POSTRETIREMENT BENEFITS AND EMPLOYEE STOCK OWNERSHIP PLAN

We offer various postretirement benefits to our employees.

Defined Contribution Retirement Plans

We have defined contribution plans which cover the majority of our U.S. employees, as well as employees in certain other countries. These plans are fully funded. We generally make contributions to participants' accounts based on individual base salaries and years of service. Total global defined contribution expense was $305, $311 and $314 in 2015, 2014 and 2013, respectively.

The primary U.S. defined contribution plan (the U.S. DC plan) comprises the majority of the expense for the Company's defined contribution plans. For the U.S. DC plan, the contribution rate is set annually. Total contributions for this plan approximated 14% of total participants' annual wages and salaries in 2015 and 15% in 2014 and 2013.

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

Defined Benefit Retirement Plans and Other Retiree Benefits

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

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

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



	Pension Benefits ⁽¹⁾						Other Retiree Benefits ⁽²⁾
Years ended June 30	2015			2014			2015			2014
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year ⁽³⁾	$	17,053		$	14,514		$	5,505		$	5,289
Service cost	317			298			156			149
Interest cost	545			590			240			256
Participants' contributions	19			20			71			72
Amendments	17			4			(325		)	(5		)
Actuarial loss/(gain)	524			1,365			(399		)	(46		)
Acquisitions	7			—			—			—
Special termination benefits	11			5			23			9
Currency translation and other	(1,908		)	797			(134		)	20
Benefit payments	(634		)	(540		)	(233		)	(239		)
BENEFIT OBLIGATION AT END OF YEAR ⁽³⁾	$	15,951		$	17,053		$	4,904		$	5,505



CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year	$	11,098		$	8,561		$	3,574		$	3,553
Actual return on plan assets	1,016			964			10			124
Employer contributions	262			1,549			18			31
Participants' contributions	19			20			71			72
Currency translation and other	(1,156		)	544			(6		)	—
ESOP debt impacts ⁽⁴⁾	—			—			36			33
Benefit payments	(634		)	(540		)	(233		)	(239		)
FAIR VALUE OF PLAN ASSETS AT END OF YEAR	$	10,605		$	11,098		$	3,470		$	3,574
FUNDED STATUS	$	(5,346	)	$	(5,955	)	$	(1,434	)	$	(1,931	)


⁽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 other retiree benefit plans, the benefit obligation is the accumulated postretirement benefit obligation.


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

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



	Pension Benefits						Other Retiree Benefits
Years ended June 30	2015			2014			2015			2014
CLASSIFICATION OF NET AMOUNT RECOGNIZED
Noncurrent assets	$	276		$	69		$	—		$	—
Current liabilities	(39		)	(40		)	(20		)	(25		)
Noncurrent liabilities	(5,583		)	(5,984		)	(1,414		)	(1,906		)
NET AMOUNT RECOGNIZED	$	(5,346	)	$	(5,955	)	$	(1,434	)	$	(1,931	)
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)
Net actuarial loss	$	4,488		$	5,169		$	1,731		$	1,871
Prior service cost/(credit)	300			344			(346		)	(39		)
NET AMOUNTS RECOGNIZED IN AOCI	$	4,788		$	5,513		$	1,385		$	1,832

The accumulated benefit obligation for all defined benefit pension plans was $14,239 and $14,949 as of June 30, 2015 and 2014, respectively. Pension plans with accumulated benefit obligations in excess of plan assets and plans with projected benefit obligations in excess of plan assets consisted of the following:



	Accumulated Benefit Obligation Exceeds the Fair Value of Plan Assets				Projected Benefit Obligation Exceeds the Fair Value of Plan Assets
Years ended June 30	2015		2014		2015		2014
Projected benefit obligation	$	13,411	$	14,229	$	14,057	$	15,325
Accumulated benefit obligation	11,918		12,406		12,419		13,279
Fair value of plan assets	7,931		8,353		8,435		9,301

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



	Pension Benefits									Other Retiree Benefits
Years ended June 30	2015			2014			2013			2015			2014			2013
AMOUNTS RECOGNIZED IN NET PERIODIC BENEFIT COST
Service cost	$	317		$	298		$	300		$	156		$	149		$	190
Interest cost	545			590			560			240			256			260
Expected return on plan assets	(732		)	(701		)	(587		)	(406		)	(385		)	(382		)
Prior service cost/(credit) amortization	30			26			18			(20		)	(20		)	(20		)
Net actuarial loss amortization	275			214			213			105			118			199
Special termination benefits	11			5			39			23			9			18
Curtailments, settlements and other	—			—			4			—			—			—
GROSS BENEFIT COST	446			432			547			98			127			265
Dividends on ESOP preferred stock	—			—			—			(58		)	(64		)	(70		)
NET PERIODIC BENEFIT COST/(CREDIT)	$	446		$	432		$	547		$	40		$	63		$	195
CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN AOCI
Net actuarial loss/(gain) - current year	$	240		$	1,102					$	(3	)	$	215
Prior service cost/(credit) - current year	17			4						(325		)	(5		)
Amortization of net actuarial loss	(275		)	(214		)				(105		)	(118		)
Amortization of prior service (cost)/credit	(30		)	(26		)				20			20
Currency translation and other	(677		)	245						(34		)	2
TOTAL CHANGE IN AOCI	(725		)	1,111						(447		)	114
NET AMOUNTS RECOGNIZED IN PERIODIC BENEFIT COST AND AOCI	$	(279	)	$	1,543					$	(407	)	$	177

Amounts expected to be amortized from AOCI into net periodic benefit cost during the year ending June 30, 2016, are as follows:



	Pension Benefits		Other Retiree Benefits
Net actuarial loss	$	270	$	78
Prior service cost/(credit)	30		(52		)

Assumptions. We determine our actuarial assumptions on an annual basis. These assumptions are weighted to reflect each country that may have an impact on the cost of providing retirement benefits. As of June 30, 2015, we updated our assumptions for revised mortality projections for the measurement of U.S. retirement benefit obligations that reflect longevity improvements of plan participants, resulting in an increase to future pension expense and to our benefit obligation. The weighted average assumptions used to determine benefit obligations recorded on the Consolidated Balance Sheets as of June 30, were as follows: ⁽¹⁾



	Pension Benefits				Other Retiree Benefits
	2015		2014		2015		2014
Discount rate	3.1	%	3.5	%	4.5	%	4.4	%
Rate of compensation increase	3.1	%	3.2	%	N/A		N/A
Health care cost trend rates assumed for next year	N/A		N/A		6.8	%	6.8	%
Rate to which the health care cost trend rate is assumed to decline (ultimate trend rate)	N/A		N/A		5.0	%	5.0	%
Year that the rate reaches the ultimate trend rate	N/A		N/A		2021		2021


⁽¹⁾	Determined as of end of year.

The weighted average assumptions used to determine net benefit cost recorded on the Consolidated Statement of Earnings for the years ended June 30, were as follows: ⁽¹⁾



	Pension Benefits						Other Retiree Benefits
Years ended June 30	2015		2014		2013		2015		2014		2013
Discount rate	3.5	%	4.0	%	4.2	%	4.4	%	4.8	%	4.3	%
Expected return on plan assets	7.2	%	7.2	%	7.3	%	8.3	%	8.3	%	8.3	%
Rate of compensation increase	3.2	%	3.2	%	3.3	%	N/A		N/A		N/A

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

Several factors are considered in developing the estimate for the long-term expected rate of return on plan assets. For the defined benefit retirement plans, these factors include historical rates of return of broad equity and bond indices and projected long-term rates of return obtained from pension investment consultants. The expected long-term rates of return for plan assets are 8 - 9% for equities and 5 - 6% for bonds. For other retiree benefit plans, the expected long-term rate of return reflects that the assets are comprised primarily of Company stock. The expected rate of return on Company stock is based on the long-term projected return of 8.5% and reflects the historical pattern of returns.

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



	One-Percentage Point Increase		One-Percentage Point Decrease
Effect on the total service and interest cost components	$	81	$	(62	)
Effect on the accumulated postretirement benefit obligation	824		(642		)

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

Our target asset allocation for the year ended June 30, 2015, and actual asset allocation by asset category as of June 30, 2015 and 2014, were as follows:



	Target Asset Allocation				Actual Asset Allocation at June 30
	Pension Benefits		Other Retiree Benefits		Pension Benefits				Other Retiree Benefits
Asset Category	Pension Benefits		Other Retiree Benefits		2015		2014		2015		2014
Cash	2	%	2	%	2	%	1	%	1	%	1	%
Debt securities	51	%	3	%	50	%	51	%	5	%	6	%
Equity securities	47	%	95	%	48	%	48	%	94	%	93	%
TOTAL	100	%	100	%	100	%	100	%	100	%	100	%

The following tables set forth the fair value of the Company's plan assets as of June 30, 2015 and 2014 segregated by level within the fair value hierarchy (refer to Note 5 for further discussion on the fair value hierarchy and fair value principles). Common collective funds are valued using the net asset value reported by the managers of the funds and as supported by the unit prices of actual purchase and sale transactions. Company stock listed as Level 2 in the hierarchy represents preferred shares which are valued based on the value of Company common stock. The majority of our Level 3 pension assets are insurance contracts. Their fair values are based on their cash equivalent or models that project future cash flows and discount the future amounts to a present value using market-based observable inputs, including credit risk and interest rate curves.



	Pension Benefits
	Level 1				Level 2				Level 3				Total
Years ended June 30	2015		2014		2015		2014		2015		2014		2015		2014
ASSETS AT FAIR VALUE
Cash and cash equivalents	$	154	$	79	$	112	$	—	$	—	$	—	$	266	$	79
Collective fund - equity	—		—		5,054		5,336		—		—		5,054		5,336
Collective fund - fixed income	—		—		5,162		5,539		—		—		5,162		5,539
Other	4		5		—		—		119		139		123		144
TOTAL ASSETS AT FAIR VALUE	$	158	$	84	$	10,328	$	10,875	$	119	$	139	$	10,605	$	11,098



	Other Retiree Benefits
	Level 1				Level 2				Level 3				Total
Years ended June 30	2015		2014		2015		2014		2015		2014		2015		2014
ASSETS AT FAIR VALUE
Cash and cash equivalents	$	36	$	30	$	—	$	—	$	—	$	—	$	36	$	30
Company stock	—		—		3,239		3,304		—		—		3,239		3,304
Common collective fund - equity	—		—		17		18		—		—		17		18
Common collective fund - fixed income	—		—		178		217		—		—		178		217
Other	—		—		—		—		—		5		—		5
TOTAL ASSETS AT FAIR VALUE	$	36	$	30	$	3,434	$	3,539	$	—	$	5	$	3,470	$	3,574

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

Cash Flows. Management's best estimate of cash requirements and discretionary contributions for the defined benefit retirement plans and other retiree benefit plans for the year ending June 30, 2016, is $215 and $34, respectively. For the defined benefit retirement plans, this is comprised of $96 in expected benefit payments from the Company directly to participants of unfunded plans and $119 of expected contributions to funded plans. For other retiree benefit plans, this is comprised of $27 in expected benefit payments from the Company directly to participants of unfunded plans and $7 of

expected contributions to funded plans. Expected contributions are dependent on many variables, including the variability of the market value of the plan assets as compared to the benefit obligation and other market or regulatory conditions. In addition, we take into consideration our business investment opportunities and resulting cash requirements. Accordingly, actual funding may differ significantly from current estimates.

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



Years ending June 30	Pension Benefits		Other Retiree Benefits
EXPECTED BENEFIT PAYMENTS
2016	$	533	$	182
2017	542		196
2018	560		210
2019	572		223
2020	587		235
2021 - 2025	3,403		1,334

Employee Stock Ownership Plan

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

The ESOP borrowed $1.0 billion in 1989 and the proceeds were used to purchase Series A ESOP Convertible Class A Preferred Stock to fund a portion of the U.S. DC plan. Principal and interest requirements of the borrowing were paid by the Trust from dividends on the preferred shares and from advances provided by the Company. The original borrowing of $1.0 billion has been repaid in full, and advances from the Company of $86 remain outstanding at June 30, 2015. Each share is convertible at the option of the holder into one share of the Company's common stock. The dividend for the current year was equal to the common stock dividend of $2.59 per share. The liquidation value is $6.82 per share.

In 1991, the ESOP borrowed an additional $1.0 billion. The proceeds were used to purchase Series B ESOP Convertible Class A Preferred Stock to fund a portion of retiree health care benefits. These shares, net of the ESOP's debt, are considered plan assets of the other retiree benefits plan discussed above. Debt service requirements are funded by preferred stock dividends, cash contributions and advances provided by the Company, of which $662 is outstanding at June 30, 2015. Each share is convertible at the option of the holder into one share of the Company's common stock. The dividend for the current year was equal to the common stock dividend of $2.59 per share. The liquidation value is $12.96 per share.

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

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



Shares in thousands	2015	2014	2013
Allocated	42,044	44,465	45,535
Unallocated	7,228	8,474	9,843
TOTAL SERIES A	49,272	52,939	55,378

Allocated	23,074	22,085	21,278
Unallocated	34,096	35,753	37,300
TOTAL SERIES B	57,170	57,838	58,578

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