Procter & Gamble
Annual Report 2013

Plain-text annual report

P & G 2 0 1 3 A n n u a l R e p o r t 2013 Annual Report CONTENTS 1 Letter to Shareholders 5 Sectors and Markets 11 Form 10-K Index Form 10-K 12 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 2013 2012 2011 2010 2009 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(1) Dividends per Common Share $84,167 14,481 11,312 13.5% $ 3.86 3.86 2.29 $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 (1) Diluted net earnings per share are calculated based on net earnings attributable to Procter & Gamble. NET SALES ($ billions) OPERATING CASH FLOW ($ billions) DILUTED NET EARNINGS (per common share) $84.2 $83.7 $81.1 $77.6 $75.3 13 12 11 10 09 $14.9 $13.3 $13.3 $16.1 $14.9 13 12 11 10 09 $3.86 $3.66 $3.93 $4.11 $4.26 13 12 11 10 09 2013 NET SALES BY BUSINESS SEGMENT(2) BY GEOGRAPHIC REGION BY MARKET MATURITY 20% 24% 9% 32% 15% Beauty Grooming Health Care Fabric Care and Home Care Baby Care and Family Care 15% 10% 39% 18% 18% North America Western Europe Asia Latin America Central & Eastern Europe, Middle East & Africa Developed Developing 39% 61% (2) These results exclude net sales in Corporate. A.G. Lafley Chairman of the Board, President and Chief Executive Officer Dear Shareholders, P&G is focused on winning with those who matter most: consumers, customers and shareholders. P&G’s performance in fiscal 2013 was a step in this direction. Our results were in line with objectives the Company set at the beginning of the fiscal year: • Organic sales growth was 3%. • Core earnings per share increased 5%, despite the operating impact of the Venezuelan currency devaluation and significant strengthening of the dollar. • Our progress on working capital and capital spending productivity enabled us to deliver 98% adjusted free cash flow productivity. • We returned $12.5 billion in cash to shareholders — 110% of net earnings — through a combination of $6.5 billion in dividends and $6 billion in share repurchase. In April, we raised the dividend by 7%. We’re beginning to restore growth in the core U.S. market that represents over a third We’re beginning to restore growth in the core U.S. market that represents over a third of P&G’s sales and nearly half of profit. We continued to focus on our core businesses. of P&G’s sales and nearly half of profit. We continued to focus on our core businesses. That’s why we organized P&G’s business into four, larger industry groups — beauty; That’s why we organized P&G’s businesses into four, larger industry groups — beauty; baby, feminine and family care; fabric and home care; and health care and personal baby, feminine and family care; fabric and home care; and health care and personal grooming — to ensure we create value by focusing on common consumer benefits, grooming — to ensure we create value by focusing on common consumer benefits, technologies, and competitors in each industry. We maintained good developing technologies, and competitors in each industry. We maintained good developing market momentum. Organic sales growth in our top 10 developing markets was up 8% market momentum. Organic sales growth in our top 10 developing markets was up 8% for the year, and profit grew well ahead of sales, even as we increased investments for the year, and profit grew well ahead of sales, even as we increased investments in growth. We ended the year with improving market share trends. in growth. We ended the year with improving market share trends. 2 The Procter & Gamble Company We are moving in the right direction. Company performance is improving in several key measures. We are building on this momentum. Business plans are more focused. The core strengths and assets of our Company remain important sources of competitive advantage and are the primary source of my confidence in P&G’s future. We are focusing on core businesses, which include the leading, most profitable categories and countries. Delivering strong results in our core businesses is the largest contributor to shareholder value creation. Core businesses are an important contributor to growth, and an enabler of investments in developing markets and innovation. But there is more work to do. More business units have to perform better more consistently. We are making the changes necessary to improve performance significantly. We’ve established value creation for consumers and shareholders as our clear priority. P&G’s Priority Is Value Creation First, we’ve established value creation — for consumers and shareholders — as our clear priority. This starts with winning the value equation with the consumer, who is always the boss. We have to win at the first moment of truth, when the consumer chooses our product at the store shelf, and the second moment of truth, when the consumer uses the product at home and decides whether to buy it again. We also have to win at the “zero moment of truth,” when the consumer discovers information about our brands and products before they shop. When P&G products win the consumer value equation versus competitors, consumers reward us — and our shareholders — with their hard- earned money. We’ll measure our business performance through operating total shareholder return. This goal is important because it’s an integrated measure of value creation at the business unit level. Strong operating TSR requires sales growth, progress on gross and operating margins, and strong cash flow productivity. Business units will be guided by disciplined strategies and operating plans that focus on the most important choices for creating value. Sales Growth Margin Improvement Asset Efficiency Profit Growth Cash Flow Growth Total Shareholder Return P&G Is Driving Value Creation through Productivity and Innovation Second, we are significantly strengthening productivity and cost savings efforts. Innovation and productivity are the two biggest drivers of value creation. Innovation remains our primary driver of growth, and we have a strong innovation pipeline, but we need to increase our focus on productivity. Productivity provides financial resources to invest in growth, and productivity frees P&G people to fully utilize their capabilities and make bigger contributions to the business. With nearly $500 million in sales in North America this fiscal year, Tide PODS is now expanding globally — starting with Latin America, Western and Central Europe, and Africa. Crest and Oral-B 3D White toothpaste have grown value share in the U.S. for 13 consecutive quarters — every quarter since 3D White first launched — and are now sold in more than 40 markets globally. Fusion ProGlide launched in the U.S. three years ago. It is now in more than 45 markets, most recently expanding to Brazil, Mexico and China. Fusion has grown global value share for 30 straight quarters — ever since the first Fusion product launched. We’re making significant progress. By the end of fiscal 2013, we reduced non-manufacturing enrollment by 7,000 roles, which is 1,300 role reductions ahead of our initial target. We delivered over $1.2 billion in cost-of-goods-sold savings and we improved manufacturing productivity by 7%, both ahead of target. Still, we have significant opportunities to continue improving productivity in all facets of the business. We will deliver the productivity improvements we promised on or ahead of schedule — but that is not an endpoint for productivity improvement at P&G. It’s a milestone. We know we can do more. We are making productivity systemic, not episodic. We are significantly strengthening productivity and cost savings efforts. We’re already mobilized to address the next round of productivity initiatives, which we are working in parallel, not sequentially. They cover a full range of cost and cash opportunities. The projects are being led by business unit and function leaders. Some are yielding savings already and others will take a few years to fully implement. The Procter & Gamble Company 3 We’re making strategic investments in innovation and go-to-market capabilities. In developing markets, we have opportunities to locate supply chains closer to the customers and consumers we serve. This will enable us to reduce costs and serve customers faster. In developed markets, we are studying options that would reduce the number of facilities, build scale across categories, and reduce costs and inventory — all while improving customer service. This will require investment, but should generate very attractive returns. We’ll improve marketing return on investment, driven by a better mix of media, greater message clarity, and greater efficiency in non-advertising marketing spending. Productivity will become one of P&G’s core strengths — like brand building and innovation, for example — to deliver value creation and growth. P&G Is Improving Execution Our third focus area is to step-change operating discipline. We simply have to execute better, more consistently and more reliably than our competitors. We know this is necessary to win with consumers and customers day in and day out — which is a requirement for delivering leadership returns in our Pantene Expert Collection Age Defy Advanced Thickening Treatment launched in North America in January 2013 at a premium price and is already the #1 treatment in the Salon Inspired segment of the Hair Care category — and one of the top 10 products in the Pantene lineup. Vidal Sassoon Pro Series launched in the U.S. in January 2013 — offering consumers “salon genius, brilliantly priced.” It is performing ahead of expectations in sales and share. Cover Girl Outlast Stay Brilliant Nail Gloss has 45 shades providing high- gloss color that lasts as long as a week with no top coat. It was the biggest Nails launch in the U.S. industry this past year. 4 The Procter & Gamble Company industry. Quality execution has long been a hallmark of P&G’s success. We are committed to return to the standards of excellence necessary to win. We’re committed to do what it takes to get P&G back to balanced, consistent, reliable, and sustainable value creation. P&G Is Investing in Capabilities for Growth Our final focus area is to make strategic, focused investments in innovation and go-to-market capabilities. These are two of our core strengths as a Company and two important sources of competitive advantage and growth. They are critical to winning the first and second moments of truth. P&G Is Committed to Winning We will build on the past year, but we’ll be more focused. We’ll commercialize brand and product innovations with excellence. We’ll implement productivity initiatives to significantly simplify how we work and realize savings. We’ll focus on best-in-class execution, and we’ll continue to invest selectively where needed to win. I’m as confident as ever that P&G has what’s needed to win — with consumers, customers and shareholders. We have a strong brand portfolio: 25 billion-dollar brands and roughly 15 more between half-a-billion and a billion dollars in annual sales. We have a well-balanced geographic portfolio. We are the leading non-food consumer products business in the U.S. — the largest and fastest-growing developed market — and the leading household and personal care business in developing markets. Both present significant value creation opportunities. We have an innovation portfolio and pipeline that will only get stronger. We have a broad portfolio of productivity initiatives. Most fundamentally, we have an exceptional organization. P&G people are passionate about consumers and P&G’s businesses. They bring tremendous experience and expertise to every part of our business. They are committed to win. They are our most important asset, the critical source of strength and competitive advantage for P&G. We’ve taken a hard look at what we need to do and how we need to change to perform better. We’re committed to do what it takes to get P&G back to balanced, consistent, reliable, and sustainable value creation for consumers, customers, shareholders and employees. We are focused on the future. We are determined to win. A.G. Lafley Chairman of the Board, President and Chief Executive Officer 3x cleaner #1 Bounty DuraTowel, launched in North America in early 2013, is 3 times cleaner than a germy dish towel and is boldly asking consumers to “Ditch their dish towels!” With consumer use of Downy Unstopables nearly twice as high as initially expected, it only made sense to expand this in-wash scent booster technology to the Gain brand with Gain Fireworks. Now these two make up nearly 70% of the category. ZzzQuil, our first entry into the sleep aid category, has grown to nearly 20% value share and is the #1 branded product in unit and dollar sales in the U.S. sleep aid category. P&G recently grouped its Global Business Units into four industry-based sectors as part of the Company’s ongoing plan to improve business performance. The businesses in each sector are focused on common consumer benefits, share common technologies, and face common competitors. The Procter & Gamble Company 5 global beauty 2013 NET SALES GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS $20 billion* Beauty Care Antiperspirant and Deodorant, Cosmetics, Personal Cleansing, Skin Care Cover Girl, Max Factor, Olay, Old Spice, Safeguard, Secret *This reflects an estimate. Our historical financial data will be restated to reflect the new structure in fiscal year 2014. Hair Care and Color Hair Care, Hair Color Prestige Fragrances, Prestige Skin Care Head & Shoulders, Herbal Essences, Nice ’n Easy, Pantene, Rejoice Gucci, Hugo Boss, SK-II Salon Professional Salon Professional Wella 6 The Procter & Gamble Company global baby, feminine and family care 2013 NET SALES GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS $22 billion* Baby Care Family Care *This reflects an estimate. Our historical financial data will be restated to reflect the new structure in fiscal year 2014. Feminine Care Baby Wipes, Diapers, Pants Luvs, Pampers Paper Towels, Tissues, Toilet Paper Bounty, Charmin, Puffs Feminine Care, Incontinence Always, Naturella, Tampax The Procter & Gamble Company 7 global fabric and home care 2013 NET SALES GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS $26 billion* Fabric Care Bleach and Laundry Additives, Fabric Enhancers, Laundry Detergents Ace, Ariel, Bold, Bounce, Dash, Downy, Gain, Tide *This reflects an estimate. Our historical financial data will be restated to reflect the new structure in fiscal year 2014. Home Care Air Care, Dish Care, Surface Care Cascade, Dawn, Febreze, Mr. Clean, Swiffer P&G Professional P&G Professional — Personal Power Batteries Duracell 8 The Procter & Gamble Company global health and grooming 2013 NET SALES GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS $17 billion* *This reflects an estimate. Our historical financial data will be restated to reflect the new structure in fiscal year 2014. Braun and Appliances Beauty Electronics Braun Oral Care Personal Health Care Crest, Fixodent, Oral-B Prilosec, Vicks Toothbrush, Toothpaste, Other Oral Care Gastrointestinal, Other Personal Health Care, Rapid Diagnostics, Respiratory, Vitamins / Minerals / Supplements Pet Care Shave Care Pet Care Eukanuba, Iams Blades and Razors, Pre- and Post-Shave Products Fusion, Gillette, Mach3, Prestobarba, Venus P&G’s Market Development Organizations (MDOs) are focused on understanding consumers and retailers in each market. MDOs integrate the innovations flowing from the Global Business Units into business plans to grow our business in each country, using their expertise in sales, logistics The Procter & Gamble Company 9 and retail execution. developed markets Western Europe North America Japan SALES % OF TOTAL P&G VOLUME % OF TOTAL P&G MARKET DEVELOPMENT ORGANIZATION (MDO) 61% 55% North America Western Europe Japan 10 The Procter & Gamble Company developing markets Central & Eastern Europe Latin America Africa Middle East Asia SALES % OF TOTAL P&G VOLUME % OF TOTAL P&G MARKET DEVELOPMENT ORGANIZATION (MDO) 39% 45% Asia (excluding Japan) Central & Eastern Europe, Middle East & Africa Latin America The Procter & Gamble Company 11 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 Reports of Independent Registered Public Accounting Firm Consolidated Statements of Earnings Consolidated Statements of Comprehensive Income 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 Page 13 14 18 18 18 18 20 22 23 44 45 48 49 50 51 52 53 76 76 76 77 77 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 77 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 79 79 79 UNITEDSTATES SECURITIES ANDEXCHANGE COMMISSIONWashington, D.C. 20549Form 10-K(Markone)[x]ANNUAL REPORT PURSUANTTO SECTION 13OR 15(d) OFTHE SECURITIES EXCHANGEACT OF 1934For the FiscalYear EndedJune 30, 2013OR[ ]TRANSITIONREPORT PURSUANTTOSECTION 13 OR 15(d) OFTHESECURITIES EXCHANGEACT OF1934Forthetransition period fromtoCommissionFileNo. 1-434THEPROCTER& GAMBLECOMPANYOne Procter & GamblePlaza, Cincinnati,Ohio45202Telephone (513) 983-1100IRS Employer IdentificationNo.31-0411980State of Incorporation: OhioSecuritiesregistered pursuant to Section 12(b)oftheAct: Title of eachclass Nameof eachexchangeon whichregisteredCommonStock, without Par ValueNewYork Stock Exchange,NYSEEuronext-ParisIndicatebycheck markiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.Yes NoIndicatebycheck mark if the registrant isnotrequired to file reportspursuanttoSection 13 or 15(d)oftheAct.Yes NoIndicateby check markwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.Yes NoIndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporatewebsite,ifany,everyInteractiveDataFilerequired tobe submittedandposted pursuanttoRule405ofRegulation S-T(§232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitandpostsuchfiles).Yes NoIndicateby check markif disclosure of delinquent filerspursuant to Item 405 of RegulationS-K is not containedherein, andwillnotbecontained,tothebestofregistrant'sknowledge,indefinitiveproxyorinformationstatementsincorporatedbyreferenceinPartIIIofthisForm10-KoranyamendmenttothisForm10-K.Indicatebycheckmarkwhetherthe registrant isalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfilerorasmallerreportingcompany(asdefinedinRule12b-2oftheExchangeAct).LargeacceleratedfilerAcceleratedfilerNon-acceleratedfilerSmallerreportingcompanyIndicate by check mark whether theregistrant is a shell company (as defined in Rule 12b-2 ofthe ExchangeAct).Yes NoTheaggregatemarketvalueofthevotingstockheldbynon-affiliatesamountedto$185billiononDecember31,2012.Therewere2,738,760,542sharesofCommonStockoutstandingasofJuly31,2013.DocumentsIncorporatedbyReferencePortionsoftheProxyStatementforthe2013AnnualMeetingof Shareholderswhichwillbefiledwithinonehundredand twenty daysofthefiscalyearendedJune30,2013(2013ProxyStatement)areincorporated by referenceintoPartIIIofthisreporttotheextentdescribedherein.The Procter&Gamble Company13PARTIItem1.Business.Additional informationrequired bythis item isincorporatedherein by reference to Management's Discussion andAnalysis(MD&A); Note 1to our Consolidated FinancialStatements andNote 12 toourConsolidatedFinancialStatements. Unless the context indicatesotherwise,the termsthe"Company,""P&G,""we," "our" or"us"as used hereinrefertoTheProcter&GambleCompany(theregistrant)anditssubsidiaries.TheProcter & Gamble Company is focused on providingbranded consumer packaged goods of superior quality andvaluetoimprovethelives of theworld'sconsumers.TheCompany was incorporated in Ohio in 1905, having beenbuilt from a business founded in 1837 byWilliam ProcterandJamesGamble.Today, we sell our productsin morethan180countriesandterritories.Throughout thisForm10-K,we incorporatebyreferenceinformationfromotherdocumentsfiled withtheSecuritiesand Exchange Commission (SEC).TheCompany's annualreport on Form 10-K,quarterlyreports onForm 10-Q and current reports onForm 8-K, andamendments thereto, arefiled electronically with theSEC.TheSECmaintainsaninternet sitethatcontainsthesereportsat:www.sec.gov.Youcan alsoaccessthesereportsthrough links from our website at:www.pg.com/investors.Copies of thesereportsare also available, withoutcharge,bycontacting Computershare Inc., 250 Royall Street, Canton,MA 02021.Financial Information about SegmentsAs ofJune30, 2013, theCompany has fivereportablesegments underU.S.GAAP: Beauty;Grooming;HealthCare;Fabric CareandHomeCare;and Baby CareandFamilyCare.Many of thefactorsnecessaryforunderstandingthese businesses are similar. Operatingmargins of theindividual businessesvary due to the natureof materials and processes usedto manufacturethe products,thecapital intensity of the businesses and differencesinselling,generalandadministrativeexpenses asapercentageof net sales. Net sales growthbybusiness is also expectedtovaryslightlydue to the underlyinggrowth of themarketsandproductcategoriesinwhichtheyoperate.Whilenoneofour reportable segments arehighly seasonal,componentswithincertainreportable segments,such as Batteries (FabricCare andHomeCare),Appliances(Grooming) andPrestigeFragrances(Beauty) areseasonal.Inaddition, anticipationoroccurrence ofnatural disasters,such ashurricanes, candrive unusually high demandforbatteries.Additional information about ourreportable segmentscan befound in MD&AandNote 12 to ourConsolidatedFinancialStatements.NarrativeDescription of BusinessBusinessModel.Ourbusiness modelrelies on thecontinued growthand success of existingbrands andproducts, aswell as thecreationof new products.Themarketsand industry segments inwhich weoffer ourproductsare highly competitive. Our productsaresold inmorethan180 countriesand territoriesaround theworldprimarily through mass merchandisers, grocery stores,membership club stores, drug stores, department stores,salons, e-commerce and high-frequency stores, theneighborhood storeswhich servemany consumersindevelopingmarkets.Wework collaborativelywith ourcustomers to improve thein-storepresenceof our productsand win the "first moment oftruth"- whenaconsumerisshopping inthestore.Wemustalso win the "secondmoment of truth" - when aconsumer usesthe product,evaluates how wellitmethisor her expectations and decideswhether it wasagoodvalue.Webelievewemustcontinueto provide new,innovative products and branding to theconsumer in order to grow our business. Research andproduct developmentactivities,designed to enable sustainedorganicgrowth, continued tocarrya high priority during thepastfiscalyear.While many of the benefits from theseeffortswill not berealized untilfutureyears,webelievethese activitiesdemonstrate our commitment tofuturegrowth.Key Product Categories. Informationon key productcategoriescan be foundinNote 12 to our ConsolidatedFinancial Statements.KeyCustomers.Our customersincludemassmerchandisers,grocery stores,membership club stores, drugstores, high-frequency stores, distributors and e-commerceretailers. SalestoWal-Mart Stores, Inc.anditsaffiliatesrepresentapproximately 14% ofour total revenue in 2013and 2012,and 15% in 2011. No other customer representsmorethan 10% of ournet sales. Our top ten customersaccount for approximately30%, 31% and32%ofourtotalunitvolumein 2013, 2012and 2011, respectively.Thenatureof our business results in no material backlog ordersorcontractswiththe government.Webelieve our practicesrelated to working capital items for customers and suppliersareconsistentwiththe industrysegments inwhich wecompete.Sources andAvailability of Materials.Almostalloftheraw and packagingmaterials used bytheCompany arepurchased from others,some ofwhich are single-sourcesuppliers.We produce certain raw materials, primarilychemicals, for further useinthe manufacturing process. Inaddition, fuel, natural gas and derivative products areimportant commodities consumed in our manufacturingprocess and in the distribution of input materials and finishedproductto customers.Thepriceswepay formaterials and14The Procter&Gamble Companyothercommodities are subject to fluctuation.Whenpricesforthese itemschange,wemayormaynotpass the changeto our customers.TheCompanypurchasesa substantialvariety ofother raw and packaging materials, none of whichis materialto ourbusinesstakenasa whole.Trademarks andPatents.We own or have licenses underpatentsand registeredtrademarkswhichareusedinconnectionwith ouractivityinall businesses. Some of thesepatents or licensescoversignificant productformulation andprocesses used to manufacture our products.The trademarksareimportantto the overallmarketingandbranding of ourproducts.All majorproductsand trademarksineachbusinessare registered.Inpart,our successcan be attributedto the existence and continued protection of thesetrademarks,patentsand licenses.CompetitiveCondition.Themarkets in which our productsare soldarehighly competitive. Our products competeagainstsimilar products ofmany large andsmallcompanies,includingwell-knownglobalcompetitors.Inmanyofthemarkets andindustry segments inwhich we sellourproducts, wecompeteagainstotherbranded productsas wellas retailers' private-labelbrands.Wearewellpositionedintheindustrysegments andmarketsin which we operate,often holding a leadership or significant marketshareposition.We support our products with advertising,promotions and other vehicles to build awareness of ourbrandsinconjunctionwith anextensive salesforce.Webelieve this combinationprovidesthe most efficientmethodof marketing forthesetypesof products. Productquality,performance, value andpackagingarealso importantcompetitive factors.ResearchandDevelopment Expenditures. Research anddevelopment expendituresenable usto develop technologiesand obtain patents acrossallcategoriesin order to meet theneedsand improvethelives of our consumers.Totalresearchanddevelopment expenses were $2.0billion in2013, 2012and2011.Expenditures for Environmental Compliance.Expendituresforcompliance with federal, stateandlocalenvironmental laws and regulations are fairly consistentfromyear to yearand arenot materialto the Company. Nomaterialchange is expected infiscal year2014.Employees.Total numberof employeesis an estimateoftotal Companyemployees excludinginterns, co-ops andemployeesofjointventures.Thenumberofemployeesincludes manufacturing and non-manufacturing employees.A discussion of progressonnon-manufacturing enrollmentobjectivesisincluded in Note 3 to our ConsolidatedFinancialStatements. Historical numbers include employeesof discontinued operations.Total NumberofEmployees2013121,0002012126,0002011129,0002010127,0002009132,0002008135,000Financial Informationabout Foreign andDomesticOperationsNet sales inthe UnitedStatesaccountfor approximately36% of total net sales. No other individual country exceeds10% of total net sales.Operations outside the United Statesaregenerallycharacterizedby thesameconditions discussedinthedescription ofthebusinessaboveand may beaffectedby additionalfactors including changing currency values,different ratesofinflation, economicgrowthandpoliticalandeconomicuncertainties and disruptions. Oursales bygeographyforthefiscal years ended June30 wereasfollows:201320122011NorthAmerica(1)39%39%41%Western Europe18%19%20%Asia18%18%16%LatinAmerica10%10%9%CEEMEA(2)15%14%14%(1)NorthAmerica includes results for the United States andCanadaonly.(2)CEEMEAincludesCentralandEastern Europe,Middle EastandAfrica.Net salesand assetsinthe UnitedStatesandinternationallywere as follows (in billions):UnitedStatesInternationalNet Sales (for the year ended June 30)2013$30.3$53.92012$29.5$54.22011$29.9$51.2Assets(June30)2013$68.3$71.02012$68.0$64.22011$70.3$68.1Item 1A.RiskFactors.Wediscussour expectationsregarding future performance,eventsand outcomes,suchas our business outlook andobjectives in this Form 10-K, other quarterly reports, pressreleases and other written and oral communications.Allstatements, except for historical and presentfactualinformation, are “forward-looking statements” and are basedon financial data and business plans available only as of theThe Procter&Gamble Company15timethe statementsaremade, which may become out of dateorincomplete.Weassume noobligationtoupdate anyforward-lookingstatementsas a resultofnew information,futureevents, orother factors. Forward-looking statementsareinherently uncertainandinvestors must recognize thatevents couldsignificantlydiffer fromourexpectations.Thefollowing discussion of“risk factors” identifies the mostsignificant factors that mayadversely affectour business,operations, financial position or future financialperformance.This information should bereadinconjunction withMD&AandtheConsolidated FinancialStatements and relatedNotesincorporated in thisreport.The following discussion ofrisks is notallinclusive, butisdesignedtohighlightwhat we believeareimportant factorstoconsider when evaluatingour expectations.Thesefactorscould causeourfutureresultstodifferfrom thoseintheforward-looking statementsandfrom historicaltrends.A change in consumer demand for our products and/orlack of market growth could have a significant impactonour business.Weareaconsumer productscompanyand relyon continuedglobal demandforourbrands and products.Toachievebusiness goals, we must develop andsell productsthatappeal to consumers.Thisis dependent onanumberoffactors, including ourabilitytodevelopeffective sales,advertising andmarketing programs.We expecttoachieveourfinancialtargets, in part, by focusingon themostprofitable businesses,biggestinnovationsand mostimportantemerging markets.Wealsoexpect to achieve ourfinancialtargets, in part, by achieving disproportionategrowth in developing regions. If demandfor our productsand/ormarket growthratesin either developed or developingmarkets falls substantially below expected levels or ourmarketshare declines significantly in these businesses, ourvolume, and consequently our results, could be negativelyimpacted.Thiscould occur due to, among otherthings,unforeseennegative economic orpolitical events, changes inconsumer trends and habits or negative consumer responsesto pricing actions.The abilityto achieveourbusiness objectives isdependenton how well we cancompetewithour localandglobalcompetitorsin new and existing marketsandchannels.Theconsumer products industry ishighlycompetitive.Acrossallof ourcategories, we competeagainst awidevarietyofglobal andlocalcompetitors.Asaresult,thereareongoingcompetitivepressures inthe environments inwhichweoperate,aswell as challenges in maintaining profitmargins.This includes, among otherthings,increasingcompetition frommid-andlower-tier valueproducts in bothdeveloped and developing markets.Toaddress thesechallenges, we must beable to successfullyrespondtocompetitive factors,includingpricing,promotionalincentives andtradeterms. Inaddition, the emergence ofnewsales channelsmayaffectcustomerandconsumerpreferences,aswellasmarket dynamics.Failure toeffectively compete in these new channels could negativelyimpact results.Ourability tomeetour growth targets dependsonsuccessful product, marketing and operationsinnovationand our abilityto successfully respond to competitiveinnovation.Achieving our business results depends, inpart,on thesuccessful development, introduction and marketing of newproductsand improvements to our equipmentandmanufacturing processes.Successful innovationdepends onour ability to correctly anticipate customer and consumeracceptance, to obtain and maintain necessaryintellectualpropertyprotections andto avoidinfringing the intellectualproperty rights of others.Wemustalso beabletosuccessfullyrespond totechnologicaladvances madebycompetitors and intellectual propertyrightsgrantedtocompetitors.Failure to doso could compromise ourcompetitive position and impact our results.Our businesses face cost fluctuations and pressuresthatcould affect ourbusinessresults.Our costs are subject to fluctuations, particularly due tochanges in commodity prices, raw materials, laborcosts,energy costs, pensionand healthcarecostsandforeignexchangeandinterestrates.Therefore, our success isdependent,inpart, on our continued ability to managethesefluctuations through pricing actions, cost saving projects andsourcingdecisions,whilemaintainingandimprovingmargins andmarketshare.In addition,ourfinancialprojectionsinclude costsavingsdescribedinour announcedproductivity plan. Failure to deliver these savings couldadverselyimpactourresults.We facerisks that areinherent in global manufacturingthatcouldnegativelyimpact ourbusiness results.Weneedto maintainkey manufacturing and supplyarrangements,including any key sole supplier and solemanufacturing plant arrangements, toachieve ourcosttargets.Whilewehavebusiness continuity andcontingencyplans for key manufacturing sites and the supply of rawmaterials, it may beimpracticable tohaveasufficientalternativesource, particularlywhen theinputmaterialsareinlimitedsupply. In addition, our strategy forglobal growthincludesincreased presence inemerging markets.Someemerging markets have greaterpolitical volatility andgreatervulnerability to infrastructure and labor disruptions thanestablished markets.Any significant disruption ofmanufacturing,suchas labordisputes,lossor impairmentofkey manufacturing sites,natural disasters, acts of war orterrorismand otherexternalfactors over which we havenocontrol, could interrupt product supply and, if not remedied,havean adverseimpacton our business.16The Procter&Gamble CompanyWeface risks associatedwith having significantinternational operations.Weareaglobalcompany,withmanufacturingoperations inmorethan40countries andasignificantportionofourrevenueis outsidethe U.S. Our internationaloperations aresubject to a number ofrisks, including, but not limited to:•compliancewith U.S. laws affectingoperations outsideoftheUnitedStates,such astheForeign CorruptPracticesAct;•compliance witha varietyof localregulations andlaws;•changesintaxlawsandthe interpretationofthoselaws;•changes inexchangecontrolsandotherlimitsonourabilityto repatriateearningsfromoverseas;•discriminatory or conflicting fiscalpolicies;•difficulties enforcing intellectual propertyandcontractualrights incertainjurisdictions;•greater risk of uncollectible accounts and longercollectioncycles;•effective and immediate implementation of controlenvironment processes across our diverse operationsandemployeebase; and•imposition ofincreased or new tariffs,quotas,tradebarriersorsimilarrestrictionsonoursales outside theUnitedStates.We have sizable businesses and maintain local currency cashbalances ina numberof foreigncountrieswith exchange,import authorization orpricing controls, including, butnotlimitedto,Venezuela,Argentina, China, India and Egypt.Ourresults ofoperations and/orfinancialconditioncould beadversely impacted ifweareunable tosuccessfully managethese and other risks of international operationsin anincreasinglyvolatileenvironment.Fluctuationsinexchange ratesmay have an adverseimpact on ourbusinessresultsor financial condition.Weholdassets and incur liabilities, earn revenues and payexpensesin a variety of currenciesotherthantheU.S.dollar.Because ourconsolidated financialstatements are presentedin U.S. dollars,the financialstatementsof oursubsidiariesoutsidetheUnited States aretranslatedinto U.S.dollars.Ouroperationsoutsideof the U.S. generate a significantportion of our net revenue. Fluctuations in exchange ratesmaytherefore adversely impact our business resultsorfinancial condition. Seealso the ResultsofOperationsandCash Flow,FinancialCondition and Liquidity sections oftheMD&A and Note5to our Consolidated FinancialStatements.Weface risksrelated to changes inthe global andpolitical economicenvironment, including the globalcapital andcredit markets.Our business isimpacted by global economic conditions,which continueto bevolatile. Our products are sold in morethan180countriesand territories around theworld.Iftheglobaleconomy experiences significant disruptions, ourbusinesscouldbe negatively impactedby reduceddemandfor our products related to: a slow-down in the generaleconomy; supplier, vendor or customerdisruptions resultingfromtighter creditmarkets; and/or temporary interruptionsinour ability toconductday-to-daytransactions through ourfinancialintermediaries involving the payment to orcollection of funds from our customers, vendors andsuppliers.Our objective istomaintaincreditratingsthatprovide uswith readyaccess to globalcapital and creditmarkets.Anydowngradeofour current creditratingsbya credit ratingagencycouldincrease our futureborrowing costs andimpairour ability to access capital and credit markets on termscommerciallyacceptable to us.We could also benegativelyimpactedby political issuesorcrisesin individual countriesorregions,including sovereignriskrelatedtoadefaultby ordeterioration in the creditworthiness of local governments. For example, we could beadversely impactedby continuedinstabilityinthebankingandgovernmentalsectorsofcertaincountries in theEuropean Union or the dynamics associatedwiththefederalandstate debt and budgetchallenges in theUnitedStates.Consequently, our success will depend, in part, on our abilityto manage continued global and/or economic uncertainty,especiallyinoursignificant geographies, as wellas anypolitical oreconomicdisruption.Theseriskscouldnegatively impact our overall liquidity and financing costs,as well as our ability to collect receipts due fromgovernments,including refundsofvalue addedtaxes,and/orcreatesignificantcreditrisks relative toourlocal customersanddepository institutions.If the reputation of theCompany or one or more of ourbrandserodessignificantly,itcouldhave amaterialimpact on our financial results.The Company'sreputation is thefoundationof ourrelationships with key stakeholders and otherconstituencies,suchas customersandsuppliers. In addition,many of ourbrands haveworldwide recognition.This recognition is theresult of the largeinvestments we have made in our productsover many years.Thequality and safety of our productsiscriticaltoourbusiness. OurCompany also devotessignificanttime andresources to programs designed toprotect and preserve our reputation, such as socialresponsibility and environmentalsustainability. Ifwe areunableto effectively manage real orperceivedissues,includingconcerns about safety, quality, efficacy or similarmatters,these issues could negativelyimpactsentimentstoward the Companyorour products, our ability to operatefreelycouldbeimpairedandourfinancial resultscouldsuffer. Our financialsuccessis directly dependent on thesuccess of our brands and the success of these brands cansufferifourmarketing plans orproductinitiatives do nothavethedesiredimpact on a brand's imageorits abilitytoattract consumers. Our results couldalsobe negativelyimpactedif one of our brandssuffersa substantialimpedimenttoits reputation dueto a significant productrecall,product-related litigation,allegationsof producttampering or the distribution and sale of counterfeitThe Procter&Gamble Company17products.Inaddition, given the association of ourindividualproducts with the Company, an issuewith one of ourproductscouldnegativelyaffectthe reputation of ourotherproducts, or the Companyas a whole,thereby potentiallyhurting results.Our ability tosuccessfully manage ongoingorganizational change could impactourbusinessresults.Werecentlyexperienced a CEO transition,as wellasotherseniorleadership changes, and we continueto executeanumber ofsignificantbusiness and organizationalchanges,including acquisitions, divestitures andworkforceoptimizationprojects to supportour growth strategies.Weexpectthese typesof changes, whichmayincludemanystaffing adjustments aswell asemployeedepartures,tocontinue for the foreseeable future. Successfully managingthesechanges,includingretention of particularlykeyemployees, is criticaltoour business success. Further,ongoing business and organizationalchangesare likely toresult in more relianceonthird parties forvariousservicesandthat reliancemayincreasereputational,operationalandcompliance risks,includingtheriskofcorruption.Wearegenerally a build-from-within companyand our success isdependentonidentifying, developing andretaining keyemployeestoprovideuninterrupted leadershipanddirectionfor our business.This includes developingorganizationcapabilitiesin keygrowth markets wherethe depth of skilledorexperienced employees maybelimitedandcompetitionfor these resourcesisintense. Finally, ourfinancial targetsassumeaconsistent level of productivity improvement. Ifwe are unabletodeliver expectedproductivityimprovements,whilecontinuingtoinvest inbusinessgrowth, our financial results could be adversely impacted.Our ability to successfully manage ongoing acquisition,joint venture anddivestiture activitiescould impact ourbusinessresults.Asa companythat managesa portfolio ofconsumer brands,our ongoingbusinessmodelinvolves a certain levelofacquisition,jointventure anddivestiture activities.Wemustbe abletosuccessfully manage the impacts of theseactivities,whileatthe sametime deliveringagainstourbusinessobjectives. Specifically, ourfinancial resultscouldbeadversely impacted if:1)changes inthecash flows orother market-based assumptions cause the value of acquiredassetstofall below book value, 2) we areunabletooffsetthedilutive impacts from the loss of revenue associated withdivestedbrands,or3)weare not able to deliver the expectedcostandgrowthsynergiesassociatedwithour acquisitionsandjoint ventures,which could also have an impact ongoodwillandintangibleassets.Additionally,jointventuresinherently involve a lesser degreeofcontrolover businessoperations,therebypotentiallyincreasingthe financial,legal,operationaland/orcompliance risksassociated with eachjoint venture.Ourbusinessis subject to changesinlegislation,regulation and enforcement, and ourability tomanageand resolve pending legal matters in theUnited Statesandabroad.Changes in laws, regulations and related interpretations,including changes in accounting standards, taxationrequirementsandincreased enforcementactionsandpenaltiesmay alter theenvironment in which wedobusiness.AsaU.S.basedmultinationalcompanywe aresubjecttotaxregulationsinthe UnitedStates andmultipleforeignjurisdictions, some of which are interdependent.Forexample,certain incomethatisearnedand taxed in countriesoutside the United Statesisnottaxed in the UnitedStates,provided those earnings are indefinitely reinvested outsidethe United States. Ifthese or othertax regulationsshouldchange, our financial results could be impacted.In addition,our ability to manage regulatory,environmental,tax and legal matters (including, but not limited to, productliability, patentand other intellectualproperty matters) andto resolve pending legal matters without significantliabilitymay materially impact our results of operations and financialposition.Furthermore,ifpendinglegal matters,includingthe competitionlawandantitrust investigations described inNote 11 toour Consolidated Financial Statements result infinesorcostsin excess of the amounts accrued to date, thatcould materially impactourresults ofoperationsandfinancialposition.Thereare increasing calls intheUnitedStates frommembersof leadership inboth major U.S. politicalparties for“comprehensivetax reform”which maysignificantly changetheincometaxrules that are applicableto U.S.domiciledcorporations,such as P&G. Itis very difficulttoassesswhethertheoveralleffectof such potential legislation wouldbecumulatively positive or negative forour earnings andcash flows, but suchchangescouldsignificantlyimpactourfinancialresults.A significant change in customer relationships or incustomer demandfor our productscould have asignificant impact on ourbusiness.We sellmost of our products viaretail customers,whichconsist ofmassmerchandisers,grocery stores,membershipclub stores, drug stores,high-frequency stores, distributorsande-commerce retailers.Our successis dependenton ourabilitytosuccessfullymanage relationshipswithourretailtrade customers.This includes our abilityto offer tradetermsthat are acceptabletoour customers and arealignedwith ourpricingand profitabilitytargets. Our business couldsufferifwecannot reachagreement witha key customerbased on our trade terms and principles. Our businesswouldbenegatively impactedifakey customerweretosignificantly reduce the inventory level of our products orexperience a significant business disruption.Consolidation amongour retail customers could also createsignificantcost and margin pressure and lead tomorecomplexity across broadergeographicboundaries forboth us18The Procter&Gamble Companyand ourkeyretailers.This wouldbe particularlychallengingif major customers are addressinglocal tradepressures, locallawand regulation changes or financial distress.A failureof oneor more key information technologysystems, networks,processes, associated sites or serviceproviders could have a materialadverse impact on ourbusinessor reputation.Werelyextensivelyon informationtechnology (IT) systems,networks and services, including internetsites, datahostingand processing facilities andtools andother hardware,software and technical applications and platforms, some ofwhich aremanaged, hosted,provided and/or used by third-parties or theirvendors,to assistin conductingour business.Thevarious uses oftheseIT systems, networks and servicesinclude,butarenotlimited to:•orderingand managing materials fromsuppliers;•convertingmaterialsto finishedproducts;•shippingproducts tocustomers;•marketing andselling productstoconsumers;•collectingandstoringcustomer,consumer,employee,investor and otherstakeholder information and personaldata;•processingtransactions;•summarizingand reporting resultsof operations;•hosting, processing and sharing confidentialandproprietary research, business plans and financialinformation;•complyingwith regulatory,legalortaxrequirements;•providingdatasecurity;and•handlingother processes necessary to manage ourbusiness.Increased IT security threats and more sophisticatedcomputercrime,includingadvancedpersistent threats,posea potential risktothe securityof ourIT systems,networksandservices,aswellastheconfidentiality, availabilityandintegrity of our data.If the IT systems, networks or serviceproviderswerely upon failto function properly, or if wesuffera loss or disclosure of business orstakeholderinformation, due to any number of causes, ranging fromcatastrophic eventstopower outages to security breaches,and our businesscontinuity plans do not effectively addressthese failures on atimelybasis, wemaysuffer interruptionsin our ability to manageoperations and reputational,competitive and/orbusinessharm,which mayadverselyimpactourresultsofoperations and/orfinancialcondition.Item1B.UnresolvedStaff Comments.None.Item2.Properties.In the U.S., weown and operate 32 manufacturing siteslocatedin21different states orterritories. Inaddition, weownand operate102 manufacturing sitesin 40othercountries.Many ofthe domesticandinternational sitesmanufacture products for multiple businesses.Beautyproducts aremanufacturedat39 of these locations;Groomingproductsat 15; Fabric Care andHomeCareproducts at 59; Baby CareandFamily Care products at 36;and Health Careproductsat 35. Management believes thatthe Company's production facilities are adequate to supportthebusinessandthattheproperties and equipmenthavebeenwell maintained.Item3.LegalProceedings.The Companyissubject,from timeto time, to certain legalproceedings and claims arising out of our business,whichcoverawide range of matters, includingantitrustand traderegulation, product liability,advertising, contracts,environmental issues,patent andtrademarkmatters,laborandemploymentmatters and tax.See Note 11to ourConsolidated Financial Statements forinformation on certainlegal proceedings for which there are contingencies.In March 2013, theRepublic ofTurkey Ministry ofEnvironmentaland UrbanPlanning notifiedthe Companythat it was imposing a fine on the Company based on allegedwastemanagement violations ataWellafacility inTurkey.The Company paid the fine ($790,000) and the matter iscurrently on appeal.Thisitemshould be readin conjunctionwiththe Company'sRisk Factors in Part I, Item 1A foradditional information.Item4.MineSafetyDisclosure.NotApplicable.The Procter&Gamble Company19Executive Officersof the RegistrantThenames,agesand positionsheldbythe ExecutiveOfficers of the Company onAugust 8, 2013,are:NamePositionAgeFirst ElectedtoOfficer PositionA. G. LafleyChairman of the Board, PresidentandChiefExecutiveOfficer662013DirectorsinceMay23, 2013WernerGeisslerVice Chairman -Global Operations602007GiovanniCiseraniGroup President -Global FabricandHomeCare512013Melanie HealeyGroupPresident - NorthAmericaand Global Hyper, Superand Mass Channel522013Deborah A. HenrettaGroup President- Global Beauty522013MartinRiantGroup President-Global Baby,Feminineand Family Care542013DavidTaylorGroup President- GlobalHealth and Grooming552013FilippoPasseriniGroup President- GlobalBusinessServicesandChiefInformationOfficer562003JonMoellerChiefFinancialOfficer492009Bruce BrownChiefTechnology Officer552008RobertL.Fregolle, Jr.Global Customer BusinessDevelopment Officer562009Deborah P.MajorasChief Legal Officer and Secretary492010Mark F. BieggerGlobal Human ResourcesOfficer512012Marc S. PritchardGlobal Brand Building Officer532008Valarie SheppardSeniorVicePresident & Comptroller492005Yannis SkoufalosGlobal Product SupplyOfficer562011AlltheExecutiveOfficersnamedabove,excludingMr.Lafley,havebeenemployedbytheCompanyformorethanthepastfiveyears.Mr.LafleyisChairmanoftheBoard,PresidentandChiefExecutiveOfficeroftheCompanyandwasappointedtothispositiononMay23,2013.Mr.LafleyoriginallyjoinedtheCompanyin1977andheldpositionsofincreasingresponsibility,intheU.S.andinternationally,untilhewaselectedPresidentandChiefExecutiveOfficerin2000,apositionhehelduntilJune30,2009.OnJuly1,2002,Mr.LafleywaselectedChairmanoftheBoard,apositionhehelduntilJanuary2010.Duringthepastfiveyears,inadditiontohisrolesasaCompanyemployee,Mr.LafleyservedasaconsultanttotheCompanyandasamemberoftheboardsofdirectorsofpubliccompaniesDell,Inc.andGeneralElectricCompany.Henolongerservesontheseboards.SincehisretirementfromtheCompany,heservedasaSeniorAdvisoratClayton,Dubilier&Rice,LLC,aprivateequitypartnership,andwasappointedbyPresidentObamatoserveonThePresident'sCouncilonJobsandCompetitiveness.Mr.LafleyconsultedwithanumberofFortune50companiesonbusinessandinnovationstrategy.HealsoadvisedonCEOsuccessionandexecutiveleadershipdevelopment,andcoachedexperienced,newandpotentialCEOs.HecurrentlyservesontheboardofdirectorsofLegendaryPictures,LLC(afilmproductioncompany).20The Procter&Gamble CompanyPART IIItem5.Market forRegistrant's CommonEquity,Related Stockholder Matters andIssuer Purchases ofEquity Securities.ISSUERPURCHASES OF EQUITY SECURITIESPeriodTotalNumber ofShares Purchased(1)AveragePricePaid perShare(2)TotalNumber ofShares PurchasedasPartofPubliclyAnnouncedPlans orPrograms(3)Approximate DollarValue ofSharesThatMay YetbePurchasedUnderour ShareRepurchase Program4/1/2013- 4/30/20134,408,128$79.404,408,1285/1/2013- 5/31/20134,435,478$78.914,435,478Seenote (3)6/1/2013- 6/30/20133,861,882$77.683,861,882(1)Thetotalnumberofsharespurchasedwas12,705,488 for thequarter.All transactionsweremadeintheopenmarketwithlargefinancial institutions.Thistableexcludes shares withheld from employeestosatisfyminimum tax withholding requirementson optionexercises andotherequity-based transactions.TheCompany administers cashless exercises through an independentthirdpartyanddoesnot repurchase stockinconnection with cashless exercises.(2)Averageprice paid pershareis calculated ona settlementbasisandexcludescommission.(3)OnApril 24, 2013,theCompanystated that fiscal year2013share repurchases toreduceCompanyshares outstanding wereestimatedto be approximately $6 billion.Thisdoesnot includeany purchases under the Company'scompensationandbenefitplans.Thesharerepurchaseswereauthorized pursuant toaresolutionissued by the Company's Board of Directorsandwere financedthroughacombination of operatingcashflows and issuance of long-termandshort-term debt.Thetotal dollar value of shares purchasedundertheshare repurchase planwas$6.0 billion.Thesharerepurchase plan expired onJune30, 2013.Additional information required by this item can be found in Part III, Item 12 of this Form 10-K.Shareholder Return Performance GraphsMarket andDividendInformationP&G hasbeen paying adividend for 123 consecutive years since its incorporation in 1890 and hasincreased itsdividendfor 57consecutive yearsatanannual compound average rate ofover 9%.(in dollars; split-adjusted)19561970198419982013DividendsperShare$0.01$0.04$0.15$0.51$2.29The Procter&Gamble Company21QUARTERLYDIVIDENDSQuarterEnded2012-20132011 - 2012September30$0.5620$0.5250December310.56200.5250March 310.56200.5250June300.60150.5620COMMONSTOCK PRICERANGE2012-20132011-2012QuarterEndedHighLowHighLowSeptember30$69.97$60.78$65.14$57.56December3170.9965.8466.9861.00March 3177.8268.3567.9562.56June3082.5475.1067.9259.08SHAREHOLDERRETURNThe followinggraph comparesthecumulativetotalreturnof P&G’scommonstock for the 5-yearperiod ending June 30,2013,against the cumulative total return oftheS&P 500 Stock Index (broad market comparison) and the S&P500 ConsumerStaplesIndex (lineof businesscomparison).Thegraph and table assume $100 wasinvestedon June 30,2008, andthatalldividendswerereinvested.CumulativeValue of$100Investment,throughJune 30Company Name/Index200820092010201120122013P&G$100$86$105$114$114$148S&P500Index1007484110116140S&P 500 Consumer Staples Index1009010212914817422The Procter&Gamble CompanyItem6.SelectedFinancial Data.The information required by this item is incorporated by reference to Note 1 and Note 12 to our Consolidated FinancialStatements.FinancialSummary (Unaudited)Amounts inmillions, except pershareamounts201320122011201020092008Netsales$84,167$83,680$81,104$77,567$75,295$77,714Grossprofit41,73941,28941,24540,52537,64439,534Operating income14,48113,29215,49515,73215,18815,743Netearnings from continuing operations11,4029,31711,69810,85110,64511,224Net earningsfromdiscontinued operations—1,5872291,9952,877930Netearnings attributable toProcter&Gamble11,31210,75611,79712,73613,43612,075NetEarningsmarginfromcontinuingoperations13.5%11.1%14.4%14.0%14.1%14.4%Basic netearnings per common share(1):Earningsfrom continuingoperations$4.04$3.24$4.04$3.63$3.51$3.56Earnings fromdiscontinued operations—0.580.080.690.980.30Basic netearnings per common share4.043.824.124.324.493.86Diluted net earnings per common share(1):Earningsfrom continuingoperations$3.86$3.12$3.85$3.47$3.35$3.36Earnings fromdiscontinued operations—0.540.080.640.910.28Diluted net earnings per common share3.863.663.934.114.263.64Dividends per commonshare$2.29$2.14$1.97$1.80$1.64$1.45Researchanddevelopmentexpense$2,023$2,029$1,982$1,931$1,844$1,927Advertisingexpense9,7299,3459,2108,4757,4538,426Totalassets139,263132,244138,354128,172134,833143,992Capitalexpenditures4,0083,9643,3063,0673,2383,046Long-termdebt19,11121,08022,03321,36020,65223,581Shareholders' equity68,70964,03568,00161,43963,38269,784(1)Basicnet earnings per common share and diluted netearnings percommon shareare calculated basedon netearnings attributable toProcter& Gamble.The Procter&Gamble Company23Item7.Management'sDiscussionandAnalysis of Financial Condition and Results of Operations.Management'sDiscussionandAnalysisForward-Looking StatementsCertainstatements in this report, otherthanpurely historicalinformation, including estimates,projections,statementsrelating to our business plans, objectives and expectedoperating resultsandtheassumptions upon which thosestatements are based, are “forward-lookingstatements”within themeaningof the PrivateSecurities LitigationReformActof 1995,Section 27A of theSecuritiesActof1933 and Section 21E of the Securities ExchangeAct of1934. Forward-looking statementsmay appear throughoutthis report,including, without limitation, in the followingsections: “Management's DiscussionandAnalysis” and“RiskFactors.”These forward-lookingstatementsgenerallyare identified by the words “believe,” “project,” “expect,”“anticipate,”“estimate,” “intend,” “strategy,”“future,”“opportunity,” “plan,”“may,”“should,” “will,” “would,”“willbe,”“will continue,”“willlikely result” andsimilarexpressions. Forward-lookingstatements are based oncurrentexpectations and assumptionsthat aresubjectto risksand uncertainties which maycauseactualresultsto differmateriallyfromtheforward-looking statements.A detaileddiscussion of risks and uncertainties that could cause actualresults and events to differ materially from such forward-looking statementsis included in the sectiontitled"EconomicConditions,Challenges and Risks" and thesectiontitled“RiskFactors” (Item1A of this Form 10-K).Forward-lookingstatements are made as of the dateof thisreportandweundertake no obligation to update orrevisepublicly any forward-looking statements, whether because ofnew information, futureevents orotherwise.ThefollowingManagement'sDiscussionandAnalysis(MD&A)is intended toprovide the readerwith anunderstandingof P&G'sfinancial condition, results ofoperations and cash flows by focusing on changes in certainkeymeasures from yearto year. MD&A isprovidedas asupplementto, andshould beread in conjunction with,ourConsolidated Financial Statements andaccompanyingNotes. MD&A is organized in the following sections:•Overview•Summary of2013 Results•Economic Conditions, Challenges and Risks•Resultsof Operations•Segment Results•Cash Flow, FinancialCondition andLiquidity•SignificantAccountingPoliciesandEstimates•OtherInformationThroughout MD&A, we referto measures used bymanagement toevaluateperformance, includingunit volumegrowth, netsales and netearnings.Wealso refertoanumberoffinancial measures thatarenot definedunderaccounting principles generally accepted in theUnitedStatesofAmerica(U.S.GAAP),including organicsales growth,coreearnings per share (Core EPS),freecashflow and freecash flow productivity. Organic sales growthisnetsalesgrowth excludingthe impacts offoreign exchange,acquisitionsand divestitures.Core EPS isdilutednetearnings persharefromcontinuing operations excludingcertainspecifiedcharges and gains. Freecash flow isoperating cash flow lesscapital spending.Freecashflowproductivity is theratio of freecash flow to netearnings.Webelievethese measuresprovide ourinvestorswithadditionalinformationabout our underlying results andtrends, as well as insightto some ofthemetrics used toevaluate management.The explanation attheendofMD&Aprovidesmore detailsontheuseandderivationof thesemeasures.Management also uses certain market shareand marketconsumption estimates to evaluateperformancerelative tocompetition despite some limitationson the availabilityandcomparabilityofshareand consumption information.References to market share and market consumption inMD&Aarebasedonacombinationof vendor-reportedconsumption and market size data, as well as internalestimates.Allmarketshare references representthepercentageofsalesin dollar terms on aconstantcurrencybasis of ourproducts, relative toall productsales in thecategory and aremeasured on an annualbasis versus theprior 12 month period.References tocompetitiveactivityinclude promotionaland productinitiatives from ourcompetitors.OVERVIEWP&G is a globalleaderinretailgoods focusedon providingbranded consumer packaged goods of superior quality andvalue to our consumersaroundthe world.Our productsaresold in more than 180 countries and territories primarilythroughmassmerchandisers, grocerystores, membershipclub stores, drug stores,departmentstores, salonsand high-frequencystores.Wecontinue to expand our presenceinother channels,including perfumeries, pharmaciesande-commerce.We have on-the-ground operations inapproximately70 countries.Our marketenvironmentishighly competitivewithglobal,regionaland local competitors.In manyofthemarketsandindustrysegmentsinwhichwe sellourproducts,wecompete againstotherbrandedproductsaswell asretailers'private-label brands.Additionally, manyofthe productsegmentsinwhichwe competeare differentiatedbypricetiers(referred toassuper-premium,premium,mid-tier andvalue-tierproducts).We are well positioned in the industrysegmentsandmarketsinwhichwe operate,oftenholdingaleadership or significantmarket shareposition.24The Procter&Gamble CompanyORGANIZATIONAL STRUCTUREOur organizational structureis comprised of Global Business Units (GBUs), Global Operations,Global BusinessServices(GBS) and CorporateFunctions(CF).Global BusinessUnitsUnderU.S. GAAP, the GBUs areaggregatedintofive reportablesegments: Beauty; Grooming; Health Care; FabricCareandHomeCare;andBabyCare and Family Care.The GBUs areresponsiblefor developingoverallbrand strategy,new productupgrades andinnovations and marketing plans.The following provides additional detail on our reportable segments and thekeyproduct categoriesandbrandcomposition withineach segment.ReportableSegment% ofNetSales*%ofNetEarnings*GBUs(Categories)BillionDollarBrandsBeauty24%21%Beauty Care (Antiperspirant and Deodorant,Cosmetics, PersonalCleansing, Skin Care);HairCare and Color; Prestige (SK-II, Fragrances);SalonProfessionalHead &Shoulders,Olay,Pantene, SK-II,WellaGrooming9%16%ShaveCare (Blades and Razors, Pre- and Post-Shave Products); BraunandAppliancesFusion,Gillette,Mach3,PrestobarbaHealthCare15%17%FeminineCare(FeminineCare, Incontinence);OralCare (Toothbrush, Toothpaste, Other OralCare);PersonalHealthCare(Gastrointestinal,Rapid Diagnostics,Respiratory, Other PersonalHealthCare, Vitamins/Minerals/Supplements)Always, Crest, Oral-B,VicksFabricCare andHomeCare32%27%FabricCare (Bleachand LaundryAdditives,FabricEnhancers,LaundryDetergents); HomeCare (AirCare,DishCare, Surface Care);Personal Power(Batteries);PetCare;ProfessionalAce, Ariel, Dawn,Downy,Duracell,Febreze,Gain,Iams,TideBaby Careand Family Care20%19%BabyCare(BabyWipes, Diapers and Pants);Family Care (PaperTowels,Tissues,ToiletPaper)Bounty,Charmin,Pampers*Percentofnetsalesandnet earnings from continuingoperationsfortheyearendedJune30, 2013 (excluding resultsheld in Corporate).RecentDevelopments:In fiscal 2012, we completedthedivestiture of oursnacks business toThe KelloggCompany.Inaccordance with the applicableaccountingguidanceforthe disposalof long-lived assets, the results of our snacksbusinessarepresented as discontinued operations in2012and,as such,havebeen excluded from continuingoperationsand from segment results for all periods presented.Beauty:We are a globalmarket leader in thebeautycategory. Mostofthebeautymarkets inwhich we competearehighly fragmented with a large number ofglobal andlocalcompetitors.We compete in beauty care, hair care andcolor andprestige. In beautycare,weoffer a wide variety ofproducts, ranging from deodorantstocosmeticsto skincare,such as our Olay brand, which is the top facial skin carebrand in the world withapproximately 10% global marketshare.In haircare andcolor, we compete in both the retailandsalonprofessionalchannels.Wearetheglobalmarketleaderin thehaircare andcolor market with over 20%globalmarketshare behind our Panteneand Head &Shoulders brands. In the prestige channel, we competeprimarily with our prestige fragrances and the SK-II brand.Wearetheglobalmarketleaderin prestigefragrances,primarily behind our Dolce & Gabbana, Gucci and HugoBossfragrancebrands.Grooming:Wearethe globalmarketleaderinthebladesand razors market globally and in nearly all of thegeographies inwhichwecompete.Our globalbladesandrazorsmarketshare is approximately 70%, primarily behindthe Gillette franchise including Fusion, Mach3,PrestobarbaandVenus. Ourelectronichairremovaldevices,suchaselectric razors and epilators, are sold under the Braunbrandinanumber ofmarkets around theworldwherewecompeteagainstbothglobaland regionalcompetitors.We hold over20% ofthemale shaversmarket andover40% of the femaleepilators market.Health Care:We competein oralcare, feminine care andpersonal health care. In oralcare,thereareseveralglobalcompetitors in the market and we have the number twomarket share position with approximately 20% globalmarket share.We aretheglobalmarket leaderinthefeminine carecategorywithover30%global marketshare.In personal healthcare,we arethe global marketleader innonprescriptionheartburnmedications behind our PrilosecOTC brand andin respiratory treatmentsbehind ourVicksbrand. Nearly all of our salesoutside the U.Sin personalhealtharegeneratedthrough the PGTHealthcarepartnershipwithTevaPharmaceuticalsLtd.The Procter&Gamble Company25FabricCare and HomeCare:Thissegmentis comprised ofa variety of fabric care products, including: laundrydetergents,additivesandfabricenhancers;homecareproducts,includingdishwashing liquids and detergents,surface cleanersand airfresheners; batteries;and petcare.Infabric care, we generally have the number oneor numbertwo shareposition in the markets inwhichwecompeteandarethe globalmarketleader, withover 25% globalmarketshare,primarily behindourTide,ArielandDownybrands.Our global home care market share is approximately 20%across thecategoriesin which wecompete. Inbatteries,wehave over25%global batterymarket share, behind ourDuracellbrand.Inpet care,we competein several marketsprimarily in the premium pet care segment, with the Iamsand Eukanubabrands.The vast majorityof our pet carebusiness is in NorthAmerica,wherewe haveover5%marketshare.Baby Care and FamilyCare:Inbabycare, we competemainlyin diapers,pants and baby wipes, with approximately35% globalmarketshare.Wearethenumber oneornumbertwo baby care competitor in most of the key markets inwhichwecompete, primarilybehindPampers, theCompany'slargest brand, with annual net sales of more than$10 billion.Our family carebusinessis predominantlyaNorthAmerican business comprisedlargely ofthe BountypapertowelandCharmin toilet paperbrands.U.S.marketsharesareapproximately45% forBountyand over 25% forCharmin.FiscalYear 2014 Changes to Global BusinessUnitStructureWe recently announced anumber of changestoour GBUstructure,which willresultin changesto our reportablesegments. EffectiveJuly 1, 2013, as partof our plantoimprovebusiness performance, we organized our GlobalBusinessUnits into fourindustry-based sectors, comprisedof 1) GlobalBaby, Feminine and FamilyCare, 2) GlobalBeauty, 3) GlobalHealth andGrooming,and4) GlobalFabric and HomeCare. UnderU.S.GAAP, the GBUsunderlying these sectors will be aggregatedinto fivereportable segments:1)GlobalBaby,Feminine and FamilyCare,2) GlobalBeauty, 3)Global Health,4) Grooming and5) GlobalFabricand HomeCare.Asaresult, FeminineCare willtransition from Health Care to GlobalBaby,Feminineand Family Care.Additionally,PetCare willtransition fromFabricCareand HomeCareto GlobalHealth.Thesechanges willbe reflected in our segment reportingbeginninginfiscal year 2014, atwhich time our historicalsegment reportingwillalso berestated to reflect the newstructure.Thesegmentdiscussions in MD&A and theaccompanying ConsolidatedFinancialStatements reflecttheorganizationalstructure thatexistedthrough June30, 2013.GlobalOperationsGlobal Operations is comprised of our Market DevelopmentOrganization(MDO),which is responsiblefor developinggo-to-marketplans at the locallevel.TheMDO includesdedicatedretailcustomer, trade channel and country-specificteams. It isorganized alongfive geographic regions:NorthAmerica,WesternEurope,Central& EasternEurope/MiddleEast/Africa(CEEMEA), LatinAmericaandAsia, whichiscomprisedof Japan,GreaterChinaandASEAN/Australia/India/Korea(AAIK).Throughout MD&A, wereferencebusiness results in developing markets, which we define astheaggregate ofCEEMEA,LatinAmerica,AAIKandGreater China,anddeveloped markets, whichare comprisedof NorthAmerica,WesternEuropeandJapan.GlobalBusinessServicesGBS providestechnology, processesand standard data toolsto enable the GBUsand the MDO to better understand thebusinessand betterserve consumersandcustomers.TheGBSorganization isresponsible for providing world-classsolutions ata low cost and withminimalcapital investment.Corporate FunctionsCFprovidesCompany-level strategyand portfolioanalysis,corporate accounting,treasury, tax,external relations,governance,human resources andlegal,aswellasothercentralizedfunctional support.STRATEGIC FOCUSWearefocusedonstrategiesthat webelieveare right forthelong-term health of theCompany withtheobjective ofdelivering total shareholder return in thetop one-third ofourpeergroup.Wearefocusingour resourcesonour leading, mostprofitablecategoriesandmarkets.•Wewill focuson ourcoremarkets, such as the U.S., tostrengthenand grow thesebusinesses.•We willfocusourdeveloping market investmentsonthecategories andcountrieswith the largest size of prizeandhighestlikelihoodofwinning.•Wewillfocustheportfolio, allocatingresourcestobusinesseswherewecancreate disproportionate value.Tocreateflexibilityto fundour growth efforts and deliverourfinancial commitments, we areworkingtomakeproductivityacorestrengthforP&G.Wehavetakensignificantsteps toacceleratecost savings, including afive-yearcost savings initiative which was announced inFebruary2012.Thecostsavings programcoversallelements of costs includingcost of goodssold,marketingexpenseand non-manufacturing overhead.Innovation hasalwaysbeen - and continues to be - P&G'slifeblood.To consistentlywinwithconsumers around theworld across pricetiers and preferencesandtoconsistentlywin versus our best competitors, each P&G product categoryneedsa fullportfolio ofinnovation, includinga mixofcommercialprograms,productimprovementsandgame-changing innovations.26The Procter&Gamble CompanyFinally, weare focused onimproving operating discipline ineverything we do. Executing better than ourcompetitors ishowwe winwithcustomersandconsumersandgenerateleadership returns for our shareholders.Given currentmarket growth rates, the Companyexpects theconsistentdelivery of the following annualfinancial targetswillresultintotalshareholderreturnsin the top third of thecompetitivepeer group:•Grow organic sales modestly above market growthratesin the categories andgeographies inwhich wecompete,•Deliver CoreEPS growth of highsingle digits, and•Generate free cash flow productivityof 90% orgreater.SUMMARY OF 2013 RESULTSAmounts inmillions, except pershareamounts2013Change vs.Prior Year2012Change vs.Prior Year2011Netsales$84,1671%$83,6803%$81,104Operating income14,4819%13,292(14)%15,495Netearnings from continuing operations11,40222%9,317(20)%11,698Net earningsfromdiscontinued operations—(100)%1,587593%229Netearnings attributable toProcter&Gamble11,3125%10,756(9)%11,797Diluted net earnings per common share3.865%3.66(7)%3.93Dilutednet earnings per share from continuing operations3.8624%3.12(19)%3.85Core earningsper common share4.055%3.85(1)%3.87•Netsalesincreased 1% to$84.2 billion.Organicsalesincreased3%.Unitvolumeincreased2%duetolowsingle-digitincreasesin bothdeveloping and developedregions.•Netearnings attributable to Procter & Gamble were$11.3 billion,anincrease of $556 millionor 5%versusthe prioryearperiod.Netearningsfromcontinuing operations increased$2.1 billion, or 22%, to $11.4billion.Thecombination of thenet year-over-year impact ofacquisition and divestiture gains and the net year-over-year declineinimpairmentcharges drove $1.9billionofthe increase.Theremainingincreasewaslargelydue tonetsalesgrowth and grossmarginexpansion.Net earningsfromdiscontinued operationsdecreased$1.6 billion due to the gain on the sale ofthe snacks businessand theearnings of the snacksbusinesspriortothe divestiture in the prior yearperiod.•Dilutednetearningsper share increased 5% to$3.86.Dilutednetearningspersharefromcontinuingoperationsincreased 24%to $3.86.CoreEPSincreased5%to$4.05.•Cash flow from operating activities was $14.9 billion.Freecashflowwas$10.9billion.Freecashflowproductivitywas95%.ECONOMIC CONDITIONS,CHALLENGESANDRISKSWe discuss expectations regardingfuture performance,eventsand outcomes,suchas our business outlook andobjectives, in annualandquarterlyreports, press releasesandotherwritten andoral communications.Allsuchstatements, except for historical and presentfactualinformation,are"forward-lookingstatements"and arebasedonfinancialdataand our business plans available onlyas ofthetime thestatements are made, which may become out-of-dateorincomplete.We assume no obligation to update anyforward-looking statementsas a resultofnew information,futureevents or otherfactors. Forward-looking statementsareinherentlyuncertainandinvestors must recognize thatevents could be significantly different from our expectations.For more information on risksthat couldimpact ourresults,referto Item1ARiskFactorsin this10-K.Ability toAchieveBusinessPlans.We are a consumerproductscompanyand relyoncontinueddemandforourbrands and products.To achieve business goals, we mustdevelop andsellproductsthatappeal toconsumersand retailThe Procter&Gamble Company27trade customers. Our continued successisdependent onleading-edge innovationwithrespectto both productsandoperations, on thecontinued positive reputations of ourbrands and ourability to successfully maintaintrademarkprotection.Thismeanswe mustbeabletoobtain patentsand trademarks, and respond to technological advances andpatentsgrantedtocompetition.Our success is alsodependentoneffectivesales,advertising andmarketingprograms.Our abilitytoinnovateand executein these areaswill determine theextentto which weareableto growexisting netsalesandvolumeprofitably,especially withrespectto theproductcategoriesand geographic markets(including developing markets)in whichwehavechosentofocus.There are high levels of competitive activity in theenvironments in whichwe operate.To address thesechallenges, wemustrespond tocompetitive factors,includingpricing,promotional incentives,trade termsandproductinitiatives.We must manage each of these factors,as well as maintain mutually beneficial relationships withourkeycustomers,inorder to effectively compete andachieve our business plans.Asa companythat managesa portfolio ofconsumer brands,our ongoingbusinessmodelinvolves a certain levelofongoingacquisition, divestiture andjointventureactivities.We mustbeabletosuccessfully managetheimpactsoftheseactivities, while at the same time deliveringagainst basebusiness objectives.Daily conductof ourbusiness also depends on our ability tomaintain keyinformationtechnologysystems, includingsystems operated bythird-partysuppliers and tomaintainsecurity overourdata.CostPressures.Our costsaresubjecttofluctuations,particularly due to changesincommodity prices,rawmaterials,labor costs,foreign exchange andinterest rates.Therefore,oursuccess is dependent,in part,on ourcontinued ability to manage these fluctuationsthroughpricing actions,costsavings projects, sourcing decisionsandcertain hedgingtransactions,as wellasconsistentproductivityimprovements.Wealsomustmanage our debtandcurrency exposure,especiallyin certain countrieswithcurrency exchangecontrols,suchasVenezuela,China,India,EgyptandArgentina.We need tomaintain keymanufacturingandsupply arrangements,includingsolesupplier and manufacturing plant arrangements,andsuccessfully manageanydisruptions atCompanymanufacturing sites.Wemustimplement,achieveandsustaincost improvementplans,includingouroutsourcingprojectsand those related togeneraloverheadandworkforceoptimization. Successfullymanaging these changes,includingidentifying, developingandretainingkeyemployees, is critical to our success.GlobalEconomicConditions. Demand for our products hasa correlation to global macroeconomicfactors.Thecurrentmacroeconomic factorsremain dynamic.Economicchanges, terroristactivity, political unrest and naturaldisasters may result inbusinessinterruption, inflation,deflationor decreased demand for our products. Oursuccesswilldepend,inpart,onourabilitytomanagecontinuedglobalpolitical and/or economicuncertainty,especiallyinoursignificant geographic markets, duetoterrorist and otherhostileactivitiesornaturaldisasters.Wecouldalso be negativelyimpactedby a global, regionalornationaleconomic crisis,including sovereign riskintheevent ofadeteriorationin the credit worthiness of, or adefault by localgovernments, resulting in a disruption ofcredit markets.Sucheventscouldnegatively impactourability to collect receipts due from governments, includingrefunds of valueaddedtaxes, createsignificantcredit risksrelativeto our localcustomersand depositoryinstitutionsand/ornegatively impact our overallliquidity.Additionally,changes inexchangecontrolsandotherlimitscouldimpactourabilityto repatriateearningsfromoverseas.Regulatory Environment. Changes inlaws,regulations andtherelated interpretationsmay alter the environmentinwhich we do business.This includeschangesinenvironmental, competitive andproduct-relatedlaws, aswellas changes in accounting standards and tax laws or theenforcementthereof.Our ability to manageregulatory, taxand legalmatters (including, but notlimitedto,productliability, patentand other intellectualproperty matters) andtoresolvepending legalmatters withincurrentestimatesmayimpact our results.RESULTS OF OPERATIONSThekey metrics includedin our discussion of ourconsolidated resultsofoperations include netsales,grossmargin, selling, general and administrative expenses(SG&A), other non-operatingitemsandincometaxes.Theprimaryfactors driving year-over-yearchanges in net salesincludeoverall marketgrowthinthecategoriesin which wecompete, product initiatives, geographicexpansionandacquisitionanddivestiture activity,allofwhichdrivechanges in our underlyingunit volume, aswell aspricingactions(whichcanalso indirectly impactvolume),changesin product andgeographic mix and foreigncurrencyimpactson salesoutsidethe U.S.Most of our costof products soldand SG&Aareto someextent variablein nature.Accordingly, our discussion ofthese operating costs focuses primarily on relative marginsratherthanthe absolute year-over-year changesintotalcosts.Theprimary driversof changes in grossmarginareinputcosts(energy andothercommodities),pricingimpacts,product andgeographic mix(for example, grossmarginsindevelopedmarkets aregenerally higher than in developingmarkets for similarproducts), the impacts of manufacturingsavingsprojects and toa lesser extent scaleimpacts(forcosts that are fixedorlessvariable in nature).Theprimarydrivers of SG&Aare marketing-related costs andoverheadcosts. Marketing-relatedcosts are primarily variable innature,althoughwe doachieve somelevel of scale benefitover time due to overall growth and other marketingefficiencies. Overhead costs arealso variablein nature,butonarelativebasis,lessso than marketingcostsdue to our28The Procter&Gamble Companyabilitytoleverageourorganization andsystemsinfrastructuresto support businessgrowth.Accordingly, wegenerallyexperience morescale-related impacts for thesecosts.In FebruaryandNovember2012, theCompanymadeannouncements related toa productivityand costsavingsplantoreducecosts in the areas ofsupplychain, researchanddevelopment, marketing and overheadexpenses.Theplanisdesigned toaccelerate cost reductions bystreamlining management decision making, manufacturingand otherwork processesinorder to helpfund theCompany's growth strategy.TheCompanyexpectsto incurinexcessof$3.5billioninbefore-taxrestructuringcostsover a five-yearperiod(fiscal2012 through fiscal2016) aspartof this plan.Overall,thecostsareexpectedtodeliverinexcess of $2.0 billion in before-tax annual savings.NetSalesFiscal year 2013 compared withfiscalyear 2012Netsales increased1%to $84.2 billionin 2013 on a2%increaseinunitvolume.VolumeinBabyCareandFamilyCaregrew mid-singledigits.Volumein FabricCareandHomeCareand in Health Care grew low single digits.Beautyvolumewasinlinewiththeprioryear.Groomingvolumedecreased lowsingledigits.Volumegrewlowsingledigitsinboth developedanddevelopingregions.Theimpact of overall globalmarket growthwas partially offsetbymarket share declines in certaincategories. Priceincreasesadded 1% to net sales, drivenbyprice increasesacrossall business segments, primarily executedinpriorperiods to offset cost increases and devaluing developingmarket currencies. Foreign exchange reduced netsales by2%. Organic sales growth was 3% driven byboth volumeandpriceincreases.Fiscal year 2012 compared with fiscal year 2011Net sales increased 3% to $83.7 billion in 2012 on unitvolumethat wasconsistent with theprior yearperiod.Difficultmacroeconomicconditionscaused a slowdown inmarketgrowthin fiscal2012,particularlyin developedmarkets. In addition, we initiated a number of priceincreases across each reportable segment in fiscal 2012, inlargepartto recover the risingcostof commoditiesandcurrencydevaluations.Thesefactorsnegatively impactedvolume growth in 2012,but the priceincreases led tohigheroverallsales.Volumegrewlowsingle digitsinBeauty,Grooming,Health Care, and BabyCareandFamily Care.Fabric Careand HomeCare volumedecreasedlowsingledigits.Volumegrewmid-single digitsindevelopingregionsandwas down lowsingle digitsin developed regions.Theimpact of overall globalmarket growthwas partially offsetbymarket share declines in certaincategories. Priceincreasesadded 4% to net sales, drivenby priceincreasesacrossall businesssegmentsand regions, primarily to helpoffsetcommoditycosts anddevaluingcurrencies incertaindeveloping markets. Mix reducednet sales by 1% duetounfavorablegeographic mix acrosstheBeauty, Grooming,HealthCare and Fabric Care andHomeCare reportablesegments and unfavorable productmix. Foreignexchangewasneutralto net sales. Organicsales growth was 3%driven by priceincreases.Operating CostsComparisonsasa percentage ofnet sales; Years ended June 302013BasisPointChange2012BasisPointChange2011Gross margin49.6%3049.3%(160)50.9%Selling,generalandadministrativeexpense32.0%5031.5%(30)31.8%Goodwill and indefinite-lived intangible asset and impairmentcharges0.4%(150)1.9%190—%Operatingmargin17.2%13015.9%(320)19.1%Earnings from continuing operations before income taxes17.6%23015.3%(320)18.5%Netearnings from continuing operations13.5%24011.1%(330)14.4%Netearnings attributable toProcter&Gamble13.4%5012.9%(170)14.6%Fiscal year 2013 compared with fiscal year 2012Grossmargin expanded30 basis points in 2013 to49.6% ofnetsales,driven by higher pricing and manufacturing costsavings, partially offsetby negativemixandhighercommodity costs. Grossmargin waspositivelyimpactedby70basis points fromhigher pricingandapproximately160basis points from manufacturing cost savings. Grossmarginwasnegativelyimpacted by 160basispoints fromnegativegeographic andproductmixbehind disproportionategrowthindevelopingregionsandmid-tierproducts,bothofwhichhavelowergrossmarginsthantheCompany average. Grossmargin was also reducedbycapacity investmentsandto alesser extent byforeign exchange impactsandhighercommoditycosts.TotalSG&A increased 2% to $27.0 billion in 2013, drivenbyachargeforthebalancesheet impactfromthedevaluationoftheofficial foreignexchangerateinVenezuela and an increase in marketing spending, partiallyThe Procter&Gamble Company29offsetby reducedoverheadcosts asa resultoftheproductivity and cost savingsplan. SG&A as a percentageof netsales increased50 basis points to 32.0%largely duetoa40basis point impact fromtheVenezuela devaluationchargeand a 10basispoint increase inmarketingspendingas a percentageof net sales. Overheadcosts asapercentageof net salesdeclined20 basis points, as a 70-basispointbenefit from our productivity and costsavingsplan and 20basis points of lower restructuringcosts werelargely offsetby the impact of foreign exchange.This was dueto ahigherportion of SG&Aspending in strengtheningcurrenciesascompared to net sales, higher employee wages and benefitcostsandincreased merchandisinginvestments.In fiscal2013weincurred impairmentcharges of $308million($290millionafter-tax)relatedtothe carrying valueof goodwillin ourAppliancesbusiness and the related Brauntrade name intangible asset. In fiscal 2012 we incurredimpairment charges of $1.6billion($1.5 billion after-tax)relatedto thecarrying valuesof goodwillin ourAppliancesand Salon Professional businesses and our KolestonPerfectandWella indefinite-livedintangible assets,whicharepartof our Salon Professionalbusiness. See Note2 to ourConsolidated Financial Statements for more details,includingfactors leading totheimpairment charges. Sincegoodwillisincluded in Corporatefor internalmanagementandsegmentreporting,the goodwillimpairment chargesareincluded intheCorporate segment.Theindefinite-livedintangibleasset impairmentsarealso included in theCorporate segment formanagement and segment reporting.Fiscal year 2012 compared withfiscalyear 2011Grossmargincontracted 160basis points in 2012to49.3%of netsales.The reduction in gross margin was drivenmainlybya 230-basispointimpact from higher commodityand energy costs. Gross marginwasalso negativelyimpacted by 200 basis points from negativegeographic andproduct mixand by 30 basis points from theimpact ofincreased restructuring spending due to the productivity andcost savings plan.The negative mix resulted fromdisproportionate growth in developing regions, asdevelopingregionshavelower relative grossmarginsthandevelopedregions.These impacts were partially offsetby a200-basis point impact fromincreased pricinganda 140-basis pointimpactfrom manufacturingcost savings.TotalSG&A increased 3% to $26.4 billion in 2012, drivenby higher marketing spendingto support initiative activityand a $510 million increaseinrestructuringspending fromour productivity andcostsavingsplan, partially offsetby areduction in competition law fines (see Item 3 of this Form10-Kand Note11 to our Consolidated FinancialStatements), whichwere $303 millionin 2011comparedto$75millionin 2012. SG&A as apercentage of netsalesdecreased30 basis points to 31.5%, as reducedcompetitionlawfinesandthe impactofincreasedscaleleverageonmarketing and overhead costs from higher sales werepartially offsetby 60 basis points of incrementalrestructuring costs.Non-Operating ItemsFiscal year 2013 compared with fiscal year 2012Interest expensedecreased 13%in 2013 to $667 million, duetolower interestrates on floating-rate debt. Interest incomeincreased 13% in 2013 to $87 million, due to an increase incash,cash equivalentsand debtsecurities.Other non-operating income, net primarily includes divestiture gainsandinvestment income.Othernon-operatingincomeincreased $757 million to $942 million in 2013 mainly duetonetacquisitionand divestitureactivities.A holding gainof $631million resultingfrom thepurchaseof the balanceofP&G'sBaby Careand FeminineCare jointventurein Iberiaand a gain ofapproximately$250 million fromthe sale ofourItalianbleachbusiness,bothin the currentyear,werepartially offset bya$130 million divestituregain fromthePUR water filtration business in the prior year period.Fiscal year 2012 compared with fiscal year 2011In 2012,interestexpense decreased7%to$769 million, dueto lowerinterest rateson floating-rate debt and a decrease inaveragedebtoutstanding.Interest income increased 24% in2012 to $77 million,due to anincrease in cash, cashequivalents and debt securities. Other non-operatingincome, net decreased $86 millionto$185millionin2012mainly behindtheimpact ofminorbrand divestitures.Adivestiture gain fromthe saleofthe PUR water filtrationbrandin fiscal 2012 was less than the Zest and Infasildivestiture gainsinfiscal2011.IncomeTaxesFiscal year 2013 compared with fiscal year 2012Theeffective taxrateoncontinuingoperations decreased390 basis pointsto23.2%in2013.The primary drivers ofthis ratedeclinewere as follows:•Approximately 210 basis points due to the non-deductibility of impairment charges related to ourAppliances and Salon Professional businesses,whichwerehigherinthebaseperiodversusthecurrentyear.•Approximately 100 basis points due tothetaximpactsfromacquisitionanddivestiture activity(primarily the non-taxablegain on the purchase ofthe balanceofthe BabyCare andFeminineCarejointventure inIberia).•Approximately50basispointsduetothe netimpactoffavorablediscreteadjustmentsrelated touncertain incometaxpositions.The currentyearnetbenefit was $275, or 180 basis points,versus anetbenefitof 130 basis points in the prior year.•Approximately20 basispoints from theimpact oftheVenezuelacurrencydevaluation.30The Procter&Gamble CompanyFiscal year 2012 compared withfiscalyear 2011In 2012,theeffectivetaxrate on continuing operationsincreased510 basis points to27.1% primarilyduetoa 250-basis pointimpactfrom the non-deductibilityof impairmentcharges infiscal2012andthe net impact offavorablediscrete adjustments related to uncertain income taxpositions, which drove250 basispoints of thetaxratedifference.Thenetbenefit fromfavorable discreteadjustmentswas$165 million in fiscal 2012, which netted to130 basispoints, versus 380 basis points of net benefits infiscal2011.Net EarningsFiscal year 2013 compared withfiscalyear 2012Netearningsfrom continuingoperationsincreased$2.1billion or 22% to $11.4 billion in 2013.Thecombinationofthenetyear-over-yearimpact of acquisition and divestituregainsandthe net year-over-year decline inimpairmentcharges drove$1.9billion of theincrease. Earnings alsoincreaseddueto the increase innet salesandthe30-basispointgrossmargin expansioninthecurrentyear.Netearningsfrom discontinuedoperationsdecreased$1.6billion in 2013due to thegainon thedivestitureofthesnacks business and theearningsfrom the snacks businesspriorto thedivestitureintheprioryear period.Netearningsattributable toProcter& Gamble increased $556 million,or5% to$11.3 billion.Dilutednet earnings per share from continuing operationsincreased 24% to $3.86 due to the increase in net earningsandareduction in shares outstanding.Thenumber of sharesoutstanding decreased due to $6.0 billion oftreasury sharerepurchases under our publicly announced share repurchaseprogram,partially offsetby shares issued under share-basedcompensation plans. Diluted netearningsper share fromdiscontinuedoperations was$0.54 in the prior yearperiod(zeroin thecurrentperiod) dueto thegain onthedivestitureof the snacks businessandearnings of the snacks businessprior to the divestiture.Dilutednetearnings per shareincreased 5% to $3.86.CoreEPSincreased 5%to$4.05 primarily duetoincreasednetsales, gross marginexpansionandthe reductioninsharesoutstanding. Core EPSrepresentsdiluted net earnings persharefromcontinuing operations excluding thecurrentperiodchargefor thebalance sheetimpact fromthedevaluationoftheofficial foreignexchangerateinVenezuela,thecurrentyearholding gain on thepurchaseofthe balance of our Iberian joint venture and chargesin bothyearsforEuropean legal matters,incremental restructuringrelated toourproductivity andcost savingsplan andimpairments ofgoodwillandindefinite-livedintangibleassets.Fiscal year 2012 compared withfiscalyear 2011In 2012, netearnings from continuing operations decreased20% to $9.3 billion asan increase innet saleswas morethanoffsetby the impact of impairmentcharges,incrementalrestructuring charges and an increase in income taxes.Operatingmargin declined320 basispoints dueprimarily toa 190-basis pointimpactfromgoodwill andintangibleassetsimpairment chargesin ourAppliances andSalonProfessionalbusinesses and an 85-basispointimpact fromincremental restructuring charges.Theimpactofhighercommoditycosts andnegative productmixwaslargelyoffsetbyhigherpricing, manufacturing costsavingsandincreased scale leverage.Net earningsfromdiscontinued operationsincreased$1.4billion in 2012due to thegainon thedivestitureofthesnacks business. Net earnings attributable to Procter &Gamble declined 9%to$10.8billion.Dilutednet earnings per share from continuing operationsdecreased 19% in 2012 to $3.12 duetothedecline innetearnings, partially offsetby areduction insharesoutstanding.Thereduction in the number of sharesoutstanding was driven bytreasury sharerepurchases of $4.0billion,which weremadeunder ourpublicly announcedshare repurchase program,partially offsetbyshares issuedunder share-based compensation plans. Diluted net earningsper sharefromdiscontinuedoperations increased $0.46 dueto the gain on the divestiture of the snacks business, partiallyoffset by a decrease in the earnings of the snacks businessprior to the divestiture.Dilutednetearnings per sharedecreased 7% fromtheprioryear to$3.66 in fiscal2012.CoreEPS in2012 decreased 1%to$3.85.Venezuela Currency ImpactsVenezuela is a highly inflationary economyunderU.S.GAAP.As a result, the U.S. dollaris thefunctionalcurrencyfor our subsidiaries inVenezuela.Anycurrencyremeasurementadjustments for non-dollar denominatedmonetary assetsandliabilities held by these subsidiaries andothertransactional foreign exchange gains and losses arereflectedinearnings.TheVenezuelangovernment hasestablishedoneofficialexchange rate for qualifying dividends andimported goodsandservices.That rate wasequal to4.3BolivaresFuertes(VEF)to oneU.S.dollarthrough February 12, 2013.Effective February 13, 2013, theVenezuelangovernmentdevalued its currency relative to the U.S.dollar from 4.3 to6.3 (officialrate).Theremeasurementofour balance sheetsin2013to reflect the impact ofthe devaluationresulted inanetafter-taxcharge of $236 million ($0.08 per share).Therewillalso be an ongoing impact relatedtotranslatingourincome statementatthenew exchange rates. Moving fromthe 4.3rate tothe 6.3 rate will reduce future total Companyreportednet sales by less than1% on agoing basis.Thisdoes not impact our organic salesgrowth rate,whichexcludestheimpact of foreigncurrencychanges.Versus ourexisting business plans, the exchange rate changereducedour reportedearningsper share by approximately$0.04pershare in 2013.The Procter&Gamble Company31Transactions at the officialexchangerate are subject toCADIVI (Venezuelan government's ForeignExchangeAdministrativeCommission). Ouroverall results inVenezuelaarereflectedin our Consolidated FinancialStatementsattheofficial rate,which iscurrently therateexpected tobe applicable to dividend repatriations.Inadditionto theofficial exchange rate, therehadbeenaparallel exchange market(SITME)that was controlled bytheCentralBankofVenezuelaastheonly legal intermediarytoexecute foreign exchangetransactionsoutsideofCADIVI.Thepublishedrate was 5.3through February12,2013.The notionalamountoftransactionsthatran throughthis foreign exchange rate for nonessential goods wasrestrictive, which for us essentially eliminated our ability toaccessany foreignexchange rate other than the officialCADIVI rate to pay for importedgoodsand/or manageourlocal monetary asset balances.When the governmentdevalueditscurrencyinFebruary,2013,it alsoeliminatedSITME,but establishedanew exchange ratemarketprogram, referred toas SICAD.As of June 30, 2013, thereis little official information available on thenew auctionprocessor theunderlyingauction rates.Asof June30, 2013,wehad netmonetaryassetsdenominated in local currencyof$913million.Localcurrency balancesdecreased14% sinceJune 30, 2012 duetothe impactof the February 2013 devaluation and an increasein paymentsbythe government through CADIVI,partiallyoffsetbyanincreaseinthenet amount of indirect valueaddedtaxes (VAT) receivablefromthegovernment fromgoodsreceiptsand shipments.Priortothe February2013devaluation,aportionofournetmonetary assetsdenominated in localcurrency wasremeasuredusingtheSITMErate because we plannedtouse thatamount ofthenetassets (largely cash) to satisfy U.S. dollar denominatedliabilitiesthatdonotqualifyforofficial ratedollars.Theremaining net monetary assetbalanceshadbeen reflectedwithin our Consolidated Financial Statements atthe 4.3officialexchange rate. However, as notedin theprecedingparagraph, the parallel SITME market was eliminated at thetimeoftheFebruary2013 devaluation, and there is littleinformation availableontheSICADmechanism.Accordingly, allof our netmonetary assetsaremeasured attheofficial 6.3 exchange rate atJune 30, 2013.Additionally,theVenezuelangovernment enactedapricecontrollawduringthe secondhalf offiscal2012 thatnegativelyimpacted thenetsellingpricesofcertainproductssoldinVenezuela.Depending on theultimate transparency andliquidity of theSICAD market, it is possible that we mayremeasure aportion of our netmonetarybalances(the amount ofthenetassets needed to satisfyU.S. dollar denominated liabilitiesthat donot qualifyfor official rate dollars,approximately$240 million asof June 30, 2013) atthe SICADrate.Thiswouldresult in an additional devaluation charge. Overtime,weintend to restore netsalesand profittolevels achievedpriorto the devaluation.However, our ability to do so willbe impactedbyseveral factors.These includetheCompany's abilityto mitigatethe effectof the recentlyenacted pricecontrols,any potentialfuturedevaluation, anyfurtherVenezuelan government price or exchange controls,economic conditionsand the availability of raw materialsandutilities.In addition,dependingonthefutureavailability ofU.S.dollars attheofficialrate,ourlocal U.S.dollarneeds,ouroverall repatriationplans, thecreditworthiness ofthe local depository institutions andother creditors and our abilitytocollect amounts due fromcustomersandthe government,includingVATreceivable,we may have exposure for our local monetary assets.Wealso have devaluation exposure for the differentialbetweenthecurrent and potential futureofficialexchangerates.SEGMENT RESULTSSegment results reflect informationon thesame basis we useforinternal managementreporting andperformanceevaluation.Theresults ofthese reportable segments do notincludecertainnon-business unitspecificcostssuchasinterest expense,investing activities and certainrestructuringandasset impairmentcosts.These costsarereported in ourCorporate segment and areincluded aspart of our Corporatesegmentdiscussion.Additionally, as described in Note 12 tothe Consolidated FinancialStatements, we have investmentsin certain companies over which we exert significantinfluence,but do notcontrol the financial and operatingdecisions and, therefore, do not consolidate thesecompaniesfor U.S.GAAP purposes("unconsolidatedentities"). Giventhat certainof theseinvestments aremanagedas integralparts oftheCompany's business units, they are accountedforas if they wereconsolidated subsidiariesformanagementandsegmentreporting purposes.This means pre-taxearningsin thebusinessunits include100% of each pre-taxincomestatement component.Indeterminingafter-taxearningsin thebusinessunits, we eliminatetheshareofearningsapplicableto otherownershipinterests, ina mannersimilartononcontrollinginterest, and apply the statutory taxrates.Eliminations to adjust eachlineitem to U.S.GAAPare included in our Corporate segment.Allreferencesto netearnings throughout the discussion ofsegment results refertonetearnings from continuing operations.32The Procter&Gamble CompanyNetSales Change Drivers(2013 vs. 2012)VolumewithAcquisitions&DivestituresVolumeExcludingAcquisitions&DivestituresForeignExchangePriceMixOtherNetSalesGrowthBeauty0%0%-2%2%-1%-1%-2%Grooming-1%0%-4%2%0%-1%-4%HealthCare3%3%-3%1%1%1%3%FabricCare andHomeCare3%3%-2%1%-1%0%1%Baby Careand Family Care4%4%-2%1%-1%0%2%TOTAL COMPANY2%2%-2%1%0%0%1%NetSalesChangeDrivers(2012 vs.2011)VolumewithAcquisitions&DivestituresVolumeExcludingAcquisitions&DivestituresForeignExchangePriceMixOtherNetSalesGrowthBeauty2%2%0%3%-3%0%2%Grooming1%1%-1%2%-1%0%1%HealthCare1%0%0%3%-1%0%3%FabricCare andHomeCare-1%-1%0%5%-1%0%3%Baby Careand Family Care1%1%0%5%0%0%6%TOTAL COMPANY0%0%0%4%-1%0%3%Net sales percentagechanges are approximations based onquantitative formulas that areconsistently applied. Other includes thesalesmiximpact from acquisitions and divestitures and rounding impacts necessary to reconcile volume to net sales.BEAUTY($millions)2013Changevs20122012Changevs2011Volumen/a0%n/a+2%Netsales$19,956-2%$20,318+2%Net earnings$2,474+4%$2,390-6%% of NetSales12.4%60 bps11.8%(100) bpsFiscal year 2013 compared withfiscalyear 2012Beauty netsales decreased 2% to$20.0billion in 2013 onunit volume that was in line with the prior year period.Organicsalesincreased 1%. Price increases contributed2%tonet sales growth. Unfavorable geographicmixreducednetsales by 1% due to disproportionategrowth indevelopingregions,which havelower than segmentaveragesellingprices.Unfavorable foreignexchangereducednetsalesby2%.Themix impactofminorbranddivestituresreduced netsales by1%. Global market shareof the Beautysegment decreased0.5points.Volumeincreasedlowsingledigitsindevelopingmarketsanddecreasedlowsingle digitsin developedregions.Volume inHairCareand Color was inline with theprior yearperiod duetoalow single-digitincreaseindevelopingregions from marketgrowthandinnovation offset byalowsingle-digitdecline in developedregions fromreducedshipmentsasaresult of price gapsversus competition. Globalmarketshareof thehaircare andcolor category was down more than half a point.Volume inBeauty Carewasinlinewith the prior year period.A lowsingle-digit volume increase in personal cleansing and amid-single-digitincrease indeodorants, drivenby innovationandmarketgrowthin developingregions, was offset by amid-single-digitdecline in facial skin care,where globalmarketshare decreasedabout a point.Volume inSalonProfessional was in line with the prior yearperiodduetomid-single-digitgrowthindeveloping marketsbehind newinnovations,offset bya lowsingle-digitdecline indevelopedregionsfrommarketcontraction.Volume in Prestige was inlinewith theprioryearperioddue to minor branddivestitures and market contractioninWestern Europe,offset by innovation and marketgrowth in developingmarkets. Organicvolume in Prestige increasedlowsingledigits.Net earnings increased 4%to $2.5 billion, aslower net salesweremore than offsetby a60-basispoint increasein netearnings margin. Net earnings margin increased due to grossmarginexpansion,adecreasein SG&A as a percentage ofsalesand alower effectivetaxrate. Gross marginincreasedbehindmanufacturingcostsavingsandhigherpricing.SG&Aas apercentageofnetsalesdeclinedlargelyduetoreducedoverheadspending.The effectivetaxratedeclineddueto the geographic mix of earnings.Fiscal year 2012 compared with fiscal year 2011Beautynetsalesincreased 2% to $20.3billion in 2012 onunitvolume growth of 2%. Organicsales alsogrew 2% on2% organicvolume growth. Priceincreasescontributed 3%to net sales growth. Mix negatively impacted net sales by3% behind a decreaseinSalonProfessionalandThe Procter&Gamble Company33disproportionate growth in developingregions, whichhavelower thansegment average selling prices. Global marketshareof theBeautysegment decreased0.3points.Volumeincreased mid-single digits in developing regionswhiledeveloped regionvolumedecreased lowsingledigits.Volume inHairCareandColorgrewmid-singledigitsbehind highsingle-digit growthindevelopingregions led byPanteneinitiatives and Head &Shoulders geographicexpansion.Volume in developed regionswas down lowsingledigits due to competitiveactivity.Globalmarketshare of the haircare category wasunchanged.Volume inBeauty Caredecreasedmid-singledigits due totheZest andInfasildivestitures andthe impact ofcompetitiveactivityinNorthAmericaandWestern Europe which contributed toabouthalfapointofglobal share loss.VolumeinSalonProfessional wasdownhigh singledigitsmainly duetomarketcontractioninEuropeandthe impact of competitiveactivity.Volumein Prestige Productsincreased mid-singledigits driven by initiative activity, partially offsetbyminorbrand divestitures.Netearnings decreased6% to$2.4 billion as highernetsalesweremore than offset by a100-basispointdecreasein netearnings margin. Net earnings margin decreased due togross margincontraction partiallyoffsetbylower SG&A asapercentage ofnetsales.Grossmargindecreasedprimarilydue to an increase incommodity costsand unfavorablegeographicand productmix, partially offsetbymanufacturingcostsavings and higher pricing.SG&A as apercentageof netsalesdecreased dueto scale leverage fromincreasedsales.GROOMING($millions)2013Changevs20122012Changevs2011Volumen/a-1%n/a+1%Netsales$8,038-4%$8,339+1%Net earnings$1,837+2%$1,807+2%% of NetSales22.9%120 bps21.7%10 bpsFiscal year 2013 compared withfiscalyear 2012Groomingnet sales decreased 4% to $8.0billion in 2013 ona 1%decreasein unitvolume. Organicsales wereup 2% onorganic volume that wasinline withthe prioryearperiod.Price increases contributed2% tonetsalesgrowth.Unfavorableforeignexchange reduced net sales by 4%.Theimpact of theBraun householdappliances businessdivestiture reducednet sales by 1%. Global market shareofthe Grooming segment increased0.4points.Volumeincreased low singledigitsin developingregions anddecreased mid-singledigitsindeveloped regions. ShaveCarevolume increased lowsingle digits due to lowsingle-digit growth in developing regions,primarily behind marketgrowth and innovation expansion, partially offset byalowsingle-digit decreaseindeveloped regions primarily due tomarketcontractioninWestern Europe.Globalmarketshareof the blades and razors category was up less than half apoint.VolumeinAppliancesdecreased double digits due tothe sale ofthe Braunhouseholdappliancesbusiness,competitiveactivityandmarket contraction.OrganicvolumeinAppliances declinedhighsingledigits.Globalmarketshareoftheappliances categorydecreasednearlyhalfapoint.Netearnings increased2% to $1.8billion due to a120-basispoint increase in net earningsmargin, partially offsetby thedecrease in net sales. Net earnings margin increasedprimarily duetogrossmargin expansion. Gross marginincreased due to pricing and manufacturingcostsavings.SG&A as a percentage ofnet sales decreased nominally asincreasedmarketing spendingwas offsetby reducedoverheadcosts.Fiscal year 2012 compared with fiscal year 2011Groomingnet sales increased 1% to $8.3 billionin 2012ona 1%increase in unitvolume.Organicsales were up 2%.Price increases contributed2%tonetsalesgrowth.Unfavorable geographic and product mix decreasednet salesby1% mainly dueto disproportionate growth indevelopingmarkets, which have lower than segment average sellingprices. Unfavorableforeign exchange decreased net salesgrowth by 1%. GlobalmarketshareoftheGroomingsegmentdecreased 0.2points.Volume grew mid-singledigits in developingregionsdue to initiative activityandmarketgrowth and decreasedlow singledigitsin developedregions primarily due tocompetitiveactivity.VolumeinShaveCarewas uplow single digitsdueto mid-single-digitgrowth indevelopingregions behind initiatives,FusionProGlidegeographicexpansion andmarket growth, partiallyoffset by a low single-digit decrease in developed regionsduetomarket contraction andtheimpactofcompetitiveactivity. Globalmarket share of the blades and razorscategorywasunchanged.VolumeinAppliances decreasedmid-singledigits dueto marketcontractioninWesternEurope andtheimpact of competitive activity. Globalmarketshareof thedryshavecategory was downover 2points.Netearningsincreased2%to $1.8billionduetohighernetsalesand a 10-basispoint increase innet earningsmargin.Thenetearningsmarginincrease was driven byadecreasein SG&A as a percentage ofnetsales, largely offset by grossmargin contraction. SG&A as a percentage ofnetsalesdecreased duetoreductions in both overhead and marketingspending. Gross margin decreased primarily due to anincreaseincommodity costs and unfavorable geographicandproductmix, partially offsetby priceincreases.34The Procter&Gamble CompanyHEALTHCARE($millions)2013Changevs20122012Changevs2011Volumen/a+3%n/a+1%Netsales$12,830+3%$12,421+3%Net earnings$1,898+4%$1,826+2%% of NetSales14.8%10 bps14.7%(20) bpsFiscal year 2013 compared withfiscalyear 2012HealthCarenet salesincreased 3% to $12.8 billion in 2013on a3%increasein unitvolume.Organicsales were up 5%.Price increases contributed1% tonetsalesgrowth.Favorableproduct mix, partially offset by unfavorablegeographicmix,increased net sales by 1%. Unfavorableforeignexchangereduced net sales by 3%.Themix impactfromacquisitions and divestituresincreased net salesby 1%.Global market shareofthehealth caresegment decreased0.3points.Volume increasedmid-single digits indevelopingregions andincreased low singledigits indeveloped regions. Oral Care volume increased mid-singledigits due to geographicexpansion, innovation and marketgrowth. Globalmarket share of theoralcarecategorywasdownslightly.Volume in PersonalHealth Care increasedmid-single digits partially due toanetincreasefrom prioryear acquisition anddivestitureactivity (theadditionofthePGT Healthcare partnership and New ChapterVMS,partially offsetby the divestitureofthePuR business).Organic volume increasedlow singledigits primarilyduetothelaunchof ZzzQuilandgeographicexpansionforVicks.Volume inFeminine Care increasedlow single digits withmid-single-digit growth in developing markets behindmarketgrowth andinnovation partially offset by alowsingle-digitdecreasein developed regions duetoincreasedpromotionalactivity fromcompetition andmarketcontraction.Global market shareofthefemininecarecategory was down halfa point.Netearningsincreased4%to $1.9billiondue tohighernetsales anda10-basispoint increasein netearnings margin.Net earnings margin increased due to a reduction inoverheadspending, partiallyoffsetby an increase inmarketingspendingandgrossmargincontraction.Grossmargin decreaseddue toincreased commoditycosts andsupply chaininvestments,partiallyoffset byhigherpricingandmanufacturing costsavings.Fiscal year 2012 compared withfiscalyear 2011HealthCarenet salesincreased 3% to $12.4 billion in 2012on 1% growthinunitvolume.Organicsales wereup 2% onflat organic volume. Priceincreases contributed3%tonetsalesgrowth. Mix negatively impacted netsales by 1% dueto disproportionate growthincertain developing countriesand products with lower than segment average selling prices.Globalmarket share of the Health Care segment decreased0.1points.Volume increasedmid-single digits indeveloping regionsanddecreasedlowsingledigitsindeveloped regions. Oral Carevolumewas in line with theprior year period astheexpansion of Oral-BtoothpasteinWestern Europe andLatinAmericawas offset by theimpactof competitiveactivityin developedmarketsandAsiaandlost volume followingpriceincreases inAsia. Globalmarketshareoftheoralcarecategorywas downslightly.Volume in PersonalHealth Care increased low single digitsdrivenbythe additionofthePGTHealthcarepartnership.Organicvolumewas down low singledigits as thebenefitsfrom market growth weremorethan offset by lowershipmentsofPrilosec OTC in NorthAmerica.All-outletvalueshareoftheU.S.personalhealthcare marketwasdownslightly.VolumeinFeminineCarewas up lowsingledigits driven by mid-single-digit growth in developingmarketsduetomarket growth andinitiativeactivity inIndia,Brazil and CEEMEA. Feminine Care global market sharewas down about half apoint.Net earningsincreased 2% to $1.8 billion behind higher netsales partiallyoffsetby a 20-basis point decreaseinnetearnings margin. Net earnings margin decreased due togross margin contraction, partiallyoffsetbylower SG&A asapercentage ofnetsales.Grossmargindeclinedduetohigher commodity costs and unfavorableproductandgeographic mix, partiallyoffsetbymanufacturing costsavings and price increases. SG&A asapercentageofnetsalesdecreased primarily due toscale leveragefromincreasedsales.FABRIC CAREANDHOME CARE($ millions)2013Changevs20122012Changevs2011Volumen/a+3%n/a-1%Netsales$27,448+1%$27,254+3%Net earnings$3,126+7%$2,915-6%% of NetSales11.4%70 bps10.7%(100) bpsFiscal year 2013 compared with fiscal year 2012FabricCare andHomeCarenetsalesincreased 1%in2013to $27.4 billionon a 3%increase inunitvolume.Organicsales were up 3%. Price increases contributed 1% to netsalesgrowth. Unfavorableproduct mixdecreased netsalesby 1% driven by a reductioninPetCarevolume,which hashigherthansegment average selling prices. Unfavorableforeign exchangereduced netsalesby 2%. Globalmarketshareof the Fabric Care and Home Caresegmentdecreased0.3points.Volume increasedmid-single digits indeveloping regions andlow singledigits in developedregions.Fabric Care volumeincreased lowsingledigitsbehind low single-digit growth in developed regions andmid-single-digitgrowthindevelopingregions,drivenprimarily byAsia.Overall growth due toinnovationandmarketgrowthwaspartiallyoffset bythe impacts ofcompetitive activity.Global marketshare of thefabriccarecategory decreased more than half a point. Home Carevolumeincreased mid-singledigits driven by a high single-digitincreasein developingmarkets, behind innovation anddistribution expansion, and a low single-digit increase indevelopedmarkets primarilyduetothe impactofreducedThe Procter&Gamble Company35pricinginNorthAmerica.Global marketshareof thehomecare categorywas unchanged. Batteriesvolume increasedlow singledigitsdue to amid-single-digitincreaseindevelopingregionsfrom marketgrowthandgeographicexpansion, partially offset by a low single-digitdecreaseindevelopedmarkets due to market contraction and sharelosses, primarilybehind higher pricinginWesternEurope toimprovethe margin structure. Global market shareof thebatteriescategorywasunchanged.Pet Carevolumedecreased mid-singledigitsdue tocompetitive activityandthe impact of productrecalls for Natura in developedmarkets.Volumewasin line withtheprior yearindevelopingregions. Global market shareof thepet carecategorywasdown less thanhalf a point.Netearningsincreased 7% to$3.1billionduetoa70-basispoint increase in net earningsmarginandtheincreaseinnetsales.Netearningsmarginincreasedmainly dueto grossmargin expansion. Gross margin increased due to higherpricingand manufacturing cost savings,partially offsetbyhighercommodity costsandthe impactfromproductrecallson theNatura brand.SG&Aas apercentageof netsales wasnearlyunchanged,asincreased marketingspendingwaslargelyoffsetbyreducedoverhead costs.Fiscal year 2012 compared withfiscalyear 2011FabricCare andHomeCare netsales increased 3% to$27.3billionin 2012. Unitvolumedecreased 1%.Organicsaleswere up 3%. Priceincreases contributed 5%tonetsalesgrowth. Mix negativelyimpacted net sales growth by 1%dueto disproportionategrowth of mid-tier productlinesanddevelopingregions,which havelower than segmentaverageselling prices. Global market share of the Fabric Care andHomeCare segment decreased0.3points.Volumeindevelopingregions grew mid-singledigits, while volumeindeveloped regions decreasedmid-single digits. FabricCarevolume decreasedlow singledigits mainly due to the impactof price increases in NorthAmerica, partiallyoffset bygrowth inAsia. Global market share of the fabric carecategorydecreased half apoint. HomeCarevolumeincreased low single digits driven by initiative activity anddistributionexpansion indeveloping regions,partially offsetby alowsingle-digit decline in developedregions due totheimpactof price increases. Globalmarketshare of the homecarecategory was unchanged. Batteries volume decreasedlow single digits due to market contraction and distributionlossesindeveloped markets, partially offset by marketgrowth and distribution expansion in developing regions.Globalmarketshare ofthebatteries category increasedabout half a point. Pet Care volume decreased high singledigitsdue mainlyto market contractionandcustomerinventory reductions. Global market share of the pet carecategory wasdown about half a point.Net earnings decreased6% to$2.9 billionas net salesgrowth wasmorethan offset by a 100-basis pointdecreasein net earningsmargin. Net earnings margindecreasedprimarily duetogrossmargin contraction. Gross margindecreased mainlydueto higher commoditycostsandunfavorable product and geographic mix, partially offsetbymanufacturing costsavings and higher pricing.SG&A as apercentage of net sales decreased nominallyashighermarketingcostswerelargely offsetby overheadscaleleverage fromincreased sales.BABY CAREAND FAMILY CARE($ millions)2013Changevs20122012Changevs2011Volumen/a+4%n/a+1%Netsales$16,790+2%$16,493+6%Net earnings$2,242+6%$2,123+7%% of NetSales13.4%50 bps12.9%20 bpsFiscal year 2013 compared with fiscal year 2012Baby Care and Family Care net sales increased2% to $16.8billionin 2013 on 4% volume growth. Organicsales wereup 4%. Pricing added 1% to net sales growth. Productmixreduced net sales by 1% due to disproportionate growth ofFamily Care, which has lower than segment average sellingprices.Unfavorable foreign exchange reducednetsalesby2%. Global market shareof theBaby CareandFamilyCaresegment decreased0.3points.Volumeincreased mid-singledigits in developing regions and lowsingledigits indevelopedregions.Volumein Baby Care increased lowsingle digitsas a mid-single-digit increase in developingregionsfrommarket growth, distribution expansionandinnovation,was partiallyoffset by a low single-digitdecrease in developed regionsduetomarket contractionandcompetitive promotionalactivity, primarily inWesternEurope. Global market shareofthebabycarecategorydecreasednearly halfa point.Volume inFamilyCareincreasedmid-single digits primarily due to market growthandinnovation onCharmin and Bounty. In the U.S., all-outletshareof the family care category was flat.Net earnings increased 6% to $2.2 billion due to the increasein net salesand a 50-basispoint increase in net earningsmargin. Net earnings margin increased due to gross marginexpansion.The increase in grossmargin was driven bytheimpactof higher pricing and manufacturing and commoditycostsavings, partiallyoffset byunfavorable product andgeographic mix.Fiscal year 2012 compared with fiscal year 2011Baby Care and Family Care net sales increased6% to $16.5billionin 2012 on 1%volumegrowth. Organicsaleswereup6%. Pricing added 5% to net sales growth. Global marketshare of the Baby Care and Family Care segment increased0.2 points.Volume grew doubledigitsin developing regionsanddecreased lowsingle digits indeveloped regions.Volumein Baby Care was up mid-singledigits behindmarketsize growth and distribution expansion indevelopingregions,partially offset by declines in NorthAmericaandWesternEurope fromdiapermarketcontraction.Globalmarketshare of the baby carecategory increasedmore thanhalfapoint.VolumeinFamilyCaredecreasedlowsingle36The Procter&Gamble Companydigits primarily due to competitive activity and the impact ofapriceincreaseinNorthAmerica.IntheU.S.,all-outletshare of the familycare categorywas down half apoint.Net earningsincreased 7%to $2.1billion duetosalesgrowth and a20-basis pointincreasein net earnings margin.Net earnings margin increased mainly dueto a decreaseinSG&Aasapercentageofnetsales,partially offset by alowergross margin.Thereductionin gross marginwasdrivenprimarily byhighercommodity costs and unfavorablegeographicand productmix, partially offsetby theimpact ofhigher pricing. SG&A as a percentage ofnetsales decreasedduetoscale leveragefrom increasedsales.CORPORATE($millions)2013Changevs20122012Changevs2011Netsales$(895)-22%$(1,145)-9%Net earnings$(175)N/A$(1,744)N/ACorporate includes certain operating and non-operatingactivities not allocatedto specific business units.Theseinclude:theincidentalbusinessesmanagedat the corporatelevel;financing and investingactivities; othergeneralcorporate items; the historical results of certain divestedbrandsandcategories;certainasset impairmentcharges;andcertainrestructuring-type activities to maintain a competitivecost structure, including manufacturing and workforceoptimization. Corporate also includes reconciling items toadjusttheaccounting policies usedin the segments to U.S.GAAP.Themostsignificantreconcilingitems includeincometaxes (toadjust from statutory ratesthat are reflectedin thesegmentstotheoverallCompanyeffective taxrate),adjustments forunconsolidated entities (to eliminate netsales,cost of products sold andSG&A forentities thatareconsolidatedinthesegments but accounted for usingtheequity methodforU.S.GAAP)andnoncontrollinginterestadjustmentsfor subsidiaries where we do nothave100%ownership. Since certain unconsolidated entities and lessthan 100%-owned subsidiaries aremanaged as integral partsof therelatedsegments, theyare accounted for similar to awholly-owned subsidiaryfor managementand segmentpurposes.This means our segment results recognize100%ofeach income statementcomponentthroughbefore-taxearnings inthe segments, with eliminations forunconsolidatedentities andnoncontrollinginterestsinCorporate. In determining segmentnetearnings,weapplythestatutory tax rates(withadjustments to arrive at theCompany'seffectivetaxratein Corporate) and eliminate theshare of earnings applicableto other ownership interests, ina manner similar tononcontrolling interest.Corporatenetsalesprimarily reflecttheadjustment toeliminatethesales of unconsolidated entities included inbusiness segmentresults.Accordingly, Corporate net salesaregenerallynegative. Negative net sales in Corporatefor2013 decreasedby $250million dueto1)the purchaseofthebalanceof ourIberian jointventure (after which thisbusiness isconsolidatedfor both segmentandconsolidatedresults and the underlying sales no longer need tobeeliminated)and 2) smaller adjustmentsrequired toeliminatereduced salesoftheremainingunconsolidated entities.Corporate net earnings improved $1.6 billion primarilyduetoreducednetafter-taxgoodwill andintangible assetimpairment charges(which totaled $1.5 billionintheprioryear ascomparedto$290 million in the current period),alongwiththecurrentyearnetafter-taxholdinggainrelatedto the purchase of thebalanceofour Iberian jointventure,partially offset bythecurrent yearcharge forthe impactoftheVenezuela devaluation.Additionaldiscussion of theitems impacting net earnings in Corporate are included in theResults of Operations section.In 2012, negative netsales inCorporatedecreasedby $108million due to adjustments requiredtoeliminatethe lowernetsales of unconsolidated entities.Corporatenet earningsdeclined $2.2 billion primarily due to the net after taxgoodwillandintangibleassetimpairmentcharges of $1.5billion,incrementalafter-taxrestructuringchargesof$587millionandthe impact of lowernet discrete taxadjustmentsin2012.Additionaldiscussionof the items impactingnetearnings in Corporateareincluded intheResults ofOperationssection above.ProductivityandCostSavingsPlanIn FebruaryandNovember2012, theCompanymadeannouncements related toa productivityand costsavingsplantoreducecostsand better leverage scaleintheareasofsupply chain, research and development, marketing andoverheads.The plan was designed to acceleratecostreductions by streamlining management decision making,manufacturingand other work processesto fund theCompany's growth strategy.As part of this plan,the Company expectstoincurinexcessof $3.5 billion in before-tax restructuring costs overafive-yearperiod (from fiscal 2012 through fiscal 2016).Approximately 55%ofthe costs havebeenincurred throughthe end of fiscal 2013. Savings generated from therestructuringcostsaredifficulttoestimate,giventhenatureof theactivities,thecorollary benefits achieved,thetimingof the executionandthedegreeofreinvestment. Overall,the costs areexpectedtodeliverinexcess of $2billioninbefore-tax annualsavings.The cumulative before-taxsavingsrealized asaresult of restructuringcosts incurredthrough2013 wereapproximately$940 million.Restructuring accruals of$323 millionas of June 30, 2013,areclassifiedascurrentliabilities.Approximately 86% oftherestructuringcharges incurredduringfiscal 2013eitherhavebeen orwillbesettled with cash. Consistentwithourhistorical policies for ongoingrestructuring-type activities,theresultingchargesarefunded by andincludedwithinCorporate forsegment reporting.Refer to Note 3 to our Consolidated Financial Statements formoredetails on therestructuring program.The Procter&Gamble Company37CASH FLOW, FINANCIALCONDITIONANDLIQUIDITYWe believeourfinancial conditioncontinuestobeofhighquality, as evidenced by our ability to generate substantialcashfromoperations and readyaccessto capitalmarkets atcompetitive rates.Operating cash flow provides the primary source of cash tofund operating needs and capital expenditures.Excessoperating cashis used first to fund shareholder dividends.Other discretionary uses include share repurchases andacquisitions tocomplement our portfolio of businesses,brands and geographies.As necessary, we maysupplementoperatingcash flow withdebt to fund these activities.Theoverallcashposition oftheCompany reflectsourstrongbusiness results anda globalcashmanagementstrategy thattakes intoaccount liquidity management, economic factorsandtaxconsiderations.OperatingCashFlowFiscal year 2013 compared withfiscalyear 2012Operatingcashflow was $14.9billion in 2013, a 12%increase fromtheprioryear.Operatingcashflowsresultedprimarilyfrom net earnings, adjusted fornon-cash items(depreciation andamortization, stock-based compensation,asset impairments, deferred income taxes and gains on saleandpurchase of businesses)and a decreasein workingcapital. Increased accounts receivable used $415 millionofcash primarily to fund growth. In addition, accountsreceivabledayssalesoutstandingincreased two daysdue tothetiming and mixofsaleslate in theperiod andforeignexchange impacts. Increased inventory used $225 million ofcash to supportproductinitiatives and to build stock tosupport capacity expansionsandmanufacturingsourcingchanges,partially offset by inventory managementimprovementefforts. Inventory days onhandincreased byone day primarily due to foreign exchange impacts.Increased accounts payable, accrued and other liabilitiesgenerated $1.3billion of cash primarily duetoanincreaseinmarketing accruals fromincreased advertising andothermarketingcosts.Fiscal year 2012 compared withfiscalyear 2011Operatingcash flow was $13.3 billion in2012, in linewiththeprioryear.Operatingcashflowsresultedprimarilyfromnet earnings, adjusted for non-cash items (depreciation andamortization,stock-basedcompensation, asset impairments,deferredincome taxes and gainson sale of businesses),partially offset by working capital increases. Increasedaccounts receivableused $427 million ofcashto fundgrowth. However,accountsreceivabledayssalesoutstanding weredown two daysprimarily duetothe impactof foreign exchange. Inventory generated$77 million ofcash, mainly due toan increase ininventorymanagementimprovementefforts, partially offsetbyinventory to supportproductinitiatives andtobuildstocktosupportcapacityexpansions and manufacturing sourcing changes. Inventorydays on hand declinedby 10 days primarily duetoinventorymanagement improvementeffortsand theimpact of foreignexchange.Accounts payable, accruedand otherliabilitiesused $22million ofcash, due primarily tothepaymentoffines relatedto violations ofthe Europeancompetition laws.Cashflow fromdiscontinued operationscontributedapproximately $200million tooperating cash flow.Free Cash Flow.Weview freecash flow as animportantmeasure because it is a factorimpacting the amount of cashavailable fordividends,share repurchases, acquisitions andother discretionary investment.It is defined as operatingcash flowless capitalexpenditures andisoneof themeasuresusedtoevaluate seniormanagement anddeterminetheirat-riskcompensation.Fiscal year 2013 compared with fiscal year 2012Freecash flowwas $10.9 billionin2013, anincreaseof 17%versusthe prior year.Theincrease was driven bytheincrease in operatingcash flows.Freecash flowproductivity, defined as the ratio of free cash flow to netearnings,was 95% in 2013.Fiscal year 2012 compared with fiscal year 2011Freecash flow was $9.3 billionin 2012, a decrease of 7%versusthe prior year. Freecashflowdecreased primarilydueto higher capitalspending to supportgeographicexpansion. Free cashflow productivity, definedas theratioof freecash flow to net earnings, was 85% in 2012.InvestingCashFlowsFiscal year 2013 compared with fiscal year 2012Netinvestingactivitiesconsumed $6.3 billion in cash in2013 mainly due tocapital spending,cash paidforacquisitionsand investments inavailable-for-sale securities,partially offset by assetsales.Fiscal year 2012 compared with fiscal year 2011Netinvestingactivitiesconsumed $1.1 billion in cash in2012 mainly due to capital spending, partially offsetbyproceedsfrom assetsales of $2.9 billion.Theseproceedswere primarilyrelated to cashreceivedfromthe saleofoursnacks business in 2012.Capital Spending.Wemanagecapital spending to supportourbusiness growth plans andhave cost controls todeliverourcashgenerationtargets.Capitalexpenditures,primarilyto supportcapacityexpansion,innovationand costsavings,were $4.0 billion inboth2013and 2012. Capital spendingasapercentageofnet salesincreased10basispointsto4.8%in 2013. Capitalspendingas apercentage of net salesincreased60 basis pointsto4.7% in 2012.Acquisitions.Acquisitions used$1.1 billion of cashin 2013primarilyfor the acquisition of our partner'sinterest in ajoint venturein Iberia.Acquisitionsused$134 million of38The Procter&Gamble Companycashin2012primarily fortheacquisition of New Chapter, avitamins supplement business.Proceedsfrom Divestitures and OtherAsset Sales.Proceeds from assetsales contributed $584million incashin2013 mainlyduetothe divestituresof our bleach business inItaly and the Braun household appliances business. Proceedsfromassetsalescontributed$2.9billionto cash in2012mainly due tothe saleof our snacks business.FinancingCashFlowsDividend Payments. Our first discretionaryuse ofcash isdividendpayments.Dividendspercommonshareincreased7% to $2.29 per sharein 2013.Totaldividend paymentstocommonandpreferredshareholderswere$6.5billionin2013 and $6.1 billion in 2012. InApril2013,the Board ofDirectors declared anincreaseinourquarterlydividendfrom$0.5620 to $0.6015 per share on Common StockandSeriesA and B ESOP Convertible ClassAPreferred Stock.Thisrepresentsa 7%increasecomparedtothepriorquarterly dividend andis the57th consecutive year that ourdividendhasincreased.Wehave paida dividendineveryyearsince ourincorporationin1890.Long-Term andShort-Term Debt.We maintain debt levelsweconsider appropriate afterevaluating a number of factors,includingcashflow expectations,cash requirementsforongoingoperations, investmentandfinancingplans(includingacquisitions andshare repurchase activities)andthe overallcost ofcapital.Totaldebt was $31.5 billion as ofJune 30, 2013 and $29.8 billionasof June 30, 2012.Ourtotaldebt increased in2013mainlydueto debtissuancesandanincreaseincommercial paper outstanding,partiallyoffsetby bond maturities.TreasuryPurchases.Total share repurchases were $6.0billionin 2013 and $4.0 billion in 2012.LiquidityAt June 30, 2013, our currentliabilitiesexceeded currentassets by $6.0 billion, largely due to short-termborrowingsunder our commercial paper program.Weanticipatebeingable to support our short-term liquidity and operating needslargely through cash generated from operations.Additionally, a portion of our cash is held off-shore byforeignsubsidiaries.TheCompanyregularly assessesitscash needsandtheavailablesourcesto fund theseneeds andwe do not expect restrictions or taxes on repatriation of cashheld outside of theUnitedStatesto have a materialeffect onour overallliquidity, financial condition or the results ofoperationsforthe foreseeablefuture.We utilizeshort- andlong-termdebtto fund discretionary items, suchasacquisitions and share repurchases.Wehave strongshort-andlong-termdebtratings, whichhaveenabled and shouldcontinue to enable us to refinance our debt as itbecomes dueatfavorableratesin commercialpaperandbondmarkets.Inaddition, we haveagreementswitha diverse group offinancial institutions that,if needed,should providesufficientcreditfunding to meetshort-termfinancingrequirements.OnJune 30,2013, our short-term credit ratingswereP-1(Moody's)andA-1+ (Standard& Poor's),whileourlong-termcredit ratings areAa3 (Moody's)andAA- (Standard &Poor's), both with a stable outlook.We maintainbank credit facilities tosupportourongoingcommercialpaperprogram.Thecurrentfacility is an$11.0billion facility splitbetween a $7.0 billion 5-yearfacilityanda $4.0 billion 364-day facility, which expire inAugust2018andAugust 2014, respectively.The 364-dayfacilitycanbeextendedforcertainperiodsof time as specifiedin,andinaccordancewith,theterms ofthe credit agreement.Thesefacilitiesare currently undrawn andweanticipatethat theywillremainlargely undrawn for theforeseeable future.These credit facilities do not havecross-default or ratingstriggers, nor do they have material adverse events clauses,exceptatthe time of signing. In additionto these creditfacilities,wehave an automaticallyeffectiveregistrationstatement on Form S-3 filedwiththe SECthatisavailableforregistered offerings of short- orlong-termdebt securities.Guarantees and Other Off-Balance SheetArrangementsWedo not haveguaranteesor otheroff-balancesheetfinancingarrangements,including variableinterest entities,whichwebelievecouldhave a materialimpactonfinancialconditionor liquidity.The Procter&Gamble Company39ContractualCommitmentsThefollowing tableprovides information on theamountand payabledateof ourcontractualcommitments as ofJune 30, 2013.($millions)TotalLessThan1Year1-3Years3-5YearsAfter5YearsRECORDEDLIABILITIES Total debt$31,441$12,393$6,004$2,609$10,435Capitalleases315188—Uncertaintax positions(1)4646———OTHERInterest payments relating tolong-term debt8,2208651,3821,1694,804Operating leases(2)1,512254437302519Minimum pensionfunding(3)722263459——Purchase obligations(4)2,1831,114625210234TOTALCONTRACTUALCOMMITMENTS44,15514,9408,9254,29815,992(1)Asof June 30, 2013, the Company'sConsolidated BalanceSheet reflectsaliability for uncertaintax positions of $2.0 billion, including$447 million of interest andpenalties. Dueto the high degree of uncertainty regarding the timing of future cash outflows ofliabilitiesforuncertain taxpositionsbeyond oneyear, areasonable estimateof the period of cashsettlement beyond twelve monthsfromthebalancesheet date of June 30, 2013, cannot be made.(2)Operating lease obligations are shown net of guaranteed sublease income.(3)Represents future pensionpaymentstocomply withlocalfunding requirements.Thesefuturepension paymentsassumetheCompanycontinues to meet itsfuture statutory fundingrequirements.Theseamountsdonot include expectedfuture discretionarycontributions,including theJuly 2013 contribution to a foreignpensionplanofapproximately $1 billion. Considering the current economicenvironment in which the Company operates, the Company believes its cash flows are adequate to meet the future statutoryfundingrequirements.The projectedpaymentsbeyondfiscalyear2016 arenot currentlydeterminable.(4)Primarily reflects future contractual payments under various take-or-pay arrangementsentered into as part of the normal courseofbusiness.Commitments madeundertake-or-payobligations representfuture purchasesinline withexpected usage to obtainfavorablepricing.Approximately 20%relatestoservicecontracts forinformationtechnology,humanresourcesmanagementandfacilitiesmanagementactivities that havebeenoutsourced.While the amounts listed represent contractual obligations, we do not believe it islikelythat the fullcontractualamount wouldbepaid if the underlying contracts were canceledpriorto maturity. Insuchcases, wegenerally areableto negotiate new contracts or cancellationpenalties,resultinginareducedpayment.The amounts donot includeothercontractualpurchaseobligationsthat are not take-or-pay arrangements. Suchcontractualpurchaseobligations areprimarily purchaseordersat fair valuethatare part ofnormaloperationsandarereflectedinhistoricaloperating cash flowtrends.Wedo notbelievesuchpurchase obligations will adversely affect our liquidity position.SIGNIFICANTACCOUNTING POLICIESANDESTIMATESInpreparingour financial statements in accordancewithU.S.GAAP,there are certain accountingpolicies that mayrequirea choice betweenacceptable accountingmethods ormayrequire substantial judgmentor estimationintheirapplication.These includeincometaxes, certain employeebenefitsandacquisitions,goodwill andintangibleassets.We believe theseaccountingpolicies, andothersset forth inNote 1tothe Consolidated FinancialStatements, should bereviewed as they are integral to understanding the results ofoperationsand financial condition of the Company.TheCompanyhas discussed the selection ofsignificantaccounting policies andtheeffectofestimates with theAuditCommitteeof the Company's Board of Directors.IncomeTaxesOurannual taxrateisdeterminedbasedonour income,statutory tax rates and the tax impacts of items treateddifferentlyfortaxpurposesthanforfinancialreportingpurposes.Tax law requires certain items be included in thetaxreturnatdifferent timesthantheitemsarereflectedinthefinancial statements.Someofthesedifferences arepermanent, such as expenses that are not deductible in ourtaxreturn,andsomedifferencesaretemporary,reversingovertime, suchas depreciation expense.Thesetemporarydifferences create deferred tax assetsand liabilities.Deferred taxassets generally representthetax effectof itemsthatcan be used as a tax deductionor creditinfuture yearsfor which wehave alreadyrecorded thetaxbenefitinourincome statement. Deferredtaxliabilities generallyrepresent tax expense recognized in our financialstatementsfor which paymenthas beendeferred, thetaxeffect of40The Procter&Gamble Companyexpenditures for which a deduction has already been taken inour taxreturn but hasnot yetbeen recognizedin ourfinancial statementsorassetsrecorded at fairvalue inbusiness combinations for which therewas no correspondingtaxbasisadjustment.Inherentin determiningourannual taxrate are judgmentsregardingbusiness plans,planning opportunitiesandexpectationsabout futureoutcomes. Realizationofcertaindeferred taxassets, primarily net operatingloss and othercarryforwards,isdependent upongeneratingsufficienttaxable income in the appropriate jurisdiction prior to theexpirationofthecarryforwardperiods.Although realizationis not assured,managementbelievesitismore likely thannotthat our deferred tax assets,netofvaluation allowances,will berealized.We operate in multiple jurisdictionswith complextaxpolicyandregulatoryenvironments. In certainof thesejurisdictions,wemaytaketax positionsthat managementbelievesare supportable, but are potentially subjecttosuccessful challenge bytheapplicabletaxing authority.These interpretational differenceswiththerespectivegovernmentaltaxing authoritiescanbeimpacted bythe localeconomic and fiscal environment.Weevaluateour taxpositions and establish liabilities in accordance with theapplicableaccounting guidanceon uncertainty in incometaxes.We reviewthesetax uncertaintiesinlightof changingfacts and circumstances, such as the progress of tax audits,andadjust themaccordingly.Wehaveanumberof auditsinprocess in various jurisdictions.Although theresolution ofthesetaxpositionsisuncertain,basedoncurrently availableinformation, we believe thattheultimateoutcomes will nothave a material adverse effectonour financial position,resultsof operations or cashflows.Because there are a number of estimates and assumptionsinherentin calculatingthevariouscomponentsofourtaxprovision, certain changesor future events such as changesintaxlegislation, geographic mix of earnings, completionoftax audits or earnings repatriation plans could have animpact onthoseestimatesandoureffectivetaxrate.Foradditional details on the Company's income taxes, see Note10totheConsolidatedFinancialStatements.EmployeeBenefitsWesponsor variouspost-employment benefitsthroughoutthe world.These include pensionplans,both definedcontributionplans and definedbenefit plans, and otherpost-employment benefit(OPEB) plans, consisting primarily ofhealthcareandlife insuranceforretirees.Foraccountingpurposes, thedefined benefitpension andOPEBplansrequire assumptions to estimate the projected andaccumulated benefit obligations, including the followingvariables:discountrate;expectedsalaryincreases;certainemployee-related factors,such as turnover,retirementageandmortality;expectedreturn on assets and healthcarecosttrendrates.Theseandother assumptionsaffecttheannualexpense andobligations recognizedfor the underlying plans.Ourassumptions reflectourhistoricalexperiences andmanagement'sbestjudgment regardingfutureexpectations.AspermittedbyU.S.GAAP,thenetamountbywhich actualresults differ from our assumptions is deferred.If this netdeferredamountexceeds10% of the greaterofplan assets orliabilities,a portionof the deferred amount is included inexpenseforthefollowingyear.Thecostorbenefitofplanchanges, suchas increasingor decreasingbenefits for prioremployeeservice (priorservice cost),isdeferredandincludedinexpense on a straight-line basis over the averageremainingserviceperiodofthe employees expectedtoreceivebenefits.Theexpected return onplan assets assumptionimpactsourdefinedbenefitexpense,since many of ourdefinedbenefitpension plansand our primaryOPEB plan arepartiallyfunded.The processforsettingthe expected ratesofreturnis described inNote9totheConsolidatedFinancialStatements. For 2013, the average return on assetsassumptions for pension planassetsandOPEBassets were7.3% and 8.3%, respectively.Achange intherate of returnof 100 basispoints for both pension and OPEB assets wouldimpactannualafter-taxbenefitexpensebyapproximately$100million.Since pensionandOPEBliabilitiesare measuredonadiscountedbasis,thediscount rate impactsour planobligations andexpenses. Discountrates usedforourU.S.definedbenefitpension and OPEB plans are based onayieldcurveconstructed froma portfolio ofhigh quality bondsforwhichthetiming and amount of cash outflows approximatethe estimated payouts of the plan. For our internationalplans,the discount rates areset by benchmarking againstinvestment grade corporate bonds ratedAA or better.Theaveragediscount rate on the defined benefit pensionplansand OPEB plans of 4.0% and 4.8%, respectively, representsaweightedaverageof localrates in countrieswheresuchplans exist.A 100-basis pointchangeinthe pensiondiscountrate would impactannualafter-taxdefinedbenefitpension expensebyapproximately$160 million.A changeintheOPEBdiscount rate of 100 basispoints wouldimpactannual after-tax OPEBexpense byapproximately $65million.For additional details onourdefined benefitpensionandOPEB plans, see Note9totheConsolidatedFinancial Statements.Acquisitions,Goodwill and IntangibleAssetsOur Consolidated Financial Statementsreflectthe operationsof anacquiredbusiness startingfrom the completionof thetransaction. In addition, the assets acquired and liabilitiesassumedarerecordedat the date of acquisitionat theirrespective estimated fair values, with any excess of thepurchase price over the estimated fair values ofthe netassetsacquiredrecordedasgoodwill.Significant judgment is requiredto estimate thefairvalue ofintangibleassets and inassigning theirrespectiveusefullives.Accordingly,we typicallyobtain the assistance ofthird-party valuation specialists for significant tangible andintangible assets.The fair valueestimatesarebased onavailable historical information and onfuture expectationsThe Procter&Gamble Company41and assumptions deemed reasonable by management, but areinherentlyuncertain.Wetypically useanincomemethod to estimate the fair valueofintangibleassets,which is based onforecasts of theexpectedfuturecash flows attributable to the respectiveassets. Significant estimates and assumptions inherent in thevaluationsreflectaconsideration ofother marketplaceparticipants, andincludetheamountand timing offuturecashflows(includingexpectedgrowthrates andprofitability), the underlying product or technology lifecycles, economic barriers to entry, a brand's relative marketpositionandthe discount rate appliedtothe cashflows.Unanticipated market ormacroeconomicevents andcircumstancesmayoccur,whichcouldaffect theaccuracyorvalidity of the estimatesandassumptions.Determining theusefullifeofan intangibleassetalsorequiresjudgment. Certain brand intangible assets areexpectedtohaveindefinite lives based on their history andour plans tocontinueto supportand build theacquiredbrands. Otheracquiredintangibleassets (e.g.,certaintrademarks or brands,customer relationships,patents andtechnologies) are expected tohave determinableuseful lives.Our assessment as to brandsthat haveanindefinitelifeandthose that havea determinablelifeisbasedon anumber offactorsincludingcompetitiveenvironment, marketshare,brand history,underlying product lifecycles, operating plansandthemacroeconomic environmentofthecountriesinwhich the brands aresold.Ourestimates of the useful livesof determinable-lived intangible assets are primarily basedonthese samefactors.Allof ouracquiredtechnology andcustomer-relatedintangible assetsareexpectedtohavedeterminableusefullives.Thecosts of determinable-lived intangibleassetsareamortized toexpense overtheir estimated lives.Thevalueof indefinite-livedintangibleassets and residualgoodwillisnot amortized, but is testedatleast annually for impairment.Our impairment testing for goodwill is performed separatelyfrom our impairment testing of indefinite-lived intangibleassets.We testgoodwillforimpairmentbyreviewing thebook value compared to the fairvalue at thereporting unitlevel.Wetestindividualindefinite-livedintangible assetsbycomparingthebookvaluesof eachasset tothe estimatedfairvalue.We determine the fair value of our reporting units andindefinite-livedintangibleassets based ontheincomeapproach.Under the income approach,wecalculatethefairvalueof our reporting unitsandindefinite-livedintangibleassets based on thepresentvalueofestimatedfuturecashflows.Considerable managementjudgmentis necessary toevaluate the impact of operating and macroeconomicchanges andto estimate futurecash flows tomeasure fairvalue.Assumptions used in our impairmentevaluations,such as forecastedgrowth ratesand cost ofcapital,areconsistent with internal projections and operating plans.Webelieve such assumptionsandestimates are also comparabletothosethatwould beused by othermarketplaceparticipants.When certainevents or changesin operatingconditionsoccur,an impairment test isperformedandindefinite-lived brands maybe adjusted to a determinablelife.Withtheexception of ourAppliances and Salon Professionalbusinesses, all of our reporting units have fairvaluesthatsignificantlyexceed recordedvalues. However, futurechanges in the judgments, assumptions and estimatesthatareusedinour impairmenttesting for goodwillandindefinite-lived intangible assets, including discount and taxratesorfuture cash flowprojections, could result in significantlydifferentestimates of the fair values.A significantreductionintheestimated fair values could result inimpairmentchargesthat couldmateriallyaffectthefinancialstatementsin anygiven year.The recordedvalue of goodwillandintangible assets from recently impairedbusinessesandrecentlyacquired businesses arederivedfrommore recentbusiness operating plans and macroeconomic environmentalconditions and therefore are more susceptible to an adversechange that couldrequirean impairmentcharge.Forexample,the Gillette intangibleand goodwill amountsrepresent valuesas of a more recentacquisitiondateand,assuch,theamounts are moresusceptible toanimpairmentrisk ifbusiness operatingresults ormacroeconomicconditions deteriorate. Gilletteindefinite-lived intangibleassetsrepresentapproximately89%ofthe $26.8billionofindefinite-livedintangible assetsat June 30, 2013. Goodwillallocated to stand-alone reportingunits consisting primarilyof businesses purchased as part ofthe Gillette acquisitionrepresents 42% of the $55.2 billion of goodwill at June 30,2013.This includesthe Shave Care andAppliancesbusinesses, whicharecomponentsofthe Grooming segment,and theBatteriesbusiness, which is part oftheFabric CareandHome Caresegment.The results of our impairment testing during fiscal2012indicated that the estimatedfairvalues of ourAppliancesandSalonProfessional reporting units were less than theirrespectivecarryingamounts.Therefore,werecorded anon-cash before- and after-tax impairmentcharge of $1.3 billionin fiscal2012.Additionally, our impairmenttesting forindefinite-lived intangible assets during fiscal 2012 indicateda decline in the fair value of our Koleston Perfect andWellatrade nameintangibleassetsbelow theirrespectivecarryingvalues.This resulted in a non-cash,before-tax impairmentchargeof $246million ($173million after-tax)toreduce thecarrying amounts of these assets to their estimated fairvalues.During the fourth quarter of fiscal 2013, the estimated fairvalue of ourAppliances reporting units declined further,below the carrying amount resulting from the fiscal 2012impairment.Therefore,we recorded an additional non-cashbeforeandafter-taximpairmentchargeof$259millioninfiscal 2013.Additionally, our fourthquarter2013impairmenttesting forAppliancesindicated a decline in thefairvalueof our Braun trade name intangibleasset belowitscarrying value.This resultedin a non-cash,before-taximpairment charge of $49 million($31million after-tax) toreduce the carrying amount ofthisassettoitsestimated fairvalue.42The Procter&Gamble CompanyTheAppliances businesswas acquiredaspart of the Gilletteacquisitionin2005 andtheSalonProfessionalbusinessconsists primarily of operations acquired intheWellaacquisition in 2004. Bothbusinesses are stand-alonereporting units.These businesses representsome of ourmore discretionaryconsumer spending categories. Becauseofthis,their operationsandunderlyingfair values weredisproportionatelyimpacted by the economicdownturn thatbegan in fiscal 2009, which led to a reduction in home andpersonal grooming appliance purchases andinvisitsto hairsalonsthatdrove the fiscal2012impairment.The additionalimpairment oftheAppliances business in fiscal 2013 wasdue to the devaluation of currency in Japan, a key countrythat generates a significant portion of the earnings of theAppliances business, relative to thecurrencies in whichtheunderlying net assetsarerecorded.AsofJune30, 2013, theAppliancesbusiness has remaining goodwill of $313million, whiletheSalon Professional businesshas remaininggoodwill of $424 million.Asa result of the impairments,the estimated fairvalueof ourAppliances businessapproximates its carrying value, whiletheestimated fairvalue ofthe Salon Professional business now slightlyexceeds itscarrying value. Ourfiscal 2013valuations of theAppliancesandSalonProfessional businesses has themreturning to sales and earnings growth ratesconsistent withourlong-term businessplans. Failuretoachievethesebusinessplansor afurtherdeterioration ofthemacroeconomicconditions could result in a valuation thatwould triggeranadditional impairment of thegoodwillandintangibleassets of these businesses.NewAccounting PronouncementsDuring fiscal 2013, the Company adoptedASU 2011-05,"ComprehensiveIncome (Topic 220) - Presentation ofComprehensiveIncome"(ASU 2011-05),andASU2013-02,“Comprehensive Income(Topic 220)- Reporting ofAmounts Reclassified out ofAccumulatedOtherComprehensiveIncome”(ASU2013-02).Thisguidanceeliminatestheoption topresentthe componentsofothercomprehensive income as part of the statement ofshareholders'equityand requires entities to presentthecomponentsofnet earningsandother comprehensiveincome in either a singlecontinuousstatement ofcomprehensive income or in two separate but consecutivestatements.Wechose topresent net earnings and othercomprehensive income in two separate but consecutivestatements.Thisguidance also requiresentities toprovideinformationabout theamounts reclassified out ofaccumulated other comprehensiveincomebycomponentandtopresent, eitheron the faceof thestatementwherenetincome is presented or in the notes, significant amountsreclassified out of accumulated other comprehensive incomeby the respective line items of net income.Wechose topresentthe requirementsinthenotestothe financialstatements(seeNote 6to the Consolidated FinancialStatements).Theadoptionof this guidancehad noimpacton our consolidated financialposition,resultsof operationsor cash flows.Noother new accountingpronouncementissued or effectiveduring thefiscal year had or is expected to have a materialimpact onthe ConsolidatedFinancial Statements.OTHERINFORMATIONHedging and Derivative FinancialInstrumentsAs a multinationalcompany with diverseproductofferings,we are exposed to market risks, such as changes in interestrates,currency exchange ratesand commodity prices.Weevaluate exposureson a centralized basis to takeadvantageofnatural exposurecorrelationand netting.Except withinfinancingoperations,weleverage the Company's broadlydiversifiedportfolioof exposures as anaturalhedgeandprioritizeoperational hedgingactivities over financialmarketinstruments.Totheextentwe choosetofurthermanage volatilityassociatedwiththe netexposures, weenterinto variousfinancial transactions which we account forusingtheapplicableaccounting guidance for derivativeinstruments and hedgingactivities.Thesefinancialtransactionsaregoverned by our policies coveringacceptable counterparty exposure, instrument types andother hedging practices. Note5 to the ConsolidatedFinancialStatements includes adetailed discussion of ouraccounting policiesfor financial instruments.Derivativepositions canbemonitored using techniquesincluding market valuation, sensitivity analysis and value-at-risk modeling.Thetests for interest rate, currencyrate andcommodity derivativepositions discussed beloware basedontheCorporateManager™ value-at-risk modelusing a one-yearhorizonanda95%confidence level.Themodelincorporatesthe impactof correlation (thedegree to whichexposures move together over time) and diversification(from holdingmultiple currency,commodityandinterestrate instruments) and assumes thatfinancial returns arenormallydistributed.Estimates ofvolatilityand correlationsofmarket factorsaredrawnfromtheRiskMetrics™datasetas of June 30, 2013. In cases where data is unavailable inRiskMetrics™, a reasonable proxy is included.Our market riskexposures relative to interestrates,currencyrates and commodity prices,as discussed below, have notchangedmaterially versus theprevious reporting period. Inaddition,we arenotaware of anyfacts or circumstancesthatwould significantly impact such exposures in the near term.Interest Rate Exposure on FinancialInstruments. Interestrate swaps are used to hedge exposures to interest ratemovementon underlying debtobligations. Certaininterestrateswapsdenominatedinforeigncurrenciesare designatedto hedge exposures tocurrency exchangerate movements onour investmentsin foreignoperations.These currencyinterest rate swaps are designated as hedges of theCompany's foreign net investments.Based onourinterest rateexposure as of and duringtheyearended June 30, 2013,includingderivative and otherinstrumentssensitiveto interestrates,webelieveanear-termchangeininterestrates,at a95% confidence levelbasedonThe Procter&Gamble Company43historical interest rate movements, would not materiallyaffect our financialstatements.CurrencyRate ExposureonFinancial Instruments.Becausewe manufactureandsellproductsandfinanceoperationsinanumber of countries throughoutthe world,we areexposed to theimpacton revenueandexpenses ofmovements incurrency exchange rates. Corporatepolicyprescribes the range of allowable hedging activity.Tomanage the exchange rateriskassociated with our financingoperations, we primarily use forward contracts withmaturities of less than 18 months. Inaddition, weenterintocertaincurrency swaps with maturities of up to fiveyearstohedgeour exposure to exchange rate movementsonintercompany financing transactions.Based onour currency rate exposureonderivative andotherinstruments as of and during theyear endedJune30, 2013,webelieve,ata95%confidence levelbasedon historicalcurrencyratemovements, the impact of a near-termchangein currency rateswould notmaterially affectour financialstatements.Commodity PriceExposure on Financial Instruments. Weuse rawmaterials thatare subject toprice volatilitycausedby weather,supplyconditions, politicaland economicvariablesand other unpredictable factors. Inadditiontofixed price contracts, we may use futures, options and swapcontractstomanage the volatilityrelatedtotheaboveexposures.As of and during the year ended June 30, 2013, we did nothavematerialcommodityhedgingactivity.Measures Not Defined ByU.S.GAAPOur discussionof financial results includes several "non-GAAP" financialmeasures.We believethesemeasuresprovide our investors with additionalinformationabout ourunderlying results and trends, as wellasinsight to someofthe metricsusedtoevaluate management.WhenusedinMD&A, we have provided the comparable GAAPmeasurein the discussion.Thesemeasures include:Organic SalesGrowth. Organicsalesgrowthis a non-GAAPmeasure of salesgrowth excluding theimpacts ofacquisitions, divestitures and foreign exchangefrom year-over-yearcomparisons.Webelievethis providesinvestorswith amore complete understanding of underlyingsalestrends byproviding sales growth on a consistentbasis.Organicsalesis also oneofthemeasures usedtoevaluatesenior management and is a factor in determining their at-risk compensation.The following tables provide a numerical reconciliation oforganicsalesgrowthtoreported net sales growth:YearendedJune 30, 2013NetSalesGrowthForeignExchangeImpactAcquisition/DivestitureImpact*OrganicSalesGrowthBeauty-2%2%1%1%Grooming-4%4%2%2%HealthCare3%3%-1%5%FabricCareand HomeCare1%2%0%3%Baby CareandFamilyCare2%2%0%4%TOTALCOMPANY1%2%0%3%YearendedJune 30, 2012NetSalesGrowthForeignExchangeImpactAcquisition/DivestitureImpact*OrganicSalesGrowthBeauty2%0%0%2%Grooming1%1%0%2%HealthCare3%0%-1%2%FabricCareand HomeCare3%0%0%3%Baby CareandFamilyCare6%0%0%6%TOTALCOMPANY3%0%0%3%*Acquisition/Divestiture Impact includesrounding impactsnecessary toreconcilenetsalestoorganicsales.Core EPS.Thisis a measure ofthe Company's diluted netearnings persharefromcontinuing operations excludingcertain items that arenotjudged to bepart oftheCompany'ssustainableresultsortrends.This includesa chargein 2013for thebalance sheet impact fromthedevaluation of theofficialforeign exchangerateinVenezuela,a holding gain in2013 onthepurchase ofthe balanceof ourIberianjointventure,impairment chargesin 2013 and2012 for goodwilland indefinite-lived intangible assets, charges in 2013 and2012relatedtoincremental restructuringdue to increasedfocus onproductivity andcostsavings,a significant benefitin 2011 fromthesettlementof U.S. tax litigationprimarilyrelated tothe valuationoftechnologydonationsandchargesin2013, 2012 and 2011 relatedto pending Europeanlegalmatters.Wedonot viewtheseitems to be part of oursustainableresults.WebelievetheCore EPSmeasureprovides animportantperspectiveof underlying businesstrends andresultsand providesamore comparable measureof year-on-year earnings per share growth. Core EPS is alsooneofthemeasures used to evaluateseniormanagementandisafactor in determiningtheirat-riskcompensation.44The Procter&Gamble CompanyThe table below provides a reconciliation of reported dilutednet earnings per share fromcontinuing operations to CoreEPS:Yearsended June 30201320122011Dilutednetearnings pershare-continuingoperations$3.86$3.12$3.85Venezuela balance sheetdevaluationImpacts0.08——Gain on purchaseofbalance of Iberian JV(0.21)Impairment charges0.100.51—Incrementalrestructuringcharges0.180.20—SettlementfromU.S. taxlitigation——(0.08)ChargesforpendingEuropeanlegal matters0.050.030.10Rounding(0.01)(0.01)—CORE EPS4.053.853.87CoreEPSGrowth5%(1)%Note -All reconciling itemsarepresentednetof tax.Taxeffectsarecalculated consistentwith thenatureofthe underlying transaction.Thesignificant adjustment toan income taxreserve was taxexpense.There was notaximpact on EPSduetothe charges forpendingEuropeanlegalmatters.Free Cash Flow. Free cash flow is defined as operatingcash flowless capital spending.Weviewfree cashflow asan important measure because it is one factor in determiningthe amountofcash available for dividends, sharerepurchases, acquisitions and other discretionary investment.Freecashflow isalsoone of the measures used to evaluatesenior management and is a factor in determining their at-risk compensation.Free CashFlowProductivity.Freecashflow productivityis definedasthe ratio offree cashflowtonetearnings.Freecash flow productivity is also one of the measures used toevaluateseniormanagement andis a factorindeterminingtheir at-riskcompensation.The following table provides a numerical reconciliation offreecash flow and freecashflowproductivity ($ millions):OperatingCashFlowCapitalSpendingFreeCashFlowNetEarningsFreeCashFlowProductivity2013$14,873$(4,008)$10,865$11,40295%201213,284(3,964)9,32010,90485%201113,330(3,306)10,02411,92784%Item 7A.QuantitativeandQualitativeDisclosuresAboutMarketRisk.The informationrequiredbythisitemisincorporatedbyreference tothe section entitled Other Information underManagement's DisclosureandAnalysis,andNote5totheConsolidatedFinancialStatements.The Procter&Gamble Company45Item8.Financial Statements and Supplementary Data.MANAGEMENT'S RESPONSIBILITY FORFINANCIALREPORTINGAtTheProcter&Gamble Company,wetakegreatpride inour long history of doing what's right. If you analyze what'smade our Company successful over the years, you may focuson our brands, our marketingstrategies, our organizationdesign and ourability to innovate.But if you really want toget atwhat drives our Company'ssuccess,the place tolook isour people. Our peoplearedeeply committed to our Purpose,Values and Principles. It is this commitment to doing what'sright that unites us.This commitmenttodoing what'sright is embodied in ourfinancialreporting. High-qualityfinancialreporting is ourresponsibility, one we execute withintegrity, and within boththeletterandspirit ofthelaw.High-qualityfinancialreportingischaracterizedbyaccuracy,objectivityandtransparency. Management is responsibleformaintaininganeffective system of internalcontrols overfinancialreportingto deliverthose characteristics inallmaterial respects.The Board ofDirectors, throughitsAuditCommittee,providesoversight.Wehaveengaged Deloitte&ToucheLLP to audit our Consolidated Financial Statements,on whichthey have issuedan unqualified opinion.Ourcommitmenttoprovidingtimely, accurate andunderstandable informationtoinvestors encompasses:Communicating expectations to employees.Everyemployee,fromsenior managementon down,isrequired tobe trainedon the Company'sWorldwide Business ConductManual, whichsets forththeCompany's commitmenttoconductitsbusiness affairswithhigh ethical standards.Everyemployee is held personally accountable for complianceandisprovidedseveral meansofreporting anyconcerns aboutviolations of theWorldwideBusinessConduct Manual,which is available on our websiteatwww.pg.com.Maintaining a strong internalcontrol environment.Oursystem of internal controls includes written policies andprocedures, segregationofdutiesand the carefulselectionand development ofemployees.The system is designed toprovide reasonableassurance thattransactionsare executedasauthorized andappropriately recorded, that assets aresafeguardedandthat accountingrecordsare sufficientlyreliableto permitthepreparationoffinancial statementsconforminginallmaterial respectswithaccountingprinciples generally acceptedin theUnitedStates ofAmerica.Wemonitortheseinternalcontrolsthrough controlself-assessments conducted by business unit management. Inaddition to performing financial and compliance auditsaround the world, our GlobalInternalAuditorganizationprovidestraining and continuously improves internal controlprocesses.Appropriate actions are taken by management tocorrect any identified controldeficiencies.Executing financialstewardship.Wemaintainspecificprograms and activitiesto ensure that employees understandtheirfiduciary responsibilities toshareholders.Thisongoingeffort encompasses financialdisciplineinstrategic and dailybusiness decisions and brings particularfocusto maintainingaccuratefinancial reportingandeffective controlsthroughprocess improvement, skill development and oversight.Exerting rigorousoversight of the business.Wecontinuously review business resultsand strategicchoices.Our Global Leadership Council isactively involved- fromunderstanding strategies to reviewing key initiatives,financialperformanceandcontrolassessments.The intentistoensure weremainobjective,identifypotential issues,continuously challengeeachotherand ensurerecognition andrewardsareappropriatelyalignedwith results.Engaging our DisclosureCommittee.We maintaindisclosure controls and procedures designed to ensure thatinformationrequired tobedisclosedis recorded,processed,summarizedandreportedtimelyandaccurately.OurDisclosure Committee is a groupof senior-levelexecutivesresponsibleforevaluatingdisclosureimplicationsofsignificantbusinessactivitiesand events.TheCommitteereports itsfindingstothe CEO and CFO, providing aneffectiveprocess toevaluate our external disclosureobligations.Encouragingstrong andeffective corporate governancefrom ourBoard ofDirectors.Wehaveanactive,capableanddiligentBoardthatmeets the required standards forindependence, and we welcome the Board's oversight. OurAudit Committee comprises independent directors withsignificant financial knowledge and experience.Wereviewsignificantaccounting policies, financial reportingandinternalcontrol matterswith them andencouragetheirindependentdiscussionswith externalauditors. Ourcorporategovernanceguidelines,aswellasthe charteroftheAuditCommitteeand certainothercommittees of our Board,areavailableon ourwebsite at www.pg.com.P&G hasa strong historyof doing what'sright. OuremployeesembraceourPurpose,ValuesandPrinciples.Wetake responsibility for the quality and accuracy of ourfinancialreporting.Wepresentthis informationproudly,withthe expectationthat those whouse itwill understand ourCompany, recognizeourcommitment to performancewithintegrity andshareourconfidence in P&G's future./s/A. G. LafleyA.G.LafleyChairmanof theBoard,PresidentandChief ExecutiveOfficer/s/Jon R.MoellerJon R. MoellerChief Financial Officer46The Procter&Gamble CompanyMANAGEMENT'S REPORT ONINTERNALCONTROLOVERFINANCIALREPORTINGManagement is responsible for establishing and maintainingadequate internalcontrol overfinancialreportingofTheProcter&Gamble Company(asdefined inRule13a-15(f)undertheSecuritiesExchangeActof1934,asamended).Ourinternalcontrolover financialreportingis designedtoprovidereasonableassuranceregarding the reliabilityoffinancial reporting andthe preparation of financialstatementsforexternalpurposes inaccordancewith generally acceptedaccountingprinciples intheUnitedStatesofAmerica.Stronginternal controlsis an objectivethat is reinforcedthrough ourWorldwideBusinessConduct Manual, whichsetsforth our commitment to conductbusinesswith integrity,andwithin both the letter and the spirit of the law.TheCompany'sinternal control over financial reporting includesaControlSelf-Assessment Programthatis conductedannually forcriticalfinancial reporting areasofthe Companyandisauditedbythe internal auditfunction.Managementtakes theappropriateactiontocorrect any identifiedcontroldeficiencies. Because of itsinherent limitations, any systemofinternalcontrol over financial reporting, no matter howwelldesigned, may notpreventordetectmisstatementsduetothepossibility that acontrol canbe circumventedoroverridden orthatmisstatementsdue to erroror fraud mayoccurthatarenot detected.Also, becauseof changesinconditions,internalcontroleffectiveness may vary overtime.Management assessed the effectiveness of the Company'sinternalcontrol over financialreportingas ofJune 30, 2013,usingcriteria established inInternal Control -IntegratedFramework (1992)issuedbytheCommitteeof SponsoringOrganizations of theTreadway Commission (COSO)andconcluded that the Company maintained effectiveinternalcontrol over financial reporting as ofJune 30, 2013, based onthesecriteria.Deloitte &Touche LLP,an independent registered publicaccountingfirm, has auditedtheeffectivenessof theCompany's internalcontroloverfinancial reporting as ofJune30,2013,asstatedin their reportwhich isincludedherein./s/A. G. LafleyA.G.LafleyChairmanof the Board, Presidentand ChiefExecutiveOfficer/s/Jon R.MoellerJon R. MoellerChief Financial OfficerAugust 8, 2013REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTING FIRMTothe Board ofDirectorsand Stockholders ofThe Procter&GambleCompanyWehaveaudited theaccompanying ConsolidatedBalanceSheetsofThe Procter & Gamble Company and subsidiaries(the"Company")as ofJune 30, 2013 and2012, andtherelated Consolidated Statements of Earnings, ComprehensiveIncome, Shareholders'Equity andCash Flows foreachof thethree yearsintheperiod endedJune 30, 2013.Thesefinancialstatementsare the responsibility ofthe Company'smanagement. Our responsibilityistoexpress anopinion onthesefinancialstatementsbasedonouraudits.Weconductedour audits inaccordance with the standardsofthe Public CompanyAccounting OversightBoard (UnitedStates).Thosestandardsrequire that weplanand performtheauditto obtainreasonableassuranceabout whether thefinancial statements are free of material misstatement.Anauditincludesexamining,ona testbasis, evidencesupporting the amounts anddisclosuresinthefinancialstatements.An auditalsoincludes assessing theaccountingprinciplesusedand significantestimatesmadebymanagement, aswellasevaluatingtheoverallfinancialstatement presentation.Webelievethatour audits provideareasonablebasisfor our opinion.In ouropinion, such Consolidated Financial Statementspresentfairly, in allmaterialrespects, the financial positionof theCompanyatJune 30, 2013and2012, and the results ofitsoperationsand cash flows for each of the three yearsintheperiod endedJune 30, 2013, in conformity withaccountingprinciples generally accepted in theUnitedStatesofAmerica.As discussed in Note1totheConsolidated FinancialStatements, the Company adopted the new accountingguidanceinASU 2011-05,Comprehensive Income (Topic220)-Presentation of Comprehensive Income,andASU2013-02,Comprehensive Income(Topic 220) -ReportingofAmounts Reclassified outofAccumulated OtherComprehensive Income.We have also audited, in accordance with the standardsof thePublicCompanyAccounting Oversight Board (UnitedStates),the Company's internalcontroloverfinancialreporting as ofJune 30, 2013,based onthe criteriaestablishedinInternal Control-IntegratedFramework(1992)issuedby the Committeeof Sponsoring OrganizationsoftheTreadway Commissionand our report datedAugust 8,2013 expressed an unqualified opinion on the Company'sinternalcontrolover financial reporting./s/Deloitte & Touche LLPCincinnati, OhioAugust 8, 2013The Procter&Gamble Company47REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTING FIRMTotheBoard ofDirectorsand StockholdersofThe Procter&GambleCompanyWehave auditedtheinternal control over financialreportingofThe Procter &Gamble Company and subsidiaries(the"Company")asofJune30, 2013, based on criteriaestablishedinInternal Control-IntegratedFramework(1992)issuedby the Committeeof Sponsoring OrganizationsoftheTreadwayCommission.TheCompany's managementisresponsibleformaintainingeffectiveinternal controloverfinancialreporting and for its assessmentofthe effectivenessofinternalcontrol over financial reporting, included inManagement's Reporton InternalControloverFinancialReporting.Our responsibility is to express anopinion ontheCompany's internal control over financial reporting based onouraudit.Weconducted our audit in accordancewith the standards ofthe Public CompanyAccountingOversightBoard(UnitedStates).Thosestandardsrequire that weplanand performthe audit to obtain reasonable assurance about whethereffective internalcontrolover financialreportingwasmaintainedinallmaterial respects. Our audit includedobtaining anunderstanding of internal control overfinancialreporting,assessing theriskthat amaterialweakness exists,testing and evaluating the design and operating effectivenessofinternalcontrolbased on the assessed risk, and performingsuch other proceduresasweconsiderednecessaryinthecircumstances.We believe that our auditprovides areasonablebasisfor our opinion.A company's internal control over financial reporting is aprocess designed by, or under thesupervision of, thecompany'sprincipal executive and principalfinancialofficers, or persons performing similarfunctions,andeffected by the company's boardofdirectors,management,and other personnel to provide reasonable assuranceregardingthereliabilityoffinancialreportingand thepreparation offinancial statements forexternal purposes inaccordancewithgenerallyaccepted accounting principles.Acompany's internal control over financial reporting includesthosepoliciesand proceduresthat(1)pertain to themaintenance ofrecordsthat, inreasonable detail,accuratelyand fairly reflectthe transactions and dispositions of theassets of thecompany; (2) provide reasonableassurancethattransactions are recordedas necessary to permit preparationoffinancialstatementsinaccordancewithgenerally acceptedaccounting principles,and thatreceiptsandexpendituresofthe company are being made only in accordancewithauthorizations of management anddirectors of thecompany;and(3)providereasonableassuranceregardingpreventionortimely detection of unauthorized acquisition,use, ordisposition of the company's assets that could have a materialeffect onthefinancialstatements.Because of the inherent limitations of internal control overfinancial reporting,including the possibility of collusionorimproper managementoverrideof controls,materialmisstatements due toerrororfraud maynotbe preventedordetected onatimelybasis.Also, projections ofanyevaluationoftheeffectivenessof the internal controloverfinancialreporting tofuture periodsaresubject to theriskthat thecontrolsmay become inadequate becauseof changesin conditions,or thatthedegreeof compliance with thepoliciesorproceduresmaydeteriorate.Inouropinion, theCompany maintained,inallmaterialrespects,effectiveinternal controloverfinancialreportingasofJune 30, 2013, based on thecriteriaestablished inInternalControl - IntegratedFramework (1992)issued by theCommittee of Sponsoring Organizations of theTreadwayCommission.We have also audited, in accordance with the standardsof thePublicCompanyAccounting Oversight Board (UnitedStates),theConsolidatedFinancial Statementsof theCompany as of and fortheyear endedJune 30, 2013and ourreport datedAugust 8, 2013 expressedanunqualified opiniononthosefinancialstatements andincluded an explanatoryparagraphregardingthe Company's adoption ofthenewaccountingguidanceinASU 2011-05,ComprehensiveIncome (Topic 220) -Presentation of Comprehensive Income,andASU 2013-02,Comprehensive Income (Topic220) -Reporting ofAmounts Reclassified out ofAccumulated OtherComprehensive Income./s/Deloitte & Touche LLPCincinnati, OhioAugust 8, 201348The Procter&Gamble CompanySee accompanying Notes to Consolidated Financial Statements.Consolidated Statements ofEarningsAmountsinmillionsexcept pershare amounts; Yearsended June 30201320122011NETSALES$84,167$83,680$81,104Cost of products sold42,42842,39139,859Selling,generalandadministrativeexpense26,95026,42125,750Goodwill and indefinite-lived intangible asset impairment charges3081,576—OPERATING INCOME14,48113,29215,495Interestexpense667769831Interest income877762Othernon-operating income, net942185271EARNINGSFROM CONTINUING OPERATIONS BEFOREINCOME TAXES14,84312,78514,997Incometaxesoncontinuing operations3,4413,4683,299NETEARNINGSFROM CONTINUING OPERATIONS11,4029,31711,698NETEARNINGSFROMDISCONTINUEDOPERATIONS—1,587229NETEARNINGS11,40210,90411,927Less:Netearnings attributabletononcontrollinginterests90148130NET EARNINGSATTRIBUTABLE TO PROCTER & GAMBLE$11,312$10,756$11,797BASICNET EARNINGSPER COMMONSHARE(1):Earnings from continuing operations$4.04$3.24$4.04Earningsfromdiscontinued operations—0.580.08BASIC NETEARNINGSPER COMMON SHARE4.043.824.12DILUTEDNET EARNINGSPER COMMONSHARE(1):Earnings from continuing operations$3.86$3.12$3.85Earningsfromdiscontinued operations—0.540.08DILUTEDNETEARNINGSPER COMMONSHARE3.863.663.93DIVIDENDSPERCOMMONSHARE$2.29$2.14$1.97(1)Basic net earningspercommonshareanddiluted net earnings percommon share are calculated on net earnings attributabletoProcter&Gamble.The Procter&Gamble Company49See accompanying Notes to Consolidated Financial Statements.Consolidated Statements ofComprehensive IncomeAmountsinmillions;Years ended June 30201320122011NETEARNINGS$11,402$10,904$11,927OTHERCOMPREHENSIVEINCOME/(LOSS),NETOFTAXFinancial statement translation710(5,990)6,493Unrealized gains/(losses) on cash flow hedges (net of $92, $441 and $713 tax, respectively)144724(1,181)Unrealized gains/(losses) on investment securities (net of $5, $3 and $2 tax, respectively)(24)(3)3Defined benefit retirement plans (net of $637, $993 and $302 tax, respectively)1,004(2,010)453TOTAL OTHERCOMPREHENSIVEINCOME/(LOSS), NET OFTAX1,834(7,279)5,768TOTALCOMPREHENSIVE INCOME13,2363,62517,695Less:Total comprehensive incomeattributable to noncontrolling interests94124143TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER &GAMBLE$13,142$3,501$17,55250The Procter&Gamble CompanySee accompanying Notes to Consolidated Financial Statements.Consolidated Balance SheetsAmounts inmillions; June30Assets20132012CURRENTASSETSCashand cashequivalents$5,947$4,436Accountsreceivable6,5086,068INVENTORIESMaterials and supplies1,7041,740Work in process722685Finished goods4,4834,296Total inventories6,9096,721Deferred incometaxes9481,001Prepaid expensesand other currentassets3,6783,684TOTAL CURRENTASSETS23,99021,910PROPERTY,PLANT ANDEQUIPMENT,NET21,66620,377GOODWILL55,18853,773TRADEMARKSAND OTHERINTANGIBLEASSETS,NET31,57230,988OTHERNONCURRENTASSETS6,8475,196TOTALASSETS$139,263$132,244Liabilities and Shareholders' EquityCURRENTLIABILITIESAccountspayable$8,777$7,920Accrued and other liabilities8,8288,289Debtdue within oneyear12,4328,698TOTALCURRENTLIABILITIES30,03724,907LONG-TERMDEBT19,11121,080DEFERREDINCOMETAXES10,82710,132OTHER NONCURRENT LIABILITIES10,57912,090TOTALLIABILITIES70,55468,209SHAREHOLDERS' EQUITYConvertibleClass A preferredstock,statedvalue$1pershare(600 sharesauthorized)1,1371,195Non-VotingClass Bpreferred stock, statedvalue$1 pershare(200sharesauthorized)——Common stock, stated value $1pershare(10,000sharesauthorized; sharesissued: 2013- 4,009.2,2012-4,008.4)4,0094,008Additionalpaid-in capital63,53863,181Reserve for ESOP debt retirement(1,352)(1,357)Accumulatedother comprehensive income/(loss)(7,499)(9,333)Treasurystock,at cost (shares held: 2013 - 1,266.9, 2012-1,260.4)(71,966)(69,604)Retained earnings80,19775,349Noncontrolling interest645596TOTALSHAREHOLDERS'EQUITY68,70964,035TOTALLIABILITIESANDSHAREHOLDERS' EQUITY$139,263$132,244The Procter&Gamble Company51See accompanying Notes to Consolidated Financial Statements.Consolidated Statements ofShareholders' EquityDollarsinmillions/SharesinthousandsCommonSharesOutstandingCommonStockPreferredStockAdditionalPaid-InCapitalReserveforESOPDebtRetirementAccumulatedOtherComprehensiveIncome/(loss)TreasuryStockRetainedEarningsNon-controllingInterestTotalBALANCEJUNE30, 20102,843,471$4,008$1,277$61,697$(1,350)$(7,822)$(61,309)$64,614$324$61,439Netearnings11,79713011,927Other comprehensive income5,7685,768Dividendstoshareholders:Common(5,534)(5,534)Preferred,net of tax benefits(233)(233)Treasurypurchases(112,729)(7,039)(7,039)Employee planissuances29,7297021,0331,735Preferredstock conversions5,266(43)637—ESOPdebt impacts(7)3831Noncontrolling interest,net(93)(93)BALANCEJUNE30, 20112,765,7374,0081,23462,405(1,357)(2,054)(67,278)70,68236168,001Netearnings10,75614810,904Othercomprehensiveloss(7,279)(7,279)Dividendstoshareholders:Common(5,883)(5,883)Preferred,net of tax benefits(256)(256)Treasurypurchases(61,826)(4,024)(4,024)Employee planissuances39,5465501,6652,215Preferredstock conversions4,576(39)633—ESOPdebt impacts5050Noncontrolling interest,net22087307BALANCEJUNE30, 20122,748,0334,0081,19563,181(1,357)(9,333)(69,604)75,34959664,035Netearnings11,3129011,402Other comprehensive income1,8341,834Dividendstoshareholders:Common(6,275)(6,275)Preferred,net of tax benefits(244)(244)Treasurypurchases(84,234)(5,986)(5,986)Employee planissuances70,92313523,5733,926Preferredstock conversions7,605(58)751—ESOPdebt impacts55560Noncontrolling interest,net(2)(41)(43)BALANCEJUNE30, 20132,742,327$4,009$1,137$63,538$(1,352)$(7,499)$(71,966)$80,197$645$68,70952The Procter&Gamble CompanySee accompanying Notes to Consolidated Financial Statements.ConsolidatedStatementsofCash FlowsAmountsin millions;YearsendedJune 30201320122011CASHAND CASHEQUIVALENTS, BEGINNING OF YEAR$4,436$2,768$2,879OPERATING ACTIVITIESNetearnings11,40210,90411,927Depreciationand amortization2,9823,2042,838Share-based compensation expense346377414Deferred incometaxes(307)(65)128Gainon sale andpurchase ofbusinesses(916)(2,106)(203)Goodwill and indefinite-lived intangible asset impairment charges3081,576—Changein accounts receivable(415)(427)(426)Changein inventories(225)77(501)Changein accounts payable, accrued and other liabilities1,253(22)358Change in other operatingassetsand liabilities68(444)(1,221)Other37721016TOTAL OPERATING ACTIVITIES14,87313,28413,330INVESTING ACTIVITIESCapitalexpenditures(4,008)(3,964)(3,306)Proceeds from asset sales5842,893225Acquisitions,netof cash acquired(1,145)(134)(474)Purchasesofavailable-for-saleinvestmentsecurities(1,605)——Changein other investments(121)11273TOTAL INVESTING ACTIVITIES(6,295)(1,093)(3,482)FINANCINGACTIVITIESDividendstoshareholders(6,519)(6,139)(5,767)Changein short-termdebt3,406(3,412)151Additionsto long-term debt2,3313,9851,536Reductionsoflong-term debt(3,752)(2,549)(206)Treasury stock purchases(5,986)(4,024)(7,039)Impact ofstock options andother3,4491,7291,203TOTAL FINANCINGACTIVITIES(7,071)(10,410)(10,122)EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS4(113)163CHANGE INCASH ANDCASHEQUIVALENTS1,5111,668(111)CASHANDCASHEQUIVALENTS,ENDOF YEAR$5,947$4,436$2,768SUPPLEMENTALDISCLOSURECashpaymentsfor: Interest$683$740$806 Incometaxes3,7804,3482,992Assets acquired through non-cash capital leases are immaterial for all periods.The Procter&Gamble Company53Amounts inmillions ofdollars except per share amountsorasotherwise specified.Notes to Consolidated Financial StatementsNOTE1SUMMARY OF SIGNIFICANTACCOUNTINGPOLICIESNature of OperationsThe Procter & Gamble Company's (the "Company,""Procter&Gamble,""we"or "us") businessisfocused on providingbranded consumer packaged goods of superior quality andvalue. Our productsaresoldin more than180 countriesandterritories primarily through retail operations including massmerchandisers,grocerystores,membershipclub stores,drugstores,department stores,salons,high-frequency stores ande-commerce.Wehaveon-the-groundoperationsinapproximately70 countries.Basis of PresentationThe ConsolidatedFinancial Statements includetheCompany anditscontrolledsubsidiaries.Intercompanytransactions areeliminated.Use of EstimatesPreparation of financialstatements inconformitywithaccountingprinciples generally accepted intheUnitedStatesofAmerica(U.S.GAAP)requiresmanagement tomakeestimatesand assumptionsthataffect theamounts reportedin the Consolidated Financial Statementsand accompanyingdisclosures.These estimates arebasedon management'sbestknowledge ofcurrent events andactionstheCompanymay undertake in the future. Estimates are used inaccounting for,amongotheritems, consumerand tradepromotionaccruals, restructuring reserves,pensions, post-employmentbenefits, stock options, valuationofacquiredintangible assets,useful livesfordepreciationandamortizationof long-livedassets, futurecash flowsassociated withimpairmenttesting for goodwill,indefinite-lived intangible assets and other long-lived assets, deferredtaxassets, uncertain income tax positions and contingencies.Actualresults mayultimately differfromestimates, althoughmanagement does not generally believe such differenceswould materiallyaffect the financialstatements in anyindividual year. However, in regardtoongoingimpairmenttestingofgoodwill andindefinite-livedintangible assets,significant deterioration in future cash flow projections orother assumptions used in estimatingfair valuesversus thoseanticipated at the time of the initial valuations, could resultinimpairment chargesthatmateriallyaffect the financialstatements inagiven year.RevenueRecognitionSalesarerecognized when revenueis realizedor realizableand hasbeen earned. Revenuetransactions represent salesofinventory.The revenuerecorded ispresented netofsalesand other taxes we collect on behalf of governmentalauthorities.The revenueincludesshipping andhandlingcosts,which generally are includedinthelist price tothecustomer. Our policyisto recognizerevenuewhen title totheproduct, ownership and risk of loss transfer to thecustomer, whichcanbe onthedateofshipment or thedateof receipt bythecustomer.A provision for paymentdiscounts and product return allowances is recorded as areductionofsalesinthe sameperiodthat the revenueisrecognized.Tradepromotions,consisting primarily ofcustomerpricingallowances,merchandising fundsand consumer coupons,areofferedthrough various programs to customersandconsumers. Salesarerecordednetoftrade promotionspending,which is recognized as incurred, generally at thetimeof the sale. Most of these arrangements have terms ofapproximately one year.Accruals forexpectedpayoutsunder these programs areincluded as accruedmarketingandpromotion in theaccruedand other liabilitieslineitem in theConsolidatedBalanceSheets.CostofProductsSoldCostof products sold is primarilycomprisedof directmaterials and supplies consumed in the manufacture ofproduct, aswell asmanufacturinglabor, depreciationexpenseanddirect overhead expense necessary to acquireandconvert thepurchasedmaterials andsupplies intofinishedproduct.Cost ofproductssold also includesthecost todistribute products to customers,inbound freightcosts, internaltransfer costs, warehousing costsandothershipping andhandling activity.Selling, General andAdministrativeExpenseSelling,generaland administrativeexpense (SG&A)isprimarilycomprised of marketing expenses,sellingexpenses,research and development costs, administrativeand other indirect overhead costs, depreciation andamortization expense on non-manufacturing assets and othermiscellaneous operating items.Researchand developmentcostsarechargedto expenseas incurredand were$2.0billion in2013,2012 and2011.Advertisingcosts, chargedto expenseas incurred, include worldwide television, print,radio, internet and in-store advertising expenses and were$9.7 billionin2013,$9.3 billion in2012 and$9.2 billion in2011.Non-advertising relatedcomponents oftheCompany's totalmarketing spending include costs associatedwithconsumerpromotions, product sampling and sales aids,whichareincludedinSG&A, aswellascoupons andcustomertradefunds,which are recordedasreductionstonetsales.Other Non-Operating Income, NetOther non-operating income,net,primarilyincludes netacquisitionanddivestiture gains and investmentincome.54The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.CurrencyTranslationFinancial statements of operatingsubsidiaries outside theU.S. generally are measuredusingthelocalcurrency as thefunctionalcurrency.Adjustments totranslate thosestatementsintoU.S. dollarsarerecorded in othercomprehensiveincome (OCI). CurrencytranslationadjustmentsinaccumulatedOCI were a gain of$353 atJune 30, 2013 and alossof$357 atJune 30,2012. Forsubsidiariesoperating in highly inflationaryeconomies, theU.S.dollar is the functional currency. Re-measurementadjustments for financial statements in highly inflationaryeconomies and othertransactional exchange gains and lossesarereflectedinearnings.Cash Flow PresentationTheConsolidated Statements ofCash Flows are preparedusing the indirectmethod, which reconcilesnetearnings tocash flow fromoperating activities.Thereconciliationadjustments includetheremovalof timingdifferencesbetweenthe occurrenceofoperatingreceiptsandpaymentsandtheir recognition in netearnings.The adjustmentsalsoremovecashflows arising frominvesting and financingactivities,whicharepresented separatelyfrom operatingactivities. Cash flows from foreign currency transactionsand operations aretranslated at an averageexchange rate forthe period. Cash flows from hedging activities are includedinthesamecategoryasthe itemsbeing hedged. Cash flowsfrom derivativeinstrumentsdesignatedas net investmenthedgesare classified as financingactivities. Realizedgainsand losses from non-qualifyingderivative instruments usedtohedgecurrencyexposuresresultingfrom intercompanyfinancing transactions are also classified as financingactivities. Cash flows from other derivative instrumentsused to manage interest, commodity or other currencyexposures areclassified as operatingactivities.Cashpaymentsrelated to income taxes are classifiedas operatingactivities. Cash flows fromtheCompany's discontinuedoperationsare included inthe Consolidated StatementsofCashFlows.Cash EquivalentsHighlyliquidinvestments with remainingstated maturitiesof threemonths orless when purchased areconsidered cashequivalentsand recorded at cost.InvestmentsInvestmentsecuritiesconsist ofreadily marketabledebt andequitysecurities. Unrealized gains or losses forinvestmentsclassifiedastradingarechargedtoearnings.Unrealizedgains orlosses on securities classifiedas available-for-salearegenerally recorded in OCI. If anavailable-for-salesecurity isotherthan temporarilyimpaired,thelossischarged to either earnings or OCI depending on our intentandability toretain the security until we recover the full costbasis and theextent oftheloss attributable tothecreditworthinessof the issuer. Investmentsecurities areincludedasothercurrentassets or other noncurrent assetsinthe Consolidated BalanceSheets.Investments in certain companies overwhichweexertsignificant influence,but do not controlthe financialandoperating decisions, are accounted for as equity methodinvestments. Otherinvestments thatare not controlled, andover which wedo not havetheabilitytoexercisesignificantinfluence,areaccounted forunderthe cost method.Bothequityand cost methodinvestmentsareincludedasothernoncurrentassetsintheConsolidated Balance Sheets.InventoryValuationInventoriesare valued at thelowerofcostormarketvalue.Product-related inventories are primarily maintained on thefirst-in,first-outmethod. Minor amounts ofproductinventories,including certain cosmeticsandcommodities,are maintained on the last-in, first-out method.Thecost ofspare partinventories is maintained using the average-costmethod.Property, Plant andEquipmentProperty,plantand equipment isrecorded at cost reduced byaccumulateddepreciation. Depreciation expenseisrecognizedoverthe assets'estimated usefullivesusing thestraight-linemethod. Machineryand equipment includesoffice furniture and fixtures (15-year life),computerequipmentandcapitalized software (3- to 5-yearlives)andmanufacturing equipment (3- to 20-year lives). Buildingsaredepreciated over anestimatedusefullife of 40 years.Estimatedusefullivesareperiodically reviewedand,whenappropriate, changes aremadeprospectively.Whencertaineventsor changes in operating conditionsoccur, assetlivesmaybe adjustedandanimpairment assessment may beperformedon the recoverability of the carrying amounts.GoodwillandOtherIntangibleAssetsGoodwill and indefinite-lived intangible assets are notamortized,but are evaluated forimpairmentannuallyormore often if indicatorsof a potential impairmentarepresent.Ourannual impairmenttestingofgoodwillisperformed separately from our impairment testing ofindefinite-livedintangibleassets.Theannual evaluationforimpairment ofgoodwilland indefinite-lived intangibleassetsis based on valuationmodels thatincorporateassumptionsand internal projectionsofexpected futurecash flowsandoperatingplans.Webelieve suchassumptions arealsocomparable to those that would beused by othermarketplace participants.Wehaveacquiredbrandsthat have been determinedtohaveindefinitelives.Weevaluate a number of factors todetermine whetheran indefinitelifeis appropriate,includingthecompetitive environment, marketshare, brandhistory,product life cycles, operating plans and the macroeconomicenvironmentof the countriesinwhich thebrandsare sold.When certaineventsor changesin operatingconditionsoccur, an impairment assessment is performed andThe Procter&Gamble Company55Amounts inmillions ofdollars except per share amountsorasotherwise specified.indefinite-lived brands maybe adjusted to a determinablelife.Thecostofintangibleassetswith determinableusefullivesisamortizedto reflect the patternofeconomic benefitsconsumed,either onastraight-line oraccelerated basis overtheestimatedperiods benefited. Patents,technology andother intangible assets with contractual terms are generallyamortized over their respectivelegal orcontractuallives.Customerrelationships, brands and other non-contractualintangible assets with determinable lives are amortized overperiodsgenerallyranging from5 to30 years.When certaineventsor changes in operating conditionsoccur,animpairment assessment is performed and remaining lives ofintangibleassets with determinablelivesmaybe adjusted.FairValues of Financial InstrumentsCertain financialinstrumentsarerequired to berecordedatfair value.Changes in assumptions or estimationmethodscould affect the fairvalueestimates;however, we do notbelieveanysuch changeswouldhaveamaterial impactonour financialcondition,results of operationsorcashflows.Other financialinstruments, includingcash equivalents,other investmentsand short-term debt, are recorded atcost,whichapproximatesfairvalue.Thefairvaluesof long-termdebtandfinancialinstrumentsare disclosed inNote5.NewAccounting Pronouncements andPoliciesOther thanas described below, no new accountingpronouncementissuedor effective duringthe fiscal year hadorisexpectedto haveamaterial impactontheConsolidatedFinancial Statements.During fiscal 2013,the Company adoptedASU 2011-05,"ComprehensiveIncome (Topic 220) - Presentation ofComprehensive Income", andASU2013-02,“Comprehensive Income(Topic 220)- Reporting ofAmounts Reclassified out ofAccumulatedOtherComprehensive Income”.This guidance eliminates theoptiontopresent the componentsofOCIaspartofthestatement of shareholders' equity and requires entities topresentthecomponents of netearnings and OCIineitherasingle continuous statement of comprehensive income ortwoseparate but consecutivestatements.Wechosetopresent net earnings and OCI intwo separate but consecutivestatements.Thisguidancealso requiresentities toprovideinformation about the amounts reclassified out ofaccumulated other comprehensiveincome (AOCI)bycomponentandtopresent, either on thefaceof the statementwhere netincome is presented or in the notes, significantamounts reclassified out ofAOCI bytherespective lineitems ofnetincome.We chose to present the requirementsinthe notesto the financial statements (seeNote 6).Theadoption of this guidance had no impact on our consolidatedfinancial position,results of operations orcashflows.NOTE2GOODWILLANDINTANGIBLEASSETSThe change in the net carrying amount of goodwill by reportable segmentwasas follows:BeautyGroomingHealthCareFabricCareandHomeCareBabyCareandFamilyCareCorporateTotalCompanyGOODWILL at JUNE30, 2011 -Gross$18,039$22,650$8,179$6,735$1,553$406$57,562Accumulatedimpairment losses at June30,2011———————GOODWILL at JUNE30, 2011 - Net18,03922,6508,1796,7351,55340657,562Acquisitionsanddivestitures(3)(12)47434—(92)401Goodwillimpairment charges(431)(899)————(1,330)Translation andother(1,176)(1,059)(314)(212)(94)(5)(2,860)GOODWILL at JUNE 30, 2012 -Gross16,86021,5798,3396,5571,45930955,103Accumulatedimpairment losses atJune 30,2012(431)(899)————(1,330)GOODWILL at JUNE 30, 2012 - Net16,42920,6808,3396,5571,45930953,773Acquisitionsanddivestitures(21)(40)624(11)463—1,015Goodwillimpairmentcharges—(259)————(259)Translationandother255236964032—659GOODWILL at JUNE 30, 2013 -Gross17,09421,7759,0596,5861,95430956,777Accumulatedimpairment losses at June30,2013(431)(1,158)————(1,589)GOODWILL at JUNE 30, 2013 - Net16,66320,6179,0596,5861,95430955,18856The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.InOctober2012,theCompany acquired ourpartner'sinterestina joint venturein IberiathatoperatesinourBabyCareandFamily CareandHealthCare reportablesegments.We paid$1.1 billion for our partner's interestand thetransaction wasaccounted for as a business combination.Thetotal enterprise value of$1.9billion wasallocated toindefinite-livedintangibleassets of$0.2 billion,defined-lifeintangible assets of$0.9 billion and goodwill of$1.1 billion.These were partially offsetby$0.3 billion of deferredtaxliabilitieson the intangibleassets.TheCompanyrecognizeda$0.6billionholdinggainonitspreviouslyheld investment,whichwas included inothernon-operating income, net intheConsolidated Statement of Earnings in fiscal2013. Inaddition to theseitems andtheimpairment discussed below,theremainingnetincrease in goodwill since June 30,2012wasprimarily due tocurrencytranslationacrossallreportablesegments.During the fourth quarter of fiscal 2013, the estimated fairvalue of ourAppliancesreportingunitdeclined below itscarryingamount.As a result, we recorded a non-cash beforeand after-tax impairmentcharge of$259infiscal2013toreducethe carryingamountofgoodwill toestimatedfairvalue.Thesame factorsthatledtothe declinein the fairvalueofthereportingunit led toadeclinein the fairvalueofourBrauntradenameintangibleasset belowitsrespectivecarrying value.This resultedina non-cashbefore-taximpairmentchargeof$49($31after-tax)toreducethecarryingamountofthis assettoitsfairvalue.Theresultsof our goodwillimpairment testing during fiscal2012determinedthat the estimated fair valuesofourAppliances and SalonProfessional reporting units werelessthan their respectivecarryingamounts.Asaresult,werecordedanon-cashbeforeandafter-tax impairment chargeof$1.3 billionin fiscal2012 to reducethecarrying amountof goodwillto estimated fairvalue;$899 of theimpairmentrelated toAppliancesand$431relatedto Salon Professional.Our impairment testing for indefinite-lived intangible assetsduringfiscal2012also indicateda declineinthefairvalueof our Koleston PerfectandWellatrade name intangibleassetsbelow their respectivecarrying values.Thisresultedina non-cash before-taximpairmentcharge of$246 ($173after-tax) toreducethecarryingamountsofthese assets totheirrespective fair values.All of the fiscal 2013 and 2012 goodwill and indefinite-livedintangibleassetimpairmentchargesareincluded inCorporate forsegmentreporting.Thegoodwillandintangibleasset valuations aredependentona number ofsignificant estimates and assumptions,includingmacroeconomic conditions,overall categorygrowth rates, competitive activities, costcontainment andmargin expansion and Company business plans.We believethese estimatesandassumptionsarereasonable.However,actual events andresults could differ substantially fromthose used in our valuations.To theextentsuchfactorsresult in afailure to achieve the levelof projected cash flowsusedtoestimate fair value, wemay need to record additionalnon-cash impairment chargesinthefuture.Thefiscal 2013declines infairvaluesoftheAppliancesreporting unit andthe Braun trade name intangible assetwere primarilydrivenbycurrency impacts.Specifically,currency inJapan, a country that generates asignificantportion of theAppliancesearnings,devalued approximately20%in thesecond halfof fiscal 2013relative to thecurrencies in which the underlying net assets are recorded.This sustained reduction in the yen reduced the underlyingcategory market size and the projected future cash flows ofthe business,whichin turn triggered the impairment.Thefiscal2012 declines inthe fair valuesof theAppliancesand Salon Professional reportingunits and the underlyingKoleston PerfectandWellatradenameintangibleassetswere drivenbyacombination of similar competitiveandeconomic factors, which resulted in a reduction in theforecasted growth rates and cash flowsused to estimate fairvalue.The factors included: (1)a more prolonged anddeeper deteriorationofthe macroeconomic environmentthanwaspreviously expected which, due to themorediscretionarynatureof theAppliancesand SalonProfessionalbusinesses, ledtoa reductionin the overallmarketsizeintheshortterm andamore significant andprolongedreduction in theexpected underlying marketgrowth rates andresulting saleslevelsinthe longer term.Thiswasparticularly evidentinEurope,wherewehavehistorically generateda majority of theAppliancesand SalonProfessionalsales; (2) increasingcompetitivelevels ofinnovationin SalonProfessional, which negatively impactedour current and nearer-term projectedmarket share progress;and, (3) an increasing level of competitivepricingactivities,whichnegatively impacted overallcategory profitability.Asaresult ofthesefactors,we reduced our currentand long-termsalesandearnings forecasts forthese businesses.In addition to theimpairmentchargesdiscussed above,goodwill alsodecreased infiscal2012duetocurrencytranslation across all reporting segments partially offsetbytheestablishmentofgoodwill related tothe businesscombinationwithTevaPharmaceuticals Ltd. inour HealthCarereportablesegment.The Procter&Gamble Company57Amounts inmillions ofdollars except per share amountsorasotherwise specified.Identifiable intangible assetswere comprisedof:20132012June30GrossCarryingAmountAccumulatedAmortizationGrossCarryingAmountAccumulatedAmortizationINTANGIBLE ASSETS WITH DETERMINABLELIVESBrands$4,251$2,020$3,297$1,687Patentsandtechnology2,9762,0323,1642,021Customerrelationships2,1187032,048642Other348168352218TOTAL9,6934,9238,8614,568INTANGIBLE ASSETSWITHINDEFINITE LIVESBrands26,802—26,695—TOTAL36,4954,92335,5564,568Amortization expense of intangible assets was as follows:Yearsended June 30201320122011Intangible asset amortization$528$500$546Estimated amortization expense over the next five fiscalyearsis asfollows:YearsendedJune 3020142015201620172018Estimatedamortizationexpense$504$485$442$405$380Such estimatesdo notreflecttheimpactof future foreignexchange ratechanges.NOTE3SUPPLEMENTAL FINANCIALINFORMATIONThe components of property,plantandequipment wereasfollows:June 3020132012PROPERTY,PLANT AND EQUIPMENTBuildings$7,829$7,324Machineryand equipment31,07029,342Land878880Construction inprogress3,2352,687TOTAL PROPERTY, PLANTANDEQUIPMENT43,01240,233Accumulated depreciation(21,346)(19,856)PROPERTY, PLANTANDEQUIPMENT, NET21,66620,377The June 30, 2012constructioninprogressbalance,whichwas includedin machineryand equipment in fiscal2012,isshownseparatelyto conformwiththe fiscal 2013presentation.Selectedcomponentsof current andnoncurrentliabilitieswere as follows:June 3020132012ACCRUED ANDOTHERLIABILITIES- CURRENTMarketingandpromotion$3,122$2,880Compensation expenses1,6651,660Restructuringreserves323343Taxespayable817414Legalandenvironmental374264Other2,5272,728TOTAL8,8288,289OTHERNONCURRENTLIABILITIESPensionbenefits$6,027$5,684Otherpostretirementbenefits1,7133,270Uncertaintax positions2,0022,245Other837891TOTAL10,57912,090RESTRUCTURINGPROGRAMThe Company has historicallyincurredan ongoing annuallevel ofrestructuring-type activities tomaintainacompetitive cost structure, includingmanufacturingandworkforceoptimization. Before-tax costsincurredunder theongoing program have generallyranged from$250 to$500annually. In February and November 2012, theCompanymadeannouncementsregardingan incremental restructuringprogram as partof a productivity and cost savings plan toreduce costs in theareas of supplychain, researchanddevelopment,marketing andoverheads.The productivityand cost savingsplan wasdesignedto acceleratecostreductions by streamlining management decision making,manufacturing and other work processes in order to helpfundthe Company's growthstrategy.The Company expectstoincurinexcessof$3.5billionin before-tax restructuringcosts over a five yearperiod (from fiscal 2012through fiscal2016), including costs incurred as part of the ongoing andincrementalrestructuringprogram.TheCompanyhasincurred approximately55%of thecosts under thisplanasof the end of fiscal2013,with the remainder expected to beincurred in fiscal years2014 through 2016.The restructuring program isbeingexecutedacross theCompany's centralized organizationaswellas acrossvirtually all ofits Market DevelopmentOrganizations(MDO) and GlobalBusinessUnits (GBU).Therestructuring program plans included an initialtargeted netreductioninnon-manufacturing overhead enrollment of58The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.approximately5,700 by the end of fiscal 2013.Throughfiscal2013, the Companyhasreduced non-manufacturingenrollmentbyapproximately7,000, whichis1,300positionsabove theinitialtarget.Inaddition tothereductionof5,700employees, therestructuringprogram includes plansfor afurther non-manufacturing overhead personnel reduction ofapproximately2% -4% annuallyfrom fiscal2014throughfiscal2016,roughlydoubling the size of the initialenrollment reductiontarget.Thisisbeingdoneviatheelimination of duplicate work,simplification through theuseoftechnologyandtheoptimizationofvariousfunctionalandbusiness organizationsand the Company'sglobalfootprint.Inaddition,theplan includes integrationofnewly acquiredcompanies and the optimizationofthesupply chain andother manufacturing processes.Restructuring costs incurredconsistprimarily ofcosts toseparateemployeesandasset-relatedcoststoexitfacilities.The Companyisalso incurring other types of costs asoutlined below.TheCompany incurred total restructuringcharges of approximately $956 million and $1.1 billion fortheyears ended June 30, 2013 and June30, 2012,respectively.Approximately $600 and $746 ofthesechargeswere recorded in SG&Afortheyears endedJune30, 2013and June 30, 2012, respectively.Theremainder isincludedincost ofproductssold.Since the inception of thisrestructuring program,the Companyhas incurredcharges ofapproximately $2.0 billion.Approximately$1.1 billion ofthesechargeswererelatedtoseparations,$487millionwereasset-related and$431millionwererelated tootherrestructuring-type costs.The following tablepresentsrestructuring activity fortheyearsended June 30, 2013 and2012:SeparationsAsset-RelatedCostsOtherTotalRESERVEJUNE 30, 2011$121$—$30$151Charges4953781791,052Cash spent(300)—(182)(482)Chargesagainstassets—(378)—(378)RESERVEJUNE 30, 2012316—27343Charges595109252956Cash spent(615)—(252)(867)Chargesagainstassets—(109)—(109)RESERVEJUNE 30, 2013296—27323Separation CostsEmployeeseparationcharges for theyears endedJune 30,2013 and June 30, 2012 relate to severance packages forapproximately3,450 and3,300employees, respectively. Forthe years ended June 30, 2013 and June 30, 2012,theseseverance packagesincludeapproximately2,390 and2,250non-manufacturing employees,respectively.Theseseparations areprimarilyin NorthAmericaandWesternEurope.The packagesarepredominantlyvoluntaryandtheamounts are calculated based on salary levels and pastservice periods. Severancecostsrelated to voluntaryseparationsare generallycharged to earnings when theemployeeacceptstheoffer.Sinceitsinception,therestructuringprogramhasincurredseparationchargesrelated to approximately6,750employees, of whichapproximately4,640arenon-manufacturing overheadpersonnel.Asset-Related CostsAsset-related costs consist ofboth asset write-downsandaccelerated depreciation.Assetwrite-downs relatetotheestablishment of a new fair value basis for assets held-for-saleor disposal.These assets were written down to thelowerof their current carrying basis or amounts expected toberealized upon disposal,less minor disposal costs.Charges for accelerated depreciation relate to long-livedassets that willbetakenout of service prior to the end oftheir normalserviceperiod.These assetsrelate primarilytomanufacturing consolidationsandtechnologystandardization.Theasset-relatedchargeswillnothaveasignificant impact onfuture depreciation charges.OtherCostsOther restructuring-typecharges areincurredas a directresultof therestructuring program. Suchcharges primarilyinclude employee relocation related to separations and officeconsolidations, termination of contracts related tosupplychain redesign and the cost to change internal systems andprocesses to support theunderlyingorganizationalchanges.Consistentwithourhistorical policies forongoingrestructuring-type activities, the restructuringprogramcharges are funded by and included within Corporate forbothmanagementandsegmentreporting.Accordingly,100% ofthecharges under the program are included withinthe Corporate reportable segment. However, for informativepurposes,the following table summarizes thetotalrestructuringcosts relatedto ourreportable segments:YearsEnded June 3020132012Beauty$132$120Grooming5020HealthCare5825FabricCare andHomeCare148184BabyCareandFamilyCare8863Corporate(1)480640Total Company9561,052(1) Corporateincludescostsrelatedtoallocated overheads,includingchargesrelated toourMDO, GlobalBusinessServicesandCorporateFunctions activities.The Procter&Gamble Company59Amounts inmillions ofdollars except per share amountsorasotherwise specified.NOTE4SHORT-TERMANDLONG-TERM DEBTJune 3020132012DEBTDUE WITHINONEYEARCurrent portion of long-term debt$4,506$4,083Commercial paper7,6424,574Other28441TOTAL12,4328,698Short-term weighted average interestrates(1)0.5%0.6%(1)Weightedaverageshort-term interest rates include the effectsofinterest rateswaps discussed inNote 5.June 3020132012LONG-TERM DEBTFloating rate USDnotes dueFebruary2014$2,000$1,0004.50% EURnote due May 20141,9601,8874.95%USD note due August 20149009000.70%USD note due August 20141,0001,0003.50%USDnote due February20157507500.95% JPY note due May 20151,0121,2613.15% USDnotedueSeptember20155005001.80%USD note dueNovember20151,0001,0004.85% USD notedueDecember 20157007001.45%USD note due August 20161,0001,0005.13% EUR notedueOctober 20171,4371,3834.70%USDnote due February20191,2501,2504.13% EUR notedue December 20207847559.36% ESOP debentures due2013-2021(1)7017572.30%USDnote due February20221,0001,0002.00% EUR note due August 20221,307—4.88% EURnote due May 20271,3071,2586.25% GBP note dueJanuary 20307647805.50%USDnote due February20345005005.80%USD note due August 20346006005.55% USD notedueMarch 20371,4001,400Capitallease obligations3145All otherlong-term debt1,7145,437Current portion of long-term debt(4,506)(4,083)TOTAL19,11121,080Long-termweightedaverage interestrates(2)3.3%3.3%(1)Debt issued bytheESOPisguaranteedby theCompany andmust be recordedasdebtofthe Company as discussed in Note 9.(2)Weighted averagelong-term interestratesincludetheeffectsofinterest rateswaps discussed inNote 5.Long-term debt maturitiesduring the nextfivefiscalyears areas follows:June 3020142015201620172018Debtmaturities$4,506$3,798$2,379$1,085$1,531The Procter&GambleCompanyfullyandunconditionallyguarantees the registered debt and securities issued by its100%finance subsidiaries.NOTE5RISK MANAGEMENTACTIVITIESANDFAIRVALUE MEASUREMENTSAs a multinationalcompany with diverseproductofferings,we are exposed to market risks, such as changes in interestrates,currency exchange ratesand commodity prices.Weevaluateexposures on a centralized basis to takeadvantageof naturalexposurecorrelation andnetting.Tothe extentwechoose to manage volatilityassociatedwith the netexposures, we enter into various financial transactionsthatweaccount for usingthe applicable accounting guidance forderivative instrumentsand hedging activities.Thesefinancial transactionsare governed by our policiescoveringacceptable counterparty exposure, instrument types andotherhedgingpractices.Atinception,weformallydesignate anddocumentqualifyinginstruments as hedges of underlying exposures.Weformally assess, atinception andatleast quarterly,whetherthefinancialinstrumentsusedinhedgingtransactions areeffectiveatoffsettingchangesineitherthefair value or cash flowsoftherelatedunderlying exposures.Fluctuations in thevalueof these instruments generallyareoffsetbychangesinthe valueorcashflows of theunderlying exposuresbeing hedged.Thisis driven bythehigh degreeof effectivenessbetween theexposure beinghedgedandthe hedginginstrument.Theineffective portionofachange in the fair valueofaqualifyinginstrumentisimmediately recognized inearnings.Theamountofineffectivenessrecognizedwasimmaterialfor allyearspresented.Credit Risk ManagementWehavecounterparty credit guidelines and normallyenterintotransactions with investmentgradefinancial institutions.Counterparty exposures aremonitoreddailyand downgradesin counterparty creditratings are reviewedon a timely basis.Wehavenotincurred, and donotexpecttoincur,materialcreditlosses on our risk management or other financialinstruments.Certain of the Company's financialinstrumentsused inhedging transactions are governed by industry standardnettingandcollateralagreements with counterparties. If theCompany's credit rating were to fall below the levelsstipulatedin the agreements,the counterparties coulddemandeithercollateralizationorterminationofthe60The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.arrangements.Theaggregate fairvalue oftheinstrumentscovered by thesecontractual featuresthatareinanetliability position as ofJune 30, 2013, was notmaterial.TheCompany has not been required to post collateral as a resultofthesecontractualfeatures.Interest Rate Risk ManagementOurpolicy is tomanage interestcostusinga mixtureoffixed-rate andvariable-ratedebt.To manage this risk in acost-efficientmanner,weenter intointerestrate swapswherebywe agree to exchangewiththe counterparty,atspecified intervals,thedifference betweenfixed andvariableinterest amounts calculated by reference to a notionalamount.Interestrateswapsthatmeetspecific accountingcriteria areaccounted for as fair value or cash flow hedges. For fairvaluehedges, the changes in the fair value of both thehedginginstruments andtheunderlying debtobligationsareimmediately recognizedininterestexpense. For cashflowhedges,theeffective portion ofthechangesinfairvalueofthe hedging instrumentis reportedin OCI and reclassifiedintointerestexpense over the life of the underlyingdebtobligation.Theineffectiveportion forbothcash flow andfairvaluehedges,whichwasnotmaterialforany yearpresented, was immediatelyrecognized in interest expense.Foreign Currency Risk ManagementWe manufacture andsell our products and financeoperationsinanumber ofcountriesthroughoutthe world.Asa result,weareexposedtomovementsinforeigncurrencyexchangerates.Tomanage the exchange rate risk primarilyassociatedwithour financing operations,we have historically used acombination of forwardcontracts, optionsand currencyswaps.As ofJune 30, 2013,wehad currencyswaps withmaturitiesup to five years,which areintended to offsettheeffect of exchange rate fluctuations on intercompanyloansdenominated in foreign currencies.These swaps areaccounted for as cash flow hedges.The effectiveportionofthe changes in fair value of these instruments is reported inOCI and reclassifiedinto SG&Aand interest expenseinthesameperiod or periods duringwhich the related hedgedtransactions affectearnings.Theineffective portion,whichwasnotmaterial for any year presented, was immediatelyrecognized inSG&A.The change in fair values of certain non-qualifyinginstrumentsusedto manage foreignexchangeexposureofintercompanyfinancingtransactions and certainbalancesheetitemssubjectto revaluationare immediatelyrecognized in earnings,substantially offsettingtheforeigncurrencymark-to-market impact of the relatedexposures.Net InvestmentHedgingWe hedge certain net investment positions in foreignsubsidiaries.To accomplish this, weeitherborrow directlyin foreign currencies and designate all or a portion of theforeign currency debtas ahedgeoftheapplicable netinvestment positionorwe enter intoforeigncurrencyswapsthat aredesignated ashedges ofnetinvestments.Changes inthefairvalue of these instruments are recognizedinOCI tooffsetthechange in the value ofthe netinvestment beinghedged.Currencyeffects of these hedges reflected in OCIwere after-tax gains of$156and$740 in2013 and2012,respectively.Accumulatednetbalanceswereafter-taxlossesof$3,550 and$3,706 as ofJune 30, 2013 and2012,respectively.Theineffective portion, which wasnotmaterialin anyyearpresented, was immediately recognizedininterestexpense.Commodity Risk ManagementCertain raw materials usedin our productsorproductionprocesses are subjecttoprice volatilitycaused byweather,supplyconditions,political andeconomicvariablesandotherunpredictablefactors.Tomanage thevolatilityrelatedtoanticipatedpurchasesofcertainofthese materials,wehavehistorically, on a limited basis, used futures and optionswith maturities generallylessthan oneyear andswapcontracts withmaturities uptofiveyears.As of and duringtheyearended June30, 2013,we didnothavematerialcommodityhedgingactivity.InsuranceWeself-insure for most insurable risks.However, wepurchase insurance for Directors and Officers Liabilityandcertain other coverage where it is requiredbylaw, bycontract ordeemed to be in the best interestof theCompany.FairValueHierarchyAccounting guidanceonfair value measurementsforcertainfinancial assetsand liabilities requires that financialassetsand liabilities carriedat fair value be classifiedand disclosedinoneof thefollowing categories:Level1: Quotedmarket pricesin activemarkets foridenticalassetsorliabilities.Level2: Observablemarket-basedinputs or unobservableinputsthatare corroborated bymarket data.Level3: Unobservableinputs reflecting the reportingentity'sownassumptionsor externalinputs from inactivemarkets.Whenapplyingfairvalueprinciplesinthevaluationofassetsandliabilities, we arerequired to maximizethe use ofquoted market pricesand minimize the use of unobservableinputs.TheCompanyhas notchangedits valuationtechniquesusedinmeasuringthe fair value of any financialassets orliabilities during theyear. Our fair valueestimatestakeintoconsideration the credit riskof boththeCompanyand our counterparties.When active market quotes are not availableforfinancialassetsand liabilities, weuseindustry standard valuationmodels.Whereapplicable,these models project futurecashflows and discountthefuture amounts to a presentvalueThe Procter&Gamble Company61Amounts inmillions ofdollars except per share amountsorasotherwise specified.usingmarket-based observableinputs including creditrisk,interest ratecurves, foreign currency rates andforward andspot prices for currencies. Incircumstanceswheremarket-basedobservable inputs are notavailable,managementjudgment isused todevelop assumptions to estimatefairvalue.Generally,thefair valueof our Level3 instrumentsisestimated as the net present valueofexpected futurecashflowsbased on external inputs.Thefollowing table sets forththeCompany's financial assets and liabilities asofJune 30, 2013 and2012 thatweremeasuredatfairvalueona recurring basisduring the period, segregatedbylevelwithinthefairvaluehierarchy:Level 1Level 2Level3TotalJune 3020132012201320122013201220132012ASSETSRECORDEDATFAIRVALUE Investments:U.S. governmentsecurities$—$—$1,571$—$—$—$1,571$—Other investments239——24244733Derivatives relatingto:Foreign currencyhedges——168———168—Other foreign currencyinstruments(1)——1986——1986Interest rates——191298——191298Netinvestmenthedges——23332——23332Commodities———3———3TOTALASSETS RECORDEDATFAIRVALUE(2)2392,18241924242,229452LIABILITIESRECORDEDATFAIR VALUE Derivatives relatingto: Foreign currencyhedges$—$—$—$142$—$—$—$142Otherforeigncurrency instruments(1)——9023——9023Interest rates——59———59—Netinvestmenthedges———19———19Commodities———2———2TOTALLIABILITIESATFAIRVALUE(3)——149186——149186LIABILITIESNOTRECORDEDATFAIR VALUELong-termdebt(4)22,67125,8293,0222,119——25,69327,948TOTALLIABILITIES RECORDEDANDNOT RECORDEDATFAIRVALUE22,67125,8293,1712,305——25,84228,134(1)Otherforeigncurrency instruments are comprisedof foreign currency financialinstrumentsthatdonot qualifyashedges.(2)Investmentsecuritiesandall derivative assets arepresented inprepaid expenses and othercurrent assetsand other noncurrent assets.The amortizedcostof the U.S.governmentsecuritieswas$1,604 asofJune30, 2013.AllU.S.government securities have contractualmaturities between oneand five years.Fair valuesare generally estimated based uponquotedmarketpricesforsimilarinstruments.(3)Allliabilities are presented in accruedandotherliabilitiesor other noncurrent liabilities.(4)Long-termdebt includes thecurrentportion($4,540 and$4,095asof June 30, 2013and 2012, respectively)ofdebtinstruments. Long-termdebtisnotrecorded atfairvalue on a recurring basis, butis measuredatfair value fordisclosurepurposes. Fair values aregenerallyestimated based on quotedmarket prices foridentical orsimilarinstruments.TheCompany recognizes transfers betweenlevels withinthefairvaluehierarchy, if any,attheend of eachquarter. Duringfiscal2013,theCompanytransferredlong-term debt instruments with a fairvalueof$455 fromLevel1to Level 2.Thetransferred instruments represent the Company's investment in industrial development bonds which are infrequently traded inan observable market.Therewere no additional transfers betweenlevels during the periods presented. In addition,therewasno significantactivity within the Level 3 assets andliabilitiesduringtheperiods presented.62The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.Duringfiscal2013and 2012, we recorded impairments of certaingoodwill and intangible assets.Also,during fiscal 2013,weapplied purchaseaccountingandre-measured assets and liabilities at fair value related to the purchase of thebalance of ajointventureinIberia (see Note 2 for additional details ontheseitems).Inaddition, the Company re-measured certain operating realestateassetstoanestimated fairvalue of$8 during theyear ended June 30, 2012, using comparable pricesfor similar assets,resultingina$220 impairment. Exceptforthese items,there were no significantassets orliabilities that were re-measuredatfairvalue on anon-recurringbasisduring theyears presented.Disclosures about Derivative InstrumentsThe notionalamounts andfairvalues of qualifyingand non-qualifying financialinstruments used inhedgingtransactionsas ofJune 30, 2013 and2012 are asfollows:NotionalAmountFair Value Asset/(Liability)June 302013201220132012DERIVATIVESIN CASHFLOWHEDGINGRELATIONSHIPSForeigncurrencycontracts$951$831$168$(142)DERIVATIVESINFAIR VALUEHEDGINGRELATIONSHIPSInterest ratecontracts$9,117$10,747$132$298DERIVATIVESINNETINVESTMENTHEDGINGRELATIONSHIPSNetinvestmenthedges$1,303$1,768$233$13DERIVATIVES NOTDESIGNATEDAS HEDGINGINSTRUMENTSForeigncurrencycontracts$7,080$13,210$(71)$63Commoditycontracts—125—1TOTAL7,08013,335(71)64The total notional amount of contracts outstanding at the endof the periodis indicative of thelevelof the Company'sderivativeactivityduringthe period.AmountofGain/(Loss)RecognizedinAOCIonDerivatives(EffectivePortion)June3020132012DERIVATIVESIN CASHFLOWHEDGINGRELATIONSHIPSInterestratecontracts$7$11Foreigncurrency contracts1422TOTAL2133DERIVATIVESINNETINVESTMENTHEDGINGRELATIONSHIPSNetinvestmenthedges$145$6The effective portion of gains and losses on derivativeinstruments thatwasrecognized inOCIduring the yearsendedJune 30, 2013 and2012 was notmaterial. During thenext12months, theamountof theJune 30, 2013,accumulatedOCIbalance that will be reclassified toearnings is expectedto beimmaterial.The amounts ofgains and losses onqualifyingandnon-qualifying financialinstruments used inhedging transactionsforthe years endedJune 30, 2013 and2012 wereas follows:AmountofGain/(Loss)ReclassifiedfromAOCIinto IncomeYearsended June 3020132012DERIVATIVESIN CASHFLOWHEDGINGRELATIONSHIPSInterestratecontracts$6$6Foreigncurrency contracts2155Commodity contracts—3TOTAL22114AmountofGain/(Loss)Recognized inIncomeYearsended June 3020132012DERIVATIVES INFAIRVALUEHEDGINGRELATIONSHIPSInterestratecontracts$(167)$135Debt171(137)TOTAL4(2)DERIVATIVES IN NETINVESTMENTHEDGINGRELATIONSHIPSNetinvestmenthedges$(2)$(1)DERIVATIVESNOTDESIGNATEDASHEDGINGINSTRUMENTSForeigncurrency contracts(1)$(34)$(1,121)Commodity contracts—2TOTAL(34)(1,119)(1)The gain or loss on non-qualifying foreign currencycontractssubstantially offsetsthe foreigncurrencymark-to-marketimpactoftherelatedexposure.The Procter&Gamble Company63Amounts inmillions ofdollars except per share amountsorasotherwise specified.NOTE6ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)The tables below present the changes in accumulated other comprehensive income/(loss) by component and thereclassificationsout of accumulatedothercomprehensiveincome/(loss):ChangesinAccumulated Other Comprehensive Income/(Loss) by ComponentHedgesInvestmentSecuritiesPensionandOtherRetireeBenefitsFinancialStatementTranslationTotalBalance at June 30, 2012$(3,673)$(3)$(5,300)$(357)$(9,333)OCIbefore reclassifications(1)363(24)7317101,780Amounts reclassifiedfromAOCI(219)—273—54Netcurrentperiod OCI144(24)1,0047101,834Balance at June 30, 2013(3,529)(27)(4,296)353(7,499)(1) Net oftax of$94,$5and$496 for gainsand losses onhedges, investment securitiesand pensionand otherretiree benefititems,respectively.ReclassificationsoutofAccumulatedOther Comprehensive Income/(Loss)Year ended June 302013HEDGES(1)Interestratecontracts$6Foreign exchange contracts215Total before-tax221Tax (expense)/benefit(2)Net of tax219PENSIONANDOTHER RETIREE BENEFITS(2)Amortization of deferred amounts2Recognized net actuarialgains/(losses)(412)Curtailments and settlements(4)Total before-tax(414)Tax (expense)/benefit141Net of tax(273)TOTALRECLASSIFICATIONS, NET OFTAX(54)(1)See Note5forclassification ofthese itemsin the Consolidated Statement of Earnings.(2)Reclassified fromAOCI into costs of products sold and SG&A.These components are included in the computation of netperiodicpension cost (see Note 9 for additional details).NOTE7EARNINGSPERSHARENet earningsattributable to Procter & Gamble less preferred dividends (net of related tax benefits) aredivided bytheweightedaveragenumber of common shares outstanding during the yearto calculate basicnetearnings percommon share. Dilutednetearningspercommon sharearecalculated to giveeffect tostock options and otherstock-based awards(see Note8) and assumeconversion of preferredstock (see Note 9).64The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.Net earnings attributable to Procter & Gamble and common shares used to calculate basicand diluted net earnings per sharewere as follows:YearsendedJune 30201320122011NETEARNINGSFROM CONTINUING OPERATIONS$11,402$9,317$11,698Net earningsfromdiscontinued operations—1,587229NETEARNINGS11,40210,90411,927Netearnings attributabletononcontrolling interests(90)(148)(130)NET EARNINGSATTRIBUTABLE TO PROCTER & GAMB11,31210,75611,797Preferreddividends,netof taxbenefit(244)(256)(233)NETEARNINGS ATTRIBUTABLE TO PROCTER & GAMBLEAVAILABLETOCOMMONSHAREHOLDE11,06810,50011,564NET EARNINGSFROMCONTINUINGOPERATIONSATTRIBUTABLE TOPROCTER& GAMBLEAVAILABLE TOCOMMONSHAREHOLDERS$11,068$8,913$11,335NETEARNINGSFROM CONTINUING OPERATIONSATTRIBUTABLETOPROCTER & GAMBLE (Diluted)$11,312$9,169$11,568Sharesin millions; Years endedJune30201320122011Basicweighted averagecommon sharesoutstanding2,742.92,751.32,804.0Effect of dilutive securitiesConversion of preferredshares(1)116.8123.9128.5Exercise of stock optionsandother unvested equity awards(2)70.966.069.4DILUTED WEIGHTED AVERAGE COMMON SHARESOUTSTANDING2,930.62,941.23,001.9(1)Despitebeing includedcurrentlyin diluted net earnings per commonshare,theactualconversion tocommon stock occurs whenthepreferredsharesaresold. Shares may onlybesold afterbeingallocatedto theESOP participantspursuant to therepayment oftheESOP's obligations through 2035.(2)Approximately12 million in2013,67 million in2012 and93million in2011 of the Company's outstanding stock options were notincluded in the diluted net earnings per share calculation because the optionswere out of the money or to do so would havebeenantidilutive (i.e., the total proceeds upon exercise would have exceededthe marketvalueoftheunderlying commonshares).NOTE8STOCK-BASEDCOMPENSATIONWehave stock-based compensation plans underwhichweannuallygrantstock option, restricted stock, restricted stockunit(RSU) and performancestockunit (PSU) awards to keymanagersand directors. Exercise prices on options grantedhave been, andcontinuetobe,set equal tothe market priceoftheunderlyingshareson thedate ofthegrant.SinceSeptember2002, the keymanagerstockoptionawardsgranted vestafterthreeyears andhave a10-yearlife.Thekey manager stock option awards granted from July 1998throughAugust2002 vested after threeyearsand have a15-yearlife. Keymanagerscan elect to receive up to 100% ofthe value of their option award in RSUs. Key managerRSUsvest and are settled in shares of common stock fiveyears from thegrantdate.Theawards providedto theCompany'sdirectorsareintheformofrestrictedstock andRSUs.In additionto our keymanager anddirector grants,wemakeother minor stock option and RSU grantstoemployeesforwhichtheterms are not substantially differentthanthosedescribed in the preceding paragraph. In 2011, weimplementeda performancestock program (PSP)andgrantedPSUstoseniorlevelexecutives.Underthisprogram,the number ofPSUs that will vest three years aftertherespective grantdate is based on the Company'sperformancerelativeto pre-established performancegoalsduring thatthree year period.Atotal of180 million sharesof commonstock wereauthorized forissuanceunder stock-based compensationplans approved by shareholdersin2003and 2009.A total of56 millionshares remainavailable for grantunder the 2003and 2009 plans.Totalstock-basedcompensation expensefor stock optiongrants was$249,$317 and$358 for2013,2012 and2011,respectively.Totalcompensationexpenseforrestrictedstock, RSUs andPSUswas$97,$60 and$56 in2013,2012and2011, respectively.The total incometax benefitrecognizedin the income statement for stockoptions,restricted stock, RSUs and PSUs was$96,$102 and$117 in2013,2012 and2011,respectively.Incalculatingthecompensationexpensefor stockoptionsgranted, we utilize a binomial lattice-based valuation model.RSLE)asic(B(Basic)(Diluted)(Diluted)The Procter&Gamble Company65Amounts inmillions ofdollars except per share amountsorasotherwise specified.Assumptionsutilizedin the model, which are evaluated andrevised, as necessary,to reflectmarket conditionsandexperience, were as follows:YearsendedJune 30201320122011Interest rate0.2-2.0%0.2-2.1%0.3-3.7%Weightedaverageinterest rate1.8%1.9%3.4%Dividend yield2.9%2.6%2.4%Expectedvolatility14-15%12-18%14-18%Weightedaveragevolatility15%15%16%Expected life inyears8.98.58.8Lattice-basedoption valuation models incorporaterangesofassumptions for inputs and those ranges are disclosed in theprecedingtable. Expectedvolatilitiesare basedonacombination ofhistorical volatility of our stock and impliedvolatilitiesofcall options onour stock.Weusehistoricaldatatoestimate optionexerciseand employee terminationpatternswithinthe valuationmodel.Theexpected lifeofoptions granted is derivedfromtheoutputof theoptionvaluation model andrepresentstheaverage periodoftimethat options granted are expected to be outstanding.Theinterest ratefor periods within the contractuallifeoftheoptions isbased on the U.S.Treasuryyieldcurveineffectatthetimeofgrant.Asummary of options, RSUsandPSUsoutstanding undertheplans asofJune 30, 2013, and activityduring theyearthenendedispresentedbelow:OptionsinthousandsOptionsWeightedAvg.ExercisePriceWeightedAvg.RemainingContract-ualLifeinYearsAggregateIntrinsicValue(inmillions)Outstanding,beginningofyear353,093$53.83Granted24,81875.41Exercised(69,933)47.09Canceled(1,739)60.97OUTSTANDING,ENDOFYEAR306,23957.074.9$6,100EXERCISABLE223,15452.973.65,367The weighted averagegrant-date fair value of optionsgranted was$8.19,$8.05 and$11.09 persharein2013,2012and2011,respectively.Thetotalintrinsic value ofoptionsexercised was$1,759,$820 and$628 in2013,2012 and2011,respectively.Thetotal grant-date fair value of optionsthat vested during2013,2012and 2011 was$352,$435 and$445, respectively.AtJune 30, 2013, therewas$233 ofcompensation cost thathasnot yetbeen recognizedrelatedto stock optiongrants.Thatcostis expectedto berecognized over aremaining weightedaverageperiodof1.8years. Cash received from options exercisedwas$3,294,$1,735 and$1,237 in2013,2012 and2011,respectively.The actual tax benefit realized for the tax deductions fromoption exercisestotaled$575,$239 and$188 in2013,2012and2011, respectively.RSUsPSUsOtherStock-BasedAwardsinthousandsUnitsWeighted-AverageGrant-Date FairValueUnitsWeighted-AverageGrant-Date FairValueNon-vested atJuly 1, 20123,670$55.531,261$58.79Granted1,95162.6962667.70Vested(952)59.50——Forfeited(79)55.31——Non-vested atJune 30, 20134,59056.881,88761.75AtJune 30, 2013,therewas$195 ofcompensationcost thathas not yet beenrecognized related to restricted stock, RSUsandPSUs.That costisexpectedtoberecognized overaremainingweightedaverage periodof3.1years.Thetotalfair value of shares vested was$51,$38 and$30 in 2013,2012 and 2011,respectively.Wehaveno specificpolicyto repurchase common shares tomitigatethe dilutiveimpactofoptions, RSUs and PSUs.However,we havehistoricallymade adequate discretionarypurchases, basedoncash availability,markettrends andotherfactors, to offset the impacts of such activity.NOTE9POSTRETIREMENTBENEFITSAND EMPLOYEESTOCK OWNERSHIP PLANWeoffervariouspostretirement benefitstoour employees.Defined Contribution RetirementPlansWe have defined contributionplanswhich coverthe majorityofourU.S. employees, aswellasemployeesin certainothercountries.Theseplansarefullyfunded.Wegenerally makecontributions to participants'accountsbased onindividualbasesalariesandyearsofservice.Totalglobaldefinedcontributionexpensewas$314,$353 and$347 in2013,2012 and2011, respectively.The primary U.S.defined contribution plan (theU.S.DCplan)comprises themajorityoftheexpensefortheCompany's definedcontribution plans. For theU.S.DCplan,the contribution rate is setannually.Totalcontributions for this planapproximated15% of totalparticipants' annual wages and salaries in2013,2012 and2011.WemaintainThe Procter&GambleProfitSharingTrust(Trust) and Employee Stock Ownership Plan (ESOP) toprovide aportion ofthefunding for the U.S. DC plan andotherretiree benefits (described below). Operating details oftheESOP are provided at the end of this Note.Thefairvalueofthe ESOPSeriesA shares allocated toparticipants66The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.reduces our cash contribution requiredto fund the U.S.DCplan.Defined Benefit Retirement Plans and OtherRetireeBenefitsWeofferdefined benefit retirement pension plans to certain employees.Thesebenefits relate primarily to local plans outsidetheU.S.and,toa lesserextent, plans assumed in previous acquisitions covering U.S. employees.Wealso providecertainother retiree benefits,primarily health care and lifeinsurance,for themajorityofourU.S. employeeswho become eligible for thesebenefits when theymeet minimumageandservicerequirements.Generally,thehealth care plansrequire cost sharing with retirees andpay astated percentage of expenses, reducedby deductibles and other coverages.Thesebenefits are primarily fundedby ESOP SeriesBsharesandcertain other assets contributed by the Company.Obligationand FundedStatus.Thefollowing provides a reconciliationof benefit obligations, plan assets and funded statusofthesedefinedbenefitplans:Pension Benefits(1)OtherRetireeBenefits(2)Yearsended June 302013201220132012CHANGEINBENEFITOBLIGATIONBenefitobligationat beginningofyear(3)$13,573$12,229$6,006$4,886Servicecost300267190142Interest cost560611260276Participants'contributions20226668Amendments104(44)——Actuarial loss/(gain)4731,911(1,022)957Acquisitions/(divestitures)51(17)——Specialterminationbenefits39—1827Currencytranslation andother(4)(847)5(95)Benefitpayments(602)(559)(234)(255)BENEFIT OBLIGATIONAT ENDOFYEAR(3)14,51413,5735,2896,006CHANGEINPLANASSETSFair value of plan assets at beginning of year7,9747,9622,7132,975Actualreturnonplanassets796459954(126)Acquisitions/(divestitures)59———Employercontributions3914852324Participants'contributions20226668Currencytranslation andother(77)(395)——ESOPdebtimpacts(4)——3127Benefitpayments(602)(559)(234)(255)FAIRVALUEOFPLANASSETS AT ENDOFYEAR8,5617,9743,5532,713FUNDED STATUS(5,953)(5,599)(1,736)(3,293)(1)Primarily non-U.S.-based defined benefit retirement plans.(2)Primarily U.S.-based other postretirement benefit plans.(3)For the pension benefit plans, the benefit obligation is the projected benefit obligation. For otherretiree benefit plans,the benefitobligation istheaccumulated postretirement benefitobligation.(4)Represents the net impact of ESOP debt service requirements, which is nettedagainstplanassets forotherretiree benefits.The underfunding of pension benefits isprimarily a function ofthedifferent funding incentives thatexist outsideofthe U.S.Incertaincountries, there are no legal requirements orfinancial incentives providedto companiestopre-fund pension obligationsprior to their due date. In these instances, benefit payments are typically paid directly from the Company's cash as theybecomedue.The Procter&Gamble Company67Amounts inmillions ofdollars except per share amountsorasotherwise specified.PensionBenefitsOtherRetireeBenefitsJune 302013201220132012CLASSIFICATIONOFNETAMOUNTRECOGNIZEDNoncurrentassets$114$128$—$—Currentliability(40)(43)(23)(23)Noncurrentliability(6,027)(5,684)(1,713)(3,270)NETAMOUNTRECOGNIZED(5,953)(5,599)(1,736)(3,293)AMOUNTS RECOGNIZED IN ACCUMULATED OTHERCOMPREHENSIVEINCOME (AOCI)Netactuarialloss$4,049$4,010$1,772$3,565Priorservicecost/(credit)353261(54)(75)NETAMOUNTSRECOGNIZEDINAOCI4,4024,2711,7183,490Theaccumulated benefit obligationfor alldefinedbenefit pensionplans was$12,652 and$11,763 as ofJune 30, 2013 and2012, respectively. Pensionplans with accumulated benefitobligations inexcessofplan assets andplans with projectedbenefitobligations in excess of plan assets consistofthefollowing:AccumulatedBenefitObligation ExceedstheFairValue ofPlanAssetsProjectedBenefitObligation ExceedstheFairValue ofPlanAssetsJune 302013201220132012Projected benefit obligation$12,024$11,623$12,962$12,310Accumulatedbenefitobligation10,40610,00911,14910,533Fairvalueofplanassets6,0866,0136,8956,58368The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.Net Periodic Benefit Cost. Componentsof thenetperiodic benefitcostwereasfollows:PensionBenefitsOtherRetireeBenefitsYearsendedJune 30201320122011201320122011AMOUNTS RECOGNIZED IN NET PERIODIC BENEFIT COSTServicecost$300$267$270$190$142$146Interest cost560611588260276270Expectedreturnonplanassets(587)(573)(492)(382)(434)(431)Prior service cost /(credit) amortization182118(20)(20)(18)Netactuariallossamortization2131021541999996Specialterminationbenefits39——18273Curtailments, settlements and other46————GROSS BENEFIT COST5474345382659066Dividends on ESOP preferred stock———(70)(74)(79)NETPERIODICBENEFIT COST/(CREDIT)54743453819516(13)CHANGEIN PLAN ASSETSAND BENEFITOBLIGATIONSRECOGNIZEDIN AOCINetactuarialloss /(gain)- currentyear2642,009(1,594)1,516Priorservicecost/(credit) -current year104(44)——Amortization ofnetactuarial loss(213)(102)(199)(99)Amortization of prior service(cost) /credit(18)(21)2020Settlement/curtailment cost(4)(6)——Currencytranslation andother(2)(234)1(36)TOTALCHANGEINAOCI1311,602(1,772)1,401NET AMOUNTS RECOGNIZED INPERIODICBENEFITCOST AND AOCI6782,036(1,577)1,417Amounts expected to be amortized fromAOCI into netperiodicbenefitcost during the year ending June 30, 2014, areasfollows:PensionBenefitsOtherRetireeBenefitsNetactuarialloss$210$118Prior servicecost/(credit)24(20)Assumptions.We determine our actuarial assumptions on an annual basis.Theseassumptionsare weightedtoreflecteachcountrythat may have animpact on the costofproviding retirement benefits.Theweightedaverageassumptions for thedefinedbenefitand otherretireebenefitcalculations, as well as assumedhealth care trend rates, were as follows:PensionBenefitsOtherRetireeBenefitsYearsended June 302013201220132012ASSUMPTIONSUSEDTODETERMINEBENEFITOBLIGATIONS(1)Discountrate4.0%4.2%4.8%4.3%Rateofcompensationincrease3.2%3.3%—%—%ASSUMPTIONSUSEDTODETERMINENETPERIODICBENEFITCOST(2)Discountrate4.2%5.3%4.3%5.7%Expectedreturn onplanassets7.3%7.4%8.3%9.2%Rateofcompensationincrease3.3%3.5%—%—%ASSUMEDHEALTHCARECOSTTRENDRATESHealthcarecosttrendratesassumedfornextyear—%—%7.3%8.0%Rate to which the health care costtrendrateisassumedtodecline(ultimatetrendrate)—%—%5.0%5.0%Yearthattheratereachestheultimatetrendrate—%—%20202019(1)Determinedasofendofyear.(2)Determinedasofbeginning ofyear and adjusted for acquisitions.The Procter&Gamble Company69Amounts inmillions ofdollars except per share amountsorasotherwise specified.Several factors are considered in developingthe estimate for thelong-termexpectedrate ofreturnonplan assets. For thedefined benefit retirementplans, these factors include historical rates of return of broad equity and bond indices and projectedlong-term ratesofreturnobtained frompensioninvestmentconsultants.Theexpected long-term ratesof returnforplan assetsare8 -9% forequitiesand5 -6%for bonds.For other retiree benefit plans,the expectedlong-termrate of return reflectsthefact that the assets are comprised primarilyof Company stock.The expectedrate ofreturn on Company stockis basedon thelong-termprojectedreturnof8.5% andreflectsthe historical patternof returns.Assumed health carecost trendrates couldhaveasignificanteffecton theamounts reported for theother retiree benefitplans.A onepercentage point change in assumed health care cost trend rates would have thefollowing effects:One-PercentagePointIncreaseOne-PercentagePointDecreaseEffecton the total service and interestcostcomponents$91$(70)Effect on the accumulated postretirement benefitobligation806(643)PlanAssets. Ourinvestmentobjective fordefined benefit retirementplanassets is tomeet the plans' benefit obligations, whileminimizing the potentialfor future required Companyplancontributions.The investment strategies focusonasset classdiversification,liquidity to meet benefit payments and an appropriate balance oflong-terminvestment returnandrisk.Targetranges for asset allocations are determined bymatchingthe actuarialprojections of the plans'future liabilities andbenefitpayments with expected long-term ratesof return on the assets, takinginto account investment returnvolatilityand correlationsacrossassetclasses.Plan assetsare diversified across several investment managers and aregenerallyinvestedinliquidfundsthat are selected to track broad market equity and bond indices. Investment risk is carefully controlled with plan assetsrebalanced totargetallocationson a periodicbasis and withcontinualmonitoring of investment managers' performance relativeto the investment guidelinesestablishedwith each investmentmanager.Ourtarget assetallocation for the year endedJune 30, 2013, and actual asset allocation by asset category as ofJune 30, 2013and2012,were asfollows:Target AssetAllocationActualAssetAllocation atJune30PensionBenefitsOtherRetireeBenefitsAssetCategoryPensionBenefitsOtherRetireeBenefits2013201220132012Cash1%2%1%1%2%1%Debtsecurities54%8%52%52%6%9%Equitysecurities45%90%47%47%92%90%TOTAL100%100%100%100%100%100%Thefollowing tables setforththefair value of the Company's plan assets as ofJune 30, 2013 and2012 segregated by levelwithin the fair value hierarchy (refertoNote5 forfurther discussion on the fair value hierarchyandfair valueprinciples).Common collective fundsarevalued usingthe net asset value reported by the managers of the funds andas supportedbytheunitpricesofactualpurchase and sale transactions. Companystock listedas Level2 in the hierarchyrepresents preferredshareswhich are valued based on the valueof Companycommonstock.The majority of our Level3 pension instrumentsareinsurancecontracts.Theirfair values are basedontheircashequivalentormodelsthatproject future cash flows anddiscountthe future amounts to a present valueusing market-based observable inputs including credit risk and interest rate curves.PensionBenefitsLevel 1Level 2Level3TotalJune3020132012201320122013201220132012ASSETS AT FAIRVALUE Cash andcashequivalents$71 $60$— $—$— $—$71 $60Commoncollectivefund -equity— —3,9933,727— —3,9933,727Commoncollectivefund- fixed income— —4,3614,112— —4,3614,112Other4 4— —13271136 75TOTAL ASSETS ATFAIR VALUE75 648,3547,839132 718,5617,97470The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.OtherRetireeBenefitsLevel 1Level 2Level3TotalJune3020132012201320122013201220132012ASSETS AT FAIRVALUE Cash andcashequivalents$56 $16$— $—$— $—$56 $16Companystock——3,2702,418——3,2702,418Commoncollectivefund -equity— —16 30— —16 30Commoncollectivefund- fixed income— —200247— —200247Other— —— —11211 2TOTALASSETS ATFAIRVALUE56 163,4862,69511 23,5532,713Therewasnosignificant activity withinthe Level 3 pensionand other retiree benefits planassets duringthe yearspresented.CashFlows.Management'sbest estimate of cashrequirements and discretionary contributions for the definedbenefit retirement plans and other retiree benefitplans forthe year ending June 30,2014, is approximately$1,463and$31, respectively. For the defined benefit retirement plans,this is comprised of$90 in expected benefit payments fromthe Company directly to participants of unfunded plans and$1,373 ofexpectedcontributionsto fundedplans.Thisestimateincludesa discretionary contribution madeto aforeign pension plan for approximately$1.0 billioninJuly2013. For other retireebenefit plans,this iscomprised ofexpectedcontributions that will be used directly for benefitpayments. Expectedcontributions are dependentonmanyvariables, including the variability ofthemarketvalue of theplanassetsas compared tothe benefit obligationandothermarket or regulatory conditions. In addition,wetakeintoconsiderationourbusiness investmentopportunitiesandresultingcashrequirements.Accordingly,actualfundingmaydiffersignificantlyfromcurrent estimates.Totalbenefit paymentsexpectedtobepaid to participants,which include payments funded from the Company'sassets,as discussed above,aswellas paymentsfromthe plans,areas follows:Years ending June30PensionBenefitsOtherRetireeBenefitsEXPECTED BENEFITPAYMENTS2014$553$20820155452242016568237201759625120186022662019 - 20233,3921,549Employee StockOwnershipPlanWemaintainthe ESOP to providefundingforcertainemployeebenefits discussed inthepreceding paragraphs.TheESOP borrowed$1.0 billionin 1989 and the proceedswereusedto purchaseSeriesA ESOP ConvertibleClassAPreferredStock to fund a portion of the U.S. DC plan.Principalandinterest requirements of the borrowing werepaid bytheTrust from dividends on thepreferredshares andfromadvancesprovidedby theCompany.Theoriginalborrowing of$1.0 billion hasbeen repaidin full,andadvancesfrom theCompany of$112 remain outstandingatJune 30, 2013. Eachshareisconvertibleat the option of theholder intoone share of theCompany's commonstock.Thedividend for the current year was equal to the common stockdividendof$2.29pershare.Theliquidationvalue is$6.82pershare.In 1991,theESOP borrowed an additional$1.0 billion.Theproceedswere usedto purchaseSeriesB ESOP ConvertibleClassAPreferredStock tofundaportionofretireehealthcarebenefits.Theseshares,net ofthe ESOP'sdebt,areconsidered plan assets of the other retiree benefits plandiscussed above. Debtservice requirementsarefundedbypreferred stockdividends, cash contributionsand advancesprovided by the Company, ofwhich$539 is outstanding atJune 30, 2013. Eachshareisconvertibleat the option of theholder intoone share of theCompany's commonstock.Thedividend for the current year was equal to the common stockdividendof$2.29 pershare.Theliquidation value is$12.96pershare.OurESOPaccounting practicesare consistent with currentESOP accounting guidance,includingthe permissiblecontinuation of certain provisionsfromprioraccountingguidance. ESOP debt, which isguaranteed bytheCompany,is recorded as debt (see Note4) with an offset tothereservefor ESOPdebtretirement,which ispresentedwithinshareholders' equity.Advances tothe ESOP bytheCompany are recordedasanincrease in thereserveforESOP debt retirement. Interestincurred on theESOP debt isrecordedas interestexpense.Dividendsonall preferredshares, netof relatedtax benefits,arecharged to retainedearnings.TheseriesAand Bpreferredshares ofthe ESOP areallocated to employees basedon debt service requirements,net ofadvances made by the Company to theTrust.TheThe Procter&Gamble Company71Amounts inmillions ofdollars except per share amountsorasotherwise specified.numberof preferred shares outstanding atJune 30 was asfollows:Sharesinthousands201320122011Allocated45,53550,66852,281Unallocated9,84311,34813,006TOTALSERIESA55,37862,01665,287Allocated21,27820,80220,759Unallocated37,30038,74340,090TOTALSERIESB58,57859,54560,849For purposesof calculating diluted netearnings per commonshare,thepreferred sharesheld by the ESOPareconsideredconvertedfrominception.NOTE10INCOMETAXESIncome taxesare recognized for theamountof taxespayablefor thecurrentyear and forthe impact of deferred taxassetsand liabilities,whichrepresentfuture taxconsequencesofeventsthathave beenrecognizeddifferentlyin thefinancialstatements than for tax purposes. Deferred tax assets andliabilitiesare established using the enactedstatutory tax ratesand are adjustedforany changes in such rates in the periodof change.Earnings from continuing operations before income taxesconsisted of the following:YearsendedJune 30201320122011UnitedStates$8,351$7,584$8,858International6,4925,2016,139TOTAL14,84312,78514,997Incometaxesoncontinuing operations consistedof thefollowing:YearsendedJune 30201320122011CURRENT TAXEXPENSEU.S.federal$1,885$1,913$1,770International1,5841,3741,149U.S. stateandlocal2792462563,7483,5333,175DEFERREDTAXEXPENSEU.S.federal18083200Internationaland other(487)(148)(76)(307)(65)124TOTALTAXEXPENSE3,4413,4683,299AreconciliationoftheU.S. federal statutory income taxratetoouractual income taxrate oncontinuingoperations isprovided below:Yearsended June 30201320122011U.S. federal statutory incometaxrate35.0%35.0%35.0%Country mix impactsofforeign operations(7.6)%(8.1)%(8.2)%Changesin uncertaintaxpositions(1.8)%(1.3)%(3.6)%Impairmentadjustments0.6%3.7%—%Holding gainon jointventurebuy-out(1.4)%—%—%Other(1.6)%(2.2)%(1.2)%EFFECTIVEINCOMETAXRATE23.2%27.1%22.0%Changes in uncertaintaxpositions represent changes in ournet liability related to prior yeartaxpositions.Taxcostschargedtoshareholders'equity totaled$503 fortheyearendedJune 30, 2013.This primarily relates to theimpact of certainadjustmentstopension obligationsrecordedinshareholders'equity, partially offsetby excesstax benefits from the exercise of stockoptions.Tax benefitscredited toshareholders' equity totaled$661 for the yearendedJune30, 2012.Theseprimarily relate to thetaxeffectsofnet investmenthedges,excesstaxbenefitsfromtheexercise of stock options and the impacts ofcertainadjustments to pensionand other retireebenefitobligationsrecorded inshareholders'equity.We have undistributed earnings of foreign subsidiaries ofapproximately$42.0 billion atJune 30, 2013, for whichdeferred taxes havenotbeen provided. Suchearnings areconsideredindefinitely invested in the foreign subsidiaries.Ifsuch earnings were repatriated, additional tax expensemay result. However,thecalculationof the amountofdeferred U.S. income tax on these earnings is not practicablebecauseof the large numberof assumptions necessarytocompute the tax.72The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.A reconciliation ofthe beginningandending liabilityforuncertaintaxpositions is as follows:YearsendedJune 30201320122011BEGINNINGOFYEAR$1,773$1,848$1,797Increasesin tax positions forprioryears162166323Decreases intaxpositions forprioryears(225)(188)(388)Increasesin tax positions forcurrentyear188178222Settlements withtaxingauthorities(195)(49)(168)Lapse in statuteoflimitations(98)(81)(94)Currencytranslation(5)(101)156ENDOF YEAR1,6001,7731,848TheCompanyispresentinapproximately150taxablejurisdictionsand,atanypoint in time,has40-50jurisdictional audits underway at various stages ofcompletion.Weevaluateour tax positions and establishliabilitiesforuncertaintax positionsthat may be challengedby local authorities and may notbe fullysustained, despiteour belief that the underlying tax positions are fullysupportable. Uncertain tax positionsarereviewed onanongoingbasisand are adjusted in light of changingfactsandcircumstances, including progress oftax audits,developmentsincase law andclosingofstatuteoflimitations. Such adjustments arereflected inthe taxprovisionas appropriate.The Companyismakingaconcerted efforttobring itsauditinventorytoamorecurrentposition.Wehavedone this byworking withtaxauthoritiesto conductaudits for severalopen years atonce.We havetax years open ranging from2002 and forward.We aregenerallynotable toreliably estimate the ultimatesettlementamounts until the close of the audit.Whilewe do notexpectmaterial changes,itispossiblethat the amount ofunrecognized benefitwith respect to our uncertaintaxpositionswillsignificantly increase or decrease withinthenext12 monthsrelatedtothe audits described above.At thistime, we are notabletomake a reasonable estimate of therangeof impacton thebalance of uncertaintaxpositionsortheimpacton the effective tax rate related to these items.Included in the total liability for uncertain tax positionsatJune 30, 2013, is$1.2 billion that, depending ontheultimateresolution, could impacttheeffective taxrate in futureperiods.Accounting pronouncements require that, without discretion,we recognizethe additional accrual of any possible relatedinterest andpenalties relating to the underlying uncertaintaxposition in income taxexpense, unless the Companyqualifies for a specific exception.As ofJune 30, 2013,2012and2011,wehadaccruedinterest of$413,$439 and$475andaccrued penalties of$34,$66 and$80, respectively, thatare notincluded in the abovetable. During thefiscalyearsendedJune 30, 2013,2012 and2011, we recognized$24,$2and$197 ininterest benefitand$32,$10 and$16 inpenaltiesbenefit,respectively.Thenet benefits recognizedresulted primarily fromthe favorableresolutionoftaxpositionsfor prioryears.Deferredincome tax assets and liabilitieswerecomprised ofthefollowing:June 3020132012DEFERRED TAXASSETSPension and postretirementbenefits$1,777$2,366Stock-based compensation1,1251,304Loss and othercarryforwards1,062853Goodwill and other intangible assets6078Accruedmarketing and promotion285238Fixedassets135165Unrealizedloss on financial andforeignexchange transactions324363Accrued interest andtaxes1528Inventory4658Other879761Valuationallowances(341)(375)TOTAL5,3675,839DEFERREDTAX LIABILITIESGoodwill and other intangible assets$11,941$11,816Fixedassets1,7181,719Other315286TOTAL13,97413,821Netoperating losscarryforwardswere$3.1 billionand$2.8billionatJune 30, 2013 and2012, respectively. If unused,$1.4 billion will expire between 2014and2033.Theremainder,totaling$1.7 billionatJune 30, 2013,may becarriedforwardindefinitely.NOTE11COMMITMENTSAND CONTINGENCIESGuaranteesIn conjunctionwithcertain transactions, primarilydivestitures, wemayprovide routine indemnifications(e.g.,indemnification for representations and warranties andretentionof previously existing environmental,taxandemployeeliabilities)for whichterms rangein duration and,insomecircumstances,arenotexplicitly defined.Themaximum obligationundersomeindemnifications is alsonotexplicitly stated and, as aresult,the overall amountoftheseobligations cannot bereasonablyestimated. Otherthan obligations recorded as liabilities at the time ofdivestiture, we havenotmade significant paymentsfortheseindemnifications.Webelievethatifwewereto incura lossonanyof thesematters, the loss would not have amaterialeffecton our financial position, results ofoperations or cashflows.The Procter&Gamble Company73Amounts inmillions ofdollars except per share amountsorasotherwise specified.In certain situations, we guarantee loans for suppliers andcustomers.Thetotalamountofguarantees issued undersuch arrangements is notmaterial.Off-BalanceSheetArrangementsWedonothaveoff-balance sheetfinancingarrangements,includingvariable interest entities,thathaveamaterialimpactonourfinancialstatements.PurchaseCommitments and Operating LeasesWe have purchase commitments for materials, supplies,servicesandproperty, plant and equipment as part of thenormal course of business. Commitmentsmade undertake-or-pay obligations areas follows:Years endedJune 3020142015201620172018ThereafterPurchaseobligations$1,114$383$242$136$74$234Such amounts represent future purchases in line withexpected usageto obtainfavorablepricing.Approximately20% of our purchasecommitmentsrelatetoservice contractsforinformationtechnology,human resources managementandfacilitiesmanagementactivities that havebeenoutsourced tothird-party suppliers. Duetotheproprietarynatureofmanyofourmaterialsandprocesses,certainsupply contractscontain penaltyprovisions for earlytermination.We do not expect toincur penaltypaymentsunder theseprovisions thatwould materiallyaffect ourfinancial position,results of operations orcashflows.Wealsoleasecertain propertyandequipment for varyingperiods. Future minimum rentalcommitmentsunder non-cancelableoperatingleases,net of guaranteed subleaseincome, are as follows:Years endedJune3020142015201620172018ThereafterOperatingleases$254$241$196$161$141$519LitigationWe are subject to various legalproceedingsandclaimsarising out of our businesswhichcoverawiderange ofmatters such as antitrust, trade and other governmentalregulations,product liability,patentand trademarkmatters,advertising, contracts, environmental issues,labor andemployments matters and income and other taxes.As previously disclosed,theCompanyhas had a number ofantitrustmattersinEurope.Thesematters involve anumberof other consumer products companies and/orretailcustomers. Several regulatory authorities in Europehaveissued separate decisions pursuanttotheirinvestigationsalleging that theCompany,alongwith severalothercompanies,engagedinviolations ofcompetition laws inthosecountries.TheCompanyhasaccruedtheassessedfinesforeach ofthe decisions, ofwhich all but$16 has beenpaid asof June 30, 2013. Some ofthose are on appeal.As aresultofour initialandon-going analyses of otherformalcomplaints, theCompany has accrued liabilities forcompetitionlawviolationstotaling$139 as of June 30, 2013.Whilethe ultimateresolution of these matters may result infines orcostsinexcessof the amountsreserved, we donotexpectanysuchincremental losses to materially impact ourfinancial statements in theperiod in which they are accruedandpaid,respectively.With respect to other litigation andclaims, whileconsiderable uncertaintyexists,in theopinionofmanagement andourcounsel, theultimate resolutionofthevarious lawsuitsandclaims will notmaterially affect ourfinancial position,results of operations orcashflows.Wearealsosubject tocontingenciespursuanttoenvironmental laws and regulationsthat in thefuturemayrequire us totake action to correct theeffects ontheenvironment of priormanufacturing and wastedisposalpractices.Based oncurrently availableinformation,we donot believe the ultimate resolution of environmentalremediation willhave a materialeffect on ourfinancialposition, results of operations or cashflows.NOTE12SEGMENT INFORMATIONUnderU.S. GAAP,theGBUs (Categories) are aggregatedintofivereportablesegments:•Beauty: Beauty Care (Antiperspirant and Deodorant,Cosmetics, PersonalCleansing,SkinCare);Hair Careand Color; Prestige (SKII, fragrances);SalonProfessional;•Grooming:Shave Care (Bladesand Razors, Pre- andPost-ShaveProducts); BraunandAppliances;•Health Care: Feminine Care (Feminine Care,Incontinence);OralCare (Toothbrush,Toothpaste,Other Oral Care);PersonalHealthCare(Gastrointestinal, Rapid Diagnostics, Respiratory,OtherPersonalHealth Care,Vitamins/Minerals/Supplements);•FabricCare and Home Care: Fabric Care (Bleachand LaundryAdditives, Fabric Enhancers,LaundryDetergents); Home Care (Air Care,Dish Care,Surface Care);Personal Power(Batteries); Pet Care;Professional;•BabyCare and FamilyCare: BabyCare(BabyWipes,Diapersand Pants); Family Care(PaperTowels,Tissues,ToiletPaper).Theaccountingpolicies of the businesses are generally thesame asthosedescribedinNote 1.DifferencesbetweenthesepoliciesandU.S.GAAPprimarilyreflect incometaxes, which are reflected in the businesses using applicableblendedstatutory rates, and the treatment of certainunconsolidated investees.Certainunconsolidatedinvesteesare managed as integralparts of our businesses for74The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.managementreportingpurposes.Accordingly,thesepartiallyowned operationsarereflected as consolidatedsubsidiariesinsegmentresults, withfull recognition oftheindividual incomestatement line items through before-taxearnings.Eliminationsto adjusttheselineitemstoU.S.GAAP are included in Corporate. In determining after-taxearnings for the businesses,weeliminatetheshareofearningsapplicableto other ownershipinterests, ina mannersimilar to noncontrollinginterest,andapplystatutory taxrates.Adjustmentsto arrive at oureffective tax ratearealsoincluded inCorporate.Corporate includes certain operating and non-operatingactivitiesthatare notreflected intheoperatingresults usedinternallytomeasure and evaluate thebusinesses,aswell aseliminations to adjust management reporting principles toU.S.GAAP.OperatingactivitiesinCorporate include theresults of incidentalbusinesses managed at thecorporatelevel along with the elimination of individual revenues andexpenses generated by certain unconsolidated investees,discussed in thepreceding paragraph, over which we exertsignificantinfluence,but do notcontrol. Operating elementsalsoincludecertainemployeebenefitcosts, thecosts ofcertainrestructuring-type activities to maintain a competitivecost structure, including manufacturing and workforceoptimizationandother generalCorporate items.Thenon-operating elements in Corporate primarily include interestexpense,acquisition anddivestiture gains and interestandinvestingincome. Inaddition, Corporateincludes thehistorical resultsof certain divested businesses.Totalassets for thereportablesegments include those assetsmanaged by the reportable segment, primarilyinventory,fixedassets andintangibleassets.Other assets, primarilyincluding cash, accounts receivable, investment securitiesand goodwill, areincludedinCorporate.Our businessunits are comprised of similarproductcategories. In 2013, 2012 and 2011,ninebusiness unitsindividually accounted for 5% or more of consolidated netsales as follows:%of SalesbyBusinessUnitYearsendedJune 30201320122011FabricCare20%20%20%Baby Care13%13%12%Hair Care andColor11%11%11%ShaveCare8%9%9%Beauty Care7%7%7%Home Care7%7%7%FamilyCare7%6%7%OralCare6%6%6%Feminine Care6%6%6%AllOther15%15%15% Total100%100%100%TheCompany hadnet sales intheU.S. of$30.3 billion,$29.5 billionand$29.9 billion for the years endedJune 30,2013,2012 and2011,respectively.AssetsintheU.S.totaled$68.3 billion and$68.0 billion as ofJune 30, 2013and2012,respectively. No othercountry's netsalesorassetsexceed10%ofthe Companytotals.Ourlargestcustomer,Wal-MartStores,Inc. and itsaffiliates,accounted for approximately14%,14% and15% ofconsolidated netsales in 2013, 2012 and 2011, respectively.The Procter&Gamble Company75Amounts inmillions ofdollars except per share amountsorasotherwise specified.Global SegmentResultsNet SalesEarningsfromContinuingOperationsBeforeIncomeTaxesNet EarningsfromContinuingOperationsDepreciationandAmortizationTotalAssetsCapitalExpendituresBEAUTY2013$19,956$3,215$2,474$375$8,396$541201220,3183,1962,3903798,357569201119,9373,4152,5423879,544504GROOMING20138,0382,4581,83760323,97137820128,3392,3951,80762324,51839220118,2452,3751,77564524,866373HEALTH CARE201312,8302,7691,8983808,400529201212,4212,7181,8263537,501496201112,0332,7201,7963597,796409FABRICCAREANDHOMECARE201327,4484,8253,12669512,0181,115201227,2544,6452,91567911,4191,036201126,5364,8673,10963312,060950BABY CARE AND FAMILY CARE201316,7903,5092,2426488,4601,278201216,4933,3512,1235867,5351,250201115,6063,1811,9785497,184912CORPORATE(1)2013(895)(1,933)(175)28178,0181672012(1,145)(3,520)(1,744)58472,9142212011(1,253)(1,561)49826576,904158TOTAL COMPANY201384,16714,84311,4022,982139,2634,008201283,68012,7859,3173,204132,2443,964201181,10414,99711,6982,838138,3543,306(1)The Corporate reportable segment includes the total assets and capital expenditures of the snacks business prior to its divestitureeffectiveMay 31,2012.NOTE13DISCONTINUEDOPERATIONSIn fiscal2012, the Companycompleted thedivestiture of ourglobalsnacksbusiness toTheKellogg Company(Kellogg)for $2.7 billion of cash. Under theterms ofthe agreement,Kellogg acquired ourbranded snacks products, ourmanufacturing facilities inBelgium and the United Statesandthe majorityof theemployeesworking onthesnacksbusiness.TheCompany recordedanafter-tax gain onthetransaction of $1.4 billion,which isincluded in net earningsfrom discontinued operations in the Consolidated Statementof Earnings forthe yearended June 30, 2012.The snacks business had historically been part of theCompany'sSnacks and Pet Care reportable segment. Inaccordance with the applicable accounting guidance for thedisposalof long-lived assets,the results ofthe snacksbusiness are presented as discontinued operations and, assuch,havebeenexcludedfrombothcontinuing operationsandsegmentresultsforall years presented.Following is selectedfinancialinformationincludedin net earnings from discontinuedoperations for the snacks business:NetsalesEarningsfromdiscontinuedoperationsIncome taxexpenseGain on saleofdiscontinuedoperationsIncome taxbenefit/(expense) onsaleNetearningsfromdiscontinuedoperationsSnacks2013$—$—$—$—$—$—20121,440266(96)1,899(482)1,58720111,455322(93)——22976The Procter&Gamble CompanyAmountsinmillions ofdollars except per share amountsorasotherwisespecified.NOTE14QUARTERLYRESULTS (UNAUDITED)QuartersEndedSept 30Dec31Mar 31Jun 30Total YearNET SALES2012-2013$20,739$22,175$20,598$20,655$84,1672011-201221,53021,74420,19420,21283,680OPERATINGINCOME2012-20133,9514,4923,4052,633(3)14,4812011-20124,2502,680(3)3,2993,06313,292GROSS MARGIN2012-201350.1%50.9%49.8%47.5%49.6%2011-201249.8%50.1%49.3%48.1%49.3%NET EARNINGS:Netearnings from continuing operations2012-2013$2,853$4,076(2)$2,591$1,882(3)$11,4022011-20122,9991,672(3)2,4332,2139,317Net earningsfromdiscontinued operations2012-2013—————2011-20125841341,454(4)1,587Netearnings attributable toProcter&Gamble2012-20132,8144,057(2)2,5661,875(3)11,3122011-20123,0241,690(3)2,4113,63110,756DILUTED NETEARNINGSPERCOMMON SHARE:(1)Earningsfrom continuingoperations2012-2013$0.96$1.39$0.88$0.64$3.862011-20121.010.560.810.743.12Earnings fromdiscontinued operations2012-2013—————2011-20120.020.010.010.500.54Net earnings2012-20130.961.390.880.643.862011-20121.030.570.821.243.66(1)Diluted net earnings per share is calculated on earnings attributable to Procter & Gamble.(2)The Company acquiredthebalance ofits Baby Careand Feminine Care joint venture in Iberia in October 2012resultingina non-operatinggainof$623.(3)Duringthe fourth quarter of fiscal year 2013 and the second quarter offiscal year2012, the Company recorded goodwillandindefinite-lived intangibleassetsimpairment charges of $308millionand $1.6billion, respectively.Foradditionaldetails, see Note 2.(4)The Companydivested itssnacks business in May 2012. See Note13for details of the transaction.Item9.ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure.Not applicable.Item 9A.Controls and Procedures.Evaluation ofDisclosure Controls and Procedures.The Company's PresidentandChiefExecutive Officer,A. G.Lafley, andtheCompany'sChief Financial Officer, Jon R.Moeller, performed an evaluation of the Company'sdisclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) of the Securities ExchangeActof1934(ExchangeAct))asoftheendof theperiodcovered bythisAnnualReport on Form 10-K.Messrs.LafleyandMoellerhaveconcluded that theCompany's disclosure controls and procedures wereeffectiveto ensurethatinformation requiredto be disclosedin reports we file or submit under the ExchangeAct is(1) recorded, processed,summarized andreportedwithin thetimeperiodsspecified in Securities and ExchangeCommissionrules and forms, and (2) accumulated andcommunicated toourmanagement, includingMessrs. Lafleyand Moeller,toallowtheir timely decisions regardingrequired disclosure.ChangesinInternal Control overFinancial Reporting.There wereno changesinour internal controloverfinancialreportingthat occurredduringthe Company's fourthfiscalquarter that have materiallyaffected, or are reasonably likelytomateriallyaffect, the Company'sinternalcontroloverfinancial reporting.Item9B.Other Information.Not applicable.The Procter&Gamble Company77PART IIIItem 10.Directors, ExecutiveOfficersandCorporateGovernance.The Board ofDirectors has determined that the followingmembers oftheAuditCommittee are independent andareAudit Committeefinancialexpertsas defined bySEC rules:Ms. PatriciaA.Woertz(Chair)andMr. Kenneth I. Chenault.The informationrequiredbythisitemisincorporatedbyreference to the following sections of the 2013 ProxyStatement filedpursuant toRegulation14A: thesectionentitled Election of Directors, up to andincludingthesubsection entitled Nominees for Election of Directors withTermsExpiring in 2014, CorporateGovernance,upto butnotincludingthe subsection entitledBoardEngagementandAttendance;the section entitled CodeofEthics;and thesection entitled Section 16(a) Beneficial OwnershipReportingCompliance.Pursuant toInstruction3ofItem401(b) of Regulation S-K,Executive Officers of the RegistrantarereportedinPart I ofthisreport.Item 11.ExecutiveCompensation.The informationrequiredbythisitemisincorporatedbyreference to the following sections of the2013 ProxyStatement filed pursuant to Regulation 14A: the portion oftheCorporate Governance sectionentitled Committees ofthe Board andthe portionbeginning withDirectorCompensationupto but not including thesection entitledSecurity Ownershipof Management and Certain BeneficialOwners.Item 12.SecurityOwnership of Certain BeneficialOwnersandManagementand Related StockholderMatters.The following table gives information about the Company'scommonstock that maybe issuedupontheexerciseofoptions, warrantsandrights under all of the Company'sequitycompensation plansas ofJune 30, 2013.Thetableincludesthefollowing plans:The Procter& Gamble1992StockPlan;TheProcter&Gamble1992StockPlan(BelgianVersion);TheProcter &Gamble 1993 Non-EmployeeDirectors'StockPlan;TheProcter&GambleFutureSharesPlan;TheProcter & Gamble 2001 Stock and IncentiveCompensationPlan;The Procter & Gamble 2003 Non-EmployeeDirectors' Stock Plan;The GilletteCompany 1971StockOption Plan;TheGillette Company 2004Long-TermIncentive Plan; andThe Procter&Gamble2009 StockandIncentiveCompensationPlan.PlanCategory(a)Numberofsecuritiestobeissueduponexerciseofoutstandingoptions,warrantsandrights(b)Weighted-averageexercisepriceofoutstandingoptions,warrants andrights(c)Numberofsecuritiesremainingavailableforfuture issuance underequity compensation plans(excludingsecuritiesreflectedin column(a))Equity compensationplans approvedbysecurity holders(1)Options291,021,000$57.1208(2)RestrictedStock Units (RSUs) /PerformanceStock Units(PSUs)10,081,890N/A(2)Equitycompensation plans notapproved bysecurity holders(3)Options15,217,78456.1637(4)Restricted Stock Units (RSUs)42,995N/A(4)GRAND TOTAL316,363,66957.0733(5)56,253,893(1)IncludesTheProcter & Gamble 1992Stock Plan;TheProcter & Gamble 1993 Non-Employee Directors Stock Plan; TheProcter&Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 2003 Non-Employee Directors Stock Plan; and TheProcter&Gamble2009Stock andIncentive Compensation Plan.(2)Of theplans listed in(1), only TheProcter & Gamble 2009 Stock and Incentive CompensationPlanand The 2003 Non- EmployeeDirectors StockPlanallowforfuture grantsof securities. The maximum number of sharesthatmaybe granted under theseplans is180millionshares. Stock optionsandstock appreciationrights are countedon a onefor one basis while full valueawards (such asRSUs and PSUs) willbe counted as 2.88 sharesfor each share awarded. Total shares available for future issuanceundertheseplansis 56 million.(3)IncludesTheProcter &Gamble 1992 Stock Plan (Belgian version); The Procter & Gamble Future SharesPlan;and The GilletteCompany2004 Long-TermIncentivePlan.(4)Noneof theplans listedin(3)allowfor futuregrantsofsecurities.(5)Weighted averageexercise price of outstandingoptionsonly.78The Procter&Gamble CompanyThe Procter &Gamble1992 StockPlan(BelgianVersion)No furthergrantscanbemadeunder the plan,althoughunexercised stock optionspreviously granted underthisplanremainoutstanding.Thisplan wasapprovedby theCompany'sBoard ofDirectorsonFebruary14, 1997.Although theplanhas not been submittedtoshareholdersforapproval,itisnearlyidentical toTheProcter & Gamble1992 StockPlan,approvedbythe Company's shareholdersonOctober13, 1992,except for afew minor changesdesignedtocomply withtheBelgian tax laws.Theplan was designed to attract, retainandmotivatekeyBelgian employees. Under the plan, eligible participantswere: (i)grantedorofferedtherighttopurchasestockoptions, (ii) granted stock appreciationrights and/or(iii)granted sharesoftheCompany'scommonstock.Exceptinthe case of death oftherecipient, all stock options andstockappreciationrights mustvest innoless thanoneyearfrom thedateofgrantand must expirenolater than fifteenyears fromthe dateof grant.The exercise price for all stockoptions granted under the plan is the average price of theCompany'sstockonthe dateof grant. Ifa recipient of agrantleaves the Company while holding an unexercisedoption or right, any unexercisableportions immediatelybecome void, except in the case of death, and anyexercisableportions becomevoid within one month ofdeparture,exceptinthe caseof deathorretirement.Anycommonstockawardedunderthe plan maybe subjecttorestrictions on sale or transfer while the recipient isemployed, as thecommitteeadministering the plan maydetermine.TheProcter & GambleFuture Shares PlanOn October 14, 1997, the Company's Board of DirectorsapprovedTheProcter&GambleFutureSharesPlanpursuanttowhich options topurchasesharesof theCompany'scommonstockmaybe granted toemployeesworldwide.Thepurpose ofthisplan is to advancetheinterests of the Companyby giving substantiallyallemployees a stake in the Company's future growth andsuccess and to strengthen the alignment of interests betweenemployees and theCompany's shareholdersthroughincreased ownership of shares of the Company's stock.Theplanhasnot beensubmitted toshareholdersforapproval.Subjectto adjustmentfor changes intheCompany'scapitalization, thenumber of shares tobegranted under theplanisnotto exceed17 millionshares.Underthe plan'sregulations,recipients are granted options to acquire 100shares ofthe Company'scommon stock at an exercise priceequal to the average price of the Company's common stockon thedate ofthegrant.Theseoptions vest five yearsafterthe dateofgrantandexpire ten yearsfollowingthedateofgrant. Ifa recipientleavestheemploy of theCompanypriorto the vesting date for a reason other than disability,retirement or special separation (asdefined in the plan), thenthe award isforfeited.At the time ofthe first grant followingBoardapprovalof theplan, each employeeofthe Company not eligible foranawardunder the 1992StockPlanwasgranted optionsfor100 shares. Fromthedateof thisfirst grantthrough June 30,2003, eachnewemployee ofthe Companyhasalsoreceivedoptions for 100 shares. Following the grant of options onJune 30, 2003, theCompanysuspendedthis part of the plan.The plan terminated on October 13, 2007.The Gillette Company 2004 Long-Term IncentivePlanShareholdersofTheGilletteCompanyapprovedTheGillette Company 2004 Long-TermIncentivePlan onMay 20, 2004,and the planwasassumed bythe Companyuponthemerger betweenTheProcter&GambleCompanyandThe GilletteCompany.AlloptionsbecameimmediatelyvestedandexercisableonOctober 1, 2005 asaresultof themerger.Afterthemerger,alloutstanding optionsbecameoptions to purchase shares ofTheProcter &GambleCompany subjecttoan exchange ratioof .975 shares ofP&Gstock per share of Gillette stock. Onlyemployeespreviously employed byTheGillette Company prior toOctober1, 2005 areeligible to receive grantsunderthisplan.Theplan was designedtoattract,retain andmotivateemployeesofTheGilletteCompany, and untiltheeffectivedateofthemerger betweenTheGillette CompanyandTheProcter & GambleCompany, non-employeemembers oftheGillette Board of Directors. Under theplan, eligibleparticipants are: (i) granted or offered the rightto purchasestockoptions, (ii) granted stock appreciationrightsand/or(iii) granted shares of the Company's common stock orrestrictedstockunits (anddividendequivalents). Subjecttoadjustment forchanges intheCompany'scapitalizationandthe addition of any shares authorized butnot issued orredeemed underThe Gillette Company 1971 Stock OptionPlan,the number of sharesto be granted under theplanisnot to exceed 19,000,000 shares.Except in thecaseofdeath of therecipient,allstockoptionsandstock appreciationrights mustexpire nolater thantenyears fromthe dateof grant.The exercise price for all stockoptions granted under the plan must be equal to or greaterthan thefair marketvalueoftheCompany'sstockonthedateof grant.Any common stock awarded under the planmaybesubject torestrictions on sale ortransfer whiletherecipientis employed, as thecommitteeadministering theplan maydetermine.If a recipient of agrantleaves the Companywhile holdinganunexercisedoptionorright:(1)anyunexercisableportions immediately become void,exceptin thecase ofdeath,retirement,specialseparation(asthose termsaredefined in the plan) or any grants as to which theCompensationCommitteeof the Board of Directors haswaived the termination provisions; and (2) any exercisableportions immediately become void,exceptin thecase ofThe Procter&Gamble Company79death, retirement, special separation, voluntary resignationthat is not for Good Reason (as those terms are defined intheplan) oranygrantsastowhichthe CompensationCommitteeof theBoardofDirectorshaswaivedtheterminationprovisions.Additional informationrequired bythis item isincorporatedby referencetothe2013 Proxy Statement filed pursuanttoRegulation 14A,beginningwiththe section entitled SecurityOwnership of Managementand Certain BeneficialOwnersand up tobut notincluding the section entitled Section 16(a)Beneficial Ownership ReportingCompliance.Item 13.CertainRelationshipsandRelatedTransactionsandDirectorIndependence.The informationrequiredbythisitemisincorporatedbyreference to the following sections of the2013 ProxyStatement filed pursuant to Regulation 14A: the sectionsentitledDirectorIndependenceandReviewandApprovalofTransactionswithRelatedPersons.Item14.PrincipalAccounting Fees and Services.The informationrequiredbythisitemisincorporatedbyreferencetothe2013 Proxy StatementfiledpursuanttoRegulation 14A, beginning withthe sectionentitled ReportoftheAuditCommittee and ending withthe section entitledServices Provided by Deloitte.PART IVItem15.Exhibits and Financial Statement Schedules.1.Financial Statements:ThefollowingConsolidatedFinancialStatementsofTheProcter& GambleCompany andsubsidiaries, management'sreport and the reports of the independent registered publicaccounting firmareincorporated by reference in Part II,Item8 of thisForm 10-K.•Management'sReportonInternalControloverFinancialReporting•Report of Independent Registered PublicAccountingFirm onInternalControlover FinancialReporting•Report of Independent Registered PublicAccounting Firm on Consolidated Financial Statements•Consolidated Statements ofEarnings -for yearsendedJune 30, 2013,2012 and2011•Consolidated Statements of OtherComprehensiveIncome - for yearsendedJune 30, 2013,2012 and2011•ConsolidatedBalance Sheets - as ofJune 30, 2013and2012•Consolidated StatementsofShareholders' Equity-for yearsendedJune 30, 2013,2012 and2011•Consolidated StatementsofCash Flows-for yearsendedJune 30, 2013,2012 and2011•Notes to ConsolidatedFinancial Statements2.Financial Statement Schedules:These schedulesareomittedbecause of the absenceof theconditionsunderwhichtheyarerequiredorbecausetheinformationis set forth intheConsolidated FinancialStatements orNotesthereto.Exhibits:Exhibit (3-1)-AmendedArticlesof Incorporation (asamended by shareholders at the annual meeting onOctober11, 2011) (Incorporated by referenceto Exhibit(3-1) of the Company's Form 10-Q for thequarter ended September 30,2011).(3-2) -Regulations (as amended by the Board of Directors on January 16, 2012 pursuant to authoritygranted by shareholders at the annual meeting on October 13,2009) (IncorporatedbyreferencetoExhibit(3-2)ofthe Company's Form 10-Q for the quarter ending December 31, 2011).Exhibit (4)-Registrantagrees to file a copy of documents defining therights of holders oflong-term debt uponrequest of the Commission.Exhibit (10-1)-The Procter & Gamble2001 Stockand Incentive Compensation Plan (as amendedonAugust 17,2007), which was originally adopted by shareholdersatthe annualmeeting onOctober9, 2001(Incorporated by reference toExhibit(10-1) of the Company'sForm10-Q forthe quarter endedMarch 31,2013),and related correspondence and terms and conditions (Incorporated by referencetoExhibit(10-1)of the Company's Form 10-Q for the quarter ended December31,2008).*(10-2) -TheProcter&Gamble1992 StockPlan (as amended December 11, 2001),whichwasoriginallyadopted by the shareholders attheannualmeeting onOctober 12, 1992.* +(10-3) -The Procter& Gamble ExecutiveGroup Life InsurancePolicy.* +80The Procter&Gamble Company(10-4) -TheProcter & Gamble Deferred Compensation Plan forDirectors (asamendedDecember 12, 2006),whichwasoriginally adopted bythe Board of Directors on September9, 1980 (Incorporated byreferenceto Exhibit (10-4) ofthe Company’s Annual Reporton Form 10-K fortheyear ended June30, 2012).*(10-5) -TheProcter& Gamble 1993 Non-EmployeeDirectors' Stock Plan (as amended September 10,2002),which was originally adopted by the shareholdersatthe annual meeting on October11,1994.* +(10-6) -TheProcter&Gamble1992 StockPlan (BelgianVersion) (as amended December11, 2001),whichwas originally adopted by the Board of Directors on February 14, 1997.* +(10-7) -The Procter & Gamble Future Shares Plan (as adjusted for the stock split effectiveMay 21, 2004),which was originally adopted by the Board of Directors onOctober 14, 1997 (Incorporatedbyreference to Exhibit (10-7) of the Company'sAnnual Report on Form 10-K for the year ended June30, 2010).*(10-8) -The Procter &Gamble2003 Non-Employee Directors' Stock Plan (as amended in August 2007)which wasoriginallyadopted bythe shareholders at theannual meeting on October14,2003, andrelated correspondence and terms and conditions (Incorporated by referencetoExhibit (10-1) oftheCompany'sForm 10-Qfor thequarterendedSeptember30,2012).*(10-9) -The Procter & Gamble Company Executive Deferred Compensation Plan(IncorporatedbyreferencetoExhibit (10-2) of the Company's Form 10-Q for the quarterendedDecember 31, 2008).*(10-10) -Summary of the Company's Short Term Achievement Reward Program (Incorporatedby referencetoExhibit(10-2) of theCompany’sForm10-Qforthe quarter ended September 30, 2012) and relatedcorrespondence and terms and conditions (Incorporated by reference to Exhibit (10-4) of theCompany'sForm 10-Qforthe quarterendedDecember 31,2012).(10-11) -Company's Form ofSeparation Agreement& Release (Incorporated by reference toExhibit(10-3) oftheCompany's Form 10-Q for thequarter ended December 31, 2012).(10-12) -Summary ofpersonal benefits available tocertainofficers and non-employeedirectors(Incorporatedby reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended September 30,2008).(10-13) -TheGilletteCompany2004 Long-TermIncentive Plan (as amendedon August 14, 2007)(Incorporated by reference toExhibit(10-4) of the Company'sForm10-Q forthe quarter endedSeptember30, 2012).*(10-14)-The Gillette CompanyExecutive LifeInsuranceProgram(Incorporatedbyreference toExhibit(10-15) of theCompany’s AnnualReporton Form10-K fortheyearended June 30, 2012).*(10-15) -TheGilletteCompany Personal FinancialPlanningReimbursement Program (Incorporatedbyreferenceto Exhibit (10-16) of the Company’sAnnualReport on Form10-Kfor theyearended June30, 2012) .*(10-16) -TheGillette Company Senior Executive FinancialPlanning Program (Incorporated by referencetoExhibit(10-17) of the Company’s AnnualReport on Form 10-K for the year ended June 30, 2012).*(10-17) -The Gillette Company Estate Preservation (Incorporated by reference to Exhibit (10-18) of theCompany’s AnnualReport onForm 10-K fortheyearendedJune 30, 2012).*(10-18) -TheGillette Company Deferred CompensationPlan (Incorporated byreferenceto Exhibit (10-19)oftheCompany’s Annual Report on Form10-K for theyear ended June 30, 2012).*(10-19) -SeniorExecutiveRecoupment Policy (Incorporated by reference to Exhibit (10-20) of theCompany’s AnnualReport onForm 10-K fortheyearendedJune 30, 2012).*(10-20) -The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) asamendedthrough August 21, 2006 (Incorporated by reference to Exhibit (10-21) ofthe Company’sAnnualReportonForm 10-K for theyearended June 30, 2012).*The Procter&Gamble Company81(10-21) -The Procter &Gamble2009Stockand IncentiveCompensation Plan which wasoriginallyadoptedby shareholders at the annual meeting on October 13, 2009 (Incorporatedbyreferenceto Exhibit(10-3) of theCompany'sForm 10-Q for the quarter ended December 31,2011), andthe Regulationsof the Compensation andLeadershipDevelopment Committee for The Procter&Gamble2009Stock andIncentive Compensation Plan, The Procter &Gamble 2001 Stockand IncentiveCompensation Plan, The Procter& Gamble 1992Stock Plan, TheProcter &Gamble 1992 StockPlan (Belgium Version), TheGillette Company 2004 Long-TermIncentive Plan and the GilletteCompany1971StockOption Plan(Incorporatedbyreference toExhibit(10-1)ofthe Company'sForm10-Q for the quarter endedDecember31, 2012).*(10-22) -TheProcter& Gamble 2009StockandIncentiveCompensation Plan - Additional termsandconditions(Incorporated by reference to Exhibit (10-2) of theCompany’sForm 10-Qfor the quarterended December 31, 2012)and relatedcorrespondence(Incorporated by reference to Exhibit (10-5)oftheCompany Form 10-Q forthe quarter ended December31, 2012).*(10-23) -TheProcter & Gamble PerformanceStockProgram Summary (Incorporatedbyreference toExhibit(10-2) of theCompany'sForm 10-Q for the quarter endedMarch 31, 2012) andrelated terms andconditions (Incorporated byreferenceto Exhibit(10-24) ofthe Company’s AnnualReporton Form10-Kfor theyearended June 30, 2012). *Exhibit (11)-ComputationofEarnings Per Share. +Exhibit (12)-Computation of Ratio ofEarningsto Fixed Charges.+Exhibit (21)-Subsidiaries oftheRegistrant. +Exhibit (23)-Consent of IndependentRegistered PublicAccounting Firm.+Exhibit (31)-Rule13a-14(a)/15d-14(a)Certifications. +Exhibit (32)-Section 1350 Certifications.+Exhibit (99-1)-Summary of Directors and Officers InsuranceProgram. +101.INS (1) XBRLInstanceDocument101.SCH (1) XBRLTaxonomy Extension SchemaDocument101.CAL (1) XBRLTaxonomyExtension Calculation LinkbaseDocument101.DEF(1) XBRLTaxonomyDefinition Linkbase Document101.LAB (1) XBRLTaxonomyExtensionLabelLinkbase Document101.PRE (1) XBRL TaxonomyExtensionPresentationLinkbase Document(1)Pursuantto Rule 406Tof Regulation S-T,these interactive data files are deemed not filed or part of aregistration statementor prospectus for purposes ofSections 11 or 12 of the SecuritiesAct of 1933orSection 18 of the SecuritiesExchange Actof 1934 and otherwiseare notsubject to liability.*Compensatoryplanorarrangement+Filed herewith.82The Procter&Gamble CompanySIGNATURESPursuanttothe requirements of Section 13 or 15(d) of the Securities ExchangeActof 1934,the registranthas dulycaused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized in the city of Cincinnati, State of Ohio.THEPROCTER&GAMBLECOMPANYBy/s/ A.G. LAFLEY(A.G. Lafley)Chairman of the Board, PresidentandChiefExecutiveOfficerAugust 8, 2013Pursuanttothe requirements of theSecuritiesExchangeAct of 1934, this report has been signed below by thefollowingpersonsinthecapacities and on the datesindicated.SignatureTitleDate/S/A.G. LAFLEY ___ (A.G. Lafley)Chairman of the Board, PresidentandChief Executive Officer (PrincipalExecutiveOfficer)August 8, 2013/S/ JON R. MOELLER (Jon R. Moeller)Chief Financial Officer(Principal FinancialOfficer)August 8, 2013/S/VALARIE L. SHEPPARD(Valarie L.Sheppard)SeniorVice President &Comptroller(PrincipalAccountingOfficer)August 8, 2013/S/ANGELA F. BRALY (Angela F.Braly)DirectorAugust 8, 2013/S/ KENNETHI. CHENAULT (KennethI. Chenault)DirectorAugust 8, 2013/S/ SCOTTD. COOK__(ScottD. Cook)DirectorAugust8, 2013/S/ SUSAN DESMOND-HELLMANN(SusanDesmond-Hellmann)DirectorAugust 8, 2013/S/TERRY J.LUNDGREN (TerryJ. Lundgren)DirectorAugust 8, 2013/S/W.JAMESMCNERNEY, JR. (W.James McNerney,Jr.)DirectorAugust 8, 2013/S/JOHNATHANA. RODGERS (JohnathanA.Rodgers)DirectorAugust 8, 2013/S/ MARGARET C.WHITMAN (MargaretC.Whitman)DirectorAugust 8, 2013/S/MARYAGNESWILDEROTTER(MaryAgnesWilderotter)DirectorAugust 8, 2013/S/PATRICIAA.WOERTZ(PatriciaA.Woertz)DirectorAugust 8, 2013/S/ ERNESTOZEDILLO(Ernesto Zedillo)DirectorAugust 8, 2013The Procter&Gamble Company83EXHIBITINDEXExhibit (3-1)-AmendedArticlesof Incorporation (asamended by shareholders at the annual meeting onOctober11, 2011) (Incorporated by referenceto Exhibit(3-1) of the Company's Form 10-Q for thequarter ended September 30,2011).(3-2) -Regulations (as amended by the Board of Directors on January 16, 2012 pursuant to authoritygranted by shareholders at the annual meeting on October 13,2009) (IncorporatedbyreferencetoExhibit(3-2)ofthe Company's Form 10-Q for the quarter ending December 31, 2011).Exhibit (4)-Registrantagrees to file a copy of documents defining therights of holders oflong-term debt uponrequest of the Commission.Exhibit (10-1)-TheProcter & Gamble 2001 Stock and Incentive CompensationPlan (as amended on August 17,2007)which was originally adopted by shareholdersatthe annualmeeting onOctober9, 2001(Incorporated by reference toExhibit(10-1) of the Company'sForm10-Q forthe quarter endedMarch 31,2013),and related correspondence and terms and conditions (Incorporated by referencetoExhibit(10-1)of the Company's Form 10-Q for the quarter ended December31,2008).*(10-2) -TheProcter&Gamble1992 StockPlan (as amended December 11, 2001),whichwasoriginallyadopted bytheshareholdersat the annualmeetingonOctober 12, 1992.*(10-3) -The Procter & Gamble Executive Group LifeInsurance Policy.*(10-4) -TheProcter & Gamble Deferred Compensation Plan forDirectors (asamendedDecember 12, 2006),whichwasoriginally adopted bythe Board of Directors on September9, 1980 (Incorporated byreferenceto Exhibit (10-4) ofthe Company’s Annual Reporton Form 10-K fortheyear ended June30, 2012).*(10-5) -TheProcter& Gamble 1993 Non-EmployeeDirectors' Stock Plan (as amended September 10,2002),which was originally adopted by the shareholdersatthe annual meeting on October11,1994.*(10-6) -TheProcter&Gamble1992 StockPlan (BelgianVersion) (as amended December11, 2001),whichwas originally adopted by the Board of Directors on February 14, 1997.*(10-7) -The Procter & Gamble Future Shares Plan (as adjusted for the stock split effectiveMay 21, 2004),which was originally adopted by the Board of Directors onOctober 14, 1997 (Incorporatedbyreference to Exhibit (10-7) of the Company'sAnnual Report on Form 10-K for the year ended June30, 2010).*(10-8) -The Procter & Gamble 2003 Non-Employee Directors' Stock Plan (as amended inAugust 2007),which wasoriginallyadopted bythe shareholders at theannual meeting on October14,2003, andrelated correspondence and terms and conditions (Incorporated by referencetoExhibit (10-1) oftheCompany'sForm 10-Qfor thequarterendedSeptember30,2012).*(10-9) -The Procter & Gamble Company Executive Deferred Compensation Plan(IncorporatedbyreferencetoExhibit (10-2) of the Company's Form 10-Q for the quarterendedDecember 31, 2008).*(10-10) -Summary of the Company's Short Term Achievement Reward Program (Incorporatedby referencetoExhibit(10-2) of theCompany’sForm10-Qforthe quarter ended September 30, 2012) and relatedcorrespondence and terms and conditions (Incorporated by reference to Exhibit (10-4) of theCompany'sForm 10-Qforthe quarterendedDecember 31,2012).(10-11) -Company's Form ofSeparation Agreement& Release (Incorporated by reference toExhibit(10-3) oftheCompany's Form 10-Q for thequarter ended December 31, 2012).(10-12) -Summary ofpersonal benefits available tocertainofficers and non-employeedirectors(Incorporatedby reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended September 30,2008).(10-13) -TheGilletteCompany2004 Long-TermIncentive Plan (as amendedon August 14, 2007)(Incorporated by reference toExhibit(10-4) of the Company'sForm10-Q forthe quarter endedSeptember30, 2012).*(10-14)-The Gillette CompanyExecutive LifeInsuranceProgram(Incorporatedbyreference toExhibit(10-15) of theCompany’s AnnualReporton Form10-K fortheyearended June 30, 2012).*84The Procter&Gamble Company(10-15) -TheGilletteCompany Personal FinancialPlanningReimbursement Program (Incorporatedbyreferenceto Exhibit (10-16) of the Company’sAnnual Report on Form10-Kfor theyearended June30, 2012) .*(10-16) -TheGillette Company Senior Executive FinancialPlanning Program (Incorporated by referencetoExhibit(10-17) of the Company’s AnnualReport on Form 10-K for the year ended June 30, 2012).*(10-17) -The Gillette Company Estate Preservation (Incorporated by reference to Exhibit (10-18) of theCompany’s AnnualReport onForm 10-K fortheyearendedJune 30, 2012).*(10-18) -TheGillette Company Deferred CompensationPlan (Incorporated byreferenceto Exhibit (10-19)oftheCompany’s Annual Report on Form 10-K for the year ended June 30, 2012).*(10-19) -SeniorExecutiveRecoupment Policy (Incorporated by reference to Exhibit (10-20) of theCompany’s AnnualReport onForm 10-K fortheyearendedJune 30, 2012).*(10-20) -The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) asamendedthrough August 21, 2006 (Incorporated by reference toExhibit (10-21) ofthe Company’sAnnualReportonForm 10-K for theyearended June 30, 2012).*(10-21) -TheProcter & Gamble2009 Stockand IncentiveCompensation Plan, which wasoriginallyadoptedby shareholders at the annual meeting on October 13, 2009 (Incorporatedbyreferenceto Exhibit(10-3) of theCompany'sForm 10-Q for the quarter endedDecember31,2011),and theRegulationsof the Compensation andLeadership Development CommitteeforTheProcter&Gamble2009StockandIncentiveCompensation Plan,The Procter & Gamble 2001 Stock and IncentiveCompensationPlan,The Procter&Gamble1992 Stock Plan,The Procter &Gamble1992 StockPlan(BelgiumVersion),TheGillette Company 2004 Long-Term IncentivePlanandtheGilletteCompany1971StockOption Plan(Incorporatedbyreference toExhibit(10-1)ofthe Company'sForm10-Q for the quarter endedDecember31, 2012).*(10-22) -TheProcter& Gamble 2009StockandIncentiveCompensation Plan - Additional termsandconditions(Incorporated by reference to Exhibit (10-2) of theCompany’sForm 10-Qfor the quarterended December 31, 2012)and relatedcorrespondence(Incorporated by reference to Exhibit (10-5)oftheCompany Form 10-Q forthe quarter ended December31, 2012).*(10-23) -TheProcter & Gamble PerformanceStockProgram Summary (Incorporatedbyreference toExhibit(10-2) of theCompany'sForm 10-Q for the quarter endedMarch 31, 2012) andrelated terms andconditions (Incorporated byreferenceto Exhibit(10-24) ofthe Company’s AnnualReporton Form10-Kfor theyearended June 30, 2012). *Exhibit (11)-ComputationofEarnings perShare.Exhibit (12)-Computation of Ratio ofEarningsto Fixed Charges.Exhibit (21)-Subsidiaries ofthe Registrant.Exhibit (23)-ConsentofIndependentRegisteredPublicAccounting Firm.Exhibit (31)-Rule13a-14(a)/15d-14(a)Certifications.Exhibit(32)-Section1350Certifications.Exhibit (99-1)-Summary ofDirectors and Officers Insurance Program.101.INS (1) XBRLInstanceDocument101.SCH (1) XBRLTaxonomy Extension SchemaDocument101.CAL (1) XBRLTaxonomyExtension Calculation LinkbaseDocument101.DEF(1) XBRLTaxonomyDefinition Linkbase Document101.LAB (1) XBRLTaxonomyExtensionLabelLinkbase Document101.PRE (1) XBRL TaxonomyExtensionPresentationLinkbase Document(1)Pursuantto Rule 406Tof Regulation S-T,these interactive data files are deemed not filed or part of aregistration statementor prospectus for purposes ofSections 11 or 12 of the SecuritiesAct of 1933orSection 18 of the SecuritiesExchange Actof 1934 and otherwiseare notsubject to liability.*Compensatoryplanorarrangement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: 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. The following tables provide a numerical reconciliation of organic sales growth to reported net sales growth: 2013 - Total P&G 2013 – Top 10 Developing Net Sales Growth 1% 4% Foreign Exchange Impact 2% 4% Acquisition/ Divestiture Impact* 0% 0% Organic Sales Growth 3% 8% * Acquisition/Divestiture Impact includes rounding impacts necessary to reconcile net sales to organic sales. Free Cash Flow. Free cash flow is defined as operating cash flow less capital spending. Adjusted Free Cash Flow Productivity. Adjusted free cash flow productivity is defined as the ratio of free cash flow to net earnings excluding the gains from major divestitures and impairment charges. Given the size of these gains and the impairment charges, as well as our view that they are not part of our sustainable results, we have excluded these from our calculation. We believe this provides a better perspective of our underlying liquidity trends. The Company’s long-term target is to generate free cash flow at or above 90 percent of net earnings. We view adjusted free cash flow productivity as an important measure because it is a factor in determining the amount of cash available for dividends and discretionary investment. Adjusted free cash flow productivity is also a measure used to evaluate senior management and is a factor in determining their at-risk compensation. The reconciliation of adjusted free cash flow productivity is provided below (amounts in millions): Operating Cash Flow Capital Spending Free Cash Flow 2013 $ 14,873 $ (4,008) $ 10,865 2013 $ Net Earnings 11,402 $ Gain on buyout of Iberian JV 623 $ Impairment Charges (290) $ Net Earnings Excluding Gain/Impairment 11,069 Adjusted Free Cash Flow Productivity 98% 86 The Procter & Gamble Company Global Leadership Council Board of Directors A.G. Lafley Chairman of the Board, President and Chief Executive Officer COMPANY OPERATIONS Mark Biegger Chief Human Resources Officer Bruce Brown Chief Technology Officer Robert L. Fregolle, Jr. Global Customer Business Development Officer Deborah P. Majoras Chief Legal Officer and Secretary Jon Moeller Chief Financial Officer Dimitri Panayotopoulos Vice Chairman and Advisor to the Chairman and Chief Executive Officer Filippo Passerini Group President – Global Business Services and Chief Information Officer Marc S. Pritchard Global Brand Building Officer Yannis Skoufalos Global Product Supply Officer Jorge Uribe Global Productivity & Organization Transformation Officer Linda Clement-Holmes Senior Vice President – Innovation, Supply Chain and Employee Services, Global Business Services Philip Duncan Global Design Officer William Gipson Senior Vice President – Global Diversity and Research & Development, Global Hair Care and Color Joan Lewis Global Consumer & Market Knowledge Officer Teri L. List-Stoll Senior Vice President & Treasurer Valarie Sheppard Senior Vice President & Comptroller Nancy K. Swanson Vice President – Corporate GLOBAL OPERATIONS Werner Geissler Vice Chairman – Global Operations 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 Philippe Group President – Central & Eastern Europe, Middle East and Africa and Global High Frequency Stores Channel Tarek Farahat President – Latin America and Global Club, Cash & Carry Channel Hatsunori Kiriyama President – Asia Jeffrey K. Schomburger President – Global Walmart Team Shannan Stevenson President – Greater China and Global Specialty Channel Julio Nemeth Senior Vice President – Product Supply, Global Operations Alessandro Tosolini Senior Vice President – Global eBusiness GLOBAL BABY, FEMININE AND FAMILY CARE Martin Riant Group President – Global Baby, Feminine and Family Care Steven D. Bishop Group President – Global Feminine Care Kirk Perry President – Global Family Care GLOBAL BEAUTY Deborah A. Henretta Group President – Global Beauty Joanne Crewes President – Global Prestige Colleen Jay President – Global Retail Hair Care and Color Adil Mehboob-Khan President – Global Salon Professional GLOBAL FABRIC AND HOME CARE Giovanni Ciserani Group President – Global Fabric and Home Care Stassi Anastassov President – Duracell George Tsourapas President – Global Home Care and P&G Professional GLOBAL HEALTH AND GROOMING David Taylor Group President – Global Health and Grooming Patrice Louvet Group President – Global Shave Care Charles E. Pierce Group President – Global Oral Care and New Business Creation and Innovation Thomas M. Finn President – Global Health Care Austin Lally President – Global Braun and Appliances The following Company officers retired during the 2012 –13 fiscal year: Virginia Drosos Robert A. McDonald Moheet Nagrath Daniel S. Rajczak The following Company officer announced his intention to retire during the 2013 –14 fiscal year: Jorge S. Mesquita Angela F. Braly Former Chair of the Board, President and Chief Executive Officer of WellPoint, Inc. (healthcare insurance). Director since 2009. Age 52. Member of the Audit and Governance & Public Responsibility Committees. Kenneth I. Chenault Chairman and Chief Executive Officer of the American Express Company (global services, payments and travel). Director since 2008. Also a Director of International Business Machines Corporation. Age 62. 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 61. 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. Director since 2010. Also a Director of Facebook, Inc. Age 56. Member of the Audit and Innovation & Technology Committees. A.G. Lafley Chairman of the Board, President and Chief Executive Officer of the Company. Appointed to the Board on May 23, 2013. Also a Director of Legendary Pictures, LLC. Age 66. Terry J. Lundgren Chairman, President and Chief Executive Officer of Macy’s, Inc. (national retailer). Appointed to the Board on January 8, 2013. Also a Director of Kraft Foods Group. Age 61. Member of the Governance & Public Responsibility and Innovation & Technology Committees. 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 64. 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 Comcast and Nike, Inc. Age 67. Mr. Rodgers has announced his intention to retire from the Board of Directors effective at the Company’s October 2013 Board meeting. Member of the Governance & Public Responsibility and Innovation & Technology Committees. Margaret C. Whitman President and Chief Executive Officer of Hewlett Packard (computer software, hardware and IT services) since September 2011. Former President and Chief Executive Officer of eBay Inc. (ecommerce and payments) from 1998 to 2008. Director since 2011. Age 57. 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 58. 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 60. 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 61. 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, and 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 AND LEADERSHIP Forbes ranked P&G #41 on the list of the World’s Most Reputable Companies, and we earned a #13 ranking on the America’s Most Reputable Companies list. Fortune named P&G #15 Overall and #2 in Industry (Soaps and Cosmetics) on its list of World’s Most Admired Companies. Barron’s ranked P&G #21 on its World’s Most Respected Companies List. Universum named P&G one of The World’s Most Attractive Employers. For the second consecutive year, Chief Executive Magazine named P&G first on its list of 40 Best Companies for Leaders. INNOvATION P&G products Crest Complete Multi Benefit (#5), Febreze CAR Vent Clips (#8) and Olay Body Collections (#9) earned three of the Top 10 spots on IRI’s annual New Product Pacesetters List, with P&G products filling six of the top 20 spots. In the 18 years the Pacesetters list has been published, P&G has had 148 products make the top 25 Pacesetters list in non-Food categories — more than our six largest competitors combined. Gartner also recognized P&G at #6 on its annual Supply Chain Top 25. The Procter & Gamble Company 87 DIvERSITY P&G’s commitment to creating a diverse workplace has been recognized by DiversityInc, including a #7 ranking in the Top 50 Companies for Diversity and a #8 ranking in the Top 10 Companies for Global Diversity. DiversityInc has also ranked P&G #5 in its Top 10 Companies for Recruitment and Retention. We have earned spots in the Top 10 on Working Mother lists recognizing the Best Companies for Multicultural Women and 100 Best Companies for Working Mothers. The National Association for Female Executives ranks P&G in its Top 10 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 sixth 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 our sustainability work, P&G earned a spot on The Dow Jones Sustainability Index, and FTSE4Good — on which P&G has been named since the index’s inception. P&G scientists received the Economist Innovation Award for their work on, and the Company’s commitment to providing clean drinking water to those in need, through our Children’s Safe Drinking Water Program. 88 heT Pro ble CmGa&retc om ynpa 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 Computershare Trust Company 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 Computershare 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 The Computershare Trust Company 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/shareholder_services or by contacting Computershare. 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 or contact Computershare 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. Website: www.pg.com/en_US/investors/shareholder_services E-mail: P&G@computershare.com Phone (M – F, 9a – 4p Eastern): 1-800-742-6253; 1-781-575-4399 (outside U.S. and Canada) Financial information request line (24 hours): 1-800-742-6253 TRANSFER AGENT Computershare 250 Royall Street Canton, MA 02021 REGISTRAR Computershare P.O. Box 43078 Providence, RI 02940 EXCHANGE LISTINGS New York Stock Exchange, NYSE Euronext-Paris STOCK SYMBOL PG SHAREHOLDERS OF COMMON STOCK There were approximately 2,375,000 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, 2013. ANNUAL MEETING The next annual meeting of shareholders will be held on Tuesday, October 8, 2013. 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 2013 report to the Securities and Exchange Commission on Form 10-K by going to www.pg.com/investors or by calling 1-800-742-6253. This information is also available at no charge by sending a request to Computershare 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, 2013. We have also filed with 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. . c n I , s r e n t r a P A S V : n g i s e D At P&G, we are committed to growing our business responsibly. We believe that most sustainability challenges can be solved with innovation, and that this innovation can have a positive impact on our business, as well as on the communities in which we and our consumers live and work. As we continually look for ways to be more productive and use our resources and materials efficiently, we’re creating value for P&G consumers and shareholders, and delivering cost savings that fuel our growth. ~5,000 metric tons Using trucks powered by natural gas delivers cost savings and helps us reduce greenhouse gas emissions by nearly 5,000 metric tons per year. Natural Gas P&G has made a commitment to convert 20% of our for-hire truck loads to natural gas, delivering cost savings and reducing greenhouse gas emissions by nearly 5,000 metric tons a year — equivalent to 1,000 passenger vehicles. Natural-gas-powered trucks are a cleaner way to deliver superior products and help ensure we’re taking the critical steps to make our supply chain more efficient and sustainable. 50% Tide PODS is one of the most concentrated detergents in the market, and reduces plastic use by 50% per consumer. Tide PODS Tide PODS is an example of our commitment to meaningful innovation that enables people to live more sustainably. The three-chamber, premeasured pacs are one of the most concentrated detergents in the market and are packaged in either a tub or a lightweight bag, reducing plastic use by 50% per consumer. The tub is recyclable, and PODS are made with a best-in-class film that is specially designed to dissolve in cold water — requiring less energy used to heat water for the wash. Less packaging and reduced energy usage make each load a more sustainable one. Having achieved North America market leadership in single load packets detergents, we continued expansion of this innovation worldwide, rolling out Ariel “3-in-1” PODS in Europe, Latin America, and Africa in 2013. P & G 2 0 1 3 A n n u a l R e p o r t ©2013 Procter & Gamble 00387128 

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