<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

               QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE

                        SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended June 30, 2005                     Commission File Number 1-922

                              THE GILLETTE COMPANY
             (Exact name of registrant as specified in its charter)

Incorporated  in  Delaware                                04-1366970
(State  or  other  jurisdiction  of            (IRS Employer Identification No.)
incorporation or organization)

Prudential Tower Building,
Boston, Massachusetts                                                   02199
(Address of principal executive offices)                              (Zip Code)

Registrant's telephone number, including area code                (617) 421-7000

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                             Yes   X          No______

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                             Yes   X          No______

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Title of each class

Common Stock, $1.00 par value

Shares Outstanding August 1, 2005. . . . . . . . . . . . . . . . . . 999,082,975

                                     PAGE 1
<PAGE>

                         PART I. FINANCIAL INFORMATION
                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                        CONSOLIDATED STATEMENT OF INCOME
                      (Millions, except per share amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                       Three Months Ended        Six Months Ended
                                                             June 30                  June 30
                                                       ------------------       ------------------
                                                         2005       2004          2005       2004
                                                       -------    -------       -------    -------
<S>                                                    <C>        <C>           <C>        <C>
Net Sales ..........................................   $ 2,770    $ 2,443       $ 5,380    $ 4,678
Cost of Sales ......................................     1,127        968         2,219      1,846
                                                       -------    -------       -------    -------
  Gross Profit .....................................     1,643      1,475         3,161      2,832

Selling, General and Administrative Expenses .......       922        865         1,800      1,666
                                                       -------    -------       -------    -------
  Profit from Operations ...........................       721        610         1,361      1,166

Nonoperating Charges (Income):
  Interest income ..................................       (11)        (3)          (19)        (6)
  Interest expense .................................        18         11            35         23
  Exchange .........................................         -         (2)           (1)        18
  Other charges - net ..............................        21          3            28          -
                                                       -------    -------       -------    -------
                                                            28          9            43         35
                                                       -------    -------       -------    -------
Income before Income Taxes .........................       693        601         1,318      1,131

Income Taxes .......................................       195        175           372        329
                                                       -------    -------       -------    -------
  Net Income .......................................   $   498    $   426       $   946    $   802
                                                       =======    =======       =======    =======
Net Income per Common Share:
  Basic ............................................   $   .50    $   .43       $   .95    $   .80
                                                       =======    =======       =======    =======
  Assuming full dilution ...........................   $   .49    $   .42       $   .94    $   .79
                                                       =======    =======       =======    =======

Dividends per Common Share:
  Declared .........................................   $ .1625    $ .1625       $ .3250    $ .3250
  Paid .............................................   $ .1625    $ .1625       $ .3250    $ .3250

Weighted average number of common shares outstanding
  Basic ............................................       997      1,003           995      1,004
  Assuming full dilution ...........................     1,012      1,012         1,009      1,012
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                     PAGE 2
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                           CONSOLIDATED BALANCE SHEET
                                     ASSETS
                                   (Millions)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                            June 30,   December 31,  June 30,
                                                              2005        2004         2004
                                                            --------   ------------  --------
<S>                                                         <C>        <C>           <C>
Current Assets:
  Cash and cash equivalents ..............................  $    471     $    219    $    208
  Short-term investments .................................       325          847         436
  Trade receivables, less allowances, $32; $37; and $51,
    respectively .........................................       939          835         884
  Other receivables ......................................       576          376         332
  Inventories
     Raw materials and supplies ..........................       186          127         122
     Work in process .....................................       246          244         250
     Finished goods ......................................     1,052          920       1,035
                                                            --------     --------    --------
       Total Inventories .................................     1,484        1,291       1,407
                                                            --------     --------    --------

  Deferred income taxes ..................................       300          303         328
  Other current assets ...................................       376          197         190
                                                            --------     --------    --------
       Total Current Assets ..............................     4,471        4,068       3,785
                                                            --------     --------    --------

Property, Plant and Equipment, at cost ...................     7,626        7,835       7,162
Less accumulated depreciation ............................    (4,048)      (4,088)     (3,638)
                                                            --------     --------    --------
       Net Property, Plant and Equipment .................     3,578        3,747       3,524
                                                            --------     --------    --------

Goodwill .................................................     1,024        1,052       1,024
Intangible Assets, less accumulated amortization .........       551          557         570
Deferred Income Taxes ....................................        32           36          41
Other Assets .............................................     1,121        1,271       1,108
                                                            --------     --------    --------

                                                            $ 10,777     $ 10,731    $ 10,052
                                                            ========     ========    ========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                     PAGE 3
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                           CONSOLIDATED BALANCE SHEET
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      (Millions, except per share amount)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                       June 30,   December 31,  June 30,
                                                         2005        2004         2004
                                                       --------   ------------  --------
<S>                                                    <C>        <C>           <C>
Current Liabilities:
  Loans payable ....................................   $    273     $    533    $    345
  Current portion of long-term debt ................        356          711         717
  Accounts payable .................................        637          698         598
  Accrued liabilities ..............................      1,629        1,786       1,731
  Dividends payable ................................        162          161         163
  Income taxes .....................................        480          289         271
  Deferred Income taxes ............................         22           25          26
                                                       --------     --------    --------
     Total Current Liabilities .....................      3,559     $  4,203    $  3,851
                                                       --------     --------    --------

Long-Term Debt .....................................      2,129        2,142       2,050
Deferred Income Taxes ..............................        688          723         693
Other Long-Term Liabilities ........................        742          754         932
Minority Interest ..................................         67           73          69

Stockholders' Equity:
  Common stock, par value $1.00 per share:
    Authorized 2,320 shares
    Issued: 1,390 shares; 1,382 shares; and
      1,378 shares, respectively....................      1,390        1,382       1,378
  Additional paid-in capital .......................      1,810        1,521       1,375
  Earnings reinvested in the business ..............      8,998        8,376       7,809
  Accumulated other comprehensive loss .............       (923)        (760)     (1,082)
  Treasury stock, at cost: 392 shares; 392 shares;
    and 376 shares, respectively ...................     (7,683)      (7,683)     (7,021)
  Deferred stock-based compensation ................          -            -          (2)
                                                       --------     --------     -------
          Total Stockholders' Equity ...............      3,592        2,836       2,457
                                                       --------     --------     -------
                                                       $ 10,777     $ 10,731    $ 10,052
                                                       ========     ========    ========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                     PAGE 4
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Millions)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                          Six Months Ended
                                                               June 30
                                                          ----------------
                                                           2005       2004
                                                          ------     -----
<S>                                                       <C>        <C>
Operating Activities
    Net income .......................................    $  946     $ 802
    Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization ..................       315       299
      Pension Expenses  ..............................        84        72
      Deferred income taxes ..........................        37        32
      Other ..........................................         4        14
      Changes in assets and  liabilities,  excluding
      effects of acquisitions and divestitures:
        Trade receivables ............................      (144)       26
        Inventories ..................................      (273)     (330)
        Accounts payable and accrued liabilities .....       (99)      (21)
        Other working capital items ..................       (81)        9
        Funding of Company benefit plans .............       (15)      (37)
        Other noncurrent assets and liabilities ......      (127)       55
                                                          ------     -----
          Net cash provided by operating activities          647       921
                                                          ------     -----
Investing Activities

    Purchases of short-term investments ..............      (654)     (576)
    Proceeds from sales of short-term investments ....     1,175       578
    Additions to property, plant and equipment .......      (309)     (228)
    Disposals of property, plant and equipment .......        37        30
    Acquisitions, net of cash acquired ...............         -      (115)
    Other ............................................         1         1
                                                          ------     -----
          Net cash provided by (used in)
          investing activities                               250      (310)
                                                          ------     -----
Financing Activities

    Purchase of treasury stock .......................         -      (355)
    Proceeds from exercise of stock option and
         purchase plans ..............................       296       100
    Repayment of long-term debt ......................      (353)     (389)
    Increase (Decrease) in loans payable .............      (258)      228
    Dividends paid ...................................      (323)     (327)
    Net settlements, debt-related derivative contracts        (6)      100
                                                          ------     -----
          Net cash used in financing activities ......      (644)     (643)
                                                          ------     -----
Effect of Exchange Rate Changes on Cash ..............        (1)       (3)
                                                          ------     -----
Increase (Decrease) in Cash and Cash Equivalents .....       252       (35)
Cash and Cash Equivalents at Beginning of Period .....       219       243
                                                          ------     -----
Cash and Cash Equivalents at End of Period ...........    $  471     $ 208
                                                          ======     =====
Supplemental disclosure of cash paid for:

    Interest .........................................    $   38     $  21
    Income taxes .....................................    $  304     $ 237
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                     PAGE 5
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                   (Millions)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                         Three Months Ended          Six Months Ended
                                               June 30                    June 30
                                         ------------------          ----------------
                                          2005         2004           2005       2004
                                         -----        -----          -----      -----
<S>                                      <C>          <C>            <C>        <C>
Net Income, as reported                  $ 498        $ 426          $ 946      $ 802
  Other Comprehensive Income,
    net of tax:
  Foreign Currency Translation             (60)          (4)          (161)         7
  Cash Flow Hedges                          (2)          (1)            (2)        (1)
                                         -----        -----          -----      -----
Comprehensive Income                     $ 436        $ 421          $ 783      $ 808
                                         =====        =====          =====      =====
</TABLE>

Accumulated Other Comprehensive Loss
------------------------------------

The balances for the components of Accumulated Other Comprehensive Loss are:

<TABLE>
<CAPTION>
                                                                           Accumulated
                                   Foreign                                    Other
                                   Currency      Pension     Cash Flow    Comprehensive
                                  Translation   Adjustment     Hedges         Loss
                                  -----------   ----------   ---------    -------------
<S>                               <C>           <C>          <C>          <C>
Balance  December 31, 2003        $      (898)  $     (193)  $       3    $      (1,088)
Change in period                          (14)           -           1              (13)
Reclassification to
  Earnings (pre-tax)                       16            -           -               16
Income tax benefit (expense)                9            -          (1)               8
                                  -----------   ----------   ---------    -------------
Balance  March 31, 2004           $      (887)  $     (193)  $       3    $      (1,077)
Change in period                           (7)           -          (1)              (8)
Reclassification to
  Earnings (pre-tax)                        -            -          (1)              (1)
Income tax benefit (expense)                3            -           1                4
                                  -----------   ----------   ---------    -------------
Balance  June 30, 2004            $      (891)  $     (193)  $       2    $      (1,082)
                                  ===========   ==========   =========    =============
Balance December 31, 2004         $      (568)  $     (195)  $       3    $        (760)
Change in period                         (113)           -           2             (111)
Reclassification to
  Earnings (pre-tax)                        -            -          (2)              (2)
Income tax benefit (expense)               12            -           -               12
                                  -----------   ----------   ---------    -------------
Balance March 31, 2005            $      (669)  $     (195)  $       3    $        (861)
Change in period                          (26)           -          (2)             (28)
Reclassification to
  Earnings (pre-tax)                        -            -          (1)              (1)
Income tax benefit (expense)              (34)           -           1              (33)
                                  -----------   ----------   ---------    -------------
Balance  June 30, 2005            $      (729)  $     (195)  $       1    $        (923)
                                  ===========   ==========   =========    =============
</TABLE>

Net exchange gains or losses resulting from the translation of assets and
liabilities of foreign subsidiaries, except those in highly inflationary
economies, are accumulated in a separate section of stockholders' equity. Also
included are the effects of foreign exchange rate changes on intercompany
balances of a long-term investment nature and transactions designated as hedges
of net foreign investments.

The Company recorded net pre-tax losses of $26 million and $139 million in
accumulated foreign currency translation for the three months and six months
ended June 30, 2005, respectively, due primarily to the weakening of the Euro
and the U.K. Pound Sterling, partially offset by gains in the Brazilian Real and
Mexican Peso. Included in these amounts are gains of $142 million and $150
million related to net investment hedges, primarily of the Company's Euro
functional currency subsidiaries, for the three and six months ended June 30,
2005, respectively.

In the six months ended June 30, 2004, the Company reclassified $16 million in
exchange losses from accumulated other comprehensive loss upon liquidation of
foreign subsidiaries to the income statement.

See Accompanying Notes to Consolidated Financial Statements.

                                     PAGE 6
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

Accounting Comments
-------------------

Reference is made to the registrant's 2004 Annual Report to Shareholders, which
contains, at pages 42 through 74, the audited consolidated financial statements
and the notes thereto, which are incorporated by reference into the registrant's
Annual Report on Form 10-K for the year ended December 31, 2004.

On January 27, 2005, the Company entered into an Agreement and Plan of Merger
with The Procter & Gamble Company ("P&G"), an Ohio corporation, and Aquarium
Acquisition Corp., a wholly-owned subsidiary of P&G. The accompanying
Consolidated Financial Statements have been prepared assuming the Company
continues on a stand-alone basis and do not reflect any adjustments or
disclosures that may be required upon consummation of the merger. Refer to the
registration statement on Form S-4, as amended and filed by P&G on May 25, 2005
with the Securities and Exchange commission ("SEC"), and our Annual Report on
Form 10-K for the year ended December 31, 2004, for a more complete description
of the Merger and related agreements.

With respect to the financial information for the interim periods included in
this report, which is unaudited, the management of the Company believes that all
adjustments necessary for a fair presentation of the results for such interim
periods have been included and are of a normal recurring nature.

The Company's annual financial statements are prepared on a calendar year basis.
For interim reporting, the Company divides the calendar year into thirteen-week
quarterly reporting periods. The first and fourth quarter may be more or less
than 13 weeks, by zero to six days, which can affect comparability between
periods. The first quarter of 2004 consisted of 12 weeks and 3 days, while the
first quarter of 2005 consisted of 13 weeks and 1 day. The fourth quarter of
2004 consisted of 13 weeks and 6 days, while the fourth quarter of 2005 will
consist of exactly 13 weeks.

Advertising costs are expensed as incurred. Advertising expenses, for interim
periods, are charged to operations as a percentage of sales, based on estimated
sales and related advertising expense for the full year.

The Company accounts for its stock option plans under Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and
related Interpretations. No compensation cost is recorded on the date of grant,
as all options granted under the plans had an exercise price equal to the market
value of the underlying common stock. The Company recognizes stock-based
compensation expense related to stock appreciation rights. The following table
illustrates the effect on net income and net income per common share as if the
Company had applied the fair-value-based method under Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
to record expense for stock options.

                                     PAGE 7
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                           Three Months      Six Months
                                          Ended June 30,   Ended June 30,
(Millions, except per share amounts)       2005    2004     2005    2004
------------------------------------      ------  ------   ------  ------
<S>                                       <C>     <C>      <C>     <C>
Net income, as reported                   $  498  $  426   $  946  $  802
Add:  Compensation expense included in
      reported net income, net of
      related tax effects                      -       1        2       1
Less: Compensation expense for option
      awards determined by the fair-
      value-based method, net of
      related tax effects                    (24)    (24)     (48)    (48)
                                          ------  ------   ------  ------
Pro forma net income                      $  474  $  403   $  900  $  755
                                          ======  ======   ======  ======
Net income per common share
Basic
  As reported                             $  .50  $  .43   $  .95  $  .80
  Pro forma                                  .48     .40      .90     .75
Assuming full dilution
  As reported                             $  .49  $  .42   $  .94  $  .79
  Pro forma                                  .47     .40      .89     .75
</TABLE>

The fair value of each option grant for the Company's plans is estimated on the
date of the grant using the Black-Scholes option pricing model.

Certain amounts in the prior year financial statements have been reclassified to
conform to the 2005 presentation.

Repatriation of Foreign Earnings Under the American Jobs Creation Act of 2004
-----------------------------------------------------------------------------

In the second quarter, as a result of the issuance by the Internal Revenue
Service of Notice 2005-38, providing guidance on the temporary incentive for US
corporations to repatriate foreign earnings under the American Jobs Creation Act
of 2004 (the "Act"), the Company adjusted its previously determined (in 2004)
level of planned repatriation from $325 million to $600 million. This guidance
provided clarity regarding the treatment of foreign tax credits related to
certain dividends under the Act. The interaction of the guidance and the
increased repatriation amount resulted in the $25 million tax liability accrued
at the end of 2004 remaining unchanged. The $600 million amount was repatriated
at the close of the quarter after the Company and P&G formally agreed to an
interim plan for the repatriation of foreign earnings under the Act, as called
for under the terms of the Agreement and Plan of Merger. The Company is still
evaluating its plans for potential further repatriation and may agree to further
plans with P&G prior to the closing of the merger, or if no further agreement is
reached, P&G may request that the Company implement a P&G developed plan, and if
P&G so requests, the Company is required to use its best efforts to implement
such a plan prior to closing. Based on the Company's analysis to date, it is
reasonably possible that it may repatriate an additional amount up to $2.0
billion, with a related tax liability ranging up to $84 million.

Accounting Pronouncements
-------------------------

On December 16, 2004, the FASB issued SFAS 123 (R), "Share-Based Payment," which
is a revision of SFAS 123, "Accounting for Stock-Based Compensation." SFAS
123(R) requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statement based on their
fair values. Pro forma disclosure is no longer an alternative.

On April 14, 2005, the SEC issued revised dates for companies to implement SFAS
123(R). The Company is now required and expects to adopt SFAS 123(R) on January
1, 2006, utilizing the modified retrospective method. The modified retrospective
method requires compensation costs to be recognized beginning with the effective
date based on the requirements of SFAS 123(R) for all (a) share-based payments
granted after the effective date and (b) awards granted to employees prior to
the effective date of SFAS 123(R) that remain unvested on the effective date.
Amounts for prior years will be restated based on the amounts previously
recognized under SFAS 123 for purposes of pro forma disclosures.

                                     PAGE 8
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

As permitted by SFAS 123, the Company currently accounts for share-based
payments to employees using APB Opinion 25's intrinsic value method and, as
such, generally recognizes no compensation cost for employee stock options.
Accordingly, the adoption of SFAS 123(R)'s fair value method will have a
significant impact on the Company's results of operations, although it will have
no impact on the Company's overall financial position. The impact of the
adoption of SFAS 123(R) cannot be predicted at this time because it will depend
on levels of share-based payments granted in the future. However, when adopted,
the impact of SFAS 123(R) on prior periods will approximate the impact of SFAS
123 as described in the disclosure of pro forma net income and earnings per
share in the Accounting Comments note above.

In November 2004, the FASB issued SFAS 151, "Inventory Costs - an amendment of
ARB No.43, Chapter 4," which requires companies to expense abnormal freight,
handling costs, or spoilage in the period incurred and to allocate fixed
overhead based on normal capacity, with adjustment if production is abnormally
high. The Company adopted the provisions of the pronouncement in the first
quarter 2005, on a prospective basis, as they relate to capitalization of fixed
overhead expenses. Implementation of this standard did not have a material
impact on the total Company or segment results for the three and six months
ended June 30, 2005. The Company also expects that the implementation of this
standard will have no material impact on the total Company for the remainder of
the year. There may be a material impact on the results at the segment level in
certain future quarters.

In March 2005, the FASB issued FASB Interpretation No. 47 (FIN 47) Accounting
for Conditional Asset Retirement Obligations, which clarifies that a liability
must be recognized (at fair value) for an asset retirement obligation when it
has been incurred if the amount can be reasonably estimated, even if settlement
of the liability is conditional on a future event. FIN 47 is effective as of
December 31, 2005. The Company continues to review its asset retirement
obligations to determine the need to record a liability to cover any conditional
obligation. The Company does not anticipate that any identified liabilities will
have a material impact on operations either at the segment or total Company
level.

In June 2005, the FASB issued FASB Staff Position (FSP) SFAS 143-1 Accounting
for Electronic Equipment Waste Obligations, which addresses the accounting for
obligations associated with the European Union Directive 2002/96/EC on Waste of
Electrical and Electronic Equipment (WEEE). This FSP addresses only waste from
products in the market prior to August 13, 2005 (referred to as historical
waste). The Directive distinguishes between commercial user waste and private
household waste for purposes of designating who is liable for the costs
associated with proper disposal of the waste. Under the Directive, the waste
obligation associated with commercial users remains with the commercial users
until they either transfer the obligation to the producer of replacement
equipment or dispose of the equipment. SFAS 143-1 requires commercial users to
apply the provisions of SFAS 143, Accounting for Asset Retirement Obligations,
and the related FIN 47, Accounting for Conditional Asset Retirement Obligations,
when establishing the commercial user liability.

Also, the Directive provides that the cost of disposal of waste held by private
households is to be borne collectively by producers based on future market
share. The liability and offsetting expense to be recorded by producers of goods
is to be based on each producer's respective market share as defined by each
European Union member country.

The Company continues to review current local European Union member country
legislation to determine its historical waste obligation as a commercial user.
Based on current legislation, it is unclear to the Company whether its
manufacturing equipment is subject to the WEEE directive. As such, the Company
has not established a liability on its books as it relates to commercial user
historical waste.

In addition, the Company will be reviewing its historical waste obligation as a
manufacturer of household products based on its market share data after August
2005, as required by the Directive. The Directive primarily impacts products
sold by the Company's Braun and Oral Care segments. The Company anticipates that
the waste obligation will be immaterial at both a segment and total company
level.

                                     PAGE 9
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

Share Repurchase Program
------------------------

In the three and six months ended June 30, 2005, the Company repurchased no
shares. We may repurchase shares in 2005; however, such share repurchases are
limited due to the proposed merger. As of June 30, 2005, there are 26.2 million
shares remaining on the share repurchase program which was authorized on
September 16, 2003. Shares may be repurchased in the open market or in
privately-negotiated transactions, depending on market conditions and other
factors.

Financial Information by Business Segment
-----------------------------------------

Net sales, profit (loss) from operations and identifiable assets for each of the
Company's business segments are set forth below. There are no material
intersegment revenues.

<TABLE>
<CAPTION>
                                                 Net Sales
                                -------------------------------------
                                Three Months Ended   Six Months Ended
                                      June 30              June 30
                                ------------------   ----------------
(Millions)                       2005        2004     2005      2004
                                ------      ------   ------    ------
<S>                             <C>         <C>      <C>       <C>
Blades & Razors                 $1,214      $1,099   $2,387    $2,136
Duracell                           539         456    1,001       870
Oral Care                          420         358      833       673
Braun                              341         294      647       553
Personal Care                      256         236      512       446
                                ------      ------   ------    ------
   Total                        $2,770      $2,443   $5,380    $4,678
                                ======      ======   ======    ======
</TABLE>

<TABLE>
<CAPTION>
                                     Profit/(Loss) from Operations
                                -------------------------------------
                                Three Months Ended   Six Months Ended
                                      June 30             June 30
                                ------------------   ----------------
(Millions)                       2005        2004     2005      2004
                                ------      ------   ------    ------
<S>                             <C>         <C>      <C>       <C>
Blades & Razors                 $  488      $  420   $  957    $  837
Duracell                           119          89      210       163
Oral Care                           87          68      170       123
Braun                               26          24       31        45
Personal Care                       30          24       58        37
                                ------      ------   ------    ------
 Subtotal Reportable Segments      750         625    1,426     1,205
 All Other                         (29)        (15)     (65)      (39)
                                ------      ------   ------    ------
   Total                        $  721      $  610   $1,361    $1,166
                                ======      ======   ======    ======
</TABLE>

<TABLE>
<CAPTION>
                                     Identifiable Assets
                                ---------------------------
                                June 30   Dec. 31   June 30
(Millions)                        2005      2004     2004
                                -------   -------   -------
<S>                             <C>       <C>       <C>
Blades & Razors                 $ 3,309   $ 3,253   $ 3,206
Duracell                          2,632     2,664     2,664
Oral Care                         1,605     1,527     1,456
Braun                             1,624     1,453     1,329
Personal Care                       493       450       485
                                -------   -------   -------
Subtotal Reportable Segments      9,663     9,347     9,140
All Other                         1,114     1,384       912
                                -------   -------   -------
  Total                         $10,777   $10,731   $10,052
                                =======   =======   =======
</TABLE>

                                    PAGE 10
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

Computation of net income per common share
(Millions, except per share amounts)
------------------------------------

<TABLE>
<CAPTION>
                                         Three Months Ended   Six Months Ended
                                               June 30            June 30
                                         ------------------   ---------------
                                          2005        2004     2005      2004
                                         ------      ------   ------    ------
<S>                                      <C>         <C>      <C>       <C>
Net Income ............................  $  498      $  426   $  946    $  802
                                         ======      ======   ======    ======
Common shares, basic ..................     997       1,003      995     1,004
Effect of dilutive securities:
    Stock options .....................      15           9       14         8
                                         ------      ------   ------    ------
Common shares, assuming full dilution     1,012       1,012    1,009     1,012
                                         ======      ======   ======    ======
Net Income per Common Share:

  Basic ...............................  $ 0.50      $ 0.43   $ 0.95    $ 0.80
                                         ======      ======   ======    ======
  Assuming full dilution ..............  $ 0.49      $ 0.42   $ 0.94    $ 0.79
                                         ======      ======   ======    ======
</TABLE>

For the three-month periods ended June 2005 and 2004, respectively, 6.9 million
and 29.9 million shares attributable to outstanding stock options were excluded
from the calculation of diluted earnings per share because the exercise prices
of the stock options were greater than the average market price for the quarter
and therefore their inclusion would have been anti-dilutive. For the six-month
periods ended June 30, 2005 and 2004, 7.0 million and 28.5 million shares
attributable to outstanding stock options were excluded from the calculation of
diluted earnings per share because the exercise prices of the stock options were
greater than the average market price for the quarter and therefore their
inclusion would have been anti-dilutive.

Pensions and Other Retiree Benefits
-----------------------------------

<TABLE>
<CAPTION>
                                                  U.S.               Non-U.S.             Other
(Millions)                                  Pension Benefits     Pension Benefits    Retiree Benefits
----------                                 ------------------   ------------------   ------------------
                                           Three Months Ended   Three Months Ended   Three Months Ended
                                                 June 30              June 30             June 30
                                           ------------------   ------------------   ------------------
                                           2005          2004   2005          2004   2005          2004
                                           ----          ----   ----          ----   ----          ----
<S>                                        <C>           <C>    <C>           <C>    <C>           <C>
Components of Net Defined Benefit Expense
  Service cost-benefits earned             $  8          $  7   $ 16          $ 13   $  1          $  1
  Interest cost on benefit obligation        21            20     22            20      7             7
  Estimated return on assets                (24)          (22)   (26)          (23)    (4)           (1)
  Net amortization and other                  9             7     15            14      -             1
                                           ----          ----   ----          ----   ----          ----
Net defined benefit expense                $ 14          $ 12   $ 27          $ 24   $  4          $  8
                                           ====          ====   ====          ====   ====          ====
</TABLE>

<TABLE>
<CAPTION>
                                                 U.S.             Non-U.S.           Other
                                           Pension Benefits   Pension Benefits  Retiree Benefits
                                           ----------------   ----------------  ----------------
                                           Six Months Ended   Six Months Ended  Six Months Ended
                                                June 30            June 30           June 30
                                           ----------------   ----------------  ----------------
                                           2005        2004   2005       2004   2005        2004
                                           ----        ----   ----       ----   ----        ----
<S>                                        <C>         <C>    <C>        <C>    <C>         <C>
Components of Net Defined Benefit Expense
  Service cost-benefits earned             $ 17        $ 14   $ 32        $26   $  2        $  2
  Interest cost on benefit obligation        42          40     45         40     14          14
  Estimated return on assets                (49)        (44)   (52)       (46)    (8)         (2)
  Net amortization and other                 18          14     31         28      -           2
                                           ----        ----   ----        ---   ----        ----
Net defined benefit expense                $ 28        $ 24   $ 56        $48   $  8        $ 16
                                           ====        ====   ====        ===   ====        ====
</TABLE>

                                    PAGE 11
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

The Company contributed $10 million and $15 million to its non-US pension plans,
respectively, for the three and six months ended June 30, 2005. There were no
contributions to US pension plans or other retiree benefit plans for these
periods. The Company expects to contribute an additional $26 million to its
non-US pension plans, $28 million to its US pension plan and $7 million to its
other postretirement benefit plans in 2005.

The Company continues to monitor financial markets and other factors that impact
plan asset and liability balances. Such factors may influence the Company's
decisions regarding additional contributions to its pension and other retiree
benefit plans in 2005. The Company previously disclosed total 2005 estimated
contributions of $40 million to US pension, $41 million to non-US pension and
$10 million to other retiree benefit plans.

REALIGNMENT PROGRAMS
--------------------

Functional Excellence
---------------------

In the second quarter of 2002, the Company began actions associated with its
Functional Excellence initiative. This initiative impacts all business segments
and is focused on upgrading capabilities, while reducing overhead costs by
improving processes and eliminating duplication across all functions. This
program was substantially complete at December 31, 2004.

Total pretax charges under the Functional Excellence initiative, including
employee termination benefits and other costs, were $5 million and $12 million
for the three months ended June 30, 2005 and 2004, respectively. For the six
months ended June 30, 2005 and 2004, total pretax charges under the program were
$12 million and $19 million, respectively. Functional excellence charges in 2005
included $4 million and $17 million which were recorded to cost of goods sold
and $1 million and a credit of $5 million which were recorded to selling,
general and administrative expense in the three months and six months ended June
30, 2005, respectively.

2003 Manufacturing Realignment Program
--------------------------------------

During December 2003, the Company announced a blade and razor manufacturing,
packaging and warehouse operations realignment program throughout Europe and
Russia. The program will significantly reduce costs, improve operating
efficiency, and streamline manufacturing, packaging, and warehouse operations.
The program began in December 2003 and is expected to be completed by 2007.

The Company recorded, in the three and six months ended June 30, 2005,
approximately $7 million and $15 million, respectively, to cost of sales related
to project expenses and accelerated depreciation on the Isleworth, U.K. facility
which will cease to be used as a manufacturing facility after 2006. This
facility will eventually be sold but does not yet meet the requirements of "held
for sale" accounting treatment. Other project expenses consisted primarily of
severance, based on the amounts that have been earned as of June 30, 2005, at
current service levels and pay rates and expenses related to the relocation of
equipment between impacted locations. Severance payments will span through 2006,
when the Isleworth facility will be completely closed.

                                    PAGE 12
<PAGE>

                 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

Other Realignment Programs
--------------------------
On March 31, 2005, the Board of Directors of the Company committed to a plan to
close its Duracell manufacturing facility located in Lexington, North Carolina.
This decision was announced to affected employees on April 7, 2005.

As part of its ongoing business practice, the Company continuously evaluates its
operations in accordance with business needs. The Lexington plant is primarily
dedicated to the production of high-power lithium batteries. Over the past
several years, the demand for these batteries has decreased significantly, as
film camera sales have declined and digital cameras utilizing rechargeable
batteries have gained acceptance. The Company plans to move some Lexington
manufacturing operations to the other Duracell facilities and will also source
some of the products manufactured in Lexington from third-party providers. The
closure of this facility will occur over the next several quarters with a 2006
target completion date and will result in the reduction of approximately 280
manufacturing positions and support staff.

In conjunction with the plan to close this facility, the Company currently
expects to incur approximately $29 million in cash expenses, consisting of
severance and other employee-related costs of approximately $20 million and
equipment relocation and other facility transition costs of approximately $9
million. The Company will also incur non-cash asset impairment related costs of
approximately $46 million through accelerated depreciation. For the three and
six months ended June 30, 2005, the Company incurred approximately $17 million
and $37 million, respectively, to cost of sales related to project expenses and
accelerated depreciation related to the Lexington facility.

Realignment Programs
--------------------

<TABLE>
<CAPTION>
                                                       Provisions
                                          Provisions     Accrual/               Charges   Charges
                                            Accrual   (Recoveries)              and Uses  and Uses   Charges   Accrual
                                            through      Second     Provisions  through   Second     and Uses  Balance
                                            Mar. 31      Quarter      Total     Mar. 31   Quarter     Since    June 30
(Millions)                                    2005        2005       Accruals     2005     2005     Inception    2005
                                          ----------  ------------  ----------  --------  --------  ---------  -------
<S>                                       <C>         <C>           <C>         <C>       <C>       <C>        <C>
Functional Excellence:
Employee-related expenses                    $283        $  1          $284      $(222)    $ (19)     $(241)    $  43
Other                                          57           4            61        (54)       (5)       (59)        2
                                             ----        ----          ----      -----     -----      -----     -----
Total Functional Excellence Program          $340        $  5          $345      $(276)    $ (24)     $(300)    $  45
                                             ----        ----          ----      -----     -----      -----     -----

2003 Manufacturing Realignment Program:
Employee-related expenses
  Severance payments                           43           -            43         (4)        -         (4)       39
  Other benefits                                8          (1)            7          -         -          -         7
Asset-related expenses:
  Asset write-offs                             22           4            26        (22)       (4)       (26)        -
  Loss on sales of assets                       6           -             6         (6)        -         (6)        -
Contractual obligations and other              18           4            22        (17)       (4)       (21)        1
                                             ----        ----          ----      -----     -----      -----     -----
Total 2003 Realignment Program                 97           7           104        (49)       (8)       (57)       47
                                             ----        ----          ----      -----     -----      -----     -----

Other Realignment Programs:
  Employee-related expenses
    Severance payments                         12           -            12          -         -          -        12
    Other benefits                              2           -             2          -         -          -         2
  Asset-related expenses
    Accelerated depreciation                    6          16            22         (6)      (16)       (22)        -
  Contracted Obligations and other              -           1             1          -        (1)        (1)        -
                                             ----        ----          ----      -----     -----      -----     -----
Total Other Realignment Programs               20          17            37         (6)      (17)       (23)       14
                                             ----        ----          ----      -----     -----      -----     -----
     Total                                   $457        $ 29          $486      $(331)    $ (49)     $(380)    $ 106
                                             ====        ====          ====      =====     =====      =====     =====
</TABLE>

                                    PAGE 13
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of
Operations The Gillette Company and Subsidiary Companies
--------------------------------------------------------------------------

EFFECTS OF MERGER
-----------------

The proposed merger between The Gillette Company and The Procter & Gamble
Company (P&G), described in the registration statement on Form S-4, as amended
and filed by P&G on May 25, 2005 with the Securities and Exchange Commission
("SEC"), if completed, will have material effects on the forward-looking
statements contained in this report. Investors are advised that such
forward-looking statements with respect to revenues, earnings, performance,
strategies, prospects, and other aspects of the Company's business are discussed
as a combined business in the aforementioned registration statement. INVESTORS
ARE URGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT IS PART
OF THE REGISTRATION STATEMENT, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION.

Executive Overview
------------------

We achieved record results in the second quarter and six months ended June 30,
2005, with double-digit percentage increases in net sales, profit from
operations, net income, and diluted net income per common share.

For the second quarter of 2005 net sales increased 13% to $2.8 billion as
compared with $2.4 billion in 2004, driven by strong sell-in of new product
offerings from our Blades and Razors, Oral Care, Braun and Personal Care
businesses, the continuing strength of established products, and the trade-up
activity across core categories in all regions, with notable growth in the
developing markets of Latin America and Eastern Europe. Category growth for
batteries in most regions of the world and consumer trade-up from inferior
performing zinc to alkaline batteries resulted in further sales growth. Sales of
batteries in the U.S. grew as trade and consumers prepared for the hurricane
season. The impact of foreign currency movement on net sales contributed 3
points to the gain, primarily related to Europe. The impact of pricing was
slightly negative, as price increases in Blades and Razors were more than offset
by the lower average pricing associated with sales of larger pack sizes at
Duracell. Gross profit increased 11% to $1.6 billion in the second quarter of
2005, as gross profit margin declined by 1.1 percentage points to 59.3%,
compared with 60.4% in 2004. The positive impact of manufacturing efficiencies
was more than offset by incremental costs related to the manufacturing
realignment at Duracell, an increase in the proportion of razors versus blades
sales due to the sell in of Venus Vibrance, and higher currency-based European
manufacturing costs, primarily for Braun and to a lesser extent for Oral Care.
Profit from operations rose 18% year-over-year, to $721 million in the second
quarter of 2005, compared with $610 million in 2004, driven by strong net sales
growth, sustained manufacturing efficiencies, and continued overhead reductions,
offset in part by manufacturing realignment costs at Duracell, higher
currency-based European manufacturing costs, and merger-related transaction
costs. Net income for the quarter rose 17% to $498 million from $426 million
last year, driven by the strong operating results and a lower effective tax rate
of 28%, down one percentage point from a year ago and consistent with the first
quarter of 2005. The reduction in the 2005 effective income tax rate versus 2004
was primarily due to a favorable change in the mix of earnings to countries
taxed at rates lower than the U.S. statutory rate. Net income per common share,
diluted, increased 17%, in line with the net income growth.

                                     PAGE 14
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Blades and Razors net sales for the second quarter of 2005 increased 11% versus
the comparable period in 2004, driven by strong consumer demand for new
products, which included the launch of Venus Vibrance in North America in the
second quarter of 2005. Trade-up to premium systems and higher performing
disposables in developed markets, and to entry-level systems in developing
markets also contributed to year-on-year growth. Blades and Razors profit from
operations increased 16% compared to the second quarter of 2004 due to higher
sales of new products, price increases, and trade-up to premium products in all
regions, partially offset by an unfavorable razor versus blade mix. Duracell net
sales increased 18% as compared to the second quarter of 2004 driven by
accelerating battery category growth in most regions of the world, consumer
trade-up to alkaline from inferior performing zinc batteries, particularly in
Asia, and the favorable effects of foreign currency. In addition, the early
start to the U.S. hurricane season and a Florida state-sponsored hurricane
preparedness program for consumers contributed to net sales growth in this
period. Duracell maintained its leading value share in the U.S., as it increased
its advertising and marketing spending to counter the competitive promotional
activity and the deflationary pricing activity of price-value alkaline brands.
Duracell profit from operations increased 34% due to higher volumes, improved
product mix and manufacturing efficiencies, offset in part by lower average
pricing resulting from a shift in mix towards larger pack sizes and costs
associated with a manufacturing facility closure. Oral Care net sales increased
17%, driven by the introduction of new products, trade-up to premium products,
and the unmatched impact of two acquisitions completed in April and June of
2004. Oral Care profit from operations was up 28% year-over-year, due to the
growth in net sales and improved product mix, partially offset by increases in
advertising spending and currency-related European-based manufacturing costs.
Braun net sales increased 16% as compared to the second quarter of 2004 driven
by new product introductions, including the Activator premium shaver, the
cruZer(3) youth shaver and Tassimo Coffee on Demand. Braun profit from
operations of $26 million was up 8% as compared to the second quarter of 2004 as
sales growth was tempered by currency-related increases in European-based
manufacturing costs, an unfavorable product mix related to the double-digit
growth in lower margin household appliances, and increased marketing support.
Personal Care net sales increased 9% as compared to the second quarter of 2004,
driven by the ongoing trade-up to premium products, and the success of recently
introduced TAG body sprays and MACH3 shave gels. Personal Care profit from
operations increased 25% as compared to the second quarter of 2004 due to
improved product mix from new product introductions and trade-up in shaving
preparations from foams to gels.

For the six month period ended June 30, 2005, total Company net sales increased
15%, profit from operations increased 17% and operating profit margin increased
to 25.3% from 24.9% for the same period last year. The effective income tax rate
declined by one percentage point to 28%. Net income climbed 18% and net income
per common share, diluted, increased 19%, outpacing the percentage increase in
net income as we benefited from the impact of share repurchase activity during
2004. The Company did not repurchase any shares during the six months ended June
30, 2005 due to restrictions associated with the pending merger with P&G.

                                     PAGE 15
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
---------------------

Second Quarter 2005 vs. 2004
----------------------------

Selected statement of income data is presented below.
<TABLE>
<CAPTION>
                                                      Second Quarter
                                        ------------------------------------------
                                                % of            % of      %
    (millions, except per share                  Net             Net     Increase/
      amounts and percentages)           2005   Sales   2004    Sales   (Decrease)
------------------------------------    ------  -----  ------  -------  ----------
<S>                                     <C>     <C>    <C>     <C>      <C>
Net sales                               $2,770         $2,443                13
Gross profit                             1,643   59.3   1,475   60.4         11
   Advertising                             306   11.0     258   10.6         19
   Sales promotion                         101    3.6      93    3.8          9
   Other selling, general and
     administrative (SG&A) expense         515   18.6     514   21.0          -
                                        ------         ------
Total SG&A expense                         922   33.3     865   35.4          7
                                        ------         ------

Profit from operations                  $  721   26.0  $  610   25.0         18
Nonoperating charges (income):
     Net interest expense                    7              8
     Foreign exchange                        -             (2)
     Other                                  21              3
                                        ------         ------
Total nonoperating charges                  28    1.0       9    0.4       +100
                                        ------         ------
Income taxes                            $  195    7.0  $  175    7.2         11
Net income                              $  498   18.0  $  426   17.4         17
Net income per common share, diluted    $ 0.49         $ 0.42                17
</TABLE>

Total Company
-------------

Net sales for the second quarter of 2005 were $2.8 billion, an increase of 13%
versus $2.4 billion for the same period in 2004. Favorable volume/mix
contributed 11% to net sales. Net sales increased due to new product offerings,
the ongoing strength of established products, trade-up activity across our core
categories in all regions, and advance purchases of batteries in the U.S. in
anticipation of the hurricane season. Favorable foreign exchange, notably in
Europe, contributed 3 percentage points to the net sales gain. The impact of
pricing was slightly negative, as price increases in Blades and Razors were
offset by average pricing decreases in Duracell due to a shift towards larger
pack sizes.

Gross profit was $1.6 billion for the second quarter of 2005 versus $1.5 billion
for the same period in 2004. As a percent of net sales, gross profit was 59.3%
in 2005 and 60.4% in 2004. The positive impact of manufacturing efficiencies was
more than offset by an unfavorable razor versus blade mix, incremental costs
related to manufacturing realignment costs at Duracell and higher currency-based
European manufacturing costs, particularly for Braun and to a lesser extent for
Oral Care.

                                     PAGE 16
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Total selling, general and administrative expenses amounted to 33.3% of net
sales for the second quarter of 2005, compared with 35.4% in 2004. Within
selling, general and administrative expenses, advertising expenses increased 19%
to $306 million or 11.0% of net sales for the second quarter of 2005, in support
of the new product launches and established product programs. Other selling,
general and administrative expenses were down as a percentage of net sales to
18.6% from 21.0% in the second quarter of 2004, reflecting the effects of
continued overhead reductions, partially offset by $11 million in merger-related
transaction costs.

Profit from operations was $721 million in the second quarter of 2005,
representing 26.0% of net sales, compared with $610 million for the same period
in 2004, or 25.0% of net sales. The 18% increase in year-on-year profit from
operations was the result of strong sales growth from new products, a shift in
mix to premium priced products, incremental manufacturing efficiencies, and
continued overhead reductions, offset in part by incremental costs related to
the closure of a Duracell plant and merger-related transaction costs.

Within non-operating charges/income, net interest expense amounted to $7 million
in second quarter of 2005 and $8 million in 2004. The net foreign transactional
exchange impact for the second quarter of 2005 was zero, versus $2 million of
net foreign exchange income for the same period in 2004. The $18 million
increase in other non-operating charges for the second quarter of 2005 compared
to the same period in 2004 resulted from a write-down of certain non-operating
assets.

The effective income tax rate was 28% for the second quarter of 2005, compared
with rate of 29% for the same period in 2004. The reduction in the 2005
effective income tax rate was primarily due to a favorable change in the mix of
earnings to countries taxed at rates lower than the U.S. statutory rate.

Net income increased 17% to $498 million for the second quarter of 2005,
representing 18.0% of net sales, compared with $426 million for the same period
in 2004, which represented 17.4% of net sales. Diluted net income per common
share was $0.49 for the second quarter of 2005, compared with $0.42 for the
second quarter in 2004, representing growth of 17%.

                                     PAGE 17
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Six Months Ended June 30, 2005 vs. 2004
---------------------------------------

Selected statement of income data is presented below.
<TABLE>
<CAPTION>
                                              For Six Months Ended June 30
                                        ------------------------------------------
                                                 % of            % of      %
   (millions, except per share                   Net             Net    Increase/
     amounts and percentages)            2005   Sales   2004    Sales   (Decrease)
------------------------------------    ------  ------  ------  ------  ----------
<S>                                     <C>     <C>     <C>     <C>     <C>
Net sales                               $5,380          $4,678             15
Gross profit                             3,161   58.8    2,832   60.5      12
   Advertising                             576   10.7      494   10.6      17
   Sales promotion                         192    3.6      166    3.5      16
   Other selling, general and
     administrative (SG&A) expense       1,032   19.2    1,006   21.5       3
                                        ------          ------
Total SG&A expense                       1,800   33.5    1,666   35.6       8
                                        ------          ------

Profit from operations                  $1,361   25.3   $1,166   24.9      17
Nonoperating charges (income):
     Net interest expense                   16              17
     Foreign exchange                       (1)             18
     Other                                  28               -
                                        ------          ------
Total nonoperating charges                  43    0.8       35    0.8      23
                                        ------          ------
Income taxes                            $  372    6.9   $  329    7.0      13
Net income                              $  946   17.6   $  802   17.1      18
Net income per common share, diluted    $ 0.94          $ 0.79             19
</TABLE>

Total Company
-------------

Net sales for the six months ended June 30, 2005 were $5.4 billion, an increase
of 15% versus $4.7 billion for the same period in 2004. Favorable volume/mix
contributed 12% to net sales. Net sales increased due in part to new product
offerings, the ongoing strength of established products, accelerating
consumption in the battery category, and trade-up activity across our core
categories in all regions. Favorable foreign exchange, notably in Europe,
contributed 3 percentage points to the net sales gain. Pricing was flat, as
price increases in Blades and Razors were offset by unfavorable pricing impacts
in Duracell due to a shift towards larger pack sizes.

Gross profit was $3.2 billion for the six months ended June 30, 2005 versus $2.8
billion for the same period in 2004. As a percent of net sales, gross profit was
58.8% in 2005 and 60.5% in 2004. The positive impact of manufacturing
efficiencies was more than offset by incremental costs related to the
manufacturing realignment at Duracell, an unfavorable razor versus blade mix,
and higher currency-based European manufacturing costs, primarily for Braun and
to a lesser extent for Oral Care.

                                     PAGE 18
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Total selling, general and administrative expenses amounted to 33.5% of net
sales for the six months ended June 30, 2005, compared with 35.6% in 2004.
Within selling, general and administrative expenses, advertising expenses
increased 17% to $576 million or 10.7% of net sales for the six months ended
June 30, 2005. We expect advertising expense to remain at the current level, as
a percentage of sales, for the remainder of the year. Sales promotion as a
percentage of net sales increased slightly, compared with the six months ended
June 30, 2004, in support of the new product launches. Other selling, general
and administrative expenses were down as a percentage of net sales to 19.2% from
21.5% for the six months ended June 30, 2004, reflecting the effects of
continued overhead reductions, offset in part by approximately $22 million in
merger-related transaction costs.

Profit from operations was $1.4 billion for the six months ended June 30, 2005,
representing 25.3% of net sales, compared with $1.2 billion for the same period
in 2004, or 24.9% of net sales. The 17% increase in year-on-year profit from
operations was the result of strong sales growth from new products, a shift in
mix to premium priced products, sustained manufacturing efficiencies, and
continued overhead reductions, offset in part by incremental costs related to
the closure of a Duracell plant and merger-related transaction costs.

Within non-operating charges/income, net interest expense amounted to $16
million and $17 million for the six months ended June 30, 2005 and 2004,
respectively. The net foreign transactional exchange impact for the six months
ended June 30, 2005 was $1 million of net foreign exchange income, versus $18
million of net foreign exchange expense for the same period in 2004. The 2004
result was driven by a non-cash loss related to the write-off of translation
adjustment balances associated with the liquidation of certain international
subsidiaries. The $28 million increase in other non-operating charges for the
six months ended June 30, 2005 versus the same period last year is due to a
write-down in 2005 of certain non-operating assets and an unmatched insurance
settlement credit recorded in 2004.

The effective income tax rate was 28% for the six months ended June 30, 2005,
compared with 29% for the same period of 2004. The reduction in the 2005
effective income tax rate was primarily due to a favorable change in the mix of
earnings taxed at rates lower than the U.S. statutory rate. Unless we repatriate
significant additional foreign earnings, we expect our tax rate for the
remainder of 2005 to be approximately 28%.

Net income increased 18% to $946 million for the six months ended June 30, 2005,
representing 17.6% of net sales, compared with $802 million for the same period
in 2004, which represented 17.1% of net sales. Diluted net income per common
share was $0.94 for the six months ended June 30, 2005, compared with $0.79 for
the same period in 2004, representing growth of 19%. The percentage growth in
net income per common share, diluted, outpaced the percentage growth in net
income, due to share repurchase program activity in 2004. The Company did not
repurchase any shares during the six months ended June 30, 2005 due to
restrictions associated with the pending merger with P&G.

                                     PAGE 19
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Operating Segments
------------------

Second Quarter 2005 vs. 2004
----------------------------

The following tables summarize key operating metrics for the second quarter of
2005 versus 2004, for each of our five operating segments. Cost savings and
realignment charges are recorded in the relevant segments.

<TABLE>
<CAPTION>
                                       Blades &                  Oral               Personal    Unallocated/     Total
Second Quarter                          Razors      Duracell     Care      Braun      Care         Other        Company
--------------------------------       --------     --------     -----     -----    --------    ------------    -------
(millions, except percentages)
<S>                                    <C>          <C>          <C>       <C>      <C>         <C>             <C>
Net Sales:
     Net sales, 2005                     $1,214        $ 539     $ 420     $ 341       $ 256       $   -         $2,770
     Net sales, 2004                      1,099          456       358       294         236           -          2,443
     % Incr/(Decr) vs. 2004                  11           18        17        16           9                         13
          Impact of exchange                  3            3         3         3           3                          3
          Impact of volume/mix                7           20        14        13           6                         11
          Impact of pricing                   1           (5)        -         -           -                         (1)

Profit from operations (PFO):
     PFO, 2005                           $  488        $ 119     $  87     $  26       $  30       $ (29)        $  721
     PFO, 2004                              420           89        68        24          24         (15)           610
     % Incr/(Decr) vs. 2004                  16           34        28         8          25          93             18
     PFO as % of net sales, 2005           40.2         22.1      20.7       7.6        11.7                       26.0
     PFO as % of net sales, 2004           38.2         19.5      19.1       8.1        10.3                       25.0
</TABLE>

Blades and Razors
-----------------

Net sales of $1.2 billion for the second quarter of 2005 were 11% higher than
for the same period in 2004, including a 3% favorable foreign exchange impact.
Net sales growth was driven by successful new product introductions which
included the launch of Venus Vibrance in North America in the second quarter of
2005. Favorable volume/mix related to trade-up to premium products, including a
shift to higher performing disposables in Latin America and to entry level
systems in developing markets such as China, Turkey, India and Korea,
contributed 7% to net sales growth. Pricing contributed 1% to sales growth.

Profit from operations of $488 million was up 16% from the second quarter of
2004. The profit margin increased by 2.0 percentage points to 40.2% as higher
sales from new products, price increases, and a continued shift to premium
products in all regions was partially offset by an unfavorable razor versus
blade mix and ongoing costs associated with our program to realign European
manufacturing and distribution.

                                     Page 20

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Duracell
--------

Net sales of $539 million for the second quarter of 2005 were 18% higher than
the same period in 2004, including a 3% favorable foreign exchange impact. Net
sales gains were driven by accelerating category growth in most regions of the
world, including advance purchases of batteries in the U.S. in anticipation of
the hurricane season, as well as demand associated with consumer electronics
such as MP3 players and trade-up from zinc to alkaline. Duracell maintained its
leading value share in the U.S., as it increased its advertising and marketing
spending to counter the competitive promotional activity and the deflationary
pricing activity of price-value alkaline brands.

In March of 2005, we committed to a plan to close a Duracell manufacturing
facility located in Lexington, North Carolina. Of the approximately $75 million
in total expected costs to be incurred in conjunction with the closure of this
facility, we recognized $17 million of expense in the second quarter of 2005.
This program is discussed further under Realignment Programs and in the
accompanying Notes to Consolidated Financial Statements.

For the second quarter of 2005, profit from operations of $119 million increased
34%, and profit margin grew by 2.6 percentage points, compared with the same
period in 2004. The increases were due to higher net sales and significant
benefits from manufacturing efficiencies, offset in part by an unfavorable shift
in mix towards larger pack sizes and costs associated with the plant closure.

With the early arrival of hurricanes in the U.S. in 2005 pushing forward the
purchase of batteries, Duracell will face a difficult comparison in the third
quarter against the same period last year, when hurricane related sales peaked.

Oral Care
---------

Oral Care net sales for the second quarter of 2005 of $420 million were 17%
higher than the same period in 2004, with favorable foreign exchange
contributing 3%. Volume/mix was favorable by 14% in the second quarter of 2005.
Net sales gains were driven by the introduction of new products, ongoing
trade-up to premium products such as CrossAction Vitalizer and Advantage Artica
manual toothbrushes and to the ProfessionalCare 8000 and Sonic Complete premium
rechargeable brushes, and the Rembrandt and Zooth acquisitions which added 3%.

For the second quarter of 2005, profit from operations of $87 million increased
28%. The increase was driven by higher net sales from new products and improved
product mix, partially offset by a double-digit percentage increase in
advertising and higher currency-related European-based manufacturing costs.

                                    Page 21

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Braun
-----

In the second quarter of 2005, Braun net sales of $341 million were 16% higher
than the same period in 2004, with favorable foreign exchange contributing 3%.
Net sales growth was driven by solid growth in all major regions due to very
active new product programs, including the roll-out of the Activator premium
shaver, the cruZer(3) youth shaver and Tassimo Coffee on Demand. Braun also
experienced gains in female hair removal led by the ongoing growth in epilators,
particularly in AMEE (Africa, Middle East, and Eastern Europe). During the
quarter, Braun increased its value share of the male electric shaver market in
key North America, Europe, and Asia markets.

Profit from operations in the second quarter of 2005 of $26 million compared
with $24 million in 2004. Profit from operations was up 8% as compared to the
second quarter of 2004 as sales growth was tempered by currency-related
increases in European-based manufacturing costs, a change in product mix to
lower yielding household appliances, and higher marketing support.

Personal Care
-------------

In the second quarter of 2005, net sales increased 9% versus 2004 to $256
million, with favorable foreign exchange contributing 3% of the gain. Volume/mix
was favorable by 6% in the second quarter of 2005. Net sales growth was due to
strong demand for new products, including the recently launched TAG body sprays
and MACH3 Shave Gel. In addition, the ongoing trade-up to premium products, in
particular foam to gel shave preparations, has been aided by an increase in
marketing investment behind our foam-to-gel trade-up initiative in Europe and
AMEE.

Profit from operations increased 25% to $30 million for 2005, compared with $24
million in 2004. Profit improvement was driven by net sales growth associated
with improved mix from new products and trade-up from foams to gels partially
offset by a double-digit percentage increase in advertising investment behind
new product launches and the foam-to-gel trade-up initiative.

Unallocated/Other
-----------------

In the second quarter of 2005,  unallocated  expenses increased over prior year,
due in part to $11 million in merger-related transaction costs.

                                    Page 22

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Six Months Ended June 30, 2005 vs. 2004
---------------------------------------

The following tables summarize key operating metrics for the six months ended
June 30, 2005 versus 2004, for each of our five operating segments. Cost savings
and realignment charges are recorded in the relevant segments.
<TABLE>
<CAPTION>
                                       Blades &                  Oral               Personal    Unallocated/    Total
June Year-to-Date                       Razors      Duracell     Care      Braun      Care         Other       Company
--------------------------------       --------     --------     ----      -----    --------    ------------   -------
(millions, except percentages)
<S>                                    <C>          <C>          <C>       <C>      <C>         <C>            <C>
Net Sales:
     Net sales, 2005                     $2,387      $1,001      $ 833     $647      $ 512           $  -       $5,380
     Net sales, 2004                      2,136         870        673      553        446              -        4,678
     % Incr/(Decr) vs. 2004                  12          15         24       17         15                          15
          Impact of exchange                  3           3          3        3          3                           3
          Impact of volume/mix                8          16         22       14         12                          12
          Impact of pricing                   1          (4)        (1)       -          -                           -

Profit from operations (PFO):
     PFO, 2005                           $  957      $  210      $ 170     $ 31      $  58           $(65)      $1,361
     PFO, 2004                              837         163        123       45         37            (39)       1,166
     % Incr/(Decr) vs. 2004                  14          29         38      (31)        57             67           17
     PFO as % of net sales, 2005           40.1        21.0       20.4      4.8       11.3                        25.3
     PFO as % of net sales, 2004           39.2        18.8       18.4      8.1        8.3                        24.9
</TABLE>

Blades and Razors
-----------------

Net sales of $2.4 billion for the six months ended June 30, 2005 were 12% higher
than for the same period in 2004, including a 3% favorable foreign exchange
impact. Net sales growth was driven by successful new product introductions
including the roll-out of M3Power to the remainder of Europe and in Australia,
the launch of M3Power Nitro and Venus Vibrance in North America and the launch
of Venus Disposables in North America and Europe. Trade-up to premium products,
particularly in Latin America, China, Turkey, India and Korea contributed to
favorable volume/mix of 8% and pricing contributed 1% to sales growth.

Profit from operations of $957 million was up 14% from the six months ended June
30, 2004, as the profit margin increased by 0.9 percentage points to 40.1%.
Profit from operations reflected higher sales from new products, price
increases, and a continued shift to premium products in all regions, partially
offset by an unfavorable razor versus blade mix and ongoing costs associated
with our program to realign European manufacturing and distribution.

                                     Page 23

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Duracell
--------
Net sales of $1.0 billion for the six months ended June 30, 2005 were 15% higher
than the same period in 2004, including a 3% favorable foreign exchange impact.
Net sales gains were driven by accelerating category growth in most regions of
the world.

For the six months ended June 30, 2005, profit from operations of $210 million
increased 29%, and profit margin grew by 2.2 percentage points, compared with
the same period in 2004. The increases were due to higher net sales and
significant benefits from manufacturing efficiencies, offset in part by an
unfavorable shift in mix towards larger pack sizes and costs associated with the
Lexington plant closure.

Oral Care
---------

Oral Care net sales for the six months ended June 30, 2005 of $833 million were
24% higher than the same period in 2004, with favorable foreign exchange
contributing 3%. Volume/mix was favorable by 22% for the six months ended June
30, 2005 and pricing was relatively flat. Net sales gains were driven by the
introduction of new products, ongoing trade-up to premium products such as
CrossAction Vitalizer and Advantage Artica manual toothbrushes and to the
ProfessionalCare 8000 and Sonic Complete premium rechargeable brushes, and the
Rembrandt and Zooth acquisitions which added 5% to net sales.

For the six months ended June 30, 2005, profit from operations of $170 million
increased 38%. The increase was driven by higher net sales from new products and
improved product mix, partially offset by a double-digit percentage increase in
advertising and higher currency-related European-based manufacturing costs.

Braun
-----

For the six months ended June 30, 2005, Braun net sales of $647 million were 17%
higher than the same period in 2004, with favorable foreign exchange
contributing 3%. Net sales growth was driven by new product introductions,
especially in male hair removal and Household product categories, as well as
gains in female hair removal led by the ongoing growth in epilators.

Profit from operations for the six months ended June 30, 2005 of $31 million
compared with $45 million in 2004. Profit from operations for 2005 was tempered
by higher costs related to manufacturing realignment, currency-related increases
in European-based manufacturing costs, unfavorable product mix, and higher
marketing support.

                                     Page 24

<PAGE>

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Personal Care
-------------

For the six months ended June 30, 2005, net sales increased 15% versus 2004 to
$512 million, with favorable foreign exchange contributing 3% of the gain.
Volume/mix was favorable by 12% for the six months ended June 30, 2005. Net
sales growth was due to strong demand for new products, including the launch of
TAG body sprays and MACH3 Shave Gel in the first quarter, ongoing trade-up to
premium products, including foam to gel, and expansion in developing markets,
including Russia, Turkey and Poland.

Profit from operations increased 57% to $58 million for the six months ended
June 30, 2005, compared with $37 million for the same period in 2004. Profit
improvement came from net sales growth associated with new products and improved
product mix due to the trade-up from foams to gels, partially offset by a
double-digit percentage increase in advertising investment behind new product
launches and the foam-to-gel trade-up initiative.

Unallocated/Other
-----------------

For the first half of 2005, unallocated expenses increased over prior year, due
in part to $22 million in merger-related transaction costs.


                                     Page 25

<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

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

Cash Flow
---------

Cash provided by operations is our primary source of funds to finance
operations, capital expenditures, share repurchases, and dividend payments. We
use our free cash flow, defined as net cash provided by operating activities net
of additions to and disposals of property, plant and equipment, to measure our
liquidity, as well as our ability to fund future growth and to provide a return
to shareholders. Free cash flow is not a measure of the residual cash flow that
is available for discretionary expenditures, since we have certain
non-discretionary obligations, such as debt service, that are not deducted from
the measure. A reconciliation of free cash flow to the change in cash and cash
equivalents in accordance with Generally Accepted Accounting Principles (GAAP)
follows.

<TABLE>
<CAPTION>
                                                                 2005                       2004
                                                           -----------------         ------------------
                                                           Free         GAAP         Free          GAAP
                                                           Cash         Cash         Cash          Cash
      Six Months Ended June 30,                            Flow         Flow         Flow          Flow
---------------------------------------                    ----         ----         ----          ----
            (millions)
<S>                                                        <C>          <C>          <C>           <C>
Net Income                                                              $946                       $802
Depreciation and amortization                                            315                        299
Pension expenses                                                          84                         72
Deferred income taxes and other                                           41                         46
(Increase) Decrease in trade  receivable                                (144)                        26
Increase in inventories                                                 (273)                      (330)
Net change in other assets and liabilities                              (322)                         6
                                                           ----         ----         ----          ----
Net cash provided by operating activities*                 $647         $647         $921          $921
  Additions to property, plant and equipment               (309)                     (228)
  Disposals of property, plant and equipment                 37                        30
                                                           ----                      ----
Free cash flow                                             $375                      $723
                                                           ----                      ----
Net cash provided by (used in) investing activities*                     250                       (310)
Net cash used in financing activities*                                  (644)                      (643)
Effect of foreign exchange rate changes on cash                           (1)                        (3)
                                                                        ----                       ----
Increase (Decrease) in cash and cash equivalents                        $252                       $(35)
                                                                        ----                       ----
</TABLE>

* See Consolidated Statement of Cash Flows on page 5.

Free cash flow for the six months ended June 30, 2005, was $375 million driven
by the strong net income partially offset by increases in working capital versus
year-end 2004 where we achieved a record low level.

Free Cash Flow, net cash provided by investing activities and proceeds from the
exercise of stock options were used to pay dividends of $323 million and to
reduce loans and long-term debt payable by $611 million. Net cash used in
investing activities for the first six months of 2005 was primarily the result
of a net decrease in short term investments of $521 million, offset by capital
spending of $309 million in support of new product programs and the realignment
of our European blade and razor manufacturing and distribution. Net cash used in
financing activities for the first six months of 2005 resulted from repayments
of loans and long-term debt as well as dividend payments of $323 million,
partially offset by an increase in proceeds received from the exercise of stock
options. There were no shares repurchased in the first six months of 2005 due to
restrictions associated with the pending merger with P&G.


<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Debt
----

Total debt decreased by $628 million during the six months ended June 30, 2005,
from $3.4 billion at December 31, 2004, to $2.8 billion at June 30, 2005. This
decrease was principally due to the reduction of loans payable and long-term
debt of approximately $260 million and $368 million respectively.

Our investment grade long-term credit ratings of AA- from Standard & Poor's and
Aa3 from Moody's and commercial paper ratings of A1+ from Standard & Poor's and
P1 from Moody's provide a high degree of flexibility in obtaining funds. We have
the ability to issue up to $1.6 billion in commercial paper in the U.S. and Euro
markets. Our commercial paper program is supported by our revolving credit
facility and other sources of liquidity, primarily our cash flow from
operations. At June 30, 2005, there was $184 million outstanding under our
commercial paper program, compared with $443 million at December 31, 2004. On
October 12, 2004, we entered into a 364-day revolving bank credit facility in
the amount of $930 million, expiring October 2005. Liquidity is enhanced through
a provision in the 364-day facility that gives us the option to enter into a
one-year term loan in an amount up to $930 million. On October 14, 2003, we
entered into a revolving bank credit facility under which up to $288 million is
available for five years, expiring October 2008. We believe we have sufficient
alternative sources of funding available to replace our commercial paper
program, if necessary.

During 2002, two shelf registration statements were filed allowing us to issue
up to $2.8 billion in debt securities in the U.S. We currently anticipate that
the proceeds from the sale of any debt securities issued under these shelf
registrations will be used to repay commercial paper borrowings and replace
other maturing debt, although the proceeds may also be used for other corporate
purposes, including repurchase of our common stock. At June 30, 2005, $1.9
billion, at face value, was issued under these shelf registrations, and a total
of $918 million was available for future debt issuance. All proceeds from these
issuances were used to reduce commercial paper borrowings.

With our strong brands, leading market shares, strong financial condition and
substantial cash-generating capability, we expect to continue to have funds
available for growth through both internally generated cash flow and significant
credit resources. We have substantial unused lines of credit and access to
worldwide financial markets which enable us to raise funds at favorable interest
rates.

Although our credit rating agencies have confirmed that our long-term financing
ratings are no longer under the review that was described in more detail in our
Annual Report on Form 10-K for the year ended December 31, 2004, our credit
ratings and borrowing rates may still be impacted by the proposed merger with
P&G.

                                    Page 26

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Market Risk
-----------

We are subject to market risks, such as changes in currency and interest rates,
which arise from normal business operations. We regularly assess these risks and
have established business strategies designed to provide natural offsets,
supplemented by the use of derivative financial instruments, designed to protect
against the adverse effects of these and other market risks. We use
foreign-denominated debt and forward contracts to hedge the impact of foreign
currency changes on our net foreign investments, normally in currencies with low
interest rates. Most of our transactional foreign exchange exposure is managed
through centralized cash management. We hedge net residual transactional foreign
exchange exposures primarily through forward contracts.

We manage our mix of fixed and floating rate debt by entering into interest rate
swaps and forward rate agreements. We use primarily floating rate debt,
principally achieved through interest rate swaps, in order to balance interest
costs to the impact of inflation on earnings.

More detailed information about the strategies, policies, and use of derivative
financial instruments is provided in our 2004 Form 10-K under the Financial
Instruments and Risk Management Activities note in Notes to Consolidated
Financial Statements. We have established policies, procedures, and internal
controls governing the use of derivative financial instruments and do not use
them for trading, investment, or other speculative purposes. In addition, our
use of derivative instruments is reviewed by the Finance Committee of the Board
of Directors annually. Financial instrument positions are monitored using a
value-at-risk model. Value at risk is estimated for each instrument based on
historical volatility of market rates and a 95% confidence level.

Based on our overall evaluation of our market risk exposures from all of our
financial instruments at June 30, 2005, a near-term change in market rates would
not materially affect our consolidated financial position, results of our
operations, or cash flows.

REALIGNMENT PROGRAMS
--------------------

Functional Excellence
---------------------

In the second quarter of 2002, the Company began actions associated with its
Functional Excellence initiative, which is described in Notes to Consolidated
Financial Statements. During the three and six month periods ended June 30, 2005
and 2004, the Company recorded the following expenses related to this
initiative:

<TABLE>
<CAPTION>
                                                 Three Months Ended         Six Months Ended
                                                       June 30                  June 30
                                                 -------------------       ------------------
(millions)                                        2005          2004       2005          2004
----------                                        ----          ----       ----          ----
<S>                                               <C>           <C>        <C>           <C>
Functional Excellence expense recorded in:
Cost of goods sold                                $ 4           $ 4        $17           $ 4
Selling, general and administrative expense         1             8         (5)           15
                                                  ---           ---        ---           ---
Total functional excellence expense               $ 5           $12        $12           $19
                                                  ===           ===        ===           ===
</TABLE>

                                     Page 27

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

2003 Manufacturing Realignment Program
--------------------------------------

During 2003, the Company announced a blade and razor manufacturing, packaging
and warehouse operations realignment program throughout Europe and Russia. The
program will significantly reduce costs, improve operating efficiency, and
streamline operations. The program began in December 2003 and will be completed
during 2007. This program is further described in Notes to Consolidated
Financial Statements.

During the three and six months ended June 30, 2005, the Company recorded
charges of $7 million and $15 million, respectively, to cost of goods sold for
this program, related mainly to accelerated depreciation of certain assets,
severance accruals and costs related to the relocation of equipment between
impacted locations.

Other Realignment Expenses
--------------------------

On March 31, 2005, we committed to a plan to close a Duracell manufacturing
facility located in Lexington, North Carolina. As part of its ongoing business
practice, the Company continuously evaluates its operations in accordance with
business needs. The Lexington plant is primarily dedicated to the production of
high-power lithium batteries. Over the past several years, the demand for these
batteries has decreased significantly, as film camera sales have declined and
digital cameras, utilizing rechargeable batteries, have gained acceptance. We
plan to move some Lexington manufacturing operations to other Duracell
facilities and will also source some of the products manufactured in Lexington
from third-party providers. The closure of this facility will occur over the
next several quarters with a 2006 target completion date.

In conjunction with the plan to close this facility, we expect to incur
approximately $29 million in cash expenses, consisting of severance and other
employee-related costs of approximately $20 million and equipment relocation and
other facility transition costs of approximately $9 million. We will also incur
non-cash asset impairment related costs of approximately $46 million through
accelerated depreciation. For the three and six months ended June 30, 2005,
expense was approximately $17 million and $37 milllion on a pre-tax basis. We
expect to incur further expenses throughout the rest of this year of
approximately $19 million on a pre-tax basis.

PROPOSED MERGER
---------------

On January 27, 2005, we entered into an Agreement and Plan of Merger with The
Procter & Gamble Company ("P&G"), an Ohio corporation, and Aquarium Acquisition
Corp., a wholly-owned subsidiary of P&G. Upon consummation of the proposed
merger, each share of our common stock will be converted into the right to
receive 0.975 of a share of P&G common stock. The consummation of the proposed
merger is subject to customary conditions, such as regulatory approvals and
approval by our shareholders. Our shareholders approved the merger at a special
meeting that was held on July 12, 2005. We also received approval of the merger
from the European Commission on July 15, 2005. Until the proposed merger closes,
we are generally obligated to carry on our business in the ordinary course.

For a more complete description of the proposed merger and the Agreement and
Plan of Merger, refer to the registration statement on Form S-4, as amended and
filed by P&G on May 25, 2005 with the Securities and Exchange Commission, and
our Annual Report on Form 10-K for the year ended December 31, 2004.

                                     Page 28

<PAGE>

                       DISCLOSURE CONTROLS AND PROCEDURES

Item 4. Controls and Procedures

Our management, under the supervision and with the participation of our Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), has evaluated the
effectiveness of our disclosure controls and procedures as defined in Securities
and Exchange Commission ("SEC") Rule 13a-15(e) as of the end of the period
covered by this report. Based upon that evaluation, management has concluded
that our disclosure controls and procedures are effective to ensure that
information we are required to disclose in reports that we file or submit under
the Securities Exchange Act is accumulated and communicated to management,
including the CEO and CFO, as appropriate to allow timely decisions regarding
required disclosure and is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms.

During the Company's second quarter, there were no significant changes in
internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.

All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.


                                     Page 29

<PAGE>

                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are subject, from time to time, to legal proceedings and claims arising out
of our business, which cover a wide range of matters, including antitrust and
trade regulation, advertising, product liability, contracts, environmental
issues, patent and trademark matters and taxes. Management, after review and
consultation with legal counsel, considers that any liability from all of these
legal proceedings and claims would not materially affect our consolidated
financial position, results of operations or liquidity.

We have been subject to litigation in connection with the proposed merger with
The Procter & Gamble Company ("P&G"). On February 10, 2005, a putative class
action was filed in Delaware state court on behalf of our shareholders, alleging
breaches of fiduciary duties by our board of directors and senior management in
connection with the proposed merger. The complaint alleges, among other things,
that the proposed merger is "unduly favorable" to P&G and that, if consummated,
our senior managers will receive excessive compensation. The plaintiff seeks
injunctive relief barring consummation of the proposed merger or, in the
alternative, rescission following consummation. The plaintiff also seeks
compensatory damages. A second action was filed on February 11, 2005, and a
third action was filed on February 28, 2005, both in Delaware state court. These
actions are virtually identical to the action filed on February 10, 2005. A
motion to consolidate the three actions was granted, lead counsel was appointed,
and a consolidated amended complaint was filed on May 9, 2005. We filed an
answer to the consolidated amended complaint on June 23, 2005. It is possible
that other similar actions will be filed. We and the other named defendants
believe the allegations are without merit and intend to vigorously defend the
actions.

Since the announcement of the merger agreement, we have received various
inquiries from the Securities Division of the Secretary of The Commonwealth of
Massachusetts (the "Secretary"). Resolving a dispute over the proper scope of
subpoenas issued by the Secretary to us and our financial advisors, the
Massachusetts Superior Court (the "Court") concluded on April 28, 2005 that the
Secretary lacks jurisdiction over the proposed merger generally and limited the
scope of the Secretary's investigation to the fairness opinions provided to us
by our financial advisors in connection with the proposed merger. The Court
reiterated its conclusion in a subsequent order dated May 19, 2005. Consistent
with the Court's orders, we have produced responsive documents, and certain
Gillette officers and directors have provided testimony to the Secretary.

                                     Page 30

<PAGE>

                           PART II. OTHER INFORMATION

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

The following represents information required under Item 703 of Regulation S-K
for any purchases made in the quarter covered by this report.

<TABLE>
<CAPTION>
                                                           Total Number
                                                             of Shares          Maximum Number
                                                         Purchased as Part        of Shares
                         Total Number       Average        of Publicly         that May Yet Be
                           of Shares       Price Paid    Announced Plans     Purchased Under the
Period                     Purchased (1)   per Share      or Programs (2)      Plans or Programs
------                   ---------------   ----------    -----------------      ----------------
<S>                      <C>               <C>           <C>                  <C>
04/01/05 - 04/30/05          1,599           $51.15              -                 26,200,000
05/01/05 - 05/31/05          1,871           $53.42              -                 26,200,000
06/01/05 - 06/30/05              -                -              -                 26,200,000
  Total Second Quarter       3,470           $52.37              -                 26,200,000
</TABLE>

(1) Shares were repurchased by the Company under equity-based programs.

(2) The Company's active share repurchase program was announced on 9/16/03 and
authorizes the purchase of up to 50 million shares of the Company's common
stock. There is no expiration date specified for this program. There were no
share repurchases made under the program in the first half of 2005.


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

At its Annual Meeting on May 12, 2005, the shareholders of The Gillette Company
took the following actions:

1.    Elected the following four directors for terms to expire at the 2008
      Annual Meeting of Shareholders, with votes as indicated opposite each
      director's name:


                          In Favor       Withheld
                         -----------    -----------
Michael B. Gifford       831,266,967     41,640,753
Ray J. Groves            823,523,427     49,384,293
Fred H. Langhammer       734,535,032    138,372,688
Marjorie M. Yang         728,242,082    144,665,638

      The directors whose term of office as a director continued after the
      meeting are Roger K. Deromedi, Dennis F. Hightower, Herbert H. Jacobi,
      Nancy J. Karch, Edward F. DeGraan, Wilbur H. Gantz, and James M. Kilts.

2.    Approved the ratification of the appointment of KPMG LLP as independent
      registered public accounting firm for the year 2005. The vote was
      843,678,465 for the proposal, 22,876,520 against, with 6,352,735
      abstentions.

At a Special Meeting on July 12, 2005, the shareholders of The Gillette Company
took the following actions:

1.    Approved a proposal to adopt the Agreement and Plan of Merger, dated as of
      January 27, 2005, among Procter & Gamble, Aquarium Acquisition Corp., a
      wholly owned subsidiary of Procter & Gamble, and Gillette and approved the
      merger contemplated by the Merger Agreement. The vote was 726,059,411 for
      the proposal, 22,510,736 against, and 6,454,772 abstentions.

2.    Approved the proposal to adjourn the special meeting to a later date or
      dates, if necessary, to permit further solicitation of proxies if there
      are not sufficient votes at the time of the special meeting to adopt the
      merger agreement and approve the merger. The vote was 547,607,927 for the
      proposal, 140,981,130 against, with 66,281,934 abstentions and 153,928
      broker non-votes.


Cautionary Statement
--------------------

Certain statements that we may make from time to time, including statements
contained in this report, constitute "forward-looking statements" under the
federal securities laws. Forward-looking statements may be identified by words
such as "plans," "expects," "believes," "anticipates," "estimates," "projects,"
"will" and other words of similar meaning used in conjunction with, among other
things, discussions of future operations, acquisitions and divestitures,
financial performance, our strategy for growth, product development and new
product launches, market position, and expenditures.

Forward-looking statements are based on current expectations of future events,
but actual results could vary materially from our expectations and projections.
Investors are cautioned not to place undue reliance on any forward-looking
statements. We assume no obligation to update any forward-looking statements. We
caution that historical results should not be relied upon as indications of
future performance.

                                     Page 31

<PAGE>

                           PART II. OTHER INFORMATION

Other factors that could cause actual results to differ materially from those
expressed in any forward-looking statement include the following, some of which
are described in greater detail below:

-     merger, acquisition, divestitures and collaborative activities by us, our
      competitors, or customers;

-     failure to complete the proposed merger with The Procter & Gamble Company;

-     the pattern of our sales, including variations in sales volume within
      periods;

-     consumer demands and preferences, including the acceptance by our
      customers and consumers of new products and line extensions;

-     the mix of products sold;

-     our ability to control and reduce our internal costs and the cost of raw
      materials;

-     competitive factors, including prices, promotional incentives, and trade
      terms for our products, and our response, as well as those of our
      customers and competitors, to changes in these factors;

-     product introductions and innovations by us and our competitors;

-     technological advances by us and our competitors;

-     new patents granted to us and our competitors;

-     changes in foreign exchange rates in one or more of our geographic
      markets;

-     changes in laws and regulations, including trade regulations, accounting
      standards and tax laws, governmental actions affecting the manufacturing
      and sale of our products, unstable governments and legal systems, and
      nationalization of industries;

-     changes in accounting policies;

-     failure to maintain effective internal controls; and

-     the impact of general political and economic conditions or hostilities in
      the United States and in other parts of the world.

Competitive Environment
-----------------------

We experience intense competition for sales of our products in most markets. Our
products compete with widely advertised, well-known, branded products, as well
as private label products, which typically are sold at lower prices. In most of
our markets, we have major competitors, some of which are larger and more
diversified than we are. In March 2003, Energizer Holdings, Inc. acquired the
Schick blade and razor business, and in certain countries, the Wilkinson Sword
blade and razor business. We have experienced increased competition in our
Blades and Razors segment as a result of this change in business ownership.
Aggressive competition within our markets to preserve, gain, or regain market
share can affect our results in any given period.

                                     Page 32

<PAGE>

                           PART II. OTHER INFORMATION

Failure to Complete the Proposed Merger
---------------------------------------

On January 27, 2005, we entered into an Agreement and Plan of Merger with The
Procter & Gamble Company ("P&G"). The proposed merger with P&G will, if
completed, affect the revenues, earnings, performance, strategies, prospects,
and other aspects of our business. There is no assurance, however, that the
proposed merger will be consummated. If the proposed merger with P&G is not
completed, (i) the value of our common stock may decline and (ii) our ability to
accelerate growth opportunities and innovate on significantly broader platforms
and other prospects and aspects of our business may be adversely affected.

Changes in Technology and New Product Introductions
---------------------------------------------------

In most product categories in which we compete, there are continuous
technological changes and frequent introductions of new products and line
extensions. Our ability to introduce new products and/or extend lines of
established products successfully will depend on, among other things, our
ability to identify changing consumer tastes and needs, develop new
technologies, differentiate our products, and gain market acceptance of new
products. We cannot be certain that we will achieve these goals.

Intellectual Property
---------------------

We rely upon patent, copyright, trademark, and trade secret laws in the United
States and in other countries to establish and maintain our proprietary rights
in technology, products, and our brands. Our intellectual property rights,
however, could be challenged, invalidated, or circumvented. We do not believe
that our products infringe the intellectual property rights of others, but any
such claims, if they were successful, could result in material liabilities or
loss of business.

Cost-Savings Strategy
---------------------

We have implemented and approved a number of programs designed to reduce costs.
Such programs will require, among other things, the consolidation and
integration of facilities, functions, systems, and procedures, all of which
present significant management challenges. There can be no assurance that such
actions will be accomplished as rapidly as anticipated or that the full extent
of expected cost reductions will be achieved.

Sales and Operations Outside of the United States
-------------------------------------------------

Sales outside of the United States represent a substantial portion of our
business. In addition, we have a number of manufacturing facilities and
suppliers located outside of the United States. Accordingly, the following
factors could adversely affect operating results in any reporting period:

-     changes in political or economic conditions;

-     trade protection measures;

-     import or export licensing requirements;

-     changes in the mix of earnings taxed at varying rates;

-     changes in regulatory requirements or tax laws; and

-     longer payment cycles in certain countries.

We are also exposed to foreign currency exchange rate risk with respect to our
sales, profits, and assets and liabilities denominated in currencies other than
the U.S. dollar. Although we use instruments to hedge certain foreign currency
risks (through foreign currency forward, swap, and option contracts and non-U.S.
dollar denominated financings) and we are partially hedged through our foreign
manufacturing operations, we are not fully protected against foreign currency
fluctuations, and our reported earnings will be affected by changes in foreign
exchange rates.

                                     Page 33

<PAGE>

                           PART II. OTHER INFORMATION

Retail Environment
------------------

With the growing trend toward retail trade consolidation, especially in
developed markets such as the United States and Europe, we are increasingly
dependent upon key retailers whose bargaining strength is growing. Accordingly,
we face greater pressure from significant retail trade customers to provide more
favorable trade terms.

We can be negatively affected by changes in the policies of our retail trade
customers, such as trade inventory levels, access to shelf space, and other
conditions. Many of our customers, particularly our high-volume retail trade
customers, have engaged in accelerated efforts to reduce inventory levels and
shrinkage and to change inventory delivery systems. While we expect the level of
trade inventory of our products to decline over time, the speed and magnitude of
such reductions and/or our inability to develop satisfactory inventory delivery
systems could adversely affect operating results in any reporting period.

Effect of Terrorism, Military Action and War
--------------------------------------------

Terrorism, military hostilities and attendant political activity have created an
atmosphere of economic uncertainty throughout the world. A disruption in our
supply chain, an increase in import or export costs, and/or other macroeconomic
events, could adversely affect operating results in any reporting period.

                                     Page 34

<PAGE>

                           PART II. OTHER INFORMATION

Item 6 Exhibits.

The following exhibits are included herewith:

12    Statement Regarding Computation of Ratio of Earnings to Fixed Charges.

31.1  Certification of Chief Executive Officer Pursuant to Rule 13a-14(a).

31.2  Certification of Chief Financial Officer Pursuant to Rule 13a-14(a).

32.1  Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section
      1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

32.2  Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
      1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

                                     Page 35

<PAGE>

                                    SIGNATURE

SIGNATURES

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

THE GILLETTE COMPANY
(Registrant)

/s/ Joseph J. Schena
--------------------------------
Joseph J. Schena
Vice President, Controller
and Principal Accounting Officer

August 4, 2005

                                    Page 36

<PAGE>

EXHIBIT INDEX

Exhibit Number and Description

Exhibit 12    Statement Regarding Computation of Ratio of Earnings to
              Fixed Charges.

Exhibit 31.1  Certification of Chief Executive Officer Pursuant to
              Rule 13a-14(a).

Exhibit 31.2  Certification of Chief Financial Officer Pursuant to
              Rule 13a-14(a).

Exhibit 32.1  Certification of Chief Executive Officer Pursuant to 18 U.S.C.
              Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act
              of 2002.

Exhibit 32.2  Certification of Chief Financial Officer Pursuant to 18 U.S.C.
              Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act
              of 2002.

                                    Page 37