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Section 1: 11-K (PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN 2019)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form 11-K
 
\X\
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE FISCAL YEAR ENDED JUNE 30, 2019, OR
 
\ \
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] for the transition period from _________ to _______________
 
Commission file number 001-00434
 
A.
Full title of the plan and the address of the plan, if different from that of the issuer named below: Procter & Gamble International Stock Ownership Plan, The Procter & Gamble Company, One Procter & Gamble Plaza, Cincinnati, Ohio 45202.
 
B.
Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: The Procter & Gamble Company, One Procter & Gamble Plaza, Cincinnati, Ohio 45202.
 
REQUIRED INFORMATION
 
Item 1.
Audited statements of financial condition as of the end of the latest two fiscal years of the plan (or such lesser period as the plan has been in existence).
 
Item 2.
Audited statements of income and changes in plan equity for each of the latest three fiscal years of the plan (or such lesser period as the plan has been in existence).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
            
 
Procter & Gamble
International Stock
Ownership Plan

Financial Statements as of June 30, 2019 and 2018,
and for the Years Ended June 30, 2019, 2018,
and 2017, and Report of Independent Registered
Public Accounting Firm
  
                
               
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

   
PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN

TABLE OF CONTENTS
       
       Page
       
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    1
       
FINANCIAL STATEMENTS:    
       
  Statements of Net Assets Available for Plan Benefits as of June 30, 2019 and 2018    2
       
 
Statements of Changes in Net Assets Available for Plan Benefits for the Years Ended
          June 30, 2019, 2018, and 2017
   3
       
 
Notes to Financial Statements as of June 30, 2019 and 2018, and for the
          Years Ended June 30, 2019, 2018, and 2017
 
 4-9















REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Plan Participants and The Board of Directors of The Procter & Gamble Company

Opinion on the Financial Statements

We have audited the accompanying statements of net assets available for plan benefits of the Procter & Gamble International Stock Ownership Plan (the "Plan") as of June 30, 2019 and 2018, the related statements of changes in net assets available for plan benefits for each of the three years in the period ended June 30, 2019, 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 plan benefits of the Plan as of June 30, 2019 and 2018, and the changes in net assets available for plan benefits for each of the three years in the period ended June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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.



/s/ Deloitte & Touche LLP

Cincinnati, Ohio
September 27, 2019

We have served as the auditor of the Plan since at least 2000; however, an earlier year could not be reliably determined.








PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
   
       
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
   
AS OF JUNE 30, 2019 AND 2018
     
       
       
 
                         2019
 
                        2018
       
ASSETS:
     
  Cash
  $              19,702,430
 
  $           18,902,130
       
  Investments — at fair value:  
     
    The Procter & Gamble Company common stock —
     
      11,081,647 shares (cost $841,093,009) at June 30, 2019
     
      12,195,961 shares (cost $881,855,161) at June 30, 2018
             1,215,102,594
 
             952,016,716
    The J.M. Smucker Company common stock —
     
       2,065 shares (cost $267,764) at June 30, 2019
     
       2,082 shares (cost $291,686) at June 30, 2018
                       237,867
 
                    223,773
       
       
           Total investments
             1,215,340,461
 
             952,240,489
       
  Receivables:
     
    Participant contributions
                    7,846,486
 
                 8,034,838
    Employer contributions
                    3,046,995
 
                 3,715,173
       
           Total receivables
                  10,893,481
 
               11,750,011
       
           Total assets
             1,245,936,372
 
             982,892,630
       
LIABILITY — Benefits payable
                    1,083,334
 
                 1,020,991
       
NET ASSETS AVAILABLE FOR PLAN BENEFITS
  $         1,244,853,038
 
  $         981,871,639
       
See notes to financial statements.
     














-2-


PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN
   
           
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
   
FOR THE YEARS ENDED JUNE 30, 2019, 2018, AND 2017
       
           
           
 
                        2019
 
                        2018
 
                         2017
           
ADDITIONS:
         
  Contributions:
         
    Participant contributions
  $             94,317,654
 
  $           95,220,231
 
  $          91,237,882
    Employer contributions
                 39,681,985
 
               41,334,350
 
              38,279,959
           
           Total contributions
               133,999,639
 
             136,554,581
 
            129,517,841
           
  Net investment income (loss):
         
   Increase (decrease) in unrealized
         
      appreciation of investments
               303,886,046
 
           (143,039,859)
 
            (30,959,107)
    Realized gain from The Procter &
         
      Gamble Company common stock sold
                 64,686,112
 
               36,563,797
 
              65,324,730
    Realized gain from The J.M. Smucker
         
      Company common stock sold
                        81,674
 
                    101,840
 
                   162,735
    Dividends from The Procter &
         
      Gamble Company common stock
                 27,324,087
 
               26,920,918
 
              27,773,208
    Dividends from The J.M. Smucker
         
      Company common stock
                          7,912
 
                        9,711
 
                     12,269
    Interest income
                      167,280
 
                      83,634
 
                       6,487
           
           Net investment income (loss)
               396,153,111
 
             (79,359,959)
 
              62,320,322
           
           Net additions
               530,152,750
 
               57,194,622
 
            191,838,163
           
DEDUCTIONS:
         
  Benefits paid to participants
             (266,144,763)
 
           (167,878,817)
 
          (297,159,197)
  Reimbursement to The Procter &
         
    Gamble Company
                    (976,043)
 
               (1,007,186)
 
  -
  Administrative fees
                      (50,545)
 
                    (51,947)
 
                 (145,685)
           
           Net deductions
             (267,171,351)
 
           (168,937,950)
 
          (297,304,882)
           
NET INCREASE (DECREASE)
               262,981,399
 
           (111,743,328)
 
          (105,466,719)
           
NET ASSETS AVAILABLE FOR
         
  PLAN BENEFITS:
         
  Beginning of year
               981,871,639
 
          1,093,614,967
 
         1,199,081,686
           
  End of year
  $        1,244,853,038
 
  $         981,871,639
 
  $     1,093,614,967
           
           
See notes to financial statements.
         







-3-

PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN

NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2019 AND 2018, AND FOR THE YEARS ENDED JUNE 30, 2019, 2018, AND 2017

1.
DESCRIPTION OF THE PLAN
The following description of the Procter & Gamble International Stock Ownership Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan Document and their country’s Plan Supplement for more complete information.
General — The Plan is a defined contribution plan established in June of 1992 covering substantially all full-time international employees of The Procter & Gamble Company (the “Company”) and certain of its subsidiaries. Generally, participation varies by subsidiary or country and eligibility can begin immediately after employment and at various milestones up to one year. The Board of Directors of the Company controls and manages the operation and administration of the Plan. Bank of America Merrill Lynch serves as custodian of the Plan. The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA), the rules and regulations of the U.S. Department of Labor, nor is it subject to U.S. income taxation (Note 7). The Plan’s recordkeeper is the Company.
Plan management closes participant accounts that are not closed by the deferral period in accordance with the Plan Document. Per the Plan Document, the Plan may apply the funds resulting from the account closures to defray a subsidiary’s obligation for administrative expenses (see Note 5). If a lost member later notifies the subsidiary of his or her whereabouts and requests the payments due under the Plan, the cash value of the amounts so applied shall be paid to him or her, as of the sales date, denominated in the currency of the participant’s jurisdiction. During the years ended June 30, 2019, 2018 and 2017, 1,650, 2,957 and 1,170 participant accounts were closed for approximately 69,345, 150,997 and 45,239 shares of Company common stock and 54, 218 and 80 shares of the J.M. Smucker Company (“Smucker”) common stock, respectively. Funds of $6,339,397, $13,866,522, and $4,477,369 were deposited to a separate account and are held as cash during the years ended June 30, 2019, 2018 and 2017 respectively. During the years ended June 30, 2019, 2018 and 2017, $4,075,602, $3,979,731and $3,032,297, respectively, was reclaimed by participants. During the years ended June 30, 2019 and 2018, the Plan used deferred funds to reimburse the Company $976,043 and $1,007,186, respectively, for administrative expenses incurred by the Company.  The Plan did not reimburse the Company for any administrative expense incurred by the Company during the year ended June 30, 2017.
Contributions — Each year, participants may contribute up to 15% of their base compensation, as defined in the Plan. The Company contributes 50% of the first 5% of the base compensation that a participant contributes to the Plan. However, participants in their initial year of eligibility receive a 100% Company contribution on the first 1% of the base compensation that the participant contributes to the Plan. Participants and/or Company may be permitted to contribute a lump sum payment as a “Special Additional Deposit.”
Participant Accounts — Individual accounts are maintained for each Plan participant. Each participant’s account is credited with the participant’s contribution, the Company’s matching contribution, allocations of Special Additional Deposits, if any, and Plan earnings, and charged with withdrawals and an allocation of Plan losses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.



-4-



Investments — Participants are only permitted to invest in Company common stock. All employee and Company contributions are converted into U.S. dollars and then invested in shares of Company common stock when funds are delivered to the custodian. Sales of Company stock may occur daily. Any dividends on shares of Company common stock are invested in additional shares of Company common stock.
The Plan’s investment in shares of Smucker common stock resulted from a 2002 transaction between the Company and Smucker.
Vesting — Generally, participants are fully vested in all shares of common stock credited to their accounts under the Plan. In certain subsidiaries or countries, vesting provisions provide for vesting based on up to 30 years of continuous service for shares resulting from employer contributions.
Payment of Benefits — Participants may withdraw any portion of their contributions in excess of 5% of their base compensation, at any time during the year. Contributions made up to 5% of base compensation and Company matches are available to be withdrawn without penalty five years after the year in which the contributions are made. If a participant withdraws these funds prior to the completion of five years, the Company will suspend matching of employee contributions for one year.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 Plan 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 invests in Company common stock and Smucker common stock. 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 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 or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 3 for discussion on fair value measurements.
Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Interest income is recorded on the accrual basis.
Cash — Amounts shown as cash are either 1) uninvested funds held by the custodian that are to be invested daily in Company common stock or 2) the balance of account closures past deferral that are held in a separate cash account.
Administrative Expenses — Administrative expenses (i.e., investment management and record keeping expenses) of the Plan are paid by the Company and the subsidiaries as provided in the Plan Document. The Plan may reimburse the Company for certain administrative expenses (see Note 5). Brokerage commissions are paid by the participant, and other costs related to the purchase or sale of shares are reflected in the price of the shares and borne by the participant.
Payment of Benefits — Benefit payments to participants are recorded when participants elect to withdraw. Amounts allocated to accounts of persons who have elected to withdraw from the Plan but have not yet been paid were $1,083,334 and $1,020,991 at June 30, 2019, and 2018, respectively.




-5-

3.
FAIR VALUE MEASUREMENTS
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. Assets are classified 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. The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, 2019 and 2018.
Common Stocks — Valued at the closing price reported on the active market on which they 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. In such instances, the transfer is reported at the beginning of the reporting period.
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, 2018, and 2017, there were no transfers between levels.












-6-


The following tables set 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 2018.
  Assets Measured at Fair Value
  at June 30, 2019, Using
 
Quoted Prices in
 
Significant
 
Significant
   
 
Active Markets for
 
Other
 
Unobservable
   
   Identical Assets    Observable Inputs    Inputs    
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
           Total
               
Common stock:
             
  The Procter & Gamble
             
    Company common stock
  $     1,215,102,594
 
  $                -
 
  $                -
 
  $   1,215,102,594
  The J.M. Smucker Company
             
    common stock
                   237,867
         
                 237,867
               
Total investments
  $     1,215,340,461
 
  $                -
 
  $                -
 
  $   1,215,340,461
               

  Assets Measured at Fair Value
  at June 30, 2018, Using
 
Quoted Prices in
 
Significant
 
Significant
   
 
Active Markets for
 
Other
 
Unobservable
   
   Identical Assets    Observable Inputs    Inputs    
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
          Total
               
Common stock:
             
  The Procter & Gamble
             
    Company common stock
  $        952,016,716
 
  $                -
 
  $                -
 
  $      952,016,716
  The J.M. Smucker Company
             
    common stock
                   223,773
         
                 223,773
               
Total investments
  $        952,240,489
 
  $                -
 
  $                -
 
  $      952,240,489
               

4.
INVESTMENTS
The investments held by the Plan as of June 30, 2019, 2018, and 2017, and the related unrealized appreciation for the years ended June 30, 2019, 2018, and 2017, were as follows:
 
                    2019
 
                   2018
 
                      2017
           
Number of shares
             11,083,712
 
           12,198,043
 
           12,316,559
           
Cost
  $       841,360,773
 
  $     882,146,847
 
  $     860,356,044
Market value
        1,215,340,461
 
         952,240,489
 
      1,073,489,545
           
Unrealized appreciation
  $       373,979,688
 
  $       70,093,642
 
  $     213,133,501
           
Increase (decrease) in unrealized appreciation
  $       303,886,046
 
  $    (143,039,859)
 
  $     (30,959,107)



-7-


The realized gain on sales of Company common stock for the years ended June 30, 2019, 2018, and 2017, was determined as follows:
 
                         2019
 
                       2018
 
                     2017
           
Proceeds on sales of shares
  $      268,240,621
 
  $    177,629,964
 
  $    298,838,371
Cost
          203,554,509
 
        141,066,167
 
        233,513,641
           
Realized gain
  $        64,686,112
 
  $      36,563,797
 
  $      65,324,730
           

The realized gain on sales of Smucker common stock for the years ended June 30, 2019, 2018, and 2017, was determined as follows:
 
                       2019
 
                         2018
 
                       2017
           
Proceeds on sales of shares
  $    105,596
 
  $    127,836
 
  $    199,068
Cost
          23,922
 
          25,996
 
          36,333
           
Realized gain
  $      81,674
 
  $    101,840
 
  $    162,735

5.
RELATED-PARTY TRANSACTIONS
At June 30, 2019 and 2018, the Plan held 11,081,647 and 12,195,961 shares, respectively, of Company common stock with a cost basis of $841,093,009 and $881,855,161, respectively. During the years ended June 30, 2019, 2018, and 2017, the Company contributed $39,681,985, $41,334,350, and $38,279,959, respectively, to the Plan on behalf of participating employees.
During the years ended June 30, 2019, 2018, and 2017, the Plan recorded dividend income from Company common stock of $27,324,087, $26,920,918, and $27,773,208, respectively.
During the years ended June 30, 2019, 2018, and 2017, 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 (depreciated) in value by $368,534,142, $(106,340,904), and $34,850,059, respectively.
During the years ended June 30, 2019 and 2018, the Plan made distributions of funds to the Company of $976,043, and $1,007,186, respectively. This represents reimbursement of administrative expenses paid by the Company for the Plan using funds obtained from the closing of accounts past deferral process (see Note 1).  No such distribution of funds to the Company were made during the year ended June 30, 2017.
6.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right under the Plan Document to discontinue its contributions at any time and to terminate the Plan subject to the provisions set forth in the Plan Document.
7.
FEDERAL INCOME TAX STATUS
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 trustee should be viewed as a direct custodian.






-8-


Plan management believes that the participating employees should be treated as the beneficial owners of the shares of Company and Smucker common stock held for their account under the Plan for U.S. tax purposes and that, subject to certain procedural conditions, the information provided by the employees may be relied upon in determining the applicable U.S. tax withholding rate on dividends paid by the Company with respect to these shares. The Plan is subject to routine audits by taxing jurisdictions at any time.
******


























 
-9-






THE PLAN.  Pursuant to the requirements of the Securities Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized on September 24, 2019.


PROCTER & GAMBLE INTERNATIONAL STOCK OWNERSHIP PLAN



By:   /s/ Judy Virzi                            
Judy Virzi
Manager
Stock Plan Administer







EXHIBIT INDEX

Exhibit No.

       23 Consent of Deloitte & Touche LLP



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Section 2: EX-23 (CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 33-47656, 333-44034, 333-108997, and 333-208409 on Form S-8 of our report dated September 27, 2019, relating to the financial statements of the Procter & Gamble International Stock Ownership Plan, appearing in this Annual Report on Form 11-K of the Procter & Gamble International Stock Ownership Plan for the year ended June 30, 2019.


Cincinnati, Ohio
September 27, 2019
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