Jeronimo Martins — Annual Report 2007

Mar 17, 2008

3	Message from the Chairman
	I. Introduction
6	1. The Group's Strategic Profile
13	2. Operating and Financial Highlights
17	3. Corporate Bodies
19	4. Business and Ownership Structure
21	5. Management Structure
23	6. Financial Glossary
25	7. Contacts
	II. Corporate Governance
27	Introduction
28	1. Statement of Compliance
29	2. Disclosure of Information
57	3. Exercise of Shareholder Voting and Representation Rights
59	4. Company Rules
60	5. Board of Directors
	III. Consolidated Management Report
69	1. Relevant facts of the Year
71	2. International Macroeconomic Environment
73	3. International Sector Environment
76	4. Portugal
78	5. Poland
80	6. Overview of the Group's Consolidated Activity
90	7. Food Distribution - Portugal
105	8. Food Distribution - Poland
108	9. Manufacturing
112	10. Jerónimo Martins Distribution
115	11. Simplification of Internal Management Processes
117	12. Group Investment Programme
119	13. Outlook for 2008
131	14. Events after Balance Sheet Date
131	15. Results Appropriation Proposal
132	16. Consolidated Management Report
	IV. Social Responsibility
135	1. Relevant Facts of the Year
138	2. Jerónimo Martins and Sustainable Development
140	3. Corporate Ethics
142	4. Human Resources
151	5. Quality and Food Safety
159	6. Environmental Management
172	7. Patronage
179	8. Frequently Asked Questions
	V. Consolidated Financial Statements
188	1. Consolidated Financial Statements
232	2. Statement of Conformity
233	3. Auditor's Report
235	4. Report and Opinion of the Audit Committee
	VI. Individual Financial Statements
238	1. Management Report
246	2. Financial Statements
281	3. Auditor's Report
283	4. Report and Opinion of the Audit Committee
285	Excerpt of the Annual General Meeting Draft Minutes

MESSAGE FROM THE CHAIRMAN

Dear Shareholders,

For Jerónimo Martins, the year 2007 was marked by a notable growth in its operations, particularly in the Distribution area, which was achieved thanks to adjusting the defined strategies, the way they were strictly implemented and the balanced management of the available resources.

Consolidated sales reached 5,350 million euros, which corresponds to a year on-year growth of 21.4%, and the net profit for Jerónimo Martins amounted to 131 million euros, 13.0% more than in 2006. Largely responsible for this growth were the Pingo Doce chain, which registered a 17.5% increase in sales, passing the 1,000 million euros mark and 8.7% like-for-like growth against the previous year, and the Biedronka chain, with an excellent performance of 35.0% increase in sales and 21.1% in the like-for-like basis. With these levels of growth, both Companies strengthened their market shares.

Within this consolidating leadership strategy, I am enthusiastic to write about the opening of the 1,000th Biedronka store in Warsaw, Poland, in September 2007, which is a symbol of the Group's strong investment in the Polish market. I should also like to highlight Jerónimo Martins' continued investment in its offer of a high quality Private Brand, which is an extremely important support to its Company differentiation strategy and which grew 41.0% in retail operations in Portugal and 31.8% in Biedronka. As proof of our compliance with the highest and strictest Private Brand quality requirements, I have the pleasure to report that the Pingo Doce and Recheio Companies were the first, worldwide, to certify their private brand products development as well as the follow-up process of both products and suppliers after the launching of the products, in accordance with the NP EN ISO 9001:2000 referential system.

I also would like to highlight the retail market concentrations in Portugal and Poland, in which the Group played an active part by acquiring, at the end of the year, to the Tengelmann Group the Plus chain operations in Portugal and Poland, involving 75 and 210 stores respectively and an overall turnover of around 500 million euros.

Although the performance in 2007 is an important milestone in the Group's history, it is the responsibility emerging, also from the 2,700 and the 3,700 new employees in Portugal and Poland, respectively (+19% comparing with the same period last year in the retail area) this which motivates our ambition for the new cycle that is going to commence. It is a cycle of strong, balanced and sustainable growth in all business areas and of the permanent creation of value.

For Jerónimo Martins, the dawn of 2008 is already marked by new challenges. In the short-term and as soon as the acquisition of the Plus operations has been approved, a refurbishing process will take place in the respective stores and the new employees will be integrated into the Group's culture. The basic principle of this integration will always be not only the transferral of Jerónimo Martins' knowledge but also to receive the value and integration of best practice and knowledge from the experience of the integrated chain's employees.

Once the necessary integrations have been consolidated, the Group will return to organic growth, not forgetting to study new opportunities for growth, either by expansion into new geographic areas or new business areas. What is certain is that

the Group will be paying attention to any new opportunities that might arise in the food-manufacturing sector in Portugal and in Poland, while always taking into consideration the solidity of its balance sheet.

I usually say that we are a "People's Business, made by People" and it is from this perspective that I value a policy based on training. Because I believe that we are currently living in the Talent Age, the personal and professional development of the Jerónimo Martins Employees is more and more evident as a competitive advantage in this global market.

In the light of this, both Portugal and Poland provide their Middle and Senior Managers with specific training at renowned national and international Academic institutions with which the Group has established protocols and long-term relationships, such as Universidade Católica Portuguesa, Universidade Nova, INSEAD, Harvard University, Kellog's University, among others.

Without ever neglecting the business and taking into consideration the importance the Perishables area holds for the Group's strategy, I would like also to highlight the creation of the Jerónimo Martins Perishables School, which is dedicated to rigorous and professional training to develop the Employees' technical skills in the specialised areas of butcher's, fishery, bakery and pastry, fruit and vegetables.

I am also very pleased to confirm that in 2007 the Jerónimo Martins Training School joined the "New Opportunities" Programme, in partnership with the "Employment and Professional Training Institute" and the "Institute for Quality in Training", with a project called "Learn and Develop". This project, which aims to give all the employees with less than third cycle or high school graduation the opportunity of receiving, in working hours, the respective qualification, already had more than 3,000 people enrolled at the end of December 2007.

On the other hand, being aware of the responsibility we have towards the community of which we are a part, and the importance of integrating people with special needs but who are able to actively participate in society and in the companies - the partnership with ACAPO (Portuguese Association of the Blind and Poorly-sighted) was reinforced, with a view to another 39 employees being integrated into Jerónimo Martins. Also with people with reduced sight in mind, a new functionality was introduced on the Group's institutional website - www.jeronimomartins.com -, which allows people to hear the written content, in Portuguese and English, a real first in terms of the top 20 listed companies in Portugal.

On closing 2007, with our eyes set on the challenges and opportunities that we come across, I would like to leave a very well-earned word of thanks to all the Employees, for their invaluable professionalism and dedication. Once again we wanted to pay homage to our Employees, making them the leading faces in this Report, as we are sure of their decisive contribution towards the Group's outstanding performance.

Finally, I also would like to express my gratitude to each of our Shareholders and I am sure that they will continue to support our project, enabling us to take Jerónimo Martins ever further.

• 6 1. The Group's Strategic Profile
• 13 2. Operating and Financial Highlights
• 17 3. Corporate Bodies
• 19 4. Businesses and Ownership Structure
• 19 4.1. Business Structure
• 20 4.2. Ownership Structure
• 21 5. Management Structure
• 23 6. Financial Glossary
• 25 7. Contacts

1. THE GROUP'S STRATEGIC PROFILE

Asset Portfolio

Jerónimo Martins is a Portuguese Group of relevant size, whose turnover in 2007 was 5,350 thousand million euros, with 41,300 employees, and whose international business represents around 44.7% of sales and 46.8% of its employees.

The Group holds a balanced business portfolio which combines the strength of the market position of its retail and wholesale operations' in Portugal, with the growth potential of the Biedronka operation in the Polish market, and the maturity and capability for generating cash flow of its Manufacturing partnership with Unilever in Portugal.

In the Food Distribution Area in Portugal, at the end of 2007, in joint terms, the Group held the leading market position, with the brands Pingo Doce (210 supermarkets in Mainland Portugal and 13 supermarkets in Madeira), Feira Nova (9 hypermarkets and 37 mini-hypermarkets), and Recheio (31 Cash & Carry stores and 2 Food Service platforms in Mainland Portugal and 1 store together with 1 Food Service platform in Madeira), and it was the market leader in the supermarket and in the Cash & Carry segments.

In Poland, Biedronka, a chain of stores with a variety of food products, which combines the quality with an everyday-low-price policy, is a strong market leader in its format and has a substantial lead over competitors in terms of number of stores and brand awareness. At the end of 2007 the chain had 1,045 stores in Poland, with more than 494 million client tickets and 2,392 thousand million euros turnover for the year under review.

Also in Poland, 4 pilot stores were opened in 2007 under the "Apteka Na Zdrowie" banner, joining the first store that opened at the end of 2006 after the partnership agreement signed in February 2006 with the National Association of Pharmacies in Portugal, in order to study the viability of developing a line of pharmacy retail businesses.

Jerónimo Martins is also the biggest Portuguese manufacturing Group in fast moving consumer goods, through its partnership with Unilever in the areas of Food, Personal Care and Home Care, and Out of Home, which was reinforced in 2007 with the merger of FimaVG, Bestfoods, LeverElida and IgloOlá into a single organisation – Unilever Jerónimo Martins. The new Company maintains its position as market leader for Olive Oil, Margarines, Iced Tea, Ice creams and Washing Detergents, among others.

The Group's portfolio also includes a business area providing Marketing Services, Representations and Restaurants, including:

• Jerónimo Martins Distribuição de Produtos de Consumo, which is the Portuguese representative for several international brands, some of which are market leaders in the fast-moving consumer food and food service markets, in this case through Caterplus, in the selective cosmetics and in the fast-moving cosmetics, through its joint venture with the Puig Group;
• Hussel, a Specialised Retail chain with 21 stores, selling chocolates and confectionary;
• Jerónimo Martins Restauração e Serviços, dedicated to the development of projects in the restaurant sector, which includes the Jeronymo chain of coffee shops and the Ben & Jerry's and Olá ice-cream stores and the Subway stores.

Main Historic Milestones

1792

Jerónimo Martins opens a premium grocery store in Lisbon in the Chiado area.

1944

Opening of the Fima plant (producing mainly margarine).

1949 – 1970

A joint venture was established with Unilever in Portugal to develop manufacturing and market know-how in the fast moving consumer goods markets, starting with Fima and later growing to include Lever (Soap and Detergents), Olá (Ice-Creams) and Iglo (Frozen Food).

1980 – 1995

Development of the food distribution business area through the Pingo Doce supermarkets, Feira Nova hypermarkets, the expansion of Pingo Doce to Madeira with Lidosol, the Recheio Cash & Carry, the Marketing and Representation Services, with JMD and Specialised Retail, with Hussel.

Expansion through organic growth and acquisitions. Development of strategic partnerships, first with Delhaize at Pingo Doce, and then with Ahold at Pingo Doce and Feira Nova, with Booker at Recheio and with Douglas at Hussel.

1989

Jerónimo Martins is listed on the Stock Market, beginning a decade of consistent and significant increase in market capitalisation.

1995 – 2000

International expansion to Poland (Eurocash Cash & Carry, Biedronka stores and Jumbo hypermarkets), Brazil (Sé supermarkets) and England (Lillywhites chain of sports goods).

Diversification of the business portfolio: In-store banking, in joint venture with BCP (Expresso Atlantico) and participation in the Telecommunications sector (Oniway).

The Group moves into the Water and Tourism business with the acquisition of VMPS.

2001 – 2005

Portfolio of assets' restructuring, with the sale of non-core businesses, improved balance sheet and minimization of exposure to financial risk.

Operational restructuring, with a view to focusing the operational units on the commercial dynamics of their respective segments, maximising the scale, exploring the synergies, simplifying processes and reducing costs; creation of multi-disciplinary teams, higher organizational flexibility and launch of the Jerónimo Martins Training School.

2006–2007

New Stage of the growth strategic plan, by returning to expansion in Portugal and maintaining expansion levels in Poland; strong investment in technological update, store refurbishing for the various chains and training programmes for Management and Non-Management staff; study of new business opportunities.

Continuing a Pioneering Culture

The Jerónimo Martins Group, pioneer in Portuguese business life in several fields, is renowned, among other reasons, for being the foremost Food Distribution company in Portugal for implementing new management practices such as:

• Adopting the International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) in 2000;
• Starting up a Food Service platform in Oporto, in 2002;
• Implementing a business-to-business (B2B) platform in its relations with suppliers in 2004;
• Obtaining from APCER (Portuguese Certifying Association) at the end of 2005 the HACCP - Hazard Analysis Critical Control Point Certification (DS 3027E: 2002) and the Environmental Management System Certification (NP EN ISO 14001: 2004), placing the Retail warehouses as the first in Portugal in the Food Distribution sector to achieve this double recognition;
• Having 19 Recheio stores and two Food Service Platforms recognised with Food Safety Certification at the end of 2006 – certification of the HACCP system, in accordance with the Codex Alimentarius CAC/RCP-1-1969, Rev.4 (2003) – becoming the first wholesale Distribution chain in Portugal to obtain a multi-site certificate in HACCP;
• Obtaining, in 2007, the certification of private label activity in Pingo Doce and Recheio according to NP EN ISO 9001:2000 guidelines – certification of internal and supplier's processes in the development of private label products and in the control after launch - becoming the first operators worldwide to obtain this type of certification.

Jerónimo Martins also registers several innovative market initiatives.

The private label range of its food retail chains in Portugal has been consolidating the image of quality and innovation through initiatives such as:

• Developing brands by major area of product and for ranges of product common to both retail banners, providing the opportunity to enlarge the assortment, to optimise the scale and to reinforce the image of specialist;
• Launching a wide range of fresh products under private label, with specific quality control requirements from the source to ensure food safety and quality standards;
• Launching, in 2006, a range of products under Pingo Doce label, alternative to the standard dairy milk products, for clients that have intolerance to milk protein – becoming the first retail company in Portugal to do so;
• Launching, in 2007, a certified organic fresh range of products under Pingo Doce, becoming the first retail company in Portugal to do so.

In 2005, the Group took another truly innovative step in the Portuguese Distribution sector by establishing the Jerónimo Martins Customer Ombudsman;

In 2006 Biedronka established an unprecedented partnership with Danone, Lubella and the Polish Institute of the Mother and Child, to fight the problem of poor nutrition amongst children and young people and so Milk Start, a product which was developed

based on a strict nutritional profile and under the supervision of an independent institute, was launched.

Finally, in July 2007, Jerónimo Martins launched the "Learn and Develop" project, as part of the national "New Opportunities" programme developed by the Ministry of Education and it was the first Company in its sector to celebrate a co-operation protocol aiming to train and certify employees, which in this case totalled 11,500. Also in 2007, a new functionality was introduced to the Group's institutional website, enabling access to the blind, which is an unprecedented initiative among the Companies present in PSI-20.

Mission

Jerónimo Martins is a Group with international projection operating in food distribution and manufacturing, which aims to satisfy the legitimate interests of its Shareholders, while contributing to the economic growth and to the sustainable development of the regions where it operates.

In the fulfilment of its mission, the Group aims to:

• Promote maximum operational efficiency across all business areas, so as to optimise the results generated through its financial, material and human resources;
• Ensure maximum customer satisfaction, by improving their quality of life through a firm commitment in terms of innovation and in terms of offering the best possible value for money for the products and services it provides;
• Direct the entire Organization to work to the highest possible standards of conduct and of Social Responsibility, building relationships of trust with all stakeholders;
• Conduct business through dynamic and flexible Organisations, staffed with people who can bring together the benefits of their experience and know-how with an acceptance of the permanent need for change, through continual investment in training and in the most up-to-date management practice, thereby guaranteeing that the whole Organization is focused on the strategic challenges and on the activities which are real value drivers.

A Benchmark Identity

Being a longstanding benchmark in its business sector and in the market in general, Jerónimo Martins has a history of 215 years, made up of hugely diverse events, experiences and learning, which have conferred to the Group its solidity and capacity for renewal, mirrored in the strength and vitality for which it is renowned.

The new Jerónimo Martins' corporate identity, implemented in 2004, demonstrates and symbolizes the profound changes that have taken place within the Group. This new visual identity embodies the new reality of Jerónimo Martins and the three values that are core to its corporate culture and attitude in the market:

Rigour in Management, which ensures...

• Adequate analysis of macro-economic, sector and market trends;

• Definition of strategic priorities;

• Establishment and conveyance of clear, demanding objectives;

• Adequate control and correct critical evaluation of results.

Permanent Innovation, which stimulates...

• A pioneering spirit in management processes and practices;
• Dynamism and market leadership.

Transparency in its Policies, which promotes...

• The safeguard of the Shareholders' interests as a priority;
• Ethical conduct of the Organisation in relation to all its stakeholders;
• Objective assessment of employees with regard to their performance and professional development;
• Social Responsibility as a strategic option;
• Investment in strategic partnerships in those markets and regions in which it operates.

Today, Jerónimo Martins is a solid, cohesive Group, with a clear vision. It is an Organization geared towards professional excellence, which is prepared to add another chapter to its already long history, contributing to a stable and lasting future.

A Strategy of Sustainable Development

The Jerónimo Martins Group is a player in a sector, which is highly sensitive to the macro-economic environment globally, and in the countries in particular, and which is very diversified and dynamic, with regard to both supply and demand.

It is known that macro-economic environments generate risks and opportunities and are ever more cross-connected due to globalisation. The macro-economic scenarios outlined by the experts offer significant levels of uncertainty and volatility. Financial markets demand generally higher risk premiums, as well as greater transparency and selectivity and Companies must learn how to deal with this new reality.

The food world is made of progressively quicker market development cycles and has ever more demanding consumers who prefer trustworthy brands and competitive prices.

The consumers have proven to be very rational in their food spending, as they have access to a great deal of information and they can choose between various alternatives. Price sensitivity, concern for quality, food safety and health as well as the need for convenient solutions are global trends, although each market still demonstrates its own degree of consumer development. Consumers are also characterized by major social and demographic trends such as ageing, racial and cultural diversity, concentration of population in "mega" urban towns, lack of time, smaller households, among other.

With regard to supply, the players in the food sector, for the most part, have recently gone through profound restructuring. The ones that envision the consolidation of their market positions in highly aggressive and competitive environments stay focused on continuous incremental competitiveness and continuous differentiation of their value propositions.

Depending on the local, regional or even global position that each player seeks to attain, Mergers and Acquisitions and international expansion continue to be central topics in a growth strategy.

It should be also added that citizens are more and more aware of environmental and social problems. Media, experts, NGO's and governments in general, have been focusing the public debate on issues related with sustainability.

On the other side, the food retail players are showing signs of being aware of the relevant role they can carry out concerning the issues related with sustainability. As the last link in the interface with the final customer, they know that the goodwill of their environmental and social initiatives can leverage the value of their brands and banners and reinforce clients' trust. Looking from another angle, they will also influence positively a long value chain of multiple players just with the options they take.

Being aware of all this, when developing its strategy, the Jerónimo Martins Group has an economic commitment based on healthy and profitable growth.

Focusing its management activity on value creation in the short, medium and longterm, the Group assumes two main priorities.

First of all, the Group envisions the continuous reinforcement of its market leadership positions with regard to current assets and investment priorities will be determined that way.

Simultaneously, the Group envisions the preparation for the future growth through carefully studying and testing new business opportunities for expanding the current portfolio of assets within the scope of its mission.

Therefore, Jerónimo Martins intends to continue to:

• hold solid financial resources, paying particular attention to its capital structure, to the solidity of its balance-sheet and to risk provision, while ensuring a balanced portfolio and a careful evaluation of new investments.
• promote programmes that generate strong growth in cash flow and profit for its asset base, including expansion and consolidation operations.
• guarantee continued reinforcement of the different formats, promoting focused, flexible, creative and dynamic organisations, capitalising on scale, synergies and shared knowledge and rewarding the value creation. Continuous investment in training Management and Non-Management employees is a key factor to ensure an organizational performance of excellence.
• implement appropriate risk analysis and management mechanisms, at all critical levels of the value chain, to firmly sustain its current business and its plans for growth in the future.
• differentiate from others by being innovative and pioneering in responding proactively to customers' demands and to emerging consumer trends. The investment in strategic partnerships continues to play a determining role in the desired innovative and pioneering culture.
• continually and proactively adjust the strategic plan in articulation with annual objectives that must be very demanding but also feasible, being this the key to ensure continuous value creation for the Jerónimo Martins' Shareholders and stakeholders in general.

Jerónimo Martins' economic commitment with its shareholders has always been, and will continue to be, marked by strict compliance with economic, environmental and social rules. However, it is also relevant to say that the Group has already proven during its long history of 215 years, the will to contribute beyond what is requested.

Within the scope of its corporate values, Jerónimo Martins has been implementing, for many years, a series of policies, practices and initiatives that illustrate that will. This Annual Report has a specific chapter to provide very complete information organised by major areas of interest, namely, Corporate Ethics, Human Resources, Quality and Food Safety, Environmental Management and Patronage.

The Group is also convinced that the policies and practices which direct its market conduct have to evolve proactively, following the evolution of the society in general and reflecting the degree of internal maturity on each of the matters. It is this consistent attitude over time that sustains and reinforces Jerónimo Martins' identity for its shareholders, staff and stakeholders in general.

On a different level, Jerónimo Martins will continue to integrate sustainability values into the market strategy of each of the Group's businesses, believing that clients will value and trust, more and more, on brands and banners that better integrate the relevant economic, environmental and social values and that perform in accordance over time.

All in all, the strategy of sustainable development of Jerónimo Martins aims to satisfy continuously the legitimate interests of its shareholders while contributing to the economic growth and to the sustainable development of the regions in which it operates, continuing being a corporate benchmark identity, holding trustful brands and banners.

2. OPERATING AND FINANCIAL HIGHLIGHTS

			€ 000.000	20
8		270	Net Results Cash Flow
	151		Nr. Common Shares Nr.Own Shares	θ
			Data per Share (€) Net Results Cash Flow Share Price (ye)
	2007		* Stock Split

Consolidated Balance Sheet
€ 000.000
	2007	2006
Invested Capital	1,443.5	1,273.5
Financial Debt *	843.6	679.6
(Marketable securities and bank loans)	-264.3	$-173.4$
Net Debt	579.3	506.2
Minority interests	287.3	275.4
Equity	576.9	491.9
Shareholders Funds	864.2	767.3
Gearing	67.0%	66.0%
Interest Cover	3.79	5.00

Number of Stores and Sales Area
	2007	2006	2005	2004	2003
Pingo Doce	210	189	179	178	177
sqm	183,770	161,279	149,158	146,089	145,869
Feira Nova	46	38	29	28	25
sqm	172,039	150,189	130,684	128,317	122,907
Madeira	15	15	15	14	15
sqm	14,626	13,697	13,697	11,982	11,463
Recheio	33	33	32	32	31
sam	109,634	110,005	107,202	107,202	104,524
Biedronka	1.045	905	805	725	672
sqm	536,729	452,952	394,536	348,751	317,942

	Control Cardinal O412020120 Sales (Million euro)		EBITDA Margin		Nr. Stores	Sales Area	Sales/	LFL. 口%
					07	06	$\aleph\%$	07	06	07	(s qm) 07	sqm * 07	07/06
F o		CE PINGO Supermarkets (Leader)	51%		1.136,8	967.6	17.5%			210	183,770	6.7	8.7%
о D	Portugal Mainland	FeiraNova Hypermarkets (3rd Player)	51%		800.9	739,7	8,3%	7.0%	8.2%	46	172.039	5,0	$-2.0%$
D л. s		CRECHEIO Cash & Carry (Leader)	100%	п	626.1	602.2	4,0%	6,0%	6.0%	33	109.634	5,7	3,6%
T. R	Portugal Madeira	R PINGO (Lidosol) Supermarkets	75,5%	J.		123,3 111,1	10,9%	4,6%	5,5%	15	14.626	9,0	12,7%
в U T		(J.G.Camacho) Cash & Carry (RECHEIO										8.5	$-0.9%$
$\mathbf{I}$ $\circ$ N	Poland	Biedronka Retail Stores (Leader) Continente alabia como	100%		2.392,3	1.715,5	39,5%	5,9%	5,3%	1.045	536.729	18,6	21,1%
M А N U F A с T. U R п N	Portugal	Margarine, Olive Oil, Seed Oil Ready to Drink Tea & Savoury ř. Home Care & Personal Care Unifavor JERON/MO/MAKTINS	45%	P
		322.257 327.7 $-1,7%$ 11.3% Ice Cream	14.2%
		$C$ provisions Representation & M arketing Services Consuming	100%	J.
G		Chocolats HUSSEI	51%	п
		CONSOLIDATED			5.349,7 4.407,2 21,4%			6,6%	7,2%
	I - Integral * in local currency ('000)

P - Proportional

3. CORPORATE BODIES

Election Date: 30th March 2007

Composition of the Board of Directors elected for the term 2007-2009

President of the Board of Directors Elísio Alexandre Soares dos Santos

• 73 years old;
• President of the Group since February 1996.

Executive Board Members:

CEO and Responsible for the Financial Area (CFO) Luís Maria Viana Palha da Silva

• 52 years old;
• President of the Executive Committee since 2004;
• Executive Member of Jerónimo Martins, SGPS, S.A. Board since 2001.

Responsible for Food Distribution Operations

• Pedro Manuel de Castro Soares dos Santos
• 48 years old;
• Member of the Executive Committee;
• Executive Member of Jerónimo Martins, SGPS, S.A. Board since 1995.

Responsible for Manufacturing Operations and Representation and Marketing Services

José Manuel da Silveira e Castro Soares dos Santos

• 45 years old;
• Member of the Executive Committee;
• Executive Member of Jerónimo Martins, SGPS, S.A. Board since 2004.

Non-Executive Members of the Board:

António Mendo Castel-Branco Borges

• 59 years old;
• Non-Executive Member of the Jerónimo Martins, SGPS, S.A. Board since 2001.

Hans Eggerstedt

• 69 years old;
• Non-Executive Member of the Jerónimo Martins, SGPS, S.A. Board since 2001.
• Rui de Medeiros d'Espiney Patrício
• 75 years old;
• Non-Executive Member of the Jerónimo Martins, SGPS, S.A. Board since 2001.

Artur Eduardo Brochado dos Santos Silva

• 66 years old;
• Non-Executive Member of the Jerónimo Martins, SGPS, S.A. Board since 2004.

Nicolaas Pronk

• 45 years old;
• Non-Executive Member of the Jerónimo Martins, SGPS, S.A. Board since 2007.

Single Auditor and External Auditor:

PricewaterhouseCoopers & Associados – Sociedade de Revisores Oficiais de Contas, Lda. Palácio Sottomayor, Rua Sousa Martins, 1 – 3º, 1050-217 Lisboa Represented by: Jorge Manuel Santos Costa, R.O.C. Substitute: José Manuel Henriques Bernardo

Corporate Secretary:

Henrique Manuel da Silveira e Castro Soares dos Santos Substitute Secretary: António Neto Alves

President of the Shareholder's General Meeting: João Vieira de Castro

Secretary of the Shareholder's General Meeting: Tiago Ferreira de Lemos

4. BUSINESS AND OWNERSHIP STRUCTURE

4.1. Business Structure

		PINGO DOCE - Supermarkets
	PORTUGAL	FEIRA NOVA - Hypermarkets / Mini-hypermarkets
DISTRIBUTION		RECHEIO - Cash & Carry
POLAND		BIEDRONKA – Retail Stores
		BLISKA (Apteka Na Zdrowie) – Pharmacies
MANUFACTURING	PORTUGAL	UNILEVER JERÓNIMO MARTINS - Spreads & Cooking, Olive Oil, Ready to Drink Tea, Soups, Savoury, Home & Personal Care, Ice Cream and Food Products
		JMD - Agency & Marketing Services – Food and
		Cosmetics
SERVICES	PORTUGAL	JM RESTAURAÇÃO – Specialised Retail – Coffee Shops, Ice Cream Stores & Sandwich Stores
		HUSSEL - Specialised Retail – Sweets & Chocolates

4.2. Ownership Structure

5. MANAGEMENT STRUCTURE

Jerónimo Martins, SGPS, S.A. is the Group's Holding Company, which encompasses three distinct Business Areas: (1) Food Distribution, (2) Manufacturing and (3) Marketing, Representations and Restaurant Services.

Food Distribution is divided into geographical areas of operation, in Portugal and Poland.

In Portugal, the Operating Companies – Pingo Doce and Feira Nova – have the following Divisions in their organisation structure: Operations, Category Management, Marketing, Technical and Controller. With regard to Recheio, apart from the aforementioned Divisions, there are also the following: Food Service, Information Systems, and Human Resources. For the operation in Madeira, its structure also requires the following areas, although on a more reduced scale: Logistics, Quality Control and Human Resources. In each case, the abovementioned areas have a direct report to the Managing Director of the Company.

It should also be noted that there are Functional Divisions in Retail Operations in Portugal organisation structure, providing services across the Operating Companies in each of the respective areas, namely Human Resources, Sourcing, Logistics, Perishables, Quality Control, Financial, Information Systems, Customer Ombudsman, Market Surveys, Expansion and Legal Services.

In this way, there is an effort to maximize the Group's synergies in terms of scale, resources and know-how, as well as to guarantee the necessary focus on business formats and on the consumer.

The Operating Companies and the Distribution Functional Divisions are represented on the Distribution Portugal Executive Board, a body that chairs the coordination and deliberation of strategic decisions regarding the business.

On the other hand, Poland follows a management structure in which the head of the Business Division is responsible for the areas of Category Management, Marketing, Operations, Technical, Human Resources, Logistics, Financial, Quality Control and Information Systems.

Following the merger of the former Companies FimaVG, Bestfoods, LeverElida and IgloOlá into Unilever Jerónimo Martins, the management structure of the Manufacturing area is based on a Management Board, made up of members nominated by the partners Jerónimo Martins SGPS, S.A. and Unilever.

An Executive Division reports to this Body, which is made up of the Business Units' Food, Personal and Home Care and Out of Home Divisions, as well as the Functional Divisions of Sales, Human Resources, Supply Chain (which encompasses Purchasing, Planning, Logistics, Customer Service, Quality Control and Productive Units), Financial, Legal, Communications and Information Systems.

Jerónimo Martins Distribuição is in charge of Jerónimo Martins Distribuição de Produtos de Consumo, Jerónimo Martins Restauração e Serviços and the PGJM, Caterplus and Hussel joint ventures.

All Companies are responsible for their operations and business managements, although Jerónimo Martins Distribuição provides its sister companies with Financial Information Systems and Logistics services.

Jerónimo Martins, SGPS, S.A. also includes a number of Functional Divisions whose responsibility is to support and advise the Executive Committee, the Board of Directors and the Companies of the Group, about the specific situation of each area: Human Resources, Development and Strategy, Planning and Control, Consolidation and Accountancy, Internal Auditing, Financial Operations and Risk Management, Special Projects, Investor Relations, Tax, Legal Affairs, Communications and Safety.

Each of these Functional Management Divisions of the Group's Holding Company is responsible for ensuring consistency of approach for each of the objectives defined. Their activities are described in the Corporate Governance Report.

6. FINANCIAL GLOSSARY *

EBITDA Margin =

• (+ Operating Results
• • Depreciation
• • Goodwill Amortisation
• Non-Recurrent Operating Results)

/

Net Sales & Services

EBITA Margin =

• (+ Operating Results
• • Depreciation
• Non-Recurrent Operating Results)
• /

Net Sales & Services

OIC (Operating Invested Capital) =

• • Gross Goodwill
• • Net Fixed Assets
• • Working Capital

NOIC (Non Operating Invested Capital) =

• • Goodwill Accumulated Amortisation
• • Net Financial Investments
• • Deferred Taxes Provision
• • Income Tax Provision

Pre-Tax ROIC (Return, before taxes, on Invested Capital) =

[Sales & Services / (OIC + NOIC – Deferred Taxes provision - Goodwill Acc. Amortisation) average] x EBITA Margin

Cash Flow =

• • Net Results
• • Amortisation, Depreciation and Provisions
• Deferred Taxes
• Non Recurrent Items (operating, disposals and financial)

Net Debt =

• • Bonds
• • Bank Loans
• • Other loans
• Marketable securities and bank deposits
• • Leasing
• • Accrued interest

Gearing =

• Net Debt

/

• Shareholders funds

Interest Cover Ratio

• EBITA

• / [+ Financial Results (excluding non recurrent items)

• Partners loans interest]

Like For Like sales:

Sales made by stores that operated under the same conditions in two periods. Excludes stores opened, closed or which suffered major remodelling works in one of the periods.

* This financial glossary is based on the income statement by functions

7. CONTACTS

Aiming to facilitate the direct access to some of Jerónimo Martins Group entities the following e-mail address are disclosed:

Elísio Alexandre Soares dos Santos (Chairman of the Group) ASSantos@jeronimo-martins.pt

Luís Palha (Chief Executive Officer) LPalha@jeronimo-martins.pt

Pedro Soares dos Santos (Member of the Executive Committee - Responsible for Food Distribution Operations)

PSSantos@jeronimo-martins.pt

José Soares dos Santos (Member of the Executive Committee - Responsible for Manufacturing and Representations and Marketing Services) JSSantos@jeronimo-martins.pt

Henrique Soares dos Santos (Company Secretary) HSSantos@jeronimo-martins.pt

Cláudia Falcão (Head of Investor Relations and Market Relations Representative) Investor.relations@jeronimo-martins.pt

Ethics Committee Comissao.etica@jeronimo-martins.pt

Communication Department Comunicacao@jeronimo-martins.pt

Human Resources Department Rh@jeronimo-martins.pt

Client's Ombudsman

provedoradocliente@jeronimo-martins.pt

II. Corporate Governance

Introduction

• 28 1. Statement of Compliance
• 29 2. Disclosure of Information
• 2.1. Organizational Structure and Distribution of Responsibilities
• 2.2. Specific Committees
• 2.3. Risk Control System
• 2.4. Share Price Performance
• 2.5. Dividend Distribution Policy
• 2.6. Stock Options Plan
• 2.7. Business between the Company and Members of the Board, Holders of Qualified Stakes and Companies in a Parent-Subsidiary or Group Relationship
• 2.8. Investor Relations Department
• 2.9. Remuneration Committee
• 2.10. Yearly Amount paid to External Auditor
• 57 3. Exercise of Shareholder Voting and Representation Rights
• 3.1. Statutory Rules on Exercising Voting Rights
• 3.2. Required Deadline for Depositing or Blocking Shares
• 3.3. Deadline for Receiving Postal Votes
• 3.4. Number of Shares Corresponding to One Vote
• 59 4. Company Rules
• 4.1. Code of Conduct and Internal Regulations
• 4.2. Internal Procedures for Risk Control in Company Activity
• 4.3. Measures Likely to Interfere with Public Tender Offers
• 60 5. Board of Directors
• 5.1. Description of the Board of Directors
• 5.2. Executive Committee
• 5.3. Structure and Role of the Board of Directors
• 5.4. Remuneration Policy of Board of Directors
• 5.5. Remuneration of the Members of the Board
• 5.6. Communications Policy for Alleged Irregularities Occurring within the Company (Whistleblower Procedure)

INTRODUCTION

The modification of the Commercial Companies Code, and the application of Decree-Law 76-A/2006 of 29 March, brought about a profound change in the rules with respect to Corporate Governance in Portugal, particularly in reforming supervision of companies through separation of supervisory functions and accounts review, thus reinforcing the independence and technical competence of members of supervisory bodies. Consequently, last year a revision of the By-Laws was discussed at the General Annual Shareholders Meeting, contemplating the changes imposed by that law in this important matter.

Thus, the Company adopted the so-called "Anglo-Saxon" model of governance, with its corporate entities being called: the General Shareholders Meeting, the Board of Directors, the Audit Committee and the Chartered Accountant, as a coherent evolution of the previous monist model.

In order to modernise the By-Laws and to adhere to the most advanced practices in the realm of corporate governance, an effort was made to adjust the related issues accordingly, such as: regulating votes by correspondence, the possibility of holding meetings of the Board of Directors using telematic means, as well as establishing the number of absences from meetings (without justification accepted by the Board) which will lead to declaration of definitive absence of the Director. With regard to remuneration, the By-Laws established the maximum percentage of profits from the year that may be delivered to the directors as variable pay.

In 2008, and considering that the so-called new Corporate Governance package will enter into effect, Jerónimo Martins will continue to heed the respective recommendations, always seeking to follow the criteria that is interesting to the shareholder and to the market, adjusting its practices, if necessary, in order to provide more rigour and transparency.

Therefore, to date the Company has already adopted (or projects that it will adopt this year) the measures that will allow it to comply with the recommendations contained in the new Corporate Governance Code.

Since these recommended rules, as devised for 2008, will only take effect in 2009, this report complies with CMVM Regulation No. 7/2001, according to the instructions given by the Comissão do Mercado de Valores Mobiliários (CMVM) itself [Securities and Exchange Commission].

1. Statement of Compliance

The Company fully complies with the recommendations of the Portuguese Securities and Exchange Commission on the Governance of Listed Companies. The Company accepts, however, that in the light of the document in question, it might be thought that there has not been a complete response to the recommendation concerning the individual breakdown of remuneration paid to the Members of the Board of Directors.

In this respect, the Company maintains the view that there are other options for verifying the internal distribution of remuneration and assessing the relationship between the performance of each Company sector and the level of remuneration of the Members of the Board of Directors who are responsible for supervising these sectors, considering that it is attained with indication of global remuneration of Executive Directors on one side, and Non-Executives on the other.

In addition, the Board of Directors believes that the internal and external sensitivity that such a disclosure could cause in no way contributes towards improving the performance of its members. Therefore, the Recommendation has been adopted as far as remunerations in collective terms are concerned, and by differentiating the amounts paid to Executive Members (with reference to both the fixed and variable parts) and Non-Executive Members.

On the other hand, as occurred last year, the recommendation with regard to the appreciation, by the General Shareholders Meeting, of a statement on the remuneration policy of the Board of Directors was adopted, as it is the Company's understanding that the purpose of this recommendation is fully adhered to by the fact of the Annual Report submitted for Shareholder approval contains the information relevant to remuneration paid in the previous year, as well as the main guidelines defined in relation to the matter in question, which will be tracked by the Remuneration Committee. As it is admitted that another interpretation of this recommendation is possible, and that the CMVM has not recognized the Company's position merit, in 2008 it will opt to autonomously submit that statement to the Shareholders.

2. DISCLOSURE OF INFORMATION

2.1. Organizational Structure and Distribution of Responsibilities

Jerónimo Martins SGPS, S.A. is the Holding Company of the Group and as such, responsible for the main guidelines of the various businesses, as well for ensuring consistency between the established objectives and the available resources. The Holding is made up of a group of Functional Divisions which provide both support to the Corporate Centre and services to the Functional and Operating Divisions of the Group's Companies.

In operational terms, Jerónimo Martins is organised into three business areas: (i) Food Distribution, (ii) Manufacturing and (iii) Marketing, Representations and Restaurant Services. The first area is organised into Geographical Areas and Operating Divisions.

2.1.1. Holding Company Functional Divisions

The Holding Company is responsible for: (i) defining and implementing the development strategy of the Group's portfolio; (ii) strategic planning and control of the various businesses and its consistency with global objectives; (iii) defining and controlling financial policies and (iv) defining human resources policy, with direct responsibility for implementing the Management Development Policy.

The Functional Divisions of the Holding Company are organised in the following way:

Internal Audit – Assesses the quality and efficiency of systems (both operational and non-operational) of internal control and risk control established by the Board of Directors, ensuring compliance with the Group's Manual of Procedures. The Division also guarantees full compliance with the procedures laid out in the Operations Manual of each business unit and ensures compliance with the legislation and regulations applicable to the respective operations.

The activities carried out by this Functional Division can be found in detail later in this chapter.

Communication – Proposes and implements strategies for external and internal communication. Included in its scope are the areas that provide media advice for the Holding Company and its subsidiaries, internal communications, patronage, communication in the area of Social Responsibility, as well as brand management and managing the institutional image of Jerónimo Martins.

2007 was marked by the development of innovative communication solutions, which were recognised by the market. Thus, the digital format of the 2006 Accounts Report obtained the award "Best Accounts Report for the Non-Financial Sector" for the second time (Investor Relations and Governance Awards, 2007). Jerónimo Martins' Internet site, through its audio functionality on online content (in Portuguese and English) ensures complete accessibility to the vision-impaired.

In media relations, in addition to daily clarifications and numerous press releases, there were five events with Media and members of the Group's Board of Directors. Of these events, the opening of the 1000th Biedronka store is noteworthy. This event resulted in significant representation by different media sources visiting Poland, Biedronka's stores and its distribution centre.

In the Internal Communications area, investments were made in profound reformation of the My JM Portal, in order to ensure an increasingly efficient and complete communication channel.

Legal Affairs – Responsible for supervising the Group's corporate affairs and for ensuring strict compliance by all its Companies with legal obligations. Legal Affairs also assists the Board of Directors in preparing and negotiating contracts in which Jerónimo Martins is a party, and it heads the development and implementation of strategies for the protection of the Group's interests in the case of legal disputes, and the management of external counselling.

In 2007, the Division focused its activity on overseeing compliance with company obligations, particularly in tracking the Group's reorganisation and expansion activities, particularly acquisition of Plus companies in Portugal and Poland to the Tenglemann Group, as well as other smaller-scale acquisitions.

Consolidation and Accounting – Prepares consolidated financial information in order to comply with legal obligations and supports the Board of Directors, by implementing and monitoring the policies and the accounting principles adopted by the Board and common to all the Companies of the Group. The Division also verifies compliance with obligations stated in the By-Laws.

In 2007, activity was centred on supervising conformance with the accounting standards adopted by the Group, supporting the Companies in the accounting assessment of all non-recurring transactions, as well as in the restructuring and expansion activities of the Group.

Development and Strategy – Guarantees continuous assessment of the markets, identification of the risks, opportunities and major contingencies of the Group's activity in the short-, medium- and long-term, and critical analysis of development plans for the different business areas. It contributes with perspectives on strategic debates that lead to growth projects, both in the current portfolio and in new business areas, and to optimisation initiatives in order to create value. It also ensures mechanisms to define priorities deriving from the strategic debate, and the common and general understanding of the main challenges that face the Organisation, leading to clear and objective communication.

In 2007, the Department concentrated its efforts on performing studies, considering consolidation of the debate on the foundations of the strategic plan. In this way, it was able to evaluate the Group's competitive position, showing the businesses' competitive advantages, the areas of potential growth, and differentiation and possible contingencies. In turn, financial analysis, based on historical three-year projections, allowed showing the degree of agreement with the Group's medium- and long-term objectives.

A strategic evaluation system was also presented, with trends that would allow a simple reading of the sector and the markets in connection with the projects being developed by the Group. Within this scope, the study of new business opportunities continued to be a central theme of the strategic debate, thus the Department contributed with specific studies for the vast group of initiatives that the Group has been developing in this area.

Investor Relations - This Division is the interface with all investors - institutional and private, national and foreign - as well as the analysts who formulate opinions and recommendations regarding Jerónimo Martins' share price.

Besides guaranteeing the availability - through institutional channels, in particular the website of the CMVM (Securities Exchange Commission) - of all information that may influence the share price, the Division is responsible for providing general information and clarification regarding the different Business Areas.

The activities carried out by this Functional Division can be found in detail later in this chapter.

Fiscal Affairs – Provides all the Group's Companies with assistance in fiscal matters, ensuring compliance with the current legislation as well as optimising the business unit's management activities from a fiscal viewpoint. The Division also manages the Group's tax disputes and its relations with external consultants and Tax Authorities.

In the course of its work in 2007, the Fiscal Affairs Department provided assistance to the Company's acquisition and restructuring operations.

Furthermore, special work was carried out with regard to the different taxes in order to unify the policies adopted by the Group's different Companies.

Finally, over the course of the year, the Fiscal Department collaborated in filing several procedures to better defend the interests of the Group with the Tax Authorities.

Financial Operations – This Division includes two distinct areas: Risk Management and Treasury Management. The activity of the Risk Management area is dealt with in detail later in this chapter.

Treasury Management is responsible for managing relations with the financial institutions that have or intend to have business dealings with Jerónimo Martins, establishing the criteria that these entities must fulfil.

The Treasury is also in charge of planning the most suitable financial sources according to need for all the Companies of the Group. The type of funding, corresponding terms, cost and back-up documentation must comply with the criteria established by Management. Likewise, the Treasury is responsible for conducting business with financial institutions, optimising factors so that the best possible conditions may be obtained at all times.

A large part of the treasury activities of Jerónimo Martins are centralised in the Holding Company, which is a structure that provides services to the rest of the Companies of the Group. The National Distribution Companies are completely centralised while the Polish Distribution and Representation and Restaurant areas still work independently in relation to processing payments to third parties. It is also Treasury's responsibility to elaborate and comply with the treasury budget that is based on the activity plans of the Group's Companies.

In compliance with the activities described above, namely in relation to maturity dates of the Group's debt and investments, Jerónimo Martins SGPS paid back two bond loans in advance, in the amount of 25 million euros each, and on the same date it issued two new bond loans in the amount of 70 million euros, thus increasing the

maturity of the debt profile. The subsidiary JMR-Gestão de Empresas de Retalho SGPS, S.A. exercised the call option on the bond loan issued in June 2003, repaying the amount of 115 million euros. It then issued a new bond loan in the amount of 200 million euros, which also sought to restructure the short-term debt.

In addition to increasing the maturity profile of the debt, this restructuring also resulted in reducing the average cost of the debt.

Planning and Control – Responsible for defining and implementing processes, policies and procedures in the planning and control area (plans, budgets and investments), and coordinating and supporting M&A activities of companies or businesses, and company restructuring operations.

In 2007, the process of reorganising the assets of Grupo Jerónimo Martins was initiated, with a view to simplifying management and maximising operating efficiency of the different business areas. Support was thus provided to various projects under way, including centralisation of the Group's brand management in one business area, and analysing different scenarios for the Group's real estate assets.

It also coordinated the acquisition of Plus companies in Portugal and Poland from Grupo Tenglemann, and it will accompany the integration process until it is concluded, which is projected to be until the end of the first quarter in 2008.

It also coordinated and supported other, smaller-scale acquisitions by different business areas in the Group, in Portugal and Poland, some of which have been concluded.

Some adjustments were made to the Planning process in conjunction with the Departments of Strategy and Development, and Consolidation and Accounting, in order to simplify and expedite it without losing efficiency.

Finally, in relation to investments and considering the Group's current phase of organic expansion, numerous proposals were analysed, which will be discussed in its own chapter in the Management Report.

Special Projects– In collaboration with the various Operating Divisions of Food Distribution in Portugal, the Division's main objectives are: (i) to identify, prioritise and optimise existing processes within the Companies; (ii) to recognise new opportunities that may add value for customers; (iii) increase business profitability; (iv) increase productivity and improve competition in the markets in which they are present; and (v) to strengthen innovation processes, promote responsibility in those involved and integrate businesses and new information technologies.

The activities carried out by this Functional Division are detailed in the chapter Consolidated Management Report.

Human Resources – Ensures the definition and implementation of global Human Resources strategies and policies to be applied to the entire Group, in particular to its managers. It is therefore responsible for drawing up Human Resources strategies, policies, standards and procedures, particularly in the areas of recruitment, training, performance management, career management, remuneration and benefits. The

Division is also responsible for coordinating new projects and for compliance with good Human Resources practices.

The activities carried out by this Functional Division in 2007, can be found detailed in the chapter on Social Responsibility.

Security – Defines and controls procedures aimed at preserving the security of personnel and assets within the Group and monitors any matters involving the police or legal authorities, when required. The Department is also responsible for supporting security system audits and risk prevention. The activities carried out by this Functional Division are detailed in this chapter in the section on the Risk Control System.

2.1.2 Operating Divisions

The organizational structure of the Jerónimo Martins Group is aimed mainly at ensuring specialisation in the Group's various businesses by creating geographical areas and Operating Divisions that guarantee the required proximity to the different markets.

As mentioned, the Food Distribution business is divided into Geographical Areas and currently has four Operating Divisions in Portugal - Pingo Doce (supermarkets), Feira Nova (hypermarkets), Recheio (cash & carry) and Madeira (supermarkets and cash & carries) and an Operating Division in Poland, which includes Biedronka food stores and "Apteka Na zdrowie" pharmacies in partnership with the Portuguese National Association of Pharmacies.

Manufacturing operates through a partnership between Unilever, the company Unilever Jerónimo Martins, Lda., which runs food, personal care and home care, and ice-creams businesses.

Within the Group's portfolio there is also a business area dedicated to Marketing, Representations and Restaurant Services, which includes: (i) Jerónimo Martins Distribuição, which represents important, widely consumed food products and premium and mass market cosmetic brands under international brands in Portugal and that include Caterplus, a specialist in the trade and distribution of specific products for Food Service; (ii) Hussel, a retail chain specialised in chocolates and confectionary; and (iii) Jerónimo Martins Restauração e Serviços, with the chain of Jeronymo coffee shops, Ben & Jerry's and Olá ice cream stores and Subway stores.

2.1.3. Functional Operational Support Divisions

The Functional Divisions at the operating level ensure that Group synergies are maximised through the sharing of resources and functions across the main markets, in order to optimise the efficiency of the Organisation and the sharing of relevant skills and know-how.

The Operating Functions of Support Divisions are: Sourcing, Logistics, Quality and Environmental Control, Financial and Information Systems. These Divisions are responsible for providing services to the various distribution operating divisions in Portugal, in accordance with the guidelines given by the Group's Holding Company. They are also responsible for ensuring standard of policies and internal procedures.

2.1.4 Matters Committed to the Members of the Executive Committee

While their functions are carried out collectively, each Member of the Executive Committee holds supervisory responsibilities in certain specific areas, as follows:

Luís Palha da Silva (President): Development and Strategy, Financial Area, Reporting and Operational Control, Investor Relations, Legal Affairs, Fiscal Affairs, Human Resources and Communication.

Pedro Soares dos Santos: Food Distribution Operations, including Sourcing, Logistics, Quality Control, Human Resources, Security and Information Systems.

José Soares dos Santos: Manufacturing Operations, Marketing Services, Representations and Restaurants.

2.2. Specific Committees

2.2.1 Audit Committee

From alteration of the By-Laws approved in the Annual General Shareholders Meeting of 2007, that the Audit Committee is in effect, which is a result of changes to the Code of Commercial Companies imposed by Decree-Law 76-A/2006 of 29 March. Thus, as voted on in the mentioned General Shareholders Meeting, and arising from the Board of Directors, the Audit Committee is responsible for supervising Company management and assessing corporate structure and governance. In addition to the responsibilities conferred by law, the Audit Committee, in performing its activities, is particularly responsible for the following: assessing the Company's governance structure, monitoring the process of preparing and releasing financial information, the efficacy of internal control systems, internal audit and risk management, as well as approving activity plans within the scope of risk management and tracking its execution, especially evaluating the recommendations resulting from audit activities and reviewing the procedures put into place.

The Audit Committee, which has three Non-Executive Managers as members, including: Mr. Hans Eggerstedt (President), Mr. António Borges and Mr. Rui Patrício, all of whom are independent according to legal criteria, met four times during 2007, paying particular attention to the internal control and risk management systems.

2.2.2 Ethics Committee

The Ethics Committee of the Jerónimo Martins Group is currently comprised of Ana Vidal (Director of Communications) presiding, Mr. Hugo Cunha (Director of Human Resources of Recheio), Mr. António Neto Alves (Director of the Company's Legal Department), Professor Leslaw Kanski (Director of the Legal Department of Jerónimo Martins Dystrybucja), and by Ms. Ewa Micinska (Director of Labour Relations of Jerónimo Martins Dystrybucja). Reporting to the Chairman of the Board of Directors of the Company, its mission is to provide independent supervision of the disclosure of, and compliance with, the Code of Conduct of the Group in all its Companies.

In performing its duties, the Ethics Committee: (i) establishes channels of communication with the targets of the Group's Code of Conduct and gathers information sent for this purpose; (ii) administers a suitable internal control system for compliance with the Code of Conduct and assesses the recommendations arising from

these controls; (iii) evaluates questions that, also in compliance with this Code of Conduct, may be submitted to it by the Board of Directors of Jerónimo Martins and by the Audit Committee, and impartially analyses any questions raised by employees, customers or business partners through the system to communicate alleged irregularities; and, finally (iv) submits to the Company's Board of Directors any measures it considers appropriate for adoption in this area, including the review of internal procedures, as well as proposals for changing the Code of Conduct.

During 2007, the Ethics Committee met twelve times and examined various questions submitted to it by the Executive Committee, the Group's employees or by third parties. In the year in question, special attention was given to the bottom-up communication system, which ensures that all employees at all levels can communicate possible irregularities, seeking to strengthen efficiency in the two countries where the Group operates.

2.2.3 The Internal Control Committee

The Internal Control Committee, appointed by the Board of Directors and reporting to the Audit Committee, is specifically responsible for assessing the quality and reliability of the internal control system and the process of preparing financial statements, as well as assessing the quality of the monitoring process in effect at the Companies of Jerónimo Martins, seeking to ensure compliance with the laws and regulations to which they are subjected. In performing its tasks of assessing the quality of the monitoring process being used in the Companies of the Group, the Internal Control Committee must obtain regular information on the legal and fiscal contingencies that affect the Group's Companies.

The Internal Control Committee meets monthly and is comprised of a President (Mr. David Duarte) and three members (Mr. José Gomes Miguel, Mr. Nuno Sereno and Mr. Henrique Santos), none of whom are Company Board Members.

In 2007, the Internal Control Committee met ten times to carry out its activities of supervision and assessment of risks and critical processes and to review the reports prepared by the Internal Audit Department. When a representative of the External Audit team is invited to attend these meetings, the Committee is also informed of the conclusions of the external audit work that takes place during the year.

2.3. Risk Control System

2.3.1 Risk Management

The Company, and in particular its Board of Directors, dedicate a great deal of attention to the risks affecting their business. Business continuity is critically dependent on the elimination or control of risks that may materially affect its assets (people, information, equipment, facilities), thereby jeopardising the strategic objectives they have set. The Group's Risk Management Policy formalises this concern.

Because of the size and geographical dispersion of Jerónimo Martins' activities, the success of risk management depends on the participation of all employees, who should assume it as an integral part of their jobs, particularly through the identification and reporting of risks associated with their area. All activities must be carried out with an understanding of what risk is and an awareness of the potential impact of unexpected events on the Company and its reputation.

Risk Management Objectives

Within the Group, Risk Management aims to meet the following objectives:

• To promote the identification, evaluation, handling and monitoring of risks, in accordance with a methodology common to the whole Group;
• To regularly assess the strengths and weaknesses of key value drivers;
• To develop and implement programmes to cover and prevent risk;
• To integrate Risk Management into business planning;
• To promote the awareness of the workforce with regard to risks and the positive and negative effects of all processes that influence operations and that are sources of value creation;
• To improve the decision-making and priority-setting processes, through the structured understanding of the business processes of the Group, their volatility, opportunities and threats.

The Risk Management Process (RMP)

In the first place, risk evaluation seeks to distinguish what is irrelevant from what is material. This requires active management and involves consideration of sources of risk, probability of occurrence, and the consequences of their manifestation within the context of the control environment. Controls may encompass both the likelihood of occurrence of an event and the extent of its consequences.

The RMP is cyclical in nature, and includes (i) identification and evaluation of risks; (ii) definition of management strategies; (iii) implementation of control processes; and (iv) monitoring of the process.

The RMP of the Group complies with the Federation of European Risk Management Associations (FERMA) standards, which is seen as a model of good practice.

The objectives defined during the strategic and operational planning process are the departure point of the RMP. At this time internal and external factors that may compromise fulfilment of the established goals are being identified and assessed.

This approach is based on the concept of Economic Value Added (EVA). It begins with the analysis of the key value drivers of both the operating profit and the cost of capital, in an attempt to identify the factors of uncertainty that may negatively influence the generation of value.

In this manner, a systematised, interconnected perspective of the risks inherent to processes, functions and organisational Divisions is developed.

2.3.2. Organization of Risk Control

The risk areas where management must be assumed by specific departments are as follows:

Quality, Food Safety and Environment

Management of this risk area, which in Distribution in Portugal is coordinated by the Quality and Environment Division, works in prevention, monitoring and training,

minimising food risks (with an impact on the consumers' health) and progressively reducing the associated environmental impacts of the Group's products and services.

The following are important management tools in this risk area:

• Performing periodic simulations that recreate a crisis scenario and allow assessment of how adequate existing procedures are;
• Audits to select, assess and track suppliers' proposals for improvements;
• Regular internal audits aimed at assessing compliance with good practices (environmental, hygiene and labour) and compliance with the requirements of systems (HACCP Food Safety System/Environmental Management System, Quality Management System), and monitoring a product throughout the entire logistics chain;
• Implementation of analytical control plans, both internal store operations involving work surfaces, product handling/transformation in the stores and the water used, and external – suppliers – such as the periodic control that private brand products are subject to, or research of the phytopharmaceutical residue in fruit and vegetables;
• Training for current staff and subcontractors to ensure good practices with regard to the environment, labour, production, exposure and hygiene;
• Undertaking innovative projects for the Group's activities (for example, promoting technologies that rely on renewable energy sources), seeking to prevent pollution and to reduce costs;
• Periodically review existing HACCP Food Safety Systems, adapting them to the new business areas that emerged in 2007, such as the Restaurants and Central Kitchens of Pingo Doce.

The activities developed by the Quality and Environmental Division in 2007, are detailed in the chapter on Social Responsibility.

Contingency Plan for the Bird Flu Pandemic

The World Health Organisation (WHO) has warned that bird flu (H5N1 virus) has a high likelihood of becoming the next pandemic. Previous pandemics had a huge impact on people's lives and on the economy on a global scale.

Currently in Phase 3 (WHO), transmission between humans has already occurred in more than one geographical region. However, the virus has still not acquired the capacity for effective transmission; therefore the WHO has not yet decreed progress to the next phase.

In addition to being a public health problem, a pandemic flu constitutes a social and economic risk with a huge impact on the supply chain, caused by breakdowns in areas of the economy as important as production and distribution of fuel, energy, water and food products.

In order to minimise the impact of a possible pandemic, it is considered necessary to prepare and implement contingency plans aimed at reducing the propagation of the disease, as well as finding ways to keep business activities running.

Hence, the Company has an operational contingency plan that establishes which management activities and procedures must be carried out to minimise the impact of a pandemic on the Organisation and guarantee business continuity.

In 2007, a process of divulging the contingency operating plan to employees working in the Group's companies was developed.

Hygiene and Safety at Work (HSW)

In this area the continuous action has focussed on the gradual implementation of a safety culture, with consequent improvement in working conditions and accident reduction. As such, safety and hygiene in the workplace audits were carried out, especially focussing on professional risk factors, and physical, chemical and biological hazards were assessed.

The prevention of possible emergency situations was also made a priority in the action programme for this area, and there are several Internal Emergency Plans, including one for the head office.

In the Food Distribution area in Portugal, the Director of HSW heads coordination of the risk management process. In Poland, this responsibility is decentralised among the implementation regions of the Biedronka operation. As for the Manufacturing, this risk area is managed centrally, covering all the Companies involved.

Security of People and Property

The Security Department is responsible for ensuring that conditions exist to guarantee the physical integrity of people and facilities, intervening in cases of theft and robbery, as well as fraud and other illegal and/or violent activities perpetrated in the facilities or against the Group's employees.

Among the responsibilities of the Security Department are: (i) definition and control of procedures in terms of prevention, and safety of the Group's personnel and property, including supervision of the performance and strategies of the security/surveillance firms hired; (ii) follow up, when deemed necessary, of events involving the police or judicial authorities; and (iii) providing support to security system and risk prevention audits.

The Security Department is one of the Functional Divisions that comprise Holding Company of the Group and it reports directly to a member of the Executive Committee. In the course of its operations, the Division is in close contact with the Operations, Legal Affairs, Internal Audit and Risk Management Divisions.

Facilities and Equipment

The Companies Technical Teams, in strict collaboration with the respective Operations Departments have responsibility for: (i) guaranteeing the definition and execution of programmes for regular maintenance of facilities, in order to meet operational needs, and (ii) managing the process that aims to ensure the lowest level of negative impacts of equipment maintenance and repair on operations.

In this area of risk Technical Managers are also involved in supervising the status of electrical equipment, the management of the means of protection and detection of fires as well as the storage of flammable material.

Financial Risks

Risk Factors

Jerónimo Martins is exposed to various financial risks, namely: Market risk (which includes exchange rate risk, interest rate risk and price risk), liquidity risk and credit risk.

Risk management focuses on the unpredictability of the financial markets, and seeks to minimise its adverse effects on the Company's financial performance.

For certain types of exposure, risks are hedged with financial derivative instruments.

Financial risk management is carried out by the Financial Operating Division, under policies approved by the Executive Committee. The Risk Management Department is responsible for identifying, assessing and hedging financial risks following the guidelines defined by Management.

a) Market Risk

a.1.) Foreign Exchange Risk

The main source of exposure to foreign exchange risk comes from Jerónimo Martins' operations in Poland. Managing this risk is governed by principles defined by the Executive Committee. The Group's Strategic Scorecard includes a target hedge of 100% of the net investment in Poland.

At December 31st, 2007, and ignoring the existing hedging transactions, the impact on the net investment of a 10% adverse variation in the EUR/PLN exchange rate would be – keeping everything else constant – negative 28 million euros (2006: negative 17 million euros). Including the effect of the existing hedging transactions, the impact would be negative 18 million euros (2006: negative 8 million euros). These impacts would be reflected in the consolidated equity. Jerónimo Martins' sensitivity to this risk increased during 2007, due to the increased value of the net investment in Poland.

The other source of relevant exposure to exchange rate risk comes from debt issued in US dollars in 2004, with the following characteristics:

Financing	Amount	Maturity
Private Placement #1 \$84,000,000.00 23-Jun-11
Private Placement #2 \$96,000,000.00 23-Jun-14

This risk is completely hedged through two cross currency swaps negotiated at the same time the debt was issued, which match precisely the terms of the debt issued:

		Counter
Financing	Amount	amount	Maturity
Swap #1		\$84,000,000.00 70,469,798.66 € 23-Jun-11
Swap #2		\$96,000,000.00 80,536,912.75 € 23-Jun-14

Thus, net exposure to exchange rate risk resulting from these transactions is null, and there were no changes from 2006 to 2007.

In addition to these exposures, within the scope of the commercial activities of its subsidiaries, Jerónimo Martins acquires merchandise that is denominated in foreign currency, mainly US dollars. In general, these transactions involve low amounts, and are very short dated. Managing the exchange rate risk from these transactions is analysed case by case, and there is no fixed rule that is applied on all occasions.

Management of the operating Companies' exchange rate risk is centralised in the Holding Company's Financial Operations Division. Whenever possible, Jerónimo Martins seeks to manage exposure through natural hedges, namely through borrowings denominated in local currency. When this is not possible, more or less structured operations at zero cost are contracted, such as: swaps, forwards or options.

The Group's exposure to foreign exchange risk in recognised financial instruments included and not included in the balance sheet at December 31st, 2007, was as follows:

				(€'000)
As at December 31st, 2007	Euro	Zloty	Dollar	Total
Assets
Cash and cash equivalents	98,772	169,867	0	268,639
Available-for-sale financial investments	10,289	0	0	10,289
Debtors and deferred costs	115,846	28,381	0	144,227
Derivative financial instruments	1,193	0	0	1,193
Total financial assets	226,100	198,248	0	424,348
Liabilities
Borrowings	499,313	166,949	125,894	792,156
Derivative financial instruments	7,965	17,862	25,113	50,940
Creditors and accrued costs	707,775	534,268	0	1,242,043
Total financial liabilities	1,215,053	719,079	151,007	2,085,139
Net financial position in the balance sheet	-988,953	-520,831	-151,007	-1,660,791
As at December 31st, 2006
Total financial assets	233,387	120,535	0	353,922
Total financial liabilities	1,122,894	405,362	151,007	1,679,263
Net financial position in the balance sheet	-889,507	-284,827	-151,007	-1,325,341

a.2.) Price Risk

Because of its investment in Banco Comercial Português, Jerónimo Martins is exposed to equity price risk. At December 31st, 2007, a negative 10% variation in the trading price of BCP shares would have a negative effect of 438,000 euros. On December 31st, 2006, a variation of the same magnitude would have a negative impact of 2,956 thousand euros. The significant reduction in sensitivity to this risk is due to the sale of 9 million shares of BCP during 2007.

a.3.) Cash Flow and Fair Value Interest Rate Risk

Since Jerónimo Martins has no significant interest-bearing assets on its balance sheet, its main exposure to interest rate risk is through its liabilities. All financial liabilities are directly or indirectly indexed to a reference interest rate which exposes Jerónimo Martins to cash flow risk. Given a portion of this risk hedged through fixed interest rate swaps, Jerónimo Martins is also exposed to fair value risk.

Exposure to interest rate risk is monitored dynamically. In addition to evaluating future cash flows based on forward rates, sensitivity tests to variations in interest rate levels are performed. Jerónimo Martins is basically exposed to the interest rate curve of the euro and the zloty, but it uses derivative instruments to diversify this exposure and thus reduce the risk. For the purpose of sensitivity analyses, the benefits of diversification are ignored, assuming a perfect correlation between the interest rate curves. This analysis is for illustrative purposes only, as in practice, market rates rarely change separately. The sensitivity analysis is based on the following assumptions:

• Changes in market interest rates affect interest gains and losses on variable financial instruments;
• Changes in market interest rates only affect gains and losses in interest on financial instruments with fixed interest rates if these are recognised at fair value;
• Changes in market interest rates affect the fair value of derivative financial instruments and other financial assets and liabilities;
• Changes in the fair value of derivative financial instruments and other financial assets and liabilities are estimated by discounting future cash flow from current net values, using the market rates at the end of the year.

For each analysis, whatever the currency, the same changes to exchange rate curves are used. The analyses are carried out for the net debt, i.e., deposits and short-term investments with financial institutions and derivative financial instruments are deducted. Simulations are carried out based on net debt values and the fair value of derivate financial instruments as of the reference dates and the respective change in the interest rate curves.

Based on the simulations performed on December 31st, 2007, and ignoring the impact of the interest rate derivatives, a 50b.p. shift in the yield curves would have a negative impact, keeping everything else constant, of 3 million euros. Including the impact of the interest rate derivatives, the net impact would be positive in the amount of 3 million euros of which 2 million euros are related to interest rate derivatives associated with the exchange rate swap on EUR/PLN. These impacts would be reflected on the consolidated net earnings.

These simulations are run a minimum of one time per quarter, but they are reviewed whenever there are relevant changes, such as: Debt issuance, repayment or restructuring; significant variations in reference rates and/or in the slope of the interest rate curve.

Interest rate risk is managed through operations involving more or less structured financial derivatives, contracted at zero cost.

b) Credit Risk

Credit risk is centrally managed. The main sources of credit risk are: i) bank deposits, short-term investments and derivatives contracted with financial institutions; and ii) clients.

The financial institutions that Jerónimo Martins chooses to do business with are selected based on the ratings they receive from independent rating agencies. The minimum acceptable rating is "A".

In relation to clients, risk is mainly related to Recheio's Cash&Carry and Manufacturing and Services businesses, since the other businesses operate based on cash sales or with bank cards (debit and credit). It is managed based on experience and individual knowledge of the client, as well as through credit insurance and imposing credit limits, which are monitored on a monthly basis and reviewed annually by Internal Audit.

The following table shows a summary of the quality of the deposits, short-term investments and derivate financial instruments with positive fair value, as at December 31st, 2007 and 2006:

	(€'000)
	Financial Institutions
31 Dec 2007 31 Dec 2006
Rating	Balance	Balance
A-1	112,019	81,689
A-1+	84,524	16,941
F2	68,963	76,667

The ratings shown correspond to the notations given by Standard and Poor's ("A-1" and "A-1+"). When these are not available, Fitch's notations are used ("F2").

The following table shows an analysis of the credit quality of the amounts receivable from customers without non-payment or impairment.

(€'000)
Credit quality of the financial assets
	31 Dec 2007	31 Dec 2006
	Balance	Balance
New customer balances (less than 6 months)	788	675
Balances of customer without a history of non payment	76,786	90,722
Balances of customer with a history of non-payment	12,575	12,484
Balances of other debtors with the provision of guarantees	1,180	401
Balances of other debtors without the provision of guarantees	56,963	49,216
	148,292	153,498

The following table shows an analysis of the concentration of credit risk from amounts receivable from customers, taking into account its exposure for the Group:

(€'000)
Concentration of the credit risk from the financial assets
		31 Dec 2007	31 Dec 2006
	No.	Balance	No.	Balance
Customers with a balance above 1,000,000 euros	19	31,151	22	29,210
Customers with a balance between 250,000 and 1,000,000 euros	110	15,009	105	15,320
Customers with a balance below 250,000 euros	7,153	34,333	7,484	38,314
Other Debtors with a balance above 250,000 euros	59	28,446	24	13,001
Other Debtors with a balance below 250,000 euros	1,983	39,353	2,288	57,653
	9,324	148,292	9,923	153,498

During the reporting period, no credit limits were exceeded and it is not expecting to sustain losses from defaults by these counterparties.

The maximum exposure to credit risk at December 31st 2007 and 2006 is the financial assets accounting value.

c) Liquidity Risk

Liquidity risk is managed by maintaining an adequate level of cash or equivalents, as well as by negotiating credit facilities that not only allow the regular development of Jerónimo Martins' activities, but also ensuring some flexibility to be able to absorb shocks unrelated to Company activities.

To manage this risk, Jerónimo Martins uses, for example, credit derivatives in order to manage the impact of widening credit spreads that are the result of impacts beyond the control of Jerónimo Martins.

Treasury needs are managed based on short-term planning (executed on a daily basis) which derives from the annual plans which are reviewed at least twice a year.

The following table shows Jerónimo Martins' liabilities by intervals of contractual residual maturity. The amounts shown in the table are the non-discounted contractual cash flow. In addition, it should be noted that all the derivative financial instruments that Jerónimo Martins contracts are settled at net value.

(€'000)
Exposure to liquidity risk
	Less than 1
2007	year	1 to 5 years	+ 5 years
Borrowings
Financial Leasing	27,903	58,467	490
Loans	97,794	680,789	89,432
Derivative Financial Instruments	1,518	5,476	1,236
Creditors	1,148,179	0	0
Operational Lease Liabilities	86,134	251,988	209,615
2006
Borrowings
Financial Leasing	16,883	32,250	931
Loans	71,976	469,564	95,451
Derivative Financial Instruments	206	1,629	752
Creditors	922,850	0	0
Operational Lease Liabilities	65,956	184,839	133,121

Capital Risk Management

Jerónimo Martins seeks to keep its Capital structure at appropriate levels such that it not only ensures its ability to continue as a going concern and its development, but it also provides adequate returns to its Shareholders, and it optimises the cost of capital.

Capital adequacy is monitored based on the gearing ratio, calculated according to the following formula: Net Debt / Shareholders Funds. The Executive Committee established as a target a gearing ratio between 60-120%, consistent with an investment grade rating.

The gearing ratios at December 31st, 2006 and 2007, were the following:

(€'000)	2007	2006
Capital Invested		1,443,4711,273,499
Net Debt	579,266	506,218
Shareholders' Funds	864,205	767,281
Gearing	67.0%	66.0%

Information Security

The mission of the Information Security Department consists of setting up and maintaining an information security management system that ensures confidentiality, integrity and availability of the critical business information and recovery of the systems in the event of interruption in the operations.

The Information Security Officer (ISO) acts under the guidance of the Information Security Policy (ISP), which defines the usage and maintenance rules for the information assets of Jerónimo Martins.

In 2007, development was continued of the information systems recovery plan (Disaster Recovery), through implementation of recovery environments for alternative

systems and the definition of recovery strategies in light of identified disaster scenarios.

An audit was performed on the communications network, and a global audit was performed on the information security system, including testing the vulnerabilities of the most critical systems, approving renovation of Front Office systems, Communications and radio frequency. As a result of these audits, standards and procedures were introduced that seek to strengthen the information security environment, namely:

• Procedures to manage users and Internet access;
• Procedures for acquisition and use of computers;
• Policy for remote access via VPN;
• Policy for software licensing and use;
• Procedures to protect against virus and malignant programmes;
• Procedures to safeguard information on computers;
• Policy to filter e-mail content and Internet access.

In 2008, systems recovery procedures as defined in the current Business Continuity Plan will be finalised, and other projects are planned to minimise the risks to information safety, namely:

• Implementation of a plan to manage system and network vulnerability;
• Evaluation of the security of the SAP Retail system;
• Review of the information security rules for third parties;
• Optimisation of the user management process;
• Training on good information security practices.

Legal Compliance

Compliance with legal obligations is ensured by the Legal Departments at the Group's Companies. At the Holding level, the Legal Department guarantees the coordination and implementation of strategies aimed at protecting the Group's interests in case of legal dispute, and it also provides outside counsel.

In order to ensure the fulfilment of tax obligations and also to mitigate risk due to inadequate checks and balances, the Fiscal Department of the Holding Company advises all the Group's Companies, and also manages their tax proceedings.

Process Risks

The model used in the management of Process Risks includes Operating Risks, Human Resources, Information Systems and Risks to Information for Decision-Making. Given the critical nature of some of the risks considered in each of these areas, their management is shared by different functional areas of the Group's Companies.

The Operating Risks category, which includes the risk management model, takes into account those risks related to sourcing, supply chain, transport, stock losses, obsolescence, disruption, level of service of suppliers and distribution centres to stores, customer satisfaction, maintaining prices, cash collection, investments, asset safety, efficiency in the use of resources, business interruption and fraud. Among the risks related to Human Resources are risks associated with payroll, authorization levels and

ethical behaviour. Risks to Information for Decision-Making include accounting and financial report risks.

The Information Systems Risk category includes system access risks, communications, and infrastructure and disaster recovery. Also included in this category are risk related to Information Security, which has been monitored since 2005 by the Information Security Department.

2.3.3. Communication, Reporting and Monitoring of the Risk Management Process

Risk Management process monitoring involves the Board of Directors of the Company, the Operating Divisions, the Functional Divisions of the Operation, the Audit Committee and members of Risk Management and Internal Audit.

Specifically, the Board of Directors, as the body responsible for the strategy of Jerónimo Martins, has the following objectives and responsibilities:

• To establish the most significant risks affecting the Group;
• To ensure that the Group possesses appropriate levels of knowledge of the risks affecting operations, and how to manage them;
• To ensure the widespread dissemination of the Group's Risk Strategy at all hierarchical levels;
• To ensure that the Group is able to minimise the probability and impact of risks to the business;
• To ensure that the Group can react to crisis situations;
• To ensure that the Risk Management process is adequate and it strictly monitors those risks that have the highest probability of occurrence or impact on the Group's activities.

Those responsible for critical processes of the business, along with members of the Risk Management Department, develop and implement the risk control mechanisms. The Internal Audit of the Group, in turn, evaluates the efficiency of these mechanisms.

Evaluation of the Internal Control System

Annually, the Internal Control Committee approves the Internal Audit Department activity plan, which defines the nature of the audits to be carried out, for evaluating the quality of the control processes that aim to achieve the Internal Control System objectives, particularly those that ensure the efficiency of operations, the integrity of financial and operating reports and respect for laws and regulations.

To this end, process and conformance audits were performed, as well as financial audits and information systems audits whose associated risks presented a higher probability of occurrence and/or potential impact on operations.

This approach helps make the process of internal auditing of the Group more efficient and contributes to increasing the awareness of those responsible for the prompt implementation of scheduled recommendations.

The results of these consultations and the evaluation of operating risks are made available by the Internal Audit Department to the Audit Committee, to the Internal

Control Committee and to the Executive Members of the Group's Board via a quarterly Audit Letter.

In 2007, the Internal Audit Department evaluated to what extent the Internal Control System of the Companies of Jerónimo Martins in Portugal and Poland mitigate the effect of identified risks. This evaluation of the control processes allowed the updating of a database of risks that affect or that may affect the Group's Companies.

In accordance with the activities plan, and also in light of the updating of the Operating Risk models and critical business processes applicable to each Company in the Group, audits were performed on processes related to the risk of stock damage and obsolescence, maintaining sales prices, cash collection, logistical operations, transport, investments, safeguarding assets and control of accounts payable.

In the area of information systems, projects to upgrade systems that are critical to the Group's operations were tracked, and evaluation audits were carried out on the risk of system access, while at the same time the conclusions reached the previous year regarding the general controls for information systems were updated.

2.4. Share Price Performance

During 2007, the main Portuguese Stock Market index - PSI-20 - increased 16.3%, which was the fifth consecutive double-digit appreciation and the fourth-largest among the main European markets.

Despite the strong rise in the national index, during 2007 the stock markets were influenced by some unstable factors, such as the crisis in the high-risk credit market – the subprime market – which especially affected the markets during the third quarter of the year. Other factors affected market evolution in certain ways during the year, such as: the end of unsuccessful takeover bids (Sonaecom/Sonae bid for Portugal Telecom and BCP bid for BPI), the strong appreciation of the euro against the dollar, and the rise in underlying interest rates in some of the world's main economies, and the continuing rise in the price of oil.

On the other hand, growth reported in companies' results, increased dividends and improved outlook for future results, combined with dynamic Mergers and Acquisitions in Europe and the United States, allowed the markets to maintain interesting growth rates.

Specifically, the Portuguese stock market was marked by rises, some of them significant, examples of which are the cases of Soares da Costa and Galp. Also deserving mention is the good performance of Jerónimo Martins shares, which rose more than 58% over the previous year. On the other hand, nine companies listed on the PSI-20 had a negative year.

The PSI-20 index reached its maximum level in the middle of July, with an appreciation of more than 22%, and reaching its seven-year maximum of more than 13,700 points. During 2007, the subprime crisis penalised the European indices more than the American exchanges, negatively affecting the Lisbon market by 14% under its maximum.

The year in Portugal is also marked by the listing of two companies: Martifer and REN.

2.4.1 Performance of Jerónimo Martins Shares

JM shares description
Jerónimo Martins, SGPS, S.A.
	Shares Trade: Euronext Lisboa
	Stock market admission: November 1989.
	Euronext Codes:
	Description	Type	ISIN Codes	Symbol
	J. Martins - Out/03 Jerónimo Martins- SGPS	Bonds Shares	PTJMTEOE0008 PTJMT0AE0001	JMTEOE JMT
Codes:
	Reuters RIC Bloomberg		JMT.LS JMAR PL
Shares
	Share Capital: Shares nominal value: Number of shares:		629,293,220 1.00 629,293,220	Euro Euro

Since the first months of 2007, Jerónimo Martins' shares have maintained growth, in line with the appreciation of the PSI-20 Index. The lowest point of the year was on 2 January (3.4 euros), and the highest on 28 November (5.59 euros).

The biggest rises in share value coincided with release of the 2006 full year results at the end of February, with the stock split at the end of May, and with the Investor's Day event in Poznan, Poland, in the last week of November.

In terms of liquidity, it is important to note the accentuated return of investors to the Portuguese market, with all the liquidity records being surpassed. Jerónimo Martins' shares during the year registered an average daily trading volume of 1,080,000 shares, nearly 46% higher than trading volume in 2006, which also shows investor interest in the Group.

	2007	2006	2005	2004	2003
Share Capital	629,293,220	629,293,220		629,293,220 629,293,220	479,293,220
Number of ordinary shares	629,293,220	125,858,644		125,858,644 125,858,644	95,858,644
Own Shares	859,000	171,800	171,800	171,800	171,800
EPS (Eur)	0.21	0.92	0.88	0.83	0.61
Cash Flow per share (Eur)	0.43	2.05	1.96	2.23	2.33
Dividend per share (Eur)	0.44	0.42	0.36	0.00	0.00
Stock market Performance *
High (Eur)	5.59	3.52	2.57	2,00	1.93
Low (Eur)	3.43	2.55	1.97	1.54	1.05
Average (Closing) (Eur)	4.37	2.85	2.35	1.76	1.28
Closing (End of year) (Eur)	5.40	3.40	2.54	1.94	1.85
Market Capitalisation (31/12) (Eur's 000,000)	3,398	2,140	1,598	1,221	1,003
Transactions
Volume (1,000 shares) *	275,512	189,430	173,135	144,815	101,045
Annual Growth
PSI 20	16.3%	29.9%	13.4%	12.2%	16.0%
Jerónimo Martins	58.8%	33.9%	30.9%	5.0%	49.6%

2.4.2 Publication of Results

Throughout the year, the Investor Relations Office published the Group's quarterly results, and it released all relevant information on performance of the Group's business areas, in order to keep analysts and investors informed as to the development of Jerónimo Martins' operational and financial activities.

In addition to the documents published, all financial analysts and investors who contacted the Investor Relations Office were provided with information.

16 January	Trading Statment 2006
1 March	FY 2006 Results
3 May	First Quarter 2006 Results
26 July	First Half 2006 Results
25 October	Third Quarter 2006 Results

Shareholder Structure

The financial statements were released to the market on the following dates:

2.4.3. Shareholder Structure

The Companies whose voting rights under the terms of Article 20, No. 1 of the Securities and Exchange Code, are attributable to Ameriprise Financial Inc, and are identified in the note that refers the List of Qualified Shares on December 31st, 2007, included in the Consolidated Management Report Annex. Other qualified shareholders are Sociedade Francisco Manuel dos Santos, SGPS, S.A., Julius Baer Investment Management LLC and Asteck, S.A..

All shares are ordinary and there are no restrictions concerning their tradability.

2.4.4 Plan to Acquire Own Shares

In 2007 there were no movements to purchase own shares, and the Company maintained 859,000 own shares in its portfolio (corresponding to 171,800 shares

before the stock split in May 2007), acquired in 1999 at the average price of 7.06 euros per share (price adjusted by the stock split) and representing 0.14% of the Company's capital.

2.5. Dividend Distribution Policy

The Board of Directors of the Company maintained a policy of dividend distribution based on the following rules:

• The value of the dividend distributed should be between 40% and 50% of ordinary consolidated net earnings;
• If, as a result of the application of criteria mentioned above, there is a drop in the dividend in a certain year compared to that of the previous year, and the Board of Directors considers that this decrease is a result of abnormal and merely circumstantial situations, it may propose that the value from the previous year should be maintained. It may even resort to free existing reserves, providing that the use of these reserves does not jeopardise the principles adopted for balance sheet management.

In relation to fiscal year 2004, the gross dividend paid to Shareholders was 0.36 euros per share, in comparison to 2005, which was 0.42 euros per share, and to 2006, which was 0.44 euros per share (corresponding to 0.088 euros adjusted by the stocksplit), always according to the abovementioned directives.

In view of the net results of fiscal year 2007, and the established policy, the Board of Directors will propose, at the General Shareholders Meeting, the distribution of a gross dividend of 0.096 euros per share, excluding the 859,000 owned shares in the portfolio.

This proposal represents an increase of 9.1% over the dividend paid in the prior year, corresponding to a dividend yield of 2.2% on the average share price in 2007, which was 4.37 euros.

2.6. Stock Options Plan

The Company does not have any plan in force to attribute shares or options to acquire shares. Although the adoption of such type of plan may be studied, the Board of Directors believes that it has established instruments that allow a fair and effective system of management by objectives, based on analysis of indicators of profitability, business growth and generation of value for the Shareholders.

2.7. Business between the Company and Members of the Board, Holders of Qualified Stakes and Companies in a Parent-Subsidiary or Group Relationship

During 2007, no significant business or operations were carried out, in economic terms, between the Company and members of its Management or Supervisory Bodies, or holders of Qualified Stakes. Regarding the companies in a Parent-Subsidiary or Group relationship, the business carried out with the Company was done so in the normal operation of its business and under arms-length conditions.

2.8. Investor Relations Department

The Investor Relations Office of Jerónimo Martins is the interface with all investors institutional and private, national and foreign - as well as the analysts who formulate opinions and recommendations regarding share price.

Aimed at transmitting an up-to-date and clear vision of the strategies of the different Areas of the Group's Business to the market, in terms of operating performance and perspectives, every year the Office draws up a Financial Market Communication Plan.

This Plan, incorporated into Jerónimo Martins' global communication strategy, includes a series of events organised with a view to providing information about the various businesses of the Group, their strategies and future projections and, at the same time, accompanying the development of the year's business activity, and answering any questions.

During the year the Department put on events that allowed the financial markets to have contact with the Group's management team. The following events were highlights:

• Meetings with financial analysts and investors;
• Answering questions sent by e-mail to the Department;
• Telephone calls;
• Publication of announcements to the market through CMVM (Securities and Exchange Commission) extranet, at the Jerónimo Martins and Euronext Lisbon sites and mass mailings set to all the Company's investors and financial analysts whose contacts are included in a database created and updated by the Office;
• Presentations to the financial community: Presentation of results, roadshows, General Shareholders Meeting and conferences.

Within the scope of information sent to the market, in 2007 the following communications were published:

December 21, 2007	Presentation on aquisition of Plus operations in Portugal and Poland
December 21, 2007	Aquisition of Plus operations in Portugal and Poland
December 18, 2007	Financial Calendar Plan for 2008
December 10, 2007	Clarification of newspaper article
November 30, 2007	Investor's Day 2007 Presentation
October 25, 2007	Release - 3rd Quarter 07 Results
October 4, 2007	Report by DSPIT
October 1, 2007	Clarification of newspaper article
September 5, 2007	Information on stake in BCP
July 26, 2007	Update on Financial Calendar Plan for 2007
July 26, 2007	Release - 1st Half 07 Results
June 11, 2007	Release - Cooperation with Martifer
May 3, 2007 March 1, 2007	Release - 1st Quarter 07 Results Release - FY 2006 Results
January 16, 2007	Release - Preliminary Sales 2006
Financial Information
November 22, 2007	3rd Quarter 07 Consolidated Results
September 19, 2007	Individual Accounts 1st Half 07 Results
September 19, 2007	1st Half 07 Consolidated Results
May 18, 2007	1st Quarter 07 Consolidated Results
April 20, 2007	FY 2006 Results
Corporate Governance
April 20, 2007	FY 2006 Corporate Governance Report
Board Members and Functions May 3, 2007	Election of the Corporate Bodies for the three year period 2007-09
March 30, 2007	Election of the Executive Committee for the three year period 2007-09
	Changes, Convertion, Reconstitution and Extinction of Securities
May 9, 2007	Stock Split
	Dividends, Interests, Redemptions and Exercise of Other Rights
August 28, 2007	Bond Issues Redemption
March 30, 2007	Dividends Payment 2006
Notice of Meetings
February 25, 2007	Notice of General Meeting 2007
	Qualifying Holdings and Shareholders Agreements
August 6, 2007	Threadneedle Qualified Shareholding
July 17, 2007	Zenith Qualified Shareholders Reduction
July 17, 2007	Strand Ventures Qualified Shareholders Reduction
February 26, 2007	Heerema Qualified Shareholding
February 23, 2007	Zenith Qualified Shareholders Reduction
February 23, 2007	Strand Ventures Qualified Shareholders Reduction
February 23, 2007	Multiplus Qualified Shareholders Reduction
February 23, 2007	Fitron Qualified Shareholders Reduction
Annual Summary of Information Disclosed	March 0, 2007

The Office may be contacted through the Market Relations representative and the Investor Relations Office Manager, Mrs. Cláudia Falcão – and at the e-mail address investor.relations@jeronimo-martins.pt.

The communications issued regularly by the Office are available in full on the institutional site of Jerónimo Martins, at www.jeronimomartins.com, in order to make information available for all those interested. The site provides not only the mandatory information, as stipulated in Article 4 of CMVM Regulation No. 1/2007, but also general information about the Group and its Companies, in addition to other information considered relevant, namely:

• Announcements to the market regarding material information;

• The Group's annual, semester and quarterly results;
• Economic and financial indicators and statistical data, updated once or twice a year according to the Company or Business Area;
• Annual Reports of the Group's Companies with listed securities;
• The Group's most recent presentation to the financial community;
• Information about share performance on the stock market;
• The annual calendar of Company events, released at the beginning of every year, including, among others, General Shareholders Meetings, the disclosure of annual, half-year and, if applicable, quarterly results;
• Information regarding the General Shareholders Meeting;
• Information about Corporate Governance;
• Code of Conduct of Jerónimo Martins;
• Company By-Laws;
• Current Internal Regulations;
• Customer Ombudsman.

The site also has a contact/information request form, which allows rapid interaction, via email, with the Company and inclusion on information mailing list.

The main contact information for the Investor Relations Office is as follows:

Address: Rua Actor António Silva, n° 7, 14° floor, 1600-404, Lisbon, Portugal Telephone: +351 21 752 61 05 Fax: +351 21 752 61 65 E-mail: investor.relations@jeronimo-martins.pt

It is also the responsibility of the Office to coordinate preparation of the Annual Report, which is well known as a fundamental document for communicating with financial markets. Through it, the Office strives for transparency and comprehensiveness of information published in relation to the various Business Areas of Jerónimo Martins, seeking to clearly, completely and consistently transmit the progress of the different activities during the year.

The effort of the entire Jerónimo Martins team in preparation of this document resulted in the Group receiving the award for Best Annual Report for the second time, in the category of Non-Financial Companies, awarded at the Investor Relations Awards '07 ceremony organised by Deloitte, in partnership with the newspapers Semanário Económico and Diário Económico.

2.9. Remuneration Committee

The General Shareholders Meeting in 2007 elected a Remuneration Committee, which is comprised of the following shareholders: Mr. António Sousa Gomes, Mr. José Queirós Lopes Raimundo and Mr. Arlindo do Amaral, none of whom is a Member of the Board of the Company, nor has any spouse or relative in such circumstances. This Committee, in accordance with legal requirements, determines the earnings of the Members of the Board of Directors. During 2007, the Remuneration Committee met once.

2.10. Yearly Amount paid to External Auditor

In 2007, total remuneration paid to the External Auditor over the year was 936,690 euros, not including expenses related to travel and other costs supported directly by the Group's Companies.

In percentage terms, the amount referred to is divided as follows:

• Legal accounts audit services: 70%;
• Other services (not legal accounts audits or external audits): 30%.

The services not included in the legal account certification, a total of 276,786 euros, relate to access to a fiscal database, support for internal reorganisation processes and business acquisitions, technical advice on a project to convert accounting standards, and certification of subsidiary accounts as a part of commercial transactions with third parties. All these services are marginal to the work of the auditors and are carried out by employees who do not participate in any auditing work for the Group.

3. EXERCISE OF SHAREHOLDER VOTING AND REPRESENTATION RIGHTS

3.1. Statutory Rules on Exercising Voting Rights

The right to vote by representation and the way in which this right is exercised are fully ensured in accordance with the law and the Company's By-Laws, under the terms set down in the respective notices convening General Meetings. Moreover, the Company is actively committed to promoting the Shareholders' exercise of voting rights, namely through votes submitted by mail.

The Company provides appropriate information to enable the represented Shareholders to give voting instructions, in particular by providing them with the proposals to be submitted at the General Shareholders Meeting within the legally established time limits. Since 2003, the preparatory information for the General Meetings has also been made available on the Group's corporate website.

A Member of the Company's Board of Directors or another Shareholder may also represent Shareholders at the General Meeting. In the case of an individual, the person appointed for this purpose may be a spouse, a relative in ascending or descending line, or, in the case of a Company, a person appointed for that purpose. The instruments of Shareholder representation must be addressed to the Chairman of the General Meeting, indicating the representative's name, address and the date of the meeting, and they must be delivered by the start of the proceedings.

3.1.1 Voting by Post

The Company has established the right to vote by mail in accordance with the form provided in the latest convening notices. This form aims to make voting easy and secure. Since 2004, the Company has provided Shareholders with ballot papers to facilitate this procedure.

3.1.2. Electronic Voting

The Company accepts that the use of new technologies promotes the exercise of voting rights, especially in the case of electronic voting, and it instituted this mechanism in 2006.

3.2. Required Deadline for Depositing or Blocking Shares

In accordance with the Company's By-Laws, shareholders with voting rights may participate in the General Shareholders Meeting provided that their shares are registered under their name in a securities account, or deposited in the Company's safes or those of a credit institution, at least five working days prior to the meeting. In the latter case, there must be proof of this deposit by means of a letter issued by the respective credit institution, which must also reach the Company within the same period of five business days. Presence at the General Shareholders Meeting is not conditioned on holding a minimum number of shares.

3.3. Deadline for Receiving Postal Votes

As the Company's By-Laws fail to provide an indication in this matter, the Company has established a deadline of 48 hours prior to the General Shareholders Meeting to receive postal votes, thus complying with and, to a certain extent, exceeding the recommendation of the Securities and Exchange Commission in this respect.

3.4. Number of Shares Corresponding to One Vote

In accordance with the Company's By-Laws, changed in 2007, each share corresponds to one vote.

4. COMPANY RULES

4.1. Code of Conduct and Internal Regulations

The Company complies with current legislation and the rules of behaviour appropriate to its activity, adopting codes of conduct and internal regulations whenever the issues involved call for them.

Jerónimo Martins has always acted upon principles of absolute respect for the rules of good conduct in managing conflicts of interest, incompatibilities and confidentiality and in ensuring that Members of the Board of Directors and Managers do not use insider information. To this end the Company has a regularly updated list of people who may have access to insider information.

Although the existing instruments and practices have proved adequate in regulating these matters, it was decided that a code should be drawn up for the existing rules concerning the aforementioned issues, as well as others that are specifically related to the activities of the Group's companies. The aim of this code is to formalise commitments that require a high standard of conduct from everyone within the Group and provide a tool for optimising management.

Thus, and in addition to the current Code of Conduct, there are currently in force Regulations for the Board of Directors, the Executive Committee, the Audit Committee, the Ethics Committee and the Internal Control Committee, regulating the competence and functioning of the mentioned bodies, as well as a Company Share Transactions Regulations applicable to Board Members and Senior Management of the Group.

These Codes and Regulations can be consulted on the Group's website at www.jeronimomartins.com, or requested from the Investor Relations Office.

4.2. Internal Procedures for Risk Control in Company Activity

This issue is dealt with earlier within this chapter.

4.3. Measures Likely to Interfere with Public Tender Offers

No special rights or restraints on the exercise of voting rights are provided for in the Company's By-Laws. The Board of Directors has no knowledge of shareholders' agreements. There are no agreements between the Company and the members of the Board of Directors or the employees, which imply compensation following a Takeover Bid. As it leads a group that includes various partnerships with national and international groups, it may be possibly understood that certain arrangements in the joint venture contracts celebrated within this scope may include change of control arrangements. However, the Board of Directors believes that disclosing this would be against the Company and its shareholders' interests.

5. BOARD OF DIRECTORS

5.1. Description of the Board of Directors

Since its election at the General Shareholders Meeting on March 30th, 2007, the Board of Directors of the Company has consisted of nine Members, three of whom are Executive Directors – Mr. Luís Palha da Silva, Mr. Pedro Soares dos Santos and Mr. José Soares dos Santos – and six are Non-Executive Directors - Mr. Elísio Alexandre Soares dos Santos (Chairman of the Board), Prof. António Borges, Mr. Rui Patrício, Mr. Hans Eggerstedt, Mr. Artur Santos Silva and Mr. Nicolaas Pronk. The number of Company shares that are held by officers are indicated in the point concerning the Consolidated Management Report Annex.

However, in accordance with the principles by which the Company is run, all Board Members are accountable to all Shareholders equally, the independence of the Board of Directors in relation to them is further reinforced by the existence of Independent Board Members.

In accordance with the laws, the Directors who are considered to be Independent Directors are António Borges, Rui Patrício, Artur Santos Silva and Hans Eggerstedt.

The Members of the Board of Directors also hold positions in other companies, namely:

Elísio Alexandre Soares dos Santos

Member of the Supervisory Board of Banco Comercial Português, S.A. Director of Sindcom – Sociedade de Investimento na Indústria e Comércio, SGPS, S.A. Director of Sociedade Francisco Manuel dos Santos, SGPS, S.A.

Luís Palha da Silva

Director of Jerónimo Martins Serviços, S.A.* Director of JMR - Gestão de Empresas de Retalho, SGPS, S.A.* Director of Lidosol II - Distribuição de Produtos Alimentares, S.A.* Director of Funchalgest - Sociedade Gestora de Participações Sociais, S.A.* Director of Lidinvest - Gestão de Imóveis, S.A.* Director of João Gomes Camacho, S.A.* Manager of Desimo - Desenvolvimento e Gestão Imobiliária, Lda.* Manager of EVA - Sociedade de Investimentos Mobiliários e Imobiliários, Lda.* Manager of Friedman - Sociedade de Investimentos Mobiliários e Imobiliários, Lda.* Manager of Hermes - Sociedade de Investimentos Mobiliários e Imobiliários, Lda.* Manager of Idole - Utilidades, Equipamentos e Investimentos Imobiliários, Lda.* Manager of PSQ - Sociedade de Investimentos Mobiliários e Imobiliários, Lda. * Director of Fima - Produtos Alimentares, S.A.* Director of Victor Guedes – Indústria e Comércio, S.A.* Director of Indústrias Lever Portuguesa, S.A.* Director of Olá - Produção de Gelados e Outros Produtos Alimentares, S.A. * Manager of Unilever Jerónimo Martins, Lda. *

Pedro Soares dos Santos

Director of Jerónimo Martins Serviços, S.A.* Director of Imocash - Imobiliário de Distribuição, S.A.* Director of Recheio Cash & Carry, S.A* Director of Recheio, SGPS, S.A.* Director of Sindcom – Sociedade de Investimento na Indústria e Comércio, SGPS, S.A. Director of Lidosol II - Distribuição de Produtos Alimentares, S.A.* Director of Funchalgest - Sociedade Gestora de Participações Sociais, S.A.* Director of Lidinvest - Gestão de Imóveis, S.A.* Director of Larantigo - Sociedade de Construções, S.A.*

Director of João Gomes Camacho, S.A.* Director of JMR - Gestão de Empresas de Retalho, SGPS, S.A.* Director of Feira Nova - Hipermercados, S.A* Director of Comespa - Gestão de Espaços Comerciais, S.A.* Director of Gestiretalho - Gestão e Consultoria para a Distribuição a Retalho, S.A.* Director of Supertur - Imobiliária, Comércio e Turismo, S.A.* Director of Imoretalho - Gestão de Imóveis, S.A.* Director of Cunha & Branco - Distribuição Alimentar, S.A.* Director of Dantas & Vale, S.A.* Director of Pingo Doce - Distribuição Alimentar, S.A* Director of Casal de S. Pedro - Administração de Bens, S.A.* Director of Masterchef, S.A. * Director of Escola de Formação Jerónimo Martins Serviços, S.A.* Manager of Idole - Utilidades, Equipamentos e Investimentos Imobiliários, Lda.* Manager of Friedman - Sociedade de Investimentos Mobiliários e Imobiliários, Lda.* Manager of Hermes - Sociedade de Investimentos Mobiliários e Imobiliários, Lda.* Manager of Servicompra - Consultores de Aprovisionamento, Lda.* Manager of Simões e Freitas, Lda.*

José Soares dos Santos

Director of Fima - Produtos Alimentares, S.A. * Director of Victor Guedes – Indústria e Comércio, S.A.* Director of Indústrias Lever Portuguesa, S.A. * Director of Olá - Produção de Gelados e Outros Produtos Alimentares, S.A. Director of Sindcom – Sociedade de Investimento na Indústria e Comércio, SGPS, S.A. Director of Sociedade Francisco Manuel dos Santos, SGPS, S.A. Manager of Unilever Jerónimo Martins, Lda. Manager of Transportadora Central do Infante, Lda.

António Borges

Chairman of the Supervisory Board of Banco Santander de Negócios Portugal Member of the Board of Directors of Heidrick & Struggles (USA) Member of the Board of Directors of CNP Assurances (France) Member of the Board of Directors of SCOR (France) Member of the Board of Directors of Caixa Seguros (Brazil)

Rui Patrício

Member of the Board of Directors of Monteiro Aranha, S.A. (Brazil) Member of the Board of Directors of Monteiro Aranha Participações, S.A. (Brazil) Member of the Board of Directors of Owens-Illinois do Brasil Member of the Board of Directors of Klablin, S.A. (Brazil) Member of the Board of Directors of Espírito Santo International Holding Member of the Board of Directors of Vivo Participações (Brazil) Chairman of Sociedade de Electricidade Industrial Portuguesa S.A.

Hans Eggerstedt

Member of the Supervisory Board of Unilever Deutschland Gmbh (Germany) Non-Executive Director of Colt Telecom Group, Plc. (United Kingdom) Member of the Advisory Board of Amsterdam Institute of Finance (The Netherlands)

Artur Santos Silva

Chairman of the Board of Directors of Banco BPI, S.A. Chairman of the Board of Directors of Banco Português de Investimento, S.A. Member of the Board of Directors of the Calouste Gulbenkian Foundation Member of the Board of Directors of Sindcom – Sociedade de Investimento na Indústria e Comércio, SGPS, S.A.

President of the Direction of Cotec Portugal - Business Association for Innovation

Nicolaas Pronk

Member of the Board of Directors of Heerema Holding Construction, Inc. Member of the Board of Directors of Heerema Offshore Construction Group, Inc. Member of the Board of Directors of Heerema Fabrication Group, Inc. Member of the Board of Directors of Heavy Transport Group, Inc. Member of the Board of Directors of Heerema Engineering & Project Services, Inc. Member of the Board of Directors of 360 Family Equity S.A. Member of the Board of Directors of RegEnersys, Inc. Member of the Board of Directors of RegEnersys Investment I, Inc. Member of the Board of Directors of RegEnersys Investment II, Inc. Member of the Board of Directors of RegEnersys Investment III, Inc. Member of the Board of Directors of Heerema Infrastructure, Inc. Member of the Board of Directors of RegEnersys Investment I Ltd. Member of the Board of Directors of RegEnersys Investment II Ltd. Member of the Board of Directors of RegEnersys Investment III Ltd. Member of the Board of Directors of RegEnersys Investment IV Ltd. Member of the Board of Directors of Heerema Holding Services (Antilles) N.V. Member of the Board of Directors of Antillian Holding Company, N.V. Member of the Board of Directors of Heerema Bouw - & Infrastructure N.V. Member of the Board of Directors of Aquamondo Insurance N.V. Member of the Board of Directors of HMC Holding Denmark ApS Member of the Board of Directors of Heavy Transport Holding Denmark ApS Member of the Board of Directors of HEPS US, Inc. Member of the Board of Directors of Heerema EPS1, LLC Member of the Board of Directors of Heerema EPS2, LLC Member of the Board of Directors of Aquamondo Insurance Company Ltd. Member of the Board of Directors of RegEnersys (Bermuda) Ltd. Member of the Board of Directors of Heerema Fabrication Finance (Luxembourg) S.A. Member of the Board of Directors of Heavy Transport Finance (Luxembourg) S.A. Member of the Board of Directors of Heerema Transport Finance (Luxembourg) S.A. Member of the Board of Directors of Heerema Marine Contractors Finance (Luxembourg) S.A. Member of the Board of Directors of Heerema Group Services S.A. Member of the Board of Directors of Asteck S.A. Member of the Board of Directors of Heerema Engineering and Project Services (Luxembourg) S.A. Member of the Board of Directors of 360 Family Equity S.A.

The current Chairman of the Board of Directors, Elísio Alexandre Soares dos Santos, began his professional career in 1957, when he joined Unilever. From 1964 to 1967, he acted as Marketing Director for Unilever Brasil. In 1968, he joined the Board of Directors of Jerónimo Martins as a Deputy Director, a post he combined with that of Jerónimo Martin's representative in the joint venture with Unilever. He has been President of the Group since February 1996 and his current mandate expires in 2009.

Luís Palha da Silva, President of the Executive Committee, has a degree in Company Management from Universidade Católica Portuguesa and another in Economics from Instituto Superior de Economia e Gestão. He was an Assistant at Universidade Católica between 1985 and 1992. From 1987 on, he assumed Director's functions at various companies, including Covina, SEFIS, EGF, CELBI, SOGEFI and IPE. He was Secretary of State for Trade, between 1992 and 1995, and Director of Cimpor between 1998 and 2001. He has been an Executive Director of the Company since June 29th, 2001, and President of the Executive Committee since 2004. His current mandate expires in 2009.

Executive Director Pedro Soares dos Santos joined the Operating Division of Pingo Doce in 1983. In 1985, he joined the Sales and Marketing Department of Iglo/Unilever, and five years later, assumed the post of Assistant Director of Recheio Operations. In 1995, he was named General Manager of the Company. Between 1999 and 2000 he accepted responsibility for operations in Poland and Brazil. In 2001, he also

became responsible for the Operations area for Food Distribution in Portugal. He has been Executive Director of Jerónimo Martins SGPS, S.A. since March 31st, 1995. His current mandate expires in 2009.

Executive Director José Soares dos Santos, who holds a Biology Degree from Universidade Clássica de Lisboa, joined Svea Lab AB in Sweden, in 1985, prior to going to work for Url Colwort laboratory in March 1987. In 1988, he joined the Human Resources Department of FimaVG – Distribuição de Produtos Alimentares, Lda., and in 1990 he was named Product Manager. Between 1992 and 1995 he worked for Brooke Bond Foods. He was Executive Director of Jerónimo Martins SGPS, S.A. between March 31st, 1995, and June 29th, 2001, and was reappointed on April 15th, 2004. His present mandate expires in 2009.

António Borges, who has a degree in Economics from Universidade Técnica de Lisboa and a PhD in Economics from Stanford University, attended INSEAD in 1980. In 1990 he was nominated Vice-Governor of the Banco de Portugal, and in 1995 he was named Dean of INSEAD. He was also a Lecturer at Universidade Católica and Stanford University, and a Consultant for the Treasury Department of the United States of America, the OCDE and the Portuguese Government. He has held various administrative posts, including at Citibank Portugal, Petrogal, Vista Alegre, Paribas and Sonae. He has been Vice-President of Goldman Sachs since 2000. He has been a Non-Executive Director of the Company since June 29th, 2001, and his current mandate expires in 2009.

Hans Eggerstedt has a degree in Economics from the University of Hamburg. He joined Unilever in 1964, where he has spent his entire career. Among other positions, he was Director of Retail Operations, Ice Cream and Frozen Foods in Germany, President and CEO of Unilever Turkey, Regional Director for Central and Eastern Europe, Financial Director, and Information and Technology Director of Unilever. He was nominated for the Board of Directors of Unilever N.V and Unilever PLC in 1985, a position he held until 1999. He has been Non-Executive Director of Jerónimo Martins SGPS, S.A. since June 29th, 2001, and his current mandate expires in 2009.

Rui Patrício has a Law degree from the Law School of Universidade de Lisboa, where he was an Assistant from 1958 to 1963. In 1970 he was named Sub-Secretary of State for Foreign Development. He was Vice President of the Monteiro Aranha Group between 1976 and 1991, at which point he took up administrative functions at various Brazilian companies, among which were Monteiro Aranha, Masa-Alsthom, Hochtief, Ericsson, Telesp Celular, and Axa Seguros. He was also a Consultant for Grupo Espírito Santo. He has been a Non-Executive Director of the Company since June 29th, 2001, and his current mandate expires in 2009.

Artur Santos Silva holds a degree in law from Universidade de Coimbra. He was Director of Banco Português do Atlântico from 1968 to 1975, and Treasury Secretary of State between 1975 and 1976. From 1977 to 1978, he was Vice Governor of the Banco de Portugal. He has been President of Grupo BPI since 1981, member of the Board of Directors of the Calouste Gulbenkian Foundation since 2002, member of the Consulting Committee of Portuguese Technologic Plan, member of the Consulting Committee of the CMVM, and Non-Executive Director of the Company since April 15th, 2004. His current mandate expires in 2009.

Nicolaas Pronk is Dutch, and has a Masters degree in Finance, Auditing, and Information Technology. Between 1981 and 1989 he worked for KPMG in the Financial Audit area for Dutch and foreign companies. In 1989 he joined the Heerema Group, created the Internal Audit Department, and since then has performed various functions within the Group, having been responsible for various acquisitions and

divestitures, defining Corporate Governance and implementation of EVA. Since 1999, he has been the Financial Director for the Heerema Group, including the areas of Finance, Treasury, Corporate Governance, Insurance and Taxation, reporting to the respective President. He is currently acting in his first mandate as Non-Executive Director of the Company, which expires in 2009.

5.2. Executive Committee

The main role of the Company's Executive Committee is to assist the Board of Directors in its management functions. As a delegate body of the Board of Directors, and in accordance with its regulations, the Executive Committee is responsible for the following functions:

• Monitoring implementation by the Group's Companies of the strategic guidelines and policies outlined by the Board of Directors;
• Financial and accounting control of the Group and its Companies;
• Top-level coordination of the operational activities under the responsibility of the Group's various Companies, whether or not integrated into business areas;
• Supervision of new businesses during their launch phase and while the respective Companies are not integrated into a business area;
• Implementation of the Human Resources management policy outlined for the entire Group's executive staff.

The Executive Committee meets at the Company's Head Office, or at any other location. The Chairman is responsible for convening and running the meetings, setting the respective date, time and agenda. In 2007, the Executive Committee met thirtyone times.

5.3. Structure and Role of the Board of Directors

According to the By-Laws, the Board of Directors is comprised of a minimum of seven and a maximum of eleven members. At present, the Board of Directors consists of nine Members, of which three are Executives and six are Non-Executives.

Since the Board of Directors has Independent Members and Non-Executive Members, it is endowed with a range of skills that enriches management of the Company, reflecting a desire and an interest to bring together a wide range of technical skills, contact networks and connections with national and international entities, which optimises the Group's management from the standpoint of creating value for Shareholders.

The selection of this model represents yet another step to ensure adequate defence of the interests of all Shareholders. For this same purpose, since election of the Board of Directors for the preceding three-year period, there has been an increase in the number of Independent Members, at present totalling four of the nine Members. Furthermore, the practices of Corporate Governance have been reinforced and the Chairman of the Board of Directors (under the responsibility of Mr. Elísio Alexandre Soares dos Santos) has been separated from the Chairman of the Executive Committee (under the responsibility of Mr. Luís Palha da Silva).

The Board of Directors meets at least four times a year and another Member, by means of a letter addressed to the Chairman, may represent any Member at the Board meetings.

Unless otherwise provided, decisions are carried by majority vote of the directors present or represented and of those who vote by post. In the event of a tie, the Chairman has the casting vote.

The duties of the Board of Directors are described in article 13 of the Company's Articles of Association. The matters referred to in article 407, paragraph 4 of the Commercial Companies Code are denied to the Executive Committee. Any capital increase is subject to prior deliberation by shareholders.

As set down in specific regulations, the Board of Directors has delegated several duties to the Executive Committee, such as management of corporate business within the ambit of the day-to-day running of the Company. This includes approving expansion plans, representing the Company and financial management of the Group, among others.

However, the Board of Directors has effective control over the Company's affairs, always seeking to be duly informed and ensuring supervision of Company management. For this purpose, it meets at regular intervals, and in 2007 seven meetings were held.

To this end, the Board of Directors has at its disposal the minutes of the Executive Committee meetings, in which the matters discussed and the decisions taken are recorded. At each Board meeting, the Executive Committee reports on Company activity since the last meeting, and is ready to provide any further clarification that the Non-Executive Members may require.

5.4. Remuneration Policy of Board of Directors

Using its competences, the Remuneration Committee established the remuneration parameters of the Executive Committee based on a fixed component and a variable one, with the aim of making it more competitive in market terms. It will also serve as a motivating element for high individual and collective performance, allowing aggressive targets for rapid growth to be established and achieved and an adequate remuneration of its shareholders.

The variable component is approved annually by the Remuneration Committee who will take into account the extent to which the Executive Committee has brought about business evolution (EVA) and increased share price over the previous year. The Remuneration Committee, under these guiding principles, defines the rules for the attribution of performance bonuses to Executive Directors, accordingly to a proposal submitted by the Chairman of the Board of Directors, bearing in mind how far personal and Company objectives have been met.

There is no type of agreement or defined policy in place for the possible compensation of Company Directors in the case of breaking or terminating contracts, and such a situation has never, in fact, arisen.

5.5. Remuneration of the Members of the Board

The remuneration paid to the Members of the Board in 2007 was 2,703,862.12 euros, with the Executive Directors paid 1,833,604.92 euros (1,324,728.12 euros in relation to the fixed portion, and 508,876.80 euros in relation to the variable portion). Non-Executive Directors received 870,257.20 euros (as fixed remuneration).

The criteria for attributing the variable part of the remuneration to the members of the Board were referred to above. In concrete terms, the Remuneration Committee decided to award the above amounts, based on results obtained, the share performance, the work carried out this year, the success of developed projects bearing in mind previously defined targets, and the criteria applied to the attribution of variable payments to the Company's Senior Management.

No plan is in place to attribute shares, or options to purchase shares to the Directors. In the same way, no remuneration was paid as profit sharing, nor was any compensation paid to former directors, executive or otherwise, related to the cessation of his duties, and there is no outstanding debt in the Company in this respect. The Group's Directors did not receive any other amount from any Company in a parent/subsidiary or Group related to the Company.

As for the complementary pension or retirement regimes, under the terms of the Regulations in force, Directors have the right to a Complementary Pension, at retirement age, cumulatively, when they: (i) are over 60 years old, (ii) exercise executive functions, and (iii) perform the role of a Director for more than ten years.

At the Annual General Meeting in 2005, a retirement pension plan was approved. It is a fixed-contribution Pension Plan, with a pre-determined contribution amount, with the value of benefits depending on earnings received. The Remuneration Committee defines the contribution rate of the Company and the initial contribution.

Participants in the Plan are the Executive Directors of the Company, and those who opted for the current Pension Plan will forego eligibility for the Retirement Complement Plan, expressly and irretrievably renouncing it.

The retirement date is defined as either the actual day or the first day of the month following the natural age of retirement as established by the General Social Security Regime (currently 65 years old). A Participant will be considered to be in a state of total and permanent invalidity if the Portuguese Social Security Authorities acknowledge this.

Pensionable salary is the gross monthly base salary multiplied by 14 and divided by 12. At the end of the calendar year, a variable amount made up of all variable payments received is added to this monthly amount. The annual amount of the variable payments in question is a maximum of 20% of the gross base monthly salary, based on the final month of the year, multiplied by 14.

5.6. Communications Policy for Alleged Irregularities Occurring within the Company (Whistleblower Procedure)

Since 2004, the Ethics Committee of Jerónimo Martins has implemented a system of bottom-up communication that ensures that every employee at every level has the opportunity to access those communication channels to contact recognised addressees regarding possible irregularities occurring within the Group, as well as to make any other comments or suggestions, particularly with respect to compliance with the procedural manuals in force, especially the Code of Ethics.

This measure clarifies guidelines on questions as diverse as compliance with current legislation, respect for the principles of non-discrimination and equal opportunities, environmental concerns, business transparency and the integrity of relations with suppliers, customers and official entities, among other matters.

The Ethics Committee forwarded a message to all Employees of the Group to the effect that, if necessary, they could communicate with the Committee via: (i) letter, or (ii) internal or external e-mail with a dedicated address. Interested parties may also request from the respective General Manager or Functional Director any clarification of the rules in force and their application, or they may provide them with information regarding any relevant situation.

Whichever communication channel is used, anonymity is assured for anyone who requires it.

69	1.	Relevant Facts of the Year
71	2.	International Macroeconomic Environment
73	3.	International Sector Environment
76	4.	Portugal
78	5.	Poland
80	6.	Overview of the Group's Consolidated Activity
80		6.1. Net Sales
83		6.2 Operating Results
85		6.3. Net Profit
86		6.4. Balance Sheet
88		6.5. Jerónimo Martins on the Stock Exchange Market
89		6.6. Jerónimo Martins Financial Performance 2003-2007
90	7.	Food Distribution - Portugal
90		7.1. Pingo Doce
92		7.2. Feira Nova
95		7.3. Recheio
98		7.4. Madeira
100		7.5. Functional Operations Management
105	8.	Food Distribution - Poland
105		8.1. Biedronka
107		8.2. Apteka Na Zdrowie
108	9.	Manufacturing
108		9.1. Unilever JM
112		10. Jerónimo Martins Distribution
113		10.1. PGJM
113		10.2. Hussel
113		10.3. Caterplus
113		10.4. Jerónimo Martins Restaurants & Services
115		11. Simplification of Internal Management Processes
115		11.1. Distribution in Portugal
115		11.2. Distribution in Poland
116		11.3. Manufacturing
117		12. Group Investment Programme
117		12.1. Investments
118		12.2. Disposals
119		13. Outlook for 2008
119		13.1. International Outlook
122		13.2. Outlook for the Portuguese Market
124		13.3. Outlook for the Polish Market
127		13.4. Outlook for the Group's Business
131		14. Events after Balance Sheet Date
131		15. Results Appropriation Proposal

132 16. Consolidated Management Report Annex

1. RELEVANT FACTS OF THE YEAR

Operating Activity

January

As of January 1, 2007, FimaVG – Distribuição de Produtos Alimentares, Lda., LeverElida – Distribuição de Produtos de Limpeza e Higiene Pessoal, Lda, IgloOlá – Distribuição de Gelados e Ultracongelados, Lda. and Unilever Bestfoods Portugal, Lda. – Produtos Alimentares, Sociedade Unipessoal, Lda. were merged to form the new company Unilever Jerónimo Martins, Lda., 45% owned by Jerónimo Martins.

February

• Opening of Pingo Doce stores in Canidelo and Évora;
• Opening of petrol station at the Feira Nova store in Penafiel;
• Retail Company Award in 2006 in Poland to JM Dystrybucja, by Gazeta Finansowa.

March

• Opening of Pingo Doce stores in S. Gens, Prior Velho, Tágide Park and Guimarães;
• Opening of Feira Nova stores in Fafe and Monção;
• Opening of petrol station at the Feira Nova store in Aveiro;
• Opening of a new distribution centre in Azambuja.

April

Opening of Pingo Doce store in Castelo da Maia.

May

• Stock split of capital of Jerónimo Martins SGPS, S.A., by division of each share with nominal value of five euros into five new shares with nominal value of one euro, representing the current company capital;
• Opening of Pingo Doce stores in S. João da Madeira e Estarreja;
• Opening of Feira Nova store in Almerim.

June

• Jerónimo Martins Distribuição de Produtos de Consumo ceases the representation of Calvin Klein;
• Initial agreement to collaborate with Grupo Martifer to provide management services and provision of petrol stations;
• Opening of Pingo Doce stores in Benavente and Oliveira de Frades;
• Opening of petrol station at the Feira Nova store in Mirandela.

July

• For the second time, award received at the Investor Relations Awards sponsored by Deloitte, Diário Económico and Semanário Económico, for the Best Annual Report of 2006 in the non-financial companies' category;
• Certification of Pingo Doce in "Development of Private Brands and Monitoring of Product/Supplier" under ISO 9001/2000, granted to the "Pingo Doce, UltraPro, ActivPet, B.Sensy, Skino and Essentya" brands;
• Certification of Recheio in "Development of Private Brands and Monitoring of Product/Supplier" under ISO 9001/2000, granted to the "MasterChef" brand;
• Opening of Pingo Doce stores in S. Pedro de Cova, Soure and Almodovar;
• Opening of Feira Nova store in Trofa.

August

• Jerónimo Martins Restauração & Serviços acquired six "Storia del Café" coffee shops;
• Opening of Pingo Doce stores in Castelo de Vide and Batalha;
• Opening of Feira Nova store in Tondela.

September

• Opening of the one thousandth Biedronka store in Poland;
• Opening of Pingo Doce stores in Forte da Casa, Canidelo and Oliveira do Douro;
• Early repayment of two loans in the amount of 25 million euros each by Jerónimo Martins, SGPS, S.A.;
• Issue of two new loans totalling 70 million euros by Jerónimo Martins SGPS, S.A.

October

• Opening of Pingo Doce store in Funchal Centrum (Madeira);
• Opening of Feira Nova stores in Vizela and Castelo Branco.

November

Opening of Pingo Doce stores in Santa Marta de Corroios and Sever do Vouga.

December

• Consolidated sales of Jerónimo Martins reach five billion euros;
• Signature of agreement to acquire Plus operations in Portugal and Poland;
• Opening of Pingo Doce stores in Vale de Cambra, Borba and Arcozelo;
• Opening of Feira Nova store in Quinta do Conde;
• Opening of petrol station at the Feira Nova store in Torres Novas;
• Exercise of the call option on the bond loan issued in June 2003, repaying the amount of 115 million euros, by JMR – Gestão de Empresas de Retalho, SGPS, S.A.;
• Issue of a bond loan in the amount of 200 million euros by JMR Gestão de Empresas de Retalho, SGPS, S.A.;
• A five-year syndicated bank loan in the amount of 83 million euros was taken out by the company Optimum Mark within the scope of the process of concentrating the Group's brands into one central company.

2. INTERNATIONAL MACROECONOMIC ENVIRONMENT

According to the most recent projections from the International Monetary Fund (IMF) available at the end of the year, worldwide economic activity in 2007 grew about 5%. A softening economy translated into lower growth in international commerce by volume, falling from 9.2% in 2006 to 6.6% at the end of 2007.

While emerging economies continued to post a strong growth of about 8%, nearly equal to the previous year, developed economies fell from an economic growth rate of 2.9% to 2.5% during the year.

The North American economy was mainly responsible for the worldwide economic softening, registering very modest growth in comparison with previous years. Deterioration in the housing market and the difficulties felt in the mortgage market throughout the year, especially as of August, were the main reasons for this economic cooling. The sub-prime mortgage credit crisis not only affected the economy of the United States, but it also altered the perception of risk and conditions of financial access on a global scale. Despite everything, growth in the United States economy remained close to 2%, backed by strong exports, leveraged by depreciation of the dollar and by maintenance of business investment levels.

The Euro Zone registered a growth of 2.5%, higher than the North American economy, but the signs of economic softening were felt in the main economies of this region. Exports were pressured by the euro's strong appreciation, but there were also signs of acceleration in investment, especially in Germany where investment grew more than 2.5%. In turn, structural reforms seeking to deregulate the labour market, as well as increased immigration, contributed to favourable evolution of the unemployment rate in the Euro Zone, from 7.9% to 6.8%.

Among the emerging economies, China, India and Russia continued to shine. The Chinese economy grew 11.5% and, according to the IMF, was the economy that most contributed to worldwide growth. This was the first time that China has had this role. Russia's economy grew nearly 7%. While India showed signs of softening, its economy still grew almost 9%.

While Central and Eastern Europe continued to show strong dynamic economies, this did not prevent them from following the softening trend. The region's growth rate was close to 6%. Domestic demand fell due to the more restrictive monetary and fiscal policies, and exports were penalised by the overall international economic situation.

Brent oil hit a new record at the end of the year, trading at US\$ 96.53/barrel, a consequence of growing worldwide demand and the political instability felt in various regions of the globe. Commodities, especially agricultural goods that directly and indirectly affect the prices of basic goods such as bread, meat, and milk, once again experienced price increases of nearly 30%. This was due to the joint effect of factors such as the continued increase in worldwide demand caused by the strong growth in emerging markets, adverse climatic conditions in countries such as the United States and Canada, which are large global producers of grains and other agricultural products, and growing bio-fuels production.

However, according to IMF projections, annual inflation for the group of developed economies remained contained at 2.1% and below the values recorded in 2006. For the group of emerging economies, the inflation index increased to nearly 6%.

The monetary policies registered in 2007 reflected the economic climate experienced throughout the year. The FED reduced the reference interest rate to 4.25% to contain the strong tendencies toward economic softening. In turn, the European Central Bank progressively increased the reference interest rate to 4% in June, as projected. Starting in August, the ECB faced turbulence in the financial markets, and despite continued inflationary pressures, decided to keep the official interest rates unaltered until the end of the year. In another step to calm the volatility registered in the financial markets, the central banks decided to inject liquidity into the market at various times during the year.

The dollar experienced successive devaluations, and the €/US\$ rate reached its highest level ever of 1.4967, having the euro closed 2007 appreciating 11% against the United States dollar. There was yet more devaluation at the start of 2008, with investors showing concerns and anticipating deeper FED interest rate cuts in reaction to increasing oil prices and a new fall in the industrial activity index in the United States. Investors started to aggressively sell off their dollars, causing dollar devaluation.

Turbulence in the credit markets and, consequently, the climate of uncertainty and volatility in the financial market, began to have a significant impact on the stock markets, as they witnessed the transfer of investment from sectors sensitive to private consumption and economic growth, to more defensive sectors.

However, the European and North American stock markets managed to appreciate significantly based on strong company performance, although this appreciation was more moderate than in the previous year. In the stock markets, the DAX, the PSI 20, the IBEX 35 and the S&P500 appreciated 15%, 17%, 8% and 3.5%, respectively. The other global stock markets recorded devaluations, which, in general, should be interpreted as adjustments to the softening economic climate since their sustainability continues to be supported by worldwide economic growth and the robustness of companies that have solid balance sheets and that are increasingly global in nature.

3. INTERNATIONAL SECTOR ENVIRONMENT

Overall, the retail sector continues to show attractive growth, and profitability continues to increase, having overcome the difficult period that the majority of market players faced at the end of the last decade, and despite increasingly intense international competition.

The sector has continued to show signs of great vitality and growing concentration during the deep portfolio-restructuring process that has been occurring in recent years, without significant alterations in the ranking of the largest worldwide market players, except for the fact that Tesco replaced Metro in fourth place in the global ranking, and Ahold is no longer among the twenty largest companies. In turn, dynamic growth in markets such as Russia and China has resulted in several local market players appearing in the global ranking of the 250 largest global retailers, particularly the Russian market player X5 Retail and the Chinese market player, Bailian.

Internationalisation

Internationalisation continues to capture the interest of market players, and the heightened economic dynamism of emerging markets – namely those of Eastern Europe, China, Russia and India - has resulted in these areas continuing to be preferred destinations in international-level expansion plans.

In 2007, the various market players present in Eastern Europe continued to reinforce their market position in that region. Tesco advanced in Slovakia, and Lidl started operating in Slovenia and Croatia.

In Romania and Bulgaria, two countries that have recently joined European Union, market players continue to reinforce their presence there. Carrefour added the supermarket format to its business in Romania, and announced that it will enter Bulgaria in 2008. Auchan continued to strengthen its presence in Romania, as well as Schwarz that is present in both regions with its Kaufland format.

In Russia, Carrefour announced that it will soon be opening its first store and Wal-Mart also stated its intention to enter the market, although it still does not have a scheduled date. Also, the Schwarz Group announced that it will study the market and may proceed with the Kaufland brand.

Ukraine reported the entry of its first international market player - Auchan – and there were news about interest from other international market players, including Russian, in entering this market.

With operations that are still somewhat new in Central and Eastern Europe, Aldi advanced in Croatia in 2007; it also created a company in the Czech Republic, and it scheduled plans to begin operations in Poland, Hungary and Greece in 2008.

In Asian markets, the largest global retail companies are starting to take market share. In 2007, Wal-Mart went into India through a joint venture, and it announced that it plans to enter the Chinese market by acquiring a share of a local chain. Carrefour revealed its intention to enter the Chinese market, and it also released its plans for the Indian market. Tesco also announced that in 2008 it might enter the Indian market with the cash & carry format as a franchise system with a local chain.

In 2007, some internationalisation movements were also reported in developed markets. The North American Company Whole Foods opened its first store in England, while the English company Tesco entered the United States with a new store concept under its Fresh & Easy brand.

Market Consolidation

The year 2007 was very rich in mergers and acquisitions.

The most relevant news came out of Germany with Tengelmann deciding to sell all its food retail assets. Following that decision, at the end of the year, it sold its business in Portugal and Poland to Jerónimo Martins. In Spain the business was sold to Carrefour Group, in Greece to Delhaize, and in Germany, Tengelmann agreed to a 70/30 joint venture with Edeka. At the start of 2008, the sale process in Austria, Czech Republic, Hungary and Romania was still under way.

At the same time, Migros Turk put its businesses in Russia and Turkey up for sale, having just completed the sale of 14 hypermarkets in Russia to the Auchan Group in 2007.

Several market players further continue to redefine their geographic presence. Carrefour finalised its exit from Slovakia and the Czech Republic, and sold its hypermarkets in Portugal. Ahold finalised its exit from Poland with the sale of its assets to Carrefour, and reduced its business in the United States by selling its Tops Market hypermarket to Morgan Stanley Private Equity. Casino abandoned the Polish market with the sale of Leader Price to Tesco and the sale of its hypermarkets chain Geant to Metro, and sold its Smart & Final chain in the United States.

Also in 2007, local market players underwent consolidation in various regions. In Russia, growth of the largest domestic retail chains has been organic, in step with acquisitions of small local market players. An example of this was the purchase of the Korzinka chain (22 stores) and Strana Gerkulesia (29 stores) by X5 Retail. In Spain, the Caprabo supermarket chain sold 75% of its capital to Eroski, and in Germany, Rewe acquired 133 stores from the Edeka chain.

New Concepts

The Spanish market was the stage for new proximity concepts developed by hypermarket players. Carrefour launched Carrefour City and Dia Market, while Auchan launched Simply Market. Also in Spain, Lidl opened its first store of 3,000 square meters. In Manchester, Aldi inaugurated a store that shows a clear upgrade of its concept – with a focus on Perishables, and Tesco took its Fresh & Easy concept to the United States – betting on Perishables and healthy food at low prices.

After having decided to initiate the sale of food products in 2006, Amazon decided to start with the sale of Perishables in 2007. Already in 2008, Tesco announced the launch of basic medical services, such as check-ups to control blood pressure, weight, cholesterol and the risk of diabetes, after several well-known market players in the United States that also took this initiative.

Finally, in 2007, some innovative initiatives arose in the sector to make retail property assets more profitable. Carrefour announced its intention to place part of its assets in the Paris Stock Exchange, and Tesco set up a joint venture with a British company in

the property sector to make its assets more profitable. Finally, Tengelmann placed its retail business in several countries up for sale, but it intends to retain ownership of real estate assets.

4. PORTUGAL

Macroeconomic Environment

The year was positively impacted by the announcement that a 3% budget deficit was attained after two years of applying a restrictive budgetary policy, which did not cease to limit national economic growth. Private consumption continued to be pressured by high family indebtness, with interest rates rising, salaries growing only modestly and taxes increasing. The employment rate reached 8%, but investment advanced well, contrary to what has been seen in previous years.

According to the Winter Bulletin of Banco de Portugal, in 2007 the Portuguese economy grew 1.9%, which was closer to the rate of the Euro Zone, but even so, it did not recover yet from the economic slowdown registered in previous years. Growth continued to be sustained by exports (+7%), despite deceleration in the international economic climate.

The inflation rate was 2.4%, lower than in 2006, aided by slower inflation of energy prices, modest growth of production salaries, and by more competitive prices on imports as a result of market globalisation.

The national stock exchange had an up-and-down year due to the failure of public acquisition offers for PT and BPI, and due to the failure of merging BPI/BCP. However, according to the specialised press, the PSI 20 index showed the third-best performance in Europe, accumulating gains of 17%, after Germany (+22.25%) and Finland (+21.63%). Among 21 worldwide indices, the PSI-20 had the lowest volatility at 200 days, while for shorter periods only the Spanish IBEX registered lower volatility levels.

Retail Food Market in Portugal

In 2007, the retail food market continued to register very modest growth when inflationary effects are discounted. Modern organised retail continued to be very dynamic, and growth was clearly above that of inflation. The year was characterised by a high number of openings and relevant consolidation processes in the hypermarket and discount formats.

The hypermarket format continued to lose market share in organised retail, affected by growth in the proximity formats and by the absence of organic expansion opportunities. Thus, market players continued to choose to open smaller-scale stores, with six stores between 4,000 and 6,500 square meters opening under hypermarket brands. In 2007, the format also saw a significant consolidation movement with the acquisition of Carrefour by Sonae Group.

The various discount market players continued to register strong expansion trends through the opening of 91 stores. The growth in sales of this format continue to be sustained by aggressive expansion plans, but several independent market research studies showed that, in 2007, the pace of growth in the discount sector fell off. This was due to more commercial aggressiveness by the other market players, and various adjustments were registered in the like-for-like market shares.

The year 2007 closed with the announcement of a significant acquisition operation in the discount format, with Jerónimo Martins purchasing the 75 Plus stores of Tengelmann. With this operation, Jerónimo Martins can increase its total sales area in

the retail food sector by more than 15%, thus consolidating its leadership position in the sector.

The market players who entered the market in 2006 continue to have a relatively small number of stores. According to analysts, the discount stores Aldi and Netto (Grupo ITM), had seven and four stores open, respectively, at the end of the year, while Schleker, the first European specialised retail player to enter the Portuguese market, closed the year with nearly 30 stores.

Formats up to 2,000 square meters registered 63 openings, with Pingo Doce, the leading supermarket brand, showing the greatest dynamism in this area.

In total, the number of openings in 2007 was higher than the number recorded in the previous year, resulting in 12% growth both in the sales area as well as in the number of stores.

According to information provided by the General Division of Economic Activity (DGAE), in 2007 nearly 130 licenses for new food retail stores were granted, which, although still high, already show some signs of softening. The discount format continued to be the most dynamic in licensing – with 51% of the licenses issued – while market players with formats up to 2,000 square meters took 45% of the licenses, while the remaining 5% were issued to hypermarket brands for sales areas between 2,000 and 5,000 square meters.

Wholesale Food Market in Portugal

According to internal estimates, 2007 was the fifth consecutive year in which a significant decrease in the total business volume of the wholesale food market was recorded, and with the exception of Recheio, no market player recorded significant growth, while a high number of small- and medium-sized market players reported losses of more than 10%.

Evolution in the wholesale market continued to be explained by the very noticeable decrease in sales of small independent retailers, while the HoReCa channel grew comfortably above the inflation rate. This has increasingly come to determine the strategy focus of the main wholesale market players in this segment.

The main market players are progressively adapting their business models to the needs of the food service segment, simultaneously exploring the dimensions of "delivery service" and "Perishables". Also with the objective of responding as adequately as possible to the needs of the food service segment, when remodelling their stores, the market players are mainly concerned with ensuring that the best hygiene and food safety practices are met.

5. POLAND

Macroeconomic Environment

In 2007, the Polish economy again surpassed specialists' expectations by registering growth of 6.5%. This was sustained mainly by dynamic investments, exports and private consumption.

The deficit in the trade balance continues to grow, registering 4.5% of GDP in 2007. This was a function of growth in domestic demand, which originated in higher import than export growth.

Inflationary pressures increased in the second half of 2007, and the inflation rate at the end of the year was above 3%. Increased inflationary pressures led the Central Bank of Poland to raise interest rates in three distinct phases, the most recent in August, by 75 basis points, to 4.75%.

The fiscal status of the central government improved considerably, as the deficit remained close to 2.4%, clearly below the 3% limit established by the European Union. Considering Poland's integration into the Euro Zone, projected for 2012, the Polish government approved updating the Poland Convergence Pact, which establishes limits on the budget deficit until 2010.

According to the National Bank of Poland, the average value of the zloty in 2007 was 0.2775 euros. Remittances by immigrants, direct investments into Poland, and improved labour productivity were determining factors in the 5.8% appreciation of the Polish currency.

Legislative elections in October resulted in gains by the Platforma Obywatelska (PO) party, which is more focused on opening the Polish market to foreigners than the previous government. This shift in Poland's political sphere reinforced investors' expectations and lowered the country's risk premiums.

Retail Food Market in Poland

According to internal estimates, in 2007 the Polish food retail market experienced double-digit growth, surpassing 220 billion zlotys, aided by the climate of strong economic growth.

While still heavily weighted by independent retailers, the modern organised retail market continued to gain market share and to invest in the expansion of its stores. Only discount format recorded more than 200 store openings.

The licensing system was revised in September, and stores with more than 400 square meters in sales area are now included in a more complex licensing process that requires additional approvals. This is raising doubts and generating debates by market players.

As in prior years, the consolidation process intensified in 2007, as a result of the highly aggressive competitive environment of the Polish market. Small domestic retail chains recorded various consolidation movements, with the Emperia Group acquiring several regional chains: Euro Sklepy, Polka, Zatoka and Pss Tychy.

Bomi joined with Rabat Pomorze and Rust, and Zabka, a convenience store chain, was sold to the Czech investment fund, Penta.

At the end of the year, yet another international market player left the Polish market. Tengelmann sold its 210 Plus stores to Jerónimo Martins, allowing Biedronka to increase its total sales area by more than 20% with only this operation.

Aldi had scheduled its entry into the Polish market for 2007, but it ended up delaying it until 2008.

Sources:

IMF World Economic Outlook, October 2007; Economic Outlook no. 80 OCDE, November 2007; Autumn Forecasts of the European Commission; Reuters; Economist Intelligence Unit; UBS, HSBC, Credit Suisse, BPI Economic and Financial Studies, December 2007; Bank of Portugal Economic Bulletins, Autumn and Winter 2007; Portuguese Ministry of Finance; Portuguese Catholic University Thematic Reports – NECEP/CEA FCEE; National Statistics Institute; General Division of Economic Activity; Bank of Poland Economic Bulletins; Polish Ministry of Finance; Central Statistical Office (GUS); Citigroup; Citibank Handlowy; BRE Bank; Planet Retail; Deloitte; TNS; Nielsen; Girasic; Datamonitor; Accenture; Ernst & Young; AT Kearney, Business Monitor International Ltd; APED; Uniarme; AREST; CIES; AMS, WBCSD.

6. OVERVIEW OF THE GROUP'S CONSOLIDATED ACTIVITY

6.1. Net Sales

	2007		2006		A 0 /o
	Eur Tho.	% total	Eur Tho.	% total	Zloty	Euro
Sales & Services
Retail Mainland	2,111,501	39.5%	1,863,629	42.3%	n.a.	13.3%
Cash & Carry	626,053	11.7%	602,153	13.7%	n.a.	4.0%
Madeira	123,265	2.3%	111,110	2.5%	n.a.	10.9%
Poland - Biedronka	2,392,282	44.7%	1,715,470	38.9%	35.0%	39.5%
Manufacturing	246,349	4.6%	252,997	5.7%	n.a.	$-2.6%$
Mkt, Repr. and Rest. Services	75,908	1.4%	74,703	1.7%	n.a.	1.6%
Consolidated Adjustments	$-225,680$	$-4.2%$	$-212,886$	$-4.8%$	n.a.	6.0%
Total JM	5,349,678 100.0%		4,407,175 100.0%		n.a.	21.4%
p.m. Retail Portugal (store sales)	1,937,659	36.2%	1,707,284	38.7%		13.5%

In 2007, Jerónimo Martins' consolidated net sales reached 5.350 million euros, a growth of 21.4% (+19.6% excluding the exchange rate effect) on 2006. This performance is the result of the execution of the organic Retail growth plan in Portugal and Poland, and the strong like-for-like sales increase registered by Pingo Doce and Biedronka throughout the year.

Consolidated Sales (Euro Mio)

Pingo Doce - Number of Stores

Pingo Doce - Like for like sales growth

In 2007, Pingo Doce recorded an 8.7% increase in like-for-like sales, a result of the strong growth trend that started at the beginning of the year and which led to total sales growth of 17.5% in the year, together with the opening of 24 new stores (+13.9% in the sales area).

This performance throughout 2007 shows the success of the business model in the Portuguese market, with a value proposition based on strong differentiating characteristics: Proximity/Competitive Prices/Private Brand/Perishables; these all allowed Pingo Doce to strengthen its market position by growing 1.4 percentage points in its market share in the APED universe.1

In 2007, Feira Nova accelerated the repositioning of its business model with visible impacts in the 14% growth in sales of Perishables, and 56% in sales of Private Brand products.

The 4.3% decrease in like-for-like sales of the hypermarkets reflected the aggressive campaigns, especially during the summer, of all operators of this format, while the performance of compact stores (+0.7% in like-for-like growth in the year) shows positive signs of strategy in implementation, although it is still too early to see the effect of the changes reflected in the assortment, where the strong increase in penetration of Private Brands is highlighted.

¹ APED – Portuguese Association of Distribution Companies

Biedronka - Number of Stores

Biedronka - Like for like sales growth

In 2007, Biedronka recorded accelerated like-for-like sales growth, which culminated in a 26.1% increase in comparable sales in the fourth quarter. Thus, the Company ended the year with a 21.1% growth in like-for-like sales, compared to 2006.

Total sales increased in 2007 by 35.0% in local currency (+39.5% in euros) reflecting growth comparable stores, but also the execution of the expansion plan with the opening of 156 stores (+18.5% in sales area).

This performance surpassed that of the sector in Poland, and confirmed Biedronka's value proposition as a success in the local market, which allows the Company to consolidate its leadership position in that region year after year.

Reheio - Like for like sales growth

At Recheio, 2007 was the first year in which the HoReCa channel had a greater weight in the Company's sales, being responsible for 43.3% of total sales. The 7.6% growth in sales in this segment obtained in 2007, compared to the same period in the prior year, reflects the Company's successful repositioning after defining a business strategy that was especially geared toward this client.

While the Traditional Retail channel as a whole is showing a significant decline, Recheio managed to increase its market share in this segment, managing to keep its sales stable. Recheio's total net sales grew 4.0% over the same period of last year.

In Manufacturing, excluding the sale of the frozen food business in November 2006, sales attributable to Jerónimo Martins posted a growth of 0.7% over the same period in 2006, as a result of differentiated performance among categories and brands. The leading market brands in the Company's portfolio recorded positive performance, increasing their market share, while some categories' performance was affected by several factors, including: i) the drop in the price of olive oil, which did not allow the double-digit growth that occurred in volume to be reflected in growth in sales in the category, and ii) more aggressive competition in the personal care segment.

In Marketing, Representation and Restaurant Services, sales grew 3.0% over the same period of the previous year, mainly reflecting the increased sales in the restaurant area, which were due to the expanded number of stores.

	Sales		Nr. Stores		Sales Area (sqm)		Δ		LFL
	A%	2007 2006		А	2007	2006	(sqm)		2007		2006
	Pln. Eur							Eur	Pln	Eur	Pln
Pingo Doce	17.5%	210	189	21	183,770	161,279	22,491	$8.7\%$		11.2%
Feira Nova	8.3%	46	38	8	172,039	150,189	21,850	$-2.0%$		$-0.3%$
Hypers	$-4.4%$	9	9	0	82,653	82,653	0	$-4.3%$		$-1.8%$
Compact	22.9%	37	29	8	89,386	67,536	21,850	0.7%		2.1%
Recheio	4.0%	33	33	0	109,634	110,005	$-371$	3.6%		3.6%
Madeira	10.9%	15	15	0	14,626	13,697	929	9.1%		4.0%
Biedronka	39.5% 35.0% 1.045		905	140	536,729	452,952	83,777		21.1%		11.8%

6.2. Operating Results

	2007		2006		07/06
	Mil. Eur	$\%$	Eur Tho.	$\%$	$\mathbf{A}^{0}/\mathbf{0}$
Net Sales & Services	5,349,678		4,407,175		21.4%
Gross Margin	1,224,754	22.9%	1,042,915	23.7%	17.4%
Operating Costs	$-869,000$	$-16.2%$	$-721,568$	$-16.4%$	20.4%
Provisions	$-4,323$	$-0.1\%$	$-2,565$	$-0.1%$	68.6%
EBITDA	351,430	6.6%	318,782	7.2%	10.2%
Depreciation	$-126,721$	$-2.4%$	$-107,028$	$-2.4%$	18.4%
EBIT *	224,708	4.2%	211,754	4.8%	6.1%

Consolidated operating cash flow (EBITDA) reached 351.4 million euros, 10.2% higher compared to the previous year, reaching 6.6% of consolidated sales (7.2% in the same period of 2006).

Consolidated EBITDA (Euro Mio)

EBITDA Margin

The evolution of the EBITDA margin of the Group reflected several factors, including:

- Retail in Portugal:

• Execution of the expansion plan – opening in 2007 of 24 Pingo Doce supermarkets and 8 Feira Nova mini hyper – with pre-opening costs related to rents, personnel and training, and 52 stores opened in the last 24 months still operating with a margin below normal maturity levels;

• The remodelling of 28 Pingo Doce stores, with closure of those stores for 45 day periods, during this time the stores did not contribute to sales but continued to incur costs;

• Sales performance of the large Feira Nova hypermarkets, whose negative evolution on a comparable basis, did not allow dilution of the network fixed costs;

• The decision to accelerate the repositioning of the Feira Nova chain, with a significant increase in a short period of time of penetration of Private Brands, led to pressure on the margin due to the fast change in the sales mix: from industry brands to Private Brand;

• At Biedronka, the strong sales performance on a comparable basis with a like-forlike sales growth of 21.1% drove the 60 basis-point increase reported in the Company's EBITDA margin, from 5.3% in 2006 to 5.9% in 2007. Thus, in 2007, Biedronka reported growth, in euros, of 39.5% in total sales (+35.0% in local currency) in conjunction with a 55.9% increase in cash EBITDA (+50.9% in local currency).

The increased contribution of Biedronka to consolidated EBITDA went from 28.3% in 2006 to 40.0% in 2007.

• In the Cash&Carry area, Recheio, benefiting from an efficient business structure, managed to keep its prices competitive in the market and having a specialised offer for the HoReCa channel, keeping the Company's EBITDA margin at 6.0%.

• In Manufacturing, the increased prices of raw materials that were felt mainly starting in the third quarter, had a significant impact on the margin of some categories, such as margarines, soups, savoury and ice creams. The repositioning of prices of some brands by virtue of the entry of competing brands and Private Brand in new categories also ended up impacting evolution of the EBITDA margin.

6.3. Net Profit

		2007		2006
	Eur Tho.	$\%$	Eur Tho.	$\%$	$\mathbf{A}^{0}/\mathbf{0}$
EBIT	224,708	4.2%	211,754	4.8%	6.1%
Net Financial Results **	$-59,238$	$-1.1\%$	-42,345	$-1.0\%$	39.9%
Non Recurrent Items ***	22,296	0.4%	19,943	0.5%	11.8%
EBT	187,766	3.5%	189,352	4.3%	$-0.8\%$
Taxes	$-36,857$	$-0.7%$	$-38,444$	$-0.9%$	$-4.1%$
Net Profit	150,909	2.8%	150,908	3.4%	$0.0\%$
Minority Interests	$-19,648$	$-0.4%$	$-34,756$	$-0.8\%$	-43.5%
Net Profit attr. to JM	131,261	2.5%	116,152	2.6%	13.0%
EPS (euro)	$0.21$ *		0.92
Cash Flow per share (euro)	$0.43*$		2.05

Net profit for Jerónimo Martins was 131.3 million euros, a 13.0% increase over the same period of the prior year.

The cash flow per share was 0.43 euros, a 4.8% increase on 2006.

Consolidated financial results were 59.2 million euros in 2007, reflecting: i) the Group's investment programme, which in the period was 468.5 million euros; ii) the increase in the average cost of debt resulting from the rise in reference rates; and iii) the impact of the costs of interest rate hedging operations.

Non-recurring results include, among other items, added value in the sale of BCP shares and the sale of land not allocated to operations.

6.4. Balance Sheet

Balance Sheet	$(\epsilon$ '000)
	2007	2006
Net Goodwill	416,290	385,341
Net Fixed Assets	1,750,509	1,378,190
Net Working Capital	-862,967	-667,065
Others	139,639	177,033
Invested Capital	1,443,471	1,273,499
Debt	712,730	605,802
Leasings	79,426	47,504
Accrued Interest & Hedging	51,447	26,337
Marketable Sec. & Bank Deposits	$-264,337$	$-173,425$
Net Debt	579,266	506,218
Minority Interests	287,326	275,391
Share Capital	629,293	629,293
Retained Earnings	-52,414	-137,403
Shareholders Funds	864,205	767,281
Gearing	67.0%	66.0%

6.4.1. Investment

The evolution of invested capital reflects the execution of the Group's expansion plan both in Portugal and Poland, but it also reflects the investment made in the Group's existing stores in order to maintain their quality. Capex in 2007 reached 468.5 million euros, of which 57.3% was invested in Portugal, and 42.7% in Poland.

Capex 2007

The expansion plan for retail operations in Portugal and Poland continued to be a priority of the Group, which earmarked 69.1% of its total investment to carrying out the expansion plan in 2007.

Gearing was kept at the same level as the previous year, clearly below 100%.

6.4.2. Debt

On one side, evolution of the debt reflects the Group's investment plan, but on the other side, it shows a high balance of suppliers at the end of the year, showing the heavy weight of Christmas sales in 2007 compared to the impact of Christmas sales in the previous year.

DEBT BREAKDOWN	(€'000)
	2007
Long Term Debt	620,480
Bond Loans	360,000
Private Placement	151,007
Commercial Paper	n
Other LT Debt	109,473
Short Term Debt	92,250
as % of Financial Debt	12.9%
Bond Loans	Ω
Commercial Paper	n
Other ST Debt	92,250
Financial Debt	712,730
Maturity	3.7
Average Cost of Debt	4.8%
% Debt in Euros	86.0%
% Debt in Zlotys	14.0%
Leasings	79,426
Accrued Interest & Hedging	51,447
Marketable Securities & Bank Deposits	-264,337
Net Debt	579,266

Throughout 2007, important work was undertaken to extend the debt profile, extending maturity from 3.3 years in 2006 to 3.7 years in 2007.

Financial costs evolved according to the increased debt, and its average cost that went from 3.8% in 2006 to 4.8% in 2007, reflecting the higher reference interest rates.

Financial costs include costs from interest rate hedging operations. In terms of cash outflow, they provide protection against rising interest rates in the markets.

6.5. Jerónimo Martins on the Stock Exchange Market

During 2007, two more research institutions started to cover Jerónimo Martins, in addition to the 12 who already followed the Company in the previous year. At the end of 2007, they showed the following positions:

Nr. of Recommendations

In relation to share performance in the capital markets, the performance above the market and the sector is noted, as well as an increase in the volumes traded during 2007 in comparison with 2006. The increased trading volumes was caused by both the stock split in May 2007 (with each share now representing five shares) and also by the increase in the Company's free float from 23.5% in 2006 to 28.9% in 2007.

	2007	2006
Stock market Performance ***
High (EUR)	5.59	3.52
Low (EUR)	3.43	2.55
Average (Closing) (EUR)	4.37	2.85
Closing (End of year) (EUR)	5.40	3,40
Market Capitalisation (31/12) (EUR 000,000)	3,398	2,140
Market Capitalisation Ranking / PSI-20	10°	$11^{\circ}$
Average Stock turnover Ranking /PSI-20 *	13%	$12^{\circ}$
Transactions
Volume (1,000 shares) ***	275,512	189,430
Daily Average	132,001	147,991
Annual Growth
PSI 20	16.3%	29.9%
Retail Sector Average **	13.7%	21.8%
Jerónimo Martins	58.8%	33.9%

6.6. Jerónimo Martins Financial Performance 2003-2007

					(E' 000.000)
	2007	2006	2005	2004	2003
BALANCE SHEET
Fixed Assets
Net Goodwill	416	385	384	301	277
Net Intangibles Assets	80	61	40	31	37
Net Tangible Assets	1,671	1,317	1,102	1,035	1,029
Financial Investments	61	92	82	218	131
Working Capital	$-863$	$-667$	$-547$	$-513$	$-584$
Long Term Assets	63	61	62	61	60
Income Tax Provision	$-1$	-2	2	1	$-1$
Deferred Taxes	18	26	43	48	45
Invested Capital	1,443	1,274	1,168	1,181	996
Net Debt
Financial Debt	713	606	673	730	842
Leasings Accrued Interest	79 52	47 26	30 5	25 16	23 $-3$
Marketable Securities and Bank Deposits	-264	$-173$	$-211$	$-159$	$-148$
Minority Interests	287	275	251	228	205
Equity	577	492	420	342	77
INCOME STATEMENT
Net Sales & Services	5,350	4,407	3,828	3,495	3,417
EBITDA	351	319	308	305	290
EBITDA margin	$6.6\times$	$7.2\times$	8.1%	8.7%	8.5%
Depreciation	$-127$	$-107$	$-100$	$-97$	$-100$
EBITA	225	212	209	208	189
EBITA margin	$4.2\times$	4.8%	5.4%	$5.9\times$	$5.5\times$
Amortisation	0	0	0	0	-24
EBIT	225	212	209	208	165
EBIT margin	$4.2\times$	$4.8\%$	5.4%	5.9%	$4.8\times$
Financial results
Net Interest	$-52$	$-39$	$-39$	$-42$	$-43$
Other financial costs/income	-7	-3	-7	-9	$-14$
Non recurrent items "	22	20	9	-7	$-5$
EBT	188	189	171	150	103
Income Tax	$-26$	$-21$	$-16$	$-16$	$-18$
Deferred Tax	$-11$	$-17$	-9	-3	$-3$
Net income	151	151	146	131	82
Minority interests Net income attr. to JM	$-20$ 131	$-35$ 116	$-35$ 110	$-38$ 93	$-24$ 58
Cash Flow	270	258	247	247	223

----	ET BATH

629,293,220	125,858,644	125,858,644	125,858,644	95,858,644
859,000	171.800	171,800	171.800	171,800
0.21	0.92	0.88	0.83	0.61
0.43	2.05	1.96	2.23	2.33
5.59	3.52	2.57	2.00	1.93
3.43	2.55	1.97	1.54	1.05
4.37	2.85	2.35	1.76	1.28
5.40	3.40	2.54	1.94	1.85
3,398	2,140	1,598	1,221	1,003

7. FOOD DISTRIBUTION – PORTUGAL

7.1. Pingo Doce

Message from the General Manager - Eduardo Cid Correia

"In 2007, we continued to implement our plan to open and remodel stores, which will allow Pingo Doce to consolidate its market position.

Along the year, stores were opened whose licenses were granted under Licensing Law No. 12/2004 of March 30, with the inauguration of 24 stores and 28 remodelled stores.

The year 2007 was further marked by innovative projects that differentiate Pingo Doce stores with the introduction of flower businesses, restaurants and seafood tanks. We invested more in the brand through advertising and we reached the end of the year with a stronger position in the markets where we are present."

Mission

To be the best supermarket chain operating in Perishables in Portugal, with the capacity to maintain a long-term relationship of trust with consumers, providing them with a quality food solution for the entire family, at stable, competitive prices.

In 2007, Pingo Doce continued with its strategic direction that it defined in 2002: to be the best supermarket chain operating in Perishables in Portugal, increasing its market share in dry grocery by converting its regular peripherical clients (clients who frequent the stores but who make less than half of their purchases there) into core clients (clients who make the majority of their monthly purchases at the chain). Over the past five years, the balance became quite positive, with the loyalty index to the chain (translated by the ratio of core clients over, peripherical clients) increasing 50% over this period.

Private Brand

Private brand sales grow th

In the year under analysis, the success of the chain's positioning showed like-for-like growth in sales of 8.7%. Total business volume was 1,136.8 million euros, 17.5% higher than in the previous year, mainly due to the 13.5% increase in the number of transactions. These results were attained during a difficult macroeconomic environment in which the unemployment rate increased and consumers' purchasing power decreased.

Contributing to this was Pingo Doce's offering of products to the consumer, who values quality and diversity, and the Company invested heavily in Perishables and Private Brands, areas of brand differentiation in the market, and areas that posted higher sales growth than total sales for the Company.

The Company's prices reflected inflation of only 0.2% over prices in 2006, compared to average variation of 2.4% over the last twelve months in the Consumer Price Index.

Significant investment in communication at the beginning of the year intended to make consumers aware of the decrease in the prices of Private Brands to levels that were identical to prices at discount chains.

Finally, the Company sought to make the store environment more pleasant and welcoming with a layout that emphasises the quality of Perishables and the overall ease of making purchases.

In 2008, Pingo Doce will continue to carry out its activity in line with the strategy defined in 2002, seeking to reinforce the number of core clients, particularly in the categories of lowest penetration for the chain and reinforcing the differentiation aspects of the brand.

Also in 2008, the Company is awaiting approval for the acquisition of the Plus stores, which are expect to be integrated into the Company during the year.

7.2. Feira Nova

Message from the General Manager - João Queimado

"In 1993, the first Feira Nova stores were acquired. Since that time, 14 years ago, much has changed. Modern distribution, specifically in the retail food sector, year after year has been very dynamic, while the market has simultaneously become more competitive and consumers' purchasing decisions have become more selective. This evidence should be, above all, the departure point for definition of strategies and tactics which, added to the Company's passion for this business, allow it to continue to build a strong brand."

Mission

To be the brand that Portuguese consumers trust, where they can always find the best-priced food products, high-quality Perishables, and an adequate selection for everyday or one-stop shopping. Feira Nova is heavily involved with the local community.

Characterised by consolidation movements in the National Retail market, 2007 saw the expansion of virtually all-existing distribution formats. In fact, together hypermarkets, supermarkets and hard discount stores opened 148 new locations throughout the year, together totalling 173,000 square meters new selling area available to Portuguese consumers.

As per its expansion plan, Feira Nova inaugurated another eight new stores, growing the Company's number of stores to 46 (nine hypermarkets and 37 minihypermarkets).

The repositioning of the brand, which began in 2006, continued throughout 2007, with increased competitiveness in its pricing policy, the strength of investments in the Perishables area, and accelerated penetration of its Private Brands.

Despite the complex environment, the year 2007 was positive for the Company due to implementation of the defined strategy, notably:

• Continuing to invest in aggressive commercial work, which resulted in Feira Nova getting the title of "cheapest hypermarket in the country", given by Deco Pro-Teste Magazine;
• Consistent investment in developing the Perishables area, which introduced into stores a differentiating factor that is very highly valued by clients, and which translated into growth of 3.0% on a comparable basis of sales in this category of products, in relation to the prior year;
• Investments made in strengthening the presence of Private Brands whose quality today is widely recognised by the national market – in Feira Nova stores, which resulted in growth of 37.6% on a comparable basis, of sales of these products in these stores.

The success of this differentiation strategy is clear in the increased client loyalty index, verified by a monitoring study conducted in 2007. All these efforts further culminated in increased market share of the brand, in a context of intense commercial activity.

Thus it may be affirmed that Feira Nova stores, especially the mini-hypermarkets, are today more prepared to compete in a differentiated manner in a market where there are few brands that can claim to present a truly innovative approach.

The year 2007 was further marked by expansion of new businesses, such as "Bem Estar" para-pharmacies and petrol stations, and by the launch of a new business concept under the GET brand, in the area of entertainment and technology.

The first "Bem Estar" space opened in the Sintra store in July, with a store-in-store format, a space close to 200 sqm within the sales area, with its own image and environment. This is the format in the hypermarkets.

In the case of the mini-hypermarkets, wherever justified, the format of a gallery store was adopted, with 60 to 70 sqm, encompassing a wide range of items more specific to

the business of medications that do not require a prescription, to all items such as baby products, products for pregnant women, dermato-cosmetic and oral hygiene products.

The petrol station business was driven by the partnership with Martifer, having already developed the entire business model in 2007 and the respective image, as well as planned its respective expansion. Four petrol stations opened in 2007.

ElectricCo rethought its positioning, and tested a new concept in 2007: GET – Gadgets, Entertainment and Technology. A new business concept focusing on these areas is currently being tested in three stores.

In 2008, the Company is going to invest in differentiating the large hypermarkets, based on solid foundations and a consistent development plan. Like a preview of new projects, investing in the Feira Nova brand in the hypermarket model may be affirmed not only as it is known today, but as a new concept that will reinvigorate this format. Simultaneously, and in order to strengthen the power of attraction of the large areas of Feira Nova, establishing partnerships to build shopping centres close to its stores is projected.

7.3. Recheio

Message from the General Manager - Jorge Santos Dias

"The year 2007 will go down in Recheio's history as the year in which the Company completed its process of transforming into a Company focused on the HoReCa channel.

Ten years after the start of this process, we can proudly say that today Recheio is recognised by the majority of Restaurant and Hotel professionals as the benchmark in the supply of food products to this economic sector.

But this recognition, plus the fact that the Company is the market leader, also brings more responsibility and greater challenges for the future.

With the objective of continuing to better satisfy the needs of Restaurant and Hotel professionals, the commitment is reaffirmed to continue to establish lasting relationships of true partnership with the Company's suppliers, to train, develop and motivate employees, seeking to provide our clients with the highest standards of service. Updating our stores by outfitting them with the newest equipment capable of ensuring unparalleled conditions of food hygiene and safety will be another of the Company's designs in 2008."

Mission

To meet all the needs of Traditional Retail customers and of the HoReCa channel. To give Recheio's clients value for their money, and to do this by focusing on long-term relationships with them, offering each segment the best value solution for their needs. Recheio's employees, with their motivation, competence and dedication, are the best building blocks for such relationships, whether with clients or suppliers. Everyone focused on the client and on the Company's efficiency is the best way to guarantee profitability and a return on shareholders' investment.

The year 2007 was marked by consolidation of the HoReCa channel as the Company's main business segment, representing 43.3% of total sales (41.9% in 2006).

Net Sales per Segment

It was also the year in which Recheio recorded its best sales, reaching 626 million euros, corresponding to a growth of 4.0% on 2006. In like-for-like stores, the 3.6% growth was equally strong. It is noted that this performance was attained despite the revamping of two of the Company's stores: Airport (Lisbon) and Viseu.

In November, after major renovation, the Airport and Viseu stores were effectively reinaugurated. They were completely remodelled and opened with a new concept from the design, image and decoration viewpoint, as well as from the functionality viewpoint. In these "new" stores, Recheio invested heavily in renovating the Perishables areas, which received the most advanced equipment in order to guarantee unparalleled conditions of food safety and hygiene, all with the objective of better serving the Company's clients.

The Algarve stores also contributed significantly to this performance, having grown 9.3% on the previous year.

A brief analysis of the performance of the two main business channels shows that:

• Retail, despite the less favourable economic environment, strongly affected by the opening of more than 320 Modern Retail stores since the start of the new licensing law (including new stores and acquisitions of local operators) registered sales in line with last year's.
• In 2007, the HoReCa channel definitively became the Company's most important segment, growing 7.6% on 2006.

This evolution resulted from the Company's strategy of clearly committing itself to serving hotel industry professionals, and obtaining recognition by these clients as the supply source that is able to guarantee them the proper levels of service, quality, hygiene and food safety. In this context, Recheio continues to be the only wholesale company with HACCP certification.

Sales for the MasterChef Private Brand also recorded excellent performance, growing 13.3% on the previous year, and already representing 12.1% of sales in the sectors where the brand is present. This growth also reflects the increasing acceptance by restaurant and hotel professionals of MasterChef's category of products, and recognition of the quality of these products that are specially designed to serve the specific needs of these customers.

Recheio's operating cash flow rose in 2007 to 38 million euros, which corresponded to 6.0% of sales, and the Company continued to consistently show levels of profitability that are well above the sector average.

Without discounting the important support role to all Traditional Retail businesses, in 2008 the Company will continue to view the HoReCa channel as Recheio's growth driver.

7.4. Madeira

Message from the General Manager - Pedro Sá

"Madeira's priority has been to increase market share through an aggressive pricing policy, quality of Perishables and strong investment in Private Brand and in innovative products and services.

The attention to specific regional needs, plus the high motivation of our team are essential to winning over more and more Madeira consumers, using the best practices and experience available within the Group".

Mission

To provide Madeira families with the best food solutions, both in-home and out-of-home. Through the Pingo Doce chain, to supply high-quality products at the best prices in the region, and meet to the needs of the HoReCa channel and those of traditional retail through Recheio, offering them competitive quality, service and prices.

The year 2007 was marked by the Group's heavy investment in the Madeira region, finalising remodelling of the Recheio store and two Pingo Doce stores, and the opening of a new Pingo Doce store in the centre of Funchal at the end of October.

Pingo Doce reported strong sales performance, with growth of 15.1% over 2006, reaching 94.5 million euros. The results obtained were a consequence of strategic repositioning of the brand in the region.

In effect, in 2007 the Pingo Doce network in Madeira had a deflationary pricing policy for the third year in a row, which this year resulted in a 4.5% price decline of the chain's average basket.

Pingo Doce's Perishables line, strategically identified as key categories for brand differentiation, and recognised by its clients as high-quality products, increased 1.9 percentage points to 32.7% of the Company's sales weight in 2007.

The Private Brand, another strategic focus in differentiating the Pingo Doce chain, posted an increase in the weight of the Company's sales from 21.8% in 2006 to 28.7% in 2007, which represented growth of 48.6% in the category's sales in comparison with 2006.

Despite being penalised by the remodelling work, which affected the entire first quarter of 2007, in 2007 Recheio in Madeira had sales volume of 28.8 million euros, with the recovering in the last three quarters that offset the decrease in sales, which was -0.9% over 2006. The awarding of a Quality Certification for Recheio by an external entity was considered an important milestone, recognising the excellent standards of its operation. In 2007, the Company maintained its leadership position in its segment, which is currently more concentrated due to the departure of one of the region's main operators.

Facing a market undergoing major transformation due to pressure in today's retail market, Recheio obtained a marked leadership position not only in the traditional market, but also in the HoReCa channel. The recent remodelling and certification of the Madeira store established the bases of business for the years to come, which will necessarily have a strong component of service to the hotel and restaurant industry. Together the two Jerónimo Martins chains operating in Madeira saw their sales grow 10.9%, reaching 123.3 million euros.

For 2008, one of Pingo Doce's main challenges in Madeira is to maintain sales growth, even considering the expansion plan announced by its main competitors, and the remodelling of its main store in Madeira.

In 2008, Recheio must reflect the impact of reorganisation of its operations, which are increasingly focused on the HoReCa market, offering services and solutions that are appropriate to this sector.

7.5. Functional Operations Management

In Portugal, the Group's Food Distribution operations, with the objective of maximising scale, synergies and sharing know-how, share a fundamental group of services provided by the Departments of Sourcing, Private Brand, Logistics, Quality Control and Environment, Financial Services, Information Systems, and Market Research.

7.5.1. Sourcing and Private Brand

The objective of this Division is to generate value for the Group and its Operating Divisions through: (i) creation of know-how in the key areas of competitive differentiation - Perishables and Private Brand; (ii) leveraging the Group's negotiating capacity through the establishment of agreements with the main manufacturers; and (iii) developing a programme of business synergies with selected partners.

The Private Brands Programme of Jerónimo Martins in Portugal is a horizontal programme that involves all the Company's departments. It not only seeks to make consumers more loyal, but also seeks operating and logistical efficiencies and efforts that result in productivity. These are common objectives of the entire Group.

The year 2007 was specifically the most relevant period of affirmation of the Group's brands with the market and with consumers. From the data analysed, it can be affirmed that the number of products launched and growth in sales contributed to this Programme assuming the leadership position among all those that exist in the Portuguese market. By defining 'maximum quality at the most competitive price on the market' as a principle, growth of 41.0% was obtained in the retail sector, and growth of 13.3% was attained in the hotel industry, allowing all the Group's brands to attain values never before reached in terms of sales and market share of their brands.

In the Perishables area, 2007 was marked by the growth rates obtained in these categories. The continuous investment in quality together with a strong competitiveness in this area are already fully recognised by the consumers as key success factors.

With more than 500 products launched – an average of 1.5 products per day - Jerónimo Martins also saw its methodology of developing products and brands recognised, as it was the first company in the world to receive ISO 9001 Certification for the Private Brands Development Process. Among other important points, this Certification ensures that all products launched and to be launched by the Group follow strict quality control, as well as evaluation by consumers.

As a result of this new methodology, in the first six months of the year, 83% of the Private Brand products tested by consumers were classified as equal or superior to the industry market leader. Backing these results there is a long-term partnership developed with all the Group's Private Brand suppliers, and with the Daymon Company, a worldwide leader in developing Private Brands.

Innovation is one of the main methods of development of this Programme, and within this scope Jerónimo Martins is the first distribution group in Portugal to launch baby food, with very encouraging results. This concern with innovation has extended to nutrition, with the introduction of a group of products adapted to people who are lactose intolerant and who have cholesterol. These products meet the needs of groups with specific risks.

7.5.2 Logistics

The objective of this division is to support the purchasing, transportation and storage departments of the Group's brands in Portugal, while respecting the individual business formats and their business decisions. As a logistics company, it operates at low cost, according to the standard and level of services required, observing the principles of operational discipline, efficiency and respect for people, and maximising total client satisfaction.

With the objective of upholding the strong growth programme outlined by the Group for Portugal, in 2007 the redimensioning of the physical structure of the logistics area began.

Within this scope, the Group's Logistics in Portugal assumed responsibility for the entire management process of the light and heavy bazaar areas, whose storage and transport had until that time been managed by an outside logistics services supplier. Implementing this decision meant a reduction in costs per unit of nearly 60%, as well as the benefits of greater efficiency and quality of the internal operation, with positive impacts on service levels to the stores and in the relationships with business partners in the supply chain.

There is also highlighted to open in March 2007, a new distribution centre with an area of 10,000 sqm, built in the zone of Azambuja. It will benefit from accessibility, the quality of the fleet and human resources present at the warehouses that already exist at that location.

The ongoing objective of the supply chain – to generate more value at lower cost – became concrete in 2007 through an increase in the amount of cross-docking operations, essentially in the area of the light bazaar. Similarly, execution of a pilot plan in RFID (Radio Frequency Identification) was initiated, with emphasis on receipt of merchandise based on EAN UCC128, ensuring correct application of standards related to food legislation, and particularly to the traceability of products.

Finally, communication and integration with suppliers was improved via the JM Direct platform (a business-to-business project with suppliers), which contains all relevant information to quickly and efficiently satisfy the needs and wishes of clients. Specifically, in 2007 an increase in supplier adhesion to the JM Direct/B2B portal was reported, which led to a 55% reduction in paper invoices.

The efficiency gains equally reflected on the efficiency of processes and cost reduction: 80% in centralisation of invoicing and non-paper invoices, 38% in costs of archiving compared with paper costs, 50% in communication costs via fax and 62% in costs of payment notice letters.

The creation of this increasingly close network of collaboration with suppliers brought benefits to all those who participate in the supply chain. These advantages come not only from simplification of logistical processes, receipt of merchandise and control of returns, but also from reducing turnover in stores, with the consequent impact on sales growth.

The fact that all those who play a role in the process can have real-time access to information, translated into increased reaction and response capacity, thus allowing control over processes and impacts. This is noted in the 90% adhesion rate to JM Direct, in the 72% who currently represent the business volume with non-paper invoices, or in the 60% of suppliers already working with non-paper invoices.

The Logistics Department supports its activities using the following physical platforms:

	Area (sqm)	Description
Azambuja Distribution Centre	48,000	Non-Perishable Products, Heavy and Light Bazaar, fruits and vegetables, meat, dairy products, cold meats and fish
Guardeiras Distribution Centre	12,500	Non-Perishable Products and Just-in Time products (JIT), Light and Heavy Bazaar
Modivas - Vila do Conde Distribution Centre	24,900	Fruit and vegetables, meat, dairy products, cold meats, fish and frozen food, non-perishable products
Modivas - Vila Nova da Rainha Distribution Centre	10,000	JIT Non-Perishable Products, JIT Light and Heavy Bazaar

Determined by the expansion of the Group's retail brands in Portugal, in 2008 Logistics will focus on proceeding with the redesign of the physical structure by opening a frozen foods operating centre in the south, with close to 3,500 sqm, as well as a new warehouse in the north of approximately 12,000 sqm, to support the operation's growth of non-perishable goods.

Reinforcement of the physical structure of the logistics operation will be accompanied by implementation of a programme to optimise and reduce costs. This programme, which was studied and designed in 2007, will be applied to the transport fleet.

7.5.3. Quality and Environmental Control

The objective of this division is to promote Quality and Food Safety of the products sold in the stores of the Companies belonging to the Jerónimo Martins Group, progressively reducing the environmental impacts linked to the products and services made available in order to satisfy clients' needs and expectations.

In 2007, the Quality and Environment Division increased its monitoring of Perishable goods suppliers, particularly in the area of fresh fish and fish products. In this context, and continuing random verification of compliance with good agricultural practices by the producers, the control of forbidden substances in fruit products, which began in 2006, was reinforced, and analogous verification was done on national and imported refrigerated meats.

In further validation of those items that are pre-requisites for food safety, verifications of own production take-away and pastry products were optimised.

These developments were fundamental for improving the food safety systems of the Group's Companies in Portugal.

Likewise, supervision of stores by region was reinforced, thus guaranteeing the expansion of monitoring to the entire supply chain in order to guarantee quality and food safety.

In 2008, Logistics will concentrate on process optimisation and efficiency, diminishing waiting times, supporting the Companies' needs for growth, and supporting the needs of new business areas.

Detailed report on the activity of this division is presented in the Social Responsibility Chapter.

7.5.4. Financial Area

The Financial Division is comprised of the Sales Accounting, General Accounting, Consolidation and Reporting, Controller and Real-Estate Management areas, and it provides services to the retail food area in Portugal. On a daily basis, this Division controls and monitors all transactions and operations related to total margin, store revenues versus sales, gross margin, inventory losses, stocks, services and real-estate transactions. The Financial Department supports Management in establishing and maintaining a suitable structure and the procedures needed for internal control of financial reports.

The Financial Division is responsible for all accounting documentation of the Portuguese Retail Business operating Companies, which are reported on a monthly basis – individual and consolidated - for both shareholders, Jerónimo Martins and Ahold. The financial management information produced by the Financial Division is also critical for the Operating Divisions, as it is the main source of information for decision-making by the respective brands.

7.5.5. Information Systems

The mission of this division is to develop and provide information processing systems to the Operating Divisions, according to their business objectives, and to use the most secure and efficient technology, thereby contributing to operating improvements.

The year 2007 was marked by the conclusion of the project to update the SAP system. This was carried out by a team formed by people from the Operating Companies, the Information Systems Department, and other Functional Departments, with the participation of consultants from technology provider companies at specific times.

Also in this project, new technological infrastructure with greater capacity was installed, prepared to accompany the Group's organic growth, and managing the training of more than 1,800 employees regarding the functionalities of the new version of SAP software.

As planned, installation of the new Store Front solution proceeded in all Pingo Doce and Feira Nova stores, totalling 2,500 points of sale (POS). Beyond providing a better purchasing experience to clients and supporting the EMV (chip card) payment system, due to its intuitive graphic interface, the new Store Front also contributed to increasing the productivity of the cashiers. In Feira Nova of Odivelas, the Self-Service Cashier pilot project – the Self-Express Cashiers – was installed and expansion to the remaining stores will be executed based on how this project is received.

In 2007, migration from the communications network of Jerónimo Martins was done to VPN.IP technology. This operation, which was undertaken in more than 300 locations,

significantly increased the available bandwidth, which will be fundamental for new applications to come on line.

A telephone infrastructure based on VoIP technology was also implemented, encompassing all the Distribution Centres and Central Offices of the Group. These projects were carried out in a scenario of strong expansion and store remodelling, with flexible resource management allowing concluding those projects without causing any delay in the expansion plans of Jerónimo Martins.

For 2008, Information Systems' priorities will be to continue to support the Group's expansion plan and develop the projects that contribute to the increased efficiency of its operations.

7.5.6. Market Research

The purpose of this Division is to be the best partner of Feira Nova, Pingo Doce, Recheio and Lidosol in the supply of market - and consumer - related information, for its subsequent incorporation into the businesses of these Companies.

Considering the dynamic environment that currently characterises the food retail sector, in 2007 the Market Research Department had a fundamental role in supporting decisions in the various Companies of Jerónimo Martins.

Last year, with its ambitious objectives, was marked by the existence of a diversity of projects, encompassing various business areas in each of the mentioned Companies. They are:

• Market Evolution. Beyond monitoring store openings and licensing, the department played an active role in determining the potential of possible locations to implement new stores, and in gauging specific purchasing behaviours of consumers in the locations where those stores are present. Within this scope, the projects developed included retail (food, electronic and technology, textile and pharmacy), and the wholesale channel.
• Private Brands. The department was involved in two projects that are an integral part of the development process of Private Brand Products, and which contribute to identifying opportunities to improve in:
• Consumer tests between new product launches and routine tests performed on the consumer, in 2007 more than 300 tests were done, allowing determination of product performance and their competitiveness against competitors, as well as consumer satisfaction indices in relation to those products;
• Private Labels Brand Equity Index Studies to evaluate all Private Brands of the Companies Pingo Doce, Feira Nova and Recheio.

Information Management. Continuing with the information normalisation project started in 2006, and the consequent greater efficacy in releasing information, some pro-active projects to release information to various levels and areas of the Companies were implemented.

8. FOOD DISTRIBUTION - POLAND

8.1. Biedronka

Message from the General Manager - Pedro Silva

"The year 2007 witnessed intensification of consolidation of the Polish Retail Market, with the most competitive chains ensuring their position through organic growth complemented by acquisitions, trying to ensure long-term survival through critical mass.

Biedronka made important steps in strengthening its leadership position in this competitive market, obtaining the preference of consumers.

Once again we saw Biedronka strategy bearing fruit, strengthening its solid competitive advantages and its strong position in this market, which allowed it to grow its sales even further.

Attending to the projects under way, complemented by the operation to purchase Plus stores in Poland, the Company can face future positively, knowing that it can rely on the collaborative spirit and endeavour shown by both employees and business partners".

Mission

To offer a limited range of carefully selected, very high-quality products, in order to satisfy clients' daily requirements, at an everyday low price. All employees should ensure that the Company works with supreme efficiency and at low cost.

In 2007 the Retail Market in Poland benefited from a favourable economic climate, through positive evolution in private consumption and the unemployment rate.

Simultaneously there was intensified consolidation of the Polish Retail Market, after the movements in the previous year, with some retail brands continuing to be takeover targets by the most competitive chains, thus abandoning the market.

Therefore, Biedronka's strategy, which focused on (i) "Quality at every day low prices", (ii) operating efficiency, and (iii) proximity to the consumer through aggressive organic expansion, proved once again to be the most suitable approach to the reality of the Polish market.

The objectives of creating Company value were reached once again. The reinforcement of Biedronka's strategic positioning led to growth in like-for-like sales of 21.1%, which together with the organic expansion of 140 more stores resulted in a total rise in sales of 35.0% compared to the previous year.

Biedronka's commercial policy contributed decisively to attaining these objectives by ensuring innovation and differentiation of the range of products.

Biedronka Net Sales Breakdown

The focus on quality and innovation of the exclusive brand mix remained a strategic priority that remained consistent with the actions initiated in previous years.

Effectively, the successful launch of new product categories with exclusive formats and reinforcement of in&out food product sales associated with ongoing innovation at the packaging level, deserved the immediate interest of clients of the brand.

At the same time, the trusting relationships that resulted from establishing solid medium and long-term partnerships with suppliers, allowed reinforcement of price competitiveness in the mix, guaranteeing market share growth in most categories in which Biedronka operates.

Local suppliers that complied with the more stringent quality standards continue to be given priority, supplying 95% of the brand's food mix.

Store communications were optimised using folders, merchandising posters and pricelists, complemented by a continually improving layout. Investments and improvements in the product display space for self-service delicatessens, fresh meat, fruits and vegetables, bakery and an innovative area for sales of cosmetic and personal hygiene products, were also important factors in promoting sales.

External communications continued to focus on TV ads, taking advantage of the complete geographical coverage made available by the 1,045 Biedronka stores. The entertaining and innovative nature of the advertisements created an immediate impression, already attained by the brand, and confirmed by two nominations for the prestigious Golden Eagle award (awards the best advertising campaigns).

Regarding expansion of the chain, the creation of a professional team in previous years allowed for the opening of 156 new stores in 2007, while 16 stores were closed or replaced. The total sales area increased 83,777 sqm over the past year. In addition, the opening of the one thousandth Biedronka store in September 2007 was an important milestone in the gradual and sustained development of the chain in Poland.

In relation to the existing stores, 71 were revamped, allowing consumers to enjoy a more pleasant and efficient commercial space that optimises their shopping experience and ensures their choice preference.

To sustain the new chain of stores in 2007, the Grudziadz and Kosztrzyn distribution centres were enlarged by 6,640 sqm and 1,199 sqm, respectively.

Furthermore, in order to standardise and optimise the quality of transport and preservation of food products, as well as the efficiency and capacity of the logistical operations, the Company fleet was strengthened with 165 new modern trailers.

The development of human resources continued to be among the foremost priorities of the Company, in order to sustain the growth of a motivated team with the highest levels of skills and know-how.

In 2008, Biedronka expects to continue to intensify geographic coverage of the country through its stores, trying to get the largest possible number of consumers. In 2008, beyond organic growth, the Company is awaiting approval for the acquisition of the Plus stores, which are expecting to be integrated into the Company during the year.

To support this faster growth pace, beyond reinforcing the logistical operation (already done in 2007), the construction of a new distribution centre in Lubin has already begun. This infrastructure will be completely tailored to the logistics operation, with a coverage area of 24,200 sqm, which will ensure Biedronka's commitment to the highest food safety standards. This centre is expected to enter into operation during the second quarter of 2008.

8.2. Apteka Na Zdrowie

Following the partnership agreement signed in February 2006 with the National Association of Pharmacies in Portugal, in order to study the viability of developing a line of pharmacy retail businesses, four pilot stores were opened in 2007 under the brand "Apteka Na Zdrowie", in addition to the first store opened at the end of 2006.

The positive signs obtained from the pilot tests may lead to increasing the scope of the network of stores in 2008, to confirm the critical factors for the success of the business and to define the exact characteristics for expansion of the model, although they will still not have an impact on the Group's business portfolio.

9. MANUFACTURING

9.1. Unilever Jerónimo Martins

Mensagem do CEO - Luís Mesquita Dias

"The year 2007 was marked by the merger of the Companies FimaVG, Bestfoods, LeverElida and IgloOlá. The result of this process of integration was a single organisation as of January 1st, 2007, - the Company Unilever Jerónimo Martins, 55% owned by Unilever and 45% owned by Jerónimo Martins.

In 2007, the business experienced a series of complex external events in which structural phenomena of transformation of commercial textile and adverse climatic conditions, combined with the reduced price of olive oil affected sales growth in the business area.

Despite this, the vast majority of brands maintained their leadership positions, with some of them even improving their market share.

The Company continued to implement efficiency improvement projects and to reduce costs, which partially offset the reduced billing, and the Group's factories further improved their contribution with growing productivity and larger volumes.

Conditions were created so that throughout 2008, and particularly in the second half of the year, sustained growth will be reinitiated".

Mission

"To provide More Vitality to Life – Every day we satisfy our customers' needs with brands that help them feel good and attractive, and to make the most out of life".

Food Division

The Food Business Unit reported a 3.4% decrease in total sales compared with 2006. These results were affected by weak performance in the Beverage, Savoury categories. The Olive Oil business performed well in terms of sales volume (+24% over the previous year), however this was not matched in value due to the decrease in prices to consumers.

On the flipside, the stronger market position of the Vaqueiro brand after its re-launch must be highlighted. From the financial point of view, the strong increase in raw materials prices, particularly Seed Oils, cannot be completely reflected in the market having a direct impact on commercial margins.

Lipton, the market leader in iced tea, saw its performance affected on one side by the launch of strong Private Brands of retailers, and on the other side by atmospheric conditions that were not conducive to consuming this type of product. The Company's innovative capacity allowed the launch of the "Lipton Linea" in the weight loss segment, with quite positive results, providing encouraging data in relation to the attractiveness of the concept.

In the Hot Tea category, for the first time it attained the leadership position in the green tea segment (with a great deal of help from the abovementioned Lipton Linea).

In the Sauces market, Calvé ended the year with a slight drop in market share, particularly in ketchup and mustard.

In the Savoury category, Knorr's strong market share remained stable because of the strong innovation in this segment (for example, sauce for beef, cod, and economic sauce).

Relative to Olive Oil, the 24% growth in sales volume led to a 2% increase in market share in Portugal, and 4% in Brazil. However, the reduction in selling price as a consequence of the decrease in raw materials prices annulled the registered growth in volume.

The Spreads and Savoury Production Unit in Santa Iria de Azóia, maintained its strategy to obtain productivity gains and improve the level of service provided to the client, reinforcing the production of Savoury throughout Europe in 2007.

In 2008, the Food Unit will continue to fight for leadership in the categories in which it operates through sustained growth. To achieve this, excellence in its operation in the market and the indispensable implementation of price increase will be determining factors to face the increased costs of raw materials.

Personal and Home Care Unit

The year 2007 was marked by several factors that impacted the contribution of the brands in this Business Unit, such as: (i) deterioration of the wholesale channel in which the Company's brands have historically registered market share levels above those of the national average; (ii) price deflation in the Personal Care market, explained by the growing weight relative to Private Brands of retailers in the Shower Gel and Soaps categories, and by growth in the Discounters Channel; and (iii) entry of competitors into new categories.

The Personal Care area created the pillars that will sustain its future growth, highlighting the following:

• Launch of Dove Pro-Age, fundamental to strengthening the capital of the Dove brand;
• Start-up of a public relations programme directed toward health professionals, intended to strengthen the healthy image of the Vasenol brand;
• Relaunch of Linic and the launch of Linic Woman, which will provide impetus to reversing the performance of products in the hair care category, which reported negative growth in 2007, impacting the entire personal care area.

It is noted that despite the entry of new competitors into the Deodorant category, the market share in this category remained protected.

The Home Care Business Unit managed to defend its leadership position, not only through its Skip mega-brand, but also by reinforcing its position in other categories and segments (concentrates, liquids and aerosols).

Reinforcement of the leadership position of the Comfort brand in the clothes-softener category, Skip in the liquid detergent segment, and Cif in the house-cleaning category by the launch of new and innovative products in 2007 must also be noted: "Comfort Essência", "Skip Pequeno e Poderoso" and "CIF Inox".

Finally, the initiatives implemented or under way that seek to substantially improve the exposure and visibility of the Personal Care and Home Care brands at the principal points of sale must also be highlighted.

The year 2008 will be characterised by significant price increases in raw materials. Consequently, the balance of the price and volume variables will be determining factors in ensuring business growth without deterioration in the margins. In regard to the level of support of the brands, this will be greater than it was in 2007, favouring the priority categories.

Out-of-Home Consumption Unit

As a result of the merger of various areas in the Company Unilever Jerónimo Martins, management of Ice Cream business was transferred to the Out-of-Home Consumption Unit, which also includes the businesses of Lipton Ready-to-Drink (within the out-ofhome consumption area) and Food Solutions (the business area especially geared toward restaurant professionals).

In 2007, the Ice Cream business in Portugal was affected by the lack of a warm summer. However, Olá's focus on the market did not waiver, and it launched new products for children and teenagers such as Discbee, Calippo pineapple/orange and Simpsons, as well as new items for adults within the Magnum, Solero and Cornetto brands.

Seeking to reverse the impact that the poor weather conditions had on sales, the Outof-Home Business Unit launched several innovations for winter, including Magnum Temptation and Feast Krisspi Ice Cream goods, new frozen dessert and Magnum chocolates.

In the Ice Cream segment for at-home consumption, the sales performance reflected the impact of reinforcing the Private Brands of retailers in this product segment, while Olá has maintained its leadership position in the in-home Ice Cream consumption market.

Unit sales, driven by growth in exports, recorded an increase of 4.8%. In the national market, while sales fell the Ice Cream business once again attained good profitability levels through efficient management of investment in sales and marketing, and continued optimisation of fixed costs, namely through exploring operating synergies with other Company businesses.

In the Lipton Ready-to-Drink business, in the out-of-home consumption area, 2007 also proved to be particularly difficult, fundamentally due to the already-mentioned weather conditions. Despite this, Lipton Ready-to-Drink strengthened its leadership position by nearly three points in ready-to-drink teas in the out-of-home consumption channel.

In 2007, the Food Solutions business confirmed its consistent performance of previous years, posting growth of 4% over 2006.

The Frozen Foods unit in Santa Iria de Azóia maintained its high levels of operating excellence, exceeding the expected results for 2007 and increasing the number of exported products. Implementation of a culture of continuous operating improvement continues to be this factory's secret competitive advantage within Europe.

For 2008, the Out-of-Home Consumption Business Unit will continue to invest in innovation, product quality and its operating excellence in the market, and customer service at points of sale, seeking to add other Company products to the portfolio and exploring new business opportunities.

10. JERÓNIMO MARTINS DISTRIBUTION

Message from the General Manager - Pedro Veloso

"In 2007, Jerónimo Martins Distribution launched the bases for a new era in the sphere of representation, having undergone a profound commercial restructuring. This measure will provide the Company with the resources necessary not only to obtain more representations, but also to ensure its current partners with greater focus and specialisation in the respective markets.

As a result of the research and selection work done in 2007, the year 2008 is profiled as the year for launching new and significant business partnerships".

Mission

To build leadership positions in the Portuguese market, for the brands represented, sustained by excellent standards of service at very competitive prices. To identify, develop and implement specialised retail and restaurant concepts whose value proposals meet the Group's profit criteria.

The year 2007 was marked by continuing growth of Private Brands and by the significant increase in raw materials costs, which pressured commercial margins and caused a cycle of price increases.

Food Division

Sales remained at the level reported in the prior year, which was a positive result considering the performance of the vast majority of the other operators.

Analysing the food partnerships in detail, positive performance was registered by the Guloso, Heinz, Merci, Lindt, Buitoni, Werthers, Bahlsen and Jerónimo brands.

The priority in 2008 is to once again grow the Kellogg's brand in order to ensure expansion of the food business, and to continue with research to select business partners.

Cosmetics Division

The year 2007 was marked by the end of the business relationship with the Calvin Klein brand due to its acquisition by Coty, and its subsequent transfer to the business structure that Coty has in Portugal.

The ended of this representation in June 2007 had a considerable impact, not only on the cosmetics division – which finds itself forced to find a new business model that will ensure its continuation – but also for the Company, since Calvin Klein was a relevant representation.

In the second half of the year, the Division focused its activity on its current brands - Better Elite and Adolfo Dominguez – and on preparing its future strategy.

10.1. PGJM

In its third year of activity, the partnership with Puig continues to reveal healthy energy among its main brands.

The results of the year were again consolidated by two standout brands – António Banderas and the revitalised Denim.

The greatest challenge for 2008 will be the ability to adapt to the changes that are occurring in large commercial centres.

10.2. Hussel

Hussel chocolate chain has been synonymous of innovation and quality in the confectionary market. The year 2007 was again positive for the Company, which reported business growth in all relevant areas, namely sales volume, number of consumers, and average purchase value.

Within the expansion plan, the Company opened two stores in the shopping centres of Gaia and Chiado, and two existing units in Loures and Odivelas were closed. In line with the market research that was done, the Colombo Shopping Centre store was remodelled. Hussel closed the year with 21 stores, the same number as in the prior year. One more new unit is projected to open in 2008.

10.3. Caterplus

The return to positive results is highlighted, after the year 2006, which was characterised by the Company's commercial and logistical restructuring.

In 2007, Heinz sold the share it had in Caterplus. This sale was the result of the global sale of Heinz's Portuguese operation to the national company, SugalIdal.

10.4. Jerónimo Martins Restaurants and Services

Message from the General Manager – Francisco Soares dos Santos

"In 2007, Jerónimo Martins Restaurant and Services launched the foundations for a new cycle of growth, having implemented an ambitious programme of expansion and innovation of its current restaurant concepts.

2008 will be the year to launch new concepts, and consequently, the entry into new market segments according to the long-term strategic plan approved for this business area."

The new restaurant businesses of Jerónimo Martins Group are located within this Company.

The restaurant area is new for the Group, thus the Company has been focused on the process of learning this new activity, and on fulfilling the outlined launch plan.

In order to accelerate this expansion plan, the Company is attentive to consolidation movements. Thus in 2007 it acquired six stores of the "Storia del Café" chain, whose stores it intends to remodel and operate as Jeronymo.

The year 2007 closed with 60 stores of differing concepts.

Jeronymo

This was one of the most dynamic brands in 2007, both in terms of new store openings as well as in launching new concepts.

Three new units were opened under the original version of café kiosks; with the acquisition of six stores of the "Storia del Café" chain the first cafeteria under the brand Jeronymo outside of the Pingo Doce and Feira Nova retail units was launched.

Olá

Olá is the chain with the greatest number of stores in this segment, and it intends to maintain and consolidate its current leadership position. Ten units were opened in 2007, and one existing store was closed. The brand currently owns 32 stores and five franchises stores, for a total of 37 units.

Ben & Jerry

This concept has been slower to start up than initially expected, and thus while its acceptance by the Portuguese consumer remains uncertain, the pilot programme will be continued, with one store in Lisbon.

Along with the brand holders, alternatives that facilitate better adaptation to the Portuguese reality remain to be analysed.

Subway

This concept has still not attained the level that ensures its acceptance by the Portuguese consumer and that would allow its consequent expansion.

Therefore, the intention is first to expand selectively, sustainably building the awareness levels and experimentation necessary for more generalised expansion of the concept in the future.

11. SIMPLIFICATION OF INTERNAL MANAGEMENT PROCESSES

The project for Simplification of Internal Management Processes, which began in 2003, continues in several areas of the organisation, redesigning existing processes with the objective of increasing efficiency and competitiveness of the Group's businesses.

11.1. Distribution in Portugal

The year 2007 was marked by implementation of the updated SAP system by a multidisciplinary team, which had been prepared in 2006 through the simplification of various processes.

During the year, analysis of objectives, costs and results expected from the Simplification of Internal Management Processes was concluded. Based on this analysis, five priority projects were identified: (i) reduce paperwork; (ii) better process automation; (iii) implementation of self-service operations in the areas of re-supply; (iv) management of human resources; and (v) acquisition of services.

11.2. Distribution in Poland

The Biedronka's supply chain faced several challenges of logistical efficiency, to which it responded through projects such as fully synchronising loading and unloading at its Distribution Centre (which allowed better use of warehouse space) reduced lead time – the time between order and delivery by suppliers – from 48 hours to 24 hours, and optimisation of unloading time by these same suppliers, which was accompanied by an improvement in their service levels, quantified at more than 3% over the prior year.

Simultaneously, new logistical system developments and optimisation of planning and picking processes allowed a substantial improvement in the punctuality of store deliveries. This resulted in reduction of inventory coverage at the Company by more than one day.

However, operating efficiency and excellence was not exclusive to the Logistics area.

Considerable improvements were made in front office and back office systems of the stores through a complete re-engineering of the stores' administrative and operating processes, allowing increased productivity and optimisation of operating efficiency.

In the administrative areas, priority was given to the development of electronic workflows to support administrative processes, as well as automation of reporting systems, guaranteeing enhanced productivity and operational control.

Hard copy document flow was minimised with the implementation of electronic invoicing with business partners. Although electronic transfer of invoices has been a reality at Biedronka since 2003, new regulations approved in 2006 allow definitive elimination of physical invoices, thus business partners incorporated this process during 2007.

11.3. Manufacturing

The result of the process of merger of several business areas into one single Company, in 2007 developed into a series of projects with two major objectives: the creation of synergies and increased efficiency at the cost level, as well as process optimisation and the introduction of new management tools. Two examples are highlighted:

Merger Projects

This merger required preparation of the SAP system within a very short period of time, and all the operations of Unilever Jerónimo Martins were successfully initiated in January 2007. Central to finalisation of this project were the enormous effort, dedication and spirit of collaboration of all members of the Financial, Supply Chain and Information Systems teams of the Companies.

Unification of In-Home and Out-of-Home Consumption Sales Forces In 2007, with the creation of the company Unilever Jerónimo Martins, a new organisational model was initiated at the level of the Company's sales force.

The total In-Home Consumption business was incorporated into two Business Units: (i) Food; and (ii) Personal and Home Care, as well as a Commercial Department. The year was thus characterised by a re-engineering of processes, aligning concepts and redefining information systems.

In 2007, management of the frozen foods business was transferred to the Out-of-Home Consumption Unit, and the Lipton Ready-to-Drink (also out-of-home consumption area) and Food Solutions (the area focused on HoReCa) were also transferred. Thus, the Company Unilever Jerónimo Martins promoted the creation of a management and sales team specialised in this segment, taking advantage of operating synergies and the complementary nature of the portfolio of food products, which allowed it to strengthen its market position.

12. GROUP INVESTMENT PROGRAMME

12.1. Investments

Determined to maintain its leadership position in the business areas and markets where it operates, the Jerónimo Martins Group views investments and excellence in store operations as pillars of its growth strategies, which simultaneously allow maximisation of the return on shareholders' investment.

In 2007, Jerónimo Martins inaugurated a total of 243 new stores, and in September it also commemorated the opening of the one thousandth Biedronka store, a milestone in the Group's business in Poland.

The Biedronka brand ended the year with 1,045 stores, having opened 156 new points of sale in Poland. In Portugal, the rate of openings in food retail was also significant: 25 Pingo Doce stores and 8 Feira Nova stores.

The investment in developing new business areas further translated into the opening of 54 new establishments in areas such as restaurants, pharmacies and petrol stations.

	New Stores				Refurbished 1			Closed Stores
	2007	2006	2005	2007	2006	2005	2007	2006	2005
Pingo Doce 2	25	11	5	30	26	14	4	1	3
Feira Nova	8	9	2	0	2	6	0	0	1
Recheio 3	0	1	0	3	1	5	0	0	0
Biedronka	156	116	84	71	57	64	16	16	4
Other Businesses	54	33	20	3	2	10	7	1	0

1 Excluding Recheio, only includes the refurbishing that implied the closing of the food sales area.

2 Including Pingo Doce stores in Madeira

3 Including Recheio store in Madeira

It is Jerónimo Martins' intent to proceed with its demanding expansion plan. In addition to the December 2007 acquisition of the operations of Plus in Portugal (75 stores) and Poland (210 stores), an operation for which the Company is awaiting

approval by the appropriate authorities, the Group has a series of approved licenses to open stores in Portugal, which will allow it to strengthen its market position.

Business Area	Expansion 1	2007 Others 2	Total	Expansion 1	2006 Others 2	Total
Retail Mainland Pingo Doce Feira Nova Logistics and Head Office	173.0 102.2 69.9 1.0	66.4 57.3 6.2 2.8	239.4 159.5 76.1 3.8	135.7 69.2 66.5 0.0	51.9 36.4 8.2 7.4	187.6 105.6 74.6 7.4
Cash & Carry	0.0	12.8	12.8	6.1	12.3	18.4
Madeira	2.7	6.0	8.7	0.0	1.9	1.9 z
Food Distribution Portugal	175.7	85.1	260.8	141.9	66.1	208.0
Poland p.m PLN '000 Biedronka Logistics and Head Office Total Food Distribution	143.7 541.8 140.4 3.3 319.4	56.4 212.5 40.4 16.0 141.5	200.1 754.3 180.8 19.3 460.9	102.6 399.6 87.7 14.9 244.5	29.9 116.3 22.7 7.1 96.0	132.5 515.9 110.4 22.1 340.5
Manufacturing & Services	4.2	3.4	7.6	2.3 2	3.3	5.6
Total JM	323.6	144.9	468.5	246.7	99.3	346.1
% do EBITDA	88.9%	39.8%	128.7%	77.4%	31.2%	108.6%

In parallel, aware of the importance of ensuring the best conditions for clients who choose the Group's brands, in recent years Jerónimo Martins has upped investment in maintaining and remodelling its network of stores.

This is essential to providing clients with quality purchasing environments, and these investments have a fundamental role in like-for-like sales growth, while in the year in which they occur they have a significant impact on sales, since the stores being remodelled must be closed for a period of 30 to 45 days. In 2007, 145 million euros (close to 40% of the operating results - EBITDA) was invested in remodelling.

In 2007, the simultaneous focus on growth and improving the quality of the stores represented investments of 468.5 million euros.

12.2. Disposals

As in previous years, the contribution of each store was tracked, and the decision was made to close a store whenever it was impossible to reverse the trend of loss in value or when the store did not fit into the respective brand positioning, or when it was decided to replace the existing store. Thus, 16 Biedronka stores, 4 Pingo Doce stores and 7 stores focused on the restaurant industry were closed.

The reasoning behind the capital invested in the business also merit special attention by the Group's Management. Thus, partnership agreements were already signed to develop commercial spaces attached to the stores, and others are still to be analysed. Similarly, there is work to be done to determine the best solutions to make the Group's real estate profitable.

13. OUTLOOK FOR 2008

13.1. International Outlook

Macroeconomic Environment

According to projections from the International Monetary Fund (IMF) presented in January, worldwide economic growth in 2008 should remain high, at around 4.0%. Experts continue to expect a scenario of strong dynamic in emerging economies, but they also expect a global softening for the second consecutive year.

In January 2008, IMF issued revised statistics taking into account new calculations for purchasing power parity between 2002 and 2007. In this revised framework, projections for 2008 reflect a higher economic slowdown in most economies.

Economic growth in the United States should reach 1.5%, reflecting a very conservative view due to more restrictive credit conditions, to the readjustment under way in the housing sector, and to evolution in the price of oil.

Economic growth in Euro Zone should reach 1.6%, reflecting an expectation of slowdown of about one percentage point. Private consumption continues to be the growth driver due to a strong labour market and the fact that more restrictive fiscal policies are already being diluted. However, the softening reflected in the projections is explained by several factors, namely, (i) the North American economic environment, (ii) the euro's continuing strong against the dollar, and (iii) widening credit spreads due to risk expectations. Investment is expected to soften again, but it continues to be well sustained by the solid balance sheets of European companies. Strengthening of the euro may lead to a loss of competitiveness in Europe and to a decrease in exports.

For 2008, specialists projected scenarios of:

• Contained inflation both in Europe and the United States as a result of the expected economic softening, in spite of strong inflationary pressures in the price of oil and in the price of non-energy raw materials, particularly in agricultural goods, which are part of production of essential food items;
• Maintained reference interest rates by the American Federal Reserve (FED) and the European Central Bank (ECB);
• Continued devaluation of the dollar, with the euro knocking up against the 1.50 barrier right at the beginning of the year. This may revert in the second half of the year.

Many investment firms assume that 2008 will be a year of gains sustained in economic growth and in strong performance in the companies that continue to show evidence of financial solidity, and to gain scale in processes of internationalisation. Merger and Acquisition operations will also remain an important axis of economic growth, and they may be an important factor for appreciation of securities in the capital markets.

Factors of Macroeconomic Uncertainty and Volatility

The current level of uncertainty regarding the worldwide economy, and more specifically the North American economy in 2008 is high, not only because of pressure regarding a possible worsening in the crisis in the financial markets, which impacts individuals and companies' access to credit, but also due to pressure from the increasing price of oil.

In fact, the price of crude reached new historic highs at the start of 2008, passing the US\$ 100 per barrel mark in the reference market in New York. The hotspots of Nigeria, Kenya and Pakistan, in conjunction with a decline in North America's reserve stocks to the lowest level in the last three years, were the cause of the price rise, and experts believe that oil may reach US\$ 110 dollars during the first quarter of 2008, and US\$ 120 dollars later in the year since global demand continues to grow and geopolitical tensions are a constant factor of instability.

Non-energy raw materials may feel greater-than-expected inflationary effects, not only because of global demand, which continues to rise, but also due to climatic conditions, which may be adverse. There is also a growing demand for raw materials, such as grains, to produce alternative energy sources, which may be accelerated by new increases in oil prices.

Consequently, the scenario of the reference interest rate remaining stable carries a high degree of uncertainty with it. The American Federal Reserve may continue to reduce interest rates to "heat up" the economy, although specialists' expectations were already surpassed with the interest rate of reference reaching 3% already in January 2008. In Europe, the ECB may want to raise interest rates if inflation does not remain contained. But as happened in 2007, the ECB may have to face the dilemmas of its monetary policies in order to prevent a greater-than-expected scenario of economic softening.

Evolution of currencies, namely the dollar and the euro, is also uncertain and will be correlated with the effects of the monetary policies that are implemented by the Central Banks. However, it is certain that the appreciation of the euro beyond what is expected will have adverse effects on the scenario projected for the European economy.

Levels of uncertainty and volatility are also high in the stock markets. Expectations surrounding company results and investor confidence may be affected by evolution in the worldwide economy, but despite everything, it is recognised that companies are better prepared to face adversities due to the restructuring processes they have undertaken in recent years. However, the recommendation of the majority of investment firms for 2008 is prudent short-term exposure, and attentiveness to the macroeconomic environment in order to anticipate signs of: (i) more accentuated economic softening; (ii) greater difficulty in accessing credit; (iii) readjustment of the housing market in some European economies; and (iv) restatement of profit estimates by companies that did not correctly anticipate the macroeconomic scenario.

Food Distribution Sector

In 2008, the Food Distribution sector is expected to continue to be very dynamic and diverse, but macroeconomic uncertainty and volatility should not be ignored at the various levels of operators' activities.

Consolidations will continue to occur in the more mature markets where there is little space for profitable organic growth. Developing markets will also continue to offer consolidation opportunities. On one side, it is expected that the traditional retail market will continue to provide space for the growth of modern distribution, and, on the other side, international operators that are not attaining the expected return on their investments will continue to choose to leave the market to rationalise their portfolio of assets or to invest in other locations.

International expansion continues to be a central theme in the sector. The trends in emerging markets continue but countries where there is greater growth potential are also associated with relevant structural risks. The pressure for company profits, together with an optimistic but uncertain global macroeconomic situation, leads operators to continue to set more cautious internationalisation plans than those implemented over the last decade.

Both Merger & Acquisition operations, as well as international expansion, require a funding capacity that must be leveraged with credit. In this particular, operators are going to be pressured by greater demands and selectivity from the financial markets, not only in terms of cost of capital, but also related to guarantees associated with the solidity of balance sheets and company's capacity to anticipate macroeconomic and market scenarios.

The higher level of competition, both in mature and developing markets, is going to continue to pressure prices, and in turn, returns on investment, forcing operators to be extremely careful with their offer and to continuously capture efficiencies at all stages of the value chain. Optimisation of structures and processes, outsourcing of secondary activities and productivity gains that new technologies can provide will continue to be a priority. In certain countries, above all where the real estate market is more highly valued, retail operators are starting to carefully analyse how to manage real estate assets.

Demographic and consumption trends are global and will remain so, but the markets will continue to offer different degrees of development linked to respective purchasing power indices. Price sensitivity in the food sector will continue to be a global reality. Families' indebtedness, associated with more restrictive monetary policies issued by the Central Banks, directly affects consumers' purchasing power.

In turn, consumption patterns in more mature markets continue to suggest increased spending on well-being, the latest technology, healthcare, travel, restaurants, and leisure and entertainment, to the detriment of in-home consumption. In emerging and developing markets, purchasing power is very low in general, but there is a tendency toward consumption habits that are similar to those in developed countries, which puts food expenses under great pressure as well.

Technological evolution and access to information will continue to be crucial to consumption patterns in general, and in eating habits in particular, and may quickly bring about major changes. Concern about food in terms of quality and safety, health, well-being and diversity, in combination with the growing importance of the "convenience" factor and immediate consumption (above all in large urban areas), ageing and racial and cultural diversity of populations, are factors that will continue to guide the evolution of food manufacturing in general.

The solidity of operators' market positions is increasingly determined by scale, price competitiveness and the capacity to continually adapt to the specific evolution of each market. Operators must know how to anticipate the aspects that are truly valued by the consumer, and offer differentiated solutions at competitive prices.

Several international hypermarket operators have been testing new proximity concepts in order to capture the growth potential of this segment and to minimise the pressure that the hypermarket format is facing in more mature markets. Discount operators continue to expand their assortment of Perishables, brands and private label ranges with superior quality but always within the parameters of operational efficiency under which they usually operate. In turn, supermarket operators seek the best combination of price/proximity/variety, while at the same time they are approaching the operating efficiency of discount stores. Finally, convenience and specialised retail stores should continue to show signs of growth.

Investment in categories and services, which until recently were not available in food retail stores, and the development of alternative distribution channels, such as the Internet or catalogue sales, are activities that have been intensified by many international operators, independent of the format in which they operate.

Likewise, retail operators are intensifying their investment in the development and communication of corporate sustainability programmes related with current environmental and social issues.

Environmental initiatives are mainly focused on reducing consumption: energy, transportation, and packaging material and other consumables throughout the value chain, resulting in cost reduction, protection of environmental resources and promotion of better quality of life in the environment. Simultaneously, operators are monitoring technological evolution and introducing new practices, and environmentally friendly products and equipment. But most of those new technologies are still very expensive when compared with standard technologies.

On the other side, social initiatives that intend to contribute to the development of society in general and local communities in particular, are wide-ranging and can cover topics such as the promotion of more food quality and safety, more balanced and healthy eating, fair trade, local sourcing, employment opportunities for minorities and support for the least fortunate, among other.

13.2. Outlook for the Portuguese Market

Macroeconomic Environment

Economic growth in Portugal should remain stable in 2008. Exports will continue to be the main driver of growth for the Portuguese economy but projections show a slowdown to 5%. On the other side, continuing high levels of family debt, in combination with an unemployment rate above 7.5%, limit growth expectations surrounding private consumption. Experts further anticipate that inflation will remain at 2007 levels, around 2.4%, and that investment will continue to grow at a rate of 3.3%, mainly backed by the recovery of public investment.

In all, the exposure of the Portuguese economy to the international environment, described as uncertain and volatile, is high. Growth in exports in the next year may be affected by the fact that 80% are destined for Europe. This region is also very exposed to the international environment, and particularly to the United States economy.

On the other side, the country continues to be pressured by the need to control public expenditures and to proceed with complex structural reforms, which increases the risk in a macroeconomic scenario that is already uncertain.

Despite the difficult economic climate that is anticipated for Portugal, analysts have said that the Portuguese stock market may appreciate between 10% and 15% in 2008.

Food Retail Market

In 2008, the Portuguese food retail market should continue to register very modest growth, if inflationary effects are discounted.

But organised food retail should continue to experience sustained growth, not only by capturing sales from other segments, namely grocery stores, municipal markets and specialised independent stores, but also by expanding the assortment to new categories and services that are already sold by these types of operators in more mature markets.

It is expected that the conclusion of major acquisitions, started in 2007 by the two largest national retail operators, Jerónimo Martins and Sonae, will consolidate their respective market positions, with both strengthening their scale and client base. Some analysts believe there is still room for further consolidation in the Portuguese market.

The level of competition in the food retail sector is expected to remain high, and may even increase due to new openings that are expected and possible additional pressure from discount stores in an attempt to strengthen their market share.

Licensing should continue to soften, with the larger-scale formats hesitating to invest in a market that already shows significant signs of saturation.

But the pace of store openings should remain in line with that of previous years, given the high number of licenses still available. The licensing system, which is currently being revised, may introduce new specificities and more clarity in processes, but it is not expected to substantially alter market perspectives.

Operators that are positioning themselves for the long term should continue to invest in strengthening their store brands in a market that has shown to have little differentiation so far. New store concepts may also arise, launched by operators present in the market.

Wholesale Market

Independent Retail

In 2008, total turnover of independent retailers that are supplied by wholesalers is expected to continue to decrease. It is also expected a decrease in the total number of independent retailers.

The increasing level of consolidation of organised food retail through acquisitions, on one side, and the pace of store openings in the area of influence of independent retailers, on the other, in conjunction with higher competitive pressure, both on prices and margins, are the factors responsible for intensifying this market trend.

Food Service

The total food service market is worth nearly five billion euros in sales but the number of players is significantly wide, with the five leading companies representing only 6% of the market. The traditional restaurant is the most important segment, representing 70% of total food service market.

The overall pace of growth in the market (chains, collective restaurants and traditional restaurants) should intensify in the coming years, reaching 4% in 2008. The proportion of meals eaten outside the household, should increase in the coming years, converging to the average in the European Union.

In turn, meals made at home will increasingly be comprised of food solutions created by companies and delivered at home, or purchased at free-service counters.

The concern with healthy and balanced nutrition will be a determining factor in the development of out-of-home food service business.

The macroeconomic environment, whether it is more favourable or more adverse, will always be one determining factor in the evolution of this market. But given the growth perspectives of food service, more organised operators are expected to grow organically and new competitors will enter the market and will accelerate the level of competition.

On the other side, operators that supply the food service market will face higher pressure on prices and on their value proposition to gain market share. Included in this group are the wholesalers who will continue to be pressured by the decline of independent retail. Simultaneously, the growth of food service (HoReCa channel) offers perspectives of moderate growth, for the wholesalers that are best positioned to serve this type of client.

In 2008, there may be some acquisitions by wholesalers that intend to consolidate their market position and their long-term profitability. It is also expected the opening of two or three new stores by the largest market operators.

13.3. Outlook for the Polish Market

Macroeconomic Environment

Experts expect that in 2008, Poland will continue to experience strong economic growth, above 5%, although it will reflect some signs of softening in comparison with the previous year. Internal demand will continue to be the main growth driver, encouraged by lower fiscal pressure and lower social contributions.

In the labour market, the unemployment rate is projected to continue falling, although at a slower pace. Salaries should continue to rise significantly, with increases higher than 10% estimated for this year.

There is, also, a clear tendency toward inflationary pressure, especially in the food sector, driven not only by increased purchasing power and more dynamic consumption, but also by the increased cost of the production factors such as salaries and energy. The inflation rate projected for 2008 is set above 3%.

In December 2007, the Monetary Policies Council kept interest rates stable, but they are expected to rise to 5.5% in April 2008, and to 6%, or even 6.25%, by the end of the year, depending on the zloty evolution.

The Polish currency should continue to appreciate, sustained by remittances sent by immigrants, by direct investment into Poland, and by the increase of labour productivity. The new political environment as a result of the elections and a lower risk premium, are factors that will also sustain the zloty's appreciation.

Analysts believe that the lack of deep structural reforms in public finances will prevent Poland from entering the Euro Zone before 2016, although the Convergence Pact assumes 2012 as the target date.

Retail Food Market

The projected scenario for the Polish food retail is a continuation of previous years.

The increasing purchasing power will allow the consumer profile to continue evolving very rapidly, as the consumer seeks and demands more quality and innovation. However, the consumer will continue to be particularly sensitive to price, following a strict value-for-money philosophy. It is, also, expected that manufacturers, whether Polish or foreign, will continue to very quickly attain the food quality and safety standards and the range of products available in Western Europe.

Although the economic growth perspectives provide a good outlook for the food retail sector, the market will continue to stay very aggressive in terms of competition, being Poland one of the countries with the highest presence of international operators.

Organic expansion will continue strong in all formats, given that market consolidation is still low when compared to Western Europe averages. In addition to the large cities, which continue to provide expansion opportunities, the smaller cities will continue to attract sector investment.

As happened in 2007, Merger & Acquisition activity should continue and the possible entrance of new international operators to replace current players is not excluded. Aldi's entrance into the Polish market, planned for spring 2008, is still to be confirmed.

In turn, independent traditional retailers are striving to modernise by specialising and forming integrated business chains, in line with what happened in more developed markets.

The recent licensing law introduced additional difficulties to the pace of expansion of chains that operate with store sales area larger than 400 square meters, and it is expected that some corrective measures will be taken in this regard.

Finally, appreciation in real estate should continue to be a relevant factor for the retail sector, both with regard to leasing and acquisition.

Sources:

IMF World Economic Outlook, October 2007, January 2008; Economic Outlook no. 80 OCDE, November 2007; Autumn Forecasts of the European Commission; Reuters; Economist Intelligence Unit; UBS, HSBC, Credit Suisse, BPI Economic and Financial Studies, December 2007; Bank of Portugal Economic Bulletins, Autumn and Winter 2007; Portuguese Ministry of Finance; Portuguese Catholic University Thematic Reports – NECEP/CEA FCEE; National Statistics Institute; General Division of Economic Activity; Bank of Poland Economic Bulletins; Polish Ministry of Finance; Central Statistical Office (GUS); Citigroup; Citibank Handlowy; BRE Bank; Planet Retail; Deloitte; TNS; Nielsen; Girasic; Datamonitor; Accenture; Ernst & Young; AT Kearney, Business Monitor International Ltd; APED; Uniarme; AREST; CIES; AMS, WBCSD.

13.4. Outlook for the Group's Business

Considering the current macroeconomic and sector environment, Jerónimo Martins will continue the strategy that it has been implementing, which has produced consistent results and received market recognition.

Competitiveness and growth continue to be major areas of focus for the Group, although they are subject to profitability goals and financial solidity goals that have been outlined.

In conducting business, it is fundamental to continue to properly anticipate an environment that is uncertain, volatile and generates contingencies. Jerónimo Martins therefore continues to focus on exploring opportunities that fit into its strategic vision and to proactively prepare itself to manage the risks and contingencies of each business in its portfolio.

The first strategic priority continues to be the sustainability and value creation of the current portfolio. Investment will be prioritised toward maintaining the competitiveness of the Group's Companies, and toward consolidation of their current market shares.

The various distribution formats will continue to be focused on sales growth and capital efficiency, investing in continued development of its value propositions to better satisfy the consumers' demands and concerns, and, simultaneously, to compete in increasingly saturated markets with extremely narrow commercial margins.

The Retail Food Market in Portugal

In 2008, Jerónimo Martins will continue to invest heavily in consolidating its leadership position in the food retail sector. With the agreement to acquire 75 Tengelmann Plus stores announced to the market at the end of 2007, which is expected to become final during the first half of the year, the Group expects to increase its food retail sales area around 15%.

Throughout the year, Jerónimo Martins will pay particular attention to the process of integrating these stores under the Pingo Doce brand in order to attain the desired ratios and ensure stability of the entire operational structure as quickly as possible. In turn, the expansion plan and remodelling of stores under the Pingo Doce brand, assumed until finalisation of the acquisition operation, will be reviewed in order to ensure financial and operational focus, and to avoid possible situations of overlap in areas of influence.

Also during 2008, Jerónimo Martins expects to analyse the scenario of integrating Feira Nova Megas under the Pingo Doce brand, depending on the result of the tests that will be conducted during the year. With this decision, the Group can reinforce its network of Pingo Doce stores, becoming the national banner with the largest sales area, while specialises Pingo Doce and Feira Nova in supermarkets up to 2,000 square meters and hypermarkets, respectively.

The Group will also continue to protect the profitability of its assets through the optimisation of operational processes and cost structures, and the two main projects of 2008, mentioned above will also be included under this objective.

Market research continues to show that the Group has been improving the image of its banners in consumers' mind, due to marketing strategies that have been implemented.

At this stage, Pingo Doce has an image of quality and competitiveness, which allows it to continue to set very ambitious sales growth targets for its current park of stores. These targets will be reached by investing in consolidation of its Private Brands and Perishables as elements of differentiation and drivers of growth. The Company further envisions new growth opportunities, which it intends to study in great detail. Categories of product such as health and well-being, natural flowers, kitchen and athome, take-away and restaurant, whenever the sales area of the store allows, are examples of new growth opportunities under evaluation.

Feira Nova continues to face a major challenge, as the hypermarket format continues to be subject to growing pressure by proximity food retail stores and discount stores, both in Portugal and in other more mature markets. Market research shows significant evolution in the image of the Feira Nova banner, to which factors such as quality of Perishables, the Private Brand and the assortment dynamics in general contribute equally.

Wholesale Business in Portugal

In 2008, Recheio intends to continue to strengthen its leadership position in the wholesale market by investing solidly and consistently in the HoReCa channel. It is certain that the weight of this segment in total sales is already higher than traditional retail sales, and the outlook is to continue growing sustainably.

To attain this, the Company will continue to reinforce its positioning as food expert by developing the value proposition and by communicating it to target clients, as well as, by investing in the modernisation of its stores, which it will outfit with the best equipment for food safety and management processes that will allow to obtain incremental gains in efficiency.

Continued training, motivation and development of operational teams are essential conditions in Recheio's growth plan so that it can provide high levels of service and satisfaction, which are two essential factors in attaining customers' loyalty.

Due to the outlook for the organised food retail sector, and namely for the traditional retail, the Company believes that, in 2008, the wholesale market will continue to offer strong consolidation opportunities, and Recheio intends to be aware of all the opportunities that can allow it to reinforce its market share.

The Retail Food Business in Poland

Jerónimo Martins will continue to invest heavily in strengthening and consolidating its leadership position in the food retail market in Poland, as it has done until now and an example is the mentioned agreement to acquire the 210 Tengelmann Plus stores announced to the market at the end of 2007, which allows the Company to increase its total retail sales area by more than 20%. Even tough a relatively linear integration process is predicted, because the formats are very similar and the six large logistical regions dilute the operating impact, it will be implemented a more conservative expansion plan during the integration process. But the previous aggressiveness in organic expansion will be retaken as soon as is reasonable.

The Biedronka banner has proven to be robust, and the Company intends to continue to invest in strengthening its image with Polish consumers by continually renewing its value proposition in terms of price, quality, proximity and innovation, so that it can accompany the strong development of the Polish economy. Biedronka is determined to maintain double-digit sales growth in its current park of stores, even knowing that it will continue to be faced with a highly competitive scenario.

Optimisation of operational efficiency, both internally and in partnership with suppliers, will continue to be an essential element in the Company's market competitiveness.

It is also expected that the early results of pilot-tests in pharmacy business throughout 2007, may lead to an increase in the store network during 2008 to confirm the critical success factors of the business and to clarify the business model. However, in 2008, this area of business will not have any significant weight in the Group's business portfolio.

The Manufacturing and Services Business in Portugal

In the Manufacturing area, investment in the market leader brands, both in price and innovation, continues to be a major priority for the business. The restructuring process that led to the creation of a single Company and to portfolio rationalisation, eliminating the brands with little potential, should allow the Company to continue protecting the profitability of its assets and the market shares of the brands that comprise the current portfolio.

Jerónimo Martins Distribuição and Jerónimo Martins Restauração e Serviços will continue to seek sustainability of its portfolio of represented brands, while it simultaneously studies opportunities in the food service business, reinforcing its growth plan in this area.

Development of New Businesses

The second major strategic priority for Jerónimo Martins is the development of new areas of business that will enable the Group to increase the average profitability of its assets and attain higher growth levels, while respecting its parameters of financial health and risk profile.

As stated in its mission statement, the Group will continue to invest exclusively in the food business, knowing that it provides stable and moderate growth as a whole, but, also, distinct and significant business opportunities outlined by the macroeconomic environment and market dynamics.

Attention to possible new investments will be mainly channelled toward geographic diversification in the distribution area, namely in Central and Eastern Europe, where the Group has over ten years of successful international experience. However, growth opportunities in other areas of the food business will not be neglected.

Geographic diversification continues to demand very careful evaluation of market risks and the organizational needs to face a new growth phase. These must be properly planned, and the Group will continue to carefully analyse them in 2008.

Also, the recent acquisition of the Plus chain in Portugal and Poland requires a financial and operational focus to ensure a successful integration process. In 2008, project calendars for geographical expansion in Eastern Europe must be analysed of light of this fact.

Once again, Jerónimo Martins anticipates another extremely challenging year, but it continues to set ambitious but achievable goals that reflect the clear commitment of the entire Organisation to attain healthy growth and create value in the short-, medium- and long-term. Investment in training and in developing internal competencies will also continue to be a major priority of the Group, both at the operational and management levels.

14. EVENTS AFTER THE BALANCE SHEET DATE

On January 2nd, 2008, as per the press release on September 14th, 2007, issued by Unilever PLC, Jerónimo Martins and Unilever reached an agreement regarding the sale by Unilever Jerónimo Martins, Lda., of part of its ready-to-drink tea business under the Lipton brand, to Pepsi Lipton International (PLI), which is a company representing a partnership between Unilever PLC and PepsiCo. On the same date, Unilever Jerónimo Martins, Lda. signed a contract with PLI to distribute PLI's products in Portugal, agreeing to receive 38 million euros as payment for an estimated reduction in its future cash flows. This payment should have an impact of around 12 million euros on Jerónimo Martins' net result for 2008.

On January 9th, 2008, Recheio Cash & Carry, SA and its subsidiary Imocash – Imobiliário de Distribuição, SA signed a promissory agreement of acquisition of a going concern and of purchase of an immovable asset with Luta – Comércio e Distribuição de Produtos de Consumo, CRL, with the intent of acquiring a wholesale commercial establishment and the property where it is located, which is owned by Luta in the municipality of Cascais. The operation, which involves a global amount (including the property value) of 15 million euros, will be subject to the non-opposition of the Portuguese Anti-Trust Authority, among other conditions.

15. RESULTS APPROPRIATION PROPOSAL

In the financial year 2007, Jerónimo Martins, SGPS, S.A. declared consolidated profits of EUR 131,261,083 and a profit in individual accounts of EUR 81,613,839.47.

The Board of Directors proposes that the net profits be applied in the following manner:

• Legal Reserve ………………………. EUR 4,080,691.97
• Dividends …………………………….. EUR 60,329,685.12
• Retained Earnings ……………….. EUR 17,203,462.38

In accordance with the policy of dividend distribution announced several years ago, and described in the Corporate Governance Report, the dividend proposed represents a distribution of 46% of consolidated net profit.

This proposal represents a gross dividend payment of EUR 0.096 per share, excluding own shares in the portfolio.

16. CONSOLIDATED MANAGEMENT REPORT ANNEX

INFORMATION CONCERNING STAKES HELD IN THE COMPANY BY MEMBERS OF THE BOARD OF DIRECTORS AND STATUTORY AUDITOR AS AT DECEMBER 31st , 2007

(As provided in article 447 of the Portuguese Commercial Companies Code and under the terms of sub-paragraph b), paragraph 1 of article 7 of the Portuguese Securities Market Commission - CMVM - Regulation nº 24/2000)

Members of the Board of Directors		Held on 31.12.06 1				Increases during the year Decreases during the year		Held on 31.12.07
	Shares	Bonds	Shares	Bonds	Shares	Bonds	Shares	Bonds
Elísio Alexandre Soares dos Santos	100.355	-	-	-	-	-	100.355	-
José Manuel da Silveira e Castro Soares dos Santos	-	-	-	-	-	-	-	-
Luís Maria Viana Palha da Silva	-	-	-	-	-	-	-	-
Pedro Manuel de Castro Soares dos Santos 2	118.305	-	80.000	-	-	-	198.305	-
António Mendo Castel-Branco Borges 3	-	-	-	-	-	-	-	-
Artur Eduardo Brochado dos Santos Silva	7.680	-	-	-	-	-	7.680	-
Hans Eggerstedt 3	19.700	-	-	-	-	-	19.700	-
Nicolaas Pronk 4	n.a.	n.a.	-	-	-	-	-	-
Rui Manuel de Medeiros d`Espiney Patrício 3	-	-	-	-	-	-	-	-

BOARD OF DIRECTORS

1 the number of shares held on 31.12.06 was adjusted in accordance with the stock-split on 31st May 2007, when each share was converted into five new shares.

² the 80,000 shares were bought on 18/09/2007, at a price of 4.00 euros each.

3 they also belong to the Audit Committee.

4 was only appointed to the Board on 30th March, 2007

STATUTORY AUDITOR

As at December 31st, 2007, the Statutory Auditor PricewaterhouseCoopers & Associados, SROC, Lda., did not hold any shares and bonds of Jerónimo Martins, SGPS, S.A. and had not made any transactions with Jerónimo Martins, SGPS, S.A. securities.

LIST OF SHAREHOLDERS WITH QUALIFYING STAKES AS AT DECEMBER 31st, 2007

(Under the terms of articles 447 and 448 of the Portuguese Commercial Companies Code and for the purposes of section e), paragraph 1 of article 6 of the Portuguese Securities Market Commission – CMVM - Regulation nº 11/2000 and in the terms of the Portuguese Securities Code)

Shareholder	Nº of shares held	% Capital	% of Voting Rights1
Sociedade Francisco Manuel dos Santos, SGPS, S.A.
Directly	351,769,925	55.899%	55.976%
Asteck, S.A. 2
Directly	62,929,500	10.000%	10.014%
Ameriprise Financial Inc 3
Through Threadneedle Asset Management Limited	14,747,447	2.343%	2.347%
Through Threadneedle International Limited	3,940,910	0.626%	0.627%
Through RiverSource Investment LLC	39,110	0.006%	0.006%
Total Attributable	18,727,467	2.975%	2.980%
Julius Baer Investment Management LLC 4
Directly	13,838,065	2.199%	2.202%

¹ % Voting rights = No. Shares Held / (Total No. JM shares – Own shares)

²Under the terms articles 16 and 20 of the Portuguese Securities Code (CVM), the stakes held by Asteck, S.A. must be attributed to Heerema Holding Company Inc., which has a 100% holding in that company.

³ Under the terms of articles 16 and 20 of the Portuguese Securities Code (CVM), we hereby inform that the companies Threadneedle Asset Management Limited and Threadneedle International Limited are held by the company Threadneedle Asset Management Holdings Limited. We also inform that the company Ameriprise Financial Inc. holds the companies Threadneedle Asset Management Holdings Limited and RiverSource Investment LLC.

⁴ This number of shares indicated refers to 6th December, 2006, date of the last communication made by this company to Jerónimo Martins, SGPS, S.A.

135	1. Relevant Facts of the Year
138	2. Jerónimo Martins and Sustainable Development
140	3. Corporate Ethics
142	4. Human Resources
142	4.1. Breakdown of Jerónimo Martins' Human Resources
143	4.2. Recruitment
144	4.3. Training and Personal Development
147	4.4. Career Management
148	4.5. Remuneration Policy
148	4.6. Working Conditions
148	4.7. Accident figures
149	4.8. Occupational Health
149	4.9. Partners in the Area of Human Resources
150	4.10. Company Agreements and Benefits
151	5. Quality and Food Safety
151	5.1. Food Safety Policy
151	5.2. Policies Concerning Modified Organisms (GMOs)
152	5.3. Main Projects of 2007
154	5.4. Key Figures in Day-to-Day Work
158	5.5. Organisations to which the Group belongs
159	6. Environmental Management
159	6.1. Environmental Policy
160	6.2. Main Environmental Impacts
160	6.3. Environmental Management Programmes
171	6.4. Partners in the Area of the Environment
172	7. Patronage
172	7.1. Social Patronage
177	7.2. Cultural Patronage
179	8. Frequently Asked Questions

1. RELEVANT FACTS OF THE YEAR

January

• Certification of the Integrated Quality, Environmental and Safety System is renewed by Fima in accordance with ISO Standards (International Organization for Standardization) 9001:2000 (Quality) and ISO 14001:2004 (Environment), and BRC (British Retail Consortium);
• BRC (British Retail Consortium) certifies Fima's Stock Cube Production;
• Recheio MasterChef Food Service platforms of the Lisbon Regional Supply Market and the Porto Supply Market retain certification of the HACCP Food Safety System (Hazard Analysis Critical Control Points), in accordance with Codex Alimentarius CAC/RCP-1-1969, Rev.4 (2003);
• Biedronka launches the informational advertising campaign "Polish is healthy" as a national production incentive. The means used include television, posters and outdoor advertising;
• Pingo Doce Perishables School opening, whose mission is the training and development of the technical skills of the professionals in the specialised areas of Butcher's, Fishery, Bakery and Fruit and Vegetables;
• Pingo Doce starts charging two cents for plastic bags, reducing consumption by 40% in comparison with the previous year.

February

• In an effort to prevent highway accidents, manufacturing companies start a Defensive Driving program, prioritising the training of employees who drive the most in service of the companies. This program had more than 120 participants during the year;
• Once again Biedronka celebrates the Patient's Day by offering gifts to young patients in three Polish hospitals.

March

• Unilever Jerónimo Martins promotes Safety and Environmental Week 2007, which is a one-day event in each factory;
• The Lever factory obtains 96.7% in the Enzymes audit performed by Unilever.

April

• Olá renews certifications of the Integrated Quality, Environmental and Safety System in accordance with ISO Standards 9001:2000 (Quality), ISO 14001:2004 (Environment) and OHSAS (Occupational Health and Safety Assessment Series) 18001 (Safety);
• Biedronka launches a new environmental Campaign on best practices in the use of water and energy;
• Pingo Doce and Feira Nova implement a computer system to register Noncompliance.

May

• In co-operation with Ecopilhas, Pingo Doce, Feira Nova and Recheio launch a distribution Campaign for mini-containers, directed to the clients;

• Victor Guedes facilities perform a Work Safety simulation with the support of the Abrantes Municipal Fire Department;

• Victor Guedes maintains certification of the Integrated Quality, Environmental and Safety System in accordance with ISO 9001:2000 (Quality) and ISO 14001:2004 (Environment) standards;

• Cornetto produced by the Portuguese Olá factory is ranked among its peers as "the best Cornetto in Europe";
• Jerónimo Martins again participates in the "Junior Achievement" initiative, with 63 volunteers lecturing in 31 different schools, reaching a total of 1,283 students;
• Pingo Doce and Feira Nova join the Food Bank's Food Collection Campaign.

June

• Pingo Doce, Feira Nova and Recheio sign the ECO protocol and adhere to the Autoridade Nacional de Protecção Civil (National Authority for Civil Protection), "Portugal without fires depends on everyone" Campaign;
• Four from the six Biedronka Distribution Centres acquire certification for the HACCP Food Safety System according to Standard DS3027:2002, encompassing food product warehousing and distribution activities (Fast Moving Consumer Goods);
• Biedronka encourages people's awareness for the need to exchange their old identity documents, which ceased to be valid in January 2008, launching an Information Campaign on June 11 in cooperation with the Ministry of the Interior and the Polish government.

July

• Pingo Doce and Recheio are the first Distribution Companies in the world to have the development process of Private Brand products certified. This Management System is certified according to the reference NP EN ISO 9001:2000 (Quality), regarding activities of Development of Private Brands and Product and Supplier Follow-Up after Launch;
• Jerónimo Martins signs a protocol within the "New Opportunities" Programme of the Portuguese Government, with the objective of giving Jerónimo Martins employees the equivalence of 9th and 12th grade schooling;
• Jerónimo Martins facilitates information access to the vision-impaired, launching a new functionality on the Group's Internet site with audible online content;
• Pingo Doce is the first distribution company in Portugal to launch a Private Brand of organic products.

September

• Lever renews certifications of the Integrated Quality, Environmental and Safety System in accordance with ISO Standards 9001:2000 (Quality), ISO 14001:2004 (Environment) and OHSAS 18001 (Safety);
• In partnership with the Association for the Protection of Animals (a Polish entity), Biedronka launches the environmental Campaign "Help Animals in Winter";
• Biedronka establishes protocols with private operators to efficiently collect and dispose of old electric and electronic equipment, and organic waste;
• Biedronka launches the third edition of its Quality Seal posters;
• Companies in the Distribution area in Portugal engage 20 New Graduates in the Business Management and Food Engineering areas and similar;
• Jerónimo Martins participates in the event "MarketPlace A Market of CSR Solutions," presenting two innovative projects in the Social Responsibility area: the Client's Ombudsman for the Pingo Doce and Feira Nova brands; and trading the product "Milk Start" in the Biedronka stores, which is the first socially responsible product in Poland.

October

• The Azambuja Distribution Centre installs 36 solar collectors to heat water;
• Pingo Doce and Feira Nova participate in spreading the APED (Portuguese Association of Distribution Companies) Waste Management Awareness Campaign;
• Recheio's Cash&Carry stores and João Gomes Camacho SA maintain and respectively receive certification of the HACCP Food Safety System according to Codex Alimentarius CAC/RCP-1-1969, Rev.4 (2003), thereby extending its scope to a total of 24 stores;
• Olá and Victor Guedes factories attain the highest ranking ("A") in the Quality Audit performed by Unilever;
• The Azambuja Distribution Centre starts to receive visits from Elementary Schools at its facilities, offering tickets to the Lisbon Aquarium for each student and an accompanying adult.

November

• Warehouses of the Gestiretalho Distribution Centres in Azambuja, Vila do Conde and Guardeiras, renew certification of their activities related to Food Safety and Environmental Management, in accordance with the DS3027:2002 and NP EN ISO 14001:2004 standards (awaiting APCER report);
• Jerónimo Martins participates in the Academic Employment Fairs from Universidade Católica de Lisboa and Universidade Nova de Lisboa.

December

• The Feira Nova store in Quinta do Conde installs outdoor illumination powered by photovoltaic panels;
• The Pingo Doce store in Borba installs solar collectors to heat water;
• Pingo Doce and Feira Nova launch the 2008 Environmental Calendar Campaign (4th edition);
• Pingo Doce and Feira Nova join the Food Bank's Food Collection Campaign, and Jerónimo Martins is the Group that contributes the most to the institution within this Campaign;
• Feira Nova launches the Toy Campaign, appealing to a sense of charity, and more than 3,000 children receive presents donated by the Company and by the Company's clients;
• Pingo Doce offers 400 pine trees left over from Christmas sales to Municipal Chambers of Commerce in Óbidos and Vila do Conde.

2. JERÓNIMO MARTINS AND SUSTAINABLE DEVELOPMENT

Sustainable Development as the paradigm of our activities.

"A socially responsible company assesses the impacts of its decisions not only in the short term, but also in the medium and long term, knowing that sooner or later it will be judged by the good or bad consequences of its actions in terms of its profits, and also by its social and environmental record."1

Jerónimo Martins has been in operations for more than 215 years, with a professional and responsible management team that rigorously defines short-, medium- and longterm objectives. These objectives come from a pioneering philosophy that considers shareholders' dividends, the interests of all the other stakeholders and the impact of the Group's Companies on the environment, to be important.

Adopting this vision has affected how the Companies operate, resulting in management that is rigorous and innovative, with a permanent bent toward learning and improving and attaining ambitious results at three different levels: Profit, People and Planet (Triple Bottom Line: Profit, People and Planet).

As a part of this learning process, Jerónimo Martins has become a member of several Associations that promote implementation of socially responsible practices, such as Business Council for Sustainable Development (BCSD) Portugal and RSE Portugal (Social Responsibility of Portuguese Companies).

The Group is also a Signatory of the Letter of Commitment to the Millennium Objectives, and it has voluntarily submitted to the 10 Universal Principles outlined in the Global Compact; which is an initiative of the former Secretary General of the United Nations, Kofi Annan.

Jerónimo Martins also took part in several forums and conferences, namely the National Forum of Sustainable Development and the Forum on Social Responsibility of Organisations.

Another of these initiatives was Jerónimo Martins' reformulation in 2007 of a new functionality on its Internet site that allows people to hear written online content, thus facilitating access to online information for the vision-impaired.

In the Human Resources area, creation of the project "Learn and Develop" is noted under the "New Opportunities" programme, which consists of a cooperation protocol between Jerónimo Martins and two more public entities that joined together with the intention of training and certifying 11,500 employees.

Finally, regarding Environmental Management, Pingo Doce introduced bags that are 100% recyclable in its supermarkets. These bags are acquired by the client for a symbolic amount, seeking to make consumers aware and alert them to the fundamental role that each one can have in preserving natural resources. The introduction of this initiative resulted in a 40% reduction in the number of plastic bags used, in comparison with the previous year.

¹ Alexandre Soares dos Santos, Chairman of the Board of Directors of Jerónimo Martins Group, in the internal magazine for middle and senior managers, "Workout", No. 6.

Sustainable Development is today an intrinsic part of the management philosophy of Jerónimo Martins, outlining socially responsible management of the Group in its various areas.

It is precisely these areas of Corporate Ethics, Human Resources, Quality and Food Safety, Environmental Management, Patronage and their respective activities in 2007, that will be presented in this chapter.

3. CORPORATE ETHICS

Jerónimo Martins employees must adopt behavioural habits based on principles of integrity and loyalty, acting as the Group's cultural foundation. These principles are outlined in the current Code of Conduct. This instrument, which must be complied with by all associates, whether in Portugal or Poland, may be consulted at the Group's Internet site: www.jeronimo-martins.pt.

This Code states the guidelines for implementing the Mission of Jerónimo Martins which, among other items, states:

• Compliance with current legislation;
• Respect for the principles of non-discrimination and equal opportunity;
• Environmental Concerns;
• Transparent negotiations;
• Integrity in relationships with employees, suppliers, clients and official entities.

In parallel, with the Code of Conduct, in 2003 Jerónimo Martins established an Ethics Committee that is responsible for impartially and independently monitoring and guaranteeing the dissemination of and compliance with this Code of Conduct.

The Committee may be contacted by any employee to clarify questions about the Code of Conduct, or to communicate any irregularities within the Group using the following methods:

• By mail, to: Remessa Livre 52673 EC Campo Grande 1721-972 Lisbon, Portugal;
• By internal e-mail, to: Comissao Etica JMH/JMH/JMARTINS;
• By outside e-mail, to: Comissao.etica@jeronimo-martins.pt.

In 2007 the Ethical Committee met 12 times with the objective of encouraging actions to create added value for the Group and to draw up recommendations and resolve cases presented to it.

A central figure that embodies the aforementioned corporate ethics is the Client's Ombudsman of Jerónimo Martins, created by the Group at the end of 2005; this was a pioneering step in the Food Distribution sector in Portugal. The Ombudsman is an entity that independently and impartially guarantees the legitimate rights and interests of Pingo Doce and Feira Nova customers, reinforcing the Customer Service offered by the Companies.

This second year of the Client's Ombudsman developed positively in terms of the number and quality of contacts received, with its activities contributing to greater transparency and to the balance of power among the Companies and the client, as set forth in the Social Responsibility policy of Jerónimo Martins.

Also registered during the year was greater awareness regarding nutritional and health questions, from a medium and long-term perspective, which is unusual in retail. There was also an increase in the communication of important and useful information to the client – far beyond what is required by law.

However, implementation of measures that seek to protect the legitimate interests of clients will have to be improved and energised, particularly in promotional and

commercial questions, in conjunction with distributing the Client's Ombudsman's reports.

These are examples of measures that have reinforced Jerónimo Martins' commitment in recent years to its ethical principles and its various audiences. This commitment will continue to be a focus, with a permanent attitude of learning and continuous improvement.

4. HUMAN RESOURCES

May each person give their best to the business, the company and themselves.

The people, with their behaviour, attitudes, knowledge and skills, are without a doubt, the main foundation of Jerónimo Martins.

The Group values the necessity to recruit, train, develop and maintain in an appropriate, planned and sustained manner, the talent of its human capital, which is a determining factor for its success strategy. Ensuring and stimulating excellent performances in line with its culture and values and in accordance with the demands of its business and the market in which it operates are, therefore, the principles that guide the definition and development of the Jerónimo Martins Human Resources Policy.

4.1. Breakdown of Jerónimo Martins' Human Resources

Total number of Employees as of 31st December 2007

Holding	62
Distribution in Portugal	20,391
Distribution in Poland	19,349
Manufacturing and Services	1,498
Total	41,300

Breakdown of Middle and Senior Management as of 31st December 2007

Company	Total	Sex	Age	Academic Degree	Years of service	Contractual situation
Holding		37 51.4% Men	73% 30-39 Years	84% Graduates	73% >5 years	100%
Distribution in Portugal		413 61.5% Men	61.5% 30-44 Years	62% Bachelors / Graduates	73.4% >5 years	99.8%
Distribution in Poland		232 66.4% Men	76.3% 25-39 Years	78% Graduates	67.7% 2-10 Years	99.1%
Manufacturing and Services		253 60.5% Men	64% 30-44 Years	81% Graduates	84.6% > 5 years	98%

Company	Total	Sex	Age	Academic Degree	Years of service	Contractual situation
Holding	25	84% Women	72% 30-49 Years	32% Bachelors / Graduates	44% 5-10 Years	100%
Distribution in Portugal	19,978	74.1% Women	62.4% 18-34 Years	69% Basic School/High School	56.1% < 5 years	62.9%
Distribution in Poland	19,117	77.4% Women	76.8% 18-34 Years	94% < Bachelor	81.3% < 5 years	32.9%
Manufacturing and Services	1,245	53.7% Women	50.1% 18-34 Years	63.6% Basic School/High School	54.5% > 5 years	68.8%

Breakdown of Non-Managers as of 31st December 2007

4.2. Recruitment

Distribution (Portugal and Poland)

Within its expansion policy, 2007 was another year marked by strong growth and the reinforcement of Jerónimo Martins' position in the Food Distribution market in Portugal and in Poland.

In this way, the Companies continued to provide their associates with challenges and opportunities for growth and personal and professional development through interand intra-company promotions and transfers. Whenever necessary, external recruitment was used, in co-operation with various partners: academic field, written press, Internet, "job sites", and other associations.

According to the Strategic Plan and taking into account the mid-term and long-term Human Resources requirements in Portugal, four large recruitment projects are highlighted as follows: i) the processes arising from the opening of 33 new stores (25 Pingo Doce stores and 8 Feira Nova stores); ii) the Pingo Doce Store Managers Training Programme (covering 87 employees; iii) Trainee Feira Nova Heads of Section Programme (for 12 employees); and iv) the Annual New Graduates Recruitment Process (20 employees).

In line with Jerónimo Martins' policy and positioning in the academic market, the Group continues to favour reinforcing its partnerships with Universities and Teaching Establishments as a strategic means of information about the sectors in which it operates. In this way, it looks to attract and recruit new talent; facilitate and provide the first contact students have with the work marketplace, through curricular and professional training schemes (with special emphasis on the operational areas); support academic work; take part in workshops, employment fairs, seminars and other similar events.

Whereas in Poland, Biedronka has made its brand known to the employment market in an innovative way. An example of this are the recruitment stands in its stores.

Also of note is that in this country, apart from daily operational recruitment, 24 new graduates were recruited for roles in the Logistics, Operations, Purchasing, Human Resources and Financial areas.

Manufacturing

In 2007, within the scope of the New Graduate Programme, 13 employees were taken on. The Group's institutional site on the Internet continued to be the preferred mean of receiving applications for curricular and professional training schemes.

Some Recruitment Indicators – Jerónimo Martins

	Distribution Portugal	Distribution Poland	Manufacturing and Services
Transfers of Middle and Senior Managers	165	88	61
Employees recruited for new stores	1,731	1,760	95*
New Graduates Recruited	20	24	13
Curricular and Professional Training Schemes	333	3	33

*Data related to JMRS – Jerónimo Martins Restauração e Serviços

4.3. Training and Personal Development

In an ever more global and competitive market, Jerónimo Martins believes that its employee's training and development are critical and determining factors for a successful organisation, which is ever more efficient with a special focus on productivity.

Distribution in Portugal

One of the projects which represent Jerónimo Martins' philosophy and intentions within its ever more modern, ambitious and rigorous training policy, is the "Jerónimo Martins Training School", which, on its way to an ever more professional organisation, submitted its accreditation request to the IQF – Institute for Quality Training.

In line with the business strategy of the various Companies, the Training School continues to invest in integrated training programmes in order to respond to the operational requirements of the different companies. This includes the long-term courses, like the initial Pingo Doce Store Management Course, the Training Course for Feira Nova Heads of Section and the Jerónimo Martins New Graduates Training Programme.

Investment in providing and developing internal training sessions is without a doubt one of the Group's priorities. As an example, in 2007, the Training School relied on the co-operation of more than a hundred certified trainers to promote and spread the internal know-how existing in the different functional areas of the Organisation. Within the scope of this, the Training Programme for Internal Trainers - both in terms of Initial Training and Continued Training – plays an essential role in reinforcing and ensuring the quality of the participations.

The Training School also joined the "New Opportunities" Programme, promoted by the Portuguese Government, in order to fight the Portuguese population's low qualification levels and in June 2007, launched an internal 3-year project entitled "Learn and Develop". This way, the idea is to give all the employees with less than 9th or 12th

grade schooling, the opportunity of receiving, in working hours, the respective equivalence. This project comprised a total of 11,500 Jerónimo Martins employees.

In 2007, there were a total of 3,151 enrolments, 1,952 for 12th Grade and 1,199 for the 9th. About 250 employees have already started the RVCC process (Recognition, Validation and Certification of Competencies) and it is estimated that in 2008 it will be possible to involve approximately a further 2,000 employees.

Considering the importance that the Perishables area holds in the Group's strategy, at the beginning of 2007 the Pingo Doce Perishables School was created, whose mission is the training and development of the technical skills of the professionals in the specialised areas of Butcher's, Fishery, Bakery and Fruit and Vegetables.

Some Training Indicators

Training Projects	Companies	Total Participants	Amount of Training Hours
Training in Perishables	FN/GST/RCH/PD JMRS/JMH/LDS	11,454	90,102
Behavioural Training *	FN/LDS/LOG/PD/GST/ RCH/JMH/DAY	5,921	82,907
Technical and Business Training **	FN/PD/RCH/GST/JMRS /LDS/LOG	5,540	52,420
Information Systems and Personal Computing	GST/JMD/RCH/JMH/ PD/FN/JMRS/LOG/LDS	2,929	25,352
Health and Safety in the Workplace	LOG/FN/PD/ GST/RCH/LDS	7,102	23,525
Food Health and Safety	PD/FN/LDS/RCH /GST/JMRS	2,390	13,971
Pandemic Flu	LDS/PD/FN/RCH/JMRS	9,910	13,722
English	FN/PD/GST/JMD /JMH/RCH	703	4,147
Internal Procedures	LOG/LDS/FN/PD/ RCH/GST/JMH	1,092	2,840
Training Strategy for Trainers	FN/PD/RCH/ GST/JMD/JMH	116	2,454
Internal Quality Audits	FN/PD/GST/ JMRS/RCH	14	448

Covers mostly actions in the area of:

* Customer Service; Team Leadership and Management; among others

** Management; Marketing, Market and Consumer; Human Resources; Finance for Non-Financial Employees and actions related to business specifics

Distribution in Poland

In 2007, Biedronka followed a policy of strong investment in training its teams, 14,859 actions were developed evolving a total of 36,476 participations and 1,396,278 hours of training is such diverse areas as Perishables, Hygiene and Food Safety, Hygiene and Work Safety, Behaviour Training, Technical and Business trainings, Information Systems and Personal Computing, and Internal Procedures.

Equally, and following the project that began within the concept of the Academies, in 2007 the training programmes for Non-Management associates and Middle and Senior Management continued.

Some Training Indicators:

Academy	Duration	Targets	Total Participants	Volume of Training hours
Business Management	2 years	Middle and Senior Managers	146	12,444
Biedronka Management	1 to 2 years	Store Managers and Deputy Managers	1,044	13,512
Finance and Accounting	2 years	Finance employees	73	876
Modules - Functional Areas*		All trainees at the Academies	1,824	54,984

*Customer Service, Fruit & Vegetables, Bread, Meat, Non-Food, Health and Safety, HACCP, OHR (IT system for store Human Resources) and Lotus Notes.

In their second and third editions, the Biedronka Management Academy and the Management Academy aim to adopt the best business management practices and procedures. As a result of the partnership that exists between Biedronka and the Universities of Economy and Logistics, the most recent Academies – Finance and Logistics – have the goal of promoting acquired competencies in the areas of Finance, Logistics and the Supply Chain. In this way, the intention is for the Training Programmes to combine a solid technical component with a practical side applied to Biedronka's operational situation.

In order to enrich the training programmes, all the Academies were, once again, increased in value, by introducing modules for the various functional areas of the Company, which were given by both external entities, and by internal trainers (namely Directors and Senior Managers).

Both in Poland and in Portugal, Jerónimo Martins sent its Middle and Senior Managers to take part in seminars, congresses and training sessions at national and international Academic Institutions, namely: Universidade Católica/Portugal (25), Universidade Nova/Portugal (3), INSEAD/France (10), Harvard University/United States (3), Wharton School/United States (1), Chicago University/United States (1), Kellogs University/United States (3), Cranfield University/United Kingdom (3), IMD/Switzerland (1), and MCE/Belgium (2). At the same time, the Group shared the cost of attendance on MBAs and different, specialised post-graduation courses.

Manufacturing

Within the scope of the Unilever Jerónimo Martins (ULJM) Training Programmes, 16 internal sessions, 34 external sessions and 8 sessions abroad were recorded, totalling 364 participants.

The training programme also included national and international courses geared towards the manufacturing plants, and in the year under review, 185 internal sessions and 49 external sessions were recorded, with a total of 1,520 participations.

Overall, Manufacturing registered a total 15,549 training hours.

Among the various training sessions that were carried out at the Training Lab Training Centre, it is worth highlighting the Sales Academy courses, which in 2007 continued as an integrated training programme for sales and marketing professionals; the

Supply Chain Mini MBA; and the TPM – Total Productive Maintenance Instructors Course.

As was the case in Distribution and within the scope of the "New Opportunities" Programme, an internal training programme for certifying employees with 9th Grade schooling also began. In 2007, 15 employees were trained, who are now awaiting the 9th Grade Certificates to be issued and formally delivered by the Ministry of Education.

At the same time, the defensive driving training programme continued, aimed at all those who use company cars for their job. Since it began, this programme has reached more than 120 employees.

Finally, the programme for the reception, integration and development of new graduates continued, which aims to raise their knowledge about the business sector, the Companies' operational situation and the functions of its different work areas.

4.4. Career Management

In an ever more global and competitive market, it has become essential to provide the Organization with qualified and motivated professionals, in order to face up to the strategic challenges and requirements of the business.

Distribution (Portugal and Poland)

The Companies continue to provide the associates with exciting career opportunities, by taking benefit of one of the Group's competitive advantages: its varied presence in several business areas and in different geographic locations. For this, various mechanisms take place for identifying internal potential opportunities and succession plans are defined for the critical roles.

The development and implementation of various initiatives took place, for example a competency model for Non-Management employees was drawn up, Assessment Centres took place (internal assessments on team potential), Development Plans were created and an Internal Satisfaction Questionnaire was given on a national basis to the employees of the Feira Nova and Pingo Doce Companies.

Manufacturing

As it has happened in previous years, 4 employees who were working at Unilever in France, England, Ireland and Mozambique have returned. Also noteworthy is the fact that there are two employees who carry out international roles, even though they work locally.

Special attention should also be given to four transfers that took place between ULJM and Jerónimo Martins Restauração e Serviços (JMRS) within the scope of new business development.

4.5. Remuneration Policy

The Group has undertaken different measures to make sure that its policies are always adequate and to have fair, appropriate and competitive remuneration systems, which should encourage an excellent performance.

Therefore, in 2007, the Pingo Doce, Feira Nova, Lidosol, and Biedronka Companies continued to increase the minimum starting salary, creating an even bigger gap between this and the official minimum wages practiced in these two countries.

4.6. Working Conditions

The Group's Distribution Companies in Portugal and Poland accept improvement and adjustment of working conditions to the demands of today as an integral part of its Social Responsibility.

Among them, the attention given to Health and Safety in the Workplace has gained special interest, aiming to fight the occurrence of accidents by means of an educative approach, calling on people to give their opinions on the improvements they would like to see in the working environment and to contribute towards the adoption of best practices in this area. Efforts were made to increase the existing means for this purpose, both through available and better prepared human resources and through constant research, update and optimisation of the work instruments and equipment.

Another aspect considered by the different chains in 2007, was the drawing up of emergency plans, as well as the inherent necessary rescue and evacuation equipment.

The Health and Safety in the Workplace theme was also highlighted in the internal magazine "A Nossa Gente", which has a circulation of 20,000 copies.

In Poland, initiatives were carried out which deserve a special mention, namely: implementation of procedures and instructions on health and safety in the Distribution Centres; implementation of the SAP module for this area; organization of the "Cleanest Biedronka Store" and participation, along with other companies, in a national first aid competition, in which the Company won the fourth place.

4.7. Accident Figures

Portugal's Distribution results show an improvement during 2007 compared to the previous year, thanks to a greater awareness and commitment by all in general and by the Health and Safety in the Workplace team in particular.

In fact, there was a decrease of 7.5% in frequency and 1.8% in severity. These results point out a reduction of the number of accidents at work in relation to the number of labour hours, as well as a slight reduction in the number of unfit days caused by this kind of accidents.

The performance shown by the following chains is, also, noteworthy:

• Pingo Doce Continues to manage a progressive reduction in accidents, having achieved a decrease of 17.7% in frequency and 10.5% in severity.
• Feira Nova and Recheio Recorded an improvement in frequency of 4.1% and 3.1%, respectively. However, despite worsening in terms of severity, Feira Nova

continues to be the chain with the best performance with regard to the consequences of accidents in terms of lost work days.

In the Group of Manufacturing Companies, the year 2007 registered a total of 1,360,762 man hours and 5 LTA's (Lost Time Accidents). Therefore the frequency indicator (for every 100,000 man hours) in 2007 was 0.37% and the severity indicator 4.9%. Manufacturing continues therefore to work towards reaching its objective of zero accidents.

4.8. Occupational Health

As in previous years, the Occupational Health Service gave the Head Office associates in Portugal the possibility of carrying out blood pressure and cholesterol tests. Another initiative to which Jerónimo Martins has continued to give special attention is the availability of the Flu vaccine for the employees in Poland and the employees of the Azambuja, Guardeiras Distribution Centres.

Some Occupational Health Indicators

	Recruitment medical exams	Periodic medical exams	Sporadic medical exams
Distribution in Portugal	6,330	6,224	6,662
Distribution in Poland	10,829	3,789	335
Manufacturing and Services	609	289	2,870
Total	17,768	10,302	9,804

4.9. Partners in the Area of Human Resources

Within the scope of Labour Relations, the Group is proud of its close relationship with various socio-labour partners, with whom it has co-operated over the last years.

Interfaces like the Portuguese Association of Distribution Companies (APED) have received contributions from Jerónimo Martins for updating and revising the Collective Contract Policies for the Sector. Another contribution towards progress in this area was the commentaries made on the work presented by the White Paper on Labour Relations Committee.

It also noteworthy other contributions, regarding the contacts and synergies established with the current Authority on Working Conditions, with the Unions and with the Workers' Committees (in the case of the Manufacturing Companies). Namely with regard to matters concerning the Collective Contract, improving and adjusting working conditions taking in consideration the requirements and demands of the various business sectors of the Group.

In terms of labour policies, the partnerships mentioned above have resulted in continued improvement in the working environment and an ever greater outlet for dialogue and trust in the interpersonal and professional relationship of the Group's employees.

In Poland, of note are the Employee Forums which take place and in which, within the Law regarding "Information and Consultation of Employees", in force since May 2006, the activity of the employer, its economic situation, as well as possible changes and actions aimed at maintaining the level of jobs in the company, are discussed.

Of significant note, is also the reinforcement of the partnership with ACAPO – Portuguese Association of the Blind and Poorly Sighted, which, in 2007, started a new recruitment process which aims to integrate a further 39 employees as telephonists in the Stores of the Feira Nova chain.

Equally, the Group established partnerships with various Institutions geared towards the social inclusion of handicapped people and in light of this, granted some training experience: Notably: Cercimb (six trainees), Ensinus (one trainee) and Rumo (two trainees).

4.10. Company Agreements and Benefits

In line with Jerónimo Martins' Social Responsibility Policy, the Companies have continued to develop and promote initiatives in the areas of health and prevention, aid to the less fortunate and integration of employees.

In Portugal, Grupo Jerónimo Martins established and renewed partnerships with various entities in the field of telecommunications, banks and insurance companies, health services, transports, sports and leisure. This was a way of trying to guarantee special conditions of access and various discounts on products and services to its associates, and in some cases, their respective families.

A year after the inauguration of Espaço +, as a distinct area for the Head Office associates to have their meals, an internal satisfaction questionnaire was carried out, to improve the service provided. The level of satisfaction recorded was 80% and a very significant number of the identified suggestions for improvement are already being implemented. Equally, the Client Ombudsman has continually developed a varied choice of suitable menus for a healthy diet.

In 2007, Biedronka took another step forward regarding social benefits, when it toasted 813 new-born children of its employees with a basket of specific baby products. Apart from that, the Company has continued to provide preventative breast cancer tests to around 10,700 women; to sponsor enrolment in holiday camps for 420 children of lower income employees; to give rucksacks and school materials to all the employee's children (800) who started the 1st year of primary school for the first time; to promote support programmes to employees members' children who are handicapped or have serious health problems; and to organize events for the commemoration of the Children's Day.

Finally, Manufacturing has maintained its investment in implementing actions which promote its employee's well-being and favour a healthy lifestyle. So, within the Vitality mission defined by Unilever – Jerónimo Martins, the following initiatives are highlighted: every day, baskets of fruit are set out at the entrance to the offices; massages at the desk for around 15 minutes during work hours; stretch classes (for clerks and night-shift workers) and massages at the Santa Iria and Sacavém plants.

5. QUALITY AND FOOD SAFETY

Maximum quality and food safety from the source to the consumer.

A solid Quality and Food Safety Policy is an essential aspect of Jerónimo Martins' strategy, and as such, a critical success factor for the operations of the Distribution Companies in Portugal and in Poland and in Manufacturing.

Therefore, because technology, science and customer expectations evolve, so the Group commits itself to continually improve its performance in Quality and Food Safety, with the objective of meeting the current and future requirements of its customers.

In order to carry out these objectives, the commitment and contribution of all Jerónimo Martins associates is essential, as they are individually and collectively responsible for the Quality and Food Safety of the products that are produced and commercialised by the Group.

5.1. Food Safety Policy

Reviewing and updating the Quality and Food Safety Policies are one of the Organisation's commitments, along with promoting and changing processes that are implemented, in order to improve efficiency.

The basic principles of the Quality and Food Safety Policies aim to:

• Find out the requirements and demands of the customers with the subsequent development of information mechanisms which answer in a timely manner to their concerns;
• Continue the partnership and co-operation with suppliers, service providers, institutions and authorities, for promotion of Quality and Food Safety;
• Have strict control over the quality of products, from their source to the consumer;
• Provide continuous training of the human resources, encouraging motivation and high performance, as well a pro-active behaviour in protecting Food Safety;
• Comply with all legal and regulatory requirements, as well as to fulfil other relevant requirements to which the organisation is committed.

5.2. Policies concerning Genetically Modified Organisms (GMOs)

Jerónimo Martins has developed a relationship of co-operation with its suppliers, promoting the understanding of the procedures leading to Distribution and thereby ensuring compliance with its policies. Taking this in consideration, the policy regarding GMOs (Genetically Modified Organisms) is extremely important, according to which and as a question of principle, the Private Brand and Manufactured products do not contain ingredients or additives of transgenic origin. If there are products where it is not

possible to eliminate transgenic ingredients, the customers are informed of the fact on the product label.

5.3 Main Projects for 2007

Distribution in Portugal

In accordance with the policies laid down, the projects that were taken on during 2007 reflect the implementation and consolidation of Quality and Food Safety best practices.

In the light of this, certifications for the Food Safety Systems of the Distribution Companies in Portugal were prepared, attributed or renewed. Milestones to be highlighted are:

• Pingo Doce and Recheio are the first Companies in the world, in the Distribution area, to have the development process of Private Brand products certified. Certification of the Quality Management Systems by the SGS ICS, according to the reference NP EN ISO (International Organization for Standardization) 9001:2000, regarding the Development of Private Brands and Product and Supplier Follow-Up after Launching, at the Companies Pingo Doce and Recheio Cash&Carry;
• Maintenance of the Integrated Management System certification (Environment and Food Safety), in accordance with DS3027:2002 (Food Safety Management System) and NP EN ISO 14001:2004 (Environmental Management System), covering the activities of reception, storage, handling and forwarding of consumables (perishables, non-perishables and non-foodstuffs), in the Azambuja, Vila do Conde and Guardeiras Distribution Centres;
• Implementation of the IT application for Registering Non-Conformities (RENCO), which diminished the use of paper and made on-line follow-up and correction of occurrences possible, at Pingo Doce and Feira Nova;
• Extension of the Food Safety certification HACCP Hazard Analysis Critical Control Points to 5 new Recheio Cash&Carry stores, according to Codex Alimentarius CAC/RCP-1-1969, Rev.4 (2003), thereby extending the scope of this to a total of 24 stores in that chain. The Recheio/João Gomes Camacho store in Madeira also obtained the same certification;
• The development of applicable HACCP Food Safety systems: to the industrial production of meals in the central Pingo Doce kitchens and restaurants; to the functioning of convenience stores associated to Feira Nova service stations.

It should be noted that the HACCP Food Safety System certification 2007 follow-up audits did not take place in the Recheio MasterChef Food Service platforms of the Lisbon and Porto Supply Markets, due to there being no available dates for this purpose. They already took place in January 2008.

Along side the certifications that were obtained or revalidated, the launch of a range of organic Perishables took place in 2007. Within this project, tests were carried out with thermo-sensitive labels on packets of ready-prepared poultry and vegetables. Preparation has already commenced for this technology to be applied for the production of a Private Brand product in 2008.

Apart from the new range of organic Perishables, another launch in this area is worth pointing out, which is the creation of a line of Private Brand organic products. Thus, Pingo Doce is the first Company in the Distribution area in Portugal to launch a Private Brand of products of organic origin. These products were certified by the external entity Ecocert, and 23 references of fruit and vegetables, one reference of bread and 20 references of meat have been launched.

With regard to checking on the compliance of agricultural good practices by the producers, apart from reinforcing the control of forbidden substances in fruit products, which began in 2006; in 2007 an analogical control took place (also by sampling) on national and imported, refrigerated meats.

Training is also essential for implementing the Food Safety policy. Therefore, all the awareness-raising sessions that took place for both internal and subcontracted employees, namely the drivers of the distribution fleet, that are mentioned in the chapter on Human Resources, are of relevance.

Across the different Companies, the production of articles on Quality and Food Safety stand out in the permanent section dedicated to Social Responsibility in the internal magazine "A Nossa Gente" ("Our People").

Distribution in Poland

In Poland, the development of the "Biedronka – the trustful food retailer" project continues, which objective is to commercialise safe products in which the customers can trust; satisfy the demands of these same customers in terms of Food Safety; ensure the Company's policies and practices in this area comply with Polish legislation requirements.

The relevant facts for 2007 are:

• Certification by the HACCP Food Safety System according to Standard DS3027:2002 was obtained by the Ruda Śląska, Wyszków, Kostrzyn and Grudziądz Distribution Centres, which covered the areas of stock management and distribution of food products (Fast Moving Consumer Goods);
• HACCP audits on the stores in partnership with JohnsonDiversey, who made the results of this available on an Internet site, making it possible to make a quick trend analysis, identifying the problems and following up the respective corrections;
• Specific training for the Quality controllers in the Distribution Centres so that they can carry out regular and random checks, which lead to a decrease in errors and an improvement in goods-in efficiency. This measure covered bakery and fruit products, so that these maintain their quality and freshness along the distribution chain.

Manufacturing

The Quality Policy was reviewed generally and became one and the same for all the Unilever organizations. The intention is to demonstrate the Company's same commitment to Quality, in all countries, organizations and categories.

During the year under review, the Group's plants continued their commitment to supplying products that consistently offer costumers benefits in terms of quality, safety and price, by:

• Using the most suitable technology and equipment for their production;
• Investing in training and raising awareness among Employees with regard to Quality and Food Safety and the associates themselves undertaking self-control analyses, whenever applicable and technically possible;
• Using the HACCP methodology, with the aim of "zero incidents" in the Food area and in the Personal Product area;
• The use of Total Productive Maintenance (TPM) tools such as suggestions for improvement, point-by-point lessons, Quality Matrixes, amongst others, aiming to optimise the productivity, efficiency and quality procedures;

The following projects are highlighted in 2007:

• Harmonisation of procedures between plants;
• Consolidation of audits on partners in the logistics and point of sale areas;
• Product evaluation in the points of sale;
• Implementation of the "Touch screen SAP QM" in Lever's production and Warehouse Management;
• Continuity of the CRQS (Consumer Relevant Quality Standards) methodology at Olá;
• BRC (British Retail Consortium) certification of Fima's Stock Cube Production.

5.4. Key Figures in Day-to-Day Work

Stores and Distribution Centres – Portugal

During 2007, in co-operation with the Human Resources areas of the Companies and the Jerónimo Martins training school, 3,084 hours of training in Quality and Food Safety were provided, which correspond to 7.2% of the FTE (Full Time Equivalence) of the Quality Technicians. In this context, the training plans and contents were adjusted, including the production of Manuals for the School of Fresh Products (Professional Training for Butcher's, Fishery and Bakery).

These trainings aim to provide new employees with the necessary technical knowledge to carry out their roles, as well to reinforce the knowledge already acquired by the remaining employees.

To assess the effectiveness of training, the suitability of premises and equipment and to ensure the implementation of defined procedures, internal audits were carried out. In this context, between April and December 2007, HACCP audits were carried out at 188 Pingo Doce stores and 41 Feira Nova stores. At Recheio, 158 internal audits were carried out, covering all the stores.

Apart from these internal audits, at Pingo Doce, Recheio and Gestiretalho, audits on the certified systems were also carried out, with the following total values.

With the objective to follow-up claims and planning corrective actions, as well as monitoring the Perishable products along the chain, and preparing for inspections or changes to infra-structures, follow-up audits were also carried out, as shown in the table below.

Year 2007	Pingo Doce	Feira Nova	Recheio	Gestiretalho
Internal Audits	189	41	161	6
External Audits	1	-	3	1
Follow-up audits	881	224	294	-

As a result of the group of actions carried out at the Companies, the "HACCP Implementation" indicator performance levels rose to 81.2% at Pingo Doce and 81.6% at Feira Nova. At Recheio, following certification of the food safety system that was implemented, the assessment standard is unmistakable, as a performance indicator of 75.7% was obtained.

Assessment also took place of the effectiveness of labour and hygiene best practices, by means of analytical control. Compared to 2006, there was a decrease in the number of tests carried out, resulting from optimisation of the plans, which enabled monitoring and validation of Food Safety requirements to be continued. Analytical conformity was set at 89.7% at Pingo Doce, 91.6% at Feira Nova and 95.4% at Recheio.

Analytical Control (no. analyses)	2007	2006
Work surfaces	21,028	23,817
Handlers	8,279	10,656
Food Products (excluding Private Brands)	5,501	6,540

Stores and Distribution Centres – Poland

In order to guarantee proper compliance with the procedures implemented, particularly with regard to labour hygiene best practices, in 2007 a total of 768 hours in 192 training sessions were provided, involving 14,728 employees.

From April to December, HACCP audits were carried out on 814 stores in Poland.

In the same year, four of the six Distribution Centres underwent an internal audit (carried out by external auditors), with an additional external audit by the SGS, ICS, seeking to obtain the certification.

Suppliers

The process for auditing suppliers is carried out in accordance with internal standards, based on international requirements, like the Codex Alimentarius and others benchmarked by entities such as the International Food Safety Initiative (CIES), BRC

(British Retail Consortium), EFIS (European Food Safety Inspection Service) and EUREPGAP (European Good Agricultural Practices), among others.

Distribution in Portugal

In Portugal, the internal group responsible for these audits is specialised in various business areas and assesses not only the Quality and Food Safety components but also compliance with the minimum Environmental Management requirements.

In 2007, in view of the maturity of the supplier base, the audits carried out concentrated on monitoring them (62%), the main objective being product selection, following-up planned corrective actions and ensuring compliance with Quality and Food Safety requirements.

The remaining 38% of the audits were carried out for selecting and evaluating suppliers.

Distribution in Poland

The audits carried out on suppliers in 2007 covered 105 grocery suppliers and 79 bakery suppliers. These audits aim to ensure the implementation of procedures in the production area that ensure Food Safety, product Quality consistence and logistics efficiency of the largest retail chain in Poland.

	Selection and Follow-up Audits	2007	2006
Portugal		1,039	1,196
Poland		184	129

Manufacturing

Whenever possible, internal audits are carried out by mixed teams of elements from the various manufacturing units. These teams enable optimisation of resources and of the level of knowledge and interaction between participants, thereby contributing to an improved evaluation of the existing practices and procedures.

Audits	ISO 9001	ISO 14001	OHSAS 18001	BRC	Internal
Olá	1	1	1		5
Fima	1	1		2	7
Lever	1	1	1		4
VG	1	1			6
ULJM					2

In 2007, Manufacturing carried out the following audits, with the objective of monitoring supplier performance and guaranteeing the quality of the products throughout the distribution chain:

Audits	2007
Suppliers (raw materials and packing material)	21
Service Providers (environmental)	2
Logistics operators	5
Main dealers	49
Points of sale (ice-creams)	214

30 visits to points of sales were also carried out, to evaluate the Knorr Stock Cubes and Spreads and another 15 to evaluate Lever products.

Private Brands

The Quality and Food Safety of the Private Brand products is still a priority for the Companies in Portugal and Poland. Therefore, regular audits are carried out, through sensorial and analytical tests, to ensure that suppliers comply with the policies and requirements subscribed by the Companies.

This is a dynamic process, which begins before launching the products and is continued by carrying out analyses on products taken from points of sale, both for validating their technical characteristics and the suppliers' declarations of conformity (e.g.: confirmation of the non-existence of Genetically Modified Organisms in the risk products/groups), and for evaluating the consumers' acceptance/preference or their position against the market leaders.

In the case of proposals for products to be developed, these are analysed internally, receive sensorial assessment and undergo specific consumer tests, for which the various methodologies available are used: acceptance, preference, comparison and classification tests. Whenever necessary, external entities are used to carry out laboratory assessment and performance assessment of non-food products.

When developing new products, special attention is given to the packaging and labelling, taking into account the target population, existing legal and EU requirements, the methods of use and the nutritional characteristics of the products themselves.

The analytical control, to which Private Brand products are subjected, is carried out by accredited laboratories, in accordance with a pre-defined annual plan and is subject to selection and assessment by Quality Technicians.

Development of Private Brands		Portugal	Poland
	2007	2006	2007	2006
Audits on Suppliers	79	105	184	129
Launches and Re-launches	480	622	371	386

Control of Private Brands		Portugal	Poland
	2007	2006	2007	2006
Sensory tests – pre and post-launch	685	1,100	821	937
Routine laboratory tests	1,271	988	3,250	2,835
Selection laboratory tests	275	314	750	537

Manufacturing

In Manufacturing, 29 internal training and awareness sessions were carried out in the areas of Hygiene, HACCP and Food Safety in 2007.

Reinforcing its close co-operation with Schools and Universities, this area continued to grant study visits and graduate training in 2007.

5.5. Organisations to which the Group belongs

Distribution in Portugal

• APED Portuguese Association of Distribution Companies Food Products and Food Safety Committee;
• AMS Associated Marketing Service;
• Associação Portuguesa para a Qualidade (Portuguese Quality Association);
• Instituto Português de Acreditação (Portuguese Accreditation Institute).

Distribution in Poland

• Polish Trade and Distribution Organisation member of the Quality Committee;
• Association of Cosmetics and Home Care Producers.

Manufacturing

Unilever Jerónimo - Martins has representatives, is a member of and/or takes part in working groups of the following organisations:

• AISDPCL- Association of Manufacturers of Soaps, Detergents and Maintenance and Cleaning Products;
• ANIGA National Association of Ice Cream Manufacturers;
• ANIRSF National Association of Manufacturers of Soft Drinks and Fruit Juices;
• APA- Portuguese Association of Aerosols;
• APLOG Portuguese Association of Logistics;
• APOGOM Portuguese Association of Oils and Vegetable Fats, Margarines and Derivatives;
• Casa do Azeite Association of Portuguese Olive Oil;
• FIPA- Federation of the Agro-Food Portuguese Industries;
• Instituto Português da Qualidade (Portuguese Quality Institute);
• Sociedade Ponto Verde (Green Dot Recycling Association).

6. ENVIRONMENTAL MANAGEMENT

Ensuring proper environmental management is guaranteeing a sustainable future for all.

Jerónimo Martins strives to protect the environment, considering this to be essential for guaranteeing the success of its businesses and for the growth of its Companies, which have adopted a pro-active attitude in this area for many years.

Within this context and in accordance with the environmental programmes laid down for 2007, the main Environmental Management initiatives carried out during the year are set out below.

6.1. Environmental Policy

Jerónimo Martins' Environmental Policy aims to continuously improve the environmental performance of its activities, products and services of the Group Companies. At the same time, and through this, Jerónimo Martins tries not only to encourage its employees and suppliers to adopt environmental good practices, but also to answer to its consumers' legitimate environmental concerns, all within strict compliance of the environmental legislation in force.

This Environmental Policy is implemented through the Distribution and Manufacturing Companies' Environmental Management Systems, which, based on the ISO 14001 standard, ensure that the applicable environmental legislation is updated, environmental diagnoses and audits are carried out on the various units and other environmental aspects are monitored.

Environmental Certification

As far as Distribution in Portugal is concerned, the Gestiretalho Distribution Centres in Azambuja, Vila do Conde and Guardeiras have implemented a certified environmental management system in accordance with the NP EN – ISO 14001:2004 Standard.

In 2007, the Manufacturing Companies maintained their environmental certification in accordance with the NP EN – ISO 14001:2004 Standard.

Biodiversity

Jerónimo Martins recognises the importance of Biodiversity, as a value to be preserved, for the sustainability of the community in which it operates and even of its businesses, aiming to make a positive contribution towards its protection at a local, national and global level.

6.2. Main Environmental Impacts

Distribution

The main environmental impacts in Distribution are to be found in rationalising water consumption; in energy consumption used in preserving foodstuffs, in lighting, airconditioning and operating equipment; in the production of organic solid waste and paper, cardboard and plastic packaging; in the air emissions and in the consumption of fossil fuels for transporting goods.

During 2007, with the objective to minimize the environmental impacts resulting from countless aspects, various environmental diagnostics were carried out on stores and Distribution Centres, in order to guarantee their compliance with the legal requirements and the Group's internal environmental management procedures.

Manufacturing

Under the Environmental Management Systems implemented according to the requirements of the NP EN - ISO 14001:2004 Standard, the Manufacturing Companies carry out an annual assessment and review of the environmental aspects they consider to be most important.

Last year, the following areas of intervention were identified: consumption of water used for heating, cooling, cleaning, sanitation and personal hygiene; consumption of energy, mainly electricity, natural gas and LPG; production of solid waste; production of other types of waste, like reagents and solvents; liquid, industrial and domestic wastewater, air emissions resulting from production processes; and, finally, atmospheric noise, as a result of the production.

6.3. Environmental Management Programmes

The Environmental Management Programmes implemented in 2007 in the areas of Distribution (Portugal and Poland) and Manufacturing resulted in the various actions described below:

Water Consumption Rationalisation

The management of water consumption, within the Distribution in Portugal, assumes the highest importance. In this respect, of note in 2007 is the beginning of the implementation of the integrated water plan in the Distribution Centres, which encompasses actions such as replacement of equipment, minimisation of water flow from taps, quarterly monitoring of consumption, among other good practices of this kind.

The indicators shown for water consumption cover 81% of the units in Portugal and 83% in Poland.

Stores - Water consumption per sales area (m3 /m2 )

Distribution	2007	2006	Δ 07/06	2005	Δ 06/05
Portugal	2.12	2.08	+1.9%	2.03	+2.5%
Poland	0.78	0.75	+4.0%	0.74	+1.4%

Distribution Centres - Water consumption per thousand boxes of throughput (m3 / UMC'000*)

Distribution	2007	2006	Δ 07/06	2005	Δ 06/05
Portugal	0.59	0.58	+1.6%	0.47	+23.4%
Poland	0.10	0.10	0%	0.10	0%

(*)UMC – Purchasing Buying Unit in thousands

In order to achieve an efficient control of water consumption, the Companies in the Manufacturing area have been taking several actions to rationalise their water consumption and minimise waste. To achieve these objectives, the following initiatives, amongst others, were taken in during 2007:

• The Environmental Health and Safety Week, carried out with the various Manufacturing units, chose water and energy consumption rationalisation as one of the topics to be dealt with;
• Follow up/monitoring of consumption, with various awareness initiatives being carried out for the employees, presenting the topic of water rationalisation;
• At Olá, the water circuit in the cooling towers of the refrigerating system was automated, in order to reduce the number of purges carried out, thereby decreasing water consumption;
• At Lever, a water consumption rationalisation awareness campaign was carried out, inspired by the World Water Day, which was made up of posters and a small reference manual on the topic, while at the same time a drawing contest on this theme took place for the employees' children. Other initiatives were also developed aiming to reduce consumption, of which the following are highlighted: change in the product line washing system, by introducing a water and air system instead of the system which only used water; thermal disinfection of the production equipment, instead of chemical disinfect ion, with a reduction in consumption of both water and disinfectants; re-utilisation of condensed matter; installation of thermostatic mixer taps in the showers; periodic analysis of the water consumption status and the generation of liquid outflows in order to define improvement initiatives;
• At Victor Guedes, re-circulation of the auto-collected water, thereby reducing overall consumption, was implemented and a half-yearly, periodic environmental awareness initiative was carried out with the employees, regarding the correct usage of water.

Manufacturing	2007	2006	Δ 07/06	2005	Δ 06/05
Global water consumption (thousand m3 )	413.1	387.0	+6.7%	434.0	-10.8%
Water consumption per unit of product produced (m3 /t)	2.47	2.51	-1.6%	2.75	-8.4%

Energy Consumption Rationalisation

Within the scope of the "Energy Saving" project, launched in 2006 for the Distribution Companies in Portugal, which aims to bring into operation Jerónimo Martins' commitment to the combat of Climate Change and to reinforce the rationalisation of energy consumption, initiatives were developed on various levels in 2007:

• Awareness: all employees were given a copy of a pocket manual on energy saving good practices for day-to-day implementation;
• Internal eco-benchmarking: on a monthly basis a store-by-store consumption report for each of the Companies was produced and made available;
• Cleaner technologies: 72 m2 of solar collectors for heating water were installed in the Azambuja Distribution centre (savings: 5,100 kWh/month and 31 t CO2/year); 46 outdoor lamp posts, fed by photovoltaic panels were installed at the Feira Nova store in Quinta do Conde (savings: 5,000 kWh/month and 30 t CO2/year); 5.4 m2 of solar collectors for heating water were installed in the Pingo Doce store in Borba; 76 units of a tubular system for transporting solar light for the inside lighting were installed in the Pingo Doce stores in Vila Nova de Gaia and Oliveira do Douro (savings: 2,255 kWh/month and 13 t CO2/year).

The following activities that were carried out over this year are also noteworthy:

• Implementation of energy consumption rationalisation plans in the three retail Distribution Centres in Portugal (two of which are considered intensive energy consumers);
• Various energy diagnoses were carried out in the Pingo Doce, Feira Nova and Recheio stores;
• Reduction of the time for lighting the car parks and external advertising in the Recheio stores;
• Start-up of a technical management system for electricity consumption in the Recheio store in Ramalde, in order to reduce this type of consumption by 10%;
• Commencement of monthly monitoring of the stores and Distribution Centres' fuel consumption in Portugal;
• Installation of low consumption fluorescent lights in the Biedronka stores.

The indicators shown cover 99% of the units in Portugal, and 92% of the units in Poland. The increase of the specific consumption at the Distribution Centres is mainly due to the opening of another refrigerated warehouse in the end of 2006.

Energy consumption in the stores:

Distribution	2007	2006	Δ 07/06	2005	Δ 06/05
Portugal Electricity (kWh/m2 ) Fuel (GJ)	694.6 32,901	727.1	-4.5%	653.9	+11.2%
Poland Electricity (kWh/m2 ) Fuel (GJ)	334.9 104,682	348.2	-3.8%	361.4	-3.7%

Energy consumption in the Distribution Centres:

Distribution	2007	2006	Δ 07/06	2005	Δ 06/05
Portugal Electricity (kWh/ UMC'000*)	132.6	118.5	+11.9%	125.5	-5.6%
Fuel (GJ)	2,259
Poland Electricity (kWh/ UMC'000*)	52.0	55.8	-6.8%	54.1	+3.1%

(*)UMC – Purchasing Buying Unit in thousands

To minimise energy consumption and contribute towards the preservation of energy resources, the Manufacturing area has implemented several initiatives as a result of the rationalization plan, namely:

The topic was covered during the Environmental Health and Safety Week, in order to reach a greater number of employees;

Per productive units:

• Aiming for greatest efficiency and least energy consumption, Olá renewed its air compressors, the evaporative condensers in the refrigerating system and the evaporators in the finished product freezers. The fitting of presence detectors connected to the lighting in public areas and toilets was continued;
• At Lever, a speed differential in the compressed air station and a reduced capacity compressor, both of low consumption, were installed for the night shifts, and were associated to a series of awareness initiatives aimed at the employees, which enabled electricity consumption to be reduced significantly. Procedure optimisation works in the atomisation tower continued, in order to reduce natural gas consumption;

• At Victor Guedes, similar to what is done in terms of water consumption rationalisation, every six months an environmental awareness initiative for the employees takes place on the appropriate use of energy;

• At Fima several projects were implemented, of which the works in the compressed air and lighting fittings are highlighted;

• At the head office of Unilever Jerónimo Martins, more than 120 T8 fluorescent lamps were replaced with T5.

Manufacturing	2007	2006	Δ 07/06	2005	Δ 06/05
Global Electricity Consumption (MWh) Global Natural Gas Consumption (thousand Nm3)	26,989 1,723	27,697 1,940	-2.6% -11.2%	27,102 2,038	+2.2% -4.8%
Consumption of energy per unit of produced product (GJ/t)	1.02	1.18	-13.8%	1.16	+1.9%

Waste Management

In the Distribution area, many projects were carried out in 2007 regarding optimisation of waste management. The main projects are:

• Investment in equipment in order to optimise separation, conditioning and storage of cardboard and plastic waste (presses, containers and compacters) in the Pingo Doce, Feira Nova and Recheio stores according to the infra-structure and requirements of each store;
• At the Azambuja Distribution Centre, mud resulting from the organic treatment of waste effluents is now being handed over for compost;
• Selective collection of the organic part in 65 stores, with around 2,500 tonnes being sent for compost;
• Commencement of selective waste packaging collection in the Distribution headquarters in Portugal, for which 18 internal recycling points were installed;
• Selective waste collection of organic waste in 1,045 Biedronka stores in Poland, with a total of 1,100 tons given for compost.

Environmental Indicators:

Total packaging waste (cardboard and plastic) sent for recycling (tonnes):

	2007	2006	Δ 07/06	2005	Δ 06/05
Portugal	18,559	14,889	+24.6%	14,200	+4.9%
Poland	46,616	33,730	+38.2%	21,720	+55.3%
Total	64,715	48,619	+35.4%	35,920	+35.4%

The increase in the quantity of waste forwarded for recycling is mainly due to the strong commitment and awareness on the part of the Group's employees, and also due to the new store openings.

In the Manufacturing area, employees' awareness campaigns were given priority, with the purpose of separating waste, whenever possible, and recognising and using the

proper places for this, in order to ensure that all waste is taken to the appropriate destination. Waste forwarded for recycling was also given priority.

Waste separation was also one of the topics covered in the Environmental Health and Safety Week, which contributed towards deeper knowledge of the various aspects associated to waste: the various chains, possible destinations and innovative uses of recycled material, among others.

While at Unilever Jerónimo Martins head office, apart from continuing to collect organic waste, this year the collection of separated waste began (packaging, glass, cardboard) within the scope of the Lisbon Town Hall's programme.

Environmental Indicators:

	2007	2006	Δ 07/06	2005	Δ 06/05
Quantity of waste per unit of produced product (t/t)	0.0299	0.0296	+1.1%	0.0285	+3.7%
Total residues forwarded for recycling (t)	4,241	3,810	+11.3%	3,393	+12.3%
Waste recycling rate	84.9%	83.7%	+1.2 b.p.	75.3%	+8.4 b.p.

Management of Wastewater

Wastewater produced by the Distribution sector is not highly polluting. For the most part it is discharged into municipal collectors. However, in order to decrease the amount of organic outflow, namely in terms of the amount of edible oils and fats, i) pretreatment systems have been installed, ii) highly biodegradable cleaning products are used and iii) the edible oils are selectively collected.

In this respect, the Azambuja Distribution Centre has a Wastewater Treatment Plant, as well as retainers for fats and hydrocarbons and ensures compliance with the discharge limits imposed by law.

In 2007, the plan to monitor the wastewaters covered 55 units in Portugal, in order to obey the municipal regulations and other legal requirements.

Within this area, Fima and Olá have a pre-treatment system for the effluents generated, which are subsequently drained into the municipal collector. The main objective is to lower the amount of pollution from these wastewaters.

At Olá, the objective of the aforementioned automation of the water circuit in the cooling towers was also to reduce the volume of effluents.

At Lever, in addition to the initiatives previously mentioned concerning reduction in water consumption and the resulting decrease in the generation of wastewater, work continued to be carried out to review, simplify and maintain the effluent network. Industrial liquid effluents (like water from washing the packing lines for example) continued to be re-used in the productive process.

Lastly, at Victor Guedes the effluents generated are equivalent to domestic wastewater, given that they have a low pollution index, and they are channelled to the Municipal Water Treatment Plant.

	2007	2006	Δ 07/06	2005	Δ 06/05
Total quantity of industrial wastewater per unit of product produced (thousand m3 / t)	147.7	155.6	-5.1%	138.5	+12.3%

Management of Air Emissions

In terms of gas air emissions within the Distribution sector (Portugal and Poland), the only substance subject to regulation is R22 (refrigerating gas), which has been systematically replaced by substances with less environmental impact. In Poland, the objective is to replace R22 in all equipment by the end of 2008.

In the Distribution units in Portugal where that obligation exists, the implementation of a Monitoring Plan of the quality of air emissions (19 characteristics) began, and should be concluded in the first quarter of 2008.

In the manufacturing units with fixed sources of air emissions, relevant parameters are monitored with the objective of ensuring compliance with legislation.

Noise Control

In the Manufacturing area, namely Olá, compliance with the Environmental noise limits is ensured through the replacement of air compressors.

Environmental Criteria in the Construction and Remodelling of Units

Environmental criteria are taken into account in all the building or remodelling projects of the Distribution units in Portugal, namely the purchase of more efficient equipment (e.g. taps and lighting systems), installation of monitoring equipment (e.g. water submeters), optimisation of waste management (e.g. cardboard and plastic presses and compactors), improvement of the emission control systems (e.g. retainers for solids and fats in the sewage system) and pollution prevention (replacement of refrigeration gases with monopropylene glycol.

In 2007, of note is the construction of a new Pingo Doce store in Batalha, with a gardened cover, which minimises the visual impact on its surroundings and promotes the absorption of carbon dioxide into the atmosphere during the daytime.

When remodelling the Biedronka stores, apart from the legal requirements, investment has been reinforced to rationalise energy consumption: lighting, heating and ventilation and equipment run on electricity.

In Manufacturing, the type and quantity of gases are defined and measured for all facilities using refrigerating gases, and are taken into account when implementing the building or remodelling plans of units.

Employee Adoption of Good Practices

Environmental awareness initiatives were carried out in 2007 for the employees of the Distribution Companies, of which the following are highlighted:

• Training in the Gestiretalho Distribution Centres on the principles of the environmental Management System, environmental policy and good practices (internal employees and subcontractors);
• Training sessions for new employees of the Group with managerial functions, aimed at informing about internal procedures and creating awareness of good environmental practices;
• Training sessions for store employees on internal procedures for separating waste (including packaging and organic waste);
• Development of "Environment" features in the permanent section on Social Responsibility of the in-house magazine "A Nossa Gente" ("Our People"). In 2007, these came under the following themes: energy saving, environmental awareness campaigns, ECO– Companies protocol; solar collectors (Azambuja Distribution Centre); more Environmentally-friendly products; separation and delivery of waste in the retail sector;
• Weekly information on environmental good practices and environmental management procedures for the employees of the Pingo Doce stores.

The initial training given to new employees in the Manufacturing area includes environmental issues, to ensure overall adoption of good practices in this area. Environmental training/awareness-raising sessions addressed to all the associates also take place on a regular basis. In 2007, the following are highlighted:

• Implementation of general training sessions for service providers at Lever, namely on containing spillages, separating waste, liquid effluents and good environmental practices;
• Initiatives to raise awareness among employees so as to improve waste separation in all the productive units.

Total Productive Maintenance Methodology (TPM)

Companies in the Manufacturing area have been implementing the TPM methodology, which is based on concerns for Environmental Health and Safety:

Within the scope of this methodology, in the Environmental Health and Safety Week 2007, good practice themes were covered, like handling dangerous substances, separating waste, energy and water, in a joint session which brought together a total of 80 participants (20 per productive unit).

Environmental Criteria for Selecting Suppliers

In 2007, to improve environmental performance along the supply chain, the Environmental Technical Standard continued to be applied when carrying out audits on suppliers of goods in the Distribution sector in Portugal. Checking the requirements of this Standard has enabled the classification of suppliers and service providers in accordance with their performance in terms of environmental legislation applicable to their activity, adoption of good practices and implementation of environmental management systems.

In fact, in the Manufacturing area, the criteria for selecting suppliers have a strong environmental component, as they are evaluated within the same parameters as those of the Group's plants, and are invited to adopt environmental management programmes.

Logistics and Environment

The Companies in the Distribution sector have the objective of progressively reducing the weight of packaging, which consequently generates the minimisation of waste production, optimisation of space in transportation vehicles, reduction of fuel consumption and minimisation of emissions of polluting gases.

Therefore the use of reusable plastic boxes in Portugal already covers the Fruit & Vegetable, Meat, Dairy, Fish and Bakery sections. In Poland, reusable packages are used whenever logistic and operational conditions for this are met. The indicator of the number of reusable boxes shows the evolution of this technique in the logistical activity of the Group.

Environmental Indicators:

Percentage of reusable boxes vs. total number of boxes transported:

	2007	2006	07/06	2005	06/05
Portugal	12.9%	9.2%	+3.7 b.p.	6.7%	+2.5 b.p.

It is worth mentioning that the Companies from the Manufacturing area cooperate with their Suppliers, whenever possible, in reusing the transport packaging.

Sustainable Consumption

At the beginning of 2007, Pingo Doce took on an important role in changing consumer's habits, by starting to charge two cents of a euro for each plastic bag, which until then had been free. This pollution prevention measure has allowed the consumption of bags to be reduced by about 40%, which represents a reduction of:

• 750 t of petroleum and natural gas used in producing polyethylene;
• 950 t of carbon dioxide emissions (from the production and transport of the bags);
• 400 t of bags deposited in the waste burial ground (after customer use).

Within the scope of the "-100kg" project, carried out in partnership with LIPOR (entity responsible for managing solid waste in the Oporto area), with the objective of reducing each family's solid waste production, Pingo Doce granted 4,000 trolleys to be distributed to replace plastic bags in the households covered by this initiative.

Also noteworthy is Unilever Jerónimo Martins' launch of the new products Skip Líquido Pequeno & Poderoso and Comfort Essência, which have various advantages from an environmental point of view that are associated to the reduction in size (e.g. Comfort Essência has a 67% reduction in water, 48% in plastic, 43% in cardboard, 58% in the number of transport lorries and pallets handled and 30% in storage space). At the same time, there was a reduction in the weight of the Skip powder, as due to its new formula, a lesser quantity of product is used for the same result.

Environmental Campaigns

Being conscious of the fact that companies should play an active role in raising the awareness of the population in boosting sustainable development, in 2007 the Companies of the Group in the Distribution area in Portugal carried out several environmental initiatives aimed at consumers and employees, including:

• Disclosure of good environmental practices in the promotional leaflets of Feira Nova and Recheio;
• In co-operation with Ecopilhas, a Campaign was launched at Pingo Doce, Feira Nova and Recheio for the distribution to customers of mini containers for recycling batteries;
• Pingo Doce, Feira Nova and Recheio joined the Campaign by the Autoridade Nacional de Protecção Civil (National Authority for Civil Protection), "Portugal without fires depends on everyone" (ECO programme);
• Pingo Doce and Recheio's participation in spreading the Awareness Campaign by APED on Waste Management;
• Launch of the 2008 Environmental Calendar Campaign (4th edition) in Pingo Doce and Feira Nova stores;
• Pingo Doce offered 400 pine trees, exceeded from the Christmas sales, to the City Halls of Óbidos and Vila do Conde.

In Poland, in 2007, under the banner "Biedronka – trustworthy partner for the Environment", two environmental Campaigns were carried out for Company customers and employees, as a way of reinforcing appropriate environmental behaviour within society. Specifically:

• A Campaign was launched for the rational use of water and energy, following on from previous initiatives;
• The Campaign "Help the animals in winter" was also launched in partnership with the Association for the Protection of Animals (Polish organism).

In Manufacturing, Unilever Jerónimo Martins continued to give its support, which started in 2002, to the Eco-Schools Programme, a Europe-wide initiative, which is the responsibility of the European Blue Flag Association (ABAE)/Foundation for Environmental Education (FEE), aiming to raise environmental awareness among young people. In the 2006/2007 academic year, 669 schools took part in this Programme, of which 455 were awarded.

Unilever Jerónimo Martins also maintained its National Green Brigade Initiative, carried out in co-operation with the ABAE. Each "Green Brigade" analysed the resources lacking in the respective schools or in the surroundings, and subsequently created and presented a specific project, with solutions to improve the existing situation. In 2007, this national competition involved the participation of 55 projects, covering nursery schools, primary, middle and secondary schools and involved about 1,200 pupils.

Also noteworthy is last year's launch of a special edition of Skip, in which a domestic recycling box was offered and information was given regarding separating waste. In addition, a joint initiative was carried out with Valorsul, for the promotion of proper waste separation.

Climate Change

The Group considers the fight against the phenomenon of climate change to be part of the social responsibility of the economic agents. Jerónimo Martins Companies adopt responsible and proactive behaviour in implementing actions that contribute to minimising the emission of greenhouse effect gases, one of the underlying concerns in their environmental policy.

In order to contribute to the minimisation of the emission of these gases, the various Companies of the Group have implemented several actions, aiming at:

• Employee training;
• Reinforcing the investment in more efficient technology and equipment;
• Adoption of cleaner technologies;
• Optimisation of routes and loads;
• Society's awareness of the importance of this topic.

Environmental Indicators:

Portugal	2007	2006	Δ 07/06	2005	Δ 06/05
Stores	0.058	0.058*	0%	0.052*	+11.5
Equivalent CO2 emissions per volume of sales (t CO2 eq. / € thousands)					%
Distribution Centres	0.066	0.058*	+13.8	0.062	-6.5%
Equivalent CO2 emissions per thousand boxes of throughput (t CO2 eq / UMC'000**)			%
Transport by JM exclusive fleet (Distribution Centres - stores)	0.977	0.929	+5.2%
Equivalent CO2 emissions per thousand boxes of throughput (t CO2 eq / thous. km) N.B.: In 2007, this fleet assured 90% of the distances covered.
Manufacturing	0.085	0.095	-10.5%	0.091	+4.4%
Equivalent CO2 emissions per unit of product produced (t CO2 eq /t)
Reduction of Carbon emissions due to the use of renewable energies Equivalent CO2 emissions avoided	16.7

* These values don't include the fuel consumption

**UMC – Purchasing Buying Unit in thousands

Poland	2007
Transport by JM exclusive fleet (Distribution Centres - stores)	0.922
Equivalent CO2 emissions per thousand boxes of throughput (t CO2 eq / thous. km) N.B. In 2007, this fleet assured 100% of the distances covered.

Note: the figures presented took into account emission factors defined by the IPCC (fuel) and by the GASA/FCT (report "Emission and Control of Gases with Greenhouse Effect in Portugal", 2000).

6.4. Partners in the Area of the Environment

Distribution

The Distribution area of Jerónimo Martins has representatives in the following organisations:

• Portuguese Chapter of the World Business Council for Sustainable Development (WBCSD);
• APED (Portuguese Association of Distribution Companies) Committee for the Environment;
• DISPAR an institution of national distributors representing about 20% of the share capital of Sociedade Ponto Verde.

Manufacturing

Unilever Jerónimo Martins has representatives, is a member of and/or takes part in working groups of the following organisations:

• AISDPCL- Association of Manufacturers of Soaps, Detergents and Maintenance and Cleaning Products;
• ANIGA National Association of Ice Cream Manufacturers;
• ANIRSF National Association of Manufacturers of Soft Drinks and Fruit Juices;
• APA- Portuguese Association of Aerosols;
• APLOG Portuguese Association of Logistics;
• APOGOM Portuguese Association of Oils and Vegetable Fats, Margarines and Derivatives;
• Casa do Azeite Association of Portuguese Olive Oil;
• FIPA Federation of the Agro-Food Portuguese Industries;
• Instituto Português da Qualidade (Portuguese Quality Institute);
• Sociedade Ponto Verde (Green Spot Recycling Association).

7.PATRONAGE

Commitment to the community.

Jerónimo Martins has always supported charitable projects and institutions both at an institutional level and also through the voluntary contribution of its associates.

These activities, which are part of the Group's Patronage policy and respective areas of intervention – Social and Cultural – follow three guidelines which are: the Food World, the Portuguese Character and Innovation as a stance in business. These are implemented through two programmes currently in existence:

• "Jerónimo Martins Feeds Smiling Futures": a programme of a social nature essentially addressed at providing support to children and young people;
• "Jerónimo Martins supports National Culture": a programme specifically addressing cultural issues, in particular the conservation and communication of Portuguese historical and cultural heritage.

7.1. Social Patronage

7.1.1. Jerónimo Martins Institutional Support

Within the scope of co-operation with institutions and projects that help less fortunate communities and groups, Jerónimo Martins has selected children and young people as the priority target groups. Throughout the year various types of support are given in the form of funds, goods and voluntary time to various entities and causes:

CONTINUED SUPPORT
Name of the Institution	Area of Activity	Start of Jerónimo Martins Support	Type of Support
Aldeia SOS de Bicesse	Charity to shelter and protect children without a normal family environment.	2002	Food support for children and youths.
Obra do Ardina	66 years old Institution supporting underprivileged boys.	2003	Food support for all children and young people that board at the institution.
Casa da Acreditar	Support for children with cancer and their families.	2003	Sponsorship of 2 bedrooms in Lisbon. Offer of quality brand personal care products and food.
CrescerSer: support to the APDMF shelter	Shelters for children and youths, victims of violence or coming from families whose situation requires temporary support.	2004	Support through monthly shopping vouchers for two of the residences in Porto.
Centro Social da Paroquia de Torredeita	Centre geared towards underprivileged children and youths from the Torredeita region (Viseu).	2004	Funding of most of the groceries.
Casa dos Rapazes	Protects, shelters and educates male minors on a boarding or semi boarding basis.	2005	Support towards feeding the children in the home through shopping vouchers.
Associação Protectora das Florinhas da Rua	Private Charity that shelters and protects children at risk, on a boarding basis.	2005	Support towards most of the food for the 25 children of the home.
Diferenças - Centro de Desenvolvimento Infantil	Evaluation, diagnosis and intervention in child development illnesses.	2005	Provision of space in the Feira Nova Bela Vista Shopping Centre. Support for maintaining the image and publicising the centre.
APPACJ – Association of Psychologists and Parents for Support to Children and the Young	Support to broken families of underprivileged neighbourhoods in Alcabideche.	2006	Support towards the majority of the food for 30 families.
Entreajuda Association to Support Charitable Institutions	Various types of support to charitable institutions.	2006	Financial and logistic support.
Associação SOL	Support to HIV positive children or those coming from families affected by AIDS.	2007	Support towards part of the Casa SOL's food through shopping vouchers.

Besides the support mentioned, the Group also promotes awareness campaigns directed to its employees, whose involvement in these charitable initiatives resulted in assisting the following institutions in 2007: Casa de Santo António (Private Charity for Single Mothers and their Babies); Associação de Apoio ao Recém Nascido (Association for Support to the New Born); Obra do Padre Gregório (Institution for Orphan Girls); Movimento Apostólico de Schonstadt (Schoenstatt Movement); Vila d'Este (Economic Housing); Mosteiro de S. Vicente de Fora (St. Vincent's Monastery); Laço (Association of Breast Cancer); Associação Física e Desportiva de Torres Vedras (Torres Vedras Sports Association); Escola Básica da Buraca (Buraca Primary School); Fundação Eça de Queiroz (Eça de Queiroz Foundation); Liga Portuguesa Contra o Cancro (Portuguese Cancer League); Associação Nacional de Bombeiros Profissionais (National Association of Professional Firemen); among others.

7.1.2. Patronage in Portugal – Distribution

In 2007, Pingo Doce, Feira Nova and Recheio Cash & Carry continued to support the local communities where they operate, directing this support mainly to underprivileged children and young people.

Pingo Doce

At Pingo Doce, contributions in the form of money and goods were made to more than 30 charitable institutions or to initiatives promoted by local Government in locations where the chain is represented.

At the same time, throughout the year, the Company co-operated with Raríssimas, both through collecting funds and through direct donations, to buy wheelchairs or special care equipment for children and young people with special needs.

The co-operation between the Company and the Association of Support to Gastroenterology and Hepatology Research and Training went on, through general actions of tracking eating and health habits and specific actions in the gastroenterological and hepatic fields. The objective of this investigation, which is based in studies carried out at the Vila Nova de Gaia Hospital, is to verify the existence of possible correlations between eating habits and the number of new cases of Colon Cancer.

Finally, the Pingo Doce customers contributed towards the "Banco Alimentar" (Food Bank), these two food collection initiatives were carried out in May and December.

Feira Nova

With regard to Feira Nova, various national initiatives were promoted, of these initiatives the following can be highlighted: The Campaign in favour of ACAPO (Portuguese Association of the Blind and Poorly Sighted) where around 17 thousand euros were collected in donations; and the already usual Food Bank Campaign.

As far as the last action is concerned, the Company granted space for collecting food, and this operation collected dozens of tonnes of food groceries.

In total, Feira Nova supported more than 90 institutions in 2007, contributing with food support and fund raising.

Also noteworthy is the innovative charity Campaign, launched last Christmas by Feira Nova, which, managed to collect toys, offered by its customers and by the Company, for more than 3,000 children in 45 charitable institutions.

Recheio Cash & Carry

Recheio Cash & Carry applied 94% of its patronage budget to social welfare activities, not forgetting in the meantime, other areas like education and sport, which the Company believes to be essential for the balanced development of children and young people.

Therefore, the growth trend in social and cultural patronage continued in 2007, and also maintained the support that has been given over the last few years to institutions like: Partilha – Ajuda Solidária do Oeste (Social Welfare in the West), Centro Social "Boa Aldeia" (Good Village Social Centre), Associação Portuguesa Remar (NGO Against Social Exclusion), Centro Social "S. Nicolau" (St. Nicholas Social Centre), Verbum Dei (Catholic Charity), Centro Cristão da Cidade (City Christian Centre), Lar Santa Teresinha (Nursing Home), Banco Alimentar contra a fome (Food Bank), Diocese de Viseu (Diocese from Viseu), and Associação "Casa do Caminho" (Association for Children at Risk).

7.1.3. Patronage in Portugal – Manufacturing

In 2007, and in line with the Group's Patronage policy, Unilever Jerónimo Martins maintained its involvement with the more vulnerable population, directing its activities towards children, people with special needs and the elderly, in areas like health, education and the environment, which were defined as priorities.

Several entities received support from the Group's Manufacturing Companies through the donation of food and non-food products adapted to their situations and needs. Among the more than 25 target institutions with whom a co-operation protocol exists, the following can be renowned: AARN – Association for the Support of the New-Born, Acreditar (Private Charity Supporting Children with Cancer and their Families), Ajuda de Berço (Private Charity for Babies and Toddlers at Risk), Ajuda de Mãe (Private Charity for Pregnant Women), Associação CrescerSer (Portuguese Association for Rights of Minors and Families), Associação Novo Futuro (Association for Children and Young People Deprived of a Family Environment), Banco Alimentar (Food Bank), Centro Social Paroquial S. Tiago Camarate (Parish Social Centre), Centro Social de Sacavém (Sacavém Social Centre), Entrajuda (Support to Charitable Institutions) and Raríssimas (Association for the Mentally Handicapped and Rare Illnesses).

In 2007, for the first time, Unilever Jerónimo Martins participated in Fight Hunger – Walk the World from the World Food Programme, which took place on 13th May. The Company's active co-operation consisted not only of a donation of money and goods donation but also of voluntary work by its associates and their respective families. The Manufacturing area also contributed towards the fight against hunger with 556 tonnes of food for the Food Bank.

Also noteworthy is Unilever Jerónimo Martins' sponsorship of the Lisbon Town Hall's initiative to clean the historic areas of the capital, by supplying cleaning products.

Even so, social support was not only on a central level, as the private brands were also directly involved with the community. In this way, Olá and Ben&Jerry's developed

specific actions for charitable institutions, like the Aldeias SOS (SOS Villages), for example.

7.1.4. Patronage in Poland – Distribution

Jerónimo Martins' social responsibility does not run out at the national boarders. In fact, as Poland's food market leader, Jerónimo Martins Dystrybucja also understands and takes on this kind of responsibility, promoting actions that benefit Polish society in general, the communities where it operates and younger people in particular, especially reacting to situations of abuse and human suffering.

In this way, the Company encourages and is regularly involved in Patronage programmes, not only by giving ongoing support, but also by informing about special events and projects.

An example of this is the ongoing project "Partnership For Health", in which Biedronka, together with Danone, Lubella and the Polish Mother and Child Institute provide the product "Milk Start", which aims to combat the problem of infantile and juvenile mal nutrition in the country.

The Company also carried out other projects in cooperation with Cáritas (Catholic Charity), like the Patient's Day, for example. So, once again, in February 2007, Biedronka and Caritas offered gifts to young patients in three hospitals: The Niekłańska Str. Childrens Hospital in Warsaw, the Otwock Childrens Hospital and the Miedzylsie Child Health Centre, at a ceremony in which the Archbishop Sławoj Leszek Głódź was the guest of honour.

In June, to commemorate Children's Day, and in December to commemorate Christmas, Biedronka also offered presents to over 16,000 children from underprivileged families.

Finally, the Company has constantly supported and helped Orphanages and Charitable Associations. For example, the beneficiaries include an orphanage, day centres and special schools, namely the Krasne Orphanage, the Bethlehem Home, the Open Door Foundation and the Open Hand Organisation.

7.2. Cultural Patronage

7.2.1. Jerónimo Martins Institutional Support

As part of its "Jerónimo Martins Supports National Culture" programme, the Group has funded projects of cultural and educational interest, through its Companies.

CONTINUED SUPPORT
Name of the Institution	Area of Activity	Start of Jerónimo Martins Support	Type of Support
Support to the Orquestra Sinfónica Juvenil (Youth Symphony Orchestra)	Training of Young Musicians.	2002	Sponsorship of the Year End Concert.
Fundação de Serralves (Serralves Foundation)	Exhibition Centre.	2004	Support as founding member.
ACEJE	Christian Association of Entrepreneurs and Managers.	2000	Financial support.
CIVITAS – Centre for Literature and Literacy Resources	Encouraging children's educators, teachers and guardians to come into contact with children's books. Teacher training.	2005	Funding that allows the centre to function regularly.
Aprender a Empreender (Junior Achievement)	Association of young Portuguese entrepreneurs, which is a non-profit association that arose out of JA-YE Europe and some companies operating in Portugal.	2005	As Senior Associate, supports with annual amounts of money. Recruitment of 63 volunteers among the company's management associates to give lessons.
UCP	Universidade Católica Portuguesa (Portuguese Catholic University).	1999	Various types of educational support.
EIS Entrepreneurs for Social Inclusion	Combat against failing school and promotion of entrepreneurship.	2006	As a founding member, gives annual financial support.

Pingo Doce

Pingo Doce favours initiatives that are geared towards conserving and/or informing about Portuguese historic and cultural heritage and local traditions and so, in 2007, it brightened fairs and supported small artisans through specific actions, thereby contributing towards maintaining deeply-rooted regional activities.

Equally, the Company supported in-depth learning about the seas, protection of ocean life and helped raise the general public's awareness regarding their future and the environment. So, since March 2003 and the signing of "Pingo Doce Pela Preservação

dos Oceanos", (Pingo Doce for the Conservation of the Oceans), the Company has been the Official Sponsor of the Lisbon Oceanarium.

Feira Nova

With regard to Cultural Patronage, Feira Nova also assumes an active role. In 2007, it supported the children's play "123 – Uma colher de cada vez" (123 – One spoon at a time), a musical which aims to educate children in their hygiene and feeding habits.

Manufacturing

As far as Unilever Jerónimo Martins is concerned, cultural activities are organised through a Staff Club, an autonomous entity that is financed by the Company employees, through the members' subscriptions and various activities.

In 2007 in the cultural area, the Staff Club involved 1,311 employees in activities such as theatre plays (16), cultural visits (11) and a variety of other shows (24).

In terms of sporting and recreational activities – totalling 16 - 3,656 employees were involved, who took part in journeys, trips, walks and a rally paper, and they played radical sports, tennis and five-a-side football.

Also of note is that over the year, the premises of the various Manufacturing plants were visited by over 11,000 school and university students.

8. FREQUENTLY ASKED QUESTIONS

To provide readily available information about the practices of Jerónimo Martins in the area of Social Responsibility, this section lists the most frequently asked questions put to the Group and their corresponding answers.

For further details, the chapter of this report on Social Responsibility may also be consulted, at the Group's institutional website - www.jeronimomartins.com.

Corporate Ethics

1. Does the Jerónimo Martins have a Code of Conduct?

Yes	No
-----	----

If yes, what areas does it cover and what has been done to make it public?

Areas covered:

Social Responsibility
Respect for the Law
Cooperation with Official Entities
Independence vis-a-vis Political Parties
Integrity
Measures against Corruption
Patronage
Environmental Protection
Thorough and Transparent Information
Quality
Fair Trade Practices
Selection of Partners/Suppliers
Workers and Employees
Equal Opportunities
Health, Hygiene and Safety in the Workplace

The Code of Conduct has been made public and is available internally to all the Group employees in Portugal and Poland, and externally on the Group's website.

2. Is there a specific body that coordinates the application of the Code of Conduct to which the employees can resort?

Yes, the Ethics Committee is the body responsible for identifying, providing clarification and ensuring compliance with the Code. Any employee may address this Committee. In addition, the Group's management is prepared to provide clarification and direct procedures in order to guarantee full compliance with the established principles. All employees are responsible for strict compliance with the Code of Conduct.

Social Performance

3. Does Jerónimo Martins report externally on its Social Responsibility policy and performance?

Yes. Every year the Jerónimo Martins Group's Annual Report includes a chapter on Social Responsibility. The institutional website also has a section dedicated to this issue.

4. Does the Group have a written policy that contains measures for upholding and promoting human rights?

Yes, Jerónimo Martins respects Human Rights within the framework of the Universal Declaration of Human Rights, assuming its responsibility in this area, and seeking to promote the improvement of quality of life of all those with whom it has relations, as it believes that this is a mission that falls to everyone and in particular to economic entities. These principles are located in the Group's Code of Conduct and Human Resources policy.

5. Does Jerónimo Martins have policies or take measures intended to ensure...

non-discrimination?
	Yes No
freedom from slavery practices?	Yes No
freedom of association and the right to collective bargaining?
	Yes No
the Prohibitions of child labour?	Yes No
assure the health and safety of employees?	Yes No

6. Does the Group have a Code of Conduct for Suppliers?

Yes No

What are the main aspects of the Code?

The Jerónimo Martins Group actively seeks to do business with entities that share its ethical principles, namely with regard to employment, the environment and quality and the safety of its products.

The selection of suppliers is therefore carried out impartially, in accordance with criteria based on quality and safety of the products supplied or services provided, and the capability of the companies to innovate, supply and perform with confidence and continuously over time.

7. Does Jerónimo Martins have a written Human Resources Policy?

Yes No

See reference under Human Resources chapter of this report on Social Responsibility.

8. Does the Group have professional development programs/instruments (internal promotion systems, employee evaluations, job rotation, individual career plans and training)?

Yes, the Group has in place procedures for professional and personal development. For more information, see the section on Human Resources in the chapter of this report on Social Responsibility, and the Group's institutional site, under Human Resources.

9. Is there any form of employee representation in the company?

The employees of the Group are represented by trade unions with which the Group maintains an open relationship and dialogue that seeks to maintain a climate of understanding and social peace.

10. In the area of health, hygiene & safety in the workplace, does Jerónimo Martins...

...have a formal policy?

Yes No

If yes, specify principles.

This policy is based on the "Zero Tolerance" principle.

• ...have specific technicians in this area? Yes No
• ...have manuals? Yes No
• ...organize training sessions? Yes No
• ...are audits and reports prepared? Yes No

×l Yes	No
∑. Yes	No
κΓ Yes	No
Yes ΧĿ	No

11. Is the company involved in local community development programmes?

Jerónimo Martins has long supported and developed projects at the Company level with a strong social component where the community plays an important role, with employees' voluntary contributions.

All these activities are part of a clear and structured Patronage policy. As part of this policy two strategic areas of support - social and cultural - were defined, annually undertaking activities as part of the two major programmes currently in effect:

• "Jerónimo Martins Feeds Smiling Futures": a social programme essentially addressed at providing support to children and young people;

• "Jerónimo Martins Supports National Culture": a programme specifically addressing cultural issues, in particular the preservation and dissemination of Portuguese historical and cultural heritage.

12. Is the Group a member of any organisation in this area?

The Group is a member of RSE Portugal and the Portuguese chapter of the World Business Council for Sustainable Development (WBCSD). It has signed the Company Commitment Letter with the Millennium Objectives, which is an initiative promoted by Grace (Group for Reflection and Support to Corporate Citizenship). Jerónimo Martins participates in the Global Compact initiative proposed by the former Secretary General of the United Nations, Kofi Annan, and is committed to the 10 Universal Principles it outlines.

13. Has Jerónimo Martins signed any national protocol/agreement in the area of Human Resources?

Jerónimo Martins is proud of the relationships it has established with its social and labour partners, namely the unions. The Group is part of the Portuguese Association of Distribution Companies, and has contributed to revising Human Resources policies in the sector.

In addition to this relationship is the existence of protocols that show socially responsible management practices, such as the Protocol with ACAPO, which seeks to integrate the vision-impaired into the labour force at Jerónimo Martins. In 2007, the Group signed the "New Opportunities" protocol within the scope of the "Learn and Develop" project, with the objective of providing an education equivalent to 9th and 12th grades to the employees that request it, ensuring not only their graduation, but also the conditions that allow the employees to attend courses during their workday.

14. Does Jerónimo Martins have initiatives for people with special needs?

The Group recognizes that there are clients and employees with special needs, thus it takes measures to facilitate people's access to stores, warehouses and central buildings, and it also facilitates making purchases. Examples of measures implemented include, among others: designated spaces in parking lots, access ramps, Braille signage in elevators, priority boxes at stores, and personalized accompaniment for the vision-impaired in stores (when possible). Another of these initiatives was Jerónimo Martins' introduction in 2007 of a new functionality on its institutional site (www.jeronimomartins.com), which allows people to hear written content, thus facilitating access to online information for the vision-impaired.

Quality and Food Safety

15. Does Jerónimo Martins have a written Policy for Quality and Food Safety?

Yes No

Please see Food Quality and Safety in the chapter of this report on Social Responsibility.

16. Has Jerónimo Martins implemented food safety prevention systems?

Yes		No
-----	--	----

All food manufacturing and distribution units are equipped with Hazard Analysis and Critical Control Points (HACCP) and auto-control systems.

17. How do you guarantee the suitability of systems?

• Permanent assessment of risks
• Maintaining hazard analysis and critical control points systems
• Adequate equipment and installations
• Employees training
• Suppliers' qualifications
• Management of customer complaints
• Use of suitable, scientifically proven models
• Consumer/customer information
• System audits

18. How do you guarantee the Quality and Safety of the products throughout the supply chain?

• Use of contract provisions rigorous technical specifications
• Supplier audits
• Inspection of products at source / suppliers
• Inspection of products in the warehouses (*)
• The existence of HACCP/auto-control systems implemented in the warehouses
• Product inspections in the stores (*)
• The existence of HACCP/auto-control systems implemented in the stores (*)
• Certification of the HACCP Food Safety System of Recheio's Cash&Carry stores and logistics platforms
• Certification in Food Safety and Environmental Management, in accordance with the DS3027:2002 and NP EN ISO 14001:2004 standards, for the activities of the Gestiretalho Distribution Centres and warehouses in Azambuja, Guardeiras and Vila do Conde.

(*) These phases/processes also involve laboratory control.

19. What evidence does the Group have related to Quality and Food Safety of its Private Brand products?

In line with the various supplier audits that are done on a regular basis, in 2007, according to standard NP EN ISO 9001:2000 (Quality), Pingo Doce and Recheio certified activities related to the Development of Private Brands and Product and Supplier Follow-Up after Launch, becoming the first companies in the world to obtain this certification.

Also from a sustainable development point of view, is the Pingo Doce's pioneering launch, in 2007, of organic products under its Private Brand.

20. How are the implementation and performance of Food Quality and Safety Systems measured?

• Performing internal system audits
• Performing store audits with regard to good practices, conservation, infrastructure, hygiene, etc.

21. Has Jerónimo Martins signed any national/international protocol/agreement on Food Safety?

Yes. The Group actively participates in the Global Food Safety Initiative (GFSI) developed by CIES (Comité International d'Entreprises a Succursales), which established a benchmarking model to assess Supplier Standards and Certification under the principle "certified by one, accepted by all".

22. Is there a policy regarding the sale of products containing Genetically Modified Organisms (GMOs)?

Yes, we have an established policy in this area. In principle, Jerónimo Martins does not use GMOs in its Private Brand products, in the Distribution area, nor in the products of the Manufacturing area. When there is no other alternative, the Group alerts consumers to the fact, by providing information on the package in accordance with European Community regulations.

23. Is there a biodiversity policy?

Yes	No
-----	----

Please see the Environmental Management in the Social Responsibility chapter of this report.

24. Do you conduct tests on animals at any stage of the development of Group products?

Jerónimo Martins understands and shares consumers' concerns with respect to this important and complex issue. Consumers are the first priority of the Group. Animal testing is only allowed for reasons of consumer health or safety, and only if there is no other option through alternative testing, or through recourse to available safety information. Today, the vast majority of our products reach

consumers without having undergone any animal testing, and this will continue to be the case.

Environment management

25. Does Jerónimo Martins have a written environmental policy?

Yes	No
-----	----

Please see the Environmental Management section in the Social Responsibility chapter of this report.

26. Does the Group have programs to implement its environmental policy?

Yes, the Group has environmental management programmes that are revised on an annual basis. These programmes seek to implement corporate environmental policy principles, ensuring the adoption of good environmental practices by suppliers, employees and even consumers.

27. Has Jerónimo Martins signed an environmental protocol or is it a member of an environmental protocol/council, and/or does it use a specific environmental management system?

The Group is a member of the Portuguese chapter of the World Business Council for Sustainable Development (WBCSD). With regard to its management systems, the Manufacturing area's plants are certified under ISO 14001, and the Distribution area received certification under the same standard. Jerónimo Martins also has Certification in Food Safety and Environmental Management, in accordance with DS3027:2002 and NP EN ISO 14001:2004 standards, for the activities in the Distribution Centre warehouses in Gestiretalho in Azambuja, Guardeiras and Vila do Conde.

28. With regard to Environmental Management does the Group...

...have rules concerning the choice of suppliers?

Yes	No
-----	----

...assess specific environmental aspects and include environmental criteria in building new or refurbishing its facilities?

Yes		No
-----	--	----

29. Does Jerónimo Martins seek to raise consumer awareness about the environment?

Yes, the Group has launched campaigns addressed to the consumer, namely on issues related to: Energy, Water and Waste. More recently, the "Environmental Calendar" campaign was launched for 2008.

Other information

30. Is the Group involved in the sale of products in the following areas:

Animal Hides Yes No Gambling Games Yes No Firearms Yes No

Pornography Yes No

Alcoholic Drinks Yes No Percentage of sales: 7.5%

Tobacco Yes No Percentage of sales: 1.6%

V. Consolidated Financial Statements

CONSOLIDATED INCOME STATEMENT BY FUNCTIONS FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006

			Euro thousand
	Notes	2007	2006
Sales and services rendered	3	5,349,678	4,407,175
Cost of sales		(4,331,264)	(3,534,707)
Supplementary income and costs	5	206,340	170,447
Gross profit		1,224,754	1,042,915
Distribution costs	6	(865,769)	(704,226)
Administrative costs	6	(134,277)	(126,935)
Exceptional operating profits/losses	11.1	472	4,043
Operating profit		225,180	215,797
Net financial costs	8	(59,469)	(42,551)
Profit in associated companies	16	231	206
Gains in other investments	11.2	21,824	15,900
Profit before taxes		187,766	189,352
Income taxes	10	(36,857)	(38,444)
Profit before minority interests		150,909	150,908
Attributable to:
Minority interests		19,648	34,756
Jerónimo Martins Shareholders		131,261	116,152
Basic and diluted earnings per share- Euros (*)	24.4	0.2089	0.1848

(*) The earning per share concerning December 2006 was adjusted as a result of the stock split of 31st May 2007 (each share was split into five new shares).

To be read with the attached notes to the consolidated financial statements.

CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007 AND 2006

			Euro thousand
	Notes	2007	2006
Assets
Tangible assets	12	1,670,506	1,317,146
Investment properties	14	49,600	34,876
Intangible assets	13	496,293	446,385
Investments in associated Companies	16	700	621
Available-for-sale financial investments	17	10,289	35,385
Trade debtors and deferred costs	20	65,667	64,336
Derivative financial instruments	15	585	1,897
Deferred tax assets	19.1	73,322	75,165
Total non-current assets		2,366,962	1,975,811
Investment properties	14	-	21,500
Inventories	18	308,571	255,941
Taxes receivable	19.3	28,657	25,345
Trade debtors, accrued income and deferred costs	20	153,626	150,360
Derivative financial instruments	15	608	-
Cash and cash equivalents	21	268,639	175,764
Total current assets		760,101	628,910
Total assets		3,127,063	2,604,721
Shareholders' equity and liabilities
Share capital	23.2	629,293	629,293
Share premium		22,452	22,452
Own shares		(6,060)	(6,060)
Fair value and other reserves	23.1	92,814	84,420
Retained earnings		(161,620)	(238,215)
		576,879	491,890
Minority interests		287,326	275,391
Total Shareholders' equity		864,205	767,281
Borrowings	25	675,441	563,239
Derivative financial instruments	15	50,832	26,843
Employee benefits	26	18,685	19,154
Deferred profits- state grants		1,056	1,344
Provisions for risks and contingencies	27	15,433	13,690
Deferred tax liabilities	19.1	55,697	49,061
Total non-current liabilities		817,144	673,331
Trade creditors, accrued costs and deferred income	28	1,289,562	1,041,840
Derivative financial instruments	15	108	317
Borrowings	25	116,715	90,067
Taxes payable	19.3	39,262	31,782
Deferred profits- state grants		67	103
Total current liabilities		1,445,714	1,164,109
Total Shareholders' equity and liabilities		3,127,063	2,604,721

To be read with the attached notes to the consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

								Eur hou d o t san
			Sh ho lde ity rs' are equ
	No tes	Sh are Ca pit al	Sh are Pre miu m	Ow n Sh are s	Fai alu nd r v e a oth er res erv es	tai ned Re Ear nin gs	tal To	Min ori ty Int sts ere	Sh ho lde rs' are Equ ity
Ba lan Sh eet at 1 J y 2 00 6 ce an uar		62 9,2 93	22 ,45 2	(6 0) ,06	76 ,07 8	(30 63) 1,9	41 9,8 00	250 ,76 5	670 ,56 5
Equ ity cha s in 20 06 nge
Cur nsla tion dif fere s in 20 06 tra ren cy nce	23. 1				1.8 34		1.8 34		1.8 34
alu f fix ed Rev atio ets n o ass :	23. 1
fro m 2 006 -					4,6 92		4,6 92	3,1 15	7,8 07
lan d t sfe r to inv est nt p erty ran me rop -					(38 3)	383	-		-
lue of h fl hed Fai gin r va cas ow g	23. 1				470		470		470
lue of he dgi n fo Fai inst ent reig atio r va ng rum s o n o per ns	23. 1				(1. 849 )		(1. 849 )		(1. 849 )
lue of ilab le-f sale fin ial Fai inv est nts r va ava or- anc me	23. 1				3,5 78		3,5 78		3,5 78
Oth han in reta ine d e ing s in 20 05 er c ges arn	23. 1					2	2		2
Ga ins/ loss dire ctly nise d in uity es re cog eq		-	-	-	8,3 42	385	8,7 27	3,1 15	11, 842
Net ofit in 200 6 pr		-	-	-	-	116 ,15 2	116 ,15 2	34, 756	150 ,90 8
To tal ins /lo ise d d uri the ga sse s r eco gn ng ye ar		-	-	-	8,3 42	,53 116 7	124 ,87 9	37 ,87 1	2,7 16 50
Div ide nds						(52 ,78 9)	(52 ,78 9)	(1 45) 3,2	(66 4) ,03
Ba lan Sh eet at 31 De ber 20 06 ce cem		62 9,2 93	22 ,45 2	(6 0) ,06	84 ,42 0	(23 15) 8,2	49 1,8 90	27 5,3 91	76 7,2 81
Equ ity cha s in 20 07 nge
Cur nsla tion dif fere s in 20 07 tra ren cy nce	23. 1				943 15.		943 15.		943 15.
Rev alu atio f fix ed ets n o ass :	23. 1
fro m 2 007 -					5,2 76		5,2 76	5,2 19	10, 495
nd Bus ine isit ion tru ctu ring ss a cqu s a res -					(63 6)	636	-		-
Fai lue of h fl hed gin r va cas ow	23. 1				(23 5)		(23 5)		(23 5)
g lue of he dgi n fo Fai inst ent reig atio r va rum s o n o ns	23. 1				(4. 963 )		(4. 963 )		(4. 963 )
ng per lue of ilab le-f sale fin ial Fai inv est nts r va ava or- anc me	23. 1				(6, 991 )		(6, 991 )		(6, 991 )
Ga ins/ loss dire ctly nise d in uity es re		-	-	-	8,3 94	636	9,0 30	5,2 19	14, 249
cog eq Net ofit in 200 7 pr		-	-	-	-	131 ,26 1	131 ,26 1	19, 648	150 ,90 9
To tal ins /lo ise d d uri the ga sse s r eco gn ng ye ar		-	-	-	8,3 94	13 1,8 97	140 ,29 1	24 ,86 7	16 5,1 58
Div ide nds						(55 ,30 2)	(55 ,30 2)	(12 ,93 2)	(68 ,23 4)
Ba lan Sh eet at 31 De ber 20 07 ce cem		62 9,2 93	22 ,45 2	(6, 0) 06	92 ,81 4	(16 20) 1,6	57 6,8 79	28 7,3 26	86 4,2 05

To be read with the attached notes to the consolidated financial statements.

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006

			Euro thousand
	Notes	2007	2006
Operating Activities
Cash received from Customers		5,988,247	4,923,719
Cash paid to Suppliers and Employees		(5,478,418)	(4,497,428)
Cash generated from operations	22	509,829	426,291
Interest paid		(56,346)	(44,700)
Income taxes paid		(26,732)	(17,194)
Cash Flow from operating activities		426,751	364,397
Investment activities
Disposals of tangible assets		7,813	5,988
Disposals of available-for-sale financial investments and investment
property		49,980	32,334
Interest received		2,905	2,956
Dividends received		698	1,432
Acquisition of group and associated companies		(6,821)	-
Acquisition of tangible assets		(438,098)	(284,807)
Acquisition of available-for-sale financial investments and investment property		(379)	(203)
Acquisition of intangible assets		(21,154)	(21,461)
Cash flow from investment activities		(405,056)	(263,761)
Financing activities
Received from other non-current loans		221,115	-
Reimbursement of loans		(91,630)	(51,124)
Dividends paid	23.4	(68,234)	(66,034)
Cash Flow from financing activities		61,251	(117,158)
Net changes in cash and cash equivalents		82,946	(16,522)
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of the year		175,764	191,392
Net changes in cash and cash equivalents		82,946	(16,522)
Effect of acquisition of subsidiaries		1,053	-
Effect of currency translation differences		8,876	894
Cash and cash equivalents at the end of the year	21	268,639	175,764

To be read with the attached notes to the consolidated financial statements

	Index to the Notes to the Consolidated Financial Statements	Page
1	Activity 193
2	Accounting policies 193
3	Segments reporting 204
4	Businesses Acquisitions 205
5	Supplementary income and costs 206
6	Distribution and administrative costs 206
7	Staff costs 206
8	Net financial costs 207
9	Financial instruments 207
10	Income tax recognised in the income statement 208
11	Exceptional operating profits/losses and gains in other investments 208
12	Tangible Assets 209
13	Intangible Assets 211
14	Investment Property 212
15	Derivative financial instruments 213
16	Investments in associated companies 214
17	Available-for-sale financial investments 214
18	Inventories 215
19	Taxes 215
20	Trade debtors, accrued income and deferred costs 216
21	Cash and cash equivalents 217
22	Cash generated from operations 217
23	Capital and reserves 218
24	Earnings per share 219
25	Borrowings 219
26	Employee benefits 221
27	Provisions and adjustments to the net realisable value 224
28	Trade creditors, accrued costs and deferred income 224
29	Guarantees 225
30	Operational lease 225
31	Capital commitments 225
32	Contingencies 225
33	Related parties 227
34	Group companies 228
35	Interest in joint ventures 230
36	Events after the balance sheet date 231

1 Activity

Jerónimo Martins, SGPS, S.A. (JMH), is the parent Company of Jerónimo Martins Group (Group) and has its head office in Lisbon.

Jerónimo Martins Group is essentially devoted to the production, distribution and sale of food and other fast moving consumer goods products. The Group operates in Portugal and Poland, and employs 41,300 people (34,675 in 2006).

Head Office: Rua Tierno Galvan, Torre 3, 9º, J- 1099-008 Lisbon

Share Capital: 629,293,220 euros

Registered at the Commercial Registry Office of Lisbon and Tax Number: 500 100 144

JMH has been listed on Euronext Lisbon (ex-Lisbon and Porto Stock Exchange) since 1989.

The share capital is comprised of 629,293,220 ordinary shares (2006: 629,293,220 shares, this number having been adjusted according to the stock split on May 31st, 2007, - each share was split into five new shares), and all shares have a nominal value of one euro.

The Board of Directors approved these consolidated financial statements on 27th February 2008.

2 Accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are as follows:

2.1. Basis for preparation

All amounts are shown in thousand euros (EUR thousand) unless otherwise stated.

The consolidated financial statements of JMH were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).

The JMH consolidated financial statements were prepared in accordance with the historical cost principle, except for land recorded in tangible assets, investment property, derivative financial instruments and available-for-sale financial investments, that includes equity holdings referred in note 2.8, which were stated at their fair value (market value).

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of current event and actions, actual results ultimately may differ from those estimates. It is, however, firmly believed by the management that the estimates and assumptions adopted do not involve significant risks that may, over the course of the coming financial year, cause material adjustments in the value of the assets and liabilities (note 2.25).

The financial risk management, as defined in the IFRS 7 – Financial instruments: Disclosures, is detailed in the Corporate Governance report.

Change in Accounting Policy and Bases for Presentation

Starting on January 1st, 2007, the new standard IFRS 7 – Financial Instruments: Disclosures, as well as changes introduced to IAS 1 – Presentation of Financial Statements, were adopted. These introduce new disclosures relative to financial instruments and do not have any impact on the classification and measurement of financial instruments held by the Group or in the information disclosed related to taxes, accounts receivable or accounts payable.

Also starting in 2007, some standards, amendments and interpretations to standards became mandatory but without any material effects on the Group's financial statements and in most cases they are not applicable to the Group's activities. This is the case of the amendments introduced to standard IFRS 4 – Insurance Contracts, and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC): IFRIC 7 – Applying the Restatement Approach under IAS 29, IFRIC 8 – Scope of IFRS 2, IFRIC 9 – Reassessment of Embedded Derivatives and IFRIC 10 – Interim Financial Reporting and Impairment.

The new standard, IFRS 8 – Operating Segments, as well as the amendments to IAS 23 – Borrowing Costs, must be applied starting January 1st, 2009. Since they have a reduced impact on the Group's financial statements, bearing in mind the disclosures that are currently made, it was decided not to anticipate their adoption.

The IFRIC also issued a set of interpretations to the actual standards, with effective date for accounting periods beginning after March 1st, 2007, namely IFRIC 11 – IFRS 2 – Group and Treasury Share Transactions, IFRIC 12 – Service Concession Arrangements, IFRIC 13 – Customer Loyalty Programmes and IFRIC 14 – IAS 19 – The limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction. These interpretations are not materially relevant and the majority is not applicable to the Group's activities.

2.2. Basis of consolidation

Reference dates

The consolidated financial statements include, as of 31 December 2007, assets, liabilities and results of Group companies, i.e., the ensemble consisting of JMH and its subsidiaries and associated companies, which are presented in notes 34 and 16, respectively.

Investments in Group companies

Group companies (subsidiaries) are those controlled by JMH. There is control when JMH, directly or indirectly, holds more than half of the voting rights, or has the power to conduct the company's financial and operating policy with the purpose of deriving benefits from its activity. It is assumed that there is control when the percentage of the holding exceeds 50%.

Group companies are included in the consolidation by the full consolidation method, from the date when control was acquired to the date when it effectively ends. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of the acquisition is measured as the fair value of the assets given up, shares issued and liabilities undertaken at the date of the acquisition plus costs attributable to the acquisition.

In cases where the share capital of subsidiaries is not held at 100%, a minority interest is recognised relative to the portion of results and net value of assets attributable to third parties.

The accounting policies used by the subsidiaries to comply with legal requirements, whenever necessary have been changed to ensure consistency with the policies adopted by the Group.

Investments in associated companies

Associated companies are those over whose financial and operating policy JMH exercises significant influence. Such influence is presumed to exist when the percentage of participation exceeds 20%.

These investments are consolidated by the equity method, i.e., the consolidated financial statements include the Group's interest in the associated company's total recognised gains and losses from the date when significant influence starts to the date when it effectively ends.

When the Group's share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless the Group has incurred obligations or made payments on behalf of the associates.

Investments in companies subject to joint control

Companies subject to joint control are those over which the Group exercises joint control as established in shareholder agreements.

These companies are consolidated by proportional method, i.e., the consolidated financial statements include the share attributable to the Group in these company's assets, liabilities and accumulated earnings and losses from the date when joint control starts to the date when it effectively ends.

Goodwill

Goodwill represents the surplus of acquisition cost over the fair value of identifiable assets and liabilities attributable to the Group at the date of acquisition or first consolidation. If the cost of acquisition is lower than the fair value of the net assets of the acquired subsidiary, the difference is recognised directly in the income statement.

At the balance sheet date the Group makes an assessment for Goodwill impairment indicators. If those indicators exist, an evaluation of the recoverable amount of Goodwill is made, and the respective impairment losses recognised whenever the accounting value of Goodwill exceeds its recoverable amount (note 2.13).

The gain or loss on the disposal of an entity includes the carrying amount of Goodwill related to the entity sold, unless the business to which that Goodwill is related is maintained generating benefits to the Group.

Foreign currency translation

The financial statements of foreign entities are translated into Euros based on the closing exchange rate for assets and liabilities and historical exchange rates for equity. Costs and income are translated at the average monthly exchange rate, which basically corresponds to the exchange rate on the date of the respective transaction. Exchange differences arising are entered directly in equity net of the effect generated by the respective hedging instrument (see accounting policy described in note 2.5).

When a foreign entity is sold, accumulated exchange differences are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Balances and transactions between Group companies

Balances and transactions as well as unrealised gains between Group companies and between these and the parent company are eliminated in the consolidation. Unrealised losses are also eliminated unless the cost cannot be recovered.

Unrealised gains arising from transactions with associated companies or companies subject to joint control are eliminated in the consolidation proportionally to the share attributable to the Group. Unrealised losses are also eliminated except when providing proof of impairment of the asset transferred.

2.3 Transactions in foreign currencies

Transactions in foreign currencies are translated into Euros at the exchange rate prevailing on the transaction date.

On the balance sheet date, monetary assets and liabilities expressed in foreign currencies are translated at the exchange rate prevailing on that date and exchange differences arising from this conversion are recognised in the income statement. When qualifying as hedges on investments in foreign subsidiaries the exchange differences are deferred in equity.

The main exchange rates applied on the balance sheet date are those listed below:

	Rate on 31 December 2007	Average rate for the year
Polish Zloty (PLN)	€ 0.2783	€ 0.2653
US Dollar (USD)	€ 0.6853	-

2.4 Derivative Financial instruments

The Group uses derivatives with the sole intention of managing any financial risks to which it is subject. In accordance with its financial policies, the Group does not enter into speculative positions.

Although derivatives entered by the Group correspond to effective economic hedges against risks to be hedged, not all of them qualify as hedge instruments for accounting purposes, according to IAS 39 rules. Those that do not qualify as hedge instruments are booked on the Balance sheet at fair value and changes to that amount are recognized in the financial results.

Whenever available, fair values are estimated based on quoted instruments. In absence of market prices, fair values are estimated through discounted cash flow methods and option valuation models, in accordance with generally accepted assumptions.

Derivative financial instruments are recognised on the date they are negotiated (trade date), by their fair value. Subsequently, the fair value of derivative financial instruments is re-evaluated on a regular basis, and the gains or losses resulting from this re-evaluation are recorded directly into the results of the period, except in relation to hedge derivatives. Recognition of changes in the fair value of hedge instruments depends on the nature of the hedged risk and the type of hedge used.

2.5 Hedging operations

Derivative financial instruments used for hedging may be classified, from an accounting point of view, as hedge instruments, as long as they comply with all the following conditions:

• (i) At the starting date of the transaction, the hedge relationship is identified and formally documented, including identification of the item hedged, the hedge instrument, and evaluation of the effectiveness of the hedge;
• (ii) There is the expectation that the hedge relationship will be highly effective on the initial transaction date and throughout the life of the operation;
• (iii) The effectiveness of the hedge may be reliably measured on the initial transaction date and throughout the life of the operation;
• (iv) For cash flow hedge operations, those cash flows must have a high probability of occurring.

Interest rate risk (cash flow hedge)

Whenever expectations surrounding movements in interest rates so justify, the Group tries to anticipate any adverse impact through the use of derivatives, such as, interest rates swaps, caps and floors, forward rates agreements, etc. The selection process that each instrument is subject to, praises economic contribution more than anything else. The implications of adding any new instrument to a portfolio of derivatives are also taken into account, namely, in terms of volatility impact on earnings.

The instruments that qualify as cash flow hedging instruments are booked at fair value on the Balance sheet, and to the degree that they are considered effective, changes to their fair value are initially booked against equity and afterwards reclassified as financial expenses.

If an hedging instrument is ineffective it is recognised directly in the profit and loss. This way, in net terms, all costs associated to the underlying exposure are carried at the interest rate of the hedging instruments.

When a hedge instrument expires or is sold, or when the hedge ceases to meet the criteria required for hedge accounting, the changes in the fair value of the derivative, that are accumulated in reserves, are recognised in the results when the hedged operation also affects the results.

Interest rate risk (fair value hedge)

For financing operations in foreign currency or fixed interest rate that are not natural hedging of investments in foreign operations, whenever justifies, the Group uses fair value hedging operations as instruments to neutralise the volatility of those financing operations in the Group financial statements.

Hedging instruments that are designated and qualify as fair value hedging are recognised in the balance sheet at their fair value, with changes recognised in the profit and loss. At the same time, changes to the fair value of the hedged instrument, in the component that is being hedged, are recognised in profit and loss. Consequently, any ineffectiveness of the hedging operations is immediately recognised in the results.

If the hedge ceases to comply with the criteria required for hedge accounting, the derivative financial instrument is transferred to the negotiation portfolio, and the hedge accounting is prospectively discontinued. If the hedged asset or liability corresponds to a fixed-income instrument, the revaluation adjustment is amortised until maturity using the effective interest rate method.

Foreign exchange risk

With respect to foreign exchange risks, the Group follows a natural hedge policy, raising debt in local currency whenever market conditions are judged to be convenient (namely, taking into consideration the level of interest rates).

Net investments in foreign entities

Exchange rate fluctuations in loans contracted in foreign currencies for the purpose of funding investments in foreign operations are taken directly to currency translation reserve (note 2.2).

Any cross currency swaps that are entered into with the purpose of hedging investments in foreign entities that qualify as hedging instruments are booked at fair value on the Balance sheet. To the degree that they are considered effective, changes to their fair value are recognized directly in currency translation reserve (note 2.2). The cumulative gains and losses recognised in reserves are transferred to results of the year when a foreign entity is disposed.

2.6 Tangible assets

Assets other than land are recorded at acquisition cost net of accumulated depreciation and impairment losses (note 2.13).

Assets classified as land are stated as per the respective revaluation carried out by independent agents (note 2.9).

Increases in the carrying amount arising from revaluation of land are credited to fair value reserves in shareholders' equity. Decreases that offset previous increases of the same asset are charged against fair value reserves. All other decreases are charged to the income statement.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in the operating profit. When revalued assets are sold, the amounts included in fair value and other reserves are transferred to retained earnings.

Repairs and maintenance costs that do not extend the useful life of these assets are charged directly to the income statement during the financial period in which they are incurred. The cost of major store renovation is included in the carrying amount of the asset when it is probable that additional economic benefits will flow to the Group.

Financial lease agreements

Assets used under financial lease contracts relative to which the Group substantially assumes all the risks and rewards of ownership of the leased asset are classified as tangible assets.

Financial lease contracts are recorded at the time they are entered into as assets and liabilities for the lower of fair value of leased assets or present value of outstanding lease payments.

The depreciation of leased assets is based on the policy established by the Group for tangible assets.

Rental payments are split into a financial charge and a reduction of liability. Financial charges are recognised as costs over the lease period, so as to produce a constant periodic rate of return on the lessor's remaining net investment.

Depreciation

Depreciation is calculated by the straight-line method, on a duodecimal basis on acquisition cost according to the useful life estimated for each class of asset. The most important annual depreciation rates are as follows (in %):

	%
Land	Not depreciated
Buildings and other constructions	2-4
Plants and machinery	10-20
Transport equipment	12.5-25
Office equipment	10-25

2.7 Intangible assets

Intangible assets are stated at acquisition cost net of accumulated amortisation and impairment losses (note 2.13).

Costs with internally generated Goodwill and own brands are taken to the income statement as they are incurred.

Research and development expenditure

Research expenditure incurred in the search for new technical or scientific knowledge or alternative solutions are recognised in the income statement as incurred.

Development expenditure is recognised as intangible assets when the technical feasibility of the product or process being developed can be demonstrated and the Group has the intention and capacity to complete their development and start trading or using them.

Capitalised development expenditure includes the cost of materials used, direct labour costs and a share of general expenditure.

Computer software

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. If those costs are directly associated with development projects that will probably generate future economic benefits (reliably measured), they are recognised as research and development in intangible assets.

Other intangible assets

Expenses to acquire key money, trademarks, patents and licences are capitalised when expect to be used by the Group.

Intangible assets with indefinite useful life

The trademarks Pingo Doce and Feira Nova are, besides Goodwill, the only intangible assets with indefinite useful life, where there is no foreseeable limit to the period over which these assets are expected to generate economic benefits for the Group.

Depreciation

Depreciations are recognized in the income statement on a linear basis over the estimated useful life of the intangible assets, except if that life is considered indefinite. Goodwill and the intangible assets with indefinite useful life are tested for impairment at balance sheet date, and whenever there is an indication that the book value will not be recoverable.

Depreciation of the other intangible assets is calculated by the straight-line method, on a duodecimal basis on acquisition cost. The most important annual depreciation rates are as follows (in %):

	%
Development expenditure	20-33.33
Key money and trademarks	5-6.66

2.8 Financial assets

Financial assets are recognised in the Group's balance sheet on their trade or contracting date, which is the date on which the Group commits to acquiring or selling an asset. Financial assets are initially recognised by their fair value plus directly attributable transaction costs, except for assets carried at fair value through profit and loss in which the transaction costs are immediately recognised in the results. These assets are derecognised when (i) the Group's contractual rights to receive their cash flows expire, (ii) the Group has substantially transferred all the risks and rewards of ownership, or (iii) although it retains a portion but not substantially all the risks and rewards of ownership, the Group has transferred control over the assets.

Financial assets and liabilities are offset and presented by their net value only when the Group has the right to offset the amounts recognised and has the intention to settle on a net basis.

The Group classifies its financial assets into the following categories: financial investments held for trading, loans and receivables and available-for-sale financial investments. The classification depends on the purpose for which the investments were acquired.

Financial investments held for trading (derivative financial instruments)

An asset is classified in this category if it was acquired with the principal intention of being sold in the short term. This category also includes those Derivatives that do not qualify for hedge accounting. The gains and losses of changes in the fair value of assets measured at fair value through profit and loss, are recognised in the results of the year in which they occur in net financial costs, where interests received and dividends are also included.

Loans and receivables

These correspond to non-derivative financial assets, with fixed or determined payments, that are not quoted in an active market. The assets are those that result from the normal operational activities of the Group, such as the supply of goods or services, and that the group has no intention of selling. Subsequently loans and receivables are measured at amortised cost in accordance with the effective interest rate method.

Available-for-sale financial investments

The available for sale financial assets are non derivative financial assets that: (i) the Group intends to maintain for an indeterminate period of time; (ii) are designated as available for sale when they are first recognised; or (iii) they do not fit into the abovementioned categories. They are recognised as non-current assets, unless there is the intention to sell them within 12 months of the balance sheet date.

Equity holdings other than Group's companies, joint ventures or associates, are classified as available-for-sale financial investments and recognised in the accounts as non-current assets.

These financial investments are marked to market, i.e., they are stated at the respective market price value as at balance sheet date. When there is medium term expectation of significant decrease of the value below the listed value, provisions for impairment losses are set up to reflect permanent losses.

If the investments are unlisted, the Group uses, whenever possible, valuation techniques to obtain the fair value of those investments. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same or estimation of discounted cash flow to be received in the future. Not being possible the use of any of these valuation techniques, they are stated at cost. When so justified, provisions for impairment losses are recognised.

Unrealised capital gains and losses are recognised directly in equity, until the financial asset is derecognised, at which time the accumulated gain or loss previously recognised in equity is included in net gains or losses for the period. The dividends of equity holdings classified as available for sale are recognised in gains in other investments, when the right to receive the payment is established.

2.9 Investment Property

Investment property is registered at fair value, determined by specialised independent entities, with appropriate recognised professional qualification and experience in valuations of these kinds of assets.

The fair value is based on market values, being this the amount that two independent willing parties would be interested in making a transaction of the asset.

The methodology adopted in the evaluation and determination of fair value consists of applying the market's comparative method, in which the asset to be evaluated is compared with other similar assets that perform the same function, negotiated recently in the same location or in comparable zones. The known transaction values are adjusted to make the comparison pertinent, and the variables of size, location, existing infrastructure, state of conservation and other variables that may be relevant in some way are considered.

In addition, and particularly in cases in which comparison with transactions that have occurred is difficult, the profitability method is used, in which it is assumed that the value of the asset corresponds to the present value of all the future benefits and rights arising from its ownership.

For this purpose, an estimation of the market rent is used, considering all the endogenous and exogenous variables of the asset under evaluation, and it is considered an yield that reflects the risk of the market of which that asset is a part, as well as the characteristics of the asset itself. Thus, the assumptions used in the evaluation of each asset vary according to its location and technical characteristics, using an average yield of 8%.

Changes to fair value of investment property are recognised in the income statement, in net financial costs, in accordance with IAS 40, since it is related with the expected return of a financial investment in assets owned for appreciation.

Whenever, as a result of changes in their expected use, tangible assets are transferred to investment property, the transfer value corresponds to their carrying amount, which should correspond to the respective market value on the date of transfer.

If an investment property starts to be used by the business operations of the Group, it is transferred to tangible assets and its fair value at the date of transfer becomes its acquisition cost for accounting purposes.

2.10 Customers and debtors

Customers and debtor balances are initially recorded at fair value, being subsequently measured at amortised cost in accordance with the effective interest rate method, net of any provision for impairment losses.

2.11 Inventories

Inventories are valued at the lower of cost or net realisable value. The net realisable value corresponds to the selling price in the ordinary course of business, less the estimated selling expenses.

Inventories are usually valued at the last acquisition cost, which, considering the high rotation of Inventories corresponds approximately to the actual cost that would be determined based on the FIFO method.

The cost of finished goods and work in progress comprises raw materials, direct labour, and other direct costs.

2.12 Cash and cash equivalents

The cash and cash equivalents heading includes cash, deposits on hand and short-term investments with high liquidity. Bank overdrafts are presented as current Borrowings.

2.13 Impairment

2.13.1 Impairment of non financial assets

Except for investment property (note 2.9), inventories (note 2.11) and deferred tax assets (note 2.22), all other Group assets are considered at each balance sheet date in order to assess for indicators of possible impairment losses. If such indication exists, the assets recoverable amount is estimated.

For Goodwill and other intangible assets with indefinite useful life, the recoverable amount is estimated annually at balance sheet date.

Regarding cash-generating units in operation for less than a certain time period (2 to 3 years, depending on the business segment), the Group decided not to make impairment tests as the respective businesses have not yet reached sufficient maturity, for revaluation to be proved credible. It is determined the recoverable amount of assets with indication of potential impairment loss. Whenever the carrying value of an asset, or the cashgenerating unit to which the same belongs, exceeds its recoverable amount, its value is reduced to the recoverable amount and the impairment loss recognised in the income statement.

Determining the recoverable amount of assets

The recoverable amount of medium and long-term receivables corresponds to the present value of estimated future cash inflows, using as discount rate the actual interest rate implicit in the original operation. For all other assets, the recoverable amount is the higher of net selling price and value in use.

The value in use of an asset is calculated as the present value of estimated future cash flows. The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and the specific risks of the asset in question.

The recoverable amount of assets that by them do not generate independent cash flow is determined together with the cash-generating unit to which these assets belong.

Reversal of impairment losses

An impairment loss recognised in a medium and long-term receivable is only reversed if justification for the increase in the respective recoverable amount is based on an event taking place after the date the impairment loss was recognised.

An impairment loss recognised as related to Goodwill is not reversed.

Impairment losses for other assets are reversed whenever there are changes in the estimates used to determine the respective recoverable amount. Impairment losses are reversed to the extent of the amount (net of amortisation or depreciation) that would have been determined for the asset if no impairment loss was recognised.

2.13.2 Impairment of financial assets

At each reporting date the Group analyses if there is objective evidence that a financial asset or group of financial assets is impaired.

Available-for-sale financial investments

In the case of financial investments classified as available for sale, a prolonged or significant decline in the fair value of the instrument below its cost is considered to be an indicator that the instruments are impaired. If there is similar evidence for financial assets classified as available for sale, the accumulated loss – measured as the difference between the acquisition cost and the actual fair value, minus any impairment loss of the financial asset that has already been recognised in the results – is removed from equity and recognised in the profit and loss.

Clients, debtors and other financial assets

Provisions are recorded for impairment losses when there are objective indicators that the Group will not receive the entire amounts it is due according to the original terms of established contracts. When identifying situations of impairment, various indicators are used, such as:

• (i) analysis of breach;
• (ii) breach for more than 3 months;
• (iii) financial difficulties of the debtor;
• (iv) probability of the debtor's bankruptcy.

Provision for impairment losses is determined by the difference between the recoverable amount and the accounting value of the financial assets and is recognised in the profit and loss. The accounting value of these assets is reduced to the recoverable amount by using a provisions account. When an amount receivable from customers and debtors is considered to be irrecoverable, it is written-off using the provisions account for impairment losses. Subsequent recovery of amounts that had been written-off is recognised as profit.

Whenever receivable amounts from clients and other debtors that are overdue, are subject to renegotiation of its terms, ceased to be considered as overdue and are considered as new credits.

2.14 Share Capital

Costs incurred with the issuance of new shares are recognised directly in reserves, net of respective taxes.

Own shares purchased are shown at cost as a deduction in equity. When they are disposed, the amount received, net of costs related with the transaction and taxes, are recognised directly in equity.

2.15 Dividends

Dividends are recognised as liabilities when they are declared.

2.16 Loans

Loans are initially recognised at fair value less the transaction costs that were incurred and are subsequently measured at the amortized cost. Any difference between the issued value (net of transaction costs incurred) and the nominal value is recognised in the profit for the period of the loans, in accordance with the effective interest rate method.

2.17 Employees benefit

Post-employment benefits (Retirement)

Defined contribution plans

Defined contribution plans are pension plans for which the Group makes defined contributions to independent entities (funds), and for which it has no legal or constructive obligation to pay any additional contribution at the time when the employees come into use of that benefits.

Group contributions to defined contribution plans are recognised as expenses at the time they are incurred.

Defined benefit plans

Defined benefit plans are pension plans where the Group guarantees the attribution of a certain benefit to the employees included in the plan at the time such employees retire.

The Group's obligation for defined benefit plans is estimated, for each plan separately, every semester at the accounts closing date by a specialised independent agent.

Actuarial valuation is made using the immediate rents method, having present that the plans includes only retired ex-workers. The discount rate is the interest rate on medium and long-term risk-free bonds. The obligation thus determined is shown in the balance sheet net of plan assets.

The year's current service costs, interest, return on plan assets and actuarial gains or losses are recognised as costs or income for the year.

2.18 Provisions

Provisions are booked in the balance sheet whenever the Group has a present obligation (legal or implicit) as a result of a past event and it is probable that a rationally estimated outflow of resources embodying economic benefits will be required to settle the obligation.

Restructuring provision

Provisions for restructuring costs are set up whenever a formal restructuring plan has been approved by the Group and the restructuring has started to be implemented or has been publicly announced.

2.19 Suppliers and other creditors

Suppliers and other creditors' balances are stated initially at the fair value and subsequently at the amortised cost accordingly with the effective interest rate method.

2.20 Recognition of revenue

Sales and services rendered

Revenues from sales are recognised in the income statement when significant risks and rewards of ownership are transferred to the buyer. Revenues from the services rendered are recognised as income in accordance with their stage of completion as of the balance sheet date. Revenues relating to the purchase of goods for resale are recognised when these are sold.

Government grants

Government grants are only recognised after it has been safely established that the Group will comply with the inherent conditions and that the grants will be received.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs they are intended to compensate.

Government grants received to compensate investments made by the Group in the acquisitions fixed assets are recognised in the income statement during the estimated useful life of the respective subsidised asset, for a maximum of 10 years.

Rents

Rents received for the lease of investment property are recognised as financial revenues in the income statement in the period to which they relate.

Dividends

Dividends are recognised as revenues at the time they are declared.

2.21 Costs

Operational Leasing

Payments made for operational leasing contracts are recognised in the income statement on a linear basis for the duration of same contracts.

Net financial costs

Net financial costs represent the interest on borrowings, the interest on investment made, dividends, foreign exchange gains and losses, gains and losses resulting from changes in the fair value of assets measured at fair value through profit and loss, gains and losses in the valuation of investment property and costs and income with financing operations. Net financial costs are accrued in the income statement in the period in which they are incurred.

2.22 Income tax

Income tax includes current and deferred taxes. Income tax is recognised in the income statement except when relating to gains or losses directly recognised in equity, in which case it is also stated directly in equity.

Tax on current income is calculated in accordance with tax criteria prevailing as of the balance sheet date.

Deferred tax is calculated in accordance with the balance sheet liability method on temporary differences between the book value of assets and liabilities and the respective tax base. No deferred tax is calculated on Goodwill and initial recognition differences of an asset and liability if the same does not affect statutory or tax results.

The measurement of deferred tax assets and liabilities should reflect the tax consequences that would follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amount of its assets and liabilities.

The rate used to determine deferred tax is that in force during the period when temporary differences are reversed.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which temporary differences can be utilised. Deferred tax assets are revised on an annual basis and reduced when it is no longer probable that they may be used.

2.23 Segment information

Business segment

Business segment is a distinguishable component of the Group committed to supplying an individual product or service and subject to different risks and returns from those of other business segments. Two business segments were identified:

• Distribution of consumption products in self-service stores; and
• Manufacturing industry of food products, personal and home care products, and product distribution services through representations.

Geographical segment

Geographical segment is an individual unit of the Group committed to provide products or services within a specific economic environment and subject to different risks and returns from those of other units operating in other economic environments. The following geographical segments were identified: Portugal and Poland.

2.24 Business combinations

To a Business combination involving entities under common control, before and after the combination takes effect, it is applied the book value measurement method to the transactions of the business combination.

2.25 Critical accounting estimates and judgments

Tangible and intangible assets, and investment properties

Determining the fair value of tangible assets and investment properties, as well as the useful life of assets, is based on management estimates. Determining impairment losses of these assets also involves the use of estimates. The recoverable amount and the fair value of these assets are normally determined using the discounted cash flow method, which incorporates market assumptions. Identifying indicators of impairment, as well as estimating future cash flows and determining the fair value of assets, requires significant judgment by Management in validating indicators of impairment, expected cash flows, applicable discount rates, estimated useful life and residual values. If these assumptions do not materialise as Management estimates, the Group's operating results may be impacted, and consequently registering impairments, namely Goodwill, may be affected.

Fair value of financial instruments

The fair value of financial instruments not quoted in an active market is determined based on evaluation methods and financial theories. The use of valuation methodologies requires using assumptions, with some assumptions requiring Management to use estimates. Therefore, alterations in those assumptions could result in a change in the fair value reported.

Impairment of investments in associated companies

As a rule, an investment is recorded as impaired according to the IFRS when the accounting value of the investment exceeds the present value of future cash flows. Calculating the present value of estimated cash flows and the decision to consider an asset as permanently impaired involves judgment and substantially relies on Management's analysis of the future development of its associated companies. When measuring impairment, market prices are used if they are available, or other evaluation parameters are used, based on the information available from the associated companies. In order to determine if the impairment is permanent, the Group considers the capacity and intention to retain the investment for a reasonable period of time that is sufficient to predict recovery of the fair value up to (or above) the accounting value, including an analysis of factors such as the expected results of the associated company, the regional economic situation, and the status of the sector.

Deferred taxes

Recognising deferred taxes assumes the existence of results and future collectable income. Deferred tax assets and liabilities were determined based on tax legislation currently in effect for the Group's companies, or on

legislation already published for future application. Changes in the tax legislation may influence the value of deferred taxes.

Provisions for impairment losses of clients and debtors

Management maintains a provision for impairment losses of clients and debtors, in order to reflect the estimated losses resulting from clients' inability to make required payments. When evaluating the reasonability of provisions for the mentioned impairment losses, Management bases its estimates on an analysis of the time of non-payment on accounts receivable from its clients, its historical experience of write-offs, the client's credit history and changes in the client's payment terms. If the client's financial conditions deteriorate, the provisions for impairment losses and actual write-offs may be higher than expected.

Pensions and other long-term benefits granted to employees

Determining responsibilities for pension payments requires the use of assumptions and estimates, including actuarial projections, estimated profit from investments and other factors that may impact the costs and responsibilities of the pension plan. Changes to these assumptions may have a significant impact on the values determined.

Provisions

The Group exercises considerable judgment in measuring and recognising provisions and its exposure to contingent liabilities related to legal proceedings. This judgment is necessary to determine the probability that a lawsuit may be successful, or to record a liability. Provisions are recognised when the Group expects that proceedings under way will result in cash outflows, the loss is considered probable and may be reasonably estimated. Due to the uncertainties inherent to the evaluation process, real losses may be different from those originally estimated in the provision. These estimates are subject to changes as new information becomes available, mainly with the support of internal specialists, if available, or through the support of external consultants, such as actuaries or legal advisers. Revisions to the estimates of these losses from proceedings under way may significantly affect future results.

2.26 Fair value of financial instruments

To determine the fair value of a financial asset or liability, if such a market exists, the market price is applied. Otherwise, which is the case of some financial assets and liabilities, evaluation techniques that are generally accepted, in the market, are used, based on market assumptions.

The Group applies evaluation techniques for unlisted financial instruments, such as, derivatives, fair value financial instruments through profit and loss and assets that are available for sale. The evaluation models most frequently used are discounted cash flow and options models, which incorporate for example interest rate curves and market volatility.

Cash and cash equivalents, debtors and accruals and deferrals

These financial instruments include mainly short-term financial assets and for that reason their accounting value at reporting date is considered approximately its fair value.

Available for sale financial investments

Listed financial instruments are recognised in the balance sheet at its fair value, the other available for sale financial investments are stated at cost, deducted of any impairment loss, since its fair value cannot be reliably measured (note 17).

Loans

The fair value of loans is achieved from the discount cash flow of all expected payments. The expected cash flows are discounted using actual market interest rates. At the reporting date, the accounting value is approximately its fair value, except for the bond loan Private Placement (USPP), which balance sheet amount differs from the fair value amount (note 25.2).

Creditors, accruals and deferrals

These financial instruments include mainly short-term financial liabilities and for that reason their accounting value at reporting date is considered approximately its fair value.

2.27 Financial instruments by category

	Held for Trade derivatives	Derivatives defined as hedging instruments	Borrowings and accounts receivable	Available-for sale financial investments	Other financial liabilities	Total assets and financial liabilities
2007
ASSETS
Cash and cash equivalents			268.639			268.639
Available-for-sale financial investments				10.289		10.289
Debtors and deferred costs			144.227			144.227
Derivative financial instruments	1.066	127				1.193
TOTAL FINANCIAL ASSETS	1.066	127	412.866	10.289	-	424.348
LIABILITIES
Borrowings					792.156	792.156
Derivative financial instruments	13.447	37.493				50.940
Creditors and accrued costs					1.242.043	1.242.043
TOTAL FINANCIAL LIABILITIES	13.447	37.493		-	2.034.199	2.085.139
2006
ASSETS
Cash and cash equivalents			175.764			175.764
Available-for-sale financial investments				35.385		35.385
Debtors and deferred costs			140.876			140.876
Derivative financial instruments	1.710	187				1.897
TOTAL FINANCIAL ASSETS	1.710	187	316.640	35.385	-	353.922
LIABILITIES
Borrowings					653.306	653.306
Derivative financial instruments	6.158	21.002				27.160
Creditors and accrued costs					998.797	998.797
TOTAL FINANCIAL LIABILITIES	6.158	21.002		-	1.652.103	1.679.263

3 Segments reporting

Information by segments is reported relative to the Group's geographical and business segments.

The results, assets and liabilities of each segment correspond to those directly attributable to them as well as those that may reasonably be attributed to them. The results, assets and liabilities not directly attributable to segments and included in the "not allocated" column refer essentially to financial operations, also including consolidation adjustments.

Detailed Information by Segment

	DISTRIBUTION				MANUFACTURING AND SERVICES		NOT
		Portugal		Poland		Portugal	ALLOCATED		TOTAL
	2007	2006	2007	2006	2007	2006	2007	2006	2007	2006
Revenues from external customers
Sales			2.685.584 2.419.318 2.379.208 1,704,425		265,437	266,663	480	415	5,330,709	4,390,821
Services rendered	6,014	5,284	12,561	10,780	-	-	394	290	18,969	16,354
			2,691,598 2,424,602 2,391,769 1,715,205		265,437	266,663	874	705	5,349,678	4,407,175
Inter-segments revenues	226	656	513	266	54,632	58,834	(55,371)	(59,756)	-	-
TOTAL REVENUES			2,691,824 2,425,258 2,392,282 1,715,471		320,069	325,497	(54,497)	(59,051)	5,349,678	4,407,175
SEGMENT RESULTS	103,771	116,947	91,789	51,907	31,664	47,226	(2,044)	(283)	225,180	215,797
Net financial costs									(59,469)	(42,551)
Profit in associated Companies									231	206
Gains in other investments									21,824	15,900
PROFIT BEFORE TAXES									187,766	189,352
Income taxes									(36,857)	(38,444)
Minority interest									(19,648)	(34,756)
NET PROFIT									131,261	116,152
TOTAL ASSETS		1,942,543 1,712,622	950,215	662,754	310,074	295,742	(75,769)	(66,397)	3,127,063	2,604,721
TOTAL LIABILITIES		1,296,950 1,134,398	579,179	422,192	222,125	218,280	164,604	62,570	2,262,858	1,837,440
Cash flow from operating activities									430,654	364,397
Cash flow from investment activities									(406,500)	(263,761)
Cash flow from financing activities									58,792	(117,158)
Investment in tangible and intangible assets	256,134	208,100	205,365	135,890	7,520	5,535	336	145	469,355	349,670
Amortisation and depreciation	72,680	64,276	48,664	38,190	5,275	4,482	102	80	126,721	107,028

Financial assets with credit risk per segment

The table below shows the Group's exposure according to accounting value of the financial assets, set out by business sector.

	DISTRIBUTION				MANUFACTURING AND SERVICES		NOT
	Portugal		Poland		Portugal		ALLOCATED		TOTAL
	2007	2006	2007	2006	2007	2006	2007	2006	2007	2006
ASSETS
Cash and cash equivalents	61,160	57,438	196,231	94,327	9,023	20,025	2,225		3,974 268,639	175,764
Available-for-sale financial investments	5,882	5,804	-	-	20	19	4,387	29,562	10,289	35,385
Debtors and deferred costs	88.911	76.844	28.206	25.927	71.485	72.693		(44.375) (34.588) 144.227		140.876
Derivative financial instruments	261	778	-	-	-	-	932	1,119	1,193	1,897
TOTAL	156.214	140.864	224.437	120.254	80.528	92.737	(36.831)		67 424.348	353.922

4 Businesses Acquisitions

Following the agreement with its partner Unilever and the merger of the manufacturing business companies FimaVG – Distribuição de Produtos Alimentares, Lda.; LeverElida – Distribuição de Produtos de Limpeza e Higiene Pessoal, Lda.; IgloOlá – Distribuição de Gelados e Ultracongelados, Lda. and Unilever Bestfoods Portugal – Produtos Alimentares, Sociedade Unipessoal, Lda, as of 1st January 2007 Jerónimo Martins incorporated in its consolidated accounts 45% of the financial statements of the company resulting from that merger – Unilever Jerónimo Martins, Lda.

On February 1st, 2007, Pingo Doce – Distribuição Alimentar, S.A. bought Simões & Freitas, Lda., owner of a retail store in Évora, after receiving, in January 23rd ,2007, clearance from the Portuguese anti-trust Authority.

The effects of these operations on the Financial Statements were as follows:

Fixed assets	3,259
Inventories	1,957
Other accounts receivables	(1,393)
Cash and cash equivalents	1,053
Bank Loans	(18,306)
Other accounts payables	(2,024)
Total Assets	(15,454)
Goodwill	22,275
Invested amount	6,821
Debt increase	18,306
Cash acquired	(1,053)
Net invested amount	24,074

5 Supplementary income and costs

	2007	2006
Supplementary gains	193,216	157,893
Cash discount received	34,007	31,254
Cash discount paid	(3,477)	(3,223)
Electronic payment commissions	(11,592)	(11,281)
Other supplementary costs	(5,926)	(5,380)
Provisions for debtors suppliers	112	1,184
	206,340	170,447

Supplementary gains concern to profits obtained by the Group through the distribution of goods, namely, rental of spaces, participation in birthday events, rental of shelf's, etc. Supplementary costs concern to the same nature of supplementary gains mentioned, paid by subsidiaries operating in the manufacturing and services segments.

6 Distribution and administrative costs

	2007	2006
Supplies and services	225,450	196,292
Advertising costs	53,963	48,602
Rents	96,664	83,654
Staff costs	425,227	345,807
Depreciations, amortisations and assets profit/loss	125,723	104,895
Transportation costs	71,735	57,751
Other operational profit/loss	1,284	(5,840)
	1,000,046	831,161

7 Staff costs

	2007	2006
Wages and salaries	340,944	273,524
Social security	67,215	54,490
Employee benefits (note 26)	1,288	2,032
Other staff costs	26,797	25,229
	436,244	355,275

Other staff costs include, namely, labour accident insurance, social action costs, training costs and indemnities. Of total staff costs EUR 24,996 thousand corresponds to staff costs of subsidiaries and associated companies consolidated by the proportional method, the total amount of which was EUR 55,474 thousand.

The difference to the staff costs stated in note 6 of EUR 11,017 thousands (EUR 9,468 thousand in 2006) is related to the productive activity that were attributable to the cost of the goods sold.

The average number of Group employees during the year was 37,960, distributed as follows:

	2007	2006
Portugal	20,756	18,925
Poland	17,204	14,178
Total number of employees	37,960	33,103

Of the total number of employees 1,119 are employed by subsidiaries and associated companies consolidated by the proportional method.

The number of employees at the end of 2007 was 41,300, in 2006 it was 34,675, distributed as follows:

	2007	2006
Portugal	21,951	19,184
Poland	19,349	15,491
Total number of employees	41,300	34,675

Of the total number of employees 1,044 are employed by subsidiaries and associated companies consolidated by the proportional method.

8 Net financial costs

	2007	2006
Interest expense	(54,335)	(41,386)
Interest received	2,548	1,726
Dividends	33	68
Net foreign exchange	239	(107)
Investment property:
Changes to fair value	(18)	(18)
Other financial costs and gains	(1,966)	(2,653)
Changes to fair value in derivative financial instruments
(note 9)	(5,970)	(181)
	(59,469)	(42,551)

Interest expense includes the interest related with loans measured at amortised cost as well as, interest on derivatives of fair-value hedge and cash flow hedge (note 15).

Other financial costs and gains include costs with debt issued by the Group.

The other financial costs and gains heading includes an amount of EUR 260 thousand (2006: EUR 109 thousand) regarding transfers from reserves for covering cash-flow.

9 Financial instruments

Fair value of derivative financial instruments

The impact in income statement (net of taxes and minority interests), is as follows:

	2007	2006
Derivatives held for trading
Currency swaps	(3,603)	(1,029)
Interest rates swaps	(2,909)	848
Credit default swap	542	-
	(5,970)	(181)
Deferred taxes	1,582	48
Minority interests	461	(274)
Value recognised in profit/loss	(3,927)	(407)

The value recognised in reserves referred to hedging of investment in Poland is negative EUR 4,963 thousand (net of tax).

Changes to the fair value of derivative instruments designated as fair value hedging (note 15) for the amount of EUR 10,119 thousand (2006: EUR 18,367 thousand) was offset by a variation in value for the loan of USD 180 million (note 25.2).

10 Income tax recognised in the income statement

10.1 Income taxes

	2007	2006
Current income tax
Current tax of the year	(26,148)	(20,337)
Adjustment to prior year estimation	(46)	(646)
	(26,194)	(20,983)
Deferred tax (note 19.1)
Temporary differences created and reversed	(12,622)	(18,006)
Tax rate decrease	-	(2,446)
Change to the recoverable amount of tax losses and temporary differences from previous years	1,959	2,991
	(10,663)	(17,461)
Total income taxes	(36,857)	(38,444)

10.2 Reconciliation of effective tax rate

	2007			2006
Profit before tax		187.766		189,352
Income tax using the Portuguese corporation tax rate Fiscal effect due to:	26.5%	(49,758)	27.5%	(52,072)
Different tax rates in foreign jurisdictions	3.7%	6,864	5.9%	11,177
Non taxable or non recoverable results	1.0%	1,836	0.0%	34
Non-deductible expenses and fiscal benefits	1.2%	2,204	0.3%	643
Tax rate decrease	0.0%	-	-1.3%	(2,446)
Adjustment to prior year estimation	0.0%	(48)	-0.3%	(646)
Change to the recoverable amount of tax losses and temporary differences of prior years	1.0%	1,959	1.6%	2,991
Results subject to special taxation	0.0%	86	1.0%	1,875
Income tax	19.6%	(36,857)	20.3%	(38,444)

11 Exceptional operating profits/losses and gains in other investments

11.1 Exceptional operating profits/losses

	2007	2006
Gains with businesses disposals	(714)	5,946
Previous years cosmetic rate		- (1,105)
Others	1,186	(798)
	472	4,043

11.2 Gains in other investments

	2007	2006
Gains on disposals of available-for-sale financial investments	17,543	3,347
Dividends received from available-for-sale financial investments Extraordinary increase in value of investment with preliminary sale	514	1,114
agreement	3,767	11,439
	21,824	15,900

12 Tangible Assets

12.1 Changes occurred during the year

2007	Land and natural resources	Buildings and other constructions	Plants, machinery and tools	Transport equipment and others	Work in progress and advances	Total
Cost
Opening balance	329,494	929,799	634,188	132,579	86,414	2,112,474
Foreign exchange differences	1,599	20,993	7,891	3,939	3,832	38,254
Increases	21,136	134,580	104,292	20,791	167,402	448,201
Revaluation	13,272	-	-	-	-	13,272
Disposals	(163)	(6,297)	(11,287)	(2,877)	(1,456)	(22,080)
Transfers and write off's	38,275	91,009	3,762	2,485	(149,712)	(14,181)
Business acquisitions and restructuring	(167)	417	13,778	963	(98)	14,893
Transfers from/to investment properties	(4,159)	(110)	-	-	-	(4,269)
Reversal of impairment	113	410	-	-	-	523
Closing balance	399,400	1,170,801	752,624	157,880	106,382	2,587,087
Depreciation and impairment losses
Opening balance	-	253,267	440,275	101,786	-	795,328
Foreign exchange differences	-	7,044	4,183	2,667	-	13,894
Increases	-	48,418	58,961	13,816	-	121,195
Disposals	-	(1,621)	(10,928)	(2,815)	-	(15,364)
Transfers and write off's	-	(2,089)	(6,954)	(1,421)	-	(10,464)
Business acquisitions and restructuring	-	389	10,346	894	-	11,629
Reversal of impairment	-	363	-	-	-	363
Closing balance	-	305,771	495,883	114,927	-	916,581
Net value
As at 1 January 2007	329,494	676,532	193,913	30,793	86,414	1,317,146
As at 31 December 2007	399,400	865,030	256,741	42,953	106,382	1,670,506

2006	Land and natural	Buildings and other	Plants, machinery	Transport equipment and	Work in progress and	Total
	resources	constructions	and tools	others	advances
Cost
Opening balance	283,576	797,455	564,243	123,090	43,434	1,811,798
Foreign exchange differences	180	2,532	923	423	252	4,310
Increases	31,681	75,464	68,841	11,837	140,385	328,208
Revaluation	8,168	-	-	-	-	8,168
Disposals	(818)	(3,395)	(2,994)	(2,559)	(1,637)	(11,403)
Transfers and write off's	6,707	57,743	3,175	(212)	(96,020)	(28,607)
Closing balance	329,494	929,799	634,188	132,579	86,414	2,112,474
Depreciation and impairment losses
Opening balance	-	216,983	394,969	98,151	-	710,103
Foreign exchange differences	-	839	497	269	-	1,605
Increases	-	39,324	50,415	12,897	-	102,636
Disposals	-	(1,397)	(2,130)	(2,444)	-	(5,971)
Transfers and write off's	-	(2,482)	(3,476)	(7,087)	-	(13,045)
Closing balance	-	253,267	440,275	101,786	-	795,328
Net value
As at 1 January 2006	283,576	580,472	169,274	24,939	43,434	1,101,695
As at 31 December 2006	329,494	676,532	193,913	30,793	86,414	1,317,146

During 2007, the following were reverted: impairment losses of EUR 113 thousand, regarding the adjustment to the current recoverable value of a plot of land in Madeira, and EUR 47 thousand which refers to a lower than estimated impact of the closure of a store.

12.2 Equipment under financial lease

The Group has a variety of equipment under financial lease or other equivalent contract conditions. Financial lease payments do not include values relative to contingent rentals. Unsettled liabilities on financial lease contracts are referred in note 25.4.

The value of assets under financial lease is shown below:

	2007	2006
Land and natural resources
Tangible assets	34	34
	34	34
Buildings and other constructions
Tangible assets	20,686	11,381
Accumulated depreciation	(2,625)	(1,148)
	18,061	10,233
Plants and machinery
Tangible assets	76,460	44,661
Accumulated depreciation	(18,000)	(10,320)
	58,460	34,341
IT and office equipment and tools and utensils
Tangible assets	16,489	15,250
Accumulated depreciation	(14,160)	(12,834)
	2,329	2,416
Transport equipment
Tangible assets	28,060	15,988
Accumulated depreciation	(12,005)	(7,274)
	16,055	8,714

12.3 Guarantees

No tangible assets have been pledged as security for the fulfilment of bank or other obligations.

12.4 Revaluation

The Group records land allocated to its operating activity at market value, determined by specialist and independent entities. In 2007 new revaluations were carried out, creating an increase of EUR 13,272 thousand (note 23.1).

Revaluation values under fixed assets amount to EUR 161,020 thousand (EUR 148,524 thousand in 2006), with the following impact on shareholders' equity:

	2007	2006
Revaluation of land	161,020	148,524
Deferred taxes	(34,543)	(31,906)
Minority interests	(50,080)	(44,861)
Net revaluation (Note 23.1)	76,397	71,757

13 Intangible Assets

13.1 Changes occurring during the year

2007	Goodwill	R&D expenses	Software, ind. property and other rights	Key money	Work in progress	Total
Cost
Opening balance	385,341	27,515	23,390	51,560	5,334	493,140
Foreign exchange differences	8,674	1,410	739	1,513	267	12,603
Increases	-	2,146	2,892	4,843	11,273	21,154
Transfers and write off's	-	(759)	6,769	4,306	(11,476)	(1,160)
Business acquisitions and restructuring	22,275	-	(23)	-	-	22,252
Closing balance	416,290	30,312	33,767	62,222	5,398	547,989
Depreciation and impairment losses
Opening balance	-	25,062	2,074	19,619	-	46,755
Foreign exchange differences	-	1,378	10	183	-	1,571
Increases	-	1,310	494	3,724	-	5,528
Transfers and write off's	-	(1,999)	(141)	-	-	(2,140)
Business acquisitions and restructuring	-	-	(18)	-	-	(18)
Closing balance	-	25,751	2,419	23,526	-	51,696
Net value
As at 1 January 2007	385,341	2,453	21,316	31,941	5,334	446,385
As at 31 December 2007	416,290	4,561	31,348	38,696	5,398	496,293

2006	Goodwill	R&D expenses	Software, ind. property and other rights	Key money	Work in progress	Total
Cost
Opening balance	384,355	27,014	20,629	29,620	7,656	469,274
Foreign exchange differences	986	162	81	240	31	1,500
Increases	-	323	1,499	6,584	13,056	21,462
Transfers and write off's	-	16	1,181	15,116	(15,409)	904
Closing balance	385,341	27,515	23,390	51,560	5,334	493,140
Depreciation and impairment losses
Opening balance	-	24,135	4,181	16,946	-	45,262
Foreign exchange differences	-	159	-	18	-	177
Increases	-	1,218	519	2,655	-	4,392
Transfers and write off's	-	(450)	(2,626)	-	-	(3,076)
Closing balance	-	25,062	2,074	19,619	-	46,755
Net value
As at 1 January 2006	384,355	2,879	16,448	12,674	7,656	424,012
As at 31 December 2006	385,341	2,453	21,316	31,941	5,334	446,385

The Group identified as intangible assets of indefinite useful life, besides goodwill, the trademarks Pingo Doce and Feira Nova, for which there is no time limit for how long they will continue to create economic benefits to the Group. Their net value is EUR 13,717 thousand, which are not being amortised and are subject to impairment tests annually.

13.2 Guarantees

No intangible assets have been pledged as security for the fulfilment of bank or other obligations.

13.3 Intangible assets in progress

The implementation of projects for processes simplification, transfers of operating rights and key money are considered in intangible assets-work in progress.

13.4 Impairment tests for Goodwill

Goodwill is allocated to the Groups' business areas as presented bellow:

Business Areas	2007	2006
Retail Portugal	101,610	97,298
Cash & Carry Portugal	72,433	72,433
Madeira	8,509	8,509
Manufacturing	93,809	75,846
Poland	139,929	131,255
	416,290	385,341

The additions in this heading include:

• acquisition of the company Simões e Freitas, Lda., as mentioned in note 4, whose Goodwill value was EUR 4,312 thousand;
• also mentioned in note 4, the merger process of the companies FimaVG, LeverElida and IgloOlá into Unilever Jerónimo Martins, and Jerónimo Martins Group started to recognise a 45% share of the new company in its consolidated accounts, resulted in an increase to Goodwill of EUR 17,963 thousand;
• as a consequence of the currency translation adjustment of assets in the Group's business in Poland, the Goodwill value related to this business, totalling PLN 502,818 thousand, increased by EUR 8,674 thousand.

In 2007 evaluations were made according to the Discounted Cash Flows (DCF) evaluation models, thereby sustaining the recoverability of Goodwill value.

The values of these evaluations are reached through past performances and through expectations for market development, with future cash-flow projections being drawn up for each of the businesses, based on medium/long term plans approved by the Board of Directors.

These estimates were made considering a discount rate of between 7.5% and 7.9% for Portugal and 10.1% for Poland, and a perpetual growth rate between 0% and 1% for the various businesses.

14 Investment Property

	2007	2006
Opening balance	56,376	40,845
Increases due to acquisitions	11	203
Transfers from tangible assets	4,269	10,061
Foreign exchange differences	-	(56)
Changes to fair value	3,642	11,421
Disposals	(14,698)	(6,098)
Closing balance	49,600	56,376

The investment property relates to plots of land initially acquired for use in Group operations, and others actually used for that purpose for a period of time but which became redundant, either because they could not be used to build cash-generating units or because they became superfluous as a result of the restructuring of operations carried out in them.

This category also includes recently acquired land, whose use has still not been determined, being, therefore, considered has investment expecting for a market value increase.

As non-current assets are all the investment properties that are not expectable to be sold within a period below 12 months.

15 Derivative financial instruments

		2007			2006
	Notional		Assets		Liabilities	Notional		Assets	Liabilities
		Current	Non Current	Current	Non Current		Current	Non Current	Current	Non Current
Non current Derivatives held for trading
Interest rate swap	120 millions EUR	481	43	108		7,827 130 millions EUR	-	1,455	-	4,002
Currency swap	200 millions PLN	-	-	-		5,512 305 millions PLN	-	255	317	1,839
Credit default swap	100 millions EUR	-	542	-	-		-	-	-	-
Fair value hedging derivatives USD loan hedging	180 millions	-	-	-		25,143 180 millions	-	-	-	14,980
	USD					USD
Cash flow hedging derivatives Interest rate swap	10 millions EUR	127	-	-	-	10 millions EUR	-	187	-	-
Foreign operation investments hedging derivatives
Currency swap	400 millions PLN	-	-	-		12,350 400 millions PLN	-	-	-	6,022
Total derivatives held for trading		481	585	108	13,339		-	1,710	317	5,841
Total hedging derivatives		127	-	-	37,493		-	187	-	21,002
Total assets/liabilities derivatives		608	585	108	50,832		-	1,897	317	26,843

In 2007 the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 253 thousands.

Derivatives held for trading

Interest rate swap

The Group enters into interest rate swaps with the intention of make an economic hedge of the interest rate risk on its future interest payments on the loans. At 31 December 2007, the total amount of loans was EUR 461.007 thousands (2006: 356.007 thousands), and the Group had derivatives financial instruments with a notional of EUR 120.000 thousands (2006: EUR 130.000 thousands).

Currency swap

The Group makes an economic hedge of the exchange rate risk of its exposure in zloty. The most significant derivative financial instruments were three interest rate swaps entered in 2006 with a notional of 305 million zloty. In 2007, two of them were cancelled, being opened one swap with the notional of 200 million zlotys.

Credit default swap

The Group entered into this derivative with the intention of minimizing the impact of the credit spreads increase resulting from exogenous effects to JMH.

Hedging fair value

The Group hedges its exposure to the fair value of its loans in the total amount of USD 180 million, arising from interest rate risk and exchange rate risk, through two cross currency swaps that have the same characteristics as the debt that was issued. The objective of this hedge is to transform the fixed rate into a variable rate, and to hedge exposure to the US dollar, thus reflecting changes to the fair value of the debt that was issued. The credit risk is not hedged. The fair value of the two cross currency swaps at 31 December 2007 was negative EUR 25,143 thousand (2006: negative EUR 14,980 thousand).

Cash flow hedge

The Group partially hedges future interest payments on the loans, using for that interest rate swaps, in which pays fixed interest rate and receives variable interest rate, with a notional of EUR 10,000 thousand (2006: EUR 10,000 thousand). This is an hedging of interest rate risk associated with variable-rate interest payments arising from recognised financial liabilities. The hedged risk is indexed to the variable rate associated with the loans. The objective of the hedge is to convert the loans with variable interest rate into fixed interest rate. The credit risk is not hedged. The fair value of the interest rate swaps at December 31st, 2007, was EUR 127 thousand (2006: EUR 187 thousand).

In August 2006, one of the hedges was discontinued, and it is still recognised in equity an amount of EUR 293 thousand (2006: EUR 553 thousand), which is being recycled to the profit and loss, having been recognised in 2007 results in the amount of EUR 260 thousand (2006: EUR 109 thousand).

Hedging of investments in foreign entities

The Group hedges part of its exposure to the variation of the zloty due to its net investment in Poland through an exchange rate swap for PLN 400,000 thousand (2006: PLN 400,000 thousand). This instrument qualifies for hedge accounting. The fair value of the derivative at December 31st, 2007 was negative EUR 12,350 thousand (2006: negative EUR 6,022 thousand). The changes in the fair value of the derivative was recognised in the currency translation reserve in equity.

16 Investments in associated companies

In 2007 and 2006 the movement under this heading was as follows:

	2007	2006
Investments
Opening balance	646	690
Acquisitions	-	-
Equity method	231	206
Transfers	(176)	(250)
Business acquisitions and restructuring	(1)
Closing balance	700	646
Fair value adjustments
Opening balance	(25)	(25)
Transfers	25	-
Closing balance	0	(25)
Net value as at 1 January	621	665
Net value as at 31 December	700	621

17 Available-for-sale financial investments

Non-Currents
	2007	2006
BCP shares	4,380	29,557
Advances on account of financial investments	4,988	4,988
Others		921 840
	10,289	35,385

The financial assets available-for-sale include non-listed capital instruments whose fair value cannot be reliably measured and so as such are recognised at cost to the value of EUR 5,909 thousand at December 31st, 2007 (2006: EUR 5,828 thousand). At the date of preparing the financial statements, the Group does not intend to dispose of any of its investments.

The main financial investments measured at cost are set out in the table below:

	2007	2006
Investment in Uniarme	175	150
Investment in Mercado Abastecedor do Porto	646	597
Investment in AMS	63	63
Other investments	37	30
	921	840

There are no market prices available for the mentioned investments, and not being able to determine the fair value based on comparable transactions, the Group did not measured this instruments based on expected discounted cash flows since they can not be reasonably estimated.

18 Inventories

	2007	2006
Raw and subsidiary materials and consumables	4,368	4,700
Goods and work in progress	459	550
Finished and semi-finished goods	289	216
Goods	314,810	258,625
	319,926	264,091
Fair value adjustment (note 27)	(11,355)	(8,150)
Net inventories	308,571	255,941

No inventories have been pledged as guarantee for the fulfilment of contractual obligations.

19 Taxes

19.1 Deferred tax assets and liabilities

Change in deferred tax accounts

	2007	2006
Opening balance	26,104	43,166
Currency translation difference (note 23.1)	4,598	929
Revaluation and reserves (note 23.1)	(2,692)	(530)
Acquisition/disposal of businesses	278	-
Result of the year (note 10.1)	(10,663)	(17,461)
Closing balance	17,625	26,104

Deferred taxes are presented in balance sheet as follows:

	2007	2006
Deferred tax assets	73,322	75,165
Deferred tax liabilities	(55,697)	(49,061)
	17,625	26,104

Movement in deferred taxes during the year

	Opening balance	Impact on results	Impact on equity	Acquisitions disposals	Currency translation differences	Closing balance
Deferred tax liabilities
Revaluation of assets	33,825	129	2,789	(48)	-	36,695
Deferred income for tax purposes	1,209	498	-	-	104	1,811
Differences on accounting policies in other countries	10,767	1,123	-	-	767	12,657
Other temporary differences (including IAS impact)	3,260	1,229	-	45	-	4,534
	49,061	2,979	2,789	(3)	871	55,697
Deferred tax assets
Excess over legal provisions	9,071	1,080	-	258	492	10,901
Revaluation of assets	996	70	12	-	-	1,078
Pension costs	4,543	(157)	-	2	-	4,388
Costs with foreign exchange risk hedging operations	2,059	2,207	85	-	1,790	6,141
Recoverable losses	28,263	(17,667)	-	-	1,214	11,810
Profit in inventories	491	(84)	-	-	-	407
Fair value adjustments on inventories	1,569	595	-	-	81	2,245
Other deferred costs for tax purposes	22,882	6,311	-	-	1,822	31,015
Differences on accounting policies in other countries	965	132	-	-	70	1,167
Other temporary differences	4,326	(171)	-	15	-	4,170
	75,165	(7,684)	97	275	5,469	73,322
Net change in deferred tax	26,104	(10,663)	(2,692)	278	4,598	17,625

Deferred tax assets arising from recoverable losses are as follows:

	2007	2006
Consolidated tax Group Recheio, SGPS, S.A.	358	11,452
Consolidated tax Group JMR, SGPS, S.A.	2,307	4,540
Jerónimo Martins Dystrybucja, S.A.	3,778	6,826
Others	5,367	5,445
	11,810	28,263

The Group recognised these deferred tax assets on tax losses based on projections for the respective businesses that show that tax profits will be realised in the future ensuring their recoverability.

19.2 Unrecognised deferred taxes on tax losses

The Group did not recognise deferred tax assets relative to tax losses in respect of which, with reasonable accuracy, no sufficient tax profits are expected to guarantee the recovery of deferred tax assets. Total unrecognised tax assets amount to EUR 20,844 thousand (2006: EUR 19,825 thousand) relative to part of the losses generated in Jerónimo Martins, SGPS, S.A., and the total amount of the losses from Jerónimo Martins – Distribuição de Produtos de Consumo, Lda., Belegginsmaatschappij Tand BV, Servicompra- Consultores de Aprovisionamento. Lda., Jerónimo Martins – Restauração e Serviços, S.A. and Bliska Sp. Z.o.o.

19.3 Receivable and payable taxes

Taxes receivable	2007	2006
Income tax receivable	6,954	1,814
VAT receivable	19,770	22,185
Others	1,933	1,346
	28,657	25,345
Taxes payable
Income tax payable	8,289	3,916
VAT payable	12,012	13,651
Income tax withheld	3,567	1,974
Social security	9,166	7,501
Other taxes	6,228	4,740
	39,262	31,782

20 Trade debtors, accrued income and deferred costs

Non-current	2007	2006
Other debtors	60,427	59,651
Deferred costs	5,240	4,685
	65,667	64,336
Current	2007	2006
Commercial customers	75,264	78,074
Associated companies	9	7
Suppliers	11,584	13,203
Staff	1,157	1,344
Other debtors	35,951	33,662
Accrued income	20,262	14,586
Deferred costs	9,399	9,484
	153,626	150,360

Non-current debtors balance of EUR 59,634 thousand is related to additional tax liquidation. The Group has already contested the amount paid and made a legal claim for reimbursement (note 32).

Accrued income essentially respects to the recognition of supplementary gains contracted with suppliers, in the amount of EUR 15,174 thousand.

The deferred costs heading includes EUR 7,038 thousand of pre-paid rents, EUR 1,913 thousand of bond issue and credit opening costs, EUR 5,688 thousand relative to other costs attributable to future years and paid in 2007, or, when not paid, were already charged by the competent entities.

The debtor's amount is registered by the recoverable value, i.e., the Group constitutes provisions for impairment losses whenever there are signs of uncollectible amounts (note 27).

Other debtors includes an amount of EUR 8,104 thousand (2006: EUR 6,373 thousand), of guarantees to landlords of stores.

Current debtors that are less than 3 months past due are not considered impaired. The ageing analysis of debtors that are past due is as follows:

	2007	2006
Debtors balances not considered impaired
Less than 3 months past due	18,554	18,666
Less more than 3 months past due	11,170	9,622
Total of amounts not impaired	29,724	28,288
Debtors balances considered impaired
Less than 3 months past due	565	221
Less more than 3 months past due	19,497	17,237
Total of amounts impaired	20,062	17,458

Relating to the amounts due without impairment EUR 5,035 thousand are covered by credit guarantees.

21 Cash and cash equivalents

	2007	2006
Bank deposits	213,507	158,635
Short-term investments	50,830	14,790
Cash and cash equivalents	4,302	2,339
	268,639	175,764

Bank deposits includes EUR 3,390 thousand regarding an amount granted to a financial institution as part of the agreement conditions of a specific derivative financial instrument.

The short-term investments include short-term bank deposits and other negotiable funds for which provisions were booked to reduce it to the realizable value (note 27).

22 Cash generated from operations

	2007	2006
Net results	131,261	116,152
Adjustments for:
Minority interests	19,648	34,756
Taxes	36,857	38,444
Depreciations	126,721	107,028
Provisions	1,310	2,565
Net financial costs	59,469	42,551
Profit/loss in associated companies	(231)	(206)
Profit/ Losses on financial investment disposals	(21,824)	(15,900)
Profit/ Losses on tangible assets disposals	2,876	1,021
	356,087	326,411
Changes in working capital:
Inventories	(55,679)	(14,835)
Trade debtors, accrued income and deferred costs	9,077	(12,755)
Trade creditors, accrued costs and deferred income	200,344	127,470
	509,829	426,291

23 Capital and reserves

23.1 Fair value and other reserves

	Land and buildings	Cash-flow Hedging reserve	Available for-sale financial investments	Currency translation reserve	Total
Balance as at 1 January 2006	67,448	73	4,630	3,927	76,078
Land transferred to investment property: - Gross value - Deferred tax - Minority interests	(954) 204 367				(954) 204 367
Revaluation:
- Gross value - Deferred tax - Minority interests	8,168 (361) (3,115)				8,168 (361) (3,115)
Fair value adjustment of financial instruments: - Gross value - Deferred tax		639 (169)		(2,516) 667	(1,877) 498
Fair value adjustment of available-for-sale financial investments: - Gross value			3,578		3,578
Currency translation differences: - In the year - Deferred tax				1,572 262	1,572 262
Balance as at 1 January 2007	71,757	543	8,208	3,912	84,420
Business acquisitions and restructuring: - Gross value - Deferred tax	(776) 140				(776) 140
Revaluation:
- Gross value - Deferred tax - Minority interests	13,272 (2,777) (5,219)				13,272 (2,777) (5,219)
Fair value adjustment of financial investments: - Gross value - Deferred tax		(320) 85		(6,752) 1,790	3,578 (7,072) 1,875
Fair value adjustment of available-for-sale financial investments: - Gross value			(6,991)		(6,991)
Currency translation differences: - In the year - Deferred tax				13,134 2,808	13,134 2,808
Balance as at 31 December 2007	76,397	308	1,217	14,892	92,814

We note that the values mentioned in revaluation reserves refer to application of the fair value of fixed assets, and they cannot be distributed in the individual accounts of the companies that originated them.

The individual annual report of Jerónimo Martins, SGPS, S.A. duly state all conditions related to the use of reserves to be distributed comprised in company equity, therefore we expressly recommend the reading of this information in the individual annual report.

23.2 Share capital and share premium

Authorised share capital is represented by 629,293,220 ordinary shares (2006: 125,858,644).

On May 31st, 2007, the shares of JMH. were subject to a stock split. Each share held was converted into five new shares, with a nominal value of one euro. Therefore, calculation of the results per share was adjusted for December 2006.

The holders of ordinary shares have the right to received dividends as established in the General Meeting and have one vote for each share held. There are no preferential shares and the own shares' rights are suspended until these shares are back in the market.

23.3 Own shares

The reserve for own shares reflects the cost of shares held by the Group in portfolio. As of 31 December 2007, the Group held 859,000 own shares (2006: 171,800, converted in the stock-split to 859,000). As defined by law the own shares are not entitled to dividends.

23.4 Dividends

Taking into consideration Group results in 2007, the Board of Directors of JMH. will propose in the General Meeting the distribution of EUR 60,329,685.12, which corresponds to a dividend per share of EUR 0.096.

Dividends distributed in 2007 in the amount of EUR 68,234 thousand were paid to Jerónimo Martins, SGPS, S.A. shareholders an amount of EUR 55,302 thousand and to minority interest in the Group companies an amount of EUR 12,932 thousand.

24 Earnings per share

24.1 Basic and diluted earnings per share

On May 31st, 2007, the shares of JMH were subject to a stock split. Each share held was converted into five new shares, with a nominal value of one euro. Therefore, calculation of the results per share was adjusted in December 2006.

Basic net results per share are calculated based on the net profit of EUR 131,261 thousand (2006: profit of EUR 116,152 thousand) and on weighted average outstanding ordinary shares, numbering 628,434,220 (2006 adjusted: 628,434,220).

24.2 Weighted average ordinary shares

	2007	2006
Ordinary shares issued at the beginning of the year	629,293,220	629,293,220
Own shares at the beginning of the year	859,000	859,000
Shares issued during the year	-	-
Weighted average number of ordinary shares	628,434,220	628,434,220

24.3 Diluted net results attributable to ordinary shareholders

	2007	2006
Diluted net profit of the year attributable to ordinary shareholders	131,261	116,152

24.4 Diluted weighted average ordinary shares

	2007	2006
Diluted weighted average ordinary shares	628,434,220	628,434,220
Basic and diluted earnings per share – Euros	0.2089	0.1848

25 Borrowings

In the first semester, JMH negotiated a new commercial paper programme in the maximum amount of EUR 100,000 thousand, or its equivalent value in PLN, maturing in March 2010. Group JMR likewise negotiated two new commercial paper programmes for a total amount of EUR 140,000 thousand. These credit lines are not being used at the balance sheet date.

During the first semester, the conditions of some existing commercial paper programmes and leasing financing lines were also renegotiated, reducing pricing levels and increasing the amounts available.

New financial lease operations were also contracted, amounting to EUR 48,000 thousand, and for periods of 48 months with monthly amortisation. During the year EUR 19,500 thousand in financial lease was amortised.

In December, a bank loan was issued by Optimum Mark for EUR 83,000 thousand, maturing in five years, with variable interest rate and indexed to the 3-month Euribor.

25.1 Current and non-current loans

	2007	2006
Non-current loans
Bank loans	134,586	140,162
Bond loans	485,894	391,012
Other loans	-	112
Financial lease liabilities	54,961	31,953
	675,441	563,239
Current loans
Bank overdrafts	17,068	1,713
Bank loans	75,154	72,803
Other loans	28	-
Financial lease liabilities	24,465	15,551
	116,715	90,067

25.2 Loan terms and maturities

	Average rate	Total	Less than 1 year	Between 1 and 5 years	More than 5 year
Bank loans
Loans in EUR	4.59%	31,999	31,999	-	-
Loans in PLN	4.94%	177,769	43,183	134,586	-
Bond Loans
Loans	4.94%	511,007	-	430,470	80,537
Fair value adjustment		(25,113)	-	(12,084)	(13,029)
Bank overdrafts	4.93%	17,068	17,068	-	-
Financial lease liabilities	4.62%	79,426	24,465	54,478	483
		792,156	116,715	607,450	67,991

The amount of negative EUR 25,113 thousand, adjusted to the total of bond loans, refers to the updating of the bond loan for USD 180 million, for which the Group contracted a hedging instrument, presented in note 15.

25.3 Bond loans

	2007	2006
Non-convertible bonds	511,007	406,007

The bond loans in course at the end of 2007 were as follows:

In October 2003, 8 million JMH bonds were issued, at a nominal value of 5 Euros. They were issued with a deadline of 5 years. The maturity date of these bonds was fixed for October 2008. The interest rate is variable. In 2005 the conditions of this loan were renegotiated. On the one hand their maturity was prolonged for another two years, now maturing in October 2010, and on the other hand the spread to add to the base rate for calculating the interest to be paid on each coupon was reduced.

In February 2004 Recheio, SGPS, S.A. issued 1 million bonds at a nominal value of 50 Euros, totalling EUR 50,000 thousand Euros. This is a 5-year issue, which matures in February 2009 and the interest rate is variable and indexed to 6-month Euribor.

In June 2004 a Private Placement was carried out by JMR on the US market, in the amount of USD 180 million, at a fixed rate. These "Notes" issued by JMR are equivalent to Bond Loans in Portuguese law. The total amount was

divided between a 7-year issue of USD 84 million and a 10-year one of USD 96 million. Immediately after the contracting of this amount a EUR/USD Cross Currency Swap was carried out.

On September 28th, 2007, two bond loans were issued by JMH for EUR 35,000 thousand each, with periods of four and five years, variable interest rates, and indexed to the 6-month Euribor.

In December 2007, JMR issued a new bond loan for EUR 200,000 thousand, maturing in five years. The interest rate is variable, and it is indexed to the 6-month Euribor.

In September 2007, the early repayment option on two bond loans issued in August 2005 was exercised in the amount of EUR 25,000 thousand each. These loans had expiration dates in August 2009 and August 2010.

Also in December 2007, the early payment option for bond loan JMR/2003, which was issued in June 2003, was exercised. This loan was initially issued for the period of five years, maturing in 2008. In 2005, the conditions of this loan were renegotiated, its maturity was extended for two more years, maturing in June 2010, and the spread added to the base rate for calculation of the interest on each coupon was reduced.

The redemption dates of the bond loans are as follows:

Total	511,007
2014	80,537
2012	235,000
2011	105,470
2010	40,000
2009	50,000

25.4 Financial lease liabilities

	2007	2006
Payments in less than 1 year	27,903	16,883
Payments between 1 and 5 years	58.467	32,250
Payments in more than 5 years	490	931
	86,860	50,064
Payment of future interest	(7,434)	(2,560)
Present value of liabilities	79,426	47,504

25.5 Financial debt

As the Group contracted several foreign exchange rate risk and interest risk hedging operations, as well as short-term investments, the net consolidated financial debt as at 31 December is:

	2007	2006
Non-current loans (note 25.1)	675,441	563,239
Current loans (note 25.1)	116,715	90,067
Derivative financial instruments (note 15)	49,747	25,263
Interest on accruals and deferrals	1,700	1,074
Bank deposits (note 21)	(213,507)	(158,635)
Short-term investments (note 21)	(50,830)	(14,790)
	579,266	506,218

26 Employee benefits

Amounts of employee benefits in the balance sheet:

	2007	2006
Retirement benefits - defined benefit plan paid for by the group	18,062	18,284
Retirement benefits - defined benefit plan with a fund managed by a third party	195	461
Seniority premium	428	409
Total	18,685	19,154

Amounts reflected in the income statement – staff costs (note 7):

	2007	2006
Retirement benefits – defined contribution plan	692	609
Retirement benefits - defined benefit plan paid for by the group	707	964
Retirement benefits - defined benefit plan with a fund managed by a third party	(104)	428
Seniority premium	(7)	31
Total	1,288	2,032

A brief description of the plans and each one's impacts follows:

26.1 Defined contribution plans for employees, with funds managed by a third party

The Group has defined contribution pension plans in the companies Jerónimo Martins, SGPS, S.A., Jerónimo Martins Serviços, S.A., Jerónimo Martins Distribuição de Produtos de Consumo, Lda. and in the companies of Unilever Jerónimo Martins Group.

These plans cover all of the employees in these companies who have permanent contract status, and they allow cost control related to the attribution of benefits, while simultaneously creating an incentive for the employees to participate in their own pension scheme.

Movements in the year:

	2007	2006
Liabilities (not covered) as at 1 January	-	-
Staff costs	692	609
Contributions of the year	(692)	(609)
Liabilities (not covered) as at 31 December	-	-

26.2 Defined benefit plans for former employees

Defined benefit plans paid for by the group

The Group has direct responsibility for these plans. Independent actuaries evaluate them twice a year. According to the actuarial calculation reported on 31st December 2007, the responsibility totals EUR 18,062 thousand, and is totally included in the heading employee benefits.

Movement in the year:

	2007
Balance on 1 January	18,284
Business acquisitions and restructuring	14
Interest costs	885
Actuarial (gains)/losses	(178)
Retirement pensions paid in	(943)
Balance on 31 December	18,062

Actuarial assumptions used:

Mortality table	TV – 88/90
Discount rate	5.30%
Pension growth rate	2.3% - 2.5%

In this period the mortality table was changed from the TV 73/77 to the TV 88/90 which better reflects the profile of the actual beneficiaries.

Defined Benefit plans with a fund managed by a third party

The companies of Unilever Jerónimo Martins Group have a defined benefit plan limited to a range of pensioners. The responsibilities entailed by this plan are met by an autonomous pension fund managed by an independent entity.

Amounts in the balance sheet:

	2007	2006
Present value of funded obligations	1,908	2,107
Fair value of plan assets	1,713	1,646
Liability in balance sheet - employee benefits	195	461

Movement in the year:

	2007
Balance on 1 January	461
Costs recognised in income statement	(104)
Business acquisitions and restructuring	(162)
Balance on 31 December	195

The amounts recognised in income statement, are as follows:

	2007
Interest costs	85
Expected return on plan assets	(76)
Actuarial losses recognised	(113)
Total costs recognised	(104)

Actuarial assumptions used:

Mortality table	TV – 88/90
Discount rate	5.30%
Expected return on plan assets	5.20%
Pension growth rate	2.50%

26.3 Other long-term benefits granted to employees

The companies of Unilever Jerónimo Martins Group have an incentive plan which involves the attribution of a seniority premium payment when employees complete 15, 25 and 40 years of service. The companies pay for this plan and an independent actuary evaluates the implied responsibilities each year. According to the actuarial study carried out, on 31st December the responsibility was for EUR 428 thousand, which is accounted for in the liabilities, in employee benefits.

Movement in the year:

	2007
Balance on 1 January	409
Current service cost	(27)
Interest cost	19
Benefits paid in the year	(14)
Business acquisitions and restructuring	41
Balance on 31 December	428

Liability calculation assumptions:

Mortality table	TV – 88/90
Discount rate	5.30%
Salaries growth rate	3.25%

27 Provisions and adjustments to the net realisable value

2007	Opening balance	Provisions set up	Provisions used	Foreign exchange difference	Transfers	Business acquisition and restructuring	Closing balance
Doubtful debtors (note 20)	28,525	1,760	(5,079)	326	(72)	32	25,492
Investment in associated companies	25	-	(25)	-	-	-	-
Inventories (note 18)	8,150	6,127	(3,369)	425	-	22	11,355
Short terms investments (note 21)	57	-	-	-	-	-	57
Total fair value adjustments	36,757	7,887	(8,473)	751	(72)	54	36,904
Employee benefits (note 26)	19,154	596	(957)	-	-	(108)	18,685
Other risks and contingencies	13,690	4,361	(3,816)	90	72	1,036	15,433
Total of provisions	32,844	4,957	(4,773)	90	72	928	34,118

2006	Opening balance	Provisions set up	Provisions used	Foreign exchange difference	Transfers	Business acquisition and restructuring	Closing balance
Doubtful debtors (note 20)	43,030	3,214	(18,095)	26	350	-	28,525
Investment in associated companies	25	-	-	-	-	-	25
Inventories (note 18)	7,660	4,176	(3,730)	44	-	-	8,150
Short terms investments (note 21)	57	-	-	-	-	-	57
Total fair value adjustments	50,772	7,390	(21,825)	70	350	-	36,757
Employee benefits (note 26)	18,690	1,374	(910)	-	-	-	19,154
Other risks and contingencies	14,663	2,530	(3,650)	12	135	-	13,690
Total of provisions	33,353	3,904	(4,560)	12	135	-	32,844

Provision for risks and contingencies includes:

• An amount of EUR 3,062 thousand relating to possible future compensation to be paid by the Group in respect of guarantees on sales deals carried out in recent years.
• An amount of EUR 12,371 thousand relating to litigious cases, which are not expected to be resolved within the year.

28 Trade creditors, accrued costs and deferred income

	2007	2006
Associated companies and subsidiaries	8	8
Other commercial creditors	1,068,461	861,785
Other non-commercial creditors	79,718	61,065
Accrued costs	140,020	117,596
Deferred income	1,355	1,386
	1,289,562	1,041,840

The heading accrued costs includes essentially salaries and wages to be paid to the employees, in the amount of EUR 46,164 thousand, interest payable in the amount of EUR 14,848 thousand and supplementary costs with the distribution and promotion of goods in the amount of EUR 33,068 thousand. The remaining EUR 45,940 thousand respects to sundry costs (utilities, insurance, consultants, rents, etc), for 2007, which had not been invoiced by the respective entities prior to the end of the year.

The heading deferred income comprises essentially supplementary gains in the amount of EUR 349 thousand, which are deferred until the respective goods are sold.

29 Guarantees

The bank guarantees are as follows:

	2007	2006
Guarantees provided to EDP (Electricity company)	121	99
Guarantees provided to suppliers	1,336	1,933
Guarantees for D.G.C.I. (Portuguese tax authorities)	19,502	7,638
Financing bank guarantees	55,656	-
Other guarantees for the Government	11,800	8,709
Other guarantees provided	1,690	4,045
Total of Guarantees	90,105	22,424

30 Operational lease

The amounts of liabilities related to medium and long-term contracts which have penalty clauses if broken, are the following:

	2007	2006
Payments in less than 1 year	86,134	65,956
Payments between 1 and 5 years	251,988	184,839
Payments in more than 5 years	209,615	133,121
	547,737	383,916

These amounts respect to stores and warehouses rent contracts, with initial term between 5 and 20 years, with an option to renegotiate after that period. The payments are annually updated, reflecting inflation and/or market valuation.

As mentioned all these contracts are breakable through the payment of penalty clauses. The liabilities inherent to these penalties were, in the end of 2007, of EUR 21,451 thousand.

The operational lease contracts recognised as costs during the year in the amount of EUR 96,211 thousand (2006: EUR 82,780 thousand), are distributed as follows:

	2007	2006
Buildings	83,768	72,551
Plants & machinery	3,788	2,924
Transport equipment	6,276	5,018
IT equipment	1,089	831
Others	1,290	1,456
	96,211	82,780

The difference to the rents stated in note 6 are costs with occasional renting in the amount of EUR 840 thousand (2006: EUR 1,162 thousand) and rents costs that were attributable to the cost of goods sold in the amount of negative EUR 387 thousand (2006: negative EUR 288 thousand).

31 Capital commitments

Capital expenditure contracted for at the balance sheet date amount EUR 93,456 thousand and referred essentially to work in progress and the celebrated preliminary agreement of acquisition of lands and buildings whose public deeds will go to occur opportunely.

32 Contingencies

• Under non-current debtors (note 20), an amount of EUR 59,634 thousand relates to tax liquidations claimed by the Tax Administration. The amounts were liquidated under the exceptional regularisation process of tax debts (as outlined in note 32 of the 2006 Notes to the Consolidate Financial Statements).

The Board of Directors, supported by its tax and legal advisers, believes it has acted entirely within the law and maintains the claims filed against such settlements, without waiving its legitimate right to appeal against them and expecting their full recovery.

In this context, the Group immediately demanded total reimbursement of the amounts paid, as well as indemnity interest at the legal rate for the period between the payment date and its effective restitution date.

According to the principle of prudence, the Group has not recognised the amount of indemnity interest over this credit.

• Besides several claims related to normal Group activities, the following materially relevant situations are pending:

• a) In 1999, as a result of the acquisition of two companies that held establishments previously owned by former franchisees of ITMI – Norte-Sul Portugal – Sociedade de Desenvolvimento e Investimento, S.A., this company, together with Regional de Mercadorias – Sociedade Central de Aprovisionamento, S.A., has filed an action against several subsidiaries of the Group, holding them responsible for the alleged non fulfilment, by those former franchisees, of the contract they had set up with ITMI, already terminated at the date of the acquisitions, demanding an indemnity of EUR 14,600 thousand. This procedure is still pending a court date. Considering both the complexity of the process and the fact that a relevant part of the evidence has not yet been produced, it is not possible, with assurance, to determine its outcome. Nevertheless, it is the belief of the Board of Directors that the amount requested will probably not be granted, thus, as referred to in the Groups' affiliates annual reports of previous years, no provision has been set up.
• b) The Company Leirimundo Construção Civil, Lda claims an indemnity of EUR 8,196 thousand from Gestiretalho, as a result of the termination of the lease agreement entered into by the parties. Gestiretalho refutes the claim filed by Leirimundo, having filed its own claim for an indemnity of EUR 31,441 thousand for losses and lost revenues. Gestiretalho claims non-fulfilment by Leirimundo as basis for terminating the agreement. At the moment the process is in the arbitration court.
• c) The company Proherre Internacional, Lda claimed an indemnity payment of EUR 2,500 thousand from Pingo Doce – Distribuição Alimentar, S.A., alleging termination of a lease agreement by Pingo Doce, without the minimum period agreed between the parties having elapsed. Pingo Doce contests this claim based on the fact that the lease was terminated through mutual agreement. The case is in a preliminary phase. No date for the trial has been schedule yet.
• d) The Portuguese tax authorities claim from Recheio, SGPS, S.A. the amount of EUR 2,503 thousands concerning Value Added Tax (VAT) additional assessment. Tax authorities are challenging the VAT deduction method adopted by Recheio, SGPS, S.A.. Recheio's Management, supported by their tax consultants, believe that they are entirely right concerning this matter, being this fact reinforced by recent judgements ruled by the Lisbon Tax and Administrative Court regarding this matter.
• e) The Portuguese tax authorities claim from Recheio Cash & Carry, S.A. the amount of EUR 751 thousands regarding VAT additional assessment, since certain requirements proving the VAT exemption on intracommunity transactions were not complied with. Recheio's Management, supported by their tax consultants, have already contested this VAT additional assessment, believing that they are entirely right concerning this matter.
• f) The Portuguese Tax Authorities have informed Recheio, SGPS, S.A., that it should restate the dividends received, amounting to EUR 81,952 thousands, from its subsidiary in the Madeira Free Zone, during the years 2000 to 2003, considering them as interest for tax purposes. According to the Portuguese tax authorities the said income should be subject to Corporate Income Tax in opposition to the dividends received that are exempt. Recheio's Management, supported by their tax consultants and legal advisors, consider that the report issued by the tax authorities does not have legal basis or validity, and will use all the resources at its disposal to challenge it. Recheio's Management believe that they are entirely right concerning this matter.
• g) The Portuguese tax authorities claim from Feira Nova- Hipermercados, S.A. the amount of EUR 743 thousands concerning to Special Contribution additional assessments due to the value increase of the Bela Vista complex. Feira Nova's Management, supported by their lawyers and tax consultants, has already contested that assessment, believing that the tax authorities have no grounds to request this payment.
• h) The Portuguese tax authorities claim from Feira Nova Hipermercados, S.A. and Pingo Doce Distribuição Alimentar, S.A. the amounts of EUR 851 thousands and EUR 999 thousands, respectively, regarding to financial years 2001, 2002 and 2003 Corporate Income Tax (CIT). This was due to payments made to nonresident entities, for taxation purposes, in Portugal, having applied the withholding tax exemption without having a tax residency certificate of the income beneficiary duly signed and stamped by the tax authorities from the country where the income beneficiary is a tax resident, in order to the withholding tax exemption may be applied. Feira Nova and Pingo Doce's Management, supported by their lawyers and tax consultants, has challenge these claims, believing that the tax authorities have no grounds to request this payment.

• i) The Portuguese tax authorities assessed Feira Nova Hipermercados, S.A. and Pingo Doce Distribuição Alimentar, S.A. the amounts of EUR 2,214 thousands and EUR 1,357 thousands, respectively. These additional assessments are related to the amount booked by these companies as shrinkage (loss of inventory through crime or wastage), which was not accepted as a tax deductible cost, for CIT purposes and, hence, to missing VAT since there are no evidence that the goods were not sold. These assessments respect to the years of 2002 and 2003. Feira Nova and Pingo Doce's Management, supported by their lawyers and tax consultants, have challenged these assessments, believing that the tax authorities have no arguments to request these payments.

• j) The Portuguese tax authorities carried out some corrections to the CIT amount from companies included in the perimeter of the Tax group headed by JMR – Gestão de Empresas de Retalho, SGPS, S.A. (JMR), which led to additional assessments, concerning 2002 and 2003, amounting to EUR 10,536 thousands. JMR's Management supported by their lawyers and tax consultants have challenged these assessments, assuming that the tax authorities have no grounds to request this payment.

• k) The Portuguese tax authorities have informed Jerónimo Martins, SGPS, S.A., that should restate the dividends received, amounting to EUR 6,498 thousand, from its subsidiary in the Madeira Free Zone in 2004, considering them as interest for tax purposes. According to the Portuguese tax authorities the said income should be subject to CIT in opposition to the dividends received that are exempt. Jerónimo Martins' Management, supported by their tax consultants and legal advisors, consider that the report issued by the tax authorities does not have any legal basis or validity, and will use all the resources at its disposal to challenge it. Jerónimo Martins' Management believe that they are entirely right concerning this matter.
• l) The Portuguese tax authorities have claimed EUR 989 thousand from Jerónimo Martins in relation to the CIT for an indemnity paid by the Company due to an agreement reached in arbitration court, and which the Tax Authorities considered as dealing with a payment to an entity subject to a more favourable tax regime, and therefore not accepted for tax purposes. The Management of Jerónimo Martins, with the support of its tax and legal advisers, does not consider the report of the Tax Authorities to have legal basis or validity, and thus has already used all the resources at its disposal to challenge it.
• m) The Tax Authorities assessed JMR, SGPS, S.A. for the amount of EUR 16,078 thousand due to the fact that JMR should restate the dividends received, in 2003 and 2004, from its subsidiary in the Madeira Free Zone, considering them as interest for tax purposes. According to the Portuguese tax authorities the said income should be subject to CIT in opposition to the dividends received that are exempt. JMR Management, supported by their tax consultants and legal advisors, consider that the report issued by the tax authorities does not have any legal basis or validity, and will use all the resources at its disposal to challenge it. JMR's Management believe that they are entirely right concerning this matter.
• n) The Fiscal Authorities claim from Unilever Bestfoods Portugal Produtos Alimentares, S.A., the amount of EUR 4,343 thousands for non-acceptance of withholding tax exemption carried out by the company, in paying dividends in 2002. The Management of the company, backed up by its lawyers and fiscal consultants, have contested these charges, believing that the Fiscal Authorities are not justified in requesting this payment.
• o) The Fiscal Authorities claim from LeverElida Distribuição de Produtos de Limpeza e Higiene Pessoal, Lda, the amount of EUR 1,448 thousands with regard to non-acceptance, for fiscal purposes of several costs CIT for the year 2000. The process is being analysed by the Lisbon Fiscal Authorities and its execution is suspended through the provision of a bank guarantee by the company.

33 Related parties

33.1 Balances and transactions with related parties

55.899% of the Group is owned by the Sociedade Francisco Manuel dos Santos, and no transactions occurred between this Company and any other company of the Group in 2007, neither were there any amounts payable or receivable between them on December 31st, 2007.

Balances and transactions of Group companies with related parties are as follows:

		Sales and services rendered		Stocks purchased and services supplied		Interests received
	2007	2006	2007	2006	2007	2006
Joint Ventures	998	2.037	106.505	119.094	-	125.501
Related parties	991	947	1.214	959.429		-
			Trade debtors, accrued income and deferred costs	Trade creditors, accrued income and deferred costs
		31/12/2007	31/12/2006	31/12/2007	31/12/2006
	Joint Ventures	1.060	2.644	9.822	11.957
	Related parties	97	342	515	428

Balances and transactions with related parties not eliminated in the consolidation process, were as follows:

	Sales and services rendered		Stocks purchased and services supplied			Interests received
	2007	2006	2007	2006	2007	2006
Joint Ventures	472	746	47.927	51.001	-	33
Related parties	991	947	1.214	959		-

	Trade debtors, accrued income and deferred costs		Trade creditors, accrued income and deferred costs
	31/12/2007	31/12/2006	31/12/2007	31/12/2006
Joint Ventures	499	983	4.420	4.815
Related parties	97	342	515	428

All the transactions with companies consolidated using the proportional method (joint-ventures) or using the equity method were made under normal market conditions, i.e., the transaction value corresponds to prices that would be applicable between non related parties.

In 2007, one of the subsidiaries sold a property to a close family member of one Director of the Company, in the amount of EUR 310 thousand, being the higher value from two valuations performed by independent valuators. This transaction was done complying with the terms of no. 2 of article 397 of the Portuguese Companies Code. At the date of financial statements there is no amount outstanding.

33.2 Benefits attributed to directors

Directors of JMH board are entitled to complementary retirement benefits, providing they have been executive board members for at least 10 years, and retire from the post at 65 years old of age.

This benefit corresponds to a complementary pension so as to receive an amount equivalent to the net salary earned as of retirement date.

At the Annual General Meeting in 2005, an alternative retirement pension plan was approved. It is a defined contribution Pension Plan. It is the Remuneration Committee that defines the contribution rate of the Company. The Directors that choose this plan are no longer eligible for the complementary retirement benefits plan, renouncing expressly and irrevocably to the latter.

33.3 Remuneration paid to directors

The members of the board of directors received the following remuneration (fixed, variable and contributions to the pension plans):

	2007	2006
Executive directors	1,834	1,729
Non-executive directors	882	1,144
	2,716	2,873

The Board of Directors of the company contains 9 members, of which 3 are Executive and 6 Non executive as stated in this Annual Report- Corporate Governance.

The remuneration paid to Non executive Board Members in 2007, of EUR 12 thousand is relative to their participation in the Audit Committee (2006: EUR 10 thousand).

33.4 Key Management compensation

	2007	2006
Salaries and other short-term employee benefits	17,699	13,777
Termination benefits	1,103	1,127
Post-employment benefits	449	256
Other benefits	173	166
Total	19,424	15,326

The average number of Senior Managers was 89.

The amounts presented reflects 100% of costs with salaries and wages of the senior management, including the companies under the proportional consolidation method (joint-ventures).

34 Group companies

Group control is ensured by the parent company, Jerónimo Martins, SGPS, S.A..

The tables below list the companies that form part of Jerónimo Martins Group. These tables were organised according to the consolidation method used, and where there are exclusions, the relevant reasons are given.

a) Full consolidation method

		Head office	% Owned
Company Jerónimo Martins, SGPS, S.A.	Business area Business portfolio management
Jerónimo Martins – Serviços, S.A.	Human resources top management	Lisbon Lisbon	100.00
	Business portfolio management in the area of retail
JMR – Gestão de Empresas de Retalho, SGPS, S.A.	distribution	Lisbon	51.00
Pingo Doce – Distribuição Alimentar, S.A.	Retail sales in supermarkets	Lisbon	51.00
Supertur – Imobiliária, Comércio e Turismo, S.A.	Real estate purchase and sale	Lisbon	51.00
Feira Nova – Hipermercados, S.A.	Retail sales in hypermarkets	Lisbon	51.00
Bazar Novo – Distribuição de Produtos Não Alimentares, Lda	Retail sales of durable consumer goods	Lisbon	51.00
Gestiretalho – Gestão e Consultoria para a Distribuição a Retalho, S.A.	Retail management, consultancy and logistics	Lisbon	51.00
Imoretalho – Gestão de Imóveis, S.A.	Real estate management and administration	Lisbon	51.00
Casal de São Pedro – Administração de Bens, S.A.	Real estate management and administration	Lisbon	51.00
Jerónimo Martins Finance Company (2), Limited	Financial services	Dublin (Ireland)	51.00
EVA – Sociedade de Investimentos Mobiliários e Imobiliários, Lda	Provision of services in the economic and financial areas and investment management	Funchal	51.00
Cunha & Branco – Distribuição Alimentar, S.A.	Retail sales in supermarkets		51.00
Electric Co – Distribuição de Produtos não Alimentares, Lda.	Distribution of non-food and consumer goods	Lisbon Lisbon	51.00
Dantas & Vale, S.A.	Distribution of food products	Lisbon	51.00
Recheio, SGPS, S.A.	Business portfolio management in wholesale and retail distribution	Lisbon	100.00
Recheio-Cash & Carry, S.A.	Wholesale of food and consumer goods	Lisbon	100.00
Imocash – Imobiliário de Distribuição, S.A.	Real estate management and administration	Lisbon	100.00
Larantigo – Sociedade de Construções, S.A.	Real estate purchase and sale		100.00
PSQ – Sociedade de Investimentos Mobiliários e Imobiliários, Lda	Provision of services in the economic and financial areas and investment management	Lisbon Funchal	100.00
Masterchef, S.A.	Retail sales and/or wholesale of food or non-food products	Lisbon	100.00
Funchalgest– Sociedade Gestora de Participações Sociais, S.A.	Business portfolio management	Funchal	75.50
João Gomes Camacho, S.A.	Wholesale of food and consumer goods	Funchal	75.50
Lidosol II – Distribuição de Produtos Alimentares, S.A.	Retail sales in supermarkets	Funchal	75.50
Idole–Utilidades, Equipamentos e Investimentos Imobiliários, Lda	Real estate purchase and sale	Lisbon	75.50
Lidinvest – Gestão de Imóveis, S.A.	Real estate management and administration	Funchal	75.50
Belegginsmaatschappij Tand B.V.	Financial services	Rotterdam (Holland)	100.00
Jerónimo Martins Dystrybucja, S.A.	Retail and wholesale of food and consumer goods	Kostrzyn (Poland)	100.00
Optimum Mark Sp. Z.o.o.	Exploration of trade marks	Warsaw (Poland)	100.00
Jerónimo Martins – Distribuição de Produtos de Consumo, Lda	Wholesale of food products	Lisbon	100.00
Caterplus – Comercialização e Distribuição de Produtos de Consumo, Lda	Wholesale of other food products	Lisbon	49.00
Jerónimo Martins – Restauração e Serviços, S.A.	Food retail stores	Lisbon	100.00
Hermes–Sociedade Investimentos Mobiliários e Imobiliários, Lda	Provision of services in the economic and financial areas and investment management	Funchal	100.00
Friedman - Sociedade Investimentos Mobiliários e Imobiliários ,Lda	Provision of services in the economic and accounting area	Funchal	100.00
Servicompra – Consultores de Aprovisionamento, Lda	Provision of services in the areas of market research, procurement and marketing and bargaining techniques	Lisbon	100.00
Jerónimo Martins Retail Services, S.A.	Exploration of trade marks	Klosters Switzerland	51.00
Desimo – Desenvolvimento e Gestão Imobiliária, Lda	Real estate management and administration and trade marks	Lisbon	100.00
Comespa - Gestão de Espaços Comerciais, S.A.	Management and administration of retail outlets	Lisbon	51.00
Hussel Ibéria – Chocolates e Confeitaria, S.A.	Retail sale of chocolates, confectionery and similar products Lisbon		51.00
Escola de Formação Jerónimo Martins, S.A.	Training	Lisbon	51.00
Simões & Freitas, Lda.	Retail sales in supermarkets and hypermarkets	Évora	51.00

b) Proportional consolidation method

		Head	%
Company	Business area	Office	Owned
Unilever Jerónimo Martins, Lda.	Wholesale of other food products	Lisbon	45.00
Indústrias Lever Portuguesa, S.A.	Detergent manufacturing	Lisbon	45.00
Olá – Produção de Gelados e Outros Produtos Alimentares, S.A.	Manufacturing of ice-cream and sorbet	Lisbon	45.00
Fima - Produtos Alimentares, S.A.	Production of margarines and similar products	Lisbon	45.00
Victor Guedes – Indústria e Comércio, S.A.	Production of olive oil	Lisbon	45.00
Bliska Sp. Z.o.o.	Retail sale of pharmaceutical, orthopaedic and health products	Warsaw (Poland)	50.00

c) Equity method

		Head	%
Company	Business area	Office	Owned
PGJM – Importação e Distribuição de Perfumes e Cosméticos, S.A.	Wholesale of perfumes and cosmetics	Lisbon	50.00

d) In 2007:

• The companies JM Holdings UK Limited e TIP Marken-Discount Handelsgesellschaft mbH were wound up;
• The company Jerónimo Martins Finance Company (1), Limited was disposed of;
• The companies Unilever Bestfoods Portugal Produtos Alimentares, S.A., LeverElida Distribuição de Produtos de Limpeza e Higiene Pessoal, Lda. and IgloOlá – Distribuição de Gelados e Ultracongelados, Lda., were merged in the Company Fima/VG – Distribuição de Produtos Alimentares. Lda., that was renamed to Unilever Jerónimo Martins, Lda.

35 Interests in joint ventures and associates

The Group owns (directly and indirectly) interests in the following joint ventures:

• In Unilever Jerónimo Martins the Group has a shareholding of 45% which controls a group of companies dedicated to manufacturing and selling products, as described below:
• Fima manufactures and sells food products, specifically edible fats and drinks, and private labels as well as Unilever Group brands.
• Lever manufactures and sells personal and home care products. The brands marketed are the property of the Unilever Group.
• Olá manufactures ice cream and markets ice cream under private and Unilever Group brands.

● The Group holds a shareholding of 50% in Bliska, company located in Poland, and its business area is retail sale of pharmaceutical, orthopaedic and health products.

The Group owns directly interests in the following associated company:

● The Group holds a shareholding of 50% in PGJM- Importação e Distribuição de Perfumes e Cosméticos, S.A., and its business area is retail sale of perfumes and cosmetic products.

The consolidated financial statements include the following amounts relative to assets and liabilities appropriated as a result of participation in the above-mentioned joint ventures, consolidated by the proportional method:

	2007	2006
Non-current assets	162,589	121,302
Current assets	78,021	80,708
Non-current liabilities	(193,191)	(170,987)
Current liabilities	(115,529)	(97,174)
Net assets	(68,110)	(66,151)
Income and gains	335,109	357,622
Costs and losses	(321,382)	(330,209)
Net result	13,727	27,413

The financial statements of the associated company, accounted using the equity method, includes the following amounts of assets, liabilities and results:

	2007	2006
Non-current assets	170	158
Current assets	5,251	4,941
Non-current liabilities	(419)	(317)
Current liabilities	(3,805)	(3,748)
Net assets	1,197	1,034
Income and gains	7,278	6,790
Costs and losses	(6,816)	(6,378)
Net result	462	412

In applying the equity method there were no problems in harmonizing the accounting policies of the associate.

36 Events after the balance sheet date

On January 2nd, 2008, as per the press release on September 14th, 2007, issued by Unilever PLC, Jerónimo Martins and Unilever reached an agreement regarding the sale by Unilever Jerónimo Martins, Lda., of part of its ready-to-drink tea business under the Lipton brand, to Pepsi Lipton International (PLI), which is a company representing a partnership between Unilever PLC and PepsiCo. On the same date, Unilever Jerónimo Martins, Lda. signed a contract with PLI to distribute PLI's products in Portugal, agreeing to receive 38 million euros as payment for an estimated reduction in its future cash flows. This payment should have an impact of around 12 million euros on Jerónimo Martins' net result for 2008.

On January 9th, 2008, Recheio Cash & Carry, SA and its subsidiary Imocash – Imobiliário de Distribuição, SA signed a promissory agreement of acquisition of a going concern and of purchase of an immovable asset with Luta – Comércio e Distribuição de Produtos de Consumo, CRL, with the intent of acquiring a cash & carry store and the property where it is located, in the municipality of Cascais. The operation, which involves a global amount (including the property value) of 15 million euros, will be subject to the non-opposition of the Portuguese Anti-Trust Authority, among other conditions.

Lisbon, 27 February 2008

The Certified Accountant The Board of directors

Statement of conformity

Dear Shareholders,

Within the terms of paragraph c) of article 245 of the Portuguese Securities Code, we hereby inform you that to the best of our knowledge:

(i) the information contained in the management report is a faithful statement of the evolution of the businesses, of the performance and of the position of Jerónimo Martins, SGPS, S.A. and the companies included within the consolidation perimeter, and contains a description of the main risks and uncertainties which they face; and

(ii) the information contained in the individual and consolidated financial statements, as well as their annexes, was produced in compliance with the applicable accounting standards and gives a true and appropriate image of the assets and liabilities, the financial situation and the results of Jerónimo Martins, SGPS, S.A. and the companies included in the consolidation perimeter.

Lisbon, 27th February, 2008

Elísio Alexandre Soares dos Santos (President of the Board of Directors)

Luís Maria Viana Palha da Silva (President of the Executive Committee in charge of financial matters)

Pedro Manuel de Castro Soares dos Santos (Member of the Executive Committee - Responsible for Food Distribution Operations)

José Manuel da Silveira e Castro Soares dos Santos (Member of the Executive Committee - Responsible for Manufacturing Operations and Representation and Marketing Services)

António Mendo Castel-Branco Borges (Non-Executive Member)

Hans Eggerstedt (Non-Executive Member)

Rui de Medeiros d'Espiney Patrício (Non-Executive Member)

Artur Eduardo Brochado dos Santos Silva (Non-Executive Member)

Nicolaas Pronk (Non-Executive Member)

Report and Opinion of the Audit Committee

Dear Shareholders,

In accordance with the paragraph g) of article 423-F of the Commercial Companies Code, we herewith present our report on our supervisory activity and our opinion on the Jerónimo Martins, SGPS, S.A. report and consolidated accounts for the year ending 31 December 2007, as well as on the proposals presented by the Board of Directors.

This committee met four times during 2007 and carried out its duties on:

• i) the management of the Company, both on its compliance with the law and with the Company Articles of Association;
• ii) the effectiveness of the risk managements systems, the internal control system and the internal audit system; and
• iii) the preparation and disclosure of financial information as well as the review of the accuracy of the accounting documentation, accounting policies and valuation methods used by the Company, in order to ensure that these correspond to a correct evaluation of the equity and its results.

Within the scope of the competence conferred upon us, we have found that:

• i) The consolidated management report shows a correct, clear and complete view of the most significant aspects of the evolution of the businesses and the position of the Company and its subsidiaries, and all existing risks, both operational and financial, are duly presented; and
• ii) the consolidated financial statements and respective annex give a true and fair view of the Company and its subsidiaries financial situation.

Therefore, taking into account the information received from the Board of Directors, the Company personnel and the conclusions outlined in the Report of the Auditors for Statutory and Stock Exchange Regulatory Purposes in Respect of the Consolidated Financial Information, we are of the opinion that:

• i) The Consolidated Management Report should be approved;
• ii) The Consolidated Financial Statements should be approved; and

iii) The Board of Directors' results appropriation proposal should be approved.

Lisbon, February 27th, 2008

Hans Eggerstedt (President of the Audit Committee)

António Mendo Castel-Branco Borges (Vogal)

Rui de Medeiros d'Espiney Patrício (Vogal)

Jerónimo Martins, SGPS, S.A.

Public Company

Registered at the Commercial Registry Office of Lisbon and Tax Number: 500 100 144

Share Capital: Eur 629.293.220,00

Rua Tierno Galvan, Torre 3, 9º, Letra J

1099 - 008 LISBOA

JERÓNIMO MARTINS, SGPS, S.A.

PUBLIC COMPANY

MANAGEMENT REPORT

Financial year 2007

As a manager of equity holdings, Jerónimo Martins has a portfolio of investments characterized by a strong presence in food retail in Portugal mainland (Pingo Doce, Feira Nova and Recheio), Madeira Island (Pingo Doce e Recheio) and in Poland (Biedronka), in the industrial sector, where it maintains a long-standing partnership with Unilever (Fima, Bestfoods, Lever and Olá), in the specialized retail (where Hussel, Olá and Jeronymo stand out) and in the marketing and distribution services (JMD).

As the Group's holding company, JMH co-ordinates and provides consultancy services to its subsidiaries, where the functional areas of support to the Group, range from administration to institutional relations, development and strategy, planning and control, legal and fiscal affairs, risk control, internal audit, human resources, financial operations, consolidation and accounting, security and communication. Services provided reached 11.9 million euros.

1. The Group's operational performance in Portugal

Pingo Doce

In the year under analysis, the success of the chain's positioning showed like-for-like growth in sales of 8.7%. Total business volume was 1,136.8 million euros, 17.5% higher than in the previous year, mainly due to the 13.5% increase in the number of transactions.

These results were attained during a difficult macroeconomic environment in which the unemployment rate increased and consumers' purchasing power decreased.

Feira Nova

In 2007, Feira Nova accelerated the repositioning of its business model with visible impacts in the 14% growth in sales of Perishables, and 56% in sales of Private Brand products.

The 4.3% decrease in like-for-like sales of the hypermarkets reflected the aggressive campaigns, especially during the summer, of all operators of this format, while the performance of compact stores (+0.7% in like-for-like growth in the year) shows positive signs of strategy in implementation, although it is still too early to see the effect of the changes reflected in the assortment, where the strong increase in penetration of Private Brands is highlighted.

Recheio

At Recheio, 2007 was the first year in which the HoReCa channel had a greater weight in the Company's sales, being responsible for 43.3% of total sales. The 7.6% growth in sales in this segment obtained in 2007, compared to the same period in the prior year, reflects the Company's successful repositioning after defining a business strategy that was especially geared toward this client.

It was also the year, in which Recheio recorded its best sales, reaching 626 million euros, corresponding to a growth of 4.0% on 2006. In like-for-like stores, the 3.6% growth was equally strong.

Madeira

Pingo Doce in Madeira reported strong sales performance, with growth of 15.1% over 2006, reaching 94.5 million euros. The results obtained were a consequence of strategic repositioning of the brand in the region. In effect, in 2007 the Pingo Doce network in Madeira had a deflationary pricing policy for the third year in a row, which this year resulted in a 4.5% price decline of the chain's average basket.

Despite being penalised by the remodelling work, which affected the entire first quarter of 2007, in 2007 Recheio in Madeira had sales volume of 28.8 million euros, with the recovering in the last three quarters that offset the decrease in sales, which was -0.9% over 2006.

JMD and specialized retail

In Marketing, Representation and Restaurant Services, sales grew 3.0% over the same period of the previous year, mainly reflecting the increased sales in the restaurant area, which was due to the expanded number of stores.

Marketing and Representation Services

In the food division, sales remained at the level reported in the prior year, which was a positive result considering the performance of the vast majority of the other operators.

In the cosmetics division, the year 2007 was marked by the end of the business relationship with the Calvin Klein brand. The end of this representation in June 2007 had a considerable impact, not only on the cosmetics division, which finds itself forced to find a new business model that will ensure its continuation, but also for the Company, since Calvin Klein was a relevant representation. In the second half of the year, the Division focused its activity on its current and on preparing its future strategy.

Hussel

Hussel chocolate chain has been synonymous of innovation and quality in the confectionary market. The year 2007 was again positive for the Company, which reported business growth in all relevant areas, namely sales volume, number of consumers, and average purchase value.

Restaurants and Services

Jeronymo, was one of the most dynamic brands in 2007, both in terms of new store openings as well as in launching new concepts. Three new units were opened under the original version of café kiosks; with the acquisition of the "Storia del Café" chain the first cafeteria under the brand Jeronymo outside of the Pingo Doce and Feira Nova retail units was launched.

Olá is the chain with the greatest number of stores in this segment, and it intends to maintain

and consolidate its current leadership position. Ten units were opened in 2007, and one existing store was closed. The brand currently owns 32 stores and five franchises stores, for a total of 37 units.

Industry

In Manufacturing, excluding the sale of the frozen food business in November 2006, sales attributable to Jerónimo Martins posted a growth of 0.7% over the same period in 2006, as a result of differentiated performance among categories and brands. The leading market brands in the Company's portfolio recorded positive performance, increasing their market share, while some categories' performance was affected by several factors, including: i) the drop in the price of olive oil, which did not allow the double-digit growth that occurred in volume to be reflected in growth in sales in the category, and ii) more aggressive competition in the personal care segment.

2. The Group's operational performance in Poland

The objectives of creating Company value were reached once again. The reinforcement of Biedronka's strategic positioning led to growth in like-for-like sales of 21.1%, which together with the organic expansion of 140 more stores resulted in a total rise in sales of 35.0% compared to the previous year.

Total sales increased in 2007 by 35.0% in local currency (+39.5% in euros) reflecting growth comparable stores, but also the execution of the expansion plan with the opening of 156 stores (+18.5% in sales area). In addition, the opening of the one thousandth Biedronka store in September 2007 was an important milestone in the gradual and sustained development of the chain in Poland.

3. Perspectives for 2008

In 2008, Pingo Doce will continue to carry out its activity in line with the strategy defined in 2002, seeking to reinforce the number of core clients, particularly in the categories of lowest penetration for the chain and reinforcing the differentiation aspects of the brand. Also in 2008, the Company is awaiting approval for the acquisition of the Plus stores, which are expect to be integrated into the Company during the year.

In 2008, Feira Nova is going to invest in differentiating the large hypermarkets, based on solid foundations and a consistent development plan. Like a preview of new projects, investing in the Feira Nova brand in the hypermarket model may be affirmed not only as it is known today, but as a new concept that will reinvigorate this format.

Recheio in 2008, without discounting the important support role to all Traditional Retail businesses, will continue to view the HoReCa channel as its growth driver.

For 2008, one of Pingo Doce's main challenges in Madeira is to maintain sales growth, even considering the expansion plan announced by its main competitors, and the remodelling of its main store in Madeira. In 2008, Recheio in Madeira must reflect the impact of

reorganisation of its operations, which are increasingly focused on the HoReCa market, offering services and solutions that are appropriate to this sector.

In the Manufacturing area, investment in the market leader brands, both in price and innovation, continues to be a major priority for the business. The restructuring process that led to the creation of a single Company and to portfolio rationalisation, eliminating the brands with little potential, should allow to continue protecting the profitability of its assets and the market shares of the brands that comprise the current portfolio.

JMD and the specialized retail area will continue to seek sustainability of its portfolio of represented brands, while it simultaneously studies opportunities in the food service business, reinforcing its growth plan in this area.

In 2008, Biedronka expects to continue to intensify geographic coverage of the country through its stores, trying to get the largest possible number of consumers. In the commencing year, beyond organic growth, the Company is awaiting approval for the acquisition of the Plus stores, which are expecting to be integrated into the Company during the year.

Once again, Jerónimo Martins anticipates another extremely challenging year, but it continues to set ambitious but achievable goals that reflect the clear commitment of the entire Organisation to attain healthy growth and create value in the short, medium and long-term. Investment in training and in developing internal competencies will also continue to be a major priority of the Group, both at the operational and management levels.

The Group's business activities are analysed in further detail in the Consolidated Management Report that accompanies the 2007 Consolidated Financial Statements.

4. Company's performance as a Holding of investments

The company as the Holding and manager of company holdings presented, in 2007, operating results of -0,1 million euros, which represents for a decrease of 2,0 million euros towards 2006. This decrease is due to the reduction of services rendered to subsidiaries during 2007.

The Loans to Group companies and Joint-Ventures increased in net terms 84.4 million euros. Additionally, the sale of a substantial part of BCP shares allowed a net inflow of 44.3 million euros. These facts conducted to a reduction of the financial debt of 115.5 million euros, to 137.5 million euros (253.0 million euros in 2006).

The net financial costs increased 3.4 million euros in relation to 2006, totalling the amount of 15.5 million euros. This growth is due essentially to the interest rates increase during the year and the exchange rate variations on the Zloty debt.

The several Commercial Paper Programmes, which amounted 110 million euros in 2006, were reimbursed. A new Commercial Paper Programme, in Zlotys (Polish currency) was also contracted in the amount of 100 million zlotys. Finally, the reimbursement of the 50 million euros bond loan issued in 2005 was anticipated, having been issued a new bond loan in the

amount of 70 million euros.

5. Risk Management

The Company, and in particular its Board of Directors, dedicate a great deal of attention to the risks affecting their business. Business continuity is critically dependent on the elimination or control of risks that may materially affect its assets (people, information, equipment, facilities), thereby jeopardising the strategic objectives they have set. The Group's Risk Management Policy is further detailed in the Corporate Governance chapter.

5.1 Financial Risks

JMH is exposed to various financial risks, namely: Market risk (which includes exchange rate risk, interest rate risk and price risk), liquidity risk and credit risk.

Risk management focuses on the unpredictability of the financial markets, and seeks to minimise its adverse effects on the Company's financial performance. For certain types of exposure, risks are hedged with financial derivative instruments.

Financial risk management is carried out by the Financial Operating Division, under policies approved by the Executive Committee. The Risk Management Department is responsible for identifying, assessing and hedging financial risks following the guidelines defined by Management.

a) Market Risk

Foreign Exchange Risk

JMH main source of exposure to foreign exchange risk comes from its Commercial Paper Programme in polish currency (zloty), in the amount of 100 million zlotys (200 million zlotys in 2006).

At December 31st 2007, the impact on JMH results, of an adverse variation of the EUR/PLN exchange rate in the order of 10%, through the foreign exchange revaluation of its Zlotys loan, would be of negative 3.1 million euros (negative 5.8 million euros in 2006).

Price Risk

Because of its investment in Banco Comercial Português, Jerónimo Martins is exposed to equity price risk. At December 31st, 2007, a negative 10% variation in the trading price of BCP shares would have a negative effect of 438 thousand euros. On December 31st, 2006, a variation of the same magnitude would have a negative impact of 2,956 thousand euros. The significant reduction in sensitivity to this risk is due to the sale of 9 million shares of BCP during 2007.

Cash Flow and Fair Value Interest Rate Risk

Since Jerónimo Martins has no significant interest-bearing assets on its balance sheet, its main exposure to interest rate risk is through its liabilities. All financial liabilities are directly or indirectly indexed to a reference interest rate which exposes Jerónimo Martins to cash flow risk. Given a portion of this risk is hedged through fixed interest rate swaps, Jerónimo Martins is also exposed to fair value risk.

Exposure to interest rate risk is monitored dynamically. In addition to evaluating future cash flows based on forward rates, sensitivity tests to variations in interest rate levels are performed.

Interest rate risk is managed through operations involving more or less structured financial derivatives, contracted at zero cost.

b) Credit Risk

Credit risk is centrally managed. The main sources of credit risk are bank deposits, shortterm investments and derivatives contracted with financial institutions.

The financial institutions that Jerónimo Martins chooses to do business with are selected based on the ratings they receive from independent rating agencies. The minimum acceptable rating is "A".

The following table shows a summary of the quality of the deposits, short-term investments and derivate financial instruments with positive fair value, as at December 31st 2007, and 2006:

		(thousand euros)
	Financial Institutions
	31/Dec/2007	31/Dec/2006
Rating	Balance	Balance
A-1	4,472	345
A-1+	605	875
Others	4	7
Total	5,081	1,227

The ratings shown correspond to the notations given by Standard and Poor's ("A-1" and "A-1+"). When these are not available, Fitch's notations are used ("F2").

The maximum exposure to credit risk at December 31st 2007 and 2006 is the financial assets accounting value.

c) Liquidity Risk

Liquidity risk is managed by maintaining an adequate level of cash or equivalents, as well as by negotiating credit facilities that not only allow the regular development of JMH activities, but also ensuring some flexibility to be able to absorb shocks unrelated to its activities.

To manage this risk, JMH uses, for example, credit derivatives in order to manage the impact of widening credit spreads that are the result of impacts beyond the control of JMH. Treasury needs are managed based on short-term planning (executed on a daily basis) which derives from the annual plans which are reviewed at least twice a year.

The following table shows JMH's liabilities by intervals of contractual residual maturity. The amounts shown in the table are the non-discounted contractual cash flow. In addition, it should be noted that all the derivative financial instruments that Jerónimo Martins contracts are settled at net value.

2007	Less than 1 year	1 to 5 years	+ 5 years
Borrowings
Financial Leasing	10	8	-
Loans	8,026	155,853	-
Derivative Financial Instruments	83	521	-
Creditors	456	-	-
Operational Lease Liabilities	325	330	-
2006
Borrowings
Financial Leasing	17	11	-
Loans	34,866	246,185	-
Derivative Financial Instruments	-	393	-
Creditors	415	-	-
Operational Lease Liabilities	205	237	-

Exposure to liquidity risk

6. Information on environmental matters

There are no environmental matters likely to affect the company's financial performance and situation, or its future development.

7. Results Appropriation Proposal

In the financial year 2007, Jerónimo Martins, SGPS, S.A. declared consolidated profits of EUR 131,261,083 euros and a profit in the individual accounts of 81,613,839.47 euros.

The Board of Directors proposes that the net profits be applied in the following manner:

• Legal Reserve ……… EUR 4,080,691.97
• Dividends……………… EUR 60,329,685.12
• Free Reserves …….. EUR 17,203,462.38

In accordance with the policy of dividend distribution announced several years ago, and described in the Corporate Governance Report, the dividend proposed represents a distribution of 46% of consolidated net profit.

This proposal represents a gross dividend payment of EUR 0.096 per share, excluding own shares in the portfolio.

Statements for legal purposes

Under the Law, the Board of Directors is required to provide the following information:

• a) In addition to the facts referred above, and those that, in greater detail, are given in the Report that accompanies the Group's Consolidated Financial Statements for 2007, no other situation has come to the Board of Director's knowledge after the end of the year whose relevance warrants a special mention;
• b) Under the terms of Article 21 of Decree-Law nº 411/91, from 17 October, there are no debts for arrears of payments to the Social Security;
• c) Under the terms of the paragraph 2, article 324 of the Portuguese Commercial Companies Code, there were no purchases or sales of Own Shares, and therefore the number of Own Shares held at the end of 2007 was the same as on 31 December 2006: 859,000 Own Shares;
• d) The information regarding subsequent events, stakes held in the company by members of the board of directors and statutory auditor and the list of shareholders with qualifying stakes, can be found in the consolidated Management Report.

Lisbon, 27 February 2008

The board of Directors

JERÓNIMO MARTINS, SGPS, S.A.

INCOME STATEMENT BY FUNCTIONS

FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006

			Euro thousand
	Notes	2007	2006
Services rendered		11,900	14,087
Cost of the services rendered		(8,715)	(8,327)
Gross profit		3,185	5,760
Other operating revenues		132	188
Administrative costs		(2,534)	(1,988)
Other operating costs		(1,407)	(1,990)
Exceptional operating profits/losses	9	623	-
Operating profit		(1)	1,970
Net financial costs	4	(15,465)	(12,087)
Profit/loss in subsidiaries and associated companies	7	77,173	42,361
Profit/loss in other investments	8	18,057	4,461
Profit/loss before taxes		79,764	36,705
Income taxes	6	1,850	(405)
Net profit/loss		81,614	36,300
Basic earnings per share – Euros *	21	0.130	0.058
Diluted earnings per share – Euros *	21	0.130	0.058

* The 2006 earnings per share have been adjusted according with May 31st 2007 stock split, in which each 5 euro share was converted into 5 new one euro shares.

____________________________ ______________________________

To be read with the attached notes to the Individual Financial Statements

The Certified Accountant Board of Directors

246

JERÓNIMO MARTINS, SGPS, S.A. BALANCE SHEET AT 31 DECEMBER 2007 AND 2006

Euro thousand

	Notes	2007	2006
Assets
Tangible assets	10	170	249
Intangible assets	11	18	11
Investment properties	12	2,470	2,470
Investments in subsidiaries	13	259,628	240,529
Investments in joint-ventures	13	6,349	6,349
Loans to subsidiaries	14	595,695	719,375
Loans to joint-ventures	14	186,048	164,199
Available-for-sale financial investments	15	4,380	29,557
Derivative financial instruments	27	585	331
Deferred tax assets	16	8,570	6,658
Total non-current assets		1,063,913	1,169,728
Taxes receivable	16	217	120
Loans to subsidiaries	14	100,121	82,661
Trade debtors, accrued income and deferred costs	17	7,114	15,012
Derivative financial instruments	27	347	-
Cash and cash equivalents	18	4,156	905
Total current assets		111,955	98,698
Total assets		1,175,868	1,268,426
Shareholders' equity and liabilities
Share capital	20.1	629,293	629,293
Share premium	20.1	22,452	22,452
Own shares	20.2	(6,060)	(6,060)
Reserves	20.3	1,310	8,344
Retained earnings	20.4	368,870	342,558
Total shareholders' equity		1,015,865	996,587
Borrowings	22	137,835	227,216
Derivative financial instruments	27	3,561	1,343
Employee benefits	28	14,342	14,647
Provisions	25	-	14
Deferred tax liabilities	16	299	305
Total non-current liabilities		156,037	243,525
Trade creditors and accrued costs	26	3,758	3,097
Borrowings	22	37	25,017
Taxes payable	16	171	200
Total current liabilities		3,966	28,314
Total Shareholders' equity and liabilities		1,175,868	1,268,426

To be read with the attached notes to the Individual Financial Statements

JE R	ÓN IM O MA	RT IN S,	SG PS	S.A
			,

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

							Eu tho d ro us an
	No te s	Sh e C ita l ar ap	Sh ar e Pr ium em	Ow ha n s re s	Re se rv es	Re ta ine d ing ea rn s	Sh eh old s' ar er uit eq y
Ba lan sh t 1 Ja 20 06 t a st ce ee nu ar y		62 9, 29 3	22 45 2 ,	( ) 6, 06 0	4, 64 6	35 9, 04 7	8 1, 00 9, 37
Fa ir v lue f a i la b le- for le fin cia l in stm ts a o va -sa an ve en					3, 8 57		3, 8 57
Fa ir v lue f c h f low he dg ing a o as s
- G t ros s a mo un fer d t - D e re ax	27				16 3 ( ) 43		16 3 ( ) 43
/lo Ga ins d ire ly nis ed in uit ct ss es re co g eq y		-	-	-	3, 69 8	-	3, 69 8
Ne fit in 20 0 6 t p ro						3 6, 3 0 0	3 6, 3 0 0
l g ain /lo nis ed d ing th To ta s ss es re co g ur e y ea r		-	-	-	3, 69 8	36 30 0 ,	39 99 8 ,
de d p Div i nt n ay me						( 5 2, 78 9 )	( 5 2, 78 9 )
Ba lan sh t 3 1s t D be r 2 00 6 t a ce ee ec em		62 9, 29 3	22 45 2 ,	( ) 6, 06 0	8, 34 4	34 2, 55 8	99 6, 58 7
ir v lue f a i la b le- for le fin cia l in Fa stm ts a o va -sa an ve en	15				( ) 6, 9 91		( ) 6, 9 91
lue f c h f low he dg Fa ir v ing a o as s
- G t ros s a mo un - D fer d t e re ax	27 16				( ) 5 9 16		( ) 5 9 16
/lo Ga ins d ire ct ly nis ed in uit ss es re co g eq y		-	-	-	( ) 7, 03 4	-	( ) 7, 03 4
fit Ne t p in 20 07 ro						81 61 4 ,	81 61 4 ,
To l g ain /lo nis ed d ing th ta s ss es re co g ur e y ea r		-	-	-	( ) 7, 03 4	81 61 4 ,	74 58 0 ,
Div i de d p nt n ay me						( 3 0 2 ) 55 ,	( 3 0 2 ) 55 ,
Ba lan sh t a t 3 1s t D be r 2 00 7 ce ee ec em		62 9, 29 3	22 45 2 ,	( ) 6, 06 0	1, 31 0	36 8, 87 0	1, 01 5, 86 5

To be read with the attached notes to the Individual Financial Statements

JERÓNIMO MARTINS, SGPS, S.A. CASH FLOW STATEMENT FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006

			Euro thousand
	Notes	2007	2006
Operating Activities
Cash received from Customers		14,465	18,907
Cash paid to Suppliers and Employees		(14,669)	(14,864)
Cash generated from operations	19	(204)	4,043
Interest and other similar costs paid	4	(10,471)	(11,565)
Income taxes paid		(179)	(61)
Cash Flow from operating activities		(10,854)	(7,583)
Investment activities
Disposals of tangible assets	10	25	-
Disposals of available-for-sale financial investments		44,313	4,197
Reimbursement of loans and capital contributions from subsidiaries	14	282,685	21,517
Interest received	7	18,016	10,120
Dividends received	7 and 8	40,368	26,973
Acquisition or capital increase of joint-ventures		-	(64)
Acquisition of available-for-sale financial investments		(318)	-
Loans and capital contributions given to subsidiaries	14	(198,389)	(33,027)
Acquisition of tangible assets	10	(13)	(79)
Acquisition of intangible assets	11	(10)	(11)
Cash flow from investment activities		186,677	29,626
Financing activities
Received from non-current loans	22	70,027	52,097
Interest and similar income received	4	65	93
Reimbursement of loans	22	(187,362)	(22,021)
Dividends paid		(55,302)	(52,789)
Cash Flow from financing activities		(172,572)	(22,620)
Net increase in cash and cash equivalents		3,251	(577)
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of the year		905	1,482
Changes in cash and cash equivalents		3,251	(577)
Cash and cash equivalents at the end of the year	18	4,156	905

To be read with the attached notes to the Individual Financial Statements

1. Activity 251
2. Accounting policies 251
3. Staff costs 261
4. Net financial costs 261
5. Operating lease 261
6. Income tax recognised in the income statement 262
7. Profit/loss in subsidiaries and associated companies 263
8. Profit/loss in other investments 263
9. Exceptional operating profits/losses 263
10. Tangible assets 263
11. Intangible assets 265
12. Investment property 265
13. Investments in subsidiaries and joint ventures 265
14. Loans 266
15. Available-for-sale financial investments 266
16. Taxes 267
17. Trade debtors, accrued income and deferred costs 268
18. Cash and cash equivalents 268
19. Cash generated from operations 268
20. Capital and reserves 268
21. Earnings per share 269
22. Borrowings 270
23. Financial debt 271
24. Financial risks 272
25. Provisions and adjustments to the net realisable value 272
26. Trade creditors and accrued costs 272
27. Derivative financial instruments 273
28. Employee benefits 274
29. Guarantees 275
30. Contingencies 275
31. Related parties 275
32. Subsidiaries, joint-ventures and available for sale investments 276
33. Group Companies and Joint-Ventures– Direct and indirect stakes 277
34. Transactions with related parties 278
35. Interests in joint ventures 280
36. Information on environmental matters 280
37. Events after the balance sheet date 280

1. Activity

Jerónimo Martins, SGPS, S.A. (JMH) is the parent company of Jerónimo Martins Group (Group) and has its head office in Lisbon, Rua Tierno Galvan, Torre 3, Piso 9, Letra J, 1099-008 Lisboa. The activity of JMH results mostly in the management of investments in Group companies. JMH employs 56 people (56 in 2006).

Jerónimo Martins Group is essentially devoted to the production, distribution and sale of food and other fast moving consumer goods products. The Group operates in Portugal and Poland, and employs about 41,300 people (34,675 in 2006).

JMH has been listed on Euronext Lisbon (ex-Lisbon and Oporto Stock Exchange) since 1989.

The Board of Directors approved these individual financial statements on 27th February 2008.

2. Accounting policies

The principal accounting policies adopted in the preparation of these financial statements are as follows:

2.1 Basis for preparation

All amounts are shown in thousand euros (EUR thousand) unless otherwise stated.

The consolidated and individual financial statements of JMH were prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).

The financial statements were prepared in accordance with the historical cost principle, except for investment property, derivative financial instruments and available-for-sale financial investments referred in note 2.8, which were stated at their fair value (market value).

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of current event and actions, actual results ultimately may differ from those estimates. It is, however, firmly believed by the management that the estimates and assumptions adopted do not involve significant risks that may, over the course of the coming financial year, cause material adjustments in the value of the assets and liabilities (note 2.23).

The financial risk management, as defined in the IFRS 7 – Financial instruments: Disclosures, is detailed in the Mangement Report.

Change in Accounting Policy and Bases for Presentation

Starting on January 1st, 2007, the new standard IFRS 7 – Financial Instruments: Disclosures, as well as changes introduced to IAS 1 – Presentation of Financial Statements. These introduce new disclosures relative to financial instruments and do not have any impact on the classification and measurement of financial instruments held by JMH or in the information disclosed related to taxes, accounts receivable or accounts payable.

Also starting in 2007, some standards, amendments and interpretations to standards became mandatory but without any material effects on the JMH financial statements and in most cases they are not applicable to JMH activities. This is the case of the amendments introduced to standard IFRS 4 – Insurance Contracts, and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC): IFRIC 7 – Applying the Restatement Approach under IAS 29, IFRIC 8 – Scope of IFRS 2, IFRIC 9 – Reassessment of Embedded Derivatives and IFRIC 10 – Interim Financial Reporting and Impairment.

The new standard, IFRS 8 – Operating Segments, as well as the amendments to IAS 23 – Borrowing Costs, must be applied starting January 1st, 2009. Since they have a reduced impact on JMH financial statements, bearing in mind the disclosures that are currently made, it was decided not to anticipate their adoption.

The IFRIC also issued a set of interpretations to the actual standards, with effective date for accounting periods beginning after March 1st, 2007, namely IFRIC 11 – IFRS 2 – Group and Treasury Share Transactions, IFRIC 12 – Service Concession Arrangements, IFRIC 13 – Customer Loyalty Programmes and IFRIC 14 – IAS 19 – The limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction. These interpretations are not materially relevant and the majority is not applicable to JMH activities.

2.2 Transactions in foreign currencies

Transactions in foreign currencies are translated into Euros at the exchange rate prevailing on the transaction date.

On the balance sheet date, monetary assets and liabilities expressed in foreign currencies are translated at the exchange rate prevailing on that date and exchange differences arising from this conversion are recognised in the income statement.

The main exchange rates applied on the balance sheet date are those listed below:

Rate on 31 December 2007

Polish Zloty (PLN) € 0.27828

2.3 Derivative financial instruments

JMH uses derivatives with the sole intention of managing any financial risks to which it is subject. In accordance with its financial policies, JMH does not enter into speculative positions.

Although derivatives entered by JMH correspond to effective economic hedges against risks to be hedged, not all of them qualify as hedge instruments for accounting purposes, according to IAS 39 rules. Those that do not qualify as hedge instruments are booked on the Balance sheet at fair value and changes to that amount are recognized in the financial results.

Whenever available, fair values are estimated based on quoted instruments. In absence of market prices, fair values are estimated through discounted cash flow methods and option valuation models, in accordance with generally accepted assumptions.

Derivative financial instruments are recognised on the date they are negotiated (trade date), by their fair value. Subsequently, the fair value of derivative financial instruments is re-evaluated on a regular basis, and the gains or losses resulting from this re-evaluation are recorded directly into the results of the period, except in relation to hedge derivatives. Recognition of changes in the fair value of hedge instruments depends on the nature of the hedged risk and the type of hedge used.

2.4 Hedging operations

Derivative financial instruments used for hedging may be classified, from an accounting point of view, as hedge instruments, as long as they comply with all the following conditions:

(i) At the starting date of the transaction, the hedge relationship is identified and formally documented, including identification of the item hedged, the hedge instrument, and evaluation of the effectiveness of the hedge;

(ii) There is the expectation that the hedge relationship will be highly effective on the initial transaction date and throughout the life of the operation;

(iii) The effectiveness of the hedge may be reliably measured on the initial transaction date and throughout the life of the operation;

(iv) For cash flow hedge operations, those cash flows must have a high probability of occurring.

Interest rate risk (cash flow hedge)

Whenever expectations surrounding movements in interest rates so justify, JMH tries to anticipate any adverse impact through the use of derivatives, such as, interest rates swaps, caps and floors, forward rates agreements, etc. The selection process that each instrument is subject to, praises economic contribution more than anything else. The implications of adding any new instrument to a portfolio of derivatives are also taken into account, namely, in terms of volatility impact on earnings.

The instruments that qualify as cash flow hedging instruments are booked at fair value on the Balance sheet, and to the degree that they are considered effective, changes to their fair value are initially booked against equity and afterwards reclassified as financial expenses.

If an hedging instrument is ineffective it is recognised directly in the profit and loss. This way, in net terms, all costs associated to the underlying exposure are carried at the interest rate of the hedging instruments.

When a hedge instrument expires or is sold, or when the hedge ceases to meet the criteria required for hedge accounting, the changes in the fair value of the derivative, that are accumulated in reserves, are recognised in the results when the hedged operation also affects the results.

2.5 Tangible assets

Tangible assets are recorded at acquisition cost, including all costs necessary to put them in use, net of accumulated depreciation and impairment losses.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in the operating profit.

Repairs and maintenance costs that do not extend the useful life of these assets are charged directly to the income statement during the financial period in which they are incurred.

Financial lease agreements

Assets used under financial lease contracts relative to which JMH substantially assumes all the risks and rewards of ownership of the leased asset are classified as tangible assets.

Financial lease contracts are recorded at the time they are entered into as assets and liabilities for the lower of fair value of leased assets or present value of outstanding lease payments.

The depreciation of leased assets is based on the policy established by JMH for tangible assets.

Rental payments are split into a financial charge and a reduction of liability. Financial charges are recognised as costs over the lease period, so as to produce a constant periodic rate of return on the lessor's remaining net investment.

Depreciation

Depreciation is calculated by the straight-line method, on a duodecimal basis on acquisition cost according to the useful life estimated for each class of asset. Most important annual depreciation rates are as follows (in %):

	%
Buildings and other constructions	10
Tools	25
Transport equipment	25
Office equipment	10-25
Other tangible fixed assets	10

2.6 Intangible assets

Intangible assets are stated at acquisition cost net of accumulated amortisation and impairment losses.

Research and development expenditure

Research expenditure incurred in the search for new technical or scientific knowledge or alternative solutions are recognised in the income statement as incurred.

Development expenditure is recognised as intangible assets when the technical feasibility of the product or process being developed can be demonstrated and JMH has the intention and capacity to complete their development and start trading or using them.

Computer software

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. If those costs are directly associated with development projects that will probably generate future economic benefits (reliably measured), they are recognised as development in intangible assets.

Depreciation

Depreciations are recognized in the income statement on a linear basis over the estimated useful life of the intangible assets, except if that life is considered indefinite.

Depreciation is calculated by the straight-line method, on a duodecimal basis on acquisition cost.

The most important annual depreciation rates are as follows (in %):

	%
Development expenditure	20-33,33

2.7 Investments and loans to subsidiaries

Investments and loans to subsidiaries, associates and joint ventures are stated at cost. When so justified, provisions are set up for loss of value.

2.8 Financial assets

Financial assets are recognised in JMH balance sheet on their trade or contracting date, which is the date on which JMH commits to acquiring or selling an asset. Financial assets are initially recognised by their fair value plus directly attributable transaction costs, except for assets carried at fair value through profit and loss in which the transaction costs are immediately recognised in the results. These assets are derecognised when (i) JMH contractual rights to receive their cash flows expire, (ii) JMH has substantially transferred all the risks and rewards of ownership, or (iii) although it retains a portion but not substantially all the risks and rewards of ownership, JMH has transferred control over the assets.

Financial assets and liabilities are offset and presented by their net value only when JMH has the right to offset the amounts recognised and has the intention to settle on a net basis.

JMH classifies its financial assets into the following categories: financial investments held for trading, loans and receivables and available-for-sale financial investments. The classification depends on the purpose for which the investments were acquired.

Financial investments held for trading (derivative financial instruments)

An asset is classified in this category if it was acquired with the principal intention of being sold in the short term. This category also includes those Derivatives that do not qualify for hedge accounting. The gains and losses of changes in the fair value of assets measured at fair value through profit and loss, are recognised in the results of the year in which they occur in net financial costs, where interests received and dividends are also included.

Loans and receivables

These correspond to non-derivative financial assets, with fixed or determined payments, that are not quoted in an active market. The assets are those that result from the normal operational activities of JMH, such as the supply of goods or services, and that the group has no intention of selling. Subsequently loans and receivables are measured at amortised cost in accordance with the effective interest rate method.

Available-for-sale financial investments

The available for sale financial assets are non derivative financial assets that: (i) JMH intends to maintain for an indeterminate period of time; (ii) are designated as available for sale when they are first recognised; or (iii) they do not fit into the above mentioned categories. They are recognised as non-current assets, unless there is the intention to sell them within 12 months of the balance sheet date.

Equity holdings other than Group's companies, joint ventures or associates, are classified as available-for-sale financial investments and recognised in the accounts as non-current assets.

These financial investments are marked to market, i.e., they are stated at the respective market price value as

at balance sheet date. When there is medium term expectation of significant decrease of the value below the listed value, provisions for impairment losses are set up to reflect permanent losses.

If the investments are unlisted, JMH uses, whenever possible, valuation techniques to obtain the fair value of those investments. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same or estimation of discounted cash flow to be received in the future. Not being possible the use of any of these valuation techniques, they are stated at cost. When so justified, provisions for impairment losses are recognised.

Unrealised capital gains and losses are recognised directly in equity, until the financial asset is derecognised, at which time the accumulated gain or loss previously recognised in equity is included in net gains or losses for the period.

2.9 Investment Property

Investment property is registered at fair value, determined by specialised independent entities, with appropriate recognised professional qualification and experience in valuations of these kinds of assets.

The fair value is based on market values, being this the amount that two independent willing parties would be interested in making a transaction of the asset.

The methodology adopted in the evaluation and determination of fair value consists of applying the market's comparative method, in which the asset to be evaluated is compared with other similar assets that perform the same function, negotiated recently in the same location or in comparable zones. The known transaction values are adjusted to make the comparison pertinent, and the variables of size, location, existing infrastructure, state of conservation and other variables that may be relevant in some way are considered.

In addition, and particularly in cases in which comparison with transactions that have occurred is difficult, the profitability method is used, in which it is assumed that the value of the asset corresponds to the present value of all the future benefits and rights arising from its ownership.

For this purpose, an estimation of the market rent is used, considering all the endogenous and exogenous variables of the asset under evaluation, and it is considered a yield that reflects the risk of the market of which that asset is a part, as well as the characteristics of the asset itself.

Changes to fair value of investment property are recognised in the income statement, in net financial costs, in accordance with IAS 40, since it is related with the expected return of a financial investment in assets owned for appreciation.

Whenever, as a result of changes in their expected use, tangible assets are transferred to investment property, the transfer value corresponds to their carrying amount, which should correspond to the respective market value on the date of transfer.

If an investment property starts to be used by the business operations, it is transferred to tangible assets and its fair value at the date of transfer becomes its acquisition cost for accounting purposes.

2.10 Customers and debtors

Customers and debtor balances are initially recorded at fair value, being subsequently measured at amortised cost in accordance with the effective interest rate method, net of any provision for impairment losses.

2.11 Cash and cash equivalents

The cash and cash equivalents heading includes cash, deposits on hand and short-term investments with high liquidity. Bank overdrafts are presented as current Borrowings.

2.12 Impairment

2.12.1 Imparment of non financial assets

Except for investment property (note 2.9), and deferred tax assets (note 2.21), all other JMH assets are considered at each balance sheet date in order to assess for indicators of possible impairment losses. If such indication exists, the assets recoverable amount is estimated.

It is determined the recoverable amount of assets with indication of potential impairment loss. Whenever the carrying value of an asset, exceeds its recoverable amount, its value is reduced to the recoverable amount and the impairment loss recognised in the income statement.

Determining the recoverable amount of assets

The recoverable amount of medium and long-term receivables corresponds to the present value of estimated future cash inflows, using as discount rate the actual interest rate implicit in the original operation. For all other assets, the recoverable amount is the higher of net selling price and value in use.

The value in use of an asset is calculated as the present value of estimated future cash flows. The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and the specific risks of the asset in question.

The recoverable amount of assets that by them do not generate independent cash flow is determined together with the cash-generating unit to which these assets belong.

Reversal of impairment losses

An impairment loss recognised in a medium and long-term receivable is only reversed if justification for the increase in the respective recoverable amount is based on an event taking place after the date the impairment loss was recognised.

Impairment losses for other assets are reversed whenever there are changes in the estimates used to determine the respective recoverable amount. Impairment losses are reversed to the extent of the amount (net of amortisation or depreciation) that would have been determined for the asset if no impairment loss was recognised.

2.12.2 Imparment of financial assets

At each reporting date, JMH analyses if there is objective evidence that a financial asset or group of financial assets is impaired.

Available-for-sale financial investments

In the case of financial investments classified as available for sale, a prolonged or significant decline in the fair value of the instrument below its cost is considered to be an indicator that the instruments are impaired. If there is similar evidence for financial assets classified as available for sale, the accumulated loss – measured as the difference between the acquisition cost and the actual fair value, minus any impairment loss of the financial asset that has already been recognised in the results – is removed from equity and recognised in the profit and loss.

Clients, debtors and other financial assets

Provisions are recorded for impairment losses when there are objective indicators that JMH will not receive the entire amounts it is due according to the original terms of established contracts. When identifying situations of impairment, various indicators are used, such as:

• (i) Analysis of breach;
• (ii) Breach for more than 3 months;
• (iii) Financial difficulties of the debtor;
• (iv) Probability of the debtor's bankruptcy.

Provision for impairment losses is determined by the difference between the recoverable amount and the accounting value of the financial assets and is recognised in the profit and loss. The accounting value of these assets is reduced to the recoverable amount by using a provisions account. When an amount receivable from customers and debtors is considered to be irrecoverable, it is written-off using the provisions account for impairment losses. Subsequent recovery of amounts that had been written-off is recognised as profit.

Whenever receivable amounts from clients and other debtors that are overdue, are subject to renegotiation of its terms, ceased to be considered as overdue and are considered as new credits.

2.13 Share capital

Costs incurred with the issuance of new shares are recognised directly in reserves, net of respective taxes.

Own shares purchased are shown at cost as a deduction in equity. When they are disposed, the amount received, net of costs related with the transaction and taxes, are recognised directly in equity.

2.14 Dividends

Dividends are recognised as liabilities when they are declared.

2.15 Loans

Loans are initially recognised at fair value less the transaction costs that were incurred and are subsequently measured at the amortized cost. Any difference between the issued value (net of transaction costs incurred) and the nominal value is recognised in the profit for the period of the loans, in accordance with the effective interest rate method.

2.16 Employees benefit

2.16.1 Post-employment benefits (Retirement)

Defined contribution plans

Defined contribution plans are pension plans for which JMH makes defined contributions to independent entities (funds), and for which it has no legal or constructive obligation to pay any additional contribution at the time when the employees come into said benefits.

JMH contributions to defined contribution plans are recognised as expenses at the time they are incurred.

Defined benefit plans

Defined benefit plans are pension plans where the company guarantees the attribution of a certain benefit to the employees included in the plan at the time such employees retire.

JMH's obligation for defined benefit plans is estimated, for each plan separately, every semester at the accounts closing date by a specialised independent agent.

Actuarial valuation is made using the immediate rents method, having present that the plans includes only retired ex-workers. The discount rate is the interest rate on medium and long-term risk-free bonds. The obligation thus determined is shown in the balance sheet net of plan assets, if applicable.

The year's current service costs, interest, return on plan assets and actuarial gains or losses are recognised as costs or income for the year.

2.17 Provisions

Provisions are booked in the balance sheet whenever JMH has a present obligation (legal or implicit) as a result of a past event and it is probable that a rationally estimated outflow of resources embodying economic benefits will be required to settle the obligation.

Restructuring provision

Provisions for restructuring costs are set up whenever a formal restructuring plan has been approved by JMH

and the restructuring has started to be implemented or has been publicly announced.

2.18 Suppliers and other creditors

Suppliers and other creditors' balances are stated initially at the fair value and subsequently at the amortised cost accordingly with the effective interest rate method.

2.19 Recognition of revenue

Services rendered

Revenues from the services rendered are recognised as income in accordance with their stage of completion as of the balance sheet date.

Dividends

Dividends are recognised as revenues at the time they are declared.

2.20 Costs

Operational Leasing

Payments made for operational leasing contracts are recognised in the income statement on a linear basis for the duration of same contracts.

Net financial costs

Net financial costs represent the interest on borrowings, the interest on investment made, dividends, foreign exchange gains and losses, gains and losses resulting from changes in the fair value of assets measured at fair value through profit and loss, gains and losses in the valuation of investment property and costs and income with financing operations. Net financial costs are accrued in the income statement in the period in which they are incurred.

2.21 Income tax

Income tax includes current and deferred taxes. Income tax is recognised in the income statement except when relating to gains or losses directly recognised in equity, in which case it is also stated directly in equity.

Tax on current income is calculated in accordance with tax criteria prevailing as of the balance sheet date.

Deferred tax is calculated in accordance with the balance sheet liability method on temporary differences between the book value of assets and liabilities and the respective tax base.

The measurement of deferred tax assets and liabilities should reflect the tax consequences that would follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amount of its assets and liabilities.

The rate used to determine deferred tax is that in force during the period when temporary differences are reversed.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which temporary differences can be utilised. Deferred tax assets are revised on an annual basis and reduced when it is no longer probable that they may be used.

2.22 Segment information

No segment information has been provided in these individual financial statements. Detailed information is presented in the Group consolidated financial statements.

2.23 Critical accounting estimates and judgments

Tangible and intangible assets and investment properties

Determining the fair value of tangible assets and investment properties, as well as the useful life of assets, is based on management estimates. Determining impairment losses of these assets also involves the use of estimates. The recoverable amount and the fair value of these assets are normally determined using the

discounted cash flow method, which incorporates market assumptions. Identifying indicators of impairment, as well as estimating future cash flows and determining the fair value of assets, requires significant judgment by Management in validating indicators of impairment, expected cash flows, applicable discount rates, estimated useful life and residual values. If these assumptions do not materialise as Management estimates, JHM operating results may be impacted, and consequently registering impairments may be affected.

Fair value of financial instruments

The fair value of financial instruments not quoted in an active market is determined based on evaluation methods and financial theories. The use of valuation methodologies requires using assumptions, with some assumptions requiring Management to use estimates. Therefore, changes in those assumptions could result in a change in the fair value reported.

Impairment of investments in associated companies

As a rule, an investment is recorded as impaired according to the IFRS when the accounting value of the investment exceeds the present value of future cash flows. Calculating the present value of estimated cash flows and the decision to consider an asset as permanently impaired involves judgment and substantially relies on Management's analysis of the future development of its associated companies. When measuring impairment, market prices are used if they are available, or other evaluation parameters are used, based on the information available from the associated companies. In order to determine if the impairment is permanent, JMH considers the capacity and intention to retain the investment for a reasonable period of time that is sufficient to predict recovery of the fair value up to (or above) the accounting value, including an analysis of factors such as the expected results of the associated company, the regional economic situation, and the status of the sector.

Deferred taxes

Recognising deferred taxes assumes the existence of results and future collectable income. Deferred tax assets and liabilities were determined based on tax legislation currently in effect, or on legislation already published for future application. Changes in the tax legislation may influence the value of deferred taxes.

Provisions for impairment losses of clients and debtors

Management maintains a provision for impairment losses of clients and debtors, in order to reflect the estimated losses resulting from clients' inability to make required payments. When evaluating the reasonability of provisions for the mentioned impairment losses, Management bases its estimates on an analysis of the time of non-payment on accounts receivable from its clients, its historical experience of write-offs, the client's credit history and changes in the client's payment terms. If the client's financial conditions deteriorate, the provisions for impairment losses and actual write-offs may be higher than expected.

Pensions and other long-term benefits granted to employees

Determining responsibilities for pension payments requires the use of assumptions and estimates, including actuarial projections, estimated profit from investments and other factors that may impact the costs and responsibilities of the pension plan. Changes to these assumptions may have a significant impact on the values determined.

Provisions

JMH exercises considerable judgment in measuring and recognising provisions and its exposure to contingent liabilities related to legal proceedings. This judgment is necessary to determine the probability that a lawsuit may be successful, or to record a liability. Provisions are recognised when JMH expects that proceedings under way will result in cash outflows, the loss is considered probable and may be reasonably estimated. Due to the uncertainties inherent to the evaluation process, real losses may be different from those originally estimated in the provision. These estimates are subject to changes as new information becomes available, mainly with the support of internal specialists, if available, or through the support of external consultants, such as actuaries or legal advisers. Revisions to the estimates of these losses from proceedings under way may significantly affect future results.

2.24 Fair value of financial instruments

To determine the fair value of a financial asset or liability, if such a market exists, the market price is applied. Otherwise, which is the case of some financial assets and liabilities, evaluation techniques that are generally accepted, in the market, are used, based on market assumptions.

JMH applies evaluation techniques for unlisted financial instruments, such as, derivatives, fair value financial instruments through profit and loss and assets that are available for sale. The evaluation models most

frequently used are discounted cash flow and options models, which incorporate for example interest rate curves and market volatility.

Cash and cash equivalents, debtors and accruals and deferrals

These financial instruments include mainly short-term financial assets and for that reason their accounting value at reporting date is considered approximately its fair value.

Available for sale financial investments

Listed financial instruments are recognised in the balance sheet at its fair value.

Loans

The fair value of loans is achieved from the discount cash flow of all expected payments. The expected cash flows are discounted using actual market interest rates. At the reporting date, the accounting value is approximately its fair value.

Creditors, accruals and deferrals

These financial instruments include mainly short-term financial liabilities and for that reason their accounting value at reporting date is considered approximately its fair value.

2.25 Financial instruments by category

	Held for trade Derivatives	Derivatives defined as hedging instruments	Borrowings and accounts receivable	Available for-sale financial investments	Other financial liabilities	Total assets and financial liabilities
2007
ASSETS
Cash and cash equivalents	-	-	4,156	-	-	4,156
Available-for-sale financial investments	-	-	-	4,380	-	4,380
Loans to subsidaries	-	-	881,864	-	-	881,864
Debtors and deferred costs	-	-	7,026	-	-	7,026
Derivative financial instruments	805	127	-	-	-	932
TOTAL FINANCIAL ASSETS	805	127	893,046	4,380	-	898,358
LIABILITIES
Borrowings	-	-	-	-	137,872	137,872
Derivative financial instruments	3,561	-	-	-	-	3,561
Creditors and accrued costs	-	-	-	-	2,428	2,428
TOTAL FINANCIAL LIABILITIES	3,561	-	-	-	140,300	143,861
2006
ASSETS
Cash and cash equivalents	-	-	905	-	-	905
Available-for-sale financial investments	-	-	-	29,557	-	29,557
Loans to subsidaries	-	-	966,235	-	-	966,235
Debtors and deferred costs	-	-	14,883	-	-	14,883
Derivative financial instruments	144	187	-	-	-	331
TOTAL FINANCIAL ASSETS	144	187	982,023	29,557	-	1,011,911
LIABILITIES
Borrowings	-	-	-	-	252,233	252,233
Derivative financial instruments	1,343	-	-	-	-	1,343
Creditors and accrued costs	-	-	-	-	1,968	1,968
TOTAL FINANCIAL LIABILITIES	1,343	-	-	-	254,201	255,544

3. Staff costs

	2007	2006
Wages and salaries	4,439	4,594
Social security	419	422
Employee benefits (note 28)	539	917
Other staff costs	434	469
	5,831	6,402

Other staff costs include namely labour accident insurance, social action costs, training costs and indemnities, among others.

The number of employees at the end of 2007 was 56 (2006 was 56). The company's average number of employees during the year was 56 (59 in 2006).

4. Net financial costs

	2007	2006
Interest expense	(10,806)	(9,860)
Fair value in financial instruments that do not qualify for hedge accounting	(1,344)	117
Net foreign exchange	(2,984)	(1,845)
Other financial costs	(331)	(499)
Net financial costs	(15,465)	(12,087)

Interest expense includes the interest related with loans measured at amortised cost as well as, interest on derivatives of fair-value hedge and cash flow hedge (note 27).

Other financial costs include, namely, stamp tax and issuance costs related to non-current debt recognised in the income statement for the loan's term.

Changes to fair value in financial instruments that do not qualify for hedge accounting are referred in note 27.

4.1 Fair value of financial instruments that do not qualify as hedge accounting

	2007	2006
Held for Trade derivatives
Interest Rate Swap	(1,886)	117
Credit Default Swap	542	-
	(1,344)	117

5. Operating lease

The costs recognised in the income statement as operating leases are as follows:

	2007	2006
Buildings – Third parties	209	202
Buildings - Group	297	368
Plants & tools – Third parties	-	1
Vehicles – Third parties	265	242
IT equipment – Third parties	24	17
Others – Third parties	-	1
Total cost recognised in the income statement	795	831

The total costs with operating leases include EUR 9 thousand (2006: EUR 3 thousand) regarding occasional renting.

Vehicle and IT equipments lease contracts entered by JMH are treated as operating lease. These contracts do not include renewal or purchase option at termination date, nor any amount relating to contingent rents. All contracts may be cancelled by means of prior notice and do not provide any type of restrictions concerning dividends or debt.

The minimum lease payments related with vehicles and IT equipment lease are as follows:

	2007	2006
Payments in less that 1 year	325	205
Payments between 1 and 5 years	330	237
Payment in more that 5 years	-	-
Total future payments	655	442

As referred above, all the contracts may be cancelled upon the payment of a penalty clause. At the end of 2007, the liabilities arising from penalty clauses were EUR 232 thousand (2006: EUR 209 thousand).

6. Income tax recognised in the income statement

6.1 Current tax

	2007	2006
Current tax
Current tax of the year	(51)	(29)
Adjustment to prior year estimation	(1)	(1)
	(52)	(30)
Deferred tax
Temporary differences originated and reversed	258	(284)
Tax rate decrease (Municipal Tax)	-	(386)
Change to the recoverable amount of tax losses and temporary differences from previous years	1,644	295
	1,902	(375)
Total income taxes	1,850	(405)

6.2 Reconciliation of the effective tax rate

	2007	2006
Profit/loss before taxes	79,764	36,705
Income tax using the Portuguese corporation tax rate – 27.5%	(21,137)	(10,094)
Non taxable or non recoverable results	21,620	10,714
Non-deductible expenses	(225)	(904)
Tax rate decrease (Municipal Tax)	-	(386)
Change to the recoverable amount of tax losses and temporary differences from previous years	1,644	295
Adjustment to prior year estimation	(1)	(1)
Results subject to special taxation	(51)	(29)
Income tax of the year	1,850	(405)
Effective tax rate	(2.32%)	1.10%

7. Profit/loss in subsidiaries and associated companies

	2007	2006
Dividends received	39,854	25,859
Interests in loans to subsidiaries and associated companies	18,288	10,124
Losses in the liquidation of subsidiaries and associated companies	(68)	-
Adjustments of acquisition cost of financial investments	19,099	6,379
Increase/decrease of provisions for contingencies	-	(1)
	77,173	42,361

During 2007, considering the unavailability of any official record of their existence, JMH proceeded with the writte-off of its investments in Empal – Emp. Ind. de Produtos Alimentares, Lda. and Soc. Com. de Representações Socorel Lda., both with head-office in Angola. Additionaly, during 2007, JMH proceeded with the liquidation of Jerónimo Martins Holdings (UK) Ltd, with its head-office in the United Kingdom, as well as with the disposal of its investment in Jerónimo Martins Finance Company (1) Ltd, with its head-office in Ireland. These operations had a negative impact of EUR 68 thousand in the 2007 results.

8. Profit/loss in other investments

	2007		2006
BCP shares disposal		17,543	3,347
BCP dividends received		514	1,114
		18,057	4,461

9. Exceptional operating profits/losses

	2007	2006
Capital increase paid fees reimbursement	623	-
	623	-

This reimbursement occurred as the conclusion of a legal action won by JMH. There are still in process other legal actions that may outcome in a future refund to JMH of about EUR 1.815 thousand.

10. Tangible assets

10.1 Changes occurred during the year

Gross assets

01/01/2007 Opening balance	Increases	Disposals	Transfers and write-offs	31/12/2007 Closing balance
	-	-	-	130
91	-	(30)	-	61
2	-	-	-	2
1,675	3	-	(31)	1,647
389	-	-	-	389
2,287	3	(30)		2,229
		130		(31)

Accumulated depreciation and impairment

	01/01/2007 Opening balance	Increases	Disposals	Transfers and write-offs	31/12/2007 Closing balance
Buildings and other constructions	59	13	-	-	72
Transport equipment	62	4	(5)	-	61
Tools and utensils	2	-	-	-	2
Office equipment	1,589	40	-	(31)	1.598
Other tangible assets	326	-	-	-	326
	2,038	57	(5)	(31)	2.059
Net book amount	249				170

10.2 Changes occurred in the previous year

Gross assets

	01/01/2006 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2006 Closing balance
Buildings and other constructions	130	-	-	-	130
Transport equipment	61	30	-	-	91
Tools and utensils	2	-	-	-	2
Office equipment	1,655	20	-	-	1,675
Other tangible assets	389	-	-	-	389
	2,237	50	-	-	2,287

Accumulated depreciation and impairment

	01/01/2006 Opening	Increases	Disposals	Transfers and	31/12/2006 Closing
	balance			write-offs	balance
Buildings and other constructions	46	13	-	-	59
Transport equipment	61	1	-	-	62
Tools and utensils	2	-	-	-	2
Office equipment	1,516	73	-	-	1,589
Other tangible assets	293	33	-	-	326
	1,918	120	-	-	2,038
Net book amount	319				249

10.3 Equipment under financial lease

JMH has some of its IT equipment under financial leases. These leases include a purchase option at the end of the contract and do not include any amount relating to contingent rents or any restriction of any nature concerning dividends or debt.

Unsettled liabilities on financial lease contracts are referred in note 22.5. The value of assets under financial lease is shown below:

	2007	2006
Administrative and IT Equipment
Tangible assets	125	161
Accumulated depreciation	(114)	(128)
Net book amount	11	33

10.4 Guarantees

No assets have been pledged as security for the fulfilment of bank or other obligations.

11. Intangible assets

Intangible assets are made up of research and development expenses and include expenses borne with the implementation of the SAP information system, in the net amount of EUR 18 thousand (2006: EUR 11 thousand).

12. Investment property

JMH owns a building in Vila Franca de Xira (land and building), which is not allocated to the operational activity and which destination is yet unknown. This building was revaluated to its market value in 2003, according to an independent entity evaluation and, in 2007, no change occurred in its state or in current market circumstances.

	2007	2006
Opening balance	2,470	2,470
Changes to market value Depreciation	- -	- -
Closing balance	2,470	2,470

13. Investments in subsidiaries and joint ventures

13.1 In subsidiaries
	2007	2006
Net value at 1 January	240,529	234,074
Increases	-	-
Decreases	-	-
Increases/Decreases in provisions for impairment loss	(19,099)	6,455
Net value at 31 December	259,628	240,529

13.2 In joint ventures

The investment in joint ventures was EUR 6,349 thousand (2006: EUR 6,349 thousand) – see note 35.

14. Loans

14.1 Loans to subsidiaries

Non-current loans	2007	2006
Net value at 1 January	719,375	690,601
Increases	150,080	29,366
Decreases	(273,685)	(517)
Increases/ Decreases in provisions for impairment loss	(75)	(75)
Net value at 31 December	595,695	719,375

Current loans	2007	2006
Net value at 1 January	82,661	100,000
Increases	26,460	3,661
Decreases	(9,000)	(21,000)
Net value at 31 December	100,121	82,661

Current loans are liable to interest rates at normal market levels. Non-current loans are taken as supplementary capital contributions (which do not bear interest), and as medium and long-term shareholders loans (remunerated at normal market rates).

14.2 Loans to joint ventures

Non-current loans	2007	2006
Net value at 1 January	164,199	164,199
Increases	21,849	-
Decreases	-	-
Net value at 31 December	186,048	164,199

Non-current loans are granted as medium and long term shareholders loans remunerated at normal market rates.

15. Available-for-sale financial investments

	2007	2006
BCP shares		4,380	29,557
		4,380	29,557

During the current year, 9,1 million BCP shares were sold, having this operation originated a profit on the amount of EUR 17,543 thousand.

As of 31 December 2007, all BCP shares in the company's portfolio (1,5 million shares) were marked to market – price as of 31 December 2007 of Euro 2.92 – Euronext Lisbon. Changes in the fair value of these assets are recognised directly in equity, having been transferred to the income statement (note 8), as a result of the sale, the amount of EUR 7,113 thousand. The fair value of the shares in the company's portfolio has been adjusted in the equity on the mount of EUR 122 thousand. During the year, these adjustments have originated an accumulated negative equity variation of EUR 6,991 thousand.

16. Taxes

16.1 Deferred tax assets and liabilities

Deferred taxes are presented in balance sheet as follows:

	2007	2006
Deferred tax assets	8,570	6,658
Deferred tax liabilities	(299)	(305)
	8,271	6,353

Movement in deferred taxes during the year:

	01/01/2007	Impact on results	Impact on equity	31/12/2007
Deferred tax liabilities
Revaluation of assets	(271)	11	-	(260)
Fair value in derivative financial instruments	(34	(5)	-	(39)
	(305)	6	-	(299)
Deferred tax assets
Pension costs	3,881	(80)	-	3,801
Recoverable losses	2,379	1,644	-	4,023
Fair value in derivative financial instruments	314	416	16	746
Excess over legal depreciations	84	(84)	-	-
	6,658	1,896	16	8,570
Net change in deferred tax	6,353	1,902	16	8,271

16.2 Unrecognised deferred taxes on tax losses

The company did not recognise deferred tax assets relative to tax losses in respect of which, with reasonable assurance, no sufficient tax profits are expected to guarantee the recovery of deferred tax assets.

Unrecognised deferred taxes on tax losses are as follow:

	2007	2006
Tax losses	61,933	28,147
Tax rate	25%	25%
Deferred tax assets (Unrecognised)	15,483	7,037

16.3 Taxes receivable and payable

Taxes receivable	2007	2006
Income tax receivable	215	117
VAT receivable – Outside Portugal	2	3
	217	120
Taxes payable
VAT payable	1	9
Income tax payable	-	27
Income tax withheld	88	83
Social security	44	43
Municipal real estate tax	38	38
	171	200

17. Trade debtors, accrued income and deferred costs

	2007	2006
Subsidiaries and associated companies	2,864	1,052
Receivables from suppliers	3	11
Staff	24	15
Other debtors	14	8,280
Accrued income	3,703	4,758
Deferred costs	506	896
	7,114	15,012

Amounts entered in subsidiaries and associated companies concern mainly to invoices issued to group companies relating to various natures services provided.

Accrued income respects namely to EUR 2,887 thousand regarding the rendering of technical and administrative services to subsidiaries and EUR 815 thousand of interest receivable.

Deferred costs heading includes EUR 418 thousand of prepaid expenses with bonds, bank loans and commercial paper, and EUR 88 thousand of other costs relating to future periods, paid in 2007 or when not paid, already charged by the competent entities.

18. Cash and cash equivalents

	2007	2006
Bank deposits	49	26
Short-term investments	4,100	870
Cash and cash equivalents	7	9
	4,156	905

19. Cash generated from operations

	2007	2006
Net results	81,614	36,300
Adjustments for:
Taxes	(1,850)	402
Depreciations	60	121
Net financial costs	(43,179)	(25,013)
Profit/loss in subsidiaries	(19,024)	(6,379)
Profit/loss in available-for-sale financial investments	(17,543)	(3,347)
Profit/ Losses on tangible assets disposals	-	-
	78	2,084
Changes in working capital:
Trade debtors, accrued income and deferred costs	(567)	2,352
Trade creditors, accrued costs and deferred income	603	(514)
Provisions and employee benefits	(318)	121
	(204)	4,043

20. Capital and reserves

20.1 Share capital and share premium account

In May 31st, 2007 there was a stock-split on Jerónimo Martins, SGPS, SA shares: each share held with 5 euro face value was converted into five new shares, with one euro face value. In this sense, the authorised share capital is represented by 629,293,220 ordinary shares (2006: 125,858,644), all with one euro par value.

The owners of ordinary shares have the right to receive dividends in accordance with the deliberations of the General Meeting, and have the right to 1 vote for each share owned. There are no preferential shares. Rights relating to shares held in portfolio by the company are suspended until they are placed on the market again.

During the year 2007, no changes occurred in the amount of EUR 22,452 thousand showed in share premium account.

20.2 Own shares

The reserve for own shares reflects the cost of shares held by the company in portfolio. As of 31 December 2007, the company held 859,000 own shares (2006: 171,800, converted in the stock-split to 859,000).

20.3 Reserves

	Cash Flow Hedging reserve	Available-for sale financial instruments	Total
Balance as at 1 January 2006	17	4,629	4,646
Fair value of cash flow hedging instruments:
- Gross value	163		163
- Deferred tax	(43)		(43)
Fair value adjustment of available-for-sale financial instruments		3,578	3,578
Balance as at 1 January 2007	137	8,207	8,344
Fair value of cash flow hedging instruments: - Gross value	(59)		(59)
- Deferred tax	16		16
Fair value adjustment of available-for-sale financial instruments		(6,991)	(6,991)
Balance as at 31 December 2007	94	1,216	1,310

These reserves are not able to be distributed to the shareholders.

20.4 Retained earnings

On 31st December 2007, the total amount of retained earnings was EUR 368,870 thousand, resulting from profit generated in the financial year, and previous years.

Of this amount, the following are not able to be distributed: EUR 35,042 thousand corresponding to the legal reserve (articles 218, 295 and 296 of the Legal Code for Commercial Companies); and EUR 6,060 thousand corresponding to the own shares reserve. (Article 324 of the Legal Code for Commercial Companies).

20.5 Dividends

In accordance with the dividend distribution policy announced several years ago and described in chapter 2.5 – Corporate Governance, which is an integral part of the consolidated annual report, the Board of Directors proposes to the shareholders the distribution of the amount 60,329,685.12 Euros, which corresponds to a dividend per share of EUR 0.096.

21. Earnings per share

21.1 Basic and diluted earnings per share

In May 31st, 2007 there was a stock-split on Jerónimo Martins, SGPS, SA shares: each share held with five euro face value was converted into five new shares, with one euro face value. In this sense, there was an adjustment in the 2006 earnings per share computation.

Basic earnings per share are calculated based on the net profit of EUR 81,614 thousand (2006: profit of EUR 36,300 thousand) attributable to ordinary shareholders and on weighted average outstanding ordinary shares, numbering 628,434,220 (2006 adjusted: 628,434,220). The diluted earnings per share are equal to basic earnings per share as there are no dilution events.

	2007	2006*
Ordinary shares issued at the beginning of year*	629,293,220	629,293,220
Own shares at the beginning of year*	859,000	859,000
Own shares acquired during the year	-	-
Ordinary shares issued during the year	-	-
Weighted average outstanding shares (equal to diluted)	628,434,220	628,434,220
Net profit of the year attributable to ordinary shareholders	81,614	36,300
Diluted net profit of the year attributable to ordinary shareholders	81,614	36,300
Earnings per share – Euros	0.130	0.058
Diluted earnings per share – Euros	0.130	0.058

* Number of shares adjusted as per May 31st, 2007 stock-split.

22. Borrowings

This note provides information on the terms of loan contracts and other forms of financing. For further details regarding the company's exposure to interest rates see note 27.

22.1 Current and non-current loans

	2007	2006
Non-current loans
Bank loans – Commercial Paper	-	85,000
Bank loans – Commercial Paper (Zloty - PLN)	27,828	52,206
Non-convertible Bond loans	110,000	90,000
Financial lease liabilities	7	10
	137,835	227,216
Current loans
Bank loans – Commercial Paper	-	25,000
Bank overdrafts	27	-
Financial lease liabilities	10	17
	37	25,017

22.2 Loan terms and maturities

	Average rate	Total	Payable in less than 1 year	Payable between 1 and 5 years
Bank loans – Commercial Paper (PLN)	4.67%	27,828	-	27,828
Non-convertible Bond loan: JMH/03	4.52%	40,000	-	40,000
Non-convertible Bond loan: JM2011 e JM2012	5.02%	70,000	-	70,000
Bank overdrafts	4.91%	27	27	-
Financial lease liabilities	6.10%	17	10	7
		137,872	37	137,835

22.3 Bond loans

	2007	2006
Non-convertible Bond loan: JMH/03	40,000	40,000
Non-convertible Bond loan: JM2009 e JM2010	-	50,000
Non-convertible Bond loan: JM2011 e JM2012	70,000	-
	110,000	90,000

Non-convertible bonds

In October 2003, the company issued a bond loan in the amount of EUR 40,000 thousand, with variable interest rate, with maturity in 2010.

In August 2005, the company issued a new bond loan, in the amount of EUR 50,000 thousand, with variable interest rate, with maturity of EUR 25,000 thousand in 2009 and EUR 25,000 thousand in 2010. This bond loan was fully reimbursed in September 2007.

In September 2007, was also issued a new bond loan in the amount of EUR 70,000, with variable interest rate, and maturity of EUR 35,000 thousand in 2011 and EUR 35,000 thousand in 2012.

The redemption date of bond loans is as follows:

Maturity	Amount
2010	40,000
2011	35,000
2012	35,000

22.4 Bank loans: Commercial paper

There are several bank loans in the form of a commercial paper programme, in the global amount of EUR 220,000 thousand, with variable interest rate. In the end of 2007, none of the programs was in use.

Addicionaly, JMH subscribed a bank loan in the form of a commercial paper programme, in the amount of 100 million Zloties (Polish currency), with maturity in 2010 and variable WIBOR interest rate (Polish interest rate).

22.5 Financial lease liabilities

The responsibilities with financial lease are as follow:

	2007	2006
Payments in less than 1 year	10	17
Payments between 1 and 5 years	8	11
Total future payment	18	28
Payment of future interest	(1)	(1)
Present value of liabilities	17	27

23. Financial debt

	2007	2006
Non-current loans	137,835	227,216
Current loans	37	25,017
Derivative financial instruments	2,629	1,012
Accruals and deferrals (financial headings only)	1,198	675
Deposits on hand	(49)	(26)
Short-term investments	(4,100)	(870)
	137,550	253,024

24. Financial risks

JMH is exposed to several financial risks, namely: market risk (which includes interest rate and price risks), liquidity risk and credit risk. Risk management is focused in the unpredictable nature of the financial markets and tries to minimize its adverse effects in the company financial performance. The information regarding financial risks management is detailed in the Management Report.

25. Provisions and adjustments to the net realisable value

2007	Opening balance	Provisions set up	Provisions used	Closing balance
Investments in subsidiaries	259,370	-	(42,261)	217,109
Loans to subsidiaries	26,267	75	(26,342)	-
Total adjustments to the net realisable value	285,637	75	(68,603)	217,109
Employee benefits	14,647	337	(642)	14,342
Other provisions	14	-	(14)	-
Total provisions	14,661	337	(656)	14,342

During 2007, considering the impossibility of identifying any official record of their existence, JMH proceeded with the write-off of its investments in Empal – Emp. Ind. de Produtos Alimentares, Lda. and Soc. Com. De Representações Socorel Lda., both with their head-office in Angola. Also in 2007, JMH proceeded with the liquidation of Jerónimo Martins Holdings (UK) Ltd, with its head-office in the United Kingdom, as well as with the disposal of its investment in Jerónimo Martins Finance Company (1) Ltd, with its head-office in Ireland.

All these investments were entirely provisioned (EUR 23,162 thousand). In 2007, was also an adjustment on the realizable value of a subsidiary which originated a reduction in the provisions amount of 19,099 thousand. In aggregated terms in 2007, the adjustments for financial investments realizable values, were reduced in EUR 42,261 thousand.

Additionally, as a result of the disposal of its investment in Jerónimo Martins Finance Company (1) Ltd, with its head-office in Ireland, the loans on the amount of EUR 26,342 thousand, which were totally provisioned, were also reduced.

2006	Opening balance	Provisions set up	Provisions used	Closing balance
Investments in subsidiaries	265,825	36	(6,491)	259,370
Loans to subsidiaries	26,192	75	-	26,267
Total adjustments to the net realisable value	292,017	111	(6,491)	285,637
Employee benefits	14,527	758	(638)	14,647
Other provisions	12	2	-	14
Total provisions	14,539	760	(638)	14,661

26. Trade creditors and accrued costs

	2007	2006
Payables to subsidiaries		174 157
Other trade creditors		274 248
Other non-trade creditors		8 10
Accrued costs	3,302	2,682
	3,758	3,097

The heading accrued costs is made up of salaries and wages payable in the amount of EUR 1,330 thousand, and interest's payable in the amount of EUR 1,627 thousand. The remaining EUR 345 thousand respect to various costs (utilities, insurance, consultants, rents, etc.), relating to 2007 and not invoiced by the respective entities prior to the end of the year.

27. Derivative financial instruments

		2007				2006
	Notional		Assets		Liabilities	Notional		Assets		Liabilities
		Current	Non Current	Current	Non Current		Current	Non Current	Current	Non Current
Derivatives held for trading
Interest rate swap	80 million EUR	220	43	-	3.561	40 million EUR	-	144	-	1.343
Credit default swap	100 million EUR	-	542	-	-		-	-	-	-
Cash flow hedge derivatives
Interest rate swap	10 million EUR	127	-	-	-	10 million EUR	-	187	-	-
Total assets/liabilities negotiation derivatives		220	585	-	3.561		-	144	-	1.343
Total assets/liabilities hedge derivatives		127	-	-	-		-	187	-	-
Total assets/liabilities derivatives		347	585	-	3.561		-	331	-	1.343

In 2007 the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 186 thousands (2006: EUR 174 thousand).

Derivatives held for trading

Interest rate swap

JMH enters into interest rate swaps with the intention of make an economic hedge of the interest rate risk on its future interest payments on the loans, which amounted at 31 December 2007 EUR 110.000 thousands (2006: EUR 90.000 thousands), The notional of the derivatives financial instruments contracted by JMH are EUR 80.000 thousands (2006: EUR 40.000 thousands). The chages to the Fair Value of this instruments was recognised in profit ans loss, in amount of EUR -1,344 thousand (2006: EUR 117 thousand).

Credit default swap

The Group entered into this derivative with the intention of minimizing the impact of the credit spreads increase resulting from exogenous effects to JMH.

Cash flow hedge

JMH partially hedges future interest payments on the loans, using for that interest rate swaps, in which pays fixed interest rate and receives variable interest rate, with a notional of EUR 10,000 thousand (2006: EUR 10,000 thousand). This is a hedging of interest rate risk associated with variable-rate interest payments arising from recognised financial liabilities. The hedged risk is indexed to the variable rate associated with the loans. The objective of the hedge is to convert the loans with variable interest rate into fixed interest rate. The credit risk is not hedged. The fair value of the interest rate swaps at December 31st, 2007, was EUR 127 thousand (2006: EUR 187 thousand).

27.1 Impacts on Financial Statements

	2007	2006
Fair value of the financial instruments at 1st January	(1,012)	(1,296)
(Receivings) / Payments made	(335)	3
Fair value of financial instruments that do not qualify as hedge accounting (P&L)	(1,344)	117
Fair value of financial instruments that qualify as hedge accounting (Reserves)	(59)	163
Interest expense from financial instruments that qualify as hedge accounting (P&L)	121	1
Fair value of the financial instruments at 31st December	(2,629)	(1,012)

28. Employee benefits

28.1 Defined contribution plans for employees, with a third party managed fund

The company has a defined contribution plan for all employees who have permanent contract status, with a third party managed fund.

This kind of plan allows costs control related to the attribution of benefits, while simultaneously creates an incentive for the employees to participate in their own pension scheme.

Changes in the year:

	2007	2006
Liabilities at 1 January	-	-
Staff costs on the year	202	159
Contributions on the year	(202)	(159)
Liabilities at 31 December	-	-

28.2 Group managed defined benefit plans for former employees

Independent actuaries evaluate this plan 6-monthly. According to the actuarial calculation reported on 31 December 2007 the liability is EUR 14,342 thousand, provisioned entirely in liabilities in the employee benefits heading.

Changes in the year:

	2007	2006
Balance at 1 January	14,647	14,527
Interest costs	716	710
Actuarial (gains)/ losses	(379)	48
Retirement pensions paid in	(642)	(638)
Balance at 31 December	14,342	14,647

Actuarial assumptions used:

Mortality table	TV 88/90
Discount rate	5.3%
Pensions growth rate	2.3%

In 2007, the mortality table was changed from TV 73/77 to TV 88/90, considering that this one better

represents the beneficiaries' current profile.

29. Guarantees

The guarantees given to D.G.C.I (Portuguese Tax Authority), amount to EUR 1.335 thousand.

30. Contingencies

• The Portuguese tax authorities have informed Jerónimo Martins, SGPS, S.A., that should restate the dividends received, amounting to EUR 6,498 thousand, from its subsidiary in the Madeira Free Zone in 2004, considering them as interest for tax purposes. According to the Portuguese tax authorities the said income should be subject to Corporate Income Tax (CIT) in opposition to the dividends received that are exempt. Jerónimo Martins' Management, supported by their tax consultants and legal advisors, consider that the report issued by the tax authorities does not have any legal basis or validity, and will use all the resources at its disposal to challenge it. Jerónimo Martins' Management believe that they are entirely right concerning this matter.
• The Portuguese tax authorities have claimed EUR 989 thousand from Jerónimo Martins in relation to the CIT for an indemnity paid by the Company due to an agreement reached in arbitration court, and which the Tax Authorities considered as dealing with a payment to an entity subject to a more favourable tax regime, and therefore not accepted for tax purposes. The Management of Jerónimo Martins, with the support of its tax and legal advisers, does not consider the report of the Tax Authorities to have legal basis or validity, and thus has already used all the resources at its disposal to challenge it.

31. Related parties

31.1 Benefits attributed to directors

Complementary retirement plans

Regarding complementary retirement benefits, and according with the present regulations, Directors are entitled to receive it, providing that on their retirement date: (i) they have more than 60 years, (ii) they have executive functions, and (iii) they have been board members for at least 10 years.

At the Annual General Meeting in 2005, an alternative retirement pension plan was approved. It is a fixedcontribution Pension Plan, with a pre-determined contribution value, with the value of benefits depending on earnings received. The Remuneration Committee defines the contribution rate of the company and of the initial contribution.

Participants in the Plan are the Executive Directors of the Company, and those Directors who opted for the current Pension Plan forewent eligibility for the Retirement Complement Plan, which had to be expressly and irretrievably renounced.

31.2 Remuneration paid to directors

The fixed, variable and contributions to the pension plans were:

	2007	2006
Executive directors	1,834	1,729
Non-executive directors	882	1,144
	2,716	2,873

The amount considered remuneration for non-executive Directors, in 2007, includes EUR 12 thousand relating to remuneration paid to non-Executive Directors taking part in the Auditing Commission (2006: EUR 10 thousand).

None of the Directors received any additional remuneration from any other Group company.

32. Subsidiaries, joint-ventures and available for sale investments

The direct investments owned by JMH, at 31 December 2007, are as follows:

Companies	Notes	Head Office	% Owned	Stake held directly	Total assets	Shareholder's Equity	Net profit /loss
Investments in subsidiaries
Jerónimo Martins – Distrib. de Prod. de Consumo, Lda.	a)	Lisboa	99.99%	1,746	104,132	12,152	6,060
Recheio, SGPS, S.A.	a)	Lisboa	15.93%	23,850	742,056	495,953	(1,552)
Desimo – Desenvolvimento e Gestão Imobiliária, Lda.	a)	Lisboa	100.00%	50	575	122	(16)
JMR - Gestão de Empresas de Retalho, SGPS, SA	a)	Lisboa	51.00%	168,300	1,545,272	1,072,337	59,420
Comespa-Gestão de Espaços Comerciais, S.A.	a)	Lisboa	51.00%	26	17,132	290	163
Jerónimo Martins Serviços, S.A.	a)	Lisboa	100.00%	50	2,145	52	2
Servicompra – Consultores de Aprovisionamento, Lda	a)	Lisboa	96.00%	5	198,867	198,867	(0.9)
Imocash – Imobiliário de Distribuição, S.A.	a)	Lisboa	1.00%	30	63,123	7,978	668
Larantigo – Sociedade de Construções, S.A.	a)	Lisboa	0.20%	1	5,410	3,323	42
Hermes - Soc. de Invest. Mobiliários e Imobiliários, Lda.	a) b)	Funchal	99.99%	999	56,725	54,402	53,067
Eva – Soc. de Investimentos Mobiliários e Imobiliários, Lda	a)	Funchal	5.60%	28	72,027	72,025	3,031
PSQ – Soc. de Investimentos Mobiliários e Imobiliários, Lda	a)	Funchal	11.00%	55	46,477	46,476	(6)
Friedman – Soc. de Investim. Mobiliários e Imobiliários, Lda	a)	Funchal	100.00%	5	28	27	(3)
Investments in joint-ventues
Unilever Jerónimo Martins, Lda.		Lisboa	32.50%	12,283	730,738	64,957	28,890
Bliska Sp. Z.o.o.		Polónia	50.00%	65	c)	c)	c)
Available-for-sale financial investments
BCP - Banco Comercial Português, S.A.		d) Porto	0.04%	1,500	79,258,746	5,067,940	831,878

a) For the purposes of the article 486, paragraph 3, of the Portuguese Commercial Companies Code, we declare that we hold the control of the companies indicated.

b) A value adjustment provision has been set up.

c) Not available.

d) The amounts showed refer to 2006 accounts

33. Group Companies and Joint-Ventures– Direct and indirect stakes

Table below describes the companies directly and indirectly held by Jerónimo Martins, SGPS, SA, as of 31 December 2007:

Group Companies

Companies	Head Office	% Owned
JMR – Gestão de Empresas de Retalho, SGPS, S.A.	Lisbon	51.00
Pingo Doce – Distribuição Alimentar, S.A.	Lisbon	51.00
Supertur – Imobiliária, Comércio e Turismo, S.A.	Lisbon	51.00
Feira Nova – Hipermercados, S.A.	Lisbon	51.00
Bazar Novo – Distribuição de Produtos Não Alimentares, Lda.	Lisbon	51.00
Gestiretalho – Gestão e Consultoria para a Distribuição a Retalho, S.A.	Lisbon	51.00
Imoretalho – Gestão de Imóveis, S.A.	Lisbon	51.00
Casal de São Pedro – Administração de Bens, S.A.	Lisbon	51.00
Jerónimo Martins Finance Company (2), Limited	Dublin (Ireland)	51.00
EVA – Sociedade de Investimentos Mobiliários e Imobiliários, Lda.	Funchal	51.00
Cunha & Branco – Distribuição Alimentar, S.A.	Águeda	51.00
Electric Co – Distribuição de Produtos não Alimentares, Lda.	Lisbon	51.00
Dantas & Vale, S.A.	Lisbon	51.00
Jerónimo Martins Retail Services, S.A.	Klosters (Switzerland)	51.00
Comespa - Gestão de Espaços Comerciais, S.A.	Lisbon	51.00
Simões & Freitas, Lda.	Évora	51.00
Escola de Formação Jerónimo Martins, S.A.	Lisbon	51.00
Funchalgest– Sociedade Gestora de Participações Sociais, S.A.	Funchal	75.50
João Gomes Camacho, S.A.	Funchal	75.50
Lidosol II – Distribuição de Produtos Alimentares, S.A.	Funchal	75.50
Idole–Utilidades, Equipamentos e Investimentos Imobiliários, Lda.	Lisbon	75.50
Lidinvest – Gestão de Imóveis, S.A.	Funchal	75.50
Recheio, SGPS, S.A.	Lisbon	100.00
Recheio-Cash & Carry, S.A.	Lisbon	100.00
Imocash – Imobiliário de Distribuição, S.A.	Lisbon	100.00
Larantigo – Sociedade de Construções, S.A.	Lisbon	100.00
Masterchef, S.A.	Lisbon	100.00
PSQ – Sociedade de Investimentos Mobiliários e Imobiliários, Lda.	Funchal	100.00
Belegginsmaatschappij Tand B.V.	Rotterdam (Holand)	100.00
Jerónimo Martins Dystrybucja S.A.	Kostrzyn (Poland)	100.00
Optimum Mark Sp. Zo. o.	Warszawa (Poland)	100.00
Jerónimo Martins – Distribuição de Produtos de Consumo, Lda.	Lisbon	100.00
Caterplus – Comercialização e Distribuição Produtos de Consumo, Lda.	Lisbon	49.00
Hussel Ibéria – Chocolates e Confeitaria, S.A.	Lisbon	51.00
PGJM – Importação e Distribuição de Perfumes e Cosméticos, S.A.	Lisbon	50,00
Jerónimo Martins – Restauração e Serviços, S.A.	Lisbon	100.00
Hermes–Sociedade Investimentos Mobiliários e Imobiliários, Lda.	Funchal	100.00
Friedman - Sociedade Investimentos Mobiliários e Imobiliários ,Lda.	Funchal	100.00
Desimo – Desenvolvimento e Gestão Imobiliária, Lda.	Lisbon	100.00
Jerónimo Martins – Serviços, S.A.	Lisbon	100.00
Servicompra – Consultores de Aprovisionamento, Lda.	Lisbon	100.00

Joint-ventures

Companies	Head Office	% Owned
Unilever Jerónimo Martins, Lda.	Lisbon	45.00
Fima - Produtos Alimentares, S.A.	Lisbon	45.00
Victor Guedes – Indústria e Comércio, S.A.	Lisbon	45.00
Indústrias Lever Portuguesa, S.A.	Lisbon	45.00
Olá – Produção de Gelados e Outros Produtos Alimentares, S.A.	Lisbon	45.00
Bliska Sp. Zo.o.	Warszawa (Poland)	50.00

34. Transactions with related parties

Note: transactions with related parties are always carried out at market prices.

34.1 Technical and administrative services provided

As the Group's holding company, Jerónimo Martins co-ordinates and provides consultancy services to its subsidiaries. The functional areas of support to the Group range from administration to institutional relations, development and strategy, planning and control, legal and fiscal affairs, risk control, internal audit, human resources, financial operations, consolidation and accounting, security and communication. In this sense, JMH is remunerated for those services.

Income from technical and administrative services provided during 2007 was EUR 8,956 thousand (2006: EUR 12,831 thousand), as follows:

Companies	2007	2006
Joint-ventures Subsidiaries	- 8,956	4,027 8,804
Total	8,956	12,831

34.2 Financial services

The Financial Operations Division of the holding centrally ensures part of the Jerónimo Martins Group companies' financial management.

This management includes acting on behalf of the companies in the negotiation and contracting with banks and other financial institutions, debt conditions and application of funds. The purpose of this centralized management is to obtain more favourable conditions for funding and applications than would be obtained if negotiated on an individual basis. This centralised management is remunerated, adding up in 2007 to the amount of EUR 2,593 thousand (2006: EUR 884 thousand).

This management includes also the centralised treasury, responsible for payments to suppliers, employees and other entities, as well as daily cash management. This management is also remunerated, adding up in 2007 to the amount of EUR 351 thousand (2005: EUR 372 thousand).

34.3 Lease of property

JMH develops its activity in premises rented to a subsidiary, which represented costs of EUR 297 thousand (2006: EUR 368 thousand).

34.4 Supplementary income

JMH makes an annual debit to a joint-venture company relating to a sales commission. In 2007, this debit was EUR 114 thousand (2006: EUR 129 thousand).

34.5 Loans to subsidiaries (current and non-current loans)

JMH granted loans to subsidiaries, which generated interest in the amount of EUR 18,288 thousand (2006: EUR 10,124 thousand).

	Companies	2007	2006
Joint-ventures		9,192	6,706
Subsidiaries		9,096	3,418
Total		18,288	10,124

34.6 Debits relating to staff

As a group, JMH takes advantage of the synergies existing amongst its various companies and frequently transfers staff from one company to another, according to the needs of the various businesses. In 2007, total costs incurred with personnel from other companies amounted to EUR 2,320 thousand (2006: EUR 1,282 thousand).

34.7 Open balances as of 31 December 2007

					Account
Companies	Current	Non-current	Accounts	Accrued	s	Accrued
	Loans	Loans	receivabl e	Income	Payable	costs
Group companies
Casal de São Pedro – Administração Bens, S.A.	-	-	5	-	-	-
Desimo – Desenv. Gestão Imobiliária, Lda.	-	441	-	11	-	-
Feira Nova – Hipermercados, S.A.	-	-	208	875	19	-
Gestiretalho – Gest. Cons. Distrib. Retalho, S.A.	-	-	97	-	28	-
Hussel Ibéria – Chocolates e Confeitaria, S.A.	-	-	2	2	-	-
Imocash – Imobiliário de Distribuição, S.A.	-	-	65	-	-	-
Imoretalho – Gestão de Imóveis, S.A.	-	-	94	-	28	-
João Gomes Camacho, S.A.	-	-	12	19	-	-
Jerónimo Martins – Dist. Prod. Consumo, Lda.	75,853	-	355	22	9	-
Jerónimo Martins Dystrybucja S.A.	-	-	-	794	-	-
JMR – Gestão Empresas Retalho, SGPS, S.A.	-	-	193	-	4	-
Jerónimo Martins – Serviços, S.A.	-	-	-	-	74	499
Lidosol II – Distrib. Produtos Alimentares, S.A.	-	-	4	72	-	-
Lidinvest – Gestão de Imóveis, S.A.	-	-	2	-	-	-
Pingo Doce – Distribuição Alimentar, S.A.	-	-	119	768	5	-
Recheio - Cash & Carry, S.A.	-	-	401	335	2	-
Recheio, SGPS, S.A.	24,268	386,664	850	-	-	-
Servicompra – Cons. Aprovisionamento, Lda.	-	208,590	-	-	-	-
Simões & Freitas, Lda.	-	-	2	-	-	-
Subtotal	100,121	595,695	2,409	2,898	169	499
Joint-ventures
Unilever Jerónimo Martins, Lda.	-	186,048	455	794	5	-
Subtotal	-	186,048	455	794	5	-
TOTAL	100,121	781,743	2,864	3,692	174	499

35. Interests in joint ventures

The company owns (directly and indirectly) interests in the following joint ventures:

• Unilever Jerónimo Martins JMH holds 45% of this group of companies dedicated to manufacturing and selling several products, as follows:
• Fima This subgroup of companies manufactures and sells food products, specifically edible fats and drinks, commercializing private labels as well as Unilever Group brands;
• Lever This subgroup of companies manufactures and sells personal, home and industrial hygiene products for the hotel and food sectors. The brands marketed are property of the Unilever Group;
• Olá This subgroup of companies manufactures and markets ice cream products under private labels and Unilever Group brands.
• Bliska JMH holds 50% of this company, which operates in the Polish market, selling pharmaceutical, orthopaedic and health products.

36. Information on environmental matters

As referred in the management report, there are no environmental matters likely to affect the company's financial performance and situation, and the company is unaware of any contingent liability or obligation concerning environmental matters. Likewise, the company did not recognise in its financial statements any relevant costs or investment of environmental nature.

37. Events after the balance sheet date

On January 2nd, 2008, as per the press release on September 14th, 2007, issued by Unilever PLC, Jerónimo Martins and Unilever reached an agreement regarding the sale by Unilever Jerónimo Martins, Lda., of part of its ready-to-drink tea business under the Lipton brand, to Pepsi Lipton International (PLI), which is a company formed by a partnership between Unilever PLC and PepsiCo. On the same date, Unilever Jerónimo Martins, Lda.. signed a contract with PLI to distribute PLI's products in Portugal, agreeing to receive 38.2 million euros as payment for an estimated reduction in its future cash flow. This payment will have a positive impact of 12.6 million euros on Jerónimo Martins' net result for 2008.

Lisbon, 27 February 2008

The Certified Accountant The Board of Directors

Report and Opinion of the Audit Committee

Dear Shareholders,

In accordance with the paragraph g) of article 423-F of the Commercial Companies Code, we herewith present our report on our supervisory activity and our opinion on the Jerónimo Martins, SGPS, S.A. report and individual accounts for the year ending 31 December 2007, as well as on the proposals presented by the Board of Directors.

This committee met four times during 2007 and carried out its duties on:

• i) the management of the Company, both on its compliance with the law and with the Company Articles of Association;
• ii) the effectiveness of the risk managements systems, the internal control system and the internal audit system; and
• iii) the preparation and disclosure of financial information as well as the review of the accuracy of the accounting documentation, accounting policies and valuation methods used by the Company, in order to ensure that these correspond to a correct evaluation of the equity and its results.

Within the scope of the competence conferred upon us, we have found that:

• i) The management report shows a correct, clear and complete view of the most significant aspects of the evolution of the business and the position of the Company, and all existing risks, both operational and financial, are duly presented; and
• ii) the financial statements and respective annex give a true and fair view of the Company financial situation.

Therefore, taking into account the information received from the Board of Directors, the Company personnel and the conclusions outlined in the Report of the Auditors for Statutory and Stock Exchange Regulatory Purposes in Respect of the Individual Financial Information, we are of the opinion that:

• i) The Management Report should be approved;
• ii) The Financial Statements should be approved; and

iii) The Board of Directors' results appropriation proposal should be approved.

Lisbon, February 27th, 2008

Hans Eggerstedt (President of the Audit Committee)

António Mendo Castel-Branco Borges (Vogal)

Rui de Medeiros d'Espiney Patrício (Vogal)

JERÓNIMO MARTINS, SGPS, S.A.

PUBLIC COMPANY Rua Tierno Galvan, Torre 3, Piso 9, Letra J – 1099-008 Lisboa Registered at the Commercial Registry Office of Lisbon Tax Payer Number: 500 100 144 Share Capital: EUR 629.293.220

EXCERPT OF THE ANNUAL GENERAL MEETING DRAFT MINUTES

Jerónimo Martins, SGPS, S.A.'s Annual General Meeting was held at 11:25 a.m., on the 14th of March, 2008, at Rua Actor António Silva, 7, 15th floor, Lisbon, for not having availability of space in its head office, the shareholders of this society congregated in Annual General Meeting",

(…)

The Chairman of the Meeting verified that were present and/or represented the shareholders referred to in the attendees list, which was lawfully elaborated and which represent 72.09% of the share capital, for what he declared the General Meeting validly held and in conditions to deliberate on the following issues of the Agenda, that the secretary of the General Meeting read and which contents are as follows:

(…)

Entering into the first item of the Agenda, the Chairman proposed the discussion of the first and third issues together - resolving on the 2007 annual report and accounts and resolving on the 2007 consolidated annual report and accounts - notwithstanding its separate voting.

(…)

the Chairman of the Meeting announced that he was going to proceed with voting the 2007 annual report and individual accounts. Results of this voting were announced by the Chairman of the Meeting and the referred documents were approved by 451,785,674 favourable votes, corresponding to 99.72% of the Share Capital of the Shareholders in attendance or represented, 168,165 votes against corresponding to 0.04% of the same universe.

Moving forward to the second issue of the Agenda – resolving on the Proposal for the Appropriation of the Results (…)

the current proposal was submitted to the shareholders, and was unanimously approved and , in consequence, the individual net result of EUR 81,613,839.47, will have the following application:

Legal Reserve: EUR 4,080,691.97 Dividends: EUR 60, 329,685.12

Free Reserves: EUR 17,203,462.38

Concluded the voting of the second issue of the Agenda, the Chairman of the Meeting announced that he was going to proceed with voting on the third issue of the Agenda – resolving on the 2007 Consolidated Annual Report and Accounts.

Proceeding with the voting, the 2007 Consolidated Annual Report and Accounts were approved by 451,785,674 favourable votes corresponding to 99.72% of the Share Capital of the Shareholders in attendance or represented and 168,165 votes against to corresponding to 0.04% of the same universe.

(…)

Since there were no more issues on the Agenda, the Chairman of the Meeting thanked all present for their collaboration and declared the Meeting over at 12:12 and ordered the elaboration of the present draft minutes which, after being read, will be signed by the members of the table of the General Meeting.

João Vieira de Castro

Tiago Ferreira de Lemos