Danone Finance RDA4-5.1.1 RDA4-5.1.2 (Incorporated in the Republic of France)

Groupe Danone RDA4-5.1.4 SNA5-4.1 (Incorporated in the Republic of France) SNA12-4.1.1

i5,000,000,000 Euro Medium Term Note Programme

Under this k5,000,000,000 Euro Medium Term Note Programme (the ‘‘Programme’’), described in this offering circular (the ‘‘Offering Circular’’), Danone Finance and Groupe Danone (each an ‘‘Issuer’’ and, together, the ‘‘Issuers’’) may from time to time issue notes (the ‘‘Notes’’) denominated in any currency agreed between the relevant Issuer and the relevant Dealer(s) (as defined below) subject to compliance with all applicable legal and/or regulatory and/or central bank requirements. Payment of principal and interest in respect of Notes issued by Danone Finance will be unconditionally and irrevocably guaranteed by Groupe Danone (in such capacity, the RDA6-1 ‘‘Guarantor’’). Notes may be issued on a continuing basis to one or more of the Dealers specified in ‘‘General Description of the Programme’’ herein and any additional Dealers appointed under the Programme from time to time, which appointment may be for a specific issue or on an ongoing basis (each a ‘‘Dealer’’ and together, the ‘‘Dealers’’). This Offering Circular supersedes the Offering Circular dated 19th October, 2005 issued in respect of the Programme.

Application has been made to the Luxembourg Stock Exchange for Notes issued under the Programme described in SNA5-6.1 the Offering Circular to be listed and traded on the market of the Luxembourg Stock Exchange appearing on the list SNA12-6.1 of regulated markets issued by the European Commission during the twelve months from the date hereof. Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and any other terms and conditions not contained herein which are applicable to each issue of Notes will be set forth in the ﬁnal terms (the ‘‘Final Terms’’). The Final Terms will, with respect to Notes to be listed and traded on the Luxembourg Stock Exchange, be delivered to the Luxembourg Stock Exchange. However, the Notes may also be issued under the Programme which are listed and traded on another stock exchange or which will not be listed or traded on any stock exchange. References in this Offering Circular to the Luxembourg Stock Exchange (the ‘‘Luxembourg Stock Exchange’’) (and all related references) shall include the Regulated Market. This Offering Circular may be used to list Notes on ‘‘Bourse de Luxembourg’’ (the ‘‘Regulated Market’’) as may be agreed between the Issuer and the relevant Dealer, or may be unlisted, in each case as speciﬁed in the relevant Final Terms. Application has been made to the Commission de Surveillance du Secteur Financer (the ‘‘CSSF’’) for approval of this Offering Circular. Programme Arranger Citigroup

Dealers Citigroup Credit Suisse First Boston Deutsche Bank Merrill Lynch International Morgan Stanley Offering Circular dated 6th December, 2005 RESPONSIBILITY STATEMENTS

Danone Finance and the Guarantor having taken all reasonable care to ensure that such is the case, SNA5-1.1 RDA4-1.1 con¢rm that the information contained in this O¡ering Circular (including the translation of ¢nancial SNA12-1.1 statements where such ¢nancial statements have been translated from French to English) with respect to SNA5-1.2 RDA4-1.2 Danone Finance and the Notes in the context of the issue and o¡ering of such Notes, is, to the best of their SNA12-1.2 knowledge, in accordance with the facts and contains no omission likely to a¡ect its import. Danone Finance and the Guarantor accept responsibility for the information contained in this O¡ering Circular accordingly.

Groupe Danone having taken all reasonable care to ensure that such is the case, con¢rms that the SNA5-1.1 RDA4-1.1 information contained in this O¡ering Circular (including the translation of ¢nancial statements where such SNA12-1.1 ¢nancial statements have been translated from French to English) with respect to Groupe Danone or the SNA5-1.2 RDA4-1.2 subsidiaries thereof taken as a whole ‘‘the Group’’ and the Notes in the context of the issue and o¡ering of SNA12-1.2 such Notes, is, to the best of its knowledge, in accordance with the facts and contains no omission likely to a¡ect its import. Groupe Danone accepts responsibility for the information contained in this O¡ering Circular accordingly.

2 This O¡ering Circular (together with any Supplements hereto (each a ‘‘Supplement’’ and together the ‘‘Supplements’’) comprises two base prospectuses for the purposes of Article 5.4 of Directive 2003/71/EC (the ‘‘Prospectus Directive’’) and for the purpose of giving information with regard to Danone Finance, Groupe Danone or the subsidiaries thereof taken as a whole and the Notes which, according to the particular nature of each Issuer, the Guarantor and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, ¢nancial position, pro¢t and losses and prospects of the relevant Issuer and in the case of Notes issued by Danone Finance, the Guarantor.

This O¡ering Circular is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see ‘‘Documents Incorporated by Reference’’ below). This O¡ering Circular shall, save as speci¢ed herein, be read and construed on the basis that such documents are so incorporated and form part of this O¡ering Circular.

This O¡ering Circular may only be used for the purposes for which it has been published.

The Dealers have not separately veri¢ed the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by any of the Dealers as to the accuracy or completeness of the information contained in this O¡ering Circular or any other information provided by the Issuers and the Guarantor in connection with the Programme, the Notes or their distribution. The statements made in this paragraph are made without prejudice to the responsibility of the Issuers and the Guarantor under the Programme.

No person is or has been authorised to give any information or to make any representation not contained in or not consistent with this O¡ering Circular or any other information supplied in connection with the Programme and the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuers, the Guarantor or any of the Dealers.

Neither this O¡ering Circular nor any other information supplied in connection with the Programme or any issue of Notes (i) is intended to provide the basis of any credit or other evaluation or (ii) should be considered as a recommendation or constituting an invitation or o¡er by the Issuers, the Guarantor or any of the Dealers that any recipient of this O¡ering Circular or any other information supplied in connection with the Programme or any issue of Notes should subscribe for or purchase any Notes. Each investor contemplating purchasing any Notes must make its own independent investigation of the ¢nancial condition and a¡airs, and its own appraisal of the creditworthiness, of the relevant Issuer and, in the case of Notes issued by Danone Finance, the Guarantor.

The delivery of this O¡ering Circular does not at any time imply that the information contained herein concerning the Issuers and the Guarantor is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date indicated in the document containing the same. The Dealers expressly do not undertake to review the ¢nancial condition or a¡airs of the Issuers and the Guarantor during the life of the Programme. Investors should review, inter alia, the most recent published ¢nancial statements of the relevant Issuer and the Guarantor when deciding whether or not to purchase any Notes. This O¡ering Circular may only be used for the purposes for which it has been published.

The distribution of this O¡ering Circular and any Final Terms and the o¡er or sale of Notes may be SNA5-4.13 restricted by law in certain jurisdictions. The Issuers, the Guarantor and the Dealers do not represent that SNA12-4.1.10 this document may be lawfully distributed, or that any Notes may be lawfully o¡ered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or o¡ering. In particular, no action has been taken by the Issuers, the Guarantor or the Dealers (save for the application to list and trade Notes issued under the Programme on the Luxembourg Stock Exchange) which would permit a public o¡ering of any Notes or distribution of this document in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be o¡ered or sold, directly or indirectly, and neither this O¡ering Circular nor any advertisement or other o¡ering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations and the Dealers have represented that all o¡ers and sales by them will be made on the same terms. Persons into whose possession this O¡ering Circular or any Notes come must inform themselves about, and observe, any such restrictions (see ‘‘Subscription and Sale’’).

The Notes have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission in the United States nor has the Securities and Exchange Commission or any

3 state securities commission passed upon the accuracy or the adequacy of this O¡ering Circular. Any representation to the contrary is a criminal o¡ence in the United States. The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’), or with any securities regulatory authority of any state or other jurisdiction of the United States. The Notes are in bearer form and are subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be o¡ered or sold within the United States or to, or for the account or bene¢t of, U.S. persons (as de¢ned in Regulation S under the Securities Act (‘‘Regulation S’’)). (See ‘‘Subscription and Sale’’). This O¡ering Circular has been prepared by each of the Issuers and the Guarantor for use in connection with the o¡er and sale of Notes in reliance upon Regulation S outside the United States to non- U.S. persons. In connection with the issue of any Tranche of Notes, one of the Dealers will act as stabilising manager (the ‘‘Stabilising Manager’’). The identity of the Stabilising Manager will be disclosed in the relevant Final Terms. The Stabilising Manager may over-allot Notes, provided that, in the case of any Tranche of Notes to be admitted to trading on the Luxembourg Stock Exchange or any other regulated market in the EEA, the aggregate principal amount of Notes allotted does not exceed 105 per cent. of the aggregate nominal amount of the relevant Tranche) or e¡ect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the ¢nal terms of the o¡er of the relevant Tranche of Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. In this O¡ering Circular, unless otherwise speci¢ed or the context otherwise requires, references to ‘‘k’’, ‘‘EURO’’, ‘‘Euro’’ or ‘‘euro’’ are to the single currency of the participating Member States of the European Union, references to ‘‘U.S.$’’, ‘‘$’’ or ‘‘U.S. dollars’’ are to the lawful currency of the United States of America, references to ‘‘Yen’’ or ‘‘JPY’’ are to the lawful currency of Japan and references to ‘‘»’’, ‘‘pounds sterling’’ and ‘‘Sterling’’ are to the lawful currency of the United Kingdom.

4 TABLE OF CONTENTS

Page Responsibility Statements ...... 2 Summary ...... 6 Risk Factors ...... 9 Documents incorporated by reference ...... 15 General Description of the Programme ...... 17 Form of the Notes ...... 22 Terms and Conditions of the Notes ...... 24 Use of Proceeds ...... 38 Guarantee ...... 39 Danone Finance ...... 40 Capitalisation of Danone Finance ...... 42 Danone Finance Selected Financial Data ...... 43 Danone Finance 2005 Half Year Results ...... 50 Groupe Danone ...... 54 Consolidated Capitalisation of Danone ...... 57 Business of the Group ...... 59 Management and Control ...... 77 Selected Consolidated Financial Data ...... 80 Recent Developments ...... 88 Group2005HalfYearResults ...... 90 Taxation ...... 93 Subscription and Sale ...... 94 Final Terms ...... 97 General Information ...... 108

5 SUMMARY

This summary is provided for purposes of the issue of Notes of a denomination less than Euro 50,000. Investors in Notes of a denomination greater than Euro 50,000 should not rely on this summary in any way and the relevant Issuer and the Guarantor accept no liability to such investors. This summary must be read as an introduction to this O¡ering Circular. Any decision to invest in any Notes should be based on a consideration of this O¡ering Circular as a whole, including the documents incorporated by reference, by any investor. The relevant Issuer and the Guarantor may have civil liability in respect of this summary, if it is misleading, inaccurate or inconsistent when read together with the other parts of this O¡ering Circular. Where a claim relating to information contained in this O¡ering Circular is brought before a court in a European Economic Area State (an ‘‘EEA State’’), the plainti¡ may, under the national legislation of the EEA State where the claim is brought, be required to bear the costs of translating this O¡ering Circular before the legal proceedings are initiated. Words and expressions de¢ned in ‘‘Terms and Conditions of the Notes’’ below shall have the same meanings in this summary.

Essential characteristics of Danone Finance and Groupe Danone Danone Finance Danone Finance was incorporated on 19th April, 1962 under French Law as a public limited liability company (socie¤ te¤ anonyme). It is a wholly-owned subsidiary of Groupe Danone (the ‘‘Guarantor’’). The registered o⁄ce of Danone Finance is situated at 17 Boulevard Haussmann, 75009 Paris. It is registered at the Registre du Commerce et des Socie¤ te¤ s in Paris under number B 622 021 848. The primary business activities of Danone Finance are the management of the cash available from, and the borrowing of funds for, the Group. As such, Danone Finance is the legal entity issuing under the Group’s commercial paper programme and operates in the ¢nancial and derivative markets to manage actively the interest rate and exchange rate risks within the Group.

Groupe Danone Groupe Danone (the ‘‘Company’’ or ‘‘Danone’’) is a socie¤ te¤ anonyme (public limited liability company) organised and existing under the laws of the Republic of France. It operates under the law relating to socie¤ te¤ scommerciales(French commercial companies) of 24th July, 1966 and the decree of 23rd March, 1967 of the Republic of France, both as amended. The Company is the holding company which owns directly, or indirectly, controlling and non- controlling interests in the subsidiaries and a⁄liates which together make up the group (the ‘‘Group’’). The objet social (purpose) or activities of the Company are as follows: ç Manufacturing and commercial activities in all types of food and packaging products. ç Execution of all types of ¢nancial operations, portfolio management of all types of securities and rights, listed and unlisted, French or foreign; acquisition and management of all types of property and real estate. ç Acquisition of equity interests in all types of companies. The Company was incorporated on 2nd February, 1899 and registered on 23rd January, 1908. Its statuts were ¢led at the o⁄ce of Mr. Dufour, notary in Paris. The duration of these statuts has since been extended to 13th December, 2040 except in the case of early dissolution or further extension. The Company changed its name to Groupe Danone in July 1994. The registered and head o⁄ce of the Company is: 17 Boulevard Haussmann, 75009 Paris. The Company is registered at the Registre du Commerce et des Socie¤ te¤ s in Paris under number B 552 032 534.

Essential risks associated with Danone Finance and Groupe Danone Each of the Issuers and the Guarantor are subject to certain risks. To make payments on the Notes issued under the Programme, the relevant Issuer will depend on the income it receives from its business operations or in the case of Danone Finance, the business operations of the Group. The income producing capacity may be adversely a¡ected by a large number of factors.

6 These factors include: ç The actual or alleged contamination or deterioration of the Group’s products, or of similar products of other producers; ç Instability in markets where the Group operates; ç Seasonal consumption cycles and weather conditions may result in £uctuations in demand for some of the Group’s products; ç Price increases and shortages of food and packaging raw materials; ç Changes in exchange rates; ç The Group’s dependence on key customers and increased market concentration could negatively a¡ect the Group’s ability to achieve its targeted margins and reduce its competitiveness; ç The Group depends on a limited number of suppliers for certain products and services; ç Changes in governmental regulations; ç The Group’s dominant position in certain markets may lead to accusations of abuse of dominance or anticompetitive practices; ç Failure of the Group’s information systems; ç The Group may not be able to adequately protect its intellectual property rights; ç Labor disputes may cause work stoppages, strikes and disruptions; ç Competition may lead to a reduction of the Group’s margins and a decline in pro¢tability; ç The Group’s sales may be a¡ected by overall economic trends in its principal geographic markets; and ç The Group’s strategy relies signi¢cantly on acquisitions, which involve risks.

Credit ratings may not re£ect all risks The ratings may not re£ect the potential impact of all risks related to structure, market and other factors that may a¡ect the value of the Notes.

Essential characteristics of the Programme and the Notes Under the Programme, the Notes may be issued on a continuing basis to one or more of the Dealers speci¢ed under ‘‘General Description of the Programme’’ below and any additional Dealer appointed under the Programme from time to time, which appointment may be for a speci¢c issue or on an ongoing basis (each a ‘‘Dealer’’ and together the ‘‘Dealers’’). Each Issuer may from time to time issue Notes denominated in any currency or unit of account, subject as set out herein. A general description of the Programme and the terms and conditions of the Notes appears below. The applicable terms of any Notes will be agreed between the relevant Issuer and the relevant Dealer(s) prior to the issue of the Notes and will be set out in the Terms and Conditions of the Notes endorsed on, or incorporated by reference into, the Notes, as modi¢ed and supplemented by the relevant Final Terms attached to, or endorsed on, such Notes, as more fully described below. The relevant Issuer may agree with any Dealer that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein. The Programme provides for Notes to be issued on a syndicated or a privately placed basis. The Notes may bear ¢xed or £oating rate interest, may be issued at a premium or a discount to face value, and may have redemption or coupon amounts which are determined by reference to a formula or index (‘‘Indexed Notes’’). Notes may be denominated or payable in or by reference to any one or more currency or currencies, subject to compliance with applicable legal and regulatory requirements.

For the purpose of calculating the euro equivalent of the aggregate nominal amount of Notes issued SNA5-6.1 and outstanding under the Programme from time to time in connection with the listing and trading of Notes on the Bourse de Luxembourg: (i) the principal amount of Notes denominated in a currency other than euro shall be converted into euro using the spot rate of exchange for the purchase of the relevant currency against payment of euro being quoted by the Agent on the date on which the Relevant Agreement (as de¢ned in the Dealer

7 Agreement) in respect of the relevant Issue was made or such other rate as the relevant Issuer and the Dealer may agree; (ii) any Notes which provide for an amount less than the principal amount thereof to be due and payable upon redemption following an event of default in respect of such Notes shall have a principal amount equal to their nominal amount; (iii) any zero coupon Notes (and any other Notes issued at a discount or premium) shall have a principal amount equal to their nominal amount; (iv) the currency in which any Notes are payable, if di¡erent from the currency of their denomination, shall be disregarded; and (v) ‘‘outstanding’’ shall have the meaning given to that term in the Agency Agreement.

Essential risks associated with the Notes There are certain factors that may a¡ect each Issuer’s ability to ful¢l its obligations under Notes issued under the Programme.

The trading market for debt securities may be volatile and may be adversely impacted by many events. The market for debt securities issued by issuers is in£uenced by economic and market conditions and, to varying degrees, market conditions, interest rates, currency exchange rates and in£ation rates in other European and other industrialised countries.

Any early redemption at the option of the Issuer, if provided for in any Final Terms for a particular issue of Notes, could cause the yield anticipated by Noteholders to be considerably less than anticipated. The Final Terms for a particular issue of Notes may provide for early redemption at the option of the Issuer. Such right of termination is often provided for bonds or notes in periods of high interest rates. If the market interest rates decrease, the risk to Noteholders that the Issuer will exercise its right of termination increases. As a consequence, the yields received upon redemption may be lower than expected, and the redeemed face amount of the Notes may be lower than the purchase price for the Notes paid by the Noteholder. As a consequence, part of the capital invested by the Noteholder may be lost.

Investors will not be able to calculate in advance theirrateofreturnonFloatingRateNotes. Interest income on Floating Rate Notes cannot be anticipated. Due to varying interest income, investors are not able to determine a de¢nite yield of Floating Rate Notes at the time they purchase them, so that their return on investment cannot be compared with that of investments having longer ¢xed interest periods.

Zero Coupon Notes are subject to higher price £uctuations than non-discounted bonds. Due to their leverage e¡ect, Zero Coupon Notes are a type of investment associated with a particularly high price risk. Further, if market interest rates increase, Zero Coupon Notes can su¡er higher price losses than other Notes having the same maturity and credit rating.

8 RISK FACTORS

Each of the Issuers and the Guarantor believe that the following factors may a¡ect their ability to ful¢l SNA5-2.1 RDA4-4 their obligations under Notes issued under the Programme. All of these factors are contingencies which may or SNA12-2.1 may not occur and the Issuers and the Guarantor are not in a position to express a view on the likelihood of any such contingency occurring. The risk factors may relate to Danone Finance, Groupe Danone or the subsidiaries thereof. In addition, factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme are also described below. Each of the Issuers and the Guarantor believe that the factors described below represent the principal risks inherent in investing in Notes issued under the Programme. Prospective investors should however read the detailed information set out elsewhere in this O¡ering Circular and reach their own views prior to making any investment decision. In particular, investors should make their own assessment as to the risks associated with the Notes prior to investing in Notes issued under the Programme.

Risk Factors relating to each of the Issuers and the Guarantor Danone Finance is a wholly-owned subsidiary of Groupe Danone. As a result the factors that may a¡ect its ability to ful¢l its obligations under the Notes are the same as the risk factors for the Group.

The actual or alleged contamination or deterioration of the Group’s products, or of similar products of other producers, could hurt the Group’s reputation and its operating results and ¢nancial condition The Group’s business could be negatively a¡ected by the actual or alleged contamination or deterioration of certain of its principal products, or of similar products sold by other producers. A substantial portion of the Group’s products, such as fresh dairy products, must be maintained within certain temperatures to retain their £avor and nutritional value and avoid contamination or deterioration. Depending on the speci¢c type of food product, a risk of contamination or deterioration exists at each stage of the production cycle, including the purchase and delivery of food raw materials such as milk, the processing and packaging of food products, the stocking and delivery of ¢nished products to distributors and food retailers, and the storage and shelving of ¢nished products at the points of ¢nal sale. With respect to bottled water, the natural sources of Danone’s supply may be subject to pollution. In the event that certain of Danone’s products are found, or are alleged, to have su¡ered contamination or deterioration, whether or not while such products were under Danone’s control, the Group’s net sales, results of operations and ¢nancial condition could be materially adversely a¡ected. In addition, reports or allegations of inadequate product quality control with respect to certain products of other food manufacturers could negatively impact sales of the Group’s products.

Instability in markets where the Group operates could harm its business The Group’s operations are subject to the risks and uncertainties attendant to doing business in numerous countries which may be exposed to, or may have recently experienced, economic or governmental instability, particularly in China, Latin America, certain regions of Asia and the Middle East. Also, a number of countries in which the Group’s operations are conducted have less developed and less stable legal environments, maintain controls on the repatriation of pro¢ts and invested capital, impose taxes and other payments and put in place restrictions on the activities of multinational companies. Management believes that it has taken and continues to take appropriate measures to minimise the risks arising from the Group’s international operations. However, there can be no assurance that the ¢nancial results of the Group could not be materially a¡ected by a downturn in economic conditions or by any regional crisis or signi¢cant regulatory change.

Seasonal consumption cycles and weather conditions may result in £uctuations in demand for some of the Group’s products and impact results of operations Some of the Group’s product markets are a¡ected by seasonal consumption cycles and weather conditions which can have a negative impact on the Group’s interim and annual results. In particular, bottled water and beverages experience peak demand during the summer months. As a result, the Group’s sales are generally higher during these months. Conversely, relatively cool summer temperatures may result in substantially reduced sales of bottled water and thus may have a material adverse e¡ect on the Group’s results of operations.

9 Price increases and shortages of food and packaging raw materials could adversely a¡ect the Group’s results of operations The Group’s results of operations may be a¡ected by the availability and pricing of raw materials, principally materials needed to produce Danone’s food and beverage products, including mainly milk, wheat, sugar and cocoa, and materials needed for packaging its products, including mainly PET and PVC plastics and light cardboard for cartons. Factors such as changes in the global or regional levels of supply and demand, weather conditions and government controls could substantially impact the price of food and packaging raw materials. A substantial increase in raw material prices (if not passed on to customers through price increases) or a continued interruption in supply could have a material adverse e¡ect on the Group’s ¢nancial condition and results of operations.

The Group’s results of operations and ¢nancial condition could be harmed by changes in exchange rates The Group publishes its Consolidated Financial Statements in euro. In addition, in 2004, approximately 55 per cent. of the Group’s consolidated net sales and approximately 62 per cent. of its operating income were in euro (compared to 55 per cent. and 64 per cent., respectively, in 2003). However, a substantial portion of the Group’s assets, liabilities, sales, costs and earnings are denominated in currencies other than the euro, particularly in the Chinese yuan, U.S. dollar and U.S. dollar-in£uenced currencies, the British pound or the Polish zloty. As a result, the Group is exposed to £uctuations in the values of such currencies against the euro with respect to the translation into euro of amounts to be re£ected in its Consolidated Financial Statements. These currency £uctuations, especially with respect to these principal non-euro currencies, can have a signi¢cant impact on the Group’s results of operations. In particular, the appreciation of the euro relative to other currencies decreases the euro value of the contribution to the Group’s consolidated results and ¢nancial condition of subsidiaries which maintain their accounts in such other currencies. In addition, to the extent the Group incurs expenses and e¡ects sales in di¡erent currencies in cross-border transactions, £uctuations in exchange rates can also a¡ect the pro¢tability of such transactions. As a result of the Group’s international strategy, the contribution by international activities to net sales, operating results and margins is expected to continue to increase over time.

The Group’s dependence on key customers and increased market concentration could negatively a¡ect the Group’s ability to achieve its targeted margins and reduce its competitiveness While the ¢nal consumers of Danone products are individual retail customers, Danone sells its products principally to major retail and grocery chains. The distribution market has become increasingly concentrated, and in most of the Group’s markets, the Group’s top three customers in such markets have more than 30 per cent. of the market share. In 2004, the Group’s ten largest customers worldwide accounted in the aggregate for approximately 35 per cent. of the Group’s consolidated net sales. Six of those customers are French companies and the Group’s largest client, Carrefour, represented approximately 11 per cent. of the Group’s consolidated net sales in 2004. Any increase in the Group’s dependence on key customers or market concentration generally could negatively a¡ect the margins and competitiveness of the Group.

The Group depends on a limited number of suppliers for certain products and services In connection with its policy of optimising its purchasing procedures, the Group centralises the purchase of certain materials or sub-contracted services, such as the ferments used in the fresh dairy products segment, from a limited number of suppliers. If these suppliers are not able to supply the Group with the quantities of materials the Group needs or if the suppliers are not able to provide services in the required time period, this could have a material adverse e¡ect on the Group’s ¢nancial condition and results of operations.

Changes in governmental regulations could harm the Group’s business As a producer of consumer foods and beverages, the Group’s activities are subject to extensive regulation by national authorities and international organisations, including regulation with respect to hygiene, quality control, beverages or packaging and tax laws. The Group’s activities may also be subject to all kinds of barriers or sanctions imposed by countries in order to limit international trade. The Group’s activities could be adversely a¡ected by signi¢cant changes in such regulations. The activities of the Group are also subject to increasingly restrictive regulation with regard to the release or discharge of substances or waste into the environment, the protection of the environment and the protection of health and human safety. While the Group believes that it has put in place appropriate measures to limit the risks associated with these activities through a policy of environmental management, including, in particular, the establishment of regular inspections at all of its sites, the introduction of higher

10 standards or more stringent regulations could necessitate additional investments and result in substantial costs for the Group.

The Group’s dominant position in certain markets may lead to accusations of abuse of dominance or anticompetitive practices In certain of its markets, the Group is the market leader. As a consequence, the Group may be accused of the abuse of a dominant position or the use of anti-competitive practices. Such allegations could a¡ect the reputation of the Group, result in judicial proceedings and could have a material adverse e¡ect on the Group’s ¢nancial condition and results of operations.

The Group’s results of operations and ¢nancial condition could be harmed by a failure of its information systems The Group is increasingly dependent upon information technology network systems to obtain the numerical data which it uses as a basis for its operating management decisions. Any failure of these applications or communications networks may delay or taint certain decisions and result in ¢nancial losses.

The Group may not be able to adequately protect its intellectual property rights Given the importance of brand recognition to its business, the Group has invested considerable e¡ort in protecting its portfolio of intellectual property rights, including trademark registration, such as, for example, the trademarks Danone, Evian, and LU. The Group also uses security measures to protect its patents, licenses and proprietary formulae. However, the Group cannot be certain that the steps it has taken will be su⁄cient to protect its intellectual property rights adequately or that third parties will not infringe upon or misappropriate its proprietary rights. Moreover, some of the countries in which the Group operates o¡er less protection for intellectual property rights than Europe or North America. If the Group is unable to protect its proprietary rights against infringement or misappropriation, its future ¢nancial results and its ability to develop its business could be harmed.

Labor disputes may cause work stoppages, strikes and disruptions The Group has in the past implemented, and may in the future continue to implement, restructuring measures, including plant closings and headcount reductions, in order to lower production costs, improve e⁄ciency of its facilities, exploit synergies and respond to the demands of a changing market. Restructurings could harm its employee relations and result in labor disputes, including work stoppages, strikes and disruptions, which in turn could have an adverse impact on the Group’s business or ¢nancial results.

Competition may lead to a reduction of the Group’s margins and a decline in pro¢tability The markets for each of Danone’s main business lines are highly competitive markets in which large international groups and numerous local actors are present. In Western Europe, the markets served by Danone tend to be relatively mature and competition for market share is therefore particularly intense. With respect to the Group’s activities outside Western Europe, certain international food and beverage groups also have important positions in certain product lines and in certain emerging markets and seek to expand such positions or enter new markets. In addition, as a result of the development of private labels by major retail and grocery chains, certain of Danone’s customers also o¡er their own competing products, which could pose a commercial con£ict between Danone’s customers as such and as direct competitors. Failure to remain competitive would have a material adverse e¡ect on the Group’s operating results and ¢nancial condition. As a result, the Group must continually strive to strengthen the selling power and premium image of its brand names, di¡erentiate its products and improve the e⁄ciency and management of its operations in order to maintain or increase its pro¢t margins.

The Group’s sales may be a¡ected by overall economic trends in its principal geographic markets As a producer principally of consumer foods and beverages, the Group’s results of operations may be a¡ected by the overall economic trends of its principal geographic markets. In periods of economic slowdown, consumer purchase decisions may be a¡ected by speci¢c consumer behaviors, thus creating negative pressure on the sales volume of many of the Group’s products.

The Group’s strategy relies signi¢cantly on acquisitions, which involve risks The Group’s strategy is to become the leader in each of the markets in which it operates. Within the context of continued concentration in the food and beverage industry, this strategy involves the pursuit of external growth opportunities through acquisitions and alliances. These acquisitions and alliances could

11 have a negative impact on the Group’s business if the Group is unsuccessful in the integration process or fails to achieve the synergies and savings it expects from these acquisitions. Furthermore, the relations with partners of the Group in certain entities are governed by documents or agreements that could allow certain decisions to be made with the agreement of such partners or without the agreement of the Group. Such restrictions could make it di⁄cult for the Group to pursue its objectives through these entities.

Credit ratings may not re£ect all risks One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not re£ect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may a¡ect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time. In addition, a rating downgrade may lead to an increase in the cost of ¢nancing for the relevant Issuer and may therefore lead to di⁄culties for the Issuer to meet its obligations.

Factors that may a¡ect each Issuer’s ability to ful¢l its obligations under Notes issued under the Programme Risk Factors relating to the Notes The trading market for debt securities may be volatile and may be adversely impacted by many events. The market for debt securities issued by issuers is in£uenced by economic and market conditions and, to varying degrees, market conditions, interest rates, currency exchange rates and in£ation rates in other European and other industrialised countries. There can be no assurance that events in France, Europe or elsewhere will not cause market volatility or that such volatility will not adversely a¡ect the price of Notes or that economic and market conditions will not have any other adverse e¡ect.

An active trading market for the Notes may not develop. Although application has been made to the Luxembourg Stock Exchange for Notes issued under the Programme to be listed and traded on the Luxembourg Stock Exchange, there can be no assurance that an active trading market for the Notes will develop, or, if one does develop, that it will be maintained. If an active trading market for the Notes does not develop or is not maintained, the market or trading price and liquidity of the Notes may be adversely a¡ected. The Issuer and any of its subsidiaries are entitled to buy the Notes, as described in Condition 6(c), and the Issuer may issue further notes, as described in Condition 13. Such transactions may favourably or adversely a¡ect the price development of the Notes. If additional and competing products are introduced in the markets, this may adversely a¡ect the value of the Notes.

The Notes may be redeemed prior to maturity. Unless in the case of any particular Tranche of Notes the relevant Final Terms specify otherwise, in the event that the Issuer would be obliged to increase the amounts payable in respect of any Notes due to any withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges or whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the jurisdiction of the Issuer or a political subdivision thereof or any authority therein or thereof having power to tax, the Issuer may redeem all outstanding Notes in accordance with the Conditions.

Investors will not be able to calculate in advance theirrateofreturnonFloatingRateNotes. A key di¡erence between Floating Rate Notes and Fixed Rate Notes is that interest income on Floating Rate Notes cannot be anticipated. Due to varying interest income, investors are not able to determine a de¢nite yield of Floating Rate Notes at the time they purchase them, so that their return on

12 investment cannot be compared with that of investments having longer ¢xed interest periods. If the terms and conditions of the notes provide for frequent interest payment dates, investors are exposed to the reinvestment risk if market interest rates decline. That is, investors may reinvest the interest income paid to them only at the relevant lower interest rates then prevailing.

Zero Coupon Notes are subject to higher price £uctuations than non-discounted bonds. Changes in market interest rates have a substantially stronger impact on the prices of Zero Coupon Notes than on the prices of ordinary Notes because the discounted issue prices are substantially below par. If market interest rates increase, Zero Coupon Notes can su¡er higher price losses than other Notes having the same maturity and credit rating. Due to their leverage e¡ect, Zero Coupon Notes are a type of investment associated with a particularly high price risk.

Investments in Index linked interest notes entail signi¢cant risks and may not be appropriate for investors lacking ¢nancial expertise. An investment in Index Linked Interest Notes entails signi¢cant risks that are not associated with similar investments in a conventional ¢xed or £oating rate debt security. The Issuer believes that Index Linked Interest Notes should only be purchased by investors who are, or who are purchasing under the guidance of, ¢nancial institutions or other professional investors that are in a position to understand the special risks that an investment in these instruments involves. These risks include, among other things, the possibility that: . such index or indices may be subject to signi¢cant changes, whether due to the composition of the index itself, or because of £uctuations in value of the indexed assets; . the resulting interest rate will be less (or may be more) than that payable on a conventional debt security issued by the Issuer through the Issuer at the same time; . the repayment of principal can occur at times other than that expected by the investor; . the holder of an Index Linked Interest Note could lose all or a substantial portion of the principal of such Note (whether payable at maturity or upon redemption or repayment), and, if the principal is lost, interest may cease to be payable on the Index Linked Interest Note; . the risks of investing in an Index Linked Interest Note encompasses both risks relating to the underlying indexed securities or commodities and risks that are unique to the Note itself; . any Index Linked Interest Note that is indexed to more than one type of underlying asset, or on formulae that encompass the risks associated with more than one type of asset, may carry levels of risk that are greater than Notes that are indexed to one type of asset only; . it may not be possible for investors to hedge their exposure to these various risks relating to Index Linked Interest Notes; and . a signi¢cant market disruption could mean that the index on which the Index Linked Interest Notes are based ceases to exist. In addition, the value of Index Linked Interest Notes on the secondary market is subject to greater levels of risk than is the value of other Notes. The secondary market, if any, for Index Linked Interest Notes will be a¡ected by a number of factors, independent of the creditworthiness of the Issuer and the value of the applicable currency, commodity, stock, interest rate or other index, including the volatility of the applicable currency, commodity, stock, interest rate or other index, the time remaining to the maturity of such Notes, the amount outstanding of such Notes and market interest rates. The value of the applicable currency, commodity, stock or interest rate index depends on a number of interrelated factors, including economic, ¢nancial and political events, over which the Issuer has no control. Additionally, if the formula used to determine the amount of principal, premium and/or interest payable with respect to Index Linked Interest Notes contains a multiplier or leverage factor, the e¡ect of any change in the applicable currency, commodity, stock, interest rate or other index will be increased. The historical experience of the relevant currencies, commodities, stocks or interest rate indices should not be taken as an indication of future performance of such currencies, commodities, stock, interest rate or other indices during the term of any Index Linked Interest Note. Additionally, there may be regulatory and other rami¢cations associated with the ownership by certain investors of certain Index Linked Interest Notes. The credit ratings assigned to the Programme are a re£ection of the credit status of the relevant Issuer and, in the case of Danone Finance, the Guarantor, and in no way are a re£ection of the potential impact of

13 any of the factors discussed above, or any other factors, on the market value of any Index Linked Interest Note. Accordingly, prospective investors should consult their own ¢nancial and legal advisors as to the risks entailed by an investment in Index Linked Interest Notes and the suitability of such Notes in light of their particular circumstances. Various transactions by the Issuer could impact the performance of any Index Linked Interest Notes, which could lead to con£icts of interest between the Issuer and holders of its Index Linked Interest Notes.

Exchange rate risks and exchange controls. The Issuer will pay principal and interest on the Notes in the Speci¢ed Currency. This presents certain risks relating to currency conversions if an investor’s ¢nancial activities are denominated principally in a currency or currency unit (the ‘‘Investor’s Currency’’) other than the Speci¢ed Currency. These include the risk that exchange rates may signi¢cantly change (including changes due to devaluation of the Speci¢ed Currency or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the Speci¢ed Currency would decrease (1) the Investor’s Currency-equivalent yield on the Notes, (2) the Investor’s Currency-equivalent value of the principal payable on the Notes and (3) the Investor’s Currency-equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely a¡ect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

14 DOCUMENTS INCORPORATED BY REFERENCE

This O¡ering Circular should be read and construed in conjunction with the following documents RDA4-13.1 RDA4-13.2 which have been previously published or are published simultaneously with the O¡ering Circular and that RDA4-13.3.1 have been ¢led with the CSSF and are incorporated in, and form part of, this O¡ering Circular: RDA4.-13.5.1 RDA4.-3.2 (a) the 2003 and 2004 Document de Re¤ fe¤ rence in the French language, ¢led with the AMF on RDA4-13.5.2 RDA4-13.4.1 12th March, 2004 and 22nd March, 2005 respectively, relating to Groupe Danone containing the audited consolidated annual ¢nancial statements (including the auditors’ report thereon and notes thereto but excluding the Attestation des Responsables du contro“ le des comptes ç Avis 6 ç 801 which is a French requirement for AMF ¢ling only) of Groupe Danone for the ¢nancial years ended 31st December, 2003 and 2004 (the other information contained in the 2003 and 2004 Document de Re¤ fe¤ rence is for information purposes only); (b) the audited annual ¢nancial statements (including the auditors’ report thereon and notes thereto) of Danone Finance for the ¢nancial years ended 31st December, 2003 and 2004; and (c) the 2005 semi-annual unaudited ¢nancial statements of Groupe Danone and the limited review of the auditors thereon. The relevant Issuer will, at the speci¢ed o⁄ces of the Paying Agents set out at the end of this O¡ering Circular, make available, free of charge, a copy of any or all of the documents incorporated herein by reference relevant to it. All documents incorporated by reference in this O¡ering Circular will also be available on the website of the Luxembourg Stock Exchange (www.bourse.lu). In relation to each issue of Notes, this O¡ering Circular shall be completed by the applicable Final Terms. Information Incorporated by Reference Reference Groupe Danone audited consolidated 2003 DocdeRe¤ f page 67 annual ¢nancial statements for the year ended 31st December, 2003 ç Income Statement Balance Sheet relating to the above 2003 DocdeRe¤ f page 68 Cash Flow statement relating to the above 2003 DocdeRe¤ f page 69 Notes relating to the above 2003 DocdeRe¤ f pages 71-101 Accounting principles relating to the above 2003 DocdeRe¤ f pages 71-76 Audit Report relating to the above 2003 DocdeRe¤ f page 102 Groupe Danone audited consolidated 2004 DocdeRe¤ f page 73 annual ¢nancial statements for the ¢nancial year ended 31st December, 2004 ç Income Statement Balance Sheet relating to the above 2004 DocdeRe¤ f page 74 Cash Flow statement relating to the above 2004 DocdeRe¤ f page 75 Notes relating to the above 2004 DocdeRe¤ f pages 77-109 Accounting principles relating to the above 2004 DocdeRe¤ f pages 77-82 Audit Report relating to the above 2004 DocdeRe¤ f page 110 Groupe Danone semi-annual unaudited ¢nancial Press release pages 1-5 statements for the 6 months ended 30th June, 2005 Limited review of the auditors relating to the above Rapport des Commissaires aux comptes sur l’examen limite des comptes consolide¤ s semestriels pour la pe¤ riode du 1er janvier au 30 juin 2005 ç pages 1-30 Danone Finance audited annual ¢nancial statements Comptes Annuels 2003 pages 6-7 for the year ended 31st December, 2003 ç Income Statement Balance Sheet relating to the above Comptes Annuels 2003 pages 4-6 Notes relating to the above Comptes Annuels 2003 pages 7-20

15 Accounting principles relating to the above Comptes Annuels 2003 pages 16-17 Audit Report relating to the above Comptes Annuels 2003 pages 1-2 Danone Finance audited annual ¢nancial statements Comptes Annuels 2004 page 6 for the ¢nancial year ended 31st December, 2004 ç Income Statement Balance Sheet relating to the above Comptes Annuels 2004 pages 4-5 Notes relating to the above Comptes Annuels 2004 pages 7-17 Accounting principles relating to the above Comptes Annuels 2004 pages 7-8 Audit Report relating to the above Comptes Annuels 2004 pages 1-3 Groupe Danone Corporate Governance 2004 DocdeRe¤ f pages 147-160 Groupe Danone Audit Committee 2004 DocdeRe¤ f page 151

16 GENERAL DESCRIPTION OF THE PROGRAMME

The following general description does not purport to be complete and is taken from, and is quali¢ed in its entirety by, the full text of this O¡ering Circular and, in relation to the terms and conditions of any issue of Notes, the relevant Final Terms. Words and expressions de¢ned in ‘‘Form of the Notes’’ and ‘‘Terms and Conditions of the Notes’’ have the same meaning when used herein. Issuers: Danone Finance Groupe Danone

Guarantor: Groupe Danone (in the case of Notes issued by Danone Finance) RDA6-1 Arranger: Citigroup Global Markets Limited Dealers: Citigroup Global Markets Limited Credit Suisse First Boston (Europe) Limited Deutsche Bank AG, London Branch Merrill Lynch International Morgan Stanley & Co. International Limited and any other Dealer appointed from time to time, either generally in relation to the Programme or in relation to a particular series or tranche of Notes. Agent: Citibank, N.A. Paying Agent: Dexia Banque Internationale a' Luxembourg, socie¤ te¤ anonyme. Additional paying agents may be appointed from time to time, either generally in relation to the Programme or in relation to a particular series of Notes. Luxembourg Listing Agent: Kredietbank S.A. Luxembourgeoise Programme Amount: Up to k5,000,000,000 (or its equivalent as at the respective dates of any agreement to issue Notes in any other currency or currencies calculated as described above). The aggregate principal amount of Notes which may be outstanding under the Programme may be increased from time to time, subject to compliance with the relevant provisions of the Dealer Agreement (as de¢ned under ‘‘Subscription and Sale’’).

Currencies: Notes may be denominated in any currency, currencies including, without SNA5-4.4 limitation, United States Dollars (‘‘U.S.$’’ or ‘‘U.S. Dollars’’), Australian SNA12-4.1.5 Dollars (‘‘A$’’), Canadian Dollars (‘‘C$’’), Czech Crown, euro (‘‘k’’ or ‘‘EUR’’), Finnish Markkas, Hong Kong Dollars (‘‘HK$’’), Japanese Yen (‘‘Yen’’ or ‘‘JPY’’), New Zealand Dollars (‘‘NZ$’’), Norwegian Kroner, Pounds Sterling (‘‘»’’), South African Rand, Swedish Kronor and Swiss Francs, subject to compliance with all applicable legal and/or regulatory and/ or central bank requirements and as speci¢ed in the relevant Final Terms. Payments in respect of Notes may, subject to compliance as aforesaid, be made in and/or linked to any currency or currencies other than the currency in which such Notes are denominated. Legal and regulatory Each issue of Notes denominated in a currency in respect of which particular requirements: laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see ‘‘Subscription and Sale’’). The relevant Issuer will ensure that Notes denominated or payable in Yen (‘‘Yen Notes’’) will only be issued in compliance with applicable Japanese laws, regulations, guidelines and policies. Each issue of Notes denominated in Pounds Sterling will be made in accordance with any applicable requirements from time to time of the Bank of England. In particular, the relevant Issuer will, in relation to Notes

17 denominated in Pounds Sterling, comply with all applicable laws, regulations, restrictions and guidelines (as amended from time to time) of United Kingdom authorities and relevant in the context of the issue of such Notes, and shall submit (or procure the submission on its behalf of) such reports or information as may from time to time be required for compliance with such laws, regulations, restrictions and guidelines. The relevant Issuer shall ensure that such Notes shall have the maturities and denominations as required by such laws, regulations, restrictions and guidelines.

Issuance in Series and Notes will be serially numbered and will be issued in series (each a ‘‘Series’’). Tranches: Each Series may comprise one or more tranches (‘‘Tranches’’ and each a ‘‘Tranche’’) issued on di¡erent dates. The Notes of each Series will all be subject to identical terms, whether as to currency, interest, maturity or otherwise, or terms which are identical except that the issue date, the amount of the ¢rst payment of interest and/or the denomination thereof may be di¡erent. The Notes of each Tranche will all be subject to identical terms in all respects, save that a Tranche may comprise Notes of di¡erent denominations.

Form of the Notes: The Notes will be issued in bearer form. SNA5-4.3 SNA12-4.1.4 Unless otherwise speci¢ed in the relevant Final Terms, Notes of each issue will initially be represented by a temporary global Note in bearer form (a ‘‘Temporary Global Note’’), or in relation to an issue in respect of which the TEFRA C Rules (as de¢ned below) apply, a global Note in bearer form (a ‘‘Global Note’’), each of these without interest coupons (‘‘Coupons’’) or talons for further Coupons (‘‘Talons’’), which will be deposited on or before the relevant date with a common depositary on behalf of Clearstream Banking, socie¤ te¤ anonyme (‘‘Clearstream, Luxembourg’’) and Euroclear Bank S.A./N.V., as operator of the Euroclear system (‘‘Euroclear’’), and/or any other relevant clearing system(s) on the relevant issue date. In relation to an issue other than an issue in respect of which the TEFRA C Rules (as de¢ned below) apply, interests in a Temporary Global Note will be exchangeable for interests in a permanent global note in bearer form (a ‘‘Permanent Global Note’’), without Coupons or Talons, or, if so speci¢ed in the relevant Final Terms, for de¢nitive Notes on or after the date 40 days after the later of the relevant issue date and the completion of distribution of all Notes of the relevant Tranche (the ‘‘Exchange Date’’), upon certi¢cation as to non-U.S. bene¢cial ownership. The Permanent Global Note will be exchangeable, in whole (but not in part only) and at the expense of the relevant Issuer for de¢nitive Notes in certain limited circumstances at the request of the holder as speci¢ed in the applicable Final Terms.

Deeds of Covenant: Notes in global form will have the bene¢t of (a) in the case of Notes issued by Danone Finance, an amended and restated deed of covenant (as supplemented, amended or restated from time to time, the ‘‘DF Deed of Covenant’’) dated 19th October, 2005 and executed by Danone Finance and (b) in the case of Notes issued by Groupe Danone, an amended and restated deed of covenant (as supplemented, amended or restated from time to time, the ‘‘GD Deed of Covenant’’) dated 19th October, 2005 and executed by Groupe Danone.

Guarantee: The Guarantor has executed an amended and restated deed of guarantee (as supplemented, amended or restated from time to time, the ‘‘Deed of Guarantee’’) dated 19th October, 2005 pursuant to which it has agreed irrevocably and unconditionally to guarantee the payment obligations of Danone Finance under the Notes and the DF Deed of Covenant.

Issue Price: Notes may be issued at par or at a discount to or premium over par, as speci¢ed in the relevant Final Terms.

18 Distribution: Notes may be distributed by way of private or public placement and, in each case, on a syndicated or non-syndicated basis. Further Notes may be issued as part of an existing Series.

Maturities: Notes may have any maturity, as speci¢ed in the relevant Final Terms, between 1 day and 30 years subject, in relation to speci¢c currencies, to compliance with all applicable legal and/or regulatory and/or central bank requirements. Where Notes have a maturity of less than one year and either (a) the issue proceeds are received by the relevant Issuer in the United Kingdom or (b) the activity of issuing the Notes is carried on from an establishment maintained by the relevant Issuer in the United Kingdom, such Notes must: (i) have a minimum redemption value of »100,000 (or its equivalent in other currencies) and be issued only to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses; or (ii) be issued in other circumstances which do not constitute a contravention of section 19 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’) by such Issuer.

According to Luxembourg law on prospectuses for securities, the CSSF is not competent for approving prospectuses for the listing of money market instruments having a maturity at the issue of less than 12 months and complying also with the de¢nitions of securities.

Interest Rate: Notes may be issued on an interest or non-interest bearing basis. Notes may be issued, inter alia, on a ¢xed rate, £oating rate, zero coupon or indexed basis, all as speci¢ed in the relevant Final Terms.

Redemption: Notes may be redeemable at par or at such other redemption amount (detailed in a formula or otherwise) as may be speci¢ed in the relevant Final Terms.

Early Redemption: Early redemption of any Series will be permitted for taxation reasons as detailed in ‘‘Terms and Conditions of the Notes ç Redemption and Purchase ç Redemption for Tax Reasons’’, but will otherwise be permitted (other than in speci¢ed installments) only to the extent speci¢ed in the relevant Final Terms. Where such redemption is permitted by the relevant Final Terms, the relevant Notes will be redeemable at the option of the relevant Issuer and/or the holder of any Note upon giving not less than 15 nor more than 30 days’ irrevocable notice to the Noteholders or such Issuer, as the case may be, on the date(s) speci¢ed prior to such stated maturity and at a price or prices and on such terms as are indicated in the relevant Final Terms.

The relevant Final Terms may provide that the Notes may be redeemable in two or more installments of such amounts and on such dates indicated in the relevant Final Terms.

Fixed Interest Rate Notes: Fixed interest will be payable on such date(s) as agreed between the relevant Issuer and the relevant Dealer(s) (as indicated in the relevant Final Terms) and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the relevant Issuer and the relevant Dealer.

Floating Rate Notes: Floating Rate Notes will bear interest calculated on the same basis as the £oating amounts under a notional interest rate swap transaction in the relevant speci¢ed currency governed by an agreement in the form of the Interest Rate and Currency Exchange Agreement published by the International Swaps and Derivatives Association, Inc., and evidenced by a con¢rmation incorporating the 2000 ISDA De¢nitions, or on such other basis as may be agreed between the relevant Issuer and the relevant Dealer(s) (as indicated in the applicable Final Terms).

19 The Margin (if any) relating to such variable rate will be agreed between the relevant Issuer and the relevant Dealer(s) for each issue of Floating Rate Notes. Floating Rate Notes may also have a maximum interest rate, a minimum interest rate or both. Interest on Floating Rate Notes in respect of each Interest Period, as selected prior to issue by the relevant Issuer and the relevant Dealer(s), will be payable on the ¢rst day of the next Interest Period and will be calculated on the basis of the actual number of days in the Interest Period concerned divided by 360 unless otherwise indicated in the relevant Final Terms. Dual Currency Notes: Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency Notes will be made in such currency or currencies, and based on such rate or rates of exchange, as the relevant Issuer and the relevant Dealer(s) may agree (as indicated in the relevant Final Terms). Indexed Notes: Indexed Notes may be issued, in accordance with all applicable laws and regulations in force from time to time. Zero Coupon Notes: Zero Coupon Notes will be o¡ered and sold at a discount to their principal amount and will not bear interest other than in the case of the late payment.

Withholding Tax: All payments in respect of the Notes which constitute obligations will be made SNA5-4.14 without withholding or deduction for, or on account of, taxes imposed by or SNA12-4.1.14 on behalf of the Republic of France as provided by Article 131 quater of the Code ge¤ ne¤ ral des impo“ ts, to the extent that the Notes are issued (or deemed to be issued) outside France. Notes constituting obligations under French law will be issued (or deemed to be issued) outside France (i) in the case of syndicated or non-syndicated issues of Notes, if such Notes are denominated in euro, (ii) in the case of syndicated issues of Notes denominated in currencies other than euro, if, inter alia, the Issuer and the relevant Dealers agree not to o¡er the Notes to the public in the Republic of France in connection with their initial distribution and such Notes are o¡ered in the Republic of France only through an international syndicate to quali¢ed investors (investisseurs quali¢e¤ s) as described in Article L.411-2 of the Code mone¤ taire et ¢nancier or (iii) in the case of non-syndicated issues of Notes denominated in currencies other than euro, if each of the subscribers of the Notes on the primary market (marche¤ primaire) is domiciled or resident for tax purposes outside the Republic of France, in each case as more fully set out in the Instruction of the Direction Ge¤ ne¤ rale des Impo“ ts 5I-11-98 dated 30th September, 1998. The tax regime application to Notes which do not constitute obligations will be set out in the relevant Final Terms. Denominations: Notes will be issued in such denominations as may be speci¢ed in the relevant Final Terms, subject to compliance with all applicable legal and/or regulatory and/or central bank requirements applicable to the Speci¢ed Currency as of the issue date of such Notes. The minimum denomination of each Note will be k1,000 (or the equivalent amount in any other currency at the issue date).

Listing: Each Series of Notes may be listed and traded on the Bourse de Luxembourg SNA5-6.1 or any alternative or additional stock exchange(s) as speci¢ed in the relevant Final Terms or may be unlisted.

Status of the Notes: The Notes will constitute direct, unconditional and unsecured obligations of SNA5-4.1 SNA5-4.5 the relevant Issuer which will rank at least equally with all other unsecured SNA12-4.1.1 and unsubordinated obligations of such Issuer. SNA12-4.1.6

20 Status of the Guarantee: The Guarantee will constitute a direct, unconditional and unsecured obligation of the Guarantor which will rank at least equally with all other unsecured and unsubordinated obligations of such Guarantor. Negative Pledge: Neither the relevant Issuer nor, in the case of Notes issued by Danone Finance, the Guarantor will create any pledge, mortgage, charge or other security interest on any real estate properties or on any of its assets to secure any other bonds or negotiable securities issued by such Issuer, Guarantor or any of their Subsidiaries without, at the same time, according the same security to Notes of the same rank. As used in this provision, ‘‘Securities’’ means any loan or other indebtedness in the form of, or represented or evidenced by, bonds, debentures or other securities and ‘‘Subsidiary’’ means, in respect of the relevant Issuer or, as the case may be, the Guarantor at any particular time, any entity: (a) whose a¡airs and policies such Issuer or, as the case may be, the Guarantor controls or has the power to control, whether by ownership of share capital, contract, the power to appoint or remove members of the governing body of such entity or otherwise; or (b) whose ¢nancial statements are, in accordance with applicable law and (to the extent not inconsistent with applicable law) generally accepted accounting principles or standards, fully consolidated with those of such Issuer or, as the case may be, the Guarantor. Clearing Systems: Clearstream, Luxembourg and Euroclear and/or such other recognised clearing system as agreed and speci¢ed in the relevant Final Terms. Cross Default: The Notes will have the bene¢t of a cross default in respect of certain indebtedness as more particularly set out in Condition 9.

Governing Law: The Notes and the Guarantee will be governed by, and shall be construed in SNA12-4.1.3 accordance with, English law. SNA5-4.2 Substitution of Issuer: Substitution of the Issuer (where the Issuer is not Groupe Danone) is permitted in certain circumstances and upon satisfaction of certain conditions, as set out in Condition 17.

Selling Restrictions: For a description of certain restrictions on o¡ers, sales, deliveries of Notes and SNA5-4.13 the distribution of any o¡ering material in respect thereof, see under SNA12-4.1.10 ‘‘Subscription and Sale’’. Further restrictions may be required in connection with any particular issue of Notes. Any such further restrictions will be speci¢ed in the relevant Final Terms.

Ratings: Tranches of Notes issued under the Programme may be rated or unrated. SNA5-7.5 Where a Tranche of Notes is rated, such rating will not necessarily be the same as the ratings assigned to the Programme. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.

21 FORM OF THE NOTES

The Notes will be issued in bearer form. SNA5-4.3 SNA12-4.1.4 Each Global Note, Temporary Global Note and Permanent Global Note contains provisions which apply to the Notes while they are in global form, some of which modify the e¡ect of the Terms and Conditions of the Notes set out herein. Set out in this section (together with a description of the form of the Notes) is a summary of certain of those provisions.

Forms of Notes Unless speci¢ed in the relevant Final Terms, an issue of Notes of any particular Series will be represented upon issue by a Global Note or a Temporary Global Note in bearer form without interest coupons, which will be deposited on or about the relevant closing date with a common depositary or depositaries for Euroclear and Clearstream, Luxembourg or with any other relevant clearing system(s). In relation to an issue to which the provisions of United States Treasury Regulation ‰1.163-5(c)(2)(i)(C) (the ‘‘C Rules’’) apply, each issue of Notes shall be represented upon issue by a Global Note. In relation to an issue other than an issue to which the C Rules apply, each issue of Notes shall be represented upon issue by a Temporary Global Note on or after the date which is 40 days after the later of the Issue Date of the relevant Series or issue and the completion of distribution of all Notes of the relevant Series or issue and provided certi¢cation as to non-U.S. bene¢cial ownership has been received, interests in a Temporary Global Note may be exchanged for interests in a Permanent Global Note in bearer form without interest coupons or, if so speci¢ed in the Final Terms, for De¢nitive Notes.

If, in relation to an issue other than an issue under the C Rules, any interest payment on the Notes of a particular Series falls due whilst any of the Notes of that Series are represented by a Temporary Global Note, the related interest payment will be made on such Temporary Global Note only to the extent that certi¢cation as to non-U.S. bene¢cial ownership has been received by Euroclear or Clearstream, Luxembourg or any other relevant clearing system(s) in accordance with the terms of such Temporary Global Note. Payments of amounts due in respect of a Permanent Global Note will be made through Euroclear or Clearstream, Luxembourg or any other relevant clearing system(s) without any requirement for certi¢cation.

Interests in a Permanent Global Note will be exchanged by the relevant Issuer (in whole but not in part), for de¢nitive Notes if (a) either Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of public holidays) or announces an intention to cease business permanently or does in fact do so or (b) an Event of Default occurs in respect of any Note of the relevant Series or (c) if so speci¢ed in the relevant Final Terms, at the option of the Holder of such Permanent Global Note upon such Holder’s request, in all cases at the cost and expense of such Issuer.

In relation to an issue under the C Rules, on or after the date which is 40 days after the later of the date of issue of the relevant Series or Tranche and completion of distribution of all Notes of the relevant Series or Tranche, interests in a Global Note may be exchanged by the relevant Issuer (in whole but not in part) for De¢nitive Notes if (a) either Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of public holidays) or announces an intention to cease business permanently or does in fact do so or (b) an Event of Default occurs in respect of any Note of the relevant Series or (c) if so speci¢ed in the relevant Final Terms, at the option of the Holder of such Global Note upon such Holder’s request, in all cases at the cost and expense of such Issuer.

Payments in respect of Notes in global form Payments of principal, interest and any additional amounts pursuant to Condition 7, if any, in respect of the Notes when represented by a Global Note, Temporary Global Note, or as the case may be, a Permanent Global Note will be made against presentation and surrender or, as the case may be, presentation of the relevant Global Note, Temporary Global Note or, as the case may be, Permanent Global Note at the speci¢ed o⁄ce of any of the Paying Agents. A record of each payment so made will be endorsed on the relevant schedule to the Global Note, Temporary Global Note or, as the case may be, Permanent Global Note by or on behalf of the Agent, which endorsement will be prima facie evidence that such payment has been made.

22 Notices So long as the Notes of any Series are represented by a Global Note, Temporary Global Note or, as the case may be, Permanent Global Note, notices to holders of the Notes may be given by delivery of the relevant notice to Clearstream, Luxembourg or Euroclear or any other relevant clearing system for communication by them to entitled account holders in substitution for publication as required by the Conditions, provided that, in the case of Notes listed on the Luxembourg Stock Exchange, the requirements of the rules of the Luxembourg Stock Exchange have been complied with or, in the case of Notes admitted to listing on any other stock exchange, the requirements (if any) of such stock exchange(s) have been complied with.

Meetings The holder of a Global Note, Temporary Global Note or, as the case may be, a Permanent Global Note will be treated as being two persons for the purposes of any quorum requirements of a meeting of holders of Notes.

Cancellation Cancellation of any Note surrendered for cancellation following its redemption will be e¡ected by reduction in the principal amount of the Global Note, Temporary Global Note or, as the case may be, Permanent Global Note.

Relevant Issuer’s Option No drawing of lots will be required under Condition 6(c) in the event that the relevant Issuer exercises any option relating to those Notes while all such Notes which are outstanding are represented by a Global Note, Temporary Global Note or a Permanent Global Note, as the case may be. In such event standard procedures of Clearstream, Luxembourg or Euroclear or, as the case may be, such other relevant clearing system shall operate to determine which interests in such global Notes are to be subject to such option.

Holder’s Option For so long as the Notes of any Series are represented by either a Global Note, Temporary Global Note or, as the case may be, a Permanent Global Note the owner of a bene¢cial interest therein may exercise its option to redeem under Condition 6(d) (where such put option is speci¢ed in the relevant Final Terms as being applicable) by depositing the redemption notice with any Agent, together with an authority to Clearstream, Luxembourg or Euroclear or any other relevant clearing system to e¡ect redemption (in accordance with its operating procedures and rules) of the portion of the Global Note, Temporary Global Note or, as the case may be, Permanent Global Note which represents the Notes then being redeemed.

Conditions apply Until the whole of a Global Note, Temporary Global Note or, as the case may be, Permanent Global Note has been exchanged as provided therein or cancelled in accordance with the Agency Agreement, the holder of the Global Note shall be subject to the terms and conditions of the Notes set out therein and, subject as otherwise provided therein, shall be entitled to the same rights and bene¢ts thereunder as if the bearer were the holder of the de¢nitive Notes and Coupons represented by the relevant part of the relevant Global Note.

23 TERMS AND CONDITIONS OF THE NOTES SNA5-4.6 SNA12-4.1.7 SNA12-5.1.1 The following is the text of the terms and conditions which, subject to completion in accordance with the SNA5-5.1.1 provisions of the relevant Final Terms in relation to a speci¢c issue of Notes, will be incorporated by reference into each global Note and endorsed on any de¢nitive Notes which may be issued in exchange for the global Note(s) representing such Notes. The relevant Issuer may, in addition, from time to time agree speci¢c terms and conditions for particular issues of Notes. Such speci¢c terms and conditions will be attached to the relevant Final Terms, endorsed on the relevant de¢nitive Notes and lodged with any stock exchange(s) upon which such Notes are, or are to be, listed.

The notes (‘‘Notes’’) are issued pursuant to and in accordance with an amended and restated issuing and paying agency agreement (as amended, supplemented or replaced from time to time, the ‘‘Agency Agreement’’) dated 19th October, 2005, and made between Danone Finance, Groupe Danone, Citibank, N.A. in its capacity as issuing and paying agent (the ‘‘Agent’’, which expression shall include any successor to Citibank, N.A. in its capacity as such), and the paying agents named therein (the ‘‘Paying Agents’’, which expression shall include the Agent and any substitute or any additional Paying Agents appointed in accordance with the Agency Agreement). References herein to ‘‘Agents’’ shall, where the context so requires, be to the Paying Agents and, where applicable, to the Calculation Agent speci¢ed in the relevant Final Terms. Notes issued by Danone Finance have the bene¢t of an amended and restated deed of covenant (as supplemented, amended or restated from time to time, the ‘‘DF Deed of Covenant’’) dated 19th October, 2005 executed by Danone Finance. Groupe Danone (in its capacity as guarantor of Notes issued by Danone Finance, the ‘‘Guarantor’’) has entered into an amended and restated deed of guarantee (as supplemented, amended or restated from time to time, the ‘‘Deed of Guarantee’’) dated 19th October, 2005 pursuant to which it has agreed irrevocably and unconditionally to guarantee the payment obligations of Danone Finance under the Notes and the DF Deed of Covenant (the ‘‘Guarantee’’). Notes issued by Groupe Danone have the bene¢t of a deed of covenant (as supplemented, amended or restated from time to time, the ‘‘GD Deed of Covenant’’) dated 19th October, 2005 executed by Groupe Danone. All persons from time to time entitled to the bene¢t of obligations under any Notes shall be deemed to have notice of, and shall be bound by, all of the provisions of the Agency Agreement, the DF Deed of Covenant, the GD Deed of Covenant and the Deed of Guarantee insofar as they relate to the relevant Notes.

The Notes are issued in series (each a ‘‘Series’’), and each Series may comprise one or more tranches (‘‘Tranches’’ and each, a ‘‘Tranche’’) of Notes. Each Tranche will be the subject of a pricing supplement (each the ‘‘Final Terms’’) which supplements these Terms and Conditions and may specify other terms and conditions which shall, to the extent so speci¢ed or to the extent inconsistent with these Terms and Conditions, replace or modify these Terms and Conditions for the purposes of the Notes. References herein to the ‘‘relevant Final Terms’’ are to the Final Terms (or the relevant provisions thereof) attached to or endorsed on the Notes.

References in these Conditions to Notes are to Notes of the relevant Series and any references to coupons (‘‘Coupons’’ and the expression ‘‘Coupons’’ shall where the context so requires, include a talon for further coupons, a ‘‘Talon’’) are to Coupons relating to Notes of the relevant Series. References in these Conditions to the ‘‘Issuer’’ are to the Issuer named in the relevant Final Terms.

Copies of the Agency Agreement, the DF Deed of Covenant, the GD Deed of Covenant and the Deed of Guarantee are available for inspection, and the Final Terms applicable to listed notes is obtainable, during normal business hours at the speci¢ed o⁄ce of the Arranger and each of the Paying Agents save that, in the case of unlisted Notes, the relevant Final Terms will only be obtainable by a Holder (as de¢ned below) holding one or more unlisted Notes of that Series and such Holder must produce evidence satisfactory to the relevant Paying Agent as to identity.

Capitalised terms used herein but not further de¢ned should be interpreted as being references to such terms as used and speci¢ed in the relevant Final Terms.

1. Form, Denomination and Title SNA5-4.3 (a) Form: The Notes will be issued in bearer form and will be serially numbered.

Notes may be issued as Fixed Rate Notes, Floating Rate Notes, Zero Coupon Notes, Indexed Interest Notes, Dual Currency Notes, Partly Paid Notes or a combination of any of the foregoing depending on the Interest/Payment Basis shown in the relevant Final Terms. All payments in respect of an issue of Notes shall be made in the currency or unit of account in which such Notes are denominated or, if di¡erent, in the

24 currency or unit of account in which such Notes are expressed to be payable (in each case the ‘‘Speci¢ed Currency’’) speci¢ed in the relevant Final Terms.

Notes which are interest-bearing will, if so speci¢ed in the relevant Final Terms, have attached at the time of their initial delivery Coupons and, if so speci¢ed in the relevant Final Terms, Talons. References to interest (other than in relation to interest due after the Maturity Date as speci¢ed in the relevant Final Terms), Coupons and Talons in these Conditions are not applicable to Zero Coupon Notes.

(b) Denomination: Notes are issued in the Speci¢ed Denomination(s) set out in the relevant Final Terms save that the minimum denomination of each Note listed and traded on a Regulated Market in a Member State of the European Economic Area (‘‘EEA’’) in circumstances which require the publication of a prospectus under the Prospectus Directive, will be k1,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency at the issue date) or such other higher amount as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Speci¢ed Currency.

Any minimum Speci¢ed Denomination required by any law or directive or regulatory authority in respect of the currency or unit of account of issue of any Note shall be such as applied on or prior to the date of issue of such Note.

Notes of one denomination may not be exchanged for Notes of another denomination.

(c) Title: Title to Notes, Coupons and Talons shall pass by delivery. Except as ordered by a court of competent jurisdiction or as required by law, the Holder (as de¢ned below) of any Note, Coupon and Talon shall be deemed to be and may be treated as the absolute owner of such Note, Coupon or Talon for the purpose of receiving payment thereon or on account thereof and for all other purposes, whether or not such Note, Coupon and Talon shall be overdue and notwithstanding any notice of ownership, trust or interest therein, any theft or loss thereof or any writing thereon made by anyone.

No person shall have any rights to enforce any Term or Condition of any Note under the Contracts (Rights of Third Parties) Act 1999.

References herein to the ‘‘Holder’’ of Notes, Coupons or Talons are to the bearer of such Notes, Coupons or Talons.

2. Status SNA5-4.5 SNA12-4.1.6 (a) Notes: Each Note will constitute a direct, unconditional and, subject to the provisions of Condition 3, unsecured obligation of the Issuer (without any preference among the Notes) and will rank at least equally with all other unsecured and unsubordinated obligations of the Issuer (subject, in the event of bankruptcy, to laws a¡ecting creditors’ rights generally and to such preferred exceptions as may from time to time be mandatory by law).

(b) Guarantee: In the case of Notes issued by Danone Finance, the Guarantee will constitute a direct, unconditional and, subject to the provisions of Condition 3, unsecured obligation of the Guarantor and will rank at least equally with all other unsecured and unsubordinated obligations of the Guarantor (subject, in the event of bankruptcy, to laws a¡ecting creditors’ rights generally and to such preferred exceptions as may from time to time be mandatory by law).

3. Negative Pledge So long as any of the Notes of any Series is outstanding the Issuer and, if applicable, the Guarantor, without a¡ecting its ability to dispose of its assets, shall not create any mortgage, pledge, charge or other security interests on any real estate properties or on any of its assets to secure any other bonds or negotiable securities issued by the Issuer, the Guarantor (if applicable) or any of its or their Subsidiaries without, at the same time, according the same security to Notes of the same rank.

For the purposes of this Condition, ‘‘Subsidiary’’ means, in respect of the Issuer or, as the case may be, the Guarantor at any particular time, any entity:

(a) whose a¡airs and policies the Issuer or, as the case may be, the Guarantor controls or has the power to control, whether by ownership of share capital, contract, the power to appoint or remove members of the governing body of such entity or otherwise; or

25 (b) whose ¢nancial statements are, in accordance with applicable law and (to the extent not inconsistent with applicable law) generally accepted accounting principles or standards, fully consolidated with those of the Issuer or, as the case may be, the Guarantor.

4. Interest 4A Fixed Rate Notes (a) Interest rate: Each Fixed Rate Note shall bear interest on its nominal amount (or, if it is a Partly Paid Note, the amount paid up) from, and including, the Interest Commencement Date (which shall be the date of issue thereof or such other date as may be speci¢ed in the relevant Final Terms) in respect thereof at the rate per annum (expressed as a percentage) equal to the Fixed Rate(s) of Interest speci¢ed in the relevant Final Terms payable in arrear on the Fixed Interest Dates (as speci¢ed in the relevant Final Terms) in each year and on the Maturity Date speci¢ed in the relevant Final Terms if that date does not fall on a Fixed Interest Date. (b) Payment: The ¢rst payment of interest will be made on the Fixed Interest Date next following the Interest Commencement Date and, if the ¢rst anniversary of the Interest Commencement Date is not a Fixed Interest Date, will amount to the Initial Broken Amount speci¢ed in the relevant Final Terms. If the Maturity Date is not a Fixed Interest Date, interest from, and including, the preceding Fixed Interest Date (or from the Interest Commencement Date, as the case may be) to, but excluding, the Maturity Date will amount to the Final Broken Amount speci¢ed in the relevant Final Terms. If interest is required to be calculated for a period of other than a full year, such interest shall be calculated on the basis of the Day Count Fraction (as de¢ned in Condition 4C below) speci¢ed in the Final Terms for the purposes of this Condition 4.1.

4B Floating Rate Notes/Indexed Interest Notes SNA5-4.7 (a) Interest Payment Dates: Each Floating Rate Note or Indexed Interest Note shall bear interest on its nominal amount (or, if it is a Partly Paid Note, on the amount paid up) from and including the Interest Commencement Date in respect thereof and such interest will be payable in arrear on either: (i) the Interest Payment Date(s) (as speci¢ed in the relevant Final Terms) in each year (the period from and including the Interest Commencement Date to but excluding the ¢rst Interest Payment Date and each successive period from and including an Interest Payment Date to but excluding the next Interest Payment Date each being an ‘‘Interest Period’’); or (ii) if no express Interest Payment Date(s) is/are speci¢ed in the relevant Final Terms, each date (each an ‘‘Interest Payment Date’’) which falls the number of months or other period speci¢ed as the Interest Period in the relevant Final Terms, after the preceding Interest Payment Date or, in the case of the ¢rst Interest Payment Date, after the Interest Commencement Date. If a business day convention is speci¢ed in the relevant Final Terms and if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the business day convention speci¢ed is: (i) in any case where Interest Periods are speci¢ed in accordance with Condition 4B(a)(ii) above, the Floating Rate Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (A) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (B) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the number of months or other period speci¢ed as the Interest Period in the relevant Final Terms after the preceding applicable Interest Payment Date occurred; or (ii) the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or (iii) the Modi¢ed Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or (iv) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day.

26 In this Condition, ‘‘Business Day’’ means a day which is both: (i) a day on which commercial banks and foreign exchange markets settle payments in London and any Additional Business Centre speci¢ed in the relevant Final Terms; and (ii) either (1) in relation to interest payable in a Speci¢ed Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments in the principal ¢nancial centre of the country of the relevant Speci¢ed Currency (if other than London and any Additional Business Centre and which if the Speci¢ed Currency is Australian dollars or New Zealand dollars shall be Sydney or Auckland, respectively) or (2) in relation to interest payable in euro, a day on which the Trans- European Automated Real-time Gross Settlement Express Transfer System (‘‘TARGET’’) is open. (b) Rate of Interest: The Rate of Interest payable from time to time in respect of Indexed Interest Notes will be determined in the manner speci¢ed in the relevant Final Terms. The Rate of Interest payable from time to time in respect of Floating Rate Notes shall be determined by (A) ISDA Determination, (B) by Screen Rate Determination, or on such other basis as may be speci¢ed in the Relevant Final Terms. Floating Rate Notes may also have a maximum interest rate, a minimum interest rate or both. (A) ISDA Determination for Floating Rate Notes: Where ISDA Determination is speci¢ed in the relevant Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the relevant Final Terms) the Margin (if any) speci¢ed in the relevant Final Terms. For the purposes of this subparagraph (A), ‘‘ISDA Rate’’ for an Interest Period means a rate equal to the Floating Rate that would be determined by the Calculation Agent under an interest rate swap transaction if the Calculation Agent were acting as Calculation Agent for the swap transaction in the Speci¢ed Currency under the terms of an agreement in the form of the Multicurrency-Cross Border Master Agreement published by the International Swaps and Derivatives Association, Inc. incorporating the 2000 ISDA De¢nitions, as amended and updated from time to time as at the date of issue of the ¢rst Tranche of the Notes, published by the International Swaps and Derivatives Association Inc. (the ‘‘ISDA De¢nitions’’) and under which: (i) the Floating Rate Option is as speci¢ed in the relevant Final Terms; (ii) the Designated Maturity is a period speci¢ed in the relevant Final Terms; and (iii) the relevant Reset Date is either (i) if the applicable Floating Rate Option is based on the London interbank o¡ered rate (LIBOR) for a currency other than euro, or for the euro the Euro-zone Inter- bank O¡ered Rate (‘‘EURIBOR’’), the ¢rst day of that Interest Period or (ii) in any other case, as speci¢ed in the relevant Final Terms. For the purposes of this sub-paragraph (A), ‘‘Floating Rate’’, ‘‘Calculation Agent’’, ‘‘Floating Rate Option’’, ‘‘Designated Maturity’’ and ‘‘Reset Date’’ have the meanings given to those terms in the ISDA De¢nitions. When this sub-paragraph (A) applies, in respect of each relevant Interest Period the Calculation Agent will be deemed to have discharged its obligations under Condition 4B(d) in respect of the determination of the Rate of Interest if it has determined the Rate of Interest in respect of such Interest Period in the manner provided in this sub-paragraph (A). (B) Screen Rate Determination for Floating Rate Notes: Where Screen Rate Determination is speci¢ed in the relevant Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either: (i) the o¡ered quotation; or (ii) the arithmetic mean (rounded if necessary to the ¢fth decimal place, with 0.000005 being rounded upwards) of the o¡ered quotations, (expressed as a percentage rate per annum) for the Reference Rate (as speci¢ed in the relevant Final Terms) which appears or appear, as the case may be, on the Relevant Screen Page (as speci¢ed in the relevant Final Terms) as at 11.00 a.m. (London time) (or, where the Floating Rate basis is EURIBOR, at 11.00 a.m. (Brussels time) in the Euro-zone interbank market) on the Interest Determination Date (as speci¢ed in the relevant Final Terms) in question plus or minus (as indicated in the relevant Final Terms) the Margin (if any), all as determined by the Calculation Agent. If ¢ve or more of such o¡ered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations)

27 shall be disregarded by the Calculation Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such o¡ered quotations.

If, on any Interest Determination Date no such quotation for the Reference Rate so appears (or, in the case of (ii) above, fewer than three such o¡ered quotations appear, the Calculation Agent will request appropriate quotations and will determine the arithmetic mean of the rates at which deposits in the relevant currency are o¡ered by four major banks in the interbank market of the Relevant Financial Centre (as speci¢ed in the relevant Final Terms) or, where EURIBOR is speci¢ed, the rate at which deposits in euro are o¡ered by the principal Euro-zone o⁄ce of each of four banks in the Euro-zone interbank market at approximately 11.00 a.m. (Brussels time) on the Interest Determination Date, for a period of the duration of the relevant Interest Period and in an amount that is representative for a single transaction in the relevant market at the relevant time.

If the Reference Rate from time to time in respect of Floating Rate Notes or, as the case may be, Indexed Rate Notes is speci¢ed in the relevant Final Terms as being other than the London interbank o¡ered rate or the Euro-zone interbank o¡ered rate, the Rate of Interest in respect of such Notes will be determined as provided in the relevant Final Terms.

(c) Minimum and/or Maximum Interest Rate: If the relevant Final Terms speci¢es a Minimum Interest Rate for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of sub-paragraph (B) above is less than such Minimum Interest Rate, the Rate of Interest for such Interest Period shall be such Minimum Interest Rate. If the relevant Final Terms speci¢es a Maximum Interest Rate for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (B) above is greater than such Maximum Interest Rate, the Rate of Interest for such Interest Period shall be such Maximum Interest Rate.

(d) Determination of Rate of Interest and Calculation of Interest Amounts: The Calculation Agent will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. The Calculation Agent will calculate the amount of interest (the ‘‘Interest Amount’’) payable on the Floating Rate Notes or Indexed Interest Notes in respect of each Speci¢ed Denomination for the relevant Interest Period. Each Interest Amount shall be calculated by applying the Rate of Interest to each Speci¢ed Denomination, multiplying such sum by the actual number of days in the Interest Period concerned divided by 360 (or 365 or 366, as applicable, in the case of Notes denominated in Pounds Sterling), or such other denominator determined by the Calculation Agent or calculated on the basis of the Day Count Fraction (as de¢ned in Condition 4C below), speci¢ed in the Final Terms for the purposes of this Condition 4B to be customary for such calculation, and rounding the resultant ¢gure to the nearest sub-unit of the relevant Speci¢ed Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. The Calculation Agent will notify the Agent of the Rate of Interest and the Interest Amount for the relevant Interest Period as soon as practicable after calculating the same.

(e) Noti¢cation of Rate of Interest and Interest Amounts: The Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be noti¢ed to the Issuer and any stock exchange on which the relevant Floating Rate Notes or Indexed Interest Notes are for the time being listed and notice thereof to be published in accordance with Condition 16 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so noti¢ed may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly noti¢ed to each stock exchange on which the relevant Floating Rate Notes or Indexed Interest Notes are for the time being listed and to the Holders of the Notes in accordance with Condition 16.

In this Condition, ‘‘London Business Day’’ means a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments in London.

(f) Certi¢cates to be Final: All certi¢cates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 4, whether by the Agent or the Calculation Agent, shall (in the absence of wilful default, bad faith or manifest error) be binding on the Issuer, the Guarantor (if applicable), the Agent, the Calculation Agent, the other Paying Agents and all Holders of Notes, Coupons or Talons (as applicable) and (in the absence as aforesaid) no liability to the Issuer, the Guarantor (if applicable) and the Holders of Notes, Coupons or

28 Talons (as applicable) shall attach to the Agent or the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions. 4C ‘‘Day Count Fraction’’ means, in respect of the calculation of an amount for any period of time (‘‘Calculation Period’’), such day count fraction as may be speci¢ed in the Final Terms and: (a) if ‘‘Actual/365’’ or ‘‘Actual/Actual (ISDA)’’ is speci¢ed, the actual number of days in the Calculation Period in respect of which payment is being made divided by 365 (or, if any portion of that Calculation Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Calculation Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Calculation Period falling in a non-leap year divided by 365); (b) if ‘‘Actual/365 (Fixed)’’ is speci¢ed, the actual number of days in the Calculation Period in respect of which payment is being made divided by 365; (c) if ‘‘Actual/360’’ is speci¢ed, the actual number of days in the Calculation Period in respect of which payment is being made divided by 360; (d) if ‘‘Actual/Actual (ICMA)’’ is so speci¢ed, means: (i) where the Calculation Period is equal to or shorter than the Interest Period during which it falls, the actual number of days in the Calculation Period divided by the product of (1) the actual number of days in such Interest Period and (2) the number of Interest Periods normally ending in any year; and (ii) where the Calculation Period is longer than one Interest Period, the sum of: (A) the actual number of days in such Calculation Period falling in the Interest Period in which it begins divided by the product of (1) the actual number of days in such Interest Period and (2) the number of Interest Period in any year; and (B) the actual number of days in such Calculation Period falling in the next Interest Period divided by the product of (1) the actual number of days in such Interest Period and (2) the number of Interest Periods normally ending in any year; (e) if ‘‘30/360’’, ‘‘360/360’’ or ‘‘Bond Basis’’ is speci¢ed, the number of days in the Calculation Period in respect of which payment is being made divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months (unless (i) the last day of the Calculation Period is the 31st day of a month but the ¢rst day of the Calculation Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (ii) the last day of the Calculation Period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month)); and (f) if ‘‘30E/360’’ or ‘‘Eurobond Basis’’ is speci¢ed, the number of days in the Calculation Period in respect of which payment is being made divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months, without regard to the date of the ¢rst day of the Calculation Period unless, in the case of the ¢nal Calculation Period, the Maturity Date is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month).

4D Dual Currency Notes In the case of Dual Currency Notes, if the rate or amount of interest falls to be determined by reference to an exchange rate, the rate or amount of interest payable shall be determined in the manner speci¢ed in the relevant Final Terms.

4E Partly Paid Notes In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as speci¢ed in the relevant Final Terms.

4F Accrual of Interest Each Note (or in the case of the redemption of part only of a Note that part only of such Note) will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof,

29 payment of principal is improperly withheld or refused. In such event, interest will continue to accrue on the principal amount in respect of which payment has been improperly withheld or refused or default has been made at the Rate of Interest then applicable or such other rate as may be speci¢ed for this purpose in the relevant O¡ering Circular until whichever is the earlier of: (1) the date on which all amounts due in respect of such Note have been paid; and (2) the date on which the full amount of the moneys payable has been received by the Agent and notice to that e¡ect has been given in accordance with Condition 16 or individually.

4G The Calculation Agent If the Calculation Agent does not at any time for any reason so determine the Rate of Interest or calculate the Interest Amount for an Interest Period, the Agent or an agent appointed by it for such purpose shall do so and such determination or calculation shall be deemed to have been made by the Calculation Agent. In doing so, the Agent or, as the case may be, its agent shall apply the provisions of this Condition 4 or, as the case may be, the provisions of the relevant Final Terms, with any necessary consequential amendments, to the extent that, in its opinion, it can do so, and/or in all other respects it shall do so in such manner as it shall, in its absolute discretion, deem fair and reasonable in all the circumstances.

5. Payments (a) Method of Payment: Subject as provided below: (i) payments in a Speci¢ed Currency will be made by transfer to an account in the relevant Speci¢ed Currency maintained by the payee with, or by a cheque in such Speci¢ed Currency drawn on, a bank in the principal ¢nancial centre of the country of such Speci¢ed Currency (which, if the Speci¢ed Currency is Australian dollars or New Zealand dollars, shall be Sydney or Auckland, respectively); and (ii) payments in euro will be made by credit or transfer to a euro account speci¢ed by the payee. Payments will be subject in all cases to any ¢scal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 7. (b) Presentation of Notes and Coupons: Payments of principal in respect of de¢nitive Notes will (subject as provided below) be made in the manner provided in Condition 5(a) above only against surrender of de¢nitive Notes and payments of interest in respect of de¢nitive Notes will (subject as provided below) be made as aforesaid only against surrender of Coupons, in each case at the speci¢ed o⁄ce of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction)). Fixed Rate Notes (other than Dual Currency Notes), should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as de¢ned in Condition 7) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 8) or, if later, ¢ve years from the date on which such Coupon would otherwise have become due, but in no event thereafter. Upon any Fixed Rate Note becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof. Upon the date on which any Floating Rate Note, Dual Currency Note or Indexed Interest Note, as the case may be, becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof. If the due date for redemption of any de¢nitive Note is not a Fixed Interest Date or an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Fixed Interest Date or Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant de¢nitive Note.

30 Notwithstanding the foregoing, if any amount of principal and/or interest in respect of the Notes of the relevant Series is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of such Notes will be made at the speci¢ed o⁄ce of a Paying Agent in the United States if: (i) the Issuer has appointed Paying Agents with speci¢ed o⁄ces outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such speci¢ed o⁄ces outside the United States of the full amount of principal and interest on the Notes in the manner provided above when due; (ii) payment of the full amount of such principal and interest at all such speci¢ed o⁄ces outside the United States is illegal or e¡ectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and (iii) such payment is then permitted under United States law without involving, in the opinion of the Issuer, adverse tax consequences to the Issuer. (c) Payment Day in relation to Notes: If the date for payment of any amount in respect of any Note or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, ‘‘Payment Day’’ means any day which is: (i) a day on which commercial banks and foreign exchange markets settle payments in the relevant place of presentation; and (ii) a Business Day (as de¢ned in Condition 4B(a)). (d) Interpretation of Principal and Interest: Any reference in these Terms and Conditions to principal in respect of the Notes shall be deemed to include, as applicable: (i) any additional amounts which may be payable with respect to principal under Condition 7; (ii) the Final Redemption Amount of the Notes; (iii) the Early Redemption Amount of the Notes; (iv) the Optional Redemption Amount(s) (if any) of the Notes; (v) in relation to the Notes redeemable in installments, the Installment Amounts; (vi) in relation to Zero Coupon Notes the Amortised Face Amount; and (vii) any premium and any other amounts which may be payable by the Bank under or in respect of the Notes. Any reference in these Terms and Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 7.

6. Redemption and Purchase SNA5-4.8 (a) At Maturity: Unless previously redeemed or purchased and cancelled as speci¢ed below, each Note will be redeemed by the Issuer at its Final Redemption Amount speci¢ed in, or determined in the manner speci¢ed in, the relevant Final Terms in the relevant Speci¢ed Currency on the Maturity Date. (b) Redemption for Tax Reasons: The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (in the case of Notes other than Floating Rate Notes or Indexed Interest Rate Notes) or on any Interest Payment Date (in the case of Floating Rate Notes or Indexed Interest Rate Notes), on giving not less than 30 nor more than 60 days’ notice to the Holders of Notes of the relevant Series (which notice shall be irrevocable), if: (i) on the occasion of the next payment due under the Notes the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 7 as a result of any change in, or amendment to, the laws or regulations of France, or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or o⁄cial interpretation of such laws or regulations, which change or amendment becomes e¡ective on or after the date of issue of the ¢rst Tranche of the Notes; and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it,

31 provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the Agent a certi¢cate signed by two authorised o⁄cers of the Issuer stating that the Issuer is entitled to e¡ect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and an opinion of independent legal advisers of recognised standing to the e¡ect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment. Notes redeemed pursuant to this Condition 6 will be redeemed at their Early Redemption Amount referred to in Condition 6(e) below together (if appropriate) with interest accrued to (but excluding) the date of redemption. (c) Redemption at the option of the Issuer: If the Issuer is speci¢ed in the relevant Final Terms as having an option to redeem, the Issuer shall, having given: (i) not less than 15 nor more than 30 days’ notice to the Holders of Notes of the relevant Series in accordance with Condition 16; and (ii) not less than 15 days before the giving of the notice referred to in (i), notice to the Agent, (which notices shall be irrevocable), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) in each case as speci¢ed in, or determined in the manner speci¢ed in, the relevant Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount equal to the Minimum Redemption Amount or a Maximum Redemption Amount in each case as speci¢ed in the relevant Final Terms. In the case of a partial redemption of Notes, the Notes to be redeemed will be selected individually by lot, not more than 60 days prior to the date ¢xed for redemption and notice of the Notes called for redemption will be given to the Holders of the Notes of the relevant Series not less than 30 days prior to such date. In the case of a partial redemption of global Notes, such Notes will be selected in accordance with the rules of the relevant clearing system or systems, as the case may be. (d) Redemption at the option of Holders of Notes: If the Holders of Notes are speci¢ed in the relevant Final Terms as having an option to redeem, upon the Holder of any Note giving to the Issuer not less than 15 nor more than 30 days’ notice or such other period of notice as is speci¢ed in the relevant Final Terms, the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms speci¢ed in the relevant Final Terms, in whole (but not in part), such Note on the Optional Redemption Date and at the Optional Redemption Amount speci¢ed in, or determined in the manner speci¢ed in, the relevant Final Terms, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date. To exercise the right to require redemption of this Note the Holder of this Note must deliver such Note at the speci¢ed o⁄ce of any Paying Agent at any time during normal business hours of such Paying Agent together with notice of exercise in the form (for the time being current) obtainable from any speci¢ed o⁄ce of any Agent (a ‘‘Put Notice’’) and in which the holder must specify a bank account (or, if payment is by cheque, an address) to which payment is to be made under this Condition. Any Put Notice given by a Holder of any Note pursuant to this Condition 6(d) shall be irrevocable except where prior to the due date of redemption an Event of Default shall have occurred in which event such Holder, at its option, may elect by notice to the Issuer to withdraw the notice given pursuant to this Condition 6(d) and instead to declare such Note forthwith due and payable pursuant to Condition 9. Each Note should be presented for redemption together with all unmatured Coupons relating to it, failing which such Note will be redeemed only against provision of such indemnity as the Issuer may require. Upon the date on which any Note falls due for redemption or is purchased for cancellation, all unmatured Coupons appertaining thereto will become void and no payment will thereafter be made in respect thereto. (e) Early Redemption Amounts: For the purpose of Condition 6(b) above and Condition 9, the Notes will be redeemed at the Early Redemption Amount calculated as follows: (i) in the case of Notes with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof; (ii) in the case of Notes (other than Zero Coupon Notes but including Partly Paid Notes) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a

32 Speci¢ed Currency other than that in which the Notes are denominated, at the amount speci¢ed in, or determined in the manner speci¢ed in, the relevant Final Terms or, if no such amount or manner is so speci¢ed in the relevant Final Terms, at their nominal amount; or (iii) in the case of Zero Coupon Notes, at an amount (the ‘‘Amortised Face Amount’’) equal to the sum of: (A) the Reference Price (as speci¢ed in the relevant Final Terms); and (B) the product of the Accrual Yield (as speci¢ed in the relevant Final Terms) (compounded annually) being applied to the Reference Price from (and including) the Issue Date to (but excluding) the date ¢xed for redemption or (as the case may be) the date upon which such Note becomes due and repayable. Where such calculation is to be made for a period which is not a whole number of years, it shall be made on the basis of a 360-day year consisting of 12 months of 30 days each or such other calculation basis as may be speci¢ed in the relevant Final Terms. (f) Partly Paid Notes: If the Notes are Partly Paid Notes they will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition and the relevant Final Terms. (g) Purchases: Each of the Issuers and the Guarantor (if applicable) and any of its or their respective subsidiaries or a⁄liates (as applicable) may at any time purchase Notes at any price (provided that they are purchased together with all unmatured Coupons and unexchanged Talons relating to them) in the open market or otherwise, provided that in any such case such purchase or purchases are in compliance with all relevant laws, regulations and directives. The Notes so purchased, while held by or on behalf of the Issuer, Guarantor (if applicable), subsidiary or a⁄liate, as the case may be, shall not entitle the Holder to vote at any meetings of Holders of Notes and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of Holders of Notes or for the purposes of Condition 10. Unless cancelled pursuant to Condition 6(h), Notes so purchased may be reissued or resold and any Note so issued or resold shall be deemed for all purposes to form part of the original Series of Notes of which the purchased Note was part. For the purposes of these Conditions, ‘‘directive’’ includes any present or future directive, regulation, request, requirement, noti¢cation, rule or credit restraint programme of any relevant agency, authority, central bank department, government, legislature, minister, o⁄cial, public or statutory corporation, self- regulating organisation or stock exchange. (h) Cancellation: All Notes which are redeemed will forthwith be cancelled (together with all unmatured Coupons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and the Notes purchased and cancelled pursuant to this Condition 6(h) (together with all unmatured Coupons cancelled therewith) shall be forwarded to the Agent and cannot be reissued or resold. (i) Late payment on Zero Coupon Notes: If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to Conditions 6(a), (b), (c) or (d) above or upon its becoming due and repayable as provided in Condition 10 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in Condition 6(e)(iii) above as though the references therein to the date ¢xed for redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of: (i) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and (ii) the date on which the full amount of the monies payable has been received by the Agent and notice to that e¡ect has been given to the Holders of the Notes of the relevant Series either in accordance with Condition 16 or individually. (j) Obligation to redeem: Upon the expiry of any notice as is referred to in Conditions 6(b), (c) or (d) above, the Issuer (failing which the Guarantor (if applicable)) shall be bound to redeem the Notes to which the notice referred at the relevant redemption price applicable at the date of such redemption together with, if appropriate, interest accrued to (but excluding) the relevant redemption date.

7. Taxation SNA5-4.14 SNA12-4.1.14 All payments in respect of the Notes and the Coupons will be made free and clear of, and without withholding or deduction for, or on account of, any taxes, duties, assessments or governmental charges (together, the ‘‘Taxes’’) of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of France or any other jurisdictions to which the Issuer is subject or any authority therein or thereof having power to tax unless, in each case, such withholding or deduction is required by law. In such event, the Issuer

33 will pay such additional amounts as will result in receipt by the Holder of Notes or, as the case may be, Coupons of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable with respect to any Note or, as the case may be, Coupon presented for payment: (a) by, or on behalf, of a Holder or bene¢cial owner who is liable to such Taxes in respect of such Note or Coupon by reason of his having or having had some connection with the jurisdiction by which such Taxes have been imposed, levied, collected, withheld or assessed other than the mere holding of such Note or Coupon; or (b) more than thirty days after the Relevant Date, except to the extent that the Holder or bene¢cial owner would have been entitled to such additional amounts on presenting the same for payment on the last day of such thirty-day period; or (c) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council Meeting of 26th-27th November, 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; or (d) by or on behalf of a Holder who would have been able to avoid such withholding or deduction by presenting the relevant Note or Coupon to another Paying Agent in a Member State of the EU. The obligation to pay such additional amounts shall not apply to (a) any estate, inheritance, gift, sale, transfer, personal property or any similar tax, duty, assessment or governmental charge or (b) any tax, duty, assessment or governmental charge which is payable otherwise than by deduction or withholding.

As used herein, the ‘‘Relevant Date’’ means the date on which such payment in respect of such Note or SNA5-4.7 Coupon ¢rst becomes due and payable, but if the full amount of the monies payable has not been received by the Agent on or prior to such due date, it means the ¢rst date on which the full amount of such monies has been so received and notice to that e¡ect shall have been duly given to the Holder of such Note in accordance with Condition 16. Any reference herein to principal, premium and/or interest in respect of a Note shall be deemed also to refer to any additional amounts which may be payable hereunder. If at any time the Issuer determines with respect to any Note that it is or would be required, on the next succeeding date on which a payment is due in connection therewith, to pay any additional amounts referred to above with respect to such Note and if the additional amounts permitted by law would be insu⁄cient to satisfy its obligation to pay the amount provided for in such Note as due and payable on such date, the Issuer shall be obligated to redeem such Note in the manner and on the terms set out above under Condition 6(b).

8. Prescription Claims against the Issuer for payment in respect of the Notes and Coupons (which, for this purpose shall not include Talons) shall be prescribed and become void unless made within ten years (in the case of principal) and ¢ve years (in the case of interest) from the appropriate Relevant Date in respect thereof. There shall not be included in any Coupon sheet issued in exchange for a Talon, any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 5(b) or any Talon which would be void pursuant to Condition 5(b).

9. Events of Default Each of the following events shall be an event of default (each an ‘‘Event of Default’’): (a) a default is made in the payment of principal or interest due in respect of any Note and continues for a period of 15 days or more in respect of payment of interest; or (b) the Issuer or, if applicable, the Guarantor fails to perform or observe any of its other material obligations under the Agency Agreement or under the terms of a Note and, if applicable, the Guarantee including, in the case of the Guarantor the withdrawal or modi¢cation of the Guarantee, and such failure continues for a period of 30 days after the date on which written notice of such failure requiring the same to be remedied shall have been given to the Agent by the Holder; or (c) any borrowed money of the Issuer or, if applicable, the Guarantor or any Principal Subsidiary (as de¢ned below) for an amount in excess of U.S.$10,000,000 or the equivalent thereof in any other currency becomes due and payable prematurely by reason of a default in relation thereto or is not paid at maturity as

34 extended by any applicable grace period or if any guarantee or indemnity in respect of any borrowed money of any person for an amount in excess of U.S.$10,000,000 or the equivalent thereof in any other currency given by the Issuer or, if applicable, the Guarantor or any Principal Subsidiary is not honoured when due and called upon or within any applicable grace period as originally provided; or (d) the Issuer or, if applicable, the Guarantor or any Principal Subsidiary applies for the appointment of a conciliator (conciliateur) or enters into an amicable settlement (accord amiable) or ceases to pay its debts as and when they fall due or a judgment is issued for the judicial liquidation (liquidation judiciaire) or for the transfer of the whole of its business (cession totale de l’entreprise), or if the Issuer or, if applicable, the Guarantor is wound up or dissolved except in connection with a merger, provided that the entity resulting from such merger assumes the obligations under each Note or, if applicable, the Guarantee; or (e) any event shall occur which, under the law of any relevant jurisdiction, has an analogous or equivalent e¡ect to any of the events mentioned above. As used in this Condition, ‘‘Principal Subsidiary’’ shall mean any subsidiary of the Issuer or, if applicable, the Guarantor: (i) whose total consolidated assets or gross consolidated revenues attributable to the Issuer or, if applicable, the Guarantor represent not less than 10 per cent. of the consolidated total assets or, consolidated gross revenues, as the case may be, of Groupe Danone and its subsidiaries taken as a whole, all as calculated by reference to the then latest consolidated audited accounts of Groupe Danone and its subsidiaries; or (ii) to which is transferred the whole or substantially the whole of the assets and undertakings of a subsidiary which immediately prior to such transfer was a Principal Subsidiary. If any Event of Default with respect to a Note shall have occurred and be continuing, then the Holder of such Note may exercise any right, power or remedy permitted to it by law, and shall have, in particular, without limiting the generality of the foregoing, the right to declare the entire principal of, and premium and all interest accrued, if any, on such Note to be, and such Note shall thereupon become, forthwith due and payable, without any presentation, demand, protest or other notice of any kind, all of which are hereby expressly waived. Subject to the operation of any applicable limitation period, no course of dealing on the part of the Holder of such Note or delay or failure on the part of such Holder to exercise any right shall operate as a waiver of such right or otherwise prejudice such Holder’s rights, powers or remedies. Upon payment in full (i) of the amount of principal and interest, if any, so declared due and payable, and (ii) of interest on any overdue principal and overdue interest (in the latter case to the extent that the payment of such interest shall be legally enforceable) all of the Issuer’s and, if applicable, Guarantor’s obligations in respect of the payment of the principal and interest, if any, on such Note shall terminate.

10. Meetings of Holders, Modi¢cation and Waiver SNA5-4.10 (a) Meetings of Holders The Agency Agreement contains provisions for convening meetings of Holders of Notes of a Series to consider any matter a¡ecting their interests, including modi¢cation by Extraordinary Resolution (as de¢ned in the Agency Agreement) of the Notes of such Series (including these Conditions insofar as the same may apply to such Notes). Any Extraordinary Resolution duly passed shall be binding on all Holders of Notes and Coupons (if any) of the relevant Series (whether or not they were present or represented at the meeting at which such resolution was passed). (b) Modi¢cation and waiver: The parties to the Agency Agreement may agree, without the consent of the Holders of the Notes or Coupons to (i) any modi¢cation of any provision of the Agency Agreement which is of a formal, minor or technical nature or is made to correct a manifest error and (ii) any other modi¢cation, and any waiver or authorisation of any breach or proposed breach, of any provision of the Agency Agreement which is in the opinion of such parties not materially prejudicial to the interests of the Holders of Notes or Coupons.

11. Replacement of Notes, Coupons and Talons If any Note, Coupon or Talon, is lost, stolen, mutilated, defaced or destroyed it may be replaced at the speci¢ed o⁄ce of the Agent subject to all applicable laws and stock exchange requirements, upon payment by the claimant of the taxes and expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may require (provided that the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Notes, Coupons or Talons must be surrendered before replacements will be issued.

35 12. Exchange of Talons On and after the Fixed Interest Date or the Interest Payment Date, as appropriate, on which the ¢nal Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the speci¢ed o⁄ce of the Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the ¢nal date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 8. Each Talon shall, for the purposes of these Terms and Conditions, be deemed to mature on the Fixed Interest Date or the Interest Payment Date (as the case may be) on which the ¢nal Coupon comprised in the relative Coupon sheet matures.

13. Further Issues The Issuer may from time to time without the consent of the Holders of the Notes or Coupons create and issue further securities having the same terms and conditions as the Notes of any Series in all respects (or in all respects except for the ¢rst payment of interest on them and/or the denomination thereof) so that such further issue shall be consolidated and form a single series with the outstanding securities of any Series (including the Notes of any Series). References in these Conditions to the Notes of any Series include (unless the context requires otherwise) any other securities issued pursuant to this Condition 13 and forming a single series with the Notes of such Series.

14. Currency Indemnity The Speci¢ed Currency in relation to any Series of Notes is the sole currency of account and payment for all sums payable by the Issuer and the Guarantor (as applicable) under or in respect of such Notes and Coupons, including damages. If any sum due from the Issuer in respect of Notes or Coupons or any order or judgment given or made in relation thereto has to be converted from the currency (the ‘‘¢rst currency’’) in which the same is payable in accordance with the relevant Final Terms or such order or judgment into another currency (the ‘‘second currency’’) for the purpose of (a) making or ¢ling a claim or proof against the Issuer as the case may be, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to such Notes or such Coupons, the Issuer shall indemnify each Holder of such Notes or Coupons, on the written demand of such Holder addressed to the Issuer against any loss su¡ered as a result of any discrepancy between (i) the rate of exchange used for such purpose to convert the sum in question from the ¢rst currency into the second currency and (ii) the rate or rates of exchange at which such Holder may in the ordinary course of business purchase the ¢rst currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. This indemnity constitutes a separate and independent obligation of the Issuer and shall give rise to a separate and independent cause of action.

15. Agents The names of the initial Agents and their initial speci¢ed o⁄ces are set out below. The Issuer and the Guarantor (if applicable) reserve the right at any time to vary or terminate the appointment of any Paying Agent and/or appoint additional or other Paying Agents and/or approve any change in the speci¢ed o⁄ce through which each Paying Agent acts, provided that: (i) so long as the Notes are listed on any stock exchange, there will at all times be a Paying Agent with a speci¢ed o⁄ce in such place as may be required by the rules and regulations of the relevant stock exchange; (ii) there will at all times be a Paying Agent with a speci¢ed o⁄ce in a city in continental Europe; (iii) there will at all times be a Paying Agent with a speci¢ed o⁄ce in an EU member state that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any European Union Directive implementing the conclusions of the ECOFIN Council meeting of 26th-27th November, 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; and (iv) there will at all times be an Agent. In addition, the Issuer and the Guarantor (if applicable) shall forthwith appoint a Paying Agent having a speci¢ed o⁄ce in New York City in the circumstances described in Condition 5(b). Any variation,

36 termination, appointment or change shall only take e¡ect (other than in the case of insolvency, when it shall be of immediate e¡ect) after not less than 30 nor more than 45 days’ prior notice thereof shall have been given to the Holders in accordance with Condition 16. In acting under the Agency Agreement, the Agents act solely as agents of the Issuer and the Guarantor (as applicable) and do not assume any obligation or relationship of agency or trust for or with any Holder.

16. Notices Notice to Holders of Notes will, save where another means of e¡ective communication has been speci¢ed in the relevant Final Terms, be deemed to be validly given if (i) published in a leading daily newspaper having general circulation in London (which is expected to be the Financial Times), (ii) in the case of any Notes which are admitted to trading on the Luxembourg Stock Exchange (so long as such Notes are admitted to trading on the Luxembourg Stock Exchange and the rules of that regulated market so require), on the website of the Luxembourg Stock Exchange (www.bourse.lu) or in a leading newspaper having general circulation in Luxembourg (which is expected to be d’Wort) or, (in the case of (i) or (ii) if such publication is not practicable, if published in a leading English language daily newspaper having general circulation in Europe provided that, in the case of Notes admitted to trading on the Luxembourg Stock Exchange, the requirements of that regulated market have been complied with or, in the case of the Notes admitted to trading on another stock exchange the requirements of the rules of such stock exchange have been complied with. Any notice so given will be deemed to have been validly given on the date of such publication (or, if published more than once, on the date of ¢rst such publication) provided that, so long as the Notes of any Series are represented by a Global Note, Temporary Global Note or, as the case may be, Permanent Global Note, notices to holders of the Notes may be given by delivery of the relevant notice to Clearstream, Luxembourg and/or Euroclear and/or any other relevant clearing system through which the relevant Notes are held for communication by them to entitled account holders in substitution for publication as required by the Conditions, provided always that, in the case of Notes admitted to trading on the Luxembourg Stock Exchange the requirements of the rules of the Luxembourg Stock Exchange have been complied with or, in the case of Notes admitted to trading on any other stock exchange, the requirements (if any) of such stock exchange(s) have been complied with. Holders of Coupons will be deemed for all purposes to have notice of the contents of any notice given to Holders of Notes in accordance with this Condition.

17. Substitution of the Issuer The Issuer (where the Issuer is not Groupe Danone) may be replaced and the Guarantor or any subsidiary of the Guarantor may be substituted for the Issuer as principal debtor in respect of the Notes, without the consent of the Holders. If the Issuer determines that the Guarantor or any subsidiary will become the principal debtor (in such capacity, the ‘‘Substituted Issuer’’), the Issuer shall give no less than 30 nor more than 45 days’ notice to the Holder of each Note then outstanding of such event and, immediately on the expiry of such notice, the Substituted Issuer shall become the principal debtor in respect of the Notes in place of the Issuer and Holders shall thereupon cease to have any rights or claims whatsoever against the Issuer. However, no such substitution shall take e¡ect: (i) if the e¡ect of such substitution would, at the time of such substitution, be that payments in respect of any Note would be required to be made subject to any withholding or deduction which would not otherwise arise in the absence of such substitution; (ii) if the Substituted Issuer is not the Guarantor, until the Guarantor shall have entered into an unconditional and irrevocable guarantee, which is substantially in the form of the Guarantee, in respect of the obligations of such Substituted Issuer; (iii) in any case, until the Substituted Issuer shall have provided to the Agent such documents as may be necessary to make each Note and the Agency Agreement legal, valid and binding obligations; and (iv) until such Substituted Issuer shall have been approved by the relevant authorities as able to issue the relevant Notes. Upon any such substitution, each Note, Coupon and Talon will be deemed modi¢ed in all appropriate respects. Upon any substitution a supplemental prospectus will be ¢led with the Luxembourg Stock Exchange.

37 18. Governing Law and Jurisdiction SNA5-4.2 ANA12-4.1.3 (a) Governing law: The Notes and all matters arising from or connected with the Notes are governed by, and shall be construed in accordance with, English law. (b) English courts: The courts of England have exclusive jurisdiction to settle any dispute (a ‘‘Dispute’’) arising from or connected with the Notes. (c) Appropriate forum: The Issuer agrees that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue to the contrary. (d) Rights of the Holders to take proceedings outside England: Condition 18(b) is for the bene¢t of the Holders only. As a result, nothing in this Condition 18 prevents any Holder from taking proceedings relating to a Dispute (‘‘Proceedings’’) in any other courts with jurisdiction. To the extent allowed by law, Holders may take concurrent Proceedings in any number of jurisdictions. (e) Process agent: The Issuer agrees that the documents which start any Proceedings and any other documents required to be served in relation to those Proceedings may be served on it by being delivered to Danone Holdings (UK) at 4 Hillgate Place, 18-20 Balham Hill, London SW12 9ER or, if di¡erent, its registered o⁄ce for the time being or at any address of the Issuer in Great Britain at which process may be served on it in accordance with Part XXIII of the Companies Act 1985. If such person is not or ceases to be e¡ectively appointed to accept service of process on the Issuer’s behalf, the Issuer shall, on the written demand of any Holder addressed to the Issuer and delivered to the Issuer or to the speci¢ed o⁄ce of the Agent, appoint a further person in England to accept service of process on its behalf and, failing such appointment within 15 days, any Holder shall be entitled to appoint such a person by written notice addressed to the Issuer and delivered to the Issuer or to the speci¢ed o⁄ce of the Agent. Nothing in this Condition shall a¡ect the right of any Holder to serve process in any other manner permitted by law. This Condition applies to Proceedings in England and to Proceedings elsewhere. There will appear at the foot of the Conditions endorsed on each Note the name and speci¢ed o⁄ces of the Agents.

USE OF PROCEEDS SNA5-3.2 SNA12-3.2 It is intended that the net proceeds of any issue of Notes under the Programme will be used by the Issuer for its general corporate purposes. If in respect of any particular issue, there is a particular identi¢ed use of proceeds, this will be stated in the applicable Final Terms.

38 GUARANTEE

The following is a summary of certain provisions of the Deed of Guarantee. The Guarantee will be RDA6-1 available for inspection at the registered o⁄ce of Danone Finance and the speci¢ed o⁄ce of the Agent for the RDA6-2 duration of the Programme. Terms de¢ned in the Terms and Conditions of the Notes (the ‘‘Conditions’’) and the DF Deed of Covenant have the same meanings below. For the purposes of this section ‘‘Guarantee’’, references to the Issuer shall be references to Danone Finance or any Substituted Issuer pursuant to Condition 17.

Guarantee The Guarantor will unconditionally and irrevocably guarantee to the holder of each Note the due and punctual payment of all sums from time to time payable by the Issuer in respect of such Note as and when the same become due and payable and accordingly undertakes to pay such Holder, in the manner and currency prescribed by the Conditions for payments by the Issuer in respect of the Notes, any and every sum or sums which the Issuer is at any time liable to pay in respect of such Note and which the Issuer has failed to pay. Further, the Guarantor will unconditionally and irrevocably guarantee to each Relevant Account Holder the due and punctual payment of all sums from time to time payable by the Issuer to such relevant Account Holder in respect of the Direct Rights as and when the same become due and payable and accordingly undertakes to pay to such Relevant Account Holder, in the manner and currency prescribed by the Conditions for payments by the Issuer in respect of the Notes, any and every sum or sums which the Issuer is at any time liable to pay such Relevant Account Holder in respect of the Notes and which the Issuer has failed to pay.

Indemnity The Guarantor will undertake to each Bene¢ciary that, if any sum referred to in the above paragraph is not recoverable from the Guarantor thereunder for any reason whatsoever (including, without limitation, by reason of any Note, the DF Deed of Covenant or any provision thereof being or becoming void, unenforceable or otherwise invalid under any applicable law), then (notwithstanding that the same may have been known to such Bene¢ciary) the Guarantor will pay such sum by way of a full indemnity in the manner and currency prescribed by the Conditions. This indemnity will constitute a separate and independent obligation from the other obligations in the Deed of Guarantee and will give rise to a separate and independent cause of action.

Status and Negative Pledge The obligations of the Guarantor under the Deed of Guarantee will constitute direct, unconditional and, subject to certain provisions described therein, unsecured obligations of the Guarantor and will rank at least equally with all other unsecured and unsubordinated obligations of the Guarantor (subject, in the event of bankruptcy, to laws a¡ecting creditors’ rights generally and to such preferred exceptions as may from time to time be mandatory by law). So long as any Note is outstanding, the Guarantor, without a¡ecting its ability to dispose of its assets, shall not create any mortgage, pledge, charge or other security interests on any real estate properties or on any of its assets to secure any other bonds or negotiable securities without, at the same time, according the same security to Notes of the same rank.

Taxation All amounts payable in respect of the Notes and the Direct Rights under the Deed of Guarantee will be made free and clear of, and without withholding or deduction for, or on account of, any taxes, duties assessments or governmental charges (together, the ‘‘Taxes’’) of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of France or any other jurisdictions to which the Guarantor is subject or any authority therein or thereof having power to tax unless in each case, such withholding or deduction is required by law. In such event, the Guarantor will pay such additional amounts as will result in receipt by the Bene¢ciaries of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in relation to any payment in respect of the Guarantee to, or to a third party on behalf of, any Bene¢ciary who is liable to such Taxes in respect of such payment by reason of his having or having had some connection with France or such other jurisdictions other than the mere fact of being a Bene¢ciary or receiving any payment in respect of the Guarantee and as more particularly set out in Condition 7. The Guarantee will contain certain other provisions in respect of the preservation of rights, the deposit of the Deed of Guarantee, the bene¢t of the Guarantee and a currency indemnity. The Deed of Guarantee will be governed by, and shall be construed in accordance with, English law.

39 DANONE FINANCE

Name, Incorporation, Registered O⁄ce and Purpose RDA4-5.1.1 RDA4-5.1.2 Danone Finance was incorporated on 19th April, 1962 under French Law as a public limited liability RDA4-5.1.3 company (socie¤ te¤ anonyme) until 15th April, 2061. It is a wholly-owned subsidiary of Groupe Danone (the RDA4-5.1.4 RDA4-7.1 ‘‘Guarantor’’). The registered o⁄ce of Danone Finance is situated at 17 Boulevard Haussmann, 75009 Paris (telephone number +33 1 40 87 40 34). It is registered at the Registre du Commerce et des Socie¤ te¤ s in Paris under number B 622 021 848.

Business RDA4-6.1.1 RDA4-6.2 The primary business activity of Danone Finance is the borrowing of funds for the Group. As such, Danone Finance is the legal entity issuing under the Group’s commercial paper programme and operates in the ¢nancial and derivative markets to manage actively the interest rate and exchange rate risks within the Group.

Principal and future Investments Danone Finance Ireland Ltd has been created as a subsidiary of Danone Finance. Danone Finance RDA4-5.2.1 RDA4-5.2.2 Ireland Ltd is in charge of managing the cash of the Group. RDA4-5.2.3 To ¢nance these new developments, Danone Finance is able to make use of general fund raising in the international capital markets.

Corporate Governance RDA4-11.2 Danone Finance complies with all rules of Corporate Governance in France.

Share Capital Danone Finance’s share capital as at 30th June, 2005 is k9,800,944 divided into 612,559 shares of k16 RDA4-12.1 each. All shares are ordinary shares which are issued, paid-up and wholly-owned by the Guarantor. There is RDA4-14.1.1 only one class of share.

Audit Committee Danone Finance does not have an audit committee. For information on the audit committee in relation RDA4-11.1 to the Group, please see ‘‘Audit Committee’’ below in relation to Groupe Danone.

Auditors RDA4-2.1 The statutory auditor of Danone Finance is Mazars & Gue¤ rard. Mazars & Gue¤ rard Le Vinci 4, alle¤ e de l’Arche 92075 La De¤ fense Mazars & Gue¤ rard are registered with the Paris regional o⁄ce of the Compagnie Nationale des Commissaires aux Comptes (‘‘CNCC’’).

Board of Directors The following are Directors of Danone Finance: RDA4-10.1 Jean Claude Horen, Director and General Manager Head of Department Risk, Chairman of the Board and CEO 17 Boulevard Haussmann, 75009 Paris Groupe Danone, Director represented by Jacques Vincent, Vice-Chairman of Groupe Danone 17 Boulevard Haussmann, 75009 Paris Franois-Xavier Roger, Director Head of Finance Department 17 Boulevard Haussmann, 75009 Paris

40 Ge¤ rard Soularue, Director and Deputy Chief Executive 17 Boulevard Haussmann, 75009 Paris O⁄cer (‘‘Directeur Ge¤ ne¤ ral De¤ le¤ gue¤ ’’) The contact address of the members of the Board of Directors is the same as that of Danone Finance.

Con£ictofinterest To the knowledge of Danone Finance, there is no potential con£ict of interest between any duties to the RDA4-10.2 issuing entity of the persons above and their private interests and or other duties.

Corporate Object In accordance with Article 2 of the Articles of Association, the corporate object of Danone Finance in RDA4-14.2.1 France and abroad is: ç for any ¢nancial transactions and especially those involving the purchase of any interests and shareholdings in any French or foreign companies and businesses whatever the purpose, created or to be created by any means of contribution, by the purchase of shares, bonds or other securities and of any company rights and, generally, by any means whatsoever; the membership of any groups or consortia; ç for this purpose, the study of any market, the observation of trends of the general economic situation and of the conditions speci¢c to various regions; the ¢nancial analysis of listed or unlisted companies, the study of negotiable or non-negotiable securities; ç the management of a portfolio of shareholdings and of securities and the operations relating thereto; ç the study and the completion of any ¢nancing, treasury, foreign exchange risk or interest rate risk managements operations for companies, groups and enterprises placed under direct or indirect control of Groupe Danone; for this purpose, the search for and the negotiation of any means of short-, medium or long-term ¢nancing, the issuing of treasury notes, of commercial paper, the use of any loans and of ¢nancial instruments traded on a stock market or over-the-counter; ç the study and the completion of any hedging operations for purchases and sales of raw materials, of agribusinesses products for companies, groups and enterprises placed under direct or indirect control of Groupe Danone; ç and, generally, any securities, real estate, industrial, commercial and ¢nancial operations connected directly or indirectly to its purpose or capable of being necessary for any operation for its completion.

41 CAPITALISATION OF DANONE FINANCE

Capitalisation and Term Debt RDA4-3.1 The following table sets forth the capitalisation of Danone Finance as at 30th June, 2005(1)

2005 (euro thousands) Total Stockholders’ Equity ...... 77,802 Debt owed to Financial Institutions(2) ...... 3,080,268 Total Debt ...... 3,158,070 Regularisation Account...... 123 Total ...... 3,158,193

(1) There has been no material change in the capitalisation table of Danone Finance since 30th June, 2005. (2) This ¢gure is comprised of short term debt of k597,861 (thousands) added to long term debt of k2,482,407 (thousands).

The information source regarding the ¢nancial information relating to Danone Finance is the Treasury RDA4-13.3.3 Department of Groupe Danone. All information in relation to the ¢nancial information of Danone Finance can be requested by writing to: Mr Jean-Luc CLOAREC DANONE FINANCE Head of the Accounting Department 15 rue Jules Guesdes 75009 Paris France

42 DANONE FINANCE SELECTED FINANCIAL DATA

Balance Sheet Assets As of 31st December, 2004 2003 (euro thousands) Fixed Assets ç Intangible ¢xed assets ...... ç ç ç Tangible ¢xed assets ...... ç ç ç Land ...... ç ç ç Buildings ...... ç ç ç Machinery and Equipment ...... ç ç ç Other ...... ç ç ç Fixed assets in progress ...... ç ç ç Prepaid accounts ...... ç ç Financial investments(A) ...... ç ç ç Long term investments ...... ç ç ç Loans ...... ç ç ç Other investments ...... ç ç ç Loans ...... 2,560,650 2,631,772 ç Other ...... ç ç Total Fixed Assets ...... 2,560,650 2,631,772 Current Assets ç Inventories ...... ç ç ç Trade account receivables ...... ç ç ç Other receivables(B) ...... 3,361,808 3,616,752 ç Marketable securities ...... 1,993,110 1,635,796 ç Cash and equivalents ...... 1,597 2,108 Total Current Assets ...... 5,356,515 5,254,656 Regularisation Accounts ç Prepaid expenses(B) ...... 606 896 ç Expenses to be carried forward ...... ç ç ç Premiums on bond redemptions ...... ç ç ç Foreign exchange di¡erences ...... 22,800 40,159 Total Regularisation Accounts ...... 23,406 41,055 Total Assets ...... 7,940,571 7,927,483

(A) Including part of less than one year: k60,650 (thousands). (B) Including part of less than one year: k3,362,414 (thousands).

43 Liabilities As of 31st December, 2004 2003 (euro thousands) Shareholder’s Equity Capital stock ...... 9,801 9,801 Capital surplus ...... 15,307 15,307 Reserves ç Legal reserves ...... 1,337 1,337 ç Regulated reserves ...... 2,469 2,469 ç Other reserves ...... 176 176 Retained earnings ...... 47,927 51,681 Total Shareholders’ Equity ...... 77,017 80,771 Provisions for Risks and Charges ç Provisions for risks ...... ç 4,390 ç Provisions for charges ...... 49 ç Total Provisions for Risks and Charges ...... 49 4,390 Debts Financial liabilities ç Convertible bonds ...... ç ç ç Bond issues ...... ç ç ç Bank loans(A) ...... 2,857,080 3,145,936 ç Other ¢nancial liabilities ...... 99,067 103,159 Current liabilities ç Account payables ...... ç ç ç Fiscal and social liabilities ...... 180 206 ç Other ...... ç ç Other liabilities ...... 4,891,608 4,586,261 Total Liabilities(B) ...... 7,847,935 7,835,562 Regularisation Accounts ç Prepaid revenues(B) ...... 1,110 2,136 ç Foreign exchange di¡erences ...... 14,460 4,624 Total Shareholders’ Equity and Liabilities ...... 7,940,571 7,927,483

(A) Including bank overdrafts: k12,274 (thousands). (B) Including part of more than one year: k2,049,318 (thousands).

44 Statements of Income As of 31st December, 2004 2003 (euro thousands) Net Sales Total Operating Revenues Other purchases and external expenses ...... 5,871 5,399 Taxes ...... 170 195 Wages Social Charges Depreciation and amortisation Other expenses Total Operating Expenses ...... 6,041 5,594 Operating Income ...... (6,041) (5,594) Income from participations (A) Income from other securities and receivables on ¢xed assets (A) ...... 16,117 44,563 Other interest incomes (A)...... 160,467 193,564 Tack-back of provisions ...... 4,390 2,136 Foreign exchange di¡erences ...... 44,282 478,065 Net capital gain on sales of securities ...... 14,752 13,117 Total Financial Revenues ...... 240,008 731,445 Depreciation and amortisation Interest charges(B) ...... 197,338 252,836 Foreign exchange di¡erences ...... 35,324 467,857 Net capital loss on sales of securities Total Financial Expenses ...... 232,722 720,693 Financial Income ...... 7,286 10,752 Earnings Before Taxes ...... 1,245 5,158 Total Exceptional Revenues ...... ç ç Total Exceptional Expenses ...... ç ç Exceptional Income ...... ç ç Employees’ share in company’s pro¢ts Income taxes ...... 32 237 Net Income ...... 1,213 4,921

(A) Including income from entities of the Group: k154,227 (thousands). (B) Including payment to entities of the Group: k90,302 (thousands).

45 Cash Flow Statement As of 31st December, 2003 (euro thousands) Cash Flow provided by Operations (MBA) ...... 4,921 Net Change in Working Capital (714) Cash Flows provided by Operations Activities...... 4,207 Acquisition of tangible assets Acquisition of intangible assets Acquisition of Financial Investments Change in Other Financial Assets Change in ST/LT Loans (excluded from net debt) ...... 52,319 Proceeds from the sale of assets Cash Flows provided by Investing Activities ...... 52,319 Share Capital Increase/Decrease Dividends Paid Out ...... (10,144) Net Change in Securitised Receivables (net of Cash Collateral) ...... (2,142) New Borrowings ...... 1,236,487 Borrowings Repayment...... (425,510) Change in ST/LT Loans (in net debt) ...... (1,941,529) Investment Subsidies received Change in Bank Overdrafts ...... (1,388) Change in Marketable Securities ...... 1,087,738 Cash Flows provided by Financing Activities ...... (56,488) Other Elements Change in Cash and Cash equivalent ...... 38

46 Review Report We have reviewed the cash £ow statement of Danone Finance (the ‘‘Company’’) as at 31st December, 2003. This cash £ow statement is the responsibility of the Company’s management. Our responsibility is to issue a report on this cash £ow statement based on our review. We conducted our review in accordance with the standards for review engagements generally accepted in France. These standards require that we plan and perform the review to obtain moderate assurance as to whether the cash £ow statement is free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to ¢nancial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the accompanying cash £ow statement is not presented fairly, in all material respects, with accounting principles generally accepted in France. Paris La De¤ fense, 13th October, 2005 for Mazars & Gue¤ rard

Thierry COLIN

47 Cash Flow Statement As of 31st December, 2004 (euro thousands) Cash Flow provided by Operations (MBA) ...... 1,213 Net Change in Working Capital ...... 2,923 Cash Flows provided by Operations Activities...... 4,136 Acquisition of tangible assets Acquisition of intangible assets Acquisition of Financial Investments Change in Other Financial Assets Change in ST/LT Loans (excluded from net debt) ...... 2,102 Proceeds from the sale of assets Cash Flows provided by Investing Activities ...... 2,102 Share Capital Increase/Decrease Dividends Paid Out ...... (4,919) Net Change in Securitised Receivables (net of Cash Collateral) ...... (1,298) New Borrowings ...... 697,874 Borrowings Repayment...... (651,236) Change in ST/LT Loans (in net debt) ...... 312,149 Investment Subsidies received Change in Bank Overdrafts ...... 8,606 Change in Marketable Securities ...... (367,925) Cash Flows provided by Financing Activities ...... (6,749) Other Elements Change in Cash and Cash equivalent ...... (511)

48 Review Report on Cash Flow Statement We have reviewed the cash £ow statement of Danone Finance (the ‘‘Company’’) as at 31st December, 2004. This cash £ow statement is the responsibility of the Company’s management. Our responsibility is to issue a report on this cash £ow statement based on our review. We conducted our review in accordance with the standards for review engagements generally accepted in France. These standards require that we plan and perform the review to obtain moderate assurance as to whether the cash £ow statement is free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to ¢nancial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the accompanying cash £ow statement is not presented fairly, in all material respects, with accounting principles generally accepted in France. Paris La De¤ fense, 6th October, 2005 for Mazars & Gue¤ rard

Thierry COLIN

49 DANONE FINANCE 2005 HALF YEAR RESULTS

Balance Sheet as of 30th June, 2005 RDA4-13.5.2 Assets As of 30th June, 2005 2004 (euro thousands) Fixed Assets ç Intangible ¢xed assets ...... ç ç ç Tangible ¢xed assets ...... ç ç ç Land ...... ç ç ç Buildings ...... ç ç ç Machinery and Equipment ...... ç ç ç Other ...... ç ç ç Fixed assets in progress ...... ç ç ç Prepaid accounts ...... ç ç Financial investments(A) ...... ç ç ç Long term investments ...... 3,026,400 ç ç Loans ...... ç ç ç Other investments ...... ç ç ç Loans ...... ç 2,557,895 ç Other ...... ç ç Total Fixed Assets ...... 3,026,400 2,557,895 Current Assets ç Inventories ...... ç ç ç Trade account receivables ...... ç ç ç Other receivables(B) ...... 17,974 3,217,233 ç Marketable securities ...... 22,740 961,391 ç Cash and equivalents ...... 100,451 2,944 Total Current Assets ...... 141,165 4,181,568 Regularisation Accounts ç Prepaid expenses(B) ...... 833 447 ç Expenses to be carried forward ...... ç ç ç Premiums on bond redemptions ...... ç ç ç Foreign exchange di¡erences ...... 7,422 12,548 Total Regularisation Accounts ...... 8,255 12,995 Total Assets ...... 3,175,820 6,752,458

(A) Including part of less than one year: ’-’. (B) Including part of less than one year: k18,807 (thousands).

50 Balance Sheet as of 30th June, 2005 Liabilities As of 30th June, 2005 2004 (euro thousands) Shareholder’s Equity Capital stock ...... 9,801 9,801 Capital surplus ...... 15,307 15,307 Reserves ç Legal reserves ...... 1,337 1,337 ç Regulated reserves ...... 2,469 2,469 ç Other reserves ...... 176 176 Retained earnings ...... 46,714 46,763 Total Shareholders’ Equity ...... 77,802 77,296 Provisions for Risks and Charges ç Provisions for risks ...... ç ç ç Provisions for charges ...... 49 ç Total Provisions for Risks and Charges ...... 49 ç Debts Financial liabilities ç Convertible bonds ...... ç ç ç Bond issues ...... ç ç ç Bank loans(A) ...... 3,080,268 2,625,632 ç Other ¢nancial liabilities ...... ç 122,232 Current liabilities ç Account payables ...... ç ç ç Fiscal and social liabilities ...... 55 98 ç Other ...... ç ç Other liabilities ...... 17,523 3,923,843 Total Liabilities(B) ...... 3,097,846 6,671,805 Regularisation Accounts ç Prepaid revenues(B) ...... ç 336 ç Foreign exchange di¡erences ...... 123 2,971 Total Shareholders’ Equity and Liabilities ...... 3,175,820 6,752,458

(A) Including bank overdrafts: k11,559 (thousands). (B) Including part of more than one year: k1,842,408 (thousands).

51 Statements of Income as of 30th June, 2005 As of 30th June, 2005 2004 (euro thousands) Net Sales Total Operating Revenues ...... ç ç Other purchases and external expenses ...... 2,608 2,481 Taxes ...... 50 86 Wages Social Charges Depreciation and amortisation Other expenses Total Operating Expenses ...... 2,658 2,567 Operating Income ...... (2,658) (6,041) Income from participations (A) ...... 15,000 ç Income from other securities and receivables on ¢xed assets (A) ...... 2,996 8,964 Other interest incomes (A)...... 35,865 70,409 Tack-back of provisions ...... ç 4,390 Foreign exchange di¡erences ...... 4,068 13,849 Net capital gain on sales of securities ...... 8,174 6,240 Total Financial Revenues ...... 66,103 103,852 Depreciation and amortisation Interest charges (B) ...... 63,358 89,096 Foreign exchange di¡erences ...... 4,499 8,842 Net capital loss on sales of securities Total Financial Expenses ...... 67,857 97,938 Financial Income ...... (1,754) 5,914 Earnings Before Taxes ...... (4,412) 3,347 Total Exceptional Revenues ...... ç ç Total Exceptional Expenses ...... ç ç Exceptional Income ...... ç ç Employees’ share in company’s pro¢ts Income taxes ...... (6,410) 1,904 Net Income ...... 1,998 1,443

(A) Including income from entities of the Group: k49,247 (thousands). (B) Including payment to entities of the Group: k25,258 (thousands).

52 Cash Flow Statement as of 30th June, 2005 As of 30th June, 2005 2004 (euro thousands) Cash Flow provided by Operations (MBA) ...... 1,998 1,443 Net Change in Working Capital ...... (4,432) 6,974 Cash Flows (used in) provided by Operations activities ...... (2,434) 8,417 Acquisition of tangible assets Acquisition of intangible assets Acquisition of Financial Investments Change in Other Financial Assets Change in ST/LT Loans (excluded from net debt) ...... 15,977 1,355 Proceeds from the sale of assets ...... Cash Flows (used in) provided by Investing activities ...... 15,977 1,355 Share Capital Increase / Decrease ...... (3,026,400) ç Dividends Paid out ...... (1,213) (4,919) Net Change in Securitised receivables (net of Cash Collateral) ...... (5,869) 7,580 A New borrowings ...... 284,269 171,789 Borrowings repayments ...... (5,012,272) (1,310,838) Change in ST/LT Loans (in net debt) ...... 5,877,174 456,982 Investment subsidies received Change in Bank overdrafts ...... (715) 6,682 Change in Marketable securities ...... 1,970,337 663,787 Cash Flows (used in) provided by Financing activities ...... 85,311 (8,937) Other Elements Change in Cash and Cash equivalent...... 98,854 835

The 2005 unaudited interim ¢nancial statements relating to Danone Finance have been prepared by the RDA4-13.3.3 Danone Finance accounting department solely for the purpose of this O¡ering Circular. The 2005 interim ¢nancial statements relating to Danone Finance have not been audited. All information in relation to the ¢nancial information of Danone Finance can be requested by writing to: Mr Jean-Luc CLOAREC DANONE FINANCE Head of the Accounting Department 15 rue Jules Guesdes 75009 Paris France

53 GROUPE DANONE

Group Structure Groupe Danone (the ‘‘Company’’ or ‘‘Danone’’) is a socie¤ te¤ anonyme (public limited liability RDA6-3 company) organised and existing under the laws of the Republic of France. It operates under the law relating to socie¤ te¤ scommerciales(French commercial companies) of 24th July, 1966 and the decree of 23rd March, 1967 of the Republic of France, both as amended. The Company is the holding company which owns directly, or indirectly, controlling and non- controlling interests in the subsidiaries and a⁄liates which together make up the group (the ‘‘Group’’).

The objet social (purpose) or activities of the Company are as follows: RDA4-6.1.1 ç Manufacturing and commercial activities in all types of food and packaging products. ç Execution of all types of ¢nancial operations, portfolio management of all types of securities and rights, listed and unlisted, French or foreign; acquisition and management of all types of property and real estate. ç Acquisition of equity interests in all types of companies.

Incorporation and Registration The Company was incorporated on 2nd February, 1899 and registered on 23rd January, 1908 under RDA4-5.1.3 the name CIE Des Glaces et Verres Spe¤ ciaux de France. Its statuts were ¢led at the o⁄ce of Mr. Dufour, RDA4-5.1.2 notary in Paris. The duration of these statuts has since been extended to 13th December, 2040 except in the case of early dissolution or further extension. The Company changed its name from Boussois-Souchon- Nevesel (BSN) to Groupe Danone in July 1994.

The registered and head o⁄ce of the Company is: 17 Boulevard Haussmann, 75009 Paris (telephone RDA4-5.1.1 number +33 1 44 35 33 80). The Company is registered at the Registre du Commerce et des Socie¤ te¤ s in Paris RDA4-5.1.4 under number B 552 032 534.

Financial Year The ¢nancial year of the Company runs from 1st January, up to and including 31st December.

Share Information Stock Exchange Listings and Share Capital The Company’s shares are listed on Euronext Paris (i.e. listings in Paris, Brussels and Amsterdam) and on the stock exchanges of Switzerland and New York (see below ‘‘Listing on the New York Stock Exchange’’).

The share capital of the Company is k132,100,125 represented by 264,200,250 issued and paid-up RDA4-14.1.1 shares of k0.5 par value each as at 30th June, 2005.

Listing on the New York Stock Exchange Up to 1997, Danone shares were represented by unlisted American Depositary Receipts traded over the counter in the United States of America. On 20th November, 1997, Danone shares made their debut on the New York Stock Exchange in the form of American Depositary Shares (‘‘ADSs’’) traded under the symbol ‘‘DA’’ and with one ADS equal to one-¢fth of an ordinary share.

Stock Ownership and Voting Rights As at 30th April, 2005, the total number of voting rights of the Company amounted to 269,919,721. Fully-paid, registered shares which have not changed hands for at least two years, receive double voting rights.

54 Major Shareholders The following table sets forth certain information with respect to the bene¢cial ownership of shares and RDA4-12.1 voting rights by principal shareholders, as of 31st December, 2004. Number of shares Percentage Number of Percentage Beneficially of Shares Voting of Voting Name Owned Owned Rights Rights(1) Eurazeo ...... 9,816,486 3.66% 19,632,972 7.16% Caisse des De¤ po“ ts et Consignations ...... 7,732,754 2.88% 7,732,754 2.82% FCPE ‘‘Fonds GROUPE DANONE’’ ...... 3,827,403 1.43% 6,867,951 2.50% PUBLIC ...... 229,390,158 85.56% 240,128,259 87.52% The Company and its subsidiaries(2) ...... 17,328,719 6.47% ç ç Total ...... 268,095,520 100.00% 274,361,936 100.00%

(1) Double voting rights have been granted for each share fully subscribed, paid for, and bene¢cially owned by the same individual or entity for at least two years. (2) Including 2,882,060 shares (i.e., 1.08 per cent. of the capital) indirectly held.

To the best of the Company’s knowledge there are no shareholders whose bene¢cial ownership represents 5 per cent. or more of the Company’s share capital and voting rights. However, certain ¢nancial institutions, mutual funds, may manage funds that collectively hold more than 5 per cent. of the capital of the Company. There is no clause in the Company’s bylaws giving preferential rights for the acquisition or sale of shares. Furthermore, at 31st December, 2004, existing pledges on shares of the Company in registered form on the books of the Company (nominatif pur) and in registered form on the books of a ¢nancial intermediary (nominatif administre¤ ), respectively, amounted to 1,932 shares held by four shareholders and 5,976 shares held by ten shareholders. As of 31st December, 2004, pursuant to authorisations granted by the general shareholders’ meeting of 15th April, 2004 or prior authorisations, the Group owned, directly and through its Spanish subsidiary, Danone SA, 17,328,719 shares of Groupe Danone, representing 6.47 per cent. of its share capital, of which 9,454,774 shares were held under stock purchase options granted to the Company’s senior management.

Signi¢cant Changes Shareholdings Eurazeo, having exceeded 5 per cent. of Danone’s capital on 22nd February, 2001, reported on 2nd July, 2004 that it held 3.66 per cent. of the capital and 7.16 per cent. of the Company’s voting rights. The Caisse des De¤ po“ ts et Consignations, having exceeded 3 per cent. of the Company’s voting rights on 8th September, 2004, reported on 3rd November, 2004 that it held 2.88 per cent. of the capital and 2.82 per cent. of the Company’s voting rights. Worms & Cie, having reported that it exceeded 5 per cent. of the Company’s capital on 9th April, 1999, reported on 2nd October, 2003 that it no longer held shares of the Company. To the Company’s knowledge, there were no other signi¢cant shareholding changes during the past three years. On 31st December, 2004, the Company conducted a survey of its nominative shares, which revealed the following distribution of the Company’s shareholders:

Institutional Investors ...... 71% ç France ...... 29% ç United States...... 15% ç United Kingdom ...... 9% ç Other ...... 18% Individual shareholders ...... 15% Shareholders represented at the Board of Directors ...... 6% Treasury shares and FCPE ‘‘Fonds GROUPE DANONE’’ ...... 8% Total ...... 100%

55 Changes in share capital AMOUNTS OF CHANGES IN CAPITAL Cumulative Operating resulting in changes in capital Premium over par Amount of total number Year during past five years Debt Stock Nominal value capital of shares in euros in euros in euros 26/01/1999 Conversion of convertible bonds and exercise of warrants 714.352 1,089,022.60 84,229,685.48 112,697,646 73,924,810 07/05/1999 Early reimbursement of the 6.60 per cent. convertible bonds 3,533,766 5,387,191.54 435,509,212.72 118,084,838 77,458,576 31/05/1999 Cancellation of shares (buy back) (4,500,000) (6,860,205.78) (1,014,492,425.58) 111,224,632 72,958,576 07/06/1999 Issuance of shares reserved to the employees 178,576 272,237.36 32,159,943.46 111,496,869 73,137,152 26/01/2000 Conversion of convertible bonds and exercise of warrants 998,436 1,522,105.87 132,940,775.08 113,018,975 74,135,588 26/01/2000 Conversion of capital into euros ç 35,252,200.68 (35,252,200.68) 148,271,176 74,135,588 04/04/2000 Cancellation of shares (buy back) (3,200,000) (6,400,000) (787,663,678.95) 141,871,176 70,935,588 04/05/2000 Conversion of convertible bonds 3,279,711 6,559,422 500,929,127.55 148,430,598 74,215,299 24/05/2000 Issuance of shares reserved to the employees 191,415 382,830 31,181,570.75 148,813,428 74,406,714 05/06/2000 Division of capital value by two 74,406,714 ç ç 148,813,428 148,813,428 30/01/2001 Exercise of warrants 272,780 272,780 14,191,240.06 149,086,208 149,086,208 28/05/2001 Issuance of shares reserved to employees 341,944 341,944 39,908,284.24 149,428,152 149,428,152 20/12/2001 Cancellation of shares (buy back) (8,500,000) (8,500,000) (1,086,466,285.23) 140,928,152 140,928,152 17/01/2002 Exercise of warrants 105,275 105,275 5,432,231.50 141,033,427 141,033,427 03/05/2002 Issuance of shares reserved to employees 357,945 357,945 37,161,865.92 141,391,372 141,391,372 17/10/2002 Cancellation of shares (buy back) (2,800,000) (2,800,000) (364,945,421.00) 138,591,372 138,591,372 20/12/2001 Cancellation of shares (buy back) (1,400,000) (1,400,000) (180,782,108.26) 137,191,372 137,191,372 17/01/2003 Exercise of warrants 143,750 143,750 7,586,252.60 137,335,122 137,335,122 24/04/2003 Issuance of shares reserved to the employees 332,861 332,861 31,042,616.86 137,667,983 137,667,983 22/07/2003 Cancellation of shares (buy back) (1,000,000) (1,000,000) (128,529,669.74) 136,667,983 136,667,983 22/12/2003 Cancellation of shares (buy back) (1,700,000) (1,700,000) (216,882,782.43) 134,967,983 134,967,983 20/01/2004 Exercise of warrants 7,510 7,510 473,881 134,975,493 134,975,493 10/04/2004 Cancellation of shares (buy back) (1,300,000) (1,300,000) (155,926,934.77) 133,675,493 133,675,493 24/04/2004 Issuance of shares reserved to employees 352,232 352,232 37,572,587.44 134,027,725 134,027,725 15/06/2004 Exercise of warrants 2,265 2,265 142,921,50 134,029,990 134,029,990 15/06/2004 Division of capital value by two 134,029,990 ç ç 134,029,990 268,059,980 20/01/2005 Exercise of warrants 35,540 17 770 1,121,287.40 134,047,760 268,095,520 22/04/2005 Cancellation of shares (buy-back) (4,600,000) (2,300,000) (56,206,484,83) 131,747,760 263,495,520 28/04/2005 Issuance of shares reserved to employees 704 730,00 352 365,00 39,246,413.70 132,100,125 264,200,250

56 CONSOLIDATED CAPITALISATION OF DANONE RDA4-.3.1

The following table sets out consolidated shareholders’ equity, minority interests of the Company, and borrowings as of 31st December, 2004. There has been no material change in the consolidated capitalisation of the Company since 31st December, 2004. As at 31st December, 2004 (euro millions) Stockholders’ Equity Issued and fully paid shares of k0,5 each(1) ...... 134 Capital surplus ...... 218 Retained earnings ...... 7,122 Total ...... 7,474 Less Treasury stock ...... (902) Less Translation adjustments...... (1,995) Total Shareholders’ Equity ...... 4,577

Minority Interest ...... 717 Short term bank loans ...... 437 Long Term debt Total long term debt ...... 3,614 Total Consolidated Capitalisation ...... 9,345

(1) There is only one class of shares

As at 31st December, 2004, the Company’s most important contingent liabilities and guarantees were as follows:

(i) Guarantees and pledges The Company and its subsidiaries are parties to a variety of legal proceedings arising out of the normal course of business, including in connection with certain warranties given as part of the divestitures completed between 1997 and 2004. In addition, tax liabilities are usually accrued for when noti¢cations are received by the Group.

(ii) Commitments relating to ¢nancial investments The Danone Springs of Eden BV As part of the creation of the company the Danone Springs of Eden BV, the Group has granted a put option and has been granted a call option on the 33.1 per cent. interest it does not already own, directly or indirectly. These options can be unconditionally exercised in 2008 and, when certain conditions are met, before 2008. The exercise price of these options is based on a valuation of the company that takes into account its economic performance and results. As of 31st December, 2004, the Group’s commitment relating to these options amounted to k140 million.

DS Waters LP As part of the creation of the joint venture DS Waters LP, Suntory has been granted a put option on its shareholding in the joint venture. This option can be exercised in two stages, in November 2006 and November 2008. The exercise price of the option is based on the market value of the joint venture less 15 per cent. with a £oor (k230 million) and a cap (k520 million). As of 31st December, 2004, the Group’s commitment with regards to this put option was valued at k230 million and was partly reserved for. In addition, the Group is committed to subscribe for k100 million of preference shares in the event that DS Waters LP is unable to satisfy its ¢nancial covenants in November, 2006.

57 Other The Group is committed to acquiring the minority shareholdings owned by third parties in some of the less than 100 per cent. owned subsidiaries, should these third parties wish to exercise their put options. The exercise prices of these put options are usually based on the pro¢tability and the ¢nancial position of the subsidiary as of the exercise date. As of 31st December, 2004, the Group’s commitments with regards to these options were estimated at approximately k2.6 billion, of which a majority is currently exercisable. These commitments mainly relate to Danone Spain (k1,860 million) and Danone Asia (k150 million). In January, 2005, a portion of the put option for Danone Asia Pte Ltd was exercised, increasing the Group’s interest from 93.56 per cent. to 96.78 per cent. The Group does not anticipate any other signi¢cant investment associated with these puts in the near future. Equity (including minority) amounted to k4.262 million at the end of June 2005 compared to k4.506 million at the end of December 2004. Net debt increased from k4.538 million at the end of December 2004 to k4.830 million at the end of June 2005. This includes the following Notes issued under the Programme since 31st December, 2004, which remain outstanding as at the end of September 2005: No. Principal Amount Currency Maturity Date 1...... 3,000,000,000 JPY 20th January, 2008 2...... 7,500,000,000 JPY 25th August, 2006 3...... 7,000,000,000 JPY 19th July, 2006 4...... 11,500,000,000 JPY 7th September, 2006

58 BUSINESS OF THE GROUP

Description of Business Overview RDA4-6.1.1 Danone is one of the world’s leading food companies, with worldwide sales and operating income of approximately k13.7 billion and k1.7 billion, respectively, in 2004. By volume, Danone is the world’s leading producer of fresh dairy products, the second largest producer of biscuits and cereal products and the co-leading producer of packaged water. Danone’s portfolio of brands and products includes national and international market leaders such as Danone (Dannon in the United States), the world’s leading brand of fresh dairy products; Evian, the world’s leading brand of bottled still water; Volvic, the Group’s other major international brand of bottled still water; LU, Europe’s leading biscuits brand; Wahaha, the leading Chinese brand of bottled water; and Aqua, the leading brand of packaged water in Indonesia. In addition, the Group also produces sauces (HP Foods, Lea & Perrins and Amoy) and infant food in France (Ble¤ dina). Overall, in 2004 approximately 75 per cent. of world sales were realised through leading positions in local markets. The Group’s strategy of international expansion, through both internal and external growth, has led to a signi¢cant increase in net sales outside Western Europe. These sales represented 40 per cent. of total net sales in 2004 compared to less than 15 per cent. in 1995. The brand name Danone (Dannon in the United States) currently represents approximately 44 per cent. of the Group’s sales and experienced growth of close to 10 per cent. in 2004 at constant exchange rates and scope of consolidation. In addition to fresh dairy products, the brand has been extended to certain other products, such as bottled water in the United States and certain European countries as well as biscuits in Asia. Four of the Group’s brands (Danone, LU, Evian and Wahaha) represent approximately 63 per cent. of the Group’s net sales. These four brands, with a growth rate of more than 8 per cent. in 2004, made a 67 per cent. contribution to the Group’s growth in net sales. In addition, the Group has developed product lines known under the names Actimel (probiotic dairy products), Taille¢ne, Vitalinea, and Ser (low-fat products) and Activia and Bio (bi¢dus products). These brands, which are progressively being extended to all countries in which the Group is present, represented 49 per cent. of the Group’s growth in net sales in 2004. Danone’s main product for export is bottled water, mainly under the brand names Evian and Volvic. Evian was exported to more than 120 countries in 2004 and has strong market shares in the United Kingdom, Germany and Japan. Volvic is the leading still mineral water brand in Germany and the leading imported water in Japan.

Business Strategy The Group’s strategy relies upon (i) a concentration on three categories of products which have substantial elements of health and well-being, (ii) strong and grouped brand names, kept dynamic by sustained advertising campaigns, (iii) a balanced geographical distribution between developed countries and emerging countries and (iv) an ambitious strategy of innovation supported by an ever growing knowledge of consumer expectations. The continued internal growth of the Group in recent years is based upon the Group’s ability to sell quality products satisfying demands of local markets by (i) improving the products sold by recently acquired companies, (ii) introducing products that are accessible to large numbers of consumers in emerging countries in order to develop mass consumption of packaged food products and ensure demand for the Group’s brands for the future and (iii) taking advantage of the Group’s marketing expertise to sell value-added products already sold in other countries, to accompany increases in purchasing power and developments in consumer trends. The Group believes that demographic trends and economic developments in Asia and Latin America will lead in the medium term, despite possible economic di⁄culties, to signi¢cant market expansion. The progressive improvement in the purchasing power of local populations, together with the development of a middle class, is expected to increase demand for bottled beverages and brand name food products. The Group will continue to follow a strategy whereby its three business lines will grow pro¢tably, as a model of development to guarantee the Group’s values and speci¢city. Danone believes that it can sustain a growth rate of 5 per cent. to 7 per cent. at constant exchange rates and scope of consolidation by (i) having a portfolio of activities concentrated on dynamic health-oriented products, especially in fresh dairy products, (ii) advertising and promoting a selected number of major

59 brands, (iii) having a signi¢cant presence in countries which present the best prospects for long-term growth, particularly China, Mexico and Indonesia, especially in beverages, (iv) occupying leading positions internationally in each business line built on strong leading positions in local markets and (v) o¡ering promising innovations based on satisfaction of consumers. Sales growth at constant exchange rates and scope of consolidation is expected to continue to be a leading force for improving the Group’s economic performances, due to the continuing leadership of products generating a favorable mix e¡ect and the achievement by the Group of a critical size in several emerging markets. Concurrently, the Group will continue to promote numerous initiatives aimed at increasing its global e⁄ciency and widespread appeal. In a di⁄cult international economic climate and in the absence of a signi¢cant crisis, Danone expects that its consolidated net margin should improve by between 20 and 40 basis points in 2005 and that net earnings per share should increase by 10 per cent. The Group will continue its policy of making acquisitions in order to consolidate current positions and to hold leading local market positions in each of its business lines. With signi¢cant free cash £ow (de¢ned as cash £ows provided by operating activities less capital expenditures) and a level of net debt (de¢ned as short- term debt and overdrafts, long-term debt and convertible bonds less cash, cash equivalents, marketable securities and, in 2003, items amounting to k130 million re£ected in other long-term assets and short-term loans) representing less than one year of cash £ow provided by operations, the Group possesses the necessary resources to sustain its growth.

Products and Markets The tables below show, for each of the years 2002, 2003 and 2004 consolidated net sales and operating RDA4-6.2 income by principal geographic areas and business lines.

Geographic Areas Year ended 31st December,(1)(2) 2002 2003 2004 (l millions, except percentages) Net Sales(3) Europe(4) ...... 8,841 65.2% 8,876 67.6% 9,354 68.3% Asia ...... 2,080 15.3% 1,957 14.9% 2,072 15.1% Rest of the World ...... 2,634 19.5% 2,298 17.5% 2,274 16.6% Total ...... 13,555 100.0% 13,131 100.0% 13,700 100.0%

Operating Income(3) Europe ...... 1,192 75.0% 1,244 77.6% 1,275 74.8% Asia ...... 277 17.3% 279 17.4% 290 17.0% Rest of the World ...... 175 11.0% 196 12.2% 238 13.9% Unallocated income (expense)(5) .. .. (54) (3.3)% (115) (7.2%) (98) (5.7%) Total ...... 1,590 100.0% 1,604 100.0% 1,705 100.0%

(1) Since 1st January, 2003, the Group has presented its net sales and operating income according to new geographic areas. The new geographic areas are Europe (which includes Western Europe, Central and Eastern Europe), Asia (which includes the Paci¢c region, i.e., Australia and New Zealand) and the Rest of the World (which includes North and South America, Africa and the Middle East). The information for the year 2002 has been revised to re£ect this new presentation. (2) Certain ¢nancial and statistical information in this annual report have been rounded to the next higher or lower number. As a result, various amounts and percentages may not total. (3) Net sales or operating income of the Group’s subsidiaries after elimination of sales between companies belonging to the same area and elimination of inter-region sales. (4) France represented approximately 38.5 per cent. of net sales for Europe in 2004 (41 per cent. in 2003 and 40 per cent. in 2002). (5) Unallocated income (expense) represents the balance of Group income (expenses) that has not been allocated to any speci¢c operating division.

60 Business Lines Year ended 31st December, 2002 2003 2004 (l millions, except percentages) Net Sales(1) Fresh dairy products(2) ...... 6,276 46.4% 6,185 47.1% 6,914 50.5% Beverages(3) ...... 3,691 27.2% 3,557 27.1% 3,427 25.0% Biscuits and cereal products(4) .. .. 3,232 23.8% 3,071 23.4% 3,041 22.2% Other food businesses ...... 356 2.6% 318 2.4% 318 2.3% Total ...... 13,555 100.0% 13,131 100.0% 13,700 100.0%

Operating Income(1) Fresh dairy products(2) ...... 802 50.4% 845 52.7% 947 55.5% Beverages(3) ...... 464 29.2% 537 33.5% 494 29.0% Biscuits and cereal products(4) .. .. 317 19.9% 280 17.4% 301 17.6% Other food businesses ...... 61 3.8% 57 3.6% 61 3.6% Unallocated income (expenses)(5) .. .. (54) (3.3)% (115) (7.2%) (98) (5.7%) Total ...... 1,590 100.0% 1,604 100.0% 1,705 100.0%

(1) Net sales or operating income of Danone’s subsidiaries after elimination of sales between companies belonging to the same division and elimination of intra-group sales. Intra-group sales consist of sales of products between companies that are in di¡erent divisions. Intra-group sales were k19 million, k19 million and k21 million for the years 2002, 2003 and 2004, respectively. (2) In 2002, Danone’s Italian cheese and meat businesses, which were subsequently sold, were only consolidated for the ¢rst four months of the year. (3) In 2002, the bottled water activities in the United States, which were subsequently sold, were only consolidated during the ¢rst six months of the year. In 2002 and 2003, net sales and operating income included the large container water business in the United States, which was deconsolidated at the end of 2003. (4) In 2004, the biscuits businesses in the United Kingdom and Ireland, which were subsequently sold, were only consolidated during the ¢rst nine months of the year. (5) Unallocated income (expense) represents the balance of Group income (expenses) that has not been allocated to any speci¢c operating division.

Fresh Dairy Products With net sales of fresh dairy products in 2004 of more than k6.9 billion, representing approximately RDA4-6.1.1 3.6 million tons, Danone is the leading producer of fresh dairy products worldwide, with more than 18 per cent. of the world’s market share and an average market share of greater than 25 per cent. in each of its ten most signi¢cant markets, which is three times more than its closest competitor. Danone’s principal products in this business line are yogurts and similar products which, together, accounted for over 90 per cent. of Danone’s total net sales of fresh dairy products in 2004, with the remainder represented by infant food sold principally in France under the Ble¤ dina brand and, until April 2002, by Galbani cheese and cured meat.

Principal Markets and Brand Names. Sales in Europe accounted for 75 per cent. of net sales of fresh dairy products and sales in the Rest of the World accounted for 25 per cent. Danone’s principal markets for fresh dairy products in Europe are France, Spain, Germany, Italy and the Benelux countries which, together, accounted for approximately 57 per cent. of Danone’s sales of fresh dairy products in 2004. In the Rest of the World, the Group’s principal markets are the United States, Mexico and Argentina.

In France, Danone is the market leader for fresh dairy products with over one-third of the total market. Danone markets yogurts and similar products and other fresh dairy products principally under the Danone brand name. The Group is also the market leader in France for infant food with its brand Ble¤ dina. Sales in France experienced negative growth in 2004 due primarily to competing retail and discount brands as well as the negative impact of the agreement to reduce prices by 2 per cent., which was signed with retailers in June 2004.

In Spain, Danone has a 55.96 per cent. interest in Danone S.A., Spain’s leading producer of fresh dairy products with a share of the Spanish market of approximately 48 per cent. Danone is also the leading producer of yogurt in Italy, with a market share of approximately 26 per cent.

In Germany, Danone is an important player in a relatively fragmented market. Danone also markets its products in Belgium and Portugal where it holds leading positions through locally established production

61 subsidiaries and in The Netherlands, Denmark, the United Kingdom, Austria, Switzerland, Finland and Sweden through marketing subsidiaries and franchises that sell Danone’s product lines. With the acquisition of the brand Shape in August 2002, the third-leading brand of low-fat fresh dairy products in the United Kingdom, Danone has become the second largest player in the fresh dairy product market in the United Kingdom. In Eastern Europe, Danone is the leading producer of fresh dairy products in Poland, Hungary, the Czech Republic, Slovakia, Bulgaria and Romania. In each of these countries, the Danone brand name has one of the highest levels of brand awareness in the food market. The Group holds the second-leading position by value in Russia, a country where the Group’s production capacity is currently being increased and that is one of the Group’s ‘‘Nouvelles Frontie' res’’ countries due to its potential for growth. In addition, the Group has a market presence in the Ukraine, Croatia and the Baltic countries. Danone is the leading producer of fresh dairy products in terms of both net sales and volumes in Latin America, and has become the leading producer in North America. Danone is in a leading market position in Mexico, Argentina and Canada, and, since 2004, in the United States. The fresh dairy products business in the United States, which experienced growth in net sales of over 30 per cent. in 2004 primarily due to the acquisition of Stony¢eld, is one of the ‘‘Nouvelles Frontie' res’’ countries due to its potential for growth. In the Asia-Paci¢c region, Danone is present in Australia and Japan through licenses or joint ventures. In 2003, the Group reinforced its presence in Japan with the acquisition of an additional equity interest in Yakult, with which the Group entered into a partnership in the beginning of 2004 with the objective of strengthening their global leadership in probiotics and further accelerating the growth of both companies in the functional food and beverage market. Through its association with Shanghai Bright Dairy in China, Danone is pursuing the establishment of the Danone brand in a still relatively small market. Danone also has minority interests in major producers of fresh dairy products in Morocco, Algeria, Tunisia, Saudi Arabia and Israel, which all have leading positions in their respective countries. In South Africa, Danone has a majority interest in Danone Clover and in December 2003 the Group reinforced its presence in Turkey with the acquisition of Nestle¤ ’s dairy business and the purchase of the 50 per cent. interest held by its partner Sabanci in their joint venture.

New Products. Danone is continuously involved in the introduction of new products while trying to RDA4-6.1.2 develop, as quickly and widely as possible, a worldwide market for high-potential products. At the same time, Danone is continuously reviewing or relaunching some of its key existing products to better meet consumer demand in terms of recipes, formats or packaging. The dynamism of the segment is strongly linked to its capacity to deploy, extend and adapt global concepts very rapidly in numerous countries, especially with the low-fat product lines under the Taille¢ne, Vitalinea or Ser brand names, a bi¢dus line under the Bio or Activia brand names, the Actimel line and a line of ‘‘fromage frais’’ (creamy dairy product) for children. In 2004, this segment con¢rmed its ability to adapt global products to local markets. Danacol, a dairy product with preventative e¡ects against cholesterol, was successfully launched in 2004 in a number of countries, including France, Spain, Belgium and the United Kingdom. Activia was also launched in numerous countries, including Germany, Canada, Mexico and The Netherlands. In addition, new varieties were introduced to accelerate the growth of Activia in countries where the brand is already marketed. Finally, drinkable versions of existing products, such as Activia, Danette and Danonino, were launched in France, Spain and Argentina, respectively. In 1995, Danone introduced Actimel, a probiotic dairy product, which is now sold in approximately 20 countries and continues to enjoy very strong sales growth. In 2004, net sales of Actimel at constant exchange rates and scope of consolidation increased by more than 30 per cent., reaching nearly k790 million, and 75 per cent. of this growth came from ¢ve countries: Spain, Germany, France, the United Kingdom and Italy. In addition, Actimel represented 20 per cent. of the Group’s growth in net sales. Furthermore, the strong rates of growth recorded in 2004 in Argentina, Poland and Russia con¢rm the potential of this type of product in emerging countries. In the United States, the ‘‘low carb’’ product line launched in early 2004 has experienced growing success. The U.S. market represents a strong potential for growth, characterised by low consumption per person compared to Western Europe. Due to its strong ability to innovate, in 2004, Danone became the leader in the United States in the fresh dairy products market. Present at the beginning and for more than thirty years in ¢ve major countries, Petit Gervais aux Fruits, the ‘‘fromage frais’’ designed for children, is now consumed in thirty-¢ve countries. This growth has been

62 driven by a strategy of constant innovation and local adaptation (from one country to another the product line has di¡erent names: Danonino, Danimals, Petits Gervais). Furthermore, in 2004, Petit Gervais aux Fruits underwent an organoleptic renovation. A series of studies was performed on children aged ¢ve to eight in thirty-¢ve countries where this product is sold in order to identify consumer preferences. These studies were incorporated in the development of new £avors in each of these countries.

Market Trends. Overall, the market for fresh dairy products on a worldwide basis has grown steadily RDA4-8.2 over the past several years. This market has grown continually in Western Europe, driven by the innovative and dynamic nature of health-oriented products. In the United States, the fresh dairy products market has increased over the past few years, making this product line one of the most dynamic in the food industry. Danone has a strong presence in this market, mainly due to the success of the ‘‘low carb’’ product line introduced in 2004. Emerging markets have generally enjoyed favorable conditions, particularly in Turkey, Argentina and Mexico. Management believes that the introduction of new products, particularly health- oriented products, infant foods and drinkable versions, will allow Danone to continue to improve its market position. In addition, management believes that premiums often associated with innovative products will help raise the total value of the market for fresh dairy products. Danone expects to see continued growth in demand for infant food in France, driven in part by trends toward increased consumption of convenience foods under the in£uence of new lifestyles and the success of new and innovative product lines that combine practicality and nutritional quality.

Beverages RDA4-6.1.1 Danone’s beverage activities comprise packaged water and other non-alcoholic beverages. In 2004, net sales of beverages were k3.4 billion, of which 47 per cent. were in Europe, 42 per cent. in Asia and 11 per cent. in the Rest of the World. Danone is the co-leading producer of packaged water in the world based on volume, with two of the ¢ve leading brands of bottled water in the world (Evian and Volvic) as well as the leading brand of packaged water in the world (Indonesia: Aqua). With approximately 17 billion liters of packaged water sold in 2004, Danone has a market share of approximately 12 per cent. Danone is also the second leading producer of packaged water in Europe, the leading producer of packaged water in Asia- Paci¢c and a major actor in Latin America. Principal Markets and Brand Names. The Group maintains strong market shares in Western Europe, where there is a long tradition of consumption of still and sparkling bottled water. Danone’s principal market for bottled water is France, where Danone has approximately 23 per cent. of the national market in terms of volume, mainly through its Evian, Volvic, Badoit, Salvetat and Arvie brands. Danone is also the leading producer of bottled water in Spain, with approximately 21 per cent. of the Spanish market through its Lanjaro¤ n, Font Vella and Fonter brands. In the United Kingdom, where the still water market is experiencing rapid growth, the Group has a leadership position with a market share greater than 25 per cent., due to its Evian and Volvic brands. In Germany, the Group is the leader in the market for still water. Furthermore, with the formation of The Danone Springs of Eden BV in September 2003 with Eden Springs Ltd, the Group holds the number two position in the European HOD water market. In Eastern Europe, Danone is the market leader in Poland, the largest market in the region, with Zywiec Zdroj, a subsidiary acquired in 2001, and Polska Woda, a joint venture entered into in 2000 with the Italian group San Benedetto. In addition, Danone reinforced its presence in Turkey with the repurchase at the end of 2003 of the 50 per cent. interest held by its partner Sabanci in Danone Hayat. In North Africa and the Near and Middle East, the Group is present in Morocco, where it acquired in 2001, in collaboration with the Moroccan conglomerate ONA, a 30 per cent. interest in Sotherma, a leader in the bottled water market in Morocco. In the United States, the Group reinforced its position in the HOD water market with the formation in 2003 of DS Waters LP, a joint venture which joins together the businesses of Suntory Water Group and the HOD business of Danone in the United States. DS Waters LP holds a leading position in the United States HOD water market, ranking ¢rst in twenty-¢ve major cities in the United States. In addition, Danone has a signi¢cant position in the premium bottled water market through its brand Evian which has been marketed by The Coca-Cola Company since July 2002. Danone is also active in the United States domestic market for water mainly through the Sparkletts and Dannon brands, through the company created in 2002 with The Coca-Cola Company, which holds a 51 per cent. ownership interest in the company. In Canada, the Group is the leader in the HOD water market and reinforced its position in 2003 with the acquisition of Sparkling Springs Water Holdings. The Group is the leader in the bottled water market, with its Crystal Springs, Labrador, Naya and Evian brand names.

63 In Latin America, Danone is the market leader in packaged water. In Mexico, the Group is the leader in the bottled water market with Bonafont, the leading Mexican producer in this market. The Group also holds a 50 per cent. interest in Pureza Aga, a major actor in the Mexican HOD water market. In addition, the Group reinforced its presence in the large container water market in Mexico through the acquisition of Bonafont Garrafones y Servicios in 2004. Based on size, the Mexican bottled water market is one of the largest markets worldwide and the largest emerging market. The Group also has a leading position in the bottled water market in Argentina with the Villa del Sur and Villavicencio brands and is the market leader in Uruguay. In Asia, Danone is the clear leader in packaged water with a market share of around 20 per cent. in the region. In China, the Group is the market leader with more than 25 per cent. of the bottled water market where it sold more than 3 billion liters in 2004, primarily under the Wahaha and Robust brands. The Group is also the market leader of dairy drinks in this country and is a major actor in the cola and ready-to-drink tea markets. In Indonesia, the Group holds a 74 per cent. interest in Aqua, which is the clear leader in the country with more than 50 per cent. of the market. A signi¢cant part of its revenue is achieved through the sale of water in large containers. In 2004, the brand name Aqua had the leading position in the worldwide packaged water market with 4 billion liters of water sold. In Japan, during September 2002, the Group entered into an agreement with Mitsubishi Corp. and Kirin Beverage Corp., one of the leaders in the Japanese beverage market, with the aim of accelerating growth of the Volvic brand in Japan and participating in the growth of the domestic segment of the market. The Group is already the leader by value in the bottled water market in Japan and has a dominant position in the premium segment with its imported water brands Volvic and Evian.

New Products. Once again, innovations contributed signi¢cantly to growth, and the Group con¢rmed RDA4-6.1.2 its ability to respond to the development of consumption trends in 2004. The £avored water segment, where sales were particularly strong in 2004, expanded its range of product types and brands. In Argentina, the Ser product line has been widely developed since 2003. The line, composed of a still water enriched with calcium and a slightly sweetened and £avored sparkling water (Lime &Lemon), is number two in its market and added new £avors in 2004. In Mexico, Levite, the £avored water launched in 2002, represented more than 25 per cent. of Bonafont’s 2004 sales. In France, the sales of £avored Taille¢ne water continue to develop, in spite of building competition. Due to its innovations, the Group holds more than 58 per cent. of the £avored water market in France. In addition, Badoit Rouge,a sparkling water launched in June 2004, aims to expand the territory of the brand and attract soft drink consumers. The functional beverage segment, another area of development, has had signi¢cant growth in Asia, particularly in China where the Group is present through the companies Robust and Wahaha. Sales of Mizone, which was launched in China in 2003, experienced strong growth in 2004 and the launch by Wahaha of G-Vital, an energy drink principally aimed at towns and villages, was a success.

Market Trends. Packaged water is one of the most dynamic segments of the world’s food market due to RDA4-8.2 consumption trends favoring safety and health. The segment of water-based, slightly sweetened, refreshment drinks is a growing market and £avored water is expected to represent a signi¢cant portion of the growth of the segment. Likewise, functional beverages are expected to be one of the areas of growth in the segment, particularly in China and Indonesia. Despite already relatively high levels of per capita consumption, the European market, the largest in the world, continues to experience sustained growth. Outside Western Europe, the global trend in consumption of bottled water has shown a regular progression. Certain countries which already have a signi¢cant market, including China and Indonesia, are experiencing double-digit growth rates. In contrast, the HOD water market in the United States shows lower growth prospects coupled with a more competitive price environment. These unfavorable factors have led the Group to record an impairment charge on its investments in DS Waters LP.

Biscuits and Cereal Products With net sales in 2004 of approximately k3 billion, representing approximately 1.2 million metric tons, RDA4-6.1.1 Danone is the world’s second-leading producer of biscuits and cereal products. Danone’s biscuit products include cookies, which represent more than half of the segment’s net sales, as well as savory snacks,

64 crispbreads and crackers, and packaged cakes. The segment retains a strong potential with, in certain regions, rates of growth higher than the average for other food segments.

Principal Markets and Brand Names. In 2004, sales in Europe accounted for 76 per cent. of biscuit and cereal products net sales, 19 per cent. in Asia and 5 per cent. in the Rest of the World.

Danone’s main product lines are marketed under the LU brand name, which accounts for more than 40 per cent. of the segment’s net sales and which has a dominant position in Western Europe. The Danone brand name is used in Asia, especially in China and Indonesia. The Group also has various local brands worldwide resulting from the many business acquisitions carried out by the Group in recent years. In an attempt to harmonize and bene¢t from these assets, in 2001, the Group implemented a strategy for the progressive transfer to the LU brand name of some of its international businesses, including the re-branding of products in Brazil, Poland, Denmark, Norway, Sweden and Finland in 2001 and 2002.

In Western Europe, Danone is the market leader and has a strong leading position in France, the Benelux countries, Greece and Finland. In Italy, the Group is number two in the market, with Saiwa. In Spain, the Group reinforced its number two position. The Group is no longer present in the United Kingdom and Ireland following the disposal in 2004 of its biscuits businesses in these countries.

In Eastern Europe, Danone is the clear market leader with a strong position in Russia, Poland, Hungary, the Czech Republic and Slovakia.

In Latin America, Danone is an important biscuit and cereal product producer with a presence in Brazil and Argentina. In April 2004, the Group and ARCOR signed an agreement aimed at merging their biscuits businesses in South America in 2005, thus forming the leading player in the market in that region. This agreement is e¡ective as of the beginning of 2005.

In Asia, Danone is the market leader for biscuits and cereal products. Danone has very strong positions in China and India, two of the top three largest biscuit and cereal product markets in the world in terms of volumes consumed. In the biscuits and cereal products segment, Danone is the leading brand in China and Britannia is the leading brand in India. Danone also has leading positions in Malaysia and New Zealand, where it has approximately 40 per cent. of the market share. In Indonesia, the Group continues to reinforce its growth in the biscuit market under the Danone brand name. One of the Group’s objectives in this segment is to develop nutritional products that are a¡ordable to everyone. In order to achieve this objective, the Group is striving to develop product formats that are adapted to the budget of the average consumer.

New Products. Danone’s strategy for innovation tends to emphasise the nutritional qualities of RDA4-6.1.2 biscuits, the establishment of additional eating times throughout the day, the rollout of concepts with a high commercial potential in several countries and the promotion of a¡ordable products in the segment, especially in the Asia-Paci¢c region. Furthermore, in 2004, the strategy for the segment in Europe mainly consisted of renewing certain existing products, with the goal of improving quality and taste in order to di¡erentiate them from competing brands.

The breakfast (‘‘Petit De¤ jeuner’’) product line continued to be deployed across Europe and has an increased number of varieties. Launched in 1999, this range targets breakfast, a mealtime during which the consumption of biscuits remains minor. The biscuits of this range take advantage of the concept of ‘‘Long Lasting Energy’’ (‘‘Energie a' Di¡usion Progressive’’) developed by Danone Vitapole, which has been validated by international experts. The research and development teams of the Group have been able to show that certain complex sugars in cereals are digested slowly and over an optimal length of time release the necessary sugars for the healthy functioning of the body and brain. This nutritional advantage, the result of an original combination and formulation of the biscuit, including preparation and cooking, has been included in the Prince Petit De¤ jeuner line, targeted at the youth market, as well as the LU Petit De¤ jeuner, its equivalent for adults. Launched successfully in France, the line has also been developed in Belgium, Holland, Italy and Spain, and for the past few years has expanded into Hungary, Russia, Poland and the Czech Republic. In 2004, the segment expanded its Petit De¤ jeuner line with the launch of its ¢rst low-fat cookie product.

Revenues for Prince, the Group’s principal brand name for the youth market, continued to increase, particularly in the Group’s key markets such as France, the Benelux countries and Spain.

In addition, in 2004 the segment reinforced its strategy of o¡ering nutritional products accessible to everyone. After the success of Biskuat in Indonesia, the segment launched two products at k0.10 in China, capitalising on the success of its Tuc and Danone & Milk brands.

65 Other Food Businesses RDA4-6.1.1 Net sales of grocery products in 2004 were approximately k318 million. These products are mainly comprised of sauces such as HP Foods in the United Kingdom, Lea & Perrins in the United States and Amoy in China. The Group also markets Asian-style grocery products under the Amoy brand name, which are exported to Western Europe from Hong Kong.

Market Trends. While the market for traditional sauces has increased moderately over the last few RDA4-8.2 years in developed countries, the market for imported exotic sauces has continued to show marked growth. In Asia, particularly in China, the sauce market continues to progress.

Principal Future Investments RDA4-5.2.2 Industrial Investments During the next three years, the Group is to increase its industrial investments by about 50 or 60 million euros in the ‘‘New Frontier’’ countries: ç In Indonesia, the Group is to increase its production capacities in their Biscuit activity, Beverages activity (launching of Mizone) and also in its Fresh Dairy Products (growth of the volume of Milkwat, milky drink improved with added vitamins and calcium); ç In Russia, the Group will continue to invest in order to treble the factory production capacity of Fresh Dairy Products in Tchekov by 2009; ç In Mexico, the Group is to increase its production capacities in its Fresh Dairy Products and Beverages activities (growth in the volume of Levite); and ç In China, the Group is to increase the production capacities of its subsidiary Wahaha (increase in the number of bottling lines). The Group expects that industrial investments will represent about 4.5 per cent. of its 2005 turnover.

Financial Investments Sticking to its strategy of international development, every time opportunities arise, the Group will continue to carry out acquisitions to reinforce its di¡erent areas of activities. Therefore, in 2005, the Group will increase its interest in Shanghai Bright Dairy (Fresh Dairy Product- China) up to about 10 per cent., after obtaining all necessary authorisations to ¢nalise the transaction. Otherwise, the Company and its subsidiaries have made di¡erent agreements to buy the minority shares held by third parties in certain subsidiaries, in case these shareholders would like to sell their interest. Likewise, Eden Springs Ltd and the Suntory Limited Group have options to sell their respective interest in the Danone Springs of Eden BV and DS Waters, LP. Within the framework of these agreements, the Group acquired in January, 2005 complementary interest of 3.22 per cent. in Danone Asia, holding company holding the interests of the Group in Asia. No other signi¢cant investment at the level of the Group is expected in 2005 on account of these agreements. Finally, the General Meeting of 22nd April, 2005 authorised the Board of Directors to acquire a maximum number of 18 million shares, for a maximum purchasing price of 100 euros per share, which would represent a maximum investment of 1800 million euros. The company reserves the right to use a part of its available funds to ¢nance the shares buying back programme and/or to resort to short and medium run debt to cover the additional needs which could exceed the self-¢nancing.

Anticipated sources of funds To ¢nance new developments the Group’s activities are and have always been su⁄cient to provide the RDA4-5.2.3 Group with su⁄cient resources to manage its investment expenditures, debt management and shareholders’ equity. With important free cash £ows and a debt, that can be reimbursed in less than one year of cash £ows, the Group has su⁄cient resources to ensure its development. The Group is also able to make use of its funding programmes.

66 Research and Development Danone’s overall research and development objective is to contribute to the Group’s pro¢table growth by: ç ensuring uncompromising food safety; ç contributing to the development of products to better respond to consumers’ expectations in terms of nutritional value, taste or practicality; and ç designing innovative production processes in line with the Group’s cost reduction policy. In 2000, Danone signi¢cantly revised its research and development policy to transform it into a major competitive advantage of the Group. To increase e⁄ciency, speed and communication within the Group, the research and development teams have been grouped together in one global multidisciplinary center, Danone Vitapole Daniel Carasso, incorporating the three main business lines, and research has been refocused on a limited number of strategic projects. This center, located in the Paris region, has been operational since mid- 2002 and employs approximately 500 researchers, engineers and technicians, supported by 300 people throughout the world. In order to conduct basic research related to nutrition, £avor, and food processing and preservation, Danone regularly collaborates with outside entities such as universities and specialised public research centers. The Group bene¢ts from the expertise of external scienti¢c committees on strategic themes, such as the committee of experts on probiotics or the Evian Center for Water with approximately 30 international experts. Furthermore, the Group maintains permanent relations with the scienti¢c community in order to better understand nutrition issues and to stay informed of the latest developments in research. This permanent dialogue with scientists as well as the support of research programs constitute two of the commitments made by the Group in its Food, Health and Nutritional Charter. Danone has also established an international prize to reward research in nutrition or major contributions to public health. Product development and improvement are the responsibility of the Group’s research and development teams, which apply the results of both internal and outside research. Furthermore, the ¢fteen Danone Institutes worldwide contribute to public awareness regarding nutrition through their activities for the bene¢t of professionals in the ¢elds of nutrition and healthcare and have launched several projects for researchers and practitioners. Since 1991, the Danone Institutes have ¢nancially supported more than 600 research programs in nutrition selected by independent panels, have organised over 130 conferences with 24,000 professionals, have published 72 scienti¢c books and have developed over 70 programs for the public. Finally, as part of its strategy aimed at further accelerating growth in the functional food and beverage market, in the beginning of 2004 the Group concluded an agreement with Yakult Honsha, the world leader in the market for probiotics. As part of this agreement, a liaison o⁄ce was created between the Group and Yakult for facilitating joint projects, particularly in the areas of research and development. Danone spent k131 million, k130 million and k133 million on research and development in 2004, 2003 and 2002, respectively, representing, in 2004, close to 1 per cent. of total net sales.

Purchasing Raw Materials Danone’s principal raw material needs consist of (i) materials needed to produce Danone’s food and beverage products, including primarily milk, fruits, £our, sugar, cocoa and fats or, collectively, food raw materials and (ii) materials needed for packaging its products, primarily plastics and cardboard or, collectively, packaging raw materials. Energy supplies represent a smaller portion of the Group’s purchases. Food Raw Materials. Milk represents the most important food raw material for the Group in terms of cost. In each country where Danone requires milk for the production of its dairy products, the Company’s operating subsidiaries generally enter into contracts with individual local milk producers or dairy cooperatives. In Europe, the price of milk is essentially ¢xed by the European Union or supported by various national governments through quotas and customs charges such that only a small portion of purchases is directly subject to £uctuations in the worldwide market. Milk prices decreased in Europe and North America, but remained on an upward trend in Latin America in 2004. Purchasing for other food raw materials, mainly fruit mixtures, sugar, cocoa, £our and vegetable oils, is managed through global or regional purchasing programs, allowing for synergies in terms of volumes and skills. Purchases of sugar and cocoa are closely monitored because the market structure for these products is highly concentrated, with a small number of intermediaries controlling a substantial portion of total supply.

67 Packaging Raw Materials. The Group also manages its purchases of packaging raw materials through global or regional programs in order to optimise shared knowledge and volume e¡ects. Factors that in£uence the pricing of packaging materials include international and regional supply and demand, installed production capacities and, more generally, economic cycles and oil prices. The price of PET and plastics, which are among the most signi¢cant packaging raw materials purchased by the Group, increased markedly in Europe and Asia in 2004, mainly due to the increase in the price of oil. The other signi¢cant raw materials used for packaging (such as cardboard) did not experience signi¢cant change in prices at the Group level during the year.

Organisational Systems and Information Technology Project Themis In 2000, through the Themis project, the Group decided to restructure its organisation and operating systems and implement an integrated information system or ERP (Enterprise Resource Planning) through an SAP framework. This implementation is expected to result in the optimisation of information £ows within the subsidiaries and within the Group as a whole among the ¢nancial, industrial, quality control, supply chain, commercial and purchasing divisions. After its installation in 2001 in four test sites, the system’s global deployment began in 2002 and continued in 2003 with deployment in 12 subsidiaries and the parent company of the Group. In the beginning of 2004, the Group began a phase of technical stabilisation in order to ensure stable functionality and system security. This phase was followed by a maximisation phase, aimed at optimising its utilisation and improving functionality. The Group has thus decided to defer to the end of 2004 certain installations, in particular in the water division, that were initially planned for 2004, with the exception of Indonesia. Today, approximately 50 per cent. of the Group’s sales in Europe and North America and 70 per cent. of worldwide sales in fresh dairy products are from subsidiaries which have implemented this system. eSupply Chain For several years, the Group has been optimising its purchases, with the goal of improving upstream e⁄ciency as well as collaboration with its suppliers. A dedicated team has been established to this task as part of the eSupply Chain project. This team is in charge of organising the operations and interactions among the Group’s subsidiaries, the Themis teams, suppliers and CPGmarket. CPGmarket is an electronic marketplace, dedicated to the consumer products sector, created in 2000 by Danone, Nestle¤ , Henkel and SAP. It o¡ers suppliers and producers a line of technological solutions to optimise purchases and the various stages of the commercial process and in particular allows electronic quotes and online bids. CPGmarket has been operational since 2001 with a database of over 13,000 active users, suppliers and purchasers, in 60 countries and has generated over k10 billion in online transactions. The Group, which began to deploy CPGmarket’s eSourcing product in 2001, uses it in over 40 of its subsidiaries across the world and for more than 50 per cent. of its purchases in all markets. CPGmarket has also completed applications which allow the standardised, real-time exchange of data between suppliers and purchasers. These exchanges of commercial documents, estimates, plans and inventory levels increase the pro¢t potential of all the participants. In 2004, CPGmarket established more than 410 supplier-purchaser connections. These connections apply the standards developed by the market, utilising various formats and information exchange protocols. After having completed three pilot projects in 12 plants in France, Spain and the Czech Republic, the Group plans to deploy eSupply Chain solutions in all of its European subsidiaries in 2005.

Intellectual Property The Group owns rights to trademarks, brand names, models and copyrights throughout the world. The territorial extent of protection depends on the signi¢cance of the product concerned. The Group has established a chart of its intellectual property and regularly updates and revises its portfolio of products and corresponding rights for each of its subsidiaries in order to monitor the protection of its brand names. The Group is also the owner of patents, licenses and proprietary recipes, as well as substantial know- how and technologies related to its products and the processes for their production, the packages used for its products and the design and exploitation of various processes and equipment used in its business. Such trademarks, brand names, models, copyrights, licenses, patents, proprietary recipes and know- how, which are held by the Company and several operational entities throughout the Group, represent major

68 commercial assets for Danone. The Group is committed to taking appropriate legal steps to protect and exploit such intellectual and industrial property.

Risk Management Policy The Group maintains an active risk management policy to preserve the investment of shareholders and the interests of employees, consumers and the environment. The policy is based upon identi¢cation and control of risks in conjunction with a global policy of insuring goods and potential liabilities. The Group has a global insurance policy based on stringent technical evaluations using worldwide available insurance products based on their availability and local regulations. The insurance policy for risk is uniform for all of the subsidiaries over which the Company has direct or indirect operational control. In addition, in order to optimise its insurance expenses and maintain a strong level of control over its risks, the Group self-insures through its reinsurance subsidiary Danone Re¤ , a company consolidated in the Group’s ¢nancial statements. The self-insurance policy covers certain risks whose costs can be accurately estimated as the Group is aware of their frequency and their ¢nancial impact. Such risks relate essentially to (i) coverage for damage to goods, transport, operating losses and civil liability for the majority of the Group’s companies and (ii) payments for disabilities, training and death for the French subsidiaries. These self-insurance programs are limited to accidents under k7.5 million per accident. Moreover, ‘‘stop loss’’ insurance protects Danone Re¤ against an increased frequency of accidents and loss. These self-insurance programs are managed by professional insurers and the provisions recorded in the ¢nancial statements are determined by independent actuaries.

Customers, Distribution and Marketing Customers While end consumers of Danone products are individual retail customers, the principal portion of Danone’s sales are to major retail and grocery chains. The retail industry has become increasingly concentrated over the past several years, and in many national markets such as France, Germany and Belgium, the Group’s three largest clients represent together more than 30 per cent. of total net sales. This concentration, particularly advanced in Europe, is expected to increase in North America and in emerging countries. In 2004, the Group’s 10 largest customers worldwide, of which six are French retail groups, accounted in the aggregate for approximately 35 per cent. of total consolidated net sales. Danone’s largest client alone, Carrefour, accounted for approximately 11 per cent. of consolidated net sales in 2004. The Group has global partnership agreements with major retailers. These partnership agreements typically contain provisions concerning geographic expansion policy, logistical collaboration or management of food safety. However, they typically exclude pricing terms which remain within the responsibility of the Group’s subsidiaries. In recent years, certain European retail chains have rapidly expanded internationally. The Group has bene¢ted from this expansion by using existing commercial relationships to introduce its products in certain international markets and therefore accelerate its own geographic expansion as well as the international development of its brands. In these new areas, most large retail chains seek to develop the marketing of brand name quality products as their means of growth and pro¢tability.

Distribution Although distribution policies vary among di¡erent countries due to local characteristics, the Group has two major distribution policies: on the one hand the £ow of products towards major retailers and on the other hand the £ow designated for traditional market outlets. In emerging countries, particularly in Asia and Latin America, a large portion of Danone’s sales is made through traditional market outlets or through smaller distribution networks that are most often controlled by the Group. A strong distribution structure is a competitive factor in those countries in which traditional businesses and independent supermarkets still represent a signi¢cant share of food sales. In Latin America, 65 per cent. of sales from fresh dairy products are made through local networks. In Argentina, the Group bene¢ts from a distribution network which enables delivery to over 75,000 sales points through a £eet of 1,000 trucks. Similarly, in Indonesia, the beverages subsidiary Aqua has built a distribution network by signing agreements with 70 exclusive distributors, who account for 80 per cent. of deliveries. This amounts to a total of 10,000 trucks stamped with the Aqua name, circulating in Indonesia every day to supply 1.3 million points of sale.

69 In the past three years, the Group has built leadership positions in the market for water in large containers in North America, Latin America, Asia and, more recently, in Europe. This business requires a direct relationship with the consumers (for example, Home and O⁄ce Delivery (‘‘HOD’’) in the United States and Europe) or through franchised retail shops (for example, Robust in China). The Group follows an active policy of streamlining its distribution facilities in order to increase quality of service while reducing costs. This policy is based on an ongoing assessment of the Group’s organisational models and solutions that have been implemented, especially outsourcing its distribution in collaboration with specialised distributors. The Group has undertaken several initiatives, working closely with its mass retailers to accelerate the development of product categories, to optimise the £ow of products and the inventory levels of its customers. These include e⁄cient consumer response, or ECR, which in addition to achieving stock management, automatic stock replenishments and just-in-time delivery is used to coordinate stock levels between the stores, the client’s warehouses and Danone’s warehouses. ECR is also used to work with distributors to better manage consumer demand and expectations. Danone also works with its customers to develop marketing concepts to enhance its customers’ sales, such as joint promotions for speci¢c events.

Marketing The Group’s advertising and promotional strategy constitutes a key element in the success of its overall strategy based on innovation, brand recognition and market leadership. The Group engages signi¢cant resources to ensure the success of its advertising and promotional strategy and management expects advertising costs, in relation to net sales, to remain at least at the same level in the future. For several years, the Group has been following a policy of resource optimisation by focusing on a few brands in order to maximise e⁄ciency. Accordingly, more and more products have been introduced under leading brand names such as Danone or Taille¢ne/Vitalinea, currently used for fresh dairy products, water and biscuits and cereal products. In addition, each subsidiary of the Group annually conducts a segmentation study of its brand portfolio using internal methods in order to optimise the allocation of advertising budgets. Danone’s operating companies in each business line and geographic market are responsible for developing their own advertising, promotional and sales strategies adapted to local consumer patterns. The Group maintains a decentralised marketing and sales structure in order to provide its operating companies with the proximity and £exibility necessary to respond and adapt to a broad and changing variety of market conditions. In order to ensure (i) consistency of retail strategies within the Group, (ii) an optimal sharing of marketing know-how and (iii) an optimisation of promotional costs, the Group has a director in charge of coordinating commercial retail strategies and initiatives as well as a policy of ensuring that strategic principles and initiatives extend across product lines and geographic areas. The Group believes that direct marketing, which aims at creating direct contact with consumers, will continue to develop rapidly. This strategy, in France, is oriented around a centralised database, which contains 3.5 million French households and which allows the Group to regularly communicate with its customers through personalised mailing campaigns that are adapted to consumer pro¢les. This program includes, notably, a mailing of Danoe¤ , the magazine of the Group’s brands, electronic newsletters, as well as savings coupons and special o¡ers, such as ‘‘Bingo des Marques’’ which regroups all of the Group’s di¡erent brands.

Food Safety and Quality Management Food Safety Food safety is a paramount consideration for Danone. The Group has implemented a strict policy of risk identi¢cation and control. Danone has created a food safety unit at its global multidisciplinary research center, Danone Vitapole, that focuses on identifying and analysing microbiological, chemical, physical or allergenic risks that may threaten the safety of the Group’s products at any stage. The goal is to control the risks in the Group as well as in suppliers. The Group strives to continually improve control over its supply chain by (i) gaining signi¢cant knowledge of the raw materials it purchases, (ii) rigorously monitoring the chain of distribution, (iii) developing a more e⁄cient tracing system and (iv) controlling the production processes by using measures to de¢ne and implement rules relating to hygiene and production based on international standards. For certain risks, such as pesticides and heavy metals, the Group has implemented monitoring programs, while for others, such as risks of allergies, the Group imposes preventative measures for all its subsidiaries

70 that go beyond regulatory requirements. Danone’s policy also includes the implementation of rigorous procedures for crisis management in order to guarantee consumer safety while maintaining the reputation of its brands as well as the use of tracing tools in order to enable the Group to identify the origin of raw materials used, the procedures followed, the controls carried out and the customers to whom the products were sold. Furthermore, the Group periodically carries out a survey in order to evaluate the level of control over all the risks to which the Group’s businesses are exposed. Beyond risks that are scienti¢cally established, the Group remains particularly committed to staying informed of risks perceived by the consumer, such as genetically modi¢ed organisms. To this end, the Group has developed a network of privileged advisors, including consumer associations that discuss and attempt to clarify topics that are of common concern through various formal and informal forums.

Quality Management The Group considers quality to be a managerial responsibility that is rooted in understanding consumers and customers as well as in the pursuit of performance. The Group has made quality a determining factor for all of its processes, businesses and activities. The quality management policy has three main components: (i) the identi¢cation, evaluation and control of food safety risks at each stage from the procurement of raw materials through the consumption of products, (ii) the improvement of all processes and (iii) monitoring the quality perceived by consumers. This quality policy is based on monitoring product performance through internal tests and external consumer testing. In addition, external audits are performed to assess the manufacturing process and hygiene. In the water segment, for example, this process of veri¢cation goes from the original water supply all the way to the actual dispatch of the products for sale. Quality management teams oversee quality systems and their implementation at each of Danone’s operating subsidiaries. They are speci¢cally dedicated to: (i) the development of new products through organoleptic tests performed internally and by consumers, allowing a clear vision of the products on the market as well as how the Group responds to consumers’ needs; (ii) teaching skills to employees in quality control departments through speci¢c training programs allowing for experience sharing and transfer of best practices between di¡erent subsidiaries; and (iii) developing quality control systems in each subsidiary. The Group is accordingly engaged in a process of evolution of the certi¢cation of its industrial sites, from the ISO 9002 standard towards ISO 9001 and towards Danone’s reference system, built on the ISO 22000 standard. This reference system will allow the Group to have a single instrument of quality management and will also facilitate the alignment of all of its action plans towards achieving the objectives de¢ned by the Group.

Regulation In addition to the Group’s own internal regulations, each subsidiary of the Group is subject to local laws and regulations in place in its home country concerning production standards, quality of ingredients and products, labeling and the sale of ¢nished products. In order to ensure respect of these standards, the Group and the divisions have regulatory specialists with an expert and consulting role with all its subsidiaries, which nevertheless remain responsible for compliance with the applicable regulations.

Regulatory and Environmental Matters Regulatory Matters The Group’s activities are subject to stringent laws and regulations relating principally to water, air, noise, ground and waste. These activities are subject to obtaining authorisations and making ¢lings with respect to the protection of the environment under French legislation and equivalent regulations in other countries. Packaging is subject to more or less restrictive regulations depending on location, in particular, the European Directive of 2001 relating to plastic materials and objects in contact with food products, which determined the regulatory framework in Europe. In addition, the Group’s activities are subject to the European Directive of 2003 establishing an exchange system and quotas for greenhouse gas emissions, as well as national regulations implementing this directive. The principal potential risks relating to the environment are: (i) water pollution (essentially organic and biodegradable pollution), (ii) risks related to refrigerating installations (ammonia and other refrigerating liquids), (iii) risks related to the storage of raw materials (£our and sugar silos) or products for the cleaning and disinfection of the Group’s plants (acid or alkaline products) and (iv) risks resulting from amendments to the regulatory provisions relating to packaging. Nevertheless, the Group believes that, in light of its activities, it has a limited negative impact on the environment.

71 Environmental Policy Danone’s environmental policy aims to respond to the growing concerns of many di¡erent parties, especially consumers, about the environmental impact of industrial plants and products. In 1996, the Company’s management established the basic principles of the Group’s commitment to environmental protection through the adoption of an environmental charter which applies to each of Danone’s facilities and divisions (research and development, purchasing, marketing, production and headquarters) in all the countries where the Group operates. The charter aims to create a system of systematic accountability and protection of the environment at every step of production, from design to delivery of the ¢nal product, and encourages the participation of all employees. In addition, since 1991, the Group has had an environmental department to de¢ne and coordinate the application of its environmental policy in collaboration with a network of 50 correspondents throughout the world. This policy focuses on three principal areas: industrial activity, packaging and agriculture-related issues.

Industrial Activity The application of the Group’s environmental policy in its facilities involves three areas: ensuring compliance with regulations, which is linked with control of environmental risks, reduction of water and energy consumption and of waste production through its ‘‘Green Plants’’ (‘‘usines sobres’’) program and, ¢nally, ISO 14001 certi¢cation of the Company’s sites.

Regulatory Compliance and Risk Management Since 1995, all of the Group’s industrial sites are subject to an annual self-evaluation of their environmental situation. The internal evaluation serves to raise the environmental awareness of the actors in the ¢eld, and give them an in-depth knowledge of the sites to enable them to establish action plans. To ensure regulatory compliance and reinforce risk management, the Group implemented in 2000 a program for the audit of its production facilities by a specialised company. The analysis covers multiple criteria such as operating licenses, water supplies, out£ow, atmospheric emissions, storage of raw materials, refrigerating installations, energy, noise and environmental, soil and waste management. The conclusions of the analysis lead to recommendations for the development of quanti¢ed and prioritised plans. At 31st December, 2004, most of the Group’s plants had been audited, excluding those recently acquired, and the Group believes that the results and actions taken indicate that no major risks are present that would have a serious detrimental e¡ect on the environment.

Decrease in the Consumption of Natural Resources Since 1995, the Group’s ‘‘Green Plants’’ program has been aimed at reducing the consumption of water and energy and reducing the production of waste material. This program corresponds to the Group’s desire to promote an economic and sustainable business model, limiting plants to using only the resources absolutely necessary to the plant’s activities. The average ratios of the Group between 2002 and 2004 (total water used per ton produced; thermal energy per ton produced; total energy per ton produced) have improved signi¢cantly. Furthermore, the current rate of waste quanti¢cation is approximately 83 per cent. Targets were ¢xed in September 2001 by the Group’s executive committee for the reduction of the ratios for the consumption of water and energy between 2000 and 2010: 30 per cent. for the consumption of water and thermal energy and 20 per cent. for total energy (thermal and electric). These reductions constitute a signi¢cant response from the Group to the necessity of reducing the emission of gases causing the greenhouse e¡ect.

Environmental Management The Group has implemented an environmental management program (Environmental Management System or ‘‘EMS’’) enabling it to ensure that all of its plants integrate environmental consciousness into plant activities. At 31st December, 2004, 75 industrial sites, ¢ve corporate headquarters and one research center had ISO 14001 certi¢cations, amounting to more than 45 per cent. of the Group’s industrial sites. In the event of an environmental accident, there are procedures in place in each of the plants and sites to manage the situation and minimise the consequences of such an accident. A guide to the management of environmental emergencies was distributed to each plant at the beginning of 2001 and is updated annually.

Packaging Management believes that environmental consciousness in the packaging of the Group’s products can play a large role in the protection of the environment. Since 1992, Danone has been involved in ‘‘Eco- Emballages,’’ an organisation targeted at developing the collection and recycling of packaging in France.

72 Abroad, and in Europe in particular, Danone has actively participated in decreasing packaging waste through ‘‘Point Vert’’ type organisations. Danone also strives to reduce packaging waste at the source by slightly lightening its packaging materials. Danone established a network of contact people who are dedicated to educate and train various interested parties in product development and marketing, in particular through the publication of a new manual on ecological packaging.

Agriculture Most of the Group’s raw materials are agricultural products. In order to protect the environment without diminishing the quality of its products, the Group encourages farmers to adopt farming methods that are more environmentally friendly than traditional methods. The Group implemented pilot operations for its cereal, dairy farm and fresh produce suppliers to test these methods for limiting to a strict minimum the use of fertiliser and phyto-sanitary products, without negatively a¡ecting competitiveness of its operations.

The Group wishes to expand this method progressively through the farms that supply its plants. In 2002, the Group joined forces with Nestle¤ and Unilever on a program called the ‘‘Sustainable Agriculture Initiative’’ (‘‘SAI’’). This initiative comprises sharing experiences in sustainable agriculture with other industrial businesses in cooperation with farmers and consumers, ¢rst in Europe and then throughout the world. Sustainable agriculture, as de¢ned in SAI, is a broader concept than integrated agriculture, as it includes the consumption of natural resources (such as energy sources) and the economic and social impact of operations on local communities. Integrated agriculture should be considered an initial step towards sustainable agriculture. In 2003, the SAI established sustainable agriculture practices for the production of cereal and milk in Europe. In 2004, all of the Group’s milk producers were audited according to internal standards regarding food quality, tracability and security. From 2005, these audits will also cover environmental aspects.

Protection of Water Resources In 1998, the Group and in particular its beverages division joined the 1971 Ramsar Convention on Wetlands to implement awareness campaigns, training and information relating to the preservation and use of wetlands. The Ramsar Convention consists of 133 countries that agreed to policies favoring wetlands, marshes, peatland and other natural water retention sites in the plains or highlands, which ¢lter rainwater and supply the water tables. These zones are fundamental for the conservation of water and water quality. In 2002, following a Group initiative, the Danone-Evian Fund was created to support projects for the protection and sustainable management of water and water quality. The fund, with a k1 million budget, is managed by the Ramsar Convention with the help of a local French non-pro¢t organisation for the defense of coastlines.

In 2004, the Group performed a complete inventory of the springs that it uses, their risks and their level of protection. In addition, the Group promotes sharing best practices among those responsible for the management of these springs. For example, the Evian spring has special protection. The recognised catchment area where Evian natural spring water begins covers over 34 square kilometers at an average altitude of 850 meters. Eighty-¢ve per cent. of this pristine catchment area is covered by forests, natural meadows and marshes. Human presence is limited to a few villages and family farms principally making cheese. Socie¤ te¤ des Eaux Mine¤ rales d’Evian joined with the French government in 1992 to found the Association pour la Protection de l’Impluvium des Eaux Mine¤ rales d’Evian (APIEME). This organisation seeks to protect the Evian natural spring water catchment area by expanding the sewer system, experimenting with more environmentally friendly farming practices and bringing livestock housing into regulatory compliance.

Training and Employee Information The Group attempts to increase the environmental awareness of its employees through various informational tools. Each year, approximately 15,000 employees attend environmental awareness sessions. In addition, a speci¢c training program for the protection of the environment and plant assets is o¡ered to all industrial engineers. Since 2000, an Intranet site has enabled the dissemination of information relating to the environment, the Group’s environmental policy and sharing experience. The environment managers also have tools for the dissemination of such information (letters, ¢lms, CD-Roms, guides).

73 Environmental Expense and Investment Investments for the protection of the environment amounted to approximately k16 million (approximately 3 per cent. of the Group’s total industrial investments) in 2004 of which 35 per cent. were for water (water treatment, puri¢cation stations, economies of consumption), 15 per cent. were for waste (improving collection, storage, sorting) and 11 per cent. were for energy (economies of consumption, conversion to cleaner energy sources). Management does not expect these investments to increase signi¢cantly in the near future. Expenses related to the environment amounted to approximately k35 million in 2004. They included expenses for the management of water, energy and waste and taxes other than packaging charges. In addition, the ¢nes, penalties and damages paid to third parties in connection with environmental issues were less than k1 million in 2004. No signi¢cant provision for risks or expenses related to the environment is included in the Consolidated Financial Statements as of 31st December, 2004.

Competition Competitors in Danone’s core businesses include other large international food and beverage groups, such as Nestle¤ , Kraft, Pepsi Co. and The Coca-Cola Company, as well as smaller companies with focused markets or product lines and food retailing chains o¡ering generic or private label products. The food and beverage sector is highly competitive due to the large number of national and international competitors. Management believes that Danone’s strategy to maintain and improve its pro¢tability is based on the quality, convenience, and innovative aspects of Danone’s products and the strong image associated with its brands in the important areas of health and food safety. Management believes that success in this industry is achieved through strong local market positions, and therefore the Group seeks to be the market leader in each country where it operates. This strategy allows for a long-lasting, balanced and constructive relationship with major distribution networks, by marketing key products yielding growth and pro¢tability. Because Danone’s markets in Western Europe tend to be relatively mature, competition for market share is particularly intense. Danone’s strategy, complemented by a strong advertising component focusing on certain brands, is to di¡erentiate itself from its competitors by marketing innovative, value-added products that respond to a growing consumer demand for health-oriented/well-being food products. Despite the generally mature food and beverage market in North America and intense competition, the Group has competitively penetrated this market in rapidly growing market segments (packaged water and fresh dairy products). In competition with other large food and beverage groups, Danone has based its strategy on its experience in the management of value-added, health-oriented products and its ability to market locally its diverse global product lines. In the Rest of the World, essentially in emerging countries, competition in the Group’s three business lines is high. This is due to the presence of local competitors who usually market products at very low prices, but is also due to the e¡orts of international competitors to penetrate or increase their activities in these high potential markets. Danone’s strategy has consisted of targeting these areas by marketing quality products that emphasise health and safety and are accessible to the greatest number of consumers.

74 Employees At 31st December, 2004, Danone had a total of 89,449 employees worldwide. The table below shows the total number of employees at year-end and the percentage of such employees by geographic area and business line from 2002 through 2004. 2002 2003 2004 Total number of employees ...... 92,209 88,607 89,449 By Geographical Area: France ...... 13.3% 13.9% 13.8% Rest of Europe ...... 22.9% 23.1% 23.6% China ...... 24.1% 25.5% 27.2% Rest of Asia-Paci¢c ...... 21.4% 21.6% 18.7% North and South America ...... 17.8% 15.3% 16.3% Africa ...... 0.5% 0.6% 0.4% Total ...... 100.0% 100.0% 100.0%

By Business Line: Fresh dairy products ...... 21.8% 24.0% 26.7% Beverages ...... 43.5% 44.2% 43.7% Biscuits and cereal products ...... 29.7% 27.1% 24.4% Other food businesses ...... 3.6% 3.2% 2.8% Corporate functions ...... 1.4% 1.5% 2.4% Total ...... 100.0% 100.0% 100.0%

Between 2002 and 2004, permanent employees (those with contracts for indeterminate duration (‘‘contrats a' dure¤ e inde¤ termine¤ e’’) represented approximately 90 per cent. of the average workforce of the Group, the temporary employees representing 10 per cent., equally distributed between part-time employees and those with ¢xed-term contracts (‘‘contrats a' dure¤ ede¤ termine¤ e’’).

Corporate Governance RDA4-11.2 The Group complies with all rules of Corporate Governance in France. The Group has adopted a Code of Ethics to emphasise the importance it attaches to respecting values and rules which each member of the Group should respect in their work. For more information on Corporate Governance, see the 2004 Document de Re¤ fe¤ rence of Groupe Danone.

Legal Proceedings On 5th December 2001, the European Commission concluded that anti-competitive practices in the RDA4-13.6 beer market in Belgium had occurred and imposed a ¢ne of k44.6 million on Group Danone. The entire amount was provisioned in the Group’s accounts at 31st December 2001 and was paid in 2002. In February, 2002, the Group launched a procedure seeking to recover the amount paid, the outcome of which is still pending. In September 2004, the European Commission rendered its decision following an investigation of alleged understandings among beer market participants in France and imposed a ¢ne of k1.5 million on Groupe Danone. The Group is not presently party to litigation or arbitration that could have or has had, in the recent past, a signi¢cant e¡ect on its ¢nancial condition, activities or results. The Company and its subsidiaries are parties to a variety of legal proceedings arising out of the normal course of business, including in connection with certain warranties given as part of the divestitures completed between 1997 and 2004. In some cases, damages are sought and liabilities are accrued for when a loss is probable and can be reasonably estimated.

75 GROUP’S ORGANISATION CHART

The table below presents a list of the Group’s principal operational subsidiaries by business line, including name, country of incorporation or residence, proportion of Danone’s direct and indirect ownership interest and voting interest, if di¡erent, at 31st December, 2004.

FRESH DAIRY PRODUCTS BEVERAGES BISCUITS AND CEREAL PRODUCTS OTHER

EUROPE AMERICAS EUROPE EUROPE AFRICA and FOOD ACTIVITIES THEMIDDLEEAST GERMANY ARGENTINA GERMANY GERMANY UNITED STATES Danone GmbH 100% Danone Argentina Danone Waters LU Snack Foods 100% EGYPT Lea & Perrins 100% S.A. 99.37% Deutschland 100% Griesson De Beukelaer 40% Danone Mashreq 50.98% AUSTRIA Logistica La UNITED KINGDOM SPAIN Danone Ges.mbH 100% Serenissima 50.67% BELGIUM MOROCCO HP Foods 100% Aguas de Lanjaro¤ n78.61% LU Belgique 100% Bimo 50% Dasanbe 50% BELGIUM BRAZIL CHINA Font Vella 77.87% N.V. Danone S.A. 100% Danone Ltda. 100% DENMARK TUNISIA Amoy 93.56% Mahou 33.34% LU Nordic 100% Socie¤ te¤ Tunisienne Shanghai Amoy BULGARIA CANADA FRANCE de Biscuiterie 20% Foods 56.14% Danone Serdika 100% Danone Inc. 100% Evian (SAEME) 100% SPAIN Mont Roucous 100% LU Biscuits 100% ASIA DENMARK MEXICO Seat 99.86% Danone A/S 100% Danone de Mexico 100% Smda 100% FINLAND CHINA Volvic 100% LU Finlande 100% Jiangmen Danone SPAIN UNITED STATES UNITED KINGDOM Biscuits 93.56% Danone S.A. 55.96% The Danone Co. 100% Danone Waters FRANCE Shanghai Danone Danone Canaries Stony¢eld Farm 82.08% UK & Ireland 100% LU France 100% Biscuits Foods Co. (Iltesa) 43.93% Ltd 84.20% ITALY AFRICA and (3) GREECE FINLAND THEMIDDLEEAST Italaquae 92.67% Papadopoulos 60% INDIA Danone Filande Oy 100% THE NETHERLANDS Britannia Industries SOUTH AFRICA The Danone Springs ITALY Ltd. 22.47% FRANCE Clover Danone 55% of Eden BV(2) 66.90% Saiwa 100% Ble¤ dina 100% Clover Beverages 39.46% INDONESIA POLAND Danone 100% HUNGARY PT Danone Biscuits 93.56% Polska Woida 50% ALGERIA Gyo« ri Kelksz 100% (2) Zywiec Zdroj 100% UNITED KINGDOM Danone Djurdjura 51% MALAYSIA Danone Ltd 100% SWITZERLAND NORWAY Danone Biscuits SAUDI ARABIA Evian Volvic Suisse 100% LU Norge 100% Manufacturing (M) GREECE Al Sa¢ Danone(2) 50.10% Sdn Bhd 93.56% TURKEY Delta Dairy(6) 30% THE NETHERLANDS Danone Snakcs Danone Hayat 100% ISRAEL LU Nederland 100% Manufacturing (M) HUNGARY Strauss Dairy 20% AMERICAS Sdn Bhd 93.56% Danone Kft 100% ARGENTINA POLAND MOROCCO Aguas Danone de LU Polska 75% NEW ZEALAND IRELAND Centrale Laitie' re 29.22% Argentina 100% Gri⁄n’s Foods 93.56% Danone Ltd 100% Danone Argentina CZECH REPUBLIC TUNISIA S.A. 99.37% Opavia LU 99.71% PAKISTAN ITALY Stial-Socoges 50% Continental Biscuits Danone SpA 100% CANADA RUSSIA Ltd 46.30% ASIA Danone Waters of Bolshevik 76.42% THE NETHERLANDS Canada 100% Chock and Rolls 76.42% Danone Nederland JAPAN UNITED STATES B.V. 100% Calpis Ajinomoto CCDA Waters 49% SWEDEN Danone 50% Great Brands of LU Sverige 100% POLAND Yakult 18.73% Europe 100% (1) Bakoma 52.43% DS Waters LP 49.96% AMERICAS Danone Sp zoo 100% MEXICO ARGENTINA PORTUGAL Bonafont 100% Danone Argentina Danone Portugal Pureza Aga 50% S.A.(5) 99.37% S.A. 54.02% URUGUAY Salus 43.05% BRAZIL CZECH REPUBLIC Tricamp Alimentos(5) 100% AFRICA and Danone a.s. 98.30% THEMIDDLEEAST COLUMBIA ROMANIA MOROCCO Galletas Noel(4) 30% Danone SRL 65% Sotherma 30% ASIA RUSSIA Danone Industria 70% AUSTRALIA Danone Volga 61.79% Frucor Beverages 93.56% CHINA SLOVAKIA Aquarius 46.78% Danone Spol s.r.o. 100% Wahaha group 47.72% SWEDEN Robust group 86.08% Danone AB 100% Shenzhen Health Drinks 56.14% TURKEY INDONESIA Danonesa Tikvesli 100% Aqua 69.23% UKRAINE JAPAN Danone 100% Kirin Danone Mitsubishi 25% NEW ZEALAND Frucor 93.56%

(1) The Group only holds 18.15 per cent. of the voting rights of Bakoma. (2) By virtue of an agreement among shareholders, the e¡ective voting rights are 50 per cent. (3) Italaquae was sold in January, 2005. (4) The Group sold its interests in Galletas Noe« l in February 2005. (5) These subsidiaries were transferred to Bagley Lationamerica in the beginning of 2005. (6) In February 2005, the Group announced the conclusion of an agreement for the sale of its interest in Delta Dairy.

76 MANAGEMENT AND CONTROL

A. MANAGEMENT RDA4-10.1 The business of the Group is managed by a Board of Directors (‘‘Conseil d’Administration’’). Each director is elected for a maximum of three years but can then be re-elected by the Shareholders’ General Meeting.

The following table sets forth, as at June 2005, the names and ages of the directors of the Company, their principal occupation or employment, the dates of their initial election as directors and the years of expiration of their terms:

Director Term Name Age Principal Occupation or Employment Since Expires Franck Riboud 49 Chairman and Chief Executive O⁄cer (‘‘Pre¤ sident 1992 2007 Directeur Ge¤ ne¤ ral’’). Director: Renault, L’Oreal SA, So¢na, ONA, Quicksilver; Member of Supervisory Board: Acco, Eurazeo Michel David-Weill 72 President of Supervisory Board: Eurazeo, Board 1970 2008(1) Member: Publicis Group Jacques Vincent 59 Vice-Chairman, Directeur Ge¤ ne¤ ral De¤ le¤ gue¤ . 1997 2008(1) Chairman of the Board of Directors: Ecole Normale Supe¤ rieure de Lyon; Director: Mahou, Centrale Laitie' re Hirokatsu Hirano 67 Adviser of the International Business Division of 2004 2008 Yakult Honsha Bruno Bonnell(2) 46 Chairman of the Board of Directors: Infogrames 2002 2008(1) Entertainment; Director: Olympique Lyonnais; Member of the Supervisory Board: Pathe¤ , Eurazeo Emmanuel Faber 41 Senior Vice-President, Asia/Paci¢c. Director: 2002 2007 Ryanair Holdings Plc; Member of the Supervisory Board: Legris Industries Richard Goblet 56 Chief Executive O⁄cer (‘‘Administrateur 2003 2006 d’Alviella(2) De¤ le¤ gue¤ ’’): So¢na SA; Director: Delhaize Groupe, SES Global, Suez-Tractebel, Finasucre SA, Glaces de Moustier sur Sambre, Caledonia Investments, Danone Asia Pte Ltd, Henex SA, Socie¤ te¤ de Participations Industrielles SA; Member of the Supervisory Board: Eurazeo Christian Laubie 66 Member of the ‘‘Haut Conseil du Commissariat aux 1985 2006 Comptes’’ Hakan Mogren(2) 60 Chairman: A⁄body AB, Director: Norsk Hydro 2003 2006 ASA, Marianne and Marcus Wallenberg Foundation; Deputy Chairman: AstraZeneca Plc; Vice-Chairman: Gambro AB; Board Member: Remy Cointreau Jacques-Alexandre 57 Chairman: Casas Atlas SA, Pe¤ trofrance Chimie 1981 2008(1) Nahmias(2) SA, Terminales Portuarias SL; Vice-Chairman: Mercury Oil & Shipping Corporation, Petrofrance Inc Bernard Hours 48 Executive Vice President ç Fresh Dairy Products. 2005 2008 Director: Colombus Cafe¤ , Flam’s, Francesca Jean Laurent(2) 61 Chairman of the Board of Directors: Calyon S.A., 2005 2008 Credit Lyonnais S.A., Institute Europlace de Finance; Director: Banca Intesa SPA. Member of Supervisory Board: Eurazeo

77 Director Term Name Age Principal Occupation or Employment Since Expires Beno|“ t Potier(2) 47 Chairman of the Management Board: Air Liquide 2003 2006 SA; Chairman and Chief Executive O⁄cer: Air Liquide International The contact address of the members of the Board of Directors is the same as that of Groupe Danone. (1) Following a renewal to be proposed at the shareholders’ meeting of 22nd April, 2005. (2) Independent director as determined by the board of directors.

Group General Management (Comite¤ Exe¤ cutif) Franck RIBOUD Chairman and Chief Executive O⁄cer Jacques VINCENT Vice Chairman and Chief Operating O⁄cer Antoine GISCARD-D’ESTAING Executive Vice-President, Finance, Strategy and Information Systems Georges CASALA Executive Vice-President, Biscuits and Cereal Snacks Simon ISRAEL President ç Asia/Paci¢c Emmanuel FABER Executive Vice-President, Asia/Paci¢c Thomas KUNZ Executive Vice-President, Beverages Bernard HOURS Executive Vice-President, French Dairy Products Franck MOUGIN Executive Vice-President, Human Resources

Compensation and Nominal Committee Michel DAVID-WEILL Chairman Jean LAURENT Haken MOGREN

Audit Committee RDA4-11.1 Beno|“ t POTIER Chairman Richard GOBLET D’ALVIELLA Christian LAUBIE For more information on the audit committee, see page 151 of the 2004 Document de Re¤ fe¤ rence of Groupe Danone. The contact address of the members of the Group General Management and Compensation and Nominal Committee is the same as that of Groupe Danone.

Con£ictofInterest RDA4-10.2 To the knowledge of Groupe Danone, there is no potential con£ict of interest between any duties to the issuing entity of the persons above and their private interests and or other duties.

B. CONTROL Statutory Auditors RDA4-2.1 The accounts of the Company are examined by two Statutory Auditors (Commissaires aux Comptes): MAZARS et GUERARD PRICEWATERHOUSECOOPERS La Vinci 63, rue de Villiers 4, alle¤ e de l’Arche 92200 Neuilly sur Seine 92075 Paris La De¤ fense Cedex The Statutory Auditors have issued an unquali¢ed opinion on the 2004 Groupe Danone consolidated ¢nancial statements. Mazars & Gue¤ rard are registered with the Paris regional o⁄ce of the CNCC and PricewaterhouseCoopers are registered with the Versailles regional o⁄ce of the CNCC.

78 Corporate Object RDA4-14.2.1 In accordance with Article 2 of the Articles of Association, the corporate object of Groupe Danone in France and abroad is: ç industry and trade relating to all food products; ç the performance of all and any ¢nancial transactions and the management of all and any transferable rights and securities, listed or unlisted, French or foreign, the acquisition and the management of all and any real estate properties and rights.

79 SELECTED CONSOLIDATED FINANCIAL DATA

The tables below present selected audited consolidated ¢nancial data for the Group for the three-year RDA4-3.1 period ended 31st December, 2004. Such data with respect to the years ended 31st December, 2002, 2003 and 2004 have been extracted or derived from the consolidated ¢nancial statements of the Group, and are quali¢ed by reference to, and should be read in conjunction with, the Consolidated Financial Statements and the Notes thereto. The ¢nancial statements have been prepared in accordance with French GAAP. The principal consolidated ¢gures of the Group are summarised in the following tables.

Consolidated Statements of Income Year ended 31st December, 2002 2003 2004 (in millions of euro) Net sales ...... 13,555 13,131 13,700 Cost of goods sold ...... (6,442) (5,983) (6,369) Selling expenses ...... (4,170) (4,176) (4,294) General and administrative expenses ...... (964) (977) (997) Research and development expenses ...... (133) (130) (131) Other (expense) income ...... (256) (261) (204) Operating income ...... 1,590 1,604 1,705 Non-recurring items ...... 458 (60) (105) Interest expenses, net ...... (110) (70) (73) Income before provision for income taxes and minority interests 1,938 1,474 1,527 Provision for income taxes ...... (490) (488) (457) Income before minority interests...... 1,448 986 (1,070) Minority interests ...... (182) (184) (189) Share in net income of equity method companies...... 17 37 (564) Net income...... 1,283 839 317

80 Consolidated Balance Sheet RDA4-3.1 As of 31st December, 2002 2003 2004 (In millions of euro) ASSETS Property, plant and equipment ...... 6,895 6,630 6,650 Less: accumulated depreciation ...... (3,903) (3,896) (3,968) 2,992 2,734 2,682 Brand names ...... 1,259 1,274 1,147 Other intangible assets, net...... 234 249 253 Goodwill (net) ...... 2,734 2,143 1,817 4,227 3,666 3,217 Investments accounted for under the equity method ...... 1,066 2,073 2,948 Investments in non-consolidated companies ...... 634 766 213 Long-term loans...... 388 457 316 Other long term assets ...... 284 286 198 2,372 3,582 2,675 Non-current assets ...... 9,591 9,982 8,574 Inventories...... 592 571 603 Trade accounts and notes receivable ...... 820 798 764 Other accounts receivable and prepaid expenses ...... 775 648 554 Short-term loans ...... 128 92 40 Marketable securities ...... 2,801 1,763 2,200 Cash and cash equivalents ...... 568 451 466 Current assets ...... 5,684 4,323 4,627 Total assets ...... 15,275 14,305 13,201

LIABILITIES AND STOCKHOLDERS’ EQUITY Capital stock (par value k0.50 per share; shares issued 2004: 268,095,520-2003: 269,950,986-2002: 274,670,244) ...... 137 135 134 Additional paid-in capital ...... 649 336 218 Retained earnings ...... 6,568 7,113 7,122 Cumulative translation adjustments ...... (1,441) (1,914) (1,995) Treasury stock ...... (826) (846) (902) Stockholders’ equity ...... 5,087 4,824 4,577 Minority interests ...... 729 704 717 Convertible bonds ...... 1,000 624 624 Long-term debt ...... 3,092 3,547 2,990 Retirement indemnities, pensions and post-retirement healthcare bene¢ts ...... 272 259 277 Provisions and other long-term liabilities ...... 492 361 403 Stockholders’ equity and non-current liabilities ...... 10,672 10,319 9,588 Trade accounts and notes payable ...... 1,516 1,586 1,659 Accrued expenses and other current liabilities ...... 1,541 1,535 1,517 Short-term debt and bank overdrafts ...... 1,546 865 437 Current liabilities ...... 4,603 3,986 3,613 Total liabilities and stockholders’ equity ...... 15,275 14,305 13,201

81 Consolidated Statements of Cash Flows RDA4-3.1 Year ended 31st December, 2002 2003 2004 (in millions of euro) Net income ...... 1,283 839 317 Share of minority interests in net income of consolidated subsidiaries ...... 182 184 189 Share in net income of a⁄liates ...... (17) (37) 564 Depreciation and amortisation ...... 721 599 559 Dividends received from a⁄liates ...... 30 32 45 Other (621) (157) (46) Cash £ows provided by operations ...... 1,578 1,460 1,628 (Increase)/decrease in inventories ...... 11 (15) (68) (Increase)/decrease in trade accounts and other accounts receivable(1) ...... (109) 37 75 (Increase)/decrease in trade accounts and other accounts payable 148 155 151 Changes in other working capital items ...... 13 16 ç Net change in current working capital...... 63 193 158 Cash £ows provided by operating activities ...... 1,641 1,653 1,786 Capital expenditure ...... (603) (543) (526) Purchase of businesses and other investments ...... (495) (1,088) (98) Proceeds from sale of businesses and other investments .. .. 3,410 216 651 (Increase)/decrease in long-term loans and others assets .. .. (232) (27) 131 Cash £ows (used in) provided by investing activities ...... 2,080 (1,422) 158 Increase in capital and additional paid-in capital...... 47 32 38 Purchase of treasury stock ...... (786) (368) (213) Dividends ...... (404) (432) (456) Increase/(decrease) in long-term debt ...... (467) 603 (326) Increases/(decrease) in short-term debt ...... 245 (1,122) (536) (Increase)/decrease in marketable securities ...... (2,418) 1,032 (415) Cash £ows (used in) provided by ¢nancing activities ...... (3,783) (255) (1,908) E¡ect of exchange rate changes on cash and cash equivalents .. (83) (73) (21) Increase/(decrease) in cash and cash equivalents ...... (145) (117) 15 Cash and cash equivalents at beginning of year ...... 713 568 451 Cash and cash equivalents at end of year ...... 568 451 466

Supplemental disclosures Cash paid during the year: - interest ...... 105 95 105 - income tax ...... 431 511 439

(1) Including the impact of the securitisation programme.

82 Consolidated Results of Operations Net Sales Operating Income Operating Margins(1) 2002 2003 2004 2002 2003 2004 2002 2003 2004 (millions of k, except percentages) By Business Line Fresh dairy products .. .. 6,277 6,185 6,914 802 845 947 12.8% 13.7% 13.7% Beverages ...... 3,691 3,557 3,427 464 537 494 12.6% 15.1% 14.4% Biscuits and cereal products 3,231 3,071 3,041 317 280 301 9.8% 9.1% 9.9% Other food businesses .. .. 356 318 318 61 57 61 17.1% 17.9% 19.2% Unallocated expenses .. .. ç ç ç (54) (115) (98) ç ç ç Total ...... 13,555 13,131 13,700 1,590 1,604 1,705 11.7% 12.2% 12.4%

By Geographic Area(2) Europe(3) ...... 8,841 8,876 9,354 1,192 1,244 1,275 13.5% 14.0% 13.6% Asia ...... 2,080 1,957 2,072 277 279 290 13.3% 14.3% 14.0% Rest of the World ...... 2,634 2,298 2,274 175 196 238 6.6% 8.5% 10.5% Unallocated expenses .. .. ç ç ç (54) (115) (98) ç ç ç Total ...... 13,555 13,131 13,700 1,590 1,604 1,705 11.7% 12.2% 12.4%

(1) Operating income as a percentage of net sales. (2) Since 1st January, 2003, the Group has presented its net sales and operating income according to new geographic areas. The new geographic areas are Europe (which includes Western Europe, Central and Eastern Europe), Asia (which includes the Paci¢c region, i.e., Australia and New Zealand) and the Rest of the World (which includes North and South America, Africa and the Middle East). The information for the year 2002 has been revised to re£ect this new presentation. (3) France represented approximately 38.5 per cent. of the net sales of Europe in 2004 (41 per cent. in 2003 and 40 per cent. in 2002).

Results of Operations for the Years Ended 31st December, 2003 and 2004 Net Sales. Net sales are stated net of rebates and discounts, except for trade support actions that are RDA4-5.2.1 generally invoiced by customers, and which are treated as selling expenses. The term ‘‘trade support actions’’ refers to consideration given by the Group to its customers which represents these customers’ or resellers’ separately invoiced services which, for example, relate to coupon redemption costs, cooperative advertising programs, new product introduction fees, feature price discounts and in-store display incentives, and which are required to be accounted for as a selling expense under French GAAP. Net sales for the Group increased by 4.3 per cent. from k13,131 million in 2003 to k13,700 million in 2004. This increase in net sales resulted from a 7.8 per cent. increase in net sales at constant exchange rates and scope of consolidation, partially o¡set by a negative impact of currency exchange rates (2.3 per cent.) and a net negative e¡ect (1.2 per cent.) of changes in the scope of consolidation of the Group’s operations. The 7.8 per cent. increase in net sales at constant exchange rates and scope of consolidation achieved in 2004 resulted from an increase in sales volumes (5.7 per cent.) and an increase in price per unit of goods sold (2.1 per cent.). The e¡ect of changes in the scope of consolidation primarily resulted from the disposal or deconsolidation of businesses during the last quarter of 2003, particularly the HOD water activities in the United States, which were contributed to DS Waters LP, as well as from the sale in 2004 of the Group’s biscuits activities in the United Kingdom (Jacob’s) and in Ireland (Irish Biscuits). These negative e¡ects were partially o¡set by the ¢rst time consolidation in 2004 of Stony¢eld Farm (Fresh Dairy Products in the United States) and Danone Tikvesli and Hayat (Fresh Dairy Products and Beverages in Turkey), after the Group obtained control of these companies at the end of 2003. The currency conversion e¡ect was mainly due to the appreciation of the euro against the U.S. dollar and currencies related to it, particularly the Chinese yuan. Geographically, at constant exchange rates and scope of consolidation, growth in net sales in 2004 was driven by Asia and the Rest of the World, which achieved growth rates of 12.2 per cent. and 18.6 per cent., respectively. Growth in Europe, which is a more mature market, was 4.6 per cent.

83 The increase in net sales in 2004 at constant exchange rates and scope of consolidation (as compared to the corresponding quarter of 2003) varied between quarters: 1st Quarter ...... 9.8% 2nd Quarter ...... 7.9% 3rd Quarter ...... 5.5% 4th Quarter ...... 8.5% The lower growth in the third quarter of 2004 resulted primarily from unfavorable weather conditions in Europe that negatively impacted sales in the beverages segment, combined with a high basis of comparison due to the heat wave in the summer of 2003. The growth in the fourth quarter remained strong, despite the negative impact arising from the application of an agreement for a permanent lowering of prices signed by manufacturers and retailers in France on 17th June, 2004. Cost of Goods Sold. Cost of goods sold corresponds to production costs, including costs of raw materials (food and packaging), labor costs and depreciation of production machinery. In absolute terms, the cost of goods sold increased by 6.5 per cent. from k5,983 million in 2003 to k6,369 million in 2004. As a percentage of net sales, cost of goods sold increased from 45.6 per cent. in 2003 to 46.5 per cent. in 2004, representing an approximately 90 basis point increase. This increase was mainly due to (i) changes in the scope of consolidation, as the large container water business in the United States, which was contributed to DS Waters LP at the end of 2003, had a di¡erent cost structure than the other businesses of the Group due to the unique mode of distribution and (ii) the increase in cost of certain raw materials, particularly PET, resulting from the increase in the price of oil. These unfavorable factors were partially compensated by the Group’s policy of optimising its use of ingredients and packaging, rationalising raw materials £ows in collaboration with suppliers and increasing productivity. Selling, General and Administrative Expenses. Selling expenses correspond to advertising and promotional expenses, distribution costs and costs relating to the sales force. In absolute terms, selling expenses increased from k4,176 million in 2003 to k4,294 million in 2004, representing 31.8 per cent. and 31.4 per cent. of net sales, respectively. This decrease in percentage of net sales resulted mainly from the deconsolidation of the large container water business in the United States, which had very high distribution costs, but also resulted from the Group’s policy of optimising its advertising and promotional campaigns and reinforcing the accessibility of the Group’s products in terms of price, especially in emerging countries. In 2004, marketing expenses remained stable as a percentage of net sales. General and administrative expenses increased slightly in 2004 to k997 million from k977 million in 2003, representing 7.3 per cent. of net sales in 2004 compared to 7.4 per cent. in 2003. This slight decrease in percentage of net sales was mostly due to the Group’s active policy of reducing structural costs. Research and Development Expenses. Research and development expenses, which represent 1 per cent. of net sales, remained stable between 2003 and 2004, at approximately k130 million. Other Income and Expense. Other income and expense amounted to k204 million in 2004 compared to k261 million in 2003. Other income and expense is composed of the following items: Year ended 31st December, 2003 2004 (k in millions) Employee pro¢t sharing ...... 118 115 Goodwill amortisation (excluding a⁄liates) ...... 84 70 Other ...... 59 19 Total ...... 261 204

The decrease in goodwill amortisation in 2004 resulted primarily from the reorganisation of the HOD water business in the United States at the end of 2003. The decrease in the other items resulted from the reversal of certain accruals that were no longer required. Operating Income. Operating income increased by k101 million, from k1,604 million in 2003 to k1,705 million in 2004. The Group’s operating income and margin under French GAAP are calculated before certain items such as impairment losses and restructuring charges.

84 Operating margin increased by 22 basis points, from 12.2 per cent. in 2003 to 12.4 per cent. in 2004. The 22 basis point increase, which included 32 basis points from the Group’s operating activity, occurred despite the marked increase in the price of raw materials, mainly PET in Asia and Europe, and the negative impact of exchange rates on water exports. Furthermore, operating margin in the second half of 2004 was negatively impacted by the weather conditions in Europe and the application of a general agreement on lowering prices in France concluded with retailers in June 2004. However, changes in the scope of consolidation had only a limited impact on operating margin in 2004. Non-Recurring Items. In 2004, non-recurring items totaled k105 million, consisting essentially of (i) a capital loss of k132 million on the disposal of the Group’s biscuits subsidiaries in the United Kingdom (Jacob’s) and Ireland (Irish Biscuits), partially o¡set by an earn-out on the disposal of BSN Glasspack in the amount of k71 million and capital gains on the disposal of non-consolidated investments, (ii) impairment charges on assets of k34 million and (iii) restructuring and integration costs of k62 million related to the biscuits segment in Europe and South America. In 2003, non-recurring items amounted to k60 million, which mainly consisted of (i) restructuring costs relating principally to the reorganisation of the European biscuits division, (ii) pre-retirement costs and (iii) costs relating to the formation of the joint venture DS Waters LP in the United States. Interest Expense. Net interest expense increased from k70 million in 2003 to k73 million in 2004. Net interest expense is composed of the following items: Year ended 31st December, 2003 2004 (k in millions) Cost of net debt ...... 105 86 Other ¢nancial income and expenses...... (35) (13) Interest expense, net...... 70 73 The decrease in the Group’s average net debt, resulting from the divestitures which have taken place since 2002, was combined with the decrease in the Group’s average ¢nancing costs, resulting from the continued decrease in interest rates in 2002 and 2003 and the issuance in 2002 and 2003 of equity-linked notes at a low interest rate. The decrease in ‘‘Other ¢nancial income and expenses’’ resulted from the repayment of the loan granted to the holding company that acquired BSN Glasspack and lower capital gains on the disposals of Scottish & Newcastle securities. Provision for Income Taxes. The Group’s provision for income taxes decreased from k488 million in 2003 to k457 million in 2004. The e¡ective tax rate decreased from 33.1 per cent. in 2003 to 29.9 per cent. in 2004, due to the application of speci¢c tax rates to capital gains and losses associated with divestitures and reversals of provisions following the favorable outcome of tax audits which were ongoing in 2003. Minority Interests. Minority interests increased from k184 million in 2003 to k189 million in 2004. This increase resulted primarily from improved operating results of companies in which Danone holds signi¢cant minority interests, primarily Wahaha (Beverages in China), and Danone Spain (Fresh Dairy Products in Spain). Share in Net Income of A⁄liates. Share in net income of a⁄liates is detailed as follows: Year ended 31st December, 2003 2004 (k in millions) Share in net income (before goodwill amortisation and impairment charges) 49 58 Goodwill amortisation ...... (12) (22) Other ...... ç (600) Total ...... 37 (564)

In 2004, the item ‘‘Provision and impairment charges’’ includes provision and impairment charges related to DS Waters LP and The Danone Springs of Eden BV. Among the factors that led to the decision to record an impairment charge on the Group’s investment in DS Waters LP were slower volume growth in the

85 industry, an increasingly aggressive price environment in the HOD water market and a faster than anticipated decline of cooler rental revenues. These factors together currently have a greater impact than the cost synergies generated by the joining of the Group’s HOD activities with those of Suntory Limited. In 2003, the item ‘‘Share in net income of a⁄liates’’ included the integration costs of The Danone Springs of Eden BV and DS Waters LP. In 2004, this item includes share in net income of Yakult Honsha, which has been equity accounted for as from April 2004. Net Income. In 2004, the Group’s net income amounted to k317 million compared to k839 million in2003. This reduction resulted from the exceptional impairment charge recorded on the Group’s investments in the HOD water business in the United States and Europe. Excluding these exceptional items, net income for 2004 would have been k917 million, and the increase in net income from 2003 to 2004 would have been 9.3 per cent. Net Income per Share. The diluted net income per share decreased from k3.22 in 2003 to k1.25 in 2004. Excluding provisions and exceptional impairment charges recorded on the Group’s HOD water business, net income per share would have been k3.58, an increase of 11.2 per cent. as compared to 2003.

Net Sales, Operating Income and Operating Margin by Main Business Line In accordance with French GAAP, net sales are stated net of rebates and discounts, except for trade support actions that are generally invoiced by customers, and which are treated as selling expenses. Operating income and margin under French GAAP are calculated before certain items such as impairment losses and restructuring charges. Fresh Dairy Products. Net sales of fresh dairy products increased from k6,185 million in 2003 to k6,914 million in 2004, an 11.8 per cent. increase. At constant exchange rates and scope of consolidation, net sales increased by 10.5 per cent., the strongest performance for the segment in the last years. This internal growth was reinforced by positive e¡ects of changes in the scope of consolidation, primarily related to the consolidation of Stony¢eld (United States) and Danone Tikvesli (Turkey), of which the Group obtained control at the end of 2003.Variations in exchange rates had a 1.7 per cent. negative impact on growth of net sales. Sales of yogurt and similar products, which represent approximately 92 per cent. of the segment’s sales, showed an increase in net sales of 12 per cent. Most of the companies in this segment recorded growth in net sales, with Europe contributing to this growth by approximately 60 per cent. The 2004 results re£ect the segment’s ability to innovate and expand the scope of its brands and key products, whether geographically or through the introduction of new products. Danacol, a dairy product with preventative e¡ects against cholesterol, was successfully launched in a number of countries, including France, Spain, Belgium and the United Kingdom. Actimel, currently present in close to twenty countries, continues to show an increase in sales of close to 30 per cent. at constant exchange rates and scope of consolidation and represented net sales of approximately k790 million in 2004. The low-fat product line Taille¢ne/Vitalinea and the bi¢dus product line Bio/Activia, which represented approximately 7 per cent. and 5 per cent., respectively, of the Group’s total net sales had growth rates of approximately 15 per cent. and 36 per cent., respectively. Operating income improved 12.1 per cent. from k845 million in 2003 to k947 million in 2004, while operating margin remained stable at 13.7 per cent. due to strong growth in countries with lower margins and di⁄culties encountered in markets with higher margins, such as France. Beverages. Net sales of beverages decreased from k3,557 million in 2003 to k3,427 million in 2004, a decrease of 3.6 per cent. resulting from a 6.7 per cent. negative impact from changes in the scope of consolidation and a negative currency exchange rate e¡ect of 4.0 per cent. At constant exchange rates and scope of consolidation, net sales of beverages increased 7.0 per cent. in 2004 compared to 9.9 per cent. in 2003, despite unfavorable climate conditions in Europe in the third quarter. The negative e¡ects arising from changes in the scope of consolidation are primarily related to the deconsolidation of the large container water business in the United States, which was contributed to DS Waters LP in November, 2003. Innovation was again a key factor in the growth of this segment, in particular with the development of functional beverages in Asia, such as Mizone and G-Vital in China. Operating income for beverages decreased 8.0 per cent. from k537 million in 2003 to k494 million in 2004 and operating margin decreased from 15.1 per cent. in 2003 to 14.4 per cent. in 2004. The decrease in operating margin resulted from (i) negative e¡ects related to the increase in the cost of raw materials, in particular PET, (ii) unfavorable exchange rate e¡ects on exports of Evian and Volvic and (iii) variations in climate conditions between 2003 and 2004. On the other hand, the deconsolidation of the large container water business in the United States had a positive impact on operating margin.

86 Biscuits and Cereal Products. Net sales of biscuits and cereal products decreased from k3,071 million in 2003 to k3,041 million in 2004, a decrease of 1.0 per cent. with a negative impact from changes in the scope of consolidation of 3.5 per cent. and a 1.4 per cent. negative exchange rate e¡ect. At constant exchange rates and scope of consolidation, net sales of biscuits and cereal products increased 3.9 per cent. in 2004, compared to an average growth of 1 per cent. over the past three years. In 2004, this increase was again driven by Asia (particularly India and Indonesia) as well as by Latin America. In Europe, sales increased slightly, despite a general decrease in the consumption of cookies and strong competitive pressure from local actors. Operating income for biscuits and cereal products increased from k280 million in 2003 to k301 million in 2004. Operating margin increased from 9.1 per cent. in 2003 to 9.9 per cent. in 2004. This increase re£ects the Group’s e¡orts to improve pro¢tability in the biscuits segment. Other Food Businesses. Net sales of other food businesses remained stable at k318 million in 2004, with growth of 0.5 per cent. at constant exchange rates and scope of consolidation being balanced by negative exchange rate e¡ects. Operating income for the other food business segment increased slightly from k57 million in 2003 to k61 million in 2004. Operating margin increased to 19.2 per cent. in 2004 compared to 17.9 per cent. in 2003, bene¢ting from e¡orts to focus on the most pro¢table product lines.

87 RECENT DEVELOPMENTS

Fresh dairy products RDA4-5.1.5 In April 2005, Groupe Danone and Yakult Honsha Co. announced plans for a joint venture in India. Held equally by the two partners, the new company, to be called Yakult Danone India Private Limited, will be developing the Indian market for probiotics. India has enormous potential, with a fast-growing population of one billion, an economy that grew by around 7 per cent. in 2004 and a long tradition in dairy products. Yakult Danone India will initially market Yakult brand products, beginning at the end of 2005, and Danone probiotics products and brands may be added later. Aimed at creating India’s leading producer of probiotics, the move is part of an agreement in March 2004 calling for cooperation between Groupe Danone and Yakult Honsha. By joining forces the two partners, will reinforce their leadership in probiotics and hope to develop operations jointly in a country where neither is yet present. The alliance will also strengthen joint e¡orts in research and development and raise awareness of probiotics around the world through the Global Probiotics Council and the establishment of joint working groups. Group Danone holds a 20 per cent. interest in Yakult Honsha Co. Danone is present in India in the biscuit category through market leader Britannia. Danone participates through a joint venture with the Wadia Group, representing a long-standing and valued relationship.

Beverages Groupe Danone announced in November 2004 an agreement to sell its bottled water business in Italy (Italaque) to LGR Holding. With reported sales of k150 million in 2003, Italaque is the n‡3 player in the Italian bottled water market with £agship brands including Ferrarelle, Vitasnella and Boario, and a 8.5 per cent. market share of the total market. Italaquae is the leader of the lightly sparkling water segment with its Ferrarelle brand. LGR Holding is controlled by the Italian entrepreneur Carlo Pontecorvo, former vice chairman of AVIR Finanziara Spa, manufacturer of glass packaging and one of the historical suppliers of Italaque. In January 2005, Groupe Danone announced a one time charge of approximately 600 million euros on its US and European HOD partnerships. Following a meeting of its Audit Committee, Groupe Danone announced on 26th January, 2005 that it would incur a charge of approximately 450 million euros in its 2004 accounts in relation to its holding in DS Waters, LLP, the US Home and O⁄ce Delivery bottled water activities (HOD) joint venture that it formed with Suntory Limited in late 2003. This one-time charge consists of an impairment of its holding in DS Waters and a provision for its related commitment to Suntory. Danone’s ¢rst entry into the US HOD market dates back ¢ve years, when it acquired McKesson Water Products, the leading HOD player in the West Coast in early 2000. In late 2003, Danone agreed to combine this business with the Suntory Water Group, a major nationwide HOD player, to create DS Waters, LLP, the US HOD market leader with leading positions in many of the top 25 cities in the United Sates. Among factors leading to this impairment decision on its DS Waters holding, Danone cited slower volume growth patterns for the HOD industry, an increasingly aggressive pricing environment on HOD formats and faster than expected erosion of cooler rental revenues. These negative factors have thus far more than o¡set the cost synergies generated by the combination of Danone and Suntory’s HOD businesses. On 21st July, 2005, Groupe Danone’s CFO announced that the Group was under negotiation to sell the Group’s participation in the HOD business in the United States. The negotiations are at an advanced level.

88 Danone has extended its review of HOD activities to Europe, and as a result, Danone will incur in 2004 an impairment of approximately 150 million euros in relation to Danone Springs of Eden BV, its joint venture with Eden Springs Ltd on the European HOD market. In April 2005, Danone and The Coca-Cola Company reach an agreement on the distribution of DANONE retail bottled water products in the United States. Groupe Danone announced that it and The Coca-Cola Company have agreed to amend their existing agreements regarding the distribution of retail bottled water products in North America. The existing Distribution Agreement between Groupe Danone and the Coca-Cola Company providing for the distribution of Evian products-the world leading mineral water brand in terms of sales revenues-in North America will be amended to, among other things, increase by approximately 20 per cent. the amount to be spent on advertising and promoting Evian products over the next ¢ve years. The Coca-Cola Company will also buy for undisclosed cash amount all of Groupe Danone’s interest in CCDA, becoming the sole owner of CCDA’s business. CCDA was established in 2002 to produce and sell Danone’s United States domestic retail bottled water products, including Dannon and Sparkletts branded products, which will continue to be sold by CCDA.

Non-core businesses In June 2005, Groupe Danone reached an agreement for the sale to Heinz of its sauce business represented by HP Foods in the UK and Lea Perrins in the US. The agreement provides for Heinz to be granted a license for the use of the Amoy brand in Europe. Amoy is a trademark of Danone Asia. In 2004, HP Foods and Lea & Perrins posted sales of approximately k240 million. With their £agship HP Foods and Lea & Perrins brands, the two companies form a key player in the sauce market in both the UK and North America, with substantial positions in Worcester sauces and brown sauces. The HP Foods and Lea & Perrins brands also bene¢t from a high international pro¢le, with a presence in over 75 countries. In addition to its sauce business, HP Foods is involved in the importation of ethnic foods, mainly from China and India, and sold respectively under the Amoy brand and the Rajah brand. The transaction represents an amount of approximately k700 million and Groupe Danone will record a capital gain of over k450 million in its 2005 accounts. It remains subject to relevant authorisations, procedures and regulatory approvals. The sale will mark the completion of the process of refocusing Group operations on the three strategic businesses in which it is leader and co-leader in world markets-Fresh Dairy Products, Beverages (bottled water in particular) and Biscuits.

89 GROUP 2005 HALF YEAR RESULTS

Information from a press release containing ¢nancial highlights for unaudited half year results for the Group: RDA4-3.2

Key figures (k millions) H1 2004 H1 2005 Growth Sales ...... 6,257 6,437 +6.5%1 Trading operating income ...... 820 857 Trading operating margin ...... 13.1% 13.3% +21 bps Underlying net income from continuing activities ...... 468 503 +7.5% Underlying EPS fully diluted from continuing activities .. .. k1.83 2.00 +9.3% Net income attributable to the parent ...... 547 347 Free Cash Flow2 ...... 485 485 2004 and 2005 ¢gures are under IFRS. The net income of Sauce business, in the process of being disposed of, is reported on the line ‘‘discontinued operations’’. 2004 and 2005 Group sales and trading operating income exclude Sauce business.

1. Acceleration of like-for-like sales growth in 2nd quarter 2005: +7.6 per cent. ç Like-for-like sales growth in 1st half: +6.5 per cent. Like-for-like sales increased by 7.6 per cent. in 2nd quarter 2005. In the 1st half, sales by business line and by geographical area were as follows:

Q1 2005 Q2 2005 H1 2005 By business line Fresh Dairy Products ...... +6.4% +8.0% +7.2% Beverages ...... +5.7% +11.0% +8.6% Biscuits & Cereal Products ...... +1.3% +1.3% +1.3% By geographical area Europe ...... +1.9% +3.8% +2.9% Asia ...... +8.3% +13.2% +10.8% Rest of World ...... +15.3% +17.3% +16.4% Group ...... +5.3% +7.6% +6.5% On a reported basis, 2nd-quarter sales increased 4.7 per cent. Changes in exchange rates had a positive impact of 0.4 per cent. and changes in the scope of consolidation a negative impact of minus 3.3 per cent. Like-for-like sales growth of 7.6 per cent. in the 2nd quarter re£ects a 6.2 per cent. rise in volume and a 1.4 per cent. rise in value.

First half 2005 Consolidated net sales of Groupe Danone amounted to k6,437 million in the ¢rst half of 2005 compared to k6,257 million in the ¢rst half of 2004, an increase of 2.9 per cent. on a reported basis. Changes in exchange rates had a negative impact of minus 0.4 per cent. Changes in the scope of consolidation had a negative impact of minus 3.2 per cent. due to the deconsolidation of Biscuits operations in the United Kingdom and Ireland, Biscuits operations in Brazil and Argentina, and Beverages activities in Italy. Like-for-like sales were up 6.5 per cent., with a 5.2 per cent. rise in volume and a 1.3 per cent. rise in value.

1 At constant scope of consolidation and exchange in working capital requirement 2 Cash from operations less capital expenditures and change in working capital requirements

90 Like-for-like sales growth by business line and by geographical area is as follows:

(k millions) H1 2004 H1 2005 By business line Fresh Dairy Products ...... 3,254 3,504 Beverages ...... 1,705 1,772 Biscuits & Cereal Products ...... 1,298 1,161 By geographical area Europe ...... 4,100 4,120 Asia...... 1,047 1,119 Rest of World ...... 1,110 1,198 Group 6,257 6,437 [1]: like-for-like: at constant scope of consolidation and exchange rates

2. Trading operating margin increased 21 basis points to 13.3 per cent. Group trading operating margin rose from 13.1 per cent. in the ¢rst half of 2004 to 13.3 per cent. in the ¢rst half of 2005, an increase of 21 basis points. Changes in the scope of consolidation had a favourable impact on margin while the increase in input costs, mainly plastics, continued to have an adverse impact. Operating income by business line and geographical area is as follows:

Trading operating By business line Trading operating income margin (k millions) H1 2004 H1 2005 H1 2004 H1 2005 Fresh Dairy Products ...... 463 507 14.2% 14.5% Beverages ...... 279 242 16.4% 13.7% Biscuits & Cereal Products ...... 134 153 10.3% 13.2% Unallocated Items ...... (56) (45) ç ç Group ...... 820 857 13.1% 13.3% Trading operating Trading operating income margin (k millions) H1 2004 H1 2005 H1 2004 H1 2005 Europe...... 632 639 15.4% 15.5% Asia ...... 139 126 13.2% 11.3% Rest of World ...... 105 137 9.4% 11.4% Unallocated Items ...... (56) (45) ç ç Group ...... 820 857 13.1% 13.3% Structure of trading operating income

(k millions) H1 2004 %Sales H1 2005 %Sales Sales ...... 6,257 6,437 Cost of goods sold ...... (3,141) 50.2% (3,280) 51.0% Selling expenses ...... (1,598) 25.5% (1,657) 25.7% Other ...... (698) 11.2% (643) 10.0% Trading operating income ...... 820 13.1% 857 13.3% 3. Underlying EPS (fully diluted) from continuing activities grew 9.3 per cent. Underlying net income from continuing activities amounted to k503 million in the ¢rst half of 2005, compared to k468 million in the ¢rst half of 2004, an increase of 7.5 per cent. Negotiations to sell the Group’s participation in the HOD business in the US are now at an advanced stage, and have led it to book a provision of approximately k200 million (net of tax) in 2005 ¢rst-half accounts. This provision makes up the majority of non-current net income for the period. Net income attributable to the parent company amounted to k347 million in the ¢rst half of 2005, compared to k547 million in the ¢rst half of 2004.

91 Underlying Earnings Per Share from continuing activities (fully diluted) were up 9.3 per cent.

(k millions) H1 2004 H1 2005 Trading operating income...... 820 857 Other operating items ...... (20) (0) Operating income ...... 800 857 Cost of net debt ...... (56) (67) Other ¢nancial items ...... 94 (17) Income tax ...... (247) (219) Net income of consolidated companies ...... 591 554 Share in net income of a⁄liates ...... 22 (132) Net income of discontinued activities ...... 23 23 Net income ...... 636 445 Attributable to the parent ...... 547 347 Attributable to minority interests ...... 89 98

(k millions) H1 2004 H1 2005 Underlying net income from continuing activities ...... 468 503 +7.5% + Non current net income from continuing operations ...... 56 (179) + Net income from discontinued operations ...... 23 23 = Net income attributable to the parent ...... 547 347 Underlying earnings per share fully diluted from continuing activities .. .. k1.83 k2.00 +9.3% 4. Financing Free Cash Flow was stable in the ¢rst half of 2005 at k485 million, as the increase in Cash from Operations o¡set the acceleration of capital expenditure in the countries identi¢ed as top priority for development. Capital expenditure amounted to k228 million in the ¢rst half of 2005, compared to k210 million in the same period of 2004. Net debt increased from k4,538 million at the end of December 2004 to k4,830 million at the end of June 2005. Equity (including minorities) amounted to k4,273 million at the end of June 2005 compared to k4,506 million at the end of December 2004. The Group used k529 million of its share buyback authorisation in the ¢rst half of 2005.

5. 2005 Outlook Based on its performance in the 1st half of 2005, Groupe Danone is con¢dent in its ability to achieve for the full year 2005: . like-for-like sales growth now running at between 6 per cent. and 7 per cent. . a rise in trading operating margin of 20 to 40 basis points . growth in underlying earnings per share from continuing activities of approximately 10 per cent. Proceeds of disposals announced by the Group in the ¢rst half of 2005 ç mainly its stake in the Spanish brewer Mahou and Sauce activities in the United Kingdom and the United States ç will amount to approximately k1.3 billion in the 2nd half of the year, representing a capital gain of more than k700 million. Non-current net income will consequently be largely positive for the full year.

FORWARD-LOOKING STATEMENTS This information contains certain forward-looking statements. Although the Company believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties, which could cause actual results to di¡er materially from those anticipated in the forward-looking statements. For a detailed description of the important factors that could cause actual results to di¡er materially from the expectations of the Company or its management, please see the section ‘‘Risk Factors’’.

92 TAXATION

The information below is not intended as tax advice and it does not purport to describe all of the tax SNA5-4.14 considerations that may be relevant to a prospective purchaser of the Notes. Prospective purchasers are urged SNA12-4.1.14 to satisfy themselves as to the overall tax consequences of purchasing, holding and/or selling the Notes.

France Under current French tax law, payments in respect of the Notes which constitute obligations will be made without withholding or deduction for, or on account of, taxes imposed by or on behalf of (i) the Republic of France as provided by Article 131 quater of the Code ge¤ ne¤ ral des impo“ ts, to the extent that the Notes are issued (or deemed to be issued) outside France. Notes constituting obligations under French law will be issued (or deemed to be issued) outside France (i) in the case of syndicated or non-syndicated issues of Notes, if such Notes are denominated in euro, (ii) in the case of syndicated issues of Notes denominated in currencies other than euro, if, inter alia, the Issuer and the relevant Dealers agree not to o¡er the Notes to the public in the Republic of France in connection with their initial distribution and such Notes are o¡ered in the Republic of France only through an international syndicate to quali¢ed investors (investisseurs quali¢e¤ s) as described in Article L.411-2 of the Code mone¤ taire et ¢nancier or (iii) in the case of non-syndicated issues of Notes denominated in currencies other than euro, if each of the subscribers of the Notes is domiciled or resident for tax purposes outside the Republic of France, in each case as more fully set out in the Instruction of the Direction Ge¤ ne¤ rale des Impo“ ts 5I-11-98 dated 30th September, 1998. The tax regime applicable to Notes which do note constitute obligations will be set out in the relevant Final Terms. A Holder of a Note will not be subject to French income taxes (other than withholding taxes) in respect of any payment under the Notes, provided that such Holder is neither domiciled in France nor deemed to be resident, established or carrying on an activity in France for French tax purposes. A corporate Holder of a Note may be subject to French taxes on capital gains in respect of any gains realised on the disposal of the Notes. However, France has entered into a number of tax treaties, most of which provide for an exemption from French taxes on such capital gains. The preceding is only a summary of certain of the implications of an investment in Notes based on current French law and does not purport to constitute legal advice. Prospective purchasers are urged to consult with their own tax advisers prior to purchasing Notes to determine the tax implications of investing in the Notes in the light of each purchaser’s circumstances.

93 SUBSCRIPTION AND SALE

The Dealers have, in an amended and restated dealer agreement dated 19th October, 2005, as (as SNA5-4.13 supplemented, amended or replaced from time to time, the ‘‘Dealer Agreement’’), agreed with each of the SNA5-5.2.1 Issuers and Guarantor a basis upon which they or any of them may from time to time agree to purchase Notes. Any such agreement will, inter alia, make provision for the form and terms and conditions of the relevant Notes, the price at which such Notes will be purchased by the Dealers and the commissions or other agreed deductibles (if any) payable or allowable by the relevant Issuer and Guarantor (if applicable) in respect of such purchase. The Dealer Agreement makes provisions for the resignation or replacement of existing Dealers and the appointment of additional or other dealers. It also contemplates that Notes may be sold on a syndicated basis pursuant to subscription agreements or corresponding documents. Notes may also be sold by each Issuer to institutions who are not Dealers.

General Save for having applied for Notes issued under the Programme to be admitted to trading on the SNA12-4.1.10 Luxembourg Stock Exchange, and save for such other applications for listing and trading on other stock SNA5-4.13 exchange(s) as may be made from time to time in respect of individual Series of Notes, no action has been or will be taken in any jurisdiction by Issuers, the Guarantor or the Dealers that would permit a public o¡ering of Notes, or possession or distribution of any o¡ering material in relation thereto, in any country or jurisdiction where action for that purpose is required. Persons into whose hands this O¡ering Circular and any Final Terms comes are required by the relevant Issuer, and in the case of Danone Finance, the Guarantor, and the Dealers to comply with all laws and regulations in each country or jurisdiction in or from which they purchase, o¡er, sell or deliver Notes or have in their possession or distribute such o¡ering material, in all cases at their own expense.

United States of America The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’) and may not be o¡ered or sold within the United States or to, or for the account or bene¢t of, U.S. persons except in certain transactions exempt from or not subject to the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.

Notes in bearer form are subject to U.S. tax law requirements and may not be o¡ered, sold or delivered within the United States or its possessions or to United States persons, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meaning given to them by the United States Internal Revenue Code of 1986 and regulations thereunder.

Each Dealer has agreed or will agree that, except as permitted by the Dealer Agreement, it has not o¡ered and sold, and will not o¡er or sell, Notes of any issue (a) as part of their distribution at any time and (b) otherwise until 40 days after the completion of the distribution of the Notes comprising the relevant Tranche as certi¢ed to the Agent or the Issuer by such Dealer (or in the case of a sale of a Tranche of Notes to or through more than one Dealer, by each of such Dealers as to the Notes of such issue purchased by or through it, in which case the Agent shall notify each such Dealer when all such Dealers have so certi¢ed) within the United States or to, or for the account or bene¢t of, U.S. persons, and that it will have sent to each dealer to which it sells Notes of such issue during the distribution compliance period a con¢rmation or other notice setting forth the restrictions on o¡ers and sales of such Notes within the United States or to, or for the account of bene¢t of, U.S. persons.

In addition, until 40 days after the commencement of the o¡ering of any issue of Notes, an o¡er or sale of Notes of such issue within the United States by any dealer (whether or not participating in the o¡ering of such Notes) may violate the registration requirements of the Securities Act if such o¡er or sale is made otherwise than in accordance with an applicable exemption from registration under the Securities Act.

In addition, certain Series of Notes in respect of which any payment is determined by reference to an index or formula, or to changes in prices of securities or commodities, or certain other Notes will be subject to such additional U.S. selling restrictions as the relevant Issuer and the relevant Dealers may agree, as indicated in the relevant Final Terms. Each Dealer has agreed that it will o¡er, sell and deliver such Notes only in compliance with such additional U.S. selling restrictions.

94 European Economic Area In respect of Notes the denomination per unit of which is less than Euro 50,000 (or its equivalent in another currency): in relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a ‘‘Relevant Member State’’), each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that with e¡ect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the ‘‘Relevant Implementation Date’’) it has not made and will not make an o¡er of Notes to the public in that Relevant Member State except that it may, with e¡ect from and including the Relevant Implementation Date, make an o¡er of Notes to the public in that Relevant Member State: (a) in (or in Germany, where the o¡er starts within) the period beginning on the date of publication of a prospectus in relation to those Notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and noti¢ed to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive and ending on the date which is 12 months after the date of such publication; (b) at any time to legal entities which are authorised or regulated to operate in the ¢nancial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; (c) at any time to any legal entity which has two or more of (1) an average of at least 250 employees during the last ¢nancial year; (2) a total balance sheet of more than k43,000,000 and (3) an annual net turnover of more than k50,000,000, as shown in its last annual or consolidated accounts; or (d) at any time in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this provision, the expression an ‘‘o¡er of Notes to the public’’ in relation to any Notes in any Relevant Member State means the communication in any form and by any means of su⁄cient information on the terms of the o¡er and the Notes to be o¡ered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

United Kingdom Each Dealer has agreed that: (i) Financial Promotions: It has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) received by it in connection with the issue or sale of such Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; (ii) General Compliance: It has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to such Notes in, from or otherwise involving the United Kingdom; and (iii) Accepting Deposits in the United Kingdom: In relation to any Notes which have a maturity of less than one year (a) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (b) it has not o¡ered or sold and will not o¡er or sell any Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of section 19 of the FSMA by the Issuer.

Japan The Notes have not been and will not be registered under the Securities and Exchange Law of Japan and, accordingly, each Dealer has undertaken that it will not o¡er or sell any Notes, directly or indirectly, in Japan or to, or for the bene¢t of, any Japanese Person or to others for re-o¡ering or resale, directly or

95 indirectly, in Japan or to any Japanese Person except under circumstances which will result in compliance with all applicable laws, regulations and guidelines promulgated by the relevant Japanese governmental and regulatory authorities and in e¡ect at the relevant time. For the purposes of this paragraph, ‘‘Japanese Person’’ shall mean any person resident in Japan, including any corporation or other entity organised under the laws of Japan.

France The relevant Issuer and each Dealer has represented and agreed that, in connection with their initial distribution, it has not o¡ered or sold and will not o¡er or sell, directly or indirectly, the Notes to the public in France, and has not distributed or caused to be distributed and will not distribute or cause to be distributed to the public in France, the O¡ering Circular or any other o¡ering material relating to the Notes, and that such o¡ers, sales and distributions have been and shall only be made in France to (i) quali¢ed investors (investisseurs quali¢e¤ s) and/or (ii) a restricted circle of investors (cercle restreint d’investisseurs) acting for their own account, all as de¢ned in and in accordance with Article L.411-2, D.411-1 and D.411-2 of the Code Mone¤ taire et Financier.

96 FINAL TERMS

PRO FORMA FINAL TERMS FOR USE IN CONNECTION WITH ISSUES OF SECURITIES TO BE ADMITTED TO TRADING ON AN EU REGULATED MARKET AND/OR OFFERED TO THE PUBLIC IN THE EUROPEAN ECONOMIC AREA

Final Terms dated

[Danone Finance/Groupe Danone] PR 2.2.9 Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] PR 2.2.10 [Guaranteed by Groupe Danone] under the [k5,000,000,000] [Euro Medium Term Note Programme]

PART A CONTRACTUAL TERMS

Terms used herein shall be deemed to be de¢ned as such for the purposes of the Conditions set forth in the O¡ering Circular dated * [and the supplemental [O¡ering Circular/Prospectus] dated *] which [together] constitute[s] a base prospectus for the purposes of the Prospectus Directive (Directive 2003/71/ EC) (the Prospectus Directive) in relation to [Danone Finance/Groupe Danone]. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with such O¡ering Circular [as so supplemented]. Full information on the Issuer Art. 14.2 PD Arts. 26 and 33 and the o¡er of the Notes is only available on the basis of the combination of these Final Terms and the PR O¡ering Circular. [The O¡ering Circular [and the supplemental [O¡ering Circular/Prospectus]] [is] [are] available for viewing at [address] [and] [website] and copies may be obtained from [address].]

The following alternative language applies if the ¢rst tranche of an issue which is being increased was issued under an O¡ering Circular with an earlier date.

Terms used herein shall be deemed to be de¢ned as such for the purposes of the Conditions (the Conditions) set forth in the O¡ering Circular dated [original date] [and the supplemental [O¡ering Circular/ Prospectus] dated *]. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive (Directive 2003/71/EC) (the Prospectus Directive) and must be read in conjunction with the O¡ering Circular dated [current date] [and the supplemental [O¡ering Circular/Prospectus] dated *], which [together] constitute[s] a base prospectus for the purposes of the Prospectus Directive in relation to [Danone Finance/Groupe Danone], save in respect of the Conditions which are extracted from the O¡ering Circular dated [original date] [and the supplemental [O¡ering Circular/Prospectus] dated *] and are attached hereto. Full information on the Issuer and the o¡er of the Notes is only available on the basis of the combination of these Final Terms and the O¡ering Circular dated [original date] and [current date] [and the supplemental [O¡ering Circulars/Prospectuses] dated * and *]. [The O¡ering Circulars [and the supplemental [O¡ering Circulars/Prospectuses]] are available for viewing at [address] [and] [website] and copies may be obtained from [address].]

1. [(i)] Issuer: [Danone Finance/Groupe Danone]

[[(ii) Guarantor: [Groupe Danone/Not Applicable]]

2. [(i)] Series Number: [ ]

[(ii) Tranche Number: [ ]

(If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible).]

3. Speci¢ed Currency or Currencies: [ ] Annex V,4.4 Annex XII, 4.1.5 4. Aggregate Nominal Amount: [ ] Annex V, 5.1.2 Annex XII, 5.1.2 [(i)] Series: [ ]

[(ii) Tranche: [ ]]

97 5. Issue Price: [ ] per cent. of the Aggregate Nominal Annex V, 5.3.1 Amount [plus accrued interest from [insert date] Annex XII, 5.3.1 (if applicable)] 6. Speci¢ed Denominations1:[][]

7. [(i)] Issue Date: [ ] Annex V, 4.12 Annex XII, 4.1.9 [(ii)] Interest Commencement Date [ ] Annex V, 4.7 Annex XII, 4.1.11 8. Maturity Date: [specify date or (for Floating Rate Notes) Interest Annex V, 4.8 Payment Date falling in or nearest to the relevant month and year]

9. Interest Basis: [* per cent. Fixed Rate] Annex V, 4.7 [[specify reference rate]+/* per cent. Floating Rate] [Zero Coupon] [Index Linked Interest] [Other (specify)] (further particulars speci¢ed below)

10. Redemption/Payment Basis: [Redemption at par] Annex V, 4.7 [Index Linked Redemption] [Dual Currency] [Partly Paid] [Installment] [Other (specify)] 11. Change of Interest or Redemption/Payment [Specify details of any provision for convertibility of Basis2: Notes into another interest or redemption/ payment basis] 12. Put/Call Options: [Investor Put] [Issuer Call] [(further particulars speci¢ed below)]

13. [(i)] Status of the Notes: [Senior/[Dated/Perpetual]/ Subordinated] Annex V, 4.5 Annex XII, 4.1.6 [(ii)] Status of the Guarantee: [Senior/[Dated/Perpetual]/Subordinated]] [(iii)] [Date [Board] approval for issuance of [ ] [and [ ], respectively]] Notes [and Guarantee] obtained: (N.B. Only relevant where Board (or similar) Annex V, 4.11 authorisation is required for the particular tranche of Annex XII, 4.1.8 Notes or related Guarantee)] 14. Method of distribution: [Syndicated/Non-syndicated]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE 15. Fixed Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Rate[(s)] of Interest: [ ] per cent. per annum [payable [annually/semi- annually/quarterly/monthly] in arrear] (ii) Interest Payment Date(s): [ ] in each year [adjusted in accordance with [specify Business Day Convention and any applicable Business Centre(s) for the de¢nition of ‘‘Business Day’’]/not adjusted]

1 If an issue of Notes is (i) not admitted to trading on a EEA regulated market and (ii) only o¡ered within the EEA in circumstances where a prospectus is not required to be published under the Prospectus Directive the k1000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency) minimum denomination is not required. 2 If Notes constitute derivative securities the requirements of Annex XII of the Prospectus Directive need to be complied with. Please refer to part B point 10.

98 (iii) Fixed Coupon Amount[(s)]: [ ] per [ ] in Nominal Amount (iv) Broken Amount(s): [Insert particulars of any initial or ¢nal broken interest amounts which do not correspond with the Fixed Coupon Amount[(s)]] (v) Day Count Fraction: [30/360 / Actual/Actual ([ISMA] /ISDA) / other] (vi) Determination Dates: [ ] in each year (insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short ¢rst or last coupon. N.B. only relevant where Day Count Fraction is Actual/Actual ([ISMA])) (vii) Other terms relating to the method of [Not Applicable/give details] calculating interest for Fixed Rate Notes: 16. Floating Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph)

(i) Interest Period(s): [ ] Annex V, 4.5

(ii) Speci¢ed Interest Payment Dates: [ ] Annex XIII, 4.12 (iii) Business Day Convention: [Floating Rate Convention/ Following Business Day Convention/ Modi¢ed Following Business Day Convention/ Preceding Business Day Convention/ other (give details)] (iv) Business Centre(s): [ ] (v) Manner in which the Rate(s) of Interest [Screen Rate is/are to be determined: Determination/ISDA Determination/other (give details)] (vi) Party responsible for calculating the [] Rate(s) of Interest and Interest Amount(s) (if not the [Agent]): (vii) Screen Rate Determination: ^ Reference Rate: [ ]. ^ Interest Determination Date(s): [ ] ^ Relevant Screen Page: [ ] (viii) ISDA Determination: ^ Floating Rate Option: [ ] ^ Designated Maturity: [ ] ^ Reset Date: [ ] (ix) Margin(s): [+/-][ ] per cent. per annum (x) Minimum Rate of Interest: [ ] per cent. per annum (xi) Maximum Rate of Interest: [ ] per cent. per annum (xii) Day Count Fraction: [ ] (xiii) Fall back provisions, rounding provisions, [] denominator and any other terms relating to the method of calculating interest on Floating Rate Notes, if di¡erent from those set out in the Conditions:

99 17. Zero Coupon Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) [Amortisation/Accrual] Yield: [ ] per cent. per annum (ii) Reference Price: [ ] (iii) Any other formula/basis of determining [] amount payable:

18. Index-Linked Interest Note/other variable- [Applicable/Not Applicable] Annex XII, 5.4.5 linked interest Note Provisions (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Index/Formula/other variable: [give or annex details] (ii) Calculation Agent responsible for [] calculating the interest due: (iii) Provisions for determining Coupon [] where calculated by reference to Index and/or Formula and/or other variable: (iv) Determination Date(s): [ ]

(v) Provisions for determining Coupon [] Annex V, 4.7 where calculation by reference to Index and/or Formula and/or other variable is impossible or impracticable or otherwise disrupted: (vi) Interest or calculation period(s): [ ] (vii) Speci¢ed Interest Payment Dates: [ ] (viii) Business Day Convention: [Floating Rate Convention/ Following Business Day Convention/Modi¢ed Following Business Day Convention/Preceding Business Day Convention/ other (give details)] (ix) Business Centre(s): [ ] (x) Minimum Rate/Amount of Interest: [ ] per cent. per annum (xi) Maximum Rate/Amount of Interest: [ ] per cent. per annum (xii) Day Count Fraction: [ ] 19. Dual Currency Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Rate of Exchange/method of calculating [give details] Rate of Exchange: (ii) Calculation Agent, if any, responsible for [] calculating the principal and/or interest due:

(iii) Provisions applicable where calculation [] Annex V, 4.7 by reference to Rate of Exchange impossible or impracticable: (iv) Person at whose option Speci¢ed [] Currency(ies) is/are payable:

100 PROVISIONS RELATING TO REDEMPTION 20. Call Option [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Optional Redemption [] Date(s): (ii) Optional Redemption [ ] per Note of [ ] speci¢ed denomination Amount(s) of each Note and method, if any, of calculation of such amount(s): (iii) If redeemable in part: (a) Minimum Redemption Amount: [ ] (b) Maximum Redemption Amount: [ ] (iv) Notice period: [ ] 21. Put Option [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph) (i) Optional Redemption [] Date(s): (ii) Optional Redemption [ ] per Note of [ ] speci¢ed denomination Amount(s) of each Note and method, if any, of calculation of such amount(s): (iii) Notice period: [ ]

22. Final Redemption Amount of each Note [[ ] per Note of [ ] speci¢ed denomination /other/ SNA5-4.8 see Appendix] In cases where the Final Redemption Amount is Index-Linked or other variable-linked: (i) Index/Formula/variable: [give or annex details] (ii) Calculation Agent [] responsible for calculating the Final Redemption Amount:

(iii) Provisions for determining Final [] Redemption Amount where calculated by reference to Index and/or Formula and/or other variable: (iv) Determination Date(s): [ ] (v) Provisions for determining Final [] Redemption Amount where calculation by reference to Index and/or Formula and/or other variable is impossible or impracticable or otherwise disrupted: (vi) Payment Date: [ ] (vii) Minimum Final Redemption Amount: [ ] (viii) Maximum Final Redemption Amount:

101 23. Early Redemption Amount SNA5-4.8

Early Redemption Amount(s) of each Note [] payable on redemption for taxation reasons or on event of default or other early redemption and/or the method of calculating the same (if required or if di¡erent from that set out in the Conditions):

GENERAL PROVISIONS APPLICABLE TO THE NOTES 24. Form of Notes: Bearer Notes:

[Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for De¢nitive Notes on [ ] days’ notice/at any time/in the limited circumstances speci¢ed in the Permanent Global Note]

[Temporary Global Note exchangeable for De¢nitive Notes on [ ] days’ notice]

[Permanent Global Note exchangeable for De¢nitive Notes on [ ] days’ notice/at any time/in the limited circumstances speci¢ed in the Permanent Global Note]

[Registered Notes]

25. Financial Centre(s) or other special provisions [Not Applicable/give details. Note that this item relating to Payment Dates: relates to the date and place of payment, and not interest period end dates, to which items 15 (ii), 16(iv) and 18(ix) relates]

26. Talons for future Coupons or Receipts to be [Yes/No. If yes, give details] attached to De¢nitive Notes (and dates on which such Talons mature):

27. Details relating to Partly Paid Notes: amount [Not Applicable/give details] of each payment comprising the Issue Price and date on which each payment is to be made [and consequences (if any) of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment]:

28. Details relating to Installment Notes: amount [Not Applicable/give details] Annex V, 4.8 of each installment, date on which each payment is to be made:

29. Redenomination, renominalisation and [Not Applicable/The provisions [in Condition *] reconventioning provisions: apply]

30. Consolidation provisions: [Not Applicable/The provisions [in Condition *] apply]

31. Other ¢nal terms: [Not Applicable/give details] (When adding any other ¢nal terms consideration should be given as to whether such terms constitute ‘‘signi¢cant new factors’’ and consequently trigger the need for a supplement to the Prospectus under Article 16 of the Prospectus Directive.)

102 DISTRIBUTION 32. (i) If syndicated, names and addresses of [Not Applicable/give names, addresses and Annex V, 5.4.4 Managers and underwriting underwriting commitments] commitments: (Include names and addresses of entities agreeing to underwrite the issue on a ¢rm commitment basis and names and addresses of the entities agreeing to place the issue without a ¢rm commitment or on a ‘‘best e¡orts’’ basis if such entities are not the same as the Managers.)

(ii) Date of [Subscription] Agreement: [ ] Annex V,5.4.1, 5.4.3 (iii) Stabilising Manager(s) (if any): [Not Applicable/give name] 33. If non-syndicated, name and address of [Not Applicable/give name and address] Dealer:

34. Total commission and concession: [ ] per cent. of the Aggregate Nominal Amount Annex V, 5.4.3 Annex XII, 4.1.10 35. Additional selling restrictions: [Not Applicable/give details] SNA5-4.13

[LISTING AND ADMISSION TO TRADING APPLICATION Annex AII, 6.1 These Final Terms comprise the ¢nal terms required to list and have admitted to trading the issue of Notes described herein pursuant to the k5,000,000,000 Euro Medium Term Note Programme of Danone Finance and Groupe Danone.]

RESPONSIBILITY The Issuer and the Guarantor accept responsibility for the information contained in these Final Terms. Annex V, 1.1 Annex XII, 1.1 Signed on behalf of the Issuer:

By: ...... Duly authorised [Signed on behalf of the Guarantor: By: ...... Duly authorised]

103 PART B OTHER INFORMATION

1. LISTING

(i) Listing: [Bourse de Luxembourg/other (specify)/None] Annex V, 6.1 Annex XII, 6.1 (ii) Admission to trading: [Application has been made for the Notes to be admitted to trading on [ ] with e¡ect from [ ].] [Not Applicable.] (Where documenting a fungible issue need to indicate that original securities are already admitted to trading.)

(iii) Regulated markets or equivalent markets [specify] Annex V, 6.2 on which, to the knowledge of the issuer, Annex XII, 6.2 securities of the same class of the securities to be o¡ered or admitted to trading are already admitted to trading: 2. RATINGS

Ratings: The Notes to be issued have been rated: Annex V, 7.5 [S & P: [ ]] [Moody’s: [ ]] [[Other]: [ ]] [Need to include a brief explanation of the meaning of the ratings if this has previously been published by the rating provider.] (The above disclosure should re£ect the rating allocated to Notes of the type being issued under the Programme generally or, where the issue has been speci¢cally rated, that rating.)

3. [NOTIFICATION The [include name of competent authority in EEA home Member State] [has been requested to provide/ has provided ç include ¢rst alternative for an issue which is contemporaneous with the establishment or update of the Programme and the second alternative for subsequent issues] the [include names of competent authorities of host Member States] with a certi¢cate of approval attesting that the Prospectus has been drawn up in accordance with the Prospectus Directive.]

4. [INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE [ISSUE/OFFER] Annex V, 3.1 Annex XII, 3.1 Need to include a description of any interest, including con£icting ones, that is material to the issue/ o¡er, detailing the persons involved and the nature of the interest. May be satis¢ed by the inclusion of the following statement: ‘‘Save as discussed in [‘‘Subscription and Sale‘‘], so far as the Issuer is aware, no person involved in the o¡er of the Notes has an interest material to the o¡er.’’]

5. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES Annex V, 3.2 Annex XII, 3.2 [(i) Reasons for the o¡er: [ ] (See [‘‘Use of Proceeds’’] wording in Prospectus ç if reasons for o¡er di¡erent from making pro¢t and/or hedging certain risks will need to include those reasons here.)] [(ii)] Estimated net proceeds: * (If proceeds are intended for more than one use will need to split out and present in order of priority. If

104 proceeds insu⁄cient to fund all proposed uses state amount and sources of other funding.) [(iii)] Estimated total expenses: *.[Include breakdown of expenses.] (If the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies it is only necessary to include disclosure of net proceeds and total expenses at (ii) and (iii) above where disclosure is included at (i) above.)

6. [Fixed Rate Notes only ç YIELD Annex V, 4.9 Indication of yield: *. Calculated as [include details of method of calculation in summary form] on the Issue Date. As set out above, the yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield. ]

7. [Floating Rate Notes only ç HISTORIC INTEREST RATES Annex V, 4.7 Details of historic [LIBOR/EURIBOR/other] rates can be obtained from [Telerate].]

8. [Index-Linked or other variable-linked Notes only ç PERFORMANCE OF INDEX/FORMULA/ Annex XII, 4.1.2, 4.2.2 OTHER VARIABLE, EXPLANATION OF EFFECT ON VALUE OF INVESTMENT AND Annex V, 4.7 ASSOCIATED RISKS AND OTHER INFORMATION CONCERNING THE UNDERLYING Need to include details of where past and future performance and volatility of the index/formula/other variable can be obtained and a clear and comprehensive explanation of how the value of the investment is a¡ected by the underlying and the circumstances when the risks are most evident.[Where the underlying is an index need to include the name of the index and a description if composed by the Issuer and if the index is not composed by the Issuer need to include details of where the information about the index can be obtained. Where the underlying is not an index need to include equivalent information.]* ]

9. [Dual Currency Notes only ç PERFORMANCE OF RATE[S] OF EXCHANGE AND Annex V, 4.7 Annex XII, EXPLANATION OF EFFECT ON VALUE OF INVESTMENT 4.1.2, 4.2.2 Need to include details of where past and future performance and volatility of the relevant rate[s] can be obtained and a clear and comprehensive explanation of how the value of the investment is a¡ected by the underlying and the circumstances when the risks are most evident.]

10. [Derivatives only ç Other Information concerning the Securities to be [o¡ered]/[admitted to trading]]1 Name of the issuer of the underlying security: [*] Annex XII, 4.1.1 Annex XII, 4.2.2

ISIN Code: [*] Underlying interest rate: [*] Relevant weightings of each underlying in the [*] basket:

Adjustment rules with relation to events [*] Annex XII, 4.2.4 concerning the underlying: Source of information relating to the [Index]/ [*] [Indices]: Place where information relating to the [*] [Index]/[Indices] can be obtained:

105 Name and address of entities which have a ¢rm [*] Annex XII, 6.3 commitment to act as intermediaries in secondary trading:

Details of any market disruption/settlement [*] Annex XII, 4.2.3 disruption events a¡ecting the underlying: Annex XII, 4.2.4

Exercise price/¢nd reference price of [*] Annex XII, 4.2.1 underlying:

Details of how the value of investment is [*] Annex XII, 4.1.2 a¡ected by the value of the underlying instrument(s):

Details of settlement procedure of derivative [*] Annex XII, securities: 4.1.12

Details of how any return on derivative [*] Annex XII, securities takes place, payment or delivery 4.1.13 date, and manner of calculation:

Details of any post-issuance information to be [*] Annex XII, 7.5 provided (only in case of Derivatives Instruments). Details of any post-issuance information relating to the underlying to be provided and where such information can be obtained:

11. [Terms and Conditions of the O¡er] Annex XII, 5.1.3 The time period, including any possible [*] Annex V, 5.1.3 amendments, during which the o¡er will be open and description of the application process:

Details of the minimum and/or maximum [*] Annex XII, 5.1.4 amount of application1 Annex V, 5.1.5

Description of possibility to reduce [*] Annex XII, 5.1.5 subscriptions and manner for refunding excess Annex V, 5.1.6 amount paid by applicants:

Details of method and time limits for paying Annex XII, 5.1.6 up and delivering securities: Annex V, 5.1.7 [*] Manner and date in which results of the o¡er [*] are to be made public:

Procedure for exercise of any right of pre- [*] Annex V, 5.1.8 emption, negotiability of subscription rights and treatment of subscription rights not exercised:

Categories of potential investors to which the [*] Annex XII, 5.2.1 securities are o¡ered2 Annex V, 5.2.1 [For example: ‘‘Legal entities which are authorised or regulated to operate in the ¢nancial markets or, if not so

1 Whether in number of securities or aggregate amount to invest. 2 If the o¡er is being made simulataneously in the markets of two or more countries and if a tranche has been or is being reserved for certain of these, indicate any such tranche.

106 authorised or regulated, whose corporate purpose is solely to invest in securities. Any legal entity which has two or more of (1) an average of at least 250 employees during the last ¢nancial year; (2) a total balance sheet of more than k43,000,000 and (3) an annual net turnover of more than k50,000,000, as shown in its last annual or consolidated accounts.’’]

Process for noti¢cation to applicants of the [*] Annex XII, 5.2.2 amount allotted and indication whether Annex V, 5.2.2 dealing may begin before noti¢cation is made:

12. [Placing and Underwriting]1 Name and address of the co-ordinator(s) of the [*] Annex XII, 4.1.2 Annex V, 5.4.1 global o¡er and of single parts of the o¡er: Annex XII, 5.4.1

Name and address of any paying agents and [*] Annex XII, 5.4.2 depository agents in each country (in addition Annex V, 5.4.2 to the Principal Paying Agent):

Names and addresses of entities agreeing to [*] Annex XII, 5.4.3 underwrite the issue on a ¢rm commitment Annex V, 5.4.3 basis, and entities agreeing to place the issue without a ¢rm commitment or under ‘‘best e¡orts’’ arrangements:2 When the underwriting agreement has been or [*] will be reached:

13. OPERATIONAL INFORMATION Annex V, 4.1 Annex XII, 4.1.1 ISIN Code: [ ] Common Code: [ ] Any clearing system(s) other than Euroclear [Not Applicable/give name(s) and number(s)] Bank S.A./N.V. and Clearstream Banking Socie¤ te¤ Anonyme and the relevant identi¢cation number(s): Delivery: Delivery [against/free of] payment

Names and addresses of additional Paying [] Annex V, 5.4.2 Agent(s) (if any):

1 To the extent known to the Issuer, of the placers in the various countries where the o¡er takes place. 2 Where not all of the issue is underwritten, a statement of the portion not covered.

107 GENERAL INFORMATION

1. Application has been made to admit the Notes to trading issued under the Programme on the Luxembourg Stock Exchange. Notes may be issued pursuant to the Programme which will not be admitted to trading on the Luxembourg Stock Exchange or any other stock exchange or which will be admitted to trading on such stock exchange as the relevant Issuer and the relevant Dealer(s) may agree. 2. The establishment of the Programme was authorised by a resolution of the Board of Directors of Danone Finance dated 23rd July, 1996. The increase in the Programme amount was authorised by a resolution of the Board of Directors of Danone Finance dated 19th June, 2000. The issuance of Notes SNA5-4.11 under the Programme up to k2 billion was authorised by a resolution of the Board of Directors of SNA12-4.1.8 Groupe Danone dated 22nd April, 2005 pursuant to an authorisation given by a resolution of the Shareholders of Groupe Danone dated 22nd April, 2005. The issuance of Notes under the Programme up to k3 billion was authorised by a resolution of the Board of Directors of Danone Finance dated 26th September, 2005. 3. The entry into the Guarantee was authorised by a resolution of the Board of Directors of Groupe Danone dated 23rd July, 1996 and the authorisation was renewed by a further resolution of the Board of Directors of Groupe Danone dated 10th February, 2005.

4. Neither Danone Finance or Groupe Danone nor any of their respective subsidiaries has been involved RDA4.13.7 in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Danone Finance or Groupe Danone is aware) during the 12 months preceding the date of this O¡ering Circular which may have or have had in the recent past signi¢cant e¡ects, in the context of the issue of the Notes, on the ¢nancial position or pro¢tability of Danone Finance, Groupe Danone or the subsidiaries thereof taken as a whole.

5. Except as disclosed in this O¡ering Circular, there has been no signi¢cant change in the ¢nancial or RDA4.8.1 trading position of Danone Finance or Groupe Danone since 31st December, 2004. 6. Except as disclosed in this O¡ering Circular, there has been no material adverse change in the prospects of Danone Finance or Groupe Danone since 31st December, 2004. 7. The ¢nancial statements of Danone Finance have been audited since its incorporation by Mazars & Gue¤ rard, Statutory Auditors and Certi¢ed Public Accountants. The ¢nancial statements of Groupe Danone have been audited for the three ¢nancial years preceding the date of this O¡ering Circular by PricewaterhouseCoopers and Mazars & Gue¤ rard, Statutory Auditors.

8. For so long as Notes are outstanding under the Programme and are admitted to trading on the RDA4.17 Luxembourg Stock Exchange, copies and, where appropriate, English translations of the following RDA6-4 documents will be made available for inspection and, in the case of (a), (f), (g) and (h), copies may be obtained during normal business hours at the speci¢ed o⁄ce of the relevant Issuer and the speci¢ed o⁄ce of the Paying Agent in Luxembourg, namely: (a) the statuts of Groupe Danone and Danone Finance; (b) the Dealer Agreement; (c) the Agency Agreement; (d) the GD Deed of Covenant and the DF Deed of Covenant; (e) the Guarantee; (f) the audited ¢nancial statements of Danone Finance and the audited consolidated and non- consolidated ¢nancial statements of Groupe Danone for the two ¢nancial years ended 31st December, 2003 and 2004 together with all other audited annual ¢nancial statements of Danone Finance and audited annual consolidated and non-consolidated and unaudited semi- annual interim consolidated ¢nancial statements (if any) of Groupe Danone published subsequent to 31st December, 2004. Danone Finance does not publish semi-annual interim ¢nancial statements and Groupe Danone publishes semi-annual interim ¢nancial statements only in the summary form. Groupe Danone does not publish non-consolidated semi-annual interim ¢nancial statements; (g) any Final Terms in relation to any Tranche which is listed on the Luxembourg Stock Exchange or any other stock exchange; and

108 (h) the O¡ering Circular and any document incorporated by reference therein prepared in relation to the Programme. 9. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The appropriate codes allocated by Euroclear and Clearstream, Luxembourg for each Series of Notes, together with the relevant International Securities Identi¢cation Numbers will be contained in the Final Terms relating thereto. 10. Settlement arrangements will be agreed between the relevant Issuer, the relevant Dealer(s) and the Agent in relation to each Series of Notes. 11. The Luxembourg Stock Exchange has allocated to the Programme, for listing purposes, the number 11322 for Danone Finance and the number 13244 for Groupe Danone.

12. EU taxation SNA12-4.1.14 SNA5-4.14 The European Union has adopted EC Council Directive 2003/48/EC regarding the taxation of savings income. Member States are from 1st July, 2005 to provide to the tax authorities of another Member State details of payments of interest (or other similar income) paid by a person within its jurisdiction to or for the bene¢t of an individual resident in that other Member State, except that Austria, Belgium and Luxembourg are instead required to operate a withholding system for a transitional period in relation to such payments unless during such period they elect otherwise (the ending of such transitional period being dependent upon the conclusion of certain other agreements relation to information exchange with certain other countries). A number of non-EU countries and territories have agreed to adopt similar measures with e¡ect from 1st July, 2005.

13. Luxembourg Taxation Under Luxembourg tax law, there is currently no withholding tax on payments of principal, premium or interest, nor on accrued but unpaid interest, in respect of the Notes, nor is any Luxembourg withholding tax payable upon redemption or repurchase of the Notes. Luxembourg levies withholding tax on interest payments made by a Luxembourg paying agent to individual bene¢cial owners who are tax resident of (i) another EU Member State, pursuant to EC Council Directive 2003/48/EC on taxation of savings income in the form of interest payments, or (ii) certain non-EU countries and territories which have agreed to adopt similar measures to those provided for under EC Council Directive 20003/48/EC. Responsibility for the withholding of such tax will be assumed by the Luxembourg paying agent and not by the Issuer.

109 REGISTERED OFFICE OF THE ISSUERS AND THE GUARANTOR

Danone Finance Groupe Danone RDA4-5.1.4 17 Boulevard Haussman 17 Boulevard Haussman 75009 Paris 75009 Paris

AGENT SNA12-5.4.5 Citibank, N.A. 5 Carmelite Street London EC4Y 0PA

PAYING AGENT Dexia Banque Internationale a' Luxembourg, socie¤ te¤ anonyme 69 route d’Esch L-2953 Luxembourg

AUDITORS TO DANONE FINANCE AUDITORS TO GROUPE DANONE AND GROUPE DANONE SNA5-7.3 RDA4-2.1 PricewaterhouseCoopers Mazars & Gue¤ rard RDA4.16.1 SNA12-7.3 63, rue de Villiers Le Vinci 92200 Neuilly sur Seine 4, alle¤ e de l’Arche 92075 La De¤ fense

LEGAL ADVISERS To the Dealers as to English and French Law Cli¡ord Chance Europe LLP SNA5-7.1 112, Avenue Kle¤ ber SNA12-7.1 BP 163 Trocade¤ ro 75770 Paris Cedex 16

110 PROGRAMME ARRANGER Citigroup Global Markets Limited Citigroup Centre Canada Square Canary Wharf London E14 5LB

LUXEMBOURG LISTING AGENT Kredietbank S.A. Luxembourgeoise 43 boulevard Royal L-2955 Luxembourg

DEALERS Citigroup Global Markets Limited Credit Suisse First Boston (Europe) Limited Citigroup Centre One Cabot Square Canada Square London E14 4QJ Canary Wharf London E14 5LB

Deutsche Bank AG, London Branch Merrill Lynch International Winchester House Merrill Lynch Financial Centre 1 Great Winchester Street 2 King Edward Street London EC2N 2DB London EC1A 1HQ

Morgan Stanley & Co. International Limited 25 Cabot Square Canary Wharf London E14 4QA

111 Printed by greenaways, a member of the ormolu group. 157772