UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

The Procter & Gamble Company

(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

THE PROCTER & GAMBLE COMPANY

Notice of Annual Meeting

and

Proxy Statement

Procter & Gamble Hall

at the Aronoff Center for the Arts

Annual Meeting of Shareholders

October 13, 200911, 2011

THE PROCTER & GAMBLE COMPANY

P.O. Box 599

Cincinnati, Ohio 45201-0599

August 28, 2009[·]

Fellow Procter & Gamble Shareholders:

It is ourmy pleasure to invite you to this year’s annual meeting of shareholders, which will be held on Tuesday, October 13, 2009.11, 2011.

The meeting will start at 9:00 a.m., Eastern Daylight Time, at the Procter & Gamble Hall at the Aronoff Center for the Arts, 650 Walnut Street, in Cincinnati.

We appreciate your continued confidence in our Company and look forward to seeing you on October 13.11.

THE PROCTER & GAMBLE COMPANY

P.O. Box 599

Cincinnati, Ohio 45201-0599

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

August 28, 2009[·]

Purposes of the meeting:

Who may attend the meeting:

Only shareholders, persons holding proxies from shareholders and invited representatives of the media and financial community may attend the meeting.

Shareholders attending the meeting who are hearing-impaired should identify themselves during registration so they can sit in a special section where an interpreter will be available.

What to bring:

If your shares are registered in your name and you requested and received a printed copy of the proxy materials, you should bring the enclosed Admission Ticket to the meeting. If you received a Notice of Internet Availability of Proxy Materials and will not be requesting a printed copy of the proxy materials, please bring that Notice with you as your Admission Ticket.

If your shares are held in the name of a broker, trust, bank or other nominee, you will need to bring a proxy or letter from that broker, trust, bank or nominee that confirmsconfirming that you are the beneficial owner of those shares.

WebcastAudiocast of the annual meeting:

If you are not able to attend the meeting in person, you may join a live video and audiocast of the meeting on the Internet by visitingwww.pg.com/investors at 9:00 a.m., Eastern Daylight Time on October 13, 2009.11, 2011.

Record Date:

August 14, 200912, 2011, is the record date for the meeting. This means that owners of Procter & Gamble stock at the close of business on that date are entitled to:

Information About the Notice of Internet Availability of Proxy Materials:

Again this year, instead of mailing a printed copy of our proxy materials, including our Annual Report, to each shareholder of record, we have decided to provide access to these materials in a fast and efficient manner via the Internet. This reduces the amount of paper necessary to produce these materials, as well as the costs associated with mailing these materials to all shareholders. On August 28, 2009,[·], we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to all shareholders of record as of August 14, 2009,12, 2011, and we posted our proxy materials on the website referenced in the Notice (www.proxyvote.com). As more fully described in the Notice, all shareholders may choose to access our proxy materials on the website referred to in the Noticeat www.proxyvote.com or may request to receive a printed set of our proxy materials. In addition, the Notice and website provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. For those who previously requested printed proxy materials or electronic materials on an ongoing basis, you will receive those materials as you requested.

Householding Information:

We have adopted a procedure approved by the Securities and Exchange Commission (“SEC”) called “householding.” Under this procedure, shareholdersShareholders of record who have the same address and last name and have not previously requested electronic delivery of proxy materials will receive a single envelope containing the Notices for all shareholders having that address. The Notice for each shareholder will include that shareholder’s unique control number needed to vote his or her shares. This procedure reduces our printing costs and postage fees.

If, in the future, you do not wish to participate in householding and prefer to receive your Notice in a separate envelope, please call us toll-free at 1-800-742-6253 in the U.S., or inform us in writing at: The Procter & Gamble Company, Shareholder Services, P.O. Box 5572, Cincinnati, OH 45201-5572, or by email at shareholders.im@pg.com. We will respond promptly to such requests.

For those shareholders who have the same address and last name and who request to receive a printed copy of the proxy materials by mail, we will send only one copy of such materials to each address unless one or more of those shareholders notifies us, in the same manner described above, that they wish to receive a printed copy for each shareholder at that address.

Beneficial shareholders can request information about householding from their banks, brokers or other holders of record.

Proxy Voting:

Your vote is important. Please vote your proxy promptly so your shares can be represented, even if you plan to attend the annual meeting. You can vote by Internet, by telephone or by requesting a printed copy of the proxy materials and using the enclosed proxy card.

Our proxy tabulator, Broadridge Financial Solutions, must receive any proxy that will not be delivered in person to the annual meeting by 11:59 p.m., Eastern Daylight Time on Monday, October 12, 2009.10, 2011.

By order of the Board of Directors,

Table of Contents

Proxy Statement

As more fully described in the Notice, the Board of Directors (“Board”) of The Procter & Gamble Company (the “Company”) has made these materials available to you over the Internet or, upon your request, has mailed you printed versions of these materials in connection with the Company’s 20092011 annual meeting of shareholders, which will take place on October 13, 2009.11, 2011. The Notice was mailed to Company shareholders beginning August 28, 2009,[·], and our proxy materials were posted on the website referenced in the Notice on that same date. The Company, on behalf of its Board, of Directors, is soliciting your proxy to vote your shares at the 20092011 annual meeting of shareholders. We solicit proxies to give all shareholders of record an opportunity to vote on matters that will be presented at the annual meeting. In this proxy statement, you will find information on these matters, which is provided to assist you in voting your shares.

Voting Information

Who can vote?

You can vote if, as of the close of business on Friday, August 14, 2009,12, 2011, you were a shareholder of record of the Company’s:

Each share of Company stock gets one vote. On August 14, 2009,12, 2011, there were issued and outstanding:

For The Procter & Gamble Shareholder Investment Program participants:

If you are a participant in The Procter & Gamble Shareholder Investment Program, you can vote shares of common stockCommon Stock held for your account through the custodian for that program.

For participants in The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan and/or The Procter & Gamble Savings Plan:

If you are a participant in The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan and/or The Procter & Gamble Savings Plan, you can instruct the Trustees how to vote the shares of stock that are allocated to your account. If you do not vote your shares, the Trustees will vote them in proportion to those shares for which they have received voting instructions. Likewise, the Trustees will vote shares held by the trust that have not been allocated to any account in the same manner.

How do I vote by proxy?

Most shareholders can vote by proxy in three ways:

Please see the Notice or the information your bank, broker or other holder of record provided you for more information on these options.

If you authorize a proxy to vote your shares over the Internet or by telephone, you should not return a proxy card by mail (unless you are revoking your proxy).

If you vote by proxy, your shares will be voted at the annual meeting in the manner you indicate on your proxy card. If you sign your proxy card but do not specify how you want your shares to be voted, they will be voted as the Board of Directors recommends.

Can I change or revoke my vote after I return my proxy card?

Yes. You can change or revoke your proxy by Internet, telephone or mail at any time before the annual meetingprior to 11:59 p.m., Eastern Daylight Time on Monday, October 10, 2011 or by attending the annual meeting and voting in person.

Can I vote in person at the annual meeting instead of voting by proxy?

Yes. However, we encourage you to vote your proxy by Internet, telephone or mail prior to the meeting.

Voting Procedures

Election of Directors—Each of the twelve11 nominees for Director who receivereceives a majority of votes cast will be elected as a member of the Board of Directors.Board. A “majority of votes cast” means that the number of shares cast “for” a nominee must exceed the number of votes cast “against” that nominee. Abstentions and broker non-votes will have no effect. Pursuant to the By Laws of the Board of Directors, if a non-incumbent nominee for Director receives a greater number of votes cast “against” than votes cast “for” such nominee, such nominee shall not be elected as a member of the Board of Directors.Board. Any incumbent nominee for Director who receives a greater number of votes cast “against” than votes cast “for” such nominee shall continue to serve on the Board pursuant to Ohio law, but shall immediately tender his or her resignation as a Director to the Board of Directors.Board. Within 90 days, the Board will decide, after taking into account the recommendation of the Governance & Public Responsibility Committee (in each case excluding the nominee in question), whether to accept the resignation. Absent a compelling reason for the Director to remain on the Board, the Board of Directors shall accept the resignation. The Board’s explanation of its decision shall be promptly disclosed on a Form 8-K submitted to the SEC.Securities and Exchange Commission (“SEC”).

The Board Proposal to amendProposals regarding Say on Pay and Say on Pay vote frequency are advisory and not binding on the Company’s Code of Regulations—The affirmative vote of a majority ofCompany. They require the Company’s issued and outstanding shares is required for adoption. Accordingly, abstentions and broker non-votes have the same effect as votes against these proposals.

Board Proposal to approve The Procter & Gamble 2009 Stock and Incentive Compensation Plan—The affirmative vote of a majority of shares participating in the voting on thiseach proposal is required for adoption.approval. Abstentions and broker non-votes will not be counted as participating in the voting and will therefore have no effect.

The Board Proposal to amend the Company’s Amended Articles of Incorporation requires the affirmative vote of a majority of the Company’s issued and outstanding shares for adoption. Accordingly, abstentions and broker non-votes have the same effect as votes against this proposal.

All Other Proposals—TheProposals require the affirmative vote of a majority of shares participating in the voting on each proposal is required for adoption.approval. Abstentions and broker non-votes will not be counted as participating in the voting and will therefore have no effect.

Who pays for this proxy solicitation?

The Company does. We have hired Georgeson Shareholder Communications, Inc.,Phoenix Advisory Partners, a proxy solicitation firm, to assist us in soliciting proxies for a fee of $22,000$15,000 plus reasonable expenses. In addition, GeorgesonPhoenix Advisory Partners and the Company’s Directors, officers and employees may also solicit proxies by mail, telephone, personal contact, email or other online methods. We will reimburse their expenses for doing this.

We will also reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of Company stock. Other proxy solicitation expenses that we will pay include those for preparing, mailing, returning and tabulating the proxies.

Board Composition

Experiences, Skills and Qualifications

Each individual Director should epitomize the Company’s Purpose, Values and Principles, possess the highest ethics and integrity and demonstrate commitment to representing the long-term interests of the Company’s shareholders. Each Director should also have individual experiences that provide practical wisdom, mature judgment and an inquisitive and objective mind. These experiences, at policy-making levels, may include business, government, technology, international, marketing and other areas that are relevant to the Company’s global operations. In addition, as noted above, the evaluation of Director nominees by the Governance & Public Responsibility Committee takes into account diversity, including with respect to international background, age, gender and race.

Below we identify and describe specific experiences, skills and qualifications our Directors bring to the Board. Each Director’s specific experiences, skills and qualifications that the Board considered in their re-nomination are included in their individual biographies. However, the fact that we do not list a particular experience, skill or qualification for a Director does not mean that Director does not possess that particular experience, skill or qualification.

Leadership experience. Directors with significant leadership experience over an extended period, especially current and former chief executive officers, provide the Company with special insights. These individuals demonstrate a practical understanding of how large organizations operate including the importance of human resource management and how employee and executive compensation are set. They understand strategy and risk management. They possess extraordinary leadership qualities and are able to identify and develop leadership qualities in others. And, through their various leadership positions, they have access to important information and relationships that benefit the Company.

Consumer Industry experience. Directors with experience in dealing with consumers, particularly in the areas of marketing and selling products or services to consumers, provide valuable insights to the Company. They understand consumer needs, recognize products and marketing campaigns that might resonate with consumers and identify potential changes in consumer trends and buying habits.

International experience. Directors with experience in markets outside of the United States bring valuable knowledge to the Company, which generates over [·]% of its revenue from international markets.

Marketing experience. Directors with experience identifying, developing and marketing new products, as well as new areas for existing products, can add significant positive impact to the Company’s operational results. As one of the world’s largest advertisers, this is a particularly important attribute.

Finance experience. Directors with an understanding of accounting and financial reporting processes, particularly as they relate to a large, complex, international business, provide an important oversight role. The Company employs a number of financial targets to measure its performance, and accurate financial reporting is critical to the Company’s success. Directors with financial experience are critical to ensuring effective oversight of the Company’s financial measures and processes.

Government experience. Directors with government experience, whether as members of the government or through extensive interactions with government and government agencies, are able to recognize, identify and understand the key issues that the Company faces in an economy increasingly affected by the role of governments around the world.

Technology experience. Directors with an understanding of technology and innovation help the Company focus its efforts in these important areas, as well as track progress. As one of the few companies with an Innovation & Technology Committee of the Board, this is particularly important to the Company’s overall success.

Diversity

The Board considers diversity to be an important criterion in the selection and nomination of candidates for Director. As a global company, the Board seeks Directors with international background and global experience, among other factors. This is reflected in the Board’s Corporate Governance Guidelines, which set forth the minimum criteria for Board members, and note that the Board “seeks to achieve a mix of Board members that represents a diversity of background and experience, including with respect to age, gender, international background, race and specialized experience.”

Although the Board does not establish specific goals with respect to diversity, the Board’s overall diversity is a significant consideration in the Director nomination process. For this year’s election, the Board has nominated 11 individuals. Those 11 individuals range in age from 50 to 65. Each nominee is a strategic thinker and has varying, specialized experience in areas that are relevant to the Company. Moreover, their collective experience covers a wide range of countries, geographies and industries, including consumer products, technology, financial services, media, agriculture, aerospace and health care, as well as roles in consulting and government. Five are women; two are African-American and one is Mexican.

The Board assesses the effectiveness of its diversity policy every year as part of the nomination process for the annual election of Directors by the Company’s shareholders. The Board’s Governance & Public Responsibility Committee, responsible for making recommendations for Director nominations to the full Board, reviews the Director nominees (including shareholder nominees) and ascertains whether, as a whole, the group meets the Board’s policy in this regard. Having reviewed the collective background and experience of the 11 nominees, the Board has concluded that they provide sufficient diversity to meet the Board’s policy.

Election of Directors

All of the Board’s nominees for Director are incumbent nominees who will be elected for a one-year term. Angela F. Braly, Kenneth I. Chenault, Scott D. Cook, Rajat K. Gupta,Robert A. G. Lafley, Charles R. Lee, Lynn M. Martin,McDonald, W. James McNerney, Jr., Johnathan A. Rodgers, Ralph Snyderman,Mary Agnes Wilderotter, Patricia A. Woertz and Ernesto Zedillo were elected for one yearone-year terms at the 20082010 annual meeting. Robert A. McDonaldSusan Desmond-Hellmann was appointed to the Board effective July 1, 2009.December 13, 2010 and Margaret C. Whitman was appointed to the Board effective February 8, 2011. The current terms of all nominees for Director will expire at the 20092011 annual meeting. The Board has nominated each of these individuals for new terms that will expire at the 20102012 annual meeting.

Each of the nominees for Director has accepted the nomination and agreed to serve as a Director if elected by the Company’s shareholders. If any nominee becomes unable or unwilling to serve between the date of the proxy statement and the annual meeting, the Board may designate a new nominee and the persons named as proxies will vote for that substitute nominee.

The Board of Directors recommends a vote FOR Angela F. Braly, Kenneth I. Chenault, Scott D. Cook, Rajat K. Gupta, A. G. Lafley, Charles R. Lee, Lynn M. Martin,Susan Desmond-Hellmann, Robert A. McDonald, W. James McNerney, Jr., Johnathan A. Rodgers, Ralph Snyderman,Margaret C. Whitman, Mary Agnes Wilderotter, Patricia A. Woertz and Ernesto Zedillo as Directors to hold office until the 20102012 annual meeting of shareholders and until their successors are elected.

Nominees for Election as Directors with Terms Expiring in 2012

		Scott D. Cook		Director since 2000, Age 59
		Mr. Cook is Chairman of the Executive Committee of the Board of Intuit Inc. (software(a software and web services).services company), which he co-founded in 1983. He is alsoserved as President and Chief Executive Officer of Intuit from 1983 to 1994 and as Chairman of the Board of Intuit from 1993 through 1998. He has been a Director of eBay Inc. Age 57.since 1998.   MemberAs a co-founder and former Chief Executive Officer of Intuit, whose software is marketed and sold directly to consumers, and a current Director of eBay, Mr. Cook has a wealth of leadership, technology, consumer industry and marketing experience that he brings to the Board. Chair of the Innovation & Technology Committee and member of the Compensation & Leadership Development and Innovation & Technology Committees.Committee.
		Rajat K. GuptaSusan Desmond-Hellmann		Director since 20072010, Age 54
		Mr. GuptaDr. Desmond-Hellmann is Senior Partner EmeritusChancellor and Arthur and Toni Rembe Rock Distinguished Professor, University of California, San Francisco (“UCSF”), where she has served since August 2009. From 2004 through 2009, Dr. Desmond-Hellmann served as president of product development at McKinsey & Company (international consulting). He isGenentech, a biotechnology company, where she was responsible for pre-clinical and clinical development, business development and product portfolio management. She joined Genentech in 1995. Prior to joining Genentech, Dr. Desmond-Hellmann was associate director of clinical cancer research at Bristol-Myers Squibb Pharmaceutical Research Institute. She was appointed to the Company’s Board on December 13, 2010. As Chancellor of UCSF, a member of the California Academy of Sciences board of trustees and president of product development at Genentech, Dr. Desmond-Hellmann has extensive leadership and technology experience. As a member of the Federal Reserve Bank of San Francisco’s Economic Advisory Council, she also a Director of American Airlines, Genpact, Ltd., The Goldman Sachs Group, Inc., Harman International Industries, Inc. and Sberbank. Age 60.brings finance experience to the Board.   Member of the Audit and Innovation & Technology Committees.

		A. G. Lafley		Director since 2000
		Mr. Lafley is Chairman of the Board and former Chief Executive Officer of the Company. He is also a Director of General Electric Company. Age 62.
		Charles R. Lee		Director since 1994
		Mr. Lee is retired Chairman of the Board and Co-Chief Executive Officer of Verizon Communications Inc. (telecommunication services). He is also a Director of The DIRECTV Group, Inc., Marathon Oil Corporation, United Technologies Corporation and U.S. Steel Corporation. Age 69.   Chair of the Audit Committee and member of the Compensation & Leadership Development Committee.
		Lynn M. Martin		Director since 1994
		Ms. Martin is a former Professor at the J. L. Kellogg Graduate School of Management, Northwestern University and former Chair of the Council for the Advancement of Women and Advisor to the firm of Deloitte & Touche LLP for Deloitte’s internal human resources and minority advancement matters. She is also a Director of AT&T Inc., Ryder System, Inc., Dreyfus Funds and Constellation Energy Group, Inc. Age 69. Member of the Governance & Public Responsibility and Innovation & Technology Committees.
		Robert A. McDonald		Director since 2009, Age 58
		Mr. McDonald is Chairman of the Board, President and Chief Executive Officer of the Company.Company, which he joined in 1980 and where he has held numerous positions of increasing responsibility in the United States and internationally, including Chief Operating Officer from 2007 to 2009 and Vice Chair, Global Operations from 2004 to 2007. He was appointed to the Board effective July 1, 2009. He is alsohas been a Director of Xerox Corporation. Age 56.Corporation since 2005.
				As someone who has spent his entire career with the Company, much of it outside of the United States, and who currently serves as Chief Executive Officer, Mr. McDonald has an extensive, in-depth knowledge of the Company’s business. His wide-ranging roles throughout his career at the Company also provide him with significant leadership, consumer industry, marketing and international experience.

		W. James McNerney, Jr.		Director since 2003, Age 61
		Mr. McNerney is Chairman of the Board, President and Chief Executive Officer of The Boeing Company (aerospace,(an aerospace, commercial jetliners and military defense systems). Age 60.systems company), a position he has held since 2005. From 2001 to 2005, Mr. McNerney was CEO of 3M Company, a global technology company. Prior to his appointment as CEO of 3M Company, Mr. McNerney was employed by General Electric for nearly twenty years, where he held positions of increasing importance. He has been a Director of International Business Machines Corporation since 2009. As the Chief Executive Officer of Boeing, former Chief Executive Officer of 3M and former executive of General Electric, Mr. McNerney brings a wealth of leadership, global and technology experience. His extensive experience managing large, global manufacturing companies, as well as his insight into government affairs, enable him to advise the Board on a variety of strategic and business matters.   Presiding Director, Chair of the Compensation & Leadership Development Committee and member of the Governance & Public Responsibility Committee.
		Johnathan A. Rodgers		Director since 2001, Age 65
		Mr. Rodgers is President and Chief Executive Officer of TV One, LLC (media(a media and communications).communications company), a position he has held since 2003. Prior to joining TV One, Mr. Rodgers was President of Discovery Networks for six years and worked for CBS, Inc. for twenty years, where he held a variety of executive positions. He is alsohas been a Director of Nike, Inc. Age 63.since 2006. As Chief Executive Officer of TV One, LLC, Mr. Rodgers has significant leadership experience. His current role in media and communications, combined with past management roles at Discovery Networks and CBS, Inc., also give him extensive consumer industry, marketing and technology experience.   Member of the Innovation & Technology Committee.
		Ralph Snyderman, M.D.Margaret C. Whitman		Director since 19952011, Age 55
		Dr. SnydermanMs. Whitman is Chancellor Emeritus, James B. Duke Professora part-time Strategic Advisor to Kleiner, Perkins, Caulfield & Byers (a Silicon Valley venture capital firm). She formerly served as President and Chief Executive Officer of MedicineeBay Inc. (an ecommerce and payments company) from 1998 to 2008. Prior to joining eBay, Ms. Whitman held executive level positions at Duke University. He isHasbro Inc., a toy company, FTD, Inc., a floral products company, The Stride Rite Corporation, a footwear company, The Walt Disney Company, an entertainment company, and Bain & Company, a consulting company. She also served as a Director of Targacept,the Company from 2003 to 2008 and of DreamWorks Animation SKG, Inc. from 2005 to 2008, having resigned from both boards of directors in preparation for her 2010 California gubernatorial bid. She has been a Director of Hewlett Packard Company since January 21, 2011 and a Venture Partner of New Enterprise Associates. Age 69.Zipcar since February 28, 2011. Ms. Whitman was appointed to the Company’s Board on February 8, 2011.   ChairAs the former President and Chief Executive Officer of eBay, and previously as a senior officer of a number of consumer products companies, Ms. Whitman has extensive leadership and consumer industry experience. Her prior management roles also provide her with significant marketing and technology experience. Member of the Compensation & Leadership Development and Innovation & Technology Committee and member of the Audit Committee.Committees.

		Mary Agnes Wilderotter		Director since 2009, Age 56
			Mrs. Wilderotter is Chairman of the Board, President and Chief Executive Officer of Frontier Communications Corporation (a communications company specializing in providing services to rural areas and small and medium-sized towns and cities), which she joined as President and Chief Executive Officer in 2004. Mrs. Wilderotter previously held positions as Senior Vice President of Worldwide Public Sector at Microsoft, President and Chief Executive Officer of Wink Communications, Inc. and Executive Vice President of National Operations for AT&T’s Wireless Service, Inc. She has been a Director of Xerox Corporation since 2006. Mrs. Wilderotter was a Director of The McClatchy Company from 2001 to 2007, and she was a Director of Yahoo! Inc. from 2007 to 2009. As Chief Executive Officer of Frontier Communications, and previously as Chief Executive Officer of Wink Communications, Mrs. Wilderotter has significant leadership experience. Her current role, along with her prior roles at Microsoft, Wink Communications and AT&T, also give her a vast amount of consumer industry, marketing and technology experience. Member of the Compensation & Leadership Development and Governance & Public Responsibility Committees.
		Patricia A. Woertz		Director since 2008, Age 58
		Ms. Woertz is Chairman, Chief Executive Officer and President of Archer Daniels Midland Company (agricultural processors of oilseeds, corn, wheat and cocoa). Age 56.cocoa, etc.), a company she joined in 2006. Ms. Woertz was named Chief Executive Officer and President in 2006 and Chairman in 2007. Prior to joining Archer Daniels Midland, Ms. Woertz held positions of increasing importance at Chevron Corporation and its predecessor companies. She began her career as a certified public accountant with Ernst & Ernst.   MemberAs Chief Executive Officer of Archer Daniels Midland, Ms. Woertz has significant leadership experience. Having started her career as a certified public accountant, and with a broad range of executive roles at Chevron Corporation and its predecessor companies, Ms. Woertz also brings a significant amount of international, marketing, finance, government relations and technology experience. Chair of the Audit Committee and member of the Governance & Public Responsibility Committees.Committee.

		Ernesto Zedillo		Director since 2001, Age 59
		Dr. Zedillo is the formerserved as President of Mexico from 1994 to 2000 and currently serves as Director of the Center for the Study of Globalization and Professor in the field of International Economics and Politics at Yale University. He is alsohas been a Director of Alcoa Inc. Age 57.since 2002 and Citigroup, Inc. and Grupo PRISA since 2010. Dr. Zedillo was also a Director of Union Pacific Corporation from 2001 to 2006. Dr. Zedillo’s prior service as President of Mexico provides him with significant government and leadership experience. His current role as Director of the Center for the Study of Globalization and Professor in the field of International Economics and Politics at Yale University provides him with a wealth of international experience. He also has significant financial experience, having previously served on the Audit Committee of Union Pacific and as the Secretary of Economic Programming and the Budget for Mexico, as well as having held various positions at the Banco de Mexico.   Chair of the Governance & Public Responsibility Committee and member of the Innovation & Technology Committee.

Messrs. Chenault, Lafley, McDonald and Rodgers have been executive officers of their respective employers for more than the past five years. Messrs. Cook and Lee have been retired from executive officer positions with their respective former employers for more than the past five years.

Mr. Gupta was named Senior Partner Emeritus at McKinsey & Company in 2007, where he previously held the positions of Senior Partner Worldwide and Managing Director. Ms. Martin was a Professor at Northwestern University from 1993 until her retirement in 1999. Mr. McNerney was Chairman of the Board and Chief Executive Officer of 3M Company from 2001 until July 2005. Dr. Snyderman previously served as Chancellor for Health Affairs and Dean of the Duke University School of Medicine from 1985 until 2004. Ms. Woertz was Executive Vice President of Chevron Texaco from 2001 until 2006. Dr. Zedillo was President of Mexico from 1994 until 2000.

The Board of Directors

General Oversight

The Board of Directors has general oversight responsibility for the Company’s affairs pursuant to Ohio’s General Corporation Law, the Company’s Amended Articles of Incorporation, andthe Code of Regulations, and the By Laws of the Board of Directors’ By Laws.Directors. The Board has established committees to assist in this regard. In exercising its fiduciary duties, the Board of Directors represents and acts on behalf of the Company’s shareholders. Although the Board of Directors does not have responsibility for the day-to-day management of the Company, it stays informed about the Company’s business and provides guidance to Company management through periodic meetings, site visits and other interactions. The Board is deeply involved in the Company’s strategic planning process, leadership development and succession planning. Additional details concerning the role and structure of the Board of Directors are contained in the Board’s Corporate Governance Guidelines, which can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.

Leadership Structure

The Board regularly considers the appropriate leadership structure for the Company and has concluded that the Company and its shareholders are best served by not having a formal policy on whether the same individual should serve as both Chief Executive Officer (“CEO”) and Chairman of the Board. The Board believes that it is important to retain the flexibility to make this determination at any given point in time based on what it believes will provide the best leadership structure for the Company at that time. This approach allows the Board to utilize its considerable experience and knowledge to elect the most qualified Director as Chairman of the Board, while maintaining the ability to separate the Chairman and CEO roles when necessary. Accordingly, at different points in time in the Company’s history, the CEO and Chairman of the Board roles have been held by the same person. At other times, they have been held by different individuals. In each instance, the decision on whether to combine or separate the roles was made in the best interests of the Company’s shareholders, based on the circumstances at the time.

Further, in the event that the Board determines that the same individual should hold the positions of CEO and Chairman of the Board, the Board elects a Presiding Director from the independent Directors. The Presiding Director has the authority to call meetings of the independent Directors, can be contacted directly by shareholders, acts as the key Board liaison with the CEO, chairs the executive sessions of the Board, presides over Board meetings in the absence of the Chairman and communicates the Board’s feedback to the CEO, including the non-management Directors’ annual evaluation of his performance. This guarantees full involvement in decision-making by the non-employee Directors. The Presiding Director also advises the Chairman and the Chair of the Governance & Public Responsibility Committee regarding membership of the various Board Committees and selection of the Committee Chairs, advises the Chairman on retention of advisors and consultants to the Board and advises on issues discussed at executive sessions. This ensures that the Presiding Director plays an active role in Board governance. Finally, the Presiding Director also approves meeting agendas and other information sent to the Board and ensures that there is sufficient time for discussion of all agenda items.

The Board believes that its current leadership structure, with Mr. McDonald serving as both CEO and Chairman of the Board, provides unified leadership and direction for the Company and gives clear focus for management to execute the Company’s strategy and business plans at this time. This structure has served the Company and its shareholders well in the past, as evidenced by the Company’s success. The Board will continue to evaluate the Company’s leadership structure to ensure the Board’s structure is right and appropriate at all times.

Risk Oversight

It is the responsibility of the Company’s senior management to develop and implement the Company’s strategic plans and to identify, evaluate, manage and mitigate the risks inherent in those plans.

It is the responsibility of the Board to understand and oversee the Company’s strategic plans, the associated risks and the steps that senior management is taking to manage and mitigate those risks. The Board takes an active approach to its risk oversight role. This approach is bolstered by the Board’s leadership and committee structure, which ensures: (1) proper consideration and evaluation of potential enterprise risks by the full Board under the auspices of the Chairman of the Board and Presiding Director; and (2) further consideration and evaluation of discrete risks at the committee level.

To ensure proper oversight of the Company’s management and the potential risks that face the Company, the non-employee members of the Board elect annually a Presiding Director from the Board’s independent Directors. In addition, the Board is predominantly comprised of independent Directors, and all members of the key committees of the Board (Audit, Compensation & Leadership Development, and Governance & Public Responsibility) are independent. This strong system of checks and balances ensures that key decisions made by the Company’s most senior management, up to and including the CEO, are reviewed and overseen by the non-employee Directors of the Board.

Risk management oversight by the full Board includes a comprehensive annual review of the Company’s overall strategic plan and the plans for each of the Company’s global business units, including the risks associated with these strategic plans. The Board also conducts an annual review of the conclusions and recommendations generated by management’s enterprise risk management process. This process involves a cross-functional group of the Company’s senior management which, on a continual basis, identifies current and future potential risks facing the Company and ensures that actions are taken to manage and mitigate those potential risks. The Board also has overall responsibility for leadership succession for the Company’s most senior officers and reviews succession plans each year.

In addition, the Board has delegated certain risk management oversight responsibilities to certain Board committees, each of which reports regularly to the full Board. In performing these oversight responsibilities, each committee has full access to management, as well as the ability to engage independent advisors. The Audit Committee oversees the Company’s compliance with legal and regulatory requirements and its overall risk management process. It also regularly receives reports regarding the Company’s most significant internal controls, compliance risks, and potential legal and regulatory risks, along with management’s plans for managing and mitigating those risks, and processes for maintaining compliance within a strong internal controls environment. Representatives from the Company’s independent auditor attend Audit Committee meetings, regularly make presentations to the Audit Committee and comment on management presentations. In addition, the Company’s Chief Financial Officer (“CFO”), Chief Legal Officer, chief audit executive and representatives of the Company’s independent auditor individually meet in private session with the Audit Committee to raise any concerns they might have with the Company’s risk management practices.

The Board’s Compensation & Leadership Development (“C&LD”) Committee employs an independent compensation consultant, Frederic W. Cook & Co., Inc., who does not work for management and, among other tasks, reviews and reports on all of the Company’s executive compensation programs, including the potential risks and other impacts of incentives created by the programs. For more details on the arrangement with Frederic W. Cook & Co., Inc., please see the section entitled “Engagement of Independent Adviser” found on page [·] of this proxy statement.

This review included an analysis of the Company’s short-term and long-term compensation programs covering key program details, performance factors for each program, target award ranges, maximum funding levels, and plan administrative oversight and control requirements. Key program elements assessed relating to potential compensation risks were pay mix, performance metrics, performance goals and payout curves, payment timing and adjustments, severance packages, equity incentives and stock ownership requirements and trading policies. Simultaneously, members of management performed a

similar review of the Company’s other compensation programs. The results of the consultant’s analysis of the Company’s executive compensation programs, as well as management’s review of the Company’s other compensation programs, were shared with the C&LD Committee, which concluded that the Company’s compensation programs are not reasonably likely to have a material adverse effect on the Company as a whole.

In reaching its conclusion, the C&LD Committee noted that the Company’s compensation programs include a mix of cash and equity and annual and long-term incentives. This mix of compensation, the design features of these programs and the Company’s respective oversight and control requirements mitigate the potential of any individual inclination toward taking unnecessary risks. The C&LD Committee also acknowledged various other features of the Company’s compensation programs, policies and practices designed to mitigate unwarranted risk. For example, the Company’s annual cash bonus program, the Short-term Achievement Reward (“STAR”), provides the C&LD Committee with discretion to reduce or eliminate any award that would otherwise be payable. In addition, the performance metrics under STAR include both quantitative measures (e.g. top-line growth, bottom-line profits, free cash flow, etc.) and qualitative measures (e.g., relative performance, internal collaboration, strategic strength, innovation, etc.). These non-metric features mitigate any tendency for an executive to focus too much on the specific financial metrics under STAR. Moreover, the performance metrics associated with STAR (50% Core earnings per share growth and 50% organic sales growth) are aligned with the Company’s business plans and strategic objectives, and the weighting of STAR target awards in the mix of annual target total direct pay is generally at or below the median for the Peer Group (as defined on page [·] of this proxy statement).

Further, the C&LD Committee recognized that the Company’s long-term incentives include a balanced portfolio of options, restricted stock units and performance-vested stock (under the Performance Stock Plan). These long-term incentives incorporate a variety of payout horizons that focus executives on long-term performance: 10-year terms with three-year cliff vesting for stock options, restricted stock units with five-year cliff vesting and a three-year performance period for performance-vested stock. The C&LD Committee also noted that the design of the Performance Stock Plan reduces the likelihood that an executive will focus too much on a single performance measure by including four different performance categories, each of which is equally weighted: organic sales growth, adjusted before tax operating profit, adjusted earnings per share growth and adjusted free cash flow productivity. Each of the financial measures are defined on page [·] of this proxy statement.

Finally, the C&LD Committee acknowledged that the Company has adopted several policies intended to mitigate inappropriate risk taking, including stock ownership guidelines for senior executives, a recoupment policy that applies in the event of any significant financial restatement and an insider trading policy that prohibits margin and hedging transactions by senior executives.

Committees of the Board

To facilitate deeper penetration ofinto certain key areas of oversight, the Board of Directors has established four Committees.committees. Membership on these Committees, as of June 30, 2009,July 1, 2011, is shown in the following chart.chart:

All Directors served on the respective Committeescommittees listed above, including Committee Chairs,committee chairs, for the Company’s entire fiscal year, with the exception of following exceptions:

Dr. Zedillo, whoDesmond-Hellmann was appointed Chair of the Governance & Public Responsibility Committee at the February 10, 2009 Board of Director’s meeting, following the resignation of Ms. Margaret C. Whitman from the Board effective December 31, 2008. From July 1, 2008 through December 31, 2008, Ms. Whitman served as a member of the Audit and Innovation & Technology Committees effective upon her appointment to the Board of Directors, Chair of the Governance & Public Responsibility Committee andon December 13, 2010.

Ms. Whitman was appointed as a member of the CompensationC&LD and Innovation & Leadership Development Committee.Technology Committees effective as of the Board’s April 2011 meeting.

The Company’s Committee Charter Appendix applies to all Committees and can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.

TheAudit Committeemet nine8 times during the fiscal year ended June 30, 20092011, to carry out its responsibilities under its charter. At all of these meetings, representatives of Deloitte & Touche LLP (“Deloitte”), the Company’s independent registered public accounting firm, and financial management were present to review accounting, control, auditing and financial reporting matters. During certain of these meetings, the Committee also held fiveprivate sessions where onlywith the Company’s CFO, Chief Legal Officer, chief audit executive and representatives of Deloitte & Touche, LLP were present and five sessions with only the Company’s Vice President of Internal Audit present.Deloitte. All members of the Committee are independent under the New York Stock Exchange (“NYSE”) listing standards and the Board of Directors’ Guidelines for Determining the Independence of its Members (the “Independence Guidelines,”Guidelines”) which can be found in the corporate governance section of the Company’s website atwww.pg.com/investors). The Audit Committee has the responsibilities set forth in its charter with respect to accounting, financial reporting and disclosure processes and adequacy of systems of disclosure and internal control established by management; the quality and integrity of the Company’s financial statements; the Company’s compliance with legal and regulatory requirements; the Company’s overall risk management process;profile; the independent registered public accounting firm’s qualifications and independence; the performance of the Company’s internal audit function and the independent registered public accounting firm; and preparing the annual Report of the Audit Committee to be included in the Company’s proxy statement; and assisting the Board of Directors and the Company in interpreting and applying the Company’sWorldwide Business Conduct Manual.statement. In addition to these responsibilities, during fiscal year 2008-09, in response to actions taken by external regulatory authorities, the Company launched an internal investigation into potential violationsCommittee, at the request of competition laws in Europe, and the Board, assigned the Committee responsibility for the oversight of that investigation. In that capacity, the Committee met four additional timescontinued to discuss and reviewoversee the Company’s internal investigation, as well as the external investigations, duringinto competition law violations in Europe, for which it held four sessions where no members of management were present.the Board assigned oversight responsibility to the Committee. The Audit Committee’s charter can be found in the corporate governance section of the Company’s website atwww.pg.com/investors and is attached to this proxy statement as Exhibit A..

TheCompensation & Leadership Development Committeemet six5 times during the fiscal year ended June 30, 2009,2011, during which it held five5 executive sessions with no member of management present. All members of this Committee are independent under the NYSE listing standards and the Independence Guidelines. The Compensation & Leadership DevelopmentC&LD Committee has a charter, under which it has full authority and responsibility for the Company’s overall compensation policies, including base pay, short and long-term pay, retirement benefits, perquisites, clawback policy, stock ownership requirements, stock holding requirements and severance arrangements, if any, and their specific application to principal officers elected by the Board of Directors (including review and evaluation of their compensation) and the compensation of the non-employeeto members of the Board of Directors.Board. This Committee also assists the Board in the leadership development and evaluation of principal officers. As a practical matter, the Chief Executive OfficerCEO makes recommendations to the C&LD Committee regarding the compensation elements of the principal officers (other than his own compensation) based on Company performance, individual performance and input from Company management and the C&LD Committee’s independent compensation consultant. This Committee makes a recommendation to the Board regarding the shareholder votes related to executive compensation. All final decisions regarding compensation for principal officers are made by this Committee. For more details regarding principal officer compensation or this Committee’s process for making decisions regarding the compensation of principal officers, please see the Compensation Discussion and Analysis section of this proxy statement found on pages [Ÿ·] to [Ÿ·]. This Committee also approves all stock-based equity grants made under The Procter & Gamble 20012009 Stock and

Incentive Compensation Plan and The Gillette Company 2004 Long-Term Incentive Plan to non-principal officers. This Committee has delegated to the Chief Executive OfficerCEO the authority to make equity grants to non-principal officers and determinesubject to the specific terms and conditions of such grants withindetermined by the guidelines set forth by theC&LD Committee. This Committee retains an independent compensation consultant, hired directly by the C&LD Committee, to advise it regarding executive compensation matters. For more details on this arrangement, please see the section entitled “How is competitiveness established for executive compensation?” found on page [Ÿ] of this proxy statement. The Compensation & Leadership DevelopmentC&LD Committee’s charter can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.

TheGovernance & Public Responsibility Committeemet five6 times during the fiscal year ended June 30, 2009.2011. All members of the Governance & Public Responsibility Committee are independent under the NYSE listing standards and the Independence Guidelines. The Governance & Public Responsibility Committee has thegovernance responsibilities set forth in its charter with respect to identifying individuals qualified to become members of the Board of Directors;Board; recommending when new members should be added to the Board; recommendingBoard and individuals to fill vacant Board positions; recommending to the Board the Director nominees for the next annual meeting of shareholders; recommending to the Boardshareholders and whether to accept the resignation of any incumbent Director nominee who received a greater number of “against” votes than “for” votes in a non-contested election; recommending Board committees and committee assignments; periodically developingreviewing and recommending updates to the Board’s Corporate Governance Guidelines; educating the Board and the Company in applicable governance laws and regulations; assisting the Board and the Company in interpreting and applying the Company’s Corporate Governance Guidelines and other issues related to Director governanceBoard governance; and ethics; evaluation ofevaluating the Board of Directors and its members;members. The Committee also covers public responsibility topics such as overseeing the Company’s social investments and commitment to making a meaningful impact around the world, by reviewing strategies and plans for improving lives in ways that enable people to thrive and making recommendationsthat increase their quality of living; overseeing the Company’s commitment to and efforts regarding environmental sustainability; overseeing the Board onCompany’s community and government relations; overseeing the Company’s product quality and quality assurance systems; overseeing protection of the Company’s corporate sustainability efforts (including environmental quality, economic developmentreputation and corporate social responsibility); and overseeingother matters of importance to the Company and its stakeholders including(including employees, consumers, customers, suppliers, shareholders, governments, local communities and the general public. Public responsibility topics considered by this Committee include organization diversity, sustainable development, communitypublic); and government relations, product quality and quality assurance systems and corporate reputation.overseeing the Company’s organizational diversity. The Governance & Public Responsibility Committee’s charter can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.

TheInnovation & Technology Committeemet twice2 times during the fiscal year ended June 30, 2009.2011. The Innovation & Technology Committee has the responsibilities set forth in its charter with respect to overseeing and providing counsel on matters of innovation and technology. Topics considered by this Committee include the Company’s approach to technical and commercial innovation; the innovation and technology acquisition process; and tracking systems important to successful innovation. The Innovation & Technology Committee’s charter can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.

Board and Committee Meeting Attendance

During the fiscal year ended June 30, 2009,2011, the Board of Directors held seven8 meetings and the Committees of the Board of Directors held 2621 meetings for a total of 3329 meetings. Average attendance at these meetings by members of the Board during the past year exceeded 95%98%. All Directors attended greater than 88%86% of the meetings of the Board and the Committees on which they serve, except for Mr. Cook, who was only able to attend 73% of the meetings due to prior commitments.serve.

Corporate Governance

Corporate Governance Guidelines

The Board of Directors has adopted Corporate Governance Guidelines to set forth its commitments and guiding principles concerning overall governance practices. These guidelines can be found in the corporate governance section of the Company’s website atwww.pg.com/investors.

Director Independence

The Board of Directors has determined that the following Directors are independent under the NYSE listing standards and the Independence Guidelines because they have either no relationship with the Company (other than being a Director and shareholder of the Company) or only immaterial relationships with the Company: Angela F. Braly, Kenneth I. Chenault, Scott D. Cook, Rajat K. Gupta, Charles R. Lee, Lynn M. Martin,Susan Desmond-Hellmann, W. James McNerney, Jr., Ralph Snyderman,

Margaret C. Whitman, Mary Agnes Wilderotter, Patricia A. Woertz and Ernesto Zedillo. In addition, Ms. Whitman was independent during the period in which she served as Director. As noted previously, all members of the Board’s Audit, Compensation & Leadership Development,C&LD and Governance & Public Responsibility Committees are independent.

In making these independence determinations, the Board applied the NYSE listing standards and the categorical independence standards contained in the Independence Guidelines. Under the Independence Guidelines, certain relationships were considered immaterial and, therefore, were not considered by the Board in determining independence, but were reported to the Chair of the Governance & Public Responsibility Committee. Applying the NYSE listing standards and the Independence Guidelines, the Board determined that there are no transactions, relationships or arrangements that would impair the independence or judgment of any of the directors deemed independent by the Board.

Effective July 1, 2009, Mr. Lafley moved full-time into the role ofMcDonald is Chairman of the Board, and Mr. McDonald was elected President and Chief Executive OfficerCEO of the Company. As such, theyhe cannot be deemed independent under the NYSE listing standards and the Independence Guidelines. Mr. Rodgers is the President and CEO of TV One, LLC, a cable television network. The Board has declared Mr. Rodgers not independent under the NYSE listing standards and the Independence Guidelines which contain a three-year look-back provision, because, during 2006,two of the past three years, the Company paid TV One, LLC for advertising time in an amount that exceeded 2% of TV One, LLC’s gross revenue for that year.

Code of Ethics

For a number of years, theThe Company has had a code of ethics for its employees. The most recent version of this code of ethics, which is consistent with SEC regulations and NYSE listing standards, is contained in theWorldwide Business Conduct Manual, which applies. TheWorldwide Business Conduct Manual was updated and redeployed to all of the Company’s employees, officers and Directors in early 2011, and is availablecan be found on the Company’s website atwww.pg.com., along with any future amendments thereto. TheWorldwide Business Conduct Manual is firmly rooted in the Company’s long-standing Purpose, Values and Principles, which can also be found on the Company’s website atwww.pg.com. During the fiscal year ended June 30, 2009,2011, the Company continued its deployment of theWorldwide Business Conduct Manual throughout the Company in 29 different languages, including online training.

Review and Approval of Transactions with Related Persons

The Company’sWorldwide Business Conduct Manual requires that all employees and Directors disclose all potential conflicts of interest and promptly take actions to eliminate any such conflict when the Company requests. In addition, the Company has adopted a written Related Person Transaction Policy that prohibits any of the Company’s executive officers, Directors or any of their immediate family members from entering into a transaction with the Company, except in accordance with the policy.

Under our Related Person Transaction Policy, the Chief Legal Officer is charged with primary responsibility for determining whether, based on the facts and circumstances, a related person has a direct or indirect material interest in a proposed transaction. To assist the Chief Legal Officer in making this determination, the policy sets forth certain categories of transactions that are deemed not to involve a direct or indirect material interest on behalf of the related person. If, after applying these categorical standards and weighing all of the facts and circumstances, the Chief Legal Officer determines that the related person would have a direct or indirect material interest in the transaction, the Chief Legal Officer must present the proposed transaction to the Audit Committee for review or, if impracticable under the circumstances, to the Chair of the Audit Committee. The Audit Committee must then either approve or reject the transaction in accordance with the terms of the policy. In the course of making this determination, the Audit Committee shall consider all relevant information available to it and, as appropriate, must take into consideration the following:

The Audit Committee may only approve the proposed transaction if it determines that the transaction is not inconsistent with the best interests of the Company as a whole. Further, in approving any such transaction, the Audit Committee has the authority to impose any terms or conditions it deems appropriate on the Company or the related person. Absent this approval, no such transaction may be entered into by the Company with any related person.

Mr. Jon R. Moeller, the Company’s Chief Financial Officer,CFO, is married to Lisa Sauer, a long-tenured employee of the Company who currently holds the position of Manager—Vice President–Purchases, Global Product Supply, Purchases, OrganicPackaging and Hygiene Materials. Her total compensation in the last year was approximately [Ÿ·], consisting of salary, bonus, equity grants and retirement benefits. Her compensation is consistent with the Company’s overall compensation principles based on her years of experience, performance and position within the Company. Prior to Mr. Moeller becoming Chief Financial Officer,CFO, the Audit Committee approved the continued employment of Ms. Sauer with the Company under the Company’s Related Person Transaction Policy, concluding that her continued employment was not inconsistent with the best interests of the Company as a whole.

Deborah P. Majoras, the Company’s Chief Legal Officer and Secretary, is married to John M. Majoras, one of over 800 partners in the law firm of Jones Day. The Company has hired Jones Day in the ordinary course of business, to perform legal services. The Company’s relationship with Jones Day dates back more than 25 years and significantly precedes Ms. Majoras joining the Company as Vice President and General Counsel in 2008 from the Federal Trade Commission, where she served as Chairman. Mr. Majoras does not receive any direct compensation from the fees paid to Jones Day by the Company, his ownership in the Jones Day law firm is significantly less than 1%, and the fees paid by the Company to Jones Day in our last fiscal year were significantly less than 1% of their annual revenues. Mr. Majoras did not personally render any legal services to the Company, nor supervise any attorney in rendering legal services to the Company during the previous fiscal year. Under the Company’s Related Person Transaction Policy, the Audit Committee reviewed and approved the continued use of Jones Day as a provider of legal services to the Company, but required Mr. McDonald, the Company’s CEO, to approve any recommendations by Ms. Majoras to hire Jones Day for a specific legal matter. In doing so, the Committee concluded that the Majorases did not have a direct or indirect material interest in the Company’s hiring of Jones Day and that the relationship is not inconsistent with the best interests of the Company as a whole.

Other than as noted above, there were no transactions, nor are there any currently proposed transactions, in which the Company or any of its subsidiaries was or is to be a participant, the amount involved exceeded $120,000, and any Director, Director nominee, executive officer or any of their immediate family members had a direct or indirect material interest reportable under applicable SEC rules or that required approval of the Audit Committee under the Company’s Related Person Transaction Policy.Policy nor are there any currently proposed.

Presiding Director and Executive Sessions

After consultation withUpon recommendation of the Governance & Public Responsibility Committee, the non-employee members of the Board of Directors reappointed W. James McNerney, Jr. to serve as the Presiding Director for fiscal year 2009 -10.2011-12. Mr. McNerney began his service as Presiding Director on August 14, 2007. The Presiding Director acts as the key Board liaison with the Chief Executive Officer, assists in settingDirector:

The non-employee members of the Board of Directors met six6 times during fiscal year 2008-092010-11 in executive session (without the presence of employee Directors or other employees of the Company) to discuss various matters related to the oversight of the Company, the management of Board affairs, succession planning for the Company’s top management (including the Chief Executive OfficerCEO position), and the Chief Executive Officer’sCEO’s performance. It also met in semi-executive session (with the Chief Executive OfficerCEO present for portions of the discussion) on five3 occasions.

Communication with Directors and Executive Officers

Shareholders and others who wish to communicate with the Board of Directors or any particular Director, including the Presiding Director, or with any executive officer of the Company, may do so by writing to the following address:

[Name of Director(s)/Executive Officer or “Board of Directors”]

The Procter & Gamble Company

c/o Secretary

One Procter & Gamble Plaza

Cincinnati, OH 45202-3315

All such correspondence is reviewed by the Secretary’s office, which logs the material for tracking purposes. The Board of Directors has asked the Secretary’s office to forward to the appropriate Director(s) all correspondence, except for personal grievances, items unrelated to the functions of the Board, of Directors, business solicitations, advertisements and materials that are profane.

Availability of Corporate Governance Documents

In addition to their availability on the Company’s website atwww.pg.com, copies of the Company’s Amended Articles of Incorporation, the Company’s Code of Regulations, all Committee Charters, the Committee Charter Appendix, the Corporate Governance Guidelines the(including Independence Guidelines, Confidentiality Policy and Financial Literacy and Expertise Guidelines), theWorldwide Business Conduct Manual, the Company’s Purpose, Values and Principles and the Related Person Transaction Policy are available in print upon request by writing to the Company Secretary at One Procter & Gamble Plaza, Cincinnati, OH 45202-3315.

Shareholder Recommendations of Board Nominees and Committee Process for Recommending Board Nominees

The Governance & Public Responsibility Committee will consider shareholder recommendations for candidates for the Board, which should be submitted to:

Chair of the Governance & Public Responsibility Committee

The Procter & Gamble Company

c/o Secretary

One Procter & Gamble Plaza

Cincinnati, OH 45202-3315

Shareholder recommendations should includePursuant to the nameCompany’s Code of Regulations, a shareholder wishing to nominate a candidate for election to the Board at an annual meeting of shareholders is required to give written notice to the Secretary of the Company of his or her intention to make such nomination. The notice of nomination must be received at the Company’s principal executive offices not less than 140 days nor more than 240 days prior to the one-year anniversary of the preceding year’s annual shareholder meeting. Certain other notice periods apply if the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date. Based on the one-year anniversary of the 2011 annual meeting, a shareholder wishing to nominate a candidate as well as relevant biographical information. for election to the Board at the 2012 annual meeting must provide such notice no earlier than February 14, 2012, and no later than May 24, 2012.

As set forth in the Company’s Code of Regulations, the notice of nomination is required to contain information about both the nominee and the shareholder making the nomination, including information sufficient to allow the Governance & Public Responsibility Committee to determine if the candidate meets certain criteria. A nomination that does not comply with the requirements set forth in the Company’s Code of Regulations will not be considered for presentation at the annual meeting.

The minimum qualifications and preferred specific qualities and skills required for Directors are set forth in Article II, Sections B through E of the Board’s Corporate Governance Guidelines.

The Committee considers all candidates using these criteria, regardless of the source of the recommendation. The Committee’s process for evaluating candidates includes the considerations set forth in Article II, Section B of the Committee’s Charter. After initial screening for minimum qualifications, the Committee determines appropriate next steps, including requests for additional information, reference checks and interviews with potential candidates. In addition to shareholder recommendations, the Committee also relies on recommendations from current Directors, Company personnel and others. From time to time, the Committee may engage the services of outside search firms to help identify candidates. During the fiscal year ended June 30, 2009,2011, no such engagement existed (and none currently exists), and no funds were

paid to outside parties in connection with the identification of nominees. All nominees for election as Directors who currently serve on the Board are known to the Committee and were recommended by the Committee to the Board as Director nominees. Dr. Desmond-Hellmann was recommended to the Governance & Public Responsibility Committee by various non-employee members of the Board and other executive officers. Ms. Whitman was recommended to the Governance & Public Responsibility Committee by various non-employee members of the Board who know her professionally and through her prior service on the Company’s Board.

Annual Meeting Attendance

The Board’s expectation is that all of its members attend the annual meeting of shareholders. All Directors except Scott D. Cook who was unavailable due to personal reasons, attended the 20082010 annual meeting.

Director Compensation

The following table and footnotes provide information regarding the compensation paid to the Company’s non-employee Directors in fiscal year 2008-09.2010-11. Directors who are employees of the Company receive no compensation for their services as Directors.

Director Compensation Table

c.

Mr. Gupta has 3,835 unvested stock awards outstanding.

d.

Mr. LeeGupta has 36,909[·] unvested stock awards outstanding and 16,712[·] option awards outstanding.

e.

Ms. MartinMr. McNerney has 18,878[·] unvested stock awards outstanding and 16,712 option awards outstanding.

f.

Mr. McNerneyRodgers has 16,708[·] unvested stock awards outstanding and [·] option awards outstanding.

g.

Mr. RodgersMrs. Wilderotter has 21,306[·] unvested stock awards outstanding and 6,644 option awards outstanding.

h.

Dr. Snyderman has 37,188Ms. Woertz has[·] unvested stock awards outstanding and 16,712 option awards outstanding.

i.

Ms. WhitmanDr. Zedillo has 10,740[·] unvested stock awards outstanding and [·] option awards outstanding.

j.

Ms. Woertz has 1,996 unvestedUnvested stock awards outstanding.include RSUs that have not yet been delivered in shares and restricted stock for which the restrictions have not lapsed. RSUs earn dividend equivalents which are accrued in the form of additional RSUs each quarter and credited to each Director’s holdings. These RSUs have the same vesting restrictions as the underlying RSUs and are ultimately deliverable in shares. Restricted stock earns cash dividends that are paid quarterly with the option of reinvesting in Company stock.

k.

Dr. Zedillo has 16,188 unvested stock awards outstanding and 6,644 option awards outstanding.

Unvested stock awards include RSUs that have not yet delivered in shares and restricted stock for which the restrictions have not lapsed. RSUs earn dividend equivalents which are accrued in the form of additional RSUs each quarter and credited to each Director’s holdings. These RSUs have the same vesting restrictions as the underlying RSUs and are ultimately deliverable in shares. Restricted stock earns cash dividends that are paid quarterly.

The objective of the Compensation & Leadership DevelopmentC&LD Committee of the Board of Directors is to provide non-employee members of the Board of Directors a compensation package consistent with the median of the Peer Group (as this group is further described on page [Ÿ]companies. Directors can elect to receive any part of this proxy statement). Intheir fees or retainer (other than the grant of RSUs) as cash, retirement restricted stock or unrestricted stock. The Company did not grant any stock options to Directors in fiscal year 2008-09,2010-11. Effective October 12, 2010, non-employee members of the Board of Directors received the following compensation:

In addition, for the period of July 1, 2010 until October 12, 2010, Directors can electreceived a committee meeting fee of $2,000 for every Committee meeting attended prior to receive any partthe effective date of their fees or retainer (other than the grant of RSUs) as cash, retirement restricted stock, or unrestricted stock. The Company did not grant any stock options to Directors in fiscal year 2008-09.current compensation package.

Non-employee members of the Board of Directors must own Company stock and/or RSUs worth six times their annual cash retainer. Except for Mr. Gupta, who wasA number of the non-employee Directors were recently appointed in June 2007, Ms. Woertz, who was appointed in January 2008, and Mr. Chenault, who was appointed in April 2008,or elected to the Board within the last few years. However, all non-employee Directors have already achieved this ownership requirement. Ms. Woertz and Messrs. Gupta and Chenaulteither meet or are on track to achieve this goalmeet the ownership requirements within the five-year period established by the Compensation & Leadership Development Committee for achieving this level of ownership.C&LD Committee.

Report of the Compensation & Leadership Development Committee

The Compensation & Leadership Development Committee of the Board of Directors has reviewed and discussed the following section of this proxy statement entitled “Compensation Discussion and Analysis” with management. Based on this review and discussion, the Committee has recommended to the Board that the section entitled “Compensation Discussion and Analysis” as it appears below, be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2009.2011.

W. James McNerney, Jr. (Chair)

Kenneth I. Chenault

Scott D. Cook

Charles R. LeeMargaret C. Whitman

August [Ÿ], 2009Mary Agnes Wilderotter

Compensation Discussion and Analysis

Executive Summary

A summary of our key financial targets for fiscal year 2010-11, and our results relative to those targets, are set forth below:

Our Compensation Philosophy

Our fundamental and overriding objective is to create value for our shareholders at leadership levels on a consistent basis. To accomplish this goal, we design executive compensation programs that emphasize pay for performance, support our business strategies, and discourage our executives from taking excessive risks. We ensure that target compensation opportunities for our executives are competitive with the target opportunities for comparable positions at our Peer Group companies. This is crucial for retention of our talented employees who are committed to the Company’s long-term success and spending their careers with the Company. Furthermore, we align the interests of executives and shareholders by tying a significant portion of executive compensation to performance goals and the value of our Company’s stock. These design features, along with significant stock ownership requirements, ensure that executives focus on building long-term shareholder value and benefit from this value along with our shareholders.

Our Compensation Programs

Our executive compensation program consists of four key components: salary, Short-Term Achievement Reward (“STAR”) and two long-term incentive equity programs—the Performance Stock

Program (“PSP”) and the Key Manager Stock Program. These four components constitute approximately [Ÿ·]% of each Named Executive Officer’s (“NEO”) total compensation. The remaining [·]% consists of retirement and other benefits.

We design our programs so that NEO compensation varies by type (fixed versus performance-based), length of performance period (short versus long-term) and form (cash versus equity). We believe that such variation is necessary to (1) strike the appropriate balance between short and long-term business goals; (2) encourage the right behaviors and discourage excessive risk-taking; and (3) align the interests of the Company’s executives with our shareholders. Salary is the only key component of pay that is fixed—the value of the remaining components vary based on the performance of the individual, the performance of the individual’s business unit and the performance of the Company as a whole. This mix of components is designed to incent both individual accountability and teamwork to build long-term shareholder value. The charts below show the average mix of NEO compensation by type, length and form.

Consistent with our design principles, actual compensation earned under each of our performance-based programs varies based on results.

CEO Compensation

The target compensation opportunity for Mr. McDonald is structured to position him in line with chief executive officers in our Peer Group companies. Approximately [·]% of Mr. McDonald’s compensation is performance-based, with [·] being tied to the three-year quantitative performance goals in the PSP, [·] in the Key Manager Stock Program and the remaining [·] in STAR. In addition to a significant portion of his total compensation being performance-based, Mr. McDonald holds [·] times his salary in Company stock, [·].

Our Approach to Stock Ownership

Employee stock ownership has been a cornerstone of our compensation and retirement programs since William Cooper Procter established the Company’s employee stock ownership plan in 1887. This stock-based retirement program, along with the Company’s other compensation programs, result in equity accounting for approximately [·]% of our NEOs’ compensation.

We reinforce this approach to ownership through share ownership requirements and share retention requirements from stock option exercises. These requirements, when combined with the significant percentage of executive compensation paid in Company equity, ensure that our senior executives always have a significant stake in the long-term success of the Company.

Other Key Program Features

2011 Compensation Actions and Performance Highlights

We design our compensation programs to motivate our executives to win during these tough economic times and to achieve our fundamental and overriding objective—to create value for our shareholders at leadership levels on a consistent basis.

Our Compensation Philosophy

What are the Company’s overall compensation principles?

The Compensation & Leadership DevelopmentC&LD Committee designs and oversees the Company’s compensation policies and approves compensation for all seniorprincipal officers, including the Named Executive Officers.NEOs. The C&LD Committee has established the following principles for compensating all Company employees:

These principles serveencourage the Company well andright behaviors, enable us to deliver strong shareholder value over time. Application of these principles also ensurestime, and ensure the development and retention of talented employees who are committed to the Company’s long-term success.success and career development.

What are the Company’s executive compensation objectives?

The Committee established the following objectives to continue the Company’s history of superior management and leadership:

Who are the Company’s Named Executive Officers?

The Company’s Named Executive Officers for fiscal year 2008-09 are: A.G. Lafley, Chairman of the Board and Chief Executive Officer; Jon R. Moeller, Chief Financial Officer; Robert A. McDonald, Chief Operating Officer; Werner Geissler, Vice Chairman—Global Operations; E. Dimitri Panayotopoulos, Vice Chairman—Global Household Care; Susan E. Arnold, former President, Global Business Units; and Clayton C. Daley, Jr., Vice Chairman and former Chief Financial Officer.

Effective July 1, 2009. Mr. Lafley stepped down as Chief Executive Officer and Mr. McDonald became President and Chief Executive Officer. Mr. Lafley will continue as Chairman of the Board.

Ms. Arnold and Mr. Daley were no longer executive officers of the Company at fiscal year-end and have announced their intention to retire. Since announcing their retirements, both have continued to report to Mr. Lafley, working on assignments and projects as required by Mr. Lafley.

Throughout this Compensation Discussion and Analysis and the compensation tables that follow, we will refer to the title of each Named Executive Officer in effect on the last day of the fiscal year, June 30, 2009.

What are the elements of the Company’s executive compensation programs?

The Company achieves its executive compensation objectives through the following programs in which some or all of our Named Executive Officers participate. A more detailed discussion of each program is provided later in this Compensation Discussion and Analysis.

How do we assure that compensation keeps executives focused on long-term success?

For our employees, focus on the long-term success of the Company begins at hire and is built over careers which often span decades. Because P&G has a longstanding practice of building the organization from within, most employees spend their entire career at the Company. P&G’s people are a cornerstone of P&G’s success.

Employee stock ownership has long been an important aspect of the Company’s culture of commitment to long-term success. William Cooper Procter established the Company’s employee stock ownership plan in 1887, and today it is the oldest continuous profit sharing plan of its kind in the United States. For more than 120 years, this innovative plan has connected employees to the Company’s long-term success. The Company makes annual contributions of P&G stock to the retirement accounts of all U.S.-based employees from the time that they complete their first two years of service until the end of their careers with P&G. Employees think and act like owners from the day they are hired until the day they retire. As a result, those who rise to the senior executive levels in the Company have been focused on the long-term success of the Company from the outset—and continue this focus as their equity-based compensation increases over time. Our Named Executive Officers have an average of almost 30 years of service at the Company—long-term careers during which these individuals—first as employees, then as managers, then as senior executives—build shareholder value and benefit from the value they help to create. This is enhanced by talented employees who join the Company through acquisitions.

In addition to PST, the Company makes an annual grant of stock options and RSUs to the Company’s key managers. These awards reinforce the executives’ focus on the long-term success of the Company by tying their personal success to that of other shareholders. Our key managers hold stock options for an average of eight years (five years beyond the vesting date) before they exercise. These behaviors reflect a culture that is focused on, and confident in, the long-term success of the Company.

Many companies use employment contracts for their top executives. Generally, the Committee believes these arrangements are not necessary for our executives because most have spent the majority of their professional careers with the Company, and have developed a focus on the Company’s long-term success. Except in certain circumstances such as acquisitions, or where required by law in certain jurisdictions, the Company does not have any employment contracts with its executives. None of our current Named Executive Officers has an employment contract.

Ownership and Holding Requirements Focus on Long-Term Success

The Committee established the Executive Share Ownership Program and Stock Option Exercise Holding Requirement Policy to ensure that our most senior executives, including the Named Executive Officers, continue to own and hold a significant amount of Company stock. This aligns management’s interests with shareholders’ interests and further focuses executives on the long-term success of the Company.

TheExecutive Share Ownership Program requires executives to own shares of Company stock and/or RSUs valued at eight times base salary for the Chief Executive Officer, and five times base salary for the other Named Executive Officers. The Committee reviews the holdings of our Named Executive Officers annually, and in 2009 they each exceeded these requirements with the exception of the newly appointed Chief Financial Officer, who is on track to meet these requirements. TheStock Option Exercise Holding Requirement Policy ensures executives remain focused on sustained shareholder value, even after exercising stock options. Under this policy, the Chief Executive Officer must hold the net shares received from stock option exercises for at least two years, and the other Named Executive Officers must hold such net shares for at least one year after exercise. This policy reinforces our executives’ focus on the long-term business and financial performance of the Company. Incentive plan awards that executives elect to take as stock options instead of cash or unrestricted stock are not subject to the holding requirement.

Finally, to further align our executives with the interests of our shareholders, the Company’s Insider Trading Policy prohibits collars, short sales, hedging investments or other derivative transactions involving Company stock. Purchases and sales of Company stock by Named Executive Officers can only be made during the one-month period following public earnings announcements or, if outside these window periods, with express permission from the Company’s Chief Legal Officer or in accordance with a

previously established trading plan that meets SEC requirements. Only Mr. Lafley currently has such a plan, which began in 2003 and is updated periodically, most recently in May 2007.

The Company Emphasizes Pay for Performance

Our long-term success depends on excellent financial and operational performance year after year. Therefore, the Committee ties approximately [Ÿ] of our senior executives’ compensation to the achievement of short and long-term goals, taking into consideration the individual’s impact on delivering those goals. If short-term and long-term financial and operational goals are not achieved, then performance-related compensation decreases. If goals are exceeded, then performance-related compensation increases.

Moreover, all compensation in the form of Company stock, RSUs or stock options changes in value with changes in the Company’s stock price. Because such a large percentage of the Company’s executive compensation is tied both to performance and to the Company’s stock price, our executives have a significant stake in the long-term success of the Company—just like other shareholders.

The chart below shows that [Ÿ]% of the Chief Executive Officer’s total compensation was performance-based and a full [Ÿ]% of his total compensation was paid in stock, RSUs or options—forms of compensation tied to the Company’s stock price. Since becoming Chief Executive Officer in 2000, Mr. Lafley has received 80% of his compensation in equity, and has not sold any of these shares (except those used to pay taxes). On average, [Ÿ]% of the other Named Executive Officers’ compensation was performance-based and [Ÿ]% of their total compensation was in stock, RSUs or stock options. Tying pay to the Company’s and the individual’s performance, as well as to the Company’s stock price, motivates Company executives to drive superior business and financial performance for the long-term, while retaining talented executives and encouraging stock ownership.

How is competitiveness established for executive compensation?

The C&LD Committee structures executive compensation so that total targeted annual cash and long-term compensation opportunities are competitive with the targets for comparable positions at 25 companies considered to be our peers, (basedbased on criteria described below) (Peer Group)below (“Peer Group”). The C&LD Committee sets targets for each element of compensation based on the same elements of compensation paid to those holding similar jobs at companies in our Peer Group, focusing on positions with similar management and revenue responsibility. The C&LD Committee uses a regression analysis to adjust for the differences in revenue size within the Peer Group companies.Group. For the CEO’s compensation analysis, the C&LD Committee considers the Company’s revenue and market capitalization compared to our Peer Group.

The Peer Group is objectively determined and consists of companies that generally meet the following criteria:

TheEach year, the C&LD Committee evaluates and, if appropriate, updates the composition of the Peer Group each year to ensure it remains relevant and is not skewed by over-representation of any non-consumer products industry.Group. Changes to the Peer Group are carefully considered and made infrequently to assure continuity from year to year. The Peer Group currently consists of the following companies:companies unchanged from the prior year:

At its annual review in April 2009,While the Committee replaced General Motors and Motorola with ConocoPhillips and United Technologies which better fit the Committee’s criteria for market capitalization and pay models.

While Named Executive Officers’target total compensation targets arefor our NEOs is set consistent withbased on the median target total compensation inwithin our Peer Group, actual compensation varies depending on experience in role and total Company, business unit and individual performance. This may result in substantial differences among the Named Executive Officers’NEOs’ pay. Consistent with our principles to pay competitively and to pay for performance and pay competitively, the C&LD Committee does not set guidelines for the ratio of any one position’s pay to another such as Chief Executive Officer pay relative to other Named Executive Officers.another.

Who are the Company’s NEOs?

The CommitteeCompany’s NEOs for fiscal year 2010-11 are: Robert A. McDonald, Chairman of the Board, President and CEO; Jon R. Moeller, CFO; and our Vice Chairmen (in alphabetical order) Werner Geissler, Vice Chairman—Global Operations; E. Dimitri Panayotopoulos, Vice Chairman—Global Household Care; Edward D. Shirley, Vice Chairman—Global Beauty & Grooming; and Robert A. Steele, Vice Chairman—Health Care Strategy, former Vice Chairman—Global Health and Well-Being. Mr. Steele has directed Frederic W. Cook & Co., its outsideannounced his intention to retire effective September 1, 2011 and independent compensation consultant,Mr. Shirley has announced his intention to advise it on various compensation matters, including peer group identification, competitive practicesretire effective January 1, 2012.

Throughout this Compensation Discussion and trends, specific program design, and Committee actions with respect to principal officer compensation. Under the terms of its agreement with the Committee, Frederic W. Cook & Co. is prohibited from doing any other business for the Company or its management,Analysis and the Committee may contact Frederic W. Cook & Co. without any interaction from Company management. This is meantcompensation tables that follow, except where noted, we refer to ensure the independencetitle of each NEO in effect on the last day of the Committee’s compensation consultant. Consistent withfiscal year, June 30, 2011.

Our Compensation Programs

What are the termselements of the Committee’s agreement with Frederic W. Cook & Co., the Committee has adopted a policy prohibiting anyCompany’s executive compensation consultant retained by the Committee from doing any other business for the Company or its management.programs?

Company management uses a separate compensation consultant, Hewitt Associates, to provide compensation advice, competitive survey data and other benchmark information related to trends and competitive practices in executive compensation.

Details regarding each element of executive compensation

Annual Cash Compensation

The building blocks of the Company’s annual cash compensation program are baseconsists of salary and annual bonus (STAR).STAR. We collect and analyze data from the Peer Group on the total annual cash compensation (base salaryopportunity (salary plus annual bonus target) offor positions comparable to those at the Company. For each position, we set a target amount for both base salary and STAR, where the STAR Target is thean amount payable as a percentage of annual base salary if all goals are met. The sum of the base salary range midpoint and STAR targets for each positionTarget [·] is generally set at the target median annual cash compensation opportunity of our Peer Group for each position, adjusted for size using a regression analysis of Peer Group revenues.

Base Salary

Base salarySalary provides a competitive fixed rate of pay, recognizing different levels of responsibility within the Company. Salaries are the basis for the other performance-driven programs discussed below, as well as the basis for retirement programs, executive group life insurance and certain benefits available to all employees. [Ÿ·]

STAR Annual Bonus

The STAR bonus program provides an incentive for approximately 14,000[·] senior managers to achievemeet or exceed annual performance and exceed the annual business goals set for the business units and the Company as a whole. The program rewards outstanding business results and pays reduced awards when target business goals are not met.goals. The program primarily focuses on the achievement of business unit results, but includes a component that measures the performance of the Company as well as total Company performance.a whole. STAR Awardsawards are generally paid in cash, but executives can elect to receive their awards in RSUs, stock options or deferred compensation, at the executive’s election.compensation.

STAR Awardsawards are based on three factors: 1)(1) STAR Target; 2)Target, (2) business unit performance;performance and 3)(3) total Company performance. By multiplying these factors, as shown inSTAR awards are calculated using the formula below, both individual business unit and Company performance are recognized. The measures that determine each factor are discussed below. The STAR Award calculation is:following formula:

The basis for each element of the STAR Award is:

The C&LD Committee carefully considers the metrics used to measure performance to minimize the risk of too much focus on one result to the detriment of building long-term shareholder value. Each Business Unit’s performance against these targets is discussed and evaluated by the Chairman ofCEO, the Board, the Chief Executive Officer, the Chief Financial OfficerCFO and the Global Human Resources Officer, who collectively makeOfficer. Based on their review, they provide a recommendation for each Business Unit Performance Factor to the C&LD Committee for review and approval. None of these officers participates in the determination or recommendation for any Business Unit Performance Factor that could impact their own STAR award. Each Business Unit Performance Factor is determined by:established after considering:

The Business Unit Performance Factor for each Business Unit can range from 53% to 167% (with a target level of 100%). The Business Unit Performance Factor has a wide range and the greatest potential impact on the amount of each STAR award.

The Business Unit Performance Factor for each of the NEOs is based on the combined results of each of the smaller Business Units for which the NEO is ultimately responsible. For example, the Business Unit Performance Factor for the Vice Chairman—Global Household Care, consists of a weighted average of the Business Unit Performance Factors of the individual Business Units within Global Household Care. There are no separate performance goals for Global Household Care for purposes of compensation.

Fiscal Year 2008-09 Results2010-11 Results:: The table below summarizes: 1)that follows summarizes the quantitative measuresprimary responsibilities and inputs used to determine each Business Unit Factor, 2) the fiscal year results for those quantitative measures, and 3) the Business UnitPerformance Factor recommended to the C&LD Committee for each Named Executive OfficerNEO other than Messrs. Lafley, MoellerMcDonald and McDonald.Moeller. [·]

Organic sales growth: OrganicThe C&LD Committee includes organic sales growth excludesin the impact of acquisitions, divestitures and foreign exchange. The Committee selected organic sales growthTotal Company Performance Factor because it drives total shareholder return, is a tangible measure for which managers take ownership and is directly linked to the performance of each business. For fiscal year 2008-09, the target was 5%, which is at the midpoint of the Company’s long-term goal of 4% to 6%2010-11, [·].

Core EPS growth: This measure is used in the STAR calculation because it assures continued Company alignment with shareholder interests. The target for Core EPS growth for fiscal year 2008-092010-11 was 10% diluted[·].

The Total Company Performance Factor is determined by a matrix that includes a series of growth rates for organic sales growth ranging from£ [·]% to³ [·]% along a horizontal axis and a series of growth rates for Core EPS growth, consistentranging from£ [·]% to³ [·]% along a vertical axis. The matrix provides for a Total Company Performance Factor of 100% when both results are at the target performance level. If both results are at or below the minimum performance level, the Total Company Performance Factor is 80%. If both results are at or above the maximum performance level, the Total Company Performance Factor is 130%. For results that fall between the minimum and maximum performance levels, the matrix assigns a Total Company Performance Factor between 80%-130%. The Total Company Performance Factor varies with each particular combination of results achieved for these measures within the Company’s long-term goal.ranges set forth in the matrix.

Fiscal Year 2008-09 Results2010-11 Results:: Reported organic sales growth for the Company was [Ÿ·]%, and EPS growth was [Ÿ]. These two results are equally weighted and, when entered into a formula previously approved by the Committee, derived a Total Company Factor of [Ÿ]%, which was [Ÿ] the target of 100%.

The recommended STAR Awards for Ms. Arnold and Messrs. Geissler, Panayotopoulos and Daley were set using the multiplicative formula shown and described above. The recommendations for Ms. Arnold and Mr. Daley were based on [Ÿ]. The Committee reviews the recommendations for the Business Unit Factors and total STAR Award and considering Company performance results, determines final payments for these Named Executive Officers.

Because they evaluate and recommend Business Unit Factors for the other Named Executive Officers, the STAR Awards for Messrs. Lafley, Moeller and McDonald are determined separately and directly by the Committee. The Committee sets their awards after the range for all other STAR Awards is decided, taking into account [Ÿ]. TheC&LD Committee retains the authority to make no STAR award in a given year and the discretion to accept, modify or reject management’s recommendations for any or all employees, including the Named Executive Officers.

NEOs. For fiscal year 2008-09, the combined STAR performance factors resulted in a Company average STAR Award of2010-11, [Ÿ]% of STAR Target. The Committee concluded that Mr. Lafley should receive an award of [Ÿ] based on [Ÿ]. Mr. Moeller’s award of [Ÿ] was based on [Ÿ]. Based on [Ÿ], Mr. McDonald received an award of [Ÿ·].

The following shows the actualcalculation of the C&LD Committee-approved STAR calculationawards for each Named Executive Officer:NEO:

STAR Annual Bonus

(Dollar Figures Shown in Thousands)

The STAR awards approved by the C&LD Committee for Messrs. Geissler, Panayotopoulos, Shirley and Steele were calculated using the formula described on page [·] of this proxy statement. The C&LD Committee reviewed [·].

Because they evaluate and recommend Business Unit Performance Factors for the other NEOs, the STAR awards for Messrs. McDonald and Moeller are determined separately and directly by the C&LD Committee. The CEO provides the C&LD Committee with a recommendation to assist with its evaluation and determination of Mr. Moeller’s STAR award. That recommendation was based on his [·].

[·]

The C&LD Committee approved a STAR award of $[·] for Mr. McDonald which was [·].

Summary of Total Annual Cash Compensation

The total annual cash compensation for each of our NEOs for fiscal year 2010-11 is the sum of each officer’s salary and STAR award and reflects the scope and complexity of the business he leads. Mr. McDonald’s total annual cash compensation was $[·], which was [·].

The C&LD Committee sets the remaining NEO’s salary and STAR Target to be aligned with the size-adjusted median of total salary and bonus opportunity of those holding similar roles in the Peer Group. Total annual compensation is based on the performance of the Company and their respective business units as described on pages [·]-[·] of this proxy statement.

The table below summarizes the total annual cash compensation of each NEO:

Summary of Total Annual Cash Compensation

The total annual cash compensation for each of our Named Executive Officers for fiscal year 2008-09 is the sum of each officer’s base salary and STAR award and reflects his or her performance in a company of our size, scope and complexity. [Ÿ]

Long-Term Incentive Programs

Long-term incentive compensation comprises the majority of total compensation for senior executives and is paid through two programs—the PSP and the Key Manager Annual Stock Grant and the BGP three-year incentive plan.Grant. The C&LD Committee establishes an annual target for total long-term compensation consistent with the target median, total long-term compensation of comparable positions at Peer Group companies regressed for revenue size. It then allocates this overall target into a target for each of the two programs. BGP allocationsFirst, PSP targets are annualized based on salaries atset to represent about half of the beginning of each BGP three-year cycle. The amounts allocated tototal long-term compensation target. Next, the targets for the Key Manager programStock Grant are established by subtracting these BGP allocationsthe discounted value of the PSP targets from the medianoverall target total long-term compensationcompensation. In fiscal year 2010-11, [·]. The ultimate value of similar positions in the Peer Group described above. Actual amounts earned dependthese awards depends upon Company performance and individual performance.stock price.

Key ManagerPerformance Stock GrantProgram

The Key Manager Stock Grant, which is paid in stock options and RSUs, focuses senior executives’ attention on the long-term performance of the Company and directly links executives’ interests to those of the shareholders. Stock options are not exercisable (do not vest) until three years from the grant and

expire ten years from the date of grant. RSUs deliver in shares five years from the date of grant. These restrictions enhance retention because employees who voluntarily resign from the Company during the specified periods prior to retirement forfeit their grants.

Once the Key Manager Grant target is established based on Peer Group competitive data, the Chief Executive Officer recommends specific grants to the Committee for Named Executive Officers based on their individual performance. These recommendations can be up to 50% above or 50% below target. In exceptional cases, no grant will be awarded. The Committee retains full authority to accept, modify or reject these recommendations.

For the 2008-09 fiscal year, the Committee awarded grants to the Named Executive Officers as follows: [Ÿ]. Named Executive Officers receive 50% of their respective award in stock options, and the remaining 50% may be taken in stock options or RSUs at the election of the Named Executive Officer.

The Committee determined Mr. Lafley’s Key Manager Grant based on [Ÿ]. Mr. Lafley’s Key Manager Grant was awarded in 50% RSUs and 50% stock options.

Business Growth Program (BGP) Three-Year Incentive

BGP is the second component of the Company’s long-term incentive compensation for its senior executives. ItPSP focuses executives on the long-term goals most critical to the overall success of the Company. BGPPSP compensation is subject tocontingent upon the achievement of specific Company growth objectives over aperformance against three-year performance period. On June 30, 2008, the Company’s current BGP program expiredgoals (“Performance Goals”) in categories (“Performance Categories”) focused on its own terms.building shareholder value. The Committee renewed BGP, incorporating the Company’s current business objectives for the new three-year performance period beginning July 1, 2008 and ending on June 30, 2011 (Performance Period). In setting the performance metrics for the newfour Performance Period, the Committee took the metrics from the previous three-year program—operating total shareholder return and earnings per share growth—and broke operating total shareholder return into the following:Categories include: organic sales growth, adjusted before tax operating profit, adjusted earnings per share growth and adjusted free cash flow efficiency. Separatingproductivity. The C&LD Committee sets the combined measure makesPerformance Goals for each metric more visiblethree-year period that begins on July 1 and ends on June 30, three years later (the “Performance Period”). In the first year of each Performance Period, the C&LD Committee grants Performance Stock Units (“PSUs”) to participants allowing them(“Initial PSU Grant”).

The C&LD Committee also establishes a sliding scale of performance factors (each, individually, a “Performance Factor;” together, in the aggregate, “Performance Factors”) for each of the Performance Goals. The performance factors range from a minimum of 0% to a maximum of 200%, with a target of 100% for each Performance Goal. This results in a participant having the ability to earn a maximum number of shares of common stock equal to two times the Initial PSU Grant or a minimum of zero depending on the Company performance versus the Performance Goals. Performance Factors for Company results falling between the minimum, target and maximum levels are determined via linear interpolation. Using the sliding scale to reward performance versus the Performance Goals, as opposed to “all or nothing” goals, discourages participants from taking unnecessary risks to ensure a final payment under the program. This aligns the interests of the NEOs with shareholders by encouraging participants to focus on deliveringthe long-term performance of the Company over a multi-year period.

After each of these important long-term goals.

The three-year BGP Awards arePerformance Period, the C&LD Committee determines the Performance Factors for each Performance Category based on the Company’s performance in eachresults versus the Performance Goals. The average of the following four performance categories measured against the three-year performance goals establishedPerformance Factors is multiplied by the Committee atInitial PSU Grant to determine the beginningvested PSUs. The formula is as follows:

The vested PSUs are then converted into shares of Company’s common stock and delivered to the applicable participant following the end of the Performance Period:Period.

For the Performance Period July 1, 2010 through June 30, 2013, The C&LD Committee granted Mr. McDonald [·] PSUs valued at $[·] and granted Messrs. Geissler, Moeller, Panayotopoulos, Shirley and Steele [·] PSUs valued at $[·]. The following chart outlines the Performance Goals established for each Performance Category and their minimum, target and maximum levels for each Performance Factor.

Basing BGP Awards on these four metrics encourages sound business decisions for the long-term health of the Company and minimizes the risk that participants over-emphasize one success measure to the detriment of others.

At the end of the Performance Period, the Committee determines the Payout Factor for each performance category by comparing the Company’s results to a sliding payout scale ranging from 0%-200%. By rewarding incremental improvements in Company results, as opposed to “all or nothing” three-year goals, this pay-out mechanism discourages the taking of unnecessary risks to ensure a Final Payment under the program. This aligns the interests of the Named Executive Officers with shareholders by encouraging participants to focus on the long-term performance of the Company over a multi-year period.

The target BGP award for the three-year performance period is six times base salary for the Chief Executive Officer and three times base salary for the other Named Executive Officers.

The payout formula for the BGP Award is:

While the BGP payout formula is based on results at the end of the Performance Period, the Committee may make an Interim Payment at the end of year one for any performance category where Company results are on track to meet or exceed the three-year performance goals. At the end of year two, the Committee may make an Interim Payment for each performance category where the Company’s cumulative results for years one and two are on track to meet or exceed the three-year performance goals. For Interim Payments, the Payout Factor for each performance category is 0% if results are not on track and 100% if results are on track to meet or exceed the three-year performance goals. The total amount of any Interim Payment is calculated using these Payout Factors (0% or 100%) in the payout formula above to obtain a total, and then by dividing this total by three (since any Interim Payment is based on annual performance against the three-year program). The Committee uses these interim payments to even out compensation when performance is on track.

At the end of the third year of the Performance Period, the Final Payment of the BGP Award will be calculated by inserting the applicable Payout Factors (from the 0%-200% payout scale) in the above payout formula to obtain a total, and then subtracting any Interim Payments made during the Performance Period from this total. In the unlikely event that total Interim Payments exceed the amount of the BGP Award Final Payment, the Committee will require repayment of any amount overpaid. The Committee may make adjustments for program participants who did not participate for the entire Performance Period and may make any necessary adjustments to the payments pursuant to program accounting guidelines. The Committee retains discretion to reduce or eliminate either Final or Interim Payments if it determines that such payments are inconsistent with shareholders’ best interests.

Any Interim Payment will be paid 75% in RSUs and 25% in cash to more closely align executives with shareholder interests during the Performance Period. Any Final Payment will be made in 100% cash. Participants may elect to receive RSUs or deferred compensation instead of cash. BGP RSUs deliver in shares on the day of the Final Payment if any. Paying a portion of BGP Awards in RSUs aligns participants with shareholder interests and promotes the retention of key top talent who will forfeit undelivered RSUs if they resign.

Fiscal Year 2008-2009 Results[Ÿ]

BGP Payment Summary

(Dollar Figures Shown in Thousands)

Key Manager Stock Grant

The Key Manager Stock Grant is the second component of the Company’s long-term incentive compensation for its senior executives. It is paid in stock options and/or RSUs, focuses senior executives’ attention on the long-term performance of the Company and directly links executives’ interests to those of shareholders. Stock options are not exercisable (do not vest) until three years from the grant and expire ten years from the date of grant. RSUs deliver in shares five years from the date of grant. In addition to focusing executives on the long-term success of the Company, these restrictions enhance retention because employees who voluntarily resign from the Company during the specified periods forfeit their grants.

Once the Key Manager Stock Grant target is established based on Peer Group competitive data and the establishment of the PSP target, the CEO recommends specific grants to the C&LD Committee for each NEO based on: (1) the prior year’s business results for which each NEO is responsible; (2) the prior year’s Key Manager Stock Grant for each NEO; (3) summaries of business results for each Business Unit for the current fiscal year; and (4) individual contributions by each NEO, including that individual’s leadership skills. These recommendations can be up to 50% above or 50% below target. In exceptional cases, no grant will be awarded. The C&LD Committee retains full authority to accept, modify or reject these recommendations.

For the fiscal year 2010-11, the C&LD Committee awarded the following grants to each of the Vice Chairmen and the CFO: Mr. Geissler $[·]; Mr. Panayotopoulos $[·]; Mr. Shirley $[·]; Mr. Steele $[·]; and Mr. Moeller $[·]. [·]

The C&LD Committee awarded Mr. McDonald a Key Manager Stock Grant of [·].

Summary of Total Long-Term Incentive Compensation

Our Named Executive Officers’NEOs’ total long-term compensation includes the PSP and the Key Manager Stock Grant. The PSP grant represents approximately half of the total long-term incentive compensation includesfor each NEO and is payable at the Key Manager Stock Grant and any Interim or Final Payment amounts under the three-year BGP. The Committee considersend of the performance of these individualsperiod only to the extent that results are delivered in the contextfour

performance categories. The total long-term incentive compensation for each of the sizeVice Chairmen and scope of the organization in which they lead. [CFO was: Mr. Geissler $[Ÿ·]; Mr. Panayotopoulos $[·]; Mr. Shirley $[·]; Mr. Steele $[·]; and Mr. Moeller $[·].

Mr. McDonald’s total long-term incentive compensation of [·].

Special Equity Awards

On rare occasions, the C&LD Committee makes special equity grants in the form of restricted stock or RSUs to senior executives to assure retention of the talent necessary to manage the Company successfully or to recognize superior performance. In 2008-09 the Committee awarded two special equity grants, in the form of RSUs, to recognize superior performance by Mr. Lafley[·].

Retirement Programs

The Procter & Gamble Profit Sharing Trust and Mr. Daley in connection with one of the largest and most successful transactions in the Company’s history—the acquisition and integration of The Gillette Company. Specifically, the Committee recognized Mr. Lafley’s foresight for initiating the acquisition and his leadership throughout the acquisition and integration process by granting him a $3,500,000 award paid in RSUs on February 27, 2009. These RSUs are forfeitable until August 27, 2009 and will deliver in shares on February 27, 2012 unless deferred by Mr. Lafley. The Committee separately granted Mr. Daley a $1,500,000 award paid in RSUs on August 12, 2008, recognizing the integral role that he played in the valuation, negotiation and acquisition of Gillette as well as his role in the integration of Gillette into P&G. Mr. Daley’s RSUs are forfeitable until August 12, 2010, although retirement prior to that date will not result in forfeiture. Unless Mr. Daley chooses to defer, the RSUs will deliver in shares on August 12, 2010.

Retirement Programs

PSTEmployee Stock Ownership Plan (PST) is the Company’s primary retirement program for U.S.-based employees. PST is a qualified defined contribution plan providing retirement benefits for full-time U.S. employees, including the Named Executive Officers.NEOs. Under the PST, program, each employee’s PST account receivesthe Company makes an annual grantcontribution of cash used to purchase Company stock deposited into each participant’s PST account, upon which dividends are earned. The amount of the stock grant varies based upon individual base salaries and years of service.

Some participants in PST (including the Named Executive Officers)NEOs) do not receive their full grant due to federal tax limitations andlimitations. As a result, they participate in the nonqualified PST Restoration Program. These individuals receive RSUs valued at an amount equal to the difference between the amount grantedcontribution made under PST and what would have otherwise been grantedcontributed under PST, but for the tax limitations. Participants are vested in their PST accounts after five years and their PST Restoration RSUs are forfeitable until they become eligible for retirement.

We are proud of the way PST and the PST Restoration Program have created ownership at all levels of our Company. We believe these programs continue to serve the Company and its shareholders well by focusing employees on the long-term success of the business. We do not have Special Executive Retirement Programs (SERP) for our senior executives. Because the accumulation of retirement benefits for all other U.S. employees is dependent upon the Company’s share price and PST contributions, we believe it is appropriate for the Named Executive Officers to share the same risk and reward.

For non U.S.-based employees, the Company offers individual country pension plans that provide retirement benefits. In addition, the Company offers the International Retirement Plan (IRP)(“IRP”) and the Global International Retirement Arrangement which provide supplemental benefits to senior executivesemployees who work in multiple countries during their careers. Employees on extended expatriate assignments or who transfer out of their home country on a permanent basis also receive competitive retirement benefits under international retirement plans. Messrs. Geissler and Panayotopoulos participate in these programs.

Mr. Shirley was employed by The Gillette Company prior to the merger and participated in The Gillette Retirement Plan, a defined benefit plan covering full-time U.S. employees. The benefits in this plan were frozen as of December 31, 2007. Some participants in The Gillette Retirement Plan, including Mr. Shirley, would not receive their full pension benefits due to federal tax limitations and participate in the nonqualified Gillette Supplemental Retirement Plan. Similar to the PST Restoration Plan described above, the Gillette Supplemental Retirement Plan provides a benefit equal to the difference between the benefit provided under the Gillette Retirement Plan and the benefit that otherwise would have been provided by that plan, but for the tax limitations. In addition, Mr. Shirley participates in the Gillette Employee Stock Ownership Plan, which is a qualified retirement plan allowing eligible participants to fund their participation in a Gillette retiree medical plan.

Executive Benefits

The Company provides certain other limited benefits to certainsenior executives to fulfill particular business purposes. purposes, which are primarily for convenience and personal security. Total executive benefits were [·].

Benefits such as home security systems, secured workplace parking and an annual physical health examination are provided to safeguard Named Executive Officers.NEOs. While Company aircraft are generally used for Company business only, for security reasons Mr. LafleyMcDonald is required by the Board to use Company aircraft for all air travel, including personal travel. To increase executive efficiency, in limited circumstances, Named Executive OfficersNEOs may travel to outside board meetings on Company aircraft, in which case the Company generally receives some reimbursement from the companies on whose boards our executives serve. In addition, if a Company aircraft flight is already scheduled for business purposes and can accommodate additional passengers, Named Executive OfficersNEOs and their spouse/guests may join flights for personal travel. To the extent any travel on Company aircraft results in imputed income to the Named Executive Officer,NEO, the Company does not provide gross-up payments to cover the Named Executive Officer’sNEO’s personal income tax due on such imputed income. We also reimburse Named Executive OfficersNEOs for tax preparation and some financial counseling to focusminimize distractions and keep their attention focused on Company business issues and to assure accurate personal tax reporting. To remain competitive and retain our top executives, we offer executive group whole life insurance coverage (equal to base salary plus STAR Target). Finally, to further increase executive efficiency, we provide limited local transportation within Cincinnati.

In general, executive benefits make up a very small percentage of total compensation (less than 1%) for the Named Executive Officers. The Company does not gross-up payments to cover personal income taxes that may pertain to any of the executive benefits. TheC&LD Committee reviews these arrangements regularly to assure they continue to fulfill business needs.

Total Compensation for Named Executive Officers

Given the Company’s emphasis on stock-based compensationneeds and because the SEC requires stock-based compensation to be reported based on what is expensed in our financial statements, we provide the table below to facilitate understanding of the actual compensation awarded to our Named Executive Officers in the fiscal year. The table summarizes all compensation awarded to Named Executive Officers in the fiscal year and reconciles amounts shown in the table to amounts in the Summary Compensation Table that follows this Compensation Discussion and Analysis. Inclusion of this table is not designed to replace the Summary Compensation Table, but rather to reflect the Committee’s decisions about compensation awarded to the Named Executive Officers during the fiscal year and to better illustrate the relationship between compensation and performance for the period reported.remain reasonable versus market practice.

Actual Compensation Awarded 2008-09

Chief Executive OfficerCEO Compensation

Mr. Lafley’sMcDonald’s compensation is determined by the C&LD Committee using the same principles applied to all Company executives.executives, focusing on paying for performance, paying competitively and supporting the business strategies. The Committee works to make itsC&LD Committee’s process for assessing Mr. Lafley’sMcDonald’s compensation and performance is rigorous and objective, with performance standards based on what is important to the Company’s success. The entire process is supported by the C&LD Committee’s independent compensation consultant, Frederic W. Cook & Co., which does no other work for the Company.

as described on pages [·]-[·] of this proxy statement. Mr. Lafley’sMcDonald’s total compensation is linked directly to his personal performance andcontribution to the Company’s performance. ThroughAs explained below, through STAR and BGP,PSP, his compensation is aligned with business strategies and focused on rewarding sustained, long-term growth in shareholder value. [Ÿ]

The Committee primarily considered the following factors in determining Mr. Lafley’s short and long-term incentive compensation in fiscal year 2008-09:

In evaluating Mr. Lafley’sMcDonald’s individual performance the Committee considered the results of Mr. Lafley’s individual leadership and hisduring fiscal year 2010-11, [·]

Our Approach To Stock Ownership

For our employees, focus on sustaining growth for the futurelong-term success of the Company including:and creating shareholder value begins at hire and is often built over decades. Because we have a longstanding practice of building our organization from within, most of our employees spend their entire careers with the Company. Whether an employee begins a career with the Company, or joins as a result of an acquisition, our compensation programs and our approach towards stock ownership, encourage them to focus on the long-term success of the Company and creating shareholder value. This dynamic creates an inextricable link between the long-term success of the individual and the long-term success of the Company—it is difficult to achieve the former without the latter. We tailor our compensation programs to reinforce this result.

Employee Stock Ownership Aligns the Interests of Executives and Shareholders

Employee stock ownership has long been an important aspect of the Company’s culture of commitment to long-term success. William Cooper Procter established the Company’s employee stock ownership plan in 1887. Today it is the oldest continuous profit sharing plan of its kind in the United States. For more than 120 years, this innovative plan has connected employees to the Company’s long-term success. The Company makes annual contributions of P&G stock to the retirement accounts of all U.S.-based employees beginning shortly after they are hired until the end of their careers. By making employees shareholders early on, and increasing their level of ownership over time, we consistently reinforce the importance of long-term success—both for the individual and for the Company.

The Company’s annual grant of stock options and RSUs to the Company’s key managers further reinforces the executives’ focus on the long-term success of the Company and creating shareholder value by further tying their personal success to that of other shareholders. Our key managers hold these stock options for an average of [Ÿ·] before they exercise. This reflects a culture that is focused on, and confident in, the long-term success of the Company.

The long-term focus that comes with stock ownership is even more pronounced for our senior executives. Most of our NEOs have risen through the Company’s ranks and their personal wealth is often tied to the Company stock and options that they have accumulated over the course of their careers. Our NEOs have an average of [·] years of service at the Company or its subsidiaries—long-term careers during which these individuals—first as employees, then as managers, then as senior executives—build shareholder value and benefit from the value they help to create.

Ownership and Holding Requirements Focus on Long-Term Success

To gain further perspective on Mr. Lafley’s total compensation, before making decisions on each elementreinforce the importance of his total compensation,stock ownership and long-term focus for our most senior executives, including the NEOs, the C&LD Committee established the Executive Share Ownership Program and Stock Option Exercise Holding Requirement. The Executive Share Ownership Program requires the CEO to own shares of Company stock and/or RSUs valued at a minimum of eight times salary. All other NEOs must own stock and/or RSUs valued at a minimum of five times salary. The C&LD Committee annually reviews a summary of all elements of Mr. Lafley’s total compensation, including base salary, STAR annual bonus, Key Manager Stock Grant, BGP three-year incentive award, any special equity award, unrealized gains from stock options, restricted stock and RSUs, and the cost to the Company of all retirement programs, benefits and executive benefits. Based on its review of this summarythese holdings, and in consultation with its independent compensation consultant, the Committee determined that2011 [Ÿ·].

The Stock Option Exercise Holding Requirement ensures executives remain focused on sustained shareholder value even after exercising their stock options. The holding requirement applies when an executive, including a NEO, has not met the ownership requirements of the Executive Share Ownership Program. Additionally, the holding requirement does not apply to incentive plan awards that executives elect to take as stock options instead of cash or unrestricted stock. Under the holding requirement, the CEO would be required to hold the net shares received from stock option exercises for at least two years while the other NEOs must hold net shares for at least one year.

Additional InformationOther Key Compensation Program Features

This additional information may assist the reader in better understanding the Company’s compensation practices and principles.

RoleEngagement of Independent Adviser

The C&LD Committee has directed Frederic W. Cook & Co., its outside and independent compensation consultant, to advise it on various compensation matters, including Peer Group identification, competitive practices and trends, specific program design, and Committee actions with respect to principal officer compensation. Under the terms of its agreement with the C&LD Committee, Frederic W. Cook & Co. is prohibited from doing any other business for the Company or its management, and the C&LD Committee may contact Frederic W. Cook & Co. without any interaction from Company management. This is meant to ensure the independence of the Chief Executive OfficerC&LD Committee’s compensation consultant. Consistent with the terms of the C&LD Committee’s agreement with Frederic W. Cook & Co., the C&LD Committee has adopted a policy prohibiting any compensation consultant retained by the C&LD Committee from doing any other business for the Company or its management.

Company management uses a separate compensation consultant, Meridian Compensation Partners, LLC, to provide compensation advice, competitive survey analysis and other benchmark information related to trends and competitive practices in Setting Other Named Executive Officers’ Compensationexecutive compensation.

Avoidance of Poor Pay Practices

Perquisites

The Company provides limited benefits to NEOs to fulfill particular business purposes as explained on pages [·] to [·] of this proxy statement. [·].

Employment Contracts

The C&LD Committee has broad authority overbelieves employment contracts for executives are not necessary because most have spent the compensationmajority of their professional careers with the Company, and have developed a focus on the Company’s Named Executive Officers, includinglong-term success. Moreover, the review and evaluationC&LD Committee does not provide special severance payments, such as golden parachutes, to its executives. In the event the Company encourages a NEO, or any other U.S. employee, to terminate employment with the Company (but not for cause), that individual may receive a separation allowance of their total compensation. The Chief Executive Officer makes recommendationsup to the Committee regarding theone year’s annual cash and long-term incentive compensation of the Company’s Named Executive Officers (other than his own)salary, calculated based on Company performance, individual performance and input from the Company’s compensation consultant and the Committee’s independent compensation consultant. All final decisions regarding compensation for Named Executive Officers are made by the Committee.years of service.

Tax Gross-Ups

Generally, the Company does not increase payments to any employees, including Named Executive Officers,NEOs, to cover non-business-relatednon-business related personal income taxes. However, certain expatriate allowances, relocation reimbursements and tax equalization payments are made to employees assigned to work outside their home countries, and the Company will cover the personal income taxes due on these items in accordance with expatriate policy.policy because there is a business purpose. In addition, from time to time, the Company may be required to pay personal income taxes for certain separating executives hired through acquisitions in conjunction with pre-existing contractual obligations.

Governing Plans, Timing, Pricing and PricingVesting of Stock-Based Grants

All grants of stock options, PSUs, restricted stock and/or RSUs made after October 13, 2009, are made under The Procter & Gamble 2009 Stock and Incentive Compensation Plan (as amended) (“2009 Plan”). The 2009 Plan was approved by Company shareholders at the October 13, 2009, annual shareholders’ meeting. Previous grants were made under The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended) (2001 Plan) or(“2001 Plan”) and The Gillette Company 2004 Long-Term Incentive Plan (Gillette Plan)(“2004 Gillette Plan”). The 2001 Plan was approved by Company shareholders in 2001.shareholders. The 2004 Gillette Plan was approved by Gillette shareholders in 2004 and adopted by the Company in 2005 as part of our merger with The Gillette Company.

The 2009 Plan contains a “second trigger” vesting provision which limits accelerated vesting to involuntary terminations of employment for reasons other than cause and for terminations of employment for good reason when time-based equity awards are assumed as part of a change in control.

With the exception of any Special Equity Awardsawards discussed on page [Ÿ·], of this proxy statement, the Company grants stock, PSUs, RSUs and stock options on dates that are consistent from year to year. If the C&LD Committee changes a grant date, it is done in advance and only after careful review and discussion. The Company does not backdate stock options.

The Company has never repricedre-priced stock options and is not permitted to do so without prior shareholder approval.

We use the closing price of the Company’s stock on the date of grant to determine the grant price for executive compensation awards. However, because PST uses the value of shares based on the average price of Company stock for the last five days in June, the grants of RSUs made under the PST Restoration Program and IRP follow this same grant price practice. The pre-established grant dates for

the programs are as follows: PST Restoration and IRP, first Thursday in August; STAR, and BGP, last business day on or before September 15; and PSP and Key Manager Stock Grants, last business day of February (and, if necessary for corrections, on the last business day on or before May 9).

Mitigation of Excessive Risk-Taking

Recoupment Policy& Clawback

The C&LD Committee has adopted the Senior Executive Officer Recoupment Policy that permits the Company to recoup or “claw back”“clawback” STAR or BGPlong-term incentive program payments made to executives in the event of a significant restatement of financial results for any reason. This authority is in addition to the C&LD Committee’s authority under the 2001 Plan and the 2009 Plan to suspend or terminate any outstanding stock optionoptions if the C&LD Committee determines that the participant acted significantly contraryviolated certain plan provisions. Moreover, the 2009 Plan has a clawback provision that allows the Company to recover certain proceeds from option exercises or delivery of shares if the participant violates certain plan provisions.

Balanced Weighting of Performance Metrics in Compensation Programs

The STAR program and PSP use balanced weighting of multiple performance metrics to determine the payout. This discourages excessive risk-taking by removing any incentive to focus on one goal to the best interestsdetriment of others. STAR and PSP are described on pages [·] to [·] and pages [·] to [·] of this proxy statement, respectively.

Prohibition of use of Company Stock in Derivative Transactions

The Company’s Insider Trading Policy prohibits NEOs from involving Company stock in pledging, collars, short sales, hedging investments and other derivative transactions. Purchases and sales of Company stock by NEOs can only be made during the Companyone-month period following public earnings announcements or, its subsidiaries.if outside these window periods, with express permission from the Company’s Legal Division or in accordance with a previously established trading plan that meets SEC requirements.

Additional Information

Deferred Compensation Plan

The Procter & Gamble Company Executive Deferred Compensation Plan (“EDCP”) allows executives to defer receipt of up to 100% of their STAR annual bonus, up to 25% of their interim BGP payments and 100% of their final BGP payment,award and/or up to 50% of their annual base salary. Beginning in 2008-09 executivesExecutives may also elect to convert a portion of their PST Restoration RSUs into notional cash contributions to the Deferred Compensation PlanEDCP with investment choices that mirror those available to all U.S. employees who participate in the Company’s 401(k) plan. No above-market or preferential interest is credited on deferred compensation, as those terms are defined by the SEC.

Tax Treatment of Certain Compensation

Section 162(m) of the Internal Revenue Code limits the Company deductibility of executive compensation paid to certain Named Executive OfficersNEOs to $1,000,000 per year, but contains an exception for certain performance-based compensation.

For fiscal year 2008-09,2010-11, awards granted under STAR, the STAR, Key Manager Stock Grant and BGPPSP programs satisfied[·]. PSP award payments do not vest until the performance-based requirements for deductible compensation. Theend of FY 2012-13 at which time the C&LD Committee approved award pools for STAR and BGP based on net earnings with a maximum portion of each pool set for each ofwill determine the Named Executive Officers subject to Section 162(m). The Committee then used its discretion to determine STAR Awards and BGPPSP payments based on Company and business results. Each ofresults for the amounts approved for Named Executive Officers subject to Section 162(m) were below the maximums established, and are therefore deductible by the Company.three year performance period.

Company deductibility of compensation was taken into account by the C&LD Committee when setting compensation levels for current Named Executive Officers.NEOs. While the C&LD Committee’s general policy is to preserve the deductibility of compensation paid to the Named Executive Officers,NEOs, the C&LD Committee nevertheless authorizes payments that might not be deductible if it believes they are in the best interests of the Company and its shareholders. The C&LD Committee determined that it was appropriate to pay Mr. Lafley a competitive base salary of [Ÿ·], although [Ÿ] was not deductible by the Company. Named Executive Officers are eligible for certain grants that may not be deductible by the Company.. In addition, in certain years individuals may receive non-deductible payments resulting from awards made prior to becoming a Named Executive Officer.NEO.

2009-102011-12 Executive Compensation Changes

As further described in this Proxy Statement on pages [Ÿ·] to [Ÿ], the Board is proposing that Company shareholders approve The Procter & Gamble 2009 Stock and Incentive Compensation Plan, attached to this proxy statement as Exhibit C. [Ÿ].

Executive Compensation

The following tables, footnotes and narratives found on pages [Ÿ·]to [Ÿ·], provide information regarding the compensation, benefits and equity holdings in the Company for the Named Executive Officers. The tables reflect each Named Executive Officer’s title as of June 30, 2009.NEOs.

Summary Compensation

The following table and footnotes provide information regarding the compensation of the Named Executive OfficersNEO for the fiscal years shown.

Summary Compensation Table