10-K

THE PROCTER & GAMBLE COMPANY
AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K
TO THE
SECURITIES AND EXCHANGE COMMISSION
FOR THE
YEAR ENDED JUNE 30, 2008

******************************************

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark one)

þ ANNUAL REPORT ON FORM 10-K PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended June 30, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 1-434

THE PROCTER & GAMBLE COMPANY

One Procter & Gamble Plaza, Cincinnati, Ohio 45202
Telephone (513) 983-1100
IRS Employer Identification No. 31-0411980
State of Incorporation: Ohio

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each Exchange on which registered
Common Stock, without Par Value	New York, Paris

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ      No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o      No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ      No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o      No þ

The aggregate market value of the voting stock held by non-affiliates amounted to $226 billion on December 31, 2007.

There were 3,034,310,829 shares of Common Stock outstanding as of July 31, 2008.

Documents Incorporated By Reference

Portions of the Annual Report to Shareholders for the fiscal year ended June 30, 2008 are incorporated by reference into Part I, Part II and Part IV of this report to the extent described herein.

Portions of the Proxy Statement for the 2008 Annual Meeting of Shareholders are incorporated by reference into Part III of this report to the extent described herein.

TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 1A. Risk Factors
	Item 1B. Unresolved Staff Comments
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	Item 9A. Controls and Procedures
	Item 9B. Other Information
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
	Item 13. Certain Relationships and Related Transactions
	Item 14. Principal Accounting Fees and Services
PART IV
	Item 15. Exhibits and Financial Statement Schedules
SIGNATURES
EXHIBIT INDEX
EX-10.1
EX-10.2
EX-10.3
EX-10.5
EX-10.6
EX-10.10
EX-10.14
EX-11
EX-12
EX-13
EX-21
EX-23
EX-31
EX-32
EX-99.1

PART I

Item 1. Business.

     Additional information required by this item is incorporated herein by reference to Management’s Discussion and Analysis, which appears on pages 39-55; Note 1, Summary of Significant Accounting Policies, which appears on pages 60-63; Note 2, Acquisitions, which appears on page 63; and Note 12, Segment Information, which appears on pages 74-75 of the Annual Report to Shareholders for the fiscal year ended June 30, 2008. Unless the context indicates otherwise, the terms the “Company,” “P&G,” “we,” “our” or “us” as used herein refers to The Procter & Gamble Company (the registrant) and its subsidiaries.

     The Procter & Gamble Company is focused on providing branded consumer goods products of superior quality and value to improve the lives of the world’s consumers. The Company was incorporated in Ohio in 1905, having been built from a business founded in 1837 by William Procter and James Gamble. Today, we market our products in more than 180 countries.

     Throughout this Form 10-K, we incorporate by reference information from other documents filed with the Securities and Exchange Commission (SEC).

     The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K are filed electronically with the SEC. The SEC maintains an internet site that contains these reports at: http://www.sec.gov. You can also access these reports through links from our website at: www.pg.com/investors/sectionmain.shtml.

     Copies of these reports are also available, without charge, by contacting The Procter & Gamble Company, Shareholder Services Department, P.O. Box 5572, Cincinnati, Ohio 45201-5572.

Financial Information About Segments

     In fiscal year 2008, the Company was organized into three Global Business Units: Beauty; Health & Well-Being; and Household Care. We had six reportable segments under U.S. GAAP: Beauty; Grooming; Health Care; Snacks, Coffee and Pet Care; Fabric Care and Home Care; and Baby Care and Family Care. Many of the factors necessary for an understanding of these businesses are similar. Operating margins of the individual businesses vary slightly due to the nature of materials and processes used to manufacture the products, the capital intensity of the businesses and differences in selling, general and administrative expenses as a percentage of net sales. Net sales growth by business is also expected to vary slightly due to the underlying growth of the markets of each business and products. While none of our reportable segments are highly seasonal, components within certain of our reportable segments, such as batteries (Fabric Care and Home Care), appliances (Grooming) and prestige fine fragrances (Beauty) are seasonal. In addition, anticipation or occurrence of natural disasters, such as hurricanes, can drive unusually high demand for batteries.

     Additional information about our businesses can be found in Management’s Discussion and Analysis, pages 39-55, and Note 12, Segment Information, which appears on pages 74-75 of the Annual Report to Shareholders for the fiscal year ended June 30, 2008.

2

Narrative Description of Business

     Business Model. Our business model relies on the continued growth and success of existing brands and products, as well as the creation of new products. The markets and industry segments in which we offer our products are highly competitive. Our products are sold in over 180 countries around the world primarily through mass merchandisers, grocery stores, membership club stores, drug stores and in “high-frequency stores,” the neighborhood stores which serve many consumers in developing markets. We work collaboratively with our customers to improve the in-store presence of our products and win the “first moment of truth” — when a consumer is shopping in the store. We must also win the “second moment of truth” — when a consumer uses the product, evaluates how well it met his or her expectations and whether it was a good value. We believe we must continue to provide new, innovative products and branding to the consumer in order to grow our business. Research and product development activities, designed to enable sustained organic growth, continued to carry a high priority during the past fiscal year. While many of the benefits from these efforts will not be realized until future years, we believe these activities demonstrate our commitment to future growth.

     Key Product Categories. In 2008, one product category accounted for 10% or more of consolidated net sales. The laundry category constituted approximately 16% of net sales for fiscal years 2008, 2007 and 2006.

     Key Customers. Our customers include mass merchandisers, grocery stores, membership club stores, drug stores and high-frequency stores. Sales to Wal-Mart Stores, Inc. and its affiliates represent approximately 15% of our total revenue in 2008, 2007 and 2006. No other customer represents more than 10% of our net sales. Our top ten customers account for approximately 31% of our total unit volume in 2008, compared to 30% of total unit volume in 2007 and 31% in 2006. The nature of our business results in no material backlog orders or contracts with the government. We believe our practices related to working capital items for customers and suppliers are consistent with the industry segments in which we compete.

     Sources and Availability of Materials. Almost all of the raw and packaging materials used by the Company are purchased from others, some of whom are single-source suppliers. We produce raw materials, primarily chemicals, for further use in the manufacturing process. In addition, fuel, natural gas and derivative products are important commodities used in our plants, products and in the trucks used to deliver our products to customers. The prices we pay for materials and other commodities are subject to fluctuation. When prices for these items change, we may or may not pass on the change to our customers, depending on the magnitude and expected duration of the change. The Company purchases a substantial variety of other raw and packaging materials, no one of which is material to our business taken as a whole.

     Trademarks and Patents. We own or have licenses under patents and registered trademarks which are used in connection with our activity in all businesses. Some of these patents or licenses cover significant product formulation and processes used to manufacture our products. The trademarks are important to the overall marketing and branding of our products. All major products and trademarks in each business are registered. In part, our success can be attributed to the existence and continued protection of these trademarks, patents and licenses.

3

     Competitive Condition. The markets in which our products are sold are highly competitive. Our products compete against similar products of many large and small companies, including well-known global competitors. We market our products with advertising, promotions and other vehicles to build awareness of our brands in conjunction with an extensive sales force. We believe this combination provides the most efficient method of marketing for these types of products. Product quality, performance, value and packaging are also important competitive factors.

     Research and Development Expenditures. Research and development expenditures enable us to develop technologies and obtain patents across all categories in order to meet the needs and improve the lives of our consumers. Total research and development expenses were $2,226 million in 2008, $2,112 million in 2007 and $2,075 million in 2006.

     Expenditures for Environmental Compliance. Expenditures for compliance with federal, state and local environmental laws and regulations are fairly consistent from year to year and are not material to the Company. No material change is expected in fiscal year 2009.

     Employees. The Company has approximately 138,000 employees.

Financial Information About Foreign and Domestic Operations

     Net sales in the United States account for approximately 40% of total net sales. No other individual country had net sales exceeding 10% of total net sales. Operations outside the United States are generally characterized by the same conditions discussed in the description of the business above and may also be affected by additional factors including changing currency values, different rates of inflation, economic growth and political and economic uncertainties and disruptions. Our sales by geography for the fiscal years ended June 30 were as follows:

	2008			2007			2006
North America		44	%		46	%		47	%
Western Europe		22	%		23	%		23	%
Northeast Asia		4	%		4	%		4	%
Developing Markets		30	%		27	%		26	%

     Developing markets include Latin America, Central & Eastern Europe/Middle East and Africa, Greater China, and ASEAN/Australasia/India.

     Net sales and assets in the United States and internationally were as follows (in millions):

	Net Sales (for the year ended June 30)						Assets (as of June 30)
	2008		2007		2006		2008		2007		2006
United States	$	33,005	$	31,946	$	29,462	$	73,751	$	73,527	$	75,444
International		50,498		44,530		38,760		70,241		64,487		60,251

4

Development of the Business

     The discussion below provides insight to the general development of our business, including the material acquisitions and disposition of assets over the past five years.

     Gillette Acquisition. On October 1, 2005, we completed the acquisition of The Gillette Company. Pursuant to the acquisition agreement, which provided for the exchange of 0.975 shares of The Procter & Gamble Company common stock, on a tax-free basis, for each share of The Gillette Company, we issued 962 million shares of The Procter & Gamble Company common stock. We also issued 79 million stock options in exchange for The Gillette Company’s outstanding stock options. Under the purchase method of accounting, the total consideration was approximately $53.43 billion including common stock, the fair value of vested stock options and acquisition costs.

     The acquisition of The Gillette Company provided us with global market leadership in male grooming, selected female grooming products, alkaline batteries and in manual and power toothbrushes. Total sales for The Gillette Company during its most recent pre-acquisition year ended December 31, 2004 were $10.5 billion.

     In order to obtain regulatory approval of the transaction, we were required to divest certain overlapping businesses. We completed the divestiture of the Spinbrush toothbrush business, Rembrandt (a Gillette oral care product line) and Right Guard and other Gillette deodorant brands during the fiscal year ended June 30, 2006.

     Juice Divestiture. In August 2004 the Company completed the divestiture of its Juice business.

     Wella Acquisition. In September 2003, the Company acquired a controlling interest in Wella. Through a stock purchase agreement with the majority shareholders of Wella and a tender offer made on the remaining shares, we acquired approximately 81% of the outstanding Wella shares (99% of the voting class shares and 45% of the preference shares). In June 2004, a Company’s subsidiary and Wella entered into a Domination and Profit Transfer Agreement (the Domination Agreement). Under the Domination Agreement, we are entitled to exercise full operating control and receive 100% of the future earnings of Wella. As consideration for the Domination Agreement, we agreed to pay the remaining shareholders of Wella a guaranteed annual dividend payment. Alternatively, the remaining Wella shareholders could have elected to tender their shares to the Company for an agreed price. The fair value of the total guaranteed annual dividend payments was $1.11 billion, which is the approximate cost if all remaining shares were tendered. During the year ended June 30, 2006, a portion of the remaining shares were tendered, resulting in a $944 million reduction in our liability under the Domination Agreement. In December 2005, the Wella shareholder meeting approved the squeeze-out of the remaining shareholders. Upon the registration of the squeeze-out in the commercial register on November 12, 2007, the remaining shares of the minority shareholders were transferred to the Company in exchange for a pre-determined cash consideration. While the Domination Agreement transaction, including the guaranteed dividend payment and the cash offer, as well as the squeeze-out transaction, including the cash consideration, have been challenged by the former minority shareholders, the Company now owns 100% of the Wella stock.

5

     The total purchase price for Wella, including acquisition costs and the costs of the guaranteed dividend and squeeze-out payments, was $6.27 billion based on exchange rates at the acquisition dates. The acquisition was financed by a mixture of available cash balances, debt and the liability recorded under the Domination Agreement.

     Hutchison Acquisition. In June 2004, we purchased the remaining 20% stake of our China venture from our partner, Hutchison Whampoa China Ltd. (Hutchison), giving us full ownership of our operations in China. The net purchase price was $1.85 billion, which is the purchase price of $2.00 billion net of minority interest and certain obligations that were eliminated as a result of the transaction. The acquisition was funded by debt.

Item 1A. Risk Factors.

     We discuss our expectations regarding future performance, events and outcomes, such as our business outlook and objectives in this Form 10-K, the Annual Report to Shareholders, quarterly reports, press releases and other written and oral communications. All statements, except for historical and present factual information, are “forward-looking statements” and are based on financial data and business plans available only as of the time the statements are made, which may become out of date or incomplete. We assume no obligation to update any forward-looking statements as a result of new information, future events, or other factors. Forward-looking statements are inherently uncertain, and investors must recognize that events could significantly differ from our expectations.

     The following discussion of “risk factors” identifies the most significant factors that may adversely affect our business, operations, financial position or future financial performance. This information should be read in conjunction with Management’s Discussion and Analysis (MD&A) and the consolidated financial statements and related notes incorporated by reference into this report. The following discussion of risks is not all inclusive but is designed to highlight what we believe are important factors to consider when evaluating our expectations. These factors could cause our future results to differ from those in the forward-looking statements and from historical trends.

A material change in consumer demand for our products could have a significant impact on our business.

     We are a consumer products company and rely on continued global demand for our brands and products. To achieve business goals, we must develop and sell products that appeal to consumers. This is dependent on a number of factors including our ability to develop effective sales, advertising and marketing programs in an increasingly fragmented media environment. We expect to achieve our financial targets, in part, by shifting our portfolio towards faster growing, higher margin businesses. If demand and growth rates fall substantially below expected levels or our market share declines significantly in these businesses, our results could be negatively impacted. This could occur due to unforeseen negative economic or political events or to changes in consumer trends and habits. In addition, our continued success is dependent on leading-edge innovation, with respect to both products and operations. This means we must be able to obtain patents that lead to the development of products that appeal to our consumers across the world.

The ability to achieve our business objectives is dependent on how well we can respond to our local and global competitors.

6

     Across all of our categories, we compete against a wide variety of global and local competitors. As a result, there are ongoing competitive product and pricing pressures in the environments in which we operate, as well as challenges in maintaining profit margins. To address these challenges, we must be able to successfully respond to competitive factors, including pricing, promotional incentives and trade terms, as well as technological advances and patents granted to competition.

Our ability to successfully integrate key acquisitions, such as Gillette, could impact our business results.

     Since our goals include a growth component tied to acquisitions, we must be able to successfully manage and integrate key acquisitions, such as the acquisition of The Gillette Company. Specifically, we must be able to integrate acquisitions without any significant disruption to our ability to manage and execute business plans on our base businesses. In addition, our financial results could be adversely impacted if we are not able to deliver the expected cost and growth synergies associated with our acquisitions.

Our businesses face cost pressures which could affect our business results.

     Our costs are subject to fluctuations, particularly due to changes in commodity prices, raw materials, cost of labor, foreign exchange and interest rates. Our costs in 2008 were impacted by higher commodity costs and this trend is likely to continue in 2009. Therefore, our success is dependent, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings projects (including outsourcing projects), sourcing decisions and certain hedging transactions. In the manufacturing and general overhead areas, we need to maintain key manufacturing and supply arrangements, including any key sole supplier and sole manufacturing plant arrangements.

We face risks associated with significant international operations.

     We conduct business across the globe with a significant portion of our sales outside the United States. We expect to achieve our financial targets, in part, by achieving disproportionate growth in developing regions. Should growth rates or our market share fall substantially below expected levels in these regions, our results could be negatively impacted. In addition, economic changes, terrorist activity and political unrest may result in business interruption, inflation, deflation or decreased demand for our products. Our success will depend, in part, on our ability to manage continued global political and/or economic uncertainty, especially in our significant geographical markets, as well as any political or economic disruption due to terrorist and other hostile activities.

Our business is subject to regulation in the U.S. and abroad.

     Changes in laws, regulations and the related interpretations may alter the environment in which we do business. This includes changes in environmental, competitive and product-related laws, as well as changes in accounting standards and taxation requirements. Accordingly, our ability to manage regulatory, tax and legal matters (including product liability, patent, and intellectual property matters), and to resolve pending legal matters without significant liability, including the competition law and antitrust investigations described in Part I, Item 3 of this Form 10-K, which could require the Company to take significant reserves or pay significant fines during a reporting period, may materially impact our results.

If the reputation of one or more of our leading brands erodes significantly, it could have a material impact on our financial results.

7

     Our Company’s financial success is directly dependent on the success of our brands, particularly our billion-dollar brands. The success of these brands can suffer if our marketing plans or product initiatives do not have the desired impact on a brand’s image or its ability to attract consumers. Further, our Company’s results could be negatively impacted if one of our leading brands suffers a substantial impediment to its reputation due to real or perceived quality issues.

A material change in customer relationships or in customer demand for our products could have a significant impact on our business.

     Our success is dependent on our ability to successfully manage relationships with our retail trade customers. This includes our ability to offer trade terms that are acceptable to our customers and are aligned with our pricing and profitability targets. Our business could suffer if we cannot reach agreement with a key customer based on our trade terms and principles. Further, there is a continuing trend towards retail trade consolidation and this leads to more complex work across broader geographic boundaries for both us and key retailers. This can be particularly difficult when major customers are addressing local trade pressures or local law and regulation changes. Further, our business would be negatively impacted if a key customer were to significantly reduce the range or inventory level of our products.

Item 1B. Unresolved Staff Comments.

     None.

Item 2. Properties.

     In the United States, we own and operate 39 manufacturing facilities located in 23 different states. In addition, we own and operate 103 manufacturing facilities in 42 other countries. Many of the domestic and international facilities produce products for multiple businesses. Beauty products are manufactured at 42 of these locations; Grooming products are manufactured at 13 of these locations; Fabric Care and Home Care products at 49; Baby Care and Family Care products at 29; Pet Care, Snacks and Coffee products at 15; and Health Care products at 37. Management believes that the Company’s production facilities are adequate to support the business efficiently and that the properties and equipment have been well maintained.

Item 3. Legal Proceedings.

     The Company is subject, from time to time, to certain legal proceedings and claims arising out of our business, which cover a wide range of matters, including antitrust and trade regulation, product liability, advertising, contracts, environmental issues, patent and trademark matters, and taxes.

     Recently, the Company has become subject to a variety of investigations into potential competition law violations in the European Union. In July 2006, French authorities, in connection with an inquiry into potential competition law violations in France, entered the premises of two of the Company’s French subsidiaries and seized a variety of documents. In April 2008, UK authorities initiated an investigation concerning potential antitrust violations in the UK involving one of the Company’s subsidiaries. In June 2008, European Commission officials, with the assistance of the national authorities from a variety of countries, started an investigation into potential competition law violations in a variety of countries across the European Union. At the same time, the national authorities in Spain and Italy initiated additional investigations into potential antitrust concerns within those countries. In connection with these investigations, a number of the Company’s subsidiaries were visited and documents seized. The Company or its

8

subsidiaries are also involved in other competition law investigations in Belgium, Romania and Greece. We believe that all of the above matters involve a number of other consumer products companies and/or retail customers. The Company’s policy is to comply with all laws and regulations, including all antitrust and competition laws.

     Competition and antitrust law investigations often continue for several years and, if violations are found, can result in substantial fines. At this point, no formal claims have been made against the Company or any of our subsidiaries in connection with any of above inquiries.

     During the fiscal year just ended, certain of the Company’s subsidiaries in Germany received a formal complaint alleging violations of the antitrust laws. We are now discussing the situation with the German authorities.

     Although the Company cannot accurately predict what financial impact may ultimately result from the totality of these matters, we have taken and will take reserves as appropriate. Please refer to the Company’s Risk Factors in Item 1A of this Form 10-K for additional information.

Item 4. Submission of Matters to a Vote of Security Holders.

     Not Applicable.

9

Executive Officers of the Registrant

The names, ages and positions held by the executive officers of the Company on August 28, 2008 are:

			Elected to
Name	Position	Age	Officer Position
Alan G. Lafley	Chairman of the Board and Chief Executive Officer Director since June 8, 2000	61	1992
Susan E. Arnold	President — Global Business Units	54	2004
Robert A. McDonald	Chief Operating Officer	55	1999
Clayton C. Daley, Jr.	Vice Chairman & Chief Financial Officer	56	1998
Werner Geissler	Vice Chairman — Global Operations	55	2007
E. Dimitri Panayoptopoulos	Vice Chairman — Global Household Care	56	2007
Edward D. Shirley	Vice Chairman — Global Beauty & Grooming	51	2008
Robert A. Steele	Vice Chairman — Global Health & Well Being	53	2007
Bruce Brown	Chief Technology Officer	50	2008
R. Keith Harrison, Jr.	Global Product Supply Officer	60	2001
Steven W. Jemison	Chief Legal Officer and Secretary	57	2008
Mariano Martin	Global Customer Business Development Officer	55	2003
Moheet Nagrath	Global Human Resources Officer	49	2008
Charlotte R. Otto	Global External Relations Officer	55	1996
Filippo Passerini	Chief Information Officer and Global Services Officer	51	2003
Marc S. Pritchard	Global Marketing Officer	48	2008
Valarie L. Sheppard	Vice President and Comptroller	44	2005

10

All of the Executive Officers named above, excluding Mr. Shirley, have been employed by the Company for more than five years. During the previous five years, Mr. Shirley has held the following positions within the Company: Vice Chairman — Global Beauty and Grooming (July 1, 2008 - present), Group President — North America (April 17, 2006 — June 30, 2008) and President - Commercial Operations — Gillette International (October 11, 2005 — April 16, 2006). Mr. Shirley also held the following positions with The Gillette Company prior to its acquisition by the Company in October 2005: President — Gillette International Commercial Operations (June 2004 — October 11, 2005) and Senior Vice President, Gillette Global Value Chain & Global Marketing Resources (June 2002 — May 2004).

11

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

ISSUER PURCHASES OF EQUITY SECURITIES

					Total Number of		Approximate dollar value
					Shares Purchased		of shares that may yet be
	Total Number of		Average Price		as Part of Publicly		purchased under our share
	Shares Purchased		Paid per Share		Announced Plans or		repurchase program
Period	(1)		(2)		Programs(3)		($ in Billions)(3) (4)
4/1/08-4/30/08		13,929,269	$	69.37		13,912,597		21
5/1/08-5/31/08		7,852,339	$	65.94		7,824,090		20.5
6/1/08-6/30/08		7,978,819	$	65.91		7,968,090		20

(1)	The total number of shares purchased was 29,760,427 for the quarter. All transactions were made in the open market or pursuant to prepaid forward agreements with large financial institutions. Under these agreements, the Company prepaid large financial institutions to deliver shares at a future date in exchange for a discount. The number of shares purchased other than through a publicly announced repurchase plan was 55,650 for the quarter. These shares were acquired by the Company under various compensation and benefit plans. This table excludes shares withheld from employees to satisfy minimum tax withholding requirements on option exercises and other equity-based transactions. The Company administers cashless exercises through an independent, third party broker and does not repurchase stock in connection with cashless exercise.
(2)	Average price paid per share is calculated on a settlement basis and excludes commission.
(3)	On August 3, 2007, the Company announced a share repurchase plan. Pursuant to the share repurchase plan, the Board of Directors authorized the Company and its subsidiaries to acquire in open market and/or private transactions $24 to $30 billion of shares of Company common stock over the subsequent three years to be financed by issuing a combination of long-term and short-term debt. Certain purchases were made prior to announcement of program but are considered purchases against the program.
(4)	The dollar values listed in this column include commissions to be paid to brokers to execute the transactions.

     Additional information required by this item is incorporated by reference to Shareholder Information, which appears on page 79 of the Annual Report to Shareholders for the fiscal year ended June 30, 2008, and Part III, Item 12 of this Form 10-K.

Item 6. Selected Financial Data.

     The information required by this item is incorporated by reference to Note 1, Summary of Significant Accounting Policies, which appears on pages 60-63; Note 12, Segment Information, which appears on pages 74-75; and Financial Summary, which appears on page 80 of the Annual Report to Shareholders for the fiscal year ended June 30, 2008.

12

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     The information required by this item is incorporated by reference to Management’s Discussion and Analysis, which appears on pages 39-55; Note 1, Summary of Significant Accounting Policies, which appears on pages 60-63; Note 2, Acquisitions, which appears on page 63; Note 11, Commitments and Contingencies, which appears on pages 73-74; and Note 12, Segment Information, which appears on pages 74-75 of the Annual Report to Shareholders for the fiscal year ended June 30, 2008.

     The Company has made certain forward-looking statements in the Annual Report to Shareholders for the fiscal year ended June 30, 2008 and in other contexts relating to volume and net sales growth, increases in market shares, financial goals and cost reduction, among others.

     These forward-looking statements are based on assumptions and estimates regarding competitive activity, pricing, product introductions, economic conditions, customer and consumer trends, technological innovation, currency movements, governmental action and the development of certain markets available at the time the statements are made. There are a number of key factors that could cause our actual results to materially differ from the forward-looking statements made herein and in other contexts. Please see Item 1A “Risk Factors” of this Form 10-K for a discussion of these important factors.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

     The information required by this item is incorporated by reference to the section entitled Other Information, which appears on pages 54-55, and Note 6, Risk Management Activities, which appears on pages 65-66 of the Annual Report to Shareholders for the fiscal year ended June 30, 2008.

Item 8. Financial Statements and Supplementary Data.

     The financial statements and supplementary data are incorporated by reference to pages 56-76 and 79-81 of the Annual Report to Shareholders for the fiscal year ended June 30, 2008, but excluding the section entitled Shareholder Return Performance Graphs on page 81.

     Note 5 (Short-Term and Long-Term Debt) to the consolidated financial statements incorporated by reference herein includes: The Procter & Gamble Company fully and unconditionally guarantees the registered debt securities issued by its 100% owned finance subsidiaries.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

     Not applicable.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

     The Company’s Chairman of the Board and Chief Executive Officer, A. G. Lafley, and the Company’s Chief Financial Officer, Clayton C. Daley, Jr., performed an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”)) as of the end of the period covered by this Annual Report on Form 10-K.

     Messrs. Lafley and Daley have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and

13

(2) accumulated and communicated to our management, including Messrs. Lafley and Daley, to allow their timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting.

     Management’s annual report on internal control over financial reporting and the report of the independent registered public accounting firm are incorporated by reference to page 37 of the Annual Report to Shareholders for the fiscal year ended June 30, 2008.

Changes in Internal Control Over Financial Reporting.

     There were no changes in our internal control over financial reporting that occurred during the Company’s fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information.

     Not applicable.

14

PART III

Item 10. Directors and Executive Officers of the Registrant.

     The Board of Directors has determined that Mr. Charles R. Lee, Chairman of the Audit Committee, is independent and an audit committee financial expert, as defined by SEC guidelines.

     The information required by this item is incorporated by reference to pages 4-10, up to but not including the section entitled Board and Committee Meeting Attendance; to the section entitled Code of Ethics, which appears on pages 10-11; and to the section entitled Section 16(a) Beneficial Ownership Reporting Compliance, which appears on page 53 of the Proxy Statement filed since the close of the fiscal year ended June 30, 2008, pursuant to Regulation 14A which involved the election of directors. Pursuant to Instruction 3 of Item 401(b) of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this report.

Item 11. Executive Compensation.

     The information required by this item is incorporated by reference to pages 13-51 of the Proxy Statement filed since the close of the fiscal year ended June 30, 2008, pursuant to Regulation 14A which involved the election of directors, beginning with the section entitled Director Compensation up to but not including the section entitled Security Ownership of Management and Certain Beneficial Owners.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

     The following table gives information about the Company’s common stock that may be issued upon the exercise of options, warrants and rights under all of the Company’s equity compensation plans as of June 30, 2008. The table includes the following plans: The 1968 Procter & Gamble Plan for the Use of Shares in Payment of Remuneration; The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 1992 Stock Plan (Belgian Version); The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan; The Procter & Gamble Future Shares Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 2003 Non-Employee Directors’ Stock Plan; The Gillette Company 1971 Stock Option Plan and The Gillette Company 2004 Long-Term Incentive Plan.

15

					(c)
					Number of securities
	(a)		(b)		remaining available for
	Number of securities to be		Weighted-average exercise		future issuance under
	issued upon exercise of		price of outstanding		equity compensation plans
	outstanding options,		options, warrants and		(excluding securities
Plan Category	warrants and rights		rights		reflected in column (a))
Equity compensation plans approved by security     holders (1)
Options		283,231,615		$48.8344		(2)
Restricted Stock Units		4,198,405		N/A		(2)
Equity compensation plans not approved by security     holders (3)
Options		53,945,145		$45.1620		(4)
Restricted Stock Units		56,884		N/A		(4)
GRAND TOTAL		341,432,049		$48.2468		61,993,881

(1)	Includes The 1968 Procter & Gamble Plan for the Use of Shares in Payment of Remuneration; The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 1993 Non-Employee Directors Stock Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; and The Procter & Gamble 2003 Non-Employee Directors Stock Plan.
(2)	Of the plans listed in (1), only The Procter & Gamble 2001 Stock and Incentive Compensation Plan and The 2003 Non- Employee Directors Stock Plan allow for future grants of securities. The maximum number of shares that may be granted under these plans is 229 million shares, of which no more than 36 million in shares may be available for awards of restricted and unrestricted stock. Total shares available for future issuance under these plans is approximately 50 million.
(3)	Includes The Procter & Gamble 1992 Stock Plan (Belgian version); The Procter & Gamble Future Shares Plan; The Gillette Company 1971 Stock Option Plan; and The Gillette Company 2004 Long-Term Incentive Plan.
(4)	Of the plans listed in (3), only The Gillette Company 2004 Long-Term Incentive Plan allows for future grants of securities. The maximum number of shares that may be granted under this plan is 20 million shares. Total shares available for future issuance under this plan is approximately 12 million.

The Procter & Gamble 1992 Stock Plan (Belgian Version)

     No further grants can be made under the plan, although unexercised stock options previously granted under this plan remain outstanding. This plan was approved by the Company’s Board of Directors on February 14, 1997. Although the plan has not been submitted to shareholders for approval, it is nearly identical to The Procter & Gamble 1992 Stock Plan, approved by the Company’s shareholders on October 13, 1992, except for a few minor changes designed to comply with the Belgian tax laws.

     The plan was designed to attract, retain and motivate key Belgian employees. Under the plan, eligible participants were: (i) granted or offered the right to purchase stock options, (ii) granted stock appreciation rights and/or (iii) granted shares of the Company’s common stock. Except in the case of death of the recipient, all stock options and stock appreciation rights must vest in no less than one year from the date of grant and must expire no later than fifteen years from the date of grant. The exercise price for all stock options granted under the plan is the average price of the Company’s stock on the date of grant. If a recipient of a grant leaves the Company while holding an unexercised option or right, any unexercisable portions immediately become void, except in the case of death, and any exercisable portions become void within one month of departure, except in the case of death or retirement. Any common stock awarded under the plan may be subject to restrictions on sale or transfer while the recipient is employed, as the committee administering the plan may determine.

16

The Procter & Gamble Future Shares Plan

     On October 14, 1997, the Company’s Board of Directors approved The Procter & Gamble Future Shares Plan pursuant to which options to purchase shares of the Company’s common stock may be granted to employees worldwide. The purpose of this plan is to advance the interests of the Company by giving substantially all employees a stake in the Company’s future growth and success and to strengthen the alignment of interests between employees and the Company’s shareholders through increased ownership of shares of the Company’s stock. The plan has not been submitted to shareholders for approval.

     Subject to adjustment for changes in the Company’s capitalization, the number of shares to be granted under the plan is not to exceed 17 million shares. Under the plan’s regulations, recipients are granted options to acquire 100 shares of the Company’s common stock at an exercise price equal to the average price of the Company’s common stock on the date of the grant. These options vest five years after the date of grant and expire ten years following the date of grant. If a recipient leaves the employ of the Company prior to the vesting date for a reason other than disability, retirement or special separation (as defined in the plan), then the award is forfeited.

     At the time of the first grant following Board approval of the plan, each employee of the Company not eligible for an award under the 1992 Stock Plan was granted options for 100 shares. From the date of this first grant through June 30, 2003, each new employee of the Company has also received options for 100 shares. Following the grant of options on June 30, 2003, the Company suspended this part of the plan and intends to make no further grants under this part of the plan. The plan terminated on October 13, 2007.

     In addition to the grants above, annual grants of options for 100 shares are granted to approximately 3,000 employees who are not eligible for participation in the 2001 Stock and Incentive Compensation Plan in recognition of outstanding performance. The Company’s key managers are not eligible for such grants.

The Gillette Company 1971 Stock Option Plan

     No further grants can be made under the plan after April 25, 2005, although unexercised stock options previously granted under this plan remain outstanding. The plan was approved by shareholders of The Gillette Company and assumed by the Company upon the merger between The Procter & Gamble Company and The Gillette Company. All options became immediately vested and exercisable on October 1, 2005 as a result of the merger. After the merger, all outstanding options became options to purchase shares of The Procter & Gamble Company subject to an exchange ratio of 0.975 shares of P&G stock per share of Gillette stock.

     The plan was designed to attract, retain and motivate key salaried employees of The Gillette Company and non-employee members of its Board of Directors. Under the plan, eligible participants receive the option to purchase Company stock at a pre-determined price which cannot be less than 100% of the fair market value per share at the time that the option is granted. The period of any option may not exceed ten years from the date of grant. Subject to adjustment for changes in the Company’s capitalization, the number of shares granted under the plan was not to exceed 198 million shares.

17

     If a recipient leaves the employ of the Company for any reason other than death or discharge for cause, the recipient is permitted to exercise any vested options granted under the plan for a period between thirty days and five years after termination, depending on the circumstances of his/her departure. If a participant is discharged for cause, all options are immediately cancelled. If a participant dies while holding options, the options are exercisable for a period of one to three years depending on the date of grant. In addition, the plan allows Gillette employees whose employment is terminated for “Good Reason” within two years after the effective date of the merger the ability to exercise remaining options for the shorter of five years following their termination date or the original life of the grant. Employees terminated for “Good Reason” who are also eligible to retire under a Company plan are allowed to exercise their options subject to the original terms of the grant.

The Gillette Company 2004 Long-Term Incentive Plan

     Shareholders of The Gillette Company approved The Gillette Company 2004 Long Term Incentive Plan on May 20, 2004, and the plan was assumed by the Company upon the merger between The Procter & Gamble Company and The Gillette Company. All options became immediately vested and exercisable on October 1, 2005 as a result of the merger. After the merger, all outstanding options became options to purchase shares of The Procter & Gamble Company subject to an exchange ratio of 0.975 shares of P&G stock per share of Gillette stock. Only employees previously employed by the Gillette Company prior to October 1, 2005 are eligible to receive grants under this plan.

     The plan was designed to attract, retain and motivate employees of The Gillette Company, and until the effective date of the merger between The Gillette Company and The Procter & Gamble Company, non-employee members of the Gillette Board of Directors. Under the plan, eligible participants are: (i) granted or offered the right to purchase stock options, (ii) granted stock appreciation rights and/or (iii) granted shares of the Company’s common stock or restricted stock units (and dividend equivalents). Subject to adjustment for changes in the Company’s capitalization and the addition of any shares authorized but not issued or redeemed under The Gillette Company 1971 Stock Option Plan, the number of shares to be granted under the plan is not to exceed 19 million shares.

     Except in the case of death of the recipient, all stock options and stock appreciation rights must expire no later than ten years from the date of grant. The exercise price for all stock options granted under the plan must be equal to or greater than the fair market value of the Company’s stock on the date of grant. Any common stock awarded under the plan may be subject to restrictions on sale or transfer while the recipient is employed, as the committee administering the plan may determine.

     If a recipient of a grant leaves the Company while holding an unexercised option or right: (1) any unexercisable portions immediately become void, except in the case of death, retirement, special separation (as those terms are defined in the plan) or any grants as to which the Compensation Committee of the Board of Directors has waived the termination provisions; and (2) any exercisable portions immediately become void, except in the case of death, retirement, special separation, voluntary resignation that is not for Good Reason (as those terms are defined in the plan) or any grants as to which the Compensation Committee of the Board of Directors has waived the termination provisions. In addition, the plan allows Gillette employees whose employment was terminated for “Good Reason” within two years of the effective date of the merger the ability to exercise their options for the shorter of five years following their

18

termination date or the original life of the grant. Employees terminated for “Good Reason” who are also eligible to retire under a Company plan are allowed to exercise their options subject to the original terms of the grant.

     Additional information required by this item is incorporated by reference to pages 51-53, beginning with the section entitled Security Ownership of Management and Certain Beneficial Owners and up to but not including the section entitled Section 16(a) Beneficial Ownership Reporting Compliance, of the Proxy Statement filed since the close of the fiscal year ended June 30, 2008, pursuant to Regulation 14A which involved the election of directors, including footnotes referenced therein.

Item 13. Certain Relationships and Related Transactions.

     The information required by this item is incorporated by reference to the sections entitled Director Independence and Review and Approval of Transactions with Related Persons which appear on pages 10 and 11, respectively, of the Proxy Statement filed since the close of the fiscal year ended June 30, 2008, pursuant to Regulation 14A which involved the election of directors.

Item 14. Principal Accounting Fees and Services.

     The information required by this item is incorporated by reference to pages 54-55 of the Proxy Statement filed since the close of the fiscal year ended June 30, 2008, pursuant to Regulation 14A which involved the election of directors, beginning with the section entitled Report of the Audit Committee and ending with the section entitled Services Provided by Deloitte.

19

PART IV

Item 15. Exhibits and Financial Statement Schedules.

1.	Financial Statements:
	The following Consolidated Financial Statements of The Procter & Gamble Company and subsidiaries, management’s report and the reports of the independent registered public accounting firm are incorporated by reference in Part II, Item 8 of this Form 10-K.

– Management’s Report on Internal Control over Financial Reporting

– Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

– Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

– Consolidated Statements of Earnings — for years ended June 30, 2008, 2007 and 2006

– Consolidated Balance Sheets — as of June 30, 2008 and 2007

– Consolidated Statements of Shareholders’ Equity — for years ended June 30, 2008, 2007 and 2006

– Consolidated Statements of Cash Flows — for years ended June 30, 2008, 2007 and 2006

– Notes to Consolidated Financial Statements

2.	Financial Statement Schedules:
	These schedules are omitted because of the absence of the conditions under which they are required or because the information is set forth in the financial statements or notes thereto.
	Exhibits:

Exhibit (3-1) —	Amended Articles of Incorporation (Incorporated by reference to Exhibit (3-1) of the Company’s Form 10-Q for the quarter ended September 30, 2005).
(3-2) —	Regulations (as amended by shareholders at the annual meeting on October 10, 2006) (Incorporated by reference to Exhibit (3-2) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
Exhibit (4) —	Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission.
Exhibit (10-1) —	The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended on August 14, 2007) which was originally adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended March 31, 2008), and related correspondence and terms and conditions.*

20

(10-2) —	The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001) which was originally adopted by the shareholders at the annual meeting on October 12, 1992.*
(10-3) —	The Procter & Gamble Executive Group Life Insurance Policy (each executive officer is covered for an amount equal to annual salary plus bonus).*
(10-4) —	The Procter & Gamble Deferred Compensation Plan for Directors (as amended December 12, 2006) which was originally adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended December 31, 2006).*
(10-5) —	The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan (as amended September 10, 2002) which was originally adopted by the shareholders at the annual meeting on October 11, 1994.*
(10-6) —	The Procter & Gamble 1992 Stock Plan (Belgian Version) (as amended December 11, 2001) which was originally adopted by the Board of Directors on February 14, 1997.*
(10-7) —	The Procter & Gamble Future Shares Plan (as adjusted for the stock split effective May 21, 2004) which was originally adopted by the Board of Directors on October 14, 1997 (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended March 31, 2005).*
(10-8) —	The Procter & Gamble 2003 Non-Employee Directors’ Stock Plan (as amended in August 2007) which was originally adopted by the shareholders at the annual meeting on October 14, 2003 , and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-3) of the Company’s Annual Report on Form 10-Q for the quarter ended September 30, 2007).*
(10-9) —	The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2005).*
(10-10) —	Summary of the Company’s Short Term Achievement Reward Program and related correspondence and terms and conditions.*
(10-11) —	Summary of the Company’s Business Growth Program and related correspondence and terms and conditions (Incorporated

21

	by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended March 31, 2007).*
(10-12) —	Company’s Form of Separation Agreement & Release (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended March 31, 2007).*
(10-13) —	Summary of personal benefits available to certain officers and non-employee directors (Incorporated by reference to Exhibit (10-13) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2007).*
(10-14) —	Amended Revolving Credit Agreement among Procter & Gamble International S.a.r.l and a syndicate of banks led by Citigroup.
(10-15) —	The Gillette Company 1971 Stock Option Plan (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended December 31, 2005).*
(10-16) —	The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) (Incorporated by reference to Exhibit (10-4) of the Company’s Form 10-Q for the quarter ended September 30, 2007).*
(10-17) —	Amended and Restated Employment Agreement, dated December 23, 2004, between The Gillette Company and James M. Kilts (Incorporated by reference to Exhibit 10(g) of the Annual Report on Form 10-K filed by The Gillette Company for the year ended December 31, 2004, Commission File No. 1-922).*
(10-18) —	Amendment No. 1 to the Amended and Restated Employment Agreement dated as of December 23, 2004, entered into as of January 27, 2005, between The Gillette Company and James M. Kilts (Incorporated by reference to Exhibit 10.2 of the Form 8-K filed by The Gillette Company on January 28, 2005, Commission File No. 1-922).*
(10-19) —	Stock Option Agreement, dated January 19, 2001, between The Gillette Company and James M. Kilts, filed as Exhibit A to the Amended and Restated Employment Agreement between The Gillette Company and James M. Kilts (Incorporated by reference to Exhibit 10(g) of the Annual Report on Form 10-K filed by The Gillette Company for the year ended December 31, 2004, Commission File No. 1-922).*

22

(10-20) —	The Gillette Company Executive Life Insurance Program (Incorporated by reference to Exhibit (10-4) of the Company’s Form 10-Q for the quarter ended September 30, 2006).*
(10-21) —	The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to Exhibit (10-5) of the Company’s Form 10-Q for the quarter ended September 30, 2006).*
(10-22) —	The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit (10-6) of the Company’s Form 10-Q for the quarter ended September 30, 2006).*
(10-23) —	The Gillette Company Estate Preservation Plan (Incorporated by reference to Exhibit (10-7) of the Company’s Form 10-Q for the quarter ended September 30, 2006).*
(10-24) —	The Gillette Company Deferred Compensation Plan (Incorporated by reference to Exhibit (10-8) of the Company’s Form 10-Q for the quarter ended September 30, 2006).*
(10-25) —	Employment Agreement dated July 28, 2006 between The Procter & Gamble Company and Mark M. Leckie (Incorporated by reference to Exhibit (10-24) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2006).*
(10-26) —	Form of Commercial Paper Dealer Agreement in connection with the $10 Billion commercial paper program initiated by Procter & Gamble International Funding S.C.A. (Incorporated by reference to Exhibit (10-9) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-27) —	Form of Issuing and Paying Agent Agreement in connection with the $10 Billion commercial paper program initiated by Procter & Gamble International Funding S.C.A. (Incorporated by reference to Exhibit (10-10) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-28) —	Senior Executive Recoupment Policy (Incorporated by referenced to Exhibit 99 of the Company’s Form 8-K filed on December 15, 2006).*
(10-29) —	The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through August 21, 2006 (Incorporated by reference to Exhibit (10-29) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2007).*

23

Exhibit (11) —	Computation of earnings per share.
Exhibit (12) —	Computation of ratio of earnings to fixed charges.
Exhibit (13) —	Annual Report to Shareholders (pages 1-82).
Exhibit (21) —	Subsidiaries of the registrant.
Exhibit (23) —	Consent of Independent Registered Public Accounting Firm.
Exhibit (31) —	Rule 13a-14(a)/15d-14(a) Certifications.
Exhibit (32) —	Section 1350 Certifications.
Exhibit (99-1) —	Summary of Directors and Officers Insurance Program.

* Compensatory plan or arrangement

24

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the city of Cincinnati, State of Ohio.

THE PROCTER & GAMBLE COMPANY
By	A.G. LAFLEY
	(A.G. Lafley)
	Chairman of the Board and Chief Executive Officer
	August 28, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
A.G. LAFLEY       (A.G. Lafley)	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	August 28, 2008
CLAYTON C. DALEY, JR.           (Clayton C. Daley, Jr.)	Chief Financial Officer (Principal Financial Officer)	August 28, 2008
VALARIE L. SHEPPARD           (Valarie L. Sheppard)	Vice President and Comptroller (Principal Accounting Officer)	August 28, 2008
KENNETH I. CHENAULT           (Kenneth I. Chenault)	Director	August 28, 2008
SCOTT D. COOK        (Scott D. Cook)	Director	August 28, 2008
RAJAT K. GUPTA          (Rajat K. Gupta)	Director	August 28, 2008

25

Signature	Title	Date
CHARLES R. LEE         (Charles R. Lee)	Director	August 28, 2008
LYNN M. MARTIN         (Lynn M. Martin)	Director	August 28, 2008
W. JAMES MCNERNEY, JR.          (W. James McNerney, Jr.)	Director	August 28, 2008
JOHNATHAN A. RODGERS            (Johnathan A. Rodgers)	Director	August 28, 2008
RALPH SNYDERMAN, M.D.          (Ralph Snyderman, M.D.)	Director	August 28, 2008
MARGARET C. WHITMAN            (Margaret C. Whitman)	Director	August 28, 2008
PATRICIA A. WOERTZ             (Patricia A. Woertz)	Director	August 28, 2008
ERNESTO ZEDILLO           (Ernesto Zedillo)	Director	August 28, 2008

26

EXHIBIT INDEX

Exhibit (3-1) —	Amended Articles of Incorporation (Incorporated by reference to Exhibit (3-1) of the Company’s Form 10-Q for the quarter ended September 30, 2005).
(3-2) —	Regulations (as amended by shareholders at the annual meeting on October 10, 2006) (Incorporated by reference to Exhibit (3-2) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
Exhibit (4) —	Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission.
Exhibit (10-1) —	The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended on August 17, 2007) which was originally adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended March 31, 2008), and related correspondence and terms and conditions.
(10-2) —	The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001) which was originally adopted by the shareholders at the annual meeting on October 12, 1992.
(10-3) —	The Procter & Gamble Executive Group Life Insurance Policy (each executive officer is covered for an amount equal to annual salary plus bonus).
(10-4) —	The Procter & Gamble Deferred Compensation Plan for Directors (as amended December 12, 2006), which was originally adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended December 31, 2006).
(10-5) —	The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan (as amended September 10, 2002) which was originally adopted by the shareholders at the annual meeting on October 11, 1994.
(10-6) —	The Procter & Gamble 1992 Stock Plan (Belgian Version) (as amended December 11, 2001) which was originally adopted by the Board of Directors on February 14, 1997.

(10-7) —	The Procter & Gamble Future Shares Plan (as adjusted for the stock split effective May 21, 2004) which was originally adopted by the Board of Directors on October 14, 1997 (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended March 31, 2005).
(10-8) —	The Procter & Gamble 2003 Non-Employee Directors’ Stock Plan (as amended in August 2007) which was originally adopted by the shareholders at the annual meeting on October 14, 2003, and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended September 30, 2007).
(10-9) —	The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2005).
(10-10) —	Summary of the Company’s Short Term Achievement Reward Program and related correspondence and terms and conditions.
(10-11) —	Summary of the Company’s Business Growth Program and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended March 31, 2007).
(10-12) —	Company’s Form of Separation Agreement & Release (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended March 31, 2007).
(10-13) —	Summary of personal benefits available to certain officers and non-employee directors (Incorporated by reference to Exhibit (10-13) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2007).
(10-14) —	Amended Revolving Credit Agreement among Procter & Gamble International S.a.r.l and a syndicate of banks led by Citigroup.
(10-15) —	The Gillette Company 1971 Stock Option Plan (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended December 31, 2005).
(10-16) —	The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) (Incorporated by reference to Exhibit (10-4) of the Company’s Form 10-Q for the quarter ended September 30, 2007).

(10-17) —	Amended and Restated Employment Agreement, dated December 23, 2004, between The Gillette Company and James M. Kilts (Incorporated by reference to Exhibit 10(g) of the Annual Report on Form 10-K filed by The Gillette Company for the year ended December 31, 2004, Commission File No. 1-922).
(10-18) —	Amendment No. 1 to the Amended and Restated Employment Agreement dated as of December 23, 2004, entered into as of January 27, 2005, between The Gillette Company and James M. Kilts (Incorporated by reference to Exhibit 10.2 of the Form 8-K filed by The Gillette Company on January 28, 2005, Commission File No. 1-922).
(10-19) —	Stock Option Agreement, dated January 19, 2001, between The Gillette Company and James M. Kilts, filed as Exhibit A to the Amended and Restated Employment Agreement between The Gillette Company and James M. Kilts (Incorporated by reference to Exhibit 10(g) of the Annual Report on Form 10-K filed by The Gillette Company for the year ended December 31, 2004, Commission File No. 1-922).
(10-20) —	The Gillette Company Executive Life Insurance Program. (Incorporated by reference to Exhibit (10-4) of the Company’s 10-Q for the quarter ended September 30, 2006).
(10-21) —	The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to Exhibit (10-5) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-22) —	The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit (10-6) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-23) —	The Gillette Company Estate Preservation Plan (Incorporated by reference to Exhibit (10-7) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-24) —	The Gillette Company Deferred Compensation Plan (Incorporated by reference to Exhibit (10-8) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-25) —	Employment Agreement dated July 28, 2006 between The Procter & Gamble Company and Mark M. Leckie (Incorporated by reference to Exhibit (10-24) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2006).

(10-26) —	Form of Commercial Paper Dealer Agreement in connection with the $10 Billion commercial paper program initiated by Procter & Gamble International Funding S.C.A. (Incorporated by reference to Exhibit (10-9) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-27) —	Form of Issuing and Paying Agent Agreement in connection with the $10 Billion commercial paper program initiated by Procter & Gamble International Funding S.C.A. (Incorporated by reference to Exhibit (10-10) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-28) —	Senior Executive Recoupment Policy (Incorporated by reference to Exhibit 99 of the Company’s Form 8-K filed on December 15, 2006).
(10-29) —	The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through August 21, 2006. (Incorporated by reference to Exhibit (10-29) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2007).

Exhibit (11) —	Computation of earnings per share.
Exhibit (12) —	Computation of ratio of earnings to fixed charges.
Exhibit (13) —	Annual Report to Shareholders (pages 1-82).
Exhibit (21) —	Subsidiaries of the registrant.
Exhibit (23) —	Consent of Independent Registered Public Accounting Firm.
Exhibit (31) —	Rule 13a-14(a)/15d-14(a) Certifications.
Exhibit (32) —	Section 1350 Certifications.
Exhibit  (99-1) —	Summary of Directors and Officers Insurance Program.

EX-10.1

EXHIBIT (10-1)

The Procter & Gamble 2001 Stock and Incentive Compensation Plan related
correspondence and terms and conditions

Appendix 1

[GRANT_DATE]                [GLOBALID]

[FIRST_NAME] [MIDDLE_NAME] [LAST_NAME]]

Subject: NON-STATUTORY STOCK OPTION SERIES 08-AA

In recognition of your contributions to the future success of the business, The Procter & Gamble Company (“Company”) hereby grants to you an option to purchase shares of Procter & Gamble Common Stock as follows:

Grant Value:	$[DELIVERED_GRANT_VALUE]
Option Price per Share:	$[STOCK_PRCE]
Number of Shares:	[SHARES]
Date of Grant:	[GRANT_DATE]
Expiration of Option:	[EXPIRATION_DATE]
Option Vest Date:	100% after [VEST_DATE]
Acceptance Deadline:	[ACCEPTANCE_DATE]

This stock option is granted in accordance with and subject to the terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan (including any applicable sub-plan) (the “Plan”), the Regulations of the Compensation and Leadership Development Committee of the Board of Directors (“Committee”), and the Exercise Instructions in place as may be revised from time to time.

You may access, download and/or print the terms, or any portion thereof, of the Plan by activating this hyperlink: The Procter & Gamble 2001 Stock and Incentive Compensation Plan. Specific portions of the Plan are also hyperlinked below for your ease in reviewing. Nonetheless, if you would prefer to receive a paper copy of The Procter & Gamble 2001 Stock and Incentive Compensation Plan, please send a written request via email to Execcomp.IM@pg.com. Please understand that you will continue to receive future Plan materials and information via electronic mail even though you may have requested a paper copy.

The option is not transferable other than by will or the laws of descent and distribution and is exercisable during your life only by you. This option will become void upon any separation (including retirement) from the Company or any of its subsidiaries within 6 months of the grant date. This option may also become void upon separation from the Company or any of its subsidiaries at any time later than 6 months after the grant date (see Article G, paragraph 4 of the Plan). For the purposes of this option, separation from the Company or any of its subsidiaries and termination of employment will be effective as of the date that you are no longer actively employed and will not be extended by any notice period required under local law.

Appendix 1

Please note that when the issue or transfer of the Common Stock covered by this option may, in the opinion of the Company, conflict or be inconsistent with any applicable law or regulation of any governmental agency, the Company reserves the right to refuse to issue or transfer said Common Stock and that any outstanding options may be suspended or terminated if you engage in actions that are significantly contrary to the best interests of the Company or any of its subsidiaries.

This option to purchase shares of Common Stock of the Company is subject to the Employee Acknowledgement and Consent Form below and to the terms of the Plan, with which you acknowledge you are familiar by accepting this award, including the non-compete provision and other terms of Article F. The option is also subject to and bound by the actions of the Compensation and Leadership Development Committee and of the Company’s Board of Directors. This option grant and the Plan together constitute an agreement between the Company and you in accordance with the terms thereof and hereof, and no other understandings and/or agreements have been entered by you with the Company regarding this specific stock option grant. Any legal action related to this option, including Article F, may be brought in any federal or state court located in Hamilton County, Ohio, USA, and you hereby agree to accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this option grant.

Under IRS standards of professional practice, certain tax advice must meet requirements as to form and substance. To assure compliance with these standards, we disclose to you that this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties or promoting, marketing, or recommending to another party any transaction or matter addressed herein.

THE PROCTER & GAMBLE COMPANY

James J. Johnson

Secretary for the Compensation and Leadership
Development Committee

ATTACHMENTS

To Accept Your Stock Option

Read and check each of the boxes below:

o	I have read, understand and agree to be bound by each of:	the terms of this letter; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; and the Employee Acknowledgement and Consent Form (below).
o	I accept the stock option grant detailed above. (To accept this option, you must also check the box above.)

To Reject Your Stock Option

Read and check the box below:

Appendix 1

o I have read and understand the terms noted above. I do not agree to be bound by these terms, and hereby reject the stock option grant detailed above.

SUBMIT

Employee Acknowledgement and Consent Form

I understand that I am eligible to receive a grant of stock options or restricted stock units (“RSUs”) under The Procter & Gamble 2001 Stock and Incentive Compensation Plan or The Gillette Company 2004 Long Term Incentive Plan (together, referred to as the “Plans”).

Data Privacy

I hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of my personal data as described in this document by and among, as applicable, my employer (“Employer”) and The Procter & Gamble Company and its subsidiaries and affiliates (“P&G”) for the exclusive purpose of implementing, administering and managing my participation in the Plans.

I understand that P&G and my Employer hold certain personal information about me, including, but not limited to, my name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in P&G, details of all options or RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in my favor, for the purpose of implementing, administering and managing the Plans (“Data”). I understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plans, that these recipients may be located in my country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than my country. I understand that I may request a list with the names and addresses of any potential recipients of the Data by contacting my local human resources representative. I authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing my participation in the Plans, including any requisite transfer of such Data as may be required to a broker or other third party with whom I may elect to deposit any shares of stock acquired upon exercise of the option or settlement of the RSU. I understand that Data will be held only as long as is necessary to implement, administer and manage my participation in the Plans. I understand that I may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing my local human resources representative. I understand, however, that refusing or withdrawing my consent may affect my ability to participate in the Plans. For more information on the consequences of my refusal to consent or withdrawal of consent, I understand that I may contact my local human resources representative.

Nature of Grant

By completing this form and accepting the grant of the stock options or RSUs evidenced hereby, I acknowledge that: i) the Plans are established voluntarily by The Procter & Gamble Company, it is discretionary in nature and it may be amended, suspended or terminated at any time; ii) the grant of options or RSUs under the Plans is voluntary and occasional and does not create any contractual or other right to receive future grants of options or RSUs, or benefits in lieu of options or RSUs, even if options or RSUs have been granted repeatedly in the past; iii) all decisions with respect to future grants of options or RSUs, if any, will be at the sole discretion of P&G; iv) my participation in the Plans is voluntary; v) the option or RSU is an extraordinary item and not part of normal or expected compensation or salary for any purposes including, but not limited to, calculating any termination, severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; vi) in the event that my employer is not P&G, the grant of options or RSUs will not be interpreted to form an employment relationship with P&G; and furthermore, the grant of options or RSUs will not be interpreted to form an employment contract with my Employer; vii) the future value of the shares purchased under the Plans is unknown and cannot be predicted with certainty, may increase or decrease in value, even below the exercise price and, if the underlying shares do not increase in value, the option will have no value; iix) my participation in the Plans shall not create a right to further employment with my

Appendix 1

Employer and shall not interfere with the ability of my Employer to terminate my employment relationship at any time, with or without cause; ix) and no claim or entitlement to compensation or damages arises from the termination of the option or RSU or the diminution in value of the option or RSU or shares purchased and I irrevocably release P&G and my Employer from any such claim that may arise.

Responsibility for Taxes

Regardless of any action P&G or my Employer takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), I acknowledge that the ultimate liability for all Tax-Related Items is and remains my responsibility and that P&G and/or my Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the option or RSU grant, including the grant, vesting or exercise of the option, settlement of the shares from the RSU, the subsequent sale of shares acquired and the receipt of any dividends or the potential impact of current or future tax legislation in any jurisdiction; and (2) do not commit to structure the terms of the grant or any aspect of the option or RSU to reduce or eliminate my liability for Tax-Related Items.

Prior to exercise of the option or settlement of the shares from the RSU, I shall pay or make adequate arrangements satisfactory to P&G and/or my Employer to satisfy all withholding and payment on account obligations of P&G and/or my Employer. In this regard, I authorize P&G and/or my Employer to withhold all applicable Tax-Related Items from my wages or other cash compensation paid to me by P&G and/or my Employer or from proceeds of the sale of the shares. Alternatively, or in addition, if permissible under local law, P&G may (1) sell or arrange for the sale of shares that I acquire to meet the withholding obligation for Tax-Related Items, and/or (2) withhold in shares, provided that P&G only withholds the amount of shares necessary to satisfy the minimum withholding amount. Finally, I shall pay to P&G or my Employer any amount of Tax-Related Items that P&G or my Employer may be required to withhold as a result of my participation in the Plan or my purchase of shares that cannot be satisfied by the means previously described. P&G may refuse to honor the exercise and refuse to deliver the shares if I fail to comply with my obligations in connection with the Tax-Related Items as described in this section.

Appendix 2

Payment Preference Materials for Key Manager Awards

[DATE]
[NAME]

Subject : Payment Form Elections for STAR, BGP and Key Manager Awards

Your choices for the awards are:

February [YEAR] Key Manager Long-Term Incentive Award

• Stock Options

• Restricted Stock Units (RSUs) (0%, 25% or 50%)

September [YEAR] STAR Award

• Cash

• Stock Options

• Restricted Stock Units (for BGP participants only)– no forfeiture provision

• Deferred Compensation (for BGP participants only)

September [YEAR] BGP Award

• Three-Year Restricted Stock Units (50% of award required in this form)

• Cash, Restricted Stock Units – no forfeiture provision, or Deferred Compensation (50% of award subject to this election)

Attached you will find an election form to be returned to [NAME]. Please note Form A now includes the Senior Executive Officer Recoupment Policy.

It is strongly recommended that you consult legal/tax/financial advisors to determine the appropriate award form(s) for your personal situation.

While your selection will be given consideration, it is not binding on the Company until approved by the Compensation and Leadership Development Committee of the Board of Directors. IF YOU MISS THE [DATE] DEADLINE, CURRENT LAWS REQUIRED US TO DEFAULT YOUR AWARDS. The Key Manager Stock Option grant will default to 100% stock options; the STAR award will default to 100% cash; and the BGP award will default to 50% 3-year RSUs and 50% cash.

GLOBAL EXECUTIVE COMPENSATION

Appendix 2

Payment Preference Materials for Key Manager Awards

[YEAR] EXECUTIVE COMPENSATION AWARD FORM PREFERENCES

• You must be an active employee as of [DATE] to receive any non-cash award

• All elections are irrevocable after [DATE]

[YEAR] Key Manager Long-Term Incentive Award Payable [DATE] [YEAR]

Stock Options	%
Restricted Stock Units (RSUs)	% (maximum of 50%)		Shares will deliver 100% in [YEARS] years ([DATE], [YEAR]). Key Manager RSUs have no dividend equivalents and no deferral past 5 years.
Total		100%

[YEAR] STAR Award Payable [DATE] [YEAR]

Cash	%
Stock Options	%
Restricted Stock Units (RSUs)	%		(Select year you want shares delivered, e.g. [YEAR], or one year after retirement.)
Deferred Compensation	%
Total		100%

[YEAR] BGP Award Payable [DATE] [YEAR] (Complete for remaining 50%)

3-Year Restricted Stock Units (RSUs) (If you leave the Company within 3 years of grant for reasons other than retirement, you forfeit these units.)	50% (required)		(Select year you want shares delivered, e.g. [three years after grant date, any year later than three years after grant date, or one year after retirement]
Restricted Stock Units (RSUs)	%		(Select year you want shares delivered, e.g., [YEAR], or one year after retirement)
Cash	%
Deferred Compensation	%
Total		100%

PLEASE NOTE: Any election by you to delay the settlement date of your RSUs does not in any way alter or amend the terms of The Procter & Gamble Stock and Incentive Compensation Plan and/or the Statement of Terms and Conditions for Restricted Stock Units pursuant to which the subject RSUs were granted.

Your signature below indicates your agreement that any awards granted or paid pursuant to the STAR and/or BGP programs will be subject to the terms of the Senior Executive Officer Recoupment Policy. This Policy provides that in the event of a significant restatement of financial results, if compensation paid pursuant to STAR and/or BGP would have been lower based on restated results, the Compensation and Leadership Development Committee may seek to recoup from the senior executive officers some or all of the compensation paid pursuant to STAR and/or BGP. A copy of the policy is available from [NAME].

                                                                                 Signature)                                                                                     (Date)

Return form to [NAME].

Appendix 3 Form RTN

[INSERT DATE]

[INSERT NAME]

Subject: Award of Restricted Stock Units

This is to advise you that The Procter & Gamble Company, an Ohio corporation, is awarding you with Restricted Stock Units, on the dates and in the amounts listed below, pursuant to The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and subject to the attached Statement of Terms and Conditions Form RTN.

Grant Date:	[INSERT DATE OF GRANT]
Forfeiture Date:	[INSERT DATE FORFEITURE ENDS]
Original Settlement Date:	[INSERT DATE RSUs BECOME SHARES]
Number of Restricted Stock Units:	[INSERT NUMBER GRANTED]

Paragraph 3(a) of Statement of Terms and Conditions Form RTN [is/is not] waived.

THE PROCTER & GAMBLE COMPANY

James J. Johnson, Secretary
For the Compensation Committee

o I hereby accept the Award of Restricted Stock Units set forth above in accordance with and subject to the terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan and the attached Statement of Terms and Conditions for Restricted Stock Units, with which I am familiar. I agree that the Award of Restricted Stock Units, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and the attached Statement of Terms and Conditions for Restricted Stock Units together constitute an agreement between the Company and me in accordance with the terms thereof and hereof, and I further agree that any legal action related to this Award of Restricted Stock Units may be brought in any federal or state court located in Hamilton County, Ohio, USA, and I hereby accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this Award of Restricted Stock Units.

o I hereby reject the Award of Restricted Stock Units set forth above.

  Date   Signature   P&G E-mail Address

Appendix 3 Form RTN

THE PROCTER & GAMBLE COMPANY

STATEMENT OF TERMS AND CONDITIONS FOR RESTRICTED STOCK UNITS

THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN

     The Restricted Stock Units awarded to you as set forth in the letter you received from the Company (your “Award Letter”), and your ownership thereof, are subject to the following terms and conditions.

1. Definitions.

     For purposes of this Statement of Terms and Conditions for Restricted Stock Units (“Terms and Conditions”), all capitalized terms not defined in these Terms and Conditions will have the meanings described in The Procter & Gamble 2001 Stock and Incentive Compensation Plan (the “Plan”), and the following terms will have the following meanings.

(a) “Data” has the meaning described in Section 10;

(b) “Disability” means termination of employment under the permanent disability provision of any retirement plan of Procter & Gamble;

(c) “Dividend Equivalents” has the meaning described in Section 4;

(d) “Forfeiture Date” is the date identified as such in your Award Letter;

(e) “Forfeiture Period” means the period from the Grant Date until the Forfeiture Date.

(f) “Grant Date” means the date a Restricted Stock Unit was awarded to you, as identified in your Award Letter;

(g) “Original Settlement Date” is the date identified as such in your Award Letter, as adjusted, if applicable, by Section 2;

(h) “Post-Forfeiture Period” means the period from the Forfeiture Date until the Original Settlement Date;

(i) “Procter & Gamble” means the Company and/or its Subsidiaries;

(j) “Restricted Stock Unit” means an unfunded, unsecured promise by the Company, in accordance with these Terms and Conditions and the provisions of the Plan, to issue to you one share of Common Stock on the Original Settlement Date.

2. Transfer and Restrictions.

(a) Neither Restricted Stock Units nor your interest in them may be sold, exchanged, transferred, pledged, hypothecated, given or otherwise disposed of by you at any time, except by will or by the laws of descent and distribution. Any attempted transfer of a Restricted Stock Unit, whether voluntary or involuntary on your part, will result in the immediate forfeiture to the Company, and cancellation, of the Restricted Stock Unit (including all rights to receive Dividend Equivalents).

Appendix 3 Form RTN

(b) During the Forfeiture Period, your Restricted Stock Units (including all rights to receive Dividend Equivalents) will be forfeited and cancelled if you leave your employment with Procter & Gamble for any reason, except due to: (i) your Disability; or (ii) in certain circumstances, your Special Separation. In the event of your Disability during the Forfeiture Period, unless otherwise agreed to in writing by the Company, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your Disability. In the event of your Special Separation during the Forfeiture Period, your Restricted Stock Units will be forfeited and cancelled unless otherwise agreed to in writing by the Company.

(c) During the Post-Forfeiture Period, if you leave your employment with Procter & Gamble for any reason other than: (i) Disability; (ii) Special Separation; or (iii) retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your termination of employment. In the event of your Disability or Special Separation during the Post-Forfeiture Period, unless otherwise agreed to in writing by the Company, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your Disability or Special Separation, as applicable. In the event of your retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble during the Post-Forfeiture Period, you will retain your Restricted Stock Units subject to the Plan and these Terms and Conditions.

(d) Upon your death or the occurrence of a Change in Control at any time while you hold Restricted Stock Units and/or Dividend Equivalents, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your death or of the Change in Control, as applicable.

(e) From time to time, the Company and/or the Committee may establish procedures with which you must comply in order to accept an award of Restricted Stock Units, or to settle your Restricted Stock Units, including requiring you to do so by means of electronic signature, or charging you an administrative fee for doing so.

(f) Once your Restricted Stock Units have been settled by delivery to you of an equivalent number of shares of Common Stock, the Restricted Stock Units will have no further value, force or effect and you will cease to receive Dividend Equivalents associated with the Restricted Stock Units.

3. Confidentiality and Non-Competition

(a) In order to better protect the goodwill of Procter & Gamble and to prevent the disclosure of Procter & Gamble’s trade secrets and confidential information, and thereby help ensure the long-term success of Procter & Gamble’s business, in consideration of your being awarded Restricted Stock Units, you (without prior written consent of Procter & Gamble), will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, advisor, consultant or otherwise, for a period of three (3) years following the date your employment with Procter & Gamble is terminated in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of Procter & Gamble (including both existing products as well as products known to you, as a consequence of your employment with Procter & Gamble, to be in development):

Appendix 3 Form RTN

(i) with respect to which your work has been directly concerned at any time during the two (2) years preceding the termination of your employment with Procter & Gamble; or

(ii) with respect to which, during the two (2) years preceding the termination of your employment with Procter & Gamble, you, as a consequence of your job performance and duties, acquired knowledge of trade secrets or other confidential information of Procter & Gamble.

For purposes of this Section 3(a), it will be conclusively presumed that you have knowledge of information you were directly exposed to through actual receipt or review of memoranda or documents containing such information, or through attendance at meetings at which such information was discussed or disclosed.

(b) The provisions of Section 3(a) are not in lieu of, but are in addition to your continuing obligation (which you acknowledge by accepting an award of Restricted Stock Units) to not use or disclose Procter & Gamble’s trade secrets or confidential information known to you until any particular trade secret or confidential information becomes generally known (through no fault of yours). As used in this Section 3(b), “generally known” means known throughout the domestic United States industry or, if you have job responsibilities partially or entirely outside of the United States, the appropriate domestic United States and/or appropriate foreign country or countries’ industry(ies). Information regarding products in development, in test marketing, or being marketed or promoted in a discrete geographic region, which information Procter & Gamble is considering for broader use, will not be deemed to be “generally known” until such broader use is actually commercially implemented. As used in this Section, “trade secrets or other confidential information” also includes personnel knowledge about a manager, or managers, of Procter & Gamble or its subsidiaries gained in the course of your employment with Procter & Gamble or its subsidiaries (including personnel ratings or rankings, manager or peer evaluations, performance records, special skills or abilities, compensation, work and development plans, training, nature of specific project and work assignments, or specialties developed as a result of such assignments) which directly or indirectly affords you a confidential basis to solicit, encourage, or participate in soliciting any manager, or managers, of Procter & Gamble or any subsidiary to terminate his or her relationship with Procter & Gamble or that subsidiary.

(c) By accepting an award of Restricted Stock Units, you agree that, if you were, without authority, to use or disclose Procter & Gamble’s trade secrets or confidential information or threaten to do so, Procter & Gamble would be entitled to injunctive and other appropriate relief to prevent you from doing so. You further agree that the harm caused to Procter & Gamble by the breach or anticipated breach of this Section 3(c) is, by its nature, irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. You agree that any interim or final equitable relief entered by a court of competent jurisdiction will, at the request of Procter & Gamble, be entered on consent and enforced by any court having jurisdiction over you, without prejudice to any rights you or Procter & Gamble may have to appeal from the proceedings which resulted in any grant of such relief.

(d) If any of the provisions contained in Sections 3(a) through (c) are for any reason, whether by application of existing law or law which may develop after your acceptance of an award of Restricted Stock Units, determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, then by accepting an award of Restricted Stock Units you agree to join Procter & Gamble in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then-applicable law. If any one or more of the provisions contained in

Appendix 3 Form RTN

Section 3(a) through (c) are determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the provisions will remain in full force and effect and will not be affected, impaired or invalidated in any way.

4. Dividend Equivalents.

     As a holder of Restricted Stock Units, during the period from the Grant Date until the Original Settlement Date, each time a cash dividend or other cash distribution is paid with respect to Common Stock, you will receive additional Restricted Stock Units (“Dividend Equivalents”). The number of such additional Restricted Stock Units will be determined as follows: multiply the number of Restricted Stock Units currently held by the per share amount of the cash dividend or other cash distribution on the Common Stock, and then divide the result by the price of the Common Stock on the date of the dividend or distribution. These Dividend Equivalent Restricted Stock Units will be subject to the same terms and conditions as the original Restricted Stock Units that gave rise to them, including forfeiture and settlement terms, except that if there is a fractional number of Dividend Equivalent Restricted Stock Units on the date they are to be settled, you will receive one share of Common Stock for the fractional Dividend Equivalent Restricted Stock Units.

5. Voting and Other Shareholder Rights.

     A Restricted Stock Unit is not a share of Common Stock, and thus you are not entitled to any voting, dividend or other rights as a shareholder of the Company with respect to the Restricted Stock Units you hold.

6. Adjustments in Case of Stock Dividends, Stock Splits, Etc.

     In the event of a future reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off, or other change affecting the corporate structure, capitalization or Common Stock, the number of Restricted Stock Units you hold will be adjusted appropriately and equitably to prevent dilution or enlargement of your rights.

7. Tax Withholding.

     To the extent Procter & Gamble is required to withhold federal, state, local or foreign taxes in connection with your Restricted Stock Units or Dividend Equivalents, the Committee may require you to make such arrangements as Procter & Gamble may deem appropriate for the payment of such taxes required to be withheld, including without limitation, relinquishment of some of the shares of Common Stock that would otherwise be given to you. However, regardless of any action taken by Procter & Gamble with respect to any income tax, social insurance, payroll tax, or other tax, by accepting a Restricted Stock Unit or Dividend Equivalent, you acknowledge that the ultimate liability for any such tax owed by you is and remains your responsibility, and that Procter & Gamble makes no representations about the tax treatment of your Restricted Stock Units or Dividend Equivalents, and does not commit to structure any aspect of the Restricted Stock Units or Dividend Equivalents to reduce or eliminate your tax liability.

8. Suspension Periods and Termination.

     The Company reserves the right from time to time to temporarily suspend your right to settle your Restricted Stock Units for shares of Common Stock where such suspension is deemed by the Company as necessary or appropriate.

Appendix 3 Form RTN

9. Procter & Gamble Right to Terminate Employment and Other Remedies.

(a) Nothing in these Terms and Conditions, or the fact that you have been awarded Restricted Stock Units, affects in any way the right or power of Procter & Gamble to terminate your employment at any time for any reason, with or without cause, or precludes Procter & Gamble from taking any action or enforcing any remedy available to it with respect to any action or conduct on your part. Without limiting the previous sentence, the Committee may, for example, suspend or terminate any outstanding Restricted Stock Units for actions taken by you if the Committee determines that you have acted significantly contrary to the best interests of Procter & Gamble or its subsidiaries. For purposes of this paragraph, an action taken “significantly contrary to the best interests of Procter & Gamble or its subsidiaries” includes without limitation any action taken or threatened by you that the Committee determines has, or is reasonably likely to have, a significant adverse impact on the reputation, goodwill, stability, operation, personnel retention and management, or business of Procter & Gamble or any subsidiary. This paragraph is in addition to any remedy Procter & Gamble or a subsidiary may have at law or in equity, including without limitation injunctive and other appropriate relief.

(b) By accepting a Restricted Stock Unit, you acknowledge that: (i) the Plan is established voluntarily by The Procter & Gamble Company, is discretionary in nature, and may be amended, suspended or terminated at any time; (ii) the award of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been awarded repeatedly in the past; (iii) all decisions with respect to future Restricted Stock Unit awards, if any, will be at the sole discretion of the Company; (iv) your participation in the Plan is voluntary; (v) Restricted Stock Units are an extraordinary item and not part of normal or expected compensation or salary for any purpose, including without limitation calculating any termination, severance, resignation, redundancy, or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vi) in the event that your employer is not the Company, the award of Restricted Stock Units will not be interpreted to form an employment relationship with the Company; and, furthermore, the award of Restricted Stock Units will not be interpreted to form an employment contract with any Procter & Gamble entity; (vii) the future value of Common Stock is unknown and cannot be predicted with certainty; and (viii) no claim or entitlement to compensation or damages arises from termination or forfeiture of Restricted Stock Units, or diminution in value of Restricted Stock Units or Common Stock received in settlement thereof, and you irrevocably release Procter & Gamble from any such claim that may arise.

10. Data Privacy.

     By accepting a Restricted Stock Unit, you explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, any Procter & Gamble entity or third party for the purpose of implementing, administering and managing your participation in the Plan. You understand that Procter & Gamble holds certain personal information about you, including without limitation your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in a Procter & Gamble entity, details of all options, Restricted Stock Units, or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be

Appendix 3 Form RTN

located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data to any broker or other third party with whom you may elect to deposit any shares of Common Stock in connection with the settlement of your Restricted Stock Units. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data, or refuse or withdraw the consents contained in this paragraph, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

11. Notices.

(a) Any notice to Procter & Gamble that is required or appropriate with respect to Restricted Stock Units held by you must be in writing and addressed to:

The Procter & Gamble Company
ATTN: Corporate Secretary’s Office
P.O. Box 599
Cincinnati, OH 45201

or such other address as Procter & Gamble may from time to time provide to you in writing.

(b) Any notice to you that is required or appropriate with respect to Restricted Stock Units held or to be awarded to you will be provided to you in written or electronic form at any physical or electronic mail address for you that is on file with Procter & Gamble.

12. Successors and Assigns.

     These Terms and Conditions are binding on, and inure to the benefit of, (a) the Company and its successors and assigns; and (b) you and, if applicable, the representative of your estate.

13. Governing Law.

     The validity, interpretation, performance and enforcement of these Terms and Conditions, the Plan and your Restricted Stock Units will be governed by the laws of the State of Ohio, U.S.A. without giving effect to any other jurisdiction’s conflicts of law principles. With respect to any dispute concerning these Terms and Conditions, the Plan and your Restricted Stock Units, you consent to the exclusive jurisdiction of the federal or state courts located in Hamilton County, Ohio, U.S.A.

14. The Plan.

     All Restricted Stock Units awarded to you have been awarded under the Plan. Certain provisions of the Plan may have been repeated or emphasized in these Terms and Conditions;

Appendix 3 Form RTN

however, all terms of the Plan apply to you and your Restricted Stock Units whether or not they have been called out in these Terms and Conditions.

15. Effect of These Terms and Conditions.

     These Terms and Conditions and the terms of the Plan, which are incorporated herein by reference, describe the contractual rights awarded to you in the form of Restricted Stock Units, and the obligations imposed on you in connection with those rights. No right exists with respect to Restricted Stock Units except as described in these Terms and Conditions and the Plan.

Appendix 4 Form KM

[INSERT DATE]

[INSERT NAME]

Subject: Award of Restricted Stock Units

This is to advise you that The Procter & Gamble Company, an Ohio corporation, is awarding you with Restricted Stock Units, on the dates and in the amounts listed below, pursuant to The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and subject to the attached Statement of Terms and Conditions Form KM.

Grant Date:	[INSERT DATE OF GRANT]
Forfeiture Date:	[INSERT DATE FORFEITURE ENDS]
Original Settlement Date:	[INSERT DATE RSUs BECOME SHARES]
Number of Restricted Stock Units:	[INSERT NUMBER GRANTED]
	THE PROCTER & GAMBLE COMPANY
	James J. Johnson, Secretary
	For the Compensation Committee

o I hereby accept the Award of Restricted Stock Units set forth above in accordance with and subject to the terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan and the attached Statement of Terms and Conditions for Restricted Stock Units, with which I am familiar. I agree that the Award of Restricted Stock Units, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and the attached Statement of Terms and Conditions for Restricted Stock Units together constitute an agreement between the Company and me in accordance with the terms thereof and hereof, and I further agree that any legal action related to this Award of Restricted Stock Units may be brought in any federal or state court located in Hamilton County, Ohio, USA, and I hereby accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this Award of Restricted Stock Units.

o I hereby reject the Award of Restricted Stock Units set forth above.

Date Signature P&G E-mail Address

Appendix 4 Form KM

THE PROCTER & GAMBLE COMPANY

STATEMENT OF TERMS AND CONDITIONS FOR KEY MANAGER RESTRICTED STOCK UNITS

THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN

     The Restricted Stock Units awarded to you as set forth in the letter you received from the Company (your “Award Letter”), and your ownership thereof, are subject to the following terms and conditions.

1. Definitions.

     For purposes of this Statement of Terms and Conditions for Restricted Stock Units (“Terms and Conditions”), all capitalized terms not defined in these Terms and Conditions will have the meanings described in The Procter & Gamble 2001 Stock and Incentive Compensation Plan (the “Plan”), and the following terms will have the following meanings.

(a) “Data” has the meaning described in Section 9;

(b) “Forfeiture Date” is the date identified as such in your Award Letter;

(c) “Forfeiture Period” means the period from the Grant Date until the Forfeiture Date.

(d) “Grant Date” means the date a Restricted Stock Unit was awarded to you, as identified in your Award Letter;

(e) “Original Settlement Date” is the date identified as such in your Award Letter, as adjusted, if applicable, by Section 2;

(f) “Procter & Gamble” means the Company and/or its Subsidiaries;

(g) “Restricted Stock Unit” means an unfunded, unsecured promise by the Company, in accordance with these Terms and Conditions and the provisions of the Plan, to issue to you one share of Common Stock on the Original Settlement Date.

2. Transfer and Restrictions.

(a) Neither Restricted Stock Units nor your interest in them may be sold, exchanged, transferred, pledged, hypothecated, given or otherwise disposed of by you at any time, except by will or by the laws of descent and distribution. Any attempted transfer of a Restricted Stock Unit, whether voluntary or involuntary on your part, will result in the immediate forfeiture to the Company, and cancellation, of the Restricted Stock Unit.

(b) During the Forfeiture Period, your Restricted Stock Units will be forfeited and cancelled if you leave your employment with Procter & Gamble for any reason, except due to: (i) Retirement in accordance with the provisions of any appropriate Retirement plan of Procter & Gamble that occurs more than six months from the Grant Date; or (ii) Special Separation that occurs more than six months from the Grant Date. In the event of your Retirement or Special Separation that occurs more than six months from the Grant Date, you will retain your Restricted Stock Units subject to the Plan and these terms and conditions.

Appendix 4 Form KM

(c) Upon your death or the occurrence of a Change in Control at any time while you hold Restricted Stock Units, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your death or of the Change in Control, as applicable.

(d) From time to time, the Company and/or the Committee may establish procedures with which you must comply in order to accept an award of Restricted Stock Units, or to settle your Restricted Stock Units, including requiring you to do so by means of electronic signature, or charging you an administrative fee for doing so.

(e) Once your Restricted Stock Units have been settled by delivery to you of an equivalent number of shares of Common Stock, the Restricted Stock Units will have no further value, force or effect.

3. Confidentiality and Non-Competition

(a) In order to better protect the goodwill of Procter & Gamble and to prevent the disclosure of Procter & Gamble’s trade secrets and confidential information, and thereby help ensure the long-term success of Procter & Gamble’s business, in consideration of your being awarded Restricted Stock Units, you (without prior written consent of Procter & Gamble), will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, advisor, consultant or otherwise, for a period of three (3) years following the date your employment with Procter & Gamble is terminated in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of Procter & Gamble (including both existing products as well as products known to you, as a consequence of your employment with Procter & Gamble, to be in development):

(i) with respect to which your work has been directly concerned at any time during the two (2) years preceding the termination of your employment with Procter & Gamble; or

(ii) with respect to which, during the two (2) years preceding the termination of your employment with Procter & Gamble, you, as a consequence of your job performance and duties, acquired knowledge of trade secrets or other confidential information of Procter & Gamble.

For purposes of this Section 3(a), it will be conclusively presumed that you have knowledge of information you were directly exposed to through actual receipt or review of memoranda or documents containing such information, or through attendance at meetings at which such information was discussed or disclosed.

(b) The provisions of Section 3(a) are not in lieu of, but are in addition to your continuing obligation (which you acknowledge by accepting an award of Restricted Stock Units) to not use or disclose Procter & Gamble’s trade secrets or confidential information known to you until any particular trade secret or confidential information becomes generally known (through no fault of yours). As used in this Section 3(b), “generally known” means known throughout the domestic United States industry or, if you have job responsibilities partially or entirely outside of the United States, the appropriate domestic United States and/or appropriate foreign country or countries’ industry(ies). Information regarding products in development, in test marketing, or being marketed or promoted in a discrete geographic region, which information Procter & Gamble is considering for broader use, will not be deemed to be “generally known” until such broader use is actually commercially implemented. As used in this Section, “trade secrets or other

Appendix 4 Form KM

confidential information” also includes personnel knowledge about a manager, or managers, of Procter & Gamble or its subsidiaries gained in the course of your employment with Procter & Gamble or its subsidiaries (including personnel ratings or rankings, manager or peer evaluations, performance records, special skills or abilities, compensation, work and development plans, training, nature of specific project and work assignments, or specialties developed as a result of such assignments) which directly or indirectly affords you a confidential basis to solicit, encourage, or participate in soliciting any manager, or managers, of Procter & Gamble or any subsidiary to terminate his or her relationship with Procter & Gamble or that subsidiary.

(c) By accepting an award of Restricted Stock Units, you agree that, if you were, without authority, to use or disclose Procter & Gamble’s trade secrets or confidential information or threaten to do so, Procter & Gamble would be entitled to injunctive and other appropriate relief to prevent you from doing so. You further agree that the harm caused to Procter & Gamble by the breach or anticipated breach of this Section 3(c) is, by its nature, irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. You agree that any interim or final equitable relief entered by a court of competent jurisdiction will, at the request of Procter & Gamble, be entered on consent and enforced by any court having jurisdiction over you, without prejudice to any rights you or Procter & Gamble may have to appeal from the proceedings which resulted in any grant of such relief.

(d) If any of the provisions contained in Sections 3(a) through (c) are for any reason, whether by application of existing law or law which may develop after your acceptance of an award of Restricted Stock Units, determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, then by accepting an award of Restricted Stock Units you agree to join Procter & Gamble in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then-applicable law. If any one or more of the provisions contained in Section 3(a) through (c) are determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the provisions will remain in full force and effect and will not be affected, impaired or invalidated in any way.

4. Voting and Other Shareholder Rights.

     A Restricted Stock Unit is not a share of Common Stock, and thus you are not entitled to any voting, dividend or other rights as a shareholder of the Company with respect to the Restricted Stock Units you hold.

5. Adjustments in Case of Stock Splits, Etc.

     In the event of a future reorganization, recapitalization, stock split, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off, or other change affecting the corporate structure, capitalization or Common Stock, the number of Restricted Stock Units you hold will be adjusted appropriately and equitably to prevent dilution or enlargement of your rights.

6. Tax Withholding.

     To the extent Procter & Gamble is required to withhold federal, state, local or foreign taxes in connection with your Restricted Stock Units, the Committee may require you to make such arrangements as Procter & Gamble may deem appropriate for the payment of such taxes required to be withheld, including without limitation, relinquishment of some of the shares of Common Stock that would otherwise be given to you. However, regardless of any action taken

Appendix 4 Form KM

by Procter & Gamble with respect to any income tax, social insurance, payroll tax, or other tax, by accepting a Restricted Stock Unit, you acknowledge that the ultimate liability for any such tax owed by you is and remains your responsibility, and that Procter & Gamble makes no representations about the tax treatment of your Restricted Stock Units, and does not commit to structure any aspect of the Restricted Stock Units to reduce or eliminate your tax liability.

7. Suspension Periods and Termination.

     The Company reserves the right from time to time to temporarily suspend your right to settle your Restricted Stock Units for shares of Common Stock where such suspension is deemed by the Company as necessary or appropriate.

8. Procter & Gamble Right to Terminate Employment and Other Remedies.

(a) Nothing in these Terms and Conditions, or the fact that you have been awarded Restricted Stock Units, affects in any way the right or power of Procter & Gamble to terminate your employment at any time for any reason, with or without cause, or precludes Procter & Gamble from taking any action or enforcing any remedy available to it with respect to any action or conduct on your part. Without limiting the previous sentence, the Committee may, for example, suspend or terminate any outstanding Restricted Stock Units for actions taken by you if the Committee determines that you have acted significantly contrary to the best interests of Procter & Gamble or its subsidiaries. For purposes of this paragraph, an action taken “significantly contrary to the best interests of Procter & Gamble or its subsidiaries” includes without limitation any action taken or threatened by you that the Committee determines has, or is reasonably likely to have, a significant adverse impact on the reputation, goodwill, stability, operation, personnel retention and management, or business of Procter & Gamble or any subsidiary. This paragraph is in addition to any remedy Procter & Gamble or a subsidiary may have at law or in equity, including without limitation injunctive and other appropriate relief.

(b) By accepting a Restricted Stock Unit, you acknowledge that: (i) the Plan is established voluntarily by The Procter & Gamble Company, is discretionary in nature, and may be amended, suspended or terminated at any time; (ii) the award of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been awarded repeatedly in the past; (iii) all decisions with respect to future Restricted Stock Unit awards, if any, will be at the sole discretion of the Company; (iv) your participation in the Plan is voluntary; (v) Restricted Stock Units are an extraordinary item and not part of normal or expected compensation or salary for any purpose, including without limitation calculating any termination, severance, resignation, redundancy, or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vi) in the event that your employer is not the Company, the award of Restricted Stock Units will not be interpreted to form an employment relationship with the Company; and, furthermore, the award of Restricted Stock Units will not be interpreted to form an employment contract with any Procter & Gamble entity; (vii) the future value of Common Stock is unknown and cannot be predicted with certainty; and (viii) no claim or entitlement to compensation or damages arises from termination or forfeiture of Restricted Stock Units, or diminution in value of Restricted Stock Units or Common Stock received in settlement thereof, and you irrevocably release Procter & Gamble from any such claim that may arise.

9. Data Privacy.

Appendix 4 Form KM

     By accepting a Restricted Stock Unit, you explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, any Procter & Gamble entity or third party for the purpose of implementing, administering and managing your participation in the Plan. You understand that Procter & Gamble holds certain personal information about you, including without limitation your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in a Procter & Gamble entity, details of all options, Restricted Stock Units, or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data to any broker or other third party with whom you may elect to deposit any shares of Common Stock in connection with the settlement of your Restricted Stock Units. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data, or refuse or withdraw the consents contained in this paragraph, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

10. Notices.

(a) Any notice to Procter & Gamble that is required or appropriate with respect to Restricted Stock Units held by you must be in writing and addressed to:

The Procter & Gamble Company
ATTN: Corporate Secretary’s Office
P.O. Box 599
Cincinnati, OH 45201

or such other address as Procter & Gamble may from time to time provide to you in writing.

(b) Any notice to you that is required or appropriate with respect to Restricted Stock Units held or to be awarded to you will be provided to you in written or electronic form at any physical or electronic mail address for you that is on file with Procter & Gamble.

11. Successors and Assigns.

     These Terms and Conditions are binding on, and inure to the benefit of, (a) the Company and its successors and assigns; and (b) you and, if applicable, the representative of your estate.

12. Governing Law.

Appendix 4 Form KM

     The validity, interpretation, performance and enforcement of these Terms and Conditions, the Plan and your Restricted Stock Units will be governed by the laws of the State of Ohio, U.S.A. without giving effect to any other jurisdiction’s conflicts of law principles. With respect to any dispute concerning these Terms and Conditions, the Plan and your Restricted Stock Units, you consent to the exclusive jurisdiction of the federal or state courts located in Hamilton County, Ohio, U.S.A.

13. The Plan.

     All Restricted Stock Units awarded to you have been awarded under the Plan. Certain provisions of the Plan may have been repeated or emphasized in these Terms and Conditions; however, all terms of the Plan apply to you and your Restricted Stock Units whether or not they have been called out in these Terms and Conditions.

14. Effect of These Terms and Conditions.

     These Terms and Conditions and the terms of the Plan, which are incorporated herein by reference, describe the contractual rights awarded to you in the form of Restricted Stock Units, and the obligations imposed on you in connection with those rights. No right exists with respect to Restricted Stock Units except as described in these Terms and Conditions and the Plan.

Appendix 5 Form KMG

[INSERT DATE]

[INSERT NAME]

Subject: Award of Restricted Stock Units

This is to advise you that The Procter & Gamble Company, an Ohio corporation, is awarding you with Restricted Stock Units, on the dates and in the amounts listed below, pursuant to The Gillette Company 2004 Long-Term Incentive Plan, and subject to the attached Statement of Terms and Conditions Form KMG.

Grant Date:	[INSERT DATE OF GRANT]
Forfeiture Date:	[INSERT DATE FORFEITURE ENDS]
Original Settlement Date:	[INSERT DATE RSUs BECOME SHARES]
Number of Restricted Stock Units:	[INSERT NUMBER GRANTED]
	THE PROCTER & GAMBLE COMPANY
	James J. Johnson, Secretary
	For the Compensation Committee

o I hereby accept the Award of Restricted Stock Units set forth above in accordance with and subject to the terms of The Gillette Company 2004 Long-Term Incentive Plan and the attached Statement of Terms and Conditions for Restricted Stock Units, with which I am familiar. I agree that the Award of Restricted Stock Units, The Gillette Company 2004 Long-Term Incentive Plan, and the attached Statement of Terms and Conditions for Restricted Stock Units together constitute an agreement between the Company and me in accordance with the terms thereof and hereof, and I further agree that any legal action related to this Award of Restricted Stock Units may be brought in any federal or state court located in Hamilton County, Ohio, USA, and I hereby accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this Award of Restricted Stock Units.

o I hereby reject the Award of Restricted Stock Units set forth above.

Date Signature P&G E-mail Address

Appendix 5 Form KMG

THE PROCTER & GAMBLE COMPANY

STATEMENT OF TERMS AND CONDITIONS FOR KEY MANAGER RESTRICTED STOCK UNITS

THE GILLETTE COMPANY 2004 LONG-TERM INCENTIVE PLAN

     The Restricted Stock Units awarded to you as set forth in the letter you received from the Company (your “Award Letter”), and your ownership thereof, are subject to the following terms and conditions.

1. Definitions.

     For purposes of this Statement of Terms and Conditions for Restricted Stock Units (“Terms and Conditions”), all capitalized terms not defined in these Terms and Conditions will have the meanings described in The Gillette Company 2004 Long-Term Incentive Plan (the “Plan”), and the following terms will have the following meanings.

(a) “Data” has the meaning described in Section 9;

(b) “Forfeiture Date” is the date identified as such in your Award Letter;

(c) “Forfeiture Period” means the period from the Grant Date until the Forfeiture Date.

(d) “Grant Date” means the date a Restricted Stock Unit was awarded to you, as identified in your Award Letter;

(e) “Original Settlement Date” is the date identified as such in your Award Letter, as adjusted, if applicable, by Section 2;

(f) “Procter & Gamble” means the Company and/or its Subsidiaries;

(g) “Restricted Stock Unit” means an unfunded, unsecured promise by the Company, in accordance with these Terms and Conditions and the provisions of the Plan, to issue to you one share of Common Stock on the Original Settlement Date.

2. Transfer and Restrictions.

(a) Neither Restricted Stock Units nor your interest in them may be sold, exchanged, transferred, pledged, hypothecated, given or otherwise disposed of by you at any time, except by will or by the laws of descent and distribution. Any attempted transfer of a Restricted Stock Unit, whether voluntary or involuntary on your part, will result in the immediate forfeiture to the Company, and cancellation, of the Restricted Stock Unit.

(b) During the Forfeiture Period, your Restricted Stock Units will be forfeited and cancelled if you leave your employment with Procter & Gamble for any reason, except due to: (i) Retirement in accordance with the provisions of any appropriate Retirement plan of Procter & Gamble that occurs more than six months from the Grant Date; or (ii) Special Separation that occurs more than six months from the Grant Date. In the event of your Retirement or Special Separation that occurs more than six months from the Grant Date, you will retain your Restricted Stock Units subject to the Plan and these terms and conditions.

Appendix 5 Form KMG

(c) Upon your death or the occurrence of a Change in Control at any time while you hold Restricted Stock Units, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your death or of the Change in Control, as applicable.

(d) From time to time, the Company and/or the Committee may establish procedures with which you must comply in order to accept an award of Restricted Stock Units, or to settle your Restricted Stock Units, including requiring you to do so by means of electronic signature, or charging you an administrative fee for doing so.

(e) Once your Restricted Stock Units have been settled by delivery to you of an equivalent number of shares of Common Stock, the Restricted Stock Units will have no further value, force or effect.

3. Confidentiality and Non-Competition

(a) In order to better protect the goodwill of Procter & Gamble and to prevent the disclosure of Procter & Gamble’s trade secrets and confidential information, and thereby help ensure the long-term success of Procter & Gamble’s business, in consideration of your being awarded Restricted Stock Units, you (without prior written consent of Procter & Gamble), will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, advisor, consultant or otherwise, for a period of three (3) years following the date your employment with Procter & Gamble is terminated in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of Procter & Gamble (including both existing products as well as products known to you, as a consequence of your employment with Procter & Gamble, to be in development):

(i) with respect to which your work has been directly concerned at any time during the two (2) years preceding the termination of your employment with Procter & Gamble; or

(ii) with respect to which, during the two (2) years preceding the termination of your employment with Procter & Gamble, you, as a consequence of your job performance and duties, acquired knowledge of trade secrets or other confidential information of Procter & Gamble.

For purposes of this Section 3(a), it will be conclusively presumed that you have knowledge of information you were directly exposed to through actual receipt or review of memoranda or documents containing such information, or through attendance at meetings at which such information was discussed or disclosed.

(b) The provisions of Section 3(a) are not in lieu of, but are in addition to your continuing obligation (which you acknowledge by accepting an award of Restricted Stock Units) to not use or disclose Procter & Gamble’s trade secrets or confidential information known to you until any particular trade secret or confidential information becomes generally known (through no fault of yours). As used in this Section 3(b), “generally known” means known throughout the domestic United States industry or, if you have job responsibilities partially or entirely outside of the United States, the appropriate domestic United States and/or appropriate foreign country or countries’ industry(ies). Information regarding products in development, in test marketing, or being marketed or promoted in a discrete geographic region, which information Procter & Gamble is considering for broader use, will not be deemed to be “generally known” until such broader use is actually commercially implemented. As used in this Section, “trade secrets or other

Appendix 5 Form KMG

confidential information” also includes personnel knowledge about a manager, or managers, of Procter & Gamble or its subsidiaries gained in the course of your employment with Procter & Gamble or its subsidiaries (including personnel ratings or rankings, manager or peer evaluations, performance records, special skills or abilities, compensation, work and development plans, training, nature of specific project and work assignments, or specialties developed as a result of such assignments) which directly or indirectly affords you a confidential basis to solicit, encourage, or participate in soliciting any manager, or managers, of Procter & Gamble or any subsidiary to terminate his or her relationship with Procter & Gamble or that subsidiary.

(c) By accepting an award of Restricted Stock Units, you agree that, if you were, without authority, to use or disclose Procter & Gamble’s trade secrets or confidential information or threaten to do so, Procter & Gamble would be entitled to injunctive and other appropriate relief to prevent you from doing so. You further agree that the harm caused to Procter & Gamble by the breach or anticipated breach of this Section 3(c) is, by its nature, irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. You agree that any interim or final equitable relief entered by a court of competent jurisdiction will, at the request of Procter & Gamble, be entered on consent and enforced by any court having jurisdiction over you, without prejudice to any rights you or Procter & Gamble may have to appeal from the proceedings which resulted in any grant of such relief.

(d) If any of the provisions contained in Sections 3(a) through (c) are for any reason, whether by application of existing law or law which may develop after your acceptance of an award of Restricted Stock Units, determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, then by accepting an award of Restricted Stock Units you agree to join Procter & Gamble in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then-applicable law. If any one or more of the provisions contained in Section 3(a) through (c) are determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the provisions will remain in full force and effect and will not be affected, impaired or invalidated in any way.

4. Voting and Other Shareholder Rights.

     A Restricted Stock Unit is not a share of Common Stock, and thus you are not entitled to any voting, dividend or other rights as a shareholder of the Company with respect to the Restricted Stock Units you hold.

5. Adjustments in Case of Stock Splits, Etc.

     In the event of a future reorganization, recapitalization, stock split, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off, or other change affecting the corporate structure, capitalization or Common Stock, the number of Restricted Stock Units you hold will be adjusted appropriately and equitably to prevent dilution or enlargement of your rights.

6. Tax Withholding.

     To the extent Procter & Gamble is required to withhold federal, state, local or foreign taxes in connection with your Restricted Stock Units, the Committee may require you to make such arrangements as Procter & Gamble may deem appropriate for the payment of such taxes required to be withheld, including without limitation, relinquishment of some of the shares of Common Stock that would otherwise be given to you. However, regardless of any action taken

Appendix 5 Form KMG

by Procter & Gamble with respect to any income tax, social insurance, payroll tax, or other tax, by accepting a Restricted Stock Unit, you acknowledge that the ultimate liability for any such tax owed by you is and remains your responsibility, and that Procter & Gamble makes no representations about the tax treatment of your Restricted Stock Units, and does not commit to structure any aspect of the Restricted Stock Units to reduce or eliminate your tax liability.

7. Suspension Periods and Termination.

     The Company reserves the right from time to time to temporarily suspend your right to settle your Restricted Stock Units for shares of Common Stock where such suspension is deemed by the Company as necessary or appropriate.

8. Procter & Gamble Right to Terminate Employment and Other Remedies.

(a) Nothing in these Terms and Conditions, or the fact that you have been awarded Restricted Stock Units, affects in any way the right or power of Procter & Gamble to terminate your employment at any time for any reason, with or without cause, or precludes Procter & Gamble from taking any action or enforcing any remedy available to it with respect to any action or conduct on your part. Without limiting the previous sentence, the Committee may, for example, suspend or terminate any outstanding Restricted Stock Units for actions taken by you if the Committee determines that you have acted significantly contrary to the best interests of Procter & Gamble or its subsidiaries. For purposes of this paragraph, an action taken “significantly contrary to the best interests of Procter & Gamble or its subsidiaries” includes without limitation any action taken or threatened by you that the Committee determines has, or is reasonably likely to have, a significant adverse impact on the reputation, goodwill, stability, operation, personnel retention and management, or business of Procter & Gamble or any subsidiary. This paragraph is in addition to any remedy Procter & Gamble or a subsidiary may have at law or in equity, including without limitation injunctive and other appropriate relief.

(b) By accepting a Restricted Stock Unit, you acknowledge that: (i) the Plan is established voluntarily by The Procter & Gamble Company, is discretionary in nature, and may be amended, suspended or terminated at any time; (ii) the award of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been awarded repeatedly in the past; (iii) all decisions with respect to future Restricted Stock Unit awards, if any, will be at the sole discretion of the Company; (iv) your participation in the Plan is voluntary; (v) Restricted Stock Units are an extraordinary item and not part of normal or expected compensation or salary for any purpose, including without limitation calculating any termination, severance, resignation, redundancy, or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vi) in the event that your employer is not the Company, the award of Restricted Stock Units will not be interpreted to form an employment relationship with the Company; and, furthermore, the award of Restricted Stock Units will not be interpreted to form an employment contract with any Procter & Gamble entity; (vii) the future value of Common Stock is unknown and cannot be predicted with certainty; and (viii) no claim or entitlement to compensation or damages arises from termination or forfeiture of Restricted Stock Units, or diminution in value of Restricted Stock Units or Common Stock received in settlement thereof, and you irrevocably release Procter & Gamble from any such claim that may arise.

9. Data Privacy.

Appendix 5 Form KMG

     By accepting a Restricted Stock Unit, you explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, any Procter & Gamble entity or third party for the purpose of implementing, administering and managing your participation in the Plan. You understand that Procter & Gamble holds certain personal information about you, including without limitation your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in a Procter & Gamble entity, details of all options, Restricted Stock Units, or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data to any broker or other third party with whom you may elect to deposit any shares of Common Stock in connection with the settlement of your Restricted Stock Units. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data, or refuse or withdraw the consents contained in this paragraph, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

10. Notices.

(a) Any notice to Procter & Gamble that is required or appropriate with respect to Restricted Stock Units held by you must be in writing and addressed to:

The Procter & Gamble Company
ATTN: Corporate Secretary’s Office
P.O. Box 599
Cincinnati, OH 45201

or such other address as Procter & Gamble may from time to time provide to you in writing.

(b) Any notice to you that is required or appropriate with respect to Restricted Stock Units held or to be awarded to you will be provided to you in written or electronic form at any physical or electronic mail address for you that is on file with Procter & Gamble.

11. Successors and Assigns.

     These Terms and Conditions are binding on, and inure to the benefit of, (a) the Company and its successors and assigns; and (b) you and, if applicable, the representative of your estate.

Appendix 5 Form KMG

12. Governing Law.

     The validity, interpretation, performance and enforcement of these Terms and Conditions, the Plan and your Restricted Stock Units will be governed by the laws of the State of Ohio, U.S.A. without giving effect to any other jurisdiction’s conflicts of law principles. With respect to any dispute concerning these Terms and Conditions, the Plan and your Restricted Stock Units, you consent to the exclusive jurisdiction of the federal or state courts located in Hamilton County, Ohio, U.S.A.

13. The Plan.

     All Restricted Stock Units awarded to you have been awarded under the Plan. Certain provisions of the Plan may have been repeated or emphasized in these Terms and Conditions; however, all terms of the Plan apply to you and your Restricted Stock Units whether or not they have been called out in these Terms and Conditions.

14. Effect of These Terms and Conditions.

     These Terms and Conditions and the terms of the Plan, which are incorporated herein by reference, describe the contractual rights awarded to you in the form of Restricted Stock Units, and the obligations imposed on you in connection with those rights. No right exists with respect to Restricted Stock Units except as described in these Terms and Conditions and the Plan.

Appendix 6 Form KMW

[INSERT DATE]

[INSERT NAME]

Subject: Award of Restricted Stock Units

This is to advise you that The Procter & Gamble Company, an Ohio corporation, is awarding you with Restricted Stock Units, on the dates and in the amounts listed below, pursuant to The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and subject to the attached Statement of Terms and Conditions Form KMW.

Grant Date:	[INSERT DATE OF GRANT]
Forfeiture Date:	[INSERT DATE FORFEITURE ENDS]
Original Settlement Date:	[INSERT DATE RSUs BECOME SHARES]
Number of Restricted Stock Units:	[INSERT NUMBER GRANTED]
	THE PROCTER & GAMBLE COMPANY
	James J. Johnson, Secretary
	For the Compensation Committee

o I hereby accept the Award of Restricted Stock Units set forth above in accordance with and subject to the terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan and the attached Statement of Terms and Conditions for Restricted Stock Units, with which I am familiar. I agree that the Award of Restricted Stock Units, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and the attached Statement of Terms and Conditions for Restricted Stock Units together constitute an agreement between the Company and me in accordance with the terms thereof and hereof, and I further agree that any legal action related to this Award of Restricted Stock Units may be brought in any federal or state court located in Hamilton County, Ohio, USA, and I hereby accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this Award of Restricted Stock Units.

o I hereby reject the Award of Restricted Stock Units set forth above.

Date Signature P&G E-mail Address

Appendix 6 Form KMW

THE PROCTER & GAMBLE COMPANY

STATEMENT OF TERMS AND CONDITIONS FOR KEY MANAGER RESTRICTED STOCK UNITS

THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN

     The Restricted Stock Units awarded to you as set forth in the letter you received from the Company (your “Award Letter”), and your ownership thereof, are subject to the following terms and conditions.

1. Definitions.

     For purposes of this Statement of Terms and Conditions for Restricted Stock Units (“Terms and Conditions”), all capitalized terms not defined in these Terms and Conditions will have the meanings described in The Procter & Gamble 2001 Stock and Incentive Compensation Plan (the “Plan”), and the following terms will have the following meanings.

(a) “Data” has the meaning described in Section 9;

(b) “Forfeiture Date” is the date identified as such in your Award Letter;

(c) “Forfeiture Period” means the period from the Grant Date until the Forfeiture Date.

(d) “Grant Date” means the date a Restricted Stock Unit was awarded to you, as identified in your Award Letter;

(e) “Original Settlement Date” is the date identified as such in your Award Letter, as adjusted, if applicable, by Section 2;

(f) “Procter & Gamble” means the Company and/or its Subsidiaries;

(g) “Restricted Stock Unit” means an unfunded, unsecured promise by the Company, in accordance with these Terms and Conditions and the provisions of the Plan, to issue to you one share of Common Stock on the Original Settlement Date.

2. Transfer and Restrictions.

(a) Neither Restricted Stock Units nor your interest in them may be sold, exchanged, transferred, pledged, hypothecated, given or otherwise disposed of by you at any time, except by will or by the laws of descent and distribution. Any attempted transfer of a Restricted Stock Unit, whether voluntary or involuntary on your part, will result in the immediate forfeiture to the Company, and cancellation, of the Restricted Stock Unit.

(b) During the Forfeiture Period, your Restricted Stock Units will be forfeited and cancelled if you leave your employment with Procter & Gamble for any reason, except due to: (i) Retirement in accordance with the provisions of any appropriate Retirement plan of Procter & Gamble; or (ii) Special Separation. In the event of your Retirement or Special Separation, you will retain your Restricted Stock Units subject to the Plan and these terms and conditions.

Appendix 6 Form KMW

(c) Upon your death or the occurrence of a Change in Control at any time while you hold Restricted Stock Units, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your death or of the Change in Control, as applicable.

(d) From time to time, the Company and/or the Committee may establish procedures with which you must comply in order to accept an award of Restricted Stock Units, or to settle your Restricted Stock Units, including requiring you to do so by means of electronic signature, or charging you an administrative fee for doing so.

(e) Once your Restricted Stock Units have been settled by delivery to you of an equivalent number of shares of Common Stock, the Restricted Stock Units will have no further value, force or effect.

3. Confidentiality and Non-Competition

(a) In order to better protect the goodwill of Procter & Gamble and to prevent the disclosure of Procter & Gamble’s trade secrets and confidential information, and thereby help ensure the long-term success of Procter & Gamble’s business, in consideration of your being awarded Restricted Stock Units, you (without prior written consent of Procter & Gamble), will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, advisor, consultant or otherwise, for a period of three (3) years following the date your employment with Procter & Gamble is terminated in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of Procter & Gamble (including both existing products as well as products known to you, as a consequence of your employment with Procter & Gamble, to be in development):

(i) with respect to which your work has been directly concerned at any time during the two (2) years preceding the termination of your employment with Procter & Gamble; or

(ii) with respect to which, during the two (2) years preceding the termination of your employment with Procter & Gamble, you, as a consequence of your job performance and duties, acquired knowledge of trade secrets or other confidential information of Procter & Gamble.

For purposes of this Section 3(a), it will be conclusively presumed that you have knowledge of information you were directly exposed to through actual receipt or review of memoranda or documents containing such information, or through attendance at meetings at which such information was discussed or disclosed.

(b) The provisions of Section 3(a) are not in lieu of, but are in addition to your continuing obligation (which you acknowledge by accepting an award of Restricted Stock Units) to not use or disclose Procter & Gamble’s trade secrets or confidential information known to you until any particular trade secret or confidential information becomes generally known (through no fault of yours). As used in this Section 3(b), “generally known” means known throughout the domestic United States industry or, if you have job responsibilities partially or entirely outside of the United States, the appropriate domestic United States and/or appropriate foreign country or countries’ industry(ies). Information regarding products in development, in test marketing, or being marketed or promoted in a discrete geographic region, which information Procter & Gamble is considering for broader use, will not be deemed to be “generally known” until such broader use is actually commercially implemented. As used in this Section, “trade secrets or other confidential information” also includes personnel knowledge about a manager, or

Appendix 6 Form KMW

managers, of Procter & Gamble or its subsidiaries gained in the course of your employment with Procter & Gamble or its subsidiaries (including personnel ratings or rankings, manager or peer evaluations, performance records, special skills or abilities, compensation, work and development plans, training, nature of specific project and work assignments, or specialties developed as a result of such assignments) which directly or indirectly affords you a confidential basis to solicit, encourage, or participate in soliciting any manager, or managers, of Procter & Gamble or any subsidiary to terminate his or her relationship with Procter & Gamble or that subsidiary.

(c) By accepting an award of Restricted Stock Units, you agree that, if you were, without authority, to use or disclose Procter & Gamble’s trade secrets or confidential information or threaten to do so, Procter & Gamble would be entitled to injunctive and other appropriate relief to prevent you from doing so. You further agree that the harm caused to Procter & Gamble by the breach or anticipated breach of this Section 3(c) is, by its nature, irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. You agree that any interim or final equitable relief entered by a court of competent jurisdiction will, at the request of Procter & Gamble, be entered on consent and enforced by any court having jurisdiction over you, without prejudice to any rights you or Procter & Gamble may have to appeal from the proceedings which resulted in any grant of such relief.

(d) If any of the provisions contained in Sections 3(a) through (c) are for any reason, whether by application of existing law or law which may develop after your acceptance of an award of Restricted Stock Units, determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, then by accepting an award of Restricted Stock Units you agree to join Procter & Gamble in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then-applicable law. If any one or more of the provisions contained in Section 3(a) through (c) are determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the provisions will remain in full force and effect and will not be affected, impaired or invalidated in any way.

4. Voting and Other Shareholder Rights.

     A Restricted Stock Unit is not a share of Common Stock, and thus you are not entitled to any voting, dividend or other rights as a shareholder of the Company with respect to the Restricted Stock Units you hold.

5. Adjustments in Case of Stock Splits, Etc.

     In the event of a future reorganization, recapitalization, stock split, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off, or other change affecting the corporate structure, capitalization or Common Stock, the number of Restricted Stock Units you hold will be adjusted appropriately and equitably to prevent dilution or enlargement of your rights.

6. Tax Withholding.

     To the extent Procter & Gamble is required to withhold federal, state, local or foreign taxes in connection with your Restricted Stock Units, the Committee may require you to make such arrangements as Procter & Gamble may deem appropriate for the payment of such taxes required to be withheld, including without limitation, relinquishment of some of the shares of Common Stock that would otherwise be given to you. However, regardless of any action taken by Procter & Gamble with respect to any income tax, social insurance, payroll tax, or other tax,

Appendix 6 Form KMW

by accepting a Restricted Stock Unit, you acknowledge that the ultimate liability for any such tax owed by you is and remains your responsibility, and that Procter & Gamble makes no representations about the tax treatment of your Restricted Stock Units, and does not commit to structure any aspect of the Restricted Stock Units to reduce or eliminate your tax liability.

7. Suspension Periods and Termination.

     The Company reserves the right from time to time to temporarily suspend your right to settle your Restricted Stock Units for shares of Common Stock where such suspension is deemed by the Company as necessary or appropriate.

8. Procter & Gamble Right to Terminate Employment and Other Remedies.

(a) Nothing in these Terms and Conditions, or the fact that you have been awarded Restricted Stock Units, affects in any way the right or power of Procter & Gamble to terminate your employment at any time for any reason, with or without cause, or precludes Procter & Gamble from taking any action or enforcing any remedy available to it with respect to any action or conduct on your part. Without limiting the previous sentence, the Committee may, for example, suspend or terminate any outstanding Restricted Stock Units for actions taken by you if the Committee determines that you have acted significantly contrary to the best interests of Procter & Gamble or its subsidiaries. For purposes of this paragraph, an action taken “significantly contrary to the best interests of Procter & Gamble or its subsidiaries” includes without limitation any action taken or threatened by you that the Committee determines has, or is reasonably likely to have, a significant adverse impact on the reputation, goodwill, stability, operation, personnel retention and management, or business of Procter & Gamble or any subsidiary. This paragraph is in addition to any remedy Procter & Gamble or a subsidiary may have at law or in equity, including without limitation injunctive and other appropriate relief.

(b) By accepting a Restricted Stock Unit, you acknowledge that: (i) the Plan is established voluntarily by The Procter & Gamble Company, is discretionary in nature, and may be amended, suspended or terminated at any time; (ii) the award of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been awarded repeatedly in the past; (iii) all decisions with respect to future Restricted Stock Unit awards, if any, will be at the sole discretion of the Company; (iv) your participation in the Plan is voluntary; (v) Restricted Stock Units are an extraordinary item and not part of normal or expected compensation or salary for any purpose, including without limitation calculating any termination, severance, resignation, redundancy, or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vi) in the event that your employer is not the Company, the award of Restricted Stock Units will not be interpreted to form an employment relationship with the Company; and, furthermore, the award of Restricted Stock Units will not be interpreted to form an employment contract with any Procter & Gamble entity; (vii) the future value of Common Stock is unknown and cannot be predicted with certainty; and (viii) no claim or entitlement to compensation or damages arises from termination or forfeiture of Restricted Stock Units, or diminution in value of Restricted Stock Units or Common Stock received in settlement thereof, and you irrevocably release Procter & Gamble from any such claim that may arise.

9. Data Privacy.

Appendix 6 Form KMW

     By accepting a Restricted Stock Unit, you explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, any Procter & Gamble entity or third party for the purpose of implementing, administering and managing your participation in the Plan. You understand that Procter & Gamble holds certain personal information about you, including without limitation your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in a Procter & Gamble entity, details of all options, Restricted Stock Units, or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data to any broker or other third party with whom you may elect to deposit any shares of Common Stock in connection with the settlement of your Restricted Stock Units. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data, or refuse or withdraw the consents contained in this paragraph, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

10. Notices.

(a) Any notice to Procter & Gamble that is required or appropriate with respect to Restricted Stock Units held by you must be in writing and addressed to:

The Procter & Gamble Company
ATTN: Corporate Secretary’s Office
P.O. Box 599
Cincinnati, OH 45201

or such other address as Procter & Gamble may from time to time provide to you in writing.

(b) Any notice to you that is required or appropriate with respect to Restricted Stock Units held or to be awarded to you will be provided to you in written or electronic form at any physical or electronic mail address for you that is on file with Procter & Gamble.

11. Successors and Assigns.

     These Terms and Conditions are binding on, and inure to the benefit of, (a) the Company and its successors and assigns; and (b) you and, if applicable, the representative of your estate.

12. Governing Law.

Appendix 6 Form KMW

     The validity, interpretation, performance and enforcement of these Terms and Conditions, the Plan and your Restricted Stock Units will be governed by the laws of the State of Ohio, U.S.A. without giving effect to any other jurisdiction’s conflicts of law principles. With respect to any dispute concerning these Terms and Conditions, the Plan and your Restricted Stock Units, you consent to the exclusive jurisdiction of the federal or state courts located in Hamilton County, Ohio, U.S.A.

13. The Plan.

     All Restricted Stock Units awarded to you have been awarded under the Plan. Certain provisions of the Plan may have been repeated or emphasized in these Terms and Conditions; however, all terms of the Plan apply to you and your Restricted Stock Units whether or not they have been called out in these Terms and Conditions.

14. Effect of These Terms and Conditions.

     These Terms and Conditions and the terms of the Plan, which are incorporated herein by reference, describe the contractual rights awarded to you in the form of Restricted Stock Units, and the obligations imposed on you in connection with those rights. No right exists with respect to Restricted Stock Units except as described in these Terms and Conditions and the Plan.

Appendix 7 Form OPN

[INSERT DATE]

[INSERT NAME]

Subject: Award of Restricted Stock Units

This is to advise you that The Procter & Gamble Company, an Ohio corporation, is awarding you with Restricted Stock Units, on the dates and in the amounts listed below, pursuant to The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and subject to the attached Statement of Terms and Conditions Form OPN.

Grant Date:	[INSERT DATE OF GRANT]
Original Settlement Date:	[INSERT DATE RSUs BECOME SHARES]
Number of Restricted Stock Units:	[INSERT NUMBER GRANTED]

Paragraph 3(a) of Statement of Terms and Conditions Form OPN [is/is not] waived.

As you will see from the Statement of Terms and Conditions Form OPN, under certain circumstances you may agree with The Procter & Gamble Company to delay the settlement of your Restricted Stock Units beyond the Original Settlement Date. You may want to consult your personal tax advisor before making a decision about this matter.

THE PROCTER & GAMBLE COMPANY

James J. Johnson, Secretary

For the Compensation Committee

o I hereby accept the Award of Restricted Stock Units set forth above in accordance with and subject to the terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan and the attached Statement of Terms and Conditions for Restricted Stock Units, with which I am familiar. I agree that the Award of Restricted Stock Units, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and the attached Statement of Terms and Conditions for Restricted Stock Units together constitute an agreement between the Company and me in accordance with the terms thereof and hereof, and I further agree that any legal action related to this Award of Restricted Stock Units may be brought in any federal or state court located in Hamilton County, Ohio, USA, and I hereby accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this Award of Restricted Stock Units.

o I hereby reject the Award of Restricted Stock Units set forth above.

Date Signature P&G E-mail Address

Appendix 7 Form OPN

THE PROCTER & GAMBLE COMPANY

STATEMENT OF TERMS AND CONDITIONS FOR RESTRICTED STOCK UNITS

THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN

     The Restricted Stock Units awarded to you as set forth in the letter you received from the Company (your “Award Letter”), and your ownership thereof, are subject to the following terms and conditions.

1. Definitions.

     For purposes of this Statement of Terms and Conditions for Restricted Stock Units (“Terms and Conditions”), all capitalized terms not defined in these Terms and Conditions will have the meanings described in The Procter & Gamble 2001 Stock and Incentive Compensation Plan (the “Plan”), and the following terms will have the following meanings.

(a) “Agreed Settlement Date” has the meaning described in Section 2(b);

(b) “Data” has the meaning described in Section 10;

(c) “Disability” means termination of employment under the permanent disability provision of any retirement plan of Procter & Gamble;

(d) “Dividend Equivalents” has the meaning described in Section 4;

(e) “Grant Date” means the date a Restricted Stock Unit was awarded to you, as identified in your Award Letter;

(f) “Original Settlement Date” is the date identified as such in your Award Letter, as adjusted, if applicable, by Section 2;

(g) “Procter & Gamble” means the Company and/or its Subsidiaries;

(h) “Restricted Stock Unit” means an unfunded, unsecured promise by the Company, in accordance with these Terms and Conditions and the provisions of the Plan, to issue to you one share of Common Stock on the later of the Original Settlement Date or the Agreed Settlement Date.

(i) “Settlement Period” means the period from the Grant Date until the later of the Original Settlement Date or the Agreed Settlement Date.

2. Transfer and Restrictions.

(a) Neither Restricted Stock Units nor your interest in them may be sold, exchanged, transferred, pledged, hypothecated, given or otherwise disposed of by you at any time, except by will or by the laws of descent and distribution. Any attempted transfer of a Restricted Stock Unit, whether voluntary or involuntary on your part, will result in the immediate forfeiture to the Company, and cancellation, of the Restricted Stock Unit (including all rights to Dividend Equivalents).

(b) At any time at least one calendar year prior to the Original Settlement Date, you and the Company may agree to postpone the date on which you are entitled to receive

Appendix 7 Form OPN

one share of Common Stock for each Restricted Stock Unit you hold, according to the deferral terms in place at the time, and provided the new date (the “Agreed Settlement Date”) is at least five years from the Original Settlement Date. During the Settlement Period, if you leave your employment with Procter & Gamble for any reason other than: (i) Disability; (ii) Special Separation; or (iii) retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble, your Original Settlement Date or Agreed Settlement Date, as applicable, will automatically and immediately become, without any further action by you or the Company, the date of your termination of employment. In the event of your Disability or Special Separation during the Settlement Period, unless otherwise agreed to in writing by the Company, your Original Settlement Date or Agreed Settlement Date, as applicable, will automatically and immediately become, without any further action by you or the Company, the date of your Disability or Special Separation, as applicable. In the event of your retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble during the Settlement Period, you will retain your Restricted Stock Units subject to the Plan and these Terms and Conditions.

(c) Upon your death or the occurrence of a Change in Control at any time while you hold Restricted Stock Units and/or Dividend Equivalents, your Original Settlement Date or Agreed Settlement Date, as applicable, will automatically and immediately become, without any further action by you or the Company, the date of your death or of the Change in Control, as applicable.

(d) From time to time, the Company and/or the Committee may establish procedures with which you must comply in order to accept an award of Restricted Stock Units, to agree to an Agreed Settlement Date, or to settle your Restricted Stock Units, including requiring you to do so by means of electronic signature, or charging you an administrative fee for doing so.

(e) Once your Restricted Stock Units have been settled by delivery to you of an equivalent number of shares of Common Stock, the Restricted Stock Units will have no further value, force or effect and you will cease to receive Dividend Equivalents associated with the Restricted Stock Units.

3. Confidentiality and Non-Competition

(a) In order to better protect the goodwill of Procter & Gamble and to prevent the disclosure of Procter & Gamble’s trade secrets and confidential information, and thereby help ensure the long-term success of Procter & Gamble’s business, in consideration of your being awarded Restricted Stock Units, you (without prior written consent of Procter & Gamble), will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, advisor, consultant or otherwise, for a period of three (3) years following the date your employment with Procter & Gamble is terminated in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of Procter & Gamble (including both existing products as well as products known to you, as a consequence of your employment with Procter & Gamble, to be in development):

(i) with respect to which your work has been directly concerned at any time during the two (2) years preceding the termination of your employment with Procter & Gamble; or

(ii) with respect to which, during the two (2) years preceding the termination of your employment with Procter & Gamble, you, as a consequence of your job

Appendix 7 Form OPN

performance and duties, acquired knowledge of trade secrets or other confidential information of Procter & Gamble.

For purposes of this Section 3(a), it will be conclusively presumed that you have knowledge of information you were directly exposed to through actual receipt or review of memoranda or documents containing such information, or through attendance at meetings at which such information was discussed or disclosed.

(b) The provisions of Section 3(a) are not in lieu of, but are in addition to your continuing obligation (which you acknowledge by accepting an award of Restricted Stock Units) to not use or disclose Procter & Gamble’s trade secrets or confidential information known to you until any particular trade secret or confidential information becomes generally known (through no fault of yours). As used in this Section 3(b), “generally known” means known throughout the domestic United States industry or, if you have job responsibilities partially or entirely outside of the United States, the appropriate domestic United States and/or appropriate foreign country or countries’ industry(ies). Information regarding products in development, in test marketing, or being marketed or promoted in a discrete geographic region, which information Procter & Gamble is considering for broader use, will not be deemed to be “generally known” until such broader use is actually commercially implemented. As used in this Section, “trade secrets or other confidential information” also includes personnel knowledge about a manager, or managers, of Procter & Gamble or its subsidiaries gained in the course of your employment with Procter & Gamble or its subsidiaries (including personnel ratings or rankings, manager or peer evaluations, performance records, special skills or abilities, compensation, work and development plans, training, nature of specific project and work assignments, or specialties developed as a result of such assignments) which directly or indirectly affords you a confidential basis to solicit, encourage, or participate in soliciting any manager, or managers, of Procter & Gamble or any subsidiary to terminate his or her relationship with Procter & Gamble or that subsidiary.

(c) By accepting an award of Restricted Stock Units, you agree that, if you were, without authority, to use or disclose Procter & Gamble’s trade secrets or confidential information or threaten to do so, Procter & Gamble would be entitled to injunctive and other appropriate relief to prevent you from doing so. You further agree that the harm caused to Procter & Gamble by the breach or anticipated breach of this Section 3(c) is, by its nature, irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. You agree that any interim or final equitable relief entered by a court of competent jurisdiction will, at the request of Procter & Gamble, be entered on consent and enforced by any court having jurisdiction over you, without prejudice to any rights you or Procter & Gamble may have to appeal from the proceedings which resulted in any grant of such relief.

(d) If any of the provisions contained in Sections 3(a) through (c) are for any reason, whether by application of existing law or law which may develop after your acceptance of an award of Restricted Stock Units, determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, then by accepting an award of Restricted Stock Units you agree to join Procter & Gamble in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then-applicable law. If any one or more of the provisions contained in Section 3(a) through (c) are determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the provisions will remain in full force and effect and will not be affected, impaired or invalidated in any way.

Appendix 7 Form OPN

4. Dividend Equivalents.

     As a holder of Restricted Stock Units, during the Settlement period, each time a cash dividend or other cash distribution is paid with respect to Common Stock, you will receive additional Restricted Stock Units (“Dividend Equivalents”). The number of such additional Restricted Stock Units will be determined as follows: multiply the number of Restricted Stock Units currently held by the per share amount of the cash dividend or other cash distribution on the Common Stock, and then divide the result by the price of the Common Stock on the date of the dividend or distribution. These Dividend Equivalent Restricted Stock Units will be subject to the same terms and conditions as the original Restricted Stock Units that gave rise to them, including forfeiture and settlement terms, except that if there is a fractional number of Dividend Equivalent Restricted Stock Units on the date they are to be settled, you will receive one share of Common Stock for the fractional Dividend Equivalent Restricted Stock Units.

5. Voting and Other Shareholder Rights.

     A Restricted Stock Unit is not a share of Common Stock, and thus you are not entitled to any voting, dividend or other rights as a shareholder of the Company with respect to the Restricted Stock Units you hold.

6. Adjustments in Case of Stock Dividends, Stock Splits, Etc.

     In the event of a future reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off, or other change affecting the corporate structure, capitalization or Common Stock, the number of Restricted Stock Units you hold will be adjusted appropriately and equitably to prevent dilution or enlargement of your rights.

7. Tax Withholding.

     To the extent Procter & Gamble is required to withhold federal, state, local or foreign taxes in connection with your Restricted Stock Units or Dividend Equivalents, the Committee may require you to make such arrangements as Procter & Gamble may deem appropriate for the payment of such taxes required to be withheld, including without limitation, relinquishment of some of the shares of Common Stock that would otherwise be given to you. However, regardless of any action taken by Procter & Gamble with respect to any income tax, social insurance, payroll tax, or other tax, by accepting a Restricted Stock Unit or Dividend Equivalent, you acknowledge that the ultimate liability for any such tax owed by you is and remains your responsibility, and that Procter & Gamble makes no representations about the tax treatment of your Restricted Stock Units or Dividend Equivalents, and does not commit to structure any aspect of the Restricted Stock Units or Dividend Equivalents to reduce or eliminate your tax liability.

8. Suspension Periods and Termination.

     The Company reserves the right from time to time to temporarily suspend your right to settle your Restricted Stock Units for shares of Common Stock where such suspension is deemed by the Company as necessary or appropriate.

9. Procter & Gamble Right to Terminate Employment and Other Remedies.

(a) Nothing in these Terms and Conditions, or the fact that you have been awarded Restricted Stock Units, affects in any way the right or power of Procter & Gamble to terminate your employment at any time for any reason, with or without cause, or

Appendix 7 Form OPN

precludes Procter & Gamble from taking any action or enforcing any remedy available to it with respect to any action or conduct on your part. Without limiting the previous sentence, the Committee may, for example, suspend or terminate any outstanding Restricted Stock Units for actions taken by you if the Committee determines that you have acted significantly contrary to the best interests of Procter & Gamble or its subsidiaries. For purposes of this paragraph, an action taken “significantly contrary to the best interests of Procter & Gamble or its subsidiaries” includes without limitation any action taken or threatened by you that the Committee determines has, or is reasonably likely to have, a significant adverse impact on the reputation, goodwill, stability, operation, personnel retention and management, or business of Procter & Gamble or any subsidiary. This paragraph is in addition to any remedy Procter & Gamble or a subsidiary may have at law or in equity, including without limitation injunctive and other appropriate relief.

(b) By accepting a Restricted Stock Unit, you acknowledge that: (i) the Plan is established voluntarily by the Company, is discretionary in nature, and may be amended, suspended or terminated at any time; (ii) the award of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been awarded repeatedly in the past; (iii) all decisions with respect to future Restricted Stock Unit awards, if any, will be at the sole discretion of the Company; (iv) your participation in the Plan is voluntary; (v) Restricted Stock Units are an extraordinary item and not part of normal or expected compensation or salary for any purpose, including without limitation calculating any termination, severance, resignation, redundancy, or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vi) in the event that your employer is not the Company, the award of Restricted Stock Units will not be interpreted to form an employment relationship with the Company; and, furthermore, the award of Restricted Stock Units will not be interpreted to form an employment contract with any Procter & Gamble entity; (vii) the future value of Common Stock is unknown and cannot be predicted with certainty; and (viii) no claim or entitlement to compensation or damages arises from termination or forfeiture of Restricted Stock Units, or diminution in value of Restricted Stock Units or Common Stock received in settlement thereof, and you irrevocably release Procter & Gamble from any such claim that may arise.

10. Data Privacy.

     By accepting a Restricted Stock Unit, you explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, any Procter & Gamble entity or third party for the purpose of implementing, administering and managing your participation in the Plan. You understand that Procter & Gamble holds certain personal information about you, including without limitation your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in a Procter & Gamble entity, details of all options, Restricted Stock Units, or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and

Appendix 7 Form OPN

transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data to any broker or other third party with whom you may elect to deposit any shares of Common Stock in connection with the settlement of your Restricted Stock Units. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data, or refuse or withdraw the consents contained in this paragraph, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

11. Notices.

(a) Any notice to Procter & Gamble that is required or appropriate with respect to Restricted Stock Units held by you must be in writing and addressed to:

The Procter & Gamble Company
ATTN: Corporate Secretary’s Office
P.O. Box 599
Cincinnati, OH 45201

or such other address as Procter & Gamble may from time to time provide to you in writing.

(b) Any notice to you that is required or appropriate with respect to Restricted Stock Units held or to be awarded to you will be provided to you in written or electronic form at any physical or electronic mail address for you that is on file with Procter & Gamble.

12. Successors and Assigns.

     These Terms and Conditions are binding on, and inure to the benefit of, (a) the Company and its successors and assigns; and (b) you and, if applicable, the representative of your estate.

13. Governing Law.

     The validity, interpretation, performance and enforcements of these Terms and Conditions, the Plan and your Restricted Stock Units will be governed by the laws of the State of Ohio, U.S.A. without giving effect to any other jurisdiction’s conflicts of law principles. With respect to any dispute concerning these Terms and Conditions, the Plan and your Restricted Stock Units, you consent to the exclusive jurisdiction of the federal or state courts located in Hamilton County, Ohio, U.S.A.

14. The Plan.

     All Restricted Stock Units awarded to you have been awarded under the Plan. Certain provisions of the Plan may have been repeated or emphasized in these Terms and Conditions; however, all terms of the Plan apply to you and your Restricted Stock Units whether or not they have been called out in these Terms and Conditions.

15. Effect of These Terms and Conditions.

Appendix 7 Form OPN

     These Terms and Conditions and the terms of the Plan, which are incorporated herein by reference, describe the contractual rights awarded to you in the form of Restricted Stock Units, and the obligations imposed on you in connection with those rights. No right exists with respect to Restricted Stock Units except as described in these Terms and Conditions and the Plan.

Appendix 8 Form RTD

[INSERT DATE]

[INSERT NAME]

Subject: Award of Restricted Stock Units

This is to advise you that The Procter & Gamble Company, an Ohio corporation, is awarding you with Restricted Stock Units, on the dates and in the amounts listed below, pursuant to The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and subject to the attached Statement of Terms and Conditions Form RTD.

Grant Date:	[INSERT DATE OF GRANT]
Forfeiture Date:	[INSERT DATE FORFEITURE ENDS]
Original Settlement Date:	[INSERT DATE RSUs BECOME SHARES]
Number of Restricted Stock Units:	[INSERT NUMBER GRANTED]

Paragraph 3(a) of Statement of Terms and Conditions Form RTD [is/is not] waived.

As you will see from the Statement of Terms and Conditions Form RTD, under certain circumstances you may agree with The Procter & Gamble Company to delay the settlement of your Restricted Stock Units beyond the Original Settlement Date. You may want to consult your personal tax advisor before making a decision about this matter.

THE PROCTER & GAMBLE COMPANY

James J. Johnson, Secretary

For the Compensation Committee

o I hereby accept the Award of Restricted Stock Units set forth above in accordance with and subject to the terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan and the attached Statement of Terms and Conditions for Restricted Stock Units, with which I am familiar. I agree that the Award of Restricted Stock Units, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and the attached Statement of Terms and Conditions for Restricted Stock Units together constitute an agreement between the Company and me in accordance with the terms thereof and hereof, and I further agree that any legal action related to this Award of Restricted Stock Units may be brought in any federal or state court located in Hamilton County, Ohio, USA, and I hereby accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this Award of Restricted Stock Units.

o I hereby reject the Award of Restricted Stock Units set forth above.

Date Signature P&G E-mail Address

Appendix 8 Form RTD

THE PROCTER & GAMBLE COMPANY

STATEMENT OF TERMS AND CONDITIONS FOR RESTRICTED STOCK UNITS

THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN

     The Restricted Stock Units awarded to you as set forth in the letter you received from the Company (your “Award Letter”), and your ownership thereof, are subject to the following terms and conditions.

1. Definitions.

     For purposes of this Statement of Terms and Conditions for Restricted Stock Units (“Terms and Conditions”), all capitalized terms not defined in these Terms and Conditions will have the meanings described in The Procter & Gamble 2001 Stock and Incentive Compensation Plan (the “Plan”), and the following terms will have the following meanings.

(a) “Agreed Settlement Date” has the meaning described in Section 2(c);

(b) “Data” has the meaning described in Section 10;

(c) “Disability” means termination of employment under the permanent disability provision of any retirement plan of Procter & Gamble;

(d) “Dividend Equivalents” has the meaning described in Section 4;

(e) “Forfeiture Date” is the date identified as such in your Award Letter;

(f) “Forfeiture Period” means the period from the Grant Date until the Forfeiture Date.

(g) “Grant Date” means the date a Restricted Stock Unit was awarded to you, as identified in your Award Letter;

(h) “Original Settlement Date” is the date identified as such in your Award Letter, as adjusted, if applicable, by Section 2;

(i) “Post-Forfeiture Period” means the period from the Forfeiture Date until the later of the Original Settlement Date or the Agreed Settlement Date;

(j) “Procter & Gamble” means the Company and/or its Subsidiaries;

(k) “Restricted Stock Unit” means an unfunded, unsecured promise by the Company, in accordance with these Terms and Conditions and the provisions of the Plan, to issue to you one share of Common Stock on the later of the Original Settlement Date or the Agreed Settlement Date.

2. Transfer and Restrictions.

(a) Neither Restricted Stock Units nor your interest in them may be sold, exchanged, transferred, pledged, hypothecated, given or otherwise disposed of by you at any time, except by will or by the laws of descent and distribution. Any attempted transfer of a Restricted Stock Unit, whether voluntary or involuntary on your part, will result in the

Appendix 8 Form RTD

immediate forfeiture to the Company, and cancellation, of the Restricted Stock Unit (including all rights to Dividend Equivalents).

(b) During the Forfeiture Period, your Restricted Stock Units (including all rights to receive Dividend Equivalents) will be forfeited and cancelled if you leave your employment with Procter & Gamble for any reason, except due to: (i) your Disability; (ii) your retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble; or (iii) in certain circumstances, your Special Separation. In the event of your Disability during the Forfeiture Period, unless otherwise agreed to in writing by the Company, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your Disability. In the event of your retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble during the Forfeiture Period, you will retain your Restricted Stock Units subject to the Plan and these Terms and Conditions. In the event of your Special Separation during the Forfeiture Period, your Restricted Stock Units will be forfeited and cancelled unless otherwise agreed to in writing by the Company.

(c) At any time at least one calendar year prior to the Original Settlement Date, you and the Company may agree to postpone the date on which you are entitled to receive one share of Common Stock for each Restricted Stock Unit you hold, according to the deferral terms in place at the time, and provided the new date (the “Agreed Settlement Date”) is at least five years from the Original Settlement Date. During the Post-Forfeiture Period, if you leave your employment with Procter & Gamble for any reason other than: (i) Disability; (ii) Special Separation; or (iii) retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble, your Original Settlement Date or Agreed Settlement Date, as applicable, will automatically and immediately become, without any further action by you or the Company, the date of your termination of employment. In the event of your Disability or Special Separation during the Post-Forfeiture period, unless otherwise agreed to in writing by the Company, your Original Settlement Date or Agreed Settlement Date, as applicable, will automatically and immediately become, without any further action by you or the Company, the date of your Disability or Special Separation, as applicable. In the event of your retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble during the Post-Forfeiture Period, you will retain your Restricted Stock Units subject to the Plan and these Terms and Conditions.

(d) Upon your death or the occurrence of a Change in Control at any time while you hold Restricted Stock Units and/or Dividend Equivalents, your Original Settlement Date or Agreed Settlement Date, as applicable, will automatically and immediately become, without any further action by you or the Company, the date of your death or of the Change in Control, as applicable.

(e) From time to time, the Company and/or the Committee may establish procedures with which you must comply in order to accept an award of Restricted Stock Units, to agree to an Agreed Settlement Date, or to settle your Restricted Stock Units, including requiring you to do so by means of electronic signature, or charging you an administrative fee for doing so.

(f) Once your Restricted Stock Units have been settled by delivery to you of an equivalent number of shares of Common Stock, the Restricted Stock Units will have no further value, force or effect and you will cease to receive Dividend Equivalents associated with the Restricted Stock Units.

Appendix 8 Form RTD

3. Confidentiality and Non-Competition

(a) In order to better protect the goodwill of Procter & Gamble and to prevent the disclosure of Procter & Gamble’s trade secrets and confidential information, and thereby help ensure the long-term success of Procter & Gamble’s business, in consideration of your being awarded Restricted Stock Units, you (without prior written consent of Procter & Gamble), will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, advisor, consultant or otherwise, for a period of three (3) years following the date your employment with Procter & Gamble is terminated in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of Procter & Gamble (including both existing products as well as products known to you, as a consequence of your employment with Procter & Gamble, to be in development):

(i) with respect to which your work has been directly concerned at any time during the two (2) years preceding the termination of your employment with Procter & Gamble; or

(ii) with respect to which, during the two (2) years preceding the termination of your employment with Procter & Gamble, you, as a consequence of your job performance and duties, acquired knowledge of trade secrets or other confidential information of Procter & Gamble.

For purposes of this Section 3(a), it will be conclusively presumed that you have knowledge of information you were directly exposed to through actual receipt or review of memoranda or documents containing such information, or through attendance at meetings at which such information was discussed or disclosed.

(b) The provisions of Section 3(a) are not in lieu of, but are in addition to your continuing obligation (which you acknowledge by accepting an award of Restricted Stock Units) to not use or disclose Procter & Gamble’s trade secrets or confidential information known to you until any particular trade secret or confidential information becomes generally known (through no fault of yours). As used in this Section 3(b), “generally known” means known throughout the domestic United States industry or, if you have job responsibilities partially or entirely outside of the United States, the appropriate domestic United States and/or appropriate foreign country or countries’ industry(ies). Information regarding products in development, in test marketing, or being marketed or promoted in a discrete geographic region, which information Procter & Gamble is considering for broader use, will not be deemed to be “generally known” until such broader use is actually commercially implemented. As used in this Section, “trade secrets or other confidential information” also includes personnel knowledge about a manager, or managers, of Procter & Gamble or its subsidiaries gained in the course of your employment with Procter & Gamble or its subsidiaries (including personnel ratings or rankings, manager or peer evaluations, performance records, special skills or abilities, compensation, work and development plans, training, nature of specific project and work assignments, or specialties developed as a result of such assignments) which directly or indirectly affords you a confidential basis to solicit, encourage, or participate in soliciting any manager, or managers, of Procter & Gamble or any subsidiary to terminate his or her relationship with Procter & Gamble or that subsidiary.

(c) By accepting an award of Restricted Stock Units, you agree that, if you were, without authority, to use or disclose Procter & Gamble’s trade secrets or confidential information or threaten to do so, Procter & Gamble would be entitled to injunctive and other appropriate relief to prevent you from doing so. You further agree that the harm caused to Procter & Gamble by the breach or anticipated breach of this Section 3(c) is,

Appendix 8 Form RTD

by its nature, irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. You agree that any interim or final equitable relief entered by a court of competent jurisdiction will, at the request of Procter & Gamble, be entered on consent and enforced by any court having jurisdiction over you, without prejudice to any rights you or Procter & Gamble may have to appeal from the proceedings which resulted in any grant of such relief.

(d) If any of the provisions contained in Sections 3(a) through (c) are for any reason, whether by application of existing law or law which may develop after your acceptance of an award of Restricted Stock Units, determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, then by accepting an award of Restricted Stock Units you agree to join Procter & Gamble in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then-applicable law. If any one or more of the provisions contained in Section 3(a) through (c) are determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the provisions will remain in full force and effect and will not be affected, impaired or invalidated in any way.

4. Dividend Equivalents.

     As a holder of Restricted Stock Units, during the period from the Grant Date until the Original Settlement Date or the Agreed Settlement Date, whichever is later, each time a cash dividend or other cash distribution is paid with respect to Common Stock, you will receive additional Restricted Stock Units (“Dividend Equivalents”). The number of such additional Restricted Stock Units will be determined as follows: multiply the number of Restricted Stock Units currently held by the per share amount of the cash dividend or other cash distribution on the Common Stock, and then divide the result by the price of the Common Stock on the date of the dividend or distribution. These Dividend Equivalent Restricted Stock Units will be subject to the same terms and conditions as the original Restricted Stock Units that gave rise to them, including forfeiture and settlement terms, except that if there is a fractional number of Dividend Equivalent Restricted Stock Units on the date they are to be settled, you will receive one share of Common Stock for the fractional Dividend Equivalent Restricted Stock Units.

5. Voting and Other Shareholder Rights.

     A Restricted Stock Unit is not a share of Common Stock, and thus you are not entitled to any voting, dividend or other rights as a shareholder of the Company with respect to the Restricted Stock Units you hold.

6. Adjustments in Case of Stock Dividends, Stock Splits, Etc.

     In the event of a future reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off, or other change affecting the corporate structure, capitalization or Common Stock, the number of Restricted Stock Units you hold will be adjusted appropriately and equitably to prevent dilution or enlargement of your rights.

7. Tax Withholding.

     To the extent Procter & Gamble is required to withhold federal, state, local or foreign taxes in connection with your Restricted Stock Units or Dividend Equivalents, the Committee may require you to make such arrangements as Procter & Gamble may deem appropriate for the payment of such taxes required to be withheld, including without limitation, relinquishment of some of the shares of Common Stock that would otherwise be given to you. However,

Appendix 8 Form RTD

regardless of any action taken by Procter & Gamble with respect to any income tax, social insurance, payroll tax, or other tax, by accepting a Restricted Stock Unit or Dividend Equivalent, you acknowledge that the ultimate liability for any such tax owed by you is and remains your responsibility, and that Procter & Gamble makes no representations about the tax treatment of your Restricted Stock Units or Dividend Equivalents, and does not commit to structure any aspect of the Restricted Stock Units or Dividend Equivalents to reduce or eliminate your tax liability.

8. Suspension Periods and Termination.

     The Company reserves the right from time to time to temporarily suspend your right to settle your Restricted Stock Units for shares of Common Stock where such suspension is deemed by the Company as necessary or appropriate.

9. Procter & Gamble Right to Terminate Employment and Other Remedies.

(a) Nothing in these Terms and Conditions, or the fact that you have been awarded Restricted Stock Units, affects in any way the right or power of Procter & Gamble to terminate your employment at any time for any reason, with or without cause, or precludes Procter & Gamble from taking any action or enforcing any remedy available to it with respect to any action or conduct on your part. Without limiting the previous sentence, the Committee may, for example, suspend or terminate any outstanding Restricted Stock Units for actions taken by you if the Committee determines that you have acted significantly contrary to the best interests of Procter & Gamble or its subsidiaries. For purposes of this paragraph, an action taken “significantly contrary to the best interests of Procter & Gamble or its subsidiaries” includes without limitation any action taken or threatened by you that the Committee determines has, or is reasonably likely to have, a significant adverse impact on the reputation, goodwill, stability, operation, personnel retention and management, or business of Procter & Gamble or any subsidiary. This paragraph is in addition to any remedy Procter & Gamble or a subsidiary may have at law or in equity, including without limitation injunctive and other appropriate relief.

(b) By accepting a Restricted Stock Unit, you acknowledge that: (i) the Plan is established voluntarily by The Procter & Gamble Company, is discretionary in nature, and may be amended, suspended or terminated at any time; (ii) the award of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been awarded repeatedly in the past; (iii) all decisions with respect to future Restricted Stock Unit awards, if any, will be at the sole discretion of the Company; (iv) your participation in the Plan is voluntary; (v) Restricted Stock Units are an extraordinary item and not part of normal or expected compensation or salary for any purpose, including without limitation calculating any termination, severance, resignation, redundancy, or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vi) in the event that your employer is not the Company, the award of Restricted Stock Units will not be interpreted to form an employment relationship with the Company; and, furthermore, the award of Restricted Stock Units will not be interpreted to form an employment contract with any Procter & Gamble entity; (vii) the future value of Common Stock is unknown and cannot be predicted with certainty; and (viii) no claim or entitlement to compensation or damages arises from termination or forfeiture of Restricted Stock Units, or diminution in value of Restricted Stock Units or Common Stock received in settlement thereof, and you irrevocably release Procter & Gamble from any such claim that may arise.

Appendix 8 Form RTD

10. Data Privacy.

     By accepting a Restricted Stock Unit, you explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, any Procter & Gamble entity or third party for the purpose of implementing, administering and managing your participation in the Plan. You understand that Procter & Gamble holds certain personal information about you, including without limitation your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in a Procter & Gamble entity, details of all options, Restricted Stock Units, or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data to any broker or other third party with whom you may elect to deposit any shares of Common Stock in connection with the settlement of your Restricted Stock Units. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data, or refuse or withdraw the consents contained in this paragraph, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

11. Notices.

(a) Any notice to Procter & Gamble that is required or appropriate with respect to Restricted Stock Units held by you must be in writing and addressed to:

The Procter & Gamble Company
ATTN: Corporate Secretary’s Office
P.O. Box 599
Cincinnati, OH 45201

or such other address as Procter & Gamble may from time to time provide to you in writing.

(b) Any notice to you that is required or appropriate with respect to Restricted Stock Units held or to be awarded to you will be provided to you in written or electronic form at any physical or electronic mail address for you that is on file with Procter & Gamble.

12. Successors and Assigns.

     These Terms and Conditions are binding on, and inure to the benefit of, (a) The Procter & Gamble Company and its successors and assigns; and (b) you and, if applicable, the representative of your estate.

Appendix 8 Form RTD

13. Governing Law.

     The validity, interpretation, performance and enforcement of these Terms and Conditions, the Plan and your Restricted Stock Units will be governed by the laws of the State of Ohio, U.S.A. without giving effect to any other jurisdiction’s conflicts of law principles. With respect to any dispute concerning these Terms and Conditions, the Plan and your Restricted Stock Units, you consent to the exclusive jurisdiction of the federal or state courts located in Hamilton County, Ohio, U.S.A.

14. The Plan.

     All Restricted Stock Units awarded to you have been awarded under the Plan. Certain provisions of the Plan may have been repeated or emphasized in these Terms and Conditions; however, all terms of the Plan apply to you and your Restricted Stock Units whether or not they have been called out in these Terms and Conditions.

15. Effect of These Terms and Conditions.

     These Terms and Conditions and the terms of the Plan, which are incorporated herein by reference, describe the contractual rights awarded to you in the form of Restricted Stock Units, and the obligations imposed on you in connection with those rights. No right exists with respect to Restricted Stock Units except as described in these Terms and Conditions and the Plan.

Appendix 9 Form RTD-A

[INSERT DATE]

[INSERT NAME]

Subject: Award of Restricted Stock Units

This is to advise you that The Procter & Gamble Company, an Ohio corporation, is awarding you with Restricted Stock Units, on the dates and in the amounts listed below, pursuant to The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and subject to the attached Statement of Terms and Conditions Form RTD-A.

Grant Date:	[INSERT DATE OF GRANT]
Forfeiture Date:	[INSERT DATE FORFEITURE ENDS]
Original Settlement Date:	[INSERT DATE RSUs BECOME SHARES]
Number of Restricted Stock Units:	[INSERT NUMBER GRANTED]

Paragraph 3(a) of Statement of Terms and Conditions Form RTD-A [is/is not] waived.

As you will see from the Statement of Terms and Conditions Form RTD-A, under certain circumstances you may agree with The Procter & Gamble Company to delay the settlement of your Restricted Stock Units beyond the Original Settlement Date. You may want to consult your personal tax advisor before making a decision about this matter.

THE PROCTER & GAMBLE COMPANY

James J. Johnson, Secretary

For the Compensation Committee

o I hereby accept the Award of Restricted Stock Units set forth above in accordance with and subject to the terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan and the attached Statement of Terms and Conditions for Restricted Stock Units, with which I am familiar. I agree that the Award of Restricted Stock Units, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and the attached Statement of Terms and Conditions for Restricted Stock Units together constitute an agreement between the Company and me in accordance with the terms thereof and hereof, and I further agree that any legal action related to this Award of Restricted Stock Units may be brought in any federal or state court located in Hamilton County, Ohio, USA, and I hereby accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this Award of Restricted Stock Units.

o I hereby reject the Award of Restricted Stock Units set forth above.

Date Signature P&G E-mail Address

Appendix 9 Form RTD-A

THE PROCTER & GAMBLE COMPANY

STATEMENT OF TERMS AND CONDITIONS FOR RESTRICTED STOCK UNITS

THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN

     The Restricted Stock Units awarded to you as set forth in the letter you received from the Company (your “Award Letter”), and your ownership thereof, are subject to the following terms and conditions.

1. Definitions.

     For purposes of this Statement of Terms and Conditions for Restricted Stock Units (“Terms and Conditions”), all capitalized terms not defined in these Terms and Conditions will have the meanings described in The Procter & Gamble 2001 Stock and Incentive Compensation Plan (the “Plan”), and the following terms will have the following meanings.

(a) “Agreed Settlement Date” has the meaning described in Section 2(c);

(b) “Data” has the meaning described in Section 10;

(c) “Disability” means termination of employment under the permanent disability provision of any retirement plan of Procter & Gamble;

(d) “Dividend Equivalents” has the meaning described in Section 4;

(e) “Forfeiture Date” is the date identified as such in your Award Letter;

(f) “Forfeiture Period” means the period from the Grant Date until the Forfeiture Date.

(g) “Grant Date” means the date a Restricted Stock Unit was awarded to you, as identified in your Award Letter;

(h) “Original Settlement Date” is the date identified as such in your Award Letter, as adjusted, if applicable, by Section 2;

(i) “Post-Forfeiture Period” means the period from the Forfeiture Date until the later of the Original Settlement Date or the Agreed Settlement Date;

(j) “Procter & Gamble” means the Company and/or its Subsidiaries;

(k) “Restricted Stock Unit” means an unfunded, unsecured promise by the Company, in accordance with these Terms and Conditions and the provisions of the Plan, to issue to you one share of Common Stock on the later of the Original Settlement Date or the Agreed Settlement Date.

2. Transfer and Restrictions.

(a) Neither Restricted Stock Units nor your interest in them may be sold, exchanged, transferred, pledged, hypothecated, given or otherwise disposed of by you at any time, except by will or by the laws of descent and distribution. Any attempted transfer of a Restricted Stock Unit, whether voluntary or involuntary on your part, will result in the

Appendix 9 Form RTD-A

immediate forfeiture to the Company, and cancellation, of the Restricted Stock Unit (including all rights to Dividend Equivalents).

(b) During the Forfeiture Period, your Restricted Stock Units (including all rights to receive Dividend Equivalents) will be forfeited and cancelled if you leave your employment with Procter & Gamble for any reason, except due to: (i) your Disability, or (ii) in certain circumstances, your Special Separation. In the event of your Disability during the Forfeiture Period, unless otherwise agreed to in writing by the Company, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your Disability. In the event of your Special Separation during the Forfeiture Period, your Restricted Stock Units will be forfeited and cancelled unless otherwise agreed to in writing by the Company.

(c) At any time at least one calendar year prior to the Original Settlement Date, you and the Company may agree to postpone the date on which you are entitled to receive one share of Common Stock for each Restricted Stock Unit you hold, according to the deferral terms in place at the time, and provided the new date (the “Agreed Settlement Date”) is at least five years from the Original Settlement Date. During the Post-Forfeiture Period, if you leave your employment with Procter & Gamble for any reason other than: (i) Disability; (ii) Special Separation; or (iii) retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble, your Original Settlement Date or Agreed Settlement Date, as applicable, will automatically and immediately become, without any further action by you or the Company, the date of your termination of employment. In the event of your Disability or Special Separation during the Post-Forfeiture period, unless otherwise agreed to in writing by the Company, your Original Settlement Date or Agreed Settlement Date, as applicable, will automatically and immediately become, without any further action by you or the Company, the date of your Disability or Special Separation, as applicable. In the event of your retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble during the Post-Forfeiture Period, you will retain your Restricted Stock Units subject to the Plan and these Terms and Conditions.

(d) Upon your death or the occurrence of a Change in Control at any time while you hold Restricted Stock Units and/or Dividend Equivalents, your Original Settlement Date or Agreed Settlement Date, as applicable, will automatically and immediately become, without any further action by you or the Company, the date of your death or of the Change in Control, as applicable.

(e) From time to time, the Company and/or the Committee may establish procedures with which you must comply in order to accept an award of Restricted Stock Units, to agree to an Agreed Settlement Date, or to settle your Restricted Stock Units, including requiring you to do so by means of electronic signature, or charging you an administrative fee for doing so.

(f) Once your Restricted Stock Units have been settled by delivery to you of an equivalent number of shares of Common Stock, the Restricted Stock Units will have no further value, force or effect and you will cease to receive Dividend Equivalents associated with the Restricted Stock Units.

Appendix 9 Form RTD-A

3. Confidentiality and Non-Competition

(a) In order to better protect the goodwill of Procter & Gamble and to prevent the disclosure of Procter & Gamble’s trade secrets and confidential information, and thereby help ensure the long-term success of Procter & Gamble’s business, in consideration of your being awarded Restricted Stock Units, you (without prior written consent of Procter & Gamble), will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, advisor, consultant or otherwise, for a period of three (3) years following the date your employment with Procter & Gamble is terminated in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of Procter & Gamble (including both existing products as well as products known to you, as a consequence of your employment with Procter & Gamble, to be in development):

(i) with respect to which your work has been directly concerned at any time during the two (2) years preceding the termination of your employment with Procter & Gamble; or

(ii) with respect to which, during the two (2) years preceding the termination of your employment with Procter & Gamble, you, as a consequence of your job performance and duties, acquired knowledge of trade secrets or other confidential information of Procter & Gamble.

For purposes of this Section 3(a), it will be conclusively presumed that you have knowledge of information you were directly exposed to through actual receipt or review of memoranda or documents containing such information, or through attendance at meetings at which such information was discussed or disclosed.

(b) The provisions of Section 3(a) are not in lieu of, but are in addition to your continuing obligation (which you acknowledge by accepting an award of Restricted Stock Units) to not use or disclose Procter & Gamble’s trade secrets or confidential information known to you until any particular trade secret or confidential information becomes generally known (through no fault of yours). As used in this Section 3(b), “generally known” means known throughout the domestic United States industry or, if you have job responsibilities partially or entirely outside of the United States, the appropriate domestic United States and/or appropriate foreign country or countries’ industry(ies). Information regarding products in development, in test marketing, or being marketed or promoted in a discrete geographic region, which information Procter & Gamble is considering for broader use, will not be deemed to be “generally known” until such broader use is actually commercially implemented. As used in this Section, “trade secrets or other confidential information” also includes personnel knowledge about a manager, or managers, of Procter & Gamble or its subsidiaries gained in the course of your employment with Procter & Gamble or its subsidiaries (including personnel ratings or rankings, manager or peer evaluations, performance records, special skills or abilities, compensation, work and development plans, training, nature of specific project and work assignments, or specialties developed as a result of such assignments) which directly or indirectly affords you a confidential basis to solicit, encourage, or participate in soliciting any manager, or managers, of Procter & Gamble or any subsidiary to terminate his or her relationship with Procter & Gamble or that subsidiary.

(c) By accepting an award of Restricted Stock Units, you agree that, if you were, without authority, to use or disclose Procter & Gamble’s trade secrets or confidential information or threaten to do so, Procter & Gamble would be entitled to injunctive and other appropriate relief to prevent you from doing so. You further agree that the harm caused to Procter & Gamble by the breach or anticipated breach of this Section 3(c) is,

Appendix 9 Form RTD-A

by its nature, irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. You agree that any interim or final equitable relief entered by a court of competent jurisdiction will, at the request of Procter & Gamble, be entered on consent and enforced by any court having jurisdiction over you, without prejudice to any rights you or Procter & Gamble may have to appeal from the proceedings which resulted in any grant of such relief.

(d) If any of the provisions contained in Sections 3(a) through (c) are for any reason, whether by application of existing law or law which may develop after your acceptance of an award of Restricted Stock Units, determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, then by accepting an award of Restricted Stock Units you agree to join Procter & Gamble in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then-applicable law. If any one or more of the provisions contained in Section 3(a) through (c) are determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the provisions will remain in full force and effect and will not be affected, impaired or invalidated in any way.

4. Dividend Equivalents.

     As a holder of Restricted Stock Units, during the period from the Grant Date until the Original Settlement Date or the Agreed Settlement Date, whichever is later, each time a cash dividend or other cash distribution is paid with respect to Common Stock, you will receive additional Restricted Stock Units (“Dividend Equivalents”). The number of such additional Restricted Stock Units will be determined as follows: multiply the number of Restricted Stock Units currently held by the per share amount of the cash dividend or other cash distribution on the Common Stock, and then divide the result by the price of the Common Stock on the date of the dividend or distribution. These Dividend Equivalent Restricted Stock Units will be subject to the same terms and conditions as the original Restricted Stock Units that gave rise to them, including forfeiture and settlement terms, except that if there is a fractional number of Dividend Equivalent Restricted Stock Units on the date they are to be settled, you will receive one share of Common Stock for the fractional Dividend Equivalent Restricted Stock Units.

5. Voting and Other Shareholder Rights.

     A Restricted Stock Unit is not a share of Common Stock, and thus you are not entitled to any voting, dividend or other rights as a shareholder of the Company with respect to the Restricted Stock Units you hold.

6. Adjustments in Case of Stock Dividends, Stock Splits, Etc.

     In the event of a future reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off, or other change affecting the corporate structure, capitalization or Common Stock, the number of Restricted Stock Units you hold will be adjusted appropriately and equitably to prevent dilution or enlargement of your rights.

7. Tax Withholding.

     To the extent Procter & Gamble is required to withhold federal, state, local or foreign taxes in connection with your Restricted Stock Units or Dividend Equivalents, the Committee may require you to make such arrangements as Procter & Gamble may deem appropriate for the payment of such taxes required to be withheld, including without limitation, relinquishment of some of the shares of Common Stock that would otherwise be given to you. However,

Appendix 9 Form RTD-A

regardless of any action taken by Procter & Gamble with respect to any income tax, social insurance, payroll tax, or other tax, by accepting a Restricted Stock Unit or Dividend Equivalent, you acknowledge that the ultimate liability for any such tax owed by you is and remains your responsibility, and that Procter & Gamble makes no representations about the tax treatment of your Restricted Stock Units or Dividend Equivalents, and does not commit to structure any aspect of the Restricted Stock Units or Dividend Equivalents to reduce or eliminate your tax liability.

8. Suspension Periods and Termination.

     The Company reserves the right from time to time to temporarily suspend your right to settle your Restricted Stock Units for shares of Common Stock where such suspension is deemed by the Company as necessary or appropriate.

9. Procter & Gamble Right to Terminate Employment and Other Remedies.

(a) Nothing in these Terms and Conditions, or the fact that you have been awarded Restricted Stock Units, affects in any way the right or power of Procter & Gamble to terminate your employment at any time for any reason, with or without cause, or precludes Procter & Gamble from taking any action or enforcing any remedy available to it with respect to any action or conduct on your part. Without limiting the previous sentence, the Committee may, for example, suspend or terminate any outstanding Restricted Stock Units for actions taken by you if the Committee determines that you have acted significantly contrary to the best interests of Procter & Gamble or its subsidiaries. For purposes of this paragraph, an action taken “significantly contrary to the best interests of Procter & Gamble or its subsidiaries” includes without limitation any action taken or threatened by you that the Committee determines has, or is reasonably likely to have, a significant adverse impact on the reputation, goodwill, stability, operation, personnel retention and management, or business of Procter & Gamble or any subsidiary. This paragraph is in addition to any remedy Procter & Gamble or a subsidiary may have at law or in equity, including without limitation injunctive and other appropriate relief.

(b) By accepting a Restricted Stock Unit, you acknowledge that: (i) the Plan is established voluntarily by The Procter & Gamble Company, is discretionary in nature, and may be amended, suspended or terminated at any time; (ii) the award of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been awarded repeatedly in the past; (iii) all decisions with respect to future Restricted Stock Unit awards, if any, will be at the sole discretion of the Company; (iv) your participation in the Plan is voluntary; (v) Restricted Stock Units are an extraordinary item and not part of normal or expected compensation or salary for any purpose, including without limitation calculating any termination, severance, resignation, redundancy, or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vi) in the event that your employer is not the Company, the award of Restricted Stock Units will not be interpreted to form an employment relationship with the Company; and, furthermore, the award of Restricted Stock Units will not be interpreted to form an employment contract with any Procter & Gamble entity; (vii) the future value of Common Stock is unknown and cannot be predicted with certainty; and (viii) no claim or entitlement to compensation or damages arises from termination or forfeiture of Restricted Stock Units, or diminution in value of Restricted Stock Units or Common Stock received in settlement thereof, and you irrevocably release Procter & Gamble from any such claim that may arise.

Appendix 9 Form RTD-A

10. Data Privacy.

     By accepting a Restricted Stock Unit, you explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, any Procter & Gamble entity or third party for the purpose of implementing, administering and managing your participation in the Plan. You understand that Procter & Gamble holds certain personal information about you, including without limitation your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in a Procter & Gamble entity, details of all options, Restricted Stock Units, or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data to any broker or other third party with whom you may elect to deposit any shares of Common Stock in connection with the settlement of your Restricted Stock Units. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data, or refuse or withdraw the consents contained in this paragraph, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

11. Notices.

(a) Any notice to Procter & Gamble that is required or appropriate with respect to Restricted Stock Units held by you must be in writing and addressed to:

The Procter & Gamble Company
ATTN: Corporate Secretary’s Office
P.O. Box 599
Cincinnati, OH 45201

or such other address as Procter & Gamble may from time to time provide to you in writing.

(b) Any notice to you that is required or appropriate with respect to Restricted Stock Units held or to be awarded to you will be provided to you in written or electronic form at any physical or electronic mail address for you that is on file with Procter & Gamble.

12. Successors and Assigns.

     These Terms and Conditions are binding on, and inure to the benefit of, (a) The Procter & Gamble Company and its successors and assigns; and (b) you and, if applicable, the representative of your estate.

Appendix 9 Form RTD-A

13. Governing Law.

     The validity, interpretation, performance and enforcement of these Terms and Conditions, the Plan and your Restricted Stock Units will be governed by the laws of the State of Ohio, U.S.A. without giving effect to any other jurisdiction’s conflicts of law principles. With respect to any dispute concerning these Terms and Conditions, the Plan and your Restricted Stock Units, you consent to the exclusive jurisdiction of the federal or state courts located in Hamilton County, Ohio, U.S.A.

14. The Plan.

     All Restricted Stock Units awarded to you have been awarded under the Plan. Certain provisions of the Plan may have been repeated or emphasized in these Terms and Conditions; however, all terms of the Plan apply to you and your Restricted Stock Units whether or not they have been called out in these Terms and Conditions.

15. Effect of These Terms and Conditions.

     These Terms and Conditions and the terms of the Plan, which are incorporated herein by reference, describe the contractual rights awarded to you in the form of Restricted Stock Units, and the obligations imposed on you in connection with those rights. No right exists with respect to Restricted Stock Units except as described in these Terms and Conditions and the Plan.

Appendix 10 Form RTN2

[INSERT DATE]

[INSERT NAME]

Subject: Award of Restricted Stock Units

This is to advise you that The Procter & Gamble Company, an Ohio corporation, is awarding you with Restricted Stock Units, on the dates and in the amounts listed below, pursuant to The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and subject to the attached Statement of Terms and Conditions Form RTN2.

Grant Date:	[INSERT DATE OF GRANT]
Forfeiture Date:	[INSERT DATE FORFEITURE ENDS]
Original Settlement Date:	[INSERT DATE RSUs BECOME SHARES]
Number of Restricted Stock Units:	[INSERT NUMBER GRANTED]

Paragraph 3(a) of Statement of Terms and Conditions Form RTN2 [is/is not] waived.

THE PROCTER & GAMBLE COMPANY

James J. Johnson, Secretary

For the Compensation Committee

o I hereby accept the Award of Restricted Stock Units set forth above in accordance with and subject to the terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan and the attached Statement of Terms and Conditions for Restricted Stock Units, with which I am familiar. I agree that the Award of Restricted Stock Units, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and the attached Statement of Terms and Conditions for Restricted Stock Units together constitute an agreement between the Company and me in accordance with the terms thereof and hereof, and I further agree that any legal action related to this Award of Restricted Stock Units may be brought in any federal or state court located in Hamilton County, Ohio, USA, and I hereby accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this Award of Restricted Stock Units.

o I hereby reject the Award of Restricted Stock Units set forth above.

Date Signature P&G E-mail Address

Appendix 10 Form RTN2

THE PROCTER & GAMBLE COMPANY

STATEMENT OF TERMS AND CONDITIONS FOR RESTRICTED STOCK UNITS

THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN

     The Restricted Stock Units awarded to you as set forth in the letter you received from the Company (your “Award Letter”), and your ownership thereof, are subject to the following terms and conditions.

1. Definitions.

     For purposes of this Statement of Terms and Conditions for Restricted Stock Units (“Terms and Conditions”), all capitalized terms not defined in these Terms and Conditions will have the meanings described in The Procter & Gamble 2001 Stock and Incentive Compensation Plan (the “Plan”), and the following terms will have the following meanings.

(a) “Data” has the meaning described in Section 9;

(b) “Disability” means termination of employment under the permanent disability provision of any retirement plan of Procter & Gamble;

(c) “Forfeiture Date” is the date identified as such in your Award Letter;

(d) “Forfeiture Period” means the period from the Grant Date until the Forfeiture Date.

(e) “Grant Date” means the date a Restricted Stock Unit was awarded to you, as identified in your Award Letter;

(f) “Original Settlement Date” is the date identified as such in your Award Letter, as adjusted, if applicable, by Section 2;

(g) “Post-Forfeiture Period” means the period from the Forfeiture Date until the Original Settlement Date;

(h) “Procter & Gamble” means the Company and/or its Subsidiaries;

(i) “Restricted Stock Unit” means an unfunded, unsecured promise by the Company, in accordance with these Terms and Conditions and the provisions of the Plan, to issue to you one share of Common Stock on the Original Settlement Date.

2. Transfer and Restrictions.

(a) Neither Restricted Stock Units nor your interest in them may be sold, exchanged, transferred, pledged, hypothecated, given or otherwise disposed of by you at any time, except by will or by the laws of descent and distribution. Any attempted transfer of a Restricted Stock Unit, whether voluntary or involuntary on your part, will result in the immediate forfeiture to the Company, and cancellation, of the Restricted Stock Unit.

(b) During the Forfeiture Period, your Restricted Stock Units will be forfeited and cancelled if you leave your employment with Procter & Gamble for any reason, except due to: (i) your Disability; or (ii) in certain circumstances, your Special Separation. In

Appendix 10 Form RTN2

the event of your Disability during the Forfeiture Period, unless otherwise agreed to in writing by the Company, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your Disability. In the event of your Special Separation during the Forfeiture Period, your Restricted Stock Units will be forfeited and cancelled unless otherwise agreed to in writing by the Company.

(c) During the Post-Forfeiture Period, if you leave your employment with Procter & Gamble for any reason other than: (i) Disability; (ii) Special Separation; or (iii) retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your termination of employment. In the event of your Disability or Special Separation during the Post-Forfeiture Period, unless otherwise agreed to in writing by the Company, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your Disability or Special Separation, as applicable. In the event of your retirement in accordance with the provisions of any appropriate retirement plan of Procter & Gamble during the Post-Forfeiture Period, you will retain your Restricted Stock Units subject to the Plan and these Terms and Conditions.

(d) Upon your death or the occurrence of a Change in Control at any time while you hold Restricted Stock Units, your Original Settlement Date will automatically and immediately become, without any further action by you or the Company, the date of your death or of the Change in Control, as applicable.

(e) From time to time, the Company and/or the Committee may establish procedures with which you must comply in order to accept an award of Restricted Stock Units, or to settle your Restricted Stock Units, including requiring you to do so by means of electronic signature, or charging you an administrative fee for doing so.

(f) Once your Restricted Stock Units have been settled by delivery to you of an equivalent number of shares of Common Stock, the Restricted Stock Units will have no further value, force or effect.

3. Confidentiality and Non-Competition

(a) In order to better protect the goodwill of Procter & Gamble and to prevent the disclosure of Procter & Gamble’s trade secrets and confidential information, and thereby help ensure the long-term success of Procter & Gamble’s business, in consideration of your being awarded Restricted Stock Units, you (without prior written consent of Procter & Gamble), will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, advisor, consultant or otherwise, for a period of three (3) years following the date your employment with Procter & Gamble is terminated in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of Procter & Gamble (including both existing products as well as products known to you, as a consequence of your employment with Procter & Gamble, to be in development):

(i) with respect to which your work has been directly concerned at any time during the two (2) years preceding the termination of your employment with Procter & Gamble; or

(ii) with respect to which, during the two (2) years preceding the termination of your employment with Procter & Gamble, you, as a consequence of your job

Appendix 10 Form RTN2

performance and duties, acquired knowledge of trade secrets or other confidential information of Procter & Gamble.

For purposes of this Section 3(a), it will be conclusively presumed that you have knowledge of information you were directly exposed to through actual receipt or review of memoranda or documents containing such information, or through attendance at meetings at which such information was discussed or disclosed.

(b) The provisions of Section 3(a) are not in lieu of, but are in addition to your continuing obligation (which you acknowledge by accepting an award of Restricted Stock Units) to not use or disclose Procter & Gamble’s trade secrets or confidential information known to you until any particular trade secret or confidential information becomes generally known (through no fault of yours). As used in this Section 3(b), “generally known” means known throughout the domestic United States industry or, if you have job responsibilities partially or entirely outside of the United States, the appropriate domestic United States and/or appropriate foreign country or countries’ industry(ies). Information regarding products in development, in test marketing, or being marketed or promoted in a discrete geographic region, which information Procter & Gamble is considering for broader use, will not be deemed to be “generally known” until such broader use is actually commercially implemented. As used in this Section, “trade secrets or other confidential information” also includes personnel knowledge about a manager, or managers, of Procter & Gamble or its subsidiaries gained in the course of your employment with Procter & Gamble or its subsidiaries (including personnel ratings or rankings, manager or peer evaluations, performance records, special skills or abilities, compensation, work and development plans, training, nature of specific project and work assignments, or specialties developed as a result of such assignments) which directly or indirectly affords you a confidential basis to solicit, encourage, or participate in soliciting any manager, or managers, of Procter & Gamble or any subsidiary to terminate his or her relationship with Procter & Gamble or that subsidiary.

(c) By accepting an award of Restricted Stock Units, you agree that, if you were, without authority, to use or disclose Procter & Gamble’s trade secrets or confidential information or threaten to do so, Procter & Gamble would be entitled to injunctive and other appropriate relief to prevent you from doing so. You further agree that the harm caused to Procter & Gamble by the breach or anticipated breach of this Section 3(c) is, by its nature, irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. You agree that any interim or final equitable relief entered by a court of competent jurisdiction will, at the request of Procter & Gamble, be entered on consent and enforced by any court having jurisdiction over you, without prejudice to any rights you or Procter & Gamble may have to appeal from the proceedings which resulted in any grant of such relief.

(d) If any of the provisions contained in Sections 3(a) through (c) are for any reason, whether by application of existing law or law which may develop after your acceptance of an award of Restricted Stock Units, determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, then by accepting an award of Restricted Stock Units you agree to join Procter & Gamble in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then-applicable law. If any one or more of the provisions contained in Section 3(a) through (c) are determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the provisions will remain in full force and effect and will not be affected, impaired or invalidated in any way.

Appendix 10 Form RTN2

4. Voting and Other Shareholder Rights.

     A Restricted Stock Unit is not a share of Common Stock, and thus you are not entitled to any voting, dividend or other rights as a shareholder of the Company with respect to the Restricted Stock Units you hold.

5. Adjustments in Case of Stock Splits, Etc.

     In the event of a future reorganization, recapitalization, stock split, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off, or other change affecting the corporate structure, capitalization or Common Stock, the number of Restricted Stock Units you hold will be adjusted appropriately and equitably to prevent dilution or enlargement of your rights.

6. Tax Withholding.

     To the extent Procter & Gamble is required to withhold federal, state, local or foreign taxes in connection with your Restricted Stock Units, the Committee may require you to make such arrangements as Procter & Gamble may deem appropriate for the payment of such taxes required to be withheld, including without limitation, relinquishment of some of the shares of Common Stock that would otherwise be given to you. However, regardless of any action taken by Procter & Gamble with respect to any income tax, social insurance, payroll tax, or other tax, by accepting a Restricted Stock Unit, you acknowledge that the ultimate liability for any such tax owed by you is and remains your responsibility, and that Procter & Gamble makes no representations about the tax treatment of your Restricted Stock Units, and does not commit to structure any aspect of the Restricted Stock Units to reduce or eliminate your tax liability.

7. Suspension Periods and Termination.

     The Company reserves the right from time to time to temporarily suspend your right to settle your Restricted Stock Units for shares of Common Stock where such suspension is deemed by the Company as necessary or appropriate.

8. Procter & Gamble Right to Terminate Employment and Other Remedies.

(a) Nothing in these Terms and Conditions, or the fact that you have been awarded Restricted Stock Units, affects in any way the right or power of Procter & Gamble to terminate your employment at any time for any reason, with or without cause, or precludes Procter & Gamble from taking any action or enforcing any remedy available to it with respect to any action or conduct on your part. Without limiting the previous sentence, the Committee may, for example, suspend or terminate any outstanding Restricted Stock Units for actions taken by you if the Committee determines that you have acted significantly contrary to the best interests of Procter & Gamble or its subsidiaries. For purposes of this paragraph, an action taken “significantly contrary to the best interests of Procter & Gamble or its subsidiaries” includes without limitation any action taken or threatened by you that the Committee determines has, or is reasonably likely to have, a significant adverse impact on the reputation, goodwill, stability, operation, personnel retention and management, or business of Procter & Gamble or any subsidiary. This paragraph is in addition to any remedy Procter & Gamble or a subsidiary may have at law or in equity, including without limitation injunctive and other appropriate relief.

(b) By accepting a Restricted Stock Unit, you acknowledge that: (i) the Plan is established voluntarily by The Procter & Gamble Company, is discretionary in nature,

Appendix 10 Form RTN2

and may be amended, suspended or terminated at any time; (ii) the award of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been awarded repeatedly in the past; (iii) all decisions with respect to future Restricted Stock Unit awards, if any, will be at the sole discretion of the Company; (iv) your participation in the Plan is voluntary; (v) Restricted Stock Units are an extraordinary item and not part of normal or expected compensation or salary for any purpose, including without limitation calculating any termination, severance, resignation, redundancy, or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vi) in the event that your employer is not the Company, the award of Restricted Stock Units will not be interpreted to form an employment relationship with the Company; and, furthermore, the award of Restricted Stock Units will not be interpreted to form an employment contract with any Procter & Gamble entity; (vii) the future value of Common Stock is unknown and cannot be predicted with certainty; and (viii) no claim or entitlement to compensation or damages arises from termination or forfeiture of Restricted Stock Units, or diminution in value of Restricted Stock Units or Common Stock received in settlement thereof, and you irrevocably release Procter & Gamble from any such claim that may arise.

9. Data Privacy.

     By accepting a Restricted Stock Unit, you explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, any Procter & Gamble entity or third party for the purpose of implementing, administering and managing your participation in the Plan. You understand that Procter & Gamble holds certain personal information about you, including without limitation your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in a Procter & Gamble entity, details of all options, Restricted Stock Units, or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data to any broker or other third party with whom you may elect to deposit any shares of Common Stock in connection with the settlement of your Restricted Stock Units. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data, or refuse or withdraw the consents contained in this paragraph, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

10. Notices.

(a) Any notice to Procter & Gamble that is required or appropriate with respect to Restricted Stock Units held by you must be in writing and addressed to:

Appendix 10 Form RTN2

The Procter & Gamble Company
ATTN: Corporate Secretary’s Office
P.O. Box 599
Cincinnati, OH 45201

or such other address as Procter & Gamble may from time to time provide to you in writing.

(b) Any notice to you that is required or appropriate with respect to Restricted Stock Units held or to be awarded to you will be provided to you in written or electronic form at any physical or electronic mail address for you that is on file with Procter & Gamble.

11. Successors and Assigns.

     These Terms and Conditions are binding on, and inure to the benefit of, (a) the Company and its successors and assigns; and (b) you and, if applicable, the representative of your estate.

12. Governing Law.

     The validity, interpretation, performance and enforcement of these Terms and Conditions, the Plan and your Restricted Stock Units will be governed by the laws of the State of Ohio, U.S.A. without giving effect to any other jurisdiction’s conflicts of law principles. With respect to any dispute concerning these Terms and Conditions, the Plan and your Restricted Stock Units, you consent to the exclusive jurisdiction of the federal or state courts located in Hamilton County, Ohio, U.S.A.

13. The Plan.

     All Restricted Stock Units awarded to you have been awarded under the Plan. Certain provisions of the Plan may have been repeated or emphasized in these Terms and Conditions; however, all terms of the Plan apply to you and your Restricted Stock Units whether or not they have been called out in these Terms and Conditions.

14. Effect of These Terms and Conditions.

     These Terms and Conditions and the terms of the Plan, which are incorporated herein by reference, describe the contractual rights awarded to you in the form of Restricted Stock Units, and the obligations imposed on you in connection with those rights. No right exists with respect to Restricted Stock Units except as described in these Terms and Conditions and the Plan.

EX-10.2

EXHIBIT (10-2)

The Procter & Gamble 1992 Stock Plan

The Procter & Gamble Company

Executive Offices

1 Procter & Gamble Plaza, Cincinnati, Ohio 45202-3315

December 11, 2001

To: Participants in The Procter & Gamble 1992 Stock Plan

     This document provides a copy of The Procter & Gamble 1992 Stock Plan followed by important Additional Information. Please save this with your stock option materials.

Very truly yours,

Terry L. Overbey
Secretary             

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

THE PROCTER & GAMBLE 1992 STOCK PLAN
(as amended December 11, 2001)

ARTICLE A — Purpose.

     The purpose of The Procter & Gamble 1992 Stock Plan (hereinafter referred to as the “Plan) is to encourage those employees of The Procter & Gamble Company (hereinafter referred to as the “Company”) and its subsidiaries who are largely responsible for the long-term success and development of the business to strengthen the alignment of interests between employees and the Company’s shareholders through the increased ownership of shares of the Company’s Common Stock, and to encourage those employees to remain in the employ of the Company and its subsidiaries. This will be accomplished through the granting to employees of options to purchase shares of the Common Stock of the Company, payment of a portion of the employees’ remuneration in shares of the Common Stock, and the granting to them by the Company and a subsidiary, if appropriate, of deferred awards related to the increase in the price of the Common Stock of the Company as provided by the terms and conditions set forth in the Plan.

ARTICLE B — Administration.

     1. The Plan shall be administered by the Compensation Committee (hereinafter referred to as the “Committee”) of the Board of Directors of the Company (hereinafter referred to as the “Board”), or such other committee as may be designated by the Board. The Committee shall consist of not less than three (3) members of the Board who are neither officers nor employees, or members of the Board who are “Non-Employee Directors” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (hereinafter referred to as the “1934 Act”), or any successor rule or definition adopted by the Securities and Exchange Commission, to be appointed by the Board from time to time and to serve at the discretion of the Board.

     2. It shall be the duty of the Committee to administer this Plan in accordance with its provisions, to report thereon not less than once each year to the Board and to make such recommendations of amendments or otherwise as it deems necessary or appropriate. A decision by a majority of the Committee shall govern all actions of the Committee.

     3. Subject to the express provisions of this Plan, the Committee shall have authority: to grant nonstatutory and incentive stock options; to grant to recipients stock appreciation rights either freestanding, in tandem with simultaneously granted stock options, or in parallel with simultaneously granted stock options; to award a portion of a recipient’s remuneration in shares of Common Stock of the Company subject to such conditions or restrictions, if any, as the Committee may determine; to determine all the terms and provisions of the respective stock option, stock appreciation right, and stock award agreements including setting the dates when each stock option or stock appreciation right or part thereof may be exercised and determining the conditions and restrictions, if any, of any shares of Common Stock acquired through the exercise of any stock option; and to make all other determinations it deems necessary or advisable for administering this Plan; provided, however, the Committee shall have the further authority at time of grant to:

(a)	waive the provisions of Article F, paragraph 1(a);
(b)	waive the provisions of Article F, paragraph 1(b);
(c)	waive the provisions of Article G, paragraph 4(a); and
(d)	impose conditions in lieu of those set forth in Article G, paragraphs 4 through 7, for nonstatutory stock options, stock appreciation rights, and stock award grants which do not increase or extend the rights of the recipient,

to take into consideration the differences, limitations, and requirements of foreign laws or conditions including tax regulations, exchange controls or investment restrictions, possible unenforceability of any part of this Plan, or other matters deemed appropriate by it.

     4. The Committee may establish from time to time such regulations, provisions, and procedures within the terms of this Plan as, in its opinion, may be advisable in the administration of this Plan.

     5. The Committee may designate the Secretary of the Company or other employees of the Company to assist the Committee in the administration of this Plan and may grant authority to such persons to execute documents on behalf of the Committee.

ARTICLE C — Participation.

     The Committee shall select those employees of the Company and its subsidiaries who, in the opinion of the Committee, have demonstrated a capacity for contributing in a substantial manner to the success of such companies and shall determine the number of shares of the Common Stock of the Company to be transferred under this Plan subject to such conditions or restrictions as the Committee may determine and the number of shares with respect to which stock options or stock appreciation rights will be granted. The Committee may consult with the Chief Executive, but nevertheless the Committee has the full authority to act, and the Committee’s actions shall be final.

ARTICLE D — Limitation on Number of Shares for the Plan.

     1. Unless otherwise authorized by the shareholders, the maximum aggregate number of shares available for award under this Plan for each calendar year the Plan is in effect shall be one percent (1%) of the total issued shares of Common Stock of the Company as of June 30 of the immediately preceding fiscal year.

     2. Any of the authorized shares may be used in respect of any of the types of awards described in this Plan, except that no more than twenty-five percent (25%) of the authorized shares in any calendar year may be issued as restricted or unrestricted stock and no more than 50,000,000 of the authorized shares during the term of the Plan may be issued as incentive stock options.

     3. Any authorized shares not used in a calendar year shall be available for awards under this Plan in succeeding calendar years.

ARTICLE E — Shares Subject to Use Under the Plan.

     1. The shares to be delivered by the Company upon exercise of stock options or stock appreciation rights shall be either authorized but unissued shares or treasury shares, as determined by the Board. In the case of redemption of stock appreciation rights by one of the Company’s subsidiaries, such shares shall be shares acquired by that subsidiary.

     2. For purposes of this Plan, restricted or unrestricted stock awarded under the terms of this Plan shall be authorized but unissued shares, treasury shares, or shares acquired for purposes of the Plan by the Company or a subsidiary, as determined by the Board.

ARTICLE F — Stock Options and Stock Appreciation Rights.

     1. In addition to such other conditions as may be established by the Committee, in consideration of the granting of stock options or stock appreciation rights under the terms of this Plan, the recipient agrees as follows:

(a)

The right to exercise any stock option or stock appreciation right shall be conditional upon certification by the recipient at time of exercise that the recipient intends to remain in the employ of the Company or one of its subsidiaries (except in cases of retirement, disability or Special Separation as defined in section 6 of Article G) for at least one (1) year following the date of the exercise of the stock option or stock appreciation right, and,

(b)

In order to better protect the goodwill of the Company and its subsidiaries and to prevent the disclosure of the Company’s or it subsidiaries’ trade secrets and confidential information and thereby help insure the long-term success of the business, the recipient, without prior written consent of the Company, will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, adviser, consultant or otherwise, for a period of three (3) years following the date of the recipient’s termination of employment with the Company (except for terminations of employment resulting from retirement or Special Separation), in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of the Company or its subsidiaries (including both existing products as well as products known to the recipient, as a consequence of the recipient’s employment with the Company or one of its subsidiaries, to be in development):

(1)	with respect to which the recipient’s work has been directly concerned at any time during the two (2) years preceding termination of employment with the Company or one of its subsidiaries or
(2)	with respect to which during that period of time the recipient, as a consequence of the recipient’s job performance and duties, acquired knowledge of trade secrets or other confidential information of the Company or its subsidiaries.

	For purposes of this section, it shall be conclusively presumed that recipients have knowledge of information they were directly exposed to through actual receipt or review of memos or documents containing such information, or through actual attendance at meetings at which such information was discussed or disclosed.
(c)	The provisions of this Article are not in lieu of, but are in addition to the continuing obligation of the recipient (which recipient hereby acknowledges) to not use or disclose the Company’s or its subsidiaries’ trade secrets and confidential information known to the recipient until any particular trade secret or confidential information become generally known (through no fault of the recipient), whereupon the restriction on use and disclosure shall cease as to that item. Information regarding products in development, in test marketing or being marketed or promoted in a discrete geographic region, which information the Company or one of its subsidiaries is considering for broader use, shall not be deemed generally known until such broader use is actually commercially implemented. As used in this Article, “generally known” means known throughout the domestic U. S. industry or, in the case of recipients who have job responsibilities outside of the United States, the appropriate foreign country or countries’ industry.
(d)	By acceptance of any offered stock option or stock appreciation rights granted under the terms of this Plan, the recipient acknowledges that if the recipient were, without authority, to use or disclose the Company’s or any of its subsidiaries’ trade secrets or confidential information or threaten to do so, the Company or one of its subsidiaries would be entitled to injunctive and other appropriate

relief to prevent the recipient from doing so. The recipient acknowledges that the harm caused to the Company by the breach or anticipated breach of this Article is by its nature irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. The recipient consents that any interim or final equitable relief entered by a court of competent jurisdiction shall, at the request of the Company or one of its subsidiaries, be entered on consent and enforced by any court having jurisdiction over the recipient, without prejudice to any rights either party may have to appeal from the proceedings which resulted in any grant of such relief.

(e)

If any of the provisions contained in this Article shall for any reason, whether by application of existing law or law which may develop after the recipient’s acceptance of an offer of the granting of stock appreciation rights or stock options, be determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, the recipient agrees to join the Company or any of its subsidiaries in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then applicable law. If any one or more of the terms, provisions, covenants, or restrictions of this Article shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants, and restrictions of this Article shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.

     2. The fact that an employee has been granted a stock option or a stock appreciation right under this Plan shall not limit the right of the employer to terminate the recipient’s employment at any time. The Committee is authorized to suspend or terminate any outstanding stock option or stock appreciation right for actions taken prior to termination of employment if the Committee determines the recipient has acted significantly contrary to the best interests of the Company.

     3. More than one stock option or stock appreciation right may be granted to any employee under this Plan but the maximum number of shares with respect to which stock options or stock appreciation rights may be granted to any employee in any calendar year shall not exceed five percent (5%) of the number of shares which can be issued or transferred annually hereunder.

     4. The aggregate fair market value (determined at the time when the incentive stock option is exercisable for the first time by an employee during any calendar year) of the shares for which any employee may be granted incentive stock options under this Plan and all other stock option plans of the Company and its subsidiaries in any calendar year shall not exceed $100,000 (or such other amount as reflected in the limits imposed by Section 422(d) of the Internal Revenue Code of 1986, as it may be amended from time to time).

     5. If the Committee grants incentive stock options, all such stock options shall contain such provisions as permit them to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time.

     6. With respect to stock options granted in tandem with or parallel to stock appreciation rights, the exercise of either such stock options or such stock appreciation rights will result in the simultaneous cancellation of the same number of tandem or parallel stock appreciation rights or stock options, as the case may be.

     7. The exercise price for all stock options and stock appreciation rights shall be established by the Committee at the time of their grant and shall be not less than one hundred percent (100%) of the fair market value of the Common Stock of the Company on the date of grant.

ARTICLE G — Exercise of Stock Options and Stock Appreciation Rights.

     1. All stock options and stock appreciation rights granted hereunder shall have a maximum life of no more than fifteen (15) years from the date of grant; provided, however, that any stock options or stock appreciation rights with a life of more than ten (10) years from the date of grant that have been conditionally granted to the Chief Executive or to any other executive officer subject to the provisions of Section 162(m) of the Internal Revenue Code and subject to taxation under United States law, as it may be amended from time to time, prior to the annual meeting of shareholders scheduled for October 12, 1999 shall automatically be canceled effective October 12, 1999 if the shareholders do not adopt a resolution at such annual meeting approving grants to such officers with a maximum life of up to fifteen (15) years from the date of grant.

     2. No stock options or stock appreciation rights shall be exercisable within one (1) year from their date of grant, except in the case of the death of the recipient.

     3. During the lifetime of the recipient, stock options and stock appreciation rights may be exercised only by the recipient personally, or, in the event of the legal incompetence of the recipient, by the recipient’s duly appointed legal guardian.

     4. In case a recipient of stock options or stock appreciation rights ceases to be an employee of the Company or any of its subsidiaries while holding an unexercised stock option or stock appreciation right:

(a)

Any unexercisable portions thereof are then void, except in the case of: (1) death of the recipient; (2) any Special Separation (as defined in section 6 of this Article G) that occurs more than six months from the date the options were granted; or (3) any option as to which the Committee has waived, at the time of grant, the provisions of this Article G, paragraph 4(a) pursuant to the authority granted by Article B, paragraph 3.

(b)

Any exercisable portions thereof are then void, except in the case of death, retirement in accordance with the provisions of any appropriate profit sharing or retirement plan of the Company or any of its subsidiaries, or Special Separation (as defined in section 6 of this Article G) of the recipient.

     5. In the case of the death of a recipient of stock options or stock appreciation rights while an employee of the Company or any of its subsidiaries, the persons to whom the stock options or stock appreciation rights have been transferred by will or the laws of descent and distribution shall have the privilege of exercising remaining stock options, stock appreciation rights or parts thereof, whether or not exercisable on the date of death of such employee, at any time prior to the expiration date of the stock options or stock appreciation rights.

     6. Termination of employment under the permanent disability provision of any appropriate profit sharing or retirement plan of the Company or any of its subsidiaries shall be deemed the same as retirement. Special Separation means any termination of employment, except a termination for cause or a voluntary resignation that is not initiated or encouraged by the Company, that occurs prior to the time a recipient is eligible to retire. The death of a recipient of stock options or stock appreciation rights subsequent to retirement or Special Separation shall not render exercisable stock options or stock appreciation rights which were unexercisable at the time of the retirement or Special Separation. The persons to whom the exercisable stock options or stock appreciation rights have been transferred by will or the laws of descent and distribution shall have the privilege of exercising such remaining stock options, stock appreciation rights or parts thereof, at any time prior to the expiration date of the stock options or stock appreciation rights.

     7. Stock options and stock appreciation rights are not transferable other than by will or by the laws of descent and distribution. For the purpose of exercising stock options or stock appreciation rights after the death of the recipient, the duly appointed executors and administrators of the estate of the deceased recipient shall

have the same rights with respect to the stock options and stock appreciation rights as legatees or distributees would have after distribution to them from the recipient’s estate.

     8. Upon the exercise of stock appreciation rights, the recipient shall be entitled to receive a redemption differential for each such stock appreciation right which shall be the difference between the then fair market value of one share of the Common Stock of the Company and the exercise price of one stock appreciation right then being exercised. In the case of the redemption of stock appreciation rights by a subsidiary of the Company not located in the United States, the redemption differential shall be calculated in United States dollars and converted to the appropriate local currency on the exercise date. As determined by the Committee, the redemption differential may be paid in cash, Common Stock of the Company to be valued at its fair market value on the date of exercise, any other mode of payment deemed appropriate by the Committee or any combination thereof. The number of shares with respect to which stock appreciation rights are being exercised shall not be available for granting future stock options or stock appreciation rights under this Plan.

     9. The Committee may, in its sole discretion, permit a stock option which is being exercised either (a) by an optionee whose retirement is imminent or who has retired or (b) after the death of the optionee, to be surrendered, in lieu of exercise, for an amount equal to the difference between the stock option exercise price and the fair market value of shares of the Common Stock of the Company on the day the stock option is surrendered, payment to be made in shares of the Company’s Common Stock which are subject to this Plan valued at their fair market value on such date, cash, or a combination thereof, in such proportion and upon such terms and conditions as shall be determined by the Committee. The difference between the number of shares subject to stock options so surrendered and the number of shares, if any, issued upon such surrender shall represent shares which shall not be available for granting future stock options under this Plan.

     10. Time spent on leave of absence shall be considered as employment for the purposes of this Plan. Leave of absence means any period of time away from work granted to any employee by his or her employer because of illness, injury, or other reasons satisfactory to the employer.

     11. The Company reserves the right from time to time to suspend the exercise of any stock option or stock appreciation right where such suspension is deemed by it necessary or appropriate for corporate purposes. No such suspension shall extend the life of the stock option or stock appreciation right beyond its expiration date, and in no event will there be a suspension in the five (5) calendar days immediately preceding the expiration date.

ARTICLE H — Payment for Stock Options.

     Upon the exercise of a stock option, payment in full of the exercise price shall be made by the optionee. As determined by the Committee, the stock option exercise price may be paid for by the optionee either in cash, shares of the Common Stock of the Company to be valued at their fair market value on the date of exercise, a combination thereof, or such other method as determined by the Committee.

ARTICLE I — Transfer of Shares.

     1. The Committee may transfer Common Stock of the Company under the Plan subject to such conditions or restrictions, if any, as the Committee may determine. The conditions and restrictions may vary from time to time and with respect to particular employees or group of employees and may be set forth in agreements between the Company and the employee or in the awards of stock to them, all as the Committee determines. It is contemplated that the conditions and restrictions established by the Committee will be consistent with the objectives of this Plan and may be of the following types. In giving these examples, it is not intended to restrict the Committee’s authority to impose other restrictions or conditions, or to waive restrictions

or conditions under circumstances deemed by the Committee to be appropriate and not contrary to the best interests of the Company.

(a)	Restrictions
	The employee will not be able to sell, pledge, or dispose of the shares during a specified period except in accordance with the agreement or award. Such restrictions will lapse either after a period of, for example, five years, or in fifteen or fewer annual installments following retirement or termination of employment, as the Committee from time to time may determine. However, upon the transfer of shares subject to restrictions, an employee will have all incidents of ownership in the shares, including the right to dividends (unless otherwise restricted by the Committee), to vote the shares, and to make gifts of them to family members (still subject to the restrictions).
(b)	Lapse of Restrictions
	In order to have the restrictions lapse, an employee may be required to continue in the employ of the Company or a subsidiary for a prescribed period of time. Exemption from this requirement may be prescribed in the case of death, disability, or retirement, or as otherwise prescribed by the Committee.

ARTICLE J — Adjustments.

In the event of any future reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off or other change affecting the corporate structure, capitalization or Common Stock of the Company occuring after the date of approval of the Plan by the Company’s shareholders, (i) the amount of shares authorized to be issued under the Plan and (ii) the number of shares and/or the exercise prices covered by outstanding stock options and stock appreciation rights shall be adjusted appropriately and equitably to prevent dilution or enlargement of rights under the Plan. Following any such change, the term “Common Stock” shall be deemed to refer to such class of shares or other securities as may be applicable.

ARTICLE K — Additional Provisions.

     1. The Board may, at any time, repeal this Plan or may amend it from time to time except that no such amendment may amend this paragraph, increase the annual aggregate number of shares subject to this Plan, reduce the price at which stock options or stock appreciation rights may be granted, exercised, or surrendered, alter the class of employees eligible to receive stock options, or increase the percentage of shares authorized to be transferred as restricted or unrestricted stock. The recipient of awards under this Plan and the Company shall be bound by any such amendments as of their effective dates, but if any outstanding stock options or stock appreciation rights are affected, notice thereof shall be given to the holders of such stock options and stock appreciation rights and such amendments shall not be applicable to such holder without his or her written consent. If this Plan is repealed in its entirety, all theretofore granted unexercised stock options or stock appreciation rights shall continue to be exercisable in accordance with their terms and shares subject to conditions or restrictions transferred pursuant to this Plan shall continue to be subject to such conditions or restrictions.

     2. In the case of an employee of a subsidiary company, performance under this Plan, including the transfer of shares of the Company, may be by the subsidiary. Nothing in this Plan shall affect the right of the Company or any subsidiary to terminate the employment of any employee with or without cause. None of the participants, either individually or as a group, and no beneficiary or other person claiming under or through any participant, shall have any right, title, or interest in any shares of the Company purchased or reserved for the

purpose of this Plan except as to such shares, if any, as shall have been granted or transferred to him or her. Nothing in this Plan shall preclude the issuance or transfer of shares of the Company to employees under any other plan or arrangement now or hereafter in effect.

     3. “Subsidiary” means any company in which greater than fifty percent (50%) of the total combined voting power of all classes of stock is owned, directly or indirectly, by the Company. In addition, the Board may designate for participation in this Plan as a “subsidiary,” except for the granting of incentive stock options, those additional companies affiliated with the Company in which the Company’s direct or indirect stock ownership is less than fifty percent (50%) of the total combined voting power of all classes of such company’s stock.

     4. Notwithstanding anything to the contrary in the this Plan, stock options and stock appreciation rights granted hereunder shall vest immediately and any conditions or restrictions on Common Stock shall lapse upon a “Change in Control.” A “Change in Control” shall mean the occurrence of any of the following:

(a)	An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the then outstanding Shares or the combined voting power of the Company’s then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred pursuant to this Section 4(a), Shares or Voting Securities which are acquired in a “Non- Control Acquisition” (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company (for purposes of this definition, a “Related Entity”), (ii) the Company or any Related Entity, or (iii) any Person in connection with a “Non-Control Transaction” (as hereinafter defined);
(b)	The individuals who, as of July 11, 2000 are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least half of the members of the Board; or, following a Merger (as hereinafter defined) which results in a Parent Corporation (as hereinafter defined), the board of directors of the ultimate Parent Corporation; provided, however, that if the election, or nomination for election by the Company’s common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(c)	The consummation of:

(i) A merger, consolidation or reorganization with or into the Company or in which securities of the Company are issued (a “Merger”), unless such Merger is a “Non-Control Transaction.” A “Non-Control Transaction” shall mean a Merger where:

(A) the stockholders of the Company, immediately before such Merger own directly or indirectly immediately following such Merger at least fifty percent (50%) of the

	combined voting power of the outstanding voting securities of (x) the corporation resulting from such Merger (the “Surviving Corporation”) if fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly by another Person (a “Parent Corporation”), or (y) if there is one or more Parent Corporations, the ultimate Parent Corporation;
(B)	the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such Merger constitute at least half of the members of the board of directors of (x) the Surviving Corporation, if there is no Parent Corporation, or (y) if there is one or more Parent Corporations, the ultimate Parent Corporation; and
(C)	no Person other than (1) the Company, (2) any Related Entity, (3) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such Merger was maintained by the Company or any Related Entity, or (4) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities or Shares, has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the outstanding voting securities or common stock of (x) the Surviving Corporation if there is no Parent Corporation, or (y) if there is one or more Parent Corporations, the ultimate Parent Corporation;

(ii)	A complete liquidation or dissolution of the Company; or
(iii)	The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Related Entity or under conditions that would constitute a Non-Control Transaction with the disposition of assets being regarded as a Merger for this purpose or the distribution to the Company’s stockholders of the stock of a Related Entity or any other assets).

     Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding Shares or Voting Securities as a result of the acquisition of Shares or Voting Securities by the Company which, by reducing the number of Shares or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Shares or Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Shares or Voting Securities which increases the percentage of the then outstanding Shares or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.

ARTICLE L — Consent

     Every recipient of a stock option, stock appreciation right, or transfer of shares pursuant to this Plan shall be bound by the terms and provisions of this Plan and of the stock option, stock appreciation right, or transfer of shares agreement referable thereto, and the acceptance of any stock option, stock appreciation right, or transfer of shares pursuant to this Plan shall constitute a binding agreement between the recipient and the Company and its subsidiaries and any successors in interest to any of them. This Plan shall be governed by and construed in accordance with the laws of the State of Ohio, United States of America.

ARTICLE M — Duration of Plan.

     This Plan will terminate on July 14, 2002 unless a different termination date is fixed by the shareholders or by action of the Board of Directors, but no such termination shall affect the prior rights under this Plan of the Company (or any subsidiary) or of anyone to whom stock options or stock appreciation rights were granted prior thereto or to whom shares have been transferred prior to such termination.

ADDITIONAL INFORMATION

1. Shares Awarded as a Portion of Remuneration

     Any shares of Common Stock of the Company awarded as a portion of a participant’s remuneration shall be valued at not less than one hundred percent (100%) of the fair market value of the Company’s Common Stock on the date of the award. These shares may be subject to such conditions or restrictions as the Committee may determine, including a requirement that the participant remain in the employ of the Company or one of its subsidiaries for a set period of time, or until retirement. Failure to abide by any applicable restriction will result in forfeiture of the shares.

2. Tax Effects

     Incentive Stock Options

     With regard to tax effects which may accrue to the optionee, counsel advises that if the optionee has continuously been an employee from the time an option has been granted until at least three months before it is exercised, under existing law no taxable income results to the optionee from the exercise of an incentive stock option at the time of exercise. However, the spread at exercise is an “adjustment” item for alternative minimum tax purposes.

     Any gain realized on the sale or other disposition of stock acquired on exercise of an incentive stock option is considered as long-term capital gain for tax purposes if the stock has been held more than two years after the date the option was granted and more than one year after the date of exercise of the option. If the stock is disposed of within one year after exercise, the lesser of any gain on such disposition or the spread at exercise (i.e., the excess of the fair market value of the stock on the date of exercise over the option price) is treated as ordinary income, and any appreciation after the date of exercise is considered long-term or short-term capital gain to the optionee depending on the holding period prior to sale. However, the spread at exercise (even if greater than the gain on the disposition) is treated as ordinary income if the disposition is one on which a loss, if sustained, is not recognized—e.g., a gift, a “wash” sale or a sale to a related party. The amount of ordinary income recognized by the optionee is treated as a tax deductible expense to the Company. No other amount relative to an incentive stock option is a tax deductible expense to the Company.

     Nonstatutory Stock Options

     With regard to tax effects which may accrue to the optionee, counsel advises that under existing tax law gain taxable as ordinary income to the optionee is deemed to be realized at the date of exercise of the option, the gain on each share being the difference between the market price on the date of exercise and the option price. This amount is treated as a tax deductible expense to the Company at the time of the exercise of the option. Any appreciation in the value of the stock after the date of exercise is considered a long-term or short-term capital gain to the optionee depending on whether or not the stock was held for the appropriate holding period prior to sale.

     Stock Appreciation Rights

     With regard to tax effects which may accrue to the recipient, counsel advises that “United States persons,” as defined in the Internal Revenue Code of 1986 (the “I.R.C.”), must recognize ordinary income as of the date of exercise equal to the amount paid to the recipient, i.e., the difference between the grant price and the value of the shares on the date of exercise.

     Shares Awarded as a Portion of Remuneration

     With regard to tax effects which may accrue to the recipient, counsel advises that “United States persons” as defined in the Internal Revenue Code of 1986 (the “I.R.C.”), must recognize ordinary income in the first taxable year in which the recipient’s rights to the stock are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable. Recipients who are “United States persons” may also elect to include the income in their tax returns for the taxable year in which they receive the shares by filing an election to do so with the appropriate office of the Internal Revenue Service within 30 days of the date the shares are transferred to them.

     The amount includable in income is the fair market value of the shares as of the day the shares are transferable or not subject to a substantial risk of forfeiture, whichever is applicable; if the recipient has elected to include the income in the year in which the shares are received, the amount of income includable is the fair market value of the shares at the time of transfer.

     For non-United States persons, the time when income is realized, its measurement and its taxation, will depend on the laws of the particular countries in which the recipients are residents and/or citizens at the time of transfer or when the shares are first transferable and not subject to a substantial risk of forfeiture, as the case may be. “United States persons” who receive shares awarded as a portion of remuneration may also have tax consequences with respect to the receipt of shares or the expiration of restrictions or substantial risk of forfeiture on such shares under the laws of the particular country other than the United States of which such person is a resident or citizen.

     Notwithstanding the above advice received by the Company, it is each individual recipient’s responsibility to check with his or her personal tax adviser as to the tax effects and proper handling of stock options, stock appreciation rights and Common Stock acquired. The above advice relates specifically to the U.S. consequences of stock options, stock appreciation rights and Common Stock acquired, including the U.S. consequences to “United States persons” whether or not resident in the U.S. In addition to U.S. tax consequences, for all persons who are not U.S. residents, the time when income, if any, is realized, the measurement of such income and its taxation will also depend on the laws of the particular country other than the U.S. of which such persons are resident and/or citizens at the time of grant or the time of exercise, as the case may be.

     The Plan is not subject to the qualification requirements of Section 401(a) of the I.R.C.

3. Employee Retirement Income Security Act of 1974

     The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended.

4. Incorporation of Certain Documents by Reference

     The following documents filed by the Company with the Securities and Exchange Commission (File No. 1-434) pursuant to the 1934 Act are incorporated into this document by reference:

1.	The Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2001;
2.	The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001; and
3.	All other documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold.

     The Company will provide without charge to each participant in the Plan, upon oral or written request, a copy of any or all of these documents other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents. In addition, the Company will provide without charge to such participants a copy of the Company’s most recent annual report to shareholders, proxy statement, and other communications distributed generally to security holders of the Company. Requests for such copies should be directed to Mr. James C. Ashley, Manager, Shareholder Services, The Procter & Gamble Company, P.O. Box 5572, Cincinnati, Ohio
45201, (513) 983-3413.

5. Additional Information

     Additional information about the Plan and its administrators may be obtained from Mr. Terry L. Overbey, Secretary, The Procter & Gamble Company, One Procter & Gamble Plaza, Cincinnati, Ohio 45202, (513) 983-4463.

EX-10.3

EXHIBIT (10-3)

The Procter & Gamble Executive Group Life Insurance Policy

MEMORANDUM OF UNDERSTANDING

This memorandum dated as of December 30, 1997, reflects the understanding and agreement between The Procter & Gamble Company as policyholder (“Policyholder/P&G”) of a Flexible Premium Group Variable Life Insurance Policy (the “Policy”) and Metropolitan Life Insurance Company (“Carrier/Metropolitan”).

Policyholder and Carrier understand and agree that the following is in no way inconsistent with the Policy:

Qualification of the Policy as Life Insurance (IRC Sections 7702 and 101)

Assuming insurable interest by the Policyholder, Carrier will administer the Policy to qualify as a life insurance contract under Section 7702 of the Internal Revenue Code (the “IRC”), to have a bona fide element of risk, and to provide death benefits under the Policy that will be excludible from taxable income to the extent provided under IRC section 101(a). On or before the date of this memorandum, Carrier has provided an opinion from outside counsel addressed to Policyholder that the Policy complies with the requirements of section 7702. See Exhibit 1.

Qualification of the Policy as a Variable Contract

Subject to the conditions stated below, Carrier will administer the Policy to (a) be a “variable contract” within the meaning of Section 817(d) of the Internal Revenue Code and (b) be based on one or more segregated asset accounts, the assets of which are owned by Carrier and are adequately diversified, as required by Internal Revenue Code Section 817(h).

Policyholder may determine the percentage of premium payments and/or policy cash value that is allocated to a specific separate account and will have the right to reallocate amounts among the separate accounts as provided in the Policy. The Policyholder shall not have the right to manage the assets of the separate accounts or to direct the purchase or sale of specific investment assets and will not communicate directly or in any manner with respect to these separate accounts with any of the managers or sub investment managers of the separate accounts.

Metropolitan will be the investment manager for any Separate Accounts under this Policy. Separate Accounts may have sub-investment managers chosen by Metropolitan.

The Policy will state that the assets held in each Separate Account will be maintained solely for the liabilities of the participants in that Separate Account. The Carrier will make provision that the income, gains and losses of each Separate Account shall be credited to or charged against that Separate Account’s assets and none of the assets held in a Separate Account will be charged as chargeable with liabilities arising out of any other business of the Carrier or used for purposes unrelated to the terms and provisions of that Separate Account. On or before the date of this

memorandum, Carrier has provided a letter from its counsel addressed to Policyholder on these issues. See Exhibit 2.

Underwriting

Based on the census in the November 11, 1998 illustrations, current participants who are domestic actives and retirees will be covered under Carrier’s Guaranteed Issue program for the plan benefit and cost recovery amounts in effect on the date the Policy is issued.

Future new participants will be subject to the following “Active at Work” criteria:

• not been absent from work due to illness or medical treatment for a period of more than 5 consecutive days in the last 3 months; and

• are actively at work, full time performing all duties of regular occupation, at customary place of employment.

The guaranteed issue limit upon entry into the plan by new participants will be $2 million. Based on the current plan design, death benefits under the Policy may be increased without additional underwriting:

•	by reason of promotional increases verified by P&G, and
	by up to 15% per year (with any unused portion of such increment rolling forward for five years on a cumulative basis) to reflect compensation (salary and bonus) increases,

subject to a lifetime guaranteed issue limit of $5,000,000 per life, which limit will be reviewed at least every five years and (absent retention, reinsurance or adverse selection constraints) adjusted to accommodate anticipated plan benefit and cost recovery amounts. Amounts in excess of the guaranteed issue limits will, at Carrier’s request, be subject to underwriting.

Carrier will not deny claims by reason of the suicide exclusion provision of the Policy. Carrier acknowledges, accepts and agrees to be bound by consents to insurance, beneficiary designations and assignments in effect under P&G’s executive life insurance program.

Cost of Term Insurance Charges

The Cost of Term Insurance charges (“COI”) for the current active population and new entrants (meeting the “active at work” requirements) will be based on 90% of Carrier’s current Corporate Universal Life Guaranteed Issue, Sex Distinct, Unismoker rates. The current retirees will have rates equal to 120% of Carrier’s Corporate Universal Life Guaranteed Issue, Sex Distinct, Unismoker rates.

- 2 -

P & G will have COI rates equal to the foregoing unless Carrier’s Corporate Universal Life Guaranteed Issue, Sex Distinct, Unismoker rates are increased to the maximum rates of 1980 CSO table (Table A for males and Table G for females). Only at that time will the rates under this Policy for actives and new entrants be increased to up to 100% of Corporate Universal Life Guaranteed Issue, Sex Distinct, Unismoker rates, with a corresponding change in the COI for current retirees. Any future changes in COI rates will be determined based on changes in Corporate Universal Life Guaranteed Issue Rates. Metropolitan shall inform the Policyholder in writing at least 60 days in advance of any changes in such rates.

The Guaranteed Issue, Sex Distinct COI rates are the rates that Metropolitan charges in Individual Executive Pooled Policies which are selected by the Guaranteed Issue Underwriting procedure and are filed with the state Insurance Departments. The Corporate Universal Life Product is one of those policies included in this pool. Any changes in these rates are required to be filed with the state Insurance Departments and must be justifiable in terms of experience of the Guaranteed Issue mortality pool. Therefore, the insured employees of this Policy join the mortality pool which is the aggregate of all insured executives who are selected by the Guaranteed Issue Underwriting procedure. The future determination of the COI of this pool is by the mortality experience of the pool in total and is not by the mortality experience of each case or a subgroup of insured lives of the pool. Any changes in these rates must apply to all policies which are charged the Guaranteed Issue COI rates, including the Policy.

Upon reasonable notice from Policyholder, Metropolitan will develop COI charges, retention and retrospective deductions based on the demographics of insured lives in the plan at that time.

The guaranteed maximum COI will never exceed those based on the 1980 CSO Table (Table A for males and Table G for females).

Enhanced Policy Administration

At Policyholder’s request, Carrier will provide enhanced administrative services with respect to the Policy. Such services will include:

A. Program Analysis

1.	Prepare feasibility studies and recommendations of various funding level alternatives.
2.	Provide financial analysis of the program.

B. Program Establishment

1. Provide specimen documents to and reviewing specimen documents with Policyholder’s legal counsel and auditors.

- 3 -

2.	Prepare financial projections and, where applicable, proxy statement text with respect to the program.
3.	Coordinate and establish program implementation and administration, and set up records and other systems for the program.
4.	Process section 1035 exchange.

C. Program Documentation. Provide program documentation, including:

1.	Program explanation (including original assumptions).
2.	Insurance schedule.
3.	Funding assumptions and corporate composite projections.
4.	Participant census.
5.	Individual participant information.
6.	Definition of Payment procedures.

a.	Premiums
b.	Death benefits.
c.	Withdrawals/surrenders.
d.	Loans

D. Program Servicing

1.	Provide periodic reports on program and policy financial status.
2.	Provide information for possible program modifications.
3.	Provide ongoing program coordination.
4.	Compile updated program data with assistance from Policyholder.

a.	New participants
b.	Terminations
c.	Retirees
d.	Deaths

5. Determine current and ongoing funding requirements.

- 4 -

6.	Assist with enrollment of new participants.
7.	Prepare detailed annual reviews of program experience to include:

a.	Corporate composite projections
b.	Program participant census including insurance amount

8.	Compile composite billing for program.
9.	Timely provide assistance to accountants and auditors for reporting program transactions on financial statements and/or tax return and other reports or analyses as reasonably required from time to time by Policyholder.
10.	Advise the Policyholder of transactions necessary or desirable to meet program goals and commitments.
11.	Execute quarterly social security sweeps.
12.	Annually determine and provide to Policyholder the amount of imputed taxable income for each participant.
13.	Conduct annual performance review.

E.	Performance Criteria
	Carrier’s enhanced policy administration will be subject to performance criteria mutually agreed by Carrier and Policyholder from time to time.

F.	Termination of Enhanced Policy Administration.
	Policyholder may terminate Carrier’s enhanced policy administration at any time on written notice.

Policy Expenses

• Front End Load Charges

1.	State Premium Tax - state premium tax will be handled as a pass-through. Taxes will be assessed based upon the Insureds’ state of residence as of the date of issue of the Policy.
2.	Policy DAC Tax -1.20%

- 5 -

3. Other Charge - if enhanced policy administration is in effect, a one time set-up charge of $100,000 in the aggregate for all Policies in the program, in the first policy year.

• Mortality and Expense (M&E) Charge

The M&E risk charge is assessed against the average monthly value of the total policy cash value in all separate accounts and is deducted monthly. The following M&E risk charge is based upon a 4-tier sliding scale and applies for any period when enhanced policy administration is in effect:

First $50 million	0.250	%
Next $200 million	0.150	%
Next $250 million	0.125	%
Over $500 million	0.100	%

Under the foregoing schedule, Carrier will not take into consideration the combined assets in both policies (VEBA Plan and the Split Dollar Plan) for purposes of calculating the monthly M&E expenses for this Policy. Carrier would, however, take the assets under this Policy into consideration when determining the M&E under the VEBA policy.

For any period when enhanced policy administration is not in effect, the M&E risk charge is as follows:

First $250 million	0.175	%
Next $500 million	0.150	%
Next $250 million	0.125	%
Over $1000 million	0.100	%

Under this schedule, Carrier will take into consideration the combined assets on both policies (VEBA Plan and the Split Dollar Plan) in calculating the monthly M&E risk charge for both policies.

• Investment Management Fees

Investment management fees for each separate account are assessed against the average monthly value of the policy cash value in a separate account. In calculating the monthly fee per separate account Carrier will take into consideration the combined assets in both policies (VEBA Plan and the Split Dollar Plan) which are invested in the same separate account(s). The investment management fees for the current commingled separate accounts can be found in the Offering Memorandum.

- 6 -

• Custody and Securities Accounting/Valuation

There are no separate charges for these functions for the commingled separate accounts. However, there are pass through charges for these functions for single customer accounts.

• Policy Administration Charge

Currently, and as illustrated, the Policy Administration Charge is a per insured life charge of $5.00 per month in all policy years. The current charge may be reduced by the Carrier from time to time, and reductions in the Carrier’s costs incurred to service the Policy will be commensurately reflected in the current charge. The guaranteed maximum monthly charge for administration is $5.00 per insured.

Changes in Pricing for Other Than the Cost of Insurance Charges

Carrier will not change the charges or fees related to factors under its control. Changes based on external factors may be reflected in the Policy.

For purposes of this paragraph, Carrier’s profit goals and the contribution of Specialized Benefit Resources organization to overhead are not external factors. The external factors that may be reflected include (i) Federal and State legislation and state insurance statutory and regulatory changes, and (ii) after the first three policy years, increase in investment management, custody and securities accounting/valuation charges pertaining to P&G single-customer accounts by the providers of these services.

Any increase in price due to external factors will be documented and the price increase, if appropriate, will be only to recover the increased cost of the Carrier. With respect to any increase in charges pursuant to this section, P&G may audit the relevant records of Metropolitan pursuant to an appropriate nondisclosure document.

Governing Law

The validity, construction, interpretation, and effect of this memorandum of understanding and the Policy shall be governed by the laws of the state of Ohio, without regard to Ohio’s choice of law rules.

Changes to this Memorandum

Except with respect to changes mandated by state and federal law and as otherwise specifically provided in this Memorandum or the Policy, this Memorandum may be changed only by mutual agreement among the affected parties.

- 7 -

Notices

Unless and until the parties give written notice otherwise, whenever this Memorandum provides for notices or consents in writing to be given by one of the parties hereto to the other, such notices or consent will be given when addressed and delivered to the following or their successors:

(1)	The Procter & Gamble Company	(2	)	Metropolitan Life Insurance Co.
	Global Pensions			Specialized Benefit Resources
	Two Procter & Gamble Plaza			485B Route One South, Suite 420
	Cincinnati, Ohio 45202-3315			Iselin, New Jersey 08830
	Attn: Clare Clark, Group Manager			Attn: G. Denis Dwyer, Vice President

All such notices or consents must be sent by U.S. Certified Mail, Return Receipt Requested.

Agreed:
THE PROCTER & GAMBLE COMPANY			METROPOLITAN LIFE
			INSURANCE COMPANY
By:	/s/ C. S. Clark	By:	/s/ John J. Ryan
	Group Manager Global Pensions		Vice President
	(Title)		(Title)
	C. S. Clark		John J. Ryan
	(Print or Type Name)		(Print or Type Name)
	Dec. 30, 1997		Dec. 30, 1997
	(Date)		(Date)

- 8 -

EX-10.5

EXHIBIT (10-5)

The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan

THE PROCTER & GAMBLE 1993 NON-EMPLOYEE DIRECTORS’
STOCK PLAN
(as amended September 10, 2002)

ARTICLE A — Purpose.

     The purpose of The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan (hereinafter referred to as the “Plan”) is to strengthen the alignment of interests between non-employee Directors (hereinafter referred to as “Participants”) and the shareholders of The Procter & Gamble Company (hereinafter referred to as the “Company”) through the increased ownership of shares of the Company’s Common Stock. This will be accomplished by allowing Participants to elect voluntarily to convert a portion or all of their cash fees for services as a Director into Common Stock, by granting Participants a fixed value of shares of Common Stock restricted until retirement (hereinafter referred to as “Retirement Shares”) and by granting Participants non-qualified options to purchase shares of Common Stock (hereinafter referred to as “Stock Options”).

ARTICLE B — Administration.

     1. The Plan shall be administered by the Compensation Committee (hereinafter referred to as the “Committee”) of the Board of Directors of the Company (hereinafter referred to as the “Board”), or such other committee as may be designated by the Board. The Committee shall consist of not less than three (3) members of the Board who are “Non-Employee Directors” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or any successor rule or definition adopted by the Securities and Exchange Commission, to be appointed by the Board from time to time and to serve at the discretion of the Board.

     2. It shall be the duty of the Committee to administer this Plan in accordance with its provisions and to make such recommendations of amendments or otherwise as it deems necessary or appropriate. A decision by a majority of the Committee shall govern all actions of the Committee.

     3. Subject to the express provisions of this Plan, the Committee shall have authority to allow Participants the right to elect to receive fees for services as a director in either cash or an equivalent amount of whole shares of Common Stock of the Company, or partly in cash and partly in whole shares of the Common Stock of the Company, subject to such conditions or restrictions, if any, as the Committee may determine. The Committee also has the authority to make all other determinations it deems necessary or advisable for administering this Plan.

     4. The Committee may establish from time to time such regulations, provisions, and procedures within the terms of this Plan as, in its opinion, may be advisable in the administration of this Plan.

     5. The Committee may designate the Secretary of the Company or other employees of the Company to assist the Committee in the administration of this Plan and may grant authority to such persons to execute documents on behalf of the Committee.

ARTICLE C — Participation.

     Participation in the Plan shall be limited to all non-employee Directors of the Company.

ARTICLE D — Limitation on Number of Shares for the Plan.

     The total number of shares of Common Stock of the Company that may be awarded each year shall not exceed 50,000 shares.

ARTICLE E — Shares Subject to Use Under the Plan.

     Shares of Common Stock to be awarded under the terms of this Plan shall be treasury shares.

ARTICLE F — Retirement Shares

1. On the first business day in January, each Participant shall receive Retirement Shares with a fair market value of $45,000 on the date of grant.

2. All shares awarded under this Article shall be valued as set forth in Article I.

ARTICLE G — Stock Options.

     1. The Committee may, from time to time, grant Participants a Stock Option to purchase shares of Common Stock having an exercise price of one hundred percent (100%) of the fair market value of the Common Stock on the date of the grant.

     2. The Stock Options shall have a term of ten (10) years from the date of grant, subject to earlier termination as provided herein, and shall be exercisable 100% three (3) years from the date of grant, except in the case of death, in which case the Stock Options shall be immediately exercisable.

     3. Stock Options are not transferable other than by will or by the laws of descent and distribution. Legatees, distributees and duly appointed executors and administrators of the estate of a deceased Participant shall have the right to exercise such Stock Options at any time prior to the expiration date of the Stock Options.

     4. If a Participant ceases to be a Director while holding unexercised Stock Options, such stock options are then void, except in the case of (i) death, (ii) disability,

(iii) retirement at the end of a term, (iv) retirement after attaining the age of sixty-nine (69), (v) resignation from the Board following the Participant’s retirement from a principal employer under the terms of an appropriate retirement plan or (vi) resignation from the Board for reasons of the antitrust laws or the conflict of interest, corporate governance or continued service policies.

     5. Upon the exercise of a Stock Option, payment in full of the exercise price shall be made by the Participant. The exercise price may be paid for by the Participant either in cash, shares of the Common Stock of the Company to be valued at their fair market value on the date of exercise, or a combination thereof.

ARTICLE H — Adjustments.

In the event of any future reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off or other change affecting the corporate structure, capitalization or Common Stock of the Company occuring after the date of approval of the Plan by the Company’s shareholders, (i) the amount of shares authorized to be issued under the Plan and (ii) the number of shares and/or the exercise prices covered by outstanding stock options and stock appreciation rights shall be adjusted appropriately and equitably to prevent dilution or enlargement of rights under the Plan. Following any such change, the term “Common Stock” shall be deemed to refer to such class of shares or other securities as may be applicable.

ARTICLE I — Transfer of Shares.

     1. The Committee may transfer Common Stock of the Company under the Plan subject to such conditions or restrictions, if any, as the Committee may determine. The conditions and restrictions may vary from time to time and may be set forth in agreements between the Company and the Participant or in the awards of stock to them, all as the Committee determines.

     2. The shares awarded shall be valued at the average of the high and low quotations for Common Stock of the Company on the New York Stock Exchange on the day of the transfer to a Participant. All shares awarded shall be full shares, rounded up to the nearest whole share.

ARTICLE J — Additional Provisions.

     1. The Board may, at any time, repeal this Plan or may amend it from time to time except that no such amendment may amend this paragraph, increase the annual aggregate number of shares subject to this Plan, or alter the persons eligible to participate in this Plan. The Participants and the Company shall be bound by any such amendments as of their effective dates, but if any outstanding awards are affected, notice thereof shall be given to the holders of such awards and such amendments shall not be applicable to

such holder without his or her written consent. If this Plan is repealed in its entirety, all theretofore awarded shares subject to conditions or restrictions transferred pursuant to this Plan shall continue to be subject to such conditions or restrictions.

     2. Every recipient of shares pursuant to this Plan shall be bound by the terms and provisions of this Plan and of the transfer of shares agreement referable thereto, and the acceptance of any transfer of shares pursuant to this Plan shall constitute a binding agreement between the recipient and the Company.

     3. Notwithstanding anything to the contrary in the this Plan, stock options and stock appreciation rights granted hereunder shall vest immediately and any conditions or restrictions on Common Stock shall lapse upon a “Change in Control.” A “Change in Control” shall mean the occurrence of any of the following:

(a)

An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the then outstanding Shares or the combined voting power of the Company’s then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred pursuant to this Section 4(a), Shares or Voting Securities which are acquired in a “Non- Control Acquisition” (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company (for purposes of this definition, a “Related Entity”), (ii) the Company or any Related Entity, or (iii) any Person in connection with a “Non- Control Transaction” (as hereinafter defined);

(b)

The individuals who, as of July 11, 2000 are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least half of the members of the Board; or, following a Merger (as hereinafter defined) which results in a Parent Corporation (as hereinafter defined), the board of directors of the ultimate Parent Corporation; provided, however, that if the election, or nomination for election by the Company’s common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the Exchange Act) or other

	actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(c)	The consummation of:

(i) A merger, consolidation or reorganization with or into the Company or in which securities of the Company are issued (a “Merger”), unless such Merger is a “Non-Control Transaction.” A “Non-Control Transaction” shall mean a Merger where:

(A)	the stockholders of the Company, immediately before such Merger own directly or indirectly immediately following such Merger at least fifty percent (50%) of the combined voting power of the outstanding voting securities of (x) the corporation resulting from such Merger (the “Surviving Corporation”) if fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly by another Person (a “Parent Corporation”), or (y) if there is one or more Parent Corporations, the ultimate Parent Corporation;
(B)	the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such Mergerconstitute at least half of the members of the board of directors of (x) the Surviving Corporation, if there is no Parent Corporation, or (y) if there is one or more Parent Corporations, the ultimate Parent Corporation; and
(C)	no Person other than (1) the Company, (2) any Related Entity, (3) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such Merger was maintained by the Company or any Related Entity, or (4) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities or Shares, has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the outstanding voting securities or common stock of (x) the Surviving Corporation if there is no Parent Corporation, or (y) if there is one or more Parent Corporations, the ultimate Parent Corporation;

(ii) A complete liquidation or dissolution of the Company; or

(iii) The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Related Entity or under conditions that would constitute a Non-Control Transaction with the disposition of assets being regarded as a Merger for this purpose or the distribution to the Company’s stockholders of the stock of a Related Entity or any other assets).

     Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding Shares or Voting Securities as a result of the acquisition of Shares or Voting Securities by the Company which, by reducing the number of Shares or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Shares or Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Shares or Voting Securities which increases the percentage of the then outstanding Shares or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.

ARTICLE K — Duration of Plan.

     This Plan shall be effective as of January 1, 1994. This Plan will terminate on December 31, 2003 unless a different termination date is fixed by the shareholders or by action of the Board but no such termination shall affect the prior rights under this Plan of the Company or of anyone to whom shares have been transferred prior to such termination.

Plan adopted November 9, 1993
Plan approved by shareholders on October 11, 1994
Plan Amended January 10, 1995
Plan Amended June 11, 1996
Adjusted for August 22, 1997 stock split
Plan amended January 12, 1999
Plan amended July 11, 2000
Plan amended December 12, 2000
Plan amended December 11, 2001
Plan amended September 10, 2002

EX-10.6

EXHIBIT (10-6)

The Procter & Gamble 1992 Stock Plan (Belgian Version)

The Procter & Gamble Company
Executive Offices
1 Procter & Gamble Plaza, Cincinnati, Ohio 45202-3315

December 11, 2001

To:        Participants in The Procter & Gamble 1992 Stock Plan (Belgian Version)

     This document provides a copy of The Procter & Gamble 1992 Stock Plan (Belgian Version) followed by important Additional Information. Please save this with your stock option materials.

Very truly yours,

Terry L. Overbey
Secretary            

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

THE PROCTER & GAMBLE 1992 STOCK PLAN (BELGIAN VERSION)
(as amended December 11, 2001)

1,000,000 Shares of Common Stock of The Procter & Gamble Company
and
1,000,000 Options to Purchase Common Stock of The Procter & Gamble Company

ARTICLE A — Purpose.

     The purpose of The Procter & Gamble 1992 Stock Plan (Belgian Version) (hereinafter referred to as the “Plan”) is to encourage those employees of The Procter & Gamble Company (hereinafter referred to as the “Company”) and its subsidiaries who are largely responsible for the long-term success and development of the business to strengthen the alignment of interests between employees and the Company’s shareholders through the increased ownership of shares of the Company’s Common Stock, and to encourage those employees to remain in the employ of the Company and its subsidiaries. This will be accomplished through the granting or sale to employees of options to purchase shares of the Common Stock of the Company, payment of a portion of the employees’ remuneration in shares of the Common Stock, and the granting to them by the Company and a subsidiary, if appropriate, of deferred awards related to the increase in the price of the Common Stock of the Company as provided by the terms and conditions set forth in the Plan.

ARTICLE B — Administration.

     1. The Plan shall be administered by the Compensation Committee (hereinafter referred to as the “Committee”) of the Board of Directors of the Company (hereinafter referred to as the “Board”), or such other committee as may be designated by the Board. The Committee shall consist of not less than three (3) members of the Board who are neither officers nor employees, or members of the Board who are “Non-Employee Directors” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (hereinafter referred to as the “1934 Act”), or any successor rule or definition adopted by the Securities and Exchange Commission, to be appointed by the Board from time to time and to serve at the discretion of the Board.

     2. It shall be the duty of the Committee to administer this Plan in accordance with its provisions, to report thereon not less than once each year to the Board and to make such recommendations of amendments or otherwise as it deem necessary or appropriate. A decision by a majority of the Committee shall govern all actions of the Committee.

     3. Subject to the express provisions of this Plan, the Committee shall have authority: to grant or offer for sale nonstatutory and incentive stock options; to grant to recipients stock appreciation rights either freestanding, in tandem with simultaneously granted or sold stock options, or in parallel with simultaneously granted or sold stock options; to award a portion of a recipient’s remuneration in shares of Common Stock of the Company subject to such conditions or restrictions, if any, as the Committee may determine; to determine all the terms and provisions of the respective stock option, stock appreciation right, and stock award agreements including setting the dates when each stock option or stock appreciation right or part thereof may be exercised and determining the conditions and restrictions, if any, of any shares of Common Stock acquired through the exercise of any stock option; and to make all other determinations it deems necessary or advisable for administering this Plan; provided, however, the Committee shall have the further authority at time of grant to:

(a)	waive the provisions of Article F, paragraph l(a);
(b)	waive the provisions of Article F, paragraph l(b);
(c)	waive the provisions of Article G, paragraph 4(a) and (b); and

(d) impose conditions in lieu of those set forth in Article G, paragraphs 4 through 7, for nonstatutory stock options, stock appreciation rights, and stock award grants which do not increase or extend the rights of the recipient,

to take into consideration the differences, limitations, and requirements of non-United States laws or conditions including tax regulations, exchange controls or investment restrictions, possible unenforceability of any part of this Plan, or other matters deemed appropriate by it.

     4. The Committee may establish from time to time such regulations, provisions, and procedures within the terms of this Plan as, in its opinion, may be advisable in the administration of this Plan.

     5. The Committee may designate the Secretary of the Company or other employees of the Company to assist the Committee in the administration of this Plan and may grant authority to such persons to execute documents on behalf of the Committee.

ARTICLE C — Participation.

     The Committee shall select those employees of the Company and its subsidiaries who, in the opinion of the Committee, have demonstrated a capacity for contributing in a substantial manner to the success of such companies and shall determine the number of shares of the Common Stock of the Company to be transferred under this Plan subject to such conditions or restrictions as the Committee may determine and the number of shares with respect to which stock options or stock appreciation rights will be granted or sold. The Committee may consult with the Chief Executive, but nevertheless the Committee has the full authority to act, and the Committee’s actions shall be final.

ARTICLE D — Limitation on Number of Shares for the Plan.

     1. Unless otherwise authorized by the shareholders, the maximum aggregate number of shares available for award under this Plan for each calendar year the Plan is in effect, when combined with the maximum aggregate number of shares available for award under The Procter & Gamble 1992 Stock Plan in such calendar year, shall be one percent (1%) of the total issued shares of Common Stock of the Company as of June 30 of the immediately preceding fiscal year.

     2. Any of the authorized shares may be used in respect of any of the types of awards described in this Plan, except that no more than twenty-five percent (25%) of the authorized shares in any calendar year may be issued as restricted or unrestricted stock and no more than 1,000,000 of the authorized shares during the term of the Plan may be issued as incentive stock options.

     3. Any authorized shares not used in a calendar year shall be available for awards under this Plan in succeeding calendar years.

ARTICLE E — Shares Subject to Use Under the Plan.

     1. The shares to be delivered by the Company upon exercise of stock options or stock appreciation rights shall be either authorized but unissued shares or treasury shares, as determined by the Board. In the case of redemption of stock appreciation rights by one of the Company’s subsidiaries, such shares shall be shares acquired by that subsidiary.

     2. For purposes of this Plan, restricted or unrestricted stock awarded under the terms of this Plan shall be authorized but unissued shares, treasury shares, or shares acquired for purposes of the Plan by the Company or a subsidiary, as determined by the Board.

ARTICLE F — Stock Options and Stock Appreciation Rights.

     1. In addition to such other conditions as may be established by the Committee, in consideration of the granting or sale of stock options or stock appreciation rights under the terms of this Plan, the recipient agrees as follows:

(a)

The right to exercise any stock option or stock appreciation right shall be conditional upon certification by the recipient at time of exercise that the recipient intends to remain in the employ of the Company or one of its subsidiaries (except in cases of retirement, disability or Special Separation as defined in section 6 of Article G) for at least one (1) year following the date of the exercise of the stock option or stock appreciation right, and,

(b)

In order to better protect the goodwill of the Company and its subsidiaries and to prevent the disclosure of the Company’s or it subsidiaries’ trade secrets and confidential information and thereby help insure the long-term success of the business, the recipient, without prior written consent of the Company, will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, adviser, consultant or otherwise, for a period of three (3) years following the date of the recipient’s termination of employment with the Company (except for terminations of employment resulting from retirement or Special Separation), in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of the Company or its subsidiaries (including both existing products as well as products known to the recipient, as a consequence of the recipient’s employment with the Company or one of its subsidiaries, to be in development):

(1)	with respect to which the recipient’s work has been directly concerned at any time during the two (2) years preceding termination of employment with the Company or one of its subsidiaries or
(2)	with respect to which during that period of time the recipient, as a consequence of the recipient’s job performance and duties, acquired knowledge of trade secrets or other confidential information of the Company or its subsidiaries.

For purposes of this section, it shall be conclusively presumed that recipients have knowledge of information they were directly exposed to through actual receipt or review of memos or documents containing such information, or through actual attendance at meetings at which such information was discussed or disclosed.

(c)

The provisions of this Article are not in lieu of, but are in addition to the continuing obligation of the recipient (which recipient hereby acknowledges) to not use or disclose the Company’s or its subsidiaries’ trade secrets and confidential information known to the recipient until any particular trade secret or confidential information become generally known (through no fault of the recipient), whereupon the restriction on use and disclosure shall cease as to that item. Information regarding products in development, in test marketing or being marketed or promoted in a discrete geographic region, which information the Company or one of its subsidiaries is considering for broader use, shall not be deemed generally known until such broader use is actually commercially implemented. As used in this Article, “generally known” means known throughout the domestic U. S. industry or, in the case of recipients who have job responsibilities outside of the United States, the appropriate foreign country or countries’ industry.

(d)

By acceptance of any offered stock option or stock appreciation rights granted or sold under the terms of this Plan, the recipient acknowledges that if the recipient were, without authority, to use or disclose the Company’s or any of its subsidiaries’ trade secrets or confidential information or threaten to do so, the Company or one of its subsidiaries would be entitled to injunctive and other appropriate relief to prevent the recipient from doing so.

The recipient acknowledges that the harm caused to the Company by the breach or anticipated breach of this Article is by its nature irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. The recipient consents that any interim or final equitable relief entered by a court of competent jurisdiction shall, at the request of the Company or one of its subsidiaries, be entered on consent and enforced by any court having jurisdiction over the recipient, without prejudice to any rights either party may have to appeal from the proceedings which resulted in any grant of such relief.

(e)

If any of the provisions contained in this Article shall for any reason, whether by application of existing law or law which may develop after the recipient’s acceptance of an offer of the granting or sale of stock appreciation rights or stock options, be determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, the recipient agrees to join the Company or any of its subsidiaries in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then applicable law. If any one or more of the terms, provisions, covenants, or restrictions of this Article shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants, and restrictions of this Article shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.

     2. The fact that an employee has been granted or sold a stock option or a stock appreciation right under this Plan shall not limit the right of the employer to terminate the recipient’s employment at any time. The Committee is authorized to suspend or terminate any outstanding stock option or stock appreciation right for actions taken prior to termination of employment if the Committee determines the recipient has acted significantly contrary to the best interests of the Company.

     3. More than one stock option or stock appreciation right may be granted or sold to any employee under this Plan but the maximum number of shares with respect to which stock options or stock appreciation rights may be granted or sold to any employee in any calendar year shall not exceed five percent (5%) of the number of shares which can be issued or transferred annually hereunder, when combined with the maximum aggregate number of shares available for award under The Procter & Gamble 1992 Stock Plan in such calendar year.

     4. The aggregate fair market value (determined at the time when the incentive stock option is exercisable for the first time by an employee during any calendar year) of the shares for which any employee may be granted or sold incentive stock options under this Plan and all other stock option plans of the Company and its subsidiaries in any calendar year shall not exceed $100,000 (or such other amount as reflected in the limits imposed by Section 422(d) of the Internal Revenue Code of 1986, as it may be amended from time to time).

     5. If the Committee grants or sells incentive stock options, all such stock options shall contain such provisions as permit them to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time.

     6. With respect to stock options granted or sold in tandem with or parallel to stock appreciation rights, the exercise of either such stock options or such stock appreciation rights will result in the simultaneous cancellation of the same number of tandem or parallel stock appreciation rights or stock options, as the case may be.

     7. The exercise price for all stock options and stock appreciation rights shall be established by the Committee at the time of their grant or, in the case of stock options to be sold, at the time of offer of such stock options for sale, and shall be not less than one hundred percent (100%) of the fair market value of the Common Stock of the Company on such date.

ARTICLE G — Exercise of Stock Options and Stock Appreciation Rights.

     1. All stock options and stock appreciation rights granted or sold hereunder shall have a maximum life of no more than fifteen (15) years from the date of grant or, in the case of stock options to be sold, from the date of the offer of such options for sale.

     2. No stock options or stock appreciation rights shall be exercisable within one (1) year from their date of grant or, in the case of stock options to be sold, from the date of the offer of such options for sale, except in the case of the death of the recipient.

     3. During the lifetime of the recipient, stock options and stock appreciation rights may be exercised only by the recipient personally, or, in the event of the legal incompetence of the recipient, by the recipient’s duly appointed legal guardian.

     4. In case a recipient of stock options or stock appreciation rights ceases to be an employee of the Company or any of its subsidiaries while holding an unexercised stock option or stock appreciation right:

(a)

Any unexercisable portions thereof are then void, except in the case of: (1) death of the recipient; (2) any Special Separation (as defined in section 6 of this Article G) that occurs more than six months from the date the options were granted or, in the case of stock options to be sold, from the date of the offer of such options for sale; or (3) any option as to which the Committee has waived, at the time of grant or, in the case of stock options to be sold, at the time of the offer of such options for sale, the provisions of this Article G, paragraph 4(a) pursuant to the authority granted by Article B, paragraph 3.

(b)

Any exercisable portions thereof are then void, except in the case of death, retirement in accordance with the provisions of any appropriate profit sharing or retirement plan of the Company or any of its subsidiaries, Special Separation (as defined in section 6 of this Article G) of the recipient, or any option as to which the Committee has waived, at the time of grant or, in the case of stock options to be sold, at the time of offer of such options for sale, the provisions of this Article G, paragraph 4(b) pursuant to the authority granted by Article B, paragraph 3.

     5. In the case of the death of a recipient of stock options or stock appreciation rights while an employee of the Company or any of its subsidiaries, the persons to whom the stock options or stock appreciation rights have been transferred by will or the laws of descent and distribution shall have the privilege of exercising remaining stock options, stock appreciation rights or parts thereof, whether or not exercisable on the date of death of such employee, at any time prior to the expiration date of the stock options or stock appreciation rights.

     6. Termination of employment under the permanent disability provision of any appropriate profit sharing or retirement plan of the Company or any of its subsidiaries shall be deemed the same as retirement. Special Separation means any termination of employment, except a termination for cause or a voluntary resignation that is not initiated or encouraged by the Company, that occurs prior to the time a recipient is eligible to retire. The death of a recipient of stock options or stock appreciation rights subsequent to retirement or Special Separation shall not render exercisable stock options or stock appreciation rights which were unexercisable at the time of the retirement or Special Separation. The persons to whom the exercisable stock options or stock appreciation rights have been transferred by will or the laws of descent and distribution shall have the privilege of exercising such remaining stock options, stock appreciation rights or parts thereof, at any time prior to the expiration date of the stock options or stock appreciation rights.

     7. Stock options and stock appreciation rights are not transferable other than by will or by the laws of descent and distribution and they may not be assigned or hypothecated. For the purpose of exercising stock options or stock appreciation rights after the death of the recipient, the duly appointed executors and administrators of the estate of the deceased recipient shall have the same rights with

respect to the stock options and stock appreciation rights as legatees or distributees would have after distribution to them from the recipient’s estate.

     8. Upon the exercise of stock appreciation rights, the recipient shall be entitled to receive a redemption differential for each such stock appreciation right which shall be the difference between the then fair market value of one share of the Common Stock of the Company and the exercise price of one stock appreciation right then being exercised. In the case of the redemption of stock appreciation rights by a subsidiary of the Company not located in the United States, the redemption differential shall be calculated in United States dollars and converted to the appropriate local currency on the exercise date. As determined by the Committee, the redemption differential may be paid in cash, Common Stock of the Company to be valued at its fair market value on the date of exercise, any other mode of payment deemed appropriate by the Committee or any combination thereof. The number of shares with respect to which stock appreciation rights are being exercised shall not be available for granting or selling future stock options or stock appreciation rights under this Plan.

     9. The Committee may, in its sole discretion, permit a stock option which is being exercised either (a) by an optionee whose retirement is imminent or who has retired or (b) after the death of the optionee, to be surrendered, in lieu of exercise, for an amount equal to the difference between the stock option exercise price and the fair market value of shares of the Common Stock of the Company on the day the stock option is surrendered, payment to be made in shares of the Company’s Common Stock which are subject to this Plan valued at their fair market value on such date, cash, or a combination thereof, in such proportion and upon such terms and conditions as shall be determined by the Committee. The difference between the number of shares subject to stock options so surrendered and the number of shares, if any, issued upon such surrender shall represent shares which shall not be available for granting or selling future stock options under this Plan.

     10. Time spent on leave of absence shall be considered as employment for the purposes of this Plan. Leave of absence means any period of time away from work granted to any employee by his or her employer because of illness, injury, or other reasons satisfactory to the employer.

     11. The Company reserves the right from time to time to suspend the exercise of any stock option or stock appreciation right where such suspension is deemed by it necessary or appropriate for corporate purposes. No such suspension shall extend the life of the stock option or stock appreciation right beyond its expiration date, and in no event will there be a suspension in the five (5) calendar days immediately preceding the expiration date.

ARTICLE H — Payment for Stock Options.

     Upon the exercise of a stock option, payment in full of the exercise price shall be made by the optionee. As determined by the Committee, the stock option exercise price may be paid for by the optionee either in cash, shares of the Common Stock of the Company to be valued at their fair market value on the date of exercise, a combination thereof, or such other method as determined by the Committee.

ARTICLE I — Transfer of Shares.

     1. The Committee may transfer Common Stock of the Company under the Plan subject to such conditions or restrictions, if any, as the Committee may determine. The conditions and restrictions may vary from time to time and with respect to particular employees or group of employees and may be set forth in agreements between the Company and the employee or in the awards of stock to them, all as the Committee determines. It is contemplated that the conditions and restrictions established by the Committee will be consistent with the objectives of this Plan and may be of the following types. In giving these examples, it is not intended to restrict the Committee’s authority to impose other restrictions or conditions, or to waive restrictions or conditions under circumstances deemed by the Committee to be appropriate and not contrary to the best interests of the Company.

(a)	Restrictions
	The employee will not be able to sell, pledge, or dispose of the shares during a specified period except in accordance with the agreement or award. Such restrictions will lapse either after a period of, for example, five years, or in fifteen or fewer annual installments following retirement or termination of employment, as the Committee from time to time may determine. However, upon the transfer of shares subject to restrictions, an employee will have all incidents of ownership in the shares, including the right to dividends (unless otherwise restricted by the Committee), to vote the shares, and to make gifts of them to family members (still subject to the restrictions).
(b)	Lapse of Restrictions
	In order to have the restrictions lapse, an employee may be required to continue in the employ of the Company or a subsidiary for a prescribed period of time. Exemption from this requirement may be prescribed in the case of death, disability, or retirement, or as otherwise prescribed by the Committee.

ARTICLE J — Adjustments.

In the event of any future reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, share exchange, reclassification, distribution, spin-off or other change affecting the corporate structure, capitalization or Common Stock of the Company occuring after the date of approval of the Plan by the Company’s shareholders, (i) the amount of shares authorized to be issued under the Plan and (ii) the number of shares and/or the exercise prices covered by outstanding stock options and stock appreciation rights shall be adjusted appropriately and equitably to prevent dilution or enlargement of rights under the Plan. Following any such change, the term “Common Stock” shall be deemed to refer to such class of shares or other securities as may be applicable.

ARTICLE K — Additional Provisions.

     1. The Board may, at any time, repeal this Plan or may amend it from time to time. The recipient of awards under this Plan and the Company shall be bound by any such amendments as of their effective dates, but if any outstanding stock options or stock appreciation rights are affected, notice thereof shall be given to the holders of such stock options and stock appreciation rights and such amendments shall not be applicable to such holder without his or her written consent. If this Plan is repealed in its entirety, all theretofore granted or sold unexercised stock options or stock appreciation rights shall continue to be exercisable in accordance with their terms and shares subject to conditions or restrictions transferred pursuant to this Plan shall continue to be subject to such conditions or restrictions.

     2. In the case of an employee of a subsidiary company, performance under this Plan, including the transfer of shares of the Company, may be by the subsidiary. Nothing in this Plan shall affect the right of the Company or any subsidiary to terminate the employment of any employee with or without cause. None of the participants, either individually or as a group, and no beneficiary or other person claiming under or through any participant, shall have any right, title, or interest in any shares of the Company purchased or reserved for the purpose of this Plan except as to such shares, if any, as shall have been granted, sold or transferred to him or her. Nothing in this Plan shall preclude the issuance, sale or transfer of shares of the Company to employees under any other plan or arrangement now or hereafter in effect.

     3. “Subsidiary” means any company in which greater than fifty percent (50%) of the total combined voting power of all classes of stock is owned, directly or indirectly, by the Company. In addition, the Board may designate for participation in this Plan as a “subsidiary,” except for the granting or selling of incentive stock options, those additional companies affiliated with the Company in which the Company’s direct or indirect stock ownership is less than fifty percent (50%) of the total combined voting power of all classes of such company’s stock.

ARTICLE L — Consent.

     Every recipient of a stock option, stock appreciation right, or transfer of shares pursuant to this Plan shall be bound by the terms and provisions of this Plan and of the stock option, stock appreciation right, or transfer of shares agreement referable thereto, and the acceptance of any stock option, stock appreciation right, or transfer of shares pursuant to this Plan shall constitute a binding agreement between the recipient and the Company and its subsidiaries and any successors in interest to any of them. This Plan shall be governed by and construed in accordance with the laws of the State of Ohio, United States of America.

ARTICLE M — Duration of Plan.

     This Plan will terminate on July 14, 2002 unless a different termination date is fixed by action of the Board of Directors, but no such termination shall affect the prior rights under this Plan of the Company (or any subsidiary) or of anyone to whom stock options or stock appreciation rights were granted or sold prior thereto or to whom shares have been transferred prior to such termination.

ADDITIONAL INFORMATION

1. Stock Options Offered for Purchase

     Stock options may be offered for purchase at a price of one dollar ($U.S. 1.00) per option (the “Purchased Stock Options”). Participants must pay for any Purchased Stock Option within sixty (60) days after the date of acceptance established by the Committee for such Purchased Stock Option by delivering cash or a check to the Company or its applicable subsidiary. Each Purchased Stock Option represents the right to acquire one share of Common Stock upon the exercise of such Purchased Stock Option. The number of stock options, whether Purchased Stock Options or otherwise, issued by the Company and outstanding as of January 31, 1997 is 30,884,517. The Purchased Stock Options are not listed on an exchange. For such Purchased Stock Options, the Committee, pursuant to authority granted by Article B, paragraph 3 of the Plan, has waived the conditions and restrictions of paragraphs 4(a) and (b) of Article G as follows: the Purchased Stock Options will remain exercisable for up to one (1) month following any termination of employment; provided that if termination of employment occurs as a result of death, retirement or Special Separation, the stock option will remain exercisable for its full term until its date of expiration.

     There is no guarantee that the price of the Common Stock will exceed the exercise price of any Purchased Stock Option, in which case such Purchased Stock Option would have no value.

2. Shares Awarded as a Portion of Remuneration

     Any shares of Common Stock of the Company awarded as a portion of a participant’s remuneration shall be valued at not less than one hundred percent (100%) of the fair market value of the Company’s Common Stock on the date of the award. These shares may be subject to such conditions or restrictions as the Committee may determine, including a requirement that the participant remain in the employ of the Company or one of its subsidiaries for a set period of time, or until retirement. Failure to abide by any applicable restriction will result in forfeiture of the shares.

3. U.S. Tax Treatment for U.S. Persons

     Incentive Stock Options

     With regard to tax effects which may accrue to the optionee, counsel advises that if the optionee has continuously been an employee from the time an option has been granted until at least three months before it is exercised, under existing law no taxable income results to the optionee from the exercise of an incentive stock option at the time of exercise. However, the spread at exercise is an “adjustment” item for alternative minimum tax purposes.

     Any gain realized on the sale or other disposition of stock acquired on exercise of an incentive stock option is considered as long-term capital gain for tax purposes if the stock has been held more than two years after the date the option was granted and more than one year after the date of exercise of the option. If the stock is disposed of within one year after exercise, the lesser of any gain on such disposition or the spread at exercise (i.e., the excess of the fair market value of the stock on the date of exercise over the option price) is treated as ordinary income, and any appreciation after the date of exercise is considered long-term or short-term capital gain to the optionee depending on the holding period prior to sale. However, the spread at exercise (even if greater than the gain on the disposition) is treated as ordinary income if the disposition is one on which a loss, if sustained, is not recognized—e.g., a gift, a “wash” sale or a sale to a related party. The amount of ordinary income recognized by the optionee is treated as a tax deductible expense to the Company. No other amount relative to an incentive stock option is a tax deductible expense to the Company.

     Nonstatutory Stock Options

     With regard to tax effects which may accrue to the optionee, counsel advises that under existing tax law gain taxable as ordinary income to the optionee is deemed to be realized at the date of exercise of the option, the gain on each share being the difference between the market price on the date of exercise and the option price. This amount is treated as a tax deductible expense to the Company at the time of the exercise of the option. Any appreciation in the value of the stock after the date of exercise is considered a long-term or short-term capital gain to the optionee depending on whether or not the stock was held for the appropriate holding period prior to sale.

     Stock Appreciation Rights

     With regard to tax effects which may accrue to the recipient, counsel advises that “United States persons,” as defined in the Internal Revenue Code of 1986 (the “I.R.C.”), must recognize ordinary income as of the date of exercise equal to the amount paid to the recipient, i.e., the difference between the grant price and the value of the shares on the date of exercise.

     Shares Awarded as a Portion of Remuneration

     With regard to tax effects which may accrue to the recipient, counsel advises that “United States persons” as defined in the Internal Revenue Code of 1986 (the “I.R.C.”), must recognize ordinary income in the first taxable year in which the recipient’s rights to the stock are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable. Recipients who are “United States persons” may also elect to include the income in their tax returns for the taxable year in which they receive the shares by filing an election to do so with the appropriate office of the Internal Revenue Service within 30 days of the date the shares are transferred to them.

     The amount includable in income is the fair market value of the shares as of the day the shares are transferable or not subject to a substantial risk of forfeiture, whichever is applicable; if the recipient has elected to include the income in the year in which the shares are received, the amount of income includable is the fair market value of the shares at the time of transfer.

     For non-United States persons, the time when income is realized, its measurement and its taxation, will depend on the laws of the particular countries in which the recipients are residents and/or citizens at the time of transfer or when the shares are first transferable and not subject to a substantial risk of forfeiture, as the case may be. “United States persons” who receive shares awarded as a portion of remuneration may also have tax consequences with respect to the receipt of shares or the expiration of restrictions or substantial risk of forfeiture on such shares under the laws of the particular country other than the United States of which such person is a resident or citizen.

     Notwithstanding the above advice received by the Company, it is each individual recipient’s responsibility to check with his or her personal tax adviser as to the tax effects and proper handling of stock options, stock appreciation rights and Common Stock acquired. The above advice relates specifically to the U.S. consequences of stock options, stock appreciation rights and Common Stock acquired, including the U.S. consequences to “United States persons” whether or not resident in the U.S. In addition to U.S. tax consequences, for all persons who are not U.S. residents, the time when income, if any, is realized, the measurement of such income and its taxation will also depend on the laws of the particular country other than the U.S. of which such persons are resident and/or citizens at the time of grant or sale or the time of exercise, as the case may be.

     The Plan is not subject to the qualification requirements of Section 401(a) of the I.R.C.

4. Employee Retirement Income Security Act of 1974

     The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended.

5. Incorporation of Certain Documents by Reference

     The following documents filed by the Company with the Securities and Exchange Commission (File No. 1-434) pursuant to the 1934 Act are incorporated into this document by reference:

1.	The Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2001;
2.	The Company’s Quarterly Reports on Form 10-Q for the quarter ended September 30, 2001;
3.	All other documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold.

     The Company will provide without charge to each participant in the Plan, upon oral or written request, a copy of any or all of these documents other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents. In addition, the Company will provide without charge to such participants a copy of the Company’s most recent annual report to shareholders, proxy statement, and other communications distributed generally to security holders of the Company. Requests for such copies should be directed to Mr. James C. Ashely, Manager, Shareholder Services, The Procter & Gamble Company, P.O. Box 5572, Cincinnati, Ohio 45201, (513) 983-3413.

6. Additional Information

     Additional information about the Plan and its administrators may be obtained from Mr. Terry L. Overbey, Secretary, The Procter & Gamble Company, One Procter & Gamble Plaza, Cincinnati, Ohio 45202, (513) 983-4463.

EX-10.10

EXHIBIT (10-10)

Summary of the Company’s Short Term Achievement Reward Program and related
correspondence and terms and conditions

SHORT TERM ACHIEVEMENT REWARD PROGRAM

The Short Term Achievement Reward (“STAR”) Program is The Procter & Gamble Company’s (the “Company”) annual bonus program designed to motivate and reward employees for achieving outstanding short term business results for the Company and its subsidiaries. STAR awards are made pursuant to authority delegated to the Compensation & Leadership Development Committee (the “C&LD Committee”) by the Board of Directors for awarding compensation to the Company’s principal officers and for making awards under the Procter & Gamble 2001 Stock and Incentive Compensation Plan (the “2001 Plan”) and/or the 2004 Gillette Long Term Incentive Plan (the “Gillette Plan”).

I. ELIGIBILITY

Employees at Band 3 or above and who worked at least 28 days (four calendar weeks) during the applicable fiscal year are eligible to participate. Eligible employees who do not work a full schedule (e.g., leaves of absence, disability, and less-than-full time schedules) in the fiscal year in which the award is payable may have awards pro-rated.

II. CALCULATION

The individual STAR Award is calculated as follows:

(STAR Target) x (Business Unit Performance Factor) x (Total Company Factor)

•	The STAR Target for each participant is calculated as:
	(Base Salary) x (STAR Target percent)
	Base Salary at the end of the applicable fiscal year is used to calculate the STAR award.
	Generally, the STAR Target Percent is dependent on the individual’s position and level (Band) in the organization. The STAR Target percent for participants at Band 7 or above is set by the C&LD Committee. The STAR Target percent for all other participants is set by the Chairman of the Board and Chief Executive Officer, with the concurrence of the Global Human Resources Officer, pursuant to authority delegated to them by the C&LD Committee. If an individual’s position and/or level changes during a fiscal year, and that change results in a new STAR Target Percent, the STAR Target Percent is pro-rated according to the amount of time in each position/level during the fiscal year.
•	The Business Unit Performance Factor is based on the fiscal year success for the appropriate STAR business unit. The STAR business units are determined by the Global Human Resources Officer. The Business Unit Performance Factors can range from 53% to 167% with the target at 100%. A smaller committee consisting of at least two of the Chairman of the Board and Chief Executive Officer, the Chief Financial Officer, the Global Human Resources Officer and the Chief Operating Officer (the “STAR Committee”), conducts a comprehensive retrospective assessment of the fiscal year performance of each STAR business unit according to one or more of the following measures: Operating Total Shareholder Return, Key Competitor Comparison, After Tax Profit, Operating Cash Flow, Value Share, Volume, Net Outside Sales, Value Contribution, Organization Head Self Assessment, and Cross Organization Assessment. The STAR Committee makes a recommendation of an appropriate Business Unit/Corporate Function Performance Factor to the C&LD Committee. There may also be other factors significantly affecting unit results positively or negatively which can be considered by the STAR Committee when making its recommendation. No

member of the STAR Committee makes any recommendation or determination as to their own STAR award.

•

The Total Company Factor is based on the total Company’s success during the fiscal year and ranges from 80% to 130%, with a 100% target. The same Total Company Factor is applied to all STAR award calculations, regardless of business unit. It is determined using the attached matrix which measures organic sales growth for the fiscal year and diluted earnings per share (“EPS”) growth for the fiscal year.

While the STAR Committee makes recommendations to the C&LD Committee regarding the performance factor percentages to be applied to all STAR awards (except those for the STAR Committee members), only the final award amounts for principal officers are approved specifically by the C&LD Committee. The C&LD Committee has delegated the approval of STAR awards for other participants to the Chief Executive Officer. The C&LD Committee has discretion to use, increase or decrease the performance factor percentages recommended by the STAR Committee and/or to choose not to pay STAR awards during a given year.

Each year the C&LD Committee approves a cash pool for STAR awards equal to a percentage of basic net earnings multiplied by the number of common shares outstanding, and the C&LD Committee sets a limit on the portion of that pool which can be awarded to each of the Named Executives subject to Section 162(m) of the Internal Revenue Service code. This ensures that any STAR awards paid to such executives are fully tax deductible by the Company.

III. TIMING AND FORM

STAR awards are determined after the close of the fiscal year and are paid on or about September 15. The award form choices and relevant considerations are explained in payment preference materials generally in the form of Appendix 1. Participants receive written notice of their award detailing the calculation, generally in the form of Appendix 2. The grant letters used for those employees who elect to receive awards in stock options or restricted stock units are generally in the form of Appendix 3.

Generally, STAR awards are paid in cash. However, before the end of the calendar year preceding the award date, eligible participants can elect to receive their STAR award in forms other than cash. Alternatives to cash include stock options, local deferral programs (depending on local regulations in some countries), or restricted stock units and/or deferred compensation (for participants also in the Business Growth Program). The Company converts cash to other forms of payment (e.g., stock options, restricted stock units, etc.) using a conversion factor that is reviewed and approved by the C&LD Committee annually. Any STAR award paid in stock options, restricted stock units or other form of equity shall be awarded pursuant to this program and the terms and conditions of the 2001 Plan, the Gillette Plan or any successor stock plan approved in accordance with applicable listing standards, as they may be revised from time to time.

IV. SEPARATION FROM THE COMPANY

• Retirement, Death or Special Separation with a Separation Package: If a participant worked at least 28 days (4 calendar weeks) during the fiscal year, the STAR award is pro-rated by dividing the number of calendar days the participant was an “active employee” during the fiscal year by 365.

• Voluntary Resignation or Termination for cause: Separating employees must have been active employees as of June 30 (the close of the fiscal year for which the award is payable) to receive an award.

Eligible participants who have left the Company will receive a cash payment (equity such as stock options and RSUs can only be issued to active employees) on the same timing as STAR awards or as soon thereafter as possible.

V. CHANGE IN CONTROL

Notwithstanding the foregoing, if there is a Change in Control in any fiscal year, STAR awards will be calculated in accordance with Section II above, but each factor will be calculated for the period from the beginning of the fiscal year in which a Change in Control occurred up to and including the date of such Change in Control (“CIC Period”). “Change in Control” shall have the same meaning as defined in the 2001 Plan.

VI. GENERAL TERMS AND CONDITIONS

While any STAR award amount received by one individual for any year shall be considered as earned remuneration in addition to salary paid, it shall be understood that this plan does not give to any officer or employee any contract rights, express or implied, against any Company for any STAR award or for compensation in addition to the salary paid to him or her, or any right to question the action of the Board of Directors or the C&LD or STAR Committees.

Each award to the Chairman of the Board and Chief Executive Officer, Vice-Chairs, Group Presidents, Presidents, Global Function Heads and Senior Vice Presidents and equivalents, made pursuant to this plan, is subject to the Senior Executive Recoupment Policy adopted by the C&LD Committee in December 2006.

This program document may be amended at any time by the C&LD Committee.

Appendix 1: Payment Preference Materials for STAR Awards

[DATE]
[NAME]

Subject: Preferences for [YEAR] STAR Payments and Deferred Compensation Choices

Your choices for the awards are:

September [YEAR] STAR Award

• Cash

• Stock Options

• Restricted Stock Units (for BGP participants only) – no forfeiture provision

• Deferred Compensation (for BGP participants only)

Attached you will find an election form to be returned to [NAME].

Please keep the following in mind as you consider your choices:

• It is recommended that you consult legal/tax/financial advisors to determine the appropriate award form(s) for your personal situation.

• While your selection will be given consideration, it is not binding on the Company until approved by the Compensation & Leadership Development Committee of the Board of Directors.

IF YOU MISS THE [DATE] DEADLINE, YOU WILL RECEIVE THE DEFAULT (CASH).

[NAME]

[YEAR] EXECUTIVE COMPENSATION AWARD FORM PREFERENCES

[YEAR] STAR Award Payable [DATE] [YEAR] Preference Selection

Cash	%
Stock Options	%
Restricted Stock Units	%		(Select year you want shares delivered, e.g., [YEAR], or one year after retirement)
Deferred Compensation	%
Total		100%

• You must be an active employee as of the award date to receive any non-cash award

• All elections are irrevocable after [DATE].

Signature Date

Return form to [NAME]

Appendix 2: STAR Award Letter

[DATE]
Fellow P&G Leaders:

I am pleased to announce the average STAR award for [YEAR] is [NUMBER] % of target. STAR awards are a determined based on your individual Business Unit Performance Factor and a Total Company Factor. Business Unit Performance Factors are decided by the STAR Committee based on a retrospective assessment of each unit’s performance. The Total Company Factor is calculated based on P&G’s organic sales growth and earnings per share. [EXPLANATION OF COMPANY RESULTS and COMPARISON TO PREVIOUS YEAR]

Actual STAR awards as a percentage of target [HISTORICAL COMPARISON OF RESULTS TO PREVIOUS YEAR(S)]

By remaining choiceful, focused, and disciplined, we can look forward to future success. Well done! Thanks.

[NAME]

Personal & Confidential
Individual Award Summary
[NAME]

Your STAR Award is [NUMBER] payable in [FORM]

[Number]	x	[Number]%	x	[Number]%	=	Number
STAR Target		Business Unit		Total		STAR
	x	Performance	x	Company	=	Award
		Factor		Factor

STAR Target
Based on	June 30 [YEAR] Base Salary:	[NUMBER]
	Band Level(s) during [YEAR]:	[NUMBER]
	STAR Target Percent:	[NUMBER]
	(Adjusted and/or prorated, as appropriate)
	Base x STAR Target Percent:	[NUMBER]
	Your STAR Target:	[NUMBER]

Business Unit Performance
Business Unit	Weight	Performance Factor
[Business Unit]	[NUMBER]	[NUMBER] %

Total Company Factor
Organic Sales Growth	[NUMBER]
Earnings Per Share	[NUMBER]
Total Company Factor	[NUMBER] %

Your STAR Award is [NUMBER] % of STAR Target

Appendix 3: Cover letter for STAR Grant
in Stock Options and Stock Appreciation Rights

TO: Short Term Achievement Reward (STAR) Recipients of P&G Stock Options and Stock Appreciation Rights*

The attached stock option grant letter refers to your STAR award. The grant was determined by dividing the gross award amount to be paid in stock options (shown on your award summary previously distributed) by the [DATE] closing stock price of $ [NUMBER]. The result was multiplied by [NUMBER] and then rounded up to the next full share. No further action to accept this grant is required.

You may retain these STAR stock options until their expiration date in [NUMBER] years even if you leave the Company, as long as you are in good standing. This is true for STAR stock options only as they represent payment for the award that you have already earned. These options will vest in [NUMBER] years.

Stock options are granted under the terms and conditions of the 2001 Procter & Gamble Stock and Incentive Compensation Plan. The updated plan prospectus is available via the [WEBSITE].

Please keep a copy of the grant letter for your records. If you have any questions about the award granted, please direct them to [NAME]. Questions related to the exercise process should be directed to [NAME].

[NAME]

* Recipients of stock appreciation rights should see their subsidiary Chief Financial Officer regarding the procedure for redeeming such rights.

Grant Letter for STAR Award in Stock Options
and Stock Appreciation Rights

[DATE]
[NAME]
Subject:      Non-Statutory Stock Option Series xx-STAR-xx

In recognition of your contributions to the success of the business, the Procter & Gamble Company (“Company”) hereby grants to you an option to purchase shares of the Procter & Gamble Common Stock as follows:

Grant Value:	[NUMBER]
Option Price per Share:	[NUMBER]
Number of Shares:	[NUMBER]
Date of Grant:	[DATE]
Expiration of Option:	[DATE]
Option Exercisable:	[NUMBER]% after [DATE]

This stock option is granted in accordance with and subject to the terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan (including any applicable sub-plan) (the “Plan”), the Regulations of the Compensation & Leadership Development Committee of the Board of Directors (the “Committee”), and the Exercise Instructions in place as may be revised from time to time,

You may access, download and/or print the terms, or any portion thereof, of the Plan by activating this hyperlink [LINK]. Nonetheless, if you would prefer to receive a paper copy of The Procter & Gamble 2001 Stock and Incentive Compensation Plan, please send a written request via email to [EMAIL ADDRESS]. Please understand that you will continue to receive future Plan materials and information via electronic mail even though you may have requested a paper copy.

This option is not transferable other than by will or the laws of descent and distribution and is exercisable during your life only by you. The Compensation & Leadership Development Committee has waived the provisions of Article G, paragraph 4 in the event of separation from the Company.

Please note that when the issue or transfer of the Common Stock covered by this option may, in the opinion of the Company, conflict or be inconsistent with any applicable law or regulation of any governmental agency, the Company reserves the right to refuse to issue or transfer said Common Stock and that any outstanding stock options may be suspended or terminated if you engage in actions that are significantly contrary to the best interests of the Company or any of its subsidiaries.

Under IRS standards of professional practice, certain tax advice must meet requirements as to form and substance. To assure compliance with these standards, we disclose to you that this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties, or promoting, marketing or recommending to another party any transaction or matter addressed herein.

You do not need to do anything further to accept this award under the terms of the 2001 Stock Plan.

The Procter & Gamble Company
[NAME]

Grant Letter for STAR Award in RSUs

[DATE]
[NAME]

     Subject: Award of Restricted Stock Units (STAR)

This is to advise you that The Procter & Gamble Company, an Ohio corporation, is awarding you with Restricted Stock Units, on the dates and in the amounts listed below, pursuant to The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and subject to the attached Statement of Terms and Conditions Form [CODE]

Grant Date:	[DATE]
Original Settlement Date:	[DATE]
Number of Restricted Stock Units:	[NUMBER

Paragraph 3(a) of Statement of Terms and Conditions Form [CODE] is not waived.

As you will see from the Statement of Terms and Conditions Form [CODE], under certain circumstances you may agree with The Procter & Gamble Company to delay the settlement of your Restricted Stock Units beyond the Original Settlement Date. You may want to consult your personal tax advisor before making a decision about this matter.

THE PROCTER & GAMBLE COMPANY
          [NAME]

o I hereby accept the Award of Restricted Stock Units set forth above in accordance with and subject to the terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan and the attached Statement of Terms and Conditions for Restricted Stock Units, with which I am familiar. I agree that the Award of Restricted Stock Units, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, and the attached Statement of Terms and Conditions for Restricted Stock Units together constitute an agreement between the Company and me in accordance with the terms thereof and hereof, and I further agree that any legal action related to this Award of Restricted Stock Units may be brought in any federal or state court located in Hamilton County, Ohio, USA, and I hereby accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this Award of Restricted Stock Units.

o I hereby reject the Award of Restricted Stock Units set forth above.

Date Signature

EX-10.14

EXHIBIT (10-14)

Amended Revolving Credit Agreement among Procter & Gamble International S.a.r.1 and a
syndicate of banks led by Citigroup

EXECUTION VERSION

AMENDMENT TO $17B 364-DAY REVOLVING CREDIT AGREEMENT

As of January 31, 2008

          Reference is made to the $17B 364-Day Revolving Credit Agreement, dated as of July 27, 2005 (as amended as of July 30, 2006, as further amended as of December 7, 2006, as further amended as of August 17, 2007 and as may be further amended, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”) among The Procter & Gamble Company, an Ohio corporation (“P&G”), Procter & Gamble International S.A.R.L., a société a responsibility é limitée organized under the laws of the Grand Duchy of Luxembourg. Procter & Gamble Holding (HK) Limited, a company organized and existing under the laws of Hong Kong, Procter & Gamble International Operations S.A., a company organized and existing under the laws of Switzerland, the Additional Borrowers party thereto (collectively, the “Borrowers”), the Lenders party thereto, Citibank, N.A., as administrative agent for such Lenders (the “Agent”), JPMorgan Chase Bank, N.A., as syndication agent, and ABN Amro Bank N.V., Deutsche Bank Securities Inc. and HSBC Bank USA, National Association, as
co-documentation agents. Capitalized terms not otherwise defined in this Amendment shall have the same meanings as specified therefor in the Credit Agreement.

PRELIMINARY STATEMENTS

          The Lenders have agreed to make and have made loans and other extensions of credit to the Borrowers under the Credit Agreement. The Borrowers have requested and, on the Amendment Effective Date (as hereinafter defined), the Lenders will have agreed, that certain provisions of the Credit Agreement be amended and otherwise modified in the manner provided for herein.

          As of the date hereof, (i) the aggregate outstanding principal amount of Tranche B Advances owing to Procter & Gamble Financial Services (“PGFS”) is $11,829,490,971.68, of which $9,811,779,061.19 have an Interest Period that ends on January 31, 2008 (the “First Refinancing Date”) and of which $2,071,711,910.49 have an Interest Period that ends on February 5, 2008 (the “Second Refinancing Date”), (ii) PGFS has an outstanding Tranche B Commitment of $12,100,000,000 and (iii) no Lender other than PGFS has an outstanding Tranche B Commitment or Tranche B Advances owing to it. Each of the First Refinancing Date and the Second Refinancing Date are referred to herein as a “Refinancing Date”, as the context may require.

          NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other valuable consideration the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

          SECTION 1. Amendment To The Credit Agreement. On the First Refinancing Date, so long as the Amendment Effective Date has occurred, up to $9,811,779,061.19 of the outstanding Tranche B Advances shall be refinanced into and shall constitute obligations solely of one or more of the Borrowers under an agreement (the “Intercompany Loan Agreement”) entered into or concurrently to be entered into solely by and among such Borrowers and PGFS and/or any of its affiliates. On the Second Refinancing Date, so long as the Amendment Effective Date has occurred, all of the Tranche B Advances that remain outstanding on such date shall be refinanced into and shall constitute obligations solely under the Intercompany Loan Agreement. On each Refinancing Date, after giving effect to the refinancing consummated on such date, the parties acknowledge and agree that (i) the Tranche B Advances so refinanced on such date shall no longer be governed by the Credit Agreement or any other Loan Document, (ii) no Lender shall have any interest in any Tranche B Advances so refinanced on such date (except as otherwise provided in Section 2 below) and (iii) the Agent shall have no further duties or obligations to PGFS under or in respect of any of the Tranche B Advances so refinanced on such date. It

is understood and agreed that, on or prior to the Second Refinancing Date, P&G may (and intends to) deliver a notice pursuant to Section 2.01(c) of the Credit Agreement on or prior to the Second Refinancing Date that reallocates all or a portion of the Tranche B Commitments (which shall then be unused) to additional Tranche A Commitments.

          SECTION 2. Conditions Precedent to the Effectiveness of this Amendment. This Amendment shall become effective as of the date first above written (the “Amendment Effective Date”) when (i) P&G, the Required Lenders and the Agent shall have executed this Amendment and (ii) the Initial Borrower, or P&G on its behalf, shall have notified the Agent that the Intercompany Loan Agreement has become effective.

          SECTION 3. Reference To And Effect On The Loan Documents. On and after the Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended hereby. Except as amended herein, all of the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed.

          SECTION 6. Execution in Counterparts. This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Amendment signed by all the parties shall be lodged with P&G and the Agent.

          SECTION 7. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

[signature pages follow]

2

          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written.

THE PROCTER & GAMBLE COMPANY, as a Borrower
By
	Name:
	Title:

CITIBANK, N.A., as Agent and Lender
By
	Name:
	Title:

ABN AMRO BANK N.V., as Lender
By
	Name:
	Title:
By
	Name:
	Title:

DEUTSCHE BANK AG, NEW YORK BRANCH, as Lender
By
	Name:
	Title:
By
	Name:
	Title:

HSBC BANK USA, NATIONAL ASSOCIATION, as Lender
By
	Name:
	Title:

JPMORGAN CHASE BANK, N.A., as Lender
By
	Name:
	Title:

MERRILL LYNCH CAPITAL CORP., as Lender
By
	Name:
	Title:

MERRILL LYNCH BANK USA, as Lender
By
	Name:
	Title:

GOLDMAN SACHS CREDIT PARTNERS L.P., as Lender
By
	Name:
	Title:

MORGAN STANLEY SENIOR FUNDING, INC., as Lender
By
	Name:
	Title:

THE HONG KONG SHANGHAI BANKING CORPORATION LIMITED, as an Exiting Lender
By
	Name:
	Title:

EXECUTION COPY

AMENDMENT TO REVOLVING CREDIT AGREEMENT

As of August 17, 2007

          Reference is made to the Revolving Credit Agreement dated as of July 27, 2005 (as amended as of July 30, 2006 and as further amended as of December 7, 2006 and as may be further amended, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”) among Procter & Gamble International S.A.R.L., a société à responsabilité limitée organized under the laws of the Grand Duchy of Luxembourg (the “Initial Borrower”), the Additional Borrowers party thereto, the Lenders party thereto, Citibank, N.A., as administrative agent for such Lenders (the “Agent”), Citigroup Global Markets Inc., as sole lead arranger and sole book runner, JPMorgan Chase Bank, N.A., as syndication agent, and ABN Amro Bank N.V. and Deutsche Bank Securities Inc., as co-documentation agents. Capitalized terms not otherwise defined in this Amendment shall have the same meanings as specified therefor in the Credit Agreement.

PRELIMINARY STATEMENTS

          The Lenders have agreed to make and have made loans and other extensions of credit to the Borrowers under the Credit Agreement. The Initial Borrower has requested and, upon this Amendment becoming effective, the Lenders will have agreed, that certain provisions of the Credit Agreement be amended and otherwise modified in the manner provided for herein.

          NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other valuable consideration the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

          SECTION 1. Amendment To The Credit Agreement. As of the Amendment Effective Date (as hereinafter defined), the Credit Agreement shall be amended and restated in its entirety in the form of Exhibit A hereto, in part, and Exhibit B hereto, in part.

          SECTION 2. Conditions Precedent. This Amendment shall become effective as of the date first above written (the “Amendment Effective Date”) when (i) the Borrowers, Lenders and the Agent shall have executed this Amendment with respect to Exhibit A, (ii) the Borrowers, the Required Lenders and the Agent have executed this Amendment with respect to Exhibit B, and (iii) Agent shall have received a certificate from P&G certifying that the resolutions of P&G, the Initial Borrower and each Additional Borrower authorizing the execution, delivery and performance of the Credit Agreement, copies of which have been previously delivered to Agent, remain in full force and effect without any modification or amendment.

          SECTION 3. Assignment and Acceptance; Exiting Lenders. Each of the Lenders agrees that such Lender has effected all required purchases and sales of its Commitments and outstanding Advances owing to it under the Credit Agreement such that, as of the Amendment Effective Date, (i) such Lender’s Commitments and outstanding Advances owing to it under the agreement set forth on Exhibit A hereto shall be as set forth on Schedule II to such agreement and (ii) such Lender’s Commitments and outstanding Advances owing to it under the agreement set forth on Exhibit B hereto shall be as set forth on Schedule II to such agreement. Each Borrower hereby ratifies and confirms that the Commitments and outstanding Advances owing to each of the Lenders under each such agreement as of the Amendment Effective Date are as set forth on Schedule II to each respective agreement. Notwithstanding any other provision of this Amendment or in Exhibit A or Exhibit B, each Lender that is a party to the Credit Agreement listed on the signature pages hereof as an “Exiting Lender” (each, an “Exiting Lender”) shall cease to be a party to the Credit Agreement on the Amendment Effective Date and shall be paid on the

Amendment Effective Date (A) the aggregate principal amount of, and any interest accrued and unpaid to the Amendment Effective Date on the outstanding Advances, if any, of such Exiting Lender plus (B) any accrued but unpaid facility fees owing to such Exiting Lender as of the Amendment Effective Date; plus (C) all additional costs, reimbursements, expense reimbursements and indemnities payable to such Exiting Lender, and all other accrued and unpaid amounts owing to such Exiting Lender, under the Credit Agreement, as of the Amendment Effective Date.

          SECTION 4. Reference To And Effect On The Loan Documents. On and after the Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended and otherwise modified hereby. Except as amended or waived herein, all of the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed.

          SECTION 5. Execution in Counterparts. This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Amendment signed by all the parties shall be lodged with the Initial Borrower and the Administrative Agent.

          SECTION 6. Confirmation of Guaranty. By execution below, P&G hereby consents to this Amendment and hereby confirms and agrees that (a) notwithstanding the effectiveness of this Amendment, the P&G Guaranty is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that, on and after the effectiveness of this Amendment, each reference in the Guaranty to the “Credit Agreement”, “thereunder”, “thereof” or words of like import shall mean and be a reference to the Credit Agreement, as amended hereby.

          SECTION 7. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

[signature pages follow]

2

          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written.

PROCTER & GAMBLE INTERNATIONAL S.A.R.L., as the Initial Borrower
By
	Name:
	Title:

PROCTER & GAMBLE HOLDING (HK) LIMITED, as a Borrower
By
	Name:
	Title:
PROCTER & GAMBLE INTERNATIONAL OPERATIONS S.A., as a Borrower
By
	Name:
	Title:
THE PROCTER & GAMBLE COMPANY, as a Guarantor
By
	Name:
	Title:

CITIBANK, N.A., as Agent and Lender
By
	Name:
	Title:

ABN AMRO BANK N.V., as Lender
By
	Name:
	Title:

DEUTSCHE BANK AG, NEW YORK BRANCH, as Lender
By
	Name:
	Title:

HSBC BANK USA, NATIONAL ASSOCIATION, as Lender
By
	Name:
	Title:
JPMORGAN CHASE BANK, N.A., as Lender
By
	Name:
	Title:
MERRILL LYNCH CAPITAL CORP., as Lender
By
	Name:
	Title:
MERRILL LYNCH BANK USA, as Lender
By
	Name:
	Title:

MORGAN STANLEY BANK, as Lender
By
	Name:
	Title:

MORGAN STANLEY SENIOR FUNDING, INC., as Lender
By
	Name:
	Title:
GOLDMAN SACHS CREDIT PARTNERS L.P., as Lender
By
	Name:
	Title:
THE HONG KONG SHANGHAI BANKING CORPORATION LIMITED, as an Exiting Lender
By
	Name:
	Title:

EXECUTION COPY

U.S. $17,000,000,000

364-DAY REVOLVING CREDIT AGREEMENT

Dated as of June 27, 2005, as amended as of July 30, 2006, as further amended as of December 7, 2006
and as further amended as of August 17, 2007

among

THE PROCTER & GAMBLE COMPANY,
PROCTER & GAMBLE INTERNATIONAL S.A.R.L.,
PROCTER & GAMBLE HOLDING (HK) LIMITED,
PROCTER & GAMBLE INTERNATIONAL OPERATIONS S.A., and
THE ADDITIONAL BORROWERS (AS DEFINED HEREIN)
as Borrowers

and

THE LENDERS PARTY HERETO
as Lenders

and

CITIBANK, N.A.
as Sole Lead Arranger and Administrative Agent

and

JPMORGAN CHASE BANK, N.A.
as Syndication Agent

and

ABN AMRO BANK N.V., DEUTSCHE BANK AG, NEW YORK BRANCH and
HSBC BANK USA, NATIONAL ASSOCIATION
as Co-Documentation Agents

TABLE OF CONTENTS

	Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS		1
SECTION 1.01 Certain Defined Terms		1
SECTION 1.02 Computation of Time Periods		12
SECTION 1.03 Accounting Terms		12
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES		12
SECTION 2.01 The Revolving Credit Advances and Reallocation Between Facilities		12
SECTION 2.02 Making the Revolving Credit Advances		13
SECTION 2.03 Competitive Bid Facility		15
SECTION 2.04 Facility Fees		18
SECTION 2.05 Termination or Reduction of the Commitments		19
SECTION 2.06 Repayment of Advances		19
SECTION 2.07 Interest on Revolving Credit Advances		19
SECTION 2.08 Interest Rate Determination		21
SECTION 2.09 Optional Conversion of Advances		22
SECTION 2.10 Prepayments		22
SECTION 2.11 Increased Costs		23
SECTION 2.12 Illegality		24
SECTION 2.13 Payments and Computations		25
SECTION 2.14 Taxes		26
SECTION 2.15 Sharing of Payments, Etc.		29
SECTION 2.16 Use of Proceeds		29
SECTION 2.17 Evidence of Debt		30
SECTION 2.18 Call Right of Affiliates		30
SECTION 2.19 Put Right of Affiliates		30
SECTION 2.20 Extension of Facility		31
ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING		33
SECTION 3.01 Conditions Precedent to Initial Borrowing		33
SECTION 3.02 Conditions Precedent to Each Borrowing		34
SECTION 3.03 Determinations Under Section 3.01		34
ARTICLE IV REPRESENTATIONS AND WARRANTIES		34
SECTION 4.01 Representations and Warranties of the Borrowers		34
ARTICLE V COVENANTS OF P&G		36

-i-

TABLE OF CONTENTS
(Continued)

	Page
SECTION 5.01 Affirmative Covenants		36
SECTION 5.02 Negative Covenants		37
ARTICLE VI EVENTS OF DEFAULT		38
SECTION 6.01 Events of Default		38
SECTION 6.02 Remedies		39
ARTICLE VII THE AGENT		39
SECTION 7.01 Authorization and Action		39
SECTION 7.02 Agent’s Reliance, Etc.		40
SECTION 7.03 Citibank and Affiliates		40
SECTION 7.04 Lender Credit Decision		40
SECTION 7.05 Indemnification		41
SECTION 7.06 Successor Agent		41
SECTION 7.07 Sub-Agent		41
SECTION 7.08 Other Agents		42
ARTICLE VIII MISCELLANEOUS		42
SECTION 8.01 Amendments, Etc.		42
SECTION 8.02 Notices, Etc.		42
SECTION 8.03 No Waiver; Remedies		43
SECTION 8.04 Costs and Expenses		43
SECTION 8.05 Right of Set-off		45
SECTION 8.06 Binding Effect		45
SECTION 8.07 Assignments and Participations		45
SECTION 8.08 Confidentiality		47
SECTION 8.09 Judgment Currency		48
SECTION 8.10 Additional Borrowers; Assumption of Advances		48
SECTION 8.11 Replacement of Lenders		49
SECTION 8.12 Governing Law		49
SECTION 8.13 Jurisdiction		49
SECTION 8.14 Execution in Counterparts		50
SECTION 8.15 Waiver of Jury Trial		50
SECTION 8.16 Patriot Act		50

-ii-

Schedules
Schedule I	–	List of Applicable Lending Offices
Schedule II	–	Commitments
Exhibits
Exhibit A-1	–	Form of Notice of Revolving Credit Borrowing
Exhibit A-2	–	Form of Notice of Competitive Bid Borrowing
Exhibit B	–	Form of Assignment and Acceptance
Exhibit C-1	–	Form of Opinion of Luxembourg Counsel for the Initial Borrower
Exhibit C-2	–	Form of Opinion of In-house Counsel for the Initial Borrower
Exhibit C-3	–	Form of Opinion of Special Counsel for the Initial Borrower
Exhibit D	–	Form of Borrower Accession Agreement
Exhibit E	–	Form of Section 2.14 Certificate
Exhibit F-1	–	Form of Tranche A Note
Exhibit F-2	–	Form of Tranche B Note
Exhibit F-3	–	Form of Competitive Bid Note
Exhibit G	–	Form of Notice of Extension of Termination Date

-iii-

$17,000,000,000
364-DAY REVOLVING CREDIT AGREEMENT

Dated as of July 27, 2005,

as amended as of July 30, 2006, as further amended as of December 7, 2006 and as further amended as of
August 17, 2007

     THE PROCTER & GAMBLE COMPANY, an Ohio corporation (“P&G”), PROCTER & GAMBLE INTERNATIONAL S.A.R.L., a société à responsabilité limitée organized under the laws of the Grand Duchy of Luxembourg (“PGI”), PROCTER & GAMBLE HOLDING (HK) LIMITED, a company organized and existing under the laws of Hong Kong (“P&G HK”), PROCTER & GAMBLE INTERNATIONAL OPERATIONS S.A., a company organized and existing under the laws of Switzerland (“PGIO” and, together with P&G, PGI, P&G HK and the Additional Borrowers (as hereinafter defined), collectively, the “Borrowers”), the LENDERS PARTY HERETO, CITIBANK, N.A., as sole lead arranger and administrative agent for such Lenders (together with any successor thereto appointed pursuant to Article VII, the “Agent”), JPMORGAN CHASE BANK, N.A., as syndication agent and ABN AMRO BANK N.V., DEUTSCHE BANK AG, NEW YORK BRANCH and HSBC BANK USA, NATIONAL ASSOCIATION., as co-documentation agents, agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

     SECTION 1.01 Certain Defined Terms.

     As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

     “Act” has the meaning specified in Section 8.16.

     “Additional Borrower” has the meaning specified in Section 8.10(a).

     “Advance” means a Tranche A Advance, a Tranche B Advance or a Competitive Bid Advance made by a Lender to a Borrower as part of a Borrowing and refers to a Base Rate Advance or a Eurocurrency Rate Advance (each of which shall be a “Type” of Advance).

     “Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to vote 10% or more of the Voting Equity of such Person.

     “Agent’s Account” means (a) in the case of Advances denominated in Dollars, the account of the Agent maintained at Citibank, N.A., at its office at Two Penns Way, New Castle, Delaware 19720, Account No. 36852248, Attention: Bank Loan Syndications, (b) in the case of Advances denominated in any Optional Currency, the account of the Sub-Agent designated in writing from time to time by the Agent to the Borrowers and the Lenders for such purpose, and (c) in any such case, such other account of the Agent as is designated in writing from time to time by the Agent to each of the Borrowers and the Lenders for such purpose.

     “Agreement” means this 364-Day Revolving Credit Agreement, dated as of August 17, 2007, as amended, supplemented or otherwise modified from time to time.

     “Amendment Effective Date” means the date on which the condition precedent to the effectiveness of the amendment to this Agreement, dated as of December 7, 2006, has been satisfied.

     “Applicable Lending Office” means, with respect to each Lender, such Lender’s Domestic Lending Office in the case of a Base Rate Advance and such Lender’s Eurocurrency Lending Office in the case of a Eurocurrency Rate Advance and, in the case of a Competitive Bid Advance, the office of such Lender or any of its Affiliates notified by such Lender to the Agent as its Applicable Lending Office with respect to such Competitive Bid Advance. It is acknowledged and agreed that any Lender may have one or more Applicable Lending Offices with respect to Advances of any Type made or to be made to any Borrower and one or more other Applicable Lending Offices with respect to Advances of such Type made or to be made to any other Borrower.

     “Applicable Margin” means, as of any date, (a) for Base Rate Advances, 0.000% per annum and (b) for Eurocurrency Rate Advances, 0.070% per annum.

     “Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and any Person and approved by P&G and the Agent, in substantially the form of Exhibit B hereto or in such other form as agreed to by P&G, the Agent and the applicable Lender assignee.

     “Assuming Extending Lender” has the meaning specified in Section 2.20(c).

     “Base Rate” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of:

     (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.’s base rate; and

     (b) 0.50% per annum above the Federal Funds Rate.

     “Base Rate Advance” means a Revolving Credit Advance denominated in Dollars that bears interest as provided in Section 2.07(a)(i).

     “beneficial owner” has the meaning specified in Section 2.14(c)(v).

     “Borrowers” has the meaning specified in the recital of parties to this Agreement.

     “Borrowing” means a Revolving Credit Borrowing or a Competitive Bid Borrowing.

     “Borrower Accession Agreement” has the meaning specified in Section 8.10(a).

     “Business Day” means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurocurrency Rate Advances, on which dealings are carried on in the London interbank market (or, in the case of an Advance denominated in (i) Euros, on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open or (ii) a currency other than Dollars and Euros, on which dealings in deposits in the relevant currency are conducted by and between banks in the London or other applicable offshore interbank markets for such currency).

-2-

     “Change in Law” has the meaning specified in Section 2.14(a).

     “Closing Date” has the meaning specified in Section 3.01.

     “Commitment” means, with respect to each Lender, the Tranche A Commitment or the Tranche B Commitment of such Lender, as the context may require.

     “Communications” has the meaning specified in Section 8.02(b).

     “Competitive Bid Advance” means an advance by a Lender to any Borrower as part of a Competitive Bid Borrowing and refers to a Fixed Rate Advance or a Eurocurrency Rate Advance.

     “Competitive Bid Borrowing” means a borrowing consisting of simultaneous Competitive Bid Advances from each of the Lenders whose offer to make one or more Competitive Bid Advances as part of such Borrowing has been accepted under the competitive bidding procedure described in Section 2.03.

     “Competitive Bid Note” has the meaning specified in Section 2.03(f).

     “Competitive Bid Reduction” means, at any time, the deemed use of each Lender’s Tranche A Commitment in an amount equal to such Lender’s Pro Rata Share of all outstanding Competitive Bid Advances at such time.

     “Confidential Information” means information that P&G or any of the other Borrowers furnishes to the Agent or any Lender on a confidential basis or that a reasonable Person would conclude is confidential or proprietary, but does not include any such information that is or becomes generally available to the public or that is or becomes available to the Agent or such Lender from a source other than P&G, any of the other Borrowers or any of their Affiliates or any of their respective advisors.

     “Consenting Lender” has the meaning specified in Section 2.20(b).

     “Consolidated” refers to the consolidation of accounts in accordance with GAAP.

     “Consolidated Assets” means, with respect to any Person, all assets of such Person and its Subsidiaries that, in accordance with GAAP, would be classified as assets on the balance sheet of such Person determined on a Consolidated basis.

     “Consolidated EBITDA” means, for any Person for any period, net income (or net loss) plus the sum of (a) interest expense, (b) income tax expense, (c) depreciation expense and (d) amortization expense, in each case determined for such Person and its Consolidated Subsidiaries in accordance with GAAP for such period.

     “Convert”, “Conversion” and “Converted” each refers to a conversion of Revolving Credit Advances under a particular Facility and of one Type into Revolving Credit Advances under such particular Facility of the other Type pursuant to Section 2.08 or 2.09.

     “Covered Jurisdiction” means, with respect to any Borrower, the United States, Switzerland and Ireland.

     “Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person’s business), (c) all obligations of

-3-

such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (e) all non-contingent obligations to reimburse any Person in respect of any amounts paid under acceptances, letters of credit or similar extensions of credit, (f) all Debt of others referred to in clauses (a) through (e) above or clause (g) below guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (g) all Debt referred to in clauses (a) through (f) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Mortgage on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt.

     “Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Advances required to be funded by it hereunder within three Business Days of the date required to be funded by it hereunder and such failure is continuing, or (b) has otherwise failed to pay over to the Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, and such failure is continuing, unless the subject of a good faith dispute.

     “Dollars” and the “$” sign each means lawful currency of the United States of America.

     “Domestic Lending Office” means, with respect to any Lender, the office, offices, Affiliate or Affiliates of such Lender specified as its “Domestic Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office or Affiliate of such Lender as such Lender may from time to time specify to each of the Borrowers and the Agent. It is acknowledged and agreed that any Lender may specify one or more Domestic Lending Offices with respect to Advances made or to be made to any Borrower and one or more other Domestic Lending Offices with respect to Advances made or to be made to any other Borrower; provided that no Lender may specify more than one Domestic Lending Office unless it also specifies a “Principal Domestic Lending Office”, in which case such “Principal Domestic Lending Office” shall be deemed to be its “Domestic Lending Office” for purposes of the definition herein of “Eurocurrency Lending Office” and Section 8.02.

     “Email” has the meaning specified in Section 8.02(a).

     “EMU” means Economic and Monetary Union as contemplated in the Treaty of Rome.

     “EMU Legislation” means legislative measures of the European Union for the introduction of, changeover to or operation of the Euro in one or more member states, being in part legislative measures to implement EMU.

     “Equivalent” means, at any time, (a) with respect to any amount denominated in Dollars, the equivalent amount thereof in the applicable Optional Currency determined by using the quoted spot rate at which the Sub-Agent’s principal office in London offers to exchange Dollars for such Optional Currency in London prior to 4:00 P.M. (London time) (unless otherwise indicated by the terms of this

-4-

Agreement) on such date as is required pursuant to the terms of this Agreement and (b) with respect to any amount denominated in any Optional Currency, the equivalent amount thereof in Dollars determined by using the quoted spot rate at which the Sub-Agent’s principal office in London offers to exchange such Optional Currency for Dollars in London prior to 4:00 P.M. (London time) (unless otherwise indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this Agreement.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

     “Euro” and “(euro)” means the lawful currency of the European Union as constituted by the Treaty of Rome which established the European Community.

     “Eurocurrency Lending Office” means, with respect to any Lender, the office, offices, Affiliate or Affiliates of such Lender specified as its “Eurocurrency Lending Office” opposite its name on Schedule I hereto or in Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office, offices, Affiliate or Affiliates of such Lender as such Lender may from time to time specify to each of the Borrowers and the Agent. It is acknowledged and agreed that any Lender may specify one or more Eurocurrency Lending Offices with respect to Advances made or to be made to any Borrower and one or more other Eurocurrency Lending Offices with respect to Advances made or to be made to any other Borrower.

     “Eurocurrency Rate” means, for any Interest Period for each Eurocurrency Rate Advance comprising part of the same Borrowing, the rate per annum (rounded upward to the nearest whole multiple of 1/1000 of 1% per annum) appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page) as the London interbank offered rate for deposits in the applicable currency at approximately 11:00 A.M. (London time) on the Business Day immediately preceding the first day of such Interest Period, for a term comparable to such Interest Period or, if for any reason such rate is not available, the average (rounded upward to the nearest whole multiple of 1/1000 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in the applicable currency is offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) on the Business Day immediately preceding the first day of such Interest Period in an amount substantially equal to such Reference Bank’s Eurocurrency Rate Advance comprising part of such Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period. If the Reuters Screen LIBOR01 Page (or on any successor or substitute page) is unavailable, the Eurocurrency Rate for any Interest Period for each Eurocurrency Rate Advance comprising part of the same Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks on the Business Day immediately preceding the first day of such Interest Period, subject, however, to the provisions of Section 2.08.

     “Eurocurrency Rate Advance” means a Revolving Credit Advance denominated in any Optional Currency that bears interest as provided in Section 2.07(a)(ii) or a Competitive Bid Advance denominated in any Optional Currency that bears interest by reference to the Eurocurrency Rate.

     “Events of Default” has the meaning specified in Section 6.01.

     “Excluded Taxes” means, (a) with respect to any Lender or the Agent, Taxes imposed on such Person’s overall net income (and franchise Taxes imposed on such Person in lieu of net income Taxes) as a result of any present or former connection between such Person and the relevant taxing authority, in each case, whether in effect as of the date hereof or subsequently imposed as a result of a Change in Law, and (b) with respect to payments made by any Borrower organized in a Covered Jurisdiction to any

-5-

Person, any Taxes not imposed as a direct result of a Change in Law occurring after the date on which such Person became a Lender or the Agent.

     “Existing Credit Agreement” means the Bridge Credit Agreement dated as of January 28, 2005 between the Initial Borrower and Merrill Lynch Capital Corporation, as amended, supplemented and otherwise modified from time to time.

     “Facility” means the Tranche A Facility or the Tranche B Facility, as the context may require.

     “Facility Fee” has the meaning specified in Section 2.04(a).

     “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it.

     “Five Year Revolving Credit Agreement” means the Five Year Revolving Credit Agreement, dated as of June 27, 2005 (as amended as of July 20, 2006, as further amended as of December 7, 2006, and further amended as of August 17, 2007, and as may be further amended, supplemented or otherwise modified from time to time, the), among the Borrower, the other “Borrowers” referred to therein, Citibank, N.A, as the Agent, the Lenders, Citigroup Global Markets Inc., as sole lead arranger and sole book runner, JPMorgan Chase Bank, N.A., as syndication agent, and Deutsche Bank Securities Inc., as documentation agent.

     “Fixed Rate Advances” means a Competitive Bid Advance denominated in any Optional Currency that bears interest as provided in Section 2.03(a)(i).

     “GAAP” has the meaning specified in Section 1.03.

     “Indemnified Costs” has the meaning specified in Section 7.05.

     “Initial Borrower” means PGI, in its capacity as the Initial Borrower under the Existing Credit Agreement.

     “Initial Lender” means each financial institution identified as an Initial Lender on the signature pages to this Agreement.

     “Interest Payment Date” means (a) with respect to any Base Rate Advance, (i) the last day of each March, June, September and December during the period in which such Base Rate Advance is outstanding and (ii) the date such Base Rate Advance is Converted or paid in full, and (b) with respect to any Eurocurrency Rate Advance, (i) the last day of each Interest Period applicable to such Eurocurrency Rate Advance and, if such Interest Period has a duration of more than three months, each day that occurs during such Interest Period every three months from the first day of such Interest Period and (ii) the date such Eurocurrency Rate Advance is Converted or paid in full.

     “Interest Period” means, for each Eurocurrency Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurocurrency Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurocurrency Rate Advance and ending on the last day

-6-

of the period selected by the Borrower requesting a Borrowing pursuant to the provisions below and, thereafter, with respect to Eurocurrency Rate Advances, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by such Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one week or one, two, three or six, or to the extent generally available, nine or twelve months, as such Borrower may, upon notice received by the Agent not later than 9:00 A.M. (New York City time) on the Business Day immediately preceding the first day of such Interest Period, select; provided, however, that:

     (a) no Borrower may select any Interest Period that ends after the Termination Date or, if the Advances have been converted to a term loan pursuant to Section 2.20 prior to such selection, that ends after the Maturity Date;

     (b) Interest Periods commencing on the same date for Eurocurrency Rate Advances comprising part of the same Borrowing shall be of the same duration;

     (c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and

     (d) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.

     “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

     “Lenders” means each Initial Lender and each Person that shall become a party hereto pursuant to Section 8.07 and, as to any Lender, the term “Lender” includes any of its Affiliates designated as such by such Lender located in (e.g., being fiscally resident in or organized in or having a branch, office, permanent establishment or other place of business in) a Covered Jurisdiction.

     “Loan Documents” means, collectively, this Agreement, each Note, if any, and each Borrower Accession Agreement.

     “Material Adverse Change” means any material adverse change in the financial condition or results of operations of P&G and its Subsidiaries, taken as a whole.

     “Material Adverse Effect” means a material adverse effect on (a) the financial condition or results of operations of P&G and its Subsidiaries, taken as a whole, (b) the rights and remedies of the Agent or the Lenders under any Loan Document or (c) the ability of the Borrowers to perform their obligations under the Loan Documents.

     “Material Subsidiary” means, at any time, any Subsidiary of P&G having (a) assets with a value of not less than 5% of the total value of the assets of P&G and its Subsidiaries, taken as a whole, or (b) Consolidated EBITDA of not less than 5% of the aggregate Consolidated EBITDA of P&G and its Subsidiaries, taken as a whole, in each case as of the end of or for the most recently completed fiscal quarter of P&G.

-7-

     “Maturity Date” means the earlier of (a) the first or second anniversary of the Scheduled Termination Date, as determined by P&G in accordance with Section 2.20 and (b) the date of termination in whole of the aggregate Commitments pursuant to Section 2.05 or 6.02.

     “Mortgage” means any lien or security interest or other charge or encumbrance having the effect of a lien or security interest.

     “Non-Consenting Lender” has the meaning specified in Section 2.20(b).

     “Non-Excluded Taxes” has the meaning specified in Section 2.14(a).

     “Note” means a Tranche A Note, a Tranche B Note or a Competitive Bid Note, as context may require.

     “Notice” has the meaning specified in Section 8.02(c).

     “Notice of Competitive Bid Borrowing” has the meaning specified in Section 2.03(a)(i).

     “Notice of Revolving Credit Borrowing” has the meaning specified in Section 2.02(a).

     “Optional Currency” means Dollars, Sterling, Yen or Euro, as the context may require.

     “P&G Guaranty” means the Guaranty dated as of August 23, 2006 made by P&G in favor of the Agent and the Lenders.

     “Permitted Mortgages” means the following types of Mortgages:

     (a) Mortgages for taxes, assessments and governmental charges or levies to the extent not otherwise required to be paid under Section 5.01(b);

     (b) Mortgages imposed by law, including, without limitation, materialmen’s, mechanics’, carriers’, workmen’s, storage and repairmen’s Mortgages and other similar Mortgages arising in the ordinary course of business;

     (c) pledges or deposits to secure obligations under workers’ compensation laws, unemployment insurance or other similar social security legislation (including, without limitation, in respect of employee benefit plans subject to ERISA) or to secure public or statutory obligations;

     (d) Mortgages securing the performance of, or payment in respect of, tenders, statutory obligations, progress or advance payments, contract bids, government or utility obligations, payment, performance, surety and return-of-money bonds and other similar obligations incurred in the ordinary course of business and other obligations of a similar nature, whether pursuant to statutory requirements, common law or consensual arrangements;

     (e) any interest or title of a lessor or sublessor or a licensor and any restriction or encumbrance to which the interest or title of such lessor, sublessor or licensor may be subject;

     (f) Mortgages arising out of judgments or awards that do not constitute an Event of Default under Section 6.01(e);

-8-

     (g) rights of way, easements, restrictions (including zoning restrictions), covenants, consents, reservations, encroachments, variations, mineral reservations and rights, leases, licenses and other similar restrictions, charges, encumbrances (whether or not recorded), prior rights of other Persons, and similar obligations with respect to real property arising by operation of law or contained in similar instruments;

     (h) Mortgages arising from the rights of lessors under leases (including financing statements regarding property subject to such leases or subleases);

     (i) rights of consignors of goods, whether or not perfected by the filing of a financing statement under the Uniform Commercial Code of any jurisdiction (or similar filings and recordings under equivalent provisions of applicable law), including, without limitation, goods which are the subject of tolling agreements or manufacturing and servicing agreements;

     (j) leases, licenses, subleases or sublicenses (including the provision of software under an open source license) which would not have a Material Adverse Effect;

     (k) Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

     (l) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on the items in the course of collection, (ii) attaching to commodity trading accounts or other commodities brokerage accounts and (iii) in favor of a banking or other financial institution arising as a matter of law encumbering deposits or other funds maintained with a financial institution (including the right of set off);

     (m) Liens consisting of an agreement or arrangement to sell, lease, transfer or otherwise convey or dispose of property of P&G and/or one or more of its Subsidiaries; and

     (n) Liens arising as part of the securitization (or other similar arrangements) or other off-balance sheet financing of property of P&G and/or one or more of its Subsidiaries.

     “Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.

     “Platform” has the meaning specified in Section 8.02(b).

     “Primary Currency” has the meaning specified in Section 8.09(b).

     “Principal Manufacturing Property” means any facility (together with the land on which it is erected and fixtures comprising a part thereof) used primarily for manufacturing or processing, wherever located, owned or leased by any Borrower or any Subsidiary of any Borrower and having a gross book value in excess of $750,000,000, other than any such facility or portion thereof (a) which is a pollution control or other facility financed by obligations issued by (i) a state or local governmental unit pursuant to Section 103(b)(4)(E), 103(b)(4)(F) or 103(b)(6) of the Internal Revenue Code of 1954, or any successor provision thereof, or (ii) the equivalent of the financing referred to in subclause (a)(i) above in any jurisdiction other than the United States, or (b) which, in the opinion of the Board of Directors of P&G or any Borrower, is not of material importance to the total business conducted by P&G and its Subsidiaries, considered as a whole.

-9-

     “Process Agent” has the meaning specified in Section 8.13(a).

     “Pro Rata Share” of any amount means, with respect to any Lender at any time, the product of (a) such amount multiplied by (b) a fraction the numerator of which is the amount of such Lender’s Commitment(s) under the applicable Facility or Facilities at such time (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.02 at or prior to such time, such Lender’s Commitment(s) under the applicable Facility or Facilities as in effect immediately prior to such termination) and the denominator of which is the aggregate amount of such Facility or Facilities at such time (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.02 at or prior to such time, the applicable Facility or Facilities as in effect immediately prior to such termination).

     “Reference Advance” has the meaning specified in Section 2.07(c).

     “Reference Banks” means (a) in the case of any Revolving Credit Borrowing, Citibank, N.A. and JPMorgan Chase Bank, N.A. and (b) in the case of any Competitive Bid Borrowing, two of the Lenders making the all or part of such Competitive Bid Borrowing (as selected by the applicable Borrower) or if only one Lender is making such Competitive Bid Borrowing, such Lender.

     “Register” has the meaning specified in Section 8.07(d).

     “Related Indemnified Party” has the meaning specified in Section 8.04(b).

     “Required Lenders” means at any time Lenders owed in excess of 50% of the then aggregate unpaid principal amount (based on the Equivalent in Dollars at such time) of the Revolving Credit Advances owing to the Lenders or, if no such principal amount is then outstanding, Lenders having in excess of 50% of the Commitments; provided, however, that if any Lender shall be an Affiliate of any Borrower at such time, there shall be excluded from the determination of Required Lenders at such time the then aggregate unpaid principal amount (based on the Equivalent in Dollars at such time) of the Revolving Credit Advances owing to such Affiliate (in its capacity as a Lender) at such time or, if no such principal amount is then outstanding, such Affiliate’s Commitment at such time.

     “Revolving Credit Advance” means a Tranche A Advance or a Tranche B Advance, as applicable.

     “Revolving Credit Borrowing” means a Tranche A Borrowing or a Tranche B Borrowing, as applicable.

     “Scheduled Termination Date” means the Termination Date as defined by reference to clause (a) of the definition thereof.

     “Section 2.14 Certificate” has the meaning specified in Section 2.14(c)(ii).

     “Sterling” means the lawful currency of the United Kingdom.

     “Sub-Agent” means Citibank International plc.

     “Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits

-10-

of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

     “Taxes” has the meaning specified in Section 2.14(a).

     “Termination Date” means the earlier of (a) August 15, 2008 and (b) the date of termination in whole of the aggregate Commitments pursuant to Section 2.05 or 6.02.

     “Tranche A Advance” means an advance by a Lender to a Borrower as part of a Tranche A Borrowing and refers to a Base Rate Advance or a Eurocurrency Rate Advance.

     “Tranche A Borrowing” means a Borrowing consisting of simultaneous Tranche A Advances of the same Type made by each of the Lenders pursuant to Section 2.01(b).

     “Tranche A Commitment” means, with respect to each Lender, the amount set forth opposite such Lender’s name on Schedule II hereof and identified as its “Tranche A Commitment” or, if such Lender has entered into any Assignment and Acceptance, the amount set forth for such Lender in the Register maintained by the Agent pursuant to Section 8.07(d), as such amount may be reduced pursuant to Section 2.05.

     “Tranche A Facility” means, at any time, the aggregate Tranche A Commitments of all of the Lenders at such time.

     “Tranche A Note” has the meaning specified in Section 2.17(a).

     “Tranche B Advance” means an advance by a Lender to a Borrower as part of a Tranche B Borrowing and refers to a Base Rate Advance or a Eurocurrency Rate Advance.

     “Tranche B Borrowing” means a Borrowing consisting of simultaneous Tranche B Advances of the same Type made by each of the Lenders pursuant to Section 2.01(c).

     “Tranche B Commitment” means, with respect to each Lender, the amount set forth opposite such Lender’s name on Schedule II hereof and identified as its “Tranche B Commitment” or, if such Lender has entered into any Assignment and Acceptance, the amount set forth for such Lender in the Register maintained by the Agent pursuant to Section 8.07(d), as such amount may be reduced pursuant to Section 2.05.

     “Tranche B Facility” means, at any time, the aggregate Tranche B Commitments of all of the Lenders at such time.

     “Tranche B Note” has the meaning specified in Section 2.17(a).

     “Treaty of Rome” means the Treaty of Rome of 25 March 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on 7 February 1992 and came into force on 1 November 1993), as such treaty may be amended from time to time and as referred to in the EMU legislation.

     “Type” has the meaning specified in the definition of “Advance” set forth in this Section 1.01.

-11-

     “Unused Tranche A Commitment” means, with respect to any Lender at any time, (a) such Lender’s Tranche A Commitment at such time, less (b) the sum of:

     (i) the aggregate principal amount of all Tranche A Advances made by such Lender (in its capacity as a Lender) and outstanding at such time; and

     (ii) the product of (A) a fraction the numerator of which is the amount of such Lender’s Tranche A Commitment at such time minus the aggregate principal amount of the Tranche A Advances held by such Lender at such time and the denominator of which is the aggregate Tranche A Commitments of all Lenders at such time minus the aggregate principal amount of the Tranche A Advances made by the Lenders and outstanding at such time and (B) the aggregate principal amount of all Competitive Bid Advances made by the Lenders and outstanding at such time.

     “Unused Tranche B Commitment” means, with respect to any Lender at any time, (a) such Lender’s Tranche B Commitment at such time, less (b) the aggregate principal amount of all Tranche B Advances made by such Lender (in its capacity as a Lender) and outstanding at such time.

     “Voting Equity” means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

     “Yen” means the lawful currency of Japan.

     SECTION 1.02 Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”.

     SECTION 1.03 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements delivered to the Agent in accordance with this Agreement (“GAAP”).

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES

     SECTION 2.01 The Revolving Credit Advances and Reallocation Between Facilities. (a) Tranche A Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Tranche A Advances to each Borrower from time to time on any Business Day during the period from the Closing Date until the Termination Date in an aggregate amount (based in respect of any Advances to be denominated in any Optional Currency other than Dollars by reference to the Equivalent thereof in Dollars determined on the date of delivery of the applicable Notice of Revolving Credit Borrowing) not to exceed such Lender’s Unused Tranche A Commitment. Each such Borrowing shall be in a minimum amount of $10,000,000, in respect of Tranche A

-12-

Advances denominated in Dollars (or the Equivalent in any other applicable Optional Currency thereof), or, if less, an aggregate amount equal to the amount by which the aggregate amount of a proposed Competitive Bid Borrowing requested by any Borrower exceeds the aggregate amount of Competitive Bid Advances offered to be made by the Lenders and accepted by such Borrower in respect of such Competitive Bid Borrowing, if such Competitive Bid Borrowing is made on the same date as such Tranche A Borrowing) and shall consist of Tranche A Advances of the same Type made on the same day by the Lenders ratably according to their respective Tranche A Commitments; provided that such minimum amount shall not apply with respect to any Revolving Credit Advances made in accordance with the provisions of Sections 2.04(b) or 2.07(c). Within the limits of each Lender’s Tranche A Commitment, each Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.10 and reborrow under this Section 2.01(a).

     (b) Tranche B Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Tranche B Advances to each Borrower from time to time on any Business Day during the period from the Closing Date until the Termination Date in an aggregate amount (based in respect of any Advances to be denominated in any Optional Currency by reference to the Equivalent thereof in Dollars determined on the date of delivery of the applicable Notice of Revolving Credit Borrowing) not to exceed such Lender’s Unused Tranche B Commitment. Each such Borrowing shall be in a minimum amount of $10,000,000, in respect of Tranche B Advances denominated in Dollars (or the Equivalent in any other applicable Optional Currency thereof), and shall consist of Tranche B Advances of the same Type made on the same day by the Lenders ratably according to their respective Tranche B Commitments; provided that such minimum amount shall not apply with respect to any Tranche B Advances made in accordance with the provisions of Sections 2.04(b) or 2.07(c). Within the limits of each Lender’s Tranche B Commitment, each Borrower may borrow under this Section 2.01(b), prepay pursuant to Section 2.10 and reborrow under this Section 2.01(b).

     (c) Reallocation of Advances and Commitments. P&G shall be entitled, upon at least one Business Day’s notice to the Agent, to reallocate a portion of the Tranche A Commitments to additional Tranche B Commitments (and vice versa) and/or to reallocate all or a portion of the outstanding Tranche A Advances comprising part of the same Borrowings to additional Tranche B Advances comprising part of the same Borrowings (and vice versa); provided that (a) each such reallocation of Commitments and/or Advances shall be made ratably among the Lenders; provided that P&G, in its sole discretion, may elect to reallocate all, a portion or none of such Commitments and/or Advances to any Lender that is an Affiliate of a Borrower, (b) any such reallocation of Advances shall be in an aggregate principal amount of at least $100,000,000 (or the Equivalent in any other applicable Optional Currency thereof) or shall otherwise be all of the Revolving Credit Advances comprising part of the same Borrowings and (c) any such reallocation of Commitments and/or Advances may (but shall not be required) be made in conjunction with the exercise of the call rights set forth in Section 2.18 and/or the put rights set forth in Section 2.19. Any notice delivered by P&G pursuant to this Section 2.01(c) shall specify (i) the effective date of each intended reallocation of Commitments and/or Advances (ii) whether the reallocation is of Commitments, Revolving Credit Advances or both, (iii) the amount of each such reallocation of Commitments and/or Revolving Credit Advances and, in the case of Revolving Credit Advances, which Borrowings are to comprise such reallocation. On or promptly following the effective date of any reallocation of Commitments and/or Revolving Credit Advances pursuant to this Section 2.01(c), the Agent shall notify the Lenders of the effective date of each such reallocation and shall distribute a revised Schedule II hereto reflecting each such reallocation

     SECTION 2.02 Making the Revolving Credit Advances.

     (a)  Each Revolving Credit Borrowing shall be made on notice, given not later than (i) 9:00 A.M. (New York City time) on the Business Day immediately preceding the date of the proposed Borrowing in the case of a Revolving Credit Borrowing consisting of Eurocurrency Rate Advances denominated in Dollars, (ii) 11:00 A.M. (London time) on the second Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Eurocurrency Rate Advances denominated in any Optional Currency, or (iii) 9:00 A.M. (New York City time) on the Business Day of the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Base Rate Advances, by any Borrower to the Agent (and, in

-13-

the case of a Revolving Credit Borrowing consisting of Eurocurrency Rate Advances denominated in any Optional Currency, simultaneously to the Sub-Agent), which shall give to each Lender prompt notice thereof by telecopier or Email. Each such notice of a Revolving Credit Borrowing (a “Notice of Revolving Credit Borrowing”) shall be by Email, confirmed promptly by telephone or by telecopier and shall be in substantially the form of Exhibit A-1 hereto, specifying therein (A) the requested date of such Revolving Credit Borrowing, (B) whether such Borrowing is a Tranche A Borrowing or a Tranche B Borrowing, (C) the requested Type and Optional Currency of Revolving Credit Advances comprising such Revolving Credit Borrowing, (D) the requested aggregate amount of such Revolving Credit Borrowing, (E) in the case of a Revolving Credit Borrowing consisting of Eurocurrency Rate Advances, the requested initial Interest Period for each such Revolving Credit Advance, and (F) the requested account to which the proceeds of the requested Revolving Credit Borrowing are to be transferred. Each Lender shall, before 11:00 A.M. (New York City time) on the date of such Revolving Credit Borrowing, make available for the account of its Applicable Lending Office to the Agent at the Agent’s Account, in same day funds, such Lender’s ratable portion of such Revolving Credit Borrowing. After the Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the appropriate Borrower by transferring the amount thereof to the account designated by such Borrower for such purpose.

     (b) Anything in subsection (a) above to the contrary notwithstanding, no Borrower may select Eurocurrency Rate Advances for any Revolving Credit Borrowing if the obligation of the Lenders to make Eurocurrency Rate Advances shall then be suspended pursuant to Section 2.08 or 2.12.

     (c) Each Notice of Revolving Credit Borrowing shall be irrevocable and binding on the Borrower giving such notice. In the case of any Revolving Credit Borrowing which the related Notice of Revolving Credit Borrowing specifies is to be composed of Eurocurrency Rate Advances, such Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Revolving Credit Borrowing for such Revolving Credit Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Revolving Credit Advance to be made by such Lender as part of such Revolving Credit Borrowing when such Revolving Credit Advance, as a result of such failure, is not made on such date.

     (d) Unless the Agent or the Sub-Agent, as the case may be, shall have received notice from a Lender prior to the time of any Revolving Credit Borrowing that such Lender will not make available to the Agent or the Sub-Agent, as the case may be, such Lender’s Pro Rata Share of such Revolving Credit Borrowing, the Agent or the Sub-Agent, as the case may be, may assume that such Lender has made such portion available to the Agent or the Sub-Agent, as the case may be, on the date of such Revolving Credit Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent or the Sub-Agent, as the case may be, may, in reliance upon such assumption, make available to the Borrower requesting such Revolving Credit Borrowing on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Agent or the Sub-Agent, as the case may be, such Lender and such Borrower severally agree to repay to the Agent or the Sub-Agent, as the case may be, forthwith on demand (or, solely in the case of the Borrowers, within five days of such demand) such corresponding amount, together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Agent or the Sub-Agent, as the case may be, at (i) in the case of such Borrower, the interest rate applicable at the time to Revolving Credit Advances comprising such Revolving Credit Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent or the Sub-Agent, as the case may be, such corresponding amount, such amount so repaid shall constitute such Lender’s Revolving Credit Advance as part of such Revolving Credit Borrowing for purposes of this Agreement.

-14-

     (e) The failure of any Lender to make the Revolving Credit Advance to be made by it as part of any Revolving Credit Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Revolving Credit Advance to be made by such other Lender on the date of any Revolving Credit Borrowing.

     (f) Any Revolving Credit Advance made by any Applicable Lending Office of any Lender shall be deemed to be an Advance of such Lender for purposes of calculating the utilization of the Tranche A Commitment or the Tranche B Commitment (as applicable) of such Lender hereunder, except that if such Applicable Lending Office of such Lender is another Lender, such Revolving Credit Advance shall be deemed to be an Advance of such other Lender for purposes of calculating the utilization of the Tranche A Commitments or the Tranche B Commitments (as applicable) of both such Lenders hereunder.

     SECTION 2.03 Competitive Bid Facility. (a)  Each Lender severally agrees that any Borrower may make Competitive Bid Borrowings under this Section 2.03 from time to time on any Business Day during the period from the Closing Date until the date occurring 30 days prior to the Termination Date in the manner set forth below; provided that, the aggregate principal amount of the Competitive Bid Advances comprising each Competitive Bid Borrowing shall not exceed the aggregate Unused Tranche A Commitments of the Lenders at such time.

     (i) Any Borrower may request a Competitive Bid Borrowing under this Section 2.03 by delivering to the Agent (and, in the case of a Competitive Bid Borrowing not consisting of Fixed Rate Advances or Eurocurrency Rate Advances to be denominated in Dollars, simultaneously to the Sub-Agent), by telephone or Email, confirmed promptly in writing, or by telecopier, a notice of a Competitive Bid Borrowing (a “Notice of Competitive Bid Borrowing”), in substantially the form of Exhibit A-2 hereto, specifying therein (A) the requested date of such proposed Competitive Bid Borrowing (which shall be a Business Day), (B) the requested aggregate amount and Optional Currency of such proposed Competitive Bid Borrowing, (C) whether such proposed Competitive Bid Borrowing shall consist of Fixed Rate Advances or Eurocurrency Rate Advances, (D) in the case of a Competitive Bid Borrowing consisting of (1) Eurocurrency Rate Advances, the requested Interest Period for each such Eurocurrency Rate Advance and (2) Fixed Rate Advances, the requested maturity date for repayment of each such Fixed Rate Advance (which maturity date may not be earlier than the date occurring seven days after the date of such proposed Competitive Bid Borrowing or later than the earlier of (x) 365 days after the date of such proposed Competitive Bid Borrowing and (y) the Termination Date), (E) the requested interest payment date or dates for each Competitive Bid Advance comprising part of such proposed Competitive Bid Borrowing, (F) whether or not the Competitive Bid Advances comprising such proposed Competitive Bid Borrowing may be prepaid and, if so, whether with or without penalty, (G) the address and account number of such Borrower to which the proceeds of such proposed Competitive Bid Borrowing are to be advanced, and (H) the requested other terms, if any, to be applicable to such proposed Competitive Bid Borrowing, not later than (I) 9:00 A.M. (New York City time) at least two Business Days prior to the date of the proposed Competitive Bid Borrowing, if such Borrower shall specify in the related Notice of Competitive Bid Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum (the Advances comprising any such Competitive Bid Borrowing, which shall be denominated in Dollars or any Optional Currency, being referred to herein as “Fixed Rate Advances”) (II) 9:00 A.M. (New York City time) three Business Days preceding the date of the proposed Competitive Bid Borrowing in the case of a Competitive Bid Borrowing consisting of Eurocurrency Rate Advances denominated in Dollars, and (III) 2:00 P.M. (New York City time) three Business Days preceding the date of the proposed Competitive Bid Borrowing in the case of a Competitive Bid Borrowing consisting of Eurocurrency Rate Advances denominated in any

-15-

Optional Currency. Each Notice of Competitive Bid Borrowing shall be irrevocable and binding on the Borrower that requested such Competitive Bid Borrowing. The Agent or the Sub-Agent, as the case may be, shall in turn promptly notify each Lender of each request for a Competitive Bid Borrowing received by it from any Borrower by sending such Lender a copy of the related Notice of Competitive Bid Borrowing by telecopier or Email.

     (ii) Each Lender may, in its sole discretion, elect to irrevocably offer to make one or more Competitive Bid Advances to the Borrower requesting the Competitive Bid Advances as part of such proposed Competitive Bid Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Agent or the Sub-Agent, as the case may be (which shall give prompt notice thereof to the Borrower requesting the Competitive Bid Borrowing), before 12:00 P.M. (New York City time) one Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances, and (B) before 1:00 P.M. (New York City time) two Business Days prior to the date of the proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Eurocurrency Rate Advances, of the minimum amount and maximum amount of each Competitive Bid Advance that such Lender would be willing to make as part of such proposed Competitive Bid Borrowing (which amounts, subject to the proviso of the first sentence of this Section 2.03(a), may exceed such Lender’s Tranche A Commitment), the rate or rates of interest therefor and such Lender’s Applicable Lending Office with respect to such Competitive Bid Advance; provided that if the Agent, in its capacity as a Lender, shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower requesting such Competitive Bid Borrowing of such offer at least 30 minutes before the time and on the date on which notice of such election is to be given to the Agent or to the Sub-Agent, as the case may be, by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Agent, before 10:00 A.M. (New York City time) or the Sub-Agent before 12:00 Noon (London time), as the case may be, on the date on which notice of such election is to be given to the Agent or to the Sub-Agent, as the case may be, by the other Lenders, and such Lender shall not be obligated to, and shall not, make any Competitive Bid Advance as part of such proposed Competitive Bid Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Bid Advance as part of such proposed Competitive Bid Borrowing.

     (iii) The Borrower requesting any particular Competitive Bid Borrowing shall, in turn, before (A) 4:00 P.M. (New York City time) one Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances, and (B) 4:00 P.M. (New York City time) two Business Days prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Eurocurrency Rate Advances, either:

     (A) cancel such Competitive Bid Borrowing by giving the Agent notice to that effect; or

     (B) accept one or more of the offers made by any Lender or Lenders pursuant to Section 2.03(a)(ii), in its sole discretion but subject to the next two succeeding sentences, by giving notice to the Agent or to the Sub-Agent, as the case may be, of the amount of each Competitive Bid Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to such Borrower by the Agent or the Sub-Agent, as the case may be, on behalf of such Lender for such Competitive Bid Advance pursuant to Section 2.03(a)(ii)) to be made by each Lender as part of such Competitive Bid Borrowing, and reject any

-16-

remaining offers made by Lenders pursuant to Section 2.03(a)(ii) by giving the Agent or the Sub-Agent, as the case may be, notice to that effect; provided, however, that such Borrower may not accept offers that, in the aggregate, exceed the amount of the proposed Competitive Bid Borrowing specified in the related Notice of Competitive Bid Borrowing. The Borrower that requested such Competitive Bid Borrowing shall accept the offers made by any Lender or Lenders to make Competitive Bid Advances in order of the lowest to the highest rates of interest offered by such Lenders for a particular Competitive Bid Borrowing. If two or more Lenders have offered the same interest rate for a particular Competitive Bid Borrowing, the amount to be borrowed at such interest rate will be allocated among such Lenders ratably according to the amount that each such Lender offered at such interest rate.

     (iv) If the Borrower that requested any particular Competitive Bid Borrowing notifies the Agent or the Sub-Agent, as the case may be, that such Competitive Bid Borrowing is cancelled pursuant to Section 2.03(a)(iii)(A), the Agent or the Sub-Agent, as the case may be, shall give prompt notice thereof to each of the Lenders and such Competitive Bid Borrowing shall not be made.

     (v) If the Borrower that requested any particular Competitive Bid Borrowing accepts one or more of the offers made by any Lender or Lenders pursuant to Section 2.03(a)(iii)(B) in respect of such Competitive Bid Borrowing, the Agent or the Sub-Agent, as the case may be, shall in turn promptly notify (A) each Lender that has made an offer as described in Section 2.03(a)(ii) of the date and the aggregate amount of such Competitive Bid Borrowing and whether or not any offer or offers made by such Lender pursuant to Section 2.03(a)(ii) have been accepted by such Borrower and (B) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, (1) of the amount of each Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing and (2) upon receipt, that the Agent or the Sub-Agent, as the case may be, has received forms of documents appearing to fulfill the applicable conditions set forth in Article III. Each Lender that is to make a Competitive Bid Advance as part of any Competitive Bid Borrowing shall, before 12:00 Noon (New York City time) on the date of such Competitive Bid Borrowing specified in the notice received from the Agent or from the Sub-Agent, as the case may be, pursuant to subclause (v)(A) of the immediately preceding sentence or any later time when such Lender shall have received notice from the Agent or from the Sub-Agent, as the case may be, pursuant to subclause (v)(B)(2) of the immediately preceding sentence, make available for the account of its Applicable Lending Office to the Agent at the applicable Agent’s Account, in same day funds, such Lender’s portion of such Competitive Bid Borrowing. Upon fulfillment of the applicable conditions set forth in Article III and after receipt by the Agent of such funds, the Agent will make such funds available to the Borrower that requested such Borrowing at the address and the account number specified by such Borrower in the related Notice of Competitive Bid Borrowing or, if no such address and account number are specified in the related Notice of Competitive Bid Borrowing, at the Agent’s address referred to in Section 8.02. Promptly after (x) each Competitive Bid Borrowing, the Agent will notify each Lender of the amount of such Competitive Bid Borrowing, the corresponding Competitive Bid Reduction resulting therefrom and the dates upon which such Competitive Bid Reduction commenced and will terminate and (y) the prepayment of any Competitive Bid Borrowing by the applicable Borrower, the Agent will notify each Lender of the amount and date of each such prepayment and the amount, if any, of the corresponding Competitive Bid Reduction remaining after giving effect thereto.

     (vi) If the Borrower that requested any applicable Competitive Bid Borrowing notifies the Agent or the Sub-Agent, as the case may be, that it accepts one or more of the offers

-17-

made by any Lender or Lenders pursuant to Section 2.03(a)(iii)(B), such notice of acceptance shall be irrevocable and binding on such Borrower. Such Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Competitive Bid Borrowing for such Competitive Bid Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing when such Competitive Bid Advance, as a result of such failure, is not made on such date.

     (b) Each Competitive Bid Borrowing shall be in an aggregate amount of not less than $10,000,000 (or the Equivalent in any other Optional Currency thereof) and, following the making of each Competitive Bid Borrowing, the Borrowers shall be in compliance with the limitation set forth in the proviso to the first sentence of Section 2.03(a).

     (c) Within the limits and on the conditions set forth in this Section 2.03, any Borrower may from time to time borrow under Section 2.03(a), repay pursuant to Section 2.06(b) or prepay pursuant to Section 2.03(d), and reborrow under Section 2.03(a).

     (d) The Borrower to which any particular Competitive Bid Borrowing is made shall have no right to prepay the principal amount of any Competitive Bid Advance (or any portion thereof) unless, and then only on the terms, specified by such Borrower for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to Section 2.03(a)(i) and, if applicable, set forth in the Competitive Bid Note evidencing such Competitive Bid Advance.

     (e) The Borrower to which any particular Competitive Bid Borrowing is made shall pay interest on the unpaid principal amount of each Competitive Bid Advance from the date of such Competitive Bid Advance to the date the principal amount of such Competitive Bid Advance is repaid in full, at the rate of interest for and in the Optional Currency of such Competitive Bid Advance specified by the Lender making such Competitive Bid Advance in its notice with respect thereto delivered pursuant to Section 2.03(a)(ii), payable on the interest payment date or dates specified by such Borrower for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to Section 2.03(a)(i) and, if applicable, provided in the Competitive Bid Note evidencing such Competitive Bid Advance.

     (f) Each Borrower agrees that upon notice by any Lender to such Borrower (with a copy of such notice to the Agent) to the effect that a promissory note or other evidence of indebtedness is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) any Competitive Bid Advance owing to, or to be made by, such Lender as part of a Competitive Bid Borrowing, such Borrower shall promptly execute and deliver to such Lender a separate promissory note, in substantially the form of Exhibit F-2 hereto (each, a “Competitive Bid Note”), payable to the order of such Lender in a principal amount equal to the amount of indebtedness of such Borrower resulting from such Competitive Bid Advance.

     SECTION 2.04 Facility Fees.

     (a) P&G agrees to pay to the Agent for the account of each Lender a facility fee (a “Facility Fee”) in Dollars on the sum of (i) the aggregate amount of such Lender’s Commitments plus (ii) such Lender’s ratable share of the aggregate amount of the Commitments assumed by Affiliates of any of the Borrowers pursuant to Section 2.18, from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in

-18-

the case of each other Lender until the Termination Date or the Maturity Date, as applicable to such Lender, at a rate per annum equal to 0.025% per annum, payable in arrears quarterly on the last day of each March, June, September and December and on the Termination Date or the Maturity Date, as applicable.

     (b) At any time prior to the Termination Date, unless P&G shall have notified the Agent in writing on or before 9:00 A.M. (New York City time) on the Business Day immediately preceding the last day of each March, June, September and December and the Termination Date, that it will pay, in cash, the Facility Fees that are due and payable by it on such date, the Lenders will be deemed to have made Tranche A Advances and/or Tranche B Advances, as appropriate, on such date in an amount equal to the Facility Fees that would otherwise be due and payable on such date, in each case which Revolving Credit Advance, unless P&G has otherwise notified the Agent in writing on or before such Business Day, shall be a Eurocurrency Rate Advance denominated in Dollars (or the Equivalent in any other Optional Currency thereof) having an initial Interest Period of one week. Each Revolving Credit Advance made pursuant to this Section 2.04(b) shall be deemed to have made pursuant to the Commitments and shall be subject to the limitations that the aggregate outstanding principal amount of the Tranche A Advances may at no time exceed the amount of the Tranche A Facility then in effect and the aggregate outstanding principal amount of the Tranche B Advances may at no time exceed the amount of the Tranche B Facility then in effect.

     SECTION 2.05 Termination or Reduction of the Commitments.

     (a) Optional. P&G shall have the right, upon at least three Business Days’ notice to the Agent, to terminate in whole or reduce in part the Unused Tranche A Commitments or the Unused Tranche B Commitments of the Lenders; provided that each partial reduction shall be in the aggregate amount of $10,000,000; and provided, further, that P&G, in its sole discretion, may elect to effect such termination or reduction on a non-ratable basis with respect to the Unused Tranche A Commitments or the Unused Tranche B Commitments of one or more Lenders that are Affiliates of a Borrower (it being understood that such termination or reduction shall be on a ratable basis as to all other Lenders).

     (b) Mandatory. The Commitments of each Lender shall automatically terminate on the Termination Date or Maturity Date, as applicable to such Lender.

     SECTION 2.06 Repayment of Advances.

     (a) Revolving Credit Advances. Each Borrower shall repay to the Agent for the ratable account of each Lender on the Termination Date or Maturity Date, as applicable to such Lender the aggregate principal amount of all Revolving Credit Advances made by such Lender to it that are then outstanding.

     (b) Repayment of Competitive Bid Advances. Each Borrower shall repay to the Agent, for the account of each Lender that has made a Competitive Bid Advance, the aggregate outstanding principal amount of each Competitive Bid Advance made to such Borrower and owing to such Lender on the earlier of (i) the maturity date therefor, in the case of any such Competitive Bid Advance that is a Fixed Advance, or the last day of the Interest Period therefor, in the case of any such Competitive Bid Advance that is a Eurocurrency Rate Advance, in each case as specified in the related Notice of Competitive Bid Borrowing delivered pursuant to Section 2.03(a)(i) and, if applicable, provided in the Competitive Bid Note evidencing such Competitive Bid Advance, and (ii) the Termination Date.

     SECTION 2.07 Interest on Revolving Credit Advances.

-19-

     (a) Scheduled Interest. Subject to the provisions of Section 2.07(c), each Borrower shall pay interest on the unpaid principal amount of each Revolving Credit Advance made to it that is owing to each Lender from the date of such Revolving Credit Advance until such principal amount shall be paid in full, at the following rates per annum:

     (i) Base Rate Advances. During such periods as such Revolving Credit Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time plus (B) the Applicable Margin for Base Rate Advances, payable in arrears on each Interest Payment Date with respect to such Base Rate Advance.

     (ii) Eurocurrency Rate Advances. During such periods as such Revolving Credit Advance is a Eurocurrency Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurocurrency Rate for such Interest Period for such Advance plus (B) the Applicable Margin for Eurocurrency Rate Advances, payable in arrears on each Interest Payment Date with respect to such Eurocurrency Rate Advance.

     (b) Default Interest. Each Borrower shall pay interest on:

     (i) any portion of the unpaid principal amount of each Revolving Credit Advance made to it that is owing to each Lender that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Revolving Credit Advance pursuant to clause (a)(i) or (a)(ii) above, as the case may be;

     (ii) any portion of the unpaid principal amount of each Competitive Bid Advance made to such Borrower and owing to any Lender, payable in arrears on the date or dates interest is payable on such Competitive Bid Advance, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Competitive Bid Advance in the offer made by such Lender pursuant to Section 2.03(a)(ii) and accepted by such Borrower under Section 2.03(a)(v); and

     (iii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to clause (a)(i) above.

     (c) Capitalization of Interest. Unless the appropriate Borrower has notified the Agent in writing on or before 9:00 A.M. (New York City time) on the Business Day immediately preceding the relevant Interest Payment Date or date of a prepayment pursuant to Section 2.10(b)(i), that it will pay, in cash, the interest applicable to any Revolving Credit Advance that is due and payable by it on such Interest Payment Date in accordance with Section 2.07(a) or on such prepayment date in accordance with Section 2.10(b)(i), as applicable, the Lenders will be deemed to have made Tranche A Advances and/or Tranche B Advances, as appropriate, on such Interest Payment Date or prepayment date, as applicable, in an amount equal to the aggregate amount of interest that would otherwise be due and payable on such date, which Revolving Credit Advances shall, unless such Borrower has otherwise notified the Agent in writing on or before such Business Day, (i) be of the same Type and Optional Currency as the Advance (the “Reference Advance”) in respect of which such interest shall have accrued (in each case after giving effect to any Conversion of the Reference Advance on such Interest Payment Date), and (ii) if such Revolving Credit Advance is a Eurocurrency Rate Advance, have an initial Interest Period of the same

-20-

duration as the Interest Period commencing on such Interest Payment Date with respect to the Reference Advance, provided, however notwithstanding anything herein to the contrary, the appropriate Borrower shall pay in cash all accrued and unpaid interest on (x) Base Rate Advances made after the Scheduled Termination Date and (y) Eurocurrency Rate Advances the Interest Periods with respect to which have commenced after the Scheduled Termination Date. Each Revolving Credit Advance made pursuant to this Section 2.07(c) shall be deemed to have been made pursuant to the Commitments and shall be subject to the limitations that the aggregate outstanding principal amount of the Tranche A Advances may at no time exceed the amount of the Tranche A Facility then in effect and the aggregate outstanding principal amount of the Tranche B Advances may at no time exceed the amount of the Tranche B Facility then in effect.

     SECTION 2.08 Interest Rate Determination.

     (a) Each Reference Bank agrees to furnish to the Agent timely information for the purpose of determining each Eurocurrency Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Agent for the purpose of determining any such interest rate, the Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. The Agent shall give prompt notice to each of the Borrowers and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.07(a)(i) or 2.07(a)(ii), and the rate, if any, furnished by each Reference Bank for the purpose of determining the interest rate under Section 2.07(a)(ii).

     (b) If, with respect to any Eurocurrency Rate Advances, the Required Lenders in good faith notify the Agent that the Eurocurrency Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective Eurocurrency Rate Advances for such Interest Period, the Agent shall forthwith so notify each of the Borrowers and the Lenders, whereupon (i)(A) each Eurocurrency Rate Advance denominated in Dollars will automatically Convert into Base Rate Advances, and (B) each Eurocurrency Rate Advance denominated in any Optional Currency will automatically be exchanged for an Equivalent of Dollars and Convert into Base Rate Advances, and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurocurrency Rate Advances shall be suspended until the Agent shall notify each of the Borrowers and the Lenders that the circumstances causing such suspension no longer exist.

     (c) If any Borrower shall fail to select the duration of any Interest Period for any Eurocurrency Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01, the Agent will forthwith so notify each of the Borrowers and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Eurocurrency Rate Advances denominated in the same Optional Currency and having an Interest Period of one week.

     (d) On the date on which the aggregate unpaid principal amount of Eurocurrency Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000 (or the Equivalent in any other Optional Currency thereof), such Advances shall automatically (i) if such Eurocurrency Rate Advances are denominated in Dollars, Convert into Base Rate Advances and (ii) if such Eurocurrency Rate Advances are denominated in any other Optional Currency, be exchanged for an Equivalent amount of Dollars and Convert into Base Rate Advances.

     (e) Upon the occurrence and during the continuance of any Event of Default, (i) each Eurocurrency Rate Advance will, upon the written request of the Agent (at the request of the Required Lenders), on the last day of the then existing Interest Period therefor, (A) if such Eurocurrency Rate Advance is denominated in Dollars, be Converted into a Base Rate Advance and (B) if such Eurocurrency

-21-

Rate Advance is denominated in any other Optional Currency, be exchanged for an Equivalent amount of Dollars and be Converted into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurocurrency Rate Advances shall be suspended.

     (f) If either, with respect to Eurocurrency Rate Advances denominated in Dollars, the Reuters Screen LIBOR01 Page, or, with respect to Eurocurrency Rate Advances denominated in any other Optional Currency, the Reuters Screen LIBOR01 Page, is unavailable and, in each such case, fewer than two Reference Banks furnish timely information to the Agent for determining the applicable Eurocurrency Rate,

     (i) the Agent shall forthwith notify the applicable Borrower and the Lenders that the interest rate cannot be determined for such Eurocurrency Rate Advances,

     (ii) each such Advance will automatically, on the last day of the then existing Interest Period therefor, (A) if such Eurocurrency Rate Advance is denominated in Dollars, Convert into a Base Rate Advance and (B) if such Eurocurrency Rate Advance is denominated in any Optional Currency, be prepaid by the applicable Borrower or be automatically exchanged for an Equivalent amount of Dollars and be Converted into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and

     (iii) the obligation of the Lenders to make Eurocurrency Rate Advances or to Convert Advances into Eurocurrency Rate Advances shall be suspended until the Agent shall notify each of the Borrowers and the Lenders that the circumstances causing such suspension no longer exist.

     SECTION 2.09 Optional Conversion of Advances.

     Any Borrower may subject to the provisions of Sections 2.08 and 2.12, Convert all or any portion of Revolving Credit Advances under the same Facility of one Type made to it and comprising the same Borrowing into Advances of the other Type; provided, however, that (a) any such Conversion of (i) Base Rate Advances into Eurocurrency Advances denominated in Dollars or of Eurocurrency Advances of one Interest Period into Eurocurrency Advances denominated in Dollars and of another Interested Period shall be made on notice received no later than 9:00 A.M. (New York City time) on the Business Day immediately preceding the date of the proposed Conversion, or (ii) in all other cases, shall be made on notice received no later than 9:00 A.M. (New York City time) on the Business Day of the proposed Conversion, (b) in the case of any Conversion of Eurocurrency Rate Advances denominated in Dollars into Base Rate Advances other than on the last day of an Interest Period therefor, the Borrower requesting such Conversion shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(c), and (c) any Conversion of Base Rate Advances into Eurocurrency Rate Advances shall be in an amount not less than $10,000,000. Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) whether the Advances to be Converted are Tranche A Advances or Tranche B Advances, (iii) the Advances to be Converted, and (iv) if such Conversion is into Eurocurrency Rate Advances, the duration of the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower giving such notice.

     SECTION 2.10 Prepayments.

     (a) Optional.  Each Borrower may, upon at least three Business Days notice to the Agent in the case of any Revolving Credit Borrowing comprised of Eurocurrency Rate Advances and one Business Day’s notice to the Agent in the case of any Revolving Credit Borrowing comprised of Base Rate Advances, in each case stating the proposed date and aggregate principal amount of the prepayment, and

-22-

if such notice is given such Borrower shall, prepay the outstanding principal amount of the Tranche A Advances or the Tranche B Advances comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (i) each partial prepayment shall be in an aggregate principal amount of at least $10,000,000 (or the Equivalent in any other Optional Currency thereof), and (ii) in the event of any such prepayment of a Eurocurrency Rate Advance, such Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(c). No Borrower may prepay any Competitive Bid Advances other than in accordance with Section 2.03(d).

     (b) Mandatory. (i)  If, on any date, the Agent notifies P&G that, on any Interest Payment Date, the sum of (A) the aggregate principal amount of all Advances denominated in Dollars plus (B) the Equivalent in Dollars (determined on the Business Day immediately preceding such Interest Payment Date) of the aggregate principal amount of all Advances denominated in Optional Currency other than Dollars then outstanding exceeds 110% of the aggregate Commitments of the Lenders on such date, one or more of the Borrowers (as determined by P&G) shall, as soon as practicable and in any event within five Business Days after receipt of such notice, subject to the proviso to this sentence below, prepay the outstanding principal amount of any such Advances (which may be, at P&G’s election, Tranche A Advances and/or Tranche B Advances) owing by such Borrowers in an aggregate amount sufficient to reduce such sum to an amount not to exceed 100% of the aggregate Commitments of the Lenders on such date (but with any interest accrued on the aggregate principal amount of Advances prepaid to be payable as otherwise provided under Section 2.07(a)); provided, however, that if the aggregate principal amount of Base Rate Advances outstanding at the time of such required prepayment is less than the amount of such required prepayment, the portion of such required prepayment in excess of the aggregate principal amount of Base Rate Advances then outstanding shall be deferred until the earliest to occur of the last day of the Interest Period of the outstanding Eurocurrency Rate Advances in an aggregate amount equal to the excess of such required prepayment. The Agent shall give prompt notice of any prepayment required under this Section 2.10(b)(i) to each of the Borrowers and the Lenders, and shall provide prompt notice to each of the Borrowers of any such notice of required prepayment received by it from any Lender.

     (ii) On each Business Day, the Borrowers shall repay (A) the outstanding Tranche A Advances by an amount equal to the excess of the outstanding principal amount of the Tranche A Advances over the aggregate Tranche A Commitments after giving effect to any reduction of the Tranche A Commitments pursuant to Section 2.05 on the immediately preceding Business Day and (B) the outstanding Tranche B Advances by an amount equal to the excess of the outstanding principal amount of the Tranche B Advances over the aggregate Tranche B Commitments after giving effect to any reduction of the Tranche B Commitments pursuant to Section 2.05 on the immediately preceding Business Day.

     SECTION 2.11 Increased Costs.

     (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation enacted or issued after the date of this Agreement or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) issued after the date of this Agreement, there shall be any material increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate Advances (excluding for purposes of this Section 2.11 any such increased costs resulting from (i) Taxes (as to which Section 2.14 shall govern) or (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction, state or any political subdivision thereof under the laws of which such Lender has any present or former connection, then one or more of the Borrowers shall from time to time, within 30 days of written demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such

-23-

Lender for such increased cost. A certificate as to the amount of such increased cost in reasonable detail and stating the basis upon which such amount has been calculated and certifying that such Lender’s method of allocating such costs is fair and reasonable and that such Lender’s demand for payment of such costs hereunder is not inconsistent with its treatment of other borrowers which, as a credit matter, are similarly situated to P&G and which are subject to similar provisions, submitted to the Borrowers and the Agent by such Lender, shall be conclusive and binding for all purposes, absent error in the calculation of such amount.

     (b) If any Lender reasonably determines that compliance with any law or regulation enacted or issued after the date of this Agreement, or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) issued after the date of this Agreement, affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is materially increased by or based upon the existence of such Lender’s commitment to lend hereunder and other commitments of this type, then, within 30 days of written demand by such Lender (with a copy of such demand to the Agent), one or more of the Borrowers shall pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender’s commitment to lend hereunder. A certificate as to the amount of such increased cost in reasonable detail and stating the basis upon which such amount has been calculated and certifying that such Lender’s method of allocating such costs is fair and reasonable and that such Lender’s demand for payment of such costs hereunder is not inconsistent with its treatment of other borrowers which, as a credit matter, are similarly situated to P&G and which are subject to similar provisions, submitted to the Borrowers and the Agent by such Lender, shall be conclusive and binding for all purposes, absent error in the calculation of such amount.

     (c) Before making any demand under this Section 2.11, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. Notwithstanding anything in subsection (a) or (b) of this Section 2.11 to the contrary, no Borrower shall be obligated to compensate any Lender for any amounts arising or accruing before the date which is 180 days prior to the date on which such Lender provides written demand for such payment to such Borrower and the Agent under such Sections.

     (d) If any Lender shall subsequently recoup any costs (other than from a Borrower) for which such Lender has theretofore been compensated by a Borrower under this Section 2.11, such Lender shall remit to such Borrower an amount equal to the amount of such recoupment.

     (e) If any Lender entitled to additional compensation under any of the foregoing provisions of this Section 2.11 shall fail to designate a different Applicable Lending Office that avoids the need for additional compensation as provided in this Section 2.11, then P&G may cause such Lender to (and, if P&G so demands, such Lender or the Agent shall) assign all of its rights and obligations under this Agreement to one or more other Persons identified by any Borrower in the manner provided in Section 8.11.

     SECTION 2.12 Illegality.

     Notwithstanding any other provision of this Agreement, if any Lender shall notify the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Lender or its

-24-

Eurocurrency Lending Office to perform its obligations hereunder to make Eurocurrency Rate Advances in Dollars or any other Optional Currency or to fund or maintain Eurocurrency Rate Advances in Dollars or any other Optional Currency hereunder, (a) each Eurocurrency Rate Advance, as the case may be, will automatically, upon such demand, (i) if such Eurocurrency Rate Advance is denominated in Dollars, Convert into a Base Rate Advance and (ii) if such Eurocurrency Rate Advance is denominated in any other Currency, be exchanged for an Equivalent amount of Dollars and Convert into a Base Rate Advance, and (b) the obligation of the Lenders to make Eurocurrency Rate Advances or to Convert Advances into Eurocurrency Rate Advances shall be suspended until the Agent shall notify each of the Borrowers and the Lenders that the circumstances causing such suspension no longer exist; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurocurrency Lending Office if the making of such a designation would allow such Lender or its Eurocurrency Lending Office to continue to perform its obligations to make Eurocurrency Rate Advances or to continue to fund or maintain Eurocurrency Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender.

     SECTION 2.13 Payments and Computations.

     (a) Each Borrower shall make each payment hereunder and under the Notes, if any, irrespective of any right of counterclaim or set-off, with respect to principal of, interest on, and other amounts relating to, Advances denominated in Dollars, not later than 1:00 P.M. (New York City time) on the day when due in Dollars to the Agent, by deposit of such funds to the applicable Agent’s Account in same day funds. Each Borrower shall make each payment hereunder and under the Notes, if any, irrespective of any right of counterclaim or set-off, with respect to principal of, interest on, and other amounts relating to, Advances denominated in any Optional Currency (other than Dollars), not later than 1:00 P.M. (London time) on the day when due in such Optional Currency (other than Dollars) to the Agent, by deposit of such funds to the applicable Agent’s Account in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.03, 2.11, 2.14 or 8.04(c)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon an extension pursuant to Section 2.20, and upon Agent’s receipt of each Assuming Extending Lender’s Assignment Agreement and recording of the information contained therein in the Register, from and after the date upon an Assuming Extending Lender giving notice pursuant to Section 2.20(a) herein, the Agent shall make all payments hereunder and under any Notes issued in connection therewith in respect of the interest assumed thereby. Upon its acceptance of an Assignment and Acceptance or the effective date of the exercise of the call rights in Section 2.18 or the put rights in Section 2.19, as the case may be, and, in any such case, its recording of the information contained therein or relating thereto in the Register pursuant to Section 8.07(c), from and after the effective date specified in such Assignment and Acceptance or the applicable notice delivered pursuant to Section 2.18 or Section 2.19, as applicable, the Agent shall make all payments hereunder and under the Notes, if any, in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.

     (b) All computations of interest based on the Base Rate shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurocurrency Rate or the Federal Funds Rate and of facility fees shall be made by the Agent or the Sub-Agent, as the case may be, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or

-25-

facility fees are payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.

     (c) Whenever any payment hereunder or under the Notes, if any, shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurocurrency Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.

     (d) Unless the Agent or the Sub-Agent, as the case may be, shall have received notice from the appropriate Borrower prior to the date on which any payment is due to the Lenders hereunder that such Borrower will not make such payment in full, the Agent or the Sub-Agent, as the case may be, may assume that such Borrower has made such payment in full to the Agent or to the Sub-Agent, as the case may be, on such date, and the Agent or the Sub-Agent, as the case may be, may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent such Borrower shall not have so made such payment in full to the Agent or to the Sub-Agent, as the case may be, each Lender shall repay to the Agent or to the Sub-Agent, as the case may be, forthwith on demand such amount distributed to such Lender, together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent or to the Sub-Agent, as the case may be, at (i) the Federal Funds Rate, in the case of Advances denominated in Dollars, or (ii) the cost of funds incurred by the Sub-Agent, in respect of such amount in the case of Advances denominated in any other Optional Currency.

     SECTION 2.14 Taxes.

     (a) Each Borrower (including for purposes of this Section 2.14 P&G in its capacity as guarantor) shall only be required to pay or reimburse any Lender or the Agent for present or future taxes, levies, imposts, deductions, withholdings or other governmental charges arising from or in connection with any payments made by any Borrower under this Agreement or any of the other Loan Documents, or any liabilities with respect to the foregoing (collectively, “Taxes”), other than Excluded Taxes. If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any of the other Loan Documents to any Lender or the Agent, (i) such Borrower shall make such deductions in respect of Taxes, (ii) such Borrower shall pay the full amount deducted in respect of Taxes to the relevant taxation authority or other governmental or regulatory authority in accordance with applicable law, and (iii) to the extent there is an increase in any Taxes (other than Excluded Taxes) imposed on such Lender or the Agent as a result of this Agreement or any of the other Loan Documents (such increased amount being the “Non-Excluded Taxes” of such Lender or the Agent), the sum payable by such Borrower shall be increased as may be necessary so that after making all required deductions of Non-Excluded Taxes such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made in respect of Non-Excluded Taxes. Within 30 days after the date of any payment of Non-Excluded Taxes by any Borrower, such Borrower shall furnish to the Agent, at its address referred to in Section 8.02, the original or a copy of a receipt evidencing such payment. For purposes of this Section 2.14, the term “Change in Law” shall mean the adoption of any law, rule, regulation, court decision or precedential administrative guidance after the date of this Agreement.

     (b) Each of the Borrowers shall indemnify each Lender and the Agent for, and hold each of them harmless against, the full amount of Non-Excluded Taxes paid by such Lender or the Agent, as the case may be. This indemnification shall be made within 90 days from the date on which such Lender or

-26-

the Agent, as the case may be, makes written demand therefor and provides adequate documentary evidence of payment thereof.

     (c) Each Lender and the Agent shall deliver or cause to be delivered to any requesting Borrower required to withhold under Section 1441 or 1442 or comply with any information reporting or backup withholding requirements of the U.S. Internal Revenue Code of 1986, as amended, or the regulations thereunder, the following properly completed and duly executed documents:

     (i) if such Lender or the Agent is not a United States Person, a complete and executed (A) U.S. Internal Revenue Form W-8BEN with Part II completed in which Lender claims and validly establishes the benefits of a tax treaty with the United States providing for a zero or reduced rate of withholding (or any successor forms thereto), including all appropriate attachments, or (B) a U.S. Internal Revenue Service Form W-8ECI (or any successor forms thereto);

     (ii) if such Lender or the Agent is a natural person, a complete and executed (A) U.S. Internal Revenue Service Form W-8BEN (or any successor forms thereto) and a certificate, in substantially the form of Exhibit E hereto (a “Section 2.14 Certificate”), or (B) U.S. Internal Revenue Service Form W-9 (or any successor forms thereto);

     (iii) if such Lender or the Agent is organized under the laws of the United States, any State thereof, or the District of Columbia, (A) a complete and executed U.S. Internal Revenue Service Form W-9 (or any successor forms thereto), including all appropriate attachments, or (B) if such Person is disregarded for federal income tax purposes, the documents that would be required under this clause (iii) or clause (i), (ii), (iv), (v) or (vi) of this Section 2.14(c) with respect to its beneficial owner as if such beneficial owner were a Lender;

     (iv) if such Lender or the Agent (A) is not organized under the laws of the United States, any State thereof, or the District of Columbia and (B) is treated as a corporation for U.S. federal income tax purposes, a complete and executed U.S. Internal Revenue Service Form W-8BEN establishing a zero rate of withholding (or any successor forms thereto) and a Section 2.14 Certificate;

     (v) if such Lender or the Agent (A) is treated as a partnership or other non-corporate entity, and (B) is not organized under the laws of the United States, any State thereof, or the District of Columbia, (1) a complete and executed U.S. Internal Revenue Service Form W-8IMY (or any successor forms thereto), including all required documents and attachments, and (2) a Section 2.14 Certificate, and, without duplication, with respect to each of its beneficial owners and the beneficial owners of such beneficial owners looking through chains of owners to individuals or entities that are treated as corporations for U.S. federal income tax purposes (all such owners, the “beneficial owners”), the documents that would be required by this clause (v) and/or clause (i), (ii), (iii), (iv) and/or clause (vi) of this Section 2.14(c) with respect to each such beneficial owner if such beneficial owner were Lender, provided, however, that no such documents will be required with respect to a beneficial owner to the extent the actual Lender or the Agent is determined to be in compliance with the requirements for certification on behalf of its beneficial owner as may be provided in applicable U.S. Treasury Regulations, or the requirements of this clause (v) are otherwise determined to be unnecessary (all such determinations under this clause (v) to be made in the sole discretion of P&G); or

     (vi) (A) if such Lender or the Agent is disregarded for U.S. federal income tax purposes, such Person shall deliver the document that would be required by this clause (vi), or by

-27-

clause (i), (ii), (iii), (iv), or (v) of Section 2.14(c) with respect to its sole owner as if such sole owner were such Lender or the Agent, or (B) if such Lender or the Agent is not a United States person and is acting in the capacity as an “intermediary” (as defined in U.S. Treasury Regulations), (1) a complete and executed U.S. Internal Revenue Service Form W-8IMY (or any successor form thereto), including all required documents and attachments, and (2) if such intermediary is a “non-qualified intermediary” (as defined in U.S. Treasury Regulations), from each person on whose behalf the “non-qualified intermediary” is acting, the documents that would be required by clause (i), (ii), (iii), (iv), (v) or this clause (vi) of Section 2.14(c) with respect to each such Person as if each such Person were Lender.

In addition, each Lender or the Agent, shall provide any requesting Borrower with such other forms, certificates and other documentation as may be necessary or appropriate to obtain any reduction of or exemption from any withholding or other Tax imposed by any governmental authority on payments made by such Borrower under any Loan Document. Each Lender and the Agent shall provide the appropriate forms, certificates and other documentation described in this Section 2.14(c) (x) prior to becoming a party to this Agreement; (y) upon a Change in Law or circumstances requiring or making appropriate a new or additional form, certificate or other documentation; and (z) whenever reasonably requested by any of the Borrowers or the Agent. If the forms referred to above in this Section 2.14(c) that are provided by a Lender indicate a withholding tax rate in excess of zero on payments under this Agreement to be received by such Lender from a Borrower organized in a Covered Jurisdiction, unless and to the extent attributable to a Change in Law, such withholding tax at such rate shall be treated as Excluded Taxes unless and until such Lender provides all such forms, duly completed and delivered, establishing that a lesser rate applies, whereupon such withholding tax at such lesser rate shall be considered Excluded Taxes solely for the periods governed by such form. If the forms referred to above in this Section 2.14(c) that are provided by a Lender indicate a withholding tax rate in excess of zero on payments under this Agreement to be received by such Lender from a Borrower that is not organized in a Covered Jurisdiction, such withholding tax at such rate shall be considered Non-Excluded Taxes. If, on the date a Lender assigns all or a portion of its commitments under this Agreement, such Lender assignor was entitled to additional amounts under Section 2.14(a), then the related Lender assignee shall be entitled to additional amounts solely to the extent that amounts payable to such Lender assignee are themselves subject to a withholding tax imposed as a direct result of a Change in Law occurring after the date on which the Lender assignor became a party to this Agreement. Any additional Taxes imposed on any Lender as a direct result of a change in the Applicable Lending Office of such Lender shall be considered Excluded Taxes except to the extent that (I) any such additional Non-Excluded Taxes are imposed as a result of a Change in Law occurring after the date of change of its Applicable Lending Office, or (II) such change is made at the request of P&G in which case the additional Non-Excluded Taxes shall be treated as Non-Excluded Taxes imposed by reason of a Change in Law and indemnified pursuant to subsection (a) above.

     (d) Should any Lender or the Agent become subject to Taxes because of its failure to deliver a form required hereunder, the appropriate Borrower shall, at the Agent’s or such Lender’s sole expense, take such steps (consistent with legal and regulatory restrictions) as such Lender or the Agent shall reasonably request to assist such Person in recovering such Taxes from the proper governmental or regulatory authority. However, none of the Borrowers will be required to take any action that would be inadvisable or overly burdensome.

     (e) Each Lender and the Agent hereby agrees that, upon the occurrence of any circumstances entitling such Person to any additional amounts under Section 2.14(a) or to indemnification under Section 2.14(b), such Lender or the Agent shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions), at its own expense, to designate a different Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts or indemnification that may thereafter accrue.

-28-

     (f) If any Lender or the Agent entitled to additional compensation under any of the foregoing provisions of this Section 2.14 shall fail to designate a different Applicable Lending Office that avoids the need for additional compensation as provided in Section 2.14, then P&G may cause such Lender or the Agent to (and, if P&G so demands, such Lender or the Agent shall) assign all of its rights and obligations under this Agreement to one or more other Persons identified by any Borrower in the manner provided in Section 8.11.

     (g) If any Lender or the Agent determines that it has received a refund of or credit against any Taxes as to which it has been indemnified by any Borrower or with respect to which any Borrower has paid additional amounts pursuant to this Section 2.14, it shall pay over such refund or credit to Borrower (but only to the extent of amounts paid by such Borrower under this Section 2.14), net of all out-of-pocket expenses of such Lender or the Agent and without interest (other than any interest paid by the relevant governmental or regulatory authority with respect to such refund or credit); provided, however, that such Borrower, upon the request of such Lender or the Agent, agrees to repay the amount paid over to such Borrower to such Lender or the Agent in the event such Lender or the Agent is required to repay such refund to such governmental authority or such credit is subsequently denied. Nothing in this Section 2.14(g) shall be deemed to require the Agent or any Lender to provide copies of tax returns or other confidential tax information.

     (i) Each Lender and the Agent shall take all actions reasonably requested by any Borrower to assist such Borrower, at the sole expense of such Borrower, to recover from the relevant taxation authority or other governmental authority any Taxes in respect of which amounts were paid by such Borrower pursuant to Section 2.14(a) or Section 2.14(b).

     SECTION 2.15 Sharing of Payments, Etc.

     If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Revolving Credit Advances owing to it (other than pursuant to Section 2.11, 2.14 or 8.04(c) or as payment to a Non-Consenting Lender on the Termination Date in accordance with Section 2.06) in excess of its ratable share of payments on account of the Revolving Credit Advances or participations obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Revolving Credit Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each of the Borrowers agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation.

     SECTION 2.16 Use of Proceeds.

     The proceeds of the Advances shall be available (and each Borrower agrees that it shall use such proceeds) for general corporate purposes of P&G and its Subsidiaries, including to finance acquisitions and providing backup liquidity to support the issuance of commercial paper.

-29-

     SECTION 2.17 Evidence of Debt.

     (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time on account thereof. Each Borrower agrees that upon notice by any Lender to such Borrower (with a copy of such notice to the Agent) to the effect that a promissory note or other evidence of indebtedness is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Revolving Credit Advances owing to, or to be made by, such Lender, such Borrower shall promptly execute and deliver to such Lender promissory notes of such Borrower payable to the order of such Lender, in substantially the forms of Exhibit F-1 hereto (a “Tranche A Note”), and of Exhibit F-2 hereto (a “Tranche B Note”), in a principal amount equal to the respective Tranche A Commitment and Tranche B Commitment, respectively, of such Lender.

     (b) The Register maintained by the Agent pursuant to Section 8.07(d) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing, whether such Advances are Tranche A Advances or Tranche B Advances and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iv) the amount of any sum received by the Agent from such Borrower hereunder and each Lender’s share thereof.

     (c) Entries made in good faith by the Agent in the Register pursuant to subsection (b) above, and by each Lender in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from each Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of any Borrower under this Agreement.

     SECTION 2.18 Call Right of Affiliates.

     Any Affiliate of a Borrower may upon at least one Business Day’s notice to the Agent, state the proposed date and aggregate principal amount of the purchase, and, if such notice is given, such Affiliate shall, purchase from the Lenders at par the outstanding principal amount of Tranche A Advances or Tranche B Advances comprising part of the same Borrowing in whole or in part, and assume from the Lenders Tranche A Commitments or Tranche B Commitments, as the case may be, in an amount at least equal to the principal amount of the Advances so purchased; provided that P&G, in its sole discretion, may elect to effect such purchase on a non-ratable basis with respect to the Advances and Commitments under the applicable Facility held by one or more Lenders that are Affiliates of a Borrower (it being understood that such purchase shall be on a ratable basis as to all other Lenders). After giving effect to each such purchase, the purchasing Affiliate shall be treated as a Lender to the extent of the rights and obligations so purchased, except as otherwise expressly set forth herein. Each purchase made pursuant to this Section 2.18 shall also be subject to Section 8.07(a).

     SECTION 2.19 Put Right of Affiliates.

     Any Lender that is an Affiliate of a Borrower shall be entitled upon at least two Business Day’s notice to the Agent, to sell and assign to the other Lenders, and each of the Lenders irrevocably agrees to purchase, at par all or a portion of the outstanding Tranche A Advances or Tranche B Advances owing to

-30-

such Affiliate of the Borrower, and to assign to the other Lenders Tranche A Commitments or Tranche B Commitments, as the case may be, in an amount at least equal to the principal amount of the Advances so sold and assigned; provided that each such sale and assignment shall be made to the other Lenders (based on their respective Commitments under the applicable Facility); provided, further, that P&G, in its sole discretion, may elect to effect such sale and assignment on a non-ratable basis with respect to the Advances and Commitments under the applicable Facility held by one or more Lenders that are Affiliates of a Borrower (it being understood that such sale and assignment shall be on a ratable basis as to all other Lenders). Any notice delivered by a Lender that is an Affiliate of a Borrower pursuant to this Section 2.19 shall specify (i) the effective date of such sale and assignment and (ii) the amount of Revolving Credit Advances under each Facility subject to each such sale and assignment. After giving effect to each such sale and assignment, the selling Affiliate shall cease to be a Lender to the extent of the right and obligations so sold and assigned. On or promptly following the effective date of any sale and assignment pursuant to this Section 2.19, the Agent shall notify the Lenders of the effective date thereof and shall distribute a revised Schedule II hereto reflecting each such sale and assignment.

     SECTION 2.20 Extension of Facility.

     (a) P&G, by written notice to the Agent, may request an extension of the maturity of all Revolving Credit Advances outstanding on the Scheduled Termination Date by one year or two years (as selected by P&G) from its then scheduled expiration during which time all outstanding Advances on such Scheduled Termination Date shall convert into term loans; provided that such request is made at least 30 days, but not more than 60 days, prior to the Scheduled Termination Date. The Agent shall promptly notify each Lender of such request, and each Lender shall, in turn, in its sole discretion, not earlier than 30 days but not later than 20 days prior to the Scheduled Termination Date, notify P&G and the Agent in writing as to whether such Lender will consent to such extension, such notice to be in substantially the form of Exhibit G hereto. If any Lender shall fail to notify the Agent and P&G in writing of its consent to any such request for extension of the Scheduled Termination Date at least 20 days prior to the Scheduled Termination Date, such Lender shall be deemed to be a Non-Consenting Lender with respect to such request. The Agent shall notify P&G in writing not later than 15 days prior to the Scheduled Termination Date of the decision of the Lenders regarding P&G’s request for an extension of the Scheduled Termination Date.

     (b) If all the Lenders consent in writing to any such request in accordance with subsection (a) of this Section 2.20, the Scheduled Termination Date shall, effective as of such date, be extended for the one or two year period selected by P&G in its initial request; provided that no Default shall have occurred and be continuing. If fewer than all of the Lenders consent in writing to any such request in accordance with subsection (a) of this Section 2.20, the maturity of the Revolving Credit Advances outstanding on the Scheduled Termination Date shall, effective as of such date, be extended as to those Lenders that so consented (each a “Consenting Lender”) but shall not be extended as to any other Lender (each a “Non-Consenting Lender”). To the extent that the maturity of the Revolving Credit Advances outstanding on the Scheduled Termination Date is not extended as to any Lender pursuant to this Section 2.20 and the Commitment of such Lender is not assumed in accordance with subsection (c) of this Section 2.20 on or prior to the Scheduled Termination Date, the Commitment of such Non-Consenting Lender shall automatically terminate in whole on the Scheduled Termination Date without any further notice or other action by P&G, the Agent, such Lender or any other Person; provided that such Non-Consenting Lender’s rights under Sections 2.11, 2.14 and 8.04, and its obligations under Section 7.05, shall survive the Scheduled Termination Date for such Lender as to matters occurring prior to such date. It is understood and agreed that no Lender shall have any obligation whatsoever to agree to any request made by P&G for any requested extension of the Scheduled Termination Date.

-31-

     (c) If fewer than all of the Lenders consent to any such request pursuant to subsection (a) of this Section 2.20, the Agent shall promptly so notify the Consenting Lenders, and each Consenting Lender may, in its sole discretion, give written notice to the Agent not later than 10 days prior to the Scheduled Termination Date of the amount of the Non-Consenting Lenders’ Commitments for which it is willing to accept an assignment. If the Consenting Lenders notify the Agent that they are willing to accept assignments of Commitments in an aggregate amount that exceeds the amount of the Commitments of the Non-Consenting Lenders, such Commitments shall be allocated among the Consenting Lenders willing to accept such assignments in such amounts as are agreed between P&G and the Agent. If after giving effect to the assignments of Commitments described above there remain any Commitments of Non-Consenting Lenders, P&G may arrange for one or more Consenting Lenders or other Persons that agree to an extension of the Termination Date (each, an “Assuming Extending Lender”) to assume, effective as of the Extension Date, any Non-Consenting Lender’s Commitment and all of the obligations of such Non-Consenting Lender under this Agreement thereafter arising, without expense to such Non-Consenting Lender; provided, however, that the amount of the Commitment of any such Assuming Extending Lender as a result of such substitution shall in no event be less than $10,000,000 unless the amount of the Commitment of such Non-Consenting Lender is less than $10,000,000, in which case such Assuming Extending Lender shall assume all of such lesser amount; and provided, further that:

     (i) any such Consenting Lender or Assuming Extending Lender shall have paid to such Non-Consenting Lender (A) the aggregate principal amount of, and any interest accrued and unpaid to the effective date of the assignment on, the outstanding Advances, if any, of such Non-Consenting Lender plus (B) any accrued but unpaid facility fees owing to such Non-Consenting Lender as of the effective date of such assignment; and

     (ii) all additional costs, reimbursements, expense reimbursements and indemnities payable to such Non-Consenting Lender, and all other accrued and unpaid amounts owing to such Non-Consenting Lender hereunder, as of the effective date of such assignment shall have been paid to such Non-Consenting Lender.

At least one Business Day prior to any Extension Date, (A) each such Assuming Extending Lender that was not a Lender prior to the Extension Date, if any, shall have delivered to P&G and the Agent an Assignment and Acceptance, duly executed by such Assuming Extending Lender, such non-Consenting Lender, P&G and the Agent, (B) any such Consenting Lender shall have delivered confirmation in writing satisfactory to P&G and the Agent as to the increase in the amount of its Commitment, and (C) each Non-Consenting Lender being replaced pursuant to this Section 2.20 shall have delivered to the Agent any Note or Notes held by such Non-Consenting Lender. Upon the payment or prepayment of all amounts referred to in subsections (i), (ii) and (iii) of this Section 2.20(c), each such Consenting Lender or Assuming Extending Lender, as of the Extension Date, will be substituted for such Non-Consenting Lender under this Agreement and shall be a Lender for all purposes of this Agreement, without any further acknowledgment by or the consent of the other Lenders, and, except as otherwise provided above, the obligations of each such Non-Consenting Lender hereunder shall, by the provisions hereof, be released and discharged.

     (d) This Section 2.20 shall supersede any provisions of this Agreement (including, without limitation, Section 2.15 or 8.01) or any of the other Loan Documents to the contrary.

-32-

ARTICLE III

CONDITIONS TO EFFECTIVENESS AND LENDING

     SECTION 3.01 Conditions Precedent to Initial Borrowing.

     The initial Borrowing of Advances under this Agreement shall be made on and as of the first date (the “Closing Date”) on which the following conditions precedent have been satisfied:

     (a) All amounts owing by the Initial Borrower under the Existing Credit Agreement shall have been, or concurrently with the initial Borrowing hereunder shall be, paid in full, and all commitments of the lenders thereunder shall have been, or concurrently with the initial Borrowing hereunder shall be, terminated in accordance with the terms of the Existing Credit Agreement.

     (b) The Initial Borrower shall have paid all accrued fees and expenses of the Agent (including reasonable fees and expenses of counsel to the Agent).

     (c) On the Closing Date, the Agent shall have received for the account of each Lender a certificate signed by a duly authorized representative of the Initial Borrower, dated the Closing Date, stating that:

     (i) The representations and warranties contained in Section 4.01 are correct in all material respects on and as of the Closing Date, and

     (ii) No event has occurred and is continuing that constitutes a Default.

     (d) The Agent shall have received on or before the Closing Date the following, each dated such date, in form and substance satisfactory to the Agent and in sufficient copies for each Lender:

     (i) Certified copies of each of the charter or other organizational documents of the Initial Borrower and of resolutions of the Initial Borrower approving this Agreement and of all documents evidencing other necessary corporate action with respect to this Agreement.

     (ii) A certificate of an authorized representative of the Initial Borrower certifying the names and true signatures of the other authorized representatives of the Initial Borrower authorized to sign this Agreement and the other documents to be delivered hereunder.

     (iii) [Intentionally Omitted].

     (iv) Favorable written opinions of counsel for the Initial Borrower, in the form of (A) Exhibit C-1 hereto from Luxembourg counsel to the Initial Borrower, (B) Exhibit C-2 hereto from the Initial Borrower’s special counsel, and (C) Exhibit C-3 hereto from Cadwalader, Wickersham & Taft LLP, special counsel to the Initial Borrower.

     (v) A favorable opinion of Shearman & Sterling LLP, counsel for the Agent, in form and substance satisfactory to the Agent.

-33-

     SECTION 3.02 Conditions Precedent to Each Borrowing.

     The obligation of each Lender to make any Advance on the occasion of each Borrowing (other than any deemed Revolving Credit Borrowing pursuant to Section 2.04(b) or Section 2.07(c)) shall be subject to the conditions precedent that:

     (a) on the date of such Borrowing the following statements shall be true (and each of the giving of the applicable Notice of Revolving Credit Borrowing or Notice of Competitive Bid Borrowing, as applicable, and the acceptance by any Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the applicable Borrower that on the date of such Borrowing such statements are true):

     (i) the representations and warranties of P&G and, if applicable, such Borrower, contained in Section 4.01 (except the representations set forth in subsection (e) thereof and in subsection (f) thereof) are correct in all material respects on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and

     (ii) no event has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom, that constitutes a Default; and

     (b) the Agent shall have received such other approvals, opinions or documents as the Required Lenders through the Agent may reasonably request.

     SECTION 3.03 Determinations Under Section 3.01.

     For purposes of determining compliance with the conditions specified in Section 3.01, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the Closing Date specifying its objection thereto.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     SECTION 4.01 Representations and Warranties of the Borrowers.

     Each of the Borrowers represents and warrants as to itself as follows:

     (a) Such Borrower is a corporation, general partnership or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation and is duly qualified and in good standing in each jurisdiction wherein the failure to so qualify would have a material adverse effect on the financial condition or results of operations of such Borrower and its Subsidiaries, taken as a whole. Each of the Subsidiaries of such Borrower is duly organized and validly existing under the laws of its jurisdiction of incorporation or formation.

     (b) The execution, delivery and performance by such Borrower of each Loan Document to which it is a party delivered hereunder, and the consummation of the transactions contemplated hereby, are within their respective corporate or other similar organization powers, have been duly authorized by all necessary corporate or other similar organization action, and do not contravene (i) their respective

-34-

charter, by-laws or other organizational documents or (ii) law or any material contractual restriction binding on or affecting such Borrower.

     (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance by such Borrower of this Agreement or any other Loan Document to which it is a party, except for any such authorizations, approvals, actions, notices or filings as have already been made or obtained and are in full force and effect.

     (d) This Agreement has been, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by such Borrower party thereto. This Agreement is, and each other Loan Document to which it is a party when delivered hereunder will be, the legal, valid and binding obligation of such Borrower, enforceable against it in accordance with their respective terms.

     (e) Except as disclosed in writing to the Agent prior to the Closing Date, since December 31, 2006, there has been no Material Adverse Change.

     (f) There is no pending or overtly threatened action, suit, investigation, litigation or proceeding affecting such Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator that could reasonably be expected to adversely affect the legality, validity or enforceability of any Loan Document or the consummation of the transactions contemplated hereby.

     (g) Such Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System).

     (h) Following application of the proceeds of each Advance, not more than 25% of the value of the assets (either of the Borrowers only or of the Borrowers and their Subsidiaries, taken as a whole) subject to the provisions of Section 5.02(a) will be margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System).

     (i) All written information (other than financial information, projections, estimates and other forward looking statements) heretofore furnished by such Borrower to the Lenders for purposes of or in connection with this Agreement or any transaction contemplated hereby, taken as a whole, in each case as such written information may be amended, modified or supplemented by it from time to time, is correct in all material respects and does not omit to state any material fact or any fact necessary to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made.

     (j) Such Borrower is not an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

     (k) All of the Advances and other obligations owing by such Borrower to the Agent and the Lenders under this Agreement and the Notes, if any, rank pari passu or senior to all of its other senior unsecured indebtedness for money borrowed.

-35-

ARTICLE V

COVENANTS OF P&G

     SECTION 5.01 Affirmative Covenants.

     So long as any Advance shall remain unpaid or any Lender shall have any Revolving Credit Commitment hereunder, P&G will, in the case of clause (d) of this Section 5.01, and each of the Borrowers will, in all other cases under this Section:

     (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, except where the failure to so comply would not have a Material Adverse Effect.

     (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all material lawful claims that, if unpaid, might by law become a Mortgage upon its property; provided, however, that none of the Borrowers or the Subsidiaries of a Borrower shall be required to pay or discharge any such tax, assessment, charge, levy or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Mortgage resulting therefrom attaches to its property and proper enforcement, collection, execution, levy or foreclosure proceedings shall have been commenced with respect thereto.

     (c) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its existence as a corporation, general partnership or limited liability company, as applicable, its rights (charter and statutory) and franchises; provided, however, that (i) each of the Borrowers and each of their respective Subsidiaries may consummate any merger, consolidation or transfer, sale or lease of its assets as an entirety to any Person not prohibited under Section 5.02(b), (ii) each of the Borrowers and each of their respective Subsidiaries may wind up, liquidate or dissolve any inactive or immaterial Subsidiary of such Person, (iii) none of the Borrowers or the Subsidiaries of a Borrower shall be required to preserve any right or franchise if the Board of Directors of such Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of P&G and its Subsidiaries, taken as a whole, and that the loss thereof is not disadvantageous in any material respect to P&G and its Subsidiaries, taken as a whole, or the Lenders, and (iv) each of the Borrowers and each of their respective Subsidiaries may reincorporate or otherwise change its legal form so long as (A) the applicable Borrower provides written notice thereof to the Agent reasonably promptly following such reincorporation or change (together with certified copies of each amended charter or other organizational document), and (B) such reincorporation or change would not result in a Material Adverse Effect.

     (d) Reporting Requirements. Deliver to the Agent (for distribution by the Agent to the Lenders):

     (i) within the time periods specified in the rules and regulations of the Securities and Exchange Commission, but only for so long as P&G is subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, a Quarterly Report on Form 10-Q for each of the first three fiscal quarters of each fiscal year of P&G and an Annual Report on Form 10-K for each fiscal year of P&G;

-36-

     (ii) as soon as possible and in any event within five days after the occurrence of each Default continuing on the date of such statement, a statement of any Borrower setting forth details of such Default and the action that one or more of P&G and its Subsidiaries has taken and propose to take with respect thereto;

     (iii) promptly after the sending or filing thereof, copies of all reports that P&G sends to any of its security holders, and copies of all reports and registration statements that P&G files with the Securities and Exchange Commission or any national securities exchange;

     (iv) promptly after the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting any of the Borrowers or any of their Subsidiaries of the type described in Section 4.01(f); and

     (v) such other information respecting any of the Borrowers or any of their Subsidiaries as the Required Lenders through the Agent may from time to time reasonably request;

provided, however, that in the case of clauses (i) and (iii) of this subsection (d), P&G may comply with its obligations thereunder by posting the relevant documents to its website, to any of the other Borrowers’ websites, to www.sec.gov, or to such other website as notified to the Agent and the Lenders in lieu of delivering hard copies thereof to the Lenders.

     SECTION 5.02 Negative Covenants.

     So long as any Advance shall remain unpaid or any Lender shall have any Revolving Credit Commitment hereunder, P&G shall not:

     (a) Restrictions on Mortgages. Incur, assume or guarantee, or permit any of its Subsidiaries to incur, assume or guarantee, any Debt (other than the Advances, if applicable) secured by a Mortgage on any Principal Manufacturing Property or on any Debt of any of its Subsidiaries unless such Borrower secures, or causes such Subsidiary to secure, the Advances equally and ratably with (or prior to) such Debt for so long as such Debt is secured; provided, however, that the Borrowers shall not be required to so secure, or cause any of its Subsidiaries to so secure, the Advances as provided in this Section 5.02(a) if after giving effect thereto the aggregate amount of all such Debt so secured would not exceed 20% of Consolidated Assets of P&G and its Subsidiaries at the time of such incurrence, assumption or guarantee. Notwithstanding the foregoing, this Section 5.02(a) shall not apply to, and there shall be excluded in computing secured Debt for the purposes of this Section 5.02(a):

     (i) Permitted Mortgages;

     (ii) Mortgages existing as of the date hereof;

     (iii) Mortgages granted in favor of P&G, any of the Borrowers or any of their Subsidiaries on all or any portion of the assets of P&G and its Subsidiaries;

     (iv) Mortgages arising solely from precautionary filings of financing statements under the Uniform Commercial Code of any jurisdiction (or similar filings and recordings under equivalent provisions of applicable law);

     (v) any Mortgages existing on any Principal Manufacturing Property or Debt at the time such Principal Manufacturing Property or Debt is acquired by any Borrower or any of its

-37-

Subsidiaries, or on any Principal Manufacturing Property or Debt of any Person at the time such Person becomes, or is merged into, P&G or any of its Subsidiaries;

     (vi) purchase money and title retention Mortgages, capitalized leases and construction- or improvement-cost Mortgages and other similar Mortgages; and

     (vii) any extension, refinancing, renewal or refunding of any Mortgage referred to in clauses (i) through (vi) of this Section 5.02(a).

     (b) Consolidation, Merger and Sale of Assets. Consolidate or merge with or into, or transfer, sell or lease its assets as an entirety to, any Person, unless the Person (if other than a Borrower or a Subsidiary of P&G) formed by such consolidation or into which such Borrower is merged or which acquires or leases the assets of such Borrower substantially as an entirety assumes such Borrower’s obligations under the Loan Documents (and, upon such assumption, such Person shall be a Borrower for all purposes of the Loan Documents), or another Borrower assumes such Borrower’s obligations under the Loan Documents; provided, that after giving effect to such transaction, no Default shall have occurred and be continuing, and such consolidation, merger, transfer, sale or lease of assets shall not be prohibited under the indentures pursuant to which any publicly held debt of such Borrower was issued.

ARTICLE VI

EVENTS OF DEFAULT

     SECTION 6.01 Events of Default.

     Each of the following events shall constitute an “Event of Default” under this Agreement:

     (a) Any Borrower shall fail to pay any principal of any Advance when the same becomes due and payable; or any Borrower shall fail to pay any interest on any Advance or make any other payment of fees payable under this Agreement or any Note within 10 days after the same becomes due and payable; or any Borrower shall fail to make any payment of any other amount payable under any Loan Document, or P&G shall fail to make any payment of any other amount payable under the P&G Guaranty, within 10 days after the same becomes due and payable; or

     (b) Any representation or warranty made by any Borrower (or any of its authorized representatives) under or in connection with this Agreement or any of the other Loan Documents shall prove to have been incorrect in any material respect when made; or

     (c) (i) Any Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(c) or Section 5.01(d) (other than clauses (d)(i) or (d)(iii)), or (ii) any Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement or any of the Loan Documents on its part to be performed or observed if, in the case of this clause (ii), such failure shall remain unremedied for 30 days after written notice thereof shall have been given to P&G by the Agent or any Lender; or

     (d) Any Borrower or any of its Subsidiaries shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Borrower or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee,

-38-

custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 90 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or any Borrower or any of its Subsidiaries shall take any corporate or other action to authorize any of the actions set forth above in this subsection (d); or

     (e) Any judgment or order for the payment of money in excess of $250,000,000 shall be rendered against any Borrower or any of the Material Subsidiaries and not satisfied and there shall be any period of 60 consecutive days during which a stay of enforcement of such unsatisfied judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; provided, however, that the rendering of any such judgment or order shall not be an Event of Default under this Section 6.01(e) if and for so long as (i) the amount of such judgment or order, or a portion thereof in an amount sufficient to reduce the total uninsured amount to an amount less than $250,000,000, is covered by a valid and binding policy of insurance between the defendant and the insurer covering payment thereof and (ii) such insurer, which shall be rated at least “A” by A.M. Best Company, has been notified of, and has not properly disputed the claim made for payment of, the amount of such judgment or order.

     SECTION 6.02 Remedies.

     (a) If any Event of Default shall occur and be continuing, then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to each of the Borrowers, declare the obligation of each Lender to make Advances to be terminated, whereupon the obligation of each Lender to make such Advances shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to each of the Borrowers, declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each of the Borrowers.

     (b) Notwithstanding anything to the contrary in clause (a) of this Section 6.02, in the event of an actual or deemed entry of an order for relief with respect to any Borrower under the Federal Bankruptcy Code, (i) the obligation of each Lender to make Advances to such Borrower shall automatically be terminated and (ii) the Advances made to such Borrower, all interest thereon and all amounts payable under this Agreement with respect thereto shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by each of the Borrowers.

ARTICLE VII

THE AGENT

     SECTION 7.01 Authorization and Action.

     Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement or the other Loan Documents (including, without limitation, enforcement or collection of the Advances), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to

-39-

refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement or the other Loan Documents applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by each of the Borrowers pursuant to the terms of this Agreement or the other Loan Documents.

     SECTION 7.02 Agent’s Reliance, Etc.

     Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or any of the other Loan Documents, except for its or their own negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (i) may treat the Lender that made any Advance as the holder of the Debt resulting therefrom until the Agent receives and accepts an Assignment and Acceptance entered into by such Lender, as assignor, and any assignee thereof as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for any of the Borrowers), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith (without negligence or willful misconduct) by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement or any of the other Loan Documents; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any of the other Loan Documents on the part of any of the Borrowers or to inspect the property (including the books and records) of any of the Borrowers; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness or sufficiency or value of this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (vi) shall incur no liability under or in respect of this Agreement or any of the other Loan Documents by acting in good faith upon any notice, consent, certificate or other instrument or writing (which may be by telecopier or telegram) believed by it to be genuine and signed or sent by the proper party or parties.

     SECTION 7.03 Citibank and Affiliates.

     With respect to its Commitment, the Advances made by it and any Note or Notes issued to it, Citibank shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include Citibank in its individual capacity. Citibank and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any of the Borrowers, any of their Subsidiaries and any Person who may do business with or own securities of any of the Borrowers or their Subsidiaries, all as if Citibank were not the Agent and without any duty to account therefor to the Lenders.

     SECTION 7.04 Lender Credit Decision.

     Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements delivered to the Agent in accordance with this Agreement and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and

-40-

information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.

     SECTION 7.05 Indemnification.

     The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrowers), ratably according to the respective principal amounts of the Advances then owing to each of them (or if no Advances are at the time outstanding or if any Advances are then owing to Persons that are not Lenders, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any of the other Loan Documents or any action taken or omitted by the Agent hereunder or thereunder (collectively, the “Indemnified Costs”), provided that no Lender shall be liable for any portion of the Indemnified Costs resulting from the Agent’s negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed for such expenses by the Borrowers. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by the Agent, any Lender or a third party.

     SECTION 7.06 Successor Agent.

     The Agent may resign at any time by giving written notice thereof to the Lenders and each of the Borrowers and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent acceptable to P&G. If no successor Agent shall have been so appointed by the Required Lenders and approved by P&G, and shall have accepted such appointment, within 30 days after the retiring Agent’s giving of notice of resignation or the Required Lenders’ removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Agent’s resignation or removal hereunder as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents.

     SECTION 7.07 Sub-Agent.

     The Sub-Agent has been designated under this Agreement to carry out the duties of the Agent. The Sub-Agent shall be subject to each of the obligations in this Agreement to be performed by the Sub-Agent, and each of the Borrowers and the Lenders agrees that the Sub-Agent shall be entitled to exercise each of the rights and shall be entitled to each of the benefits of the Agent under this Agreement as such rights and benefits relate to the performance of its obligations hereunder.

-41-

     SECTION 7.08 Other Agents.

     Each Lender hereby acknowledges that no syndication agent and no documentation agent nor any other Lender designated as any “agent” (other than the Agent and the Sub-Agent) on the signature pages or the cover hereof has any liability hereunder other than in its capacity as a Lender.

ARTICLE VIII

MISCELLANEOUS

     SECTION 8.01 Amendments, Etc.

     No amendment or waiver of any provision of this Agreement or any of the other Loan Documents, nor consent to any departure by any Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by P&G and the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Borrowers and all of the Lenders (other than any Lender that is an Affiliate of any Borrower), do any of the following: (a) waive any of the conditions specified in Section 3.01, (b) increase the Commitments of the Lenders or postpone the Termination Date (other than as provided in Section 2.20), (c) reduce the principal of, or interest on, the Revolving Credit Advances or any fees or other amounts payable hereunder, (d) postpone any scheduled date for any payment of principal of, or interest on, the Revolving Credit Advances or any fees or other amounts payable hereunder pursuant to Section 2.04, 2.06 or 2.07 (other than as provided in Section 2.20), (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Revolving Credit Advances, or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder, or (f) amend this Section 8.01; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any other Loan Document.

     SECTION 8.02 Notices, Etc.

     (a) All notices and other communications provided for hereunder shall be either (x) in writing (including telecopier communication) and mailed, telecopied or delivered, or (y) to the extent set forth in Section 8.02(b) and in the proviso to this Section 8.02(a), by electronic mail (in .PDF form) (“Email”), confirmed reasonably promptly thereafter in writing, if to any Borrower party hereto on the Closing Date, at the address of such Person set forth on the signature pages hereto; if to any Additional Borrower, to such Person at the address specified therefor in the applicable Borrower Accession Agreement; if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender, as the case may be; and if to the Agent, at its address at Two Penns Way, New Castle, Delaware 19720; or, as to any Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to each of the Borrowers and the Agent; provided, that Notices of Revolving Credit Borrowing, Notices of Competitive Bid Borrowing and materials delivered pursuant to Section 5.01(d)(i) and (d)(iii) shall be delivered to the Agent as specified in Section 8.02(b) or as otherwise specified to P&G by the Agent. All such notices and communications shall, when mailed, telecopied or Emailed, be effective when deposited in the mails, telecopied or confirmed by Email, respectively, except that notices and communications to the Agent pursuant to Article II or III shall not be effective until received by the Agent. Delivery by telecopier or facsimile of an executed counterpart of any amendment or waiver of any provision of this Agreement or

-42-

any other Loan Document or of any Exhibit hereto or thereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof.

     (b) Notices of Revolving Credit Borrowing, Notices of Competitive Bid Borrowing and materials required to be delivered pursuant to Section 5.01(d)(i) and (d)(iii) may be delivered to the Agent in an electronic medium in a format acceptable to the Agent by Email at oploanswebadmin@citigroup.com, or such other email address as the Agent shall specify in writing to each of the Borrowers. Each of the Borrowers agrees that the Agent may make such materials, as well as any other written information, documents, instruments and other material relating to each of the Borrowers, any of its Subsidiaries or any other materials or matters relating to this Agreement, any of the other Loan Documents or any of the transactions contemplated hereby or thereby (collectively, the “Communications”) available to the Lenders by posting such notices on Intralinks or a substantially similar electronic system reasonably approved by P&G (the “Platform”). Although the primary web portal is secured with a dual firewall and a User ID/Password Authorization System and the Platform is secured through a single user per deal authorization method whereby each user may access the Platform only on a deal-by-deal basis, each of the Borrowers acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there may be confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Agent or any of its Affiliates in connection with the Platform.

     (c) Each Lender agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such information, documents or other materials to such Lender for purposes of this Agreement. Each Lender agrees (i) to notify the Agent in writing of such Lender’s Email address to which a Notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender becomes a party to this Agreement (and from time to time thereafter to ensure that the Agent has on record an effective Email address for such Lender) and (ii) that any Notice may be sent to such Email address.

     SECTION 8.03 No Waiver; Remedies.

     No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

     SECTION 8.04 Costs and Expenses.

     (a) P&G agrees to pay reasonably promptly following demand therefor all reasonable out-of-pocket costs and expenses of the Agent in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement, the other Loan Documents and the other documents to be delivered hereunder, including, without limitation, (A) all due diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, consultant, and audit expenses and (B) the reasonable fees and expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this

-43-

Agreement and the other Loan Documents. Each of the Borrowers further agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement against such Borrower (whether through negotiations, legal proceedings or otherwise) of this Agreement, the other Loan Documents and the other documents to be delivered hereunder and thereunder, including, without limitation, reasonable fees and expenses of counsel for the Agent and each Lender in connection with the enforcement of rights against such Borrower under this Section 8.04(a).

     (b) Each of the Borrowers agrees to indemnify and hold harmless the Agent and each Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an “Indemnified Party”; and each of the Agent and the Lenders, and their respective Affiliates officers, directors, employees, agents and advisors being, in relation to each other, a “Related Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) the Advances, this Agreement or any of the other Loan Documents, any of the transactions contemplated herein or therein or the actual or proposed use of the proceeds of the Advances; provided, however, that no Borrower shall have any obligation to indemnify an Indemnified Party pursuant to this Section 8.04(b) with respect to any claim, damage, loss, liability or expense (i) that resulted from negligence, willful misconduct, violation of law or the breach of any Loan Document by such Indemnified Party or a Related Indemnified Party, (ii) is attributable to Taxes or Other Taxes, which in each case shall be governed solely by Section 2.14, (iii) that arises out of a claim, litigation, arbitration or proceeding of one or more of the Agent and/or any of the Lenders solely against the Agent and/or any of the other Lenders not attributable to the actions of such Borrower or any of its Subsidiaries or Affiliates or (iv) that arises out of a claim, litigation, arbitration or proceeding in which one or more of the Borrowers and/or their Subsidiaries or Affiliates prevail. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 8.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the directors, shareholders or creditors of any Borrower or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. Each of the Borrowers and each of the Indemnified Parties hereby agrees not to assert any claim against each such other Person, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Advances, this Agreement or any of the other Loan Documents, any of the transactions contemplated herein or therein or the actual or proposed use of the proceeds of the Advances. No Indemnified Party shall settle or otherwise pay or agree to pay any claim, damages, losses liabilities or expenses for which any Borrower is obligated to provide indemnification under this Section 8.04(b) without the prior written consent of such Borrower.

     (c) If any payment of principal of, or Conversion of, any Eurocurrency Rate Advance is made by any Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.08(d) or (e), 2.10 or 2.12, acceleration of the maturity of the Advances pursuant to Section 6.02 or for any other reason, or by an assignee to a Lender other than on the last day of the Interest Period for such Advance upon an assignment of rights and obligations under this Agreement pursuant to Section 8.07 as a result of a demand by a Borrower pursuant to Section 8.07(a), each of the Borrowers shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance.

-44-

     (d) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in Sections 2.11, 2.14 and 8.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents.

     SECTION 8.05 Right of Set-off.

     Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.02 to authorize the Agent to declare the Advances due and payable pursuant to the provisions of Section 6.02, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Affiliate to or for the credit or the account of any Borrower against any and all of the obligations of any Borrower now or hereafter existing under this Agreement, whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to notify each of the Borrowers after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its Affiliates may have.

     SECTION 8.06 Binding Effect.

     This Agreement shall become effective when it shall have been executed and delivered by P&G and the Agent and when the Agent shall have been notified by each Initial Lender that such Initial Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrowers, the Agent and each Lender and their respective successors and assigns, except that (other than in accordance with Section 5.02(b) or Section 8.10) no Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders.

     SECTION 8.07 Assignments and Participations.

     (a) Without the prior written consent of P&G and, except in connection with an Affiliate of any of the Borrowers exercising its call rights under Section 2.18, and of the Agent (which Agent’s consent shall not be unreasonably withheld), no Lender may assign all or any portion of its rights and obligations under this Agreement to any Person, except to an Affiliate of such Lender, as provided in Section 2.11 or 2.14, or as set forth in Section 8.07(g) or to another Lender that is an Affiliate of such Lender. Each assignment pursuant to the terms of this Section 8.07(a) (A) shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement and shall be on a pro rata basis between the Facilities (and, in the case of an assignment demanded by a Borrower, shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement), except that any such assignment of a Commitment by a Lender to another Lender that is an Affiliate of such Lender need not be accompanied by an assignment of the same percentage of any of the assigning Lender’s Advances and any such assignment of one or more Advances by a Lender to another Lender that is an Affiliate of such Lender need not be accompanied by an assignment of the same percentage the assigning Lender’s Commitment or any of the assigning Lenders other Advances, (B) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an assignment of all of a Lender’s rights and obligations under this Agreement, shall in no event be less than $10,000,000, and (C) shall be evidenced by evidenced by an Assignment and

-45-

Acceptance executed by each of the parties thereto and delivered to the Agent, for its acceptance and recordation in the Register. No Lender shall be obligated to make any such assignment as a result of a demand by a Borrower pursuant to this Section 8.07(a) unless and until such Lender shall have received one or more payments from either the Borrowers or one or more Lender assignees therefrom in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement, (D) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Notes subject to such assignment and (E) the Lenders party to each such Assignment and Acceptance shall remit to the Agent a processing and recordation fee of $3,500, which fee shall be payable by either the assigning Lender or the assignee Lender. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (1) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (2) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto).

     (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents or the execution, legality, validity, enforceability, genuineness or sufficiency or value of this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or the performance or observance by any Borrower of any of its obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements delivered to Agent in accordance with this Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender.

     (c) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee in accordance with Section 8.07(a), together with any Note or Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to each of the Borrowers.

-46-

     (d) The Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and Commitments of, and principal amount of the Advances under each Facility owing to, each Lender from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and each of the Borrowers, the Agent and the Lenders may treat each Person whose name is recorded as a Lender in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by each of the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice.

     (e) Each Lender may upon not less than five Business Days’ notice to P&G sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments which may be on a non-pro rata basis between the Facilities, the Advances owing to it and any Note or Notes held by it); provided, however, that (i) such Lender’s obligations under this Agreement (including, without limitation, its Commitment to each of the Borrowers hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) each of the Borrowers, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any other Loan Document, or any consent to any departure by the Borrowers therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any scheduled date for any payment of principal of, or interest on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. If any Lender sells a participation as described in this Section 8.07(e), such Lender shall provide to the Agent on behalf of the Borrowers, or maintain as agent of the Borrowers, the information described in Section 8.07(d) with respect to such participation and shall permit each of the Borrowers to review such information (to the extent permitted under applicable law) from time to time upon request. Neither the sale of any such participation nor the holding of such a participation by any participant shall increase any obligation of any Borrower under Section 2.11 or Section 2.14.

     (f) Any Lender may, in connection with any assignment or participation or proposed assignment or proposed participation, disclose to the assignee or participant or proposed assignee or participant any financial statements and related documents delivered to the Agent in accordance with Section 4.01(e) or Section 5.01(d)(i); provided that, prior to any such disclosure, the assignee or participant or proposed assignee or proposed participant shall agree to preserve the confidentiality of any Confidential Information received by it in accordance with the terms of Section 8.08.

     (g) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and any Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.

     SECTION 8.08 Confidentiality.

     Neither the Agent nor any Lender shall disclose any Confidential Information to any other Person without the consent of each of the Borrowers, other than (a) to the Agent’s or such Lender’s Affiliates and their officers, directors, employees, agents and advisors and, as contemplated by Section 8.07(f), to actual or prospective assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process and (c) as requested or required by any state, federal or foreign

-47-

authority or examiner regulating banks, banking or other financial institutions; provided, that, with respect to clause (b) above, the Agent and each Lender agree to notify P&G promptly of any such request for the disclosure of Confidential Information unless such notification is prohibited by applicable law, rule or regulation or by judicial process.

     SECTION 8.09 Judgment Currency.

     (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars or any Optional Currency into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase Dollars or such Optional Currency, as the case may be, with such other currency at Citibank’s principal office in London at 11:00 A.M. (London time) on the Business Day preceding that on which final judgment is given.

     (b) The obligation of each Borrower in respect of any sum due from it in any currency (the “Primary Currency”) to any Lender or the Agent hereunder shall, notwithstanding any judgment in any other currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Agent (as the case may be), of any sum adjudged to be so due in such other currency, such Lender or the Agent (as the case may be) may in accordance with normal banking procedures purchase the applicable Primary Currency with such other currency; if the amount of the applicable Primary Currency so purchased is less than such sum due to such Lender or the Agent (as the case may be) in the applicable Primary Currency, each Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Agent (as the case may be) against such loss, and if the amount of the applicable Primary Currency so purchased exceeds such sum due to any Lender or the Agent (as the case may be) in the applicable Primary Currency, such Lender or the Agent (as the case may be) agrees to remit to such Borrower such excess.

     SECTION 8.10 Additional Borrowers; Assumption of Advances.

     (a) P&G may request upon not less than 10 Business Days’ notice to the Agent and each Lender, that any of its Subsidiaries become party to this Agreement as an additional borrower (an “Additional Borrower”), and additionally such Subsidiary or a Borrower may elect that all or any portion of the Advances and other obligations of any Borrower under this Agreement and the other Loan Documents shall be assumed by any other Borrower, in either case, by delivering to the Agent a Borrower Accession Agreement, substantially in the form of Exhibit D (a “Borrower Accession Agreement”), duly executed by P&G and such Subsidiary, together with a certificate of an authorized representative of the Additional Borrower certifying the names and true signatures of the other authorized representatives of the Additional Borrower authorized to sign the Borrower Accession Agreement and the other documents to be delivered hereunder. Following the giving of any notice pursuant to this Section 8.10(a), if the designation of such Additional Borrower obligates the Administrative Agent or any Lender to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, P&G shall, promptly upon the request of the Administrative Agent or any Lender, supply such documentation and other evidence as is reasonably requested by the Administrative Agent or any Lender in order for the Administrative Agent or such Lender to carry out and be satisfied it has complied with the results of all necessary “know your customer” or other similar checks under all applicable laws and regulations. Within thirty days following the execution and delivery of the Borrower Accession Agreement by such Additional Borrower, such Additional Borrower shall deliver certified resolutions (or the equivalent thereof) of the Board of Directors (or the appropriate committee or authorized individual(s) thereof) of such Additional Borrower, approving the Borrower Accession Agreement and the other documents to be delivered thereunder and all documents evidencing other necessary corporate (or equivalent) action. If P&G shall designate as an Additional Borrower

-48-

hereunder any Subsidiaries not organized under the laws of the United States or any State thereof, or if any Borrower is reincorporated in a different jurisdiction in which a Lender may be restricted either legally or operationally from lending, any Lender may, with notice to the Administrative Agent and P&G, fulfill its Commitment by causing an Affiliate of such Lender to act as the Lender in respect of such Additional Borrower or Borrower as the case may be (and such Lender shall, to the extent of Advances made to such Additional Borrower, be deemed for all purposes hereof to have assigned the full amount of such Advances to such Affiliate in compliance with the provisions of Section 8.07).

     (b) A Subsidiary in respect of which P&G has delivered a Borrower Accession Agreement to the Agent shall become an Additional Borrower and, as such, shall have all of the rights and obligations of a Borrower hereunder with respect to the Commitments specified to be made available to such Additional Borrower, which shall be in a minimum amount of $500,000,000; provided, that no Default shall have occurred and be continuing or would result from such joinder or assumption, as applicable. Upon any assumption of all of the Advances and other obligations of any Borrower, then, so long no Notice of Revolving Credit Borrowing or Notice of Competitive Bid Borrowing in respect of such Borrower is outstanding at such time, such Borrower shall no longer be a party to this Agreement.

     SECTION 8.11 Replacement of Lenders. If (i) any Lender requests any payment under Section 2.11 or Section 2.14 or gives notice to any Borrower pursuant to Section 2.12, (ii) any Lender is a Defaulting Lender, (iii) any Lender has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding or (iv) any Lender fails to consent to an amendment, modification or waiver of this Agreement that pursuant to the terms hereof requires consent of all of the Lenders or all of the Lenders affected thereby (provided that (A) such amendment, modification, waiver or currency request has been consented to by the Required Lenders and (B) all such non-consenting Lenders are replaced on the same terms) the Borrowers may, upon notice to such Lender and the Agent, replace such Lender by causing such Lender to assign its Commitments pursuant to Section 8.07 to one or more other Persons procured by the Borrowers. The Borrowers shall (1) pay in full all principal, accrued interest, accrued fees and other amounts owing to such Lender through the date of replacement and (2) release such Lender from its obligations under the Loan Documents. Any Lender being replaced shall execute and deliver an Assignment and Assumption with respect to such Lender’s Commitments and outstanding Advances.

     SECTION 8.12 Governing Law.

     This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

     SECTION 8.13 Jurisdiction.

     (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. Each Borrower agrees that service of process in any such action or proceeding brought in any such New York State court or in such federal court may be made upon CT Corporation System and its offices at 111 Eighth Avenue, New York, New York 10011 (the “Process Agent”), and hereby further agrees that any failure of the Process Agent to give any notice of any such service to any Borrower shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and

-49-

may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document in the courts of any jurisdiction.

     (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

     SECTION 8.14 Execution in Counterparts.

     This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement.

     SECTION 8.15 Waiver of Jury Trial.

     Each of the Borrowers, the Agent and the Lenders hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or any of the other Loan Documents or the actions of the Agent or any Lender in the negotiation, administration, performance or enforcement thereof.

     SECTION 8.16 Patriot Act.

     Each Lender hereby notifies each of the Borrowers that, pursuant to the requirements of the USA Patriot Improvement and Reauthorization Act of 2005 (the “Act”), it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender to identify such Borrower in accordance with the Act.

-50-

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers or representatives thereunto duly authorized, as of the date first above written.

THE PROCTER & GAMBLE COMPANY,      as a Borrower
By
	Title:

  Address:

PROCTER & GAMBLE INTERNATIONAL      S.A.R.L., as a Borrower
By
	Title:

  Address:

PROCTER & GAMBLE HOLDING (HK)      LIMITED, as a Borrower
By
	Title:

  Address:

Signature Page to Credit Agreement

PROCTER & GAMBLE INTERNATIONAL      OPERATIONS S.A., as a Borrower
By
	Title:

  Address:

CITIBANK, N.A., as Sole Lead Arranger and      Administrative Agent
By
	Title:

JPMORGAN CHASE BANK, N.A.,      as Syndication Agent
By
	Title:

DEUTSCHE BANK AG, NEW YORK BRANCH,      as Co-Documentation Agent
By
	Title:

ABN AMRO BANK N.V.,      as Co-Documentation Agent
By
	Title:

Signature Page to Credit Agreement

HSBC BANK USA, NATIONAL ASSOCIATION,      as Co-Documentation Agent
By
	Title:

Signature Page to Credit Agreement

SCHEDULE I
CREDIT AGREEMENT
APPLICABLE LENDING OFFICES

Name of Lender	Domestic Lending Office	Eurocurrency Lending Office
ABN AMRO Bank N.V.	250 Bishopsgate	250 Bishopsgate
	London	London
	EC2M 4AA	EC2M 4AA
	Attn: David French	Attn: David French
	T: 00 44 (0) 207 678 0204	T: 00 44 (0) 207 678 0204
	F: 00 44 (0) 207 678 8604	F: 00 44 (0) 207 678 8604
Citibank, N.A.	Two Penns Way	Two Penns Way
	New Castle, DE 19720	New Castle, DE 19720
	Attn: Bank Loan Syndications	Attn: Bank Loan Syndications
	T: 302 894-6016	T: 302 894-6016
	F: 212 994-0961	F: 212 994-0961
Deutsche Bank AG New York Branch	60 Wall Street New York, NY 10005	60 Wall Street New York, NY 10005
	Attn: Joe Cusmai	Attn: Joe Cusmai
	T: 201-593-2202	T: 201-593-2202
	F: 212-593-2313	F: 212-593-2313
Goldman Sachs Credit Partners L.P.	30 Hudson Street, 17th Floor Jersey City, NJ 07302	30 Hudson Street, 17th Floor Jersey City, NJ 07302
	Attn: Phillip Green	Attn: Phillip Green
	T: 212 357-7570	T: 212 357-7570
	F: 212 357-4597	F: 212 357-4597
HSBC Bank USA, National Association	452 Fifth Avenue, 5th Floor New York, NY 10018	452 Fifth Avenue, 5th Floor New York, NY 10018
	Attn: Donna Riley	Attn: Donna Riley
	T: 716 841-4178	T: 716 841-4178
	F: 716 841-0269	F: 716 841-0269
JPMorgan Chase Bank, N.A.	1111 Fannin Street, 10th Floor	1111 Fannin Street, 10th Floor
	Houston, TX 77002	Houston, TX 77002
	Attn: Cherry Arnaez	Attn: Cherry Arnaez
	T: 713 750-2789	T: 713 750-2789
	F: 713 750-2782	F: 713 750-2782
Merrill Lynch Bank USA	Merrill Lynch Capital	Merrill Lynch Capital
	4 World Financial Center	4 World Financial Center
	22nd Floor	22nd Floor
	New York, NY 10080	New York, NY 10080
	Attn: Gillian Prince	Attn: Gillian Prince
	T: 212-449-7839	T: 212-449-7839
	F: 212-449-9435	F: 212-449-9435
Merrill Lynch Capital Corporation	Merrill Lynch Capital 4 World Financial Center	Merrill Lynch Capital 4 World Financial Center
	22nd Floor	22nd Floor
	New York, NY 10080	New York, NY 10080
	Attn: Gillian Prince	Attn: Gillian Prince
	T: 212-449-7839	T: 212-449-7839
	F: 212-449-9435	F: 212-449-9435

Name of Lender	Domestic Lending Office	Eurocurrency Lending Office
Morgan Stanley Senior Funding, Inc.	1585 Broadway New York, NY 10036	1585 Broadway New York, NY 10036
	Attn: Larry Benison	Attn: Larry Benison
	T: 718 754-7299	T: 718 754-7299
	F: 718 754-7249	F: 718 754-7249
Morgan Stanley Bank	2500 Lake Park Blvd.	2500 Lake Park Blvd.
	Suite 300C	Suite 300C
	West Valley City, UT 84120	West Valley City, UT 84120
	Attn: Larry Benison	Attn: Larry Benison
	T: 718 754-7299	T: 718 754-7299
	F: 718 754-7249	F: 718 754-7249
Morgan Stanley Senior Funding, Inc.	1585 Broadway New York, NY 10036	1585 Broadway New York, NY 10036
	Attn: Larry Benison	Attn: Larry Benison
	T: 718 754-7299	T: 718 754-7299
	F: 718 754-7249	F: 718 754-7249
Goldman Sachs Credit Partners L.P.	85 Broad Street New York, NY 10004	c/o Goldman Sachs International Petershill 1 Carter Lane London EC4V 5ER England

SCHEDULE II
CREDIT AGREEMENT
COMMITMENTS

Name of Lender	Commitment
Citibank, N.A.		2,850,000,000
ABN AMRO Bank N.V.		2,800,000,000
Deutsche Bank AG New York Branch		2,000,000,000
JPMorgan Chase Bank, N.A.		2,000,000,000
Merrill Lynch Bank USA		850,000,000
Merrill Lynch Capital Corp.		1,150,000,000
Goldman Sachs Credit Partners L.P.		1,350,000,000
HSBC Bank USA, National Association		2,000,000,000
Morgan Stanley Senior Funding, Inc.		2,000,000,000

EX-11

EXHIBIT (11)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

Computation of Earnings Per Share

Amounts in millions except per share amounts

	Years Ended June 30
	2008		2007		2006		2005		2004
BASIC NET EARNINGS PER SHARE
Net earnings	$	12,075	$	10,340	$	8,684	$	6,923	$	6,156
Preferred dividends, net of tax benefit		176		161		148		136		131
Net earnings available to common shareholders	$	11,899	$	10,179	$	8,536	$	6,787	$	6,025
Basic weighted average common shares outstanding		3,080.8		3,159.0		3,054.9		2,515.6		2,580.1
Basic net earnings per common share	$	3.86	$	3.22	$	2.79	$	2.70	$	2.34
DILUTED NET EARNINGS PER SHARE
Net earnings	$	12,075	$	10,340	$	8,684	$	6,923	$	6,156
Deduct preferred dividend impact on funding of ESOP		0		0		0		1		4
Diluted net earnings	$	12,075	$	10,340	$	8,684	$	6,922	$	6,152
Basic weighted average common shares outstanding		3,080.8		3,159.0		3,054.9		2,515.6		2,580.1
Add potential effect of:
Conversion of preferred shares		144.2		149.6		154.1		158.3		164.0
Exercise of stock options and other unvested equity awards		91.8		90.0		76.9		63.2		55.3
Diluted weighted average common shares outstanding		3,316.8		3,398.6		3,285.9		2,737.1		2,799.4
Diluted net earnings per common share	$	3.64	$	3.04	$	2.64	$	2.53	$	2.20

(1)	Despite being included currently in diluted net earnings per common share, the actual conversion to common stock occurs pursuant to the repayment of the ESOP debt through 2021.
(2)	Approximately 40 million in 2008, 41 million in 2007, and 44 million in 2006 of the Company’s outstanding stock options were not included in the diluted net earnings per share calculation because to do so would have been antidilutive (i.e., the total proceeds upon exercise would have exceeded the market value of the underlying common shares).

EX-12

EXHIBIT (12)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

Computation of Ratio of Earnings to Fixed Charges

Amounts in millions

	Years Ended June 30
	2008			2007			2006			2005			2004
EARNINGS, AS DEFINED
Earnings from operations before income taxes and before adjustments for minority interests in consolidated subsidiaries and after eliminating undistributed earnings of equity method investees	$	16,120		$	14,746		$	12,419		$	9,954		$	9,010
Fixed charges, excluding capitalized interest		1,604			1,428			1,242			924			719
TOTAL EARNINGS, AS DEFINED	$	17,724		$	16,174		$	13,661		$	10,878		$	9,729
FIXED CHARGES, AS DEFINED
Interest expense (including capitalized interest)	$	1,546		$	1,374		$	1,153		$	869		$	629
1/3 of rental expense (1)		137			124			122			90			90
TOTAL FIXED CHARGES, AS DEFINED	$	1,683		$	1,498		$	1,275		$	959		$	719
RATIO OF EARNINGS TO FIXED CHARGES		10.5	x		10.8	x		10.7	x		11.3	x		13.5	x

⁽¹⁾ Considered to be representative of interest factor in rental expense.

EX-13

EXHIBIT (13)

Annual Report to Shareholders
(pages 1-82)

-^^ I »MH

^RjTJK^J IMIw

K^3

^^B^^^^

^^^^^^^ffi ^^^^^^^ffl

H^^^ul^QSliiiilc^^nf^^^^H ^^KK^H

^^^ffi

^^^^^^^^ m^^m

Iflffl

^^^Q ^^^1

^^^^^^H ^^^^^^1 ^^^^^^1 ^^^^^^1 ^^^^^B ^^^^w

^^w ^^^^^H ^^^^^H ^^^^^1 ^^^^^1 ^^w ^^^^^1 ^^^^Q ^^^^^1 ^^^^^H

^jjgjj^^^^fljgo^flfl^l ^^^^^^H aiBgBiaSiiBlMBMMMBiB ^M^ ^^^^^1 ^^^^^1 ^^^^^1 ^JjjpjfflBffl^J^B^B^^^^^^j^jgU^^B^J ^^^^^^^1 ^^l^^^^^l ^^E^^^^^l ^^^^^^^^^^^^^^B^^^^^^^^^^^^^^B^CT ^S^^^^^^^^^^^^j^^^^^^^^^^^B^^ ^^^a^^^^^^^^^^M^^^^^^^^^^^^BB            B^^^^^^^^^^^^^B^^^^^^^^^^^8B ^^^a^^^^^^^^^^^^^^^^^^^^^^^^^^^^^aE            E^^^^^^^^^^^^^B^^^^^^^^^^^^SB ^^^^^^^^^^^^^^^^•^^^^^^^^^^^^•Ea b^^^^^^^^^^^^^b^^^^^^^^^^^^ski E^^^^^^^^M^^^^^^^^^fiB Q^^^^^^^^^^^^^^^E^ ^^^^^^^^^^^•^^^^^^^^^^^•m ^^0^2 ^^^^^^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^fl

^^^

W

P&G is designed to innovate consistently and successfully in every part of our business.

We define innovation broadly, in terms of what it is, where it comes from, and who’s responsible for it.

We invest in innovation at industry-leading levels with ongoing productivity savings.

We manage innovation with discipline.

We deliver innovation that builds consumer trust and loyalty over time.

We lead innovation on leading global brands and with an outstanding team of innovation leaders.

P&G is Designed to Innovate... and to grow.

2     The Procter & Gamble Company

A.G. Lafley
Chairman of the Board and
Chief Executive Officer

Fellow P&G Shareholders:

In last year’s annual report, I explained how P&G is designed to grow. We’ve designed a global, diversified business portfolio that enables P&G to grow consistently and reliably. We’ve developed the core strengths—consumer understanding, brand-building, innovation, go-to-market capability, and scale-that are needed to win in the consumer products industry. We manage the business with rigorous strategic, financial and operating discipline. We’ve built the most diverse, globally experienced team of business leaders in P&G’s 171-year history. These elements work in combination to ensure P&G can meet or exceed its growth targets reliably year after year.

At the heart of P&G’s design for growth is our capability to innovate — broadly, reliably, and successfully, year after year, in every part of our business. We innovate across more categories and on more leading brands than any other consumer products company. We have a broader range of science and technology than any of our competitors. We invest more in innovation and marketing support than any other consumer products company. We deliver an unrelenting stream of innovation with systematic discipline. And P&G’s businesses are run by women and men who are not only globally experienced general managers but also highly skilled innovation leaders.

This helps P&G deliver consistent, reliable innovation and reliable, sustainable growth. Innovation drives growth.

We saw this in fiscal 2008, as P&G delivered another year of innovation-driven growth at or above the Company’s target levels for sales, earnings-per-share and cash generation.

FISCAL 2008 RESULTS

• Net sales increased 9%, to $83.5 billion. Organic sales increased 5%.

• Diluted earnings per share increased 20%, to $3.64 per share.

• Free cash flow from operating activities was $12.8 billion, or 106% of net earnings, well ahead of the 90% cash productivity target.

Fiscal 2008 was P&G’s seventh consecutive year of organic sales growth at or ahead of the long-term target range; brand and new product innovations, particularly in developing markets, accounted for virtually all this sales growth. Over the same period, diluted earnings per share have grown at a compound average growth rate of 13%,⁽¹⁾ well ahead of our long-term target. We’ve generated more than $60 billion in free cash flow since the beginning of the decade. Most importantly, we’ve delivered consistently strong total shareholder return over the past ten-, five-, three- and one-year periods, above the Dow Jones Industrial Average.

1. 2001 EPS excludes S0.61 per share of costs from the Organization 2005 restructuring program and amortization of goodwill and indefinite-lived intangible assets.

Note: An explanation and reconciliation of free cash flow and organic sales for 2008 is provided on page 55.

The Procter & Gamble Company     3

P&G’s sales growth in fiscal 2008 came from a diverse mix of businesses and was driven primarily by innovation.

• Baby and Family Care organic sales increased 8%. Charmin delivered double-digit organic volume growth behind the introduction of Charmin UltraStrong and a complete restage of the brand line-up. Pampers delivered double-digit volume growth—and became P&G’s first $8 billion brand — behind the continued strength of Pampers Baby Stages of Development. Bounty introduced Bounty Extra Soft and upgraded Bounty Basic.

• Fabric and Home Care grew organic sales 6%, driven by liquid laundry detergent compaction—a disruptive innovation rolled out across the entire North America laundry portfolio— along with strong product innovation on Tide, Gain, Ariel, Downy, and Febreze.

• Beauty organic sales increased 4%, behind the continuing success of Olay Definity and Regenerist product innovation, new product and package innovation on Head & Shoulders, and a revolutionary new home hair-colorant called Perfect 10 on Nice ‘N Easy.

• Grooming grew organic sales 4%, led by more than 40% top-line growth on the superior Fusion male shaving system. Fusion became P&G’s 24th billion-dollar brand.

• Health Care organic sales grew 3%, driven by strong innovation across the Health Care business: Crest Pro-Health Night Paste and Rinse, Oral-B Cross-Action Pro-Health Brush, Always Clean and Always Fresh, and comfort upgrades on the Naturella brand.

• Snacks, Coffee and Pet Care organic sales increased 4%, led by the launch of Dunkin Donuts^® retail coffee, a number of Pringles initiatives—including Rice Infusion, Extreme Flavors and Pringles Stix—and lams Proactive Health for dogs and Healthy Naturals for cats.

Growth was broad-based across all geographic regions, with mid-single-digit sales growth in developed markets and double-digit sales growth in developing markets.

We successfully completed the integration of Gillette, exceeding cost synergy and dilution targets. Revenue synergies are on target, with significant upside potential over the next three to five years. We’ve just begun to leverage the Gillette and Oral-B brands, both strong platforms for innovation.

P&G REPORT CARD

Progress Against P&G’s Goals and Strategies
GROWTH RESULTS

Average annual	Goals			2008			2001-2008
Organic Sales Growth(1)		4-6	%		5	%		6	%
Earnings-per-Share Growth		10	%+		20	%		13	%(2)
Free Cash Flow Productivity(3)		90	%+		106	%		118	%

GROWTH STRATEGIES (2001-2008)

Grow from the core: Leading Brands, Big Markets, Top Customers

ü	Volume up 7%,	ü	Volume up 7%,	ü	Volume up 8%,
	on average, for		on average, for		on average,
	P&G’s 24 billion-		P&G’s top 16		for P&G’s top 10
	dollar brands(4)		countries(5)		retail customers(5)

Develop faster-growing, higher-margin, more asset-efficient businesses

ü	Beauty sales	ü	Health Care	ü	Home Care
	more than		sales more than		sales more than
	doubled to		doubled to		doubled; profits
	$19.5 billion;		$14.6 billion;		more than tripled
	profits tripled to		profit increased
	$2.7 billion		4-fold to
			$2.5 billion

Accelerate growth in developing markets and among low-income consumers

ü	Developing	ü	Over one-third	ü	Developing market
	market sales up		of total company		profit margins
	18% per year		sales growth		comparable to
			from developing		developed market
			markets		margins

(1)	Organic sales exclude the impacts of acquisitions, divestitures and foreign exchange, which were 6%, on average, in 2001-2008.
(2)	2001 EPS excludes S0.61 per share of costs from the Organization 2005 restructuring program and amortization of goodwill and indefinite-lived intangible assets.
(3)	Free cash flow productivity is the ratio of free cash flow to net earnings.
(4)	Excludes the impact of adding newly acquired billion-dollar brands to the portfolio.
(5)	Excludes impact of adding Gillette.

4     The Procter & Gamble Company

On June 4, 2008, we announced our agreement to merge P&G’s coffee business with The J.M. Smucker Company. The agreement maximizes the after-tax value of the coffee business for P&G shareholders and minimizes earnings-per-share dilution versus other alternatives. We expect to complete the transaction during the second quarter of fiscal 2009.

SUSTAINING GROWTH THROUGH INNOVATION

This is strong performance, but the challenge of sustaining growth is greater today than at any time in the past 50 years. Commodity and energy costs continue to rise for companies. Consumers are facing higher food and gas prices, declining home values, and rising levels of unemployment. The question shareholders and prospective investors are asking is: “How will P&G sustain growth in today’s challenging and uncertain economic environment?”

The answer is clear to all of us at P&G: we will continue to innovate in every part of our business. Innovation is at the heart of P&G’s business model. It is the primary way we delight consumers, create value with retail partners, and create new business models to deliver consistent, sustainable growth at or ahead of the Company’s goals.

A lot of companies talk about innovation, but P&G has demonstrated the capability—over decades—to innovate consistently, reliably and successfully. We have a long list of innovation firsts in our industry:

• Tide was the first heavy-duty laundry detergent

• Crest, the first fluoride toothpaste clinically proven to prevent tooth decay

• Downy, the first ultra-concentrated rinse-add fabric softener

• Pert Plus, the first 2-in-1 shampoo and conditioner

• Head & Shoulders, the first pleasant-to-use shampoo effective against dandruff

• Pampers, the first affordable, mass-marketed disposable diaper

• Bounty, the first three-dimensional paper towel

• Always, the first feminine protection pad with an innovative, dry-weave topsheet.

• Febreze, the first fabric and air care products that actually remove odors from fabrics and the air

• Crest White Strips, the first patented in-home teeth whitening technology

P&G continues to be one of the few companies in our industry that creates new categories and brands, new performance standards, and new definitions of consumer value. Swiffer and Febreze created entirely new product categories. Crest Pro-Health, Olay Regenerist and Definity, Pampers Baby Stages of Development, and Tide with Bleach redefined high performance in their categories. Olay innovation has created new consumer experiences that are as good as—or better than—several-hundred-dollar department and specialty store brands.

We innovate so consistently across our diverse portfolio of businesses, and so consistently over time, because we’ve created a unique design for innovation at P&G.

     1. We define innovation broadly.

     2. We invest in innovation at industry-leading levels.

     3. We manage innovation with discipline.

     4. We deliver innovation that builds consumer trust and loyalty over time.

     5. We lead innovation with global brands and an outstanding team of innovation leaders.

This integrated, end-to-end approach is complemented by P&G’s global scale and scope, which is unrivaled in our industry.

The result is an innovation design that enables P&G to win with consumers and retail customers and to generate sustainable long-term growth and shareholder value.

DEFINING INNOVATION BROADLY

We define innovation broadly. We innovate in every area where our brands touch consumers’ lives: the package and product, the shopping experience, the in-home product usage experience, and every aspect of communication. We also create innovative new business models and organizational structures. By innovating so broadly, we get to see more innovation opportunities and to leverage more innovation resources than more narrowly focused competitors.

Our Family Care business is a good example. Twenty years ago, we created a proprietary paper-making process that enables us to produce the strongest, softest, most absorbent paper towels and tissues on the market. But our approach to innovation in Tissues and Towels is driven by consumers, not by the technology.

The Procter & Gamble Company      5

Designed to Innovate

Consumers don’t all want the same benefits from a brand like Bounty. Some consumers want a paper towel designed for spills and light cleaning; it’s important to them not to be wasteful. We created Bounty Basic for these consumers, which is just right for everyday tasks but not over-designed. We created Bounty UltraStrong for consumers who value strength and absorbency and Bounty Extra Soft for those who want more softness. All these products use the same paper-making technology, but provide highly tailored benefits to meet specific consumer needs.

We also tailor marketing and communications to specific consumer needs. Bounty Basic consumers aren’t persuaded by television advertising; they get all the brand communication they need at the store shelf. Other consumers are receptive to information about our brands at different times and places, and we respond with communication and marketing plans tailored to their desires and preferences.

We’re able to innovate broadly and successfully because we engage consumers as co-designers of innovation. We live with consumers in their homes, shop with them in stores, and observe their daily behavior for days, weeks and even months at a time. Consumers are active participants in P&G’s innovation process, and we keep them involved in every step that guides a new product or idea from concept to launch.

We also involve external innovation partners to turbo-charge P&G’s internal innovative capability—an approach we call “Connect and Develop.” Six years ago, only 15% of our product initiatives included innovation from outside P&G. Today, more than half of all P&G innovation includes an external partner. In just the past year, we evaluated more than 5,000 innovation opportunities from small entrepreneurs, universities, research institutes, and large companies. This is a fourfold increase over the number of external innovations we were considering at the beginning of the decade.

6      The Procter & Gamble Company

By defining innovation so broadly—what it is, where it comes from, who’s responsible for it—we continually expand and unleash P&G’s innovation potential. The best proof of our innovation capability is the number of top-selling new products that come from P&G. The IRI Pacesetters study tracks and ranks the most successful new consumer products introduced in the U.S. For the past 13 years, one-third of the most successful Pacesetter products, on average, have come from P&G and Gillette—more than our top six competitors combined. In 2008, 5 of the 10 best-selling new products came from P&G, including Tide Simple Pleasures detergent, Febreze Noticeables air freshener, the new Herbal Essences line of products, Crest Pro-Health toothpaste, and Olay Definity skin care products.

INVESTING IN INNOVATION

Another point of difference is P&G’s ability to invest in innovation at industry-leading levels. We invest more than $2 billion a year in R&D, nearly twice the level of our closest competitor, Unilever, and roughly equal to the combined total of our other major competitors—Avon, Clorox, Colgate, Energizer, Henkel, Kimberly Clark, L’Oreal, and Reckitt Benckiser. We also maintain a high level of marketing investment in our brands. P&G’s advertising investment has averaged about 10% of sales over the past 15 years.

We maintain this strong level of innovation and marketing investment, while continuing to grow margins, by continually increasing P&G’s productivity. The more productive we become, the more we can redeploy people and dollars to innovation.

P&G has a strong track record of reliable productivity growth. Sales per employee have grown more than threefold and net earnings per employee are up eightfold since 1980. Over the past 10 years, P&G’s productivity on a sales-per-employee basis has grown at an average rate of 6% a year. This performance is more than twice the U.S. average of roughly 2.5% productivity growth per year.

P&G grows productivity so reliably because we take a very systemic approach. A good example of this is Global Business Services—P&G’s shared services business model. Early this decade, we significantly reduced the cost of business services by centralizing and standardizing P&G systems, infrastructure and services. We then focused on improved service levels and greater value creation, ultimately creating a global business services organization that has been recognized externally as the best shared-services organization in the world, and which has delivered nearly $600 million of cumulative cost savings to date— a substantial portion of which we’ve reinvested in innovation.

In addition, GBS—in collaboration with our R&D and Engineering functions—is making P&G a more productive and effective innovator by accelerating the use of virtualization, computer modeling and simulation. Virtualization is enabling P&G brands to co-design products with consumers. The same technologies allow us to show retailers virtual in-store displays for half the cost and less than half the time required for physical shelf designs. Computer modeling and simulation saved P&G about 17 years of design time in the last year alone.

We’re convinced we can become even more productive, increasing productivity 7-8% a year. We’re making our brand portfolio more productive by focusing even more on our largest leading brands—the 44 brands with sales of $500 million or more that represent 85% of sales and more than 90% of profits. We’re getting more disciplined about how to manage the remaining brands in P&G’s portfolio, investing in small brands that have potential to become billion-dollar brands of the future, supporting brands that may not have global potential but are local jewels in some markets, and consolidating or divesting underperforming brands. And, we’re seizing even more opportunities to leverage P&G scale by eliminating duplicative activities, centralizing more functional support, and consolidating some small countries into regional hubs.

We’re also going after cost savings throughout the Company. We have clearly defined goals for controlling overhead spending. Businesses projected to grow significantly faster than the balance of the portfolio have an overhead target equal to or less than half their projected sales growth; slower-growing businesses and all corporate functions are committed to zero overhead growth; businesses growing below company goals and/or with significant cost-structure issues must reduce overhead spending every year. This discipline reflects our commitment to flat or declining headcount for the foreseeable future.

These and other efforts throughout the Company are critical. Productivity fuels innovation. Innovation drives growth.

MANAGING INNOVATION WITH DISCIPLINE

The next factor that sets P&G apart as an innovator is discipline. We don’t rely on “Eureka!” moments; we take a systematic approach to innovation.

For example, we’re highly systematic about how we organize for innovation. We don’t take a “one-size-fits-all” approach but we’re deliberate about creating the right structure for different kinds of innovation work. Our Corporate Innovation Fund, for example, specializes in high-risk, high-reward ideas; it’s essentially an in-house venture capital firm that does initial concept, design, engineering, and qualification work and then

The Procter & Gamble Company     7

hands over successful ideas to the appropriate business units. The FutureWorks team focuses exclusively on innovations that can create entirely new businesses. There are new-business development teams in every global business unit focusing on opportunities to create adjacent categories. Innovation centers help us solve tough innovation challenges by providing simulated in-home and in-store environments where P&G teams can isolate themselves and interact with consumers and shoppers for days or even weeks at a time.

Once an idea is qualified and begins moving through our product launch system, the innovation team continues to face go/no-go gates at every critical milestone. At each gate, we make decisions about which initiatives are ready to progress, which need further work, and which should be stopped. Every decision is grounded in maximizing the productivity of innovation investments and generating shareholder value.

This disciplined approach is essential to innovation success. It builds accountability into both the creative and executional aspects of innovation. P&G’s Family Care business is a good example here, as well. Family Care is one of P&G’s strongest value-creating businesses. They’ve innovated broadly across brand platforms—Bounty, Charmin and Puffs—while delivering industry-leading, double-digit total shareholder return for the past one-, three- and five-year periods in a highly capital-intensive category. They’ve increased gross margins 7% and have delivered free cash flow well above the Company’s 90% cash productivity target for the past five years, despite investments in innovation and in new manufacturing capacity to support growth.

There are similar stories in Fabric Care, Feminine Care, Baby Care, Beauty Care, and Health Care. These are the results of disciplined innovation.

DELIVERING A STEADY STREAM OF INNOVATION

What I’ve explained so far—the way we think about innovation, our ability to invest in it, and the discipline with which we manage it—are the elements of P&G’s innovation design that are difficult to see from the outside. Each of these factors helps to set P&G apart as an innovator. What counts most, however, is the innovation that consumers experience day after day, year after year.

We earn consumer trust and loyalty over time by delivering an unending stream of innovation that consumers learn to expect from P&G brands. We plan three-to-five years out and fill our pipeline with three distinct kinds of innovation.

• Disruptive innovation creates new categories, new segments, or entirely new sources of consumer consumption. These are innovations that address consumer needs no other brand or product has met. Virtually all of P&G’s billion-dollar brands were created with disruptive innovations.

• Sustaining innovation is what we focus on most. These are extensions or improvements of existing products: big initiatives that meet consumer needs by filling gaps, eliminating consumer trade-offs, or providing new benefits. Examples include Pampers Caterpillar-Flex, which improved the fit and comfort of baby diapers, and Crest Pro-Health Rinse, the Crest brand’s entry into the mouth-rinse category adjacent to toothpastes.

• Commercial innovation generates trial on existing products without a product or package change. Examples include the Gillette Champions and Pampers Unicef programs, marketing efforts that give consumers new reasons to be interested in and loyal to a P&G brand.

Always is a great example of how this multidimensional innovation strategy builds loyalty and category leadership. We introduced Always in 1984 as the first feminine protection pad with an innovative, dry-weave topsheet. In 1986, the brand set yet another performance standard with its proprietary “wings” product, followed by Ultra Thin products in 1991. These three disruptive innovations brought years of competitive advantage. In addition to these disruptive innovations, we have maintained a steady pace of product upgrades with sustaining innovations like Always Fresh, Always Clean and Always Overnight. This year, Always is leading innovation again, with a disruptive initiative called Always Infinity that uses a unique pad design and new, state-of-the-art technology to bring a new level of superior protection and absorbency to consumers.

Always has also delivered a steady stream of meaningful commercial innovation. The brand’s school education programs teach girls about puberty, and introduce them to the category and our brands. Another commercial innovation, from both Always and Tampax, is beinggirl.com, a unique website that enables teens to get information in a safe, discreet environment and to interact with peers facing similar life-stage issues.

This combination of disruptive, sustaining and commercial innovation keeps a brand like Always growing year after year. Always has grown in 21 of the 24 years since launch and has increased its U.S. market share from 14% to 48%, and today has a global share of 31%. There are examples like Always throughout P&G’s brand portfolio.

8     The Procter & Gamble Company

LEADING INNOVATION

Making P&G’s design for innovation work is the job of leadership.

Innovation is a human activity and leaders must unleash the creativity, initiative, leadership, and productivity of the innovators in their businesses. This requires a blend of intelligence and empathy. Empathy is incredibly important in a diverse, people-intensive business like ours. Most of our creativity and innovation happens in teams, and often the teammates are working in different parts of the world.

To lead in this kind of environment, we need a balance of intellectual skills and empathic skills. We have to develop the intuition to understand and appreciate people’s intentions, feelings and motivations—all of which have been shaped by experiences that may be sharply different from those we’ve grown up with ourselves.

At the same time, innovation leaders must be decision-makers. They must exercise the judgment and the courage to take innovation risks and to understand the role fast failure plays in the innovation process, while also being willing to stop projects and reallocate resources to bigger innovation opportunities when necessary.

I’m a big believer that innovation leaders are made, not born. They learn to get comfortable with uncertainty. They learn to become more open-minded, to co-create with consumers, and to be receptive to ideas from different disciplines and industries. They learn to become both strategists and operational managers, to be agile and disciplined. As they learn and gain experience, they become more effective at leveraging P&G’s design for innovation to deliver consistent, sustainable growth.

The ability to lead effective innovation programs is required at P&G, particularly at the general manager and president levels. Good innovation leaders need to be cultivated and promoted — and I hold myself accountable for helping to select and develop the innovation leaders who run P&G businesses around the world. Ensuring P&G has the leaders and the pipeline to innovate for the next ten years is one of my most fundamental responsibilities as chief executive.

LEVERAGING GLOBAL SCALE AND SCOPE

The most differentiating aspect of P&G’s approach to innovation is the scale and scope of our business and brand portfolio, science and technology platforms, and geographic reach.

The diversity of our business portfolio creates highly valuable scale benefits. Our Health & Beauty businesses take advantage of purchasing pools created by Household businesses such as laundry, diapers and paper products. This enables them to purchase packing materials and basic commodities at lower prices than their direct competitors. Similarly, Household Care enjoys economies of scale created by the large advertising budgets supporting our Health & Beauty Care businesses. We use these scale advantages to invest in innovation.

The diversity of P&G’s brand portfolio gives us the opportunity to innovate in more aspects of consumers’ lives than nearly any other company. P&G brands are in every room of the house, at virtually every hour of the day. As a result, we get to see more of consumers’ needs than other companies. This helps us spot more problems P&G innovation can help solve and more aspirations P&G brands can help achieve.

Our science and technology portfolio is another huge scale advantage. Bleach technology from Laundry has been used in Health & Beauty Care products such as Crest White Strips and Nice ‘n Easy Perfect 10 Hair Colorant. Non-woven top sheet technology started in Diapers, traveled to Feminine Care then moved to Swiffer and Olay Daily Facials. Proprietary perfume technology has been used to enhance the performance of Bounce, Febreze, Fine Fragrances, Camay and most recently Secret and Gillette Clinical Strength deodorant. We’re now combining Gillette’s expertise in mechanical engineering with our expertise in chemical engineering.

Companies that compete primarily in Beauty can’t benefit from such technology transfer because they don’t have a Laundry business. Home Care competitors can’t move a substrate technology from diapers or feminine hygiene if they’re not in those businesses. There is no other company in our industry whose portfolio of businesses and brands, sciences and technologies is as broad, as deep or as diverse as P&G’s. This is a very significant source of competitive advantage. We use our diverse mix of sciences and technologies to make innovation connections that other companies cannot make on their own.

Another area in which we can leverage P&G scale is our geographic reach. In developed markets like the U.S., where P&G brands can be found in virtually every household, we leverage household penetration as a scale advantage. In developing markets, we’re using our portfolio of leading brands to attract and build a network of best-in-class, often exclusive distributors in countries such as China, India and Russia. Today our distributor network in China reaches about 800 million people. In India, our distributor network covers 4.5 million stores, an increase of two million stores in just five years. In Russia, we now have access to 80% of the population.

The Procter & Gamble Company     9

P&G’s global scale allows us to quickly flow innovation across developing countries. We create innovation to meet consumer needs in a particular region and then quickly flow that technology across multiple countries faster than competition. For example, consumers who wash clothing by hand need improved rinsing with less water. This is a common need in many developing countries. We launched Downy Single Rinse in Mexico, and have since expanded it into 12 countries, including China, the Philippines, and Peru. We did the same with Naturella, an innovative feminine protection product created specifically for low-income consumers in Latin America; we’re now expanding Naturella throughout Eastern Europe. We’ve created highly cost-effective laundry detergent formulations that we’ve expanded rapidly across developing markets. We’ve created a “better and cheaper” dentifrice formulation for Crest that was first introduced in China and has now been expanded into Eastern European markets—and has also been introduced as an important cost innovation in several developed markets.

We’re able to do all this because we’ve built the systems and go-to-market scale that allow us to move an entire innovation — concept, brand, product formulation, package, marketing, and in-store presence—to multiple markets almost simultaneously. With this geographic reach and capability, in developed and developing markets alike, we can expand innovation around the world and into millions of homes very quickly.

DESIGNED TO INNOVATE —AND GROW

We’ve built P&G’s business model around innovation because it’s the primary driver of superior consumer value and profitable organic sales growth in the consumer products industry. The companies that lead innovation are growth catalysts and generally capture a substantial portion of the growth they stimulate. I don’t know of a company that has sustained growth and industry leadership over the long term that has not also been the innovation leader.

Innovation is especially important in tough economic periods. Consumers will continue to buy premium-priced products as long as they’re confident they’re getting value for their money. This is why innovation is so important. Price is an element of value, but the real driver of value perception is relative pricing, not absolute pricing, combined with product performance and brand equity. Innovation drives value. It differentiates our brands in the hearts and minds of consumers. It enables category leadership. It stimulates growth and prevents commoditization of the categories in which we compete. It drives premium pricing and higher gross and operating margins.

This reality plays to P&G strengths as an innovator. We innovate more broadly than any other company in our industry. We invest more in innovation and marketing support. We bring a richer mix of innovation to market with greater discipline and strong leadership. We’ve designed an innovation capability that is unmatched in the consumer products industry.

Most important of all, P&Gers around the world see innovation as their job. They look for opportunities to innovate in every part of the business. Consumer researchers are developing innovative new ways to learn from consumers. Marketers are finding new ways and new places to engage consumers. Technicians operating lines in P&G plants are creating innovative ideas for making products better, faster and cheaper. Innovation has always been at the heart of P&G’s business model, but today it’s not the province of only one or two functions within the Company. Innovation is the focus of our entire organization.

P&G’s innovation capability is stronger and more robust today than at any time in the Company’s history—and this is why I’m confident innovation will continue to be the primary driver of sustainable sales and earnings-per-share growth at or ahead of P&G’s long-term targets.

P&G is designed to innovate, and to grow.

A.G. Lafley
Chairman of the Board
and Chief Executive Officer
August 12, 2008

^^Q ^^1

FiB^JiP

•^q

^^^» ^^^«

^^^^^ffl^^^^^^^^^m ^^^m ^«ffi ^^wE

^^^^^^^^^^^ ^^^^^H

^^^^^^^^^^^^^^^^ffl ^^Q

^^^^^^^^^^^^^^^^^^^^^m]^^^ i^^^l ^m^^^^^^^^^ n^^ffi

~S.CONT^^^^^U            fldfi

^^^ra            l^^^w            t^^^^^l

^^^^^^^^^^ffil^^^^^^^^^^^^^^^m ^^^^^^w ^^^H

^^« ^^^1

^^^^^m^^M^^^Q I^^^B ^^^H

^^S H»B [^^r —

^n^ w^H^^^ ^^hk OT^^Hm ^^^^^^^^m ^^«^^^n ^Q^^^^^^n            t^^^^^w? ^^^m ^^^^^^Hra ^^Q^ ^^^Q ^^^mj ^^^^^^2 ^^^^ ^^^^^^^B B^^n ^^^n ^^™ fflBJgi K^^^^fl^^^^U ^^^1 ^^^ul ^^^1 ^w^^^^ff^^Hra ^^^m

^^M            B^H

·^mu^^m^^^^^^^ffin^^^M n^^Hra •^ffi^MHrallllR

^^^^^^^^^^u^^^^^^^^uE^^^^SIu ^^^1 ^ffl ui^Qu ^^^^^^M^^^^^ra^^^^w^Hml^^^^^Q I^^^B ^^^^ ^^^Q

^fl^^^^^^^^^^^^^n ^^n^ ^^^^ ^^^H ^^^R

^^^m ^^E iginijii            n^^Hra

Head & Shoulders now generates about $2 billion in annual sales for P&G. With strong momentum and a robust innovation pipeline. Head & Shoulders should remain one of P&G’s fastest-growing billion-dollar brands.

[ijfl — What innovation is at P&G: Where innovation            Who’s responsible for comes from at P&G: innovation at P&G: ^^m Tgig ^^5

^^

^^Q H

^^E            I H

^^9 ^f

IISIZ^^H

Net Sales

a

— — —

H^^^^^ro^

^ffi

SALES PER EMPLOYEE

5% Compound Average Growth Rate

NET EARNINGS PER EMPLOYEE

8% Compound Average Growth Rate

^kKlfnEMsn

> < ^ ^

Operating Profit

Pretax Profit Net Earnings

^^ffl ^^ffl

^^^Q ^^^rc^^^ffi ^^^^ ^^^^^^^^Q ^MW i^^^^^l SffiaB ^^^M ^]^^»fcini ^^^O ^^ffn^^^^^^^^m^^^^n^^^Qm ^^^^^^^^^^^^^^1 ^^^^^^^^R^Q ^^^g ^^^Q ^^^^ffl ^^^n ^^H ^^^^^^^^^^^^^H ^^^Q ^^^^^^^Q ^^^^^^Q ^^^^^^^9 ^^^a^^^w ffi^^Q ^^^^^^^^^^a ^^^^^^B ^^^^ffl ^^^^^^^^^^^^^^H ^^^^^Q            ajiBKBBi — ^^H ^^ffl^^ffl ^^^^ff^^^ ^^^^^9 ^^^Q ^^^Q ^^^^^ ^^^^^W ^^^^^^H ^i^^^ik ^i|Mi^R ^^R^^^^^^^^H

^^^a ^^^^H ^^^^Te^^^^^^^Tt^^^H ^l^^^^n ^^^^^^^^^^^^^H h^^h ^^^m ^^^Q ^^^3 ^^X| ^^^R ^^^^ ^^^Q ^^^H

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^H

^^^^m ^^^

^^^w nss iffM ^Nffl            vm            Brl?/» — fipKiirSj            BSE

Rij5iBn3irf7]rfiMl

•^n

aSR

n^^^K            a^^BB ^EMBBau5jiM|iig^i^

jl^ffiE^M

^^9
^^R ^^^^H

^^^^^R^UjjPijkjjiiia.^^^^

^^^^l^^^^h^^^ ^Q^n

^^^M

^Rhjgfci^^^^S ^^M ^^Q

^^^^^^S

^^H ^^B

^^m ^^^^Q ^^^

^^ffl

P&G’s
Innovation

Process

·H fcLvJilJ

jRliB^WBK

H^^^ul ^BKflw Q^^^^l

^l^^9»

5B BB — ^k ^ b!b

Hm Q^^^^V

HV^I ^KV^, ^Kjj3

B^E^nni^n?Bisv ^^^^ ^^^M ^5 ^^Q ^^g ^jfl ^^9 ^^^Q ^^S ..•^O            jn^^^R |^^^5 ^S^Rj ^^^^^^^g U^^B            m^ffl

jmm            mr            mm -

•in

BtiffiiBKiiBBiMMiiTSBpiEiiMBj^^MSjHflip^

^TKrJ^^^^^nij^^l

WORLD CUP 1994

Gillette was a leading World Cup sponsor from 1960 to 2006

ATRA 1977

The first razor with
TRAC II _a pj_votj_ng head to

¹⁹⁷¹ hug the contours

Gillette’s first            of the face

twin-blade

shaving system
for a closer shave ^^^

SENSOR 1990

The first razor with spring-mounted blades for increased closeness and comfort

MACH3 1998

World’s first triple-blade razor, taking shaving performance to a new level

• YOUNG GUNS 2004

New marketing campaign including top NASCAR drivers

^^^K^^^^^H^^B

Hi

^^^•^1
^^^^^^^^^^^^^^^^^^^^^^H

Disruptive Innovation Commercial Innovation

FUSION/FUSION POWER 2006

First five-blade shaving system with unique trimmer blade, setting a new standard for shaving closeness and comfort

CHAMPIONS 2008

New marketing campaign featuring three of the world’s top athletes

·

^^^1

•22jEsI &•
^^^^^^T wffl|

jTSirrTrwiMl — m ^^^n ^2»w ^^^j E1Bji£TC^H ;1lji£U^H            HilflBr —

^^^^^^^5S^R ‘ ^^^^^9• ^^^ffl^^2 j            JTitfPti *Mn^U \ ^^^

— J j^^^ffljEB I            a/ul /C^ Ag 1^5 ‘ 8 j^¹ ^^9 ^^^_y‘¹ ^Blffim!! mS|^§n»a^’ IHVI* k‘ ^j|ujjn^«9|^^^nnlffll|j |sij^niMHsll«kifl _^@o! vm^^^Q ^n^^R ^^^^^^ffi^fjgig^j^M^^w^m^ • mmm jjB ^^gj ^^B IK^flV B f            S ^^^^ i            j • • B •JlBaliBilEnBEaSalBnEBaillMiiBiiiiHB j

m ha iiMM|||||ij||i|i||||||w

” ''^A-• -^ ^^^^^^B ‘‘^t^^f \ M»»“TECflftT?T:?i’l - -’•. j ^^^m^•hri^J HflAAfi^^TOJMi^u^H^^^^^^^^BW^ ^•juwttlirall^BalBiiiaJKlgHMwajBiiuMnta^^BalimMJ b^m ILti abc iHHMIHMIWP’lH9MIIIII • ^Hi^YililuiUMiIllE |^^«^M^^ny^u_ ^^^^^^k l^^n^a* . •••••••••••••••••••^•^ ₍m ^•K^VI^m ’’ •. j            ju^^^^&u^^tf^uS ^R^^g HHw^Jn^^ff ^^^^^^9^V^?fS|r ^^^wj^^^^^l “*^w ^KBiihbk< 1111*1 MiPBHiIK3^B ^^^^^HHiiWBfia ^SffiTOti ^’ *’ ^^^SmffSt\ *^•NlHlt •^•JFHRIIgJp* ^ <L’ ft- ^^^^HiBH            I^IH^^^B^^^I^^K4hli[*|_ihH^*lQ_iQ_i^^^H^HU^MnE•’ ^^*I^K

— ^Es^^J jO^L* “* ^IfllliMlllilllllllllllll^l            I^B^^aikks ^S^^^s^B ^K^^I^N?^P^fffnHlBt ^ ^ ^^ ___t ^ ~ •oijJL^y^v ^ — ..^^jf*^Kjp^t ^RHPnPWRS^Ii «w*^*-^f^’>^»l8B8BfflBP.^;‘^- -^* ^ tsSS^S ffT ‘ ^ 1.1^^j^jjimm^tjgMjmjjg^ijsg^^ . _r^9llL| ^^BHVHHIHlK^B|||Hl^^^l ^^^fllffi^^^B f ^^p^gg^n^^^^^MB_**y^u^^^£ F9IHH4L ^^Ir’lBAvlHUH ^^E£^V^L.^^K£^^^uIvJ I^H

^BK^H3 Mil i j [sjii bm iB^s^^^^^^^^^^BjB3o4’51IE^^M*^^B ^I^^^M^I ~ IMIHRNHHI i? MlfllllH^^^IIIIJ

^^^BZ^^S^^^u ^llll’VSlHHHlll MHn^n! ‘*.•*** ’ ^^ *u-»gi’ ,’’ ^^m A* v

•MHWHMIMHMMi«m*“p*- ._™—— H!MHHI_r* “ v* ** — ^^n^^UukUtUlii^Sflmj^m^^^HHHHflHIIBflkg^F^^^ jrgj ^A * % ^

^^^^^^^^^^^^^^^W’-lBBHIR^^-wir/^r ^Bk&H^DBi

29 The Procter & Gamble Company

^ot

Since the beginning of the decade, P&G has more than doubled the number of brands in its portfolio that generate overa billion dollars in annual sales— from 10 to 24. The most recent addition to the billion-dollar brand club is Gillette Fusion, which went from launch to billion-dollar stature in just two years, the fastest in P&G history.

Global Beauty & Grooming

Global Household Care

^C

K?

P&G’s brand portfolio now includes 20 brands that generate between $500 million and $1 billion in annual sales. Combined with the billion-dollar brands, P&G’s top 44 brands account for more than 85% of P&G sales and 90% of profits. Global Health & Well-Being

The Procter & Gamble Company 32

^Qiy^g            Ui’’*’ Vt            i ft fi\f . jHT ^^R^^OT^I^^MV^^l^^^^nffl^^^l [m            Sl^i J ^9flffl^^lS^^i|lj^^l ». i ^^^^^^w"'^ jBHii^^^B — ^^Blfflw^^l ^^H^^^^^mU^^^K            JMjf            L ^j^^^^^^^Xii*v^k I^^^^^^M^^^ ^^mm^^p^^^^ri ^nu^^ ^^Mhjwiflfe^v hk^^^^^^Bflnji • ^^^^EK^^jbr ^ ^1 ^f^^^•^^^Qra^^^^MMi V^t^ •/* •-v*’ ••’ •JUJjljJIjK^B^M B|^^^^W^3^3 *^^^^ffl^^^^g ^^qmj ^B^jBn^ffiH^raiTiffiiB ^^^^^Mffl^^^^n ^^^^^^^^M^ 4 T9uij^^^^^^^l2! ^B^^Ewt ‘A^^^ ^^^^^^^g^^B^^^^ta            j^^^Jr ^^ffi •••••••ll^^l ^l I , . ^jj^^H . ^HHh <iH ^^^^^Q^ ^^^^ ^^^^^^ffl^^^^^^^qmi ^^^ffi ^f%. 4| AnlllHF^T^iniF ^fll^^^SU^^I ™;^®t            i* • ^ flA.’’ ""*> ^• B^K*f

^QPBtfvn *i ., ‘^^^S* ‘•i if” ^H^H^’/"' ..••_**k.^ ‘ H*I^M

H[^23^5^^^g Hffl I^^^^Rffl^^Quft^^^B^H^X^^^R^Q^^MIH ... -

^H^^^mM^^l^^nn^^^SIQi^fll ^^^I^^^Qw^^l*^^^nN^^^^^^M^^Q*^^^^^Zj4ffl^^Mi^QfI^^^Ku@iB*S^£^^H^^Q%I^^MH^^^^3^^u^5^^^^D

BB^P”-’* ‘ / ^^^^^^^^^^B[ ••.

The Procter & Gamble Company       35

Financial Contents

Management’s Responsibility for Financial Reporting	36
Management’s Report on Internal Control over Financial Reporting	37
Reports of Independent Registered Public Accounting Firm	37
Management’s Discussion and Analysis
Overview	39
Summary of 2008 Results	42
Forward-Looking Statements	42
Results of Operations	42
Segment Results	44
Financial Condition	49
Significant Accounting Policies and Estimates	51
Other Information	54
Audited Consolidated Financial Statements
Consolidated Statements of Earnings	56
Consolidated Balance Sheets	57
Consolidated Statements of Shareholders’ Equity	58
Consolidated Statements of Cash Flows	59
Notes to Consolidated Financial Statements	60

36      The Procter & Gamble Company

Management’s Responsibility for Financial Reporting

At The Procter & Gamble Company, we take great pride in our long history of doing what’s right. If you analyze what’s made our company successful over the years, you may focus on our brands, our marketing strategies, our organization design and our ability to innovate. But if you really want to get at what drives our company’s success, the place to look is our people. Our people are deeply committed to our Purpose, Values and Principles. It is this commitment to doing what’s right that unites us.

This commitment to doing what’s right is embodied in our financial reporting. High-quality financial reporting is our responsibility — one we execute with integrity, and within both the letter and spirit of the law.

High-quality financial reporting is characterized by accuracy, objectivity and transparency. Management is responsible for maintaining an effective system of internal controls over financial reporting to deliver those characteristics in all material respects. The Board of Directors, through its Audit Committee, provides oversight. We have engaged Deloitte & Touche LLP to audit our Consolidated Financial Statements, on which they have issued an unqualified opinion.

Our commitment to providing timely, accurate and understandable information to investors encompasses:

Communicating expectations to employees. Every employee — from senior management on down — is required to be trained on the Company’s Worldwide Business Conduct Manual, which sets forth the Company’s commitment to conduct its business affairs with high ethical standards. Every employee is held personally accountable for compliance and is provided several means of reporting any concerns about violations of the Worldwide Business Conduct Manual, which is available on our website at www.pg.com.

Maintaining a strong internal control environment. Our system of internal controls includes written policies and procedures, segregation of duties and the careful selection and development of employees. The system is designed to provide reasonable assurance that transactions are executed as authorized and appropriately recorded, that assets are safeguarded and that accounting records are sufficiently reliable to permit the preparation of financial statements conforming in all material respects with accounting principles generally accepted in the United States of America. We monitor these internal controls through control self-assessments conducted by business unit management. In addition to performing financial and compliance audits around the world, including unannounced audits, our Global Internal Audit organization provides training and continuously improves internal control processes. Appropriate actions are taken by management to correct any identified control deficiencies.

Executing financial stewardship. We maintain specific programs and activities to ensure that employees understand their fiduciary responsibilities to shareholders. This ongoing effort encompasses financial discipline in strategic and daily business decisions and brings particular focus to maintaining accurate financial reporting and effective controls through process improvement, skill development and oversight.

Exerting rigorous oversight of the business. We continuously review business results and strategic choices. Our Global Leadership Council is actively involved — from understanding strategies to reviewing key initiatives, financial performance and control assessments. The intent is to ensure we remain objective, identify potential issues, continuously challenge each other and ensure recognition and rewards are appropriately aligned with results.

Engaging our Disclosure Committee. We maintain disclosure controls and procedures designed to ensure that information required to be disclosed is recorded, processed, summarized and reported timely and accurately. Our Disclosure Committee is a group of senior-level executives responsible for evaluating disclosure implications of significant business activities and events. The Committee reports its findings to the CEO and CFO, providing an effective process to evaluate our external disclosure obligations.

Encouraging strong and effective corporate governance from our Board of Directors. We have an active, capable and diligent Board that meets the required standards for independence, and we welcome the Board’s oversight. Our Audit Committee comprises independent directors with significant financial knowledge and experience. We review significant accounting policies, financial reporting and internal control matters with them and encourage their independent discussions with external auditors. Our corporate governance guidelines, as well as the charter of the Audit Committee and certain other committees of our Board, are available on our website at www.pg.com.

P&G has a strong history of doing what’s right. Our employees embrace our Purpose, Values and Principles. We take responsibility for the quality and accuracy of our financial reporting. We present this information proudly, with the expectation that those who use it will understand our company, recognize our commitment to performance with integrity and share our confidence in P&G’s future.

A.G. Lafley	Clayton C. Daley, Jr.
Chairman of the Board	Vice Chairman and
and Chief Executive Officer	Chief Financial Officer

The Procter & Gamble Company      37

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting of The Procter & Gamble Company (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

Strong internal controls is an objective that is reinforced through our Worldwide Business Conduct Manual, which sets forth our commitment to conduct business with integrity, and within both the letter and the spirit of the law. The Company’s internal control over financial reporting includes a Control Self-Assessment Program that is conducted annually by substantially all areas of the Company and is audited by the internal audit function. Management takes the appropriate action to correct any identified control deficiencies. Because of its inherent limitations, any system of internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due to error or fraud may occur that are not detected. Also, because of changes in conditions, internal control effectiveness may vary over time.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2008, using criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and concluded that the Company maintained effective internal control over financial reporting as of June 30, 2008, based on these criteria.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting as of June 30, 2008, as stated in their report which is included herein.

A.G. Lafley	Clayton C. Daley, Jr.
Chairman of the Board	Vice Chairman and
and Chief Executive Officer	Chief Financial Officer
August 12, 2008

Report of Independent Registered Public Accounting Firm

Deloitte

To the Board of Directors and Shareholders of The Procter & Gamble Company

We have audited the accompanying Consolidated Balance Sheets of The Procter & Gamble Company and subsidiaries (the “Company”) as of June 30, 2008 and 2007, and the related Consolidated Statements of Earnings, Shareholders’ Equity, and Cash Flows for each of the three years in the period ended June 30, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such Consolidated Financial Statements present fairly, in all material respects, the financial position of the Company at June 30, 2008 and 2007, and the results of its operations and cash flows for each of the three years in the period ended June 30, 2008, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the Consolidated Financial Statements, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” effective July 1, 2007. Also, as discussed in Note 1 to the Consolidated Financial Statements, the Company adopted the provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R),” effective June 30, 2007.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of June 30, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 12, 2008, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Cincinnati, Ohio
August 12, 2008

38       The Procter & Gamble Company

Report of Independent Registered Public Accounting Firm

Deloitte

To the Board of Directors and Shareholders of
The Procter & Gamble Company

We have audited the internal control over financial reporting of The Procter & Gamble Company and subsidiaries (the “Company”) as of June 30, 2008, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Financial Statements as of and for the year ended June 30, 2008 of the Company and our report dated August 12, 2008 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” effective July 1, 2007 and the Company’s adoption of the provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R),” effective June 30, 2007.

Cincinnati, Ohio
August 12, 2008

The Procter & Gamble Company       39

Management’s Discussion and Analysis

The purpose of this discussion is to provide an understanding of P&G’s financial results and condition by focusing on changes in certain key measures from year to year. Management’s Discussion and Analysis (MD&A) is organized in the following sections:

• Overview

• Summary of 2008 Results

• Forward-Looking Statements

• Results of Operations

• Segment Results

• Financial Condition

• Significant Accounting Policies and Estimates

• Other Information

Throughout MD&A, we refer to measures used by management to evaluate performance including unit volume growth, net outside sales and after-tax profit. We also refer to a number of financial measures that are not defined under accounting principles generally accepted in the United States of America (U.S. GAAP), including organic sales growth, free cash flow and free cash flow productivity. We believe these measures provide investors with important information that is useful in understanding our business results and trends. The explanation of these measures at the end of MD&A provides more details on the use and the derivation of these measures. Management also uses certain market share and market consumption estimates to evaluate performance relative to competition despite some limitations on the availability and comparability of share information. References to market share and market consumption in MD&A are based on a combination of vendor-reported consumption and market size data, as well as internal estimates.

On October 1, 2005, we completed the acquisition of The Gillette Company for $53.4 billion. The Gillette acquisition ultimately resulted in the creation of Grooming, a new reportable segment, primarily consisting of Gillette’s Blades and Razors and Braun businesses. Results of Gillette’s Personal Care, Oral Care and Duracell businesses were primarily subsumed within the Beauty, the Health Care and the Fabric Care and Home Care reportable segments, respectively. Our discussion of 2007 results within MD&A are in comparison to 2006 results that included the Gillette business only for the nine-month period from October 1, 2005 (the acquisition date) through June 30, 2006. We previously provided details regarding the changes to our reportable segment structure resulting from the integration of the Gillette businesses (as presented in our Form 8-K filed on October 31, 2007).

OVERVIEW

P&G’s business is focused on providing branded consumer goods products. Our goal is to provide products of superior quality and value to improve the lives of the world’s consumers. We believe this will result in leadership sales, profits and value creation, allowing employees, shareholders and the communities in which we operate to prosper.

Our products are sold in more than 180 countries primarily through mass merchandisers, grocery stores, membership club stores and drug stores. We continue to expand our presence in other channels including department stores, salons and “high frequency stores,” the neighborhood stores which serve many consumers in developing markets. We have on-the-ground operations in approximately 80 countries.

Our market environment is highly competitive, with global, regional and local competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products as well as retailers’ private-label brands. Additionally, many of the product segments in which we compete are differentiated by price (referred to as premium, mid-tier and value-tier products). Generally speaking, we compete with premium and mid-tier products and are well positioned in the industry segments and markets in which we operate—often holding a leadership or significant market share position.

Organizational Structure

Our organizational structure is comprised of three Global Business Units (GBUs) and a Global Operations group. The Global Operations group consists of the Market Development Organization (MDO) and Global Business Services (GBS).

GLOBAL BUSINESS UNITS

Our three GBUs are Beauty, Health and Well-Being, and Household Care. The primary responsibility of the GBUs is to develop the overall strategy for our brands. They identify common consumer needs, develop new product innovations and upgrades, and build our brands through effective commercial innovations, marketing and sales.

Under U.S. GAAP, the business units comprising the GBUs are aggregated into six reportable segments: Beauty; Grooming; Health Care; Snacks, Coffee and Pet Care; Fabric Care and Home Care; and Baby Care and Family Care. The following provides additional detail on our GBUs and reportable segments and the key product and brand composition within each.

40       The Procter & Gamble Company Management’s Discussion and Analysis

	Reportable	% of				% of Net
GBU	Segment	Net Sales			*	Earnings			*	Key Products	Billion-Dollar Brands
beauty	Beauty		23	%			22	%		Cosmetics, Deodorants, Hair Care, Personal Cleansing, Prestige Fragrances, Skin Care	Head & Shoulders, Olay, Pantene, Wella
	Grooming		10	%			13	%		Blades and Razors, Electric Hair Removal Devices, Face and Shave Products, Home Appliances	Braun, Fusion, Gillette, Mach3
health and well-being	Health Care		17	%			20	%		Feminine Care, Oral Care, Personal Health Care, Pharmaceuticals	Actonel, Always, Crest, Oral-B
	Snacks, Coffee and Pet Care		6	%			4	%		Coffee, Pet Food, Snacks	Folgers, lams, Pringles
household care	Fabric Care and Home Care		28	%			27	%		Air Care, Batteries, Dish Care, Fabric Care, Surface Care	Ariel, Dawn, Downy, Duracell, Gain, Tide
	Baby Care and Family Care		16	%			14	%		Baby Wipes, Bath Tissue, Diapers, Facial Tissue, Paper Towels	Bounty, Charmin, Pampers

* Percent of net sales and net earnings for the year ended June 30, 2008 (excluding results held in Corporate).

Beauty

Beauty: We are a global market leader in beauty and compete in markets which comprise approximately $230 billion in global retail sales. Most of the beauty markets in which we compete are highly fragmented with a large number of global and local competitors. We are the global market leader in hair care with over 20% of the global market share. In skin care, we compete primarily with the Olay brand, which is the top facial skin care retail brand in the world. We are also one of the global market leaders in prestige fragrances, primarily behind the Gucci, Hugo Boss and Dolce & Gabbana fragrance brands.

Grooming: This segment consists of blades and razors, face and shave preparation products (such as shaving cream), electric hair removal devices and small household appliances. We hold leadership market share in the manual blades and razors market on a global basis and in almost all of the geographies in which we compete. Our global manual blades and razors market share is about 70%, primarily behind Mach3, Fusion, Venus and the Gillette franchise. Our electric hair removal devices and small home appliances are sold under the Braun brand in a number of markets around the world, where we compete against both global and regional competitors. Our primary focus in this area is in electric hair removal devices, such as electric razors and epilators, where we hold over 30% and over 50% of the male and female markets, respectively.

Health and Well-Being

Health Care: We compete in oral care, feminine care, and pharmaceuticals and personal health. In oral care, there are several global competitors in the market, and we have the number two market share position at approximately 20% of the global market. We are the global market leader in the feminine care category with about one-third of the global market share. In pharmaceuticals and personal health, we have approximately one-third of the global bisphosphonates market for the treatment of osteoporosis under the Actonel brand. We are the market leader in nonprescription heartburn medications and in respiratory treatments behind Prilosec OTC and Vicks, respectively.

Snacks, Coffee and Pet Care: In snacks, we compete against both global and local competitors and have a global market share of approximately 10% in the potato chips market behind our Pringles brand. Our coffee business competes almost solely in North America, where we hold a leadership position with approximately one-third of the U.S. market, primarily behind our Folgers brand. We have announced plans to separate our coffee business and merge it with The J. M. Smucker Company in a transaction that is expected to close in the second quarter of fiscal 2009. In pet care, we compete in several markets around the globe in the premium pet care segment, behind the lams and Eukanuba brands. The vast majority of our pet care business is in North America, where we have about a 10% share of the market.

Household Care

Fabric Care and Home Care: This segment is comprised of a variety of fabric care products, including laundry cleaning products and fabric conditioners; home care products, including dish care, surface cleaners and air fresheners; and batteries. In fabric care, we generally have the number one or number two share position in the markets in which we compete and are the global market leader, with approximately one-third of the global market share. Our global home care market share is about 20% across the categories in which we compete. In batteries, we compete primarily behind the Duracell brand and have over 40% of the global alkaline battery market share.

Baby Care and Family Care: In baby care, we compete primarily in diapers, training pants and baby wipes, with over one-third of the global market share. We are the number one or number two baby care competitor in most of the key markets in which we compete, primarily behind Pampers, the Company’s largest brand, with annual net sales of approximately $8 billion. Our family care business is predominantly a North American business comprised primarily of the Bounty paper towel and Charmin toilet tissue brands, with U.S. market shares of over 40% and over 25%, respectively.

Management’s Discussion and Analysis The Procter & Gamble Company      41

GLOBAL OPERATIONS

Market Development Organization

Our MDO is responsible for developing go-to-market plans at the local level. The MDO includes dedicated retail customer, trade channel and country-specific teams. It is organized along seven geographic regions: North America, Western Europe, Northeast Asia, Central & Eastern Europe/Middle East/Africa, Latin America, ASEAN/Australia/lndia and Greater China. Throughout MD&A, we reference business results in developing markets, which we define as the aggregate of Central & Eastern Europe/Middle East/Africa, Latin America, ASEAN/Australia/ India and Greater China, and developed markets, which are comprised of North America, Western Europe and Northeast Asia.

Global Business Services

GBS provides technology, processes and standard data tools to enable the GBUs and the MDO to better understand the business and better serve consumers and customers. The GBS organization is responsible for providing world-class solutions at a low cost and with minimal capital investment.

Strategic Focus

P&G is focused on strategies that we believe are right for the long-term health of the Company and will increase returns for our shareholders. The Company’s annual financial targets are:

• Organic sales growth of 4% to 6%. This is comprised of:

– 3% to 5% pre-Gillette organic sales growth target, plus

– 1% of growth acceleration behind revenue synergies associated with the Gillette acquisition.

• Diluted net earnings per share (EPS) growth of 10% or better,excluding the net impact of Gillette dilution.

• Free cash flow productivity of 90% or greater (defined as the ratio of operating cash flow less capital expenditures to net earnings).

– Capital spending at or below 4% of net sales annually.

In order to achieve these targets, we focus on our core strengths of consumer understanding, branding, innovation, go-to-market capability and global scale and scope against the following growth areas:

• Grow our leading brands in our biggest markets and with our winning customers.

• Shift our portfolio mix to faster-growing businesses with higher gross margins that are less asset-intensive.

• Grow disproportionately in developing markets and with value-conscious consumers.

To sustain consistent and reliable sales and earnings growth in line with our financial targets, we have identified four key enablers:

• Building a diversified and balanced portfolio of businesses, brands and geographies to deliver consistent, reliable top- and bottom-line growth. Our portfolio of businesses provides a unique combination of stability, scale and growth. We compete primarily in 22 global product categories and are a market leader in over two-thirds of these categories. In addition, our portfolio includes 24 brands that generate over $1 billion in annual sales and 20 brands that generate between $500 million and $1 billion in annual sales. Combined, these 44 brands account for 85% or more of our sales and profits. These brands are platforms for future innovations that will drive sales growth, expand categories for retail customers and differentiate brands in the minds of consumers. Our geographic portfolio includes a healthy balance of developed and developing market businesses. Approximately 40% of sales are generated from the United States, our home market, and developing markets account for approximately 30% of sales. We will continue to invest to grow market sizes and share in developed regions, and will continue to expand our product range in faster-growing developing markets.

• Investing in innovation and core P&G capabilities and strengths to enable us to reach more of the world’s consumers with quality, affordable products. This includes expanding our presence in markets and reaching more consumers where we are underrepresented, including value-conscious consumers.

• Leveraging the Company’s organizational structure to drive clear focus, accountability and improved go-to-market capability. We have an organizational structure that works together to leverage our knowledge and scale at the global level with a deep understanding of the consumer and customer at the local level.

– The GBU organizations leverage their consumer understanding to develop the overall strategy for our brands. They identify common consumer needs, develop new products and build our brands through effective marketing innovations and product upgrades. The GBU is focused on winning the “second moment of truth”— when the consumer uses the product and evaluates how well the product meets his or her expectations.

– The MDO develops go-to-market plans at the local level, leveraging their understanding of the local consumers and customers. The MDO is focused on winning the “first moment of truth”— when a consumer stands in front of the shelf and chooses a product from among many competitive offerings.

– Global Business Services operates as the “back office” for the GBUs and the MDO, providing cost-effective world-class technology, processes and standard data tools to better understand the business and better serve consumers and customers. GBS personnel, or highly efficient and effective third-party partners, provide these services.

• Focusing on cost improvement and cash productivity. Each organization is evaluated on its ability to support the Company’s financial goals and increase total shareholder return. This includes an evaluation of net sales growth, earnings growth, profit margin expansion and cash productivity. Our organizations are evaluated on their ability to generate cash, for example, by increasing productivity, improving capacity utilization, meeting capital spending targets and reducing working capital required to run the business.

42      The Procter & Gamble Company Management’s Discussion and Analysis

SUMMARY OF 2008 RESULTS

For the fiscal year ended June 30, 2008, we delivered our seventh consecutive year of sales growth and free cash flow productivity at or above our stated targets.

• Net sales increased 9% to $83.5 billion.

– Organic sales, which exclude the impacts of acquisitions, divestitures and foreign exchange, increased 5%, in line with our post-Gillette
    organic sales growth target range of 4% to 6%.

– Every reportable segment delivered year-on-year organic sales growth.

• Diluted net earnings per share increased 20% to $3.64.

– Earnings per share grew behind 11% operating profit growth.

• Cash flow from operating activities was $15.8 billion.

– Free cash flow productivity was 106%, ahead of our 90% target.

FORWARD-LOOKING STATEMENTS

We discuss expectations regarding future performance, events and outcomes, such as our business outlook and objectives, in annual and quarterly reports, press releases and other written and oral communications. All such statements, except for historical and present factual information, are “forward-looking statements,” and are based on financial data and our business plans available only as of the time the statements are made, which may become out-of-date or incomplete. We assume no obligation to update any forward-looking statements as a result of new information, future events or other factors. Forward-looking statements are inherently uncertain and investors must recognize that events could be significantly different from our expectations.

Ability to Achieve Business Plans. We are a consumer products company and rely on continued demand for our brands and products. To achieve business goals, we must develop and sell products that appeal to consumers and retail trade customers. Our continued success is dependent on leading-edge innovation with respect to both products and operations and on the continued positive reputations of our brands. This means we must be able to obtain patents and respond to technological advances and patents granted to competition. Our success is also dependent on effective sales, advertising and marketing programs in an increasingly fragmented media environment. Our ability to innovate and execute in these areas will determine the extent to which we are able to grow existing sales and volume profitably, especially with respect to the product categories and geographic markets (including developing markets) in which we have chosen to focus. There are high levels of competitive activity in the environments in which we operate. To address these challenges, we must respond to competitive factors, including pricing, promotional incentives, trade terms and product initiatives. We must manage each of these factors, as well as maintain mutually beneficial relationships with our key customers, in order to effectively compete and achieve our business plans. Since our goals include a growth component tied to acquisitions, we must manage and integrate key acquisitions, such as the Gillette and Wella acquisitions, including achieving the cost and growth synergies in accordance with stated goals.

Cost Pressures. Our costs are subject to fluctuations, particularly due to changes in commodity prices, raw materials, cost of labor, foreign exchange and interest rates. Therefore, our success is dependent, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings projects, sourcing decisions and certain hedging transactions. We also must manage our debt and currency exposure, especially in volatile countries. We need to maintain key manufacturing and supply arrangements, including sole supplier and sole manufacturing plant arrangements. We must implement, achieve and sustain cost improvement plans, including our outsourcing projects and those related to general overhead and workforce rationalization.

Global Economic Conditions. Economic changes, terrorist activity and political unrest may result in business interruption, inflation, deflation or decreased demand for our products. Our success will depend, in part, on our ability to manage continued global political and/or economic uncertainty, especially in our significant geographic markets, as well as any political or economic disruption due to terrorist and other hostile activities.

Regulatory Environment. Changes in laws, regulations and the related interpretations may alter the environment in which we do business. This includes changes in environmental, competitive and product-related laws, as well as changes in accounting standards and taxation requirements. Our ability to manage regulatory, tax and legal matters (including product liability, patent, intellectual property and competition law matters) and to resolve pending legal matters within current estimates may impact our results.

RESULTS OF OPERATIONS

Net Sales

Net sales increased 9% in 2008 to $83.5 billion behind 4% unit volume growth, a favorable 5% foreign exchange impact and a positive 1% pricing impact. Favorable foreign exchange resulted primarily from the strengthening of European and other currencies relative to the U.S. dollar. Price increases were taken across a number of our businesses primarily to offset higher commodity costs. Mix had a negative 1 % impact on net sales primarily due to disproportionate growth in developing regions, where selling prices are below the Company average. Each reportable segment posted year-on-year volume growth, with mid-single-digit growth in Fabric Care and Home Care, Baby Care and Family Care, Grooming and Health Care and low-single-digit growth in Beauty and Snacks, Coffee and Pet Care. Each geographic region posted
year-on-year volume growth except Western Europe, which was down low-single digits due to the impact of divestitures. Excluding the impact of acquisitions and divestitures, every geographic region delivered year-on-year volume growth. Volume grew primarily behind initiative activity on key brands and continued double-digit growth in developing regions. Organic sales increased 5% behind organic volume growth of 5%, which excludes the impact of acquisitions and divestitures. Each reportable segment posted year-on-year organic sales and organic volume growth.

Management’s Discussion and Analysis The Procter & Gamble Company      43

Net sales increased 12% in 2007 to $76.5 billion. Sales were up behind 9% unit volume growth, including the impact of an extra three months of Gillette results in 2007. Organic volume increased 5%. Developing regions continued to lead the growth with double-digit increases for the year. All reportable segments increased organic volume for the year except the Snacks, Coffee and Pet Care segment. Higher pricing, primarily in coffee and Health Care, contributed 1% to sales growth. Product mix had no net impact on sales as a more premium product mix driven by the additional three months of Gillette results in 2007 was offset by the negative mix impact of disproportionate growth in developing markets, where the average unit sales price is lower than the Company average. Favorable foreign exchange contributed 2% to net sales growth. Organic sales increased 5% versus 2006 with each reportable segment posting year-on-year growth.

NET SALES
(in billions of dollars)

DEVELOPING MARKETS
(% of net sales)

Operating Costs

Gross margin was down 70 basis points in 2008 to 51.3% of net sales. Commodity and energy cost increases had a negative impact on gross margin of about 200 basis points. These were largely offset by the benefits of scale leverage from volume growth and cost savings projects resulting from manufacturing efficiency improvements and product reformulations.

Gross margin was 52.0% in 2007, an increase of 60 basis points versus the prior year. Higher commodity and energy costs had a negative impact of approximately 60 basis points on gross margin. These were more than offset by scale leverage from organic volume growth, higher pricing and cost savings projects. The additional three months of the Gillette business in 2007, which has a higher gross margin than the base P&G business, drove additional gross margin improvement of approximately 30 basis points.

				Basis Point						Basis Point
Comparisons as a percentage of net sales; Years ended June 30	2008			Change			2007				Change		2006
Gross margin		51.3	%		(70	)		52.0	%		60		51.4	%
Selling, general and administrative		30.8	%		(100	)		31.8	%		(20	)	32.0	%
Operating margin		20.5	%		30			20.2	%		80		19.4	%
Earnings before income taxes		19.3	%		10			19.2	%		100		18.2	%
Net earnings		14.5	%		100			13.5	%		80		12.7	%

GROSS MARGIN
(% of net sales)

Total selling, general and administrative expenses (SG&A) increased 6% to $25.7 billion in 2008. The increase was driven by higher overhead and marketing spending to support business growth. SG&A as a percentage of net sales was down 100 basis points. Overhead spending was down as a percentage of net sales for the total Company and for each reportable segment primarily due to volume scale leverage, a focus on overhead productivity and incremental synergy savings from the Gillette acquisition. Marketing spending as a percentage of net sales was in line with previous year levels.

SG&A in 2007 increased 11 %, or $2.5 billion, to $24.3 billion. SG&A increased primarily due to the additional three months of Gillette in 2007 and to support business growth, partially offset by overhead and media purchasing synergies from the Gillette integration. The additional three months of Gillette in 2007 accounted for approximately $1.1 billion of the increase, including approximately $160 million of incremental acquisition-related expenses. The incremental acquisition-related expenses were comprised of three additional months of intangible asset amortization resulting from revaluing intangible assets in the opening balance sheet of the acquired Gillette business, costs to restructure the business post-acquisition and other integration-related expenses. SG&A as a percentage of net sales was 31.8% in 2007, an improvement of 20 basis points versus 2006. Overhead expenses as a percentage of net sales were down due to volume scale leverage, overhead cost control and synergies from the Gillette integration. Marketing spending as a percentage of net sales in 2007 was roughly in line with prior year levels despite media purchasing synergies generated by the Gillette acquisition and a continued focus on marketing return-on-investment (ROI) programs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
(% of net sales)

44      The Procter & Gamble Company Management’s Discussion and Analysis

Non-Operating Items

Non-operating items primarily include interest expense, divestiture gains and interest and investment income. Interest expense increased 13% to $1.5 billion in 2008 driven by a higher interest rate on our long-term borrowings and a higher debt level to fund the Company’s previously announced share repurchase program. Under this share repurchase program, which began in July 2007, we plan to repurchase between $24—$30 billion of P&G stock over a three-year period. In 2007, interest expense increased 17% to $1.3 billion due to the financing costs associated with the debt issued to fund the share repurchase program executed in conjunction with the acquisition of Gillette in October 2005. The repurchase program associated with Gillette was completed in July 2006.

Other non-operating income in 2008 decreased $102 million versus the prior year period primarily due to lower current period interest income. Interest income declined in 2008 primarily due to lower interest rates and cash balances. Divestiture gains on the sale of minor brands in 2008 were in line with previous year levels. Other non-operating income increased $281 million in 2007 to $564 million primarily due to higher divestiture gains in 2007.

Our tax rate declined in 2008 from 29.7% to 24.9%. Approximately 3 percentage points of this decline was due to discrete adjustments to reserves for previously existing uncertain tax positions in the U.S. and other countries. The balance of the decline was primarily driven by a more favorable geographic mix of earnings and a reduction in the German statutory tax rate, which reduced our deferred tax liabilities related to acquired intangible assets. Our effective tax rate in 2007 was down 30 basis points versus 2006 primarily due to a more favorable country mix impact in 2007, partially offset by higher levels of reserve releases in 2006.

Net Earnings

Net earnings increased 17% to $12.1 billion in 2008 behind sales growth and a 100-basis point improvement in net earnings margin. Net earnings margin increased due to lower SG&A as a percentage of net sales and a lower tax rate, which more than offset lower gross margin. Net earnings in 2007 increased 19% to $10.3 billion behind sales growth, including the additional three months of Gillette results and earnings margin expansion. Net earnings margin expanded 80 basis points primarily behind gross margin improvement.

Diluted net earnings per share in 2008 were up 20% versus the prior year to $3.64 per share. Diluted net earnings per share growth exceeded net earnings growth due to share repurchase activity. We repurchased $10 billion of treasury shares in 2008 under a previously announced share buyback program that started in July 2007. Gillette was modestly accretive to our earnings per share results in 2008, compared to dilution of approximately $0.10—$0.12 per share in 2007. The elimination of Gillette dilution on our earnings per share drove approximately 4 percentage points of earnings per share growth in 2008. Diluted net earnings per share in 2007 increased 15% to $3.04 primarily behind earnings growth, partially offset by the impact of a net increase in the weighted average shares outstanding in 2007 versus 2006 resulting from the incremental shares issued in conjunction with the Gillette acquisition on October 1, 2005.

DILUTED NET EARNINGS
(per common share)

SEGMENT RESULTS

Results for the segments reflect information on the same basis we use for internal management reporting and performance evaluation. Within the Beauty GBU, we provide data for the Beauty and the Grooming reportable segments. In the Health and Well-Being GBU, we provide data for the Health Care and the Snacks, Coffee and Pet Care reportable segments. In the Household Care GBU, we provide data for the Fabric Care and Home Care and the Baby Care and Family Care reportable segments.

The results of these reportable business segments do not include certain non-business unit specific costs such as interest expense, investing activities and certain restructuring costs. These costs are reported in our Corporate segment and are included as part of our Corporate segment discussion. Additionally, as described in Note 12 to the Consolidated Financial Statements, we have investments in certain companies over which we exert significant influence, but do not control the financial and operating decisions and, therefore, do not consolidate them (“unconsolidated entities”). Since certain of these investments are managed as integral parts of the Company’s business units, they are accounted for as if they were consolidated subsidiaries for management and segment reporting purposes. This means pretax earnings in the business units include 100% of each pretax income statement component. In determining after-tax earnings in the business units, we eliminate the share of earnings applicable to other ownership interests, in a manner similar to minority interest, and apply the statutory tax rates. Eliminations to adjust each line item to U.S. GAAP are included in our Corporate segment.

Beauty

BEAUTY

			Change vs.					Change vs.
(in millions of dollars)	2008		Prior Year			2007		Prior Year*
Volume		n/a		+2	%		n/a		+4	%
Net sales	$	19,515		+9	%	$	17,889		+7	%
Net earnings	$	2,730		+5	%	$	2,611		+8	%

* The Gillette business was acquired on October 1, 2005. Therefore, the fiscal 2007 growth rates are versus a base period that included only 9 months of Gillette Beauty results (e.g., deodorants products).

Beauty net sales increased 9% in 2008 to $19.5 billion behind 2% volume growth and 6% of favorable foreign exchange. Favorable product mix had a positive 1% impact on net sales primarily due to stronger growth in skin care and prestige fragrances, which have

Management’s Discussion and Analysis The Procter & Gamble Company     45

				Volume
	Volume with			Excluding
	Acquisitions			Acquisitions			Foreign									Net Sales
Net Sales Change Drivers vs. Year Ago (2008 vs. 2007)	& Divestitures			& Divestitures			Exchange			Price			Mix/Other			Growth
BEAUTY
Beauty		2	%		3	%		6	%		0	%		1	%		9	%
Grooming		5	%		6	%		7	%		2	%		-3	%		11	%
HEALTH AND WELL-BEING
Health Care		4	%		4	%		5	%		1	%		-1	%		9	%
Snacks, Coffee and Pet Care		2	%		2	%		3	%		3	%		-1	%		7	%
HOUSEHOLD CARE
Fabric Care and Home Care		6	%		6	%		5	%		1	%		-1	%		11	%
Baby Care and Family Care		4	%		8	%		4	%		1	%		0	%		9	%
TOTAL COMPANY		4	%		5	%		5	%		1	%		-1	%		9	%

Sales percentage changes are approximations based on quantitative formulas that are consistently applied.

higher than segment average unit selling prices. This more than offset the impact of disproportionate growth in developing regions, which have lower selling prices than the segment average. Skin care volume was up mid-single digits driven by growth on Olay behind the Definity and Regenerist initiatives. Our global skin care market share was up slightly, driven primarily by about a 1 point increase in our U.S. market share. Prestige fragrances volume was up low-single digits and organic volume was up high-single digits behind new product launches on Dolce & Gabbana and Hugo Boss. Retail hair care volume was up mid-single digits, led by high-single-digit growth in developing markets. Retail hair care volume in developed regions was flat as a double-digit volume increase on Head & Shoulders was offset by a double-digit volume decline on Pantene in North America. Hair color volume increased low-single digits as growth on Nice ‘N Easy behind the Perfect 10 launch more than offset declines on other color brands. Professional hair care volume declined mid-single digits as growth from color was more than offset by declines in care and styling. Overall, global hair care market share was in line with the prior year level. Volume in deodorants was down low-single digits primarily due to competitive activity and market softness in Western Europe.

Net earnings in Beauty increased 5% to $2.7 billion in 2008 as the impact of higher sales was partially offset by a lower net earnings margin. Net earnings margin was down 60-basis points as lower gross margin and the impact of base period divestiture gains on minor brands more than offset the benefit of a lower tax rate due to geographic mix. Gross margin was down due to higher commodity costs, which more than offset the benefit of increased volume scale leverage and manufacturing cost savings projects. SG&A increased slightly as higher marketing spending as a percentage of net sales was partially offset by lower overhead spending as a percentage of net sales.

In 2007, Beauty net sales increased 7% to $17.9 billion behind 4% unit volume growth. Volume growth was driven by initiative activity across categories and continued expansion in developing regions, where volume increased high-single digits. Prestige fragrances volume was up double-digits behind The One, Boss Selection and Boss Femme fragrance initiatives and the addition of Dolce & Gabbana. Skin care volume was up high-single digits behind the Olay Definity and Regenerist product initiatives. Hair care volume grew mid-single digits as a result of product initiatives on Pantene, Head & Shoulders and Herbal Essences and continued expansion in developing regions. Beauty sales benefited from a 1 % positive mix impact primarily due to disproportionate growth in prestige fragrances, which has a higher than segment average unit selling price. This was offset by higher levels of promotional activity, which resulted in a negative 1% pricing impact. Favorable foreign exchange contributed 3% to net sales. Net earnings increased 8% in 2007 to $2.6 billion primarily behind net sales growth. Earnings margin increased 15 basis points primarily due to lower SG&A as a percentage of net sales and divestiture gains on several minor Beauty brands, partially offset by the negative mix impact from lower SK-II shipments. SG&A improved as higher marketing spending as a percentage of net sales to support initiative activity was more than offset by lower overhead expenses as a percentage of net sales resulting from the benefit of volume scale leverage and Gillette-related synergy savings. SK-II shipments were down in 2007 due to the sales disruption in Asia resulting from the voluntary temporary suspension of SK-II shipments in China early in the 2007 fiscal year.

GROOMING
			Change vs.				Change vs.
(in millions of dollars)	2008		Prior Year		2007		Prior Year *
Volume		n/a	+5	%		n/a	+36	%
Net sales	$	8,254	+11	%	$	7,437	+45	%
Net earnings	$	1,679	+21	%	$	1,383	+63	%

* The Gillette business was acquired on October 1, 2005. Therefore, the fiscal 2007 growth rates are versus a base period that included only 9 months of Gillette Grooming results.

Grooming net sales increased 11% to $8.3 billion in 2008. Net sales were up behind 5% volume growth, a 7% favorable foreign exchange impact and a 2% positive pricing impact driven by price increases on premium shaving systems. Product mix had a negative 3% impact on net sales as positive product mix from growth on the premium-priced Fusion brand was more than offset by the impact of disproportionate growth in developing regions, where selling prices are below the segment average. Blades and razors volume increased high-single digits behind double-digit growth in developing regions driven primarily by

46      The Procter & Gamble Company Management’s Discussion and Analysis

Fusion expansion and Prestobarba3 launch. In developed regions, blades and razors volume was down low-single digits as double-digit growth on Fusion was more than offset by lower shipments of legacy shaving systems. Fusion delivered more than $1 billion in net sales for 2008, making it the Company’s 24th billion-dollar brand. Braun volume was down mid-single digits primarily due to supply constraints at a contract manufacturer, the announced exits of certain appliance businesses and the divestiture of the thermometer and blood pressure devices business.

Net earnings in Grooming were up 21% in 2008 to $1.7 billion behind net sales growth and a 170-basis point earnings margin expansion. Earnings margin improved behind lower SG&A as a percentage of net sales, partially offset by a reduction in gross margin. Gross margin declined due to higher costs incurred at a contract manufacturer on the Braun home appliance business, which more than offset benefits from higher pricing and volume scale leverage. SG&A as a percentage of net sales was down primarily due to lower overhead spending driven largely by synergies from the integration of Gillette into P&G’s infrastructure.

In 2007, net sales in Grooming increased 45% to $7.4 billion on 36% unit volume growth, including the impact of the extra three months of Gillette results in fiscal 2007. Organic sales increased 6% during the year, with organic volume up 2%. Blades and razors organic volume was up mid-single digits primarily behind the continued expansion of the Fusion razor system and growth of Mach3 in countries where Fusion has not yet launched. Fusion was launched in North America in fiscal 2006 and expanded into other markets including Western Europe in fiscal 2007. In Braun, organic volume was down low-single digits as the impact of the launches of 360 Complete and Contour razors in North America and Pulsonic razors in Germany and Japan were more than offset by lower volume on household appliances in Europe. Favorable product mix, primarily behind the launch of the premium Fusion razors, contributed 3% to net sales. Price increases taken across most shaving systems added an additional 2% to net sales and favorable foreign exchange added an additional 4%. Net earnings increased 63% in 2007 to $1.4 billion. The extra three months of Gillette results in fiscal 2007 contributed 46% of the total earnings growth. The remaining growth was due to organic sales growth and integration-driven synergy savings, partially offset by higher marketing investment behind Fusion and incremental acquisition-related charges. We incurred approximately $40 million of incremental acquisition-related charges in fiscal 2007. The incremental acquisition-related charges are primarily comprised of amortization charges from revaluing intangible assets in the opening balance sheet, partially offset by base period product costs related to revaluing Gillette’s opening inventory balance. Amortization charges were higher in fiscal 2007 due to the extra three months of Gillette results in the period.

Health and Weil-Being

HEALTH CARE

			Change vs.					Change vs.
(in millions of dollars)	2008		Prior Year			2007		Prior Year *
Volume		n/a		+4	%		n/a		+8	%
Net sales	$	14,578		+9	%	$	13,381		+13	%
Net earnings	$	2,506		+12	%	$	2,233		+22	%

* The Gillette business was acquired on October 1, 2005. Therefore, the fiscal 2007 growth rates are versus a base period that included only 9 months of Gillette Health Care results (e.g., Oral-B).

Health Care net sales increased 9% in 2008 to $14.6 billion behind a 4% increase in unit volume. Foreign exchange had a positive 5% impact on net sales and price increases added 1% to net sales. Disproportionate growth in developing regions, which have selling prices below the segment average, resulted in a negative 1% mix impact. Feminine care volume increased mid-single digits and organic volume was up high-single digits behind double-digit growth on Naturella and high-single digit growth on Always, which more than offset a low-single digit decline on Tampax. Our global feminine care market share increased slightly in 2008 to about 38%. Oral care volume was up mid-single digits behind initiative-driven growth on Oral-B toothbrushes and Crest. U.S. market share on Crest dentifrice was in line with the previous year. Volume in Pharmaceuticals and personal health was up low-single digits as the impact of adding the Swiss Precision Diagnostics business was largely offset by lower shipments of Actonel, Prilosec OTC and PuR. The PuR decline was from adjustments to a Whirlpool^® water filters licensing agreement. Prilosec OTC volume began to decline in the third fiscal quarter of 2008 due to the recent loss of marketplace exclusivity and the entry of competing products into the market. This is expected to continue and to have an adverse effect on the results of the Health Care segment in future periods.

Net earnings in Health Care were up 12% in 2008 to $2.5 billion due to higher net sales and a 50-basis point improvement in net earnings margin. Net earnings margin increased as reduced SG&A as a percentage of net sales more than offset lower gross margin. Gross margin was down due to higher commodity costs and a less profitable mix driven primarily by disproportionate growth in developing regions and lower shipments of Prilosec OTC, which more than offset the benefit of increased volume scale leverage and manufacturing cost savings. SG&A improved primarily behind lower overhead spending as a percentage of net sales due to a focus on productivity improvement and Gillette synergy benefits.

Health Care net sales increased 13% in 2007 to $13.4 billion behind an 8% increase in unit volume. Sales and volume were up as a result of three additional months of Gillette oral care results in fiscal 2007 and growth on the base P&G business. Health Care organic sales increased 7% behind 5% organic volume growth. Oral care organic volume grew mid-single digits behind double-digit growth in developing regions, high-single-digit growth on Oral-B and the launch of Crest Pro-Health toothpaste in North America. Pharmaceuticals and personal health volume increased low-single digits behind growth on

Management’s Discussion and Analysis The Procter & Gamble Company      47

Prilosec OTC, partially offset by lower volume on Actonel due to strong competitive activity in the osteoporosis market. Our U.S. market share on Prilosec OTC increased about 1-point during the year. Feminine care volume was up high-single digits, led by double-digit growth in developing regions. Successful initiative activity in North America on the Always Clean and Fresh initiatives and product upgrades on Tampax Pearl more than offset the impact of strong competitive activity in Western Europe and Northeast Asia, resulting in a 1-point increase in our global feminine care market share. Pricing, primarily in Pharmaceuticals and personal health, contributed 2% to segment net sales growth. A more premium product mix added an additional 1% to net sales as disproportionate growth on Crest Pro-Health in North America more than offset the negative impact from higher relative growth in developing regions. Foreign exchange had a positive 2% impact on net sales. Net earnings grew 22% to $2.2 billion in 2007 behind organic sales growth, the additional three months of Gillette oral care results and earnings margin expansion. Earnings margin increased 120 basis points behind increased gross margin on our base business and lower SG&A as a percentage of net sales. SG&A improved primarily due to lower overhead expenses as a percentage of net sales resulting from volume scale leverage, Gillette synergy savings and lower research and development costs in our Pharmaceuticals business driven by further leveraging external R&D networks and higher clinical milestone payments in the base period.

SNACKS, COFFEE AND PET CARE

			Change vs.					Change vs.
(in millions of dollars)	2008		Prior Year			2007		Prior Year
Volume		n/a		+2	%		n/a		+0	%
Net sales	$	4,852		+7	%	$	4,537		+4	%
Net earnings	$	477		0	%	$	477		+24	%

Snacks, Coffee and Pet Care net sales increased 7% to $4.9 billion in 2008. Net sales grew behind a 2% volume increase, a positive 3% price impact resulting from price increases in coffee and pet care and a 3% favorable foreign exchange impact. Product mix had a negative 1% impact on net sales from a decline in coffee volume, which has higher selling prices than the segment average. Snacks volume was up high-single digits behind the launch of Rice Infusion in Western Europe and Extreme Flavors and Pringles Stix in North America. Coffee volume declined low-single digits as growth from the launch of the Dunkin’ Donuts^® line was more than offset by lower volume on the balance of the business due to higher price gaps versus branded competition and reductions in trade inventory levels ahead of an upcoming product restage. Coffee market share in the U.S. was up about 1 point versus the prior year, primarily due to favorable mix impacts from the premium-priced Dunkin’ Donuts^® line. In pet care, volume was down low-single digits due to negative impacts from the voluntary wet pet food recall in the U.S. in March 2007 that contributed to about a 1% decline in our U.S. market share.

Net earnings in Snacks, Coffee and Pet Care were $477 million in 2008, in line with the prior year. Higher sales were offset by lower net earnings margin. Net earnings margin was down 70 basis points as lower gross margin more than offset improved SG&A expenses as a percentage of net sales. Gross margin was down as higher commodity costs across the segment more than offset price increases, base period pet food recall impacts and manufacturing cost savings. SG&A decreased as a percentage of net sales due to reductions in both overhead and marketing spending as a percentage of net sales. Hurricane Katrina insurance payments were received in both the current and previous fiscal years and, therefore, had minimal impact on the segment’s year-on-year net earnings growth rate.

We previously announced plans to separate our coffee business into a separate operating company. In June 2008, we announced an agreement with The J. M. Smucker Company to merge the separated coffee company into The J. M. Smucker Company in an all-stock reverse Morris Trust transaction. We expect the transaction to close in the second quarter of fiscal 2009. The coffee business comprised $1.8 billion of net sales in 2008.

Snacks, Coffee and Pet Care net sales increased 4% in 2007 to $4.5 billion. Unit volume was in line with the prior year as growth in coffee was offset by a decline in pet care. Snacks volume was in line with the prior year. Coffee volume was up high-single digits primarily due to a low base period that included a reduction in the coffee business from Hurricane Katrina and 2007 volume from the launches of Folgers Simply Smooth and Gourmet Selections. Pet care volume was down mid-single digits versus the year-ago period due to strong competitive activity and the impacts of a voluntary recall. In March 2007, we voluntarily recalled certain lams and Eukanuba wet pet foods to help ensure maximum pet safety following the discovery of contaminated materials at a pet food supplier. Price increases in coffee and favorable product mix from disproportionate coffee growth each had a positive 1% impact on net sales. Foreign exchange had a positive 2% impact on net sales. Net earnings in 2007 increased 24% to $477 million. Earnings increased behind sales growth and a base period comparison that included costs related to Hurricane Katrina, which more than offset a decline in 2007 gross margin from the impacts of higher commodity costs and expenses associated with the pet food recall.

Household Care

FABRIC CARE AND HOME CARE

			Change vs.					Change vs.
(in millions of dollars)	2008		Prior Year			2007		Prior Year *
Volume		n/a		+6	%		n/a		+10	%
Net sales	$	23,831		+11	%	$	21,469		+13	%
Net earnings	$	3,422		+9	%	$	3,127		+20	%

* The Gillette business was acquired on October 1, 2005. Therefore, the fiscal 2007 growth rates are versus a base period that included only 9 months of Gillette Fabric Care and Home Care results (e.g., batteries).

Fabric Care and Home Care net sales in 2008 increased 11% to $23.8 billion. Volume was up 6%, price increases added 1% and favorable foreign exchange added 5% to net sales growth. This was partially offset by a negative 1% mix impact primarily from disproportionate growth in developing regions and a shift toward large sizes in fabric care, both of which have selling prices below the segment

48      The Procter & Gamble Company Management’s Discussion and Analysis

average. Fabric care volume increased mid-single digits behind high-single-digit growth in developing regions and mid-single-digit growth in developed regions. Growth was driven by the liquid laundry detergent compaction launch in North America and initiative activity on Tide, Gain, Ariel and Downy. Home care volume was up mid-single digits due to double-digit growth in developing regions and high-teens growth on Febreze from the launch of Febreze Candles. Batteries volume was up mid-single digits behind double-digit growth in developing regions and mid-single-digit growth in developed regions.

Net earnings in Fabric Care and Home Care increased 9% to $3.4 billion in 2008 primarily behind higher net sales. Net earnings margin was down 20 basis points primarily due to lower gross margin, partially offset by a reduction in SG&A as a percentage of net sales. Gross margin was down due to higher commodity costs, which more than offset benefits from pricing, increased volume scale leverage and manufacturing cost savings projects. SG&A improved as a percentage of net sales due to lower overhead spending as a percentage of net sales resulting from a focus on overhead productivity improvements.

Fabric Care and Home Care net sales increased 13% in 2007 to $21.5 billion. Sales growth was driven by a 10% increase in volume and a 3% favorable foreign exchange impact. The extra three months of batteries results in fiscal 2007 contributed 3% to the segment’s sales growth and 2% to segment volume growth. Volume was up high-single digits in both fabric care and home care led by double-digit growth in developing regions. In developed regions, fabric care volume grew mid-single digits and home care volume grew high-single digits behind product initiatives such as Tide Simple Pleasures, Gain Joyful Expressions, Febreze Noticeables, upgrades on Swiffer and the launch of Fairy auto-dishwashing in Western Europe. Our market share in both fabric care and home care increased by about 1 point globally during the year. In batteries, organic volume increased mid-single digits behind high-single-digit developing region growth from expanded distribution in high-frequency stores in Latin America. Net earnings in 2007 were up 20% to $3.1 billion behind organic sales growth, the additional three months of batteries results and an 80-basis point improvement in net earnings margin. Earnings margin improved behind higher gross margin and lower SG&A as a percentage of net sales. The gross margin improvement was driven by scale benefits of volume growth and cost savings projects that more than offset higher commodity costs. SG&A improved primarily behind lower overhead expenses as a percentage of net sales resulting from volume scale leverage and Gillette synergy savings.

BABY CARE AND FAMILY CARE

			Change vs.					Change vs.
(in millions of dollars)	2008		Prior Year			2007		Prior Year
Volume		n/a		+4	%		n/a		+5	%
Net sales	$	13,898		+9	%	$	12,726		+6	%
Net earnings	$	1,728		+20	%	$	1,440		+11	%

Baby Care and Family Care net sales increased 9% in 2008 to $13.9 billion. Volume was up 4%, including the impact of the Western European family care divestiture. Price increases contributed 1% to net sales and foreign exchange had a positive 4% impact on net sales. Organic volume and organic sales, which exclude the impacts of the Western European family care divestiture and foreign exchange, both grew 8%. Organic volume growth was balanced across the segment with high-single-digit growth in both baby care and family care. Baby care volume in developed regions was up mid-single digits behind growth on the Pampers Baby Stages of Development and on the Baby Dry Caterpillar Flex initiative. In developing regions, baby care volume was up double-digits behind continued growth on Pampers. Baby care market share in the U.S. was up nearly 1 point to about 29%. Family care volume was down low-single digits due to the divestiture of the Western European family care business but was up high-single digits on an organic basis behind the Bounty and Charmin product restages. U.S. market share on both Bounty and Charmin was up over 1 point to about 45% and 28%, respectively.

Net earnings in Baby Care and Family Care were up 20% to $1.7 billion in 2008 behind higher net sales and earnings margin expansion. Net earnings margin improved 110 basis points primarily behind higher gross margin and lower SG&A as a percentage of net sales. Gross margin was up due to a more profitable product mix following the Western Europe family care divestiture, the benefit of increased volume scale leverage, pricing and manufacturing cost savings projects, which more than offset higher commodity and energy costs. SG&A improved as a percentage of net sales due to lower overhead spending as a percentage of net sales, partially offset by higher marketing expenses as a percentage of net sales.

Baby Care and Family Care net sales increased 6% in 2007 to $12.7 billion behind 5% unit volume growth. Baby care volume grew mid-single digits with developing regions up double digits. In developed regions, baby care volume was up low-single digits as growth on Pampers Baby Stages of Development and Baby Dry Caterpillar Flex more than offset softness on Pampers in Western Europe and Luvs in North America from lower competitor pricing of both branded and private label products. Family care volume increased mid-single digits behind product performance upgrades on Bounty and continued growth on Bounty and Charmin Basic products. Disproportionate growth on baby care in developing regions and on the Basic tier products, which have a lower average selling price, led to a negative 1% mix impact. Favorable foreign exchange contributed 2% to sales growth. Net earnings in Baby Care and Family Care increased 11% to $1.4 billion in 2007 behind net sales growth and a 50-basis point improvement in net earnings margin. Earnings margin increased as lower SG&A as a percentage of net sales more than offset a reduction in gross margin. Gross margin was down slightly as manufacturing cost savings and volume scale leverage were more than offset by the impact of higher pulp costs and a less profitable product mix. SG&A improved as a percentage of net sales due to lower overhead expenses from volume scale leverage and a reduction in marketing expenses as a percentage of net sales.

Management’s Discussion and Analysis The Procter & Gamble Company      49

Corporate

Corporate includes certain operating and non-operating activities not allocated to specific business units. These include: the incidental businesses managed at the corporate level; financing and investing activities; other general corporate items; the historical results of certain divested brands and categories, including certain Gillette brands that were divested as required by regulatory authorities in relation to the Gillette acquisition; and certain restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce rationalization. Corporate also includes reconciling items to adjust the accounting policies used in the segments to U.S. GAAP. The most significant reconciling items include income taxes (to adjust from statutory rates that are reflected in the segments to the overall Company effective tax rate), adjustments for unconsolidated entities (to eliminate sales, cost of products sold and SG&A for entities that are consolidated in the segments but accounted for using the equity method for U.S. GAAP) and minority interest adjustments for subsidiaries where we do not have 100% ownership. Since both unconsolidated entities and less than 100% owned subsidiaries are managed as integral parts of the Company, they are accounted for similar to a wholly owned subsidiary for management and segment purposes. This means our segment results recognize 100% of each income statement component through before-tax earnings in the segments, with eliminations for unconsolidated entities in Corporate. In determining segment aftertax net earnings, we apply the statutory tax rates (with adjustments to arrive at the Company’s effective tax rate in Corporate) and eliminate the share of earnings applicable to other ownership interests, in a manner similar to minority interest.

Corporate net sales primarily reflect the adjustment to eliminate the sales of unconsolidated entities included in business unit results. Net sales decreased $462 million primarily driven by higher adjustments to eliminate the impact of joint venture net sales for unconsolidated entities that are reflected as sales in the business segments. These adjustments increased due to sales growth of existing unconsolidated entities and the addition of the Swiss Precision Diagnostics business. In 2008, net earnings in Corporate increased $464 million. The increase was driven primarily by a lower tax rate resulting from the net benefits of adjustments to reserves for uncertain tax positions.

Corporate segment net earnings declined $235 million in 2007 primarily due to higher interest expenses and higher Gillette integration costs. Interest expense was up $185 million primarily due to the financing costs associated with the debt issued to fund the share repurchase program announced in conjunction with the Gillette acquisition.

FINANCIAL CONDITION

We believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and ready access to capital markets at competitive rates.

Operating cash flow provides the primary source of funds to finance operating needs and capital expenditures. Excess operating cash is used first to fund shareholder dividends. Other discretionary uses include share repurchases and “tack-on” acquisitions to complement our portfolio of brands and geographies. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations.

Operating Activities

Operating cash flow was $15.8 billion in 2008, an increase of 18% over the prior year. Both operating cash flow and the increase in operating cash flow over the prior year resulted primarily from higher net earnings and non-cash charges (depreciation and amortization, stock-based compensation and deferred income taxes). Working capital balances increased primarily to support business growth resulting in a net use of cash. Inventory days on hand increased by 8 days primarily due to foreign exchange and higher material costs, partially offset by accounts receivable and accounts payable impacts. Accounts payable days were up 4 days due to higher material values and increased capital expenditures in the fourth quarter. Accounts receivable days were down 2 days primarily due to the harmonization of Gillette trade terms, which historically carried longer payment terms than P&G.

Operating cash flow in 2007 increased 18% to $13.4 billion. Operating cash flow increased as a result of higher net earnings, including the benefit of an additional three months of Gillette in 2007. Net earnings, adjusted for non-cash items (primarily depreciation and amortization, share-based compensation and deferred income taxes) was partially offset by cash used to fund working capital. Working capital increased in 2007 primarily to support business growth.

Free Cash Flow. We view free cash flow as an important measure because it is one factor impacting the amount of cash available for dividends and discretionary investment. It is defined as operating cash flow less capital expenditures and is one of the measures used to evaluate senior management and determine their at-risk compensation. In 2008, free cash flow was $12.8 billion, compared to $10.5 billion in 2007. Free cash flow increased primarily as a result of higher operating cash flow. Capital expenditures increased from $2.9 billion in 2007 to $3.0 billion in 2008 representing 3.6% of net sales. Free cash flow productivity, defined as the ratio of free cash flow to net earnings, was 106% in 2008, ahead of the Company’s 90% target.

In 2007, free cash flow was $10.5 billion, compared to $8.7 billion in 2006 as a result of higher operating cash flow. Free cash flow productivity was 101 % in 2007.

FREE CASH FLOW PRODUCTIVITY
(% of net earnings)

50     The Procter & Gamble Company Management’s Discussion and Analysis

Investing Activities

Net investing activities used $2.5 billion of cash in both 2008 and 2007.

Acquisitions. Acquisitions used $381 million of cash in 2008 primarily for the acquisition of Frederic Fekkai, a premium hair care brand, in Beauty. In 2007, acquisitions used $492 million of cash for several minor transactions, primarily in Beauty and Health Care, including the Swiss Precision Diagnostics business.

Capital Spending. We view capital spending efficiency as a critical component of our overall cash management strategy. Capital expenditures in 2008 were $3.0 billion, compared to $2.9 billion in 2007. Capital spending as a percentage of net sales was 3.6% in 2008, compared to 3.9% in 2007.

CAPITAL SPENDING
(% of net sales)

Proceeds from Asset Sales. Proceeds from asset sales were $928 million in 2008 primarily behind the sale of our Western Europe family care business as well as several minor Beauty and Health Care divestitures. In 2007, proceeds from asset sales were $281 million primarily due to the divestitures of Pert in North America, Sure and several non-strategic minor Beauty brands.

Financing Activities

Dividend Payments. Our first discretionary use of cash is dividend payments. Dividends per common share increased 13% to $1.45 per share in 2008. This increase represents the 52nd consecutive fiscal year the Company has increased its common share dividend. Total dividend payments to both common and preferred shareholders were $4.7 billion, $4.2 billion and $3.7 billion in 2008, 2007 and 2006, respectively.

DIVIDENDS
(per common share)

Long-Term and Short-Term Debt. We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including acquisitions and share repurchase activities) and the overall cost of capital. Total debt was $36.7 billion in 2008, $35.4 billion in 2007 and $38.1 billion in 2006. Debt increased in 2008 primarily to fund the Company’s treasury share repurchase program discussed below. The decrease in debt in 2007 was primarily due to the utilization of operating cash flow to pay down existing balances.

Liquidity. Our primary source of liquidity is cash generated from operations. We believe internally generated cash flows adequately support business operations, capital expenditures and shareholder dividends, as well as a level of other discretionary cash uses (e.g., for minor acquisitions or share repurchases).

We are able to supplement our liquidity needs, as required, with broad access to financing in capital markets and four bank credit facilities. Broad access to financing includes commercial paper programs in multiple markets at favorable rates given our strong credit ratings (including separate U.S. dollar and Euro multicurrency programs).

We maintain four bank credit facilities: a $6 billion 364-day facility expiring in August 2008, a $6 billion 5-year facility expiring in August 2012, a $3 billion 5-year facility expiring in August 2012 and a $1.8 billion 364-day facility expiring in June 2009. The facility expiring in August 2008 is no longer needed and is not planned to be replaced. The remaining credit facilities are in place to support our ongoing commercial paper program and can be extended for certain periods of time as specified in, and in accordance with, the terms of each credit agreement. We anticipate that these facilities will remain largely undrawn for the foreseeable future. These credit facilities do not have cross-default or ratings triggers, nor do they have material adverse events clauses, except at the time of signing. In addition to these credit facilities, we have an automatically effective registration statement on Form S-3 filed with the SEC that is available for registered offerings of short- or long-term debt securities.

The Company’s Moody’s and Standard & Poor’s (S&P) short-term credit ratings are P-1 and A-1+, respectively. Our Moody’s and S&P long-term credit ratings are Aa3 with a negative outlook and AA-with a stable outlook, respectively.

Treasury Purchases. Total share repurchases in 2008 were $10.0 billion, nearly all of which were made under our publicly announced share repurchase plan. Under this plan, which began in July 2007, the Company expects to repurchase $24-30 billion of Company shares at a rate of $8-10 billion per year. Total share repurchases in 2007 were $5.6 billion.

Guarantees and Other Off-Balance Sheet Arrangements. We do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on financial condition or liquidity.

Contractual Commitments. The following table provides information on our contractual commitments as of June 30, 2008.

Management’s Discussion and Analysis The Procter & Gamble Company     51

			Less Than						After
(in millions of dollars)	Total		1 Year		1-3 Years		3-5 Years		5 Years
RECORDED LIABILITIES
Total debt	$	36,321	$	13,063	$	5,426	$	3,807	$	14,025
Capital leases		407		55		90		76		186
Unrecognized tax benefit(1)		318		318		—		—		—
OTHER
Interest payments relating to long-term debt		13,084		1,230		1,921		1,746		8,187
Operating leases(2)		1,656		299		528		381		448
Minimum pension funding(3)		1,401		575		826		—		—
Purchase obligations(4)		4,326		1,205		1,662		1,096		363
TOTAL CONTRACTUAL COMMITMENTS		57,513		16,745		10,453		7,106		23,209

(1)	As of June 30, 2008, the Company’s Consolidated Balance Sheet reflects a liability for unrecognized tax benefits of S3.4 billion, including S811 of interest and penalties. Due to the high degree of uncertainty regarding the timing of future cash outflows of liabilities for unrecognized tax benefits beyond one year, a reasonable estimate of the period of cash settlement for the next twelve months beyond the balance sheet date of June 30, 2008, can not be made.
(2)	Operating lease obligations are shown net of guaranteed sublease income.
(3)	Represents future pension payments to comply with local funding requirements. The projected payments beyond fiscal year 2011 are not currently determinable.
(4)	Primarily reflects future contractual payments under various take-or-pay arrangements entered into as part of the normal course of business. Commitments made under take-or-pay obligations represent future purchases in line with expected usage to obtain favorable pricing. Approximately 36% relates to service contracts for information technology, human resources management and facilities management activities that were outsourced in recent years. While the amounts listed represent contractual obligations, we do not believe it is likely that the full contractual amount would be paid if the underlying contracts were canceled prior to maturity. In such cases, we generally are able to negotiate new contracts or cancellation penalties, resulting in a reduced payment. The amounts do not include obligations related to other contractual purchase obligations that are not take-or-pay arrangements. Such contractual purchase obligations are primarily purchase orders at fair value that are part of normal operations and are reflected in historical operating cash flow trends. We do not believe such purchase obligations will adversely affect our liquidity position.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

In preparing our financial statements in accordance with U.S. GAAP, there are certain accounting policies that are particularly important. These include revenue recognition, income taxes, certain employee benefits, acquisitions, and goodwill and intangible assets. We believe these accounting policies, and others set forth in Note 1 to the Consolidated Financial Statements, should be reviewed as they are integral to understanding the results of operations and financial condition of the Company. In the case of revenue recognition, these policies simply represent required accounting and there is minimal judgment or estimation involved. In other areas, they may represent a choice between acceptable accounting methods or may require substantial judgment or estimation in their application.

Due to the nature of our business, these estimates generally are not considered highly uncertain at the time of estimation, meaning they are not expected to result in changes that would materially affect our financial condition, results of operations or cash flows in any given year.

The Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee of the Company’s Board of Directors.

Revenue Recognition

Most of our revenue transactions represent sales of inventory, and we recognize revenue when title, ownership and risk of loss transfer to the customer, which can be on the date of shipment or the date of receipt by the customer. The revenue recorded is presented net of sales and other taxes we collect on behalf of governmental authorities and includes shipping and handling costs, which generally are included in the list price to the customer. A provision for payment discounts and product return allowances is recorded as a reduction of sales within the same period that the revenue is recognized. We offer sales incentives to customers and consumers through various programs, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons. The cost of these programs is recognized as incurred and recorded as a reduction of sales. Given the nature of our business, revenue recognition practices do not contain estimates that materially affect results of operations.

Income Taxes

Our annual tax rate is determined based on our income, statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Tax law requires certain items to be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities.

Deferred tax assets generally represent items that can be used as a tax deduction or credit in future years for which we have already recorded the tax benefit in our income statement. Deferred tax liabilities generally represent tax expense recognized in our financial statements for which payment has been deferred, or expenditures for which we have already taken a deduction in our tax return but have not yet been recognized in our financial statements or assets recorded at fair value in business combinations for which there was no corresponding tax basis adjustment.

52     The Procter & Gamble Company Management’s Discussion and Analysis

Inherent in determining our annual tax rate are judgments regarding business plans, planning opportunities and expectations about future outcomes. Realization of certain deferred tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carry-forward periods. Although realization is not assured, management believes it is more likely than not that our deferred tax assets, net of valuation allowances, will be realized.

We operate in multiple jurisdictions with complex regulatory environments subject to different interpretations by the taxpayer and respective governmental taxing authorities. In certain of these jurisdictions we may take positions that management believes are supportable, but are potentially subject to successful challenge by the applicable taxing authority. We evaluate our tax positions and establish liabilities in accordance with Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). We review these tax uncertainties in light of the changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We have a number of audits in process in various jurisdictions. Although the resolution of these tax positions is uncertain, based on currently available information, we believe that the ultimate outcomes will not have a material adverse effect on our financial position, results of operations or cash flows.

Because there are a number of estimates and assumptions inherent in calculating the various components of our tax provision, certain changes or future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effective tax rate.

Employee Benefits

We sponsor various post-employment benefits throughout the world. These include pension plans, both defined contribution plans and defined benefit plans, and other post-employment benefit (OPEB) plans, consisting primarily of health care and life insurance for retirees. For accounting purposes, the defined benefit and OPEB plans require assumptions to estimate the projected and accumulated benefit obligations, including the following variables: discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality; expected return on assets and health care cost trend rates. These and other assumptions affect the annual expense and obligations recognized for the underlying plans. Our assumptions reflect our historical experiences and management’s best judgment regarding future expectations. In accordance with U.S. GAAP, the net amount by which actual results differ from our assumptions is deferred. If this net deferred amount exceeds 10% of the greater of plan assets or liabilities, a portion of the deferred amount is included in expense for the following year. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.

The expected return on plan assets assumption is important, since many of our defined benefit plans and our primary OPEB plan are funded. The process for setting the expected rates of return is described in Note 9 to the Consolidated Financial Statements. For 2008, the average return on assets assumption for pension plan assets and OPEB assets was 7.4% and 9.3%, respectively. A change in the rate of return of 0.5% for both pension and OPEB assets would impact annual benefit expense by less than $50 million after tax.

Since pension and OPEB liabilities are measured on a discounted basis, the discount rate is a significant assumption. Discount rates used for our U.S. defined benefit and OPEB plans are based on a yield curve constructed from a portfolio of high quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better. The average discount rate on the defined benefit pension plans of 6.3% represents a weighted average of local rates in countries where such plans exist. A 0.5% change in the discount rate would impact annual after-tax benefit expense by less than $50 million. The rate on the OPEB plan of 6.9% reflects the higher interest rates generally applicable in the U.S., which is where a majority of the plan participants receive benefits. A 0.5% change in the discount rate would impact annual after-tax OPEB expense by less than $10 million.

Certain defined contribution pension and OPEB benefits in the U.S. are funded by the Employee Stock Ownership Plan (ESOP), as discussed in Note 9 to the Consolidated Financial Statements.

Acquisitions

We account for acquired businesses using the purchase method of accounting. Under the purchase method, our Consolidated Financial Statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and labilities assumed must be recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.

Significant judgment is required in estimating the fair value of intangible assets and in assigning their respective useful lives. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant items. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management, but are inherently uncertain.

We typically use an income method to estimate the fair value of intangible assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth rates and profitability), the underlying product or technology life cycles, economic barriers to entry, a brand’s relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

Management’s Discussion and Analysis The Procter & Gamble Company     53

Determining the useful life of an intangible asset also requires judgment. Certain brand intangibles are expected to have indefinite lives based on their history and our plans to continue to support and build the acquired brands. Other acquired brands are expected to have determinable useful lives. Our assessment as to brands that have an indefinite life and those that have a determinable life is based on a number of factors including competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. Our estimates of the useful lives of determinable-lived intangibles, primarily including brands, technologies and customer relationships, are primarily based on these same factors. All of our acquired technology and customer-related intangibles are expected to have determinable useful lives.

Other significant estimates associated with the accounting for acquisitions include exit costs. Provided certain criteria are met, exit costs related to acquired operations are treated as assumed liabilities. If those criteria are not met, the costs are treated as operating expenses of the combined company as incurred. Exit costs, consisting primarily of severance costs, facility closure and other exit costs related to redundant manufacturing, selling, general and administrative functions, are based upon plans that have been committed to by management but which are subject to refinement. Significant estimates and assumptions inherent in the calculation of exit costs relate to the number of employees that will be terminated, future costs to operate and eventually vacate duplicate facilities and costs to terminate agreements. These estimates and assumptions may change as we execute approved plans. Decreases to the estimated costs are generally recorded as an adjustment to goodwill. Increases to the estimates are generally recorded as an adjustment to goodwill during the purchase price allocation period (generally within one year of the acquisition date) and as operating expenses thereafter.

Goodwill and Intangible Assets

Acquired intangible assets may represent indefinite-lived assets (e.g., certain trademarks or brands), determinable-lived intangibles (e.g., certain trademarks or brands, customer relationships, patents and technologies) or residual goodwill. Of these, only the costs of determinable-lived intangibles are amortized to expense over their estimated life. The value of indefinite-lived intangible assets and residual goodwill is not amortized, but is tested at least annually for impairment. Our impairment testing for goodwill is performed separately from our impairment testing of indefinite-lived intangibles. We test goodwill for impairment, at least annually, by reviewing the book value compared to the fair value at the reportable unit level. We test individual indefinite-lived intangibles at least annually by reviewing the individual book values compared to the fair value. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate future cash flows to measure fair value. Assumptions used in the Company’s impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with internal projections and operating plans. We believe such assumptions and estimates are also comparable to those that would be used by other marketplace participants. When certain events or changes in operating conditions occur, indefinite-lived intangible assets may be reclassified to a determinable life asset and an additional impairment assessment may be performed. We did not recognize any material impairment charges for goodwill or intangible assets during the years presented.

The recorded value of goodwill and intangible assets from recently acquired businesses are derived from more recent business operating plans and macroeconomic environmental conditions and therefore are more susceptible to an adverse change that could require an impairment charge. Indefinite-lived intangible assets totaled $27.9 billion at June 30, 2008, of which $24.7 billion represent recently acquired Gillette intangible assets. The Gillette indefinite-lived intangible assets were recorded at estimated fair values as of the acquisition date. Total goodwill is $59.8 billion at June 30, 2008, of which $38.0 billion results from the Gillette acquisition. Such goodwill reflects the residual amount from a purchase price allocation as of the acquisition date. Because the Gillette intangible and goodwill amounts represent current values as of the relatively recent acquisition date, such amounts are more susceptible to an impairment risk if business operating results or macroeconomic conditions deteriorate.

New Accounting Pronouncements

As more fully discussed in Notes 1 and 10 to the Consolidated Financial Statements, on July 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No.109” (FIN 48). FIN 48 addresses the accounting and disclosure of uncertain tax positions. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The difference between the tax benefit recognized in the financial statements for a position in accordance with FIN 48 and the tax benefit claimed in the tax return is referred to as an unrecognized tax benefit.

As more fully discussed in Notes 1 and 9 to the Consolidated Financial Statements, we adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R),” (SFAS 158) at June 30, 2007. SFAS 158 requires companies to recognize the over-funded and under-funded status of defined benefit pension and other postretirement plans as assets or liabilities on their balance sheets and to recognize previously unrecognized changes in that funded status, in the year in which changes occur, through other comprehensive income in shareholders’ equity.

In September 2006 the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157). This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The standard, as amended, is effective for the Company beginning July 1, 2008, for certain financial assets and liabilities and beginning July 1, 2009, for non-financial assets and liabilities recognized or disclosed at fair value on a nonrecurring basis. We believe that the adoption of SFAS 157 will not have a material effect on our financial position, results of operations or cash flows.

54     The Procter & Gamble Company Management’s Discussion and Analysis

In December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations” (SFAS 141(R)) and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51"(SFAS 160). SFAS 141(R) and SFAS 160 revise the method of accounting for a number of aspects of business combinations and noncontrolling interests, including acquisition costs, contingencies (including contingent assets, contingent liabilities and contingent purchase price), the impacts of partial and step-acquisitions (including the valuation of net assets attributable to non-acquired minority interests), and post acquisition exit activities of acquired businesses. SFAS 141(R) and SFAS 160 will be effective for the Company during our fiscal year beginning July 1, 2009.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (SFAS 161). SFAS 161 impacts disclosures only and will provide additional qualitative and quantitative information on the use of derivatives and their impact on an entity’s financial position, financial performance, and cash flows. SFAS 161 will be effective for the Company beginning January 1, 2009.

No other new accounting pronouncement issued or effective during the fiscal year has had or is expected to have a material impact on the Consolidated Financial Statements.

OTHER INFORMATION

Hedging and Derivative Financial Instruments

As a multinational company with diverse product offerings, we are exposed to market risks such as changes in interest rates, currency exchange rates and commodity prices. To manage the volatility related to these exposures, we evaluate our exposures on a global basis to take advantage of the direct netting opportunities and of currency, interest rate and commodity correlations that exist within the portfolio. For the remaining exposures, we enter into various derivative transactions in accordance with the Company’s hedging policies that are designed to partially, or entirely, offset changes in the underlying exposures being hedged. We do not hold or issue derivative financial instruments for speculative trading purposes. Note 6 to the Consolidated Financial Statements includes a detailed discussion of our accounting policies for financial instruments.

Derivative positions are monitored using techniques including market valuation, sensitivity analysis and value-at-risk modeling. The tests for interest rate, currency rate and commodity price exposures discussed below are based on the CorporateManager™ value-at-risk model using a one-year horizon and a 95% confidence level. The model incorporates the impact of correlation (the degree to which exposures move together over time) and diversification (from holding multiple currency, commodity and interest rate instruments) and assumes that financial returns are normally distributed. Estimates of volatility and correlations of market factors are drawn from the RiskMetrics™ dataset as of June 30, 2008. In cases where data is unavailable in RiskMetrics™, a reasonable proxy is included.

Our market risk exposures relative to interest rates, currency rates and commodity prices, as discussed below, have not changed materially versus the previous reporting period. In addition, we are not aware of any facts or circumstances that would significantly impact such exposures in the near term.

Interest Rate Exposure on Financial Instruments. Interest rate swaps are used to hedge exposures to interest rate movement on underlying debt obligations. Certain interest rate swaps denominated in foreign currencies are designated to hedge exposures to currency exchange rate movements on our investments in foreign operations. These currency interest rate swaps are designated as hedges of the Company’s foreign net investments.

Based on our overall interest rate exposure as of and during the year ended June 30, 2008, including derivative and other instruments sensitive to interest rates, we believe a near-term change in interest rates, at a 95% confidence level based on historical interest rate movements, would not materially affect our financial statements.

Currency Rate Exposure on Financial Instruments. Because we manufacture and sell products in a number of countries throughout the world, we are exposed to the impact on revenue and expenses of movements in currency exchange rates. The primary purpose of our currency hedging activities is to reduce the risk that our financial position will be adversely affected by short-term changes in exchange rates. Corporate policy prescribes the range of allowable hedging activity. We primarily use forward contracts and options with maturities of less than 18 months.

In addition, we enter into certain currency swaps with maturities of up to five years to hedge our exposure to exchange rate movements on intercompany financing transactions. We also use purchased currency options with maturities of generally less than 18 months and forward contracts to hedge against the effect of exchange rate fluctuations on intercompany royalties and to offset a portion of the effect of exchange rate fluctuations on income from international operations.

Based on our overall currency rate exposure as of and during the year ended June 30, 2008, we believe, at a 95% confidence level based on historical currency rate movements, the impact of a near-term change in currency rates on derivative and other instruments would not materially affect our financial statements.

Commodity Price Exposure on Financial Instruments. We use raw materials that are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. In addition to fixed price contracts, we use futures, options and swap contracts to manage the volatility related to the above exposures.

Based on our overall commodity price exposure as of and during the year ended June 30, 2008, we believe, at a 95% confidence level based on historical commodity price movements, the impact of a near-term change in commodity prices on derivative and other instruments would not materially affect our financial statements.

Management’s Discussion and Analysis The Procter & Gamble Company      55

Measures Not Defined By U.S. GAAP

Our discussion of financial results includes several “non-GAAP” financial measures. We believe these measures provide our investors with additional information about our underlying results and trends, as well as insight to some of the metrics used to evaluate management. When used in MD&A, we have provided the comparable GAAP measure in the discussion. These measures include:

Organic Sales Growth. Organic sales growth measures sales growth excluding the impacts of foreign exchange, acquisitions and divestitures from year-over-year comparisons. The Company believes this provides investors with a more complete understanding of underlying results and trends by providing sales growth on a consistent basis.

The following table provides a numerical reconciliation of organic sales growth to reported net sales growth for fiscal 2008:

																Fabric
	Total												Snacks, Coffee			Care and			Baby Care and
	Company			Beauty			Grooming			Health Care			and Pet Care			Home Care			Family Care
Reported net sales growth		9	%		9	%		11	%		9	%		7	%		11	%		9	%
Acquisitions & divestitures impact		+1	%		+1	%		0	%		-1	%		0	%		0	%		+3	%
Foreign exchange impact		-5	%		-6	%		-7	%		-5	%		-3	%		-5	%		-4	%
ORGANIC SALES GROWTH		5	%		4	%		4	%		3	%		4	%		6	%		8	%

The following table provides a numerical reconciliation of organic sales growth to reported net sales growth for fiscal 2007:

	Total
	Company			Grooming			Health Care
Reported net sales growth		12	%		45	%		13	%
Acquisitions & divestitures impact		-5	%		-35	%		-4	%
Foreign exchange impact		-2	%		-4	%		-2	%
ORGANIC SALES GROWTH		5	%		6	%		7	%

Free Cash Flow. Free cash flow is defined as operating cash flow less capital spending. The Company views free cash flow as an important measure because it is one factor in determining the amount of cash available for dividends and discretionary investment. Free cash flow is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.

Free Cash Flow Productivity. Free cash flow productivity is defined as the ratio of free cash flow to net earnings. The Company’s target is to generate free cash flow at or above 90% of net earnings. Free cash flow productivity is one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.

The following table provides a numerical reconciliation of free cash flow:

										Free
	Operating		Capital			Free		Net		Cash Flow
	Cash Flow		Spending			Cash Flow		Earnings		Productivity
2008	$	15,814	$	(3,046	)	$	12,768	$	12,075		106	%
2007	$	13,435	$	(2,945	)	$	10,490	$	10,340		101	%

56      The Procter & Gamble Company

Consolidated Statements of Earnings

Amounts in millions except per share amounts; Years ended June 30	2008		2007		2006
NET SALES	$	83,503	$	76,476	$	68,222
Cost of products sold		40,695		36,686		33,125
Selling, general and administrative expense		25,725		24,340		21,848
OPERATING INCOME		17,083		15,450		13,249
Interest expense		1,467		1,304		1,119
Other non-operating income, net		462		564		283
EARNINGS BEFORE INCOME TAXES		16,078		14,710		12,413
Income taxes		4,003		4,370		3,729
NET EARNINGS	$	12,075	$	10,340	$	8,684
BASIC NET EARNINGS PER COMMON SHARE	$	3.86	$	3.22	$	2.79
DILUTED NET EARNINGS PER COMMON SHARE	$	3.64	$	3.04	$	2.64
DIVIDENDS PER COMMON SHARE	$	1.45	$	1.28	$	1.15

See accompanying Notes to Consolidated Financial Statements.

The Procter & Gamble Company     57

Consolidated Balance Sheets

Amounts in millions; June 30	2008			2007
CURRENT ASSETS
Cash and cash equivalents	$	3,313		$	5,354
Investment securities		228			202
Accounts receivable		6,761			6,629
Inventories
Materials and supplies		2,262			1,590
Work in process		765			444
Finished goods		5,389			4,785
Total inventories		8,416			6,819
Deferred income taxes		2,012			1,727
Prepaid expenses and other current assets		3,785			3,300
TOTAL CURRENT ASSETS		24,515			24,031
PROPERTY, PLANT AND EQUIPMENT
Buildings		7,052			6,380
Machinery and equipment		30,145			27,492
Land		889			849
Total property, plant and equipment		38,086			34,721
Accumulated depreciation		(17,446	)		(15,181	)
NET PROPERTY, PLANT AND EQUIPMENT		20,640			19,540
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwil		59,767			56,552
Trademarks and other intangible assets, net		34,233			33,626
NET GOODWILL AND OTHER INTANGIBLE ASSETS		94,000			90,178
OTHER NONCURRENT ASSETS		4,837			4,265
TOTAL ASSETS	$	143,992		$	138,014
CURRENT LIABILITIES
Accounts payable	$	6,775		$	5,710
Accrued and other liabilities		10,154			9,586
Taxes payable		945			3,382
Debt due within one year		13,084			12,039
TOTAL CURRENT LIABILITIES		30,958			30,717
LONG-TERM DEBT		23,581			23,375
DEFERRED INCOME TAXES		11,805			12,015
OTHER NONCURRENT LIABILITIES		8,154			5,147
TOTAL LIABILITIES		74,498			71,254
SHAREHOLDERS’ EQUITY
Convertible Class A preferred stock, stated value $1 per share (600 shares authorized)		1,366			1,406
Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized)		—			—
Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2008- 4,001 .8, 2007-3,989.7)		4,002			3,990
Additional paid-in capital		60,307			59,030
Reserve for ESOP debt retirement		(1,325	)		(1,308	)
Accumulated other comprehensive income		3,746			617
Treasury stock, at cost (shares held: 2008-969.1, 2007-857.8)		(47,588	)		(38,772	)
Retained earnings		48,986			41,797
TOTAL SHAREHOLDERS’ EQUITY		69,494			66,760
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	143,992		$	138,014

See accompanying Notes to Consolidated Financial Statements.

58     The Procter & Gamble Company

Consolidated Statements of Shareholders’ Equity

															Accumulated
	Common								Additional			Reserve for			Other
	Shares			Common		Preferred			Paid-in			ESOP Debt			Comprehensive			Treasury			Retained
Dollars in millions/Shares in thousands	Outstanding			Stock		Stock			Capital			Retirement			Income			Stock			Earnings			Total
BALANCE JUNE 30, 2005		2,472,934		$	2,977	$	1,483		$	3,030		$	(1,259	)	$	(1,566	)	$	(17,194	)	$	31,004		$	18,475
Net earnings																						8,684			8,684
Other comprehensive income:
Financial statement translation																1,316									1,316
Net investment hedges, net of $472 tax																(786	)								(786	)
Other, net of tax benefits																518									518
Total comprehensive income																								$	9,732
Dividends to shareholders:
Common																						(3,555	)		(3,555	)
Preferred, net of tax benefits																						(148	)		(148	)
Treasury stock purchases		(297,132	)							(9	)								(16,821	)					(16,830	)
Employee plan issuances		36,763			16					1,308									887			(319	)		1,892
Preferred stock conversions		3,788					(32	)		5									27						—
Gillette acquisition		962,488			983					53,522									(1,134	)					53,371
E50P debt impacts													(29	)											(29	)
BALANCE JUNE 30, 2006		3,178,841			3,976		1,451			57,856			(1,288	)		(518	)		(34,235	)		35,666			62,908
Net earnings																						10,340			10,340
Other comprehensive income:
Financial statement translation																2,419									2,419
Net investment hedges, net of $488 tax																(835	)								(835	)
Other, net of tax benefits																(116	)								(116	)
Total comprehensive income																								$	11,808
Adjustment to initially apply SFAS 158, net of tax																(333	)								(333	)
Dividends to shareholders:
Common																						(4,048	)		(4,048	)
Preferred, net of tax benefits																						(161	)		(161	)
Treasury stock purchases		(89,829	)																(5,578	)					(5,578	)
Employee plan issuances		37,824			14					1,167									1,003						2,184
Preferred stock conversions		5,110					(45	)		7									38						—
ESOP debt impacts													(20	)											(20	)
BALANCE JUNE 30, 2007		3,131,946			3,990		1,406			59,030			(1,308	)		617			(38,772	)		41,797			66,760
Net earnings																						12,075			12,075
Other comprehensive income:
Financial statement translation																6,543									6,543
Net investment hedges, net of $1,719 tax																(2,951	)								(2,951	)
Other, net of tax benefits																(463	)								(463	)
Total comprehensive income																								$	15,204
Cumulative impact for adoption of FIN 48																						(232	)		(232	)
Dividends to shareholders:
Common																						(4,479	)		(4,479	)
Preferred, net of tax benefits																						(176	)		(176	)
Treasury stock purchases		(148,121	)																(10,047	)					(10,047	)
Employee plan issuances		43,910			12					1,272									1,196						2,480
Preferred stock conversions		4,982					(40	)		5									35						—
ESOP debt impacts													(17	)								1			(16	)
BALANCE JUNE 30, 2008		3,032,717		$	4,002	$	1,366		$	60,307		$	(1,325	)	$	3,746		$	(47,588	)	$	48,986		$	69,494

See accompanying Notes to Consolidated Financial Statements.

The Procter & Gamble Company     59

Consolidated Statements of Cash Flows

Amounts in millions; Years ended June 30	2008			2007			2006
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	$	5,354		$	6,693		$	6,389
OPERATING ACTIVITIES
Net earnings		12,075			10,340			8,684
Depreciation and amortization		3,166			3,130			2,627
Share-based compensation expense		555			668			585
Deferred income taxes		1,214			253			(112	)
Change in accounts receivable		432			(729	)		(524	)
Change in inventories		(1,050	)		(389	)		383
Change in accounts payable, accrued and other liabilities		134			(273	)		230
Change in other operating assets and liabilities		(1,239	)		(157	)		(508	)
Other		527			592			10
TOTAL OPERATING ACTIVITIES		15,814			13,435			11,375
INVESTING ACTIVITIES
Capital expenditures		(3,046	)		(2,945	)		(2,667	)
Proceeds from asset sales		928			281			882
Acquisitions, net of cash acquired		(381	)		(492	)		171
Change in investment securities		(50	)		673			884
TOTAL INVESTING ACTIVITIES		(2,549	)		(2,483	)		(730	)
FINANCING ACTIVITIES
Dividends to shareholders		(4,655	)		(4,209	)		(3,703	)
Change in short-term debt		1,844			8,981			(8,627	)
Additions to long-term debt		7,088			4,758			22,545
Reductions of long-term debt		(11,747	)		(17,929	)		(5,282	)
Impact of stock options and other		1,867			1,499			1,319
Treasury stock purchases		(10,047	)		(5,578	)		(16,830	)
TOTAL FINANCING ACTIVITIES		(15,650	)		(12,478	)		(10,578	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		344			187			237
CHANGE IN CASH AND CASH EQUIVALENTS		(2,041	)		(1,339	)		304
CASH AND CASH EQUIVALENTS, END OF YEAR	$	3,313		$	5,354		$	6,693
SUPPLEMENTAL DISCLOSURE
Cash payments for:
Interest	$	1,373		$	1,330		$	1,045
Income taxes		3,499			4,116			2,869
Assets acquired through non-cash capital leases		13			41			363
Gillette acquisition funded by share issuance		—			—			53,371

See accompanying Notes to Consolidated Financial Statements.

60       The Procter & Gamble Company

Notes to Consolidated Financial Statements

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Procter & Gamble Company’s (the “Company,” “we” or “us”) business is focused on providing branded consumer goods products of superior quality and value. Our products are sold in more than 180 countries primarily through retail operations including mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons and high-frequency stores. We have on-the-ground operations in approximately 80 countries.

Basis of Presentation

The Consolidated Financial Statements include The Procter & Gamble Company and its controlled subsidiaries. Intercompany transactions are eliminated.

Use of Estimates

Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, consumer and trade promotion accruals, pensions, post-employment benefits, stock options, valuation of acquired intangible assets, useful lives for depreciation and amortization, future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and long-lived assets, deferred tax assets, uncertain income tax positions and contingencies. Actual results may ultimately differ from estimates, although management does not believe such differences would materially affect the financial statements in any individual year.

Revenue Recognition

Sales are recognized when revenue is realized or realizable and has been earned. Most revenue transactions represent sales of inventory. The revenue recorded is presented net of sales and other taxes we collect on behalf of governmental authorities and includes shipping and handling costs, which generally are included in the list price to the customer. Our policy is to recognize revenue when title to the product, ownership and risk of loss transfer to the customer, which can be on the date of shipment or the date of receipt by the customer. A provision for payment discounts and product return allowances is recorded as a reduction of sales in the same period that the revenue is recognized.

Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are offered through various programs to customers and consumers. Sales are recorded net of trade promotion spending, which is recognized as incurred, generally at the time of the sale. Most of these arrangements have terms of approximately one year. Accruals for expected payouts under these programs are included as accrued marketing and promotion in the accrued and other liabilities line item in the Consolidated Balance Sheets.

Cost of Products Sold

Cost of products sold is primarily comprised of direct materials and supplies consumed in the manufacture of product, as well as manufacturing labor, depreciation expense and direct overhead expense necessary to acquire and convert the purchased materials and supplies into finished product. Cost of products sold also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity.

Selling, General and Administrative Expense

Selling, general and administrative (SG&A) expense is primarily comprised of marketing expenses, selling expenses, research and development costs, administrative and other indirect overhead costs, depreciation and amortization expense on non-manufacturing assets and other miscellaneous operating items. Research and development costs are charged to expense as incurred and were $2,226 in 2008, $2,112 in 2007 and $2,075 in 2006. Advertising costs, charged to expense as incurred, include worldwide television, print, radio, internet and in-store advertising expenses and were $8,667 in 2008, $7,937 in 2007 and $7,122 in 2006. Non-advertising related components of the Company’s total marketing spending include costs associated with consumer promotions, product sampling and sales aids, all of which are included in SG&A expense, as well as coupons and customer trade funds, which are recorded as reductions to net sales.

Other Non-Operating Income, Net

Other non-operating income, net, primarily includes divestiture gains and interest and investment income.

Currency Translation

Financial statements of operating subsidiaries outside the United States of America (U.S.) generally are measured using the local currency as the functional currency. Adjustments to translate those statements into U.S. dollars are recorded in other comprehensive income. Currency translation adjustments in accumulated other comprehensive income were gains of $9,484 and $2,941 at June 30, 2008 and 2007, respectively. For subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments for financial statements in highly inflationary economies and other transactional exchange gains and losses are reflected in earnings.

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company       61

Cash Flow Presentation

The Statement of Cash Flows is prepared using the indirect method, which reconciles net earnings to cash flow from operating activities. The reconciliation adjustments include the removal of timing differences between the occurrence of operating receipts and payments and their recognition in net earnings. The adjustments also remove cash flows from operating activities arising from investing and financing activities, which are presented separately from operating activities. Cash flows from foreign currency transactions and operations are translated at an average exchange rate for the period. Cash flows from hedging activities are included in the same category as the items being hedged. Cash flows from derivative instruments designated as net investment hedges are classified as financing activities. Cash flows from other derivative instruments used to manage interest, commodity or currency exposures are classified as operating activities. Cash payments related to income taxes are classified as operating activities.

Cash Equivalents

Highly liquid investments with remaining stated maturities of three months or less when purchased are considered cash equivalents and recorded at cost.

Investments

Investment securities consist of readily marketable debt and equity securities. Unrealized gains or losses are charged to earnings for investments classified as trading and to shareholders’ equity for investments classified as available-for-sale. Auction rate securities are classified as other noncurrent assets with unrealized losses charged to shareholders’ equity unless an impairment is judged to be other than temporary, in which case it is charged to earnings.

Investments in certain companies over which we exert significant influence, but do not control the financial and operating decisions, are accounted for as equity method investments. Other investments that are not controlled, and over which we do not have the ability to exercise significant influence, are accounted for under the cost method.

Inventory Valuation

Inventories are valued at the lower of cost or market value. Product-related inventories are primarily maintained on the first-in, first-out method. Minor amounts of product inventories, including certain cosmetics and commodities, are maintained on the last-in, first-out method. The cost of spare part inventories is maintained using the average cost method.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets’ estimated useful lives using the straight-line method. Machinery and equipment includes office furniture and fixtures (15-year life), computer equipment and capitalized software (3- to 5-year lives) and manufacturing equipment (3- to 20-year lives). Buildings are depreciated over an estimated useful life of 40 years. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.

Goodwill and Other Intangible Assets

We have a number of acquired brands that have been determined to have indefinite lives due to the nature of our business. We evaluate a number of factors to determine whether an indefinite life is appropriate, including the competitive environment, market share, brand history, product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. When certain events or changes in operating conditions occur, an impairment assessment is performed and indefinite-lived brands may be adjusted to a determinable life.

Goodwill and indefinite-lived brands are not amortized, but are evaluated annually for impairment or when indicators of a potential impairment are present. Our impairment testing of goodwill is performed separately from our impairment testing of individual indefinite-lived intangibles. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. We believe such assumptions are also comparable to those that would be used by other marketplace participants.

The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. Customer relationships and other noncontractual intangible assets with determinable lives are amortized over periods generally ranging from 5 to 40 years. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted.

Fair Values of Financial Instruments

Certain financial instruments are required to be recorded at fair value. The estimated fair values of such financial instruments (including certain debt instruments, investment securities and derivatives) have been determined using market information and valuation methodologies, primarily discounted cash flow analysis. Changes in assumptions or estimation methods could affect the fair value estimates. However, we do not believe any such changes would have a material impact on our financial condition, results of operations or cash flows. Other financial instruments, including cash equivalents, other investments and short-term debt, are recorded at cost, which approximates fair value. The fair values of long-term debt and derivative instruments are disclosed in Note 5 and Note 6, respectively.

Amounts in millions of dollars except per share amounts or as otherwise specified.

62 The Procter & Gamble Company Notes to Consolidated Financial Statements

New Accounting Pronouncements and Policies

Other than as described below, no new accounting pronouncement issued or effective during the fiscal year has had or is expected to have a material impact on the consolidated financial statements.

ADOPTION OF FIN 48, “ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES — AN INTERPRETATION OF FASB STATEMENT NO. 109”

On July 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB statement No. 109” (FIN 48). FIN 48 addresses the accounting and disclosure of uncertain tax positions. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The difference between the tax benefit recognized in the financial statements for a position in accordance with FIN 48 and the tax benefit claimed in the tax return is referred to as an unrecognized tax benefit.

The adoption of FIN 48 resulted in a decrease to retained earnings as of July 1, 2007, of $232, which was reflected as a cumulative effect of a change in accounting principle, with a corresponding increase to the net liability for unrecognized tax benefits. The impact primarily reflects the accrual of additional statutory interest and penalties as required by FIN 48, partially offset by adjustments to existing unrecognized tax benefits to comply with FIN 48 measurement principles. The implementation of FIN 48 also resulted in a reduction in our net tax liabilities for uncertain tax positions related to prior acquisitions accounted for under purchase accounting, resulting in an $80 decrease to goodwill. Additionally, the Company historically classified unrecognized tax benefits in current taxes payable. As a result of the adoption of FIN 48, unrecognized tax benefits not expected to be paid in the next 12 months were reclassified to other noncurrent liabilities on a prospective basis.

The total amount of unrecognized tax benefits as of the adoption of FIN 48 at July 1, 2007, was $2,971, excluding any related accruals for interest and penalties. Included in this total was $1,893 that, if recognized, would impact the effective tax rate in future periods. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. Accrued interest and penalties as of July 1, 2007, were $589 and $128, respectively, on an after-tax basis. Refer to Note 10 for additional information regarding uncertain tax positions and related activity in the current year.

ADOPTION OF FASB STANDARD 158, “EMPLOYERS’ ACCOUNTING FOR DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT PLANS—AN AMENDMENT OF FASB STATEMENTS NO. 87, 88, 106, AND 132(R)”

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS 158). SFAS 158 requires companies to recognize the over-funded and under-funded status of defined benefit pension and other postretirement plans as assets or liabilities on their balance sheets. In addition, changes in the funded status must be recognized through other comprehensive income in shareholders’ equity in the year in which the changes occur. We adopted SFAS 158 on June 30, 2007. In accordance with the transition rules in SFAS 158, this standard was adopted on a prospective basis. The adoption of SFAS 158 resulted in an adjustment to our balance sheet, but had no impact on our net earnings or cash flow, nor did it impact any debt covenants. SFAS 158 had no impact on our measurement date, which continues to be as of our fiscal year-end. Refer to Note 9 for additional information regarding our pension and postretirement plans.

The following table reflects the effect of the adoption of SFAS 158 on our Consolidated Balance Sheets:

	Before					After
	Application		SFAS 158			Application
As of June 30, 2007	of SFAS 158		Adjustments			of SFAS 158
Other noncurrent assets	$	4,432	$	(167	)	$	4,265
TOTAL ASSETS		138,181		(167	)		138,014
Deferred income taxes		12,214		(199	)		12,015
Other noncurrent liabilities		4,782		365			5,147
TOTAL LIABILITIES		71,088		166			71,254
Accumulated other comprehensive income		950		(333	)		617
TOTAL SHAREHOLDERS’ EQUITY		67,093		(333	)		66,760
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		138,181		(167	)		138,014

FASB STANDARDS 141(R), “BUSINESS COMBINATIONS,” AND 160, “NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS —AN AMENDMENT OF ARB NO. 51”

In December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations,” (SFAS 141(R)) and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 “(SFAS 160). SFAS 141 (R) and SFAS 160 revise the method of accounting for a number of aspects of business combinations and noncontrolling interests, including acquisition costs, contingencies (including contingent assets, contingent liabilities and contingent purchase price), the impacts of partial and step-acquisitions (including the valuation of net assets attributable to non-acquired minority interests) and post acquisition exit activities of acquired businesses. SFAS 141 (R) and SFAS 160 will be effective for the Company during our fiscal year beginning July 1, 2009. The Company believes that the adoption of SFAS 141(R) and SFAS 160 will not have a material effect on its financial position, results of operations or cash flows.

FASB STANDARD 157, “FAIR VALUE MEASUREMENTS”

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157). This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157, as amended, is effective for the Company beginning July 1, 2008, for certain financial assets and liabilities and beginning July 1, 2009, for non-financial assets and liabilities recognized or disclosed at fair value on a non-recurring basis. The Company believes that theadoption of SFAS 157 will not have a material effect on its financial position, results of operations or cash flows.

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company       63

FASB STANDARD 161, “DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES — AN AMENDMENT OF FASB STATEMENT NO. 133”

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133” (SFAS 161). SFAS 161 impacts disclosures only and will provide additional qualitative and quantitative information on the use of derivatives and their impact on an entity’s financial position, results of operations and cash flows. SFAS 161 will be effective for the Company beginning January 1, 2009.

NOTE 2

ACQUISITIONS

Gillette Acquisition

On October 1, 2005, we completed our acquisition of The Gillette Company. Pursuant to the acquisition agreement, which provided for the exchange of 0.975 shares of The Procter & Gamble Company common stock, on a tax-free basis, for each share of The Gillette Company, we issued 962 million shares of The Procter & Gamble Company common stock. The value of these shares was determined using the average Company stock prices beginning two days before and ending two days after January 28, 2005, the date the acquisition was announced. We also issued 79 million stock options in exchange for Gillette’s outstanding stock options. Under the purchase method of accounting, the total consideration was approximately $53.4 billion including common stock, the fair value of vested stock options and acquisition costs. This acquisition ultimately resulted in a new Grooming reportable segment. The Gillette oral care, batteries and personal care businesses were subsumed within the Health Care, Fabric Care and Home Care, and Beauty reportable segments, respectively. The operating results of the Gillette businesses are reported in our financial statements beginning October 1, 2005.

The Gillette Company was a market leader in several global product categories including blades and razors, oral care and batteries. Total sales for Gillette during its most recent pre-acquisition year ended December 31, 2004, were $10.5 billion.

In order to obtain regulatory approval of the transaction, we were required to divest certain overlapping businesses. We completed the divestiture of the Spinbrush toothbrush business, Rembrandt (a Gillette oral care product line), Right Guard and other Gillette deodorant brands during the fiscal year ended June 30, 2006.

In connection with this acquisition, we also announced a share buyback plan, which we completed in July 2006, under which we acquired $20.1 billion of Company common shares either through the open market or from private transactions.

In conjunction with the acquisition of The Gillette Company, we recognized an assumed liability for Gillette exit costs of $1.2 billion, including $854 in separation costs related to approximately 5,500 people, $55 in employee relocation costs and $320 in other exit costs. These costs are primarily related to the elimination of selling, general and administrative overlap between the two companies in areas like Global Business Services, corporate staff and go-to-market support, as well as redundant manufacturing capacity. These activities are substantially complete as of June 30, 2008. Total integration plan charges against the assumed liability were $286, $438 and $204 for the years ended June 2008, 2007 and 2006, respectively. A total of $121 of the liability was reversed, which resulted in a reduction to goodwill during the year ended June 30, 2008, related to underspending on a number of projects that were concluded during the period.

Other minor business purchases and intangible asset acquisitions totaled $418, $540 and $395 in 2008, 2007 and 2006, respectively.

Amounts in millions of dollars except per share amounts or as otherwise specified.

64      The Procter & Gamble Company Notes to Consolidated Financial Statements

NOTE 3

GOODWILL AND INTANGIBLE ASSETS

The change in the net carrying amount of goodwill by Global Business Unit (GBU) was as follows:

	2008			2007
BEAUTY GBU
Beauty, beginning of year	$	15,359		$	14,968
Acquisitions and divestitures		187			(18	)
Translation and other		1,357			409
GOODWILL, JUNE 30, 2008		16,903			15,359
Grooming, beginning of year		24,211			23,586
Acquisitions and divestitures		(269	)		289
Translation and other		1,370			336
GOODWILL, JUNE 30, 2008		25,312			24,211
HEALTH & WELL BEING GBU
Health Care, beginning of year		8,482			8,387
Acquisitions and divestitures		(59	)		5
Translation and other		327			90
GOODWILL, JUNE 30, 2008		8,750			8,482
Snacks, Coffee and Pet Care, beginning of year		2,407			2,396
Acquisitions and divestitures		(5	)		5
Translation and other		32			6
GOODWILL, JUNE 30, 2008		2,434			2,407
HOUSEHOLD CARE GBU
Fabric Care and Home Care, beginning of year		4,470			4,406
Acquisitions and divestitures		(43	)		(8	)
Translation and other		228			72
GOODWILL, JUNE 30, 2008		4,655			4,470
Baby Care and Family Care, beginning of year		1,623			1,563
Acquisitions and divestitures		(34	)		9
Translation and other		124			51
GOODWILL, JUNE 30, 2008		1,713			1,623
GOODWILL, NET, beginning of year		56,552			55,306
Acquisitions and divestitures		(223	)		282
Translation and other		3,438			964
GOODWILL, JUNE 30, 2008		59,767			56,552

The increase in goodwill from June 30, 2007, is primarily due to currency translation.

Identifiable intangible assets were comprised of:

	2008				2007
	Grass				Gross
	Carrying		Accumulated		Carrying		Accumulated
June 30	Amount		Amortization		Amount		Amortization
INTANGIBLE ASSETS WITH DETERMINABLE LIVES
Brands	$	3,564	$	1,032	$	3,317	$	710
Patents and technology		3,188		1,077		3,135		776
Customer relationships		1,947		353		1,738		237
Other		333		209		377		188
TOTAL		9,032		2,671		8,567		1,911
BRANDS WITH INDEFINITE LIVES		27,872		—		26,970		—
TOTAL		36,904		2,671		35,537		1,911

The amortization of intangible assets for the years ended June 30, 2008, 2007 and 2006 was $649, $640 and $587, respectively. Estimated amortization expense over the next five years is as follows: 2009–$626;2010–$599; 2011–$549; 2012–$512; and 2013–$489. Such estimates do not reflect the impact of future foreign exchange rate changes.

NOTE 4

SUPPLEMENTAL FINANCIAL INFORMATION

Selected components of current and noncurrent liabilities were as follows:

June 30	2008		2007
ACCRUED AND OTHER LIABILITIES — CURRENT
Marketing and promotion	$	2,760	$	2,538
Compensation expenses		1,527		1,390
Accrued Gillette exit costs		257		608
Other		5,610		5,050
TOTAL		10,154		9,586
OTHER NONCURRENT LIABILITIES
Pension benefits	$	3,146	$	2,898
Other postretirement benefits		512		503
Noncurrent FIN 48 liability		3,075		—
Other		1,421		1,746
TOTAL		8,154		5,147

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company       65

NOTE 5

SHORT-TERM AND LONG-TERM DEBT

June 30	2008		2007
SHORT-TERM DEBT
Current portion of long-term debt	$	1,746	$	2,544
Commercial paper		9,748		9,410
Floating rate note due February 2009		1,500		—
Other		90		85
TOTAL		13,084		12,039

The weighted average short-term interest rates were 2.7% and 5.0% as of June 30, 2008 and 2007, respectively, including the effects of interest rate swaps discussed in Note 6.

June 30	2008			2007
LONG-TERM DEBT
4.30% USD note due August 2008	$	500		$	500
3.50% USD note due December 2008		650			650
Floating rate note due July 2009		1,750			—
Floating rate note due August 2009		1,500			—
6.88% USD note due September 2009		1,000			1,000
4.88% EUR note due October 2011		1,573			—
3.38% EUR note due December 2012		2,203			1,882
4.50% EUR note due May 2014		2,360			2,016
4.95% USD note due August 2014		900			900
4.85% USD note due December 2015		700			700
5.13% EUR note due October 2017		1,731			—
4.13% EUR note due December 2020		944			806
9.36% ESOP debentures due 2008-2021(1)		934			968
4.88% EUR note due May 2027		1,573			1,344
6.25% GBP note due January 2030		993			1,001
5.50% USD note due February 2034		500			500
5.80% USD note due August 2034		600			600
5.55% USD note due March 2037		1,400			1,400
Capital lease obligations		407			628
All other long-term debt		3,109			11,024
Current portion of long-term debt		(1,746	)		(2,544	)
TOTAL		23,581			23,375

(1) Debt issued by the ESOP is guaranteed by the Company and must be recorded as debt of the Company as discussed in Note 9.

Long-term weighted average interest rates were 4.5% and 3.3% as of June 30, 2008 and 2007, respectively, including the effects of interest rate swaps and net investment hedges discussed in Note 6.

The fair value of the long-term debt was $23,276 and $23,122 at June 30, 2008 and 2007, respectively. Long-term debt maturities during the next five years are as follows: 2009–$1,746; 2010–$5,508; 2011–$43; 2012–$1,643; and 2013–$2,240.

NOTE 6

RISK MANAGEMENT ACTIVITIES

As a multinational company with diverse product offerings, we are exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. To manage the volatility related to these exposures, we evaluate exposures on a consolidated basis to take advantage of logical exposure netting and correlation. For the remaining exposures, we enter into various financial transactions, which we account for under SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended and interpreted. The utilization of these financial transactions is governed by our policies covering acceptable counterparty exposure, instrument types and other hedging practices. We do not hold or issue derivative financial instruments for speculative trading purposes.

At inception, we formally designate and document qualifying instruments as hedges of underlying exposures. We formally assess, both at inception and at least quarterly on an ongoing basis, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair value or cash flows of the related underlying exposure. Fluctuations in the value of these instruments generally are offset by changes in the fair value or cash flows of the underlying exposures being hedged. This offset is driven by the high degree of effectiveness between the exposure being hedged and the hedging instrument. Any ineffective portion of a change in the fair value of a qualifying instrument is immediately recognized in earnings.

Credit Risk

We have counterparty credit guidelines and normally enter into transactions with investment grade financial institutions. Counterparty exposures are monitored daily and downgrades in credit rating are reviewed on a timely basis. Credit risk arising from the inability of a counterparty to meet the terms of our financial instrument contracts generally is limited to the amounts, if any, by which the counterparty’s obligations exceed our obligations to the counterparty. We have not incurred and do not expect to incur material credit losses on our risk management or other financial instruments.

Interest Rate Management

Our policy is to manage interest cost using a mixture of fixed-rate and variable-rate debt. To manage this risk in a cost-efficient manner, we enter into interest rate swaps in which we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount.

Interest rate swaps that meet specific criteria under SFAS 133 are accounted for as fair value and cash flow hedges. There were no fair value hedging instruments at June 30, 2008, or June 30, 2007. For cash flow hedges, the effective portion of the changes in fair value of the hedging instrument is reported in other comprehensive income (OCI) and reclassified into interest expense over the life of the underlying debt. The ineffective portion, which is not material for any year

Amounts in millions of dollars except per share amounts or as otherwise specified.

66      The Procter & Gamble Company Notes to Consolidated Financial Statements

presented, is immediately recognized in earnings. The fair value of these cash flow hedging instruments was a liability of $17 and an asset of $53 at June 30, 2008 and 2007, respectively. During the next 12 months, $4 of the June 30, 2008 OCI balance will be reclassified to earnings consistent with the timing of the underlying hedged transactions.

Foreign Currency Management

We manufacture and sell our products in a number of countries throughout the world and, as a result, are exposed to movements in foreign currency exchange rates. The purpose of our foreign currency hedging program is to reduce the risk caused by short-term changes in exchange rates.

To manage this exchange rate risk, we primarily utilize forward contracts and options with maturities of less than 18 months and currency swaps with maturities up to five years. These instruments are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases, intercompany royalties and intercompany loans denominated in foreign currencies and are therefore accounted for as cash flow hedges. The fair value of these instruments at June 30, 2008 and 2007, was $4 and $34 in assets and $37 and $2 in liabilities, respectively. The effective portion of the changes in fair value of these instruments is reported in OCI and reclassified into earnings in the same financial statement line item and in the same period or periods during which the related hedged transactions affect earnings. The ineffective portion, which is not material for any year presented, is immediately recognized in earnings.

Certain instruments used to manage foreign exchange exposure of intercompany financing transactions, income from international operations and other balance sheet items subject to revaluation do not meet the requirements for hedge accounting treatment. In these cases, the change in value of the instruments is designed to offset the foreign currency impact of the related exposure. The fair value of these instruments at June 30, 2008 and 2007, was $190 and $110 in assets and $33 and $78 in liabilities, respectively. The change in value of these instruments is immediately recognized in earnings. The net impact of such instruments, included in selling, general and administrative expense, was $1,397, $56 and $87 of gains in 2008, 2007 and 2006, respectively, which substantially offset foreign currency transaction and translation losses of the exposures being hedged.

Net Investment Hedging

We hedge certain net investment positions in major foreign subsidiaries. To accomplish this, we either borrow directly in foreign currency and designate all or a portion of foreign currency debt as a hedge of the applicable net investment position or enter into foreign currency swaps that are designated as hedges of our related foreign net investments. Under SFAS 133, changes in the fair value of these instruments are immediately recognized in OCI to offset the change in the value of the net investment being hedged. Currency effects of these hedges reflected in OCI were after-tax losses of $2,951 and $835 in 2008 and 2007, respectively. Accumulated net balances were $5,023 and $2,072 after-tax losses as of June 30, 2008 and 2007, respectively.

Commodity Price Management

Certain raw materials utilized in our products or production processes are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. To manage the volatility related to anticipated purchases of certain of these materials, we use futures and options with maturities generally less than one year and swap contracts with maturities up to five years. These market instruments generally are designated as cash flow hedges under SFAS 133. The effective portion of the changes in fair value for these instruments is reported in OCI and reclassified into earnings in the same financial statement line item and in the same period or periods during which the hedged transactions affect earnings. The ineffective and non-qualifying portions, which are not material for any year presented, are immediately recognized in earnings. The fair value of these cash flow hedging instruments was an asset of $229 and $70 at June 30, 2008 and 2007, respectively. During the next 12 months, $126 of the June 30, 2008 OCI balance will be reclassified to earnings consistent with the timing of the underlying hedged transactions.

Insurance

The Company purchases limited discretionary insurance to cover catastrophic property damage, business interruption and liability risk of loss exposures. Deductibles and loss sharing will likely increase over time, recognizing the Company’s ability to cost-effectively fund losses from internal cash flow generation and access to capital markets.

NOTE 7

EARNINGS PER SHARE

Net earnings less preferred dividends (net of related tax benefits) are divided by the weighted average number of common shares outstanding during the year to calculate basic net earnings per common share. Diluted net earnings per common share are calculated to give effect to stock options and other stock-based awards (see Note 8) and assume conversion of preferred stock (see Note 9).

Net earnings and common shares used to calculate basic and diluted net earnings per share were as follows:

Years ended June 30	2008			2007			2006
NET EARNINGS	$	12,075		$	10,340		$	8,684
Preferred dividends, net of tax benefit		(176	)		(161	)		(148	)
NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS		11,899			10,179			8,536
Preferred dividends, net of tax benefit		176			161			148
DILUTED NET EARNINGS		12,075			10,340			8,684

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company       67

Shares in millions; Years ended June 30	2008		2007		2006
Basic weighted average common shares outstanding		3,080.8		3,159.0		3,054.9
Effect of dilutive securities
Conversion of preferred shares(1)		144.2		149.6		154.1
Exercise of stock options and other unvested equity awards(2)		91.8		90.0		76.9
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		3,316.8		3,398.6		3,285.9

(1)	Despite being included currently in diluted net earnings per common share, the actual conversion to common stock occurs pursuant to the repayment of the ESOPs’ obligations through 2035.
(2)	Approximately 40 million in 2008, 41 million in 2007 and 44 million in 2006 of the Company’s outstanding stock options were not included in the diluted net earnings per share calculation because to do so would have been antidilutive (i.e., the total proceeds upon exercise would have exceeded the market value of the underlying common shares).

NOTE 8

STOCK-BASED COMPENSATION

We have stock-based compensation plans under which we annually grant stock option and restricted stock awards to key managers and directors. Exercise prices on options granted have been and continue to be set equal to the market price of the underlying shares on the date of the grant. The key manager stock option awards granted since September 2002 are vested after three years and have a 10-year life. The key manager stock option awards granted from July 1998 through August 2002 vested after three years and have a 15-year life. Beginning in 2008, key managers were given the alternative to elect up to 50% of the value of their option award in restricted stock units (RSUs). Key manager RSUs are vested and settled in shares of common stock five years from the grant date. The awards provided to the Company’s directors are in the form of restricted stock and RSUs. In addition to our key manager and director grants, we make other minor stock options and RSU grants to employees for which the terms are not substantially different.

A total of 229 million shares of common stock were authorized for issuance under stock-based compensation plans approved by shareholders in 2001 and 2003, of which 50 million remain available for grant. An additional 20 million shares of common stock available for issuance under a plan approved by Gillette shareholders in 2004 were assumed by the Company in conjunction with the acquisition of The Gillette Company in October 2005. A total of 12 million of these shares remain available for grant under this plan. There were also 5 million shares available for grant under the Future Shares Plan approved by the Board of Directors in 1997. This plan was terminated in October 2007.

Total stock-based compensation expense for stock option grants was $522, $612 and $526 for 2008, 2007 and 2006, respectively. The total income tax benefit recognized in the income statement for these stock-based compensation arrangements was $141, $163 and $140 for 2008, 2007 and 2006, respectively. Total compensation cost for restricted stock, restricted stock units and other stock-based grants, was $33, $56 and $59 in 2008, 2007 and 2006, respectively.

In calculating the compensation expense for options granted, we utilize a binomial lattice-based model for the valuation of stock option grants. Assumptions utilized in the model, which are evaluated and revised, as necessary, to reflect market conditions and experience, were as follows:

Years ended June 30	2008			2007			2006
Interest rate		1.3-3.8	%		4.3-4.8	%		4.5-4.7	%
Weighted average interest rate		3.4	%		4.5	%		4.6	%
Dividend yield		1.9	%		1.9	%		1.9	%
Expected volatility		19-25	%		16-20	%		15-20	%
Weighted average volatility		20	%		19	%		19	%
Expected life in years		8.3			8.7			8.7

Because lattice-based option valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed in the preceding table. Expected volatilities are based on a combination of historical volatility of our stock and implied volatilities of call options on our stock. We use historical data to estimate option exercise and employee termination patterns within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of options outstanding under the plans as of June 30, 2008, and activity during the year then ended is presented below:

						Weighted Avg.
						Remaining		Aggregate
				Weighted Avg.		Contractual		Intrinsic Value
Options in thousands	Options			Exercise Price		Life in Years		(in millions)
Outstanding, beginning of year		355,006		$	46.10
Granted		28,345			66.33
Exercised		(43,413	)		42.32
Canceled		(2,761	)		51.29
OUTSTANDING, END OF YEAR		337,177			48.25		6.8	$	4,474
EXERCISABLE		244,533			42.63		6.1		4,447

The weighted average grant-date fair value of options granted was $15.91, $17.29 and $16.30 per share in 2008, 2007 and 2006, respectively. The total intrinsic value of options exercised was $1,129, $894 and $815 in 2008, 2007 and 2006, respectively. The total grant-date fair value of options that vested during 2008, 2007 and 2006 was $532, $552 and $388, respectively. We have no specific policy to repurchase common shares to mitigate the dilutive impact of options; however, we have historically made adequate discretionary purchases, based on cash availability, market trends and other factors, to satisfy stock option exercise activity.

Amounts in millions of dollars except per share amounts or as otherwise specified.

68       The Procter & Gamble Company Notes to Consolidated Financial Statements

At June 30, 2008, there was $565 of compensation cost that has not yet been recognized related to stock awards. That cost is expected to be recognized over a remaining weighted average period of 1.9 years.

Cash received from options exercised was $1,837, $1,422 and $1,229 in 2008, 2007 and 2006, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $318, $265 and $242 in 2008, 2007 and 2006, respectively.

NOTE 9

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. The primary U.S. defined contribution plan (the U.S. DC plan) comprises the majority of the balances and 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 15% of total participants’ annual wages and salaries in 2008, 2007 and 2006.

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, as well as other retiree benefits. 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. Total defined contribution expense was $290, $273, and $249 in 2008, 2007 and 2006, respectively.

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 the Gillette acquisition covering U.S. employees. These acquired Gillette plans were frozen effective January 1, 2008.

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, as well as certain other assets contributed by the Company.

Obligation and Funded Status. We use a June 30 measurement date for our defined benefit retirement plans and other retiree benefit plans. The following provides a reconciliation of benefit obligations, plan assets and funded status of these plans:

							Other
	Pension Benefits(1)						Retiree Benefits(2)
Years ended June 30	2008			2007			2008			2007
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year(3)	$	9,819		$	9,244		$	3,558		$	3,286
Service cost		263			279			95			85
Interest cost		539			476			226			206
Participants’ contributions		14			19			58			55
Amendments		52			24			(11	)		12
Actuarial (gain) loss		(655	)		1			(232	)		80
Acquisitions (divestitures)		(7	)		(8	)		2			—
Curtailments and settlements		(68	)		(163	)		(3	)		(1	)
Special termination benefits		1			1			2			2
Currency translation and other		642			431			67			35
Benefit payments		(505	)		(485	)		(209	)		(202	)
BENEFIT OBLIGATION AT END OF YEAR(3)		10,095			9,819			3,553			3,558
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year		7,350			6,203			3,390			3,091
Actual return on plan assets		(459	)		736			(29	)		429
Acquisitions (divestitures)		—			(2	)		—			—
Employer contributions		507			565			21			30
Participants’ contributions		14			19			58			55
Currency translation and other		318			314			1			1
ESOP debt impacts(4)		—			—			(7	)		(14	)
Benefit payments		(505	)		(485	)		(209	)		(202	)
FAIR VALUE OF PLAN ASSETS AT END OF YEAR		7,225			7,350			3,225			3,390
FUNDED STATUS		(2,870	)		(2,469	)		(328	)		(168	)

(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 increases in the ESOP’s debt, which is netted against plan assets for Other Retiree Benefits.

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company       69

							Other
	Pension Benefits						Retiree Benefits
Years ended June 30	2008			2007			2008			2007
CLASSIFICATION OF NET AMOUNT RECOGNIZED
Noncurrent assets	$	321		$	469		$	200		$	347
Current liability		(45	)		(40	)		(16	)		(12	)
Noncurrent liability		(3,146	)		(2,898	)		(512	)		(503	)
NET AMOUNT RECOGNIZED		(2,870	)		(2,469	)		(328	)		(168	)
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)
Net actuarial loss		715			379			578			337
Prior service cost (credit)		213			172			(175	)		(185	)
NET AMOUNTS RECOGNIZED IN AOCI		928			551			403			152
CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)
Net actuarial loss — current year		361			n/a			226			n/a
Prior service cost (credit) current year		52			n/a			(11	)		n/a
Amortization of net actuarial loss		(9	)		n/a			(7	)		n/a
Amortization of prior service (cost)/credit		(14	)		n/a			21			n/a
Settlement/Curtailment cost		(32	)		n/a			(2	)		n/a
Currency translation and other		19			n/a			24			n/a
TOTAL CHANGE IN AOCI		377						251
NET AMOUNTS RECOGNIZED IN PERIODIC BENEFIT COST AND AOCI		609						33

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. In these instances, benefit payments are typically paid directly from the Company’s cash as they become due.

The accumulated benefit obligation for all defined benefit retirement pension plans was $8,750 and $8,611 at June 30, 2008 and June 30, 2007, respectively. Pension plans with accumulated benefit obligations in excess of plan assets and plans with projected benefit obligations in excess of plan assets consist of the following:

	Accumulated Benefit				Projected Benefit
	Obligation Exceeds the				Obligation Exceeds the
	Fair Value of Plan Assets				Fair Value of Plan Assets
Years ended June 30	2008		2007		2008		2007
Projected benefit obligation	$	5,277	$	4,813	$	7,987	$	6,763
Accumulated benefit obligation		4,658		4,294		6,737		5,792
Fair value of plan assets		2,153		1,973		4,792		3,825

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

	Pension Benefits									Other Retiree Benefits
Years ended June 30	2008			2007			2006			2008			2007			2006
Service cost	$	263		$	279		$	265		$	95		$	85		$	97
Interest cost		539			476			383			226			206			179
Expected return on plan assets		(557	)		(454	)		(353	)		(429	)		(407	)		(372	)
Prior service cost (credit) amortization		14			13			7			(21	)		(22	)		(22	)
Net actuarial loss amortization		9			45			76			7			2			6
Curtailment and settlement gain		(36	)		(176	)		(4	)		(1	)		(1	)		—
GROSS BENEFIT COST (CREDIT)		232			183			374			(123	)		(137	)		(112	)
Dividends on ESOP preferred stock		—			—			—			(95	)		(85	)		(78	)
NET PERIODIC BENEFIT COST (CREDIT)		232			183			374			(218	)		(222	)		(190	)

Pursuant to plan revisions adopted during 2007, Gillette’s U.S. defined benefit retirement pension plans were frozen effective January 1, 2008, at which time Gillette employees in the U.S. moved into the P&G defined contribution Profit Sharing Trust and Employee Stock Ownership Plan. This revision resulted in a $154 curtailment gain for the year ended June 30, 2007.

Amounts expected to be amortized from accumulated other comprehensive income into net period benefit cost during the year ending June 30, 2009, are as follows:

			Other
	Pension		Retiree
	Benefits		Benefits
Net actuarial loss	$	31	$	4
Prior service cost (credit)		17		(23	)

Amounts in millions of dollars except per share amounts or as otherwise specified.

70      The Procter & Gamble Company Notes to Consolidated Financial Statements

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. The weighted average assumptions for the defined benefit and other retiree benefit calculations, as well as assumed health care trend rates, were as follows:

	Pension Benefits						Other Retiree Benefits
Years ended June 30	2008			2007			2008			2007
ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATIONS(1)
Discount rate		6.3	%		5.5	%		6.9	%		6.3	%
Rate of compensation increase		3.7	%		3.1	%		—			—
ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT COST (2)
Discount rate		5.5	%		5.2	%		6.3	%		6.3	%
Expected return on plan assets		7.4	%		7.2	%		9.3	%		9.3	%
Rate of compensation increase		3.1	%		3.0	%		—			—
ASSUMED HEALTH CARE COST TREND RATES
Health care cost trend rates assumed for next year		—			—			8.6	%		9.0	%
Rate to which the health care cost trend rate is assumed to decline (ultimate trend rate)		—			—			5.1	%		5.1	%
Year that the rate reaches the ultimate trend rate		—			—			2015			2013

(1)	Determined as of end of year.
(2)	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 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 the fact 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 9.5% and reflects the historical pattern of favorable 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		One-Percentage
	Point Increase		Point Decrease
Effect on total of service and interest cost components	$	60	$	(46	)
Effect on postretirement benefit obligation		505		(411	)

Plan Assets. Our target asset allocation for the year ended June 30, 2008, and actual asset allocation by asset category as of June 30, 2008 and 2007, were as follows:

	Target Asset Allocation
Asset Category	Pension Benefits			Other Retiree Benefits
Equity securities(1)		48	%		96	%
Debt securities		52	%		4	%
TOTAL		100	%		100	%

	Asset Allocation at June 30
	Pension Benefits						Other Retiree Benefits
Asset Category	2008			2007			2008			2007
Equity securities(1)		45	%		56	%		96	%		96	%
Debt securities		50	%		39	%		4	%		4	%
Cash		3	%		3	%		—			—
Real estate		2	%		2	%		—			—
TOTAL		100	%		100	%		100	%		100	%

(1) Equity securities for other retiree plan assets include Company stock, net of Series B ESOP debt of $2,809 and $2,932 as of June 30, 2008 and 2007, respectively.

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 continual monitoring of investment managers’ performance relative to the investment guidelines established with each investment manager.

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company    71

Cash Flows. Management’s best estimate of cash requirements for the defined benefit retirement plans and other retiree benefit plans for the year ending June 30, 2009, is $575 and $22, respectively. For the defined benefit retirement plans, this is comprised of $180 in expected benefit payments from the Company directly to participants of unfunded plans and $395 of expected contributions to funded plans. For other retiree benefit plans, this is comprised of expected contributions that will be used directly for benefit payments. 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, as discussed above, as well as payments paid from the plans, are as follows:

			Other
	Pension		Retiree
Years ending June 30	Benefits		Benefits
EXPECTED BENEFIT PAYMENTS
2009	$	500	$	204
2010		505		222
2011		518		240
2012		520		256
2013		537		271
2014—2018		2,974		1,590

Employee Stock Ownership Plan

We maintain the ES0P to provide funding for certain employee benefits discussed in the preceding paragraphs.

The ES0P borrowed $1.0 billion in 1989 and the proceeds were used to purchase Series A ES0P 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 $ 197 remain outstanding at June 30, 2008. 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 $1.45 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 $194 is outstanding at June 30, 2008.

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 $1.45 per share. The liquidation value is $12.96 per share.

As permitted by SOP 93-6, “Employers Accounting for Employee Stock Ownership Plans,” we have elected, where applicable, to continue our practices, which are based on SOP 76-3, “Accounting Practices for Certain Employee Stock Ownership Plans.” ESOP debt, which is guaranteed by the Company, is recorded as debt (see Note 5) 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, net of advances made by the Company to the Trust. The number of preferred shares outstanding at June 30 was as follows:

Shares in thousands	2008		2007		2006
Allocated		58,557		60,402		61,614
Unallocated		18,665		20,807		23,125
TOTAL SERIES A		77,222		81,209		84,739
Allocated		21,134		21,105		21,733
Unallocated		43,618		44,642		45,594
TOTAL SERIES B		64,752		65,747		67,327

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

In connection with the Gillette acquisition, we assumed the Gillette ESOP, which was established to assist Gillette employees in financing retiree medical costs. These ESOP accounts are held by participants and must be used to reduce the Company’s other retiree benefit obligations. Such accounts reduced our obligation by $201 at June 30, 2008.

Amounts in millions of dollars except per share amounts or as otherwise specified.

72    The Procter & Gamble Company Notes to Consolidated Financial Statements

NOTE 10

INCOME TAXES

Under SFAS 109, “Accounting for Income Taxes,” income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax liabilities and assets, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.

Earnings before income taxes consisted of the following:

Years ended June 30	2008		2007		2006
United States	$	9,142	$	9,138	$	7,410
International		6,936		5,572		5,003
TOTAL		16,078		14,710		12,413

The income tax provision consisted of the following:

Years ended June 30	2008			2007		2006
CURRENT TAX EXPENSE
U.S. federal	$	1,016		$	2,667	$	1,961
International		1,546			1,325		1,702
U.S. state and local		227			125		178
		2,789			4,117		3,841
DEFERRED TAX EXPENSE
U.S. federal		1,267			231		226
International and other		(53	)		22		(338	)
		1,214			253		(112	)
TOTAL TAX EXPENSE		4,003			4,370		3,729

A reconciliation of the U.S. federal statutory income tax rate to our actual income tax rate is provided below:

Years ended June 30	2008			2007			2006
U.S. federal statutory income tax rate		35.0	%		35.0	%		35.0	%
Country mix impacts of foreign operations		-6.6	%		-4.3	%		-3.6	%
Income tax reserve adjustments		-3.1	%		-0.3	%		-1.5	%
Other		-0.4	%		-0.7	%		0.1	%
EFFECTIVE INCOME TAX RATE		24.9	%		29.7	%		30.0	%

Income tax reserve adjustments represent changes in estimated exposures related to prior year tax positions.

As discussed in Note 1, on July 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). The adoption of FIN 48 resulted in a decrease to retained earnings as of July 1, 2007, of $232, which was reflected as a cumulative effect of a change in accounting principle, with a corresponding increase to the net liability for unrecognized tax benefits. The impact primarily reflects the accrual of additional statutory interest and penalties as required by FIN 48, partially offset by adjustments to existing unrecognized tax benefits to comply with FIN 48 measurement principles. The implementation of FIN 48 also resulted in a reduction in our net tax liabilities for uncertain tax positions related to prior acquisitions accounted for under purchase accounting, resulting in an $80 decrease to goodwill. Additionally, the Company historically classified unrecognized tax benefits in current taxes payable. As a result of the adoption of FIN 48, unrecognized tax benefits not expected to be paid in the next 12 months were reclassified to other noncurrent liabilities.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

BALANCE AT JULY 1, 2007	$	2,971
Increases in tax positions for prior years		164
Decreases in tax positions for prior years		(576	)
Increases in tax positions for current year		375
Settlements with taxing authorities		(260	)
Lapse in statute of limitations		(200	)
Currency translation		108
BALANCE AT JUNE 30, 2008		2,582

Included in the total unrecognized tax benefits is $1,563 that, if recognized, would impact the effective tax rate in future periods.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. Accrued interest and penalties as of June 30, 2008, were $656 and $155, respectively, and are not included in the above table. During the fiscal year ended June 30, 2008, we recognized $213 and $35 in interest and penalties, respectively.

The Company is present in over 140 taxable jurisdictions, and at any point in time, has 30–40 audits underway at various stages of completion. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closing of statute of limitations. Such adjustments are reflected in the tax provision as appropriate. The Company has made a concerted effort to bring its audit inventory to a more current position. We have done this by working with tax authorities to conduct audits for several open years at once. We have tax years open ranging from 1997 and forward. We have $318 related to uncertain tax positions classified as current, for which we expect settlement to be made in the next 12 months. For the remaining uncertain tax positions, it is difficult at this time to estimate the timing of the resolution. In addition, we are generally not able to reliably estimate the ultimate settlement amounts until the close of the audit. While we do not expect material changes, it is possible that the amount of unrecognized benefit with respect to our uncertain tax positions will significantly increase or decrease within the next 12 months related to the audits described

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company   73

above. At this time we are not able to make a reasonable estimate of the range of impact on the balance of unrecognized tax benefits or the impact on the effective tax rate related to these items.

Tax benefits credited to shareholders’ equity totaled $1,823 and $1,066 for the years ended June 30, 2008 and 2007, respectively. These primarily relate to the tax effects of net investment hedges, excess tax benefits from the exercise of stock options and the impacts of certain adjustments to pension and other retiree benefit obligations recorded in shareholders’ equity, including the impact of adopting SFAS 158 in 2007.

We have undistributed earnings of foreign subsidiaries of approximately $21 billion at June 30, 2008, for which deferred taxes have not been provided. Such earnings are considered indefinitely invested in the foreign subsidiaries. If such earnings were repatriated, additional tax expense may result, although the calculation of such additional taxes is not practicable.

Deferred income tax assets and liabilities were comprised of the following:

June 30	2008			2007
DEFERRED TAX ASSETS
Stock-based compensation	$	1,082		$	1,132
Unrealized loss on financial and foreign exchange transactions		1,274			723
Pension and postretirement benefits		633			560
Loss and other carryforwards		482			439
Advance payments		302			183
Goodwill and other intangible assets		267			249
Accrued marketing and promotion expense		125			161
Accrued interest and taxes		123			—
Inventory		114			95
Fixed assets		100			85
Other		1,048			1,119
Valuation allowances		(173	)		(190	)
TOTAL		5,377			4,556
DEFERRED TAX LIABILITIES
Goodwill and other intangible assets	$	12,371		$	12,102
Fixed assets		1,847			1,884
Other		151			132
TOTAL		14,369			14,118

Net operating loss carryforwards were $1,515 and $1,442 at June 30, 2008 and 2007, respectively. If unused, $629 will expire between 2009 and 2028. The remainder, totaling $886 at June 30, 2008, may be carried forward indefinitely.

NOTE 11

COMMITMENTS AND CONTINGENCIES

Guarantees

In conjunction with certain transactions, primarily divestitures, we may provide routine indemnifications (e.g., indemnification for representations and warranties and retention of previously existing environmental, tax and employee liabilities) of which terms range in duration and in some circumstances are not explicitly defined. The maximum obligation under some indemnifications is not explicitly stated and, as a result, the overall amount of these obligations cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss on any of these matters, the loss would not have a material effect on our financial position, results of operations or cash flows.

In certain situations, we guarantee loans for suppliers and customers. The total amount of guarantees issued under such arrangements is not material.

Off-Balance Sheet Arrangements

We do not have off-balance sheet financing arrangements, including variable interest entities, under FIN 46(R), “Consolidation of Variable Interest Entities,” that have a material impact on our financial statements.

Purchase Commitments

We have purchase commitments for materials, supplies, services and property, plant and equipment as part of the normal course of business. Commitments made under take-or-pay obligations are as follows: 2009–$1,205; 2010–$917; 2011–$745; 2012–$688; 2013–$408; and $363 thereafter. Such amounts represent future purchases in line with expected usage to obtain favorable pricing. Approximately 35% of our purchase commitments relate to service contracts for information technology, human resources management and facilities management activities that were outsourced in recent years. Due to the proprietary nature of many of our materials and processes, certain supply contracts contain penalty provisions for early termination. We do not expect to incur penalty payments under these provisions that would materially affect our financial position, results of operations or cash flows.

Operating Leases

We lease certain property and equipment for varying periods. Future minimum rental commitments under noncancelable operating leases are as follows: 2009–$299; 2010–$288; 2011–$240; 2012–$196; 2013–$185; and $448 thereafter. Operating lease obligations are shown net of guaranteed sublease income.

Amounts in millions of dollars except per share amounts or as otherwise specified.

74      The Procter & Gamble Company Notes to Consolidated Financial Statements

Litigation

We are subject to various legal proceedings and claims arising out of our business which cover a wide range of matters such as governmental regulations, antitrust and trade regulations, product liability, patent and trademark matters, income taxes and other actions.

Recently, the Company became subject to a variety of investigations into potential competition law violations in the European Union, including investigations initiated in the fourth quarter of fiscal 2008 by the European Commission with the assistance of the national authorities from a variety of countries. We believe these matters involve a number of other consumer products companies and/or retail customers. The Company’s policy is to comply with all laws and regulations, including all antitrust and competition laws. Competition and antitrust law inquiries often continue for several years and, if violations are found, can result in substantial fines. At this point, no significant formal claims have been made against the Company or any of our subsidiaries in connection with any of the above inquiries. We cannot at this time predict the final financial impact of these competition law issues. However, the ultimate resolution of these matters could result in fines or other costs that could materially impact future results. As these matters evolve we will, if necessary, recognize the appropriate reserves.

With respect to other litigation and claims, while considerable uncertainty exists, in the opinion of management and our counsel, the ultimate resolution of the various lawsuits and claims will not materially affect our financial position, results of operations or cash flows.

We are also subject to contingencies pursuant to environmental laws and regulations that in the future may require us to take action to correct the effects on the environment of prior manufacturing and waste disposal practices. Based on currently available information, we do not believe the ultimate resolution of environmental remediation will have a material adverse effect on our financial position, results of operations or cash flows.

NOTE 12

SEGMENT INFORMATION

Effective July 1, 2007, we made a number of changes to our organizational structure and certain of our key leadership positions. These resulted in changes to our Global Business Units (GBU) and reporting segment structure. The following discussion and segment information reflect the organizational changes for all periods presented. We are organized under three Global Business Units as follows:

• The Beauty GBU includes the Beauty and the Grooming businesses. The Beauty business is comprised of cosmetics, deodorants, prestige fragrances, hair care, personal cleansing and skin care. The Grooming business includes blades and razors, electric hair removal devices, face and shave products and home appliances.

• The Health and Well-Being GBU includes the Health Care and the Snacks, Coffee and Pet Care businesses. The Health Care business includes feminine care, oral care, personal health care and Pharmaceuticals. The Snacks, Coffee and Pet Care business includes coffee, pet food and snacks.

• The Household Care GBU includes the Fabric Care and Home Care as well as the Baby Care and Family Care businesses. The Fabric Care and Home Care business includes air care, batteries, dish care, fabric care and surface care. The Baby Care and Family Care business includes baby wipes, bath tissue, diapers, facial tissue and paper towels.

Under U.S. GAAP, we have six reportable segments: Beauty; Grooming; Health Care; Snacks, Coffee and Pet Care; Fabric Care and Home Care; and Baby Care and Family Care. The accounting policies of the businesses are generally the same as those described in Note 1. Differences between these policies and U.S. GAAP primarily reflect: income taxes, which are reflected in the businesses using applicable blended statutory rates; the recording of fixed assets at historical exchange rates in certain high-inflation economies; and the treatment of certain unconsolidated investees. Certain unconsolidated investees are managed as integral parts of our business units for management reporting purposes. Accordingly, these partially owned operations are reflected as consolidated subsidiaries in segment results, with 100% recognition of the individual income statement line items through before-tax earnings. Eliminations to adjust these line items to U.S. GAAP are included in Corporate. In determining after-tax earnings for the businesses, we eliminate the share of earnings applicable to other ownership interests, in a manner similar to minority interest, and apply statutory tax rates. Adjustments to arrive at our effective tax rate are also included in Corporate.

Corporate includes certain operating and non-operating activities that are not reflected in the operating results used internally to measure and evaluate the businesses, as well as eliminations to adjust management reporting principles to U.S. GAAP. Operating activities in Corporate include the results of incidental businesses managed at the corporate level along with the elimination of individual revenues and expenses generated by certain unconsolidated investees discussed in the preceding paragraph over which we exert significant influence, but do not control. Operating elements also comprise certain employee benefit costs, the costs of certain restructuring-type activities to maintain a competitive cost structure including manufacturing and workforce rationalization and other general corporate items. The non-operating elements primarily include interest expense, divestiture gains and interest and investing income. In addition, Corporate includes the historical results of certain divested businesses, including certain Gillette brands that were divested in 2006 as required by the regulatory authorities in relation to the Gillette acquisition. Corporate assets primarily include cash, investment securities and all goodwill.

We had net sales in the U.S. of $33.0 billion, $31.9 billion and $29.5 billion for the years ended June 30, 2008, 2007 and 2006, respectively. Assets in the U.S. totaled $73.8 billion and $73.5 billion as of June 30, 2008 and 2007, respectively.

Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for 15% of consolidated net sales in 2008, 2007 and 2006.

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company     75

					Before Tax						Depreciation &				Capital
Global Segment Results		Net Sales			Earnings			Net Earnings			Amortization		Total Assets		Expenditures
BEAUTY GBU
BEAUTY(1)	2008	$	19,515		$	3,528		$	2,730		$	454	$	12,260	$	465
	2007		17,889			3,440			2,611			419		11,140		431
	2006		16,687			3,262			2,412			380		10,081		384
GROOMING(1)	2008		8,254			2,299			1,679			739		27,406		305
	2007		7,437			1,895			1,383			729		27,767		314
	2006		5,114			1,176			846			573		28,994		361
HEALTH AND WELL-BEING GBU
HEALTH CARE(1)	2008		14,578			3,746			2,506			441		10,597		450
	2007		13,381			3,365			2,233			439		9,512		374
	2006		11,831			2,785			1,829			374		9,636		341
SNACKS, COFFEE AND PET CARE	2008		4,852			762			477			136		2,275		105
	2007		4,537			759			477			164		2,176		141
	2006		4,383			627			385			159		2,122		150
HOUSEHOLD CARE GBU
FABRIC CARE AND HOME CARE(1)	2008		23,831			5,078			3,422			603		13,772		765
	2007		21,469			4,650			3,127			573		12,179		710
	2006		18,918			3,905			2,609			521		11,318		599
BABY CARE AND FAMILY CARE	2008		13,898			2,700			1,728			612		8,102		763
	2007		12,726			2,291			1,440			671		7,731		769
	2006		11,972			2,071			1,299			612		7,339		739
CORPORATE(1)	2008		(1,425	)		(2,035	)		(467	)		181		69,580		193
	2007		(963	)		(1,690	)		(931	)		135		67,509		206
	2006		(683	)		(1,413	)		(696	)		8		66,205		93
TOTAL COMPANY(1)	2008		83,503			16,078			12,075			3,166		143,992		3,046
	2007		76,476			14,710			10,340			3,130		138,014		2,945
	2006		68,222			12,413			8,684			2,627		135,695		2,667

(1) 2006 data includes Gillette results for the nine months ended June 30, 2006.

Amounts in millions of dollars except per share amounts or as otherwise specified.

76   The Procter & Gamble Company Notes to Consolidated Financial Statements

NOTE 13

QUARTERLY RESULTS (UNAUDITED)

Quarters Ended		Sept 30			Dec 31			Mar 31			Jun 30			Total Year
NET SALES	2007-2008	$	20,199		$	21,575		$	20,463		$	21,266		$	83,503
	2006-2007		18,785			19,725			18,694			19,272			76,476
OPERATING INCOME	2007-2008		4,418			4,714			4,111			3,840			17,083
	2006-2007		4,054			4,350			3,646			3,400			15,450
GROSS MARGIN	2007-2008		52.9	%		51.8	%		51.3	%		49.2	%		51.3	%
	2006-2007		52.8	%		52.9	%		51.6	%		50.8	%		52.0	%
NET EARNINGS	2007-2008	$	3,079		$	3,270		$	2,710		$	3,016		$	12,075
	2006-2007		2,698			2,862			2,512			2,268			10,340
DILUTED NET EARNINGS PER COMMON SHARE	2007-2008	$	0.92		$	0.98		$	0.82		$	0.92		$	3.64
	2006-2007		0.79			0.84			0.74			0.67			3.04

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company    77

Corporate Officers

CORPORATE & COMPANY OPERATIONS

A.G. Lafley
Chairman of the Board and
Chief Executive Officer

Susan E. Arnold
President—Global Business Units

Robert A. McDonald
Chief Operating Officer

Clayton C. Daley, Jr.
Vice Chairman and
Chief Financial Officer

Moheet Nagrath
Global Human Resources Officer

Bruce Brown
Chief Technology Officer

R. Keith Harrison, Jr.
Global Product Supply Officer

Steven W. Jemison
Chief Legal Officer and Secretary

Mariano Martin
Global Customer Business Development Officer

Charlotte R. Otto
Global External Relations Officer

Filippo Passerini
President—Global Business Services and Chief Information Officer

Marc S. Pritchard
Global Marketing Officer

Jon R. Moeller
Vice President and Treasurer

Valarie L. Sheppard
Vice President and Comptroller

GLOBAL OPERATIONS

Werner Geissler
Vice Chairman—Global Operations

Deborah A. Henretta
Group President—Asia

Laurent L. Philippe
Group President—Central & Eastern Europe, Middle East & Africa

Steven D. Bishop
President—North America

Giovanni Ciserani
President—Western Europe

Daniela Riccardi
President—Greater China

Jeffrey K. Schomburger
President—Global Wal-Mart Team

Jorge A. Uribe
President—Latin America

GLOBAL BEAUTY & GROOMING

Edward D. Shirley

Vice Chairman—Global Beauty & Grooming

Charles V. Bergh
Group President—Global Personal Care

Christopher de Lapuente
Group President—Global Hair Care

Juan Pedro Hernandez
President—Braun

Virginia C. Drosos
President—Global Personal Beauty

Robert Jongstra
President—Global Professional Care

Hartwig Langer
President—Global Prestige Products

GLOBAL HEALTH & WELL-BEING

Robert A. Steele
Vice Chairman—Global Health & Well-Being

Melanie Healey
Group President—Global Feminine & Health Care

Charles E. Pierce
Group President—Global Oral Care

John P. Goodwin
President—Global Snacks & Pet Care

Jamie P. Egasti
President—Coffee

Thomas M. Finn
President—Global Health Care

GLOBAL HOUSEHOLD CARE

Dimitri Panayotopoulos
Vice Chairman—Global Household Care

Jorge S. Mesquita
Group President—Global Fabric Care

Martin Riant
Group President—Global Baby Care

David S. Taylor
Group President—Global Home Care

Mark Bertolami

President—Duracell

Mary Lynn Ferguson-McHugh
President—Family Care

Sharon J. Mitchell
Senior Vice President—Research & Development, Global Fabric Care

The following company officers have announced their intention to retire during the 2008/09 fiscal year:

Ravi Chaturvedi
President—Northeast Asia

G. Gilbert Cloyd
Chief Technology Officer

James R. Stengel
Global Marketing Officer

78     The Procter & Gamble Company

Board of Directors

Bruce L. Byrnes

Retired Vice Chairman of the Board—Global Brand Building Training. Director since 2002. Also a Director of Cincinnati Bell Inc. Age 60. Mr. Byrnes retired from the Board of Directors following the Company’s June, 2008 Board meeting.

Kenneth I. Chenault

Chairman and Chief Executive Officer of the American Express Company (financial services). Appointed to the Board on April 21, 2008. Also a Director of International Business Machines Corporation. Age 57. Member of the Audit and Compensation & Leadership Development Committees.

Scott D. Cook

Chairman of the Executive Committee of the Board, Intuit Inc. (software and web services). Director since 2000. Also a Director of eBay Inc. Age 56. Member of the Compensation & Leadership Development and Innovation & Technology Committees.

Rajat K. Gupta

Senior Partner Emeritus at McKinsey & Company (international consulting). Director since 2007. Also a Director of The Goldman Sachs Group, Inc. Genpact, Ltd. and American Airlines. Age 59. Member of the Audit and Innovation & Technology Committees.

A.G. Lafley

Chairman of the Board and Chief Executive Officer of the Company. Director since 2000. Also a Director of General Electric Company and Dell Inc. Age 61.

Charles R. Lee

Retired Chairman of the Board and Co-Chief Executive Officer of Verizon Communications Inc. (telecommunication services). Director since 1994. Also a Director of The DIRECTV Group, Inc., Marathon Oil Corporation, United Technologies Corporation and US Steel Corporation. Age 68. Chair of the Audit Committee and member of the Compensation & Leadership Development Committee.

Lynn M. Martin

Former Professor at the J.L. Kellogg Graduate School of Management, Northwestern University and former Chair of the Council for the Advancement of Women and Advisor to the firm of Deloitte & Touche LLP for Deloitte’s internal human resources and minority advancement matters. Director since 1994. Also a Director of AT&T Inc., Ryder System, Inc., Dreyfus Funds and Constellation Energy Group, Inc. Age 68. Member of the Governance & Public Responsibility and Innovation & Technology Committees.

W. James McNerney, Jr.

Chairman of the Board, President and Chief Executive Officer of The Boeing Company (aerospace, commercial jetliners and military defense systems). Director since 2003. Age 59. Presiding Director, Chair of the Compensation & Leadership Development Committee and member of the Governance & Public Responsibility Committee.

Johnathan A. Rodgers

President and Chief Executive Officer of TV One, LLC (media and communications). Director since 2001. Also a Director of Nike, Inc. Age 62. Member of the Innovation & Technology Committee.

John F. Smith, Jr.

Retired Chairman of the Board and Chief Executive Officer of General Motors Corporation (automobiles and related businesses) and retired Chairman of the Board of Delta Air Lines, Inc. Director since 1995. Also a Director of Swiss Reinsurance Company. Age 70. Mr. Smith retired from the Board of Directors following the Company’s April, 2008 Board meeting.

Ralph Snyderman, M.D.

Chancellor Emeritus, James B. Duke Professor of Medicine at Duke University. Director since 1995. Also a Director of Targacept, Inc. and a Venture Partner of NEA. Age 68. Chair of the Innovation & Technology Committee and member of the Audit Committee.

Margaret C. Whitman

Former President and Chief Executive Officer of eBay Inc. (global internet company that includes online marketplaces, payments and communications). Director since 2003. Also a Director of eBay Inc. and Dreamworks Animation SKG, Inc. Age 52. Chair of the Governance & Public Responsibility Committee and member of the Compensation & Leadership Development Committee.

Patricia A. Woertz

Chairman, Chief Executive Officer and President of Archer Daniels Midland Company (agricultural processors of oilseeds, corn, wheat, and cocoa). Appointed to the Board on January 8, 2008. Age 55. Member of the Audit and Governance & Public Responsibility Committees.

Ernesto Zedillo

Former President of Mexico, Director of the Center for the Study of Globalization and Professor in the field of International Economics and Politics at Yale University. Director since 2001. Also a Director of Alcoa Inc. and Electronic Data Systems Corporation. Age 56. Member of the Governance & Public Responsibility and Innovation & Technology Committees.

THE BOARD OF DIRECTORS HAS FOUR COMMITTEES:

Audit Committee

Compensation & Leadership Development Committee Governance & Public Responsibility Committee Innovation & Technology Committee

The Procter & Gamble Company      79

Shareholder Information

IF...

• You need online access or help with your account

• You are interested in our certificate safekeeping service

• You want to arrange for direct deposit or reinvestment of dividends

• You have a lost, stolen or destroyed stock certificate

CALL PERSON-TO-PERSON

• Shareholder Services representatives are available
Monday–Friday, 9AM–4PM ESTat 1-800-742-6253
(call 1-513-983-3034 outside the USA and Canada)

• Automated service available after USA business hours

CONTACT P&G—24 HOURS A DAY

• Visit us online at www.pg.com/investor, where you can get stock purchase information, transaction forms, Company annual reports and webcasts

• E-mail us at shareholders.im@pg.com

• Call for financial information at 1-800-764-7483

COMMON STOCK PRICE RANGE AND DIVIDENDS

	Price Range
	2007-2008		2007-2008		2006-2007		2006-2007
Quarter Ended	High		Low		High		Low
September 30	$	70.73	$	60.89	$	62.85	$	55.25
December 31		75.18		67.90		64.73		61.50
March 31		73.81		62.74		66.30		60.42
June 30		71.20		60.44		64.75		60.76

	Dividends
Quarter Ended	2007-2008		2006-2007
September 30	$	0.350	$	0.310
December 31		0.350		0.310
March 31		0.350		0.310
June 30		0.400		0.350

DIVIDEND HISTORY

P&G has paid dividends without interruption since its incorporation in 1890, and has increased dividends each year for the past 52 fiscal years. Over the past 52 years, P&G’s compound annual dividend growth has exceeded 9%.

CORPORATE HEADQUARTERS

The Procter & Gamble Company
P.O. Box 599
Cincinnati, OH 45201-0599

TRANSFER AGENT/SHAREHOLDER SERVICES

The Procter & Gamble Company
Shareholder Services Department
P.O. Box 5572
Cincinnati, OH 45201-5572

REGISTRAR

The Bank of New York Trust Company, N.A.
Corporate Trust Division
525 Vine Street, Suite 900
Cincinnati, OH 45202

EXCHANGE LISTING

New York, Paris

STOCK SYMBOL

PG

SHAREHOLDERS OF COMMON STOCK

There were approximately 2,231,000 common stock shareowners, including shareholders of record, participants in the Shareholder Investment Program, participants in P&G stock ownership plans and beneficial owners with accounts at banks and brokerage firms, as of June 30, 2008.

FORM 10-K

Shareholders may obtain a copy of P&G’s 2008 report to the Securities and Exchange Commission on Form 10-K by going to www.pg.com/investor or by calling us at 1-800-764-7483. This information is also available at no charge by sending a request to Shareholder Services at the address listed above.

The most recent certifications by our Chief Executive and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to our Form 10-K for the fiscal year ended June 30, 2008. We have also filed with the New York Stock Exchange the most recent Annual CEO certification as required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual.

ANNUAL MEETING

The next annual meeting of shareholders will be held on Tuesday, October 14, 2008. A full transcript of the meeting will be available from Susan Felder, Assistant Secretary. Ms. Felder can be reached at 299 East Sixth Street, Cincinnati, Ohio 45202-3315.

80     The Procter & Gamble Company

Financial Summary (Unaudited)

Amounts in millions,
except per share amounts	2008			2007			2006			2005			2004			2003			2002			2001			2000			1999			1998
Net Sales	$	83,503		$	76,476		$	68,222		$	56,741		$	51,407		$	43,377		$	40,238		$	39,244		$	39,951		$	38,125		$	37,154
Gross Margin		42,808			39,790			35,097			28,869			26,264			21,155			19,159			17,071			18,395			16,901			16,019
Operating Income		17,083			15,450			13,249			10,469			9,382			7,312			6,073			4,260			5,678			6,130			5,581
Net Earnings		12,075			10,340			8,684			6,923			6,156			4,788			3,910			2,612			3,363			3,683			3,472
Net Earnings Margin		14.5	%		13.5	%		12.7	%		12.2	%		12.0	%		11.0	%		9.7	%		6.7	%		8.4	%		9.7	%		9.3	%
Basic Net Earnings per Common Share	$	3.86		$	3.22		$	2.79		$	2.70		$	2.34		$	1.80		$	1.46		$	0.96		$	1.24		$	1.35		$	1.25
Diluted Net Earnings per Common Share		3.64			3.04			2.64			2.53			2.20			1.70			1.39			0.92			1.17			1.27			1.18
Dividends Per Common Share		1.45			1.28			1.15			1.03			0.93			0.82			0.76			0.70			0.64			0.57			0.51
Restructuring Program Charges(1)	$	—		$	—		$	—		$	—		$	—		$	751		$	958		$	1,850		$	814		$	481		$	—
Research and Development Expense		2,226			2,112			2,075			1,940			1,802			1,665			1,601			1,769			1,899			1,726			1,546
Advertising Expense		8,667			7,937			7,122			5,929			5,466			4,487			3,782			3,729			3,906			3,542			3,638
Total Assets		143,992			138,014			135,695			61,527			57,048			43,706			40,776			34,387			34,366			32,192			31,042
Capital Expenditures		3,046			2,945			2,667			2,181			2,024			1,482			1,679			2,486			3,018			2,828			2,559
Long-Term Debt		23,581			23,375			35,976			12,887			12,554			11,475			11,201			9,792			9,012			6,265			5,774
Shareholders’ Equity		69,494			66,760			62,908			18,475			18,190			17,025			14,415			12,560			12,673			12,352			12,493

(1) Restructuring program charges, on an after-tax basis, totaled $538, $706, $1,475, $688 and $285 for 2003, 2002, 2001, 2000 and 1999, respectively.

The Procter & Gamble Company      81

Shareholder Return Performance Graphs

The following graph compares the five-year cumulative total return of P&G’s common stock as compared with the S&P 500 Stock Index, the Dow Jones Industrial Average Index, and a composite group comprised of the S&P Household Products Index, the S&P Paper Products Index, the S&P Personal Products Index, the S&P Health Care Index and the S&P Food Index. The composite group is weighted based on P&G’s current fiscal year revenues. The graph assumes $100 was invested on June 30, 2003 and that all dividends were reinvested.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

(in dollars)	2003		2004		2005		2006		2007		2008
P&G		100		124		123		132		149		151
Composite Group		100		128		127		143		175		164
S&P 500		100		119		127		138		166		144
DJIA		100		119		119		133		163		142

P&G has paid dividends without interruption since its incorporation along with the increased dividends each year for the past 52 fiscal years. P&G’s compound annual dividend growth rate has exceeded 9% over the last 52 years.

DIVIDENDS PER SHARE (split-adjusted)

(in dollars; split-adjusted)	1956		1969		1982		1995		2008
Dividends per Share	$	0.01	$	0.04	$	0.13	$	0.35	$	1.45

82     The Procter & Gamble Company

P&G at a Glance

				Net Sales
				by GBU		(1)
GBU	Reportable Segment	Key Products	Billion Dollar Brands	(in billions)
BEAUTY	Beauty	Cosmetics, Deodorants, Hair Care, Personal Cleansing, Prestige Fragrances, Skin Care	Head & Shoulders, Olay, Pantene, Wella	$	27.8
	Grooming	Blades and Razors, Electric Hair Removal Devices, Face and Shave Products, Home Appliances	Braun, Fusion, Gillette, Mach3
HEALTH AND WELL-BEING	Health Care	Feminine Care, Oral Care, Personal Health Care, Pharmaceuticals	Actonel, Always, Crest, Oral-B	$	19.4
	Snacks, Coffee and Pet Care	Coffee, Pet Food, Snacks	Folgers, lams, Pringles
HOUSEHOLD CARE	Fabric Care and Home Care	Air Care, Batteries, Dish Care, Fabric Care, Surface Care	Ariel, Dawn, Downy, Duracell, Gain, Tide	$	37.7
	Baby Care and Family Care	Baby Wipes, Bath Tissue, Diapers, Facial Tissue, Paper Towels	Bounty, Charmin, Pampers

(1) Partially offset by net sales in corporate to eliminate the sales of unconsolidated entities included in business unit results.

2008 NET SALES

(% of total business segments)

RECOGNITION

P&G is recognized as a leading global company, including a #5 ranking on Fortune’s “Global Most Admired Companies,” the #2 ranking on Fortune’s “Top Companies for Leaders” survey, the #4 ranking on Barren’s “World’s Most Respected List,” a #8 ranking on Business Week’s list of “World’s Most Innovative Companies,” top rankings on the Dow Jones Sustainability Index from 2000-2008, the “Advertiser of the Year” award at the 2008 Cannes International Advertising Festival, and a consistent #1 ranking within our industry on Fortune’s Most Admired list for 23 of 24 total years and for 11 years in a row.

P&G ranks among the top companies for Executive Women (National Association for Female Executives), African Americans (Working Mother and Black Enterprise Magazines), and Diversity (Diversity Inc. Magazine).

Supplier diversity is a fundamental business strategy at P&G. In 2008, P&G again spent over $1.9 billion with minority- and women-owned businesses. Since 2005, P&G has been a member of the Billion Dollar Roundtable, a forum of 14 corporations that spend more than $1 billion annually with diverse suppliers.

The paper utilized in the printing of this annual report is certified by SmartWood to the FSC Standards, which promotes environmentally appropriate, socially beneficial and economically viable management of the world’s forests. The paper contains a mix of pulp that is derived from FSC certified well-managed forests; post-consumer recycled paper fibers and other controlled sources.

Design: VSA Partners, Inc.

Sustainability & innovation

Improving quality of life, now and for generations to come

At p&G, sustainability is embedded into both our business strategy and our holistic view of innovation. By incorporating sustainability into the rhythm of our work, we delight consumers who want to make sustainable choices but do not want to make trade-offs in performance or value. We believe this is where p&g innovation can make the most meaningful difference.

By viewing innovation systematically through the lens of sustainability

we define innovation broadly, looking for sustainability opportunities at every touch-point along the path of our product.

this definition encompasses raw materials formulation, manufacturing customization, logistics, customers and consumers. in fact we find that a big innovation in one part of the path often sparks innovations in other areas.. for example when we moved our line of liquid laundry detergents in north America to 2x concentration we delivered significant environmental improvements in water energy and co2 usage as a result of the products packaging changes a significan t reduction in distribution miles. in addition we innovated in our customer interface to reduce solid waste.

we invest in innovation to improve the environment profile of our operations and products

in addition to investing in product development of more sustainable products we have systematized the process of sustainable designing and building new facilities in box elder utah we recently broke ground on a state of the art manufacturing facility that will deliver improvements in energy water solid and indoor environmental quality.

touching lives improving life p&g

EX-21

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

AB Tudor Hellesens [Sweden]

AG für Aetherische Oele [Switzerland]

Agile Pursuits, Inc. [Ohio]

Alejandro Llauro E. Hijos S.A.I.C. [Argentina]

An-Pro Company [Ohio]

Atkinsons of London Ltd. [U.K.]

B&C International Co. (BVI) Ltd. [British Virgin Islands]

B.V.B.A. Intercosmetic S.P.R.L. [Belgium]

Beauty Center AG [Russia]

Becruz, S.A. de C.V. [Mexico]

Belcosa Distribuidora de Cosmeticos Ltda. [Brazil]

Belfam Industria Cosmetic S.A. [Brazil]

Betrix Cosmetic GmbH [Germany]

Braun (Shanghai) Co., Ltd. [China]

Braun (Shanghai) International Trading Co., Ltd. [China]

Braun de Mexico y Compania de C.V. [Mexico]

Braun Espanola, Sociedad Anonima [Spain]

Braun GmbH [Germany]

Braun Oral-B Ireland Limited [Ireland]

Braun-Gillette Immobilien GmbH & Co. KG [Germany]

CAMADA Grundstücks-GmbH & Co. OHG [Germany]

Celtic Insurance Company Limited [Bermuda]

Chemlog LLC [Ohio]

Chemo Laboratories Manufacturing [Malaysia]

China Battery Limited [Hong Kong]

Clairol Brasil Higiene e Cosmeticos Ltda [Brazil]

Clairol Limited [U.K.]

Clivia Publicidade Ltda. [Brazil]

Colfax Laboratories (India) Ltd. [India]

Colton Razor Blade Company [Massachusetts]

Compania Giva, S.A. [Delaware]

Compania Interamericana Gillette, S.A. [Panama]

Compania Procter & Gamble Mexico, S. de R.L. de C.V. [Mexico]

Compañia Quimica S.A. [Argentina]

Consumer Studies, Inc. [Massachusetts]

Corporativo Procter & Gamble, S. de R.L. de C.V. [Mexico]

Corpydes S.A. de C.V. [Mexico]

Cosmetic Products Pty. Ltd. [Australia]

Cosmetic Research Bureau, Inc. [Delaware]

Cosmetic Suppliers Pty. Ltd. [Australia]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Cosmetics Beauty Inc. [New Jersey]

Cosmital S.A. [Switzerland]

Cosmonor Distribuidora de Cosméti [Brazil]

Cosmopolitan Cosmetics (Pty) Ltd. [South Africa]

Cosmopolitan Cosmetics China Ltd. [Hong Kong]

Cosmopolitan Cosmetics GmbH [Germany]

Cosmopolitan Cosmetics Inc. [Florida]

Cosmopolitan Cosmetics International GmbH & Co. oHG [Germany]

Cosmopolitan Cosmetics K.K. [Japan]

Cosmopolitan Cosmetics Korea Co., [Republic of Korea]

Cosmopolitan Cosmetics Ltd. [Hong Kong]

Cosmopolitan Cosmetics S.r.l. [Italy]

Cosmoresearch Co. Ltd. [Japan]

Crest Toothpaste Inc. [Canada]

Detergent Products A.G. [Switzerland]

Deutsche Procter & Gamble Unternehmensbeteiligungs GmbH & Co. Operations oHG [Germany]

Deutsche Procter & Gamble Unternehmensbeteiligungs GmbH [Germany]

Dicosma Distribuidora de Cosmétic [Brazil]

Dictus Grundstücks-Verwaltungsges [Germany]

Dietmar Bt. [Hungary]

District Pet Imaging, LLC [Ohio]

Duracell (1993) Ltd. [U.K.]

Duracell (China) Ltd. [China]

Duracell Batteries B.V.B.A. [Belgium]

Duracell Batteries Ltd. [U.K.]

Duracell do Brasil Industria e Comercio Ltda. [Brazil]

Eastern European Supply Company [Ukraine]

Eau de Cologne- & Parfumerie-Fabrik GmbH [Germany]

Ecopan Inc. [Panama]

Empresa de elaboracion, importacion, y venta de productos Gillette, S.A. de C.V. [Guatemala]

Ensambles de Silleria de Mexico S.A. de C.V. [Mexico]

Escada Cosmetics Ltd [Republic of Korea]

Eurocos Cosmetic GmbH [Germany]

European Beauty Products (U.K.) Limited [U.K.]

Explotadora de Inmuebles Magdalena, S.A. [Mexico]

Feraris BT [Hungary]

FF Trademark, LLC [Delaware]

Finco do Brasil Fomento Comercial Ltda. [Brazil]

FINCO HOLDINGS (BVI) Inc. [British Virgin Islands]

Fine Beauty Care (Pte) Ltd. [Namibia]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

FINPAR-Finco do Brasil Participac [Brazil]

Finpark [U.K.]

Finusa S.A. [Argentina]

F-Net Co., Ltd. [Japan]

Foreign Company “Procter & Gamble” [Belarus]

Fountain Square Music Publishing Co., Inc. [Ohio]

Frederic Fekkai & Co., LLC [Delaware]

Frederic Fekkai & Company (Soho), LLC [New York]

Frederic Fekkai (Mark NY), LLC [Delaware]

Frederic Fekkai Beverly Hills, LLC [Calfornia]

Frederic Fekkai Dallas, LLC [Delaware]

Frederic Fekkai Greenwich, LLC [Delaware]

Frederic Fekkai Las Vegas, LLC [Delaware]

Frederic Fekkai Melrose Place, LLC [California]

Frederic Fekkai New York, LLC [New York]

Frederic Fekkai NY II, LLC [Delaware]

Frederic Fekkai Palm Beach, LLC [Florida]

Frederic Holding Co. [Delaware]

Frederic Holding Co. [Delaware]

Frederic, LLC [Delaware]

Fruehling Cosmetics Co. Ltd. [Thailand]

Fujian Nanping Nanfu Battery Co., Ltd. [China]

Gala Cosmetics International Limited [U.K.]

Gala Marketing [Ukraine]

Gala of London Limited [U.K.]

Garrity Industries Inc. [Connecticut]

Gilfin B.V. [Netherlands]

Gilfin Holding B.V. [Netherlands]

Gillette (China) Ltd. [China]

Gillette (Malaysia) Sdn. Berhad [Malaysia]

Gillette (Philippines) Inc. [Philippines]

Gillette (Shanghai) Ltd. [China]

Gillette (Shanghai) Sales Company Limited [China]

Gillette (Thailand) Limited [Thailand]

Gillette Aesop Ltd. [U.K.]

Gillette Argentina Holding LLC [Delaware]

Gillette Argentina S.A. [Argentina]

Gillette Australia Pty. Ltd. [Australia]

Gillette Bangladesh Private Ltd. [Bangladesh]

Gillette Belgium Holding LLC [Delaware]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Gillette Berlin Holding GmbH [Germany]

Gillette Canada Holdings, Inc. [Delaware]

Gillette Canada Overseas Holding Company [Canada]

Gillette CEEMEA Holding, LLC [Ohio]

Gillette Central Services Limited [U.K.]

Gillette China Investment Ltd. [Bermuda]

Gillette Commercial Operations North America [Massachusetts]

Gillette Czech and Ukraine Holding, LLC [Ohio]

Gillette de Mexico, Inc. [Delaware]

Gillette de Mexico, S. de R.L. de C.V. [Mexico]

Gillette del Uruguay, S.A. [Uruguay]

Gillette Deutschland GmbH & Co. oHG [Germany]

Gillette Distribution Ltd. [Egypt]

Gillette Diversified Operations Pvt. Ltd. [India]

Gillette Dominicana, S.A. [Dominican Republic]

Gillette Egypt S.A.E. [Egypt]

Gillette European Services Centre Ltd. [U.K.]

Gillette Financial Holding B.V. [Netherlands]

Gillette Fountain LLC [Delaware]

Gillette GOK Holding LLC [Ohio]

Gillette Group (Europe) Holding B.V. [Netherlands]

Gillette Group (S.E.A.) Pte. Ltd. [Singapore]

Gillette Group India Private Limited [India]

Gillette Group U.K. Ltd [U.K.]

Gillette Gruppe Deutschland GmbH & Co. oHG [Germany]

Gillette Holding Company, Inc. [Delaware]

Gillette Holding GmbH [Germany]

Gillette Hong Kong Limited [Hong Kong]

Gillette India Limited [India]

Gillette Industries Ltd. [U.K.]

Gillette International B.V. [Netherlands]

Gillette Ireland Limited [Ireland]

Gillette Korea Holding B.V. [Netherlands]

Gillette Lanka (Private) Ltd. [Sri Lanka]

Gillette Latin America Holding B.V. [Netherlands]

Gillette Management (S.E.A.) Pte. Ltd. [Singapore]

Gillette Management LLC [Delaware]

Gillette Morocco SAS [Morocco]

Gillette Nova Scotia Company [Canada]

Gillette Pakistan Limited [Pakistan]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Gillette Petersburg Investment Inc. [Delaware]

Gillette Poland International sp. z.o.o. [Poland]

Gillette Poland S.A. [Poland]

Gillette Products Private Limited [India]

Gillette Puerto Rico LLC [Puerto Rico]

Gillette Safety Razor Company [Massachusetts]

Gillette Sanayi ve Ticaret A.S. [Turkey]

Gillette Southern Cone, LLC [Ohio]

Gillette Stationery Benelux B.V. [Netherlands]

Gillette Taiwan, LLC [Delaware]

Gillette U.K. Limited [U.K.]

Gillette Ukraine LLC [Ukraine]

Gillette Verwaltungs GmbH [Germany]

Gillette Worldwide Holding LLC [Delaware]

Giorgio Beverly Hills, Inc. [Delaware]

Global Business Services de Costa Rica Limitada [Costa Rica]

Graham Webb International, Inc. [Delaware]

Greshem Cosmetics Pty. Ltd [Australia]

Grupo Gillette, S. de R.L. de C.V. [Mexico]

Handelsmaatschappij Van Ravensberg [Netherlands]

HDS Cosmetics Lab Inc. [Delaware]

Herman Lepsøe A/S [Norway]

Hikari Biyo Kagaku Co. Ltd. [Japan]

Humatro Corporation [Delaware]

Hyginett KFT [Hungary]

Iams Argentina S.A. [Argentina]

Iams Chile Limitada [Chile]

Iams do Brasil Comercial, Exportadora e Importadora Ltda. [Brazil]

Iams Europe B.V. [Netherlands]

Iams Global, Inc. [Ohio]

Iams Japan K.K. [Japan]

Iams Mexico, S. de R.L. de C.V. [Mexico]

Iams New Zealand Limited [New Zealand]

Iams Pet Food International N.V. [Netherlands]

Iams Pet Imaging, Inc. [Ohio]

Iams Pet Imaging, LLC [Ohio]

Iams S. Africa Pty. [S. Africa]

Iams U.K. Limited [U.K.]

Industrias Modernas, S.A. [Guatemala]

Industries Marocaines Modernes [Morocco]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Inmobiliaria Procter & Gamble de Venezuela, S.C.S. [Venezuela]

Inmobiliaria Procter & Gamble de Venezuela, S.R.L. [Venezuela]

Intercosmetic BVBA [Belgium]

Interkosmetic Gesellschaft m.b.H. [Austria]

Intpropco S.A. [Switzerland]

Inverta Verwaltungs GmbH [Germany]

Ipse Beteiligungsgesellschaft mbH [Germany]

Juvian Fabric Care Corporation [Ohio]

Kadabell GmbH & Co. KG [Germany]

Kadabell GmbH [Germany]

Komal Manufacturing Chemists Ltd. [India]

Labocos S.r.l. [Italy]

Laboratorios Vicks, S.L. [Spain]

Liberty Street Music Publishing Company, Inc. [Ohio]

Limited Liability Company ‘Procter & Gamble Trading Ukraine’ [Ukraine]

LLC “Gillette Group” [Russia]

LLC “Procter & Gamble Manufacturing Istra” [Russia]

LLC “Procter & Gamble Novomoskovsk” [Russia]

LLC “Procter & Gamble Services” [Russia]

LLC “Procter & Gamble” [Russia]

Londa GmbH [Germany]

Londa Kosmetika SAO [Russia]

Londa Rothenkirchen Produktions G [Germany]

Malabar (HK) Corporation Limited [Hong Kong]

Marcosma Distribuidora de Cosméti [Brazil]

Marcvenca Inversiones, C.A. [Venezuela]

Max Factor & Co. (U.K.) Ltd. [Bermuda]

Max Factor & Co. [Delaware]

Merveille S.A. [Switzerland]

Metropolitan Cosmetics GmbH [Germany]

Metropolitan Cosmetics Pte. Ltd. [Singapore]

Midway Holdings Ltd. [Cayman Islands]

Millstone Coffee, Inc. [Washington]

Mining Consultants (India) Private Ltd. [India]

Mir Kosmetiki [Russia]

Modern Hairdressing Supplies Pty [South Africa]

Modern Holdings (Pty) Ltd. [South Africa]

Modern Industrial Products FZE [United Arab Emirates]

Modern Industries Company — Dammam [Saudi Arabia]

Modern Industries Company — Jeddah [Saudi Arabia]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Modern Products Company — Jeddah [Saudi Arabia]

Muelhens GmbH & Co. KG [Germany]

Neoblanc-Produtos de Higiene e Limpeza Lda. [Portugal]

Nexus Mercantile Private Ltd. [India]

Noon-in-China, LLC [Delaware]

North Carolina Pet Imaging, LLC [Ohio]

Noxell Corporation [Maryland]

Olay LLC [Puerto Rico]

Ondabel S.A. [Argentina]

Ondal France E.u.r.l. [France]

Ondal USA, Inc. [Delaware]

Ondelle S.A.(Pty) Ltd. [South Africa]

OOO “Capella” [Russia]

OOO “P&G Prestige Products” [Russia]

OOO “Procter & Gamble Distributorskaya Compania” [Russia]

OOO “Russwell” [Russia]

OOO P&G Distribution Co. [Russia]

Oral-B (Shanghai) Ltd. [China]

Oral-B Laboratories Dublin LLC [Delaware]

Oral-B Laboratories International LL C[Delaware]

Oral-B Laboratories Islands Ltd. [Cayman Islands]

Oral-B Laboratories Ltd. [U.K.]

Oral-B Laboratories Newbridge LLC [Delaware]

Oral-B Laboratories [Delaware]

P & G Prestige Beauté GmbH [Germany]

P&G Bath Luxuries Ltd. [U.K.]

P&G Holding B.V. [Netherlands]

P&G Holding Company S.R.L. [Argentina]

P&G Indochina [Vietnam]

P&G Industrial Peru S.R.L. [Peru]

P&G Inversiones S.A. [Argentina]

P&G Investments Limited [Costa Rica]

P&G Israel Enterprise 2005 Ltd. [Israel]

P&G Israel M.D.O. Ltd. [Israel]

P&G K.K. [Japan]

P&G Kobe Yugen Kaisha [Japan]

P&G Northeast Asia Pte. Ltd. [Singapore]

P&G Prestige Beaute S.A.R.L. [Switzerland]

P&G Prestige Products A/S [Denmark]

P&G Prestige Products AG [Switzerland]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

P&G Prestige Products B.V. [Netherlands]

P&G Prestige Products GmbH [Austria]

P&G Prestige Products GmbH [Germany]

P&G Prestige Products Ltd. [U.K.]

P&G Prestige Products N.V. [Belgium]

P&G Prestige Products S.A.S. [France]

P&G Prestige Products, Inc. [Connecticut]

P&G Servicios S.A. [Argentina]

P&G South African Trading (Pty.) Ltd. [South Africa]

P&G-Clairol, Inc. [Delaware]

Pacific Beauty Care Pte. Ltd. [Singapore]

PADOS Grundstücks-Vermietungsgese [Germany]

Palo Co. Ltd. [Japan]

Papierhygiene GmbH [Germany]

Parfums Rochas S.A.S. [France]

Parkfin [U.K.]

Phase II Holdings Corporation [Philippines]

PL Battery BVBA [Belgium]

PPProducts SARL [Switzerland]

PPS Hairwear Australia Pty. Ltd. [Australia]

Procter & Gamble (Chengdu) Ltd. [China]

Procter & Gamble (China) Ltd. [China]

Procter & Gamble (East Africa) Limited [Kenya]

Procter & Gamble (Egypt) Manufacturing Company [Egypt]

Procter & Gamble (Enterprise Fund) Limited [U.K.]

Procter & Gamble (Guangzhou) Ltd. [China]

Procter & Gamble (Health & Beauty Care) Limited [U.K.]

Procter & Gamble (L&CP) Limited [U.K.]

Procter & Gamble (Malaysia) Sdn Bhd [Malaysia]

Procter & Gamble (Manufacturing) Ireland Limited [Ireland]

Procter & Gamble (NBD) Pty. Ltd. [Australia]

Procter & Gamble (Shanghai) International Trade Company Ltd. [China]

Procter & Gamble (Vietnam) Ltd. [Vietnam]

Procter & Gamble (Yemen) Ltd. [Yemen]

Procter & Gamble Acquisition GmbH [Germany]

Procter & Gamble Albania Ltd. [Albania]

Procter & Gamble Algeria EURL [Algeria]

Procter & Gamble Amazon Holding B.V. [Netherlands]

Procter & Gamble Amiens S.A.S. [France]

Procter & Gamble Argentina Sociedad Colectiva [Argentina]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Procter & Gamble Asia Holding B.V. [Netherlands]

Procter & Gamble Asia Pte. Ltd. [Singapore]

Procter & Gamble Australia Holding, LLC [Ohio]

Procter & Gamble Australia Proprietary Limited [Australia]

Procter & Gamble Austria GmbH [Austria]

Procter & Gamble Azerbaijan Services LLC+A38 [Azerbaijan]

Procter & Gamble Bangladesh Private Ltd. [Bangladesh]

Procter & Gamble Belize Ltda. [Belize]

Procter & Gamble Blois S.A.S. [France]

Procter & Gamble Bolivia S.R.L. [Bolivia]

Procter & Gamble Braun de Mexico Holding, LLC [Ohio]

Procter & Gamble Brazil Holdings B.V. [Netherlands]

Procter & Gamble Bulgaria EOOD [Bulgaria]

Procter & Gamble Business Services Canada Company [Canada]

Procter & Gamble Canada Holding B.V. [Netherlands]

Procter & Gamble Central & Eastern Europe GmbH [Germany]

Procter & Gamble Chemical Services Pte. Ltd. [Singapore]

Procter & Gamble Chile Holding Ltda. [Chile]

Procter & Gamble Chile, Inc. [Ohio]

Procter & Gamble Colombia Ltda. [Colombia]

Procter & Gamble Comercial Limitada [Chile]

Procter & Gamble Commercial de Cuba, S.A. [Cuba]

Procter & Gamble Commercial LLC [Puerto Rico]

Procter & Gamble Czech Holding B.V. [Netherlands]

Procter & Gamble Czech Republic s.r.o.A492 [Czech Republic]

Procter & Gamble d.o.o. za trgovinu [Croatia]

Procter & Gamble Danmark ApS [Denmark]

Procter & Gamble de Nicaragua y Compania Ltda. [Nicaragua]

Procter & Gamble de Venezuela, S.C.A. [Venezuela]

Procter & Gamble de Venezuela, S.R.L. [Venezuela]

Procter & Gamble Detergent (Beijing) Ltd. [China]

Procter & Gamble Development Company A.G. [Switzerland]

Procter & Gamble Distributing (HK) Limited [Hong Kong]

Procter & Gamble Distributing (Philippines) Inc. [Philippines]

Procter & Gamble Distributing New Zealand [New Zealand]

Procter & Gamble Distribution Company (Europe) BVBA [Belgium]

Procter & Gamble Distribution S.R.L. [Romania]

Procter & Gamble do Brasil S/A [Brazil]

Procter & Gamble do Brazil, LLC [Delaware]

Procter & Gamble do Nordeste S/A [Brazil]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Procter & Gamble DS Polska Spolka z.o.o. [Poland]

Procter & Gamble Eastern Europe, LLC [Ohio]

Procter & Gamble Ecuador Cia. Ltda. [Ecuador]

Procter & Gamble Egypt Distribution [Egypt]

Procter & Gamble Egypt Holding [Egypt]

Procter & Gamble Egypt Supplies [Egypt]

Procter & Gamble Egypt [Egypt]

Procter & Gamble Energy Company LLC [Ohio]

Procter & Gamble Espana S.A. [Spain]

Procter & Gamble Estonia Ltd. [Estonia]

Procter & Gamble Eurocor N.V. [Belgium]

Procter & Gamble Europe N.V. [Belgium]

Procter & Gamble Europe SA [Switzerland]

Procter & Gamble European Supply Company BVBA [Belgium]

Procter & Gamble Export Operations SARL [Switzerland]

Procter & Gamble Export-FZE [United Arab Emirates]

Procter & Gamble Exports, S. de R.L. [Panama]

Procter & Gamble Far East, Inc. [Ohio]

Procter & Gamble Finance (Canada) Limited Partnership [Canada]

Procter & Gamble Finance (U.K.) Ltd. [U.K.]

Procter & Gamble Financial Services Holding Sarl [Luxembourg]

Procter & Gamble Financial Services Ltd. [Ireland]

Procter & Gamble Finland OY [Finland]

Procter & Gamble Food Products SARL [Switzerland]

Procter & Gamble France S.A.S. [France]

Procter & Gamble FSC (Barbados) Inc. [Barbados]

Procter & Gamble Ghana, Ltd. [Ghana]

Procter & Gamble Global Holdings Ltd. [Bermuda]

Procter & Gamble GmbH [Germany]

Procter & Gamble Grundstucks-und Vermogensverwaltungs GmbH & Co. KG [Germany]

Procter & Gamble Gulf FZE [United Arab Emirates]

Procter & Gamble Hair Care, LLC [Delaware]

Procter & Gamble Health and Beauty Care-Europe Limited [U.K.]

Procter & Gamble Hellas Ltd. [Greece]

Procter & Gamble Higiene e Cosmeticos Limitada [Brazil]

Procter & Gamble Holding (HK) Limited [Hong Kong]

Procter & Gamble Holding (Thailand) Limited [Thailand]

Procter & Gamble Holding France S.A.S. [France]

Procter & Gamble Holding GmbH [Germany]

Procter & Gamble Holding S.r.l. [Italy]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Procter & Gamble Holdings (U.K.) Ltd. [U.K.]

Procter & Gamble Holdings Limited [Ireland]

Procter & Gamble Holdings Singapore Pte. Ltd. [Singapore]

Procter & Gamble Home Products Limited [India]

Procter & Gamble Hong Kong Limited [Hong Kong]

Procter & Gamble Hungary Wholesale Trading Partnership (KKT) [Hungary]

Procter & Gamble Hygiene & Health Care Limited [India]

Procter & Gamble Inc. [Canada]

Procter & Gamble India Holdings B.V. [Netherlands]

Procter & Gamble India Holdings, Inc. [Ohio]

Procter & Gamble Industrial Colombia Ltda. [Colombia]

Procter & Gamble Industrial de Guatemala, S.A. [Guatemala]

Procter & Gamble Industrial e Comercial Ltda. [Brazil]

Procter & Gamble Industrial S.C.A. [Venezuela]

Procter & Gamble Interamericas de Costa Rica, Limitada [Costa Rica]

Procter & Gamble Interamericas de El Salvador, Limitada de Capital Variable [El Salvador]

Procter & Gamble Interamericas de Guatemala, Limitada [Guatemala]

Procter & Gamble Interamericas de Honduras, S. de R.L. [Honduras]

Procter & Gamble Interamericas de Panama, S. de R.L. [Panama]

Procter & Gamble International Finance Funding General Management S.a.r.l. [Luxembourg]

Procter & Gamble International Funding SCA [Luxembourg]

Procter & Gamble International Operations Pte. Ltd. [Singapore]

Procter & Gamble International Operations S.A. [Switzerland]

Procter & Gamble International S.a.r.l. [Luxembourg]

Procter & Gamble Investment Company (UK) Ltd. [U.K.]

Procter & Gamble Investment GmbH [Germany]

Procter & Gamble Investments Limited [Ireland]

Procter & Gamble Ireland Limited [Ireland]

Procter & Gamble Italia, S.p.A. [Italy]

Procter & Gamble Jamaica Ltd. [Jamaica]

Procter & Gamble Japan K.K. [Japan]

Procter & Gamble Kazakhstan LLP [Kazakhstan]

Procter & Gamble Korea IE, Co. [Korea]

Procter & Gamble Korea Inc. [Korea]

Procter & Gamble Korea S&D Co. [Korea]

Procter & Gamble Latin America Holding B.V. [Netherlands]

Procter & Gamble Leasing LLC [Ohio]

Procter & Gamble Levant S.A.L. [Lebanon]

Procter & Gamble Limitada [Chile]

Procter & Gamble Limited Liability Company [Uzbekistan]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Procter & Gamble Limited [U.K.]

Procter & Gamble Luxembourg Finance S.a.r.l. [Luxembourg]

Procter & Gamble Luxembourg Global S.a.r.l. [Luxembourg]

Procter & Gamble Manufactura, S. de R.L. de C.V. [Mexico]

Procter & Gamble Manufacturing (Thailand) Limited [Thailand]

Procter & Gamble Manufacturing (Tianjin) Co. Ltd. [China]

Procter & Gamble Manufacturing Belgium N.V. [Belgium]

Procter & Gamble Manufacturing GmbH [Germany]

Procter & Gamble Manufacturing SA [South Africa]

Procter & Gamble Manufacturing Ukraine [Ukraine]

Procter & Gamble Marketing & Commercial Activities d.o.o. Ljubljana [Slovenia]

Procter & Gamble Marketing and Services d.o.o. [Serbia and Montenegro]

Procter & Gamble Marketing DOOEL Skopje [Macedonia]

Procter & Gamble Marketing Latvia Ltd. [Latvia]

Procter & Gamble Marketing Romania SRL [Romania]

Procter & Gamble Maroc [Morocco]

Procter & Gamble Mataro, S.L. [Spain]

Procter & Gamble Materials Management Czech Republic s.r.o. [Czech Republic]

Procter & Gamble Materials Management Romania S.R.L. [Romania]

Procter & Gamble Max Factor Godo Kaisha [Japan]

Procter & Gamble Mexico Holding B.V. [Netherlands]

Procter & Gamble Moldova SRL [Moldova]

Procter & Gamble N.S. Holding Company [Canada]

Procter & Gamble Nederland B.V. [Netherlands]

Procter & Gamble Netherland Services B.V. [Netherlands]

Procter & Gamble Neuilly S.A.S. [France]

Procter & Gamble Nigeria Limited [Nigeria]

Procter & Gamble Nordic LLC [Ohio]

Procter & Gamble Norge AS [Norway]

Procter & Gamble NPD, Inc. [Ohio]

Procter & Gamble Operations Polska-Spolka z o.o. [Poland]

Procter & Gamble Orleans S.A.S. [France]

Procter & Gamble Overseas Canada B.V. [Netherlands]

Procter & Gamble Overseas India B.V. [Netherlands]

Procter & Gamble Overseas Ltd. [U.K.]

Procter & Gamble Pakistan (Private) Limited [Pakistan]

Procter & Gamble Peru S.R.L. [Peru]

Procter & Gamble Pet Care (Australia) Pty. Ltd. [Australia]

Procter & Gamble Pharmaceuticals [Germany]

Procter & Gamble Pharmaceuticals Canada, Inc. [Canada]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Procter & Gamble Pharmaceuticals France [France]

Procter & Gamble Pharmaceuticals Iberia, S.L. [Spain]

Procter & Gamble Pharmaceuticals Longjumeau S.A.S. [France]

Procter & Gamble Pharmaceuticals N.V. [Belgium]

Procter & Gamble Pharmaceuticals Nederland B.V. [Netherlands]

Procter & Gamble Pharmaceuticals Puerto Rico LLC [Puerto Rico]

Procter & Gamble Pharmaceuticals SARL [Switzerland]

Procter & Gamble Pharmaceuticals U.K. Limited [U.K.]

Procter & Gamble Pharmaceuticals, Inc. [Ohio]

Procter & Gamble Pharmaceuticals-Germany GmbH [Germany]

Procter & Gamble Philippines, Inc. [Philippines]

Procter & Gamble Platform, Inc. [Ohio]

Procter & Gamble Polska-Spolka z o.o [Poland]

Procter & Gamble Porto, Lda. [Portugal]

Procter & Gamble Portugal S.A. [Portugal]

Procter & Gamble Prestige Product [Portugal]

Procter & Gamble Prestige Products Polska-Spolka z o.o. [Poland]

Procter & Gamble Prestige Products S.A. [Portugal]

Procter & Gamble Prestige Products S.A. [Spain]

Procter & Gamble Product Supply (U.K.) Limited [U.K.]

Procter & Gamble Productions, Inc. [Ohio]

Procter & Gamble Quimica Ltda. [Brazil]

Procter & Gamble RHD, Inc. [Ohio]

Procter & Gamble RSC Regional Service Company Ltd. [Hungary]

Procter & Gamble S.r.l. [Italy]

Procter & Gamble Santiago Inversiones S.A. [Chile]

Procter & Gamble Satis ve Dagitim Ltd. Sti. [Turkey]

Procter & Gamble Senegal S.a.r.l. [Senegal]

Procter & Gamble Service GmbH [Germany]

Procter & Gamble Services (Switzerland) SA [Switzerland]

Procter & Gamble Services Company N.V. [Belgium]

Procter & Gamble Services LT [Lithuania]

Procter & Gamble Services Ltd. [Kenya]

Procter & Gamble Servicios Latinoamerica, S.C.A. [Venezuela]

Procter & Gamble Servicios Latinoamerica-1, S.R.L. [Venezuela]

Procter & Gamble Singapore Investment Pte. Ltd. [Singapore]

Procter & Gamble Singapore Pte. Ltd. [Singapore]

Procter & Gamble South Africa Proprietary Limited [South Africa]

Procter & Gamble South America Holding B.V. [Netherlands]

Procter & Gamble Sri Lanka Private Ltd. [Sri Lanka]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Procter & Gamble Sverige AB [Sweden]

Procter & Gamble Switzerland SARL [Switzerland]

Procter & Gamble Taiwan Limited [Taiwan]

Procter & Gamble Technical Centers Limited [U.K.]

Procter & Gamble Technology (Beijing) Co., Ltd. [China]

Procter & Gamble Trading (Thailand) Limited [Thailand]

Procter & Gamble Trading International S.a.r.l. [Switzerland]

Procter & Gamble Trgovaeko Drustvo d.o.o. Sarajevo [Bosnia]

Procter & Gamble Tuketim Mallari Sanayii A.S. [Turkey]

Procter & Gamble U.K. [U.K.]

Procter & Gamble Ukraine [Ukraine]

Procter & Gamble Unternehmensbeteiligungs GmbH & Co. Operations oHG [Germany]

Procter & Gamble Verwaltungs GmbH [Germany]

Procter & Gamble, Spol. s.r.o. (Ltd.) [Slovak Republic]

Procter & Gamble-Rakona s.r.o. [Czech Republic]

Productos Cosméticos S.L. [Spain]

Productos Sanitarios Sociedad Colectiva [Argentina]

Professional Care Logistics, S.L. [Spain]

Progam Realty & Development Corporation [Philippines]

Promotora de Bienes y Valores, S. de R.L. de C.V. [Mexico]

PT Cosmopolitan Cosmetic [Indonesia]

PT Kosmindo [Indonesia]

PT Mawar Sejati [Indonesia]

PT Procter & Gamble Home Products Indonesia [Indonesia]

PT Procter & Gamble Indonesia [Indonesia]

PUR Water Purification Products, Inc. [Ohio]

Redmond Products, Inc. [Minnesota]

Richardson-Vicks do Brasil Quimica e Farmacêutica Ltda [Brazil]

Richardson-Vicks Real Estate Inc. [Ohio]

Riverfront Music Publishing Co., Inc. [Ohio]

Rosemount Corporation [Delaware]

RPI Management, Inc. [Nevada]

R-V Chemicals Holdings Ltd. [Ireland]

S.C. Detergenti S.A. [Romania]

S.C. Wella Romania S.R.L. [Romania]

S.P.F. Beauté S.A.S. [France]

Salon Debut [Russia]

Salon Service Genova SrL [Italy]

San Francisco Pet Imaging, Inc. [California]

San Francisco Pet Imaging, LLC [Ohio]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Scannon GmbH [Germany]

Scannon S.A. [France]

Scannon S.A.S. [France]

Sebastian Europe GmbH [Germany]

Sebastian International, Inc. [California]

Series Acquisition B.V. [Netherlands]

Series Overseas Investment Ltd. [Bermuda]

Shulton (Great Britain) Ltd. [U.K.]

Shulton, Inc. [New Jersey]

Sigma Cosmetica International S.A [Uruguay]

Societe Immobiliere Les Colombettes, S.A. [Switzerland]

Star Parfums GmbH [Germany]

Star Parfums Verwaltungs GmbH [Germany]

Sulcosma Distribuidora de Cosméti [Brazil]

Surfac S. R. Ltda. [Peru]

Sycamore Productions, Inc. [Ohio]

Tambrands Inc. [Delaware]

Tambrands Industria e Comercia Ltda. [Brazil]

Tambrands Ireland Limited [Ireland]

Tambrands Limited [U.K.]

Tambrands Ukraine Ltd. [Ukraine]

Tefa Holdings (Pty) Ltd. [South Africa]

Temple Trees Impex & Investment Private Limited [India]

The Dover Wipes Company [Ohio]

The Folger Coffee Company [Ohio]

The Folgers Coffee Company [Delaware]

The Folgers Coffee Distributing Company [Delaware]

The Gillette Company [Delaware]

The Iams Company [Ohio]

The Malabar Company [Delaware]

The Procter & Gamble Company of South Africa (Proprietary) Limited [South Africa]

The Procter & Gamble Distributing LLC [Delaware]

The Procter & Gamble GBS Company [Ohio]

The Procter & Gamble Global Finance Company [Ohio]

The Procter & Gamble International Insurance Company, Limited [Ireland]

The Procter & Gamble Manufacturing Company [Ohio]

The Procter & Gamble Paper Products Company [Ohio]

The Procter & Gamble U.S. Business Services Company [Ohio]

The Wella Corporation [Delaware]

Thomas Hedley & Co. Limited [U.K.]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Transcosmetics Holdings Sdn. Bhd. [Malaysia]

Universal Beauty Supply Corp. [Puerto Rico]

US CD LLC [Delaware]

Valbonne S.A. [Switzerland]

Vick International Corporation [Delaware]

Vidal Sassoon (Shanghai) Academy [China]

Vidal Sassoon Co. [Ohio]

WEBA Betriebsrenten-Verwaltungsgesellschaft mbH [Germany]

Wella (Ireland) Ltd. [Ireland]

Wella (U.K.) Holdings Ltd. [Great Brita]

Wella (U.K.) Ltd. [U.K.]

Wella AB [Sweden]

Wella AG [Germany]

Wella Beteiligungen GmbH [Switzerland]

Wella Canada, Inc. [Canada]

Wella Chile S.A. [Chile]

Wella Cosmetics China Ltd. Co. [China]

Wella CZ s.r.o. [Czech Republic]

Wella Danmark A/S [Denmark]

Wella de México, S.de R.L. de C.V [Mexico]

Wella de Mexico [Mexico]

Wella France S.A.S. [France]

Wella Hellas Ltd. [Greece]

Wella Hongkong Limited [Hong Kong]

Wella India Haircosmetics Private [India]

Wella Intercosmetic GmbH [Germany]

Wella Interkosmetik GmbH [Austria]

Wella Japan Co. Ltd. [Japan]

Wella Laboratories, Inc. [Delaware]

Wella Magyarorszag Kft. [Hungary]

Wella Management GmbH [Germany]

Wella Manufacturing GmbH [Germany]

Wella Manufacturing of Virginia, Inc. [Virginia]

Wella New Zealand [New Zealand]

Wella Nordamerika Beteiligungen GmbH [Germany]

Wella Paraguay S.A. [Paraguay]

Wella Personal Care of North America, Inc. [Delaware]

Wella Philippines Inc. [Philippines]

Wella Polska Spolka z o.o. [Poland]

Wella Portugal Sociedade Unipesso [Portugal]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Subsidiaries of the Registrant

Wella Salon Einrichtungen GmbH [Germany]

Wella Service GmbH [Germany]

Wella Slovensko s.r.o. [Slovak Republic]

Wella Taiwan Co. Ltd. [Taiwan]

Wella Trading (Thailand) Ltd. [Thailand]

Wella Ukraina [Ukraine]

ZAO “Petersburg Products International zao” [Russia]

Zogi SRL [Italy]

Zooth de Mexico, S. de R.L. de C.V. [Mexico]

Zooth, Inc. [Texas]

[ ] Brackets indicate state or country of incorporation and do not form part of corporate name

EX-23

EXHIBIT (23)

Independent Registered Public Accounting Firm’s Consent

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following documents of our reports dated August 12, 2008, relating to the consolidated financial statements of The Procter & Gamble Company and subsidiaries (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of (1) FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” and (2) SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132 (R)”) and the effectiveness of The Procter & Gamble Company and subsidiaries’ internal control over financial reporting, incorporated by reference in the Annual Report on Form 10-K of The Procter & Gamble Company and subsidiaries for the year ended June 30, 2008.

1.	Amendment No. 1 on Form S-8 Registration Statement No. 33-31855 on Form S-4 (now S-8) for the 1982 Noxell Employees’ Stock Option Plan and the 1984 Noxell Employees’ Stock Option Plan;
2.	Post-Effective Amendment No. 1 to Registration Statement No. 33-49289 on Form S-8 for The Procter & Gamble 1992 Stock Plan;
3.	Registration Statement No. 33-47656 on Form S-8 for The Procter & Gamble International Stock Ownership Plan;
4.	Registration Statement No. 33-50273 on Form S-8 for The Procter & Gamble Commercial Company Employees’ Savings Plan;
5.	Registration Statement No. 33-51469 on Form S-8 for The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan;
6.	Registration Statement No. 333-05715 on Form S-8 for The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan;
7.	Post-Effective Amendment No. 2 to Registration Statement No. 33-59257 on Form S-3 for The Procter & Gamble Shareholder Investment Program;
8.	Registration Statement No. 333-14381 on Form S-8 for Profit Sharing Retirement Plan of The Procter & Gamble Commercial Company;
9.	Registration Statement No. 333-14397 on Form S-8 for Procter & Gamble Subsidiaries Savings Plan;
10.	Registration Statement No. 333-21783 on Form S-8 for The Procter & Gamble 1992 Stock Plan (Belgian Version);

11.	Registration Statement No. 333-37905 on From S-8 for The Procter & Gamble Future Shares Plan;
12.	Registration Statement No. 333-51213 on Form S-8 for Group Profit Sharing, Incentive, and Employer Contribution Plan (France);
13.	Registration Statement No. 333-51219 on Form S-8 for Procter & Gamble Ireland Employees Share Ownership Plan;
14.	Registration Statement No. 333-51221 on Form S-8 for Employee Stock Purchase Plan (Japan);
15.	Registration Statement No. 333-51223 on Form S-8 for Savings and Thrift Plan (Saudi Arabia);
16.	Registration Statement No. 333-34606 on Form S-8 for The Procter & Gamble Future Shares Plan;
17.	Registration Statement No. 333-40264 on Form S-8 for Savings and Thrift Plan Saudi Arabia;
18.	Registration Statement No. 333-44034 on From S-8 for The Procter & Gamble International Stock Ownership Plan;
19.	Registration Statement No. 333-47132 on Form S-8 for Employee Stock Purchase Plan (Japan);
20.	Registration Statement No. 333-49764 on Form S-3 for The Procter & Gamble U.K. Share Investment Scheme;
21.	Registration Statement No. 333-75030 on Form S-8 for The Procter & Gamble 2001 Stock and Incentive Compensation Plan;
22.	Registration Statement No. 333-100561 on Form S-8 for The Procter & Gamble (U.K.) 1-4-1 Plan;
23.	Registration Statement No. 333-108753 on Form S-8 for The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan;
24.	Registration Statement No. 333-108991 on Form S-8 for The Procter & Gamble 1992 Stock Plan (Belgian Version);
25.	Registration Statement No. 333-108992 on Form S-8 for Savings and Thrift Plan (Saudi Arabia);

26.	Registration Statement No. 333-108993 on Form S-8 for Employee Stock Purchase Plan (Japan);
27.	Registration Statement No. 333-108994 on Form S-8 for Procter & Gamble Ireland Employees Share Plan;
28.	Registration Statement No. 333-108995 on Form S-8 for Group Profit Sharing, Incentive, and Employer Contribution Plan (France);
29.	Registration Statement No. 333-108997 on Form S-8 for The Procter & Gamble International Stock Ownership Plan;
30.	Registration Statement No. 333-108998 on Form S-8 for The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan;
31.	Registration Statement No. 333-108999 on Form S-8 for The Procter & Gamble 1992 Stock Plan;
32.	Registration Statement No. 333-111304 on Form S-8 for The Procter & Gamble 2003 Non-Employee Directors’ Stock Plan;
33.	Registration Statement No. 333-111305 on Form S-8 for The Procter & Gamble U.K. Share Investment Scheme;
34.	Amendment No. 1 to Registration Statement No. 333-113515 on Form S-3 for The Procter & Gamble Company Debt Securities and Warrants;
35.	Amendment No. 3 to Registration Statement No. 333-123309 on Form S-4 for The Procter & Gamble Company; and
36.	Registration Statement No. 333-128859 on Form S-8 for certain employee benefit plans of The Gillette Company (2004 Long –Term Incentive Plan of The Gillette Company; 1971 Stock Option Plan of The Gillette Company; James M. Kilts Non-Statutory Stock Option Plan; The Gillette Company Employees’ Savings Plan; The Gillette Company Supplemental Savings Plan; The Gillette Company Global Employee Stock Ownership Plan (GESOP))
37.	Registration Statement No. 333-143801 on Form S-8 for The Procter & Gamble Savings Plan.
38.	Registration Statement No. 333-145938 on Form S-3 for The Procter & Gamble Company and Procter & Gamble International Funding SCA;
39.	Registration Statement No. 333-146904 on Form S-8 for The Gillette Company Employee’s Savings Plan.

DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

Cincinnati, Ohio
August 28, 2008

EX-31

EXHIBIT (31)

Rule 13a-14(a)/15d-14(a) Certifications

Rule 13a-14(a)/15d-14(a) Certifications

I, A.G. Lafley, certify that:

(1)	I have reviewed this annual report on Form 10-K of The Procter & Gamble Company;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s

auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

A.G. LAFLEY

(A.G. Lafley)

Chairman of the Board
and Chief Executive Officer

August 28, 2008

Date

Rule 13a-14(a)/15d-14(a) Certifications

I, Clayton C. Daley, Jr., certify that:

(1)	I have reviewed this annual report on Form 10-K of The Procter & Gamble Company;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s

auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

CLAYTON C. DALEY, JR.

(Clayton C. Daley, Jr.)

Chief Financial Officer

August 28, 2008

Date

EX-32

EXHIBIT (32)

Section 1350 Certifications

Section 1350 Certifications

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of The Procter & Gamble Company (the “Company”) certifies to his knowledge that:

(1)	The Annual Report on Form 10-K of the Company for the year ended June 30, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in that Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

A.G. LAFLEY

(A.G. Lafley)

Chairman of the Board
and Chief Executive Officer

August 28, 2008

Date

Section 1350 Certifications

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of The Procter & Gamble Company (the “Company”) certifies to his knowledge that:

(1)	The Annual Report on Form 10-K of the Company for the year ended June 30, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in that Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

CLAYTON C. DALEY, JR.

(Clayton C. Daley, Jr.)

Chief Financial Officer

August 28, 2008

Date

EX-99.1

EXHIBIT (99-1)

Summary of Directors and Officers Insurance Program

P&G Directors & Officers Insurance Program Summary

This summary states the general effect of the Company’s Directors & Officers Insurance Program for the policy period effective for June 30, 2008 to June 30, 2009.

INSURANCE		LIMIT		UNDERLYING
COMPANY	COVER	($MILL)		($MILL)
Corporate Officers & Directors Assurance Ltd.	Side A		25	nil
XL Insurance (Bermuda) Ltd.	Side A		25		25
ACE Bermuda Insurance Ltd.	Side A,B,C		15		50
Zurich American Insurance Company	Side A,B,C		15		65
Allied World Assurance Company Ltd.	Side A,B,C		20		80
Arch Insurance (Bermuda)	Side A,B,C		25		100
Max Bermuda Ltd.	Side A,B,C		15		125
National Union Fire Insurance Company of Pittsburgh , Pa	Side A,B,C		10		140
Starr Excess Liability Insurance International Limited	Side A,B,C		25		150
Axis Specialty Limited Bermuda	Side A,B,C		25		175
Corporate Officers & Directors Assurance Ltd.	Side A		25		200
XL Insurance (Bermuda) Ltd.	Side A		15		225
Starr Excess Liability Insurance International Limited	Side A		10		240
TOTAL			250

Note- “Side A coverage” refers to Directors & Officers (“D&O”) insurance coverage that provides direct coverage to insured directors and officers for claims for which the insured company is unable or unwilling to indemnify the insured individuals. For example, the law in many states prohibits a company from indemnifying its directors or officers for shareholder derivative claims. “Side B coverage” refers to D&O coverage that indemnifies the insured company or corporation, typically in excess of a deductible, for sums that the company or corporation spends to indemnify insured directors or officers for allegedly wrongful acts covered by the terms of D&O insurance. “Side C coverage” refers to direct entity coverage provided to the insured company or corporation itself when a claim is brought against the company or corporation itself for allegedly wrongful acts covered by the terms of D&O insurance.