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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.      )

Filed by the Registrant    [X]

Filed by a Party other than the Registrant    [_]

Check the appropriate box:

Donaldson Company, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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DONALDSON COMPANY, INC.

1400 West 94th Street
Minneapolis, Minnesota 55431-2370
www.donaldson.com

NOTICE OF 20052006 ANNUAL MEETING OF STOCKHOLDERS

By Order of the Board of Directors

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DONALDSON COMPANY, INC.
1400 West 94th Street
Minneapolis, Minnesota 55431

PROPOSALS YOU ARE ASKED TO VOTE ON

Item No. 1
Election of Directors
        Three current directors, Jack W. Eugster, John F. Guillaume Bastiaens, Janet M. DolanGrundhofer, and Jeffrey Noddle,Admiral Paul David Miller (Ret.), are recommended for election to the Board of Directors at the annual meeting. Detailed informationInformation on the nominees is provided on page 6.7. Directors are elected for a three-year term so that approximately one-third are elected at each annual meeting of stockholders.

The Board of Directors unanimously recommends a vote FOR each director nominee.

Item No. 2
Ratification of the Appointment of Independent AuditorsRegistered Public Accounting Firm
        The Audit Committee has selected PricewaterhouseCoopers LLP (“PwC”) as Donaldson Company’s independent registered accounting firm to audit the Company’s consolidated financial statements for fiscal year 2006, subject to2007, and is requesting ratification by the stockholders.

        Representatives of PwC will attend the annual meeting, where they will have the opportunity to make a statement and to answer questions.

The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of PricewaterhouseCoopers LLP as Donaldson Company’s independent auditorsregistered accounting firm for fiscal year 2006.

Item No. 3
Approval of the Donaldson Company, Inc. Qualified Performance-Based Compensation Plan
        The Donaldson Company, Inc. Qualified Performance-Based Compensation Plan is presented to stockholders for their approval.

        The purpose of the plan is to allow for the Company to issue Performance Awards under the 2001 Master Stock Incentive Plan that specifically satisfy the requirement of Section 162(m) of the Internal Revenue Code that plans for qualified performance-based compensation awards be approved by the stockholders every five years. The 2001 Master Stock Incentive Plan was approved by stockholders at the 2001 Annual Meeting. More information on the Qualified Performance-Based Compensation Plan can be found on page 14.

The Board of Directors unanimously recommends a vote FOR the approval of the Donaldson Company, Inc. Qualified Performance-Based Compensation Plan.2007.

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GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

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SECURITY OWNERSHIP

Set forth below is information regarding persons known by the Company to own beneficially more than 5% of the outstanding Common Stock of the Company based on the number of shares of Common Stock outstanding on September 30, 2005:21, 2006:

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The following table on page 5 shows information regarding the beneficial ownership of the Company’s common stock and information concerning deferred restricted stock units, deferred share units under stock option exercises and phantom stock units, as of September 30, 2005,21, 2006, by each director, each of the Named Officers (as

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identified on page 18)16) and all executive officers and directors of the Company as a group. The definition of beneficial ownership includes shares over which a person has sole or shared voting power, or sole or shared power to invest or dispose of the shares, whether or not a person has any economic interest in the shares, and also includes shares subject to options exercisable within 60 days of September 30, 2005.21, 2006. Except as otherwise indicated, the named beneficial owner has sole voting and investment power with respect to the shares held by such beneficial owner.

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ITEM 1:   ELECTION OF DIRECTORS

The Bylawsbylaws of the Company provide that the Board of Directors shall consist of not less than three nor more than fifteen directors and that the number of directors may be fixed from time to time by the affirmative vote of a majority of the directors. The Board of Directors has fixed the number of directors constituting the entire Board at eight.ten. Vacancies and newly created directorships resulting from an increase in the number of directors may be filled by a majority of the directors then in office and the directors so chosen will hold office until the next election of the class for which such directors shall have been chosen and until their successors are elected and qualified. Directors are elected for a term of three years with positions staggered so that approximately one-third of the directors are elected at each annual meeting of the stockholders. The terms of Mr. Bastiaens, Ms. DolanEugster, Mr. Grundhofer and Mr. NoddleMiller expire at the annual meeting. It is intended that proxies received will be voted, unless authority is withheld,FOR the election of the nominees, namely Mr. Bastiaens, Ms. Dolan and Mr. Noddle. The three director nominees receiving the highest number of votes will be elected to fill the seats on the Board.

The Board of Directors has no reason to believe that any nominees will be unavailable or unable to serve, but in the event any nominee is not a candidate at the meeting, the persons named in the enclosed proxy intend to vote in favor of the remaining nominees and such other person, if any, as they may determine.

The Board of Directors recommends that stockholders voteFOR election of each director nominee.

The table below and on the following page sets forth additional information with respect to each nominee for election as a director and each other person whose term of office as a director will continue after the meeting.

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NOMINEES FOR ELECTION

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DIRECTORS CONTINUING IN OFFICE

DIRECTORS CONTINUING IN OFFICE

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BOARD STRUCTURE AND GOVERNANCE

Board Oversight and Director Independence

Donaldson’s Board believes that a primary responsibility of the Board of Directors is to provide effective governance over Donaldson’s business. The Board selects the Chairman of the Board and the Chief Executive Officer and monitors the performance of senior management to whom it has delegated the conduct of the business. The Board has adopted a set of Corporate Governance Guidelines to assist in its governance, and the complete text of Donaldson’s Corporate Governance Guidelines is available on the Investor Relations page of our website at www.donaldson.com under Corporate Governance.

The Corporate Governance Guidelines provide that a significant majority of our directors will be non-employee directorsNon-employee Directors who meet the independence requirements of the New York Stock Exchange (“NYSE”). The listing standards of the NYSE require that a majority of our directors be independent, and that our Corporate Governance, Audit and Human Resources Committees be comprised entirely of independent directors. In accordance with the NYSE listing standards, our Board has adopted formal Director Independence Standards setting forth the specific criteria by which the independence of our directors will be determined, including restrictions on the nature and extent of any affiliations directors and their immediate family members may have with Donaldson, its independent auditors, or any commercial or not-for-profit entity with which Donaldson has a relationship. Consistent with regulations of the Securities and Exchange Commission (“SEC”), our Director Independence Standards also prohibit Audit Committee members from accepting, directly or indirectly, any consulting, advisory or other compensatory fee from Donaldson, other than in their capacity as Board or Committee members. The complete text of our Director Independence Standards is attached as Appendix B to this proxy statement and also is posted on the Investor Relations page of our website at www.donaldson.com under Corporate Governance.

The Board has determined that every director, with the exception of Mr. Cook, who is an employee director, satisfies our Director Independence Standards.is independent under the rules of the NYSE. The Board also has determined that every member of its Corporate Governance, Audit and Human Resources Committees is an independent director. In making the independence determinations, the Board reviewed all of the directors’ relationships with the Company based primarily on a review of the responses of the directors to questions regarding employment, business, familial, compensation and other relationships with the Company and its management.

Meetings and Committees of the Board of Directors

There were six meetings of the Board of Directors in 2005.2006. Each director attended at least 75% of the aggregate of all meetings of the Board and its committees on which she or he served during the year. It also is our policy that directors are expected to attend our annual shareholderstockholder meetings. All individuals then serving as directors attended last year’s annual meeting of shareholders,stockholders, with the exception of Mr. Grundhofer.two directors.

The Board of Directors has three committees:

Each of the Board committees has a written charter, approved by the Board, establishing the authority and responsibilities of the committee. Each committee’s charter is posted on the Investor Relations page of our website at www.donaldson.com under the “Corporate Governance” caption.caption and is available in print to stockholders who mail a request to the Company Secretary, Donaldson Company, Inc., MS 101, P.O. Box 1299, Minneapolis, MN 55440-1299 or call 952-887-3631. The following tables provide a summary of each committee’s key areas of oversight, the number of meetings of each committee during the last fiscal year and the names of the directors currently serving on each committee.

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Audit Committee

Human Resources Committee

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Corporate Governance Committee

Corporate Governance PrinciplesGuidelines
        As indicated above, our Board has adopted a set of Corporate Governance Guidelines to assist it in carrying out its oversight responsibilities. These Guidelinesguidelines address a broad range of topics, including director qualifications, director nomination processes, term limits, Board and committee structure and process, Board evaluations, director education, CEO evaluation, management succession planning and conflicts of interest. The complete text of the Guidelinesguidelines is available on the Investor Relations page of our website at www.donaldson.com under Corporate Governance.Governance and is available in print to stockholders who mail a request to the Company Secretary, Donaldson Company, Inc., MS 101, P.O. Box 1299, Minneapolis, MN 55440-1299 or call 952-887-3631.

Code of Business Conduct and Ethics
        All of our directors and employees, including our chief executive officer, chief financial officer, chief accounting officer and other senior executives, are required to comply with our code of business conduct and ethics to help ensure that our business is conducted in accordance with the highest standards of legal and ethical behavior. Employees are required to bring any violations and suspected violations of the code to Donaldson’s attention through management, Donaldson’s Compliance Committee or Donaldson’s legal counsel, or by using our confidential compliance Hotline.

        The full text of our code of business conduct and ethics is posted on the Investor Relations page of our website at www.donaldson.com under Corporate Governance.Governance and is available in print to stockholders who mail a request to the Company Secretary, Donaldson Company, Inc., MS 101, P.O. Box 1299, Minneapolis, MN 55440-1299 or call 952-887-3631.

Board Composition and Qualifications
        Our Corporate Governance Committee oversees the process for identifying and evaluating candidates for the Board of Directors. Directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of the shareholders.stockholders. General and specific guidelines for Directordirector selection and qualification standards are detailed in the Corporate Governance Guidelines. The Corporate Governance Committee will consider nominations from shareholdersstockholders under these standards if the nominations are timely received as described in this proxy statement.

Director Selection Process
        The Bylawsbylaws of the Company provide that the Board of Directors shall consist of not less than three nor more than fifteen directors and that the number of directors may be fixed from time to time by the affirming

vote of a majority of the directors. The Board of Directors has fixed the number of directors constituting the entire Board at eight.ten. Vacancies and newly created directorships resulting from an increase in the number of directors may be filled by a majority of the directors then in office and the directors so chosen will hold office until the next election of the class for which such directors shall have been chosen and until their successors

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are elected and qualified. Directors are elected for a term of three years with positions staggered so that approximately one-third of the directors are elected at each annual meeting of the stockholders. Based on advice from the Corporate Governance Committee, each year the Board will recommend a slate of directors to be presented for election at the annual meeting of shareholders.stockholders.

        The Corporate Governance Committee will consider candidates submitted by members of the Board, executives and our shareholders,stockholders, and the Committee will review such candidates in accordance with our bylaws, Corporate Governance Guidelines and applicable legal and regulatory requirements. Candidates nominated by shareholdersstockholders are evaluated in accordance with the same criteria and using the same procedures as candidates submitted by Board members or the chief executive officer.

        Our bylaws provide that if a shareholderstockholder proposes to nominate a candidate at the annual meeting of shareholders,stockholders, the shareholderstockholder must give written notice of the nomination to our Corporate Secretary in compliance with the applicable deadline for submitting shareholderstockholder proposals for the applicable annual meeting. The shareholderstockholder must attend the meeting in person or by proxy. The shareholder’sstockholder’s notice must set forth as to each nominee all information relating to the person whom the stockholder proposes to nominate that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended and Rule 14a-11 thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected). No shareholdersstockholders submitted director nominations in connection with this year’s meeting.

Independent Director Executive Sessions
        The Chair of our Corporate Governance Committee, John F. Grundhofer, currently is designated to preside over all meetings or executive sessions of the independent directors. Our independent directors meet in executive session without management present at each Board meeting. Likewise, all Board committees regularly meet in executive session without management.

Communications with Directors
        The Donaldson Company Compliance Hotline is in place for our employees to direct their concerns to the Audit Committee, including on a confidential and anonymous basis, regarding accounting, internal accounting controls and auditing matters.

        In addition, we have adopted procedures for our shareholders,stockholders, employees and other interested parties to communicate with the independent members of the Board of Directors. You should communicate by writing to the Chair of the Audit Committee, the Chair of the Corporate Governance Committee or the independent directors as a group in the care of the office of the CorporateCompany Secretary, Donaldson Company, Inc., MS 101, P.O. Box 1299, Minneapolis, MN 55440-1299.

        Written communications about accounting, internal accounting controls and auditing matters should be addressed to the Chair of the Audit Committee. Please indicate if you would like your communication to be kept confidential from management. The procedures for communication with the Board of Directors also isare posted on the Investor Relations page of our website at www.donaldson.com under Corporate Governance.

Audit Committee Expertise; Complaint-Handling Procedures
        In addition to meeting the independence requirements of the NYSE and the SEC,Securities and Exchange Commission (“SEC”), all members of the Audit Committee have been determined by the Board to meet the financial literacy requirements of the NYSE’s listing standards. The Board also has designated John P. Wiehoff as the “audit committee financial expert” as defined by SEC regulations.

        In accordance with federal law, the Audit Committee has adopted procedures governing the receipt, retention and handling of complaints regarding accounting and auditing matters. These procedures include a means for employees to submit concerns on a confidential and anonymous basis, through Donaldson’s compliance hotline.

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Director Compensation
        Directors who are not employees receive a retainer fee of $38,000 annually and are paid $2,500 for each Board meeting attended. Audit Committee members receive $1,500 for each Committeecommittee meeting, and

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members of the Corporate Governance and Human Resources Committees receive $1,000 for each Committeecommittee meeting attended. The Audit Committee Chair receives an additional annual retainer of $10,000, and the other Committee Chairs receive an additional annual retainer of $5,000.$7,500. Pursuant to the Company’sour Compensation Plan for Non-EmployeeNon-employee Directors, any non-employee director may elect, prior to each year of their term, to defer all or part of his or her director compensation received during the upcoming year. Each participating director is entitled to a Company credit on the balance in his or her deferral account at the ten-year Treasury Bond rate plus 2%. The deferral election must also specify the manner for distribution of the deferral balance.

        Non-employee directorsDirectors are credited on January 1, of each calendar year with shares to a deferred stock account in lieu of 30% of the annual retainer for services as a Directordirector to be rendered in the following service year. Directors are allowed to elect to receive a credit of shares to a deferred stock account in lieu of all or part of the remaining retainer and meeting fees. The directors also receive a credit for dividend reinvestment shares. The Company contributes an amount equal to the deferred stock accounts to a trust and the trust purchases shares of Donaldson Common Stock. Each director is entitled to direct the trustee to vote all shares allocated to the director’s account in the trust. The Common Stock will be distributed to each director following the director’s retirement from the Board pursuant to the director’s deferral payment election. The trust assets remain subject to the claims of the Company’s creditors. The trust becomes irrevocable in the event of a “Change in Control” as defined under the 1991 Master Stock Compensation Plan and 2001 Master Stock Incentive Plan.

        The Company’s Non-Qualified Stock Option Program for Non-employee Directors provides for the automatic grant of a non-qualified stock option for 7,200 shares of Common Stock to each non-employee Directordirector of the Company who is a member of the Board on DecemberJanuary 1 each year. The exercise price of such options is the closing price of Common Stock in consolidated trading on the first business day of DecemberJanuary 1 in the respective year. The options are fully vested and have a term of ten years. The option award was modified from 1998 through 2004 to include a “reload option” granted at the time of exercise of the original option for the number of shares equal to the shares used in payment of the purchase price. The one-time reload option feature is similar to that previously included in the option grants to officers.

        Shares credited to deferred stock accounts to non-employee directors in fiscal 2005,2006, were as follows: Bastiaens, 418 shares,404 shares; Dolan, 1,988 shares,2,138 shares; Eugster, 2,017 shares,2,171 shares; Grundhofer, 1,939 shares,1,956 shares; Hoffman 1,508 shares; Miller, 1,623 shares,1,213 shares; Noddle, 2,043 shares,2,096 shares; Oberton, 0 shares; and Wiehoff, 1,9871,888 shares.

AUDIT COMMITTEE REPORT AND APPOINTMENTRATIFICATION OF AUDITORS

Audit Committee Report
        The following is the report of the Audit Committee with respect to Donaldson’s audited financial statements presented in its Annual Report on Form 10-K for the fiscal year ended July 31, 2005.2006. The information contained in this Audit Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Donaldson specifically incorporates it by reference in such filing.

The Audit Committee of the Board of Directors is composed entirely of independent, non-employee directors, all of whom have been determined by the Board to be independent under the rules of the Securities and Exchange Commission and the New York Stock Exchange. In addition, the Board has determined that John P. Wiehoff is an audit committee financial expert, as defined by the rules of the Securities and Exchange Commission.

The Audit Committee acts under a written charter approved by the Board of Directors. A copy of the Audit Committee Charter is attached as Appendix A to this proxy statement. The Audit Committee assists the Board in carrying out its oversight of the Company’s financial reporting process, audit process and internal controls. The Audit Committee formally met nineeight times during the past fiscal year in carrying out its oversight functions. The Audit Committee has the sole authority to appoint, terminate or replace the Company’s

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independent auditors.registered public accounting firm. The independent auditors reportregistered public accounting firm reports directly to the Audit Committee.

The Audit Committee reviewed Donaldson’s 20052006 audited financial statements with management, the internal auditor and PricewaterhouseCoopers LLP, the Company’s independent auditors.registered public accounting firm. The Audit Committee also met separately with the internal auditor and the independent auditorsregistered public accounting firm to discuss and review those financial statements and reports prior to issuance. Management has represented and PricewaterhouseCoopers LLP has confirmed in its opinion to the Audit Committee that the financial

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statements were prepared in accordance with generally accepted accounting principles and fairly present, in all material respects, the financial condition of Donaldson.

The Audit Committee also received from, and discussed with, PricewaterhouseCoopers LLP the written disclosures and the letter required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees. These items relate to the independent auditorsPwC independence from Donaldson. The Committee also reviewed and considered under its pre-approval policy, the compatibility of the independent auditorsregistered public accounting firm’s performance of non-audit services with the maintenance of its independence as the Company’s independent auditor.registered public accounting firm. The Audit Committee also discussed with the independent auditorsPwC the matters required to be discussed by Statement on Auditing Standards No. 61, Communications with Audit Committees, which includes, among other items, matters related to the conduct of the audit of Donaldson’s financial statements.

Based on the review and discussions with management and the independent auditors,registered public accounting firm, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2005.2006.

Members of the Audit Committee
Jack W. Eugster, Chair
Janet M. Dolan
Michael J. Hoffman
Paul David Miller
Jeffrey Noddle
John P. Wiehoff

Information Regarding the Independent Auditors

Registered Public Accounting Firm

Independent Auditors Fees
        The aggregate fees billed to the Company for fiscal years 20052006 and 20042005 by PwC, the Company’s independent registered public accountants,accounting firm, are as follows:

Audit Fees for Fiscalfiscal 2006 and fiscal 2005 and Fiscal 2004 include professional services rendered in connection with the audit of the Company’s financial statements, including the quarterly reviews, and statutory audits of certain of the Company’s international subsidiaries. Audit Fees for Fiscal 2005 also include professional services rendered forsubsidiaries and the audit of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Audit RelatedFiscal 2006 Audit-Related Fees include primarilyaccounting advisory fees related to financial accounting matters. Fiscal 2005 Audit-Related Fees include professional services rendered for benefit plan audits, due diligence and acquisition related work. Tax Fees include primarilyprofessional services for tax returns, advice and planning. All Other Fees include a license fee for technical materials.

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        Audit Committee Pre-Approval Policies and Procedures

        The Audit Committee pre-approves all audit and permitted non-audit services provided by the independent auditors,registered public accounting firm, including the fees and terms for those services. The Audit Committee may

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delegate to one or more designated committee members the authority to grant pre-approvals. This designated member is the Chair of the Audit Committee. Any pre-approval by the Chair must be presented to the full Audit Committee at its next scheduled meeting. All of the services provided by the independent registered public accounting firm during fiscal 2006 and fiscal 2005, including services related to the Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees described above, were approved by the Audit Committee under its pre-approval policies.

ITEM 2:   RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORSREGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed PricewaterhouseCoopers LLP as Donaldson Company’s independent registered public accountantsaccounting firm to audit the books and accounts of the Company for the fiscal year ending July 31, 2006, such appointment to continue at the pleasure of the Audit Committee and subject to ratification by the stockholders.2007. PwC has audited the books and accounts of the Company since 2002. Representatives of PwC are expected to be present atWhile the meeting with the opportunity to make a statement and to respond to appropriate questions. In the event this appointmentCompany is not ratified,required to do so, it is submitting the Audit Committee will reconsider its selection. Ratificationselection of PricewaterhouseCoopers, LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending July 31, 2007 for ratification in order to ascertain the views of the selection will require the affirmative vote of a majority of the shares of Common Stock of the Company entitled to vote and represented at the meeting in person or by proxy.Company’s stockholders on this appointment. Even if the appointment is ratified, the Audit Committee, which is solely responsible for appointing and terminating our independent auditor, may in its discretion, direct the appointment of a different independent auditor at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders. Representatives of PwC are expected to be present at the meeting with the opportunity to make a statement and to respond to appropriate questions. In the event this appointment is not ratified, the Audit Committee will reconsider its selection.

The Audit Committee of the Board of Directors recommends that stockholders voteFOR ratification of the appointment of PricewaterhouseCoopers LLP as independent auditorsregistered public accounting firm for the fiscal year ending July 31, 2006.2007.

ITEM 3:  APPROVAL OF QUALIFIED PERFORMANCE-BASED COMPENSATION PLAN

        Stockholders are asked to approve the Donaldson Company, Inc. Qualified Performance-Based Compensation Plan (the “Sub-Plan”), which was adopted by the Board of Directors in September, 2005. The Company previously established the 2001 Master Stock Incentive Plan (the “2001 Master Stock Plan”) which was approved by stockholders in 2001. This Sub-Plan is proposed to be established under the 2001 Master Stock Plan as an amendment solely for the purpose of authorizing the issuance of Performance Awards specifically intended to qualify as “qualified performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). All Performance Awards granted under the Sub-Plan will be subject to the terms, conditions and restrictions of the 2001 Master Stock Plan. No additional shares are proposed to be authorized under this Sub-Plan.

        Subject to stockholder approval, the Sub-Plan is designed so that compensation paid under the Sub-Plan will be tax deductible by Donaldson under Section 162(m) of the Code. Section 162(m) of the Code generally limits to $1,000,000 the amount that Donaldson is allowed each year to deduct for compensation paid to our chief executive officer and our other four most highly compensated executive officers. However, “qualified performance-based compensation” is not subject to this deductibility limit. The Sub-Plan contains provisions necessary for the incentive payments made under the Plan to qualify as performance-based compensation, including the requirement that Donaldson’s stockholders approve the business criteria upon which performance goals are based and a limit on the maximum amount that may be paid to an executive officer with respect to any performance period.

        In accordance with the requirements of Section 162(m) of the Code, the Sub-Plan is being presented to stockholders for their approval. If the stockholders approve the Sub-Plan, all incentive payments under the Sub-Plan (including payments based on performance criteria established for fiscal year 2006) will be deductible under Section 162(m) of the Code for the next five fiscal years. If the Sub-Plan is not approved by stockholders, no awards may be paid to participants under the Sub-Plan. In such event, the Human Resources Committee may use an alternative framework for the annual incentive program.

        The complete text of the Sub-Plan is attached as Appendix A to this proxy statement. The following summary is qualified in its entirety by reference to Appendix A.

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Summary of the Sub-Plan

Eligibility

        Participation in the Sub-Plan is limited to eligible persons under the 2001 Master Stock Plan, which includes all officers and employees of the Company and its affiliates — a total of approximately 11,000 employees. We intend to limit awards under the Sub-Plan to the executive officers and other key employees as determined by the Human Resources Committee.

Administration

        The Sub-Plan is administered by the Human Resources Committee, which consists solely of individuals who qualify as “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and “outside directors” within the meaning of Section 162(m) of the Code. On or prior to the 90th day of each performance period under the Sub-Plan, the Human Resources Committee must designate the participants for such performance period and establish the objective performance factors for each participant for that performance period. Under the Sub-Plan, the Human Resources Committee is required to certify that the applicable performance goals have been met prior to payment of any qualified performance awards to participants. The Human Resources Committee also has the authority to interpret the Sub-Plan and establish rules and make any determinations for the administration of the Plan.

Determination of Qualified Performance Awards; Payment

        The right to receive payment of any qualified performance award will be based solely on the attainment of one or more specific, objective, predetermined performance goals selected by the Human Resources Committee within the first 90 days of a performance period. Performance goals will be based solely on one or more of the following business criteria: earnings per share; return on investment; revenues, including net sales growth; earnings, including net operating profit after taxes; return on equity; profit margins; cost reductions; inventory levels; delivery performance; safety performance; quality performance; core operating earnings; total stockholder return; cash flow, including operating cash flows, free cash flow, discounted cash flow return on investment, and cash flow in excess of cost of capital; economic value added; stockholder value added; market share; price to earnings ratio; expense ratios; workforce goals; total expenditures; or completion of key projects.

        Performance goals may relate to a particular individual, an identifiable business unit or Donaldson as a whole.

        The maximum bonus which may be paid to any participant pursuant to any qualified performance award pursuant to the Sub-Plan may not exceed $5,000,000 for any performance period. Once awards have been granted, the Human Resources Committee may not increase the payment to any participant for any performance period, but has discretion to reduce the amount of an incentive payment that would otherwise be payable if the performance criteria have been met.

        A qualified performance award granted under the Sub-Plan may be payable in the form of cash, shares of common stock, or restricted stock. All equity compensation paid to participants will be granted under and governed by the terms and conditions of Donaldson’s 2001 Master Stock Plan. Participants may elect to defer any payments in accordance with Donaldson’s Deferred Compensation and 401(k) Excess Plan.

Federal Tax Consequences

        The following is a summary of the principal federal income tax consequences generally applicable to payments that may be made under the Sub-Plan.

        The amount of any cash or the dollar value of any common stock received outright and not subject to forfeiture, or common stock received pursuant to an award of restricted stock granted in connection with the Sub-Plan, is taxable as ordinary income to a participant. Subject to the usual rules concerning reasonable compensation, and assuming that, as expected, compensation paid under the Sub-Plan is “qualified performance-based compensation” within the meaning of Section 162(m) of the Code, Donaldson will be entitled to a corresponding tax deduction at the time a participant recognizes ordinary income from the Sub-Plan.

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        Participants who receive shares of common stock pursuant to the Sub-Plan that are not transferable and subject to a substantial risk of forfeiture must, unless a special election is made pursuant to the Code, recognize ordinary income equal to the fair market value of such securities, determined as of the first time such securities become transferable or not subject to a substantial risk of forfeiture, whichever occurs earlier. Donaldson expects to be entitled to a corresponding tax deduction. It is not anticipated that there will be any tax consequences to Donaldson in connection with a subsequent disposition of any securities acquired by a participant.

New Plan Benefits
        The amounts that will be received by officers and employees of Donaldson under the Sub-Plan, if the plan is approved by the stockholders, are not presently determinable.

Shares Available for Awards
        No additional shares will be authorized under the Sub-Plan. Any awards under the Sub-Plan will be issued under the shares previously authorized under the 2001 Master Stock Plan.

2001 Master Stock Plan Information
        The shares authorized for issuance during the 10-year term of the 2001 Master Stock Plan are limited in each plan year to 1.5% of the Company’s outstanding shares. The following table sets forth the information as of July 31, 2005, regarding the equity securities under the 2001 Master Stock Plan:

		Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining for future issuance under equity compensation plans (excluding securities reflected in column (a))
		(a)		(b)		(c)
Equity compensation plans
approved by security holders
2001 Master Stock Incentive Plan:
Stock Options		2,270,578		$25.6425		See Note 1
Long Term Compensation		216,410		$32.5800		See Note 1
Total		2,486,988		$26.2462

Note 1:

Shares authorized for issuance during the 10-year term are limited in each plan year to 1.5% of the Company’s “outstanding shares” (as defined in the 2001 Master Stock Incentive Plan).

The Board of Directors recommends that stockholders voteFOR approval of the Donaldson Company, Inc. Qualified Performance-Based Compensation Plan.

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TOTAL RETURN TO SHAREHOLDERSSTOCKHOLDERS

The following graphs compare the cumulative total stockholder return on the Company’s Common Stock for the last five fiscal years and sixteenseventeen fiscal years with the cumulative total return of the Standard & Poor’s 500 Stock Index and the Standard & Poor’s Index of Industrial Machinery Companies. The graph and table assume the investment of $100 in each of Donaldson’s common stockCommon Stock and the specified indexes at the beginning of the applicable period, and assume the reinvestment of all dividends. The second graph shows the total return over theour Company’s sixteen-yearseventeen-year period of increases in earnings per share.

COMPARISON OFFIVE-IVEY-YEARCUMULATIVETOTALRETURN*

			2000			2001			2002			2003			2004			2005
Donaldson Co., Inc.			$	100.00		$	162.36		$	178.25		$	261.74		$	288.14		$	355.20
S&P 500				100.00			85.67			65.43			72.39			81.93			93.44
S&P Industrial Machinery				100.00			109.41			110.01			129.06			167.29			181.29

				2001				2002				2003				2004				2005				2006
Donaldson Co., Inc.				$	100.00			$	109.79			$	161.21			$	177.47			$	218.78			$	223.04
S&P 500					100.00				76.37				84.50				95.63				109.07				114.94
S&P Industrial Machinery					100.00				100.54				117.95				152.90				165.69				173.52

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*	$100 invested on 7/31/0001 in stock or index — including reinvestment of dividends. Fiscal year ending July 31.

COMPARISON OFSIXTEEN-IXTEENY-YEARCUMULATIVETOTALRETURN*

FISCALYEARSENDEDJULY31

																																																								1989				1990				1991				1992				1993				1994				1995				1996				1997
			1989			1990			1991			1992			1993			1994			1995			1996			1997			1998			1999			2000			2001			2002			2003			2004			2005
Donaldson Co., Inc.			$	100.00		$	181.43		$	210.15		$	275.35		$	341.93		$	456.67		$	504.55		$	469.91		$	786.11		$	722.40		$	976.72		$	764.65		$	1,241.46		$	1,362.95		$	2,001.35		$	2,203.27		$	2,716.05					$	100.00			$	181.43			$	210.15			$	275.35			$	341.93			$	456.67			$	504.55			$	469.91			$	786.11
S&P 500				100.00			106.50			120.09			135.45			147.27			154.87			195.31			227.67			346.37			413.16			496.64			541.21			463.66			354.10			391.79			443.40			505.71						100.00				106.50				120.09				135.45				147.27				154.87				195.31				227.67				346.37
S&P Industrial Machinery				100.00			102.90			112.74			131.56			158.02			178.91			244.28			253.82			397.36			389.87			527.10			434.76			481.26			484.31			568.73			739.18			801.63						100.00				103.72				112.35				131.16				157.35				178.76				244.07				253.61				397.03

				1998				1999				2000				2001				2002				2003				2004				2005				2006
Donaldson Co., Inc.				$	722.40			$	976.72			$	764.63			$	1,241.46			$	1,362.95			$	2,001.35			$	2,203.27			$	2,716.05			$	2,768.89
S&P 500					413.16				496.64				541.21				463.66				354.10				391.79				443.40				505.71				532.93
S&P Industrial Machinery					389.55				526.66				434.40				480.87				483.91				568.26				738.57				800.97				846.76

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*	$100 invested on 7/31/89 in stock or index — including reinvestment of dividends. Fiscal year ending July 31.

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EXECUTIVE COMPENSATION

The following table includes information for each person who was, at the end of fiscal 2005,2006, the Chief Executive Officer or one of the other four most highly compensated executive officers of the Company (the “Named Officers”) on the basis of total annual salary and bonus for the last completed fiscal year. The table includes compensation information for each of the last three fiscal years. Mr. Van Dyke served as Chairman and as an executive officer through the end of fiscal 2005. Mr. Cook became Chairman on August 1, 2005. Mr. Priadka served as Senior Vice President, International through the end of fiscal 2005.

SUMMARYCOMPENSATIONTABLE

												Long Term Compensation
						Annual Compensation (1)						Awards						Payouts
Name and Principal Position			Fiscal Year			Salary ($)			Bonus ($)			Restricted Stock Award(s) ($) (2)			Securities Underlying Stock Options/SARs (Shares) (3)			LTIP Payouts ($) (4)			All Other Compensation ($) (5)
William G. Van Dyke			2005				723,315			753,945			0			500,024			1,443,985			110,209
Former Chairman			2004				697,308			791,840			0			136,000			1,040,760			70,780
			2003				665,000			558,600			0			170,000			0			64,496
William M. Cook			2005				525,135			586,520			0			75,514			522,132			44,700
Chairman, Chief Executive			2004				302,596			233,750			0			113,416			507,238			23,480
Officer and President			2003				288,000			152,352			0			44,224			0			21,721
Lowell F. Schwab			2005				300,385			240,979			0			83,603			431,961			22,569
Senior Vice President,			2004				286,039			220,806			0			96,148			305,760			19,039
Engine Systems and Parts			2003				273,000			144,417			0			114,224			0			18,981
Nickolas Priadka			2005				295,192			238,243			0			20,500			526,528			25,637
Former Senior Vice			2004				286,039			260,478			0			71,768			392,000			22,752
President, International			2003				273,000			197,516			0			95,934			0			19,734
James R. Giertz			2005				304,192			203,834			0			21,500			222,152			22,025
Senior Vice President,			2004				295,020			192,676			400,350			38,000			158,760			16,826
Commercial and Industrial			2003				281,000			92,449			0			49,000			253,727			18,493

																Long Term Compensation
								Annual Compensation (1)								Awards								Payouts
Name and Principal Position				Fiscal Year				Salary ($)				Bonus ($)				Restricted Stock Award(s) ($) (2)				Securities Underlying Options (#) (3)				LTIP Payouts ($) (4)				All Other Compensation ($) (5)
William M. Cook					2006				593,270				1,000,000				0				53,000				692,925				63,941
Chairman, Chief Executive      Officer and President					2005				525,135				586,520				0				75,514				522,132				44,700
					2004				302,596				233,750				0				113,416				507,238				23,480
James R. Giertz (6)					2006				314,059				325,080				0				20,000				397,967				22,224
Former Senior Vice President,      Commercial and Industrial					2005				304,192				203,834				0				21,500				222,152				22,025
					2004				295,020				192,676				400,350				38,000				158,760				16,826
Lowell F. Schwab					2006				314,059				324,467				0				20,000				548,657				16,074
Senior Vice President,      Engine Systems and Parts					2005				300,385				240,979				0				83,603				431,961				22,569
					2004				286,039				220,806				0				96,148				305,760				19,039
Thomas R. VerHage (7)					2006				295,820				283,746				0				9,000				0				28,149
Vice President and Chief      Financial Officer					2005				273,077				213,498				0				9,000				0				17,914
					2004				95,192				62,816				507,690				25,000				0				3,503
Geert Henk Touw					2006				254,905				207,467				0				16,000				457,523				16,781
Senior Vice President,      Asia Pacific					2005				236,500				151,000				0				18,000				343,966				15,197
					2004				220,039				134,168				0				15,000				393,680				12,695

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(1)	Includes any portion of salary and bonus deferred under the Deferred Compensation and 401(K)401(k) Excess Plan.

(2)

Amounts in the Restricted Stock Award column represent the dollar value on the grant date of grants of restricted stock under the Company’s 2001 Master Stock CompensationIncentive Plan. Regular dividends are paid on the restricted shares. At the end of fiscal 2005,2006, the number and value of the aggregate restricted stockholdingsstock holdings for the Named Officers that vest in less than three years were: William G. Van Dyke, 0, $0; William M. Cook, 0 shares, $0; Lowell F.Giertz, 15,000 shares, $488,550; Schwab, 0 shares, $0; Nickolas Priadka,VerHage, 18,000 shares, $586,260; and Touw, 0 $0; and James R. Giertz, 15,000, $488,700. Mr.shares, $0. Giertz surrendered 50,000 shares of restricted stock in 2001 and received 49,275 deferred restricted share units. The balance of Mr. Giertz’s deferred restricted share units at the end of fiscal 2005,2006, including dividend equivalent rights earned, was 50,93151,439 shares valued at $1,659,344. Mr.$1,675,360. Cook surrendered 25,000 shares of restricted stock in 2005 and received 24,638 deferred restricted share units. The balance of Mr. Cook’s deferred restricted share units at the end of fiscal 2005,2006, including dividend equivalent rights earned, was 24,63824,883 shares valued at $802,690. No$810,437. One additional restricted stock awards wereaward of 3,000 shares was made to the Executive Officers as a group in fiscal 2005. 2006 to Sandra Joppa, and is subject to a five-year vesting schedule.

(3)	The stock option grants include both new fiscal 20052006 annual grants and previously awardedgrants. No reload grants resulting from the exercise in fiscal 20052006 of option awards granted in prior years. years were awarded in fiscal 2006.

(4)

Earned under the Company’s 2001 Master Stock CompensationIncentive Plan during the three-year period ending in the fiscal year in which the payout is listed. Payout is made in the form of the Company’s common stockCommon Stock and delivered or deferred into the Company’s Deferred Compensation and 401(K)401(k) Excess Plan during the following fiscal year.

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(5)	Amounts in this column represent the dollar value of share allocations (i) under the Company’s match for bonus and salary under the Company’s ESOP and 401k401(k) benefit plans; and (ii) under the Company’s

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match (both the fixed match and the discretionary variable match) for deferred bonus and salary and salary in excess of the limits established by Section 415 of the Internal Revenue Code contributed by the Company to an unqualified supplemental plan; and (iii) also includes amounts for the dollar value of the interest accrued that is above the market interest rates determined under SEC rules during each of the applicable three fiscal year periods for compensation deferred under the Company’s Deferred Compensation and 401(K)401(k) Excess Plan. The interest rate for the Company’s deferred compensation plans is set by the Human Resources Committee at the ten-year Treasury Bond rate plus 2%. The amounts

Name				Salary and Bonus Match				Deferred Salary and Bonus Match				Excess Match				Discretionary Match				Above Market Interest
William M. Cook				$	7,712			$	11,730			$	26,661			$	4,633			$	13,205
James R. Giertz					8,642				0				12,073				1,509				0
Lowell F. Schwab					8,800				441				5,212				1,594				27
Thomas R. VerHage					2,914				16,770				0				2,155				6,310
Geert Henk Touw					8,279				0				7,557				945				0

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(6)

James Giertz resigned as an officer of the above market interest for fiscal 2003 are: Van Dyke $12,440, Cook $1,863, Schwab $0, Priadka $862 and Giertz $0; andCompany effective September 15, 2006, resulting in the amounts for fiscal 2004 are: Van Dyke $18,117, Cook $3,452, Schwab $0, Priadka $1,358 and Giertz $0. The amounts for eachforfeiture of the items for15,000 shares of restricted stock granted in fiscal 2005 are:2004.

(7)

Thomas VerHage was appointed as an officer of the Company effective March 1, 2004.

Name			Salary and Bonus Match			Deferred Salary and Bonus Match			Excess Match			Discretionary Match			2005 Above Market Interest
William G. Van Dyke			$	3,111		$	0		$	52,206		$	9,704		$	45,188
William M. Cook				11,641			9,812			8,903			3,103			11,241
Lowell F. Schwab				8,400			0			12,448			1,721			0
Nickolas Priadka				9,576			1,863			9,789			638			3,771
James R. Giertz				8,408			0			11,467			2,150			0

OPTION/PTIONSARS GRANTEDRANTS INLASTFISCALYEAR

			Individual Grants (1)												Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term (3)
Name			Number of Securities Underlying Options/SARs Granted (2)			% of Total Options/SARs Granted to Employees in Fiscal Year			Exercise or Base Price/sh ($)			Expiration Date
															0%  ($)			5%  ($)			10%  ($)
William G. Van Dyke				75,500		7.1			30.69			12/07/14			0				1,457,209			3,692,853
				108,193	(4)	10.2			31.97			12/12/10			0				1,071,010			2,399,649
				99,940	(4)	9.4			31.97			12/19/07			0				422,940			878,236
				90,609	(4)	8.6			31.97			12/03/08			0				540,104			1,148,602
				85,052	(4)	8.0			31.97			12/06/09			0				669,643			1,461,160
				40,730	(4)	3.9			31.97			12/03/11			0				486,303			1,118,220
William M. Cook				53,500		5.1			30.69			12/07/14			0				1,032,592			2,616,790
				22,014	(4)	2.1			32.10			12/21/05			0				19,535			38,663
Lowell F. Schwab				20,500		1.9			30.69			12/07/14			0				395,666			1,002,695
				31,699	(4)	3.0			32.50			12/03/11			0				400,919			927,684
				31,404	(4)	3.0			32.50			12/05/12			0				468,476			1,114,134
Nicholas Priadka				20,500		1.9			30.69			12/07/14			0				395,666			1,002,695
James R. Giertz				21,500		2.0			30.69			12/07/14			0				414,967			1,051,607
All Executive Officers as
a Group				749,141		70.7
All Non-Executive Officer
Employees as a Group				310,707		29.3

				Individual Grants (1)																Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term (3)
Name				Number of Securities Underlying Options/SARs Granted (2)				% of Total Options/SARs Granted to Employees in Fiscal Year				Exercise Price ($/sh)				Expiration Date
																				5%  ($)				10%  ($)
William M. Cook					53,000				15.5				32.80				12/16/15				1,093,270				2,770,562
James R. Giertz					20,000				5.9				32.80				12/16/15				412,555				1,045,495
Lowell F. Schwab					20,000				5.9				32.80				12/16/15				412,555				1,045,495
Thomas R. VerHage					9,000				2.6				32.80				12/16/15				185,650				470,473
Geert Henk Touw					16,000				4.7				32.80				12/16/15				330,044				836,396

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(1)	No stock appreciation rights (“SARs”) have been granted. Total shares used to calculate the total options percentages do not include options to purchase 57,600 shares of Common Stock granted to the Board of Directors of 50,400. Company’s non-employee directors.

(2)

All officer grants (other than the officer grantsoption granted to Sandra Joppa noted in footnote (4))the following sentence) during the period were non-qualified stock options granted at the market value on date of grant for a term of ten years, vesting immediately and were granted with the right to use shares in lieu of cash to pay the exercise price and to satisfy any tax withholding obligations. Ms. Joppa received an option grant of 10,000 shares on November 1, 2005, that is the same in its terms as the officer grants described above, except that it vests in equal annual one-third increments starting on November 1, 2006.

(3)	These amounts represent certain assumed rates of appreciation over the full term of the option. The value ultimately realized, if any, will depend on the amount by which the market price of the Company’s stockCommon Stock exceeds the exercise price on date of sale.

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(4)

These grants were made to officers who exercised an option during fiscal 2005 and made payment of the purchase price using shares of previously owned Company stock. This restoration or “reload” grant is for the number of shares equal to the shares used in payment of the purchase price or withheld for tax withholding. The option price is equal to the market value of the Company’s stock on the date of exercise and will expire on the same date as the original option which was exercised. These options, which are the result of such a restoration, do not contain the reload feature.

AGGREGATEDOPTION/PTIONSAR EXERCISES INLASTFISCALYEAR
ANDFISCALYEARE-ENDOPTION/PTIONSAR VALUES

									Number of Securities Underlying Unexercised Options/SARs at Fiscal Year-end (2)						Value of Unexercised In-the-Money Options/SARs at Fiscal Year-end (2)(3)
Name			Shares Acquired on Exercise (1)			Value Realized ($)			Exercisable (Shares)			Unexercisable (Shares)			Exercisable ($)			Unexercisable ($)
William G. Van Dyke				798,792			15,638,955			948,424			0			5,439,030			0
William M. Cook				40,416			1,036,837			524,720			0			7,409,023			0
Lowell F. Schwab				137,912			1,975,679			251,975			0			1,415,097			0
Nickolas Priadka				30,382			394,966			143,202			0			704,100			0
James R. Giertz				148,138			2,893,087			300,838			0			4,279,090			0

Name				Shares Acquired on Exercise (#) (1) (2)				Value Realized ($)				Number of Securities Underlying Unexercised Options at Fiscal Year-End (#)								Value of Unexercised In-the-Money Options at Fiscal Year-End ($)(3)
												Exercisable				Unexercisable				Exercisable				Unexercisable
William M. Cook					22,014				30,379				555,706				0				7,393,430				0
James R. Giertz					51,488				1,076,872				269,350				0				3,258,937				0
Lowell F. Schwab					39,360				645,110				232,615				0				812,731				0
Thomas R. VerHage					0				0				34,667				8,333				89,671				36,374
Geert Henk Touw					0				0				49,000				0				66,690				0

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(1)	The number of shares shown in this column is larger than the number of shares actually acquired on exercise. The actual number of shares received is reduced by the number of shares delivered in payment of the exercise price and shares withheld to cover withholding taxes.

(2)	No SARs were exercised in fiscal 2005. 2006.

(3)	This value is based on the difference between the exercise price of such options and the closing price of Company Common Stock as of fiscal year-end 2005. 2006.

LONG-ONGT-TERMINCENTIVEPLANS—AWARDS INLASTFISCALYEAR

Name			Number of Shares, Units or Other Rights (1)			Performance or Other Period Until Maturation or Payout			Estimated Future Payouts under Non-Stock Price-Based Plan
									Threshold			Target			Maximum
William G. Van Dyke				20,200		8/1/04 – 7/31/07				5,050			20,200			55,550
William M. Cook				14,300		8/1/04 – 7/31/07				3,575			14,300			39,325
Lowell F. Schwab				6,200		8/1/04 – 7/31/07				1,550			6,200			17,050
Nickolas Priadka				6,200		8/1/04 – 7/31/07				1,550			6,200			17,050
James R. Giertz				6,400		8/1/04 – 7/31/07				1,600			6,400			17,600

Name				Number of Shares, Units or Other Rights (#)(1)				Performance or Other Period Until Maturation or Payout				Estimated Future Payouts Under Non-Stock Price-Based Plan
												Threshold (#)				Target (#)				Maximum (#)
William M. Cook					14,800				8/1/05 – 7/31/08				3,700				14,800				40,700
James R. Giertz					6,200				8/1/05 – 7/31/08				1,550				6,200				17,050
Lowell F. Schwab					6,200				8/1/05 – 7/31/08				1,550				6,200				17,050
Thomas R. VerHage					5,800				8/1/05 – 7/31/08				1,450				5,800				15,950
Geert Henk Touw					4,200				8/1/05 – 7/31/08				1,050				4,200				11,550

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(1)

Awards are of Performance Sharesperformance shares of the Company’s common stock.Common Stock. Awards are earned only if the Company achieves the minimum Performance Objectivesperformance objectives and the Award Valueaward value will be based on a weighting of compound corporate net sales growth and after-tax return on investment over the three year period.year-period. The amounts shown in the table under the headings “Threshold”,“Threshold,” “Target” and “Maximum” are amounts awarded at 25%, 100% and 275% of the targeted award. The award maywill also be adjusted upward by 25% if earnings per share increase in each of the three years in the period by at least 5%.

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HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Human Resources Committee of the Board of Directors, consisting of four independent, non-employee directors (“the Committee”(the “Committee”), is responsible for establishing the compensation programs for the Company’s key executives. The Company’s executive compensation program comprises base salary, annual incentive and long-termlong term incentive compensation. The objectives of the Company’s executive compensation program are to:

	•	emphasize a pay-for-performance philosophy by placing significant portions of pay at risk and requiring outstanding results for payment at the threshold level;
	•	attract, reward and retain the best executives available in our industry taking into consideration all aspects of performance and ethical leadership, with their compensation levels keyed to a peer group of companies;
	•	motivate and reward executives responsible for attaining the financial and strategic objectives essential to the Company’s long-term success focusing on earnings per share growth and continued growth in stockholder value; and

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Table of pay at risk and requiring outstanding results for payment at the threshold level;Contents

attract, reward and retain the best executives available in our industry taking into consideration all aspects of performance and ethical leadership and have their compensation levels keyed to a peer group of companies;

motivate and reward executives responsible for attaining the financial and strategic objectives essential to the Company’s long-term success focusing on earnings per share growth and continued growth in stockholder value; and

align the interests of executives with those of the Company’s stockholders by providing a significant portion of compensation in the form of Company common stock. Common stockStock. Common Stock ownership objectives have been established for all executive officers at a high level, ranging from five times base salary for Vice Presidents, seven times base salary for Senior Vice Presidents and ten times base salary for the Chief Executive Officer.

Base Salaries.   Base salaries for all executives are reviewed annually based on performance and market conditions. A performance appraisal taking into consideration predetermined performance objectives is required for all executives of the Company. The Committee approves and/or determines the annual base salary increases for all senior executive officers based on performance of the executive and external market data. The Company’s objective is that base salaries should approximate the mid-point (average) of senior executives of manufacturing companies of similar size in the United States. The Company uses surveys by national consultants for external market data. Executives are eligible to defer up to 100%75% of their base compensation under the Company’s Deferred Compensation and 401(K)401(k) Excess Plan.

Annual Cash Incentive.   Executive officers are eligible for target awards under the annual cash incentive programplan that range upfrom 40% to 80% of base salary. The size of the target award is determined by the executive officer’s position and competitive data for similar positions atwithin the peer group and cross-industry companies as presented in the same nationally recognized surveys as are used for the base salary. The Company sets performance goals and, in keeping with the strong performance-based philosophy, the resulting awards decreaseincrease or increasedecrease substantially if actual Company performance exceeds or fails to meet or exceeds targeted levels. Payments can range from 0% to 200% of the target awards.award amounts. Executive officers annual cash incentive opportunity is linked to achieving record earnings per share and to achieving sales, profits and return on investment targets for the Company and for their respective business units. Executives are eligible to defer up to 100% of their incentive compensation under the Company’s Deferred Compensation and 401(K)401(k) Excess Plan.

Long-termLong Term Incentive Stock Compensation Awards and Stock Option Grants.   There was a payoutwere payouts under the Long-TermLong Term Compensation Plan in 2006, 2005 and 2004 as shown in the summary compensation table on page 18. There was a payout under the Plan16 because the Company achieved the performance objectives for three-year compounded growth in net sales and after-tax return on investment. There was a payout to only one named officer under the plan in 2003 because the Company did not achieve all of the performance objectives. The variance in the Long Term Compensation Plan award payouts are consistent with the at risk and pay for performance compensation philosophy. The Long Term Compensation Plan Award targets are based on three-year compounded growth in net sales and an after-tax return on investment that exceeds the Company’s weighted average cost of capital. Under this program, the Committee selectedannually selects and approves eligible executives and established anestablishes incentive opportunityopportunities as a percentage of base salary. In order for a participant to receive a payout, minimumthreshold performance must be attained.achieved.

The Committee also occasionally grants restricted stock with a fixed restriction period, usually three to five years, to ensure retention of key executives. The Committee also believes that stock option grants encourage the key executives to own and hold Donaldson stock and tie their long-term economic interests

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directly to those of the stockholders. Stock options are typically granted annually. In determining the number of shares covered by such options, the Committee takes into account position levels,level, base salary, and other factors relevant to individual performance but does not consider the amount and terms of options and restricted stock already held by the executive.performance.

        TargetsTarget awards for the incentive portion of compensation are designed based on financial performance in the sixtieth60^th to sixty-fifth65^th percentile of the peer group. Executives are eligible to make elections in advance to defer up to 100% of their long-termlong term incentive stock compensation awards, stock option grants upon exercise and restricted stock awards upon vesting under the Company’s Deferred Compensation and 401(K)401(k) Excess Plan and the Deferred Stock Option Gain Plan.

Stock Option Bonus Replacement Program.   To encourage stock ownership by executives, the Company adopted in fiscal 2000 a program that allows executives to elect in advance to receive stock options under the 2001 Master Stock Incentive Plan in lieu of some ora portion of all of the cash compensation earned under the annual cash bonus incentive program.Officer Annual Cash Incentive Plan. Currently under the program, participants receive an option to acquire $4 of stock at market value for every $1 of compensation exchanged. In fiscal 2005,2006, no executives participated in the program.

Stock Ownership.   Ownership of Donaldson stock is expected of Donaldson executives. The Committee believes that linking a significant portion of the executive’s current and potential net worth to the Company’s

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success, as reflected in the stock price, gives the executive a stake similar to the stockholders. The Committee has established stock ownership guidelines for the Named Officers and certain other executive officers, which encourage retention of shares. The guidelines range from five to ten times base salary and, in addition, require officers to retain one-halfone-quarter of the net shares acquired in excess of their initial target. The goal of the Chief Executive Officer is ten times annual base salary. Mr. Van DykeCook exceeded this ownership goal during his entire service as Chairman and Chief Executive Officer. Mr. Cook also exceeded this ownership goal for the Chief Executive Officer in fiscal 2005.2006.

Compensation of the Chairman.   Mr. Van Dyke served as an executive officer in the capacity of Chairman through the end of fiscal 2005. Mr. Van Dyke’s fiscal 2005 base salary and incentive award opportunity were determined by the Committee in accordance with the evaluation process and the methodology described above. The Committee considered Mr. Van Dyke’s performance against pre-established objectives and met both in private and with Mr. Van Dyke in completing his performance appraisal and setting his compensation and objectives. The Committee determined Mr. Van Dyke’s compensation for fiscal 2005 in a manner consistent with his fiscal 2004 compensation based on his serving as a full-time executive officer in his capacity as Chairman of the Board of Directors for a one-year transition period.

Base Salary.   Mr. Van Dyke’s base salary for fiscal 2005 was $723,315.

Annual Bonus.   Mr. Van Dyke’s bonus award for fiscal 2005 was $753,945. This annual bonus was earned under the annual incentive program based on the Company achieving performance objectives for earning per share growth over the previous record earned in fiscal 2004.

Stock Options.   Mr. Van Dyke received an annual option grant in December 2004 of options to purchase 75,500 shares of stock.

Long-Term Incentive Plan Payout.   Mr. Van Dyke received a payout of 47,297 shares of stock under the Long-Term Incentive Plan in 2005 based on the Company’s achieving the performance objectives for three-year compounded growth in net sales and after-tax return on investment.

Retirement and Consulting Agreement.   The Company entered into a retirement and consulting agreement with Mr. Van Dyke on August 29, 2005 that provides for a one-time payment to Mr. Van Dyke in the amount of $111,000. Mr. Van Dyke agrees to provide certain consulting services to the Company and further agrees not to compete with the Company during the five year term of the agreement.

Compensation of the Chief Executive Officer.    Mr. Cook’s fiscal 20052006 base salary and incentive award opportunity were determined by the Committee in accordance with the evaluation process and the methodology described above. The Committee considered Mr. Cook’s performance against pre-established objectives and met both in private and with Mr. Cook in completing his performance appraisal and setting his compensation and objectives.

Base Salary.    Mr. Cook’s base salary earnings for fiscal 2006 were $593,270, which is at the lower end of the range of the market mid-point for manufacturing companies of similar size. Mr. Cook’s base salary was increased by the Committee following its annual performance evaluation to $625,000 effective January 1, 2006.

Annual Incentive.    Mr. Cook’s incentive award for fiscal 2006 was $1,000,000. This annual incentive was earned under the annual cash incentive plan based on the Company achieving performance objectives for earning per share growth over the previous record earned in fiscal 2005.

Stock Options.    Mr. Cook received an annual stock option grant in December 2005 to purchase 53,000 shares of stock.

Long Term Compensation Plan Payout.    Mr. Cook received a payout of 18,770 shares of stock under the Long Term Compensation Plan in 2006 based on the Company’s achieving the performance objectives for three-year compounded growth in net sales and after-tax return on investment.

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Base Salary.   Mr. Cook’s base salary for fiscal 2005 was $525,135, which is at the lower end of the range of the market mid-point for manufacturing companies of similar size.

Annual Bonus.   Mr. Cook’s bonus award for fiscal 2005 was $586,520. This annual bonus was earned under the annual incentive program based on the Company achieving performance objectives for earning per share growth over the previous record earned in fiscal 2004.

Stock Options.   Mr. Cook received an annual option grant in December 2004 of options to purchase 53,500 shares of stock.

Long-Term Incentive Plan Payout.   Mr. Cook received a payout of 17,102 shares of stock under the Long-Term Incentive Plan in 2005 based on the Company’s achieving the performance objectives for three-year compounded growth in net sales and after-tax return on investment.

Policy on Qualifying Compensation.   The Company’s policy is to preserve the tax deduction for compensation paid to its Chief Executive Officer and other senior executive officers. In accordance with this policy, in November 1994,2005, the stockholders approved the Company’s Annual Cash BonusQualified Performance-Based Compensation Plan for Designated Executives and annuallyestablished under the Human Resources2001 Master Stock Incentive Plan. The Committee approves the performance goals for payment of the cash bonus.incentive and share awards under The Long Term Compensation Plan annually. The 1991 Master Stock Compensation Plan, now expired, and the 2001 Master Stock Incentive Plan were approved by stockholders in 1991 and 2001, respectively, and limit the number of shares that can be granted in any one year to any one individual to further the policy of preserving the tax deduction for compensation paid to executives. The CompanyCompany’s policy is requesting stockholder approval of the Qualified Performance-Based Compensation Plan to further the policy of preservingpreserve the tax deductibility of such performance-based compensation.

Conclusion.   The executive officer compensation program administered by the Committee provides incentives to attain strong financial performance and anto ensure alignment with stockholder interests. The Committee believes that the Company’s total executive compensation program focuses the efforts of Company executives on the continued achievement of growth and profitability for the long-term and for the benefit of the Company’s stockholders.

Members of the Human Resources Committee

Jeffrey Noddle, Chair
F. Guillaume Bastiaens
Jack W. Eugster
John F. Grundhofer

PENSION BENEFITS

The Company maintains the Donaldson Company, Inc. Salaried Employees’ Pension Plan (the “Retirement Plan”), a defined benefit pension plan that provides retirement benefits to eligible employees through a cash balance plan structure. The Company also maintains the Donaldson Company, Inc. Excess Retirement Plan (the “Excess Retirement Plan”). The Excess Retirement Plan is an unfunded, non-qualified deferred compensation arrangement that primarily provides retirement benefits that cannot be paid under the Retirement Plan because of the limitations imposed by the Internal Revenue Code on qualified plans in regards to compensation and benefits.

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Participants in the Retirement Plan and Excess Retirement PlansPlan accumulate benefits in a hypothetical account balance through interest credits, and company credits that vary with age, service and pay. At retirement or termination of employment, the vested account balance is payable to the participant in the form of an immediate or deferred lump sum, or an actuarially equivalent annuity.

Under the cash balance benefit structure, account balances receive an Interest Creditinterest credit annually. The Interest Creditinterest credit is defined as the current plan year’s Interest Crediting Rateinterest crediting rate times the account balance as of the beginning of the plan year. The Interest Crediting Rateinterest crediting rate for a particular plan year is the greater of the yield on one-year U.S. Treasury Constant Maturities during the month of June preceding the plan year, plus one percent, and 4.83%. The Interest Crediting Rateinterest crediting rate is 4.83%6.16% for the 20052006 plan year.

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Company Creditscredits are credited to the account balances at the end of each plan year. The participant’s Company Credit Percentages are based on the participant’s years of age and service with the Company and its affiliates as of the end of each plan year. As of August 1, 2005,2006, the sum of years of age plus service for Messrs. Van Dyke, Cook, Giertz, Schwab, PriadkaVerHage and GiertzTouw were 92, 76, 81, 9478, 61, 83, 55 and 59,80, respectively. The participant’s Base Company Credit is equal to the Base Company Credit Percentage times total covered compensation during the plan year (“Pensionable Earnings”). The participant’s Excess Company Credit is equal to the Excess Company Credit Percentage times Pensionable Earnings in excess of the Social Security taxable wage base. The following table displays the Company Credit Percentages for the sum of years of age and service shown:

			Company Credit Percentages
Sum of Years of Age Plus Service			Base			Excess
Less than 40			3.0%			3.0%
40 – 49			4.0			4.0
50 – 59			5.0			5.0
60 – 69			6.5			5.0
70 or more			8.5			5.0

Special Career Credits are credited at the end of the plan year to the account balances of participants who were born prior to August 1, 1957 and continuously employed since August 1, 1992. The Special Career Credits are equal to 3.0% of the participant’s Pensionable Earnings and will continue through the end of the 2006 plan year, or if earlier, through the plan year in which the participant attains 35 years of benefit service. Messrs. Van Dyke, Cook, Schwab and PriadkaTouw are all currently eligible to receive Special Career Credits.

The individuals named in the Summary Compensation Table are also eligible for retirement benefits under the Donaldson Company, Inc. Supplemental Executive Retirement Plan (the “SERP”). The SERP assures participants a lump sum retirement benefit from all company funded retirement programs equal to six times their average compensation (three highest consecutive years) upon reaching age 62 with 20 years of service. This target benefit is reduced by 2% for each year the participant’s retirement precedes age 62, and it is also reduced on a prorated basis for less than 20 years of service. In determining whether the SERP must supplement the other company funded retirement programs, the Company will consider the lump sum benefits described in the previous paragraph and footnote (5) to the Summary Compensation Table, as well as, any vested pension benefits available from prior employers, if any.

The projections below set forth the estimated annual benefit payable to each of the individuals named in the Summary Compensation Table as a single life annuity, beginning at age 65, under the Retirement, and Excess Retirement and SERP Plans: Mr. Van Dyke, $500,061;Cook, $427,893; Mr. Cook, $351,298;Giertz, $246,424; Mr. Schwab, $166,370;$183,735; Mr. Priadka, $181,530;VerHage, $124,796; and Mr. Giertz, $208,501. No additional benefits areTouw, $113,542. Mr. VerHage is the only participant who is expected to be requiredreceive a benefit from the SERP for any of these participants.Plan. These projections are based on the following assumptions: (1) employment until age 65; (2) base pay plus target bonus with no future increase in pensionable earnings; (3) interest credits at the actual rate of 4.83%6.16% during the 20052006 plan year, and thereafter; and (4) conversion to a single life annuity at normal retirement age based on a discount rate of 6.00% and the Unisex 1994 Group Annuity Mortality Table.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers to file initial reports of ownership and reports of changes in ownership with the SEC and the New York Stock Exchange.NYSE. To the Company’s knowledge, based on a review of copies of such forms and representations furnished to the Company during fiscal 2005,2006, all Section 16(a) filing requirements applicable to the Company’s directors and executive officers were satisfied.satisfied, except that one Form 4 reporting a company matching contribution of two shares into one reporting person’s employee benefit account was filed late.

CHANGE-IN-CONTROL ARRANGEMENTS

Each of the Named Officers has a severance agreement with the Company designed to retain the executive and provide for continuity of management in the event of an actual or threatened change of control in the Company (as defined in the agreements). The agreements provide that in the event of a change of control, each key employee would have specific rights and receive certain benefits if, within three years after a change in control, the employee is terminated without cause or the employee terminates voluntarily under

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“constructive “constructive involuntary” circumstances as defined in the agreement. In such circumstance the employee will receive a severance payment equal to three times the employee’s annual average compensation calculated over the five years preceding such termination as well as continued health, disability and life insurance for three years after termination. The awards issued under the stock compensation plans, the supplementary retirement benefit plan and the deferred compensation plan also provide for immediate vesting or payment in the event of termination under circumstances of a change in control.

By Order of the Board of Directors

Norman C. Linnell Secretary

October 7, 20059, 2006

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APPENDIX A

DONALDSON COMPANY, INC.
QUALIFIED PERFORMANCE-BASED COMPENSATION PLAN

Section 1.    EstablishmentAUDIT COMMITTEE CHARTER

Mission Statement

The Audit Committee will assist the Board of Directors in fulfilling its oversight of (1) the integrity of the Company’s financial statements, (2) the Company’s compliance with legal and Purpose

regulatory requirements, (3) the independent auditor’s qualifications and independence, and (4) the performance of the Company’s internal audit function and independent auditors; and will prepare the report that SEC rules require be included in the Company’s annual proxy statement. The CompanyCommittee also will carry out its duties and responsibilities to retain and terminate the Company’s independent auditors and to conduct an annual performance evaluation of the Audit Committee.

While the Audit Committee has previously established the 2001 Master Stock Incentive Plan (the “Master Stock Plan”) which authorizes the issuance of, among other awards, Performance Awards which are payable upon the achievement of such performance goals asoversight responsibilities and powers set forth in this charter, the Committee may establish. In furtherance of that authorization, this Plan is hereby established under the Master Stock Plan for the purpose of authorizing the issuance of Performance Awards specifically intended to qualify as “qualified performance-based compensation” within the meaning of Section 162(m)does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of the Code. All Performance Awards granted underCompany’s financial statements. This is the responsibility of management and the Company’s independent auditor.

Organization

The Committee will be organized consistent with the following significant parameters:

Size of the committee:    The Committee will have no less than three members.

Qualifications:    Committee members must be Non-employee Directors who meet the independence and experience requirements of the Securities and Exchange Commission, the New York Stock Exchange and applicable law.

Frequency of Meetings:    The Committee will have no less than four regularly scheduled meetings each fiscal year. In addition, the Committee will meet at other times if deemed necessary to discharge completely its duties and responsibilities as outlined in this Plan are subject to any applicable terms, conditionscharter.

Appointment of Members and restrictions requiredChairperson:    Each Committee member and the Chairperson will be recommended by the Master Stock Plan,Corporate Governance Committee and any successor plans thereto.

Section 2.    Definitions

        Except as expressly defined herein, capitalized terms used in this Plan shall have the same meanings as appear in the Master Stock Plan.

Section 3.    Qualified Performance-Based Compensation under Section 162(m)be elected by vote of the Code

        From timeBoard of Directors to time,serve a term of one year. Committee members and the CommitteeChairperson may designate an Award granted pursuant to the Plan as an award of “qualified performance-based compensation” within the meaning of Section 162(m) of the Code (a “Qualified Performance Award”). A Qualified Performance Award granted under the Plan may be payable in cash or in Shares (including,serve successive one-year terms without limitation, Restricted Stock). Notwithstanding any other provision of this Plan or the Master Stock Plan to the contrary, the following additional requirements shall apply to all Qualified Performance Awards made to any Participant under the Plan:limitation.

Oversight

Internal Controls and Disclosure Controls:

	(i)    Stockholder Approval of Plan.   Any Qualified Performance Award shall be null1.	Review the appointment, performance and void and have no effect whatsoever unless the Plan shall have been approved by the stockholdersreplacement of the Company atsenior internal audit executive.
	2.	Review the internal auditor’s reports and findings on internal audit activities and the major issues as to the adequacy of the Company’s November 18, 2005internal controls.
	3.	Review the Company’s disclosure controls and procedures for its filings with the Securities and Exchange Commission.

Financial Reporting:

	1.	Review the Company’s policies with respect to risk assessment and risk management.
	2.	Review major issues regarding accounting principles and financial statement presentations, including any significant change in the Company’s selection or application of accounting principles.
	3.	Review analyses prepared by management and/or the independent auditor setting forth the Company’s critical accounting policies and estimates, and significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.

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	4.	Review the effect on the financial statements of regulatory and accounting initiatives and off-balance sheet structures.
	5.	Review the annual meetingfinancial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of stockholders. No Qualified Performance Award under this Plan shall be granted more than five years after such meetingFinancial Condition and Results of stockholders unlessOperations,” with management and the stockholders have reapproved the Planindependent auditors prior to the extentfiling or release of such financial statements, including confirmation that the Committee (i) discussed with the external auditors the matters requiring discussion by Statement on Auditing Standards No. 61, and (ii) received the written report from the external auditors required by Section 162(m)Independence Standards Board Statement No. 1. Based on these reviews and discussions, recommend to the Board of Directors that the Code.audited financial statements be included in the Annual Report on Form 10-K filed with the SEC.
	6.	Review and approve the process for reviewing and discussing with management and the independent auditors the quarterly financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” either through the Committee as a whole or through the Chairperson.

(ii)    Business Criteria.   UnlessCompliance with Laws, Regulations and until the Committee proposes for stockholder approval and the Company’s stockholders approve a change in the general business criteria set forth in this section, the attainment of which may determine the amount and/or vesting with respect to Qualified Performance Awards, the business criteria to be used for purposes of establishing performance goals for such Qualified Performance Awards shall be selected from among the following alternatives, each of which may be based on absolute standards or comparisons versus specified companies or groups of companies and may be applied at individual or various organizational levels (e.g., the Company as a whole or identified business units, segments or the like):Policies:

Earnings per share

Return on investment

Revenues, including net sales growth

Earnings, including net operating profit after taxes

Return on equity

Profit margins

Cost reductions

Inventory levels

Delivery performance

Safety performance

Quality performance

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Core operating earnings

Total stockholder return

Cash flow, including operating cash flows, free cash flow, discounted cash flow return on investment, and cash flow in excess of cost of capital

Economic value added

Stockholder value added

Market share

Price to earnings ratio

Expense ratios

Workforce goals

Total expenditures

Completion of key projects

	In1.	Review the eventCompany’s compliance system (including, but not limited to, a code of ethics for senior financial officers).
	2.	Review the Committee’s charter on an annual basis and recommend any proposed changes to the Board of Directors for approval.
	3.	Affirmatively determine that Section 162(m) of the Code or applicable tax and/or securities laws change to permit Committee discretion to alter the governing performance measures without disclosing to stockholders and obtaining stockholder approval of such changes and without thereby exposing the Company to potentially adverse tax or other legal consequences, the Committee shall havemembers are independent as required by the sole discretion to make such changes without obtaining stockholder approval.“Qualifications” section of this charter.

(iii)    Maximum Award.Relationship with Independent Auditor:

	1.	The maximum bonus which mayCommittee has the ultimate authority and responsibility to select and evaluate the independent auditor, approve all audit engagement terms and fees to be paid to such firm, and terminate such firm when circumstances warrant, and the independent auditor shall be accountable to and report to the Committee.
	2.	Evaluate the independent auditor’s qualifications, performance and independence on an ongoing basis, but no less frequently than once per year.
	3.	Review and approve the scope of the external audit to be performed each fiscal year.
	4.	Set policies and procedures for, and, as appropriate, approve the engagement of, the independent auditor for any Participant pursuantnon-audit service (to the extent such service is not prohibited) and the fee for such service, and consider whether the independent auditor’s performance of any non-audit services is compatible with its independence.
	5.	Review with the independent auditor any audit problems or difficulties the independent auditor may have encountered in the course of the audit work and any management letter provided by the independent auditor, and management’s response (including any restrictions on the scope of the independent auditor’s activities or on access to requested information and any Qualified Performance Awardsignificant disagreements with respect to any performance period shall not exceedmanagement).
	6.	At least annually, obtain and review a value of $5,000,000.report by the independent auditor describing:

		•	the independent auditor’s internal quality-control procedures;
		•	any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditor’s firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with such issues; and (to assess the auditor’s independence)
		•	all relationships between the independent auditor and the Company.

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(iv)    Payment of Qualified Performance Awards.Other Responsibilities:   Qualified Performance Awards shall be paid no later than two and one-half months following the conclusion of the applicable performance period (unless the Participant has elected to have such Award deferred in accordance with the terms of the Donaldson Company, Inc. Deferred Compensation and 401(k) Excess Plan). The Committee may, in its discretion, reduce the amount of a payout otherwise to be made in connection with a Qualified Performance Award, but may not exercise discretion to increase such amount.

	(v)    Certain Events.   If a Participant dies1.	Set clear hiring policies for employees or becomes permanentlyformer employees of the independent auditor.
	2.	Review procedures for the receipt, retention and totally disabledtreatment of complaints received by the Company regarding accounting, internal controls or has a normal retirement event beforeauditing matters, and the endconfidential, anonymous submissions by employees of a performance periodconcerns regarding questionable accounting or afterauditing matters.
	3.	Meet separately, periodically, with management, with internal auditors and with the performance periodindependent auditor in executive sessions.
	4.	Discuss generally with management earnings press releases and before a Qualified Performance Award is paid,financial information and earnings guidance provided through public disclosures under the New York Stock Exchange requirements and applicable law.
	5.	Prepare the Committee may, in its discretion, determine that the Participant shall be paid a prorated portion of the award that the Participant would have received butreport for such death or disability or normal retirement event.

(vi)    Timing of Designations.   For a Qualified Performance Award, the Committee shall, not later than 90 days after the beginning of each performance period, (A) designate all Participants for such performance period, and (B) establish the objective performance factors for each Participant for that performance period on the basis of one or more of the criteria set forth in (ii) above.

(vii)    Certification.   Following the close of each performance period and prior to payment of any amount to a Participant with respect to a Qualified Performance Award, the Committee shall certify in writing as to the attainment of all factors (including the performance factors for a Participant) upon which any payments to a Participant for that performance period are to be based.

(viii)    Interpretation.   Each of the provisions in this Section 3, and all of the other terms and conditions of the Plan as it applies to any Qualified Performance Award, shall be interpreted in such a fashion as to qualify all compensation paid thereunder as “qualified performance-based compensation” within the meaning of Section 162(m) of the Code. Nothing in this Plan shall be interpreted to limit the Committee’s authority to grant non-qualifying Performance Awards under the terms of the Master Stock Plan.

Section 4.    Effective Date of the Plan

        The Plan shall be effective as of the date of its approval by the stockholders of the Company.

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APPENDIX B

DIRECTOR INDEPENDENCE STANDARDS

I.	No director shall qualify as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). The Company shall disclose these determinationsinclusion in the Company’s annual proxy statement.
	6.	Conduct an annual performance evaluation of the Committee.
	7.	As appropriate, obtain advice and assistance from outside legal, accounting or other advisors. In this regard, the Committee will have authority to:

II.	In addition, in accordance with the New York Stock Exchange’s minimum standards for independence, a director automatically shall be disqualified from being deemed independent under the following circumstances:

	A.	The director has been an employee,•	conduct or an immediate family member* has been an executive officerauthorize investigations into any matters within its scope of responsibilities;
		•	engage outside auditors for special audits, reviews and other procedures;
		•	retain special counsel and other experts and consultants to advise the Committee and meet with any representative of the company, withinCompany; and
		•	approve the last three years; fees and other retention terms for such parties.

B.8.

The director or an immediate family member receives more than $100,000 per year in direct compensation fromReport regularly to the Company during anyfull Board of Directors regarding the prior three years, other than director and committee fees and pension or other formssignificant items of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);

C.

The director has been affiliated with or employed by, or an immediate family member was affiliated with or employed in a professional capacity by, a present or former internal or external auditor of the Company within the past three years;

D.

The director or immediate family member was employed an executive officer of another company on whose compensation committee one of the Company’s executive officers has served during the last three years;

E.

The director is an executive officer or an employee, or an immediate family member is an executive officer, of a company that, within the last three years, has made payments to, or receives payments from, the Company for property or services in an amount exceeding the greater of $1 million or 2% of such other company’s consolidated gross revenues in that fiscal year. (Note that while charitable organizations are not deemed “companies” under this standard, the Company would have to disclose in its proxy statement contributions in excess of these thresholds to any charity for which a director serves as an executive.)

*

For purposes of these standards, an “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home. discussion at each Committee meeting.

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Donaldson Company, Inc. Annual Meeting of Stockholders
Friday, November 18, 2005,17, 2006, at 1:00 p.m.
Held at the Corporate Offices of
Donaldson Company, Inc.
1400 West 94th Street
Minneapolis, Minnesota

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DONALDSON COMPANY, INC.

ANNUAL MEETING OF STOCKHOLDERS

November 18, 2005
17, 2006

1:00 p.m., Central Time

Donaldson Company, Inc.

1400 West 94th Street

Minneapolis, Minnesota

Your telephone or Internet vote authorizes the Named Proxies to vote your shares

in the same manner as if you marked, signed and returned your proxy card.

	Donaldson Company, Inc.	Proxy
	The undersigned appoints WILLIAM M. COOK, NORMAN C. LINNELL and AMY C. BECKER, and each of them, as Proxies, each with the power to appoint a substitute, to represent and vote, as designated on the reverse side, all shares of the undersigned at the 2006 Annual Meeting of Stockholders of Donaldson Company, Inc. at Donaldson Company, Inc., 1400 West 94th Street, Minneapolis, Minnesota, at 1:00 p.m., Central Time, on Friday, November 17, 2006, and at any adjournment thereof. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Meeting or any adjournment thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, DONALDSON COMPANY, INC.
	Address Changes/Comments:   ___________________________________________________________________    ___________________________________________________________________________________________
	(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) (Continued, and to be signed and dated on other side)

The undersigned appoints WILLIAM M. COOK, NORMAN C. LINNELL and AMY C. BECKER, and each of them, as Proxies, each with the power to appoint a substitute, to represent and vote, as designated on the reverse side, all shares of the undersigned at the 2005 Annual Meeting of Stockholders of Donaldson Company, Inc. at Donaldson Company, Inc., 1400 West 94th Street, Minneapolis, Minnesota, at 1:00 p.m., Central Time, on Friday, November 18, 2005, and at any adjournment thereof.

In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Meeting or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTEDFOR EACH PROPOSAL. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, DONALDSON COMPANY, INC.

(Continued, and to be signed and dated on other side)

 

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Table of Contents

There are three ways to P.O. BOX 1299 MINNEAPOLIS,  MN  55440-1299

PLEASE VOTE PROMPTLY If you vote your Proxy

COMPANY #

Your telephoneby Phone or Internet, vote authorizes the Named Proxies to voteplease do not mail your shares in the same manner as if you marked, signed and returned your proxy card.
Proxy Card VOTE BY PHONE — TOLL FREE — 1-800-560-1965 — QUICK *** EASY *** IMMEDIATE
•	INTERNET - www.proxyvote.com Use any touch-tone telephonethe Internet to votetransmit your proxy 24 hours a day, 7 days a week,voting instructions and for electronic delivery of information   up until   12:00 p.m.11:59 P.M.  (Central time)   on November 17, 2005.
•	Please have16, 2006. Have your proxy card in hand when you access the web site and follow the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions the voice provides you.
VOTE BY INTERNET — http://www.eproxy.com/dci/ — QUICK *** EASY *** IMMEDIATE
•	Use the Internet to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m. (Central time) on November 17, 2005.
•	Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions to obtain your records and to create an electronic ballot.
voting instruction form. ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by Donaldson Company, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access   shareholder communications electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. (Central time) on November 16, 2006. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we’vewe have provided or return it to Donaldson Company, Inc., c/o Shareowner ServicesSM, P.O. Box 64873, St. Paul, MN 55164-0873.ADP, 51 Mercedes Way, Edgewood, NY 11717.

If you vote by Phone or Internet, please do not mail your Proxy Card
\/Please fold here\/

The Board of Directors Recommends votes FOR:

1. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:		Election of directors: DONCO1	01 F. Guillaume Bastiaens 02 Janet M. Dolan KEEP THIS PORTION FOR YOUR RECORDS
	03  Jeffrey NoddleTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.		DETACH AND RETURN THIS PORTION ONLY
	[   ]	Vote FOR all nominees		[   ]	Vote WITHHELD from all nominees

DONALDSON COMPANY, INC.

(Instructions: The Board of Directors recommends votes FOR:
Vote on Directors			For All	Withhold All	For All Except		To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s)name(s) of the nominee(s) inon the box to the right.line below.
1.	Election of directors:	01   Jack W. Eugster 02   John F. Grundhofer 03   Paul David Miller	o	o	o

2. Vote on Proposal		For	Against	Abstain
2.	Ratify appointment of PricewaterhouseCoopers LLP as independent auditors.		[   ]	For	[   ]	Against	[   ]	Abstain

3.

Approve the Donaldson Company, Inc. Qualified Performance-Based Compensation Plan.Inc’s independent registered accounting firm.

o

[   ] o

For

[   ]

Against

[   ]

Abstain

Address Change? Mark Box   [   ]
Indicate changes below:

o

Date ___________________________________________________
PLEASE DATE AND SIGN ABOVEBELOW exactly as name appears, indicating, if appropriate, official position or representative capacity. If stock is held in joint tenancy, each joint owner should sign.

For address changes and/or comments, please check this box and write them on the back where indicated.

o

Please indicate if you plan to attend this meeting.	o	o
	Yes	No

Signature [PLEASE SIGN WITHIN BOX]	Date		Signature (Joint Owners)	Date

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