the decision to relocate operations
from the Company's offices in Kobe, Japan.

Other Costs
Other restructuring-type charges are incurred as a direct
result of the productivity and cost savings plan. Such
charges primarily include employee relocation related to
separations and office consolidations, termination of
contracts related to supply chain redesign and the cost to
change internal systems and processes to support the
underlying organizational changes.

Consistent with our historical policies for ongoing
restructuring-type activities, the restructuring program
charges will be funded by and included within Corporate for
both management and segment reporting. Accordingly,
100% of the charges under the program are included within
the Corporate reportable segment. However, for informative
purposes, the following table summarizes the total
restructuring costs related to our reportable segments.

Year Ended
June 30, 2012

Beauty
Grooming
Health Care
Fabric Care and Home Care
Baby Care and Family Care
Corporate (1)
Total Company
(1) Corporate includes costs related to allocated overheads,

120
20
25
184
63
640
1,052

including charges related to our MDO, GBS and Corporate
Functions activities.

NOTE 4

SHORT-TERM AND LONG-TERM DEBT

June 30
DEBT DUE WITHIN ONE YEAR

2012

2011

Current portion of long-term debt

$ 4,083

$ 2,994

Commercial paper

Other
TOTAL

4,574

8,698

6,950

9,981

Short-term weighted average interest
rates(1)

0.6%

0.9%

(1) Weighted average short-term interest rates include the effects of
interest rate swaps discussed in Note 5.

Amounts in millions of dollars except per share amounts or as otherwise specified.

June 30
LONG-TERM DEBT

2012

2011

1.38% USD note due August 2012

$ 1,250

Floating rate note due November
2012

3.38% EUR note due December 2012

Floating rate note due February 2014

4.50% EUR note due May 2014

4.95% USD note due August 2014

0.70% USD note due August 2014

3.50% USD note due February 2015

0.95% JPY note due May 2015

3.15% USD note due September
2015

1.80% USD note due November
2015

4.85% USD note due December 2015

1.45% USD note due August 2016

5.13% EUR note due October 2017

4.70% USD note due February 2019

4.13% EUR note due December 2020

9.36% ESOP debentures due
2012-2021(1)
2.30% USD note due February 2022

4.88% EUR note due May 2027

6.25% GBP note due January 2030

5.50% USD note due February 2034

5.80% USD note due August 2034

5.55% USD note due March 2037

Capital lease obligations

All other long-term debt

Current portion of long-term debt
TOTAL

500

1,761

1,000

1,887

900

1,000

750

1,261

500

2,031

—

2,176

900

—

750

1,243

500

1,000

700

1,000

1,383

1,250

755

757

1,000

1,258

780

500

600

1,400

1,926

(4,083)

21,080

1,000

700

—

1,596

1,250

871

808

—

1,451

805

500

600

1,400

407

4,289

(2,994)

22,033

Long-term weighted average interest
rates(2)

3.3%

3.4%

(1) Debt issued by the ESOP is guaranteed by the Company and

must be recorded as debt of the Company as discussed in Note 8.

(2) Weighted average long-term interest rates include the effects of

interest rate swaps discussed in Note 5.

Long-term debt maturities during the next five fiscal years are
as follows:

June 30
Debt
maturities

2013

2014

2015

2016

2017

$ 4,083 $ 3,013 $ 4,082 $ 2,404 $ 1,093

The Procter & Gamble Company fully and unconditionally
guarantees the registered debt and securities issued by its
100% owned finance subsidiaries.

NOTE 5

RISK MANAGEMENT ACTIVITIES AND FAIR
VALUE MEASUREMENTS

At inception, we formally designate and document
qualifying instruments as hedges of underlying exposures.
We formally assess, at inception and at least quarterly,
whether the financial instruments used in hedging
transactions are effective at offsetting changes in either the
fair value or cash flows of the related underlying exposures.
Fluctuations in the value of these instruments generally are
offset by changes in the value or cash flows of the
underlying exposures being hedged. This offset is driven by
the high degree of effectiveness between the exposure being
hedged and the hedging instrument. The ineffective portion
of a change in the fair value of a qualifying instrument is
immediately recognized in earnings. The amount of
ineffectiveness recognized is immaterial for all years
presented.

Credit Risk Management

We have counterparty credit guidelines and normally enter
into transactions with investment grade financial institutions.
Counterparty exposures are monitored daily and downgrades
in counterparty credit ratings are reviewed on a timely basis.
We have not incurred, and do not expect to incur, material
credit losses on our risk management or other financial
instruments.

Certain of the Company's financial instruments used in
hedging transactions are governed by industry standard
netting and collateral agreements with counterparties. If the
Company's credit rating were to fall below the levels
stipulated in the agreements, the counterparties could
demand either collateralization or termination of the
arrangements. The aggregate fair value of the instruments
covered by these contractual features that are in a net
liability position as of June 30, 2012, was $52. The
Company has not been required to post collateral as a result
of these contractual features.

Interest Rate Risk Management

Our policy is to manage interest cost using a mixture of
fixed-rate and variable-rate debt. To manage this risk in a
cost-efficient manner, we enter into interest rate swaps
whereby we agree to exchange with the counterparty, at

The Procter & Gamble Company 59

specified intervals, the difference between fixed and variable
interest amounts calculated by reference to a notional
amount.

Interest rate swaps that meet specific accounting criteria are
accounted for as fair value or cash flow hedges. For fair
value hedges, the changes in the fair value of both the
hedging instruments and the underlying debt obligations are
immediately recognized in interest expense. For cash flow
hedges, the effective portion of the changes in fair value of
the hedging instrument is reported in OCI and reclassified
into interest expense over the life of the underlying debt
obligation. The ineffective portion for both cash flow and
fair value hedges, which is not material for any year
presented, is immediately recognized in earnings.

Foreign Currency Risk Management

We manufacture and sell our products and finance operations
in a number of countries throughout the world. As a result,
we are exposed to movements in foreign currency exchange
rates.

To manage the exchange rate risk primarily associated with
our financing operations, we have historically used a
combination of forward contracts, options and currency
swaps. As of June 30, 2012, we had currency swaps with
maturities up to five years, which are intended to offset the
effect of exchange rate fluctuations on intercompany loans
denominated in foreign currencies. These swaps are
accounted for as cash flow hedges. The effective portion of
the changes in fair value of these instruments is reported in
OCI and reclassified into earnings in the same financial
statement line item and in the same period or periods during
which the related hedged transactions affect earnings. The
ineffective portion, which is not material for any year
presented, is immediately recognized in earnings.

The change in fair values of certain non-qualifying
instruments used to manage foreign exchange exposure of
intercompany financing transactions and certain balance
sheet items subject to revaluation are immediately
recognized in earnings, substantially offsetting the foreign
currency mark-to-market impact of the related exposures.

Net Investment Hedging

We hedge certain net investment positions in foreign
subsidiaries. To accomplish this, we either borrow directly in
foreign currencies and designate all or a portion of the
foreign currency debt as a hedge of the applicable net
investment position or enter into foreign currency swaps that
are designated as hedges of net investments. Changes in the
fair value of these instruments are recognized in OCI to
offset the change in the value of the net investment being
hedged. Currency effects of these hedges reflected in OCI
were an after-tax gain of $740 and an after-tax loss of $1,176
in 2012 and 2011, respectively. Accumulated net balances
were after-tax losses of $3,706 and $4,446 as of June 30,
2012 and 2011, respectively.

Amounts in millions of dollars except per share amounts or as otherwise specified.

based observable inputs are not available, management
judgment is used to develop assumptions to estimate fair
value.

Generally, the fair value of our Level 3 instruments is
estimated as the net present value of expected future cash
flows based on external inputs.

60 The Procter & Gamble Company

Commodity Risk Management

Certain raw materials used in our products or production
processes are subject to price volatility caused by weather,
supply conditions, political and economic variables and
other unpredictable factors. To manage the volatility related
to anticipated purchases of certain of these materials, we
may, on a limited basis, use futures and options with
maturities generally less than one year and swap contracts
with maturities up to five years. These market instruments
generally are designated as cash flow hedges. The effective
portion of the changes in fair value for these instruments is
reported in OCI and reclassified into earnings in the same
financial statement line item and in the same period or
periods during which the hedged transactions affect
earnings. The ineffective and non-qualifying portions, which
are not material for any year presented, are immediately
recognized in earnings. As of and during the year ended June
30, 2012, we did not have material commodity hedging
activity.

Insurance

We self-insure for most insurable risks. However, we
purchase insurance for Directors and Officers Liability and
certain other coverage in situations where it is required by
law, by contract or deemed to be in the best interest of the
Company.

Fair Value Hierarchy

Accounting guidance on fair value measurements for certain
financial assets and liabilities requires that financial assets
and liabilities carried at fair value be classified and disclosed
in one of the following categories:

Level 1: Quoted market prices in active markets for identical
assets or liabilities.

Level 2: Observable market-based inputs or unobservable
inputs that are corroborated by market data.

Level 3: Unobservable inputs reflecting the reporting entity's
own assumptions or external inputs from inactive markets.

When applying fair value principles in the valuation of
assets and liabilities, we are required to maximize the use of
quoted market prices and minimize the use of unobservable
inputs. The Company has not changed its valuation
techniques used in measuring the fair value of any financial
assets or liabilities during the year. Our fair value estimates
take into consideration the credit risk of both the Company
and our counterparties.

When active market quotes are not available for financial
assets and liabilities, we use industry standard valuation
models. Where applicable, these models project future cash
flows and discount the future amounts to a present value
using market-based observable inputs including credit risk,
interest rate curves, foreign currency rate and forward and
spot prices for currencies. In circumstances where market-
Amounts in millions of dollars except per share amounts or as otherwise specified.

The following table sets forth the Company's financial assets and liabilities as of June 30, 2012 and 2011 that were measured at
fair value on a recurring basis during the period, segregated by level within the fair value hierarchy:

The Procter & Gamble Company 61

As of June 30
ASSETS RECORDED AT FAIR
VALUE

Investment securities

Derivatives relating to:

Foreign currency hedges
Other foreign currency instruments(1)
Interest rates

Net investment hedges

Commodities

TOTAL ASSETS RECORDED AT
FAIR VALUE(2)

LIABILITIES RECORDED AT
FAIR VALUE

Derivatives relating to:

Foreign currency hedges
Other foreign currency instruments(1)
Net investment hedges

Commodities

TOTAL LIABILITIES AT FAIR
VALUE(3)
LIABILITIES NOT RECORDED AT
FAIR VALUE

Level 1

Level 2

Level 3

Total

2012

2011

2012

2011

2012

2011

2012

2011

$ — $ — $

—

298

419

182

163

—

350

—

298

452

$ — $ — $

142

119

$ — $ — $

142

—

186

138

301

—

186

182

163

—

389

119

138

301

Long-term debt (4)

25,829

24,940

2,119

1,486

TOTAL LIABILITIES RECORDED
AND NOT RECORDED AT FAIR
VALUE

25,829

24,940

2,305

1,787

— 27,948

26,426

— 28,134

26,727

(1) Other foreign currency instruments are comprised of foreign currency financial instruments that do not qualify as hedges.
(2)

Investment securities are presented in other noncurrent assets and all derivative assets are presented in prepaid expenses and other
current assets or other noncurrent assets.

(3) All liabilities are presented in accrued and other liabilities or other noncurrent liabilities.
(4) Long-term debt includes the current portion ($4,095 and $3,008 as of June 30, 2012 and 2011, respectively) of debt instruments. Long-
term debt is not recorded at fair value on a recurring basis, but is measured at fair value for disclosure purposes. Fair values are
generally estimated based on quoted market prices for identical or similar instruments.

The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. There were
no transfers between levels during the years presented. In addition, there was no significant activity within the Level 3
financial assets and liabilities during the years presented.

The Company re-measured operating real estate assets to estimated fair value of $8 during the year ended June 30, 2012, using
comparable prices for similar assets, resulting in a $220 impairment. Except for this and the goodwill and intangible assets
discussed in Note 2, there were no additional significant assets or liabilities that were re-measured at fair value on a non-
recurring basis during the years presented.

Amounts in millions of dollars except per share amounts or as otherwise specified.

—

62 The Procter & Gamble Company

Disclosures about Derivative Instruments

The notional amounts and fair values of qualifying and non-
qualifying financial instruments used in hedging transactions
as of June 30, 2012 and 2011 are as follows:

Notional Amount

Fair Value Asset/(Liability)

The effective portion of gains and losses on derivative
instruments that was recognized in OCI during the years
ended June 30, 2012 and 2011 is not material. During the
next 12 months, the amount of the June 30, 2012,
accumulated OCI balance that will be reclassified to
earnings is expected to be immaterial.

2012

As of June 30
DERIVATIVES IN CASH FLOW HEDGING
RELATIONSHIPS

2011

2012

2011

The amounts of gains and losses on qualifying and non-
qualifying financial instruments used in hedging transactions
for the years ended June 30, 2012 and 2011 are as follows:

Interest rate
contracts

Foreign
currency
contracts

Commodity
contracts
TOTAL

— $

—

831

—

831

847

(142)

(118)

—

(142)

(114)

DERIVATIVES IN FAIR VALUE HEDGING
RELATIONSHIPS

Interest rate
contracts

$ 10,747

$ 10,308

298

163

DERIVATIVES IN NET INVESTMENT HEDGING
RELATIONSHIPS

Net
investment
hedges

$ 1,768

$ 1,540

(138)

Amount of Gain/(Loss)
Reclassified from
Accumulated
OCI into Income(1)

Years ended June 30
DERIVATIVES IN CASH FLOW HEDGING
RELATIONSHIPS
Interest rate contracts

2012

Foreign currency contracts

Commodity contracts
TOTAL

2011

(77)

(50)

Amount of Gain/(Loss)
Recognized in Income

Years ended June 30
DERIVATIVES IN FAIR VALUE HEDGING
RELATIONSHIPS(2)
Interest rate contracts

135

2012

2011

(28)

—

DERIVATIVES NOT DESIGNATED AS HEDGING
INSTRUMENTS

Debt
TOTAL

(137)

(2)

Foreign
currency
contracts

Commodity
contracts
TOTAL

$ 13,210

$ 14,957

139

125

13,335

14,996

(1)

138

The total notional amount of contracts outstanding at the end
of the period is indicative of the level of the Company's
derivative activity during the period.

Amount of Gain/(Loss)
Recognized in
Accumulated OCI
on Derivatives
(Effective Portion)

As of June 30
DERIVATIVES IN CASH FLOW HEDGING
RELATIONSHIPS

2012

2011

Interest rate contracts

Foreign currency contracts

Commodity contracts
TOTAL

—
33

3
50

DERIVATIVES IN NET INVESTMENT HEDGING
RELATIONSHIPS

Net investment hedges

(88)

Amounts in millions of dollars except per share amounts or as otherwise specified.

DERIVATIVES IN NET INVESTMENT HEDGING
RELATIONSHIPS(2)
Net investment hedges

(1) $

1,359

$ (1,121) $

DERIVATIVES NOT DESIGNATED AS HEDGING
INSTRUMENTS(3)
Foreign currency contracts(4)
Commodity contracts
TOTAL
1,362
(1) The gain or loss on the effective portion of cash flow hedging
relationships is reclassified from accumulated OCI into net
income in the same period during which the related items
affect earnings. Such amounts are included in the
Consolidated Statements of Earnings as follows: interest rate
contracts in interest expense, foreign currency contracts in
selling, general and administrative and interest expense, and
commodity contracts in cost of products sold.

(1,119)

(2) The gain or loss on the ineffective portion of interest rate

contracts, debt and net investment hedges, if any, is included
in the Consolidated Statements of Earnings in interest
expense.

(3) The gain or loss on contracts not designated as hedging

instruments is included in the Consolidated Statements of
Earnings as follows: foreign currency contracts in selling,
general and administrative expense and commodity contracts
in cost of products sold.

(4) The gain or loss on non-qualifying foreign currency contracts
substantially offsets the foreign currency mark-to-market
impact of the related exposure.

The Procter & Gamble Company 63

NOTE 6

EARNINGS PER SHARE

Net earnings attributable to Procter & Gamble less preferred dividends (net of related tax benefits) are divided by the weighted
average number of common shares outstanding during the year to calculate basic net earnings per common share. Diluted net
earnings per common share are calculated to give effect to stock options and other stock-based awards (see Note 7) and assume
conversion of preferred stock (see Note 8).

Net earnings attributable to Procter & Gamble and common shares used to calculate basic and diluted net earnings per share
were as follows:

Years ended June 30
NET EARNINGS FROM CONTINUING OPERATIONS

Net earnings from discontinued operations
NET EARNINGS

Net earnings attributable to noncontrolling interests
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE (Diluted)

Preferred dividends, net of tax benefit
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE AVAILABLE
TO COMMON SHAREHOLDERS (Basic)

NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO
PROCTER & GAMBLE AVAILABLE TO COMMON SHAREHOLDERS
(Basic)
NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO
PROCTER & GAMBLE (Diluted)

Shares in millions; Years ended June 30
Basic weighted average common shares outstanding

Effect of dilutive securities

Conversion of preferred shares(1)
Exercise of stock options and other unvested equity awards(2)

2012
9,317

1,587

10,904
(148)
10,756
(256)

2011
$ 11,698

2010
$ 10,851

229

11,927
(130)
11,797
(233)

1,995

12,846
(110)
12,736
(219)

10,500

11,564

12,517

8,913

$ 11,335

$ 10,522

9,169

$ 11,568

$ 10,741

2012
2,751.3

2011
2,804.0

2010
2,900.8

123.9

66.0

128.5

69.4

134.0

64.5

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

2,941.2

3,001.9

3,099.3

(1) Despite being included currently in diluted net earnings per common share, the actual conversion to common stock occurs pursuant to

the repayment of the ESOPs' obligations through 2035.

(2) Approximately 67 million in 2012, 93 million in 2011 and 101 million in 2010 of the Company's outstanding stock options were not
included in the diluted net earnings per share calculation because the options were out of the money or to do so would have been
antidilutive (i.e., the total proceeds upon exercise would have exceeded the market value of the underlying common shares).

NOTE 7

STOCK-BASED COMPENSATION

We have stock-based compensation plans under which we
annually grant stock option, restricted stock, restricted stock
unit (RSU) and performance stock unit (PSU) awards to key
managers and directors. Exercise prices on options granted
have been, and continue to be, set equal to the market price
of the underlying shares on the date of the grant. Since
September 2002, the key manager stock option awards
granted are vested after three years and have a 10-year life.
The key manager stock option awards granted from July
1998 through August 2002 vested after three years and have
a 15-year life. Key managers can elect to receive up to 50%
of the value of their option award in RSUs. Key manager
RSUs vest and are settled in shares of common stock five
years from the grant date. The awards provided to the

Company's directors are in the form of restricted stock and
RSUs.

In addition to our key manager and director grants, we make
other minor stock option and RSU grants to employees for
which the terms are not substantially different. In 2011, we
implemented a performance stock program (PSP) and
granted PSUs to senior level executives. Under this
program, the number of PSUs that will vest three years after
the respective grant date is based on the Company's
performance relative to pre-established performance goals
during that three year period.

A total of 180 million shares of common stock were
authorized for issuance under stock-based compensation
plans approved by shareholders in 2003 and 2009. A total of
87 million shares remain available for grant under the 2003
and 2009 plans.

Amounts in millions of dollars except per share amounts or as otherwise specified.

64 The Procter & Gamble Company

Total stock-based compensation expense for stock option
grants was $317, $358 and $417 for 2012, 2011 and 2010,
respectively. Total compensation cost for restricted stock,
RSUs and PSUs was $60, $56 and $36 in 2012, 2011 and
2010, respectively. The total income tax benefit recognized
in the income statement for stock options, restricted stock,
RSUs and PSUs was $102, $117 and $118 in 2012, 2011 and
2010, respectively.

In calculating the compensation expense for stock options
granted, we utilize a binomial lattice-based valuation model.
Assumptions utilized in the model, which are evaluated and
revised, as necessary, to reflect market conditions and
experience, were as follows:

Years ended June 30
Interest rate

Weighted average
interest rate

Dividend yield

2012

2010
0.2-2.1% 0.3-3.7% 0.3-4.0%

2011

1.9%

2.6%

3.4%

2.4%

3.7%

2.2%

granted was $8.05, $11.09 and $13.47 per share in 2012,
2011 and 2010, respectively. The total intrinsic value of
options exercised was $820, $628 and $342 in 2012, 2011
and 2010, respectively. The total grant-date fair value of
options that vested during 2012, 2011 and 2010 was $435,
$445 and $563, respectively. We have no specific policy to
repurchase common shares to mitigate the dilutive impact of
options; however, we have historically made adequate
discretionary purchases, based on cash availability, market
trends and other factors, to satisfy stock option exercise
activity.

At June 30, 2012, there was $297 of compensation cost that
has not yet been recognized related to stock option grants.
That cost is expected to be recognized over a remaining
weighted average period of 1.8 years. At June 30, 2012,
there was $125 of compensation cost that has not yet been
recognized related to restricted stock, RSUs and PSUs. That
cost is expected to be recognized over a remaining weighted
average period of 3.1 years.

Expected volatility

12-18%

14-18%

15-20%

Weighted average
volatility

Expected life in
years

15%

16%

18%

8.5

8.8

Cash received from options exercised was $1,735, $1,237
and $703 in 2012, 2011 and 2010, respectively. The actual
tax benefit realized for the tax deductions from option
exercises totaled $239, $188 and $89 in 2012, 2011 and
2010, respectively.

Lattice-based option valuation models incorporate ranges of
assumptions for inputs and those ranges are disclosed in the
preceding table. Expected volatilities are based on a
combination of historical volatility of our stock and implied
volatilities of call options on our stock. We use historical
data to estimate option exercise and employee termination
patterns within the valuation model. The expected life of
options granted is derived from the output of the option
valuation model and represents the average period of time
that options granted are expected to be outstanding. The
interest rate for periods within the contractual life of the
options is based on the U.S. Treasury yield curve in effect at
the time of grant.

A summary of options outstanding under the plans as of
June 30, 2012, and activity during the year then ended is
presented below:

Weighted
Avg.
Remaining
Contract-
ual Life in
Years

Aggregate
Intrinsic
Value
(in
millions)

Weighted
Avg.
Exercise
Price

Options

363,174 $ 51.75

30,225

(38,967)
(1,339)

353,093
268,131

67.05

44.53
59.12

53.83
50.52

5.0 $ 3,125
3,109
3.8

Options in thousands
Outstanding,
beginning of year

Granted

Exercised
Canceled
OUTSTANDING,
END OF YEAR
EXERCISABLE

NOTE 8

POSTRETIREMENT BENEFITS AND EMPLOYEE
STOCK OWNERSHIP PLAN

We offer various postretirement benefits to our employees.

Defined Contribution Retirement Plans

We have defined contribution plans which cover the majority
of our U.S. employees, as well as employees in certain other
countries. These plans are fully funded. We generally make
contributions to participants' accounts based on individual
base salaries and years of service. Total global defined
contribution expense was $353, $347 and $344 in 2012,
2011 and 2010, respectively.

The primary U.S. defined contribution plan (the U.S. DC
plan) comprises the majority of the expense for the
Company's defined contribution plans. For the U.S. DC plan,
the contribution rate is set annually. Total contributions for
this plan approximated 15% of total participants' annual
wages and salaries in 2012, 2011 and 2010.

We maintain The Procter & Gamble Profit Sharing Trust
(Trust) and Employee Stock Ownership Plan (ESOP) to
provide a portion of the funding for the U.S. DC plan and
other retiree benefits (described below). Operating details of
the ESOP are provided at the end of this Note. The fair value
of the ESOP Series A shares allocated to participants reduces
our cash contribution required to fund the U.S. DC plan.

The weighted average grant-date fair value of options
Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company 65

Defined Benefit Retirement Plans and Other Retiree Benefits

We offer defined benefit retirement pension plans to certain employees. These benefits relate primarily to local plans outside
the U.S. and, to a lesser extent, plans assumed in previous acquisitions covering U.S. employees.

We also provide certain other retiree benefits, primarily health care and life insurance, for the majority of our U.S. employees
who become eligible for these benefits when they meet minimum age and service requirements. Generally, the health care plans
require cost sharing with retirees and pay a stated percentage of expenses, reduced by deductibles and other coverages. These
benefits are primarily funded by ESOP Series B shares and certain other assets contributed by the Company.

Obligation and Funded Status. The following provides a reconciliation of benefit obligations, plan assets and funded status of
these defined benefit plans:

Years ended June 30
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year(3)
Service cost

Interest cost

Participants' contributions

Amendments

Actuarial loss/(gain)

Acquisitions/(divestitures)

Special termination benefits

Currency translation and other

Benefit payments
BENEFIT OBLIGATION AT END OF YEAR(3)

Pension Benefits

(1)

Other Retiree Benefits

(2)

2012

2011

2012

2011

$ 12,229

$ 11,245

4,886

4,778

267

611

22
(44)
1,911
(17)
—
(847)
(559)
13,573

270

588

93
(633)
—

—

1,137
(492)
12,229

142

276

—

957

—

27
(95)
(255)
6,006

146

270

7
(235)
—

89
(239)
4,886

Pension Benefits

(1)

Other Retiree Benefits

(2)

2012

2011

2012

2011

CHANGE IN PLAN ASSETS

Fair value of plan assets at beginning of year

7,962

6,562

Actual return on plan assets

Employer contributions

Participants' contributions

Currency translation and other
ESOP debt impacts(4)
Benefit payments
FAIR VALUE OF PLAN ASSETS AT END OF YEAR

FUNDED STATUS
(1)

459

485

22
(395)
—
(559)
7,974
(5,599)

685

555

631

—
(492)
7,962
(4,267)

2,975
(126)
24

—

27
(255)
2,713
(3,293)

$ 2,843

253

20
(239)
2,975
(1,911)

(2)

(3)

Primarily non-U.S.-based defined benefit retirement plans.
Primarily U.S.-based other postretirement benefit plans.
For the pension benefit plans, the benefit obligation is the projected benefit obligation. For other retiree benefit plans, the benefit
obligation is the accumulated postretirement benefit obligation.

(4) Represents the net impact of ESOP debt service requirements, which is netted against plan assets for other retiree benefits.

The underfunding of pension benefits is primarily a function of the different funding incentives that exist outside of the U.S. In
certain countries, there are no legal requirements or financial incentives provided to companies to pre-fund pension obligations
prior to their due date. In these instances, benefit payments are typically paid directly from the Company's cash as they become
due.

Amounts in millions of dollars except per share amounts or as otherwise specified.

66 The Procter & Gamble Company

Years ended June 30
CLASSIFICATION OF NET AMOUNT RECOGNIZED

Noncurrent assets

Current liability

Noncurrent liability
NET AMOUNT RECOGNIZED

AMOUNTS RECOGNIZED IN ACCUMULATED OTHER
COMPREHENSIVE INCOME (AOCI)

Net actuarial loss

Prior service cost /(credit)
NET AMOUNTS RECOGNIZED IN AOCI

CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS
RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE
INCOME (AOCI)

Net actuarial loss /(gain) - current year

Prior service cost/(credit) - current year

Amortization of net actuarial loss

Amortization of prior service (cost) / credit

Settlement / curtailment cost

Currency translation and other
TOTAL CHANGE IN AOCI
NET AMOUNTS RECOGNIZED IN PERIODIC BENEFIT COST AND
AOCI

Pension Benefits

Other Retiree Benefits

2012

2011

2012

2011

128
(43)
(5,684)
(5,599)

168
(47)
(4,388)
(4,267)

— $
(23)
(3,270)
(3,293)

—
(24)
(1,887)
(1,911)

4,010

2,315

261

4,271

354

2,669

3,565
(75)
3,490

2,181
(92)
2,089

2,009
(44)
(102)
(21)
(6)
(234)
1,602

(827) $
93
(154)
(18)
—

262
(644)

1,516

—
(99)
20

—
(36)
1,401

(60)
7
(96)
18

—

20
(111)

2,036

(106)

1,417

(124)

The accumulated benefit obligation for all defined benefit retirement pension plans was $11,763 and $10,436 as of June 30,
2012 and 2011, respectively. Pension plans with accumulated benefit obligations in excess of plan assets and plans with
projected benefit obligations in excess of plan assets consist of the following:

June 30
Projected benefit obligation

Accumulated benefit obligation
Fair value of plan assets

Accumulated Benefit
Obligation Exceeds the
Fair Value of Plan Assets

Projected Benefit
Obligation Exceeds the
Fair Value of Plan Assets

2012
$ 11,623

10,009
6,013

2011

6,817

5,923
2,845

2012
$ 12,310

2011
$ 10,650

10,533
6,583

8,940
6,214

Net Periodic Benefit Cost. Components of the net periodic benefit cost were as follows:

Years ended June 30
Service cost

Interest cost

Expected return on plan assets

Prior service cost /(credit) amortization

Net actuarial loss amortization
Curtailments, settlements and other
GROSS BENEFIT COST/(CREDIT)

Dividends on ESOP preferred stock
NET PERIODIC BENEFIT COST/(CREDIT)

Amounts in millions of dollars except per share amounts or as otherwise specified.

Pension Benefits

Other Retiree Benefits

2012

2011

2010

2012

2011

2010

267

270

218

142

146

103

611
(573)
21

102
6
434
—
434

588
(492)
18

154
—
538
—
538

579
(437)
15

91
3
469
—
469

276
(434)
(20)
99
27
90
(74)
16

270
(431)
(18)
96
3
66
(79)
(13)

253
(429)
(21)
20
14
(60)
(83)
(143)

The Procter & Gamble Company 67

Amounts expected to be amortized from accumulated OCI into net periodic benefit cost during the year ending June 30, 2013,
are as follows:

Net actuarial loss
Prior service cost/(credit)

Pension Benefits
212
$
18

Other Retiree Benefits
199
$
(20)

Assumptions. We determine our actuarial assumptions on an annual basis. These assumptions are weighted to reflect each
country that may have an impact on the cost of providing retirement benefits. The weighted average assumptions for the
defined benefit and other retiree benefit calculations, as well as assumed health care trend rates, were as follows:

Years ended June 30
ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATIONS(1)

Discount rate

Rate of compensation increase
ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT
COST(2)

Discount rate

Expected return on plan assets

Rate of compensation increase
ASSUMED HEALTH CARE COST TREND RATES

Health care cost trend rates assumed for next year

Rate to which the health care cost trend rate is assumed to decline (ultimate
trend rate)

Year that the rate reaches the ultimate trend rate

(1) Determined as of end of year.
(2) Determined as of beginning of year and adjusted for acquisitions.

Pension Benefits

Other Retiree Benefits

2012

2011

2012

2011

4.2%

3.3%

5.3%

7.4%

3.5%

—

5.3%

3.5%

5.0%

7.0%

3.5%

—

4.3%

—%

5.7%

9.2%

—%

5.7%

—%

5.4%

9.2%

—%

8.0%

8.5%

5.0%

2019

5.0%

2018

Several factors are considered in developing the estimate for the long-term expected rate of return on plan assets. For the
defined benefit retirement plans, these factors include historical rates of return of broad equity and bond indices and projected
long-term rates of return obtained from pension investment consultants. The expected long-term rates of return for plan assets
are 8 - 9% for equities and 5 - 6% for bonds. For other retiree benefit plans, the expected long-term rate of return reflects the
fact that the assets are comprised primarily of Company stock. The expected rate of return on Company stock is based on the
long-term projected return of 9.5% and reflects the historical pattern of favorable returns.

Assumed health care cost trend rates could have a significant effect on the amounts reported for the other retiree benefit plans.
A one- percentage point change in assumed health care cost trend rates would have the following effects:

Effect on total of service and interest cost components

Effect on postretirement benefit obligation

One-Percentage
Point Increase

One-Percentage
Point Decrease

942

(59)
(724)

Plan Assets. Our target asset allocation for the year ended June 30, 2012, and actual asset allocation by asset category as of
June 30, 2012 and 2011, were as follows:

Asset Category
Cash
Debt securities
Equity securities
TOTAL

Target Asset Allocation

Actual Asset Allocation at June 30

Pension Benefits
2%
51%
47%
100%

Other Retiree
Benefits

2%
8%
90%
100%

Pension Benefits

Other Retiree
Benefits

2012

2011

2012

2011

1%
1%
1%
2%
9%
52% 52%
8%
47% 46%
90% 91%
100% 100% 100% 100%

Amounts in millions of dollars except per share amounts or as otherwise specified.

68 The Procter & Gamble Company

The following tables set forth the fair value of the Company's plan assets as of June 30, 2012 and 2011 segregated by level
within the fair value hierarchy (refer to Note 5 for further discussion on the fair value hierarchy and fair value principles).
Common collective funds are valued using the net asset value reported by the managers of the funds and as supported by the
unit prices of actual purchase and sale transactions. Company stock listed as Level 2 in the hierarchy represents preferred
shares which are valued based on the value of Company common stock. Insurance contracts represent the majority of our
Level 3 pension instruments and are based on their cash equivalent or models that project future cash flows and discount the
future amounts to a present value using market-based observable inputs including credit risk and interest rate curves.

Pension Benefits

Level 1

Level 2

Level 3

Total

2012

2011

2012

2011

2012

2011

2012

2011

ASSETS AT FAIR VALUE:

Cash and cash equivalents

Government bonds

Company stock

Common collective fund - equity

Common collective fund - fixed income

Other
TOTAL ASSETS AT FAIR VALUE

ASSETS AT FAIR VALUE:

Cash and cash equivalents

Company stock

Common collective fund - equity

Common collective fund - fixed income

Other
TOTAL ASSETS AT FAIR VALUE

189

$ — $ — $ — $ — $

60
4
—
—
—
—
64

—
—
11
— 3,727
— 4,112
—

—

3,612

4,027

—

268

7,839

7,639

—
—
—
—
71
71

—

60
4
—
—
— 3,727
— 4,112
55

189

3,612

4,027

7,974

7,962

Other Retiree Benefits

Level 1

Level 2

Level 3

Total

2012

2011

2012

2011

2012

2011

2012

2011

$ — $ — $ — $ — $

16 $

16 $
—
—
—
—
16

43
— 2,418
—

2,655

232

—

30
247
—

2,695

2,928

—

—
—
—
2
2

— 2,418
—

2,655

232

30
247

2,713

2,975

—

There was no significant activity within the Level 3 pension
and other retiree benefits plan assets during the years
presented.

Our investment objective for defined benefit retirement plan
assets is to meet the plans' benefit obligations, while
minimizing the potential for future required Company plan
contributions. The investment strategies focus on asset class
diversification, liquidity to meet benefit payments and an
appropriate balance of long-term investment return and risk.
Target ranges for asset allocations are determined by
matching the actuarial projections of the plans' future
liabilities and benefit payments with expected long-term
rates of return on the assets, taking into account investment
return volatility and correlations across asset classes. Plan
assets are diversified across several investment managers
and are generally invested in liquid funds that are selected to
track broad market equity and bond indices. Investment risk
is carefully controlled with plan assets rebalanced to target
allocations on a periodic basis and continual monitoring of

investment managers' performance relative to the investment
guidelines established with each investment manager.

Cash Flows. Management's best estimate of cash
requirements for the defined benefit retirement plans and
other retiree benefit plans for the year ending June 30, 2013,
is approximately $452 and $25, respectively. For the defined
benefit retirement plans, this is comprised of $144 in
expected benefit payments from the Company directly to
participants of unfunded plans and $308 of expected
contributions to funded plans. For other retiree benefit plans,
this is comprised of expected contributions that will be used
directly for benefit payments. Expected contributions are
dependent on many variables, including the variability of the
market value of the plan assets as compared to the benefit
obligation and other market or regulatory conditions. In
addition, we take into consideration our business investment
opportunities and resulting cash requirements. Accordingly,
actual funding may differ significantly from current
estimates.

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company 69

Total benefit payments expected to be paid to participants,
which include payments funded from the Company's assets,
as discussed above, as well as payments from the plans, are
as follows:

Years ending June 30
EXPECTED BENEFIT PAYMENTS

Pension
Benefits

Other Retiree
Benefits

2013

2014

2015

2016

2017

546

516

525

553

567

207

225

242

258

275

2018 - 2022

3,133

1,614

The series A and B preferred shares of the ESOP are
allocated to employees based on debt service requirements,
net of advances made by the Company to the Trust. The
number of preferred shares outstanding at June 30 was as
follows:

Shares in thousands
Allocated

Unallocated
TOTAL SERIES A

Allocated

Unallocated
TOTAL SERIES B

2012
50,668

11,348

62,016

20,802

38,743

59,545

2011
52,281

13,006

65,287

20,759

40,090

60,849

2010
54,542

14,762

69,304

20,752

41,347

62,099

Employee Stock Ownership Plan

We maintain the ESOP to provide funding for certain
employee benefits discussed in the preceding paragraphs.

For purposes of calculating diluted net earnings per common
share, the preferred shares held by the ESOP are considered
converted from inception.

The ESOP borrowed $1.0 billion in 1989 and the proceeds
were used to purchase Series A ESOP Convertible Class A
Preferred Stock to fund a portion of the U.S. DC plan.
Principal and interest requirements of the borrowing were
paid by the Trust from dividends on the preferred shares and
from advances provided by the Company. The original
borrowing of $1.0 billion has been repaid in full, and
advances from the Company of $127 remain outstanding at
June 30, 2012. Each share is convertible at the option of the
holder into one share of the Company's common stock. The
dividend for the current year was equal to the common stock
dividend of $2.14 per share. The liquidation value is $6.82
per share.

In 1991, the ESOP borrowed an additional $1.0 billion. The
proceeds were used to purchase Series B ESOP Convertible
Class A Preferred Stock to fund a portion of retiree health
care benefits. These shares, net of the ESOP's debt, are
considered plan assets of the other retiree benefits plan
discussed above. Debt service requirements are funded by
preferred stock dividends, cash contributions and advances
provided by the Company, of which $473 is outstanding at
June 30, 2012. Each share is convertible at the option of the
holder into one share of the Company's common stock. The
dividend for the current year was equal to the common stock
dividend of $2.14 per share. The liquidation value is $12.96
per share.

Our ESOP accounting practices are consistent with current
ESOP accounting guidance, including the permissible
continuation of certain provisions from prior accounting
guidance. ESOP debt, which is guaranteed by the Company,
is recorded as debt (see Note 4) with an offset to the reserve
for ESOP debt retirement, which is presented within
shareholders' equity. Advances to the ESOP by the Company
are recorded as an increase in the reserve for ESOP debt
retirement. Interest incurred on the ESOP debt is recorded as
interest expense. Dividends on all preferred shares, net of
related tax benefits, are charged to retained earnings.

NOTE 9

INCOME TAXES

Income taxes are recognized for the amount of taxes payable
for the current year and for the impact of deferred tax assets
and liabilities, which represent future tax consequences of
events that have been recognized differently in the financial
statements than for tax purposes. Deferred tax assets and
liabilities are established using the enacted statutory tax rates
and are adjusted for any changes in such rates in the period
of change.

Earnings from continuing operations before income taxes
consisted of the following:

Years ended June 30
United States

International
TOTAL

2012
$ 7,584

2011
$ 8,858

2010
$ 8,258

5,201

6,139

6,610

12,785

14,997

14,868

Income taxes on continuing operations consisted of the
following:

Years ended June 30
CURRENT TAX
EXPENSE

U.S. federal

International

U.S. state and local

DEFERRED TAX
EXPENSE

U.S. federal

International and other

2012

2011

2010

$ 1,913

$ 1,770

$ 2,118

1,374

1,149

1,581

246

256

285

3,533

3,175

3,984

(148)

(65)

200

(76)

124

250

(217)

TOTAL TAX EXPENSE

3,468

3,299

4,017

Amounts in millions of dollars except per share amounts or as otherwise specified.

70 The Procter & Gamble Company

A reconciliation of the U.S. federal statutory income tax rate
to our actual income tax rate on continuing operations is
provided below:

Years ended June 30
U.S. federal statutory income
tax rate

Country mix impacts of
foreign operations

Changes in uncertain tax
positions

Patient Protection and
Affordable Care Act

Impairment Adjustments

Other
EFFECTIVE INCOME
TAX RATE

2012

2011

2010

35.0 % 35.0 % 35.0 %

(8.1)% (8.2)% (7.7)%

(1.3)% (3.6)% (0.4)%

— % — %
1.0 %
3.7 % — % — %
(2.2)% (1.2)% (0.9)%

27.1 % 22.0 % 27.0 %

Changes in uncertain tax positions represent changes in our
net liability related to prior year tax positions.

In March 2010, the Patient Protection and Affordable Care
Act (PPACA) was signed into law. One of the provisions of
the PPACA changed the taxability of federal subsidies
received by plan sponsors that provide retiree prescription
drug benefits at least equivalent to Medicare Part D
coverage. As a result of the change in taxability of the
federal subsidy, we were required to make adjustments to
deferred tax asset balances, resulting in a $152 charge to
income tax expense in 2010.

Tax benefits credited to shareholders' equity totaled $661
and $510 for the years ended June 30, 2012 and 2011,
respectively. These primarily relate to the tax effects of net
investment hedges, excess tax benefits from the exercise of
stock options and the impacts of certain adjustments to
pension and other retiree benefit obligations recorded in
shareholders' equity.

We have undistributed earnings of foreign subsidiaries of
approximately $39 billion at June 30, 2012, for which
deferred taxes have not been provided. Such earnings are
considered indefinitely invested in the foreign subsidiaries.
If such earnings were repatriated, additional tax expense
may result, although the calculation of such additional taxes
is not practicable.

Amounts in millions of dollars except per share amounts or as otherwise specified.

A reconciliation of the beginning and ending liability for
uncertain tax positions is as follows:

2012

2011

2010

BEGINNING OF YEAR

$ 1,848

$ 1,797

$ 2,003

Increases in tax positions for
prior years

Decreases in tax positions for
prior years

Increases in tax positions for
current year

Settlements with taxing
authorities

Lapse in statute of limitations

Currency translation
END OF YEAR

166

323

128

(188)

(388)

(146)

178

222

193

(49)

(81)

(101)

(168)

(94)

156

(216)

(45)

(120)

1,773

1,848

1,797

The Company is present in over 150 taxable jurisdictions
and, at any point in time, has 40-50 jurisdictional audits
underway at various stages of completion. We evaluate our
tax positions and establish liabilities for uncertain tax
positions that may be challenged by local authorities and
may not be fully sustained, despite our belief that the
underlying tax positions are fully supportable. Uncertain tax
positions are reviewed on an ongoing basis and are adjusted
in light of changing facts and circumstances, including
progress of tax audits, developments in case law and closing
of statute of limitations. Such adjustments are reflected in
the tax provision as appropriate. The Company is making a
concerted effort to bring its audit inventory to a more current
position. We have done this by working with tax authorities
to conduct audits for several open years at once. We have tax
years open ranging from 2002 and forward. We are generally
not able to reliably estimate the ultimate settlement amounts
until the close of the audit. While we do not expect material
changes, it is possible that the amount of unrecognized
benefit with respect to our uncertain tax positions will
significantly increase or decrease within the next 12 months
related to the audits described above. At this time, we are not
able to make a reasonable estimate of the range of impact on
the balance of uncertain tax positions or the impact on the
effective tax rate related to these items.

Included in the total liability for uncertain tax positions at
June 30, 2012, is $1.4 billion that, depending on the ultimate
resolution, could impact the effective tax rate in future
periods.

We recognize accrued interest and penalties related to
uncertain tax positions in income tax expense. As of June 30,
2012, 2011 and 2010, we had accrued interest of $439, $475
and $622 and penalties of $66, $80 and $89, respectively,
that are not included in the above table. During the fiscal
years ended June 30, 2012, 2011 and 2010, we recognized
$(2), $(197) and $38 in interest expense/(benefit) and $(10) ,
$(16) and $(8) in penalties expense/(benefit), respectively.

Deferred income tax assets and liabilities were comprised of
the following:

June 30
DEFERRED TAX ASSETS

2012

2011

Pension and postretirement benefits

$ 2,366

$ 1,406

Stock-based compensation

1,304

1,284

Loss and other carryforwards

Goodwill and other intangible assets

Accrued marketing and promotion

Fixed assets

Unrealized loss on financial and
foreign exchange transactions

Accrued interest and taxes

Inventory

Other

Valuation allowances
TOTAL

853

238

165

363

874

298

217

111

770

761

(375)

834

(293)

5,839

5,581

DEFERRED TAX LIABILITIES

Goodwill and other intangible assets

$11,816

$12,206

Fixed assets

Other
TOTAL

1,719

286

1,742

211

13,821

14,159

Net operating loss carryforwards were $2.8 billion and $2.7
billion at June 30, 2012 and 2011, respectively. If unused,
$1.2 billion will expire between 2013 and 2032. The
remainder, totaling $1.6 billion at June 30, 2012, may be
carried forward indefinitely.

NOTE 10

COMMITMENTS AND CONTINGENCIES

Guarantees

In conjunction with certain transactions, primarily
divestitures, we may provide routine indemnifications (e.g.,
indemnification for representations and warranties and
retention of previously existing environmental, tax and
employee liabilities) for which terms range in duration and,
in some circumstances, are not explicitly defined. The
maximum obligation under some indemnifications is also
not explicitly stated and, as a result, the overall amount of
these obligations cannot be reasonably estimated. Other than
obligations recorded as liabilities at the time of divestiture,
we have not made significant payments for these
indemnifications. We believe that if we were to incur a loss
on any of these matters, the loss would not have a material
effect on our financial position, results of operations or cash
flows.

In certain situations, we guarantee loans for suppliers and
customers. The total amount of guarantees issued under such
arrangements is not material.

The Procter & Gamble Company 71

Off-Balance Sheet Arrangements

We do not have off-balance sheet financing arrangements,
including variable interest entities, that have a material
impact on our financial statements.

Purchase Commitments and Operating Leases

We have purchase commitments for materials, supplies,
services and property, plant and equipment as part of the
normal course of business. Commitments made under take-
or-pay obligations are as follows:

2013

June 30
Purchase
obligations $1,094 $ 333 $ 263 $ 119 $ 96 $

2014

2015

2016

2017 Thereafter

282

Such amounts represent future purchases in line with
expected usage to obtain favorable pricing. Approximately
22% of our purchase commitments relate to service contracts
for information technology, human resources management
and facilities management activities that have been
outsourced to third-party suppliers. Due to the proprietary
nature of many of our materials and processes, certain
supply contracts contain penalty provisions for early
termination. We do not expect to incur penalty payments
under these provisions that would materially affect our
financial position, results of operations or cash flows.

Our partner in a joint venture that holds a portion of our
business in Spain has informed us of their intent to exercise
their rights to put their interest in the joint venture to us.
The put price is based on a formula tied to the venture's
earnings and approximates fair value. Upon closing of the
transaction, which is subject to regulatory approvals, we
would account for the transaction as a purchase, whereby we
would record the entire underlying business at fair value and
recognize a holding gain for the portion of the venture
currently held by us. The purchase price for the partner's
interest would be approximately $1 billion based on current
exchange rates, and the resulting holding gain on our current
interest in the venture would be approximately $400 to $600.

We also lease certain property and equipment for varying
periods. Future minimum rental commitments under non-
cancelable operating leases, net of guaranteed sublease
income, are as follows:

2013

2014

2015

2016

2017

Thereafter

$ 289 $ 263 $ 235 $ 223 $ 170 $

637

June 30
Operating
leases

Litigation

We are subject to various legal proceedings and claims
arising out of our business which cover a wide range of
matters such as antitrust, trade and other governmental
regulations, product liability, patent and trademark matters,
advertising, contracts, environmental issues, labor and
employments matters and income and other taxes.

Amounts in millions of dollars except per share amounts or as otherwise specified.

72 The Procter & Gamble Company

As previously disclosed, the Company has had a number of
antitrust matters in Europe. These matters involve a number
of other consumer products companies and/or retail
customers. The Company's policy is to comply with all laws
and regulations, including all antitrust and competition laws,
and to cooperate with investigations by relevant regulatory
authorities, which the Company is doing. Competition and
antitrust law inquiries often continue for several years and, if
violations are found, can result in substantial fines.

In response to the actions of the regulatory authorities, the
Company launched its own internal investigations into
potential violations of competition laws. The Company
identified violations in certain European countries and
appropriate actions were taken.

Several regulatory authorities in Europe have issued separate
decisions pursuant to their investigations alleging that the
Company, along with several other companies, engaged in
violations of competition laws in those countries. The
Company has accrued the assessed fines for each of the
decisions, of which all but $15 has been paid as of June 30,
2012. Most of those are on appeal. As a result of our initial
and on-going analyses of other formal complaints, the
Company has accrued liabilities for competition law
violations totaling $18 as of June 30, 2012. While the
ultimate resolution of these matters for which we have
accrued liabilities may result in fines or costs in excess of
the amounts reserved, we do not expect any such
incremental losses to materially impact our financial
statements in the period in which they are accrued and paid,
respectively. The remaining authorities' investigations are in
various stages of the regulatory process. For these other
remaining competition law matters, we cannot reasonably
estimate any additional fines to which the Company may be
subject as a result of the investigations. We will continue to
monitor developments for all of these investigations and will
record additional charges as appropriate.

With respect to other litigation and claims, while
considerable uncertainty exists, in the opinion of
management and our counsel, the ultimate resolution of the
various lawsuits and claims will not materially affect our
financial position, results of operations or cash flows.

We are also subject to contingencies pursuant to
environmental laws and regulations that in the future may
require us to take action to correct the effects on the
environment of prior manufacturing and waste disposal
practices. Based on currently available information, we do
not believe the ultimate resolution of environmental
remediation will have a material effect on our financial
position, results of operations or cash flows.

Amounts in millions of dollars except per share amounts or as otherwise specified.

NOTE 11

SEGMENT INFORMATION

Effective during the quarter ended December 31, 2011, we
implemented a number of changes to our organization
structure for the Beauty & Grooming Global Business Unit
(GBU), which resulted in changes to the components of the
Beauty reportable segment and the Grooming reportable
segment. As a result of these changes, female blades and
razors transitioned from the Beauty segment to the
Grooming segment, while male personal care products such
as Old Spice and Gillette, moved from the Grooming
segment to the Beauty segment. In May 2012, we
completed the divestiture of the snacks business to The
Kellogg Company. As a result of this transaction, the snacks
business, which was previously included in the Snacks and
Pet Care segment, is reported as discontinued operations.
Additionally, as a result of this change, the pet care business
is now included in the Fabric Care and Home Care segment.
The segment information provided below reflects these
changes for all periods presented.

The Company has two GBUs: the Beauty & Grooming GBU
and the Household Care GBU.

Under U.S. GAAP, we have five reportable segments:

•

Beauty: Antiperspirant and Deodorant, Cosmetics,
Hair Care, Hair Color, Personal Cleansing, Prestige
Products, Salon Professional and Skin Care;

Grooming: Blades and Razors, Electronic Hair
Removal Devices, Hair Care Appliances and Pre- and
Post-Shave Products;

Health Care: Feminine Care, Gastrointestinal,
Incontinence, Rapid Diagnostics, Respiratory,
Toothbrush, Toothpaste, Other Oral Care, Other
Personal Health Care and Vitamins/Minerals/
Supplements;

Fabric Care and Home Care: Bleach and Laundry
Additives, Air Care, Batteries, Dish Care, Fabric
Enhancers, Laundry Detergents, Pet Care,
Professional and Surface Care;

Baby Care and Family Care: Baby Wipes, Diapers,
Paper Towels, Tissues and Toilet Paper.

The accounting policies of the businesses are generally the
same as those described in Note 1. Differences between
these policies and U.S. GAAP primarily reflect income
taxes, which are reflected in the businesses using applicable
blended statutory rates, and the treatment of certain
unconsolidated investees. Certain unconsolidated investees
are managed as integral parts of our business units for
management reporting purposes. Accordingly, these partially
owned operations are reflected as consolidated subsidiaries
in segment results, with full recognition of the individual
income statement line items through before-tax earnings.
Eliminations to adjust these line items to U.S. GAAP are

included in Corporate. In determining after-tax earnings for
the businesses, we eliminate the share of earnings applicable
to other ownership interests, in a manner similar to
noncontrolling interest and apply statutory tax rates.
Adjustments to arrive at our effective tax rate are also
included in Corporate.

Corporate includes certain operating and non-operating
activities that are not reflected in the operating results used
internally to measure and evaluate the businesses, as well as
eliminations to adjust management reporting principles to
U.S. GAAP. Operating activities in Corporate include the
results of incidental businesses managed at the corporate
level along with the elimination of individual revenues and
expenses generated by certain unconsolidated investees,
discussed in the preceding paragraph, over which we exert
significant influence, but do not control. Operating elements
also include certain employee benefit costs, the costs of
certain restructuring-type activities to maintain a competitive
cost structure, including manufacturing and workforce
rationalization, and other general Corporate items. The non-
operating elements in Corporate primarily include interest
expense, divestiture gains and interest and investing income.
In addition, Corporate includes the historical results of
certain divested businesses.

Total assets for the reportable segments include those assets
managed by the reportable segment, primarily inventory,
fixed assets and intangible assets. Other assets, primarily
including cash, accounts receivable, investment securities
and goodwill, are included in Corporate.

In 2012, 2011 and 2010, nine product categories individually
accounted for 5% or more of consolidated net sales as
follows:

Fabric Care

Baby Care

Hair Care

Male Grooming

Beauty Care

Home Care

Family Care

Oral Care

Feminine Care
All Other

Total

% of Sales by Product
Category

2012
20%

13%

11%

6%
15%

2011
20%

12%

11%

6%
15%

2010
20%

12%

11%

6%
15%

100% 100% 100%

The Company had net sales in the U.S. of $29.5 billion,
$29.9 billion and $29.5 billion for the years ended June 30,
2012, 2011 and 2010, respectively. Assets in the U.S.
totaled $68.0 billion and $70.3 billion as of June 30, 2012
and 2011, respectively. No other country's net sales or assets
exceed 10% of the Company.

The Procter & Gamble Company 73

Our largest customer, Wal-Mart Stores, Inc. and its affiliates,
accounted for 14%, 15% and 16% of consolidated net sales
in 2012, 2011 and 2010, respectively.

Amounts in millions of dollars except per share amounts or as otherwise specified.

74 The Procter & Gamble Company

Global Segment Results
BEAUTY

GROOMING

HEALTH CARE

2012

2011

2010
2012

2011

2010
2012

2011

2010
FABRIC CARE AND HOME CARE 2012

2010
BABY CARE AND FAMILY CARE 2012

2011

CORPORATE(1)

TOTAL COMPANY

2011

2010
2012

2011

2010
2012

2011

2010

Earnings
from
Continuing
Operations
Before
Income
Taxes
3,196

3,415

3,444
2,395

2,375

2,211
2,718

2,720

2,809
4,645

4,867

5,405
3,351

3,181

3,270
(3,520)
(1,561)
(2,271)
12,785

14,997

14,868

Net Sales
$ 20,318

19,937

19,258
8,339

8,245

7,864
12,421

12,033

11,493
27,254

26,536

25,570
16,493

15,606

14,736
(1,145)

(1,253)

(1,354)
83,680

81,104

77,567

Net Earnings
from
Continuing
Operations
2,390

Depreciation
and
Amortization
379
$

Total
Assets
$ 8,357

Capital
Expenditures
569
$

2,542

2,568
1,807

1,775

1,621
1,826

1,796

1,860
2,915

3,109

3,547
2,123

1,978

2,049
(1,744)
498
(794)
9,317

11,698

10,851

387

448
623

645

680
353

359

385
679

633

643
586

549

612
584

265

9,544

8,516
24,518

24,866

24,568
7,501

7,796

7,142
11,419

12,060

10,411
7,535

7,184

6,406
72,914

76,904

340
3,204

2,838

3,108

71,129
132,244

138,354

128,172

504

510
392

373

283
496

409

383
1,036

950

817
1,250

912

852
221

158

222
3,964

3,306

3,067

(1) The Corporate reportable segment includes the total assets and capital expenditures of the snacks business prior to its divestiture

effective May 31, 2012.

NOTE 12

DISCONTINUED OPERATIONS

In May 2012, the Company completed the divestiture of our
global snacks business to The Kellogg Company (Kellogg)
for $2.7 billion of cash. Under the terms of the agreement,
Kellogg acquired our branded snacks products, our
manufacturing facilities in Belgium and the United States
and the majority of the employees working on the snacks
business. The Company recorded an after-tax gain on the
transaction of $1.4 billion, which is included in net earnings
from discontinued operations in the Consolidated Statement
of Earnings for the year ended June 30, 2012.

The snacks business had historically been part of the
Company's Snacks and Pet Care reportable segment. In
accordance with the applicable accounting guidance for the
disposal of long-lived assets, the results of the snacks
business are presented as discontinued operations and, as
such, have been excluded from both continuing operations
and segment results for all years presented.

In October 2009, the Company completed the divestiture of
our global pharmaceuticals business to Warner Chilcott plc
(Warner Chilcott) for $2.8 billion of cash, net of assumed
and transferred liabilities. Under the terms of the agreement,
Warner Chilcott acquired our portfolio of branded
pharmaceutical products, our prescription drug product
pipeline and our manufacturing facilities in Puerto Rico and
Germany. In addition, the majority of the employees
working on the pharmaceuticals business were transferred to
Warner Chilcott. The Company recorded an after-tax gain on
the transaction of $1.5 billion, which is included in net
earnings from discontinued operations in the Consolidated
Statement of Earnings for the year ended June 30, 2010.

The pharmaceuticals business had historically been part of
the Company's Health Care reportable segment. In
accordance with the applicable accounting guidance for the
disposal of long-lived assets, the results of the
pharmaceuticals business are presented as discontinued
operations and, as such, have been excluded from both
continuing operations and segment results for all years
presented.

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company 75

Following is selected financial information included in net earnings from discontinued operations for the snacks and
pharmaceuticals businesses:

Earnings from
discontinued
operations

Income tax
expense

Gain on sale of
discontinued
operations

Net sales

Snacks

2012 $

1,440 $

266 $

Pharmaceuticals

Total

2011

2010
2012

2011

2010
2012

2011

2010

1,455

1,372
—

—

751
1,440

1,455

2,123

322

289
—

—

306
266

322

595

(96) $
(93)
(84)
—

—
(101)
(96)
(93)
(185)

1,899 $

—

—
—

—

2,632
1,899

—

2,632

Income tax
benefit/
(expense) on
sale
(482) $
—

—
—

—
(1,047)
(482)
—
(1,047)

Net earnings
from
discontinued
operations
1,587

229

205
—

—

1,790
1,587

229

1,995

The net gain on the sale of the pharmaceuticals business for the year ended June 30, 2010, also includes an after-tax gain on the
sale of the Actonel brand in Japan. This transaction occurred prior to the divestiture to Warner Chilcott.

NOTE 13

QUARTERLY RESULTS (UNAUDITED)

Quarters Ended
NET SALES

OPERATING INCOME

GROSS MARGIN

NET EARNINGS:

Sept 30
2011-2012 $21,530

2010-2011
2011-2012

2010-2011

19,784
4,250

4,425
49.8%

52.0 %

Dec 31
$21,744

20,976
2,680

Mar 31
$20,194

19,893
3,299

(2)

Jun 30
$20,212

20,451
3,063

4,186
50.1%

52.1 %

3,705
49.3%

50.8 %

3,179
48.1%

48.5 %

Total Year
$83,680

81,104
13,292

15,495

49.3%

50.9 %

Earnings from continuing operations

2011-2012 $ 2,999

$ 1,672

Earnings from discontinued operations

2010-2011
2011-2012

2010-2011
Net earnings attributable to Procter & Gamble 2011-2012
2010-2011

DILUTED NET EARNINGS PER
COMMON SHARE: (1)
Earnings from continuing operations

Earnings from discontinued operations

Diluted net earnings per common share

2011-2012 $

2010-2011
2011-2012

2010-2011

3,065
58

55
3,024

3,081

1.01

1.00
0.02

0.02
1.03

1.02

3,306
41

56
1,690

3,333

0.56

1.09
0.01

0.02
0.57

1.11

(2) $ 2,433
2,859
34

(2)

47
2,411

2,873

0.81

0.94
0.01

0.02
0.82

0.96

$ 2,213

$ 9,317

2,468
1,454

71
3,631

2,510

0.74

0.82
0.50

0.02
1.24

0.84

(3)

11,698
1,587

229
10,756

11,797

3.12

3.85
0.54

0.08
3.66

3.93

(1) Diluted net earnings per share is calculated on earnings attributable to Procter & Gamble.
(2) During the second quarter of fiscal year 2012, the Company recorded goodwill and indefinite lived intangibles impairment charges

of 1.6 billion. For additional details, see Note 2 to the Consolidated Financial Statements.

(3) The Company divested of its snacks business in May 2012. See Note 12 to the Consolidated Financial Statements for details of the

transaction.

Amounts in millions of dollars except per share amounts or as otherwise specified.

76 The Procter & Gamble Company

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

The Company's President and Chief Executive
Officer, Robert A. McDonald, and the Company's Chief
Financial Officer, Jon R. Moeller, performed an evaluation
of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934 (Exchange Act)) as of the end of the
period covered by this Annual Report on Form 10-K.

Messrs. McDonald and Moeller have concluded

that the Company's disclosure controls and procedures were
effective to ensure that information required to be disclosed

in reports we file or submit under the Exchange Act is
(1) recorded, processed, summarized and reported within the
time periods specified in Securities and Exchange
Commission rules and forms, and (2) accumulated and
communicated to our management, including Messrs.
McDonald and Moeller, to allow their timely decisions
regarding required disclosure.

Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over

financial reporting that occurred during the Company's
fourth fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Company's internal
control over financial reporting.

Item 9B. Other Information.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate
Governance.

The Board of Directors has determined that the

following members of the Audit Committee are independent
and are Audit Committee financial experts as defined by
SEC rules: Ms. Patricia A. Woertz (Chair) and Mr. Kenneth
I. Chenault.

The information required by this item is
incorporated by reference to the following sections of the
2012 Proxy Statement filed pursuant to Regulation 14A: the
sections entitled Election of Directors, Nominees for
Election of Directors with Terms Expiring in 2013,
Corporate Governance, up to but not including the
subsection entitled Board Engagement and Attendance; the
section entitled Code of Ethics; and the section entitled
Section 16(a) Beneficial Ownership Reporting Compliance.
Pursuant to Instruction 3 of Item 401(b) of Regulation S-K,
Executive Officers of the Registrant are reported in Part I of
this report.

Item 11. Executive Compensation.

The information required by this item is
incorporated by reference to the following sections of the

2012 Proxy Statement filed pursuant to Regulation 14A: the
portion of the Corporate Governance section entitled
Committees of the Board and the portion beginning with
Director Compensation up to but not including the section
entitled Security Ownership of Management and Certain
Beneficial Owners.

Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters.

The following table gives information about the

Company's common stock that may be issued upon the
exercise of options, warrants and rights under all of the
Company's equity compensation plans as of June 30, 2012.
The table includes the following plans: The Procter &
Gamble 1992 Stock Plan; The Procter & Gamble 1992 Stock
Plan (Belgian Version); The Procter & Gamble 1993 Non-
Employee Directors' Stock Plan; The Procter & Gamble
Future Shares Plan; The Procter & Gamble 2001 Stock and
Incentive Compensation Plan; The Procter & Gamble 2003
Non-Employee Directors' Stock Plan; The Gillette Company
1971 Stock Option Plan; The Gillette Company 2004 Long-
Term Incentive Plan; and The Procter & Gamble 2009 Stock
and Incentive Compensation Plan.

The Procter & Gamble Company 77

(a)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights

(b)
Weighted-
average exercise
price of outstanding
options, warrants and
rights

(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))

326,369,977

$54.0810

8,449,554

N/A

26,722,810
95,361

50.7101
N/A

(2)

(4)

Plan Category
Equity compensation plans approved by
security holders (1)
Options
Restricted Stock Units (RSUs) / Performance
Stock Units (PSUs)
Equity compensation plans not approved by
security holders (3)
Options
Restricted Stock Units (RSUs)

GRAND TOTAL

361,637,702

$53.8259

(5)

86,671,516

(1)

Includes The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 1993 Non-Employee Directors Stock Plan; The Procter &
Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 2003 Non-Employee Directors Stock Plan; and The
Procter & Gamble 2009 Stock and Incentive Compensation Plan.

(2) Of the plans listed in (1), only The Procter & Gamble 2009 Stock and Incentive Compensation Plan and The 2003 Non- Employee
Directors Stock Plan allow for future grants of securities. The maximum number of shares that may be granted under these plans is
180 million shares. Stock options and stock appreciation rights are counted on a one for one basis while full value awards (such as
RSUs and PSUs) will be counted as 2.88 shares for each share awarded. Total shares available for future issuance under these plans
is 87 million.

(3)

Includes The Procter & Gamble 1992 Stock Plan (Belgian version); The Procter & Gamble Future Shares Plan; The Gillette
Company 1971 Stock Option Plan; and The Gillette Company 2004 Long-Term Incentive Plan.

(4) None of the plans listed in (3) allow for future grants of securities.
(5) Weighted average exercise price of outstanding options only.

The Procter & Gamble 1992 Stock Plan (Belgian Version)

No further grants can be made under the plan,

although unexercised stock options previously granted under
this plan remain outstanding. This plan was approved by the
Company's Board of Directors on February 14, 1997.
Although the plan has not been submitted to shareholders for
approval, it is nearly identical to The Procter & Gamble
1992 Stock Plan, approved by the Company's shareholders
on October 13, 1992, except for a few minor changes
designed to comply with the Belgian tax laws.

The plan was designed to attract, retain and

motivate key Belgian employees. Under the plan, eligible
participants were: (i) granted or offered the right to purchase
stock options, (ii) granted stock appreciation rights and/or
(iii) granted shares of the Company's common stock. Except
in the case of death of the recipient, all stock options and
stock appreciation rights must vest in no less than one year
from the date of grant and must expire no later than fifteen
years from the date of grant. The exercise price for all stock
options granted under the plan is the average price of the
Company's stock on the date of grant. If a recipient of a
grant leaves the Company while holding an unexercised
option or right, any unexercisable portions immediately
become void, except in the case of death, and any
exercisable portions become void within one month of
departure, except in the case of death or retirement. Any

common stock awarded under the plan may be subject to
restrictions on sale or transfer while the recipient is
employed, as the committee administering the plan may
determine.

The Procter & Gamble Future Shares Plan

On October 14, 1997, the Company's Board of

Directors approved The Procter & Gamble Future Shares
Plan pursuant to which options to purchase shares of the
Company's common stock may be granted to employees
worldwide. The purpose of this plan is to advance the
interests of the Company by giving substantially all
employees a stake in the Company's future growth and
success and to strengthen the alignment of interests between
employees and the Company's shareholders through
increased ownership of shares of the Company's stock. The
plan has not been submitted to shareholders for approval.

Subject to adjustment for changes in the Company's

capitalization, the number of shares to be granted under the
plan is not to exceed 17 million shares. Under the plan's
regulations, recipients are granted options to acquire 100
shares of the Company's common stock at an exercise price
equal to the average price of the Company's common stock
on the date of the grant. These options vest five years after
the date of grant and expire ten years following the date of
grant. If a recipient leaves the employ of the Company prior

78 The Procter & Gamble Company

to the vesting date for a reason other than disability,
retirement or special separation (as defined in the plan), then
the award is forfeited.

At the time of the first grant following Board

approval of the plan, each employee of the Company not
eligible for an award under the 1992 Stock Plan was granted
options for 100 shares. From the date of this first grant
through June 30, 2003, each new employee of the Company
has also received options for 100 shares. Following the grant
of options on June 30, 2003, the Company suspended this
part of the plan. The plan terminated on October 13, 2007.

The Gillette Company 1971 Stock Option Plan

No further grants can be made under the plan after

April 25, 2005, although unexercised stock options
previously granted under this plan remain outstanding. The
plan was approved by shareholders of The Gillette Company
and assumed by the Company upon the merger between The
Procter & Gamble Company and The Gillette Company. All
options became immediately vested and exercisable on
October 1, 2005 as a result of the merger. After the merger,
all outstanding options became options to purchase shares of
The Procter & Gamble Company subject to an exchange
ratio of .975 shares of P&G stock per share of Gillette stock.

The plan was designed to attract, retain and

motivate key salaried employees of The Gillette Company
and non-employee members of its Board of Directors. Under
the plan, eligible participants receive the option to purchase
Company stock at a pre-determined price which cannot be
less than 100% of the fair market value per share at the time
that the option is granted. The period of any option may not
exceed ten years from the date of grant. Subject to
adjustment for changes in the Company's capitalization, the
number of shares granted under the plan was not to exceed
198,000,000 shares.

If a recipient leaves the employ of the Company for

any reason other than death or discharge for cause, the
recipient is permitted to exercise any vested options granted
under the plan for a period between thirty days and five
years after termination, depending on the circumstances of
his/her departure. If a participant is discharged for cause, all
options are immediately cancelled. If a participant dies while
holding options, the options are exercisable for a period of
one to three years depending on the date of grant. In
addition, the plan allows Gillette employees whose
employment is terminated for "Good Reason" within two
years after the effective date of the merger the ability to
exercise remaining options for the shorter of five years
following their termination date or the original life of the
grant. Employees terminated for "Good Reason" who are
also eligible to retire under a Company plan are allowed to
exercise their options subject to the original terms of the
grant.

The Gillette Company 2004 Long-Term Incentive Plan

Shareholders of The Gillette Company approved
The Gillette Company 2004 Long-Term Incentive Plan on
May 20, 2004, and the plan was assumed by the Company
upon the merger between The Procter & Gamble Company
and The Gillette Company. All options became immediately
vested and exercisable on October 1, 2005 as a result of the
merger. After the merger, all outstanding options became
options to purchase shares of The Procter & Gamble
Company subject to an exchange ratio of .975 shares of
P&G stock per share of Gillette stock. Only employees
previously employed by The Gillette Company prior to
October 1, 2005 are eligible to receive grants under this
plan.

The plan was designed to attract, retain and
motivate employees of The Gillette Company, and until the
effective date of the merger between The Gillette Company
and The Procter & Gamble Company, non-employee
members of the Gillette Board of Directors. Under the plan,
eligible participants are: (i) granted or offered the right to
purchase stock options, (ii) granted stock appreciation rights
and/or (iii) granted shares of the Company's common stock
or restricted stock units (and dividend equivalents). Subject
to adjustment for changes in the Company's capitalization
and the addition of any shares authorized but not issued or
redeemed under The Gillette Company 1971 Stock Option
Plan, the number of shares to be granted under the plan is
not to exceed 19,000,000 shares.

Except in the case of death of the recipient, all

stock options and stock appreciation rights must expire no
later than ten years from the date of grant. The exercise price
for all stock options granted under the plan must be equal to
or greater than the fair market value of the Company's stock
on the date of grant. Any common stock awarded under the
plan may be subject to restrictions on sale or transfer while
the recipient is employed, as the committee administering
the plan may determine.

If a recipient of a grant leaves the Company while

holding an unexercised option or right: (1) any unexercisable
portions immediately become void, except in the case of
death, retirement, special separation (as those terms are
defined in the plan) or any grants as to which the
Compensation Committee of the Board of Directors has
waived the termination provisions; and (2) any exercisable
portions immediately become void, except in the case of
death, retirement, special separation, voluntary resignation
that is not for Good Reason (as those terms are defined in
the plan) or any grants as to which the Compensation
Committee of the Board of Directors has waived the
termination provisions.

Additional information required by this item is

incorporated by reference to the 2012 Proxy Statement filed
pursuant to Regulation 14A, beginning with the section
entitled Security Ownership of Management and Certain
Beneficial Owners and up to but not including the section

entitled Section 16(a) Beneficial Ownership Reporting
Compliance.

Item 13. Certain Relationships and Related Transactions and
Director Independence.

The Procter & Gamble Company 79

Item 14. Principal Accounting Fees and Services.
The information required by this item is
incorporated by reference to the 2012 Proxy Statement filed
pursuant to Regulation 14A, beginning with the section
entitled Report of the Audit Committee and ending with the
section entitled Services Provided by Deloitte.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

Financial Statements:

The following Consolidated Financial Statements of The
Procter & Gamble Company and subsidiaries, management's
report and the reports of the independent registered public
accounting firm are incorporated by reference in Part II,
Item 8 of this Form 10-K.

• Management's Report on Internal Control over
Financial Reporting
•
Report of Independent Registered Public
Accounting Firm on Internal Control over Financial
Reporting
•

Report of Independent Registered Public

Consolidated Balance Sheets - as of June 30, 2012

Accounting Firm on Consolidated Financial Statements
•
Consolidated Statements of Earnings - for years
ended June 30, 2012, 2011 and 2010
•
and 2011
•
for years ended June 30, 2012, 2011 and 2010
•
ended June 30, 2012, 2011 and 2010
•

Consolidated Statements of Cash Flows - for years

Consolidated Statements of Shareholders' Equity -

Notes to Consolidated Financial Statements

Financial Statement Schedules:

These schedules are omitted because of the absence of the
conditions under which they are required or because the
information is set forth in the financial statements or notes
thereto.

80 The Procter & Gamble Company

Exhibits:

Exhibit (3-1) -

Amended Articles of Incorporation (as amended by shareholders at the annual meeting on
October 14, 2008) (Incorporated by reference to Exhibit (3-1) of the Company's Form 10-Q for the
quarter ended September 30, 2011).

(3-2) -

Regulations (as amended by the Board of Directors on April 18, 2010 pursuant to authority granted
by shareholders at the annual meeting on October 13, 2009) (Incorporated by reference to Exhibit
(3-2) of the Company's Form 10-Q for the quarter ending December 31, 2011).

Exhibit

(4) -

Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon
request of the Commission.

Exhibit

(10-1) -

(10-2) -

(10-3) -

(10-4) -

(10-5) -

(10-6) -

(10-7) -

(10-8) -

(10-9) -

(10-10) -

(10-11) -

(10-12) -

The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended on August 17,
2007) which was originally adopted by shareholders at the annual meeting on October 9, 2001
(Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended
March 31, 2008), and related correspondence and terms and conditions (Incorporated by reference
to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2008).*

The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001) which was originally
adopted by the shareholders at the annual meeting on October 12, 1992 (Incorporated by reference
to Exhibit (10-2) of the Company's Annual Report on Form 10-K for the year ended June 30,
2008).*

The Procter & Gamble Executive Group Life Insurance Policy (Incorporated by reference to
Exhibit (10-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 2008).*

The Procter & Gamble Deferred Compensation Plan for Directors (as amended December 12,
2006), which was originally adopted by the Board of Directors on September 9, 1980.* +

The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended September 10,
2002) which was originally adopted by the shareholders at the annual meeting on October 11, 1994
(Incorporated by reference to Exhibit (10-5) of the Company's Annual Report on Form 10-K for the
year ended June 30, 2008).*

The Procter & Gamble 1992 Stock Plan (Belgian Version) (as amended December 11, 2001) which
was originally adopted by the Board of Directors on February 14, 1997 (Incorporated by reference
to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30,
2008).*

The Procter & Gamble Future Shares Plan (as adjusted for the stock split effective May 21, 2004)
which was originally adopted by the Board of Directors on October 14, 1997 (Incorporated by
reference to Exhibit (10-7) of the Company's Annual Report on Form 10-K for the year ended June
30, 2010).*

The Procter & Gamble 2003 Non-Employee Directors' Stock Plan (as amended in August 2007)
which was originally adopted by the shareholders at the annual meeting on October 14, 2003, and
related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-3) of
the Company's Form 10-Q for the quarter ended September 30, 2007).*

The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by
reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended December 31,
2008).*

Summary of the Company's Short Term Achievement Reward Program and related correspondence
and terms and conditions (Incorporated by reference to Exhibit (10-10) of the Company's Annual
Report on Form 10-K for the year ended June 30, 2010).

Company's Form of Separation Agreement & Release (Incorporated by reference to Exhibit (10-2)
of the Company's Form 10-Q for the quarter ended December 31, 2011).

Summary of personal benefits available to certain officers and non-employee directors
(Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended
September 30, 2008).

(10-13) -

The Gillette Company 1971 Stock Option Plan.* (Incorporated by reference to Exhibit (10-13) of
the Company's Form 10-K for the year ended June 30, 2011).

The Procter & Gamble Company 81

(10-14) -

(10-15) -

(10-16) -

(10-17) -

(10-18) -

(10-19) -

(10-20) -

(10-21) -

(10-22) -

(10-23) -

(10-24) -

The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007)
(Incorporated by reference to Exhibit (10-4) of the Company's Form 10-Q for the quarter ended
September 30, 2007).*

The Gillette Company Executive Life Insurance Program.* +

The Gillette Company Personal Financial Planning Reimbursement Program.* +

The Gillette Company Senior Executive Financial Planning Program.* +

The Gillette Company Estate Preservation.* +

The Gillette Company Deferred Compensation Plan.* +

Senior Executive Recoupment Policy.* +

The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005)
as amended through August 21, 2006.* +

The Procter & Gamble 2009 Stock and Incentive Compensation Plan which was originally adopted
by shareholders at the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit
(10-1) of the Company's Form 10-Q for the quarter ended December 31, 2009), and the
Regulations of the Compensation and Leadership Development Committee for The Procter &
Gamble 2009 Stock and Incentive Compensation Plan, The Procter & Gamble 2001 Stock and
Incentive Compensation Plan, The Procter & Gamble 1992 Stock Plan, The Procter & Gamble
1992 Stock Plan (Belgium Version), The Gillette Company 2004 Long-Term Incentive Plan and the
Gillette Company 1971 Stock Option Plan (Incorporated by reference to Exhibit (10-1) of the
Company's Form 10-Q for the quarter ended March 31, 2011).*

The Procter & Gamble 2009 Stock and Incentive Compensation Plan - Additional terms and
conditions + and related correspondence (Incorporated by reference to Exhibit (10-1) of the
Company Form 10-Q for the quarter ended March 31, 2012).*

The Procter & Gamble Performance Stock Program Summary (Incorporated by reference to
Exhibit (10-2) of the Company's Form 10-Q for the quarter ended March 31, 2012) and related
terms and conditions. * +

Exhibit

(11) -

Computation of earnings per share. +

Exhibit

(12) -

Computation of ratio of earnings to fixed charges. +

Exhibit

(21) -

Subsidiaries of the registrant. +

Exhibit

(23) -

Consent of Independent Registered Public Accounting Firm. +

Exhibit

(31) -

Rule 13a-14(a)/15d-14(a) Certifications. +

Exhibit

(32) -

Section 1350 Certifications. +

Exhibit

(99-1) -

Summary of Directors and Officers Insurance Program. +

101.INS (1)

XBRL Instance Document

101.SCH (1)

XBRL Taxonomy Extension Schema Document

101.CAL (1)

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF (1)

XBRL Taxonomy Definition Linkbase Document

101.LAB (1)

XBRL Taxonomy Extension Label Linkbase Document

101.PRE (1)

XBRL Taxonomy Extension Presentation Linkbase Document

(1) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration

statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities
Exchange Act of 1934 and otherwise are not subject to liability.

* Compensatory plan or arrangement
+ Filed herewith.

82 The Procter & Gamble Company

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized in the city of Cincinnati, State of Ohio.

THE PROCTER & GAMBLE COMPANY

By /s/ ROBERT A. MCDONALD

(Robert A. McDonald)
Chairman of the Board, President and
Chief Executive Officer
August 8, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons in the capacities and on the dates indicated.

Signature

Title

Date

/S/ ROBERT A. MCDONALD
(Robert A. McDonald)

Chairman of the Board, President and
Chief Executive Officer (Principal
Executive Officer)

/S/

JON R. MOELLER
(Jon R. Moeller)

Chief Financial Officer
(Principal Financial Officer)

August 8, 2012

/S/ VALARIE L. SHEPPARD
(Valarie L. Sheppard)

Senior Vice President & Comptroller
(Principal Accounting Officer)

August 8, 2012

/S/ ANGELA F. BRALY
(Angela F. Braly)

/S/ KENNETH I. CHENAULT
(Kenneth I. Chenault)

/S/ SUSAN DESMOND-HELLMANN
(Susan Desmond-Hellmann)

/S/

JOHNATHAN A. RODGERS
(Johnathan A. Rodgers)

/S/ MARGARET C. WHITMAN
(Margaret C. Whitman)

/S/ MARY AGNES WILDEROTTER
(Mary Agnes Wilderotter)

/S/ PATRICIA A. WOERTZ
(Patricia A. Woertz)

/S/ ERNESTO ZEDILLO
(Ernesto Zedillo)

Director

August 8, 2012

The Procter & Gamble Company 83

EXHIBIT INDEX

Exhibit (3-1) -

Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 14,
2008) (Incorporated by reference to Exhibit (3-1) of the Company's Form 10-Q for the quarter ended
September 30, 2011).

(3-2) -

Regulations (as amended by the Board of Directors on April 18, 2010 pursuant to authority granted by
shareholders at the annual meeting on October 13, 2009) (Incorporated by reference to Exhibit (3.ii)
of the Company's Form 10-Q for the quarter ending December 31, 2011).

(4) -

Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon
request of the Commission.

(10-1) -

(10-2) -

(10-3) -

(10-4) -

(10-5) -

(10-6) -

(10-7) -

(10-8) -

The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended on August 17,
2007) which was originally adopted by shareholders at the annual meeting on October 9, 2001
(Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended March
31, 2008), and related correspondence and terms and conditions (Incorporated by reference to
Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2008).

The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001) which was originally
adopted by the shareholders at the annual meeting on October 12, 1992 (Incorporated by reference to
Exhibit (10-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 2008).

The Procter & Gamble Executive Group Life Insurance Policy (Incorporated by reference to Exhibit
(10-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 2008).

The Procter & Gamble Deferred Compensation Plan for Directors (as amended December 12, 2006),
which was originally adopted by the Board of Directors on September 9, 1980. +

The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended September 10, 2002)
which was originally adopted by the shareholders at the annual meeting on October 11, 1994
(Incorporated by reference to Exhibit (10-5) of the Company's Annual Report on Form 10-K for the
year ended June 30, 2008).

The Procter & Gamble 1992 Stock Plan (Belgian Version) (as amended December 11, 2001) which
was originally adopted by the Board of Directors on February 14, 1997 (Incorporated by reference to
Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 2008).

The Procter & Gamble 2003 Non-Employee Directors' Stock Plan (as amended in August 2007)
which was originally adopted by the shareholders at the annual meeting on October 14, 2003, and
related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-3) of the
Company's Form 10-Q for the quarter ended September 30, 2007).

(10-9) -

The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference
to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended December 31, 2008).

(10-10) -

(10-11) -

Company's Form of Separation Agreement & Release (Incorporated by reference to Exhibit (10-2) of
the Company's Form 10-Q for the quarter ended December 31, 2011).

(10-12) -

Summary of personal benefits available to certain officers and non-employee directors (Incorporated
by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended September 30,
2008).

(10-13) -

The Gillette Company 1971 Stock Option Plan. (Incorporated by reference to Exhibit (10-13) of the
Company's Form 10-K for the year ended June 30, 2011).

(10-14) -

The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007)
(Incorporated by reference to Exhibit (10-4) of the Company's Form 10-Q for the quarter ended
September 30, 2007).

(10-15) -

The Gillette Company Executive Life Insurance Program. +

84 The Procter & Gamble Company

Exhibit (10-16) -

The Gillette Company Personal Financial Planning Reimbursement Program. +

(10-17) -

The Gillette Company Senior Executive Financial Planning Program. +

(10-18) -

The Gillette Company Estate Preservation Plan. +

(10-19) -

The Gillette Company Deferred Compensation Plan. +

(10-20) -

Senior Executive Recoupment Policy. +

(10-21) -

(10-22) -

(10-23) -

(10-24) -

The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as
amended through August 21, 2006. +

The Procter & Gamble 2009 Stock and Incentive Compensation Plan which was originally adopted by
shareholders at the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit (10-1)
of the Company's Form 10-Q for the quarter ended December 31, 2009), and the Regulations of the
Compensation and Leadership Development Committee for The Procter & Gamble 2009 Stock and
Incentive Compensation Plan, The Procter & Gamble 2001 Stock and Incentive Compensation Plan,
The Procter & Gamble 1992 Stock Plan, The Procter & Gamble 1992 Stock Plan (Belgium Version),
The Gillette Company 2004 Long-Term Incentive Plan and the Gillette Company 1971 Stock Option
Plan (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended
March 31, 2011).

The Procter & Gamble 2009 Stock and Incentive Compensation Plan - Additional terms and
conditions + and related correspondence (Incorporated by reference to Exhibit (10-1) of the Company
Form 10-Q for the quarter ended March 31, 2012).

The Procter & Gamble Performance Stock Program Summary (Incorporated by reference to Exhibit
(10-2) of the Company's Form 10-Q for the quarter ended March 31, 2012) and related terms and
conditions. +

Exhibit (11) -

Computation of earnings per share. +

Exhibit (12) -

Computation of ratio of earnings to fixed charges. +

Exhibit (21) -

Subsidiaries of the registrant. +

Exhibit (23) -

Consent of Independent Registered Public Accounting Firm. +

Exhibit (31) -

Rule 13a-14(a)/15d-14(a) Certifications. +

Exhibit (32) -

Section 1350 Certifications. +

Exhibit (99-1) -

Summary of Directors and Officers Insurance Program. +

101.INS (1)

XBRL Instance Document.

101.SCH (1)

XBRL Taxonomy Extension Schema Document.

101.CAL (1)

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF (1)

XBRL Taxonomy Definition Linkbase Document.

101.LAB (1)

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE (1)

XBRL Taxonomy Extension Presentation Linkbase Document.

(1) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration

statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities
Exchange Act of 1934 and otherwise are not subject to liability.

+ Filed herewith.

The Procter & Gamble Company 85

Reconciliation of Non-GAAP Financial Measures

Our discussion of financial results includes several "non-GAAP" financial measures. We believe these measures provide our
investors with additional information about our underlying results and trends, as well as insight to some of the metrics used to
evaluate senior management and factors in determining their at-risk compensation. These measures include:

Sept.
2009

Dec.
2009

Mar.
2010

June
2010

Sept.
2010

Dec.
2010

Mar.
2011

June
2011

Sept.
2011

Dec.
2011

Mar.
2012

June
2012

2012

Quarter Ended

Year Ended

Three Fiscal
Years Ended
2012 (Avg.)

Net Sales
Growth
Foreign
Exchange
Impact
Acquisition/
Divestiture
Impact*
Organic
Sales
Growth

(6)% 6% 7% 5% 2% 2% 5% 10% 9%

4% 2% (1)%

7% (2)% (3)% (1)% 3% 2% (1)% (5)% (5)% 0% 1% 4%

1% 1% 0% 0% (1)% (1)% 0% 0% 0%

0% 0% 0%

2% 5% 4% 4% 4% 3% 4% 5% 4%

4% 3% 3%

* Acquisition/Divestiture Impact includes rounding impacts necessary to reconcile net sales to organic sales.

Adjusted Free Cash Flow. Adjusted free cash flow is defined as operating cash flow less capital spending and excluding the
tax payments for the snacks divestiture.

Adjusted Free Cash Flow Productivity. Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow
to net earnings excluding the snacks divestiture gain and impairment for goodwill and indefinite lived intangible assets. The
following table provides a numerical reconciliation of adjusted free cash flow and adjusted free cash flow productivity ($
millions):

Operating Cash Flow

Capital Spending

Free Cash Flow

Cash Tax Payments -
Snacks Gain

13,284 $
13,330

(3,964) $
(3,306)

9,320 $
10,024

519 $
—

Adjusted Free Cash
Flow
9,839
10,024

Net Earnings

Snacks Gain

Impairment

10,904 $
11,927

1,418 $
—

(1,503) $
—

Net Earnings
Excluding Gain/
Impairment
10,989
11,927

Adjusted Free Cash
Flow Productivity
90%
84%

2012
2011

Global Leadership Council

Board of Directors

Colleen Jay
President – Global Retail Hair
Care and Color
Austin Lally
President – Global Braun and
Appliances
Patrice Louvet
President – Global Shave Care
Adil Mehboob-Khan
President – Global Salon Professional

CORPORATE AND COMPANY
OPERATIONS
Bruce Brown
Chief Technology Officer
Robert L. Fregolle, Jr.
Global Customer Business
Development Officer
Deborah P. Majoras
Chief Legal Officer and Secretary
Jon R. Moeller
Chief Financial Officer
Moheet Nagrath
Global Human Resources Officer
Filippo Passerini
Group President – Global Business
Services and Chief Information
Officer
Marc S. Pritchard
Global Brand Building Officer
Linda W. Clement-Holmes
Senior Vice President – Research
& Development, Product Supply
and Employee Solutions, Global
Business Services
Philip J. Duncan
Global Design Officer
William Gipson
Senior Vice President – Global
Diversity and Research &
Development, Global Hair Care
and Color
Joan M. Lewis
Global Consumer & Market
Knowledge Officer
Teri L. List-Stoll
Senior Vice President & Treasurer
Nancy K. Swanson
Vice President – Corporate
Valarie L. Sheppard
Senior Vice President & Comptroller
The following company officers
retired during the 2011/12 fiscal
year:
Charles V. Bergh
R. Keith Harrison
Christopher Hassall
Robert Jongstra
Shekhar Mitra
Edward D. Shirley
Robert A. Steele
The following company officers
announced their intention to
retire during the 2012/13 fiscal
year:
Virginia Drosos
John Goodwin
Daniel S. Rajczak

Robert A. McDonald
Chairman of the Board, President
and Chief Executive Officer

GLOBAL OPERATIONS
Werner Geissler
Vice Chairman – Global Operations
Yannis Skoufalos
Global Product Supply Officer
Mary Lynn Ferguson-McHugh
Group President – Western Europe
and Global Discounter & Pharmacy
Channels
Melanie Healey
Group President – North America
and Global Hyper, Super and Mass
Channel
Laurent L. Philippe
Group President – Central & Eastern
Europe, Middle East and Africa
and Global High Frequency Stores
Channel
Jorge A. Uribe
Group President – Latin America and
Global Club, Cash & Carry Channel
Hatsunori Kiriyama
President – Asia
Jeffrey K. Schomburger
President – Global Wal-Mart Team
Shannan Stevenson
President – Greater China and
Global Specialty Channel

GLOBAL BUSINESS UNITS
Dimitri Panayotopoulos
Vice Chairman–Global Business Units
Household Care
Giovanni Ciserani
Group President – Global Fabric Care
Jorge S. Mesquita
Group President –New Business
Creation and Innovation and
Global Pet Care
Martin Riant
Group President – Global Baby Care
David S. Taylor
Group President – Global Home Care
Stassi Anastassov
President – Duracell
Thomas M. Finn
President – Global Health Care
Kirk Perry
President – Global Family Care
Daniel S. Rajczak
Senior Vice President on Special
Assignment
Beauty & Grooming
Steven D. Bishop
Group President – Global
Feminine Care
Virginia Drosos
Group President on Special
Assignment
Deborah A. Henretta
Group President – Global
Beauty Care
Charles E. Pierce
Group President – Global Oral Care
Joanne Crewes
President – Global Prestige
John Goodwin
President on Special Assignment

86 The Procter & Gamble Company

Angela F. Braly
Chair of the Board, President and Chief Executive Officer of WellPoint, Inc.
(healthcare insurance). Director since 2009. Age 51. Member of the Audit
and Governance & Public Responsibility Committees.

Kenneth I. Chenault
Chairman and Chief Executive Officer of the American Express Company
(financial services). Director since 2008. Also a Director of International
Business Machines Corporation. Age 61. Member of the Audit and
Compensation & Leadership Development Committees.

Scott D. Cook
Chairman of the Executive Committee of the Board of Intuit Inc. (software
and web services). Director since 2000. Also a Director of eBay Inc.
Age 60. Chair of the Innovation & Technology Committee and member of
the Compensation & Leadership Development Committee.

Susan Desmond-Hellmann
Chancellor and Arthur and Toni Rembe Rock Distinguished Professor,
University of California, San Francisco (“UCSF”). Director since 2010.
Age 55. Member of the Audit and Innovation & Technology Committees.

Robert A. McDonald
Chairman of the Board, President and Chief Executive Officer of the Company.
Director since 2009. Also a Director of Xerox Corporation. Age 59.

W. James McNerney, Jr.
Chairman of the Board, President and Chief Executive Officer of The
Boeing Company (aerospace, commercial jetliners and military defense
systems). Director since 2003. Also a Director of International Business
Machines Corporation. Age 63. Presiding Director, Chair of the
Compensation & Leadership Development Committee and member
of the Governance & Public Responsibility Committee.

Johnathan A. Rodgers
Retired President and Chief Executive Officer of TV One, LLC (media and
communications). Director since 2001. Also a Director of Nike, Inc.
and Comcast Corporation. Age 66. Member of the Governance & Public
Responsibility and Innovation & Technology Committees.

Margaret C. Whitman
President & Chief Executive Officer of Hewlett-Packard (computer software,
computer hardware, IT consulting, and IT services). Director since 2011.
Also a Director of Zipcar, Inc. Age 56. Member of the Compensation
& Leadership Development and Innovation & Technology Committees.

Mary Agnes Wilderotter
Chairman of the Board and Chief Executive Officer of Frontier
Communications Corporation (communications company specializing in
providing services to rural areas and small and medium-sized towns
and cities). Director since 2009. Also a Director of Xerox Corporation.
Age 57. Member of the Audit and Compensation & Leadership
Development Committees.

Patricia A. Woertz
Chairman, Chief Executive Officer and President of Archer Daniels
Midland Company (agricultural processors of oilseeds, corn, wheat and
cocoa, etc.). Director since 2008. Age 59. Chair of the Audit Committee
and member of the Governance & Public Responsibility Committee.

Ernesto Zedillo
Former President of Mexico, Director of the Center for the Study of
Globalization and Professor in the field of International Economics and
Politics at Yale University. Director since 2001. Also a Director of Alcoa Inc.,
Citigroup, Inc. and Promotora de Informaciones S.A. Age 60. Chair of
the Governance & Public Responsibility Committee and member of the
Innovation & Technology Committee.

ThE BOARD Of DIRECTORS hAS fOUR COMMITTEES:
– Audit Committee
– Compensation & Leadership Development Committee
– Governance & Public Responsibility Committee
– Innovation & Technology Committee

Recognition

P&G is consistently recognized as a leading global company,
earning a variety of awards and recognition in several key areas.

REPUTATION
Fortune named P&G #9 Overall and #1 in Industry (Soaps and
Cosmetics) on its list of “Global Most Admired Companies,”
while Barron’s ranked P&G #21 on its “World’s Most Respected
Companies List.”

Forbes ranked P&G #10 on the “America’s Most Reputable
Companies” list, and #49 on the list of the “World’s Most Reputable
Companies.”

Universum named P&G one of The World’s Most Attractive Employers.

P&G received the U.S. Secretary of State Award for Corporate
Excellence (ACE) for contributions to improving the lives of consumers
in Nigeria and Pakistan.

We also received the United Way Spirit of America Award,
United Way’s highest national honor for any corporation.

LEADERShIP
Chief Executive Magazine named P&G first on its list of “40 Best
Companies for Leaders,” while Fortune ranked us third on its list of
“Global Top Companies for Leaders.” P&G ranked #2 of 20 in the
Hay Group “Global Top 20 Best Companies for Leadership.”

INNOvATION
P&G products Pampers Dry Max and Gillette Fusion ProGlide earned
the top two spots on SymphonyIRI Group’s annual New Product
Pacesetters List, with P&G products filling eight of the top 25 spots.
In the 17 years the Pacesetters List has been published, we’ve had 140
products make the top 25 — more than our six biggest competitors
combined.

Gartner also recognized P&G at #5 on its “Top 25” list of global
Supply Chain Leaders.

DIvERSITY
P&G’s commitment to creating a diverse workplace has been
recognized by DiversityInc, including a #5 ranking in the
“Top 50 Companies for Diversity” and a #2 ranking in the
“Top 10 Companies for Recruitment and Retention.”

We have also earned spots on Working Mother lists recognizing
the “Top 25 Best Companies for Multicultural Women” and
“100 Best Companies for Working Mothers,” while the National
Association for Female Executives ranks P&G in its “Top 50
Companies for Executive Women.”

SUPPLIER DIvERSITY
Supplier diversity is a fundamental business strategy that strengthens
our innovation and go-to-market capabilities and touches and
improves the lives of our diverse suppliers, their employees and the
communities in which they live and work. For the fifth year in a row,
P&G spent more than $2 billion with minority- and women-owned
businesses.

Since 2005, P&G has been a member of the Billion Dollar Roundtable,
a forum of 18 corporations that spend more than $1 billion annually
with diverse suppliers.

SUSTAINABILITY
For the tenth consecutive year, P&G earned a spot on the
Dow Jones Sustainability Index.

Corporate Knights ranked us #66 on its “Global 100 Most
Sustainable Corporations in the World.”

The Procter & Gamble Company 87

Company and Shareholder Information

P&G’S PURPOSE
We will provide branded products and services of superior quality
and value that improve the lives of the world’s consumers, now
and for generations to come. As a result, consumers will reward us
with leadership sales, profit and value creation, allowing our people,
our shareholders, and the communities in which we live and work
to prosper.

SHAREHOLDER SERVICES
The Procter & Gamble Shareholder Services Department serves as
transfer and dividend paying agent for P&G Common Stock and
Administrator of the Procter & Gamble Shareholder Investment
Program. Registered shareholders and Program participants needing
account assistance with share transfers, plan purchases/sales, lost
stock certificates, etc. should contact P&G Shareholder Services at:

BRANDS
For information on our portfolio of leadership brands and our
latest innovations, please visit www.pg.com/brands and
www.pginnovation.com.

SUSTAINABILITY
At P&G, we are focusing our efforts where we can make the most
meaningful difference in both environmental and social sustainability.
To learn more, please visit www.pg.com/sustainability.

CORPORATE HEADQUARTERS
The Procter & Gamble Company
P.O. Box 599, Cincinnati, OH 45201-0599

P&G SHAREHOLDER INVESTMENT PROGRAM
The Procter & Gamble Shareholder Investment Program (SIP) is a
direct stock purchase and dividend reinvestment plan. The SIP is
open to current P&G shareholders as well as new investors and is
designed to encourage long-term investment in P&G by providing
a convenient and economical way to purchase P&G stock and
reinvest dividends. Highlights of the plan include:

• Minimum initial investment — $250
• Nominal administrative fees, including no enrollment fee, and

no dividend reinvestment fee

• Optional Cash Investment — minimum $50
• Administered by P&G Shareholder Services Department

For complete information on the SIP, please read the Program
Prospectus. The Prospectus and New Account Application Form are
available at www.pg.com/en_US/investors/request_information.shtml
or by contacting P&G Shareholder Services.

GIVING THE GIFT OF P&G STOCK
Did you know you can give P&G stock to your children, grandchildren,
nieces, nephews and friends? Many of our long-time shareholders
know what a great gift P&G stock makes for a special person on a
special occasion. You can make the gift by transferring shares from
your account or by purchasing shares for the recipient through the
SIP. Please visit www.pg.com/en_US/investors/shareholder_services/
share_transactions.shtml or contact P&G Shareholder Services for
details.

The paper utilized in the printing of this annual report is certified by SmartWood to the FSC
Standards, which promotes environmentally appropriate, socially beneficial and economically
viable management of the world’s forests. The paper contains a mix of pulp that is derived
from FSC certified well-managed forests; post-consumer recycled paper fibers and other
controlled sources.

88 The Procter & Gamble Company

Website: www.pg.com/en_US/investors/shareholder_services
E-mail: shareholders.im@pg.com
Phone (M – F, 9a – 4p Eastern): 1-800-742-6253;
1-513-983-3034 (outside U.S. and Canada)
Financial information request line (24 hours): 1-800-764-7483

TRANSFER AGENT
The Procter & Gamble Company
Shareholder Services Department
P.O. Box 5572, Cincinnati, OH 45201-5572

REGISTRAR
The Procter & Gamble Company
P.O. Box 599, Cincinnati, OH 45201-0599

EXCHANGE LISTINGS
New York Stock Exchange, NYSE Euronext-Paris

STOCK SYMBOL
PG

SHAREHOLDERS OF COMMON STOCK
There were approximately 2,367,000 common stock shareowners,
including shareholders of record, participants in the P&G Shareholder
Investment Program, participants in P&G stock ownership plans and
beneficial owners with accounts at banks and brokerage firms, as
of June 30, 2012.

ANNUAL MEETING
The next annual meeting of shareholders will be held on Tuesday,
October 9, 2012. A full transcript of the meeting will be available
from Susan Felder, Assistant Secretary. Ms. Felder can be reached
at 299 East Sixth Street, Cincinnati, Ohio 45202-3315.

FORM 10-K
Shareholders may obtain a copy of P&G’s 2012 report to the
Securities and Exchange Commission on Form 10-K by going to
www.pg.com/investors or by calling 1-800-764-7483. This informa-
tion is also available at no charge by sending a request to P&G
Shareholder Services at the address listed.

The most recent certifications by our Chief Executive and Chief
Financial Officers pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 are filed as exhibits to our Form 10-K for the fiscal year
ended June 30, 2012. We have also submitted to the New York
Stock Exchange the most recent Annual CEO certification as
required by Section 303A.12(a) of the New York Stock Exchange
Listed Company Manual.

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Sustainability: We Have a Vision for the Future

We believe that as we grow our
Company, we have a responsibility to
grow sustainably. So we’ve set out to
achieve a bold, long-term environmental
sustainability vision that includes:

• Using 100% renewable or recycled materials

for all of our products and packaging

• Designing products that delight consumers
while maximizing conservation of resources

• Having zero consumer or manufacturing waste

going to landﬁ lls

• Powering all of our plants with 100%

renewable energy

We know this vision is bold and will take decades to achieve.
Here are two areas where we’re making progress.

2020 goal

<½%

of manufacturing
waste to landﬁ lls

2020 goal

70%

of washes done
in cold water

Going Zero Waste

Cold Water Washing

Over 96% of material entering our plants leaves as ﬁ nished
product — but that isn’t good enough for us. So we created the
Global Asset Recovery Team to identify uses for what once left
our plants as waste. Now, detergent-plant wash-water is being
used in car washes. Bleach waste is being used for industrial
disinfection. And by-product from the production of batteries is
being used to make bricks. Not only are these processes better
for the environment, they have resulted in tens of millions in
savings for the company. While zero waste is a long-term vision
for P&G, we’re getting closer every day.

When we analyzed P&G’s environmental footprint, we found
that one of the biggest impacts came from the in-home use of
our laundry products, since heating water for machine washing
consumes so much energy. So we created Tide Coldwater —
a detergent that delivers the clean you expect from Tide, in cold
water. This year when we launched Tide PODS, an innovation
that changed the way people do laundry, we kept our footprint
in mind and designed PODS speciﬁ cally to dissolve easily in cold
water — just as well as warm or hot. These innovations allow us to
grow as a company while making clear investments in the future
of the world we all share.