10-K

THE PROCTER & GAMBLE COMPANY

AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K

TO THE

SECURITIES AND EXCHANGE COMMISSION

FOR THE

YEAR ENDED JUNE 30, 2010

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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark one)

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

For the Fiscal Year Ended June 30, 2010

OR

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

For the transition period from              to             

Commission File 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 Stock Exchange, NYSE Euronext-Paris

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

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

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

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

Indicate by check mark 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.  ¨

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

Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

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

The aggregate market value of the voting stock held by non-affiliates amounted to $176 billion on December 31, 2009.

There were 2,838,474,868 shares of Common Stock outstanding as of July 31, 2010.

Documents Incorporated by Reference

Portions of the Annual Report to Shareholders for the fiscal year ended June 30, 2010, (2010 Annual Report) are incorporated by reference into Part I, Part II and Part IV of this report to the extent described herein.

Portions of the Proxy Statement for the 2010 Annual Meeting of Shareholders which will be filed within one hundred and twenty days of the fiscal year ended June 30, 2010, (2010 Proxy Statement) are incorporated by reference into Part III of this report to the extent described herein.

PART I

Item 1. Business.

Additional information required by this item is incorporated herein by reference to Management’s Discussion and Analysis (MD&A), which appears on pages 31-50; Note 1, Summary of Significant Accounting Policies, which appears on pages 55-57; and Note 11, Segment Information, which appears on pages 71-72 of the 2010 Annual Report. Unless the context indicates otherwise, the terms the “Company,” “P&G,” “we,” “our” or “us” as used herein refers to The Procter & Gamble Company (the registrant) and its subsidiaries.

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

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

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

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

Financial Information about Segments

As of June 30, 2010, the Company was organized into three Global Business Units (GBU’s): Beauty and Grooming; Health and Well-Being; and Household Care. We had six reportable segments under U.S. GAAP: Beauty; Grooming; Health Care; Snacks and Pet Care; Fabric Care and Home Care; and Baby Care and Family Care. Many of the factors necessary for an understanding of these businesses are similar. Operating margins of the individual businesses vary slightly due to the nature of materials and processes used to manufacture the products, the capital intensity of the businesses and differences in selling, general and administrative expenses as a percentage of net sales. Net sales growth by business is also expected to vary slightly due to the underlying growth of the markets of each business and products. While none of our reportable segments are highly seasonal, components within certain of our reportable segments, such as Batteries (Fabric Care and Home Care), Appliances (Grooming) and Prestige Fragrances (Beauty) are seasonal. In addition, anticipation or occurrence of natural disasters, such as hurricanes, can drive unusually high demand for batteries.

Additional information about our businesses can be found in MD&A and Note 11, Segment Information, which appear on pages 31-50 and 71-72, respectively, of the 2010 Annual Report.

Narrative Description of Business

Business Model. Our business model relies on the continued growth and success of existing brands and products, as well as the creation of new products. The markets and industry segments in which we offer our products are highly competitive. Many of the product segments in which we compete are differentiated by price (referred to as super-premium, premium, mid-tier value and low-tier economy products). Generally speaking, we compete with super-premium, premium and mid-tier value products. Our products are sold in more than 180 countries around the world primarily through mass merchandisers, grocery stores, membership club stores, drug stores and in “high-frequency stores,” the neighborhood stores which serve many consumers in developing

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markets. We work collaboratively with our customers to improve the in-store presence of our products and win the “first moment of truth”—when a consumer is shopping in the store. We must also win the “second moment of truth”—when a consumer uses the product, evaluates how well it met his or her expectations and whether it was a good value. We believe we must continue to provide new, innovative products and branding to the consumer in order to grow our business. Research and product development activities, designed to enable sustained organic growth, continued to carry a high priority during the past fiscal year. While many of the benefits from these efforts will not be realized until future years, we believe these activities demonstrate our commitment to future growth.

Key Product Categories. In 2010, two product categories accounted for 10% or more of consolidated net sales. The laundry category constituted approximately 17% of net sales for fiscal years 2010, 2009 and 2008. The diaper category constituted approximately 11% of net sales for fiscal years 2010 and 2009 and 10% in 2008.

Key Customers. Our customers include mass merchandisers, grocery stores, membership club stores, drug stores and high-frequency stores. Sales to Wal-Mart Stores, Inc. and its affiliates represent approximately 16% of our total revenue in 2010, 2009 and 2008. No other customer represents more than 10% of our net sales. Our top ten customers account for approximately 32% of our total unit volume in 2010, compared to 30% of total unit volume in 2009 and 31% in 2008. The nature of our business results in no material backlog orders or contracts with the government. We believe our practices related to working capital items for customers and suppliers are consistent with the industry segments in which we compete.

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

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

Competitive Condition. The markets in which our products are sold are highly competitive. Our products compete against similar products of many large and small companies, including well-known global competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products as well as retailers’ private-label brands. We are well positioned in the industry segments and markets in which we operate—often holding a leadership or significant market share position. We market our products with advertising, promotions and other vehicles to build awareness of our brands in conjunction with an extensive sales force. We believe this combination provides the most efficient method of marketing for these types of products. Product quality, performance, value and packaging are also important competitive factors.

Research and Development Expenditures. Research and development expenditures enable us to develop technologies and obtain patents across all categories in order to meet the needs and improve the lives of our consumers. Total research and development expenses were $1,950 million in 2010, $1,864 million in 2009 and $1,946 million in 2008.

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Expenditures for Environmental Compliance. Expenditures for compliance with federal, state and local environmental laws and regulations are fairly consistent from year to year and are not material to the Company. No material change is expected in fiscal year 2011.

Employees. Total number of employees is an estimate of total company employees excluding interns, co-ops and employees of joint ventures. Historical numbers include employees of discontinued operations.

	2010	2009	2008	2007	2006	2005
Total Number of employees	127,000	132,000	135,000	135,000	136,000	107,000

Financial Information about Foreign and Domestic Operations

Net sales in the United States account for approximately 38% of total net sales. No other individual country had net sales exceeding 10% of total net sales. Operations outside the United States are generally characterized by the same conditions discussed in the description of the business above and may also be affected by additional factors including changing currency values, different rates of inflation, economic growth and political and economic uncertainties and disruptions. Our sales by geography for the fiscal years ended June 30 were as follows:

	2010		2009		2008
North America	42	%	42	%	41	%
Western Europe	21	%	21	%	24	%
Asia	15	%	14	%	13	%
Latin America	9	%	9	%	8	%
CEEMEA (1)	13	%	14	%	14	%

(1) CEEMEA includes Central and Eastern Europe, Middle East and Africa

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

	Net Sales (for the year ended June 30)						Assets (as of June 30)
	2010		2009		2008		2010		2009		2008
United States	$	30.0	$	29.6	$	29.7	$	70.1	$	71.9	$	73.8
International	$	48.9	$	47.1	$	49.6	$	58.1	$	62.9	$	70.2

Development of the Business

The discussion below provides insight to the general development of our business, including the material acquisitions and disposition of assets since the beginning of fiscal 2010.

Beauty and Grooming GBU. Effective July 1, 2009, we implemented a number of changes to the organization structure of the Beauty GBU, which resulted in changes to the components of our reportable segment structure. Female blades and razors were formerly included in the Grooming reportable segment and are now included in the Beauty reportable segment. Certain male-focused brands and businesses, such as Old Spice and Gillette personal care, moved from the Beauty reportable segment to the Grooming reportable segment. In addition, the Beauty GBU was renamed the Beauty and Grooming GBU. These changes have been reflected in our segment reporting for all periods presented.

Pharmaceuticals Divestiture. On October 30, 2009, we sold our global pharmaceuticals business to Warner Chilcott plc (Warner Chilcott) for $2.8 billion. Under the terms of the agreement, Warner Chilcott acquired our portfolio of branded pharmaceuticals products, prescription drug product pipeline and manufacturing facilities in Puerto Rico and Germany. The pharmaceuticals business had historically been part of

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the Health Care reportable segment. In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of the pharmaceuticals business are presented as discontinued operations and, as such, are excluded from continuing operations and from segment results.

Item 1A. Risk Factors.

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

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

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

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

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

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

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

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

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We face risks associated with significant international operations.

We conduct business across the globe with a significant portion of our sales outside the United States. As a result, we are subject to a number of risks, including, but not limited to, changes in exchange rates for foreign currencies, which may reduce the U.S. dollar value of revenues and earnings received and/or balances held by or invested in our foreign subsidiaries, as well as exchange controls and other limits on our ability to repatriate earnings from outside the U.S. that can increase our exposure. We have sizable businesses and maintain local currency cash balances in a number of foreign countries with exchange controls, including, but not limited to, Venezuela, China and India. Our results of operations and/or financial condition could be adversely impacted if we are unable to successfully manage these risks in an increasingly volatile environment. Further, we expect to achieve our financial targets, in part, by achieving disproportionate growth in developing regions. Should growth rates or our market share fall substantially below expected levels in these regions, our results could be negatively impacted. In addition, economic changes, terrorist activity and political unrest may result in business interruption, inflation, deflation or decreased demand for our products. Our success will depend, in part, on our ability to manage continued global political and/or economic uncertainty, especially in our significant geographical markets, as well as any political or economic disruption due to terrorist and other hostile activities.

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

The Company’s reputation is the foundation of our relationships with key stakeholders and other constituencies. If we are unable to effectively manage real or perceived issues, which could negatively impact sentiments toward the Company, our ability to operate freely could be impaired and our financial results could suffer. Our financial success is directly dependent on the success of our brands, particularly our billion-dollar brands. The success of these brands can suffer if our marketing plans or product initiatives do not have the desired impact on a brand’s image or its ability to attract consumers. Further, our results could be negatively impacted if one of our leading brands suffers a substantial impediment to its reputation due to real or perceived quality issues or the distribution and sale of counterfeit products.

Our ability to successfully adapt to ongoing organizational change could impact our business results.

We have executed a number of significant business and organizational changes including acquisitions, divestitures and workforce optimization projects to support our growth strategies. We expect these types of changes to continue for the foreseeable future. Successfully managing these changes, including retention of key employees, is critical to our business success. In addition, we are generally a build-from-within company, and our success is dependent on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing organization capabilities in key growth markets where the depth of skilled employees is limited and competition for these resources is intense. Further, business and organizational changes may result in more reliance on third parties for various services, and that reliance may increase compliance risks, including anti-corruption. Finally, our financial targets assume a consistent level of productivity improvement. If we are unable to deliver expected productivity improvements, while continuing to invest in business growth, our financial results could be adversely impacted.

Our ability to successfully manage ongoing acquisition and divestiture activities could impact our business results.

As a company that manages a portfolio of consumer brands, our ongoing business model involves a certain level of acquisition and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against base business objectives. Specifically, our financial results could be adversely impacted if: 1) we are not able to deliver the expected cost and growth synergies associated with our acquisitions, 2) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value or 3) we are unable to offset the dilutive impacts from the loss of revenue streams associated with divested brands.

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

Changes in laws, regulations and the related interpretations and increased enforcement actions may alter the environment in which we do business. This includes changes in competition, product-related, privacy and environmental laws, including actions in response to global climate change concerns, increased enforcement as well as changes in accounting standards, taxation requirements and enforcement penalties. Accordingly, our ability to manage regulatory, tax and legal matters (including product liability, patent, and other intellectual property matters), and to resolve pending legal matters without significant liability, including the competition law and antitrust investigations described in Part I, Item 3 of this Form 10-K, which could require us to take significant reserves in excess of amounts accrued to date or pay significant fines during a reporting period, may materially impact our results. In addition, as a U.S. based multinational company we are also subject to tax regulations in the U.S. and multiple foreign jurisdictions, some of which are interdependent. For example, certain income that is earned and taxed in countries outside the U.S. is not taxed in the U.S., provided those earnings are indefinitely reinvested outside the U.S. If these or other tax regulations should change, our financial results could be impacted.

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

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

We face risks related to changes in the global economic environment.

Our business is impacted by global economic conditions, which are increasingly volatile. If the global economy experiences significant disruptions, our business could be negatively impacted, including such areas as reduced demand for our products from a slow-down in the general economy, supplier or customer disruptions resulting from tighter credit markets and/or temporary interruptions in our ability to conduct day-to-day transactions through our financial intermediaries involving the payment to or collection of funds from our customers, vendors and suppliers.

A failure of a key information technology system, process or site could have a material adverse impact on our ability to conduct business.

We rely extensively on information technology systems, some of which are managed by third-party service providers, to interact with internal and external stakeholders. These interactions include, but are not limited to, ordering and managing materials from suppliers, converting materials to finished products, shipping product to customers, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, and other processes necessary to manage the business. If our systems are damaged or cease to function properly due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may suffer interruptions in our ability to manage operations which may adversely impact our results of operations and/or financial condition. In addition, we are transitioning our ordering, shipping and billing systems in North America and Western Europe to a new system during fiscal 2011. If the new system does not function properly upon implementation, our ability to process and deliver customer orders in our two largest regions could be limited and could negatively impact our results of operations during the period(s) of transition. Also, we may be unable to process and receive payments for products sold which could negatively impact our cash flow results during those periods.

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Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

In the U.S., we own and operate 37 manufacturing facilities located in 23 different states or territories. In addition, we own and operate 97 manufacturing facilities in 41 other countries. Many of the domestic and international facilities produce products for multiple businesses. Beauty products are manufactured at 39 of these locations; Grooming products at 14; Fabric Care and Home Care products at 51; Baby Care and Family Care products at 30; Snacks and Pet Care products at 11; and Health Care products at 35. Management believes that the Company’s production facilities are adequate to support the business efficiently and that the properties and equipment have been well maintained.

Item 3. Legal Proceedings.

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

The Company is subject to a variety of investigations into potential competition law violations in Europe. The Company’s policy is to comply with all laws and regulations, including all antitrust and competition laws, and to cooperate with investigations by relevant regulatory authorities, which the Company is doing.

The Company is subject to a number of antitrust investigations in Europe. In 2006, French authorities, in connection with an inquiry into potential competition law violations in France, entered the premises of two of the Company’s French subsidiaries and seized a variety of documents. In 2008, European Commission officials, with the assistance of the national authorities from a variety of countries, started an investigation into potential competition law violations in a variety of countries across the European Union. Around the same time, the national authorities in Spain, Italy and the Czech Republic initiated additional investigations into potential antitrust concerns within those countries. In connection with these investigations, a number of the Company’s subsidiaries were visited and documents seized. Also in 2008, authorities in the United Kingdom (UK) initiated an investigation concerning potential antitrust violations in the UK involving one of the Company’s subsidiaries. The Company or its subsidiaries are also involved in other competition law investigations in Germany, Belgium, Romania, Switzerland, France and Greece, as well as some other countries. We believe that all of the above matters involve a number of other consumer products companies and/or retail customers. Competition and antitrust law investigations often continue for several years and, if violations are found, can result in substantial fines. In other industries, fines have amounted to hundreds of millions of dollars.

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

During this fiscal year, authorities in France, Germany, Italy, Spain and Switzerland have issued complaints alleging that the Company, along with several other companies, engaged in violations of competition laws. The Company has the opportunity to respond to these complaints. The remaining matters discussed above are in various stages of the investigatory process.

It is still too early for us to reasonably estimate the total amount of fines to which the Company will be subject as a result of these various competition law issues. However, we have taken and will take reserves as appropriate. Please refer to the Company’s Risk Factors in Item 1A of this Form 10-K for additional information.

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

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Executive Officers of the Registrant

The names, ages and positions held by the executive officers of the Company on August 13, 2010, are:

Name	Position	Age	Elected to Officer Position
Robert A. McDonald	Chairman of the Board, President and Chief Executive Officer	57	1999
	Director since July 1, 2009
Jon R. Moeller	Chief Financial Officer	46	2009
Werner Geissler	Vice Chairman—Global Operations	57	2007
E. Dimitri Panayotopoulos	Vice Chairman—Global Household Care	58	2007
Edward D. Shirley	Vice Chairman—Global Beauty & Grooming	53	2008
Robert A. Steele	Vice Chairman—Global Health and Well—Being	55	2007
Bruce Brown	Chief Technology Officer	52	2008
Robert L. Fregolle, Jr.	Global Customer Business Development Officer	53	2009
R. Keith Harrison, Jr.	Global Product Supply Officer	62	2001
Christopher D. Hassall	Global External Relations Officer	56	2009
Deborah P. Majoras	Chief Legal Officer and Secretary	47	2010
Moheet Nagrath	Global Human Resources Officer	51	2008
Filippo Passerini	President—Global Business Services and Chief Information Officer	53	2003
Marc S. Pritchard	Global Brand Building Officer	50	2008
Valarie L. Sheppard	Senior Vice President & Comptroller and Global Household Care Finance and Accounting	46	2005

All of the Executive Officers named above, excluding Mr. Shirley and Ms. Majoras, have been employed by the Company for more than five years. During the previous five years, Mr. Shirley held the following positions within the Company: Vice Chairman – Global Beauty and Grooming (July 1, 2008 – present), Group President—North America (April 17, 2006 – June 30, 2008) and President—Commercial Operations—Gillette International (October 11, 2005 – April 16, 2006). Prior to the Company’s acquisition of The Gillette Company in October 2005, Mr. Shirley was President—Gillette International Commercial Operations (June 2004 – October 11, 2005). Ms. Majoras held the following positions within the Company during the past five years: Chief Legal Officer and Secretary (February 1, 2010 – present), Vice President and General Counsel (June 24, 2008 – January 31, 2010). Ms. Majoras was Chairman of the Federal Trade Commission from 2004 until joining the Company in 2008.

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PART II

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

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased (in thousands)(1)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)	Approximate Dollar Value of Shares That May Yet Be Purchased Under our Share Repurchase Program ($ in billions) (3) (4)
4/1/10 - 4/30/10	6,376,462	$	62.76	6,373,863	$	9.9
5/1/10 - 5/31/10	17,345,260	$	61.98	17,344,431	$	8.8
6/1/10 - 6/30/10	18,092,881	$	61.41	18,092,881	$	0

(1) The total number of shares purchased was 41,814,603 for the quarter. All transactions were made in the open market or pursuant to prepaid forward agreements with large financial institutions. Under these agreements, the Company prepays large financial institutions to deliver shares at future dates in exchange for a discount. The number of shares purchased other than through a publicly announced repurchase plan was 3,428 for the quarter. The 3,428 shares were acquired by the Company under various compensation and benefit plans. This table excludes shares withheld from employees to satisfy minimum tax withholding requirements on option exercises and other equity-based transactions. The Company administers cashless exercises through an independent, third party broker and does not repurchase stock in connection with cashless exercise.

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

(3) On August 3, 2007, the Company announced a share repurchase plan. Pursuant to the share repurchase plan, the Board of Directors authorized the Company and its subsidiaries to acquire in open market and/or private transactions $24 to $30 billion of shares of Company common stock over the subsequent three years (through June 30, 2010) to be financed by issuing a combination of long-term and short-term debt. Certain purchases were made prior to the announcement of the program but are considered purchases against the program. The total dollar value of shares purchased under the share repurchase plan was $22 billion. The share repurchase plan expired on June 30, 2010.

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

Additional information required by this item is incorporated by reference to Shareholder Return Performance Graphs, which appears on pages 76-77; Company and Shareholder Information, which appears on page 78 of the 2010 Annual Report; and can be found in Part III, Item 12 of this Form 10-K.

Item 6. Selected Financial Data.

The information required by this item is incorporated by reference to Note 1, Summary of Significant Accounting Policies, which appears on pages 55-57; Note 11, Segment Information, which appears on pages 71-72; and Financial Summary, which appears on page 76 of the 2010 Annual Report.

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

The information required by this item is incorporated by reference to Management’s Discussion and Analysis, which appears on pages 31-50; Note 1, Summary of Significant Accounting Policies, which appears on pages 55-57; Note 10, Commitments and Contingencies, which appears on page 70; and Note 11, Segment Information, which appears on pages 71-72 of the 2010 Annual Report.

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The Company has made certain forward-looking statements in the 2010 Annual Report and in other contexts relating to volume and net sales growth, increases in market shares, financial goals and cost reduction, among others.

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

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

The information required by this item is incorporated by reference to the section entitled Other Information, which appears on pages 48-49, and Note 5, Risk Management Activities and Fair Value Measurements, which appears on pages 59-62 of the 2010 Annual Report.

Item 8. Financial Statements and Supplementary Data.

Additional information required by this item is incorporated by reference to pages 51-74 and 76 of the 2010 Annual Report.

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

Not applicable.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

The Company’s President and Chief Executive Officer, Robert A. McDonald, and the Company’s Chief Financial Officer, Jon R. Moeller, performed an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act)) as of the end of the period covered by this Annual Report on Form 10-K.

Messrs. McDonald and Moeller have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including Messrs. McDonald and Moeller, to allow their timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting.

Management’s annual report on internal control over financial reporting and the report of the independent registered public accounting firm are incorporated by reference to pages 29-30 of the 2010 Annual Report.

Changes in Internal Control over Financial Reporting.

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

Item 9B. Other Information.

Not applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The Board of Directors has determined that the following members of the Audit Committee are independent and are audit committee financial experts as defined by SEC rules: Ms. Patricia A. Woertz (Chair) and Mr. Rajat K. Gupta.

The information required by this item is incorporated by reference to the following sections of the 2010 Proxy Statement filed pursuant to Regulation 14A: the sections entitled Election of Directors, Nominees for Election of Directors with Terms Expiring in 2011, The Board of Directors and Committees of the Board, up to but not including the section entitled Board and Committee Meeting Attendance; the section entitled Code of Ethics; and the section entitled Section 16(a) Beneficial Ownership Reporting Compliance. Pursuant to Instruction 3 of Item 401(b) of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this report.

Item 11. Executive Compensation.

The information required by this item is incorporated by reference to the 2010 Proxy Statement filed pursuant to Regulation 14A, beginning with the section entitled Director Compensation up to but not including the section entitled Security Ownership of Management and Certain Beneficial Owners.

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

The following table gives information about the Company’s common stock that may be issued upon the exercise of options, warrants and rights under all of the Company’s equity compensation plans as of June 30, 2010. The table includes the following plans: The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 1992 Stock Plan (Belgian Version); The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan; The Procter & Gamble Future Shares Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 2003 Non-Employee Directors’ Stock Plan; The Gillette Company 1971 Stock Option Plan; The Gillette Company 2004 Long-Term Incentive Plan; and The Procter & Gamble 2009 Stock and Incentive Compensation Plan.

Plan Category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders (1)
Options	323,131,725	$	50.5810	(2	)
Restricted Stock Units (RSUs)	5,376,606		N/A	(2	)
Equity compensation plans not approved by security holders (3)
Options	41,839,216	$	46.9131	(4	)
Restricted Stock Units (RSUs)	98,136		N/A	(4	)
GRAND TOTAL	370,445,683	$	53.6847	155,167,362

(1) Includes The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 1993 Non-Employee Directors Stock Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 2003 Non-Employee Directors Stock Plan; and The Procter & Gamble 2009 Stock and Incentive Compensation Plan.

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(2) Of the plans listed in (1), only The Procter & Gamble 2009 Stock and Incentive Compensation Plan and The 2003 Non- Employee Directors Stock Plan allow for future grants of securities. The maximum number of shares that may be granted under these plans is 180 million shares. Stock options and stock appreciation rights are counted on a one for one basis while full value awards (such as RSUs) will be counted as 2.88 shares for each share awarded. Total shares available for future issuance under these plans is 155 million.

(3) Includes The Procter & Gamble 1992 Stock Plan (Belgian version); The Procter & Gamble Future Shares Plan; The Gillette Company 1971 Stock Option Plan; and The Gillette Company 2004 Long-Term Incentive Plan.

(4) None of the plans listed in (3) allow for future grants of securities.

The Procter & Gamble 1992 Stock Plan (Belgian Version)

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

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

The Procter & Gamble Future Shares Plan

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

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

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

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

The Gillette Company 1971 Stock Option Plan

No further grants can be made under the plan after April 25, 2005, although unexercised stock options previously granted under this plan remain outstanding. The plan was approved by shareholders of The Gillette Company and assumed by the Company upon the merger between The Procter & Gamble Company and The Gillette Company. All options became immediately vested and exercisable on October 1, 2005 as a result of the merger. After the merger, all outstanding options became options to purchase shares of The Procter & Gamble Company subject to an exchange ratio of .975 shares of P&G stock per share of Gillette stock.

The plan was designed to attract, retain and motivate key salaried employees of The Gillette Company and non-employee members of its Board of Directors. Under the plan, eligible participants receive the option to purchase Company stock at a pre-determined price which cannot be less than 100% of the fair market value per share at the time that the option is granted. The period of any option may not exceed ten years from the date of grant. Subject to adjustment for changes in the Company’s capitalization, the number of shares granted under the plan was not to exceed 198,000,000 shares.

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

The Gillette Company 2004 Long-Term Incentive Plan

Shareholders of The Gillette Company approved The Gillette Company 2004 Long-Term Incentive Plan on May 20, 2004, and the plan was assumed by the Company upon the merger between The Procter & Gamble Company and The Gillette Company. All options became immediately vested and exercisable on October 1, 2005 as a result of the merger. After the merger, all outstanding options became options to purchase shares of The Procter & Gamble Company subject to an exchange ratio of .975 shares of P&G stock per share of Gillette stock. Only employees previously employed by The Gillette Company prior to October 1, 2005 are eligible to receive grants under this plan.

The plan was designed to attract, retain and motivate employees of The Gillette Company, and until the effective date of the merger between The Gillette Company and The Procter & Gamble Company, non-employee members of the Gillette Board of Directors. Under the plan, eligible participants are: (i) granted or offered the right to purchase stock options, (ii) granted stock appreciation rights and/or (iii) granted shares of the Company’s common stock or restricted stock units (and dividend equivalents). Subject to adjustment for changes in the Company’s capitalization and the addition of any shares authorized but not issued or redeemed under The Gillette Company 1971 Stock Option Plan, the number of shares to be granted under the plan is not to exceed 19,000,000 shares.

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

15

If a recipient of a grant leaves the Company while holding an unexercised option or right: (1) any unexercisable portions immediately become void, except in the case of death, retirement, special separation (as those terms are defined in the plan) or any grants as to which the Compensation Committee of the Board of Directors has waived the termination provisions; and (2) any exercisable portions immediately become void, except in the case of death, retirement, special separation, voluntary resignation that is not for Good Reason (as those terms are defined in the plan) or any grants as to which the Compensation Committee of the Board of Directors has waived the termination provisions.

Additional information required by this item is incorporated by reference to the 2010 Proxy Statement filed pursuant to Regulation 14A, beginning with the section entitled Security Ownership of Management and Certain Beneficial Owners and up to but not including the section entitled Section 16(a) Beneficial Ownership Reporting Compliance.

Item 13. Certain Relationships and Related Transactions and Director Independence.

The information required by this item is incorporated by reference to the following sections of the 2010 Proxy Statement filed pursuant to Regulation 14A: the sections entitled Director Independence and Review and Approval of Transactions with Related Persons.

Item 14. Principal Accounting Fees and Services.

The information required by this item is incorporated by reference to the 2010 Proxy Statement filed pursuant to Regulation 14A, beginning with the section entitled Report of the Audit Committee and ending with the section entitled Services Provided by Deloitte.

16

PART IV

Item 15. Exhibits and Financial Statement Schedules.

1. Financial Statements:

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

– Management’s Report on Internal Control over Financial Reporting

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

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

– Consolidated Statements of Earnings — for years ended June 30, 2010, 2009 and 2008

– Consolidated Balance Sheets — as of June 30, 2010 and 2009

– Consolidated Statements of Shareholders’ Equity — for years ended June 30, 2010, 2009 and 2008

– Consolidated Statements of Cash Flows — for years ended June 30, 2010, 2009 and 2008

– 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 (as amended by shareholders at the annual meeting on October 14, 2008) (Incorporated by reference to Exhibit (3-1) of the Company’s Form 10-Q for the quarter ended December 31, 2008).
(3-2) —	Regulations (as amended by shareholders at the annual meeting on October 10, 2006) (Incorporated by reference to Exhibit (3-2) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
Exhibit        (4) —	Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission.
Exhibit   (10-1) —	The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended on August 17, 2007) which was originally adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended March 31, 2008), and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2008).*
(10-2) —	The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001) which was originally adopted by the shareholders at the annual meeting on October 12, 1992 (Incorporated by reference to Exhibit (10-2) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2008).*
(10-3) —	The Procter & Gamble Executive Group Life Insurance Policy (Incorporated by reference to Exhibit (10-3) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2008).*

17

(10-4) —	The Procter & Gamble Deferred Compensation Plan for Directors (as amended December 12, 2006), which was originally adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended December 31, 2006).*
(10-5) —	The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan (as amended September 10, 2002) which was originally adopted by the shareholders at the annual meeting on October 11, 1994 (Incorporated by reference to Exhibit (10-5) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2008).*
(10-6) —	The Procter & Gamble 1992 Stock Plan (Belgian Version) (as amended December 11, 2001) which was originally adopted by the Board of Directors on February 14, 1997 (Incorporated by reference to Exhibit (10-6) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2008).*
(10-7) —	The Procter & Gamble Future Shares Plan (as adjusted for the stock split effective May 21, 2004) which was originally adopted by the Board of Directors on October 14, 1997.*
(10-8) —	The Procter & Gamble 2003 Non-Employee Directors’ Stock Plan (as amended in August 2007) which was originally adopted by the shareholders at the annual meeting on October 14, 2003, and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended September 30, 2007).*
(10-9) —	The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended December 31, 2008).*
(10-10) —	Summary of the Company’s Short Term Achievement Reward Program and related correspondence and terms and conditions.*
(10-11) —	Summary of the Company’s Business Growth Program and related correspondence and terms and conditions. (Incorporated by reference to Exhibit (10-11) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2009).*
(10-12) —	Company’s Form of Separation Agreement & Release (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended March 31, 2007).*
(10-13) —	Summary of personal benefits available to certain officers and non-employee directors (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended September 30, 2008).*
(10-14) —	The Gillette Company 1971 Stock Option Plan (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended December 31, 2005).*
(10-15) —	The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) (Incorporated by reference to Exhibit (10-4) of the Company’s Form 10-Q for the quarter ended September 30, 2007).*
(10-16) —	The Gillette Company Executive Life Insurance Program (Incorporated by reference to Exhibit (10-4) of the Company’s 10-Q for the quarter ended September 30, 2006).*
(10-17) —	The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to Exhibit (10-5) of the Company’s Form 10-Q for the quarter ended September 30, 2006).*

18

(10-18) —	The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit (10-6) of the Company’s Form 10-Q for the quarter ended September 30, 2006).*
(10-19) —	The Gillette Company Estate Preservation Plan (Incorporated by reference to Exhibit (10-7) of the Company’s Form 10-Q for the quarter ended September 30, 2006).*
(10-20) —	The Gillette Company Deferred Compensation Plan (Incorporated by reference to Exhibit (10-8) of the Company’s Form 10-Q for the quarter ended September 30, 2006).*
(10-21) —	Form of Commercial Paper Dealer Agreement in connection with the $10 Billion commercial paper program initiated by Procter & Gamble International Funding S.C.A. (Incorporated by reference to Exhibit (10-9) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-22) —	Form of Issuing and Paying Agent Agreement in connection with the $10 Billion commercial paper program initiated by Procter & Gamble International Funding S.C.A. (Incorporated by reference to Exhibit (10-10) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-23) —	Senior Executive Recoupment Policy (Incorporated by referenced to Exhibit 99 of the Company’s Form 8-K filed on December 15, 2006).*
(10-24) —	The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through August 21, 2006. (Incorporated by reference to Exhibit (10-29) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2007).*
(10-25) —	The Procter & Gamble 2009 Stock and Incentive Compensation Plan which was originally adopted by shareholders at the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2009), and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2009).*
Exhibit      (11) —	Computation of earnings per share.
Exhibit      (12) —	Computation of ratio of earnings to fixed charges.
Exhibit      (13) —	Annual Report to Shareholders (pages 1-79).
Exhibit      (21) —	Subsidiaries of the registrant.
Exhibit      (23) —	Consent of Independent Registered Public Accounting Firm.
Exhibit      (31) —	Rule 13a-14(a)/15d-14(a) Certifications.
Exhibit      (32) —	Section 1350 Certifications.
Exhibit   (99-1) —	Summary of Directors and Officers Insurance Program.
101.INS (1)	XBRL Instance Document
101.SCH (1)	XBRL Taxonomy Extension Schema Document
101.CAL (1)	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)	XBRL Taxonomy Definition Linkbase Document
101.LAB (1)	XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)	XBRL Taxonomy Extension Presentation Linkbase Document

19

(1) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

* Compensatory plan or arrangement

20

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	/s/    ROBERT A. MCDONALD
	(Robert A. McDonald) Chairman of the Board, President and Chief Executive Officer August 13, 2010

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
/S/    ROBERT A. MCDONALD         (Robert A. McDonald)	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)	August 13, 2010
/S/    JON R. MOELLER         (Jon R. Moeller)	Chief Financial Officer (Principal Financial Officer)	August 13, 2010
/S/    VALARIE L. SHEPPARD         (Valarie L. Sheppard)	Senior Vice President & Comptroller and Global Household Care Finance and Accounting (Principal Accounting Officer)	August 13, 2010
/S/    ANGELA F. BRALY         (Angela F. Braly)	Director	August 13, 2010
/S/    KENNETH I. CHENAULT         (Kenneth I. Chenault)	Director	August 13, 2010
/S/    SCOTT D. COOK         (Scott D. Cook)	Director	August 13, 2010
/S/    RAJAT K. GUPTA         (Rajat K. Gupta)	Director	August 13, 2010
/S/    W. JAMES MCNERNEY, JR.         (W. James McNerney, Jr.)	Director	August 13, 2010
/S/    JOHNATHAN A. RODGERS         (Johnathan A. Rodgers)	Director	August 13, 2010
/S/    MARY AGNES WILDEROTTER         (Mary Agnes Wilderotter)	Director	August 13, 2010

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Signature	Title	Date
/S/    PATRICIA A. WOERTZ         (Patricia A. Woertz)	Director	August 13, 2010
/S/    ERNESTO ZEDILLO         (Ernesto Zedillo)	Director	August 13, 2010

22

EXHIBIT INDEX

Exhibit     (3-1) —	Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 14, 2008) (Incorporated by reference to Exhibit (3-1) of the Company’s Form 10-Q for the quarter ended December 31, 2008).
(3-2) —	Regulations (as amended by shareholders at the annual meeting on October 10, 2006) (Incorporated by reference to Exhibit (3-2) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
Exhibit        (4) —	Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission.
Exhibit  (10-1) —	The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended on August 17, 2007) which was originally adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended March 31, 2008), and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2008).
(10-2) —	The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001) which was originally adopted by the shareholders at the annual meeting on October 12, 1992 (Incorporated by reference to Exhibit (10-2) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2008).
(10-3) —	The Procter & Gamble Executive Group Life Insurance Policy (Incorporated by reference to Exhibit (10-3) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2008).
(10-4) —	The Procter & Gamble Deferred Compensation Plan for Directors (as amended December 12, 2006), which was originally adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended December 31, 2006).
(10-5) —	The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended September 10, 2002) which was originally adopted by the shareholders at the annual meeting on October 11, 1994 (Incorporated by reference to Exhibit (10-5) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2008).
(10-6) —	The Procter & Gamble 1992 Stock Plan (Belgian Version) (as amended December 11, 2001) which was originally adopted by the Board of Directors on February 14, 1997 (Incorporated by reference to Exhibit (10-6) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2008).
(10-7) —	The Procter & Gamble Future Shares Plan (as adjusted for the stock split effective May 21, 2004) which was originally adopted by the Board of Directors on October 14, 1997.
(10-8) —	The Procter & Gamble 2003 Non-Employee Directors’ Stock Plan (as amended in August 2007) which was originally adopted by the shareholders at the annual meeting on October 14, 2003, and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended September 30, 2007).
(10-9) —	The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended December 31, 2008).
(10-10) —	Summary of the Company’s Short Term Achievement Reward Program and related correspondence and terms and conditions.

(10-11) —	Summary of the Company’s Business Growth Program and related correspondence and terms and conditions. (Incorporated by reference to Exhibit (10-11) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2009).
(10-12) —	Company’s Form of Separation Agreement & Release (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended March 31, 2007).
(10-13) —	Summary of personal benefits available to certain officers and non- employee directors (Incorporated by reference to Exhibit (10-3) of the Company’s Form 10-Q for the quarter ended September 30, 2008).
(10-14) —	The Gillette Company 1971 Stock Option Plan (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended December 31, 2005).
(10-15) —	The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) (Incorporated by reference to Exhibit (10-4) of the Company’s Form 10-Q for the quarter ended September 30, 2007).
(10-16) —	The Gillette Company Executive Life Insurance Program (Incorporated by reference to Exhibit (10-4) of the Company’s 10-Q for the quarter ended September 30, 2006).
(10-17) —	The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to Exhibit (10-5) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-18) —	The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit (10-6) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-19) —	The Gillette Company Estate Preservation Plan (Incorporated by reference to Exhibit (10-7) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-20) —	The Gillette Company Deferred Compensation Plan (Incorporated by reference to Exhibit (10-8) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-21) —	Form of Commercial Paper Dealer Agreement in connection with the $10 Billion commercial paper program initiated by Procter & Gamble International Funding S.C.A. (Incorporated by reference to Exhibit (10-9) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-22) —	Form of Issuing and Paying Agent Agreement in connection with the $10 Billion commercial paper program initiated by Procter & Gamble International Funding S.C.A. (Incorporated by reference to Exhibit (10-10) of the Company’s Form 10-Q for the quarter ended September 30, 2006).
(10-23) —	Senior Executive Recoupment Policy (Incorporated by referenced to Exhibit 99 of the Company’s Form 8-K filed on December 15, 2006).
(10-24) —	The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through August 21, 2006. (Incorporated by reference to Exhibit (10-29) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2007).
(10-25) —	The Procter & Gamble 2009 Stock and Incentive Compensation Plan which was originally adopted by shareholders at the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2009), and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company’s Form 10-Q for the quarter ended December 31, 2009).

Exhibit      (11) —	Computation of earnings per share.
Exhibit      (12) —	Computation of ratio of earnings to fixed charges.
Exhibit      (13) —	Annual Report to Shareholders (pages 1-79).
Exhibit      (21) —	Subsidiaries of the registrant.
Exhibit      (23) —	Consent of Independent Registered Public Accounting Firm.
Exhibit      (31) —	Rule 13a-14(a)/15d-14(a) Certifications.
Exhibit      (32) —	Section 1350 Certifications.
Exhibit   (99-1) —	Summary of Directors and Officers Insurance Program.
101.INS (1)	XBRL Instance Document
101.SCH (1)	XBRL Taxonomy Extension Schema Document
101.CAL (1)	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)	XBRL Taxonomy Definition Linkbase Document
101.LAB (1)	XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

EX-10.7

EXHIBIT (10-7)

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(k).

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 thirty-four million (34,000,000) 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 occuring 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(k).

(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(k)), 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(k). 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 or Retirement.

(i)        If prior to the fifth anniversary of the Grant Date a Participant’s employment is terminated due to Disability or Retirement, 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(k). If a Participant’s employment is terminated due to Disability or Retirement 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 or Retirement to the extent such payment is permitted by law.

(f)      Termination of Employment due to Special Separation.

(i)        If a Participant’s employment is terminated due to Special Separation (except for Participants located in Italy), the Participant will receive an immediate cash payment equal to the Spread Value of the Award in full satisfaction of the Award, to the extent permitted by law.

(ii)        Notwithstanding the above, the Committee reserves the discretionary ability to waive the above cash payment provision and: (1) for terminations of employment due to Special Separation prior to the fifth anniversary of the Grant Date, specify that 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(k); and (2) for terminations of employment due to Special Separation on or after the fifth anniversary of the Grant Date, specify that 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.

(g)      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.

(h)      Nontransferability. Awards are not transferable and may only be exercised by the Participant.

(i)      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.

(j)      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.

(k)      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.

(l)      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

Article 6, Paragraph 6.1(e) changed; Article 6, Paragraph 6.1(f) adopted – March 11, 2003

Article 6, paragraphs 6.1(f)(i) and (ii) amended June 10, 2003

Adjusted for stock split effective May 21, 2004

EX-10.10

EXHIBIT (10-10)

Summary of the Company’s Short Term Achievement Reward Program and Related Correspondence and Terms and Conditions

SHORT TERM ACHIEVEMENT REWARD PROGRAM

The Short Term Achievement Reward (“STAR”) Program is The Procter & Gamble Company’s (the “Company”) annual bonus program designed to motivate and reward employees for achieving outstanding short term business results for the Company and its subsidiaries. STAR awards are made pursuant to authority delegated to the Compensation & Leadership Development Committee (the “C&LD Committee”) by the Board of Directors for awarding compensation to the Company’s principal officers and for making awards under the Procter & Gamble 2009 Stock and Incentive Compensation Plan (the “2009 Plan”) or any successor stock plan approved in accordance with applicable listing standards.

I. ELIGIBILITY

Employees at Band 3 or above and who worked at least 28 days (four calendar weeks) during the applicable fiscal year are eligible to participate. Eligible employees who do not work a full schedule (e.g., leaves of absence, disability, and less-than-full time schedules) in the fiscal year in which the award is payable may have awards pro-rated.

II. CALCULATION

The individual STAR Award is calculated as follows:

(STAR Target) x (Business Unit Performance Factor) x (Total Company Performance Factor)

• The STAR Target for each participant is calculated as:

(Base Salary) x (STAR Target percent)

Base Salary at the end of the applicable fiscal year is used to calculate the STAR award.

Generally, the STAR Target Percent is dependent on the individual’s position and level (Band) in the organization. The STAR Target percent for participants at Band 7 or above is set by the C&LD Committee. The STAR Target percent for all other participants is set by the Chief Executive Officer, with the concurrence of the Global Human Resources Officer, pursuant to authority delegated to them by the C&LD Committee. If an individual’s position and/or level changes during a fiscal year, and that change results in a new STAR Target Percent, the STAR Target Percent is pro-rated according to the amount of time in each position/level during the fiscal year.

The Business Unit Performance Factor is based on the fiscal year success for the appropriate STAR business unit. The STAR business units are defined by the Global Human Resources Officer and may consist of business categories, segments, geographies, functions, organizations or a combination of one or more of these items. The STAR business units will be defined within ninety (90) days of the beginning of the fiscal year, but may be adjusted as necessary to reflect business and/or organizational changes (e.g., reorganization, acquisition, merger, divestiture, etc.). The Business Unit Performance Factors can range from 53% to 167% with a target of 100%. In general, a committee consisting of at least two of the Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Global Human Resources Officer and/or the Chief Operating Officer (the “STAR Committee”), conducts a comprehensive retrospective assessment of the fiscal year performance of each STAR business unit against previously established goals for one or more of the following measures: Operating Total Shareholder Return, Key Competitor Comparison, After

Tax Profit, Operating Cash Flow, Value Share, Volume, Net Outside Sales, Customer spending effectiveness, SRAP cost progress, Transportation and warehouse cost progress, Internal controls, Accounts receivable payscore (collection effectiveness), Organization Head Self Assessment, and Cross Organization Assessment. The STAR Committee makes a recommendation of an appropriate Business Unit Performance Factor to the C&LD Committee. There may also be other factors significantly affecting STAR business unit results positively or negatively which can be considered by the STAR Committee when making its recommendation. No member of the STAR Committee makes any recommendation or determination as to their own STAR award. As a result, there are certain instances in which a Business Unit Performance Factor recommendation to the C&LD Committee must be made exclusively by the Chief Executive Officer.

• The Total Company Performance Factor is based on the total Company’s success during the fiscal year and ranges from 80% to 130%, with a target of 100%. The same Total Company Performance Factor is applied to all STAR award calculations, regardless of STAR business unit. It is determined using a matrix which compares results against pre-established goals for fiscal year organic sales growth and core earnings per share (“EPS”) growth for the fiscal year.

While the STAR Committee makes recommendations to the C&LD Committee regarding the Business Unit and Total Company performance factors to be applied to all STAR awards (except those for the STAR Committee members), only the final award amounts for principal officers are approved specifically by the C&LD Committee. The C&LD Committee has delegated the approval of STAR awards for other participants to the Chief Executive Officer. The C&LD Committee has discretion to use, increase or decrease the performance factors recommended by the STAR Committee and/or to choose not to pay STAR awards during a given year.

Each year the C&LD Committee approves a cash pool for STAR awards equal to a percentage of profit, and the C&LD Committee sets a limit on the portion of that pool which can be awarded to each of the Named Executives subject to Section 162(m) of the Internal Revenue Service code. This ensures that any STAR awards paid to such executives are fully tax deductible by the Company.

III. TIMING AND FORM

STAR awards are determined after the close of the fiscal year and are paid on or about September 15. The award form choices and relevant considerations are explained in payment preference materials generally in the form of Appendix 1. Participants receive written notice of their award detailing the calculation, generally in the form of Appendix 2. The grant letters used for those employees who elect to receive awards in stock options or restricted stock units are generally in the form of Appendix 3.

Generally, STAR awards are paid in cash. However, before the end of the calendar year preceding the award date, eligible participants can elect to receive their STAR award in forms other than cash. Alternatives to cash include stock options, local deferral programs (depending on local regulations in some countries), or restricted stock units and/or deferred compensation (for participants also in the Business Growth Program). The Company converts cash to other forms of payment (e.g., stock options, restricted stock units, etc.) using a conversion factor that is reviewed and approved by the C&LD Committee annually. Any STAR award paid in stock options, restricted stock units or other form of equity shall be awarded pursuant to this program and the terms and conditions of the 2009 Plan or any successor stock plan approved in accordance with applicable listing standards, as they may be revised from time to time.

IV. SEPARATION FROM THE COMPANY

• Retirement, Death or Special Separation with a Separation Package: If a participant worked at least 28 days (4 calendar weeks) during the fiscal year, the STAR award is pro-rated by dividing the number of calendar days the participant was an “active employee” during the fiscal year by 365.

• Voluntary Resignation or Termination for cause: Separating employees must have been active employees as of June 30 (the close of the fiscal year for which the award is payable) to receive an award.

Eligible participants who have left the Company will receive a cash payment (equity such as stock options and RSUs can only be issued to active employees) on the same timing as STAR awards or as soon thereafter as possible.

V. CHANGE IN CONTROL

Notwithstanding the foregoing, if there is a Change in Control in any fiscal year, STAR awards will be calculated in accordance with Section II above, but each factor will be calculated for the period from the beginning of the fiscal year in which a Change in Control occurred up to and including the date of such Change in Control (“CIC Period”). “Change in Control” shall have the same meaning as defined in the 2009 Plan or any successor stock plan.

VI. GENERAL TERMS AND CONDITIONS

While any STAR award amount received by one individual for any year shall be considered as earned remuneration in addition to salary paid, it shall be understood that this plan does not give to any officer or employee any contract rights, express or implied, against any Company for any STAR award or for compensation in addition to the salary paid to him or her, or any right to question the action of the Board of Directors or the C&LD or STAR Committees.

Each award to the Chairman of the Board, Chief Executive Officer, Vice-Chairs, Group Presidents, Presidents, Global Function Heads and Senior Vice Presidents and equivalents, made pursuant to this plan, is subject to the Senior Executive Recoupment Policy adopted by the C&LD Committee in December 2006.

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

Appendix 1: Payment Preference Materials for STAR Awards

[DATE]

[NAME]

Subject: Preferences for [YEAR] STAR Payments and Deferred Compensation Choices

Your choices for the awards are:

September [YEAR] STAR Award

• Cash

• Stock Options

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

• Deferred Compensation (for BGP participants only)

Attached you will find an election form to be returned to [NAME].

Please keep the following in mind as you consider your choices:

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

• While your selection will be given consideration, it is not binding on the Company until approved by the Compensation & Leadership Development Committee of the Board of Directors.

IF YOU MISS THE [DATE] DEADLINE, YOU WILL RECEIVE THE DEFAULT (CASH).

[NAME]

[YEAR] EXECUTIVE COMPENSATION AWARD FORM PREFERENCES

[YEAR] STAR Award Payable [DATE] [YEAR] Preference Selection

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

• You must be an active employee as of the award date to receive any non-cash award

• Any election by you to delay the settlement date of your RSUs does not in any way alter or amend the terms of The Procter & Gamble 2009 Stock and Incentive Compensation Plan, any successor plan(s) under which awards are granted, the Regulations of the Compensatoin and Leadership Development Committee of the Board of Directors and/or the Statement of Terms and Conditions for Restricted Stock Units pursuant to which the subject RSUs were granted.

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

• All elections are irrevocable after [DATE].

Signature Date

Return form to [NAME]

Appendix 2: STAR Award Letter

[DATE]

Fellow P&G Leaders:

I am pleased to announce the average STAR award for [YEAR] is [NUMBER] % of target. STAR awards are a determined based on your individual Business Unit Performance Factor and a Total Company Factor. Business Unit Performance Factors are decided by the STAR Committee based on a retrospective assessment of each unit’s performance. The Total Company Factor is calculated based on P&G’s organic sales growth and earnings per share. [EXPLANATION OF COMPANY RESULTS and COMPARISON TO PREVIOUS YEAR]

Actual STAR awards as a percentage of target [HISTORICAL COMPARISON OF RESULTS TO PREVIOUS YEAR(S)]

By remaining choiceful, focused, and disciplined, we can look forward to future success. Well done! Thanks.

[NAME]

Personal & Confidential

Individual Award Summary

[NAME]

Your STAR Award is [NUMBER] payable in [FORM]

[Number]	x	[Number]%	x	[Number]%	=	Number
STAR Target	x	Business Unit Performance Factor	x	Total Company Performance Factor	=	STAR Award

STAR Target

Based on	June 30 [YEAR] Base Salary:	[NUMBER]
	Band Level(s) during [YEAR]:	[NUMBER]
	STAR Target Percent:	[NUMBER]
	(Adjusted and/or prorated, as appropriate)
	Base x STAR Target Percent:	[NUMBER]
	Your STAR Target:	[NUMBER]

Business Unit Performance Factor

Business Unit	Weight	Performance Factor
[Business Unit]	[NUMBER]	[NUMBER] %

Total Company Performance Factor

Organic Sales Growth	[NUMBER]
Earnings Per Share	[NUMBER]
Total Company Performance Factor	[NUMBER] %

Your STAR Award is [NUMBER] % of STAR Target

Appendix 3: Cover letter for STAR Grant

in Stock Options and Stock Appreciation Rights

TO:     Short Term Achievement Reward (STAR) Recipients of P&G Stock Options and Stock Appreciation Rights*

The attached stock option grant letter refers to your STAR award. The grant was determined by dividing the gross award amount to be paid in stock options (shown on your award summary previously distributed) by the [DATE] closing stock price of $ [NUMBER]. The result was multiplied by [NUMBER] and then rounded up to the next full share. No further action to accept this grant is required.

You may retain these STAR stock options until their expiration date in [NUMBER] years even if you leave the Company, as long as you are in good standing. This is true for STAR stock options only as they represent payment for the award that you have already earned. These options will vest in [NUMBER] years.

Stock options are granted under the terms and conditions of the 2009 Procter & Gamble Stock and Incentive Compensation Plan and the Regulations of the Compensation and Leadership Development Committee of the Board of Directors. The updated plan prospectus is available via the [WEBSITE].

Please keep a copy of the grant letter for your records. If you have any questions about the award granted, please direct them to [NAME]. Questions related to the exercise process should be directed to [NAME].

[NAME]

* Recipients of stock appreciation rights should see their subsidiary Chief Financial Officer regarding the procedure for redeeming such rights.

Grant Letter for STAR Award in Stock Options

and Stock Appreciation Rights

[DATE]

[NAME]

Subject:            Non-Statutory Stock Option Series xx-STAR-xx

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

Grant Value:	[NUMBER]
Option Price per Share:	[NUMBER]
Number of Shares:	[NUMBER]
Date of Grant:	[DATE]
Expiration of Option:	[DATE]
Option Exercisable:	[NUMBER]% after [DATE]

This stock option is granted in accordance with and subject to the terms of The Procter & Gamble 2009 Stock and Incentive Compensation Plan (including any applicable sub-plan) (the “Plan”), the Regulations of the Compensation & Leadership Development Committee of the Board of Directors (the “Committee”), and the Exercise Instructions in place as may be revised from time to time,

You may access, download and/or print the terms, or any portion thereof, of the Plan by activating this hyperlink [LINK]. Nonetheless, if you would prefer to receive a paper copy of The Procter & Gamble 2009 Stock and Incentive Compensation Plan and/or the Regulations, please send a written request via email to [EMAIL ADDRESS]. Please understand that you will continue to receive future Plan materials and information via electronic mail even though you may have requested a paper copy.

This option is not transferable other than by will or the laws of descent and distribution and is exercisable during your life only by you. The Compensation & Leadership Development Committee has waived the provisions of Article G, paragraph 9 in the event of separation from the Company.

Please note that when the issue or transfer of the Common Stock covered by this option may, in the opinion of the Company, conflict or be inconsistent with any applicable law or regulation of any governmental agency, the Company reserves the right to refuse to issue or transfer said Common Stock and that any outstanding stock options may be suspended or terminated and net proceeds may be recovered by the Company if you fail to comply with the terms and conditions governing this award.

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

You do not need to do anything further to accept this award under the terms of the 2009 Stock Plan.

The Procter & Gamble Company

[NAME]

Grant Letter for STAR Award in RSUs

[DATE]

[NAME]

Subject:            Award of Restricted Stock Units (STAR)

This is to advise you that The Procter & Gamble Company, an Ohio corporation, is awarding you with Restricted Stock Units, on the dates and in the amounts listed below, pursuant to The Procter & Gamble 2009 Stock and Incentive Compensation Plan, and subject to the Regulations of the Compensation and Leadership Development Committee of the Board of Directors (“Regulations”) and to the attached Statement of Terms and Conditions Form [CODE]

Grant Date:	[DATE]
Original Settlement Date:	[DATE]
Number of Restricted Stock Units:	[NUMBER]

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

THE PROCTER & GAMBLE COMPANY

                [NAME]

¨ I hereby accept the Award of Restricted Stock Units set forth above in accordance with and subject to the terms of The Procter & Gamble 2009 Stock and Incentive Compensation Plan, the Regulations and the attached Statement of Terms and Conditions for Restricted Stock Units, with which I am familiar. I agree that the Award of Restricted Stock Units, The Procter & Gamble 2009 Stock and Incentive Compensation Plan, the Regulations and the attached Statement of Terms and Conditions for Restricted Stock Units together constitute an agreement between the Company and me in accordance with the terms thereof and hereof, and I further agree that any legal action related to this Award of Restricted Stock Units may be brought in any federal or state court located in Hamilton County, Ohio, USA, and I hereby accept the jurisdiction of these courts and consent to service of process from said courts solely for legal actions related to this Award of Restricted Stock Units.

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

Date                                                             Signature                         

EX-11

EXHIBIT (11)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

Computation of Earnings Per Share

Amounts in millions except per share amounts

	2010		2009		2008		2007		2006
BASIC NET EARNINGS PER SHARE
Net earnings from continuing operations	$	10,946	$	10,680	$	11,291	$	9,662	$	8,187
Preferred dividends, net of tax benefit		219		192		176		161		148
Net earnings from continuing operations available to common shareholders	$	10,727	$	10,488	$	11,115	$	9,501	$	8,039
Net earnings from discontinued operations		1,790		2,756		784		678		497
Net earnings available to common shareholders	$	12,517	$	13,244	$	11,899	$	10,179	$	8,536
Basic weighted average common shares outstanding		2,900.8		2,952.2		3,080.8		3,159.0		3,054.9
Basic net earnings per common share - continuing operations	$	3.70	$	3.55	$	3.61	$	3.01	$	2.63
Basic net earnings per common share - discontinued operations		0.62		0.94		0.25		0.21		0.16
Basic net earnings per common share	$	4.32	$	4.49	$	3.86	$	3.22	$	2.79
DILUTED NET EARNINGS PER SHARE
Diluted net earnings from continuing operations	$	10,946	$	10,680	$	11,291	$	9,662	$	8,187
Diluted net earnings from discontinued operations		1,790		2,756		784		678		497
Diluted net earnings	$	12,736	$	13,436	$	12,075	$	10,340	$	8,684
Basic weighted average common shares outstanding		2,900.8		2,952.2		3,080.8		3,159.0		3,054.9
Add potential effect of:
Conversion of preferred shares		134.0		139.2		144.2		149.6		154.1
Exercise of stock options and other Unvested Equity awards		64.5		62.7		91.8		90.0		76.9
Diluted weighted average common shares outstanding		3,099.3		3,154.1		3,316.8		3,398.6		3,285.9
Diluted net earnings per common share - continuing operations	$	3.53	$	3.39	$	3.40	$	2.84	$	2.49
Diluted net earnings per common share - discontinued operations		0.58		0.87		0.24		0.20		0.15
Diluted net earnings per common share	$	4.11	$	4.26	$	3.64	$	3.04	$	2.64

EX-12

EXHIBIT (12)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

Computation of Ratio of Earnings to Fixed Charges

Amounts in millions

	Years Ended June 30
	2010		2009		2008		2007		2006
EARNINGS, AS DEFINED
Earnings from operations before income taxes and before adjustments for noncontrolling interests in consolidated subsidiaries and after eliminating undistributed earnings of equity method investees	$	15,169	$	14,461	$	14,927	$	13,698	$	11,658
Fixed charges (excluding capitalized interest)		1,167		1,576		1,640		1,458		1,268
TOTAL EARNINGS, AS DEFINED	$	16,336	$	16,037	$	16,567	$	15,156	$	12,926
FIXED CHARGES, AS DEFINED
Interest expense (including capitalized interest)	$	1,014	$	1,431	$	1,546	$	1,374	$	1,153
1/3 of rental expense		176		177		137		124		122
TOTAL FIXED CHARGES, AS DEFINED	$	1,190	$	1,608	$	1,683	$	1,498	$	1,275
RATIO OF EARNINGS TO FIXED CHARGES		13.7x		10.0x		9.8x		10.1x		10.1x

EX-13

EXHIBIT (13)

Annual Report to Shareholders

(pages 1-79)

2 The Procter & Gamble Company

Last year, we updated P&G’s growth strategy to connect it explicitly to our Company’s Purpose. We focused on three specific choices: to grow P&G’s core brands and categories with an unrelenting focus on innovation; to build our business with unserved and underserved consumers; and to continue to grow and develop faster-growing, higher-margin businesses with global leadership potential.

These strategic choices are unified by one simple, over-arching growth strategy: to touch and improve the lives of MORE CONSUMERS in MORE PARTS OF THE WORLD, MORE COMPLETELY. We’ve made this the centerpiece of our leadership agenda because we believe a Purpose-inspired growth strategy is intrinsically rewarding and motivating. It unleashes creativity, commitment and peak performance in P&G people. It attracts talent and partners. It builds goodwill with external stakeholders.

We are executing across all three dimensions of this growth strategy on all of our businesses around the world. The Company’s performance in the 2010 fiscal year, and the strength with which we have entered the 2011 fiscal year, demonstrate that our Purpose-inspired growth strategy is working.

Substantial Progress toward Growth Goals

We also renewed our growth goals last year. Our fundamental objective is the creation of value for shareholders at industry leadership levels on a consistent basis. More specifically, our goal is to deliver total shareholder return that consistently ranks P&G among the top-third of our peers—the best performing consumer products companies in the world. In addition, we measure our progress through a combination of consumer and financial goals. We made substantial progress in fiscal 2010:

• Organic sales grew 3%, in line with Company expectations. ⁽¹⁾

• Core earnings per share grew 6%, roughly double our going-in objective for the year. ⁽²⁾

• Adjusted free cash flow was 125% of net earnings, well above our target level. ⁽³⁾

We also made substantial progress toward profitable share growth, a key priority. A year ago, our global market share was down about half a point versus prior-year levels; today, as I write this, our global market share is up nearly half a point and accelerating. Last year, we were building market share in businesses accounting for only about 33% of sales; today, we are building share in brands and countries accounting for about 66% of sales and P&G’s market share is growing in 14 of our top 17 countries.

In addition, we reached an additional 200 million consumers, bringing the total served to 4.2 billion—on track toward our goal of reaching 5 billion consumers by fiscal 2015. Average per capita spending on P&G products increased in 70% of our top countries, up from 60% in fiscal 2009. And, global household penetration—the percentage of households using at least one P&G product—increased nearly two percentage points, to 61%.

On the strength of these results, we paid approximately $5.5 billion in dividends and returned $6 billion to shareholders through the repurchase of P&G stock. Based on our current market capitalization, dividends and share repurchases provide shareholders with an effective cash yield of more than 6%, with additional potential for capital appreciation.

In April, we increased our quarterly dividend by 9.5%, making this the 120th consecutive year that P&G has paid a dividend and the 54th consecutive year that the dividend has increased. Over those 54 years, the dividend has increased at an annual compound average rate of approximately 9.5%.

Purpose-inspired Growth Strategy: Our path forward

	FY 2010	ANNUAL GROWTH TARGETS
ORGANIC SALES GROWTH (1)	3%	1-2% above global market growth rates
CORE EPS GROWTH (2)	6%	High single to low double digits
ADJUSTED FREE CASH FLOW (3)	125% of net earnings	90% of net earnings

⁽¹⁾ Organic sales growth is sales growth excluding the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons. See page 49 for a reconciliation of organic sales growth to net sales growth.

⁽²⁾ Core EPS is a measure of the Company’s diluted net earnings per share from continuing operations excluding charges for potential competition law fines, a charge related to a tax provision for retiree healthcare subsidy payments in the recently enacted U.S. healthcare reform legislation and incremental Corporate restructuring charges incurred in fiscal 2009 versus 2008 to offset the dilutive impact of the Folgers divestiture. See page 50 for a reconciliation of Core EPS to diluted net earnings per share from continuing operations.

⁽³⁾ Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings excluding the gains on the divestiture of the global pharmaceuticals business. For 2010, adjusted free cash flow of $13,985 million is operating cash flow of $16,072 million less capital spending of $3,067 million plus the tax payments made on the gains from the global pharmaceuticals divestitures of $980 million. Adjusted free cash flow productivity of 125% is adjusted free cash flow of $13,985 million divided by net earnings of $12,736 million less gains of $1,585 million from the global pharmaceuticals divestitures.

The Procter & Gamble Company 3

This is encouraging performance, inspired by the Purpose that motivates our people and partners and driven primarily by our strong, multiyear innovation program. We are innovating to win in every P&G category, we are investing behind these innovations to build profitable market share and we are continually increasing productivity that funds our investments in future growth. This investment allows us to continually replenish our multiyear innovation pipeline.

Innovating to Win

Innovation has been—and will continue to be—at the heart of our success. In fiscal 2010, for the fourth consecutive year, we invested nearly $2 billion in Research & Development. In fact, we invest about 50% more than our closest competitor and more than most of our closest competitors combined. This leadership level of investment is multiplied by our global network of external innovation partners, which leads to an effective investment in innovation that far exceeds the reported spending.

One measure of the strength of our innovation program is the SymphonyIRI Group New Product Pacesetters report—the annual list of the biggest innovations in our industry as measured by sales. Over the past 15 years, 125 P&G innovations have earned a spot on the Top 25 Pacesetters list—more than our six largest competitors combined.

Based on this track record, SymphonyIRI recognized P&G as the most innovative manufacturer in the consumer packaged goods industry for the last decade—presenting the Company with its “Outstanding Achievement in Innovation” award. In 2009, P&G launched 5 of the top 10 most successful non-food innovations as judged by SymphonyIRI: Tide Total Care, Gillette Venus Embrace, Bounty Extra Soft, Always Infinity and Secret Flawless.

Our innovation program is guided by the Company’s Purpose-inspired growth strategy:

• We are touching and improving MORE CONSUMERS’ lives by innovating and expanding vertically, up and down value tiers.

• We are touching and improving lives in MORE PARTS OF THE WORLD by innovating and expanding geographically, into new white spaces where we haven’t been competing.

• We are touching and improving consumers’ lives MORE COMPLETELY by innovating to improve existing products, by creating or entering adjacent categories and by driving regimen use that broadens our product portfolios.

We have a strong multiyear pipeline that will continue to drive growth in the future. The impact of this innovation program is already evident. We have featured six examples in the editorial section that follows this letter, but I want to share perspective here as well to give you a sense of both the strength and breadth of innovation coming from P&G. I’ll highlight just three representative businesses to illustrate.

Male Grooming

Fusion has now grown share for 18 consecutive quarters, and we recently launched Gillette Fusion ProGlide. Consumer testing shows that men prefer the Fusion ProGlide family at a ratio of up to 2-to-1 over Gillette Fusion. In the middle tier, we recently launched a new Mach3 razor specifically designed to better meet the needs of emerging-market consumers. As a result, Mach3 shares are at record levels in Argentina, Brazil and India.

In February, we launched a complete line of Gillette male grooming solutions in Brazil, and are now expanding in several Latin American countries. In March, we introduced a scientific face care regimen under the Gillette name in China. In June, we introduced Gillette Fusion ProSeries in North America.

P&G launched 5 of the top 10 most successful new non-food products in 2009, according to SymphonyIRI Group.

SymphonyIRI Group recognized P&G as the most innovative manufacturer in the consumer packaged goods industry for the last decade with its “Outstanding Achievement in Innovation” award.

4 The Procter & Gamble Company

Fabric Care

We’re expanding our portfolio horizontally with Tide Stain Release and Ariel Professional in laundry additives, and Bounce Dryer Bar in the fabric enhancer category. We are also expanding vertically and into geographic white space. In Western Europe, we are innovating in the premium tier with Ariel Excel Gel, a new-to-the-world gel that is consumer preferred by a margin of 2 to 1. In Japan, our newest laundry brand, Sarasa, is priced at a 15% premium versus the category average and is designed for consumers who want a laundry detergent that cleans well, but also provides natural and gentle benefits.

We introduced Ace in Colombia during the September quarter and Tide Naturals in India during the December quarter. Tide Naturals is priced 30% lower than regular Tide, enabling us to reach a much broader spectrum of Indian households. Ace is a mid-tier laundry brand that complements Ariel’s stain removal equity and Bold’s softness equity. Ace has become P&G’s 23rd billion-dollar brand.

Oral Care

Oral-B toothpaste and toothbrush shares in Brazil continue to exceed expectations. Based on our in-market success, we have initiated the second wave of our toothpaste expansion plan which will take us beyond the pharmacy channel. The Oral-B toothpaste launch in Belgium and the Netherlands is also going well—with Oral-B toothpaste approaching double-digit shares and driving P&G to overall Oral Care market share leadership in both countries since being launched in February 2009.

Crest Pro-Health is off to a strong start in China, helping to drive Oral Care shipments in China up high single digits in the final quarter of the fiscal year. The Crest Pro-Health formula is being expanded to other markets around the world, as well.

In March, we launched Crest 3D White in North America. 3D White is a new regimen comprised of toothpaste, brush, rinse and Professional Effects whitestrips that work in combination to clean, whiten and protect teeth while providing health benefits expected from Crest and Oral-B.

Looking Ahead

Many of our most significant innovations just launched in North America between March and June 2010. They will have a much bigger impact on fiscal 2011 than they had this past year as we continue to leverage them in North America and to expand them to additional markets. And, of course, we will bring new innovations to market. More specifically:

• Pampers with Dry Max will expand across Western Europe this year.

• Gillette Fusion ProGlide will roll out to more than 40 countries over the next two years.

• The new Pantene formulations will expand globally over the next two years.

• We are aggressively working to merge the product innovation and geographic expansion plans of Ambi Pur with the Febreze franchise, following the close of the Ambi Pur acquisition in early July. Our air care business now spans 84 countries.

• Oral Care is introducing a new Crest Clinical line of products to treat two of the most common oral care problems: gingivitis and tooth sensitivity. The Crest Clinical Sensitivity toothpaste provides the maximum strength available over the counter. Crest Clinical will start shipping in North America in August.

In total, P&G competes in 38 product categories globally, but we are not present in all these categories in all of our priority markets. For example, as a total Company, we compete in less than 50% of potential country/category combinations in our top 50 markets. This presents a tremendous growth opportunity. Our objective is to fill out our product portfolio in every category and then expand to the most relevant geographic markets. This objective is driving clear, strategic choices about where to innovate and expand to ensure our total-Company lineup is reaching more consumers in more parts of the world, more completely.

There are examples in every P&G category. I cite these few just to provide perspective on the strength and breadth of our innovation program. We currently have the strongest multiyear innovation program I’ve seen in my 30-year career at P&G. And as strong as the program has been during this past fiscal year, we are equally pleased with the quality of our pipeline going forward. It’s full of innovations that are sure to touch and improve the lives of consumers for years to come.

P&G has paid a dividend for 120 consecutive years—and 2010 marked the 54th consecutive year of dividend increases.

The amount we returned to P&G shareholders in 2010 in the form of dividends and share repurchases.

The Procter & Gamble Company 5

Investing to Grow, Changing to Lead

We are supporting our innovation program with strong levels of marketing investment. We delivered a 20% increase in consumer impressions—the number of times consumers hear about our brands and new products—this fiscal year, with most of the increase in the second half of the fiscal year behind many of the innovations I just described. This investment is critical. Decades of experience have demonstrated that making people aware of our innovation and motivating them to try our new products is the key to long-term success. When people experience the innovation we bring to market, they are frequently delighted, which in turn drives repurchase and sustainable share growth. This is the foundation of brand building, and P&G is committed to investing sufficiently and consistently to support innovation and build brands that thrive for decades.

One of the most important ways we fuel investments in innovation and brand building is through cost savings and productivity improvements. P&G is very disciplined about cash management and cost reduction. We are strengthening this discipline with a culture that continually simplifies the way we work and increases productivity.

Simplification is a significant opportunity for us, particularly given the breadth of our business and brand portfolios. For example, we have more than 16,000 product formulas and use more than 4,000 colors in our product labels and plastic packaging. Over the next two years, we expect to reduce the number of formulas and package specifications by 30% and to reduce the number of colors we use by 50–75%. Color simplification alone has the potential to generate up to $50 million in annual savings. We have simplification projects underway throughout the Company, led by line management and managed with the same discipline and integration that we use for global product launches. This will remain an ongoing priority for us.

Another good example of how we’re becoming more productive is the “digitization” of P&G. With digitization, our goal is to standardize, automate and integrate systems and data so we can create a real-time operating and decision-making environment. We want P&G to be the most technology-enabled company in the world.

We are targeting a 20–25% reduction in some spending areas and we are looking for a sevenfold increase in real-time data. By getting the right data to the right decision makers at the right time, we can become increasingly efficient and productive.

A good illustration is logistics. We are digitizing our Transportation Management systems, including what we call our “Control Tower.” Think of this as an “air traffic control system” for ground transportation. The real-time information this system provides allows us to coordinate scheduling and truck movement for all inbound and outbound transportation. So far, we’re on track to reduce the number of “deadhead legs”—or, empty truck shipments—by more than 15%. We currently have control tower approaches in place covering about one-quarter of our business in both developing and developed markets. We think increasing the capacity utilization of trucks can save more than $200 million annually.

Another way we are increasing productivity is by turning the Company’s size into scale and our scale into growth. To do this, we are increasingly competing as one Company. Our individual categories, brands, countries and functions are all critical and each has unique value to add. But at the total-Company level, we can create scale advantages by allocating resources more strategically and efficiently than any individual business can do on its own. The combination of the individual components is greater together as one Company than the sum of the parts—and we are focused on maximizing this total value.

We are working across our businesses and markets to leverage P&G scale. A good example is the global sponsorship agreement we signed in July with the International Olympic Committee (IOC). The partnership gives P&G global sponsorship rights for the next five Olympic Games, from London 2012 through the 2020 Olympic Games, enabling the Company to take the Games to the more than 4 billion consumers worldwide served by P&G brands today. The breadth of P&G’s portfolio and the depth of our reach make this the most far-reaching Olympic partnership. It demonstrates the powerful appeal of our brand portfolio and its tremendous global scale. No other consumer products company could create a comparable partnership with the IOC.

The approximate amount P&G invests in innovation each year.

“Never Walk Alone” from P&G’s Proud Sponsor of Moms campaign—“The best commercial of the [Olympic] Games... Gold.” (Stuart Elliott, “Medals for Ads During NBC’s Winter Olympics Coverage,” New York Times, March 2, 2010.)

6 The Procter & Gamble Company

As part of this sponsorship, we also announced the global expansion of our Proud Sponsor of Moms campaign. We will build upon the success of our Team USA partnership at the Vancouver 2010 Olympic Winter Games, which resulted in increased favorability ratings for P&G and our brands, greater market share and nearly $100 million in incremental sales. P&G will leverage the IOC partnership to deliver on our growth strategy and to help improve the lives of athletes, moms and their families around the world in several ways:

• We will continue to support families of Olympians, reapplying on-site activities from the Vancouver 2010 Olympic Winter Games.

• As part of the Proud Sponsor of Moms campaign, our Thank You, Mom program will continue in conjunction with the IOC’s inaugural Youth Olympic Games to be held in Singapore in August 2010, helping 25 moms of Youth Olympians from around the world with their travel and lodging costs so they can be in Singapore with their children as they compete.

• We will produce a documentary video series called “Raising an Olympian, The P&G Momumentary Project” to celebrate the dedication and sacrifice of moms, families and their Olympians. The video series will tell the stories of Olympians as seen through the eyes of their moms. It will be shown leading up to and during the London 2012 Olympic Games and will aim to answer the question, “What does it take to raise an Olympian?”

By leveraging P&G scale and competing more effectively as one Company—rather than as individual businesses and brands alone—we are able to touch and improve more lives while creating meaningful competitive advantage.

Work to Do

While we are encouraged by the Company’s recent performance, I don’t want to imply that we are satisfied. Our results were ahead of our going-in expectations in nearly every area, but we still have some significant opportunities for improvement.

Our results on some big brands and in some big categories have been soft. We are not yet growing share on every business but we have robust innovation and marketing plans in place to accelerate share growth across the portfolio.

We also need to continue our disciplined cost reduction and cash management efforts. We need to take even more cost out because there are still more investments we need to put in to keep driving profitable market share growth.

If we build on our successes, address our shortfalls and implement our strategy with excellence—which is precisely what we are focused on doing—we will continue to accelerate growth on both the top- and bottom-line, and we expect this to be reflected in stronger market share trends.

Inspired to Perform

As I wrote at the beginning of this letter, we have placed significant emphasis on P&G’s Purpose because we believe it inspires people to perform at their peak.

Fulfilling P&G’s Purpose is not merely a noble ideal. It is potentially a game-changing growth strategy because it unleashes creativity and capability. Our purpose as individuals inspires our performance as professionals. The congruence of our Company Purpose and our personal purpose captures our imagination and passion. It focuses us on the consumers we serve and inspires empathy for them that, in turn, leads to insights, big ideas and innovation that drive growth. Simply put: Touching and improving people’s lives motivates peak performance. I believe that to my core.

Everywhere I travel, P&G people and our partners tell me they are inspired by what we can accomplish together. They tell me that they are inspired by the thought of what we can accomplish if we can infuse the work of our entire organization—all 127,000 of us—with the meaning that comes from our Purpose. We’re inspired by the thought of serving five billion people by the middle of this decade, and perhaps touching and improving the lives of nearly every person on the planet in our lifetimes. We’re inspired to create new innovations, ideas, services and products that improve people’s lives in ways we’ve not yet foreseen.

It is all this, taken together, that drives my confidence in P&G’s future. We have all the elements of a high-performing organization in place at P&G: passionate leaders at every level and in every part of our business; sound strategies that continue to provide abundant opportunities to grow; robust systems that enable us to operate with discipline and to collaborate inside and outside the Company; and a culture that enables, demands and rewards high performance. These pillars stand on a foundation of technical competence and the bedrock strength of our Purpose, Values and Principles that constitute the core of P&G.

I am honored to stand alongside Purpose-inspired leaders in every part of our organization who ensure that P&G touches and improves lives every day. It is a privilege to work with such outstanding people and I thank them for all they are doing to touch and improve lives and to grow our business.

Robert A. McDonald

Chairman of the Board, President and Chief Executive Officer

The Procter & Gamble Company 27

Financial Contents

Management’s Responsibility for Financial Reporting	28
Management’s Report on Internal Control over Financial Reporting	29
Reports of Independent Registered Public Accounting Firm	29
Management’s Discussion and Analysis
Overview	31
Summary of 2010 Results	34
Forward-Looking Statements	34
Results of Operations	35
Segment Results	38
Financial Condition	43
Significant Accounting Policies and Estimates	46
Other Information	48
Audited Consolidated Financial Statements
Consolidated Statements of Earnings	51
Consolidated Balance Sheets	52
Consolidated Statements of Shareholders’ Equity	53
Consolidated Statements of Cash Flows	54
Notes to Consolidated Financial Statements	55

28 The Procter & Gamble Company

Management’s Responsibility for Financial Reporting

At The Procter & Gamble Company, we take great pride in our long history of doing what’s right. If you analyze what’s made our Company successful over the years, you may focus on our brands, our marketing strategies, our organization design and our ability to innovate. But if you really want to get at what drives our company’s success, the place to look is our people. Our people are deeply committed to our Purpose, Values and Principles. It is this commitment to doing what’s right that unites us.

This commitment to doing what’s right is embodied in our financial reporting. High-quality financial reporting is our responsibility—one we execute with integrity, and within both the letter and spirit of the law.

High-quality financial reporting is characterized by accuracy, objectivity and transparency. Management is responsible for maintaining an effective system of internal controls over financial reporting to deliver those characteristics in all material respects. The Board of Directors, through its Audit Committee, provides oversight. We have engaged Deloitte & Touche LLP to audit our Consolidated Financial Statements, on which they have issued an unqualified opinion.

Our commitment to providing timely, accurate and understandable information to investors encompasses:

Communicating expectations to employees. Every employee—from senior management on down—is required to be trained on the Company’s Worldwide Business Conduct Manual, which sets forth the Company’s commitment to conduct its business affairs with high ethical standards. Every employee is held personally accountable for compliance and is provided several means of reporting any concerns about violations of the Worldwide Business Conduct Manual, which is available on our website at www.pg.com.

Maintaining a strong internal control environment. Our system of internal controls includes written policies and procedures, segregation of duties and the careful selection and development of employees. The system is designed to provide reasonable assurance that transactions are executed as authorized and appropriately recorded, that assets are safeguarded and that accounting records are sufficiently reliable to permit the preparation of financial statements conforming in all material respects with accounting principles generally accepted in the United States of America. We monitor these internal controls through control self-assessments conducted by business unit management. In addition to performing financial and compliance audits around the world, including unannounced audits, our Global Internal Audit organization provides training and continuously improves internal control processes. Appropriate actions are taken by management to correct any identified control deficiencies.

Executing financial stewardship. We maintain specific programs and activities to ensure that employees understand their fiduciary responsibilities to shareholders. This ongoing effort encompasses financial discipline in strategic and daily business decisions and brings particular focus to maintaining accurate financial reporting and effective controls through process improvement, skill development and oversight.

Exerting rigorous oversight of the business. We continuously review business results and strategic choices. Our Global Leadership Council is actively involved—from understanding strategies to reviewing key initiatives, financial performance and control assessments. The intent is to ensure we remain objective, identify potential issues, continuously challenge each other and ensure recognition and rewards are appropriately aligned with results.

Engaging our Disclosure Committee. We maintain disclosure controls and procedures designed to ensure that information required to be disclosed is recorded, processed, summarized and reported timely and accurately. Our Disclosure Committee is a group of senior-level executives responsible for evaluating disclosure implications of significant business activities and events. The Committee reports its findings to the CEO and CFO, providing an effective process to evaluate our external disclosure obligations.

Encouraging strong and effective corporate governance from our Board of Directors. We have an active, capable and diligent Board that meets the required standards for independence, and we welcome the Board’s oversight. Our Audit Committee comprises independent directors with significant financial knowledge and experience. We review significant accounting policies, financial reporting and internal control matters with them and encourage their independent discussions with external auditors. Our corporate governance guidelines, as well as the charter of the Audit Committee and certain other committees of our Board, are available on our website at www.pg.com.

P&G has a strong history of doing what’s right. Our employees embrace our Purpose, Values and Principles. We take responsibility for the quality and accuracy of our financial reporting. We present this information proudly, with the expectation that those who use it will understand our Company, recognize our commitment to performance with integrity and share our confidence in P&G’s future.

R.A. McDonald

Chairman of the Board, President and Chief Executive Officer

J.R. Moeller

Chief Financial Officer

The Procter & Gamble Company 29

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting of The Procter & Gamble Company (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

Strong internal controls is an objective that is reinforced through our Worldwide Business Conduct Manual, which sets forth our commitment to conduct business with integrity, and within both the letter and the spirit of the law. The Company’s internal control over financial reporting includes a Control Self-Assessment Program that is conducted annually by substantially all areas of the Company and is audited by the internal audit function. Management takes the appropriate action to correct any identified control deficiencies. Because of its inherent limitations, any system of internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due to error or fraud may occur that are not detected. Also, because of changes in conditions, internal control effectiveness may vary over time.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2010, using criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and concluded that the Company maintained effective internal control over financial reporting as of June 30, 2010, based on these criteria.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting as of June 30, 2010, as stated in their report which is included herein.

R.A. McDonald

Chairman of the Board, President and Chief Executive Officer

J.R. Moeller

Chief Financial Officer

August 13, 2010

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

The Procter & Gamble Company

We have audited the accompanying Consolidated Balance Sheets of The Procter & Gamble Company and subsidiaries (the “Company”) as of June 30, 2010 and 2009, and the related Consolidated Statements of Earnings, Shareholders’ Equity, and Cash Flows for each of the three years in the period ended June 30, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, such Consolidated Financial Statements present fairly, in all material respects, the financial position of the Company at June 30, 2010 and 2009, and the results of its operations and cash flows for each of the three years in the period ended June 30, 2010, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of June 30, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 13, 2010 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Cincinnati, Ohio

August 13, 2010

30 The Procter & Gamble Company

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

The Procter & Gamble Company

We have audited the internal control over financial reporting of The Procter & Gamble Company and subsidiaries (the “Company”) as of June 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Financial Statements of the Company as of and for the year ended June 30, 2010 and our report dated August 13, 2010 expressed an unqualified opinion on those financial statements.

Cincinnati, Ohio

August 13, 2010

The Procter & Gamble Company 31

Management’s Discussion and Analysis

The purpose of this discussion is to provide an understanding of P&G’s financial results and condition by focusing on changes in certain key measures from year to year. Management’s Discussion and Analysis (MD&A) is organized in the following sections:

• Overview

• Summary of 2010 Results

• Forward-Looking Statements

• Results of Operations

• Segment Results

• Financial Condition

• Significant Accounting Policies and Estimates

• Other Information

Throughout MD&A, we refer to measures used by management to evaluate performance, including unit volume growth, net sales and net earnings. We also refer to a number of financial measures that are not defined under accounting principles generally accepted in the United States of America (U.S. GAAP), including organic sales growth, core earnings per share (Core EPS), free cash flow and free cash flow productivity. Organic sales growth is sales growth excluding the impacts of foreign exchange, acquisitions and divestitures. Core EPS is diluted net earnings per share from continuing operations excluding certain specified charges. Free cash flow is operating cash flow less capital spending. Free cash flow productivity is the ratio of free cash flow to net earnings. We believe these measures provide investors with important information that is useful in understanding our business results and trends. The explanation at the end of MD&A provides more details on the use and the derivation of these measures.

Management also uses certain market share and market consumption estimates to evaluate performance relative to competition despite some limitations on the availability and comparability of share and consumption information. References to market share and market consumption in MD&A are based on a combination of vendor-reported consumption and market size data, as well as internal estimates. All market share references represent the percentage of sales in dollar terms of our products relative to all product sales in the category. In certain situations, we discuss volume share, which is the percentage of unit volume of our products relative to all products sold in the category.

Recent Business Developments

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

Effective July 2009, we implemented a number of changes to our organization structure for the Beauty Global Business Unit (GBU), which resulted in changes to the components of its segment structure. As a result, the Beauty GBU became the Beauty and Grooming GBU and reportable segments under the GBU moved to a new consumer-oriented alignment. The two reportable segments within the Beauty and Grooming GBU continue to be Beauty and Grooming. However, female blades and razors transitioned from Grooming to Beauty. In addition, certain male-focused brands and businesses, such as Old Spice and Gillette personal care, moved from Beauty to Grooming. These changes have been reflected in our segment reporting beginning in fiscal year 2010. Our historical segment reporting, including both the MD&A and footnotes to the accompanying Consolidated Financial Statements for the years ended June 30, 2009 and 2008, has also been restated to reflect the new structure.

In November 2008, we completed the divestiture of our coffee business through the merger of our Folgers coffee subsidiary into The J.M. Smucker Company (Smucker) in an all-stock reverse Morris Trust transaction. In connection with the merger, 38.7 million shares of P&G common stock were tendered by our shareholders and exchanged for all shares of Folgers common stock. Pursuant to the merger, a Smucker subsidiary merged with and into Folgers and Folgers became a wholly owned subsidiary of Smucker.

The coffee business had historically been part of the Company’s Snacks, Coffee and Pet Care reportable segment, as well as the coffee portion of the away-from-home business which was included in the Fabric Care and Home Care reportable segment. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of our coffee business are presented as discontinued operations and, as such, have been excluded from continuing operations and from segment results for all periods presented. The Snacks, Coffee and Pet Care reportable segment was renamed Snacks and Pet Care to reflect this change.

OVERVIEW

Our business is focused on providing branded consumer packaged goods of superior quality and value to our consumers around the world. This will enable us to execute our Purpose-inspired growth strategy: to touch and improve more consumers’ lives, in more parts of the world, more completely. We believe this will result in leadership sales, earnings and value creation, allowing employees, shareholders and the communities in which we operate to prosper.

Our products are sold in more than 180 countries primarily through mass merchandisers, grocery stores, membership club stores, drug stores and high-frequency stores, the neighborhood stores which serve many consumers in developing markets. We continue to expand our presence in other channels, including department stores, perfumeries, pharmacies, salons and e-commerce. We have on-the-ground operations in approximately 80 countries.

32 The Procter & Gamble Company Management’s Discussion and Analysis

Our market environment is highly competitive with global, regional and local competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products as well as retailers’ private-label brands. Additionally, many of the product segments in which we compete are differentiated by price (referred to as super-premium, premium, mid-tier value and low-tier economy products). Generally speaking, we compete with super-premium, premium and mid-tier value products and are well positioned in the industry segments and markets in which we operate—often holding a leadership or significant market share position.

Organizational Structure

Our organizational structure is comprised of three Global Business Units (GBUs), along with Global Operations, Global Business Services (GBS) and Corporate Functions (CF).

GLOBAL BUSINESS UNITS

Our three GBUs are Beauty and Grooming, Health and Well-Being and Household Care. The primary responsibility of the GBUs is to develop the overall strategy for our brands. They identify common consumer needs, develop new product innovations and upgrades and build our brands through effective commercial innovations and marketing plans.

Under U.S. GAAP, the business units comprising the GBUs are aggregated into six reportable segments: Beauty; Grooming; Health Care; Snacks and Pet Care; Fabric Care and Home Care; and Baby Care and Family Care. The following provides additional detail on our GBUs and reportable segments and the key product and brand composition within each.

Beauty and Grooming

Beauty: We are a global market leader in the beauty category. Most of the beauty markets in which we compete are highly fragmented with a large number of global and local competitors. In female beauty, we compete with a wide variety of products, ranging from cosmetics to female blades and razors to skin care. Our largest female beauty brand is Olay, which is the top facial skin care brand in the world with approximately 10% of the global market share. In hair care, we compete in both the retail and salon professional channels. We are the global market leader in the retail hair care market with over 20% of the global market share behind Pantene and Head & Shoulders. In the prestige channel, we compete primarily with prestige fragrances and the SK-II brand. We are one of the global market leaders in prestige fragrances, primarily behind the Dolce & Gabbana, Gucci and Hugo Boss fragrance brands.

Grooming: We hold leadership market share in the male blades and razors market on a global basis and in nearly all of the geographies in which we compete. Our global male blades and razors market share is approximately 70%, primarily behind the Gillette franchise including Fusion and Mach3. We also compete in male personal care with deodorants, face and shave preparation, hair and skin care and personal cleansing products. Our beauty electronics and small home appliances are sold under the Braun brand in a number of markets around the world, where we compete against both global and regional competitors. Our primary focus in this area is electric hair removal devices, such as electric razors and epilators, where we hold approximately 30% of the male shavers market and 50% of the female epilators market.

Health and Well-Being

Health Care: We compete in oral care, feminine care and personal health. In oral care, there are several global competitors in the market, and we have the number two market share position with approximately 20% of the global market. We are the global market leader in the feminine care category with about 35% of the global market share. In personal health, we are the market leader in nonprescription heartburn medications behind Prilosec OTC and in respiratory treatments with Vicks.

GBU	Reportable Segment	% of Net Sales*		% of Net Earnings*		Categories	Billion Dollar Brands
BEAUTY AND GROOMING	Beauty	24	%	23	%	Cosmetics, Female Antiperspirant and Deodorant, Female Personal Cleansing, Female Shave Care, Hair Care, Hair Color, Hair Styling, Pharmacy Channel, Prestige Products, Salon Professional, Skin Care	Head & Shoulders, Olay, Pantene, Wella
	Grooming	10	%	13	%	Beauty Electronics, Home Small Appliances, Male Blades and Razors, Male Personal Care	Braun, Fusion, Gillette, Mach3
HEALTH AND WELL-BEING	Health Care	14	%	16	%	Feminine Care, Gastrointestinal, Incontinence, Rapid Diagnostics, Respiratory, Toothbrush, Toothpaste, Water Filtration, Other Oral Care	Always, Crest, Oral-B
	Snacks and Pet Care	4	%	3	%	Pet Care, Snacks	Iams, Pringles
HOUSEHOLD CARE	Fabric Care and Home Care	30	%	28	%	Additives, Air Care, Batteries, Dish Care, Fabric Enhancers, Laundry, Surface Care	Ace, Ariel, Dawn, Downy, Duracell, Gain, Tide
	Baby Care and Family Care	18	%	17	%	Baby Wipes, Diapers, Paper Towels, Tissues, Toilet Paper	Bounty, Charmin, Pampers

* Percent of net sales and net earnings from continuing operations for the year ended June 30, 2010 (excluding results held in Corporate).

Management’s Discussion and Analysis The Procter & Gamble Company 33

Snacks and Pet Care: In snacks, we compete against both global and local competitors and have a global market share of approximately 10% in the potato chips market behind our Pringles brand. In pet care, we compete in several markets around the globe in the premium pet care segment, with the Iams and Eukanuba brands. The vast majority of our pet care business is in North America, where we have approximately a 10% share of the market.

Household Care

Fabric Care and Home Care: This segment is comprised of a variety of fabric care products, including laundry detergents, additives and fabric enhancers; home care products, including dishwashing liquids and detergents, surface cleaners and air fresheners; and batteries. In fabric care, we generally have the number one or number two share position in the markets in which we compete and are the global market leader, with about 30% of the global market share. Our global home care market share is over 15% across the categories in which we compete. In batteries, we compete primarily behind the Duracell brand and have approximately 25% of the global battery market share.

Baby Care and Family Care: In baby care, we compete primarily in diapers and baby wipes, with approximately 35% of the global market share. We are the number one or number two baby care competitor in most of the key markets in which we compete, primarily behind Pampers, the Company’s largest brand, with annual net sales of approximately $9 billion. Our family care business is predominantly a North American business comprised primarily of the Bounty paper towel and Charmin toilet paper brands. U.S. market shares are approximately 45% for Bounty and over 25% for Charmin.

GLOBAL OPERATIONS

Global Operations is comprised of our Market Development Organization (MDO), which is responsible for developing go-to-market plans at the local level. The MDO includes dedicated retail customer, trade channel and country-specific teams. It is organized along five geographic units: North America, Western Europe, Central & Eastern Europe/Middle East/Africa (CEEMEA), Latin America and Asia, which is comprised of Japan, Greater China and ASEAN/Australia/India/Korea (AAIK). Throughout MD&A, we reference business results in developing markets, which we define as the aggregate of CEEMEA, Latin America, AAIK and Greater China, and developed markets, which are comprised of North America, Western Europe and Japan.

GLOBAL BUSINESS SERVICES

GBS provides technology, processes and standard data tools to enable the GBUs and the MDO to better understand the business and better serve consumers and customers. The GBS organization is responsible for providing world-class solutions at a low cost and with minimal capital investment.

CORPORATE FUNCTIONS

CF provides Company-level strategy and portfolio analysis, corporate accounting, treasury, external relations, governance, human resources and legal, as well as other centralized functional support.

Strategic Focus

We are focused on strategies that we believe are right for the long-term health of the Company and will deliver total shareholder return in the top one-third of our peer group. The Company’s long-term financial targets are:

• Grow organic sales 1% to 2% faster than market growth in the categories and geographies in which we compete,

• Deliver earnings per share (EPS) growth of high single digits to low double digits, and

• Generate free cash flow productivity of 90% or greater.

In order to achieve these targets, we have created one over-arching strategy, inspired by our Purpose. At the heart of this strategy is innovating to win by touching and improving the lives of:

• More Consumers. We are improving more consumers’ lives by innovating and expanding our product portfolio vertically, up and down value tiers. We continue to successfully develop and launch premium innovations focused on improving consumer value through enhanced performance. We are also serving consumers who are more price conscious through lower-priced offerings with superior performance versus other mid-tier and value-tier alternatives.

• In More Parts of the World. We are improving lives in more parts of the world by innovating and expanding our existing product portfolio geographically into new markets. We are increasing our presence in developing markets and increasing the amount of sales from these markets by focusing on affordability, accessibility and awareness of our brands.

• More Completely. We are improving lives more completely by innovating to improve existing products and creating or entering adjacent categories. We are driving regimen use that broadens the occasions for which our brands can serve the needs of each consumer. By attracting new consumers into our existing brand franchises and broadening the products used by our current consumers, we are able to build scale, reduce costs and profitably grow market share.

To achieve our targets, we will also leverage P&G’s core strengths that create competitive advantages and are critical to winning in the consumer products industry: consumer knowledge; innovation; brand-building; go-to-market capabilities and scale. We are coordinating our activities across categories and markets, acting more intentionally as one Company. We are placing particular emphasis on execution, simplification and scale as key improvement areas that will enable P&G to create the greatest value and competitive advantage. Finally, we are strengthening the depth, breadth and quality of leadership at all levels of the Company to make P&G a more demand-driven, real-time, future-focused organization.

34 The Procter & Gamble Company Management’s Discussion and Analysis

SUMMARY OF 2010 RESULTS

• Net sales increased 3% to $78.9 billion.

• Organic sales increased 3%.

• Unit volume increased 4% versus the prior year, behind mid-single-digit growth in developing regions and low single-digit growth in developed regions.

• Net earnings decreased 5% to $12.7 billion.

• Net earnings from continuing operations increased 2% to $10.9 billion behind sales growth and operating margin expansion, partially offset by a higher effective tax rate.

• Operating margin expanded 30 basis points versus the prior year due to higher gross margins, mostly offset by an increase in selling, general and administrative expenses (SG&A) as a percentage of net sales.

• Net earnings from discontinued operations declined $1.0 billion to $1.8 billion due to the loss of contribution from the divested pharmaceuticals and coffee businesses and lower current period gains on the sale of discontinued operations.

• Diluted net earnings per share declined 4% to $4.11.

• Diluted net earnings per share from continuing operations increased 4% to $3.53.

• Diluted net earnings per share from discontinued operations declined 33% to $0.58.

• Core EPS grew 6% to $3.67.

• Cash flow from operating activities was $16.1 billion.

• Free cash flow was $13.0 billion.

• Free cash flow productivity was 102% and included a negative 23% impact resulting from the global pharmaceuticals divestiture.

FORWARD-LOOKING STATEMENTS

We discuss expectations regarding future performance, events and outcomes, such as our business outlook and objectives, in annual and quarterly reports, press releases and other written and oral communications. All such statements, except for historical and present factual information, are “forward-looking statements,” and are based on financial data and our business plans available only as of the time the statements are made, which may become out-of-date or incomplete. We assume no obligation to update any forward-looking statements as a result of new information, future events or other factors. Forward-looking statements are inherently uncertain and investors must recognize that events could be significantly different from our expectations. For more information on risks that could impact our results, refer to Item 1A Risk Factors in our most recent 10-Q, 10-K and 8-K filings.

Ability to Achieve Business Plans. We are a consumer products company and rely on continued demand for our brands and products. To achieve business goals, we must develop and sell products that appeal to consumers and retail trade customers. Our continued success is dependent on leading-edge innovation with respect to both products and operations and on the continued positive reputations of our brands. This means we must be able to obtain patents and respond to technological advances and patents granted to competition. Our success is also dependent on effective sales, advertising and marketing programs in an increasingly fragmented media environment. Our ability to innovate and execute in these areas will determine the extent to which we are able to grow existing sales and volume profitably, especially with respect to the product categories and geographic markets (including developing markets) in which we have chosen to focus. We operate in an increasingly volatile economic environment with high levels of competitive activity. To address these challenges, we must respond to competitive factors, including pricing, promotional incentives, trade terms and product initiatives. We must manage each of these factors, as well as maintain mutually beneficial relationships with our key customers, in order to effectively compete and achieve our business plans. As a company that manages a portfolio of consumer brands, our ongoing business model involves a certain level of ongoing acquisition and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against base business objectives. Our success will also depend on our ability to maintain key information technology systems.

Cost Pressures. Our costs are subject to fluctuations, particularly due to changes in commodity prices, raw materials, cost of labor, foreign exchange and interest rates. Therefore, our success is dependent, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings projects, sourcing decisions and certain hedging transactions. We also must manage our debt and currency exposure, especially in certain countries with currency exchange controls, such as Venezuela, China and India. We need to maintain key manufacturing and supply arrangements, including sole supplier and sole manufacturing plant arrangements. We must implement, achieve and sustain cost improvement plans, including our outsourcing projects and those related to general overhead and workforce optimization. Successfully managing these changes, including identifying, developing and retaining key employees, is critical to our success.

Global Economic Conditions. Economic changes, terrorist activity and political unrest may result in business interruption, inflation, deflation or decreased demand for our products. Our success will depend, in part, on our ability to manage continued global political and/or economic uncertainty, especially in our significant geographic markets, as well as any political or economic disruption due to terrorist and other hostile activities.

Regulatory Environment. Changes in laws, regulations and the related interpretations and enforcement actions may alter the environment in which we do business. This includes changes in environmental, competitive and product-related laws, as well as changes in accounting standards, taxation requirements and enforcement penalties. Our ability to manage regulatory, tax and legal matters (including product liability, patent, intellectual property, competition law matters and tax policy) and to resolve pending legal matters within current estimates may impact our results.

Management’s Discussion and Analysis The Procter & Gamble Company 35

RESULTS OF OPERATIONS

Net Sales

Net sales increased 3% in 2010 to $78.9 billion on a 4% increase in unit volume. Volume increased low single digits in developed regions and mid-single digits in developing regions. All geographic regions contributed to volume growth, led by high single-digit growth in Asia and CEEMEA. Volume growth for the reportable segments was mixed, with low single-digit increases in the Beauty, Grooming and Health Care segments, a mid-single-digit increase in the Fabric Care and Home Care segment and a high single-digit increase in the Baby Care and Family Care segment, partially offset by a low single-digit decline in the Snacks and Pet Care segment. Price increases added 1% to net sales as increases taken primarily in developing regions to offset local currency devaluations were partially offset by more recent price reductions to improve consumer value. Mix reduced net sales by 1% behind disproportionate growth in developing regions, which have lower than Company average selling prices, and relatively weaker shipments of Salon Professional, Prestige, Personal Health Care and Pet Care, which have higher than Company average selling prices. Organic sales were up 3%, led by mid-single-digit growth across the Fabric Care and Home Care and the Baby Care and Family Care segments. Unfavorable foreign exchange reduced net sales growth by 1% as the U.S. dollar strengthened versus key foreign currencies.

Net sales decreased 3% in 2009 to $76.7 billion behind a 3% decline in unit volume. Unfavorable foreign exchange reduced net sales by 4% as many foreign currencies weakened versus the U.S. dollar. Price increases, taken across all segments, primarily to offset higher commodity costs and foreign exchange impacts, added 5% to net sales. Negative product mix reduced net sales by 1% mainly due to disproportionate volume declines in our more discretionary categories and channels (primarily Prestige, Salon Professional and Appliances), along with Personal Health Care, all of which have higher than Company average selling prices. Every reportable segment except Baby Care and Family Care reported volume declines led by mid-single-digit declines in Grooming and Snacks and Pet Care. Volume in both developed and developing regions was below previous year levels. Organic volume, which excludes the impact of acquisitions and divestitures, declined 2%. Organic sales increased 2% behind the net benefit of pricing and mix. Net sales levels in 2009 were negatively impacted by the global economic downturn and credit crisis that began during that period which, along with the aforementioned price increases, contributed to market contractions, trade inventory reductions and share declines in certain businesses. These impacts were more pronounced in our more discretionary categories.

Operating Costs

Comparisons as a percentage of net sales; Years ended June 30	2010		Basis Point Change	2009		Basis Point Change		2008
Gross margin	52.0	%	250	49.5	%	(100	)	50.5	%
Selling, general and administrative expense	31.7	%	220	29.5	%	(80	)	30.3	%
Operating margin	20.3	%	30	20.0	%	(20	)	20.2	%
Earnings from continuing operations before income taxes	19.1	%	30	18.8	%	0		18.8	%
Net earnings from continuing operations	13.9	%	0	13.9	%	(30	)	14.2	%

36 The Procter & Gamble Company Management’s Discussion and Analysis

Gross margin expanded 250 basis points in 2010 to 52.0% of net sales. Manufacturing and logistics cost savings projects and lower commodity and energy costs positively impacted gross margin by about 280 basis points. Volume scale leverage and price increases also contributed to gross margin expansion. These impacts were partially offset by unfavorable foreign exchange and product mix impacts.

Gross margin declined 100 basis points to 49.5% of net sales in 2009. Higher commodity and energy costs, partially offset by savings projects on raw and packing materials, negatively impacted gross margin by about 250 basis points. Unfavorable foreign exchange and incremental restructuring charges also negatively impacted gross margin. These impacts were partially offset by price increases and manufacturing and logistics cost savings.

Total selling, general and administrative expenses (SG&A) increased 10% to $25.0 billion in 2010 behind higher marketing, overhead and other operating expenses. SG&A as a percentage of net sales increased 220 basis points to 31.7% due to higher marketing and other operating expenses as a percentage of net sales, while overhead spending as a percentage of sales was in line with the prior year. Marketing spending as a percentage of net sales was up 150 basis points as additional marketing investments, primarily to increase media impressions, and the impact of reduced spending in the fourth quarter of 2009 were partially offset by media rate savings. Advertising spending as a percentage of net sales was up 110 basis points versus 2009 behind investments to support initiatives and business growth. Overhead spending as a percentage of net sales was consistent with the prior year as additional spending to support business growth was offset by productivity improvements and lower restructuring charges. Other operating expenses as a percentage of net sales increased 70 basis points mainly due to an increase in Venezuela-related foreign currency exchange costs of $492 million (see further discussion in the following paragraphs) and charges for potential competition law fines of $283 million.

Because of currency restrictions in Venezuela, payments for certain imported goods and services have historically been satisfied by exchanging Bolivares Fuertes for U.S. dollars through securities transactions in the parallel market rather than at the more favorable official exchange rate. At the discretion of management, these securities transactions can be utilized to manage exposure to currency movements on local cash balances. A reduction in the availability of foreign currency at the official exchange rate and an increased spread between the official and parallel exchange rates during most of fiscal 2010 resulted in increased costs for exchange transactions executed using securities transactions in the parallel market during 2010. For a more detailed discussion of the impacts of and recent events in Venezuela, see the section entitled “Venezuela Currency Impacts” at the end of this Results of Operations section.

SG&A decreased 6% to $22.6 billion in 2009 driven primarily by foreign currency impacts and cost reduction efforts. SG&A as a percentage of net sales was down 80 basis points due to lower marketing expenses and the impact of foreign currency transaction gains on working capital balances caused by strengthening of the U.S. dollar. Marketing expenses were down as a percentage of net sales for the total Company and for most reportable segments mainly due to media rate reductions, foreign exchange and reductions in the amount of media purchased primarily in the fourth fiscal quarter. Overhead spending as a percentage of net sales was up 30 basis points versus the prior year as productivity improvements were more than offset by the negative impacts of sales deleverage and incremental restructuring charges.

We fund a number of restructuring-type activities, primarily related to manufacturing and workforce optimization efforts, to maintain a competitive cost structure and to integrate acquired businesses. Within our results of continuing operations, after-tax charges to fund restructuring-type activities declined approximately $220 million in 2010. In 2009, we executed approximately $270 million after-tax of additional restructuring-type activities versus 2008 in order to offset the dilution caused by the disposition of our coffee business.

Non-Operating Items

Interest expense decreased 30% in 2010 to $946 million due primarily to a reduction in interest rates on floating rate debt and a reduction in debt outstanding. In 2009, interest expense decreased 7% to $1.4 billion primarily driven by a reduction in U.S. dollar interest rates, partially offset by a higher debt level primarily to fund share repurchases.

Other non-operating income/(expense), net primarily includes divestiture gains, interest and investment income and the provision for income attributable to noncontrolling interests. Other non-operating income/(expense), net declined $425 million in 2010 to an expense of $28 million mainly due to divestiture gains in the prior year, which included gains on the sale of Thermacare, Noxzema, Infusium and other minor brands, and incremental costs in the current year associated with exercising the call option on an outstanding bond. In 2009, other non-operating income increased $24 million mainly due to higher divestiture gains.

Management’s Discussion and Analysis The Procter & Gamble Company 37

Income Taxes

The effective tax rate on continuing operations increased 140 basis points to 27.3%. This was primarily due to a $152 million charge for recently enacted legislation which changed the taxation of certain future retiree prescription drug subsidy payments in the United States, the non-deductibility of the aforementioned $283 million charge for potential competition law fines and a lower current-year level of net favorable adjustments to reserves for previously existing uncertain tax positions and foreign tax credits, partially offset by a more favorable current-year geographic mix of earnings. During the current year, net adjustments to prior-year reserves balances for uncertain tax positions benefitted the effective tax rate by 40 basis points versus a 130-basis point benefit in the prior year. In 2009, the effective tax rate from continuing operations was up 180 basis points to 25.9% primarily due to a lower level of net favorable adjustments to reserves for previously existing uncertain tax positions and geographic mix of earnings across all reporting segments resulting from a weakening of key foreign currencies versus the U.S. dollar, partially offset by the utilization of tax credits. Net adjustments to reserves for uncertain tax positions benefitted the effective tax rate by 130 basis points, versus a benefit of 340 basis points in 2008.

Net Earnings

Net earnings from continuing operations were $10.9 billion in 2010, an increase of 2% versus the prior year due mainly to net sales growth and operating margin expansion, partially offset by a higher effective tax rate. Operating margin was up 30 basis points due to an increase in gross margin, mostly offset by an increase in SG&A as a percentage of net sales. Net earnings from continuing operations decreased 5% to $10.7 billion in 2009 mainly due to lower net sales and a higher effective tax rate. Operating margin was down 20 basis points behind a commodity-driven decline in gross margin, partially offset by lower SG&A as a percentage of net sales.

Net earnings from discontinued operations declined $1.0 billion to $1.8 billion in 2010 primarily due to the loss of contribution from the pharmaceuticals business divested in October 2009 and coffee business divested in November 2008 and lower gains on the sale of discontinued operations. The gains on the sale of the global pharmaceuticals business in fiscal 2010 were $1.6 billion versus a $2.0 billion gain on the sale of the coffee business in fiscal 2009. In 2009, net earnings from discontinued operations, which included the results of the coffee and pharmaceuticals businesses, increased $2.0 billion due to the gain on the sale of the coffee business. The loss of earnings contribution from the coffee business in 2009 was mostly offset by an increase in earnings of the pharmaceuticals business.

Diluted net earnings per share declined 4% to $4.11 in 2010 driven by lower net earnings from discontinued operations, partially offset by higher net earnings from continuing operations and a reduction in weighted average shares outstanding resulting from share repurchase activity. Diluted net earnings per share from continuing operations increased 4% to $3.53 behind higher net earnings from continuing operations and the reduction in shares outstanding. Diluted net earnings per share from discontinued operations declined $0.29 to $0.58. The reduction in the number of shares outstanding was driven by treasury share repurchases of $6.0 billion, nearly all of which were made under our publicly announced share repurchase program. This share repurchase program expired on June 30, 2010.

Diluted net earnings per share in 2009 increased 17% to $4.26. The increase was due mainly to the gain on the sale of our coffee business, partially offset by lower net earnings from continuing operations. Diluted net earnings per share from continuing operations in 2009 decreased $0.01 to $3.39. Diluted net earnings per share from discontinued operations was $0.87, comprised primarily of the gain on the sale of the coffee business and operating earnings of the pharmaceuticals business. Diluted net earnings per share was positively impacted by fewer shares outstanding as a result of share repurchase activity and shares tendered in the Folgers coffee transaction. Treasury shares in the amount of $6.4 billion were repurchased in 2009, nearly all of which were made under our publicly announced share repurchase program.

Core EPS was up 6% to $3.67 in 2010. Core EPS represents diluted net earnings per share from continuing operations excluding charges in 2010 for potential competition law fines and recently enacted legislation which changed the taxation of certain future retiree prescription drug subsidy payments in the United States, the 2009 impact of incremental restructuring charges incurred to offset the dilutive impact of the Folgers divestiture and the 2008 impact of significant adjustments to tax reserves. Core EPS grew 6% in 2009 to $3.47.

38 The Procter & Gamble Company Management’s Discussion and Analysis

Venezuela Currency Impacts

On January 1, 2010, Venezuela was designated as a highly inflationary economy under U.S. GAAP. As a result, the U.S. dollar became the functional currency for our subsidiaries in Venezuela. Beginning in our third fiscal quarter, currency remeasurement adjustments for non-dollar denominated monetary assets and liabilities held by these subsidiaries and other transactional foreign exchange gains and losses are being reflected in earnings and will continue to be reflected in earnings on an ongoing basis. Through December 31, 2009 (prior to being designated as highly inflationary), translation adjustments were reflected in Shareholders’ Equity as part of accumulated other comprehensive income.

On January 8, 2010, the Venezuelan government announced its intention to devalue the Bolivar Fuerte relative to the U.S. dollar. The official exchange rate for imported goods classified as essential, such as food, medicine and capital investments, changed from 2.15 to 2.6, while payments for other non-essential goods moved to an exchange rate of 4.3. Many of our imported products fall into the essential classification and qualify for the 2.6 rate. However, our overall results in Venezuela are reflected in our Consolidated Financial Statements at the 4.3 rate expected to be applicable to dividend repatriations.

The remeasurement of our local balance sheets in the third fiscal quarter to reflect the impact of the devaluation did not materially impact our results. This was due to the relatively small non-dollar denominated net monetary asset position in Venezuela. There will be an ongoing impact related to measuring our income statement at the new exchange rates. Moving from the 2.15 rate to 4.3 will reduce future total Company reported sales by less than 2% on a going basis. For the year ended June 30, 2010, the impact was about 1%. This does not impact our organic sales growth rate, which excludes the impact of foreign currency changes. Versus our original business plans, the exchange rate change reduced our reported earnings per share by approximately $0.08 in 2010, with a similar impact expected in 2011. This impact includes the devaluation impact on Venezuela-related foreign currency exchange costs.

In our fourth fiscal quarter, the Venezuelan government introduced additional exchange controls over securities transactions in the parallel market. They established the Central Bank of Venezuela as the only legal intermediary through which parallel market transactions can be executed and established government control over the parallel exchange rate (which was approximately 5.3 at June 30, 2010). At the same time, they significantly reduced the notional amount of transactions that run through this parallel market mechanism, which has eliminated our ability to access the parallel market to pay for imported goods and/or manage our local monetary asset balances.

As of June 30, 2010, we had net monetary assets denominated in local currency of approximately $350 million. Approximately $170 million of this balance has been remeasured using the parallel rate, because we plan to use that amount of the net assets (largely cash) to satisfy U.S. dollar denominated liabilities that do not qualify for official rate dollars. The availability of the parallel market to settle these transactions is uncertain. The remaining net monetary asset balances are currently reflected within our Consolidated Financial Statements at the 4.3 official exchange rate. Depending on the future availability of U.S. dollars at the official rate, our local U.S. dollar needs and our overall repatriation plans, we have exposure for the differential between the official and parallel exchange rates on this portion of our local monetary assets.

Over time, we will attempt to restore the sales and profit levels achieved prior to the devaluation. However, our ability to do so will be impacted by several factors, including the Company’s ability to mitigate the effect of the devaluation, further actions of the Venezuelan government, economic conditions in Venezuela such as inflation and consumer spending, the availability of raw materials, utilities and energy and the future state of exchange controls in Venezuela including the availability of U.S. dollars at the official foreign exchange rate.

SEGMENT RESULTS

Results for the segments reflect information on the same basis we use for internal management reporting and performance evaluation. Within the Beauty and Grooming GBU, we provide data for the Beauty and the Grooming reportable segments. In the Health and Well-Being GBU, we provide data for the Health Care and the Snacks and Pet Care reportable segments. In the Household Care GBU, we provide data for the Fabric Care and Home Care and the Baby Care and Family Care reportable segments. All references to net earnings throughout the discussion of segment results refer to net earnings from continuing operations.

The results of these reportable business segments do not include certain non-business unit specific costs such as interest expense, investing activities and certain restructuring costs. These costs are reported in our Corporate segment and are included as part of our Corporate segment discussion. Additionally, as described in Note 11 to the Consolidated Financial Statements, we have investments in certain companies over which we exert significant influence, but do not control the financial and operating decisions and, therefore, do not consolidate these companies for U.S. GAAP purposes (“unconsolidated entities”). Given that certain of these investments are managed as integral parts of the Company’s business units, they are accounted for as if they were consolidated subsidiaries for management and segment reporting purposes. This means pretax earnings in the business units include 100% of each pretax income statement component. In determining after-tax earnings in the business units, we eliminate the share of earnings applicable to other ownership interests, in a manner similar to noncontrolling interest, and apply the statutory tax rates. Eliminations to adjust each line item to U.S. GAAP are included in our Corporate segment.

Management’s Discussion and Analysis The Procter & Gamble Company 39

Net Sales Change Drivers vs. Year Ago (2010 vs. 2009)	Volume with Acquisitions & Divestitures		Volume Excluding Acquisitions & Divestitures		Foreign Exchange		Price		Mix/Other		Net Sales Growth
BEAUTY AND GROOMING
Beauty	3	%	4	%	0	%	1	%	-1	%	3	%
Grooming	1	%	1	%	0	%	4	%	-2	%	3	%
HEALTH AND WELL-BEING
Health Care	3	%	3	%	0	%	1	%	-2	%	2	%
Snacks and Pet Care	-2	%	-2	%	1	%	3	%	-1	%	1	%
HOUSEHOLD CARE
Fabric Care and Home Care	6	%	6	%	-1	%	-1	%	-1	%	3	%
Baby Care and Family Care	7	%	7	%	-1	%	0	%	-2	%	4	%
TOTAL COMPANY	4	%	4	%	-1	%	1	%	-1	%	3	%

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

Beauty and Grooming

BEAUTY

($ millions)	2010		Change vs. Prior Year		2009		Change vs. Prior Year
Volume		n/a	+3	%		n/a	-2	%
Net sales	$	19,491	+3	%	$	18,924	-4	%
Net earnings	$	2,712	+2	%	$	2,664	-6	%

Beauty net sales increased 3% in 2010 to $19.5 billion on unit volume growth of 3%. Price increases added 1% to net sales growth as earlier price increases taken in developing regions to offset currency devaluations more than offset more recent price reductions in Hair Care. Unfavorable geographic mix reduced net sales 1% due to disproportionate growth in developing regions, which have lower than segment average selling prices. Organic sales were up 3% on a 4% increase in organic volume. Volume growth was driven by high single-digit growth in developing regions, with developed region volume in line with the prior year. Hair Care volume grew mid-single digits behind growth of Pantene, Head & Shoulders and Rejoice primarily in Asia and Latin America. Global share of the hair care market on a constant currency basis was in line with 2009. Female Beauty volume was up low single digits as higher shipments of female skin care and personal cleansing products in developing regions were partially offset by the discontinuation of Max Factor in North America, the fiscal 2009 divestiture of Noxzema and volume share losses on non-strategic personal cleansing brands in developed regions. Salon Professional volume was down double digits mainly due to the exit of non-strategic businesses and continued market contractions. Prestige volume declined low single digits due to continued contraction of the fragrance market.

Net earnings increased 2% in 2010 to $2.7 billion driven by net sales growth, partially offset by a 20-basis point reduction in net earnings margin. Net earnings margins declined due to higher SG&A as a percentage of net sales, the impact of divestiture gains in the prior year and a higher tax rate in the current year, partially offset by gross margin expansion. SG&A as a percentage of net sales was up due to increased marketing spending and higher foreign currency exchange costs. The tax rate increase was due to a shift in the geographic mix of earnings to countries with higher statutory tax rates. Gross margin expansion was driven primarily by price increases and manufacturing costs savings.

Beauty net sales decreased 4% in 2009 to $18.9 billion on a 2% decline in unit volume. Price increases to offset higher commodity costs added 2% to net sales. Unfavorable foreign exchange reduced net sales by 4%. Organic sales increased 1% versus the prior year behind price increases. Volume in developed regions declined mid-single digits, while volume in developing regions grew low single digits. Hair Care volume in the retail channel grew low single digits behind growth of Pantene, Head & Shoulders and Rejoice. Salon Professional volume declined mid-single digits mainly due to market contractions and trade inventory reductions. Volume in Female Beauty declined mid-single digits primarily due to competitive activity affecting shipments of Olay and lower shipments of personal cleansing products driven by trade inventory reductions, market contractions and the divestiture of Noxzema. Prestige volume declined high single digits primarily due to market contractions and trade inventory reductions of prestige fragrances. Our market shares in key categories within Beauty were generally consistent with the prior year. Net earnings decreased 6% in 2009 to $2.7 billion mainly due to lower net sales and reduced net earnings margin. Net earnings margin contracted 30 basis points due to reduced gross margin and a higher effective tax rate, partially offset by reduced SG&A as a percentage of net sales. Gross margin declined due to higher commodity costs, which were only partially offset by price increases and manufacturing cost savings. SG&A was down primarily due to lower marketing spending as a percentage of net sales.

40 The Procter & Gamble Company Management’s Discussion and Analysis

The economic downturn which began in fiscal 2009 resulted in a disproportionate decline in the Salon Professional business, given the more discretionary nature of salon visits and purchases. Over time, we believe the Salon Professional business will return to sales and earnings growth rates consistent with our long-term business plans. Failure to achieve these business plans or a further deterioration of the macroeconomic conditions could result in an impairment of the goodwill and intangible assets of the Salon Professional business. See the discussion of Acquisitions, Goodwill and Intangibles in the Significant Accounting Policies and Estimates section for additional information.

GROOMING

($ millions)	2010		Change vs. Prior Year		2009		Change vs. Prior Year
Volume		n/a	+1	%		n/a	-5	%
Net sales	$	7,631	+3	%	$	7,408	-9	%
Net earnings	$	1,477	+9	%	$	1,359	-14	%

Grooming net sales increased 3% to $7.6 billion in 2010 on a 1% increase in unit volume. Price increases, taken primarily in developing regions to offset currency devaluations and across blades and razors, added 4% to net sales. Product mix had a negative 2% impact on net sales due mainly to disproportionate growth in developing regions and of disposable razors, both of which have lower than segment average selling prices. Organic sales grew 3%. Volume in developing regions increased low single digits, while volume in developed regions was in line with the prior year. Volume in Male Grooming was up low single digits mainly due to growth of disposable razors in developing regions. Mach3 shipments declined high single digits, while Gillette Fusion shipments increased double digits behind the launch of the new Fusion ProGlide. On a constant currency basis, global market share of the blades and razors category was down about half a point versus the prior year. Volume in Appliances was down low single digits behind a mid-single-digit decline in developing regions, due mostly to market contractions and volume share losses in home and hair care appliances. Global value share of the dry shaving market was up half a point on constant currency basis.

Net earnings increased 9% to $1.5 billion in 2010 behind sales growth and net earnings margin expansion. Net earnings margin increased 100 basis points driven by gross margin expansion and a lower tax rate, partially offset by higher SG&A as a percentage of net sales. Gross margin increased mainly due to price increases and manufacturing cost savings. The reduction in the tax rate was mainly due to a shift in the geographic mix of earnings to developing regions which generally have lower statutory tax rates. The increase in SG&A as a percentage of net sales was driven by higher marketing spending and incremental foreign currency exchange costs, partially offset by lower overhead spending as a percentage of net sales.

Grooming net sales declined 9% in 2009 to $7.4 billion on a 5% decline in unit volume. Unfavorable foreign exchange reduced net sales by 6%. Product mix had a negative 2% impact on net sales as favorable product mix from growth of the premium-priced Gillette Fusion brand was more than offset by a disproportionate decline of Appliances, both of which have higher than segment average selling prices. Price increases, taken across most product lines and in part to offset foreign exchange impacts in developing regions, added 4% to net sales. Organic sales were down 2% versus the prior year on a 5% decline in organic volume, mainly due to the sharp decline of the Appliances business. Volume in both developed and developing regions declined mid-single digits. Male Grooming volume declined low single digits primarily driven by market contractions in developed regions and trade inventory reductions. Growth of Gillette Fusion was more than offset by declines in legacy shaving systems. Global value share of male blades and razors was up less than half a point versus the prior year. Volume in Appliances was down double digits due to market contractions, trade inventory reductions and the exits of the U.S. home appliance and Tassimo coffee appliance businesses. Global value share of the male dry shaving market was down less than half a point. Net earnings were down 14% in 2009 to $1.4 billion primarily on the decline in net sales and a 120-basis point reduction in net earnings margin. Net earnings margin was down due to a higher effective tax rate and reduced gross margin, partially offset by lower SG&A as a percentage of net sales. Gross margin declined due to unfavorable product mix resulting from disproportionate growth of disposable razors, higher commodity costs and volume scale deleverage which were partially offset by price increases and manufacturing cost savings.

The economic downturn in fiscal 2009 resulted in a disproportionate decline in the Appliances business, particularly in developing geographies, given the more discretionary nature of home and personal grooming appliance purchases. Over time, we believe the Appliances business will return to sales and earnings growth rates consistent with our long-term business plans. Failure to achieve these business plans or a further deterioration of the macroeconomic conditions could result in an impairment of the goodwill and intangible assets of the Appliance business. See the discussion of Acquisitions, Goodwill and Intangibles in the Significant Accounting Policies and Estimates section for additional information.

Health and Well Being

HEALTH CARE

($ millions)	2010		Change vs. Prior Year		2009		Change vs. Prior Year
Volume		n/a	+3	%		n/a	-3	%
Net sales	$	11,493	+2	%	$	11,288	-7	%
Net earnings	$	1,860	+1	%	$	1,835	-9	%

Health Care net sales increased 2% in 2010 to $11.5 billion on unit volume growth of 3%. Price increases, taken mainly in developing regions to offset currency devaluations, added 1% to net sales. Unfavorable mix reduced net sales by 2% mainly due to disproportionate growth of developing regions, which have lower than segment average selling prices. Organic sales increased 2%. Volume grew mid-single digits in developing regions and low single digits in developed regions. Oral Care volume grew mid-single digits behind initiative

Management’s Discussion and Analysis The Procter & Gamble Company 41

activity in Western Europe, Latin America and Asia. Personal Health Care volume was up low single digits behind higher shipments of Vicks and diagnostic products, partially offset by a continuing decline of Prilosec OTC in North America due to increased competitive activity. All-outlet value share of the U.S. personal health care market has declined 1 point, led by a 5-share point decline of Prilosec OTC’s share of the upper stomach remedies segment. Feminine Care volume increased low single digits behind initiative-driven growth of Always and expansion of Naturella into China. Global market share of the feminine care category was down about half a point on a constant currency basis.

Net earnings increased 1% to $1.9 billion for 2010 on higher net sales, partially offset by a 10-basis point reduction in net earnings margin. Net earnings margin contracted due to higher SG&A as a percentage of net sales, partially offset by higher gross margin. SG&A as a percentage of net sales increased due to higher marketing and overhead spending and incremental foreign currency exchange costs. Gross margin grew behind price increases, lower commodity costs and manufacturing cost savings.

Health Care net sales were down 7% to $11.3 billion in 2009 on a 3% decline in unit volume. Unfavorable foreign exchange reduced net sales by 5%. Negative product mix from disproportionately higher volume declines of Personal Health Care, which have higher than segment average selling prices, reduced net sales by 2%. These negative impacts were partially offset by positive pricing impacts of 3%. Organic sales were down 1% versus fiscal 2008. Volume declined mid-single digits in developed regions and low single digits in developing regions. Personal Health Care volume was down double digits due to the loss of marketplace exclusivity of Prilosec OTC in North America, the impact of a mild cold and flu season on Vicks and the divestiture of Thermacare. All-outlet value share of the U.S. personal health care market has declined over 2 points, including a double-digit share decline of Prilosec OTC. Oral Care volume declined low single digits behind trade inventory reductions and market contractions in North America and CEEMEA. Our global market share of oral care was in line with the prior year. Feminine Care volume was down low single digits mainly due to trade inventory reductions and market contractions in North America and CEEMEA. Our global feminine care market share was down half a point versus the prior year. Net earnings declined 9% to $1.8 billion in 2009 mainly due to lower net sales. Net earnings margin was down 50 basis points due primarily to lower gross margin and higher overhead spending as a percentage of net sales, partially offset by a reduction in marketing spending as a percentage of net sales. The decline in gross margin was driven by higher commodity costs, which were partially offset by price increases and manufacturing cost savings.

SNACKS AND PET CARE

($ millions)	2010		Change vs. Prior Year		2009		Change vs. Prior Year
Volume		n/a	-2	%		n/a	-6	%
Net sales	$	3,135	+1	%	$	3,114	-3	%
Net earnings	$	326	+39	%	$	234	-10	%

Snacks and Pet Care net sales increased 1% in 2010 to $3.1 billion on a 2% decline in unit volume. Price increases, taken primarily to offset prior-year commodity cost increases, added 3% to net sales. Favorable foreign exchange added 1% to net sales. Mix reduced net sales by 1% due to the discontinuation of certain premium snack products, which have higher than segment average selling prices, and higher shipments of large size pet products, which have lower than segment average selling prices. Organic sales were in line with the prior year. Volume in Snacks was down mid-single digits behind volume share losses driven by lower merchandising activity in North America and the discontinuation of certain premium snack products. On a constant currency basis, global market share of the snacks category was down half a point versus the prior year. Volume in Pet Care was up low single digits behind the continued success of product initiatives, increased marketing support and incremental merchandising activity.

Net earnings increased 39% to $326 million in 2010 driven by higher net sales and a 290-basis point increase in net earnings margin. Net earnings margin expanded due to higher gross margin and a lower tax rate, partially offset by higher SG&A as a percentage of net sales. Gross margin expanded behind price increases, commodity cost declines and manufacturing cost savings. The tax rate declined due to a shift in the geographic mix of earnings to countries with lower statutory tax rates. SG&A as a percentage of net sales increased due to higher marketing and overhead spending.

Snacks and Pet Care net sales decreased 3% to $3.1 billion in 2009 on a 6% decline in unit volume. Price increases to offset higher commodity costs added 9% to net sales. Product mix reduced net sales by 2% due to lower shipments of Eukanuba and premium snack products, which have higher than segment average selling prices. Unfavorable foreign exchange reduced net sales by 4%. Organic sales increased 1%. Snacks volume decreased high single digits due to lower merchandising support and trade inventory levels, a high base period, which included the Rice Infusion, Extreme Flavors and Stix product launches and volume share declines following price increases. Our global snacks market share declined about 1 point versus the prior year. Volume in Pet Care declined mid-single digits mainly due to declines in the premium nutrition business following multiple price increases. Net earnings in 2009 were down 10% to $234 million on lower net sales and a 60-basis point reduction in net earnings margin. A reduction in gross margin and a higher effective tax rate each reduced net earnings margin. These impacts were partially offset by lower SG&A as a percentage of net sales. Gross margin declined due to higher commodity costs, partially offset by higher selling prices and manufacturing cost savings. SG&A as a percentage of net sales declined due to reductions in both marketing and overhead spending.

42 The Procter & Gamble Company Management’s Discussion and Analysis

Household Care

FABRIC CARE AND HOME CARE

($ millions)	2010		Change vs. Prior Year		2009		Change vs. Prior Year
Volume		n/a	+6	%		n/a	-3	%
Net sales	$	23,805	+3	%	$	23,186	-2	%
Net earnings	$	3,339	+10	%	$	3,032	-11	%

Fabric Care and Home Care net sales increased 3% to $23.8 billion in 2010 on a 6% increase in unit volume. Pricing reduced net sales by 1% as the impact of price reductions to improve consumer value were partially offset by price increases taken primarily in developing regions to offset currency devaluations. Mix lowered net sales by 1% due mainly to unfavorable geographic mix and a shift toward larger size products, which have lower than segment average selling prices. Unfavorable foreign exchange reduced net sales by 1%. Organic sales grew 4%. Volume increased mid-single digits in both developed and developing regions. Fabric Care volume grew mid-single digits behind new product launches, price reductions and incremental merchandising activity. Global market share of the fabric care category was down about half a point on a constant currency basis. During 2010, the Ace laundry brand became the Company’s 23rd billion-dollar brand. Home Care volume was up high single digits mainly due to new product launches, media spending increases and market size expansion. On a constant currency basis, global market share of the home care category was up about half a point versus 2009. Batteries volume increased mid-single digits primarily due to growth in Greater China, price reductions to improve consumer value in North America and higher demand from business customers.

Net earnings increased 10% to $3.3 billion due to higher net sales and a 90-basis point increase in net earnings margin. Net earnings margin increased due to higher gross margin and a lower tax rate, partially offset by an increase in SG&A as a percentage of net sales. Gross margin increased mainly due to lower commodity costs and manufacturing cost savings, while SG&A as a percentage of net sales increased due to higher marketing spending. The tax rate declined due to a shift in the geographic mix of earnings to countries with lower statutory tax rates.

Fabric Care and Home Care net sales were down 2% in 2009 to $23.2 billion on a 3% decline in unit volume. Price increases, taken primarily to offset higher commodity costs, added 6% to net sales, while unfavorable foreign exchange reduced net sales by 5%. Organic sales increased 3%. Fabric Care, Home Care and Batteries unit volume were each down in both developed and developing regions. Volume in Fabric Care declined low single digits due to trade inventory reductions and net market volume share declines following price increases. Lower shipments of premium-priced Tide and Ariel were only partially offset by growth of Gain and Downy. Global value share of the fabric care market was down less than half a point behind declines in U.S. all-outlet shares of Tide and Downy, partially offset by share growth of Gain. Home Care volume was down low single digits due to market contractions and trade inventory reductions. Batteries volume declined high single digits due to market contractions, trade inventory reductions and competitive activity, which drove a 1-point market share decline of general purpose batteries. Net earnings declined 11% to $3.0 billion primarily due to reduced net earnings margin and lower net sales. Net earnings margin contracted 130 basis points due to a commodity-driven decline in gross margin, which was partially offset by price increases and manufacturing cost savings. Lower marketing spending as a percentage of net sales was largely offset by higher overhead spending as a percentage of net sales.

In July 2010, we acquired Ambi Pur, a leading air care brand with presence in 80 countries, as well as several toilet care products from the Sara Lee Corporation for approximately $400 million. This business will be integrated into Home Care and will be reflected in the results of operations of the Fabric Care and Home Care segment beginning in fiscal 2011. This acquisition is not expected to have a material impact on the results of operations for the Company or the reportable segment.

BABY CARE AND FAMILY CARE

($ millions)	2010		Change vs. Prior Year		2009		Change vs. Prior Year
Volume		n/a	+7	%		n/a	+1	%
Net sales	$	14,736	+4	%	$	14,103	+1	%
Net earnings	$	2,049	+16	%	$	1,770	+2	%

Baby Care and Family Care net sales grew 4% to $14.7 billion in 2010 on 7% volume growth. Pricing was in line with the prior year as the impact of price increases primarily taken in developing regions to offset local currency devaluations were offset by price reductions to improve consumer value. Negative mix reduced net sales by 2% driven mainly by disproportionate growth of mid-tier product lines, large count packs and developing regions, all of which have lower than segment average selling prices. Unfavorable foreign exchange reduced net sales by 1%. Organic sales increased 5%. Volume grew double digits in developing regions and mid-single digits in developed regions. Volume in Baby Care increased high single digits behind incremental initiative activity, market size expansion and price reductions to improve consumer value, primarily in CEEMEA. Global share of the baby care market was up over half a point on a constant currency basis. Volume in Family Care grew high single digits due to increased merchandising and initiative activity, market growth and price reductions to improve consumer value.

Net earnings increased 16% to $2.0 billion in 2010 behind net sales growth and 140 basis points of net earnings margin expansion driven by higher gross margin, partially offset by higher SG&A as a percentage of net sales. Gross margin increased mainly due to lower commodity costs and manufacturing cost savings. SG&A as a percentage of net sales increased primarily behind incremental marketing investments and higher foreign currency exchange costs.

Baby Care and Family Care net sales increased 1% to $14.1 billion in 2009 on 1% volume growth. Pricing to help recover higher commodity and energy costs contributed 5% to net sales growth. Unfavorable foreign exchange reduced net sales by 4%. Negative product mix from

Management’s Discussion and Analysis The Procter & Gamble Company 43

higher shipments of mid-tier brands, which have lower than segment average selling prices, reduced net sales by 1%. Organic sales were up 7% on a 2% increase in organic volume. Volume growth was driven by low single-digit growth in developing regions, while volume in developed regions was in line with the prior year. Baby Care volume increased low single digits due to growth of Pampers primarily in developing regions and double-digit growth of Luvs in North America. Our global market share of baby care was up nearly half a point. Family Care volume was down low single digits due to the Western European family care divestiture. Organic volume for Family Care was up low single digits behind double-digit growth of Charmin Basic and Bounty Basic. U.S. market share on Bounty was up nearly 1 point, while Charmin market share remained consistent with the prior year. Net earnings were up 2% versus the prior year to $1.8 billion due to net sales growth and higher net earnings margin. Net earnings margin increased 10 basis points as higher gross margin was partially offset by an increase in SG&A as a percentage of net sales and a higher effective tax rate. Gross margin improved due to the impact of price increases, manufacturing cost savings and more positive product mix following the Western European family care divestiture, which more than offset higher commodity and energy costs. SG&A as a percentage of net sales increased due to the higher current period overhead spending and base period reimbursements for services related to the Western European family care divestiture, partially offset by lower marketing spending.

Corporate

Corporate includes certain operating and non-operating activities not allocated to specific business units. These include: the incidental businesses managed at the corporate level; financing and investing activities; other general corporate items; the historical results of certain divested brands and categories; and certain restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization. Corporate also includes reconciling items to adjust the accounting policies used in the segments to U.S. GAAP. The most significant reconciling items include income taxes (to adjust from statutory rates that are reflected in the segments to the overall Company effective tax rate), adjustments for unconsolidated entities (to eliminate net sales, cost of products sold and SG&A for entities that are consolidated in the segments but accounted for using the equity method for U.S. GAAP) and noncontrolling interest adjustments for subsidiaries where we do not have 100% ownership. Since certain unconsolidated entities and less than 100%-owned subsidiaries are managed as integral parts of the Company, they are accounted for similar to a wholly-owned subsidiary for management and segment purposes. This means our segment results recognize 100% of each income statement component through before-tax earnings in the segments, with eliminations for unconsolidated entities and noncontrolling interests in Corporate. In determining segment after-tax net earnings, we apply the statutory tax rates (with adjustments to arrive at the Company’s effective tax rate in Corporate) and eliminate the share of earnings applicable to other ownership interests, in a manner similar to noncontrolling interest.

Corporate net sales primarily reflect the adjustment to eliminate the sales of unconsolidated entities included in business segment results. Accordingly, Corporate net sales is generally a negative balance. In 2010, negative net sales in Corporate were up 2% mainly due to changes in reconciling items needed to adjust the accounting policies used in the segments to U.S. GAAP. Net expenses from continuing operations increased $603 million to $817 million. The increase was primarily due to current period charges for potential competition law fines and for recently enacted legislation impacting the taxation of certain future retiree prescription drug subsidy payments and the impact of higher prior-period divestiture gains and tax audit settlements. These impacts were partially offset by lower current-period interest expense and restructuring charges. Additional discussion of the items impacting net expenses in Corporate can be found in the Results of Operations section.

In 2009, negative net sales in Corporate declined $86 million primarily driven by lower adjustments to eliminate the sales of unconsolidated entities included in business segment results. These adjustments decreased due to lower net sales of existing unconsolidated entities. Net expenses from continuing operations decreased $325 million to $214 million. The decrease was primarily due to corporate hedging impacts, lower interest expense and higher current period divestiture gains, partially offset by higher restructuring spending.

FINANCIAL CONDITION

We believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and ready access to capital markets at competitive rates.

Operating cash flow provides the primary source of funds to finance operating needs and capital expenditures. Excess operating cash is used first to fund shareholder dividends. Other discretionary uses include share repurchases and tack-on acquisitions to complement our portfolio of brands and geographies. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations.

Operating Activities

Operating cash flow was $16.1 billion in 2010, an 8% increase versus the prior year. Operating cash flow resulted primarily from net earnings adjusted for non-cash items (depreciation and amortization, stock-based compensation, deferred income taxes and gain on the sale of businesses) and a reduction in working capital. The increase in operating cash flow was primarily due to the current year reduction in working capital balances, partially offset by a decline in earnings versus 2009. Working capital reductions contributed $2.5 billion to operating cash flow in 2010 mainly due to an increase in accounts payable, accrued and other liabilities. Accounts payable, accrued and other liabilities increased primarily due to increased expenditures to support business growth, primarily related to the increased marketing investments. Accounts receivable days were down year over year due mainly to the

44 The Procter & Gamble Company Management’s Discussion and Analysis

global pharmaceuticals divestiture and improved collection efforts. Inventory contributed to operating cash flow despite growth in the business due to a reduction in days on hand due primarily to inventory management improvement efforts. Cash flow from discontinued operations contributed $285 million to operating cash flow.

In 2009, operating cash flow was $14.9 billion, a decrease of 1% versus the prior year total of $15.0 billion. Operating cash flow resulted primarily from net earnings adjusted for non-cash items. The decrease in operating cash flow versus 2008 was primarily due to a decline in net earnings from continuing operations. A net decrease in working capital also added to cash flow as lower accounts receivable and inventory balances were partially offset by a decline in accounts payable. The decrease in working capital was primarily due to the impact of lower net sales and our ability to adequately adjust production to better meet unit volume requirements. Accounts receivable days declined primarily due to improved collection efforts. Inventory and accounts payable days declined due in part to the optimization of our manufacturing process and inventory levels and a moderation of commodity costs late in the year. Other operating assets and liabilities reduced cash flow primarily due to changes in postretirement benefit plans. Cash flow from discontinued operations contributed $662 million to operating cash flow.

Free Cash Flow. We view free cash flow as an important measure because it is one factor impacting the amount of cash available for dividends and discretionary investment. It is defined as operating cash flow less capital expenditures and is one of the measures used to evaluate senior management and determine their at-risk compensation. Free cash flow was $13.0 billion in 2010, an increase of 11% versus the prior year. Free cash flow increased due to higher operating cash flow and lower capital spending. Free cash flow productivity, defined as the ratio of free cash flow to net earnings, was 102% in 2010. This includes a negative 23% impact resulting from the global pharmaceuticals divestiture, which increased net earnings and lowered operating cash flow due to tax payments on the divestiture gain.

In 2009, free cash flow was $11.7 billion, compared to $12.0 billion in 2008. Free cash flow decreased as a result of higher capital spending and lower operating cash flow. Free cash flow productivity was 87% in 2009. This was below our 90% target primarily due to the gain on the Folgers coffee transaction which lowered productivity by approximately 15% because the gain is included in net earnings but had no material impact on operating cash flow.

Investing Activities

Net investing activities consumed $597 million of cash in 2010 and $2.4 billion in 2009 mainly due to capital spending and acquisitions, partially offset by proceeds from asset sales, including $3.0 billion in cash received from the sale of our global pharmaceuticals business in 2010. Discontinued operations consumed $1 million of cash from investing activities in 2010 and contributed $69 million in 2009.

Capital Spending. We view capital spending efficiency as a critical component of our overall cash management strategy. We manage capital spending to support our business growth plans and have cost controls to deliver our cash generation targets. Our target for capital spending is 4% of net sales. Capital expenditures, primarily to support capacity expansion, innovation and cost savings, were $3.1 billion in 2010 and $3.2 billion in 2009. The decline in capital spending resulted primarily from cost control efforts and capacity expansion of our Family Care business in 2009, partially offset by the construction of new manufacturing facilities in 2010. Capital spending as a percentage of net sales improved 30 basis points to 3.9% in 2010 behind the scale leverage of net sales growth and a reduction in capital spending. Capital spending as a percentage of net sales in 2009 increased 40 basis points versus the prior year to 4.2% primarily due to capacity expansion of our Family Care business in North America as well as increased spending to support innovation in Beauty. Capital spending for our discontinued coffee and pharmaceuticals businesses was $1 million in 2010 and $11 million in 2009.

Acquisitions. Acquisitions used $425 million of cash in 2010 primarily for the acquisition of Natura, a holistic and naturals pet products company. In 2009, acquisitions used $368 million of cash mainly for the acquisition of Nioxin, a leader in the scalp care professional hair care market.

Proceeds from Asset Sales. Proceeds from asset sales contributed $3.1 billion to cash in 2010 mainly due to the sale of our global pharmaceuticals business. In 2009, proceeds from asset sales were $1.1 billion from the sale of our coffee business, Thermacare and a number of other minor brands. Of these proceeds, $350 million related to debt issued in connection with the Folgers coffee transaction. The underlying debt obligation was transferred to The J.M. Smucker Company pursuant to the transaction. No cash was received from Smucker in the exchange transaction. Proceeds from asset sales within discontinued operations were $81 million in 2009.

Management’s Discussion and Analysis The Procter & Gamble Company 45

Financing Activities

Dividend Payments. Our first discretionary use of cash is dividend payments. Dividends per common share increased 10% to $1.80 per share in 2010. Total dividend payments to both common and preferred shareholders were $5.5 billion in 2010 and $5.0 billion in 2009. The increase in dividend payments resulted from increases in our quarterly dividends per share, partially offset by a reduction in the number of shares outstanding. In April 2010, the Board of Directors declared an increase in our quarterly dividend from $0.44 to $0.4818 per share on Common Stock and Series A and B ESOP Convertible Class A Preferred Stock. This represents a 9.5% increase compared to the prior quarterly dividend and is the 54th consecutive year that our dividend has increased. We have paid a dividend in every year since our incorporation in 1890.

Long-Term and Short-Term Debt. We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including acquisitions and share repurchase activities) and the overall cost of capital. Total debt was $29.8 billion in 2010, $37.0 billion in 2009 and $36.7 billion in 2008. Our total debt decreased in 2010 mainly due to repayments funded by operating cash flow and cash provided by the global pharmaceuticals divestiture.

Treasury Purchases. In 2007, we began to acquire outstanding shares under a publicly announced three-year share repurchase plan, which expired on June 30, 2010. We acquired $22.3 billion of shares under this repurchase plan. Total share repurchases were $6.0 billion in 2010 and $6.4 billion in 2009, nearly all of which were made under the publicly announced plan. We currently expect share repurchases of $6 – 8 billion in 2011.

In November 2008, we completed the divestiture of our Folgers coffee subsidiary. In connection with this divestiture, 38.7 million shares of P&G common stock were tendered by shareholders and exchanged for all shares of Folgers common stock, resulting in an increase of treasury stock of $2.5 billion.

Liquidity

Our current liabilities exceeded current assets by $5.5 billion. We utilize short- and long-term debt to fund discretionary items such as acquisitions and share repurchases. We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations. We have strong short- and long-term debt ratings which have enabled and should continue to enable us to refinance our debt as it becomes due at favorable rates in commercial paper and bond markets. In addition, we have agreements with a diverse group of financial institutions that, if needed, should provide sufficient credit funding to meet short-term financing requirements.

On June 30, 2010, our short-term credit ratings were P-1 (Moody’s) and A-1+ (Standard & Poor’s), while our long-term credit ratings are Aa3 (Moody’s) and AA- (Standard & Poor’s), both with a stable outlook.

We maintain three bank credit facilities: a $6 billion 5-year facility and a $3 billion 5-year facility which expire in August 2012 and a $2 billion 364-day facility which expires in August 2011. The credit facilities are in place to support our ongoing commercial paper program. These facilities can be extended for certain periods of time as specified in, and in accordance with, the terms of each credit agreement. We anticipate that these facilities will remain largely undrawn for the foreseeable future. These credit facilities do not have cross-default or ratings triggers, nor do they have material adverse events clauses, except at the time of signing. In addition to these credit facilities, we have an automatically effective registration statement on Form S-3 filed with the SEC that is available for registered offerings of short- or long-term debt securities.

Guarantees and Other Off-Balance Sheet Arrangements

We do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on financial condition or liquidity.

46 The Procter & Gamble Company Management’s Discussion and Analysis

Contractual Commitments

The following table provides information on the amount and payable date of our contractual commitments as of June 30, 2010.

($ millions)	Total		Less Than 1 Year		1–3 Years		3–5 Years		After 5 Years
RECORDED LIABILITIES
Total debt	$	29,283	$	8,429	$	5,215	$	4,611	$	11,028
Capital leases		401		44		95		76		186
Uncertain tax positions(1)		127		127		—		—		—
OTHER
Interest payments relating to long-term debt		10,292		922		1,745		1,413		6,212
Operating leases(2)		1,514		282		433		313		486
Minimum pension funding(3)		1,298		441		857		—		—
Purchase obligations(4)		2,694		896		1,096		401		301
TOTAL CONTRACTUAL COMMITMENTS		45,609		11,141		9,441		6,814		18,213

(1) As of June 30, 2010, the Company’s Consolidated Balance Sheet reflects a liability for uncertain tax positions of $2.5 billion, including $711 million of interest and penalties. Due to the high degree of uncertainty regarding the timing of future cash outflows of liabilities for uncertain tax positions beyond one year, a reasonable estimate of the period of cash settlement beyond twelve months from the balance sheet date of June 30, 2010, cannot be made.

(2) Operating lease obligations are shown net of guaranteed sublease income.

(3) Represents future pension payments to comply with local funding requirements. The projected payments beyond fiscal year 2013 are not currently determinable.

(4) Primarily reflects future contractual payments under various take-or-pay arrangements entered into as part of the normal course of business. Commitments made under take-or-pay obligations represent future purchases in line with expected usage to obtain favorable pricing. Approximately 45% relates to service contracts for information technology, human resources management and facilities management activities that have been outsourced. While the amounts listed represent contractual obligations, we do not believe it is likely that the full contractual amount would be paid if the underlying contracts were canceled prior to maturity. In such cases, we generally are able to negotiate new contracts or cancellation penalties, resulting in a reduced payment. The amounts do not include obligations related to other contractual purchase obligations that are not take-or-pay arrangements. Such contractual purchase obligations are primarily purchase orders at fair value that are part of normal operations and are reflected in historical operating cash flow trends. We do not believe such purchase obligations will adversely affect our liquidity position.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

In preparing our financial statements in accordance with U.S. GAAP, there are certain accounting policies that may require a choice between acceptable accounting methods or may require substantial judgment or estimation in their application. These include income taxes, certain employee benefits and acquisitions, goodwill and intangible assets. We believe these accounting policies, and others set forth in Note 1 to the Consolidated Financial Statements, should be reviewed as they are integral to understanding the results of operations and financial condition of the Company.

The Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee of the Company’s Board of Directors.

Income Taxes

Our annual tax rate is determined based on our income, statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Tax law requires certain items to be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities.

Deferred tax assets generally represent the tax effect of items that can be used as a tax deduction or credit in future years for which we have already recorded the tax benefit in our income statement. Deferred tax liabilities generally represent tax expense recognized in our financial statements for which payment has been deferred, the tax effect of expenditures for which a deduction has already been taken in our tax return but has not yet been recognized in our financial statements or assets recorded at fair value in business combinations for which there was no corresponding tax basis adjustment.

Inherent in determining our annual tax rate are judgments regarding business plans, planning opportunities and expectations about future outcomes. Realization of certain deferred tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carry-forward periods. Although realization is not assured, management believes it is more likely than not that our deferred tax assets, net of valuation allowances, will be realized.

We operate in multiple jurisdictions with complex tax policy and regulatory environments. In certain of these jurisdictions, we may take tax positions that management believes are supportable, but are potentially subject to successful challenge by the applicable taxing authority. These interpretational differences with the respective governmental taxing authorities can be impacted by the local economic and fiscal environment. We evaluate our tax positions and establish liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes. We review these tax uncertainties in light of changing facts and circumstances, such as the progress of tax

Management’s Discussion and Analysis The Procter & Gamble Company 47

audits, and adjust them accordingly. We have a number of audits in process in various jurisdictions. Although the resolution of these tax positions is uncertain, based on currently available information, we believe that the ultimate outcomes will not have a material adverse effect on our financial position, results of operations or cash flows.

Because there are a number of estimates and assumptions inherent in calculating the various components of our tax provision, certain changes or future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effective tax rate.

Employee Benefits

We sponsor various post-employment benefits throughout the world. These include pension plans, both defined contribution plans and defined benefit plans, and other post-employment benefit (OPEB) plans, consisting primarily of health care and life insurance for retirees. For accounting purposes, the defined benefit pension and OPEB plans require assumptions to estimate the projected and accumulated benefit obligations, including the following variables: discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality; expected return on assets and health care cost trend rates. These and other assumptions affect the annual expense and obligations recognized for the underlying plans. Our assumptions reflect our historical experiences and management’s best judgment regarding future expectations. In accordance with U.S. GAAP, the net amount by which actual results differ from our assumptions is deferred. If this net deferred amount exceeds 10% of the greater of plan assets or liabilities, a portion of the deferred amount is included in expense for the following year. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.

The expected return on plan assets assumption is important, since many of our defined benefit pension plans and our primary OPEB plan are funded. The process for setting the expected rates of return is described in Note 8 to the Consolidated Financial Statements. For 2010, the average return on assets assumptions for pension plan assets and OPEB assets were 7.1% and 9.1%, respectively. A change in the rate of return of 0.5% for both pension and OPEB assets would impact annual after-tax benefit expense by less than $45 million.

Since pension and OPEB liabilities are measured on a discounted basis, the discount rate is a significant assumption. Discount rates used for our U.S. defined benefit pension and OPEB plans are based on a yield curve constructed from a portfolio of high quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better. The average discount rate on the defined benefit pension plans of 5.0% represents a weighted average of local rates in countries where such plans exist. A 0.5% change in the discount rate would impact annual after-tax defined benefit pension expense by less than $65 million. The average discount rate on the OPEB plan of 5.4% reflects the higher interest rates generally applicable in the U.S., which is where a majority of the plan participants receive benefits. A 0.5% change in the discount rate would impact annual after-tax OPEB expense by less than $30 million.

Certain defined contribution pension and OPEB benefits in the U.S. are funded by the Employee Stock Ownership Plan (ESOP), as discussed in Note 8 to the Consolidated Financial Statements.

Acquisitions, Goodwill and Intangible Assets

We account for acquired businesses using the purchase method of accounting. Under the purchase method, our Consolidated Financial Statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and liabilities assumed must be recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.

Significant judgment is required in estimating the fair value of intangible assets and in assigning their respective useful lives. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant items. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management, but are inherently uncertain.

We typically use an income method to estimate the fair value of intangible assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth rates and profitability), the underlying product or technology life cycles, economic barriers to entry, a brand’s relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

Determining the useful life of an intangible asset also requires judgment. Certain brand intangibles are expected to have indefinite lives based on their history and our plans to continue to support and build the acquired brands. Other acquired intangible assets (e.g., certain trademarks or brands, customer relationships, patents and technologies) are expected to have determinable useful lives. Our assessment as to brands that have an indefinite life and those that have a determinable life is based on a number of factors including competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. Our estimates of the useful lives of determinable-lived intangibles are primarily based on these same factors. All of our acquired technology and customer-related intangibles are expected to have determinable useful lives.

48 The Procter & Gamble Company Management’s Discussion and Analysis

The costs of determinable-lived intangibles are amortized to expense over their estimated life. The value of indefinite-lived intangible assets and residual goodwill is not amortized, but is tested at least annually for impairment. Our impairment testing for goodwill is performed separately from our impairment testing of indefinite-lived intangibles. We test goodwill for impairment by reviewing the book value compared to the fair value at the reportable unit level. We test individual indefinite-lived intangibles by reviewing the individual book values compared to the fair value. We determine the fair value of our reporting units and indefinite-lived intangible assets based on the income approach. Under the income approach, we calculate the fair value of our reporting units based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate future cash flows to measure fair value. Assumptions used in our impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with internal projections and operating plans. We believe such assumptions and estimates are also comparable to those that would be used by other marketplace participants. When certain events or changes in operating conditions occur, indefinite-lived intangible assets may be reclassified to a determinable life asset and an additional impairment assessment may be performed. We did not recognize any material impairment charges for goodwill or intangible assets during the years presented.

Our annual impairment testing for both goodwill and indefinite-lived intangible assets indicated that all reporting unit and intangible asset fair values exceeded their respective recorded values. However, future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill and indefinite-lived intangible assets, including discount and tax rates or future cash flow projections, could result in significantly different estimates of the fair values. A significant reduction in the estimated fair values could result in impairment charges that could materially affect the financial statements in any given year. The recorded value of goodwill and intangible assets from recently acquired businesses are derived from more recent business operating plans and macroeconomic environmental conditions and therefore are more susceptible to an adverse change that could require an impairment charge.

For example, because the Gillette intangible and goodwill amounts represent values as of a relatively more recent acquisition date, such amounts are more susceptible to an impairment risk if business operating results or macroeconomic conditions deteriorate. Gillette indefinite-lived intangible assets represent approximately 89% of the $26.5 billion of indefinite-lived intangible assets at June 30, 2010. Goodwill allocated to stand-alone reporting units consisting primarily of businesses purchased as part of the Gillette acquisition represents 42% of the $54.0 billion of goodwill at June 30, 2010. This includes the Male Grooming and Appliance businesses, which are components of the Grooming segment, and the Batteries business, which is part of the Fabric Care and Home Care segment.

With the exception of our Appliances and Salon Professional businesses, all of our other reporting units have fair values that significantly exceed recorded values. As noted above, the Appliances business was acquired as part of the Gillette acquisition and is a stand-alone goodwill reporting unit. The Salon Professional business consists primarily of operations acquired in the Wella acquisition and is part of the Beauty segment. As a result of the organization changes to the structure of the Beauty GBU effected on July 1, 2009 (see the Recent Business Developments section and Note 11 to our Consolidated Financial Statements), the Salon Professional business recently became a new stand-alone goodwill reporting unit. These businesses represent some of our more discretionary consumer spending categories. The Appliances business has goodwill of $1.5 billion, while the Salon Professional business has a goodwill balance of $809 million. The estimated fair values of our Appliances and Salon Professional businesses exceed their carrying values by 18% and 20%, respectively. Because these businesses are more discretionary in nature, their operations and underlying fair values were disproportionately impacted by the economic downturn that began in fiscal 2009, which led to a reduction in home and personal grooming appliance purchases and in visits to hair salons. Our valuation of the Appliances and Salon Professional businesses has them returning to sales and earnings growth rates consistent with our long-term business plans. Failure to achieve these business plans or a further deterioration of the macroeconomic conditions could result in a valuation that would trigger an impairment of the goodwill and intangible assets of these businesses.

New Accounting Pronouncements

There were no new accounting pronouncements issued or effective during the fiscal year which have had or are expected to have a material impact on the Consolidated Financial Statements. For a discussion of new accounting pronouncements, see Note 1 to our Consolidated Financial Statements.

OTHER INFORMATION

Hedging and Derivative Financial Instruments

As a multinational company with diverse product offerings, we are exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. We evaluate exposures on a centralized basis to take advantage of natural exposure netting and correlation. Except within financing operations, we leverage the Company’s broadly diversified portfolio of exposures as a natural hedge and prioritize operational hedging activities over financial market instruments. To the extent we choose to further manage volatility associated with the net exposures, we enter into various financial transactions which we account for using the applicable accounting guidance for derivative instruments and hedging activities. These financial transactions are governed by our policies covering acceptable counterparty exposure, instrument types and other hedging practices. Note 5 to the Consolidated Financial Statements includes a detailed discussion of our accounting policies for financial instruments.

Management’s Discussion and Analysis The Procter & Gamble Company 49

Derivative positions can be monitored using techniques including market valuation, sensitivity analysis and value-at-risk modeling. The tests for interest rate, currency rate and commodity derivative positions discussed below are based on the CorporateManager™ value-at-risk model using a one-year horizon and a 95% confidence level. The model incorporates the impact of correlation (the degree to which exposures move together over time) and diversification (from holding multiple currency, commodity and interest rate instruments) and assumes that financial returns are normally distributed. Estimates of volatility and correlations of market factors are drawn from the RiskMetrics™ dataset as of June 30, 2010. In cases where data is unavailable in RiskMetrics™, a reasonable proxy is included.

Our market risk exposures relative to interest rates, currency rates and commodity prices, as discussed below, have not changed materially versus the previous reporting period. In addition, we are not aware of any facts or circumstances that would significantly impact such exposures in the near term.

Interest Rate Exposure on Financial Instruments. Interest rate swaps are used to hedge exposures to interest rate movement on underlying debt obligations. Certain interest rate swaps denominated in foreign currencies are designated to hedge exposures to currency exchange rate movements on our investments in foreign operations. These currency interest rate swaps are designated as hedges of the Company’s foreign net investments.

Based on our overall interest rate exposure as of and during the year ended June 30, 2010, including derivative and other instruments sensitive to interest rates, we believe a near-term change in interest rates, at a 95% confidence level based on historical interest rate movements, would not materially affect our financial statements.

Currency Rate Exposure on Financial Instruments. Because we manufacture and sell products and finance operations in a number of countries throughout the world, we are exposed to the impact on revenue and expenses of movements in currency exchange rates. The primary purpose of our currency hedging activities is to reduce the risk that our financial position will be adversely affected by short-term changes in exchange rates. Corporate policy prescribes the range of allowable hedging activity. We primarily use forward contracts with maturities of less than 18 months. In addition, we enter into certain currency swaps with maturities of up to five years to hedge our exposure to exchange rate movements on intercompany financing transactions.

Based on our overall currency rate exposure as of and during the year ended June 30, 2010, we believe, at a 95% confidence level based on historical currency rate movements, the impact of a near-term change in currency rates on derivative and other instruments would not materially affect our financial statements.

Commodity Price Exposure on Financial Instruments. We use raw materials that are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. In addition to fixed price contracts, we may use futures, options and swap contracts to manage the volatility related to the above exposures.

Based on our overall commodity price exposure as of and during the year ended June 30, 2010, we believe, at a 95% confidence level based on historical commodity price movements, the impact of a near-term change in commodity prices on derivative and other instruments would not materially affect our financial statements.

Measures Not Defined By U.S. GAAP

Our discussion of financial results includes several “non-GAAP” financial measures. We believe these measures provide our investors with additional information about our underlying results and trends, as well as insight to some of the metrics used to evaluate management. When used in MD&A, we have provided the comparable GAAP measure in the discussion. These measures include:

Organic Sales Growth. Organic sales growth measures sales growth excluding the impacts of foreign exchange, acquisitions and divestitures from year-over-year comparisons. We believe this provides investors with a more complete understanding of underlying results and trends by providing sales growth on a consistent basis.

The following tables provide a numerical reconciliation of organic sales growth to reported net sales growth:

Year ended June 30, 2010	Net Sales Growth		Foreign Exchange Impact		Acquisition/ Divestiture Impact*		Organic Sales Growth
Beauty	3	%	0	%	0	%	3	%
Grooming	3	%	0	%	0	%	3	%
Health Care	2	%	0	%	0	%	2	%
Snacks and Pet Care	1	%	-1	%	0	%	0	%
Fabric Care and Home Care	3	%	1	%	0	%	4	%
Baby Care and Family Care	4	%	1	%	0	%	5	%
TOTAL P&G	3	%	1	%	-1	%	3	%

Year ended June 30, 2009	Net Sales Growth		Foreign Exchange Impact		Acquisition/ Divestiture Impact*		Organic Sales Growth
Beauty	-4	%	4	%	1	%	1	%
Grooming	-9	%	6	%	1	%	-2	%
Health Care	-7	%	5	%	1	%	-1	%
Snacks and Pet Care	-3	%	4	%	0	%	1	%
Fabric Care and Home Care	-2	%	5	%	0	%	3	%
Baby Care and Family Care	1	%	4	%	2	%	7	%
TOTAL P&G	-3	%	4	%	1	%	2	%

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

50 The Procter & Gamble Company Management’s Discussion and Analysis

Core EPS. Core EPS is a measure of the Company’s diluted net earnings per share growth from continuing operations excluding certain items that are not judged to be part of the Company’s sustainable results or trends. This includes charges for potential competition law fines, a charge related to recently enacted legislation which changed the taxation of certain future retiree prescription drug subsidy payments in the United States and the impact of incremental Corporate restructuring charges incurred in fiscal 2009 versus 2008 to offset the dilutive impact of the Folgers divestiture. We believe the Core EPS measure provides an important perspective of underlying business trends and results and provides a more comparable measure of year-on-year earnings per share growth. Core EPS is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation. The tables below provide reconciliations of reported diluted net earnings per share from continuing operations to Core EPS:

Years ended June 30	2010			2009			2008
Diluted Net Earnings Per Share — Continuing Operations	$	3.53		$	3.39		$	3.40
Significant Adjustments to Tax Reserves		—			—			(0.14	)
Incremental Folgers-related Restructuring Charges		—			0.09			—
Charge for Taxation of Retiree Healthcare Subsidy		0.05			—			—
Charges for Potential Competition Law Fines		0.09			—			—
Rounding Impacts		—			(0.01	)		—
CORE EPS		3.67			3.47			3.26
Core EPS Growth		6	%		6	%

Note — All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction. The tax impact on the incremental Folgers-related restructuring charges was ($0.02) for 2009. The entire amount of the charge for taxation of retiree healthcare subsidy and significant adjustments to tax reserves are tax expense. There is no tax impact on earnings per share due to the charges for potential competition law fines.

Free Cash Flow. Free cash flow is defined as operating cash flow less capital spending. We view free cash flow as an important measure because it is one factor in determining the amount of cash available for dividends and discretionary investment. Free cash flow is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.

Free Cash Flow Productivity. Free cash flow productivity is defined as the ratio of free cash flow to net earnings. Our target is to generate free cash flow at or above 90% of net earnings. Free cash flow productivity is one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.

The following table provides a numerical reconciliation of free cash flow:

($ millions)	Operating Cash Flow		Capital Spending			Free Cash Flow		Net Earnings		Free Cash Flow Productivity
2010	$	16,072	$	(3,067	)	$	13,005	$	12,736	102	%
2009		14,919		(3,238	)		11,681		13,436	87	%
2008		15,008		(3,046	)		11,962		12,075	99	%

The Procter & Gamble Company 51

Consolidated Statements of Earnings

Amounts in millions except per share amounts; Years ended June 30	2010			2009		2008
NET SALES	$	78,938		$	76,694	$	79,257
Cost of products sold		37,919			38,690		39,261
Selling, general and administrative expense		24,998			22,630		24,017
OPERATING INCOME		16,021			15,374		15,979
Interest expense		946			1,358		1,467
Other non-operating income/(expense), net		(28	)		397		373
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		15,047			14,413		14,885
Income taxes on continuing operations		4,101			3,733		3,594
NET EARNINGS FROM CONTINUING OPERATIONS		10,946			10,680		11,291
NET EARNINGS FROM DISCONTINUED OPERATIONS		1,790			2,756		784
NET EARNINGS	$	12,736		$	13,436	$	12,075
BASIC NET EARNINGS PER COMMON SHARE:
Earnings from continuing operations	$	3.70		$	3.55	$	3.61
Earnings from discontinued operations		0.62			0.94		0.25
BASIC NET EARNINGS PER COMMON SHARE		4.32			4.49		3.86
DILUTED NET EARNINGS PER COMMON SHARE:
Earnings from continuing operations		3.53			3.39		3.40
Earnings from discontinued operations		0.58			0.87		0.24
DILUTED NET EARNINGS PER COMMON SHARE		4.11			4.26		3.64
DIVIDENDS PER COMMON SHARE	$	1.80		$	1.64	$	1.45

See accompanying Notes to Consolidated Financial Statements.

52 The Procter & Gamble Company

Consolidated Balance Sheets

Amounts in millions; June 30
	2010			2009
Assets
CURRENT ASSETS
Cash and cash equivalents	$	2,879		$	4,781
Accounts receivable		5,335			5,836
INVENTORIES
Materials and supplies		1,692			1,557
Work in process		604			672
Finished goods		4,088			4,651
Total inventories		6,384			6,880
Deferred income taxes		990			1,209
Prepaid expenses and other current assets		3,194			3,199
TOTAL CURRENT ASSETS		18,782			21,905
PROPERTY, PLANT AND EQUIPMENT
Buildings		6,868			6,724
Machinery and equipment		29,294			29,042
Land		850			885
Total property, plant and equipment		37,012			36,651
Accumulated depreciation		(17,768	)		(17,189	)
NET PROPERTY, PLANT AND EQUIPMENT		19,244			19,462
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill		54,012			56,512
Trademarks and other intangible assets, net		31,636			32,606
NET GOODWILL AND OTHER INTANGIBLE ASSETS		85,648			89,118
OTHER NONCURRENT ASSETS		4,498			4,348
TOTAL ASSETS	$	128,172		$	134,833
	2010			2009
Liabilities and Shareholders’ Equity
CURRENT LIABILITIES
Accounts payable	$	7,251		$	5,980
Accrued and other liabilities		8,559			8,601
Debt due within one year		8,472			16,320
TOTAL CURRENT LIABILITIES		24,282			30,901
LONG-TERM DEBT		21,360			20,652
DEFERRED INCOME TAXES		10,902			10,752
OTHER NONCURRENT LIABILITIES		10,189			9,146
TOTAL LIABILITIES		66,733			71,451
SHAREHOLDERS’ EQUITY
Convertible Class A preferred stock, stated value $1 per share (600 shares authorized)		1,277			1,324
Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized)		—			—
Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2010 — 4,007.6, 2009 — 4,007.3)		4,008			4,007
Additional paid-in capital		61,697			61,118
Reserve for ESOP debt retirement		(1,350	)		(1,340	)
Accumulated other comprehensive income (loss)		(7,822	)		(3,358	)
Treasury stock, at cost (shares held: 2010 — 1,164.1, 2009 — 1,090.3)		(61,309	)		(55,961	)
Retained earnings		64,614			57,309
Noncontrolling interest		324			283
TOTAL SHAREHOLDERS’ EQUITY		61,439			63,382
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	128,172		$	134,833

See accompanying Notes to Consolidated Financial Statements.

The Procter & Gamble Company 53

Consolidated Statements of Shareholders’ Equity

Dollars in millions/Shares in thousands	Common Shares Outstanding		Common Stock		Preferred Stock			Additional Paid-In Capital			Reserve for ESOP  Debt Retirement			Accumulated Other Comprehensive Income (loss)			Non- controlling Interest			Treasury Stock			Retained Earnings			Total
BALANCE JUNE 30, 2007	3,131,946		$	3,990	$	1,406		$	59,030		$	(1,308	)	$	617		$	252		$	(38,772	)	$	41,797		$	67,012
Net earnings																								12,075			12,075
Other comprehensive income:
Financial statement translation															6,543												6,543
Hedges and investment securities, net of $1,664 tax															(2,906	)											(2,906	)
Defined benefit retirement plans, net of $120 tax															(508	)											(508	)
Total comprehensive income																										$	15,204
Cumulative impact for adoption of new accounting guidance(1)																								(232	)		(232	)
Dividends to shareholders:
Common																								(4,479	)		(4,479	)
Preferred, net of tax benefits																								(176	)		(176	)
Treasury purchases	(148,121	)																			(10,047	)					(10,047	)
Employee plan issuances	43,910			12					1,272												1,196						2,480
Preferred stock conversions	4,982					(40	)		5												35						—
ESOP debt impacts												(17	)											1			(16	)
Noncontrolling interest																		38									38
BALANCE JUNE 30, 2008	3,032,717			4,002		1,366			60,307			(1,325	)		3,746			290			(47,588	)		48,986			69,784
Net earnings																								13,436			13,436
Other comprehensive income:
Financial statement translation															(6,151	)											(6,151	)
Hedges and investment securities, net of $452 tax															748												748
Defined benefit retirement plans, net of $879 tax															(1,701	)											(1,701	)
Total comprehensive income																										$	6,332
Cumulative impact for adoption of new accounting guidance(1)																								(84	)		(84	)
Dividends to shareholders:
Common																								(4,852	)		(4,852	)
Preferred, net of tax benefits																								(192	)		(192	)
Treasury purchases	(98,862	)																			(6,370	)					(6,370	)
Employee plan issuances	16,841			5					804												428						1,237
Preferred stock conversions	4,992					(42	)		7												35						—
Shares tendered for Folgers coffee subsidiary	(38,653	)																			(2,466	)					(2,466	)
ESOP debt impacts												(15	)											15			—
Noncontrolling interest																		(7	)								(7	)
BALANCE JUNE 30, 2009	2,917,035			4,007		1,324			61,118			(1,340	)		(3,358	)		283			(55,961	)		57,309			63,382
Net earnings																								12,736			12,736
Other comprehensive income:
Financial statement translation															(4,194	)											(4,194	)
Hedges and investment securities, net of $520 tax															867												867
Defined benefit retirement plans, net of $465 tax															(1,137	)											(1,137	)
Total comprehensive income																										$	8,272
Dividends to shareholders:
Common																								(5,239	)		(5,239	)
Preferred, net of tax benefits																								(219	)		(219	)
Treasury purchases	(96,759	)																			(6,004	)					(6,004	)
Employee plan issuances	17,616			1					574												616						1,191
Preferred stock conversions	5,579					(47	)		7												40						—
ESOP debt impacts												(10	)											27			17
Noncontrolling interest									(2	)								41									39
BALANCE JUNE 30, 2010	2,843,471		$	4,008	$	1,277		$	61,697		$	(1,350	)	$	(7,822	)	$	324		$	(61,309	)	$	64,614		$	61,439

(1) Cumulative impact of adopting new accounting guidance relates to: 2008 — uncertainty in income taxes; 2009 — split-dollar life insurance arrangements.

See accompanying Notes to Consolidated Financial Statements.

54 The Procter & Gamble Company

Consolidated Statements of Cash Flows

Amounts in millions; Years ended June 30	2010			2009			2008
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	$	4,781		$	3,313		$	5,354
OPERATING ACTIVITIES
Net earnings		12,736			13,436			12,075
Depreciation and amortization		3,108			3,082			3,166
Share-based compensation expense		453			516			555
Deferred income taxes		36			596			1,214
Gain on sale of businesses		(2,670	)		(2,377	)		(284	)
Change in accounts receivable		(14	)		415			432
Change in inventories		86			721			(1,050	)
Change in accounts payable, accrued and other liabilities		2,446			(742	)		297
Change in other operating assets and liabilities		(305	)		(758	)		(1,270	)
Other		196			30			(127	)
TOTAL OPERATING ACTIVITIES		16,072			14,919			15,008
INVESTING ACTIVITIES
Capital expenditures		(3,067	)		(3,238	)		(3,046	)
Proceeds from asset sales		3,068			1,087			928
Acquisitions, net of cash acquired		(425	)		(368	)		(381	)
Change in investments		(173	)		166			(50	)
TOTAL INVESTING ACTIVITIES		(597	)		(2,353	)		(2,549	)
FINANCING ACTIVITIES
Dividends to shareholders		(5,458	)		(5,044	)		(4,655	)
Change in short-term debt		(1,798	)		(2,420	)		2,650
Additions to long-term debt		3,830			4,926			7,088
Reductions of long-term debt		(8,546	)		(2,587	)		(11,747	)
Treasury stock purchases		(6,004	)		(6,370	)		(10,047	)
Impact of stock options and other		721			681			1,867
TOTAL FINANCING ACTIVITIES		(17,255	)		(10,814	)		(14,844	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(122	)		(284	)		344
CHANGE IN CASH AND CASH EQUIVALENTS		(1,902	)		1,468			(2,041	)
CASH AND CASH EQUIVALENTS, END OF YEAR	$	2,879		$	4,781		$	3,313
SUPPLEMENTAL DISCLOSURE
Cash payments for:
Interest	$	1,184		$	1,226		$	1,373
Income Taxes		4,175			3,248			3,499
Assets acquired through non-cash capital leases		20			8			13
Divestiture of coffee business in exchange for shares of P&G stock		—			2,466			—

See accompanying Notes to Consolidated Financial Statements.

The Procter & Gamble Company 55

Notes to Consolidated Financial Statements

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Procter & Gamble Company’s (the “Company,” “we” or “us”) business is focused on providing branded consumer packaged goods of superior quality and value. Our products are sold in more than 180 countries primarily through retail operations including mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons and high-frequency stores. We have on-the-ground operations in approximately 80 countries.

Basis of Presentation

The Consolidated Financial Statements include the Company and its controlled subsidiaries. Intercompany transactions are eliminated.

Use of Estimates

Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, consumer and trade promotion accruals, pensions, post-employment benefits, stock options, valuation of acquired intangible assets, useful lives for depreciation and amortization of long-lived assets, future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets, deferred tax assets, uncertain income tax positions and contingencies. Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the financial statements in any individual year. However, in regard to ongoing impairment testing of goodwill and indefinite-lived intangible assets, significant deterioration in future cash flow projections or other assumptions used in valuation models, versus those anticipated at the time of the valuations, could result in impairment charges that may materially affect the financial statements in a given year.

Revenue Recognition

Sales are recognized when revenue is realized or realizable and has been earned. Most revenue transactions represent sales of inventory. The revenue recorded is presented net of sales and other taxes we collect on behalf of governmental authorities. The revenue includes shipping and handling costs, which generally are included in the list price to the customer. Our policy is to recognize revenue when title to the product, ownership and risk of loss transfer to the customer, which can be on the date of shipment or the date of receipt by the customer. A provision for payment discounts and product return allowances is recorded as a reduction of sales in the same period that the revenue is recognized.

Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are offered through various programs to customers and consumers. Sales are recorded net of trade promotion spending, which is recognized as incurred, generally at the time of the sale. Most of these arrangements have terms of approximately one year. Accruals for expected payouts under these programs are included as accrued marketing and promotion in the accrued and other liabilities line item in the Consolidated Balance Sheets.

Cost of Products Sold

Cost of products sold is primarily comprised of direct materials and supplies consumed in the manufacture of product, as well as manufacturing labor, depreciation expense and direct overhead expense necessary to acquire and convert the purchased materials and supplies into finished product. Cost of products sold also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity.

Selling, General and Administrative Expense

Selling, general and administrative expense (SG&A) is primarily comprised of marketing expenses, selling expenses, research and development costs, administrative and other indirect overhead costs, depreciation and amortization expense on non-manufacturing assets and other miscellaneous operating items. Research and development costs are charged to expense as incurred and were $1,950 in 2010, $1,864 in 2009 and $1,946 in 2008. Advertising costs, charged to expense as incurred, include worldwide television, print, radio, internet and in-store advertising expenses and were $8,576 in 2010, $7,519 in 2009 and $8,520 in 2008. Non-advertising related components of the Company’s total marketing spending include costs associated with consumer promotions, product sampling and sales aids, all of which are included in SG&A, as well as coupons and customer trade funds, which are recorded as reductions to net sales.

Other Non-Operating Income/(Expense), Net

Other non-operating income/(expense), net, primarily includes net divestiture gains, interest and investment income and the provision for income attributable to noncontrolling interests.

Currency Translation

Financial statements of operating subsidiaries outside the United States of America (U.S.) generally are measured using the local currency as the functional currency. Adjustments to translate those statements into U.S. dollars are recorded in other comprehensive income (OCI). Currency translation adjustments in accumulated OCI were a loss of $861 at June 30, 2010 and a gain of $3,333 at June 30, 2009. For subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments for financial statements in highly inflationary economies and other transactional exchange gains and losses are reflected in earnings.

Amounts in millions of dollars except per share amounts or as otherwise specified.

56 The Procter & Gamble Company Notes to Consolidated Financial Statements

Cash Flow Presentation

The Consolidated Statements of Cash Flows are prepared using the indirect method, which reconciles net earnings to cash flow from operating activities. The reconciliation adjustments include the removal of timing differences between the occurrence of operating receipts and payments and their recognition in net earnings. The adjustments also remove cash flows arising from investing and financing activities, which are presented separately from operating activities. Cash flows from foreign currency transactions and operations are translated at an average exchange rate for the period. Cash flows from hedging activities are included in the same category as the items being hedged. Cash flows from derivative instruments designated as net investment hedges are classified as financing activities. Realized gains and losses from non-qualifying derivative instruments used to hedge currency exposures resulting from intercompany financing transactions are also classified as financing activities. Cash flows from other derivative instruments used to manage interest, commodity or other currency exposures are classified as operating activities. Cash payments related to income taxes are classified as operating activities.

Cash Equivalents

Highly liquid investments with remaining stated maturities of three months or less when purchased are considered cash equivalents and recorded at cost.

Investments

Investment securities consist of readily marketable debt and equity securities. Unrealized gains or losses are charged to earnings for investments classified as trading. Unrealized gains or losses on securities classified as available-for-sale are generally recorded in shareholders’ equity. If an available-for-sale security is other than temporarily impaired, the loss is charged to either earnings or shareholders’ equity depending on our intent and ability to retain the security until we recover the full cost basis and the extent of the loss attributable to the creditworthiness of the issuer. Investments in certain companies over which we exert significant influence, but do not control the financial and operating decisions, are accounted for as equity method investments and are classified as other noncurrent assets. Other investments that are not controlled, and over which we do not have the ability to exercise significant influence, are accounted for under the cost method.

Inventory Valuation

Inventories are valued at the lower of cost or market value. Product-related inventories are primarily maintained on the first-in, first-out method. Minor amounts of product inventories, including certain cosmetics and commodities, are maintained on the last-in, first-out method. The cost of spare part inventories is maintained using the average cost method.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets’ estimated useful lives using the straight-line method. Machinery and equipment includes office furniture and fixtures (15-year life), computer equipment and capitalized software (3- to 5-year lives) and manufacturing equipment (3- to 20-year lives). Buildings are depreciated over an estimated useful life of 40 years. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.

Goodwill and Other Intangible Assets

Goodwill and indefinite-lived brands are not amortized, but are evaluated for impairment annually or when indicators of a potential impairment are present. Our impairment testing of goodwill is performed separately from our impairment testing of indefinite-lived intangibles. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. We believe such assumptions are also comparable to those that would be used by other marketplace participants.

We have acquired brands that have been determined to have indefinite lives due to the nature of our business. We evaluate a number of factors to determine whether an indefinite life is appropriate, including the competitive environment, market share, brand history, product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. When certain events or changes in operating conditions occur, an impairment assessment is performed and indefinite-lived brands may be adjusted to a determinable life.

The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. Customer relationships, brands and other non-contractual intangible assets with determinable lives are amortized over periods generally ranging from 5 to 30 years. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted.

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company 57

Fair Values of Financial Instruments

Certain financial instruments are required to be recorded at fair value. Changes in assumptions or estimation methods could affect the fair value estimates; however, we do not believe any such changes would have a material impact on our financial condition, results of operations or cash flows. Other financial instruments, including cash equivalents, other investments and short-term debt, are recorded at cost, which approximates fair value. The fair values of long-term debt and financial instruments are disclosed in Note 4 and Note 5, respectively.

New Accounting Pronouncements and Policies

Other than as described below, no new accounting pronouncement issued or effective during the fiscal year has had or is expected to have a material impact on the Consolidated Financial Statements.

FAIR VALUE MEASUREMENTS

On July 1, 2008, we adopted new accounting guidance on fair value measurements. The new guidance defines fair value, establishes a framework for measuring fair value under U.S. GAAP and expands disclosures about fair value measurements. It was effective for the Company beginning July 1, 2008, for certain financial assets and liabilities and, beginning July 1, 2009, for certain non-financial assets and liabilities. Refer to Note 5 for additional information regarding our fair value measurements for financial and non-financial assets and liabilities.

DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS

AND HEDGING ACTIVITIES

On January 1, 2009, we adopted new accounting guidance on disclosures about derivative instruments and hedging activities. The new guidance impacts disclosures only and requires additional qualitative and quantitative information on the use of derivatives and their impact on an entity’s financial position, results of operations and cash flows. Refer to Note 5 for additional information regarding our risk management activities, including derivative instruments and hedging activities.

BUSINESS COMBINATIONS

On July 1, 2009, we adopted new accounting guidance on business combinations. The new guidance revised the method of accounting for a number of aspects of business combinations including acquisition costs, contingencies (including contingent assets, contingent liabilities and contingent purchase price) and post-acquisition exit activities of acquired businesses. The adoption of the new guidance did not have a material effect on our financial position, results of operations or cash flows.

NONCONTROLLING INTERESTS IN

CONSOLIDATED FINANCIAL STATEMENTS

On July 1, 2009, we adopted new accounting guidance on noncontrolling interests in consolidated financial statements. The new accounting guidance requires that a noncontrolling interest in the equity of a subsidiary be accounted for and reported as equity, provides revised guidance on the treatment of net income and losses attributable to the noncontrolling interest and changes in ownership interests in a subsidiary and requires additional disclosures that identify and distinguish between the interests of the controlling and noncontrolling owners. The Company’s retrospective adoption of the new guidance on July 1, 2009 did not have a material effect on our financial position, results of operations or cash flows. Net expense for income attributable to the noncontrolling interests totaling $110 in 2010, $86 in 2009 and $78 in 2008 is not presented separately in the Consolidated Statements of Earnings due to immateriality, but is reflected within other non-operating income/(expense), net. After deduction of the net expense for income attributable to noncontrolling interests, net earnings represents net income attributable to the Company’s common shareholders.

Amounts in millions of dollars except per share amounts or as otherwise specified.

58 The Procter & Gamble Company Notes to Consolidated Financial Statements

NOTE 2

GOODWILL AND INTANGIBLE ASSETS

The change in the net carrying amount of goodwill by Global Business Unit (GBU) was as follows:

	2010			2009
BEAUTY & GROOMING GBU
Beauty, beginning of year	$	18,668		$	19,662
Acquisitions and divestitures		18			66
Translation and other		(1,111	)		(1,060	)
GOODWILL, JUNE 30		17,575			18,668
Grooming, beginning of year		21,391			22,553
Acquisitions and divestitures		(35	)		(214	)
Translation and other		(972	)		(948	)
GOODWILL, JUNE 30		20,384			21,391
HEALTH & WELL-BEING GBU
Health Care, beginning of year		8,404			8,750
Acquisitions and divestitures		(249	)		(81	)
Translation and other		(296	)		(265	)
GOODWILL, JUNE 30		7,859			8,404
Snacks and Pet Care, beginning of year		2,055			2,434
Acquisitions and divestitures		154			(356	)
Translation and other		(6	)		(23	)
GOODWILL, JUNE 30		2,203			2,055
HOUSEHOLD CARE GBU
Fabric Care and Home Care, beginning of year		4,408			4,655
Acquisitions and divestitures		(6	)		(46	)
Translation and other		(154	)		(201	)
GOODWILL, JUNE 30		4,248			4,408
Baby Care and Family Care, beginning of year		1,586			1,713
Acquisitions and divestitures		(1	)		(7	)
Translation and other		(140	)		(120	)
GOODWILL, JUNE 30		1,445			1,586
CORPORATE
Corporate, beginning of year		—			—
Acquisitions and divestitures		298			—
Translation and other		—			—
GOODWILL, JUNE 30		298			—
GOODWILL, beginning of year		56,512			59,767
Acquisitions and divestitures		179			(638	)
Translation and other		(2,679	)		(2,617	)
GOODWILL, JUNE 30		54,012			56,512

The decrease in goodwill during fiscal 2010 was primarily due to currency translation across all GBUs. Acquisitions and divestitures reflect the acquisition of MDVIP, a physicians’ network focused on preventative medicine, and Natura, a leading producer and distributor of branded premium natural pet foods, partially offset by the divestiture of the global pharmaceuticals business. The decrease in goodwill during fiscal 2009 was primarily due to currency translation across all GBUs and the divestiture of the Coffee business.

Identifiable intangible assets were comprised of:

	2010				2009
June 30	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
INTANGIBLE ASSETS WITH DETERMINABLE LIVES
Brands	$	3,284	$	1,318	$	3,580	$	1,253
Patents and technology		3,140		1,575		3,168		1,332
Customer relationships		1,947		460		1,853		411
Other		304		205		320		210
TOTAL		8,675		3,558		8,921		3,206
BRANDS WITH INDEFINITE LIVES		26,519		—		26,891		—
TOTAL		35,194		3,558		35,812		3,206

The amortization of intangible assets was as follows:

Years ended June 30	2010		2009		2008
Intangible Asset Amortization	$	601	$	648	$	649

Estimated amortization expense over the next five years is as follows:

Years ended June 30	2011		2012		2013		2014		2015
Estimated Amortization Expense	$	530	$	490	$	470	$	434	$	401

Such estimates do not reflect the impact of future foreign exchange rate changes.

NOTE 3

SUPPLEMENTAL FINANCIAL INFORMATION

Selected components of current and noncurrent liabilities were as follows:

June 30	2010		2009
ACCRUED AND OTHER LIABILITIES — CURRENT
Marketing and promotion	$	2,857	$	2,378
Compensation expenses		1,822		1,983
Taxes payable		622		722
Other		3,258		3,518
TOTAL		8,559		8,601
OTHER NONCURRENT LIABILITIES
Pension benefits	$	4,701	$	3,798
Other postretirement benefits		1,915		1,516
Uncertain tax positions		2,381		2,705
Other		1,192		1,127
TOTAL		10,189		9,146

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company 59

NOTE 4

SHORT-TERM AND LONG-TERM DEBT

June 30	2010			2009
DEBT DUE WITHIN ONE YEAR
Current portion of long-term debt	$	564		$	6,941
Commercial paper		7,838			5,027
Other		70			4,352
TOTAL		8,472			16,320
Short-term weighted average interest rates(1)		0.4	%		2.0	%

(1) Weighted average short-term interest rates include the effects of interest rate swaps discussed in Note 5.

June 30	2010			2009
LONG-TERM DEBT
1.35% USD note due August 2011	$	1,000		$	—
4.88% EUR note due October 2011		1,221			1,411
1.38% USD note due August 2012		1,250			—
3.38% EUR note due December 2012		1,710			1,975
4.50% EUR note due May 2014		1,832			2,116
4.95% USD note due August 2014		900			900
3.50% USD note due February 2015		750			750
0.95% JPY note due May 2015		1,129			—
3.15% USD note due September 2015		500			—
4.85% USD note due December 2015		700			700
5.13% EUR note due October 2017		1,344			1,552
4.70% USD note due February 2019		1,250			1,250
4.13% EUR note due December 2020		733			846
9.36% ESOP debentures due 2010 – 2021(1)		854			896
4.88% EUR note due May 2027		1,221			1,411
6.25% GBP note due January 2030		753			832
5.50% USD note due February 2034		500			500
5.80% USD note due August 2034		600			600
5.55% USD note due March 2037		1,400			1,400
Capital lease obligations		401			392
All other long-term debt		1,876			10,062
Current portion of long-term debt		(564	)		(6,941	)
TOTAL		21,360			20,652
Fair value of long-term debt		23,072			21,514
Long-term weighted average interest rates(2)		3.6	%		4.9	%

(1) Debt issued by the ESOP is guaranteed by the Company and must be recorded as debt of the Company as discussed in Note 8.

(2) Weighted average long-term interest rates include the effects of interest rate swaps and net investment hedges discussed in Note 5.

Long-term debt maturities during the next five years are as follows:

June 30	2011		2012		2013		2014		2015
Debt maturities	$	564	$	2,304	$	3,051	$	1,924	$	2,897

The Procter & Gamble Company fully and unconditionally guarantees the registered debt and securities issued by its 100% owned finance subsidiaries.

NOTE 5

RISK MANAGEMENT ACTIVITIES AND FAIR VALUE MEASUREMENTS

As a multinational company with diverse product offerings, we are exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. We evaluate exposures on a centralized basis to take advantage of natural exposure netting and correlation. To the extent we choose to manage volatility associated with the net exposures, we enter into various financial transactions which we account for using the applicable accounting guidance for derivative instruments and hedging activities. These financial transactions are governed by our policies covering acceptable counterparty exposure, instrument types and other hedging practices.

At inception, we formally designate and document qualifying instruments as hedges of underlying exposures. We formally assess, at inception and at least quarterly, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair value or cash flows of the related underlying exposure. Fluctuations in the value of these instruments generally are offset by changes in the value or cash flows of the underlying exposures being hedged. This offset is driven by the high degree of effectiveness between the exposure being hedged and the hedging instrument. The ineffective portion of a change in the fair value of a qualifying instrument is immediately recognized in earnings. The amount of ineffectiveness recognized is immaterial for all years presented.

Credit Risk Management

We have counterparty credit guidelines and generally enter into transactions with investment grade financial institutions. Counterparty exposures are monitored daily and downgrades in counterparty credit ratings are reviewed on a timely basis. Credit risk arising from the inability of a counterparty to meet the terms of our financial instrument contracts generally is limited to the amounts, if any, by which the counterparty’s obligations to us exceed our obligations to the counterparty. We have not incurred, and do not expect to incur, material credit losses on our risk management or other financial instruments.

Certain of the Company’s financial instruments used in hedging transactions are governed by industry standard netting agreements with counterparties. If the Company’s credit rating were to fall below the levels stipulated in the agreements, the counterparties could demand either collateralization or termination of the arrangement. The aggregate fair value of the instruments covered by these contractual features that are in a net liability position as of June 30, 2010 was $226. The Company has never been required to post collateral as a result of these contractual features.

Amounts in millions of dollars except per share amounts or as otherwise specified.

60 The Procter & Gamble Company Notes to Consolidated Financial Statements

Interest Rate Risk Management

Our policy is to manage interest cost using a mixture of fixed-rate and variable-rate debt. To manage this risk in a cost-efficient manner, we enter into interest rate swaps whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional amount.

Interest rate swaps that meet specific accounting criteria are accounted for as fair value or cash flow hedges. For fair value hedges, the changes in the fair value of both the hedging instruments and the underlying debt obligations are immediately recognized in interest expense. For cash flow hedges, the effective portion of the changes in fair value of the hedging instrument is reported in OCI and reclassified into interest expense over the life of the underlying debt. The ineffective portion for both cash flow and fair value hedges, which is not material for any year presented, is immediately recognized in earnings.

Foreign Currency Risk Management

We manufacture and sell our products and finance operations in a number of countries throughout the world and, as a result, are exposed to movements in foreign currency exchange rates. The purpose of our foreign currency hedging program is to manage the volatility associated with short-term changes in exchange rates.

To manage this exchange rate risk, we have historically utilized a combination of forward contracts, options and currency swaps. As of June 30, 2010, we had currency swaps with maturities up to five years, which are intended to offset the effect of exchange rate fluctuations on intercompany loans denominated in foreign currencies. These swaps are accounted for as cash flow hedges. The Company may utilize and designate forward contracts and options to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and intercompany royalties denominated in foreign currencies. The effective portion of the changes in fair value of these instruments is reported in OCI and reclassified into earnings in the same financial statement line item and in the same period or periods during which the related hedged transactions affect earnings. The ineffective portion, which is not material for any year presented, is immediately recognized in earnings.

The change in value of certain non-qualifying instruments used to manage foreign exchange exposure of intercompany financing transactions, income from international operations and certain balance sheet items subject to revaluation is immediately recognized in earnings, substantially offsetting the foreign currency mark-to-market impact of the related exposure.

Net Investment Hedging

We hedge certain net investment positions in major foreign subsidiaries. To accomplish this, we either borrow directly in foreign currencies and designate all or a portion of foreign currency debt as a hedge of the applicable net investment position or enter into foreign currency swaps that are designated as hedges of our related foreign net investments. Changes in the fair value of these instruments are immediately recognized in OCI to offset the change in the value of the net investment being hedged. Currency effects of these hedges reflected in OCI were after-tax gains of $789 and $964 in 2010 and 2009, respectively. Accumulated net balances were after-tax losses of $3,270 and $4,059 as of June 30, 2010 and 2009, respectively.

Commodity Risk Management

Certain raw materials used in our products or production processes are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. To manage the volatility related to anticipated purchases of certain of these materials, we may use futures and options with maturities generally less than one year and swap contracts with maturities up to five years. These market instruments generally are designated as cash flow hedges. The effective portion of the changes in fair value for these instruments is reported in OCI and reclassified into earnings in the same financial statement line item and in the same period or periods during which the hedged transactions affect earnings. The ineffective and non-qualifying portions, which are not material for any year presented, are immediately recognized in earnings.

Insurance

We self-insure for most insurable risks. However, we purchase insurance for Directors and Officers Liability and certain other coverage in situations where it is required by law, by contract or deemed to be in the best interest of the Company.

Fair Value Hierarchy

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1:	Quoted market prices in active markets for identical assets or liabilities.
Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3:	Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

When applying fair value principles in the valuation of assets and liabilities, we are required to maximize the use of quoted market prices and minimize the use of unobservable inputs. We calculate the fair value of our Level 1 and Level 2 instruments based on the exchange traded price of similar or identical instruments where available or based on other observable instruments. The fair value of our Level 3 instruments is calculated as the net present value of expected cash flows based on externally provided or obtained inputs. Certain assets may also be based on sales prices of similar assets. These valuations take into consideration the credit risk of both the Company and our counterparties. The Company has not changed its valuation techniques in measuring the fair value of any financial assets and liabilities during the year.

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company 61

The following table sets forth the Company’s financial assets and liabilities as of June 30, 2010 and 2009 that were measured at fair value on a recurring basis during the period, segregated by level within the fair value hierarchy:

	Level 1				Level 2				Level 3				Total
June 30	2010		2009		2010		2009		2010		2009		2010		2009
ASSETS AT FAIR VALUE:
Investment securities	$	12	$	—	$	—	$	174	$	45	$	38	$	57	$	212
Derivatives relating to:
Other foreign currency instruments(1)		—		—		81		300		—		—		81		300
Interest rates		—		—		191		—		—		—		191		—
Net investment hedges		—		—		14		83		—		—		14		83
Commodities		—		3		10		25		—		—		10		28
TOTAL ASSETS AT FAIR VALUE(2)		12		3		296		582		45		38		353		623
LIABILITIES AT FAIR VALUE:
Derivatives relating to:
Foreign currency hedges		—		—		177		103		—		—		177		103
Other foreign currency instruments(1)		—		—		175		39		—		—		175		39
Interest rates		—		—		—		13		—		—		—		13
Net investment hedges		—		—		23		85		—		—		23		85
Commodities		—		2		—		96		—		3		—		101
TOTAL LIABILITIES AT FAIR VALUE(3)		—		2		375		336		—		3		375		341

(1) Other foreign currency instruments are comprised of foreign currency financial instruments that do not qualify as hedges.

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

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

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

On July 1, 2009, we adopted the provisions of the fair value measurement accounting and disclosure guidance related to non-financial assets and liabilities recognized or disclosed at fair value on a non-recurring basis. Assets and liabilities subject to this new guidance primarily include goodwill, indefinite-lived intangible assets and other long-lived assets measured at fair value for impairment assessments and non-financial assets and liabilities measured at fair value in business combinations. There were no significant assets or liabilities that were re-measured at fair value on a non-recurring basis during the fiscal year ended June 30, 2010.

Amounts in millions of dollars except per share amounts or as otherwise specified.

62 The Procter & Gamble Company Notes to Consolidated Financial Statements

Disclosures about Derivative Instruments

The notional amounts and fair values of qualifying and non-qualifying financial instruments used in hedging transactions as of June 30, 2010 and 2009 are as follows:

	Notional Amount				Fair Value Asset (Liability)
June 30	2010		2009		2010			2009
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS
Interest rate contracts	$	—	$	4,000	$	—		$	(13	)
Foreign currency contracts		690		690		(177	)		(103	)
Commodity contracts		43		503		10			(73	)
TOTAL		733		5,193		(167	)		(189	)
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts		7,942		—		191			—
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Net investment hedges		1,586		2,271		(9	)		(2	)
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts		11,845		12,348		(94	)		261
Commodity contracts		19		—		—			—
TOTAL		11,864		12,348		(94	)		261

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

	Amount of Gain (Loss) Recognized in Accumulated OCI on  Derivatives (Effective Portion)
June 30	2010			2009
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS
Interest rate contracts	$	19		$	18
Foreign currency contracts		23			26
Commodity contracts		11			(62	)
TOTAL		53			(18	)
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Net investment hedges		(8	)		(2	)

During the next 12 months, the amount of the June 30, 2010 accumulated OCI balance that will be reclassified to earnings is expected to be immaterial.

The amounts of gains and losses on qualifying and non-qualifying financial instruments used in hedging transactions for the years ended June 30, 2010 and 2009 are as follows:

	Amount of Gain (Loss) Reclassified  from Accumulated OCI into  Income(1)
Years ended June 30	2010			2009
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS
Interest rate contracts	$	(8	)	$	(56	)
Foreign currency contracts		(48	)		(66	)
Commodity contracts		(76	)		(170	)
TOTAL		(132	)		(292	)
	Amount of Gain  (Loss) Recognized in Income
Years ended June 30	2010			2009
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS(2)
Interest rate contracts	$	191		$	—
Debt		(196	)		—
TOTAL		(5	)		—
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS(2)
Net investment hedges		3			(5	)
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS(3)
Foreign currency contracts		(814	)		(1,047	)
Commodity contracts		1			(5	)
TOTAL		(813	)		(1,052	)

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

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

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

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company 63

NOTE 6

EARNINGS PER SHARE

Net earnings less preferred dividends (net of related tax benefits) are divided by the weighted average number of common shares outstanding during the year to calculate basic net earnings per common share. Diluted net earnings per common share are calculated to give effect to stock options and other stock-based awards (see Note 7) and assume conversion of preferred stock (see Note 8).

Net earnings and common shares used to calculate basic and diluted net earnings per share were as follows:

Years ended June 30	2010			2009			2008
NET EARNINGS FROM CONTINUING OPERATIONS	$	10,946		$	10,680		$	11,291
Preferred dividends, net of tax benefit		(219	)		(192	)		(176	)
NET EARNINGS FROM CONTINUING OPERATIONS AVAILABLE TO COMMON SHAREHOLDERS		10,727			10,488			11,115
Preferred dividends, net of tax benefit		219			192			176
DILUTED NET EARNINGS FROM CONTINUING OPERATIONS		10,946			10,680			11,291
Net earnings from discontinued operations		1,790			2,756			784
NET EARNINGS		12,736			13,436			12,075
Shares in millions; Years ended June 30	2010			2009			2008
Basic weighted average common shares outstanding		2,900.8			2,952.2			3,080.8
Effect of dilutive securities
Conversion of preferred shares(1)		134.0			139.2			144.2
Exercise of stock options and other unvested equity awards(2)		64.5			62.7			91.8
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		3,099.3			3,154.1			3,316.8

(1) Despite being included currently in diluted net earnings per common share, the actual conversion to common stock occurs pursuant to the repayment of the ESOPs’ obligations through 2035.

(2) Approximately 101 million in 2010, 92 million in 2009 and 40 million in 2008 of the Company’s outstanding stock options were not included in the diluted net earnings per share calculation because the options were out of the money or to do so would have been antidilutive (i.e., the total proceeds upon exercise would have exceeded the market value of the underlying common shares).

NOTE 7

STOCK-BASED COMPENSATION

We have stock-based compensation plans under which we annually grant stock option and restricted stock awards to key managers and directors. Exercise prices on options granted have been, and continue to be, set equal to the market price of the underlying shares on the date of the grant. Since September 2002, the key manager stock option awards granted are vested after three years and have a 10-year life. The key manager stock option awards granted from July 1998 through August 2002 vested after three years and have a 15-year life. Key managers can elect to receive up to 50% of the value of their option award in restricted stock units (RSUs). Key manager RSUs are vested and settled in shares of common stock five years from the grant date. The awards provided to the Company’s directors are in the form of restricted stock and RSUs. In addition to our key manager and director grants, we make other minor stock option and RSU grants to employees for which the terms are not substantially different.

A total of 180 million shares of common stock were authorized for issuance under stock-based compensation plans approved by shareholders in 2003 and 2009. The number of shares available for award under the 2009 plan includes the shares previously authorized but not awarded under the shareholder approved plan in 2001 and the shares available for issuance under a plan approved by Gillette shareholders in 2004. A total of 155 million shares remain available for grant under the 2003 and 2009 plans.

Total stock-based compensation expense for stock option grants was $417, $460 and $522 for 2010, 2009 and 2008, respectively. Total compensation cost for restricted stock, RSUs and other stock-based grants was $36, $56 and $33 in 2010, 2009 and 2008, respectively. The total income tax benefit recognized in the income statement for stock options, restricted stock, RSUs and other stock-based grants was $118, $137 and $147 in 2010, 2009 and 2008, respectively. In calculating the compensation expense for stock options granted, we utilize a binomial lattice-based valuation model. Assumptions utilized in the model, which are evaluated and revised, as necessary, to reflect market conditions and experience, were as follows:

Years ended June 30	2010		2009		2008
Interest rate	0.3–4.0	%	0.7–3.8	%	1.3–3.8	%
Weighted average interest rate	3.7	%	3.6	%	3.4	%
Dividend yield	2.2	%	2.0	%	1.9	%
Expected volatility	15–20	%	18–34	%	19–25	%
Weighted average volatility	18	%	21	%	20	%
Expected life in years	8.8		8.7		8.3

Amounts in millions of dollars except per share amounts or as otherwise specified.

64 The Procter & Gamble Company Notes to Consolidated Financial Statements

Lattice-based option valuation models incorporate ranges of assumptions for inputs and those ranges are disclosed in the preceding table. Expected volatilities are based on a combination of historical volatility of our stock and implied volatilities of call options on our stock. We use historical data to estimate option exercise and employee termination patterns within the valuation model. The expected life of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of options outstanding under the plans as of June 30, 2010, and activity during the year then ended is presented below:

Options in thousands	Options		Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life in Years	Aggregate Intrinsic Value (in millions)
Outstanding, beginning of year	357,317		$	48.83
Granted	26,581			62.49
Exercised	(17,147	)		40.98
Canceled	(1,780	)		55.23
OUTSTANDING, END OF YEAR	364,971			50.16	5.7	$	3,999
EXERCISABLE	273,279			47.30	4.7		3,587

The weighted average grant-date fair value of options granted was $13.47, $11.67 and $15.91 per share in 2010, 2009 and 2008, respectively. The total intrinsic value of options exercised was $342, $434 and $1,129 in 2010, 2009 and 2008, respectively. The total grant-date fair value of options that vested during 2010, 2009 and 2008 was $563, $537 and $532, respectively. We have no specific policy to repurchase common shares to mitigate the dilutive impact of options; however, we have historically made adequate discretionary purchases, based on cash availability, market trends and other factors, to satisfy stock option exercise activity.

At June 30, 2010, there was $474 of compensation cost that has not yet been recognized related to stock awards. That cost is expected to be recognized over a remaining weighted average period of 2 years.

Cash received from options exercised was $703, $639 and $1,837 in 2010, 2009 and 2008, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $89, $146 and $318 in 2010, 2009 and 2008, respectively.

NOTE 8

POSTRETIREMENT BENEFITS AND EMPLOYEE STOCK OWNERSHIP PLAN

We offer various postretirement benefits to our employees.

Defined Contribution Retirement Plans

We have defined contribution plans which cover the majority of our U.S. employees, as well as employees in certain other countries. These plans are fully funded. We generally make contributions to participants’ accounts based on individual base salaries and years of service. Total global defined contribution expense was $344, $364 and $290 in 2010, 2009 and 2008, respectively.

The primary U.S. defined contribution plan (the U.S. DC plan) comprises the majority of the balances and expense for the Company’s defined contribution plans. For the U.S. DC plan, the contribution rate is set annually. Total contributions for this plan approximated 15% of total participants’ annual wages and salaries in 2010, 2009 and 2008.

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

Defined Benefit Retirement Plans and Other Retiree Benefits

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

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

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company 65

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

	Pension  Benefits(1)						Other Retiree  Benefits(2)
Years ended June 30	2010			2009			2010			2009
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year(3)	$	10,016		$	10,095		$	3,928		$	3,553
Service cost		218			214			103			91
Interest cost		579			551			253			243
Participants’ contributions		19			15			58			55
Amendments		66			47			—			—
Actuarial loss		1,738			456			633			186
Acquisitions (divestitures)		(13	)		(3	)		—			(17	)
Curtailments and settlements		4			3			—			—
Special termination benefits		—			3			14			16
Currency translation and other		(798	)		(867	)		30			27
Benefit payments		(584	)		(498	)		(241	)		(226	)
BENEFIT OBLIGATION AT END OF YEAR(3)		11,245			10,016			4,778			3,928
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year		6,310			7,225			2,394			3,225
Actual return on plan assets		839			(401	)		596			(678	)
Acquisitions (divestitures)		(6	)		—			—			—
Employer contributions		439			657			22			18
Participants’ contributions		19			15			58			55
Currency translation and other		(455	)		(688	)		—			(4	)
ESOP debt impacts(4)		—			—			14			4
Benefit payments		(584	)		(498	)		(241	)		(226	)
FAIR VALUE OF PLAN ASSETS AT END OF YEAR		6,562			6,310			2,843			2,394
FUNDED STATUS		(4,683	)		(3,706	)		(1,935	)		(1,534	)

(1) Primarily non-U.S.-based defined benefit retirement plans.

(2) Primarily U.S.-based other postretirement benefit plans.

(3) For the pension benefit plans, the benefit obligation is the projected benefit obligation. For other retiree benefit plans, the benefit obligation is the accumulated postretirement benefit obligation.

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

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

	Pension Benefits						Other Retiree Benefits
Years ended June 30	2010			2009			2010			2009
CLASSIFICATION OF NET AMOUNT RECOGNIZED
Noncurrent assets	$	56		$	133		$	—		$	—
Current liability		(38	)		(41	)		(20	)		(18	)
Noncurrent liability		(4,701	)		(3,798	)		(1,915	)		(1,516	)
NET AMOUNT RECOGNIZED		(4,683	)		(3,706	)		(1,935	)		(1,534	)
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)
Net actuarial loss		3,038			1,976			2,319			1,860
Prior service cost (credit)		275			227			(119	)		(152	)
NET AMOUNTS RECOGNIZED IN AOCI		3,313			2,203			2,200			1,708
CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)
Net actuarial loss — current year		1,343			1,335			491			1,309
Prior service cost — current year		66			47			—			—
Amortization of net actuarial loss		(91	)		(29	)		(20	)		(2	)
Amortization of prior service (cost) / credit		(15	)		(14	)		21			23
Settlement / curtailment cost		(3	)		—			—			—
Currency translation and other		(190	)		(64	)		—			(25	)
TOTAL CHANGE IN AOCI		1,110			1,275			492			1,305
NET AMOUNTS RECOGNIZED IN PERIODIC BENEFIT COST AND AOCI		1,579			1,616			349			1,088

Amounts in millions of dollars except per share amounts or as otherwise specified.

66 The Procter & Gamble Company Notes to Consolidated Financial Statements

The accumulated benefit obligation for all defined benefit retirement pension plans was $9,708 and $8,637 as of June 30, 2010 and 2009, respectively. Pension plans with accumulated benefit obligations in excess of plan assets and plans with projected benefit obligations in excess of plan assets consist of the following:

	Accumulated Benefit Obligation Exceeds the Fair Value of Plan  Assets				Projected Benefit Obligation Exceeds the Fair Value of Plan  Assets
June 30	2010		2009		2010		2009
Projected benefit obligation	$	10,577	$	6,509	$	11,059	$	9,033
Accumulated benefit obligation		9,194		5,808		9,531		7,703
Fair value of plan assets		5,900		3,135		6,320		5,194

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

	Pension Benefits									Other Retiree Benefits
Years ended June 30	2010			2009			2008			2010			2009			2008
Service cost	$	218		$	214		$	263		$	103		$	91		$	95
Interest cost		579			551			539			253			243			226
Expected return on plan assets		(437	)		(473	)		(557	)		(429	)		(444	)		(429	)
Prior service cost (credit) amortization		15			14			14			(21	)		(23	)		(21	)
Net actuarial loss amortization		91			29			9			20			2			7
Curtailments, settlements and other		3			6			(36	)		14			—			(1	)
GROSS BENEFIT COST (CREDIT)		469			341			232			(60	)		(131	)		(123	)
Dividends on ESOP preferred stock		—			—			—			(83	)		(86	)		(95	)
NET PERIODIC BENEFIT COST (CREDIT)		469			341			232			(143	)		(217	)		(218	)

Amounts expected to be amortized from accumulated OCI into net periodic benefit cost during the year ending June 30, 2011, are as follows:

	Pension Benefits		Other Retiree Benefits
Net actuarial loss	$	146	$	95
Prior service cost (credit)		17		(21	)

Assumptions. We determine our actuarial assumptions on an annual basis. These assumptions are weighted to reflect each country that may have an impact on the cost of providing retirement benefits. The weighted average assumptions for the defined benefit and other retiree benefit calculations, as well as assumed health care trend rates, were as follows:

	Pension Benefits				Other Retiree Benefits
Years ended June 30	2010		2009		2010		2009
ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATIONS(1)
Discount rate	5.0	%	6.0	%	5.4	%	6.4	%
Rate of compensation increase	3.5	%	3.7	%	—		—
ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT COST(2)
Discount rate	6.0	%	6.3	%	6.4	%	6.9	%
Expected return on plan assets	7.1	%	7.4	%	9.1	%	9.3	%
Rate of compensation increase	3.7	%	3.7	%	—		—
ASSUMED HEALTH CARE COST TREND RATES
Health care cost trend rates assumed for next year	—		—		8.5	%	8.5	%
Rate to which the health care cost trend rate is assumed to decline (ultimate trend rate)	—		—		5.0	%	5.0	%
Year that the rate reaches the ultimate trend rate	—		—		2017		2016

(1) Determined as of end of year.

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

Several factors are considered in developing the estimate for the long-term expected rate of return on plan assets. For the defined benefit retirement plans, these factors include historical rates of return of broad equity and bond indices and projected long-term rates of return obtained from pension investment consultants. The expected long-term rates of return for plan assets are 8 – 9% for equities and 5 – 6% for bonds. For other retiree benefit plans, the expected long-term rate of return reflects the fact that the assets are comprised primarily of Company stock. The expected rate of return on Company stock is based on the long-term projected return of 9.5% and reflects the historical pattern of favorable returns.

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

	One-Percentage Point Increase		One-Percentage Point Decrease
Effect on total of service and interest cost components	$	63	$	(50	)
Effect on postretirement benefit obligation		718		(577	)

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company 67

Plan Assets. Our target asset allocation for the year ended June 30, 2010, and actual asset allocation by asset category as of June 30, 2010 and 2009, were as follows:

	Target Asset Allocation
Asset Category	Pension Benefits		Other Retiree Benefits
Equity securities(1)	42	%	91	%
Debt securities	58	%	9	%
TOTAL	100	%	100	%

	Actual Asset Allocation at June 30
	Pension Benefits				Other Retiree Benefits
Asset Category	2010		2009		2010		2009
Equity securities(1)	43	%	42	%	91	%	93	%
Debt securities	53	%	51	%	9	%	7	%
Cash	4	%	6	%	—		—
Real estate	—		1	%	—		—
TOTAL	100	%	100	%	100	%	100	%

(1) Equity securities for other retiree benefit plan assets include Company stock, net of Series B ESOP debt, of $2,535 and $2,084 as of June 30, 2010 and 2009, respectively.

The following table sets forth the fair value of the Company’s plan assets as of June 30, 2010 segregated by level within the fair value hierarchy (refer to Note 5 for further discussion on the fair value hierarchy and fair value principles):

	Pension Benefits
	Level 1		Level 2		Level 3		Total
ASSETS AT FAIR VALUE:
Cash and cash equivalents	$	238	$	—	$	—	$	238
Government bonds		62		—		—		62
Company stock		12		—		—		12
Common collective trust fund — equity		—		2,814		—		2,814
Common collective trust fund — fixed income		—		3,380		—		3,380
Other		—		—		56		56
TOTAL ASSETS AT FAIR VALUE		312		6,194		56		6,562

	Other Retiree Benefits
	Level 1		Level 2		Level 3		Total
ASSETS AT FAIR VALUE:
Cash and cash equivalents	$	14	$	—	$	—	$	14
Company stock		—		2,535		—		2,535
Common collective trust fund — equity		—		43		—		43
Common collective trust fund — fixed income		—		249		—		249
Other		—		—		2		2
TOTAL ASSETS AT FAIR VALUE		14		2,827		2		2,843

There was no significant activity within the Level 3 pension and other retiree benefits plan assets during the year ended June 30, 2010.

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

Cash Flows. Management’s best estimate of cash requirements for the defined benefit retirement plans and other retiree benefit plans for the year ending June 30, 2011 is approximately $441 and $25, respectively. For the defined benefit retirement plans, this is comprised of $120 in expected benefit payments from the Company directly to participants of unfunded plans and $321 of expected contributions to funded plans. For other retiree benefit plans, this is comprised of expected contributions that will be used directly for benefit payments. Expected contributions are dependent on many variables, including the variability of the market value of the plan assets as compared to the benefit obligation and other market or regulatory conditions. In addition, we take into consideration our business investment opportunities and resulting cash requirements. Accordingly, actual funding may differ significantly from current estimates.

Total benefit payments expected to be paid to participants, which include payments funded from the Company’s assets, as discussed above, as well as payments from the plans, are as follows:

Years ending June 30	Pension Benefits		Other Retiree Benefits
EXPECTED BENEFIT PAYMENTS
2011	$	494	$	195
2012		487		213
2013		500		230
2014		524		245
2015		537		261
2016 – 2020		3,063		1,530

Amounts in millions of dollars except per share amounts or as otherwise specified.

68 The Procter & Gamble Company Notes to Consolidated Financial Statements

Employee Stock Ownership Plan

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

The ESOP borrowed $1.0 billion in 1989 and the proceeds were used to purchase Series A ESOP Convertible Class A Preferred Stock to fund a portion of the U.S. DC plan. Principal and interest requirements of the borrowing were paid by the Trust from dividends on the preferred shares and from advances provided by the Company. The original borrowing of $1.0 billion has been repaid in full, and advances from the Company of $160 remain outstanding at June 30, 2010. Each share is convertible at the option of the holder into one share of the Company’s common stock. The dividend for the current year was equal to the common stock dividend of $1.80 per share. The liquidation value is $6.82 per share.

In 1991, the ESOP borrowed an additional $1.0 billion. The proceeds were used to purchase Series B ESOP Convertible Class A Preferred Stock to fund a portion of retiree health care benefits. These shares, net of the ESOP’s debt, are considered plan assets of the other retiree benefits plan discussed above. Debt service requirements are funded by preferred stock dividends, cash contributions and advances provided by the Company, of which $336 is outstanding at June 30, 2010. Each share is convertible at the option of the holder into one share of the Company’s common stock. The dividend for the current year was equal to the common stock dividend of $1.80 per share. The liquidation value is $12.96 per share.

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

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

Shares in thousands	2010	2009	2008
Allocated	54,542	56,818	58,557
Unallocated	14,762	16,651	18,665
TOTAL SERIES A	69,304	73,469	77,222
Allocated	20,752	20,991	21,134
Unallocated	41,347	42,522	43,618
TOTAL SERIES B	62,099	63,513	64,752

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

NOTE 9

INCOME TAXES

Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax liabilities and assets, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.

Earnings from continuing operations before income taxes consisted of the following:

Years ended June 30	2010		2009		2008
United States	$	8,368	$	8,409	$	8,167
International		6,679		6,004		6,718
TOTAL		15,047		14,413		14,885

Income taxes on continuing operations consisted of the following:

Years ended June 30	2010			2009		2008
CURRENT TAX EXPENSE
U.S. federal	$	2,154		$	1,619	$	670
International		1,616			1,268		1,515
U.S. state and local		295			229		188
		4,065			3,116		2,373
DEFERRED TAX EXPENSE
U.S. federal		253			595		1,272
International and other		(217	)		22		(51	)
		36			617		1,221
TOTAL TAX EXPENSE		4,101			3,733		3,594

A reconciliation of the U.S. federal statutory income tax rate to our actual income tax rate on continuing operations is provided below:

Years ended June 30	2010		2009		2008
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%
Country mix impacts of foreign operations	-7.5	%	-7.1	%	-6.8	%
Income tax reserve adjustments	-0.4	%	-1.3	%	-3.4	%
Patient Protection and Affordable
Care Act	1.0	%	0.0	%	0.0	%
Other	-0.8	%	-0.7	%	-0.7	%
EFFECTIVE INCOME TAX RATE	27.3	%	25.9	%	24.1	%

Income tax reserve adjustments represent changes in our net liability for uncertain tax positions related to prior year tax positions.

In March 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law. One of the provisions of the PPACA changed the taxability of federal subsidies received by plan sponsors that provide retiree prescription drug benefits at least equivalent to Medicare Part D

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company 69

coverage. As a result of the change in taxability of the federal subsidy, we were required to make adjustments to deferred tax asset balances, resulting in a $152 charge to income tax expense.

Tax benefits credited to shareholders’ equity totaled $5 and $556 for the years ended June 30, 2010 and 2009, respectively. These primarily relate to the tax effects of net investment hedges, excess tax benefits from the exercise of stock options and the impacts of certain adjustments to pension and other retiree benefit obligations recorded in shareholders’ equity.

We have undistributed earnings of foreign subsidiaries of approximately $30 billion at June 30, 2010, for which deferred taxes have not been provided. Such earnings are considered indefinitely invested in the foreign subsidiaries. If such earnings were repatriated, additional tax expense may result, although the calculation of such additional taxes is not practicable.

On July 1, 2007, we adopted accounting guidance on the accounting for uncertainty in income taxes. The adoption of the guidance resulted in a decrease to retained earnings as of July 1, 2007 of $232, which was reflected as a cumulative effect of a change in accounting principle with a corresponding increase to the net liability for uncertain tax positions. The impact primarily reflects the accrual of additional statutory interest and penalties as required by accounting guidance, partially offset by adjustments to existing balances for uncertain tax positions to comply with measurement principles. The implementation of the guidance also resulted in a reduction in our net tax liabilities for uncertain tax positions related to prior acquisitions accounted for under purchase accounting, resulting in an $80 decrease to goodwill.

A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:

	2010			2009			2008
BEGINNING OF YEAR	$	2,003		$	2,582		$	2,971
Increases in tax positions for prior years		128			116			164
Decreases in tax positions for prior years		(146	)		(485	)		(576	)
Increases in tax positions for current year		193			225			375
Settlements with taxing authorities		(216	)		(172	)		(260	)
Lapse in statute of limitations		(45	)		(68	)		(200	)
Currency translation		(120	)		(195	)		108
END OF YEAR		1,797			2,003			2,582

The Company is present in over 150 taxable jurisdictions and, at any point in time, has 50 – 60 audits underway at various stages of completion. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and closing of statute of limitations. Such adjustments are reflected in the tax provision as appropriate. The Company is making a concerted effort to bring its audit inventory to a more current position. We have done this by working with tax authorities to conduct audits for several open years at once. We have tax years open ranging from 1997 and forward. We are generally not able to reliably estimate the ultimate settlement amounts until the close of the audit. While we do not expect material changes, it is possible that the amount of unrecognized benefit with respect to our uncertain tax positions will significantly increase or decrease within the next 12 months related to the audits described above. At this time, we are not able to make a reasonable estimate of the range of impact on the balance of uncertain tax positions or the impact on the effective tax rate related to these items.

Included in the total liability for uncertain tax positions at June 30, 2010 is $1,318 that, depending on the ultimate resolution, could impact the effective tax rate in future periods.

We recognize accrued interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2010 and 2009, we had accrued interest of $622 and $636 and penalties of $89 and $100, respectively, that are not included in the above table. During the fiscal years ended June 30, 2010 and 2009, we recognized $38 and $119 in interest and $(8) and $(4) in penalties, respectively.

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

June 30	2010			2009
DEFERRED TAX ASSETS
Pension and postretirement benefits	$	1,717		$	1,395
Stock-based compensation		1,257			1,182
Loss and other carryforwards		595			439
Goodwill and other intangible assets		312			331
Accrued marketing and promotion		216			167
Fixed assets		102			114
Unrealized loss on financial and foreign exchange transactions		88			577
Accrued interest and taxes		88			120
Advance payments		16			15
Inventory		35			97
Other		757			885
Valuation allowances		(120	)		(104	)
TOTAL		5,063			5,218
DEFERRED TAX LIABILITIES
Goodwill and other intangible assets		11,760			11,922
Fixed assets		1,642			1,654
Other		269			146
TOTAL		13,671			13,722

Net operating loss carryforwards were $1,875 and $1,428 at June 30, 2010 and 2009, respectively. If unused, $567 will expire between 2011 and 2030. The remainder, totaling $1,308 at June 30, 2010, may be carried forward indefinitely.

Amounts in millions of dollars except per share amounts or as otherwise specified.

70 The Procter & Gamble Company Notes to Consolidated Financial Statements

NOTE 10

COMMITMENTS AND CONTINGENCIES

Guarantees

In conjunction with certain transactions, primarily divestitures, we may provide routine indemnifications (e.g., indemnification for representations and warranties and retention of previously existing environmental, tax and employee liabilities) for which terms range in duration and, in some circumstances, are not explicitly defined. The maximum obligation under some indemnifications is also not explicitly stated and, as a result, the overall amount of these obligations cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss on any of these matters, the loss would not have a material effect on our financial position, results of operations or cash flows.

In certain situations, we guarantee loans for suppliers and customers. The total amount of guarantees issued under such arrangements is not material.

Off-Balance Sheet Arrangements

We do not have off-balance sheet financing arrangements, including variable interest entities, that have a material impact on our financial statements.

Purchase Commitments and Operating Leases

We have purchase commitments for materials, supplies, services and property, plant and equipment as part of the normal course of business. Commitments made under take-or-pay obligations are as follows:

June 30	2011		2012		2013		2014		2015		Thereafter
Purchase obligations	$	896	$	568	$	528	$	281	$	120	$	301

Such amounts represent future purchases in line with expected usage to obtain favorable pricing. Approximately 45% of our purchase commitments relate to service contracts for information technology, human resources management and facilities management activities that have been outsourced to third-party suppliers. Due to the proprietary nature of many of our materials and processes, certain supply contracts contain penalty provisions for early termination. We do not expect to incur penalty payments under these provisions that would materially affect our financial position, results of operations or cash flows.

We also lease certain property and equipment for varying periods. Future minimum rental commitments under non-cancelable operating leases, net of guaranteed sublease income, are as follows:

June 30	2011		2012		2013		2014		2015		Thereafter
Operating leases	$	282	$	229	$	204	$	164	$	149	$	486

Litigation

We are subject to various legal proceedings and claims arising out of our business which cover a wide range of matters such as governmental regulations, antitrust and trade regulations, product liability, patent and trademark matters, income taxes and other actions.

As previously disclosed, the Company is subject to a variety of investigations into potential competition law violations in Europe by the European Commission and national authorities from a number of countries. These matters involve a number of other consumer products companies and/or retail customers. The Company’s policy is to comply with all laws and regulations, including all antitrust and competition laws, and to cooperate with investigations by relevant regulatory authorities, which the Company is doing. Competition and antitrust law inquiries often continue for several years and, if violations are found, can result in substantial fines.

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

Several countries in Europe issued separate complaints pursuant to their investigations alleging that the Company, along with several other companies, engaged in violations of competition laws in those countries. The Company will have the opportunity to respond to these complaints. As a result of our initial and on-going analyses of these complaints, the Company has reserves totaling $245 as of June 30, 2010 for potential fines for competition law violations. The ultimate resolution of these matters could result in fines or costs significantly in excess of the amounts reserved.

The remaining matters involving the European Commission and various other countries are in various stages of the investigatory process. It is still too early for us to reasonably estimate the fines to which the Company will be subject as a result of these competition law issues. The ultimate resolution of these matters will likely result in fines or other costs that could materially impact our income statement and cash flows in the period in which they are accrued and paid, respectively. In other industries, these fines have amounted to hundreds of millions of dollars. We will continue to monitor developments for all of these investigations and will record additional charges as appropriate.

With respect to other litigation and claims, while considerable uncertainty exists, in the opinion of management and our counsel, the ultimate resolution of the various lawsuits and claims will not materially affect our financial position, results of operations or cash flows.

We are also subject to contingencies pursuant to environmental laws and regulations that in the future may require us to take action to correct the effects on the environment of prior manufacturing and waste disposal practices. Based on currently available information, we do not believe the ultimate resolution of environmental remediation will have a material adverse effect on our financial position, results of operations or cash flows.

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company 71

NOTE 11

SEGMENT INFORMATION

Effective July 1, 2009, the Company implemented a number of changes to the organization structure of the Beauty GBU, which resulted in changes to the components of its reportable segment structure. The following discussion and segment information reflect the organizational changes for all periods presented. We are organized under three GBUs as follows:

• The Beauty and Grooming GBU includes the Beauty and the Grooming businesses. The Beauty business is comprised of female beauty products (including cosmetics, deodorants, female blades and razors, personal cleansing and skin care), hair care (including both retail and salon professional) and prestige fragrances. The Grooming business includes electric hair removal devices, home appliances, male blades and razors and male personal care products (including deodorants, face and shave products, hair care and personal cleansing).

• The Health and Well-Being GBU includes the Health Care and the Snacks and Pet Care businesses. The Health Care business includes feminine care, oral care and personal health care. The Snacks and Pet Care business includes snacks and pet food.

• The Household Care GBU includes the Fabric Care and Home Care as well as the Baby Care and Family Care businesses. The Fabric Care and Home Care business includes air care, batteries, dish care, fabric care and surface care. The Baby Care and Family Care business includes baby wipes, bath tissue, diapers, facial tissue and paper towels.

Under U.S. GAAP, we have six reportable segments: Beauty; Grooming; Health Care; Snacks and Pet Care; Fabric Care and Home Care; and Baby Care and Family Care. The accounting policies of the businesses are generally the same as those described in Note 1. Differences between these policies and U.S. GAAP primarily reflect income taxes, which are reflected in the businesses using applicable blended statutory rates, and the treatment of certain unconsolidated investees. Certain unconsolidated investees are managed as integral parts of our business units for management reporting purposes. Accordingly, these partially owned operations are reflected as consolidated subsidiaries in segment results, with full recognition of the individual income statement line items through before-tax earnings. Eliminations to adjust these line items to U.S. GAAP are included in Corporate. In determining after-tax earnings for the businesses, we eliminate the share of earnings applicable to other ownership interests, in a manner similar to noncontrolling interest and apply statutory tax rates. Adjustments to arrive at our effective tax rate are also included in Corporate.

Corporate includes certain operating and non-operating activities that are not reflected in the operating results used internally to measure and evaluate the businesses, as well as eliminations to adjust management reporting principles to U.S. GAAP. Operating activities in Corporate include the results of incidental businesses managed at the corporate level along with the elimination of individual revenues and expenses generated by certain unconsolidated investees discussed in the preceding paragraph over which we exert significant influence, but do not control. Operating elements also include certain employee benefit costs, the costs of certain restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce rationalization and other general Corporate items. The non-operating elements in Corporate primarily include interest expense, divestiture gains and interest and investing income. In addition, Corporate includes the historical results of certain divested businesses.

Total assets for the reportable segments include those assets managed by the reportable segment, primarily inventory and fixed assets. Other assets, primarily including cash, accounts receivable, investment securities and goodwill, are included in Corporate.

The Company had net sales in the U.S. of $30.0 billion, $29.6 billion and $29.7 billion for the years ended June 30, 2010, 2009 and 2008, respectively. Assets in the U.S. totaled $70.1 billion and $71.9 billion as of June 30, 2010 and 2009, respectively.

Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for 16% of consolidated net sales in 2010, 2009 and 2008.

Amounts in millions of dollars except per share amounts or as otherwise specified.

72 The Procter & Gamble Company Notes to Consolidated Financial Statements

Global Segment Results		Net Sales			Earnings  from Continuing Operations Before Income Taxes			Net Earnings from Continuing Operations			Depreciation and Amortization		Total Assets(2)		Capital Expenditures
BEAUTY AND GROOMING GBU
BEAUTY	2010	$	19,491		$	3,648		$	2,712		$	503	$	11,825	$	534
	2009		18,924			3,558			2,664			454		11,987		526
	2008		19,666			3,673			2,827			450		12,760		462
GROOMING	2010		7,631			2,007			1,477			625		21,259		259
	2009		7,408			1,900			1,359			721		22,205		294
	2008		8,103			2,154			1,582			743		23,302		308
HEALTH AND WELL-BEING GBU
HEALTH CARE	2010		11,493			2,809			1,860			385		7,142		383
	2009		11,288			2,786			1,835			369		7,206		372
	2008		12,087			3,030			2,021			372		8,088		420
SNACKS AND PET CARE	2010		3,135			499			326			92		1,237		86
	2009		3,114			388			234			100		1,123		72
	2008		3,204			409			261			102		1,303		78
HOUSEHOLD CARE GBU
FABRIC CARE AND HOME CARE	2010		23,805			5,076			3,339			604		9,650		766
	2009		23,186			4,663			3,032			578		10,419		808
	2008		23,714			5,060			3,411			599		11,387		763
BABY CARE AND FAMILY CARE	2010		14,736			3,270			2,049			612		6,406		852
	2009		14,103			2,827			1,770			570		6,259		902
	2008		13,898			2,700			1,728			612		6,821		763
CORPORATE(1)	2010		(1,353	)		(2,262	)		(817	)		287		70,653		187
	2009		(1,329	)		(1,709	)		(214	)		224		75,634		264
	2008		(1,415	)		(2,141	)		(539	)		181		80,331		252
TOTAL COMPANY	2010		78,938			15,047			10,946			3,108		128,172		3,067
	2009		76,694			14,413			10,680			3,016		134,833		3,238
	2008		79,257			14,885			11,291			3,059		143,992		3,046

(1) The Corporate reportable segment includes the total assets and capital expenditures of the coffee and pharmaceuticals businesses prior to their divestitures in November 2008 and October 2009, respectively.

(2) Prior years’ total assets have been updated to reflect a change in management accountability for certain items, primarily accounts receivable, from the reportable segments to Corporate.

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements The Procter & Gamble Company 73

NOTE 12

DISCONTINUED OPERATIONS

In October 2009, the Company completed the divestiture of our global pharmaceuticals business to Warner Chilcott plc (Warner Chilcott) for $2.8 billion of cash, net of assumed and transferred liabilities. Under the terms of the agreement, Warner Chilcott acquired our portfolio of branded pharmaceutical products, our prescription drug product pipeline and our manufacturing facilities in Puerto Rico and Germany. In addition, the majority of the employees working on the pharmaceuticals business were transferred to Warner Chilcott. The Company recorded an after-tax gain on the transaction of $1,464, which is included in net earnings from discontinued operations in the Consolidated Statement of Earnings for the year ended June 30, 2010.

The pharmaceuticals business had historically been part of the Company’s Health Care reportable segment. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of the pharmaceuticals business are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all years presented.

In November 2008, the Company completed the divestiture of our coffee business through the merger of our Folgers coffee subsidiary into The J.M. Smucker Company (Smucker) in an all-stock reverse Morris Trust transaction. In connection with the merger, 38.7 million shares of common stock of the Company were tendered by shareholders and exchanged for all shares of Folgers common stock, resulting in an increase in treasury stock of $2,466. Pursuant to the merger, a Smucker subsidiary merged with and into Folgers and Folgers became a wholly owned subsidiary of Smucker. The Company recorded an after-tax gain on the transaction of $2,011, which is included in net earnings from discontinued operations in the Consolidated Statement of Earnings for the year ended June 30, 2009.

The coffee business had historically been part of the Company’s Snacks, Coffee and Pet Care reportable segment, as well as the coffee portion of our away-from-home business, which was included in the Fabric Care and Home Care reportable segment. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of Folgers are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all years presented.

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

	2010								2009									2008
Years Ended June 30	Pharma			Coffee		Total			Pharma			Coffee			Total			Pharma			Coffee			Total
Net sales	$	751		$	—	$	751		$	2,335		$	668		$	3,003		$	2,491		$	1,754		$	4,245
Earnings from discontinued operations		306			—		306			912			212			1,124			747			446			1,193
Income tax expense		(101	)		—		(101	)		(299	)		(80	)		(379	)		(240	)		(169	)		(409	)
Gain on sale of discontinued operation		2,632			—		2,632			—			1,896			1,896			—			—			—
Income tax benefit (expense) on sale		(1,047	)		—		(1,047	)		—			115			115			—			—			—
Net earnings from discontinued operations		1,790			—		1,790			613			2,143			2,756			507			277			784

The net gain on the sale of the pharmaceuticals business, in the table above, for the year ended June 30, 2010 also includes an after-tax gain on the sale of the Actonel brand in Japan which occurred prior to the divestiture to Warner Chilcott.

Amounts in millions of dollars except per share amounts or as otherwise specified.

74 The Procter & Gamble Company Notes to Consolidated Financial Statements

NOTE 13

QUARTERLY RESULTS (UNAUDITED)

Quarters Ended		Sept 30			Dec 31			Mar 31			Jun 30			Total Year
NET SALES	2009–2010	$	19,807		$	21,027		$	19,178		$	18,926		$	78,938
	2008–2009		20,983			19,763			17,864			18,084			76,694
OPERATING INCOME	2009–2010		4,448			4,655			3,968			2,950			16,021
	2008–2009		4,386			4,055			3,553			3,380			15,374
GROSS MARGIN	2009–2010		52.6	%		53.7	%		51.9	%		49.5	%		52.0	%
	2008–2009		49.7	%		50.4	%		49.0	%		49.0	%		49.5	%
NET EARNINGS:
Earnings from continuing operations	2009–2010	$	3,027		$	3,149		$	2,585		$	2,185		$	10,946
	2008–2009		3,115			2,813			2,429			2,323			10,680
Earnings from discontinued operations	2009–2010		280			1,510			—			—			1,790
	2008–2009		233			2,191			184			148			2,756
Net earnings	2009–2010		3,307			4,659			2,585			2,185			12,736
	2008–2009		3,348			5,004			2,613			2,471			13,436
DILUTED NET EARNINGS PER COMMON SHARE:
Earnings from continuing operations	2009–2010	$	0.97		$	1.01		$	0.83		$	0.71		$	3.53
	2008–2009		0.96			0.89			0.78			0.75			3.39
Earnings from discontinued operations	2009–2010		0.09			0.48			—			—			0.58
	2008–2009		0.07			0.69			0.06			0.05			0.87
Diluted net earnings per common share	2009–2010		1.06			1.49			0.83			0.71			4.11
	2008–2009		1.03			1.58			0.84			0.80			4.26

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company 75

Global Leadership Council		Board of Directors
Robert A. McDonald Chairman of the Board, President and Chief Executive Officer GLOBAL OPERATIONS Werner Geissler Vice Chairman Global Operations Deborah A. Henretta Group President – Asia Shannan Stevenson President – Greater China Laurent L. Philippe Group President – CEEMEA Melanie L. Healey Group President – North America Giovanni Ciserani President – Western Europe Jorge A. Uribe President – Latin America Jeffrey K. Schomburger President – Global Wal-Mart Team GLOBAL HOUSEHOLD CARE Dimitri Panayotopoulos Vice Chairman Global Household Care Jorge S. Mesquita Group President – Global Fabric Care Martin Riant Group President – Global Baby Care David S. Taylor Group President – Global Home Care Mary Lynn Ferguson-McHugh President – Family Care Mark Bertolami President – Duracell GLOBAL BEAUTY & GROOMING Edward D. Shirley Vice Chairman Global Beauty & Grooming Charles V. Bergh Group President – Global Male Grooming, Beauty & Grooming Virginia C. Drosos Group President – Global Female Beauty, Beauty & Grooming Colleen E. Jay President – Global Female Beauty, Beauty & Grooming John P. Goodwin President – Global Braun, Beauty & Grooming Robert Jongstra President – Global Professional Salon, Beauty & Grooming Patrice Louvet President – Global Prestige GLOBAL HEALTH AND WELL-BEING Robert A. Steele Vice Chairman Global Health and Well-Being Charles E. Pierce Group President – Global Oral Care	Steven D. Bishop President – Global Feminine Care Thomas M. Finn President – Global Health Care Daniel S. Rajczak Senior Vice President – Global Snacks & Pet Care CORPORATE AND COMPANY OPERATIONS Bruce Brown Chief Technology Officer Shekhar Mitra Senior Vice President – Corporate R&D, Materials Science & Technology and Global Beauty & Grooming Robert L. Fregolle, Jr. Global Customer Business Development Officer R. Keith Harrison, Jr. Global Product Supply Officer Christopher D. Hassall Global External Relations Officer Deborah P. Majoras Chief Legal Officer & Secretary Jon R. Moeller Chief Financial Officer Teri L. List Senior Vice President & Treasurer Valarie Sheppard Senior Vice President & Comptroller and Global Household Care Finance and Accounting Moheet Nagrath Global Human Resources Officer Linda W. Clement-Holmes Senior Vice President – Global Diversity and Global Business Services Filippo Passerini President – Global Business Services & Chief Information Officer Marc S. Pritchard Global Brand Building Officer Philip J. Duncan Global Design Officer Joan M. Lewis Global Consumer & Market Knowledge Officer Nancy K. Swanson Vice President – Corporate The following company officers have announced their intention to retire during the 2010/11 fiscal year: Steven W. Jemison Officer on Special Assignment Christopher de Lapuente Group President on Special Assignment	Angela F. Braly Chair of the Board, President and Chief Executive Officer of WellPoint, Inc. (healthcare insurance). Appointed to the Board on December 8, 2009. Age 49. Member of the Audit and Governance & Public Responsibility Committees. Kenneth I. Chenault Chairman and Chief Executive Officer of the American Express Company (financial services). Director since 2008. Also a Director of International Business Machines Corporation. Age 59. Member of the Audit and Compensation & Leadership Development Committees. Scott D. Cook Chairman of the Executive Committee of the Board of Intuit Inc. (software and web services). Director since 2000. Also a Director of eBay Inc. Age 58. Chair of the Innovation & Technology Committee and member of the Compensation & Leadership Development Committee. Rajat K. Gupta Senior Partner Emeritus at McKinsey & Company (international consulting). Director since 2007. Also a Director of American Airlines, Genpact, Ltd., and Harman International Industries, Inc. Age 61. Member of the Audit and Innovation & Technology Committees. Robert A. McDonald Chairman of the Board, President and Chief Executive Officer of the Company. Named Chairman of the Board effective January 1, 2010. Director since 2009. Also a Director of Xerox Corporation. Age 57. W. James McNerney, Jr. Chairman of the Board, President and Chief Executive Officer of The Boeing Company (aerospace, commercial jetliners and military defense systems company). Director since 2003. Also a Director of International Business Machines Corporation. Age 61. Presiding Director, Chair of the Compensation & Leadership Development Committee and member of the Governance & Public Responsibility Committee. Johnathan A. Rodgers President and Chief Executive Officer of TV One, LLC (media and communications company). Director since 2001. Also a Director of Nike, Inc. Age 64. Member of the Innovation & Technology Committee. Mary Agnes Wilderotter Chairman, President and Chief Executive Officer of Frontier Communications Corporation (communications company specializing in providing services to rural areas and small and medium-sized towns and cities). Director since 2009. Also a Director of Xerox Corporation. Age 55. Member of the Compensation & Leadership Development and Governance & Public Responsibility Committees. Patricia A. Woertz Chairman, Chief Executive Officer and President of Archer Daniels Midland Company (agricultural processors of oilseeds, corn, wheat and cocoa, etc.). Director since 2008. Age 57. Chair of the Audit Committee and member of the Governance & Public Responsibility Committee. Ernesto Zedillo Former President of Mexico, Director of the Center for the Study of Globalization and Professor in the field of International Economics and Politics at Yale University. Director since 2001. Also a Director of Alcoa Inc. and Citigroup, Inc. Age 58. Chair of the Governance & Public Responsibility Committee and member of the Innovation & Technology Committee. THE BOARD OF DIRECTORS HAS FOUR COMMITTEES: – Audit Committee – Compensation & Leadership Development Committee – Governance & Public Responsibility Committee – Innovation & Technology Committee

76 The Procter & Gamble Company

Financial Summary (Unaudited)

Amounts in millions, except per share amounts	2010			2009			2008			2007			2006			2005
Net Sales	$	78,938		$	76,694		$	79,257		$	72,441		$	64,416		$	53,210
Gross Margin		41,019			38,004			39,996			37,065			32,549			26,391
Operating Income		16,021			15,374			15,979			14,485			12,551			9,666
Net Earnings from Continuing Operations		10,946			10,680			11,291			9,662			8,187			6,384
Net Earnings from Discontinued Operations		1,790			2,756			784			678			497			539
Net Earnings		12,736			13,436			12,075			10,340			8,684			6,923
Net Earnings Margin from Continuing Operations		13.9	%		13.9	%		14.2	%		13.3	%		12.7	%		12.0	%
Basic Net Earnings per Common Share:
Earnings from continuing operations	$	3.70		$	3.55		$	3.61		$	3.01		$	2.63		$	2.48
Earnings from discontinued operations		0.62			0.94			0.25			0.21			0.16			0.22
Basic Net Earnings per Common Share		4.32			4.49			3.86			3.22			2.79			2.70
Diluted Net Earnings per Common Share:
Earnings from continuing operations		3.53			3.39			3.40			2.84			2.49			2.33
Earnings from discontinued operations		0.58			0.87			0.24			0.20			0.15			0.20
Diluted Net Earnings per Common Share		4.11			4.26			3.64			3.04			2.64			2.53
Dividends per Common Share		1.80			1.64			1.45			1.28			1.15			1.03
Research and Development Expense	$	1,950		$	1,864		$	1,946		$	1,823		$	1,682		$	1,538
Advertising Expense		8,576			7,519			8,520			7,799			7,010			5,804
Total Assets		128,172			134,833			143,992			138,014			135,695			61,527
Capital Expenditures		3,067			3,238			3,046			2,945			2,667			2,181
Long-Term Debt		21,360			20,652			23,581			23,375			35,976			12,887
Shareholders’ Equity		61,439			63,382			69,784			67,012			63,171			18,655

Shareholder Return Performance Graphs

MARKET AND DIVIDEND INFORMATION

P&G has been paying a dividend for 120 consecutive years since its incorporation in 1890 and has increased its dividend for 54 consecutive years at an annual compound average rate of approximately 9.5%.

(in dollars; split-adjusted)	1956		1970		1984		1998		2010
Dividends per Share	$	0.01	$	0.04	$	0.15	$	0.51	$	1.80

QUARTERLY DIVIDENDS Quarter Ended	2009 – 2010		2008 – 2009
September 30	$	0.4400	$	0.4000
December 31		0.4400		0.4000
March 31		0.4400		0.4000
June 30		0.4818		0.4400

COMMON STOCK PRICE RANGE

	2009 – 2010				2008 – 2009
Quarter Ended	High		Low		High		Low
September 30	$	58.66	$	50.52	$	73.57	$	60.05
December 31		63.48		56.02		71.94		53.77
March 31		64.58		59.01		62.97		43.93
June 30		64.00		39.37		54.77		46.29

The Procter & Gamble Company 77

Shareholder Return Performance Graphs

(continued)

SHAREHOLDER RETURN

The following graph compares the cumulative total return of P&G’s common stock for the 5-year period ending June 30, 2010, against the cumulative total return of the S&P 500 Stock Index (broad market comparison) and the S&P 500 Consumer Staples Index (line of business comparison). The graph and table assume $100 was invested on June 30, 2005, and that all dividends were reinvested.

	Cumulative Value of $100 Investment, through June 30
Company Name/Index	2005		2006		2007		2008		2009		2010
P&G	$	100	$	108	$	121	$	123	$	106	$	128
S&P 500 Index		100		109		131		114		84		96
S&P 500 Consumer Staples Index		100		108		124		125		112		128

Recognition

P&G is recognized as a leading global company, including a #6 ranking on Fortune’s “Global Most Admired Companies,” the #2 ranking on Fortune’s “Top Companies for Leaders” survey, the #3 ranking on Barron’s “World’s Most Respected Companies List,” a #12 ranking on Bloomberg Businessweek’s list of “World’s Most Innovative Companies,” a ranking among Bloomberg Businessweek/Hay Group’s Twenty Best Companies for Leadership, a #2 ranking on the AMR Research Supply Chain Top 25 and the only company to have been in the Top 5 for six consecutive years, top rankings on the Dow Jones Sustainability Index from 2000 to 2010, a #13 ranking on the list of the Global 100 Most Sustainable Corporations in the World, and a consistent #1 ranking within our industry on Fortune’s Most Admired list for 25 of 26 total years and for 13 years in a row. P&G was recognized during the year by SymphonyIRI Group as the most innovative manufacturer in the consumer packaged goods industry for the last decade—presenting the Company with its “Outstanding Achievement in Innovation” award.

P&G’s commitment to creating a diverse workplace has been recognized by the National Association for Female Executives (Top 50 Companies for Executive Women), Working Mother magazine (100 Best Companies for Working Mothers and Top 20 Best Companies for Multicultural Women), Black Enterprise magazine (40 Best Companies for Diversity), and Diversity Inc. (#18 ranking on the Top 50 Companies for Diversity and #6 ranking on the Top 10 Companies for Global Diversity).

Supplier diversity is a fundamental business strategy that strengthens our innovation and go-to-market capabilities and touches and improves the lives of our diverse suppliers, their employees and the communities in which they live and work. In 2010, P&G spent more than $2 billion with minority- and women-owned businesses. Since 2005, P&G has been a member of the Billion Dollar Roundtable, a forum of 17 corporations that spend more than $1 billion annually with diverse suppliers.

78 The Procter & Gamble Company

Company and Shareholder Information

P&G’S PURPOSE

We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper.

BRANDS

For information on our portfolio of leadership brands and our latest innovations, please visit www.pg.com/brands and www.pginnovation.com.

SUSTAINABILITY

At P&G, we are focusing our efforts where we can make the most meaningful difference in both environmental and social sustainability. To learn more, please visit www.pg.com/sustainability.

CORPORATE HEADQUARTERS

The Procter & Gamble Company

P.O. Box 599, Cincinnati, OH 45201-0599

P&G SHAREHOLDER INVESTMENT PROGRAM

The Procter & Gamble Shareholder Investment Program (SIP) is a direct stock purchase and dividend reinvestment plan. The SIP is open to current P&G shareholders as well as new investors and is designed to encourage long-term investment in P&G by providing a convenient and economical way to purchase P&G stock and reinvest dividends. Highlights of the plan include:

• Minimum initial investment — $250

• Nominal administrative fees, including no enrollment fee, and no dividend reinvestment fee

• Optional Cash Investment — minimum $50

• Administered by P&G Shareholder Services Department

For complete information on the SIP, please read the Program Prospectus. The Prospectus and New Account Application Form are available at www.pg.com/en_US/investors/investing_in_pg or by contacting P&G Shareholder Services.

GIVING THE GIFT OF P&G STOCK

Did you know you can give P&G stock to your children, grandchildren, nieces, nephews and friends? Many of our long-time shareholders know what a great gift P&G stock makes for a special person on a special occasion. You can make the gift by transferring shares from your account or by purchasing shares for the recipient through the SIP. Please visit www.pg.com/investors or contact P&G Shareholder Services for details.

SHAREHOLDER SERVICES

The Procter & Gamble Shareholder Services Department serves as transfer and dividend paying agent for P&G Common Stock and Administrator of the Procter & Gamble Shareholder Investment Program. Registered shareholders and Program participants needing account assistance with share transfers, plan purchases/sales, lost stock certificates, etc. should contact P&G Shareholder Services at:

Website: www.pg.com/en_US/investors/shareholder_services

E-mail: shareholders.im@pg.com

Personal assistance (M – F, 9a – 4p Eastern): 1-800-742-6253; 1-513-983-3034 (outside U.S. and Canada)

Financial information request line (24 hours): 1-800-764-7483

TRANSFER AGENT

The Procter & Gamble Company

Shareholder Services Department

P.O. Box 5572, Cincinnati, OH 45201-5572

REGISTRAR

The Procter & Gamble Company

P.O. Box 599, Cincinnati, OH 45201-0599

EXCHANGE LISTINGS

New York Stock Exchange, NYSE Euronext-Paris

STOCK SYMBOL

PG

SHAREHOLDERS OF COMMON STOCK

There were approximately 2,311,000 common stock shareowners, including shareholders of record, participants in the P&G Shareholder Investment Program, participants in P&G stock ownership plans and beneficial owners with accounts at banks and brokerage firms, as of June 30, 2010.

ANNUAL MEETING

The next annual meeting of shareholders will be held on Tuesday, October 12, 2010. A full transcript of the meeting will be available from Susan Felder, Assistant Secretary. Ms. Felder can be reached at 299 East Sixth Street, Cincinnati, Ohio 45202-3315.

FORM 10-K

Shareholders may obtain a copy of P&G’s 2010 report to the Securities and Exchange Commission on Form 10-K by going to www.pg.com/investors or by calling 1-800-764-7483. This information is also available at no charge by sending a request to P&G Shareholder Services at the address listed.

The most recent certifications by our Chief Executive and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to our Form 10-K for the fiscal year ended June 30, 2010. We have also filed with the New York Stock Exchange the most recent Annual CEO certification as required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual.

EX-21

EXHIBIT (21)

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

Subsidiaries of the Registrant

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

AB Tudor Hellesens [Sweden]

Agile Pursuits Franchising, Inc. [Ohio]

Agile Pursuits, Inc. [Ohio]

An-Pro Company [Ohio]

Arbora & Ausonia, S.L. [Spain]

Arbora, S.A. [Spain]

Baryon, S. de R.L. de C.V. [Mexico]

Becruz, S.A. de C.V. [Mexico]

Braun (Shanghai) Co., Ltd. [China]

Braun (Shanghai) International Trading Co., Ltd. [China]

Braun GmbH [Germany]

Braun Oral-B Ireland Limited [Ireland]

Braun-Gillette Immobilien GmbH & Co. KG [Germany]

CAMADA Grundstücks-GmbH & Co. oHG [Germany] (*)

Capella OOO [Russia]

Celtic Insurance Company, Inc. [Vermont]

Chemo Laboratories Manufacturing Sdn. Bhd. [Malaysia]

China Battery Limited [Hong Kong]

Clairol Limited [U.K.]

Compania Giva, S.A. [Delaware]

Compania Procter & Gamble Mexico, S. de R.L. de C.V. [Mexico]

Consumer Studies, Inc. [Massachusetts]

Corporativo Procter & Gamble, S. de R.L. de C.V. [Mexico]

Corpydes S.A. de C.V. [Mexico]

Cosmetic Products Pty. Ltd. [Australia]

Cosmetic Research Bureau, Inc. [Delaware]

Cosmetic Suppliers Pty. Ltd. [Australia]

Cosmopolitan Cosmetics China Ltd. [Hong Kong] (*)

Cosmopolitan Cosmetics K.K. [Japan]

Cosmopolitan Cosmetics Korea Co., Ltd [South Korea]

Cosmopolitan Cosmetics Ltd. [Hong Kong] (*)

Crest Toothpaste Inc. [Canada]

Decun, S. de R.L. de C.V. [Mexico]

Detergent Products A.G. [Switzerland] (*)

Duracell (1993) Ltd. [U.K.]

Duracell (China) Ltd. [China]

Duracell Batteries B.V.B.A. [Belgium]

Duracell Batteries Ltd. [U.K.]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

Duracell do Brasil Industria e Comercio Ltda. [Brazil]

Eastern European Supply Company [Ukraine]

Escada Cosmetics Ltd. [Korea]

European Beauty Products (U.K.) Limited [U.K.]

Explotadora de Inmuebles Magdalena, S.A. [Mexico]

Fameccanica Data S.p.A. [Italy]

Fameccanica Indùstria e Comèrcio Do Brasil LTDA. [Brazil]

Fameccanica Machinery (Shanghai) Co., Ltd. [China]

Fater S.p.A. [Italy]

FF Trademark, LLC [Delaware]

Foreign Company “Procter & Gamble” [Belarus]

Fountain Square Music Publishing Co., Inc. [Ohio]

FPG Oleochemicals Sdn. Bhd. [Malaysia]

Frederic Fekkai & Co., LLC [Delaware]

Frederic Fekkai & Company (Soho), LLC [New York]

Frederic Fekkai (Mark NY), LLC [Delaware]

Frederic Fekkai Beverly Hills, LLC [Calfornia]

Frederic Fekkai Dallas, LLC [Delaware]

Frederic Fekkai Greenwich, LLC [Delaware]

Frederic Fekkai Las Vegas, LLC [Delaware]

Frederic Fekkai Melrose Place, LLC [California]

Frederic Fekkai New York, LLC [New York]

Frederic Fekkai NY II, LLC [Delaware]

Frederic Fekkai Palm Beach, LLC [Florida]

Frederic Holding Co. [Delaware]

Frederic, LLC [Delaware]

Fruehling Cosmetics Co. Ltd. [Thailand]

Fujian Nanping Nanfu Battery Co., Ltd. [China]

Gala Cosmetics International Limited [U.K.]

Gilfin B.V. [Netherlands] (*)

Gilfin Holding B.V. [Netherlands] (*)

Gillette (China) Ltd. [China]

Gillette (Shanghai) Ltd. [China]

Gillette (Shanghai) Sales Company Limited [China]

Gillette Aesop Ltd. [U.K.]

Gillette Australia Pty. Ltd. [Australia]

Gillette Canada Holdings, Inc. [Delaware]

Gillette Central Services Limited [U.K.]

Gillette China Investment, LLC [Delaware]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

Gillette Commercial Operations North America [Massachusetts]

Gillette Czech and Ukraine Holding, LLC [Ohio]

Gillette de Mexico, Inc. [Delaware]

Gillette del Uruguay, S.A. [Uruguay]

Gillette Distribution Ltd. [Egypt]

Gillette Diversified Operations Pvt. Ltd. [India]

Gillette Dominicana, S.A. [Dominican Republic]

Gillette Egypt S.A.E. [Egypt]

Gillette European Services Centre Ltd. [U.K.]

Gillette Financial Holding B.V. [Netherlands] (*)

Gillette GOK Holding LLC [Ohio]

Gillette Group UK Ltd [U.K.]

Gillette Holding Company, Inc. [Delaware]

Gillette Holding GmbH [Germany]

Gillette India Limited [India]

Gillette Industries Ltd. [U.K.]

Gillette International B.V. [Netherlands]

Gillette Korea Holding B.V. [Netherlands] (*)

Gillette Latin America Holding B.V. [Netherlands]

Gillette Management LLC [Delaware]

Gillette Nova Scotia Company [Canada]

Gillette Pakistan Limited [Pakistan]

Gillette Poland International sp. zo.o. [Poland]

Gillette Poland S.A. [Poland]

Gillette Products Private Limited [India] (*)

Gillette Puerto Rico LLC [Puerto Rico]

Gillette Safety Razor Company [Massachusetts]

Gillette Sanayi ve Ticaret A.S. [Turkey]

Gillette U.K. Limited [U.K.]

Giorgio Beverly Hills, Inc. [Delaware]

Global Business Services de Costa Rica Limitada [Costa Rica]

Graham Webb International, Inc. [Delaware]

Gresham Cosmetics Pty. Ltd. [Australia]

Grupo Gillette, S. de R.L. de C.V. [Mexico] (*)

HDS Cosmetics Lab Inc. [Delaware]

Hyginett KFT [Hungary]

Iams Europe B.V. [Netherlands]

Iams Pet Food International N.V. [Netherlands]

Industries Marocaines Modernes SA [Morocco]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

Intpropco S.A. [Switzerland] (*)

Laboratorios Vicks, S.L. [Spain]

Liberty Street Music Publishing Company, Inc. [Ohio]

Limited Liability Company ‘Procter & Gamble Trading Ukraine’ [Ukraine]

LLC “Procter & Gamble Novomoskovsk” [Russia]

LLC “Procter & Gamble Services” [Russia]

LLC “Procter & Gamble” [Russia]

Londa GmbH [Germany]

Londa Kosmetika OOO [Russia]

Londa Rothenkirchen Produktions GmbH [Germany]

Marcvenca Inversiones, C.A. [Venezuela]

MDVIP, Inc. [Delaware]

Metropolitan Cosmetics GmbH [Germany]

Mining Consultants (India) Private Ltd. [India] (*)

Modern Holdings (Pty) Ltd. [South Africa] (*)

Modern Industries Company - Dammam [Saudi Arabia]

Modern Products Company - Jeddah [Saudi Arabia]

Natura Pet Products, Inc. [Delaware]

Nexus Mercantile Private Ltd. [India] (*)

Nioxin Management, Inc. [Georgia]

Nioxin Research Laboratories, Inc. [Georgia]

Noxell Corporation [Maryland]

Olay LLC [Puerto Rico]

Ondal France SARL [France]

Ondelle S.A.(Pty) Ltd. [South Africa] (*)

Oral-B Laboratories Dublin LLC [Delaware] (*)

Oral-B Laboratories International LLC [Delaware] (*)

Oral-B Laboratories Newbridge LLC [Delaware] (*)

Oral-B Laboratories, G.P. [Delaware]

P&G Asia Investments, LLC [Ohio]

P&G Design Center Godo Kaisha [Japan]

P&G Distribution Morocco SAS [Morocco]

P&G Indochina [Vietnam]

P&G Industrial Peru S.R.L. [Peru]

P&G Innovation Godo Kaisha [Japan]

P&G Israel Enterprise 2005 Ltd. [Israel]

P&G Israel M.D.O. Ltd. [Israel]

P&G Japan Holdings GK [Japan]

P&G K.K. [Japan]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

P&G Max Factor Godo Kaisha [Japan]

P&G Northeast Asia Pte. Ltd. [Singapore]

P&G Prestige Products [Russia] (*)

P&G Prestige Products GmbH [Austria]

P&G Prestige Products GmbH [Germany]

P&G Prestige Products Ltd. [U.K.]

P&G Prestige Products N.V. [Belgium]

P&G Prestige Products S.A.S. [France] (*)

P&G Prestige Products Singapore [Singapore] (*)

P&G Prestige Products Taiwan [Taiwan]

P&G Prestige Products, Inc. [Connecticut]

P&G Prestige Service GmbH [Germany]

P&G South African Trading (Pty.) Ltd. [South Africa]

P&G-Clairol, Inc. [Delaware]

Pacific Beauty Care Pte. Ltd. [Singapore] (*)

PADOS Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Darmstadt KG [Germany]

Parfums Rochas S.A.S. [France]

Parkfin [U.K.] (*)

Phase II Holdings Corporation [Philippines]

PPI ZAO [Russia]

PPS Hairwear Australia Pty. Ltd. [Australia]

Procter & Gamble (Chengdu) Ltd. [China]

Procter & Gamble (China) Ltd. [China]

Procter & Gamble (Egypt) Manufacturing Company [Egypt]

Procter & Gamble (Enterprise Fund) Limited [U.K.]

Procter & Gamble (Guangzhou) Ltd. [China]

Procter & Gamble (Health & Beauty Care) Limited [U.K.]

Procter & Gamble (L&CP) Limited [U.K.]

Procter & Gamble (Malaysia) Sdn Bhd [Malaysia]

Procter & Gamble (Manufacturing) Ireland Limited [Ireland] (*)

Procter & Gamble (Shanghai) International Trade Company Ltd. [China]

Procter & Gamble (Singapore) Pte. Ltd. [Singapore]

Procter & Gamble Acquisition GmbH [Germany]

Procter & Gamble Albania Ltd. [Albania]

Procter & Gamble Algeria EURL [Algeria]

Procter & Gamble Amazon Holding B.V. [Netherlands]

Procter & Gamble Amiens S.A.S. [France]

Procter & Gamble Argentina SRL [Argentina]

Procter & Gamble Asia Holding B.V. [Netherlands]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

Procter & Gamble Asia Pte. Ltd. [Philippines]

Procter & Gamble Asia Pte. Ltd. [Singapore]

Procter & Gamble Australia Proprietary Limited [Australia]

Procter & Gamble Austria GmbH [Austria]

Procter & Gamble Azerbaijan Services LLC [Azerbaijan]

Procter & Gamble Bangladesh Private Ltd. [Bangladesh]

Procter & Gamble Blois S.A.S. [France]

Procter & Gamble Brazil Holdings B.V. [Netherlands]

Procter & Gamble Bulgaria EOOD [Bulgaria]

Procter & Gamble Business Services Canada Company [Canada]

Procter & Gamble Canada Holding B.V. [Netherlands]

Procter & Gamble Central & Eastern Europe GmbH [Germany]

Procter & Gamble Chemical Services Pte. Ltd. [Singapore] (*)

Procter & Gamble Chile Holding Ltda. [Chile]

Procter & Gamble Chile Limitada [Chile]

Procter & Gamble Chile, Inc. [Ohio]

Procter & Gamble Colombia Ltda. [Colombia]

Procter & Gamble Commercial de Cuba, S.A. [Cuba]

Procter & Gamble Commercial LLC [Puerto Rico]

Procter & Gamble Czech Holding B.V. [Netherlands]

Procter & Gamble Czech Republic s.r.o. [Czech Republic]

Procter & Gamble d.o.o. za trgovinu [Croatia]

Procter & Gamble Danmark ApS [Denmark]

Procter & Gamble Detergent (Beijing) Ltd. [China]

Procter & Gamble Development Company A.G. [Switzerland] (*)

Procter & Gamble Distributing (HK) Limited [Hong Kong]

Procter & Gamble Distributing (Philippines) Inc. [Philippines]

Procter & Gamble Distributing New Zealand Limited [New Zealand]

Procter & Gamble Distribution Company (Europe) BVBA [Belgium]

Procter & Gamble Distribution S.R.L. [Romania]

Procter & Gamble Distributorskaya Compania [Russia]

Procter & Gamble do Brasil S/A [Brazil]

Procter & Gamble do Brazil, LLC [Delaware] (*)

Procter & Gamble do Nordeste S/A [Brazil]

Procter & Gamble DS Polska Spolka z o.o. [Poland]

Procter & Gamble Eastern Europe, LLC [Ohio]

Procter & Gamble Ecuador Cia. Ltda. [Ecuador]

Procter & Gamble Egypt [Egypt]

Procter & Gamble Egypt Distribution [Egypt]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

Procter & Gamble Egypt Holding [Egypt]

Procter & Gamble Egypt Supplies [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 Export Operations SARL [Switzerland] (*)

Procter & Gamble Exports, S. de R.L. [Panama]

Procter & Gamble Far East, Inc. [Ohio]

Procter & Gamble Finance (U.K.) Ltd. [U.K.]

Procter & Gamble Financial Services S.a.r.l [Luxembourg]

Procter & Gamble Finland OY [Finland]

Procter & Gamble Food Products SARL [Switzerland]

Procter & Gamble France S.A.S. [France]

Procter & Gamble Germany GmbH [Germany]

Procter & Gamble Germany GmbH & Co. Operations oHG [Germany]

Procter & Gamble GmbH [Germany]

Procter & Gamble Grundstucks-und Vermogensverwaltungs GmbH & Co. KG [Germany]

Procter & Gamble Gulf FZE [United Arab Emirates]

Procter & Gamble Hair Care, LLC [Delaware]

Procter & Gamble Hellas Ltd. [Greece]

Procter & Gamble Holding (HK) Limited [Hong Kong]

Procter & Gamble Holding (Thailand) Limited [Thailand]

Procter & Gamble Holding France S.A.S. [France]

Procter & Gamble Holding GmbH [Germany]

Procter & Gamble Holding S.r.l. [Italy]

Procter & Gamble Holdings (UK) Ltd. [U.K.]

Procter & Gamble Holdings Singapore Pte. Ltd. [Singapore] (*)

Procter & Gamble Home Products Limited [India]

Procter & Gamble Hong Kong Limited [Hong Kong]

Procter & Gamble Hungary Wholesale Trading Partnership (KKT) [Hungary]

Procter & Gamble Hygiene & Health Care Limited [India]

Procter & Gamble Inc. [Canada]

Procter & Gamble India Holdings B.V. [Netherlands]

Procter & Gamble India Holdings, Inc. [Ohio]

Procter & Gamble Industrial Colombia Ltda. [Colombia]

Procter & Gamble Industrial de Guatemala, S.A. [Guatemala]

Procter & Gamble Industrial e Comercial Ltda. [Brazil]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

Procter & Gamble Industrial S.A. [Venezuela]

Procter & Gamble Interamericas de Costa Rica, Limitada [Costa Rica]

Procter & Gamble Interamericas de El Salvador, Limitada de Capital Variable [El Salvador]

Procter & Gamble Interamericas de Guatemala, Limitada [Guatemala]

Procter & Gamble Interamericas de Panama, S. de R.L. [Panama]

Procter & Gamble International Finance Funding General Management S.a.r.l. [Luxembourg] (*)

Procter & Gamble International Funding SCA [Luxembourg]

Procter & Gamble International Operations Pte. Ltd. [Singapore]

Procter & Gamble International Operations S.A. [Switzerland]

Procter & Gamble International S.a.r.l. [Luxembourg]

Procter & Gamble Investment Company (UK) Ltd. [U.K.]

Procter & Gamble Investment GmbH [Germany]

Procter & Gamble Italia, S.p.A. [Italy]

Procter & Gamble Japan K.K. [Japan]

Procter & Gamble Kazakhstan LLP [Kazakhstan]

Procter & Gamble Korea IE, Co. [Korea]

Procter & Gamble Korea Inc. [Korea]

Procter & Gamble Korea S&D Co. [Korea]

Procter & Gamble Lanka Private Ltd. [Sri Lanka]

Procter & Gamble Leasing LLC [Ohio]

Procter & Gamble Levant S.A.L. [Lebanon]

Procter & Gamble Limited [U.K.]

Procter & Gamble Luxembourg Global S.a.r.l. [Luxembourg]

Procter & Gamble Manufactura, S. de R.L. de C.V. [Mexico]

Procter & Gamble Manufacturing (Thailand) Limited [Thailand]

Procter & Gamble Manufacturing (Tianjin) Co. Ltd. [China]

Procter & Gamble Manufacturing Belgium N.V. [Belgium]

Procter & Gamble Manufacturing Berlin GmbH [Germany]

Procter & Gamble Manufacturing Cologne GmbH [Germany]

Procter & Gamble Manufacturing GmbH [Germany]

Procter & Gamble Manufacturing SA [South Africa]

Procter & Gamble Manufacturing Ukraine [Ukraine]

Procter & Gamble Marketing & Commercial Activities d.o.o. Ljubljana [Slovenia]

Procter & Gamble Marketing and Services doo Beograd [Serbia and Montenegro]

Procter & Gamble Marketing DOOEL Skopje [Macedonia]

Procter & Gamble Marketing Romania SRL [Romania]

Procter & Gamble Maroc SA [Morocco]

Procter & Gamble Mataro, S.L. [Spain]

Procter & Gamble Mexico Holding B.V. [Netherlands]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

Procter & Gamble Moldova SRL [Moldova]

Procter & Gamble Nederland B.V. [Netherlands]

Procter & Gamble Netherlands Services B.V. [Netherlands]

Procter & Gamble Neuilly S.A.S. [France]

Procter & Gamble Nigeria Limited [Nigeria]

Procter & Gamble Nordic LLC [Ohio]

Procter & Gamble Norge AS [Norway]

Procter & Gamble NPD, Inc. [Ohio]

Procter & Gamble Operations Polska-Spolka z o.o. [Poland]

Procter & Gamble Overseas India B.V. [Netherlands]

Procter & Gamble Overseas Ltd. [U.K.]

Procter & Gamble Pakistan (Private) Limited [Pakistan]

Procter & Gamble Peru S.R.L. [Peru]

Procter & Gamble Pet Care (Australia) Pty. Ltd. [Australia]

Procter & Gamble Pharmaceuticals France SAS [France]

Procter & Gamble Pharmaceuticals Longjumeau S.A.S. [France]

Procter & Gamble Philippines, Inc. [Philippines]

Procter & Gamble Polska-Spolka z o.o [Poland]

Procter & Gamble Porto, Lda. [Portugal]

Procter & Gamble Portugal S.A. [Portugal]

Procter & Gamble Prestige Products S.A. [Portugal]

Procter & Gamble Prestige Products S.A. [Spain]

Procter & Gamble Product Supply (U.K.) Limited [U.K.]

Procter & Gamble Productions, Inc. [Ohio]

Procter & Gamble RHD, Inc. [Ohio]

Procter & Gamble RSC Regional Service Company Ltd. [Hungary]

Procter & Gamble S.r.l. [Italy]

Procter & Gamble Satis ve Dagitim Ltd. Sti. [Turkey]

Procter & Gamble Senegal S.a.r.l. [Senegal]

Procter & Gamble Service GmbH [Germany]

Procter & Gamble Services (Switzerland) SA [Switzerland] (*)

Procter & Gamble Services Company N.V. [Belgium]

Procter & Gamble Services LT [Lithuania]

Procter & Gamble Services Ltd. [Kenya]

Procter & Gamble Servicse EESTI OU [Estonia]

Procter & Gamble Singapore Investment Pte. Ltd. [Singapore] (*)

Procter & Gamble South Africa Proprietary Limited [South Africa]

Procter & Gamble South America Holding B.V. [Netherlands]

Procter & Gamble Sverige AB [Sweden]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

Procter & Gamble Switzerland SARL [Switzerland]

Procter & Gamble Taiwan Limited [Taiwan]

Procter & Gamble Technical Centres Limited [U.K.]

Procter & Gamble Technology (Beijing) Co., Ltd. [China]

Procter & Gamble Trading (Thailand) Limited [Thailand]

Procter & Gamble Trading International S.a.r.l. [Switzerland] (*)

Procter & Gamble Trgovaeko Drustvo d.o.o. Sarajevo [Bosnia]

Procter & Gamble Tuketim Mallari Sanayii A.S. [Turkey]

Procter & Gamble UK [U.K.]

Procter & Gamble Ukraine [Ukraine]

Procter & Gamble Verwaltungs GmbH [Germany] (*)

Procter & Gamble Vietnam Co. Ltd. [Vietnam]

Procter & Gamble, Spol. s.r.o. (Ltd.) [Slovak Republic]

Procter & Gamble-Rakona s.r.o. [Czech Republic]

Productos Cosmeticos, S.L. [Spain]

Professional Care Logistics, S.L. [Spain]

Progam Realty & Development Corporation [Philippines]

Promotora de Bienes y Valores, S. de R.L. de C.V. [Mexico]

PT Kosmindo [Indonesia]

PT Procter & Gamble Home Products Indonesia [Indonesia]

PUR Water Purification Products, Inc. [Ohio]

Redmond Products, Inc. [Minnesota]

Richardson-Vicks do Brasil Quimica e Farmacêutica Ltda [Brazil]

Richardson-Vicks Real Estate Inc. [Ohio]

Riverfront Music Publishing Co., Inc. [Ohio]

Rosemount LLC [Delaware] (*)

Russwell OOO [Russia]

S.C. Detergenti S.A. [Romania]

S.P.F. Beaute SAS [France]

Scannon GmbH [Germany]

Scannon S.A.S. [France]

Sebastian Europe GmbH [Germany]

Series Acquisition B.V. [Netherlands]

Series Overseas Investment, LLC [Delaware]

Shulton (Great Britain) Ltd. [U.K.]

Shulton, Inc. [New Jersey]

Sigma Cosmetica International S.A [Uruguay]

SPD Development Company Limited [U.K.]

SPD Swiss Precision Diagnostics GmbH [Switzerland]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

Surfac S.R.L. [Peru]

Sycamore Productions, Inc. [Ohio]

Tambrands Inc. [Delaware]

Tambrands Limited [U.K.]

Tambrands Ukraine Ltd. [Ukraine]

Tefa Holdings (Pty) Ltd [South Africa] (*)

Temple Trees Impex & Investment Private Limited [India]

The Art of Shaving [Florida]

The Dover Wipes Company [Ohio]

The Gillette Company [Delaware]

The Iams Company [Ohio]

The Procter & Gamble Distributing LLC [Delaware]

The Procter & Gamble GBS Company [Ohio]

The Procter & Gamble Global Finance Company [Ohio]

The Procter & Gamble International Insurance Company, Limited [Ireland] (*)

The Procter & Gamble Manufacturing Company [Ohio]

The Procter & Gamble Paper Products Company [Ohio]

The Procter & Gamble U.S. Business Services Company [Ohio]

The Wella Corporation [Delaware]

Vidal Sassoon (Shanghai) Academy [China]

Vidal Sassoon Co. [Ohio]

WEBA Betriebsrenten-Verwaltungsgesellschaft mbH [Germany]

Wella (Ireland) Ltd. [Ireland] (*)

Wella (U.K.) Ltd. [U.K.]

Wella (UK) Holdings Ltd. [U.K.]

Wella AG [Germany]

Wella Beteiligungen GmbH [Switzerland] (*)

Wella Canada, Inc. [Canada]

Wella Colombiana Ltda. [Colombia]

Wella Cosmetics China Ltd. Co. [China]

Wella CZ s.r.o. [Czech Republic]

Wella de México, S. de R.L. de C.V. [Mexico]

Wella France S.A.S. [France]

Wella Grundstucks-und Vermogensverwaltungs AG & Co. KG [Germany]

Wella Hellas Ltd. [Greece]

Wella Hong Kong Limited [Hong Kong] (*)

Wella India Hair Cosmetics Private Limited [India]

Wella Intercosmetic GmbH [Germany]

Wella Japan Co. Ltd. [Japan]

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

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

The registrant’s subsidiaries are listed below, omitting certain entities that have de minimis activity or are in the process of being liquidated that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of June 30, 2010. Entities denoted with an asterisk (*) are among those currently planned for liquidation.

Wella Kozmetik Sanayi ve Ticaret Limited [Turkey]

Wella Magyarorszag Kft. [Hungary]

Wella Malaysia Sdn. Bhd. [Malaysia]

Wella Management GmbH [Germany]

Wella Manufacturing GmbH [Germany]

Wella New Zealand [New Zealand]

Wella Paraguay S.A. [Paraguay]

Wella Philippines Inc. [Philippines]

Wella Slovensko s.r.o. [Slovak Republic]

Wella Taiwan Co. Ltd. [Taiwan]

Wella Thailand Ltd. [Thailand]

Wella Trading (Thailand) Ltd. [Thailand]

Wella Verwaltung GmbH [Germany] (*)

Zogi SRL [Italy]

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

EX-23

EXHIBIT (23)

Independent Registered Public Accounting Firm’s Consent

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following documents of our reports dated August 13, 2010, relating to the consolidated financial statements of The Procter & Gamble Company and subsidiaries and the effectiveness of The Procter & Gamble Company and subsidiaries’ internal control over financial reporting, incorporated by reference in the Annual Report on Form 10-K of The Procter & Gamble Company and subsidiaries for the year ended June 30, 2010.

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

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

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

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

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

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

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

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

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

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

11. Registration Statement No. 333-37905 on 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. 333-34606 on Form S-8 for The Procter & Gamble Future Shares Plan;

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

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

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

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

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

22. Registration Statement No. 333-100561 on Form S-8 for The Procter & Gamble (U.K.) 1-4-1 Plan;

23. Registration Statement No. 333-108753 on Form S-8 for The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan;

24. Registration Statement No. 333-108991 on Form S-8 for The Procter & Gamble 1992 Stock Plan (Belgian Version);

25. Registration Statement No. 333-108992 on Form S-8 for Savings and Thrift Plan (Saudi Arabia);

26. Registration Statement No. 333-108993 on Form S-8 for Employee Stock Purchase Plan (Japan);

27. Registration Statement No. 333-108994 on Form S-8 for Procter & Gamble Ireland Employees Share Plan;

28. Registration Statement No. 333-108995 on Form S-8 for Group Profit Sharing, Incentive, and Employer Contribution Plan (France);

29. Registration Statement No. 333-108997 on Form S-8 for The Procter & Gamble International Stock Ownership Plan;

30. Registration Statement No. 333-108998 on Form S-8 for The Procter & Gamble 1993 Non-Employee Directors’ Stock Plan;

31. Registration Statement No. 333-108999 on Form S-8 for The Procter & Gamble 1992 Stock Plan;

32. Registration Statement No. 333-111304 on Form S-8 for The Procter & Gamble 2003 Non-Employee Directors’ Stock Plan;

33. Registration Statement No. 333-111305 on Form S-8 for The Procter & Gamble U.K. Share Investment Scheme;

34. Amendment No. 1 to Registration Statement No. 333-113515 on Form S-3 for The Procter & Gamble Company Debt Securities and Warrants;

35. Amendment No. 3 to Registration Statement No. 333-123309 on Form S-4 for The Procter & Gamble Company;

36. Registration Statement No. 333-128859 on Form S-8 for certain employee benefit plans of The Gillette Company (2004 Long-Term Incentive Plan of The Gillette Company; 1971 Stock Option Plan of The Gillette Company; James M. Kilts Non-Statutory Stock Option Plan; The Gillette Company Employees’ Savings Plan; The Gillette Company Supplemental Savings Plan; The Gillette Company Global Employee Stock Ownership Plan (GESOP));

37. Registration Statement No. 333-143801 on Form S-8 for The Procter & Gamble Savings Plan;

38. Registration Statement No. 333-145938 on Form S-3 for The Procter & Gamble Company and Procter & Gamble International Funding SCA;

39. Registration Statement No. 333-155046 on Form S-8 for Employee Stock Purchase Plan (Japan);

40. Registration Statement No. 333-156032 on Form S-3 for The Procter & Gamble U.K. Share Investment Scheme; and

41. Registration Statement No. 333-156033 on Form S-3 for The Procter & Gamble Shareholder Investment Program; and

42. Registration Statement No. 333-161725 on Form S-8 for The Procter & Gamble Savings Plan; and

43. Registration Statement No. 333-161767 on Form S-3 for The Procter & Gamble Company and Procter & Gamble International Funding SCA; and

44. Registration Statement No. 333-164612 on Form S-8 for The Procter & Gamble 2009 Stock and Incentive Compensation Plan.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

Cincinnati, Ohio

August 13, 2010

EX-31

EXHIBIT (31)

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

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

I, Robert A. McDonald, certify that:

(1) I have reviewed this annual report on Form 10-K of The Procter & Gamble Company;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ ROBERT A. MCDONALD

(Robert A. McDonald)

Chairman of the Board, President and Chief Executive Officer

August 13, 2010

Date

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

I, Jon R. Moeller, certify that:

(1) I have reviewed this annual report on Form 10-K of The Procter & Gamble Company;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ JON R. MOELLER

(Jon R. Moeller)

Chief Financial Officer

August 13, 2010

Date

EX-32

EXHIBIT (32)

Section 1350 Certifications

Section 1350 Certifications

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

(1) The Annual Report on Form 10-K of the Company for the year ended June 30, 2010 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.

/s/ ROBERT A. MCDONALD

(Robert A. McDonald)

Chairman of the Board, President and
Chief Executive Officer

August 13, 2010

Date

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

Section 1350 Certifications

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

(1) The Annual Report on Form 10-K of the Company for the year ended June 30, 2010 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.

/s/ JON R. MOELLER

(Jon R. Moeller)

Chief Financial Officer

August 13, 2010

Date

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

EX-99.1

EXHIBIT (99-1)

Summary of Directors and Officers Insurance Program

The Procter & Gamble Company purchases Directors and Officers Liability insurance from various insurance carriers. The policy limits for the period from June 30, 2009 to June 30, 2010 were $250 million.