10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

For the Quarterly Period Ended March 31, 2011

OR

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

For the transition period from                      to                     

Commission file number 1-434

THE PROCTER & GAMBLE COMPANY

(Exact name of registrant as specified in its charter)

Ohio	31-0411980
(State of Incorporation)	(I.R.S. Employer Identification Number)

One Procter & Gamble Plaza, Cincinnati, Ohio	45202
(Address of principal executive offices)	(Zip Code)

(513) 983-1100

(Registrant’s telephone number, including area code)

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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer  þ                    Accelerated filer  ¨                    Non-accelerated filer  ¨

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

There were 2,791,293,888 shares of Common Stock outstanding as of March 31, 2011.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

The Consolidated Statements of Earnings of The Procter & Gamble Company and subsidiaries (the “Company”, “we” or “our”) for the three months and nine months ended March 31, 2011 and 2010, the Consolidated Balance Sheets as of March 31, 2011 and June 30, 2010, and the Consolidated Statements of Cash Flows for the nine months ended March 31, 2011 and 2010 follow. In the opinion of management, these unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods reported. However, such financial statements may not necessarily be indicative of annual results.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

	Three Months Ended March 31				Nine Months Ended March 31
Amounts in millions except per share amounts	2011		2010		2011		2010
Net Sales	$	20,230	$	19,178	$	61,699	$	60,012
Cost of products sold		10,005		9,225		29,981		28,359
Selling, general and administrative expense		6,453		5,985		19,185		18,582
Operating Income		3,772		3,968		12,533		13,071
Interest expense		202		223		619		734
Other non-operating income/(expense), net		71		17		70		93
Earnings from Continuing Operations Before Income Taxes		3,641		3,762		11,984		12,430
Income taxes on continuing operations		768		1,177		2,697		3,669
Net Earnings from Continuing Operations		2,873		2,585		9,287		8,761
Net Earnings from Discontinued Operations		—		—		—		1,790
Net Earnings	$	2,873	$	2,585	$	9,287	$	10,551
Per Common Share
Basic net earnings from continuing operations	$	1.01	$	0.88	$	3.24	$	2.96
Basic net earnings from discontinued operations		—		—		—		0.61
Basic net earnings		1.01		0.88		3.24		3.57
Diluted net earnings from continuing operations		0.96		0.83		3.09		2.82
Diluted net earnings from discontinued operations		—		—		—		0.57
Diluted net earnings		0.96		0.83		3.09		3.39
Dividends	$	0.4818	$	0.4400	$	1.4454	$	1.3200
Diluted Weighted Average Common Shares Outstanding		2,999.3		3,103.9		3,008.6		3,110.2

See accompanying Notes to Consolidated Financial Statements

1

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Amounts in millions			March 31 2011			June 30 2010
ASSETS
CURRENT ASSETS
Cash and cash equivalents			$	2,946		$	2,879
Accounts receivable				6,264			5,335
Inventories
Materials and supplies				2,134			1,692
Work in process				710			604
Finished goods				4,775			4,088
Total inventories				7,619			6,384
Deferred income taxes				1,099			990
Prepaid expenses and other current assets				3,886			3,194
TOTAL CURRENT ASSETS				21,814			18,782
PROPERTY, PLANT AND EQUIPMENT
Buildings				7,574			6,868
Machinery and equipment				31,799			29,294
Land				911			850
Total property, plant and equipment				40,284			37,012
Accumulated depreciation				(19,763	)		(17,768	)
NET PROPERTY, PLANT AND EQUIPMENT				20,521			19,244
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill				57,030			54,012
Trademarks and other intangible assets, net				32,598			31,636
NET GOODWILL AND OTHER INTANGIBLE ASSETS				89,628			85,648
OTHER NONCURRENT ASSETS				4,575			4,498
TOTAL ASSETS			$	136,538		$	128,172
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable			$	6,458		$	7,251
Accrued and other liabilities				9,996			8,559
Debt due within one year				9,721			8,472
TOTAL CURRENT LIABILITIES				26,175			24,282
LONG-TERM DEBT				21,699			21,360
DEFERRED INCOME TAXES				10,923			10,902
OTHER NONCURRENT LIABILITIES				10,309			10,189
TOTAL LIABILITIES				69,106			66,733
SHAREHOLDERS’ EQUITY
Preferred stock				1,241			1,277
Common stock – shares issued –	31-Mar	4,007.8		4,008
	30-Jun	4,007.6					4,008
Additional paid-in capital				62,180			61,697
Reserve for ESOP debt retirement				(1,355	)		(1,350	)
Accumulated other comprehensive income (loss)				(3,495	)		(7,822	)
Treasury stock				(65,202	)		(61,309	)
Retained earnings				69,692			64,614
Noncontrolling interest				363			324
TOTAL SHAREHOLDERS’ EQUITY				67,432			61,439
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			$	136,538		$	128,172

See accompanying Notes to Consolidated Financial Statements

2

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended March 31
Amounts in millions	2011			2010
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	2,879		$	4,781
OPERATING ACTIVITIES
Net earnings		9,287			10,551
Depreciation and amortization		2,103			2,328
Share-based compensation expense		295			333
Deferred income taxes		186			187
Gain on sale of businesses		(70	)		(2,650	)
Changes in:
Accounts receivable		(495	)		(338	)
Inventories		(817	)		(27	)
Accounts payable, accrued and other liabilities		(223	)		2,198
Other operating assets and liabilities		(797	)		(43	)
Other		(84	)		220
TOTAL OPERATING ACTIVITIES		9,385			12,759
INVESTING ACTIVITIES
Capital expenditures		(2,066	)		(1,980	)
Proceeds from asset sales		89			3,047
Acquisitions, net of cash acquired		(489	)		(65	)
Change in investments		97			(32	)
TOTAL INVESTING ACTIVITIES		(2,369	)		970
FINANCING ACTIVITIES
Dividends to shareholders		(4,237	)		(4,001	)
Change in short-term debt		(420	)		(3,481	)
Additions to long-term debt		1,536			2,752
Reductions of long-term debt		(188	)		(5,922	)
Treasury stock purchases		(4,536	)		(3,417	)
Impact of stock options and other		758			531
TOTAL FINANCING ACTIVITIES		(7,087	)		(13,538	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS		138			(73	)
CHANGE IN CASH AND CASH EQUIVALENTS		67			118
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,946		$	4,899

See accompanying Notes to Consolidated Financial Statements

3

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010. The results of operations for the three-month and nine-month periods ended March 31, 2011 are not necessarily indicative of annual results.

2. Comprehensive Income - Total comprehensive income is comprised primarily of net earnings, net currency translation gains and losses, impacts of net investment and cash flow hedges, net unrealized gains and losses on investment securities and defined benefit and other retiree benefit plan activities. Total comprehensive income for the three months ended March 31, 2011 and 2010 was $4,734 million and $772 million, respectively. For the nine months ended March 31, 2011 and 2010, total comprehensive income was $13,614 million and $9,860 million, respectively.

3. Segment Information - Following is a summary of segment results. As discussed in Note 10, our divested global pharmaceutical business is presented as discontinued operations and is excluded from segment results for all periods presented.

Following is a summary of segment results.

		Three Months Ended March 31									Nine Months Ended March 31
Amounts in millions		Net Sales			Earnings from Continuing Operations Before Income Taxes			Net Earnings from Continuing Operations			Net Sales			Earnings from Continuing Operations Before Income Taxes			Net Earnings from Continuing Operations
Beauty	2011	$	4,870		$	762		$	547		$	15,089		$	2,984		$	2,272
	2010		4,623			772			562			14,761			2,936			2,215
Grooming	2011		1,907			524			379			5,969			1,683			1,259
	2010		1,759			462			377			5,712			1,564			1,161
Health Care	2011		2,962			658			427			9,084			2,178			1,453
	2010		2,805			663			435			8,855			2,283			1,519
Snacks and Pet Care	2011		799			94			61			2,306			264			182
	2010		747			124			77			2,337			380			249
Fabric Care and Home Care	2011		6,088			1,195			754			18,693			3,777			2,449
	2010		5,812			1,168			752			18,253			4,111			2,726
Baby Care and Family Care	2011		3,968			832			528			11,550			2,383			1,500
	2010		3,768			889			558			11,174			2,699			1,694
Corporate	2011		(364	)		(424	)		177			(992	)		(1,285	)		172
	2010		(336	)		(316	)		(176	)		(1,080	)		(1,543	)		(803	)
Total	2011		20,230			3,641			2,873			61,699			11,984			9,287
	2010		19,178			3,762			2,585			60,012			12,430			8,761

4

4. Goodwill and Other Intangible Assets - Goodwill as of March 31, 2011 is allocated by reportable segment as follows (amounts in millions):

	Nine Months Ended March 31, 2011
Beauty, beginning of year	$	17,575
Acquisitions and divestitures		(5	)
Translation and other		1,258
Goodwill, March 31, 2011		18,828
Grooming, beginning of year		20,384
Acquisitions and divestitures		6
Translation and other		1,047
Goodwill, March 31, 2011		21,437
Health Care, beginning of year		7,859
Acquisitions and divestitures		(4	)
Translation and other		275
Goodwill, March 31, 2011		8,130
Snacks and Pet Care, beginning of year		2,203
Acquisitions and divestitures		16
Translation and other		20
Goodwill, March 31, 2011		2,239
Fabric Care and Home Care, beginning of year		4,248
Acquisitions and divestitures		97
Translation and other		204
Goodwill, March 31, 2011		4,549
Baby Care and Family Care, beginning of year		1,445
Acquisitions and divestitures		(1	)
Translation and other		94
Goodwill, March 31, 2011		1,538
Corporate, beginning of year		298
Acquisitions and divestitures		11
Translation and other		—
Goodwill, March 31, 2011		309
GOODWILL, beginning of year		54,012
Acquisitions and divestitures		120
Translation and other		2,898
Goodwill, March 31, 2011	$	57,030

The increase in goodwill from June 30, 2010 is primarily due to currency translation across all reportable segments and the acquisition of Ambi Pur in our Fabric Care and Home Care reportable segment.

5

Identifiable intangible assets as of March 31, 2011 are comprised of (amounts in millions):

	Gross Carrying Amount		Accumulated Amortization
Amortizable intangible assets with determinable lives	$	9,048	$	4,079
Intangible assets with indefinite lives		27,629		—
Total identifiable intangible assets	$	36,677	$	4,079

Defined life intangible assets consist principally of brands, patents, technology and customer relationships. Indefinite lived intangible assets consist primarily of brands.

The amortization of intangible assets for the three months ended March 31, 2011, and 2010 was $128 million and $147 million, respectively. For the nine months ended March 31, 2011 and 2010, the amortization of intangible assets was $399 million and $435 million, respectively.

5. Pursuant to applicable accounting guidance for share-based payments, companies must recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards.

Total share-based compensation for the three months and nine months ended March 31, 2011 and 2010 are summarized in the following table (amounts in millions):

	Three Months Ended March 31				Nine Months Ended March 31
	2011		2010		2011		2010
Share-Based Compensation
Stock options	$	101	$	116	$	254	$	307
Other share-based awards		14		12		41		26
Total share-based compensation	$	115	$	128	$	295	$	333

Assumptions utilized in the model are evaluated and revised, as necessary, to reflect market conditions and experience.

6

6. Postretirement Benefits - The Company offers various postretirement benefits to its employees.

The components of net periodic benefit cost for defined benefit plans are as follows:

	Pension Benefits						Other Retiree Benefits
	Three Months Ended March 31						Three Months Ended March 31
Amounts in millions	2011			2010			2011			2010
Service Cost	$	65		$	54		$	40		$	26
Interest Cost		146			144			72			63
Expected Return on Plan Assets		(123	)		(109	)		(108	)		(108	)
Amortization of Deferred Amounts		4			3			(3	)		(5	)
Recognized Net Actuarial Loss		39			23			25			6
Settlement Loss		—			3			—			—
Gross Benefit Cost (Credit)		131			118			26			(18	)
Dividends on ESOP Preferred Stock		—			—			(20	)		(27	)
Net Periodic Benefit Cost (Credit)		131			118			6			(45	)
	Pension Benefits						Other Retiree Benefits
	Nine Months Ended March 31						Nine Months Ended March 31
	2011			2010			2011			2010
Service Cost	$	191		$	166		$	110		$	78
Interest Cost		430			441			203			190
Expected Return on Plan Assets		(364	)		(333	)		(323	)		(322	)
Amortization of Deferred Amounts		13			11			(13	)		(16	)
Recognized Net Actuarial Loss		114			69			72			15
Settlement Loss		—			3			—			—
Gross Benefit Cost (Credit)		384			357			49			(55	)
Dividends on ESOP Preferred Stock		—			—			(59	)		(83	)
Net Periodic Benefit Cost (Credit)		384			357			(10	)		(138	)

For the year ending June 30, 2011, the expected return on plan assets is 7.2% and 9.2% for defined benefit and other retiree benefit plans, respectively.

7. Risk Management Activities and Fair Value Measurements

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.

For details on the Company’s risk management activities, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010.

Fair Value Hierarchy

For a discussion of the Company’s fair value measurement policies under the fair value hierarchy, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010.

The Company has not changed its valuation techniques for measuring the fair value of any financial assets and liabilities during the period.

7

The following table sets forth the Company’s financial assets and liabilities as of March 31, 2011 and June 30, 2010 that are measured at fair value on a recurring basis during the period, segregated by level within the fair value hierarchy:

	Level 1				Level 2				Level 3				Total
Amounts in millions	March 31, 2011		June 30, 2010		March 31, 2011		June 30, 2010		March 31, 2011		June 30, 2010		March 31, 2011		June 30, 2010
Assets at fair value:
Investment securities	$	19	$	12	$	—	$	—	$	23	$	45	$	42	$	57
Derivatives relating to:
Foreign currency hedges		—		—		6		—		—		—		6		—
Other foreign currency instruments (1)		—		—		206		81		—		—		206		81
Interest rates		—		—		97		191		—		—		97		191
Net investment hedges		—		—		2		14		—		—		2		14
Commodities		—		—		6		10		—		—		6		10
Total assets at fair value (2)		19		12		317		296		23		45		359		353
Liabilities at fair value:
Derivatives relating to:
Foreign currency hedges		—		—		105		177		—		—		105		177
Other foreign currency instruments (1)		—		—		28		175		—		—		28		175
Interest rates		—		—		20		—		—		—		20		—
Net investment hedges		—		—		105		23		—		—		105		23
Commodities		—		—		1		—		—		—		1		—
Total liabilities at fair value (3)		—		—		259		375		—		—		259		375

(1) Other foreign currency instruments are comprised of non-qualifying foreign currency financial instruments.

(2) Investment securities are presented in other noncurrent assets and all derivative assets are presented in prepaid expenses and other current assets or other noncurrent assets.

(3) All derivative liabilities are presented in accrued and other liabilities or other noncurrent liabilities.

The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. There was no significant activity within the Level 3 assets and liabilities during the periods presented.

There were no significant assets or liabilities that were re-measured at fair value on a non-recurring basis during the periods presented.

Certain of the Company’s financial instruments used in hedging transactions are governed by industry standard netting agreements with counterparties. If the Company’s credit rating were to fall below the levels stipulated in the agreements, the counterparties could demand either collateralization or termination of the arrangement. The aggregate fair value of the instruments covered by these contractual features that are in a net liability position as of March 31, 2011 was $146 million. The Company has not been required to post any collateral as a result of these contractual features.

Fair Values of Other Financial Instruments

Other financial instruments, including cash equivalents, other investments and short-term debt, are recorded at cost, which approximates fair value. The fair value of the long-term debt was $22,996 million and $23,072 million at March 31, 2011 and June 30, 2010, respectively.

8

Disclosures about Derivative Instruments

The notional amounts and fair values of qualifying and non-qualifying financial instruments used in hedging transactions as of March 31, 2011 and June 30, 2010 are as follows:

	Notional Amount				Fair Value Asset (Liability)
Amounts in Millions	March 31, 2011		June 30, 2010		March 31, 2011			June 30, 2010
Derivatives in Cash Flow Hedging Relationships
Interest rate contracts	$	—	$	—	$	—		$	—
Foreign currency contracts		831		690		(99	)		(177	)
Commodity contracts		19		43		5			10
Total		850		733		(94	)		(167	)
Derivatives in Fair Value Hedging Relationships
Interest rate contracts		10,201		7,942		77			191
Derivatives in Net Investment Hedging Relationships
Net investment hedges		1,664		1,586		(103	)		(9	)
Derivatives Not Designated as Hedging Instruments
Foreign currency contracts		13,043		11,845		178			(94	)
Commodity contracts		51		19		—			—
Total		13,094		11,864		178			(94	)

The total notional amount of contracts outstanding at the end of the period is indicative of the level of the Company’s derivative activity during the period.

	Amount of Gain (Loss) Recognized in Accumulated OCI on Derivatives (Effective Portion)
Amounts in Millions	March 31, 2011			June 30, 2010
Derivatives in Cash Flow Hedging Relationships
Interest rate contracts	$	16		$	19
Foreign currency contracts		25			23
Commodity contracts		3			11
Total		44			53
Derivatives in Net Investment Hedging Relationships
Net investment hedges		(68	)		(8	)

During the next 12 months, the amount of the March 31, 2011 accumulated other comprehensive income (OCI) balance that will be reclassified to earnings is expected to be immaterial.

9

The amounts of gains and losses on qualifying and non-qualifying financial instruments used in hedging transactions for the three-month and nine-month periods ended March 31, 2011 and 2010 are as follows:

	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (1)
	Three Months Ended March 31						Nine Months Ended March 31
Amounts in Millions	2011			2010			2011			2010
Derivatives in Cash Flow Hedging Relationships
Interest rate contracts	$	1		$	(1	)	$	5		$	(10	)
Foreign currency contracts		17			15			(51	)		(7	)
Commodity contracts		1			(1	)		19			(86	)
Total		19			13			(27	)		(103	)
	Amount of Gain(Loss) Recognized in Income
	Three Months Ended March 31						Nine Months Ended March 31
Amounts in Millions	2011			2010			2011			2010
Derivatives in Fair Value Hedging Relationships (2)
Interest rate contracts		(90	)		122			(115	)		122
Debt		92			(128	)		118			(127	)
Total		2			(6	)		3			(5	)
Derivatives in Net Investment Hedging Relationships (2)
Net investment hedges		2			(1	)		1			3
Derivatives Not Designated as Hedging Instruments (3)
Foreign currency contracts		438			(595	)		1,064			(481	)
Commodity contracts		—			—			4			—
Total		438			(595	)		1,068			(481	)

(1) The gain or loss on the effective portion of cash flow hedging relationships is reclassified from accumulated OCI into net income in the same period during which the related item affects earnings. Such amounts are included in the Consolidated Statements of Earnings as follows: interest rate contracts in interest expense, foreign currency contracts in selling, general and administrative expense and commodity contracts in cost of products sold.

(2) The gain or loss on the ineffective portion of interest rate contracts and net investment hedges, if any, is included in the Consolidated Statements of Earnings in interest expense.

(3) The gain or loss on contracts not designated as hedging instruments is included in the Consolidated Statements of Earnings as follows: foreign currency contracts in selling, general and administrative expense and commodity contracts in cost of products sold.

8. New Accounting Pronouncements and Policies

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.

9. Commitments and Contingencies

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.

As previously disclosed, the Company is and has been subject to a variety of investigations into potential competition law violations in Europe by the European Commission and national authorities from a number of countries. These matters involve a number of 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, and to cooperate with investigations by relevant regulatory authorities, which the Company is doing. Competition and antitrust law inquiries often continue for several years and, if violations are found, can result in substantial fines.

In response to the actions of the European Commission and national authorities, the Company launched its own internal investigations into potential violations of competition laws. The Company identified violations in certain European countries and appropriate actions were taken.

10

Several regulatory authorities in Europe have issued separate complaints pursuant to their investigations alleging that the Company, along with several other companies, engaged in violations of competition laws in those countries. The remaining authorities’ investigations are in various stages of the regulatory process. As a result of our initial and on-going analyses of the complaints, as well as final decisions issued by the authorities in Spain and Czech Republic during the quarter ended March 31, 2011 and by the European Commission in April 2011, the Company has reserves totaling $606 million as of March 31, 2011 for potential fines for competition law violations. In accordance with US GAAP, certain of the reserves included in this amount represent the low end of a range of potential outcomes. Accordingly, the ultimate resolution of these matters may result in fines or costs in excess of the amounts reserved that could materially impact our income statement and cash flows in the period in which they are accrued and paid, respectively. We will continue to monitor developments for all of these investigations and will record additional charges as appropriate.

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.

Income Tax Uncertainties

The Company is present in over 150 taxable jurisdictions and, at any point in time, has 50 - 60 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. We have tax years open ranging from 2001 and forward. Net adjustments to prior-year tax balances for uncertain tax positions resulted in a tax benefit of approximately $424 million in the current year. We are generally not able to reliably estimate the ultimate settlement amounts or timing until the close of the audit. At this time, we are not able to make a reasonable estimate of the range of potential changes to the balance of uncertain tax positions over the next 12 months or the impact of any such changes on the effective tax rate.

Additional information on the Commitments and Contingencies of the Company can be found in Note 10, Commitments and Contingencies, which appears in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010.

10. Discontinued Operations

In October 2009, the Company completed the divestiture of our global pharmaceuticals business to Warner Chilcott plc (Warner Chilcott) for $2.8 billion of cash, net of assumed and transferred liabilities. Under the terms of the agreement, Warner Chilcott acquired our portfolio of branded pharmaceutical products, our prescription drug product pipeline and manufacturing facilities in Puerto Rico and Germany. In addition, the majority of the employees working on the pharmaceuticals business were transferred to Warner Chilcott. The Company recorded an after-tax gain on the transaction of $1,464 million in the quarter ended December 31, 2009, which is included in net earnings from discontinued operations in the Consolidated Statement of Earnings for the nine-month period ended March 31, 2010. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of the pharmaceuticals business are presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented.

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Following is selected financial information included in net earnings from discontinued operations for the pharmaceuticals business:

	Three months ended March  31				Nine months ended March  31
Amounts in millions	2011		2010		2011		2010
Net sales	$	—	$	—	$	—	$	751
Earnings from discontinued operations		—		—		—		306
Income tax expense		—		—		—		(101	)
Gain on sale of discontinued operations		—		—		—		2,632
Income tax benefit (expense) on sale		—		—		—		(1,047	)
Net earnings from discontinued operations		—		—		—		1,790

The net gain on the sale of the pharmaceuticals business for the nine-month period ended March 31, 2010 also includes an after-tax gain on the sale of the Actonel brand in Japan, which occurred prior to the divestiture to Warner Chilcott.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 Results

• Forward-Looking Statements

• Results of Operations - Three Months Ended March 31, 2011

• Results of Operations - Nine Months Ended March 31, 2011

• Business Segment Discussion - Three and Nine Months Ended March 31, 2011

• Financial Condition

• Reconciliation of Non-GAAP Measures

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 organic sales growth, core earnings per share growth, free cash flow and free cash flow productivity. These financial measures are not defined under accounting principles generally accepted in the United States of America (U.S. GAAP). The explanation 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 such 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.

OVERVIEW

P&G’s business is focused on providing branded consumer goods products. Our purpose is to provide products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. 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, drug stores and “high frequency stores,” the neighborhood stores which serve many consumers in developing markets. We continue to expand our presence in other channels including department stores, perfumeries, pharmacies, salons and e-commerce.

We compete in multiple product categories and have two global business units (GBUs): the Beauty and Grooming GBU and the Household Care GBU. Under U.S. GAAP, the business units comprising the GBUs are aggregated into six reportable segments: Beauty; Grooming; Health Care; Snacks and Pet Care; Fabric Care and Home Care; and Baby Care and Family Care.

We have on-the-ground operations in approximately 80 countries through our Market Development Organization, which leads country business teams to build our brands in local markets and is organized along five geographic units: North America, Western Europe, Central & Eastern Europe/Middle East/Africa (CEEMEA), Latin America and Asia, which is comprised of Japan, Greater China and ASEAN/Australia/India/Korea (AAIK). Throughout MD&A, we reference business results in developing markets, which we define as the aggregate of CEEMEA, Latin America, AAIK and Greater China, and developed markets, which are comprised of North America, Western Europe and Japan.

On October 30, 2009, we sold our global pharmaceuticals business to Warner Chilcott plc (Warner Chilcott) for $2.8 billion. Under the terms of the agreement, Warner Chilcott acquired our portfolio of branded pharmaceuticals products, prescription drug product pipeline and manufacturing facilities in Puerto Rico and Germany. The pharmaceuticals business had historically been part of the Health Care reportable segment. In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of the pharmaceuticals business are presented as discontinued operations and, as such, are excluded from continuing operations and from segment results.

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The table below provides more information about the components of our reportable business segment structure.

Reportable Segment	Categories	Billion-Dollar Brands
Beauty	Cosmetics, Female Antiperspirant and Deodorant, Female Personal Cleansing, Female Shave Care, Hair Care, Hair Color, Hair Styling, Pharmacy Channel, Prestige Products, Salon Professional, Skin Care	Head & Shoulders, Olay, Pantene, Wella
Grooming	Beauty Electronics, Home Small Appliances, Male Blades and Razors, Male Personal Care	Braun, Fusion, Gillette, Mach3
Health Care	Feminine Care, Gastrointestinal, Incontinence, Rapid Diagnostics, Respiratory, Toothbrush, Toothpaste, Water Filtration, Other Oral Care	Always, Crest, Oral-B
Snacks and Pet Care	Pet Care, Snacks	Iams, Pringles
Fabric Care and Home Care	Laundry Additives, Air Care, Batteries, Dish Care, Fabric Enhancers, Laundry Detergents, Surface Care	Ace, Ariel, Dawn, Downy, Duracell, Gain, Tide, Febreze
Baby Care and Family Care	Baby Wipes, Diapers, Paper Towels, Tissues, Toilet Paper	Bounty, Charmin, Pampers

The following table provides the percentage of net sales and net earnings from continuing operations by reportable business segment for the three and nine months ended March 31, 2011 (excludes net sales and net earnings in Corporate):

	Three Months Ended March 31						Nine Months Ended March 31
	Net Sales			Net Earnings			Net Sales			Net Earnings
Beauty		24	%		20	%		24	%		25	%
Grooming		9	%		14	%		10	%		14	%
Health Care		14	%		16	%		14	%		16	%
Snacks and Pet Care		4	%		2	%		4	%		2	%
Fabric Care and Home Care		30	%		28	%		30	%		27	%
Baby Care and Family Care		19	%		20	%		18	%		16	%
Total		100	%		100	%		100	%		100	%

SUMMARY OF RESULTS

Following are highlights of results for the nine months ended March 31, 2011 versus the nine months ended March 31, 2010:

• Net sales increased 3% to $61.7 billion as 6% volume growth was partially offset by 2 points from negative mix and 1 point from unfavorable foreign exchange. Organic sales, which exclude the impacts of acquisitions, divestitures and foreign exchange, were up 4%.

• Operating margin declined 150 basis points behind a commodity-cost driven reduction in gross margin and increased marketing investments, partially offset by reduced foreign currency exchange costs.

• Net earnings from continuing operations increased 6% to $9.3 billion mainly due to a lower effective tax rate and higher net sales, partially offset by operating margin contraction. Diluted net earnings per share from continuing operations increased 10% to $3.09. Earnings per share growth exceeded net earnings growth due to the impact of share repurchase activity.

• Net earnings were $9.3 billion, a decrease of 12% due to the divestiture of the pharmaceuticals business in the prior year period. Diluted net earnings per share were $3.09, a decrease of 9%. Core EPS, which is diluted net earnings per share from continuing operations excluding US healthcare reform legislation costs in the base period, pending European legal matters and a significant adjustment to an income tax reserve, increased 5% to $3.10.

• Operating cash flow decreased $3.4 billion to $9.4 billion mainly due to an increase in working capital. Free cash flow, which is operating cash flow less capital expenditures, was $7.3 billion. Free cash flow productivity, which is the ratio of free cash flow to net earnings, was 79%.

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

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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. For more information on risks that could impact our results, refer to Part II Item 1A Risk Factors in this 10-Q filing.

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. As a company that manages a portfolio of consumer brands, our ongoing business model involves a certain level of ongoing acquisition and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against base business objectives. Our success will also depend on our ability to maintain key information technology systems.

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 certain countries, such as Venezuela, China and India. 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 optimization. Successfully managing these changes, including identifying, developing and retaining key employees, is critical to our success.

Global Economic Conditions: Economic changes, terrorist activity, political unrest and natural disasters, such as the civil unrest in the Middle East and the Japan crisis, 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 or natural disasters.

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, competition law matters and tax policy) and to resolve pending legal matters within current estimates may impact our results.

RESULTS OF OPERATIONS – Three Months Ended March 31, 2011

The following discussion provides a review of results for the three months ended March 31, 2011 versus the three months ended March 31, 2010.

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THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

(Amounts in Millions Except Per Share Amounts)

Consolidated Earnings Information

	Three Months Ended March 31
	2011			2010			% CHG
NET SALES	$	20,230		$	19,178			5	%
COST OF PRODUCTS SOLD		10,005			9,225			8	%
GROSS MARGIN		10,225			9,953			3	%
SELLING, GENERAL & ADMINISTRATIVE EXPENSE		6,453			5,985			8	%
OPERATING INCOME		3,772			3,968			(5	)%
TOTAL INTEREST EXPENSE		202			223
OTHER NON-OPERATING INCOME/(EXPENSE), NET		71			17
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		3,641			3,762			(3	)%
INCOME TAXES		768			1,177
NET EARNINGS FROM CONTINUING OPERATIONS		2,873			2,585			11	%
NET EARNINGS FROM DISCONTINUED OPERATIONS		—			—
NET EARNINGS		2,873			2,585			11	%
EFFECTIVE TAX RATE FROM CONTINUING OPERATIONS		21.1	%		31.3	%
PER COMMON SHARE:
BASIC NET EARNINGS – CONTINUING OPERATIONS	$	1.01		$	0.88
BASIC NET EARNINGS – DISCONTINUED OPERATIONS	$	—		$	—
BASIC NET EARNINGS	$	1.01		$	0.88
DILUTED NET EARNINGS – CONTINUING OPERATIONS	$	0.96		$	0.83			16	%
DILUTED NET EARNINGS – DISCONTINUED OPERATIONS	$	—		$	—
DILUTED NET EARNINGS	$	0.96		$	0.83			16	%
DIVIDENDS	$	0.4818		$	0.4400			9.5	%
AVERAGE DILUTED SHARES OUTSTANDING		2,999.3			3,103.9
COMPARISONS AS A % OF NET SALES							Basis Pt Chg
GROSS MARGIN		50.5	%		51.9	%		(140	)
SELLING, GENERAL & ADMINISTRATIVE EXPENSE		31.9	%		31.2	%		70
OPERATING MARGIN		18.6	%		20.7	%		(210	)
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		18.0	%		19.6	%		(160	)
NET EARNINGS FROM CONTINUING OPERATIONS		14.2	%		13.5	%		70

Net sales increased 5% to $20.2 billion on 5% unit volume growth. Volume growth was broad based with growth in all major geographic regions. Volume increased high single digits in developing regions and low single digits in developed regions. All six of the business segments grew volume, led by high single-digit growth in the Baby Care and Family Care, and Snacks and Pet Care segments. Volume was up mid-single digits in the Fabric Care and Home Care, Beauty, and Health Care segments, and increased low single digits in the Grooming segment. Increased volume in advance of planned customer order system conversion in North America and Western Europe was largely offset by volume reductions from political disruptions in the Middle East. Higher prices increased net sales by 1%. Favorable foreign exchange increased net sales by 1% as key foreign currencies strengthened versus the U.S. dollar. Negative mix reduced net sales by 2% due mainly to disproportionate growth in developing regions and low and mid-tier value products, both of which have lower than Company average selling prices. Organic sales were up 4% on organic volume growth of 5%.

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	Net Sales Change Drivers 2011 vs. 2010 (Three Months  Ended Mar. 31)
	Volume with Acquisitions & Divestitures			Volume excluding Acquisitions & Divestitures			Foreign Exchange			Price			Mix/ Other			Net Sales Growth
Beauty		5	%		6	%		2	%		1	%		(3	)%		5	%
Grooming		2	%		2	%		1	%		5	%		—	%		8	%
Health Care		4	%		4	%		1	%		1	%		—	%		6	%
Snacks and Pet Care		7	%		4	%		2	%		—	%		(2	)%		7	%
Fabric Care and Home Care		6	%		5	%		1	%		—	%		(2	)%		5	%
Baby Care and Family Care		7	%		7	%		(1	)%		1	%		(2	)%		5	%
Total Company		5	%		5	%		1	%		1	%		(2	)%		5	%

Sales percentage changes are approximations based on quantitative formulas that are consistently applied.

Gross margin declined 140 basis points to 50.5% of net sales for the quarter. The decline was mainly due to a 200-basis point increase in commodity and energy costs and unfavorable product mix from disproportionate growth in developing regions and low and mid-tier value product. These were partially offset by the favorable impact of manufacturing cost savings and pricing.

Total selling, general and administrative expenses (SG&A) increased 8% driven by higher marketing and overhead spending and foreign currency impacts. Marketing and overhead spending increased primarily due to increased investments to support innovation and expansion plans. SG&A as a percentage of net sales increased 70 basis points due to higher marketing spending and foreign exchange costs as a percentage of net sales, partially offset by a reduction in overhead spending as a percentage of net sales.

Interest expense declined $21 million versus the prior year period primarily due to lower interest rates on floating rate debt, partially offset by an increase in debt outstanding. Other non-operating income/(expense), increased $54 million primarily due to a gain on the divestiture of the Zest brand in North America.

The effective tax rate on continuing operations decreased from 31.3% in the prior year to 21.1%. Approximately 530 basis points of this decline is due to the impact of discrete tax adjustments in both periods, including a $152 million base period charge for legislation that changed the taxation of certain future retiree prescription subsidy payments in the United States and a current period benefit for a number of minor adjustments to tax balances for uncertain tax positions. The remaining decline relates primarily to more favorable mix of earnings in the current year as an increased proportion of earnings were generated in lower tax jurisdictions during the current year.

Net earnings from continuing operations increased 11% to $2.9 billion driven primarily by a lower effective tax rate. The impact of higher net sales was largely offset by a 210-basis point reduction in operating margin. The decline in operating margin resulted largely from a lower gross margin and higher SG&A as a percentage of net sales. SG&A as a percentage of net sales increased due to higher marketing spending and foreign exchange impacts as a percentage of net sales, partially offset by a reduction in overhead as a percentage of net sales. Diluted net earnings per share from continuing operations increased 16% to $0.96. Earnings per share growth exceeded net earnings growth due to the impact of share repurchase activity.

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RESULTS OF OPERATIONS – Nine Months Ended March 31, 2011

The following discussion provides a review of results for the nine months ended March 31, 2011 versus the nine months ended March 31, 2010.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

(Amounts in Millions Except Per Share Amounts)

Consolidated Earnings Information

	Nine Months Ended March 31
	2011			2010			% CHG
NET SALES	$	61,699		$	60,012			3	%
COST OF PRODUCTS SOLD		29,981			28,359			6	%
GROSS MARGIN		31,718			31,653			—	%
SELLING, GENERAL & ADMINISTRATIVE EXPENSE		19,185			18,582			3	%
OPERATING INCOME		12,533			13,071			(4	)%
TOTAL INTEREST EXPENSE		619			734
OTHER NON-OPERATING INCOME/(EXPENSE), NET		70			93
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		11,984			12,430			(4	)%
INCOME TAXES		2,697			3,669
NET EARNINGS FROM CONTINUING OPERATIONS		9,287			8,761			6	%
NET EARNINGS FROM DISCONTINUED OPERATIONS		—			1,790
NET EARNINGS		9,287			10,551			(12	)%
EFFECTIVE TAX RATE FROM CONTINUING OPERATIONS		22.5	%		29.5	%
PER COMMON SHARE:
BASIC NET EARNINGS - CONTINUING OPERATIONS	$	3.24		$	2.96
BASIC NET EARNINGS - DISCONTINUED OPERATIONS	$	—		$	0.61
BASIC NET EARNINGS	$	3.24		$	3.57
DILUTED NET EARNINGS - CONTINUING OPERATIONS	$	3.09		$	2.82			10	%
DILUTED NET EARNINGS - DISCONTINUED OPERATIONS	$	—		$	0.57
DILUTED NET EARNINGS	$	3.09		$	3.39			(9	)%
DIVIDENDS	$	1.4454		$	1.3200			9.5	%
AVERAGE DILUTED SHARES OUTSTANDING		3,008.6			3,110.2
COMPARISONS AS A % OF NET SALES							Basis Pt Chg
GROSS MARGIN		51.4	%		52.8	%		(140	)
SELLING, GENERAL & ADMINISTRATIVE EXPENSE		31.1	%		31.0	%		10
OPERATING MARGIN		20.3	%		21.8	%		(150	)
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		19.4	%		20.7	%		(130	)
NET EARNINGS FROM CONTINUING OPERATIONS		15.1	%		14.6	%		50

Net sales increased 3% to $61.7 billion fiscal year to date on a 6% increase in unit volume. Volume growth was broad based with growth in all geographic regions, led by double-digit growth in Asia and high single digit growth in Latin America and CEEMEA. All six of the business segments contributed to volume growth, with high single-digit growth in the Baby Care and Family Care and Fabric Care and Home Care segments, mid-single-digit growth in the Beauty, Grooming and Health Care segments, and a low single-digit increase in the Snacks and Pet Care segment. Organic volume, which excludes acquisitions and divestitures, was up 6%. Mix reduced net sales by 2% due mainly to disproportionate growth in developing regions and low

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and mid-tier value products, both of which have lower than Company average selling prices. Unfavorable foreign exchange lowered net sales by 1% as key foreign currencies weakened versus the U.S. dollar. Organic sales were up 4% driven by unit volume growth, partially offset by unfavorable mix.

	Net Sales Change Drivers 2011 vs. 2010 (Nine Months Ended Mar. 31)
	Volume with Acquisitions & Divestitures			Volume excluding Acquisitions & Divestitures			Foreign Exchange			Price			Mix/ Other			Net Sales Growth
Beauty		5	%		5	%		(1	)%		—	%		(2	)%		2	%
Grooming		4	%		4	%		(2	)%		2	%		—	%		4	%
Health Care		5	%		5	%		(1	)%		(1	)%		—	%		3	%
Snacks and Pet Care		1	%		(2	)%		—	%		(1	)%		(1	)%		(1	)%
Fabric Care and Home Care		7	%		6	%		(2	)%		(1	)%		(2	)%		2	%
Baby Care and Family Care		9	%		9	%		(2	)%		(1	)%		(3	)%		3	%
Total Company		6	%		6	%		(1	)%		—	%		(2	)%		3	%

Sales percentage changes are approximations based on quantitative formulas that are consistently applied.

Gross margin contracted 140 basis points to 51.4% of net sales. The reduction in gross margin was driven mainly by a 180-basis point increase in commodity and energy costs and unfavorable product mix from disproportionate growth in developing regions and low and mid-tier value product. These impacts were partially offset by manufacturing cost savings and the favorable impact of volume scale leverage.

Total SG&A expense was up 3% to $19.2 billion, primarily due to higher marketing spending which was partially offset by the impact of higher foreign currency exchange costs in the base period. Marketing spending increased behind continued investments in our innovation and expansion plans. We incurred approximately $530 million of foreign currency exchange costs in the base period primarily to swap Venezuelan bolivars for U.S. dollars in the parallel market and to remeasure a portion of our net monetary assets denominated in bolivars at the parallel market exchange rate. These costs were nominal in the current period. See the section titled “Foreign Currency Translation – Venezuela Impacts” below for additional discussion. SG&A as a percentage of net sales increased marginally as increased marketing as a percentage of net sales was mostly offset by a reduction in foreign exchange costs and reduced overhead as a percentage of net sales.

Interest expense declined $115 million mainly due to lower interest rates on floating rate debt. Other non-operating income/(expense), net declined $23 million primarily due to the impact of a gain on the acquisition of MDVIP in the prior year period, partially offset a gain on the divestiture of the Zest brand in North America in the current year.

The effective tax rate on continuing operations decreased from 29.5% in the prior year to 22.5%. Net favorable discrete adjustments to income tax reserves in a number of jurisdictions in the current year, as compared to unfavorable adjustments in the prior year resulted in a 420 basis points reduction in the effective tax rate. Net adjustments to tax balances for uncertain tax positions resulted in a benefit of approximately $424 million fiscal year to date, including a $252 million benefit related to the pending settlement of tax litigation primarily related to the deductibility of technology donations. We do not expect the magnitude of recent benefits from these adjustments to be sustainable. The tax rate also benefited from the geographic mix of earnings, as an increased proportion of earnings were generated in lower tax jurisdictions during the current year.

Net earnings from continuing operations increased 6% to $9.3 billion driven primarily by a lower effective tax rate and higher net sales, partially offset by a 150-basis point reduction in operating margin. The decline in operating margin resulted largely from lower gross margin. Diluted net earnings per share from continuing operations increased 10% to $3.09. Earnings per share growth exceeded net earnings growth due to the impact of share repurchase activity.

Net earnings from discontinued operations decreased $1.8 billion mainly due to the impact of the gain on the divestiture of the global pharmaceuticals business in the prior year period.

Net earnings declined 12% to $9.3 billion due to a reduction in net earnings from discontinued operations, partially offset by an increase in net earnings from continuing operations. Diluted net earnings per share declined 9% to $3.09. The decline in earnings per share was less than the decline in net earnings due to the impact of share repurchases.

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Foreign Currency Translation - Venezuela Impacts

Venezuela is a highly inflationary economy under U.S. GAAP. As a result, the U.S. dollar is the functional currency for our subsidiaries in Venezuela. Any currency remeasurement adjustments for non-dollar denominated monetary assets and liabilities held by these subsidiaries and other transactional foreign exchange gains and losses are reflected in earnings.

The Venezuelan government has introduced a number of currency controls for companies operating in Venezuela. During calendar year 2010, there were two official exchange rates for imported goods. Those goods classified as essential, such as food, medicine and capital investments, had an exchange rate of 2.6 bolivars to the U.S. dollar, while payments for other non-essential goods had an exchange rate of 4.3. Many of our imported products fell into the essential classification and qualified for the 2.6 rate. In January 2011, the Venezuelan government announced the elimination of the 2.6 exchange rate on essential goods. Our overall results in Venezuela are reflected in our Consolidated Financial Statements at the 4.3 rate expected to be applicable to dividend repatriations.

There are also exchange controls over securities transactions in the parallel market, which has historically been used to pay for imported goods and services that do not qualify for exchange in the official market. The Central Bank of Venezuela is the only legal intermediary through which parallel market transactions can be executed. The government controls the underlying parallel exchange rate which was approximately 5.3 as of March 31, 2011. The notional amount of transactions that run through this parallel market mechanism is very restricted, which has eliminated our ability to access the parallel market to pay for imported goods and/or manage our local monetary asset balances.

As of March 31, 2011, we had net monetary assets denominated in local currency of approximately $709 million. Approximately $251 million of this balance has been remeasured using the parallel rate because we plan to use that amount of the net assets (largely cash) to satisfy U.S. dollar denominated liabilities that do not qualify for official rate dollars. The availability of the parallel market to settle these transactions is uncertain. The remaining net monetary asset balances are currently reflected within our Consolidated Financial Statements at the 4.3 official exchange rate. Depending on the future availability of U.S. dollars at the official rate, our local U.S. dollar needs and our overall repatriation plans, we have exposure for the differential between the official and parallel exchange rates on this portion of our local monetary assets.

Our ability to effectively manage sales and profit levels in Venezuela will be impacted by several factors, including the Company’s ability to mitigate the effect of any potential future devaluation, further actions of the Venezuelan government, economic conditions in Venezuela, such as inflation and consumer spending, the availability of raw materials, utilities and energy and the future state of exchange controls in Venezuela including the availability of U.S. dollars at the official foreign exchange rate.

BUSINESS SEGMENT DISCUSSION – Three and Nine Months Ended March 31, 2011

The following discussion provides a review of results by business segment. Analyses of the results for the three and nine months ended March 31, 2011 are provided compared to the same three and nine month periods ended March 31, 2010. The primary financial measures used to evaluate segment performance are net sales and net earnings from continuing operations. The table below provides supplemental information on net sales and net earnings from continuing operations by business segment for the three and nine months ended March 31, 2011 versus the comparable prior year period (amounts in millions):

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	Three Months Ended March 31, 2011
	Net Sales			% Change Versus Year Ago			Earnings From Continuing Operations Before Income Taxes			% Change Versus Year Ago			Net Earnings From  Continuing Operations		% Change Versus Year Ago
Beauty	$	4,870			5	%	$	762			(1	)%	$	547		(3	)%
Grooming		1,907			8	%		524			13	%		379		1	%
Health Care		2,962			6	%		658			(1	)%		427		(2	)%
Snacks and Pet Care		799			7	%		94			(24	)%		61		(21	)%
Fabric Care and Home Care		6,088			5	%		1,195			2	%		754		—	%
Baby Care and Family Care		3,968			5	%		832			(6	)%		528		(5	)%
Corporate		(364	)		N/A			(424	)		N/A			177		N/A
Total Company		20,230			5	%		3,641			(3	)%		2,873		11	%

	Nine Months Ended March 31, 2011
	Net Sales			% Change Versus Year Ago			Earnings From Continuing Operations Before Income Taxes			% Change Versus Year Ago			Net Earnings From Continuing Operations		% Change Versus Year Ago
Beauty	$	15,089			2	%	$	2,984			2	%	$	2,272		3	%
Grooming		5,969			4	%		1,683			8	%		1,259		8	%
Health Care		9,084			3	%		2,178			(5	)%		1,453		(4	)%
Snacks and Pet Care		2,306			(1	)%		264			(31	)%		182		(27	)%
Fabric Care and Home Care		18,693			2	%		3,777			(8	)%		2,449		(10	)%
Baby Care and Family Care		11,550			3	%		2,383			(12	)%		1,500		(11	)%
Corporate		(992	)		N/A			(1,285	)		N/A			172		N/A
Total Company		61,699			3	%		11,984			(4	)%		9,287		6	%

Beauty

Net sales increased 5% to $4.9 billion during the third fiscal quarter. Organic sales grew 4%. Volume grew 5%, while organic volume, which excludes the net impact of acquisitions and divestitures, increased 6%. Volume growth was driven by double-digit growth in developing regions, while volume in the developed regions was in line with the prior year. Higher pricing in Latin America and Prestige increased net sales by 1%. Favorable foreign exchange increased net sales by 2%. Mix negatively impacted net sales by 3% due to disproportionate growth in developing regions, which have lower than segment average selling prices, and a decrease in Salon Professional volume, which has higher than segment average selling prices. Volume in Retail Hair Care grew high single digits behind double-digit growth in developing regions due to initiative activity and distribution expansions in Asia and Latin America. Global market share of the hair care category was up nearly half a point. Volume in Female Beauty was in line with the prior period as Olay skin care distribution expansion in Asia and Latin America and deodorants growth in North America were offset by a mid-single digit decline in developed regions driven by the Zest divestiture, competitive activity in cosmetics, and decreased shipments in skin due to an Olay UV reformulation and restage. Volume in Salon Professional declined high single digits due to the exit of non-strategic businesses and market contraction in Western Europe. Volume in Prestige Products was up high single digits behind the continued impact of fragrance initiatives, partially offset by minor brand divestitures. Excluding the minor

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brand divestitures, volume increased double digits. Net earnings decreased 3% to $547 million as sales growth was more than offset by a lower operating margin. Operating margin contracted primarily behind higher SG&A as a percentage of net sales. SG&A as a percentage of net sales increased mainly due to increased marketing spending, partially offset by a decrease in overhead spending as a percentage of sales.

Net sales increased 2% to $15.1 billion fiscal year to date on unit volume growth of 5%. Organic sales grew 3%. Mix negatively impacted net sales growth by 2% behind disproportionate growth in developing regions, which have lower than segment average selling prices, and declines in the premium-priced categories of Prestige Products and Salon Professional. Unfavorable foreign exchange reduced net sales by 1%. Volume in developing regions increased double digits, while volume in developed regions declined low single digits. Volume in Retail Hair Care grew high single digits due to double-digit growth in developing regions behind initiative activity, price reductions, distribution expansions and market growth. Global market share of the hair care category was up slightly. Volume in Female Beauty was up low single digits primarily due to higher shipments of Olay, Safeguard and Venus behind initiative activity, distribution expansion and market growth. Volume in Salon Professional was down high single digits mainly due to the exit of non-strategic businesses and market size contractions in developed regions. Volume in Prestige Products declined low single digits primarily due to the divestiture of minor brands and lower shipments in Western Europe. Excluding the minor brand divestitures, volume increased low single digits. Net earnings increased 3% to $2.3 billion, consistent with sales growth. Operating margin was comparable with the prior year, as higher marketing spending was largely offset by lower overhead spending and reduced foreign currency exchange costs. The effective tax rate decreased due to favorable geographic mix of earnings.

Grooming

Net sales increased 8% to $1.9 billion for the quarter on a 2% increase in unit volume. Organic sales were up 7%. Price increases taken primarily across blades and razors in Latin America and developed regions, added 5% to net sales growth. Favorable foreign exchange increased net sales growth by 1%. Volume growth was driven by high single-digit growth in developing regions, which was partially offset by a mid-single-digit decrease in developed regions. Volume in Male Grooming increased low single digits primarily due to high-single-digit growth of blades and razors in developing regions, particularly Latin America and Asia, as well as deodorants in North America, partially offset by a mid-single-digit decline in blades and razors in the developed regions. In the developed regions, double-digit growth of Fusion was more than offset by declines of Mach 3 and other legacy blades and razors. Global market share of the blades and razors category was down 1 point. Volume in Appliances decreased high single digits due to continuing economic difficulties in Western Europe as well as a high base period behind Hair Care appliances initiatives. Global market share of the dry shaving category was down more than half a point. Net earnings increased 1% to $379 million driven by net sales growth and operating margin expansion, partially offset by a higher effective tax rate. Operating margin grew due to improved gross margin, driven primarily by higher prices. SG&A as a percentage of net sales was comparable to the prior year as higher marketing spending was largely offset by reduced overhead as a percentage of sales driven by scale efficiencies. The effective tax rate was higher due to unfavorable geographic mix of earnings.

Net sales increased 4% to $6.0 billion fiscal year to date on volume growth of 4%. Organic sales were up 6%. Price increases, taken primarily across blades and razors in Latin America and developed regions, contributed 2% to net sales growth. Unfavorable foreign exchange reduced net sales by 2%. Volume grew high single digits in developing regions and was in line with the prior year period in developed regions. Volume in Male Grooming was up mid-single digits due to higher shipments of blades and razors, mainly in developing regions driven by market growth, and deodorants in North America, partially offset by softness in blades and razors in the developed regions. Global market share of the blades and razors category was down more than half a point. Volume in Appliances decreased low single digits due to continuing economic difficulties in Western Europe as well as a high base period behind Hair Care appliances initiatives. Global market share of the dry shave category was in line with the prior year period. Net earnings increased 8% to $1.3 billion behind higher net sales and increased operating margin. Operating margin expanded due to higher gross margin and lower SG&A as a percentage of net sales. Gross margin increased due to price increases and the favorable impact of volume scale leverage. SG&A as a percentage of net sales was down due to lower foreign currency exchange costs and reduced overhead spending, partially offset by higher marketing spending.

Health Care

Net sales increased 6% during the third fiscal quarter to $3.0 billion on unit volume growth of 4%. Organic sales grew 5%. Price increases in developing regions contributed 1% to net sales. Favorable foreign exchange increased net sales by 1%. Volume was up mid-single digits in both developed and developing regions. Volume in Oral Care was up mid-single digits due to the continued strength and incremental merchandising support behind Crest 3D White in North America, Oral-B toothpaste expansions in Brazil, Belgium and Holland and toothbrush initiatives in Asia. Global market share of the oral care category was up over a point. Volume in Personal Health Care was up high single digits primarily due to double-digit growth in North America behind initiative activity and a strong cold and cough season. Volume in Feminine Care grew low single digits due to the expansion of Naturella into China and Always initiatives in Asia and Western Europe. Net earnings declined 2% to $427 million, as higher net sales were more than offset by lower operating margin. Operating margin declined due to lower gross margin driven mainly by higher commodity costs.

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Net sales increased 3% to $9.1 billion fiscal year to date on 5% growth in unit volume. Organic sales were up 4%. Price decreases in developed regions reduced net sales by 1%. Unfavorable foreign exchange negatively impacted net sales growth by 1%. Volume increased high single digits in developing regions and low single digits in developed regions. Volume in Oral Care grew high single digits behind initiative activity and incremental merchandising support of Crest and Oral-B. Global market share of the oral care category was up nearly a point. Volume in Personal Health Care grew mid-single digits behind higher shipments of Vicks and increased distribution of PuR in CEEMEA, partially offset by lower shipments of Prilosec OTC in North America. Volume in Feminine Care was up mid-single digits mainly due to higher shipments of Naturella, behind expansion into developing regions, and Always, behind initiative activity in developing regions. Global market share of the feminine care category was down less than half a point. Net earnings decreased 4% to $1.5 billion as higher net sales were more than offset by lower operating margins. Operating margin contracted due to lower gross margin and higher SG&A as a percentage of net sales. Gross margin declined mainly due to higher commodity costs. SG&A as a percentage of net sales increased behind higher marketing spending, partially offset by lower foreign currency exchange costs.

In March 2011, P&G and Teva Pharmaceutical Industries announced that the companies have reached an agreement to create a partnership in consumer health care by bringing together both companies’ existing over-the-counter medicines and complementary capabilities. The partnership is expected to have over $1 billion in sales, only a portion of which will be incremental to our consolidated financial statements. The Company expects the transaction to close by the end of the 2011 calendar year, pending necessary regulatory approvals.

Snacks and Pet Care

Net sales increased 7% to $799 million for the quarter on a 7% increase in unit volume. Organic sales, which exclude the impacts of foreign exchange and the Natura Pet Products acquisition, were in line with prior year on a 4% increase in organic volume. Mix lowered net sales by 2% primarily due to the disproportionate growth of developing regions and Snacks, both of which have lower than segment average selling prices. Favorable foreign exchange increased net sales by 2%. Snacks volume increased double digits behind increased distribution in the developing regions and incremental merchandising activity in the developed regions. Pet Care volume was up low single digits due to the impact of the Natura acquisition in June 2010, partially offset by the impacts of supply constraints following the pet food recall. Excluding the Natura acquisition, Pet Care volume decreased mid-single digits. Net earnings decreased 21% to $61 million as net sales growth was more than offset by a lower operating margin. Operating margin decreased mainly due to a lower gross margin driven by increased product costs resulting from the pet food supply disruptions and negative product mix. SG&A as a percentage of net sales decreased marginally behind lower marketing spending primarily in Pet Care, which was largely offset by increased overhead spending.

Net sales decreased 1% to $2.3 billion fiscal year to date on a 1% increase in unit volume. Organic sales, which exclude the impacts of foreign exchange and the Natura acquisition, were down 6% on a 2% decline in organic volume. Lower pricing in developed regions reduced net sales by 1%. Mix reduced net sales by 1% due to the disproportionate growth of Snacks and developing regions, both of which have lower than segment average selling prices. Snacks volume increased high single digits mainly due to increased distribution in CEEMEA and Latin America, as well as initiatives and incremental merchandising activity. Pet Care volume was down mid-single digits mainly due to the impacts of the supply constraints resulting from a restructuring of the supply chain following the voluntary pet food recalls, partially offset by the impact of the Natura acquisition in June 2010. Excluding the Natura acquisition, Pet Care volume decreased double digits. Net earnings decreased 27% to $182 million mainly due to lower net sales and a reduced operating margin driven by incremental costs and reduced scale leverage related to the pet food recall and supply chain restructuring efforts.

In April 2011, we announced plans to divest the Company’s Snacks business through a merger with Diamond Foods, Inc in an all-stock reverse Morris Trust transaction. The Snacks business had net sales of approximately $1.4 billion and operating income of about $170 million in fiscal 2010. The Company expects the transaction to close by the end of the 2011 calendar year, pending necessary regulatory approvals.

Fabric Care and Home Care

Net sales increased 5% to $6.1 billion for the quarter on a 6% increase in unit volume. Organic sales, which excludes the impact of the Ambi Pur acquisition and foreign exchange, increased 3% on 5% organic volume growth. Mix negatively impacted net sales by 2% primarily due to disproportionate growth of low and mid-tier product lines, which have lower than segment average selling prices. Favorable foreign exchange increased net sales by 1%. Volume increased high single digits in developing regions and mid-single digits in developed regions. Fabric Care volume was up mid-single digits due to the strength of prior period initiative launches such as liquitabs in Western Europe and laundry additives, as well as market growth in developing regions. Global market share of the fabric care category increased about half a point. Home Care volume increased double digits driven by initiatives, geographic expansion of dish and air care product lines, and the Ambi Pur acquisition.

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Excluding the Ambi Pur acquisition, Home Care volume increased high single digits. Global market share of the home care category was up nearly a point. Batteries volume was consistent with the prior year period as initiatives and distribution expansion in the current year period were offset by a spike in shipments in the base period following consumer value corrections in North America. Net earnings were in line with the prior year period at $754 million as sales growth was offset by operating margin contraction. Operating margin declined behind reduced gross margin, partially offset by reduced SG&A as a percentage of sales. Gross margin was down due to higher commodity costs, partially offset by manufacturing cost savings. SG&A as a percentage of net sales was down due to a reduction in marketing spending, partially offset by increased overhead spending.

Net sales increased 2% to $18.7 billion fiscal year to date. Organic sales were up 3%. Volume grew 7%, while organic volume, which excludes the impact of the Ambi Pur acquisition, increased 6%. Lower pricing, mainly in developed regions, reduced net sales by 1%. Mix negatively impacted net sales growth by 2% mainly due to disproportionate growth of low and mid-tier product lines and powdered laundry detergents, which have lower than segment average selling prices. Unfavorable foreign exchange reduced net sales growth by 2%. Volume in developing regions was up double digits, while volume in developed regions grew mid-single digits. Fabric Care volume increased mid-single digits mainly due to growth in developing regions behind initiative activity, increased distribution and market growth. Global market share of the fabric care category increased about half a point. Home Care volume increased double digits due, in part, to the Ambi Pur acquisition. Organic volume in Home Care was also up double digits driven mainly by initiative activity, including the prior-period launches of Gain hand dishwashing liquid and Febreze Set & Refresh in North America, and geographic expansion of dish and air care product lines. Global market share of the home care category was up over 1 point. Batteries volume grew mid-single digits primarily due to price reductions executed through pack count increases in North America, which were implemented in January 2010, initiative activity in Western Europe and market growth and distribution expansion in Asia. Global market share of the batteries category increased about 1 point. Net earnings decreased 10% to $2.4 billion as net sales growth was more than offset by operating margin contraction. Operating margin declined primarily due to lower gross margin, mainly due to higher commodity costs and unfavorable product mix behind disproportionate growth of developing regions and low and mid-tier value products. SG&A as a percentage of net sales increased marginally behind higher marketing spending.

Baby Care and Family Care

Net sales increased 5% to $4.0 billion for the quarter on 7% volume growth. Organic sales were up 5%. Price increases primarily in developing regions improved net sales by 1%. Mix reduced net sales by 2% driven by disproportionate growth of mid-tier and value product lines, larger package sizes and developing regions, all of which have lower than segment average selling prices. Unfavorable foreign exchange reduced net sales by 1%. Volume in developing regions was up double digits and volume in developed regions increased low single digits. Volume in Baby Care grew high single digits due to initiative activity, distribution expansion and market growth in Europe and developing regions; partially offset by the impact of the North American launch of Pampers Dry Max in the base period. Global market share of the baby care category increased nearly 1 point. Volume in Family Care was up mid-single digits behind the continued impact of prior-period initiative launches across Charmin and Bounty, and growth of Charmin Basic in North America. Net earnings declined 5% to $528 million as sales growth was more than offset by a lower operating margin. Operating margin decreased mainly due to a lower gross margin driven by higher commodity costs and unfavorable product mix due to disproportionate growth of mid-tier product lines, larger package sizes and developing regions.

Net sales increased 3% to $11.5 billion fiscal year to date on 9% volume growth. Organic sales were up 5%. Price reductions executed in prior periods lowered net sales by 1%. Mix reduced net sales by 3% driven mainly by disproportionate growth of mid-tier product lines, larger package sizes and developing regions, all of which have lower than segment average selling prices. Unfavorable foreign exchange negatively impacted net sales growth by 2%. Volume grew double digits in developing regions and mid-single digits in developed regions. Volume in Baby Care was up high single digits primarily due to growth in developing regions behind initiative activity, market size growth and distribution expansion. Global market share of the baby care category increased over 1 point. Volume in Family Care increased high single digits driven by the continued impact of initiative launches from prior periods, growth of Charmin Basic in North America and lower price gaps versus competition in Latin America. U.S. all outlet share of the family care category increased over half a point. Net earnings decreased 11% to $1.5 billion as sales growth was more than offset by a lower operating margin. Operating margin declined mainly due to a lower gross margin. Gross margin decreased as higher commodity costs and unfavorable product mix, behind disproportionate growth of mid-tier product lines, larger package sizes and developing regions, were only partially offset by the favorable impact of volume scale leverage and manufacturing cost savings. SG&A as a percentage of net sales was in line with the prior year period as increased marketing spending was largely offset by lower foreign currency exchange costs.

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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; and certain restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization. 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 net 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 noncontrolling interest adjustments for subsidiaries where we do not have 100% ownership. Since certain 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 and noncontrolling interests in Corporate. In determining segment after-tax 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 noncontrolling interest.

Net sales in the Corporate segment primarily reflect the adjustment to eliminate the sales of unconsolidated entities included in business segment results. Accordingly, Corporate net sales are generally a negative balance. Negative net sales were up $28 million in the third fiscal quarter and down $88 million fiscal year to date primarily due to adjustments required to eliminate the sales of unconsolidated entities. Corporate had net earnings of $177 million in the quarter versus net expenses of $176 million in the prior year period. This $353 million change was due to a base period charge of $152 million for legislation, which changed the taxation of certain future retiree prescription drug subsidy payments, as well as a more favorable current year effective tax rate due to a favorable mix of earnings. Net earnings fiscal year to date increased $975 million due to the net impact of discrete adjustments to reserves for uncertain income tax positions, favorable settlement of a value added tax audit, lower current period restructuring-type spending and a more favorable current year effective tax rate due to a more favorable mix of earnings. Net discrete adjustments to reserves for uncertain tax positions benefited current year by $424 million, while prior year adjustments reduced earnings by $86 million, including the aforementioned base period charge of $152 million.

FINANCIAL CONDITION

Operating Activities

We generated $9.4 billion from operating activities during the fiscal year to date period. This represents a 26% decline versus the prior year period primarily due to higher levels of cash invested in working capital. On a year-to-date basis, working capital consumed $1.5 billion primarily behind higher accounts receivable and inventory balances. Accounts receivable used $495 million to support business growth and as a result of disproportionately higher sales in the last month of the quarter. Inventory consumed $817 million driven by higher commodity costs, initiative activity, business growth, and increased safety stock levels behind customer service improvement efforts. Accounts payable, accrued and other liabilities used $223 million primarily to satisfy marketing and capital commitments accrued for at the end of the 2010 fiscal year. Other operating assets and liabilities resulted in a reconciling use of $797 million mainly due to favorable adjustments of net liabilities for unrecognized tax positions, which did not provide cash.

Investing Activities

We invested $2.4 billion to support capital expenditures and our net acquisition and divestiture activities in the current period. Capital expenditures were $2.1 billion or 3.3% of net sales. We expect capital expenditures of approximately 4% of net sales for the fiscal year. Acquisitions consumed $489 million mainly due to the purchase of Ambi Pur, while proceeds from asset sales were primarily driven by the Zest divestiture in North America. Prior-year cash generated from investing activities was $1.0 billion, as normal ongoing capital investments was more than offset by proceeds from divestitures driven by the sale of the global pharmaceuticals business in October 2009.

Financing Activities

We utilized $7.1 billion for financing activities. We continued to return cash to shareholders by purchasing $4.5 billion of treasury stock and paying $4.2 billion in dividends. We received $928 million primarily behind the proceeds from additional debt issuances. We expect to repurchase a total of $6 - $8 billion of treasury stock during fiscal 2011. In the prior year period, we consumed $13.5 billion to fund financing activities, primarily due to debt repayments, dividends and share repurchases.

As of March 31, 2011, our current liabilities exceeded current assets by $4.4 billion. We have short- and long-term debt to fund discretionary items such as acquisitions and share repurchase programs. We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations. We have strong short- and long-term debt ratings which have enabled and should continue to enable us to refinance our debt as it becomes due at favorable rates in commercial paper and bond markets. In addition, we have agreements with a diverse group of financial institutions that, if needed, should provide sufficient credit funding to meet short-term financing requirements.

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RECONCILIATION OF NON-GAAP MEASURES

Our discussion of financial results includes several measures not defined by U.S. GAAP. We believe these measures provide our investors with additional information about the underlying results and trends of the Company, 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.

Organic Sales Growth: Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons. We believe this provides investors with a more complete understanding of underlying sales trends by providing sales growth on a consistent basis. Organic sales is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.

The reconciliation of reported sales growth to organic sales for the January - March quarter:

Jan - Mar 2011	Net Sales Growth			Foreign Exchange Impact			Acquisition/ Divestiture Impact*			Organic Sales Growth
Beauty		5	%		(2	)%		1	%		4	%
Grooming		8	%		(1	)%		—	%		7	%
Health Care		6	%		(1	)%		—	%		5	%
Snacks and Pet Care		7	%		(2	)%		(5	)%		—	%
Fabric Care and Home Care		5	%		(1	)%		(1	)%		3	%
Baby Care and Family Care		5	%		1	%		(1	)%		5	%
Total P&G		5	%		(1	)%		—	%		4	%

* Acquisition/Divestiture Impacts includes rounding impacts necessary to reconcile net sales to organic sales.

The reconciliation of reported sales growth to organic sales for the fiscal year to date period:

Jul - Mar 2011	Net Sales Growth			Foreign Exchange Impact			Acquisition/ Divestiture Impact*			Organic Sales Growth
Beauty		2	%		1	%		—	%		3	%
Grooming		4	%		2	%		—	%		6	%
Health Care		3	%		1	%		—	%		4	%
Snacks and Pet Care		(1	)%		—	%		(5	)%		(6	)%
Fabric Care and Home Care		2	%		2	%		(1	)%		3	%
Baby Care and Family Care		3	%		2	%		—	%		5	%
Total P&G		3	%		1	%		—	%		4	%

* Acquisition/Divestiture Impacts includes rounding impacts necessary to reconcile net sales to organic sales.

Core EPS: This is a measure of the Company’s diluted net earnings per share from continuing operations excluding a charge related to a tax provision for retiree healthcare subsidy payments in the U.S. healthcare reform legislation in the prior year period, charges related to pending European legal matters for current and prior years, and a significant adjustment to an income tax reserve related to the deductibility of technology donations in prior years. We do not view these items to be part of our sustainable results. We believe the Core EPS measure provides an important perspective of underlying business trends and results and provides a more comparable measure of year-on-year earnings per share growth. Core EPS is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation. The table below provides a reconciliation of reported diluted net earnings per share from continuing operations to Core EPS:

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	JFM 11			JFM 10
Diluted Net Earnings Per Share - Continuing Operations	$	0.96		$	0.83
Charge for Taxation of Retiree Healthcare Subsidy		—		$	0.05
Rounding Impacts		—		$	0.01
Core EPS	$	0.96		$	0.89
Core EPS Growth		8	%
	FYTD 2011			FYTD 2010
Diluted Net Earnings Per Share - Continuing Operations	$	3.09		$	2.82
Significant Adjustment to Income Tax Reserve	($	0.08	)		—
Charges for Pending European Legal Matters	$	0.10		$	0.09
Charge for Taxation of Retiree Healthcare Subsidy		—		$	0.05
Rounding Impacts	($	0.01	)	$	—
Core EPS	$	3.10		$	2.96
Core EPS Growth		5	%

Note – All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction. The significant adjustment to an income tax reserve was tax expense. There was no tax impact on EPS due to the charges for pending European legal matters.

Free Cash Flow: Free cash flow is defined as operating cash flow less capital spending. We view 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 long-term target is to generate free cash at or above 90 percent of net earnings. Free cash flow is also one of the measures used to evaluate senior management. The reconciliation of free cash flow and free cash flow productivity is provided below (amounts in millions):

	Operating Cash Flow		Capital Spending			Free Cash Flow		Net Earnings		Free Cash Flow Productivity
Jul - Mar 2011	$	9,385	$	(2,066	)	$	7,319	$	9,287		79	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in the Company’s exposure to market risk since June 30, 2010. Additional information can be found in the section entitled Other Information, which appears on pages 48-49, and Note 5, Risk Management Activities and Fair Value Measurements, which appears on pages 59-62 of the Annual Report to Shareholders for the fiscal year ended June 30, 2010 which can be found by reference to Exhibit 13 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

The Company’s Chairman of the Board, President and Chief Executive Officer, Robert A. McDonald, and the Company’s Chief Financial Officer, Jon R. Moeller, 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 report. Messrs. McDonald and Moeller 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 (2) accumulated and communicated to our management, including Messrs. McDonald and Moeller, to allow their timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting.

There were no changes in our internal control over financial reporting that occurred during the Company’s fiscal quarter ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. 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, labor and employment matters and taxes.

As previously reported, the Company has been subject to a number of investigations into potential competition law violations in Europe. Those that are pending include investigations by national authorities in Belgium, France, Germany, Greece, and Romania. We believe that all of these matters involve a number of other consumer products companies and/or retail customers. Although non-monetary sanctions are not being sought in any of these matters, competition and antitrust law investigations often continue for several years and, if violations are found, can result in substantial fines. In cases in other industries, fines have amounted to hundreds of millions of dollars.

The Company’s policy is to comply with all laws and regulations, including all antitrust and competition laws, and to cooperate with investigations by relevant regulatory authorities, which the Company is doing. In response to the actions of the European Commission and national authorities, the Company launched its own internal investigations into potential violations of competition laws. The Company identified violations in certain European countries and appropriate actions were taken.

As a result of certain investigations that were previously disclosed, several authorities issued separate complaints alleging that the Company, along with several other companies, engaged in violations of competition laws in the past. During the most recent quarter, authorities in Spain and the Czech Republic issued final decisions, and in April 2011, the European Commission also issued a final decision. All of these decisions resulted in monetary penalties, for which the Company had previously accrued sufficient financial reserves. The ultimate resolution of the remaining matters listed above may result in fines or costs in excess of the amounts reserved that could materially impact our income statement and cash flows in the period in which they are accrued and paid, respectively. Please refer to the Company’s Risk Factors in Item 1A of this Form 10-Q for additional information.

In December 2008, the Company became aware of an investigation by Italian authorities into an environmental accident at the site of a contractor which provides services to one or more of the Company’s European affiliates. The accident involved the explosion of certain pressurized cans and resulted in the death of one worker and serious injuries to another. Italian authorities have commenced a formal criminal proceeding regarding whether the Company’s local affiliate and certain of its employees complied with Italian laws related to the proper classification and disposal of their products. Should they find that these entities violated the law, the Italian authorities could levy fines in excess of $100 thousand against the Company’s European affiliate(s).

Item 1A. Risk Factors.

For a discussion of the Company’s risk factors, please refer to Part 1, “Item 1A. Risk Factors” in the Company’s Form 10-Q for the quarter ended December 31, 2010.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share (2)		Total Number of Shares  Purchased as Part of Publicly Announced Plans or Programs (3)		Approximate Dollar Value of Shares That May Yet Be Purchased Under our Share Repurchase Program ($ in billions) (3) (4)
1/1/11 - 1/31/11		52,135	$	66.25		—		4.5
2/1/11 - 2/28/11		1,907,559	$	63.94		1,895,596		4.4
3/1/11 - 3/31/11		14,116,425	$	62.25		14,116,310		3.5

(1) The total number of shares purchased was 16,076,119 for the quarter. This includes 64,213 shares acquired by the Company under various compensation and benefit plans. All transactions were made in the open market or pursuant to prepaid forward agreements with large financial institutions. Under these agreements, the Company prepays large financial institutions to deliver shares at future dates in exchange for a discount. 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 and does not repurchase stock in connection with a cashless exercise.

(2) Average price paid per share is calculated on a settlement basis and excludes commission.

(3) On August 3, 2010, the Company announced a share repurchase plan to acquire $6 to $8 billion of Company common stock during the fiscal year ending June 30, 2011 in open market and/or private transactions. This repurchase plan was authorized pursuant to a resolution issued by the Company’s Board of Directors and is expected to be financed by issuing a combination of long-term and short-term debt. Certain purchases were made prior to the announcement of the plan but are considered purchases against the plan.

(4) The dollar values listed in this column include commissions to be paid to brokers to execute the transactions.

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Item 6. Exhibits

Exhibit

3-1	Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 14, 2008) (Incorporated by reference to Exhibit (3-1) of the Company’s Form 10-Q for the quarter ended December 31, 2008).
3-2	Regulations (as amended by the Board of Directors on April 18, 2010 pursuant to authority granted by shareholders at the annual meeting on October 13, 2009). (Incorporated by reference to Exhibit 3.ii of the Company’s Form 8-K filed on April 18, 2010).
10-1	The Procter & Gamble 2009 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2009) and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2009 Stock and Incentive Compensation Plan, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, The Procter & Gamble 1992 Stock Plan, The Procter & Gamble 1992 Stock Plan (Belgian Version), The Gillette Company 2004 Long-Term Incentive Plan, and The Gillette Company 1971 Stock Option Plan.*
10-2	The Procter & Gamble 2009 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2009) and related correspondence. *
10-3	The Procter & Gamble Performance Stock Program Summary and related terms and conditions*
11	Computation of Earnings per Share
12	Computation of Ratio of Earnings to Fixed Charges.
31-1	Rule 13a-14(a)/15d-14(a) Certification – Chief Executive Officer
31-2	Rule 13a-14(a)/15d-15(a) Certification – Chief Financial Officer
32.1	Section 1350 Certifications – Chief Executive Officer
32.2	Section 1350 Certifications – Chief Financial Officer
101.INS (1)	XBRL Instance Document
101.SCH (1)	XBRL Taxonomy Extension Schema Document
101.CAL (1)	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)	XBRL Taxonomy Definition Linkbase Document
101.LAB (1)	XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)	XBRL Taxonomy Extension Presentation Linkbase Document

⁽¹⁾ XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

* Compensatory plan or arrangement

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Pursuant to the requirements 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.

	THE PROCTER & GAMBLE COMPANY
April 29, 2011	/s/    VALARIE L. SHEPPARD
Date	(Valarie L. Sheppard)
	Senior Vice President and Comptroller

31

EXHIBIT INDEX

Item 6. Exhibits

Exhibit

3-1	Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 14, 2008) (Incorporated by reference to Exhibit (3-1) of the Company’s Form 10-Q for the quarter ended December 31, 2008).
3-2	Regulations (as amended by the Board of Directors on April 18, 2010 pursuant to authority granted by shareholders at the annual meeting on October 13, 2009). (Incorporated by reference to Exhibit 3.ii of the Company’s Form 8-K filed on April 18, 2010).
10-1	The Procter & Gamble 2009 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2009) and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2009 Stock and Incentive Compensation Plan, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, The Procter & Gamble 1992 Stock Plan, The Procter & Gamble 1992 Stock Plan (Belgian Version), The Gillette Company 2004 Long-Term Incentive Plan, and The Gillette Company 1971 Stock Option Plan.
10-2	The Procter & Gamble 2009 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2009) and related correspondence.
10-3	The Procter & Gamble Performance Stock Program Summary and related terms and conditions
11	Computation of Earnings per Share
12	Computation of Ratio of Earnings to Fixed Charges.
31-1	Rule 13a-14(a)/15d-14(a) Certification - Chief Executive Officer
31-2	Rule 13a-14(a)/15d-15(a) Certification - Chief Financial Officer
32.1	Section 1350 Certifications - Chief Executive Officer
32.2	Section 1350 Certifications - Chief Financial Officer
101.INS (1)	XBRL Instance Document
101.SCH (1)	XBRL Taxonomy Extension Schema Document
101.CAL (1)	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)	XBRL Taxonomy Definition Linkbase Document
101.LAB (1)	XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)	XBRL Taxonomy Extension Presentation Linkbase Document

⁽¹⁾  XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

32

EX-10.1

Exhibit (10-1)

Regulations of the Compensation and Leadership Development Committee for

The Procter & Gamble 2009 Stock and Incentive Compensation Plan,

The Procter & Gamble 2001 Stock and Incentive Compensation Plan,

The Procter & Gamble 1992 Stock Plan,

The Procter & Gamble 1992 Stock Plan (Belgian Version),

The Gillette Company 2004 Long-Term Incentive Plan,

and The Gillette Company 1971 Stock Option Plan.*

REGULATIONS

OF THE

COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE

FOR

THE PROCTER & GAMBLE 2009 STOCK AND INCENTIVE COMPENSATION PLAN,

THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN,

THE PROCTER & GAMBLE 1992 STOCK PLAN,

THE PROCTER & GAMBLE 1992 STOCK PLAN (BELGIAN VERSION),

THE GILLETTE COMPANY 2004 LONG-TERM INCENTIVE PLAN,

AND THE GILLETTE COMPANY 1971 STOCK OPTION PLAN

I. AUTHORITY FOR REGULATIONS

These regulations (the “Regulations”) are adopted pursuant to Article B, Paragraph 1 of The Procter & Gamble 2009 Stock and Incentive Compensation Plan (the “2009 Plan”); Article B, Paragraph 1 of The Procter & Gamble 2001 Stock and Incentive Compensation Plan (the “2001 Plan”); Article B, Paragraph 4 of The Procter & Gamble 1992 Stock Plan (the “1992 Plan”); Article B, Paragraph 4 of The Procter & Gamble 1992 Stock Plan (Belgian Version) (the “Belgian Plan”) (together, the “P&G Plans”) and pursuant to Article 2.2 of The Gillette Company 2004 Long-Term Incentive Plan and Article 2(h) of The Gillette Company 1971 Stock Option Plan (together, the “Gillette Plans”). Unless context otherwise dictates, the P&G Plans and the Gillette Plans shall each be a “Plan” and collectively be the “Plans”.

II. ADMINISTRATION - DUTIES

1. The Office of the Corporate Secretary of The Procter & Gamble Company (the “Company”) shall act as Secretary of the Compensation and Leadership Development Committee (the “Committee”) for all purposes of the Plans and shall be responsible for establishing and maintaining all necessary books and records to reflect clearly the actions of the Committee regarding the administration of the Plans. These duties may be performed by the Secretary in cooperation with the Treasurer of the Company and the chief financial officers of international subsidiaries and international branches of domestic subsidiaries, as appropriate.

2. In addition to the other duties specifically set forth in these Regulations, the Secretary and the Assistant Secretary designated by the Secretary for this purpose will assist the Committee in the administration of the Plans. The Secretary, the designated Assistant Secretary, the Global Human Resources Officer and each member of the Committee are hereby authorized to execute documents on behalf of the Committee where the action recorded, implemented, or certified has been authorized by the Committee.

III. ADMINISTRATION - MEETINGS AND ACTIONS

1. The Committee shall meet on the call of any member of the Committee at the time and place specified in the call.

2. Notice of meetings shall be given to each member, normally at least one day before the meeting. Any meeting at which all members are present shall be a duly called meeting, whether or not notice was given.

3. A majority of the Committee shall constitute a quorum.

4. Committee actions require the approval of a majority of the Committee. Actions may also be taken without a meeting with the affirmative vote or approval of all members of the Committee, set forth in a writing signed by all such members.

5. Any action taken with respect to a Plan shall be effective if it complies with that Plan and these Regulations.

IV. SUSPENSION AND TERMINATION OF STOCK OPTIONS, STOCK APPRECIATION RIGHTS OR OTHER AWARDS UNDER THE PLAN

1. Article F, of the P&G Plans authorize the Committee to suspend or terminate any outstanding stock option, stock appreciation right, stock award, Restricted Stock Unit (“RSU”) or other award, if the participant is not in compliance with all terms and conditions governing the award. On February 14, 2006, the Board amended the 2001 Plan on a prospective basis to remove the requirement that such actions by the plan participant be taken “prior to termination of employment.” The Committee hereby establishes the following procedures and delegates the following authority to assist it in the administration of this provision.

2. Actions that significantly contravene the Company’s “Statement of Purpose, Values and Principles” (“PVP”) will be considered to be “significantly contrary to the best interests of the Company.” This standard also includes any action taken or threatened by the participant 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 the Company or any subsidiary.

3. Officers of the Company and its operating units are hereby authorized to suspend on a conditional basis the outstanding stock options, stock appreciation rights, stock awards, RSUs or any other awards of any participant if the officer believes that such participant has engaged in action that violates the terms and conditions governing the award.

4. Within a reasonable time of any such suspension, the Global Human Resources Officer and the Chief Legal Officer must each concur that the participant has engaged in action that violates the terms and conditions governing the award. In a case involving an officer of the Company, the concurrence of the Chief Executive Officer is also required. If they concur, the outstanding stock options, stock appreciation rights, stock awards, RSUs or other awards shall be immediately terminated without any further action. If they both do not concur, the suspension shall be immediately lifted.

5. For purposes of Article F, paragraph 3 of the 2009 Plan, the Global Human Resources Officer and the Chief Legal Officer, along with the Chief Executive Officer if it involves an officer, must concur that the participant has engaged in action that violates the terms and conditions governing the award prior to any request for repayment. If the proper concurrences are obtained, The Global Human Resources Officer, along with the Chief Legal Officer if it involves an officer, shall decide if the repayment provisions of Article F, paragraph 3 of the 2009 Plan will be exercised.

6. All alleged violations of the terms and conditions governing an award by the Global Human Resources Officer, Chief Legal Officer, or Chief Executive Officer shall be reviewed by the Committee. If the Committee determines a violation has occurred, the Committee may terminate the individual’s outstanding stock options, stock appreciation rights, stock awards, RSUs or other awards and may exercise the repayment provision of Article F, paragraph 3 of the 2009 Plan.

7. No outstanding stock options or stock appreciation rights may be exercised, nor shall stock awards or RSUs be surrendered or delivered upon, while they are suspended.

V. AUTHORIZING, GRANTING AND VALUING OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

1. The Chief Executive Officer may submit to the Committee recommendations for grants to be made to participants pursuant to the Plans, except for grants to himself. Consistent with Article B of each P&G Plan and Article 2 of the Gillette Plans, however, the Committee shall have the sole authority to determine the manner in which and number of stock options and stock appreciation rights to be granted to such participants including the Chief Executive Officer. For purposes of these Regulations, “grant” refers to both an offer, which does not require a participant to make a cash payment in order to receive stock options or stock appreciation rights, and an offer, which does require such payment. No grant under a Gillette Plan shall be made to any individual who was employed by The Procter & Gamble Company or any of its subsidiaries before October 1, 2005.

2. The Secretary, Global Human Resources Officer or their designate shall notify the recipients as soon as practicable after stock options and stock appreciation rights are granted by the Committee. Notification shall be provided in any manner deemed reasonable by the Secretary or Global Human Resources Officer. If a recipient is an employee of an international subsidiary of the Company, or of an international branch of a domestic subsidiary of the Company, the employing subsidiary will also be notified regarding any grants of stock appreciation rights and may be a party to agreements for stock appreciation rights either with the Company or recipients.

3. The Committee may specify an appropriate time and manner for acceptance of each grant of stock options or stock appreciation rights. Any grant not accepted through the specified means within the period specified by the Committee at the time of the grant shall be considered to be canceled.

4. The Secretary shall inform the Treasurer of stock options and stock appreciation rights granted by the Committee.

5. For each grant of stock options or stock appreciation rights, the Committee authorizes the Global Human Resources Officer to determine all the terms and provisions of the respective stock option or stock appreciation right, including setting the dates when each stock option or stock appreciation right may be exercised and waiving the provisions of Article F, Paragraph 1(a), 1(b) and 1(c) and Article G, Paragraph 9(a) and 9(b) of the 2009 Plan; Article F, Paragraph 1(a) and 1(b) and Article G, Paragraphs 4(a), 4(b) and 4(c) of the 2001 Plan; Article F, Paragraph 1(b) and Article G, Paragraph 4(a) of the 1992 Plan; and Article F, Paragraph 1(b) and Article G. Paragraphs 4(a) and 4(b) of the Belgian Plan; Articles 5.8(a), 5.8(b), and 5.8(c) and Articles 6.7(a), 6.7(b), and 6.7(c) and Articles 12.1A(b) and 12.1A(c) of The Gillette Company 2004 Long-Term Incentive Plan (the “2004 Plan”).

6. The grant price of stock options and stock appreciation rights shall be the closing price for the Common Stock of the Company on the New York Stock Exchange on the day of the grant; provided that for all employees receiving the FR grant series (French locals and expatriate employees working in France), any grant made during a closed period, as described in Schedules D, E or F attached to these Regulations, shall have a grant price determined on the date following the end of the closed period.

7. For purposes of granting options under the 1992 Plan pursuant to a Scheme approved by the United Kingdom’s Inland Revenue pursuant to Section 10 to the United Kingdom’s Finance Act of 1984, the provisions set out in Schedule A attached to these Regulations shall apply.

8. The provisions set out in Schedule B attached to these Regulations as amended from time to time shall apply to all stock options granted in Australia.

9. For purposes of granting options under the 2001 Plan, pursuant to a sub-plan approved by the United Kingdom’s Inland Revenue under Schedule 9 to the United Kingdom Income and Corporation Taxes Act of 1988, the provisions set out in Schedule C to these Regulations shall apply.

10. The provisions set out in Schedules D, E and F attached to these Regulations as amended from time to time shall apply to all stock options granted in France under the 1992 Plan, the 2001 Plan and the 2009 Plan, respectively.

1. The provisions set out in Schedule G attached to these Regulations as amended from time to time shall apply to all stock options granted to employees of Procter & Gamble Hygiene and Health Care Limited.

2. For purposes of granting options under the 2009 Plan, pursuant to a sub-plan approved by the United Kingdom’s HM Revenue & Customs under Schedule 4 to the United Kingdom Income Tax (Earnings and Pensions) Act of 2003, the provisions set out in Schedule H to these Regulations shall apply.

VI. EXERCISE, SURRENDER, AND CANCELLATION OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

1. A participant’s notice of exercise of any stock option or stock appreciation right under any Plan shall be in the form established by the office of the Company designated by the Treasurer as responsible for administration of grants under the Plans. Notice shall be given prior to the expiration of the stock option or stock appreciation right and shall include proof of all necessary payment by the participant (including option cost, administration cost, required tax withholding, commissions and fees) in United States funds or as otherwise permitted by Paragraph 3 of this Article VI. Delivery of notice of exercise of a stock option shall be made to the office of the Company designated by the Treasurer as responsible for administration of grants under the Plans. Delivery of notice of exercise of a stock appreciation right may be made to the office of the Company designated by the Treasurer as responsible for administration of grants under the Plans.

2. Upon exercise of any stock option or stock appreciation right, the office of the Company designated by the Treasurer as responsible for administration of grants under the Plans shall promptly provide the recipient with a summary of the transaction.

3. The Treasurer is hereby instructed to accept cash or unrestricted shares of Common Stock as payment for (i) all or part of the exercise price of a stock option; (ii) withholding or other applicable taxes of all kinds which may be due upon the exercise of a stock option; (iii) any commissions or fees associated with the exercise of a stock option; and (iv) any other costs borne by the Company in connection with the exercise of a stock option, provided that unrestricted shares of Common Stock will not be accepted where prohibited or made impractical by local laws or regulations. Depending on the exercise method, shares of

Common Stock will either be valued at the actual price received from the sale of the Common Stock on the open market or at the average of the high and low prices for the Company’s Common Stock on the New York Stock Exchange on the day the stock option is exercised. In the event that the New York Stock Exchange is closed for business on the day upon which shares of the Company’s Common Stock are to be valued for this purpose, the Treasurer shall value such shares on the immediately preceding business day of such Exchange on which day such stock was traded.

In jurisdictions where local law permits, participants exercising stock options by means of the cashless option program using an endorsed broker, the exercise payment may be made by the endorsed broker three business days following the delivery of the notice of exercise. Further, in such cases, any taxes due shall be calculated on the basis of the actual sale price received by the endorsed broker for the Company’s Common Stock on the date of exercise.

4. The Treasurer, to the extent it is deemed appropriate by the Treasurer, is hereby authorized to utilize either authorized but unissued shares or treasury shares for issuance upon the exercise of a stock option or a stock appreciation right being redeemed by the Company. However, the Treasurer shall use only authorized but unissued shares in a country where authorized but unissued shares are required by law. Pursuant to this paragraph, the Treasurer shall use only authorized but unissued shares for grants made in Italy from January 1, 1998 through January 15, 2000.

5. Redemption of a stock appreciation right may be in Common Stock, cash or a combination thereof. A stock appreciation right shall be valued at the average of the high and low prices of the Company’s Common Stock on the New York Stock Exchange on the day the stock appreciation right is redeemed. In the event that the New York Stock Exchange is closed for business on the day upon which shares of the Company’s Common Stock are to be valued for this purpose, the Treasurer shall value such shares on the immediately preceding business day of such Exchange on which day such stock was traded.

Upon receipt of a redemption request, the Treasurer or the chief financial officer of the employing or other appropriate international subsidiary or international branch of a domestic subsidiary shall cause the appropriate payment to be paid, either in cash, Common Stock or a combination thereof unless local laws or regulations prohibit or make impractical payment in Common Stock. Cash payments made to participants employed by international subsidiaries or international branches of domestic subsidiaries shall be made in local currency at the official exchange rate for this type of transaction prevailing at the time of exercise. Shares of Common Stock to be delivered to participants employed by international subsidiaries or international branches of domestic subsidiaries shall be shares which the appropriate subsidiary has acquired for the purposes of the Plan, paying therefor the then prevailing market price. The subsidiary shall bear all of the cost of acquiring and transferring such shares to such employee, including any applicable documentary and transfer taxes but excluding any individual personal tax liability resulting to the employee therefrom.

6. Stock options and stock appreciation rights may be surrendered for cancellation before exercise by notice delivered in the form established by the office of the Company designated by the Treasurer as responsible for administration of grants under the Plans. Acceptance of such surrender for cancellation before exercise shall not constitute waiver of the participant’s obligations under Article F of the P&G Plans or Article 12 of the 2004 Plan.

7. Whenever a participant in receipt of a nonstatutory stock option is transferred to an employing subsidiary company, or retires to residence, in a location or country in which the purchase, receipt and/or holding of a stock option is prohibited by law or regulation, such nonstatutory stock option shall automatically, without further action by the participant or the Committee, be redeemable while in such location or country as if it were a stock appreciation right, subject to all of the other terms and conditions of the original option including exercise price. Redemption of stock appreciation rights, including both such nonstatutory stock options redeemable as stock appreciation rights and stock appreciation rights originally issued as such, in such a location or country shall be entirely in cash, notwithstanding any other term, condition or regulation of this Committee to the contrary.

8. To the extent that unrestricted shares of Common Stock are authorized to be accepted as payment for all or part of the exercise price of a stock option, the unrestricted shares must have been held for at least six months by the participant. The use of the newly acquired shares from the option exercise as payment of withholding or other applicable taxes that may be due upon exercise of the option is permissible, provided that local laws and regulations permit such payments.

9. Pursuant to Article B, Paragraph 2 of the 2009 Plan; Article B, Paragraph 2 of the 2001 Plan; Article B, Paragraph 3 of the 1992 Plan and the Belgian Plan; and Article 2.2(a) of the 2004 Plan, the Committee hereby waives the provisions of Article F, Paragraph 1(a) of the P&G Plans and Article 12.1A(a) of the 2004 Plan (requiring certification by the recipient at the time of exercise that the recipient intends to remain in the employ of the Company or one of its subsidiaries for at least one (1) year); provided that the participant shall be given the opportunity to certify intent to comply with this requirement and, if the participant refuses to so certify, a principal officer or an employee of the Company or any of its subsidiaries who has the title of Vice President is informed of the participant’s refusal and the participant has certified at the time of exercise no intent to engage in any activity that would violate the non-compete provisions of Article F, Paragraph 1(b) of the P&G Plans or Article 12.1A(b) of the 2004 Plan.

10. The Treasurer or Global Human Resources Officer with Treasurer concurrence, to the extent it is deemed appropriate by the Treasurer, is hereby authorized to establish such terms and conditions regarding exercise of any stock option as are required or advisable to accommodate for differences in local law, tax policy or custom, including but not limited to, requiring that Participants: (i) hold shares acquired upon exercise of any stock option for a specified period of time; (ii) hold shares acquired upon exercise of any stock option outside of the Participant’s jurisdiction of residence; or (iii) immediately repatriate proceeds from the sale of shares or dividends on shares to their local jurisdiction.

VII. AUTHORIZING AND GRANTING RESTRICTED OR UNRESTRICTED STOCK OR RESTRICTED STOCK UNITS

1. The Chief Executive Officer may submit to the Committee recommendations for awards of unrestricted or restricted Common Stock or RSUs to be made to Participants pursuant to the Plans, except for awards to himself. Consistent with Article I of the P&G Plans and Article 2.2 of the 2004 Plan, however, the Committee shall have the sole authority to determine the manner in which and number of shares of Common Stock or RSUs to be awarded to such participants, including the Chief Executive Officer.

2. Any conditions or restrictions on the award of any shares of Common Stock or RSUs beyond those contained in the Plans or these Regulations shall be determined by the Committee and set forth in the Statement of Conditions and Restrictions or Statement of Terms and Conditions. Such additional conditions or restrictions may vary from time to time and from participant to participant.

3. The Secretary or Global Human Resources Officer shall inform the Treasurer of the award of restricted shares of Common Stock or RSUs in payment of additional remuneration. The transfer and delivery will be made as soon as practicable after such award by the Committee. The shares awarded shall be valued at the closing price for the Common Stock of the Company on the New York Stock Exchange on the day of the transfer to the participant.

4. The Treasurer may accept as payment of withholding or other applicable taxes of all kinds, which may be due upon the lapsing of restrictions on Restricted Stock or Restricted Stock Units, cash or shares of Common Stock of the Company upon which restrictions are lapsing. Depending on the settlement method, shares of Common Stock will be valued at either the actual price received from the sale of the Common Stock on the open market or the average of the high and low prices for such stock on the New York Stock Exchange on the date the tax payment is otherwise due. In the event that the New York Stock Exchange is closed to business on the day upon which shares of the Company’s Common Stock are to be valued for this purpose, the Treasurer shall value such shares on the immediately preceding business day of such Exchange on which day such stock was traded.

5. Shares of Common Stock awarded or issued following redemption of RSUs under the Plans may be authorized but unissued shares, treasury shares or shares acquired for purposes of the Plans.

6. For purposes of determining ERISA Supplement (known as “PST Restoration”), International Retirement Plan and Supplemental Credit awards of restricted stock, the shares or RSUs awarded shall be valued at the average of the high and low prices for Common Stock of the Company on the New York Stock Exchange on the last five business days in June.

7. The Treasurer will transfer shares under the Plans to participants subject to restrictions as authorized by the Committee. Any certificates for shares delivered for this purpose will carry a legend legally sufficient to prohibit their sale or other disposition except in accordance with the terms of the form of Statement of Conditions and Restrictions or Statement of Terms and Conditions. Alternately, except as otherwise requested by the participant, the Treasurer may cause to be maintained a special restricted stock account for each participant without delivery of certificates for shares of restricted stock, with any such account maintained in such manner as will prevent sale or other disposition except in accordance with the terms of the applicable form of Statement of Conditions and Restrictions or Statement of Terms and Conditions.

8. Restricted shares evidenced by certificates may be surrendered to the Treasurer upon the lapse of the restrictions and certificates free of any legend for a like number of shares will be issued. Upon lapse of restrictions on restricted stock not evidenced by certificates, certificates free of restrictive legend representing such shares shall be automatically issued, without request therefor.

9. If, upon action by the Committee or pursuant to a Plan, a participant is required to sell any or all of the restricted shares to the Company pursuant to a form of Statement of Conditions and Restrictions or Statement of Terms and Conditions, the Treasurer will make such purchase for the Company at the purchase price stated in the form subject to any adjustment called for in the form or take such other action as is required.

10. In case of a triggering event under Article K of the 2009 Plan; Article K of the 2001 Plan; Article J of the 1992 Plan or the Belgian Plan; Article 3.4 of the 2004 Plan; and Article 9 of The Gillette Company 1971 Stock Option Plan (the “1971 Plan”) the appropriate number of such new or additional or different shares or securities will be issued by the Treasurer with the applicable restrictive legend to recipients holding restricted shares, in accordance with each form of Statement of Conditions and Restrictions or Statement of Terms and Conditions.

VIII. WAIVER, EXTENSION AND INTERPRETATION

1. The Committee’s authority to waive restrictions and conditions included in the form of Statement of Conditions and Restrictions or Statement of Terms and Conditions relating to any award shall be exercised sparingly. The authority shall be exercised only in the case of hardship which in the sole judgment of the Committee justifies such action. Under no circumstances will the convenience or preference of the participant be sufficient.

2. Upon request of any holder of shares subject to restrictions which would lapse upon retirement, the Treasurer is authorized to agree on behalf of the Company and the Committee to extend such restrictions so as to provide for the expiration (1) on a date not later than December 15 of

the year of retirement; (2) on January 15 of the year following retirement; (3) on January 15 in the second year following retirement; or (4) in five or ten annual installments beginning on January 15 of the year following retirement. Any such request must be made and agreed to prior to January 1 of the expected year of retirement and shall be granted only on condition that the employee making the request agrees not to engage in competitive employment (as defined in Article F of the P&G Plans or Article 12.1A(b) of the 2004 Plan) following retirement until expiration of the restrictions, without first obtaining written permission from the Company.

3. Upon the request of any employee whose compensation is subject to the jurisdiction of this Committee who has received awards of additional remuneration specified as to be paid in the form of deferred cash payable at retirement with interest, the Treasurer is authorized to agree on behalf of the Company and the Committee to make payment of any such deferred cash balances with interest owed to such a retiring employee in accordance with the Executive Deferred Compensation Plan and granted only on condition that the employee making the request agrees not to engage in competitive employment (as defined in Article F of the P&G Plans and Article 12.1A(b) of the 2004 Plan) following retirement until receipt of final payment, without first obtaining written permission from the Company.

4. Determination by the Committee as to the interpretation of the terms and provisions of the Plans shall be conclusive on all interested parties.

IX. CHIEF EXECUTIVE AWARDS

1. The Chief Executive Officer has the authority to grant a limited number of RSUs under the Plans to key employees who have demonstrated sustained superior performance or have key skills and experience, subject to such conditions or restrictions as determined by this Committee.

2. The number of grants that may be awarded by the Chief Executive Officer in any calendar year period shall not exceed twenty-five and no individual award may have a value greater than the lesser of $1,500,000 or three times the grantee’s base salary.

3. The number of shares or units authorized to be granted under Paragraph 1 of this Article IX shall be subject to appropriate adjustments in the case of a triggering event under Article K of the 2009 Plan; Article K of the 2001 Plan; Article J of the 1992 Plan and the Belgian Plan; Article 3.4 of the 2004 Plan; or Article 9 of The Gillette Company 1971 Stock Option Plan

4. The Committee shall receive an annual report of all grants under this Article IX.

X. TRANSITIONAL PROVISIONS FOR ASSUMPTION OF THE GILLETTE PLANS PURSUANT TO THE MERGER BETWEEN THE COMPANY AND THE GILLETTE COMPANY

The termination for “Good Reason” of or by an employee of the Company or its subsidiaries who was employed by The Gillette Company or its subsidiaries before the effective time of the merger with the Company shall be treated as a Special Separation or Retirement according to the provisions of Section 19A.4 of the 2004 Plan and Section 14.3 of the 1971 Plan. “Good Reason” is defined in Section 20.23 of the 2004 Plan and Section 6(c)(4)(d) of the 1971 Plan.

The Global Human Resources Officer is hereby authorized to assess and conclude whether an employee’s termination furnishes “Good Reason” for purposes of these provisions. In addition, the Global Human Resources Officer is further authorized to delegate to appropriate Company employees who, in the opinion of the Global Human Resources Officer, possess the requisite expertise, the authority to (i) develop a process for gathering facts and circumstances surrounding an employee’s termination for purposes of these provisions, which process shall include a deadline for submitting any claim for Good Reason, after which time such claims are barred, and (ii) based on such facts and circumstances, assess and conclude whether such employee’s termination furnishes “Good Reason” for purposes of these provisions. The determination of Good Reason by the Global Human Resources Officer or his/her designee(s) shall be conclusive.

Subject to the terms of the Gillette Plans, the Committee reserves the authority to modify the timing, nature, methods for exercise, and/or timing for delivery of proceeds for those equity grants subject to operation of Section 19A.4 of the 2004 Plan and Section 14.3 of the 1971 Plan (including, without limitation, recession of such grants for fair compensation) if it reasonably concludes that such modification is required by any provision of the American Jobs Creation Act of 2004 (such as Section 409A), as revised, or by any other governing law or regulation affecting executive compensation.

XI. MISCELLANEOUS

1. The Secretary shall promptly notify the affected holders of any outstanding stock options, stock appreciation rights, stock awards, RSUs or other awards of any material amendment of any Plan. If consent of the participant is required to any amendment that affects outstanding stock options and/or stock appreciation rights, failure of the participant to give consent within sixty days of the date of notice by means specified in the notice shall be deemed to mean that said participant does not consent to said amendment.

2. The requirements of Article F, Paragraph 1(b) of the P&G Plans and Article 12.1A(b) of the 2004 Plan are hereby waived as a condition of any outstanding stock option or stock appreciation right held by an employee on assignment in France, for the duration of such assignment but not thereafter.

3. The names of persons to whom stock options or stock appreciation rights have been granted or to whom shares or RSUs have been awarded under the Plans, and the number of shares covered thereby, shall not be open to inspection unless authorized by the Committee or the Secretary.

4. The Secretary shall report at each meeting of the Committee at which awards or grants are to be considered the total number of shares available for award or grant under each of the Plans.

5. In the absence of the Treasurer of the Company or of a subsidiary, an Assistant Treasurer of the appropriate Company is hereby authorized to perform the duties and have the powers of the Treasurer. In addition, the Treasurer is authorized to delegate to an appropriate manager reporting to the Treasurer the authority to acquire, transfer and deliver shares for the purposes of the Plans.

6. In the absence of the Secretary, the Office of the Corporate Secretary is hereby authorized to perform the duties and have the powers of the Secretary.

7. Signature by the Secretary or Global Human Resources Officer on agreement letters for stock options, stock appreciation rights, stock awards, RSUs or other award agreements may be by facsimile.

8. These Regulations may be amended at any time by action of the Committee.

XII. RECOGNITION SHARES PROGRAM

1. For the period July 1 to June 30 each year, stock options or stock appreciation rights totaling up to 500,000 shares may be granted to Participants as set forth in this Article XII.

2. Each grant under this Recognition Shares Program shall be for 100 shares of Procter & Gamble Common Stock with such terms and conditions as determined by the Global Human Resources Officer or such Global Human Resources Officer’s delegate.

3. The Global Human Resources Officer or such Officer’s delegates shall determine from time to time those Participants who should receive stock options or stock appreciation rights under the Recognition Shares Program.

4. All stock options and stock appreciation rights granted under the Recognition Shares Program shall have a maximum life of no more than ten (10) years from the date of grant and shall not be exercisable within five (5) years from their date of grant, except in the case of death of the Participant.

5. For all grants made pursuant to this program, the Committee waives each of the following provisions:

• Intent to Remain with Company for 1 Year (Article F, Paragraph 1(a))

• Non-Compete (Article F, Paragraph 1(b))

• 6 Month Rule ((Article G, Paragraph 9(a)(2) of the 2009 Plan) and (Article G, Paragraph 4(a)(2) of the 2001 Plan), beginning with the word “that” and ending with the word “granted”)

• 5 Year Term for Special Separation (Article G Paragraph 4(c) of the 2001 Plan)

6. For all grants made pursuant to this program, the Committee also adopts the following provision in lieu of Article G, Paragraph 5 of the 2001 Plan:

“In the case of death of a Participant, a cash payment equal to the Spread Value of the Award, as of the date of the Participant’s death, shall be paid as soon as administratively practicable to the Participant’s estate. If the Participant is located in Italy, the outstanding Award granted to such Participant shall be (i) immediately canceled if the death occurs prior to the fifth anniversary of the Grant Date, or (ii) exercisable by the executors, administrators or heirs of the deceased Participant only for six (6) months following such death if the death occurs on or after the fifth anniversary of the Grant Date.”

7. For only those grants made pursuant to this program, if a Participant’s employment is terminated on or after the fifth anniversary of the grant date, for any reason other than death, disability, Retirement or Special Separation, the stock options or stock appreciation rights granted herein shall be exerciseable for thirty (30) calendar days following such termination, and only to the extent they were exercisable on the date of termination, except as may otherwise be determined by the Committee, provided that they cannot be exercised more than ten (10) years after the grant date.

Originally adopted February 26, 1993 and amended and restated October 9, 2001

Article V, paragraphs 7 and 9 amended; Schedule C amended September 10, 2002

Reference to The Procter & Gamble 1983 Stock Plan deleted; Article VI, paragraph 3 amended and Schedule F amended December 10, 2002

Article IX, paragraphs 1 and 3 amended March 11, 2003.

Article IX, paragraph 1 amended June 10, 2003.

Article V., paragraph 12 and Schedule G added August 8, 2003.

Schedule B amended September 8, 2003.

Adjusted for stock split effective May 21, 2004.

Amended to reflect assumption of Gillette plans, December 13, 2005

Article IV amended to reflect changes in Plan to “actions taken significantly contrary to best interests”, April 30, 2006

Amended to reflect change to grant price to “closing price for the Common Stock on the day of the grant”, February, 2007.

Amended to reflect changes in French law regarding holding requirements and addition of Recognition Shares, August, 2007

Amended to reflect the adoption of the 2009 Plan and the addition of sub-plans F and H (2009 France Sub-plan and 2009 UK Sub-plan) December 2009

Amended to allow for RSU settlements to use the actual price received in the sale on the open market or the average of the high and low price on the settlement day for the value of the Common Stock depending on the settlement method February 2011

EX-10.2

Exhibit (10-2)

The Procter & Gamble 2009 Stock and Incentive Compensation Plan - related correspondence.

<date>

Name     Global Id #

Subject: NON-STATUTORY STOCK OPTION SERIES XX-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: (Grant Value)

Option Price per Share: (Grant Price)

Number of Shares: (# of Shares)

Date of Grant: (Grant Date)

Expiration of Option: (Expiration Date)

Option Vest Date: 100% after (Vest Date)

Acceptance Deadline: (Acceptance Deadline Date)

This stock option is granted in accordance with and subject to the terms of The Procter & Gamble 2009 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.

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 9(a) 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.

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 and net proceeds may be recovered by the Company, if you fail to comply with the terms and conditions governing this award.

This option to purchase shares of Common Stock of the Company is subject to the Employee Acknowledgement and Consent Form enclosed and to the terms of the Plan and Regulations of the Committee, with which you acknowledge you are familiar by accepting this award, including the non-compete and non-solicitation provisions and other terms of Article F of the Plan. 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, the Plan and Regulations of the Committee 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

Moheet Nagrath

Global Human Resources Officer

<date>

Name                Global Id #

Subject: AWARD OF RESTRICTED STOCK UNITS SERIES XX-KM-RSU

In recognition of your contributions to the future success of the business, The Procter & Gamble Company (“Company”) hereby grants to you Restricted Stock Units (“RSUs”) as follows:

Number of Restricted Stock Units:        (# Units)

Date of Grant:            <date>

Forfeiture Date:            <date>

Settlement Date (Shares Delivered on):    <date>

Acceptance Deadline:            <date>

These RSUs are granted in accordance with and subject to the terms of The Procter & Gamble 2009 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”), the Settlement Instructions in place as may be revised from time to time, and the attached Statement of Terms and Conditions Form KM.

RSUs are not transferable other than by will or the laws of descent and distribution and are exercisable during your life only by you. RSUs will become void upon any separation (including retirement) from the Company or any of its subsidiaries within 6 months of the grant date. RSUs 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 Section 2(b) of Terms and Conditions Form KM). For the purposes of this RSU grant, 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.

Please note that when the issue or transfer of the Common Stock covered by this RSU grant 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 RSUs may be suspended or terminated and net proceeds may be recovered by the Company if you fail to comply with the terms and conditions governing this award.

RSUs granted hereunder are subject to the Employee Acknowledgement and Consent Form enclosed, the terms of the Plan and Regulations of the Committee, and the attached statement of Terms and Conditions Form KM, with which you acknowledge you are familiar by accepting this award, including the non-compete and non-solicitation provisions and other terms of Article F of the Plan. These RSUs are also subject to and bound by the actions of the Compensation and Leadership Development Committee and of the Company’s Board of Directors. This RSU grant, the Plan and Regulations of the Committee, and the attached statement of Terms and Conditions Form KM 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 these RSUs. Any legal action related to these RSUs, including the non-compete provisions, 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 RSU 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

Moheet Nagrath

Global Human Resources Officer

<date>

Name                                                  Global Id #

Subject: AWARD OF PERFORMANCE STOCK UNIT SERIES XX-XX-PSP

In recognition of your contributions to the future success of the business, The Procter & Gamble Company (“Company”) hereby grants to you Performance Stock Units (“PSUs”) as follows:

Target Number of PSUs:	(Target # Units)
Maximum Number of PSUs:	(Maximum # Units)
Grant Date:	<date>
Forfeiture Date:	(Forfeiture Date)
Performance Period:	July 1, 20XX - June 30, 20XX
Original Settlement Date (Shares Delivered on):	(Original Settlement Date)
Acceptance Deadline:	<date>

These PSUs are granted in accordance with and subject to the terms of The Procter & Gamble 2009 Stock and Incentive Compensation Plan (including any applicable sub-plan) (the “Plan”), the Performance Stock Plan, the Regulations of the Compensation and Leadership Development Committee of the Board of Directors (“Committee”), the Settlement Instructions in place as may be revised from time to time, and the attached Statement of Terms and Conditions Form-PP.

PSUs are not transferable other than by will or the laws of descent and distribution. PSUs will become void upon any separation (includ-ing retirement) from the Company or any of its subsidiaries on or before August 31, 20XX. PSUs may also become void upon separation from the Company or any of its subsidiaries at any time later than August 31, 20XX (see Section 4 of Terms and Conditions Form PP). For the purposes of this PSU grant, 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.

Your right to receive all, any portion of or more than the Target Number of PSUs (but in no event more than the Maximum Number of PSUs) is contingent upon the achievement of specified levels of certain performance goals measured over the Performance Period. The applicable performance goals and payout factors for each performance goal applicable to your award for the Performance Period are set forth in attachment A.

Please note that when the issue or transfer of the Common Stock covered by this PSU grant 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 PSUs may be suspended or terminated and net proceeds may be recovered by the Company, if you fail to comply with the terms and conditions governing this award.

PSUs granted hereunder are subject to the Employee Acknowledgement and Consent Form enclosed, the terms of the Plan, the Performance Stock Plan, and Regulations of the Committee, and the attached statement of Terms and Conditions Form-PP, with which you acknowledge you are familiar by accepting this award, including the non-compete and non-solicitation provisions and other terms of Article F of the Plan. These PSUs are also subject to and bound by the actions of the Compensation and Leadership Development Committee and of the Company’s Board of Directors. This PSU grant, the Plan, the Performance Stock Plan and Regulations of the Committee, and the attached statement of Terms and Conditions Form-PP 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 these PSUs. Any legal action related to these PSUs, including the non-compete provisions, 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 PSU 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

Moheet Nagrath

Global Human Resources Officer

Employee Acknowledgement and Consent Form

I understand that I am eligible to receive a grant under The Procter & Gamble 2009 Stock and Incentive Compensation Plan referred to as the “Plan”.

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 Plan.

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 grants 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 Plan (“Data”). I 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 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 Plan, 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 or settlement of the grant. I understand that Data will be held only as long as is necessary to implement, administer and manage my participation in the Plan. 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 Plan. 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 evidenced hereby, I acknowledge that: i) the Plan is 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 under the Plan is voluntary and occasional and does not create any contractual or other right to receive future grants, or benefits in lieu of a grant, even if grants have been granted repeatedly in the past; iii) all decisions with respect to future grants, if any, will be at the sole discretion of P&G; iv) my participation in the Plan is voluntary; v) the grant 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 will not be interpreted to form an employment relationship with P&G; and furthermore, the grant will not be interpreted to form an employment contract with my Employer; vii) the future value of the shares purchased under the Plan is unknown and cannot be predicted with certainty, may increase or decrease in value, and potentially have no value; iix) my participation in the Plan shall not create a right to further employment with my 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 grant or the diminution in value of the grant 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 grant, including the issuance, vesting, exercise, settlement, the subsequent sale of shares acquired, 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 grant to reduce or eliminate my liability for Tax-Related Items.

Prior to exercise or settlement of a grant, 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.

20XX Executive Compensation Payment Preferences

20XX Base Salary                        Name

        % Deferred Compensation¹ (max 50%)

20XX/XX STAR Award

        % Cash*

        % Stock Options

        % Deferred Compensation¹

        % Restricted Stock Units (RSUs)

Deliver shares on September 15,             .

Deliver shares one year after separation or per my retirement RSU election

20XX Key Manager Long Term Incentive Award

        % Stock Options* (50%, 75%, 100%)

        % RSUs            (50%, 25%, 0%)

20XX Performance Stock Program (PSP) Award

There is no election required for 20XX.

Your signature below indicates your agreement that any awards granted or paid pursuant to the STAR and/or PSP 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 PSP 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 PSP. A copy of the policy is available from Kathy Hardman.

Signature                                 Date

Sign and return this form to Kathy Hardman, Global Executive Compensation, TN4 GO by

<date>, otherwise all awards will be paid in the default form.

* Default payment form

¹  For Deferred Compensation, please complete and return Election to Defer (Form B). First time participants also complete and return the Designation of Payment Form (Form C) and the Beneficiary Designation Form.

EX-10.3

Exhibit (10-3)

The Procter & Gamble Performance Stock Program Summary and related terms and conditions

PERFORMANCE STOCK PROGRAM SUMMARY

The Performance Stock Program (“PSP”) is a part of The Procter & Gamble Company’s (the “Company”) long-term incentive compensation and is designed to provide additional focus on key Company measures for top executives with senior management responsibility for total Company results. Awards granted under the PSP (“PSP Awards”) are made pursuant to authority delegated to the Compensation & Leadership Development Committee (the “C&LD Committee”) by the Board of Directors for determining compensation for the Company’s principal officers and for making awards under the Procter & Gamble 2009 Stock and Incentive Compensation Plan (the “2009 Plan”) or any successor stock plan approved in accordance with applicable listing standards. To the extent awarded under the 2009 Plan, the PSP Awards are Performance Awards (as defined in the 2009 Plan).

I. ELIGIBILITY

The Chairman of the Board and Chief Executive Officer and those principal officers at Band 7 or above recommended by management and approved by the C&LD Committee are eligible to participate (“Participants”).

II. OVERVIEW

PSP rewards Participants for Company performance against certain three-year performance goals in categories established by the C&LD Committee. The C&LD Committee sets these performance goals for each three-year period that begins on July 1 and ends on June 30 three years later (“Performance Period”). In the first year of each Performance Period, the C&LD Committee grants Performance Stock Units (“PSUs”) to Participants that will vest at the end of the Performance Period based on the Company’s performance relative to the pre-established performance goals (“Initial PSU Grant”). The number of PSUs that vest at the end of the Performance Period depends on the Company’s performance against the pre-established performance goals. Vested PSUs are converted into shares of the Company’s common stock (“Common Stock”) delivered to the applicable Participant within 60 days following the end of the Performance Period, or such later date as may be elected by the Participant in accordance with Section 409A of the Internal Revenue Code (“Section 409A”).

III. THE INITIAL PSU GRANT

The C&LD Committee has the sole discretion to establish the target award (“PSP Target”) for each Participant. The PSP Target will be a cash amount and will be the basis for the Initial PSU Grant. The C&LD Committee will make the Initial PSU Grant on the last business date in February (“Grant Date”) following the beginning of each Performance Period. The Initial PSU Grant will set forth a target and maximum number of PSUs. The Initial PSU Grant target will be determined by dividing the PSP Target

by the price of the Company’s Common Stock as determined by the Regulations of the Compensation and Leadership Development Committee for the 2009 Plan, rounding to the nearest whole unit. The Initial PSU Grant maximum will be two times the Initial PSU Grant target.

IV. PERFORMANCE CATEGORIES

The PSP Award is based on the Company’s performance in each of the following categories (each a “Performance Category”):

• Organic sales growth (percentile rank in peer group)

• Before-tax operating profit growth

• Core earnings per share (EPS) growth

• Free cash flow productivity

Within the first 90 days of each Performance Period, the C&LD Committee sets three-year performance goals (“Performance Goals”) for each Performance Category for such Performance Period and establishes a sliding scale to measure the Company’s performance against each Performance Goal in each Performance Category. The C&LD Committee uses the sliding scale to establish a payout factor between 0% and 200% for each Performance Category ( a “Sales Factor”, “Profit Factor”, “EPS Factor” and “Cash Flow Factor”, collectively, “Performance Factors”).

In all cases, the C&LD Committee retains the discretion to include or exclude certain of the Performance Categories for purposes of determining the PSP Award. The C&LD Committee may reduce or eliminate any payment if it determines that such payout is inconsistent with long-term shareholders’ interests.

V. PSU VESTING AND PAYMENT

After the Performance Period is complete, the C&LD Committee will establish the Payout Factors for each of the Performance Categories based on the Company’s results versus the pre-established Performance Goals. The number of PSUs that vest will be determined by multiplying the average of the Performance Factors by the number of PSUs in the Initial PSU Grant target, rounding up to the nearest whole number. The number of PSUs that vest may be equal to, above or below the Initial PSU Grant target depending on the Company’s performance in the Performance Categories, but in no event more than the Initial PSU Grant maximum. Vested PSUs are converted into shares of Common Stock delivered to the applicable Participant within 60 days following the end of the Performance Period, or such later date as may be elected by the Participant in accordance with Section 409A.

VI. SEPARATION FROM THE COMPANY (Defined terms shall have the meaning designated in the 2009 Plan or related award documents)

• Retirement Special Separation (less than age 55 and therefore not eligible for regular retirement) or Disability prior to payment:

• The Participant must be an active employee as of August 31st following the first year of the Performance Period.

• The PSP Award will vest and be paid according to the terms and conditions set forth herein.

• The Participant must comply with all terms and conditions set forth in the 2009 Plan, including those set forth in Article F.

• Death prior to payment:

• All PSP Awards will vest and be paid to the decedent’s estate according to the terms and conditions set forth herein, and shall be subject to the terms and conditions set forth in the 2009 Plan, including those set forth in Article F.

• Voluntary resignation or termination for cause:

• If a Participant voluntarily resigns or is terminated for cause prior to the completion of the Performance Period, the PSP Award shall be void.

• If a Participant voluntarily resigns or is terminated for cause after the Performance Period is complete, but prior to payment, the PSP Award shall vest and be paid according to the terms and conditions set forth herein.

• The Participant must comply with all terms and conditions set forth in the 2009 Plan, including those set forth in Article F.

VII. CHANGE IN CONTROL

Notwithstanding the foregoing, if there is a Change in Control that meets the requirements of a change in control event under Section 409A, all outstanding PSP Awards will vest at 100% of the Initial PSU Grant target (or 100% of the PSP Target if the Change in Control occurs prior to the Initial PSU Grant) and shall be paid in shares of Common Stock at the time of such Change in Control. If there is a Change in Control event that does not meet the requirements of a change in control event under Section 409A, all outstanding PSP Awards will be settled according to the terms and conditions set forth herein, without the application of Article L, Paragraph 4 of the Plan. “Change in Control” shall have the same meaning as defined in the 2009 Plan or any successor stock plan approved in accordance with applicable listing standards.

VIII. GENERAL TERMS AND CONDITIONS

It shall be understood that the PSP does not give to any officer or employee any contract rights, express or implied, against any Company for any PSP 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 Committee.

Each PSP Award made to an individual at Band 7 and above is subject to the Senior Executive Recoupment Policy adopted by the C&LD Committee in December 2006.

To the extent applicable, it is intended that the PSP comply with the provisions of Section 409A. The PSP will be administered and interpreted in a manner consistent with this intent. Neither a Participant nor any of a Participant’s creditors or beneficiaries will have the right to subject any deferred compensation (within the meaning of Section 409A) payable under the PSP to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to a Participant under the PSP may not be reduced by, or offset against, any amount owing by a Participant to the Company.

This program document may be amended at any time by the C&LD Committee.

THE PROCTER & GAMBLE COMPANY

STATEMENT OF TERMS AND CONDITIONS FOR PERFORMANCE STOCK UNITS

THE PROCTER & GAMBLE 2009 STOCK AND INCENTIVE COMPENSATION PLAN

The Performance 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 Performance Stock Units (“Terms and Conditions”), all capitalized terms not defined in these Terms and Conditions will have the meanings described in The Procter & Gamble 2009 Stock and Incentive Compensation Plan (the “Plan”), and the following terms will have the following meanings.

(a) “Data” has the meaning described in Section 8;

(b) “Disability” shall have the meaning provided under Internal Revenue Code Section 409A and corresponding regulations (collectively “Section 409A”).

(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 Performance Stock Unit was awarded to you, as identified in your Award Letter;

(f) “Maximum Units” has the meaning described in section 3 and as identified as the Maximum Number of Performance Stocks Units 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) “Procter & Gamble” means the Company and/or its Subsidiaries;

(i) “Performance Period” means the period identified as such in your Award Letter.

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

(k) “Separation from Service” shall have the meaning provided under Section 409A.

(l) “Target Units” has the meaning described in Section 3 and as identified as the Target Number of PSUs in your Award Letter.

2. Transfer and Restrictions.

(a) Neither Performance 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 Performance Stock Unit, whether voluntary or involuntary on your part, will result in the immediate forfeiture to the Company, and cancellation, of the Performance Stock Unit.

(b) During the Forfeiture Period, your Performance Stock Units will be forfeited and cancelled if you leave your employment with Procter & Gamble for any reason, except due to: (i) your Disability; (ii) death; (iii) Retirement in accordance with the provisions of any appropriate Retirement plan of Procter & Gamble that occurs after August 31 following the first year of the Performance Period; or (iv) Special Separation that occurs after August 31 following the first year of the Performance Period. In the event of your death or Disability during the Forfeiture Period, your Forfeiture Date will automatically and immediately become, without any further action by you or the Company, the date of your death or Disability. In the event of your Retirement or Special Separation that occurs after August 31 following the first year of the Performance Period, your Forfeiture Date will automatically and immediately become, without any further action by you or the Company, the date of your Retirement or Special Separation.

(d) Upon the occurrence of a Change in Control that meets the definitional requirements of a change in control event as defined under Section 409A, then notwithstanding anything in the Plan to the contrary, if not previously cancelled, forfeited or vested, (i) the Target Units will vest, (ii) your right to any Performance Stock Units greater than the Target Units will be forfeited, and (iii) your Original Settlement Date will become the date the Change in Control occurred. Upon the occurrence of a Change in Control that does not meet the definitional requirements of a change in control event as defined under Section 409A, then notwithstanding anything in the Plan to the contrary, your award will be settled in accordance with these Terms and Conditions, without the application of Article L, Paragraph 4 of the Plan.

(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 Performance Stock Units, or to settle your Performance Stock Units, including requiring you to do so by means of electronic signature, or charging you an administrative fee for doing so.

3. Performance Vesting

(a) Subject to these Terms and Conditions, your targeted number of Performance Stock Units indicated in your Award Letter (the “Target Units”) will vest depending upon performance during the Performance Period, as specified below. Your Award Letter also sets forth the maximum number of Performance Stock Units (the “Maximum Units”) that you may receive pursuant to this award. Your right to receive all, any portion of, or more than the Target Units (but in no event more than the Maximum Units) will be contingent upon the achievement of specified levels of certain performance goals measured over the Performance Period. The applicable performance goals and the payout factors for each performance goal applicable to your award for the Performance Period are set forth in your Award Letter.

(b) Within 60 days following the end of the Performance Period, the Committee will determine (i) whether and to what extent the performance goals have been satisfied for the Performance Period, (ii) the number of Performance Stock Units that shall have become vested under this award, and (iii) whether the other applicable vesting and other conditions for receipt of shares of Common Stock in respect of the Performance Stock Units have been met. Any of your Performance Stock Units that do not vest in accordance with this Section 3(b) will be forfeited and cancelled.

4. Settlement.

(a) At any time at least six months prior to the end of the Performance Period and so long as the achievement of the applicable performance goals are not yet readily ascertainable (but in no event later than your separation from service from the Company), you and the Company may agree to postpone the date on which you are entitled to receive one share of Common Stock by issuing you one Restricted Stock Unit for each vested Performance Stock Unit on the Original Settlement Date, which Restricted Stock Unit shall be paid on such later date as may be elected by you in accordance with Section 409A.

(b) The Company will settle your vested Performance Stock Units by issuing you one share of Common Stock or one Restricted Stock Unit (RSU) for each vested Performance Stock Unit on or as soon as practicable (but in no event more than 60 days) following the Original Settlement Date.

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

5. Voting and Other Shareholder Rights.

A Performance 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 Performance Stock Units you hold.

6. Suspension Periods and Termination.

The Company reserves the right from time to time to temporarily suspend your right to settle your Performance Stock Units for shares of Common Stock where such suspension is deemed by the Company as necessary or appropriate and to the extent such action does not result in immediate taxation and penalties under Section 409A.

7. Consent

By accepting a Performance 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 Performance Stock Units is voluntary and occasional and does not create any contractual or other right to receive future awards of Performance Stock Units, or benefits in lieu of Performance Stock Units, even if Performance Stock Units have been awarded repeatedly in the past; (iii) all decisions with respect to future Performance Stock Unit awards, if any, will be at the sole discretion of the Company; (iv) your participation in the Plan is voluntary; (v) Performance 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 Performance Stock Units will not be interpreted to form an employment relationship with the Company; and, furthermore, the award of Performance 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 Performance Stock Units, or diminution in value of Performance Stock Units or Common Stock received in settlement thereof, and you irrevocably release Procter & Gamble from any such claim that may arise.

8. Data Privacy.

By accepting a Performance 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, Performance 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 Performance 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.

9. Notices.

(a) Any notice to Procter & Gamble that is required or appropriate with respect to Performance 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 Performance 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.

10. 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.

11. Governing Law.

The validity, interpretation, performance and enforcement of these Terms and Conditions, the Plan and your Performance 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 Performance Stock Units, you consent to the exclusive jurisdiction of the federal or state courts located in Hamilton County, Ohio, U.S.A.

12. The Plan.

All Performance 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, including but not limited to Article F, apply to you and your Performance Stock Units whether or not they have been called out in these Terms and Conditions.

13. 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 Performance Stock Units, and the obligations imposed on you in connection with those rights. No right exists with respect to Performance Stock Units except as described in these Terms and Conditions and the Plan.

EX-11

EXHIBIT 11

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

Computation of Earnings Per Share

	Three Months Ended March 31				Nine Months Ended March 31
Amounts in millions except per share amounts	2011		2010		2011		2010
BASIC NET EARNINGS PER SHARE
Net earnings from continuing operations	$	2,873	$	2,585	$	9,287	$	8,761
Preferred dividends, net of tax benefit		51		49		167		149
Net earnings from continuing operations available to common shareholders	$	2,822	$	2,536	$	9,120	$	8,612
Net earnings from discontinued operations	$	—	$	—	$	—	$	1,790
Net earnings available to common shareholders	$	2,822	$	2,536	$	9,120	$	10,402
Basic weighted average common shares outstanding		2,802.2		2,898.2		2,810.5		2,912.1
Basic net earnings per common share - continuing operations	$	1.01	$	0.88	$	3.24	$	2.96
Basic net earnings per common share - discontinued operations	$	—	$	—	$	—	$	0.61
Basic net earnings per common share	$	1.01	$	0.88	$	3.24	$	3.57
DILUTED NET EARNINGS PER SHARE
Diluted net earnings from continuing operations	$	2,873	$	2,585	$	9,287	$	8,761
Diluted net earnings from discontinued operations	$	—	$	—	$	—	$	1,790
Diluted net earnings	$	2,873	$	2,585	$	9,287	$	10,551
Basic weighted average common shares outstanding		2,802.2		2,898.2		2,810.5		2,912.1
Add potential effect of:
Conversion of preferred shares		127.8		133.3		129.1		134.8
Exercise of stock options and other Unvested Equity awards		69.3		72.4		69.0		63.3
Diluted weighted average common shares outstanding		2,999.3		3,103.9		3,008.6		3,110.2
Diluted net earnings per common share - continuing operations	$	0.96	$	0.83	$	3.09	$	2.82
Diluted net earnings per common share - discontinued operations	$	—	$	—	$	—	$	0.57
Diluted net earnings per common share	$	0.96	$	0.83	$	3.09	$	3.39

EX-12

EXHIBIT 12

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

	Years Ended June 30										Nine Months Ended March 31
Amounts in millions	2010		2009		2008		2007		2006		2011		2010
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	$	15,169	$	14,461	$	14,927	$	13,698	$	11,658	$	12,152	$	12,387
Fixed charges (excluding capitalized interest and including amortization of capitalized interest)		1,167		1,576		1,640		1,458		1,268		783		900
TOTAL EARNINGS, AS DEFINED	$	16,336	$	16,037	$	16,567	$	15,156	$	12,926	$	12,935	$	13,287
FIXED CHARGES, AS DEFINED
Interest expense (including capitalized interest)	$	1,014	$	1,431	$	1,546	$	1,374	$	1,153	$	661	$	785
1/3 of rental expense		176		177		137		124		122		126		133
TOTAL FIXED CHARGES, AS DEFINED	$	1,190	$	1,608	$	1,683	$	1,498	$	1,275	$	787	$	918
RATIO OF EARNINGS TO FIXED CHARGES		13.7x		10.0x		9.8x		10.1x		10.1x		16.4x		14.5x

EX-31.1

EXHIBIT 31.1

Rule 13a-14(a)/15d-14(a) Certifications

I, Robert A. McDonald, certify that:

(1) I have reviewed this quarterly report on Form 10-Q 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;

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.

/s/  ROBERT A. MCDONALD

(Robert A. McDonald)

Chairman of the Board, President and

Chief Executive Officer

April 29, 2011

Date

EX-31.2

EXHIBIT 31.2

Rule 13a-14(a)/15d-14(a) Certifications

I, Jon R. Moeller, certify that:

(1) I have reviewed this quarterly report on Form 10-Q 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;

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.

/s/ JON R. MOELLER

(Jon R. Moeller)

Chief Financial Officer

April 29, 2011

Date

EX-32.1

EXHIBIT 32.1

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 Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2011 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-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company.

/s/    ROBERT A. MCDONALD

(Robert A. McDonald)

Chairman of the Board, President and

Chief Executive Officer

April 29, 2011

Date

A signed original of this written statement required by Section 906 has been provided to The Procter & Gamble Company and will be retained by The Procter & Gamble Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

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 Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2011 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-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company.

/s/    JON R. MOELLER

(Jon R. Moeller)

Chief Financial Officer

April 29, 2011

Date

A signed original of this written statement required by Section 906 has been provided to The Procter & Gamble Company and will be retained by The Procter & Gamble Company and furnished to the Securities and Exchange Commission or its staff upon request.