On April 27, 2005, a settlement was reached in the U.S. class action litigation that had been filed against Sodexho Marriott Services, Inc. now known as Sodexho Inc. This settlement is subject to approvals by District Court Judge Ellen Huvelle.

Sodexho, Inc. has agreed to resolve this litigation in order to avoid protracted legal proceedings, and without admitting any liability.

Under the terms of the settlement agreement, Sodexho, Inc. has committed to make monetary payments to eligible class members and to pay class attorneys’ fees for a total amount of up to USD 80 million. The company will also continue to promote its diversity programs.

A provision of USD 78 million (EUR 60 million) has been recorded as of February 28, 2005, in addition to the previous liability recorded of USD 10 million (EUR 8 million as of February 28, 2005).

The net-of-tax impact of this provision on the income statement for the six-months ended February 28, 2005 was EUR 40 million.

The Group financial statements have been prepared in accordance with accounting principles established by the Comité de la Réglementation Comptable No 99-02 (“CRC Regulation 99-02”) and the Opinion of the Conseil National de la Comptabilité in relation to Interim Financial Statements in France.

The interim consolidated financial statements have been prepared in accordance with the same accounting principles as the year end financial statements, including the tax calculation, which, given the nature of our activities, could be calculated with sufficient accuracy.

The interim consolidated financial statements have been prepared using the same valuation methods and presentation as the year end financial statements, except for the change in accounting method related to retirement obligations and related commitments (see note 2.2 below).

In accordance with the “Recommandation n°2003.R01 du Conseil National de la Comptabilité », the Group has chosen to apply the preferred method of accounting for retirement obligations and related commitments.

2.1. Revenue recognition

In the Food and Management Services, revenue is recognized in the period in which services are provided pursuant to the contractual conditions.

Revenues for the service voucher segment include commissions received from customers, commissions received from affiliates and investment income realized on the nominal value of the vouchers during the period from their issuance through redemption.

Effective September 1, 2004, the Group fully accounts for retirement obligations and related commitments in its consolidated financial statements.

The adoption of this preferred method has a net-of-tax impact of a reduction of EUR 104 million to shareholder’s equity, an increase of EUR 148 million in tax and employee liabilities and an increase of EUR 44 million in deferred tax assets.

The actuarial method used by the Group to evaluate these retirement obligations is the Projected Unit Credit Method.

The calculation of these obligations notably included factors such as the seniority of the employees in the company and the life expectancy turnover rate as well as economic assumptions pertaining to growth rates, expected return on assets and the discount rate.

The accumulated actuarial gains and losses will be amortized over the expected average remaining working lives of the employees participating in the plan if they exceed the greater of 10% of the present value of the defined benefit obligation and 10% of the fair value of any plan assets (corridor method).

The expense recorded in the income statement corresponds to:

The related liability, which represents to the obligation less plan assets, is recorded in Tax and employee liabilities in the balance sheet.

Following is a description of the main plans within the Group:

SODEXHO ALLIANCE has acquired treasury shares in connection with its stock options plans, which are recorded in marketable securities. A liability (and corresponding expense) is recorded if at the closing date of the period, the acquisition cost of the shares acquired is superior to the exercise price of the options awarded. If the number of treasury shares acquired is less than the number of options awarded, a liability (and corresponding expense) is recorded for the difference between the market price at the end of the period and the exercise price, multiplied by the number of remaining shares to be acquired for the applicable tranche of stock options.

Exceptional income and expenses are recorded for significant items, which, due to their unusual character and non-recurring nature, are not considered to be inherent to the operating activities of the Group. In general, such costs relate to gains or losses on asset disposals, restructuring costs, exceptional depreciation of fixed and intangible assets, or provisions or expenses recorded in connection with stock option plans.

Earnings per share and diluted earnings per share are calculated using methods recommended by Advice No. 27 of the Ordre des Experts Comptables. Earnings per share is calculated by dividing group net income by the average number of shares outstanding during the year. In the calculation of diluted earnings per share, the denominator is increased by the number of potential shares outstanding, and the numerator is increased by the net-of-tax interest income (calculated at the average monthly rate from Euro Currency Market (“Taux Moyen Mensuel du Marché Monétaire Euro”) on the proceeds, which would have resulted from the issuance of these shares.

As of February 28, 2005, there were no commitments to create new shares. Therefore, earnings per share and diluted earnings per share are the same.

2.6. Foreign currency transactions and translations

For subsidiaries located in countries with stable currencies, assets and liabilities are translated using the end of period exchange rate. Income statement and cash flow statement line items are translated using the average exchange rate, calculated using monthly averages. The monthly average exchange rates are calculated as the average of the end of month rate and the rate for the prior month. Exchange rates used are obtained from Euronext Paris and other international financial markets. The difference between the opening balance sheet accounts as translated at beginning and end of period rates is recorded in shareholders’ equity. Foreign exchange gains and losses resulting from intragroup transactions in foreign currencies during the year are recorded in the income statement.

The financial statements of subsidiaries in the following countries reflect currency devaluations as required by local regulations: Argentina, Chile, Colombia, Mexico, Peru, Turkey and Venezuela. The inclusion of monetary corrections imposed by local regulators on these subsidiaries in the consolidated financial statements had no impact on the income statement. Foreign currency translation differences for these subsidiaries are recorded in the currency translation adjustment account in shareholders’ equity in the same manner as for the subsidiaries in countries with stable currencies.

For subsidiaries located in highly inflationary countries, differences between net income translated at average and period-end rates are included in net financial expense. As of February 28, 2005, none of the countries in which the Group operates was considered to be highly inflationary.

Translation differences on monetary assets and liabilities denominated in foreign currencies are recorded in the income statement. Translation differences related to a monetary component of a net investment in a company within a consolidated foreign subsidiary are recorded in consolidated shareholders’ equity until the sale or liquidation of the net investment.

Assets and liabilities of acquired companies have been recorded at their respective fair values effective September 1, 2000.

The inclusion in the consolidation scope of Sodexho, Inc., Wood Dining Services, Sogeres, Sodexho Services Group Ltd, Sodexho Scandinavian Holding AB and Universal Services at fair value resulted in the recording of intangible assets relating to the value attributed to the significant market shares inherent in the portfolios of contracts held by these six companies in their principal geographic markets (the United States, France, the United Kingdom and Ireland, the Netherlands, Australia and Sweden).

No deferred taxes are recorded on these market share values.

Goodwill represents the excess of acquisition cost over the fair value of the identified assets and liabilities assumed, as of the initial inclusion of an acquired company in the consolidation scope. Due to the long-term nature of the markets in which the Group operates, goodwill is generally amortized over thirty years (calculated on a pro rata basis in the year of acquisition).

Market share is principally determined based on an average of multiples of revenues and EBITA achieved by the acquired companies in their main markets and is reviewed annually for impairment.

Market shares are not amortized in the consolidated financial statements. If there is a significant diminution in the market share value for more than two consecutive years, as recomputed based on actual results compared to the original amounts, an impairment loss is recorded.

As was indicated in August 31, 2003, the impairment test on market shares and goodwill is further supported by a calculation of the assets’ “value in use”, as determined based on discounted future cash flows. The method used to determine value in use is described below.

As of February 28, 2005, the Group performed the impairment tests as required by the “Règlement du CRC n° 2002-10” issued on December 12, 2002, which defines the recoverable value of an asset as the higher of the market value or value in use.

Leased assets are recorded on the balance sheet as capital leases in instances where a Group company is deemed to bear substantially all of the risks and rewards of the leased asset. A corresponding obligation is recorded as a liability, and the related rental cost is allocated between depreciation and interest expense in the income statement.

Depreciation of property, plant and equipment is calculated on a straight-line basis over the estimated useful lives of the respective assets giving consideration to the local economic conditions and climate.

The following useful lives are generally used by Group companies:

2.9. Investment securities of non consolidated companies

These investment securities are recorded at acquisition cost. If the utility value is determined to be less than the net book value, these investment securities are written down. Utility value is determined based on various criteria such as market value or market price, profitability outlook or revalued net assets. Dividends received from non-consolidated companies are recorded as income in the period in which they are received.

Client receivables are recorded at their nominal values.

The allowance for doubtful accounts is estimated based on the risk of the non-recoverability of certain client receivables.

Deferred income taxes are recorded on temporary differences between the tax basis of assets and liabilities and their carrying values for financial reporting purposes excluding market share and goodwill.

As the pattern of temporary difference reversals is not fixed, deferred taxes recorded on the balance sheet have not been present valued.

In addition, deferred tax assets pertaining to net operating loss carry-forwards (net of deferred tax liabilities), are only recorded in cases where recovery is deemed probable.

Vouchers payable represents the face value of vouchers in circulation or presented to Sodexho Alliance but not yet reimbursed to the affiliate.

Group policy is to finance acquisitions in the acquired company’s currency generally at fixed rates of interest. In most cases where variable rate debt has been negotiated, the variable rate interest is swapped into fixed rates through the use of interest-rate swap agreements. Similarly, in most cases where acquisition financing has been negotiated in a currency other than that of the acquired company, a currency swap agreement is negotiated.

All such agreements are designated as hedges at contract inception. The Group does not engage in speculative transactions.

2.14. Deferred financial charges

Deferred financing costs incurred in connection with debt issuances are amortized over the maturity of the related debt.

2.15. Provisions for contingencies and losses

A provision for contingencies and losses is recorded when it is probable that there exists a legal, equitable, or constructive obligation to sacrifice economic benefits to a third party in the future without an expectation of receiving proceeds of a similar amount from the third party. Provisions for contingencies and losses primarily include payroll and other taxes, client and supplier litigation, and employee litigation.