There were 2,542,231,468 shares of Common Stock outstanding as of July 31, 2004.

2005.

2006. Unless the context indicates otherwise, the terms the “Company,” “P&G,” “we,” “our” or “us” as used herein refers to The Procter & Gamble Company (the registrant) and its subsidiaries.

     The Company manages its business in five product segments: Fabric and Home Care; Baby and Family Care; Beauty Care; Health Care; and Snacks and Beverages. None of these segments is highly seasonal. Many of the factors necessary for an understanding of these five segments are similar. Operating margins of the individual segments vary slightly due to nature of the materials and processes used to manufacture the products, the capital intensity of the businesses and differences in selling, general and administrative expenses as a percent of net sales. Net sales growth by segment is also expected to vary slightly due to the underlying growth of the markets of each segments’ products. For example, we expect the Beauty Care and Health Care segments to provide a disproportionate percentage of overall Company net sales growth, as the market for these products is expected to grow at a higher rate than the remaining segments.

     The markets in which our products are sold are highly competitive. The products of the Company’s business segments compete with products of many large and small companies, including well-known global competitors. We market our products with advertising, promotions and other vehicles to build awareness of our brands in conjunction with an extensive sales force. We believe this combination provides the most efficient method of marketing for these types of products. Product quality, performance, value and packaging are also important competitive factors.

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2007.

In June 2004, the Company and Wella entered into a Domination and Profit Transfer Agreement (the Domination Agreement). Under the Domination Agreement, we are entitled to exercise full operating control and receive 100% of the future earnings of Wella. As consideration for the Domination Agreement, we will pay the holders of the remaining outstanding sharesshareholders of Wella a guaranteed annual dividend payment. Alternatively, the remaining Wella shareholders may elect to tender their shares to the Company for an agreed price. The fair value of the total guaranteed annual dividend payments iswas $1.11 billion, which is the approximate cost if all remaining shares were tendered.

During the year ended June 30, 2006, a portion of the remaining shares were tendered, resulting in a $944 million reduction in our liability under the Domination Agreement.

the liability recorded under the Domination Agreement.

Jif/Crisco.During May 2002, we completed the spin-off of the Jif peanut butter

Clairol.In November 2001, we completed the acquisition of the Clairol business from The Bristol-Myers Squibb Company.

Restructuring Program.In 1999, the Company announced its intention to transition from its previous geographic-based structure to a product-based global business unit structure. Concurrent with that change, we initiated a multi-year restructuring program, a discussion of which is incorporated herein by reference to Note 2, Restructuring Program, which appears on page 52 ofobjectives in this Form 10-K, the Annual Report to Shareholdersshareholders, quarterly reports, press releases and other written and oral communications. All statements, except for historical and present factual information, are “forward-looking statements” and are based on financial data and business plans available only as of the fiscal year ended June 30, 2004.time the statements are made, which may become out of date or incomplete. We assume no obligation to update any forward-looking statements as a result of new information, future events, or other factors. Forward-looking statements are inherently uncertain, and investors must recognize that events could significantly differ from our expectations.

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2006.

	(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 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, thencause our actual results mightto materially differ materially from the forward-looking statements made herein.

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