3.
FAIR VALUE MEASUREMENTS (CONTINUED)
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Level 1
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Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access.
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Level 2
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Inputs to the valuation methodology include
• quoted prices for similar assets or liabilities in active markets;
• quoted prices for identical or similar assets or liabilities in inactive markets;
• inputs other than quoted prices that are observable for the asset or liability;
• inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
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Level 3
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Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
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The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
All investments are measured at quoted prices in the active market and are classified as Level 1 assets as of June 30, 2018 and 2017.
The Plan's investment in Company common stock experienced net (depreciation) / appreciation in value as follows for the years ended June 30, 2018, 2017, and 2016:
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2018
£
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2017
£
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2016
£
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The Procter & Gamble Company common stock:
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Net (depreciation) / appreciation
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(7,364,768)
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(4,790,101)
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12,399,195
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The realized gain on shares sold of Company common stock for the years ended June 30, 2018, 2017 and 2016, was determined using an average cost method as follows:
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2018
£
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2017
£
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2016
£
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Proceeds on sale of shares
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5,672,975
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24,514,845
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9,525,794
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Cost
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(4,044,967)
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(15,263,431)
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(7,122,844)
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Realized gain on shares sold
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1,628,008
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9,251,414
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2,402,950
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5.
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FEDERAL INCOME TAX STATUS
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The Plan is not qualified under Section 401(a) of the Internal Revenue Code and is exempt from the provisions of Title I of ERISA pursuant to Section 4(b) (4) thereof. The Company believes that the fiduciary should be viewed as a directed custodian and that, for U.S. tax purposes, the participating employees should be treated as the owners of the shares of the Company's common stock held for their account under the Plan.
GAAP requires plan administrators to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS or the Department of Labor. The Plan administrators have analyzed the tax positions taken by the Plan, and have concluded that as of June 30, 2018 and 2017, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan administrators believe it is no longer subject to income tax examinations for years prior to 2013.
HM Revenue & Customs (HMRC) has determined and informed the Company that it is an approved Employee Share Scheme under UK tax legislation. Therefore, the Plan Administrator believes that the Plan was qualified and tax-exempt as of June 30, 2018 and no provision for income taxes has been reflected in the accompanying financial statements.
6.
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PARTICIPATING PROCTER & GAMBLE COMPANIES
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The participating Procter & Gamble companies are as follows:
Procter & Gamble Product Supply (UK) Limited
Procter & Gamble Technical Centres Limited
Procter & Gamble (L&CP) Limited
Procter & Gamble (Health & Beauty Care) Limited
Gillette UK Limited
Gillette Management LLC
Procter & Gamble UK Group Holdings Limited
7.
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RELATED PARTY TRANSACTIONS
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At June 30, 2018 and 2017, 770,762 and 784,705 shares of Company common stock were held by the Plan respectively. The cost of this stock at June 30, 2018 and 2017 was £35,779,321 and £34,491,056 respectively.
During the years ended June 30, 2018, 2017 and 2016, the Plan recorded dividend income from Company common stock of £1,284,353, £1,515,411 and £1,634,841 respectively.
Contributions from participating Procter & Gamble companies of 3,076,229, £3,225,454 and £3,680,413 were recorded for the years ended June 30, 2018, 2017 and 2016, respectively. Amounts payable to participating Procter & Gamble companies of £7,319, £5,743 and £5,492 were recorded at June 30, 2018, 2017 and 2016 respectively.
Also, the Plan received reimbursements for administrative expenses from the participating Procter & Gamble companies for the years ended June 30, 2018, 2017 and 2016 of £40,985, £22,378 and £32,695 respectively.