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 December 31, 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 2,522,583,573 shares of Common Stock outstanding as of December 31,
2004.



Item 1.  Financial Statements

The Consolidated Statements of Earnings of The Procter & Gamble Company and
subsidiaries (the Company) for the three and six months ended December 31, 2004
and 2003, the Consolidated Balance Sheets as of December 31, 2004 and June 30,
2004, and the Consolidated Statements of Cash Flows for the six months ended
December 31, 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                    Six Months Ended
                                                    December 31                           December 31
                                          --------------------------------    ---------------------------------
                                               2004              2003              2004              2003
                                          --------------    --------------    --------------    ---------------

                                                                                            
NET SALES                                   $  14,452         $  13,221         $  28,196         $  25,416
      Cost of products sold                     6,871             6,324            13,482            12,203
      Selling, general and
      administrative expense                    4,511             4,155             8,774             7,828
                                          --------------    --------------    --------------    ---------------

OPERATING INCOME                                3,070             2,742             5,940             5,385
      Interest expense                            200               149               381               290
      Other non-operating income, net              55                29               237                69
                                          --------------    --------------    --------------    ---------------

EARNINGS BEFORE INCOME TAXES                    2,925             2,622             5,796             5,164
      Income taxes                                886               804             1,756             1,585
                                          --------------    --------------    --------------    ---------------

NET EARNINGS                                $   2,039         $   1,818         $   4,040         $   3,579
                                          ==============    ==============    ==============     ==============

PER COMMON SHARE:
      Basic net earnings                    $    0.79         $    0.69         $    1.57         $    1.36
      Diluted net earnings                  $    0.74         $    0.65         $    1.47         $    1.28
      Dividends                             $    0.25         $    0.23         $    0.50         $    0.46

DILUTED WEIGHTED AVERAGE
      COMMON SHARES OUTSTANDING               2,741.0           2,800.9           2,748.5           2,799.2






                        THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                                 CONSOLIDATED BALANCE SHEETS
Amounts in millions

                                                                  December 31        June 30
ASSETS                                                               2004             2004
                                                                 -------------    ------------
CURRENT ASSETS
                                                                                    
     Cash and cash equivalents                                        $ 7,676         $ 5,469
     Investment securities                                                494             423
     Accounts receivable                                                4,689           4,062
     Inventories
         Materials and supplies                                         1,476           1,191
         Work in process                                                  380             340
         Finished goods                                                 3,320           2,869
                                                                 -------------    ------------
     Total inventories                                                  5,176           4,400
     Deferred income taxes                                              1,017             958
     Prepaid expenses and other receivables                             1,944           1,803
                                                                 -------------    ------------

TOTAL CURRENT ASSETS                                                   20,996          17,115

PROPERTY, PLANT AND EQUIPMENT
     Buildings                                                          5,433           5,206
     Machinery and equipment                                           20,395          19,456
     Land                                                                 667             642
                                                                 -------------    ------------
                                                                       26,495          25,304
     Accumulated depreciation                                         (11,993)        (11,196)
                                                                 -------------    ------------

NET PROPERTY, PLANT AND EQUIPMENT                                      14,502          14,108

GOODWILL AND OTHER INTANGIBLE ASSETS
     Goodwill                                                          20,651          19,610
     Trademarks and other intangible assets, net                        4,655           4,290
                                                                 -------------    ------------

NET GOODWILL AND OTHER INTANGIBLE ASSETS                               25,306          23,900

OTHER NON-CURRENT ASSETS                                                2,228           1,925
                                                                 -------------    ------------

TOTAL ASSETS                                                         $ 63,032        $ 57,048
                                                                 =============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable                                                 $ 3,264         $ 3,617
     Accrued and other liabilities                                      8,083           7,689
     Taxes payable                                                      2,695           2,554
     Debt due within one year                                           9,861           8,287
                                                                 -------------    ------------

TOTAL CURRENT LIABILITIES                                              23,903          22,147

LONG-TERM DEBT                                                         13,385          12,554

DEFERRED INCOME TAXES                                                   2,307           2,261

OTHER NON-CURRENT LIABILITIES                                           3,553           2,808
                                                                 -------------    ------------

TOTAL LIABILITIES                                                      43,148          39,770

SHAREHOLDERS' EQUITY
     Preferred stock                                                    1,505           1,526
     Common stock - shares outstanding Dec 31   2,522.6                 2,523
                                       June 30  2,543.8                                 2,544
     Additional paid-in capital                                         2,779           2,425
     Reserve for ESOP debt retirement                                  (1,271)         (1,283)
     Accumulated other comprehensive income                              (366)         (1,545)
     Retained earnings                                                 14,714          13,611
                                                                 -------------    ------------

TOTAL SHAREHOLDERS' EQUITY                                             19,884          17,278
                                                                 -------------    ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $ 63,032        $ 57,048
                                                                 =============    ============

See accompanying Notes to Consolidated Financial Statements






                   THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                 Six Months Ended
Amounts in millions                                                December 31
                                                             ------------------------
                                                                 2004         2003
                                                             -----------  -----------
                                                                          
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                 $ 5,469      $ 5,912

OPERATING ACTIVITIES
       Net earnings                                              4,040        3,579
       Depreciation and amortization                               928          857
       Deferred income taxes                                       378          233
       Change in:
            Accounts receivable                                   (387)        (452)
            Inventories                                           (582)         (74)
            Accounts payable, accrued and other liabilities       (518)        (183)
            Other operating assets & liabilities                  (171)        (144)
       Other                                                       291          145
                                                             -----------  -----------

TOTAL OPERATING ACTIVITIES                                       3,979         3,961
                                                             -----------  -----------

INVESTING ACTIVITIES
       Capital expenditures                                       (911)        (810)
       Proceeds from asset sales                                   367          124
       Acquisitions, net of cash acquired                         (351)      (5,358)
       Change in investment securities                             (73)         (69)
                                                             -----------  -----------

TOTAL INVESTING ACTIVITIES                                        (968)      (6,113)
                                                             -----------  -----------

FINANCING ACTIVITIES
       Dividends to shareholders                                (1,335)      (1,245)
       Change in short-term debt                                    50        2,791
       Additions to long-term debt                               3,041        1,405
       Reductions of long-term debt                             (1,565)        (993)
       Proceeds from the exercise of stock options and other       201          233
       Treasury purchases                                       (1,633)      (1,046)
                                                             -----------  -----------

TOTAL FINANCING ACTIVITIES                                      (1,241)       1,145
                                                             -----------  -----------

EFFECT OF EXCHANGE RATE CHANGES ON CASH
       AND CASH EQUIVALENTS                                        437           38

CHANGE IN CASH AND CASH EQUIVALENTS                              2,207         (969)
                                                             -----------  -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                       $ 7,676      $ 4,943
                                                             ===========  ===========

See accompanying Notes to Consolidated Financial Statements




                  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 and
     six-month periods ended December 31, 2004 are not indicative necessarily of
     annual results.

2.   Comprehensive Income - Total comprehensive income is composed 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 December
     31, 2004 and 2003 was $3,001 million and $2,429 million, respectively. For
     the six months ended December 31, 2004 and 2003, total comprehensive income
     was $5,219 million and $4,366 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.



                                                     SEGMENT INFORMATION

Amounts in millions
                                               Three Months Ended December 31               Six Months Ended December 31
                                         ------------------------------------------  ------------------------------------------
                                                     Earnings Before                             Earnings Before
                                          Net Sales    Income Taxes   Net Earnings    Net Sales    Income Taxes   Net Earnings
                                         ------------------------------------------  ------------------------------------------

                                                                                                      
Total Beauty Care                 2004    $  5,022     $    1,166      $      814     $   9,677    $    2,174       $    1,506
                                  2003       4,492          1,011             654         8,245         1,902            1,253

    Health Care                   2004    $  2,043     $      472      $      313     $   3,887    $      847       $      568
                                  2003       1,908            488             325         3,636           881              591

    Baby & Family Care            2004    $  2,978     $      577      $      360     $   5,828    $    1,093       $      680
                                  2003       2,673            446             281         5,280           918              575
                                         ------------------------------------------  ------------------------------------------
Total Health, Baby & Family Care  2004    $  5,021     $    1,049      $      673     $   9,715    $    1,940       $    1,248
                                  2003       4,581            934             606         8,916         1,799            1,166

    Fabric & Home Care            2004    $  3,784     $      836      $      566     $   7,594    $    1,733       $    1,166
                                  2003       3,407            843             568         6,800         1,675            1,128

    Snacks & Coffee               2004    $    846     $      190      $      124     $   1,586    $      316       $      207
                                  2003         808            196             129         1,541           339              224
                                         ------------------------------------------  -------------------------------------------
Total Household Care              2004    $  4,630     $    1,026      $      690     $   9,180    $    2,049       $    1,373
                                  2003       4,215          1,039             697         8,341         2,014            1,352

Corporate                         2004    $   (221)    $     (316)     $     (138)    $    (376)   $     (367)      $      (87)
                                  2003         (67)          (362)           (139)          (86)         (551)            (192)

                                         ------------------------------------------  -------------------------------------------
Total                             2004    $ 14,452     $    2,925      $    2,039     $  28,196    $    5,796       $    4,040
                                  2003      13,221          2,622           1,818        25,416         5,164            3,579



4.   Goodwill and Other Intangible Assets - Goodwill as of December 31, 2004 is
     allocated by reportable segment as follows (amounts in millions):

                                                          Six Months Ended
                                                          December 31, 2004
                                                          -----------------
     Total Beauty Care, beginning of year                  $        14,457
                   Acquistions & divestiture                           132
                   Translation & other                                 783
                    Goodwill, December 31, 2004            $        15,372

         Health Care, beginning of year                    $         3,315
                   Acquistions & divestiture                            27
                   Translation & other                                  33
                    Goodwill, December 31, 2004            $         3,375

         Baby & Family Care, beginning of year             $           941
                   Acquistions & divestiture                            --
                   Translation & other                                  52
                    Goodwill, December 31, 2004            $           993

     Total Health, Baby & Family Care, beginning of year   $         4,256
                   Acquistions & divestiture                            27
                   Translation & other                                  85
                    Goodwill, December 31, 2004            $         4,368

         Fabric & Home Care, beginning of year             $           614
                   Acquistions & divestiture                            27
                   Translation & other                                  10
                    Goodwill, December 31, 2004            $           651

         Snacks & Coffee, beginning of year                $           283
                   Acquistions & divestiture                           (25)
                   Translation & other                                   2
                    Goodwill, December 31, 2004            $           260

     Total Household Care, beginning of year               $           897
                   Acquistions & divestiture                             2
                   Translation & other                                  12
                    Goodwill, December 31, 2004            $           911

     Goodwill, Net, beginning of year                      $        19,610
                   Acquistions & divestiture                           161
                   Translation & other                                 880
                    Goodwill, December 31, 2004            $        20,651


     The increase in goodwill from June 30, 2004 is primarily due to the
     completed allocation of the purchase price relating to the September 2003
     acquisition of Wella AG and translation impacts. 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.

     Identifiable intangible assets as of December 31, 2004 are comprised of
     (amounts in millions):


                                                  Gross Carrying  Accumulated
                                                      Amount      Amortization
      Amortizable intangible assets with              2,362          687
      determinable lives
      Intangible assets with indefinite lives         2,980            -
      ------------------------------------------------------------------------
      Total identifiable intangible assets            5,342          687


     Amortizable intangible assets consist principally of patents, technology
     and trademarks. The non-amortizable intangible assets consist primarily of
     certain trademarks.

     The amortization of intangible assets for the three and six months ended
     December 31, 2004 is $51 million and $99 million, respectively.

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 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:




     Amounts in millions except per share data

                                          Three Months Ended                 Six Months Ended
                                             December 31                        December 31
                                     -----------------------------     -----------------------------
                                          2004           2003               2004           2003
                                      ------------   ------------       ------------   ------------
                                                                           
     Net earnings
          As reported                 $   2,039      $   1,818          $   4,040      $   3,579
          Pro forma expense                  64             65                123            147
          Pro forma                       1,975          1,753              3,917          3,432

     Net earnings per common share
     Basic
          As reported                 $    0.79      $    0.69          $    1.57      $    1.36
          Pro forma adjustments           (0.02)         (0.03)             (0.05)         (0.06)
          Pro forma                        0.77           0.66               1.52           1.30
     Diluted
          As reported                      0.74           0.65               1.47           1.28
          Pro forma adjustments           (0.02)         (0.03)             (0.05)         (0.06)
          Pro forma                        0.72           0.62               1.42           1.22




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

     In December 2004, the Financial Accounting Standards Board (FASB) issued
     SFAS No. 123 (Revised 2004), "Share-Based Payment" (SFAS 123(R)). This
     Statement revises SFAS No. 123 by eliminating the option to account for
     employee stock options under APB No. 25 and generally requires companies to
     recognize the cost of employee services received in exchange for awards of
     equity instruments based on the grant-date fair value of those awards (the
     "fair-value-based" method). The Company plans to adopt SFAS 123(R) on July
     1, 2005 using the modified retrospective method, whereby all prior periods
     will be adjusted to give effect to the fair-value-based method of
     accounting for awards granted in fiscal years beginning on or after July 1,
     1995. The impact of adopting SFAS 123 (R) will be consistent with the
     impact previously disclosed pursuant to the pro forma disclosure
     requirements of SFAS No. 123.

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.



     The components of net periodic benefit cost are as follows:

     Amounts in millions


                                                           Pension Benefits                    Other Retiree Benefits
                                                  ----------------------------------     ----------------------------------
                                                          Three Months Ended                     Three Months Ended
                                                              December 31                            December 31
                                                  ----------------------------------     ----------------------------------
                                                      2004                 2003              2004                 2003
                                                  -------------        -------------     -------------        -------------

                                                                                                          
     Service Cost                                 $        40          $        42       $        17          $        22
     Interest Cost                                         60                   52                37                   43
     Expected Return on Plan Assets                       (46)                 (39)              (84)                 (82)
     Amortization of Prior Service Cost
         and Prior Transition Amount                        2                    1                (6)                  (1)
     Curtailment and Settlement Loss (Gain)                 -                   (5)                -                    -
     Recognized Net Actuarial Loss (Gain)                   8                    7                 -                    1
                                                  -------------        -------------     -------------        -------------

     Gross Benefit Cost                                    64                   58               (36)                 (17)

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

     Net Periodic Benefit Cost                    $        64          $        58       $       (54)         $       (35)
                                                  =============        =============     =============        =============



                                                           Pension Benefits                    Other Retiree Benefits
                                                  ----------------------------------     ----------------------------------
                                                          Six Months Ended                       Six Months Ended
                                                             December 31                            December 31
                                                  ----------------------------------     ----------------------------------
                                                      2004                 2003              2004                 2003
                                                  -------------        -------------     -------------        -------------

      Service Cost                                $        78          $        76       $        34          $        44
      Interest Cost                                       118                  100                73                   86
      Expected Return on Plan Assets                      (89)                 (76)             (167)                (164)
      Amortization of Prior Service Cost
          and Prior Transition Amount                       3                    1               (11)                  (1)
      Curtailment and Settlement Loss (Gain)                -                   (5)                -                    -
      Recognized Net Actuarial Loss (Gain)                 16                   14                 -                    1
                                                  -------------        -------------     -------------        -------------

      Gross Benefit Cost                                  126                  110               (71)                 (34)

      Dividends on ESOP Preferred Stock                     -                    -               (36)                 (36)
                                                  -------------        -------------     -------------        -------------

      Net Periodic Benefit Cost                   $       126          $       110       $      (107)         $       (70)
                                                  =============        =============     =============        =============


     In 2005, the expected return on plan assets is 7.2% and 9.5% for defined
     benefit and other retiree benefit plans, respectively.


7.   Income Taxes - The American Jobs Creation Act of 2004 (the "Act") was
     passed during the fourth quarter of 2004. The Act permits United States
     corporations to repatriate earnings of foreign subsidiaries at a special
     one-time favorable effective federal statutory tax rate of 5.25 percent as
     compared to the highest corporate tax rate of 35 percent. The maximum
     amount of P&G's foreign earnings that may qualify for this temporary rate
     reduction is approximately $10.7 billion. Because the Act as currently
     written contains significant uncertainties that need to be clarified or
     redrafted, the accompanying financial statements do not reflect any tax
     expense for repatriation of foreign earnings under the Act. The actual cost
     to the Company depends on a number of factors that are currently being
     analyzed, including the passage of the clarifying provisions. P&G expects
     to determine the amounts and sources of foreign earnings to be repatriated,
     if any, as well as the related one time tax expense, if the statutory
     language is revised and interpretations are issued.

8.   The Gillette Company Acquisition - On January 27, 2005 the Company entered
     into an agreement to acquire 100% of The Gillette Company. The agreement,
     which has been approved by the boards of directors of both companies,
     provides for a stock-for-stock exchange in which 0.975 shares of The
     Procter & Gamble Company common stock will be issued and exchanged, on a
     tax-free basis, for each share of The Gillette Company. Based on the
     Company's closing share price on the date of the agreement, the total
     consideration issued for The Gillette Company would be approximately $57
     billion.

     The Gillette Company is the world leader in male grooming, a category that
     includes blades, razors and shaving preparations, and in selected female
     grooming products. Gillette also holds the number one position worldwide in
     alkaline batteries and toothbrushes. The merger, which is expected to be
     completed in Fall 2005, is subject to approval by the stockholders of both
     companies as well as U.S. federal and state and non-U.S. regulatory
     authorities.


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 December 31, 2004
     Results of Operations - Six Months Ended December 31, 2004
     Business Segment Discussion (three and six months ended December 31, 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 six months ended December 31, 2004 (excludes net sales
and net earnings in Corporate):



                                     Net Sales               Net Earnings
                              ------------------------ ------------------------
Beauty Care                             34%                       37%

Health, Baby and Family Care:           34%                       30%
     Health Care                        14%                       14%
     Baby and Family Care               20%                       16%

Household Care:                         32%                       33%
     Fabric and Home Care               27%                       28%
     Snacks and Coffee                   5%                        5%

Total                                  100%                      100%


Summary of Results
------------------
Following are highlights of results for the six months ended December 31, 2004:

     o   Unit volume increased 10 percent.
     o   Net sales increased 11 percent (eight percent excluding the impact of
         foreign exchange).  Net sales growth includes a two percent gain from
         the impact of acquisitions.
     o   Net earnings increased 13 percent.  Earnings growth was due primarily
         to strong top line growth, the juice business divestiture and cost
         savings, partially offset by marketing investments and higher
         commodity costs.
     o   Diluted net earnings per share increased 15 percent versus the
         comparable prior year period. Free cash flow productivity was 76
         percent.  Operating cash flow was essentially flat versus the
         comparable prior year period.  While free cash flow productivity for
         the first six months of fiscal year 2005 is below the long-term target,
         our objective for the fiscal year remains at 90 percent or greater
         free cash flow productivity.


Forward Looking Statements
--------------------------
All statements, other than statements of historical fact included in this
release, are forward-looking statements, as that term is defined in the Private
Securities Litigation Reform Act of 1995. In addition to the risks and
uncertainties noted in this release, there are certain factors that could cause
actual results to differ materially from those anticipated by some of the
statements made. These include:

(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 (i) the Domination and Profit Transfer Agreement with Wella, and
     (ii) the Company's agreement to acquire The Gillette Company, including
     obtaining the related required shareholder and regulatory approvals;
(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), debt (including debt related to the Company's
     announced plan to repurchase shares of the Company's stock in connection
     with the Company's pending acquisition of The Gillette Company), 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 December 31, 2004
------------------------------------------------------------

The following discussion provides a review of results for the three months ended
December 31, 2004 versus the three months ended December 31, 2003.



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

                                                                       Three Months Ended
                                                                          December 31
                                                         ---------------------------------------------
                                                                 2004              2003        % CHG
                                                         ---------------------------------------------
                                                                                        
NET SALES                                                  $   14,452        $   13,221          9 %
 COST OF PRODUCTS SOLD                                          6,871             6,324          9 %
                                                         ---------------------------------------------
GROSS MARGIN                                                    7,581             6,897         10 %
 SELLING, GENERAL & ADMINISTRATIVE
  EXPENSE                                                       4,511             4,155          9 %
                                                         ---------------------------------------------
OPERATING INCOME                                                3,070             2,742         12 %
 TOTAL INTEREST EXPENSE                                           200               149
 OTHER NON-OPERATING INCOME, NET                                   55                29
                                                         ---------------------------------------------
EARNINGS BEFORE INCOME TAXES                                    2,925             2,622         12 %
 INCOME TAXES                                                     886               804

NET EARNINGS                                                    2,039             1,818          12 %
                                                         =============================================
EFFECTIVE TAX RATE                                               30.3 %            30.7 %



PER COMMON SHARE:
 BASIC NET EARNINGS                                        $     0.79        $     0.69          14 %
 DILUTED NET EARNINGS                                      $     0.74        $     0.65          14 %
 DIVIDENDS                                                 $     0.25        $     0.23
AVERAGE DILUTED SHARES OUTSTANDING                            2,741.0           2,800.9



COMPARISONS AS A % OF NET SALES
-------------------------------
 GROSS MARGIN                                                    52.5 %            52.2 %        30 bps
 SELLING, GENERAL & ADMINISTRATIVE
   EXPENSE                                                       31.2 %            31.4 %       (20)bps
 OPERATING MARGIN                                                21.2 %            20.7 %        50 bps
 EARNINGS BEFORE INCOME TAXES                                    20.2 %            19.8 %
 NET EARNINGS                                                    14.1 %            13.8 %        30 bps


Unit volume increased seven percent. Organic volume increased eight percent,
which excludes the impact of acquisitions and divestitures (primarily the sale
of the juice business). Growth was broad-based -- each geographic region and all
businesses delivered volume growth of mid-single digits or greater, led by
developing market growth in the high-teens and 10 percent growth in fabric and
home care.

Net sales for the quarter increased nine percent to $14.45 billion. Foreign
exchange contributed three percent to sales growth primarily behind continued
strength of the Euro, British pound and Japanese yen. Organic sales, which
exclude the impacts of acquisitions and divestitures and foreign exchange from
year-over-year comparisons, increased seven percent. Strong growth in developing
markets resulted in a negative mix impact of one percent on sales. Pricing did
not have an impact on sales growth. Price reductions in prior quarters,
primarily in Western Europe to address the growth of hard discounters, were
offset by price increases to partially recover higher commodity costs in family
care, health care and certain fabric care markets.




                                       Volume
                            ------------------------------
                                With
                            Acquisitions      Without                                           Total
                                  &         Acquisitions                     Mix/     Total     Impact
                            Divestitures   & Divestitures    FX    Price    Other     Impact    Ex-FX
                            -------------- --------------- ------- ------- --------- --------- ---------
                                                                             
BEAUTY CARE                      9%              9%          4%      0%      -1%       12%        8%

HEALTH, BABY & FAMILY CARE
     HEALTH CARE                 6%              5%          2%      1%      -2%        7%        5%
     BABY AND FAMILY CARE        6%              6%          3%      1%       1%       11%        8%

HOUSEHOLD CARE
     FABRIC AND HOME CARE        10%             8%          3%      0%      -2%       11%        8%
     SNACKS AND COFFEE           5%              5%          2%     -2%       0%        5%        3%

TOTAL COMPANY                    7%              8%          3%      0%      -1%        9%        6%


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

Gross margin improved 30 basis points versus the prior year period. Gross margin
expanded from the scale benefit of volume growth and cost reduction programs,
however, these favorable impacts were partially offset by higher commodity
costs. Additionally, gross margin was negatively impacted by strong growth in
developing markets, which have gross margins below the Company average, and
product mix. The base period included a higher percentage of sales in the health
care business, which has a higher gross margin than the Company average. The
Company expects gross margin to continue to be negatively impacted by higher
commodity prices through the remainder of the fiscal year. As discussed above,
price increases have been taken to recover some of the impact of higher
commodity costs in certain product categories.

Selling, general and administrative expenses (SG&A) as a percentage of net sales
decreased 20 basis points. Absolute spending for SG&A increased versus the prior
year, but at a lower rate compared to net sales. We continue to invest in
marketing to support initiatives such as Febreze Air Effects, Febreze Scent
Stories, Olay Moisturinse, Tide with a Touch of Downy and the expansion of Lenor
and Herbal Essences in Japan, as well as spending against the base business.
Additionally, SG&A spending is up behind investments in selling and research and
development to sustain top-line growth. Base period SG&A expense also included a
higher provision for minority interest than in the current year, with the
reduction driven by our purchase of the remaining stake in the China venture
from Hutchison Whampoa China Ltd. and completion of a domination and profit
transfer agreement with Wella AG.

Interest expense in the current quarter increased versus the comparable prior
year period due to the increase in the Company's average debt position.

Net earnings increased 12 percent to $2.04 billion. Earnings growth in the
quarter was driven primarily by volume, gross margin improvements discussed
above and other cost reduction programs, partially offset by commodity price
increases and the aforementioned marketing investments.

Diluted net earnings per share increased 14 percent to $0.74. Diluted net
earnings per share grew ahead of net earnings due to the lower number of diluted
shares outstanding, which was driven by our share repurchases.


RESULTS OF OPERATIONS - Six Months Ended December 31, 2004
----------------------------------------------------------

The following discussion provides a review of results for the six months ended
December 31, 2004 versus the six months ended December 31, 2003.



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

                                                          Six Months Ended
                                                            December 31
                                             ------------------------------------------
                                                   2004             2003        % CHG
                                             ------------------------------------------
                                                                         
NET SALES                                     $   28,196       $   25,416        11 %
 COST OF PRODUCTS SOLD                            13,482           12,203        10 %
                                             ------------------------------------------
GROSS MARGIN                                      14,714           13,213        11 %
 SELLING, GENERAL & ADMINISTRATIVE
   EXPENSE                                         8,774            7,828        12 %
                                             ------------------------------------------
OPERATING INCOME                                   5,940            5,385        10 %
 TOTAL INTEREST EXPENSE                              381              290
 OTHER NON-OPERATING INCOME, NET                     237               69
                                             ------------------------------------------
EARNINGS BEFORE INCOME TAXES                       5,796            5,164        12 %
 INCOME TAXES                                      1,756            1,585

NET EARNINGS                                       4,040            3,579        13 %
                                             ==========================================

EFFECTIVE TAX RATE                                30.3 %           30.7 %



PER COMMON SHARE:
 BASIC NET EARNINGS                           $     1.57       $     1.36        15 %
 DILUTED NET EARNINGS                         $     1.47       $     1.28        15 %
 DIVIDENDS                                    $     0.50       $     0.46
AVERAGE DILUTED SHARES OUTSTANDING               2,748.5          2,799.2



COMPARISONS AS A % OF NET SALES
-------------------------------
 GROSS MARGIN                                     52.2 %           52.0 %        20 bps
 SELLING, GENERAL & ADMINISTRATIVE
   EXPENSE                                        31.1 %           30.8 %        30 bps
 OPERATING MARGIN                                 21.1 %           21.2 %       (10)bps
 EARNINGS BEFORE INCOME TAXES                     20.6 %           20.3 %
 NET EARNINGS                                     14.3 %           14.1 %        20 bps


Fiscal year to date, unit volume increased 10 percent. All businesses and
geographic regions posted unit volume growth, reflecting the strength of the
Company's portfolio. Organic volume, which excludes acquisitions and
divestitures, increased eight percent. Additional volume from the acquisition of
Wella, which was acquired in September of 2003, was partially offset by the
divestiture of the juice business in August of 2004. Unit volume growth was led
by beauty care, up 16 percent, and fabric and home care, up 11 percent.
Developing markets also delivered double-digit volume growth led by Greater
China and Central and Eastern Europe/Middle East/Africa.

For the first six months of the fiscal year, net sales increased 11 percent to
$28.20 billion. Foreign exchange contributed three percent to sales growth
driven primarily by the strength of the Euro, British pound and Japanese yen.
Organic sales increased six percent. Strong growth in developing markets, where
the average unit sales price is lower than the Company average, resulted in a
negative mix impact of one percent on sales. Pricing actions also reduced sales
by one percent, as price increases in family care, health care and certain
laundry markets were more than offset by price investments, primarily initiated
in prior quarters, including in Europe to address the growth of hard
discounters.





                                        Volume
                             ------------------------------
                                 With
                             Acquisitions      Without                                           Total
                                   &         Acquisitions                     Mix/     Total     Impact
                             Divestitures   & Divestitures    FX    Price    Other     Impact    Ex-FX
                             -------------- --------------- ------- ------- --------- --------- ---------
                                                                             
BEAUTY CARE                       16%             9%          4%     -1%      -2%       17%       13%

HEALTH, BABY & FAMILY CARE
     HEALTH CARE                  6%              5%          2%      1%      -2%        7%        5%
     BABY AND FAMILY CARE         7%              7%          3%      0%       0%       10%        7%

HOUSEHOLD CARE
     FABRIC AND HOME CARE         11%             9%          3%     -1%      -1%       12%        9%
     SNACKS AND COFFEE            2%              2%          2%     -1%       0%        3%        1%

TOTAL COMPANY                     10%             8%          3%     -1%      -1%       11%        8%


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

Gross margin improved 20 basis points fiscal year to date against a comparable
base period where gross margin improved 240 basis points (including
approximately 80 basis points of improvement as a result of restructuring
program charges in the six months ending December 31, 2002). Gross margin
expanded behind the scale benefits of volume growth and cost reduction programs.
These benefits were partially offset by commodity price increases. Mix was about
neutral to gross margin, as the impact of strong developing market growth was
offset by the impacts of the Wella acquisition, which has a higher gross margin
than the Company average (current fiscal year to date results include a full six
months of Wella versus four months in the comparable prior year period).

Selling, general and administrative expenses (SG&A) increased by 30 basis points
as a percentage of net sales. The primary driver of the increase was marketing
investments to support product initiatives, including the expansion of Lenor and
Herbal Essences, support for oral care initiatives in Western Europe and North
America, Febreze, and the Olay brand. Wella, which has a higher SG&A ratio than
the Company average, also contributed to higher SG&A, as the current year
includes two additional months of Wella in the results.

Interest expense in the current fiscal year to date increased versus the
comparable prior year period due to the increase in the Company's debt position.
The increase in other non-operating income compared to the prior year is
primarily due to the before-tax gain on the sale of the juice business in the
current year.

Net earnings increased 13 percent to $4.04 billion. Earnings growth fiscal year
to date was driven primarily by volume, gross margin improvement and the impact
from the divestiture of the juice business. This was partially offset by the
marketing investments discussed above. Diluted net earnings per share increased
15 percent to $1.47 compared to $1.28 in the comparable prior year period.
Diluted net earnings per share grew ahead of net earnings due to the impact of
share repurchases.

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

The following discussion provides a review of results by business segment. An
analysis of the results for the three and six months ended December 31, 2004 is
provided compared to the same period ended December 31, 2003. The primary
financial measures used to evaluate segment performance are net sales and net
earnings. The table below provides supplemental information on net earnings by
business segment for the three and six months ended December 31, 2004 versus the
comparable prior year period:



                                                     Three Months Ended December 31, 2004
                            -------------------------------------------------------------------------------------
                                                            Earnings
                                              % Change        Before      % Change                    % Change
                                                Versus        Income        Versus          Net         Versus
                               Net Sales      Year Ago         Taxes      Year Ago      Earnings      Year Ago
                            -------------------------------------------------------------------------------------
                                                                                         
BEAUTY CARE                     $  5,022           12%      $  1,166           15%      $    814           24%

     HEALTH CARE                   2,043            7%           472           -3%           313           -4%
     BABY AND FAMILY CARE          2,978           11%           577           29%           360           28%
                            -------------------------------------------------------------------------------------
HEALTH, BABY & FAMILY CARE         5,021           10%         1,049           12%           673           11%

     FABRIC AND HOME CARE          3,784           11%           836           -1%           566            0%
     SNACKS AND COFFEE               846            5%           190           -3%           124           -4%
                            -------------------------------------------------------------------------------------
HOUSEHOLD CARE                     4,630           10%         1,026           -1%           690           -1%

TOTAL BUSINESS SEGMENT            14,673           10%         3,241            9%         2,177           11%
CORPORATE                          (221)           n/a         (316)           n/a          (138)          n/a
                            -------------------------------------------------------------------------------------
TOTAL COMPANY                     14,452            9%         2,925           12%         2,039           12%






                                                     Six Months Ended December 31, 2004
                            -------------------------------------------------------------------------------------
                                                            Earnings
                                               % Change       Before      % Change                    % Change
                                                 Versus       Income        Versus           Net        Versus
                                Net Sales      Year Ago        Taxes      Year Ago      Earnings      Year Ago
                            -------------------------------------------------------------------------------------
                                                                                         
BEAUTY CARE                     $  9,677           17%      $  2,174           14%      $  1,506           20%

     HEALTH CARE                   3,887            7%           847           -4%           568           -4%
     BABY AND FAMILY CARE          5,828           10%         1,093           19%           680           18%
                            -------------------------------------------------------------------------------------
HEALTH, BABY & FAMILY CARE         9,715            9%         1,940            8%         1,248            7%

     FABRIC AND HOME CARE          7,594           12%         1,733            3%         1,166            3%
     SNACKS AND BEVERAGES          1,586            3%           316           -7%           207           -8%
                            -------------------------------------------------------------------------------------
HOUSEHOLD CARE                     9,180           10%         2,049            2%         1,373            2%

TOTAL BUSINESS SEGMENT            28,572           12%         6,163            8%         4,127            9%
CORPORATE                           (376)          n/a          (367)          n/a           (87)          n/a
                            -------------------------------------------------------------------------------------
TOTAL COMPANY                     28,196           11%         5,796           12%         4,040           13%



BEAUTY CARE
-----------
For the quarter, unit volume increased nine percent driven by double-digit
growth in the personal beauty care and feminine care businesses. The Olay brand
delivered double-digit growth behind the continued success of Olay Regenerist,
expansion to new geographies, and the launch of Olay Quench Hand & Body lotion.
Feminine care delivered double-digit growth behind the continued strength of the
Always/Whisper, Naturella and Tampax brands. In hair care, the Pantene, Head &
Shoulders, Herbal Essences, Rejoice and Aussie brands each grew volume by
double-digits, partially offset by lower shipments for minor shampoo brands
which have been de-emphasized. Net sales increased 12 percent to $5.02 billion,
including a positive foreign exchange impact of four percent. Strong growth in
developing markets, particularly Greater China, resulted in a negative mix
impact of one percent on sales. Net earnings increased 24 percent to $814
million. Earnings growth was driven by higher volume, cost reduction programs,
the impact of the Company's increased ownership of the China operation and the
domination and profit transfer agreement with Wella AG. Net earnings growth was
partially reduced by increased marketing spending for product initiatives,
including Olay Moisturinse, Lacoste Touch of Pink, Pantene Pro-Health and the
expansion of Herbal Essences in Japan.

For the first six months of the fiscal year, unit volume is up 16 percent, which
includes two additional months of Wella compared to the base period. Organic
volume increased nine percent. Net sales increased 17 percent to $9.68 billion.
Foreign exchange contributed four percent to sales growth. Pricing reduced sales
by one percent, while the mix impact of strong developing market growth reduced
sales by two percent. Net earnings increased 20 percent to $1.51 billion. Net
earnings increased primarily due to volume growth, cost reduction programs, the
impacts of the Company's increased ownership of the China operation and
domination and profit transfer agreement with Wella AG, partially offset by
marketing spending to support initiatives.



HEALTH, BABY AND FAMILY CARE
----------------------------
Health care unit volume for the quarter increased six percent behind growth of
Actonel, Prilosec OTC and double-digit growth in developing markets, primarily
in oral care. Volume growth was negatively impacted by the pipeline volume in
the base period for Crest Whitestrips Premium, which continued to decline in the
current period. Net sales increased seven percent to $2.04 billion, including a
positive foreign exchange impact of two percent. Pricing added one percent to
sales, while product mix reduced sales by two percent due to the shift of
Macrobid branded sales to generic sales and strong developing market growth. Net
earnings were $313 million, a decrease of four percent against a base period
where earnings grew 32 percent. Earnings were negatively impacted by the product
mix impacts from lower Macrobid sales, a decline in oral care whitening volume
and developing market growth. Additionally, earnings for the quarter were
negatively impacted by an increase in the royalty expense rate for Prilosec OTC,
higher commodity prices and one-time costs associated with the Intrinsa program.

Fiscal year to date, health care unit volume increased six percent. Net sales
grew seven percent to $3.89 billion. Foreign exchange added two percent to sales
growth. Price increases in pharmaceuticals and pet health and nutrition added
one percent to sales growth. The mix impact of strong developing market growth,
particularly in Greater China, reduced sales by two percent. Net earnings were
$568 million, a decrease of four percent. Earnings were lower year-over-year
due, in part, to product mix impacts of lower volume in Macrobid, Crest
Whitestrips Premium and Vicks. Earnings were also lower due to the impacts of
the higher royalty expense rate for Prilosec OTC, higher commodity costs and
marketing investments in support of initiatives. Health care earnings are
expected to increase by double-digits in the last six months of the fiscal year
due to higher sales of Vicks due to the timing of the North America cough/cold
season and product initiatives planned for the remainder of the fiscal year.

Baby and family care unit volume increased six percent for the quarter, driven
primarily by strength in baby care in North America and developing markets.
Family care volume continued its momentum in North America behind the recent
Bounty and Charmin initiatives. Net sales increased 11 percent to $2.98 billion,
including a positive foreign exchange impact of three percent. Pricing had a one
percent positive impact on sales growth, primarily behind the recent price
increase in North America family care. Product mix was also positive due to the
strong growth of the North America business. Net earnings grew 28 percent to
$360 million. Earnings improved behind volume strength, pricing in North America
family care and manufacturing cost savings, partly offset by higher commodity
costs.

Baby and family care unit volume increased seven percent fiscal year to
date. Growth was driven behind baby care's continuous stream of innovation
including Feel and Learn training pants in North America and Baby Dry in Western
Europe, as well as family care's recent Bounty and Charmin initiatives. Net
sales increased 10 percent to $5.83 billion, including a three percent impact
from foreign exchange. Net earnings increased 18 percent to $680 million.
Earnings improved behind the scale benefits of volume, pricing in North America
family care and manufacturing cost savings projects, partly offset by higher
commodity costs.


HOUSEHOLD CARE
--------------
For the quarter, fabric and home care unit volume grew 10 percent, including a
two percent impact from acquisitions. Both fabric care and home care grew volume
10 percent. Volume growth was driven by developing markets, the continued
success of Lenor in North East Asia, Downy Simple Pleasures in North America,
Swiffer in Western Europe and Febreze Air Effects. Net sales increased 11
percent to $3.78 billion, including a foreign exchange benefit of three percent.
Sales growth includes a negative mix impact of two percent from faster growth in
developing markets and mid-tier products, including Gain in North America. Net
earnings of $566 million were essentially flat versus the prior year. The
benefits of volume growth were offset by commodity cost increases and marketing
expenses to support initiatives, as well as costs incurred to optimize the North
America supply chain (which includes capacity expansions and relocation of
certain manufacturing processes between facilities). Earnings were also
negatively impacted by expenses associated with the recall of Sweep + Vac by
Swiffer.

Fabric and home care unit volume increased 11 percent fiscal year to date behind
geographic expansion and growth in multiple price tiers. Acquisitions added two
percent to volume versus the prior year. Net sales increased 12 percent to $7.59
billion. Foreign exchange improved sales growth by three percent. Pricing,
primarily in Western Europe, reduced sales by one percent. The mix effect of
developing market growth, where the average unit sales price is generally lower
than the business average, reduced sales by one percent. Net earnings through
the first six months of the fiscal year increased three percent to $1.17
billion. The benefit of volume growth on earnings was partially offset by
commodity price increases, higher marketing spending to support initiatives and
pricing actions. Earnings were also negatively impacted by the mix effect of
developing markets, which have a lower gross margin than the balance of the
business. Earnings growth for the second half of the fiscal year is expected to
increase only modestly versus the prior year, as high commodity costs and
continued expansion in developing markets are expected to negatively impact
profit margins.

Snacks and coffee volume was up five percent and net sales increased five
percent to $846 million. Sales growth includes a two percent gain from foreign
exchange, which was offset by the impact of pricing. Net earnings were $124
million, a four percent decrease due primarily to pricing. The coffee category
also continues to experience higher commodity costs. As a consequence, the
Company recently announced a 14 percent price increase for Folgers coffee
intended to recover the impact of higher commodity prices. Marketing expenses
increased in support of the launch of Home Cafe.

Fiscal year to date, snacks and coffee volume was up two percent. Net sales
increased three percent to $1.59 billion. Foreign exchange added two percent to
sales growth, while pricing reduced sales by one percent. Net earnings were $207
million, a decrease of eight percent, due primarily to higher commodities costs
and marketing spending.


CORPORATE
---------
Corporate includes certain operating and non-operating activities not allocated
to specific business units. These include: the incidental businesses managed at
the corporate level, financing and investing activities, certain restructuring
charges, other general corporate items and the historical results of divested
businesses, including the juice business that 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 (to adjust from statutory rates that are reflected in the segments
to the overall Company effective tax rate), adjustments for unconsolidated
entities (to eliminate sales, cost of products sold and SG&A for entities that
are consolidated in the segments but accounted for using the equity method for
U.S. GAAP) and minority interest adjustments for 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 our segment results recognize 100 percent of each
income statement component through before-tax earnings in the segments, with
eliminations in Corporate. In determining segment net earnings after tax, we
apply the statutory tax rates (with adjustments to arrive at the Company's
effective tax rate in Corporate) and eliminate the share of earnings applicable
to other ownership interests, in a manner similar to minority interest.

For the quarter, net sales were -$221 million compared to -$67 million in the
prior year period. For the fiscal year to date, net sales were -$376 million
versus -$86 million. The decline is primarily due to higher sales from the
divested juice business in the base period. Net earnings in the quarter were
-$138 million compared to -$139 million in the comparable prior year period. Net
earnings were -$87 million in the first six months of the fiscal year compared
to -$192 million in the prior year. Current year net earnings reflect the net
impact of the juice divestiture, which is partially offsetting the normal level
of Corporate expenses.


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

Operating Activities
--------------------
Cash generated from operating activities for the six months ended December 31,
2004 was $3.98 billion, or essentially flat compared to $3.96 billion in the
comparable prior year period. The cash increase from higher net earnings was
offset primarily by an increase in inventory. Inventory levels increased due to
higher commodity costs and in preparation for product initiatives in the back
half of the fiscal year. Downward movements of accounts payable, accrued and
other liabilities balance were also a use of cash reflecting the Company's
continuing effort to accelerate payments to suppliers in order to maximize
efficiencies and payment discounts.


Investing Activities
--------------------
Investing activities in the current year decreased cash by $968 million compared
to $6.11 billion in the prior year, which included the cost of the acquisition
of Wella AG. Capital expenditures as a percent of net sales were 3.2 percent -
equal to the comparable prior year period. The increase in proceeds from asset
sales was primarily driven by the divestiture of the juice business.

Financing Activities
--------------------
Total cash used by financing activities was $1.24 billion compared to a source
of cash of $1.14 billion in the base period. The Company's long term debt
position provided $1.48 billion of cash as borrowings exceeded repayments.
Treasury purchases used $1.63 billion of cash compared to $1.05 billion in the
base period 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 December 31, 2004, this excess had been reduced to
$2.91 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.

Gillette Acquisition
--------------------
As noted in footnote 8 to the consolidated financial statements, the Company
entered into an agreement to acquire 100% of The Gillette Company on January 27,
2005. Pursuant to the agreement, the Company will issue 0.975 shares of stock
for each share of Gillette common stock. Based on the Company's closing share
price on the date of the agreement, the total value of the shares issued would
be approximately $57 billion. In connection with this transaction, the Company
also announced a share buyback plan under which it will acquire in open market
and/or private transactions approximately $18 billion to $22 billion of treasury
shares, subject to regulatory limitations. The Company intends to finance these
treasury share purchases, which are largely expected to be completed by June 30,
2006, by issuing a combination of long-term and short-term debt. Due to the
Company's strong long- and short-term credit ratings, the Company does not
anticipate any significant issues in securing the required debt. In addition,
the Company does not anticipate any significant impacts on its overall liquidity
as a result of the merger or share buyback program.



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:

              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%
Oct - Dec'03    2,355         446        1,909        1,818          105%
--------------------------------------------------------------------------------
Jul - Dec'03    3,961         810        3,151        3,579           88%

Jul - Sep'04    1,918         413        1,505        2,001           75%
Oct - Dec'04    2,061         498        1,563        2,039           77%
--------------------------------------------------------------------------------
Jul - Dec'04    3,979         911        3,068        4,040           76%



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 the
SEC's 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 second
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.


PART II. OTHER INFORMATION

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



                                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)
-------------------------------------------------------------------------------------------------------
                                                                                  
10/1/04-10/31/04        5,866,157                $53.34                0                      0
11/1/04-11/30/04        9,720,757                $51.98                0                      0
12/1/04-12/31/04        3,405,648                $55.76                0                      0



(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 satisfy 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.
(4)  Note - As of and during the quarter ended December 31, 2004 the Company did
     not have a publicly announced share repurchase plan. On January 28, 2005
     the Company announced a share buyback plan in connection with its planned
     acquisition of The Gillette Company (see note 8 to the Consolidated
     Financial Statements). Pursuant to the plan, the Company and its
     subsidiaries will acquire in open market and/or private transactions
     approximately $18 billion to $22 billion of treasury shares, subject to
     regulatory limitations. The Company intends to finance these treasury share
     purchases, which are largely expected to be completed by June 30, 2006, by
     issuing a combination of long-term and short-term debt.




Item 6.  Exhibits

         Exhibits

          (3-1)   Amended Articles of Incorporation (Incorporated by reference
                  to Exhibit (3-1) of the Company's Form 10-Q for the quarter
                  ended September 30, 2004).

          (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).

          (10-1)  Additional Remuneration Plan (as amended December 14, 2004)
                  which was adopted by the Board of Directors on
                  April 12, 1949*.

          (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.
 
         * Compensatory plan or arrangement


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

January 31, 2005
------------------------------
Date


                                  EXHIBIT INDEX

    Exhibit No.

          (3-1)   Amended Articles of Incorporation (Incorporated by reference
                  to Exhibit (3-1) of the Company's Form 10-Q for the quarter
                  ended September 30, 2004).

          (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).

          (10-1)  Additional Remuneration Plan (as amended December 14, 2004)
                  which was adopted by the Board of Directors on
                  April 12, 1949.

          (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.