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> FEBRUARY 10, 2005 At a board meeting at headquarters in Paris, directors reviewed and approved audited consolidated financial statements for 2004. T Decryptage_12-19_baf 24/05/05 14:51 Page 14

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4 DANONE Reorganization of DANONE’s water busi- to LGR Holding. Italaquae’s bottled-water business in Italy Ireland to Fruitfield Foods Ltd, plus United Biscuits and W&R Jacob Ltd in Jacob’s biscuits operations in the UK to progressed, among them the sale of tions and divestments as negotiations analyzed and debated significant acquisi- and financial statements. They also share buyback and cancellation program, positions and commitments, progress in the ding market trends, Group finances, cash Members addressed ongoing issues inclu- average, with 85% attendance. 2004. Meetings lasted three hours on The Board of Directors met five times in 2004 activities presented at an upcoming Board meeting. management. Results will be analyzed and methods, and relations with DANONE they receive, but also Board operating luating not only the quality of information of Board procedures, with directors eva- ed significant restructuring. Its input was round- divestments, projected investments and year on key projects including acquisitions, The Board was consulted throughout the r Board of Directors more powers and more both reflecting 2003 initiatives giving the at DANONE in 2004, corporate governance There were two main developments in decisions contributor to debate shaping important DANONE’s Board of Directors as Broader powers have enhanced the role of governance Corporate esources.

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E He qualifies as an independent director SA and Chairman of Crédit Lyonnais. Jean Laurent, 60, is CEO of Crédit Agricole meeting on April 22. ject to the approval of the shareholders' Hours be appointed directorBernard sub- co-opted Jean Laurent and proposed that Meeting on February 10, 2005, the Board Two presentations of their business and strategy. heading business lines, who gave detailed half-day with the Executive Vice-Presidents In December 2004, directors also spent a world. managers from business units around the corporate departments and some 160 held in September each year for heads of DANONE’s d’, a seminar Journées management, Board members took part in To 2004. on the Board of Directors since April 15, Hirokatsu Hirano has represented Yakult with Groupe DANONE in January 2004. tics, which signed a strategic agreement Y presentations including one by Japan’s gained new insights through in-depth dairy plant in Russia (see p. 68). Directors plans to raise capacity at the Chekhov Executive Vice-President, Beverages, and July 1 appointment of Thomas Kunz as ness was also reviewed, including the akult Honsha, a world leader in probio-

learn more about Grouplearn operations and new directors 2004 in review. an active in 2005. their terms as Groupe DANONE directors Gandois, both of whom decided to end departure of Jérôme Seydoux and Jean These two new appointments follow the Danone Germany and LU . 2001 after heading Danone Hungary, Vi BSN), in 1985 and has been Executive Hours, 48, joined DANONE (then Bernard Bouton Report. according to the criteria defined in Age 47, Benoît Potier is chairman Committee, replacing Jean Gandois. Benoît Potier was appointed head of the Audit Audit Committee ce-President, Fresh Dairy Products since 1 > 5 4 3 2 1 D’ALVIELLA > > > > > J BRUNO BONNELL RICHARD GOBLET CHRISTIAN LAUBIE HIROKATSU HIRANO ACQUES VINCENT ••• 2 > Groupe DANONE, director Chief Operating Officer, 59, Vice Chairman and director Partner, Maison Lazard, 72, Chairman, General Groupe DANONE 49, Chairman and CEO, > > > ON APRIL 22, 2005*, MEMBERS OF THE BOARD DIRECTORS WERE: Stock Exchange and the recommendations of the Bouton Report. terms of office. Seven qualify as independent under the regulations of the New York DANONE’s Board of Directors has 13 members, appointed for three-year renewable BOARD O OEIFRAIN e h AOE2004 20-F FOR MORE INFORMATION, see the DANONE JACQUES VINCENT MICHEL DAVID-WEILL OF DIRECTORS independent director Entertainment SA, 46, Chairman, Infogrames director AstraZeneca, independent 60, Deputy Chairman, > > BRUNO BONNELL HAKAN MOGREN 3 > independent director 60, CEO, Crédit Agricole, director Systems, Groupe DANONE, Strategy and Information President Finance, 41, Executive Vice- > > JEAN LAURENT* > > > > Products, director President, Fresh Dairy 48, Executive Vice- director Division, Yakult Honsha, Business International 67, Adviser of the director Comptes, independent du Commissariat aux 66, Member, Haut Conseil director Sofina SA, independent 56, Chief Executive Officer, D’ALVIELLA BERNARD HOURS* HIROKATSU HIRANO* CHRISTIAN LAUBIE RICHARD GOBLET 4 > * Jean-Claude Haas. Chairman), Yves Boël and Carasso (Honorary honorary directors: Daniel The Board also has three independent director Pétrofrance Chimie SA 47, Chairman and CEO, director Liquide SA, independent Management Board, Air 47, Chairman of the > > General Meeting of shareholders Subject to the approval of the JACQUES NAHMIAS BENOÎT POTIER DANONE 20 5 04 > Decryptage_12-19_baf 24/05/05 14:51 Page 16 1 > ••• included a review of the impact on Groupe Specific assignments during the year meetings. times, with Group auditors attending three In 2004, the Audit Committee met seven Group auditors. as any special assignments entrusted to audits, as well and external of internal It also examines the methods and results the collection and verification of data. re accounting principles, and checks the been prepared in accordance with Group It ensures in particular that accounts have approval by the Board of Directors. consolidated financial statements before with analyzing parent company and the Audit Committee is charged Made up of three independent directors, DANONE since April 2003. Liquide and has been a director of Groupe DANONE information received, Board operating methods, relations with management and more. STOP PRESS: liability of internal proceduresliability of internal for of the Management Board of Air 20 04 A self-assessment of Board procedures was carried out at year-end 2004 evaluating < 2 At December 31, 2004, committee mem- stock options. executive compensation and concerning r It met three times in 2004 to consider Committee is made up of three directors. compensation policy, the Compensation Charged with supervising executive Compensation Committee on April 15, 2004. approval at the annual General Meeting held This was presented to the shareholders for of Directors. submitting its recommendation to the Board interviewing short-listed applicants and prior to the selection of a Group auditor, defining criteria and reviewingcandidates The Committee played an active role in assets and risk. procedures for monitoring long-term DANONE of the change to IFRS, including ecommendations to the Board of Directors < 3 < 4 Jean Gandois and Jérôme Seydoux. bers were Michel David-Weill (chairman), will serve on the new committee. with effect from April 22, 2005. Three directors Compensation and Appointments Committee these two committees into a single The Board of Directors has voted to merge Appointments Committees Merger of Compensation and Benoît Potier and Jérôme Seydoux. bers were Michel David-Weill (chairman), At December 31, 2004, committee mem- of three new directors. operating procedures and the appointment Committee analyzed proposals on Board It met once in 2004. During the year, the sory capacity to the Board. up of three directors and serves in an advi- The Appointments Committee is made Appointments Committee * 6 5 4 3 2 1 Director until 04/22/2005 > > > > > > JEAN GANDOIS* MICHEL DAVID-WEILL JEAN LAURENT BENOÎT POTIER JACQUES NAHMIAS HAKAN MOGREN 5 > ••• ENLUET CEO, Crédit Agricole JEAN LAURENT, “ is fundamentally important” Jean Laurent Board of Directors? What led you to join the DANONE tetv o oegnrly I think that attentive to. More generally, believe very strongly and that I will be very mentally important. That is something I J. L. Committee? Compensation and Appointments a Director and member of the Board's What do you consider is your role as and Banco Espirito Santo in Portugal. as a Director of Banca Intesa in Italy and of M6 and Eurazeo in France, member of the Supervisory Boards in addition to my existing roles as a honored to take on this new responsibility balance sheets and so on. I am very and not just in figures, from the inside, forward to seeing how DANONE works the importance of people. I am looking team spirit and transparency, trust, wholeheartedly share with its CEO— which I are the values it stands for, markets has been exemplary. Then there winning a leading place on international are truly outstanding and its success in a remarkable business. Its achievements 6 > > Everything related to Everything related to ethics is funda- > F rto l,DANONE is irst of all, ties will always be trust and transparency. overriding the priori- However that may be, considerably from one company next. to the precise balance can the vary of course, responsibility for the business. Although, much more conscious of their personal and directors are strategy and risk control, The board now has a more defining role in have become much clearer over recent years. and management teams of large business .L. J. rate governance issues today? What do you think are the main corpo- fairness of compensation. as well as the transparency and Board, favoring the right balance within attuned to the life of business and up to do—defining rules of governance what I can to help achieve what it was set will be doing I Appointments Committee, As for my role on the Compensation and an international banker will be useful. of business from the point view I think my experience and knowledge ting to the work of the board as a whole. contribu- they think in a constructive way, to make up their own minds and say what directors should have the independence > Relationships between the boards ethics appear only in the IFRS format. French GAAP. From 2005 on, they will IFRS and the other on basis of were drawn up, one in accordance with when two sets of financial statements Tr for the staff members concerned. mation systems and organizing training well as making adjustments to infor- and calculating the main impacts, as schedule for transition and identifying switch to IFRS in 2003, defining a DANONE began preparing for the r impact of variations in this value have to be stated at fair value and the addition, certain balance-sheet items stock options must be expensed. In goodwill is no longer amortized, and considerations granted to retailers, of rebates, trade discounts and other sales revenues must be stated net To the calculation of financial ratios. basis for historical comparisons and 2005 on. This naturally changes the Reporting Standards from January 1, Financial accordance with International to present financial statements in panies listed on a regulated market adopted a regulation requiring com- 20-F and can be accessed at www.danone.com. 04 accordance with IFRS are included in the DANONE * > the IFR Standards ADOPTING (AT 04/22/2005) APPOINTMENTS COMMITTEE COMPENSATION AND > > > > > > (AT 04/22/2005) AUDIT COMMITTEE * ecognized in the income statement. Consolidated financial statements prepared in independent directors ansition took definite form in 2004, Michel David-Weill, Christian Laubie* Richard Goblet d’Alviella* Benoît Potier*, Hakan Mogren* Jean Laurent*

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0 or cannot—be insured. management of risks that can— allowing more efficient to insurance coverage, thus on hedging and transfer of risk include optimization of decisions for Group finances. Advantages with Vestalis management RISK a T to limit Group exposure. identified and monitors initiatives a summary of the main risks of the Board of Directors reviews standards. The Audit Committee with action based on international or business line, and countered summarized for each country With Vestalis, risk can be It then defines an action plan. impact on Group operations. it ranks by frequency and financial of all risks at each unit, which compiles a comprehensive list sites, the system—called Vestalis— Launched in 2002 at three pilot around the globe. unit to map risks at each business went to work and developed a tool intervention. needed for timely, informed and generate the information areas of potential risk early on The solution? A system to flag caution or immobility. its targets, while avoiding undue keep the Group from achieving and preempt risks that might The aim was initially to identify behind it. the managerial flair and vision a benchmark, recognized for global risk that has since become adopted a system for managing > oday Vestalis covers 95% of nn 1 In 1998 Groupe DANONE 8 ual DANONE

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E ••• the following amounts: members of the Board of Directors received Executive Committee who were also In 2004, the three members of the Committee. r the Board of Directors on the basis of the Executive Committee is reviewed by Compensation of the eight members communicated to financial markets. per share as cashflow and net earnings targets for sales, operating margin, free variable portion is based on Group members of the Executive Committee, of strategy during the year. For other defined in the budget, and an assessment operating profit and free cashflow as cess in meeting targets for sales, tion of compensation reflects both suc- change of a business line, the variable por- For Executive Committee members in 60% of total compensation. the latter represents between 40% and Based on business and individual targets, des a fixed portion and variable portion. Executive compensation at DANONE inclu- > analysts’ association SFAF. DANONE also won a special prize from the French financial Groupe Advisors.” and “Independent and Communication” r competition. In addition to the Grand Prix du Jury, the Groupe were rewarded in 2004 with the top place at annual Agéfi KUDOS: ecommendations of the Compensation eceived awards and Transparency for “Quality of Information Annual meeting Executive compensation policy DANONE’s achievements in corporate governance of shareholders on April 15, 2004 downloaded from www.danone.com. in the DANONE 2004 20-F, which can be Full information on these issues is set out long-term performance. Group managers a stake in DANONE’s 1,250 staff members. The aim is to give 1,919,980 stock options to approximately In 2004, the Board granted a total of of portion of u Finance, Strategy and Information Systems, Emmanuel Faber, Executive Vice-President a variable portion of of which a fixed portion Operating Officer, Jacques Vincent, Vice Chairman and Chief of portion of u Franck Riboud, Chairman and CEO: 2,426,860, down 2.7%, of which a fixed 786,430, up 4.5%, of which a fixed u u 346,430. 1,435,950. u u 440,000 and a variable portion 990,920 and a variable portion u 1,511,140, down 3.1%, u 751,140. u 760,000 and •