To The Procter & Gamble U.S. Business Services Company and the Plan Participants:
We have audited the accompanying statements of net assets available for benefits of The Procter & Gamble Savings Plan (the “Plan”) as of June 30, 2019 and 2018, the related statements of
changes in net assets available for benefits for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the net assets
available for benefits of the Plan as of June 30, 2019 and 2018, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on the Plan's financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The supplemental schedules of (1) assets (held at end of year) as of June 30, 2019 and (2) delinquent participant contributions for the year ended June 30, 2019 have been subjected to audit
procedures performed in conjunction with the audit of the Plan's financial statements. The supplemental schedules are the responsibility of the Plan's management. Our audit procedures included determining whether the supplemental schedules
reconcile to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedules. In forming our opinion
on the supplemental schedules, we evaluated whether the supplemental schedules, including their form and content, are presented in compliance with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. In our opinion, such schedules are fairly stated, in all material respects, in relation to the financial statements as a whole.
We have served as the Plan’s auditor since at least 2008; however, an earlier year could not be reliably determined.
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED JUNE 30, 2019 AND JUNE 30, 2018
1.
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DESCRIPTION OF THE PLAN
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The following brief description of The Procter & Gamble Savings Plan (the “Plan”) is provided for general information only. Participants should
refer to the Plan agreement for more complete information.
General — The Plan is a voluntary defined
contribution plan that covers substantially all domestic employees of The Procter & Gamble Company (the “Company”) and certain of its subsidiaries. The Plan is the Company’s active 401(k) plan with ongoing contributions funded by employee
contributions. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Effective July 1, 2018, participants are able to choose either a traditional 401(k) or a Roth 401(k).
The Gillette Company Employee Stock Ownership Plan (the “Gillette ESOP”), another qualified plan sponsored by the Company, transferred balances for
terminated employees who were not eligible for retiree medical coverage under the Company’s health care plan(s) to the Plan, as allowed under both the Gillette ESOP and the Plan. Balances are also transferred to the Gillette ESOP when certain
employees retire and are eligible to pay the same rate as P&G retirees. Transfers between the Plan and the Gillette ESOP are shown in Transfers (to) from Other Qualified Plans.
The recordkeeper for the Plan is Alight Solutions, LLC. The custodian for the Plan is Northern Trust.
Contributions — The Plan allows contributions
by eligible employees. Participants can elect to contribute a portion of their compensation, as defined by the Plan, up to Plan and Internal Revenue Service (IRS) limits. Participants can rollover balances from conduit individual retirement
accounts and qualified plans of former employers. In accordance with IRS regulations, participants age 50 or older are eligible to contribute an additional $6,000 as a “catch-up” contribution in excess of the maximum 401(k) contributions for the
calendar years ended December 31, 2019 and 2018 of $19,000 and $18,500, respectively.
Qualified Non-Elective Contributions (QNEC) —
The Plan recorded QNEC during the years ended June 30, 2019 and June 30, 2018, of $3,911 and $7,826, respectively, to provide for certain participants who were not given the opportunity to contribute their elected amounts due to certain
administrative errors. The QNEC are immediately 100% vested to the employees. The contributions were made in accordance with IRS regulations and do not affect the tax status of the Plan and are reflected as employer contributions on the
statements of changes in net assets available for benefits.
Participant Accounts — Individual accounts
are maintained for each Plan participant. Each participant’s account is credited with the participant’s contribution, an allocation of the Plan’s earnings or losses, administrative expenses, and participant withdrawals. The benefit to which a
participant is entitled is limited to the benefit that can be provided from their account. Participants can allocate their account to one or all investment options offered by the Plan.
Investments — Participants direct the
investment of their accounts into various investment options offered by the Plan. The Plan currently offers common stock and common collective trust funds as investment options for participants.
Vesting — Participants are 100% vested in the
assets in their Plan accounts.
Notes Receivable from Participants — The Plan
has a loan feature under which active participants may borrow up to 50% of the current value of their vested account balances exclusive of amounts attributable to previous Company contributions (up to a maximum of $50,000) and at an interest rate
equal to the prime rate plus 1%. Loans are repaid via payroll deduction over a period of up to 54 months, except for loans used to purchase a primary residence, which are repaid via payroll deduction over a period of up to 114 months. Principal
and interest paid is credited to applicable funds in the borrower’s account. Participants who are former employees are not allowed to borrow against their account balances. Upon participant termination or retirement, the outstanding loan balance
is treated as a distribution to the participant if repayment is not made by the participant within 90 days of separation, or if an on-going repayment arrangement has not been made with the Plan. Notes receivable from participants are measured at
their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are recorded as distributions based on the terms of the Plan document.
Payment of Benefits — The Plan provides for
benefits to be paid upon retirement, disability, death, or separation other than retirement as defined by the Plan document. Plan benefits may be made in a lump sum of cash and/or shares of Company common stock in annual installments over not
more than 20 years, or variable amounts paid monthly. Retired or terminated employees shall commence required minimum benefit payments after the attainment of age 70 1/2.
A participant may withdraw any portion of after-tax contributions, which were derived from previously merged plans, once in any three-month period.
Participants who have attained age 59 1/2 or have demonstrated financial hardship may withdraw all or any portion of their before-tax contributions once in any six month period. Following a hardship withdrawal, participants are not allowed to
contribute to the Plan for a period of 6 months. Account balances attributable to non-active employees are $1,523,893,479 and $1,369,635,312 as of June 30, 2019 and June 30, 2018, respectively.
Plan Amendment — The Company has the right to
amend the Plan at any time. However, no amendment can reduce the amount of any participant’s account or the participant’s vested percentage of that account.
2.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Basis of Accounting — The accompanying
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
Use of Estimates — The preparation of
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein and disclosure of contingent assets and liabilities. Actual results
could differ from those estimates.
Risks and Uncertainties — The Plan utilizes
various investment instruments, including Company common stock, The J.M. Smucker Company common stock, and various common collective trust funds which include investments in U.S. government securities, corporate debt instruments, and corporate
stocks. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes
in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.
Investment Valuation and Income Recognition —
The Plan’s investments are stated at fair value. Fair value of a financial instrument is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Quoted market prices, when
available, are used to value investments. The cost of securities sold, transferred, or distributed is determined by the weighted-average cost of securities allocated to the participant’s account.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date. Net appreciation (depreciation) includes the Plan’s gains (losses) on investments bought and sold as well as held during the year.
Management fees and operating expenses charged to the Plan for investments are deducted from income earned daily and are not separately reflected.
Consequently, management fees and operating expenses are reflected as a reduction of investment return for such investments.
Administrative Expenses — Investment
management expenses are paid by the Plan and are netted against investment income. Loan processing fees are paid by the participants through reduction in their investment balances. Recordkeeping fees of the Plan are paid by the Plan and/or
participants through a reduction in their investment balances. In addition, fees paid to other vendors are paid by the Plan.
Payment of Benefits — Benefit payments to
participants are recorded upon distribution. There were 19 and 17 participants who elected to withdrawal a total of $536,515 and $107,664 from the plan but had not yet been paid at June 30, 2019 and June 30, 2018, respectively.
3.
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FAIR VALUE MEASUREMENTS
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ASC 820, Fair Value Measurements and Disclosures, provides a framework for measuring fair value. That
framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, as follows: Level 1, which refers to securities valued using unadjusted quoted prices from active markets for identical
assets; Level 2, which refers to securities not traded on an active market but for which observable market inputs are readily available; and Level 3, which refers to securities valued based on significant unobservable inputs. There are no Level 2
or Level 3 investments in this plan. Assets are valued in their entirety based on the lowest level of input that is significant to the fair value measurement.
Asset Valuation Methodologies — Valuation methodologies maximize the use of relevant observable inputs and minimize the use of unobservable inputs. There have been no changes in the methodologies
used at June 30, 2019 and June 30, 2018.
Common Stocks — Valued at the closing price reported on the active market on which the individual securities are traded.
Transfers between Levels — The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in
economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. The Plan’s policy is to recognize transfers between levels at the actual date of the event or change
in circumstances that caused the transfer.
We evaluate the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total
net assets available for benefits. For the years ended, June 30, 2019 and June 30, 2018, there were no transfers between levels.
Common Collective Trust Funds - As permitted
by accounting principles generally accepted in the United States of America, the Plan uses net asset values as a practical expedient to determine the fair value of the common collective trust funds. Net asset value is based on the fair value of
the underlying investments held by the fund less its liabilities. Participant transactions (purchases and sales) may occur daily. Redemption for common collective trusts is permitted daily with no other restrictions or notice periods and there
are no unfunded commitments. In accordance with GAAP, the common collective trust funds measured at net asset value have not been classified in the fair value hierarchy. The fair value amounts presented in the table below are intended to permit
reconciliation to the amounts presented in the Statement of Net Assets Available for Benefits.
The following table sets forth by level within the fair value hierarchy a summary of the Plan’s investments measured at fair value on a recurring
basis at June 30, 2019 and June 30, 2018.
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Fair Value Measurements
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Quoted Prices in Active Markets
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For Identical Assets
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2019
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2018
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Investments measured at Fair Value - Common stock - Level 1
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$ 1,160,608,909
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$ 940,480,473
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Investments measured at NAV - Common Collective Trusts
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2,400,615,007
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2,249,580,494
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Total
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$ 3,561,223,916
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$ 3,190,060,967
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4.
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EXEMPT PARTY-IN-INTEREST TRANSACTIONS
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Certain Plan investments are shares of P&G common stock and funds managed by Northern Trust and BlackRock. Transactions with the recordkeeper,
trustee, custodian, and investment manager qualify as party-in-interest transactions. Fees paid by the Plan for investment management services were included as a reduction of the return earned on each fund.
At June 30, 2019 and June 30, 2018, the Plan held 10,567,682 and 12,031,731 shares, respectively, of common stock of the Company, the sponsoring
employer, with a cost basis of $618,902,906 and $674,209,750, respectively. During the years ended June 30, 2019 and June 30, 2018, the Plan recorded dividend income on Company common stock of $32,942,968 and $34,347,412, respectively.
During the years ended June 30, 2019 and June 30, 2018, the Plan’s investment in Company common stock, including gains and losses on investments
bought and sold as well as held during the year, appreciated in value by $355,017,979 and depreciated in value by $107,438,388, respectively.
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions set forth in ERISA. In the event of Plan termination, the net assets of the Plan will be distributed to the participants in an order of priority determined in accordance with ERISA and its applicable
regulations and the Plan document.
6.
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FEDERAL INCOME TAX STATUS
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The Internal Revenue Service has determined and informed the Company by a letter dated September 20, 2017, that the Plan and related trust were
designed in accordance with the applicable regulations of the Internal Revenue Code. The Plan is subject to routine audits by taxing jurisdictions at any time. The Plan has been amended since receiving the determination letter. However, the Company
and Plan management have concluded that the Plan, as designed and operated, complies with the applicable requirements of the Internal Revenue Code and the Plan and related trust remain tax-exempt. Therefore, no provision for income taxes has been
included in the Plan’s financial statements.
7.
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NON-EXEMPT PARTY-IN-INTEREST TRANSACTIONS
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The Company remitted various participant contributions to the trustee on dates later than required by the Department of Labor (DOL) Regulation
2510.3-102 as indicated in the table below. Participants were credited with the amount of investment income that would have been earned had the contributions been remitted on a timely basis. For the years ended June 30, 2019 and June 30, 2018,
the Company filed Forms 5330 with the IRS and paid the required excise tax on the transactions on the remittance dates below:
Remittances during the year ended June 30, 2019:
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Remittance Date
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Due Date
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Amount
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March 29, 2019
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June 29, 2018
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$ 1,389
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January 11, 2019
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September 1, 2017
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$ 1,314
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July 16, 2018
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January 27, 2017
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$ 1,004
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Remittances during the year ended June 30, 2018:
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Remittance Date
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Due Date
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Amount
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April 24, 2018
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July 28, 2017
|
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$ 2,741
|
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November 28, 2017
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September 17, 2017
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$ 1,186
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8.
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RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
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The following is a reconciliation of net assets available for benefits per the financial statements as of June 30, 2019 and June 30, 2018, to
Form 5500:
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2019
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2018
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Net assets available for benefits per the financial statements
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$ 3,581,402,794
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$ 3,210,340,116
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Less certain deemed distributions of participant loans
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(2,033,392)
|
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(2,102,764)
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|
|
|
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Net assets available for benefits per the Form 5500
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$ 3,579,369,402
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$ 3,208,237,352
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The following is a reconciliation of the increase in net assets per the financial statements for the year ended June 30, 2019, to Form 5500 net
income:
Net increase in assets available for benefits per the financial
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|
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statements prior to the transfer
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$ 370,972,069
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Plus previously deemed distribution of participant loans
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290,652
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Less certain deemed distributions of participant loans and related interest
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(221,280)
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Net gain per the Form 5500
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$ 371,041,441
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The following is a reconciliation of net investment income per the financial statements for the year ended June 30, 2019, to Form 5500:
Net investment income per the financial statements
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$ 510,297,230
|
|
Add interest on loans to participants
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898,008
|
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Less interest on deemed distribution
|
(3,068)
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|
|
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Net investment income per the Form 5500
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$ 511,192,170
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The following is a reconciliation of benefits paid to participants per the financial statements for the year ended June 30, 2019 to Form 5500:
Benefits paid to participants per the financial statements
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$ 275,525,437
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Less previously deemed distributions of participant loans
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(290,652)
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Plus current deemed distributions
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218,212
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Benefits paid to participants per the Form 5500
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$ 275,452,997
|
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******
SUPPLEMENTAL SCHEDULES
THE PROCTER & GAMBLE SAVINGS PLAN
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FORM 5500, SCHEDULE H, PART IV, LINE 4i — SCHEDULE OF ASSETS (HELD AT END OF YEAR)
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AS OF JUNE 30, 2019
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EIN: 31-0411980
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PLAN: 042
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Identity of Issuer
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Description of Investment
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Fair Value
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INVESTMENTS AT FAIR VALUE:
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The Procter & Gamble Company*
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Common stock
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$ 1,158,946,832
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|
|
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The J.M. Smucker Company
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Common stock
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1,662,077
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Common Collective Trusts
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BlackRock*
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MSCI ACWI EX-U.S. Index Non-Lendable Fund F
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264,105,469
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BlackRock*
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ACWI EX-US Index Non-Lendable
|
204,473,889
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BlackRock*
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Russell 2000
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328,672,902
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BlackRock*
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Equity Index Fund EX
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382,562,259
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BlackRock*
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Money MarketFund -W
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171,276,174
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BlackRock*
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MSCI ACWI EX-U.S. IMI Index Non-Lendable Fund F
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868,804,995
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State Street Global Advisors*
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SSgA US Short Term Government/Credit Bond Index
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65,414,629
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State Street Global Advisors*
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SSgA Real Return Ex-Natural Resources Equity Non-Lending Series Fund
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105,844,224
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Northern Trust*
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Short Term Investment Fund
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9,460,466
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|
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Total Common Collective Trusts
|
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2,400,615,007
|
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Loans to participants*
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Various participants, interest rates ranging from
|
|
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|
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4.25% to 10.5% various maturities through December 2028
|
17,967,834
|
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TOTAL INVESTMENTS
|
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$ 3,579,191,750
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* Denotes party-in-interest.
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THE PROCTER & GAMBLE SAVINGS PLAN
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EIN: 31-0411980
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Plan No: 042
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FORM 5500, SCHEDULE H, PART IV, LINE 4a — SCHEDULE OF DELINQUENT PARTICIPANT CONTRIBUTIONS
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FOR THE YEAR ENDED JUNE 30, 2019
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Total That Constitute Nonexempt
Prohibited
Transactions
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Total Fully
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Contributions
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Corrected
|
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Contributions
|
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Contributions
|
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Pending
|
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under VFCP
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Not
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Corrected
|
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Correction
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|
and PTE
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Participant Contributions Transferred Late to the Plan
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Corrected
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Outside VFCP
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in VFCP
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2002-51
|
|
|
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Check here if late participant loan contributions are included
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$
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$ 3,707
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$
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$
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