Jeronimo Martins — Annual Report 2009

Apr 12, 2010

Message from the Chairman	3
I. The Group Jerónimo Martins
1. Profile and Structure 2. Strategic Positioning 3. Financial Glossary 4. Contacts II. Consolidated Management Report - Creating Value and Growth	9 26 37 39
1. Relevant Facts of the Year 2. Environment 2009 3. Group's Performance 4. Business Areas Performance 5. Outlook for 2010 6. Events After Balance Sheet Date 7. Results Appropriation Proposal 8. Consolidated Management Report Annex	42 43 51 69 89 96 97 98
III. Consolidated Financial Statements 1. Consolidated Financial Statements 2. Statement of Board of Directors 3. Auditor's Report 4. Report and Opinion of the Audit Committee IV. Corporate Governance	102 152 153 155
1. Introduction Chapter 0 – Statement of Compliance Chapter 1 – Shareholders' Meeting Chapter 2 – Managing and Supervisory Bodies of the Company Chapter 3 – Information V. Sustainability in Value Creation	160 161 165 168 199
1. Relevant Facts of the Year 2. Jerónimo Martins and Sustainable Development 3. Commitment to our Customers 4. Commitment to our Employees 5. Commitment to our Suppliers 6. Quality and Food Safety 7. Environmental Responsibility 8. Patronage VI. Individual Financial Statements	209 211 213 219 23 238 245 268
1. Management Report 2. Individual Financial Statements 3. Auditor's Report 4. Report and Opinion of the Audit Committee Excerpt of the Annual Shareholders Meeting Minutes	271 279 315 317 319

Message from the Chairman

Dear Shareholders,

The general macroeconomic environment was further weakened in 2009, though the financial markets did stabilise to some degree, which could announce the recovery of the world economy and, by extension, the domestic economy.

The stabilisation of financial markets was confirmed by the stable Central Banks' reference rates as well as the recovery, though slight, of the major financial centres. Jerónimo Martins' share was one of the most distinctive cases in this regard, gaining 75.9% in value and breaking through the 7 euro barrier at the end of the year.

Despite these positive indicators, the Portuguese economy did not show signs of recovery in 2009. On the contrary, Portugal registered the year's highest unemployment rate in the last quarter and Gross Domestic Product recorded negative growth in the region of 3%.

However, 2009 was a good year for Jerónimo Martins, a result of the projects started in 2007 and 2008, the benefits of which will extend over time, contributing to the strengthening of the Group's position in the markets where it operates, fostering its growth and expansion over the next years.

The Group's operating activity registered an excellent overall performance. Consolidated sales reached 7,317.1 million euros, equivalent to an increase of 6.1% on the previous year; if it were not for the zloty's depreciation, growth would have been of 18.4%, which clearly shows the Group's potential. Net profit attributable to Jerónimo Martins surpassed 200 million euros, a 22.8% increase on 2008.

In the retail area in Portugal, Pingo Doce once again promptly responded to the challenges it took on: i) the integration of the medium-sized Feira Nova hypermarkets; ii) the restructuring of its operational and commercial areas; iii) the re-branding of Pingo Doce; and iv) the consolidation of the Plus stores acquired in May 2008.

This combined effort resulted in 8.3% growth of sales on the preceding year, with like-for-like growth registering 0.9%.

Recheio strengthened its leadership of the wholesaler market with the integration of a new unit, in Santa Maria da Feira, which was acquired at the end of 2008 and, hence, strengthened its presence in the North Portugal region. The Company reported a notable performance, with sales of 688.5 million euros, an increase of 5.2% on the previous year, and going against the sector's trend.

In the Retail area in Poland, Jeronimo Martins Dystrybucja strengthened its market position and maintained a high pace of organic expansion, opening a total of 163 stores. 167 former Plus stores, acquired in October 2008, were also integrated.

Sales in this area increased by 29.8%, and surpassed the 16 thousand million zlotys mark in 2009, making the Company the largest retail chain operating in the Polish market.

It is with great pleasure that we find the performance of this chain recognised in the ranking of Poland's most valuable brands, established and published by the opinionleader newspaper "Rzeczpospolita", with Biedronka occupying 9th position.

In the Manufacturing area, I would like to highlight the continued focus on the consumer, and the maintaining of market shares of the major product categories. In this context, a new company was established – Gallo Worldwide, Lda., a spin-off of one of the Unilever Jerónimo Martins, Lda. business units - in order to enhance the domestic and international development of the olive oil and seed oil category.

In the Services area, the focus on strengthening the portfolio of representations was maintained, through new brands in segments where it already operates or by entering new business segments.

In the Food Service area, the investment in innovation was carried forward as new business models were tested and the value propositions of already established businesses were consolidated.

The achieved results are certainly pleasing to our Shareholders: in 2009, our share price increased in 75.9%, the fifth largest rise among PSI-20 companies; and total return in the year reached 78.8%, largely compensating the negative performance observed in 2008.

All the success achieved in 2009 was the result of a well defined strategy and the notable performance and involvement of the People working for the Jerónimo Martins Group. People we continually value and who are, without doubt, our driving force.

It was on the behalf of our People that the internal Social Responsibility area "Jerónimo Martins For Us" carried out an in-depth and detailed study in Portugal that demonstrated the social reality of those who work with us and identified their real needs. I was very pleased to note the very high participation rate in this study (90%), encompassing more than 21 thousand employees.

We are capable today of supporting them in the areas of greatest need and, therefore, I have nominated Health and Education as our priorities for 2010.

I was especially pleased, besides all the work of the Jerónimo Martins Training School and Biedronka Academies, to hand over a further 600 diplomas to the employees who completed the 9th and 12th grades under our internal "Learning and Evolving - New Opportunities Initiative" programme.

In Jerónimo Martins, the rigour and enthusiasm engaged in this project have allowed the achievement of results beyond expectations. Seeing our People's will to learn and availability to continue with lifelong learning is truly remarkable.

In a year of profound economic crisis, the Group has not forgotten those who come face-to-face with the consumers. My message was clear and the pledge we made to our employees has been kept: not only were no jobs lost, but a further 1,700 employees were hired in Portugal. We are proud to be a Group that today has 53,797 employees.

When analysing the various dimensions, both managing and operational, in the market context in which the Group operates, I cannot help but feeling great satisfaction towards the results achieved in 2009. I hope our shareholders feel the same.

Concluding this brief assessment of the Group's operational results, I now turn to some matters I consider relevant towards the company's development and which I would like to share with you.

On the one hand, the CMVM (Portuguese Securities Market Commission) published the new Corporate Governance Code and CMVM Regulation No. 1/2010 on the Corporate Governance of Listed Companies, earlier this year.

The changes mainly concern the functioning of general meetings, internal control and risk management systems, specialised committees, auditing, and the disclosure of the remuneration of members of the management and supervisory bodies.

On the other hand, the draft Code of Good Corporate Governance promoted by the Portuguese Institute of Corporate Governance (IPCG) was disclosed. Jerónimo Martins identifies with the structural principles of the IPCG, in particular those concerning the adoption of best practices of corporate governance and transparency with the goal of a healthy market structure. Nonetheless, it considers that the solutions proposed by the IPCG in the Code can be counterproductive, even putting the proper functioning of companies and, consequently, of the market itself at risk.

Any of the abovementioned codes has excessive limitations on the activities of the Board of Directors, applying as much to Executive Directors as Non-Executive Directors. The recommendations are increasingly more comprehensive on the composition, operation and duties allocated to the management body, without taking into account the specific nature of the most common shareholder structure in Portugal and seeming to be founded on the "one size fits all" principle, with which we disagree.

In particular, the presence of Non-Executive Directors linked to key shareholders in the Board of Directors, which is a feature of the corporate culture of many listed companies in Portugal, tends to have been overlooked. Instead, we should take advantage of this distinctive trace, as well as of the role of the Chairman in articulating both the interests of the Company and of its Shareholders.

Jerónimo Martins, being one of the oldest companies in the country, listed since 1989, is known for its way of managing business and communicating with the market, which is underpinned by the principles of accuracy and transparency. We have a strong corporate culture that has always assimilated the ethical principles intrinsic to its solid shareholder structure and which have led to the company's sustainability and its pioneering standards in the field of governance. We were, in fact, among the first listed companies to consistently submit to the regulator and the market reliable and transparent information, as has actually been publicly acknowledged.

I therefore believe that the supervisory entities should not assume the legislator's role, extrapolating their original functions, importing governance models and suffocating companies with rules that do not correspond to market practices or take into consideration the particular aspects of the country and its business environment.

Closer supervision and aware self-regulation will surely be more recommendable vectors for a more transparent and healthier market.

Another issue that was worthy of my special consideration was the status quo of private enterprise in Portugal.

I notice, aware that the strength and dynamism of a democratic society can be wholly measured by the spirit of entrepreneurship of its private sector, with a certain degree of dismay, the role intended for the Portuguese business community in the recent economic, political and social environment.

A living, proactive and innovative business network must be deeply aware of its core role in sustaining economic progress and, as a result, creating value for society as a whole. Thus, private initiative has to be a guiding principle of the best individual incentive of its citizens, a buffer against economic and social inertia, a repository of fundamental ethical values, as well as be capable of structural strategic thinking that combines a long-term business vision oriented towards an increasingly complex and competitive global market with a sectoral identity that fosters the sustainability of the economies where it operates.

In a free and evolved society it is up to the State to foster private enterprise, recognising that this is the driving force of economic development and social renewal.

Hence, some of the key vectors to be assimilated by the State in order to propagate private initiative are the creation of supporting infrastructures, of a regulatory framework that ensures its structured development and the enhancement of a sectoral and economic identity that inspires and respects private initiative.

This is the only way in which a business structure can responsibly take on its essential mission in society.

Unfortunately, the assessment that can be made of the vitality of private initiative in Portugal during this last year is not positive. The economic environment that existed in 2009 was not, in itself, fertile ground for economic growth. The measures to foster and recover private initiative in Portugal, which are absolutely necessary and critical to stimulate investment and create jobs, continued to fall short of that required by the specific circumstances of this period.

Beholding the year which now begins, I look with expectation on the consistency of the first signs of international economic recovery in this year just beginning. I also eagerly look for signs of the strengthening of the identity, pro-activeness and confidence of private initiative, since I believe that such an economic recovery will hardly be sustainable in Portugal without the participation and in-depth involvement of its private sector.

The last decade was of great importance to Jerónimo Martins. It was a decade marked by the focus on the strategic development of its core business in Portugal and Poland. It was a time of rethinking markets and formats and setting challenges in order to ensure the expansion of the Group during that period.

In the decade now starting, Jerónimo Martins is adequately prepared to assume its role in international markets; the fact that we are among the world's 100 largest Retail companies, as well as part of the small group of the 50 fastest growing and value creating companies, is the most tangible proof of this.

We are now faced with the challenge of defining the way forward to guarantee the future development and growth of Jerónimo Martins. It is a time to study new markets, allocate resources and implement the defined strategy.

To achieve that, we rely on the support of our shareholders, who have accompanied us and always trusted in the decisions of the Board of Directors, and our employees, in whom we place our confidence and who we know will accompany us in this new challenge.

My sincerest gratitude to you all.

I – The Group Jerónimo Martins

1. Profile and Structure	9
1.1. Identity and Competencies	9
1.1.1. Asset Portfolio	9
1.1.2. Core Competencies	10
1.1.3. Innovative and Pioneering Culture	11
1.2. Operating and Financial Highlights	13
1.3. Corporate Bodies and Structure	17
1.3.1. Corporate Bodies	17
1.3.2. Business and Ownership Structure	19
1.3.3. Management Structure	21
1.4. Public Recognition	23
2. Strategic Positioning	26
2.1. Mission	26
2.2. An Integrated Vision of Sustainable Development	27
2.2.1. Assessment of the External Environment	27
2.2.2. Main Effects of Jerónimo Martins' Activity	28
2.2.3. Sustainability in Company Management System	29
2.2.4. Relationship with Stakeholders	31
2.3. Commitment to Value Creating and Growth	33
2.4. Commitment to Sustainability in Value Creation	34
3. Financial Glossary	37
4. Contacts	39

1. Profile and Structure

1.1. Identity and Competencies

1.1.1. Asset Portfolio

Jerónimo Martins is the largest Portuguese food retail Group, with a turnover in 2009 of 7.3 thousand million euros, a total of 53,797 employees at the end of the year and the sixth largest market capitalisation on the Euronext Lisboa Stock Exchange. With more than fourteen years of international experience, the business outside Portugal accounts for 50.9% of sales and 50.5% of employees.

The Group holds a sound portfolio of businesses focused on the food area, and which combines the strength of the market positions 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 of generating cash flow fostered by its manufacturing partnership with Unilever in Portugal.

In Portugal, at the end of 2009 Jerónimo Martins held a leading position in the Food Distribution sector, achieving a merged turnover of 3.3 thousand million euros. The Group's Banners are Pingo Doce (334 supermarkets in mainland Portugal and 13 in Madeira), Feira Nova (9 hypermarkets) and Recheio (33 Cash & Carry stores and 2 Food Service platforms in mainland Portugal; 1 Cash & Carry store and 1 Food Service platform in Madeira). It continues to be the leading supermarket and cash & carry player, combining the strength of its Banners with the leadership in sales area and turnover. Moreover, Jerónimo Martins has been investing in the development in Portugal of new projects that are complementary to the Food Retail business, which involved the launch of New Code (adult and children's clothing), Electric Co (electrical appliances), GET (books, music, electronics and telecommunications), petrol stations, Bem-Estar parapharmacies and "No Sítio do Costume" restaurant areas in Pingo Doce stores.

In Poland, Biedronka, a chain of stores with a variety of food products combining quality with an everyday-low-price policy, is market leader in Food Retail and holds a substantial lead over competitors with similar formats, through its high number of stores and the brand's strength. At the end of 2009, Biedronka had 1,466 stores, with 720 million customer purchases and 3,725 thousand million euros turnover for the year under review. Also in Poland, a further five pharmacies were opened in 2009 under the Apteka Na Zdrowie brand, as a result of the partnership agreement signed in February 2006 with the National Association of Pharmacies in Portugal. These new units increased the number of pharmacies in the network to 24 units.

Jerónimo Martins is also the largest manufacturing group of fast moving consumer goods in Portugal, through its partnership with Unilever, in the Food, Personal Care, Home Care and Consumption Outside of the House products. In 2007, this partnership was strengthened by the merger of FimaVG, Bestfoods, LeverElida and IgloOlá into a single Company - Unilever Jerónimo Martins. The Company maintains its leadership position in the margarines, iced tea, ice creams and washing detergents markets, among others.

In 2009, Unilever Jerónimo Martins spun-off the olive oil and seed oil business, which led to the establishment of the Gallo Worldwide Lda.. This Company assumed the leadership position of the Gallo brand in the domestic market and in Brazil.

The Group's portfolio also includes a business area in Portugal providing Marketing Services, Representations and Food Services, integrating the following businesses:

Jerónimo Martins Distribuição de Produtos de Consumo, which is the representative in Portugal of international brands, some of which are market leaders in the fast-moving consumer food, food service area (through Caterplus), in selective cosmetics and in the fast-moving cosmetics market, (through its partnership with the Puig Group). Some of the those brands are market leaders in the fast moving consumer food market;

Hussel, a Specialised Retail chain selling chocolates and confectionary, with 24 stores at the end of 2009;

Jerónimo Martins Restauração e Serviços, which is focused on the development of projects in the food service sector, which at the end of 2009 included the Jeronymo chain of kiosks and coffee-shops with 26 points of sale, the Olá chain of ice-cream stores with 33 stores and a further five franchised out, the Chili's restaurant in Lisbon, a franchising of the Brinker Group, and the Ben & Jerry's store.

1.1.2. Core Competencies

Over its long history, Jerónimo Martins has been adopting values and demonstrating core competencies which enable it to look into the future with confidence and determination.

The Group is very proud of its DNA, which has been a determining factor both in periods of fast growth and in periods of tough environments.

Jerónimo Martins also has vast experience in the Food area, rich in terms of business sectors, markets, geographies and value chains.

Its capacity to establish strategic partnerships has been a determining factor in various periods of the Group's history, and for entering new business areas. Also, its experience in mergers and acquisitions and its capacity to carry out successful integration processes are among its core competencies.

In recent years, Jerónimo Martins has gained new competencies with the internationalisation of its businesses into large, very dynamic and competitive markets where it directly competes with players of international renown.

The Jerónimo Martins business portfolio is robust. It is focused on the Food area and balanced in terms of growth perspectives and cash flow generation.

The business models are adapted to the markets and consumption trends, and they primarily embody proximity formats that are very price competitive and have a commercial focus on Private Brands and Perishables (areas in which the Group has always been at the forefront) and the development of new projects. The core businesses are supported by strong brands which are market leaders in their formats.

The operational activity is set on ongoing cost optimisation, productivity, exploitation of the Group's scale and synergies and on being constantly up-to-date technologically.

The Group's management capabilities in uncertain and volatile environments have been strengthened through ever more dynamic, flexible and pro-active planning mechanisms, which lead to the establishment of well defined priorities and the alignment of the Organisation in relation to such.

1.1.3. Innovative and Pioneering Culture

Jerónimo Martins has always proven itself to be pioneering within the Portuguese business context.

Innovative and Pioneering Culture in Management Practices

In its more recent history, Jerónimo Martins has excelled, among other reasons, for being the first Food Distribution Group in Portugal to implement various innovative management practices.

This willingness to innovate has been kept and is now an integral part of the management culture in Jerónimo Martins. In 2009, embodying that culture, the Group substantially improved its supply chain processes in technological terms.

In Portugal, Jerónimo Martins optimised its logistics automation with voice picking technology and also strengthened its resupply processes with solutions developed inhouse.

In Poland it innovated in its radio frequency logistics infrastructure, which had already been pioneering in this market, and increased the productivity of its Distribution Centres as a result.

Innovative and Pioneering Market Initiatives

Jerónimo Martins has also been highlighted by its great dynamism and market leadership, illustrated by the countless initiatives that it has implemented over the years to cement its leadership of the market, winning over growing numbers of consumers.

In this field in 2009, the innovative range of Ready Meals, "Pingo Doce à Casa" was introduced in Portugal, quality fresh meals at accessible prices.

Pingo Doce, reinforcing its focus on the excellence of its Private Brands, initiated a pioneering programme to continuously improve their nutritional profile in order to achieve healthier compositions and ingredients, using the following parameters:

• The gradual reduction of salt, sugar and fat content;
• The total removal of any potentially allergy-causing colouring;
• The review of the ingredients, raw materials, additives and size of the portions.

In Poland, the Biedronka Banner implemented the Guideline Daily Amount (GDA) system, providing labels on its products with information on the calorie content and quantity of each nutrient and comparing it to the guideline daily amount for a healthy and balanced diet.

The "Tu Biedronka" mobile telephone card service was also inaugurated in 2009.

	2009	2008	Δ %
€' 000.000
Distribution Portugal	3,321	3,093	7.4%
Distribution Poland	3,725	3,521	5.8%
Manufacturing, Services & Others	272	280	-2.9%
Consolidated Sales	7,317	6,894	6.1%

Net Results and Cash Flow

	2009	2008
Net Results	200.3	163.2
Cash Flow	434.1	344.7
Nr. Common Shares	629,293,220	629,293,220
Nr.Own Shares	859,000	859,000
Data per Share (€)
Net Results	0.32	0.26
Cash Flow	0.69	0.55
Share Price (ye)	6.99	3.97

1.2. Operating and Financial Highlights

Consolidated Balance Sheet
€' 000.000
	2009	2008
Invested Capital	1,757.7	1,777.0
Financial Debt *	911.8	1,069.5
(Marketable Securities and Bank Loans)	-219.8	-223.6
Net Debt	692.0	845.9
Minority Interests	287.6	281.3
Equity	778.1	649.8
Shareholders Funds	1,065.7	931.1
Gearing	64.9%	90.8%
Interest Cover	5.11	3.70

* including leasings and accured interest and hedging

Annual Report 09 The Group Jerónimo Martins Profile and Structure

Number of Stores and Sales Area
	2009	2008	2007	2006	2005
Pingo Doce*	334	334	210	189	179
sqm	352,276	350,396	183,770	161,279	149,158
Feira Nova*	9	9	46	38	29
sqm	82,468	82,653	172,039	150,189	130,684
Madeira	15	15	15	15	15
sqm	14,300	14,626	14,626	13,697	13,697
Recheio	35	35	33	33	32
sqm	114,410	115,724	109,634	110,005	107,202
Biedronka	1,466	1,359	1,045	905	805
sqm	814,493	753,531	536,729	452,952	394,536

*In 2008, 37 Feira Nova compact stores w ere converted into Pingo Doce

2005 2006 2007 2008 2009

				o ã ç Ow shi a ner p p ci i	o ã ç a d Co lida tion nso li o s		Sa les ( Mill ion Eu ro)																EB ITD A Ma in rg			Nr. Sto res	Sa les Ar ea (sq m)	Sa les / sqm *	LFL Δ%
				rt a P	n o C	09 07	08 06	Δ% Δ%	09 07	08 06	09	09	09	09/ 08
	d n a nl		Su ts ( ) ** rke Lea der per ma	51%	I	2,1 93. 6	1,9 44. 6	12. 8%	7.0 %	6.7 %	334	352 ,27 6	6.3	2.7 %
	ai M al g		3rd Hyp ark ( Pla ) ** ets erm yer	51%	I	307 .2	365 .6	-16 .0%			9	82 ,46 8	3.7	-10 .7%
n o ti	u rt o P		Cas h & Ca ( ) Lea der rry	% 100	I	688 .5	654 .5	% 5.2	% 6.0	% 6.1	35	114 ,41 0	6.0	% 1.7
u b i tr s i D	ra ei d a M		( Lid l) Su rke ts oso per ma
d o o F	al g u rt o P		( J.G .Ca cho ) Cas h & Ca ma rry	75. 5%	I	13 1.6	128 .4	2.5 %	4.8 %	3.6 %	15	14 ,30 0	9.2	1.1 %
	d n a ol P		Ret ail Sto ( Lea der ) res	100 %	I	3,7 24. 7	3,5 20. 9	5.8 %	7.3 %	6.9 %	1,4 66	814 ,49 3	20. 8	8.3 %
s e c vi r e S & g n	al g		Ma rine rga Rea dy to D rink Te a & Sa vou ry Hom e C & Per al C are son are Ice Cre am	45%	P	324 .9	335 .7	-3.2 %	11. 6%	11. 2%
ri u t c a f u n a M	Oliv e O il, S eed Oi l u rt o P Mkt , Re and Re st. pr.	Se rvic es	100 %	I
			Cho col ate s	51%	I
		CO NS OL	IDA TE D			7, 31 7.1	6, 89 3.7	6.1 %	7.2 %	6.9 %
* in loca	l cu cy ( '000 ) rren				I - In teg ral

** including the conversion of 37 Feira Nova compact stores into Pingo Doce P - Proportional

1.3. Corporate Bodies and Structure

1.3.1. 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
• 75 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

• 54 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

• 50 years old;
• Member of the Executive Committee;
• Executive Member of Jerónimo Martins, SGPS, S.A. Board since 1995.

Responsible for Manufacturing Operations, Services, Representations and Specialized Retail

• José Manuel da Silveira e Castro Soares dos Santos
• 47 years old;
• Member of the Executive Committee;
• Executive Member of Jerónimo Martins, SGPS, S.A. Board since 2004.

Non-Executive Board Members:

António Mendo Castel-Branco Borges

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

Hans Eggerstedt

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

Rui de Medeiros d'Espiney Patrício

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

Artur Eduardo Brochado dos Santos Silva

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

Nicolaas Pronk

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

Marcel L. Corstjens

• 59 years old;
• Non-Executive Member of the Jerónimo Martins, SGPS, S.A. Board since 2009.

Statutory Auditor and External Auditor:

PricewaterhouseCoopers & Associados – Sociedade de Revisores Oficiais de Contas, Lda. Palácio Sottomayor, Rua Sousa Martins, 1 – 3.º, 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

1.3.2. Business and Ownership Structure

Business Structure

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

Ownership Structure

DISTRIBUTION

1.3.3. Management Structure

Jerónimo Martins, SGPS, S.A. is the Group's Holding Company, which encompasses three distinct business areas: Food Distribution, Manufacturing and Marketing Services, Representations and Restaurant Services.

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

The Food Distribution structure is close to a matrix model, where it should be noted that there are Retail Functional Divisions grouped into JMR that provide services across the Operational Companies. JMR is organized into five business areas: Operations, Commercial, Financial, Human Resources and Information Technologies.

The Operational Companies and the Food Distribution Functional Divisions are represented on the Distribution Portugal Executive Board, an entity that chairs the coordination and deliberation of strategic decisions regarding the business.

In Portugal, the Operations Department of Pingo Doce is organized by regions, each Regional Division encompassing the areas of Marketing, Operational Control, Human Resources, Health and Safety at Work, Maintenance and Technical Issues. These areas have a direct report to the Regional Operations Manager and a functional report to the respective JMR Functional Divisions, with a view to thereby ensuring greater proximity to the business. The hypermarkets operating under the Feira Nova Banner are the only commercial units with a single, national Operations Department of their own.

At Recheio, apart from the Operations Department, the following Departments are highlighted: Commercial, Marketing, Financial, Human Resources and Information Technologies.

For the operation in Madeira, it should be noted that the Commercial, Financial, Quality Control and Human Resources areas need to be represented in the structure, although on a more reduced scale, adapted to the size of the business. In each case, the above-mentioned functional areas have a direct report to the General Manager of the Company.

Within the organizational structure of Biedronka, the model adopted, conciliates the autonomy of the Regional Business Units with the co-ordinating role of the Company's Central Structure.

Each of the 8 Regional Business Units is responsible for the performance of a group of 150 to 200 stores and the respective logistic infra-structure. In this way, these Units include Operations, Logistics and Supply Chain, Expansion and Technical Issues, Accounting and Finance, Human Resources, Health and Safety in the Workplace, Information Technology Support and Safety structures within their regional organisation. Thus, all the regions are autonomous in their operational management.

The Central Structure of the Company is the direct responsibility of the General Manager of the Company, and ensures the support and co-ordination of all the Regional Units, through the Operations Managers and other Central Functional Departments of the Company: Financial, Legal, Marketing, Public Relations, Sourcing and Category Management, Quality Control, Human Resources and Information Technologies.

In the area of Manufacturing, Unilever Jerónimo Martins and Gallo Worldwide should be mentioned. The management structure of Unilever Jerónimo Martins is based on a Management Board, comprised of members nominated by the partners Jerónimo Martins SGPS, S.A. and Unilever.

An Executive Board reports to this entity, 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 Technologies.

The management structure of Gallo Worldwide Lda. is based on a Management Board, comprised of members nominated from the partners Jerónimo Martins SGPS, S.A. and Unilever.

An Executive Board reports to this entity, which is made up of the Functional and Business Divisions: Financial, Customer Service and Information Technologies, Sales (Domestic Market), Marketing, Purchasing and Planning, Manufacturing and Logistics and Exports. The CEO of the Company is also responsible for the Human Resources Department.

In the area of Services, Jerónimo Martins Distribuição is in charge of Jerónimo Martins Distribuição de Produtos de Consumo, Jerónimo Martins Restauração e Serviços, as well as the Puig Portugal, Caterplus and Hussel joint ventures.

The various Companies guarantee all the Businesses' operations and management, although Jerónimo Martins Distribuição provides its sister companies with Financial, Information Technologies, Human Resources and Logistics services.

The top management structure of Jerónimo Martins, SGPS, S.A. is headed by its Board of Directors. This corporate body consists of ten members, three of which are part of the Executive Committee. It is also the responsibility of the Non-Executive Members of the Board of Directors to evaluate the performance of the Members that comprise the Executive Committee and the other existing committees.

The Jerónimo Martins, SGPS, S.A. structure also includes a number of Functional Divisions which provide support and advice to the Executive Board, the Board of Directors and the remaining Companies of the Group, about specific issues in each area: Strategy and Planning, Financial Operations and Risk Management, Consolidation and Accountancy, Internal Auditing, Investor Relations, Tax, Legal Affairs, Communications, Human Resources, and Safety.

It is the responsibility of each Functional Division of the Group's Holding to ensure consistency between the different objectives that are defined. Their activities are described in a specific chapter, within the scope of Corporate Governance.

1.4. Public Recognition

Throughout 2009, the activity of the Jerónimo Martins Group, its Companies and Banners was recognised and awarded by various entities, in the markets in which they operate.

Jerónimo Martins

• Mr. Soares dos Santos, Chairman of the Board, was given the "Personality of the Year" Award by the 2009 HR Awards, whose objective is to distinguish professionals and companies for their work in Human Resources;
• Jerónimo Martins was distinguished with the "Family Company Award", a prize awarded by APEF (Portuguese Association of Family Companies) which rewarded the exemplary manner in which Jerónimo Martins has conducted its businesses in Portugal and Poland, providing solid and sustained growth;
• Jerónimo Martins is the largest Portuguese Group amongst the Retail companies, holding the 94th position in the ranking of the 250 largest retailers in the world, which means it has risen 22 places in relation to the previous year, according to the most recent edition of the "Global Powers of Retailing" Report, prepared by Deloitte;
• Forbes distinguished Jerónimo Martins as one of the five companies in the entire World that over the last five years has presented the highest performance and the highest growth potential in the Food Retail sector;
• Jerónimo Martins has received the Award for the Best Investor Relations Office by Deloitte and the newspapers Diário Económico and Seminário Económico;
• Jerónimo Martins received the prize for Best Investor Relations Office in Portugal, attributed by the IR Magazine Continental Europe Awards;
• Jerónimo Martins was distinguished with the Awards for Best European Investor Relations Office and Best Portuguese Investor Relations Office, attributed by the Institutional Investor.

Distribution Portugal

• In 2009, Recheio received recognition as the best Portuguese wholesaler, by the magazine Distribuição Hoje;
• The Pingo Doce Banner won the "Rebranding" and "Distribution" awards, attributed in the first edition of the Awards by the magazine Marketeer;
• Following its new advertising campaign, Pingo Doce was the most remembered brand in the last few months of the year, according to a Publivaga – Marktest survey.

Distribution Poland

Jeronimo Martins Dystrybucja is in 20th place in the list of the 500 largest companies in Central and Eastern Europe, published by Newsweek Magazine, and in 8th place in the list of the 500 largest Polish companies in terms of sales, published by the magazine Polityka;

• Jeronimo Martins Dystrybucja was distinguished with the award for "Trustworthy Employer" in the category "Retail Chains". The objective of this ranking is to distinguish market leaders in the different sectors of the economy, that adopt employment policies that deserve to be highlighted;
• Jeronimo Martins Dystrybucja received the prize "Leader on the Food Market", attributed by Rynek Spozywczy magazine and Internet Portals www.dlahandlu.pl and www.portalspozywczy.pl;
• For the second year running, the Biedronka Banner won the "Trade and Services MasterCard 2009" award, in the "My Favorite Store" category, based on a market survey carried out in Poland, which distinguishes retail companies that set and form this market's future trends;
• Biedronka received the "Trade Crown Award", a prize attributed in Poland since 1997 by the retail magazine FMCG, to companies that implement new solutions with an impact on local and national commercial activity;
• The Biedronka brand is in 9th place in the ranking of the highest value brands in Poland, prepared by the Rzeczpospolita Newspaper. In the "Most Often Chosen Brand" and "Top of Mind Brand" categories, Biedronka came in 1st place;
• Forbes Magazine distinguished Biedronka with the title "Leader of Polish transformation in the last 20 years", for the best company in the Fast Moving Consumer Goods Market;
• Biedronka received the award "Ubi Caritas" with distinction in the "Donor" and "Cooperation with Caritas" categories, as a result of the co-operation that has taken place over the last few years with Caritas Polska within the scope of Corporate Social Responsibility activities;
• For the second year running, Biedronka won the "Golden Consumer's Laurel 2009" award in the "Customer-Friendly Stores" category, which is attributed based on questionnaires and market surveys of the magazine's readers;
• Biedronka's advertising campaign "Products which recommend themselves" was given the Euromarka certificate, a programme promoting entrepreneurship and exports promoted by the Polish Ministry of the Economy and the Polish Agency for Enterprise Development;
• Biedronka's advertising campaign "Products which recommend themselves" was once again distinguished with the Silver Statue at the EFFIE Awards, the global symbol of the effectiveness of Marketing campaigns.

Manufacturing and Services

• Unilever Jerónimo Martins received the Award for Best Creative Multimedia Solution, attributed by the Clube de Criativos de Portugal, for its campaign "Ideal Night Out" from the Dove Go-Fresh range;
• The Dove Go-Fresh advertising campaign won the 2009 Silver Prize for Effectiveness in the Non-food Consumer Goods category, attributed by APAN (Portuguese Association of Advertisers) and by the Grupo Consultores;

• The Knorr Brand / Chilled Soups was awarded the prize "Masters in Distribution" in the Chilled Meals category;

• The Dove, Becel, Confort and Skip brands, of Unilever Jerónimo Martins, were nominated as "Reliable Brands", in their respective categories, by readers of Selecções do Reader's Digest;

• Gallo Colheita ao Luar (Moonlight Harvest) Olive Oil was chosen as one of the Best Extra Virgin Olive Oils in the World by Marco Oreggia, in the Flos Oleis 2010 Guide, published in 2009;
• Gallo Olive Oil was voted on of the Best Extra Virgin Olive Oils in the World in the publication Der Feinschmecker Magazin 2009;
• The Gallo brand won the competition "Most Magnetic Brands" in the Olive Oil category, an initiative of Brandia Central in partnership with Marklab - Laboratório de Investigação Aplicada às Ciências do Marketing, which assesses the reputation and attractiveness of brands amongst consumers;
• Gallo was distinguished with the award "Top of Mind" in the Olive Oil Category, by the newspaper Folha de São Paulo;
• The Heinz Ketchup Top and Down brand represented in Portugal by Jerónimo Martins Distribuição de Produtos de Consumo, Lda., was awarded the prize "Masters in Distribution" in the Sauces and Condiments category;
• The Kellogg's brand, represented in Portugal by Jerónimo Martins Distribuição de Produtos de Consumo, Lda., was voted Brand of Excellence 2009 by Superbrands.

2. Strategic Positioning

2.1. Mission

Jerónimo Martins is a Portuguese Group with international projection operating in Food Distribution and Food Manufacturing, with a view to satisfying the legitimate interests of its Shareholders in the short, medium and long term, while simultaneously contributing to the sustainable development of the regions in which it operates.

Within the scope 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 customer satisfaction and loyalty by improving their quality of life through a firm commitment to innovation and by offering the best possible quality/price ratio on the products and services provided;
• Ensure the entire Organisation operates to the highest standards of conduct and Social Responsibility, through the building of relationships of trust with all the Group's stakeholders;
• Conduct business through dynamic and flexible organisations that are endowed with human capital that knows how to match experience and accrued knowledge with the ongoing need for change;
• Invest in continuous training and the most up-to-date management practices, thereby guaranteeing that the entire organisation is capable of tackling the strategic challenges of the present and the future.

2.2. An Integrated Vision of Sustainable Development

In its vision, Jerónimo Martins assumes an objective of sustainability based on ongoing value creation, on preserving the environment and natural resources, on improving the quality of life within the communities where its businesses operate, on safeguarding human rights and working conditions, and on promoting a fairer and more balanced social structure.

Within the scope of its vision, the Group assumes four axes of development:

• The assessment of the external environment, which gives in-depth knowledge on the sector and the markets and the capacity to foresee the trends that are going to determine how sound businesses are in the future;
• The assessment of the economic, social and environmental impact of the activity, which ultimately ensures the sustainability of its licence to operate and determines major development priorities;
• Sustainability in the management of the company, reflected in the Group's governance model;
• The availability of efficient channels of communication with strategic stakeholders, which are determining factors in the match-up of expectations and in building solid commitments.

2.2.1. Assessment of the External Environment

The Jerónimo Martins Group has a strong food-based identity as a result of its presence in the Distribution and Manufacturing sectors of fast moving consumer goods. These two sectors show great diversity and dynamism, but they are quite sensitive to the macroeconomic climate.

Economies are increasingly interconnected as a result of globalisation and this is a reality that brings risks and opportunities that are often of extreme relevance and materiality, which requires their constant monitoring.

In the food business, the growing demands of the consumer dictate the progressively faster cycles of development, favouring brands that inspire trust and a sound value proposition.

Moreover, most players of the Food Sector have been going through successive processes of restructuring and optimisation of their business portfolios. This fact brings about the constant mutation of the competition panorama and increases an aggressive competitiveness.

In this environment, the investment in technological development, innovation and the differentiation of business models are key factors in the positioning of the successful operators.

Organisational growth, merger and acquisition operations, and international expansion are central themes in the growth strategies of Food Sector companies, in accordance

with the positioning and local, regional or even global scale that each company envisages for itself.

The relationship among retailers and manufacturers is increasingly characterised by a vision that promotes interdependence, collaboration and the development of strategic partnerships in the search for greater efficiency, productivity and innovation. The partnerships developed under sector associations also take on a progressively more relevant role in the technological development of the sector and the promotion of common interests.

Simultaneously, market operators are focusing increasingly more on integrating sustainable development into their business strategies, according to the following five key priorities:

• Understand how environmental and social issues affect the purchase decisions of its customers and consumers;
• Outline a communication strategy that promotes its sustainability credentials, in order to reinforce the strength of its Brands and Banners;
• Introduce environmental and social criteria into the selection and negotiation with its business suppliers;
• Identify the critical points in the sustainability of its value chain and set out development plans accordingly;
• Implement actions with immediate results alongside structural projects steered towards broader time horizons.

2.2.2. Main Effects of Jerónimo Martins' Activity

By operating in the food business and selling fast moving consumer goods and services it is pertinent that Jerónimo Martins assumes "Sustainable Consumption" as one of its strategic guidelines and, with this perspective in mind, identifies the major impacts of its activity.

It is important to mention that the economic, environmental and social effects are identified according to the Organisation's in-depth knowledge of the nature of its business and that they mirror the relevance that the Operational and Functional Divisions attribute them in the performance of its activity.

The identification of the effects presented in this report is developed having the Food Distribution Business in mind, which represents more than 95% of the Group's turnover.

Economic Effects

Jerónimo Martins is one of the largest domestic employers, responsible for a high volume of direct and indirect employment in diverse areas, and equally operating as a driver of the local economy of the communities in which it operates.

It is also one of the largest companies in the supply of fast-moving food goods, with relevant impact on national production. It operates as a catalyst for competitiveness, technological development and innovation.

It also holds a vast portfolio of real estate and operates a significant group of rented stores.

The Group has an ongoing effort towards investment that generates more employment and more tax revenues, while simultaneously promoting the growth of the companies with which it works.

Lastly, Jerónimo Martins has a direct influence on the value chain by making technological development a priority, whether in partnership with its suppliers or through the sector associations to which it belongs. The fostering of initiatives that aim to optimise processes, reduce consumption, the use of more eco-efficient packaging, or explore manufacturing symbioses, among others, can have very relevant economic impacts for all parties when applied to the value chain as a whole.

Environmental Effects

Given the nature and dimension of the Group's activity, the most relevant environmental effects at the operating level are the following: consumption of resources, namely energy, water and paper; placement of packaging in the market; generation of waste and liquid effluents considered equivalent to urban waste; emissions due to transport; and emissions and noise of cooling, heating, ventilation and air conditioning equipment.

Social Effects

Throughout its history, Jerónimo Martins has placed the rights, working conditions and professional development of its employees in the centre of its concerns within the scope of human resources management, simultaneously integrating them into a culture that promotes professional excellence and team building.

Moreover, the activity of Jerónimo Martins has a direct impact on the quality of life of local communities, through the assortment of products it makes available, the services it provides and the consequent dynamisation of the economy it fosters.

2.2.3. Sustainability in Company Management System

Jerónimo Martins intends to continue building a sustainable future, preserving its solid corporate identity and retaining sound and reliable Brands and Banners.

Throughout its history, Jerónimo Martins has faced the most diverse combination of political, economic and social environments and it has known how to ensure the healthy continuation of its business.

It is currently faced with the phenomenon of globalisation, the volatility and uncertainty of macroeconomic scenarios, new information technologies, technological dynamism of the markets, and the commercial aggressiveness of operators, among other factors.

Aware of the implications of all these challenges, the Group has been implementing the management mechanisms that it considers most appropriate to ensure its sustainability in this new global reality.

Culture and the Management Model

The organisational culture of Jerónimo Martins, guided by values of rigour, transparency and innovation, among others, and by principles of integrity, loyalty and Social Responsibility is reflected in the various levels of its management model.

Guaranteeing Cohesion and Respecting Differences

Within the portfolio of businesses, the Group is faced with some relevant diversity, namely:

• Presence in Portugal and Poland, two countries with different economic realities and different degrees of technological and social development;
• Presence in Retail and Wholesale, two different food distribution channels in Portugal;
• A portfolio of distinct Food Distribution formats and business models: supermarkets, discount stores, hypermarkets and cash & carries;
• Presence in Food Manufacturing through a joint-venture with Unilever;
• Presence in Food Service in Portugal;
• Presence and partnership in non-food businesses such as Prio petrol stations, GET entertainment stores, Electric Co electrical appliance stores, New Code clothes retail stores, parapharmacies in Portugal and pharmacies in Poland.

This diversity demands efficient articulation between "integration and autonomy". On the one hand, it is crucial to have a vision and strategic objectives that cross over all of Jerónimo Martins' businesses. On the other hand, it is important to respect the specifics of each market and each business model, and to give the Companies room to develop their value propositions in a differentiated manner.

Continuous and Balanced Evolution

The policies, rules and best practices that guide the conduct of Jerónimo Martins must follow the evolution of the society as a whole in a proactive and informed way.

Jerónimo Martins believes that its businesses must develop in the direction that consumers most privilege, and its brands and banners should consistently and determinedly incorporate relevant economic, environmental and social values.

This positioning reinforces the confidence of consumers in the Group's Brands and Banners.

2.2.4. Relationship with Stakeholders

Above all, the Group's business is an activity of interpersonal relationship.

The profound knowledge that Jerónimo Martins has of society in general, as well as of its business activity and value chains, markets, customers, consumption trends, risks and opportunities in the sector in which is operates largely comes from the countless daily contacts the Group has with all elements of the process.

It is in the daily interaction that relationships of trust are built, providing sustainability to healthy growth, innovation and development, even in the most demanding environments.

Stakeholders

Jerónimo Martins considers stakeholders to be all those who are determinant in the healthy continuity of the business on its mission, namely:

• Customers and Consumers, because without them there is no business. Hence, it is fundamental that they value the products available and trust the Brands and Banners of Jerónimo Martins;
• Shareholders and Potential Investors, since they are the ones that support the existence of the Company. Therefore, it is essential to provide trustful information regarding the performance of the Group. It is also important to reinforce the confidence of Shareholders and Potential Investors in regards to future performance, showing that the relevant measures are being taken to ensure the healthy continuity of the business;
• Employees, because they are the driving force of the company activity and constitute its most relevant competitive advantage;
• Suppliers, Business Partners and Service Providers, because they are an essential part in building the value proposition of the Banners;
• Official Supervisory and Local Entities with which the Group relates in the scope of its activity;
• Representatives of the Community that promote interests that are relevant to the consumers and to the citizens of local communities;
• NGOs and Associations that promote common interests, whether in market regulation and protection of the sector's interests, in technological and social development, or in preservation of the Environment and natural resources, among others.

Main Interlocutors

Customer Service (SAC): available via a freephone line, is integrated into the Companies' Marketing Departments.

Customer Ombudsman at Pingo Doce and Feira Nova: whose main function is to defend and promote the rights, guarantees and legitimate interests of customers, enjoying total independence in the exercise of its functions. Its activity is presented in the chapter Sustainability in Value Creation of this report.

Investor Relations Department: the activity of which is presented in the chapter entitled Corporate Governance, in this report.

Human Resources Department: the activity of which is presented in the chapter Sustainability in Value Creation of this report.

Ethics Committee: which is a representative available to the employees and other stakeholders to monitor and guarantee, with independence and impartiality, the dissemination and compliance with the Group's Code of Conduct. Its activity is presented in the Corporate Governance chapter of this report.

Communications Department: the activity of which is presented in the chapter entitled Corporate Governance, in this report.

The contacts of the abovementioned representatives are provided in this report, as are the contacts of the Chairman of the Board, Executive Members of the Board, and the Corporate Secretary.

Formal Communication Channels

The Group, by establishing main interlocutors and formal communication channels, intends to provide accurate and transparent information and to promote effective dialogue with its stakeholders.

The www.jeronimomartins.pt site is the most inclusive channel for providing information, and the one that can be accessed by all. In it the information is organised into various levels of specialisation, and the stakeholders can consult it according to their interests. Special attention is paid to the content of the Group's web page and it is frequently updated in order to assure this communication channel's effectiveness.

The Annual Report, also available on the web page, presents, by the Group's initiative, information about the economic, social and environmental performance of Jerónimo Martins in each year. A questionnaire is also made available, every year, to collect information regarding the quality of the information provided.

The Group also has several different tools at its disposal to communicate frequently with all of its employees - Web platforms (with My.JM being one of the most important ones), in-house magazines, global meetings, various meetings, written messages, brochures, audiovisual media - activating the necessary channels for effective communication.

Listening to employees is a concern of the Group, especially during the process of performance evaluation and personal development. There are also other, less frequent mechanisms, such as questionnaires completed by Jerónimo Martins employees in Portugal and Poland.

Information to the customer is made available using regular marketing and communication tools. In this area, particular attention is given to Personal Customer

Service and to In-Store Communication, being the store the location where the customer is naturally predisposed to receive information to make decisions.

Listening to customers and consumers is another of Jerónimo Martins' main priorities, which is why the Group regularly carries out questionnaires, studies and customer research at all its businesses, based on statistically relevant samples.

Establishing Commitments

In relationships with stakeholders, it is fundamental to assume clear commitments, outline action plans, assign adequate resources and follow up progress.

Thus, listening to stakeholders, as described above, is critical in the process of defining more specific commitments for progress, and is something that the Group intends to continue promoting systematically and in articulation with business priorities.

2.3. Commitment to Value Creation and Growth

Having its management activity focused on value creation in the short, medium and long term, the Group assumes an economic commitment centred on the healthy and profitable growth of the current portfolio of assets, and on the development of new businesses.

Current Business Portfolio

Jerónimo Martins works to ensure the continued strengthening of its market positions achieving three major goals:

• Achieve and reinforce leadership in the markets where it operates;
• Build and maintain sound and responsible Banners and Brands;
• Ensure the balanced growth of the businesses in sales and profitability.

In the pursuit of these three goals the Group brands are focused on the continuous reinforcement of price competitiveness and value proposition, the incremental improvement of efficiency, constant technological development and furthermore, on evaluating all organisation growth opportunities and mergers and acquisitions that fit in with its growth strategy.

Development of New Businesses

Jerónimo Martins intends to continue expanding its portfolio of assets through the rigorous study of business opportunities within the scope of its mission.

The Group's attention continues to be mainly channelled toward the geographic expansion of food distribution, but growth opportunities in other areas of the food sector will be analysed as well.

Strategic Management Goals

In pursuing its growth strategy, Jerónimo Martins is concentrated on the ongoing strengthening of its balance sheet, giving particular attention to its capital structure, to the debt ratio, to risk coverage and to the portfolio balance in terms of growth and cash flow generation.

The Group further promotes the implementation of policies and good risk management practices to preserve the value of its assets, to implement business plans and to evaluate investments;

Management is focused on capitalising on the scale of the Group and its synergies in sourcing, technological knowledge, and good management practices.

Lastly, Jerónimo Martins promotes innovation and a pioneering attitude towards the major consumer trends it strongly believes in, backing strategic partnerships to capitalise on its competences, and awarding value creation.

2.4. Commitment to Sustainability in Value Creation

Considering the main economic, social and environmental effects of its activity, Jerónimo Martins establishes a commitment that is focused on "Responsible Purchase and Responsible Sale".

Six main sustainability challenges are targeted in its development programme:

• Integrating Ethics and Competitiveness in Conducting Business;
• Being an Employer of Reference;
• Building a Trustful Offer with more Added-Value;
• Building Solid Commercial Relationships;
• Contributing to a Better Environment;
• Contributing to Social Support and the Common Well-Being.

Integrating Ethics and Competitiveness in Conducting Business

Jerónimo Martins wants to be recognised by its stakeholders as a Group that encourages competitiveness, technological development and innovation in conducting business and which does not refrain from defending universal human rights and dignified working conditions, as well as the principles of integrity, loyalty, transparency and rigour.

In this context, the following preferred action mechanisms have been established in the following documents and/or entities:

• Code of Conduct;
• Ethics Committee;
• Customer Ombudsman.

Being an Employer of Reference

Jerónimo Martins wants to continue being an employer of reference in the sectors and geographic regions in which it operates. The solidity and cohesion of the organisational culture, the constant incentive toward professional development and excellence, and also the investment in improving working conditions are strategic vectors for the Group.

Within the scope of human resources management, there is special focus on the following critical activities:

• Identify, attract and integrate the people who share the Group's values and ambition;
• Promote the development employees through the Jerónimo Martins Training School and renowned learning institutions with which partnerships have been established;
• Develop and retain talent in the Companies through demanding and inspiring Career Programs; developing reference leaders for the Organisation and for the Community;
• Invest in improving working conditions and in occupational health and safety;
• Promote fair and balanced salary policies that acknowledge Jerónimo Martins' commitment to its employees and which encourage value creation;
• Promoting internal social support programs and other benefits.

Building a Trustful Offer with more Added-Value

The Companies in the Jerónimo Martins Group want to be recognised by their customers and consumers as trustworthy partners and facilitators in solving day-today food needs, as well as for their efforts to improve the quality of life of the local communities, and in promoting responsible consumption.

Within this context, the following strategic priorities of business development are established:

• Promote food safety as a strategic condition, and in this particular area, to assure the best performance in all businesses;
• Offer a balanced range at competitive prices, that is constantly renewed and incorporate more value for the consumer;
• Provide a trustworthy service that offers increasing convenience to the consumer;
• Develop activities that make customers aware of issues related to sustainability and which promote Responsible Consumption, so that customers can make more responsible and informed purchasing decisions.

Building Solid Commercial Relationships

Jerónimo Martins wants to be a reference for suppliers, service providers, business partners and competitors through the manner in which it conducts business, belief being that the sharing of values and the promotion of mutual interests are key factors in the development of healthy commercial relationships, with lasting gains for both parties.

Within this scope, the Group's development priorities are the following:

• When selecting suppliers, build lasting commercial relationships and promote local sourcing as an objective arising from Jerónimo Martins' mission, whenever suitable conditions exist;
• In daily relationships with suppliers, promote knowledge-sharing and project development that lead to greater levels of innovation, efficiency and productivity for both parties;
• Promote of technological development, by being available to collaborate on projects in partnership with suppliers.

Contributing to a Better Environment

Jerónimo Martins recognises that its environmental objectives may positively influence many parties and produce significant economic effects.

The Group's first major priority in environmental matters is safety. But, there are countless opportunities to improve environmental performance throughout the value chain in the most diverse areas, and the Group intends to continue to exert its efforts in promoting more adequate environmental behaviour.

Minimising environmental effects is assured through actions that prioritise preventing pollution and preserving natural resources.

Contributing to Social Support and the Common Well-Being

Jerónimo Martins wants to contribute to the social development of the communities where it is present, and to the promotion of a fairer and more balanced social structure, whether at the Brand level or at the institutional level.

This is a strategic option with well-defined lines that is governed by principles of Social Responsibility across the Group and by a policy of patronage and philanthropy presented in its own chapter in this report.

3. Financial Glossary

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

EBITDA Margin =

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

Net Sales & Services

• EBIT Margin =
• (+ Operating Results 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
• • Depreciation
• Deferred Taxes
• Non Recurrent Items (operating, disposals and financial)

Net Debt =

• • Bonds
• • Bank Loans
• • Other loans
• +/- Derivative Financial Instruments
• Marketable securities and bank deposits
• • Leasing
• • Accrued interest

Shareholders Funds =

• • Share Capital
• • Reserves and Retained Earnings
• • Net Profit of the year
• • Minority Interests

• 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 which operated under the same conditions in two periods. It excludes opened stores, closed stores or stores which suffered major remodelling works in one of the periods.

4. 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 Telephone: + 351 21 752 61 05 Fax: + 351 21 752 61 65

Ethics Committee

Comissao.etica@jeronimo-martins.pt Telephone: + 351 21 752 61 03 Fax: + 351 21 752 61 74

Communication Department – Media Relations

Comunicacao@jeronimo-martins.pt Telephone: + 351 21 752 61 14

Fax: + 351 21 752 61 74

Communication Department Poland

kontakt@jmpolska.com Telephone: + 48 696 77 22 13

Human Resources Department

Rh@jeronimo-martins.pt

Telephone: + 351 21 753 23 23/21 01 Fax: + 351 21 753 22 25

Expansion Department

Expansao@jeronimo-martins.pt

Telephone: + 351 21 753 20 71 Fax: + 351 21 753 22 33

Suppliers Department

Fornecedores@jeronimo-martins.pt

Telephone: + 351 263 400 930 Fax: + 351 263 400 932

Client's Ombudsman

Provedoradocliente@jeronimo-martins.pt

Telephone: 808 20 99 20 Address: R. Actor Antº Silva, nº 7 - 1600-404 Lisboa 10 a.m. to 6 p.m., every weekday

Jerónimo Martins Distribuição Customer Support

Jm.dpc@jmd.jeronimo-martins.pt Telephone: + 351 21 361 33 25 Address: R. dos Lusíadas, nº 25 A - 1349-024 Lisboa 9 a.m. to 5:30 p.m., every weekday

Feira Nova Customer Support Service

Linhacliente@feiranova.pt Telephone: 808 20 01 20 Address: R. Actor Antº Silva, nº 7, 1.º piso - 1600-404 Lisboa 9 a.m. to 9 p.m., every weekday

Pingo Doce Customer Support Service

Cliente@pingodoce.pt

Telephone: 808 20 45 45 Address: R. Actor Antº Silva, nº 7, 1.º piso - 1600-404 Lisboa 9 a.m. to 9 p.m., every weekday

Recheio Customer Support

Cliente@recheio.pt

Telephone: 800 20 31 31 Address: R. Actor Antº Silva, nº 7, 1.º piso 1600-404 Lisboa 9 a.m. to 5:30 p.m., every weekday

Poland Customer Support

Bok@biedronka.eu

Telephone: 0 800 080 010 (only for Poland) or 0 + 48 22 205 33 00 Address: Skr. Poczt. Nr 1838 – 50-385 Wroclaw 46 Mon-Sat – 7 a.m. to 9 p.m. Sun – 9 a.m. to 8 p.m.

II. Consolidated Management Report - - Creating Value and Growth

1. Relevant Facts of the Year	42
2. Environment 2009	43
2.1. International Macroeconomic Environment	43
2.2. Sector and Markets	46
2.2.1. Relevant Facts in the Food Distribution Sector 2.2.2. Portugal 2.2.3. Poland	46 47 49
3. Group's Performance	51
3.1. Main Projects in 2009 3.1.1. Commercial Response to the New Macroeconomic Environment 3.1.2. Operational Efficiency Projects 3.1.3. Group Investment Plan 3.2. Consolidated Activity in 2009	51 51 53 55 57
4. Business Areas Performance	69
4.1. Food Distribution- Portugal	69
4.1.1. Food Retail - Pingo Doce 4.1.2. Food Retail – Hypermarkets 4.1.3. Food Retail – New Business 4.1.4. Food Retail – Meal Solutions 4.1.5. Food Retail - Operation in Madeira 4.1.6. Cash & Carry - Recheio 4.2. Food Retail – Poland	70 73 74 74 75 77 80
4.2.1. Biedronka 4.2.2. Apteka Na Zdrowie	80 81
4.3. Manufacturing, Distribution & Services e Restaurants	82
4.3.1. Manufacturing 4.3.1.1. Unilever Jerónimo Martins 4.3.1.2. Gallo Worldwide 4.3.2. Services, Representations and Specialized Retail 4.3.2.1. Jerónimo Martins Distribuição de Produtos de Consumo 4.3.2.2. Jerónimo Martins Restauração & Serviços (JMRS)	82 82 84 86 86 87
5. Outlook for 2010	89
5.1. International Macroeconomic Environment 5.2. International Sector Trends 5.3. The Outlook for Portugal 5.4. The Outlook for Poland 5.5. The Outlook for Jerónimo Martins Business Activity	89 90 91 92 93
6. Events After Balance Sheet Date	96
7. Results Appropriation Proposal	97
8. Consolidated Management Report Annex	98

1. Relevant Facts of the Year

Operating Activity

First Quarter

• Opening of 27 Biedronka stores;
• Opening of one Pingo Doce store;
• Secured commercial papers in the amounts of 50, 15 and 15 million euros contracted by Jerónimo Martins at the respective maturities of five years, five years and four years.

Second Quarter

• Opening of 42 Biedronka stores;
• Opening of three Pingo Doce stores;
• A five-year 105 million euros bond loan contracted by JMR;
• Launch of the new brand of fabric detergent Surf by Unilever Jerónimo Martins, with competitive price positioning;
• Dividend payout of approximately 69 million euros by Jerónimo Martins;
• Opening of Jerónimo Martins's 2,000th store a Biedronka store in the city of Gdanski, Poland;
• Conclusion of the Pingo Doce/Feira Nova restructuring process with the registration of the merger of the two companies.

Third Quarter

• Opening of 30 Biedronka stores;
• Opening of four Pingo Doce stores;
• Spin-off of the olive oil and seed oil business of Unilever Jerónimo Martins through the creation of Sociedade Gallo Worldwide Lda..

Fourth Quarter

• Opening of 64 Biedronka stores;
• Opening of two Pingo Doce stores;
• Launch of new Pingo Doce communication campaign.

2. Environment 2009

2.1. International Macroeconomic Environment

World macroeconomic indicators and projections underwent heavy decline during 2009, as the financial crisis even spread to emerging economies.

Consumer confidence decreased to levels that had not been seen for some decades and the evolution of economic activity shrank significantly in the year, having undergone a downturn in most countries.

Economic and financial indicators showed a slight improvement in the international situation in the second half of last year. The effect of the budgetary and fiscal measures to stimulate economic recovery, the further stabilisation of the financial system and an expansionist monetary policy, characterised by lower reference interest rates, contributed to that improvement.

Economies Performance

Worldwide economic activity must have contracted 1.1% in 2009, according to projections from the International Monetary Fund (IMF) available at the end of the year. The world economy had grown 3% in 2008.

The negative evolution of international trade, which went from 3% growth in 2008 to a decrease of -11.9% in 2009, significantly contributed to the deterioration of world economic development.

The emerging economies generally registered positive development, though restricted by a slowdown in economic growth that attained 1.7% in 2009 compared with 6% in 2008 and 8.3% in 2007, thus reflecting the spread of the economic crisis to this group of countries.

Even so, not all emerging economies grew in 2009. Central and Eastern Europe, Russia, Brazil and Mexico ended the year with a contraction of economic growth.

The economic growth of China and India last year, which registered 8.5% and 5.4% respectively, deserves particular highlight.

The economic climate in the group of advanced economies was less buoyant, registering a decline to close the year on -3.4%, compared to 0.6% in 2008, and 2.7% in 2007.

The U.S. economy too shrank, by 2.7%, primarily due to its performance in the first half of 2009. An improvement in the economic situation was recorded in the second half of the year, but the instability of financial markets is still quite restrictive on investment and consumption.

The European Union recorded a 4.2% fall in economic growth. Like the U.S. economy, this trend was reversed in the second half of 2009, mainly due to the increase of exports and the recovery of inventory levels. It should be noted that despite this general shrinkage of the European Union, the Polish economy is the only one to record positive growth in 2009.

The Japanese economy, which had already undergone a decrease of 0.7% in 2008, continued to contract, shrinking in the region of 5.4%.

Financial Markets

State intervention, the policy of keeping reference interest rates low and expectations of economic recovery caused very significant movements in financial markets and of international capital inflows and outflows.

The main driver in kick-starting the markets was the State intervention, such as the guarantees provided and capital injections. As the year progressed, growth forecasts gradually improved and risk aversion slowly reduced.

Nevertheless, although a recovery of financial markets was observed, the conditions for contracting credit remain particularly difficult for small and medium sized enterprises and private individuals.

In relation to capital markets, investor confidence seems to be showing signs of a gradual return. Investors have recovered some confidence in relation to capital market investments at the expense of treasury bonds, stimulated by the search for higher returns due to very low reference interest rates.

Monetary Policies

The first signs of the stabilisation of the U.S. economy were observed in the second half of the year. Unemployment, though, reached its highest levels since the start of the 1980s.

Throughout 2009 the U.S. Federal Reserve (FED) was very active in the use of the instruments available to foster economic recovery and price stabilisation, especially policies leading to a reduction in financing costs and more credit being awarded to private individuals. Accordingly, it maintained the policy of reducing the reference interest rate to virtually 0%, as well as using less conventional policies to achieve the objectives established, including the purchase of domestic public debt and real estate credit debt.

The European Central Bank (ECB) continued its policy of reducing and maintaining reference interest rates low and, like the FED, adopted non-standard measures.

The measure that had the greatest impact was the covered bond purchase scheme. This measure was not unprecedented, since the FED and Bank of England were already implementing this scheme. The ECB's objective was to unlock financial institutions' direct access to the available liquidity, along with the usual funding operations. Furthermore, the maturity of loan transactions to banks was extended from six months to one year.

Having exhausted the ability to stimulate the economy by reducing the reference interest rates, which were cut to between 0% and 1%, central banks resorted to these extreme measures to inject cash into the financial system. They bought debt securities held directly by financial institutions, converting them into money. The monetary authorities sought, through this injection of liquidity, to encourage banks to grant credit to private individuals and businesses.

However, not all the credit is found to be flowing into the real economy. In actual fact, many financial institutions are investing that excess liquidity in long-term debt securities of high credit quality, taking advantage of the difference existing between the short- and long-term interest rates.

They also benefited from the fact that monetary authorities accepted some assets considered to be more "toxic", in particular mortgage-backed emissions, as well as government bonds or securities in companies rated at "investment grade".

In 2009, the Euro gained around 3.5% against the U.S. dollar. Nonetheless, the exchange rate was quite volatile during the year, achieving a minimum of 1.26 in March and a maximum of 1.51 at the beginning of December.

The Polish currency was also extremely volatile during 2009, achieving a maximum exchange devaluation against the Euro of 4.9 in February. That trend was reversed over the rest of the year, and the Euro/Zloty exchange rate ended 2009 at 4.10, a level similar to that existing at the end of 2008.

Government Intervention

The climate of difficulty and uncertainty that characterized 2009 was marked, like the second half of 2008, by government intervention in the economy.

Different governments established concerted action to attack the crisis through measures to restore consumer confidence and provide direct support to companies to fight the rise in unemployment. Tax incentive schemes were launched and in the banking sector guarantees were stood and capital injected.

Government intervention was a factor in reducing uncertainty, raising confidence and improving financial conditions, corroborated by the flight to capital markets and the increase in international transactions in the second half of the year.

However, as a result of these governmental measures, the worsening of deficits and debt levels of most countries is expected.

Energy and Non-Energy Raw Materials

The price of raw materials stabilised at the start of 2009 following the collapse in the second half of 2008. Prices then went up very sharply over the rest of the year.

The climate of economic crisis and the decline registered at the start of the year sparked interest in and the attractiveness of safe-haven assets, catapulting the amounts of money invested in raw materials to levels never before seen.

Raw materials almost made their largest gain since 1971, as the index consisting of 24 raw materials - the S&P GSCI - rose more than 50% in 2009.

Gold repeatedly recorded its highest ever price over the year, as its price grew by around 25%, and crude oil rose by approximately 70% to around 80 dollars per barrel, though peaking at levels lower than gold.

Raw materials such as copper and sugar increased more than 100% in 2009. The price of copper was driven by the expected recovery of industrial production of the advanced economies and the sugar price is the highest since 1989, as a result of the increased demand for this commodity among Asian consumers.

According to IMF projections, the average annual inflation rate of prices for the group of advanced economies drastically decreased in 2009 to 0.1%. However, despite the 3.8 percentage point reduction of consumer prices in the emerging economies as a whole, the average inflation rate was 5.5%.

2.2. Sector and Markets

2.2.1. Relevant Facts in the Food Distribution Sector

The macroeconomic environment in 2009 was responsible for a change in consumption patterns.

The deterioration of consumer confidence, growing unemployment, which is expected to remain high in 2010, the restrictions on obtaining loans and credit, and increased savings, led to a reduction in consumption.

Price became the principal and differentiating factor in purchases for most consumers, placing discounts in the best position to deal with the crisis.

Private brands became more important in consumers' choice and consumers reacted more significantly to retailers' promotions.

The rationalisation of consumption dominated 2009 and it had a negative impact on the non-food area, which was the most affected by the downturn, recording significant decline.

In the food area, the prevalence of low prices meant that the diversity of assortments lost importance as a differentiating factor.

Thus, most players felt the need to adjust their strategy to the changes in consumption profile. Most players invested in price and special offers, which led to price deflation in some cases. The rationalisation and reorganisation of the assortment and the increased focus on private brands were across-the-board measures adopted by most players.

In the Distribution Sector in 2009, in order to improve productivity and operational efficiency, investment was strictly controlled (restrictions and prioritisation), there was the divestment of unprofitable business units, and the focus on cost reduction and optimising working capital.

The principal mergers and acquisitions that characterised the sector in 2009 were as follows: i) the Auchan Group acquired the remaining 51% of its share already held in MGV Distri-Hiper (Romanian player); ii) SPAR acquired 13 discounts from Tengelmann in Austria; iii) E.Leclerc acquired 25 Billa Supermarkets from the Rewe Group in Poland; iv) the Rewe Group acquired 39 COOP (DE) Sky supermarket in Germany; v) the X5 Retail Group acquired the Paterson supermarket stores in Russia; vi) the german Jumbo acquired the Super de Boer supermarkets from the Casino Group in

Germany. Also in 2009, the French Carrefour Group began and shut down its food retail operation in Russia, the first rumours emerged of Wal-Mart's goal of opening in Turkey and Russia and negotiations began between Tengelmann and Lidl to sell the Plus stores in Romania and Bulgaria.

2.2.2. Portugal

Macroeconomic Environment

The Portuguese economy's performance in 2009 was heavily influenced by the international economic recession, the scale of which, unprecedented in recent history, was combined with the Portuguese structural situation, characterized by continuing economic weaknesses.

That framework decisively shaped the evolution of economic activity, with nearly all indicators developing negatively.

According to the Portuguese Central Bank, the Portuguese economy contracted significantly in 2009, with 2.7% decline in GDP. This decline reflects the sharp negative change of exports and private consumption, which, even so, was lower than that of the Eurozone and the European Union.

The unemployment rate in Portugal finished the year close to 10% (9.4%), a record high, continuing the trend in place since the start of the decade.

In relation to demand, the shrinkage of economic activity mirrored the heavy fall of consumption of durable goods, business investment and the export of goods and services. A positive development against a background of a slight increase to disposable income, in real terms, is the aggregated evolution of consumption, with the household savings rate increasing significantly.

After a decade of a relatively stable inflation rate in Portugal, at around 3%, prices underwent a sharp deceleration from the end of 2008, generating negative values from the first quarter of 2009. The average annual growth shall be -0.9%, which is an unprecedented figure in recent decades.

Modern Food Retail Sector

In 2009, the Retail Food market registered very modest growth, due to economic contraction and the generalised impact of price deflation.

Standardized products such as FMCG ("Fast Moving Consumer Goods"), based on recent studies, recorded positive annual growth that was, however, very close to zero. The sale of durable goods and food outside of home recorded quite sharp declines.

Consumer behaviour also underwent significant change during the year, namely:

• An increase in purchase frequency and greater division among banners;
• Increase in purchases of private brands and decrease in industry brands;
• Significant growth in home consumption product categories.

These factors, combined with the value proposition of the supermarket format players, were determinant to the gains of market share and greater attractiveness of this format.

Irrespective of the economic difficulties in 2009, the Food Retail market inaugurated a further 104,000 sqm (+6%) of sales space in 2009, comprising 77 new stores. That growth rate is slightly below the previous year's rate.

The Sonae and Auchan banners led the field in terms of additions of new sales space. In terms of number of stores, Minipreço was a highlight, ending the year with an additional 26 stores.

Wholesale Market

The demand figures for the wholesale market show, according to Nielsen data, that 2009 was another slump for Traditional Retail, though not as sharp as previous years. Once again, some stores disappeared and turnover diminished as Traditional Retail underwent a 1.4% downturn in value during the year.

The HoReCa channel showed signs of recession in terms of turnover as a result of the lower consumption associated with the economic and financial crisis, but has however remained constant as regards the number of establishments operating. The turnover of the HoReCa channel fell 1.4% in 2009, while the number of establishments was above 100,000, slightly up on the preceding year. Consumption outside of home has clearly fallen, which is especially evident in the choice of meals and consumption that is more controlled in spending terms. Outside of home, the consumer seems to be more attentive to prices, opting for cheaper solutions.

This perspective of the demand side, and also as a result of such, is similar on the supply side. In 2009, sales of all wholesale players fell 2%, the most in the last three years according to data from Nielsen.

Recheio once again registered a positive development in sales. This result is even more significant when compared with the deflation that characterized the Company's prices during the year.

The fact that overall demand has decreased is still a source of increased competition, a characteristic feature of this market, resulting in a greater concentration: The five largest players account for 82.3% of the market.

2.2.3. Poland

Macroeconomic Environment

Economic growth in Poland in 2009 reached 1.7%, making it the only country in the European Union and one of the few in Central and Eastern Europe to register positive GDP growth. This growth was mainly due to the growth of private consumption and the positive evolution of the trade balance.

Poland, for the first time, is among the European Union's six largest economies, according to Eurostat, behind Germany, United Kingdom, France, Italy and Spain.

As regards Public Finance, the increase in revenue allowed public debt to be lower than expected, achieving a level similar to that of the preceding year.

As a result of the international crisis and its impact on the Polish market, the unemployment rate rose sharply last year to almost 12%, compared to 9.5% in 2008.

The Polish economy, contrary to that observed in most European economies, continued to register high inflation rates, providing an average for the year of 3.5%. The deflation of the zloty and the increase of energy prices contributed significantly to this growth of inflation.

The zloty began the year devaluing, affected by the situation in some neighbouring and more problematic economies. When the markets took into consideration the country's performance, the zloty gradually gained in value and ended the year with an exchange rate against the Euro of 4.10.

The Polish Central Bank, like the other central banks and the European Central Bank, progressively reduced the reference interest rate during the first half of the year. The reference interest rate began 2009 at 5% and stabilised in the second half of the year at 3.5%.

Modern Food Retail Sector

The deceleration of the Polish economy impacted on the Food Retail market, cutting its growth rate. According to the market research company PMR, the food retail market only grew 0.4% in 2009, as opposed to the 8.9% growth in the preceding year. The segments of this market that grew most were convenience and discount stores.

The discount segment is still the most rapidly developing of the Food Distribution sector in Poland. The supply of low prices, a factor that best serves the current needs of polish consumers, and the growth in the number of stores, driving sales up by 18.5% in 2009, resulted in this segment increasing its market share from 7.7% in 2008 to 9.1% in 2009.

It is also significant that the market share of the three major formats of the Food Distribution sector (Hypermarkets, Supermarkets and Discounts) increased to 35.5% at the end of 2009, compared with 30.8% in 2008.

International groups are the leaders in terms of generated sales in the Polish food Retail Market. The list of the five major players includes Jeronimo Martins Dystrybucja

SA, Tesco Polska Sp z o.o., Carrefour Polska Sp z o.o., Auchan Sp z o.o. and Real Sp z o.o..

The economic crisis favoured the development of private brands in this market, since the worsening financial conditions led consumers to opt for this type of products that have more competitive prices.

In terms of market consolidation, some merger operations did occur, namely E.Leclerc acquiring 25 Billa stores and the acquisition of Batna, a wholesaler in the Warsaw region, by Eurocash.

Sources:

IMF World Economic Outlook; European Commission, Eurostat; Reuters; BPI Economic and Financial Studies; Bank of Portugal Economic Bulletins; Portuguese Ministry of Finance; Portuguese Catholic University Thematic Reports – NECEP/CEA FCEE; National Statistics Institute; General Department of Economic Activity; National Bank of Poland Economic Bulletins; Polish Ministry of Finance; Central Statistical Office (GUS); Citigroup; Citibank Handlowy; BRE Bank; IG Market; Planet Retail; Deloitte; TNS; Nielsen; DBK; Girasic; PMR; APED; Uniarme; AREST; CIES.

3. Group's Performance

3.1. Main Projects in 2009

The business areas of Jerónimo Martins concluded 2008 with a very strong sales and results performance, which is especially noteworthy when considering the challenges faced by the main Group banners - the takeover and integration of the Plus stores that were acquired by Pingo Doce in Portugal and Biedronka in Poland, and the integration of the compact Feira Nova stores into the Pingo Doce business.

The Group Banners started 2009 with sound business models and a clear trend of growing market share as a result of consumer preference.

At the start of 2009, the Group, certain of the value propositions of the business areas, did not refrain from conveying, in view of the prospect of a worsening macroeconomic environment, a message of caution to the Companies founded on two business principles that have long been ingrained into the management culture of Jerónimo Martins: i) permanent focus on the consumer in order to anticipate changes of needs, preferences and expectations; and ii) the flexibility required to adjust the positioning of the Banners to identified changes.

Though the Group was cautious given the development of the markets in which it operates and the world economy, it remained upbeat in relation to the medium and long-term value generating capability of the Group's businesses, and it preserved the implementation of the approved investment plan as one of the main priorities for 2009.

3.1.1. Commercial Response to the New Macroeconomic Environment

The Group Companies capitalised on their knowledge of the consumer accumulated over the many years present in the market as well as on the competitiveness of their value propositions, which becomes especially important at times of declining consumption.

Even though Pingo Doce began 2009 with very competitive positioning in terms of pricing policy it did not cease to pay attention to the changes in consumption that, driven by the negative mood throughout the year, led to the change of some purchasing habits.

The average consumer generally demonstrated greater caution in terms of consumption, a fact that also impacted the food area. Pingo Doce registered, for the same store baseline, a 5.8% increase in the number of visits. This not only indicates the attraction of new customers but also a trend among consumers to buy in small quantities, trying to spend the minimum on each visit.

A change in the composition of the average basket of purchases was registered in addition to the change to shopping frequency. In certain categories (e.g. meat), more expensive products were substituted for cheaper ones, inferring that certain products have proven to be essential to the image of competitive pricing.

In response to the expectations of its customers, who trust the competitiveness of Pingo Doce, the Banner cut the price in categories such as pork and dairy products. The Company, anticipating the sharp fall in the price of raw materials on world markets, started the year with the committed goal of reflecting that fall in prices in its variety of Private Brand products. The established targets were successfully achieved with the crucial assistance of its suppliers.

Overall, the transfer to the consumer of falling raw material prices and the adjustment implemented by the Banner in key categories resulted in the average basket at Pingo Doce registering a deflation of 5.4% in 2009. That result was significantly offset by the very positive impact on the evolution of volumes sold.

At the end of 2008 Recheio registered the significant slowdown of growth in the HoReCa channel (around 42.5% of the Banner's sales in 2009) and it also envisaged, based on the general decline in consumption, that traditional retailers (40.7% of the Company's sales in 2009) would face a difficult year.

Accordingly, Recheio implemented commercial initiatives aimed at strengthening the competitiveness of its customers in areas that the Group's Cash & Carry knows are particularly sensitive to the customers.

Recheio, with its focus on the HoReCa channel, invested in developing its assortment of Perishables in terms of i) quality, ii) variety and also iii) price, which was reduced by more than 10% on some products, offset by the significant growth in volumes sold.

Recheio launched a range of exclusive brand products for the Traditional Retail channel, with the objective of allowing these customers to sell a range of essential products in their stores that allow them to compete with the private brands of modern retailers at a very competitive price.

Recheio, driven by these measures, recorded growth in sales in both customer segments despite the fact that both sectors in the market shrank. This clearly signals the growth of Recheio's market share.

Biedronka, the leading low cost chain operating in the Polish market, began this more turbulent phase of the economic cycle in a better position that any other market operator. Nevertheless, even this Banner was required to make small adjustments to its value proposition.

The Company registered during the first quarter of 2009 that the non-food categories were not fulfilling their role of galvanising general sales since more cautious consumers began to steer clear of any non-essential consumption.

Thus, Biedronka decided to reduce the number of products in the non-food categories, focusing the respective variety on products of lower unit value. The aim of those measures was to reduce the risk of inactive stocks to a minimum, since such stock would end up pressurising the Company's profitability.

The Management remained focused on competitively managing the food varieties, the core of its value proposition (accounting for around 93.0% of total sales). The added risk that the non-food area currently represents was reduced.

3.1.2. Operational Efficiency Projects

All Group Banners have developed their activities aligned with a culture of cost efficiency. There is a constant search for redesigning processes in a more competitive manner or searching for new processes that simplify the value chain.

This LCO (Lowest Cost Operator) philosophy has favoured the business areas with the flexibility that allows them to competitively anticipate new market trends at the same profit levels.

In 2009, the various Companies were asked to review the processes in order to identify potential efficiency gains.

All operations' support areas were encompassed and the efficiency achieved combined with more extensive sourcing was essential to the positive progress of the Group's EBITDA margin in 2009.

In the Retail area in Portugal, the Information Technologies Department established the cutting of costs and the improvement of operational and administrative efficiency of the business processes as priority areas.

The cost cutting programme provided significant savings and included areas such as: i) the renegotiation of outsourcing contracts for the distributed central systems and computer systems; ii) the implementation of virtual solutions in relation to servers and workstations; iii) the renegotiation of commercial conditions associated with the data, landline voice and mobile telephone networks; and iv) the review of the cost of maintenance services for store systems, including the streamlining of equipment numbers and software licences in use.

In regards to the improvement of the operational and administrative efficiency of the business processes, a set of application solutions, developed according to the requirements of the Group's different functional and operational areas, were implemented. The most significant of these processes were store restocking, the management of contracts and services' acquisition, the management of assets and commercial licensing, the recruitment of human resources and a new shopping centre solution.

Various measures to improve the service to Operations were also implemented, including the installation of fibre optic links in the main Distribution Centres and headquarters of the Regional Operations Departments, enhancing the processing capacity of the main application environments and updating the Radio Frequency infrastructure of stores and warehouses.

The Logistics Department, which is essential to the competitiveness of the Banners in the market, focused in 2009 on analysing the current operation, drawing up a plan to restructure operations in order to maximize competitiveness in this area. The plan was drafted and approved in 2009 and it will be a priority in 2010 and 2011.

Also in the support area, technology continued to be a focus of investment as a means of ensuring the ongoing improvement of operations. A highlight in this context was the introduction of voice picking in the frozen products operation. This project significantly contributes to raising productivity and service quality.

In parallel, the Logistics areas continued to evolve as communication and integration

with suppliers was improved via the JM Direct platform (a business-to-business project with suppliers). 177 suppliers changed over to electronic invoicing processes in 2009, taking the total number of suppliers using this system up to 813. The implementation of the new master data workflow through the JM Direct portal removed the administrative load that had been attached to processes and achieved greater process simplification and flexibility.

The combined efforts of the logistics, supply chain and store operations areas led to a reduction of stocks of eight days in Pingo Doce and eight days in Recheio, in addition to positive results in terms of efficiency and the streamlining of some processes.

Various supply chain projects were developed in Biedronka's supply chain area in 2009, in order to continue increasing efficiency and productivity levels within the Company. The main actions implemented in the field of efficiency were: reducing delivery lead times and improving supplier service levels, increasing synchronization between loading and off-loading, optimizing space in the trailers and continuing to increase the punctuality of deliveries to the stores. Apart from supply chain efficiency gains, these measures also contributed towards the reduction in stock levels by three sales days.

Development of the store back office systems continued and the supply of stores were improved. The Company's efficiency increased due to implementing new systems and tools throughout the year, namely the system of inter-store DLS connections and the centralized data collection system. Another essential item was the store on-line stock-taking system. This made the stock-count process even more efficient. GPS and on-board computers continued to be implemented in the logistics fleet, optimizing its real-time management.

In the administrative areas, priority was given to developing electronic procedure systems, as well as automatic report systems, thereby guaranteeing greater productivity and operational control.

In the Manufacturing area, Unilever Jerónimo Martins continued to explore opportunities for simplifying and optimizing processes, essential to the Company's competitiveness. Of note among the many projects are:

• Conclusion of the warehousing and distribution network outsourcing project;
• Conclusion of the P4G project for updating the information systems support to the ice cream dealers;
• Design and implementation of the spin-off of the Olive Oil and Seed Oil business, which took place by creating a separate company, Gallo Worldwide. It should be noted that this project, which is constructive for the business, was entirely started and concluded in the first half of the year;
• Start of the analysis and development of Sales and Operational Planning processes, with a view to further integration of the different planning subprocesses (Sales, Logistics, Financial) and their respective systems;
• Launch of the complexity management project, whose objective is to rationalize the product portfolio, endeavouring to align consumer and customer needs with the necessity for making processes and systems more flexible.

This continuous effort to raise cost efficiency has been essential to the competitiveness of all the Group Banners, making it now a component of the management culture of Jerónimo Martins.

3.1.3. Group Investment Plan

Investments

Following the effort made to integrate the Plus Retail chain in the Pingo Doce and Biedronka banners, which was successfully undertaken during 2008, last year was marked by the focus on selective organic expansion supported by the Expansion Departments of all the Business Units of Jerónimo Martins.

In effect, the economic context of last year recommended strong prudence in the management of cash flow and consequently the Group Investment Programme.

Nonetheless, the Jerónimo Martins Expansion Plan grew was significantly strengthened and reinforced, although integrating a careful analysis of the potential of new locations.

This fact was amply demonstrated in Poland, where the Biedronka chain ended the year with 1,466 stores, after opening at 163 new locations during that period.

The Pingo Doce chain also consolidated its store network with 10 new units, concluding the year with 356 locations divided between mainland Portugal and Madeira.

The Group continued to focus on the growth of new business areas, reinforcing its value proposition to its customers and consumers:

• The Restaurant area in Portugal opened nine new units;
• The Na Zdrowie pharmacies network in Poland increased its store number to 24 locations, five of which opened in 2009;
• The New Code (adult and children's clothing), Electric Co (electrical appliances), Bem Estar parapharmacies, No Sítio do Costume restaurants and Prio petrol stations also expanded in the market, opening a total of 18 new units integrated in the Pingo Doce Banner.

	New Stores			Refurbished 1			Closed Stores
	2009	2008	2007	2009	2008	2007	2009	2008	2007
Retail Portugal 2	10	94	33	22	30	30	10	7	4
Recheio 3	0	2	0	1	3	2	0	0	0
Biedronka	163	359	156	51	83	71	56	45	16
Other Businesses	32	54	54	6	12	3	9	9	7

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

The investment in maintenance and refurbishment of the store network and logistics infrastructure of the Group's Distribution chains were also a priority focus, with 125.7 million euros allocated for that purpose.

This sum was invested in particular on remodelling 51 Biedronka stores and 22 Pingo Doce stores, with the latter Banner continuing to concentrate almost all of that investment in the ex-Plus stores, in order to optimise their growth potential.

In regards to Recheio, the Santa Maria da Feira store was likewise wholly remodelled following its integration at the end of 2008, after the acquisition of Companhia SCGR - Comércio por Grosso e a Retalho.

The Group's investment was 312.0 million euros in 2009, of which 58.4% allocated to Poland.

						(€ ' 000,000)
Business Area	Expansion1	2009 Others2	Total	Expansion1	2008 Others2	Total
Retail Portugal Stores Logistics and Head Office	45.1 45.1 0.0	67.7 60.1 7.5	112.8 105.2 7.6	87.2 82.4 4.9	89.8 84.2 5.6	177.0 166.5 10.5
Cash & Carry	0.0	11.2	11.2	4.5	11.5	16.0
Madeira	0.0	1.0	1.0	1.6	3.2	4.7
Food Distribution Portugal	45.1	79.9	125.0	93.3	104.4	197.8
Poland	136.4	45.8	182.2	209.9	79.8	289.6
p.m PLN '000	588.5	197.5	786.0	737.9	280.5	1,018.3
Biedronka	131.9	41.4	173.4	193.2	52.5	245.7
Logistics and Head Office	4.5	4.4	8.9	16.7	27.3	44.0
Total Food Distribution	181.5	125.7	307.2	303.2	184.2	487.4
Takeovers (Plus e SCGR)	0.0	0.0	0.0	378.1	0.0	378.1
Manufacturing & Services	1.3	3.6	4.8	4.1	4.6	8.7
Total JM	182.8	129.2	312.0	685.4	188.8	874.2
% do EBITDA	34.6%	24.5%	59.1%	144.9%	39.9%	184.8%

1 New Stores and New Distribution Centres

2 Refurbishing, Maintenance and Others

Store Closures

The implementation of the commitments made to the Portuguese Competition Authority and the similar agency in Poland (UOKIK), relative to the approval of the operation to integrate the Plus chain, were completed in 2009.

Formal compliance with those commitments led to the closure and/or sale of 30 stores in Poland and 1 store in Portugal, during the year.

3.2. Consolidated Activity of 2009

2009 was marked by a strong sales and results performance, revealing the strength of the Group's formats in an adverse macroeconomic environment and in a context of strong devaluation of the Zloty against the Euro (average exchange -18.5%), which has had relevant effect on Jerónimo Martins' consolidated accounts.

Consolidated Net Sales

Consolidated Revenues
	2009		2008		Δ %
	Eur Tho.	% total	Mil. Eur	% total	Zloty	Euro
Sales & Services
Retail Mainland	2,708,311	37.0%	2,503,354	36.3%	n.a.	8.2%
Cash & Carry	688,544	9.4%	654,484	9.5%	n.a.	5.2%
Madeira	131,552	1.8%	128,387	1.9%	n.a.	2.5%
Poland - Biedronka	3,724,684	50.9%	3,520,934	51.1%	29.8%	5.8%
Manufacturing	237,755	3.2%	253,868	3.7%	n.a.	-6.3%
Mkt, Repr. and Rest. Services	87,159	1.2%	81,809	1.2%	n.a.	6.5%
Consolidated Adjustments	-260,896	-3.6%	-249,099	-3.6%	n.a.	4.7%
Total JM	7,317,108		100.0% 6,893,737 100.0%		n.a.	6.1%
p.m. Retail Portugal (store sales)	2,500,799		2,310,199			8.3%

The consolidated net sales of Jerónimo Martins in 2009 were 7,317.1 million euros, up 6.1% (+18.4%, at constant exchange rate) in 2008.

The sound development of sales was the result of: i) the 4.4% growth of the Group's LFL sales, driven by strong contributions from Pingo Doce and Biedronka; ii) the success in integrating the Plus stores acquired in 2008, into Pingo Doce in Portugal and into Biedronka in Poland; and also iii) the implementation of the organic growth plan established for 2009 which added 61 thousand sqm to the Group sales area (up 4.6% on 2008).

In Portugal, of note in relation to price indices is the deflation of food, reflecting the fall in price of raw materials. This evolution was generally noted throughout the Food Retail sector.

The Portuguese Food Retail market recorded an increase of about 6% of the total sales area in 2009, with the formats of greater proximity and smaller dimension continuing to dominate the new store figures for the sector.

In 2009, Pingo Doce carried forward its trend for sales growth and strengthening market share from preceding years.

Supermarkets Like-for-like Sales Growth -3.6% 4.6% 0.6% 2.7% 1.4% 6.0% 2.7% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Q1 09 Q2 09 H1 09 Q3 09 9M 09 Q4 09 09 FY

-6.0%

It was under using the principles of flexibility and the consumer as the focal point that Pingo Doce maintained its focus on competitive prices, paying special attention to the key categories for consumers, where the increased scale of the operations made it possible to reach new levels of competitiveness (e.g. the Private Brands).

The Group's supermarket Banner, in line with the deflation registered in the food markets, recorded an annual average price reduction of 5.4% for the average basket. The impact of deflation on sales growth in terms of value was very significantly compensated for by the sharp upturn in volumes sold by the chain.

Pingo Doce registered LFL sales growth of 2.7% for the year, which considering the deflation in the average basket, corresponded to an increase of more than 8% in volumes sold.

The total sales of Pingo Doce rose 12.8% and registered 2,193.6 million euros, helped by the contribution of 262.5 million euros in 2009 from the former Plus stores,

acquired in May 2008. Apart from focusing on LFL performance, the Company dedicated a large part of its management efforts on remodelling the former Plus stores - 20 stores underwent in-depth remodelling, and combined with the 16 stores remodelled in 2008, contributed to the good performance for the year. There are still 30 stores to be remodelled, which will be the Company's priority over the coming quarters.

The LFL performance of the Group's hypermarkets in Portugal continued to reflect the repositioning that is taking place, which led to a reduction in the variety, mainly in the non-food area, though also in the food area, and which did not make it possible to clearly communicate the value proposition of these nine stores.

Hypermarkets Like-for-like Sales Growth

In Recheio the 5.2% growth of total sales as well as the robust evolution of LFL sales also includes the remodelling of a store, acquired in November 2008, which was not closed while the work was carried out.

Recheio

On a LFL basis, the Group's Cash & Carry registered sales growth of 1.7%, a strong evolution of more than 4% in volumes, considering the deflation of around 3% of the basket figures. This performance reflected the Company's anticipation of difficulties in both the business segments it supplies – Traditional Retail and HoReCa. In this context, as a way of increasing its market share, Recheio focused on contributing towards reinforcing its customers' competitiveness through actions in key areas,

1.7%

namely by investing in the quality, variety and competitiveness of its perishables and by launching a private brand for the traditional retail segment.

In Madeira, the 1.1% growth of LFL sales included two-digit growth of volumes sold and is the result of the price re-positioning which began in the second half of 2008, with a positive impact on the chain's market share on the island.

In Poland, the Food Retail sector remained challenging, and Biedronka maintained its price leadership position in the market. Even though a slowdown in consumption was registered, there was no evidence of any substantial change to the business strategies of the Banners or to their relative positioning in order to compensate for this slowdown.

One of Biedronka's main priorities continued to be its plan for opening stores. The Company opened 163 stores, ending the year with 1,466 stores. In 2009, following the normal store network reorganisation along with the decision by the Competition Authority concerning the approval of the acquisition of the former Plus stores, that required the disposal of 38 stores, Biedronka closed, in 2009, a total of 56 stores.

Total sales of Biedronka in 2009 were 16,066.7 million zloty, up 29.8% (+5.8% in euros) on the previous year. This growth was driven by the good LFL performance, the opening of new stores which led to 8.1% growth of the sales area for the year compared to the end of the preceding year and the successful integration of the Plus stores acquired in October 2008, and which accounted for around 11% of Company sales in 2009.

The LFL sales of Biedronka grew 8.3%, which is equivalent to an increase of about 12% of the food categories on a LFL basis. The performance of the non-food segment is due to the Company's decision to reduce the assortment of these products following the trend among consumers to steer clear of this type of purchase which is more expensive and surplus to their needs.

In Manufacturing, the competitiveness in core brands for the market leadership positions was reinforced. The evolution of volumes sold in the majority of categories showed a positive performance, while the evolution of -6.3% of sales in terms of value essentially reflected the substantial decrease of the prices of several categories following the evolution of raw materials (mainly olive oil and seed oil).

In the area of Representation and Restaurant Services, total sales posted 6.5% growth for the year and it should be noted that four new represented brands were added to the portfolio during 2009.

Consolidated Operating Results

	2009		2008	09/08
	Eur Tho.	%	Eur Tho.	%	Δ%
Net Sales & Services	7,317,108		6,893,737		6.1%
Gross Margin	1,717,734	23.5%	1,582,102	22.9%	8.6%
Operating Costs	-1,189,686	-16.3%	-1,109,129	-16.1%	7.3%
EBITDA	528,048	7.2%	472,974	6.9%	11.6%
Depreciation	-168,312	-2.3%	-157,583	-2.3%	6.8%
EBIT *	359,736	4.9%	315,391	4.6%	14.1%

Consolidated Operating Results

* EBIT above presented does not include operational items with non recurrent nature that in the Income Statement by Functions are classified as Exceptional Operating Losses and are included in the EBIT therein presented.

Consolidated EBITDA grew by 11.6% in 2009, above the growth in sales, to register 528.0 million euros.

The EBITDA margin increased from 6.9% in 2008 to 7.2% in 2009. This performance reflected the benefits of a larger scale of operations in both Portugal and Poland, which offset the diluting impact of the Plus operations acquired in 2008 and which is still operating at below full maturity. The positive growth of the Group's LFL sales and the rationalisation of costs in some business areas were also important drivers of that positive evolution.

Annual Report 09 Consolidated Management Report - Creating Value and Growth The Group's Performance

EBITDA Margin

Consolidated EBITDA (Euro Million)

Contribution to Consolidated Sales Growth (Euro Million)

In the Retail area in Portugal, EBITDA was 175.7 million euros, a remarkable growth of 13.7%; the EBITDA margin rose 30 base points to 7.0% of sales.

This evolution reflects, besides a constant search for cost efficiency, the larger scale of the Pingo Doce operations, with the acquisition of the former Plus stores in 2008 playing a fundamental role in that scale increase. Even though those stores, operational for less than 20 months, are still operating below normal sales and EBITDA levels, they already represent an important increase in volumes for Pingo Doce's sourcing, providing the usual benefits associated with larger buying capacities.

Pingo Doce has been able to reinforce its value proposition in some categories due to the combination of: i) increased scale in terms of sourcing; ii) the balanced management of the deflationary situation existing in raw material markets, capturing

that trend in its purchases and passing the reduction in costs on to the customer; and iii) efficiency obtained from processes over the value chain.

Recheio, which already has a very efficient cost structure, was able to use the positive LFL's and internal efficiency to promote campaigns in categories of high significance for its customers, keeping the EBITDA margin practically stable in relation to the preceding year. EBITDA was 41.4 million euros.

In relation to this banner, the sourcing capacity of the Group in relation to scale and quality was, besides the control of costs, essential to the implementation of a commercial strategy that led to the increase of its market share.

In Madeira, the positive reaction of sales to more aggressive price positioning implemented in 2008 permitted some cost dilution benefits that, together with more efficient sourcing, allowed the EBITDA margin to rise from 3.6% to 4.8%.

In Poland, Biedronka posted exceptional EBITDA growth of 37.4% in local currency (+12.0% in euros), with the respective margin registering 7.3% versus 6.9% in 2008.

Biedronka is clearly in a business development phase in which the benefits of scale impact at all levels.

The acquisition of the former Plus stores together with the continued high pace of expansion of the network of stores provided immediate sourcing benefits for the Company. In parallel, the integration of new stores - those acquired from Plus and those originating from the organic growth plan - occurred without any pressure on the Company's cost structure. The size of the Company and its robust LFL sales performance ended up bearing the normal dilution of the stores operating below maturity levels.

Biedronka, besides having the most competitive price positioning of the Polish market, achieved, through the growth of the network of stores, the necessary scale that will allow it to be in the best position in the market to tackle the challenges that reduced consumption may have on the LFL growth of sales.

In the Manufacturing area, the EBITDA margin was equivalent to 15.3% of sales, up 100 base points on the preceding year. The restructuring of the Company to reinforce the competitiveness of its operation in the market contributed to that evolution.

_______________

Consolidated Net Results

Consolidated Net Results

	2009		2008	09/08
	Eur Tho.	%	Eur Tho.	%	Δ%
EBIT*	359,736	4.9%	315,391	4.6%	14.1%
Net Financial Results *	-70,435	-1.0%	-85,337	-1.2%	-17.5%
Non Recurrent Items *	-10,410	-0.1%	-7,943	-0.1%	31.1%
EBT	278,891	3.8%	222,111	3.2%	25.6%
Taxes	-55,624	-0.8%	-46,131	-0.7%	20.6%
Net Profit	223,267	3.1%	175,980	2.6%	26.9%
Minority Interests	-22,918	-0.3%	-12,764	-0.2%	79.6%
Net Profit attr. to JM	200,349	2.7%	163,216	2.4%	22.8%
EPS (euro)	0.32		0.26		22.8%
Cash Flow per share (euro)	0.69		0.55		25.4%

The net result attributable to Jerónimo Martins reached 200.3 million euros, a growth of 22.8% on 2008, corresponding to earnings per share of 0.32 euros.

Consolidated financial expenses were 70.4 million euros, reflecting essentially the reduction of the average cost of debt by 170 b.p..

Non-recurring results were -10.4 million euros and include restructuring costs in the Manufacturing area, impairments and various types of provisions.

^* EBIT presented in the table "Consolidated Net Results" does not include operational items with non recurrent nature that in the "Income Statement by Functions" are classified as Exceptional Operating Losses and are included in the Operating Profit therein presented.

The Financial Results presented in the table "Consolidated Net Results" include the Profit in Associated Companies as disclosed in the "Income Statement by Functions".

Non Recurrent Items presented in table "Consolidated Net Results" include the Exceptional Operating Losses and Gains in Others Investments as presented in the Income Statement by Functions.

Balance Sheet

The development of the invested capital, which declined by 19.3 million euros, was due to the evolution of the Group's working capital that benefited from the growth of sales and also the rationalisation of stocks management by all the Companies, which in turn led to the reduction of sale days of consolidated stocks by four days relatively to the end of 2008.

	(€' 000)
2009	2008
736,633	734,126
2,101,566	1,967,459
-1,201,479	-1,065,131
120,976	140,521
1,757,696	1,776,975
796,296	946,018
84,560	101,659
30,914	21,811
-219,769	-223,638
692,000	845,850
287,637	281,307
629,293	629,293
148,765	20,525
1,065,695	931,125
64.9%	90.8%

The evolution of Fixed Assets basically reflects the performance of the investment plan drawn up for the different operations of the Group. Expansion in Poland remained the priority. Accordingly, Biedronka received 58.4% of the total investment of the Group.

Capex 2009

The good performance of the operations and the gains in efficiency as regards working capital were fundamental to the reduction of consolidated net debt by 153.8 million euros vis-à-vis the end of the preceding year, registering 692.0 million euros. The gearing of the Group was 64.9%, achieving the goal of strengthening the balance sheet following the acquisition of Plus in 2008.

DEBT BREAKDOWN			(€'000)
		Maturity
	2009	1 to 5 years	> 5 years
Long Term Debt	707,614	707,614	0
as % of Financial Debt	88.9%
Maturity	3.1
Bond Loans	375,000	375,000
Private Placement	151,007	151,007
Fair value adjustment	-16,880	-16,880
Commercial Paper	70,000	70,000
Other LT Debt	128,487	128,487
Short Term Debt	88,682
as % of Financial Debt	11.1%
Maturity	0.1
Bond Loans	0
Commercial Paper	18,000
Other ST Debt	70,682
Financial Debt	796,296
Maturity	2.9
Average Cost of Debt	4.0%
Leasings	84,560
Accrued Interest & Hedging	30,913
Marketable Securities & Bank Deposits	-219,769
Net Debt	692,000
% Debt in Euros (Financial Debt + Leasings)	84.1%
% Debt in Zlotys (Financial Debt + Leasings)	15.9%

The priority throughout 2009, and taking short-term markets volatility into account, was on the restructuring of the shorter term debt, contracting loans of lengthier maturity as opposed to those of shorter maturity. The average debt maturity is 3.1 years, and short-term debt accounted for 11.1% of consolidated financial debt vs. 29.0% at the end of 2008.

The zloty debt accounted for about 15.9% of the financial debt and leasings total.

Jerónimo Martins in the Stock Market

In 2009, three new research institutions began to cover Jerónimo Martins shares, and 21 analysts were monitoring the share development by the end of 2009.

In 2009, the Group share price grew in value by 75.9% on the previous year, making it the fifth-best performer on the PSI-20 stock index.

The PSI-20 index continued its upward trend in the second and third quarters. It performed worse in the fourth quarter (-0.1%), though achieving the year high of close to 8,883 points, on 19 October.

In liquid terms, an average daily trading volume of 1,358,754 shares was registered during 2009, around 46% down on the 2008 trading volume, when record liquidity results were obtained.

	2009	2008
Stock Market Performance
High (EUR)	7.05	6.40
Low (EUR)	3.07	3.22
Average (Closing) (EUR)	4.97	4.92
Closing (End of year) (EUR)	6.99	3.97
Market Capitalisation (31/12) (EUR 000,000)	4,396	2,498
Market Capitalisation Ranking / PSI-20	6º	8º
Average Stock Turnover Ranking /PSI-20 *	6º	8º
Transactions
Volume (1.000 shares)	347,603	468,826
Annual	393,520	336,790
Annual Growth
PSI 20	33.5%	-51.3%
Retail Sector Average **	15.1%	21.6%
Jerónimo Martins	75.9%	-26.5%

JM SHARES PERFORMANCE

* average volume x average share price

** includes Colruyt, Carrefour,Casino, Ahold, Metro, Delhaize, Tesco, Sainsbury and Walmart

Underperform/Reduce Hold/Neutral Buy/Accumulate/Add

Annual Report 09 Consolidated Management Report - Creating Value and Growth The Group's Performance

Jerónimo Martins Financial Performance 2005-2009

					(€' 000.000)
	2009	2008	2007	2006	2005
BALANCE SHEET
Fixed Assets
Net Goodwill	737	734	416	385	384
Net Intangibles Assets Net Tangible Assets	99 2,003	93 1,875	80 1,671	61 1,317	40 1,102
Financial Investments	72	73	61	92	82
Working Capital	-1,201	-1,065	-863	-667	-547
Long Term Assets	69	63	63	61	62
Income Tax Provision	0	-4	-1	-2	2
Deferred Taxes	-20	8	18	26	43
Invested Capital	1,758	1,777	1,443	1,274	1,168
Net Debt
Financial Debt	796	946	713	606	673
Leasings	85	102	79	47	30
Accrued Interest	31	22	52	26	5
M arketable Securities and Bank Deposits	-220	-224	-264	-173	-211
M inority Interests	288	281	287	275	251
Equity	778	650	577	492	420
INCOM E STATEM ENT
Net Sales & Services	7,317	6,894	5,350	4,407	3,828
EBITDA	528	473	351	319	308
EBITDA margin	7.2%	6.9%	6.6%	7.2%	8.1%
Depreciation	-168	-158	-127	-107	-100
EBIT	360	315	225	212	209
EBIT margin	4.9%	4.6%	4.2%	4.8%	5.4%
Financial Results
Net Interest	-66	-65	-52	-39	-39
Other Financial Costs/Income	-5	-20	-7	-3	-7
Non Recurrent Items **	-10	-8	22	20	9
EBT	279	222	188	189	171
Income Tax	-23	-43	-26	-21	-16
Deferred Tax	-32	-3	-11	-17	-9
Net Income	223	176	151	151	146
M inority Interests	-23	-13	-20	-35	-35
Net Income attributable to JM	200	163	131	116	110
Cash Flow	434	345	266	255	246
M ARKET RATIOS*
Total Shares	629,293,220	629,293,220	629,293,220	125,858,644	125,858,644
Own Shares	859,000	859,000	859,000	171,800	171,800
EPS (EUR)	0.32	0.26	0.21	0.92	0.88
Cash Flow per share (EUR)	0.69	0.55	0.42	2.03	1.95
Share Price at the Lisbon Stock Exchange
High (EUR)	7.05	6.40	5.59	3.52	2.57
Low (EUR)	3.07	3.22	3.43	2.55	1.97
Average (closing) (EUR)	4.97	4.92	4.37	2.85	2.35

* share price for the years 2005 to 2006 was adjusted by the stock split of M ay 2007

** Non Recurrent Items include the Exceptional Operating Losses and Gains in Others Investments as presented in the Income Statement by Functions and detailed in the notes to Consolidated Accounts.

Closing at year end (EUR) 6.99 3.97 5.40 3.40 2.54 M arket Capitalisation (31 Dec) (EUR 000.000) 4,396 2,498 3,398 2,140 1,598

4. Business Areas Performance

4.1. Food Distribution - Portugal

2009 ended with the brands registering a very positive performance, as a result of a sound response not only in terms of commercial policy but also from the functional divisions (Private Brands, Sourcing, Market Research, Logistics, Quality Control, Financial, Information Systems, Environment and Occupational Safety) which supported the development of store operations and constituted a definitive factor in their competitiveness.

Also significant in 2009, in addition to developments in the Private Brands area which are described in the performance analysis of each brand, were projects in the functional areas that were fundamental to the implementation of the established strategy.

Concerning Logistics the recent growth of operations in Portugal, particularly due to the strong like-for-like performance of the brands and the takeover of the Plus stores, has placed the operation under certain pressure since it has had to adequately meet a considerable increase in the volumes handled, equivalent to almost 20%. The competitive response of the logistic department was reached through a substantial cut in costs per unit handled as a result of the fall in diesel prices and also, at the same time, more efficient use of this area's assets.

The project to redesign the Logistics Network was also drafted in 2009. This plans to create new Platforms of a larger size and close warehouses, thus fostering greater logistics efficiency and an increased capacity of response in view of the growth that is forecast for the near future.

Currently, the Logistics Department's activities are based on seven platforms, with an area exceeding 135,000 sqm and the redesign of current operations will allow service levels to the operational companies to be improved, substantially reduce the number of kilometres covered and make the logistics activity more sustainable.

The Information Technologies Department, which was focused in 2009 on redesigning operating processes and renegotiating outsourcing contracts in order to cut costs, which it achieved, will team up in 2010 with the Logistics Department in order to prepare the information systems for the prospective logistics redesign of operations.

Differentiation is one of the strategic vectors that have leveraged the success of the Group's operations. The focus on the Perishables operation as a differentiating factor of the food distribution strategy in Portugal has generated new challenges for the sourcing area and, in particular, the Perishables Sourcing Department.

Hence, a new strategy that is focused on generating closer relations between Jerónimo Martins Retalho and the Producers, by reducing the number of intermediaries as much as possible, was drawn up. Moreover, the exploration of new national and international markets continued. Countries ranging from New Zealand to Chile or Ireland to South Africa were covered in a continuous work of procurement, creating ever more stable and long-lasting partnerships and relations with Producers.

The Company is currently redefining the sourcing work processes to make them more efficient and more profitable. Such processes have, for example, already given rise to a vertical integration measure - the fresh dough plant for bakeries.

The ongoing challenge of the Sourcing Department is to bring dynamism to National Producers and develop partnerships with national and international universities to carry out projects that generate a quality and exclusive end product, negotiate quantities with suppliers that guarantee the ongoing nature of the business at competitive prices and with complete rigour and transparency, and also optimise logistics so as to ensure the supply of all products ordered by the stores at the quality levels demanded by the Company and bearing quality control certification, at competitive prices.

The focus on Perishables was also the primary goal of the Quality and Food Safety Department in 2009. This led to the strengthening of control in this area, particularly in terms of sensory evaluation as well as the screening of store operations through the monitoring of good production, work and hygiene practices.

The monitoring of the entire supply chain was strengthened and complaint response times reduced through teams targeting each region and focused on production activities, as well as specialized teams in the Perishables area.

The certification of the food safety system implemented in the industrial kitchens and the strengthening of partnerships with the suppliers of perishables is planned for 2010. The development of tools that permit a more efficient management of the quality and food safety systems is also proposed for 2010.

4.1.1. Food Retail – Pingo Doce

Message from the Management

"2009 was, as predicted, the year of strengthening the Pingo Doce brand. In this context, the ex-Mega Feira Nova and ex-Plus stores were integrated and the price repositioning began in 2002 was completed. Moreover, the communication strategy was amended with the launch of an advertising campaign that summarised the areas of focus in recent years: « In Pingo Doce prices are always low throughout the store and all year through! »

Internally, the new organisational structure implemented the preceding year was strengthened, making the Company prepared to: i) tackle the challenges of the future; ii) continue to grow its market share through like-for-like performance; and iii) effectively integrate the larger stores in the established strategy."

Mission

To be the best supermarket chain operating 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 and competitive prices.

It became evident at the start of 2009 that the economic climate would worsen in Portugal, as consumer confidence declined and unemployment progressively grew.

Pingo Doce correctly read the market, trusting in its strategic positioning, initiated in 2002, as the best course for navigating a consumption crisis. Accordingly, it invested in strengthening the brand value in 2009, with the strategic focus remaining founded on three pillars:

• Competitive and Stable Price Policy
• Private Brand
• Perishables

Competitive and Stable Price Policy

Price competitiveness continued to be the focus of maximum attention and, to that end, the Company lowered the prices in three categories in the first quarter of the year: Pingo Doce brand yoghurts, pork and frozen fish, where it had still not achieved its intended positioning, thus meeting its consumers' requirements.

The commercial climate underwent substantial change in 2009, especially as regards price developments in raw materials markets. The established strategy, foreseeing this new reality, focused on the goal of significantly reducing the purchase price of private brand products in order to restart the cycle of ongoing price competitiveness improvement in relation to Private Brand products and without affecting the high quality standards.

In this context positive results were achieved in 2009 as regards the reduction of cost prices in nearly all private brand categories. It must be highlighted that the results obtained were only possible with the effective collaboration of the Group's suppliers in this field.

The savings obtained through this negotiating process were passed on to consumers in the form of lower prices in various key private brand categories, especially dairy products (yoghurts in particular).

Private Brand

Ready Meals (Pingo Doce à Casa) were a new addition to the private brands. These are products without preservatives, which are preserved by means of the hygiene conditions and strict control of the cold chain, giving rise to quality food that is fresh/only valid for a few days, tasty and at an accessible price. Refrigerated lasagne, identical to the above-stated characteristics, and fresh pizzas were also added in this area.

Skino hydrating soap and the Essentya hair range (shampoos and conditioners) were added in the non-food area. They were launched in important markets of sufficient size where no value proposition created by the Pingo Doce brand existed, and became the category leader in terms of volume within a few months.

Pingo Doce has already achieved a very significant market share for its private brands, which cover the main product categories. Pingo Doce private brand products account for around 40% of sales (excluding perishables). The brand currently has around

2,400 product references, around 250 of which are in the perishables area. In terms of new products, 309 references were launched in 2009.

Private Brand

The challenge in 2010 for Pingo Doce consists, therefore, of the ongoing quest to improve the competitiveness of the private brand products in order to strengthen the value proposition through a very competitive price/quality ratio.

The focus for new product references that are launched will be to innovate in areas where the Group's competitive advantages are difficult to match by the existing products.

Perishables

Pingo Doce reinforced its position of quality in the perishables area.

The quality of salt cod, published consistently since 2002 - cured by the traditional Portuguese method, using fresh fish and without rushing the process, i.e. an average of three months curing - is provided at a very accessible price as a result of the fall in the cost of the raw material due to the crisis. Pingo Doce substantially increased its market share in this category in 2009, attracting many new customers to try this product.

Pingo Doce was able, in a market marked by price oscillations, to provide a competitive and constant price of pork to customers, following heavy investment in this field.

Pingo Doce also developed its veal project in 2009. This project provided Portuguese consumers with a quality product while also contributing to the development of this specific sector of portuguese agriculture, through the partnership established with more than 700 farmers. This project was one of the major focal points of the brand's advertising campaign at Christmas 2009.

The quality, availability and accessible price of fresh fish was reinforced by means of partnerships with the fishing sector, working ever more directly with fishermen and removing intermediaries on the import side.

Also a reference should be made to the fruit area where quality and price competitiveness were reinforced.

The Company, at the end of the first quarter, received the report of the customer survey carried out every year. That report indicated that the Pingo Doce brand was ahead of all others in relation to perishables, private brands and value for money, and it was just behind the discount stores in terms of price.

This was the right time to change the communication strategy and launch a more audacious and distinguishing advertising campaign that might strengthen that perception. The new brand positioning campaign commenced in October. The investment in media, which extended to Christmas 2009 and into 2010, led the sector for the first time.

The strategy's success in financial terms generated an improved return on investments made in the business, primarily through improved stock turnaround and higher EBITDA margin. Despite the investment in price, the management of the mix, margin and increased efficiency have led to the improvement of the commercial and EBITDA margin, which has achieved a soundness that allows 2010 to be viewed with certain optimism. The intention is to reduce investment in the return on investment equation by improving the working capital, which is clearly evident in the reduction of stocks.

Pingo Doce once again plans in 2010, in a macroeconomic climate that will continue to be challenging, to be focusing on like-for-like performance, innovation and store remodelling.

4.1.2. Food Retail – Hypermarkets

The hypermarket area did not perform as well as the Company's other formats in 2009.

Besides consumer behaviour changes the Group's decision to reposition these stores also contributed to a negative impact on sales in the short-term.

The repositioning project that began to be implemented in these stores in 2009 involved the reduction of the food and non-food product range and the accelerated introduction of the private brand products already existing in the supermarkets. There was, in 2009, a heavy shift from the consumption of suppliers' brands to private brands, with substantially lower retail prices.

In addition to the change in the products available, the performance of two of this format's main stores (Braga and Sintra) was severely penalised during 2009 by remodelling works of the shopping centres in which they are located. Those works hindered access to those stores.

A new store concept is being developed in order to counteract this trend. This new store will be in the test phase at one of its stores in the first semester of 2010, following remodelling. The manner in which the business model of the other eight

hypermarkets will be adapted depends on how that store performs in the market which it is in.

4.1.3. Food Retail – New Business

The "New Business" area is responsible for developing a series of segments of the non-food area, which complement and give impetus to the Food Retail activity in Portugal.

This area manages and develops the following businesses: i) 16 "Bem Estar" - Parapharmacies stores; ii) 17 Petrol Stations operating with Prio brand through a partnership whit Martifer; iii) five GET stores operating in the areas of entertainment, culture and leisure; iv) 30 Electric Co stores in the area of electric appliances; and v) 30 New Code stores in the textile area.

4.1.4. Food Retail – Meal Solutions

The social trends for convenience and Pingo Doce's know-how as a perishable products' specialist are the key ingredients of its heavy investment in the Take Away and Catering businesses, ensuring that it now has 21 restaurants and 181 stores with a Take Away service.

The primary mission of the "Refeições do Sítio do Costume" restaurants is to make the stores in which they are located more attractive and to strengthen Pingo Doce's positioning as a Perishables' specialist. They are another feature of the Pingo Doce Brand's value for money strategy available to consumers, providing complete, varied and balanced meals at a very competitive price.

Two central kitchens and 12 restaurants were opened in 2009, taking the total for the operation to 6 central kitchens and 21 restaurants by the end of the year.

Distribution of the Take Away operation was extended to 80 more stores, taking the total number of stores operating this project to 181.

The strategy to be implemented for the ready meals business in 2010 will be its mass expansion. This will consist of opening restaurants in key stores and expanding the Take Away operation to the network of stores.

4.1.5. Food Retail - Operation in Madeira

Message from the Management

"2009 was a year for consolidating the strategy that had been defined for Pingo Doce in Madeira. After years of heavy investment in infra-structures and of commitment to more competitive prices, earnings are now showing the marked and sustained growth in traded volumes, especially in the third quarter, which is proof of our strengthened competitive position in a market which is expected to become one of the foundations of the Company's future performance."

Mission

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

The sales performance in 2009 demonstrated the adjustment made to the strategy over the last few years. In fact, although Pingo Doce in Madeira presented a price deflation for the fifth year running, which in 2009 represented a price decrease of 8.3%, the sales volumes increased around 12% against 2008.

This growth was achieved despite the recent opening in 2008 of four retail units by competitors, which brought about greater competition and customer sharing in the region.

Private Brands, strategically identified as business priorities, and for which the Pingo Doce banner is well renowned for quality, continued to increase their weight in the Company's sales, now representing 34.4% of the total sales (excluding Perishables).

Private Brand

In 2009, the Pingo Doce organisation in Madeira continued to consistently take advantage of the synergies created at Group level, namely regarding the buying terms negotiated for JMR.

Recheio in Madeira began 2009 with the clear objective of solidifying its leadership position in its segment and despite a competitor opening an establishment at the beginning of the year; it reached a turnover of 34.0 million euros, a decrease of 1.6% against the previous year.

Together, the Group's two Banners operating in Madeira saw their sales grow 2.5%, reaching 131.5 million euros.

Regarding 2010, Pingo Doce in Madeira will continue to strengthen its commitment to the area of fresh products and Private Brands, by investing in equipment, competitive prices and a wider assortment.

Recheio in Madeira will equally invest in fresh products, namely meat, fish, and fruit, with a special emphasis on the HoReCa.

4.1.6. Cash & Carry - Recheio

Message from the Management

"2009 was a historical milestone for Recheio, whose performance above its sector drove sales to reach 688.5 million euros, also reinforcing its competitiveness in terms of costs and the management of working capital.

But we cannot speak of 2009 without speaking of how we must already prepare for the future. Above all, the future should be built on the commitment that Recheio makes to its Shareholders and its customers. To its Shareholders, by guaranteeing fulfilment of the targets set and scrupulously complying with the management and costs level. To its customers, by restating its commitment to being the most competitive operator in the market and guaranteeing the best prices and the best quality."

Mission

To meet all the needs of the Traditional Retail customers and HoReCa channel. To give Recheio's customers their value for money through the focus on long-term relationships, 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 customers, or with suppliers. Focus on the customer and on the Company's efficiency is the best way of guaranteeing profitability and return on the Shareholders' investment.

In 2009, the above-mentioned sales volume of 688.5 million euros corresponded to a like-for-like sales growth of 1.7% and to a total sales growth for the Company of 5.2%.

Additionally, Recheio was able to reinforce its low cost leadership position by reducing its weight by 0.2 percentage points of sales and reached an EBITDA margin of 6.0% of sales, totalling around 41.4 million euros, which represented a growth of 1.4 million euros against 2008, clearly above the average earnings for the sector.

This performance is even more relevant as it occurred in a year in which:

• The international economic and financial crisis that began in the second half of 2008 was confirmed and heightened;
• The Company posted a cumulative deflation of 2.7%, which in some essential sections of the business (like Fruit & Vegetable, Fish, Salt Cod and Milk and Dairy Products) included deflations of more than 10%.

Last year, the results of this strategy could be seen in the following:

Significant growth in key categories for the Company, both in sections in which Recheio is already market leader (Beverages) and in sections in which it has made significant effort for dynamisation (Perishables);

Annual Report 09 Consolidated Management Report - Creating Value and Growth Business Areas Performance

Product Departments	Δ Value	Δ Quantity
Perishables
Fruits & Vegetables	11.4%	18.8%
Meat	3.0%	16.3%
Fresh Fish	36.9%	45.4%
Drinks & Wine Cellar	13.8%	13.9%

• 5,000 new customers that were won through various prospecting programmes, especially the following: "Customer on-the-Spot", aimed at new companies that are formed in the business sectors that are relevant for Recheio and the action "For a Greater Recheio", aimed at the employees;
• Remodelling in the first half of the year of the Santa Maria da Feira store (acquired in 2008), in order to transform it into the Banner's reference store;
• Renewal of the HACCP certification;
• Reinforcement of the leadership position in the Portuguese wholesale market, increasing the differential between all the relevant operators in the market.

Also noteworthy are the specific actions regarding the management of working capital that led to a reduction of eight sales days in stocks.

The HoReCa is Recheio's main sales channel and presented a cumulative growth for the year of 2.7%, which is equivalent to almost 8 million euros more sales compared to the previous year.

Sales per Segment

This specific performance deserves to be highlighted as HoReCa was one of the sectors in the economy that was most penalized by the adverse economic environment, as the HoReCa market shrank and Recheio increased its sales and market share.

Equally, Recheio maintains its strong investment in the Private Brand articles, on the one hand through MasterChef with the launch of articles geared towards the HoReCa channel; on the other hand through Amanhecer in 2009, a new brand geared towards Retail. This new range launched 30 references in its first year, and its objective is to have a total of 200 products that will allow the traditional retailers to operate a series of unique products that are competitive in their price/quality ratio, and which it is hoped will start working as the Private Brand of independent retail.

The customers' acceptance of Private Brand products in Recheio can be proven by the sales trend of these articles, which already represent 15.5% of the Company's sales and registered a growth of 5.6% in 2009.

The performance of Perishables is also highlighted, where a significant 12.9% share of the sales was achieved.

In 2010, Recheio intends to reinforce its expansion plan, with the expected opening of two new stores, with the intention of broadening the Company's offering to geographical areas where the HoReCa channel has high presence.

4.2. Food Retail - Poland

4.2.1. Biedronka

Message from the Management

"In 2009, despite the global economic recession, Poland was the only country in Europe to witness a growth in its Gross Domestic Product (GDP), which was 1.7%. Domestic consumption was responsible for a large part of this growth, which continues to demonstrate the Polish market's potential. In line with the positive GDP figures, the growth rate in the retail sector was around 0.4%.

For Biedronka, 2009 was a year for carrying out its strategy based on consistent offering to its customers and on efficiency. The sales growth of the former Plus stores, acquired by Biedronka last year, clearly proved the value of the brand.

If the market agents' expectations are confirmed, with regard to an economic recovery in the next few months, Biedronka is in a position to take advantage of these prospects for the polish market. The Company's management team remains confident about the future, knowing that even the difficult economic environment was not an obstacle to its commitment to opening stores and to a solid sales performance."

Mission

To offer a limited assortment of carefully selected, high quality products, satisfying the daily needs of its customers, at every-day low prices. All employees must ensure that the Company operates with great efficiency and low costs.

In 2009, the main concern of the Retail operators in Poland was to maintain their respective positions. Biedronka's advantage, in terms of market presence, was strengthened by focusing on the growth of its store network, regardless of the challenges imposed by the economic environment. The main contributing factors towards the growth posted were organic growth, the high focus on and success of the integration of the former Plus stores into the Biedronka chain, and the endeavour for operational efficiency.

Biedronka's strategy, which offers a limited assortment of quality products at every-day low prices, focused on improving operating efficiency, with proximity to the consumer, achieved through an aggressive expansion policy, proved once again to be the most appropriate for the reality of the market, despite the global economy's unstable and uncertain atmosphere.

The consistent implementation of this strategy resulted in a like-for-like sales growth of 8.3%, in conjunction with an organic expansion of 163 new stores, which gave rise to a total sales growth of 29.8% compared to last year. Throughout 2009, apart from carrying out the opening plan, 51 stores were remodelled and 56 were replaced or closed. The stores total selling area increased by 60,963 sqm.

Annual Report 09 Consolidated Management Report - Creating Value and Growth Business Areas Performance

The trusting relationship, resulting from establishing solid medium and long term partnerships with suppliers, enables Biedronka to increase its competitive advantage and create conditions for increasing its market share in the majority of the categories.

Communication in the stores was reinforced using flyers, merchandising posters and clear messages about every-day low prices. Store innovation was also complemented by various layout items, display stands and signs creating new environments.

For external communications the preference was for TV ads, taking advantage of the geographical coverage of around 1,500 Biedronka stores. The entertaining and innovative nature of the ads was recognised by the EFFIE Committee and the campaign "Products which recommended themselves" received the EFFIE prize and was distinguished by Euromarka, a programme that promotes entrepreneurship in that country.

Quality is one of Biedronka's strategic pillars. The development of quality control based on audits carried out on suppliers' plants, on permanent laboratory analyses, as well as on tests on the existing assortment and on new products was reinforced with more nutritional information on the product labels. Labels with nutritional information make it possible to describe the quantity of each nutrient present in a certain product. Guideline Daily Amount (GDA) was introduced in order to help consumers make a more suitable choice, based on the written nutritional values.

Biedronka's management team remains confident with regard to the future, knowing that it is in a position to take advantage of the investments made recently and of the macroeconomic prospects for 2010, as the Polish Government and the market in general are forecasting an economic recovery in the next few months. Expansion of the store network will continue to be one of the main priorities.

4.2.2. Apteka Na Zdrowie

Following the partnership agreement that was signed with the National Association of Pharmacies (in Portugal), in order to develop a pharmacy retail businesses in Poland, a further five establishments were opened in the Polish market in 2009.

All 24 pharmacies are located next to Biedronka stores, although in separate and independent facilities, in accordance with the Pharmaceutical Law in force in Poland.

Performance in this business area continues to confirm the Group's expectations, as this store network reached a LFL sales growth of 41.2% against the previous year.

4.3. Manufacturing, Distribution & Services and Restaurants

4.3.1. Manufacturing

4.3.1.1. Unilever Jerónimo Martins

Message from the Management

"As foreseen last year, the second half of 2009 clearly brought Unilever Jerónimo Martins accelerated growth.

Cost rationalization, careful monitoring of raw material evolution and a pricing policy tailored to cover the various customers segments and distribution channels, as well as innovative projects, were a fundamental contribution towards strengthening the position of various strategic categories.

The good evolution registered in the performance of the main categories is a sign that the Company is well prepared to transform the challenges that 2010 is expected to bring, into opportunities."

Mission

"We are working to create an ever better future".

Within 2009's tough economic and financial context, Unilever Jerónimo Martins (ULJM) maintained almost intact its competitive position in the markets in which it operates.

Sales in volume reached similar levels as the previous year, helped not only by the good performance of the local market, but also by the volumes exported by the ULJM plants to the various Unilever subsidiaries in Europe, as well as the launch of new brands and the Company's introduction of new propositions.

In these markets, despite a joint deflation of more than 5%, the balanced management of the product and brand portfolio made it possible to somehow limit the deterioration of sales in value.

Home and Personal Care Unit

Launching new brands and new propositions had a determining role in the good sales performance. In this area, of note is the launch of the Surf brand in the laundry detergent market, a unique proposition in terms of fragrance and competitive in terms of price, with unequalled advertising support over the last few years in the fast-moving consumer markets.

Of equal note is the Cif brand's expansion to the hand dishwashing category. An important position was reached in this market just a few weeks after launching the product, due to its effectiveness and to the strong launch campaign.

In the category of feminine deodorants, Dove and Rexona launched a new functional deodorant concept, which adds a hair growth reduction action to its antiperspirant effect.

Food Unit

Determining factors for the good performance in the margarine category were the continued backing of the "Why Margarine" campaign with a scientifically supported educational objective of comparing its benefits with those of animal fats, and the continued success of the Becel Gold variety.

With a growth of 4.5% in 2009, the Iced Tea category reacted well to the development of Retailers' Private Brands. The change in formats (capacity per package) for in-home consumption and the gains in out-of-home distribution and market share contributed decisively towards this good result.

Out-of-Home Consumption Unit

The Ice Cream category posted a strong growth in volume, as a result of launching new products. Both for the out-of-home range (for example Fizzy Cone, Smile Gum, Epá Fit and Surfing Board), and for the in-home range (reinforcement of the Olá Original range), the preference was for offering lower prices.

After successive years of growth, in 2009 the FoodSolutions business was the most affected by the recession that seriously affected the Hotel and Restaurant sectors causing a 14.8% drop in this business, with performance in this activity being quite similar to that in other European countries.

The operating profit generated was in line with the targets for the year, due to the performance in volume mentioned above, and to a balance of pricing, margins and brand investment.

Finally, the very positive performance of the various plants should be mentioned. Once again, they contributed decisively to the success reported in 2009, for which exports played a vital role, confirming the crucial nature of this sector for maintaining the competitiveness of ULJM.

For 2010, the Company will stay focused on protecting its market positions with the appropriate support for its key brands. Innovation will continue to be key towards market differentiation and leadership.

4.3.1.2. Gallo Worldwide

Message from the Management

"2009 was the year for forming Gallo Worldwide, which was created through a spin-off from Unilever Jerónimo Martins. The year was marked by enormous effort in preparing the separation of the business, namely forming a team of 112 employees, creating the necessary processes for the Company to operate autonomously and in ensuring a smooth transfer of the relationships with all the customers, both nationally and internationally. The most important milestone was that a recently formed team completely fulfilled all the objectives set out for the first six months in the life of the Company."

Mission

To introduce Gallo olive oil into the daily eating habits of people all over the world, letting consumers know the benefits of this "liquid gold" and understand how it can become part of their daily lives.

On 3 July 2009, the Olive Oil and Seed Oil unit was made autonomous, in order to strengthen the focus on this business.

This change was brought into effect by forming Gallo Worldwide, Lda., resulting from the spin-off from Unilever Jerónimo Martins Lda..

The idea was to better meet the specific nature of the Olive Oil business, namely the high volatility of the price of the raw material, which implies specific management logic.

On the other hand, this focus makes it easier to reach the potential coming from a broader geographical scope, making internationalization a strong area for development in the future.

Therefore, Gallo Worldwide Lda. now holds the assets that were attached to this activity, in which its affiliates Victor Guedes S.A. and Gallo Brasil Consultadoria Lda. are included.

The beginning of the year was highly influenced by the huge currency instability in the main export market (Brazil), as a result of the worldwide economic environment, which made it difficult to plan promotional campaigns and brought about uncertainty when forming sales prices in Reais (R\$).

In the domestic market, the start of the year was marked by highly aggressive pricing by the retailers' private brands, which had an influence on market share and put pressure on margins.

As from June, the instability in the price of the raw material proved to be a good opportunity for re-driving the business' growth in both markets (international and national).

Overall, the 2009 performance was achieved through reinforcing Gallo's market share in Portugal to 23.3% and a recover in Brazil, with an annual share of 23.2%. Hence, Gallo Worldwide Lda. reached a growth in volume of 1.1% in 2009.

In 2010 if the expectation of low pricing of raw material is confirmed, the evolution of olive oil sales could be favoured when comparing with other edible fats.

4.3.2. Services, Representations and Specialized Retail

4.3.2.1. Jerónimo Martins Distribuição de Produtos de Consumo

Message from the Management

"Through the diversity of Jerónimo Martins Distribuição's portfolio of represented brands, the Company was able to nearly reach two-digit growth in 2009, despite the huge pressure on prices and the continued growth in the number of private brands in the market".

Mission

To build leadership positions in the Portuguese market for the brands represented, sustained by excellent standards of service at very competitive prices.

Food Division

For the main division of Jerónimo Martins Distribuição, 2009 will be marked as the year that brought a return to growth, delivering the best sales ever in terms of value. The following represented brands contributed towards this performance: Sunquick, Heinz, Storck (Merci), Nestlé, Leaf and Mandarim. It was also an important year for the development of the frozen shrimp business, not only through the Malaki brand (wild shrimp), but also through farmed shrimp.

In 2009, Jerónimo Martins Distribuição added Arla (Castelo, Apetina, Finello and Lurpack) to its existing brand portfolio, thereby entering the foreign cheese and butter market.

Cosmetics Division

Last year saw the consolidation of the market position of the brands launched in 2008 due to the expansion in their distribution. Equally, the introduction of two new represented brands – Mavive and Life Lab – reinforced this division's position in the selective perfumery channel.

Caterplus

2009 was notably a difficult year for Caterplus within the economic environment that affected the sector and that demanded careful credit control and management, which did not encourage a sales expansion policy. Despite this reality, Caterplus added another represented brand to its portfolio – Nudisco – which will make a new contribution to the business in 2010.

PGJM

PGJM decided to enter the selective cosmetics market in 2009. In pursuit of this strategy, in September PGJM merged with Cosbel (100% held by Group António Puig, S.A.), resulting in Perfumes e Cosméticos Puig Portugal Distribuidora S.A., now the third largest cosmetics and selective cosmetics company in Portugal. The main shareholders of this new company are Group António Puig, with 72.5% of the capital, and Jerónimo Martins, with 27.5%.

Outlook for 2009

Apart from being a year for strengthening its brand portfolio (not only in the food area but also in the cosmetics division), for Jerónimo Martins Distribuição, 2010 will be a year for looking for alternative future growth channels.

4.3.2.2. Jerónimo Martins Restauração e Serviços (JMRS)

Message from the Management

"In 2009, Jerónimo Martins Restaurant and Services consolidated the foundations of its growth by opening eight new units during the first half of the year and consolidating its operations in the second half.

In the first half of 2010 the Company will launch a new concept in the casual dining segment, Oliva."

Mission

To identify, develop and implement Specialised Retail and Restaurant concepts whose value propositions meet the Group's profit criteria.

The new restaurant businesses of Jerónimo Martins Group are located within JMRS. This is a new area within the Group, which is why the focus has been on the process of learning the activity, and on fulfilling the outlined launching plan.

By the end of 2009 there were a total of 61 stores, divided among the different concepts presented below.

Jeronymo

This Brand was one of the most dynamic last year as demonstrated in the opening of new units as well as in the redefinition of its product portfolio; several innovations were introduced which were quite accepted by its targeted customer. Five units were opened in 2009: two street stores in former Subway locations and three in shopping centres. Therefore, Jeronymo closed the year with 14 cafeterias and 12 kiosks.

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. In the year 2009 three units were opened, two kiosks were closed and one unit was remodelled. The Brand currently owns 33 stores and five franchised stores, amounting to a total of 38 units.

Ben & Jerry's

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 continue with just one store in Lisbon.

Chili's

October 2008 saw the first opening of a restaurant of this brand in Portugal (Casual Dining segment), in association with Brinker International.

During 2009 the Brand consolidated the concept within its targeted customer and in 2010, the opening of a second unit in the Greater Lisbon area is foreseen.

Hussel

In 2009, Hussel, a specialised chocolate and confectionary retail chain, continued to be recognised by its customers for the quality and innovation that has characterised its operation in the Portuguese market.

The chain posted a sales growth of 4.0% against 2008, helped by the opening of a store in Braga and the implementation of a remodelling programme which covered four establishments.

Hussel ended 2009 operating a total of 24 stores.

In 2010, the Company will continue to invest in consolidating its business model.

5. Outlook for 2010

5.1. International Macroeconomic Environment

Economic Perspectives

Expectations for economic growth in 2010 following the recession of 2008 and 2009 are of gradual recovery. The interventions by central banks and governments played a very important role, since they were essential to reduce the climate of uncertainty and systemic risk in the financial markets.

Nonetheless, the recovery in 2010 is expected to be slow and negatively influenced high unemployment levels.

Over the year the central banks and governments will progressively withdraw some of the measures to inject liquidity and phase out the tax stimuli introduced to tackle the economic recession.

Against that backdrop, the world economy is expected to grow 3.1% in 2010, according to the International Monetary Fund (IMF), following contraction of around 1.1% in 2009.

The advanced economies are, according to the same source, expected to grow 1.3% in 2010, since the recovery of consumption is expected to be slow, unemployment will rise and savings rates will remain at levels higher than in the pre-recession period. It is important to note that the majority of these countries suffered the effects of the mortgage crisis and have very high government deficits. The IMF estimates growth of 0.3% for the Eurozone in 2010.

In the U.S. economy, despite the improved economic situation that is beginning to be noted, the financial markets are still very vulnerable and this has a restrictive effect on consumption and investment. Moreover, the high unemployment rate and deflation risk are the main drivers underlying the 1.5% growth estimated in 2010 for this economy by the IMF.

The emerging economies will register the largest growth rates in 2010, reaching 5.1%.

Therefore, economic drive in 2010 will be particularly restricted. Access to credit for small and medium-sized enterprises and private individuals remains difficult.

Unemployment is forecast to increase in 2010, and this is identified as a major long-term problem since it will burden on consumer spending and budget deficits.

Financial Markets

The fact that the economic recovery is occurring sooner than expected had a very positive impact on most markets. The successive interventions of governments and Central Banks in the financial systems are equally important in raising confidence levels.

The gains in the capital markets at the end of 2009 should continue throughout 2010, clearly indicating the recovery of investor confidence.

Monetary Policies

The central banks and governments resorted to interventionist and non-standard measures to stimulate the financial market in order to combat the effects of the recession of 2009.

The main central banks will remove some of these measures in 2010, given the prospects for recovery. It is extremely important that this withdrawal is carried out in a timely and gradual manner so that the liquidity offered sinks in, thus curbing any threat to price stability over the medium- and long-term.

Following a negative market and reference interest rate differential in 2009 because of the liquidity injections by central banks, this differential is expected to gradually return to positive terrain in 2010.

Most governments should struggle with serious structural problems during 2010, especially in relation to budget deficits and public debt arising as a result of government measures to fight the crisis.

Energy and Non-Energy Raw Materials

During 2009, the main reference prices of raw materials had one of the best years of the decade. Price movements exceeded all forecasts, in a context of high volatility.

The performance of raw materials in 2009 was also influenced by the depreciation of the dollar over the year. The stabilisation and strength that the dollar is expected to display in 2010 will mean less pressure on the rise of raw material prices.

The raw materials most likely to rise in price in 2010, in the climate of economic recovery, are the metals for industry, gold and crude oil.

In the same way, a rise in energy consumption and hence an increase in demand for crude oil is to be expected. The Organization of the Petroleum Exporting Countries (OPEC) recently revised its forecast of world oil demand in 2010 upwards, which should increase 1%. The estimated price of a barrel of oil at the end of 2010 is about 90 dollars.

In 2010, the average annual inflation rate of consumer prices for all the most advanced economies is estimated at 1.1% and 4.9% for the emerging economies, according to the IMF.

5.2. International Sector Trends

The changes of behaviour and consumption patterns are a real fact. Consumers have become more price sensitive, more attentive to the private brands, less attracted by impulse buying and they are consuming less outside of home.

It is expected that all these changes will remain in place even after the period of economic recovery that has recently begun.

The rationalisation and optimization of assortments as well as the development and improvement to the supply of private brands play an important and comprehensive role in the strategy of most players in the sector.

This change converts the discount format into the growth leader and the format that best responds and adapts to the new state of affairs.

Furthermore, the concept of proximity and convenience will be developed during 2010, even among those banners that have not yet adopted this positioning.

Moreover, the emerging economies will play a core role in the Modern Food Distribution sector, as they will be the basis and focus of growth for the major international players, since consumption in the most advanced economies is heading for stagnation.

The pressure on the profit performance of companies in the slow recovery environment that will mark 2010 will force players to establish investment plans that are more cautious than those implemented in the last decade.

5.3. The Outlook for Portugal

Economic Perspectives

The latest projections for the Portuguese economy point to an improvement in economic activity based on the growth of private consumption and exports, which will be the main drivers of economic recovery.

Even so, the Portuguese Central bank considers that GDP growth for 2010, estimated at 0.7 percent, will be tempered by a gradual and moderate worldwide recovery of economic activity, and also there remains a high degree of uncertainty in relation to the outlook for the Portuguese economy due to the persistence of various risks.

Domestic demand is estimated to evolve from -2.9 percent in 2009 to 0.3 percent in 2010. It is also predictable that the inflation rate returns to positive terrain (0.7 percent), due to the projected evolution of the price of imports and also a certain degree of recovery to profit margins, in a context of wage moderation.

The unemployment rate should worsen despite the improved economic conditions, increasing to between 10 and 11 percent, which will limit labour's contribution to output growth.

Another worrying fact is related to the high level of indebtedness of businesses and households, which in the current climate of growing public debt and downgrades by rating agencies may mean less favourable financing conditions and higher risk premiums.

Modern Food Retail Market in Portugal

In 2010, Food Retail in Portugal should grow more than in 2009, though still at moderate levels.

In terms of competition, commercial aggressiveness is expected to increase, taking into account the difficulties experienced by some Food Retail players in 2009. This will create an advantageous environment to market concentration.

Considering the saturation levels that the market is beginning to display and which are clearly evident in some formats, openings should slow down.

Wholesale Food Market in Portugal

In terms of demand in 2010, it is envisaged that turnovers again decline and establishments of the HoReCa channel close down. The evolution of the crisis and the domestic economic climate are determining factors in the evolution of the sector. Consumption outside of home is expected to decline, especially in the first half of the year.

In traditional retail, which is always heavily influenced by the competitive dynamics of modern food retail, a favourable evolution is also not expected. Nonetheless, it is expected that the crisis climate will make consumers opt for proximity when making purchases, which could benefit the more convenient traditional retail and partly offset the expected loss.

Wholesalers, considering the prospects for independent retail and the restaurant segment in 2010, are going to be very pressurised by the overall downturn in demand, and the prospects for business growth are not good. The pressure on sales prices will grow and all players will have to fight to maintain their market share.

5.4. The Outlook for Poland

Economic Perspectives

It is expected that economic growth in Poland will accelerate in 2010. Analysts forecast that it will grow between 2% and 3%.

Private consumption will continue to make a positive contribution to growth, as was the case in 2009, even considering penalisation by the high level of unemployment.

In terms of monetary policy, the market expects the polish Central Bank to keep the reference rates stable, though some adjustments may be likely - probably upwards, though not expected to exceed one percentage point.

The Polish currency, which was very volatile in 2009, should stabilise and even appreciate in 2010.

Modern Food Retail Market in Poland

As a result of the macroeconomic scenario presented above, modern Food Retail should continue to grow, without overlooking the fact that consumers will continue to be very rational in their food expenditure, which will mainly benefit the discount formats.

There will be some consolidation of the Food Retail market in 2010, especially in the more fragmented formats. The major players should strengthen their market positions.

The main market players will continue to invest in organisation growth, with the limiting factors being cash flow availability and business development sites, the latter being most noted in relation to the larger formats.

5.5. The Outlook for Jerónimo Martins Business Activity

The medium and long term trends set by Jerónimo Martins in its strategy (see the "Strategy: Integrated Vision of Sustainable Development" chapter) remain valid.

In the current international and national macroeconomic climate, which is marked by many uncertainties except for one - that unemployment rates will remain quite high - Jerónimo Martins will continue to adopt financial prudence that fosters balance sheet soundness and maximises the return on its assets.

The Group believes, despite the constraints of the current economic environment, that the businesses it operates, with unique value propositions focused on price and operational efficiency, are well positioned to continue to readily withstand, if not benefit, from the adverse economic environment.

Food Retail Business in Portugal: Pingo Doce

The focus in 2010 will be on the creation of value now that the process of integration of the former Plus stores and internal reorganisation is complete, which culminated in the merger of structures and the medium-sized Feira Nova stores with the Pingo Doce stores.

The Group will rely on achieving that through the Pingo Doce Banner, which has a reputation and unique positioning in the market, namely:

• The quality of the Private Brands;
• A specialist in Perishables;
• The extremely competitive price positioning;
• The excellent balance between variety and store environment.

The new communication strategy started at the end of 2009 will strengthen this unique positioning of the Banner compared to its competitors, reflecting the values of Quality and Price.

The permanent innovation of operations and commercial areas will include new businesses, restaurants and take-away, which will be complementary pillars of this differentiation strategy.

The challenge of continuing to gain market share will also be relevant in 2010, in order to carry forward the strategy initiated in 2002 of growth in like-for-like sales above the market average. The investment in new stores will remain selective, ensuring a presence in locations identified as priority.

Wholesale Business in Portugal: Recheio

In 2010, Recheio intends to continue to strengthen its leadership position in the wholesale market and sustain its growth, by investing in a sound and consistent manner in the development of its perishables business and the soundness of its pricing policy.

Additionally Recheio will open new stores to cover new areas of influence, and also promote its range of products among new customer segments, especially in the HoReCa channel.

Throughout 2010 it will continue to seek to optimise its business processes and solutions that will allow it to strengthen the competitive advantage that it has in cost leadership.

The Company will also be attentive to all new growth opportunities that arise, whether among the groups of customers and markets where it currently operates or outside of those areas.

Food Retail Business in Poland: Biedronka

The priority of Jerónimo Martins in Poland will continue to be the organic growth of Biedronka, keeping the rate of store openings of recent years and strengthening its leadership position in that country's Food Retail market. The Group plans to open a minimum of 150 stores in 2010.

The focus in 2010 will once again be on like-for-like sales growth, which will be achieved through the combination of economic growth and focus on customers, entailing a supply that is always tailored to their needs and encapsulated in the market's most competitive quality-price package.

Price leadership will remain a priority, achieved either by scale as a result of growth or the continued drive for operational efficiency improvement.

Manufacturing and Services in Portugal: Unilever Jerónimo Martins, Gallo Worldwide, Jerónimo Martins Distribuição de Produtos de Consumo and Jerónimo Martins Restauração e Serviços

The main priority of the Manufacturing area will continue to be investment in marketleading brands, both in price and innovation, in order to permit the profitability of assets and the strengthening of the market share of brands comprising the current portfolio.

Gallo Worldwide will continue to give priority to the search for new markets, with a more focused strategy as the result of the spin-off of this new business unit.

Jerónimo Martins Distribuição will seek to extend and provide sustainability for its portfolio of represented brands, while Jerónimo Martins Restauração e Serviços continues to study business opportunities in the food service sector.

Development of New Businesses

The diversification and development of the portfolio of Group assets is also one of the most important strategic goals.

The Group has identified various forms of growth, and it continues to channel its focus primarily on geographical diversification in the Distribution area and Retail formats focused on creating value, and additionally on growth opportunities in other areas of the food world and on strategic investments that will improve the operational efficiency of the current portfolio.

In an international climate that has not fulfilled the promise of economic recovery, Jerónimo Martins continues to expect quite a demanding year. The Group, driven by the high performance level demonstrated by its portfolio and by the ability of its management team, will proceed with a strategy guided by a commitment to ambitious targets.

Sources:

IMF World Economic Outlook; European Commission, Eurostat; Reuters; BPI Economic and Financial Studies; Bank of Portugal Economic Bulletins; Portuguese Ministry of Finance; Portuguese Catholic University Thematic Reports – NECEP/CEA FCEE; National Statistics Institute; General Department of Economic Activity; National Bank of Poland Economic Bulletins; Polish Ministry of Finance; Central Statistical Office (GUS); Citigroup; Citibank Handlowy; BRE Bank; IG Market; Planet Retail; Deloitte; TNS; Nielsen; DBK; Girasic; PMR; APED; Uniarme; AREST; CIES.

6. Events After the Balance Sheet Date

On the dawn of February 20th, 2010 the Island of Madeira was stuck by a heavy storm, causing the destruction of a large number of infrastructures, as well as the regretful loss of human lives.

The Jerónimo Martins Group, present in the region through the Pingo Doce supermarket chain, also experienced various asset damages. To the date of this Report's conception, a clear evaluation of immediate and long-term asset impact is still in process.

To this date a total of two stores are closed, completely inoperative and with no predicted reopening date. A further two stores were also affected though in smaller scale. In accordance with the Group's risk management policy, all affected stores have insurance coverage and are already being evaluated by the respective experts.

7. Results Appropriation Proposal

In the financial year 2009, Jerónimo Martins, SGPS, S.A. declared consolidated profits of 200,349,003 euros and a profit in individual accounts of 36,496,485.23 euros.

The Board of Directors proposes that the net profits be applied in the following manner:

• Legal Reserve ………………………. 1,824,824.26 euros
• Retained Earnings ……………….. 34,671,660.97 euros

In accordance with the policy of dividend distribution announced several years ago, and described in "Dividend Distribution Policy" included in the Corporate Governance chapter, the Board of Directors proposes a distribution to Shareholders of 89,866,093.46 euros, an amount which corresponds to 44.9% of consolidated net profit, and which is to be taken from the free reserves available for distribution.

This proposal represents a gross dividend payment of 0.143 euros per share, excluding own shares in the portfolio.

Lisbon, 2nd March 2010

The Board of Directors

8. Consolidated Management Report Annex

INFORMATION CONCERNING STAKES HELD IN THE COMPANY BY MEMBERS OF THE BOARD OF DIRECTORS AND STATUTORY AUDITOR AS AT 31 DECEMBER, 2009

(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		Increases during the year Decreases during the year		Held on 31.12.08		Held on 31.12.09
	Shares	Bonds	Shares	Bonds	Shares	Bonds	Shares	Bonds
Elísio Alexandre Soares dos Santos 2	88,355	-	64,278	-	-	-	152,633	-
José Manuel da Silveira e Castro Soares dos Santos	-	-	-	-	-	-	-	-
Luís Maria Viana Palha da Silva	-	-	-	-	-	-	-	-
Pedro Manuel de Castro Soares dos Santos	198,305	-	-	-	-	-	198,305	-
António Mendo Castel-Branco Borges 1	-	-	-	-	-	-	-	-
Artur Eduardo Brochado dos Santos Silva	7,680	-	-	-	-	-	7,680	-
Marcel Lucien Corstjens 3	n.a.	n.a.	-	-	-	-	-	-
Hans Eggerstedt 1	19,700	-	-	-	-	-	19,700	-
Nicolaas Pronk	-	-	-	-	-	-	-	-
Rui Manuel de Medeiros d`Espiney Patrício 1	-	-	-	-	-	-	-	-

BOARD OF DIRECTORS

1 They also belong to the Audit Committee.

2 The 64,278 shares were bought between 21/01/2009 and 10/02/2009, at an average price of 3.77 euros each.

3 Only appointed to the Shareholders' Meeting on 7 April, 2009.

STATUTORY AUDITOR

As at 31 December, 2009, 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 TRANSACTIONS MADE BY PERSONS DISCHARGING MANAGERIAL RESPONSABILITIES AND PEOPLE CLOSELY CONNECTED WITH THEM

Under the terms of paragraph 7 of Article 14 of CMVM Regulation 5 / 2008, Jerónimo Martins, SGPS, S.A. informs about all the transactions made by persons discharging managerial responsibilities as at 31 December, 2009.

Date Nature Code ISIN Volume Price Local
08-01-2009 Acquisition PTJMT0AE0001 10,000 3.71 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 1,496 3.70 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 5,167 3.70 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 1,861 3.70 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 1,476 3.70 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 1,190 3.68 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 300 3.68 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 893 3.68 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 2,617 3.68 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 872 3.68 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 4,128 3.68 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 1,204 3.65 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 3,416 3.65 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 342 3.65 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 5,000 3.65 Euronext Portugal
08-01-2009 Acquisition PTJMT0AE0001 38 3.65 Euronext Portugal
12-01-2009 Acquisition PTJMT0AE0001 1,619 3.69 Euronext Portugal
12-01-2009 Acquisition PTJMT0AE0001 3,500 3.69 Euronext Portugal
13-01-2009 Acquisition PTJMT0AE0001 3,255 3.55 Euronext Portugal
13-01-2009 Acquisition PTJMT0AE0001 1,745 3.55 Euronext Portugal
13-01-2009 Acquisition PTJMT0AE0001 624 3.54 Euronext Portugal
13-01-2009 Acquisition PTJMT0AE0001 4,376 3.54 Euronext Portugal
14-01-2009 Acquisition PTJMT0AE0001 4,824 3.42 Euronext Portugal
14-01-2009 Acquisition PTJMT0AE0001 176 3.42 Euronext Portugal
14-01-2009 Acquisition PTJMT0AE0001 3,002 3.46 Euronext Portugal
14-01-2009 Acquisition PTJMT0AE0001 1,998 3.46 Euronext Portugal

Sociedade Francisco Manuel dos Santos, SGPS, S.A.

E. Alexandre Soares dos Santos

Date	Nature	Code ISIN	Volume	Price
21-01-2009	Acquisition	PTJMT0AE0001	5,000	3.63
22-01-2009	Acquisition	PTJMT0AE0001	5,000	3.59
29-01-2009	Acquisition	PTJMT0AE0001	10,000	3.93
03-02-2009	Acquisition	PTJMT0AE0001	5,000	3.85
06-02-2009	Acquisition	PTJMT0AE0001	10,000	3.85
10-02-2009	Acquisition	PTJMT0AE0001	10,000	3.79
10-02-2009	Acquisition	PTJMT0AE0001	10,000	3.71
10-02-2009	Acquisition	PTJMT0AE0001	2,261	3.67
10-02-2009	Acquisition	PTJMT0AE0001	7,017	3.68

LIST OF SHAREHOLDERS WITH QUALIFYING STAKES AS AT 31 DECEMBER, 2009

(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	353,119,573	56.114%	56.190%
Asteck, S.A. 2
Directly	62,929,500	10.000%	10.014%

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.

III. Consolidated Financial Statements

CONSOLIDATED INCOME STATEMENT BY FUNCTIONS FOR THE YEARS ENDED 31 DECEMBER 2009 AND 2008

	Notes	December 2009	December 2008	4th Quarter 2009	4th Quarter 2008
Sales and services rendered	3	7,317,108	6,893,737	1,998,789	1,867,999
Cost of sales		(5,925,918)	(5,595,128)	(1,629,409)	(1,519,700)
Supplementary income and costs	5	326,544	283,493	106,957	91,795
Gross profit		1,717,734	1,582,102	476,337	440,094
Distribution costs	6	(1,201,820)	(1,108,154)	(326,304)	(300,046)
Administrative costs	6	(156,178)	(158,557)	(39,425)	(41,831)
Exceptional operating profits/losses	11.1	(9,895)	(12,576)	(3,687)	(12,744)
Operating profit		349,841	302,815	106,921	85,473
Net financial costs	8	(70,769)	(78,728)	(17,467)	(26,167)
Profit in associated companies	16	333	318	257	259
Gains/Losses in other investments	11.2	(514)	(2,294)	(514)	(637)
Profit before taxes		278,891	222,111	89,197	58,928
Income tax	10	(55,624)	(46,131)	(17,255)	(8,157)
Profit before minority interests		223,267	175,980	71,942	50,771
Attributable to:
Minority interests		22,918	12,764	10,263	8,961
Jerónimo Martins Shareholders		200,349	163,216	61,679	41,810
Basic and diluted earnings per share - euros	24.4	0.3188	0.2597	0.0981	0.0665

Euro thousand

To be read with the attached notes to the consolidated financial statements

CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2009 AND 2008

			Euro thousand
	Notes	2009	2008
Assets
Tangible assets	12	2,002,831	1,874,863
Investment properties	14	63,283	64,509
Intangible assets	13	835,368	826,721
Investments in associated Companies	16	1,118	854
Available-for-sale financial investments	17	7,528	7,470
Trade debtors and deferred costs	20	72,305	66,629
Derivative financial instruments	15	351	1,027
Deferred tax assets	19.1	69,021	63,170
Total non-current assets		3,051,805	2,905,243
Inventories	18	334,478	385,653
Taxes receivable	19.3	22,335	34,736
Trade debtors, accrued income and deferred costs	20	190,793	172,764
Derivative financial instruments	15	1,515	1,037
Cash and cash equivalents	21	223,501	227,132
Total current assets		772,622	821,322
Total assets		3,824,427	3,726,565
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	55,184	58,295
Retained earnings		77,189	(54,162)
		778,058	649,818
Minority interests		287,636	281,307
Total Shareholders' equity		1,065,694	931,125
Borrowings	25	756,361	739,333
Derivative financial instruments	15	30,137	19,664
Employee benefits	26	27,738	28,195
Deferred profits- state grants		959	984
Provisions for risks and contingencies	27	18,480	25,892
Deferred tax liabilities	19.1	88,892	54,726
Total non-current liabilities		922,567	868,794
Trade creditors, accrued costs and deferred income	28	1,647,490	1,560,042
Derivative financial instruments	15	3,084	-
Borrowings	25	124,495	308,344
Taxes payable	19.3	61,021	58,178
Deferred profits- state grants		76	82
Total current liabilities		1,836,166	1,926,646
Total Shareholders' equity and liabilities		3,824,427	3,726,565

To be read with the attached notes to the consolidated financial statements

JERÓNIMO MARTINS, SGPS, S.A.

CONSOLIDATED STATEMENT OF GAINS AND LOSSES RECOGNISED IN EQUITY

				Euro thousand
	December 2009	December 2008	4th Quarter 2009	4th Quarter 2008
Currency translation differences	9,166	(58,649)	13,261	(74,990)
Fair value of cash flow hedging	(5,504)	(2,725)	3,125	(2,490)
Revaluation of fixed assets	(5,204)	19,983	(5,204)	19,476
Fair value of hedging instruments on foreign operations	(3,057)	9,351	(4,817)	15,232
Fair value of available-for-sale financial investments	58	(1,217)	(324)	-
Gains/losses directly recognised in equity	(4,541)	(33,257)	6,041	(42,772)
Net profit	223,267	175,980	71,942	50,771
Total gains/losses recognised	218,726	142,723	77,983	7,999
Attributable to:
Minority interests	21,358	9,454	10,790	5,439
Jerónimo Martins Shareholders	197,368	133,269	67,193	2,560

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

					Shareholders' equity attributable to Shareholders of Jerónimo Martins, SGPS, S.A.
	Notes	Share Capital	Share Premium	Own Shares	Fair value and other reserves	Retained Earnings	Total	Minority Interests	Shareholders' Equity
Balance Sheet at 1st January 2008		629,293	22,452	(6,060)	92,814	(161,620)	576,879	287,326	864,205
Equity changes in 2008
Currency translation differences in 2008	23.1				(58,649)		(58,649)		(58,649)
Revaluation of fixed assets: - from 2008	23.1				21,958		21,958	(1,975)	19,983
- disposals of revaluated fixed assets					(3,982)	3,982	-		-
- land transfer to investment property					(590)	590	-		-
Fair value of cash flow hedging	23.1				(1,390)		(1,390)	(1,335)	(2,725)
Fair value of hedging instruments on foreign operations	23.1				9,351		9,351		9,351
Fair value of available-for-sale financial investments	23.1				(1,217)		(1,217)		(1,217)
Gains/losses directly recognised in equity		-	-	-	(34,519)	4,572	(29,947)	(3,310)	(33,257)
Net profit in 2008		-	-	-	-	163,216	163,216	12,764	175,980
Total gains/losses recognised during the year		-	-	-	(34,519)	167,788	133,269	9,454	142,723
Dividends						(60,330)	(60,330)	(13,251)	(73,581)
Minority interests decrease due to capital reduction								(2,222)	(2,222)
Balance Sheet at 31st December 2008		629,293	22,452	(6,060)	58,295	(54,162)	649,818	281,307	931,125
Equity changes in 2009
Currency translation differences in 2009	23.1				9,166		9,166		9,166
Revaluation of fixed assets: - from 2009 - land transfer to investment property	23.1				(5,245) (130)	130	(5,245) -	41	(5,204) -
Fair value of cash flow hedging	23.1				(3,903)		(3,903)	(1,601)	(5,504)
Fair value of hedging instruments on foreign operations	23.1				(3,057)		(3,057)		(3,057)
Fair value of available-for-sale financial investments	23.1				58		58		58
Gains/losses directly recognised in equity		-	-	-	(3,111)	130	(2,981)	(1,560)	(4,541)
Net profit in 2009		-	-	-	-	200,349	200,349	22,918	223,267
Total gains/losses recognised during the year		-	-	-	(3,111)	200,479	197,368	21,358	218,726
Dividends	23.4					(69,128)	(69,128)	(15,029)	(84,157)
Balance Sheet at 31st December 2009		629,293	22,452	(6,060)	55,184	77,189	778,058	287,636	1,065,694

To be read with the attached notes to the consolidated financial statements

Euro thousand

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEARS ENDED 31 DECEMBER 2009 AND 2008

			Euro thousand
	Notes	2009	2008
Operating Activities
Cash received from Customers		8,178,060	7,715,469
Cash paid to Suppliers and Employees		(7,525,830)	(7,030,507)
Cash generated from operations	22	652,230	684,962
Interest paid		(79,577)	(98,738)
Income taxes paid		(28,617)	(37,960)
Cash Flow from operating activities		544,036	548,264
Investment activities
Disposals of tangible assets		14,608	60,405
Disposals of intangible assets		2,316	-
Disposals of available-for-sale financial investments and investment property		12	5,708
Interest received		2,420	8,379
Dividends received		81	212
Acquisition of group and associated companies		-	(424,359)
Acquisition of tangible assets		(313,862)	(443,899)
Acquisition of available-for-sale financial investments and investment property		(1,885)	(541)
Acquisition of intangible assets		(13,185)	(27,280)
Cash flow from investment activities		(309,495)	(821,375)
Financing activities
Received from other non-current loans		175,786	346,566
Minority interests payment due to capital reduction		-	(2,222)
Loans paid		(331,575)	(83,563)
Dividends paid	23.4	(84,157)	(73,581)
Cash Flow from financing activities		(239,946)	187,200
Net changes in cash and cash equivalents		(5,405)	(85,911)
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of the year		227,132	268,639
Net changes in cash and cash equivalents		(5,405)	(85,911)
Effect of disposal/acquisition of subsidiaries	4	(1,114)	51,942
Effect of currency translation differences		2,668	(10,708)
Effect of available-for-sale financial assets revaluation		220	3,170
Cash and cash equivalents at the end of the year	21	223,501	227,132

To be read with the attached notes to the consolidated financial statements

CONSOLIDATED CASH FLOW STATEMENT FOR THE INTERIM PERIOD

				Euro thousand
	December	December	4th Quarter	4th Quarter
	2009	2008	2009	2008
Cash Flow from operating activities	544,036	548,264	172,387	206,445
Cash Flow from investment activities	(309,495)	(821,375)	(88,795)	(416,812)
Cash Flow from financing activities	(239,946)	187,200	(80,124)	95,731
Cash and cash equivalents changes	(5,405)	(85,911)	3,468	(114,636)

	Index to the Notes to the Consolidated Financial Statements	Page
1	Activity 107
2	Accounting policies 107
3	Segments reporting 121
4	Businesses acquisitions/disposals and changes to the consolidation scope 122
5	Supplementary income and costs 123
6	Distribution and administrative costs 123
7	Staff costs 123
8	Net financial costs 124
9	Financial instruments 125
10	Income tax recognised in the income statement 125
11	Exceptional operating profits/losses and gains/losses in other investments 126
12	Tangible Assets 126
13	Intangible Assets 129
14	Investment Property 130
15	Derivative financial instruments 131
16	Investments in associated companies 132
17	Available-for-sale financial investments 133
18	Inventories 133
19	Taxes 133
20	Trade debtors, accrued income and deferred costs 135
21	Cash and cash equivalents 135
22	Cash generated from operations 136
23	Capital and reserves 137
24	Earnings per share 138
25	Borrowings 138
26	Employee benefits 140
27	Provisions and adjustments to the net realisable value 143
28	Trade creditors, accrued costs and deferred income 143
29	Guarantees 143
30	Operational lease 144
31	Capital commitments 144
32	Contingencies 144
33	Related parties 147
34	Group companies 148
35	Interests in joint ventures and associates 149
36	Additional information requested by law 150
37	Events after the balance sheet date 151

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 53,797 people (53,375 in 2008).

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 (2008: 629,293,220 shares), and all shares have a nominal value of one euro.

The Board of Directors approved these consolidated financial statements on 2nd March 2010.

2 Accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are as follows. These policies were consistently applied in comparative periods, except when otherwise stated.

2.1. Basis for preparation

All amounts are shown in thousand euros (EUR thousand) unless otherwise stated.

The amounts presented for quarters, and the corresponding changes are not audited.

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, financial investments held for trading 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

The Group adopted in 2009 a set of standards and amendments to standards issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), which are mandatory in 2009 and already adopted by the European Union.

IFRS 8 – Operating Segments, replaces IAS 14 – Segment Reporting, establishes the principles for disclosure of information about operating segments of an entity, under which segment information is presented on the same basis of information reported internally by management. Although the changes would lead to additional disclosure of information regarding each operating segment, does not change significantly the way they have been presented.

The amendments to IAS 1 – Presentation of Financial Statements require that all changes to shareholders' equity to be presented separately from those relating to minority interests. This change has no impact on the Group's Financial Statements, because they had already been incorporated in previous years.

The amendments to IAS 23 – Borrowing Costs require that borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, be considered as part of the cost of that asset. This amendment has no impact on the Group's Financial Statements, since during the year 2009 there were no qualifying assets or funds taken that qualify for capitalization.

The amendments to IFRS 2 – Share-Based Payment provide clarification on what are vesting conditions, how to account for non-vesting conditions and how to account for cancellations of a shared-based payment arrangement by the entity or the counterpart. This change has no impact on the Group's Financial Statements since it has no share based payment plans.

IFRIC 13 – Customer Loyalty Programmes, clarifies that where goods or services are sold together with a customer loyalty incentive, the arrangement is a multiple-element arrangement and the consideration receivable from the customer is allocated between the components of the arrangement using fair values. Although this interpretation is applied in the business sector of Jerónimo Martins, according to the current strategy followed by the Group companies, there are no programs for customer loyalty falling under this interpretation.

IFRIC 14 – IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. This interpretation provides guidance on assessing the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. This interpretation is not applicable to the Group, neither the existing plans are subject to minimum funding requirements.

In 2009 were adopted by the European Commission a set of interpretations issued by IFRIC, which have no significant impact on the Financial Statements, or do not have application to the Group's activities.

IFRIC 12 – Service Concession Arrangements provides guidance on how service concession operators should recognise in the accounts the infrastructure construction obligations undertaken in connection with the service concession agreement. This interpretation was adopted by the Regulation No 254/2009 and is mandatory for accounting periods beginning after March 2009.

IFRIC 15 – Agreements for Construction of Real Estates is an interpretation that provides guidance on when revenue from the construction of real estate should be recognised. This interpretation was adopted by the Regulation No 636/2009 and is mandatory for accounting periods beginning after 31 December 2009.

IFRIC 16 – Hedges of a Net Investment in a Foreign Operation is an interpretation that provides clarification on how to apply the requirements of IAS 21 and IAS 39 in cases when an entity hedges the foreign currency risk arising from its net investment in foreign operations including differences between the functional currencies other than the reporting currency and hedging instruments held by other Group companies. This interpretation was adopted by the Regulation No 460/2009 and is mandatory for accounting periods beginning after 30 June 2009.

IFRIC 17 – Distribution of Non-cash Assets to Owners is an interpretation that provides clarification and guidance on the accounting treatment of distribution of non-cash assets, as dividends to its shareholders. This interpretation was adopted by the Regulation No 1142/2009 and is mandatory for accounting periods beginning after 31 October 2009.

IFRIC 18 – Transfers of Assets from Customers clarifies the accounting treatment of transfers of an item of property, plant and equipment from customers, and therefore the associated revenue. This interpretation was adopted by the Regulation No 1164/2009 and is mandatory for accounting periods beginning after 31 October 2009.

Also in 2009 the EU adopted a several changes to International Accounting Standards issued by the IASB, based on the assessment made by the Group, these changes do not have a significant impact on the Group's Financial Statements and only those that were mandatory from 1 January 2009, were adopted.

Regulation No 53/2009 adopted the amendments to IAS 32 – Financial Instruments: Presentation and IAS 1 – Presentation of Financial Statements, which require that certain instruments issued by companies that are currently classified as liabilities, when they meet specific conditions, be classified as equity. Its application is mandatory for accounting periods beginning after 31 December 2008 and had no impact on the Group's Financial Statements.

Regulation No 69/2009 adopted the amendments to IFRS 1 – First-time Adoption of IFRS and IAS 27 – Consolidated and Separated Financial Statements, which establish the methods of valuation of investments in a subsidiary, jointly controlled entity or associated, when first-time adoption of IFRS, also clarifies the method to determine the deemed cost of an investment, which may be at fair value on the date of transition or the carrying amount for which was previously recorded. Its application is mandatory for accounting periods beginning after 31 December 2008 and has no application in the Group.

Regulation No 70/2009 adopted the improvements to the International Financial Reporting Standards, which had been published by the IASB in May 2008, standards IFRS 5, IFRS 7, IAS 1, IAS 8, IAS 10, IAS 16, IAS 18, IAS 19, IAS 20, IAS 23, IAS 27, IAS 28, IAS 29, IAS 31, IAS 34, IAS 36, IAS 38, IAS 39, IAS 40 and IAS 41. These improvements include 35 amendments that resulted in accounting changes for presentation, recognition or measurement purposes, as well as terminology changes and amendments to the wording. Its application is mandatory for accounting periods beginning after 31 December 2008, except the changes to IFRS 5, whose implementation are mandatory for accounting periods beginning after 30 June 2009. The adoption of these improvements did not result in significant impacts on the Group's Financial Statements.

Regulation No 494/2009 adopted the amendments to IAS 27 – Consolidated and Separate Financial Statements, which require that the effects of all transactions with non-controlling interests to be recorded in equity, if there is no change in control and these transactions will no longer result in goodwill or gains and losses. Its application is mandatory for accounting periods beginning after 30 June 2009.

Regulation No 495/2009 adopted the amendments to IFRS 3 – Business Combinations and was subject to significant changes, highlighting the fact that all payments to purchase a business are to be recorded at fair value and all expenses incurred with the acquisitions should be recognised as cost of the exercise. Its application is mandatory for accounting periods beginning after 30 June 2009.

Regulation No 824/2009 adopted the amendments to IAS 39 – Financial Instruments: Recognition and Measurement and IFRS 7 – Financial Instruments: Disclosures, clarify the effective date and transition measures of the amendments to those standards issued by the IASB on 13 October 2008. These changes have no impact on the Group.

Regulation No 839/2009 adopted the amendments to IAS 39 – Financial Instruments: Recognition and Measurement, which clarify the application of hedge accounting to the inflation component of financial instruments and to the option contracts when they are used as a hedging instrument. Its application is mandatory for accounting periods beginning after 30 June 2009.

Regulation No 1136/2009 adopted amendments to IFRS 1 – First-time Adoption of International Financial Reporting Standards, which remove from the standard some outdated transition guidance and has been restructured to make easier to use and amend in the future. Its application is mandatory for accounting periods beginning after 31 December 2009.

Regulation No 1165/2009 adopted amendments to IFRS 4 – Insurance Contracts and IFRS 7 – Financial Instruments: Disclosures, which aim at requiring enhanced disclosures about fair value measurements and liquidity risk associated with financial instruments. Its application is mandatory for the accounting periods which began after 31 December 2008, by which those amendments were adopted by the Group in the financial year 2009.

Regulation No 1171/2009 adopted amendments to the IFRIC 9 – Reassessment of Embedded Derivatives and IAS 39 – Financial Instruments: Recognition and Measurement, which clarify the treatment of derivative financial instruments embedded in other contracts when a hybrid financial asset is reclassified out of the fair value through profit or loss category. Its application is mandatory for accounting periods which began after 31 December 2008, having no impact on the Group's Financial Statements.

Regulation No 1293/2009 adopted the amendments to IAS 32 – Financial Instruments: Presentation, clarifying how to account for certain rights when the issued instruments are denominated in a currency other than the functional currency of the issuer. Its application is mandatory for accounting periods beginning after 31 January 2010.

In addition to the standards already adopted by the European Union, IASB and IFRIC issued in 2009, the following standards and interpretations:

In April 2009, IASB issued amendments to IFRS, with improvements made to IFRS 2, IFRS 5, IFRS 8, IAS 1, IAS 7, IAS 17, IAS 18, IAS 36, IAS 38, IAS 39, IFRIC 9 and IFRIC 16.

In June 2009, IASB issued an amendment to IFRS 2 – Share-Based Payments, clarifying the accounting treatment for group cash-settled share-based payment transactions in the individual financial statements of the entity receiving the goods or services when that entity has no obligation to settle the share-based payment transaction.

In July 2009, IASB issued an amendment to IFRS 1 – First-time Adoption of International Financial Reporting Standards that introduces additional exemptions for entities applying the standards for first time.

In November 2009, IASB issued an amendment to IAS 24 – Related Parties Disclosure, simplifying the definition of related parties, eliminating inconsistencies and clarifying its intended meaning.

In November 2009, IFRIC issued an amendment to IFRIC 14 – IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction, clarifying the accounting treatment of prepayments done on account of mandatory minimum funding contribution.

In November 2009, IASB issued the new standard IFRS 9 – Financial Instruments: Classification and Measurement, this standard partially replaces IAS 39.

In November 2009, IFRIC issued a new interpretation IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments, clarifying the accounting treatment when a financial liability is renegotiated resulting in the delivery of an equity instrument issued by the entity.

2.2. Basis of consolidation

Reference dates

The consolidated financial statements include, as of 31 December 2009, 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 cash flow hedges or 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 2009	Average rate for the year
Polish Zloty (PLN)	€ 0.2436	€ 0.2318
US Dollar (USD)	€ 0.6977	-

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. However, in the case of a hedge of a forecasted transaction that results in the recognition of a non-financial asset (for example: inventory), the gains or losses previously deferred in equity are transferred and included in the initial measurement of the asset.

If a 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).

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 revaluated 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.

Leased assets are depreciated over the shorter of the useful life of the asset and the lease term.

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 and derivative financial instruments, 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 and 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 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, 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 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. Thus, the assumptions used in the evaluation of each asset vary according to its location and technical characteristics, using an average yield between 8,5% and 9%.

Changes to fair value of investment property are recognised in the income statement, in Gains/Losses in other investments, 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 amounts to be received regarding goods sold or services rendered in the ordinary course of the business. They are initially recognised 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 in liabilities.

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 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.

It is determined the recoverable amount of assets with indication of potential impairment loss. Whenever the carrying value of an asset, or the cash-generating 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.

Regarding cash-generating units in operation for less than a certain time period (2 to 3 years, depending on the business segment), the Group makes impairment tests, however since the respective businesses have not yet reached sufficient maturity, impairments losses are recognised when there are unequivocal indicators that its recoverability is considered remote.

The total assets in the above-mentioned situation, corresponds to a current investment amounting EUR 679,330 thousand, which includes mostly equipment related to the operational activity of stores and improvements made in leasehold property.

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. Impairment losses on capital instruments recognised as results will not be reversed through the income statement.

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, they 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.

Other Benefits

Seniority Awards

The program of seniority awards existing in the Group comprises a component of defined contribution and a defined benefit.

The defined contribution component consists of the attribution of a life insurance and a contribution to a supplementary retirement plan, to the employees covered by this program, starting from a specific number of years of service.

These benefits are awarded only when employees reach the age defined in the program and the costs related to this component are recognized in the year to which they relate.

The component of defined benefit consists of the attribution of an award in the year that employees complete a number of years of service. Accordingly, the responsibilities for this component are determined annually based on actuarial valuations, carried out by a specialized and independent entity.

The cost of current services as well as actuarial gains or losses is recognised as cost of 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.

Provisions for restructuring include all liabilities to be paid with the implementation of the plan, including employee termination payments. These provisions do not include any future operating losses.

2.19 Suppliers and other creditors

Suppliers and other creditors' balances are obligations to pay goods or services that have been acquired in the ordinary course of the business. They are initially recognised 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

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operational leases. Payments made for these contracts are recognised in the income statement on a straight-line basis over the period of the leases.

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 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 used. 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

Operating segments are reported consistently with the internal reporting that is provided to the Governing Bodies, including the Executive Committee and Board of Directors. Based on this report, the Governing Bodies evaluate the performance of each segment and allocate the available resources.

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 on the elaboration of the financial statements

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. A market is regarded as active if quoted prices are readily and regularly available from an exchange, broker or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis.

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).

Borrowings

The fair value of borrowings 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.

Fair Value Hierarchy

The following table shows the Group's financial assets and financial liabilities that are measured at fair value at 31 December 2009, according with the following hierarchy levels as established in IFRS 7:

• Level 1: The fair value of financial instruments is based on quoted prices in active and liquid markets at balance sheet date. This level includes essentially equity investments, debt investments (ex: NYSE Euronext) and quoted forwards in active markets;
• Level 2: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Main inputs used on these valuation models are based on observable market data. This level includes essentially the over-the-counter derivatives entered by the Group;
• Level 3: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques, and main inputs are not based on observable market data.

	2009	Level 1	Level 2	Level 3
Assets measured at fair value
Trading Financial Assets
Trading Derivatives	130	-	130	-
Derivatives used for hedging	1,736	-	1,736	-
Available-for-sale financial assets
Equity Investments	1,648	1,648	-	-
Total Assets	3,514	1,648	1,866	-
Liabilities measured at fair value
Trading Financial Liabilities
Trading Derivatives	564	-	564	-
Derivatives used for hedging	32,657	-	32,657	-
Total Liabilities	33,221	-	33,221	-

2.27 Financial instruments by category

	Held for Trade derivatives	Derivatives defined as hedging instruments	Held for Trade financial assets	Borrowings and accounts receivable	Available-for sale financial investments	Other financial liabilities	Total assets and financial liabilities
2009
ASSETS
Cash and cash equivalents				223,501			223,501
Available-for-sale financial investments					7,528		7,528
Debtors, accruals and deferrals				179,268			179,268
Derivative financial instruments	130	1,736					1,866
TOTAL FINANCIAL ASSETS	130	1,736	-	402,769	7,528	-	412,163
LIABILITIES
Borrowings						880,856	880,856
Derivative financial instruments	564	32,657					33,221
Creditors, accruals and deferrals						1,575,710	1,575,710
TOTAL FINANCIAL LIABILITIES	564	32,657	-	-	-	2,456,566	2,489,787
2008
ASSETS
Cash and cash equivalents			58,170	168,962			227,132
Available-for-sale financial investments					7,470		7,470
Debtors, accruals and deferrals				162,426			162,426
Derivative financial instruments		2,064					2,064
TOTAL FINANCIAL ASSETS	-	2,064	58,170	331,388	7,470	-	399,092
LIABILITIES
Borrowings						1,047,677	1,047,677
Derivative financial instruments	6,175	13,489					19,664
Creditors, accruals and deferrals						1,498,618	1,498,618
TOTAL FINANCIAL LIABILITIES	6,175	13,489	-	-	-	2,546,295	2,565,959

3 Segments reporting

Segment information is presented in accordance with internal reporting to Management. Based on this report, the Management evaluates the performance of each segment and allocates the available resources.

Management monitors the performance of the business based on a geographical and business nature perspective. In accordance with this, were identified the segments Portugal Retail, Poland Retail, Portugal Cash & Carry and Portugal Manufacturing. Apart from these, there are also other businesses, but due to their reduced materiality are not reported separately.

Business segments:

• Portugal Retail: comprises the business units of JMR (Pingo Doce supermarkets and Feira Nova hypermarkets);
• Portugal Cash & Carry: includes the wholesale business unit Recheio;
• Poland Retail: the business unit with the brand Biedronka;
• Portugal Manufacturing: includes the joint-venture with Unilever, consolidated by the proportional method;
• Others, eliminations and adjustments: includes i) the business units with reduced materiality (Madeira, Marketing Services and Representations, Restaurants and pharmacies in Poland), ii) the Holding companies and iii) the Group's consolidation adjustments.

Management evaluates the performance of segments based on the Earnings Before Interest and Taxes (EBIT). This indicator excludes the effects of non-recurrent results.

Reconciliation between EBIT and Operational Result

	December 2009	December 2008
EBIT	359,736	315,391
Non recurrent results	(9,895)	(12,576)
Operational Result	349,841	302,815

Detailed Information by Business Segments at December 2009 and 2008

	Portugal Retail		Portugal Poland Retail Cash & Carry		Portugal Manufacturing		Others, eliminations and adjustments		Total JM Consolidated
	2009	2008	2009	2008	2009	2008	2009	2008	2009	2008	2009	2008
Net Sales and Services	2,708,311	2,503,354	688,544	654,484	3,724,684	3,520,934	237,755	253,868	(42,186)		(38,903) 7,317,108	6,893,737
Inter-segments	201,277	187,198	1,085	1,023	469	323	41,281	41,996	(243,717)	(230,230)	395	310
External Customers	2,507,034	2,316,156	687,459	653,461	3,724,215	3,520,611	196,474	211,872	201,531		191,327 7,316,713	6,893,427
Operational Cash-Flow (EBITDA)	175,664	154,453	41,390	39,984	271,214	242,120	36,378	36,265	3,402	152	528,048	472,974
Depreciations and Amortisations	(82,458)	(72,980)	(8,616)	(8,485)	(68,425)	(67,122)	(3,381)	(3,987)	(5,432)	(5,009)	(168,312)	(157,583)
Operational Result (EBIT)	93,206	81,473	32,774	31,499	202,789	174,998	32,997	32,279	(2,030)	(4,858)	359,736	315,391
Financial Results											(70,950)	(80,704)
Net Result Attributable to JM											200,349	163,216
TOTAL ASSETS	1,818,824	1,853,543	288,099	299,833	1,428,051	1,221,703	199,438	197,647	90,015		153,839 3,824,427	3,726,565
TOTAL LIABILITIES	1,236,945	1,283,533	239,475	260,604	932,252	816,652	115,433	108,039	234,628		326,612 2,758,733	2,795,440
Investments in Fixed Assets	110,892	179,743	11,203	16,033	182,210	289,623	3,055	3,430	2,826	10,415	310,186	499,244
Reinforcement of provisions and adjustments to the net realisable value	(554)	(2,746)	(646)	(568)	(4,019)	(13,109)	(4,352)	(4,357)	(1,153)	(1,052)	(10,724)	(21,832)
Reversal of provisions and adjustments to the net realisable value	3,085	1,189	158	328	4,108	1,756	376	1,120	1,070	388	8,797	4,781

	Net Sales and Services
	2009	2008
Portugal	3,587,437	3,370,968
Poland	3,729,671	3,522,769
Total	7,317,108	6,893,737

Information by Geographical Segments at December 2009 and 2008

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 segments.

		Portugal Retail		Portugal Cash & Carry	Poland Retail						Portugal Manufacturing				Others, eliminations and adjustments		Total JM Consolidated
	2009	2008	2009	2008	2009	2008	2009	2008	2009	2008	2009	2008
Cash and cash equivalents	58,251	54,404	9,689	10,193	145,954	105,376	3,009	2,247	6,598	54,912	223,501	227,132
Available-for-sale financial investments	5,131	5,131	671	671	-	-	22	22	1,704	1,646	7,528	7,470
Debtors, accruals and deferrals	63,693	76,381	22,847	19,943	61,116	34,486	56,870	56,418	(25,258)	(24,802)	179,268	162,426
Derivative financial instruments	130	-	-	-	351	-	-	-	1,385	2,064	1,866	2,064
TOTAL	127,205	135,916	33,207	30,807	207,421	139,862	59,901		58,687 (15,571)	33,820	412,163	399,092

4 Businesses acquisitions/disposals and changes to the consolidation scope

The Group carried out the merger by incorporation of the following companies:

On June 1st, 2009, the company Feira Nova – Hipermercados, S.A., in the company Pingo Doce - Distribuição Alimentar, S.A.;

On July 31st, 2009, the company SCGR – Comércio por Grosso e a Retalho, S.A. in the company Recheio, Cash & Carry, S.A.;

On September 1st, 2009, the company PGJM – Importação e Distribuição de Perfumes e Cosméticos, S.A. in the company Perfumes e Cosméticos Puig Portugal – Distribuidora, S.A. The Group holds an interest of 27.545% in the new society. This operation resulted in an increase in the value of financial investment of EUR 57 thousand, with a consequent increase of Goodwill in the same amount.

With the focus on restructuring the Group Manufacturing area, it was started, during the 1st half of 2009, a process aiming the autonomization of the olive oil business. On the 3rd of July, the company Gallo Worldwide, Lda. was created, as a result of a demerger from Unilever Jerónimo Martins, Lda (ULJM) company. The Gallo Worldwide, Lda. company maintains the same shareholder structure as ULJM.

Throughout 2009, several companies were incorporated and acquired for the development of business in Poland, which do not represent a materially relevant impact on the Group Consolidated Financial Statements.

Company	Business area	Head office	% Owned
Dystrybucja Integrator – Sp. Z o.o.	Provision of services in the area of wholesale and retail distribution	Kostrzyn (Poland)	100.00
JM Nieruchomosci - Sp. Z o.o.	Provision of services in the area of wholesale and retail distribution	Kostrzyn (Poland)	100.00
JM Nieruchomosci - Sp. Komandytowo-akcyjna	Real estate management and administration	Kostrzyn (Poland)	100.00
JM TELE - Sp. Z o.o.	Mobile virtual network operator	Kostrzyn (Poland)	100.00
JM Uslugi - Sp. Z o.o.	Provision of services in the area of wholesale and retail distribution	Kostrzyn (Poland)	100.00
Perfumes e Cosméticos PUIG Portugal – Distribuidora, S.A.	Wholesale of perfumes and cosmetics	Lisboa Portugal	27.55

On 30 December 2009, were sold the companies Dystrybucja Integrator - Sp. Z o.o. and Dystrybucja Integrator Sp. Z o.o. SKA, the latter previously called PLUS Discount Sp. Z o.o. which included 32 stores, thereby complying with the commitments assumed before the Polish Competition Authorities

The effects of this last operation on the Consolidated Financial Statements were as follows:

Fixed assets	(544)
Taxes receivables	(6)
Cash and cash equivalents	(1,114)
Total assets (1)	(1,664)
Provisions for risks and contingencies	(452)
Taxes payable	(393)
Trade creditors, accruals and deferrals	(505)
Total liabilities (2)	(1,350)
Net assets disposed	(314)
Capital loss (3)	(133)
Disposal amount (4)=(1)-(2)-(3)	181
Cash and cash equivalents changes (5)	(1,114)
Amount receivable (6)	(169)
Net cash flow (7)=(4)+(5)+(6)	(1,102)

5 Supplementary income and costs

	2009	2008
Supplementary gains	312,837	270,337
Cash discount received	38,566	36,493
Cash discount paid	(3,531)	(3,087)
Electronic payment commissions	(14,435)	(13,280)
Other supplementary costs	(6,831)	(6,571)
Provisions for debtors suppliers	(62)	(399)
	326,544	283,493

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

	2009	2008
Supplies and services	294,716	274,524
Advertising costs	56,828	55,017
Rents	164,457	135,327
Staff costs	584,272	550,558
Depreciations and profit/loss with fixed assets	164,949	155,249
Transportation costs	92,062	96,761
Other operational profit/loss	714	(725)
	1,357,998	1,266,711

7 Staff costs

	2009	2008
Wages and salaries	468,563	443,336
Social Security	90,982	84,191
Employee benefits (note 26)	1,737	13,946
Other staff costs	37,785	37,460
	599,067	578,933

Other staff costs include, namely, labour accident insurance, social action costs, training costs and indemnities.

Of total staff costs, EUR 28,546 thousand corresponds to staff costs of subsidiaries and associated companies consolidated by the proportional method, the total amount of which was EUR 63,183 thousand.

The difference to staff costs stated in note 6 of EUR 14,795 thousands is related to the productive activity that were attributable to the cost of the goods sold in the amount of EUR 10,771 thousand (EUR 11,460 thousand in 2008), and to losses with business acquisitions and organizational restructuring program of EUR 4,024 thousand (EUR 16,915 thousand in 2008).

The average number of Group employees during the year was distributed as follows:

	2009	2008
Portugal	26,192	23,943
Poland	25,964	23,665
Total number of employees	52,156	47,608

Of the total number of employees, 1,143 are employed by subsidiaries and associated companies consolidated by the proportional method.

The number of employees at the end of the year was distributed as follows:

	2009	2008
Portugal	26,621	24,903
Poland	27,176	28,472
Total number of employees	53,797	53,375

Of the total number of employees, 1,058 are employed by subsidiaries and associated companies consolidated by the proportional method.

8 Net financial costs

	2009	2008
Interest expense	(67,936)	(73,311)
Interest received	2,266	7,882
Dividends	81	37
Net foreign exchange	(802)	3,722
Investment property:
Changes to fair value	(18)	(18)
Other financial costs and gains	(5,810)	(4,038)
Fair value of financial investments held for trade
Derivative instruments	1,230	(16,172)
Treasury bonds	220	3,170
	(70,769)	(78,728)

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 33 thousand (2008: EUR 261 thousand) regarding transfers from reserves for cash-flow hedging.

9 Financial instruments

9.1 Fair value of derivative financial instruments recognized on the income statement

The impact in income statement (net of taxes and minority interests), is as follows:

	2009	2008
Derivatives held for trading
Currency swaps	10	(6,204)
Interest rates swaps	1,220	(12,507)
Credit default swap	-	2,539
	1,230	(16,172)
Income tax recognised in the income statement	(326)	4,285
Minority interests	(425)	1,581
Value recognised in profit/loss	479	(10,306)

9.2 Fair value of derivative financial instruments recognized on reserves

The value recognised in reserves referred to hedging of investment in Poland is negative EUR 3,057 thousand (net of deferred tax).

The change to the fair value of derivative instruments designated as fair value hedging (note 15) for the amount of negative EUR 7,643 thousand (2008: positive EUR 16,020 thousand) was offset by a variation in the fair value of the loan of USD 180 million (note 25.2).

10 Income tax recognised in the income statement

10.1 Income tax

	2009	2008
Current income tax
Current tax of the year	(23,558)	(40,583)
Adjustment to prior year estimation	76	(2,322)
	(23,482)	(42,905)
Deferred tax (note 19.1)
Temporary differences created or reversed in the year	(37,365)	(4,311)
Change to the recoverable amount of tax losses and temporary differences from
previous years	5,223	1,085
	(32,142)	(3,226)
Total income tax	(55,624)	(46,131)

10.2 Reconciliation of effective tax rate

		2009		2008
Profit before tax		278,891		222,111
Income tax using the Portuguese corporation tax rate Fiscal effect due to:	26.5%	(73,906)	26.5%	(58,859)
Different tax rates in foreign jurisdictions	5.7%	15,865	6.4%	14,323
Non taxable or non recoverable results	-0.3%	(913)	-0.6%	(1,394)
Non-deductible expenses and fiscal benefits	-0.4%	(1,216)	1.1%	2,444
Adjustment to prior year estimation	0.0%	76	-1.0%	(2,322)
Change to the recoverable amount of tax losses and temporary differences of prior years	1.9%	5,223	0.5%	1,085
Results subject to special taxation	-0.3%	(753)	-0.6%	(1,408)
Income tax	19.9%	(55,624)	20.8%	(46,131)

11 Exceptional operating profits/losses and gains/losses in other investments

11.1 Exceptional operating profits/losses

	2009	2008
Gains/Losses with businesses disposals	(133)	17,947
Losses with business acquisitions and organizational restructuring	(4,112)	(27,315)
Real state disposal	-	10,215
Introduction of the seniority incentives program	-	(11,617)
Impairment of assets	(5,858)	-
Reimbursement of notary fees resulting from court decision	1,025	-
Others	(817)	(1,806)
	(9,895)	(12,576)
11.2 Gains/losses in other investments
	2009	2008
Changes in the fair value of available-for-sale financial investments	(514)	(2,116)
Losses with the disposal of available-for-sale financial investments	-	(178)
	(514)	(2,294)

12 Tangible Assets

12.1 Changes occurred during the year

2009	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	396,538	1,347,245	869,824	179,728	117,866	2,911,201
Foreign exchange differences	1,651	10,075	3,358	802	910	16,796
Increases	12,764	117,404	84,808	7,870	74,156	297,002
Revaluation	(7,972)	-	-	-	-	(7,972)
Disposals	(83)	(5,180)	(13,537)	(5,297)	(1,217)	(25,314)
Transfers and write off's	9,083	44,680	(14,654)	(3,162)	(77,741)	(41,794)
Business disposals and restructuring	-	(72)	(1,457)	(327)	(112)	(1,968)
Transfers to/from investment properties	2,776	(800)	-	-	349	2,325
Closing balance	414,757	1,513,352	928,342	179,614	114,211	3,150,276
Depreciation and impairment losses
Opening balance	-	353,479	560,728	122,131	-	1,036,338
Foreign exchange differences	-	2,536	1,627	713	-	4,876
Increases	-	69,115	72,677	19,432	-	161,224
Disposals	-	(5,155)	(13,140)	(5,245)	-	(23,540)
Transfers and write off's	-	(10,665)	(18,307)	(5,352)	-	(34,324)
Business disposals and restructuring	-	(1,094)	(1,345)	(295)	-	(2,734)
Transfers to/from investment properties	-	(193)	-	-	-	(193)
Impairment losses	-	5,273	497	28	-	5,798
Closing balance	-	413,296	602,737	131,412	-	1,147,445
Net value
As at 1 January 2009	396,538	993,766	309,096	57,597	117,866	1,874,863
As at 31 December 2009	414,757	1,100,056	325,605	48,202	114,211	2,002,831

2008	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	399,400	1,170,801	752,624	157,880	106,382	2,587,087
Foreign exchange differences	(11,481)	(73,522)	(27,395)	(12,916)	(14,591)	(139,905)
Increases	14,690	199,538	116,609	36,716	104,333	471,886
Revaluation	23,343	-	-	-	-	23,343
Disposals	(23,461)	(40,063)	(14,167)	(13,336)	(82)	(91,109)
Transfers and write off's	11,025	59,855	(4,881)	(5,257)	(79,424)	(18,682)
Business acquisitions and restructuring	171	32,933	47,034	16,641	4,659	101,438
Transfers to investment properties	(17,149)	(2,297)	-	-	(3,411)	(22,857)
Closing balance	396,538	1,347,245	869,824	179,728	117,866	2,911,201
Depreciation and impairment losses
Opening balance	-	305,771	495,883	114,927	-	916,581
Foreign exchange differences	-	(22,017)	(14,505)	(7,525)	-	(44,047)
Increases	-	62,579	69,619	18,655	-	150,853
Disposals	-	(5,545)	(12,100)	(12,164)	-	(29,809)
Transfers and write off's	-	(1,437)	(7,636)	(2,648)	-	(11,721)
Business acquisitions and restructuring	-	14,128	29,467	10,519	-	54,114
Reversal of impairment	-	-	-	367	-	367
Closing balance	-	353,479	560,728	122,131	-	1,036,338
Net value
As at 1 January 2008	399,400	865,030	256,741	42,953	106,382	1,670,506
As at 31 December 2008	396,538	993,766	309,096	57,597	117,866	1,874,863

The impairment losses recognized in 2009 are related with the Retail Portugal business segment and regards to benefits carried out in stores closed during 2009, as well as investments in expansion projects that the Group decided to discontinue following the integration of the ex-Plus chain.

These impairments are related to permanent losses not reversible, so a sensitivity analysis would not lead to additional conclusions.

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:

	2009	2008
Land and natural resources
Tangible assets	34	34
	34	34
Buildings and other constructions
Tangible assets	31,271	28,024
Accumulated depreciation	(7,725)	(4,842)
	23,546	23,182
Plants and machinery
Tangible assets	121,686	107,948
Accumulated depreciation	(43,399)	(29,374)
	78,287	78,574
IT and office equipment and tools and utensils
Tangible assets	19,291	18,979
Accumulated depreciation	(16,412)	(15,274)
	2,879	3,705
Transport equipment
Tangible assets	37,457	40,515
Accumulated depreciation	(18,328)	(15,974)
	19,129	24,541

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.

Given the high number of locations that are part of this class of assets, the Group carries out rotational valuations on all these assets at intervals of no more than 5 years. In the 4th quarter of 2009, new valuations were carried out on assets acquired more than 3 years ago and which had not yet been evaluated, on assets with an indication of a significant change in market value and on assets which had been evaluated more than 3 years ago. The outcome of these valuations was a reduction in the value of the land of Euros 7,972 thousand (note 23.1).

The table below shows the total amount of valuations carried out in the exercise, the previous revalued net book value of these assets and its acquisition cost.

	Valuations amount	Net book value (includes valuations)	Acquisition Cost	Current year valuation adjustment
Portugal	43,967	50,120	37,877	(4,626)
Poland	17,666	20,759	15,506	(3,346)
Total	61,633	70,879	53,383	(7,972)

The Group's property assets are of various ownership typologies and forms, and due to their building characteristics, have quite different market values. There is no acceptable standard that enables them to be separated by geographical area, and so it is believed relevant to separate assets that are part of buildings, from those that are stand alone assets, which normally encompass large areas surrounding the store, namely allocated for parking.

The table below shows the price intervals in Euros, by square meters, that were identified in the evaluations carried out by independent experts in 2009, regarding the average transactional value of real estate with similar functions, located in the same area or in nearby and comparable areas.

	Part of Buildings	Stand Alone
Portugal	540-1,860	60-500
Poland	100-580	190-350

Revaluation values under tangible fixed assets total EUR 159,724 thousand (EUR 172,594 thousand in 2008), reflected in the shareholders' equity as follows:

	2009	2008
Revaluation of land	159,724	172,594
Deferred taxes	(31,025)	(34,960)
Minority interests	(43,768)	(43,851)
Net revaluation (Note 23.1)	84,931	93,783

If the cost model had been applied to the land assets, that are valued for EUR 414,757 thousand (EUR 396,538 thousand in 2008), their net book value would be EUR 255,033 thousand (EUR 223,945 thousand in 2008).

13 Intangible Assets

13.1 Changes occurring during the year

2009	Goodwill	R&D expenses	Software, ind. property and other rights	Key money	Work in progress	Total
Cost
Opening balance	734,126	25,441	45,343	65,754	10,312	880,976
Foreign exchange differences	3,635	263	636	655	6	5,195
Increases	-	182	4,435	5,979	2,589	13,185
Disposals	-	-	(23)	-	(2,278)	(2,301)
Transfers and write off's	-	180	3,034	(134)	(2,936)	144
Business disposals and restructuring	(1,128)	-	-	-	-	(1,128)
Closing balance	736,633	26,066	53,425	72,254	7,693	896,071
Depreciation and impairment losses
Opening balance	-	23,492	3,807	26,956	-	54,255
Foreign exchange differences	-	239	20	221	-	480
Increases	-	1,041	1,259	4,373	-	6,673
Disposals	-	-	-	-	-	-
Transfers and write off's	-	(239)	(351)	(115)	-	(705)
Closing balance	-	24,533	4,735	31,435	-	60,703
Net value
As at 1 January 2009	734,126	1,949	41,536	38,798	10,312	826,721
As at 31 December 2009	736,633	1,533	48,690	40,819	7,693	835,368

2008	Goodwill	R&D expenses	Software, ind. property and other rights	Key money	Work in progress	Total
Cost
Opening balance	416,290	30,312	33,767	62,222	5,398	547,989
Foreign exchange differences	(60,981)	(3,069)	(3,642)	(4,882)	(1,119)	(73,693)
Increases	-	80	10,084	7,528	9,666	27,358
Disposals	-	-	(116)	-	-	(116)
Transfers and write off's	-	(1,882)	5,168	886	(3,633)	539
Business acquisitions and restructuring	378,817	-	82	-	-	378,899
Closing balance	734,126	25,441	45,343	65,754	10,312	880,976
Depreciation and impairment losses
Opening balance	-	25,751	2,419	23,526	-	51,696
Foreign exchange differences	-	(3,029)	(62)	(937)	-	(4,028)
Increases	-	1,136	1,209	4,367	-	6,712
Disposals	-	-	(35)	-	-	(35)
Transfers and write off's	-	(366)	276	-	-	(90)
Closing balance	-	23,492	3,807	26,956	-	54,255
Net value
As at 1 January 2008	416,290	4,561	31,348	38,696	5,398	496,293
As at 31 December 2008	734,126	1,949	41,536	38,798	10,312	826,721

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 9,228 thousand for Pingo Doce brand and EUR 4,489 thousand for Feira Nova brand, which are not being amortised and are subject to impairment tests annually, using the same assumptions applied in Goodwill (note 13.4).

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, usufruct 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	2009	2008
Portugal Retail	239,386	239,386
Portugal Cash & Carry	82,460	82,335
Madeira	8,509	8,509
Portugal Manufacturing	93,809	93,809
Services	57	-
Poland Retail	312,412	310,087
	736,633	734,126

The additions in this heading include:

• Corrections carried out to the fair value of assets that had been acquired during the concentration process in 2008, to the value of negative EUR 1,185 thousand;
• As a consequence of the currency translation adjustment of the assets in the Group's business in Poland, the Goodwill related to this business, totalling PLN 1,287,928 thousand, was updated by positive EUR 3,635 thousand;
• The merger of Group company PGJM Importação e Distribuição de Perfumes e Cosméticos, S.A. and the company Perfumes e Cosméticos PUIG Portugal, S.A., third-party owned, resulting in a shareholding attributable to Jerónimo Martins of 27.545% in the new company, with a subsequent increase in Goodwill to the value of EUR 57 thousand;

In 2009 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, for a five year period, 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

	2009	2008
Opening balance	64,509	49,600
Increases due to acquisitions	1,885	-
Transfers to/from tangible assets	(2,518)	22,857
Changes to fair value	(532)	(18)
Impairment losses	(61)	-
Disposals	-	(7,930)
Closing balance	63,283	64,509

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.

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

				2009					2008
	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	10 millions EUR	-	-	-	564	85 millions EUR	-	-	-	6,175
Currency Forwards (PLN)	14.1 millions PLN	115	-	-	-		-	-	-	-
Currency Forwards (USD)	0.6 millions USD	15	-	-	-		-	-	-	-
Fair value hedging derivatives
USD loan hedging	180 millions USD	-	-	-		16,766 180 millions USD	-	-	-	9,123
Cash flow hedging derivatives
Interest rate swap (EUR)	527.7 millions EUR	-	-	-	12,807	166.6 millions EUR	-	-	-	4,366
Interest rate swap (PLN)	171 millions PLN	-	351	-	-		-	-	-	-
Currency Forwards (PLN)		-	-	-	-	30 millions PLN	1,037	-	-	-
Foreign operation investments hedging derivatives
Currency swap (PLN)	400 millions PLN	1,385	-	-		- 400 millions PLN	-	1,027	-	-
Currency Forwards (PLN)	197 millions PLN	-	-	3,084	-
Total derivatives held for trading		130	-	-	564		-	-	-	6,175
Total hedging derivatives		1,385	351	3,084	29,573		1,037	1,027	-	13,489
Total assets/liabilities derivatives		1,515	351	3,084	30,137		1,037	1,027	-	19,664

In 2009, the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 1,967 thousand.

Derivatives held for trading

Interest rate swap

At 31 December 2009, the Group had derivatives financial instruments held for trading with a notional of EUR 10,000 thousand (2008: EUR 30,000 thousand). The fair value of these instruments at 31 December 2009 was negative EUR 564 thousand (2008: negative EUR 2,622 thousand). From the derivatives instruments in the portfolio at the end of 2008, EUR 20,000 thousand were cancelled in 2009.

In 2008, following the acquisition of EUR 55,000 thousand of treasury bonds (see note 21), the group entered into an interest rate swap (called "Asset Swaps") with a notional of EUR 55,000 thousand, to hedge the economic interest rate risk of bonds. The associated credit risk was not hedged. The fair value of these instruments at 31 December 2008 was EUR 3,553 thousand negative. These instruments were cancelled in 1st quarter 2009.

Currency Forwards

The Group hedges the economic risk of its exposure to the exchange rate of Zloty and US Dollar, regarding the purchase of goods in foreign currency. To do so, the Group entered into currency forwards, with maturities in the 1st quarter 2010. The derivative financial instruments held at 31 December 2009 had a notional of PLN 14,107 thousand and USD 609 thousand. The fair value of these instruments at 31 December 2009 was EUR 130 thousand positive.

Fair value hedge

Currency swap

The Group hedges its exposure to the fair value of its loans in the total amount of USD 180 million, through two cross currency swaps that have the same characteristics as the debt that was issued. The purpose of this hedge is to convert the fixed rate into a variable rate, and to hedge exposure to the US dollar, thus reflecting changes to the debt fair value. Credit risk is not hedged. The fair value of the two cross currency swaps at 31 December 2009 was negative EUR 16,766 thousand (2008: negative EUR 9,123 thousand).

Cash flow hedge

Interest rate swap

The Group enters into interest rate swaps to hedge interest rate risk, regarding future interest payments on the loans. At 31 December 2009, the total loans with derivative hedge instruments were EUR 647,007 thousand (2008: EUR 421,007 thousand) and PLN 285,000 thousand (2008: 0).

The Group set a portion of future interest payments on loans, through entering into interest rate swaps. The hedged risk is indexed to the variable rate associated with the loans. The purpose of the hedge is to convert the loans with variable interest rate into fixed interest rate. The credit risk is not hedged. The Group had interest rate swaps in Euro and Zlotys.

Interest rate swaps in Euro have a notional EUR 527,675 thousand (2008: EUR 166,625 thousand), and the fair value of these instruments at 31 December 2009 was negative EUR 12,807 thousand (2008: negative EUR 4,366 thousand).

On the other hand, the interest rate swaps in Zlotys have a notional PLN 171,000 thousand, and its fair value at 31 December 2009 was positive EUR 351 thousand.

Currency Forwards

The Group hedges the economic risk of its exposure to the exchange rate of Zloty. To do so, the Group entered currency forwards, with maturities between December 2008 and March 2009. The derivative financial instruments held at 31 December 2008 with a notional of 30 million zlotys, had a fair value of EUR 1,037 thousand. These instruments expired in 2009.

Hedging of investments in foreign entities

Currency Swap

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 of 400 million Zlotys (2008: 400 million Zlotys). The fair value of the derivative at 31 December 2009 was positive EUR 1,385 thousand (2008: positive EUR 1,027 thousand). The changes in the derivative fair value were recognised in equity currency translation reserve.

Currency Forwards

The Group hedges the economic risk of its exposure to the exchange rate of Zloty. To do so, the Group entered currency forwards, with monthly maturities up to December 2010. The derivative financial instruments held at 31 December 2009, with a notional of PLN 197,000 thousand, had a negative fair value of EUR 3,084 thousand. The changes in the derivative fair value were recognised in equity currency translation reserve.

16 Investments in associated companies

The movement under this heading was as follows:

	2009	2008
Investments
Opening balance	854	700
Acquisitions	-	14
Equity method	333	142
Disposals	(12)
Foreign exchange differences	-	(2)
Business restructuring	(57)	-
Closing balance	1,118	854
Fair value adjustments
Opening balance	-	-
Transfers	-	-
Closing balance	-	-
Net value as at 1 January	854	700
Net value as at 31 December	1,118	854

17 Available-for-sale financial investments

Non-Currents
	2009	2008
BCP shares	3,705	3,705
Advances on account of financial investments	4,988	4,988
Others	893	893
	9,586	9,586
Fair value adjustment – BCP shares (note 27)	(2,058)	(2,116)
	7,528	7,470

The financial assets available-for-sale include non-listed capital instruments whose fair value cannot be reliably measured and, as such, are recognised at cost to the value of EUR 5,879 thousand at December 31st, 2009 (2008: EUR 5,879 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:

	2009	2008
Investment in Uniarme	150	150
Investment in Mercado Abastecedor do Porto	646	646
Investment in AMS	63	63
Other investments	34	34
	893	893

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

	2009	2008
Raw and subsidiary materials and consumables	4,779	4,638
Goods and work in progress	669	735
Finished and semi-finished goods	242	231
Goods	340,915	393,421
	346,605	399,025
Fair value adjustment (note 27)	(12,127)	(13,372)
Net inventories	334,478	385,653

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

Result of the year (note 10.1)	(32,142)	(3,226)
Revaluation and reserves (note 23.1)	4,592	(2,378)
Currency translation difference (note 23.1)	(765)	(3,577)
Opening balance	8,444	17,625
	2009	2008

Deferred taxes are presented in balance sheet as follows:

	2009	2008
Deferred tax assets	69,021	63,170
Deferred tax liabilities	(88,892)	(54,726)
	(19,871)	8,444

Movement in deferred taxes during the year

	Opening balance	Impact on results	Revaluation and reserves	Currency translation differences	Closing balance
Deferred tax liabilities
Revaluation of assets	35,522	(105)	(2,925)	58	32,550
Deferred income for tax purposes	2,578	928	-	78	3,584
Differences on accounting policies in other countries	11,679	455	-	163	12,297
Deferred taxation of results	-	34,012	-	1,733	35,745
Other temporary differences	4,947	(223)	(8)	-	4,716
	54,726	35,067	(2,933)	2,032	88,892
Deferred tax assets
Excess over legal provisions	16,452	2,121	-	247	18,820
Revaluation of assets	1,240	142	(157)	-	1,225
Employee benefits	4,486	(477)	-	-	4,009
Costs with foreign exchange risk hedging operations	2,073	(1,079)	1,816	855	3,665
Recoverable losses	4,387	3,029	-	259	7,675
Profit in inventories	587	(161)	-	-	426
Fair value adjustments on inventories	2,547	(190)	-	10	2,367
Other deferred costs for tax purposes	26,521	(1,930)	-	(197)	24,394
Differences on accounting policies in other countries	523	1,708	-	93	2,324
Other temporary differences	4,354	(238)	-	-	4,116
	63,170	2,925	1,659	1,267	69,021
Net change in deferred tax	8,444	(32,142)	4,592	(765)	(19,871)

Deferred tax assets arising from recoverable losses are as follows:

	2009	2008
Consolidated tax Group Recheio, SGPS, S.A.	-	-
Consolidated tax Group JMR, SGPS, S.A.	-	2,345
Consolidated tax Group Funchalgest, SGPS, S.A.	-	142
Jerónimo Martins Dystrybucja, S.A.	5,150	-
Others	2,525	1,900
	7,675	4,387

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 15,604 thousand (2008: EUR 18,072 thousand) relative to part of the losses generated in Jerónimo Martins, SGPS, S.A. and Bliska Sp. Z o.o, and the total amount of the losses from Jerónimo Martins – Distribuição de Produtos de Consumo, Lda., Belegginsmaatschappij Tand BV, Servicompra - Consultores de Aprovisionamento. Lda. and Jerónimo Martins - Restauração e Serviços, S.A.

19.3 Receivable and payable taxes

	2009	2008
Taxes receivable
Income tax receivable	15,030	8,268
VAT receivable	6,453	25,642
Others	852	826
	22,335	34,736
Taxes payable
Income tax payable	14,752	12,452
VAT payable	20,079	19,658
Income tax withheld	4,585	5,179
Social Security	15,899	15,586
Other taxes	5,706	5,303
	61,021	58,178

20 Trade debtors, accrued income and deferred costs

Non-current	2009	2008
Other debtors	66,326	61,407
Deferred costs	5,979	5,222
	72,305	66,629
Current
Commercial customers	78,274	81,005
Associated companies	-	7
Suppliers	13,226	11,928
Staff	1,539	1,544
Other debtors	54,919	42,835
Accrued income	31,309	25,106
Deferred costs	11,526	10,339
	190,793	172,764

Non-current debtors' balance of EUR 66,308 thousand is related to additional tax liquidation as well as pre-paid tax. The Group has already contested the amounts 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 25,182 thousand.

The deferred costs heading includes EUR 9,443 thousand of pre-paid rents, EUR 3,273 thousand of bond issue expenses and pre-paid interests and EUR 4,789 thousand relative to other costs attributable to future years and paid in 2009, 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 10,288 thousand (2008: EUR 8,644 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:

	2009	2008
Debtors balances not considered impaired
Less than 3 months past due	21,523	24,979
More than 3 months past due	18,210	19,665
	39,733	44,644
Debtors balances considered impaired
Less than 3 months past due	766	1,579
More than 3 months past due	19,659	22,530
	20,425	24,109

Relating to the amounts due without impairment, EUR 19,138 thousand (2008: EUR 19,804 thousand) are covered by credit guarantees.

21 Cash and cash equivalents

	2009	2008
Bank deposits	187,497	148,025
Short-term investments	32,272	75,613
Cash and cash equivalents	3,732	3,494
	223,501	227,132

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

	2009	2008
Net results	200,349	163,216
Adjustments for:
Minority interests	22,918	12,764
Income tax	55,624	46,131
Depreciations and amortisations	168,312	157,583
Provisions	(6,778)	11,519
Net financial costs	70,769	78,728
Profit in associated companies	(333)	(318)
Profit/ Losses on financial investment	514	2,294
Profit/ Losses on tangible assets disposals	6,008	(4,745)
	517,383	467,172
Changes in working capital:
Inventories	54,152	(98,291)
Debtors, accruals and deferrals	(5,033)	3,959
Creditors, accruals and deferrals	85,728	312,122
	652,230	684,962

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 1st January 2008	76,397	308	1,217	14,892	92,814
Land transferred to investment property: - Gross value - Deferred tax - Minority interests	(1,504) 346 568				(1,504) 346 568
Disposal of revaluated Real Estate: - Gross value - Deferred tax - Minority interests	(10,265) 2,597 3,686				(10,265) 2,597 3,686
Revaluation: - Gross value - Deferred tax - Minority interests	23,343 (3,360) 1,975				23,343 (3,360) 1,975
Fair value adjustment of financial investments: - Gross value - Deferred tax - Minority interests		(3,707) 982 1,335		12,723 (3,372)	9,016 (2,390) 1,335
Fair value adjustment of available-for-sale financial investments: - Gross value			(1,217)		(1,217)
Currency translation differences: - In the year - Deferred tax				(58,444) (205)	(58,444) (205)
Balance as at 1st January 2009	93,783	(1,082)	-	(34,406)	58,295
Land transferred to investment property: - Gross value - Deferred tax - Minority interests	(606) 352 124				(606) 352 124
Revaluation: - Gross value - Deferred tax - Minority interests	(7,972) 2,768 (41)				(7,972) 2,768 (41)
Fair value adjustment of financial investments: - Gross value - Deferred tax - Minority interests		(7,328) 1,824 1,601		(4,140) 1,083	(11,468) 2,907 1,601
Fair value adjustment of available-for-sale financial investments: - Gross value			58		58
Currency translation differences: - In the year - Deferred tax	(4,292) 815			14,491 (1,848)	10,199 (1,033)
Balance as at 31st December 2009	84,931	(4,985)	58	(24,820)	55,184

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 (2008: 629,293,220).

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 own shares reflects the cost of shares held by the Group in portfolio. As of 31 December 2009, the Group held 859,000 own shares (2008: 859,000). As defined by law the own shares are not entitled to dividends.

23.4 Dividends

Taking into consideration Group results in 2009, the Board of Directors of JMH will propose in the General Meeting the distribution of EUR 89,866,093.46, which corresponds to a dividend per share of EUR 0.143.

Dividends distributed in 2009 in the amount of EUR 84,157 thousand were paid to Jerónimo Martins, SGPS, S.A. shareholders an amount of EUR 69,128 thousand and to minority interest in the Group companies an amount of EUR 15,029 thousand.

24 Earnings per share

24.1 Basic and diluted earnings per share

Basic and diluted earnings per share are calculated based on the net profit of EUR 200,349 thousand (2008: EUR 163,216 thousand) divided by the weighted average of outstanding ordinary shares, numbering 628,434,220 (2008 adjusted: 628,434,220).

24.2 Weighted average ordinary shares

	2009	2008
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 shares

	2009	2008
Diluted net results of the year attributable to ordinary shares	200,349	163,216

24.4 Diluted weighted average ordinary shares

	2009	2008
Diluted weighted average ordinary shares	628,434,220	628,434,220
Basic and diluted earnings per share – euro	0.3188	0.2597

25 Borrowings

Throughout the first quarter, Jerónimo Martins, SGPS, SA issued a new commercial paper program in the amount of EUR 30,000 thousand with a maturity of 5 years and payment of 50% on the 4th year and another one in the amount of EUR 50,000 thousand with a maturity of 5 years. Annually Jerónimo Martins has a call option and there isn't a put option from the bank.

On the second quarter Jerónimo Martins issued one new commercial paper program in the amount of EUR 10,000 thousand with a maturity of 3 years.

On April, JMR issued a Bond Loan in the amount of EUR 105,000 thousand. The issue has a maturity of 5 years and payment of 50% in the end of the 4th year, and it was issued at floating rate.

New financial leasing operations were contracted for 48-month periods, in the amount of EUR 17,280 thousand, with quarterly amortisation and interest payments.

25.1 Current and non-current loans

	2009	2008
Non-current loans
Bank loans	198,487	259,657
Bond loans	509,127	411,847
Financial lease liabilities	48,747	67,829
	756,361	739,333
Current loans
Bank overdrafts	21,563	45,355
Bank loans	67,119	179,159
Bond loans	-	50,000
Financial lease liabilities	35,813	33,830
	124,495	308,344

25.2 Loan terms and maturities

	Average rate	Total	Less than 1 year	Between 1 and 5 years	More than 5 years
Bank loans
Commercial Paper in EUR	2.71%	88,000	18,000	70,000	-
Loans in EUR	2.68%	71,000	4,700	66,300	-
Loans in PLN	4.24%	106,606	44,419	62,187	-
Bond Loans
Loans	4.51%	526,007	-	526,007	-
Fair value adjustment		(16,880)	-	(16,880)	-
Bank overdrafts	3.22%	21,563	21,563	-	-
Financial lease liabilities	3.42%	84,560	35,813	48,720	27
		880,856	124,495	756,334	27

The amount of negative EUR 16,880 thousand, adjusted to the total of bond loans, refers to the fair value adjustment of the bond loan for USD 180 million, for which the Group contracted a hedging instrument, presented in note 15.

25.3 Bond loans

	2009	2008
Non-convertible bonds	526,007	471,007

The bond loans in course at the end of 2008 were as follows:

• In June 2004, JMR placed a fixed-rate Private Placement on the US market in the amount of USD 180,000 thousand. These "Notes" issued by JMR are equivalent to Bond Loans according to Portuguese law. The total amount was divided between a 7-year issue of USD 84,000 thousand and a 10-year issue of USD 96,000 thousand. Immediately after contracting these amounts, a EUR/USD Cross Currency Swap was performed;
• On September 28, 2007, two bond loans were issued by JMH for EUR 35,000 thousand each, with four and five-year maturity periods, 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;
• On April 2009, JMR issued a new bond loan for EUR 105,000 thousand, maturing in five years, and payment of 50% in the end of the 4th year. The interest rate is variable and it is indexed to the 6-month Euribor.

The redemption dates of the bond loans are as follows:

Total	526,007
2014	133,037
2013	52,500
2012	235,000
2011	105,470

25.4 Financial lease liabilities

	2009	2008
Payments in less than 1 year	37,541	38,173
Payments between 1 and 5 years	51,468	71,157
Payments in more than 5 years	28	1,826
	89,037	111,156
Payment of future interest	(4,477)	(9,497)
Present value of liabilities	84,560	101,659

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:

	2009	2008
Non-current loans (note 25.1)	756,361	739,333
Current loans (note 25.1)	124,495	308,344
Derivative financial instruments (note 15)	31,355	17,600
Interest on accruals and deferrals	(442)	4,211
Bank deposits (note 21)	(187,497)	(148,025)
Short-term investments (note 21)	(32,272)	(75,613)
	692,000	845,850

26 Employee benefits

Amounts of employee benefits in the balance sheet:

	2009	2008
Retirement benefits - defined benefit plan paid for by the Group	16,192	17,979
Retirement benefits - defined benefit plan with a fund managed by a third party	184	241
Seniority awards	11,362	9,975
Total	27,738	28,195

Amounts reflected in the income statement – staff costs (note 7):

	2009	2008
Retirement benefits – defined contribution plan	714	713
Retirement benefits - defined benefit plan paid for by the Group	(811)	879
Retirement benefits - defined benefit plan with a fund managed by a third party	(57)	46
Seniority awards	1,891	12,308
Total	1,737	13,946

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:

	2009	2008
Liabilities (not covered) as at 1 January		-
Staff costs	714	713
Contributions of the year	(714)	(713)
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 2009, the responsibility totals EUR 16,192 thousand, and is totally included in the heading employee benefits.

Movement in the year:

	2009	2008
Balance on 1 January	17,979	18,062
Interest costs	1,036	931
Actuarial (gains)/losses	(1,847)	(52)
Retirement pensions paid in	(976)	(962)
Balance on 31 December	16,192	17,979

Actuarial assumptions used:

Mortality table	TV – 88/90	TV – 88/90
Discount rate	5.5%	6.0%
Pension growth rate	2.5%	2.5% - 3.0%

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:

	2009	2008
Present value of funded obligations	1,679	1,785
Fair value of plan assets	1,495	1,544
Liability in balance sheet - employee benefits	184	241

Changes in fair value of plan assets:

	2009	2008
Plan assets on 1 January	1,544	1,713
Expected return on plan assets	80	84
Actuarial gains/(losses)	31	(80)
Benefits paid	(160)	(173)
Plan assets on 31 December	1,495	1,544

The amounts recognised in income statement, are as follows:

	2009	2008
Interest costs	103	96
Expected return on plan assets	(80)	(85)
Actuarial losses recognised	(80)	35
Total costs recognised	(57)	46

Actuarial assumptions used:

Mortality table	TV – 88/90	TV – 88/90
Discount rate	5.50%	6.00%
Expected return on plan assets	4.90%	5.40%
Pension growth rate	2.50%	2.50%

26.3 Other long-term benefits granted to employees

The Group currently has an incentive program based on the award of seniority, for employees in Portugal.

This program consists of attributing monetary bonuses to employees when they reach 15 and 25 years of service, whilst the employees of the Group Unilever Jerónimo Martins companies receive an additional bonus on completing 40 years of service.

This plan is the responsibility of the companies and the liabilities are valued annually by an independent actuary. According to the actuarial study carried out, on 31st December the responsibility was for EUR 11,362 thousand, which is accounted for in the liabilities, in employee benefits.

Movement in the year:

	2009	2008
Balance on 1 January	9,975	428
Past services cost	-	11,623
Current service cost	1,665	1,652
Actuarial (gains)/losses	227	(967)
Paid contributions	(504)	(2,761)
Balance on 31 December	11,362	9,975
Liability calculation assumptions:
Mortality table	TV – 88/90	TV – 88/90

Discount rate 5.50% 6.00% Salaries growth rate 2.50% - 3.00% 3.00%-3.25%

26.4 Defined benefit obligation granted to employees

	2009	2008	2007	2006
Present value of defined benefit obligation	29,233	29,739	20,398	20,800
Fair value of plan assets	1,495	1,544	1,713	1,646
(Surplus)/deficit of defined benefit plans	27,738	28,195	18,685	19,154

Plan assets includes the following:

	2009		2008
Equity shares	253	17%	198	13%
Bonds	1,224	82%	1,308	85%
Cash	19	1%	38	2%
Total	1,495	100%	1,544	100%

27 Provisions and adjustments to the net realisable value

2009	Opening balance	Set up and reinforced	Used and reversed	Foreign exchange difference	Business acquisition and restructuring	Closing balance
Doubtful debtors (note 20)	25,627	876	(3,823)	39	(377)	22,342
Inventories (note 18)	13,372	1,180	(2,464)	39	-	12,127
Available-for-sale fin. investments (note 17)	2,116		(58)	-	-	2,058
Short term investments (note 21)	57	-	-	-	-	57
Total fair value adjustments	41,172	2,056	(6,345)	78	(377)	36,584
Other risks and contingencies	25,892	8,744	(15,576)	(158)	(422)	18,480
Total of provisions	25,892	8,744	(15,576)	(158)	(422)	18,480

2008	Opening balance	Set up and reinforced	Used and reversed	Foreign exchange difference	Transfers	Business acquisition and restructuring	Closing balance
Doubtful debtors (note 20)	25,492	2,511	(2,592)	(683)	-	899	25,627
Inventories (note 18)	11,355	23,979	(34,653)	(1,976)	-	14,667	13,372
Available-for-sale fin. investments (note 17)	-	2,116	-	-	-	-	2,116
Short terms investments (note 21)	57	-	-	-	-	-	57
Total fair value adjustments	36,904	28,606	(37,245)	(2,659)	-	15,566	41,172
Other risks and contingencies	15,433	15,346	(6,698)	(1,886)	2,478	1,219	25,892
Total of provisions	15,433	15,346	(6,698)	(1,886)	2,478	1,219	25,892

The heading Other Risks and Contingencies consists of provisions for possible compensation to be paid by the Group regarding guarantees provided in business sales agreements celebrated over the last few years, provisions for organizational restructuring programmes and provisions for litigation processes where there are no prospects for resolution in less than one year.

28 Trade creditors, accrued costs and deferred income

	2009	2008
Other commercial creditors	1,361,115	1,287,940
Other non-commercial creditors	89,083	111,567
Accrued costs	194,110	155,210
Deferred income	3,182	5,325
	1,647,490	1,560,042

The heading accrued costs includes essentially salaries and wages to be paid to the employees, in the amount of EUR 68,598 thousand, interest payable in the amount of EUR 14,010 thousand and supplementary costs with the distribution and promotion of goods in the amount of EUR 40,706 thousand. The remaining EUR 70,796 thousand respects to sundry costs (utilities, insurance, consultants, rents, etc), for 2009, 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 2,051 thousand, which are deferred until the respective goods are sold.

29 Guarantees

The bank guarantees are as follows:

	2009	2008
Guarantees provided to suppliers	4,617	3,173
Guarantees for D.G.C.I. (Portuguese tax authorities)	73,826	65,972
Financing bank guarantees	173,539	227,789
Other guarantees for the Government	5,184	10,314
Other guarantees provided	3,981	7,019
Total of Guarantees	261,147	314,267

30 Operational lease

The Group has liabilities related to medium and long-term contracts which have penalty clauses if broken.

The total of future payments associated with contracts, are the following:

	2009	2008
Payments in less than 1 year	154,899	132,608
Payments between 1 and 5 years	500,539	415,600
Payments in more than 5 years	546,900	506,002
	1,202,338	1,054,210

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 2009, of EUR 59,968 thousand.

The operational lease contracts recognised as costs during the year in the amount of EUR 164,016 thousand (2008: EUR 134,840 thousand), are distributed as follows:

	2009	2008
Buildings	146,548	119,167
Plants & machinery	7,315	6,451
Transport equipment	7,915	7,101
IT equipment	1,332	1,446
Others	906	675
	164,016	134,840

The difference to the rents stated in note 6 are costs with occasional renting in the amount of EUR 910 thousand (2008: EUR 925 thousand) and rents costs that were attributable to the cost of goods sold in the amount of negative EUR 469 thousand (2008: negative EUR 438 thousand).

31 Capital commitments

Capital expenditure contracted for at the balance sheet date amounted EUR 84,402 thousand and referred essentially to work in progress and the celebrated preliminary agreement of acquisition of lands, buildings and equipments whose public deeds will occur opportunely.

32 Contingencies

• Under non-current debtors (note 20), an amount of EUR 60,799 thousand relates to tax liquidations claimed by the Tax Administration.

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. The hearings are scheduled to March and April of 2010. 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. claimed an indemnity payment from JMR Prestação a Serviços para Distribuição, S.A. (previously known as Gestiretalho - Gestão e Consultoria para a Distribuição a Retalho, S.A.), in the amount of EUR 8,196 thousand, as a result of the termination of a leasing agreement entered into by the parties. This procedure was submitted to arbitration according to Regulations of the Arbitration Court of the Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry/Commercial Association of Lisbon. After a long process that went on for almost five years, the arbitrators unanimously decided to deny the plaintiff's demands. Leirimundo, did not agree with the ruling, intends now, without any basis, to use the mechanism of judicial annulment of arbitration rulings to delay the final and definitive decision on the lawsuit, having submitted a procedure requesting this annulment before the Judicial Court of the Judicial District of Lisbon. JMR - Prestação a Serviços para Distribuição, S.A. is certain of its reasons, and that the favourable ruling of the Arbitration Court will not be judicially annulled, therefore no provision was formed.
• 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 process is in its initial phase; the preliminary hearing has been held and the respective ruling issued. The plaintiff is asking the court to admit an increase of the compensation, due to the time elapsed since the suit was filed without having achieved a solution to rent the store. Pingo Doce opposed to this new claim, which is unacceptable under the Law.
• d) The company Sodisnasa, a supplier of transport services, claims indemnity payment of EUR 1,423 thousand plus interest from companies Lidosol II – Distribuição de Produtos Alimentares, S.A. and João Gomes Camacho S.A., alleging that they unlawfully terminated several transport and logistics agreements. At the start of this year, Lidosol and João Gomes Camacho presented their response, completely certain that they proceeded in a legal and timely manner in terminating the referred agreements, therefore no provision has been formed for this. The first hearing is scheduled to May of 2010.
• e) Tengelmann KG filed an arbitration procedure against the companies Jerónimo Martins, SGPS, S.A. and Pingo Doce - Distribuição de Produtos Alimentares, S.A., before the German Institute of Arbitration, in Koln. The plaintiff argues that the price paid by Pingo Doce for the shares in Plus Portugal, Lda. should be increased in EUR 4.437 thousand, concerning an alleged error detected in determining the reference price at 30 April 2008.

The plaintiff also claims EUR 120 thousand and EUR 107 thousand concerning interests allegedly due by Pingo Doce based on the fact that the bank checks used to pay for the share were only credited a few days after the transaction.

In both cases, Jerónimo Martins, SGPS, S.A. and Pingo Doce – Distribuição de Produtos Alimentares, S.A. believe that the claims are groundless and has answered accordingly. Written statements of the witnesses of the parties were submitted. Oral hearing of all witnesses took place on October 30th. The parties submitted post-hearing briefs on 15 January 2010. On 27 January 2010, a telephone conference took place in which it was decided that on 16 February another one will take place in which the arbitral tribunal will render its preliminary view on the facts and legal issues of the matter. The parties blocked 23 February 2010 in their calendars for another oral hearing, if needed.

• f) 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.
• g) 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.
• h) 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. In consequence, the Portuguese Tax Authorities have now issued additional assessments, amounting to EUR 20,888 thousand. 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.
• i) 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 arguments to request these payments.

j) The Portuguese tax authorities claim from Feira Nova – Hipermercados, S.A. and Pingo Doce – Distribuição Alimentar, S.A. the amounts of EUR 325 thousands and EUR 499 thousands, respectively, regarding to financial years 2002 and 2003 Corporate Income Tax (CIT). This was due to payments made to non-resident 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.

The Portuguese tax authorities have already ruled totally in favour of Pingo Doce – Distribuição Alimentar, S.A. (regarding years 2001 to 2003), an amounting to EUR 999 thousands and almost totally in favour of Feira Nova – Hipermercados, S.A. (regarding years 2002 and 2003), total amount of EUR 600 thousands.

• k) The Portuguese tax authorities assessed Feira Nova Hipermercados, S.A. and Pingo Doce Distribuição Alimentar, S.A. the amounts of EUR 2,966 thousands and EUR 2,324 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, 2003 and 2004. 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.
• l) 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 to 2007, amounting to EUR 33,487 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.
• m) The Portuguese tax authorities have informed Jerónimo Martins, SGPS, S.A., that should restate the dividends received, amounting to EUR 10,568 thousand, from its subsidiary in the Madeira Free Zone in 2004 and 2005, 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. 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.
• n) The Portuguese tax authorities have claimed EUR 989 thousand from Jerónimo Martins, SGPS, S.A. 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.
• o) 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 Corporate Income Tax 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.
• p) The Portuguese tax authorities assessed Feira Nova Hipermercados, S.A. and Pingo Doce Distribuição Alimentar, S.A. the amounts of EUR 1,193 thousand and EUR 1,081 thousand, respectively. These additional assessments were issued because, on both companies, the tax authorities argue that some goods were sold at a lower VAT rate and, solely on Feira Nova they do not agree with the VAT treatment of the discount sales coupons. These assessments respect to the years of 2005 to 2007. Feira Nova and Pingo Doce's Management, supported by their tax consultants, have challenged these assessments, believing that the tax authorities have no arguments to request these payments.
• q) The Portuguese tax authorities have claimed EUR 532 thousands to Imoretalho Gestão de Imóveis, S.A., due to a supposed lack of VAT payment. Nevertheless, that claim is due to an error of the tax authorities, on the analysis of substitution VAT returns which did not generate any tax due. Imoretalho's Management, supported by their tax consultants, have already contested this VAT additional assessment, believing that they are entirely right concerning this matter. The Portuguese tax authorities have already ruled in favour of Imoretalho.
• r) 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.
• s) 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. In November 2007, the Court ruled against LeverElida. Therefore, in December 2009, the company was notified to pay EUR 1,579 thousands, and the bank guarantee was cancelled.

During 2009, the Portuguese tax authorities, when called to present their arguments concerning the administrative / judicial claims of Corporate Income Tax presented by JMR – Gestão de Empresas de Retalho, SGPS, S.A. regarding 1998, 1999 and 2001, partially revoked their additional assessments. However, the company believes that those additional assessments should be totally revoked, therefore has not given up on the administrative / judicial claims.

33 Related parties

33.1 Balances and transactions with related parties

56.11% 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 2009, neither were there any amounts payable or receivable between them on December 31st, 2009.

Balances and transactions of Group companies with related parties are as follows:

	Sales and services rendered			Stocks Purchased and services supplied
	2009	2008	2009	2008
Joint Ventures	754	588	90,241	92,066
Associated companies	405	753	1,002	1,264

	Trade debtors, accrued income and deferred costs			Trade creditors, accrued income and deferred costs
	31/12/2009	31/12/2008	31/12/2009	31/12/2008
Joint Ventures	607	675	8,900	7,915
Associated companies	1	91	678	580

Balances and transactions with related parties not eliminated in the consolidation process, were as follows:

	Sales and services rendered			Stocks Purchased and services supplied
	2009	2008	2009	2008
Joint Ventures	395	310	49,632	50,637
Associated companies	405	753	1,002	1,264

	Trade debtors, accrued income and deferred costs			Trade creditors, accrued income and deferred costs
	31/12/2009	31/12/2008	31/12/2009	31/12/2008
Joint Ventures	319	356	4,894	4,353
Associated companies	1	91	678	580

All the transactions with the jointly controlled companies (joint ventures) and associate companies were made under normal market conditions, i.e., the transaction value corresponds to prices that would be applicable between non related parties.

Outstanding balances between Group companies and related parties, being a result of a trade agreement, are settled in cash, and are subject to the same payment terms as those applicable to other agreements celebrated between Group companies and their suppliers.

The amounts receivable are not covered by insurance and no guarantees are given or received, as the Group holds a relevant influence over these companies.

There are no provisions for doubtful debts and no costs were recognised during the year related with bad debts or doubtful debts with these related parties.

33.2 Benefits attributed to directors

At the Annual General Shareholders' Meeting in 2005, an Alternative Pension Plan was approved. It is a fixedcontribution 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.

Plan participants include the Executive Directors of the Company, and those who opted for the current Pension Plan will forego eligibility for the Alternative Pension Plan, expressly and irretrievably waiving it.

As for the complementary pension or retirement systems, under the terms of current Regulations, Directors have the right to a Complementary Pension at retirement age, cumulatively, when they: (i) Are over 60 years old; (ii) Have performed executive functions; and (iii) Have performed the role of a Director for more than ten years. This complement was established in the Annual General Shareholders' Meeting in 1996, but none of the Members of the Executive Committee will make use of this plan, since all of them opted for the Alternate Pension Plan mentioned above.

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):

	2009	2008
Executive directors	1,984	1,869
Non-executive directors	1,291	1,144
	3,275	3,013

The Board of Directors of the company contains 10 members, of which 3 are Executive and 7 Non executive as stated in this Annual Report- Corporate Governance.

The remuneration paid to Non executive Board Members in 2009, of EUR 18 thousand is relative to their participation in the Audit Committee (2008: EUR 14 thousand).

33.4 Key Management compensation

	2009	2008
Salaries and other short-term employee benefits	13,479	16,698
Termination benefits	2,793	1,746
Post-employment benefits	276	279
Other benefits	190	154
Total	16,738	18,877

The average number of Senior Managers was 84.

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).

The post-employment benefits granted to the senior management are part of the defined contribution plan described in note 26.1.

The cost incurred with other benefits refer to long-term benefits which are described in note 26.3.

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.

a) Full consolidation method

Company	Business area	Head office	% Owned
Jerónimo Martins, SGPS, S.A.	Business portfolio management	Lisbon
Jerónimo Martins – Serviços, S.A.	Human resources top management	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
Desimo – Desenvolvimento e Gestão Imobiliária, Lda.	Real estate management and administration and trade marks	Lisbon	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 – 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
Hussel Ibéria – Chocolates e Confeitaria, S.A.	Retail sale of chocolates, confectionery and similar products Lisbon		51.00

Company	Business area	Head office	% Owned
JMR – Gestão de Empresas de Retalho, SGPS, S.A.	Business portfolio management in the area of retail distribution	Lisbon	51.00
Jerónimo Martins Retail Services, S.A.	Exploration of trade marks	Klosters Switzerland	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
Pingo Doce – Distribuição Alimentar, S.A.	Retail sales in supermarkets	Lisbon	51.00
Imoretalho – Gestão de Imóveis, S.A.	Real estate management and administration	Lisbon	51.00
Supertur – Imobiliária, Comércio e Turismo, S.A.	Real estate purchase and sale	Lisbon	51.00
Casal de São Pedro – Administração de Bens, S.A.	Real estate management and administration	Lisbon	51.00
Bazar Novo – Distribuição de Produtos Não Alimentares, Lda.	Retail sales of durable consumer goods	Lisbon	51.00
Electric Co – Distribuição de Produtos Não Alimentares, Lda.	Distribution of non-food and consumer goods	Lisbon	51.00
Comespa – Gestão de Espaços Comerciais, S.A.	Management and administration of retail outlets	Lisbon	51.00
JMR – Prestação de Serviços para a Distribuição, S.A.	Retail management, consultancy and logistics	Lisbon	51.00
Jerónimo Martins Finance Company (2), Limited	Financial services	Dublin (Ireland)	51.00
Cunha & Branco – Distribuição Alimentar, S.A.	Retail sales in supermarkets	Lisbon	51.00
Escola de Formação Jerónimo Martins, S.A.	Training	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
Masterchef, S.A.	Retail sales and/or wholesale of food or non-food products	Lisbon	100.00
PSQ – Sociedade de Investimentos Mobiliários e Imobiliários, Lda.	Provision of services in the economic and financial areas and investment management	Funchal	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	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
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
JM Nieruchomosci - Sp. z o.o.	Provision of services in the area of wholesale and retail distribution	Kostrzyn (Poland)	100,00
JM Nieruchomosci – Sp. Komandytowo-akcyjna	Real estate management and administration	Kostrzyn (Poland)	100,00
JM TELE – Sp. z o.o.	Mobile virtual network operator	Kostrzyn (Poland)	100,00
JM Uslugi – Sp. z o.o.	Provision of services in the area of wholesale and retail distribution	Kostrzyn (Poland)	100,00

b) Proportional consolidation method

Company	Business area	Head 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
Gallo Worldwide, Lda.	Wholesale of olive oil and similar products	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
Perfumes e Cosméticos Puig Portugal Distribuidora, S.A.	Wholesale of perfumes and cosmetics	Lisbon	27.55

35 Interests in joint ventures and associates

The Group owns (directly and indirectly) interests in the following joint ventures:

● The Group has a 45% shareholding in Unilever Jerónimo Martins, which controls a group of companies dedicated to manufacturing and selling products in the area of edible fats and ice-creams and to distributing and selling drinks, personal care and home care products, using owned Private Brands and brands owned by the Unilever Group;

• The Group holds a 45% shareholding in Gallo WorldWide, which is dedicated to distributing olive oil and cooking oils, using owned Private Brands and brands of the Unilever Group;
• 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 27.545% in Perfumes e Cosméticos Puig Portugal – Distribuidora, S.A. and its business area is retail sale of perfumes and cosmetic products.

The financial statements of the above-mentioned joint ventures, are as follows:

	2009	2008
Non-current assets	618,119	617,138
Current assets	180,442	176,141
Non-current liabilities	(431,352)	(432,848)
Current liabilities	(244,166)	(223,898)
Net assets	123,043	136,533
Income and gains	726,045	815,998
Costs and losses	(688,939)	(760,539)
Net result	37,106	55,459

The table below shows the contribution to the consolidated financial statements, including Goodwill allocated, as well as the proportion of balances and transactions included in the consolidation process and not eliminated.

	2009	2008
Non-current assets	121,319	120,892
Current assets	76,841	75,020
Non-current liabilities	(8,064)	(8,734)
Current liabilities	(109,658)	(99,955)
Net assets	80,438	87,223
Income and gains	111,030	121,222
Costs and losses	(89,112)	(84,996)
Net result	21,918	36,226

The financial statements of the associate, which are integrated into the consolidated statements by the equity method, include the following amounts related to assets, liabilities and earnings:

	2009	2008
Non-current assets	89	200
Current assets	14,359	5,734
Non-current liabilities	(1,504)	(492)
Current liabilities	(9,250)	(3,960)
Net assets	3,694	1,482
Income and gains	17,328	7,086
Costs and losses	(16,118)	(6,449)
Net result	1,210	637

In applying the equity method there were no problems in harmonizing the accounting policies of the associate.

36 Additional information requested by law

In accordance with article 508-F of the Portuguese Commercial Companies Code, we hereby inform of the following:

• a) In addition to all operations described in the notes above, as well as in the Management's Report, there are no other operations considered relevant which are not already contained either in the balance sheet or its annex;
• b) The total remuneration paid to the External Auditor and Chartered Accountant, was 768,526 euros, of which 711,344 euros correspond to legal accounts audit services, while the remaining 57,182 euros, relate

to support for internal reorganisation processes, access to a tax database, and technical consulting on a project for conversion to accounting standards;

c) Note 33 of the Notes to the Consolidated Financial Statements includes all the related parties disclosures, in accordance with the International Accounting Standards.

37 Events after the balance sheet date

On the dawn of February 20th, 2010 the Island of Madeira was stuck by a heavy storm, causing the destruction of a large number of infrastructures, as well as the regretful loss of human lives.

The Jerónimo Martins Group, present in the region through the Pingo Doce supermarket chain, also experienced various asset damages. To the date of this Report's conception, a clear evaluation of immediate and long-term asset impact is still in process.

To this date a total of two stores are closed, completely inoperative and with no predicted reopening date. A further two stores were also affected though in smaller scale. In accordance with the Group's risk management policy, all affected stores have insurance coverage and are already being evaluated by the respective experts.

Lisbon, 2nd March 2010

The Certified Accountant The Board of Directors

Statement of the Board of Directors

Within the terms of paragraph c) of article 245 of the Portuguese Securities Code, the members of the Board of Directors, identified below, declare that to the best of their knowledge:

• i) the information contained in the management report, the annual accounts, the Auditors' Report and all other accounting documentation required by law or regulation, was produced in compliance with the applicable accounting standards and gives a true and fair view of the assets and liabilities, the financial position and the results of Jerónimo Martins, SGPS, S.A. and the companies included in the consolidation perimeter, and
• ii) the Management report is a faithful statement of the evolution of the businesses, of the performance and of the position of the issuer and the companies included within the consolidation perimeter, and contains a description of the main risks and uncertainties which they face.

Lisbon, 2 March 2010

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, Services, Representations and Specialized Retail)

Hans Eggerstedt (Non-Executive Member)

António Mendo Castel-Branco Borges (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)

Marcel Corstjens (Non-Executive Member)

Report and Opinion of the Audit Committee

Dear Shareholders,

In accordance with 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 2009, as well as on the proposals presented by the Board of Directors.

Supervisory activity

Throughout the year, this Committee monitored the evolution of the Company's businesses, and their management, by holding regular meetings with the Directors of the functional areas of the corporate centre and with all those responsible that it deemed necessary to hear at any given moment. It also held meetings with the Executive Committee, the Company Secretary and the Statutory Auditor, who gave their total co-operation.

The Committee monitored the implementation of the risk management programme and the Business Continuity Plan, with the co-operation of the Executive Committee, the Financial Operations Department and the External Auditor, and verified that the actions taken by the Company comply with the policies issued by the Board of Directors.

It closely monitored the work carried out by the Internal Audit Department, by following its annual activity plan, the conclusions of its reports on the work carried out, as well as the actions that the Company implemented as a result of the recommendations issued by this department and those contained in the reports issued by the External Auditor and gave special emphasis to prevention and detection of fraud.

The suitability and effectiveness of the internal control systems were verified, with the co-operation and work of the Internal Control Committee, the Internal Audit Department and the External Auditor.

This Committee was given access to all the corporate documentation that it considered relevant, namely the minutes of the meetings of the Executive Committee, the Ethics Committee and the Internal Control Committee, as well as all the related documentation it deems relevant, in order to assess compliance with its regulations and with the applicable laws.

It met with those responsible for preparing the Report and Consolidated Accounts and the main companies of the Group, and carried out a review of the accuracy of the accounting documentation, accounting policies and valuation methods used by the Company, thereby ensuring that these are a correct evaluation of the results and the equity of the Company.

Throughout the year, it monitored the evolution of issues raised by the External Auditor, as well as the conclusions of the work carried out by the Statutory Auditor which gave rise to the Auditor's Report being issued without any reservation.

Within the scope of its responsibilities, the Audit Committee verified the independence and competence of the Company's External Auditors and Statutory Auditor in carrying out their functions, and verified that all other services provided by the External Auditors to the Group's subsidiaries were not only carried out by employees that did not take part in the auditing work, but also that these services in no way jeopardise the independence of the work carried out by the External Auditor, nor do they condition the opinion of the Statutory Auditor.

In its Internal Regulations the Audit Committee also has the responsibility for assessing the Company's corporate structure and governance, and so it has sought at every turn to assess the status of Corporate Governance, exerting particular effort, both from a theoretical and practical point of view, on the necessity for adjustments and on the adopted structures and practices.

This Committee also carried out a tender to select the External Auditor and Statutory Auditor, to commence functions at the beginning of 2010, and following an analysis of the proposals made by four of the most highly recognized auditing firms in the market, this Committee decided to maintain the firm PriceWaterHouseCoopers as the External Auditor.

Opinion

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.

Statement of Responsibility

In accordance with sub-paragraph a) of paragraph 1 of article 8 of the Regulations of the Portuguese Securities Market Commission No.5/2008, the members of the Audit Committee, identified below, declare that to the best of their knowledge:

i) the information contained in the management report, the annual accounts, the Auditors' Report and all other accounting documentation required by law or regulation, was produced in compliance with the applicable accounting standards and gives a true and fair view of the assets and liabilities, the financial position and the results of Jerónimo Martins, SGPS, S.A. and the companies included in the consolidation perimeter.

ii) the Management report is a faithful statement of the evolution of the businesses, of the performance and of the position of the issuer and the companies included within the consolidation perimeter, and contains a description of the main risks and uncertainties which they face.

Lisbon, March 2nd, 2010

Hans Eggerstedt (President of the Audit Committee)

António Mendo Castel-Branco Borges (Member)

Rui de Medeiros d'Espiney Patrício (Member)

IV – Corporate Governance

Introduction	160
Chapter 0 – Statement of Compliance	161
Chapter 1 – Shareholders' Meeting	165
1.1. Presiding Members of the Shareholders' Meeting 1.2. Participation in the Shareholders' Meeting 1.3. Postal Vote 1.4. Exercise of the Right to Vote by Electronic Means 1.5. Involvement of the Shareholders' Meeting Regarding the Company's Remuneration Policy 1.6. Defensive Measures 1.7. Significant Agreements to which the Company is a Party and that Take Effect, are Altered, or Cease in the Case of Change in Control of the Company 1.8. Agreements between the Company and Officers and Members of the Board of Directors	165 165 165 166 166 166 167 167
Chapter 2 – Managing and Supervisory Bodies of the Company	168
2.1. Identification and Composition of the Corporate Bodies 2.2. Other Committees Formed with Responsibility in Company Management or Supervision 2.2.1. Executive Committee 2.2.2. Audit Committee 2.2.3. Ethics Committee 2.2.4. The Internal Control Committee 2.3. Structure and Operation of the Board of Directors and Distribution of Responsibilities 2.3.1. The Board of Directors 2.3.1.1. President of the Board of Directors 2.3.2. Responsibilities of the Members of the Executive Committee 2.3.3. Organisational Structure and Distribution of Responsibilities	168 168 168 169 170 171 172 172 174 174 174
2.3.3.1. Holding Company Functional Divisions 2.3.3.2. Operational Divisions 2.3.3.3. Operational Support Functional Divisions 2.4. Risk Management and Internal Control Systems 2.4.1. Risk Management 2.4.1.1. Risk Management Objectives 2.4.1.2. The Risk Management Process 2.4.1.3. Organisation of Risk Management 2.5. Powers of the Board of Directors, Namely in Relation to Deliberations on Capital Increases 2.6. Code of Conduct and Internal Regulations 2.7. Rules Regarding Designation and Substitution of Members of the Board of Directors and the Supervisory Board	174 178 178 179 179 179 179 180 189 189 189
2.8. Number of Meetings of the Board of Directors and Supervisory Board, and Other Committees 2.9. Description and Identification of the Board of Directors 2.10. Functions that the Members of the Board of Directors Perform in Other Companies 2.11. Board of Directors Remuneration Policy 2.12. Remuneration Committee 2.13. Remuneration of the Members of the Board of Directors and of the Supervisory Board 2.14. Communications Policy for Alleged Irregularities Occurring within the Company (Whistleblower Procedure)	190 190 191 195 195 196 198

Chapter 3 – Information	199
3.1. The Company's Capital Structure	199
3.2. Shareholder Structure	199
3.3. Restrictions Regarding Transferability of Shares, Shareholder Agreements and Rules Applicable to Altering the Company's By-Laws	200
3.4. System for Employees' Participation in the Company's Capital	200
3.5. Share Price Performance	200
3.6. Performance of Jerónimo Martins Shares	201
3.7. Publication of Market Results	203
3.8. Dividend Distribution Policy	203
3.9. Stock Options Plan	204
3.10. Business between the Company and the Members of the Board, Holders of Qualified Stakes and Companies in a Parent-Subsidiary or Group Relationship	204
3.11. Investor Relations Department	204
3.11.1. Communication Policy of Jerónimo Martins	204
3.11.2. Activities of the Investor Relations Office	204
3.12. Yearly Remuneration Paid to the External Auditor	207

1. Introduction

The revision of the Portuguese Commercial Companies Code through the entering into effect of Decree-Law 76-A/2006 of 29 March brought about a profound change in the rules regarding corporate governance in Portugal, particularly in reforming the supervision of companies by separating the supervisory functions and those for reviewing accounts, thereby aiming to reinforce the independence and technical responsibilities of the members of the supervisory bodies. Consequently, in 2007, Jerónimo Martins adopted the so-called "Anglo-Saxon" model of governance, with the following corporate bodies: the 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 update the By-Laws and to adhere to the most advanced practices in the realm of corporate governance, an effort was also made to adjust the related issues accordingly, such as: regulating votes by post, the possibility of holding Board of Directors meetings using telematic means, as well as establishing the number of absences from meetings without justification accepted by the Board. With regard to remuneration, the By-Laws established the maximum percentage of profits for the year that may be given to the Directors as variable pay.

With the entry into force of the Code of Corporate Governance, always with the interest of the shareholder and the market in mind, in 2008 Jerónimo Martins sought to adjust its activities in order to continue developing towards adopting best practices, particularly regarding the values of rigour and transparency.

The Company's Board, especially its Audit Committee, pays particular attention to matters related to Corporate Governance and believes that the Group's policy is in line with the market's best practices, and that the operation of its model of government, as recognised by countless stakeholders, is the most appropriate for their interests.

This Report is a pledge to this policy, and the Board of Directors considers that it mirrors the correct operation of the adopted model and current corporate practices.

Chapter 0 Statement of Compliance

0.1. The Company is subject to the Code of Corporate Governance defined by the Portuguese Securities and Exchange Commission (CMVM), which is published on the CMVM's website at: http://www.cmvm.pt/NR/exeres/9405C5ED-7D91-4B3A-B97E-47A04EF72B43,frameless.htm. The Company is also governed by its Code of Conduct, whose content is linked to corporate governance matters, and which may be consulted on the Company's website. All of its corporate bodies are governed by regulations, which are documented and available on the Company's website at www.jeronimomartins.pt.

0.2. The Company fully complies with the recommendations of the CMVM in the Corporate Governance Code. It is accepted, however, that there are some recommendations that were not adopted in their entirety or regarding which, it is not unquestionable as to their being fully adopted.

The following shows a breakdown of the recommendations contained in the Code of Corporate Governance of the CMVM that were adopted, not adopted and not applicable, as well as reference to the text of the Report where the compliance or justification for not adopting these recommendations may be checked.

Pursuant to the Annex to its Regulation No. 1/2007, the CMVM considers the recommendations that are not followed in their entirety as not having been adopted.

RECOMMENDATION	ADOPTED	NOT ADOPTED	N/A
I.1.1	1.1.
I.1.2	1.1.
I.2.1	1.2.
I.2.2	1.2.
I.3.1	1.3.
I.3.2	1.3.
I.3.3	1.2.
I.4.1		0.3.1.
I.5.1	3.11.2.
I.6.1	1.6.
I.6.2	1.6.
I.6.3	1.6.
II.1.1.1	Introduction
II.1.1.2	2.4.
II.1.1.3	2.6.
II.1.2.1	2.9.
II.1.2.2	2.9.
II.1.3.1	2.2.2.
II.1.4.1	2.14.
II.1.4.2	2.14.
II.1.5.1		2.11; 2.12; 0.3.2.
II.1.5.2		0.3.3., 1.5.
II.1.5.3	2.12.
II.1.5.4	2.13; 3.9.
II.1.5.5	2.13.
II.2.1	2.2.1.
II.2.2	2.2.1; 2.3.1.
II.2.3			X
II.2.4	2.3.1.
II.2.5		0.3.4.
II.3.1	2.3.1.
II.3.2	2.3.1
II.3.3	2.3.1.
II.4.1			X
II.4.2	2.2.2; 3.11.2.
II.4.3	2.2.2.
II.4.4	2.2.2.
II.4.5	2.2.2.
II.5.1	2.3.1; 2.2.2.
II.5.2	2.12.
II.5.3	2.8; 2.12.
III.1.2	3.11.
III.1.3	3.11.2.

0.3. In light of the text of the recommendations, the Company admits that it is possible to interpret the following recommendations, also referenced in the table above, as not being complied with in full.

0.3.1. Recommendation I.4.1 states that companies should not establish a constitutive or deliberative quorum greater than that indicated in the law. However, according to Article Twenty-Six of the By-Laws, the Shareholders' Meeting may take

place at the first summoning as long as more than fifty percent of the Company's share capital is present or represented. This rule was not altered in the last revision of the By-Laws, which envisaged its adaptation to Decree-Law 76-A/2006 of 29 March, although it is true that the aforementioned recommendation was issued subsequently. In any case, the Company believes that, according to the nature of its shareholder structure, no situations will occur resulting in any practical impact from failure to adopt the recommendation, which is shown by the history of the Company's Shareholder Meetings.

It should also be noted that the second part of the recommendation is complied with in as far as no special deliberative quorum was established in the By-Laws.

0.3.2. With regard to Recommendation II.1.5.1 iii), it is important to explain that the Remuneration Committee decided that, considering his role described further on point 2.3.1.1., the Chairman of the Board of Directors, earns fixed remuneration and variable remuneration, to be established on a yearly basis as, according to the Regulation of the Board of Directors, he is equally responsible for managing the respective meetings, for monitoring the action taken on the decisions made by this body, for defining the overall strategy, and for management development. As the Company understands it, these functions compel the Chairman's performance to be remunerated in a different manner, which is why this part of the recommendation is not adhered to.

0.3.3. Regarding Recommendation II.1.5.2, it should be noted that for the last two years, a statement on the remuneration policy and the performance appraisal of the Company's managing and supervisory bodies has been submitted for approval at the Annual Shareholders' Meeting. However, the Board of Directors decided that it would not make sense to present another statement for the Company's leaders along with the mentioned statement, as the Portuguese corporate tradition never trusted these types of functions to the Shareholders' Meeting, nor does the Board see good reasons to introduce this practice via a recommendation. In the opinion of the Board of Directors, this stance is reinforced by reasons which relate to the typology of the labour contracts in question and the asymmetry of the evaluation procedures between the management bodies and the Company's leaders. Due to their varied nature, these leaders encompass both purely corporate support personnel, as well as personnel responsible for businesses, making it impossible to find a common policy that is considered to be useful by the Shareholders' Meeting.

0.3.4. The Company does not comply or agree with the text of Recommendation II.2.5, which states that the Board of Directors must promote the rotation of the member who is financial officer, at least at the end of every two terms.

In the first place, the objective of the recommendation is not understood. This is a matter of strategic interest that should be decided upon by the Company and its Shareholders, depending on the specific circumstances of its governance model and its practical application.

The financial function is specific to each type of business, and may not be performed across companies without paying attention to the characteristics of the areas where the companies carry out their activities. Most of the time, this particular experience takes more than one term to acquire. Intending the member who is the financial officer to cease these functions after the integration period is, from the business point of view, an option that is counterproductive to the Company and its Shareholders.

It is known that Portugal is a small country with a peripheral economy and a labour market that is not very attractive in comparison with other countries in Western Europe. In addition, the system of incompatibilities and independence perceived in the Portuguese Commercial Companies Code is particularly burdensome. The combination of these factors in itself already limits the choice of members of managing and supervisory bodies. To also comply with the recommendation in question would be to prevent a company from having the freedom to be able to choose the best people for certain positions.

On the other hand, the recommendation seems to suggest that, within the Board of Directors, the member who is financial officer will be rotational, i.e. within the same universe of directors. In the specific case of the Company in which the supervisory body – the Audit Committee – comes from the Board of Directors, this solution is even more problematic due to the inherent limitations to the model itself.

The CMVM should therefore adjust this recommendation and adapt it to the type of company in question, and to the practice of domestic companies.

Chapter 1 Shareholders' Meeting

1.1. Presiding Members of the Shareholders' Meeting

The Board of the Shareholder's Meeting is chaired by Mr. João Vieira de Castro, the secretary being Mr. Tiago Ferreira de Lemos.

The current members of the Board of the Shareholders' Meeting were elected on 30 March 2007, for the current term, which terminated in 2009.

The Chairman of the Board of the Shareholder's Meeting received an annual payment of five thousand euros. For the only meeting held in 2009, the members had all the logistic resources considered necessary to properly carry out their roles, and both the preparatory work and that of the meeting itself, were exemplary.

1.2. Participation in the Shareholders' Meeting

In accordance with the Company's By-Laws, Shareholders with voting rights may participate in the 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's Head Office within the same deadline of five working days. By tradition, all the Chairmen of the Board of the Shareholders' Meeting have understood that, considering the questions that are received within the period of receipt of statements of blocking of shares, those that are received by fax or e-mail by the indicated period and confirmed by receipt of the originals until the evening before the Meeting is held, must be accepted.

There are no rules in the By-Laws regarding blocking of shares in the event of suspension of the Shareholders' Meeting. In these cases, it has been the Chairman of the Board of the Shareholders' Meeting's understanding that they should not be obligated to block shares during the entire period until the Meeting is resumed, and the regular advance notice required in the first session should be sufficient.

Each share has the right to one vote. Presence at the General Shareholders Meeting is not conditioned on holding a minimum number of shares.

According to Article Twenty-Six of the By-Laws, the Shareholders' Meeting may take place upon the first convocation, as long as more than fifty percent of the Company's capital is present or represented. There is no special rule in the By-Laws regarding deliberative quorums or systems that highlight the rights of equity content.

1.3. Postal Vote

According to paragraph 3 of Article Twenty-Five of the By-Laws, postal votes are allowed. Pursuant to the By-Laws, postal votes count for the formation of a constitutive quorum for the Shareholders' Meeting, and it is the responsibility of the Chairman of the Board of the Shareholders' Meeting or his substitute to verify their authenticity and regularity, as well as to assure confidentiality when a vote is

submitted. In the event that a Shareholder or a Shareholder's representative is present at the Shareholders' Meeting, the postal vote that was issued is considered to be revoked.

Postal votes count as negative votes in relation to deliberative proposals presented subsequent to the date on which those votes were issued.

The Company has provided a form to exercise the right to vote by post on its web page.

As the Company's By-Laws do not state anything on this matter, the Company has established a deadline of 48 hours prior to the Shareholders' Meeting for receipt of postal votes, thus complying with and, to a certain extent, exceeding the recommendations of the CMVM in this matter.

1.4. Exercise of the Right to Vote by Electronic Means

The Company, recognising that using new technologies encourages Shareholders to exercise their right to vote, has adopted, since 2006, adequate mechanisms so that they may vote electronically in Shareholders' Meetings. Thus, Shareholders must state their intent to exercise their right to vote electronically to the Chairman of the Board of the Shareholders' Meeting, at the Company's Head Office or using the Jerónimo Martins website (www.jeronimomartins.pt). They subsequently receive a registered letter addressed to the domicile indicated on the statement of the financial intermediary with whom the securities are registered, containing the electronic address to be used to vote, and an identification code to use in the electronic mail, with which the Shareholder may exercise his right to vote.

1.5. Involvement of the Shareholders' Meeting regarding the Company's Remuneration Policy

Since 2008, a statement, prepared by the Remuneration Committee, on the remuneration policy and performance appraisal of the Company's managing and supervisory bodies has been submitted for approval at the Annual Shareholders' Meeting. This statement outlines the main characteristics of that policy – which is better explained in point 2.11 of this Report – with special focus on the relationship between the Company's interests and its performance, and the remuneration earned by the Company's officers.

1.6. Defensive Measures

No defensive measures were adopted which cause automatic or deferred serious erosion in the Company's equity in the case of change of control or modification in the composition of the Board of Directors.

No special rights or restraints on the exercise of voting rights are provided for in the Company's By-Laws. The Company and its Board of Directors particularly value the principles of free transferability of shares and assessment by Shareholders of the performance of members of the Board of Directors.

1.7. Significant Agreements to which the Company is a Party and that Take Effect, are Altered, or Cease in the Case of Change in Control of the Company

Since it leads a group that includes various partnerships with national and international groups, it is understood that certain arrangements in the joint venture contracts entered into within this scope may include arrangements for changing the Company's control, although not of automatic nature. The Board of Directors has understood that, as their interpretation is not completely unequivocal, in particular because they deal with somewhat dated instruments, if released they would not allow the Shareholders to be better informed about their real impacts, and even so, that release would be harmful to the interests of the Company and its Shareholders.

1.8. Agreements between the Company and Officers and Members of the Board of Directors

There are no agreements between the Company and officers of the managing bodies, directors or employees that foresee indemnity payments in the event of resignation, dismissal without just cause, or termination of the labour relationship as a consequence of change in the Company's control.

Chapter 2

Managing and Supervisory Bodies of the Company

2.1. Identification and Composition of the Corporate Bodies

The Board of Directors is comprised of Mr. Elísio Alexandre Soares dos Santos (Chairman), Mr. Rui Manuel de Medeiros d'Espiney Patrício, Prof. António Mendo Castel-Branco Borges, Mr. Hans Eggerstedt, Mr. Artur Santos Silva, Mr. Nicolaas Pronk, Prof. Marcel Corstjens, Mr. Luís Maria Viana Palha da Silva, Mr. Pedro Manuel de Castro Soares dos Santos and Mr. José Manuel da Silveira e Castro Soares dos Santos.

The Audit Committee is comprised of Mr. Rui Manuel de Medeiros d'Espiney Patrício, Prof. António Mendo Castel-Branco Borges, and Mr. Hans Eggerstedt, who chairs it.

The Company Secretary is Mr. Henrique Soares dos Santos.

The Chartered Accountant is the Company PricewaterhouseCoopers & Associados, SROC, Lda., represented by Mr. Jorge Manuel Santos Costa, ROC and the alternative is Mr. José Manuel Henriques Bernardo.

2.2. Other Committees Formed with Responsibility in Company Management or Supervision

2.2.1. Executive Committee

The Company's Executive Committee is comprised of Mr. Luís Maria Viana Palha da Silva, (President), Mr. Pedro Manuel de Castro Soares dos Santos and Mr. José Manuel da Silveira e Castro Soares dos Santos, and notwithstanding the special executive responsibilities entrusted to the Chairman of the Board of Directors, its main objective is to support the Board of Directors in carrying out its management functions. As a corporate body delegated by 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 executives of all the Companies.

To carry out the listed functions, the Board of Directors delegated the following responsibilities to the Executive Committee:

To manage businesses and carry out operations related to the Company purpose included in the scope of its current management, as an equity management company;

• To represent the Company, in court and outside of court, to propose and contest any lawsuits, settle and withdraw from lawsuits, and bind the Company in arbitration; for that purpose it may appoint one or more representatives;
• Contract loans in the domestic or foreign financial markets, and accept the supervision of building societies up to 50 million euros;
• Make decisions regarding the Company providing technical and financial support, providing loans to companies in which it holds shares, quotas or social shares, in whole or in part;
• Decide on the transfer of real estate, as well as shares, portions, quotas and obligations;
• Decide on the acquisition of any goods or real estate, and in general on making any investments projected in the Annual Plan;
• After consulting the Chairman of the Board of Directors, designate the people to propose to the Companies' Shareholders' Meetings, to fill positions in the respective corporate bodies, indicating those who will be responsible for performing executive functions;
• To propose annually to the Board of Directors the financial goals to be met by the Company and by the Companies in the Group in the following accounting year, for that purpose consulting with the Chairman of the Board of Directors;
• To evaluate Jerónimo Martins' monthly consolidated accounts and those of each of its Companies;
• To approve the human resources policies to be followed by the Group, after consultation with the Chairman of the Board of Directors;
• To approve the expansion plans regarding the activities of each business area, as well as the Companies in the Group that are not included in business areas;
• To approve any investments projected in approved plans, with acquisitions of fixed assets up to 10 million euros;
• To approve any disinvestments projected in approved plans, with sales of fixed assets up to 10 million euros;
• In conjunction with the Audit Committee, to negotiate and contract the provision of external auditing services;
• To approve the organic structure of the Group's Companies.

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.

2.2.2. Audit Committee

The Audit Committee, which has three Non-Executive Directors as Members - Mr. Hans Eggerstedt (President), Prof. António Borges and Mr. Rui Patrício, all of whom are independent according to legal criteria, paid particular attention in 2009 to matters of Corporate Governance, financial risk management, and to the analysis and control of the execution of the correction measures proposed by Internal Audit.

The President of the Audit Committee, Mr. Hans Eggerstedt, is recognised internationally as one of the best managers of his generation, having worked, over the course of his long career, in positions of great responsibility in various countries. His solid academic training and professional experience in areas of management and control ensure a special ability to act as the president of the Company's supervisory body.

Since the alteration of the By-Laws, approved in the 2007 Annual Shareholders' Meeting, the Audit Committee is a statutory body, 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 Shareholders' Meeting, and arising from the Board of Directors, the Audit Committee is responsible for supervising Company management and assessing corporate structure and governance.

It should be noted that this function, established in its Internal Regulation, has been actively performed by the Audit Committee, which has sought at every turn to assess the status of Corporate Governance, proposing adjustments when necessary, and exerting particular effort on adopted structures and practices, both in terms of principles and from a practical point of view.

The vast experience of the members of the Committee in corporate positions, as well as their special technical merit in this particular matter, have created particular added value for the Company, and have strongly contributed towards this matter becoming a central point in the Company's life.

In addition to the responsibilities conferred by law, the Audit Committee, in performing its activities, is particularly responsible for the following: i) assessing the process of preparing and releasing financial information, the effectiveness of internal control systems, internal audit and risk management; ii) regularly evaluating external audits; and iii) approving activity plans within the scope of risk management and monitoring their execution, particularly evaluating the recommendations resulting from internal and external audit activities (being the first body to receive the respective reports), and reviewing the procedures put into place.

In relation to performing these functions, it is should be noted that, in accordance with the respective Regulation, the choice of an external auditor, as proposed by the Executive Committee, was the responsibility of the Audit Committee, which submitted to that body the results of the tender that it conducted in 2009 and that involved all the most highly credentialed international firms offering this type of service, which responded to strict specifications. Once again, considering the proposals presented, the Audit Committee decided on the firm that it thought most appropriate for the interests of Jerónimo Martins, verifying and evaluating the activities of the external auditor in each accounting year, ensuring that the Company provided it with the best conditions to perform its services, and that quality and transparent information is presented in a timely manner. The Annual Report includes a description of the supervisory activities performed by the Audit Committee, which is available on the Company's web page.

2.2.3. Ethics Committee

The Ethics Committee of Jerónimo Martins is currently comprised of Ms. Ana Vidal (Director of Communications) presiding, Ms. Inês Carvalho (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 Jeronimo 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 all the Companies in the Group.

Annual Report 09 Corporate Governance Managing and Supervisory Bodies of the Company

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) manages 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.

The Ethics Committee met twelve times during 2009 and examined various questions submitted to it by the Executive Committee, the Group's employees and third parties. This year, the Committee's activity across all the Group's companies and geographic regions was given special attention.

2.2.4. 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 being used in Jerónimo Martins' Companies, with a view to assuring compliance with the laws and regulations to which they are subject. In performing its tasks of assessing the quality of the monitoring process being used in the Companies, the Internal Control Committee must obtain regular information on the legal and fiscal contingencies that affect the Companies.

The Internal Control Committee meets monthly and is comprised of a President (Mr. David Duarte) and three members (Mr. José Gomes Miguel, Ms. Catarina Oliveira and Mr. Henrique Santos), none of whom are Board Members of any company within the Group.

In 2009, the Internal Control Committee continued its activities of supervision and assessment of risks and critical processes, reviewing the reports prepared by the Internal Audit Department. As 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. Structure and Operation of the Board of Directors and Distribution of Responsibilities

2.3.1. 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. Currently, the Board of Directors consists of ten members, of which three are members of the Executive Committee.

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

The selection of this model represents yet another step towards ensuring 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 who, since the entrance of Professor Marcel Corstjens, total five of the ten members. Also concerning the reinforcement of Corporate Governance practices, the Chairmanship of the Board of Directors (the responsibility of Mr. Elísio Alexandre Soares dos Santos) is still separated from the Chairmanship of the Executive Committee (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 a majority vote of the members 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 Executive Committee does not discuss the matters referred to in Article 407, Paragraph 4 of the Portuguese Commercial Companies Code.

It also states that it is the responsibility of the Chairman of the Board of Directors and of the Non-Executive Members of the Board of Directors to evaluate the performance of the members that comprise the Executive Committee and the other existing committees. They meet at least once per year in ad-hoc meetings specifically dedicated to this matter, without the presence of the Executive Members, and in which the performance of the Executive Committee and its influence on Jerónimo Martins' businesses is heavily debated, assessing the impact of its activity and adherence to the medium- and long-term interests of the Company. The same procedure is used to analyse the performance of the various committees that exist within Jerónimo Martins.

The annual management report includes a description of the activities performed by Non-Executive Members.

As set down in specific regulations, the Board of Directors has delegated several duties to the Executive Committee, including management of corporate business within the scope of the day-to-day running of the Company, including representing the Company and financial management of the Group, among others.

Nevertheless, pursuant to the terms of its Internal Regulation, the Board of Directors, and in particular its Chairman, retains authority over strategic matters of Company management, in particular those regarding the corporate structure, and to those that, due to their importance and special nature, may significantly impact their activity, exercising effective control on directing corporate life, always seeking to be duly informed and assuring supervision of Company management.

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. The President of the Executive Committee also sends the summonses and the minutes of the respective meetings to the Chairman of the Board of Directors and to the President of the Audit Committee via the Company Secretary. Additionally, 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. During 2009, all information requested by the Non-Executive Members was complete and provided in a timely manner by the Executive Committee.

2.3.1.1. Chairman of the Board of Directors

The role of Chairman of the Board of Directors is carried out by Mr. Alexandre Soares dos Santos. Despite not having a permanent participation in the meetings of the Executive Committee, the Chairman of the Board of Directors, in compliance with the Board of Directors' Regulations and apart from the role of institutional representation of the Corporate Bodies, has a special responsibility for managing the respective meetings, for monitoring the action taken on the decisions made by this body, for defining the overall strategy and for management development.

2.3.2. Responsibilities of 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, Tax Matters, Human Resources and Communications.

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

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

2.3.3. Organisational Structure and Distribution of Responsibilities

Jerónimo Martins SGPS, S.A. is the Holding Company of the Group, and as such is responsible for the main guidelines of the various businesses, as well as for ensuring consistency between the established objectives and the available resources. The Holding Company's services include 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, Services, Representations and Restaurant Services. The first area is organised into Geographical Areas and Operating Divisions.

2.3.3.1. 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 consistency with global objectives; iii) defining and controlling financial policies; and iv) defining human resources policies, with direct responsibility for implementing the Management Development Policy.

The Functional Divisions of the Holding Company are organised as follows:

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, which reports directly to the Chairman of the Board of Directors, are described in detail further on in this chapter.

Communication – Proposes and implements the communication strategy of the areas under its influence, seeking to provide rigorous, clear and complete information on Jerónimo Martins, its current performance and its future perspectives. It is responsible for managing Jerónimo Martins' Brand and Institutional Image.

Included in its scope of responsibility are the Media Relations for the Company and its subsidiaries, Institutional Communication Instruments, Patronage and Communication in matters of Sustainability.

In 2009, all the institutional communication instruments were updated, to provide better information to the Group's stakeholders. These updates met with the approval of the respective target audiences, as can be seen from the performance indicators used. Jerónimo Martins' official website recorded a monthly average of over 42 thousand visitors, with a 43% increase in the number of pages visited. Throughout 2009, the internal portal "My.JM", recorded a 39% growth in the number of visits, recording an average monthly number accesses of over 51 thousand.

In Media Relations, in addition to daily clarifications, interviews with business managers, and preparation of various press releases, 15 events were held with direct contact between the Mass Media and members of the Board of Directors, providing opportunities to receive information and clarification directly from the Group's top management.

With regard to Sustainability, there was close co-operation between various national and international entities, by replying to questionnaires covering the areas of Ethics, Human Resources, Environment, Quality and Food Safety, and Patronage. Apart from often providing clarification on different matters, Jerónimo Martins participated in five major studies, one of which was specifically on the Environment.

Legal Affairs – Responsible for supervising the Group's corporate affairs and for ensuring strict compliance by all its Companies with legal obligations. Legal Affairs assists the Board of Directors in preparing and negotiating contracts to 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 management of external counsel.

In 2009, the Department focused on monitoring the evolution of the corporate rules and recommendations in the Group's various reorganization operations, including the merger of Feira Nova into Pingo Doce and the internal training regarding the prevention of legal disputes.

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 that are common to all the Companies of the Group. The Division also verifies compliance with obligations stated in the By-Laws.

In 2009, activity was centred on supervising conformance with the accounting standards adopted by the Group, supporting the Companies in the accounting assessment of all one-off transactions, as well as in Jerónimo Martins' restructuring and expansion activities.

Strategy and Planning – Co-ordinates and supports the process for creating and maintaining the Group's Strategic Plans and their respective budgets. Along with this, it has a control function, by monitoring the performance of the Group's different Business Units, noting any possible gaps in relation to the Plans, in order to ensure corrective measures are applied, that guarantee that the Group's strategic objectives are reached. In addition, it supports the acquisition or disposal of Companies or Businesses, as well as the corporate restructuring processes.

During 2009, within the specific economic context which affected the geographic regions in which the Group operates, this Department intensified its Planning and Control processes and made them flexible. This way, the Market macro-economic trends and consequent contingencies, were permanently incorporated when assessing and monitoring the different Jerónimo Martins' Business Units and their respective performance projections. Special resources were allocated to the control of cash flow generation and of Investment Plans.

Activities that continued to be central to the Department of Strategy and Planning were support to multi-functional teams, focused on identifying new growth opportunities for the Group, as well as the assessment of alternative geographical markets and M&A opportunities.

Investor Relations - This Division is the interface with all the investors – shareholders or not, institutional and private, national and foreign - as well as the analysts who formulate opinions and recommendations regarding Jerónimo Martins' share price.

It is also the responsibility of the Investor Relations Department to co-ordinate all matters related to the Securities and Exchange Commission.

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

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

Within the scope of its activity, in 2009, the Fiscal Affairs Department provided assistance in the corporate restructuring operations, namely for the mergers between Pingo Doce and Feira Nova, and between Recheio Cash & Carry and SCGR - Comércio Por Grosso e a Retalho.

In addition, special work was carried out, in particular regarding State and other Public Entities' Extra-contractual Civil Liability, as well as regarding Value Added Tax rates on the products sold in the stores of the various banners, in order to unify the policies adopted by the various Jerónimo Martins Companies.

Also noteworthy, is the work carried out by the Fiscal Affairs Department in preparing for applications for various tax benefits within the scope of the Corporate R&D Tax Benefits System (SIFIDE).

Financial Operations – This Division includes two distinct areas: Risk Management and Treasury Management. The activity of the Risk Management area is discussed 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 to be met in that relationship.

Treasury planning has the role of selecting the most suitable financial sources according to individual need, for all of Jerónimo Martins' Companies. The type of funding, corresponding terms, cost and back-up documentation must comply with the criteria established by the Board. 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 the Jerónimo Martins Group is 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.

Human Resources – In a "Business for People, made by People", this area ensures initiatives across the Group that are indispensable for completely solidifying the mission of Jerónimo Martins. The strategic objectives of the Human Resources area are wide and ambitious, on the one side making the Jerónimo Martins brand desirable, and on the other side making it possible to retain excellent employees in the various Companies.

The Human Resources Department of Jerónimo Martins works in an integrated manner, pursuant to the global policies and strategies defined for the entire Organisation, guaranteeing compliance with the various procedures in this area, namely at the level of Recruitment, Training, Development and Administrative Support areas.

Security – This area defines and controls procedures in terms of protecting the security of Jerónimo Martins' people and assets, intervening whenever there are thefts and robberies, fraud and other illegal and/or violent activities perpetrated in the facilities or against employees.

The activities carried out by this Functional Division in 2009 are detailed in this chapter in the section on the Risk Control System.

2.3.3.2. Operational Divisions

The organisational structure of Jerónimo Martins is aimed mainly at ensuring specialisation in the Group's various businesses by creating geographical areas and Operational Divisions, thus guaranteeing the required proximity to the different markets.

As mentioned, the Food Distribution business is divided into Geographical Areas, and there are currently three Operational Divisions in Portugal: Retail in Portugal - Pingo Doce (supermarkets) and Feira Nova (hypermarkets) banners - Recheio (cash & carries) and Madeira (supermarkets and cash & carries), and an Operational Division in Poland that includes the Biedronka food stores and the "Apteka Na Zdrowie" pharmacies.

Manufacturing operates in partnership with Unilever, in the company Unilever Jerónimo Martins, Lda., which conducts the businesses of the food, personal care and home care products and ice-creams and in the company Gallo Worldwide, Lda., which produces and sells olive oil and cooking oils.

Within the Group's portfolio there is also a business area dedicated to Marketing, Services, 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, including Caterplus, a specialist in the trade and distribution of specific products for Food Service; ii) Hussel, a retail chain specialised in chocolates and confectionary; iii) Jerónimo Martins Restauração e Serviços, with the chain of Jeronymo coffee shops, Olá and Ben & Jerry's ice cream stores and Chili's restaurants; and iv) Puig Portugal, dedicated to selling perfumes, in partnership with the Puig Group.

2.3.3.3. Operational Support Functional 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 Operational Support Functional Divisions are: Sourcing, Logistics, Quality and Environmental Control, Financial and Information Technologies. These Functional Divisions are responsible for providing services to the various distribution Operational Divisions in Portugal, in accordance with the guidelines provided by the Group's Holding

Company. They are also responsible for ensuring policy standards and internal procedures.

2.4. Risk Management and Internal Control Systems

2.4.1 Risk Management

The Company, and in particular, its Board of Directors, dedicates a great deal of attention to the risks affecting the businesses and their objectives. Success in this area depends on the ability to identify, understand and handle exposure to events, which, whether or not under the direct control of the management team, may materially affect the physical, financial and/or organizational assets of the Company. This concern is materialized in the Group's Risk Management Policy, which aims to stimulate and reinforce the type of behaviour necessary for that success.

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

2.4.1.1 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 all the Companies in the Group;
• To regularly assess the strengths and weaknesses of key value drivers;
• To develop and implement programmes to handle 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 are sources of value creation;
• To improve decision-making and priority-setting processes through the structured understanding of Jerónimo Martins' business processes, their volatility, opportunities and threats.

2.4.1.2. The Risk Management Process

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 Risk Management Process (RMP) is cyclical in nature, considering: i) risk identification and evaluation; ii) definition of management strategies; iii) implementation of control processes; and iv) process monitoring.

The RMP of the Group complies with standards of the Federation of European Risk Management Associations (FERMA), which are seen as a model of best practices.

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.

2.4.1.3. Organisation of Risk Management

Risk management is organized around three categories:

• Strategic Risks;
• Financial Risks;
• Process Risks.

In the first category, attention is focused on the uncertainty which affects the viability of the business model and strategy. The other categories encompass the uncertainty affecting the implementation of the business model and strategy. The operating risks category also includes uncertainty regarding the relevance and quality of the information used for decision-making.

Strategic Risks

Strategic risk management involves monitoring factors such as social, political and macro-economic trends; the evolution of consumers' preferences; the businesses' life cycle; the dynamics of the markets (financial, employment, natural and energetic resources); the competition's activity; technological innovation; availability of resources; and legal and regulatory changes.

The management team uses this information to understand if the analysis of the identified needs is still up to date and if it is viable to develop a unique value proposition, which adequately meets those needs. That information is also used to know if there is a large enough market of customers who are willing and able to pay the price offered and to see if the Company has enough exclusive, lasting and sustainable competitive advantages to obtain a return that is commensurate with the risks involved.

In this way, the management team tries to identify any opportunities and threats in the industries and sectors in which it operates, namely in terms of potential profitability and growth, but also in terms of both the strategic alignment and appropriateness of its business model in light of current and future market conditions.

These issues are assessed at the Executive Board meetings and discussed during various internal forums throughout the year.

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.

The management of this risk category is focused on the unpredictable nature of the financial markets and tries to minimize its adverse effects on the Company's financial performance.

On this level, certain types of exposure are managed using derivative financial instruments.

Activity in this area is carried out by the Financial Operations Department, under the supervision of the Executive Committee. The Risk Management Department is responsible for identifying, assessing and hedging financial risks, by following the guidelines defined by the Board.

a) Market Risk

a.1.) Foreign Exchange Risk

The main source of exposure to foreign exchange risk comes from Jerónimo Martins' operations in Poland. Management of this risk is driven by the principles defined by the Board of Directors, who in April 2009, approved the Financial Risk Management Policy, which includes foreign exchange risks both from investments in subsidiaries and from current commercial operations.

At 31 December 2009, and excluding contracted hedge operations, the negative impact on net investment of an adverse variation in the Euro/Zloty exchange rate in the order of 10%, keeping everything else constant, would be -42 million euros (compared with –34 million euros in 2008). Incorporating the effect of contracted hedge operations, the impact would be –29 million euros (compared with –25 million euros in 2008). These impacts would be reflected in the Equity. Jerónimo Martins' sensitivity to this risk increased during 2009, due to the higher value of the net investment in Poland.

The other source of exposure regarding 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	23-06-2011
Private Placement #2	\$96.000.000,00	23-06-2014

Two cross currency swaps were contracted to hedge this risk, exactly replicating the terms of the financing:

Financing	Amount	Counter-amount	Maturity
Swap #1	\$84.000.000,00	70.469.798,66 €	23-06-2011
Swap #2	\$96.000.000,00	80.536.912,75 €	23-06-2014

Thus, net exposure to the Euro/US Dollar exchange rate resulting from these transactions is null, and there were no changes from 2008 to 2009.

In addition to this exposure, within the scope of the commercial activities of its subsidiaries, the Company acquires merchandise that is denominated in foreign currency, mainly zloty and US dollars. As a general rule, these transactions involve low amounts, and are very short dated.

Management of the Operational Companies' exchange rate risk is centralised in the Holding Company's Financial Operations Department. Whenever possible, exposure is managed through natural hedges, namely through loans denominated in local currency. When this is not possible, zero cost structures are contracted using instruments such as: swaps, forwards or options.

The following table summarizes the Group's exposure to foreign exchange risk as at 31 December 2009, being presented the Group's financial instruments at their book value, categorized by currency:

				(€'000)
As at December 31st, 2009	Euro	Zloty	Dollar	Total
Assets
Cash and cash equivalents	77,105	146,396	-	223,501
Available-for-sale financial investments	7,528	-	-	7,528
Debtors and deferred costs	118,157	61,111	-	179,268
Derivative financial instruments	-	1,851	15	1,866
Total financial assets	202,790	209,358	15	412,163
Liabilities
Borrowings	609,188	137,540	134,128	880,856
Derivative financial instruments	13,258	3,084	16,879	33,221
Creditors and accrued costs	827,276	748,434	-	1,575,710
Total financial liabilities	1,449,722	889,058	151,007	2,489,787
Net financial position in the balance sheet	(1,246,932)	(679,700)		(150,992) (2,077,624)
As at December 31st, 2008
Total financial assets	254,134	144,958	-	399,092
Total financial liabilities	1,588,442	826,510	151,007	2,565,959
Net financial position in the balance sheet	(1,334,308)	(681,552)		(151,007) (2,166,867)

a.2.) Price Risk

Because of its investment in Banco Comercial Português, the Company is exposed to the risk of share price fluctuation. At 31 December 2009, a negative 10% variation in the trading price of BCP shares would have a negative effect of 165 thousand euros. At 31 December 2008, a similar variation would have a negative effect of 159 thousand euros.

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

All financial liabilities are directly or indirectly indexed to a reference interest rate, which exposes Jerónimo Martins to cash flow risk. A portion of this risk is hedged through interest rate swaps, which exposes Jerónimo Martins to fair value risk.

Exposure to interest rate risk is analysed dynamically. In addition to evaluating future contingencies, based on forward rates, sensitivity tests to variations in interest rate levels are performed. The Company is essentially exposed to the Euro and the Zloty interest rate curves. 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 flows 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 performed 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 31 December 2009 and ignoring the effect of interest rate derivatives, a climb of 50 basis points in the interest rate, with everything else remaining constant, would have a negative impact of 3.3 million euros. Incorporating the effect of interest rate derivatives, the net impact would be a positive 5.8 million euros, of which 7.6 million are related to interest rate derivatives associated with medium- and long-term debt, and 1.5 million are related to interest rate derivatives associated with Euro/US Dollar exchange rate swaps. These effects would be reflected in other reserves in equity.

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

Interest rate risk is managed through operations involving financial derivatives contracted at zero cost.

b) Credit Risk

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

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-".

With regard to customers, risk is mainly related to Recheio Cash & Carry and Manufacturing and Services businesses, since the other businesses operate based on cash sales or with bankcards (debit and credit). This risk is managed based on experience and individual customer knowledge, as well as through credit insurance

and by 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 credit deposits, short-term investments and derivate financial instruments with positive fair value, as at 31 December 2008 and 2009:

			(€'000)
Financial Institutions		2009	2008
	Rating	Balance	Balance
Standard & Poor's	AAA	-	47,354
Standard & Poor's	[AA- : AA+]	6,172	43,738
Standard & Poor's	[A- : A+]	194,448	133,429
Moody's	Baa2	23,981	-
	Not available	15	1,164

The ratings shown correspond to the ratings given by Standard & Poor's. When these are not available Moody's or Fitch ratings are used instead.

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
	2009	2008
	Balance	Balance
New customer balances (less than six months)	4,524	2,168
Balances of customers without a history of non-payment	73,863	79,214
Balances of customers with a history of non-payment	13,618	14,850
Balances of other debtors with the provision of guarantees	641	16,522
Balances of other debtors without the provision of guarantees	75,804	48,641
	168,450	161,395

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
		2009		2008
	No.	Balance	No.	Balance
Customers with a balance above 1,000,000 euros	23	38,443	19	38,389
Customers with a balance between 250,000 and 1,000,000 euros	57	15,203	67	15,911
Customers with a balance below 250,000 euros	8,429	38,948	11,395	40,451
Other Debtors with a balance above 250,000 euros	34	49,483	37	31,179
Other Debtors with a balance below 250,000 euros	2,607	26,373	3,775	35,465
	11,150	168,450	15,293	161,395

The maximum exposure to credit risk ignoring the fair value of guarantees received as at 31 December 2008 and 2009 is the respective amount of the balance of financial assets.

c) Liquidity Risk

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

To manage this risk, the Company uses, for example, credit derivatives in order to minimise 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) resulting from the annual plans, which are reviewed at least twice a year and take under consideration the compliance with eventual covenants included in loans.

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 flows. 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
2009	Less than 1 year	1 to 5 years	+ 5 years
Borrowings
Financial Leasing	37,541	51,468	28
Loans	117,911	805,015	-
Derivative Financial Instruments	13,774	2,473	-
Creditors	1,450,198	-	-
Operational Lease Liabilities	154,899	500,539	546,900
2008
Borrowings
Financial Leasing	38,173	71,157	1,826
Loans	331,116	704,981	85,241
Derivative Financial Instruments	1,718	10,230	507
Creditors	1,399,507	-	-
Operational Lease Liabilities	132,608	415,600	506,002

The following table shows non-discounted contractual cash flows regarding gross settled derivatives:

			(€'000)
Derivative Financial Instruments gross settled
Less than 1 1 to 5 years + 5 years 2009 year
Derivative Financial Instruments
Outflows	-	(151,007)	-
Inflows	-	134,127	-
	-	(16,880)	-

Capital Risk Management

Jerónimo Martins seeks to keep its capital structure at appropriate levels so that it not only ensures the continuity and development of its activity, but also to provide adequate returns to its Shareholders and to optimise the cost of capital.

The capital structure balance is monitored based on the financial leverage ratio (Gearing), calculated according to the following formula: Net Debt / Shareholder Funds. The Executive Committee established a Gearing ratio between 70-80% as a target for 2009, consistent with an investment grade rating.

The Gearing ratios at 31 December 2009 and 2008, were the following:

		(€'000)
	2009	2008
Capital Invested	1,757,696	1,776,975
Net Debt	692,000	845,850
Shareholder´s Funds	1,065,695	931,125
Gearing	64.9%	90.88%

Process Risks

The model used in managing Process Risks includes Operating Risks, Human Resources, Information Technologies and 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 Companies.

The operational risks class covers risks related to sourcing, supply chain, stock management, fund management, investments, efficiency in the use of resources, business interruption and fraud. Quality and Food Safety Management, Security of People and Property, and Facilities and Equipment also come under this category. Due to their specific needs, these areas are the responsibility of their respective Department.

The following areas are the responsibility of the Quality and Food Safety Department of the different Companies: i) prevention, through selection, assessment, and followup audits on suppliers; ii) monitoring, by following the product throughout the whole logistics circuit, to analyse compliance with best practice and certification requirements; and iii) training, by carrying out periodic simulations and awareness initiatives.

In the different Companies, the department that manage environmental matters, have the following responsibilities: i) minimizing the environmental impacts of the activities, products and services; ii) monitoring the establishments to assess their compliance with best practices and legal and certification requirements; iii) training employees to adopt environmental best practices; and iv) co-operating with internal department and external entities, with a view to obtaining process eco-efficiency.

The Security Department is responsible for ensuring that conditions exist to guarantee the physical integrity of people and facilities, intervening against theft and robbery, as well as fraud and other illegal and/or violent activities perpetrated in the facilities or against the Group's employees. In 2009 its tasks were based on defining and controlling procedures for preventing the security and protection of the property, and

also on providing support to the audits carried out on the security and risk prevention systems.

It is the Technical Departments' responsibility, in co-operation with the respective Operational Departments, to define and carry out the regular maintenance plans on the facilities. Of note within its area of activity are supervising the status of electrical equipment, managing means of protection and detecting fires, as well as storing flammable material.

Within the class of risk related to Human Resources are risks associated with payroll, authorisation levels and ethical behaviour. Health and Safety in the Workplace also come under this area.

In the Food Distribution area in Portugal, coordinating the management process of this risk area is the responsibility of the Director of the Environment and Occupational Safety. In Poland, this responsibility is decentralised among the various regions of the Biedronka operation. Regarding Manufacturing, the risk area in Health and Safety in the Workplace is centrally managed, covering all the Companies involved. Risk management in this area involves defining and publicising working standards and instructions, carrying out employee awareness initiatives and training, performing audits on the stores, preparing risk assessments of all the establishments, and performing emergency simulations.

The risks associated to Information Technologies are analysed considering the different components: planning and organization of information technologies, development of information technologies, operations management, information security and continuity. The component of Information Security is the responsibility of the Information Security Officer (ISO), which consists of implementing and maintaining an information security management system that ensures confidentiality, integrity and availability of critical business information, and recovery of the systems in the event of interruption in the operations.

In the risks for Decision-Making accounting and financial reporting risks are considered. Also included in this area is compliance with legislation, which is ensured by the Legal Departments of the Companies. With regard to the Holding Company, the Legal Department guarantees the coordination and implementation of strategies aimed at protecting the interests of Jerónimo Martins in legal disputes, 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 Holding Company's Fiscal Affairs Department advises all the Group's Companies, as well as managing their tax proceedings.

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 Entity responsible for the strategy of Jerónimo Martins, has the following set of objectives and responsibilities:

• To understand the most significant risks affecting the Group;

• To ensure that Jerónimo Martins possesses appropriate levels of knowledge of the risks affecting its operations, and how to manage them;

• To ensure that Jerónimo Martins' Risk Management strategy is released 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 Jerónimo Martins can react to crisis situations;
• To ensure that the Risk Management process is adequate and that it strictly monitors those risks that have the highest probability of occurrence or impact on Jerónimo Martins' activities.

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

Evaluation of the Internal Control System

The Internal Control Committee annually approves the Internal Audit Department's activity plan, which defined the nature of the audits to be performed, in order to evaluate the quality of the control processes. These processes are directed at fulfilling the Internal Control System's objectives, namely those for ensuring the efficiency of the operations, the reliability of the financial and operational reports, and compliance with laws and regulations.

To this end, process and conformance audits were performed, as well as financial audits and information technology audits whose associated risks presented a higher probability of occurrence and/or potential impact on operations. This approach helps make the internal auditing process 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 Committee via a quarterly Audit Letter.

In 2009, 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 a database of risks that affect or that may affect the Group's Companies to be updated.

In accordance with the Activity Plan, and also in light of updating 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 management, cash collection, investments and safeguarding assets. In the area of Human Resources, audits were carried out on risks associated to salary processing. For risks to information for decision-making, a series of accounting audits were performed, to gauge the compliance with accountancy principles.

In the area of Information Technologies, apart from monitoring the activities carried out by the Information Security Department, the evaluations of general controls within the different Companies were updated, with specific audits on the SAP and WPMS operating systems.

2.5. Powers of the Board of Directors, namely in Relation to Deliberations on Capital Increases

Any capital increase is subject to prior deliberation by the Shareholders' Meeting.

2.6. 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, confidentiality, and ensuring that Members of the Board of Directors and Group 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 Jerónimo Martins' 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 Code of Conduct, there are currently in effect, Regulations for the Board of Directors, the Executive Committee, the Audit Committee, the Ethics Committee and the Internal Control Committee, which regulate the responsibilities and functioning of the mentioned bodies, as well as Company Share Transactions Regulations applicable to Jerónimo Martins' Board Members and Senior Management.

These Codes and Regulations may be consulted on the Company's website or requested from the Investor Relations Office. In addition to the above-mentioned documents and applicable legal provisions with which the Company complies, there are no other internal regulations regarding incompatibilities and the maximum number of corporate positions that may be accumulated.

2.7. Rules Regarding Designation and Substitution of Members of the Board of Directors and the Supervisory Board

The first article of the Regulations of the Company's Board of Directors foresees that this body has a composition that will be deliberated in the Shareholders' Meeting pursuant to the terms indicated in number 1 of Article Twelve of the Articles of Association, and it will be presided over by the respective President, chosen during the Shareholders' Meeting.

Number 3 of Article Eight of the same Regulations foresees that in the case of death, resignation or impediment, whether temporary or definitive, of any of its Members, the Board of Directors will agree on a substitute, and if appointment of the substitute does not occur within sixty days from the absence of that Member, the Audit Committee will be responsible for the appointment.

According to Article One of the respective Regulations, and Article Nineteen of the Articles of Association, the Audit Committee is comprised of three Members of the Board of Directors, one of whom will be its President. The Members of the Audit Committee are appointed simultaneously with the Members of the Board of Directors, and the lists proposed for the latter body must list the Members that are intended to form the Audit Committee, and these Members cannot be part of the Company's Executive Committee.

There is no specific regulatory prevision regarding the appointment and replacement of Members of the Audit Committee, thus what is set forth in law is applied.

2.8. Number of Meetings of the Board of Directors and Supervisory Board, and Other Committees

During 2009, the Board of Directors met five times, the Executive Committee met 29 times, of which nine were also attended by the Chairman and the Audit Committee held five meetings. In addition, the Ethics Committee met 12 times, and the Internal Control Committee held 11 meetings. The respective minutes of these meetings were drafted.

2.9. Description and Identification of the Board of Directors

The Board of Directors consists of ten members, of which three are part of the Executive Committee – Mr. Luís Palha da Silva, Mr. Pedro Soares dos Santos and Mr. José Soares dos Santos – the remaining seven being - Mr. Elísio Alexandre Soares dos Santos (Chairman of the Board), Prof. António Borges, Mr. Rui Patrício, Mr. Hans Eggerstedt, Mr. Artur Santos Silva, Mr. Nicolaas Pronk and Prof. Marcel Corstjens.

Of the Non-Executive Directors, three of them – Prof. António Borges, Mr. Rui Patrício, Mr. Hans Eggerstedt – comprise the Audit Committee, complying with the rules of incompatibility indicated in Paragraph 1 of Article 414-A of the Code of Commercial Companies, with the exception of that provided for in sub-paragraph b).

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

Pursuant to the independence criteria indicated in Paragraph 5 of Article 414 of the Code of Commercial Companies, the Independent Members are Prof. António Borges, Mr. Rui Patrício, Mr. Artur Santos Silva, Mr. Hans Eggerstedt and Prof. Marcel Corstjens.

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 Chief Executive Officer, a post he combined with that of Representative of Jerónimo Martins' in the joint venture with Unilever. He has been the Group's Chairman since 1996.

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 29 June 2001, and President of the Executive Committee since 2004.

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 assumed responsibility for the Operations area for Food Distribution in Portugal. He has been Executive Director of Jerónimo Martins SGPS, S.A. since 31 March 1995.

Executive Director José Soares dos Santos, who holds a Degree in Biology 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 31 March 1995, and 29 June 2001, and was reappointed on 15 April 2004.

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 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 OECD and the Portuguese Government. He has held various administrative posts, including at Citibank Portugal, Petrogal, Vista Alegre, Paribas and SONAE. He was a Vice President at Goldman Sachs from 2000 to 2008. He has been a Non-Executive Director of the Company since 29 June 2001.

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 to 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 29 June 2001.

Rui Patrício has a Law degree from the Law School of Universidade de Lisboa, where he was an Assistant from 1958 to 1963. In 1965 he was named Sub-Secretary of State for Foreign Development. He was the Minister of Foreign Affairs from 1970 to 1974. He was Vice President of the Monteiro Aranha Group between 1976 and 1991, at which point he assumed administrative functions at several Brazilian companies, including 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 29 June 2001.

Artur Santos Silva holds a Law degree 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 Banco de Portugal. He has been President of Grupo BPI since 1981, a Member of the Board of Directors of

the Calouste Gulbenkian Foundation since 2002, member of the Consulting Committee of the Portuguese Technological Plan, a member of the Consulting Committee of the CMVM, and Non-Executive Director of the Company since 15 April 2004.

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 disinvestments and defining Corporate Governance. 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 carried out his first mandate as a Non-Executive Director of the Company.

Marcel Corstjens is Belgian and has a PhD in Business Administration, with a major in Marketing from the University of Berkeley. Between 1978 and 1981 he was Assistant Professor at INSEAD in Fontainebleau, where he returned as Professor in 1985 and has been a Full Professor of Marketing since 1999. Since 1994, he has also been a Visiting Professor at Stanford University, in the U.S.A. Since 1978, he has been published numerous articles and books on Retailing and Marketing. He carried out his first mandate as a Non-Executive Director of the Company.

All the above referred Board Members ended their current terms in 2009 but they maintain their functions until the next Shareholders' Meeting.

The number of Company shares that are held by officers are indicated in the point concerning the Annex to the Consolidated Management Report.

2.10. Functions that the Members of the Board of Directors Perform in Other Companies

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

Elísio Alexandre Soares dos Santos

Chairman of the Board of Curators of Fundação Francisco Manuel dos Santos 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 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. * Manager of Gallo Worldwide, Lda. * Vice-President of Sporting Clube de Portugal. 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 Comespa – Gestão de Espaços Comerciais, S.A.* Director of JMR – Prestação de Serviços para a Distribuição, 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 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 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.* 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 SFMS – Imobiliária, Sociedade Unipessoal, Lda. Manager of Unilever Jerónimo Martins, Lda.* Manager of Transportadora Central do Infante, Lda. Manager of Gallo Worldwide, 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)

Rui Patrício

Member of the Board of Directors of Monteiro Aranha, S.A. (Brazil) 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)

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)

Member of the Supervisory Board of Jeronimo Martins Duystrybucja *

Artur Santos Silva

Chairman of the Board of Directors of Banco BPI, 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.

Member of the Board of Directors of Partex Oil and Gas (Holding Company)

Nicolaas Pronk

Member of the Board of Directors of Heerema Holding Company, Inc. 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 International Group Services S.A. 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 Heavy Transport Group, Inc. – Geneva Branch Office Member of the Board of Directors of Heerema Engineering & Project Services, Inc. Member of the Board of Directors of Heerema Engineering & Project Services, Inc. . – Geneva Branch Office 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 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 RegEnersys Investment V 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 Heavy Transport Holding Denmark ApS 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.r.L.

Member of the Board of Directors of Heerema Transport Finance II (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 Heerema Engineering Holding (Luxembourg) S.A. Member of the Board of Directors of 360 Family Equity S.A. Member of the Board of Directors of RegEnersys Holding (Luxembourg) S.A. Member of the Board of Directors of RegEnersys Finance (Luxembourg) S.a.r.L. Member of the Board of Directors of RegEnersys, Holding B.V. Member of the Board of Directors of Heerema Marine Contractors Finance (Luxembourg) S.A. Member of the Board of Power Ultrasonics, S.A.

Marcel Corstjens

Does not hold any post in other companies.

2.11. Board of Directors Remuneration Policy

According to its responsibilities, the Remuneration Committee established the remuneration parameters of the Executive Committee based on a fixed component and a variable component, seeking to make it more competitive in the market. It will also serve as a motivating element for high individual and collective performance, allowing ambitious targets for rapid growth to be established and achieved, and adequate remuneration of its Shareholders.

At the proposal of the Chairman of the Board of Directors, the variable component is approved annually, by the Remuneration Committee, which will consider the contribution of the Executive Committee to evolution of the businesses from the shareholder's perspective (EVA) and the Company's share price during the prior accounting year, and further, to the degree that projects forming part of Jerónimo Martins' Strategic Scorecard were realised. The Remuneration Committee, under these guiding principles, defines the rules for the attribution of performance bonuses to Executive Directors, bearing in mind the degree to which personal and Company objectives have been met.

This remuneration policy was subject to discussion at the annual Shareholders' Meeting held last year.

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, in fact, never arisen.

2.12. Remuneration Committee

The General Shareholders' Meeting in 2007 elected a Remuneration Committee, which is comprised of the following shareholders: Mr. António Sousa Gomes (Chairman), Mr. José Queirós Lopes Raimundo and Mr. Arlindo do Amaral, none of whom are members of the Board of Directors of the Company, or have a spouse or relatives in that position, nor do they have relationships with the Members of the Board of Directors

that may affect their impartiality in performing their functions. This Committee, in accordance with legal requirements, determines the earnings of the Members of the Board of Directors. During 2009, the Remuneration Committee met once, and the respective minutes were prepared.

Last year at the Company's Annual Shareholders' Meeting, this Committee submitted a statement on the policy of remuneration of the Company's administrative and fiscal bodies and at the Shareholders' Meeting, Mr. Arlindo do Amaral was present as representative of the Remuneration Committee.

2.13. Remuneration of the Members of the Board of Directors and of the Supervisory Board

With regard to this information, particularly that resulting from the obligation to individually disclose the remuneration of the members of the managing and supervisory bodies, approved within the scope of that stated in Article 2 of Law 28/2009 of 19 June, 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 achieved by indicating the overall remuneration of the Executive Directors on the one hand, and the Non-Executives on the other.

It should be added that the internal and external resentment that such disclosure could provoke, does not, in the opinion of the Board of Directors, contribute towards improving the performance of its members. Nevertheless and due to the legal obligation, the Company now discloses the information within the terms imposed.

The remuneration paid to the Members of the Board in 2009 was 3,257,061.84 euros, with the members of the Executive Committee being paid 1,983,551.04 euros (1,352,921.04 euros as fixed payment and 630,630.00 euros as variable payment) and the remaining Directors received 1,273,510.80 euros (929,007.20 euros as fixed payment and 344,503.60 euros as variable payment). All these remunerations have been paid and no other remunerations are paid by other companies in the Group.

Individually, the members of the Executive Committee earned the following remuneration: Mr. Luís Palha received a total of 662,230.88 euros (452,020.88 euros as fixed remuneration and 210,210.00 euros as variable remuneration); Mr. Pedro Soares dos Santos received a total of 660,660.08 euros (450,450.08 euros as fixed remuneration and 210,210.00 euros as variable remuneration); and Mr. José Soares dos Santos received a total of 660,660.08 euros (450,450.08 euros as fixed remuneration and 210,210.00 euros as variable remuneration).

The members of the Audit Committee earned a total remuneration of 145 thousand euros, all as fixed remuneration.

Individually, the members of the Audit Committee earned the following remuneration: Mr. Hans Eggerstedt received 51,250 euros, Prof. António Borges received 51,250 euros; and Mr. Rui Patrício received 42,500 euros.

The remaining members of the Board of Directors received the following, individually and as fixed remuneration: Mr. Artur Santos Silva received 45 thousand euros, Mr.

Nicolaas Pronk received 30 thousand euros; and Prof. Marcel Corstjens received 37,500.00 euros.

The Chairman of the Board of Directors received a total of 1,033,510.80 euros 689,007.20 euros being as fixed remuneration and 344,503.60 euros as variable 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 profitability of the businesses from the shareholder's perspective (EVA), the relative share performance, the work carried out during the 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.

In particular, the Remuneration Committee, following a current practice of the Company in recent terms, has sought to define a policy that pays the Executive Directors for the Company's long-term performance and for satisfying the interests of the Company and Shareholders within this period. Therefore, the variable component that is approved on an annual basis by the Remuneration Committee considers the contribution of the Executive Committee to conducting business through: i) solidifying EVA objectives included in the Medium- and Long-Term Plan approved by the Board of Directors; ii) share price performance; and iii) implementation of a group of projects across the Companies in the Group which, having been identified by the Board of Directors as being essential to ensuring the future competitiveness of the businesses, are scheduled so that one calendar year may be exceeded, and the Executive Committee is responsible for each phase of fulfilment.

No plan is in place to attribute shares, or provide 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 duties, and the Company has no outstanding debt in this respect. The Company's Directors did not receive any other amount from any Company in a parent/subsidiary or Group related to the Company.

At the Annual Shareholders' Meeting in 2005, an Alternative 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.

Plan participants include the Executive Directors of the Company, and those who opted for the current Pension Plan will forego eligibility for the Alternative Pension Plan, expressly and irretrievably waiving 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 System (currently 65 years old). A Participant will be considered to be in a state of total and permanent disability 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. This amount is included in the amounts mentioned above as remuneration of the Executive Directors.

As for the complementary pension or retirement systems, under the terms of current Regulations, Directors have the right to a Complementary Pension at retirement age, cumulatively, when they: i) are over 60 years old; ii) have performed executive functions; and iii) have performed the role of a Director for more than ten years. This complement was established in the Annual Shareholders' Meeting in 1996, but none of the Members of the Executive Committee will make use of this plan, since all of them opted for the Alternate Pension Plan mentioned above.

Non-pecuniary benefits are not considered as remuneration not attained in the above situations.

There is no payment obligation whatsoever, in individual terms, in the event of termination of functions during the term of the Board of Directors.

2.14. 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 access to communication channels to contact recipients who are recognised within the Company regarding information on possible irregularities occurring within the Group, and that they can make any comments or suggestions, particularly with respect to compliance with the procedural manuals in effect, 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 bodies, among other matters.

The Ethics Committee released a message to all Jerónimo Martins employees 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.

Chapter 3 Information

3.1. The Company's Capital Structure

The Company's capital is 629,293,220 euros. It is fully subscribed and paid in, and it is divided into six hundred and twenty-nine million, two hundred and ninety-three thousand, two hundred and twenty shares with nominal value of one Euro each. There are no other share categories. All shares were admitted for trading, and the Company maintained 859 thousand shares in its own portfolio (corresponding to 171,800 shares before the restatement of company capital in May 2007), acquired in 1999 at the average price of 7.06 euros per share (price adjusted by the restatement of capital) and representing 0.14% of the Company's capital. In 2009, there was no movement whatsoever of own shares.

3.2. Shareholder Structure

The Companies whose rights to vote under the terms of Paragraph 1 of Article 20 of the Securities and Exchange Code are identified in the note that refers the List of Qualified Shareholders as at 31 December 2009, included in the Annex to the Consolidated Management Report of this Report. Sociedade Francisco Manuel dos Santos SGPS, S.A., and Asteck, S.A. are qualified shareholders.

Special rights are not attributed to Shareholders in the By-Laws.

___________

^* Source: Shareholder communications.

3.3. Restrictions Regarding Transferability of Shares, Shareholder Agreements and Rules Applicable to Altering the Company's By-Laws

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

The By-Laws do not set limits on exercising the right to vote. The Board of Directors knows of no Shareholder agreements.

The By-Laws do not define any rules applicable to alteration of the Company's By-Laws, therefore the terms defined by the Law apply to these matters.

3.4. System for Employees' Participation in the Company's Capital

There is no system by which employees may participate in the Company's capital.

3.5. Share Price Performance

The main Portuguese Stock Market index - PSI-20 - increased in value by 33.5% in 2009, equivalent to growth of 17.5 billion euros, ensuring that the Portuguese stock market was the second-best performing in Europe, only surpassed by the Dutch stock market.

The Portuguese stock market also recorded its largest annual growth in value of the last 12 years, with many shares registering strong gains after being heavily penalised in 2008. The last time the PSI-20 grew more than it did in 2009 was in 1997, when it registered 71% growth.

The recovery of the Portuguese stock market was 48% if March is taken as the reference month - when the market recorded minimum values.

The recovery of the PSI-20 from March onwards was not wholly immune to the fragile signs of recovery of the Portuguese economy, but the major catalyst seems to have been the fact that many of the companies that make up the index carry out a significant portion of their business in international markets, where the economies recorded higher growth rates.

2009 was marked by general recovery, as the most penalised sectors in 2008 corrected the heavy losses in value they suffered. Furthermore, the good financial results reported by most companies over the year allowed the markets to recover the attractive growth rates achieved in previous years.

The swing from the price minimums of 2008 to the price maximums in 2009 can be explained as the reaction of markets to stabilisation of the financial system. The main indices in 2008 reflected the world recession, raising fears of its impact on companies' accounts and on increased restrictions to obtaining financing for carrying on their investment strategies. The fiscal and monetary support measures taken by the governments of various countries prevented a greater number of bankruptcies, and the markets reacted positively and began to show signs of increased dynamism, taking advantage of the low share prices.

In 2009 Jerónimo Martins grew in value by 75.9% on the previous year, making it the fifth-best performer on the PSI-20, after being the company that registered the second lowest fall in value in 2008 (-26.9%).

The PSI-20 Index continued its upward trend in the second and third quarters. It performed worse in the fourth quarter (-0.1%), though achieving the year high of close to 8,883 points, on 19 October.

3.6. 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
	Jerónimo Martins- SGPS	Shares	PTJMT0AE0001	JMT
Codes:
	Reuters RIC		JMT.LS
	Bloomberg		JMAR PL
Shares
	Share Capital:		629.293.220	Euros
	Shares nominal value:		1,00	Euro
	Number of shares:		629.293.220

The Jerónimo Martins share price registered a downward trend in the first few months of 2009, in line with the decline of the PSI-20 Index. The year's low was recorded on 23 February (3.07 euros), and the high was reached in three sessions during the final two weeks of 2009 (7.05 euros).

The greatest rises in the share price coincided with the release of the first quarter results (April), driven by the operational performance that largely exceeded market estimates, and the end of the third quarter.

The greatest decline occurred in February, coinciding with the publication of the financial results for 2008, when macroeconomic estimates were still heavily influenced by the strong world recession and volatility was the main driver of uncertainty.

Jerónimo Martins shares registered, in liquid terms, an average daily trading volume of 1,358,754 shares during 2009, around 46% down on the 2008 trading volume, when record liquidity results were obtained.

No shares or other securities were issued, and the shares are not divided into different categories, therefore dividend payments were not affected.

JM SHARES DESCRIPTION

	2009	2008	2007	2006	2005
Share Capital	629,293,220	629,293,220	629,293,220	629,293,220	629,293,220
Number of ordinary shares	629,293,220	629,293,220	629,293,220	125,858,644	125,858,644
Own Shares	859,000	859,000	859,000	171,800	171,800
EPS (Eur)	0.32	0.26	0.21	0.92	0.88
Cash Flow per share (Eur)	0.69	0.55	0.42	2.05	1.96
Dividend per share (Eur)*	0.14	0.10	0.44	0.42	0.36
Stock market Performance **
High (Eur)	7.05	6.40	5.59	3.52	2.57
Low (Eur)	3.07	3.22	3.43	2.55	1.97
Average (Closing) (Eur)	4.97	4.92	4.37	2.85	2.35
Closing (End of year) (Eur)	6.99	3.97	5.40	3.40	2.54
Market Capitalisation (31/12) (Eur's 000,000)	4,396	2,498	3,398	2,140	1,598
Transactions
Volume (1.000 shares) **	347,603	468,826	275,512	189,430	173,135
Annual Growth
PSI 20	33.5%	-51.3%	16.3%	29.9%	13.4%
Jerónimo Martins	75.9%	-26.5%	58.8%	33.9%	30.9%

*2008 dividend per share, related to 2007, discloses the stock split of M ay 2007

** data for the years 2005 and 2006 was adjusted by the stock split of M ay 2007

3.7. Publication of Market Results

Throughout the year, the Investor Relations Office published Jerónimo Martins' quarterly results, and it released all relevant information on the performance of the Company'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.

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

14 January	Preliminary Sales 2008
6 March	FY 2008 Results
6 May	1st Quarter 2009 Results
27 July	1st Half 2009 Results
29 October	3rd Quarter 2009 Results

The following table shows the performance of Jerónimo Martins' shares, taking into account the announcement of results and material information during 2009.

			Price variations JM
Event Date		Price	5 days before	1 day after	5 days after
Preliminary Sales 2008	14 January	3.38	-5.8%	10.9%	8.6%
FY 2008 Results	6 March	3.12	-1.2%	2.7%	6.6%
1st Quarter 2009 Results	6 May	4.26	0.5%	4.5%	7.6%
1st Half 2009 Results	27 July	4.71	0.8%	1.9%	4.6%
3rd Quarter 2009 Results	29 October	6.01	0.9%	4.1%	3.8%

3.8. Dividend Distribution Policy

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

• The value of the dividend distributed must be between 40% and 50% of ordinary consolidated net earnings;
• If, as a result of applying the 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 2006, the gross dividend paid to Shareholders was 0.44 euros per share (corresponding to 0.088 euros per share before the stock split in 2007). In 2007 it was 0.096 euros per share and 2008 it was 0.11 euros per share, always according to the above-mentioned directives.

In view of the net results of fiscal year 2009 and the established policy, at the Shareholders' Meeting the Board of Directors will propose the distribution of a gross dividend of 0.143 euros per share, excluding the 859,000 owned shares in the portfolio.

This proposal represents an increase of 30.0% over the dividend paid in the previous year, corresponding to a dividend yield of 2.9% on the average share price in 2009, which was 4.97 euros.

3.9. Stock Options Plan

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

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

During 2009, no significant financial business or operations were carried out 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 conducted in the normal operation of its business and pursuant to arms-length conditions.

3.11. Investor Relations Department

3.11.1. Communication Policy of Jerónimo Martins

The Communication Policy of Jerónimo Martins seeks to ensure availability of material information - historic description, current performance and outlook for the future - to all its stakeholders, so that they will have clear and complete knowledge about the Group.

The Communication strategy outlined for each year is based on the principles of transparency, rigour and consistency, which define the Communication Policy of Jerónimo Martins and ensure that all relevant information is transmitted in a nondiscriminatory, clear and complete way to its stakeholders.

3.11.2. Activities of the Investor Relations Office

As mentioned, 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 the Company.

The Investor Relations Office is also responsible for matters related to the Securities and Exchange Commission, and the Legal Representative for Market Relations is the person responsible for the Investor Relations Office.

Annually, the Office draws up a Communication Plan for the Financial Market, which is duly included in the global communication strategy of Jerónimo Martins, and based on the above-mentioned principles.

Therefore, with the objective of transmitting an updated and clear vision of the strategies of the different Business Areas of Jerónimo Martins to the market, in terms of operational performance and outlook, the Investor Relations Office organises a series of events so that investors can learn about Jerónimo Martins' various businesses, its strategies and prospects for the future, and simultaneously follow the development of activities during the year, by clarifying any doubts.

Throughout 2009, actions were carried out that allowed the financial markets to have dialogue not only with the Investor Relations Office, that was promoting those initiatives, but also with the Jerónimo Martins management team. The following are highlighted:

• Meetings with financial analysts and investors;
• Responses to questions sent by email, addressed to the Investor Relations Office;
• Telephone calls;
• Release of announcements to the market through the CMVM (Securities and Exchange Commission) extranet, through the Jerónimo Martins and Euronext Lisbon web sites, and mass mailings sent to all the Company's investors and financial analysts listed in the database that was created and is updated by the Office;
• Presentations to the financial community: presentation of results, roadshows, conferences, Shareholders' Meeting and Investor Day.

Within the scope of information sent to the market, the following communications were published during the year:

Privileged Information
December 23, 2009	Financial Calendar Plan for 2010
November 10, 2009	Investor's Day Presentation
October 29, 2009	Release - 3rd Quarter 2009 Results
July 27, 2009	Release - 1st Half 09 Results
May 06, 2009	Release - 1st Quarter 2009 Results
March 06, 2009	Presentation FY 2008 Results
March 06, 2009	Release - FY 2008 Results
February 04, 2009	Update on Financial Calendar Plan for 2009
January 14, 2009	Release - Preliminary Sales 2008
Financial Information
November 27, 2009	First nine months 2009 Accounts Report
August 26, 2009	Accounts 1st Half 2009
May 28, 2009	1st Quarter Report 2009
May 07, 2009	Accounts 1st Quarter 2009
April 07, 2009	Approval of Annual Report 2008
March 20, 2009	Accounts FY 2008 to be approved in the Shareholders Meeting 2009
Corporate Governance
April 07, 2009	Corporate Governance Report - 2008
	Dividends, Interests, Redemptions and Exercise of Other Rights
April 07, 2009	Dividends Payment for 2008
Notice of Meetings
March 04, 2009	Notice - General Shareholders Meeting 2009
Qualifying Holdings and Shareholders Agreements
August 10, 2009	Reduc tion of Qualified Participation - Threadneedle
July 03, 2009	Qualified Participation - Threadneedle Asset Management Holdings
May 26, 2009	Reduc tion of Qualified Participation - Threadneedle Asset Management Holdings
April 27, 2009	Qualified Participation - Threadneedle Asset Management Holdings
February 04, 2009	Reduction of Qualified Participation - Threadneedle Asset Management Holdings
Annual Summary of Information Disclosed
March 17, 2009	Annual Summary of Information Disclosed on 2008
Management Transactions
April 30, 2009	Management Transactions in the second half of 2008
March 17, 2009	Management Transactions
February 12, 2009	Management Transactions
February 4, 2009	Management Transactions
January 30, 2009	Management Transactions - Amendement
January 27, 2009	Management Transactions
Board Members and Functions
April 7, 2009	Direc tor's appointment

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.

In order to make information easily accessible to all interested parties, the communications issued regularly by the Office are available in full on Jerónimo Martins' institutional website at www.jeronimomartins.pt. The site provides not only the mandatory information, but also general information about the Group and its Companies, in addition to other information considered relevant, namely:

• Announcements to the market about privileged information;
• Annual, six-month and quarterly reports of Jerónimo Martins, including the Annual Report on the activities carried out by the Audit Committee;
• Economic and financial indicators and statistical data, updated every six or twelve months, according to the Company or Business Area;
• Annual Reports of the Group's Companies with listed securities;
• Jerónimo Martins' 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, Shareholders' Meetings, the disclosure of annual, halfyearly and, if applicable, quarterly results;

• Information regarding the Shareholders' Meeting;
• Information about Corporate Governance;
• Code of Conduct of Jerónimo Martins;
• Company By-Laws;
• Current Internal Regulations;
• Minutes of Shareholders' Meetings;
• Historical lists of attendees, agendas, and decisions taken at the Shareholders' Meetings held over the three previous years;
• Information regarding the Customer Ombudsman.

The website also has information in English and is a pioneer in its accessibility for the visually impaired, through a tool specially designed for this purpose.

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

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

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

Finally, it is also the responsibility of the Office to produce the Annual Report, which is recognized as an essential document for communicating with financial markets. The Office strives to publish therein transparent and comprehensive information regarding the various business areas of Jerónimo Martins, seeking to transmit the reality of the different activities throughout the year.

3.12. Yearly Remuneration Paid to the External Auditor

In 2009, the total remuneration paid to the External Auditor and other individuals or companies' belonging to the same network was 768,526.00 euros, excluding expenses related to travel and other costs paid directly by the Group's Companies.

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

• Legal accounts audit services: 93%;
• Other services (not legal accounts audits or external audits): 7%.

The services not included in the legal account certification, totalling 57,182.00 euros, relate to support for internal reorganisation processes, access to a tax database, and technical consulting on a project for conversion to accounting standards. 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.

V - Sustainability in Value Creation

	1. Relevant Facts of the Year	209
	2. Jerónimo Martins and Sustainable Development	211
	3. Commitment to our Customers	213
	3.1. Customer Ombudsman	213
	3.2. Customer Services	214
	3.3. Healthy Nutrition	215
	4. Commitment to our Employees	219
	4.1. Who are We?	219
	4.2. Building the Future with Each Employee	223
	4.2.1. Attract and Select	223
	4.2.2. Performance Evaluation and Compensation Policy	225
	4.2.3. Development and Training	226
4.3	Transversal Areas of Intervention	228
	5. Commitment to our Suppliers	233
	5.1. Suppliers Selection	233
	5.2. Relationship with our Suppliers	234
	5.3. JM Direct Project	236
	6. Quality and Food Safety	238
	6.1. Policies and Certifications	238
	6.2. Training in Quality and Food Safety	239
	6.3. Quality Management in Stores, Distributions Centres and Manufacturing	239
	Facilities 6.4. Managing Supplier Quality	242
	6.5. Private Brand	244
	7. Environmental Responsibility	245
	7.1. Environmental Policy	246
	7.2. Main Environmental Impacts	247
	7.3. Environmental Initiatives	247
	7.4. More Environmentally-Friendly Technologies	259
	7.5. Partners in the Environment Area	261
	8. Patronage	262
	8.1. Social Patronage	262
	8.2. Cultural patronage	268

1. Relevant Facts of the Year

First Quarter

• With Fujitsu and Associação dos Cegos e Amblíopes de Portugal (ACAPO), Jerónimo Martins develops an innovative solution for labelling in Braille implemented in a group of stores, which provides information to blind and visually impaired persons;
• Victor Guedes reduces the weight of the Becel oil bottle, which generates a total reduction of 900 kg of PET (polyethylene terephthalate);
• The "Sítio do Costume" restaurants and Take Away Section of Pingo Doce include dishes from the Mediterranean Flavours Programme on the weekly menu;
• Launch of the "oil collectors" project, consisting of the collection of used cooking oils from Pingo Doce store customers, for recycling;
• Cif launches the "Cif for a Cleaner City" campaign to commemorate its 30th anniversary;
• The Bem Estar stores launch a "Special Diet" campaign with leaflets on celiac disease, diabetes and lactose intolerance;
• Unilever Jerónimo Martins launches the "It is our commitment" campaign to raise awareness of good environmental practices;
• Start of the "Let's Save a Life" campaign to obtain possible bone marrow donors in Portugal and Poland.

Second Quarter

• Ben & Jerry's joins Lisbon Municipal Council, Quercus and Carbon2Oxygen in the "Lisbon for the Climate" event;
• The Company takes part in the 4th Social Responsibility Week, issuing the "Environment and Competitiveness" communication;
• Pingo Doce, Feira Nova and Unilever Jerónimo Martins participate in the Food Bank's Food Collection Campaign; Jerónimo Martins is the Group that makes the largest contribution to the institution in this Campaign;
• Vasenol launches the "Vasenol Skin Fund" to guarantee access to consults and support by health professionals, in partnership with União das Misericórdias Portuguesas (Portuguese Union of Misericórdia Welfare Charities) and Associação de Doentes de Psoríase (Association of Psoriasis Patients);
• Victor Guedes implements new analysis procedures to remove glass waste and ceases to use 200 glass vials per month;
• Planta launches the "Planta Aid" campaign and participates in the fight against hunger in Northwest Gana, in Africa, by offering 160 thousand school meals;
• Pingo Doce launches the environmental campaign among its customers to correctly sort packaging for recycling;
• The nationwide survey "Jerónimo Martins For Us" is carried out.

Third Quarter

• Recheio holds a training course on "Swine Flu FAQs";
• Pingo Doce inaugurates the fresh dough plant at the Azambuja Distribution Centre;
• The "JM School Books Campaign" is implemented;

• Pingo Doce starts to charge 0.50 euro for each reusable bag;

• Organisation of the "Packaging: Problem or Opportunity for Sustainability?" conference, in partnership with the Portugal Business Council for Sustainable Development (BCSD);

• Installation of LED (Light Emitting Diode) technology in all chiller chests and equipment and in the cold meats section of the Santo António dos Cavaleiros Pingo Doce store, in Lisbon, to cut energy consumption;
• Victor Guedes begins an energy rationalisation plan and reduces its annual energy consumption by 5%;
• Pingo Doce is invited to take part in the Portuguese Diet and Nutrition Congress, where it presented the Jerónimo Martins Nutritional Policy and the Mediterranean Flavours Programme.

Fourth Quarter

• Unilever Jerónimo Martins promotes the 2009 Safety and Environment Week, a one-day event at each manufacturing unit;
• Unilever Jerónimo Martins signs the commitment of food sector companies to promote healthy lifestyles and on marketing and advertising aimed at children;
• Unilever Jerónimo Martins invites its employees to participate in an environmental survey, forming part of the "It's Our Commitment" initiative;
• The Lever unit obtains the update of its industrial operating permit;
• Victor Guedes reduces the grammage and size of the shrink film used, which reduces the polyethylene used by 11,000 kg per year;
• Award of 600 diplomas of equivalency to ninth and twelfth years of schooling, under the Government's New Opportunities scheme and the "Learn and Develop" programme developed internally;
• Promotion of nutritional screening to mark World Food Day;
• Recheio creates a working party to initiate the "Recheio Perishables Training" project;
• Launch of the "Packaging Ecodesign" project;
• Pingo Doce and Feira Nova participate in the Food Collection Campaign for the Food Bank;
• The "Sabores Mediterrânicos" (Mediterranean Flavours) book is launched, containing a compilation of Pingo Doce recipes, nutritional evaluations and information on the Mediterranean lifestyle;
• Jerónimo Martins is the first investor on the innovative Social Stock Exchange (BVS);
• Two Ice Tea Light product references are introduced, with 90% less sugar than the regular Pingo Doce Ice Tea range;
• Introduction of new Pingo Doce "À Casa" ready meals. These meals have no additives and are mostly prepared with olive oil;
• Relaunch of the range of canned vegetables with 20% less salt, which is equivalent to a reduction in salt consumption of more than three tonnes per year;
• Relaunch of part of the range of yoghurts with 3% less sugar, which is equivalent to a reduction in sugar consumption of more than 12 tonnes per year.

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 exists for over 215 years and has a sustained growth record, which is the direct consequence of a professional, rigorous and innovative management that believes that direct dividends for the Shareholders are just as important as the interests of the other stakeholders and the impact of its activities on the environment.

The Group assumes its role in the economic and social development of the communities it serves, pursuing the creation of sustained value as a paradigm of action and basing its business model on a bent toward learning and improving and attaining ambitious results at three different levels: Profit, People and Planet (Triple Bottom Line).

This vision is transversal to all the areas of activity and throughout Jerónimo Martins' history it has given rise to simple and innovative initiatives. It is also a vision systematised into a management philosophy, which is extended to the conduct models of all its Companies.

Jerónimo Martins is aware that the behaviour of an organisation is nothing more than the sum of the individual behaviour of all those who work there and, therefore, it has a Code of Conduct, with which all employees in Portugal and in Poland are compelled to comply, and which is available on the institutional website, at www.jeronimomartins.pt.

This Code provides essential guidelines on the sustained development of the Group, such as obeying current legislation; respect for the principles of non-discrimination and equality of opportunity; environmental concern; business transparency; and integrity in relations with the strategic stakeholders, described in the first chapter of this Report. Other mechanisms for ensuring good practices are also implemented, such as the Supplier Code and the Customer Ombudsman.

For the dissemination of and compliance with these Codes of Conduct, Jerónimo Martins established an Ethics Committee, whose activity is presented in the chapter on Corporate Governance of this Report.

Being aware that the design of sustained development is based on an ongoing learning process, Jerónimo Martins is a member of several Associations promoting the implementation of socially responsible practices, such as Business Council for Sustainable Development (BCSD) and RSE Portugal (Partner of CSR Europe). 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.

¹ Alexandre Soares dos Santos, Chairman of the Board of Directors of Jerónimo Martins, in the magazine for middle and senior Managers, "Workout", No. 6.

This chapter provides information on the policies and activities of the Group in the area of sustainability, related to Consumers, Employees, Suppliers, Quality and Food Safety, Environmental Management, and Patronage in 2009.

3. Commitment to our Customers

Customer satisfaction is the pillar of success of our business.

The ongoing study of the consumers' necessities and expectations and the permanent gauging of their level of satisfaction are determining factors in the strategic definition of the assortment of competitive, quality products and services in the Jerónimo Martins Companies.

Listening to the customers and consumers, in all the businesses, on a regular basis through questionnaires, studies and customer enquiries, based on statistically relevant samples, enable gaps to be detected and support strategic decision-making, with subsequent repercussions in the variance in the marketing mix of the Companies' brands.

At the same time, the Group Companies make direct communication channels available between themselves and the consumer, which promote the collection and analysis of customers' opinions, suggestions, perceptions and expectations. This system contributes towards resolving any conflicts and obtaining different perspectives on the evaluation of the stores and the products and services offered, making it a source of ideas for developing innovative solutions.

In order to ensure the operation of the system, Jerónimo Martins counts on the co-operation of the Customer Ombudsman and the Customer Support Services of its Companies.

Actively listening to customers also helps to identify new demands and market opportunities, such as the consumers' growing concern about maintaining a healthy lifestyle, which is the basis for the work that has been carried out by the Group Companies over the last few years.

Making healthier and more accessible alternatives available to the entire population and helping the consumer to make more balanced food choices are commitments assumed by Jerónimo Martins, which can be perceived in the nutritional policy adopted by the Companies and in the co-operation between suppliers and the various departments of the Group and its Companies.

In this chapter, we write about the communication channels available to consumers – the Customer Ombudsman and the Customer Support Service (SAC) – as well as the main activities over the year, which aim to promote healthy eating habits amongst the consumers of the various Jerónimo Martins Banners.

3.1. Customer Ombudsman

The Jerónimo Martins Customer Ombudsman was created at the end of 2005 and represents a pioneering milestone in Food Distribution in Portugal. This is an institutional interface whose mission is to promote a management culture focused on customer trust and satisfaction and which acts in an impartial and independent manner in the defence of consumer's legitimate rights and expectations. Being autonomous from the Customer Support Service of the Companies, it plays a key role in carrying out the Group's commitment to dialogue and transparency, as set out in

the Jerónimo Martins Code of Conduct, as well as creating a balance between the Companies and the consumer.

Its activity is governed by internal regulations, available at www.jeronimomartins.pt and the duties attributed to it are as follows:

• To ensure strict compliance with the legitimate rights of the consumer;
• To settle conflicts between the customer and the Company;
• To promote responsible communication in all forms of relations with the customer;
• To recommend measures for operational improvement in response to the customer's legitimate expectations;
• To promote the setting of commitments for development in everyone's best interest.

In 2009, there continued to be a significant increase in the number of contacts to the Ombudsman, which, on the one hand, reflects the growth in the Group's chain of stores and in the number of clients and, on the other hand, the growing importance that the customers place on the existence of institutional communication channels.

The weight of each type of contact was identical to the previous year, the most frequent being those related to products and to store conditions to operate. There was also an increase in the number of requests for information on the Company's best practices and on the composition of the food products.

During the year, the Ombudsman paid particular attention to issues related to the quality of customer service, in order to reinforce the customers' trust and satisfaction. Within this context, whenever possible, customers were asked if the operational improvements that had been made were being effective, and some quite positive answers were received. In other cases, new measures for operational improvement were implemented, in order to finally resolve the problems that had been detected.

Also in 2009, the Customer Ombudsman identified the team's needs for training and development. And to continue to effectively respond to the consumers' growing expectations regarding the Ombudsman's activity, the Ombudsman analysed the articulation with the various areas of the Companies and identified specific topics to which special attention will be given in 2010.

3.2. Customer Services

The Customer Support Services (SAC), which are part of the Group Companies' Marketing Departments, are a privileged channel for customers to present their complaints and suggestions and to quickly and directly obtain an answer to their questions, whenever that is not possible directly in the stores.

In 2009, the contacts made with Customer Support Services revealed that the customers are highly involved with the Jerónimo Martins Banners, and are very keen to propose aspects for improvement or development to raise the level of service provided in the stores.

3.3. Healthy Nutrition

Jerónimo Martins considers the defence and promotion of Public Health to be part of the Social Responsibility of the economic agents. That is why it assumes its role in the defence and promotion of a healthy lifestyle, through the commitment to helping its customers to place more and more importance on nutritional issues and on making the right food choices.

In society today, we are seeing an increase in the intake of animal products and an excessive intake of salt, sugar and saturated fats, with serious damage to health. Also the spread of fast food and pre-prepared meals, which use preservatives and other additives in their preparation, combined with the growth of a sedentary lifestyle, have contributed towards the increase in obesity and its associated pathologies, such as cardiovascular diseases and diabetes, among others.

Therefore, it is essential that everyone assumes healthier eating habits to prevent the risk of illness and reduce the mortality rate.

The ageing population is also a reality that demands specific care. Thus, nutrition is an essential tool in reducing healthcare costs and promoting the quality of life of the elderly.

Finally, the increase in the number of food allergies requires extra effort in making food product ranges available that are adjusted to the specific needs of the segments of the population at risk, that help to promote their good health and, naturally, the quality of their lives. For this, Jerónimo Martins has been concerned in creating and implementing a Nutritional Policy, which is presented below.

Nutritional Policy

The Group Companies have been carrying out an ever more pro-active role in the nutritional field, by raising customer awareness regarding issues related to health and nutrition, providing a variety of useful information and healthy products at very accessible prices.

This work has been carried out under the guidance of the Nutritional Consulting Team, which is part of the responsibility of Jerónimo Martins' Customer Ombudsman, and acts as an impartial and independent knowledge centre for projects related to nutritional health and the promotion of healthier eating habits and lifestyles.

The Jerónimo Martins' Nutritional Policy is based on three fundamental principles:

• 1. To make simple, complete and exact information available, through various communication channels, on the nutritional value of the products and the way in which they can contribute in a positive way towards the health and quality of life of the consumer;
• 1. To make the food choices offered by the Group Companies healthier, more convenient and at accessible prices, paying particular attention to the quality and variety of the Fresh food range, to the continuous improvement and innovation of the Private Brand and to the balance in the choice of Take-Away and Restaurant services;
• 1. To make an active and healthy lifestyle simpler and more attractive, using the Mediterranean Diet as a role model.

Awareness of Healthy Nutrition

Making society aware of the benefits of healthy nutrition demands the sharing of knowledge in a simple, clear and exact manner with all the market agents.

Throughout 2009, the Nutritional Consulting Team carried out the following actions:

• At the Portuguese Conference on Diet and Nutrition, which took place at the Escola Superior de Tecnologias da Saúde (School of Further Education in Health Technology) in Lisbon, it presented the Jerónimo Martins Group Nutritional Policy and the Pingo Doce "Mediterranean Flavours" Programme;
• It checked the information on store posters and television ads regarding nutrition and health, namely on the characteristics of new products and suggestions for their correct usage;
• It followed up the production of an explanatory leaflet on celiac disease, diabetes and lactose intolerance, which was distributed to customers of the Bem Estar stores;
• It continued to invest in activities that had been implemented the previous year, namely regarding the choice of sliced fruit and vegetables or salads;
• Internally, it participated in training and awareness sessions within the scope of the Wellness Week; it followed up the production of articles for the magazine "A Nossa Gente" (Our People); and provided clarification on nutritional matters, whenever requested;
• Also internally, it carried out a nutritional check-up for the employees of the central offices, to mark World Food Day and inform about the Nutrition and Wellness Programme.

Within the scope of this, the Jerónimo Martins Banners promoted the following initiatives:

• Pingo Doce continued with the "Mediterranean Flavours" Programme, by publishing 24 fortnightly leaflets and producing 19 recipe films to be shown on television. The recipes and other content were developed and assessed according to the nutritionally rich and varied criteria of the Mediterranean Diet, thereby providing an incentive for a greater intake of vegetables, fruit, cereals, pulses and dairy products, preferably low-fat, and a reduction in meat consumption, especially red meat, giving preference to fish and poultry;
• The book "Sabores Mediterrânicos" (Mediterranean Flavours) was launched, which contained a compilation of the Pingo Doce recipes and respective nutritional evaluation, with highlights on ingredients and information on the Mediterranean lifestyle;
• In the restaurants "Sítio do Costume" (The Usual Place) and in the Take Away Section of Pingo Doce, dishes from the Mediterranean Flavours Programme were included in the weekly menu;
• In the magazine "Notícias Recheio" (Recheio News), Recheio published a series of recommendations to promote healthy nutrition and specific ways of carrying it out within the area of Quality and Food Safety.

Innovation and Development of Private Brand Products

Since the 90's, the investment in Private Brands has been one of the strategic points for leveraging the differentiation of the Jerónimo Martins Banners and the ultimate instrument for consolidating its Nutritional Policy and for high quality and innovative

products at accessible prices, thereby contributing towards an improvement in the quality of life of the consumers.

The development of new products and the improvement in the nutritional profile of the Private Brand range is the result of the joint work of the suppliers and the different Group departments, namely, Market Studies, Quality Control and Nutritional Consulting. This process is obliged to meet the sensory demands of the market, and the approval of a product is always subject to validation by an external panel of consumers.

So, Nutritional Consulting, which is part of a process, certified by an external entity, for developing Private Brand products, from the initial stage up until their launch, has followed all the Private Brand projects and presented its recommendations for improvement, whenever deemed necessary.

In 2009, the Pingo Doce rebranding programme made it possible to accelerate the application of the Private Brand's new nutritional labelling system. During this process the following initiatives were put in place:

• Analysis of the nutritional profile of the products, with the suppliers contracts now including detailed nutritional information;
• Application of the per portion, simplified system of nutritional information on the front of the packages, so that consumers may have the nutritional values interpreted in order of magnitude;
• Inclusion of the complete list of ingredients, in order to ensure a stricter appreciation of the contents of the food;
• Suggestions for promoting the consumption of vegetables, salads or fruit at meal times;
• Indication of the expiry date after opening the product, whenever deemed necessary, namely for products which are not consumed on a daily basis or which are new to the consumer.

360 Pingo Doce food packages were reviewed and approved, of which 40% are already on sale with the new labelling system. It is foreseen that this project will be concluded during the first half of 2010. At the same time, the simplified system of nutritional information was validated for 76 Masterchef products, from Recheio, which represent 78% of the food range.

Simultaneously, technical recommendations were carried out on the nutritional profile of the Private Brand, in order to achieve healthier compositions and ingredients, using the following parameters:

• Gradual reduction in the level of salt, sugar and fat;
• Total removal of any potentially allergy-causing colouring;
• Review of the ingredients, raw materials, additives and size of the portions.

163 projects for improvement were identified, the equivalent of 24% of the entire range of Private Brand Food. Around 30% of the products are already underway, while two projects were already concluded in 2009, which obtained the following results:

A 20% reduction in the salt in the canned vegetable range, which is the equivalent of a reduction in the consumption of salt of more than 3 tonnes per year;

A 3% reduction in the sugar in the yoghurt range, which is equivalent to a reduction in the consumption of sugar of over 12 tonnes per year, whilst other developments are still underway, namely a change in colourings.

Finally, in 2009, some Private Brand products were launched which deserve to be highlighted due to their contribution towards the implementation of the Jerónimo Martins Nutritional Policy, as follows:

Soya Range

The Pingo Doce Soya Range – substitutes for dairy products for consumers who are allergic to milk protein and lactose – was extended to the 200ml formats, which are more practical and convenient. The Soya light reference is still being developed, which will have less sugar.

"À Casa" Range

Three new ready meal references, which replace others that have since been discontinued. These meals have no superfluous additives, like flavour intensifiers, they are mostly prepared with olive oil and come in individual portions and always with a suggestion for a Gourmet or Light meal.

Light Range

Two Ice Tea Light product references with 90% less sugar than the regular Pingo Doce Ice Tea range.

4. Commitment to our Employees

A Business for People, made by People.

In the two last decades, with the processes for the acquisition of new Companies and the launch of new formats in Food Retail, Jerónimo Martins has been through major transformations and is no longer a national Group but has become an organization with a much broader scope of business and people.

Sharing international knowledge and experiences and a natural predisposition for innovation have been the pillars of Jerónimo Martins and the determining factor for the success of the employees, who really are the differentiating factor in an ever more global and competitive market.

The Group's greatest challenge is to attract the best human resources to the business and provide them with an environment where they wish to grow. Every day, this is renewed and seen in the practices, processes and instruments, whose main objective is to develop each employee, each team and each business. This implies systematic, detailed work which is, above all, close to the people.

Jerónimo Martins tries, therefore, to meet the personal and professional expectations of those who give their best towards the success of the business, by defining sustained and innovative Human Resources policies.

Today, being aware of its identity as a benchmark employer, Jerónimo Martins positions itself as a Company with solid principles and values, acting responsibly before its 53,797 Employees, its Customers and the Community.

4.1. Who are We?

For Jerónimo Martins, 2009 proved to be a period of strengthening the Group's human capital, in line with the growth of the business, and of creating more jobs in Portugal and Poland, within an overall team of more than 53,797 employees, made up, among others, of Middle and Senior management (2% of the total), and a motivated and dynamic operational team.

Breakdown of the Jerónimo Martins Human Resources

2009	Holding	Distribution Portugal	Distribution Poland	Manufacturing and Services	TOTAL
Managers	75	420	320	229	1,044
Non Managers	28	24,626	26,856	1,243	52,753
TOTAL	103	25,046	27,176	1,472	53,797

Total number of employees as at 31 December 2009

Breakdown of the Group's Employees per Gender as at 31 December 2009

Breakdown of the Group's Employees per Years of Service as at 31 December 2009

Breakdown of the Employees per Age and Academic Qualifications as at 31 December 2009

Distribution per Academic Degree Group JM

Breakdown of the Managers per Age Group and Academic Qualifications as at 31 December 2009

Breakdown of the Non-Managers per Age Group and Academic Qualifications as at 31 December 2009

Distribution per Academic Qualifications Non-Managers

4.2. Building the Future with Each Employee

The goal of Human Resources management is to attract the best people to the business and provide them with a context in which they wish to develop personally and professionally and towards which they want to contribute. This has a transversal and multidisciplinary approach based on four strategic pillars: Recruitment and Selection, Performance, Development, and finally Engagement.

4.2.1 Attract and Select

Jerónimo Martins knows that it is essential to have highly ambitious people with the right skills, in order to build a sustained future. Therefore, it assumes the responsibilities in keeping with the position of a notable employer, in the regions where it operates.

In 2009, the Group used the internal and external recruitment processes as an instrument for strengthening and reinforcing its teams. This guaranteed an effective response to the strategic needs of the business.

Internal Recruitment

Jerónimo Martins promotes the internal mobility and personal and professional development of its employees through clear investment in Talent Management. Internal recruitment is therefore considered to be vital for reinforcing and motivating the teams, and is also essential for increasing the Management retention levels.

Expatriation Policy

Jerónimo Martins considers expatriation to be a form of recognition. In the majority of cases, invitations are made to employees with high potential, who see this as an opportunity for career development, provided by the Company.

The Group is aware that sometimes it is difficult to adapt to a new reality, and therefore provides the employee with a two-month training period, to learn the language, history and culture of the country where the new role will be carried out. The families are also given support by the Human Resources team, who deal with their integration, namely by looking for accommodation and helping with all the administrative side of the expatriation.

External Recruitment

Jerónimo Martins uses multiple communication channels and external recruitment instruments to attract those considered to have the best talents. For this purpose, it uses online resources, press advertisements and Executive Search, the latter for selecting key positions within the Group. On the other hand, the Group also invests in the direct intake of candidates from the most prestigious universities.

In 2009, a new system for receiving applications was implemented in Manufacturing, through the website www.unilever-jm.com. This is an online system of managing applications which enables the Company to maintain a database with spontaneous applications.

In Poland, the website www.karierawJMD.pl was also launched with a view to collecting online applications.

Recruitment	No. of Employees Recruited	No. of Trainees
Managers	26	73
Non Managers	19,918	-
TOTAL	19,944	73

In 2009 we made the following recruitments:

Recruitment and Integration Programmes

The objective of the Standard Integration Programme, which has been developed and implemented internally, is to inform the new arrivals of the mission, values, culture, the Companies' objectives and the Jerónimo Martins teams, whilst promoting networking and knowledge-sharing among the employees of the Group. This is a compulsory, two-week programme and is aimed at all the Distribution Companies in Portugal.

Trainee Programme

The Trainee Programme, which has been implemented in Portugal and in Poland, aims to guarantee the sustainability and future of the Organisation in the mid and long

term, with regard to the management and reinforcement of the talents of its human resources.

The Jerónimo Martins Trainees go through a strict recruitment process, which ends in a "Selection Panel", including members of the Board. The integration programme of those selected lasts for one year and deals with training and knowledge of all the areas of the business. After one year of training and internship, if the Trainees' assessment is positive, they are invited to join the Jerónimo Martins team.

In 2009, 32 Trainees joined the programme in Portugal, in the areas of Distribution and Services, and 30 in Poland. In Manufacturing, eleven graduates were recruited.

Internships

In order to give students their first contact with the labour market, last year the Group continued to accept interns for both professional and curricular work experience within the different business areas in Portugal and in Poland. In 2009, 78 internships were carried out in the following departments: Operations, Commercial, Sales, Financial, IM&T, Human Resources, HSW and Environment.

4.2.2. Performance Evaluation and Compensation Policy

Jerónimo Martins assesses the performance of its teams, favouring the balance between the results achieved and behavioural competencies. This balance is crucial and is reflected in the internal recognition processes. For this, the assessment process is built on a range of key behavioural competencies which are determining factors for the personal and professional development of the Employees.

Performance Assessment

The Group's Performance Assessment Process is based on self-assessment and assessment by the manager.

Two of its main objectives are to contribute towards the sustained improvement of the performance of the employees and to serve as a basis for attributing a variable, more competitive remuneration that is in line with the performance of each one.

For the employee, it is important to reflect throughout the year on his or her performance, motivation, aspirations and development needs. Self-assessment is a mechanism which requires these thoughts to be systematised. On the other hand, it is up to each manager to identify the strengths and areas for improvement of each employee and challenge him or her to develop in accordance with Jerónimo Martins' strict and demanding culture.

Remuneration and Benefits Policy

For Jerónimo Martins, attributing a fair yet competitive remuneration is naturally a decisive factor for excellent performance. So it is the Group's practice to continually review and adjust its Companies' Compensation Policies.

In 2009, in order to monitor its position in the market, the Group carried out salary benchmarking for the Management roles from Distribution in Portugal and attributed a 2% salary increase to all the employees in the Operations structure. In Poland, as in Portugal, the employees' remunerations remained above the level of the national average salary.

Career Management

For the Group, managing careers is a crucial process which is part of a long-term business strategy, involving the Board of Jerónimo Martins, the Executive Directors of the Group's different business units and the Human Resources Department. Annually, a talent review is carried out, in accordance with pre-defined criteria, and the career management process and succession plans are decided and systematised.

In 2009, the following internal promotions took place within Group Jerónimo Martins:

Promotions	No. Promoted Employees
Managers	101
Non Managers	6,541
TOTAL	6,642

4.2.3. Development and Training

Jerónimo Martins believes that training is an investment that is fundamental for pursuing its Human Resources Development Policy, without which it would not be possible to effectively respond to the challenges foreseen for the future.

In 2009, the Training indicators were as follows:

2009	Training Indicators
Total No. of Sessions	23,604
Total No. of Training Hours *	2,581,594
No. of Training Hours per Employee	57

* Total No. of training hours = No. training hours x No. employees in training

Distribution Portugal

Jerónimo Martins Training School

The Jerónimo Martins Training School, which was founded in 2005, is a certified training entity within the National System for Quality and Accreditation, and reflects the growing strategic importance that the Group places on the ongoing training of its human resources.

The structure of this school, which has five training points throughout the country, currently has 82 in-store training rooms and gives around 305 courses. In 2009, there was a reinforcement of the teaching staff that comprises the internal group of trainers,

which is now made up of around 450 specialists in various areas. All together, over 23 thousand training sessions took place.

Last year was also notable for the investment in distance training, through e-learning, with the launch of various programmes that covered more than 22 thousand employees, from various Companies within the Group.

Perishables School

The Jerónimo Martins Perishables School is perfectly aligned with the food area's strategy and core business and is made up of specialised trainers, who guarantee the ongoing training of the Butcher's, Fishery, Bakery, Fruit and Vegetables, Cold Meats, Take Away, and Plants and Flowers professionals.

Apart from these two internal training entities, the Training Policy is carried out through partnerships with the most renowned universities in the country and by contributing towards MBAs and post-graduations in different areas of specialisation. Thus, the Group also continually invests in the development of its Managers' management and leadership skills.

Distribution Poland

Biedronka Academy

Biedronka's training system is built on the Academy concept and the courses it gives, which are aimed at sharing best practices and furthering management concepts, are for professionals with different levels of qualifications and experiences. The Biedronka Academy provides technical and development training, through the Management, Finance, Logistics and Human Resources academies.

Distribution in Portugal and Poland

Training abroad

Sharing experiences outside work and contacting different social and economic realities are determining factors for the development of the Group's Managers.

Therefore, Jerónimo Martins encourages and promotes its Middle and Senior Managers to participate in Executive Programmes at the most prestigious universities in the world, as well as in seminars, congresses and conferences abroad, whose topics reflect new trends in the areas of Distribution and Food Service, worldwide.

4.3. Transversal Areas of Intervention

Internal Communications

A Group of the size and characteristics of Jerónimo Martins requires clear, simple and timely communications that encourage the transversal sharing of knowledge within the Group.

Jerónimo Martins is aware that Internal Communications help to build and strengthen the Organization's identity, and therefore uses the following communication instruments:

• My.JM Portal (Intranet);
• Internal Magazines: "Nossa Gente" (Our People); "Olhos da Lei" (In the Eyes of the Law); and "Nasza Biedronka;
• Management Meetings and Operational Meetings;
• Personalized Messages;
• Lunches with the Chairman of the Board of Directors;
• Audio-visual Production Internal Movies.

Social Responsibility (Internal Aspect)

To contribute towards improving the quality of life of the employees of Jerónimo Martins and their respective families, in Portugal and in Poland, is this area's mission, which is implemented through the creation of Human Resources Policies and Practices,

that promote their well-being and motivation and contribute towards the sustainable development of the Group.

In 2009, a Social Responsibility programme called "Jerónimo Martins Por Nós" (Jerónimo Martins For Us) was created. Through a questionnaire, the Group's employees were invited to actively participate in building the Internal Social Responsibility Policy. Within the scope of this, 21 thousand answers were received, which means a participation rate of around 90.5%. The results will contribute towards the adoption of measures that are in line with the expectations of the Jerónimo Martins' employees.

Last year, the following initiatives were also carried out in Portugal:

• Learn and Develop New Opportunities Initiative: diploma award ceremony for more than 600 employees, within the internal programme "Learn and Develop", which is part of the Government's "Novas Oportunidades" (New Opportunities) Programme. 4,236 employees registered in order to obtain the equivalence of 9th and 12th grade schooling;
• Entrajuda: help in integrating young people that are socially at risk, aged between 16 and 20, by encouraging their training and qualification, with a view to entering the labour market;
• Bone Marrow: national gathering of potential bone marrow donors, which resulted in over 3,500 applications throughout the country;
• Corporate Partnerships: signing of protocols with a view to offering all the Jerónimo Martins employees a series of discounts and special terms for acquiring health products and services, education, well-being and leisure, banking, insurance, among others;
• Health Week: check-ups on around 600 employees, for osteoporosis, posture, oral health, glycaemia and cholesterol, among others;
• JM Nutrition Programme: launch of a brochure about healthy eating and offer of a nutrition programme in order to obtain the ideal weight;
• School Books Campaign: purchase of books through the Group, with discounts and payment in instalments. This covered around 1,200 employees;
• Recreational and educational activities: organization of events aimed at the employees' children, like "An Adventure in the Tagus" , "An Adventure at Christmas" and visits to the Lisbon Oceanarium;
• Christmas vouchers and gifts: vouchers were attributed all employees' children up to the age of 12 and gifts to the children of the Recheio Cash & Carry employees.

In Poland, the following initiatives are highlighted in 2009:

• Children's Day at Biedronka: recreational activities for employees' children up to the age of 12;
• School Pack: 1,500 employees' children were offered back-packs with school equipment;
• Holiday Camps: around 440 children enjoyed the sports and recreational activities that took place at the Baltic Sea and in the Tatra mountains ;
• Programme for Assistance to Handicapped Children: support for 127 physically and mentally handicapped children of Biedronka employees;
• Individual Social Support: after analysing the requests, the Company provided social support to various employees;

• Voluntary Support to Employees: fundraising for surgeries abroad and blood donations to help employees' families;

• Check-ups: a total of 21,088 women and 5,116 men benefited from the checkup policy in place at Biedronka;

• Maternity Kit: offer of products for new-born babies.

Labour Relations

The Labour Relations area, whose guidelines are for encouraging social dialogue, conciliating personal and professional life and respecting trade union freedom, has the objectives of promoting and guaranteeing the labour legislation, collective work contracts, the Group's internal standards and procedures, as well as maintaining a stable social climate within the Organization.

Also included within its field of operation is the follow-up of the action of the labour inspection entities and carrying out disciplinary action.

In Poland, in 2009, a Forum with employees took place ("Forum Pracownicze") on "Information to be provided to workers and matters on which they must be consulted".

Health and Safety in the Workplace

The Health and Safety in the Workplace area (HSW) has developed a set of policies for best practices and processes, which aim to contribute towards compliance with the law and towards the reduction of the accidents figures within the Group, thereby ensuring improved working conditions and employee satisfaction.

In 2009, the implementation of the new internal organizational model continued and the working conditions provided to employees were consolidated. Thus, regarding the Distribution area in Portugal, the senior Health and Safety in the Workplace (HSW) team and the Management of these Services were reinforced.

In Manufacturing, the Safety certification was maintained, according to the OHSAS 18001:2007 standard, at the Lever and Olá plants. Fima and Olá began implementing the Dupont Audits, in order to optimize the safety at work conditions and at Lever, apart from intensifying the above Audits, they began the Total Compliance Audits again, which cover activities with specific risks, like manual load handling.

Activity Plan

In order to promote employee health and safety and reduce workplace accidents, last year, a series of activities were carried out. The following are highlighted:

• HSW audits were carried out in all the stores;
• Implementation of risk control measures;
• Identification of dangers and continuous assessment of risks in the workplace.

Last year was also noted for the Group's strong investment in training sessions for new employees, safety delegates and store managers.

Within the scope of this, the training in evacuation procedures, first aid, fire-fighting and fork-lift driving should be mentioned. Various simulations for preparing

emergency structures in the stores of the various Banners and in Manufacturing were also carried out, for which new training content was developed.

In 2009, an awareness campaign was launched with the production of posters on HSW themes and a HSW dossier per store was produced. At the same time, within the work for continuous improvement, the Employees continued to receive information on working standards, procedures and instructions.

Awareness and informative articles were also included in the magazines "A Nossa Gente"(Our People), "Notícias Recheio" (Recheio News) and "Bom Dia TPM" (Good Morning TPM) and an Environment and Safety week was organized amongst the Group's plants, with the following themes: ATEX, Noise, CO2 and Waste.

At Lever, training began for the "EHS Passport" service providers and the "Golden Rules" were re-launched.

Accident Figures

In 2009, the following accident figures were recorded for the Group Companies:

20092009	Frequency Figures	Severity Figures
Distribution Portugal	35.70	0.54
Distribution Poland	25.47	0.18
Unilever JM	12.41	0.29

These values cannot be compared with each other, due to the different environment that surrounds Distribution and Manufacturing. It should be noted that the figures regarding Poland were calculated in compliance with the Polish legislation.

Also last year, an IT system was developed for controlling accidents and audits.

In Poland, in order to improve the working conditions of all the employees and to prevent work accidents, the following workshops were carried out:

• Accident Prevention;
• HSW Legislation;
• Safety Procedures for making bakery products;
• Flu Prevention;
• Changes to the Hygiene at Work documentation.

Medical Services

Occupational Health

Since 2009, a restructuring plan has been in place in Jerónimo Martins medical services, which makes a clear investment in Health and aims to meet and improve its Employees' needs.

Thus, last year, several innovations were introduced, by developing work programmes with specific health check protocols. Examples of these best practices are some pilotprojects that took place, like the "Gymnastics at Work" and "Psychological Support for Psychiatric Disorders", applied to the Distribution sector in Portugal.

For continuity purposes, the "social and family" component was also paid particular attention with regards to medical consultation, in order to contribute towards continually improving the working conditions and growing professional satisfaction of the Jerónimo Martins employees.

Some Occupational Health Indicators

Occupational Health	Recruitment Medical Exams	Periodic Medical Exams	Occupational Health
Distribution Portugal	3,778	7,137	3,455
Distribution Poland	8,989	7,532	697
Manufacturing & Services	474	304	2,387
TOTAL	13,341	14,973	6,539

Note: Estimate as at 31/12/09

5. Commitment to our Suppliers

Creating value through partnerships of trust.

Jerónimo Martins' suppliers are an essential part in building value propositions of the Banners of the Group and are the basis for its success. The development of commercial relationships, based on high ethical principles, on dialogue, on sharing values and a common strategic vision, with lasting gains for both parties, is a determining factor for the sustainable continuity of the business.

Therefore, the process for choosing suppliers requires a search of the national and international market, with a view to finding partners that offer excellence in the quality, reliability and efficiency of the supply chain, who are financially robust and who search for and guarantee continuous improvements in performance, as well as innovation in the products supplied.

In order to know the Group better and to grasp the compulsory compliance guidelines, the suppliers selected must know and accept the Jerónimo Martins' Supplier Code of Conduct, which contains precise guidelines with regard to obeying the law, environmental protection, product quality and safety and labour legislation, namely regarding health, hygiene and safety in the workplace, non-discrimination, remuneration and working hours.

By building long-term relationships, it is possible to adequately plan and invest in the respective businesses and carry out fair negotiations in accordance with ethical principles, guidelines that reflect the cost structure of each partner, thereby obtaining the best cost price. This is the only way to offer quality products at competitive prices that are accessible to more people, and to be a leader in innovation and contribute towards expansion and economic growth in general.

5.1. Supplier Selection

The process for selecting Group suppliers meets strict and demanding criteria. Various parameters are taken into consideration in an impartial manner, especially:

• The market conduct of the supplier, the organisation's culture and its alignment with the set of ethical principles expressed in the Code of Conduct which is disclosed to the employees and in the Jerónimo Martins Supplier Code of Conduct;
• A shared common strategic vision and a business model that is compatible with the policies of Jerónimo Martins;
• Presentation of high economic, environmental and social credentials, which mirror financial health, productivity and cost efficiency and the capacity to add value, that ensure the quality, safety, reliability and effectiveness of the products supplied or services provided;
• Compliance with the requirements demanded by Jerónimo Martins regarding production, Food Quality and Safety, the Environment and sales performance;
• Production limit, ability to adapt logistics to the Group's requirements and investment capacity, which promote technological development and innovation and ensure ongoing improvements in the performance of the products and services provided;

• Formation of the right price;

• In Portugal and in Poland, Jerónimo Martins prefers to choose local suppliers, in order to boost economic growth in the regions where it operates;

• Preference for long-term partnerships, as long as these suppliers remain up-todate and competitive in terms of technology and innovation;
• Availability and willingness to co-operate on projects in partnership with the Group, by boosting reciprocal training sessions that aim at promoting greater food safety, better environment or greater food health and innovation.

According to these parameters, the best, duly accredited suppliers are selected to work with the Group Companies, on a long-term perspective, and with the objective of always guaranteeing the consumers consistent standards of excellence and quality in the selection of products.

To this end, in 2009, international purchases of Perishables made directly from producers were broadened, in order to develop quality products in large volumes, with total control of the Supply Chain. For example, on a national basis, Jerónimo Martins invested in a project for the production of veal which covered around 700 producers.

Given that Food Distribution represents the bulk of the Group's activity (more than 90% of its sales), the relationship between Jerónimo Martins and its suppliers of goods is highlighted below.

5.2. Relationship with our Suppliers

Sales growth is a strategic pivot for creating value in the Group's business portfolio and is directly related to each Banner's ability to attract more customers to its store network and for the latter to satisfy more needs, thereby increasing the average purchase. Within the present economic environment, competition in terms of price has become an even more determining factor, with the consumer being more rational on food expenditure, and the competitive dynamics of the markets being more and more aggressive.

The Group's Banners, permanently focused on obtaining increases in productivity and cost efficiency, thereby ensure their competitiveness in terms of price, leading to a healthy balance between sales and profitability. The suppliers with whom Jerónimo Martins works must therefore be prepared to offer competitive commercial terms.

In this context, in the commercial relationship between Jerónimo Martins and its suppliers of Perishables, Private Brand and Manufacturing Brands, several actions have been carried out. The following are highlighted:

• Joint purchases, at net prices, for the various Group Brands and Banners, with the objective of exploring synergies and economies of scale in the high volume categories or in those where the products are scarce, by establishing agreements with pools of suppliers;
• Regular negotiation of commercial terms in line with raw material market evolution, growth in volume and sales, product rotation and market sales price variation;
• Joint review of order forecasts, in order to guarantee better service to the consumer;
• Development of joint projects with the Group Companies for cost optimisation;
• Development of the first Category Summit, an activity aimed at sharing knowledge between international suppliers and non-competitor retailers, with

the idea of identifying consumer trends and priorities in specific categories. Retailers from Europe, South Africa and the United States participated in this event.

Stable commercial partnerships have been developed with various suppliers who share the same responsible vision in the areas of Sourcing of Perishables and development of the Private Brands, thereby optimising the ability to generate synergies, competitiveness and added value, on a long-term perspective.

Through co-operation and mutual support, these areas intend to guarantee the maintenance and development of the following: i) offer of high quality ranges at very competitive prices; ii) innovation at more accessible prices; and iii) promotion of autochthonous breeds and demarcated region and controlled source products.

This type of partnerships make it possible to reinforce the offer of more accessible, fresher and higher quality products to the consumer and are clearly visible in initiatives such as the Veal Project and the Fish Market Project, which aim to create direct relationships with the suppliers in the upstream supply chain (producers and fishermen). This way, on the one hand, there is greater profitability for all parties, and on the other hand, greater control over production and capture, as well as over compliance with the set rules. It should be mentioned that there are currently 14 boats fishing for the Group, apart from buyers at the fish markets.

Apart from this, through Jerónimo Martins' concession of help and technical support to these suppliers in developing their activity, as well as through celebrating contracts which ensure product flow, price and payment, it was possible to establish a closer relationship with them and increase mutual trust. Proof of the success of the partnerships that have been established, is the launch of the Pingo Doce Chilled Ready Made Lasagna, and the complete range of Essentya hair products.

With regard to the Suppliers of the Manufacturing Brands, from the many manufacturing brands available in the market, the commercial departments of the Group Companies have tried to select, on the one hand those that add value to the assortment available in the stores, and on the other hand, those that offer more competitive edge and who optimise the success of the category.

In Poland, through systematically promoting locally sourced products and supporting the respective producers, Biedronka has also heavily invested in the basis for trust with its business partners, who are already more than 450, which proves the success of the strategy that was implemented.

The Logistics and Supply Chain areas are of particular importance in this business model, as the majority of the Jerónimo Martins suppliers deliver goods centrally to the Group's central warehouses. The following activities have been developed, in conjunction with the suppliers, with a view to improving operational and logistic efficiency:

• Permanent re-assessment of the logistic terms of delivery, as well as logistic flow, in order to optimise service levels to the stores, logistics costs and working capital;
• Review and redefinition of the supply processes, by optimising transport flow and that of the distribution of goods to the stores, and by ensuring that products are available and supplied on a timely basis;

• Optimisation of the upstream and downstream supply chain service fault reporting;

• Optimisation of the process for sending and communicating purchase forecasts to suppliers;

• Increase in the number of automatic cross-docking operations, which aim to simplify the process of reception and logistical handling;
• Joint processes for assessing the size of the product purchasing units of measure;
• Joint processes for minimizing out of stocks on the shelf;
• Development and implementation of a joint project with a transport accessory operator, with a view to obtaining operational synergies in the handling and separation of empty containers (boxes and palettes), to reduce stock levels and the costs of transport involved;
• Optimisation of the returns process.

During 2009, there was an increase in the group of suppliers in the Distribution area in Portugal that benefit from the Confirmed Payment System (CPS). Through CPS, the Group confirms to a certain financial institution the amount that it will pay the supplier at a future date, in accordance with the negotiated payment deadline.

Based on this information, the financial institution offers the supplier the possibility of immediately receiving the amount confirmed, with a discount corresponding to the period for which the supplier is anticipating the funds. In 2009, supplier payments through this system represented 38% of the respective total, which allowed them to be financed at advantageous costs, equal to those supported by the Group in the financial market.

5.3. JM Direct Project

JM Direct is a tool that was developed to support the exchange of information and the management of business procedures between the suppliers and Jerónimo Martins, in Portugal, in which all the information on the supply chain and inherent processes are included, namely: pricing, orders, returns, receipt of goods planning, receipt of goods, sales, stocks, promotions, current accounts, and proof of payment.

Along with this, any query of a financial, logistic or commercial nature is now carried out through the message centre on the JM Direct portal, the answers being supplied by the respective areas of support.

This tool, which has allowed for greater proximity between the supplier and the Group, facilitates and ensures more effective control of the process and greater capacity for response, in an area that is a determining factor for the success of the business. On the other hand, apart from releasing a substantial administrative load, an important objective was achieved: process simplification and flexibility.

This platform is currently the suppliers' preferred interface for its relations with Jerónimo Martins and the most direct form of contact with all the Group's areas and services.

In 2009, 177 suppliers joined the JM Direct project, making a total of around 813 suppliers with electronic invoicing, in four years of its activity. This has been a strong link between the suppliers and the Company, both with regard to use of the portal, and electronic messages. The following data are highlighted: i) 73% of the suppliers have joined JM Direct; ii) 84% of the turnover has electronic invoicing; iii) 82% of the

legal documents are issued electronically; and iv) 70% of the purchase orders are issued through the EDI (Electronic Data Interchange) system.

Also in the same year, the master data workflow was implemented on the JM Direct portal. This is a tool that makes it possible to maintain master data of articles in an interactive way and in real time. The workflow process gives suppliers total freedom to create, consult and maintain their articles, while the respective validation is ensured by the Commercial area of the Company.

The Group and its partners have obtained important gains from this project, namely with regard to the increase in the exchange of online information, the vertical integration of processes, the increase in efficiency in the supply chain, the increase in the straight level of availability, the increase in sales, the simplification of processes and reduction of costs, and finally, the satisfaction of the consumer.

6. Quality and Food Safety

Maximum quality and food safety from the source to the consumer.

6.1. Policies and Certifications

The Quality and Food Safety Policies are a key factor of the strategy of the Distribution Companies in Portugal and Poland, as well as in Manufacturing. The review and update of Quality and Food Safety Policies, and the consequent alterations to processes, comprise a commitment of the Organisation, as it seeks to achieve greater efficiency.

Jerónimo Martins' concern and the work it performs in these areas, through its Quality Control and Food Safety Departments, have been continually recognised by independent entities through the award and/or renewal of different certifications to the Group's Companies.

Accordingly, in 2009 the Jerónimo Martins Companies renewed and maintained Quality certification (ISO 9001:2000) and Hygiene and Food Safety certification (HACCP – according to the Codex Alimentarius CAC/RCP-1-1969, Rev.4.2003), besides conducting the procedure and maintaining the certification of Pingo Doce Organic Farming Products by Ecocert and the certification of the Quality Management Systems by SGS ICS according to the ISO 9001:2000, regarding the activities of "Development of Private Brands and Product and Supplier follow-up after launch" activities of the Pingo Doce and Recheio Cash & Carry Companies. The BRC (British Retail Consortium) certification of Fima's Stock Cube production is also of note.

Quality and Food Safety Policy

The Group's Quality and Food Safety Policies are based on strict compliance with legal and regulatory requirements, and values such as integrity, loyalty, honesty, transparency and trust.

Jerónimo Martins comprehends the importance of these policies in ensuring the high quality levels of the products sold to the consumer, and through these it intends to: i) guarantee the quality and safety of the products offered, from the source to the consumer; ii) develop information and response mechanisms to customers; and iii) meet the consumers' future needs.

The partnership and cooperation relationship with suppliers, service providers, authorities and the scientific community, as well as the monitoring and optimising of internal processes and the ongoing training of human resources, allows the Group to constantly improve the Food Quality and Safety systems.

The manufacturing facilities of Unilever Jerónimo Martins have a Quality Policy that reflects the requirements defined by the Company for Quality and Consumer Safety (food and non-food areas), whose mission is to meet daily nutritional, hygiene and personal care needs with brands that help people feel and look good while getting the most out of life.

Policy on Genetically Modified Organisms (GMO)

The issues related to Genetically Modified Organisms (GMO) have always been part of Jerónimo Martins' agenda and concerns. The Group has developed a cooperation relationship with its suppliers and fostered better understanding of upstream Distribution processes in order to ensure compliance with its policies.

In this context, the adopted policy establishes, as a question of principle, that the Private Brands and Manufacturing products do not contain ingredients or additives of transgenic origin. If there are products from which it is not possible to eliminate transgenic ingredients, consumers are informed through the product's labels.

6.2. Training in Quality and Food Safety

Distribution Portugal

In 2009, in collaboration with the Companies' Human Resources departments and the Jerónimo Martins Training School, 2,617 hours of training in Quality and Food Safety were provided, which corresponded to 5.9% of the FTE (Full Time Equivalence) of Quality Technicians and involved a total of 4,467 employees.

Moreover, the programme contents of all the Perishables sections and the General Store Management and Trainees Programme were also reviewed so as to ensure that the employees have the adequate technical knowledge to perform their duties.

Distribution Poland

Training was provided in collaboration with SGS Portugal (Sociedade Geral de Superintendência) to 5,644 employees in 2009, in order to guarantee appropriate compliance with procedures, particularly in regard to labour and hygiene best practices and HACCP.

Manufacturing

In the Quality and Food Safety area, 57 training and awareness raising sessions were held, involving 455 employees for a total of 464 hours.

The performance of self-controlled analyses by the employees themselves is preferred in the manufacturing areas, whenever applicable and technically possible.

6.3. Quality Management in Stores, Distribution Centres and Manufacturing Facilities

Distribution Portugal

In 2009, 731 samples of fruit and vegetables, chilled and frozen meats, and chilled and frozen fish were tested in order to monitor compliance with Perishable product requirements. The registered compliance rate was 87%. All non-conformities were analysed, identifying the cause and ensuring the adoption of measures to guarantee

non-recurrence. In some cases the suppliers have been suspended, where such was deemed necessary.

Analytical Control	2009*	2008**
Fruit	178	337
Vegetables	163	349
Fish (fresh and frozen)	137	-
Meat(fresh and frozen)	253	96
* Number of samples

** Number of analyses

The constant monitoring of the Companies by the Quality Control technicians in order to ensure the implementation of procedures, and evaluate the effectiveness of training and the suitability of facilities and equipment, generated a result of 85% for the "HACCP Implementation" indicator at Pingo Doce. The assessment standard is different for Recheio, as a result of the certification of the HACCP system, where the performance indicator obtained was 72%.

Stores and Distribution	Pingo Doce		Recheio		JMR
Centres	2009	2008	2009	2008	2009	2008
Internal Audits	1,618	1,489	102	39	9	4
External Audits	-	-	1	3	1	-
Follow-up Audits	685	752	77	36	124	97

Best practices in hygiene and labour were likewise monitored, with an analytical compliance of 95% for Pingo Doce and 96% for Recheio. The effectiveness evaluation of a new range of cleaning products focused on time and cost optimisation also took place in this area.

Analytical Control (No. Analyses)	2009	2008
Work Surfaces	30,195	24,954
Handlers	13,869	9,829
Perishables handled in stores	9,252	8,026

In addition to the above-described actions, which are included in the annual plan, a number of activities associated with the pursuit of continuous improvement in Quality and the guarantee of Food Safety stood out in 2009:

• The development of cake and pastry products with a low calorie content and suitable nutritional information;
• The identification of technological alternatives to the use of trans fats in Pingo Doce bakeries, with evaluation of their impact on stability when used in fresh dough;
• The installation of a brine tank in the fresh fish warehouse in Azambuja, in order to delay the enzyme action and microbiological development in fish, especially important for some species such as sardine and mackerel;
• The implementation of pH control in fresh meat, which is a determining factor in quality and durability;
• The licensing of industrial kitchens and implementation of an automatic temperature monitoring system;
• Review of the technical documentation (HACCP and Work Instructions) of the Perishable sections of Pingo Doce stores, JMR canteens, the Braga Recheio restaurant, Pingo Doce industrial kitchens and JMR's certified Food Safety system, in order to simplify and standardize it;

Shelf-life validation of processed meat products sold at the counter once opened, in order to minimise losses.

Distribution Poland

The Quality Department of Biedronka is focused on the "Biedronka – the trustful food retailer" concept, which entails: i) selling safe products always; ii) satisfying consumers' demands regarding Food Safety; iii) complying with current legislation; and iv) commitment to fighting obesity by placing clear nutritional information on packages.

In 2009, the following activities are highlighted:

• Cooperation with the National Food and Nutrition Institute on healthy eating education programmes, involving intervention in the formulation of products and their respective composition (fats, sugar and salt), by means of the regular publication of articles in the "Kropka TV" magazine;
• Preparing the Distribution Centres for certification according to ISO 22000, in 2010;
• The centralised reception and distribution of fruit and vegetables to the stores, contributing to the improved management of this area, particularly direct imports;
• Development of the "Barcode Reading Project" in order to analyse the potential of new codes on Private Brands that identify the product, its sell-by date, batch number and a range of other information. The goals of this project are to better manage expiry dates and prevent the sale of out-of-date products.

The cooperation project with the Polish GS1 (the entity responsible for product identification and coding), which aims to implement tracing in the Distribution Centres, was advanced with the reinforcement of the reading of barcodes that may permit the early detection of errors and enable the speeding up and improvement of customer service at the cash register. Multiple repetitions of readings were undertaken in 2009 in order to validate the improvements made, namely the faster reading of codes and strengthening the habit of checking barcodes among suppliers when receiving the packaging material for their products.

The HACCP audits programme undertaken by JohnsonDiversey was maintained in order to accompany the implementation of good practices in this area. This programme permits the instant provision of information concerning the audit results, the evolution of trends and the identification of potential problems. The compliance rate with requirements was 76%.

Accordingly, the HACCP manual was updated and distributed to the stores, in order to clarify and consolidate the technical documentation.

Audits	2009	2008
Stores	2,101	2,906
Distribution Centres	26	21

Manufacturing

Whenever possible, internal audits were carried out by mixed teams of staff from the various manufacturing units. These teams enable the optimisation of resources and the know-how and interaction between participants while, at the same time, contributing to the effective identification of opportunities to improve the systems that are audited.

Audits	ISO 9001	BRC	Unilever	Internal
Olá	1	-	-	7
Fima	1	1	-	7
Lever	1	-	1	9
ULJM	-	-	-	3
Victor Guedes	1	-	-	5

The Group's manufacturing units remain committed to supplying products that consistently offer Quality, Safety and Price benefits, by means of:

• The use of the most appropriate production technology and equipment;
• The use of HACCP methodology, with the goal of "zero incidents" in the Food and the Personal Product areas;
• The use of Total Productive Maintenance (TPM) tools to put forward improvements, point-to-point links and Quality matrices, among others, that aim to optimise processes in terms of productivity, efficiency and quality.

In 2009, the following activities are of note:

• The addition of a 20-cube packing line (Fima stock cube production) in reply to a requirement noted in the market;
• The replacement of the Glacier II and Frigo II blast freezers at Olá;
• The installation of a rotary spray to disinfect hands at the entrance to the manufacturing room at Olá;
• The installation of an automatic pallet labeller at Olá;
• The installation of cameras to detect labelling failures on bottles of the Strunck and Ronchi lines at Lever;
• The installation of a new labeller that detects labelling failures on bobbins, on the Corniani line at Lever;
• The acquisition of gas chromatograph/mass spectrometer to strengthen the analytical control of the products in relation to potential contaminants, especially pesticides, at Victor Guedes.

6.4. Managing Supplier Quality

The selection, evaluation and audit of suppliers are one of the pillars of quality management. Accordingly, the in-house check-list was reviewed in order to make the audit process more agile and to make the evaluation of Quality Systems, Food Safety, facilities, product control and the environmental management process more impartial.

Distribution Portugal

A total of 453 audits were performed to Perishables suppliers in 2009 by the pool of internal auditors. 55% of these were focused on accompanying preventive and corrective action, and ongoing improvement requested to suppliers. The remaining 45% of the audits comprised the evaluation of suppliers. The approval rate of suppliers as a result of the audits undertaken was 89%.

In addition to the selection of perishable products, conducted on the supplier's premises and which aids in guaranteeing compliance with the agreed specifications and subsequently minimises product rejection on reception at the Distribution Centre, the number of samples collected for an analytical check of the specified characteristics increased.

Distribution Poland

The suppliers' manufacturing units are audited in order to ensure that the manufacturing process meets the quality and safety product requirements as well as the efficient supply of Poland's largest Distribution chain. Hence, the officers provide technical consultancy to suppliers, supporting their development, whenever necessary.

In 2009, 255 audits were carried out, of which 123 were on grocery product suppliers, 79 on bakery product suppliers and 53 on fruit and vegetable suppliers. The primary aim of these audits is to encourage bread, fruit and vegetable suppliers to improve production, preparation and storage conditions as well as product traceability.

Product checking at fruit and vegetable suppliers began in 2009, which contributed to supplier training and played a proactive role in minimising rejects in deliveries. 129 batches of fruits and vegetables were rejected as a result of the 102 checks carried out.

Selection and Follow-up Audits	2009	2008
Portugal	150	98
Poland	255	221

Manufacturing

In Manufacturing, the audits of suppliers of raw materials and ingredients, packaging materials and finished products continue to be centralised and coordinated through Unilever Europe.

However, meetings with local suppliers, mainly in the packaging areas, continued in order to find opportunities for improvement and new ways of working together, which might influence the quality and efficiency of operations.

Similarly, Quality and Food Safety audits of supply chain partners continued, namely concession holders and logistics operators, as well as at points of sale. The intention is to know more about product cycles to the store shelf, so that improvements may be identified and implemented. In this context, training and awareness raising initiatives

in the area of "Quality at the Point of Sale" were also organised among concession holders.

Audits	2009	2008
Logistics operators	4	7
Dealers	40	44
Points of sale (ice cream)	212	210
Points of sale (stock cubes spreads)	61	26
Points of sale (Lever products)	4	13

6.5. Private Brand

The Quality and Food Safety of Private Brand products is one of the strategic pillars of the Companies in Portugal and Poland. Procedures for the correct development and follow-up of these products are established in order to constantly guarantee that the high Quality and Food Safety standards are maintained.

Distribution Portugal

The certification of the Development of Private Brands and Product and Supplier follow-up after launch according to the ISO 9001 constituted a decisive step in the rationalisation and systematisation of the practices and procedures to follow for the correct quality management of these products.

Accordingly, the stages, procedures and persons responsible for achieving the sole objective of the certified system - customer satisfaction through the recognition of the Quality, Food Safety and value of the products - have been perfectly established from the drawing up of the launch plan to the selection of suppliers and provision of the product to the consumer.

Hence, all the quality planning for the Private Brand starts long before its launch and carried on after this, through the implementation of demanding product and supplier quality control plans.

Distribution Poland

The internal procedures of the Private Brands' Development Process were reviewed with a view to the certification of that process in accordance with the ISO 22000 in 2010. An electronic tool capable of managing this process in a more efficient manner was also developed.

The Quality guarantee of Private Brand products is based on internal and external sensory analyses as well as tests carried out by accredited laboratories, before its launch. Once a product is launched, it is controlled by a monitoring plan of the established characteristics and it also undergoes regular evaluation by panels of consumers.

Annual Report 09 Sustainability in Value Creation Quality and Food Safety

	Portugal		Poland
Development of Private Brands	2009	2008	2009	2008
Audits on Suppliers	147	98	255	221
Launches and Re-launches	434	374	631	517

Control of Private Brands	Portugal		Poland
	2009	2008	2009	2008
Sensory tests (pre-launch)	611	579	459	1,107
Sensory tests (post launch)	1,152	771	683	480
Routine laboratory tests	5,571	3,592	3,329	4,028
Selective laboratory tests	191	79	717	931

Nutritional Labelling	Portugal		Poland
	2009	2008	2009	2008
Number of references	1,386	n.a.	559	513

7. Environmental Responsibility

Ensuring proper environmental management is guaranteeing a sustainable future for all.

Jerónimo Martins believes that given its dimension and the partnerships it develops it can contribute towards effectively linking supply and demand, establishing supply chains that foster sustainable production and consumption.

The Group strives to protect the environment and it has therefore adopted a pro-active stance in this area for many years, considering it to be essential to guaranteeing the success of its businesses and the growth of its Companies.

In accordance with the pre-defined environmental programmes, the main Environmental Management initiatives carried out in 2009 and their results are set out below.

7.1. Environmental Policy

Jerónimo Martins' Environmental Policy aims to improve the environmental performance of the activities, products and services of the Group Companies. Jerónimo Martins seeks, through this policy, to encourage its employees and suppliers to adopt environmental best practices and to meet the legitimate concerns of its consumers and business partners, in strict compliance with environmental legislation in force.

This Environmental Policy is implemented through the Distribution and Manufacturing Companies' Environmental Management Systems, which are based on the principles and requirements of the ISO 14001 standard and ensure continual compliance with the relevant environmental legislation, the implementation of environmental analyses and audits in the business units and the monitoring of environmental aspects.

Climate Change

The Group considers the fight against the phenomenon of climate change to be part of the social responsibility of economic agents. The Jerónimo Martins Companies adopt a responsible and proactive stance by taking action that contributes towards reducing energy consumption and minimising greenhouse gas emissions - the measures to rationalise energy consumption being an example of this.

Biodiversity

Jerónimo Martins also recognises the importance of Biodiversity for the sustainability of the communities where it develops its operations and it contributes to their protection on a local, national and global scale.

The Group acknowledges the importance of the challenges laid down by the United Nations (UN), and it has initiated the process of assessing threats and opportunities for improvement in the following fields:

• Water scarcity;
• Climate change;
• Habitat changes;
• Loss of biodiversity and invading species;
• Over-exploitation of oceans;
• Nutrient overload.

7.2. Main Environmental Impacts

Distribution (Portugal and Poland)

In the Distribution area in Portugal and Poland, the Group worked to reduce environmental impact arising from the following: i) water consumption; ii) energy consumption used to preserve foodstuffs, in lighting, in air-conditioning and powering equipment; iii) production of organic solid waste and paper, cardboard and plastic packaging; and iv) air emissions and the consumption of fossil fuels for transporting goods and for the Group's own fleet.

Therefore, several diagnoses of stores and Distribution Centres were carried out in 2009 to guarantee their compliance with legal requirements and with Jerónimo Martins' internal Environmental Management procedures. Additionally, a quick and easy to use check list was developed to aid the operational areas of the stores of the distribution sector in Portugal to self-assess their environmental performance.

Manufacturing

The Manufacturing Companies carry out an annual assessment and review of the environmental aspects they consider to be most relevant, under the Environmental Management Systems implemented according to the requirements of the NP EN - ISO 14001:2004 standard.

The following aspects were prominent in 2009: i) consumption of water used for heating, cooling, cleaning, sanitation and personal hygiene; ii) consumption of energy, mainly electricity, natural gas, LPG and steam; iii) production of solid waste; iv) production of other types of waste, like reagents and solvents; v) liquid, industrial and domestic wastewater; vi) air emissions resulting from production processes; and, vii) atmospheric noise, as a result of production activities.

7.3. Environmental Initiatives

Environmental Certification

As far as Distribution in Portugal is concerned, the Azambuja, Vila do Conde and Guardeiras Distribution Centres renewed in 2009 the certification of their Environmental Management System in accordance with the NP EN – ISO 14001:2004 standard. The Manufacturing Companies also kept their environmental certification in accordance with the NP EN - ISO 14001:2004 standard.

Water Consumption Rationalisation

In Distribution, the management of water consumption is given maximum importance and so actions for minimising waste and increasing efficiency when using this natural resource are continually being developed. The following actions were taken in 2009:

• Employee awareness and training in order to adopt best practices when performing their duties;
• Use of more efficient equipment and its respective replacement (taps and flushing cisterns, for example);
• Regular consumption monitoring, based on meter readings.

The indicators shown for water consumption cover 79% of the units in Portugal and 71% in Poland.

Environmental Indicators:

Stores - Water consumption per sales area (m3/sqm)

Distribution	2009	2008	Δ 09/08	2007	Δ 08/07
Portugal	2.69	2.25	+19.6%	2.12	+6.1%
Poland	0.70	0.61	+14.8%	0.78	-21.8%

Distribution Centres - Water consumption per thousand boxes of throughput (m3 / UMC'000*)

Distribution	2009	2008	Δ 09/08	2007	Δ 08/07
Portugal	0.71	0.72	-1.4%	0.59	+22.0%
Poland	0.10	0.08	+25.0%	0.10	-20.0%

(*) UMC –Purchasing Buying Units in thousand.

In the case of Distribution, the increases in the specific indicators for water consumption in stores are justified by the greater focus on Perishables.

The Companies in the Manufacturing area have been working to reduce water consumption and minimise waste. In 2009, the following initiatives were carried out:

• Follow up and monitoring of consumption, with various awareness initiatives encompassing all employees being carried out, in which the topic of water rationalisation was the main theme;
• In Olá, the replacement of hoses used to wash the manufacturing zone by a reel system with pistols to reduce consumption. The possibility of reducing the need for some intermediate washing, while keeping the food safety criteria through different product sequences, is taken into consideration in the weekly review of the short-term manufacturing plan.

Manufacturing	2009	2008	Δ 09/08	2007	Δ 08/07
Global water consumption (thousand m3 )	317.5	370.3	-14.3%	412.7	-10.3%
Water consumption per unit of product produced (m3 /t)	2.08	2.38	-12.6%	2.47	-3.6%

The developed strategies, supported by environmental certification, are reflected in the reduction of water consumption, in absolute and specific terms.

Energy Consumption Rationalisation

In 2009, the Distribution Companies developed various actions aimed at putting into practice Jerónimo Martins' commitment to the fight against climate change and strengthening energy consumption rationalisation. The following are highlighted:

• Consideration of energy efficiency criteria when selecting investments to be made, particularly in the refrigeration, air conditioning and lighting fields;
• Monthly consumption monitoring;
• Development of a pilot project in the Póvoa de Santo Adrião Pingo Doce store, which allowed electricity consumption to be cut by 40 thousand kWh/month solely through the adoption of good practices;
• Installation of LED (Light Emitting Diode) technology in all chiller chests and equipment and in the cold meats section of the Santo António dos Cavaleiros Pingo Doce store;
• Submittal of an application via APED (Portuguese Association of Distribution Companies) to the Plan to Foster Efficient Electricity Consumption of the Energy Sector Regulator for the installation of LED lamps in chiller cabinets;
• Implementation of energy consumption rationalisation plans in three of the retail Distribution Centres in Portugal, two of which are considered intensive energy consumers;
• Installation of lighting equipment that provides the same performance for lower energy consumption, in 168 Biedronka stores in Poland (a potential reduction of 4,100 MWh per year);
• Testing in ten Biedronka stores of new panels with greater heat insulating capacity as well as refrigerated counters.

The indicators shown cover 97% of the units in Portugal and 80% of the units in Poland.

Energy Consumption in the stores

Distribution	2009	2008	Δ 09/08	2007	Δ 08/07
Portugal
Electricity (kWh/m2)	700.9	621.3	+12.8%	694.6	-10.6%
Fuel (GJ*)	30,304	35,262	-14.1%	32,901	+7.2%
Poland
Electricity (kWh/m2)	414.9	337.6	+22.9%	334.9	+0.8%
Fuel (GJ*)	54,036	52,635	+2.7%	104,682	-49.7%

*GJ = gigajoule (energy measurement unit).

Energy Consumption in the Distribution Centres

Distribution	2009	2008	Δ 09/08	2007	Δ 08/07
Portugal
Electricity	120.4	150.7	-20.1%	132.6	+13.7%
(kWh/UMC'000*)
Fuel (GJ**)	1,864	2,511	-25.8%	2,259	+11.2%
Poland
Electricity	55.6	45.7	+21.7%	52.0	-12.1%
(kWh/UMC'000*)

* UMC = Purchasing Buying Unit in thousands.

** GJ = gigajoule (energy measurement unit).

In the Distribution companies, the increases in the specific indicators for electricity consumption in stores are justified by the greater focus on Perishables. Furthermore, due to the change of the electricity supplier, the consumption in 2009 was partially estimated.

The Manufacturing area has been implementing measures arising from the energy consumption rationalisation plan, namely:

• The replacement of lamps in the production room of Olá was concluded. In the area of thermal insulation, the improvements to the ammonia refrigeration system piping continued and the insulation of two freezers was replaced. In addition, an automatic air bleed and in-line water drier were installed on the ammonia refrigeration system, which improved the system's performance and reduced its electricity consumption. The air compressor and ice bank zone was insulated in order to cease direct exposure to the sun, which created overheating problems in the summer;
• The effort to optimise the washing powder process and reduce energy consumption continued in Lever. The investment in eliminating compressed air leaks and improving equipment also continued in tandem with raising employees' awareness in relation to the adoption of responsible behaviour steered towards reducing energy consumption;

• At Victor Guedes, apart from the employee awareness initiatives for correct energy use, which are carried out every six months, an energy audit was performed to identify improvements that could be made, and the measures to undertake were set out in an energy rationalisation plan;

• The lamps of Fima's bouillons production hall were replaced. In the end product storage area, the cooling agent (Freon R22) was replaced with a pharmaceutical monopropylene glycol system (glycol water), using the existing main ammonia compressor station at the Santa Iria facilities. The same system was also used for cooling the margarine manufacturing area;

• The process of replacing T8 fluorescent lamps for T5 lamps continued at the head office of Unilever Jerónimo Martins. Trials with LED lamps were carried out and a possible 80% saving in consumption was confirmed. A pilot project encompassing 100 lamps in constantly lit areas was initiated and 70 CRT monitors (Cathode Ray Tube) were replaced with new LCD ones (Liquid Crystal Display), which cut energy consumption by half.

Manufacturing	2009	2008	Δ 09/08	2007	Δ 08/07
Global electricity consumption (MWh)	25,655	26,557	-3.4%	27,025	-1.7%
Global fuel consumption (GJ*)	57,510	** 68,565	-16.1%	** 68,547	+0.0%
Global steam consumption (GJ*)	138,911	136,708	+1.6%	148,773	-8.1%
Consumption of energy per unit of produced product (GJ*/t)	1,89	** 1,93	-2.1%	1,88	+2.7%

*GJ = gigajoule (energy measurement unit)

** Corrected values

The strategies that were developed, supported by the environmental certification, are reflected in the reduction of energy consumption.

Paper Consumption Rationalisation

In Distribution, the consumption of office paper is considerable, which is why various projects aimed at reducing that consumption were developed, with important benefits for forest resource sustainability.

The management of electronic orders, invoices and freight bills already covered around 59% of Distribution suppliers in Portugal in 2009. The use of an IT tool in the human resources area that eradicates multiple records on paper began in 2009 and in the Logistics area transport waybills began to be printed on the front and back. This latter process helped reduce paper consumption by 50%.

The same procedure was implemented in all Biedronka stores in Poland. This measure cut paper consumption by 550,000 sheets. 310,000 electronic invoices were generated in the same year, which led to a 1,550 kg saving in paper.

Waste Management

Distribution focuses on the prevention, minimisation and recycling of the waste generated not only by its activities but also helping its consumers in this task. Thus, the following projects in 2009 are notable:

Continuous control of the waste management system in Pingo Doce, Recheio and JMR stores through the monthly monitoring of the waste generated;

• Launch of the "oil collectors" project, consisting of the collection of used cooking oils from customers for recycling. 16 tonnes of this waste had been collected at 243 Pingo Doce stores by the year's end. 225 tonnes are forecast to be collected in 2010, which will prevent the emission of 685 tonnes of CO2 originated from the use of fossil fuels;
• Selective collection of organic waste for recycling (composting and anaerobic digestion) at 115 Pingo Doce and Recheio stores and also in all Biedronka stores, totalling 13,435 tonnes;
• Co-operation with waste management entities in the pursuit of national objectives, with 18 tonnes of used batteries and 186 tonnes of waste of electrical and electronic equipment collected and sent for recycling;
• Start-up of an investment plan in Biedronka for new cardboard presses in order to optimise the management of that waste;
• In Biedronka, 10.4 tonnes of used batteries and 5.9 tonnes of electrical and electronic equipment waste were collected and sent for recycling.

Total packaging waste (cardboard and plastic) sent for recycling (tonnes):

Distribution	2009	2008	Δ 09/08	2007	Δ 08/07
Portugal	27,989	24,970	12.1%	18,559	+34.5%
Poland	75,420	61,113	23.4%	46,616	+31.1%
Total	103,409	86,083	20.1%	64,715	+33.0%

The opening of new stores, together with the strong awareness and commitment of all the Jerónimo Martins employees, contributed towards an increase in the amount of waste sent for recycling.

In the Manufacturing area there was also evident focus on employee awareness campaigns in order to comply with waste separation. In actual fact, this was one of the subjects tackled in the Safety and Environment Week, which was jointly held by the different units.

Environmental Indicators:

Manufacturing	2009	2008	Δ 09/08	2007	Δ 08/07
Quantity of waste per unit of produced product (t/t)	0.0281	0.0335	-16.1%	0.0299	+12.0%
Total residues forwarded for recycling (t)	3,720	4,188	-11.2%	4,241	-1.2%
Waste recycling rate	86.6%	80.2%	+6.4p.p	84.9%	-4.7p.p

The constant search for solutions for the different waste flow has enabled Manufacturing to continually increase their waste recycling rates.

Management of Wastewater

Wastewater produced by the Distribution sector has a similar polluting level to that of the domestic network and it is mostly discharged into municipal sewage collectors.

Nevertheless, in order to reduce the polluting content of the effluents, particularly in relation to the levels of used oils and greases, and organic and chemical content, the following have been carried out: i) installation of pre-treatment systems; ii) preventive cleaning of 233 grease separators and sewage pumping stations; iii) use of highly biodegradable cleaning products; and iv) selective collection of used cooking oils.

In 2009, the wastewaters monitoring plan covered 16 establishments in Portugal, in compliance with municipal regulations and other legal requirements.

All units in Poland are connected to the public sanitation system.

Within this area, with the objective of lowering the pollution content of the wastewaters, Fima and Olá have a pre-treatment system for the effluents generated, which are subsequently drained into the municipal collector. In Olá, the mentioned projects to reduce water consumption during production also led to the reduction of industrial wastewaters.

Employees in Fima are systematically made aware of optimising washing and hygiene practices in the production areas.

At Lever, the monitoring and analysis of water consumption and the generation of wastewater continued, with the aim of reducing consumption and consequently minimising wastewater generation through the optimisation of processes, in particular the washing of production equipment and packaging.

The wastewater generated at Victor Guedes is similar to domestic wastewater, given that it has a low pollution load. The water is subsequently channelled to the Municipal Water Treatment Plant.

Environmental Indicators:

Manufacturing	2009	2008	Δ 09/08	2007	Δ 08/07
Total quantity of industrial wastewater per unit of product produced (thousand m3 /t)	0.74	0.81	-8.6%	0.89	-9.0%

Management of Air Emissions

All action concerning the management of gas air emissions is carried out on the basis of minimising the release of polluting agents.

Various Group Companies have been implementing measures that contribute towards reducing the emission of greenhouse gases, with the aim of training employees, reinforcing investment in cleaner and more efficient technology (renewable energy, for example), optimising routes and loads, and making society more aware of the importance of this topic.

The backhauling project of the Distribution sector in Portugal is a highlight in this regard, since it allows the freighting of suppliers' goods (the project covers 64 suppliers) when the trucks that supply the stores are returning empty or almost empty.

Three aspects of the carbon footprint of Jerónimo Martins' different activities will be calculated in 2010: direct impact, indirect impact and the impact of third parties contracted by Jerónimo Martins.

In the Distribution sector in Portugal and in Poland, the only substance subject to regulation is R22 (refrigerating gas), and this gas has been systematically replaced by substances with a lower environmental impact.

The relevant parameters of the Manufacturing production units that have fixed sources of air emissions are constantly monitored, in order to ensure compliance with legislation in force.

Several projects have been implemented in Fima's refinery area in order to achieve more efficient control of the vapour mix, which have resulted in the reduction of vapour consumptions and the subsequent decrease in CO2 emissions.

The air conditioning and cooling equipment conversion programme at Unilever Jerónimo Martins was completed. Overall, 60 old and inefficient equipment units were replaced by new ones and around 100 units underwent conversion.

Environmental Indicators:

Portugal	2009	2008	Δ 09/08	2007	Δ 08/07
Stores	0.059	0.053	+11.3%	0.058	-8.6%
Equivalent CO2 emissions per volume of sales (t CO2 eq. / thousands €)
Distribution Centres	0.061	0.075	-18.7%	0.066	+13.6%
Equivalent CO2 emissions per thousand boxes of throughput (t CO2 eq. / UMC'000)
Transport by trucks (Distribution Centres - stores)	0.975	0.967	+0.8%	0.977	-1.0%
Equivalent CO2 emissions per kilometres covered (t CO2 eq. / thousand km) N.B. In 2009, this fleet assured 82% of the distances covered.
Light vehicle fleet	5,980	-	-	-	-
Equivalent CO2 emissions (t CO2 eq.)
Manufacturing	0.105	* 0.108	-2.8%	* 0.104	+3.8%
Equivalent CO2 emissions per unit of product produced (t CO2 eq. / t)
Reduction of Carbon emissions due to the use of renewable energies	85.0	82.5	+3.0%	16.7	+394%
Equivalent CO2 emissions avoided (t CO2 eq.)
Equivalent carbon emissions avoided due to "backhauling" Distribution project	4,075	-	-	-	-
Equivalent CO2 emissions avoided (t CO2eq.)

* Corrected values due to changes in fuels.

Annual Report 09 Sustainability in Value Creation Environmental Responsibility

Poland	2009	2008	Δ 09/08	2007	Δ 08/07
Stores	0.057	0.039	+46.2%	0.044	-11.4%
Equivalent CO2 emissions per volume of sales (t CO2 eq. / thousand €)
Distribution Centres	0.037	0.030	+23.3%	0.034	-11.8%
Equivalent CO2 emissions per thousand boxes of throughput (t CO2 eq. /UMC'000)
Transport by heavy vehicles (Distribution Centres - stores)	0.922	0.838	+10.0%	0.922	-9.1%
Equivalent CO2 emissions per kilometres covered (t CO2 eq / thous. km) N.B. In 2009, this fleet assured 100% of the distances covered.
Light vehicle fleet	5,947	-	-	-	-
Equivalent CO2 emissions (t CO2 eq.)

Note: the figures presented took into account emission factors defined by the IPCC – Intergovernmental Panel on Climate Change (fuels) and by the International Energy Agency (electricity).

Noise Control

The measures taken in the Distribution area to minimise noise emissions and ensure there is no noise pollution of surrounding areas encompass the soundproofing of technical areas, equipment selection and raising employee awareness. The chapter on Noise of the Manual for Environmental Best Practices was developed and disseminated in Portugal in 2009.

Compliance with environmental noise thresholds is guaranteed in the Manufacturing area. The project to insulate the air compressor and ice bank zone of Olá is also a highlight.

Environmental Criteria in the Construction and Remodelling of Units

With the aim of minimising environmental impact in the building construction and use stages, all construction or remodelling projects of Distribution units in Portugal have to comply with environmental criteria, the most significant being:

• Acquisition of more efficient equipment (taps and lighting systems);
• Installation of monitoring equipment (water submeters);
• Optimisation of waste management (presses and compactors for cardboard and plastic);
• Improvement of the emissions control systems (solids and grease traps in sewage drainage systems);
• Pollution prevention (replacement of refrigeration gases with monopropylene glycol).

The remodelling of the Biedronka stores in Poland has encompassed, in addition to compliance with legal requirements, enhanced investment in rationalising energy consumption, especially in relation to lighting, heating, air conditioning and electrically powered equipment.

A highlight in this regard was Biedronka opening its first ecological store, in Lubin, on 18 December 2008. This project required a 5% increase on investment, which provided savings of around 20% on electricity consumption and 50% on gas consumption, compared to similar stores. The following technology was deployed in this store to minimise energy consumption:

• Harnessing for air conditioning equipment of the heat of air that circulates in the piping installed in the ground;
• Exchangers that harness the residual heat of cooling equipment condensers;
• Chiller display cabinets with a double air curtain;
• Panels with high heat insulating capacity;
• LED lighting of outdoor spaces.

The types of gas and quantities in each system employing refrigerating gases are known in the Manufacturing area. These data are included in the implementation of unit construction and remodelling projects.

Employee Adoption of Best Practices

The Distribution Companies have invested more in employees' environmental training and awareness, with the objective of changing attitudes and behaviour and ensuring the appropriate management of natural resources, emissions and waste. In 2009, the following actions were carried out:

• Publication of the chapters on Noise, and Suppliers and Products, as part of the Manual for Environmental Best Practices;
• Training in the Distribution Centres in Portugal on the principles of the Environmental Management System, Environmental Policy and Good Practices, addressed to in-house employees and subcontractors;
• Training sessions for new employees of the Group holding managerial functions, aimed at disseminating internal procedures and creating awareness of environmental best practices;
• Training of store employees on internal environmental management practices;
• Development of "Environment" features in the permanent section on Sustainable Development of the in-house magazine "A Nossa Gente". The areas covered in 2009 were biodiversity, the 2008 environmental performance results, energy efficiency and the collection of used cooking oils from customers;
• Development and affixing of environmental signage at Distribution Centres in Portugal, with the aim of reducing energy and water consumption and correct waste sorting.

The initial training given to new employees in the Manufacturing area includes an environmental awareness component, in order to foster the universal adoption of environmental best practices. Environmental awareness-raising sessions addressed to other staff also take place on a regular basis. In 2009, the following are highlighted:

• Initiatives to improve waste sorting practices in all the productive units;
• Additional training at Victor Guedes on optimising the use of natural resources, primarily water and electricity;
• The "It's our commitment" campaign of Unilever Jerónimo Martins, intended to make employees more aware of responsible behaviour, backed up with advice

on promoting physical activity and healthy habits. The campaign focused in particular on:

• Reducing water and energy consumption, through signs and messages next to lighting switches, equipment (computers and lifts) and toilets;
• The sorting of waste, with signs and messages at in-house paper containers, battery boxes and recycling bins.

Total Productive Maintenance Methodology (TPM)

Companies in the Manufacturing area have been consolidating the TPM (Total Productive Maintenance) methodology, in which the Environment and Safety are principal pillars.

Under this methodology, the theme of good practices was tackled during the 2009 Safety and Environment Week, which included, Explosive Atmospheres (ATEX), Noise and its Risks, Waste Prevention and the Flow of Edible Oils, and CO2 and the greenhouse effect. This joint initiative brought together a total of almost 80 participants (20 per production unit).

Logistics and Environment

It is the objective of the Companies of the Distribution sector to progressively reduce the environmental impact associated with the logistic processes over the value chains in which the Group's activities operate, by minimising the consumption of raw materials and energy resources and the reduction of the amount of emissions and waste.

With this in mind, the transportation of goods from the Distribution Centres to the stores, both in Portugal and in Poland, obeys various principles:

• Daily route planning to optimise the use of space in the vehicles and the distances covered;
• The concern with regard to the Jerónimo Martins exclusive fleet to annually negotiate the replacement of the older, and therefore more polluting vehicles;
• Strengthening the partnerships with transporters, namely through developing joint procedures, as is the case of the Transporters' Manual developed by the Distribution sector in Portugal and revised last year.

The launch of the Packaging Ecodesign project in the Distribution sector in Portugal in 2009 is also of note. This project aims to: foster packaging reuse, remove superfluous components, minimise packaging per sales unit, replace materials, and encourage eco-efficiency and package recycling. In this regard, the Packaging Ecodesign Manual was developed and a workshop held with nine Private Brand suppliers who will, with the support of Jerónimo Martins, undertake the redesign of the packaging of the Group's Private Brand goods.

The indicator of the number of reusable boxes shows the evolution and importance this technique has taken on in the logistical activity of the Group. The use of reusable plastic boxes in Portugal, which already covers the Fruit and Vegetable, Meat, Dairy, Fish and Bakery areas, is noteworthy. In Poland, reusable packages are used whenever logistic and operational conditions permit such.

Percentage of reusable boxes vs. total number of boxes transported

	2009	2008	Δ 09/08	2007	Δ 08/07
Portugal	18.1%	11.7%	+6.4p.p	12.9%	-1.2p.p

It is worth mentioning that the Companies of the Manufacturing area cooperate with their Suppliers in the reuse of freight packaging, whenever possible.

At Victor Guedes, the optimisation of some materials was undertaken, including the reduction of bottle weight for the 250 ml and 500 ml models and the incorporation of a higher percentage of recycled paper in corrugated cardboard boxes. This Company also began daily route planning in order to optimise the use of vehicle space and of the distances covered.

Training and Selection of Suppliers

The Companies of the Distribution sector acknowledge that co-operation with their Suppliers is essential, in order to minimise environmental impact. Hence, 29 audits of maintenance service suppliers and 10 waste operators were carried out in 2009. 13% of these were found to have an excellent environmental performance and 10% registered a high environmental performance.

In the Manufacturing area, the criteria for selecting suppliers maintain 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.

Environmental Awareness

Being conscious of the fact that companies should play an active role in raising the awareness of the population in boosting sustainable development, in 2009 the Distribution Companies carried out several environmental initiatives aimed at consumers, including:

• Recheio's focus on the environmental awareness and training of HoReCa channel customers, through the publication of various articles in the "Notícias Recheio" magazine (Recheio News). The key articles in 2009 were on the following topics: energy efficiency, waste management and electronic registration of waste, biodiversity, environmental performance, new legislation and the European eco-label;
• Support of Amadora Municipal Council's project to collect used cooking oils, through the donation of five thousand mini-oil containers to the municipality's population;
• Launch of a campaign to separate waste packaging, on World Children's Day, addressed to the younger generation;
• Promoting public discussion on environmental issues, through active participation in the following events: 4th Social Responsibility Week, organised by APEE (Portuguese Association of Business Ethics); GreenFest, through the "Packaging: Problem or Opportunity for Sustainability?" conference, organised

by Jerónimo Martins and Portugal Business Council for Sustainable Development (BCSD);

Launch of the children's brand "1.2.3 Aprender é Divertido" (1.2.3 Learning is Fun), of the "Ver Crescer" (See it Grow) collection, exclusive to Pingo Doce, which tackles issues related to nature. The first two publications are: "Ver Crescer a Árvore" (See the Tree Grow) and "Ver Crescer a Borboleta" (See the Butterfly Grow).

In Manufacturing, Unilever Jerónimo Martins continued to support, ongoing since 2002, the Eco-Schools Programme, a Europe-wide initiative under the responsibility of the European Blue Flag Association (EBFA) and Foundation for Environmental Education (FEE), which aims to raise environmental awareness among young people. In the 2008/2009 academic year, 1,089 schools took part in this Programme, of which 974 were awarded.

Unilever Jerónimo Martins also continued its National Green Brigade Initiative, carried out in co-operation with the EBFA. Each "Green Brigade" analysed the resources lacking in their schools or local environment and then created and presented a specific project with solutions to improve or minimise the existing situation. This nationwide competition comprised 74 projects in 2009 from schools of all levels of education nursery school up to secondary school, involving a total of about 2,500 pupils.

In parallel, the Ben & Jerry's brand (B&J) backed the European "20-20-20" campaign (increase energy generation from renewable sources by 20%; increase energy efficiency by 20%; and reduce greenhouse gases by 20%) and in partnership with Lisbon Municipal Council, Quercus and Carbon2Oxygen, invited the general population of Lisbon and its employees to take part in the "Lisbon for the Climate" event. The brand also established the "For a Cleaner and more Sustainable Lisbon" commitment, which gathered around 9,900 signatures on the brand's website. Ben & Jerry's was also able to transform various parking spaces in the city of Lisbon into green spaces, it sponsored the purchase of a mini-wind generator in Cascais municipality and offered energy audits to 50 shopping zones.

Olá, in partnership with the EBFA, promoted environmental education and the sorting of waste on Portuguese beaches, in the second year of the Eco-Beaches project. The company selected 42 beaches, with a total of 136 recycling points, which ensured compliance with one of the mandatory requirements for the "Bandeira Azul" award: the sorting of waste at the beach.

7.4. More Environmentally-Friendly Technologies

Jerónimo Martins aims to minimise the environmental impact of its activities, products and services by adopting more environmentally correct solutions.

Sustainable Consumption

Following previous initiatives, in 2009, Pingo Doce stores began selling a resistant and reusable carrier bag for 0.50 euros, raising consumer awareness of the reuse of bags as a means of reducing the environmental impact on society.

With regard to the Private Brands and Perishables, various products have been made available which enable the consumer to opt for solutions more in keeping with the

principles of Sustainable Development; the following are notable in the Distribution companies in 2009:

• The sale of Private Brand organic products chicken and vegetables, in Pingo Doce;
• The protection of autochthonous breeds, through the sale of certified beef (Mertolenga, Barrosã and Alentejana), in Recheio and Pingo Doce;
• The sale in Pingo Doce of nine references of concentrated UltraPro detergents and recycled toilet paper of the Pingo Doce brand;
• The sale of the Neo Private Brand recycled toilet paper, in Biedronka.

In 2009, Unilever Jerónimo Martins strengthened its investment in detergent concentrations, reducing the quantity required per wash and the respective packaging.

Renewable Energy

The Distribution Companies in Portugal have been investing in technologies that use renewable energy sources since 2007, enabling the decrease in the use of non-renewable energy sources and greenhouse gases. The technologies operating in 2009 are the following:

• 72 sqm of solar collectors for heating water in the Azambuja Distribution Centre (savings: 5,100 kWh/month and 31 t CO2/year);
• 46 outdoor lamp posts powered by photovoltaic panels, installed at the Pingo Doce store in Quinta do Conde (savings: 5 thousand kWh/month and 30 t CO2/year);
• 5.4 sqm of solar collectors to heat water at the Borba Pingo Doce store;
• 126 natural light transport systems to convey daylight to indoor spaces at the Vila Nova de Gaia, Oliveira do Douro and Loures Pingo Doce stores (savings: 3,740 kWh/month and 21.5 t CO2/year);
• 12 sqm of solar collectors for heating water at the Azambuja Green Dough Plant (savings: 850 kWh/month and 5 t CO2/year).

Research and Development

The Distribution Companies in Portugal developed the following, in partnership with technology research and development entities, with the aim of fostering a culture of eco-innovation and accelerating know-how in cutting edge environmental areas:

• Support of the "Promotion of Energy Efficient Appliances in Europe", project co-ordinated by the Energy and Environment Agency of Arrábida and financed by the European Union's Intelligent Energy Europe programme, which aims to foster the acquisition and use of highly energy efficient electrical appliances;
• Taking part in the workshop of European experts on Eco-Management and Audit Scheme (EMAS) regulation, organised by the Institute for Technological Prospecting Studies and aimed at drafting a support publication for the Distribution sector;
• Support provided to Master's Degree theses on "Sustainability in the Transport Activity of a Distribution Company – Case study of Jerónimo Martins", of the Instituto Superior Técnico of Lisbon Technical University, and "Sustainability Assessment and Communication in Retail Units", of the Faculty of Science and Technology of New University of Lisbon.

7.5. Partners in the Area of the Environment

Distribution

In the Distribution area, Jerónimo Martins has representatives in the following organisations:

• "Capítulo Português" of the World Business Council for Sustainable Development (WBCSD);
• Portuguese Association of Distribution Companies (APED) Committee for the Environment;
• DISPAR, an institution of national distributors and representing about 20% of the share capital of Sociedade Ponto Verde.

Manufacturing

Unilever Jerónimo Martins is represented in, is a member of and/or takes part in working groups of the following organisations:

• Portuguese Association of Soap, Detergent and Conservation and Cleaning Product Manufacturers (AISDPCL);
• National Association of Ice Cream Manufacturers (ANIGA);
• National Association of Soft Drink and Fruit Juice Manufacturers (ANIRSF);
• Portuguese Logistics Association (APLOG);
• Portuguese Association of Oils and Vegetable Fats, Margarines and Derived Products (APOGOM);
• Olive Oil Association of Portugal (Casa do Azeite);
• Federation of Portuguese Agro-food Industries (FIPA);
• Portuguese Quality Institute (IPQ);
• Portuguese Recycling Management Association (SPV Sociedade Ponto Verde).

8. 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 staff.

These activities are part of a Patronage policy built on three guidelines, closely connected to the Group's own positioning: the Food Universe, the Portuguese Character and Innovation. Accordingly, two strategic support areas have been defined, one social and the other cultural, and a range of initiatives are promoted under the programmes in force:

• "Jerónimo Martins Por Futuros Risonhos" (Jerónimo Martins For Smiling Futures): a programme of a social nature, essentially geared towards providing support to children and young people;
• "Jerónimo Martins Pela Cultura Nacional" (Jerónimo Martins For National Culture): a programme specifically addressing cultural issues, in particular the preservation and dissemination of Portuguese historical and cultural heritage.

8.1. Social Patronage

Jerónimo Martins Institutional Support

In 2009, Jerónimo Martins granted support in the form of funds, goods and volunteers' time to a number of entities and causes under the cooperation it has maintained with institutions and the projects that help less fortunate communities and groups, mostly made up of children and young people.

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	Support towards feeding the children and young people through shopping vouchers.
Obra do Ardina	Institution supporting underprivileged boys.	2003	Support towards feeding the children and young people that board at the institution, through shopping vouchers.
Casa da Acreditar	Support for children with cancer and their families.	2003	Sponsorship of two bedrooms in the Lisbon house. Offer of quality brand personal care products and food.

Annual Report 09 Sustainability in Value Creation Patronage

CONTINUED SUPPORT
Name of the Institution	Area of Activity	Start of Jerónimo Martins Support	Type of Support
CrescerSer - APDMF Associação Portuguesa para o Direito dos Menores e da Família	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 Paróquia de Torredeita	Centre geared towards underprivileged children and young people from the Torredeita region (Viseu).	2004	Support through monthly shopping vouchers.
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 feeding the children in the home, through shopping vouchers.
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 - Associação de Psicólogos e Pais para Apoio à Criança e ao Jovem	Support to broken families of underprivileged neighbourhoods in Alcabideche.	2006	Support for making up monthly food baskets to be distributed among around 30 families.
Associação Social Cultural e Desportiva do Safurdão	Support to Elderly Day Care Centre	2006	Support towards feeding the users of the Day Care Centre.
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.
Associação Nacional de Fibrose Quística	Support to patients with cystic fibrosis.	2008	Payment of all expenses incurred with the tele-aula project (distance learning) at Santa Maria Hospital for patients hospitalised in the Paediatrics ward.

Annual Report 09 Sustainability in Value Creation Patronage

CONTINUED SUPPORT
Name of the Institution	Area of Activity	Start of Jerónimo Martins Support	Type of Support
Centro de Apoio à Vida de Viseu	Support for pregnant women in difficulty, women who are victims of violence and children and young people at risk.	2008	Support through monthly shopping vouchers.
Centro Social da Paróquia de S. Salvador de Viseu	Support for underprivileged families.	2008	Support through monthly shopping vouchers.
Casa de Santo António	Shelter for teenage pregnant women.	2008	Support through monthly shopping vouchers.
Casa de Santa Isabel	Shelter for pregnant women in difficulty.	2008	Support through monthly shopping vouchers.

Along with the institutional support above, various charitable institutions or people in need benefited from support provided during 2009, namely: Parents' Associations, Banco do Bebé, Tese-Associação para o Desenvolvimento, S. Nicolau Church, Portuguese Cardiology Foundation and the Diplomatic Corps Bazaar Association. Jerónimo Martins also developed patronage campaigns directed at its employees, to motivate their involvement in helping the needy.

The Group teamed up with the Calouste Gulbenkian Foundation in 2009 on the Solidarity Country Campaign, which aimed to provide a response to new situations of the risk of poverty in Portugal. Jerónimo Martins also invested in the Social Stock Exchange, supporting the Centro Diferenças – Efeito D Project.

Distribution Portugal

In accordance with Jerónimo Martins' policy, and continuing with the real support given to the communities served, the Pingo Doce, Feira Nova and Recheio Cash & Carry chains supported institutions that work with underprivileged children and young people.

Accordingly, various local institutions and initiatives located in the areas where the Group's stores are sited were supported in 2009. More than 100 entities received support through the Group's stores.

Monetary support was also granted over the year, mainly for acquiring apparatus such as wheelchairs or equipment for disabled children and young people. Pingo Doce and Feira Nova also participated in the holding of solidarity initiatives organised by charitable institutions such as Liga Portuguesa Contra o Cancro (Portuguese Cancer League), Associação Amigas do Peito (Association to support women with breast cancer), and Associação dos Cegos Amblíopes de Portugal (ACAPO) and Associação Portuguesa de Deficientes (Portuguese Disabled Persons' Association).

Also, food was collected for Banco Alimentar (Food Bank) on two different occasions, which involved the presence of volunteers of that entity in the store and the system of food vouchers. It should be noted that the Jerónimo Martins Banners most contributed to this campaign, with a total of 323,419.94 kg, as was the case on other occasions.

At the start of 2009 Pingo Doce teamed up with ACAPO to implement one of Jerónimo Martins' commitments: Establish conditions to serve all customers and provide the customer service resources that allow all visually impaired people to shop and make purchases quickly and efficiently.

The Group has equipped more than 140 Pingo Doce and Feira Nova stores and around 30 Recheio stores with labels printed in Braille, which allow customers to identify the products once they are at home. It also trained around 300 store employees in the personal service to provide to customers with special needs. The system is operating in at least one store per municipality, thus contributing to the social inclusion of blind and partially sighted children, young people and adults.

The Group provided support to the following institutions in Madeira, in 2009: Igreja da Nazaré (church), Mosteiro da Nossa Senhora da Piedade (monastery), Irmãs Clarissas (nuns), STAO – Serviço Técnico de Actividades Ocupacionais, Caritas Diocesana do Funchal (welfare charity) and Associação Desportiva do Porto da Cruz (sports club), among others.

Recheio, according to Jerónimo Martins' institutional policy, primarily contributed to initiatives concerning underprivileged children in the education and sport areas.

In this way, in 2009 the growth trend of social and cultural patronage initiatives was maintained and there was increased support to institutions that have been helped over the last few years, like: Parish Centres, Santa Casa da Misericórdia (welfare charity), Viseu Diocese, Centro de Caridade Nossa Senhora Perpétuo Socorro (Christian Charity), Lar Santa Teresinha (Nursing Home), Associação A Minha Casa, Associação Casa do Caminho, and the Banco Alimentar Contra a Fome (Food Bank) and Clube Desportivo Feirense (sports club).

Distribution Poland

Biedronka in Poland regularly promotes programmes for continued assistance which benefit Polish society, the communities the Company serves and younger people in particular.

Of note in this area is the continuation of the "Partnership For Health" project through which Biedronka, together with Danone, Lubella and the Polish Mother and Child Institute provide the "Milk Start" product to combat the problem of infant and juvenile malnutrition in the country.

On World Children's Day and on Christmas, Biedronka gave presents to more than 46,000 children of underprivileged families and on Sick Person's Day the Company, in cooperation with Caritas, offered gifts to young patients in three polish hospitals.

The support provided to orphanages and social welfare associations is significant. The beneficiaries include welfare institutions (Lar de Acolhimento de Belém), special schools (Associação Porta Aberta) and an orphanage (Krasne Orphanage).

The Company also joined the fight against leukaemia in 2009. In June it began working with the DKMS Foundation, which manages a bone marrow donor bank. The initiative involved more than 250 employees of the Company who registered with the bank as potential bone marrow donors.

Lastly, a protocol was signed with Fundação para o Desenvolvimento da Cirurgia Cardíaca (Foundation for the Development of Heart Surgery), with the aim of raising the necessary funds to create the first paediatric heart transplant unit in Poland.

Manufacturing

In 2009, the Manufacturing units carried on their involvement with underprivileged populations, steering their activities towards children, disabled people and the elderly, in areas it considered priorities: health, education and the environment.

Thus, several entities received support, primarily through the donation of products. Those with whom a cooperation protocol exists are: AARN – Banco do Bebé (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), Raríssimas (Association for the Mentally Handicapped and Rare Illnesses) and Associação Sol (Support to children infected with HIV and AIDS).

For the third year running, the Company took part in the World Food Programme's March Against Hunger.

The Manufacturing area continued to collaborate with Banco Alimentar, delivering 172 tonnes of food products, and with Entrajuda (Donated Goods Bank), by donating used IT material in good working order. Furthermore, due to the closure of "Academia dos Sabores", around 80% of the kitchen equipment of that entity was donated to Entrajuda.

It also supported the 5 Schools|5 Designers project, an initiative of the Education and Youth Department of Lisbon Municipal Council and MUDE (Museum of Design and Fashion). This partnership resulted in the refurbishment of the gymnasium of Padre Abel Varzim school, Bairro Alto, Lisbon.

The Manufacturing area was also involved in specific initiatives with the community in 2009, the highlights of which were:

• Cif, celebrating 30 years of existence, renovated walls along the Calçada de Carriche road in Lisbon, painted other parts of the city white and launched a petition on the subject "Cif for a cleaner city", achieving 5,759 signatures;
• Planta took part in the fight against hunger in one of Africa's poorest communities - in northwest Ghana. It offered the equivalent to 160,000 school meals, through the World Food Programme of the United Nations;
• Vasenol created the Vasenol Skin Fund, the goal of which is to guarantee access to consults and support by health professionals of the skin field; the partners of this fund included União das Misericórdias Portuguesas (Portuguese Union of Misericórdia Welfare Charities) and Associação Portuguesa de Doentes de Psoríase (Portuguese Association of Psoriasis Patients).

	SUPPORT GRANTED
Name of the Institution	Start of Jerónimo Area of Activity Martins Support		Type of Support
Novo Futuro	Bazaar (fundraising)	October 2009	Donation of products to sell (cash collection).
Banco do Bebé	Support for underprivileged families in hospital MAC	October 2009	Donation of products to include in 70 hampers.
Casa das Cores	Temporary shelter for children and young people at risk	December 2009	Sponsorship of meals zone.
Raríssimas	Electronic cards (donation)	December 2009	For each of the 3,148 Christmas E cards sent by its employees, Unilever Jerónimo Martins donated 50 cents to this institution.

8.2. Cultural Patronage

Jerónimo Martins Institutional Support

The Group has contributed to various cultural and education projects.

SUPPORT GRANTED
Name of the Institution	Area of Activity	Start of Jerónimo Martins Support	Type of Support
ACEJE	Christian Association of Entrepreneurs and Managers.	2000	Financial support.
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.
CIVITAS - Centro de Recursos de Literatura e Literacia	Encouraging children's educators, teachers and guardians to come into contact with children's books (teacher training).		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 over 50 volunteers, among the Group's staff, to give lessons.
EIS - Empresários para a Inclusão Social	Combat against failing school and promotion of entrepreneurship.	2006	As a founding member, gives annual financial support.
Maestro Álvaro Cassuto	Record publishing of the Symphonies of the composer Luís de Freitas Branco.	2008/09	Sponsorship of the 2nd and 3rd CD of the works of composer Luís de Freitas Branco.
Patriarch of Lisbon		2009	Financial support for the organisation of the archive of the Patriarch Cardinal of Lisbon, M. Cerejeira.
Faculty of Science of Porto University		2009	Financial support.

Other institutions received support during the year, such as Palácio Nacional da Ajuda (National Palace of Ajuda) and Fórum para a Competitividade (Competitiveness Forum).

Distribution Portugal

Pingo Doce and Feira Nova continued to favour in 2009 initiatives aimed at the preservation and dissemination of Portuguese historical and cultural heritage and local traditions.

Pingo Doce, as the official sponsor of the Lisbon Oceanarium since 2003, has developed and supported a range of initiatives, namely the "Pingo Doce for Ocean Preservation" campaign, which intends to foster knowledge of the seas and protect ocean life.

Pingo Doce has supported the following projects as part of its sponsorship role:

• The Protection and Integrated Management of Sea Turtles in Cape Verde, a project that is located on Santiago Island and which is being run by Algarve University;
• The Distribution and Colonisation Strategy of the River Lamprey, a study that is the result of a partnership between Évora University and the Faculty of Science of Lisbon University (Instituto de Oceanografia);
• Clean Eel, a programme organised by the Faculty of Science of Lisbon University (Instituto de Oceanografia);
• Sea Horses throughout the World, a project that aims to register and catalogue sea horses.

Manufacturing

The Manufacturing area continued with the Unilever International Schools Art Project (UISAP) in 2009. All Portuguese primary schools were invited to take part in the project. 457 works from 65 schools from all over the country were received.

The Portuguese jury selected three works that were displayed at the Tate Modern, in London, and the international jury selected two works: "Viagem dos Sentidos" and "Place Without Space" as the country's winning works.

An exhibition with the title "Olhares Intimistas" was held in the foyer of the Amoreiras office in Lisbon. This exhibition consisted of the self portraits of 14 different artists and its aim was to disseminate the work of young artists in the final year of the Sculpture course of the Faculty of Fine Arts of Lisbon University.

Unilever Jerónimo Martins offered a decorative sculpture entitled Skyline to the city of Lisbon. This sculpture is mounted on the walls of the Amoreiras road tunnel. Skyline is the work of the painter and sculptor Fernando Silva Ferreira, and it depicts the skyline of the city of Lisbon between the 25 de Abril Bridge and Vasco da Gama Bridge.

The Staff Club continued to give study grants to employees' children and it promoted various activities related to the theatre, cultural visits and other shows; more than 1,200 took part in these events.

Likewise, 3,800 members of staff and their families took part in various sporting and recreational activities, such as trips, excursions, radical sports, walks, in-house indoor football, tennis and volleyball leagues, rally paper and a trip to the Christmas circus.

Also of note is that more than 10,700 school and university students took the opportunity to visit the various Manufacturing plants, throughout the year.

VI - Individual Financial Statements

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 2009

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 and Recheio) and in Poland (Biedronka), in the industrial sector, where it maintains a long-standing partnership with Unilever (Fima, Lever, Olá and Gallo), 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 Group functional support areas, 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 11.5 million euros.

1. The Group's operational performance in Portugal

Pingo Doce

In 2009, Pingo Doce carried forward its trend for sales growth and strengthening market share from preceding years.

It was under using the principles of flexibility and the consumer as the focal point that Pingo Doce maintained its focus on competitive prices, paying special attention to the key categories for consumers, where the increased scale of the operations made it possible to reach new levels of competitiveness (e.g. the Private Brands).

The Group's supermarket Banner, in line with the deflation registered in the food markets, recorded an annual average price reduction of 5.4% for the average basket. The impact of deflation on sales growth in terms of value was strongly compensated by the sharp upturn in volumes sold by the chain.

Pingo Doce registered like-for-like (LFL) sales growth of 2.7% for the year, which considering the deflation in the average basket, corresponded to an increase of more than 8% in volumes sold.

The total sales of Pingo Doce rose 12.8% and registered 2,193.6 million euros, helped by the contribution of 262.5 million euros in 2009 from the former Plus stores, acquired in May 2008. Apart from focusing on LFL performance, the Company dedicated a large part of its management efforts on remodelling the former Plus stores - 20 stores underwent in-depth remodelling, and combined with the 16 stores remodelled in 2008, contributed to the good performance for the year. There are still 30 stores to be remodelled, which will be the Company's priority over the coming quarters.

The LFL performance of the Group's hypermarkets in Portugal continued to reflect the repositioning that is taking place, which led to a reduction in the variety, mainly in the non-food area, though also in the food area, and which did not make it possible to clearly communicate the value proposition of these nine stores.

Pingo Doce EBITDA was 175.7 million euros, a remarkable growth of 13.7%; the EBITDA margin rose 30 base points to 7.0% of sales.

This evolution reflects, apart from a constant search for cost efficiency, the larger scale of the Pingo Doce operations, with the acquisition of the former Plus stores in 2008 playing a fundamental role in that scale increase. Even though those stores, operational for less than 20 months, are still operating below normal sales and EBITDA levels, they already represent an important increase in volumes for Pingo Doce's sourcing, providing the usual benefits associated with larger buying capacities.

Recheio

In Recheio the 5.2% growth of total sales as well as the robust evolution of LFL sales also includes the remodelling of a store, acquired in November 2008 that was not closed while the work was carried out.

On a LFL basis, Recheio registered sales growth of 1.7%, a strong evolution of more than 4% in volumes, considering the deflation of around 3% of the basket figures. This performance reflected the Company's anticipation of difficulties in both the business segments it supplies – Traditional Retail and HoReCa. In this context, as a way of increasing its market share, Recheio focused on contributing towards reinforcing its customers' competitiveness through actions in key areas, namely by investing in the quality, variety and competitiveness of its perishables and by launching a Private Brand for the Traditional Retail segment.

Recheio, which already has a very efficient cost structure, was able to use the positive LFL's and internal efficiency to promote campaigns in categories of high significance for its customers, keeping the EBITDA margin practically stable in relation to the preceding year. EBITDA was 41.4 million euros.

Madeira

In Madeira, the 1.1% growth of LFL sales included two-digit growth of volumes sold and is the result of the price re-positioning which began in the 2nd semester 2008, with a positive impact on the chain's market share on the island.

In Madeira, the positive reaction of sales to more aggressive price positioning implemented in 2008 permitted some cost dilution benefits that, together with more efficient sourcing, allowed the EBITDA margin to rise from 3.6% to 4.8%.

Representation and Restaurant Services

In the area of Representation and Restaurant Services, total sales posted 6.5% growth for the year and it should be noted that four new represented brands were added to the portfolio during 2009.

Industry

In Manufacturing, the competitiveness in core brands for the market leadership positions was reinforced. The evolution of volumes sold in the majority of categories showed a positive performance, while the evolution of -6.3% of sales in terms of value essentially reflected the substantial decrease of the prices of several categories following the evolution of raw materials (mainly olive oil and seed oil).

In the Manufacturing area, the EBITDA margin was equivalent to 15.3% of sales, up 100 base points on the preceding year. The restructuring of the Company to reinforce the competitiveness of its operation in the market contributed to that evolution.

2. The Group's operational performance in Poland

In Poland, the Food Retail sector remained challenging, and Biedronka maintained its price leadership position in the market. Even though a slowdown in consumption was registered, there was no evidence of any substantial change to the business strategies of the Banners or to their relative positioning in order to compensate for this slowdown.

One of Biedronka's main priorities continued to be its plan for opening stores. The Company opened 163 stores, ending the year with 1,466 stores.

Total sales of Biedronka in 2009 were 16.066,8 billion zloty, up 29.8% (+5.8% in euros) on the previous year. This growth was driven by the good LFL performance, the opening of new stores which led to 8.1% growth of the sales area for the year compared to the end of the preceding year and the successful integration of the Plus stores acquired in October 2008, and which accounted for around 11% of Company sales in 2009.

The LFL sales of Biedronka grew 8.3%, which is equivalent to an increase of about 12% of the food categories on a LFL basis. The performance of the non-food segment is due to the Company's decision to reduce the assortment of these products following the trend among consumers to steer clear of this type of purchase which is more expensive and surplus to their needs.

In Poland, Biedronka posted exceptional EBITDA growth of 37.4% in local currency (+12.0% in euros), with the respective margin registering 7.3% versus 6.9% in 2008. Biedronka is clearly in a business development phase in which the benefits of scale impact at all levels.

3. Perspectives for 2010

For Pingo Doce, the focus in 2010 will be on the creation of value now that the integration process of the former Plus stores and internal reorganisation, which culminated in the merger of structures and the medium-sized Feira Nova stores with the Pingo Doce stores, are complete.

The new communication strategy, which began at the end of 2009, will strengthen the unique positioning of the Banner towards its competitors, reflecting the values of Quality and Price.

The permanent innovation of operations and commercial areas will include new businesses, restaurants and take-away, which will be complementary pillars of this differentiation strategy.

The challenge of continuing to gain market share will also be relevant in 2010, in order to carry forward the strategy initiated in 2002 of growth in like-for-like sales above the market average. The investment in new stores will remain selective, ensuring a presence in locations identified as priority.

In 2010, Recheio intends to continue to strengthen its leadership position in the wholesale market and sustain its growth, by investing in a sound and consistent manner in the development of its perishables business and the soundness of its pricing policy.

Recheio will be even more focused in the competitive advantages in which its strategy is based on, thus strengthening its competitive capacity through the appeal and satisfaction of new customer segments.

In order to do this, Recheio will open new stores to cover new areas of influence, and also promote its range of products among new customer segments, especially in the HoReCa channel.

Throughout 2010 it will continue to seek optimizing its business processes and solutions that will allow it to strengthen the competitive advantage it has in cost leadership. The Company will also be attentive to all new growth opportunities that arise, whether among groups of customers and markets where it

currently operates as outside of those areas.

The priority of Biedronka will continue to be organic growth, keeping the rate of store openings of recent years and strengthening its leadership position in that country's Food Retail market. The Group plans to open a minimum of 150 stores in 2010, in order to achieve its goal of 2000 stores until the end of 2012.

Biedronka focus in 2010 will once again be on like-for-like sales growth, which will be achieved through the combination of economic growth and focus on customers, entailing a supply that is always tailored to their needs and encapsulated in the market's most competitive quality-price package.

Price leadership will remain a priority, achieved either by scale as a result of growth or the continued drive for operational efficiency improvement.

The main priority of the Manufacturing area will continue to be investment in market-leading brands, both in price and innovation, in order to allow the profitability of assets and the strengthening of the market share of brands comprising the current portfolio.

Gallo Worldwide will continue to give priority to the search for new markets, with a more focused strategy as the result of the spin-off of this new business unit.

Jerónimo Martins Distribuição will seek to extend and provide sustainability for its portfolio of represented brands, while Jerónimo Martins Restauração e Serviços continues to study business opportunities in the food service sector. In 2010 the Company will launch the restaurants "Oliva", a new concept in the casual dining segment.

In an international climate that has not fulfilled the promise of economic recovery, Jerónimo Martins continues to expect quite a demanding year. The Group, driven by the high performance level demonstrated by its portfolio and by the ability of its management team, will proceed with a strategy guided by a commitment to ambitious targets.

The Group's business activities are analysed in further detail in the Consolidated Management Report that accompanies the 2009 Consolidated Financial Statements.

4. Company's performance as a Holding of investments

JMH, as the Holding and manager of company holdings, presented in 2009 operating results of 1 million euros, which represents an increase of 2.1 million euros towards 2008. This increase is due to the reduction of operating costs towards 2008, as well as exceptional operating results in the amount of 1 million euros occurred in 2009, which did not occur in 2008.

The financial debt increased 28.9 million euros, to 140.5 million euros (111.6 million euros in 2008). This growth was due to the reduction of 55.7 million euros, towards 2008, in the amount received from subsidiaries, regarding interests and dividends.

The net financial costs decreased 6.9 million euros in relation to 2008, totalling the amount of 6.7 million euros. This reduction was due essentially to the derivative financial instruments losses and less adverse exchange rate variations on the Zloty debt occurred in 2008 and were not repeated in 2009.

5. Risk Management

The Company, and in particular, its Board of Directors, dedicates a great deal of attention to the risks affecting the businesses and their objectives. Success in this area depends on the ability to identify,

understand and handle exposure to events, which, whether or not under the direct control of the management team, may materially affect the physical, financial and/or organizational assets of the Company. This concern is materialized in the Group's Risk Management Policy, which aims to stimulate and reinforce the type of behaviour necessary for that success.

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.

The management of this risk category is focused on the unpredictable nature of the financial markets and tries to minimize its adverse effects on the Company's financial performance. On this level, certain types of exposure are managed using derivative financial instruments.

Activity in this area is carried out by the Financial Operations Department, under the supervision of the Executive Committee. The Risk Management Department is responsible for identifying, assessing and hedging financial risks, by following the guidelines defined by the Board.

a) Market Risk

Foreign Exchange Risk

JMH main source of exposure to foreign exchange risk comes from a loan granted, in 2008, to a Polish subsidiary, in the amount of 10.7 million zlotys (polish currency). At December 31st 2009, the impact on JMH results, of an adverse variation of the EUR/PLN exchange rate in the order of 10%, would be negative 236 thousand euros (negative 233 thousand at December 31st 2008).

Price Risk

Because of its investment in Banco Comercial Português, Jerónimo Martins is exposed to equity price risk. At December 31st, 2009, a negative 10% variation in the trading price of BCP shares would have a negative effect of 165 thousand euros in Other Reserves. On December 31st, 2008, a variation of the same magnitude would have a negative impact of 159 thousand euros, also in Other Reserves.

b) Interest Rate Risk (Cash Flow and Fair Value)

All financial liabilities are directly or indirectly indexed to a reference interest rate which exposes Jerónimo Martins to cash flow risk. A given portion of this risk is hedged through fixed interest rate swaps, thus 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.

c) Credit Risk

Credit risk is centrally managed. The main sources of credit risk are bank deposits, short-term 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 derivative financial instruments with positive fair value, as at December 31st 2009, and 2008:

		(thousand euros)
	2009	2008
Rating	Balance	Balance
AAA	-	20,892
AA-	-	10,823
A+	148	-
A	1,438	15,493
Others	20	62
Total	1,606	47,270

The ratings shown correspond to the notations given by Standard and Poor's.

The maximum exposure to credit risk, at December 31st 2009 and 2008, is the financial assets accounting value.

d) 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.

(thousand euros)
	Exposure to liquidity risk
2009	Less than 1 year	1 to 5 years	+ 5 years
Borrowings
Financial Leasing	-	-	-
Loans	4,874	157,366	-
Derivative Financial Instruments	1,861	230	-
Creditors	431	-	-
Operational Lease Liabilities	275	175	-
2008
Borrowings
Financial Leasing	9	5	-
Loans	63,946	113,324	-
Derivative Financial Instruments	550	2,255	-
Creditors	594	-	-
Operational Lease Liabilities	276	154	-

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 of 2009, Jerónimo Martins, SGPS, S.A. declared consolidated profits of EUR 200,349,003 euros and a profit in the individual accounts of 36,496,485.23 euros.

The Board of Directors proposes that the net profits be applied in the following manner:

• Legal Reserve ……… EUR 1,824,824.26
• Free Reserves …….. EUR 34,671,660.97

In accordance with the policy of dividend distribution announced several years ago, the Board of Directors proposes, to the stockholders, the distribution of the amount of 89,866,093.46 euros, which corresponds to 44.9% of the consolidated net profit, by using the free reserves available for distribution.

This proposal represents a gross dividend payment of 0.143 euros per share, excluding own shares in the portfolio.

8. 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 2009, no other situation has come to the Board of Director's knowledge after the end of the year which 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 2009 was the same as on 31 December 2008: 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, 2nd March 2010

The Board of Directors

INCOME STATEMENT BY FUNCTIONS

FOR THE YEARS ENDED 31 DECEMBER 2009 AND 2008

	Notes	2009	2008
		11,533	12,263
Services rendered		(7,342)	(8,981)
Cost of the services rendered Gross profit		4,191	3,282
Other operating revenues		182	152
Administrative costs		(2,623)	(2,636)
Other operating costs		(1,794)	(1,940)
Exceptional operating profits/losses	9	1,025	-
Operating profit		981	(1,142)
Net financial costs	4	(6,717)	(13,600)
Profit/loss in subsidiaries and associated companies	7	42,477	47,199
Profit/loss in other investments	8	33	(2,116)
Profit/loss before taxes		36,774	30,341
Income taxes	6	(278)	(3,349)
Net profit/loss		36,496	26,992
Basic earnings per share – Euros	21	0.058	0.043
Diluted earnings per share – Euros	21	0.058	0.043

____________________________ ______________________________

To be read with the attached notes to the Individual Financial Statements

The Certified Accountant Board of Directors

BALANCE SHEET AT 31 DECEMBER 2009 AND 2008

Euro thousand
	Notes	2009	2008
Assets
Tangible assets	10	395	459
Intangible assets	11	29	48
Investment properties	12	2,470	2,470
Investments in subsidiaries	13	207,528	207,098
Investments in joint-ventures	13	6,349	6,349
Loans to subsidiaries	14	598,036	589,722
Loans to joint-ventures	14	188,643	188,612
Available-for-sale financial investments	15	1,648	1,589
Deferred tax assets	16	5,904	5,640
Total non-current assets		1,011,002	1,001,987
Taxes receivable	16	227	229
Loans to subsidiaries	14	85,308	101,378
Trade debtors, accrued income and deferred costs	17	7,025	6,798
Cash and cash equivalents	18	1,614	47,278
Total current assets		94,174	155,683
Total assets		1,105,176	1,157,670
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	(1,430)	(480)
Retained earnings	20.4	302,900	335,532
Total shareholders' equity		947,155	980,737
Borrowings	22	140,000	100,005
Derivative financial instruments	27	2,406	2,773
Employee benefits	28	12,732	14,445
Deferred tax liabilities	16	239	250
Total non-current liabilities		155,377	117,473
Trade creditors and accrued costs	26	2,462	4,296
Borrowings Taxes payable	22 16	6 176	55,008 156
		2,644	59,460
Total current liabilities
Total Shareholders' equity and liabilities		1,105,176	1,157,670

To be read with the attached notes to the Individual Financial Statements

STATEMENT OF GAINS AND LOSSES RECOGNISED IN EQUITY

			Euro thousand
	Notes	2009	2008
Fair value of cash flow hedging		(1,009)	(574)
Fair value of available-for-sale financial investments		59	(1,216)
Gains/losses directly recognised in equity		(950)	(1,790)
Net profit		36,496	26,992
Total gains/losses recognised		35,546	25,202

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

	Notes	Share Capital	Share Premium	Own shares	Reserves	Retained earnings	Shareholders' equity
Balance sheet at 1st January 2008		629,293	22,452	(6,060)	1,310	368,870	1,015,865
Fair value of available-for-sale financial investments Fair value of cash flow hedgings					(1,216)		(1,216)
- Gross amount - Deferred tax	27 16				(780) 206		(780) 206
Gains/losses directly recognised in equity		-	-	-	(1,790)	-	(1,790)
Net profit in 2008						26,992	26,992
Total gains/losses recognised during the year		-	-	-	(1,790)	26,992	25,202
Dividend payment						(60,330)	(60,330)
Balance sheet at 31st December 2008		629,293	22,452	(6,060)	(480)	335,532	980,737
Fair value of available-for-sale financial investments Fair value of cash flow hedgings	15				59		59
- Gross amount - Deferred tax	27 16				(1,373) 364		(1,373) 364
Gains/losses directly recognised in equity		-	-	-	(950)	-	(950)
Net profit in 2009						36,496	36,496
Total gains/losses recognised during the year		-	-	-	(950)	36,496	35,546
Dividend payment						(69,128)	(69,128)
Balance sheet at 31st December 2009		629,293	22,452	(6,060)	(1,430)	302,900	947,155

Euro thousand

To be read with the attached notes to the Individual Financial Statements

CASH FLOW STATEMENT

FOR THE YEARS ENDED 31 DECEMBER 2009 AND 2008

			Euro thousand
	Notes	2009	2008
Operating Activities
Cash received from Customers		12,671	15,394
Cash paid to Suppliers and Employees		(15,084)	(15,404)
Cash generated from operations	19	(2,413)	(10)
Interest and other similar costs paid	4	(10,600)	(17,017)
Income taxes paid		(204)	(256)
Cash Flow from operating activities		(13,217)	(17,283)
Investment activities
Disposals of tangible assets	10	-	1
Reimbursement of loans and capital contributions from subsidiaries	14	61,026	44,136
Interest received	7	16,883	26,168
Dividends received	7	27,174	73,583
Acquisition and capital increase of subsidiaries	13	(995)	-
Acquisition of available-for-sale financial investments	15	-	(541)
Loans and capital contributions given to subsidiaries	14	(53,270)	(42,436)
Acquisition of tangible assets	10	(36)	(355)
Acquisition of intangible assets	11	-	(40)
Cash flow from investment activities		50,782	100,516
Financing activities
Received from non-current loans	22
Interest and similar income received	4	40,006	85,000
Reimbursement of loans	22	809	2,718
Dividends paid		(55,000) (69,128)	(69,208) (60,330)
Cash Flow from financing activities		(83,313)	(41,820)
Net increase in cash and cash equivalents		(45,748)	41,413
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of the year
Changes in cash and cash equivalents		47,278	4,156
Effect of held for trade financial assets revaluation	18	(45,748) 84	41,413 1,709
Cash and cash equivalents at the end of the year	18	1,614	47,278

To be read with the attached notes to the Individual Financial Statements

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 investment management in Group companies. JMH employs 57 people (58 in 2008).

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 53,797 people (53,375 in 2008).

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 2nd March 2010.

2. Accounting policies

The principal accounting policies adopted in the preparation of these financial statements are as follows. These policies were consistently applied in comparative periods, except when otherwise stated.

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, financial investments held for trading 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 Management Report.

Change in Accounting Policy and Bases for Presentation

JMH adopted in 2009 a set of standards and amendments to standards issued by the International Accounting Standards Board (IASB) as well as interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), which are mandatory in 2009 and were already adopted by the European Union. Some of them are not applicable to its individual accounts, such as: IFRS 8 – Operating Segments; amendments to IAS 1 – Presentation of Financial Statements; amendments to IAS 23 – Borrowing Costs; amendments to IFRS 2 – Share-Based Payment; IFRIC 13 – Customer Loyalty Programmes; IFRIC 14 – IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.

In 2009, the European Commission adopted a set of interpretations issued by IFRIC, which have no significant impact on the Financial Statements, or do not have application to the Company's activities. Namely: IFRIC 12 – Service Concession Arrangements; IFRIC 15 – Agreements for Construction of Real Estates; IFRIC 16 – Hedges of a Net Investment in a Foreign Operation; IFRIC 17 – Distribution of Non-cash Assets to Owners; IFRIC 18 – Transfers of Assets from Customers.

Also in 2009 the EU adopted several changes to International Accounting Standards issued by the IASB. Based on the assessment made by the Group, these changes do not have a significant impact on the Company's Financial Statements, and only those that were mandatory from 1 January 2009 were adopted.

In addition to the standards already adopted by the European Union, IASB and IFRIC issued in 2009, the following standards and interpretations: improvements made to IFRS 2, IFRS 5, IFRS 8, IAS 1, IAS 7, IAS 17, IAS 18, IAS 36, IAS 38, IAS 39, IFRIC 9 and IFRIC 16; amendment to IFRS 2 – Share-Based Payments; amendment to IFRS 1 – First-time Adoption of International Financial Reporting Standards; amendment to IAS 24 – Related Parties Disclosure; amendment to IFRIC 14 – IAS 19 – The Limit on a Defined Benefit Asset,

Minimum Funding Requirements and Their Interaction; new standard IFRS 9 – Financial Instruments: Classification and Measurement; new interpretation IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments.

For further details on changes introduced by the standards and interpretations above mentioned, see note 2 of JMH consolidated financial statements.

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. When qualifying as cash flow hedges or 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 2009
Polish Zloty (PLN)	€ 0.2436

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. However, in the case of a hedge of a forecasted transaction that results in the recognition of a non-financial asset (for example: inventory), the gains or losses previously deferred in equity are transferred and included in the initial measurement of the asset.

If a 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.

Leased assets are depreciated over the shorter of the useful life of the asset and the lease term.

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 research and 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 and 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 services, and that JMH 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. 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.

Changes to fair value of investment property are recognised in the income statement, in Gains/Losses in other investments, 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 amounts to be received regarding services rendered by JMH in the ordinary course of the business. They are initially recognised 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 in liabilities.

2.12 Impairment

2.12.1 Impairment 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 Impairment 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. Impairment losses on capital instruments recognised as results will not be reversed through the income statement.

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:

• (v) Analysis of breach;
• (vi) Breach for more than 3 months;
• (vii) Financial difficulties of the debtor;
• (viii) 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 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.

2.16.2 Other Benefits

Seniority Awards

The program of seniority awards existing in JMH, comprises a component of defined contribution and a defined benefit.

The defined contribution component, consists of the attribution of a life insurance and a contribution to a supplementary retirement plan, to the employees covered by this program, starting from a specific number of years of service. These benefits are awarded only when employees reach the age defined in the program, and the costs related to this component are recognized in the year to which they relate.

The component of defined benefit, consists of the attribution of an award in the year that employees complete a number of years of service. Accordingly, the responsibilities for this component, are determined annually based on actuarial valuations, carried out by a specialized and independent entity.

The costs of current services as well as actuarial gains or losses are recognised as cost of 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 the Group and the restructuring has started to be implemented or has been publicly announced.

Provisions for restructuring include all liabilities to be paid with the implementation of the plan, including employee termination payments. These provisions do not include any future operating losses.

2.18 Suppliers and other creditors

Suppliers and other creditors' balances are obligations to pay services that have been acquired in the ordinary course of the business. They are initially recognised 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

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operational leases. Payments made for these contracts are recognised in the income statement on a straight-line basis over the period of the leases.

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 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 company 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, JMH 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. A market is regarded as active if quoted prices are readily and regularly available from an exchange, broker or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. 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.

In case of more complex derivatives, advanced valuation models are used, these models includes assumptions and data that are not directly observable in the market, for which JMH uses estimates and internal assumptions.

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.

Fair Value Hierarchy

The following table shows JMH financial assets and liabilities that are measured at fair value at 31 December 2009, according with the following hierarchy levels as established in IFRS 7:

• Level 1: the fair value of financial instruments is based on quoted prices in active and liquid markets at balance sheet date. This level includes essentially equity investments, debt investments (ex: NYSE Euronext) and quoted forwards in active markets;
• Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Main inputs used on these valuation models are based on observable market data. This level includes essentially the over-the-counter derivatives entered by the Group.
• Level 3: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques, and main inputs are not based on observable market data.

	2009	Level 1	Level 2	Level 3
Assets measured at fair value
Available-for-sale financial assets Equity Investments	1,648	1,648	-	-
Liabilities measured at fair value
Derivatives used for hedging	2,406	-	2,406	-

2.25 Financial instruments by category

	Held for trade Derivatives	Derivatives defined as hedging instruments	Financial assets held for trade	Borrowings and accounts receivable	Available for-sale financial investments	Other financial liabilities	Total assets and financial liabilities
2009
ASSETS
Cash and cash equivalents	-	-	-	1,614	-	-	1,614
Available-for-sale financial investments	-	-	-	-	1,648	-	1,648
Loans to subsidiaries			-	871,987	-	-	871,987
Debtors, accrued income and deferred costs	-	-	-	6,962	-	-	6,962
TOTAL ASSETS	-	-	-	880,563	1,648	-	882,211
LIABILITIES
Borrowings	-	-	-	-	-	140,006	140,006
Derivative financial instruments	-	2,406	-	-	-	-	2,406
Creditors and accrued costs	-	-	-	-	-	958	958
TOTAL LIABILITIES	-	2,406	-	-	-	140,964	143,370
2008
ASSETS
Cash and cash equivalents	-	-	31,709	15,569	-	-	47,278
Available-for-sale financial investments	-	-	-	-	1,589	-	1,589
Loans to subsidiaries			-	879,712	-	-	879,712
Debtors, accrued income and deferred costs	-	-	-	6,723	-	-	6,723
TOTAL ASSETS	-	-	31,709	902,004	1,589	-	935,302
LIABILITIES
Borrowings	-	-	-	-	-	155,013	155,013
Derivative financial instruments	2,120	653	-	-	-	-	2,773
Creditors and accrued costs	-	-	-	-	-	2,909	2,909
TOTAL LIABILITIES	2,120	653	-	-	-	157,922	160,695

3. Operating costs

The costs of services rendered correspond to the costs incurred by JMH in rendering a set of technical and specialized services to its subsidiaries. In this sense, the costs incurred, in each one of JMH cost centres, are charged to the companies in the percentage that each one has in the referred services rendering.

The administrative costs shown in the Income Statement include, among others, the percentage of the costs, incurred by each of the cost centres, which is not charged to the companies, as well as the non deductible VAT arising from the application of the effective allocation method.

Other operational costs and losses include, among others, the costs incurred with studies about other markets, as well as donations and sponsorships granted according with the Group Social Responsibility politics.

3.1 Staff costs

	2009	2008
Wages and salaries	5,213	4,763
Social security	477	438
Employee benefits (note 28)	(846)	1,027
Other staff costs	558	602
	5,402	6,830

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 2009 was 57 (2008 was 58). The company's average number of employees during the year was 57 (57 in 2008).

4. Net financial costs

	2009	2008
Interest expense	(6,000)	(7,375)
Fair value in financial instruments that do not qualify for hedge accounting
- Derivative instruments (see note 27)	139	(5,839)
- Treasury bonds (see note 18)	84	1,709
Net foreign exchange	31	(1,805)
Other financial costs	(971)	(290)
Net financial costs	(6,717)	(13,600)

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 recognised in the income statement

	2009	2008
Held for Trade derivatives
Interest Rate Swap	139	(8,378)
Credit Default Swap	-	2,539
	139	(5,839)

5. Operating lease

The costs recognised in the income statement as operating leases are as follows:

	2009	2008
Buildings – Third parties	219	213
Buildings - Group	237	267
Vehicles – Third parties	305	311
IT equipment – Third parties	25	32
Total costs recognised in the income statement	786	823

The total costs with operating leases include EUR 13 thousand (2008: EUR 9 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:

	2009	2008
Payments in less that 1 year	275	276
Payments between 1 and 5 years	175	154
Payment in more that 5 years	-	-
Total future payments	450	430

As referred above, all the contracts may be cancelled upon the payment of a penalty clause. At the end of 2008, the liabilities arising from penalty clauses were EUR 123 thousand (2008: EUR 148 thousand).

6. Income tax recognised in the income statement

6.1 Current tax

	2009	2008
Current tax
Current tax of the year	(189)	(221)
Adjustment to prior year estimation	-	(41)
	(189)	(262)
Deferred tax
Temporary differences originated or reversed in the year	(2,811)	(3,087)
Change to the recoverable amount of tax losses and temporary differences from previous years	2,722	-
	(89)	(3,087)
Total income taxes	(278)	(3,349)

6.2 Reconciliation of the effective tax rate

	2009	2008
Profit/loss before taxes	36,774	30,341
Income tax using the Portuguese corporation tax rate – 27.5%	(9,745)	(8,040)
Non taxable or non recoverable results	7,240	19,530
Non-deductible expenses	(438)	(14,730)
Change to the recoverable amount of tax losses and temporary differences from previous years	2,722	-
Adjustment to prior year estimation	-	(41)
Results subject to special taxation	(57)	(68)
Income tax of the year	(278)	(3,349)
Effective tax rate	0.76%	11.04%

7. Profit/loss in subsidiaries and associated companies

	2009	2008
Dividends received	27,141	73,583
Interests in loans to subsidiaries and associated companies	15,901	26,146
Adjustments of acquisition cost of financial investments (note 25)	(565)	(52,530)
	42,477	47,199

8. Profit/loss in other investments

	2009	2008
BCP dividends received	33	-
Adjustments of acquisition cost of financial investments (note 15)	-	(2,116)
	33	(2,116)

9. Exceptional operating profits/losses

	2009	2008
Reimbursement of notary fees resulting from court decision	1,025	-
	1,025	-

The reimbursement occurred in 2009 was due to 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 1,190 thousand.

10. Tangible assets

10.1 Changes occurred during the year

Gross assets

	2,573	36	(1)	(20)	2,588
Other tangible assets	389	-	-	-	389
Office equipment	1,885	4	(1)	(20)	1,868
Tools and utensils	2	-	-	-	2
Transport equipment	54	32	-	-	86
Buildings and other constructions	243	-	-	-	243
	01/01/2009 Opening balance	Increases	Disposals	Transfers and write-offs	31/12/2009 Closing balance

Accumulated depreciation and impairment

	01/01/2009 Opening	Increases	Disposals	Transfers and	31/12/2009 Closing
	balance			write-offs	balance
Buildings and other constructions	93	27	-	-	120
Transport equipment	54	6	-	-	60
Tools and utensils	2	-	-	-	2
Office equipment	1,639	67	(1)	(20)	1,685
Other tangible assets	326	-	-	-	326
	2,114	100	(1)	(20)	2,193
Net book amount	459				395

10.2 Changes occurred in the previous year

Gross assets

	01/01/2008 Opening balance	Increases	Disposals	Transfers and write-offs	31/12/2008 Closing balance
Buildings and other constructions	130	113	-	-	243
Transport equipment	61	-	(7)	-	54
Tools and utensils	2	-	-	-	2
Office equipment	1,647	238	-	-	1,885
Other tangible assets	389	-	-	-	389
	2,229	351	(7)	-	2,573

Accumulated depreciation and impairment

Net book amount	170				459
	2,059	62	(7)	-	2,114
Other tangible assets	326	-	-	-	326
Office equipment	1,598	41	-	-	1,639
Tools and utensils	2	-	-	-	2
Transport equipment	61	-	(7)	-	54
Buildings and other constructions	72	21	-	-	93
	balance			write-offs	balance
	01/01/2008 Opening	Increases	Disposals	Transfers and	31/12/2008 Closing

10.3 Equipment under financial lease

JMH had some of its IT equipment under financial leases. These leases included a purchase option at the end of the contract and did not include any amount relating to contingent rents or any restriction of any nature concerning dividends or debt. At the end of 2009, there is no equipment under financial lease.

Unsettled liabilities on financial lease contracts are referred in note 22.5. The value of assets under financial lease is shown below:

	2009	2008
Administrative and IT Equipment
Tangible assets	-	125
Accumulated depreciation	-	(120)
Net book amount	-	5

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.

11.1 Changes occurred during the year

Gross Assets

Net book amount	48				29
	261	19		- -	280
Research and development expenses	261	19		- -	280
	01/01/2009 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2009 Closing Balance
Accumulated depreciation and impairment
	309	-		- -	309
Research and development expenses	309	-		- -	309
	01/01/2009 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2009 Closing Balance

11.2 Changes occurred in the previous year

Gross Assets

	01/01/2008 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2008 Closing Balance
Research and development expenses	269	40	-	-	309
	269	40	-	-	309

Accumulated depreciation and impairment

	01/01/2008 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2008 Closing Balance
Research and development expenses	251	10		- -	261
	251	10		- -	261
Net book amount	18				48

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. In 2009, no change occurred in its state or in current market circumstances and is recorded by EUR 2,470 thousand (2008: EUR 2,470 thousand).

13. Investments in subsidiaries and joint ventures

13.1 In subsidiaries

	2009	2008
Net value at 1 January	207,098	259,628
Increases	995	-
Decreases	-	-
Increases/Decreases in provisions for impairment loss (note 25)	(565)	(52,530)
Net value at 31 December	207,528	207,098

13.2 In joint ventures

The investment in joint ventures was EUR 6,349 thousand (2008: EUR 6,349 thousand). See note 35.

14. Loans

14.1 Loans to subsidiaries

Non-current loans	2009	2008
Net value at 1 January	589,722	595,695
Increases	50,000	33,240
Decreases	(41,686)	(39,213)
Net value at 31 December	598,036	589,722
Current loans	2009	2008
Net value at 1 January	101,378	100,121
Increases	3,270	6,180
Decreases	(19,340)	(4,923)
Net value at 31 December	85,308	101,378

Current loans are liable to interest rates at normal market levels. Non-current loans are granted 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	2009	2008
Net value at 1 January	188,612	186,048
Increases	-	3,016
Decreases	-	-
Foreign currency loans translation differences	31	(452)
Net value at 31 December	188,643	188,612

Non-current loans are granted as supplementary capital contributions (which do not bear interest), and medium and long term shareholders loans (remunerated at normal market rates).

15. Available-for-sale financial investments

	2009	2008
BCP shares	3,705	3,705
Fair value adjustment	(2,057)	(2,116)
	1,648	1,589

As of 31 December 2009, all BCP shares in the company's portfolio (1.95 million shares) were marked to market – price as of 31 December 2009 of Euro 0.845 – Euronext Lisbon. The changes in the fair value of these assets were recognised directly in equity positive EUR 59 thousand.

16. Taxes

16.1 Deferred tax assets and liabilities

Deferred taxes are presented in balance sheet as follows:

	2009	2008
Deferred tax assets	5,904	5,640
Deferred tax liabilities	(239)	(250)
	5,665	5,390

Movement in deferred taxes during the year:

	01/01/2009	Impact on results	Impact on equity	31/12/2009
Deferred tax liabilities
Revaluation of assets	(250)	11	-	(239)
	(250)	11	-	(239)
Deferred tax assets
Pension costs	3,828	(454)	-	3,374
Recoverable losses	1,464	529	-	1,993
Fair value in derivative financial instruments	348	(175)	364	537
	5,640	(100)	364	5,904
Net change in deferred tax	5,390	(89)	364	5,665

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:

	2009	2008
Tax losses	36,548	47,436
Tax rate	25%	25%
Deferred tax assets (Unrecognised)	9,137	11,859

16.3 Taxes receivable and payable

Taxes receivable	2009	2008
Income tax receivable	223	209
VAT receivable	4	20
	227	229
Taxes payable
VAT payable	11	-
Income tax withheld	99	94
Social security	53	49
Municipal real estate tax	13	13
	176	156

17. Trade debtors, accrued income and deferred costs

	2009	2008
Subsidiaries and associated companies	1,165	2,555
Receivables from suppliers	34	1
Staff	4	35
Other debtors	1,091	19
Accrued income	4,015	3,273
Deferred costs	716	915
	7,025	6,798

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 3,783 thousand regarding the rendering of technical and administrative services to subsidiaries and EUR 210 thousand of interest receivable.

Deferred costs heading includes EUR 516 thousand of prepaid expenses with bonds, bank loans and commercial paper, EUR 137 thousand of commercial paper anticipated interests, and EUR 63 thousand of other costs relating to future periods, paid in 2009 or when not paid, already charged by the competent entities.

18. Cash and cash equivalents

	2009	2008
Bank deposits	206	76
Short-term investments	1,400	47,194
Cash and cash equivalents	8	8
	1,614	47,278

In the 4th quarter, 2008, the company acquired EUR 30,000 thousand of Treasury Bonds, issued by the Portuguese and German Republics, which was used to temporary apply surplus of liquidity, and it was sold during February 2009. As they were financial assets held for trade, the Bonds were revaluated at their market value, with the revaluation recognized in the income statement by EUR 84 thousand (2008: EUR 1.709 thousand) - see note 4.

Note 27 provide additional information on the Company's exposure to interest rate risk.

19. Cash generated from operations

	2009	2008
Net results	36,496	26,992
Adjustments for:
Taxes	278	3,349
Depreciations	119	72
Net financial costs	(36,276)	(86,117)
Profit / losses in subsidiaries	565	52,530
Profit / losses in available-for-sale financial investments	-	2,116
Profit / losses on tangible assets disposals	-	(1)
	1,182	(1,059)
Changes in working capital:
Trade debtors, accrued income and deferred costs	(1,911)	1,073
Trade creditors, accrued costs and deferred income	29	(127)
Provisions and employee benefits	(1,713)	103
	(2,413)	(10)

20. Capital and reserves

20.1 Share capital and share premium account

The authorised share capital is represented by 629,293,220 ordinary shares (2008: 629,293,220), 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 2009, no changes occurred in the amount of EUR 22,452 thousand showed in share premium account in 2008.

20.2 Own shares

The reserve for own shares reflects the cost of shares held by the company in portfolio. As of 31 December 2009, the company held 859,000 own shares (2008: 859,000).

20.3 Reserves

	Cash Flow Hedging reserve	Available-for- -sale financial instruments	Total
Balance as at 1 January 2008	94	1,216	1,310
Fair value of cash flow hedging instruments:
- Gross value	(780)	-	(780)
- Deferred tax	206	-	206
Fair value adjustment of available-for-sale financial instruments	-	(1,216)	(1,216)
Balance as at 1 January 2009	(480)	-	(480)
Fair value of cash flow hedging instruments:
- Gross value	(1,373)	-	(1,373)
- Deferred tax	364	-	364
Fair value adjustment of available-for-sale financial instruments	-	59	59
Balance as at 31 December 2009	(1,489)	59	(1,430)

These reserves are not able to be distributed to the shareholders.

20.4 Retained earnings

On 31st December 2009, the total amount of retained earnings was EUR 302,900 thousand, resulting from profit generated in the financial year, and previous years.

Of this amount, the following are not able to be distributed: EUR 40,472 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 the section regarding the Dividend Distribution Policy, included in the Corporate Governance chapter, which is an integral part of the consolidated annual report, the Board of Directors proposes to the shareholders the distribution of the amount 89,866,093.46 Euros, which corresponds to a dividend per share of EUR 0.143.

21. Earnings per share

21.1 Basic and diluted earnings per share

Basic and diluted earnings per share are calculated based on the net profit of EUR 36,496 thousand (2008: EUR 26,992 thousand) divided by the weighted average of outstanding ordinary shares, numbering 628,434,220 (2008: 628,434,220). The diluted earnings per share are equal to basic earnings per share as there are no dilution events.

	2009	2008
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 results of the year attributable to owners of ordinary shares	36,496	26,992
Diluted net results of the year attributable to owners of ordinary shares	36,496	26,992
Earnings per share – Euros	0.058	0.043
Diluted earnings per share – Euros	0.058	0.043

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

	2009	2008
Non-current loans
Bank loans – Commercial Paper	70,000	30,000
Non-convertible Bond loans	70,000	70,000
Financial lease liabilities	-	5
	140,000	100,005
Current loans
Bank loans – Commercial Paper	-	55,000
Bank overdrafts	6	-
Financial lease liabilities -	8
	6	55,008

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	2.75%	70,000	-	70,000
Non-convertible Bond loan: JM2011 e JM2012	4.44%	70,000	-	70,000
Bank overdrafts	3.07%	6	6	-
		140,006	6	140,000

JMH uses, with other Group companies, Grouped credit lines, which means that, until the maximum amount approved by a financial entity, it can be used simultaneously by more than one company. Thus, the amount of credit lines, granted to JMH, which are not being used rise to EUR 43.000 thousand.

22.3 Bond loans

	2009 2008
Non-convertible Bond loan: JM2011 e JM2012 70,000	70,000
70,000	70,000

Non-convertible bonds

In September 2007, was issued a 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.

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 315,000 thousand, with variable interest rate. In the end of 2009, of the total amount subscribed, only EUR 70,000 thousand were in use, with the following maturity:

Maturity	Amount
2014	70,000

22.5 Financial lease liabilities

As stated in note 10.3, in December 31st, 2009, JMH has no equipment under financial lease. The responsibilities with financial leases are as follows:

	2009	2008
Payments in less than 1 year	-	9
Payments between 1 and 5 years	-	5
Total future payment	-	14
Payment of future interest	-	(1)
Present value of liabilities	-	13

23. Financial debt

	2009	2008
Non-current loans	140,000	100,005
Current loans	6	55,008
Derivative financial instruments	2,406	2,773
Accruals and deferrals (financial headings only)	(342)	1,050
Deposits on hand	(206)	(76)
Short-term investments	(1,400)	(47,194)
	140,464	111,566

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

2009	Opening balance	Provisions set up	Provisions used	Closing balance
Investments in subsidiaries	269,639	565	-	270,204
Available for sale financial investments	2,116	-	(59)	2,057
Total adjustments to the net realisable value	271,755	565	(59)	272,261
Employee benefits	14,445	27	(1,740)	12,732
Total provisions	14,445	27	(1,740)	12,732

2008	Opening balance	Provisions set up	Provisions used	Closing balance
Investments in subsidiaries	217,109	52,530	-	269,639
Available for sale financial investments	-	2,116	-	2,116
Total adjustments to the net realisable value	217,109	54,646	-	271,755
Employee benefits	14,342	814	(711)	14,445
Total provisions	14,342	814	(711)	14,445

The adjustment set up on Investments in subsidiaries, in the amount of EUR 565 thousand (2008: EUR 52.530 thousand), is related to the reduction in the fair value of a subsidiary. The adjustment on Available for sale investments is detailed in note 15.

26. Trade creditors and accrued costs

	2009	2008
Payables to subsidiaries	120	351
Other trade creditors	310	235
Other non-trade creditors	1	8
Accrued costs	2,031	3,702
	2,462	4,296

The heading accrued costs is made up of salaries and wages payable in the amount of EUR 1,504 thousand, and interest's payable in the amount of EUR 311 thousand. The remaining EUR 216 thousand respect to various costs (utilities, insurance, consultants, rents, etc.), relating to 2009 and not invoiced by the respective entities prior to the end of the year.

27. Derivative financial instruments

			2009						2008
	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		-	-	-	-	30 Million EUR	-	-	-	2,120
Cash flow hedge derivatives Interest rate swap	103 million EUR	-	-	-	2,406	35 million EUR	-	-	-	653
Total assets/liabilities negotiation derivatives		-	-	-	-					2,120
Total assets/liabilities hedge derivatives		-	-	-	2,406		-	-	-	653
Total assets/liabilities derivatives		-	-	-	2,406		-	-	-	2,773

In 2009, the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 380 thousand (2008: EUR 252 thousand).

Derivatives held for trading

Interest rate swap

In 2008, following the acquisition of EUR 30,000 thousand of treasury bonds (see note 18), JMH entered into an interest rate swap (called "Asset Swaps") with a notional of EUR 30,000 thousand, to hedge the economic interest rate risk of bonds. The associated credit risk was not hedged. The fair value of these instruments at 31 December 2008 was EUR 2,120 thousand negative. These instruments were cancelled in 1st quarter 2009. The changes to the Fair Value of these instruments were recognised in the income statement, in the amount of positive EUR 139 thousand (2008: negative EUR 2,120 thousand).

Cash flow hedge

JMH enters into interest rate swaps to hedge interest rate risk, regarding future interest payments on the loans. At 31 December 2009, the bank and bond loans with derivative hedge instruments were EUR 120,000 thousand (2008: EUR 70,000 thousand).

JMH set a portion of future interest payments on loans, through entering into interest rate swaps. The hedged risk is indexed to the variable rate associated with the loans. The purpose of the hedge is to convert the loans with variable interest rate into fixed interest rate. The credit risk is not hedged. Swaps have a notional EUR 102,500 thousand (2008: EUR 35,000 thousand), and the fair value of these instruments at 31 December 2009 was negative EUR 2,406 thousand (2008: negative EUR 653 thousand). The changes in fair value of these instruments were recognised in other reserves in the amount of negative EUR 1,373 thousand (2008: negative EUR 780 thousand).

27.1 Impacts on Financial Statements

	2009	2008
Fair value of the financial instruments at 1st January	(2,773)	(2,629)
(Receivings) / Payments made	2,796	6,335
Fair value of financial instruments that do not qualify as hedge accounting (P&L)
- Interest rate and credit derivative instruments	-	(3,719)
- Treasury bonds derivative instruments	139	(2,120)
Fair value of financial instruments that qualify as hedge accounting (Reserves)	(1,373)	(780)
Interest expense from financial instruments that qualify as hedge accounting (P&L)	(1,195)	140
Fair value of the financial instruments at 31st December	(2,406)	(2,773)

28. Employee benefits

Amounts of employee benefits in the balance sheet:

	2009	2008
Retirement benefits - defined benefit plan paid for by the group	12,584	14,316
Seniority awards	148	129
Total	12,732	14,445

Amounts reflected in the income statement – staff costs (note 3):

	2009	2008
Retirement benefits – defined contribution plan	216	213
Retirement benefits - defined benefit plan paid for by the group	(1,089)	610
Seniority awards	27	204
Total	(846)	1,027

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:

	2009	2008
Liabilities at 1 January	-	-
Staff costs on the year	216	213
Contributions of the year	(216)	(213)
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 2009 the liability is EUR 12,584 thousand, provisioned entirely in liabilities in the employee benefits heading.

Changes in the year:

	2009	2008
Balance at 1 January	14,316	14,342
Interest costs	840	743
Actuarial (gains)/ losses	(1,929)	(133)
Retirement pensions paid in	(643)	(636)
Balance at 31 December	12,584	14,316

Actuarial assumptions used:

Values
TV 88/90
5.5%
2.5%

28.3 Other long-term benefits granted to employees

The Company has adopted an incentive program based on the attribution of awards to senior employees.

The program consists in the attribution of awards to senior employees when they reach 15 and 25 years of service. The responsibilities regarding the seniority awards are evaluated annually by an independent actuary.

According to the actuarial calculation reported as of 31 December 2009, the liabilities amount to EUR 148 thousand, and are provisioned entirely, in liabilities, in the employee benefits heading.

Movement in the year:

	2009	2008
Balance at 1 January	129	-
Past services costs	-	137
Current service costs	20	19
Actuarial (gains)/ losses	7	48
Bonus paid in	(8)	(75)
Balance at 31 December	148	129

Actuarial assumptions used:

Mortality table	TV 88/90
Discount rate	5.5%
Pensions growth rate	3.0%

29. Guarantees

The bank guarantees are as follows:

	2009	2008
Guarantees for D.G.C.I. (Portuguese tax authorities)	1,335	1,385
Other guarantees provided	1,483	1,577
	2,818	2,962

30. Contingencies

• The Portuguese tax authorities have informed Jerónimo Martins, SGPS, S.A., that should restate the dividends received, amounting to EUR 10,568 thousand, from its subsidiary in the Madeira Free Zone in 2004 and 2005, 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 believes 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

At the Annual General Shareholders' Meeting in 2005, an Alternative Pension Plan was approved. It is a fixedcontribution 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.

Plan participants include the Executive Directors of the Company, and those who opted for the current Pension Plan will forego eligibility for the Alternative Pension Plan, expressly and irretrievably waiving it.

As for the complementary pension or retirement systems, under the terms of current Regulations, Directors have the right to a Complementary Pension at retirement age, cumulatively, when they: (i) Are over 60 years old; (ii) Have performed executive functions; and (iii) Have performed the role of a Director for more than ten years. This complement was established in the Annual General Shareholders' Meeting in 1996, but none of the Members of the Executive Committee will make use of this plan, since all of them opted for the Alternate Pension Plan mentioned above.

31.2 Remuneration paid to directors

The fixed, variable and contributions to the pension plans were:

	3,275	3,013
Non-executive directors	1,291	1,144
Executive directors	1,984	1,869
	2009	2008

The amount considered remuneration for non-executive Directors, in 2009, includes EUR 18 thousand relating to remuneration paid to non-Executive Directors taking part in the Auditing Commission (2008: EUR 14 thousand).

None of the Directors received any additional remuneration from any other Group company.

Additional information about Directors remuneration can be found in the chapter related with "Remuneration of the Members of the Board of Directors and of the Supervisory Board", included in the Corporate Governance section, which is an integral part of the consolidated annual report.

32. Subsidiaries, joint-ventures and available for sale investments

The direct investments owned by JMH, at 31 December 2009, 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)	Lisbon	99.99%	1,746	111,504	17,359	4,444
Recheio, SGPS, S.A.	a)	Lisbon	15.93%	23,888	655,161	437,620	19,132
Desimo – Desenvolvimento e Gestão Imobiliária, Lda.	a)	Lisbon	100.00%	50	547	92	(10)
JMR - Gestão de Empresas de Retalho, SGPS, SA	a)	Lisbon	51.00%	168,300	1,587,357	1,109,928	16,605
Comespa - Gestão de Espaços Comerciais, S.A.	a)	Lisbon	51.00%	26	15,377	463	274
Jerónimo Martins Serviços, S.A.	a)	Lisbon	100.00%	50	2,655	219	7
Servicompra – Consultores de Aprovisionamento, Lda	a)	Lisbon	99.98%	1.000	198,866	198,866	1
Imocash – Imobiliário de Distribuição, S.A.	a)	Lisbon	1.00%	30	63,852	9,769	1,332
Larantigo – Sociedade de Construções, S.A.	a)	Lisbon	0.20%	1	1,284	1,278	17
Hermes - Soc. de Invest. Mobiliários e Imobiliários, Lda.	a) b)	Funchal	99.99%	999	36,486	34,046	(565)
Eva – Soc. de Investimentos Mobiliários e Imobiliários, Lda	a)	Funchal	5.60%	28	72,002	72,000	758
PSQ – Soc. de Investimentos Mobiliários e Imobiliários, Lda	a)	Funchal	11.00%	55	45,770	45,769	(79)
Friedman – Soc. de Investim. Mobiliários e Imobiliários, Lda	a)	Funchal	100.00%	5	25	24	(0.1)
INVESTMENTS IN JOINT-VENTURES
Unilever Jerónimo Martins, Lda.		Lisbon	32.50%	8,546	900,080	164,343	39,527
Gallo Worldwide, Lda.		Lisbon	32.50%	325	51,580	15,185	2,130
Bliska Sp. Z.o.o.	c)	Poland	50.00%	60	4,667	1,459	(1,991)
AVAILABLE-FOR-SALE FINANCIAL INVESTMENTS
BCP - Banco Comercial Português, S.A.	b)	Oporto	0.04%	1,950	95,550,410	7,220,801	225,217

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) The amounts showed refer to the 2008 accounts. This company reports its accounts in polish Zloty (PLN). The amounts showed were converted at December 31st, 2008 exchange rate (0.24076).

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 2009:

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
Bazar Novo – Distribuição de Produtos Não Alimentares, Lda.	Lisbon	51.00
JMR - Prestação de Serviços para a Distribuição, 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.	Lisbon	51.00
Electric Co – Distribuição de Produtos Não Alimentares, Lda.	Lisbon	51.00
Jerónimo Martins Retail Services, S.A.	Klosters (Switzerland)	51.00
Comespa – Gestão de Espaços Comerciais, S.A.	Lisbon	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
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. Z.o.o.	Warszawa (Poland)	100.00
JM Nieruchomosci – Sp. Z.o.o.	Kostrzyn (Poland)	100.00
JM Nieruchomosci – Sp. Komandytowo-akcyjna	Kostrzyn (Poland)	100.00
JM TELE – Sp. Z.o.o.	Kostrzyn (Poland)	100.00
JM Uslugi – Sp. Z.o.o.	Kostrzyn (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
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
Gallo Worldwide, Lda.	Lisbon	45.00
Bliska Sp. Z.o.o.	Warszawa (Poland)	50.00

Associates

Companies	Head Office	% Owned
Perfumes e Cosméticos PUIG Portugal – Distribuidora, S.A.	Lisbon	27.55

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 to subsidiaries during 2009 was EUR 7,125 thousand (2008: EUR 8,976 thousand).

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 2009 to the amount of EUR 4,006 thousand (2008: EUR 2,888 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 2009 to the amount of EUR 402 thousand (2008: EUR 399 thousand).

34.3 Lease of property

JMH develops its activity in premises rented to a subsidiary, which represented costs of EUR 237 thousand (2008: EUR 267 thousand).

34.4 Supplementary income

JMH makes an annual debit to a joint-venture company relating to a sales commission. In 2009, this debit was EUR 132 thousand (2008: EUR 133 thousand).

34.5 Loans to subsidiaries (current and non-current loans)

JMH granted loans to subsidiaries, which generated interest in the amount of EUR 15,901 thousand (2008: EUR 26,146 thousand).

	2008
4,842	10,460
11,059	15,686
15,901	26,146

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 2009, total costs incurred with personnel from other companies amounted to EUR 2,401 thousand (2008: EUR 2,167 thousand).

34.7 Open balances as of 31 December 2009

Group companies	- -	-
Casal de São Pedro – Administração Bens, S.A.			-	11	-	-
Desimo – Desenv. Gestão Imobiliária, Lda.		441	-	6	-	-
Escola de Formação Jerónimo Martins, S.A.	-	-	-	-	7	-
Hermes – Soc. Inv. Mobiliários Imobiliários, Lda.	-	32,740	-	-	-	-
Hussel Ibéria – Chocolates e Confeitaria, S.A.	-	-	-	1	-	-
Imocash – Imobiliário de Distribuição, S.A.	-	-	-	-	-	24
Imoretalho – Gestão de Imóveis, S.A.	-	-	-	-	23	166
João Gomes Camacho, S.A.	-	-	-	7	-	-
Jerónimo Martins – Dist. Prod. Consumo, Lda.	77,303	-	258	287	-	-
Jerónimo Martins Dystrybucja S.A.	-	-	-	91	-	-
Jerónimo Martins Serviços, S.A.	-	500	-	-	38	580
JMR – Gestão Empresas Retalho, SGPS, S.A.	-	-	-	1,638	-	-
JMR – Prestação de Serviços para a Distribuição, S.A.	-	-	54	60	2	-
Larantigo – Sociedade de Construções, S.A.	-	-	-	1	-	-
Lidinvest – Gestão de Imóveis, S.A.	-	-	-	4	-	-
Lidosol II – Distrib. Produtos Alimentares, S.A.	-	-	1	47	-	-
Pingo Doce – Distribuição Alimentar, S.A.	-	-	13	925	29	-
Recheio – Cash & Carry, S.A.	-	-	5	38	21	-
Recheio, SGPS, S.A.	8,005	356,760	532	863	-	-
Servicompra – Cons. Aprovisionamento, Lda.	-	207,595	-	-	-	-
Subtotal	85,308	598,036	863	3,979	120	770
Joint-ventures
Bliska Sp. Z.o.o.	-	2,595	-	-	-	-
Unilever Jerónimo Martins, Lda.	-	186,048	302	203	-	-
Subtotal	-	188,643	302	203	-	-
TOTAL	85,308	786,679	1,165	4,182	120	770

35. Interests in joint ventures

The company owns (directly and indirectly) interests in the following joint ventures:

• JMH holds a 45% shareholding in Unilever Jerónimo Martins, which controls a group of companies dedicated to manufacturing and selling products in the area of edible fats and ice-creams and to distributing and selling drinks, personal care and home care products, using owned Private Brands and brands owned by the Unilever Group;
• JMH holds a 45% shareholding in Gallo WorldWide, which is dedicated to distributing olive oil and cooking oils, using owned Private Brands and brands of the Unilever Group,
• JMH holds a 50% shareholding in Bliska, a company located in Poland which business area is retail sale of 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. Additional information requested by law

In accordance with article 66-A of the Portuguese Commercial Companies Code, we hereby inform of the following:

• a) In addition to all operations described in the notes above, as well as in the Management's Report, there are no other operations considered relevant which are not already contained either in the balance sheet or its annex;
• b) The total remuneration paid to the ExternalAuditor and Chartered Accountant, was 101,027 euros, of which 83,941 euros correspond to legal accounting audit services, while the remaining 17,086, relate to access to a tax database, and technical consulting on a project for conversion to accounting standards;
• c) Note 34 of the notes to the financial statements includes all the related parties disclosures, in accordance with the International Accounting Standards.

38. Events after the balance sheet date

On the dawn of February 20th, 2010 the Island of Madeira was stuck by a heavy storm, causing the destruction of a large number of infrastructures, as well as the regretful loss of human lives.

The Jerónimo Martins Group, present in the region through the Pingo Doce supermarket chain, also experienced various asset damages. To the date of this Report's conception, a clear evaluation of immediate and long-term asset impact is still in process.

To this date a total of two stores are closed, completely inoperative and with no predicted reopening date. A further two stores were also affected though in smaller scale. In accordance with the Group's risk management policy, all affected stores have insurance coverage and are already being evaluated by the respective experts.

Lisbon, 2 March 2010

The Certified Accountant The Board of Directors

Report and Opinion of the Audit Committee

Dear Shareholders,

In accordance with 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 2009, as well as on the proposals presented by the Board of Directors.

Supervisory activity

Throughout the year, this Committee monitored the evolution of the Company's businesses, and their management, by holding regular meetings with the Directors of the functional areas of the corporate centre and with all those responsible that it deemed necessary to hear at any given moment. It also held meetings with the Executive Committee, the Company Secretary and the Statutory Auditor, who gave their total co-operation.

The suitability and effectiveness of the internal control and risk management systems were verified, with the co-operation and work of the Internal Control Committee, the Internal Audit Department and the External Auditor.

This Committee was given access to all the corporate documentation that it considered relevant, namely the minutes of the meetings of the Executive Committee, the Ethics Committee and the Internal Control Committee, as well as all the related documentation it deems relevant, in order to assess compliance with its regulations and with the applicable laws.

It met with those responsible for preparing the Report and Accounts, and carried out a review of the accuracy of the accounting documentation, accounting policies and valuation methods used by the Company, thereby ensuring that these are a correct evaluation of the results and the equity of the Company.

Throughout the year, it monitored the evolution of issues raised by the External Auditor, as well as the conclusions of the work carried out by the Statutory Auditor which gave rise to the Auditor's Report being issued without any reservation.

In its Internal Regulations the Audit Committee also has the responsibility for assessing the Company's corporate structure and governance, and so it has sought at every turn to assess the status of Corporate Governance, exerting particular effort, both from a theoretical and practical point of view, on the necessity for adjustments and on the adopted structures and practices.

Opinion

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.

Statement of Responsibility

In accordance with sub-paragraph a) of paragraph 1 of article 8 of the Regulations of the Portuguese Securities Market Commission No.5/2008, the members of the Audit Committee, identified below, declare that to the best of their knowledge:

• i) the information contained in the management report, the annual accounts, the Auditors' Report and all other accounting documentation required by law or regulation, was produced in compliance with the applicable accounting standards and gives a true and fair view of the assets and liabilities, the financial position and the results of Jerónimo Martins, SGPS, S.A..
• ii) the Management report is a faithful statement of the evolution of the businesses, of the performance and of the position of the issuer, and contains a description of the main risks and uncertainties which they face.

Lisbon, March 2nd, 2010

Hans Eggerstedt (President of the Audit Committee)

António Mendo Castel-Branco Borges (Member)

Rui de Medeiros d'Espiney Patrício (Member)

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 and Tax Number: 500 100 144 Share Capital: EUR 629.293.220

EXCERPT OF THE ANNUAL SHAREHOLDERS MEETING MINUTES

On the 9th of April, 2010, at 10:10 a.m., at Rua Actor António Silva, 7, 15th floor, Lisbon, for lack of available space in its head office, the shareholders of Jerónimo Martins, SGPS, S.A. met in Annual Shareholders Meeting,

(…)

The Chairman of the Meeting verified that 203 shareholders, which represent 72.25% of the share capital were present and/or represented, as referred in the attendees list, including the share capital held by one Shareholder that have exercised electronically its voting right, which was lawfully elaborated and signed by him. The Chairman of the Meeting declared the Shareholders Meeting was validly held and in conditions to resolve on the following items of the Agenda:

(…)

Entering into the Agenda, which was read, the Chairman, without the opposition of any Shareholder, proposed to the Board of Directors the discussion of the first and third items together, notwithstanding its separate voting.

(…)

The Chairman of the Meeting announced that he was going to proceed with the voting of the first item of the Agenda – to resolve on the 2009 annual report and accounts. Results of this voting were announced by the Chairman of the Meeting and the referred documents were unanimously approved.

Subsequently, proceed with the voting of the third item of the Agenda – to resolve on the 2009 Consolidated Annual Report and Accounts.

Results of these voting were announced by the Chairman of the Meeting and the third item of the Agenda was unanimously approved.

Moving forward to the second item of the Agenda – to resolve on the Proposal for the Application of Results – the Chairman of the Meeting proceed with the reading of the Board of Directors Proposal, with the following content:

"In the financial year 2009, Jerónimo Martins, SGPS, S.A. declared consolidated profits of 200,349,003.17 euros and a profit in individual accounts of 36,496,485.23 euros.

The Board of Directors proposes that the net profits be applied in the following manner:

Legal Reserve ………………………. 1,824,824.26 euros

Free Reserves ………………………. 34,671,660.97 euros

In accordance with the policy of dividend distribution announced several years ago, and described in "Dividend Distribution Policy" included in the Corporate Governance chapter, the Board of Directors proposes a distribution to shareholders of 89,866,093.46 euros, an amount which corresponds to 44.9% of consolidated net profit, and which is to be taken from the free reserves available for distribution.

This proposal represents a gross dividend payment of 0.143 euros per share, excluding own shares in the portfolio."

(…)

The proposal of the Board was submitted to voting and was unanimously approved by the present shareholders.

(…)

Since there were no more issues on the Agenda, the Chairman of the Meeting thanked all for their valuable collaboration to the normal and speedy progressing of the Meeting and declared the Shareholders Meeting over at 11:25 and ordered the elaboration of the present minutes which, after being read, will be signed by the members of the table of the Shareholders Meeting.

João Vieira de Castro

Tiago Ferreira de Lemos