16 The Procter & Gamble Company and Subsidiaries Corporate Governance and Management’s Responsibility Procter & Gamble is committed to doing what’s right. Our actions – the  actions of all employees – are governed by our Purpose, Values and  Principles. These core values set a tone of integrity for the entire  Company – one that is reinforced consistently at all levels, in all coun- tries, internally and externally.  Importantly, this extends to our accounting and financial reporting  responsibilities. We understand our responsibilities to investors. As part  of this, we are committed to providing accurate and understandable  financial reporting. This encompasses: Focusing on financial stewardship. Even before the events that have  shaken investor confidence, we had implemented a program to ensure  employees understood their fiduciary responsibilities to shareholders.  This ongoing effort encompasses financial discipline in our strategic and  daily business decisions, and brings particular focus to maintaining  accurate accounting processes through process improvement, skill  development and oversight. Maintaining a strong internal control environment. Our system of internal  controls is designed to provide reasonable assurance that transactions  are executed as authorized and accurately recorded, and that assets are  safeguarded. We monitor these controls through self-assessments and an  ongoing program of internal and external audits. Key employee responsi- bilities are reinforced through the Company’s “Worldwide Business Con- duct Manual,” which sets forth management’s commitment to conduct  its business affairs with the highest ethical standards. Exerting rigorous oversight of the business. We continuously review our  business results and strategic choices. Our Global Leadership Council is  actively involved – from understanding strategies to reviewing key initia- tives and financial performance. The intent is to ensure we remain objec- tive in our assessments, constructively challenge the approach to busi- ness opportunities and potential issues, and monitor results and controls. Encouraging strong and effective Corporate Governance from our Board  of Directors. We have an active, capable and diligent Board. We already  meet the standards being proposed for independence, and we welcome  the Board’s oversight as a representative of the shareholders. Our Audit  Committee is comprised of independent directors with the financial  knowledge and experience to provide appropriate oversight. We review  key accounting, financial reporting and internal control matters with  them and encourage their independent discussions with Deloitte &  Touche, our external auditors. Providing investors with financial results that are complete and under- standable. The consolidated financial statements and financial informa- tion included in this report are the responsibility of management. This  includes preparing the financial statements in accordance with general- ly accepted accounting principles in the United States of America, which  necessarily requires estimates based on management’s best judgment.  Our independent auditing firm, Deloitte & Touche, has audited our  financial statements and has expressed an unqualified opinion. We are  committed to providing timely, accurate and understandable informa- tion to investors.  P&G has a strong history of doing what’s right. We know great compa- nies are built on strong ethical standards and principles. Our financial  results are delivered from that culture of accountability, and we take  responsibility for the quality and accuracy of our financial reporting.  A.G. Lafley Chairman of the Board,  President and Chief Executive Clayton C. Daley Jr. Chief Financial Officer Table of Contents Results of Operations  17 Financial Condition 18 Segment Results 20 Critical Accounting Policies  22 Hedging and Derivative Financial Instruments  23 Restructuring Program 24 Independent Auditors’ Report 26 Audited Consolidated Financial Statements Earnings 27 Balance Sheet 28 Shareholders’ Equity  30 Cash Flows 31 Notes to the Financial Statements  32 Financial Review