10-K

ANNUAL REPORT ON FORM 10-K
TO THE
SECURITIES AND EXCHANGE COMMISSION
FOR THE
YEAR ENDED JUNE 30, 2002

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

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended June 30, 2002 Commission File No. 1-434

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

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

Title of each class	Name of each Exchange on which registered
Common Stock, without Par Value	New York, Cincinnati, Amsterdam, Paris, Basle, Geneva, Lausanne, Zurich, Frankfurt, Brussels, Tokyo

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    x        No    o.

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

There were 1,300,493,412 shares of Common Stock outstanding as of July 31, 2002. The aggregate market value of the voting stock held by non-affiliates amounted to $116 billion on July 31, 2002.

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TABLE OF CONTENTS

PART I
	Item 1. Business.
	Item 2. Properties.
	Item 3. Legal Proceedings.
	Item 4. Submission of Matters to a Vote of Security Holders.
PART II
	Item 5. Market for the Common Stock and Related Stockholder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Financial Statements and Supplemental Data
	Item 9. Disagreements on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
PART IV
	Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
EXHIBIT INDEX
EX. 10-8 The P&G 1992 Stock Plan (Belgian Version)
EX. 10-9 The Procter & Gamble Future Shares Plan
EX. 11 Computation of Earnings Per Share
EX.12 Comput. of Ratio of Earnings to Fixed Chrgs
EX. 13 Annual Report
EX. 21 The Procter & Gamble Company Subsidiaries
EX. 23 Independent Auditors Consent
EX. 99-1 Certification of Periodic Financial Rprts
EX. 99-3 Dir. & Off. 1st & 6th Excess Liab. Binder
EX. 99-4 Dir. & Off. 2nd Excess Liability Binder
EX. 99-5 Dir. & Off. 3rd Excess Liability Binder
EX. 99-6 Dir. & Off. 4th Excess Liability Binder
EX. 99-7 Dir. & Off. 5th Excess Liability Binder
EX. 99-8 Dir. & Off. 7th Excess Liability Binder

Documents Incorporated By Reference

Portions of the Annual Report to Shareholders for the fiscal year ended June 30, 2002 are incorporated by reference into Part I, Part II and Part IV of this report.

Portions of the Proxy Statement for the 2002 Annual Meeting of Shareholders are incorporated by reference into Part III of this report.

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PART I

Item 1. Business.

General Development of Business

         The Procter & Gamble Company was incorporated in Ohio in 1905, having been built from a business founded in 1837 by William Procter and James Gamble. Today, the Company manufactures and markets a broad range of consumer products in many countries throughout the world.

         Unless the context indicates otherwise, the term the “Company” as used herein refers to The Procter & Gamble Company (the registrant) and its subsidiaries.

         In 1999, the Company announced its intention to transition from its previous geographic-based structure to a product-based global business unit structure. Concurrent with that change, the Company initiated a multi-year restructuring program, a discussion of which is incorporated herein by reference to Note 2, Restructuring Program, which appears on pages 33-34 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002. On November 16, 2001, the Company completed the acquisition of the Clairol business from Bristol-Myers Squibb Company and, on May 31, 2002, the Company completed the spin-off of the Jif peanut butter and Crisco shortening brands to the Company’s shareholders and their subsequent merger into the J.M. Smucker Company. Additional information about these two transactions is incorporated herein by reference to Note 3, Acquisitions and Spin-off, which appears on pages 34-35 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002. Additional information required by this item is incorporated herein by reference to the Letter to Shareholders, which appears on pages 1-14 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002.

Financial Information About Industry Segments

         The Company’s products fall into five business segments: fabric and home care; baby, feminine and family care; beauty care; health care; and food and beverage.

         Additional information required by this item is incorporated herein by reference to Note 13, Segment Information, of the Notes to the Consolidated Financial Statements, which appears on page 44, and Financial Review, which appears on pages 17-25 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002.

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Narrative Description of Business

         The Company’s business, represented by the aggregate of its fabric and home care; baby, feminine and family care; beauty care; health care; and food and beverage segments, is essentially homogeneous. None of these segments are seasonal. Many of the factors necessary for an understanding of these five segments are similar. The primary differences relate to the degree of capital intensity of the businesses, which may affect gross margin trends versus operating margins. The markets in which the Company’s products are sold are highly competitive. The products of the Company’s business segments compete with many large and small companies, and there is no dominant competitor or competitors. Advertising is used in conjunction with an extensive sales force, because the Company believes this combination provides the most efficient method of marketing for these types of products. Product quality, performance, value and packaging are also important competitive factors. Most of the Company’s products in each of its segments are distributed through food, drug, mass and other retail outlets.

         The laundry and diaper categories constitute approximately 19% and 12% of consolidated fiscal 2002 sales, respectively. These results are comparable to the year before. The creation of new products and the development of new performance benefits for consumers on the Company’s existing products are vital ingredients in its continuing progress in the highly competitive markets in which it does business. Basic research and product development activities continued to carry a high priority during the past fiscal year. While many of the benefits from these efforts will not be realized until future years, the Company believes these activities demonstrate its commitment to future growth.

         The Company has registered trademarks and owns or has licenses under patents which are used in connection with its business in all segments. Some of these patents or licenses cover significant product formulation and processing of the Company’s products. The trademarks of all major products in each segment are registered. In part, the Company’s success can be attributed to the existence and continued protection of these trademarks, patents and licenses.

         Most of the raw materials used by the Company are purchased from others, some of whom are single-source suppliers. Additionally, some raw materials, primarily chemicals, are produced by the Company for further use in the manufacturing process. The Company purchases and produces a substantial variety of raw materials, no one of which is material to the Company’s business taken as a whole.

         Expenditures in fiscal year 2002 for compliance with federal, state and local environmental laws and regulations were not materially different from such expenditures in the prior year, and no material increase is expected in fiscal year 2003.

         Operations outside the United States are generally characterized by the same conditions discussed in the description of the business above and may also be affected by additional elements including changing currency values and different rates of inflation and economic growth.

         The Company has approximately 102,000 employees. The decline of approximately 4,000 employees versus the prior year is primarily from separations related to the Company’s restructuring program, partially offset due to increased enrollment from the Clairol acquisition.

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         Additional information required by this item is incorporated herein by reference to Note 13, Segment Information, which appears on page 44; Financial Summary, which appears on page 46; and Financial Review, which appears on pages 17-25 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002.

Financial Information About Foreign and Domestic Operations

         The information required by this item is incorporated herein by reference to Note 13, Segment Information, which appears on page 44, and Financial Review, which appears on pages 17-25 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002. Company sales by geography for the fiscal year ended June 30, 2002 were as follows: North America — 57%; Europe, Middle East and Africa — 26%; Asia — 10% and Latin America — 7%.

Assets and net sales in the United States and internationally were as follows (in millions):

	Net Sales (for the year ended June 30)						Assets (as of June 30)
	2002		2001		2000		2002		2001		2000
United States	$	21,198	$	20,334	$	20,038	$	23,434	$	18,318	$	17,398
International		19,040		18,910		19,913		17,342		16,069		16,968

Item 2. Properties.

         In the United States, the Company owns and operates 36 manufacturing facilities and leases and operates 2 manufacturing facilities. These facilities are located in 21 different states. In addition, the Company owns and operates 89 manufacturing facilities in 44 other countries. Fabric and home care products are produced at 46 of these locations; baby, feminine and family care products at 42; health care products at 24; beauty care products at 28; and food and beverage products at 12. Management believes that the Company’s production facilities are adequate to support the business efficiently and that the properties and equipment have been well maintained.

Item 3. Legal Proceedings.

         The Company is involved in clean-up efforts at off-site Superfund locations, many of which are in the preliminary stages of investigation. The amount accrued at the end of June 30, 2002 representing the Company’s probable future costs that can be reasonably estimated was $5 million.

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

         Not applicable.

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Executive Officers of the Registrant

         The names, ages and positions held by the executive officers of the Company on September 1, 2002 are:

				Elected to
Name	Position	Age		Officer Position
Alan G. Lafley	Chairman of the Board,		55		1992
	President and Chief Executive
	Director since June 8, 2000
Bruce L. Byrnes	Vice Chairman of the Board and President —		54		1991
	Global Beauty & Feminine Care and
	Global Health Care
	Director since April 8, 2002
R. Kerry Clark	Vice Chairman of the Board and President —		50		1995
	Global Market Development & Business
	Operations
	Director since April 8, 2002
Richard L. Antoine	Global Human Resources Officer		56		1998
G. Gilbert Cloyd	Chief Technology Officer		56		2000
Clayton C. Daley Jr.	Chief Financial Officer		50		1998
Stephen N. David	Chief Information Officer and		53		1998
	Business-to-Business Officer
R. Keith Harrison, Jr.	Global Product Supply Officer		54		2001
James J. Johnson	Chief Legal Officer		55		1991
Mark D. Ketchum	President — Global Baby & Family Care		52		1996
Robert A. McDonald	President — Global Fabric & Home Care		49		1999
Jorge P. Montoya	President — Global Snacks & Beverages		56		1991
	and Latin America
Charlotte R. Otto	Global External Relations Officer		49		1996
Michael J. Power	Global Business Services Officer		54		2001
James R. Stengel	Global Marketing Officer		47		2001
John K. Jensen	Vice President and Comptroller		53		2002

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All of the above named Executive Officers, except Stephen N. David, John K. Jensen, Michael J. Power and James R. Stengel, are members of the Executive Committee of the Global Leadership Council of The Procter & Gamble Company. All of the Executive Officers named above have been employed by the Company for more than five years.

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PART II

Item 5. Market for the Common Stock and Related Stockholder Matters

         The information required by this item is incorporated by reference to Shareholder Information, which appears on page 48 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002, and Part III, Item 12 of this Annual Report on Form 10-K.

Item 6. Selected Financial Data

         The information required by this item is incorporated by reference to Financial Summary, which appears on page 46 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002.

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

         The information required by this item is incorporated by reference to Financial Review, which appears on pages 17-25; Note 1, Summary of Significant Accounting Policies, which appears on pages 32-33; Note 2, Restructuring Program, which appears on pages 33-34; Note 3, Acquisitions and Spin-off, which appears on pages 34-35; Note 12, Commitments and Contingencies, which appears on page 43; and Note 13, Segment Information, which appears on page 44 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002.

         The Company has made and will make certain forward-looking statements in the Annual Report to Shareholders for the fiscal year ended June 30, 2002 and in other contexts relating to volume and net sales growth, increases in market shares, financial goals and cost reduction, among others.

         These forward-looking statements are based on assumptions and estimates regarding competitive activity, pricing, product introductions, economic conditions, technological innovation, currency movements, governmental action and the development of certain markets. Among the key factors necessary to achieve the Company’s goals are: (1) the successful integration of the Company’s new organization structure, including achievement of expected cost and tax savings; (2) the ability to achieve business plans, including growing volume profitably, despite high levels of competitive activity, especially with respect to the product categories and geographical markets in which the Company has chosen to focus; (3) the ability to maintain key customer relationships; (4) the achievement of growth in significant developing markets such as China, Turkey, Mexico, the Southern Cone of Latin America, the countries of Central and Eastern Europe and the countries of Southeast Asia; (5) the ability to successfully manage regulatory, tax and legal matters, including resolution of pending matters within current estimates; (6) the successful and timely execution of planned brand divestitures; (7) the ability to successfully implement, achieve and sustain cost improvement plans in manufacturing and overhead areas; (8) the ability to successfully manage currency (including currency issues in Latin America), interest rate and certain commodity cost exposures; and (9) the ability to manage the continued political and/or economic uncertainty in Latin America and the Middle East, as well as any political and/or economic uncertainty due to terrorist activities. If the Company’s assumptions and estimates are incorrect or do not come to fruition, or if the Company does not achieve all of these key factors, then the Company’s actual performance could vary materially from the forward-looking statements made herein.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

         The information required by this item is incorporated by reference to Financial Review, which appears on pages 17-25, and Note 7, Risk Management Activities, which appears on pages 36-38 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002.

Item 8. Financial Statements and Supplemental Data

         The financial statements and supplemental data are incorporated by reference to pages 27-46 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002.

Item 9. Disagreements on Accounting and Financial Disclosure

         Not applicable.

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PART III

Item 10. Directors and Executive Officers

         The information required by this item is incorporated by reference to pages 4-9 and 22 of the proxy statement filed since the close of the fiscal year ended June 30, 2002, pursuant to Regulation 14A which involved the election of directors. Pursuant to Item 401(b) of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this report.

Item 11. Executive Compensation

         The information required by this item is incorporated by reference to pages 9-17 of the proxy statement filed since the close of the fiscal year ended June 30, 2002, pursuant to Regulation 14A which involved the election of directors.

Item 12. Security Ownership of Certain Beneficial Owners and Management

         The following table gives information about the Company’s common stock that may be issued upon the exercise of options, warrants and rights under all of the Company’s equity compensation plans as of June 30, 2002. The table includes the following plans: The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 1992 Stock Plan (Belgian Version); The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan; and The Procter & Gamble Future Shares Plan.

	Number of				Number of securities
	Securities to be				remaining available
	issued upon		Weighted-average		for future issuance
	exercise of		exercise price of		under equity
	outstanding		outstanding		compensation plans
	options, warrants		options, warrants		(excluding securities
Plan Category	and rights		and rights		reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders(1)		107,657,476	$	65.07		114,717,657
Equity compensation plans not approved by security holders(2)		12,505,420	$	80.61		4,015,000
Total		120,162,896	$	66.68		118,732,657	(3)

(1)	Includes The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 1992 Stock Plan; and The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan.
(2)	Includes The Procter & Gamble 1992 Stock Plan (Belgian Version) and The Procter & Gamble Future Shares Plan.
(3)	This number exceeds by 4,196,000 the total number of securities available for grant listed in Note 8, Earnings Per Share and Stock Options, which appears on pages 38-39 of the Annual Report to Shareholders for the fiscal year ended June 30, 2002. The chart in Note 8 excludes securities available under equity compensation plans not approved by security holders (4,015,000) and securities available under The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan (181,000).

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The Procter & Gamble 1992 Stock Plan (Belgian Version)

         Effective February 14, 1997, the Company’s Board of Directors approved The Procter & Gamble 1992 Stock Plan (Belgian Version). Although the plan has not been submitted to shareholders for approval, the plan is nearly identical to The Procter & Gamble 1992 Stock Plan, approved by the Company’s shareholders on October 13, 1992, except for a few minor changes designed to comply with the Belgian tax laws.

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

The Procter & Gamble Future Shares Plan

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

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

         At the time of the first grant following approval of the plan, each employee of the Company not eligible for an award under the 1992 Stock Plan was granted options for 100 shares. Since the date of the first grant, each new employee of the Company has also received options for 100 shares.

         Additional information required by this item is incorporated by reference to pages 19-21 of the proxy statement filed since the close of the fiscal year ended June 30, 2002, pursuant to Regulation 14A which involved the election of directors.

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Item 13. Certain Relationships and Related Transactions

         The information required by this item is incorporated by reference to page 22 of the proxy statement filed since the close of the fiscal year ended June 30, 2002, pursuant to Regulation 14A which involved the election of directors.

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PART IV

Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K

A.	1.	Financial Statements:
		The following consolidated financial statements of The Procter & Gamble Company and subsidiaries and the independent auditors’ report are incorporated by reference in Part II, Item 8.
		- Independent Auditors’ Report
		- Consolidated statement of earnings — for years ended June 30, 2002, 2001 and 2000
		- Consolidated balance sheet — as of June 30, 2002 and 2001
		- Consolidated statement of shareholders’ equity — for years ended June 30, 2002, 2001 and 2000
		- Consolidated statement of cash flows — for years ended June 30, 2002, 2001 and 2000
		- Notes to consolidated financial statements
	2.	Financial Statement Schedules:
		These schedules are omitted because of the absence of the conditions under which they are required or because the information is set forth in the financial statements or notes thereto.

Exhibits:
	Exhibit	(3-1)	—	Amended Articles of Incorporation (Incorporated by reference to Exhibit (3-1) of the Company’s Annual Report on Form 10-K for the year ended June 30, 1998).
		(3-2)	—	Regulations (Incorporated by reference to Exhibit (3-2) of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998).
	Exhibit	(4)	—	Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission.
	Exhibit	(10-1)	—	The Procter & Gamble 2001 Stock and Incentive Compensation Plan which was adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2001).
		(10-2)	—	The Procter & Gamble 1992 Stock Plan (as amended June 12, 2001) which was adopted by the shareholders at the annual meeting on October 13, 1992 (Incorporated by reference to Exhibit (10-2) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2001).

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	(10-3)	—	The Procter & Gamble Executive Group Life Insurance Policy (each executive officer is covered for an amount equal to annual salary plus bonus) (Incorporated by reference to Exhibit (10-3) of the Company’s Annual Report on Form 10-K for the year ended June 30, 1998).
	(10-4)	—	Additional Remuneration Plan (as amended July 11, 2000) which was adopted by the Board of Directors on April 12, 1949 (Incorporated by reference to Exhibit (10-4) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2000).
	(10-5)	—	The Procter & Gamble Deferred Compensation Plan for Directors which was adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-5) of the Company’s Annual Report on Form 10-K for the year ended June 30, 1998).
	(10-6)	—	The Procter & Gamble Board of Directors Charitable Gifts Program which was adopted by the Board of Directors on November 12, 1991 (Incorporated by reference to Exhibit (10-6) of the Company’s Annual Report on Form 10-K for the year ended June 30, 1998).
	(10-7)	—	The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan (as amended December 12, 2000) which was adopted by the shareholders at the annual meeting on October 11, 1994 (Incorporated by reference to Exhibit (10-8) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2001).
	(10-8)	-–	The Procter & Gamble 1992 Stock Plan (Belgian Version) (as amended December 11, 2001) which was adopted by the Board of Directors on February 14, 1997.
	(10-9)	-–	The Procter & Gamble Future Shares Plan (as amended December 11, 2001) which was adopted by the Board of Directors on October 14, 1997.
Exhibit	(11)	—	Computation of earnings per share.
Exhibit	(12)	—	Computation of ratio of earnings to fixed charges.
Exhibit	(13)	—	Annual Report to Shareholders (pages 1-48).
Exhibit	(21)	—	Subsidiaries of the registrant.
Exhibit	(23)	—	Independent Auditors’ Consent
Exhibit	(99-1)	—	Certification of Periodic Financial Reports by the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

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(99-2)	—	Directors and Officers Liability Policy (Incorporated by reference to Exhibit (99-1) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2001).
(99-3)	—	Directors and Officers (First and Sixth) Excess Liability Binder of Insurance.
(99-4)	—	Directors and Officers (Second) Excess Liability Binder of Insurance.
(99-5)	—	Directors and Officers (Third) Excess Liability Binder of Insurance.
(99-6)	—	Directors and Officers (Fourth) Excess Liability Binder of Insurance.
(99-7)	—	Directors and Officers (Fifth) Excess Liability Binder of Insurance.
(99-8)	—	Directors and Officers (Seventh) Excess Liability Binder of Insurance.

The exhibits listed are filed with the Securities and Exchange Commission but are not included in this booklet. Copies of these exhibits may be obtained by sending a request to: Linda D. Rohrer, Assistant Secretary, The Procter & Gamble Company, P. O. Box 599, Cincinnati, Ohio 45201.
B.	Reports on Form 8-K:
	During the quarter ended June 30, 2002, the Company filed Current Reports on Form 8-K containing information pursuant to Item 5 (“Other Events”) dated April 30, 2002, relating to the announcement of earnings for the January-March 2002 quarter; and dated June 12, 2002, relating to confirmation of previously issued guidance for fiscal year 2002.

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SIGNATURES

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

THE PROCTER & GAMBLE COMPANY
By	A.G. LAFLEY	.
	(A.G. Lafley)
	Chairman of the Board,
	President and Chief Executive
	September 10, 2002

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

Signature	Title	Date
A.G. LAFLEY	Chairman of the Board,	September 10, 2002
	President and Chief Executive
(A.G. Lafley)	(Principal Executive Officer)
CLAYTON C. DALEY JR.	Chief Financial Officer	September 10, 2002
	(Principal Financial Officer)
(Clayton C. Daley Jr.)
JOHN K. JENSEN	Vice President and Comptroller	September 10, 2002
	(Principal Accounting Officer)
(John K. Jensen)
NORMAN R. AUGUSTINE	Director	September 10, 2002
(Norman R. Augustine)
DONALD R. BEALL	Director	September 10, 2002
(Donald R. Beall)
BRUCE L. BYRNES	Director	September 10, 2002
(Bruce L. Byrnes)
R. KERRY CLARK	Director	September 10, 2002
(R. Kerry Clark)
SCOTT D. COOK	Director	September 10, 2002
(Scott D. Cook)
DOMENICO DESOLE	Director	September 10, 2002
(Domenico DeSole)

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Signature	Title	Date
RICHARD J. FERRIS	Director	September 10, 2002
(Richard J. Ferris)
JOSEPH T. GORMAN	Director	September 10, 2002
(Joseph T. Gorman)
CHARLES R. LEE	Director	September 10, 2002
(Charles R. Lee)
LYNN M. MARTIN	Director	September 10, 2002
(Lynn M. Martin)
JOHN E. PEPPER	Director	September 10, 2002
(John E. Pepper)
JOHNATHAN A. RODGERS	Director	September 10, 2002
(Johnathan A. Rodgers)
JOHN F. SMITH, JR	Director	September 10, 2002
(John F. Smith, Jr.)
RALPH SNYDERMAN	Director	September 10, 2002
(Ralph Snyderman)
ROBERT D. STOREY	Director	September 10, 2002
(Robert D. Storey)
MARINA V.N. WHITMAN	Director	September 10, 2002
(Marina v.N. Whitman)
ERNESTO ZEDILLO	Director	September 10, 2002
(Ernesto Zedillo)

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CERTIFICATIONS

I, A.G. Lafley, certify that:

1.	I have reviewed this annual report on Form 10-K of The Procter & Gamble Company;
2.	Based on my knowledge, this annual 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 annual report; and
3.	Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report.

Date: September 10, 2002

A.G. LAFLEY

(A.G. Lafley)
Chairman of the Board,
President and Chief Executive

I, Clayton C. Daley Jr., certify that:

1.	I have reviewed this annual report on Form 10-K of The Procter & Gamble Company;
2.	Based on my knowledge, this annual 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 annual report; and
3.	Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report.

Date: September 10, 2002

CLAYTON C. DALEY JR.

(Clayton C. Daley Jr.)
Chief Financial Officer

18

EXHIBIT INDEX

Exhibit	(3-1)	—	Amended Articles of Incorporation (Incorporated by reference to Exhibit (3-1) of the Company’s Annual Report on Form 10-K for the year ended June 30, 1998).
	(3-2)	—	Regulations (Incorporated by reference to Exhibit (3-2) of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998).
Exhibit	(4)	—	Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission.
Exhibit	(10-1)	—	The Procter & Gamble 2001 Stock and Incentive Compensation Plan which was adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2001).
	(10-2)	—	The Procter & Gamble 1992 Stock Plan (as amended June 12, 2001) which was adopted by the shareholders at the annual meeting on October 13, 1992 (Incorporated by reference to Exhibit (10-2) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2001).
	(10-3)	—	The Procter & Gamble Executive Group Life Insurance Policy (each executive officer is covered for an amount equal to annual salary plus bonus) (Incorporated by reference to Exhibit (10-3) of the Company’s Annual Report on Form 10-K for the year ended June 30, 1998).
	(10-4)	—	Additional Remuneration Plan (as amended July 11, 2000) which was adopted by the Board of Directors on April 12, 1949 (Incorporated by reference to Exhibit (10-4) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2000).
	(10-5)	—	The Procter & Gamble Deferred Compensation Plan for Directors which was adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-5) of the Company’s Annual Report on Form 10-K for the year ended June 30, 1998).
	(10-6)	—	The Procter & Gamble Board of Directors Charitable Gifts Program which was adopted by the Board of Directors on November 12, 1991 (Incorporated by reference to Exhibit (10-6) of the Company’s Annual Report on Form 10-K for the year ended June 30, 1998).
	(10-7)	—	The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan (as amended December 12, 2000) which was adopted by the shareholders at the annual meeting on October 11, 1994 (Incorporated by reference to Exhibit (10-8) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2001).

	(10-8)	-–	The Procter & Gamble 1992 Stock Plan (Belgian Version) (as amended December 11, 2001) which was adopted by the Board of Directors on February 14, 1997.
	(10-9)	-–	The Procter & Gamble Future Shares Plan (as amended December 11, 2001) which was adopted by the Board of Directors on October 14, 1997.
Exhibit	(11)	—	Computation of earnings per share.
Exhibit	(12)	—	Computation of ratio of earnings to fixed charges.
Exhibit	(13)	—	Annual Report to Shareholders (pages 1-48).
Exhibit	(21)	—	Subsidiaries of the registrant.
Exhibit	(23)	—	Independent Auditors’ Consent
Exhibit	(99-1)	—	Certification of Periodic Financial Reports by the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
	(99-2)	—	Directors and Officers Liability Policy (Incorporated by reference to Exhibit (99-1) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2001).
	(99-3)	—	Directors and Officers (First and Sixth) Excess Liability Binder of Insurance.
	(99-4)	—	Directors and Officers (Second) Excess Liability Binder of Insurance.
	(99-5)	—	Directors and Officers (Third) Excess Liability Binder of Insurance.
	(99-6)	—	Directors and Officers (Fourth) Excess Liability Binder of Insurance.
	(99-7)	—	Directors and Officers (Fifth) Excess Liability Binder of Insurance.
	(99-8)	—	Directors and Officers (Seventh) Excess Liability Binder of Insurance.

EX-10.8

                                 EXHIBIT (10-8)


             The Procter & Gamble 1992 Stock Plan (Belgian Version)


                             [PROCTER & GAMBLE LOGO]
- --------------------------------------------------------------------------------
                          The Procter & Gamble Company
                                Executive Offices
              1 Procter & Gamble Plaza, Cincinnati, Ohio 45202-3315



                                December 11, 2001



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


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


                                Very truly yours,

                                /s/ Terry L. Overbey

                                Terry L. Overbey
                                Secretary



THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.




[P&G LOGO] REWARDS OF LEADERSHIP


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

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


ARTICLE A -- PURPOSE.

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


ARTICLE B -- ADMINISTRATION.

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

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

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

       (a) waive the provisions of Article F, paragraph 1(a);

       (b) waive the provisions of Article F, paragraph 1(b);

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


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

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

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

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


ARTICLE C -- PARTICIPATION.

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


ARTICLE D -- LIMITATION ON NUMBER OF SHARES FOR THE PLAN.

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

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

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


ARTICLE E -- SHARES SUBJECT TO USE UNDER THE PLAN.

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

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


ARTICLE F -- STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.

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

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

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

           (1) with respect to which the recipient's work has been directly
               concerned at any time during the two (2) years preceding
               termination of employment with the Company or one of its
               subsidiaries or

           (2) with respect to which during that period of time the recipient,
               as a consequence of the recipient's job performance and duties,
               acquired knowledge of trade secrets or other confidential
               information of the Company or its subsidiaries.

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

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

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


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

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

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

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

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

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

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

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


ARTICLE G -- EXERCISE OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.


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

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

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

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

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

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

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

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

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


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

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

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

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

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


ARTICLE H -- PAYMENT FOR STOCK OPTIONS.

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


ARTICLE I -- TRANSFER OF SHARES.

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


       (a) Restrictions

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

       (b) Lapse of Restrictions

           In order to have the restrictions lapse, an employee may be required
           to continue in the employ of the Company or a subsidiary for a
           prescribed period of time. Exemption from this requirement may be
           prescribed in the case of death, disability, or retirement, or as
           otherwise prescribed by the Committee.


ARTICLE J -- ADJUSTMENTS.

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


ARTICLE K -- ADDITIONAL PROVISIONS.

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

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

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


ARTICLE L -- CONSENT.

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


ARTICLE M -- DURATION OF PLAN.

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


                             ADDITIONAL INFORMATION


1. STOCK OPTIONS OFFERED FOR PURCHASE

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

       THERE IS NO GUARANTEE THAT THE PRICE OF THE COMMON STOCK WILL EXCEED THE
EXERCISE PRICE OF ANY PURCHASED STOCK OPTION, IN WHICH CASE SUCH PURCHASED STOCK
OPTION WOULD HAVE NO VALUE.

2. SHARES AWARDED AS A PORTION OF REMUNERATION

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

3. U.S. TAX TREATMENT FOR U.S. PERSONS

       INCENTIVE STOCK OPTIONS

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

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


       NONSTATUTORY STOCK OPTIONS

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

       STOCK APPRECIATION RIGHTS

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

       SHARES AWARDED AS A PORTION OF REMUNERATION

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

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

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

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

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

4. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974


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

5. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

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

       1. The Company's Annual Report on Form 10-K for the fiscal year ended
          June 30, 2001;

       2. The Company's Quarterly Reports on Form 10-Q for the quarter ended
          September 30, 2001;

       3. All other documents filed by the Company pursuant to Sections 13(a),
          13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus
          and prior to the filing of a post-effective amendment which indicates
          that all securities offered have been sold or which deregisters all
          securities then remaining unsold.

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

6. ADDITIONAL INFORMATION

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

EX-10.9

                                 EXHIBIT (10-9)


                     The Procter & Gamble Future Shares Plan


THE PROCTER & GAMBLE FUTURE SHARES PLAN



CONTENTS
- --------------------------------------------------------------------------------
Article 1. Establishment, Objectives, and Duration                      1

Article 2. Definitions                                                  1

Article 3. Administration                                               3

Article 4. Shares Subject to the Plan                                   3

Article 5. Eligibility and Participation                                4

Article 6. Awards                                                       4

Article 7. General Provisions                                           6


THE PROCTER & GAMBLE FUTURE SHARES PLAN


ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION

         1.1 ESTABLISHMENT OF THE PLAN. The Procter & Gamble Company, an Ohio
corporation (hereinafter referred to as the "Company"), hereby establishes a
worldwide stock option plan to be known as "The Procter & Gamble Future Shares
Plan" (hereinafter referred to as the "Plan"), as set forth herein.

         1.2 PURPOSE. The purpose of the Plan is to advance the interests of the
Company by giving substantially all employees a stake in the Company's future
growth and success, to increase employee focus on the Company's stock price, to
strengthen the alignment of interests between employees and the Company's
shareholders through the increased ownership of shares of the Company's common
stock, and to encourage employees to remain in the employ of the Company and its
Affiliates.

         1.3 DURATION OF THE PLAN. The Plan shall become effective as of October
14, 1997 (the "Effective Date"). The Plan shall terminate on October 13, 2007.
No Award may be granted after the termination date of the Plan, but Awards
theretofore granted shall continue in force beyond that date pursuant to their
terms.


ARTICLE 2. DEFINITIONS

         Whenever used in the Plan, the following terms shall have the meanings
set forth below, and when the meaning is intended, the initial letter of the
word shall be capitalized:

         2.1 "AFFILIATE" means any entity in which the Company has an ownership
             interest of fifty percent (50%) or more.

         2.2 "AWARD" means a grant of an Option, a Modified Option, an SAR, or a
             Modified SAR under the Plan.

         2.3 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
             Company.

         2.4 "CODE" means the Internal Revenue Code of 1986 and the regulations
             thereunder, as amended from time to time.

         2.5 "COMMITTEE" means the Compensation Committee of the Board or such
             other committee appointed by the Board to administer the Plan.

         2.6 "COMMON STOCK" means the common stock, without par value, of the
             Company.

         2.7 "COMPANY" means The Procter & Gamble Company, an Ohio corporation,
             and any successor thereto.

         2.8 "DISABILITY" or "DISABLED" shall mean qualifying for benefits under
             a long-term disability pay plan maintained by the Company or any
             Affiliate, or as required by or


              available under applicable local law, or in the absence of any
              such plan or local law, as determined by the Committee.

         2.9  "EMPLOYEE" means a full- or part-time employee on the regular
              payroll of the Company or any Affiliate as of the Grant Date of an
              Award. For purposes of this definition, "on the regular payroll"
              shall mean paid through the payroll department of the Company or
              an Affiliate (or, if there is no such payroll department,
              classified as a regular employee on the Company's or Affiliate's
              employment records), and shall exclude individuals classified by
              the Company or Affiliate as intermittent or temporary, or as
              independent contractors, regardless of how such person may be
              classified by any federal, state, or local, domestic or foreign,
              government agency or instrumentality thereof, or court. An
              individual whose only relationship to the Company or an Affiliate
              is that of a temporary employee (except regular employees on
              temporary assignment from another unit) or leased employee (as
              defined in Section 414(n)(2) of the Code) shall not be an Employee
              unless determined otherwise by the Committee at its sole
              discretion. The determination of whether an individual is an
              "employee on the regular payroll" shall be made solely according
              to the method of paying the individual for services, and such
              determination shall be within the discretion of the Committee.

         2.10 "FAIR MARKET VALUE" means, unless determined otherwise by the
              Committee, the average of the high and low prices of a share of
              Common Stock on the New York Stock Exchange on the date of
              measurement as determined by the Committee, and if there were no
              trades on such date, on the day on which a trade occurred next
              preceding such date, or as otherwise determined by the Committee.

         2.11 "GRANT DATE" means such date, as determined by the Committee, upon
              which Awards are granted to Participants pursuant to the terms of
              this Plan.

         2.12 "MODIFIED OPTION" means an Option that must be exercised on the
              fifth anniversary of the Grant Date or forfeited.

         2.13 "MODIFIED SAR" means an SAR that must be exercised on the fifth
              anniversary of the Grant Date or forfeited.

         2.14 "OPTION" means a right to purchase a specified number of shares of
              Common Stock at the Option Price, which is not intended to qualify
              under Code Section 422 as an Incentive Stock Option, except as
              otherwise provided in Section 6.1(j).

         2.15 "OPTION PRICE" means the price at which a share of Common Stock
              may be purchased by a Participant pursuant to an Option or a
              Modified Option.

         2.16 "PARTICIPANT" means an Employee who has been selected by the
              Committee in its sole discretion to receive an Award or who has
              outstanding an Award granted under the Plan.


         2.17 "RETIREMENT" means, strictly for purposes of this Plan, the
              termination of employment on or after the date the Participant has
              attained age fifty-five (55), except as otherwise determined by
              the Committee.

         2.18 "SAR" means an Award pursuant to which the Participant receives a
              right to a cash settlement payment upon exercise equal to the
              excess of the Fair Market Value of one share of Common Stock on
              the date of exercise over the Fair Market Value of one share of
              Common Stock on the Grant Date of the SAR, multiplied by the
              number of SARs granted.

         2.19 "SPECIAL SEPARATION" means any termination of employment, except a
              termination for cause or a voluntary resignation that is not
              initiated or encouraged by the Company, that occurs prior to the
              time a recipient is eligible to retire.

         2.20 "SPREAD VALUE" means the excess of the Fair Market Value of one
              share of Common Stock on the date of exercise over the Fair Market
              Value of one share of Common Stock on the Grant Date, multiplied
              by the number of shares of Common Stock underlying the Award.


ARTICLE 3. ADMINISTRATION

         The Plan and all Awards granted pursuant thereto shall be administered
by the Compensation Committee of the Board. The Committee may, from time to
time, adopt rules and regulations for carrying out the provisions and purposes
of the Plan. The Committee, in its absolute discretion, shall have the power to
interpret and construe the Plan; provided, however, that the Committee may
designate persons other than members of the Committee to carry out such
responsibilities of the Committee under the Plan as it may deem appropriate. Any
interpretation of construction of any provision of this Plan by the Committee
shall be final and conclusive upon all parties. No member of the Committee or
the Board shall be liable for any action or determination made hereunder in good
faith.


ARTICLE 4. SHARES SUBJECT TO THE PLAN

         4.1 NUMBER OF SHARES AVAILABLE FOR OPTIONS. The number of shares of
Common Stock available with respect to all Awards granted under the Plan shall
not exceed seventeen million (17,000,000) in the aggregate, subject to
adjustment under Section 4.2 herein. The shares of Common Stock subject to the
Plan shall consist of either authorized but unissued shares or treasury shares,
as determined by the Committee. Notwithstanding any terms or conditions
contained herein, the shares to be delivered by the Company upon exercise of an
Award by a Participant located in Italy shall be authorized but unissued shares.

         4.2 CHANGES IN CAPITALIZATION. In the event of any future
reorganization, recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation, rights offering, share exchange,
reclassification, distribution, spin-off or other change affecting the corporate
structure, capitalization or Common Stock of the Company occurring after the
date of approval of the Plan by the Company shareholders, appropriate
adjustments and changes shall be made by the Committee to the extent necessary
to prevent dilution or enlargement of rights under the Plan in (a) the aggregate
number of shares of Common Stock subject to the Plan; (b) the number of shares
of Common Stock for which Awards may be granted or awarded to any Participant;
(c) the


number of shares and the Option Price per share of all shares of Common Stock
subject to outstanding Options or Modified Options, as applicable; (d) the
number of SARs or Modified SARs subject to an Award and the Fair Market Value of
a share of Common Stock for purposes of determining the cash settlement payment
on exercise of an SAR or Modified SAR, as applicable; and (e) such other
provisions of the Plan as may be necessary and equitable to carry out the
foregoing purposes.


ARTICLE 5. ELIGIBILITY AND PARTICIPATION

         An Award may be granted by the Committee, in its discretion, to an
Employee who is actively employed by the Company or any Affiliate on the Grant
Date. The granting of Awards under the terms of this Plan is made at the sole
discretion of the Committee and does not entitle a Participant to receive future
Awards. The adoption of this Plan shall not be deemed to give any Participant
any right to be granted an Award, except to the extent as may be determined by
the Committee.


ARTICLE 6. AWARDS

         6.1 AWARDS. The Award to each Participant under the Plan shall consist
of either Options, Modified Options, SARs, or Modified SARs. The Committee shall
determine (i) the number of shares of Common Stock to be covered by each Award;
(ii) the terms and conditions of the Awards (including, but not limited to,
restrictions upon the Awards, when Awards are first exercisable and the period
of exercise, conditions of their exercise, requirements regarding payment of the
exercise price, withholding requirements and restrictions on the shares of
Common Stock issuable upon the exercise thereof); and (iii) the form of the
instruments necessary or advisable in the administration of the Awards.

         (a) TERM OF AWARD. The term of each Award shall be no more than ten
         (10) years from the Grant Date, except as provided in Section 6.1(j).

         (b) OPTION PRICE. With respect to an Option or Modified Option, the
         Option Price shall be not less than the Fair Market Value of the Common
         Stock on the Grant Date.

         (c) EXERCISE AND LIMITATIONS ON EXERCISE. Except as otherwise provided
         for herein, if a Participant has been in the continuous employ of the
         Company through the fifth anniversary of the Grant Date, at any time on
         or after the fifth anniversary of the Grant Date, but in no event later
         than the tenth anniversary of the Grant Date (except as provided in
         Section 6.1(j)), the Participant may exercise the Award, and purchase
         the number of shares of Common Stock covered by the Option (or Modified
         Option if the Award is exercised on the fifth anniversary of the Grant
         Date), or receive the cash settlement payment with respect to the SAR
         (or Modified SAR if the Award is exercised on the fifth anniversary of
         the Grant Date), as applicable. An Award must be exercised for the full
         number of shares of Common Stock covered by the Option or Modified
         Option, or for the entire cash settlement payment with respect to the
         SAR or Modified SAR, as applicable. Notwithstanding the foregoing,
         stock options and stock appreciation rights granted hereunder shall
         vest immediately upon a "Change in Control." A "Change in Control"
         shall mean the occurrence of any of the following:

                  (i) An acquisition (other than directly from the Company) of
         any voting securities of the Company (the "Voting Securities") by any
         "Person" (as the term person is used


         for purposes of Section 13(d) or 14(d) of the Exchange Act),
         immediately after which such Person has "Beneficial Ownership" (within
         the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty
         percent (20%) or more of the then outstanding Shares or the combined
         voting power of the Company's then outstanding Voting Securities;
         provided, however, in determining whether a Change in Control has
         occurred pursuant to this Section 6.1(c), Shares or Voting Securities
         which are acquired in a "Non-Control Acquisition" (as hereinafter
         defined) shall not constitute an acquisition which would cause a Change
         in Control. A "Non-Control Acquisition" shall mean an acquisition by
         (i) an employee benefit plan (or a trust forming a part thereof)
         maintained by (A) the Company or (B) any corporation or other Person of
         which a majority of its voting power or its voting equity securities or
         equity interest is owned, directly or indirectly, by the Company (for
         purposes of this definition, a "Related Entity"), (ii) the Company or
         any Related Entity, or (iii) any Person in connection with a
         "Non-Control Transaction" (as hereinafter defined);

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

                  (iii) The consummation of:

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

                            (1) the stockholders of the Company, immediately
         before such Merger own directly or indirectly immediately following
         such Merger at least fifty percent (50%) of the combined voting power
         of the outstanding voting securities of (x) the corporation resulting
         from such Merger (the "Surviving Corporation") if fifty percent (50%)
         or more of the combined voting power of the then outstanding voting
         securities of the Surviving Corporation is not Beneficially Owned,
         directly or indirectly by another Person (a "Parent Corporation"), or
         (y) if there is one or more Parent Corporations, the ultimate Parent
         Corporation;

                            (2) the individuals who were members of the
         Incumbent Board immediately prior to the execution of the agreement
         providing for such Merger constitute at least half of the members of
         the board of directors of (x) the Surviving Corporation, if there is no
         Parent Corporation, or (y) if there is one or more Parent Corporations,
         the ultimate Parent Corporation; and


                            (3) no Person other than (1) the Company, (2) any
         Related Entity, (3) any employee benefit plan (or any trust forming a
         part thereof) that, immediately prior to such Merger was maintained by
         the Company or any Related Entity, or (4) any Person who, immediately
         prior to such Merger had Beneficial Ownership of twenty percent (20%)
         or more of the then outstanding Voting Securities or Shares, has
         Beneficial Ownership of twenty percent (20%) or more of the combined
         voting power of the outstanding voting securities or common stock of
         (x) the Surviving Corporation if there is no Parent Corporation, or (y)
         if there is one or more Parent Corporations, the ultimate Parent
         Corporation;

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

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

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

            (d) TERMINATION OF EMPLOYMENT GENERALLY.

                (i) 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 Award shall
            be exercisable only for thirty (30) calendar days following such
            termination, and only to the extent such Award was exercisable on
            the date of such termination, except as may be otherwise determined
            by the Committee. In no event, however, may an Award be exercised
            more than ten (10) years after the Grant Date, except as provided in
            Section 6.1(j). If a Participant's employment is terminated prior to
            the fifth anniversary of the Grant Date, for any reason other than
            death, Disability, Retirement, or Special Separation, each Award
            granted to such Participant shall be immediately canceled and the
            Participant shall forfeit the Award upon such termination of
            employment.

                (ii) Neither the Company nor the Committee shall have any
            obligation to notify a Participant of the expiration of an Award.

                (iii) Unless the Committee shall determine otherwise, a
            Participant employed by an Affiliate or business unit of the Company
            that is sold or otherwise divested from the


            Company shall be considered to have his or her employment terminated
            as of the effective date of the divestiture.

            (e) TERMINATION OF EMPLOYMENT DUE TO DISABILITY, RETIREMENT, OR
                SPECIAL SEPARATION.

                (i) If prior to the fifth anniversary of the Grant Date a
            Participant's employment is terminated due to Disability,
            Retirement, or Special Separation the Award may be exercised on or
            after the fifth anniversary of the Grant Date, but in no event may
            such an Award be exercised more than ten (10) years after the Grant
            Date, except as provided in Section 6.1(j). If a Participant's
            employment is terminated due to Disability, Retirement, or Special
            Separation on or after the fifth anniversary of the Grant Date, the
            Award may be exercised, to the extent such Award was exercisable on
            the date of such termination, within the remaining period of the
            Award.

                (ii) Notwithstanding the above and except for Participants
            located in Italy, the Committee reserves the discretionary ability
            to substitute an immediate cash payment equal to the Spread Value of
            the Award in full satisfaction of the Award, in the event of a
            termination of employment due to Disability, Retirement, or Special
            Separation to the extent such payment is permitted by law.

            (f) DEATH OF A PARTICIPANT. Upon the death of a Participant, while
            an Award is still outstanding, regardless of whether the Award is or
            is not exercisable, 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, in
            full satisfaction of the Award. Notwithstanding the above, upon the
            death of a Participant 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.

            (g) NONTRANSFERABILITY. Awards are not transferable and may only be
            exercised by the Participant.

            (h) EXERCISE; NOTICE THEREOF. Awards shall be exercised by
            delivering written notice of intention to exercise the Award,
            pursuant to such terms and conditions as may be determined by the
            Committee. The Committee shall have the authority to establish
            procedures under any or all methods of exercise, including the
            designation of the brokerage firm or firms through which exercises
            may be effected, which need not be the same for each grant or for
            each Participant. The Committee shall have the authority to change
            without notice any method of exercise for any reason whatsoever,
            notwithstanding the fact that the method of exercise had been
            available to Participants in the past.

            (i) RIGHTS AS SHAREHOLDER. A Participant shall have none of the
            rights of a shareholder with respect to shares of Common Stock
            covered by any Award until the Participant becomes the record holder
            of such shares as determined by the records of the Company's
            transfer agent.


            (j) ADDITIONAL TERMS. With respect to any Award, the Committee may,
            in its discretion: (i) determine which Affiliates will be covered by
            the Plan; (ii) determine which Employees are eligible to participate
            in the Plan; (iii) modify or restrict any of the terms and
            conditions of any Awards including but not limited to extending the
            term of an Award beyond ten (10) years; (iv) modify or restrict
            exercise procedures and any other Plan procedures; (v) establish
            local country plans as subplans to this Plan, each of which may be
            attached as an Appendix hereto; and (vi) take any action, before or
            after an Award is made, which it deems advisable to obtain or comply
            with any necessary local government regulatory exemptions or
            approvals; provided that the Committee may not take any action
            hereunder which would (1) increase the number of shares of Common
            Stock covered by the Plan; or (2) violate any securities law, the
            Code, or any governing statute.

            (k) STOCK APPRECIATION RIGHTS. The Committee may grant SARs or
            Modified SARs, as applicable, in lieu of Options or Modified Options
            under the Plan.

            6.2 REFUSAL OF AWARD. Any Participant may refuse the grant of an
Award by notifying the Committee of his or her refusal in writing in a form and
pursuant to procedures to be determined by the Committee.


ARTICLE 7. GENERAL PROVISIONS

         7.1 NO ADDITIONAL RIGHTS. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any Participant's
employment at any time, or confer upon any Participant any right to continue in
the employ of the Company. No Employee shall have the right to be selected to
receive an Award under this Plan or having been so selected, to be selected to
receive a future Award. Neither the Award nor any benefits arising under this
Plan shall constitute part of a Participant's employment contract with the
Company or any Affiliate, and accordingly, this Plan and the benefits hereunder
may be terminated at any time in the sole and exclusive discretion of the
Committee without giving rise to liability on the part of the Company or any
Affiliate for severance payments.

         7.2 NO EFFECT ON OTHER BENEFITS. The receipt of Awards under the Plan
shall have no effect on any benefits and obligations to which a Participant may
be entitled from the Company or any Affiliate, under another plan or otherwise,
or preclude a Participant from receiving any such benefits.

         7.3 BINDING EFFECT. Any decision made or action taken by the Company,
the Board, or by the Committee arising out of or in connection with the
construction, administration, interpretation, and effect of the Plan shall be
conclusive and binding upon all persons, including the Company, its
shareholders, Employees, Participants, and their estates and beneficiaries.

         7.4 INALIENABILITY OF BENEFITS AND INTEREST. No benefit payable under,
or interest in, the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any
such attempted action shall be void and no such benefits or interest shall be in
any manner liable for or subject to debts, liabilities, engagements, or torts of
any Participant or beneficiary.


         7.5 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
shares of Common Stock under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.

         7.6 GOVERNING LAW. To the extent not preempted by federal law, the Plan
and all agreements hereunder shall be construed in accordance with and governed
by the laws of the state of Ohio.

         7.7 WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, to require an Affiliate to deduct or withhold, or to require
a Participant to remit to the Company or an Affiliate, an amount sufficient to
satisfy federal, state, and local taxes, domestic or foreign, required by law or
regulation to be withheld with respect to any taxable event arising as a result
of this Plan.

         7.8 AMENDMENTS. Subject to the terms of the Plan, the Committee may at
any time and from time to time alter, amend, suspend, or terminate the Plan in
whole or in part.


Adopted October 14, 1997
Article 2, Paragraph 2.19 added, Article 4, Paragraph 4.1 amended, Article 6,
  Paragraphs 6.1(d)(i), (e) (i) and (ii) and (f) amended - May 12, 1998
Article 4, Paragraph 4.1 amended - April 11, 2000
Article 2, Paragraph 2.19 amended - June 13, 2000
Article 6, Paragraph 6.1(c) amended and Paragraph 6.1(c)(i), (ii) and (iii)
adopted - July 11, 2000
Article 4.2 amended - December 11, 2001

EX-11

                                  EXHIBIT (11)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

                        Computation of Earnings Per Share

Amounts in millions except per share amounts


                                                                            Years Ended June 30
                                                   ---------------------------------------------------------------------
                                                     1998            1999          2000            2001           2002
                                                   ---------      ---------      ---------      ---------      ---------
                                                                                                
BASIC NET EARNINGS PER SHARE
Net earnings                                       $   3,780      $   3,763      $   3,542      $   2,922      $   4,352
Preferred dividends, net of tax benefit                  104            109            115            121            124
                                                   ---------      ---------      ---------      ---------      ---------

Net earnings available to common shareholders      $   3,676      $   3,654      $   3,427      $   2,801      $   4,228
                                                   =========      =========      =========      =========      =========
Basic weighted average common
    shares outstanding                               1,343.4        1,328.1        1,313.2        1,300.3        1,297.4
                                                   =========      =========      =========      =========      =========

Basic net earnings per common share                $    2.74      $    2.75      $    2.61      $    2.15      $    3.26
                                                   =========      =========      =========      =========      =========

DILUTED NET EARNINGS PER SHARE
Net earnings                                       $   3,780      $   3,763      $   3,542      $   2,922      $   4,352
Deduct preferred dividend impact on
    funding of ESOP                                       25             22             18             15             12
                                                   ---------      ---------      ---------      ---------      ---------

Diluted net earnings                               $   3,755      $   3,741      $   3,524      $   2,907      $   4,340
                                                   =========      =========      =========      =========      =========

Basic weighted average common
    shares outstanding                               1,343.4        1,328.1        1,313.2        1,300.3        1,297.4
Add potential effect of:
    Conversion of preferred shares (1)                  99.8           97.2           94.3           91.9           88.8
    Exercise of stock options (2)                       22.3           21.5           19.7           13.4           18.7
                                                   ---------      ---------      ---------      ---------      ---------

Diluted weighted average common
    shares outstanding                               1,465.5        1,446.8        1,427.2        1,405.6        1,404.9
                                                   =========      =========      =========      =========      =========

Diluted net earnings per common share              $    2.56      $    2.59      $    2.47      $    2.07      $    3.09
                                                   =========      =========      =========      =========      =========



(1) Despite being included currently in diluted net earnings per common share,
    the actual conversion to common stock occurs pursuant to the repayment of
    the ESOP debt over a period exceeding 20 years.

(2) Approximately 36 million in 2002, 38 million in 2001 and 17 million in 2000
    of the Company's outstanding stock options were not included in the diluted
    net earnings per common share calculation because to do so would have been
    antidilutive (i.e., the exercise price exceeded market value.)

EX-12

                                  EXHIBIT (12)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

                Computation of Ratio of Earnings to Fixed Charges

Millions of Dollars


                                                                     Years Ended June 30
                                                    ------------------------------------------------------
                                                     1998        1999        2000        2001        2002
                                                    ------      ------      ------      ------      ------
                                                                                     
EARNINGS AS DEFINED

  Earnings from operations before income taxes
    after eliminating undistributed earnings
    of equity method investees                      $5,704      $5,866      $5,474      $4,574      $6,442

  Fixed charges                                        639         751         811         872         687
                                                    ------      ------      ------      ------      ------

    TOTAL EARNINGS, AS DEFINED                      $6,343      $6,617      $6,285      $5,446      $7,129
                                                    ======      ======      ======      ======      ======

FIXED CHARGES, AS DEFINED

  Interest expense                                  $  548      $  650      $  792      $  794      $  603
  1/3 of rental expense                                 91         101          89          78          84
                                                    ------      ------      ------      ------      ------

    TOTAL FIXED CHARGES, AS DEFINED                 $  639      $  751      $  881      $  872      $  687
                                                    ======      ======      ======      ======      ======

    RATIO OF EARNINGS TO FIXED CHARGES                 9.9         8.8         7.1         6.2        10.4

EX-13

                                  EXHIBIT (13)

                          Annual Report to Shareholders
                                  (pages 1-48)


FELLOW SHAREHOLDERS:

P&G touches the lives of consumers around the world every day. Thirty million
times a day, in more than 160 countries, P&G brands face their first moment of
truth, when consumers stand in front of a store shelf - at a Wal-Mart store in
West Virginia, a Carrefour store in France, a bodega in Mexico, a corner market
in Egypt or a tiny "sari sari" store in the Philippines - and decide whether to
buy a P&G brand, or a competing product.

A lot happens in that moment, as consumers assess the performance, quality and
value P&G brands offer relative to other products on the shelf. When we strike
the right balance between brand promise and store price, we win that first
moment of truth.

Winning the first moment of truth is only half the battle. Soon after, P&G
brands face a second moment of truth. Nearly two billion times a day, P&G
products are put to the test when consumers use Tide to clean their clothes,
Pampers to care for their babies, Pantene to care for their hair, Olay to
improve the condition of their skin, Crest to brighten their smile. Every one of
P&G's brands is put to this test.

In every one of those nearly two billion experiences, consumers decide whether
P&G brands live up to their promises. When we get this right - when we deliver
the benefits promised, when we provide a delightful and memorable usage
experience, when we make everyday life a little bit better, a little more
convenient, a little bit healthier and more beautiful - then we begin to earn
the trust on which great brands are built.

At P&G, we've been competing for and winning these moments of truth for 165
years. As a result, we've built one of the largest and strongest portfolios of
leading brands in the world.

We have made substantial progress over the past two years in strengthening P&G's
business. We're back in the lead. We're committed to continuing this progress
and to ensuring we squarely face changing marketplace realities - to get out in
front and to stay in front of change.



2



BACK ON TRACK

Getting back in the lead has certainly been "Job One" over the past two years.
With clear strategic choices, operational excellence and financial discipline,
we are now returning to the consistent, reliable earnings and cash growth that
shareholders expect from P&G.

WE ARE DELIVERING LONG-TERM GROWTH OBJECTIVES AHEAD OF PLAN. Our long-term goals
are to consistently deliver double-digit core earnings per share growth, and 4%
to 6% sales growth, excluding the impacts of foreign exchange. Core net earnings
increased 10% to $5.1 billion. Core diluted net earnings per share, which
excludes the impact of restructuring charges and the prior-year amortization of
goodwill and indefinite-lived intangibles (which is no longer required under new
accounting rules), increased 10% to $3.59. Core operating income increased 12%
to $7.6 billion. Volume for the year grew 7%. Sales were up 4%, excluding
foreign exchange impact, despite corrective pricing actions taken over the last
18 months. Consumers have reacted positively to the improved value our brands
now offer, with volume and sales growth accelerating in the second half of the
year.

This growth is broad-scale. Every business unit delivered profitable growth at
rates above the corporate objective. Every geographic region delivered volume
growth. We have work yet to do, but we have achieved P&G's long-term growth
objectives a year earlier than we had projected.

Net Earnings Growth                         Net Sales Growth
(by segment versus previous year)           (by quarter versus previous year)

 [BAR GRAPH]                                 [BAR GRAPH]























                                           WE ACHIEVED P&G's LONG-TERM
                                           GROWTH OBJECTIVES A YEAR
                                           EARLIER THAN PROJECTED.

WE ARE INCREASING FREE CASH FLOW. Cash generation is a key indicator of a
company's underlying health, and P&G's management is focused on creating
leadership, sustained cash flow growth in each of our business units. Free cash
flow - operating cash after capital spending - was $6.1 billion, up 83% from
last year and more than triple the free cash flow generated two years ago.
Capital spending improvement has been a key driver. Our objective was to reduce
capital spending to 6% of sales by fiscal 2004, and we've exceeded that goal two
years ahead of schedule. We are now resetting our capital spending target to
below 5% of sales, and continue to look for opportunities to improve asset
efficiencies.

WE ARE DELIVERING SUPERIOR TOTAL SHAREHOLDER RETURN (TSR). TSR is the key
business unit metric upon which P&G's business planning and management
compensation are based. The combination of strong earnings growth and focus on
cash has resulted in superior business returns over the past year. P&G's share
price has responded accordingly, outpacing the major indices of Dow Jones and
the S&P 500.

These are substantial achievements, in tough economic times, in a very
competitive global marketplace. These are the kinds of results P&G has delivered
consistently and reliably for decades. This is the level of performance that P&G
shareholders expect and also that we - the men and women of P&G - expect of
ourselves. I want to commend the dedication, discipline and creativity of P&G
people who delivered these results.

Free Cash Flow
(in billions of dollars)

  [BAR GRAPH]


Capital Spending
(as % of sales)

  [BAR GRAPH]

Total Shareholder Return
(indexed versus July 1999)

  [LINE GRAPH]





4

SUCCESS DRIVERS

There are six drivers of P&G's success: consumer focus, strategic choices,
operational excellence, financial discipline, organizational structure and
brand-building capability.

CONSUMER FOCUS. The consumer is boss and we put the consumer at the heart of all
we do. First and foremost, this means getting the consumer value equation right
on all our brands. It also means delivering superior, consumer-meaningful
innovation. Competitive pressures make this a continuing challenge, but we are
working hard in every part of our business to deliver a continual stream of
innovation that meets consumer needs in ways that reset performance expectations
and represent superior value.

We are also making sure that P&G business leaders - including me - get out of
the office and into stores and homes to talk directly with people who buy and
use our products. No other real-world experience clarifies the choices we must
make as much as these conversations with consumers.

STRATEGIC CHOICES. We've focused on P&G's core categories, leading brands, and
the biggest retail customers and country markets. And, we're investing in
faster-growing, higher-margin, more asset-efficient businesses. A good example
is the acquisition of Clairol, which complements the core Hair Care business and
helps P&G enter the fast-growing hair colorant category. Strategic choices like
these are paying off. For example, about one-fourth of total gross margin
improvement in fiscal 2002 came from our emphasis on faster-growing,
higher-margin businesses such as Beauty Care and Health Care.

OPERATIONAL EXCELLENCE. Execution determines success, and we've placed
heightened emphasis on operational excellence at P&G. Again, Clairol is a good
example. We closed this deal in less than six months and fully integrated
business operations seven months later. Most important, we accomplished a smooth
integration and we're on track to deliver the committed synergy savings ahead of
schedule.

FINANCIAL DISCIPLINE. We have reinforced P&G's long-standing commitment to
financial discipline. Our efforts are seen most clearly in the Company's
business results. Even before the highly publicized accounting failures at
several companies, we took a number of specific





                                                                               5

steps to ensure strong corporate governance. We reiterated clear expectations
for ethical behavior. We instituted a broad-based Financial Stewardship program
- - more than 18 months ago - to provide even more focus on fiduciary
responsibilities, internal controls and accounting processes. We continue to
engage openly with P&G's Board of Directors, and with the Board's Audit
Committee, which is comprised entirely of independent directors. And we maintain
an independent relationship with Deloitte & Touche, including formal processes
to approve non-audit services. These practices are consistent with the way P&G
has operated for decades, and we are continually renewing the organization's
commitment to them.

ORGANIZATIONAL STRUCTURE. P&G's unique operating structure is creating
meaningful competitive advantage. In 1999, we reorganized the Company by
consolidating categories and brands into Global Business Units (GBUs),
aggregating country and regional go-to-market capabilities into Market
Development Organizations (MDOs) and providing single-source business services
through a Global Business Services organization (GBS). It has taken some time to
implement, but we're now reaping real advantage from consumer and market
responsiveness and the substantial synergies made possible by the new structure.
The success of Pampers Baby Stages of Development initiative in the United
Kingdom is one good example. The business unit focused on delivering superior
product, packaging and advertising; the MDO delivered an outstanding trial plan,
superior in-store fundamentals and strong External Relations support. By
"dividing and conquering" against a common business strategy and plan, we
achieved more, faster. Since the launch, Pampers' U.K. market share is back to
51%, 16 points ahead of the #2 brand.

BRAND BUILDING. Branding is more important than ever - and big, leading brands
are more valuable than ever. In a sea of choices where confusion reigns,
consumers value the reliable promise of their favorite brands. This plays to our
strength: branding is in P&G's DNA. P&G has 12 billion-dollar brands in its
portfolio today - and more are expected to come. These brands represent more
than half of the Company's sales and earnings. Equally important, these brands
account for the majority of P&G's consumer interactions - the millions of
"moments of truth" we face and win every day.

6

P&G'S BILLION-DOLLAR BRANDS

PAMPERS

Over 30 million babies
experience the comfort and
dryness of Pampers every day.

TIDE

Tide cleans more than 32
million loads of laundry
every day.

ARIEL

More than 300 million
pieces of clothing are
washed with Ariel every
day.

ALWAYS/WHISPER

On an average day, over 25
million women are using
Always.

PANTENE

Nearly 1.7 million
consumers purchase a
Pantene product every day.

CHARMIN

Every day, 50 million
households in North
America squeeze the
Charmin.



                                                                               7

BOUNTY

Every day, 50 million
North American households
experience Bounty as the
Quicker Picker-Upper.

IAMS

Iams and Eukanuba provide
27 million dogs and cats
with superior nutrition
every day.

CREST

A Crest product brings a
beautiful, healthy smile
to over 150 million faces
every day.

FOLGERS

Americans drink 85 million
cups of Folgers every day.

PRINGLES

People pop 275 million
Pringles every day.

DOWNY/LENOR

Downy softens and freshens
over 21 million loads of
laundry every day.




                                                                               9

1 CHANGING CONSUMER EXPECTATIONS

While we've made steady progress, we know we're in a fast-moving, global
marketplace in which the magnitude, pace and scope of change are accelerating.
To keep P&G in the lead, it is essential that we anticipate change and get in
front of it. We're doing that with a focus on three "new realities" that are
shaping the future marketplace.

First is the changing expectations of consumers. Our business has always been
about consumer value and in today's demanding economic environment, value is
more important than ever.

The key to winning in this environment is to reset expectations for performance
and price. Olay Total Effects is a good illustration. In global research, women
identified seven distinct signs of aging that affect the condition of their
skin. Many products addressed one or two of these signs, but no single product
fought all seven. Further, the products that performed best in this category
were high-end department store brands priced at $60 or $70 a bottle. With Olay
Total Effects, we created a single product for all seven signs of aging based on
technology that rivals or exceeds the best department store skin care brands -
and offered it at a fraction of the department store price but at the top end of
mass skin care pricing. Olay Total Effects is now the #1 anti-aging moisturizer
in the U.S., U.K., China, Canada and Australia - growing our total Olay Skin
Care franchise by nearly 20%.

The difficulty of meeting this performance/value challenge in developing markets
- - such as China or Eastern Europe - is even greater. Consumers in these markets
have similar performance expectations, but far less purchasing power. To succeed
in these markets, it's often necessary to rethink the fundamentals - everything
from manufacturing to product and packaging to marketing and distribution. We
have experience winning in developing markets with a range of creative
solutions: single-use Pantene sachets in China and van-based distribution in
Poland, for example. And we continue to develop other approaches. This will be
an area of increasing importance for P&G.




                                                                              11

2 RETAILERS AS PARTNERS AND COMPETITORS

The second "new reality" is the changing nature of retailing. Increasingly, we
have a dual relationship with retail customers: we are strong partners and
sometimes competitors.

In concept, the need for tighter relationships between manufacturers and
retailers is obvious: we both serve the same consumer, we both want to build
consumer loyalty to our brands, we're both trying to grow sales faster and more
profitably. But, in practice, retailers and manufacturers can work at cross
purposes. Energy, resources and time that could be devoted to creating a
delightful "first moment of truth" shopping experience can be spent in
unproductive discussions over shelf space, pricing, discounts and terms.

Together with retail partners, we are working hard to change this practice. For
example, we know consumers are often frustrated when buying hair care products.
They find it hard to locate everything they want and are often left confused and
searching for product information. We're working with more than 30 retailers to
enhance the performance of their hair care departments. We've simplified the
shopping experience, provided more consumer education and made it easier for
consumers to find and ultimately use the products that best meet their needs.
Shoppers are spending half the time finding products and more time in the aisle
browsing and discovering products - all of which leads to increased volume,
sales and profits for P&G and our retail partners. These changes are delivering
department growth ranges between 10% and 44% for retailers and P&G.

Retailers are sometimes competitors as well as partners. Their own brands are
growing as the retailers, themselves, grow. Private labels or store brands
strive to match innovation quickly and try to present a compelling value
alternative in many categories. This is healthy, in my opinion. It requires that
we continue to lead innovation and to price P&G products competitively. Further,
the growing strength of store brands underscores the importance of always being
the #1 or #2 brand in any category. Brands that can't maintain this leadership
stature will find it difficult to compete effectively with the best store
brands. Based on our internal global share measures, we have the #1 or #2 brand
in 17 of our 19 key global categories - categories that account for about 70% of
sales and earnings. P&G is in a strong position, and ready to become an even
better retail partner.




                                                                              13

3 THE NEW "INTERCONNECTED" ORGANIZATION

The third "new reality" is the emerging importance of operating as an
interconnected company. A recent report by industry consultant Booz Allen
Hamilton noted "'Vertical' thinking (i.e., own or control every link in the
supply chain) has given way to `virtual' thinking (i.e., create a flexible web
of supply relationships and focus exclusively on what one does best)."

At P&G, we see this as an enormous opportunity - in part, because that's where
the marketplace is headed and, even more so, because P&G has a strong history of
developing partnerships that bring out the best in us and our partners. We've
done it for years with advertising agencies, customers, joint venture partners
and technology suppliers.

When Dr. John's, the maker of SpinBrush toothbrushes, approached us about
licensing the Crest name, we recognized the opportunity. Within five months of
that first contact, we bought the company and then brought Crest's new, powered
SpinBrush to market in record time. Crest SpinBrush, now in 20 markets, has a
50% volume share of the growing powered-brush category in the U.S. and has
quadrupled the sales of the original Dr. John's product.

When we developed the bisphosphonate technology in Actonel, we increased
marketing capability by partnering with Aventis, whose field sales force had
broad access to and credibility with doctors. The partnership worked well, and
today Actonel is a nearly $400 million brand and growing.

Our vision is that P&G will be the best company in the world at spotting,
developing and leveraging partnerships in every area of the business. In fact, I
want P&G to be a magnet for best-in-class partners who want to build significant
new business together.




14

THE NEXT GENERATION OF LEADERSHIP

The bottom line is this: P&G is getting back on track. We have what it takes and
we're doing what it takes to stay in the lead - now, and in the future. We're
making clear strategic choices, strengthening operational excellence and
operating with rigorous financial discipline. We're delivering the earnings
growth to which we've committed - ahead of plan. We're generating cash from
every business unit - at record levels. We're delivering returns that exceed the
performance of the Dow Jones index and the S&P 500. In short, we are returning
to the level of performance you, and we, expect from P&G - and we are determined
to keep it up.

I want to close this letter with one final point. The reason things work well at
P&G is that everyone is an owner and a leader. We hire people because they're
leaders. We give them the training, development and experience to become even
stronger leaders. We promote people who deliver superior results, operate with
integrity and strengthen those around them. We have a culture that values and
embraces leadership. That's true at the top of our organization. In the middle.
At entry-level. It's true of people who've just joined P&G, as well as those
who've spent 20- or 30-year careers at P&G.

The key in such an organization is to provide individual and business unit
growth opportunities, and then to empower people to lead and execute with
excellence. That is precisely what we're doing at P&G. I have no doubt we have
the right organization to keep our Company growing. In these past two years, I
have witnessed a passionate sense of ownership for our business that deepens my
confidence in P&G's future, no matter what challenges we may face.

As owners of Procter & Gamble, you can be assured that the pioneering spirit,
operating discipline and dogged commitment to being in the lead that have always
characterized this Company - for 165 years! - are as alive today as they have
ever been.


/s/ A.G. Lafley
A.G. Lafley

Chairman of the Board,                                          August 5, 2002
President and Chief Executive




                                                                              15
MANAGEMENT CHANGES

JOHN PEPPER RETIRES

On July 1, 2002, John Pepper retired as chairman after 39 years of service with
P&G. Mr. Pepper will continue as chairman of the Board's Executive Committee
until July 1, 2003.

Mr. Pepper served as the ninth Chairman of the Board and Chief Executive from
July 1995 through September 1999, when he retired. He was re-elected chairman of
the Board of Directors, in addition to his role as chairman of the Executive
Committee of the Board, in June 2000.

To honor Mr. Pepper's life-long commitment to teaching and learning, and his
devotion to developing P&G people, the Company's new corporate training center
at the General Office in Cincinnati has been named "The John Pepper Learning
Center."

"John Pepper is the heart and soul of P&G - the living embodiment of our
Purpose, Values and Principles," A.G. Lafley told employees at Mr. Pepper's
retirement reception. "We are eternally grateful for his enormous personal and
professional contributions."

BRUCE BYRNES AND KERRY CLARK NAMED VICE-CHAIRMEN

Bruce Byrnes, President, Global Beauty & Feminine Care and Global Health Care,
and Kerry Clark, President, Global Market Development & Business Operations,
were named vice-chairmen of the Board of Directors and directors of the Company,
effective July 1, 2002. Mr. Byrnes and Mr. Clark bring great breadth of business
expertise and knowledge to their new roles, along with proven track records of
results.





16   The Procter & Gamble Company and Subsidiaries

CORPORATE GOVERNANCE AND MANAGEMENT'S RESPONSIBILITY

Procter & Gamble is committed to doing what's right. Our actions - the actions
of all employees - are governed by our Purpose, Values and Principles. These
core values set a tone of integrity for the entire Company - one that is
reinforced consistently at all levels, in all countries, internally and
externally.

Importantly, this extends to our accounting and financial reporting
responsibilities. We understand our responsibilities to investors. As part of
this, we are committed to providing accurate and understandable financial
reporting. This encompasses:

Maintaining a strong internal control environment. Our system of internal
controls is designed to provide reasonable assurance that transactions are
executed as authorized and accurately recorded, and that assets are safeguarded.
We monitor these controls through self-assessments and an ongoing program of
internal and external audits. Key employee responsibilities are reinforced
through the Company's "Worldwide Business Conduct Manual," which sets forth
management's commitment to conduct its business affairs with the highest ethical
standards.

Focusing on financial stewardship. Even before the events that have shaken
investor confidence, we had implemented a program to ensure employees understood
their fiduciary responsibilities to shareholders. This ongoing effort
encompasses financial discipline in our strategic and daily business decisions,
and brings particular focus to maintaining accurate accounting processes through
process improvement, skill development and oversight.

Exerting rigorous oversight of the business. We continuously review our business
results and strategic choices. Our Global Leadership Council is actively
involved - from understanding strategies to reviewing key initiatives and
financial performance. The intent is to ensure we remain objective in our
assessments, constructively challenge the approach to business opportunities and
potential issues, and monitor results and controls.

Encouraging strong and effective Corporate Governance from our Board of
Directors. We have an active, capable and diligent Board. We already meet the
standards being proposed for independence, and we welcome the Board's oversight
as a representative of the shareholders. Our Audit Committee is comprised of
independent directors with the financial knowledge and experience to provide
appropriate oversight. We review key accounting, financial reporting and
internal control matters with them and encourage their independent discussions
with Deloitte & Touche, our external auditors.

Providing investors with financial results that are complete and understandable.
The consolidated financial statements and financial information included in this
report are the responsibility of management. This includes preparing the
financial statements in accordance with generally accepted accounting principles
in the United States of America, which necessarily requires estimates based on
management's best judgment. Our independent auditing firm, Deloitte & Touche,
has audited our financial statements and has expressed an unqualified opinion.
We are committed to providing timely, accurate and understandable information to
investors.

P&G has a strong history of doing what's right. We know great companies are
built on strong ethical standards and principles. Our financial results are
delivered from that culture of accountability, and we take responsibility for
the quality and accuracy of our financial reporting.


/s/ A.G. Lafley                 /s/ Clayton C. Daley Jr.
A.G. Lafley                     Clayton C. Daley Jr.
Chairman of the Board,          Chief Financial Officer
President and Chief Executive




TABLE OF CONTENTS
                                                                                                  

FINANCIAL REVIEW                                        INDEPENDENT AUDITORS' REPORT                      26
  Results of Operations                           17    AUDITED CONSOLIDATED FINANCIAL STATEMENTS
  Financial Condition                             18      Earnings                                        27
  Segment Results                                 20      Balance Sheet                                   28
  Critical Accounting Policies                    22      Shareholders' Equity                            30
  Hedging and Derivative Financial Instruments    23      Cash Flows                                      31
  Restructuring Program                           24      Notes to the Financial Statements               32





                              The Procter & Gamble Company and Subsidiaries  17

FINANCIAL REVIEW

RESULTS OF OPERATIONS

The Company's fiscal year ended June 30, 2002 reflects the benefits of clear
strategic choices, operational excellence and financial discipline. The Company
kept its commitment to deliver consistent, reliable earnings and cash growth. In
fact, it delivered its long-term sales and earnings growth targets ahead of the
established objective and substantially increased free cash flow.

During 2002, the Company completed the acquisition and integration of Clairol -
its largest acquisition ever - providing a strong presence in the high-margin
hair colorants business. It also divested Comet and spun off Jif and Crisco.
These transactions are part of the Company's choice to focus on building big
brands that offer the greatest potential for global growth.

The Company continues to make clear choices about where to play and how to win.
The framework for these is grounded in focus areas that include: building core
categories and leading brands; growing with the biggest retail customers in the
biggest geographic markets; and investing in faster-growing, higher-margin, more
asset-efficient businesses. This requires some difficult decisions, including
those reflected in the Company's restructuring program to reduce overheads and
streamline manufacturing and other work processes. As the fiscal year results
demonstrate, these strategic choices are paying off.

Volume and Net Sales

Record sales in 2002 of $40.24 billion exceeded 2001 sales by $994 million, or
3%. Excluding an unfavorable exchange rate impact of 1% in the current year, net
sales grew 4%. Core net sales, which exclude restructuring impacts, were $40.17
billion, up 2% versus $39.38 billion in 2001. Excluding an unfavorable exchange
rate impact of 2% in the current year, core net sales grew 4%. This is in line
with the Company's long-term objective of 4% to 6% sales growth, excluding the
impacts of foreign exchange. Sales growth in 2002 was driven by 7% unit volume
growth - with particularly strong performances in the health care and beauty
care segments.

Fiscal year 2001 sales were $39.24 billion compared to $39.95 billion in 2000.
Excluding unfavorable exchange effects of 3%, sales increased 2%, reflecting
improved pricing in beauty care, fabric and home care and baby, feminine and
family care. Unit volume was flat in 2001, as exceptionally strong performance
by new businesses in health care was offset by softness in food and beverage.

Net Earnings

In 2002, net earnings were $4.35 billion, compared to $2.92 billion in 2001 and
$3.54 billion in 2000. Reported results include after-tax restructuring charges
of $706 million, $1,475 million, and $688 million in 2002, 2001 and 2000,
respectively. This restructuring program covers a significant reduction in
enrollment, manufacturing consolidations and portfolio choices to scale back or
discontinue underperforming businesses and initiatives.

Net Earnings Per Share
(on a diluted basis)

[BAR GRAPH]

The Company's long-term earnings goal is to consistently deliver double-digit
core net earnings per share growth. Core diluted net earnings per share, which
excludes the impact of restructuring charges and the prior years' amortization
of goodwill and indefinite-lived intangibles, increased 10% to $3.59 in 2002.
This compares to core diluted net earnings per share of $3.27 in 2001 and $3.10
in 2000. The goodwill adjustment was $0.15 per share in both 2001 and 2000. In
the current year, every business unit delivered net earnings growth above the
corporate objective. Clear strategic focus and operational excellence are
enabling improved business performance across all fronts. Core diluted net
earnings per share growth in the prior year of 5% reflected cost increases and
exchange impacts, which were mitigated by pricing improvements, lower taxes and
divestiture gains.

Operating Costs

Costs of products sold was $20.99 billion in 2002, compared to $22.10 billion in
2001 and $21.51 billion in 2000. Restructuring costs included in cost of
products sold were $508 million in 2002, $1.14 billion in 2001, and $496 million
in 2000. Excluding restructuring charges, as a percent of core net sales, cost
of products sold was 51.0% in 2002, compared to 53.2% in 2001 and 52.6% in 2000.
The progress in the current year reflects a decline in material costs and a
continued focus on savings projects, including restructuring. Gross margin
progress accelerated throughout the year, as restructuring benefits and ongoing
operational savings increased.




18  The Procter & Gamble Company and Subsidiaries              Financial Review

Additionally, the Company is beginning to see gross margin improvement from the
shift to higher-margin businesses, such as health care and beauty care.
Excluding restructuring charges, gross margin in 2001 reflects fairly stable
cost of products sold, despite raw material price increases - highlighting the
benefits of cost control efforts.

Marketing, research, administrative and other expense (MRA&O) was $12.57 billion
in 2002 versus $12.41 billion in 2001 and $12.48 billion in 2000. These include
restructuring costs of $519 million in 2002, $583 million in 2001 and $318
million in 2000. Excluding restructuring charges and amortization of goodwill
and indefinite-lived intangibles, MRA&O was $12.05 billion in the current year
versus $11.59 billion in 2001 and $11.94 billion in 2000. As a percent of core
net sales, MRA&O was 30.0% in 2002, 29.4% in 2001 and 29.9% in 2000. The Company
achieved good progress on restructuring savings that have reduced base selling,
research and administrative costs. The increase in the current year was due
primarily to Clairol integration costs and increases in other operating charges.
Additionally, marketing support efficiencies realized in the prior year
continued in the current year - although marketing costs did not decline as
dramatically due to the significant progress made in the prior year.

Operating & Net Earnings Margins

Operating margin was 16.6% compared to 12.1% in 2001 and 14.9% in 2000.
Excluding restructuring charges and amortization of goodwill and
indefinite-lived intangibles, core operating margin increased 170 basis points
to 19.0%, from 17.3% in 2001. Core operating margin was 17.5% in 2000.

Net earnings margin was 10.8% versus 7.4% in 2001 and 8.9% in 2000. Excluding
restructuring charges and amortization of goodwill and indefinite-lived
intangibles, core net earnings margin was 12.6%, up from 11.7% in 2001 and 11.1%
in 2000. The margin increase in 2002 reflects excellent operating earnings
progress and the benefits of lower interest expense. In 2001, the core net
margin increase reflected the gains from minor brand divestitures and lower
taxes, partially offset by increased product costs and unfavorable exchange
impacts.

Non-Operating Items

Interest expense was $603 million in 2002, compared to $794 million in 2001 and
$722 million in 2000. The decline in interest expense was driven by lower
interest rates partially offset by an increase in debt. The increase in 2001
reflected higher debt levels, primarily due to share repurchasing and
acquisitions.

Other non-operating income, net, which consists primarily of interest and
investment income and divestiture gains, contributed $308 million in 2002,
compared to $674 million in 2001 and $304 million in 2000. This decline is
driven by significantly lower income from divestitures and asset sales in 2002
versus 2001 as the Company's activity to divest non-core brands declined. Going
forward, divestitures are expected to remain at these lower levels.

The Company's effective tax rate for the current year was 31.8%, compared to
36.7% in 2001 and 36.0% in 2000. Excluding restructuring costs, amortization of
goodwill and indefinite-lived intangibles and related tax effects, the core
effective tax rate was flat versus 2001 at 31.1% compared to 32.5% in 2000.

FINANCIAL CONDITION

The Company's financial condition remains solid - particularly regarding cash
flow generation. One of the Company's focus areas is to improve its cash
efficiency as a key element of achieving superior shareholder return.

Cash

Operating cash flow provides the primary source of funds to finance operating
needs, capital expenditures and shareholder dividends. This is supplemented by
additional borrowings to provide funds to finance the share repurchase program
and acquisitions. The overall cash position of the Company reflects a global
strategy to optimize cash management while considering off-shore funding needs,
liquidity management objectives and other economic considerations.

Free Cash Flow
(in billions of dollars)

[BAR GRAPH]

Free cash flow, defined as operating cash flow less capital expenditures, for
2002 was $6.06 billion, up over 80% from



Financial Review              The Procter & Gamble Company and Subsidiaries  19

2001. This increase is indicative of the heightened emphasis on cash generation
the Company has placed on all of its operating units. Free cash flow was $3.32
billion in 2001 and $1.66 billion in 2000.

The Company continues to generate strong cash flow from operations. In 2002,
cash flow from operations was $7.74 billion, up $1.94 billion from $5.80 billion
in 2001, which was an increase of $1.12 billion from $4.68 billion in 2000.
Higher earnings were the primary contributor. In addition, taxes payable
increased approximately $500 million versus the prior year, primarily driven by
utilization of prior year overpayments and deferred tax assets. Depreciation and
amortization charges declined by $578 million versus the prior year. Of this
decrease, $235 million is attributable to the adoption of Statement of Financial
Accounting Standards (SFAS) No. 142, under which goodwill and indefinite-lived
intangible assets are no longer being amortized. The remaining decline is
primarily driven by lower accelerated depreciation from the restructuring
program in fiscal 2002 versus 2001.

Net cash used for acquisitions completed during 2002 totaled $5.47 billion,
primarily driven by the Clairol acquisition. This compares to $138 million in
2001 and $2.97 billion in 2000, which included the Iams and PUR acquisitions.

The Company continues to divest certain non-strategic brands in order to focus
resources on core businesses. The divestitures declined significantly in the
current year, returning to historical levels. The proceeds from these and other
asset sales generated $227 million in cash flow in the current year, which is
significantly reduced when compared to the $788 million generated in 2001 and
$419 million generated in 2000.

The Company maintains a share repurchase program, which authorizes the purchase
of shares annually on the open market. A primary purpose of the program is to
mitigate the dilutive impact of stock option grants - effectively prefunding
the exercise obligation. Additionally, there is a discretionary component under
which it may repurchase additional outstanding shares. Current year purchases
under the combined programs were $568 million, compared to $1.25 billion in 2001
and $1.77 billion in 2000. The decline in the current year is primarily due to
cash requirements associated with the Clairol acquisition. The Company
anticipates the buy-back program will return to historical levels in 2003.

Common share dividends grew 9% to $1.52 per share in 2002 versus $1.40 in 2001
and $1.28 in 2000. The annual dividend rate will increase to $1.64 per common
share in 2003, marking the 47th consecutive year of increased common share
dividend payments. Total dividend payments, to both common and preferred
shareholders, were $2.10 billion, $1.94 billion and $1.80 billion in 2002, 2001
and 2000, respectively.

Total debt increased $2.91 billion to $14.93 billion compared to $12.02 billion
in 2001 and $12.25 billion in 2000. This increase was primarily driven by the
Clairol acquisition - which had a purchase price of approximately $5.00 billion.

Long-term borrowing available under the Company's current shelf registration
statement filed in March 2002 was $4.00 billion at June 30, 2002. Additionally,
the Company is able to issue commercial paper at favorable rates and to access
general bank financing.

Capital Spending

Capital spending efficiency has been a focus area for the Company. Spending
decreased $807 million to $1.68 billion in 2002, compared to $2.49 billion in
2001 and $3.02 billion in 2000. Current year spending is 4.2% of net sales,
compared to 6.3% and 7.6% in 2001 and 2000, respectively.

Capital Spending
(in billions of dollars)

[BAR GRAPH]

This current year reduction of more than $800 million versus the prior year
surpasses the Company's 6% of net sales goal two years earlier than originally
anticipated. This improvement in capital spending is the result of three main
factors: 1) completing the majority of the re-platforming and capacity expansion
investment in the baby, feminine and family care business unit, 2) sourcing
consolidation and improved capacity utilization; and, 3) increasing emphasis on
reduced but sustainable capital spending levels to improve shareholder value.

Liquidity

The Company does not have off-balance sheet arrangements,



20   The Procter & Gamble Company and Subsidiaries            Financial Review

commitments or related party transactions that are considered material. The
Company is not aware of factors that are reasonably likely to adversely affect
liquidity trends, other than the factors discussed in the Forward-Looking
Statements.

Purchase Commitments

The Company has purchase commitments for materials, supplies, services and fixed
assets as part of the normal course of business. In the aggregate, such
commitments are not at prices in excess of current market rates. Due to the
proprietary nature of many of the Company's materials and processes, certain
supply contracts contain penalty provisions for early termination. The Company
does not expect changes in such provisions to materially affect results of
operations or its financial condition. This conclusion is made based upon
reasonably likely outcomes assumed by reference to historical experience and
current business plans.

As discussed previously, the Company's primary source of liquidity is cash
generated from operations. Additionally, the Company is able to support its
short-term liquidity, if necessary, through agreements with a diverse group of
creditworthy financial institutions. The Company has never drawn on these
facilities and does not intend to do so in the foreseeable future. However,
should the facilities be needed, when combined with cash on hand, the Company
believes they would provide the Company with sufficient credit funding to cover
any short-term financing requirements.

SEGMENT RESULTS

The following pages provide perspective on the Company's business segments.
Product-based segment results exclude items that are not included in measuring
business performance for management reporting purposes, most notably certain
financing, investing, employee benefit and restructuring costs.

Sales in companies over which the Company exerts significant influence, but does
not control the financial and operating decisions, are reported for segment
purposes in a manner similar to consolidated subsidiaries. Taxes are reflected
in the business segments at estimated local statutory tax rates. The effects of
these conventions are eliminated in the corporate segment to adjust management
reporting conventions to accounting principles generally accepted in the United
States of America.

2002 Net Sales by Business Segment

[PIE CHART]

2002 Net Earnings by Business Segment

[PIE CHART]

Health Care

Health care delivered exceptional results, as strength in the oral care and
pharmaceutical businesses drove a 15% increase in unit volume and a 14% increase
in net sales. Net sales were $4.98 billion in 2002. Excluding a 1% negative
impact of foreign exchange, net sales grew 15%. Health care's volume growth from
high-margin products funded increased marketing investments and yielded a net
earnings increase of 34% to $521 million.

Oral care led the volume growth, up significantly versus 2001. The global Crest
brand continued to grow behind strength across the portfolio, including Crest
SpinBrush, Crest Whitestrips and the base dentifrice business. In 2002, Crest
joined the ranks of the Company's billion dollar brands.

Pet health and nutrition volume increased 10% behind continued growth in the
United States. Global growth was driven by new product innovation and expansion
into new geographies and channels outside the United States in the second half
of the year.

Pharmaceuticals continued to deliver strong results with worldwide volume up
29%, behind the strength of Actonel, the Company's post-menopausal osteoporosis
drug.

In 2001, health care unit volume increased 15%, driven by the excellent
performance of the pet health and nutrition, pharmaceuticals and oral care
businesses. Net sales were





Financial Review              The Procter & Gamble Company and Subsidiaries  21

$4.35 billion, up 11%. Excluding a 3% unfavorable exchange impact, net sales
grew 14%. Net earnings were $390 million, a 16% increase over fiscal 2000.

Fabric and Home Care

Fabric and home care delivered strong earnings driven by an excellent program of
cost reduction and sharpened consumer value. Unit volume grew 3%, with growth
across every geographic region. Net sales for the year were flat at $11.62
billion. Excluding a 1% unfavorable foreign exchange impact, net sales increased
1%, as volume growth was partially offset by pricing investments to improve
in-store presence and the consumer value equation, primarily in Western Europe.

Net earnings were $1.83 billion, up 11% behind lower material prices, product
reformulations and manufacturing plant efficiencies. North America delivered
exceptional earnings progress, reflecting disciplined cost management and
increased marketing support efficiencies. This earnings progress further expands
the segment's strong net earnings margin - to well above the Company average.

In 2001, unit volume decreased 2% due to heavy competitive activity, primarily
in Western Europe. Net sales were $11.66 billion, down 4% versus a strong 2000
base which included new brand introductions. Excluding a 3% unfavorable foreign
exchange impact, net sales decreased 1%. Net earnings increased 13% to $1.64
billion.

Baby, Feminine and Family Care

Baby, feminine and family care delivered strong earnings progress driven by
volume growth and extensive cost reduction. Family care and baby care drove a 3%
increase in unit volume. Net sales for the year were down 1% to $11.88 billion.
Excluding a 2% negative impact of exchange rates, net sales increased 1%, as
commodity driven price declines and pricing adjustments on Luvs and Western
European diapers partially offset volume growth.

Net earnings were $1.17 billion, up 11% behind an ongoing program of product and
overhead cost reductions, including benefits from restructuring activities that
have streamlined manufacturing operations.

Family care volume grew 7% behind strength in the North America Bounty and
Charmin businesses. Net sales increased 1%, as commodity pricing actions largely
offset volume growth.

Baby care volume increased 4% behind Pampers growth in North America and Western
Europe driven by the Baby Stages of Development product launch. Net sales
declined 1% as foreign exchange and targeted pricing adjustments more than
offset volume growth.

Feminine care volume declined 3%, stabilizing in the second half, and net sales
declined 5%. Nevertheless, net earnings improved mainly due to cost
efficiencies.

In 2001, baby, feminine and family care segment unit volume grew 2%, driven by
family care and baby care. Net sales were $11.99 billion, compared to $12.04
billion in 2000. Excluding a 4% negative impact of exchange rates, net sales
increased 4%. Net earnings decreased 2%, to $1.05 billion, despite progress in
family care and feminine care.

Beauty Care

Beauty care delivered strong results behind the Clairol acquisition, completed
in the second quarter. Throughout the fiscal year, beauty care's quarterly
growth rates for unit volume and net sales increased sequentially - delivering
unit volume growth of 19% and net sales of $8.08 billion, up 11%. Excluding a 2%
negative foreign exchange impact, net sales grew 13%. Excluding the impacts of
the Clairol acquisition, fiscal year unit volume grew 3%, primarily behind
strength in the base hair care business and solid growth in fine fragrances and
cosmetics. Net earnings were $1.18 billion, up 22%, driven by marketing support
efficiencies behind growing businesses and a continued focus on cost reductions.

The Clairol integration went according to plan during the year with North
America, the largest region, being completed in May. The Clairol acquisition
provides a strong presence in the high-margin colorants business and rounds out
the Company's hair care offerings.

In 2001, beauty care unit volume was down 1%. Excluding the impact of
divestitures, volume was flat. Net sales were $7.26 billion, down 2%, versus
$7.39 billion in 2000. Excluding a 4% impact of unfavorable exchange rates,
primarily in Western Europe and Asia, net sales grew 2%. Net earnings were $967
million, an 8% improvement behind the successful expansion of high-performance,
premium-priced products.

Food and Beverage

Food and beverage delivered solid earnings growth despite top-line challenges.
Unit volume declined 6%, including a 4%



22   The Procter & Gamble Company and Subsidiaries            Financial Review

impact from divestitures. Volume declines and commodity-related pricing actions
in coffee drove an 8% decrease in net sales, to $3.80 billion. Net earnings grew
16%, to $384 million, as broad-based cost reductions more than offset declining
volumes.

The fourth quarter marked the completion of the Jif and Crisco spin-off. This
transaction, which is accounted for similar to a dividend, delivered excellent
value to shareholders - equivalent to approximately $0.60 per share.

In 2001, food and beverage unit volume declined 10%, including a 2% impact from
divestitures. Unit volume was negatively affected by reduced trade merchandising
and the impact of snacks pricing actions in North America and Western Europe and
the divestiture of the institutional shortening and oils business. Net sales
were $4.14 billion, down 11%. Net earnings were $332 million, down 9% versus
2000.

Corporate

The corporate segment includes both operating and non-operating elements such as
financing and investing activities, certain benefit costs, restructuring
charges, segment eliminations and other general corporate items.

Corporate includes adjustments from management reporting conventions to conform
with accounting principles generally accepted in the United States of America.
These primarily affect the treatment of entities over which the Company exerts
significant influence but does not control, and income taxes, which are
reflected in the business segments using estimated local statutory tax rates.

Corporate results reflect a decrease in one-time gains from the Company's
non-strategic divestiture program. Moreover, reduced corporate hedging gains
versus 2001 were partially offset by decreased restructuring costs, lower
interest expense and the discontinuation of amortizing goodwill and certain
indefinite-lived intangibles.

In 2001, corporate results reflect increased restructuring costs, higher benefit
costs and certain tax impacts not reflected in the businesses. These were
partially offset by one-time gains from the Company's divestiture program,
reduced overhead spending and corporate hedging gains.

CRITICAL ACCOUNTING POLICIES

The Company makes various estimates when applying accounting policies affecting
the Consolidated Balance Sheet, Consolidated Statement of Cash Flows and
Consolidated Statement of Earnings. Due to the nature of the Company's business,
these estimates generally are not considered highly uncertain at the time of
estimation - meaning they are not expected to result in a period-to-period
change that would materially affect the Company's results of operations or
financial condition.

The Company does apply certain key accounting policies as required by accounting
principles generally accepted in the United States of America. These key
accounting policies govern revenue recognition, restructuring, income taxes and
certain employee benefits.

Revenue Recognition

Revenue is recognized when it is realized or realizable and earned. The vast
majority of the Company's revenue relates to sale of inventory to customers, and
revenue is recognized when title and the risks and rewards of ownership pass to
the customer. Given the nature of the Company's business and the applicable
rules guiding revenue recognition, the Company's revenue recognition practices
do not contain estimates that materially affect results of operations.

Restructuring

Restructuring charges relate to the restructuring program that began in 1999.
The Company provides forward-looking information about the overall program,
including estimated costs and savings. Such disclosures represent management's
best estimate, but do require significant estimates about the program that may
change over time. However, the specific reserves recorded in each year under the
restructuring program are not considered highly uncertain, see Note 2 to the
Consolidated Financial Statements.

Income Taxes

Under SFAS No. 109, "Accounting for Income Taxes," income taxes are recorded
based on the current year amounts payable or refundable, as well as the
consequences of events that give rise to deferred tax assets and liabilities
based on differences in how those events are treated for tax purposes (see Note
11). The Company bases its estimate of deferred tax assets and liabilities on
current tax laws and rates and, in certain cases, business plans and other
expectations about future outcomes.

Changes in existing regulatory tax laws and rates may affect



Financial Review              The Procter & Gamble Company and Subsidiaries  23

the Company's ability to successfully manage regulatory matters around the
world, and future business results may affect the amount of deferred tax
liabilities or the valuation of deferred tax assets over time. The Company's
accounting for deferred tax consequences represents management's best estimate
of future events that can be appropriately reflected in the accounting
estimates. Although certain changes cannot be reasonably assumed in the
Company's current estimates, management does not believe such changes would
result in a material period-to-period impact on the results of operations or
financial condition.

Employee Benefits

Employee benefits include pensions - both defined contribution and defined
benefit - and other post-employment benefits (OPEB), with plans and benefits
established locally. At the Corporate level, there is an employee stock
ownership plan (ESOP) and a stock option plan.

Under the provisions of SFAS No. 87, "Employer's Accounting for Pensions" and
SFAS No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions," measurement of the obligations under the defined benefit pension
plans and OPEB plans are subject to a number of assumptions. These include the
rate of return on plan assets, health care cost trend rates and the rate at
which the future obligations are discounted to the value of the liability at
June 30th of each year presented in the Consolidated Balance Sheet (see Note
10).

Certain defined contribution pension and OPEB benefits in the United States are
funded by the ESOP plan (see Note 9). The ESOP plan is accounted for under the
provisions of AICPA Statement of Position No. 76-3, "Accounting Practices for
Certain Employee Stock Ownership Plans." Series A shares are used to fund a
portion of the defined contribution plan and Series B shares are used to fund a
portion of retiree health care benefits - a component of OPEB. Changes in
estimates and assumptions that are implicit in accounting for the ESOP would not
have a material impact on the results of operations.

Under SFAS No. 123, "Accounting for Stock-Based Compensation," the Company has
elected to account for stock options under APB Opinion No. 25, "Accounting for
Stock Issued to Employees," based on their intrinsic value at the date of grant.
Because options generally are granted at market value, there is no intrinsic
value and resultant compensation expense. Note 8 provides supplemental
information, including pro forma earnings and earnings per share, as if the
Company had accounted for options based on the method prescribed by SFAS No.
123. That methodology yields an estimate of fair value based on a measurement
method that contains a number of management estimates, including estimated
option life and future volatility. Changes in these assumptions could
significantly impact the estimated fair value of the options.

HEDGING AND DERIVATIVE FINANCIAL INSTRUMENTS

As a multinational company with diverse product offerings, the Company is
exposed to market risks, such as changes in interest rates, currency exchange
rates and commodity prices. To manage the volatility relating to these
exposures, the Company evaluates its exposures on a global basis to take
advantage of the netting opportunities that exist. For the remaining exposures,
the Company enters into various derivative transactions in accordance with the
Company's hedging policies. The financial impacts of these hedging instruments
are offset in part or in whole by corresponding changes in the underlying
exposures being hedged. The Company does not hold or issue derivative financial
instruments for speculative trading purposes. Note 7 includes a more detailed
discussion of the Company's accounting policies for financial instruments.

 Derivative positions are monitored using techniques including market valuation,
sensitivity analysis and value at risk modeling. The tests for interest rate and
currency rate exposures discussed below are based on a Monte Carlo simulation
value at risk model using a one year horizon and a 95% confidence level. The
model incorporates the impact of correlation and diversification from holding
multiple currency and interest rate instruments and assumes that financial
returns are normally distributed. Estimates of volatility and correlations of
market factors are drawn from the Risk- Metrics(TM) dataset as of June 28,
2002. In cases where data is unavailable in RiskMetrics(TM), a reasonable
proxy is included.

The Company's market risk exposures relative to interest and currency rates, as
discussed below, have not changed materially versus the previous reporting
period. In addition, the Company is not aware of any facts or circumstances that
would significantly impact such exposures in the near term.

Interest Rate Exposure

Interest rate swaps are used to hedge underlying debt obligations. Certain
currency interest rate swaps are designated as hedges of the Company's foreign
net investments.



24   The Procter & Gamble Company and Subsidiaries            Financial Review

Based on the Company's overall interest rate exposure as of and during the year
ended June 30, 2002, including derivative and other instruments sensitive to
interest rates, the Company does not believe a near-term change in interest
rates, at a 95% confidence level based on historical interest rate movements,
would materially affect the Company's financial statements.

Currency Rate Exposure

The Company manufactures and sells its products in a number of countries
throughout the world and, as a result, is exposed to movements in foreign
currency exchange rates. The primary purpose of the Company's foreign currency
hedging activities is to reduce the risk that the Company's financial position
will be adversely affected by short-term changes in exchange rates. Corporate
policy prescribes the range of allowable hedging activity. The Company primarily
utilizes forward exchange contracts and purchased options with maturities of
less than 18 months.

In addition, the Company enters into certain foreign currency swaps with
maturities of up to five years to hedge intercompany financing transactions.
The Company also utilizes purchased foreign currency options with maturities of
generally less than 18 months and forward exchange contracts to hedge against
the effect of exchange rate fluctuations on royalties and income from
international operations.

Based on the Company's overall currency rate exposure as of and during the year
ended June 30, 2002, including derivative and other instruments sensitive to
foreign currency movements, the Company does not believe a near-term change in
currency rates, at a 95% confidence level based on historical currency rate
movements, would materially affect the Company's financial statements.

Commodity Price Exposure

Raw materials used by the Company are subject to price volatility caused by
weather, supply conditions, political and economic variables and other
unpredictable factors. The Company uses futures, options and swap contracts to
manage the volatility related to the above exposures. Commodity hedging activity
is not considered material to the Company's financial statements.

Restructuring Program

In 1999, concurrent with a reorganization of its operations into product-based
global business units, the Company initiated a multi-year restructuring program.
The program is designed to accelerate growth and deliver cost reductions by
streamlining management decision-making, manufacturing and other work processes
and discontinuing under-performing businesses and initiatives. Technology
improvements, as well as standardization of manufacturing and other work
processes allow the Company to streamline its operations. This resulted in the
consolidation of manufacturing activity and various business processes.

The total cost of the program is expected to be $5.6 billion before tax ($4.4
billion after tax). Through 2002, cumulative charges are $4.1 billion before tax
($3.3 billion after tax). The remaining charges are expected to continue through
fiscal 2004. Given the nature and duration of the program, costs to be incurred
in future years are subject to varying degrees of estimation for key
assumptions, such as actual timing of execution, currency effects, enrollment
impacts and other variables. All restructuring costs are reported in the
corporate segment.

Summary of Restructuring Charges

                                            Years Ended June 30
                                   -----------------------------------
(in millions of dollars)             2002          2001          2000
- ----------------------------------------------------------------------
Separations                        $  393        $  341        $  153
- ----------------------------------------------------------------------
Accelerated Depreciation              135           276           386
- ----------------------------------------------------------------------
Asset Write-Downs                     208           731            64
- ----------------------------------------------------------------------
Other                                 222           502           211
- ----------------------------------------------------------------------
Total (before tax)                    958         1,850           814
- ----------------------------------------------------------------------
Total (after tax)                     706         1,475           688
- ----------------------------------------------------------------------

Separations represent the cost of packages offered to employees, which are
generally accrued upon employee acceptance. The separation packages,
predominantly voluntary, are formula driven based on salary levels and past
service. Separation costs are charged to cost of products sold for manufacturing
employees and marketing, research, administrative and other for all other
employees.

Approximately 16,600 separation packages have been provided for through June 30,
2002: 7,400 in 2002 and 9,200 from 1999 to 2001. While all geographies and
businesses are impacted by the enrollment reduction programs, a higher number of
United States employees are affected, given the concentration of operations. Net
enrollment for the Company may decline by less than the total separations, as
terminations will be offset by increased enrollment at remaining sites,
acquisitions and other impacts.




Financial Review              The Procter & Gamble Company and Subsidiaries  25


Accelerated depreciation relates to long-lived assets that will be taken out of
service prior to the end of their normal service period due to manufacturing
consolidations, technology standardization, plant closures or strategic choices
to discontinue initiatives. The Company has shortened the estimated useful lives
of such assets, resulting in incremental depreciation expense. For segment and
management reporting purposes, normal depreciation expense is reported by the
business segments, with the incremental accelerated depreciation reported in the
corporate segment. Accelerated depreciation and write-downs are charged to cost
of products sold for manufacturing assets and marketing, research,
administrative and other expense for all other assets.

Asset write-downs relate to establishment of new fair-value bases for assets
held for sale or disposal and for assets whose future cash flow expectations
have declined significantly as a direct result of restructuring decisions.
Assets held for sale or disposal represent excess capacity that is in the
process of being removed from service as well as businesses held for sale within
the next 12 months. Such assets are written down to the net amount expected to
be realized upon sale or disposal. Assets continuing in operation, but whose
nominal cash flows are no longer sufficient to recover existing book values, are
written down to estimated fair value, generally determined by reference to
discounted expected future cash flows. Write-downs of assets that will continue
to be used were approximately $45 million before tax ($33 million after tax) in
2002, $160 million before tax ($133 million after tax) in 2001 and $0 in 2000.
Asset write-downs are not expected to significantly impact future annual
depreciation expense.

Other contains charges incurred as a direct result of restructuring decisions
including relocation, training, discontinuation of initiatives and the
establishment of global business services and the new legal and organization
structure. These costs are charged to the applicable income statement line item
based on the underlying nature of the charge.

Most restructuring accruals are classified as current liabilities. Reserve
balances were $245 million, $460 million and $88 million at June 30, 2002, 2001
and 2000, respectively. During the current year, approximately 60% of
restructuring charges were cash compared to 40% in 2001 and 55% in 2000. Going
forward, approximately 60% of future charges are expected to be cash - primarily
separations.

Savings from the restructuring program are difficult to estimate, given the
nature of the activities, the corollary benefits achieved, timing and the degree
of reinvestment. Overall, the program is expected to deliver nearly $2 billion
in after tax annual savings by fiscal 2004. Estimated incremental savings were
$700 million in 2002, $235 million in 2001 and $65 million in 2000. Incremental
savings in 2003 are estimated to be approximately $400 to $500 million after
tax.

FORWARD-LOOKING STATEMENTS

The Company has made and will make certain forward-looking statements in the
Annual Report and in other contexts relating to volume growth, increases in
market shares, financial goals and cost reduction, among others.

These forward-looking statements are based on assumptions and estimates
regarding competitive activity, pricing, product introductions, economic
conditions, technological innovation, currency movements, governmental action
and the development of certain markets. Among the key factors necessary to
achieve the Company's goals are: (1) the successful integration of the Company's
new organization structure, including achievement of expected cost and tax
savings; (2) the ability to achieve business plans, including growing volume
profitably, despite high levels of competitive activity, especially with respect
to the product categories and geographical markets in which the Company has
chosen to focus; (3) the ability to maintain key customer relationships; (4) the
achievement of growth in significant developing markets such as China, Turkey,
Mexico, the Southern Cone of Latin America, the countries of Central and Eastern
Europe and the countries of Southeast Asia; (5) the ability to successfully
manage regulatory, tax and legal matters, including resolution of pending
matters within current estimates; (6) the successful and timely execution of
planned brand divestitures; (7) the ability to successfully implement, achieve
and sustain cost improvement plans in manufacturing and overhead areas; (8)
the ability to successfully manage currency (including currency issues in Latin
America), interest rate and certain commodity cost exposures; and (9) the
ability to manage the continued political and/or economic uncertainty in Latin
America and the Middle East, as well as any political and/or economic
uncertainty due to terrorist activities. If the Company's assumptions and
estimates are incorrect or do not come to fruition, or if the Company does not
achieve all of these key factors, then the Company's actual performance could
vary materially from the forward-looking statements made herein.




26 The Procter & Gamble Company and Subsidiaries

INDEPENDENT AUDITORS' REPORT

[DELOITTE & TOUCHE LOGO]

To the Board of Directors and Shareholders of The Procter & Gamble Company:

We have audited the accompanying consolidated balance sheet of The Procter &
Gamble Company and subsidiaries as of June 30, 2002 and 2001 and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the three years in the period ended June 30, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at June 30, 2002
and 2001 and the results of its operations and cash flows for each of the three
years in the period ended June 30, 2002, in conformity with accounting
principles generally accepted in the United States of America.

/s/ Deloitte & Touche
250 East Fifth Street
Cincinnati, Ohio 45202                                          August 5, 2002





                              The Procter & Gamble Company and Subsidiaries  27




CONSOLIDATED STATEMENT OF EARNINGS



Amounts in millions except per share amounts                  Years Ended June 30
                                                        ---------------------------
                                                           2002      2001      2000
- -----------------------------------------------------------------------------------
                                                                   
NET SALES                                               $40,238   $39,244   $39,951
- -----------------------------------------------------------------------------------
Cost of products sold                                    20,989    22,102    21,514
- -----------------------------------------------------------------------------------
Marketing, research, administrative and other expense    12,571    12,406    12,483
- -----------------------------------------------------------------------------------
OPERATING INCOME                                          6,678     4,736     5,954
- -----------------------------------------------------------------------------------
Interest expense                                            603       794       722
- -----------------------------------------------------------------------------------
Other non-operating income, net                             308       674       304
- -----------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES                              6,383     4,616     5,536
- -----------------------------------------------------------------------------------
Income taxes                                              2,031     1,694     1,994
- -----------------------------------------------------------------------------------
NET EARNINGS                                             $4,352    $2,922    $3,542
- -----------------------------------------------------------------------------------


BASIC NET EARNINGS PER COMMON SHARE                       $3.26     $2.15     $2.61
- -----------------------------------------------------------------------------------
DILUTED NET EARNINGS PER COMMON SHARE                     $3.09     $2.07     $2.47
- -----------------------------------------------------------------------------------
DIVIDENDS PER COMMON SHARE                                $1.52     $1.40     $1.28
- -----------------------------------------------------------------------------------





See accompanying Notes to Consolidated Financial Statements




28  The Procter & Gamble Company and Subsidiaries


CONSOLIDATED BALANCE SHEET

Amounts in millions                                     June 30
                                                  ------------------
                                                    2002        2001
- --------------------------------------------------------------------
                                                        
ASSETS
- --------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents                         $3,427      $2,306
- --------------------------------------------------------------------
Investment securities                                196         212
- --------------------------------------------------------------------
Accounts receivable                                3,090       2,931
- --------------------------------------------------------------------
INVENTORIES
  Materials and supplies                           1,031       1,096
- --------------------------------------------------------------------
  Work in process                                    323         373
- --------------------------------------------------------------------
  Finished goods                                   2,102       1,915
- --------------------------------------------------------------------
TOTAL INVENTORIES                                  3,456       3,384
Deferred income taxes                                521         397
- --------------------------------------------------------------------
Prepaid expenses and other receivables             1,476       1,659
- --------------------------------------------------------------------
TOTAL CURRENT ASSETS                              12,166      10,889


PROPERTY, PLANT AND EQUIPMENT
  Buildings                                        4,532       4,148
- --------------------------------------------------------------------
  Machinery and equipment                         17,963      18,165
- --------------------------------------------------------------------
  Land                                               575         508
- --------------------------------------------------------------------
                                                  23,070      22,821
- --------------------------------------------------------------------
  Accumulated depreciation                        (9,721)     (9,726)
- --------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT                 13,349      13,095


GOODWILL AND OTHER INTANGIBLE ASSETS
  Goodwill                                        10,966       7,429
- --------------------------------------------------------------------
  Trademarks and other intangible assets, net      2,464         871
- --------------------------------------------------------------------
NET GOODWILL AND OTHER INTANGIBLE ASSETS          13,430       8,300

OTHER NON-CURRENT ASSETS                           1,831       2,103
- --------------------------------------------------------------------
TOTAL ASSETS                                     $40,776     $34,387
- --------------------------------------------------------------------





See accompanying Notes to Consolidated Financial Statements





                              The Procter & Gamble Company and Subsidiaries  29


CONSOLIDATED BALANCE SHEET

Amounts in millions                                               June 30
                                                             ----------------
                                                               2002      2001
- -----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable                                             $2,205    $2,075
- -----------------------------------------------------------------------------
Accrued and other liabilities                                 5,330     4,631
- -----------------------------------------------------------------------------
Taxes payable                                                 1,438       907
- -----------------------------------------------------------------------------
Debt due within one year                                      3,731     2,233
- -----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                    12,704     9,846
- -----------------------------------------------------------------------------


LONG-TERM DEBT                                               11,201     9,792
- -----------------------------------------------------------------------------
DEFERRED INCOME TAXES                                         1,077       894
- -----------------------------------------------------------------------------
OTHER NON-CURRENT LIABILITIES                                 2,088     1,845
- -----------------------------------------------------------------------------
TOTAL LIABILITIES                                            27,070    22,377
- -----------------------------------------------------------------------------


SHAREHOLDERS' EQUITY
Convertible Class A preferred stock, stated value $1 per
 share (600 shares authorized)                                1,634     1,701
- -----------------------------------------------------------------------------
Non-Voting Class B preferred stock,
 stated value $1 per share
 (200 shares authorized)                                       --        --
- -----------------------------------------------------------------------------
Common stock, stated value $1 per share
 (5,000 shares authorized; shares outstanding:
 2002 - 1,300.8, 2001 - 1,295.7)                              1,301     1,296
- -----------------------------------------------------------------------------
Additional paid-in capital                                    2,490     2,057
- -----------------------------------------------------------------------------
Reserve for ESOP debt retirement                             (1,339)   (1,375)
- -----------------------------------------------------------------------------
Accumulated other comprehensive income                       (2,360)   (2,120)
- -----------------------------------------------------------------------------
Retained earnings                                            11,980    10,451
- -----------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY                                   13,706    12,010
- -----------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                  $40,776   $34,387
- -----------------------------------------------------------------------------


See accompanying Notes to Consolidated Financial Statements


30  The Procter & Gamble Company and Subsidiaries

                                  Consolidated Statement of Shareholders' Equity





                                                                                               Accumulated
Dollars in millions/                   Common                      Additional   Reserve for           Other
Shares in thousands                    Shares    Common Preferred     Paid-In     ESOP Debt   Comprehensive Retained
                                  Outstanding     Stock     Stock     Capital    Retirement          Income Earnings     Total
- ---------------------------------------------  -------------------------------------------------------------------------------
                                                                                         
BALANCE JUNE 30, 1999               1,319,754    $1,320    $1,781      $1,337       $(1,552)        $(1,606) $10,778   $12,058
- ---------------------------------------------  -------------------------------------------------------------------------------
Net earnings                                                                                                   3,542     3,542
- ---------------------------------------------  -------------------------------------------------------------------------------
Other comprehensive income:
- ---------------------------------------------  -------------------------------------------------------------------------------
   Financial statement translation                                                                     (449)              (449)
- ---------------------------------------------  -------------------------------------------------------------------------------
   Net investment hedges,
      net of $88 tax                                                                                    150                150
- ---------------------------------------------  -------------------------------------------------------------------------------
   Other, net of tax                                                                                     63                 63
- ---------------------------------------------  -------------------------------------------------------------------------------
   Total comprehensive income
- ---------------------------------------------  -------------------------------------------------------------------------------
Dividends to shareholders:
- ---------------------------------------------  -------------------------------------------------------------------------------
   Common                                                                                                     (1,681)   (1,681)
- ---------------------------------------------  -------------------------------------------------------------------------------
   Preferred, net of tax benefit                                                                                (115)     (115)
- ---------------------------------------------  -------------------------------------------------------------------------------
Treasury purchases                    (24,296)      (24)                   72(1)                              (1,814)   (1,766)
- ---------------------------------------------  -------------------------------------------------------------------------------
Employee plan issuances                 7,592         7                   344                                              351
- ---------------------------------------------  -------------------------------------------------------------------------------
Preferred stock conversions             2,817         3       (44)         41                                               --
- ---------------------------------------------  -------------------------------------------------------------------------------
ESOP debt guarantee reduction                                                           134                                134
- ---------------------------------------------  -------------------------------------------------------------------------------
BALANCE JUNE 30, 2000               1,305,867     1,306     1,737       1,794        (1,418)         (1,842)  10,710    12,287
- ---------------------------------------------  -------------------------------------------------------------------------------
Net earnings                                                                                                   2,922     2,922
- ---------------------------------------------  -------------------------------------------------------------------------------
Other comprehensive income:
- ---------------------------------------------  -------------------------------------------------------------------------------
   Financial statement translation                                                                     (715)              (715)
- ---------------------------------------------  -------------------------------------------------------------------------------
   Net investment hedges,
      net of $276 tax                                                                                   460                460
- ---------------------------------------------  -------------------------------------------------------------------------------
   Other, net of tax benefit                                                                            (23)               (23)
- ---------------------------------------------  -------------------------------------------------------------------------------
   Total comprehensive income
- ---------------------------------------------  -------------------------------------------------------------------------------
Dividends to shareholders:
- ---------------------------------------------  -------------------------------------------------------------------------------
   Common                                                                                                     (1,822)   (1,822)
- ---------------------------------------------  -------------------------------------------------------------------------------
   Preferred, net of tax benefit                                                                                (121)     (121)
- ---------------------------------------------  -------------------------------------------------------------------------------
Treasury purchases                    (18,238)      (18)                    6(1)                              (1,238)   (1,250)
- ---------------------------------------------  -------------------------------------------------------------------------------
Employee plan issuances                 5,924         6                   223                                    229
- ---------------------------------------------  -------------------------------------------------------------------------------
Preferred stock conversions             2,185         2       (36)         34                                     --
- ---------------------------------------------  -------------------------------------------------------------------------------
ESOP debt guarantee reduction                                                            43                       43
- ---------------------------------------------  -------------------------------------------------------------------------------
BALANCE JUNE 30, 2001               1,295,738     1,296     1,701       2,057        (1,375)         (2,120)  10,451    12,010
- ---------------------------------------------  -------------------------------------------------------------------------------
Net earnings                                                                                                   4,352     4,352
- ---------------------------------------------  -------------------------------------------------------------------------------
Other comprehensive income:
- ---------------------------------------------  -------------------------------------------------------------------------------
   Financial statement translation                                                                      263                263
- ---------------------------------------------  -------------------------------------------------------------------------------
   Net investment hedges,
      net of $238 tax benefit                                                                          (397)              (397)
- ---------------------------------------------  -------------------------------------------------------------------------------
   Other, net of tax benefit                                                                           (106)              (106)
- ---------------------------------------------  -------------------------------------------------------------------------------
   Total comprehensive income
- ---------------------------------------------  -------------------------------------------------------------------------------
Dividends to shareholders:
- ---------------------------------------------  -------------------------------------------------------------------------------
   Common                                                                                                     (1,971)   (1,971)
- ---------------------------------------------  -------------------------------------------------------------------------------
   Preferred, net of tax benefit                                                                                (124)     (124)
- ---------------------------------------------  -------------------------------------------------------------------------------
   Spin-off of Jif and Crisco                                                                                   (150)     (150)
- ---------------------------------------------  -------------------------------------------------------------------------------
Treasury purchases                     (7,681)       (8)                   18(1)                                (578)     (568)
- ---------------------------------------------  -------------------------------------------------------------------------------
Employee plan issuances                 8,323         9                   352                                              361
- ---------------------------------------------  -------------------------------------------------------------------------------
Preferred stock conversions             4,390         4       (67)         63                                               --
- ---------------------------------------------  -------------------------------------------------------------------------------
ESOP debt guarantee reduction                                                            36                                 36
- ---------------------------------------------  -------------------------------------------------------------------------------
BALANCE JUNE 30, 2002               1,300,770    $1,301    $1,634      $2,490       $(1,339)        $(2,360) $11,980   $13,706
- ---------------------------------------------  -------------------------------------------------------------------------------











Dollars in millions/                  Total
Shares in thousands           Comprehensive
                                     Income
- ---------------------------------  --------
                                  
BALANCE JUNE 30, 1999
- ---------------------------------  --------
Net earnings                         $3,542
- ---------------------------------  --------
Other comprehensive income:
- ---------------------------------  --------
   Financial statement translation     (449)
- ---------------------------------  --------
   Net investment hedges,
      net of $88 tax                    150
- ---------------------------------  --------
   Other, net of tax                     63
- ---------------------------------  --------
   Total comprehensive income        $3,306
- ---------------------------------  --------
Dividends to shareholders:
   Common
   Preferred, net of tax benefit
Treasury purchases
Employee plan issuances
Preferred stock conversions
ESOP debt guarantee reduction
BALANCE JUNE 30, 2000
- ---------------------------------  --------
Net earnings                         $2,922
- ---------------------------------  --------
Other comprehensive income:
- ---------------------------------  --------
   Financial statement translation     (715)
- ---------------------------------  --------
   Net investment hedges,
      net of $276 tax                   460
- ---------------------------------  --------
   Other, net of tax benefit            (23)
- ---------------------------------  --------
   Total comprehensive income        $2,644
- ---------------------------------  --------
Dividends to shareholders:
   Common
   Preferred, net of tax benefit
Treasury purchases
Employee plan issuances
Preferred stock conversions
ESOP debt guarantee reduction

BALANCE JUNE 30, 2001
- ---------------------------------  --------
Net earnings                         $4,352
- ---------------------------------  --------
Other comprehensive income:
- ---------------------------------  --------
   Financial statement translation      263
- ---------------------------------  --------
   Net investment hedges,
      net of $238 tax benefit          (397)
- ---------------------------------  --------
   Other, net of tax benefit           (106)
- ---------------------------------  --------
   Total comprehensive income        $4,112
- ---------------------------------  --------



(1)    Premium on equity put options.

See accompanying Notes to Consolidated Financial Statements




                                The Procter & Gamble Company and Subsidiaries 31

CONSOLIDATED STATEMENT OF CASH FLOWS



Amounts in millions                                                        Years Ended June 30
                                                                ----------------------------------------
                                                                  2002            2001              2000
- --------------------------------------------------------------------------------------------------------
                                                                                         
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                    $2,306          $1,415            $2,294
- --------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
- --------------------------------------------------------------------------------------------------------
Net earnings                                                     4,352           2,922             3,542
- --------------------------------------------------------------------------------------------------------
Depreciation and amortization                                    1,693           2,271             2,191
- --------------------------------------------------------------------------------------------------------
Deferred income taxes                                              389            (102)              463
- --------------------------------------------------------------------------------------------------------
Change in accounts receivable                                       96            (122)               64
- --------------------------------------------------------------------------------------------------------
Change in inventories                                              159             (67)             (176)
- --------------------------------------------------------------------------------------------------------
Change in accounts payable, accrued and other liabilities          684             801              (883)
- --------------------------------------------------------------------------------------------------------
Change in other operating assets and liabilities                   (98)             57              (404)
- --------------------------------------------------------------------------------------------------------
Other                                                              467              44              (122)
- --------------------------------------------------------------------------------------------------------
TOTAL OPERATING ACTIVITIES                                       7,742           5,804             4,675
- --------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
- --------------------------------------------------------------------------------------------------------
Capital expenditures                                            (1,679)         (2,486)           (3,018)
- --------------------------------------------------------------------------------------------------------
Proceeds from asset sales                                          227             788               419
- --------------------------------------------------------------------------------------------------------
Acquisitions                                                    (5,471)           (138)           (2,967)
- --------------------------------------------------------------------------------------------------------
Change in investment securities                                     88              (7)              221
- --------------------------------------------------------------------------------------------------------
TOTAL INVESTING ACTIVITIES                                      (6,835)         (1,843)           (5,345)
- --------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
- --------------------------------------------------------------------------------------------------------
Dividends to shareholders                                       (2,095)         (1,943)           (1,796)
- --------------------------------------------------------------------------------------------------------
Change in short-term debt                                        1,394          (1,092)              243
- --------------------------------------------------------------------------------------------------------
Additions to long-term debt                                      1,690           1,356             4,196
- --------------------------------------------------------------------------------------------------------
Reductions of long-term debt                                      (461)           (226)           (1,409)
- --------------------------------------------------------------------------------------------------------
Proceeds from the exercise of stock options                        237             141               336
- --------------------------------------------------------------------------------------------------------
Treasury purchases                                                (568)         (1,250)           (1,766)
- --------------------------------------------------------------------------------------------------------
TOTAL FINANCING ACTIVITIES                                         197          (3,014)             (196)
- --------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS        17             (56)              (13)
- --------------------------------------------------------------------------------------------------------
CHANGE IN CASH AND CASH EQUIVALENTS                              1,121             891              (879)
- --------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                          $3,427          $2,306            $1,415
- --------------------------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE
- --------------------------------------------------------------------------------------------------------
Cash payments for:
- --------------------------------------------------------------------------------------------------------
  Interest                                                        $629            $735              $700
- --------------------------------------------------------------------------------------------------------
  Income taxes                                                     941           1,701             1,712
- --------------------------------------------------------------------------------------------------------
Non-cash spin-off of Jif and Crisco                                150            --                --
- --------------------------------------------------------------------------------------------------------
Liabilities assumed in acquisitions                                571             108               236
- --------------------------------------------------------------------------------------------------------



See accompanying Notes to Consolidated Financial Statements



32  The Procter & Gamble Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The consolidated financial statements include The Procter
& Gamble Company and its controlled subsidiaries (the Company). Intercompany
transactions are eliminated in consolidation. Investments in companies over
which the Company exerts significant influence, but does not control the
financial and operating decisions, are accounted for using the equity method.
These investments are managed as integral parts of the Company's business units,
and segment reporting reflects such investments as consolidated subsidiaries
with applicable adjustments to comply with U.S. GAAP in the corporate segment.

Use of Estimates: Preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying disclosures.
These estimates are based on management's best knowledge of current events and
actions the Company may undertake in the future. Actual results may ultimately
differ from estimates, although management does not believe such changes will
materially affect the financial statements in any individual year.

New Pronouncements: On July 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS No. 142,
"Goodwill and Other Intangible Assets."

SFAS No. 141 applies to all business combinations with a closing date after June
30, 2001. This Statement eliminates the pooling-of-interests method of
accounting and further clarifies the criteria for recognition of intangible
assets separately from goodwill.

SFAS No. 142 eliminates the amortization of goodwill and indefinite-lived
intangible assets and initiates an annual review for impairment. Identifiable
intangible assets with determinable useful lives will continue to be amortized.
Beginning July 1, 2001, the Company ceased amortizing goodwill and
indefinite-lived intangible assets. At that time, management performed an
impairment test of existing goodwill and concluded there was no goodwill
impairment.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which addresses the financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. In August 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," which
addresses the financial accounting and reporting for the impairment or disposal
of long-lived assets. The Company will adopt both SFAS No. 143 and SFAS No. 144
on July 1, 2002, and does not expect these Statements to materially impact the
Company's financial statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This pronouncement is effective for exit or
disposal activities that are initiated after December 31, 2002, and requires
these costs to be recognized when the liability is incurred and not at project
initiation. The Company is reviewing the provisions of this Statement, but does
not expect it to have a material impact on the financial statements.

Revenue Recognition: Sales are recognized when revenue is realized or realizable
and has been earned. Most revenue transactions represent sales of inventory. In
general, revenue is recognized when risk and title to the product transfers to
the customer. A provision for discounts and other allowances is taken as a
reduction in sales within the same period the revenue is recognized.

Currency Translation: Financial statements of subsidiaries outside the U.S.
generally are measured using the local currency as the functional currency.
Adjustments to translate those statements into U.S. dollars at the balance sheet
date are recorded in other comprehensive income. For subsidiaries operating in
highly inflationary economies, the U.S. dollar is the functional currency.
Remeasurement adjustments for highly inflationary economies and other
transactional exchange gains and losses are reflected in earnings.

Cash Equivalents: Highly liquid investments with maturities of three months or
less when purchased are considered cash equivalents and recorded at cost, which
approximates fair value.

Investment Securities: Investment securities consist of short-term readily
marketable instruments that mature within one year. These securities are
reported at fair value and classified as available for sale, with unrealized
gains or losses recorded net of tax in other comprehensive income.

Inventory Valuation: Inventories are valued at cost, which is not in excess of
current market prices. Cost is primarily determined by either the average cost
or the first-in, first-out method, with minor amounts maintained on the last-in,
first-out method. The replacement cost of last-in, first-out inventories
exceeded carrying value by approximately $27 and $55 at June 30, 2002 and 2001,
respectively.

Goodwill and Other Intangible Assets: The cost of intangible assets with
determinable useful lives is amortized to reflect the pattern of economic
benefits consumed, principally on a straight-line basis, over the estimated
periods benefited, ranging from 5 to 40 years. Goodwill and

Millions of dollars except per share amounts





                                The Procter & Gamble Company and Subsidiaries 33



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

indefinite-lived intangibles are evaluated annually for impairment. Beginning in
2002, such determination of fair value is based on valuation models that
incorporate expected future cash flows and profitability projections. Prior to
2002, goodwill was amortized over periods not exceeding 40 years.

Property, Plant and Equipment: Property, plant and equipment are recorded at
cost reduced by accumulated depreciation. Depreciation expense is recognized
over the assets' estimated useful lives using the straight-line method.
Estimated useful lives are based on Company averages and range from 3 to 20
years for machinery and equipment and 40 years for buildings. Estimated useful
lives are periodically reviewed and, where appropriate, changes are made
prospectively.

Fair Values of Financial Instruments: Fair values of cash equivalents, short-
and long-term investments and short-term debt approximate cost. The estimated
fair values of other financial instruments, including debt, equity and risk
management instruments, have been determined using market information and
valuation methodologies, primarily discounted cash flow analysis. These
estimates require considerable judgment in interpreting market data, and changes
in assumptions or estimation methods could significantly affect the fair value
estimates.

Reclassifications: Certain reclassifications of prior years' amounts have been
made to conform to the current year presentation.

NOTE 2 RESTRUCTURING PROGRAM

In 1999, concurrent with a reorganization of its operations into product-based
global business units, the Company initiated a multi-year restructuring program.
The program is designed to accelerate growth and deliver cost reductions by
streamlining management decision- making, manufacturing and other work processes
and discontinuing under-performing businesses and initiatives. Technology
improvements as well as standardization of manufacturing and other work
processes allow the Company to streamline operations, resulting in the
consolidation of manufacturing activity and various business processes.

Costs to be incurred include separation related costs, asset write-downs,
accelerated depreciation and other costs directly related to the restructuring
effort.

Due to the nature of the charges and the duration of the program, estimates of
the timing and amount of costs and savings require significant judgment and may
change over time. Based on current estimates, the overall program is expected to
result in total charges of $5.6 billion ($4.4 billion after tax) over the
six-year period that began in 1999. Through 2002, cumulative charges are $4.1
billion ($3.3 billion after tax). Under current accounting rules, many
restructuring charges may not be recognized at project initiation, but rather
are charged to expense as established criteria for recognition are met. This
accounting yields ongoing charges over the entire restructuring period, rather
than a large reserve at initiation.

Before-tax restructuring activity was as follows:


                                          Asset    Accelerated
                    Separations     Write-Downs    Depreciation              Other            Total
- ---------------------------------------------------------------------------------------------------
                                                                              
Reserve balance
June 30, 1999               $35          $  --            $  --                 $9              $44
- ---------------------------------------------------------------------------------------------------
2000:
- ---------------------------------------------------------------------------------------------------
Charges                     153               64              386              211              814
- ---------------------------------------------------------------------------------------------------
Cash spent                 (100)            --               --               (220)            (320)
- ---------------------------------------------------------------------------------------------------
Charged against
assets                     --                (64)            (386)            --               (450)
- ---------------------------------------------------------------------------------------------------
Reserve balance
June 30, 2000                88             --               --               --                 88
- ---------------------------------------------------------------------------------------------------
2001:
- ---------------------------------------------------------------------------------------------------
Charges                     341              731              276              502            1,850
- ---------------------------------------------------------------------------------------------------
Cash spent                 (186)            --               --               (199)            (385)
- ---------------------------------------------------------------------------------------------------
Charged against
assets                     --               (731)            (276)             (86)          (1,093)
- ---------------------------------------------------------------------------------------------------
Reserve balance
June 30, 2001               243             --               --                217              460
- ---------------------------------------------------------------------------------------------------
2002:
- ---------------------------------------------------------------------------------------------------
CHARGES                     393              208              135              222              958
- ---------------------------------------------------------------------------------------------------
CASH SPENT                 (477)            --               --               (336)            (813)
- ---------------------------------------------------------------------------------------------------
 CHARGED AGAINST
 ASSETS                    --               (208)            (135)             (17)            (360)
- ---------------------------------------------------------------------------------------------------
RESERVE BALANCE
 JUNE 30, 2002              159             --               --                 86              245
- ---------------------------------------------------------------------------------------------------


Charges for the program are reflected in the corporate segment.

Separation Costs

Employee separation charges relate to severance packages for approximately 7,400
people in 2002, 6000 people in 2001, 2800 people in 2000 and 400 people in 1999.
The packages are predominantly voluntary and are formula driven based on salary
levels and past service. Severance costs related to voluntary separations are
charged to earnings when the employee accepts the offer. The current and planned
separations span the entire organization, including manufacturing, selling,
research and administrative positions.

                                    Millions of dollars except per share amounts



34 The Procter & Gamble Company and Subsidiaries

                                      Notes to Consolidated Financial Statements

Asset Write-Downs

Asset write-downs relate to the establishment of new carrying values for assets
held for sale or disposal. These assets represent excess capacity in the process
of being removed from service or disposed as well as businesses held for sale in
the next 12 months. These assets were written down to the amounts expected to be
realized upon sale or disposal, less minor disposal costs.

Additionally, asset write-downs include certain manufacturing assets that are
expected to operate at levels significantly below their planned capacity,
primarily capital expansions related to recent initiatives that have not met
expectations. The projected cash flows from such assets over their remaining
useful lives are no longer estimated to be greater than their current carrying
values; therefore, they were written down to estimated fair value, generally
determined by reference to discounted expected future cash flows. Such
before-tax charges represented approximately $45 in 2002, $160 in 2001 and $0 in
2000.

Accelerated Depreciation

Charges for accelerated depreciation relate to long-lived assets that will be
taken out of service prior to the end of their normal service period due to
manufacturing consolidations, technology standardization, plant closures or
strategic choices to discontinue initiatives. The Company has shortened the
estimated useful lives of such assets, resulting in incremental depreciation
expense.

Other Restructuring Charges

Other costs incurred as a direct result of the program include relocation,
training, certain costs associated with discontinuation of initiatives and the
establishment of global business services and the new legal and organization
structure.

NOTE 3 ACQUISITIONS AND SPIN-OFF

Acquisitions

The purchase method of accounting was used for acquisitions in all periods
presented. In 2002, acquisitions totaled $5.5 billion, resulting in additions to
goodwill of $3.6 billion and other intangible assets of $1.7 billion (see Note
4). These acquisitions consisted primarily of Clairol along with an incremental
payment for Dr. John's Spinbrush.

On November 16, 2001, the Company completed the acquisition of the Clairol
business from the Bristol-Myers Squibb Company for approximately $5.0 billion in
cash, financed primarily with debt. Total cash paid includes final purchase
price adjustments based on a working capital formula. The Clairol business
consists of hair care, hair colorants and personal care products, giving the
Company entry into the hair colorant market, while providing potential for
significant synergies. The operating results of the Clairol business are
reported in the Company's beauty care segment from November 16, 2001.

The following table provides pro forma results of operations for the years ended
June 30, 2002, 2001 and 2000, as if Clairol had been acquired as of the
beginning of each fiscal year presented. The pro forma results include
adjustments for estimated interest expense on acquisition debt and amortization
of intangible assets, excluding goodwill and indefinite-lived intangibles.
However, pro forma results do not include any anticipated cost savings or other
effects of the planned integration of Clairol. Accordingly, such amounts are not
necessarily indicative of the results that would have occurred if the
acquisition had closed on the dates indicated, or that may result in the future.

Pro forma results                           Years Ended June 30
                                        ---------------------------
                                           2002      2001      2000
- -------------------------------------------------------------------
Net sales                               $40,780   $40,801   $41,488
- -------------------------------------------------------------------
Net earnings                              4,406     2,927     3,517
- -------------------------------------------------------------------
Diluted net earnings per common share     $3.13     $2.07     $2.45
- -------------------------------------------------------------------

The initial purchase price allocation of the Clairol business resulted in the
following condensed balance sheet of assets acquired and liabilities assumed. It
is anticipated that there will be changes to the initial allocation as fair
values are finalized next quarter, but the Company does not expect these changes
to have a material impact on the results of operations or financial condition of
the Company in future periods.

                               Opening Balance
- ----------------------------------------------
Current assets                            $487
- ----------------------------------------------
Property, plant and equipment              184
- ----------------------------------------------
Intangible assets                        1,533
- ----------------------------------------------
Goodwill (1)                             3,300
- ----------------------------------------------
Other non-current assets                    18
- ----------------------------------------------
  Total assets acquired                  5,522
- ----------------------------------------------

Current liabilities                        450
- ----------------------------------------------
Non-current liabilities                     47
- ----------------------------------------------
  Total liabilities assumed                497
- ----------------------------------------------
Net assets acquired                      5,025
- ----------------------------------------------

(1)Approximately $2.6 billion is expected to be deductible for tax purposes.

The Clairol acquisition resulted in $1,533 in total intangible assets acquired
with $1,220 allocated to trademarks with indefinite lives. The remaining $313 of
acquired intangibles have determinable useful lives and were assigned to
trademarks of $128, patents and technology of $146 and other intangible assets
of $39. Total intangible assets acquired with determinable lives have a weighted
average useful life of 9 years (11 years for trademarks, 9 years for patents and
technology and 5 years for other intangible assets).



Millions of dollars except per share amounts



Notes to Consolidated Financial Statements

                                The Procter & Gamble Company and Subsidiaries 35

During 2002, the Company completed a buyout of the purchase price contingency
associated with the prior acquisition of Dr. John's Spin-brush. The total
adjusted purchase price is approximately $475, with the incremental payment
resulting in additional goodwill.

In 2001, acquisitions totaled $246 resulting in additions to goodwill and other
intangibles of $208. In 2000, acquisitions consisted of The Iams Company and
Affiliates, Recovery Engineering, Inc. and a joint venture ownership increase in
China. These acquisitions totaled $2,967, resulting in additions to goodwill and
other intangibles of $2,508.

Spin-off

On May 31, 2002, the Jif peanut butter and Crisco shortening brands were spun
off to the Company's shareholders, and subsequently merged into The J.M. Smucker
Company (Smucker). The Company's shareholders received one new common Smucker
share for every 50 shares held in the Company, totaling 26 million shares, or
approximately $900 in market value. This transaction was not included in the
results of operations, since a spin-off to the Company's shareholders is
recorded at net book value, or $150, in a manner similar to dividends.

NOTE 4 GOODWILL AND INTANGIBLE ASSETS

The change in the net carrying amount of goodwill for the year ended June 30,
2002 is allocated by reportable business segment as follows:


                                                      2002
- ----------------------------------------------------------
FABRIC & HOME CARE, beginning of year                 $457
- ----------------------------------------------------------
  Translation & other                                   (6)
- ----------------------------------------------------------
 End of year                                           451
- ----------------------------------------------------------
BABY, FEMININE & FAMILY CARE, beginning of year      2,806
- ----------------------------------------------------------
  Translation & other                                 (163)
- ----------------------------------------------------------
 End of year                                         2,643
- ----------------------------------------------------------
BEAUTY CARE, beginning of year                       1,344
- ----------------------------------------------------------
  Acquisitions                                       3,330
- ----------------------------------------------------------
  Translation & other                                   55
- ----------------------------------------------------------
 End of year                                         4,729
- ----------------------------------------------------------
HEALTH CARE, beginning of year                       2,544
- ----------------------------------------------------------
  Acquisitions                                         284
- ----------------------------------------------------------
  Translation & other                                   38
- ----------------------------------------------------------
  End of year                                        2,866
- ----------------------------------------------------------
FOOD & BEVERAGE, beginning of year                     278
- ----------------------------------------------------------
  Translation & other                                   (1)
- ----------------------------------------------------------
 End of year                                           277
- ----------------------------------------------------------
GOODWILL, NET, beginning of year                     7,429
- ----------------------------------------------------------
  Acquisitions                                       3,614
- ----------------------------------------------------------
  Translation & other                                  (77)
- ----------------------------------------------------------
 End of year                                        10,966
- ----------------------------------------------------------



Goodwill increased in beauty care primarily due to the Clairol acquisition. The
increase in goodwill in health care related to the buyout of the purchase price
contingency for Dr. John's Spinbrush.

Identifiable intangible assets as of June 30, 2002 and 2001 are comprised of:

                               June 30, 2002              June 30, 2001
                        ------------------------------------------------------
                           Gross                      Gross
                        Carrying   Accumulated     Carrying       Accumulated
                          Amount  Amortization       Amount      Amortization
- ------------------------------------------------------------------------------
Intangible Assets with
 Determinable Lives

 Trademarks                 $457           $48        $155                $27
- ------------------------------------------------------------------------------
 Patents and technology      494           160         333                 78
- ------------------------------------------------------------------------------
 Other                       385           173         385                186
- ------------------------------------------------------------------------------
                           1,336           381         873                291
- ------------------------------------------------------------------------------
Trademarks with
 Indefinite Lives          1,678           169         458                169
- ------------------------------------------------------------------------------
                           3,014           550       1,331                460
- ------------------------------------------------------------------------------

The amortization of intangible assets for the years ended June 30, 2002, 2001
and 2000 was $97, $80 and $77, respectively. Estimated amortization expense over
the next five years is as follows: 2003-$85, 2004-$85, 2005-$80, 2006-$80 and
2007-$50. Such estimates do not reflect the impact of future foreign exchange
rate changes.

The following table provides pro forma disclosure of net earnings and earnings
per common share for the years ended June 30, 2001 and 2000, as if goodwill and
indefinite-lived intangible assets had not been amortized.

Pro forma results                                   Years Ended June 30
- -----------------------------------------------------------------------
                                                      2001        2000
- ----------------------------------------------------------------------
Net earnings                                        $2,922      $3,542
- ----------------------------------------------------------------------
Amortization, net of tax (1)                           218         212
- ----------------------------------------------------------------------
Adjusted net earnings                                3,140       3,754
- ----------------------------------------------------------------------

Basic net earnings per common share                  $2.15       $2.61
- ----------------------------------------------------------------------
Amortization, net of tax (1)                          0.15        0.16
- ----------------------------------------------------------------------
Adjusted basic net earnings per common share          2.30        2.77
- ----------------------------------------------------------------------

Diluted net earnings per common share                 2.07        2.47
- ----------------------------------------------------------------------
Amortization, net of tax (1)                          0.15        0.15
- ----------------------------------------------------------------------
Adjusted diluted net earnings per common share        2.22        2.62
- ----------------------------------------------------------------------


(1)  Amortization of goodwill and indefinite-lived intangible assets.

                                    Millions of dollars except per share amounts



36 The Procter & Gamble Company and Subsidiaries
                                      Notes to Consolidated Financial Statements

NOTE 5 SUPPLEMENTAL FINANCIAL INFORMATION

Selected components of current and non-current liabilities were as follows:

                                             June 30
                                        ---------------
                                          2002     2001
- -------------------------------------------------------
ACCRUED AND OTHER CURRENT LIABILITIES
Marketing expenses                      $1,658   $1,271
- -------------------------------------------------------
Compensation expenses                      771      576
- -------------------------------------------------------
Restructuring reserves                     245      460
- -------------------------------------------------------
Other                                    2,656    2,324
- -------------------------------------------------------
                                         5,330    4,631
- -------------------------------------------------------

OTHER NON-CURRENT LIABILITIES
Other postretirement benefits             $344     $534
- -------------------------------------------------------
Pension benefits                         1,158      925
- -------------------------------------------------------
Other                                      586      386
- -------------------------------------------------------
                                         2,088    1,845
- -------------------------------------------------------

Selected Operating Expenses

Research and development costs are charged to earnings as incurred and were
$1,601 in 2002, $1,769 in 2001 and $1,899 in 2000. Advertising costs are charged
to earnings as incurred and were $3,773 in 2002, $3,612 in 2001 and $3,793 in
2000. Both of these are components of marketing, research, administrative and
other expense.

NOTE 6 SHORT-TERM AND LONG-TERM DEBT

                                        June 30
                                    ---------------
                                      2002     2001
- ---------------------------------------------------
SHORT-TERM DEBT
USD commercial paper                $2,142     $675
- ---------------------------------------------------
Non-USD commercial paper               461      559
- ---------------------------------------------------
Current portion of long-term debt      618      414
- ---------------------------------------------------
Other                                  510      585
- ---------------------------------------------------
                                     3,731    2,233
- ---------------------------------------------------

The weighted average short-term interest rates were 2.9% and 5.3% as of June 30,
2002 and 2001, respectively.

                                            2002        2001
- ------------------------------------------------------------
LONG-TERM DEBT
  6.00% USD note due March, 2003            $500        $500
- ------------------------------------------------------------
  5.25% USD note due September, 2003         750         750
- ------------------------------------------------------------
  8.00% USD note due November, 2003          200         200
- ------------------------------------------------------------
  6.60% USD note due December, 2004        1,000       1,000
- ------------------------------------------------------------
  8.33% ESOP debentures due 2003-2004        212         306
- ------------------------------------------------------------
  4.00% USD note due April, 2005             400        --
- ------------------------------------------------------------
  5.75% EUR note due September, 2005       1,478       1,270
- ------------------------------------------------------------
  1.50% JPY note due December, 2005          459         441
- ------------------------------------------------------------
  4.75% USD note due June, 2007            1,000        --
- ------------------------------------------------------------
  6.13% USD note due May, 2008               500         500
- ------------------------------------------------------------
  6.88% USD note due September, 2009       1,000       1,000
- ------------------------------------------------------------
  2.00% JPY note due June, 2010              417         401
- ------------------------------------------------------------
  9.36% ESOP debentures due 2007-2021      1,000       1,000
- ------------------------------------------------------------
  8.00% USD note due September, 2024         200         200
- ------------------------------------------------------------
  6.45% USD note due January, 2026           300         300
- ------------------------------------------------------------
  6.25% GBP note due January, 2030           763         705
- ------------------------------------------------------------
  All other long-term debt                 1,640       1,633
- ------------------------------------------------------------
  Current portion of long-term debt         (618)       (414)
- ------------------------------------------------------------
                                          11,201       9,792
- ------------------------------------------------------------

Long-term weighted average interest rates were 4.0% and 5.0% as of June 30, 2002
and 2001, respectively, and include the effects of related interest rate swaps
discussed in Note 7.

The fair value of the long-term debt was $11,673 and $10,164 at June 30, 2002
and 2001, respectively. Long-term debt maturities during the next five fiscal
years are as follows: 2003-$618; 2004-$1,099; 2005-$1,475; 2006-$2,200 and
2007-$1,006.

NOTE 7 RISK MANAGEMENT ACTIVITIES

As a multinational company with diverse product offerings, the Company is
exposed to market risks, such as changes in interest rates, currency exchange
rates and commodity pricing. To manage the volatility related to these
exposures, the Company evaluates exposures on a consolidated basis to take
advantage of logical exposure netting. For the remaining exposures, the Company
enters into various derivative transactions in accordance with the Company's
policies in areas such as counterparty exposure and hedging practices. Effective
July 1, 2000, such derivative transactions are accounted for under SFAS No. 133,
" Accounting for Derivative Instruments and Hedging Activities," as amended and
interpreted. The Company does not hold or issue derivative financial instruments
for speculative trading purposes.

Millions of dollars except per share amounts




Notes to Consolidated Financial Statements
                                The Procter & Gamble Company and Subsidiaries 37

At inception, the Company formally designates and documents the financial
instrument as a hedge of a specific underlying exposure. The Company formally
assesses, both at inception and at least quarterly on an ongoing basis, whether
the financial instruments used in hedging transactions are effective at
offsetting changes in either the fair value or cash flows of the related
underlying exposure. Fluctuations in the derivative value are generally offset
by changes in the fair value or cash flows of the exposures being hedged. This
offset is driven by the high degree of effectiveness between the exposure being
hedged and the hedging instrument. Any ineffective portion of an instrument's
change in fair value is immediately recognized in earnings.

Credit Risk

The Company has established strict counterparty credit guidelines and enters
into transactions only with financial institutions of investment grade or
better. Counterparty exposures are monitored daily and downgrades in credit
rating are reviewed immediately. Credit risk arising from the inability of a
counterparty to meet the terms of the Company's financial instrument contracts
is generally limited to the amounts, if any, by which the counterparty's
obligations exceed the obligations of the Company. It is the Company's policy to
enter into financial contracts with a diverse group of creditworthy
counterparties. Therefore, the Company does not expect to incur material credit
losses on its risk management or other financial instruments.

Interest Rate Management

The Company's policy is to manage interest cost using a mix of fixed- and
variable-rate debt. To manage this risk in a cost efficient manner, the Company
enters into interest rate swaps in which the Company agrees to exchange, at
specified intervals, the difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional principal amount.

Interest rate swaps that meet specific conditions under SFAS No. 133 are
accounted for as fair value hedges. Accordingly, the changes in the fair value
of these agreements are immediately recorded in earnings. The mark-to-market
values of both the fair value hedging instruments and the underlying debt
obligations are recorded as equal and offsetting gains and losses in the
interest expense component of the income statement. The fair value of the
Company's interest rate swap agreements was approximately $231 at June 30, 2002
and $125 at June 30, 2001. All existing fair value hedges are 100% effective. As
a result, there is no impact to earnings due to hedge ineffectiveness.

Foreign Currency Management

The Company manufactures and sells its products in a number of countries
throughout the world and, as a result, is exposed to movements in foreign
currency exchange rates. The purpose of the Companys' foreign currency hedging
program is to reduce the risk caused by short-term changes in exchange rates.

The Company primarily utilizes forward exchange contracts and purchased options
with maturities of less than 18 months and currency swaps with maturities up to
five years. These instruments are intended to offset the effect of exchange rate
fluctuations on forecasted sales, inventory purchases, intercompany royalties
and intercompany loans denominated in foreign currencies. The fair value of
these instruments at June 30, 2002 and 2001 were $60 and $94 in assets and $29
and $101 in liabilities, respectively. The effective portions of the changes in
fair value for these contracts, which have been designated as cash flow hedges,
are reported in Other Comprehensive Income (OCI) and reclassified in earnings in
the same financial statement line item and in the same period or periods during
which the hedged transactions affect earnings. The ineffective portion, which is
not material for any year presented, is immediately recognized in earnings.
Qualifying cash flow hedges currently recorded in OCI are not considered
material.

  The Company also utilizes the same instruments for purposes that do not meet
the requirements for hedge accounting treatment. In these cases, the change in
value offsets the foreign currency impact of inter-company financing
transactions and income from international operations. The fair value of these
instruments at June 30, 2002 and 2001 was $93 in 2002 and $126 in 2001 in assets
and $25 in 2002 and $6 in 2001 in liabilities, respectively. The gain or loss on
these instruments is immediately recognized in earnings. The net impact included
in marketing, research, administrative and other expense was a $31 and $24
after-tax gain in 2002 and 2001, respectively.

Net Investment Hedging

The Company hedges its net investment position in major currencies and generates
foreign currency interest payments that offset other transactional exposures in
these currencies. To accomplish this, the Company borrows directly in foreign
currency and designates a portion of foreign currency debt as a hedge of net
investments. In addition, certain foreign currency interest rate swaps are
designated as hedges of the Company's related foreign net investments. Under
SFAS No. 133, changes in the fair value of these instruments are immediately
recognized in OCI, to offset the change in the value of the net investment being
hedged. Currency effects of these hedges reflected in OCI were a $397 after-tax
loss in 2002 and a $460 after-tax gain in 2001. Accumulated net balances were
$180 and $577 in 2002 and 2001, respectively.

Commodity Price Management

  Raw materials used by the Company are subject to price volatility caused by
weather, supply conditions, political and economic variables and other
unpredictable factors. To manage the volatility related to

                                    Millions of dollars except per share amounts



38 The Procter & Gamble Company and Subsidiaries

                                      Notes to Consolidated Financial Statements


anticipated inventory purchases, the Company uses futures and options with
maturities generally less than one year and swap contracts with maturities up to
five years. These market instruments are designated as cash flow hedges under
SFAS No. 133. Accordingly, the mark-to-market gain or loss on qualifying hedges
is reported in OCI and reclassified into cost of products sold in the same
period or periods during which the hedged transaction affects earnings.
Qualifying cash flow hedges currently recorded in OCI are not considered
material. The mark-to-market gain or loss on non-qualifying, excluded and
ineffective portions of hedges is immediately recognized in cost of products
sold. Commodity hedging activity was not material to the Company's financial
statements for the years ended June 30, 2002 and 2001.

NOTE 8 EARNINGS PER SHARE AND STOCK OPTIONS

Net Earnings Per Common Share

Net earnings less preferred dividends (net of related tax benefits) are divided
by the weighted average number of common shares outstanding during the year to
calculate basic net earnings per common share. Diluted net earnings per common
share is calculated to give effect to stock options and convertible preferred
stock. The dilutive effect of outstanding employee stock options is reflected by
application of the treasury stock method under SFAS No. 128, "Earnings per
Share."

Basic and diluted net earnings per common share are as follows:

                                       Years Ended June 30
                                  ----------------------------
                                    2002       2001       2000
- --------------------------------------------------------------
Net earnings available to
 common shareholders              $4,228     $2,801     $3,427
- --------------------------------------------------------------
 Preferred dividends, net
  of tax benefit                     124        121        115
- --------------------------------------------------------------
 Preferred dividend impact on
  funding of ESOP (see Note 9)       (12)       (15)       (18)
- --------------------------------------------------------------
Diluted net earnings               4,340      2,907      3,524
- --------------------------------------------------------------


                                            Years Ended June 30
                                      ---------------------------
Shares in millions                       2002      2001      2000
- -----------------------------------------------------------------
Basic weighted average common
 shares outstanding                   1,297.4   1,300.3   1,313.2
- -----------------------------------------------------------------
 Conversion of preferred shares (1)      88.8      91.9      94.3
- -----------------------------------------------------------------
 Exercise of stock options (2)           18.7      13.4      19.7
- -----------------------------------------------------------------
Diluted weighted average common
 shares outstanding                   1,404.9   1,405.6   1,427.2
- -----------------------------------------------------------------

(1)  Despite being included currently in diluted net earnings per common share,
     the actual conversion to common stock occurs pursuant to the repayment of
     the ESOP debt over a period exceeding 20 years.

(2)  Approximately 36 million in 2002, 38 million in 2001 and 17 million in 2000
     of the Company's outstanding stock options were not included in the diluted
     net earnings per common share calculation because to do so would have been
     antidilutive (i.e., the exercise price exceeded market value.)

Stock-Based Compensation

The Company has stock-based compensation plans under which stock options are
granted annually to key managers and directors at the market price on the date
of grant. Grants were made under stock-based compensation plans approved by
shareholders in 1992 and 2001. Grants issued since 1998 are fully exercisable
after three years and have a fifteen-year life, while prior years' grants are
fully exercisable after one year and have a ten-year life.

Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company has elected to account for its employee stock option plans under APB
Opinion No. 25, "Accounting for Stock Issued to Employees," which recognizes
expense based on intrinsic value at date of grant. As stock options have been
issued with exercise prices equal to grant date fair value, no compensation cost
has resulted. Had compensation cost for the plans been determined based on the
fair value at grant date consistent with SFAS No. 123, the Company's net
earnings and earnings per common share would have been as follows:

                                         Years Ended June 30
                                   -------------------------------
                                     2002        2001       2000
- ------------------------------------------------------------------
NET EARNINGS
  As reported                      $4,352      $2,922      $3,542
- ------------------------------------------------------------------
  Pro forma                         3,910       2,612       3,363
- ------------------------------------------------------------------

NET EARNINGS PER COMMON SHARE
Basic
  As reported                       $3.26       $2.15       $2.61
- ------------------------------------------------------------------
  Pro forma                          2.92        1.92        2.47
- ------------------------------------------------------------------
Diluted
  As reported                        3.09        2.07        2.47
- ------------------------------------------------------------------
  Pro forma                          2.77        1.85        2.34
- ------------------------------------------------------------------

The fair value of grants issued in 2001 and 2000 was estimated using the
binomial options-pricing model. For options granted in 2002, the Company has
estimated the fair value of each grant using the more widely recognized
Black-Scholes option-pricing model. Assumptions are evaluated annually and
revised, as necessary, to reflect market conditions and additional experience.
The following assumptions were used:

Options Granted               Years Ended June 30
                           ------------------------
                           2002      2001      2000
- ----------------------------------------------------
Interest rate               5.4%      5.8%      6.0%
- ----------------------------------------------------
Dividend yield              2.2%      2.0%      1.5%
- ----------------------------------------------------
Expected volatility          20%       26%       28%
- ----------------------------------------------------
Expected life in years       12         9         9
- ----------------------------------------------------

Millions of dollars except per share amounts




Notes to Consolidated Financial Statements
                                The Procter & Gamble Company and Subsidiaries 39

The following table summarizes stock option activity during 2002, 2001 and 2000:

Options in thousands                                   June 30
                                          -------------------------------
                                             2002        2001        2000
- -------------------------------------------------------------------------
Outstanding, beginning of year            104,196      82,744      76,810
- -------------------------------------------------------------------------
Granted                                    25,040      28,400      14,360
- -------------------------------------------------------------------------
Jif and Crisco spin-off adjustment            811        --          --
- -------------------------------------------------------------------------
Exercised                                  (8,149)     (5,709)     (7,401)
- -------------------------------------------------------------------------
Canceled                                   (1,735)     (1,239)     (1,025)
- -------------------------------------------------------------------------
Outstanding, end of year                  120,163     104,196      82,744
- -------------------------------------------------------------------------
Exercisable                                46,332      48,805      54,667
- -------------------------------------------------------------------------
Available for grant                       114,536      27,994      41,387
- -------------------------------------------------------------------------
Average price
- -------------------------------------------------------------------------
 Outstanding, beginning of year            $63.64      $61.73      $52.11
- -------------------------------------------------------------------------
 Granted                                    70.19       62.20       96.10
- -------------------------------------------------------------------------
 Exercised                                  29.07       24.77       25.21
- -------------------------------------------------------------------------
 Outstanding, end of year                   66.68       63.64       61.73
- -------------------------------------------------------------------------
 Exercisable, end of year                   56.99       49.14       46.67
- -------------------------------------------------------------------------
Weighted average fair value of options
granted during the year                     21.14       22.45       37.21
- -------------------------------------------------------------------------


Stock options outstanding at June 30, 2002 were in the following exercise price
ranges:

                                       Outstanding Options
                        -----------------------------------------------
                             Number                       Weighted Avg.
                        Outstanding     Weighted Avg.         Remaining
Range of prices         (Thousands)    Exercise Price  Contractual Life
- -----------------------------------------------------------------------
$25 to 46                    21,331            $33.81         2.6 years
- -----------------------------------------------------------------------
54 to 64                     37,139             61.35        11.2
- -----------------------------------------------------------------------
65 to 75                     24,756             69.39        13.7
- -----------------------------------------------------------------------
76 to 106                    36,937             89.21         9.1
- -----------------------------------------------------------------------

Stock options exercisable at June 30, 2002 were in the following exercise price
ranges:

                       Exercisable Options
                 ------------------------------
                      Number           Weighted
                 Exercisable            Average
Range of prices  (Thousands)     Exercise Price
- -----------------------------------------------
$25 to 46             21,331             $33.81
- -----------------------------------------------
54 to 64               8,182              59.75
- -----------------------------------------------
65 to 75                 946              73.14
- -----------------------------------------------
76 to 106             15,873              85.76
- -----------------------------------------------

As a component of its treasury share repurchase program, the Company generally
repurchases common shares to fund the stock options granted. Additionally, the
Company enters into equity put options on its common stock in order to reduce
the cash outlay for share repurchases. These agreements typically mature in six
months and can be settled on a physical or net-share basis at the Company's
option. The premium received from the sale of the instruments is credited to
equity.

The put options entered into during 2002 were equivalent to three million shares
at approximately $81 per share. The last of the equity put option contracts will
expire in the second quarter of 2003. The 2001 options were equivalent to one
million common shares, at approximately $74 per share and the options entered
into in 2000 were equivalent to 12 million common shares, at prices ranging from
$60 to $71 per share. The 2001 and 2000 options have expired mostly unexercised.
Over the past three years, $96 of premiums received have been credited to
equity.

In limited cases, the Company also issues stock appreciation rights, generally
in countries where stock options are not permitted by local governments. The
obligations and associated compensation expense are adjusted for changes in
intrinsic value. The impact of these adjustments is insignificant.

NOTE 9 EMPLOYEE STOCK OWNERSHIP PLAN

The Company maintains The Procter & Gamble Profit Sharing Trust and Employee
Stock Ownership Plan (ESOP) to provide funding for certain employee benefits.

The ESOP borrowed $1,000 in 1989 and the proceeds were used to purchase Series A
ESOP Convertible Class A Preferred Stock to fund a portion of the defined
contribution plan. Principal and interest requirements are $117 per year, paid
by the trust from dividends on the preferred shares and from cash contributions
and advances from the Company. Each share is convertible at the option of the
holder into one share of the Company's common stock. The liquidation value is
$13.64 per share.

In 1991, the ESOP borrowed an additional $1,000. The proceeds were used to
purchase Series B ESOP Convertible Class A Preferred Stock to fund a portion of
retiree health care benefits. These shares are considered plan assets of the
other retiree benefits plan as discussed in Note 10. Debt service requirements
are $94 per year, funded by preferred stock dividends and cash contributions
from the Company. Each share is convertible at the option of the holder into one
share of the Company's common stock. The liquidation value is $25.92 per share.

                                    Millions of dollars except per share amounts




40 The Procter & Gamble Company and Subsidiaries

                                      Notes to Consolidated Financial Statements

The number of preferred shares outstanding were:

Shares in thousands              June 30
                       -------------------------
                         2002     2001     2000

- -----------------------------------------------
Outstanding, June 30
Allocated              33,095   34,459   33,610
- -----------------------------------------------
Unallocated            17,687   19,761   22,315
- -----------------------------------------------
Total Series A         50,782   54,220   55,925
- -----------------------------------------------

Allocated               9,869    9,267    8,661
- -----------------------------------------------
Unallocated            26,454   27,338   28,424
- -----------------------------------------------
Total Series B         36,323   36,605   37,085
- -----------------------------------------------

As permitted by American Institute of Certified Public Accountants (AICPA)
Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership
Plans," the Company has elected, where applicable, to continue its practices,
which are based on Statement of Position 76-3, "Accounting Practices for Certain
Employee Stock Ownership Plans." ESOP debt which is guaranteed by the Company is
recorded in short- and long-term liabilities (see Note 6). Preferred shares
issued to the ESOP are offset by the reserve for ESOP debt retirement in the
Consolidated Balance Sheet and the Consolidated Statement of Shareholders'
Equity. Interest incurred on the ESOP debt is recorded as interest expense.
Dividends on all preferred shares, net of related tax benefits, are charged to
retained earnings.

The preferred shares held by the ESOP are considered outstanding from inception
for purposes of calculating diluted net earnings per common share. Diluted net
earnings are calculated assuming that all preferred shares are converted to
common, and therefore are adjusted to reflect the incremental ESOP funding that
would be required due to the difference in dividend rate between preferred and
common shares (see Note 8).

NOTE 10 POSTRETIREMENT BENEFITS

The Company offers various postretirement benefits to its employees.

Defined Contribution Retirement Plans

The most significant employee benefit plan offered is the defined contribution
plan in the United States, which is fully funded.

Under the defined contribution profit sharing plan, annual credits to
participants' accounts are based on individual base salaries and years of
service and do not exceed 15% of total participants' annual salaries and wages.
The fair value of the ESOP Series A shares serves to reduce the Company's cash
contribution required to fund the profit sharing plan contributions earned.
Under SOP 76-3, shares of the ESOP are allocated at original cost based on debt
service requirements, net of advances made by the Company to the trust. The
defined contribution expense pursuant to this plan was $279, $303 and $89 in
2002, 2001 and 2000, respectively.

Other Retiree Benefits

The Company also provides certain health care and life insurance benefits for
substantially all U.S. employees who become eligible for these benefits when
they meet minimum age and service requirements. Generally, the health care plans
require contributions from retirees and pay a stated percentage of expenses,
reduced by deductibles and other coverages. Retiree contributions change
annually in line with health care cost trends. These benefits primarily are
funded by ESOP Series B shares as well as certain other assets contributed by
the Company.

Certain other employees, primarily outside the U.S., are covered by local
defined benefit pension, health care and life insurance plans.

The following table sets forth the aggregate change in benefit obligation for
the Company`s defined benefit plans:

                                            Years Ended June 30
                                 -----------------------------------------
                                 Pension Benefits   Other Retiree Benefits
                                 ----------------   ----------------------
                                  2002       2001       2002       2001
- --------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
- --------------------------------------------------------------------------
Benefit obligation
 at beginning of year           $2,567     $2,627     $1,577     $1,270
- --------------------------------------------------------------------------
Service cost                       114        115         49         40
- --------------------------------------------------------------------------
Interest cost                      153        149        116        101
- --------------------------------------------------------------------------
Participants' contributions          7          4         22         18
- --------------------------------------------------------------------------
Amendments                           1        (10)         5       --
- --------------------------------------------------------------------------
Actuarial loss                      72         86        401        250
- --------------------------------------------------------------------------
Acquisitions/(Divestitures)         40        (14)        32         (5)
- --------------------------------------------------------------------------
Curtailments and
 settlements                      (101)       (22)        (1)      --
- --------------------------------------------------------------------------
Special termination benefits         9       --           37       --
- --------------------------------------------------------------------------
Currency exchange                  255       (232)         5         (4)
- --------------------------------------------------------------------------
Benefit payments                  (147)      (136)      (108)       (93)
- --------------------------------------------------------------------------
Benefit obligation
 at end of year                  2,970      2,567      2,135      1,577
- --------------------------------------------------------------------------


Millions of dollars except per share amounts




Notes to Consolidated Financial Statements
                                The Procter & Gamble Company and Subsidiaries 41

The following table sets forth the aggregate change in plan assets:

                                            Years Ended June 30
                                  -----------------------------------------
                                  Pension Benefits   Other Retiree Benefits
                                  ----------------   ----------------------
                                  2002       2001       2002       2001
- ------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
- ------------------------------------------------------------------------
Fair value of plan assets
  at beginning of year          $1,432     $1,691     $1,449     $1,274
- ------------------------------------------------------------------------
Actual return on plan assets      (150)       (88)       947        235
- ------------------------------------------------------------------------
Acquisitions/(Divestitures)         18        (19)      --         --
- ------------------------------------------------------------------------
Employer contributions             116         81         38         14
- ------------------------------------------------------------------------
Participants' contributions          7          4         22         18
- ------------------------------------------------------------------------
Settlements                        (22)        (3)      --         --
- ------------------------------------------------------------------------
Currency exchange                   78        (98)        (1)         1
- ------------------------------------------------------------------------
Benefit payments                  (147)      (136)      (108)       (93)
- ------------------------------------------------------------------------
Fair value of plan assets
  at end of year                 1,332      1,432      2,347      1,449
- ------------------------------------------------------------------------

Pension plan assets are comprised of a diversified mix of assets including
corporate equities, government securities and corporate debt securities. Other
retiree assets are comprised of Company stock, net of Series B ESOP debt, of
$2,243 and $1,335, as of June 30, 2002 and 2001, respectively.

The accrued pension and other retiree benefit costs recognized in the
accompanying Consolidated Balance Sheet are computed as follows:

                                            Years Ended June 30
                             -----------------------------------------------
                                Pension Benefits      Other Retiree Benefits
                             ---------------------    ----------------------
                              2002            2001       2002       2001
- -------------------------------------------------------------------------
FUNDED STATUS
- -------------------------------------------------------------------------
Funded status at
 end of year               $(1,638)        $(1,135)      $212      $(128)
- -------------------------------------------------------------------------
Unrecognized net
 actuarial loss (gain)         571             243       (579)      (418)
- -------------------------------------------------------------------------
Unrecognized transition
 amount                         14              17       --         --
- -------------------------------------------------------------------------
Unrecognized prior
 service cost                   21              20         (1)        (8)
- -------------------------------------------------------------------------
Net amount recognized       (1,032)           (855)      (368)      (554)
- -------------------------------------------------------------------------
Prepaid benefit cost            94              75          2          2
- -------------------------------------------------------------------------
Accrued benefit cost        (1,250)         (1,006)      (370)      (556)
- -------------------------------------------------------------------------
Intangible asset                18              16       --         --
- -------------------------------------------------------------------------
Accumulated other
 comprehensive income          106              60       --         --
- -------------------------------------------------------------------------
Net liability recognized    (1,032)           (855)      (368)      (554)
- -------------------------------------------------------------------------

The underfunding of pension benefits primarily is a function of the different
funding incentives that exist outside of the U.S. In certain countries where the
Company has major operations, there are no legal requirements or financial
incentives provided to companies for pension fund contributions. In these
instances, the associated pension liabilities are typically financed directly
from the Company's cash as they become due, rather than via the creation of a
separate pension fund. Both the benefit and the financing costs have been
reflected in net earnings.

The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $1,718, $1,385 and $276, respectively, as of June 30,
2002, and $1,414, $1,124 and $230, respectively, as of June 30, 2001.

The Company evaluates its actuarial assumptions on an annual basis. These
assumptions are revised based on an evaluation of long-term trends and market
conditions that may have an impact on the cost of providing retirement benefits.

Assumptions, which are reflected on a weighted average basis of individual
country plans, for the postretirement benefit calculations are as follows:

                                      Years Ended June 30
                           ----------------------------------------
                           Pension Benefits  Other Retiree Benefits
                           ----------------  ----------------------
                            2002      2001      2002      2001
WEIGHTED AVERAGE
ASSUMPTIONS
- --------------------------------------------------------------
Discount rate               5.6%      5.9%      7.0%      7.3%
- --------------------------------------------------------------
Expected return
on plan assets              8.6%      8.3%      9.5%     10.0%
- --------------------------------------------------------------
Rate of compensation
increase                    3.5%      4.1%       --        --
- --------------------------------------------------------------
Initial health care
cost trend rate (1)         --        --       11.3%      8.8%
- --------------------------------------------------------------

(1)  Five year trend rate assumption was adjusted in 2002 to reflect market
     trends. Rate is assumed to decrease to 5.0% by 2009 and remain at that
     level thereafter. Rate is applied to current plan costs net of Medicare;
     estimated initial rate for "gross eligible charges" (charges inclusive of
     Medicare) is 9.1% for 2002 and 8.0% for 2001.

                                    Millions of dollars except per share amounts



42 The Procter & Gamble Company and Subsidiaries
                                      Notes to Consolidated Financial Statements

Components of the net periodic benefit cost are as follows:

                                            Years Ended June 30
                             -------------------------------------------------
                                 Pension Benefits       Other Retiree Benefits
                             ----------------------    -----------------------
                             2002     2001     2000     2002     2001     2000
- ------------------------------------------------------------------------------
COMPONENTS OF NET
PERIODIC BENEFIT COST
- ------------------------------------------------------------------------------
Service cost                 $114     $115     $120      $49      $40      $39
- ------------------------------------------------------------------------------
Interest cost                 153      149      151      116      101       90
- ------------------------------------------------------------------------------
Expected return on
 plan assets                 (133)    (127)    (122)    (320)    (317)    (294)
- ------------------------------------------------------------------------------
Amortization of
 prior service cost             4        5        7       (1)      (1)      (2)
- ------------------------------------------------------------------------------
Amortization of prior
 transition amount              3        3        4     --       --       --
- ------------------------------------------------------------------------------
Settlement loss (gain)         --        6       (6)    --       --       --
- ------------------------------------------------------------------------------
Curtailment loss (gain)         1      (13)      (3)      (1)    --       --
- ------------------------------------------------------------------------------
Recognized net
 actuarial loss (gain)          9        3        4      (64)     (85)     (92)
- ------------------------------------------------------------------------------
Gross benefit cost            151      141      155     (221)    (262)    (259)
- ------------------------------------------------------------------------------
Dividends on ESOP
 preferred stock               --       --       --      (76)     (76)     (77)
- ------------------------------------------------------------------------------
Net periodic
 benefit cost                 151      141      155     (297)    (338)    (336)
- ------------------------------------------------------------------------------

In addition to the net periodic benefit cost, additional expense of $46 was
recognized during the year ended June 30, 2002, for special termination benefits
provided as part of early retirement packages in connection with the Company's
restructuring program.

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

                                        One-Percentage  One-Percentage
                                        Point Increase  Point Decrease
- ----------------------------------------------------------------------
Effect on total of service and
interest cost components                           $29           $(23)
- ----------------------------------------------------------------------
Effect on postretirement
benefit obligation                                 291           (239)
- ----------------------------------------------------------------------


NOTE 11 INCOME TAXES

Under SFAS No. 109, "Accounting for Income Taxes," income taxes are recognized
for the following: a) amount of taxes payable for the current year, and b)
deferred tax liabilities and assets for future tax consequences of events that
have been recognized differently in the financial statements than for tax
purposes. Deferred tax assets and liabilities are established using the enacted
statutory tax rates and adjusted for tax rate changes. Earnings before income
taxes consist of the following:

                   Years Ended June 30
                  ----------------------
                  2002     2001     2000
- ----------------------------------------
United States   $4,411   $3,340   $3,006
- ----------------------------------------
International    1,972    1,276    2,530
- ----------------------------------------
                 6,383    4,616    5,536
- ----------------------------------------

The income tax provision consists of the following:

                                Years Ended June 30
                            --------------------------
                            2002       2001       2000
- ------------------------------------------------------
CURRENT TAX EXPENSE
 U.S. Federal               $975     $1,030       $648
- ------------------------------------------------------
 International               551        676        816
- ------------------------------------------------------
 U.S. State & Local          116         90         67
- ------------------------------------------------------
                           1,642      1,796      1,531
- ------------------------------------------------------

DEFERRED TAX EXPENSE
 U.S. Federal                571        142        241
- ------------------------------------------------------
 International & other      (182)      (244)       222
- ------------------------------------------------------
                             389       (102)       463
- ------------------------------------------------------
                           2,031      1,694      1,994
- ------------------------------------------------------

The Company's effective income tax rate was 31.8%, 36.7% and 36.0% in 2002, 2001
and 2000, respectively, compared to the U.S. statutory rate of 35.0%. The
country mix impacts of foreign operations reduced the Company's effective tax
rate to a larger degree than prior years - 3.1% for 2002. Excluding
restructuring costs and adjustments to remove amortization of goodwill and
indefinite-lived intangibles that is no longer required, and their related tax
effects, the effective tax rate was 31.1%, 31.1% and 32.5% in 2002, 2001 and
2000, respectively.

Taxes impacted shareholders' equity with a $477 credit for the year ended June
30, 2002 and a $155 charge for the year ended June 30, 2001. These primarily
relate to the tax effects of net investment hedges and tax benefits from the
exercise of stock options.

Undistributed earnings of foreign subsidiaries that are considered to be
reinvested indefinitely were $10,698 and $9,231 at June 30, 2002 and 2001,
respectively. If such earnings were repatriated, additional taxes may result.

Millions of dollars except per share amounts



                                                                              43


Realization of certain deferred tax assets is dependent upon generating
sufficient taxable income in the appropriate jurisdiction prior to expiration of
the carryforward periods. Although realization is not assured, management
believes it is more likely than not the deferred tax assets net of applicable
valuation allowances will be realized.

Deferred income tax assets and liabilities are comprised of the following:

                                        June 30
                                   -----------------
                                    2002       2001
- ----------------------------------------------------
TOTAL DEFERRED TAX ASSETS
 Other postretirement benefits      $109       $196
- ----------------------------------------------------
 Loss and other carryforwards        454        516
- ----------------------------------------------------
 Other                               742        350
- ----------------------------------------------------
 Valuation allowances               (106)      (104)
- ----------------------------------------------------
                                   1,199        958
- ----------------------------------------------------

TOTAL DEFERRED TAX LIABILITIES
 Fixed assets                     (1,110)    (1,093)
- ----------------------------------------------------
 Other                              (495)      (362)
- ----------------------------------------------------
                                  (1,605)    (1,455)
- ----------------------------------------------------

Net operating losses and other tax credit carryforwards were $1,211 and $1,220
as of June 30, 2002 and 2001, respectively. If unused, $711 will expire between
2003 and 2012. The remainder, totaling $500 at June 30, 2002, may be carried
forward indefinitely.

NOTE 12 COMMITMENTS AND CONTINGENCIES

The Company's business creates a need to enter into commitments with suppliers
that could affect liquidity and capital resources. These commitments do not
create immediate liabilities for the Company.

The Company has purchase commitments for materials, supplies and property, plant
and equipment incidental to the ordinary conduct of business. In the aggregate,
such commitments are not in excess of current market prices. Additionally, the
Company normally commits to some level of marketing related expenditures that
extend beyond the fiscal year. These marketing related commitments are necessary
in order to maintain a normal course of business and the risk associated with
them is limited. It is not expected that these commitments will have a material
effect on the Company's financial condition.

At various points from 2007 to 2017, the minority partner in a subsidiary that
holds most of the Company's China operations has the right to exercise a put
option to require the Company to purchase from half to all of its outstanding
20% interest at a price not greater than fair market value. The impact of this
put option is dependent on factors that can change prior to its exercise. Given
the put price cannot exceed fair market value and the Company's current
liquidity, the Company does not believe that exercise of the put would
materially impact its results of operations or financial condition.

The Company leases certain property and equipment for varying periods under
operating leases. Future minimum rental payments with terms in excess of one
year total approximately $500.

The Company is subject to various lawsuits and claims with respect to matters
such as governmental regulations, income taxes and other actions arising out of
the normal course of business. The Company is also subject to contingencies
pursuant to environmental laws and regulations that in the future may require
the Company to take action to correct the effects on the environment of prior
manufacturing and waste disposal practices. Accrued environmental liabilities
for remediation and closure costs were $39 and $43 at June 30, 2002 and 2001,
respectively. In management's opinion, such accruals are appropriate based on
existing facts and circumstances. Current year expenditures were not material.

While considerable uncertainty exists, in the opinion of management and Company
counsel, the ultimate liabilities resulting from such lawsuits and claims would
not materially affect the Company's financial statements.

                                    Millions of dollars except per share amounts



44 The Procter & Gamble Company and Subsidiaries
                                      Notes to Consolidated Financial Statements

NOTE 13 SEGMENT INFORMATION

The Company is organized by product-based global business units. The segments
manufacture and market products as follows:

- -    Fabric and home care includes laundry, dish, fabric enhancers and hard
     surface cleaners.

- -    Baby, feminine and family care includes diapers, wipes, tampons, pads,
     liners, tissues and towels.

- -    Beauty care includes cosmetics, hair care, deodorants and fine fragrances.

- -    Health care includes personal health care, oral care, pharmaceuticals and
     pet health and nutrition.

- -    Food and beverage includes coffee, snacks, commercial services, juice,
     peanut butter and shortening and oil.

The corporate segment includes both operating and non-operating elements such as
financing and investing activities, intangible asset amortization, goodwill and
indefinite-lived intangible asset amortization prior to SFAS No. 142 adoption on
July 1, 2001, certain employee benefit costs, charges related to restructuring,
segment eliminations and other general corporate items. The segment eliminations
adjust management reporting principles to accounting principles generally
accepted in the United States of America and primarily affect the treatment of
unconsolidated investees and income taxes, which are reflected in the business
segments using estimated local statutory tax rates. Corporate assets primarily
include cash, investment securities and goodwill.

The Company had net sales in the United States of $21,198, $20,334 and $20,038
for the years ended June 30, 2002, 2001 and 2000, respectively. Assets in
the United States totaled $23,434 and $18,318 as of June 30, 2002 and 2001,
respectively.

The Company's largest customer, Wal-Mart Stores, Inc. and its affiliates,
accounted for 17%, 15% and 14% of consolidated net sales in 2002, 2001 and 2000,
respectively. These sales occurred primarily in the United States.




                                                       Baby,
                                      Fabric and  Feminine &  Beauty  Health  Food and
                                       Home Care Family Care    Care    Care  Beverage Corporate    Total
- ---------------------------------------------------------------------------------------------------------
                                                                          
Net Sales                        2002    $11,618     $11,877  $8,079  $4,979    $3,801    $(116)  $40,238
- ---------------------------------------------------------------------------------------------------------
                                 2001     11,660      11,991   7,257   4,353     4,139     (156)   39,244
- ---------------------------------------------------------------------------------------------------------
                                 2000     12,157      12,044   7,389   3,909     4,634     (182)   39,951
- ---------------------------------------------------------------------------------------------------------
Net Earnings                     2002      1,831       1,170   1,177     521       384     (731)    4,352
- ---------------------------------------------------------------------------------------------------------
                                 2001      1,643       1,052     967     390       332   (1,462)    2,922
- ---------------------------------------------------------------------------------------------------------
                                 2000      1,450       1,069     894     335       364     (570)    3,542
- ---------------------------------------------------------------------------------------------------------
Before-Tax Earnings              2002      2,728       1,961   1,664     795       604   (1,369)    6,383
- ---------------------------------------------------------------------------------------------------------
                                 2001      2,430       1,745   1,392     584       546   (2,081)    4,616
- ---------------------------------------------------------------------------------------------------------
                                 2000      2,318       1,817   1,393     540       566   (1,098)    5,536
- ---------------------------------------------------------------------------------------------------------
Depreciation and Amortization    2002        326         621     221     163       135      227     1,693
- ---------------------------------------------------------------------------------------------------------
                                 2001        328         673     183     159       146      782     2,271
- ---------------------------------------------------------------------------------------------------------
                                 2000        354         664     194     159       153      667     2,191
- ---------------------------------------------------------------------------------------------------------
Total Assets                     2002      5,149       8,771   3,798   2,542     2,091   18,425    40,776
- ---------------------------------------------------------------------------------------------------------
                                 2001      5,533       8,629   3,371   2,290     2,479   12,085    34,387
- ---------------------------------------------------------------------------------------------------------
Capital Expenditures             2002        368         856     200     158       137      (40)    1,679
- ---------------------------------------------------------------------------------------------------------
                                 2001        516       1,307     261     231       235      (64)    2,486
- ---------------------------------------------------------------------------------------------------------


Millions of dollars except per share amounts



Notes to Consolidated Financial Statements
                                The Procter & Gamble Company and Subsidiaries 45


NOTE 14 QUARTERLY RESULTS (UNAUDITED)


                                                                        Quarters Ended
                                                              ----------------------------------
                                                                                                    Total
                                                              Sept. 30  Dec. 31 Mar. 31  June 30     Year
- --------------------------------------------------------------------------------------------------------
                                                                             
Net Sales                                       2001-2002       $9,766  $10,403  $9,900  $10,169 $40,238
- --------------------------------------------------------------------------------------------------------
                                                2000-2001        9,969   10,182   9,511    9,582  39,244
- --------------------------------------------------------------------------------------------------------
Operating Income                                2001-2002        1,762    1,864   1,654    1,398   6,678
- --------------------------------------------------------------------------------------------------------
                                                2000-2001        1,779    1,711   1,302      (56)  4,736
- --------------------------------------------------------------------------------------------------------
Net Earnings                                    2001-2002        1,104    1,299   1,039      910   4,352
- --------------------------------------------------------------------------------------------------------
                                                2000-2001        1,155    1,194     893     (320)  2,922
- --------------------------------------------------------------------------------------------------------
Core Net Earnings (1)                           2001-2002        1,342    1,445   1,186    1,085   5,058
- --------------------------------------------------------------------------------------------------------
                                                2000-2001        1,293    1,369   1,062      891   4,615
- --------------------------------------------------------------------------------------------------------
Diluted Net Earnings Per Common Share           2001-2002         0.79     0.93    0.74     0.64    3.09
- --------------------------------------------------------------------------------------------------------
                                                2000-2001         0.82     0.84    0.63    (0.23)   2.07
- --------------------------------------------------------------------------------------------------------
Diluted Core Net Earnings Per Common Share (1)  2001-2002         0.96     1.03    0.84     0.77    3.59
- --------------------------------------------------------------------------------------------------------
                                                2000-2001         0.92     0.97    0.75     0.63    3.27
- --------------------------------------------------------------------------------------------------------


(1)  Amounts exclude restructuring costs and amortization of goodwill and
     indefinite-lived intangibles that is no longer required under accounting
     rules for 2002.

                                    Millions of dollars except per share amounts



46 The Procter & Gamble Company and Subsidiaries

                                      Notes to Consolidated Financial Statements

Financial Summary



                                                    2002       2001       2000       1999       1998
                                                                             
- ----------------------------------------------------------------------------------------------------
Net Sales                                        $40,238    $39,244    $39,951    $38,125    $37,154
- ----------------------------------------------------------------------------------------------------
Operating Income                                   6,678      4,736      5,954      6,253      6,055
- ----------------------------------------------------------------------------------------------------
Net Earnings                                       4,352      2,922      3,542      3,763      3,780
- ----------------------------------------------------------------------------------------------------
Core Net Earnings (1)                              5,058      4,615      4,442      4,338      3,947
- ----------------------------------------------------------------------------------------------------
Net Earnings Margin                                 10.8%       7.4%       8.9%       9.9%      10.2%
- ----------------------------------------------------------------------------------------------------
Core Net Earnings Margin (1)                        12.6%      11.7%      11.1%      11.4%      10.6%
- ----------------------------------------------------------------------------------------------------

Basic Net Earnings Per Common Share                $3.26      $2.15      $2.61      $2.75      $2.74
- ----------------------------------------------------------------------------------------------------
Diluted Net Earnings Per Common Share               3.09       2.07       2.47       2.59       2.56
- ----------------------------------------------------------------------------------------------------
Diluted Core Net Earnings Per Common Share (1)      3.59       3.27       3.10       2.98       2.68
- ----------------------------------------------------------------------------------------------------
Dividends Per Common Share                          1.52       1.40       1.28       1.14       1.01
- ----------------------------------------------------------------------------------------------------

Research and Development Expense                  $1,601     $1,769     $1,899     $1,726     $1,546
- ----------------------------------------------------------------------------------------------------
Advertising Expense                                3,773      3,612      3,793      3,639      3,801
- ----------------------------------------------------------------------------------------------------
Total Assets                                      40,776     34,387     34,366     32,192     31,042
- ----------------------------------------------------------------------------------------------------
Capital Expenditures                               1,679      2,486      3,018      2,828      2,559
- ----------------------------------------------------------------------------------------------------
Long-Term Debt                                    11,201      9,792      9,012      6,265      5,774
- ----------------------------------------------------------------------------------------------------
Shareholders' Equity                              13,706     12,010     12,287     12,058     12,236
- ----------------------------------------------------------------------------------------------------


(1)  Amounts exclude restructuring costs for 2002, 2001, 2000 and 1999 and
     exclude amortization of goodwill and indefinite-lived intangibles for all
     periods presented, that is no longer required under accounting rules for
     2002.

Millions of dollars except per share amounts




                                The Procter & Gamble Company and Subsidiaries 47

Directors

NORMAN R. AUGUSTINE
Retired Chairman and Chief
Executive Officer,
Lockheed Martin
Corporation and Chairman
of the Executive
Committee, Lockheed Martin
(aerospace, electronics,
telecommunications and
information management)

DONALD R. BEALL
Retired Chairman and Chief
Executive Officer, Rockwell
International Corporation (industrial
automation) and Chairman of the
Board, Rockwell Collins, Inc.
(avionics)

BRUCE L. BYRNES
Vice Chairman of the Board and
President - Global Beauty &
Feminine Care and Global Health
Care

R. KERRY CLARK
Vice Chairman of the Board and
President - Global Market
Development & Business
Operations

SCOTT D. COOK
Chairman of the Executive
Committee of the Board, Intuit Inc.
(a software and Web services firm)

DOMENICO DESOLE
President and Chief Executive
Officer and Chairman of the
Management Board, Gucci Group
N.V. (multibrand luxury goods
company)


RICHARD J. FERRIS
Retired Co-Chairman,
Doubletree Corporation

JOSEPH T. GORMAN
Retired Chairman and Chief
Executive Officer, TRW Inc.
(automotive, aerospace and
information systems) and
Chairman and Chief Executive
Officer, Moxahela Enterprises LLC
(venture capital)

A.G. LAFLEY
Chairman of the Board,
President and Chief Executive

CHARLES R. LEE
Chairman of the Board of
Directors, Verizon
Communications
(telecommunication services)

LYNN M. MARTIN
Professor, J.L. Kellogg
Graduate School of Management,
Northwestern University; Chair
of the Council for the
Advancement of Women, and
Advisor to the firm of Deloitte
& Touche LLP

JOHN E. PEPPER
Retired Chairman of the Board

JOHNATHAN A. RODGERS
Former President, Discovery
Networks, U.S. (media and
communications)


JOHN F. SMITH, JR.
Chairman of the Board, General
Motors Corporation (automobile
and related businesses)

RALPH SNYDERMAN
Chancellor for Health Affairs,
Executive Dean, School of
Medicine at Duke University,
and President/CEO of Duke
University Health Systems

ROBERT D. STOREY
Partner in the law firm of
Thompson Hine, L.L.P.

MARINA V.N. WHITMAN
Professor of Business
Administration and Public
Policy, University of Michigan

ERNESTO ZEDILLO
Former President of Mexico


CORPORATE OFFICERS

A.G. LAFLEY
Chairman of the Board,
President and Chief Executive

BRUCE L. BYRNES
Vice Chairman of the Board and
President - Global Beauty &
Feminine Care and Global Health
Care

R. KERRY CLARK
Vice Chairman of the Board and
President - Global Market
Development & Business
Operations

FERNANDO AGUIRRE
President on Special Assignment

JEFFREY P. ANSELL
President - Global Pet Health
and Nutrition

SUSAN E. ARNOLD
President - Global Personal
Beauty Care and Global Feminine
Care

CHARLES V. BERGH
President - ASEAN, Australasia
& India

FABRIZIO FREDA
President - Global Snacks

WERNER GEISSLER
President - Northeast Asia

MICHAEL J. GRIFFITH
President - Global Beverage

DEBORAH A. HENRETTA
President - Global Baby Care

MARK D. KETCHUM
President - Global Baby &
Family Care

ROBERT A. MCDONALD
President - Global Fabric & Home Care

JORGE S. MESQUITA
President - Global Home Care

JORGE P. MONTOYA
President - Global Snacks & Beverages
and Latin America

TOM A. MUCCIO
President - Global Customer Teams

MARTIN J. NUECHTERN
President - Global Hair Care

DIMITRI PANAYOTOPOULOS
President - Central & Eastern
Europe, Middle East and Africa

LAURENT L. PHILIPPE
President - Greater China

CHARLES E. PIERCE
President - Global Family Care

PAUL POLMAN
President - Western Europe

ROBERT A. STEELE
President - North America

RICHARD G. PEASE
Senior Vice President - Human
Resources, Global Baby &
Family Care

NABIL Y. SAKKAB
Senior Vice President -
Research & Development, Global Fabric &
Home Care

RICHARD L. ANTOINE
Global Human Resources Officer

G. GILBERT CLOYD
Chief Technology Officer

CLAYTON C. DALEY JR.
Chief Financial Officer

STEPHEN N. DAVID
Chief Information Officer and
Business-to-Business Officer

R. KEITH HARRISON, JR.
Global Product Supply Officer

JAMES J. JOHNSON
Chief Legal Officer

CHARLOTTE R. OTTO
Global External Relations Officer

MICHAEL J. POWER
Global Business Services Officer

JAMES R. STENGEL
Global Marketing Officer

JUAN PEDRO HERNANDEZ
Vice President and Treasurer

JOHN K. JENSEN
Vice President and Comptroller

TERRY L. OVERBEY
Secretary




48 The Procter & Gamble Company and Subsidiaries

                                                                                          

SHAREHOLDER INFORMATION

IF ...                                                       CALL PERSON-TO-PERSON

- - You need help with your account                            Shareholder Services representatives are available
- - You need automated access to your account                  Monday-Friday, 9-4 EST at 1-800-742-6253
- - You are interested in our certificate safekeeping service  (call 1-513-983-3034 outside the U.S. and Canada)
- - You want to arrange for direct deposit of dividends        Automated service available after U.S. business hours
- - You have a lost, stolen or destroyed stock certificate

                                                             OR WRITE
CONTACT P&G - 24 HOURS A DAY                                 The Procter & Gamble Company
Visit our Web site at www.pg.com/investor                    Shareholder Services Department
E-mail us at shareholders.im@pg.com                          P.O. Box 5572
Call for financial information at 1-800-764-7483             Cincinnati, OH 45201-5572
(call 1-513-945-9990 outside the U.S. and Canada)





CORPORATE HEADQUARTERS                                       SHAREHOLDERS OF COMMON STOCK
The Procter & Gamble Company                                 There were approximately 1,004,000 common stock
P.O. Box 599                                                 shareowners, including shareholders of record, participants
Cincinnati, OH 45201-0599                                    in the Shareholder Investment Program, participants in P&G
                                                             stock ownership plans and beneficial owners with accounts
TRANSFER AGENT/SHAREHOLDER SERVICES                          at banks and brokerage firms, as of July 26, 2002.
The Procter & Gamble Company
Shareholder Services Department                              FORM 10-K
P.O. Box 5572                                                Shareholders may obtain a copy of the Company's 2002
Cincinnati, OH 45201-5572                                    report to the Securities and Exchange Commission on
                                                             Form 10-K by going to P&G's investor Web site at
REGISTRAR                                                    www.pg.com/investor or by calling us at 1-800-764-7483.
The Fifth Third Bank                                         This information is also available at no charge by sending a
Stock Transfer Administration                                request to Shareholder Services at the address listed above.
Corporate Trust Department, MD 10AT60
38 Fountain Square Plaza                                     SHAREHOLDERS' MEETING
Cincinnati, OH 45263                                         The next annual meeting of shareholders will be held on
                                                             Tuesday, October 8, 2002. A full transcript of the meeting
EXCHANGE LISTING                                             will be available from Linda D. Rohrer, Assistant Secretary.
New York, Cincinnati, Amsterdam, Paris, Basle, Geneva,       Ms. Rohrer can be reached at One P&G Plaza, Cincinnati,
Lausanne, Zurich, Frankfurt, Brussels, Tokyo                 OH 45202-3315.


www.pg.com/investor                               P&G ALUMNI NETWORK                            P&G GALLERIA
You can now access your Shareholder               The P&G Alumni Network is an                  You can order imprinted P&G
Investment Program account, including             independent group whose mission is            merchandise from the P&G Galleria.
your account balance and transactions,            to advance the personal and                   Shop online for umbrellas,
24 hours a day on pg.com/investor. This           professional interests of former P&G          business
site is designed for you, the investor, with      employees. The group's Web site,              accessories and clothing through
stock purchase information, transaction           www.pgalums.com, has a worldwide              www.pg.com in Try and Buy, or call
forms, Company reports and Webcasts.              member directory, career center and           1-800-969-4693 (1-513-651-1888
And pg.com is your one-stop connection            more. The organization is planning            outside the U.S.).
to P&G product information, newsletters           a Cincinnati reunion for the weekend
and samples.                                      of April 25-27, 2003.






Common Stock Price Range and Dividends



                                 Price Range                                    Dividends
                -------------------------------------------------      -------------------------
                2001-2002    2001-2002     2000-2001    2000-2001      2001-2002       2000-2001
Quarter ended        High         Low           High          Low
- ------------------------------------------------------------------------------------------------
                                                                      
September 30       $77.28      $63.75         $67.81       $54.19          $0.38           $0.35
- ------------------------------------------------------------------------------------------------
December 31         81.72       69.73          79.31        66.56           0.38            0.35
- ------------------------------------------------------------------------------------------------
March 31            90.73       76.38          79.19        59.25           0.38            0.35
- ------------------------------------------------------------------------------------------------
June 30             94.75       87.00          68.30        55.96           0.38            0.35
- ------------------------------------------------------------------------------------------------

EX-21

                                  EXHIBIT (21)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                         Subsidiaries of the Registrant


Alejandro Llauro E. Hijos S.A.I.C. [Argentina]
Anjali (HK) Corporation [Hong Kong]
Anjali Corporation [Delaware]
An-Pro Company [Ohio]
B&C International Co. (BVI) Ltd. [British Virgin Islands]
Bess Hygiene AG [Switzerland]
Betrix Cosmetic GmbH [Germany]
Blendax GmbH [Germany]
Blendax Unterstutzungskasse GmbH [Germany]
Carlos BT [Hungary]
Celtic Insurance Company Limited [Bermuda]
Cheladerm, Inc. [Delaware]
Clairol (China) Ltd. [China]
Clairol Brasil Ltda [Brazil]
Clairol GmbH [Germany]
Clairol Limited [U.K.]
Clairol Peru S.R.L. [Peru]
Compania Procter & Gamble Mexico, S. de R.L. de C.V. [Mexico]
Compania Quimica S.A. [Argentina]
Comunivers sa [Morocco]
Corpydes S.A. de C.V. [Mexico]
Crest Toothpaste Inc. [Canada]
Detergent Products A.G. [Switzerland]
District Pet Imaging, LLC [Ohio]
Eczacibasi Yatirim Holding Ortakligi A.S. [Turkey]
Elysee BT [Hungary]
Eurocos Cosmetic GmbH [Germany]
Eurocos Cosmetic Warenvertrieb GmbH [Austria]
Eurocos Ltd [U.K.]
EURO-Juice G.m.b.H. Import und Vertrieb [Germany]
European Beauty Products (U.K.) Limited [U.K.]
Ferraris BT [Hungary]
Fountain Square Music Publishing Co., Inc. [Ohio]
Frank BT [Hungary]
Gala Cosmetics International Limited [U.K.]
Gala of London Limited [U.K.]
Giorgio Beverly Hills, Inc. [Delaware]
Girl Cosmetics Limited (U.K.)
Global Business Services de Costa Rica Limitada [Costa Rica]
Herve Leger Parfums GmbH [Germany]
Humatro Corporation [Delaware]
Hyginett KFT [Hungary]
Iams (Deutschland) Vertriebs GmbH [Germany]
Iams Argentina S.A. [Argentina]
Iams Australia/New Zealand Pty. Ltd. [Australia]
Iams Canada Inc. [Canada]
Iams Chile Limitada [Chile]
Iams Companion Animal Research Institute, Inc. [Ohio]
Iams do Brasil [Brazil]

[ ] Brackets indicate state or country of incorporation and do not form part of
corporate name

                                  EXHIBIT (21)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                         Subsidiaries of the Registrant


Iams Europe B.V. [Netherlands]
Iams France EURL [France]
Iams Global, Inc. [Ohio]
Iams Japan K.K. [Japan]
Iams Mexico, S. de R.L. de C.V. [Mexico]
Iams Pet Food GmbH & Co. KG [Germany]
Iams Pet Food International B.V. [Netherlands]
Iams Pet Imaging, Inc. [Ohio]
Iams Pet Imaging, LLC [Ohio]
Iams S. Africa Pty. [S. Africa]
Iams Servicios, S. de R.L. de C.V. [Mexico]
Iams U.K. Limited [U.K.]
Industrial Catenation Services (Pty.) Ltd. [S. Africa]
Industrias Modernas, S.A. [Guatemala]
Inmobiliaria Procter & Gamble de Venezuela, S.C.S. [Venezuela]
Inmobiliaria Procter & Gamble de Venezuela, S.R.L. Venezuela]
Inversiones Industrias Mammi, S.C.A. [Venezuela]
Inversiones Industrias Mammi-1, S.R.L. [Venezuela]
Inversiones Procter & Gamble de Venezuela, S.C.A. [Venezuela]
Inversiones Procter & Gamble de Venezuela-1, S.R.L. [Venezuela]
Juvian Fabric Care Corporation [Ohio]
Kangra Valley Enterprises Ltd. [Delaware]
Komal Manufacturing Chemists Ltd. [India]
Laboratoire Lachartre S.N.C. [France]
Liberty Street Music Publishing Company, Inc. [Ohio]
Loreto y Pena Pobre, S.A. de C.V. [Mexico]
Malabar (HK) Corporation Limited [Hong Kong]
Marcvenca Inversiones, C.A. [Venezuela]
Max Factor & Co. (U.K.) Ltd. [Bermuda]
Max Factor & Co. [Delaware]
Max Factor K.K. [Japan]
Max Factor Limited [U.K.]
Midway Holdings Ltd. [Cayman Islands]
Millstone Coffee, Inc. [Washington]
Modern Industries Company - Dammam [Saudi Arabia]
Modern Industries Company - Jeddah [Saudi Arabia]
Modern Products Company - Jeddah [Saudi Arabia]
Moroccan Modern Industries [Morocco]
Neoblanc-Produtos de Higiene e Limpeza Lda. [Portugal]
Novomoskovskbytkhim [Russia]
Noxell (Barbados) Limited [Barbados]
Noxell (Panama) S.A. [Panama]
Noxell (Thailand) Limited [Thailand]
Noxell Corporation [Maryland]
Olay Company, Inc. [Delaware]
Olga BT [Hungary]
OOO Procter & Gamble Services Company [Russia]
P&G-Clairol, Inc. [Delaware]
P&G C&CA, Inc. [Ohio]

[ ] Brackets indicate state or country of incorporation and do not form part of
corporate name

                                  EXHIBIT (21)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                         Subsidiaries of the Registrant


P&G Consultoria E Servicos Ltda. [Brazil]
P&G do Brasil Comercial Ltda. [Brazil]
P&G Holding B.V. [Netherlands]
P&G Holding Company S.A. [Argentina]
P&G Indochina [Vietnam]
P&G Industrial Peru S.R.L. [Peru]
P&G Inversiones S.A. [Argentina]
P&G Israel M.D.O. Ltd. [Israel]
P&G K.K. [Japan]
P&G Northeast Asia Pte. Ltd. [Singapore]
P&G Prestige Beaute S.A.R.L. [Switzerland]
P. T. Procter & Gamble Indonesia TbK [Indonesia]
P.T. Procter & Gamble Home Products Indonesia [Indonesia]
Papierhygiene GmbH [Germany]
PFX Pet Supply, Inc. [Ohio]
PGV Chile S.A. [Chile]
PNX Distributing, Inc. [Ohio]
PNX Real Estate, Inc. [Ohio]
PPProducts SARL [Switzerland]
Procter & Gamble (Chengdu) Ltd. [PRC]
Procter & Gamble (China) Ltd. [PRC]
Procter & Gamble (Cosmetics and Fragrances) Limited [U.K.]
Procter & Gamble (East Africa) Limited [Kenya]
Procter & Gamble (Egypt) Industrial and Commercial Company [Egypt]
Procter & Gamble (Egypt) Manufacturing Company [Egypt] (Partnership)
Procter & Gamble (Enterprise Fund) Limited [U.K.]
Procter & Gamble (Guangzhou) Ltd. [PRC]
Procter & Gamble (Health & Beauty Care) Limited [U.K.]
Procter & Gamble (Ireland) Limited [Ireland]
Procter & Gamble (Malaysia) Sdn. Berhad [Malaysia]
Procter & Gamble (Manufacturing) Ireland Limited [Ireland]
Procter & Gamble (NBD) Pty. Ltd. [Australia]
Procter & Gamble (Vietnam) Ltd. [Vietnam]
Procter & Gamble (Yemen) Ltd [Yemen]
Procter & Gamble A/S [Norway]
Procter & Gamble Amiens S.N.C.  [France]
Procter & Gamble Argentina S.A. [Argentina]
Procter & Gamble Asia Pacific Ltd. [Hong Kong]
Procter & Gamble Asia Pte. Ltd. [Singapore]
Procter & Gamble Australia Proprietary Limited [Australia]
Procter & Gamble Austria GmbH [Austria]
Procter & Gamble Bangladesh Private Ltd. [Bangladesh]
Procter & Gamble Belize Ltda. [Belize]
Procter & Gamble Beteiligungs GmbH [Germany]
Procter & Gamble Beverages GmbH [Germany]
Procter & Gamble Blois S.A.S. [France]
Procter & Gamble Bolivia S.R.L. [Bolivia]
Procter & Gamble Bulgaria EOOD [Bulgaria]
Procter & Gamble Business Services Canada Company [Canada]

[ ] Brackets indicate state or country of incorporation and do not form part of
corporate name

                                  EXHIBIT (21)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                         Subsidiaries of the Registrant

Procter & Gamble Central & Eastern Europe GmbH [Germany]
Procter & Gamble Chile, Inc. [Ohio]
Procter & Gamble Colombia Ltda. [Colombia]
Procter & Gamble Color, S.C.A. [Venezuela]
Procter & Gamble Commercial de Cuba, S.A. [Cuba]
Procter & Gamble D.J.L. Sarajevo [Bosnia]
Procter & Gamble d.o.o. za trgovinu [Croatia]
Procter & Gamble Danmark AS [Denmark]
Procter & Gamble de Panama, S.A. [Panama]
Procter & Gamble de Venezuela, S.C.A. [Venezuela]
Procter & Gamble de Venezuela, S.R. L. [Venezuela]
Procter & Gamble Detergent (Beijing) Ltd. [PRC]
Procter & Gamble Development Company A.G. [Switzerland]
Procter & Gamble Distributing Limited [U.K.]
Procter & Gamble Distribution Company (Europe) BVBA [Belgium]
Procter & Gamble do Brasil & Cia (Partnership) [Brazil]
Procter & Gamble do Brasil S/A [Brazil]
Procter & Gamble do Brazil, Inc. [Delaware]
Procter & Gamble do Nordeste S/A [Brazil]
Procter & Gamble Eastern Europe, Inc. [Ohio]
Procter & Gamble Ecuador Compania Anonima [Ecuador]
Procter & Gamble Egypt [Egypt]
Procter & Gamble Energy Company LLC [Ohio]
Procter & Gamble Espana S.A. [Spain]
Procter & Gamble Eurocor N.V. [Belgium]
Procter & Gamble Europe N.V. [Belgium]
Procter & Gamble Europe SA [Switzerland]
Procter & Gamble European Services SARL [Switzerland]
Procter & Gamble European Supply Company BVBA [Belgium]
Procter & Gamble European Technical Center BVBA Belgium]
Procter & Gamble Export Operations SARL [Switzerland]
Procter & Gamble Far East, Inc. [Ohio]
Procter & Gamble Finance (Canada) Limited Partnership [Canada]
Procter & Gamble Financial Services [Ireland]
Procter & Gamble Finland OY [Finland]
Procter & Gamble France S.N.C. [France]
Procter & Gamble FSC (Barbados) Inc. [Barbados]
Procter & Gamble Ghana, Ltd. [Ghana]
Procter & Gamble GmbH [Germany]
Procter & Gamble Gulf FZE [United Arab Emirates]
Procter & Gamble Hair Care, LLC [Delaware]
Procter & Gamble Health and Beauty Care-Europe Limited [U.K.]
Procter & Gamble Health Products, Inc. [Delaware]
Procter & Gamble Hellas A.E. [Greece]
Procter & Gamble Holding (Thailand) Limited [Thailand]
Procter & Gamble Holding Denmark ApS [Denmark]
Procter & Gamble Holding GmbH [Germany]
Procter & Gamble Holdings Singapore Pte. Ltd. [Singapore]
Procter & Gamble Home Products Limited [India]

[ ] Brackets indicate state or country of incorporation and do not form part of
corporate name

                                  EXHIBIT (21)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                         Subsidiaries of the Registrant

Procter & Gamble Hong Kong Limited [Hong Kong]
Procter & Gamble Hungary Wholesale Trading Partnership (KKT) [Hungary]
Procter & Gamble Hygien OY [Finland]
Procter & Gamble Hygiene & Health Care Limited [India]
Procter & Gamble Inc. [Ontario, Canada]
Procter & Gamble India Holdings, Inc. [Ohio]
Procter & Gamble Industrial 1, S.R.L. [Venezuela]
Procter & Gamble Industrial e Comercial Ltda.[Brazil]
Procter & Gamble Industrial S.C.A. [Venezuela]
Procter & Gamble Interamericas de Costa Rica Ltda. [Costa Rica]
Procter & Gamble Interamericas de El Salvador Ltda. [El Savador]
Procter & Gamble Interamericas de Guatemala Ltda. [Guatemala]
Procter & Gamble Interamericas de Honduras Ltda. [Honduras]
Procter & Gamble Interamericas de Nicaragua, S.A. [Nicaragua]
Procter & Gamble Interamericas LLC [Delaware]
Procter & Gamble International Operations Pte. Ltd. [Singapore]
Procter & Gamble International Operations SA [Switzerland]
Procter & Gamble Investment Subsidiary Inc. [Canada]
Procter & Gamble Investments UK [U.K.]
Procter & Gamble Italia, S.p.A. [Italy]
Procter & Gamble Italy s.r.l. [Italy]
Procter & Gamble Jamaica Ltd. [Jamaica]
Procter & Gamble Kazakhstan [Kazakhstan]
Procter & Gamble Korea IE, Co. [Korea]
Procter & Gamble Korea Inc.  [Korea]
Procter & Gamble Korea S&D Co. [Korea]
Procter & Gamble Laundry & Cleaning Products Limited [U.K.]
Procter & Gamble Limited [U.K.]
Procter & Gamble Limited Liability Company [Uzbekistan]
Procter & Gamble Luxembourg Finance Sarl [Luxembourg]
Procter & Gamble Luxembourg Investment Sarl [Luxembourg]
Procter & Gamble Manufactura, S. de R.L. de C.V. [Mexico]
Procter & Gamble Manufacturing (Thailand) Limited [Thailand]
Procter & Gamble Manufacturing (Tianjin) Co. Ltd. [PRC]
Procter & Gamble Manufacturing Belgium N.V. [Belgium]
Procter & Gamble Manufacturing GmbH [Germany]
Procter & Gamble Manufacturing Istra [Russia]
Procter & Gamble Manufacturing Romania SRL [Romania]
Procter & Gamble Marketing & Commercial Activities d.o.o. [Slovenia]
Procter & Gamble Marketing and Services D.O. [Yugoslavia]
Procter & Gamble Marketing Latvia Ltd. [Latvia]
Procter & Gamble Marketing Ltd. Skopje [Macedonia]
Procter & Gamble Marketing Romania SRL (Romania)
Procter & Gamble Maroc [Morocco]
Procter & Gamble Mataro, S.L. [Spain]
Procter & Gamble Mexico Holdings, B.V. [Netherlands]
Procter & Gamble Moldova SRL [Moldova]
Procter & Gamble N.S. Holding Company [Canada]
Procter & Gamble Nederland B.V. [Netherlands]

[ ] Brackets indicate state or country of incorporation and do not form part of
corporate name

                                  EXHIBIT (21)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                         Subsidiaries of the Registrant

Procter & Gamble Nicaragua y Cia Ltda. [Nicaragua]
Procter & Gamble Nigeria Limited  [Nigeria]
Procter & Gamble Nordic Inc. [Ohio]
Procter & Gamble Norge AS [Norway]
Procter & Gamble NPD, Inc. [Ohio]
Procter & Gamble O.O.O.  [Russia]
Procter & Gamble Operations Polska - Spolka Akcyjna  [Poland]
Procter & Gamble Oral Care (Guangzhou) [China]
Procter & Gamble Orleans S.A.S.  [France]
Procter & Gamble Pakistan (Private) Limited [Pakistan]
Procter & Gamble Paper (Guangzhou) Ltd. [PRC]
Procter & Gamble Paper (Suzhou) Co. Ltd. [PRC]
Procter & Gamble Personal Cleansing (Tianjin) Ltd. [PRC]
Procter & Gamble Peru S.R.L. [Peru]
Procter & Gamble Pharmaceuticals Canada, Inc.  [Canada]
Procter & Gamble Pharmaceuticals France [France]
Procter & Gamble Pharmaceuticals Longjumeau S.A.S. [France]
Procter & Gamble Pharmaceuticals N.V. [Belgium]
Procter & Gamble Pharmaceuticals Nederland B.V. [Netherlands]
Procter & Gamble Pharmaceuticals Puerto Rico, Inc. [Delaware]
Procter & Gamble Pharmaceuticals SARL [Switzerland]
Procter & Gamble Pharmaceuticals U.K. Limited [U.K.]
Procter & Gamble Pharmaceuticals, Inc. [Ohio]
Procter & Gamble Pharmaceuticals-Germany GmbH [Germany]
Procter & Gamble Philippines, Inc. [Philippines]
Procter & Gamble Platform, Inc. [Ohio]
Procter & Gamble Polska Sp. zo.o  [Poland]
Procter & Gamble Porto, Lda. [Portugal]
Procter & Gamble Portugal S.A. [Portugal]
Procter & Gamble Prestige Beaute GmbH [Germany]
Procter & Gamble Product Supply (U.K.) Limited [U.K.]
Procter & Gamble Productions, Inc. [Ohio]
Procter & Gamble Quimica Ltda. [Brazil]
Procter & Gamble reflect.com, Inc. [Delaware]
Procter & Gamble RHD, Inc. [Ohio]
Procter & Gamble S.A. [Chile]
Procter & Gamble S.r.l. [Italy]
Procter & Gamble Service GmbH [Germany]
Procter & Gamble Services (Switzerland) SA [Switzerland]
Procter & Gamble Services Company N.V.  [Belgium]
Procter & Gamble Services France S.A.S. [France]
Procter & Gamble Servicios Latinoamerica, S.C.A. [Venezuela]
Procter & Gamble Servicios Latinoamerica-1, S.R.L. [Venezuela]
Procter & Gamble Servicios S.A. [Argentina]
Procter & Gamble Singapore Investment Pte. Ltd. [Singapore]
Procter & Gamble Singapore Pte. Ltd. [Singapore]
Procter & Gamble South Africa Proprietary Limited [South Africa]
Procter & Gamble Sri Lanka Private Ltd. [Sri Lanka]
Procter & Gamble Sverige AB [Sweden]

[ ] Brackets indicate state or country of incorporation and do not form part of
corporate name

                                  EXHIBIT (21)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                         Subsidiaries of the Registrant

Procter & Gamble Switzerland SARL [Switzerland]
Procter & Gamble Taiwan Limited [Taiwan]
Procter & Gamble Technical Centers Limited   [U.K.]
Procter & Gamble Technology (Beijing) Co., Ltd. [PRC]
Procter & Gamble Tenedora, S.A. [Venezuela]
Procter & Gamble Trading (Thailand) Limited [Thailand]
Procter & Gamble Tuketim Mallari Sanayii A.S. [Turkey]
Procter & Gamble U.K. [U.K.] (Partnership)
Procter & Gamble Ukraine (Ukraine)
Procter & Gamble, Spol. s r.o. (Ltd.)  [Slovak Republic]
Procter & Gamble-Hutchison Ltd. [Hong Kong]
Procter & Gamble-Rakona, A.S.  [Czech Republic]
Productos  Sanitarios S.A. [Argentina]
Progam Realty & Development Corporation [Philippines]
Progasud S.p.A. [Italy]
Promotora de Bienes y Valores, S. de R.L. de C.V. [Mexico]
PUR Water Purification Products, Inc. [Ohio]
Richardson-Vicks do Brasil Quimica e Farmaceutica S.A. [Brazil]
Richardson-Vicks Real Estate Inc. [Ohio]
Richvest B.V. [Netherlands]
Riverfront Music Publishing Co., Inc. [Ohio]
Rohm Pharma GmbH Wien  [Austria]
Rosemount Corporation [Delaware]
R-V Chemicals Holdings Ltd. [Ireland]
S.C. Detergenti S.A. [Romania]
SCS Sales + Cosmetic Service GmbH [Germany]
Shulton (Great Britain) Ltd. [U.K.]
Shulton (New Zealand) Limited [New Zealand]
Shulton S.A. [Guatemala]
Shulton, Inc. [New Jersey]
Societe Immobiliere Les Colombettes, S.A. [Switzerland]
SpinBrush Company [Ohio]
SsangYong Paper Co. Ltd. [Korea]
Sundor Brands Inc. [Florida]
Sundor Brands Limited [U.K.]
Sundor Canada, Inc. [Delaware]
Surfac S. R. Ltda. [Peru]
Sycamore Productions, Inc. [Ohio]
Tambrands (Continental) Ltd. [U.K.]
Tambrands Dosmil, S.A. de C.V. [Mexico]
Tambrands France S.A.S. [France]
Tambrands Inc. [Delaware]
Tambrands Industria e Comercia Ltda. [Brazil]
Tambrands International Trading (Shanghai) Co., Ltd. [PRC]
Tambrands Investments Ltd.  [U.K.]
Tambrands Ireland Limited [Ireland]
Tambrands Limited [U.K.]
Tambrands Ukraine Ltd. [Ukraine]
Temple Trees Investments [India]

[ ] Brackets indicate state or country of incorporation and do not form part of
corporate name

                                  EXHIBIT (21)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                         Subsidiaries of the Registrant

Tempo AG [Switzerland]
The Dover Wipes Company [Ohio]
The Folger Coffee Company [Ohio]
The Iams Company [Ohio]
The Malabar Company [Delaware]
The Procter & Gamble Commercial Company [Ohio]
The Procter & Gamble Company of South Africa (Proprietary) Limited  [S. Africa]
The Procter & Gamble Distributing Company [Ohio]
The Procter & Gamble GBS Company [Ohio]
The Procter & Gamble Global Finance Company [Ohio]
The Procter & Gamble iVentures Company [Ohio]
The Procter & Gamble Manufacturing Company [Ohio]
The Procter & Gamble Manufacturing Company of Lebanon, S.A.L.[Lebanon]
The Procter & Gamble Ohio Brands Company [Ohio]
The Procter & Gamble Paper Products Company [Ohio]
The Procter & Gamble U.S. Business Services Company [Ohio]
Thomas Hedley & Co. Limited [U.K.]
TRAPOFA Leonhard-Speditions GmbH I.L. [Germany]
US/KK Investments, Inc. [Ohio]
Verwaltlungsgesellschaft Iams Pet Food mbH [Germany]
Vick International Corporation [Delaware]
Vick Nigeria Limited [Nigeria]
Vidal Sassoon (Shanghai) Academy [PRC]
Vidal Sassoon Co. [Ohio]

[ ] Brackets indicate state or country of incorporation and do not form part of
corporate name

EX-23

                                  EXHIBIT (23)


                          Independent Auditors' Consent

                              DELOITTE & TOUCHE LLP

                                                     250 East Fifth Street
                                                     Post Office Box 5340
                                                     Cincinnati, Ohio 45202
                                                     Telephone: (513) 784-7100

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in the following documents of our
report dated August 5, 2002, incorporated by reference in this Annual Report on
Form 10-K of The Procter & Gamble Company for the year ended June 30, 2002.

      1.    Amendment No. 1 on Form S-8 to Registration Statement No. 33-31855
            on Form S-4 (now S-8) for the 1982 Noxell Employees' Stock Option
            Plan and the 1984 Noxell Employees' Stock Option Plan;

      2.    Amendment No. 1, Post Effective Amendment No. 1 to Registration
            Statement No. 33-49289 on Form S-8 for The Procter & Gamble 1992
            Stock Plan;

      3.    Registration Statement No. 33-47656 on Form S-8 for The Procter &
            Gamble International Stock Ownership Plan;

      4.    Registration Statement No. 33-50273 on Form S-8 for The Procter &
            Gamble Commercial Company Employees' Savings Plan;

      5.    Registration Statement No. 33-51469 on Form S-8 for The Procter &
            Gamble 1993 Non-Employee Directors' Stock Plan;

      6.    Registration Statement No. 333-05715 on Form S-8 for The Procter &
            Gamble Profit Sharing Trust and Employee Stock Ownership Plan;

      7.    Amendment No. 2, Post-Effective Amendment No. 2 to Registration
            Statement No. 33-59257 on Form S-3 for The Procter & Gamble
            Shareholder Investment Program;

      8.    Registration Statement No. 333-14381 on Form S-8 for Profit Sharing
            Retirement Plan of The Procter & Gamble Commercial Company;

      9.    Registration Statement No. 333-14397 on Form S-8 for Procter &
            Gamble Subsidiaries Savings Plan;

      10.   Registration Statement No. 333-21783 on Form S-8 for The Procter &
            Gamble 1992 Stock Plan (Belgian Version);

      11.   Registration Statement No. 333-37905 on Form S-8 for The Procter &
            Gamble Future Shares Plan;

      12.   Registration Statement No. 333-51213 on Form S-8 for Group Profit
            Sharing, Incentive, and Employer Contribution Plan (France);

      13.   Registration Statement No. 333-51219 on Form S-8 for Procter &
            Gamble Ireland Employees Share Ownership Plan;

      14.   Registration Statement No. 333-51221 on Form S-8 for Employee Stock
            Purchase Plan (Japan);

      15.   Registration Statement No. 333-51223 on Form S-8 for Savings and
            Thrift Plan (Saudi Arabia);

      16.   Registration Statement No. 333-51225 on Form S-8 for The Procter &
            Gamble UK Matched Savings Share Purchase Plan;

      17.   Registration Statement No. 333-34606 on Form S-8 for The Procter &
            Gamble Future Shares Plan;

      18.   Registration Statement No. 333-40264 on Form S-8 for Savings and
            Thrift Plan Saudi Arabia;

      19.   Registration Statement No. 333-44034 on Form S-8 for The Procter &
            Gamble International Stock Ownership Plan;

      20.   Registration Statement No. 333-47132 on Form S-8 for Employee Stock
            Purchase Plan (Japan);

      21.   Registration Statement No. 333-47136 on Form S-8 for The Procter &
            Gamble UK Matched Savings Share Purchase Plan;

      22.   Amendment No. 1, Post-Effective Amendment No. 1 to Registration
            Statement No. 333-47136 on Form S-8 for The Procter & Gamble UK
            Matched Savings Share Purchase Plan;

      23.   Registration Statement No. 333-49764 on Form S-3 for The Procter &
            Gamble U.K. Share Investment Scheme;

      24.   Registration Statement No. 333-75030 on Form S-8 for The Procter &
            Gamble 2001 Stock and Incentive Compensation Plan; and

      25.   Registration Statement No. 333-84232 on Form S-3 for The Procter &
            Gamble Company Debt Securities and Warrants.


DELOITTE & TOUCHE LLP
September 10, 2002

EX-99.1

                                 EXHIBIT (99-1)


   Certification of Periodic Financial Reports by the Chief Executive Officer
         and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

                   CERTIFICATION OF PERIODIC FINANCIAL REPORT
                       PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of The Procter & Gamble
Company (the "Company") certifies to his knowledge that:

      (1)   The Annual Report on Form 10-K of the Company for the year ended
            June 30, 2002 fully complies with the requirements of Section 13(a)
            or 15(d) of the Securities Exchange Act of 1934; and

      (2)   The information contained in that Form 10-K fairly presents, in all
            material respects, the financial conditions and results of
            operations of the Company.


A.G. LAFLEY
- ------------------------------
(A.G. Lafley)
Chairman of the Board,
President and Chief Executive

September 10, 2002
- ------------------------------
Date

                   CERTIFICATION OF PERIODIC FINANCIAL REPORT
                       PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of The Procter & Gamble
Company (the "Company") certifies to his knowledge that:

      (1)   The Annual Report on Form 10-K of the Company for the year ended
            June 30, 2002 fully complies with the requirements of Section 13(a)
            or 15(d) of the Securities Exchange Act of 1934; and

      (2)   The information contained in that Form 10-K fairly presents, in all
            material respects, the financial conditions and results of
            operations of the Company.




CLAYTON C. DALEY JR.
- ------------------------------
(Clayton C. Daley Jr.)
Chief Financial Officer

September 10, 2002
- ------------------------------
Date

EX-99.3

                                 EXHIBIT (99-3)



  Directors and Officers (First and Sixth) Excess Liability Binder of Insurance

                               FACSIMILE MESSAGE

TO:               Marty Svensen                Fax No: 295-4622
COMPANY:          Park International Limited   Location: Hamilton
DATE:             June 28, 2002                Page: 1
- -------------------------------------------------------------------------------
FROM:             Sherron Williams             Telephone No: (441) 292 8515
                  Margaret Lewis               Facsimile No: (441) 292 1566
                  3 Health Care/ Consumer

                  XL INSURANCE LTD.            [XL LOGO]
                  XL House
                  One Bermudiana Road
                  P.O. Box HM 2245
                  Hamilton HM JX
                  Bermuda
- -------------------------------------------------------------------------------

COVERAGE BINDER FOR:                 The Procter & Gamble Company

TYPE:                                Directors and Officers Liability including
                                     Company Reimbursement Liability

OUR REFERENCE:                       14-1/3

POLICY NO:                           XLD+O-00364

POLICY PERIOD:                       June 30, 2002 to June 30, 2003

BROKERAGE:                           12.00%

NEW AGGREGRATE:            Yes


                                                     GROSS WRITTEN
LIMIT                      ATTACHMENT                PREMIUM
- -------------------------------------------------------------------------------
USD 25,000,000 D+O/CR      USD 25,000,000 D+O/CR     USD 385,000
USD 25,000,000 D+O/CR      USD 150,000,000 D+O/CR    USD 300,000







COVERAGE BINDER FOR:                The Procter & Gamble Company       Page: 2

SPECIAL CONDITIONS

   A) XL coverage to follow form of : CODA Quote dated May 1, 2002.

   B) Issue standard XL Policy : D+O-010

   C) Discovery period : 12 months at 100 Percent of annual premium.

   D) Cancellation period : as per expiring Endorsement No. (4).

   E) XL is not in a position to follow any State Amendatory Endorsement.

   F) XL will attach the following exclusions to sides B&C of the Policy:
          - Broad Form BI/PD Exclusion, as per expiring Endorsement No. (7).
          - Broad Form Pollution Exclusion, as per expiring Endorsement No. (6).
          - P/P Litigation Exclusion effective June 30, 2001, as per expiring
            Endorsement No. (8).

   G) Entity Securities Claim Coverage as per expiring Endorsement No. (2).

   H) XL will not follow CODA Premier Form on the following:
          - Exclusion (h) on Side B; XL will utilize the wording in exclusion
            (i) of the CODA 5/92 form,
          - Section 8 (a) (i)
          - Section 18 (h)

   I) Deletion of General Condition I, as per expiring Endorsement No. (11).

   J) ODL coverage as per expiring Endorsement No. (10).

   K) Subject to receipt of the outstanding additional premium for Clairol, by
      7/15/02.

   L) Incorporation of Warranty Endorsement, as per expiring Endorsement
      No. (13).

   M) Subject to receipt of all underlying carrier binders, within 10 days of
      binding.

   N) Subject to receipt of premium funds by 7/15/02.







COVERAGE BINDER FOR:             The Procter & Gamble Company       Page: 3

STANDARD CONDITIONS

1)            The above binder does not include any amount with respect to
              Insurance Premium Tax. The terms of this binder include the
              obligation of the insured to reimburse XL for any Insurance
              Premium Tax incurred by it with respect to the premiums received
              from the insured.

         All terms and conditions as per wording of Policy and appropriate
endorsements.



Regards,
/s/ Sherron Williams
- -----------------------------
Sherron Williams
XL Insurance Ltd.

EX-99.4

                                 EXHIBIT (99-4)



      Directors and Officers (Second) Excess Liability Binder of Insurance



                                                         
[ACE LOGO] ACE BERMUDA Corporate Officers &     PO Box HM 1015
                       Directors Assurance Ltd. Hamilton HM DX
                       ACE Global Headquarters  Bermuda             FAX TRANSMISSION
                       17 Woodbourne Avenue                         BINDER
                       Hamilton HM 08           441 295-5200 main
                       Bermuda                  www.acelimited.com  This message is
                                                                    intended only for the
                                                                    use of the individual
                                                                    or entity to which it
                                                                    is addressed and may
                                                                    contain information
                                                                    that is privileged,
                                                                    confidential and exempt
                                                                    from disclosure under
                                                                    applicable law.



To:                                                  From:
Paul Scope                                           Jonathan Evans
- ------------------------------                       --------------------
Company:                                             Fax:
H&H Park International                               292-2514
- ------------------------------                       --------------------
Department:                                          Tel:
                                                     299-9219
- ------------------------------                       --------------------
Fax:                                                 Date:
295-4622                                             June 27, 2002
- ------------------------------                       --------------------
Tel:                                                 E-mail:

- ------------------------------                       --------------------
Re:                                                  Pages including cover:
Procter & Gamble                                     1


Corporate Officers and Directors Assurance Ltd. (CODA) is pleased to confirm
binding the following:

Policy Period:                              June 30th, 2002 to June 30th, 2003

Limit of Liability:                         $25 million Primary

Premium:                                    $420,000.00 Gross
Less 10% Commission:                        $ 42,000.00
                                            ---------------
Premium Due:                                $378,000.00 Net
                                            ---------------
SPECIAL CONDITIONS:

1.       Binding is subject to receipt of $378,000.00 net on or before July 8th,
         2002. In the event the premium is not received by this date, this
         binder is null and void ab initio.
2.       The cover provided will be Primary.
3.       Cover will continue on policy form CODA Premier 01 ED 10/00.
4.       Endorsements to be included:
         -        as expiring

Best Regards,
/s/ Jonathan Evans
Jonathan Evans

One of the ACE Group of Insurance & Reinsurance Companies


                                                           
[ACE LOGO]  ACE BERMUDA ACE Bermuda             PO Box HM 1015      FAX TRANSMISSION
                        Insurance Ltd.          Hamilton HM DX      BINDER
                        ACE Global Headquarters Bermuda
                        17 Woodbourne Avenue
                        Hamilton HM 08          441 295-5200 main   This message is
                        Bermuda                 www.acelimited.com  intended only for the
                                                                    use of the individual
                                                                    or entity to which it
                                                                    is addressed and may
                                                                    contain information
                                                                    that is privileged,
                                                                    confidential and exempt
                                                                    from disclosure under
                                                                    applicable law.








To:                                From:
Paul Scope                         Jonathan Evans
- --------------------------------- -------------------------------

Company:                           Fax:
H&H Park International             441-292-2514
- --------------------------------- -------------------------------
Department:                        Tel:
                                   441-299-9219
- --------------------------------- -------------------------------
Fax:                               Date:
295-4622                           June 27, 2002

Re:                                Pages including cover:
Procter & Gamble                   1

ACE Bermuda Insurance Ltd. is pleased to confirm binding the following:

POLICY PERIOD.                      JUNE 30TH, 2002--JUNE 30TH, 2003
LIMIT OF LIABILITY:                 $25M
ATTACHMENT:                         $50M
AGGREGATE:                          $25M

PREMIUM:                            $365,750.00
LESS 12% COMMISSION:                $ 43,890.00
                                    -----------
PREMIUM DUE:                        $321,860.00
                                    -----------
STRUCTURE:




NAME                                LIMITS
                           D&O              C.R.
CODA                       $25M             $25M SIR
XL                         $25M             $25M

SPECIAL CONDITIONS

1.       Binding is subject to receipt of $321,860.00 net on or before July 8th,
         2002. In the event the premium is not received by this date, this
         binder is null and void ab initio.
2.       This binder is contingent on no layer above us getting a higher rate
         per million.
3.       Followed Policy is XL, based on May 29th, 2002 quote letter.
4.       Discovery Period & Pct: as per followed policy
5.       Cancellation Period: as by followed policy
6.       Coverage is D&O and C.R.
7.       Cover will be issued on Policy Form D&O 5/96, policy no. PG-9709D
8.       Endorsements to be included: As expiring

Best regards,

/s/ Jonathan Evans

Jonathan Evans
ACE BERMUDA INSURANCE LTD.

One of the ACE Group of Insurance & Reinsurance Companies

EX-99.5

                                 EXHIBIT (99-5)



       Directors and Officers (Third) Excess Liability Binder of Insurance


[AWA LOGO] ALLIED WORLD ASSURANCE COMPANY, LTD.

The Bermuda Commercial Bank Building 43 Victoria Street Hamilton HM 18, Bermuda
- - TEL 441-278-5400 - FAX 441-296-3428

                              BINDER CONFIRMATION

- -------------------------------------------------------------------------------
To:      Marty Svenson                      FROM:
                                            David Bell

COMPANY: H&H Park                           DATE:
                                            June 27, 2002

ADDRESS: Bermuda                            NO. OF PAGES:    4


FAX NO.:

- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
INSURED NAME:              Procter & Gamble Co.
- -------------------------------------------------------------------------------
INSURED ADDRESS:           One Procter & Gamble Plaza
                           Cincinnati, OH 45202
- -------------------------------------------------------------------------------

IT IS HEREBY UNDERSTOOD AND AGREED THAT COVERAGE IS BOUND AS FOLLOWS:
- -------------------------------------------------------------------------------
INSURANCE COMPANY:         Allied World Assurance Company Ltd.
- -------------------------------------------------------------------------------
ISSUING CARRIER:           Allied World Assurance Company Ltd.
- -------------------------------------------------------------------------------
UNDERWRITER:               David Bell
- -------------------------------------------------------------------------------
TYPE OF INSURANCE:         Director's and Officer's Excess Liability
- -------------------------------------------------------------------------------
POLICY FORM:               Follow Form
- -------------------------------------------------------------------------------
AWAC POLICY FORM:          D&O DB (02/02) shortform
- -------------------------------------------------------------------------------
POLICY TRIGGER:            Claims Made
- -------------------------------------------------------------------------------
POLICY REFERENCE (POLICY   TBD
NUMBER):
- -------------------------------------------------------------------------------
POLICY PERIOD:             June 30, 2002 to June 30, 2003
- -------------------------------------------------------------------------------
CURRENCY:                  United States Dollars (US$)

                                                                               2
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
COVERED LAYER LIMITS:      US$ 25,000,000   PER CLAIM
                           US$ 25,000,000   AGGREGATE WHERE APPLICABLE

                           EXCESS OF
                           US$ 75,000,000   PER CLAIM
                           US$ 75,000,000   ANNUAL AGGREGATE WHERE APPLICABLE
- --------------------------------------------------------------------------------
UNDERLYING CARRIERS:       Ace    US$ 25,000,000 excess of Primary
                           XL     US$ 25,000,000 excess of US$ 25,000,000
                           Ace    US$ 25,000,000 excess of US$ 50,000,000

                           EXCESS OF UNDERLYING INSURANCE AND SELF-INSURED
                           RETENTIONS AS LISTED IN THE LEAD POLICY.

                           NOTE: APPLICABLE AGGREGATE(S) IF POLICY PERIOD
                           EXCEEDS 365 DAYS
- -------------------------------------------------------------------------------
AWAC PARTICIPATION OF      100%
COVERED LAYER LIMITS:
- -------------------------------------------------------------------------------
AWAC LIMITS:               US$ 25,000,000
- --------------------------------------------------------------------------------
AWAC PREMIUM:              US$ 348,000.
- --------------------------------------------------------------------------------
COMMISSION:                12%
- --------------------------------------------------------------------------------
QUOTE EXPIRY DATE:         Policy Inception Date or 30 days after date quotation
                            issued
- --------------------------------------------------------------------------------
APPLICABLE                 1. PRIOR AND PENDING LITIGATION EXCLUSION &
ENDORSEMENTS:                 CONTINUITY MAY BE BACKDATED UPON RECEIPT OF THE
                              EXPIRING.
                           2. PRIOR NOTICE EXCLUSION AT INCEPTION.
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
FOLLOW FORM:        a) COMPANY: Ace

                    b) POLICY NO.: TBD

                    c) POLICY PERIOD: June 30, 2002 to June 30, 2003

                    d) POLICY LIMITS:
                       US$ 25,000,000   PER CLAIM
                       US$ 25,000,000   ANNUAL AGGREGATE WHERE APPLICABLE

                    e) PREMIUM: US$ 420,000

                    f) POLICY FORM: EXECUTIVE PROTECTION POLICY

                    g) ENDORSEMENTS: FOLLOW THE PRIMARY BINDER ON ENDORSEMENTS
- --------------------------------------------------------------------------------




                                                                               3
- --------------------------------------------------------------------------------
         ENDORSEMENTS AWAC WILL NOT FOLLOW:

         1.       State Amendatory, Choice of Law, Panel Counsel or Arbitration
                  Endorsements, if any;

         2.       Underlying sub-limits, however we will recognize erosion;

         3.       Any Others - To Be Determined upon receipt/review of the
                  followed policy.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
TERMS AND CONDITIONS

1.       This binder is strictly conditioned upon no material change in the risk
         occurring between the date of the quote letter and the inception date
         of the proposed policy (including any claim or notice of circumstances
         which may be reasonably expected to give rise to a claim under any
         policy of which the policy being proposed by this letter is a renewal,
         replacement or excess of). In the event of such change in risk, the
         Insurer may at its sole discretion, whether or not this quotation has
         already been accepted by the Insured, modify and/or withdraw this
         quotation.

2.       This binder is subject to receipt and favorable review of the
         following:
         a)       Complete copy of "Followed Policy" (including endorsements and
                  schedules).
         b)       Complete copy of signed binders (including terms and
                  conditions) for the "Followed Policy" AND any underlying
                  policies for all layers that attach beneath the AWAC layer.
         c)       Confirmation of any additional
                  endorsements/amendments/exclusions for the expired lead and
                  underlying policies.

3.       Any restrictive policy terms and/or conditions that apply to underlying
         policies that are in excess of the followed policy but underlying to
         the AWAC Excess policy will also apply to the AWAC Excess limit of
         liability. Any additional endorsements to the AWAC Policy will be
         determined upon review of the above-required documentation.

(Premium Payment)
4.       Binding is subject to payment of premium on or before 15 days. If the
         premium in respect of an annual period or proof of payment thereof is
         not received by the Company within five (5) business days of
         commencement of the annual period, or the number of days after the
         binding date listed above, whichever is greater, the Policy will be
         canceled automatically retroactively to the anniversary date.

(Taxes)
5.       The above quotation does not include any amount with respect to any
         taxes, including UK Insurance Premium Tax (IPT). The terms of our
         proposal include the obligation of the Insured to reimburse AWAC for
         any Insurance Premium Tax incurred by it with respect to the premiums
         received from the Insured. We require this information no later than
         (30) days after binding.

- -------------------------------------------------------------------------------

SUBJECTIVITIES:
This binder is subject to receipt, review and acceptance of the following
information prior to binding:

1. Copy of the primary binder.

- --------------------------------------------------------------------------------

                                                                               4
- -------------------------------------------------------------------------------
2. Copies of all underlying binders within 5 days of binding.
3. Copies of all underlying policies, as soon as possible.
4. Confirmation that any higher layer placed does not attract the same or
   higher premium per million than AWAC's lower layer.
5. This binder is subject to the receipt, review and acceptance of the
   completed program.

- -------------------------------------------------------------------------------
ADDITIONAL COMMENTS:
- -------------------------------------------------------------------------------

Thank you for the opportunity to bind this account!

                                          -------------------------------------
                                                      David Bell

EX-99.6

                                 EXHIBIT (99-6)



      Directors and Officers (Fourth) Excess Liability Binder of Insurance



                   [CHUBB LOGO] CHUBB ATLANTIC INDEMNITY LTD.

Location: Belvedere Building, 69 Pitts Bay Road, Pambroke HM 08, Bermuda
Mailing: Suite 773, #48 Par-la-Ville Road, Hamilton HM 11, Bermuda
Phone: (441) 292-7343 - Facsimile: (441) 296-1726 - www.chubbatlantic.bm

- -------------------------------------------------------------------------------

                     EXCESS DIRECTORS AND OFFICERS LIABILITY
                                     BINDER

THIS CERTIFIES THAT pending the issuance of a Policy in the form described
below, Chubb Atlantic Indemnity Ltd., hereinafter called the Company, is binding
coverage described as follows:

1.       INSURED           The Procter & Gamble Company
         Address:          One P&G Plaza
                           Cincinnati, Ohio 45202
                           U.S.A.

2.       PRODUCER          H&H Park International Limited
         Attn:             Mr. Marty Svenson
         Address:          Bermuda Commercial Bank Building
                           44 Church Street, P O Box HM 2064
                           Hamilton HM HX
                           Bermuda

3.       POLICY NO.        (03) 3310-04-49

4.       POLICY PERIOD
         From: June 30, 2002                         To:         June 30, 2003
         (12:01 a.m. Standard Time on both dates, at the address of the entity
          stated in Item 1 this Binder)

5.       TERM OF BINDER
         Effective:        June 30, 2002             Expires     June 30, 2003
         (12:01 a.m. Standard Time on both dates, at the address of the entity
         stated in Item 1 this Binder)

6.       ANNUAL PREMIUM             $331,000

7.       POLICY FORM NO./TYPE       Chubb Atlantic Indemnity Ltd. Excess Follow
                                    Form D&O policy

8.       LIMIT OF LIABILITY         $25,000,000 Annual Aggregate excess of
                                    $100,000,000 Limit of Liability for the
                                    Policy Period Excess of the Underlying
                                    Insurance shown in Item 9



                                      -2-

9.       UNDERLYING INSURANCE
              CODA: Primary limit $25MM excess of $25MM side B & C Retention for
                    $420,000 Annual Premium
              XL:   $25MM Limit xs of $25MM Limit for $385,000 Annual Premium
              ACE:  $25MM Limit xs of $50MM Limit for $365,750 Annual Premium
              AWAC: $25MM Limit xs of $75MM Limit for $348,000 Annual Premium

10.      ENDORSEMENTS
         (1)      Following XL policy form wording;
         (2)      Pending or Prior Lit. Exclusion Date - June 30, 1994 with
                  respect to Side A Coverage only;
         (3)      Amended Limit of Liability;
         (4)      Bermuda Law & Arbitration wording;
         (5)      Pending and Prior Litigation exclusion as at June 30, 2001
                  with respect to Side B & C coverage.

Bermuda Law is the governing law under the Policy. Dispute resolution is by
binding arbitration held in Bermuda pursuant to the Bermuda Arbitration Act of
1993 and the UNCITRAL Arbitration Rules. Insured is responsible to pay the
self-procured/independently procured insurance tax and report the Policy (on the
prescribed forms) in the U.S. state(s) where the risk(s) is located. The policy
will only be delivered to either the Insured's Bermuda broker or directly to the
Insured while the Insured is physically present in Bermuda. All monetary amounts
expressed or referenced herein are in US Dollars.

11.      THIS BINDER WILL NOT BE EXTENDED NOR WILL A POLICY BE ISSUED UNLESS THE
         FOLLOWING CONDITIONS HAVE BEEN SATISFIED:

         Receipt, review and acceptance of a signed warranty statement with
         regard to Side B & C coverage and

         Receipt of the binders for the underlying policies to be submitted to
         Chubb Atlantic Indemnity Ltd.

THE TERMS AND CONDITIONS GIVEN ABOVE ARE SUBJECT TO CHANGE OR WITHDRAWAL BASED
UPON REVIEW OF THE ADDITIONAL INFORMATION REQUESTED.

It is expressly stipulated that except as otherwise provided herein the coverage
provided by this binder is subject to all of the terms and conditions of the
quotation letter of JUNE 18, 2002, and attachments thereto issued by the
Company.




                                       -3-

This binder may be cancelled at any time by the entity referred to in Item 1 by
giving written notice of cancellation to the Company. This binder may be
cancelled at any time by the Company upon ten (10) days written notice of
cancellation to the entity referred to in Item 1 or its agent. This binder shall
terminate automatically upon the expiration date shown above, or upon issuance
of the policy, whichever occurs first. A short rate premium charge will be made
for this binder unless the policy is issued by the Company and accepted by the
entity referred to above. The Company reserves the right to modify the policy's
terms and conditions upon underwriting review of any information received.


/s/ [ILLEGIBLE]                             July 11, 2002
- ------------------------------------       ---------------------------------
Authorized Representative                  Date

EX-99.7

                                 EXHIBIT (99-7)



       Directors and Officers (Fifth) Excess Liability Binder of Insurance




[STARR EXCESS LOGO] STARR EXCESS International

                   EXCESS DIRECTORS & OFFICERS INSURANCE AND
                       CORPORATE REIMBURSEMENT INSURANCE

                            RENEWAL BUSINESS BINDER

NAMED CORPORATION          :        Procter & Gamble

POLICY NUMBER              :        6458089

POLICY PERIOD              :        June 30, 200 to June 30, 2003

LIMIT OF LIABILITY         :        US$25,000,000

ATTACHMENT                 :        US$125,000,000

PREMIUM                    :        US$315,000

CURRENCY                   :        U.S. Dollar

COMMISSION                 :        12%

SUBJECT TO:
         1.       Copies of all underlying binders, within 5 days of binding;
         2.       Copies of all underlying policies, as soon as possible;

ADDITIONAL TERMS:
         1.       Discovery Clause - 100% of annual premium for 12 months;
         2.       Prior & Pending Litigation exclusion effective June 30, 2  ;
         3.       Cancellation Clause - per followed policy;
         4.       This binder is subject to confirmation that any higher layers
                  attract a higher premium per million than Starr's lower layer.

FOLLOWED POLICY:
                  CODA              $25,000,000
                  XL                $25,000,000
                  Ace               $25,000,000
                  AWAC              $25,000,000
                  CAIL              $25,000,000

Premium to be received no later than June 30, 2001.
The captioned policy will be issued upon receipt of the primary and all un

ACCEPTED BY:      /s/ Adam Kleinman         DATE:
                      Adam Kleinman
                      Vice President

EX-99.8

                                 EXHIBIT (99-8)



      Directors and Officers (Seventh) Excess Liability Binder of Insurance




[ARCH INSURANCE LOGO]
ARCH INSURANCE (BERMUDA)
(A Division of Arch Reinsurance Ltd.)
FACSIMILE TRANSMITTAL SHEET
- ------------------------------------------------------------------------------

TO:                                      FROM:
         Marty Svensen                         Tony Hay
- -------------------------------------------------------------------------------

COMPANY:                                 DATE:
         H&H Park International                 JULY 2, 2002
- -------------------------------------------------------------------------------

FAX NUMBER:                              TOTAL NUMBER OF PAGES INCLUDING COVER:
         295 4622                          2
- -------------------------------------------------------------------------------

RE:            Proctor & Gamble - D&O / Corp Reimbursement - PROVISIONAL BINDER

Arch Insurance (Bermuda) confirms provisionally binding D&O / C. Re insurance as
follows:

Policy Limit:     $25,000,000 per occurrence and in the aggregate

Attachment Point: $75,000,000

Annual Premium:   $285,000 gross

Commission:       12%

Policy Period:    June 30, 2002 to June 30, 2003

Policy Form:     Excess Follow-form Policy

Binder Period:    June 30, 2002 to July 12, 2002

Policy Number:    TBA

Underlying program:

CODA: $25m side-a only.
XL: $25m xs $25m
ACE: $25m xs $50m
AWAC: $25m xs $75m
Chubb: $25m xs $100m
Starr: $25m xs $125m
XL: $25m xs $150m
Arch Bermuda: $25m xs $175m

Special Conditions:
1.       Coverage is D&O/C. Re only. Arch will provide cover no wider than the
         narrowest underlying policy. No difference in conditions coverage is
         provided. No reinstatement is available.

- ----------------------------------------------------------------------------
                          CRAIG APPIN HOUSE, 2ND FLOOR
                                8 WESLEY STREET
                                HAMILTON, HM 11
                                    BERMUDA
                            TELEPHONE (441) 278 9275
                            FACSIMILE (441) 278 9296




2.   Copies of underlying policies will be required prior to issuance of the
     Arch policy.

3.   Form followed is XL. Arch provides cover no wider than the narrowest
     underlying policy. The Policy is subject to New York law and London
     arbitration.

4.   Prior/pending litigation exclusion effective June 30, 2002.

5.   This is a provisional binder, and is subject to the following:

     -    Receipt, review and acceptance of all underlying binders prior to
          close of business on July 12, 2002.

     -    Receipt of confirmation that no carriers in layers excess of Arch
          Bermuda receive more favorable terms or a higher premium rate.

     -    Receipt, review and acceptance of an acceptable warranty letter,
          wording to be advised by Arch Insurance (Bermuda), signed by the
          Chairman or CEO, prior to July 12, 2002.

     -    Receipt of the net premium by Arch Bermuda prior to close of business
          on July 12, 2002.

Best Regards,
/s/ Tony Hay
Tony Hay


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