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<SEC-DOCUMENT>0000080424-04-000195.txt : 20041028
<SEC-HEADER>0000080424-04-000195.hdr.sgml : 20041028
<ACCEPTANCE-DATETIME>20041028170938
ACCESSION NUMBER:		0000080424-04-000195
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20040930
FILED AS OF DATE:		20041028
DATE AS OF CHANGE:		20041028

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PROCTER & GAMBLE CO
		CENTRAL INDEX KEY:			0000080424
		STANDARD INDUSTRIAL CLASSIFICATION:	SOAP, DETERGENT, CLEANING PREPARATIONS, PERFUMES, COSMETICS [2840]
		IRS NUMBER:				310411980
		STATE OF INCORPORATION:			OH
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-00434
		FILM NUMBER:		041103361

	BUSINESS ADDRESS:	
		STREET 1:		ONE PROCTER & GAMBLE PLZ
		CITY:			CINCINNATI
		STATE:			OH
		ZIP:			45202
		BUSINESS PHONE:		5139831100
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>jjas04.txt
<DESCRIPTION>P&G -- 10-Q JAS 2004
<TEXT>
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


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


For the Quarterly Period Ended September 30, 2004   Commission file number 1-434


                          THE PROCTER & GAMBLE COMPANY
             (Exact name of registrant as specified in its charter)


          Ohio                                         31-0411980
   (State of incorporation)              (I.R.S. Employer Identification No.)


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


        Registrant's telephone number, including area code (513) 983-1100


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


Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ X ] No [  ]



There were 2,536,682,989 shares of Common Stock outstanding as of September 30,
2004.

<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

The Consolidated Statements of Earnings of The Procter & Gamble Company and
subsidiaries for the three months ended September 30, 2004 and 2003, the
Consolidated Balance Sheets as of September 30, 2004 and June 30, 2004, and the
Consolidated Statements of Cash Flows for the three months ended September 30,
2004 and 2003 follow. In the opinion of management, these unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position, results of operations and cash flows for the interim periods
reported. However, such financial statements may not be indicative necessarily
of annual results.

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS

Amounts in millions except per share amounts
                                                             Three Months Ended
                                                                September 30
                                                           ---------------------
                                                             2004          2003
                                                           -------       -------
NET SALES                                                  $13,744       $12,195
      Cost of products sold                                  6,611         5,879
      Selling, general and
      administrative expense                                 4,263         3,673
                                                           -------       -------

OPERATING INCOME                                             2,870         2,643
      Interest expense                                         181           141
      Other non-operating income, net                          182            40
                                                           -------       -------

EARNINGS BEFORE INCOME TAXES                                 2,871         2,542
      Income taxes                                             870           781
                                                           -------       -------

NET EARNINGS                                               $ 2,001       $ 1,761
                                                           =======       =======

PER COMMON SHARE:
      Basic net earnings                                   $  0.77       $  0.67
      Diluted net earnings                                 $  0.73       $  0.63
      Dividends                                            $  0.25       $  0.23

DILUTED WEIGHTED AVERAGE
      COMMON SHARES OUTSTANDING                            2,756.0       2,797.7


See accompanying Notes to Consolidated Financial Statements

<PAGE>
<TABLE>
<CAPTION>
                        THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                                 CONSOLIDATED BALANCE SHEETS

Amounts in millions
                                                                 September 30       June 30
ASSETS                                                               2004            2004
                                                                 -------------    ------------
<S>                                                                   <C>             <C>
CURRENT ASSETS
     Cash and cash equivalents                                        $ 6,262         $ 5,469
     Investment securities                                                456             423
     Accounts receivable                                                4,485           4,062
     Inventories
         Materials and supplies                                         1,309           1,191
         Work in process                                                  345             340
         Finished goods                                                 3,063           2,869
                                                                 -------------    ------------
     Total Inventories                                                  4,717           4,400
     Deferred income taxes                                                961             958
     Prepaid expenses and other receivables                             1,835           1,803
                                                                 -------------    ------------

TOTAL CURRENT ASSETS                                                   18,716          17,115

PROPERTY, PLANT AND EQUIPMENT
     Buildings                                                          5,169           5,206
     Machinery and equipment                                           19,547          19,456
     Land                                                                 627             642
                                                                 -------------    ------------
                                                                       25,343          25,304
     Accumulated depreciation                                         (11,359)        (11,196)
                                                                 -------------    ------------

NET PROPERTY, PLANT AND EQUIPMENT                                      13,984          14,108

GOODWILL AND OTHER INTANGIBLE ASSETS
     Goodwill                                                          19,889          19,610
     Trademarks and other intangible assets, net                        4,521           4,290
                                                                 -------------    ------------

NET GOODWILL AND OTHER INTANGIBLE ASSETS                               24,410          23,900

OTHER NON-CURRENT ASSETS                                                2,093           1,925
                                                                 -------------    ------------

TOTAL ASSETS                                                         $ 59,203        $ 57,048
                                                                 =============    ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable                                                 $ 3,392         $ 3,617
     Accrued and other liabilities                                      7,775           7,689
     Taxes payable                                                      3,034           2,554
     Debt due within one year                                           7,701           8,287
                                                                 -------------    ------------

TOTAL CURRENT LIABILITIES                                              21,902          22,147

LONG-TERM DEBT                                                         13,731          12,554

DEFERRED INCOME TAXES                                                   2,298           2,261

OTHER NON-CURRENT LIABILITIES                                           2,913           2,808
                                                                 -------------    ------------

TOTAL LIABILITIES                                                      40,844          39,770

SHAREHOLDERS' EQUITY
     Preferred stock                                                    1,514           1,526
     Common stock - shares outstanding -  Sept 30   2,536.7             2,537
                                          June 30   2,543.8                             2,544
     Additional paid-in capital                                         2,585           2,425
     Reserve for ESOP debt retirement                                  (1,267)         (1,283)
     Accumulated other comprehensive income                            (1,328)         (1,545)
     Retained earnings                                                 14,318          13,611
                                                                 -------------    ------------

TOTAL SHAREHOLDERS' EQUITY                                             18,359          17,278
                                                                 -------------    ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $ 59,203        $ 57,048
                                                                 =============    ============

See accompanying Notes to Consolidated Financial Statements
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                      THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                    Three Months Ended
Amounts in millions                                                    September 30
                                                                ---------------------------
                                                                   2004            2003
                                                                -----------     -----------
<S>                                                                <C>             <C>
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                     $ 5,469         $ 5,912

OPERATING ACTIVITIES
       Net earnings                                                  2,001           1,761
       Depreciation and amortization                                   480             407
       Deferred income taxes                                           162             108
       Change in:
            Accounts receivable                                       (377)           (295)
            Inventories                                               (326)           (174)
            Accounts payable, accrued and other liabilities             65             (76)
            Other operating assets & liabilities                      (112)            (57)
       Other                                                            25             (68)
                                                                -----------     -----------

TOTAL OPERATING ACTIVITIES                                           1,918           1,606
                                                                -----------     -----------

INVESTING ACTIVITIES
       Capital expenditures                                           (413)           (364)
       Proceeds from asset sales                                       366              88
       Acquisitions, net of cash acquired                             (335)         (5,035)
       Change in investment securities                                 (31)             11
                                                                -----------     -----------

TOTAL INVESTING ACTIVITIES                                            (413)         (5,300)
                                                                -----------     -----------

FINANCING ACTIVITIES
       Dividends to shareholders                                      (685)           (623)
       Change in short-term debt                                    (2,429)          3,555
       Additions to long-term debt                                   2,996              -
       Reductions of long-term debt                                   (130)           (788)
       Proceeds from the exercise of stock options and other            99              89
       Treasury purchases                                             (622)           (274)
                                                                -----------     -----------

TOTAL FINANCING ACTIVITIES                                            (771)          1,959
                                                                -----------     -----------

EFFECT OF EXCHANGE RATE CHANGES ON CASH
       AND CASH EQUIVALENTS                                             59            (128)

CHANGE IN CASH AND CASH EQUIVALENTS                                    793          (1,863)
                                                                -----------     -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                           $ 6,262         $ 4,049
                                                                ===========     ===========

See accompanying Notes to Consolidated Financial Statements
</TABLE>

<PAGE>


                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   These statements should be read in conjunction with the Company's Annual
     Report on Form 10-K for the fiscal year ended June 30, 2004 and the Form
     8-K filed on October 22, 2004 reflecting certain changes to the Company's
     segment information. The results of operations for the three-month period
     ended September 30, 2004 are not indicative necessarily of annual results.

2.   Comprehensive Income - Total comprehensive income is comprised primarily of
     net earnings, net currency translation gains and losses, impacts of net
     investment and cash flow hedges and net unrealized gains and losses on
     securities. Total comprehensive income for the three months ended September
     30, 2004 and 2003 was $2,218 million and $1,937 million, respectively.

3.   Segment Information - Following is a summary of segment results, including
     supplemental data on the Fabric and Home Care, Snacks and Coffee, Health
     Care and Baby and Family Care businesses.

<PAGE>

<TABLE>
<CAPTION>
                                SEGMENT INFORMATION

Amounts in millions
                                                  Three Months Ended September 30
                                             ----------------------------------------
                                                        Earnings Before
                                             Net Sales   Income Taxes    Net Earnings
                                             ----------------------------------------
<S>                                 <C>      <C>           <C>           <C>
Total Beauty Care                   2004     $   4,655     $   1,008     $   692
                                    2003         3,753           891         599

    Health Care                     2004     $   1,844     $     375     $   255
                                    2003         1,728           393         266

    Baby & Family Care              2004     $   2,850     $     516     $   320
                                    2003         2,607           472         294
                                             ----------------------------------------
Total Health, Baby & Family Care    2004     $   4,694     $     891     $   575
                                    2003         4,335           865         560

    Fabric & Home Care              2004     $   3,810     $     897     $   600
                                    2003         3,393           832         560

    Snacks & Coffee                 2004     $     740     $     126     $    83
                                    2003           733           143          95
                                             ----------------------------------------
Total Household Care                2004     $   4,550     $   1,023     $   683
                                    2003         4,126           975         655

Corporate                           2004     $    (155)    $     (51)    $    51
                                    2003           (19)         (189)        (53)

Total                               2004     $  13,744     $   2,871     $ 2,001
                                    2003        12,195         2,542       1,761
</TABLE>

<PAGE>



4.   Goodwill and Other Intangible Assets - Goodwill as of September 30, 2004 is
     allocated by reportable segment as follows (amounts in millions):

                                                            September 30,
                                                                  2004
     Total Beauty Care, beginning of year                       $ 14,457
                   Acquistions & divestiture                         109
                   Translation & other                               141
                   Goodwill, September 30, 2004                 $ 14,707

         Health Care, beginning of year                         $  3,315
                   Acquistions & divestiture                          11
                   Translation & other                                 7
                   Goodwill, September 30, 2004                 $  3,333

         Baby & Family Care, beginning of year                  $    941
                   Acquistions & divestiture                          --
                   Translation & other                                 8
                   Goodwill, September 30, 2004                 $    949

     Total Health, Baby & Family Care, beginning of year        $  4,256
                   Acquistions & divestiture                          11
                   Translation & other                                15
                   Goodwill, September 30, 2004                 $  4,282

         Fabric & Home Care, beginning of year                  $    614
                   Acquistions & divestiture                          27
                   Translation & other                                --
                   Goodwill, September 30, 2004                 $    641

         Snacks & Coffee, beginning of year                     $    283
                   Acquistions & divestiture                         (25)
                   Translation & other                                 1
                   Goodwill, September 30, 2004                 $    259

     Total Household Care, beginning of year                    $    897
                   Acquistions & divestiture                           2
                   Translation & other                                 1
                   Goodwill, September 30, 2004                 $    900

     Goodwill, Net, beginning of year                           $ 19,610
                   Acquistions & divestiture                         122
                   Translation & other                               157
                   Goodwill, September 30, 2004                 $ 19,889


     The increase in goodwill is due to the completed allocation of the purchase
     price relating to the September 2003 acquisition of Wella AG. The Company
     finalized the allocation of Wella purchase price to the individual assets
     acquired and liabilities assumed. In addition, the Company completed its
     analysis of collaboration plans.
<PAGE>

     Identifiable intangible assets as of September 30, 2004 are comprised of:

                                            Gross Carrying     Accumulated
                                                Amount        Amortization
     Amortizable intangible assets
        with determinable lives                  2,283             622
     Intangible assets with indefinite lives     3,029             169
     ---------------------------------------------------------------------
     Total identifiable intangible assets        5,312             791

     Amortizable intangible assets consist principally of patents, technology
     and trademarks. The intangible assets with indefinite lives consist
     primarily of certain trademarks.  The amortization of intangible assets
     for the three months ended September 30, 2004 was $48 million.

5.   Pro Forma Stock-Based Compensation - The Company has a primary stock-based
     compensation plan under which stock options are granted annually to key
     managers and directors with exercise prices equal to the market price of
     the underlying shares on the date of grant. Grants were made under plans
     approved by shareholders in 1992, 2001 and 2003. Grants issued since
     September 2002 are vested after three years and have a ten-year life.
     Grants issued from July 1998 through August 2002 are vested after three
     years and have a fifteen-year life, while grants issued prior to July 1998
     are vested after one year and have a ten-year life. The Company also makes
     other minor grants to employees, for which vesting terms and option lives
     are not substantially different.

     Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," the
     Company has elected to account for its employee stock option plans under
     APB Opinion No. 25, "Accounting for Stock Issued to Employees," which
     recognizes expense based on the intrinsic value at date of grant. As stock
     options have been issued with exercise prices equal to the market value of
     the underlying shares on the grant date, no compensation cost has resulted.
     Had compensation cost for all options

<PAGE>


     granted been determined based on the fair value at grant date consistent
     with SFAS No. 123, the Company's net earnings and earnings per share would
     have been as follows:

                                                      Three Months Ended
                                                         September 30
                                                 -----------------------------
                                                     2004             2003
                                                 -----------------------------
     Net earnings
          As reported                               $2,001           $1,761
          Pro forma expense                             59               82
                                                 -----------------------------
          Pro forma                                  1,942            1,679
                                                 -----------------------------
     Net earnings per common share
     Basic
          As reported                                $0.77            $0.67
          Pro forma adjustments                      (0.02)           (0.03)
                                                 -----------------------------
          Pro forma                                   0.75             0.64
                                                 -----------------------------
     Diluted
          As reported                                 0.73             0.63
          Pro forma adjustments                      (0.03)           (0.03)
                                                 -----------------------------
          Pro forma                                   0.70             0.60
                                                 -----------------------------


     The assumptions used to calculate the fair value of options granted are
     evaluated and revised, as necessary, to reflect market conditions and
     experience.

6.   Postretirement Benefits - The Company offers various postretirement
     benefits to its employees. Additional information about these benefits is
     incorporated herein by reference to Note 9, Postretirement Benefits and
     Employee Stock Ownership Plan, which appears on page 58-63 of the Annual
     Report to Shareholders for the fiscal year ended June 30, 2004.
<PAGE>


     The components of net periodic benefit cost are as follows:

     Amounts in millions
<TABLE>
<CAPTION>
                                                 Pension Benefits         Other Retiree Benefits
                                              -----------------------     -----------------------
                                                Three Months Ended          Three Months Ended
                                                   September 30                September 30
                                              -----------------------     -----------------------
                                                 2004         2003           2004         2003
                                              ----------   ----------     ----------   ----------
<S>                                              <C>          <C>            <C>          <C>
     Service Cost                                $ 38         $ 34           $ 17         $ 22
     Interest Cost                                 58           48             36           43
     Expected Return on Plan Assets               (43)         (37)           (83)         (82)
     Amortization of deferred amounts               1           --             (5)          --
     Recognized Net Actuarial Loss (Gain)           8            7             --           --
                                              ----------   ----------     ----------   ----------

     Gross Benefit Cost                            62           52            (35)         (17)

     Dividends on ESOP Preferred Stock             --           --            (18)         (18)
                                              ----------   ----------     ----------   ----------

     Net Periodic Benefit Cost                   $ 62         $ 52           $(53)        $(35)
                                              ==========   ==========     ==========   ==========
</TABLE>


     In 2004, the average expected return on plan assets is 7.2% and 9.5% for
     pension benefit and other retiree benefit plans, respectively.

<PAGE>


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

Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) is organized in the following sections:

Overview
Results of Operations - Three Months Ended September 30, 2004
Business Segment Discussion - Three Months Ended September 30, 2004
Financial Condition

Throughout MD&A, we refer to several measures used by management to evaluate
performance including unit volume growth, net sales and after-tax profit. We
also refer to organic sales growth (net sales excluding the impacts of
acquisitions and divestitures and foreign exchange), free cash flow and free
cash flow productivity, which are not defined under accounting principles
generally accepted in the United States of America (U.S. GAAP). The explanation
of these measures at the end of MD&A provides more details.

OVERVIEW
- --------

Our business is focused on providing branded products of superior quality and
value to improve the lives of the world's consumers. We believe this will lead
to leadership sales, profits and value creation, allowing employees,
shareholders and the communities in which we operate to prosper.

Procter & Gamble markets approximately 300 consumer products in more than 160
countries. Our products are sold primarily through mass merchandisers, grocery
stores, membership club stores and drug stores. We compete in three global
business units: Beauty Care; Health, Baby and Family Care; and Household Care.
We have operations in over 80 countries through our Market Development
Organization, which leads country business teams to build our brands in local
markets and is organized along seven geographic areas: North America, Western
Europe, Northeast Asia, Latin America, Central and Eastern Europe/Middle
East/Africa, Greater China and ASEAN/Australasia/India.

The following table provides the percentage of net sales and net earnings by
business segment for the three months ended September 30, 2004 (excludes net
sales and net earnings in Corporate):

                                      Net Sales           Net Earnings
Beauty Care                              34%                  36%

Health, Baby and Family Care:            34%                  29%
     Health Care                         13%                  13%
     Baby and Family Care                21%                  16%

Household Care:                          32%                  35%
     Fabric and Home Care                27%                  31%
     Snacks and Coffee                    5%                   4%
Total                                   100%                 100%


Summary of Results. For the quarter ended September 30, 2004, the Company
delivered sales and earnings growth above long-term targets.

     o Net sales increased 13 percent (10 percent excluding the impact of
     foreign exchange).  Unit volume increased 12 percent.

     o Net earnings increased 14 percent. Earnings growth was due primarily to
     strong top line growth, as well as the juice business divestiture completed
     in August.

     o Diluted net earnings per share increased 16 percent to $0.73.

     o Free cash flow productivity was 75 percent. Operating cash flow increased
     by 19 percent versus the comparable prior year period. While first quarter
     results for free cash flow productivity are below the long-term target, our
     objective for the fiscal year remains at 90 percent free cash flow
     productivity.

Forward Looking Statements. The markets in which the Company sells its products
are highly competitive and comprised of both global and local competitors. Going
forward, business and market uncertainties may affect results. Among the key
factors that could impact results and must be managed by the Company are:
(1)  the ability to achieve business plans, including with respect to lower
     income consumers and growing existing sales and volume profitably despite
     high levels of competitive activity, especially with respect to the product
     categories and geographical markets (including developing markets) in which
     the Company has chosen to focus;
(2)  successfully executing, managing and integrating key acquisitions
     (including the Domination and Profit Transfer Agreement with Wella);
(3)  the ability to manage and maintain key customer relationships;
(4)  the ability to maintain key manufacturing and supply sources (including
     sole supplier and plant manufacturing sources);
(5)  the ability to successfully manage regulatory, tax and legal matters
     (including product liability, patent, and other intellectual property
     matters), and to resolve pending matters within current estimates;
(6)  the ability to successfully implement, achieve and sustain cost improvement
     plans in manufacturing and overhead areas, including the success of the
     Company's outsourcing projects;
(7)  the ability to successfully manage currency (including currency issues in
     volatile countries), interest rate and certain commodity cost exposures;
(8)  the ability to manage the continued global political and/or economic
     uncertainty and disruptions, especially in the Company's significant
     geographical markets, as well as any political and/or economic uncertainty
     and disruptions due to terrorist activities;
(9)  the ability to successfully manage increases in the prices of raw materials
     used to make the Company's products;
(10) the ability to stay close to consumers in an era of increased media
     fragmentation; and
(11) the ability to stay on the leading edge of innovation.

If the Company's assumptions and estimates are incorrect or do not come to
fruition, or if the Company does not achieve all of these key factors, then the
Company's actual results could vary materially from the forward-looking
statements made herein.

RESULTS OF OPERATIONS - Three Months Ended September 30, 2004

The following discussion provides a review of results for the three months ended
September 30, 2004 versus the three months ended September 30, 2003.

<TABLE>
<CAPTION>

                         THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                         (Amounts in Millions Except Per Share Amounts)
                                Consolidated Earnings Information

                                                         Three Months Ended September 30
                                               ---------------------------------------------------
                                                     2004             2003             % CHG
                                               ---------------------------------------------------
<S>                                             <C>              <C>                    <C>
NET SALES                                       $  13,744        $  12,195              13 %
  COST OF PRODUCTS SOLD                             6,611            5,879              12 %
                                               ---------------------------------
GROSS MARGIN                                        7,133            6,316              13 %
  SELLING, GENERAL & ADMINISTRATIVE EXPENSE         4,263            3,673              16 %
                                               ---------------------------------
OPERATING INCOME                                    2,870            2,643               9 %
  TOTAL INTEREST EXPENSE                              181              141
  OTHER NON-OPERATING INCOME, NET                     182               40
                                               ---------------------------------
EARNINGS BEFORE INCOME TAXES                        2,871            2,542              13 %
  INCOME TAXES                                        870              781

NET EARNINGS                                        2,001            1,761              14 %
                                               =================================

EFFECTIVE TAX RATE                                  30.3%            30.7%


PER COMMON SHARE:
  BASIC NET EARNINGS                            $    0.77        $    0.67              15 %
  DILUTED NET EARNINGS                          $    0.73        $    0.63              16 %
  DIVIDENDS                                     $    0.25        $    0.23
  AVERAGE DILUTED SHARES OUTSTANDING              2,756.0          2,797.7

COMPARISONS AS A % OF NET SALES
- -------------------------------
  GROSS MARGIN                                      51.9%            51.8%              10
  SELLING, GENERAL & ADMINISTRATIVE EXPENSE         31.0%            30.1%              90
  OPERATING MARGIN                                  20.9%            21.7%             (80)
  EARNINGS BEFORE INCOME TAXES                      20.9%            20.8%              10
  NET EARNINGS                                      14.6%            14.4%              20
</TABLE>


Unit volume increased 12 percent reflecting the overall strength of the
Company's portfolio. Each of the Company's geographic regions grew volume
mid-single digits or greater led by developing markets with more than 20 percent
volume growth. Beauty care and the fabric and home care business also grew
volume double-digits. Health care volume increased mid-single digits against a
base period comparison that includes the impact of the Prilosec OTC launch.
Organic volume increased eight percent, which excludes the impact of
acquisitions and divestitures from year-over-year comparisons.

Net sales increased 13 percent to $13.74 billion. Net sales growth includes a
positive foreign exchange impact of three percent driven primarily by continued
strength of the Euro, British pound and Japanese yen. Mix effects reduced sales
by one percent due mainly to strong growth in developing markets, which
generally have a lower average unit sales price than the Company average.
Pricing reduced sales by one percent. Price increases in family care and health
care were offset primarily by reductions initiated in prior quarters, mainly in
Europe to address the growth of hard discounters. Sales growth reflects progress
on key brands and countries, with 14 of the Company's top 16 brands and all of
the top 16 countries delivering year-to-year volume growth. Organic sales, which
exclude the impacts of acquisitions and divestitures and foreign exchange from
year-over-year comparisons, increased six percent.
<TABLE>
<CAPTION>

                                            Volume
                                 ------------------------------
                                     With         Without
                                 Acquisitions   Acquisitions                                          Total
                                       &               &                         Mix/      Total     Impact
                                 Divestitures   Divestitures      FX    Price    Other     Impact    Ex-FX
                                 --------------------------------------------------------------------------
<S>                                   <C>            <C>          <C>     <C>      <C>      <C>       <C>
BEAUTY CARE                           25%            10%          3%     -1%      -3%       24%       21%

HEALTH, BABY & FAMILY CARE
     HEALTH CARE                      6%              4%          2%      1%      -2%        7%        5%
     BABY AND FAMILY CARE             7%              8%          3%      0%      -1%        9%        6%

HOUSEHOLD CARE
     FABRIC AND HOME CARE             11%            10%          3%     -1%      -1%       12%        9%
     SNACKS AND COFFEE                -1%            -1%          2%     -1%       1%        1%       -1%

TOTAL COMPANY                         12%             8%          3%     -1%      -1%       13%       10%
</TABLE>

Note: These sales percentage changes are approximations based on quantitative
formulas that are consistently applied.

Gross margin improved 10 basis points against a strong base period comparison
where gross margin improved 260 basis points (including approximately 80 basis
points of improvement as a result of restructuring program charges in the three
months ending September 30, 2002). Despite higher commodity prices, gross margin
expanded due to the scale benefit of volume, cost reduction programs and the
shift towards higher margin businesses, primarily Wella. Strong growth in
developing markets negatively impacted gross margins, particularly in the fabric
and home care business. The Company expects higher commodity prices will
continue through the remaining quarters of the fiscal year and have a negative
impact on gross margin.

Selling, general and administrative expenses (SG&A) as a percentage of net sales
increased 90 basis points. Most of the increase was due to the impact of Wella.
The remaining increase was due to marketing investments to support geographic
product expansions, including Herbal Essences and Lenor, and support for oral
care initiatives in North America and Western Europe. The current quarter
includes two additional months of Wella results, as the acquisition was
completed in September of 2003.


Substantially all of the increase in other non-operating income compared to the
prior year is due to the before-tax gain on the sale of the juice
business.

Net earnings increased 14 percent to $2.00 billion. Earnings growth was
primarily driven by volume, as well as the impact from the divestiture of the
juice business. This was partially offset by marketing investments, including
introductory support for new product launches and on-going support for the base
business, and the pricing activity previously discussed.

Diluted net earnings per share increased 16 percent to $0.73. As expected, the
divestiture of the juice business contributed $0.02 to earnings per share for
the quarter, or three percent of the earnings per share growth. The juice impact
reflects the gain on the sale, which is reflected in non-operating income,
partially offset by the effect of lower operating income versus the base period
due to the divestiture.


BUSINESS SEGMENT DISCUSSION
- ---------------------------

The following discussion provides a review of results by business segment. An
analysis of the results for the three months ended September 30, 2004 are
compared to the same period ended September 30, 2003.

The table below provides supplemental information on net earnings by business
segment for the three months ended September 30, 2004 versus the comparable
prior year period:

<TABLE>
<CAPTION>

                                                                Three Months Ended September 30, 2004

                                                           % Change      Earnings     % Change                    % Change
                                                             Versus       Before        Versus                      Versus
                                              Net Sales    Year Ago     Income Taxes  Year Ago     Net Earnings    Year Ago
                                           --------------------------------------------------------------------------------
<S>                                           <C>               <C>     <C>                 <C>    <C>               <C>
BEAUTY CARE                                   $   4,655         24%     $   1,008           13%    $    692          16%

HEALTH, BABY & FAMILY CARE
     HEALTH CARE                                  1,844          7%           375          -5%           255         -4%
     BABY AND FAMILY CARE                         2,850          9%           516           9%           320          9%
                                           --------------------------------------------------------------------------------
                                                  4,694          8%           891           3%           575          3%
                                           --------------------------------------------------------------------------------
HOUSEHOLD CARE
     FABRIC AND HOME CARE                         3,810         12%           897           8%           600          7%
     SNACKS AND COFFEE                              740          1%           126         -12%            83        -13%
                                           --------------------------------------------------------------------------------
                                                  4,550         10%         1,023           5%           683          4%
                                           --------------------------------------------------------------------------------
TOTAL BUSINESS SEGMENT                           13,899         14%         2,922           7%         1,950          7%
CORPORATE                                          (155)        n/a           (51)         n/a            51         n/a
                                           --------------------------------------------------------------------------------
TOTAL COMPANY                                    13,744         13%         2,871          13%         2,001         14%
</TABLE>


BEAUTY CARE
- -----------

Beauty care unit volume increased 25 percent. Organic volume increased 10
percent. The hair care business grew organic volume by double-digits led by the
Head and Shoulders, Rejoice and Herbal Essences brands. Hair care volume in
North America was down slightly, due to softness in colorants and in minor
shampoo brands which have been de-emphasized in the hair care portfolio. Olay
delivered double-digit growth behind continued geographic expansion and growth
from new initiatives including Regenerist Eye Serum. The fine fragrances
business also delivered double-digit growth led by the Lacoste brand. The
feminine care business posted double-digit growth driven by the Always/Whisper
and Naturella brands. Net sales increased 24 percent to $4.66 billion. Foreign
exchange had a positive impact of three percent which was offset by a three
percent mix impact from growth in developing markets, where unit sales prices
are generally lower than the segment average, and a one percent impact from
pricing. Net earnings increased 16 percent to $692 million due to the impact of
volume growth and cost reduction programs, which more than offset the impact of
higher commodity prices. Net earnings were also impacted by increased marketing
spending in support of initiatives, including Herbal Essences and Olay
Moisturinse "in shower" body lotion in North America. Net earnings margin
decreased due to the impact of two incremental months of Wella, which currently
has a higher SG&A expense ratio compared to the other P&G beauty care
businesses.

HEALTH, BABY AND FAMILY CARE
- ----------------------------

Health care delivered mid single-digit volume and sales growth against a base
period comparison that included the pipeline shipments and launch of Prilosec
OTC. Unit volume increased six percent. Pharmaceuticals delivered double-digit
growth led by the continued success of Actonel and Asacol. Despite softness in
certain tooth whitening products, oral care volume increased low-single digits
behind growth in dentifrice and developing markets. Net sales increased seven
percent to $1.84 billion, including a positive foreign exchange impact of two
percent, which was offset by two percent of negative mix due primarily to
developing market growth, where unit sales prices are generally lower than the
average for the business. Pricing added one percent to sales. Net earnings
decreased four percent to $255 million, primarily due to the impact of Prilosec
OTC in the base period, which included significant pipeline volume but a lower
proportion of marketing spending. In addition, marketing investments in the
current year contributed to the earnings decline, including support of oral care
initiatives in North America and Western Europe, as well as marketing spending
in pharmaceuticals. Excluding the impact of Prilosec OTC, health care delivered
double-digit sales and earnings growth.

The baby and family care business delivered unit volume growth of seven percent
for the quarter. Volume growth was driven primarily in baby care behind Feel n'
Learn training pants in North America and Baby Dry in Western Europe. Family
care volume also grew behind recent Bounty and Charmin initiatives. Net sales
increased nine percent to $2.85 billion, including a positive foreign exchange
impact of three percent. Pricing had no significant impact on sales growth.
Gains from the recent North America family care price increase were offset
primarily by the continuation of prior-quarter reductions in baby care,
including in select Western European countries to address the growth of hard
discounters and in North America for new package formats. Mix reduced sales by
one percent due primarily to growth in developing markets that have a lower
average sales price than the average for the business. Net earnings grew nine
percent to $320 million against a difficult base period comparison where
earnings grew 23 percent. Earnings improved behind the scale benefits of volume,
pricing in North America family care and cost saving projects, partly offset by
higher commodity costs and targeted pricing investments in baby care.

HOUSEHOLD CARE
- --------------

For the quarter, fabric and home care unit volume was up behind geographic
expansion and an increasing presence in multiple price tiers, including the Gain
brand in North America. Volume increased 11 percent behind developing market
growth, recent initiatives including Tide with a Touch of Downy, Febreze Scent
Stories and Air Effects, and the expansion of Lenor fabric softener in Northeast
Asia. Net sales increased 12 percent to $3.81 billion. Foreign exchange
increased sales by three percent. Pricing reduced sales by one percent driven
mainly by actions to remain competitive in Germany and France, and mix reduced
sales by one percent due to developing market growth. Net earnings increased
seven percent to $600 million. The impacts of volume growth and ongoing savings
programs were partially offset by SG&A investments to support new product
initiatives, higher costs associated with the fabric care capacity expansion in
North America and higher commodity prices. Additionally, earnings margin was
negatively impacted by the aforementioned pricing actions and the mix effect of
developing market growth, which has a lower gross margin than the balance of the
business.

Snacks and coffee sales were $740 million, an increase of one percent behind
positive foreign exchange of two percent that offset the impact of a one percent
volume decline. Continued competitive discounting and trade promotion activity
had an adverse impact on volume growth. Net earnings were $83 million, down 13
percent driven by higher coffee commodity prices and marketing investments
behind innovation in the snacks business.

CORPORATE
- ---------

Corporate includes certain operating and non-operating activities not allocated
to specific business units. These include: the incidental businesses managed at
the corporate level, financing and investing activities, certain restructuring
charges, other general corporate items and the historical results of divested
businesses, including the juice business, which was divested in August of 2004.
Corporate also includes reconciling items to adjust the accounting policies used
in the segments to U.S. GAAP. The most significant reconciling items include
income taxes, which are reflected in the segments at statutory rates,
adjustments for unconsolidated entities (where we do not control the financial
and operating decisions, and therefore, do not consolidate them) and
subsidiaries where we do not have 100% ownership. Because both unconsolidated
entities and less than 100 percent owned subsidiaries are managed as integral
parts of the Company, they are accounted for similar to a wholly-owned
subsidiary for management and segment purposes. This means we recognize 100
percent of each income statement component to before-tax earnings. In
determining net earnings for the segments, we apply the statutory tax rates and
eliminate the share of earnings appliable to other ownership interests, in a
manner similar to minority interest. Accordingly, the relationship between
before-tax earnings and net earnings is impacted by the adjustments necessary to
offset the effect of the business segment treatment of taxes, unconsolidated
entities, and less than 100 percent owned subsidiaries discussed above.

Net earnings for the quarter were $51 million versus a net loss in the base
period of $53 million. The current year earnings reflect the net impact of the
juice divestiture, which more than offset the normal level of Corporate
expenses.  The current period non-operating gain was partially offset by the
reduction in operating results for the juice business versus the prior year. Due
to the divestiture, the current period includes only one month of operating
results.


FINANCIAL CONDITION
- -------------------

Operating Activities
- --------------------

Cash generated from operating activities for the three months ended September
30, 2004 was $1.92 billion compared to $1.61 billion in the prior year period,
an increase of 19%. The increase in cash from operating activities was driven by
earnings growth adjusted for non-cash items (depreciation, amortization and
deferred income taxes). Accounts receivable and inventory both increased, but at
a lower percentage than overall sales growth.

Investing Activities
- --------------------

Investing activities in the current year used $413 million compared to $5.30
billion in the prior year period, which included the acquisition of Wella.
Capital expenditures were $413 million, or three percent of net sales which is
below the Company's long-term target of four percent. Acquisitions used $335
million of cash, primarily driven by the acquisitions of a pharmaceutical and a
fabric and home care business in Europe. Proceeds from asset sales were $366
million, which includes the divestiture of the juice business.

Financing Activities
- --------------------

Financing activities used net cash of $771 million in the current year compared
to a source of cash of $1.96 billion in the base period. The difference relates
primarily to increased borrowing in the base period to fund the Wella
acquisition. The Company's gross debt position increased $437 million during the
three months ended September 30, 2004. The Company also issued $3 billion of
long-term debt during the current year to reduce its short-term commercial paper
balances. Treasury purchases were $622 million compared to $274 million last
year, when the Company was preserving capital for the Wella acquisition.

At June 30, 2004, the Company's current liabilities exceeded current assets by
$5.03 billion. The key driver was the use of commercial paper to partially fund
the Wella acquisition. At September 30, 2004, this excess had been reduced to
$3.19 billion. The Company anticipates being able to support its short-term
liquidity through cash generated from operations. The Company also has very
strong long- and short-term ratings which will enable it to refinance this debt
at favorable rates in commercial paper and bond markets. In addition, the
Company has agreements with a diverse group of creditworthy financial
institutions that, if needed, would provide sufficient credit funding to meet
short-term financing requirements.

NON-GAAP MEASURES
- -----------------

Our discussion of financial results includes several measures not defined by
U.S. GAAP. We believe these measures provide our investors with additional
information about the underlying results and trends of the Company, as well as
insight to some of the metrics used to evaluate management. When used in MD&A,
we have provided the comparable GAAP measure in the discussion.

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

OTHER MEASURES
- --------------

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

Free Cash Flow Productivity. Free cash flow productivity is defined as the ratio
of free cash flow to net earnings. The Company's long-term target is to generate
free cash at or above 90 percent of net earnings. Free cash flow is also one of
the measures used to evaluate senior management.

The reconciliation of free cash flow and free cash flow productivity is provided
below:
<TABLE>
<CAPTION>

<S>                 <C>            <C>         <C>           <C>              <C>

                  Operating      Capital       Free          Net           Free Cash
($MM)             Cash Flow     Spending     Cash Flow     Earnings     Flow Productivity
- -----------------------------------------------------------------------------------------
Jul - Sep'03        1,606          364         1,242         1,761            71%

Jul - Sep'04        1,918          413         1,505         2,001            75%

</TABLE>


<PAGE>


Item 4.  Controls and Procedures

The Company's Chairman of the Board, President and Chief Executive, A.G. Lafley,
and the Company's Chief Financial Officer, Clayton C. Daley, Jr., have evaluated
the Company's internal controls and disclosure controls systems as of the end of
the period covered by this report.

Messrs. Lafley and Daley have concluded that the Company's disclosure controls
systems are functioning effectively to provide reasonable assurance that the
Company can meet its disclosure obligations. The Company's disclosure controls
system is based upon a global chain of financial, staff and general business
reporting lines that converge in the world-wide headquarters of the Company in
Cincinnati, Ohio. The reporting process is designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
with the Commission is recorded, processed, summarized and reported within the
time periods specified in the Commission's rules and forms. Consistent with SEC
suggestion, the Company has a Disclosure Committee consisting of key Company
personnel designed to review the accuracy and completeness of all disclosures
made by the Company.

In connection with the evaluation described above, no changes in the Company's
internal control over financial reporting occurred during the Company's first
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.

<PAGE>


PART II. OTHER INFORMATION

Item 2.  Changes in Securities, Use of Proceeds and Issuer Purchases
         of Equity Securities
<TABLE>
<CAPTION>

                                   ISSUER PURCHASES OF EQUITY SECURITIES

                                                                      Total Number of        Maximum Number
                                                                    Shares Purchased as    of Shares that May
                                                                      Part of Publicly       Yet Be Purchased
                        Total Number of      Average Price Paid      Announced Plans or    Under the Plans or
        Period        Shares Purchased(1)      per Share(2)             Programs(3)            Programs(3)

<S>                       <C>                     <C>                         <C>                      <C>
    7/1/04-7/31/04        2,291,462               $53.67                      0                        0
    8/1/04-8/31/04        4,582,484               $53.58                      0                        0
    9/1/04-9/30/04        4,602,469               $54.97                      0                        0
</TABLE>


(1)  All share repurchases were made in open-market transactions. None of these
     transactions were made pursuant to a publicly announced repurchase plan.
     This table excludes shares withheld from employees to satisify minimum tax
     withholding requirements on option exercises and other equity-based
     transactions. The Company administers employee cashless exercises through
     an independent, third party broker and does not repurchase stock in
     connection with cashless exercises.

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

(3)  No share repurchases were made pursuant to a publicly announced plan or
     program. The Company's strategy for cash flow utilization is to pay
     dividends first and then repurchase Company common stock to cover option
     exercises made pursuant to the Company's stock option programs. The
     remaining cash is then available for strategic acquisitions and
     discretionary repurchase of the Company's common stock.

<PAGE>

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

At the Company's 2004 Annual Meeting of Shareholders held on October 12, 2004,
the following actions were taken:

The following Directors were elected for terms of office expiring in 2007:

                                        VOTES                        BROKER
                       VOTES FOR       WITHHELD    ABSTENTIONS*    NON-VOTES*
                     --------------------------------------------------------
R. KERRY CLARK       2,164,762,645    56,976,813       N/A            N/A
JOSEPH T. GORMAN     2,168,269,583    53,460,875       N/A            N/A
LYNN M. MARTIN       2,166,210,366    55,520,092       N/A            N/A
RALPH SNYDERMAN      2,170,824,127    50,906,331       N/A            N/A
ROBERT D. STOREY     2,157,608,947    64,121,511       N/A            N/A

* Pursuant to the terms of the Notice of Annual Meeting and Proxy Statements,
  proxies received were voted, unless authority was withheld, in favor of the
  election of the five nominees named.

In addition, the following Directors continued to serve as Directors after the
meeting:

         Norman R. Augustine
         Bruce L. Byrnes
         Scott D. Cook
         Domenico DeSole
         A. G. Lafley
         Charles R. Lee
         W. James McNerney, Jr.
         Johnathan A. Rodgers
         John F. Smith, Jr.
         Margaret C. Whitman
         Ernesto Zedillo

A proposal by the Board of Directors to ratify the appointment of Deloitte &
Touche LLP as the Company's independent registered public accounting firm to
conduct the annual audit of the financial statements of the Company and its
subsidiaries for the fiscal year ending June 30, 2005, was approved by the
shareholders. The shareholders cast 2,135,461,711 votes in favor of this
proposal and 64,340,955 votes against. There were 21,927,792 abstentions.

A proposal by the Board of Directors to approve an amendment to the Amended
Articles of Incorporation to increase the authorized number of shares of Common
Stock was approved by the shareholders. The shareholders cast 1,991,734,532
votes in favor of this proposal and 205,903,439 votes against. There were
24,092,487 abstentions.

A proposal by the Board of Directors to approve an amendment to the Code of
Regulations to provide for the annual election of Directors was defeated by the
shareholders. The Board recommended a vote against the amendment. The proposal
required the affirmative vote of a majority of the Company's issued and
outstanding shares. The shareholders cast 963,030,553 (35.63% of the issued and
outstanding shares) votes in favor of this proposal and 852,001,796 votes
against. There were 32,478,467 abstentions and 374,219,642 broker non-votes.

A shareholder resolution proposed by the People for the Ethical Treatment of
Animals was defeated by the shareholders. The proposal requested that the Board
of Directors implement rules and regulations consistent with in-home food
studies for pet nutrition. The Board opposed the resolution. The shareholders
cast 53,743,362 votes in favor of the resolution and 1,642,826,656 against.
There were 150,003,199 abstentions and 375,157,241 broker non-votes.

<PAGE>


Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         (3-1)   Amended Articles of Incorporation

         (3-2)   Regulations (Incorporated by reference to Exhibit (3-2) of the
                 Company's Annual Report on Form 10-K for the year ended June
                 30, 2003).

         (11)    Computation of Earnings per Share.

         (12)    Computation of Ratio of Earnings to Fixed Charges.

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

         (32)    Section 1350 Certifications.

(b)      Reports on Form 8-K

         During the quarter ended September 30, 2004, the Company did not file
         any Current Reports on Form 8-K. During the quarter ended September 30,
         2004, the Company furnished reports on Form 8-K pursuant to Item 7.01
         ("Regulation FD Disclosure") dated September 9, 2004, relating to
         updating previously issued guidance for the July-September 2004
         quarter. The Company also furnished reports on Form 8-K containing
         information pursuant to Item 8.01 ("Other Events") dated September 1,
         2004, relating to A.G. Lafley's extension of his Rule 10b5-1 stock
         trading plan. The Company also furnished reports on Form 8-K containing
         information pursuant to Item 9 ("Regulation FD Disclosure") dated July
         14, 2004, relating to the announcement of a quarterly dividend of
         twenty-five cents ($.25) per share on the Common Stock and on the
         Series A ESOP Convertible Class A Preferred Stock. The Company also
         furnished reports on Form 8-K containing information pursuant to Item
         12, ("Results of Operations and Financial Condition") dated August 2,
         2004, relating to the announcement of earnings for the quarter and
         fiscal year ended June 30, 2004.


<PAGE>


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.


THE PROCTER & GAMBLE COMPANY


/S/JOHN K. JENSEN
- -------------------------------
(John K. Jensen)
Vice President and Comptroller

October 28, 2004
- -------------------------------
Date


                                 EXHIBIT INDEX

Exhibit No.

         (3-1)   Amended Articles of Incorporation

         (3-2)   Regulations (Incorporated by reference to Exhibit (3-2) of the
                 Company's Annual Report on Form 10-K for the year ended June
                 30, 2003).

         (11)    Computation of Earnings per Share.

         (12)    Computation of Ratio of Earnings to Fixed Charges.

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

         (32)    Section 1350 Certifications.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>2
<FILENAME>jas04x3.txt
<DESCRIPTION>EXHIBIT 3 - 10-Q JAS 2004
<TEXT>
 EXHIBIT (3-1)

                        Amended Articles of Incorporation
<PAGE>
                                AMENDED ARTICLES

                                       of

                                  INCORPORATION

                                       of

                          THE PROCTER & GAMBLE COMPANY




                                [GRAPHIC OMITTED]



                                  October, 2004

<PAGE>

                         CERTIFICATE OF AMENDED ARTICLES

                                OF INCORPORATION

                                       OF

                          THE PROCTER & GAMBLE COMPANY


        A. G. Lafley, Chairman of the Board, President and Chief Executive, and
James J. Johnson, Chief Legal Officer and Secretary, of The Procter & Gamble
Company, an Ohio corporation, with its principal office located in Cincinnati,
Hamilton County, Ohio, do hereby certify that at a meeting of the Board of
Directors of said corporation, duly called and held on the 12th day of October,
2004, at which a quorum of such Directors was present, the following resolution
consolidating the Amended Articles of all previously adopted amendments thereto
presently in force was adopted by the affirmative vote of all Directors present:

       RESOLVED, That pursuant to the authority granted to this Board of
       Directors by Section 1701.72(B) of the Ohio Revised Code, in order to
       consolidate the provisions of the Amended Articles of Incorporation of
       the Company and all amendments thereto heretofore adopted and still in
       force, the Amended Articles of Incorporation are hereby further amended
       to read in their entirety as presented at this meeting.

and that the Amended Articles of Incorporation of the corporation as thus
presented to and approved by the Directors at said meeting are as follows:

                        AMENDED ARTICLES OF INCORPORATION

                                       OF

                          THE PROCTER & GAMBLE COMPANY

       THE PROCTER & GAMBLE COMPANY, a corporation under the laws of the State
of Ohio, adopts these Amended Articles of Incorporation to supersede and take
the place of its existing Amended Articles of Incorporation, and all amendments
thereof, that are in force at this time, and for such purpose certifies as
follows:

       First: The name of the corporation is The Procter & Gamble Company.

       Second: The place in the State of Ohio where its principal office is
located is in the City of Cincinnati, in Hamilton County.

       Third: The purposes for which it is formed are to produce, manufacture,
buy, sell, merchandise and generally deal in the following:

       1. Soap, soap products, cleansers, detergents and cleaning products of
       any and all kinds, for any and all uses and purposes.

       2. Cosmetics, perfumes, toilet powders, toilet waters, and all other
       toilet preparations and articles.

       3. Fats and oils, hydrogenated fats and oils, and derivatives of fats and
       oils for any and all uses and purposes.

       4. Cottonseed, soybeans, other oilseeds, oilseed meals, linters, cotton,
       hulls and any products and any by-products resulting from the processing
       of any of these or any products made therefrom.

       5. Cellulose, cellulose products, purified cellulose, forest products,
       fibrous products, paper and paper products of any and all kinds, and any
       products and any by-products resulting from the processing of any of
       these or any products made therefrom.

       6. Food products of any and all kinds.

       7. Candles, stearine, stearic acid, glycerine, silicate of soda, caustic
       soda and any similar or related products.

       8. Organic and inorganic chemicals, chemical compounds, drugs and
       pharmaceuticals.

       9. All substances and products, kindred to or competitive with any or all
       of the foregoing and all that may result from or be convenient to the
       production, manufacture, sale and dealing in any or all of the foregoing
       substances and products.

       10. All substances, materials, and articles made from or containing any
       or all of the foregoing products or entering into or convenient for the
       manufacture and sale of any or all of the foregoing products.

       The purpose for which it is formed also include the power to do all other
things necessary or incident to any or all of the foregoing purposes, including
provision for insurance, financial and other services and of means for the
development, promotion, advertising, marketing and transportation of raw
materials, intermediate or finished products and the power to purchase, acquire,
hold, convey, lease, mortgage or dispose of stock, securities and property, real
or personal, tangible or intangible, in connection therewith or in furtherance
thereof.

       In addition to the foregoing specified purposes and not limited in any
manner thereby, the purpose for which it is formed is to engage in any lawful
act or activity for which corporations may be formed under Sections 1701.01 to
1701.98, inclusive, of the Ohio Revised Code.

       Fourth: The authorized number of shares without par value is ten billion
eight hundred million (10,800,000,000) of which six hundred million
(600,000,000) are classified and designated as Class A Preferred Stock, two
hundred million (200,000,000) are classified and designated as Class B Preferred
Stock and ten billion (10,000,000,000) are classified and designated as Common
Stock.

       1. The express terms and provisions of the shares classified and
       designated as Class A Preferred Stock and Class B Preferred Stock are as
       follows:

              (a) The holders of the shares classified and designated as Class A
              Preferred Stock shall be entitled to one (1) vote per share at all
              meetings of the shareholders of the Company. The holders of the
              shares classified and designated as Class B Preferred Stock shall
              not be entitled to vote at meetings of shareholders of the
              Company, other than as provided by law.

              (b) The Board of Directors is authorized, subject to any
              limitations prescribed by law and to the provisions of this
              Article Fourth, to adopt amendments to these Amended Articles of
              Incorporation in respect of any unissued or treasury shares of the
              Class A Preferred Stock and Class B Preferred Stock and thereby to
              fix or change: the division of such shares into series and the
              designation and authorized number of shares of each series; the
              dividend rate; the dates of payment of dividends and the dates
              from which they are cumulative; liquidation price; redemption
              rights and price; sinking fund requirements; conversion rights;
              and restrictions on the issuance of such shares or any series
              thereof. In addition the Board of Directors is hereby authorized
              to similarly fix or change any or all other express terms in
              respect of the Class A Preferred Stock and Class B Preferred Stock
              as may be permitted or required by law.

              (c) Upon the conversion of any share of Class A Preferred Stock
              and Class B Preferred Stock, the stated capital of the Company
              shall be reduced or increased in such a manner and at such a rate
              so that the stated capital attributable to any share issued upon
              the exercise of such conversion rights shall be the same as any
              other share of its class and not the stated capital of the share
              so converted.

              (d) The holders of the shares of Class A Preferred Stock and Class
              B Preferred Stock shall receive dividends, when and as declared by
              the Board of Directors, out of funds available for the payment of
              dividends, before any dividend shall be paid on the shares of
              Common Stock. Such dividends shall be payable at the rate per
              share per annum, and no more, and pursuant to the other terms as
              shall have been fixed by the Board of Directors, and no dividends
              shall be paid on the shares of Common Stock unless the current
              dividend, and all the arrears of dividends, if any, on the
              outstanding shares of the Class A Preferred Stock and Class B
              Preferred Stock shall have been paid or provision shall have been
              made for the payment thereof.

              (e) In case of the dissolution or liquidation of the Company,
              before any payment shall be made to the holders of the Common
              Stock, the holders of the Class A Preferred Stock and Class B
              Preferred Stock shall be entitled to be paid from the assets
              available therefor the liquidation price fixed by the Board of
              Directors, and all accrued and unpaid dividends thereon, but shall
              not be entitled to participate any further in the distribution of
              the assets of the Company.

              (f) Pursuant to subsection (b) of this Section 1, there is hereby
              established a series of the Class A Preferred Stock with nine
              million ninety thousand nine hundred nine (9,090,909) shares
              authorized which is designated as "Series A ESOP Convertible Class
              A Preferred Stock" with express terms as set forth in Appendix A
              attached hereto and incorporated herein as if fully set forth
              herein.1

              (g) Pursuant to subsection (b) of this Section 1, there is hereby
              established a series of the Class A Preferred Stock with nineteen
              million, one hundred forty-two thousand, four hundred eighteen
              (19,142,418) shares authorized which is designated as "Series B
              ESOP Convertible Class A Preferred Stock" with express terms as
              set forth in Appendix B attached hereto and incorporated herein as
              if fully set forth herein.2

       2. The express terms and provisions of the shares classified and
designated as Common Stock are as follows:

              (a) The holders of said shares shall be entitled to one (1) vote
              per share at all meetings of the shareholders of the Company.

              (b) After the payment to the holders of all Class A Preferred
              Stock and Class B Preferred Stock of the preferential amounts to
              which they shall be entitled in the event of the dissolution or
              liquidation of the Company, the holders of the shares of Common
              Stock shall be entitled to all of the residue of the assets and
              shall receive payment thereof in proportion to the shares held by
              them respectively.

              (c) Subject to the express terms and provisions of the shares
              designated as Class A Preferred Stock and Class B Preferred Stock,
              the holders of the shares of Common Stock shall have all, and all
              other rights, interests, powers and privileges of shareholders of
              corporations for profit as provided by law, without any
              restrictions, qualifications or limitations thereof.

       Fifth: The stated capital of the Company shall be the aggregate stated
capital of all classes of outstanding shares:

              (a) The stated capital of shares with par value shall be the par
              value of such shares.

              (b) The stated capital of shares without par value shall be One
              Dollar ($1.00) per share or such other amount required by law.

       Sixth: The following provisions are hereby agreed to for the purpose of
defining, limiting and regulating the exercise of the authority of the Company,
or of its shareholders, or of any class of shareholders, or of its directors, or
for the purpose of creating and defining rights and privileges of the
shareholders among themselves:

       1.     The Company may purchase, hold, sell, and reissue any of its
              shares and to the extent that the authority to do the same may be
              granted under these Articles, the Board of Directors shall have
              power to do all said acts, without any action by shareholders,
              except as otherwise provided below in this Article Sixth.

       2.     No holder of shares of any class shall have any right, pre-emptive
              or other, to subscribe for or to purchase from the Company any of
              the shares of any class of the Company hereafter issued or sold.

       3.     (a) Except as otherwise provided in Subsection (b) of this Section
              3 the following transactions shall require the affirmative vote of
              the holders of at least eighty percent (80%) of the outstanding
              shares of capital stock of the Company entitled to vote thereon,
              considered for the purposes of this Section 3 as one class:

                    (i) the purchase by the Company of any of its shares of any
                    class from any Related Person, if any such shares have been
                    beneficially owned by the Related Person less than two years
                    prior to the date of such purchase or any agreement in
                    respect thereof;

                    (ii) any merger or consolidation of the Company or a
                    subsidiary of the Company with or into any Related Person,
                    in each case without regard to which entity is the surviving
                    entity;

                    (iii) any sale, lease, exchange, transfer or other
                    disposition of all or any substantial part of the assets of
                    the Company or a subsidiary of the Company to or with any
                    Related Person;

                    (iv) the purchase by the Company from any Related Person of
                    any assets or securities, or a combination thereof, except
                    assets or securities or a combination thereof so acquired in
                    a single transaction or a series of related transactions
                    having an aggregate fair market value of less than Fifty
                    Million Dollars ($50,000,000);

                    (v) the issuance or transfer of any securities of the
                    Company to any Related Person for cash;

                    (vi) the adoption of any plan or proposal for the voluntary
                    dissolution, liquidation, spin-off, or split-up of any kind
                    of the Company or a subsidiary of the Company, or a
                    recapitalization or reclassification of any securities of
                    the Company, proposed by or on behalf of any Related Person;
                    or

                    (vii) any other material transaction involving the Company
                    or a subsidiary of the Company with, or proposed by or on
                    behalf of, any Related Person.

              Such affirmative vote shall be required notwithstanding the fact
              that no vote may be required, or that some lesser percentage may
              be specified, by law or in any agreement with any national
              securities exchange.

              (b) The provisions of this Section 3 shall not apply to any
              purchase described in Subsection (a)(i) of this Section 3 if the
              purchase would be made as part of any purchase by the Company of
              its shares made on the same terms to all holders of the shares to
              be purchased and complying with the applicable requirements of the
              Securities Exchange Act of 1934. the provisions of this Section 3
              shall also not apply to any transaction described in Subsection
              (a)(ii) through (vii) of this Section 3 if the Board of Directors
              of the Company shall by resolution have approved a memorandum of
              understanding with such Related Person with respect to and
              substantially consistent with such transaction prior to the time
              the Related Person became such, or if the transaction is approved
              by a resolution adopted by the affirmative vote of at least
              two-thirds (2/3) of the members of the whole Board of Directors of
              the Company at any time prior to the consummation thereof.

              (c) For the purposes of this Section 3, and as guidance to the
              Board of Directors for the purpose of Subsection (d) hereof, the
              term "Related Person" shall mean (1) any individual, firm,
              corporation or other entity, or group thereof acting or agreeing
              to act in the manner set forth in Rule 13d-5 under the Securities
              Exchange Act of 1934 (the "Act") as in effect on October 8, 1985,
              who is the beneficial owner, directly or indirectly, of five
              percent (5%) or more of the outstanding shares of capital stock of
              the Company entitled to vote generally in the election of
              directors and (2) any "Affiliate" or "Associate" of any of the
              above or of any entity or group (or any member thereof) described
              in Clause (1) above, whether or not acting as a Director of the
              Company. The terms "Affiliate" and "Associate" as used herein
              shall have the respective meanings ascribed to such terms in The
              General Rules and Regulations under the Act as in effect on
              October 8, 1985, and shall include any person otherwise acting in
              the capacity of an "Associate" or "Affiliate". The Term "Related
              Person" shall not include the Company, any subsidiary of the
              Company, any employee benefit plan of the Company or of a
              subsidiary of the Company, or any trustee of or fiduciary with
              respect to any such plan acting in such capacity. In addition to
              all shares beneficially owned, directly or indirectly, a Related
              Person shall also be deemed to be the beneficial owner of any
              shares of capital stock of the Company (1) which it has the right
              to acquire pursuant to any agreement, or upon exercise of
              conversion rights, warrants or options, or otherwise; or (2) which
              are beneficially owned, directly or indirectly (including shares
              deemed owned through application of Clause (1) above), (A) by its
              "Affiliate" or "Associate" or (B) by any other individual, firm
              corporation, or other entity (or any "Affiliate" or "Associate"
              thereof) with which it or its "Affiliate" or "Associate" of (B) by
              any other individual, firm, corporation, or other entity (or any
              "Affiliate" or "Associate" thereof) with which it or its
              "Affiliate" or "Associate" has any agreement, arrangement or
              understanding for the purpose of acquiring, holding, voting or
              disposing of capital stock of the Company. For the purposes of
              this Section 3, (A) the outstanding shares of any class of capital
              stock of the Company shall include shares deemed owned through the
              application of Clauses (1) and (2) of the preceding sentence but
              shall not include any other shares which may be issuable pursuant
              to any agreement, or upon exercise of conversion rights, warrants
              or options, or otherwise, and (B) subsidiary shall mean any
              corporation of which the Company owns, directly or indirectly,
              fifty percent (50%) or more of the voting stock.

              (d) The Board of Directors of the Company shall have the power and
              duty to determine for the purposes of this Section 3, on the basis
              of information then known to it, whether (1) any individual, firm,
              corporation, or other entity is a Related Person or is an
              "Affiliate" or an "Associate", or a group thereof; (2) any
              proposed sale, lease, exchange or other disposition of part of the
              assets of the Company or a subsidiary of the Company involves all
              or any substantial part of the assets of the Company or a
              subsidiary of the Company; (3) any assets or securities, or a
              combination thereof, to be acquired by the Company, have an
              aggregate fair market value of less than Fifty Million Dollars
              ($50,000,000) and whether the same are proposed to be acquired in
              a single transaction or a series of related transactions; (4) any
              plan or proposal is for the voluntary dissolution, liquidation,
              spin-off or split-up of any kind of the Company or a subsidiary of
              the Company, or is a recapitalization or reclassification of any
              securities of the Company, and whether any plan or proposal is
              proposed by or on behalf of any Related Person; (5) any
              transaction involving the Company or a subsidiary of the Company
              with, or proposed by or on behalf of any Related Person is
              material, and whether any such transaction is proposed by or on
              behalf of any Related Person; and (6) the memorandum of
              understanding referred to above is substantially consistent with
              the transaction to which it relates.

              (e) The Board of Directors of the Company, when evaluating any
              material, unsolicited offer of another party to (1) merge or
              consolidate the Company or a subsidiary of the Company with or
              into another corporation; (2) purchase or otherwise acquire all or
              any substantial part of the assets of the Company or a subsidiary
              of the Company; (3) sell any assets or securities to the Company;
              (4) purchase any securities from the Company or from the holders
              thereof in a tender offer; (5) dissolve, liquidate, spin off or
              split up the Company or a subsidiary of the Company, or to
              recapitalize or reclassify any securities of the Company; or (6)
              involve the Company or a subsidiary of the Company in any other
              material transaction, shall, in connection with the exercise of
              its judgment in determining what is in the best interests of the
              Company and its shareholders, give due consideration to (A) all
              relevant factors, including without limitation the financial and
              managerial resources and future prospects of the other party and
              the social, legal, environmental and economic effects on the
              employees, customers, suppliers and other affected persons, firms
              and corporations and on the communities and geographical areas in
              which the Company and its subsidiaries operate or are located and
              on any of the business and properties of the Company or any of its
              subsidiaries, as well as such other factors as the Directors deem
              relevant; and (B) the amount and form of the consideration being
              offered in relation to the then current market price for the
              Company's outstanding shares of capital stock, in relation to the
              then current value of the Company in a freely negotiated
              transaction or transactions and in relation to the Board of
              Directors' estimate of the future value of the Company (including
              the unrealized value of its properties and assets) as in
              independent concern. In evaluating any such offer, the Board of
              Directors shall be deemed to be performing their duly authorized
              duties and acting in good faith and in the best interests of the
              Company within the meaning of Section 1701.13 of the Ohio Revised
              Code, as it may be amended from time to time, and the Company's
              Regulations.

       4. The statutes of Ohio require that action on certain specified matters
       at a shareholders' meeting shall be taken by the affirmative vote of the
       holders of more than a majority of shares entitled to vote thereon,
       unless other provision is made in the Articles of Incorporation. On all
       these specified matters action may be taken by the affirmative vote of a
       majority of shares entitled to vote thereon or, if the vote is required
       to be by classes, by the affirmative vote of a majority of each class of
       shares entitled to vote thereon as a class, except that any amendment,
       alteration, addition to or repeal of this Article Sixth and of any of the
       matters specified above in Section 3 of this Article Sixth as requiring a
       vote other than the affirmative vote of the holders of a majority of the
       shares entitled to vote thereon, may only be taken, (1) prior to the date
       of the annual meeting in 1990, by the affirmative vote of the holders of
       at least eighty percent (80%) of the outstanding shares of capital stock
       of the Company entitled to vote thereon, considered for the purposes of
       this Section 4 as one class; (2) from the date of the annual meeting in
       1990 to, and including the date of the annual meeting in 2000, by the
       affirmative vote of the holders of at least a majority of the outstanding
       shares of capital stock of the Company entitled to vote thereon,
       considered for the purposes of this Section 4 as one class, provided that
       during such period said vote may be increased at any time to the
       affirmative vote of the holders of at least eighty percent (80%) of the
       outstanding shares of capital stock of the Company by a resolution
       adopted by at least two-thirds (2/3) of the members of the whole Board of
       Directors3; (3) after the date of the annual meeting in 2000, by the
       affirmative vote of the holders of at least a majority of the outstanding
       shares of capital stock of the Company entitled to vote thereon,
       considered for the purposes of this Section 4 as one class.

       Seventh: No holder of shares of any class shall have the right to vote
cumulatively in the election of Directors.

       IN WITNESS WHEREOF, said A. G. Lafley, Chairman of the Board, President
and Chief Executive, and James J. Johnson, Chief Legal Officer and Secretary, of
The Procter & Gamble Company, acting for and on behalf of said corporation, have
hereunto subscribed their names and caused the seal of said corporation to be
hereunto affixed this 12th day of October, 2004.

                                       THE PROCTER & GAMBLE COMPANY



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



                                       JAMES J. JOHNSON
                                       Chief Legal Officer and Secretary

- -----------------------
1     As a result of four two-for-one stock splits on the Common Stock effective
      October 10, 1989, May 15, 1992, August 22, 1997 and May 21, 2004, the
      number of shares of Series A ESOP Convertible Class A Preferred Stock
      authorized was automatically increased to 145,454,544 in accordance with
      the terms of paragraph 9(A)(1) of Appendix A. (This footnote is not a part
      of the Company's Amended Articles of Incorporation, but is included to
      provide up-to-date information on the status of Series A ESOP Convertible
      Class A Preferred Stock.)

2     As a result of two two-for-one stock splits effective August 22, 1997 and
      May 21, 2004, the number of shares of Series B ESOP Convertible Class A
      Preferred Stock authorized was automatically increased to 76,569,672 in
      accordance with the terms of paragraph 9(A)(1) of Appendix B. (This
      footnote is not a part of the Company's Amended Articles of Incorporation,
      but is included to provide up-to-date information on the status of Series
      B ESOP Convertible Class A Preferred Stock.)

3     On October 9, 1990, in accordance with this provision, the vote required
      was increased to 80% of the outstanding shares of capital stock of the
      Company. (This footnote is not a part of the Company's Amended Articles of
      Incorporation, but is included to provide up-to-date information.)

<PAGE>

                                   APPENDIX A4

                SERIES A ESOP CONVERTIBLE CLASS A PREFERRED STOCK
              (hereinafter referred to as Series A Preferred Stock)

1.     Issuance and Cancellation.

       (A) All shares of Series A Preferred Stock redeemed or purchased by the
Company shall be retired and shall be restored to the status of authorized but
unissued shares of Class A Preferred Stock.

       (B) Shares of Series A Preferred Stock shall be issued only to a trustee
or trustees acting on behalf of an employee stock ownership trust or plan or
other employee benefit plan of the Company. In the event of any transfer of
shares of Series A Preferred Stock to any person other than any such plan
trustee or trustees, the shares of Series A Preferred Stock so transferred, upon
such transfer and without any further action by the Company or the holder, shall
be automatically converted into shares of Common Stock on the terms otherwise
provided for the conversion of shares of Series A Preferred Stock into shares of
Common Stock pursuant to Section 5 hereof and no such transferee shall have any
of the voting powers, preferences and relative, participating, optional or
special rights ascribed to shares of Series A Preferred Stock hereunder but,
rather, only the powers and rights pertaining to the Common Stock into which
such shares of Series A Preferred Stock shall be so converted. Certificates
representing shares of Series A Preferred Stock shall be legended to reflect
such restrictions on transfer. Notwithstanding the foregoing provisions of this
Section 1, shares of Series A Preferred Stock (i) may be converted into shares
of Common Stock as provided by Section 5 hereof and the shares of Common Stock
issued upon such conversion may be transferred by the holder thereof as
permitted by law and (ii) shall be redeemable by the Company upon the terms and
conditions provided by Sections 6, 7 and 8 hereof.

2.     Dividends and Distributions.

       (A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series A Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors out of funds legally available
therefor, cash dividends ("Preferred Dividends") in an amount per share
initially equal to $8.124 per share per annum, subject to adjustment from time
to time as hereinafter provided, (such amount, as adjusted from time to time,
being hereinafter referred to as the "Preferred Dividend Rate"), payable
quarterly, one-fourth on the third day of March, one-fourth on the third day of
June, one-fourth on the third day of September, and one-fourth on the third day
of December of each year (each a "Dividend Payment Date") commencing on June 3,
1989, to holders of record at the start of business on such Dividend Payment
Date, provided that if the Board of Directors has declared since the prior
Dividend Payment Date a quarterly dividend on the Common Stock at a rate that
exceeds one-fourth of the Preferred Dividend Rate in effect on such day, the
holders of record on the start of business on the payment date for such dividend
on the Common Stock shall be entitled to receive a cash dividend in an amount
per share equal to the quarterly dividend declared on a share of Common Stock,
payable on the same date as such dividend on the Common Stock, and provided
further that the Dividend Payment Date for the Series A Preferred Stock shall
thereafter be the same date as the payment date for the dividend on the Common
Stock or if no dividend is declared on the Common Stock in any quarter, the
Dividend Payment Date shall be, as appropriate, the fifteenth day of February,
May, August or November or if such days are not a day on which the New York
Stock Exchange is open for business, then the next preceding day when the New
York Stock Exchange is open for business. Preferred Dividends shall begin to
accrue on outstanding shares of Series A Preferred Stock from the date of
issuance of such shares of Series A Preferred Stock. Preferred Dividends shall
accrue on a daily basis, based on the Preferred Dividend Rate in effect on such
day, whether or not the Company shall have earnings or surplus at the time, but
Preferred Dividends accrued after March 3, 1989 on the shares of Series A
Preferred Stock for any period less than a full quarterly period between
Dividend Payment Dates shall be computed on the basis of a 360-day year of
30-day months. A full quarterly dividend payment of $2.034 per share shall
accrue for the period from the date of issuance until June 3, 1989. Accumulated
but unpaid Preferred Dividends shall cumulate as of the Dividend Payment Date on
which they first become payable, but no interest shall accrue on accumulated but
unpaid Preferred Dividends.

       (B)(1) No full dividends shall be declared or paid or set apart for
payment on any shares ranking, as to dividends, on a parity with or junior to
the Series A Preferred Stock, for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Series A
Preferred Stock for all Dividend Payment Dates occurring on or prior to the date
of payment of such full dividends. When dividends are not paid in full, as
aforesaid, upon the shares of Series A Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share on Series A Preferred
Stock and such other parity shares shall in all cases bear to each other the
same ratio that accumulated dividends per share on the shares of Series A
Preferred Stock and such other parity shares bear to each other. Except as
otherwise provided in these Articles, holders of shares of Series A Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or shares, in excess of full cumulative dividends, as herein provided, on Series
A Preferred Stock.

       (2) So long as any shares of Series A Preferred Stock are outstanding, no
dividend (other than dividends or distributions paid in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Common Stock or other
shares ranking junior to Series A Preferred Stock as to dividends and other than
as provided in paragraph (B)(1) of this Section 2) shall be declared or paid or
set aside for payment or other distribution declared or made upon the Common
Stock or upon any other shares ranking junior to or on a parity with Series A
Preferred Stock as to dividends, nor shall any Common Stock or any other shares
of the Company ranking junior to or on a parity with Series A Preferred Stock as
to dividends be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any such shares) by the Company (except by conversion into or
exchange for shares of the Company ranking junior to Series A Preferred Stock as
to dividends) unless, in each case, the full cumulative dividends on all
outstanding shares of Series A Preferred Stock shall have been paid.

       (3) Any dividend payment made on shares of Series A Preferred Stock shall
first be credited against the earliest accumulated but unpaid dividend due with
respect to shares of Series A Preferred Stock.

3.     Liquidation Preference.

       (A) In the event of any dissolution or liquidation of the Company,
whether voluntary or involuntary, before any payment or distribution of the
assets of the Company (whether capital or surplus) shall be made to or set apart
for the holders of any series or class or classes of stock of the Company
ranking junior to Series A Preferred Stock upon dissolution or liquidation, the
holders of Series A Preferred Stock shall be entitled to receive the Liquidation
Price (as hereinafter defined) per share in effect at the time of dissolution or
liquidation plus an amount equal to all dividends accrued (whether or not
accumulated) and unpaid thereon to the date of final distribution to such
holders; but such holders shall not be entitled to any further payments. The
Liquidation Price per share which holders of Series A Preferred Stock shall
receive upon dissolution or liquidation shall be $110.004, subject to adjustment
as hereinafter provided. If, upon any dissolution or liquidation of the Company,
the assets of the Company, or proceeds thereof, distributable among the holders
of Series A Preferred Stock shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any other shares
ranking as to dissolution or liquidation, on a parity with Series A Preferred
Stock, then such assets, or the proceeds thereof, shall be distributed among the
holders of Series A Preferred Stock and any such other shares ratably in
accordance with the respective amounts which would be payable on such shares of
Series A Preferred Stock and any such other shares if all amounts payable
thereon were paid in full. For the purposes of this Section 3, a consolidation
or merger of the Company with one or more corporations shall not be deemed to be
a dissolution or liquidation, voluntary or involuntary.

       (B) Subject to the rights of the holders of shares of any series or class
or classes of stock ranking on a parity with or prior to Series A Preferred
Stock upon dissolution or liquidation, upon any dissolution or liquidation of
the Company, after payment shall have been made in full to the holders of Series
A Preferred Stock as provided in this Section 3, but not prior thereto, any
other series or class or classes of stock ranking junior to Series A Preferred
Stock upon dissolution or liquidation shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of Series A Preferred Stock
shall not be entitled to share therein.

4.     Ranking of Shares.

       Any shares of the Company shall be deemed to rank:

       (A) prior to Series A Preferred Stock as to dividends or as to
distribution of assets upon dissolution or liquidation, if the holders of such
class shall be entitled to the receipt of dividends or of amounts distributable
upon dissolution or liquidation, as the case may be, in preference or priority
to the holders of Series A Preferred Stock;

       (B) on a parity with Series A Preferred Stock as to dividends or as to
distribution of assets upon dissolution or liquidation, whether or not the
dividend rates, dividend payment dates, or redemption or liquidation prices per
share thereof be different from those of Series A Preferred Stock, if the
holders of such class of stock and Series A Preferred Stock shall be entitled to
the receipt of dividends or of amounts distributable upon dissolution or
liquidation, as the case may be, in proportion to their respective dividend or
liquidation amounts, as the case may be, without preference or priority one over
the other; and

       (C) junior to Series A Preferred Stock as to dividends or as to the
distribution of assets upon dissolution or liquidation, if such shares shall be
Common Stock or if the holders of Series A Preferred Stock shall be entitled to
receipt of dividends or of amounts distributable upon dissolution or
liquidation, as the case may be, in preference or priority to the holders of
such shares.

5.     Conversion into Common Stock.

       (A) A holder of shares of Series A Preferred Stock shall be entitled, at
any time prior to the close of business on the date fixed for redemption of such
shares pursuant to Sections 6, 7, or 8 hereof, to cause any or all of such
shares to be converted into shares of Common Stock. The number of shares of
Common Stock into which each share of the Series A Preferred Stock may be
converted shall be determined by dividing the Liquidation Price in effect at the
time of conversion by the Conversion Price (as hereinafter defined) in effect at
the time of conversion. The Conversion Price per share at which shares of Common
Stock shall be initially issuable upon conversion of any shares of Series A
Preferred Stock shall be $110.004, subject to adjustment as hereinafter
provided.

       (B) Any holder of shares of Series A Preferred Stock desiring to convert
such shares into shares of Common Stock shall surrender, if certificated, the
certificate or certificates representing the shares of Series A Preferred Stock
being converted, duly assigned or endorsed for transfer to the Company (or
accompanied by duly executed stock powers relating thereto), or if
uncertificated, a duly executed stock power relating thereto, at the principal
executive office of the Company or the offices of the transfer agent for the
Series A Preferred Stock or such office or offices in the continental United
States or an agent for conversion as may from time to time be designated by
notice to the holders of the Series A Preferred Stock by the Company or the
transfer agent for the Series A Preferred Stock, accompanied by written notice
of conversion. Such notice of conversion shall specify (i) the number of shares
of Series A Preferred Stock to be converted and the name or names in which such
holder wishes the Common Stock and any shares of Series A Preferred Stock not to
be so converted to be issued, and (ii) the address to which such holder wishes
delivery to be made of a confirmation of such conversion, if uncertificated, or
any new certificates which may be issued upon such conversion if certificated.

       (C) Upon surrender, if certificated, of a certificate representing a
share or shares of Series A Preferred Stock for conversion, or if
uncertificated, of a duly executed stock power relating thereto, the Company
shall issue and send by hand delivery (with receipt to be acknowledged) or by
first class mail, postage prepaid, to the holder thereof or to such holder's
designee, at the address designated by such holder, if certificated, a
certificate or certificates for, or if uncertificated, confirmation of, the
number of shares of Common Stock to which such holder shall be entitled upon
conversion. In the event that there shall have been surrendered shares of Series
A Preferred Stock, only part of which are to be converted, the Company shall
issue and deliver to such holder or such holder's designee, if certificated, a
new certificate or certificates representing the number of shares of Series A
Preferred Stock which shall not have been converted, or if uncertificated,
confirmation of the number of shares of Series A Preferred Stock which shall not
have been converted.

       (D) The issuance by the Company of shares of Common Stock upon a
conversion of shares of Series A Preferred Stock into shares of Common Stock
made at the option of the holder thereof shall be effective as of the earlier of
(i) the delivery to such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon conversion thereof if
certificated or confirmation if uncertificated or (ii) the commencement of
business on the second business day after the surrender of the certificate or
certificates, if certificated, or a duly executed stock power, if
uncertificated, for the shares of Series A Preferred Stock to be converted. On
and after the effective date of conversion, the person or persons entitled to
receive Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock, but no
allowance or adjustment shall be made in respect of dividends payable to holders
of Common Stock of record on any date prior to such effective date. The Company
shall not be obligated to pay any dividends which shall have been declared and
shall be payable to holders of shares of Series A Preferred Stock on a Dividend
Payment Date if such Dividend Payment Date for such dividend shall be on or
subsequent to the effective date of conversion of such shares.

       (E) The Company shall not be obligated to deliver to holders of Series A
Preferred Stock any fractional share or shares of Common Stock issuable upon any
conversion of such shares of Series A Preferred Stock, but in lieu thereof may
make a cash payment in respect thereof in any manner permitted by law.

       (F) The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock or treasury Common Stock, solely for
issuance upon the conversion of shares of Series A Preferred Stock as herein
provided, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all the shares of Series A Preferred Stock then
outstanding.

6. Redemption at the Option of the Company.

       (A) The Series A Preferred Stock shall be redeemable, in whole or in
part, at the option of the Company at any time after March 3, 1994 (or on or
before March 3, 1994 if permitted by, and at the redemption price provided in,
paragraph (C) of this Section 6) at the following redemption prices per share:

During the
Twelve
Month
Period
Beginning  Price Per
March 4,   Share
- ---------- ----------
1989       107.3750% of Liquidation Price in effect on date fixed for redemption
1990       106.6375%                                     "
1991       105.9000%                                     "
1992       105.1625%                                     "
1993       104.4250%                                     "
1994       103.6875%                                     "
1995       102.9000%                                     "
1996       102.2125%                                     "
1997       101.4750%                                     "
1998       100.7375%                                     "

and thereafter at 100% of the Liquidation Price per share in effect on the date
fixed for redemption, plus, in each case (including in the case of redemptions
pursuant to paragraph (C) of this Section 6), an amount equal to all accrued
(whether or not accumulated) and unpaid dividends thereon to the date fixed for
redemption. Payment of the redemption price shall be made by the Company in cash
or shares of Common Stock, or a combination thereof, as permitted by paragraph
(D) of this Section 6. From and after the date fixed for redemption, dividends
on shares of Series A Preferred Stock called for redemption will cease to
accrue, such shares will no longer be deemed to be outstanding and all rights in
respect of such shares of the Company shall cease, except the right to receive
the redemption price. If less than all of the outstanding shares of Series A
Preferred Stock are to be redeemed, the Company shall either redeem a portion of
the shares of each holder determined pro rata based on the number of shares held
by each holder or shall select the shares to be redeemed by lot, as may be
determined by the Board of Directors of the Company.

       (B) Unless otherwise required by law, notice of redemption will be sent
to the holders of Series A Preferred Stock at the address shown on the books of
the Company or any transfer agent for Series A Preferred Stock by first class
mail, postage prepaid, mailed not less than twenty (20) days nor more than sixty
(60) days prior to the redemption date. Each notice shall state: (i) the
redemption date; (ii) the total number of shares of the Series A Preferred Stock
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates, if certificated,
for such shares are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; (vi) the conversion rights of the shares to be redeemed, the
period within which conversion rights may be exercised, and the Conversion Price
and number of shares of Common Stock issuable upon conversion of a share of
Series A Preferred Stock at the time. Upon surrender of the certificates, if
certificated, for any shares so called for redemption and not previously
converted, or upon the date fixed for redemption if uncertificated, such shares
shall be redeemed by the Company at the date fixed for redemption and at the
redemption price set forth in this Section 6.

       (C) In the event of (i) a change in the federal tax law of the United
States of America which has the effect of precluding the Company from claiming
any of the tax deductions for dividends paid on the Series A Preferred Stock
when such dividends are used as provided under Section 404(k)(2) of the Internal
Revenue Code of 1986, as amended and in effect on the date shares of Series A
Preferred Stock are initially issued, or (ii) The Procter & Gamble Profit
Sharing Trust and Employee Stock Ownership Plan, as authorized by the Board of
Directors of the Company on January 10, 1989, and as amended from time to time
thereafter failing to receive a determination from the Internal Revenue Service
that it is a qualified plan within the meaning of Section 401(a) or is an
employee stock ownership plan as described in Section 4975(e)(7) of the Internal
Revenue Code of 1986, as amended, and in effect on the date shares of Series A
Preferred Stock are initially issued, then, in either such event, the Company
may, in its sole discretion and notwithstanding anything to the contrary in
paragraph (A) of this Section 6, elect to redeem such shares for the Liquidation
Price in effect on the date fixed for redemption, plus, in each case, an amount
equal to all accrued (whether or not accumulated) and unpaid dividends thereon
to the date fixed for redemption. In the event the Company terminates the
employee stock ownership plan of The Procter & Gamble Profit Sharing Trust and
Employee Stock Ownership Plan, the Company may, in its sole discretion and
notwithstanding anything to the contrary in paragraph (A) of this Section 6,
elect to redeem such shares at the redemption prices per share provided in
paragraph (A) of this Section 6.

       (D) The Company, at its option, may make payment of the redemption price
required upon redemption of shares of Series A Preferred Stock in cash or in
shares of Common Stock, or in a combination of such shares and cash, any such
shares of Common Stock to be valued for such purpose at the average of the high
and low reported sales price, or, in case no sale takes place on such day, the
average reported closing bid and asked price, in either case as reported on the
New York Stock Exchange Tape on the date of redemption, or if not listed or
admitted to trading on the New York Stock Exchange, in accordance with the
valuation methods provided in paragraph 9(F)(2).

7.     Redemption at the Option of the Holder.

       Unless otherwise provided by law, shares of Series A Preferred Stock
shall be redeemed by the Company for cash or, if the Company so elects, in
shares of Common Stock, or a combination of such shares and cash, any such
shares of Common Stock to be valued for such purpose as provided by paragraph
(D) of Section 6, at the Liquidation Price per share in effect on the date fixed
for redemption plus all accrued (whether or not accumulated) and unpaid
dividends thereon to the date fixed for redemption, at the option of the holder,
at any time and from time to time upon notice to the Company given not less than
five (5) business days prior to the date fixed by the holder in such notice for
redemption, when and to the extent necessary for such holder to provide for
distributions required to be made under, or to satisfy an investment election
provided to participants in accordance with, The Procter & Gamble Profit Sharing
Trust and Employee Stock Ownership Plan, as the same may be amended, or any
successor plan (the "Plan").

8.     Consolidation, Merger, etc.

       (A) In the event that the Company shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted solely into shares of any successor or resulting
company (including the Company) that constitutes "qualifying employer
securities" with respect to a holder of Series A Preferred Stock within the
meanings of Section 4975(e)(8) of the Internal Revenue Code of 1986, as amended,
and Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended, or any successor provision of law, and, if applicable, for a cash
payment in lieu of fractional shares, if any, then, in such event, the terms of
such consolidation or merger or similar transaction shall provide that the
shares of Series A Preferred Stock of such holder shall be submitted for and
shall become preferred shares of such successor or resulting company, having in
respect of such company insofar as possible the same powers, preferences and
relative, participating, optional or other special rights (including the
redemption rights provided by Sections 6, 7, and 8 hereof), and the
qualifications, limitations or restrictions thereon, that the Series A Preferred
Stock had immediately prior to such transaction; provided, however, that after
such transaction each share of the Series A Preferred Stock shall be
convertible, pursuant to the terms and conditions provided by Section 5 hereof,
into the qualifying employer securities so receivable by a holder of the number
of shares of Common Stock into which such shares of Series A Preferred Stock
could have been converted immediately prior to such transaction (provided that,
if the kind or amount of qualifying employer securities receivable upon such
transaction is not the same for each non-electing share, then the kind and
amount of qualifying employer securities receivable upon such transaction for
each non-electing share shall be the kind and amount so receivable per share by
a plurality of the non-electing shares). The rights of the Series A Preferred
Stock as preferred shares of such successor or resulting company shall
successively be subject to adjustments pursuant to Section 9 hereof after any
such transaction as nearly equivalent to the adjustments provided for by such
section prior to such transaction. The Company shall not consummate any such
merger, consolidation or similar transaction unless all the terms of this
paragraph 8(A) are complied with.

       (B) In the event that the Company shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged for or changed,
reclassified or converted into other shares or securities or cash or any other
property, or any combination thereof, other than any such consideration which is
constituted solely of qualifying employer securities (as referred to in
paragraph (A) of this Section 8) and cash payments, if applicable, in lieu of
fractional shares, outstanding shares of Series A Preferred Stock shall, without
any action on the part of the Company or any holder thereof (but subject to
paragraph (C) of this Section 8), be deemed converted by virtue of such merger,
consolidation or similar transaction immediately prior to such consummation into
the number of shares of Common Stock into which such shares of Series A
Preferred Stock could have been converted at such time and each share of Series
A Preferred Stock shall, by virtue of such transaction and on the same terms as
apply to the holders of Common Stock, be converted into or exchanged for the
aggregate amount of shares, securities, cash or other property (payable in like
kind) receivable by a holder of the number of shares of Common Stock into which
such shares of Series A Preferred Stock could have been converted immediately
prior to such transaction if such holder of Common Stock failed to exercise any
rights of election as to the kind or amount of shares, securities, cash or other
property receivable upon such transaction (provided that, if the kind or amount
of shares, securities, cash or other property receivable upon such transaction
is not the same for each non-electing share, then the kind and amount of shares,
securities, cash or other property receivable upon such transaction for each
non-electing share shall be the kind and amount so receivable per share by a
plurality of non-electing shares).

       (C) In the event the Company shall enter into any agreement providing for
any consolidation or merger or similar transaction described in paragraph (B) of
this Section 8, then the Company shall as soon as practicable thereafter (and in
any event at least ten (10) business days before consummation of such
transaction) give notice of such agreement and the material terms thereof to
each holder of Series A Preferred Stock and each such holder shall have the
right to elect, by written notice to the Company, to receive, upon consummation
of such transaction (if and when such transaction is consummated), from the
Company or the successor of the Company, in redemption and retirement of such
Series A Preferred Stock, a cash payment equal to the Liquidation Price in
effect on the date set for redemption plus all accrued (whether or not
accumulated) and unpaid dividends. No such notice of redemption shall be
effective unless given to the Company prior to the close of business on the
fifth business day prior to consummation of such transaction, unless the Company
or the successor of the Company shall waive such prior notice, but any notice of
redemption so given prior to such time may be withdrawn by notice of withdrawal
given to the Company prior to the close of business on the fifth business day
prior to consummation of such transaction.

9.     Anti-dilution Adjustments.

       (A)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of the
Series A Preferred Stock are outstanding, (i) pay a dividend or make a
distribution in respect of the Common Stock in shares of Common Stock or (ii)
subdivide or combine the outstanding shares of Common Stock into a greater or
lesser number of shares, in each case whether by reclassification of shares,
recapitalization of the Company (excluding a recapitalization or
reclassification effected by a merger or consolidation to which Section 8 hereof
applies) or otherwise, then, in such event, each share of Series A Preferred
Stock will automatically, without any action on the part of the holder thereof
or the Company, become that number of shares of Series A Preferred Stock (the
"Non-dilutive Share Amount") equal to an amount which is a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock outstanding immediately before such event. An adjustment
pursuant to this paragraph 9(A)(1) shall be effective upon payment of such
dividend or distribution in respect of the Common Stock and in the case of a
subdivision or combination shall become effective immediately as of the
effective date thereof. Concurrently with the automatic adjustment pursuant to
this paragraph 9(A)(1), the Conversion Price, the Liquidation Price and the
Preferred Dividend Rate of all shares of Series A Preferred Stock shall be
adjusted by dividing the Conversion Price, the Liquidation Price and the
Preferred Dividend Rate, respectively, in effect immediately before the event by
the Non-dilutive Share Amount determined pursuant to this paragraph 9(A)(1).

       (2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(A)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(A)(1), then no such
automatic adjustment shall occur, but instead the Conversion Price shall
automatically be adjusted by dividing the Conversion Price in effect immediately
before the event by the Non-dilutive Share Amount determined pursuant to
paragraph 9(A)(1), and the Liquidation Price and the Preferred Dividend Rate
will not be adjusted. An adjustment to the Conversion Price made pursuant to
this paragraph 9(A)(2) shall be given effect, upon payment of such a dividend or
distribution, as of the record date for the determination of shareholders
entitled to receive such dividend or distribution (on a retroactive basis) and
in the case of a subdivision or combination shall become effective immediately
as of the effective date thereof. If subsequently the Company is able to give
full effect to the automatic adjustment as provided in paragraph 9(A)(1), then
such automatic adjustment will proceed in accordance with the provisions of
paragraph 9(A)(1) and the adjustment in the Conversion Price as provided in this
paragraph 9(A)(2) will automatically be reversed and nullified prospectively.

       (B)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of
Series A Preferred Stock are outstanding, issue to holders of shares of Common
Stock as a dividend or distribution, including by way of a reclassification of
shares or a recapitalization of the Company, any right or warrant to purchase
shares of Common Stock (but not including as such a right or warrant any
security convertible into or exchangeable for shares of Common Stock) at a
purchase price per share less than the Fair Market Value (as hereinafter
defined) of a share of Common Stock on the date of issuance of such right or
warrant, then, in such event, each share of Series A Preferred Stock will
automatically, without any action on the part of the holder thereof or the
Company, become that number of shares of Series A Preferred Stock (the
"Non-dilutive Share Amount") equal to an amount which is a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the maximum number
of shares of Common Stock that could be acquired upon exercise in full of all
such rights and warrants and the denominator of which is the number of shares of
Common Stock outstanding immediately before such issuance of rights or warrants
plus the number of shares of Common Stock which could be purchased at the Fair
Market Value of a share of Common Stock at the time of such issuance for the
maximum aggregate consideration payable upon exercise in full of all such rights
or warrants. Concurrently with the automatic adjustment pursuant to this
paragraph 9(B)(1), the Conversion Price, the Liquidation Price and the Preferred
Dividend Rate of all shares of Series A Preferred Stock shall be adjusted by
dividing the Conversion Price, the Liquidation Price and the Preferred Dividend
Rate, respectively, in effect immediately before such issuance of rights or
warrants by the Non-dilutive Share Amount determined pursuant to this paragraph
9(B)(1).

       (2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(B)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(B)(1), then no such
automatic adjustment shall occur, but instead the Conversion Price shall
automatically be adjusted by dividing the Conversion Price in effect immediately
before such issuance of rights or warrants by the Non-Dilutive Share Amount
determined pursuant to paragraph 9(B)(1), and the Liquidation Price and
Preferred Dividend Rate will not be adjusted. If subsequently the Company is
able to give full effect to the automatic adjustment as provided in paragraph
9(B)(1), then such automatic adjustment will proceed in accordance with the
provisions of paragraph 9(B)(1) and the adjustment in the Conversion Price as
provided in this paragraph 9(B)(2) will automatically be reversed and nullified
prospectively.

       (C)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of
Series A Preferred Stock are outstanding, make an Extraordinary Distribution (as
hereinafter defined) in respect of the Common Stock, whether by dividend,
distribution, reclassification of shares or recapitalization of the Company
(including recapitalization or reclassification effected by a merger or
consolidation to which Section 8 hereof does not apply) or effect a Pro Rata
Repurchase (as hereinafter defined) of Common Stock, then, in such event, each
share of Series A Preferred Stock will automatically, without any action on the
part of the holder thereof or the Company, become that number of shares of
Series A Preferred Stock (the "Non-dilutive Share Amount") equal to an amount
which is a fraction the numerator of which is the product of (a) the number of
shares of Common Stock outstanding immediately before such Extraordinary
Distribution or Pro Rata Repurchase minus, in the case of a Pro Rata Repurchase,
the number of shares of Common Stock repurchased by the Company multiplied by
(b) the Fair Market Value of a share of Common Stock on the record date with
respect to an Extraordinary Distribution or on the applicable expiration date
(including all extensions thereof) of any tender offer which is a Pro Rata
Repurchase or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be, and the denominator of which is
(i) the Fair Market Value of a share of Common Stock on the record date with
respect to an Extraordinary Distribution, or on the applicable expiration date
(including all extensions thereof) of any tender offer which is a Pro Rata
Repurchase, or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be, minus (ii) the Fair Market
Value of the Extraordinary Distribution or the aggregate purchase price of the
Pro Rata Repurchase, as the case may be. The Company shall send each holder of
Series A Preferred Stock (i) notice of its intent to make any dividend or
distribution and (ii) notice of any offer by the Company to make a Pro Rata
Repurchase, in each case at the same time as, or as soon as practicable after,
such offer is first communicated (including by announcement of a record date in
accordance with the rules of any stock exchange on which the Common Stock is
listed or admitted to trading) to holders of Common Stock. Such notice shall
indicate the intended record date and the amount and nature of such dividend or
distribution, or the number of shares subject to such offer for a Pro Rata
Repurchase and the purchase price payable by the Company pursuant to such offer,
as well as the Conversion Price and the number of shares of Common Stock into
which a share of Series A Preferred Stock may be converted at such time.
Concurrently with the automatic adjustment pursuant to this paragraph 9(C)(1),
the Conversion Price, the Liquidation Price and the Preferred Dividend Rate of
all shares of Series A Preferred Stock shall be adjusted by dividing the
Conversion Price, the Liquidation Price and the Preferred Dividend Rate,
respectively, in effect immediately before such Extraordinary Distribution or
Pro Rata Repurchase by the Non-dilutive Share Amount determined pursuant to this
paragraph 9(C)(1).

       (2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(C)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(C)(1), then no such
automatic adjustment shall occur, but instead the Conversion Price shall
automatically be adjusted by dividing the Conversion Price in effect immediately
before such Extraordinary Distribution or Pro Rata Repurchase by the
Non-dilutive Share Amount, and the Liquidation Price and the Preferred Dividend
Rate will not be adjusted. If subsequently the Company is able to give full
effect to the automatic adjustment as provided in paragraph 9(C)(1), then such
automatic adjustment will proceed in accordance with the provisions of paragraph
9(C)(1) and the adjustment in the Conversion Price as provided in this paragraph
9(C)(2) will automatically be reversed and nullified prospectively.

       (D) Notwithstanding any other provisions of this Section 9, the Company
shall not be required to make (i) any adjustment of the number of issued shares
of Series A Preferred Stock, the Conversion Price, the Liquidation Price or the
Preferred Dividend Rate unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of shares of Series A
Preferred Stock outstanding, or, (ii) if no additional shares of Series A
Preferred Stock are issued, any adjustment of the Conversion Price unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the Conversion Price. Any lesser adjustment shall be carried forward and shall
be made no later than the time of, and together with, the next subsequent
adjustment which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least one percent (1%) of
the number of Series A Preferred Shares outstanding or, if no additional shares
of Series A Preferred Stock are being issued, an increase or decrease of at
least one percent (1%) of the Conversion Price, whichever the case may be.

       (E) If the Company shall make any dividend or distribution on the Common
Stock or issue any Common Stock, other capital stock or other security of the
Company or any rights or warrants to purchase or acquire any such security,
which transaction does not result in an appropriate adjustment to the number of
shares of Series A Preferred Stock outstanding or the Conversion Price pursuant
to the foregoing provisions of this Section 9, the Board of Directors of the
Company may, in its sole discretion, consider whether such action is of such a
nature that some type of equitable adjustment should be made in respect of such
transaction. If in such case the Board of Directors of the Company determines
that some type of adjustment should be made, an equitable adjustment not
repugnant to law and for the protection of the conversion rights of the Series A
Preferred Stock shall be made effective as of such date, as determined by the
Board of Directors of the Company. The determination of the Board of Directors
of the Company as to whether some type of adjustment should be made pursuant to
the foregoing provisions of this paragraph 9(E), and, if so, as to what
adjustment should be made and when, shall be final and binding on the Company
and all shareholders of the Company. The Company shall be entitled to make such
additional adjustments, in addition to those required by the foregoing
provisions of this Section 9, as shall be necessary in order that any dividend
or distribution in shares of capital stock of the Company, subdivision,
reclassification or combination of shares of the Company or any recapitalization
of the Company shall not be taxable to holders of the Common Stock.

       (F) For purposes of this Appendix A, the following definitions shall
apply:

       (1) "Extraordinary Distribution" shall mean any dividend or other
distribution (effected while any of the shares of Series A Preferred Stock are
outstanding) of (i) cash, where the aggregate amount of such cash dividend or
distribution together with the amount of all cash dividends and distributions
made during the preceding period of twelve (12) months, when combined with the
aggregate amount of all Pro Rata Repurchases [for this purpose, including only
that portion of the aggregate purchase price of such Pro Rata Repurchase which
is in excess of the Fair Market Value of the Common Stock repurchased as
determined on the applicable expiration date (including all extensions thereof)
of any tender offer or exchange offer which is a Pro Rata Repurchase, or the
date of purchase with respect to any other Pro Rata Repurchase which is not a
tender offer or exchange offer] made during such period, exceeds twelve and
one-half percent (12 1/2%) of the aggregate Fair Market Value of all shares of
Common Stock outstanding on the record date for determining the shareholders
entitled to receive such Extraordinary Distribution and (ii) any shares of
capital stock of the Company (other than shares of Common Stock), other
securities of the Company (other than securities of the type referred to in
paragraph (B) of this Section 9), evidences of indebtedness of the Company or
any other person or any other property (including shares of any subsidiary of
the Company), or any combination thereof. The Fair Market Value of an
Extraordinary Distribution for purposes of paragraph (C) of this Section 9 shall
be the sum of the Fair Market Value of such Extraordinary Distribution plus the
aggregate amount of any cash dividends or distributions which are not
Extraordinary Distributions made during such twelve month period and not
included in the calculation of any previous adjustment pursuant to paragraph (C)
of this Section 9.

       (2) "Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Company or any other issuer
which are publicly traded, the average of the Current Market Prices (as
hereinafter defined) of such shares or securities for each day of the Adjustment
Period (as hereinafter defined). "Current Market Price" of publicly traded
shares of Common Stock or any other class of capital stock or other security of
the Company or any other issuer for a day shall mean the last reported sales
price, regular way, or, in case no sale takes place on such day, the average
reported closing bid and asked prices, regular way, in either case as reported
on the New York Stock Exchange Composite Tape or, if such security is not listed
or admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which such security is listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
NASDAQ National Market System or, if such security is not quoted on such
National Market System, the average of the closing bid and asked prices on each
such day in the over-the-counter market as reported by NASDAQ or, if bid and
asked prices for such security on each such day shall not have been reported
through NASDAQ, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm regularly making a market
in such security selected for such purpose by the Board of Directors of the
Company or the Executive Committee of the Board of Directors of the Company on
each trading day during the Adjustment Period. "Adjustment Period" shall mean
the period of five (5) consecutive trading days, selected by the Board of
Directors or the Executive Committee of the Board of Directors of the Company,
during the twenty (20) trading days preceding, and including, the date as of
which the Fair Market Value of a security is to be determined. The "Fair Market
Value" of any security which is not publicly traded or of any other property
shall mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors or the Executive
Committee of the Board of Directors of the Company, or, if no such investment
banking or appraisal firm is in the good faith judgment of the Board of
Directors or the Executive Committee of the Board of Directors available to make
such determination, as determined in good faith by the Board of Directors or the
Executive Committee of the Board of Directors of the Company.

       (3) "Pro Rata Repurchase" shall mean any purchase of shares of Common
Stock by the Company or any subsidiary thereof, whether for cash, shares of
capital stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other person or any other property (including
shares of a subsidiary of the Company), or any combination thereof, effected
while any of the shares of Series A Preferred Stock are outstanding, pursuant to
any tender offer or exchange offer subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision of law, or pursuant to any other offer available to substantially all
holders of Common Stock; provided, however, that no purchase of shares by the
Company or any subsidiary thereof made in open market transactions shall be
deemed a Pro Rata Repurchase. For purposes of this paragraph 9(F), shares shall
be deemed to have been purchased by the Company or any subsidiary thereof "in
open market transactions" if they have been purchased substantially in
accordance with the requirements of Rule 10b-18 as in effect under the Exchange
Act on the date shares of Series A Preferred Stock are initially issued by the
Company or on such other terms and conditions as the Board of Directors or the
Executive Committee of the Board of Directors of the Company shall have
determined are reasonably designed to prevent such purchases from having a
material effect on the trading market for the Common Stock.

       (G) Whenever an adjustment increasing the number of shares of Series A
Preferred Stock outstanding is required pursuant to this Appendix A, the Board
of Directors shall take such action as is necessary so that a sufficient number
of shares of Series A Preferred Stock are designated with respect to such
increase resulting from such adjustment. Whenever an adjustment to the
Conversion Price, the Liquidation Price or the Preferred Dividend Rate of the
Series A Preferred Stock is required pursuant to this Appendix A, the Company
shall forthwith place on file with the transfer agent for the Common Stock and
the Series A Preferred Stock if there be one, and with the Treasurer of the
Company, a statement signed by the Treasurer or Assistant Treasurer of the
Company stating the adjusted Conversion Price, Liquidation Price and Preferred
Dividend Rate determined as provided herein. Such statement shall set forth in
reasonable detail such facts as shall be necessary to show the reason and the
manner of computing such adjustment, including any determination of Fair Market
Value involved in such computation. Promptly after each adjustment to the number
of shares of Series A Preferred Stock outstanding, the Conversion Price, the
Liquidation Price or the Preferred Dividend Rate, the Company shall mail a
notice thereof and of the then prevailing number of shares of Series A Preferred
Stock outstanding, the Conversion Price, the Liquidation Price and the Preferred
Dividend Rate to each holder of shares of Series A Preferred Stock.

10.    Miscellaneous.

       (A) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt thereof
or three (3) business days after the mailing thereof if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms of this Appendix A) with postage prepaid, addressed: (i) if to the
Company, to its office at One Procter & Gamble Plaza, Cincinnati, Ohio 45202
(Attention: Treasurer) or to the transfer agent for the Series A Preferred
Stock, or other agent of the Company designated as permitted by this Appendix A
or (ii) if to any holder of the Series A Preferred Stock or Common Stock, as the
case may be, to such holder at the address of such holder as listed in the stock
record books of the Company (which may include the records of any transfer agent
for the Series A Preferred Stock or Common Stock, as the case may be) or (iii)
to such other address as the Company or any such holder, as the case may be,
shall have designated by notice similarly given.

       (B) The term "Common Stock" as used in this Appendix A means the
Company's Common Stock without par value, as the same exists at the date of
filing of the Amendment to the Company's Amended Articles of Incorporation first
designating Series A Preferred Stock, or any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to without par value, or from without
par value to par value. In the event that, at any time as a result of an
adjustment made pursuant to Section 9 of this Appendix A, the holder of any
share of the Series A Preferred Stock upon thereafter surrendering such shares
for conversion shall become entitled to receive any shares or other securities
of the Company other than shares of Common Stock, the anti-dilution provisions
contained in Section 9 hereof shall apply in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock, and
the provisions of Sections 1 through 8 and 10 of this Appendix A with respect to
the Common Stock shall apply on like or similar terms to any such other shares
or securities.

       (C) The Company shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of shares
of Series A Preferred Stock or shares of Common Stock or other securities issued
on account of Series A Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Company shall not, however, be
required to pay any such tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Series A Preferred Stock or
Common Stock or other securities in a name other than that in which the shares
of Series A Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Company the amount of any
such tax or has established, to the satisfaction of the Company, that such tax
has been paid or is not payable.

       (D) In the event that a holder of shares of Series A Preferred Stock
shall not by written notice designate the name in which shares of Common Stock
to be issued upon conversion of such shares should be registered or to whom
payment upon redemption of shares of Series A Preferred Stock should be made or
the address to which the certificate or certificates representing such shares,
or such payment, should be sent, the Company shall be entitled to register such
shares, and make such payment, in the name of the holder of such Series a
Preferred Stock as shown on the records of the Company and to send the
certificate or certificates or other documentation representing such shares, or
such payment, to the address of such holder shown on the records of the Company.

       (E) The Company may appoint, and from time to time discharge and change,
a transfer agent for the Series A Preferred Stock. Upon any such appointment or
discharge of a transfer agent, the Company shall send notice thereof by
first-class mail, postage prepaid, to each holder of record of Series A
Preferred Stock.

4  As a result of four two-for-one stock splits on the Common Stock
   effective October 10, 1989, May 15, 1992, August 22, 1997 and May 21,
   2004, and the Smucker transaction effective June 1, 2002, the
   Conversion Price, Liquidation Price and Preferred Dividend Rate were
   all adjusted in accordance with the terms of paragraph 9(A)(1) of this
   Appendix A to be as follows: Conversion Price -- $6.82; Liquidation
   Price -- $6.82; Preferred Dividend Rate -- $.5036075 per share per
   annum, with a corresponding change in the quarterly dividend payment.
   (This footnote is not a part of the Company's Amended Articles of
   Incorporation but is included to provide up-to-date information on the
   status of Series A ESOP Convertible Class A Preferred Stock.)
<PAGE>

                                   APPENDIX B5

                SERIES B ESOP CONVERTIBLE CLASS A PREFERRED STOCK
              (hereinafter referred to as Series B Preferred Stock)

1.     Cancellation.

       All shares of Series B Preferred Stock redeemed or purchased by the
Company shall be retired and shall be restored to the status of authorized but
unissued shares of Class A Preferred Stock.

2.     Dividends and Distributions.

       (A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series B Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors out of funds legally available
therefor, cash dividends ("Series B Preferred Dividends") in an amount per share
initially equal to $4.125 per share per annum, subject to adjustment from time
to time as hereinafter provided, (such amount, as adjusted from time to time,
being hereinafter referred to as the "Series B Preferred Dividend Rate"),
payable quarterly, one-fourth on the twenty-seventh day of November, one-fourth
on the twenty-seventh day of February, one-fourth on the twenty-seventh day of
May, and one-fourth on the twenty-seventh day of August of each year (each a
"Series B Dividend Payment Date") commencing on August 27, 1993, to holders of
record at the close of business on the second Friday of the relevant Series B
Dividend Payment Date month, provided that if the Board of Directors has
declared since the prior Dividend Payment Date a quarterly dividend on the
Common Stock at a rate that exceeds one-fourth of the Preferred Dividend Rate in
effect on such day, the holders of record on the start of business on the
payment date for such dividend on the Common Stock shall be entitled to receive
a cash dividend in an amount per share equal to the quarterly dividend declared
on a share of Common Stock, payable on the same date as such dividend on the
Common Stock, and provided further that the Dividend Payment Date for the Series
B Preferred Stock shall thereafter be the same date as the payment date for the
dividend on the Common Stock or if no dividend is declared on the Common Stock
in any quarter, the Dividend Payment Date shall be, as appropriate, the
fifteenth day of February, May, August or November or if such days are not a day
on which the New York Stock Exchange is open for business, then the next
preceding day when the New York Stock Exchange is open for business. Series B
Preferred Dividends shall begin to accrue on outstanding shares of Series B
Preferred Stock from the date of issuance of such shares of Series B Preferred
Stock. Series B Preferred Dividends shall accrue on a daily basis, based on the
Series B Preferred Dividend Rate in effect on such day, whether or not the
Company shall have earnings or surplus at the time, but Series B Preferred
Dividends accrued after June 30, 1993 on the shares of Series B Preferred Stock
for any period less than a full quarterly period between Series B Dividend
Payment Dates shall be computed on the basis of a 360-day year of 30-day months.
A partial dividend payment of $.649355 per share shall accrue for the period
from the date of issuance until August 27, 1993. Accumulated but unpaid Series B
Preferred Dividends shall cumulate as of the Series B Dividend Payment Date on
which they first become payable, but no interest shall accrue on accumulated but
unpaid Series B Preferred Dividends.

       (B)(1) No full dividends shall be declared or paid or set apart for
payment on any shares ranking, as to dividends, on a parity with or junior to
the Series B Preferred Stock, for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Series B
Preferred Stock for all Series B Dividend Payment Dates occurring on or prior to
the date of payment of such full dividends. When dividends are not paid in full,
as aforesaid, upon the shares of Series B Preferred Stock and any other shares
ranking, as to dividends, on a parity with Series B Preferred Stock, all
dividends declared upon shares of Series B Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share on Series B Preferred
Stock and such other parity shares shall in all cases bear to each other the
same ratio that accumulated dividends per share on the shares of Series B
Preferred Stock and such other parity shares bear to each other. Except as
otherwise provided in these Articles, holders of shares of Series B Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or shares, in excess of full cumulative dividends, as herein provided, on Series
B Preferred Stock.

       (2) So long as any shares of Series B Preferred Stock are outstanding, no
dividend (other than dividends or distributions paid in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Common Stock or other
shares ranking junior to Series B Preferred Stock as to dividends and other than
as provided in paragraph (B)(1) of this Section 2) shall be declared or paid or
set aside for payment or other distribution declared or made upon the Common
Stock or upon any other shares ranking junior to or on a parity with Series B
Preferred Stock as to dividends, nor shall any Common Stock or any other shares
of the Company ranking junior to or on a parity with Series B Preferred Stock as
to dividends be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any such shares) by the Company (except by conversion into or
exchange for shares of the Company ranking junior to Series B Preferred Stock as
to dividends) unless, in each case, the full cumulative dividends on all
outstanding shares of Series B Preferred Stock shall have been paid.

       (3) Any dividend payment made on shares of Series B Preferred Stock shall
first be credited against the earliest accumulated but unpaid dividend due with
respect to shares of Series B Preferred Stock.

3.     Liquidation Preference.

       (A) In the event of any dissolution or liquidation of the Company,
whether voluntary or involuntary, before any payment or distribution of the
assets of the Company (whether capital or surplus) shall be made to or set apart
for the holders of any series or class or classes of stock of the Company
ranking junior to Series B Preferred Stock upon dissolution or liquidation, the
holders of Series B Preferred Stock shall be entitled to receive the Series B
Liquidation Price (as hereinafter defined) per share in effect at the time of
dissolution or liquidation plus an amount equal to all dividends accrued
(whether or not accumulated) and unpaid thereon to the date of final
distribution to such holders; but such holders shall not be entitled to any
further payments. The Series B Liquidation Price per share which holders of
Series B Preferred Stock shall receive upon dissolution or liquidation shall be
$52.245, subject to adjustment as hereinafter provided. If, upon any dissolution
or liquidation of the Company, the assets of the Company, or proceeds thereof,
distributable among the holders of Series B Preferred Stock shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other shares ranking as to dissolution or liquidation, on a
parity with Series B Preferred Stock, then such assets, or the proceeds thereof,
shall be distributed among the holders of Series B Preferred Stock and any such
other shares ratably in accordance with the respective amounts which would be
payable on such shares of Series B Preferred Stock and any such other shares if
all amounts payable thereon were paid in full. For the purposes of this Section
3, a consolidation or merger of the Company with one or more corporations shall
not be deemed to be a dissolution or liquidation, voluntary or involuntary.

       (B) Subject to the rights of the holders of shares of any series or class
or classes of stock ranking on a parity with or prior to Series B Preferred
Stock upon dissolution or liquidation, upon any dissolution or liquidation of
the Company, after payment shall have been made in full to the holders of Series
B Preferred Stock as provided in this Section 3, but not prior thereto, any
other series or class or classes of stock ranking junior to Series B Preferred
Stock upon dissolution or liquidation shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of Series B Preferred Stock
shall not be entitled to share therein.

4.     Ranking of Shares.

       Any shares of the Company shall be deemed to rank:

       (A) prior to Series B Preferred Stock as to dividends or as to
distribution of assets upon dissolution or liquidation, if the holders of such
class shall be entitled to the receipt of dividends or of amounts distributable
upon dissolution or liquidation, as the case may be, in preference or priority
to the holders of Series B Preferred Stock;

       (B) on a parity with Series B Preferred Stock as to dividends or as to
distribution of assets upon dissolution or liquidation, whether or not the
dividend rates, dividend payment dates, or redemption or liquidation prices per
share thereof be different from those of Series B Preferred Stock, if the
holders of such class of stock and Series B Preferred Stock shall be entitled to
the receipt of dividends or of amounts distributable upon dissolution or
liquidation, as the case may be, in proportion to their respective dividend or
liquidation amounts, as the case may be, without preference or priority one over
the other; and

       (C) junior to Series B Preferred Stock as to dividends or as to the
distribution of assets upon dissolution or liquidation, if such shares shall be
Common Stock or if the holders of Series B Preferred Stock shall be entitled to
receipt of dividends or of amounts distributable upon dissolution or
liquidation, as the case may be, in preference or priority to the holders of
such shares.

5.     Conversion into Common Stock.

       (A) A holder of shares of Series B Preferred Stock shall be entitled, at
any time prior to the close of business on the date fixed for redemption of such
shares pursuant to Sections 6, 7, or 8 hereof, to cause any or all of such
shares to be converted into shares of Common Stock. The number of shares of
Common Stock into which each share of the Series B Preferred Stock may be
converted shall be determined by dividing the Series B Liquidation Price in
effect at the time of conversion by the Series B Conversion Price (as
hereinafter defined) in effect at the time of conversion. The Series B
Conversion Price per share at which shares of Common Stock shall be initially
issuable upon conversion of any shares of Series B Preferred Stock shall be
$52.245, subject to adjustment as hereinafter provided.

       (B) Any holder of shares of Series B Preferred Stock desiring to convert
such shares into shares of Common Stock shall surrender, if certificated, the
certificate or certificates representing the shares of Series B Preferred Stock
being converted, duly assigned or endorsed for transfer to the Company (or
accompanied by duly executed stock powers relating thereto), or if
uncertificated, a duly executed stock power relating thereto, at the principal
executive office of the Company or the offices of the transfer agent for the
Series B Preferred Stock or such office or offices in the continental United
States or an agent for conversion as may from time to time be designated by
notice to the holders of the Series B Preferred Stock by the Company or the
transfer agent for the Series B Preferred Stock, accompanied by written notice
of conversion. Such notice of conversion shall specify (i) the number of shares
of Series B Preferred Stock to be converted and the name or names in which such
holder wishes the Common Stock and any shares of Series B Preferred Stock not to
be so converted to be issued, and (ii) the address to which such holder wishes
delivery to be made of a confirmation of such conversion, if uncertificated, or
any new certificates which may be issued upon such conversion if certificated.

       (C) Upon surrender, if certificated, of a certificate representing a
share or shares of Series B Preferred Stock for conversion, or if
uncertificated, of a duly executed stock power relating thereto, the Company
shall issue and send by hand delivery (with receipt to be acknowledged) or by
first class mail, postage prepaid, to the holder thereof or to such holder's
designee, at the address designated by such holder, if certificated, a
certificate or certificates for, or if uncertificated, confirmation of, the
number of shares of Common Stock to which such holder shall be entitled upon
conversion. In the event that there shall have been surrendered shares of Series
B Preferred Stock, only part of which are to be converted, the Company shall
issue and deliver to such holder or such holder's designee, if certificated, a
new certificate or certificates representing the number of shares of Series B
Preferred Stock which shall not have been converted, or if uncertificated,
confirmation of the number of shares of Series B Preferred Stock which shall not
have been converted.

       (D) The issuance by the Company of shares of Common Stock upon a
conversion of shares of Series B Preferred Stock into shares of Common Stock
made at the option of the holder thereof shall be effective as of the earlier of
(i) the delivery to such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon conversion thereof if
certificated or confirmation if uncertificated or (ii) the commencement of
business on the second business day after the surrender of the certificate or
certificates, if certificated, or a duly executed stock power, if
uncertificated, for the shares of Series B Preferred Stock to be converted. On
and after the effective date of conversion, the person or persons entitled to
receive Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock, but no
allowance or adjustment shall be made in respect of dividends payable to holders
of Common Stock of record on any date prior to such effective date. The Company
shall not be obligated to pay any dividends which shall have been declared and
shall be payable to holders of shares of Series B Preferred Stock on a Series B
Dividend Payment Date if such Series B Dividend Payment Date for such dividend
shall be on or subsequent to the effective date of conversion of such shares.

       (E) The Company shall not be obligated to deliver to holders of Series B
Preferred Stock any fractional share or shares of Common Stock issuable upon any
conversion of such shares of Series B Preferred Stock, but in lieu thereof may
make a cash payment in respect thereof in any manner permitted by law.

       (F) The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock or treasury Common Stock, solely for
issuance upon the conversion of shares of Series B Preferred Stock as herein
provided, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all the shares of Series B Preferred Stock then
outstanding.

6.     Redemption at the Option of the Company.

       (A) The Series B Preferred Stock shall be redeemable, in whole or in
part, at the option of the Company at any time after November 27, 1995 (or on or
before November 27, 1995 if permitted by, and at the redemption price provided
in, paragraph (C) of this Section 6) at the following redemption prices per
share:

During the
Twelve
Month
Period
Beginning       Price Per
November 28,    Share
- ------------    ---------
1993            105.5125% of Series B Liquidation Price in effect on date fixed
                          for redemption
1994            104.7250%                             "
1995            103.9375%                             "
1996            103.1500%                             "
1997            102.3625%                             "
1998            101.5750%                             "
1999            100.7875%                             "

and thereafter at 100% of the Series B Liquidation Price per share in effect on
the date fixed for redemption, plus, in each case (including in the case of
redemptions pursuant to paragraph (C) of this Section 6), an amount equal to all
accrued (whether or not accumulated) and unpaid dividends thereon to the date
fixed for redemption. Payment of the redemption price shall be made by the
Company in cash or shares of Common Stock, or a combination thereof, as
permitted by paragraph (D) of this Section 6. From and after the date fixed for
redemption, dividends on shares of Series B Preferred Stock called for
redemption will cease to accrue, such shares will no longer be deemed to be
outstanding and all rights in respect of such shares of the Company shall cease,
except the right to receive the redemption price. If less than all of the
outstanding shares of Series B Preferred Stock are to be redeemed, the Company
shall either redeem a portion of the shares of each holder determined pro rata
based on the number of shares held by each holder or shall select the shares to
be redeemed by lot, as may be determined by the Board of Directors of the
Company.

       (B) Unless otherwise required by law, notice of redemption will be sent
to the holders of Series B Preferred Stock at the address shown on the books of
the Company or any transfer agent for Series B Preferred Stock by first class
mail, postage prepaid, mailed not less than twenty (20) days nor more than sixty
(60) days prior to the redemption date. Each notice shall state: (i) the
redemption date; (ii) the total number of shares of the Series B Preferred Stock
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates, if certificated,
for such shares are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; (vi) the conversion rights of the shares to be redeemed, the
period within which conversion rights may be exercised, and the Series B
Conversion Price and number of shares of Common Stock issuable upon conversion
of a share of Series B Preferred Stock at the time. Upon surrender of the
certificates, if certificated, for any shares so called for redemption and not
previously converted, or upon the date fixed for redemption if uncertificated,
such shares shall be redeemed by the Company at the date fixed for redemption
and at the redemption price set forth in this Section 6.

       (C) In the event of (i) a change in the federal tax law of the United
States of America which has the effect of precluding the Company from claiming
any of the tax deductions for dividends paid on the Series B Preferred Stock
when such dividends are used as provided under Section 404(k)(2) of the Internal
Revenue Code of 1986, as amended and in effect on the date shares of Series B
Preferred Stock are initially issued, or (ii) The Procter & Gamble Profit
Sharing Trust and Employee Stock Ownership Plan, as authorized by the Board of
Directors of the Company on May 7, 1990, and as amended from time to time
thereafter failing to receive a determination from the Internal Revenue Service
that it is a qualified plan within the meaning of Section 401(a) or is an
employee stock ownership plan as described in Section 4975(e)(7) of the Internal
Revenue Code of 1986, as amended, and in effect on the date shares of Series B
Preferred Stock are initially issued, then, in either such event, the Company
may, in its sole discretion and notwithstanding anything to the contrary in
paragraph (A) of this Section 6, elect to redeem such shares for the Series B
Liquidation Price in effect on the date fixed for redemption, plus, in each
case, an amount equal to all accrued (whether or not accumulated) and unpaid
dividends thereon to the date fixed for redemption. In the event the Company
terminates the employee stock ownership plan of The Procter & Gamble Profit
Sharing Trust and Employee Stock Ownership Plan or the portion thereof
associated with retiree medical benefits, the Company may, in its sole
discretion and notwithstanding anything to the contrary in paragraph (A) of this
Section 6, elect to redeem such shares at the redemption prices per share
provided in paragraph (A) of this Section 6.

       (D) The Company, at its option, may make payment of the redemption price
required upon redemption of shares of Series B Preferred Stock in cash or in
shares of Common Stock, or in a combination of such shares and cash, any such
shares of Common Stock to be valued for such purpose at the average of the high
and low reported sales price, or, in case no sale takes place on such day, the
average reported closing bid and asked price, in either case as reported on the
New York Stock Exchange Tape on the date of redemption, or if not listed or
admitted to trading on the New York Stock Exchange, in accordance with the
valuation methods provided in paragraph 9(F)(2).

7.     Redemption to Satisfy Obligations of The Procter & Gamble Profit Sharing
       Trust and Employee Stock Ownership Plan.

       Unless otherwise provided by law, shares of Series B Preferred Stock
shall be redeemed by the Company for cash or, if the Company so elects, in
shares of Common Stock, or a combination of such shares and cash, any such
shares of Common Stock to be valued for such purpose as provided by paragraph
(D) of Section 6, at the Series B Liquidation Price per share in effect on the
date fixed for redemption plus all accrued (whether or not accumulated) and
unpaid dividends thereon to the date fixed for redemption, at the option of the
holder, at any time and from time to time upon notice to the Company given not
less than five (5) business days prior to the date fixed by the holder in such
notice for redemption, when and to the extent necessary for such holder to
provide for distributions required to be made under, or to satisfy an investment
election provided to participants in accordance with, The Procter & Gamble
Profit Sharing Trust and Employee Stock Ownership Plan, as the same may be
amended, or any successor plan (the "Plan").

8.     Consolidation, Merger, etc.

       (A) In the event that the Company shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted solely into shares of any successor or resulting
company (including the Company) that constitutes "qualifying employer
securities" with respect to a holder of Series B Preferred Stock within the
meanings of Section 4975(e)(8) of the Internal Revenue Code of 1986, as amended,
and Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended, or any successor provision of law, and, if applicable, for a cash
payment in lieu of fractional shares, if any, then, in such event, the terms of
such consolidation or merger or similar transaction shall provide that the
shares of Series B Preferred Stock of such holder shall be submitted for and
shall become preferred shares of such successor or resulting company, having in
respect of such company insofar as possible the same powers, preferences and
relative, participating, optional or other special rights (including the
redemption rights provided by Sections 6, 7, and 8 hereof), and the
qualifications, limitations or restrictions thereon, that the Series B Preferred
Stock had immediately prior to such transaction; provided, however, that after
such transaction each share of the Series B Preferred Stock shall be
convertible, pursuant to the terms and conditions provided by Section 5 hereof,
into the qualifying employer securities so receivable by a holder of the number
of shares of Common Stock into which such shares of Series B Preferred Stock
could have been converted immediately prior to such transaction (provided that,
if the kind or amount of qualifying employer securities receivable upon such
transaction is not the same for each non-electing share, then the kind and
amount of qualifying employer securities receivable upon such transaction for
each non-electing share shall be the kind and amount so receivable per share by
a plurality of the non-electing shares). The rights of the Series B Preferred
Stock as preferred shares of such successor or resulting company shall
successively be subject to adjustments pursuant to Section 9 hereof after any
such transaction as nearly equivalent to the adjustments provided for by such
section prior to such transaction. The Company shall not consummate any such
merger, consolidation or similar transaction unless all the terms of this
paragraph 8(A) are complied with.

       (B) In the event that the Company shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged for or changed,
reclassified or converted into other shares or securities or cash or any other
property, or any combination thereof, other than any such consideration which is
constituted solely of qualifying employer securities (as referred to in
paragraph (A) of this Section 8) and cash payments, if applicable, in lieu of
fractional shares, outstanding shares of Series B Preferred Stock shall, without
any action on the part of the Company or any holder thereof (but subject to
paragraph (C) of this Section 8, be deemed converted by virtue of such merger,
consolidation or similar transaction immediately prior to such consummation into
the number of shares of Common Stock into which such shares of Series B
Preferred Stock could have been converted at such time and each share of Series
B Preferred Stock shall, by virtue of such transaction and on the same terms as
apply to the holders of Common Stock, be converted into or exchanged for the
aggregate amount of shares, securities, cash or other property (payable in like
kind) receivable by a holder of the number of shares of Common Stock into which
such shares of Series B Preferred Stock could have been converted immediately
prior to such transaction if such holder of Common Stock failed to exercise any
rights of election as to the kind or amount of shares, securities, cash or other
property receivable upon such transaction (provided that, if the kind or amount
of shares, securities, cash or other property receivable upon such transaction
is not the same for each non-electing share, then the kind and amount of shares,
securities, cash or other property receivable upon such transaction for each
non-electing share shall be the kind and amount so receivable per share by a
plurality of non-electing shares).

       (C) In the event the Company shall enter into any agreement providing for
any consolidation or merger or similar transaction described in paragraph (B) of
this Section 8, then the Company shall as soon as practicable thereafter (and in
any event at least ten (10) business days before consummation of such
transaction) give notice of such agreement and the material terms thereof to
each holder of Series B Preferred Stock and each such holder shall have the
right to elect, by written notice to the Company, to receive, upon consummation
of such transaction (if and when such transaction is consummated), from the
Company or the successor of the Company, in redemption and retirement of such
Series B Preferred Stock, a cash payment equal to the Series B Liquidation Price
in effect on the date set for redemption plus all accrued (whether or not
accumulated) and unpaid dividends. No such notice of redemption shall be
effective unless given to the Company prior to the close of business on the
fifth business day prior to consummation of such transaction, unless the Company
or the successor of the Company shall waive such prior notice, but any notice of
redemption so given prior to such time may be withdrawn by notice of withdrawal
given to the Company prior to the close of business on the fifth business day
prior to consummation of such transaction.

9.     Anti-dilution Adjustments.

       (A)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of the
Series B Preferred Stock are outstanding, (i) pay a dividend or make a
distribution in respect of the Common Stock in shares of Common Stock or (ii)
subdivide or combine the outstanding shares of Common Stock into a greater or
lesser number of shares, in each case whether by reclassification of shares,
recapitalization of the Company (excluding a recapitalization or
reclassification effected by a merger or consolidation to which Section 8 hereof
applies) or otherwise, then, in such event, each share of Series B Preferred
Stock will automatically, without any action on the part of the holder thereof
or the Company, become that number of shares of Series B Preferred Stock (the
"Non-dilutive Share Amount") equal to an amount which is a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock outstanding immediately before such event. An adjustment
pursuant to this paragraph 9(A)(1) shall be effective upon payment of such
dividend or distribution in respect of the Common Stock and in the case of a
subdivision or combination shall become effective immediately as of the
effective date thereof. Concurrently with the automatic adjustment pursuant to
this paragraph 9(A)(1), the Series B Conversion Price, the Series B Liquidation
Price and the Series B Preferred Dividend Rate of all shares of Series B
Preferred Stock shall be adjusted by dividing the Series B Conversion Price, the
Series B Liquidation Price and the Series B Preferred Dividend Rate,
respectively, in effect immediately before the event by the Non-dilutive Share
Amount determined pursuant to this paragraph 9(A)(1).

       (2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(A)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(A)(1), then no such
automatic adjustment shall occur, but instead the Series B Conversion Price
shall automatically be adjusted by dividing the Series B Conversion Price in
effect immediately before the event by the Non-dilutive Share Amount determined
pursuant to paragraph 9(A)(1), and the Series B Liquidation Price and the Series
B Preferred Dividend Rate will not be adjusted. An adjustment to the Series B
Conversion Price made pursuant to this paragraph 9(A)(2) shall be given effect,
upon payment of such a dividend or distribution, as of the record date for the
determination of shareholders entitled to receive such dividend or distribution
(on a retroactive basis) and in the case of a subdivision or combination shall
become effective immediately as of the effective date thereof. If subsequently
the Company is able to give full effect to the automatic adjustment as provided
in paragraph 9(A)(1), then such automatic adjustment will proceed in accordance
with the provisions of paragraph 9(A)(1) and the adjustment in the Series B
Conversion Price as provided in this paragraph 9(A)(2) will automatically be
reversed and nullified prospectively.

       (B)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of
Series B Preferred Stock are outstanding, issue to holders of shares of Common
Stock as a dividend or distribution, including by way of a reclassification of
shares or a recapitalization of the Company, any right or warrant to purchase
shares of Common Stock (but not including as such a right or warrant any
security convertible into or exchangeable for shares of Common Stock) at a
purchase price per share less than the Fair Market Value (as hereinafter
defined) of a share of Common Stock on the date of issuance of such right or
warrant, then, in such event, each share of Series B Preferred Stock will
automatically, without any action on the part of the holder thereof or the
Company, become that number of shares of Series B Preferred Stock (the
"Non-dilutive Share Amount") equal to an amount which is a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the maximum number
of shares of Common Stock that could be acquired upon exercise in full of all
such rights and warrants and the denominator of which is the number of shares of
Common Stock outstanding immediately before such issuance of rights or warrants
plus the number of shares of Common Stock which could be purchased at the Fair
Market Value of a share of Common Stock at the time of such issuance for the
maximum aggregate consideration payable upon exercise in full of all such rights
or warrants. Concurrently with the automatic adjustment pursuant to this
paragraph 9(B)(1), the Series B Conversion Price, the Series B Liquidation Price
and the Series B Preferred Dividend Rate of all shares of Series B Preferred
Stock shall be adjusted by dividing the Series B Conversion Price, the Series B
Liquidation Price and the Series B Preferred Dividend Rate, respectively, in
effect immediately before such issuance of rights or warrants by the
Non-dilutive Share Amount determined pursuant to this paragraph 9(B)(1).

       (2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(B)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(B)(1), then no such
automatic adjustment shall occur, but instead the Series B Conversion Price
shall automatically be adjusted by dividing the Series B Conversion Price in
effect immediately before such issuance of rights or warrants by the
Non-Dilutive Share Amount determined pursuant to paragraph 9(B)(1), and the
Series B Liquidation Price and Series B Preferred Dividend Rate will not be
adjusted. If subsequently the Company is able to give full effect to the
automatic adjustment as provided in paragraph 9(B)(1), then such automatic
adjustment will proceed in accordance with the provisions of paragraph 9(B)(1)
and the adjustment in the Series B Conversion Price as provided in this
paragraph 9(B)(2) will automatically be reversed and nullified prospectively.

       (C)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of
Series B Preferred Stock are outstanding, make an Extraordinary Distribution (as
hereinafter defined) in respect of the Common Stock, whether by dividend,
distribution, reclassification of shares or recapitalization of the Company
(including recapitalization or reclassification effected by a merger or
consolidation to which Section 8 hereof does not apply) or effect a Pro Rata
Repurchase (as hereinafter defined) of Common Stock, then, in such event, each
share of Series B Preferred Stock will automatically, without any action on the
part of the holder thereof or the Company, become that number of shares of
Series B Preferred Stock (the "Non-dilutive Share Amount") equal to an amount
which is a fraction the numerator of which is the product of (a) the number of
shares of Common Stock outstanding immediately before such Extraordinary
Distribution or Pro Rata Repurchase minus, in the case of a Pro Rata Repurchase,
the number of shares of Common Stock repurchased by the Company multiplied by
(b) the Fair Market Value of a share of Common Stock on the record date with
respect to an Extraordinary Distribution or on the applicable expiration date
(including all extensions thereof) of any tender offer which is a Pro Rata
Repurchase or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be, and the denominator of which is
(i) the product of (x) the number of shares of Common Stock outstanding
immediately before such Extraordinary Distribution or Pro Rata Repurchase
multiplied by (y) the Fair Market Value of a share of Common Stock on the record
date with respect to an Extraordinary Distribution, or on the applicable
expiration date (including all extensions thereof) of any tender offer which is
a Pro Rata Repurchase, or on the date of purchase with respect to any Pro Rata
Repurchase which is not a tender offer, as the case may be, minus (ii) the Fair
Market Value of the Extraordinary Distribution or the aggregate purchase price
of the Pro Rata Repurchase, as the case may be. The Company shall send each
holder of Series B Preferred Stock (i) notice of its intent to make any dividend
or distribution and (ii) notice of any offer by the Company to make a Pro Rata
Repurchase, in each case at the same time as, or as soon as practicable after,
such offer is first communicated (including by announcement of a record date in
accordance with the rules of any stock exchange on which the Common Stock is
listed or admitted to trading) to holders of Common Stock. Such notice shall
indicate the intended record date and the amount and nature of such dividend or
distribution, or the number of shares subject to such offer for a Pro Rata
Repurchase and the purchase price payable by the Company pursuant to such offer,
as well as the Series B Conversion Price and the number of shares of Common
Stock into which a share of Series B Preferred Stock may be converted at such
time. Concurrently with the automatic adjustment pursuant to this paragraph
9(C)(1), the Series B Conversion Price, the Series B Liquidation Price and the
Series B Preferred Dividend Rate of all shares of Series B Preferred Stock shall
be adjusted by dividing the Series B Conversion Price, the Series B Liquidation
Price and the Series B Preferred Dividend Rate, respectively, in effect
immediately before such Extraordinary Distribution or Pro Rata Repurchase by the
Non-dilutive Share Amount determined pursuant to this paragraph 9(C)(1).

       (2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(C)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(C)(1), then no such
automatic adjustment shall occur, but instead the Series B Conversion Price
shall automatically be adjusted by dividing the Series B Conversion Price in
effect immediately before such Extraordinary Distribution or Pro Rata Repurchase
by the Non-dilutive Share Amount, and the Series B Liquidation Price and the
Series B Preferred Dividend Rate will not be adjusted. If subsequently the
Company is able to give full effect to the automatic adjustment as provided in
paragraph 9(C)(1), then such automatic adjustment will proceed in accordance
with the provisions of paragraph 9(C)(1) and the adjustment in the Series B
Conversion Price as provided in this paragraph 9(C)(2) will automatically be
reversed and nullified prospectively.

       (D) Notwithstanding any other provisions of this Section 9, the Company
shall not be required to make (i) any adjustment of the number of issued shares
of Series B Preferred Stock, the Series B Conversion Price, the Series B
Liquidation Price or the Series B Preferred Dividend Rate unless such adjustment
would require an increase or decrease of at least one percent (1%) in the number
of shares of Series B Preferred Stock outstanding, or, (ii) if no additional
shares of Series B Preferred Stock are issued, any adjustment of the Series B
Conversion Price unless such adjustment would require an increase or decrease of
at least one percent (1%) in the Series B Conversion Price. Any lesser
adjustment shall be carried forward and shall be made no later than the time of,
and together with, the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least one percent (1%) of the number of Series B Preferred Shares
outstanding or, if no additional shares of Series B Preferred Stock are being
issued, an increase or decrease of at least one percent (1%) of the Series B
Conversion Price, whichever the case may be.

       (E) If the Company shall make any dividend or distribution on the Common
Stock or issue any Common Stock, other capital stock or other security of the
Company or any rights or warrants to purchase or acquire any such security,
which transaction does not result in an appropriate adjustment to the number of
shares of Series B Preferred Stock outstanding or the Series B Conversion Price
pursuant to the foregoing provisions of this Section 9, the Board of Directors
of the Company may, in its sole discretion, consider whether such action is of
such a nature that some type of equitable adjustment should be made in respect
of such transaction. If in such case the Board of Directors of the Company
determines that some type of adjustment should be made, an equitable adjustment
not repugnant to law and for the protection of the conversion rights of the
Series B Preferred Stock shall be made effective as of such date, as determined
by the Board of Directors of the Company. The determination of the Board of
Directors of the Company as to whether some type of adjustment should be made
pursuant to the foregoing provisions of this paragraph 9(E), and, if so, as to
what adjustment should be made and when, shall be final and binding on the
Company and all shareholders of the Company. The Company shall be entitled to
make such additional adjustments, in addition to those required by the foregoing
provisions of this Section 9, as shall be necessary in order that any dividend
or distribution in shares of capital stock of the Company, subdivision,
reclassification or combination of shares of the Company or any recapitalization
of the Company shall not be taxable to holders of the Common Stock.

       (F) For purposes of this Appendix B, the following definitions shall
apply:

       (1) "Extraordinary Distribution" shall mean any dividend or other
distribution (effected while any of the shares of Series B Preferred Stock are
outstanding) of (i) cash, where the aggregate amount of such cash dividend or
distribution together with the amount of all cash dividends and distributions
made during the preceding period of twelve (12) months, when combined with the
aggregate amount of all Pro Rata Repurchases [for this purpose, including only
that portion of the aggregate purchase price of such Pro Rata Repurchase which
is in excess of the Fair Market Value of the Common Stock repurchased as
determined on the applicable expiration date (including all extensions thereof)
of any tender offer or exchange offer which is a Pro Rata Repurchase, or the
date of purchase with respect to any other Pro Rata Repurchase which is not a
tender offer or exchange offer] made during such period, exceeds twelve and
one-half percent (12 1/2%) of the aggregate Fair Market Value of all shares of
Common Stock outstanding on the record date for determining the shareholders
entitled to receive such Extraordinary Distribution and (ii) any shares of
capital stock of the Company (other than shares of Common Stock), other
securities of the Company (other than securities of the type referred to in
paragraph (B) of this Section 9), evidences of indebtedness of the Company or
any other person or any other property (including shares of any subsidiary of
the Company), or any combination thereof. The Fair Market Value of an
Extraordinary Distribution for purposes of paragraph (C) of this Section 9 shall
be the sum of the Fair Market Value of such Extraordinary Distribution plus the
aggregate amount of any cash dividends or distributions which are not
Extraordinary Distributions made during such twelve month period and not
included in the calculation of any previous adjustment pursuant to paragraph (C)
of this Section 9.

       (2) "Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Company or any other issuer
which are publicly traded, the average of the Current Market Prices (as
hereinafter defined) of such shares or securities for each day of the Adjustment
Period (as hereinafter defined). "Current Market Price" of publicly traded
shares of Common Stock or any other class of capital stock or other security of
the Company or any other issuer for a day shall mean the last reported sales
price, regular way, or, in case no sale takes place on such day, the average
reported closing bid and asked prices, regular way, in either case as reported
on the New York Stock Exchange Composite Tape or, if such security is not listed
or admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which such security is listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
NASDAQ National Market System or, if such security is not quoted on such
National Market System, the average of the closing bid and asked prices on each
such day in the over-the-counter market as reported by NASDAQ or, if bid and
asked prices for such security on each such day shall not have been reported
through NASDAQ, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm regularly making a market
in such security selected for such purpose by the Board of Directors of the
Company or the Executive Committee of the Board of Directors of the Company on
each trading day during the Adjustment Period. "Adjustment Period" shall mean
the period of five (5) consecutive trading days, selected by the Board of
Directors or the Executive Committee of the Board of Directors of the Company,
during the twenty (20) trading days preceding, and including, the date as of
which the Fair Market Value of a security is to be determined. The "Fair Market
Value" of any security which is not publicly traded or of any other property
shall mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors or the Executive
Committee of the Board of Directors of the Company, or, if no such investment
banking or appraisal firm is in the good faith judgment of the Board of
Directors or the Executive Committee of the Board of Directors available to make
such determination, as determined in good faith by the Board of Directors or the
Executive Committee of the Board of Directors of the Company.

       (3) "Pro Rata Repurchase" shall mean any purchase of shares of Common
Stock by the Company or any subsidiary thereof, whether for cash, shares of
capital stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other person or any other property (including
shares of a subsidiary of the Company), or any combination thereof, effected
while any of the shares of Series B Preferred Stock are outstanding, pursuant to
any tender offer or exchange offer subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision of law, or pursuant to any other offer available to substantially all
holders of Common Stock; provided, however, that no purchase of shares by the
Company or any subsidiary thereof made in open market transactions shall be
deemed a Pro Rata Repurchase. For purposes of this paragraph 9(F), shares shall
be deemed to have been purchased by the Company or any subsidiary thereof "in
open market transactions" if they have been purchased substantially in
accordance with the requirements of Rule 10b-18 as in effect under the Exchange
Act on the date shares of Series B Preferred Stock are initially issued by the
Company or on such other terms and conditions as the Board of Directors or the
Executive Committee of the Board of Directors of the Company shall have
determined are reasonably designed to prevent such purchases from having a
material effect on the trading market for the Common Stock.

       (G) Whenever an adjustment increasing the number of shares of Series B
Preferred Stock outstanding is required pursuant to this Appendix B, the Board
of Directors shall take such action as is necessary so that a sufficient number
of shares of Series B Preferred Stock are designated with respect to such
increase resulting from such adjustment. Whenever an adjustment to the Series B
Conversion Price, the Series B Liquidation Price or the Series B Preferred
Dividend Rate of the Series B Preferred Stock is required pursuant to this
Appendix B, the Company shall forthwith place on file with the transfer agent
for the Common Stock and the Series B Preferred Stock if there be one, and with
the Treasurer of the Company, a statement signed by the Treasurer or Assistant
Treasurer of the Company stating the adjusted Series B Conversion Price, Series
B Liquidation Price and Series B Preferred Dividend Rate determined as provided
herein. Such statement shall set forth in reasonable detail such facts as shall
be necessary to show the reason and the manner of computing such adjustment,
including any determination of Fair Market Value involved in such computation.
Promptly after each adjustment to the number of shares of Series B Preferred
Stock outstanding, the Series B Conversion Price, the Series B Liquidation Price
or the Series B Preferred Dividend Rate, the Company shall mail a notice thereof
and of the then prevailing number of shares of Series B Preferred Stock
outstanding, the Series B Conversion Price, the Series B Liquidation Price and
the Series B Preferred Dividend Rate to each holder of shares of Series B
Preferred Stock.

10.    Miscellaneous.

       (A) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt thereof
or three (3) business days after the mailing thereof if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms of this Appendix B) with postage prepaid, addressed: (i) if to the
Company, to its office at One Procter & Gamble Plaza, Cincinnati, Ohio 45202
(Attention: Treasurer) or to the transfer agent for the Series B Preferred
Stock, or other agent of the Company designated as permitted by this Appendix B
or (ii) if to any holder of the Series B Preferred Stock or Common Stock, as the
case may be, to such holder at the address of such holder as listed in the stock
record books of the Company (which may include the records of any transfer agent
for the Series B Preferred Stock or Common Stock, as the case may be) or (iii)
to such other address as the Company or any such holder, as the case may be,
shall have designated by notice similarly given.

       (B) The term "Common Stock" as used in this Appendix B means the
Company's Common Stock without par value, as the same exists at the date of
filing of the Amendment to the Company's Amended Articles of Incorporation first
designating Series B Preferred Stock, or any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to without par value, or from without
par value to par value. In the event that, at any time as a result of an
adjustment made pursuant to Section 9 of this Appendix B, the holder of any
share of the Series B Preferred Stock upon thereafter surrendering such shares
for conversion shall become entitled to receive any shares or other securities
of the Company other than shares of Common Stock, the anti-dilution provisions
contained in Section 9 hereof shall apply in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock, and
the provisions of Sections 1 through 8 and 10 of this Appendix B with respect to
the Common Stock shall apply on like or similar terms to any such other shares
or securities.

       (C) The Company shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of shares
of Series B Preferred Stock or shares of Common Stock or other securities issued
on account of Series B Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Company shall not, however, be
required to pay any such tax which may be payable in respect of any transfer of
the Series B Preferred or Common Stock or other Securities by the holder thereof
to a subsequent holder resulting in the issuance or delivery of shares of Series
B Preferred Stock or Common Stock or other securities in a name other than that
in which the shares of Series B Preferred Stock with respect to which such
shares or other securities are issued or delivered were registered, or in
respect of any payment to any person with respect to any such shares or
securities other than a payment to the registered holder thereof, and shall not
be required to make any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or payment has paid to the
Company the amount of any such tax or has established, to the satisfaction of
the Company, that such tax has been paid or is not payable.

       (D) In the event that a holder of shares of Series B Preferred Stock
shall not by written notice designate the name in which shares of Common Stock
to be issued upon conversion of such shares should be registered or to whom
payment upon redemption of shares of Series B Preferred Stock should be made or
the address to which the certificate or certificates representing such shares,
or such payment, should be sent, the Company shall be entitled to register such
shares, and make such payment, in the name of the holder of such Series B
Preferred Stock as shown on the records of the Company and to send the
certificate or certificates or other documentation representing such shares, or
such payment, to the address of such holder shown on the records of the Company.

       (E) The Company may appoint, and from time to time discharge and change,
a transfer agent for the Series B Preferred Stock. Upon any such appointment or
discharge of a transfer agent, the Company shall send notice thereof by
first-class mail, postage prepaid, to each holder of record of Series B
Preferred Stock.

5   As a result of two two-for-one stock splits on the Common Stock
    effective August 22, 1997 and May 21, 2004 and the Smucker transaction
    effective June 1, 2002, the Conversion Price, Liquidation Price and
    Preferred Dividend Rate were all adjusted in accordance with the terms
    of paragraph 9(A)(1) of this Appendix B to be as follows: Conversion
    Price -- $12.96; Liquidation Price -- $12.96; Preferred Dividend Rate
    -- $1.022 per share per annum, with a corresponding change in the
    quarterly dividend payment. (This footnote is not a part of the
    Company's Amended Articles of Incorporation but is included to provide
    up-to-date information on the status of Series B ESOP Convertible Class
    A Preferred Stock.)


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>3
<FILENAME>jas0411.txt
<DESCRIPTION>EXHIBIT 11 - 10-Q JAS 2004
<TEXT>
                                  EXHIBIT (11)

                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                  ---------------------------------------------
                        Computation of Earnings Per Share
                        ---------------------------------

Amounts in millions except per share amounts


                                                            Three Months Ended
                                                               September 30
                                                             2004         2003
                                                          ---------    ---------
BASIC NET EARNINGS PER SHARE
Net earnings                                              $   2,001    $   1,761
Preferred dividends, net of tax benefit                          33           33
                                                          ---------    ---------
Net earnings available to common shareholders             $   1,968    $   1,728
                                                          =========    =========

Basic weighted average common shares outstanding            2,540.7      2,593.3
                                                          =========    =========

Basic net earnings per common share                       $    0.77    $    0.67
                                                          =========    =========

DILUTED NET EARNINGS PER SHARE
Net earnings                                              $   2,001    $   1,761
Deduct preferred dividend impact on
       funding of ESOP                                         --              1
                                                          ---------    ---------
Diluted net earnings                                      $   2,001    $   1,760
                                                          =========    =========

Basic weighted average common shares outstanding            2,540.7      2,593.3
Add potential effect of:
       Conversion of preferred shares                         160.1        166.6
       Exercise of stock options and other unvested
          equity awards                                        55.2         37.8
                                                          ---------    ---------

Diluted weighted average common shares outstanding          2,756.0      2,797.7
                                                          =========    =========

Diluted net earnings per common share                     $    0.73    $    0.63
                                                          =========    =========



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>4
<FILENAME>jas0412.txt
<DESCRIPTION>EXHIBIT 12 - 10-Q JAS 2004
<TEXT>
<TABLE>
<CAPTION>
                                                         EXHIBIT (12)

                                        THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                                        ---------------------------------------------
                                      COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
                                      -------------------------------------------------

Amounts in millions

                                                                                                             Three Months Ended
                                                                         Years Ended June 30                    September 30
                                                           ------------------------------------------------  ------------------

                                                             2000      2001      2002      2003      2004      2003      2004
                                                           --------  --------  --------  --------  --------  --------  --------
<S>                                                       <C>       <C>       <C>       <C>       <C>       <C>       <C>
EARNINGS, AS DEFINED
     Earnings from operations before income taxes
          and before adjustments for minority interests
          in consolidated subsidiaries and after
          eliminating undistributed earnings of equity
          method investees                                $ 5,474   $ 4,574   $ 6,442   $ 7,760   $ 9,454   $ 2,541   $ 2,849

      Fixed charges                                           811       872       687       657       719       166       204
                                                           --------  --------  --------  --------  --------  --------  --------

          TOTAL EARNINGS, AS DEFINED                      $ 6,285   $ 5,446   $ 7,129   $ 8,417   $10,173   $ 2,707   $ 3,053
                                                           ========  ========  ========  ========  ========  -=======  ========


FIXED CHARGES, AS DEFINED
      Interest expense                                    $   792   $   794   $   603   $   561   $   629   $   141   $   181
      1/3 of rental expense                                    89        78        84        96        90        25        23
                                                           --------  --------  --------  --------  --------  --------  --------

          TOTAL FIXED CHARGES, AS DEFINED                 $   881   $   872   $   687   $   657   $   719   $   166   $   204
                                                           ========  ========  ========  ========  ========  -=======  ========

          RATIO OF EARNINGS TO FIXED CHARGES                  7.1       6.2      10.4      12.8      14.1      16.3      15.0
</TABLE>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>5
<FILENAME>x31agl04.txt
<DESCRIPTION>EXHIBIT 31 - AGL - 10-Q JAS 2004
<TEXT>
                                  EXHIBIT (31)

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

I, A.G. Lafley, certify that:

     (1)  I have reviewed this quarterly report on Form 10-Q of The Procter &
          Gamble Company;

     (2)  Based on my knowledge, this report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this report;

     (3)  Based on my knowledge, the financial statements, and other financial
          information included in this report, fairly present in all material
          respects the financial condition, results of operations and cash flows
          of the registrant as of, and for, the periods presented in this
          report;

     (4)  The registrant's other certifying officer(s) and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
          registrant and have:

          a)   Designed such disclosure controls and procedures, or caused such
               disclosure controls and procedures to be designed under our
               supervision, to ensure that material information relating to the
               registrant, including its consolidated subsidiaries, is made
               known to us by others within those entities, particularly during
               the period in which this report is being prepared;

          b)   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures and presented in this report our
               conclusions about the effectiveness of the disclosure controls
               and procedures, as of the end of the period covered by this
               report based on such evaluation; and

          c)   Disclosed in this report any change in the registrant's internal
               control over financial reporting that occurred during the
               registrant's first fiscal quarter (the registrant's fourth fiscal
               quarter in the case of an annual report) that has materially
               affected, or is reasonably likely to materially affect, the
               registrant's internal control over financial reporting; and

     (5)  The registrant's other certifying officer(s) and I have disclosed,
          based on our most recent evaluation of internal control over financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's board of directors (or persons performing the equivalent
          functions):

          a)   All significant deficiencies and material weaknesses in the
               design or operation of internal control over financial reporting
               which are reasonably likely to adversely affect the registrant's
               ability to record, process, summarize and report financial
               information; and

          b)   Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal control over financial reporting.




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

October 28, 2004
- -------------------------------
Date

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>6
<FILENAME>x31ccd04.txt
<DESCRIPTION>EXHIBIT 31 - CCD - 10-Q JAS 2004
<TEXT>
                                  EXHIBIT (31)

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


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

     (1)  I have reviewed this quarterly report on Form 10-Q of The Procter &
          Gamble Company;

     (2)  Based on my knowledge, this report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this report;

     (3)  Based on my knowledge, the financial statements, and other financial
          information included in this report, fairly present in all material
          respects the financial condition, results of operations and cash flows
          of the registrant as of, and for, the periods presented in this
          report;

     (4)  The registrant's other certifying officer(s) and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
          registrant and have:

          a)   Designed such disclosure controls and procedures, or caused such
               disclosure controls and procedures to be designed under our
               supervision, to ensure that material information relating to the
               registrant, including its consolidated subsidiaries, is made
               known to us by others within those entities, particularly during
               the period in which this report is being prepared;

          b)   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures and presented in this report our
               conclusions about the effectiveness of the disclosure controls
               and procedures, as of the end of the period covered by this
               report based on such evaluation; and

          c)   Disclosed in this report any change in the registrant's internal
               control over financial reporting that occurred during the
               registrant's first fiscal quarter (the registrant's fourth fiscal
               quarter in the case of an annual report) that has materially
               affected, or is reasonably likely to materially affect, the
               registrant's internal control over financial reporting; and

     (5)  The registrant's other certifying officer(s) and I have disclosed,
          based on our most recent evaluation of internal control over financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's board of directors (or persons performing the equivalent
          functions):

          a)   All significant deficiencies and material weaknesses in the
               design or operation of internal control over financial reporting
               which are reasonably likely to adversely affect the registrant's
               ability to record, process, summarize and report financial
               information; and

          b)   Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal control over financial reporting.



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

October 28, 2004
- ------------------------------
Date

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>7
<FILENAME>x32agl04.txt
<DESCRIPTION>EXHIBIT 32 - AGL - 10-Q JAS 2004
<TEXT>
                                  EXHIBIT (32)

                           Section 1350 Certifications

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

     (1)  The Quarterly Report on Form 10-Q of the Company for the quarterly
          period ended September 30, 2004 fully complies with the requirements
          of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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




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

October 28, 2004
- -------------------------------
Date


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


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>8
<FILENAME>x32ccd04.txt
<DESCRIPTION>EXHIBIT 32 - CCD - 10-Q JAS 2004
<TEXT>
                                  EXHIBIT (32)

                          Section 1350 Certifications

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

     (1)  The Quarterly Report on Form 10-Q of the Company for the quarterly
          period ended September 30, 2004 fully complies with the requirements
          of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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




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

October 28, 2004
- -----------------------------
Date


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


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
