Message from the Chairman	3
Message from the Chief Executive Officer	7
I. The Group Jerónimo Martins
1. Profile and Structure 2. Strategic Positioning 3. Financial Glossary 4. Contacts II. Consolidated Management Report - Creating Value and	12 26 28 30
Growth
1. Relevant Facts of the Year 2. Environment 2010	33 35
3. Group's Performance	41
4. Business Areas Performance	58
5. Outlook for 2011	79
6. Events After Balance Sheet Date	87
7. Results Appropriation Proposal	88
8. Consolidated Management Report Annex	89
III. Consolidated Financial Statements
1. Consolidated Financial Statements 2. Statement of Board of Directors	92 140
3. Auditor's Report	141
4. Report and Opinion of the Audit Committee	143
IV. Corporate Governance
Introduction	148
Chapter 0 – Statement of Compliance	149
Chapter 1 – Shareholders' Meeting	153
Chapter 2 – Managing and Supervisory Bodies of the Company	157
Chapter 3 – Information and Auditing	198
V. Corporate Responsibility in Value Creation
Corporate Responsibility in Value Creation 1. The Importance of Relations, Engagement and Communication with Key	209
Stakeholders	210
2. The Five Pillars of Corporate Responsibility in Creating Value	215
2.1. Promote Good Health through Diet	217
2.2. Protecting the Environment 2.3. Responsible Shopping	233 249
2.4. Support Surrounding Communities	258
2.5. Be an Employer of Reference	262
Reputation and Public Recognition	277
VI. Individual Annual Report
1. Management Report	283
2. Individual Financial Statements	291
3. Auditor's Report	328
4. Report and Opinion of the Audit Committee	330

Message from the Chairman

Dear Shareholders,

2010 was another successful year for Jerónimo Martins, closing a decade of profound transformation and constant growth for the Group. During this period, the Organization and its business portfolio underwent a restructuring, giving preference to a management focused on the food area and all distribution concepts geared towards mass market. In fact, I look at current events as the result of a strategy that has proven to be correct, as the fruit of the collective and continuous effort to select, train and retain competent and committed human capital and as a consequence of the ability to consolidate our Food Distribution leadership in the regions where we are present.

Today, we are a mature Group, with a clear strategy and the motivation and strength to carry it out with excellence. A Group with a strong balance sheet that has, systematically, been reducing its level of debt bringing it to high levels of sustainability, and a strong expression of its leadership in all the distribution formats it operates.

Jerónimo Martin's operations in Poland have contributed decisively to this performance, with Biedronka confirming itself as the Group's main source of profitability and growth driver. We will, therefore, continue to reinforce our investment in the Country, particularly in the development of new business opportunities.

In terms of the global economy, 2010 was already a year of partial recovery, with growth in the North American economy. The International Monetary Fund (IMF) also made a more positive forecast of the global economic growth for 2011, especially through the expansion of the emerging economies and developing countries.

Although the economies in the Euro Zone and Japan have grown in comparison with 2009, they are still far from the levels prior to this recession and the IMF is indicating the possibility of tension in the Euro Zone periphery as being part of the list of possible risks that might shake the global economy in 2011.

In Portugal, according to information from the Bank of Portugal, following the strong contraction in 2009, Gross Domestic Product (GDP) growth was 1.4%. Nevertheless, there are still no clear signs of a reversal in the rising unemployment rate seen in the last decade and that reached a new historic high in 2010.

Last year, the feeling of insecurity regarding employment had a negative influence on the trust of the consumers, which, according to the National Statistics Institute of Portugal, has fallen again in January 2011.

The deterioration of the social and economic panorama in Portugal is even worse when considering the lack of strategic definition for the country that is therefore imprisoned in a vicious circle of incapacity, incompetence and neglect, which is eroding the hope of recovery.

The results of the recent Presidential elections on 23rd January 2011, when there was an absolute record of abstentions (53.4%) and of void and blank votes, reflect somehow this disillusionment. In any case, Professor Aníbal Cavaco Silva, despite being the President of the Republic elected with the least number of votes ever in the history of Portuguese democracy, had the highest number of votes in all the districts in the country and from the emigrants, which gives him an added responsibility within the current context of economical, financial and social crisis.

This re-election is proof of the Portuguese people's choice for continuity and political stability, at a time in which the country is in the shadow of the sovereign debt affecting some European countries.

I believe the country's recovery to be a challenge for all the Portuguese people. It is urgent that civil society takes action and assumes an active role, as I have already publicly defended on various occasions. It is necessary, the country's present moment demands it, that the main political, social and economic forces sit around the same table and discuss the direction for Portugal, at meetings which could and should take place under the auspices of the President of the Republic.

In a year in which both corporate and public investment in Portugal fell once again and hit new historic lows as a percentage of GDP, Jerónimo Martins invested over 163 million euros in this country.

Also in 2010, with unemployment exceeding 10%, affecting over 600 thousand people in Portugal and not decreasing from the 12% recorded in 2009 in Poland, the Group created over seven thousand new jobs, around three thousand of which were in Portugal, now having over 60 thousand employees in the two regions where it operates, who are paid in accordance with a salary policy based on meritocracy and on the recognition of individual contribution towards value creation.

Jerónimo Martins believes in the personal and professional development of its employees and in the importance of training to achieve results, which is why it seeks to protect its investment in this development through an active talent mapping and retention policy, in which the sharing of the economic value generated by work plays an important part.

So, believing that in companies that generate wealth, part of this value should go towards remunerating those who contributed towards it with their efforts and commitment, in 2011, Jerónimo Martins will maintain its philosophy for sharing and rewarding, at all levels of the Organization.

We believe that we are thereby taking firm steps in terms of the sustainability of our value creation and are creating conditions to continue to achieve ambitious results, which in 2010 reached 281,0 million euros of net results attributable to Jerónimo Martins, the equivalent of a 40.3% growth compared to 2009.

The sense of Corporate Responsibility which underlies the way we conduct our business and reach the results we set is the object of Jerónimo Martins companies' greatest attention and commitment, as they are committed to sustainably creating value, guiding their activity by the so-called triple bottom line: Profit, People and Planet. It is in the light of this stance in the business world that, in 2010, Jerónimo Martins allocated over four million euros to the direct social support of weaker groups in the surrounding communities, within the scope of a corporate policy also based on the pillars of public health promotion through food, respect for the environment, purchasing sustainability and commitment to being a benchmark employer, both in Portugal and in Poland.

Last year, the Polish economy maintained a very positive performance, with an increase in private consumption and investment stimulating a growth in GDP close to 4%, clearly above the average for the European Union countries.

Jerónimo Martins was also quite clearly the PSI 20 share with the best performance, reaching a 63.2% increase in value for the year. This clearly surpasses the sector and is largely due to the growth and the profitability of the Polish operation, as well as the expectation of future gains from an ambitious expansion plan for the Biedronka chain, which is clearly leading Food Distribution with a market share in the order of 10%. This has taken place in a country where traditional retail still represents around 50% and where Jerónimo Martins' priority will continue to be, as is the objective for the Banners in Portugal, to strengthen its leadership position.

In 2010, and facing the challenge of taking another leap in size, the Board of Directors of Jerónimo Martins decided on the need to adapt its Organizational Model to the Group's future demands and opportunities, by guaranteeing to reinforce the separation of its scope of activity between Vision and Evaluation on the one hand, and Action and Execution on the other. A new organizational structure was therefore drawn up and approved, in which the Board of Directors, which I chair, analyzes and strategically decides upon the growth options for Jerónimo Martins, and whose members comprise three Responsibility Committees that are tasked with controlling the implementation of strategic decisions.

Within the scope of this, the Chief Executive Officer model was adopted, who, supported by a Managing Committee, is responsible for carrying out strategic decisions, and to whom the Group Companies have a direct report. In recognition of his profound knowledge of the Food Distribution business, which represents the vast majority of the Group's value creation, and highly proven capability both in Portugal with the growth of Recheio and the strategic re-positioning of Pingo Doce and in the launch and development of the Polish operation, the Board of Directors decided to nominated Mr. Pedro Soares dos Santos for the position of Chief Executive Officer, which he took up in April last year.

Through all these years, I have always stressed the decisive importance of our Employees for what we are as a Group. With their competence, their energy and commitment, Jerónimo Martins' Employees are, undoubtedly, our greatest asset. I thank them all for their loyalty and their valuable contribution to our remarkable performance in 2010.

Finally, a word of appreciation for our Shareholders, who have never failed us in their trust and loyalty, even during the long period in which our operation in Poland was not profitable and to whom, for that very reason, we believe it to be our obligation to anticipate the distribution of dividends related to 2010.

Rest assured, dear Shareholders, that your investments in Jerónimo Martins are worthy of our greatest respect and recognition, and that with your preference and trust, you are helping us to take the Group to a new dimension, as well as to build stronger companies and more sustainable countries.

Message from the Chief Executive Officer

For Jerónimo Martins, 2010 was marked by Pingo Doce's celebration of its 30 years in business in Portugal, and Biedronka's 15 years in Poland. They are two quite different stories, both of which with strong reasons to be proud of for all those who have actively played a part in them, as is my case.

In 15 years, Biedronka has reached fifth place in the ranking of the biggest Polish companies, across all industries, and it is now a brand with 98% notoriety, 38% of consumers stating that the Banner is their main store for shopping.

Over the last eight years, Pingo Doce has pertinently repositioned itself by focusing on the consumer, maintaining the consistency of its policy for stable and competitive prices and by achieving leadership in the perceived quality-price ratio. In this context, the Quality of Private Brand and the Quality of Perishables have become the pillars of the strategic differentiation of its product offer.

These have been passionate years, winning over consumer preference and loyalty, systematically gaining relevance in the lives of millions of families in the regions where we are present and consolidating our leadership positions in the various segments in which we operate.

We closed 2010 with solid results and another significant jump in size, within an environment full of demanding challenges.

The good performance that the Group achieved is the result of our focus on the consistency and rigour with which we pursued the two strategic priorities that were set in the last few years: on the one hand, the investment plan, and on the other hand, the active, strongly consumer-oriented management of the value propositions of our three main business models: Biedronka, Pingo Doce and Recheio.

In fact, being attentive to the social and economic contexts of the regions in which they operate, our Distribution Banners confirmed once again last year the appropriateness of their strategies and offers, which are constantly being adjusted to fit consumer trends and patterns.

Our consolidated sales increased 18.8% compared to 2009, reaching 8.7 billion euros; EBITDA recorded a remarkable growth of 23.6% to 652.6 million euros, thereby increasing the respective margin to 7.5% of sales; consolidated net profit was 281.0 million euros, which corresponds to an evolution of 40.3% against the previous year, bringing net earnings per share up to 0.45 euros.

This evolution, which largely mirrors the Group's growing scale and the level of excellent execution that our operations have reached, has been achieved at the same time as the balance sheet continued to be strengthened by reducing the level of debt, which is currently at historically low levels (gearing of 51.0%).

With regard to the organizational structure, for carrying out the role of Chief Executive Officer that I am honoured to have taken up in April 2010, there is a Managing Committee, comprised of three members, who, together with myself, ensure that strategic decisions concerning Financial matters (Nuno Abrantes), Human Resources (Marta Maia) and Operations (Pedro Silva, who is also the Country Manager for Poland) are monitored and implemented.

In addition, we defined areas for co-ordination that run across the regions where we are present, in order to systematize policies and practices: Human Resources, Quality and Food Safety, Information Technologies, Internal Audit, Communication and Corporate Responsibility.

We are therefore in the right position to proceed, firmly and with careful consideration, in seeking new international growth opportunities, which will lift the Group to a new level.

Even when considering the threats of the macro-economic environment, in 2010 Jerónimo Martins increased its total investment, which amounted to 434.2 million euros. Compared to the previous year, we increased the weight of our investment in Poland, our dominant source of profitability, to 270 million Euros or 62.4% of our total investment.

Last year, Biedronka opened 197 stores and two distribution centres (one as a replacement), and exceeded 4.8 billion euros of sales. The strong increase in sales (+29.1% in euros) was surpassed by the growth in EBITDA generated by the Company, which reached 391.6 million euros, a 44.4% increase in euros when compared to 2009.

These results, which reflect the benefits of the Polish operation's evolution in scale and its cost-efficiency, also confirm Biedronka's clear leadership in terms of profitability, as the Polish operation increases its weight in the EBITDA generated by Jerónimo Martins to 60.0%.

Biedronka is committed to implementing what is, without doubt, the most ambitious expansion plan in the retail sector in Poland, and is prepared to continue taking advantage of the very positive growth in the Polish economy, of the resulting improvement in the families' standard of living and of the clear changes in consumer behavior patterns.

Within this context, the Banner has been agile enough to adjust its assortment to the needs and expectations of the Polish consumers and to increase its share of wallet. In 2010, the average purchase value increased 7.9% compared to 2009, which made a considerable contribution towards the remarkable like-for-like sales growth (11.6%).

Equally, the development of the Private Brand has played a key role in Biedronka's offer. This Private Brand, which in 2010 had over 650 references, represents also a powerful stimulus to the country's economy as over 90% of the food products sold by the chain are bought from Polish suppliers.

In Portugal, where we are witnessing a worsening of the social and economic crisis hitting tens of thousands of consumers and their families, last year Jerónimo Martins invested over 163 million euros, focusing especially on its Distribution operations.

In a year in which there were no more than fifty new openings in the Food Retail sector in Portugal, Pingo Doce continued to be committed to achieving organic growth and to reinforcing its proximity market position, having added seven new stores to its network and refurbished 25.

Recheio also reinforced its coverage in strategic locations for the HoReCa market, having carried out three openings in 2010, the Company closing the year with a network of 38 units.

In times of great uncertainty, the clarity and consistency with which the Brand proposals are perceived by the consumer are determining factors for their choice. Therefore, in 2010, Pingo Doce reinforced its investment in the mass communication of its policy for quality at stable and every day low prices and Recheio invested in strong promotional campaigns aimed at its Customers.

I believe that, despite the recessive environment, the above strongly contributed towards Pingo Doce and Recheio having presented in 2010, a performance ahead of that of their respective sectors, with a significant like-for-like sales growth of 7.2% and 3.2% respectively.

Today, consumers are more rational, more demanding, more objective in their purchasing decisions. They place value on the Banners' value proposition as a whole and are ever more sensitive to the price factor.

As one of the critical differentiation pillars of the Group's distribution business models, the Private Brand has been working as a protection against the increased pressure from the competition that is felt in various segments.

In Portugal, according to TNS Worldpanel data, private brands are in 100% of homes. Even when the economy starts to grow again, 95% of the Portuguese people questioned admitted that they will continue to purchase these brands.

In 2010, Pingo Doce remained focused on developing its Private Brand, having launched 191 references and closed the year with 2,011. Excluding Specialized Perishables, the Private Brand represents around 38% of the Company's total sales and it will continue to invest in the nutritional reformulation of its products as a means of promoting public health through food. Apart from that, the weight of Pingo Doce Private Brand purchases, excluding Perishables, from Portuguese producers is in excess of 60% and at Recheio this percentage goes up to around 70%.

In the area of Specialized Perishables, which represents around 34% of the Pingo Doce sales, over 77% of the chain's total suppliers of Fruit and Vegetables, Butcher's, Fishery, Bakery and Flowers are national suppliers.

This is proof of a policy, running across all the Group's Banners, for responsible purchases and, whenever possible and on equal terms, for working preferably with national suppliers, as a way of also contributing towards the social and economic development of the regions where we operate.

In Manufacturing (Unilever Jerónimo Martins and Gallo), 2010 was a year with sales of 236 million euros and in which structural investments were made, namely regarding marketing support, to strengthen the market positions of the key brands, with a view to future sales sustainability.

Particular reference should be made to Gallo Olive Oil which exceeded 30% market share (in value terms) in Brazil, in a year in which it also won the renowned Mário Solinas International Award for the best olive oil in the world in its category.

Today, Jerónimo Martins is a Group which, from the point of view of the macroeconomic environment of the two countries in which it operates, has to manage two realities at two quite different speeds.

In 2011, we shall witness an intensification of these differences, the inevitable prospect for Portugal being a reduction in families' disposable income and the resulting

fall in consumption, meaning that the growth in food retail is likely to be extremely limited.

Globally, economies also face the risk of the continued escalation in raw material food prices, which was already widely discussed in January this year by the world leaders, in Davos. The prices of cereals shot up in the last few months of 2010, getting close to the records that were reached in 2008 at the peak of the food crisis, and, in 2011, they are expected to continue to rise. It is essential to find ways of controlling speculation and volatility in the commodities markets in order to avoid creating an inflationary spiral in Europe.

Despite the demanding and tough challenges that are hovering on the horizon of a food Group such as Jerónimo Martins, I am convinced that our business models, with their unique value propositions, focused on price, quality and operational efficiency, are prepared and well-positioned to continue presenting positive performances, even when operating within an adverse economic environment.

We shall maintain our competitive, agile and innovative stance as well as a spirit of financial rigour and prudence, and we shall uphold a robust balance sheet and maximize the profitability of our operations.

At the same time, we shall make every effort to be worthy of the Portuguese and Polish consumers' preference and seek to continuously improve the conditions of our employees, who really are the Group's most valuable asset, and in whom we want to continue to invest through training and recognition of their merit.

I should like to thank all the employees for their efforts and spirit of commitment with which they have built the year of good results that 2010 has been, and which we shall endeavour to exceed in 2011.

I must thank the Chairman and the other members of the Board of Directors of Jerónimo Martins for the trust they have deposited in me and for their contribution towards the memorable year that we are reporting in this Report.

I – The Group Jerónimo Martins

1. Profile and Structure	12
1.1. Identity and Responsibilities	12
1.1.1. Asset Portfolio	12
1.1.2. Core Competencies	13
1.1.3. Innovative and Pioneering Culture	14
1.2. Operating and Financial Highlights	16
1.3. Corporate Bodies and Structure	20
1.3.1. Corporate Bodies	20
1.3.2. Business and Ownership Structure	22
1.3.3. Management Structure	24

2. Strategic Positioning	26
2.1. Mission	26
2.2. Commitment to Value Creation and Growth	26
3. Financial Glossary	28
4. Contacts	30

1. Profile and Structure

1.1. Identity and Responsibilities

1.1.1. Asset Portfolio

Jerónimo Martins is the largest Portuguese Food Distribution Group, with a turnover in 2010 of 8.7 billion euros, with a total of 61,061 employees at the end of the year and the fourth largest market capitalisation on the Euronext Lisbon Stock Exchange. With more than 15 years of international experience, the business outside Portugal accounts for 55.3% of sales and 51.6% of the employees.

The Group holds a portfolio of businesses focused on the food area, 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 Poland, and with the maturity and capability of generating cash flow, fostered by the manufacturing assets of its partnership with Unilever in Portugal.

In Portugal, at the end of 2010, Jerónimo Martins held a leading position in the Food Distribution sector, achieving an aggregate turnover of 3.6 billion euros. The Group operates under the Banners Pingo Doce (340 supermarkets in Mainland Portugal, 13 in Madeira and nine hypermarkets) and Recheio (38 cash & carries and two Food Service platforms in Mainland Portugal, one cash & carry and one Food Service platform in Madeira), and continued to be the supermarket and cash & carry market leader, combining the strength of its Banners with its 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, through the Banners New Code (adult and children's clothing), Electric Co (electrical appliances), GET (books, music, electronics and telecommunications), the Bem-Estar stores and the Restaurant services and Take Away No Sítio do Costume in the Pingo Doce stores, as well as its network of petrol stations.

In Poland, Biedronka, a chain of stores with an assortment of food products that combine quality with an every day low price policy, is market leader in Food Retail, through its high number of stores and the strength of its Banner. At the end of 2010, Biedronka had 1,649 stores, surpassing 796 million customer tickets and 4.8 billion euros of turnover for the year. Also in Poland, following the partnership signed in February 2006 with the Associação Nacional de Farmácias de Portugal (Portuguese National Pharmacy Association), Jerónimo Martins mantained its pharmacy network, under the Banner Apteka Na Zdrowie, which at the end of 2010 had 24 units.

Jerónimo Martins is also the largest manufacturing Group of fast-moving consumer goods in Portugal, through its partnership with Unilever for the areas of Food, Personal Care, Home Care and Out-of-Home consumption. In 2007, this partnership was strengthened by the merger of FimaVG, Bestfoods, LeverElida and IgloOlá into a single Company called Unilever Jerónimo Martins. This 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 Gallo Worldwide. This Company

assumed the leadership position of the Gallo brand both in the domestic market and in Brazil.

The Group's portfolio also includes a business area in Portugal geared towards Marketing Services, Representations and Restaurant 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 fast-moving consumer food, Food Service (through Caterplus), selective cosmetics and fast-moving cosmetics (through the partnership with the Puig Group);

Hussel, a Specialised Retail chain selling chocolates and confectionary, with 25 stores at the end of 2010;

Jerónimo Martins Restauração e Serviços, which is focused on developing projects in the Restaurant service sector, which at the end of 2010 included the Jeronymo chain of kiosks and coffee-shops, with 26 points of sale; the Olá chain of ice-cream parlours, with 34 stores and a further five franchised out; the Chili's restaurant in Lisbon, a franchising of the Brinker Group; the Ben & Jerry's store; and one Oliva restaurant, a new concept that was launched in 2010.

1.1.2. Core Competencies

Over its long history, Jerónimo Martins has been adopting values and core competencies which enable it to look to 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, focused on the food sector and balanced in terms of growth perspectives and cash flow generation.

The business models are adapted to the markets and consumer trends and primarily embody proximity formats that are very price competitive and with 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 Banners 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 these.

1.1.3. Innovative and Pioneering Culture

Jerónimo Martins has always proven to be pioneering within the Portuguese business context. The Group has also stood out for its great dynamism and market leadership, illustrated by the countless initiatives that it has implemented over the years to cement its leadership in that same market, winning over a growing numbers of consumers.

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 constant motivation towards an innovative and pioneering culture is an integral part of the Jerónimo Martins management culture and within this context, 2010 once again proved to be dynamic in this area, with the following highlights:

Activity of the Fresh Pasta Factory;
Launch of products in the Ready-Meals range including solutions for vegetarians.

Over the last few years, the Group has been standing out for its application of security best practices in all its IT systems and all the information that is critical and relevant for managing its business.

In 2010, Jerónimo Martins took another innovative step by implementing advanced tools for protecting against the loss of data and for detecting vulnerabilities. In the same year, the Group also developed a pioneering project for desktop and laptop virtualization, within a broad network, using this means to introduce efficient mechanisms for managing equipment, updating software and for managing and storing information.

In the Supply Chain, partnerships continued to be developed with suppliers, in order to reinforce the objective of making the management of the supply chain more consistent, being the Group a pioneer in exchanging detailed information electronically with its suppliers, regarding sales and stocks from its various points of sale, thereby improving the entire store replenishment process.

Also of note in 2010, is the innovation regarding the logistics processes, with the entire fish supply operation being redesigned to support all the processes by radio frequency and various tasks are now carried out using automation mechanisms.

During the year, determinedly pursuing a policy for greater social responsibility and enhanced customer relations regarding all aspects of food safety, information and service, by sharing best practices, recommendations and nutritional knowledge, a sophisticated customer service was developed with 24-hour support through modern IT tools, whereby all communications with customers through this channel are recorded and all relevant information with the customer is shared.

In Poland, the Group implemented the innovative DataBar code. This new solution makes it possible to put more information onto the bar code printed on the product, namely the batch and expiry date, which enables sales of products with nonconformities to be blocked.

Also in Poland, the Group pioneered the installation of equipment for transmitting data by satellite, i.e. without using any cables. Apart from enabling 99.2% of transmissions to be automatic, this new technology provides gains in efficiency, as the costs become fixed, rather than varying depending on the volume of data transmitted.

Annual Report 10 The Group Jerónimo Martins Profile and Structure

1.2. Operating and Financial Highlights

2010 2009 $\wedge$ % 8.8% 3.612 3.321 Distribution Portugal 29.1% 3.725 4.807 Distribution Poland 0.3% 272 272 Manufacturing, Services & Others	Consolidated Sales	8.691	7.317	18.8%
€' 000.000

EBITDA & EBITA Margin

Net Results and Cash Flow

€' 000.000	2010	2009

Net Results	300	223
Net Results JM	281	200
Cash Flow	515	434
Nr. Common Shares	629.293.220	629.293.220
Nr. Own Shares	859,000	859,000
Data per Share $(\epsilon)$
Net Results	0.48	0.35
Cash Flow	0.82	0.69
Share Price (ye)	11.40	6.99

Consolidated Balance Sheet
€' 000,000
	2010	2009
Invested Capital	1,709.3	1,757.7

Financial Debt *	878.6	911.8
(Marketable Securities and Bank Loans)	-301.1	-219.8
Net Debt	577.5	692.0

Non-controlling Interests	286.7	287.6
Equity	845.1	778.1
Shareholders Funds	1,131.8	1,065.7
Gearing	51.0%	64.9%
Interest Cover	6.80	5.11

* including leasings and accured interest and hedging

Annual Report 10 The Group Jerónimo Martins Profile and Structure

Number of Stores and Sales Area

	2010	2009	2008	2007	2006
Pingo Doce - Supermarkets*	340	334	334	210	189
m2	359,036	352,276	350,396	183,770	161,279
Pingo Doce - Hypermarkets*	9	9	9	46	38
sqm	78,281	82,468	82,653	172,039	150,189
Madeira	15	15	15	15	15
sqm	14,253	14,300	14,626	14,626	13,697
Recheio	38	35	35	33	33
sqm	123,532	114,410	115,724	109,634	110,005
Biedronka	1,649	1,466	1,359	1,045	905
sqm	938,218	814,493	753,531	536,729	452,952

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

* Reclassified values – see details in "Financial Glossary".

Annual Report 10 The Group Jerónimo Martins Profile and Structure

				o ã ç a Ow rsh ip ne p i c	o ã ç a d Co lida tion nso li o		Sa les ( Mill ion Eu	ro)	EB Ma	ITD A in rg	Nr. Sto res	Sa les Ar ea (sq m)	Sa les / sqm *	LFL Δ%
				ti r a P	s n o C	10 07	09 06	Δ% Δ%	10 07	09 06	10	10	10	10/ 09
	d n a nl		Su rke ts ( Lea der ) per ma	51%	I	2,4 8 55.	2,1 93. 6	12. 0%	6.8 %	7.2 %	340	359 ,03 6	6.9	8.4 %
	ai M al g u		3rd Hy rke ts ( Pla ) per ma yer	51%	I	293 .4	30 7.2	-4. 5%			9	78 ,28 1	3.7	-3. 6%
n o ti	rt o P		Ca sh & C ( Lea der ) arr y	100 %	I	720 .5	688 .5	4.6 %	6.2 %	6.0 %	38	123 ,53 2	6.0	3.2 %
u b i tr s i D al d o o F	ra ei d a M		( l) Su Lid rke ts oso per ma	75. 5%	I	14 1.9	13 1.6	7.9 %	4.7 %	4.8 %	15	14 ,25 3	10 .6	14 .5%
	g u rt o P		( J.G .Ca cho ) Ca sh & C ma arr y
	d n a ol P		Ret ail Sto ( Lea der ) res	100 %	I	4,8 07. 2	3,7 24. 7	29. 1%	8.1 %	7.3 %	1,6 49	938 ,21 8	22 .4	11 .6%
s e c vi r e S & g	al		Ma rine rga Rea dy to D rink Te a & Sa vou ry Ho Ca & P l Ca me re ers ona re Ice Cr eam	45%	P
n ri u t c	g u rt o P		Oliv e O il, S eed Oi l			326 .2	324 .9	0.4 %	10 .9%	11. 6%
a f u n a M			Mkt , Re and Re Se rvic st. pr. es	10 0%	I
			Ch late oco s	51%	I
* in loca	l cu cy ( '000 ) rren	CO NS OL	IDA TE D		I - In teg ral	8, 69 1.1	7, 31 7.1	18 .8%	7.5 %	7.2 %

1.3. Corporate Bodies and Structure

1.3.1. Corporate Bodies

Election Date: 9th April 2010

Composition of the Board of Directors elected for the term 2010-2012

President of the Board of Directors

Elísio Alexandre Soares dos Santos

76 years old;
Chairman of the Evaluation and Nominations Committee since April 2010;
Chairman of the Group since February 1996.

Chief Executive Officer

Pedro Manuel de Castro Soares dos Santos
51 years old;
Chief Executive Officer of the Group since April 2010;
Member of Board of Directors since 1995.

Luís Maria Viana Palha da Silva

55 years old;
Chairman of the Financial Matters Committee since April 2010;
Chairman of the Committee on Corporate Responsibility since April 2010;
Member of the Evaluation and Nominations Committee since April 2010;
Member of Board of Directors since 2001.

José Manuel da Silveira e Castro Soares dos Santos

48 years old;
Member of the Financial Matters Committee since April 2010;
Member of the Committee on Corporate Responsibility since April 2010;
Member of the Evaluation and Nominations Committee since April 2010;
Member of Board of Directors since 2004.

António Mendo Castel-Branco Borges

62 years old;
Member of Board of Directors since 2001 until December 31st, 2010 (resignation letter on 22nd November, 2010, with effect from 31 December of 2010).

Artur Eduardo Brochado dos Santos Silva

69 years old;
Member of the Evaluation and Nominations Committee since April 2010;
Member of Board of Directors since 2004.

Hans Eggerstedt

72 years old;
Chairman of the Audit Committee since 2007;
Member of Board of Directors since 2001.

Marcel Lucien Corstjens

60 years old;
Member of Board of Directors since 2009.

Nicolaas Pronk

49 years old;
Member of Board of Directors since 2007.

António Pedro de Carvalho Viana-Baptista

53 years old;
Member of the Audit Committee since April 2010;
Member of the Committee on Corporate Responsibility since April 2010;
Member of Board of Directors since April 2010.

Artur Stefan Kirsten

49 years old;
Member of the Audit Committee since April 2010;
Member of the Financial Matters Committee since April 2010;
Member of Board of Directors since April 2010.

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:

Abdul Nasser Abdul Sattar, R.O.C.

Substitute:

José Manuel Henriques Bernardo

Corporate Secretary:

Henrique Manuel da Silveira e Castro Soares dos Santos Substitute Secretary: António Neto Alves (resignation letter on 31st December 2010)

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 and Hypermarkets
DISTRIBUTION	PORTUGAL*	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 and Restaurants
		HUSSEL – Specialised Retail - Sweets & Chocolates

* Including mainland Portugal and Madeira

Ownership Structure

1.3.3. Management Structure

Last April represented the beginning of a new era at Jerónimo Martins. Its top organisational structure was adapted to the needs of a Group of relevant size, with international experience and ambitious growth objectives for the next decade, without losing sight of corporate governance best practices.

Leading the management structure of Jerónimo Martins, SGPS, S.A. is the Board of Directors, comprised of its Chairman and ten Directors, one of whom is the Chief Executive Director (CEO).

With the appointment of the CEO an ad-hoc body was formed, the Managing Committee, whose main objective is to support the CEO in the day-to-day management of the Company's businesses. The Managing Committee is made up of Managers with a high level of seniority within the Group, with proven management skills in the areas of Strategy and Finance – Nuno Abrantes; Operations – Pedro Siva (also Poland Country Manager); and Human Resources – Marta Maia.

The structure of Jerónimo Martins, SGPS, S.A., the Group's Holding, includes the Functional Divisions, which provide support and advice to the Board of Directors, the Managing Committee, the Audit Committee and other specialised Committees and to the other Group companies, on specific issues in each area, namely: Internal Audit, Legal Affairs, Corporate Communication, Consolidation and Accounting, Strategy and Planning, Fiscal Affairs, Financial Operations and Risk Management, Food Quality and Safety, Human Resources, Investor Relations, Security and Information Technologies. Each of these Functional Divisions of the Group's Holding is responsible for ensuring consistency of approach for each of the objectives defined and their activities are detailed within the Corporate Governance analysis scope.

In operational terms, Jerónimo Martins, SGPS, S.A. includes three distinct business segments: i. Food Distribution; ii. Manufacturing; and iii. Marketing, Representations and Restaurant Services.

In Food Distribution, both in Portugal and Poland, the model of the existing organisational structure is aimed at gains in efficiency, stronger business focus, as well as greater harmonisation between the teams and the short, mid and long-term strategic guidelines.

Thus, in all the Operational Companies - Pingo Doce, Recheio, Lidosol / J.G. Camacho and Biedronka -, the business management is carried out by the respective Managing Committee, chaired by its General Manager, and whose members include the Managers from the main functional areas, such as: Operations, Commercial, Human Resources, Financial and Logistics.

In all these Companies, the Operations Division is organized by regions. As an example, at Pingo Doce and Biedronka - the Group's largest Companies - the following functions are part of each Regional Operations Division: 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 Functional Divisions, with a view to thereby ensuring greater proximity to the business.

The Manufacturing segment is comprised of Unilever Jerónimo Martins and Gallo Worldwide.

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 comprised of the following 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.

Included in the Services segment are Jerónimo Martins Distribuição de Produtos de Consumo, which includes the partnership with Caterplus, Jerónimo Martins Restauração e Serviços and Hussel.

The various Companies secure all the operational and management side of the business, although Jerónimo Martins Distribuição provides its counterparts with Financial, Information Technologies, Human Resources and Logistics services.

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 towards the sustainable development of the regions in which it operates.

As key pillars for its mission, Jerónimo Martins adopts continuous and sustainable value creation and growth, within the framework of its corporate responsibility policy.

The corporate responsibility policy is based on respect for the preservation of the environment and natural resources and a contribution towards an improvement in the quality of life of the communities where the Group operates, by providing healthy products and food solutions, being actively responsible in its purchases and sales, defending human rights and working conditions, and stimulating a fairer and more balanced social structure.

2.2. Commitment to Value Creation and Growth

By having its management activity focused on short, medium and long term value creation, the Group assumes an economic commitment centred on the sustained optimisation of the profitability of its asset portfolio, and on its expansion, through the development of new Business Units.

Jerónimo Martins works to ensure the continued strengthening of its business portfolio, through achieving three major goals:

To attain and consolidate a leadership position in the markets where it operates;
To build and develop strong and responsible Banners and Brands;
To ensure the balanced growth of its Business Units in terms of sales and profitability.

In the pursuit of these three goals, the Group's Business Units are focused on the continuous reinforcement of their price positioning and value proposition, continuous improvement in operational efficiency, constant technological development and also, on evaluating all expansion opportunities that fit their growth strategy, whether organic or by acquisition.

Jerónimo Martins ensures that its asset portfolio is expanded by rigorously studying business opportunities that fit within the scope of its mission.

The Group's strategic planning efforts are channelled primarily into the evaluation, implementation and development of Food Distribution Business Units in new geographical markets.

However, growth opportunities in other areas of the food sector, in geographical markets where the Group already operates, are equally evaluated, if they provide sustainable competitive advantages, by developing corporate synergies.

Strategic Management Guidelines

In its growth strategy, Jerónimo Martins concentrates on the ongoing strengthening of its balance sheet, paying particular attention to its capital structure, to its debt ratio, to risk hedging and to balancing its asset portfolio 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.

The Management is geared towards capitalising on group scale and synergies in procurement, in developing its partnerships, in the efficiency of its operations, in internal sharing of business and market know-how, in technological knowledge and in empowering its human resources and management practices. It thereby permanently seeks to develop, broaden and perfect the scope of its corporate competencies.

Finally, Jerónimo Martins promotes innovation and a pioneering spirit as ways of developing competitive advantages, in accordance with its strategic vision.

3. Financial Glossary

Like-For-Like Sales (LFL)

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.

EBITDA Margin =

(+ Operating Results + Depreciation - Non-Recurrent Operating Results) / Net Sales & Services
EBITDA Retail Margin in Portugal Reclassification of Fees to Shareholders

Retail Portugal's EBITDA margin was subject to reclassification, having excluded from the EBITDA, the costs with services from Shareholders. This allows a more accurate analysis of business area performance aligning the information provided to the market with that used internally for assessing the business area's performance.

EBIT Margin =

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

Net Sales & Services

Interest Cover Ratio

EBITA / [+ Financial Results (excluding non recurrent items) - Partners loans interest]

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

(Sales & Services / Invested Capital – average of 12 months) x EBIT Margin

The method to calculate the average Invested Capital was subject to an alteration, having opted for the average of the 12 end of the month figures instead of the arithmetic mean of the year-end figures.

Invested Capital (for Pre-Tax ROIC purposes)

Gross Goodwill
- Net Fixed Assets (Tangible and Intangible)
- Working Capital (excluding Deferred Taxes and Income Tax Provisions)
- Net Financial Investments

Gearing =

(Net Debt / Shareholders funds)

Net Debt =

- Bonds
- Bank Loans
- Other loans
+/- Derivative Financial Instruments
Marketable Securities and Bank Deposits
- Leasings
- Accrued interest

Shareholders Funds =

- Share Capital
- Reserves and Retained Earnings
- Net Results of the year
- Non Controlling Interests

Cash Flow =

- Net Results
- Depreciation
Deferred Taxes
Non Recurrent Items (operating, disposals and financial)

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) [email protected]
Pedro Soares dos Santos (Chief Executive Officer of the Group) [email protected]
Luís Palha (President of the Financial Matters Committee) [email protected]

José Soares dos Santos (Responsible for Manufacturing and Marketing, Representations and Restaurant Services) [email protected]

Henrique Soares dos Santos (Corporate Secretary) [email protected]

Cláudia Falcão (Head of Investor Relations and Market Relations Representative)

[email protected] Telephone: + 351 21 752 61 05 Fax: + 351 21 752 61 65

Communication Department – Media Relations

[email protected] Telephone: + 351 21 752 61 14 Fax: + 351 21 752 61 74

Communication Department Poland

[email protected] Telephone: + 48 696 77 22 13

Human Resources Department

[email protected] Telephone: + 351 21 753 23 23/21 01 Fax: + 351 21 753 22 25

Expansion Department

[email protected]

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

Suppliers Department

[email protected]

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

Ethics Committee

[email protected] Telephone: + 351 21 752 61 03 Fax: + 351 21 752 61 74

Client's Ombudsman

[email protected]

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

[email protected] 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

Pingo Doce Customer Support Service

[email protected] 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

[email protected] 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

[email protected] 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	33
	2. Environment 2010	35
	2.1. International Macroeconomic Environment	35
	2.2. Sector and Market Environment	36
2.2.3. Poland	2.2.1. Relevant Facts in the Food Distribution Sector 2.2.2. Portugal	36 37 39
	3. Group's Performance	41
	3.1. Main Projects of 2010 3.1.1. Strengthening the Commercial Proposition 3.1.2. Group's Investment Plan 3.2. Consolidated Activity of 2010	41 41 43 44
	4. Business Areas Performance	58
	4.1. Food Distribution- Portugal	58
	4.1.1. Food Retail - Pingo Doce 4.1.2. Food Retail - Operation in Madeira 4.1.3. Cash & Carry - Recheio 4.2. Food Retail – Poland	58 62 65 68
	4.2.1. Biedronka 4.2.2. Apteka Na Zdrowie	68 71
	4.3. Manufacturing, Distribution and Restaurants & Services	72
	4.3.1. Manufacturing 4.3.1.1. Unilever Jerónimo Martins 4.3.1.2. Gallo Worldwide 4.3.2. Marketing, Representations and Restaurant Services 4.3.2.1. Jerónimo Martins Distribuição de Produtos de Consumo (JMDPC) 4.3.2.2. Jerónimo Martins Restauração & Serviços (JMRS) 4.3.2.3. Hussel	72 72 74 75 75 76 78
	5. Outlook for 2011	79
	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	79 80 81 83 84
	6. Events After Balance Sheet Date	87
	7. Results Appropriation Proposal	88
	8. Consolidated Management Report Annex	89

1. Relevant Facts of the Year

First Quarter

Opening of 42 Biedronka stores and refurbishment of 18 others;
Opening of one Pingo Doce store and refurbishment of five others;
Conversion of the first Feira Nova hypermarket into Pingo Doce, initiating implementation of the new concept (Braga);
Temporary closure of the two major Pingo Doce stores on the island of Madeira (Anadia and Dolce Vita) due to the storm that hit the region.

Second Quarter

Opening of 25 Biedronka stores and refurbishment of 24 others;
Opening of two Pingo Doce stores and refurbishment of six others;
Opening of two Recheio stores (Fátima and Évora);
Reopening in Madeira of the two stores closed since February;
Renegotiation of one of the Commercial Paper Programmes on behalf of JMH, recording a maximum value of 20 million euros.

Third Quarter

Opening of 38 Biedronka stores and refurbishment of 38 others;
Launch of the Corporate Campaign "15 years of Biedronka";
Opening of three Pingo Doce stores and refurbishment of seven others;
Launch of the Corporate Campaign "30 years of Pingo Doce";
Opening of one Recheio store (Vila Franca de Xira);
Renewal of the Commercial Paper Programme for the amount of 100 million euros contracted by JMH for a five-year term.

Fourth Quarter

Opening of 92 Biedronka stores and refurbishment of 36 others;
Opening of two new Distribution Centres in Poland: one a replacement and the other to cover a new region;
Opening of one Pingo Doce store and refurbishment of five others;
Refurbishment of two Recheio stores (Figueira da Foz and Setúbal);
Contracting of Commercial Paper for the amount of 50 million euros, maturing in one year, renewable;
Renegotiation of a 88.6 million zlotys loan in Poland, extending the maturity from November 2010 to November 2012.

2. Environment 2010

2.1. International Macroeconomic Environment

The recovery of the world economy in 2010 was in line with expectations, despite the risks of a slow-down remaining quite high. It recorded a 5.0% growth in 2010, according to the projections of the International Monetary Fund (IMF) that were available at the end of the year. In 2009, the world economy had contracted 0.6%.

2010 was a year that was noted for two quite distinct moments: a first half with a strong world economic growth, reaching a 5.3% increase in Gross Domestic Product (GDP), and a second half with a reversal in the financial system's stability (caused by the disturbances related to sovereign debt), which caused a slow-down in worldwide growth.

The extent of this economic recovery varied in different parts of the world, Asia being the region with the most significant growths, even reaching levels higher than those before the recession.

The North American economy recorded a 2.8% growth in 2010, close to the figures before the recession, but with the expectation of a much slower acceleration than the period prior to it. Consumption trend has been positive since the third quarter 2009, although on moderate levels. At the same time, there was an increase in investments directly related to foreign demand, with profitability recovery and stabilization of the financial system. However, there are still no real signs of improvement regarding employment and real estate.

The economies in the Eurozone and Japan, despite presenting growth compared to 2009, are still far from the levels prior to this recession.

With regard to the Eurozone, led by the German economy, economic activity only began to show some improvement in the second quarter of the year. The restriction on demand is directly linked to bank loans and the limitation on these imposed by the banks in the Eurozone. Unemployment levels have still not shown any signs of recovery.

During the first six months of the year, emerging economies grew 8.0%, and 7.1% over the whole year.

In China, the series of tax incentives, expansion of credit access, and the measures that were created to encourage consumption, contributed towards a very significant growth in domestic demand.

In Latin America and Caribbean, 2010 was noted for a 5.9% growth, Brazil being the leader in the region.

In the various emerging economies that were not affected so strongly by this recession, growth throughout the year was quite reassuring and encouraging.

Along the year, there was an inversion in the stabilization trend in the financial markets. Market volatility and risk aversion increased with the need to sell the weaker economies' sovereign debt. This linked to the fears regarding the sustainability of the recovery were directly reflected in the capital market.

During the last few months of the year there was an improvement to the financial system and a decrease in the levels of risk, due to the political initiatives that had been put in place by the European Union, namely the creation of the European Central Bank's (ECB) Market Securitization Programme and the European Financial Stabilisation Mechanism.

With regard to commodities, the Thomson Reuters/Jefferies CRB Index, which reflects the performance of 19 commodities, increased 15.2% in 2010.

The record demand by China, for goods like sugar and soya, led prices to shoot up by circa 34% and 32% respectively. Cotton led the gains by increasing approximately 89%, followed by silver the most widely used precious metal in manufacturing, which gained approximately 81%. Coffee came in third place, with an increase of circa 66% to a new 13-year high.

Only cocoa and natural gas lost ground, the latter falling circa 22%. The price of the remaining energy raw materials evolved, crude oil increasing 12.9% in New York, closing at almost 90 dollars per barrel, and gaining approximately 19% in London, close to 93 dollars.

2.2. Sector and Market Environment

2.2.1. Relevant Facts in the Food Distribution Sector

2010 was marked by the beginning of the world economy's recovery, although this recovery was stronger in the first half of the year.

In the developed economies, Governmental intervention to stabilize and give credibility to the banking sector, stimulate demand and increase market liquidity were not sufficient to sustain a sound recovery in these markets, and so the growth in these economies has only been modest. On the other hand, the emerging economies have shown strong growth rates.

So after a decade of excess of liquidity available, consumption tended to become more rational and objective, which of course obliged retailers to re-think their strategies.

With this change, consumers changed their priorities and placed greater importance on the offer of value as a whole, becoming more price sensitive, and more rational and selective in their purchases.

In response to this change in the consumption trend, and in order to guarantee the levels of profitability even with a fall in the level of sales, the majority of retailers implemented policies for cutting costs and rationalizing stocks.

The change in consumer behaviour had implications for most retailers that had to optimize and reduce their assortments, with a view to simplifying their offer. Retailers considered this rationalization to be a priority, as apart from the impact on sales, it also contributed towards a reduction in costs and efficient stock management.

Private Brands played an even more important role in the assortment and throughout 2010 there was an increase in the consumer's demand regarding the level of quality of these products.

The Mergers and Acquisitions on the sector that have taken place in 2010 and are worth highlighting are as follows: i. Kopeika in Russia by X5; ii. Primavera supermarkets in Romania by the Delhaize Group; iii. Ostrov Retail Chain in Russia by X5; iv. Genuardi supermarkets (Safeway) in U.S.A. by Ahold; v. Bretas supermarkets in Brazil by Cencosud; vi. the merger of Casas da Baía in Brazil with the Pão de Açúcar Group; vii. Netto in the United Kingdom by WalMart Asda; viii. Plus operation in Romania and Bulgaria by the Schwarz Group (Lidl); ix. Tengelmann's discount operation, Zielpunkt, in Austria by Fundo BluO; and x. 65 Tengelmann supermarkets by Rewe, in Germany.

It was also during 2010 that Carrefour announced the sales of its assets in Thailand to the Casino Group, that in Poland Eurocash and the Emperia Holding agreed on the sale of the latter and that Walmart, Casino and Lotte made public their interest for the acquisition of the Matahari operation in Indonesia.

2.2.2. Portugal

Macroeconomic Environment

According to the Portuguese Central Bank, GDP growth in 2010 was 1.4%, following the sharp contraction of 2009 (-2.6%). This growth has incorporated a marked deceleration of GDP over the year, reflecting a slowdown in consumer spending, exports and the continued negative growth of Gross Fixed Capital Formation (GFCF). The main trends of the Portuguese economy in 2010 resulted from the combination of several interrelated factors, most notably: i. the relatively favourable international environment; ii. the set of supranational policy measures that have eliminated restrictions on external financing; iii. the mitigated start up of the process of fiscal consolidation and deleveraging of the private sector; and iv. the maintenance of the existing institutional framework which is characterised by the continued existence of a number of structural weaknesses.

Private consumption should have grown more quickly than GDP (+1.8%), with consumption of durable goods accelerating particularly sharply. Public consumption, in turn, should have registered real growth of 3.2% (+2.9% in 2009).

GFCF should have declined 5.0%, though more tempered than the fall observed in 2009 (-11.9%). This decline was shared by public and private components. The private component demonstrated, among other factors, the deterioration of expectations for domestic demand, the high uncertainty and risk associated with investment decisions and the more stringent conditions placed on credit access.

In an environment characterized by a recovery of international trade flows and the upwards adjustment of the economic growth prospects of Portugal's main trading partners, exports of goods and services should have grown 9.0% in 2010 after falling 11.8% the preceding year. Total goods and services imports overall should have recorded an increase of 5.0%, reflecting the ongoing development of overall demand, particularly with regard to some imported components, such as consumption of durable goods.

Public and business investment both fell again, recording new lows as a percentage of GDP.

Employment continued to record consecutive declines. Unemployment increased to a new all-time high in 2010 (+10.8%), carrying forward the trend observed over the last decade.

Inflation in 2010 was 1.4%. After a period of sharp price deceleration in Portugal, which resulted in negative average annual inflation in 2009 (-0.9%), inflation went positive again in 2010. The reversal of the falling price trend since the beginning of 2010 reflects the improvement in the Portuguese economy's external environment, supported by the growth of the major world economies and the gradual recovery of international trade flows, following the sharp contraction of 2009. This resulted in an increase in the international prices of raw materials, both energy and non-energy commodities. Moreover, the recovery of current goods consumption, although not significant, has also contributed to rising prices.

Regarding the foreign trade and taking into account the unbalance between imports and exports, the Portuguese economy is still facing a structural problem, with significant impacts in the foreign debt. This fragility is even more obvious when analyzing the public solvability. Thus, it leads to a pessimistic evaluation of the international investors, which strongly conditioned the access of the Portuguese banking system to the international markets, leaving the economy with strong liquidity problems.

Modern Food Retail Sector

Turnover in retail sector in 2010 recovered year-on-year, showing positive growth throughout almost the entire year. However, this growth was made on a negative base, which was the baseline of the previous year. Growth was also curbed by the widespread effect of deflation.

However, Food and Non-food retail performed differently. Non-food retail fell quite significantly. Food retail grew positively, with a 1.6% increase.

Despite this performance, there were significant declines in the final months of the year as food and non-food retailing registered negative growth. Products classified as fast-moving consumer goods (FMCG), recorded positive year-on-year growth based on recent studies, though close to zero.

2010 was also marked by a decline in consumer confidence as a result of the deteriorating financial situation among households and expectations that the country's economic situation will worsen. The feeling of insecurity over employment and the reduced financial savings capacity are the other two factors influencing the negative consumer outlook.

In terms of format, supermarkets with areas between 1,000 and 2,500 sqm remained the fastest growing segment. In the hypermarket format, exception made to the market leader, the negative trend demonstrated in recent years has been kept.

The year was also marked by some changes to consumer behaviour, the most notable of which were:

Decreased shopping frequency, spending less each month, which is a clear sign of rationalisation and greater shopping planning by consumers;
Growth of Private Brands;
Increased in-home consumption;
Reinforcement of price as the most important factor when making the purchase.

Organic expansion slowed down across the sector as a whole, as around 50 new stores were opened, equivalent to a 2.2% increase in sales area (approximately 6% in 2009, equivalent to 77 new stores). The brands operating stores with smaller areas (Minipreço and Spar) were responsible for the majority of store openings.

Wholesale Market

2010 was marked by a significant decrease in turnover value of wholesale operators, estimated in more than 8% (Recheio analysis). This tendency results mainly from the loss of clientes in Traditional Retail segment, which is the most important segment for many wholesalers.

Thus, Traditional Retail, according to Nielsen (Nielsen Market Track), posted a fall of 9.7% versus 2009, continuing the trend towards weight loss that had become more acute over the last few years.

On the other hand, HoReCa channel revealed a slight inversion tendency of the decrease posted in previous year. According to the Turnover in Services Index from the Portuguese National Statistics Institute (INE), the segment of accommodation and food service activities presented a positive growth of 1.4% versus 2009. Nervertheless, this effect was not sufficient to offset the lost of Traditional Retail. HoReCa clientes segment is only significant to cash & carry like Makro and Recheio, once they have a large offer in the categories of perishable products.

2.2.3. Poland

Macroeconomic Environment

Throughout 2010, the Polish economy had a very positive performance, with an increase in its GDP for the year close to 4%, clearly above the average for the European Union countries. This performance was mainly due to the growth in private consumption and investments.

Though with a high level of growth, in 2010, Poland had a budget deficit close to 8% of GDP, which is above the European Union targets.

In terms of public debt, the country continues to maintain very low levels, with a rise last year to approximately 55% of GDP.

With regard to the labour market, the unemployment rate of circa 12% in 2009 was maintained during 2010.

In this same year, inflation in the Polish economy reached an average for the year of 2.6%, and being higher in the food, beverages and tobacco category, where it reached 3.2%.

The zloty started the year on a valuation path, although it had a sharp devaluation during the second quarter of 2010. As from the middle of the year, this trend was reversed, based on the positive signs shown by the Polish economy. In overall terms for the year, the Polish currency had a 3.3% increase in value against the Euro, compared to the exchange rate at the end of 2009, and it ended the year with a rate against the Euro of 3.975.

The Polish Central Bank maintained its reference interest rate at 3.5%.

Modern Food Retail Sector

The financial crisis that began in 2008 continued to have a strong influence on the Polish retail market, which only grew 3.0% in 2010, significantly below 2009 (4.9%) and 2008 (8.9%). In this market, the segments with the most significant growth are the discount and convenience stores.

The discount segment continues to grow sharply (+21.7% compared to the previous year), which is the result of an increase of 1.9 p.p. in market share, which went from 10.2% in 2009 to 12.1% in 2010. Proximity and low prices are currently the factors that best serve the needs of the Polish consumers, which is the reason for the success of this segment.

The weight of the three largest formats in Food Distribution (hypermarkets, supermarkets and discount stores) increased to 38.7% at the end of 2010, compared to 35% in 2009. It should be noted that simultaneously, the total number of stores operating in the Polish food market dropped by 1% during the year.

The Private Brand area entered a new stage in its development, with the launch of some new products by the players in the premium and convenience segments and a significant increase in the remaining players' Private Brand assortment.

Polish consumers have been increasing their preference for these products. According to a study by Nielsen, 48% of Poles stated that it was sensible to buy Private Brand products (in 2008 only 39% stated this). In addition, 39% of Poles stated that they believe that the quality of these products is at least equal to the quality of the manufacturing brands (6 b.p. more than the previous year).

The Polish market continued to consolidate during the year under review, with the main players acquiring small retailers. The main operations in this market included the acquisition of 35 Inter Kram stores in the West of Poland by Eko Holding, the purchase of Aldik by Emperia and in the last quarter of 2010, the agreement for selling Emperia Holding to 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 Corporate; APED; Uniarme; AREST; CIES.

3. Group's Performance

3.1. Main Projects of 2010

The Group's main business models - Biedronka, Pingo Doce and Recheio - which went through more or less demanding repositioning processes, are now presenting their consumers and customers with clear, valuable commercial propositions, building their growth strategies on business concepts that the Group dominates and in which it has accumulated solid experience.

Within this concept, the Jerónimo Martins distribution Banners are clearly: i. food solution providers; ii. price leaders and cost efficiency leaders; iii. operating in proximity to the customer; and iv. with differentiating aspects based on areas that the Group dominates in terms of knowledge and scale - Perishables, Private Brand and Quality (products, packaging and stores).

This strategic focus requires the Banners to have a dynamic management that leads to the respective commercial propositions being strengthened every year in light of the consumers' expectations and needs.

On the other hand, the scale and leadership in each format are essential as catalysts for the success of this strategy and, in this context, the Management has defined the Jerónimo Martins investment plan as a strategic priority.

3.1.1. Strengthening the Commercial Proposition

For Biedronka, which operates in a country where the economy's growth leads to a change in consumer patterns, the Company's average basket's growth potential is one of the main sources of sales increase per sqm.

Year after year, the Company has overcome the challenge of reviewing its assortment, leading to the replacement of certain products with others more suited to the Polish consumers' needs.

The scale of the Biedronka operations, with 1,649 stores, enables the Company to have contact with different consumption realities, depending on the level of income in the different parts of the country. This level of experience makes it possible to progressively develop the assortment, in order to follow, and even anticipate, the development of the consumption patterns. This has played an essential role in Biedronka's like-for-like sales growth, which in 2010 reached 11.6%, helped substantially (+6.8%) by the increase in the average purchase value.

Along with the review of the assortment and replacement of some basic products for other more appropriate ones within the same category, the Company also identified some categories that it considers to be essential for the future development of the average basket, which have been receiving special attention.

Pingo Doce, which operates a clear and stable commercial proposition, has received growing consumer recognition and preference and in 2010 began the process of bringing the Banner to a new, personalized dimension, with greater emotional proximity to the consumers.

Thus, while maintaining its policy for competitive and stable prices, the Company continued to invest in its differentiation pillars - Perishables, Private Brand and Take Away and further endeavoured to increase the Banner's notoriety.

Last year, the brand's notoriety was developed through a new communication line, which began in the fourth quarter of 2009. Investment in advertising substantially increased and over the year, Pingo Doce became leader in overall declared recollection.

With regard to its differentiation, the Company continued to pay particular attention to the quality and variety of its Perishables assortment, based on its experience in national and international sourcing, logistics operations and store operations.

Perishables represent 34.3% of the Banner's sales and form a category that the consumers acknowledge to be one of the brand's positive differentiating factors.

Pingo Doce has been assuming an ever more active role as a supplier of a wide variety of food solutions and has now developed a Take Away operation, which has proven to be an important mainstay for differentiation and loyalty and for boosting sales in the remaining categories. Take Away sales are already represented in 214 of the Company's 349 stores and there are a total of 33 restaurants in operation.

All together, the work carried out on the commercial proposition and on its notoriety helped to reinforce Pingo Doce's leadership in terms of the number of regular customers with an impact on the like-for-like sales growth, which reached 7.2% for the year.

In 2010, Recheio had to once again operate in a tough environment, with the two main target markets - Traditional Retail and HoReCa - once again posting negative growth.

The Company anticipated this situation right at the beginning of 2010 and reinforced its offer and competitiveness in terms of the categories that are essential for its customers, such as Perishables.

Recheio has paid special attention to the quality, variety and price competitiveness of the Perishables and by capitalising on the Group's experience and scale in this area, reinforced the Banner's value proposition and consolidated its differentiation. This category represents 14.9% of Recheio's sales and grew 20.5% in 2010, reinforcing the customers' image of the brand as a food specialist.

In parallel with the investment on Perishables, the Company carried out a series of specific events (e.g. cooking conferences for professionals), which made it possible to boost sales and, at the same time, increase its proximity to its customers and their specific needs and expectations.

As a result of this clear customer focus, in a particularly challenging environment, Recheio posted a 3.2% like-for-like sales growth, strengthening its market share.

3.1.2. Group's Investment Plan

Investment plan, along with the excellence of the store operations, which are always focused on the consumer's needs, is the fundamental of growth and value creation for Jerónimo Martins.

	New Stores		Refurbished 1		Closed Stores
	2010	2009	2010	2009	2010	2009
Biedronka	197	163	116	51	14	56
Retail Portugal 2	7	10	27	22	1	10
Recheio 3	3	0	2	1	0	0
Other Businesses	28	32	16	6	7	9

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

In 2010, Jerónimo Martins opened 207 food retail stores, the majority of which (197) were in Poland, under the Biedronka Banner. In Portugal, despite the downward trend in the opening of new food retail spaces, Pingo Doce continues to be committed to achieving organic growth and to being ever aware of all the opportunities for reinforcing its market position. Within this context, in 2010, seven Pingo Doce stores were opened in proximity locations.

Recheio also concentrates its expansion targets as a means of strengthening its proximity with its customers. Therefore, by opening three stores in 2010 (Fátima, Évora and Vila Franca de Xira) it was able to reinforce the Banner's national presence in key locations for the HoReCa market.

Focus on growth and the ambition of the Group's investment plan are accompanied by a careful analysis of the value that each investment must create, with constant concern for further analyses and criteria that make it possible to identify and prioritize the projects, according to the value they create for the Group.

Thus, the Group's investment policy will continue to privilege the organic expansion of its operations in Poland.

Investment in refurbishing and maintenance was another of Jerónimo Martins' priorities last year, which accounted for 232.7 million euros. These investments play an essential role in the sustained growth of the like-for-like sales and are indispensable for optimising the purchasing experience of its customers and clients, promoting their loyalty.

Refurbishments also provide a dynamic adaption to the needs and demands of the consumers. On this particular note, the reformation of the hypermarket concept should be highlighted, which began with the refurbishing of the Braga hypermarket, which met with very positive approval from store's visitors.

Annual Report 10 Consolidated Management Report - Creating Value and Growth The Group's Performance

						(€ ' 000,000)
		2010			2009
Business Area	Expansion1	Others2	Total	Expansion1	Others2	Total
Poland	150.8	119.9	270.7	136.4	45.8	182.2
p.m PLN '000 000	602.1	478.9	1,081.0	588.5	197.5	786.0
Biedronka	120.4	100.8	221.1	131.9	41.4	173.4
Logistics and Head Office	30.4	19.1	49.6	4.5	4.4	8.9
Retail Portugal	35.7	80.1	115.8	45.1	67.7	112.8
Stores	35.3	77.8	113.0	45.1	60.1	105.2
Logistics and Head Office	0.4	2.4	2.8	0.0	7.5	7.6
Cash & Carry	13.8	15.4	29.2	0.0	11.2	11.2
Madeira	0.0	12.4	12.4	0.0	1.0	1.0
Food Distribution Portugal	49.5	107.9	157.4	45.1	79.9	125.0
Total Food Distribution	200.3	227.9	428.1	181.5	125.7	307.2
Manufacturing & Services	1.2	4.8	6.0	1.3	3.6	4.8
Total JM	201.5	232.7	434.2	182.8	129.2	312.0
% do EBITDA	30.9%	35.7%	66.5%	34.6%	24.5%	59.1%
1

New Stores and New Distribution Centres

2 Refurbishing, Maintenance and Others

Taking into account the constant monitoring of the contribution of each store, 15 were closed (food retail), as they did not fulfil the minimum profitability criteria or because they did not fit into the Banner's strategic positioning, or as the result of replacing a store that was in close proximity to another existing one.

At the end of last year, the transfer of ownership of the building where the Azambuja Distribution Centre is located was finalised.

3.2. Consolidated Activity of 2010

For Jerónimo Martins, 2010 represented another year of strong growth, substantially reinforcing the relevant size of the Group.

The performance achieved reinforced Biedronka and Recheio's clear leadership, significantly enhancing Pingo Doce's market position, which is progressively proving itself to be the most relevant operator in the food sector.

After a very positive contribution from its main business areas, Jerónimo Martins ended the year with around 8.7 billion euros of sales, EBITDA above 650 million euros and net results of over 280 million euros.

Consolidated Net Sales

In 2010, the Group's distribution formats maintained a very competitive commercial proposition and a strong commitment to the objective of strengthening their market leadership.

Consolidated Net Sales

	2010		2009		Δ %		LFL
	Eur Tho.	% total	Eur Tho.	% total	Zloty	Euro
Sales & Services
Poland - Biedronka	4,807,166	55.3%	3,724,684	50.9%	29.8%	29.1%	11.6%
Retail Mainland	2,995,109	34.5%	2,708,311	37.0%	n.a.	10.6%	7.2%
C ash & Carry	720,508	8.3%	688,544	9.4%	n.a.	4.6%	3.2%
Madeira	141,888	1.6%	131,552	1.8%	n.a.	7.9%	14.5%
Manufacturing	236,045	2.7%	237,755	3.2%	n.a.	-0.7%	-0.7%
Mkt, Repr. and Rest. Services	90,125	1.0%	87,159	1.2%	n.a.	3.4%	-3.3%
Consolidated Adjustments	-299,725	-3.4%	-260,896	-3.6%	n.a.	14.9%	n.a.

Total JM	8,691,115	100.0%	7,317,108	100.0%	n.a.	18.8%	8.7%
p.m. Retail Portugal (store sales)	2,749,266		2,500,799			9.9%

Consolidated sales grew 18.8% (+13.9% at a fixed exchange rate) to 8.7 billion euros.

The year's sales performance reflects the strong like-for-like growth of the Biedronka (+11.6%), Pingo Doce (+7.2%) and Recheio (+3.2%) Banners, as well as the remarkable capacity to implement Biedronka's expansion with 197 new locations being opened in 2010, ending the year with a total of 1,649 stores.

Consolidated Sales (Euro Million)

Contribution to Consolidated Sales Growth (Euro Million)

In Poland, for the year under review, Biedronka posted a sales growth of 29.1% (+19.5% in zloty), reaching 4.8 billion euros. The double-digit like-for-like growth and the opening of new stores contributed towards this remarkable performance.

Biedronka ‐ Net Sales (Euro Million)

With regard to the like-for-like sales, in 2010 Biedronka posted a growth of 11.6%, as a result of the strong performance throughout the four quarters of the year. Inflation in the Company's average basket reached a cumulative 1.4% for the year.

Biedronka Like-for-like Sales Growth (Local Currency)

Contributing towards this like-for-like growth were the increase in the number of store visits and more especially, the progression of the average basket, which benefits from a dynamic strategy for constantly adapting the value proposition to the main needs and expectations of the Polish consumers.

With regard to the store network expansion plan, of note is the Company's capacity to implement this in a year in which the extremely adverse weather conditions in May and December did not prevent Biedronka from carrying out 197 openings. Following the normal store network optimisation programme, 14 locations were closed and Biedronka ended 2010 with a total of 1,649 stores, a growth of 15.2% in the Company's sales area.

In Portugal, Pingo Doce and Recheio made a greater effort towards differentiating their commercial propositions, in which the quality of the Perishables and Private Brand continued to play an essential role. Both Banners are aware of the challenges that the economic environment has been imposing since 2008 and carried out more aggressive commercial activities for communicating with their consumers and customers.

With its policy for stable and very competitive prices, the work it carried out in the areas of Perishables and Private Brand and by continuing with the new advertising project that began in October 2009, Pingo Doce posted a like-for-like growth for the year of 8.4% in the supermarkets (+7.2% in the entire store network).

The like-for-like performance remained robust throughout the four quarters of the year and even in the last quarter of 2010. With the economic environment under pressure, the normal commercial aggressive trend that is typical of the Christmas season and also the more demanding comparative terms (like-for-like in the last quarter of 2009 had already shown a substantial acceleration compared to the previous quarters), Pingo Doce maintained a healthy like-for-like performance, reaching 6.4% in the supermarkets (fourth quarter 2010).

Recheio posted a 4.6% sales growth, as a result of its sound 3.2% like-for-like and the opening of three new stores which, as mentioned, reinforced the Banner's national presence in critical locations for the HoReCa market.

Also as mentioned, Recheio achieved this sales increase in sectors with negative growth - Traditional Retail and HoReCa. Within this context, the Company focused on its commercial relationship with its customers, by implementing campaigns and innovative events, and continued developing its essential strategic pillars: Perishables and Private Brand.

Recheio - Net Sales (Euro Million)

In Madeira, sales grew 7.9%, the Company having carried out remarkable reconstruction work on its two main Pingo Doce stores on the island, which had been closed between February and June, as a result of the storm that hit the region.

In Manufacturing, the repositioning work in some categories and the greater commercial aggressiveness paved the way for a positive evolution in key category volumes such as ice tea, personal care, ice cream and olive oil. The 0.7% negative growth in the Company's sales essentially reflects the effort to reposition some categories, which is anticipated to be fundamental for their growth.

In the area of Marketing, Representations and Restaurant Services, sales grew 3.4%, with a positive contribution from the five new represented brands which reinforced the Company's brand portfolio.

Consolidated Operating Results

	2010		2009	10/09
	Eur Tho.	%	Eur Tho.	%	Δ%
Net Sales & Services	8,691,115		7,317,108		18.8%
Gross Margin	2,042,136	23.5%	1,717,734	23.5%	18.9%
Operating C osts	-1,389,552	-16.0%	-1,189,686	-16.3%	16.8%
EBITDA	652,584	7.5%	528,048	7.2%	23.6%
Depreciation	-190,775	-2.2%	-168,312	-2.3%	13.3%
EBIT *	461,809	5.3%	359,736	4.9%	28.4%

* 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.

The strong increase in sales was exceeded by the growth in consolidated EBITDA, which reached 652.6 million euros, 23.6% more than the previous year, with the respective margin increasing to 7.5% of the consolidated sales (7.2% in 2009).

Contribution to Consolidated EBITDA Growth (Euro Million)

This evolution of the EBITDA margin mainly reflects Biedronka's performance, strengthened by the growing scale of the operation. With a double-digit like-for-like growth and the capacity to implement, year after year, the most aggressive store opening plan in the Polish market, the Group's Banner is the cost leader in the food distribution sector in Poland.

This cost leadership enables Biedronka not only to maintain its price leadership in the market, but also to significantly increase its EBITDA margin. Thus, in 2010, the EBITDA generated by the Company reached 391.6 million euros, a growth of 44.4% in Euros (+33.7% in zloty), representing 60.0% of the EBITDA generated by the Group.

In Retail in Portugal, the EBITDA generated reached 186.5 million euros, a growth of 3.8% compared to last year, and the respective margin reaching 6.8% (7.2% in 2009).

The evolution of the EBITDA margin reflects the combination of different factors that had an impact on the Company's margin throughout the year.

Pingo Doce followed the management's decision to strengthen the brand's notoriety and increased its investment in advertising to levels in line with the average for the sector. This investment is anticipated to be strategic for the sustainable increase of the Banner's market share through its like-for-like sales performance.

Apart from this management decision, there were other impacts, the most relevant arising from the deflation in the Pingo Doce basket in the first half of the year, which was more significant than initially anticipated, and did not allow for the normal dilution of costs, especially those dependent on volume evolution or with a positive inflation. Although inflation reverted to positive values in the second half of the year, it was not possible to totally reverse the impact felt in the first six months of 2010.

Although this was another year of contraction for the Traditional Retail and HoReCa segments, Recheio's EBITDA reached 44.4 million euros, 7.2% up on the previous year, an increase of 20 b.p. in the respective margin to 6.2% of sales.

The Group's Cash & Carry chain successfully anticipated the tough market situation and began 2010 with the clear objective of obtaining sales growth, which was supported by an activity plan geared towards key categories for its customers.

This solid performance in terms of operating margin reflects the success of the promotional campaigns and events directed at increasing sales, which with the strong acceptance of the customers and suppliers, led to a healthy sales growth and consequently to a strengthened EBITDA.

In Manufacturing, the EBITDA margin was 14.4% (15.3% in 2009), the EBITDA generated reaching 34.1 million euros. This evolution reflects two essential factors: the re-positioning of some key products as a strategic action to increase market share and the increased marketing support to key brands within the Company's portfolio.

It is expected that the activities that began in 2010 will lead to stronger market positions, which are fundamental for a sustained sales performance.

	2010		2009	10/09
	Eur Tho.	%	Eur Tho.	%	Δ%
EBIT*	461,809	5.3%	359,736	4.9%	28.4%
Net Financial Results *	-67,872	-0.8%	-70,435	-1.0%	-3.6%
Non Recurrent Items *	-15,109	-0.2%	-10,410	-0.1%	45.1%
EBT	378,828	4.4%	278,891	3.8%	35.8%
Taxes	-79,056	-0.9%	-55,624	-0.8%	42.1%
Net Profit	299,772	3.4%	223,267	3.1%	34.3%
Non Controlling Interest	-18,756	-0.2%	-22,918	-0.3%	-18.2%
Net Profit attr. to JM	281,016	3.2%	200,349	2.7%	40.3%
EPS (euro)	0.45		0.32		40.3%
C ash Flow per share (euro)	0.82		0.69		18.6%

Consolidated Net Results

_______________

The net result attributable to Jerónimo Martins reached 281.0 million euros, a growth of 40.3% compared to the previous year, corresponding to earnings per share of 0.45 euros.

Non-recurring results to the value of 15.1 million euros include, apart from provisions and impairments of various natures, an impairment of 4.5 million euros for the writeoff of the Feira Nova brand and the adjustment of 5.0 million euros to the fair value of assets classified as available for sale.

^* 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 Results 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 Group's invested capital remained at practically the same level as the previous year, despite the Jerónimo Martins investment plan having been totally implemented, to the value of 434.2 million euros and which was, to a large extent, financed through working capital, which reached 223.4 million euros in 2010.

Balance Sheet		(Euro Tho.)
(Eur Tho.)	2010	2009
Net Goodwill	746,811	736,633
Net Fixed Assets	2,309,381	2,101,566
Net Working Capital	-1,424,859	-1,201,479
Others	78,010	120,976
Invested Capital	1,709,343	1,757,696
Debt	781,823	796,296
Leasings	71,575	84,560
Accrued Interest & Hedging	25,188	30,914
Marketable Sec. & Bank Deposits	-301,054	-219,769
Net Debt	577,532	692,000
Non C ontrolling Interests	286,706	287,637
Share Capital	629,293	629,293
Retained Earnings	215,813	148,765
Shareholders Funds	1,131,812	1,065,695
Gearing	51.0%	64.9%

Apart from the positive impact of the valuation of the zloty, the evolution of Fixed Assets essentially reflects the investment plan, 62.4% of the total programme being invested in Poland. Expansion continues to be strategic for allocating the Group's means and absorbed 46.4% of the total investments for the year, covering 207 new stores (food retail) and 2 new distribution centres.

Management of working capital continued to be a priority for all the business areas and it should be mentioned that following the work carried out in 2009, which led to a reduction of three sales days in the Group's total stocks, in 2010, Pingo Doce and Recheio once again made a sustainable reduction in the level of stocks in their operations, which was reflected in two less sales days of stocks on a consolidated basis for the Group.

Profitability of Invested Capital

* Reclassified values – see details in "Financial Glossary".

The Pre-Tax ROIC evolution reflects the success of implementing the strategy that had been drawn up for the various business areas.

A clearly prioritised investment plan, following a careful process for selecting projects and the strict management of working capital, together with a sales performance focused on organic growth and like-for-like sales, led to the increase in the capital turnover in all the business areas. For the Group as a whole, the capital turnover went from 3.8x in 2009 to 4.5x in 2010.

This solid performance, together with the positive EBITA evolution, boosted in large by Biedronka's performance, took the Group's Pre-tax ROIC up to 23.4%.

Debt Breakdown

With regard to consolidated debt, the priority last year was to maintain the Group's levels of liquidity. The work that was carried out made it possible to maintain the committed short-term loans, minimizing the cost of this availability, safeguarding financing flexibility in case this should be required.

Following the work carried out in 2009, which increased the consolidated debt maturity, it is believed that this fits the investment and cash flow profiles.

Annual Report 10 Consolidated Management Report - Creating Value and Growth The Group's Performance

DEBT BREAKDOWN			(Euro Tho.)
		Maturity
	2010	1 to 5 years	> 5 years
Long Term Debt	594,974	594,974	0
as % of Financial Debt	76.1%
Maturity	2.4
Bond Loans	340,000	340,000
Private Placement	80,537	80,537
Fair value adjustment	-1,309	-1,309
Commercial Paper	50,000	50,000
Other LT Debt	125,746	125,746
Short Term Debt	186,850
as % of Financial Debt	23.9%
Financial Debt	781,824
Maturity	2.0
Leasings	71,575
Accrued Interest & Hedging	25,187
Marketable Securities & Bank Deposits	-301,054
Net Debt	577,532
% Debt in Euros (Financial Debt + Leasings)	88.1%
% Debt in Zlotys (Financial Debt + Leasings)	11.9%

Jerónimo Martins in the Stock Market

In 2010, six investment firms began covering Jerónimo Martins: HSBC, ING, Jefferies International, Liberum Capital, Macquarie and Morgan Stanley, whilst four of the firms that covered the shares in 2009, have at the end of the year, the target price and recommendation under review, due to the change in analysts (Banif, BBVA, Nomura and Redburn) and another stopped covering the shares (Intervalores). Thus, at the end of 2010, 26 analysts followed Jerónimo Martins' share record, although only 22 actually had an up-to-date recommendation.

Underperform/Reduce Hold/Neutral Buy/Accumulate/Add

In 2010, the main Portuguese Stock Market Index - the PSI20 - devalued by 10.3%, the Portuguese Stock Market having the second worst performance in Europe (only surpassed by the Spanish Index) and the 10th worst performance in the world. Despite the Index having increased 3.6% in December, this was not enough to compensate the losses in the first eleven months of 2010 (-13.5%).

In 2010, the Group's share price increased 63.2% compared to the previous year, having the best performance on the PSI20. With regard to market capitalisation, Jerónimo Martins ended the year in fourth place in the PSI20 Index (7.2 billion euros capitalisation), representing 12% of the total value of the Index. The increase in the value of Jerónimo Martins' shares (+63.2%) in 2010 was not only above the average for the retail sector, which increased by 13.8%, but also the best performance among all the benchmark companies (Ahold, Colruyt, Carrefour, Casino, Delhaize, Metro, Sainsbury, Tesco and Walmart).

Jerónimo Martins' shares registered, in liquid terms, an average daily trading volume of 1,163,730 shares during the year, around 14.4% down on 2009.

For a more detailed analysis see Corporate Governance.

Annual Report 10 Consolidated Management Report - Creating Value and Growth The Group's Performance

Jerónimo Martins Financial Performance 2006-2010

					(€' 000.000)
	2010	2009	2008	2007	2006
BALANCE SHEET
Fixed Assets
Net Goodwill	747	737	734	416	385
Net Intangibles Assets Net Tangible Assets	117 2,193	99 2,003	93 1,875	80 1,671	61 1,317
Financial Investments	60	72	73	61	92

Working Capital	-1,425	-1,201	-1,065	-863	-667
Long Term Assets	69	69	63	63	61
Income Tax Provision	-22	0	-4	-1	-2
Deferred Taxes	-30	-20	8	18	26
Invested Capital	1,709	1,758	1,777	1,443	1,274
Net Debt
Financial Debt Leasings	782 72	796 85	946 102	713 79	606 47
Accrued Interest	25	31	22	52	26
Marketable Securities and Bank Deposits	-301	-220	-224	-264	-173
Shareholders Loans	0	0	0	0	0
Non Controlling Interests	287	288	281	287	275
Equity	845	778	650	577	492
INCOME STATEMENT
Net Sales & Services	8,691	7,317	6,894	5,350	4,407

EBITDA EBITDA margin	653 7.5%	528 7.2%	473 6.9%	351 6.6%	319 7.2%
Depreciation	-191	-168	-158	-127	-107

EBIT EBIT margin	462 5.3%	360 4.9%	315 4.6%	225 4.2%	212 4.8%
Financial Results
Net Interest	-62	-66	-65	-52	-39
Other Financial Costs/Income	-6	-5	-20	-7	-3
Non Recurrent Items *	-15	-10	-8	22	20
EBT	379	279	222	188	189
Income Tax	-70	-23	-43	-26	-21
Deferred Tax	-9	-32	-3	-11	-17
Net Income	300	223	176	151	151
Non Controlling Interests	-19	-23	-13	-20	-35
Net Income attributable to JM	281	200	163	131	116
Cash Flow	515	434	345	266	255
MARKET RATIOS **
Total Shares	629,293,220	629,293,220	629,293,220	629,293,220	125,858,644
Own Shares	859,000	859,000	859,000	859,000	171,800
EPS (EUR)	0.45	0.32	0.26	0.21	0.92
Cash Flow per share (EUR)	0.82	0.69	0.55	0.42	2.03
Share Price at the Lisbon Stock Exchange
High (EUR)	12.58	7.05	6.40	5.59	3.52
Low (EUR) Average (closing) (EUR)	6.33 8.63	3.07 4.97	3.22 4.92	3.43 4.37	2.55 2.85
Closing at year end (EUR)	11.40	6.99	3.97	5.40	3.40
Market Capitalisation (31 Dec) (EUR 000.000)	7,174.00	4,396	2,498	3,398	2,140

* 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.

** Share price for 2006 was adjusted by the stock split of May 2007.

4. Business Areas Performance

4.1. Food Distribution - Portugal

4.1.1. Food Retail – Pingo Doce

Message from the Management

"In 2010, the year in which it celebrated its thirtieth anniversary, Pingo Doce entered a new dimension. Following its successful repositioning process, Pingo Doce managed to keep up with consumption development and consumer expectations, entering a new dimension that has brought affection and a human face to the brand, developed through advertising campaigns.

2010 was also the year in which the new store concept was developed - a Pingo Doce with around 6,400 sqm and also the year in which the Company discovered another differentiation pillar – Meal Solutions (Take Away and Restaurants). Take Away sales recorded a solid growth, this category proving to be a winning bet that responds to a growing need for the offer of ready-made, high quality and tasty food at really low prices. Once again, Pingo Doce therefore acts as an enabler.

The performance accomplished in 2010 was very positive. In counter-cycle with the economic environment, Pingo Doce grew in terms of sales, number of customers and in core customers, continuing to gain market share. It was the dedication of all the employees and the partnership with suppliers that made this result possible."

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.

2010 Performance

The year of 2010, was another year where the achieved goals demonstrate that Pingo Doce continues to win the trust of the Portuguese consumers.

The Company's sales posted a growth of 9.9% that on a like-for-like basis represented a significant growth of 7.2%, reaching a sales figure of 2,749.3 million euros. The EBITDA generated reached 186.5 million euros, which represents a margin of 6.8%.

This performance was the result of the focus on the brand's main strategic pillars - Price, Private Brand and Perishables - which year after year, have received the team's total commitment, now joined by the Meal Solutions area (Take Away and Restaurants).

The objectives for the year for Pingo Doce's Private Brand were clearly defined and included on one hand, continuing the selective enlargement of the assortment, and on

the other hand, maintaining the effort to improve the profitability and competitiveness that had been initiated in 2009.

The Company had defined that the stage for the mass launch of new references had terminated at the end of 2008 and that during this stage of the project's maturity, the objective would be to carry out precision launches to address specific identified needs, in order to reinforce the value proposition through a highly competitive price/quality ratio. Within this context, 2010 was the year of innovative launches and differentiating projects.

Throughout the year, 191 new references were launched, all in categories where the Private Brand offering was not yet sufficiently represented. The aim of these Private Brand launches is to promote the growth of the category to which they belong, which in mature markets implies a consequent gain in market share.

The year ended with a total of 2,011 references in the Private Brand assortment, whose sales reached a share of approximately 38% in the Company's sales.

Private Brand

2010 was also marked by the completion and total implementation of the refreshed image of the Private Brand packages, which apart from making the packages more modern and appealing to the consumer, made it possible to add relevant information on the products, namely their origin, curiosities or the main dietary benefits.

Nutritional information was updated and the nutritional analysis that was carried out enabled some improvements to be made to the existing products with regard to their formulae (the activities carried out on this matter can be found in detail in Promote Good Health through Diet section on Corporate Responsibility in Value Creation).

For the strategic pillar based on Perishables various key projects were implemented that strengthened the offering in various categories, being of relevance the launching of Veal and Pork meat with exclusive quality and origin.

In the fish department, partnerships with national fishermen were reinforced and import intermediaries continued to be eliminated.

In vegetables, a year of continued supply was attained, with prices for the consumer's main products being agreed for the entire period.

For fruit imports, an area which is the responsibility of the Group's International Sourcing, based in Brazil, direct purchase from producers was guaranteed.

Social trends, their influence on consumption habits and Pingo Doce's enormous know-how as a food specialist, particularly in the area of Perishables, are the reasons for the strong investment in the Take Away and Restaurant businesses.

In this context, the Meal Solutions business area together with Perishables and Private Brand, established itself as a differentiating strategic pillar of the Pingo Doce Banner.

Pingo Doce took a step forward with this in the offer presented to its customers: commercialising the usual, high quality, fresh products, but already cooked (following traditional recipes) and selling them at very competitive prices. Basically, quality, distinguishing, highly convenient meal solutions, accessible to the entire population.

Continuing the 2009 trend, in 2010 the increase in the number of stores with Take Away and Restaurants was very high. Currently, 214 Pingo Doce stores have a Take Away section with fresh food and customers already have 33 "Refeições no Sítio do Costume" (Meals in the Usual Place) restaurants at their disposal.

All traditional food sold in the stores and restaurants is produced in the seven central Pingo Doce kitchens where there are around 40 professional cooks and 200 kitchen assistants. These are located from North to South of the country and make it possible to explore regional gastronomic specialities to the full and capitalize on the daily transport of food to the stores.

In total, over five million tonnes of food were produced and over three million meals were served in the restaurants in 2010.

With regard to the Pingo Doce store network, investment focus was on its continued improvement. Last year, this investment amounted to 115.8 million euros, 7 stores being inaugurated and another 25 refurbished throughout the year.

Regarding the investment plan, one of the main projects was related to repositioning the business of the nine hypermarkets, which included changing the brand Feira Nova into Pingo Doce and the opening of a new store concept in Braga. Equally, the reduction in the sales area of the hypermarket format began, as a result of the disinvestment in various non-food categories.

Focused on the Pingo Doce brand differentiation variables, namely Perishables, Private Brand and Meal Solutions, these stores began to establish themselves as real food specialists, by offering a wider and more distinguished assortment, with the Banner's usual quality and prices, and by giving preference to service in the Perishables section, in an attractive and dynamic purchasing environment.

Outlook for 2011

For 2011, Pingo Doce will continue to develop direct partnerships with suppliers of Perishables and Private Brand, which will allow for greater control over product

innovation and quality, but also the reduction of prices. At the same time, the Banner will continue to improve the nutritional formulae of its products, thereby contributing towards providing the Portuguese people with access to information that leads to an ever more balanced diet.

With a stronger, more solid brand that is winning consumer preference, Pingo Doce is confident that it will be in a position to respond to the great challenges that will arise in what is anticipated to be a difficult economic environment and it will keep focused on the objective of increasing market share.

4.1.2. Food Retail - Operation in Madeira

Message from the Management

"2010 was a year for establishing Pingo Doce's leadership in Madeira Food Retail, as a result of the defined strategy for the business through a competitive pricing policy, high quality offering of Perishables, growth in Private Brand products and improvement to the Restaurant service offering.

The year was also marked by a storm that devastated the region and leaded to the closure of Pingo Doce's two most important stores for 3.5 months, having the Banner's remarkable capacity to retain customers allowed the recovery of the total sales level.

In the Wholesale market, as a result of the improvement to the service and of the aggressive pricing, Recheio maintained its leadership position, with a remarkable growth in the volumes sold.

Strengthening the leadership positions, by increasing the volumes sold, was the Company's focus in 2010 and it will continue to be for the next few years. "

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.

2010 Performance

For Pingo Doce and Recheio, 2010 was a year for strengthening their leadership in Madeira.

Together, the Group's Banners operating in Madeira posted a sales growth of 7.9%, reaching 141.9 million euros last year.

On 20th February there was a storm in Madeira which caused immense damage, namely in Funchal and Ribeira Brava. As a consequence of this event, the Anadia and Dolce Vita Pingo Doce stores were closed until 7th June.

Despite the closure of the Banner's two most important stores for three and a half months, Pingo Doce managed to significantly recover its level of sales.

Hence, Pingo Doce's Banner presented an excellent sales performance with a growth of 9.8%, closing 2010 with sales of 107.1 million euros. To achieve this, Pingo Doce's ability to retain its customers was essential, which led to gains in market share.

This performance is a reflection of Pingo Doce's commercial proposition in Madeira, in a year in which the competition inaugurated three stores, but without any significant impact on the chain.

Like-for-like sales posted a growth of 19.2%, in a year in which it should be highlighted that there was a deflation in the Banner's average basket of 0.7%.

These results reflect the adjustment that was made to the strategy as from the second half of 2008, focussed on competitive prices, high quality assortment of Perishables and development of the Private Brand.

Private Brands, strategically identified as a business priority, and for which the Pingo Doce Banner is well renowned for quality, continued to increase their weight in the Company's sales, now representing 36.4% of total sales (excluding Perishables).

Private Brand

In the Madeira Wholesale market, of note are the opening of a competitor cash & carry in the first half of the year and a clear fall in revenue from the HoReCa market.

In 2010, and despite the storm of 20th February and the subsequent impacts it had on the main hotel customers, Recheio achieved a solid sales performance, strengthened in the second half, leading to an annual growth of 2.3%, reinforcing its leadership in its segment, by reaching a turnover of 34.8 million euros.

Recheio redesigned its distribution strategy, in order to significantly improve its service level to the hotel and restaurant industry, with clearly positive results.

The EBITDA generated in Madeira reached 6.7 million euros, a margin of 4.7%, which proves the high level of resilience to the closure of its main stores between February and June.

Last year, as a consequence of the storm of 20th February, Pingo Doce Madeira invested around 10 million euros in the complete refurbishing of its Anadia and Dolce Vita stores. These two stores adopted the most recent Pingo Doce store model, which are the most modern and innovative units in the market.

Also some small refurbishments were made in the area of Perishables, store environment and restaurant service in Machico, Cancela, Calheta and Câmara de Lobos stores.

Annual investments totalled 12.4 million euros.

Also concerning capex, it should be noted that in 2010, through an improvement to the logistic and replenishment processes, it was possible to reduce stocks by 4 sales days.

Outlook for 2011

In 2011, Pingo Doce in Madeira will focus on the strengthening of its leadership position in the food retail market, by optimizing its offering in the chain's strategic pillars: Fresh Products, Private Brand, Meal Solutions and the most competitive prices in the region.

A considerable investment will also be made in the bakery area, with a view to making the Company a benchmark in the area, within the Madeira market.

With regard to Logistics, the investment in efficiency improvements of the logistic and replenishment processes will be continued.

Recheio intends to continue strengthening its leadership position in the wholesale market, sustaining its growth in Fresh Products and in the solidity of its pricing policy.

The Company will invest in capitalizing on its customer base, through the increase in the sale of underdeveloped product families that are currently in the hands of local operators.

4.1.3. Cash & Carry - Recheio

Message from the Management

"For Recheio, 2010 was a very dynamic year, which closes with the Company's highest volume of sales and earnings of this last decade. In the year, Recheio significantly increased its market share, increasing the average ticket and the number of new clients.

This leadership consolidation in the Portuguese market is the result of the continued effort to provide training for its employees, but also of its daily attitude of independent thinking and innovation.

Focus on costs and on strict management of resources will continue not only to be a management policy but also a commitment to the Shareholders. This is the only way to maintain the business's competitiveness and sustainability in the difficult times ahead".

Mission

To meet all the needs of the Traditional Retail clients and HoReCa channel. To give the Recheio's clients 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 client and on the Company's efficiency is the best way of guaranteeing profitability and return on the Shareholders' investment.

2010 Performance

With regard to the context in which Recheio carried out its business, it should be noted that in 2010, despite the particularly difficult evolution in the sector, Recheio managed not only to surpass the 700 million euros sales barrier, but also to expand and renovate its store network.

The 720.5 million euros sales represent a growth of 3.2% in like-for-like sales and 4.6% in the total sales of the Company.

This sales performance was the result of the effort made to win 18.931 new clients, through various canvassing programmes. From this point of view of strengthening relationships with clients, it was developed promotional campaigns with high acceptance.

The HoReCa channel remained the main sales channel for Recheio and, on a cumulative basis for the year, presented a growth of 4.5%.

Annual Report 10 Consolidated Management Report - Creating Value and Growth Business Areas Performance

In the strategic categories, it should be noted that significant growths continued to be recorded, both in sections in which Recheio is already market leader (Drinks and Wine Cellar), and in sections in which it has made a considerable investment and effort to boost them, like Perishables, which posted a growth of 20.5% for the year, which already represent 14.9% of total sales and are becoming an ever more valuable instrument within the Company's value proposition.

Perishables

Important work was also carried out for the launch of new products and positioning of the Private Brands with which Recheio works: Masterchef, Gourmês and Amanhecer. As a result of these activities, sales of these brands increased 11.6% and the Private Brands' share in the Company's sales reached 17.1%. The most important vector for expanding the Private Brand will be to ensure a high level of innovation in the offering, in order to continue to increase this business area.

The Amanhecer brand was the major priority in 2010, 88 new references having been launched, ending the year with a total of 129 products. The aim of this project is to provide Recheio's independent retail clients with a Private Brand offering in key categories, enabling them to compete with Modern Retail, serving as an alternative with an excellent quality/price ratio.

With regard to the Masterchef brand, the set strategy continued to be implemented, in other words enabling this product brand to clearly help resolve the problems of the HoReCa channel clients. There are currently 1,147 references in the Masterchef range, while, in this stage of maturity in this project, new launches will be more selective.

The year's performance was also reflected on an EBITDA margin of 6.2% of sales, totalling around 44 million euros, where the overall performance made it possible to absorb the growth in costs as a result of the opening of new stores, resulting in a level of earnings clearly above the average for the sector.

2010 was also very important with regard to investments in the Recheio store network.

Three new stores were inaugurated in Fátima, Évora and Vila Franca de Xira, which added 7.2% of new sales area to the Company. A petrol station in Vila Real was also inaugurated.

Continuing its concern for maintaining the high standards of quality to which the Company has accustomed its clients, Figueira da Foz store was refurbished. A new store also opened in Setúbal to replace the previously held location in the area, which will make it possible to be properly prepared for the emerging touristic areas of Setúbal and Tróia.

In 2010, Recheio invested a total of 29.2 million euros.

Outlook for 2011

In 2011, the Company will continue to focus on increasing its market share and for that the key categories such as Perishables and the Private Brand play an essential role.

It is also expected that the stores opened in 2010 and the refurbishing investment contribute towards the 2011 sales performance and towards strengthening Recheio's presence in the markets where the Company operates.

The Amanhecer brand, especially designed for the Traditional Retail channel, has already reached a high level of notoriety and has gradually been adopted by the majority of Recheio's retail clients. It is hoped that this project gains even more notoriety with these clients, with the opening of two stores at February 3, 2011 under the Banner Amanhecer, in the centre of Lisbon and in Viana do Castelo, and Recheio clients who want to base their value proposition on the Amanhecer assortment.

4.2. Food Retail - Poland

4.2.1. Biedronka

Message from the Management

"2010 proved to be a year in which Biedronka managed to reinforce its leadership in the Polish market, based on the set strategy, offering a carefully selected product assortment and maintaining its policy of "every day low prices". The Company remained focused on the concept of total quality, reflected in the quality of the products and excellence in the service provided to its consumers, whose recognition and positive feedback are reflected in the operating profit achieved.

Various analysts estimate that there will be a positive growth in the Polish economy over the next few years. Biedronka's internal organization is prepared to take the maximum advantage of this market perspective, continuing to be confident in the future and in the increase of its sales and number of stores.

In 2010, the competition remained dynamic, attempting to develop its market position and Biedronka demonstrated that its comparative advantage comes from being able to continuously improve its success model, the main drivers of this sustained growth being like-for-like growth at a desirable rate and the execution of its expansion plans, together with operational focus on efficiency."

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.

2010 Performance

The 2010 performance has once again confirmed that Biedronka's concept is suited to the daily needs of the Polish consumer.

This strategy has recorded positive results even in the face of changes in the economic environment, showing the sustainability of the Company's value proposition in the face of tougher environments and its capacity to explore opportunities created by the economic climate and the market.

In this respect, 2010 was no exception. The consistent strategic implementation resulted in a like-for-like sales growth for the year of 11.6%, which together with the organic growth of 197 new stores, generated a total increase in sales of 19.5% compared to the previous year. The EBITDA generated reached 391.6 million euros, which represents a margin of 8.1%.

Consumer recognition was also reflected in the like-for-like growth of 4.5% in the number of visits and the 6.8% increase in the value of the average ticket.

Biedronka Net Sales Breakdown

As mentioned, focus on the quality, differentiation and innovation of the assortment continued to be the Company's key strategic pillars and they have remained consistent over the last few years.

This is only possible as a result of the long-term investment in local partnerships. The relationship with business partners, based on joint development and mutual trust, has led to solid partnerships, which enable Biedronka to maintain its competitive advantage and increase its market share in the majority of the product categories it offers to the Polish consumers.

It is important to highlight the significant changes and improvements made to the store environment and the focus on various key categories, geared towards convenience. It should also be mentioned that this continuous momentum of launching new product concepts and new categories has reinforced the assortment's exclusivity, through the development of the Private Brand, which, supported by the in & out campaigns, has led to an increase in the number of customers.

Productivity remained one of Biedronka's priorities, having always been one of its essential strategic drivers. With regard to this, in 2010 various projects were created covering a variety of areas.

On this subject, the following projects are highlighted: i. the store back-office, through a permanent link from the Company's information centre to the stores, speeding up the circulation of information; ii. the transport fleet control system, with access to all the information on routes, locations, loading times and conditions; iii. the promotion of electronic document creation in the administrative areas and automation of control reports, increasing the speed and depth of the analyses produced.

With regard to efficiency, but also supporting the planned expansion plan, emphasis goes to the opening of two new distribution centres, one in the North of the country and the other in the South (replacing an existing distribution centre), which reinforced the Company's logistic response capacity in these regions.

It is precisely in this area - logistics -, crucial for controlling costs and for increasing productivity, that apart from the investment in infra-structures, significant improvements were made to: i. delivery times; ii. supplier service levels; iii. the synchronisation of loading and unloading times; iv. the optimisation of trailer space; and also v. the increase in delivery punctuality to the stores.

Another essential part of Biedronka's strategy was the reinforcement of the "every day low price" policy, in a very competitive market, which is based on competitor promotional campaigns.

The store's traditional communication was therefore reinforced with publications directed at the consumer, merchandising posters and clear messages on the Company's pricing policy. It should be mentioned that the change in the store layout, whose application began in 2009, was implemented in the entire network in 2010.

With regard to the store network, Biedronka maintained the pursuit of its expansion plan as a strategic priority and opened 197 new stores, representing an increase of 15.2% of sales area and meaning the Company ends 2010 with a total of 1,649 stores.

Investments during the year, which amounted to 270.7 million euros, covered, apart from stores and distribution centres openings, the refurbishment of 116 stores in the existing network.

Outlook for 2011

For 2011, expansion will continue to play a key role in Biedronka's strategy, with the expectation of increasing its store network by 200 locations. Part of the expansion will be concentrated on reinforcing the Company's position in the main cities.

With regard to its value proposition, the Banner will maintain its usual dynamics, reinforcing innovation and offering convenience in the categories where the normal evolution of the Polish consumer creates opportunities.

Focus on productivity as a means of supporting its price leadership will remain an essential strategic pillar.

4.2.2. Apteka Na Zdrowie

Regarding the partnership agreement that was signed with the Portuguese National Association of Pharmacies, in order to develop a pharmacy retail businesses in Poland, in 2010 one more establishment was inaugurated in the Polish market and another was closed, thereby maintaining the number of units as 24.

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

This business area's performance continues to confirm the Group's expectations, with sales growth, in the same store network, reaching 19.5% compared to the previous year.

Throughout 2011 this business's development and potential will continue to be monitored, with strategic adjustments to its model.

4.3. Manufacturing, Distribution and Restaurants & Services

4.3.1. Manufacturing

4.3.1.1. Unilever Jerónimo Martins

Message from the Management

"Throughout 2010 Unilever Jerónimo Martins successfully focused on strengthening its market positions either through innovation or through repositioning of the value proposition in the sectors in which it operates.

2011 is expected to mark the start of a difficult period, due to the decrease in consumers' disposable income. Nevertheless, the Company is confident that it will finish this period with an increased share and stronger market position, due to the strength of its brands and the quality of its teams."

Mission

To work everyday to create a better future, helping people to feel good, look good and to live life to the full, with brands and services that are good for them and also for others.

2010 Performance

In a difficult economic environment, Unilever Jerónimo Martins achieved the goals it had set itself for 2010, demonstrating an ability to improve its position in the markets where it operates. Highlighting this fact is that the Company's market share grew by more than 20 basis points in aggregate terms.

During the year, Unilever Jerónimo Martins developed a number of initiatives in the categories where it operates, repositioning its product portfolio and covering not only the segments where it was already present but also those which the consumer is most price sensitive. This new approach, together with more aggressive advertising and a successful summer campaign for the out-of-home consumption channel, allowed sales to grow around 3% in volume over the preceding year. Also of note was the good performance of exports from the Company's factories to different Unilever subsidiaries in Europe.

2010 also signalled a successful effort by Unilever Jerónimo Martins to launch a wide range of innovations. Particularly well received by consumers was the entry of the Dove brand in the men's segment, the launch of the Knorr Stock Natura and a range of innovations by the Axe, Dove and Rexona brands in the deodorants category.

Notable in the margarine category was the launch of two new products at the end of the year - easy-spread Vaqueiro and Butter-Flavoured Planta, towards which the company has high expectations for these new products in 2011.

The Iced Tea category continued to progress in 2010, showing solid sales growth, which was greatly helped by the consolidation of the two-litre format and distribution and share gains in the Horeca channel.

The Ice Cream category also recorded significant sales and market share growth following strong campaigns for the 50th anniversary of Olá and implementation of the new "Share Happiness" communication platform where the investment in Magnum Gold here has been particularly successful, as well as the continued focus on Olá Original.

After the difficulties of 2009, the Food Solutions business recorded sales growth of 7.4% in 2010, following increased investment into customer promotions, through innovative customer loyalty programmes, as well as targeting Value for Money products and customers in the Social segment.

In addition to the overall positive performance in the markets in which it operates, the Company has fully met the goals set at the beginning of the year, regarding operating results and the freeing-up of working capital. The key to the positive performance was the combination of sales growth and maximisation of return on investment among the brands, both in terms of price and advertising or promotion.

It is important to highlight that the above-stated goals were achieved in an environment of strong deflation in the markets where Unilever Jerónimo Martins operates, which was only made possible through strict cost control at all levels of the Company.

Finally, the positive performance of the various manufacturing facilities deserves mention, since they once again contributed to the success recorded for the year, through their exports and continuous efficiency gains.

Outlook for 2011

In 2011, the Company anticipates that the consumer goods market will face increased difficulties as a result of the macroeconomic environment. However, Unilever Jerónimo Martins starts the new year confident that the work undertaken during 2010 will be key to strengthening the leadership positions it holds in the domestic market. The Company will continue to invest in product and communication innovation, continuing to position its brands competitively in the segments in which they operate.

4.3.1.2. Gallo Worldwide

Message from the Management

"In this first complete year of the Gallo Worldwide business's autonomy, the set objectives were fully surpassed. The effort to co-ordinate the team and consolidate the necessary processes for the Company to function autonomously continued in 2010. At the same time, the business processes in key markets (Brazil and Portugal) improved and the change to the business process in other markets that are below their potential was prepared. Alongside this, geographic expansion to new markets with potential began, namely China."

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.

2010 Performance

Within the domestic market, the year was marked by the distribution brands' aggressive pricing, both on olive oil and cooking oil. With regard to olive oil, the re-launch of the Condestável brand's image, as well as the launches of Gallo Dop Moura, Gallo Dip-it and Gallo Azeite Novo 2010-2011 harvest, made it possible to consolidate the olive oil market share in volume terms (26.4% in 2010 versus 26.2% in 2009 - Nielsen).

In the foreign market, the 2010 performance stood out for its increase of market share in volume in Brazil (Nielsen), the initiation of selling olives in that market, the entrance into China and the development of the brand in Venezuela and Angola.

The brand's consolidation and the success of the product launches in various markets were supported by the investment made in participating in the world's most prestigious olive oil challenges, having received various first prizes (namely the International Olive Oil Council's Mario Solinas Quality Award) and so many other positions on the podium of the best olive oils in the world.

Outlook for 2011

It is anticipated that there will be a degree of slowdown in the Brazilian market in 2011, 4.5% according to Bank of Brazil (7% in 2010), as well as a possible devaluation of the Real, both of which could contribute towards some business growth softening. In the remaining markets (except Europe and Venezuela) continued growth is anticipated. In the domestic market, the European Commission (EC) is forecasting a decrease in GDP and, as such, difficulties in the olive oil market, especially in the branded olive oil market.

4.3.2. Marketing, Representations and Restaurant Services

4.3.2.1. Jerónimo Martins Distribuição de Produtos de Consumo (JMDPC)

Message from the Management

"Although 2010 was tough for companies selling branded products in Portugal, the Company managed to respond to this expected reality and, as a result of the strong commitment and professionalism of the entire team, recorded another year of growth.

The future will continue to include new distribution channels and the strengthening of the portfolio of represented brands and this is where the team's efforts will be concentrated over the next few years."

Mission

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

2010 Performance

Food Division

Regarding JMDPC main division, the year's performance was positive, as a result of the growth of the represented brands Co-Ro, Heinz, Mandarim, Storck and Lorenz. The shrimp business, the Company's fourth most important represented brand also contributed towards the growth posted in 2010.

2010 was also the year for consolidating the Arla Foods business, as well as launching three new represented brands: Leche Pascual in the soya products and juices area, Solo Verdura in the area of pre-cooked frozen vegetables and Sam Mills in the area of special diet, namely through 100% gluten-free corn pasta.

Cosmetics Division

2010 was also a year for realigning the strategy for JMDPC's cosmetics division. Due to the existing concentration in the selective perfumery channel in Portugal, the Company decided to turn this division's focus to the Pharmacy and Parapharmacy channel, by launching the Korff brand in the make-up area.

Caterplus

Notwithstanding the demanding year that Caterplus experienced, its sales performance was very positive, reaching a growth of 10.4%, the increase in the

number of customers having been vital for reaching this goal. Also of note is the entrance of a new represented brand to the Company's portfolio, Hélios (jams).

Outlook for 2011

2011 is intended to be a year that sees the entrance of alternative growth channels/businesses for JMDPC. A consumer slowdown in Portugal is expected, and so it is indispensable to find development alternatives in order to sustain the Company's future.

4.3.2.2. Jerónimo Martins Restauração e Serviços (JMRS)

Message from the Management

"In 2010, JMRS strengthened the foundations of its growth, launching a new concept in the casual dining segment - Oliva - during the first half and consolidating its operations in the second half of the year."

Mission

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

2010 Performance

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

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

The year closed with 68 stores of differing concepts.

Jeronymo

This brand redefined its product portfolio in 2010 by introducing a set of innovations that were a success with its target customers, leading to like-for-like growth of 7.9% on the previous year.

Jeronymo closed the year with 12 Kiosks and 14 Coffee Shops.

Olá

Olá is the chain with the greatest number of stores in this segment, and it intends to maintain and consolidate its current leadership. In 2010, two stores opened and

another closed. The Brand currently has 34 own stores and five franchised stores, amounting to a total of 39 units.

Oliva

Oliva is a mediterranean-inspired restaurant that sets itself apart through its variety of preset dishes, with fresh ingredients, swiftly prepared in front of the customer, in a modern and unique environment. This concept was launched at the beginning of the year and while its acceptance by the Portuguese consumer remains uncertain, the pilot programme will continue with just one store, in Lisbon.

Chili's

The brand's first restaurant in the Portuguese market was opened in October 2008, in the casual dining segment, in association with Brinker International.

The concept was consolidated with the target customers in 2010, as the brand's sales targets were achieved, with like-for-like sales growing 13.9%.

4.3.2.3. Hussel

In 2010, Hussel, a specialised chocolate and confectionary retail chain, continued to focus on the variety of the assortment of products and the quality of the products offered.

The chain's sales recorded growth of 6.9% compared to 2009.

A new store opened at the beginning of December, and six other stores refreshed their image during the year.

Hussel ended the year running a total of 25 stores.

In 2011, the Company will maintain its focus on quality and innovation.

5. Outlook for 2011

5.1. International Macroeconomic Environment

World economic growth is expected to be positive. However, there is some uncertainty about the sustainability and dynamics of the current recovery of demand and economic activity in general.

It is not certain if the necessary conditions have been created to replace the monetary and budgetary stimuli with the sustained dynamics of private demand, when tense moments in the international financial markets persist, as well as the need to correct the budgetary imbalance in various countries.

It is important to remember that it was the series of stimuli from different economies that avoided the collapse in demand, and when these are removed, even gradually, demand will have to be fairly sound in order to guarantee sustained growth.

In addition, and taking into account the slow evolution of private domestic demand in some economies, which reflects on the one hand the correction in the excesses prior to the recession and on the other hand, the fear of the recession itself, it is necessary to heavily invest in exports in order to stimulate and promote growth.

Thus, although the developed economies are showing some improvement in exports, with the low levels of consumption and investment, they are only expected to grow approximately 2.5% in 2011. Coupled with this slow recovery, it is important to highlight the problem of unemployment, which remains at very high levels, despite showing some, albeit residual, decreases.

In the emerging economies, where the excesses prior to the recession were limited and where fears of this recession were much lower, a growth in the order of 6.5% is expected in 2011, taking into account the very positive consumption, investment and exports performances.

With regard to the financial system, although having recovered some confidence, it is expected that in 2011 there will be: i. high level of volatility; ii. various issues related to the risks of sovereign debts; iii. problems of financing; iv. decrease/removal of tax and political incentives and v. implementation of specific regulations for the banking sector.

The maturity of the sovereign debt in the more vulnerable economies of the Eurozone may cause some tension, as these economies may face refinancing problems. Any sign of disturbance in the sovereign debt markets may cause further instability in the financial system, which could affect the pace of the recovery.

With regard to commodities, in 2011, it is expected that they will reach new historic highs. The fears concerning sovereign debt would have to worsen substantially or China's growth would have to slow down much faster than expected to not confirm the trend in rising prices. In some cases, like copper, new maximum highs are expected. The same is expected for crude oil, since the 100 dollars barrier was already surpassed. With regard to gold, apart from benefiting from its status as a wealth reserve, it will also be sustained by the diversification of the central banks' reserves. The prices of cereals shot up in the last few months of 2010, getting close to the

records that were reached in 2008 at the peak of the food crisis and in 2011 they should continue to rise.

5.2. International Sector Trends

The beginning of 2011 is characterised by some uncertainty in the food retail sector, with regard to the evolution of demand in the developed economies and to its maintenance in the emerging economies.

The recent recession has provoked various changes in the consumer profile, some of which will remain even after the recovery of the world economy.

Consumers in the developed economies, who saw their purchasing power reduced or with very limited perspectives for any increase, became more conscious and objective about their purchases, placing even more value on the price and even less induce to impulse buying and superfluous goods purchase.

This change in profile implies changes to the point of purchase which moves over to discount, the new favourite format, the same applying to private brands in detriment to the industry brands. With regard to out-of-home consumption/meals, the recession caused these to be less frequent.

However, this change did not make the consumer any less demanding. The new consumer proves to pay even more attention to environmental and nutritional issues, namely to concerns related to the origin and composition of the products, packaging waste, garbage production and waste management, among others.

For the retailers operating in developed economies and consolidated markets, consumption growth expectancy is low and it is not expected that there will be much growth in sales.

Retailers who have focused on gains in efficiency, reduction in costs, process optimisation and strong balance sheets, may benefit from the economies of scale that they have created, and are well positioned to gain advantages over their competitors. This situation could result in a trend towards concentration in some developed economies.

With regard to the emerging economies, these would have a very positive and healthy economic growth over the coming years.

In these economies, it is expected that there will be a really significant improvement in families' standard of living and a consolidation of the middle class. The impact of this social change, which is reflected in the increase in purchasing power, will be one of the main sources of growth in the retail sector, with the market players seeking to attract this new class of consumer.

Consequently, the large international players will turn towards the emerging economies and those with greater demographics, especially those with the prospect of very high growth.

5.3. The Outlook for Portugal

Economic Perspectives

According to the latest projections from the Portuguese Central Bank, the Portuguese economy is expected to shrink 1.3% in 2011, following growth of 1.4% in 2010. This performance will result from the combination of a decline in domestic demand (reflecting the fall in consumption expenditure by both households and General Government and a further reduction of GFCF) with an increase of exports in line with the growth of external demand towards the Portuguese firms (insufficient to compensate the domestic demand negative impact).

The Portuguese economy will also be heavily curbed by the budgetary consolidation process as well as by a certain deleveraging dynamic of the private sector.

Private consumption will fall 2.7% in 2011, driven by a sharp reduction in durable goods consumption and a slowdown in non-durable goods consumption. The performance of private consumption largely reflects the limitations imposed by households' solvency, in an environment of particularly restrictive financing conditions.

The forecasted 6.8% reduction of GFCF in 2011 results from the decrease in public and private investment. This forecast, like that for private consumption, is also affected by the prevalence of restrictive financing conditions for banks in the international financial markets, which results in increasingly demanding criteria for granting new credit. Moreover, families' uncertainty over their permanent income level, particularly in view of labour market conditions, as well as the impact of demand growth prospects on companies' decisions, will also constrain private investment performance.

The forecast for exports indicates 5.9% growth in 2011. This reflects growth in exports of goods and services, particularly tourism. Regarding imports, it is expected a decrease of 1.9% in 2011. Essentially, this evolution is determined by the domestic demand, particularly in components with more imported contents.

The situation in the sovereign debt market will continue to restrict the national banking system's access to international wholesale debt markets. Accordingly, financing costs are expected to increase due to higher spreads and also more stringent criteria for approving new credit.

In relation to the labour market, the decrease of economic activity will lead to a 1.0% reduction in employment in 2011. This development reflects employment in the private sector as well as the reduction of the number of employees in Public Administration.

Following on from 1.4% growth in 2010, inflation is expected to grow 2.7% in 2011, in a context highly influenced by increases in indirect taxes. Hence, consumer prices should evolve in line with wage costs and import prices.

Modern Food Retail Market in Portugal

The macroeconomic context presents a negative picture, driven by the following: i. households' income trends; ii. the ongoing adverse situation in the labour market; iii. more restrictive credit access conditions; and iv. the expected slowdown in world trade growth. Given this, current projections can only mean an implicit reduction in forecast demand.

Those forecasts also reflect the impact of the budget consolidation measures. More specifically, the State Budget for 2011 includes measures that reduce households' disposable income, which therefore also makes a contraction of consumption inevitable. It is therefore expected that growth in food retail may be profoundly restricted by this environment.

Traditionally in recessions, the trend has been towards transferring consumption from outside the home to eating at home, and the consumer adopts more rational behaviour and is more sensitive to price.

Considering this context, the food retail strategy will include a strong focus on Private Brand products.

The pace of store openings will be in line with that observed in 2010, i.e. well below the levels registered between 2007 and 2009. Although there are over 250 active licences for opening new food retail stores, it is unlikely that a significant number of openings will occur given the current macroeconomic environment.

Lastly, it should be noted that, according to the latest figures published by the Portuguese Statistics Institute (INE), the consumer confidence indicator recorded a sharp drop in November and, in particular, in December. That drop fuelled the downward movement in place since November 2009, hitting its lowest since the series was created in March 2009.

Wholesale Food Market in Portugal

2011 is expected to be a year for the consumer's ongoing concern, especially regarding employment. It is envisaged that the trend for replacing out-of-home consumption with in-home consumption will continue. In terms of demand it is estimated that the HoReCa channel's turnover will fall again. Although in-home consumption may increase, Traditional Retail will continue to lose weight, influenced by the competitive dynamics of modern food retail.

With these perspectives in mind, it is envisaged that the cash & carry stores are going to be under a lot pressure due to the overall decrease in demand. The pressure on sales prices will grow and all players will have to find solutions to defend their market share.

5.4. The Outlook for Poland

Economic Perspectives

In 2011, the Polish economy will continue the positive path it has followed over the last few years, with an expected growth close to 4%.

Private consumption will continue to represent a substantial part of this growth, whilst investments will also make a positive contribution. With ongoing accelerated economic growth, unemployment is expected to drop during the year.

With regard to the budget deficit in 2010, taking into account the measures taken by the Polish Government, namely the increase in direct taxes, there should be a reduction in 2011, beginning a path towards the criteria set by the European Union.

In terms of Monetary Policy, as a reflection of the country's economic conditions, the Polish Central Bank is expected to raise the reference interest rates by not more than one percentage point.

It is probable, regarding the currency's behaviour, that following the valuation in 2010, the trend will be towards stability, although there may even be some valuation adjustments.

Modern Food Retail Market in Poland

As a result of the macro-economic environment, the food retail market should continue to grow and it is hoped, according to a study by PMR Corporate, that this growth may reach 5% in 2011.

The increase in the consumers' pace of life, mainly in the cities, places some pressure on consumption habits. With less time available for shopping and for preparing meals, the proximity, ease and speed of purchases and the availability of ready meals are ever more determining factors in the definition of consumer preferences.

The retail chains operating in the Polish market continue to have contradictory strategies and ways of operating. The premium supermarkets will continue to develop their private brands; the hypermarkets and supermarkets will adopt the cost efficiency strategies used by the discount stores.

The main market players will continue to invest in organic growth, limited by cash flow generation and available locations, the latter being more relevant in the larger formats.

In 2011, it is expected that there will continue to be a trend towards consolidation in the food retail market, especially in the more fragmented segments, with the main players reinforcing their market positions.

The franchising promoted by the main players, which enables independent store owners to take advantage of the potential of those groups, will continue to develop, and may become one of the main development pillars of some of the retail chains in Poland.

5.5. The Outlook for Jerónimo Martins Business Activity

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

Being aware of the limitations that the Portuguese economic situation will create in 2011, Pingo Doce believes it has the right organization and operational capacity to accommodate the negative effects of the economic environment.

If, on the one hand, the acquisition of the former Plus stores has already been totally assimilated, on the other hand, the Group has given the Banner a new, more flexible organizational structure and has brought it together into a single brand - Pingo Doce.

In 2010, the Company reinforced its communication of the brand, supported by a significant additional investment in advertising. The Group now has a Banner with a reputation and unique positioning in the market, recognized for:

The excellence of the Private Brand that it offers;
Being an expert in Perishables;
Having a clear and competitive pricing position;
Operating a strong balance between its assortment and the store environment.

As a means of strengthening these differentiating pillars, 2011 will be a year for continuing to further develop the partnerships with suppliers of Perishables and Private Brand, in order to ensure constant innovation and levels of high quality in the products offered to the customers. Competitiveness of the pricing policy will be maintained and launches within the Private Brand assortment will aim to reinforce some categories and boost innovation. With regard to the investment plan, this will focus on strengthening Pingo Doce's presence in essential proximity locations.

Sources Used:

IMF's World Economic Outlook; European Commission, Eurostat; Reuters; Bank of Portugal's Economic Bulletins; National Bank of Poland's Economic Bulletins; Polish Ministry of Finance; Central Statistical Office; Citigroup; Citibank Handlowy; BRE Bank; IG Markets, Planet Retail; IGD, Deloitte; Nielsen; DBK; Gira sic; and PMR Corporate.

Awareness of the work already carried out and the demands which continue to be placed on the above-mentioned differentiation pillars allow 2011 to be seen as an opportunity for growth and for reinforcing market share, notwithstanding the foreseen difficulties.

Wholesale Business in Portugal: Recheio

In 2011, Recheio wants to continue strengthening its leadership position in the markets where it operates. Growth will be attained by reinforcing its positioning as a food specialist, with strong investment in Perishables, as well as by maintaining its policy for low prices.

The Company will pursue its geographic expansion plan by opening new stores, thereby increasing its market penetration, especially in the HoReCa segment. Consideration will also be given to refurbishing the existing store network, aiming to extend Recheio's offer in the Perishables categories.

Throughout the year, Recheio 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 Private Brands for HoReCa channel, Masterchef and Gourmês, and for retail, Amanhecer, will continue to grow and to be committed to an excellent quality/price ratio, to which their customers have become accustomed.

Among the activities to be carried out, the Company will not be oblivious to its environmental responsibilities. As an example, its new or refurbished stores will be provided with LED lighting, in order to increase their energetic efficiency.

Recheio 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.

Development of New Businesses

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

The Group has therefore 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.

Food Retail Business in Poland: Biedronka

In Poland, the growth of Jerónimo Martins' leadership position will continue to be a priority. Thus, the pace of Biedronka's openings over the last few years will progressively increase, in order to surpass 2,300 stores in 2013.

Taking into account the very positive growth that is expected of the Polish economy, apart from increasing the pace of openings, the Company will continue to focus on increasing its like-for-like sales.

Thus, the strategy for price leadership will continue to be a priority, which, if we take into account Biedronka's size, will be achieved both by the effect of scale arising from the growth and from the continuous improvement in operational efficiency and profitability.

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

In Manufacturing, with the objective of reaching new levels of sales and profitability and of reinforcing market shares, will focus this year on a continuously innovative offer and on investing in the price of the brands that are market leaders.

In 2011, like 2010, Gallo Worldwide's priority will continue to be the search for new markets as a means of growing and developing the business.

At JMDPC, 2011 will focus on the sustainability of the current represented brand portfolio and in the search for new businesses providing higher levels of growth for this company.

For JMRS, in the restaurant business the main objective for 2011 will be to maximise the current portfolio in the best way possible, and at the same time, continue to study new business opportunities within the sector.

6. Events After the Balance Sheet Date

Up to the conclusion of this Report there was no relevant event to highlight.

7. Results Appropriation Proposal

In the financial year 2010, Jerónimo Martins, SGPS, S.A. declared consolidated profits of 281,015,499 euros and a profit in individual accounts of 89,360,329.60 euros.

Considering that a distribution was made as an advancement of profits for the year in the amount of 26,394,237.24 euros, approved on November 19th 2010 by the Board of Directors, the amount available to appropriation is 62,966,092.36 euros.

The Board of Directors proposes that the available amount be totally applied to reserves as follows:

Legal Reserve ........................... 4,468,016.48 euros
Free Reserves ........................... 58,498,075.88 euros

Given the distributions of reserves and the advancement of profits made at the end of 2010, which overall amounted to 131.971.186,20 euros, corresponding to 47% of the consolidated net profit, and bearing in mind the dividend distribution policy described in "Dividend Distribution Policy" included in the Corporate Governance, the Board of Directors proposes to the Shareholders that, together with the results appropriation proposal presented above, no additional dividend distribution should be carried out.

Lisbon, 17th February 2011

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, 2010

(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)

BOARD OF DIRECTORS

Members of the Board of Directors		Held on 31.12.09			Increases during the year Decreases during the year			Held on 31.12.10
	Shares	Bonds	Shares	Bonds	Shares	Bonds	Shares	Bonds
Elísio Alexandre Soares dos Santos 1	152.633	-	-	-	(15.000)	-	137.633	-
Pedro Manuel de Castro Soares dos Santos	198.305	-	-	-	-	-	198.305	-
José Manuel da Silveira e Castro Soares dos Santos	-	-	-	-	-	-	-	-
Luís Maria Viana Palha da Silva	-	-	-	-	-	-	-	-
António Mendo Castel-Branco Borges 3	-	-	-	-	-	-	-	-
António Pedro Viana-Baptista 2	n.a.	n.a.	-	-	-	-	-	-
Artur Eduardo Brochado dos Santos Silva	7.680	-	-	-	-	-	7.680	-
Marcel Lucien Corstjens -	-	-	-	-	-	-	-	-
Hans Eggerstedt	19.700	-	-	-	-	-	19.700	-
Nicolaas Pronk	-	-	-	-	-	-	-	-
Stefan Kirsten 2	n.a.	n.a	-	-	-	-	-	-

1 The 15,000 shares were sold on 28/04/2010, at an average price of 5.60 euros each.

2 Were only appointed to the Shareholders' Meeting on 9 April, 2010.

3 Resignation letter on 22nd November, 2010, with effect from 31 December of 2010.

STATUTORY AUDITOR

As at 31 December, 2010, 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 Responsibilities 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, 2010.

Date	Nature	Code ISIN	Volume	Price	Local
28‐04‐2010	Sale	PTJMT0AE0001	35	7.380	Euronext Portugal
28‐04‐2010	Sale	PTJMT0AE0001	300	7.382	Euronext Portugal
28‐04‐2010	Sale	PTJMT0AE0001	375	7.384	Euronext Portugal
28‐04‐2010	Sale	PTJMT0AE0001	1,959	7.390	Euronext Portugal
28‐04‐2010	Sale	PTJMT0AE0001	5,331	7.391	Euronext Portugal
28‐04‐2010	Sale	PTJMT0AE0001	4,371	7.439	Euronext Portugal
28‐04‐2010	Sale	PTJMT0AE0001	2,629	7.440	Euronext Portugal
TOTAL			15,000

E. Alexandre Soares dos Santos

List of Shareholders with Qualifying Holdings as at 31 December, 2010

(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	Nr. of Shares Held	% Capital	% of Voting Rights1
Sociedade Francisco Manuel dos Santos, SGPS, S.A.
Directly	353,119,573	56.114%	56.190%
Heerema Holding Company Inc.
Through Asteck, S.A.	62,929,500	10.000%	10.014%
Carmignac Gestion 2
Directly	17,254,270	2.742%	2.746%

¹% Voting rights = Nr. Shares Held / (Total No. JM shares – Own shares).

² This number of shares indicated refers to 18th November, 2010, date of the last communication made by this company to Jerónimo Martins, SGPS, S.A..

III. Consolidated Financial Statements

CONSOLIDATED INCOME STATEMENT BY FUNCTIONS FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009

					Euro thousand
	Notes	December 2010	December 2009	4th Quarter 2010	4th Quarter 2009
Sales and services rendered	3	8,691,115	7,317,108	2,357,967	1,998,789
Cost of sales		(7,056,900)	(5,925,918)	(1,929,589)	(1,629,409)
Supplementary income and costs	5	407,921	326,544	129,331	106,957
Gross profit		2,042,136	1,717,734	557,709	476,337
Distribution costs	6	(1,400,933)	(1,201,820)	(368,929)	(326,304)
Administrative costs	6	(179,395)	(156,178)	(48,107)	(39,425)
Exceptional operating profits/losses	11.1	(9,967)	(9,895)	(8,597)	(3,687)
Operating profit		451,841	349,841	132,076	106,921
Net financial costs	8	(68,517)	(70,769)	(16,776)	(17,467)
Gains in associated companies	16	646	333	325	257
Losses in other investments	11.2	(5,142)	(514)	(4,993)	(514)
Profit before taxes		378,828	278,891	110,632	89,197
Income tax	10	(79,056)	(55,624)	(20,704)	(17,255)
Profit before non-controlling interests		299,772	223,267	89,928	71,942
Attributable to:
Non-controlling interests		18,757	22,918	2,799	10,263
Jerónimo Martins Shareholders		281,015	200,349	87,129	61,679
Basic and diluted earnings per share - euros	24	0.4472	0.3188	0.1386	0.0981

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

CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2010 AND 2009

			Euro thousand
	Notes	2010	2009
Assets
Tangible assets	12	2,192,824	2,002,831
Investment properties	14	52,047	63,283
Intangible assets	13	863,368	835,368
Investments in associated Companies	16	1,213	1,118
Available-for-sale financial investments	17	7,015	7,528
Trade debtors and deferred costs	20	71,716	72,305
Derivative financial instruments	15	46	351
Deferred tax assets	19.1	67,360	69,021
Total non-current assets		3,255,589	3,051,805
Inventories	18	368,711	334,478
Taxes receivable	19.3	48,947	22,335
Trade debtors, accrued income and deferred costs	20	181,848	190,793
Derivative financial instruments	15	-	1,515
Cash and cash equivalents	21	303,927	223,501
Total current assets		903,433	772,622
Total assets		4,159,022	3,824,427
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	63,433	55,184
Retained earnings		135,988	77,189

		845,106	778,058
Non-controlling interests		286,706	287,636
Total Shareholders' equity		1,131,812	1,065,694
Borrowings	25	634,182	756,361
Derivative financial instruments	15	16,649	30,137
Employee benefits	26	30,839	27,738
Deferred profits- state grants		935	959
Provisions for risks and contingencies	27	22,907	18,480
Deferred tax liabilities	19.1	96,928	88,892
Total non-current liabilities		802,440	922,567
Trade creditors, accrued costs and deferred income	28	1,895,411	1,647,490

Derivative financial instruments Borrowings	15 25	7,763 219,217	3,084 124,495
Taxes payable	19.3	102,308	61,021
Deferred profits- state grants		71	76

Total current liabilities		2,224,770	1,836,166
Total Shareholders' equity and liabilities		4,159,022	3,824,427

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 2010	December 2009	4th Quarter 2010	4th Quarter 2009
Currency translation differences	15,414	9,166	339	13,261
Fair value of cash flow hedging	(2,604)	(5,504)	3,113	3,125
Revaluation of fixed assets	(4,133)	(5,204)	(4,133)	(5,204)
Fair value of hedging instruments on foreign operations	(2,464)	(3,057)	992	(4,817)
Fair value of available-for-sale financial investments	(513)	58	(111)	(324)
Gains and losses directly recognised in equity	5,700	(4,541)	200	6,041
Net profit	299,772	223,267	89,928	71,942
Total gains and losses recognised	305,472	218,726	90,128	77,983
Attributable to:
Non-controlling interests	15,382	21,358	1,264	10,790
Jerónimo Martins Shareholders	290,090	197,368	88,864	67,193

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

									Euro thousand
					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	Non controlling interests	Shareholders' Equity
Balance Sheet at 1st January 2009		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	23.1				(5,245)		(5,245)	41	(5,204)
- land transfer to investment property					(130)	130	-		-
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 and losses recognised during the year		-	-	-	(3,111)	200,479	197,368	21,358	218,726
Dividends						(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

Equity changes in 2010
Currency translation differences in 2010	23.1				15,414		15,414		15,414
Revaluation of fixed assets:	23,1
- from 2010 - disposals of revaluated fixed assets					(1,577) (826)	826	(1,577) -	(2,556)	(4,133) -
Fair value of cash flow hedging	23.1				(1,785)		(1,785)	(819)	(2,604)
Fair value of hedging instruments on foreign operations	23.1				(2,464)		(2,464)		(2,464)
Fair value of available-for-sale financial investments	23.1				(513)		(513)		(513)
Gains/losses directly recognised in equity					8,249	826	9,075	(3,375)	5,700
Net profit in 2010						281,015	281,015	18,757	299,772
Total gains and losses recognised during the year		-	-	-	8,249	281,841	290,090	15,382	305,472
Dividends	23.4					(221,837)	(221,837)	(16,312)	(238,149)
Dividends as result of corporate restructuring	4					(1,205)	(1,205)	-	(1,205)
Balance Sheet at 31st December 2010		629,293	22,452	(6,060)	63,433	135,988	845,106	286,706	1,131,812

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

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009

			Euro thousand
	Notes	2010	2009
Operating Activities
Cash received from Customers		9,733,271	8,178,060
Cash paid to Suppliers and Employees		(8,926,185)	(7,525,830)
Cash generated from operations	22	807,086	652,230
Interest paid		(73,912)	(79,577)
Income taxes paid		(46,468)	(28,617)
Cash Flow from operating activities		686,706	544,036
Investment activities
Disposals of tangible assets		48,773	14,608
Disposals of intangible assets		-	2,316
Disposals of available-for-sale financial investments and investment
property		11,630	12
Interest received		4,207	2,420
Dividends received		618	81
Acquisition of tangible assets		(369,807)	(313,862)
Acquisition of available-for-sale financial investments and investment property		(5)	(1,885)
Acquisition of intangible assets		(25,720)	(13,185)

Cash flow from investment activities		(330,304)	(309,495)
Financing activities
Received from other loans		78,027	175,786
Loans paid		(119,422)	(331,575)
Dividends paid	23.4	(238,149)	(84,157)
Dividends paid as result of corporate restructuring	4	(1,205)	-
Cash Flow from financing activities		(280,749)	(239,946)
Net changes in cash and cash equivalents		75,653	(5,405)
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of the year		223,501	227,132
Net changes in cash and cash equivalents		75,653	(5,405)
Effect of disposal/acquisition of subsidiaries		-	(1,114)
Effect of currency translation differences		4,773	2,668
Fair value of financial assets held for trade		-	220
Cash and cash equivalents at the end of the year	21	303,927	223,501

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

CONSOLIDATED CASH FLOW STATEMENT FOR THE INTERIM PERIOD

				Euro thousand
	December 2010	December 2009	4th Quarter 2010	4th Quarter 2009
Cash Flow from operating activities	686,706	544,036	175,043	172,387
Cash Flow from investment activities	(330,304)	(309,495)	(51,806)	(88,795)
Cash Flow from financing activities	(280,749)	(239,946)	(95,012)	(80,124)
Cash and cash equivalents changes	75,653	(5,405)	28,225	3,468

3	Segments reporting 110
4	Businesses acquisitions/disposals and changes to the consolidation scope 112
5	Supplementary income and costs 112
6	Distribution and administrative costs 112
7	Staff costs 113
8	Net financial costs 113
9	Financial instruments114
10	Income tax recognised in the income statement114
11	Exceptional operating profits/losses and gains/losses in other investments115
12	Tangible Assets115
13	Intangible Assets 118
14	Investment Property119
15	Derivative financial instruments 120
16	Investments in associated companies 121
17	Available-for-sale financial investments 121
18	Inventories122
19	Taxes 122
20	Trade debtors, accrued income and deferred costs 124
21	Cash and cash equivalents 124
22	Cash generated from operations 125
23	Capital and reserves 126
24	Earnings per share 127
25	Borrowings 127
26	Employee benefits 129
27	Provisions and adjustments to the net realisable value131
28	Trade creditors, accrued costs and deferred income132
29	Guarantees 132
30	Operational lease 132
31	Capital commitments 133
32	Contingencies 133
33	Related parties 135
34	Group companies 136
35	Interests in joint ventures and associates138
36	Additional information requested by law139
37	Events after the balance sheet date139

1 Activity

Jerónimo Martins, SGPS, S.A. (JMH), is the parent Company of Jerónimo Martins (Group) and has its head office in Lisbon.

The 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 at December 31st, employs 61,061 people (53,797 in 2009).

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 (2009: 629,293,220 shares), and all shares have a nominal value of one euro.

The Board of Directors approved these consolidated financial statements on 17th February 2011.

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 consolidated financial statements of JMH were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

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 accordance 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 Policies and Bases for Presentation

The Group adopted in 2010 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 already endorsed by the European Union and mandatory for 2010. None of the standards detailed below have a material impact on consolidated financial statements of JMH:

i) Regulation No 254/2009 adopted the interpretation IFRIC 12 Service Concession Arrangements, that 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 is mandatory for accounting periods beginning after March 2009;
ii) Regulation No 460/2009 adopted 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 is mandatory for accounting periods beginning after 30 June 2009;
iii) Regulation No 494/2009 adopted the amendments to IAS 27 Consolidated and Separate Financial Statements, which requires 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;
iv) Regulation No 495/2009 adopted the amendments to IFRS 3 Business Combinations, was subject to significant changes, highlighting the fact that all payments to purchase a business are to be recorded at fair

value at acquisition date, contingent payments should be recognised as debt, being subsequently remeasured through the statement of gains and losses recognised in equity. 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;

v) Regulation No 636/2009 adopted IFRIC 15 Agreements for Construction of Real Estates, that is an interpretation that provides guidance on when revenue from the construction of real estate should be recognised. It is mandatory for accounting periods beginning after 31 December 2009;
vi) 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;
vii) 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;
viii) Regulation No 1136/2009 adopted amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, Which removes 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;
ix) Regulation No 1142/2009 adopted IFRIC 17 Distribution of Non-cash Assets to Owners, this interpretation provides clarification and guidance on the accounting treatment of distribution of non-cash assets, as dividends to its shareholders. It is mandatory for accounting periods beginning after 31 October 2009;
x) Regulation No 1164/2009 adopted IFRIC 18 Transfers of Assets from Customers, that clarifies the accounting treatment of transfers of an item of tangible fixed assets from customers, and therefore the associated revenue. This interpretation is mandatory for accounting periods beginning after 31 October 2009;
xi) 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;

Also in 2010 the European Commission adopted a several changes to International Accounting Standards issued by the IASB and Interpretations issued by the IFRIC, that based on the assessment made by the Group, do not have a significant impact on the Group's Financial Statements, and only those that were mandatory from 1 January 2010, were adopted.

i) Regulation no. 243/2010, which adopted some improvements 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;
ii) Regulation no. 244/2010 which adopted amendments to IFRS 2 Share-based Payment, 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 the entity has no obligation to settle the share-based payment transaction;
iii) Regulation no. 550/2010 which adopted amendments to IFRS 1 First time adoption of International Financial Reporting Standards, which deals with additional exemptions for first-time adopters resulting in an amendment on oil and gas assets;
iv) the Regulation no. 574/2010 which adopted amendments to IFRS 1 First time adoption of international financial reporting standards and IFRS 7 - Financial Instruments: Disclosures, which clarifies the limited exemption from comparative IFRS 7 Disclosures for first-time adopters;
v) the Regulation no. 632/2010 which adopted the revised IAS 24 Related Party Disclosures, with the aim of simplifying the definition of a related party while removing certain internal inconsistencies and providing some relief for government-related entities;
vi) the Regulation no. 633/2010 which adopted amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement, with the objective of removing an unintended consequence of IFRIC 14 where, under certain circumstances, an early payment of contributions was required to be recognised as an expense;
vii) the Regulation no. 662/2010 which adopted the IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, providing guidance on how a debtor should account for its equity instruments issued in full or partial settlement of a financial liability following renegotiation of the terms of the liability.

With regard to Regulations no. 243, no. 244 and no. 550, its implementation is mandatory for financial years beginning after December 31, 2009. The Regulations no. 574 and no. 662 are mandatory for the first financial year starting after June 30, 2010. The Regulations no. 632 and no. 633 are mandatory for the first financial year starting after December 30, 2010. Non of the regulations mentioned have impact on the Group's Financial Statements.

In addition, the IASB issued in 2009 and 2010, the following standards that are still waiting to be endorsed by the European Union:

i) In November 2009, IASB issued the new standard IFRS 9 Financial Instruments: Classification and Measurement, this standard partially replaces IAS 39. This new standard is mandatory for accounting periods beginning on or after 1 January 2013;
ii) In May 2010, IASB issued amendments to IFRS, with improvements made to IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13. The amendments are effective for annual periods beginning on or after 1 January 2011;
iii) In October 2010, IASB issued amendments to IFRS 7 Financial Instruments: Disclosures, those amendments improve the disclosure requirements in relation to transferred financial assets. It becomes effective for annual periods beginning on or after 1 July 2011;
iv) In December 2010, IASB issued amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, The amendments replace references to fixed transition date and sets the presentation requirements when an entity was unable to comply with IFRS because its functional currency was subject to severe hyperinflation. The amendments are effective from July 2011;
v) Also in December, IAS issued an amendment to IAS 12 Income Taxes, that provides a practical solution to the problem of determining whether assets measured using the fair value model in IAS 40 - Investment Property are recovered through use or through sale. It is effective for annual periods beginning on or after 1 July 2011;

2.2. Basis of consolidation

Reference dates

The consolidated financial statements include, as of 31 December 2010, 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 non-controlling interests 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.

Non-controlling interests

Non-controlling interests are the proportion of equity of subsidiaries that are not directly or indirectly, attributable to JMH. The transactions with non-controlling interests are treated as transactions with equity owners of the Group.

In any acquisition from non-controlling interests, the difference between the consideration paid and the accounting value of the share acquired is recognised in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the measurement of the retained interest as a financial asset.

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 is approximately the exchange rate on the date of the respective transactions.

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 among 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.

At 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 2010	Average rate for the year
Polish Zloty (PLN)	€ 0.2516	€ 0.2504
US Dollar (USD)	€ 0.7453	-

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 recognised 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 Hedge accounting

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 (IRS), 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, Jerónimo Martins 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 foreign entities are disposed.

2.6 Tangible assets

Assets other than land are recognised at acquisition cost net of accumulated depreciation and impairment losses (note 2.13).

Assets classified as land are recognised 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 retains 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 minimum 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, in percentage, are as follows:

	%
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 and direct labour costs.

Computer software

Costs associated with developing or maintaining computer software are recognised as an expense as incurred. If those costs are directly associated with development projects that will probably generate future economic benefits (reliably measured), they are recognised as development expenditure 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 trademark Pingo Doce is, besides Goodwill, the only intangible asset with indefinite useful life, since there is no foreseeable limit for the period over which this asset is expected to generate economic benefits to the Group.

Amortisation

Amortisations 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 carrying amount will not be recoverable.

Amortisation of the other intangible assets is calculated by the straight-line method, on a duodecimal basis on acquisition cost. The most important annual amortisation rates, in percentage, are as follows:

	%
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 acquire or sell 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, in 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 measured 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 assets with this nature.

The fair value is based on market values, being this the amount at which two independent willing parties would be interested in making a transaction of the asset.

The methodology adopted in the valuation and determination of fair value consists of applying the market's comparative method, in which the asset under valuation 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 valuation, 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 8,0% 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 two to three 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 802,906 thousand, which includes mostly Real Estate, equipment related to the operational activity of stores and improvements made in leasehold property.

Determining the recoverable amount of assets

The recoverable amount of non financial assets corresponds to the higher amount 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 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.

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.

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.

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 equity 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 three months;
(iii) Financial difficulties of the debtor;
(iv) Probability of the debtor's bankruptcy.

Impairment losses is determined by the difference between the recoverable amount and the carrying amount of the financial assets and is recognised in the profit and loss. The carrying amount of these assets is reduced to the recoverable amount by using an impairment account. When an amount receivable from customers and debtors is considered to be unrecoverable, it is written-off using the impairment account. Subsequent recovery of amounts that had been written-off is recognised as a gain.

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, is 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 results during 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 employees. 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 recognised 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 acquisition of 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 gains/losses in other investments 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 reserves.

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 carrying amount 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 it 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 Managing 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.

2.25 Critical accounting estimates and judgments on the preparation of the financial statements

Tangible and intangible assets, and investment properties

Determining the fair value of 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 valuation 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 carrying amount 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 valuation 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 carrying amount, 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 taxable income. Deferred tax assets and liabilities were determined based on tax legislation currently effective for the Group 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, 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. 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

Otherwise, which is the case of some financial assets and liabilities, valuation techniques that are generally accepted, in the market, are used, based on market assumptions.

The Group applies valuation 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 2010, 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.

	2010	Level 1	Level 2	Level 3
Assets measured at fair value
Trading Financial Assets
Trading Derivatives	-	-	-	-
Derivatives used for hedging	46	-	46	-
Available-for-sale financial assets
Equity Investments	1,134	1,134	-	-
Total Assets	1,180	1,134	46	-
Liabilities measured at fair value
Trading Financial Liabilities
Trading Derivatives	448	-	448	-
Derivatives used for hedging	23,964	-	23,964	-
Total Liabilities	24,412	-	24,412	-

2.27 Financial instruments by category

	Held for Trade derivatives	Derivatives defined as hedging instruments	Borrowings and accounts receivable	Available-for sale financial investments	Other financial liabilities	Total assets and financial liabilities
2010
ASSETS
Cash and cash equivalents	-	-	303,927	-	-	303,927
Available-for-sale financial investments	-	-	-	7,015	-	7,015
Debtors, accruals and deferrals	-	-	170,809			170,809
Derivative financial instruments	-	46	-	-	-	46
TOTAL FINANCIAL ASSETS	-	46	474,736	7,015	-	481,797
LIABILITIES
Borrowings	-	-	-	-	853,399	853,399
Derivative financial instruments	448	23,964	-	-	-	24,412
Creditors, accruals and deferrals	-	-	-	-	1,815,953	1,815,953
TOTAL FINANCIAL LIABILITIES	448	23,964	-	-	2,669,352	2,693,764
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

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 unit of JMR (Pingo Doce supermarkets);
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 2010	December 2009
EBIT	461,808	359,736
Non recurrent results	(9,967)	(9,895)
Operational Result	451,841	349,841

Detailed Information by Business Segments at December 2010 and 2009

		Portugal Retail		Portugal Cash & Carry		Poland Retail	Portugal Manufacturing			Others, eliminations and adjustments		Total JM Consolidated
	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
Net Sales and Services		2,995,109 2,708,311	720,508	688,544		4,807,166 3,724,684	236,045	237,755	(67,713)		(42,186) 8,691,115 7,317,108
Inter-segments	239,266	201,277	1,419	1,085	1,267	469	40,944	41,281	(282,377)	(243,717)	519	395
External Customers		2,755,843 2,507,034	719,089	687,459		4,805,899 3,724,215	195,101	196,474	214,664		201,531 8,690,596 7,316,713
Operational Cash-Flow (EBITDA)	186,519	179,619	44,389	41,390	391,621	271,214	34,086	36,378	(4,031)	(553)	652,584	528,048
Depreciations and Amortisations	(88,521)	(82,458)	(9,180)	(8,616)	(84,880)	(68,425)	(3,085)	(3,381)	(5,109)	(5,432)	(190,775)	(168,312)
Operational Result (EBIT)	97,998	97,161	35,209	32,774	306,741	202,789	31,001	32,997	(9,141)	(5,985)	461,808	359,736
Financial Results	-	-	-	-	-	-	-	-	-	-	(73,013)	(70,950)
Net Result Attributable to JM	-	-	-	-	-	-	-	-	-	-	281,015	200,349
TOTAL ASSETS		1,871,330 1,818,824	301,821	288,099	1,660,500	1,428,051	199,361	199,438	126,010		90,015 4,159,022	3,824,427
TOTAL LIABILITIES	1,292,800	1,236,945	256,080	239,475	1,147,527	932,252	122,514	115,433	208,289		234,628 3,027,210	2,758,733
Investments in Fixed Assets	115,822	110,892	27,283	11,203	270,719	182,210	4,049	3,055	16,315	2,826	434,188	310,186
Reinforcement of provisions and adjustments to the net realisable value	(5,921)	(554)	(1,044)	(646)	(3,407)	(4,019)	(403)	(4,427)	(1,160)	(1,154)	(11,935)	(10,800)
Reversal of provisions and adjustments to the net realisable value	114	2,785	406	181	188	4,850	343	1,086	380	314	1,431	9,216

Information by Geographical Segments at December 2010 and 2009

	Net Sales and Services
	2010	2009
Portugal	3,877,144	3,587,437
Poland	4,813,971	3,729,671
Total	8,691,115	7,317,108

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
	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
Cash and cash equivalents	143,765	58,251	9,438	9,689	103,704	145,954	1,073	3,009	45,947	6,598	303,927	223,501
Available-for-sale financial investments	5,131	5,131	671	671	-	-	22	22	1,191	1,704	7,015	7,528
Debtors, accruals and deferrals	64,770	63,693	22,986	22,847	54,264	61,116	55,205	56,870	(26,416)	(25,258)	170,809	179,268
Derivative financial instruments	-	130	-	-	46	351	-	-	-	1,385	46	1,866
TOTAL	213,666	127,205	33,095	33,207	158,014	207,421	56,300	59,901		20,722 (15,571)	481,797	412,163

4 Businesses acquisitions/disposals and changes to the consolidation scope

In 2010, following the plan to simplify the operations of its business areas, the Group made the following ownership restructuring operations:

On November 30th, 2010, the companies Bazar Novo - Distribuição de Produtos Não Alimentares, Sociedade Unipessoal, Lda. and Electric Co - Distribuição de Produtos Não Alimentares, Sociedade Unipessoal, Lda. were merged in the company Pingo Doce - Distribuição Alimentar, S.A..

In December 2010, proceeded to a series of purchase and sale of shares between subsidiaries of the Group, which were intended to allow the future merger of a number of real estate companies of the retail business area in Portugal.

No impact on the Consolidated Financial Statements resulted from the operations described above, except the acquisition of 49% of the share capital of Comespa - Gestão de Espaços Comerciais, S.A., which in substance is a business combination involving non-controlling interest. This operation resulted in a gain in the amount of EUR 1,205 thousand, obtained by this entity, that for consolidation purposes, qualifies as a dividend distribution.

5 Supplementary income and costs

	2010	2009
Supplementary gains	393,623	312,837
Cash discount received	41,185	38,566
Cash discount paid	(3,144)	(3,531)
Electronic payment commissions	(16,689)	(14,435)
Other supplementary costs	(6,612)	(6,831)
Provisions for debtors suppliers	(442)	(62)
	407,921	326,544

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

	2010	2009
Supplies and services	337,420	294,716
Advertising costs	71,154	56,828
Rents	182,930	164,457
Staff costs	678,887	584,272
Depreciations and profit/loss with fixed assets	190,217	164,949
Transportation costs	113,657	92,062
Other operational profit/loss	6,063	714
	1,580,328	1,357,998

7 Staff costs

	2010	2009
Wages and salaries	545,927	468,563
Social Security	102,897	90,982
Employee benefits (note 26)	5,586	1,737
Other staff costs	37,673	37,785
	692,083	599,067

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

Of total staff costs, EUR 25,381 thousand corresponds to staff costs of subsidiaries and associated companies consolidated by the proportional method, the total amount of which was EUR 56,102 thousand.

The difference to staff costs stated in note 6 of EUR 13,196 thousand is related to the productive activity that were attributable to the cost of the goods sold in the amount of EUR 11,203 thousand (EUR 10,771 thousand in 2009), to exceptional losses related to the impact of actuarial assumptions update in the amount of EUR 1,993 thousand (EUR 4,024 thousand in 2009).

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

	2010	2009
Portugal	28,441	26,192
Poland	28,625	25,964
Total number of employees	57,066	52,156

Of the total number of employees, 1,133 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:

	2010	2009
Portugal	29,530	26,621
Poland	31,531	27,176
Total number of employees	61,061	53,797

Of the total number of employees, 1,069 are employed by subsidiaries and associated companies consolidated by the proportional method.

8 Net financial costs

	2010	2009
Interest expense	(65,983)	(67,936)
Interest received	4,395	2,266
Dividends	67	81
Net foreign exchange	(706)	(802)
Investment property:
Changes to fair value	(18)	(18)
Other financial costs and gains	(6,126)	(5,810)
Fair value of financial investments held for trade:
Derivative instruments	(146)	1,230
Treasury bonds	-	220
	(68,517)	(70,769)

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.

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 non-controlling interests), is as follows:

	2010	2009
Derivatives held for trading
Currency swaps	(130)	10
Interest rates swaps	(16)	1,220
	(146)	1,230
Income tax recognised in the income statement	39	(326)
Non-controlling interests	52	(425)
Value recognised in profit/loss	(55)	479

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 2,464 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 positive EUR 8,747 thousand (2009: positive EUR 7,643 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

	2010	2009
Current income tax
Current tax of the year	(69,803)	(23,558)
Adjustment to prior year estimation	147	76
	(69,656)	(23,482)
Deferred tax (note 19.1)
Temporary differences created or reversed in the year	(13,139)	(37,365)
Change to the recoverable amount of tax losses and temporary differences from
previous years	3,739	5,223
	(9,400)	(32,142)
Total income tax	(79,056)	(55,624)

10.2 Reconciliation of effective tax rate

		2010		2009
Profit before tax		378,828		278,891
Income tax using the Portuguese corporation tax rate Fiscal effect due to:	26.5%	(100,389)	26.5%	(73,906)
Different tax rates in foreign jurisdictions	6.0%	22,817	5.7%	15,865
Non taxable or non recoverable results	(0.3%)	(1,191)	(0.3%)	(913)
Non-deductible expenses and fiscal benefits	(0.4%)	(1,370)	(0.4%)	(1,216)
Adjustment to prior year estimation	0.0%	147	0.0%	76
Change to the recoverable amount of tax losses and temporary differences of prior years	1.0%	3,739	1.9%	5,223
Results subject to special taxation	(0.7%)	(2,809)	(0.3%)	(753)
Income tax	20.9%	(79,056)	19.9%	(55,624)

11 Exceptional operating profits/losses and losses in other investments

11.1 Exceptional operating profits/losses

	2010	2009
Losses with businesses disposals	(1,114)	(133)
Costs with business acquisitions and organizational restructuring	-	(4,112)
Losses related to natural disaster in Madeira	(1,341)	-
Impairment of assets	(6,607)	(5,858)
Reimbursement of notary fees resulting from court decision	1,379	1,025
Impact of actuarial assumptions changes	(1,939)	-
Others	(345)	(817)
	(9,967)	(9,895)
11.2 Losses in other investments
	2010	2009
Impairment of investment properties	(4,993)	(514)
Losses with the disposal of available-for-sale financial investments	(149)	-
	(5,142)	(514)

12 Tangible Assets

12.1 Changes occurred during the year

2010	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	414,757	1,507,577	924,335	179,528	114,211	3,140,408
Foreign exchange differences	2,763	18,476	6,472	2,493	2,890	33,094
Increases	13,219	179,778	133,242	8,050	74,169	408,458
Revaluation	(4,112)	-	-	-	-	(4,112)
Disposals	(5,312)	(54,433)	(17,182)	(4,897)	(1,591)	(83,415)
Transfers and write off's	11,151	25,438	(8,915)	109	(54,036)	(26,253)
Transfers to/from investment properties	(474)	2,863	-	-	92	2,481
Closing balance	431,992	1,679,699	1,037,952	185,283	135,735	3,470,661
Depreciation and impairment losses
Opening balance	-	407,521	598,730	131,326	-	1,137,577
Foreign exchange differences	-	5,163	3,241	1,656	-	10,060
Increases	-	81,019	83,115	18,823	-	182,957
Disposals	-	(17,275)	(16,625)	(4,825)	-	(38,725)
Transfers and write off's	-	(5,656)	(14,380)	(2,382)	-	(22,418)
Transfers to/from investment properties	-	531	-	-	-	531
Impairment losses	-	5,434	2,238	183	-	7,855
Closing balance	-	476,737	656,319	144,781	-	1,277,837
Net value
As at 1 January 2010	414,757	1,100,056	325,605	48,202	114,211	2,002,831
As at 31 December 2010	431,992	1,202,962	381,633	40,502	135,735	2,192.824

2009	Land and natural	Buildings and other	Plants, machinery	Transport equipment and	Work in progress and	Total
	resources	constructions	and tools	others	advances
Cost
Opening balance	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	38,905	(18,661)	(3,248)	(77,741)	(51,662)
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	1,507,577	924,335	179,528	114,211	3,140,408
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	-	(16,440)	(22,314)	(5,438)	-	(44,192)
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	-	407,521	598,730	131,326	-	1,137,577
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

The impairment losses are related with the impact of the natural disaster in Madeira island, as well as investments related with expansion projects in Portugal, that the Group decided to discontinue following the integration of the ex-Plus chain.

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:

	2010	2009
Land and natural resources
Tangible assets	34	34
	34	34
Buildings and other constructions
Tangible assets	34,995	31,271
Accumulated depreciation	(10,996)	(7,725)
	23,999	23,546
Plants and machinery
Tangible assets	139,697	121,686
Accumulated depreciation	(58,962)	(43,399)
	80,735	78,287
IT and office equipment and tools and utensils
Tangible assets	20,502	19,291
Accumulated depreciation	(17,632)	(16,412)
	2,870	2,879
Transport equipment
Tangible assets	38,360	37,457
Accumulated depreciation	(25,504)	(18,328)
	12,856	19,129

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 five years. In the fourth quarter of 2010, new valuations were carried out on assets acquired more than three 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 three years ago. The outcome of these valuations was a reduction in the value of the land of Euros 4,112 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	171,451	187,369	170,309	(5,792)
Poland	20,908	20,303	20,303	1,680
Total	192,359	207,672	190,612	(4,112)

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 2010, 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	460-1,700	610 – 1,730
Poland	1,120 – 1,250	1,060 – 1,300

Revaluation values under tangible fixed assets total EUR 154,796 thousand (EUR 159,724 thousand in 2009), reflected in the shareholders' equity as follows:

	2010	2009
Revaluation of land	154,796	159,724
Deferred taxes	(31,262)	(31,025)
Non-controlling interests	(40,418)	(43,768)
Net revaluation (Note 23.1)	83,116	84,931

If the cost model had been applied to the land assets, that are valued for EUR 431,992 thousand (EUR 414,757 thousand in 2009), their net book value would be EUR 277,196 thousand (EUR 255,033 thousand in 2009).

13 Intangible Assets

13.1 Changes occurring during the year

2010	Goodwill	R&D expenses	Software, ind. property and other rights	Key money	Work in progress	Total
Cost
Opening balance	736,633	26,066	53,425	72,254	7,693	896,071
Foreign exchange differences	10,178	668	1,001	1,243	209	13,299
Increases	-	663	5,200	9,803	10,064	25,730
Disposals	-	-	(15)	-	-	(15)
Transfers and write off's	-	(686)	(3,323)	1,400	(2,910)	(5,519)
Closing balance	746,811	26,711	56,288	84,700	15,056	929,566
Depreciation and impairment losses
Opening balance	-	24,533	4,735	31,435	-	60,703
Foreign exchange differences	-	646	24	308	-	978
Increases	-	903	1,328	5,626	-	7,857
Disposals	-	-	(6)	-	-	(6)
Transfers and write off's	-	(2,242)	(5,496)	(85)	-	(7,823)
Impairment losses	-	-	4,489	-	-	4,489
Closing balance	-	23,840	5,074	37,284	-	66,198
Net value
As at 1 January 2010	736,633	1,533	48,690	40,819	7,693	835,368
As at 31 December 2010	746,811	2,871	51,214	47,416	15,056	863,368

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

The Group identified as intangible assets of indefinite useful life, besides Goodwill, the trademark Pingo Doce, whose net value is EUR 9,228 thousand, for which there is no time limit for how long they will continue to create economic benefits to the Group. This intangible asset is not amortised and are subject to impairment tests annually, using the same assumptions applied in Goodwill (note 13.4).

In 2010, the Group discontinued the use of Feira Nova trademark, which had been classified so far as an intangible asset with indefinite useful life. Since there are no actual plans that allow an estimation of future economic benefits that the Group might obtain from the asset, the management decided to recognise an impairment loss for its carrying value in the amount of EUR 4,489 thousand.

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	2010	2009
Portugal Retail	239,386	239,386
Portugal Cash & Carry	82,460	82,460
Madeira	8,509	8,509
Portugal Manufacturing	93,809	93,809
Services	57	57
Poland Retail	322,590	312,412
	746,811	736,633

The change in this heading refers to the exchange rate effect of the translation of the assets in the Group's business in Poland, the Goodwill related to this business, totalling PLN 1,282,278 thousand, increased EUR 10,178 thousand.

In 2010 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 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

	2010	2009
Opening balance	63,283	64,509
Increases due to acquisitions	5	1,885
Transfers to/from tangible assets	(1,950)	(2,518)
Changes to fair value	(18)	(18)
Impairment losses	(9,209)	(575)
Disposals	(64)	-
Closing balance	52,047	63,283

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.

In 2010, as a result of valuations conducted by independent entities, impairment losses were recognised in the amount of EUR 4,993 thousand. Additionally, as a result of renegotiation of the sale agreements regarding commercial galleries, an additional impairment loss amounting to EUR 4,216 thousand was recognised, which had no impact on the income statement as it was subject of a financial compensation from an external entity.

15 Derivative financial instruments

		2010						2009
	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	-	-	-	448	10 millions EUR	-	-	-	564
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	-	-	6,776		1,243 180 millions USD	-	-	-	16,766
Cash flow hedging derivatives
Interest rate swap (EUR)	524.1 millions EUR	-	-	987	14,783	527.7 millions	-	-	-	12,807
Interest rate swap (PLN)	229.5 milions PLN	-	46	-		EUR 175 171 millions PLN	-	351	-	-
Foreign operation investments hedging derivatives
Currency swap (PLN)		-	-	-		- 400 millions PLN	1,385	-	-	-
Currency Forwards (PLN)		-	-	-		- 197 millions PLN	-	-	3,084	-
Total derivatives held for trading		-	-	-	448		130	-	-	564
Total hedging derivatives		-	46	7,763	16,201		1,385	351	3,084	29,573
Total assets/liabilities derivatives		-	46	7,763	16,649		1,515	351	3,084	30,137

In December 2010, the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 1,808 thousand.

Derivatives held for trading

Interest rate swap

At 31 December 2010, the Group had derivatives financial instruments held for trading with a notional of EUR 10,000 thousand (2009: EUR 10,000 thousand). The fair value of these instruments at 31 December 2010 was negative EUR 448 thousand (2009: negative EUR 564 thousand).

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, in 2009 the Group entered into currency forwards, with maturities in the first 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 2010 was negative EUR 8,019 thousand (2009: negative EUR 16,766 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 2010, the total loans with derivative hedge instruments were EUR 638,107 thousand (2009: EUR 647,007 thousand) and PLN 255,000 thousand (2009: PLN 285,000 thousand).

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 524,075 thousand (2009: EUR 527,675 thousand), and the fair value of these instruments at 31 December 2010 was negative EUR 15,770 thousand (2009: negative EUR 12,807 thousand).

On the other hand, the interest rate swaps in Zlotys have a notional PLN 229,500 thousand (2009: PLN 171,000 thousand), and its fair value at 31 December 2010 was negative EUR 129 thousand (2009: positive m EUR 351 thousand).

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 with maturity in December 2010. The fair value of the derivative at 31 December 2009 was positive EUR 1,385 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:

	2010	2009
Investments
Opening balance	1,118	854
Equity method	95	333
Disposals	-	(12)
Business restructuring	-	(57)
Closing balance	1,213	1,118
Fair value adjustments
Opening balance	-	-
Closing balance	-	-
Net value as at 1 January	1,118	854
Net value as at 31 December	1,213	1,118

From the application of equity method a gain of EUR 646 thousand was recognised (2009: EUR 333 thousand), which was deducted of the dividends received in 2010 in the amount of EUR 551 thousand.

17 Available-for-sale financial investments

Non-Currents
	2010	2009
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)	(2,571)	(2,058)
	7,015	7,528

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 5,881 thousand at December 31st, 2010 (2009: EUR 5,881 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:

	2010	2009
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

	2010	2009
Raw and subsidiary materials and consumables	5,365	4,779
Goods and work in progress	750	669
Finished and semi-finished goods	319	242
Goods	377,956	340,915
	384,390	346,605
Fair value adjustment (note 27)	(15,679)	(12,127)
Net inventories	368,711	334,478

No inventories have been pledged as guarantee for the fulfilment of contractual obligations.

19 Taxes

19.1 Deferred tax assets and liabilities

Changes in deferred tax accounts

	2010	2009
Opening balance	(19,871)	8,444
Currency translation difference (note 23.1)	(1,257)	(765)
Revaluation and reserves (note 23.1)	960	4,592
Result of the year (note 10.1)	(9,400)	(32,142)
Closing balance	(29,568)	(19,871)

Deferred taxes are presented in balance sheet as follows:

	2010	2009
Deferred tax assets	67,360	69,021
Deferred tax liabilities	(96,928)	(88,892)
	(29,568)	(19,871)

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	32,550	(386)	(52)	138	32,250
Deferred income for tax purposes	3,584	8,042	-	153	11,779
Differences on accounting policies in other countries	12,297	225	-	402	12,924
Deferred taxation of results	35,745	-	-	1,165	36,910
Other temporary differences	4,716	(1,651)	-	-	3,065
	88,892	6,230	(52)	1,858	96,928
Deferred tax assets
Excess over legal provisions	18,820	(2,195)	-	429	17,054
Revaluation of assets	1,225	1,064	(73)	-	2,216
Employee benefits	4,009	365	-	-	4,374
Costs with foreign exchange risk hedging operations	3,665	(544)	981	(307)	3,795
Recoverable losses	7,675	(1,029)	-	179	6,825
Profit in inventories	426	(16)	-	-	410
Fair value adjustments on inventories	2,367	741	-	50	3,158
Other deferred costs for tax purposes	24,394	(2,286)	-	171	22,279
Differences on accounting policies in other countries	2,324	691	-	79	3,094
Other temporary differences	4,116	39	-	-	4,155
	69,021	(3,170)	908	601	67,360
Net change in deferred tax	(19,871)	(9,400)	960	(1,257)	(29,568)

Deferred tax assets arising from recoverable losses are as follows:

	2010	2009
Jerónimo Martins Dystrybucja, S.A.	3,842	5,150
Others	2,983	2,525
	6,825	7,675

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 12,941 thousand (2009: EUR 15,604 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 and Jerónimo Martins - Restauração e Serviços, S.A..

19.3 Receivable and payable taxes

	2010	2009
Taxes receivable
Income tax receivable	28,778	15,030
VAT receivable	19,136	6,453
Others	1,033	852
	48,947	22,335
Taxes payable
Income tax payable	50,428	14,752
VAT payable	21,601	20,079
Income tax withheld	6,218	4,585
Social Security	19,664	15,899
Other taxes	4,397	5,706
	102,308	61,021

20 Trade debtors, accrued income and deferred costs

	2010	2009
Non-current
Other debtors	66,066	66,326
Deferred costs	5,650	5,979
	71,716	72,305
Current
Commercial customers	74,250	78,274
Suppliers	12,191	13,226
Staff	1,981	1,539
Other debtors	35,055	54,919
Accrued income	47,331	31,309
Deferred costs	11,040	11,526
	181,848	190,793

Non-current debtors' balance of EUR 66,047 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 39,228 thousand.

The deferred costs heading includes EUR 10,301 thousand of pre-paid rents, EUR 2,078 thousand of bond issue expenses and pre-paid interests and EUR 4,311 thousand relative to other costs attributable to future years and paid in 2010, 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 13,690 thousand (2009: EUR 10,288 thousand), of guarantees to landlords of stores.

Current debtors that are less than three months past due are not considered impaired. The ageing analysis of debtors that are past due is as follows:

	2010	2009
Debtors balances not considered impaired
Less than 3 months past due	19,135	21,523
More than 3 months past due	19,592	18,210
	38,727	39,733

Debtors balances considered impaired
Less than 3 months past due	666	766
More than 3 months past due	20,268	19,659
	20,934	20,425

Relating to the amounts due without impairment, EUR 17,509 thousand (2009: EUR 19,138 thousand) are covered by credit guarantees and credit insurance.

21 Cash and cash equivalents

	2010	2009
Bank deposits	131,609	187,497
Short-term investments	169,445	32,272
Cash and cash equivalents	2,873	3,732
	303,927	223,501

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

	2010	2009
Net results	281,015	200,349
Adjustments for:
Non-controlling interests	18,757	22,918
Income tax	79,056	55,624
Depreciations and amortisations	190,775	168,312
Provisions and other operational gains and losses	6,646	(6,778)
Net financial costs	68,517	70,769
Profit in associated companies	(646)	(333)
Profit/ Losses on other investments	5,142	514
Profit/ Losses on tangible and intangible assets	17,550	6,008
	666,812	517,383
Changes in working capital:
Inventories	(33,288)	54,152
Debtors, accruals and deferrals	7,949	(5,033)
Creditors, accruals and deferrals	165,613	85,728
	807,086	652,230

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 2009	93,783	(1,082)	-	(34,406)	58,295
Land transferred to investment property: - Gross value - Deferred tax - Non-controlling interests	(606) 352 124				(606) 352 124
Revaluation: - Gross value - Deferred tax - Non-controlling interests	(7,972) 2,768 (41)				(7,972) 2,768 (41)
Fair value adjustment of financial instruments: - Gross value - Deferred tax/Income tax - Non-controlling 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 instruments: - 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 1st January 2010	84,931	(4,985)	58	(24,820)	55,184
Disposals of revaluated fixed assets: - Gross value - Deferred tax - Non-controlling interests	(1,542) (78) 794				(1,542) (78) 794
Revaluation: - Gross value - Deferred tax - Non-controlling interests	(4,112) (21) 2,556				(4,112) (21) 2,556
Fair value adjustment of financial instruments: - Gross value - Deferred tax - Income tax - Non-controlling interests		(3,582) 978 819		(3,262) (307) 1,105	(6,844) 671 1,105 819
Fair value adjustment of available-for-sale financial instruments: - Gross value			(513)		(513)
Currency translation differences: - In the year - Deferred tax	726 (138)	(14) 3		15,787 (950)	16,499 (1,085)
Balance as at 31st December 2010	83,116	(6,781)	(455)	(12,447)	63,433

It should be noted 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 it is recommended 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 (2009: 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 2010, the Group held 859,000 own shares (2009: 859,000). As defined by law the own shares are not entitled to dividends.

23.4 Dividends

Dividends distributed in 2010 in the amount of EUR 238,149 thousand were paid to Jerónimo Martins, SGPS, S.A. shareholders an amount of EUR 221,837 thousand and to non-controlling interests in the Group companies an amount of EUR 16,312 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 281,015 thousand (2009: EUR 200,349 thousand) divided by the weighted average of outstanding ordinary shares, numbering 628,434,220 (2009 adjusted: 628,434,220).

2010	2009
629,293,220	629,293,220
859,000	859,000
-	-
628,434,220	628,434,220

2010	2009
281,015	200,349

628,434,220	628,434,220
0.4472	0.3188

25 Borrowings

Throughout the year, Jerónimo Martins, SGPS, SA, has renegotiated some commercial paper programs, on what maturities, amounts and pricings concerns.

On the third quarter Jerónimo Martins issued a new commercial paper program in the amount of EUR 100,000 thousand with five years maturity.

On November a new commercial paper program of EUR 75,000 thousand with maturity of one year was issued.

On Poland in November was contracted a loan of PLN 88,600 thousand with maturity of two years, with variable interest rate.

Several Group companies contracted new financial leasing operations for periods of 48 and 60-month, in the amount of EUR 26,700 thousand, with quarterly amortisation and interest payments.

25.1 Current and non-current loans

	2010	2009
Non-current loans
Bank loans	175,746	198,487
Bond loans	419,228	509,127
Financial lease liabilities	39,208	48,747
	634,182	756,361
Current loans
Bank overdrafts	7,671	21,563
Bank loans	80,536	67,119
Bond loans	98,643	-
Financial lease liabilities	32,367	35,813
	219,217	124,495

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	1.55%	109,000	59,000	50,000	-
Loans in EUR	1.43%	65,470	10,215	55,255	-
Loans in PLN	4.91%	81,812	11,321	70,491	-
Bond Loans
Loans	4.04%	526,007	105,470	420,537	-
Fair value adjustment		(8,136)	(6,827)	(1,309)	-
Bank overdrafts	2.98%	7,671	7,671	-	-
Financial lease liabilities	2.11%	71,575	32,367	39,116	92
		853,399	219,217	634,090	92

The amount of negative EUR 8,136 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

	2010	2009
Non-convertible bonds	526,007	526,007

The bond loans in course at the end of 2010 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 seven years issue of USD 84,000 thousand and a ten years 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 years maturity periods, variable interest rates, and indexed to the six months 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 six months Euribor;
On April 2009, JMR issued a new bond loan for EUR 105,000 thousand, maturing 50% in four years, and 50% in five years. The interest rate is variable and it is indexed to the six months 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

	2010	2009
Payments in less than 1 year	33,968	37,541
Payments between 1 and 5 years	40,545	51,468
Payments in more than 5 years	95	28
	74,608	89,037
Payment of future interest	(3,033)	(4,477)
Present value of liabilities	71,575	84,560

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:

	2010	2009
Non-current loans (note 25.1)	634,182	756,361
Current loans (note 25.1)	219,217	124,495
Derivative financial instruments (note 15)	24,366	31,355
Interest on accruals and deferrals	821	(442)
Bank deposits (note 21)	(131,609)	(187,497)
Short-term investments (note 21)	(169,445)	(32,272)
	577,532	692,000

26 Employee benefits

Amounts of employee benefits in the balance sheet:

	2010	2009
Retirement benefits - defined benefit plan paid for by the Group	17,570	16,192
Retirement benefits - defined benefit plan with a fund managed by a third party	253	184
Seniority awards	13,016	11,362
Total	30,839	27,738

Amounts reflected in the income statement – staff costs (note 7):

	2010	2009
Retirement benefits - defined contribution plan	881	714
Retirement benefits - defined benefit plan paid for by the Group	2,356	(811)
Retirement benefits - defined benefit plan with a fund managed by a third party	68	(57)
Seniority awards	2,281	1,891
Total	5,586	1,737

A brief description of the plans and its impacts are detailed as 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:

	2010	2009
Liabilities (not covered) as at 1 January	-	-
Costs of the year	881	714
Contributions of the year	(881)	(714)
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 2010, the responsibility totals EUR 17,570 thousand, and is totally included in the heading employee benefits.

Movement in the year:

	2010	2009
Balance on 1 January	16,192	17,979
Interest costs	841	1,036
Actuarial (gains)/losses	1.515	(1,847)
Retirement pensions paid	(978)	(976)
Balance on 31 December	17,570	16,192

Actuarial assumptions used:

Mortality table	TV 88/90	TV 88/90
Discount rate	4.5%	5.5%
Pension growth rate	2.5%	2.5%

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:

	2010	2009
Present value of funded obligations	1,671	1,679
Fair value of plan assets	1,418	1,495
Liability in balance sheet - employee benefits	253	184

Changes in fair value of plan assets:

	2010	2009
Plan assets on 1 January	1,495	1,544
Expected return on plan assets	57	80
Actuarial gains/(losses)	22	31
Contributions paid	(156)	(160)
Plan assets on 31 December	1,418	1,495

The amounts recognised in income statement, are as follows:

	2010	2009
Interest costs	88	103
Expected return on plan assets	(57)	(80)
Actuarial losses recognised	37	(80)
Total costs recognised	68	(57)

Actuarial assumptions used:

Mortality table	TV 88/90	TV 88/90
Discount rate	4.50%	5.50%
Expected return on plan assets	4.70%	4.90%
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 13,016 thousand, which is accounted for in the liabilities, in employee benefits.

Movement in the year:

		2010	2009
	Balance on 1 January	11,362	9,975
	Current service cost	1,830	1,665
	Actuarial (gains)/losses	451	227
	Paid contributions	(627)	(505)
	Balance on 31 December	13,016	11,362
Actuarial assumptions used:
	Mortality table	TV – 88/90	TV – 88/90
	Discount rate	4.50%	5.50%
	Salaries growth rate	2.50%	2.5%-3.0%

26.4 Defined benefit obligation granted to employees

	2010	2009	2008	2007
Present value of defined benefit obligation	32,257	29,233	29,739	20,398
Fair value of plan assets	1,418	1,495	1,544	1,713
(Surplus)/deficit of defined benefit plans	30,839	27,738	28,195	18,685

Plan assets includes the following:

	2010		2009
Equity shares	267	19%	253	17%
Bonds	1,138	80%	1,223	82%
Cash	13	1%	19	1%
Total	1,418	100%	1,495	100%

27 Provisions and adjustments to the net realisable value

2010	Opening balance	Set up and reinforced	Unused and reversed	Foreign exchange difference	Used	Business acquisition and restructuring	Closing balance
Doubtful debtors (note 20)	22,342	1,330	(679)	117	(1,285)	-	21,825
Inventories (note 18)	12,127	3,660	(373)	265	-	-	15,679
Available-for-sale fin. investments (note 17)	2,058	513	-	-	-	-	2,571
Short term investments (note 21)	57	-	-	-	-	-	57
Total fair value adjustments to net realisable value	36,584	5,503	(1,052)	382	(1,285)	-	40,132
Other risks and contingencies	18,480	6,432	(379)	149	(1,775)	-	22,907
Total of provisions	18,480	6,432	(379)	149	(1,775)	-	22,907

2009	Opening balance	Set up and reinforced	Unused and reversed	Foreign exchange difference	Used	Business acquisition and restructuring	Closing balance
Doubtful debtors (note 20)	25,627	876	(2,268)	39	(1,555)	(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 to net realisable value	41,172	2,056	(4,790)	78	(1,555)	(377)	36,584
Other risks and contingencies	25,892	8,744	(4,426)	(158)	(11,150)	(422)	18,480
Total of provisions	25,892	8,744	(4,426)	(158)	(11,150)	(422)	18,480

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

	2010	2009
Other commercial creditors	1,544,503	1,361,115
Other non-commercial creditors	142,502	89,083
Accrued costs	204,755	194,110
Deferred income	3,651	3,182
	1,895,411	1,647,490

The heading accrued costs includes essentially salaries and wages to be paid to the employees, in the amount of EUR 75,807 thousand, interest payable in the amount of EUR 15,331 thousand and supplementary costs with the distribution and promotion of goods in the amount of EUR 39,315 thousand. The remaining EUR 74,302 thousand respects to sundry costs (utilities, insurance, consultants, rents, among others), for 2010, 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 2,025 thousand, which are deferred until the respective goods are sold.

29 Guarantees

The bank guarantees are as follows:

	2010	2009
Guarantees provided to suppliers	3,860	4,617
Guarantees for D.G.C.I. (Portuguese tax authorities)	108,959	73,826
Financing bank guarantees	-	173,539
Other guarantees for the Government	6,441	5,184
Other guarantees provided	12,152	3,981
Total of Guarantees	131,412	261,147

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:

	2010	2009
Payments in less than 1 year	168,982	154,899
Payments between 1 and 5 years	570,415	500,539
Payments in more than 5 years	710,098	546,900
	1,449,495	1,202,338

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 2010, of EUR 134,832 thousand.

The operational lease contracts recognised as costs during the year in the amount of EUR 182,794 thousand (2009: EUR 164,016 thousand), are distributed as follows:

	2010	2009
Buildings	164,190	146,548
Plants & machinery	7,707	7,315
Transport equipment	8,846	7,915
IT equipment	1,225	1,332
Others	826	906
	182,794	164,016

The difference to the rents stated in note 6 are costs with occasional renting in the amount of EUR 763 thousand (2009: EUR 910 thousand) and rents costs that were attributable to the cost of goods sold in the amount of negative EUR 627 thousand (2009: negative EUR 469 thousand).

31 Capital commitments

Capital expenditure contracted for at the balance sheet date amounted EUR 36,670 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., which together with Regional de Mercadorias – Sociedade Central de Aprovisionamento, S.A., filed a case against various Group companies, holding them liable for those ex-franchisees' alleged non-compliance with the contract they had signed with ITMI, demanding an indemnity payment of EUR 14,600 thousand. The trial has already taken place, now awaiting rendition of judgement. Taking into account the facts that the Court considered proven, the prognosis is favourable. The Board of Directors maintains its belief that the amount requested will probably not be granted, and so as referred to in the Group's affiliates annual reports of previous years, no provision has been set up for any indemnity;
b) Proherre Internacional, Lda. claimed an indemnity payment of EUR 2,500 thousand from Pingo Doce – Distribuição de Produtos Alimentares, S.A., alleging the termination of a lease agreement by Pingo Doce, without the minimum period agreed between the parties having elapsed. Pingo Doce contested this claim based on the fact that the lease was terminated through mutual agreement. In the meantime, a curative act was pronounced, now awaiting the date of the trial to be set. Pingo Doce is convinced that the Court will reduce the amount that would result from the penalty clause, as it is manifestly excessive, and has therefore made a provision for an amount it deems reasonable for the conclusion of this case;
c) Rui Ribeiro Construções, S.A., filed indemnity proceedings with the Tribunal Arbitral da Associação Comercial de Lisboa (Arbitration Court of the Lisbon Commercial Association), with a view to condemning Pingo Doce to pay approximately EUR 800 thousand for breaking a contracted work services agreement. The trial has now taken place and the Arbitration Court partially condemned Pingo Doce for the claim (EUR 220 thousand). The Group has already appealed to the Court of Appeal, the complainant having done the same for the part of the sentence that was not in its favour. The Board of Pingo Doce and its lawyers are convinced that the Court of Appeal will prove us right, thus revoking the Arbitration Court's decision;
d) The Portuguese Tax Authorities claim from Recheio, SGPS, S.A. the amount of EUR 2,503 thousand concerning Value Added Tax (VAT) additional assessment. Tax Authorities are challenging the VAT deduction method adopted by Recheio, SGPS, S.A.. Recheio's Management, supported by their tax consultants, believe that they are entirely right concerning this matter, being this fact reinforced by recent judgements ruled by the Lisbon Tax and Administrative Court regarding this matter;
e) The Portuguese Tax Authorities claim from Recheio Cash & Carry, S.A. the amount of EUR 751 thousand regarding VAT additional assessment, since certain requirements proving the VAT exemption on

intracommunity transactions were not complied with. Recheio's Management, supported by their tax consultants, have already contested this VAT additional assessment, believing that they are entirely right concerning this matter;

f) The Portuguese Tax Authorities have informed Recheio, SGPS, S.A., that it should restate the dividends received, amounting to EUR 81,952 thousand, 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;
g) The Portuguese Tax Authorities claim from Feira Nova- Hipermercados, S.A. (merged in Pingo Doce Distribuição Alimentar, S.A., in 2009) the amount of EUR 743 thousand 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;
h) The Portuguese Tax Authorities assessed Feira Nova Hipermercados, S.A. and Pingo Doce Distribuição Alimentar, S.A. the amounts of EUR 2,966 thousand and EUR 2,324 thousand, 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 also the associated 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;
i) 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 and 2009, amounting to EUR 34,555 thousand. 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;
j) 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;
k) 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;
l) 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;
m) The Portuguese Tax Authorities assessed Feira Nova Hipermercados, S.A. and Pingo Doce Distribuição Alimentar, S.A. the amounts of EUR 1,304 thousand and EUR 1,554 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 2008. 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;
n) The Portuguese Tax Authorities claim from Recheio, SGPS, S.A. the amount of EUR 582 thousand, regarding CIT concerning the fiscal year of 2007. The Portuguese Tax Authorities following their own internal understanding did not accept the deduction of part of its financial costs. Recheio, supported by its tax consultants and Lawyers, believes that the report issued by the Tax Authorities has no grounds, and it will be challenged, meanwhile no changes were made on the financial statements;
o) The Fiscal Authorities claim from Unilever Bestfoods Portugal Produtos Alimentares, S.A., the amount of EUR 4,343 thousand 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.

During 2010, the Portuguese Tax Authorities have partially ruled in favour of Feira Nova – Hipermercados, S.A. and Pingo Doce – Distribuição Alimentar, S.A., a total amount of EUR 460 thousand. These additional assessments, related to years 2006 and 2007, were issued because the Tax Authorities argue that some goods were sold at a lower VAT rate than the one due. Nevertheless, since these assessments were not yet totally ruled in favour of the companies, Feira Nova and Pingo Doce supported by their tax consultants, will continue challenging these assessments, believing that the Tax Authorities have no grounds to request these payments.

In 2010, the following proceedings that were reported in previous years, were concluded:

p) Leirimundo Construção Civil, Lda. claimed an indemnity payment from JMR Prestação de Serviços para Distribuição, S.A. (previously known as Gestiretalho - Gestão e Consultoria para a Distribuição a Retalho, S.A.), to the amount of EUR 8,196 thousand, as a result of terminating the lease contract that had been entered into by the parties. This proceeding was submitted to arbitration according to the 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 was not satisfied with the result of the decision and attempted for the arbitral decision to be annulled, the respective case having been dismissed by final court decision. The matter is finally closed;
q) Sodisnasa, a supplier of transport services claimed an indemnity payment of EUR 1,423 thousand plus interest, from the Group companies Lidosol II – Distribuição de Produtos Alimentares, S.A. and João Gomes Camacho S.A., alleging that these had unlawfully terminated various transport and logistics contracts. Before going to trial, an agreement was obtained and Lidosol and João Gomes Camacho paid Sodisnasa an immaterial amount, thereby finally settling this dispute;
r) Tengelmann KG filed arbitration proceedings against Jerónimo Martins, SGPS, S.A. and Pingo Doce Distribuição de Produtos Alimentares, S.A., before the German Institute of Arbitration, in Cologne. The plaintiff argued 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 claimed 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 Alimentar, S.A. believed that the accusations were ungrounded, having contested the case. The parties came to an agreement during the first week in March, which also covered other issues that had been discussed between the two Groups. The agreement was ratified by the Arbitration Court on 12th March. The amount paid by Group Jerónimo Martins is not material compared to the request and, as mentioned, covers the resolution of other pending issues, such as those regarding stores to be opened in Portugal.

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 direct transactions occurred between this Company and any other company of the Group in 2010.

However, came to our knowledge that Sociedade Francisco Manuel dos Santos as a result of a public sale, conducted at the end of the year by a financial intermediary, acquired EUR 30,000 thousand of the JM commercial paper issued, with a 31 days maturity, which bear interest at Euribor rate plus 70 basis points.

Apart from the effects of the transaction described above, neither were there any amounts payable or receivable between them on December 31st, 2010.

Balances and transactions of Group companies with related parties are as follows:

	Sales and services rendered			Stocks Purchased and services supplied
	2010	2009	2010	2009
Joint Ventures	990	754	89,788	90,241
Associated companies	43	405	1,742	1,002

		Trade debtors, accrued income and deferred costs		Trade creditors, accrued income and deferred costs
	31/12/2010	31/12/2009	31/12/2010	31/12/2009
Joint Ventures	734	607	8,565	8,900
Associated companies	2	1	757	678

	Sales and services rendered		Stocks Purchased and services supplied
	2010 2009 2010		2009
Joint Ventures	519	395	49,384	49,632
Associated companies	43	405	1,742	1,002

		Trade debtors, accrued income and deferred costs		Trade creditors, accrued income and deferred costs
	31/12/2010	31/12/2009	31/12/2010	31/12/2009
Joint Ventures	388	319	4,710	4,894
Associated companies	2	1	757	678

Balances and transactions with related parties not eliminated in the consolidation process, were as follows:

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 Remuneration paid to directors and senior managers

The costs incurred with remuneration fixed, variable and contributions to the pension plans attributed to the Directors and senior managers were as follows:

	2010	2009
Salaries and other short-term employee benefits	23,018	16,573
Termination benefits	308	2,793
Post-employment benefits	656	456
Other benefits	246	190
Total	24,228	20,012

The Board of Directors of the company contains 11 members and the average number of Senior Managers of the Group was 93 (2009: 84).

The remuneration of the Members of the Management and Supervisory Bodies of the Company are stated in this Annual Report on the Corporate Governance.

The amounts presented reflects 100% of costs with salaries and wages of the Directors and the Senior Managers, including the companies under the proportional consolidation method (joint ventures).

The post-employment benefits granted to the Directors and the Senior Managers 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
Jerónimo Martins – Serviços, S.A.	Human resources top management	Lisbon 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
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.	Trademarks management	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
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 servisses	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.	Trademarks management	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		45.00
Victor Guedes – Indústria e Comércio, S.A.	Production of olive oil		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

Company	Business area	Head Office	% Owned
Perfumes e Cosméticos Puig Portugal Distribuidora, S.A.	Wholesale of perfumes and cosmetics	Lisbon	27.55

d) During the year 2010:

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:

	2010	2009
Non-current assets	620,286	618,119
Current assets	178,887	180,442
Non-current liabilities	(428,279)	(431,352)
Current liabilities	(264,950)	(244,166)
Net assets	105,944	123,043
Income and gains	717,619	726,045
Costs and losses	(675,957)	(688,939)
Net result	41,662	37,106

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.

	2010	2009
Non-current assets	122,313	121,319
Current assets	76,306	76,841
Non-current liabilities	(6,682)	(8,064)
Current liabilities	(119,001)	(109,658)
Net assets	72,936	80,438
Income and gains	106,603	111,030
Costs and losses	(84,559)	(89,112)
Net result	22,044	21,918

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:

	2010	2009
Non-current assets	122	89
Current assets	14,986	14,359
Non-current liabilities	(3,467)	(1,504)
Current liabilities	(7,603)	(9,250)
Net assets	4,038	3,694
Income and gains	20,950	17,328
Costs and losses	(18,634)	(16,118)
Net result	2,316	1,210

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 in 2010, was 748,648 euros, of which 733,762 euros correspond to legal accounts audit services, while the remaining 14,886 euros, relate to 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

Up to the conclusion of this Report there was no relevant event to highlight.

Lisbon, 17th February 2011

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.
ii) the Management report is a faithful statement of the evolution of the businesses, of the performance and of the position of Jerónimo Martins, SGPS, S.A. and the companies included within the consolidation perimeter, and contains a description of the main risks and uncertainties which they face.

Lisbon, 17 February 2011

Elísio Alexandre Soares dos Santos (Chairman of the Board of Directors)

Pedro Manuel de Castro Soares dos Santos (Chief Executive Officer and Member of the Board of Directors)

Luís Maria Viana Palha da Silva (Member of the Board of Directors, Chairman of the Financial Matters Committee, Chairman of the Committee on Corporate Responsibility and Member of the Evaluation and Nominations Committee)

José Manuel da Silveira e Castro Soares dos Santos (Member of the Board of Directors, Member of the Financial Matters Committee, Member of the Committee on Corporate Responsibility and Member of the Evaluation and Nominations Committee)

Artur Eduardo Brochado dos Santos Silva (Member of the Board of Directors and Member of the Evaluation and Nominations Committee)

Hans Eggerstedt (Member of the Board of Directors and Chairman of the Audit Committee)

Marcel Lucien Corstjens (Member of the Board of Directors)

Nicolaas Pronk (Member of the Board of Directors)

António Viana-Baptista (Member of the Board of Directors, Member of the Audit Committee and Member of the Committee on Corporate Responsibility)

Stefan Kirsten

(Member of the Board of Directors, Member of the Audit Committee and Member of the Financial Matters Commission)

Report of the Auditors for Statutory and Stock Exchange Regulatory Purposes in respect of the Consolidated Financial Information

(Free translation from the original version in Portuguese)

Introduction

1 As required by law, we present the Report of the Statutory Auditors for Stock Exchange Regulatory Purposes in respect of the Consolidated Financial Information included in the consolidated Directors' Report and the consolidated financial statements of Jerónimo Martins, SGPS, S.A., comprising the consolidated balance sheet as at December 31, 2010, (which shows total assets of Euros 4,159,022 thousand and a total of shareholder's equity of Euros 1,131,812 thousand, including a total of non-controlling interests of Euros 286,706 thousand and a net profit of Euros 281,015 thousand), the consolidated statements of income by functions, the consolidated statement of gains and losses recognised in equity, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended and the corresponding notes to the accounts.

Responsibilities

2 It is the responsibility of the Company's Board of Directors (i) to prepare the consolidated Directors' Report and consolidated financial statements which present fairly, in all material respects, the financial position of the company and its subsidiaries, the consolidated results of their operations, the consolidated gains and losses recognised in equity, the consolidated changes in equity and their cash flows; (ii) to prepare the historic financial information in accordance with International Financial Reporting Standards as adopted by the EU while also meeting the principles of completeness, truthfulness, accuracy, clarity, objectivity and lawfulness, as required by the Portuguese Securities Market Code; (iii) to adopt appropriate accounting policies and criteria; (iv) to maintain adequate systems of internal accounting controls; and (v) the disclosure of any relevant matters which have influenced the activity, the financial position or results of the company and its subsidiaries.

3 Our responsibility is to verify the consolidated financial information included in the documents referred to above, particularly as to whether it is complete, truthful, accurate, clear, objective and lawful, as required by the Portuguese Securities Code, for the purpose of expressing an independent and professional opinion on that financial information, based on our audit.

Scope

4 We conducted our audit in accordance with the Standards and Technical Recommendations approved by the Institute of Statutory Auditors which require that we plan and perform the examination to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. Accordingly, our examination included: (i) verification that the subsidiary's financial statements have been examined and for the cases where such an examination was not carried out, verification, on a test basis, of the evidence supporting the amounts and disclosures in the consolidated financial statements, and assessing the reasonableness of the estimates, based on the judgements and criteria of Management used in the preparation of the consolidated financial statements; (ii) verification of the consolidation operations and the utilization of the equity method; (iii) assessing the appropriateness and consistency of the accounting principles used and their disclosure, as applicable; (iv) assessing the applicability of the going concern basis of accounting; (v)

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. pertence à rede de entidades que são membros da PricewaterhouseCoopers International Limited, cada uma das quais é uma entidade legal autónoma e independente. Inscrita na lista das Sociedades de Revisores Oficiais de Contas sob o nº 183 e na Comissão do Mercado de Valores Mobiliários sob o nº 9077 assessing the overall presentation of the consolidated financial statements; and (vi) assessing the completeness, truthfulness, accuracy, clarity, objectivity and lawfulness of the financial information.

5 Our examination also covered the verification that the information included in the consolidated Directors' Report is in agreement with the other documents as well as the verification set forth in paragraphs 4 and 5 of Article 451 of the Companies Code.

6 We believe that our examination provides a reasonable basis for our opinion.

Opinion

7 In our opinion, the consolidated financial statements referred to above, present fairly in all material respects, the consolidated financial position of Jerónimo Martins, SGPS, S.A. as at December 31, 2010, the consolidated results of their operations, the consolidated gains and losses recognised in equity, the consolidated changes in equity and their consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and duly comply with principles of completeness, truthfulness, accuracy, clarity, objectivity and lawfulness.

Report on other legal requirements

8 It is also our opinion that the information included in the consolidated Directors' Report is consistent with the consolidated financial statements for the year and that the Corporate Governance Report includes the information required under Article 245-A of the Portuguese Securities Code.

March 2, 2011

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. represented by:

Abdul Nasser Abdul Sattar, R.O.C.

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 December 31st, 2010, 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, as well as its management, by holding regular meetings with the Directors of the functional areas of the corporate centre, with all those responsible that it deemed necessary to hear at any given moment, with the Executive Committee (up to the termination of its activity on April 9th, 2010), with the Managing Committee, the Company Secretary and the Statutory Auditor, having received their total cooperation.

The Committee monitored the development of tax proceedings and litigation involving group companies, having obtained all clarification it deemed necessary from the Company personnel, to adequately gauge the Group's contingencies. It also paid particular attention to the implementation of the risk management programme, with the co-operation of the Executive Committee (up to the termination of its functions), the Managing Committee, the Financial Operations Department and the External Auditor, and verified that the actions taken by the Company were adequate for complying 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 the 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.

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 (up to the termination of its activity), the Ethics Committee, the Internal Control Committee, and the Monitoring Committee for Financial Matters, as well as all the related documentation it deemed relevant, in order to assess compliance with its regulations and with the applicable laws.

It regularly met with the External Auditor and those responsible for preparing the Report and Consolidated Accounts and the accounts of the Group's main companies from whom it obtained sufficient necessary information to gauge the accuracy of the accounting documents, accounting policies and valuation criteria adopted 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 work methodology adopted by the External Auditor, the evolution of issues raised by the latter, 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 reservations.

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 also verified that all other services provided by the firm of External Auditors to the Group's subsidiaries, were carried out by employees that did not take part in the audits, and that these services, due to their type and the amounts involved, 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.

The Audit Committee gave a favourable opinion to the proposal presented by the Managing Committee to advance 50% of the year's profits to the shareholders, having for this purpose analysed the Company's financial situation, through an interim balance sheet as at October 31st, 2010, duly certified by the Statutory Auditor.

It also verified that, under the terms of paragraph 5 of article 420.º of the Commercial Companies Code, the Corporate Governance Report includes all the elements mentioned in article 245.º - A of Portuguese Securities Code.

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, performance and position of Jerónimo Martins, SGPS, S.A. and of the companies included within the consolidation perimeter, and contains a description of the main risks and uncertainties which they face.

Lisbon, March 2nd, 2011

Hans Eggerstedt (Chairman of the Audit Committee)

António Pedro Viana-Baptista (Member)

Artur Stefan Kirsten (Member)

IV – Corporate Governance

Introduction	148
Chapter 0 – Statement of Compliance	149
Chapter 1 – Shareholders' Meeting	153
1.1. Presiding Members of the Shareholders' Meeting 1.2. Participation in the Shareholders' Meeting 1.2.1. Shareholders' Meeting 1.2.2. Extraordinary Shareholders' Meeting 1.3. Postal Vote 1.4. Exercise of the Right to Vote by Electronic Means 1.5. Minutes and Information on Decisions 1.6. Remuneration Committee Representative Attending Shareholders' Meetings 1.7. Intervention by the Shareholders' Meeting regarding the Company's Remuneration Policy	153 153 153 154 154 155 155 155 155
and the proposal on the Share Allocation or Stock Options Plans 1.8. Intervention by the Shareholders' Meeting in the Approval of the Main Features of the Retirement Benefits Scheme	156
1.9. Defensive Measures 1.10. 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	156 156
1.11. Agreements between the Company and Officers and Members of the Board of Directors	156
Chapter 2 – Managing and Supervisory Bodies of the Company	157
Section 1 – General Matters	157
2.1. Identification and Composition of the Corporate Bodies 2.2. Identification of the Specialised Committees Formed with Responsibility in Company Management or Supervision	157 157
2.3. Organisational Charts, Delegation of Powers and Division of Responsibilities 2.3.1. Delegation of Powers 2.3.2. Organisational Structure and Division of Responsibilities 2.3.2.1. Holding Company Functional Divisions 2.3.2.2 Operational Areas 2.4. Audit Committee Annual Report and Opinion of the Audit Committee 2.5. Risk Management and Internal Control Systems	158 158 159 159 163 164 164
2.5.1. Risk Management 2.5.1.1. Risk Management Objectives 2.5.1.2. The Risk Management Process 2.5.1.3. Organisation of Risk Management 2.6. Code of Conduct and Internal Regulations	164 164 165 165 173
Section 2 – The Board of Directors	174
2.7. The Board of Directors 2.7.1. Chairman of the Board of Directors 2.8. Main Economic, Financial and Legal Risks 2.9. Powers of the Board of Directors, namely in Relation to Deliberations on Capital Increases 2.10. Information on the Rotation of Responsibilities Policy and Rules on the Appointment and Replacement of Members of the Board of Directors and of the Supervisory Board 2.10.1. Responsibilities of the Members of the Board of Directors 2.10.2. Rules Applying to the Appointment and Replacement of Members of the Board of Directors and of the Supervisory Board	174 175 175 175 175 175 176

2.11. Number of Meetings of the Management and Supervisory Bodies, and Other Committees	177
2.12. Minutes of the Executive Committee and Information for the Members of the Corporate Bodies	177
2.13. Description and Identification of the Management Body	177
2.14. Rules of the Selection Process of Candidates for Non-Executive Directors	178

2.15. Inclusion in the Annual Management Report of the Description of the Activities Performed by Non-Executive Members	179
2.16. Professional Qualifications of the Members of the Board of Directors	179
2.17. Positions that the Members of the Board of Directors Hold in Other Companies	181
Section 3 – Remuneration	184
2.18. Remuneration Policy of the Board of Directors and of the Supervisory Board	184
2.19. Remuneration of the Members of the Board of Directors and of the Supervisory Board	185
2.20 Communications Policy for Alleged Irregularities Occurring within the Company	187
(Whistleblower Procedure)
Section 4 – Specialised Committees	188
2.21. Composition of Specialised Committees and Number of Meetings during Financial Year	188
2.21.1. Chief Executive Officer and Executive Board	188
2.21.2. Audit Committee	190
2.21.3. Financial Matters Committee	192
2.21.4. Committee on Corporate Responsibility	193
2.21.5. Evaluation and Nominations Committee	194
2.21.6. Ethics Committee	195
2.21.7. Internal Control Committee	196
2.21.8. Remuneration Committee	196
Chapter 3 – Information and Auditing	198
3.1. The Company's Capital Structure	198
3.2. Shareholder Structure	198
3.3. Restrictions Regarding Transferability of Shares, Shareholder Agreements and Rules Applicable to Amendment of the Company's Articles of Association	199
3.4. System for Employees' Participation in the Company's Capital	199
3.5. Share Price Performance	199
3.6. Performance of Jerónimo Martins Shares	200
3.7. Publication of Market Results	202
3.8. Dividend Distribution Policy	202
3.9. Stock Options Plan	203
3.10. Business between the Company and the Members of the Board, Owners of Qualifying Holdings and Companies in a Parent-Subsidiary or Group Relationship	203
3.11. Investor Relations Office	204
3.11.1. Investor Communication Policy of Jerónimo Martins	204
3.11.2. Activities of the Investor Relations Office 3.12. Yearly Remuneration Paid to the External Auditor	204
3.13. Activity and Rotation Period of the External Auditor	207
	207

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 Articles of Association and to adhere to the most advanced practices in the realm of corporate governance, the adjustments considered to be necessary were also made in the following related matters: 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 Articles of Association established the maximum percentage of profits for the year that may be given to the Directors as variable pay.

With the entry into force in 2010 of the new Rules on the Corporate Governance of Listed Companies, (CMVM Regulation no. 1/2010) and the amendments to the Corporate Governance Code of the Portuguese Securities Market Commission (CMVM), both of 2010, Jerónimo Martins sought, always with the interests of shareholders and the market in mind, to adjust its activities in order to continue to adopt the best standards of the market, particularly in relation to rigour and transparency.

The Company's Board pays particular attention to matters related to Corporate Governance and it considers the Group's policy to be consistent with the best market practices and that the operation of its governance model, particularly following the latest adjustments, is the most appropriate to the interests of all its stakeholders.

The Corporate Governance Report (Report) included in this Chapter continues to be 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 of the CMVM which is published on the CMVM's web site at http://www.cmvm.pt/CMVM/Recomendacao/ Recomendacoes/Pages/default.aspx. The Company is also governed by its Code of Conduct, whose content is linked to corporate governance matters, and which may be consulted on its 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 the 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. 1/2010, the CMVM considers 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	1.2.1
I.2.2	1.2.1
I.3.1	1.3.
I.3.2	1.3.
I.3.3	1.2.
I.4.	1.2.
I.5.	1.5; 3.11.2.
I.6.1	1.9.
I.6.2	1.9.
II.1.1.1	Introduction
II.1.1.2	2.5.
II.1.1.3	2.5; 2.21.2.
II.1.1.4	2.5; 2.8.
II.1.1.5	2.6.
II.1.2.1	2.7; 2.13.
II.1.2.2	2.7; 2.13.
II.1.2.3	2.13.
II.1.3.1		0.3.0; 2.21.2.
II.1.3.2	2.14.
II.1.4.1	2.20.
II.1.4.2	2.20.
II.1.5.1		0.3.1; 2.18; 2.19.
II.1.5.2	2.18.
II.1.5.3		0.3.2.
II.1.5.4	1.7; 1.8; 2.19; 3.9.
II.1.5.6	1.6.
II.1.5.7	2.19.
II.2.1	2.3.1; 2.21.1.
II.2.2	2.3.1.
II.2.3			X
II.2.4	2.15.
II.2.5			X
II.3.1	2.12.
II.3.2	2.12.
II.3.3			X
II.4.1			X
II.4.2	2.4; 3.11.2.
II.4.3	2.4.
II.4.4	2.21.2.
II.4.5	2.21.2.
II.4.6	2.21.2; 2.21.6.
II.5.1	2.7; 2.21.4; 2.21.5.
II.5.2	2.21.8.
II.5.3	2.21.8.
II.5.4	2.11; 2.21.1;
	2.21.3; 2.21.4;
	2.21.5; 2.21.6; 2.21.8.
III.1.1	3.11.
III.1.2	3.11.2.
III.1.3	2.21.2; 3.13.
III.1.4	3.13.
III.1.5	3.12.
IV.1	3.10.
IV.1.2		0.3.3; 3.10.

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. The corresponding explanations are detailed below.

0.3.0. Regarding recommendation II.1.3.1. it is hereby clarified that the Audit Committee saw fit to appoint as its Chairman the Director that undertook that role during the previous mandate, despite the fact that this Director no longer fulfilled the independence criteria defined in Subparagraph b of Paragraph 5 of article 414 of the Commercial Companies Code. Through that appointment the Committee sought to guarantee continuity to its work, during the process of integration of the two new Committee members elected in April 2010. In a first mandate characterized by the integration in the Company, the Audit Committee deemed this to be the best way to ensure continuity is given to the auditing work performed, benefiting the company itself and its shareholders.

0.3.1. In relation to paragraph (iii) of recommendation II.1.5.1. it should be noted that the Company's remuneration policy does not provide for the deferred payment of all or part of the variable component of remuneration, and the Remuneration Committee believes that it has found, thus far, the mechanisms that allow the alignment of the interests of the Executive Directors with the long-term interests of the Company and the Shareholders, enabling the sustained growth of the Company's business and the corresponding value creation for those Directors.

In relation to paragraph (viii) of recommendation II.1.5.1. it is important to explain that the Remuneration Committee decided that the Chairman of the Board of Directors, considering the special executive role described in section 2.7.1., shall earn a fixed remuneration and a variable remuneration that is 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 taking part in the meetings of the other committees derived from the Board of Directors, and for defining overall strategy. Furthermore, the Chairman has become, during this mandate, Chairman of the Evaluation and Nominations Committee, through which he closely and systematically monitors the matters under the jurisdiction of this Committee, with particular emphasis on management development. As the Company understands it, these functions compel the Chairman of the Board of Director's performance to be remunerated in a different manner, which is why this part of the recommendation is not adhered to.

0.3.2 Regarding recommendation II.1.5.3. it is noted that, since 2008, a statement on the remuneration policy and the performance appraisal of the Company's management 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, within the meaning of paragraph 3 of article 248-B of the Portuguese Securities Code, 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.

0.3.3. In relation to recommendation IV.1.2. it is hereby clarified that the Company has established mechanisms for resolving conflicts of interest with shareholders having a Qualifying Holding, namely by giving the Corporate Responsibility Committee the power to prepare and monitor the decision-making of the corporate bodies and relevant committees on this matter. The Committee shall, in particular, decide on materially relevant business between the Company and shareholders with a Qualifying Holding. In view of the policy that has been adopted by the Company on this subject, there was no business with shareholders with a Qualifying Holding outside of normal market conditions, nor was there any business with such shareholders that, by its nature and according to logical and rational criteria and reasons of economic efficiency, might have to be submitted for the prior opinion of the supervisory board. Accordingly, the Company has not yet felt the need to set the materiality criteria that determine the intervention of the supervisory body, though it does not exclude the possibility of doing so in the near future.

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 9 April 2010 for the current term, which terminates in 2012.

The Chairman of the Board of the Shareholder's Meeting received an annual payment of 5,000 euros. For the two meetings held in 2010, the members had all the logistic resources considered necessary to carry out their roles properly, and both the preparatory work and that of the meeting itself, were exemplary.

1.2. Participation in the Shareholders' Meeting

The rules regarding participation in the Shareholders' Meeting, including those relating to the blocking of shares, have been amended by statutory requirement arising from the entry into force of Decree-Law No. 49/2010 of 19 May, which transposed the remainder of the so-called Shareholders Directive (Directive 2007/36/EC of the Parliament and the Council, of 11 July). Thus, the two Shareholders' Meetings held by the Company in 2010, one before the entry into force of the abovementioned diploma and the other afterwards, had different rules regarding the subject matter of this section - see 1.2.1. and 1.2.2. infra –, but both fully complied strictly with the legislation on the area.

According to Article Twenty-Six of the Articles of Association of the Company, 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 Articles of Association regarding deliberative quorums or systems that highlight the rights of equity content.

Each share has the right to one vote. Attending the Shareholders' Meeting is not subject to holding a minimum number of shares, nor are there rules stating that voting rights over a certain number are not counted, when issued by a single shareholder or shareholders related to it.

1.2.1. Annual Shareholders' Meeting

In relation to the Annual Shareholders' Meeting held on 9 April 2010, pursuant to the provisions of the Company's Articles of Association and the legislation in force at that time, shareholders with voting rights could take part in that Meeting when the shares were 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, the proof of deposit was by means of a letter issued by that respective institution, which also had to be submitted to 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, as regards the deadline for receiving statements of the blocking of shares, those statements that were

received by fax or e-mail by the indicated deadline and confirmed by receipt of the originals by the evening before the Meeting is held should be accepted.

There are no rules in the Articles of Association of the Company regarding the 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, as has been the case with previous Shareholders' Meetings, shareholders should not be obliged to block shares during the entire period until the Meeting is resumed, and the ordinary advance blockage required for the first session should be sufficient.

1.2.2. Extraordinary Shareholders' Meeting

In the Extraordinary Shareholders' Meeting held on 15 December 2010, after the entry into force of Decree-Law No. 49/2010, shareholders complying with the following conditions could attend and vote at the meeting:

i. At 00:00 (GMT) of the record date, corresponding to the fifth trading day prior to the Meeting's date, they held shares of the Company entitling them to at least one vote;
ii. By the end of the day preceding the record date, they communicate to the Chairman of the Board of the Shareholders' Meeting and the respective financial intermediary their intention to attend the meeting;
iii. By the end of the record date, the respective financial intermediary, informed pursuant to paragraph i. above, of the Shareholder's intention to attend the Shareholders' Meeting, has sent to the Chairman of the Board of the Shareholders' Meeting information on the number of shares registered under that Shareholder's name at 00:00 (GMT) of the record date.

Despite statutory requirements regarding the blocking of the shares under the previous legislation, the Company followed the provisions of the new legislation, which does not require such blocking.

1.3. Postal Vote

According to paragraph 3 of Article Twenty-Five of the Articles of Association, postal votes are allowed. Pursuant to the Articles of Association, 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 Articles of Association 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). In that expression of interest, shareholders must indicate the address of the financial intermediary with whom the securities are registered, to which a registered letter will be subsequently sent containing the electronic address to be used to vote, and an identification code to use in the electronic mail message by which the shareholder exercises its right to vote.

1.5. Minutes and Information on Decisions

The Company makes available on its web site (www.jeronimomartins.pt), besides the information identified in section 3.11. below, extracts of minutes of meetings of the Shareholders' Meeting within five days of their completion, and a record of the attendance lists, agendas and the resolutions passed by the Shareholders' Meeting in the previous three years.

1.6. Remuneration Committee Representative Attending Shareholders' Meetings

At the Shareholders' Meetings held during 2010, the representative of the Remuneration Committee was Mr. Arlindo do Amaral.

1.7. Intervention by the Shareholders' Meeting regarding the Company's Remuneration Policy and the proposal on the Share Allocation or Stock Options Plans

Since 2008, a statement, prepared by the Remuneration Committee, on the remuneration policy and performance appraisal of the Company's management and supervisory bodies has been submitted for approval to the Annual Shareholders' Meeting. This statement outlines the main characteristics of that policy – which is better explained in point 2.18 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.

The Company continues not to have any type of share allocation and/or stock options plan, or plan based on share price change for the members of the management and supervisory bodies and other directors, within the meaning of paragraph 3 of article 248-B of the Portuguese Securities Code.

1.8. Intervention by the Shareholders' Meeting in the Approval of the Main Features of the Retirement Benefits Scheme

The 2005 Annual Shareholders' Meeting approved a Retirement Pension Plan. The main features of that Plan are best explained in section 2.19. herein.

1.9. Defensive Measures

No special rights for Shareholders or restraints on the exercise of voting rights are provided for in the Company's Articles of Association. 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.

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.

1.10. 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, the Company understands that certain provisions of joint venture contracts entered into within this scope may include arrangements for the change in control of the Company, although not of an 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 disclosed it would not allow the Shareholders to be better informed of their real impacts and, furthermore, that their disclosure would even be harmful to the interests of the Company and its Shareholders.

1.11. 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 due cause, or termination of the labour relationship as a consequence of change in the Company's control.

Chapter 2 Management and Supervisory Bodies of the Company

Section 1 General Matters

2.1. Identification and Composition of the Corporate Bodies

The Board of Directors comprises Mr. Elísio Alexandre Soares dos Santos (Chairman), Prof. António Mendo Castel-Branco Borges (resigned from the post on 22 November 2010, with effect from 31 December), Mr. António Pedro de Carvalho Viana-Baptista, Mr. Artur Eduardo Brochado dos Santos Silva, Prof. Artur Stefan Kirsten, Mr. Hans Eggerstedt, Mr. José Manuel da Silveira e Castro Soares dos Santos, Mr. Luís Maria Viana Palha da Silva, Prof. Marcel Lucien Corstjens, Mr. Nicolaas Pronk and Mr. Pedro Manuel de Castro Soares dos Santos.

The Audit Committee comprises Mr. Hans Eggerstedt, who chairs it, Mr. António Pedro de Carvalho Viana-Baptista and Prof. Artur Stefan Kirsten.

The Company Secretary is Mr. Henrique Soares dos Santos, and the alternate is Mr. António Neto Alves (resigned from the post on 31 December 2010).

The Chartered Accountant is the company Pricewaterhousecoopers & Associados, SROC, Lda., represented by Mr. Abdul Nasser Abdul Sattar, ROC, and the alternate is Mr. José Manuel Henriques Bernardo.

2.2. Identification of the Specialised Committees Formed with Responsibility in Company Management or Supervision

In April, following the election of the members of the management body for this current term in office, the Board of Directors decided to change its organisational structure for the three-year period beginning in 2010, in order to meet the new needs and requirements of the Group without neglecting governance best practices.

In addition to the Audit Committee, the current structure of the Board includes the Chief Executive Officer, the Financial Matters Committee (CAMF), the Committee on Corporate Responsibility (CRC) and the Evaluation and Nominations Committee (CAN).

In order to assist the Chief Executive Director in carrying out his role, the Board created the Managing Committee, a new ad-hoc body chaired by the Chief Executive Officer.

The Ethics Committee and the Internal Control Committee (CCI) retain their functions as bodies supporting the Board of Directors and Audit Committee.

The composition, powers, number of meetings and identification of the members of the Committees referred to in the preceding paragraphs are detailed in section 2.21 of this Chapter.

2.3. Organisational Charts, Delegation of Powers and Division of Responsibilities

Business Structure

2.3.1. Delegation of Powers

The Board of Directors, by resolution, delegated various duties to the Chief Executive Officer regarding the day-to-day management of the Company, which are identified in more detail in Section 2.21.1 of this Report.

Nevertheless, pursuant to the terms of its Internal Regulation, the Board of Directors and, in particular, its Chairman retain authority over strategic matters of management of the Group, in particular those regarding the corporate structure and those that, due to their importance and special nature, may significantly impact on its business activity. They have, by these means, effective control over the Company's affairs through supervision of the Company's management.

The matters referred to in Article 407(4) of the Commercial Companies Code are offlimits to the Chief Executive Officer.

Pursuant to Article 407(1) of the Commercial Companies Code, the Board of Directors also allocated to the Chairman of CAMF, by inherence of the duties performed on that Committee, the monitoring of investor relations and to the Director Mr. José Soares dos Santos the monitoring of the joint venture with Unilever Jerónimo Martins, Lda., and the activities of Jerónimo Martins – Distribuição de Produtos de Consumo, Lda. and Jerónimo Martins – Restauração e Serviços, S.A.

2.3.2. Organisational Structure and Division of Responsibilities

Jerónimo Martins SGPS, S.A. is the Holding Company of the Group, and as such is responsible for the main guidelines for the various business areas, as well as for ensuring consistency between the established objectives and available resources. The Holding Company's services include a set of Functional Divisions which provide support for Corporate Centre and services to the Operating Areas of the Group's Companies, in the different geographical areas in which they operate.

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

2.3.2.1. 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 the global objectives; iii. Defining and controlling financial policies; and iv. Defining human resources policy, with direct responsibility for implementing the Management Development Policy.

The Holding Company's Functional Divisions are organised as follows:

Internal Audit – Evaluates the quality and effectiveness of the systems (both operational and non-operational) of internal control and risk control established by the Board of Directors, ensuring their compliance with the Group's Procedures Manual. It 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.

This Division reports hierarchically to the Chairman of the Board of Directors and functionally to the Audit Committee. The activities carried out by this Functional Division are detailed further in this Report.

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 by managing external counsel.

In 2010, the Division focused on monitoring the evolution of the corporate rules and recommendations in the Group's various reorganization operations, including the merger of Bazar Novo and Electric Co in Pingo Doce, and internal training on matters regarding the prevention of legal disputes.

Corporate Communication – Responsible for coordinating the strategic management of the brand and the corporate reputation among the different key non-financial audiences, both internal and external, namely employees, journalists and opinion makers, NGOs and public opinion in general. To do so, it participates in the definition of the strategic approach to policies and initiatives with potential impact on reputation, while also taking on the coordination of implementation and monitoring of the Group's corporate social responsibility policy. It operates as an agent fostering interdepartmental integration with the aim of ensuring consistency in internal and external communication and alignment with the values and objectives, of business and others, of the Group. It manages the digital corporate communication channels (website and intranet) as well as the internal communication printed matter, and it coordinates the organisation and staging of events. It is the quintessential point of interaction with general and specialised journalists, providing support to various companies and Functional Divisions on media relations and event communication and organisation, in both proactive and reactive situations, particularly in cases of threat and crisis management.

In 2010, the focus was placed on the internal restructuring of the Division, in order to strengthen orientation to meeting the needs of internal customers and accountability for communication campaigns and initiatives, and also to expand technical expertise in critical areas such as the approach to social networks. The Digital Media Manager role was created. In a year which saw the anniversaries of the launch of Pingo Doce and Biedronka, special attention was given to an editorial initiative in Portuguese and Polish, about the employees who made a decisive contribution in creating the two companies' success stories, with a view to strengthening the platform of values of Jerónimo Martins' brand and the sense of pride for belonging to the Group. In terms of current management, the Group's quarterly performance results and its Companies' activities, particularly store openings and commercial initiatives, were disclosed to the media and support was provided to the Board of Directors on internal and external communication.

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 Articles of Associations.

As a result of legislative changes, 2010 saw the conversion to the International Financial Reporting Standards (NCRF/IFRS) of the statutory accounts of the Group's Companies based in Portugal. The process was accompanied by this Division. No material impacts that might affect the equity situation of the companies involved have been identified, nor was there any resultant impact on the Group's consolidated financial statements.

Its activity was also focused on supervising conformity with the accounting standards adopted by Jerónimo Martins, supporting the Companies in the accounting assessment of all non-recurrent transactions, as well as in the restructuring and expansion activities of the Group.

Strategy and Planning – Co-ordinates and supports the process of creating and maintaining the Group's Strategic Plans and the respective budgeting. In addition, it has a control function, monitoring the performance of the different Business Units of the Group and investigating any deviations from the plans. It thus provides the Managing Committee of Jerónimo Martins with relevant information and proposals to guarantee corrective measures that allow the defined strategic objectives to be achieved.

Furthermore, it coordinates the activities of acquisition and disposal of Companies or Businesses, as well as corporate restructuring processes.

Macroeconomic and market trend performance was monitored during 2010, in order to facilitate maximum proactivity in preparing contingency scenarios, in an unfavourable economic environment. Following the Group's organisational restructuring, the reporting process was adapted and developed to meet the needs of the different corporate bodies and Functional Divisions of the Holding Company.

The process of identifying new growth opportunities for Jerónimo Martins' portfolio continued to be a priority, focusing on the evaluation of alternative geographical markets and new business potential in geographical areas where the Group already operates.

Fiscal Affairs – Provides all Group's Companies with assistance in tax matters, by ensuring compliance with legislation in force and the optimisation of the business units' management activities from a tax viewpoint. The Division also manages the Group's tax disputes and its relations with external consultants and Tax Authorities.

The activities of the Fiscal Affairs Division in 2010 included advising on corporate restructuring operations, in particular the merger of Bazar Novo and Electric Co in Pingo Doce. It also analysed the various legislative instruments that form part of the Stability and Growth Plans (SGP) and the State Budgets for 2010 and 2011, with a view to aligning the policies adopted (or to be adopted) by the various Group's Companies and preparing several applications for tax benefits.

Finally, during 2010 the Fiscal Affairs Division drew up several documents intended to defend the Group's best interests before the Tax Authorities.

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 Report.

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

Treasury planning has the role of selecting the most suitable financial sources according to individual need, for all the Companies of the Group. The type of funding, corresponding terms, cost and back-up documentation must comply with the criteria established by 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 Jerónimo Martins is centralised in the Holding Company, which is a structure that provides services to all other Companies of the Group. The National Distribution Companies are completely centralised, while the Polish Distribution, and Representation and Restaurant areas still work independently in relation to processing payments to third parties. It is also Treasury's responsibility to elaborate and comply with the treasury budget that is based on the activity plans of the Group's Companies.

In compliance with the above-described activities, several loans and commercial paper programmes were restructured in various Group's Companies during 2010, with the main aim of extending their maturities, increasing the amount available, and ensuring availability in case the funds need to be used.

Food Quality and Safety– Created in 2010, it is responsible for defining, planning, implementing and controlling the policies, procedures, methodologies and rules along the whole food chain, in order to ensure the use of the best and most up-to-date practices. This responsibility extends to the different geographical areas where Jerónimo Martins operates and where the harmonisation and consistency of the methods and procedures must be identical.

The main activities developed in 2010 were the restructuring of the area, both of the organization as a whole and of individual teams in those areas, as well as the survey of processes, methodologies, practices and procedures in Portugal and Poland with the aim of harmonising them.

Human Resources – Founded on the Culture, Values and Principles of Jerónimo Martins, this area is responsible for defining and implementing the global strategy and policies of Human Resources. This Division, which acts across the Group as a whole, is responsible for ensuring compliance with the policies, standards, procedures and good practices as regards the main pillars of Human Resource Management - Recruitment, Training, Development, Compensation and Benefits - while respecting the individual nature of the different Companies and the uniqueness of the different geographical areas in which Jerónimo Martins operates.

Investor Relations - This Division is the preferred interface with 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 Office 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 section 3.11. below.

Security – This area defines and controls procedures in terms of protecting the security of the Group's 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 of the Group.

Information Systems – Defined in 2010 as a transversal corporate area, its mission is to harmonise the information systems of the Group and define common policies, procedures and processes for managing IT, as well as outlining a strategic IT plan aligned with the strategy of Jerónimo Martins.

It is responsible in particular for providing and supporting information and communication technology services that create the conditions for the business to achieve its goals and objectives. It is also responsible for defining and providing support to the architecture, communications, hardware and software infrastructure, design and development of appropriate applications that are necessary for the processes of the organisation.

This Division is also responsible for guaranteeing an adequate level of security of the Company's information systems, developing and implementing the right tools for that purpose, defining and testing the Disaster Recovery Plan, as well as providing support and appropriate training to users in relation to all new features and systems.

2010 was marked by the adaptation of the information systems to the various legislative changes, including those related to the accounting standardisation and VAT, and also by multiple processes of technological renewal (including the SAP ERP and Data Warehouse), and by various bureaucracy reduction initiatives (such as those concerning labour accidents and proposals for the hiring of staff).

2.3.2.2 Operational Areas

The organisational structure of Jerónimo Martins is aimed mainly at ensuring specialisation in the Group's various businesses by creating Geographical Areas and Operational Areas, thus guaranteeing the required proximity to the different markets.

Hence, the Food Distribution business is divided into Geographical Areas, Portugal and Poland, and then further divided within those areas into Operational Areas. In Portugal there are three Operational Areas: Pingo Doce (supermarkets and hypermarkets), Recheio (cash & carries) and Madeira (supermarkets and cash & carries). In Poland there are two Operational Areas: Biedronka (food stores) and "Apteka Na Zdrowie" (pharmacies).

The manufacturing segment operates in partnership with Unilever, through the company Unilever Jerónimo Martins, Lda., which conducts the businesses of the food, personal care and home care products and ice creams, and through the company Gallo Worldwide, Lda., which produces and sells olive oil and cooking oils.

Within the Group's portfolio there is also a business segment devoted to Marketing Services, Representations and Restaurant Services, which includes: i. Jerónimo

Martins Distribuição, which represents in Portugal major international brands of widely consumed food products, premium cosmetic brands and mass market brands, and which includes Caterplus, a specialist in the trade and distribution of specific products for Food Service; ii. Hussel, a retail chain specialised in chocolates and confectionary; and iii. Jerónimo Martins Restauração e Serviços, which owns the chain of Jeronymo coffee shops, Ben & Jerry's and Olá ice cream stores, and Chili's and Oliva restaurants.

Information about the organisation model is provided in Chapter 1 – Management Structure, of the Annual Report of which the present Report is part.

2.4. Audit Committee Annual Report and Opinion of the Audit Committee

The annual report on the activities undertaken by the Audit Committee includes a description of the supervisory activities carried out and it has been published on the corporate website of Jerónimo Martins, together with the financial statements.

2.5. Risk Management and Internal Control Systems

2.5.1. 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 field 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 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 the risk is and an awareness of the potential impact of unexpected events on the Company and its reputation.

2.5.1.1. 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 also to 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.

2.5.1.2. 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, the probability of occurrence of a certain event, and the consequences of their manifestation within the context of the control environment.

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 the organisational divisions' processes, functions and activity is developed.

2.5.1.3. 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 defined business model and strategy. The process 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 several 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 financial derivative instruments.

Activity in this area is carried out by the Financial Operations Department, under the supervision of the Executive Board. The Risk Management Department is responsible for identifying, assessing and hedging financial risks, by following the guidelines set out in the Financial Risk Management Policy that was approved in April 2009 by the Board of Directors.

Every quarter, reports on compliance with the Financial Risk Management Policy are presented to the Audit Committee.

a) Market Risk

a.1) Foreign Exchange Risk

The main source of exposure to foreign exchange risk comes from Jerónimo Martins' operations in Poland.

At 31 December 2010, a depreciation of the zloty against the euro of around 10% would have a negative impact on the net investment of 46 million euros. The Company's vulnerability to this risk increased during 2010 for two reasons:

Increase in the value of the net investment in Poland;
Maturity of all existing hedging operations for this risk, at the end of last year.

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 US Dollar, as a result of these transactions is nil, with no changes occurring from 2009 to 2010.

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 centralized in the Financial Operations Department of the Group's Holding. 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 Group's exposure to foreign exchange risk in recognised financial instruments included and not included in the balance sheet at 31 December 2010 was as follows:

				(€'000)
As at December 31st, 2010	Euro	Zloty	Dollar	Total
Assets
Cash and cash equivalents	200,130	103,797	-	303,927
Available-for-sale financial investments	7,015	-	-	7,015
Debtors and deferred costs	117,182	53,627	-	170,809
Derivative financial instruments	-	46	-	46
Total financial assets	324,327	157,470	-	481,797
Liabilities
Borrowings	609,509	101,019	142,871	853,399
Derivative financial instruments	16,218	175	8,019	24,412
Creditors and accrued costs	896,581	919,254	117	1,815,952
Total financial liabilities	1,522,308	1,020,448	151,007	2,693,763

Net financial position in the balance sheet	(1,197,981)	(862,978)		(151,007) (2,211,966)

As at December 31st, 2009
Total financial assets	202,790	209,358	15	412,163
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)

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 2010, a negative 10% variation in the trading price of BCP shares would have a negative effect of 113 thousand euros. At 31 December 2009, a similar variation would have a negative effect of 165 thousand euros.

a.3) 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 interest rate swaps, thus the Company is also exposed to fair value risk.

Exposure to interest rate risk is monitored dynamically. In addition to evaluating future interest costs 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 the yield 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 2010, and ignoring the effect of interest rate derivatives, a rise of 50 basis points in interest rates, with everything else remaining constant, would have a negative impact of 2.8 million euros (compared to 3.3 million euros at the end of 2009). Incorporating the effect of interest rate derivatives, the net impact would be a positive 2.5 million euros. These effects would be reflected in the earnings for the year.

These simulations are carried out at least once a quarter, but 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 one of the independent, benchmark rating agencies. The minimum acceptable rating is "A-" by Standard & Poor's or equivalent.

With regard to customers, the risk is mainly limited 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 2010 and 2009:

			(€'000)
Financial Institutions		2010	2009
	Rating	Balance	Balance
Standard & Poor's	[AA- : AA]	21,776	6,172
Standard & Poor's	[A- : A+]	196,175	191,448
Standard & Poor's	[BBB : BBB+]	43,731	-
Moody's	Baa2	-	23,981
Fitch's	A	29,384	-
	Not available	10,017	15

The ratings shown correspond to the notations given by Standard and Poor's. When these are not available Moody's notations 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
	2010	2009
	Balance	Balance
New customer balances (less than six months)	3,536	4,524
Balances of customers without a history of non-payment	64,221	73,863
Balances of customers with a history of non-payment	19,605	13,618
Balances of other debtors with the provision of guarantees	432	641
Balances of other debtors without the provision of guarantees	55,140	75,804
	142,934	168,450

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
2010 2009

	No.	Balance	No.	Balance
Customers with a balance above 1,000,000 euros	19	34,219	23	38,443
Customers with a balance between 250,000 and 1,000,000 euros	63	16,593	57	15,203
Customers with a balance below 250,000 euros	7,711	37,541	8,429	38,948
Other Debtors with a balance above 250,000 euros	129	30,564	34	49,483
Other Debtors with a balance below 250,000 euros	2,332	24,017	2,607	26,373
	10,254	142,934	11,150	168,450

The maximum exposure to credit risk as at 31 December 2010 and 2009 is the financial assets accounting value.

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 result from exogenous shocks beyond the control of the Jerónimo Martins.

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

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

			(€'000)
	Exposure to liquidity risk
2010	Less than 1 year	1 to 5 years	+ 5 years
Borrowings
Financial Leasing	33,968	40,545	95
Loans	217,707	640,368	-
Derivative Financial Instruments	8,683	7,449	-
Creditors	1,687,005	-	-
Operational Lease Liabilities	168,982	570,415	710,098
2009
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

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.

Balance of the capital structure 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 below 70% as a target for 2010, consistent with an investment grade rating.

The gearing ratios at 31 December 2009 and 2010 were as follows:

		(€'000)
	2010	2009
Capital Invested	1,709,343	1,757,696
Net Debt	577,532	692,000
Shareholder´s Funds	1,131,812	1,065,695
Gearing	51.0%	64.9%

Process Risks

The model used in managing Process Risks includes Operating Risks, Human Resources, Information Technologies and Information for Decision-Making. Given the cross-over inherent to 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, cash 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 follow-up 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 departments that manage environmental matters have the following responsibilities: i. minimizing the environmental impacts of the activities, products and services; ii. monitoring the facilities to assess their compliance with best practice and legal and certification requirements; iii. training employees to adopt environmental best practice; 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. Its tasks are 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 risks related to Human Resources are risks associated with payroll, authorisation levels and ethical behaviour. Health and Safety in the Workplace also comes 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 field involves defining and publicising working standards and instructions, carrying out employee awareness initiatives and training, performing audits on the stores, risk assessments in all 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, provided by the Legal Departments of the Group 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 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 Audit Department's activity plan, which defines the scope of the audits to be carried out, allows the control processes to be evaluated. 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 compliance 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 are made available by the Internal Audit Department to the Audit Committee, the Internal Control Committee and the Managing Committee of the Group on a quarterly basis.

In 2010, 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 control process evaluation has allowed the database of risks that affects or may affect the referred to Companies to be updated. Those processes are reported half-yearly to the Group's Internal Control Committee, Audit Committee and Managing Committee.

The processes for managing stock management, cash collection, supplementary income, payroll and information systems risks were all audited in accordance with the established Activity Plan, and following the updated Operating Risk models and critical business processes applying to each Company in the Group. In the area of risks relating to information for decision-making, accounting audits were carried out to gauge compliance with accounting principles.

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 in force, there are currently in effect Regulations for the Board of Directors, the Managing Committee, the Audit Committee, the CAMF, the CRC, the CAN, the Ethics Committee and the CCI, which regulate the responsibilities and functioning of the mentioned bodies. There is also Company Share Transactions Regulations, applying to Jerónimo Martins' Board Members and Senior Management.

These Codes and Regulations may be viewed on the Jerónimo Martins website or by request addressed to the Investor Relations Office. In addition to the abovementioned 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.

Section 2 The Board of Directors

2.7. The Board of Directors

According to the Articles of Associations, the Board of Directors is comprised of a minimum of seven and a maximum of eleven members. Currently, the Board of Directors has eleven members, one of whom is the Chief Executive Officer.

The inclusion of Independent Directors and Non-Executive Directors on the Board of Directors provides for the integration of a wide range of technical skills, contact networks and connections with national and international bodies, which enrich and optimise the Company's management in terms of creating value and ensuring adequate protection of the interests of all its shareholders.

Accordingly, the Company has four Independent Directors out of a total of eleven Directors. However, due to the resignation proffered by Prof. António Borges, since 1 January 2010 the Board of Directors has been operating with a total of ten Directors. In relation to the reinforcement of Corporate Governance practices, the Chairmanship of the Board of Directors (held by Mr. Alexandre Soares dos Santos) was kept separated from the Chairmanship of the Executive Committee (held by Mr. Luís Palha da Silva) up to the termination of the mandate of the Executive Committee.

The Board of Directors, whose duties are described in Article Thirteen of the Company's Articles of Association, meets at least four times a year, and any of its members may be represented at the Board meetings by another member, by means of a letter addressed to the Chairman.

Unless otherwise provided for, decisions will be 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.

It also states that it is the responsibility of the Chairman of the Board of Directors and of the Non-Executive Members of that Board to evaluate the performance of the Executive Directors and of the various existing committees. They meet at least once per year in ad-hoc meetings specifically devoted to this matter, without the presence of the Executive Directors. At such meetings the performance of the Executive Directors and their influence on Jerónimo Martins' businesses is debated in depth, including an assessment of the impact of their activity and of the alignment with the medium- and long-term interests of the Company. The same procedure is used to analyse the performance of the various committees existing within the Group.

2.7.1. Chairman of the Board of Directors

The role of Chairman of the Board of Directors is performed by Mr. Alexandre Soares dos Santos. The Chairman of the Board of Directors, according to the Board of Directors' Regulations, and in addition to the institutional representation of the Company, has a special responsibility for managing the respective meetings, for monitoring the action taken on the decisions made by this body, for taking part in the meetings of other committees set up by the Board of Directors and for defining the overall strategy. The Chairman is also Chairman of the CAN, through which he closely and systematically monitors the matters under the jurisdiction of this Committee, with particular emphasis on management development.

2.8. Main Economic, Financial and Legal Risks

The identification and handling of economic, financial and legal risks inherent to the activity of Jerónimo Martins is addressed under the areas of strategic, financial and process risks detailed in section 2.5. of this Report.

2.9. 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.

2.10. Information on the Rotation of Responsibilities Policy and Rules on the Appointment and Replacement of Members of the Board of Directors and of the Supervisory Board

2.10.1. Responsibilities of the Members of the Board of Directors

According to the structure currently adopted by the Board of Directors there are no responsibilities being allocated among its members.

This structure has, as mentioned above, a Chief Executive Officer with the powers detailed in section 2.21.1. of this Report, and specialised committees that have been established with the aim of working with the Board of Directors to carry out its functions, tracking certain specific matters.

These committees, with the composition, functions and powers described in the sections below - namely 2.21.3., 2.21.4. and 2.21.5. –, are focused on the following subjects:

Financial Matters Committee Strategic investments; Capital allocation and structure; Investor relations; Communication with financial markets; Monitoring and supervision of financial policies adopted by the Group;
Committee on Corporate Responsibility Corporate Governance; Social Responsibility, Environment and Ethics; Sustainability; Conflicts of Interest;
Evaluation and Nominations Committee –Assessment of the performance of the members of the statutory bodies of the Relevant Subsidiary Companies; nomination and succession of members of the statutory bodies of Relevant Subsidiaries; Management development and talent management policies for the Group, by identifying potential candidates for senior positions.

Since there is no division of responsibilities among the members of the Board of Directors, the Company can not follow the guideline for the rotation of responsibilities on the Board of Directors, in particular the rotation of responsibility for financial matters.

2.10.2. Rules Applying to the Appointment and Replacement of Members of the Board of Directors and of 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 paragraph one of Article Twelve of the Articles of Association, and it will be presided over by the respective Chairman, chosen by the Shareholders' Meeting.

Paragraph number three of article eight of the same Regulations prescribes that in the event of death, resignation or impediment, whether temporary or definitive, of any of its members, the Board of Directors will agree on a substitute. If the appointment does not occur within sixty days of the absence of the Director, the Audit Committee will be responsible for appointing the substitute.

According to article one of the respective Regulations, and Article Nineteen of the Articles of Association, the Audit Committee is composed of three Members of the Board of Directors, one of whom will be its Chairman. The members of the Audit Committee are appointed simultaneously with the members of the Board of Directors, and the lists of proposed members of the latter body must indicate those that are intended to form the Audit Committee. The members of the Audit Committee cannot perform executive roles in the Company.

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.

2.11. Number of Meetings of the Management and Supervisory Bodies, and Other Committees

During 2010, the Board of Directors met seven times; the Executive Committee met eight times up to its termination in April 2010, three of which were also attended by the Chairman of the Board of Directors; the Managing Committee has met, since its appointment in April 2010, 13 times; and the Audit Committee held five meetings. Likewise, the CAMF met five times, the CRC one time, and the CAN two times. Lastly, the Ethics Committee met 11 times, and the CCI held 11 meetings. The respective minutes were prepared for all these meetings.

2.12. Minutes of the Executive Committee and Information for the Members of the Corporate Bodies

The Board of Directors and its Chairman, in particular, have, apart from the powers on strategic matters of management of the Group, effective control on directing corporate life by always seeking to be duly informed and by ensuring the supervision of the Company's management.

To this end, the Board of Directors has at its disposal the minutes of the Executive Committee meetings, held up to its termination in April 2010, in which the matters discussed and the decisions taken are recorded. During that period, the Chairman of the Executive Committee also sent the notices of meetings and the minutes of the same to the Chairman of the Board of Directors and to the Chairman of the Audit Committee via the Company Secretary. Since April 2010, by virtue of delegation of powers to the Chief Executive Officer and the creation of the Managing Committee, the minutes of this ad-hoc body are also available to the Board of Directors. These minutes contain the matters discussed and decisions taken in their meetings, and they are also sent via the Company Secretary to the Chairman of the Board of Directors and the Chairman of the Audit Committee.

Moreover, at each Board of Directors meeting the Chief Executive Officer reports on Company activity since the last meeting, and is ready to provide any further clarification that the Non-Executive Directors may require. All information requested by the Non-Executive Directors in 2010 was provided in full and in a timely manner by the Executive Committee, until its termination, and by the Chief Executive Officer since then.

2.13. Description and Identification of the Management Body

The Board of Directors has eleven members, one of whom is the Chief Executive Officer - Mr. Pedro Soares dos Santos, and the remaining ten members are: Mr. Alexandre Soares dos Santos (Chairman of the Board of Directors), Prof. António Borges (resigned from the post on 22 November 2010, with effect from 31 December), Mr. António Viana-Baptista, Mr. Artur Santos Silva, Mr. Hans Eggerstedt, Mr. José Soares dos Santos, Mr. Luís Palha da Silva, Prof. Marcel Corstjens, Mr. Nicolaas Pronk and Prof. Stefan Kirsten.

Of the Non-Executive Directors - Mr. Alexandre Soares dos Santos, Prof. António Borges, Mr. Artur Santos Silva, Prof. Marcel Corstjens, Mr. Nicolaas Pronk, Mr. Hans

Eggerstedt, Mr. António Viana-Baptista and Prof. Stefan Kirsten – the last three comprise the Audit Committee, complying with the rules of incompatibility indicated in paragraph 1 of article 414-A of the Commercial Companies Code, except that provided for in sub-paragraph b).

As regards the consistency of the qualification of Mr. António Viana-Baptista vis-a-vis the criterion of sub-paragraph h) of paragraph 1 of the mentioned article 414-A, it should be clarified that some of his management positions are held in companies within the same group, therefore the assessment of the quantitative rule established in that criterion took into account those positions as one only management position.

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 Commercial Companies Code, the Independent Members are Mr. Artur Santos Silva, Prof. Marcel Corstjens, Mr. António Viana-Baptista and Prof. Stefan Kirsten. Each of them also complies with the rules of incompatibility laid down in the above-mentioned paragraph 1 of article 414-A of the Commercial Companies Code. The Company thus complies with the recommendation that the assessment of independence made by the management body takes into account the legal rules and regulations on independence requirements and the rules governing incompatibilities.

However, the Company once again expresses its disagreement with this recommendation for two reasons: i. it further accentuates the limitations arising from the application of the current statutory scheme on independence as provided for in the Commercial Companies Code, in a market of limited size, such as Portugal, where the number of people who may meet these requirements is increasingly reduced; and ii. it submits the evaluation of the independence of the members of the management body to incompatibility criteria that are designed and exclusively adjusted to the exercise of supervisory functions.

Thus, it is the Company's opinion that the CMVM should adjust this recommendation to the size of the Portuguese market, review its adequacy to the shareholder structure of companies and distinguish the applicability of the concepts of independence and incompatibility according to the members of the corporate bodies in question.

2.14. Rules of the Selection Process of Candidates for Non-Executive Directors

As referred to in section 2.10.2 of this Report, 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 paragraph one of Article Twelve of the Articles of Association.

The shareholders of the Company are thus primarily responsible for submitting to the Shareholders' Meeting for approval proposals with candidates for positions on the Board of Directors, with the whole process conducted and supervised by the Chairman of the Shareholders' Meeting, who guarantees its legality. The selection of candidates for Non-Executive Directors is, therefore, a process in the entire availability of the Shareholders, without interference from Executive Directors.

2.15. Inclusion in the Annual Management Report of the Description of the Activities Performed by Non-Executive Members

The annual management report includes a description of the activities performed by Non-Executive Members.

2.16. Professional Qualifications of the Members of the Board of Directors

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 February 1996.

The Chief Executive Officer 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 a Director of Jerónimo Martins SGPS, S.A. since 31 March 1995, and has been Chief Executive Officer since 9 April 2010.

Luís Palha da Silva 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 from 1992 to 1995, and Director of Cimpor between 1998 and 2001. He has been a Director of the Company since 29 June 2001, and was Chairman of the Executive Committee from 2004 to 9 April 2010.

José Soares dos Santos holds a Degree in Biology from Universidade Clássica de Lisboa, joined Svea Lab AB in Sweden, in 1985, before going to work for the 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 a Director of Jerónimo Martins SGPS, S.A. between 31 March 1995 and 29 June 2001, and was reappointed on 15 April 2004 to the present day.

António Borges has a degree in Economics from Universidade Técnica de Lisboa and a PhD in Economics from Stanford University. He attended INSEAD in 1980. In 1990 he was nominated Vice Governor of the Portuguese Central Bank and in 1995 he was named Dean of INSEAD. He was also a Lecturer at Universidade Católica and Stanford University, and a Consultant to 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 of Goldman Sachs from 2000 to 2008. He has been a Non-Executive Director of the Company from 29 June 2001 to 31 December 2010.

Hans Eggerstedt is a German national, with 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.

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 the Portuguese Central Bank. 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 for the Portuguese Technological Plan, member of the Consulting Committee to the CMVM, and Non-Executive Director of the Company since 15 April 2004.

Nicolaas Pronk is a Dutch national, 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 of the Heerema Group, including responsibility for the areas of Finance, Treasury, Corporate Governance, Insurance and Taxation, reporting to that Group's President. He has been a Non-Executive Director of the Company since 30 March 2007.

Marcel Corstjens is a Belgian national, with a PhD in Business Administration, majoring in Marketing from the University of Berkeley. Between 1978 and 1981 he was an 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 has been a Non-Executive Director of the Company since 7 April 2009.

António Viana-Baptista obtained a Degree in Economics from Universidade Católica Portuguesa in 1980. He has a postgraduate diploma in European Economics from Universidade Católica Portuguesa (1981) and an MBA from INSEAD (Fontainebleau, 1983). Between 1985 and 1991 he was Principal Partner of Mckinsey & Co. in the Madrid and Lisbon office. He held the post of Director in the Banco Português de Investimento between 1991 and 1998. From 1998 to 2002 he was Chairman and CEO of Telefónica International. From 2002 to 2006 he was Chairman and CEO of Telefónica Móviles S.A. From 2006 to 2008 he was Chairman and CEO of Telefónica España. Between 2000 and 2008 he was a Non-Executive Director of the Board of Directors of Portugal Telecom. He is in his first term of office as a Non-Executive Director of the Company.

Stefan Kirsten is a German national, holding a PhD from Lüneburg University in Germany. He is currently a management consultant to various companies. Between 2007 and 2009 he was a member of the Board of Directors and CEO of the Majid Al Futtaim Group. He was a director of several companies between 2002 and 2009, in particular EMI Music, Metro AG Group and ThyssenKrupp AG. He began his

professional career in Arthur Andersen. He is in his first term of office as a Non-Executive Director of the Company.

Prof. António Borges submitted his resignation from the post of Director on 22 November 2010, coming into effect on 31 December 2010.

The numbers of Company shares that are held by officers are indicated in the point concerning the Annex to the Consolidated Management Report.

2.17. Positions that the Members of the Board of Directors Hold in Other Companies

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

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.

Director of Sindcom – Sociedade Imobiliária, 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 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 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.*

Director of Sindcom – Sociedade de Investimento na Indústria e Comércio, SGPS, 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 Jerónimo Martins Serviços, S.A.* 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 Jerónimo Martins – Restauração e Serviços, S.A.* Director of Sindcom – Sociedade de Investimento na Indústria e Comércio, SGPS, S.A. Director of Sindcom – Sociedade Imobiliária, S.A. Director of Sociedade Francisco Manuel dos Santos, SGPS, S.A. Director of Fundação Francisco Manuel dos Santos. Manager of Unilever Jerónimo Martins, Lda.* Manager of Gallo Worldwide, Lda.* Manager of Jerónimo Martins – Distribuição de Produtos de Consumo, Lda.* Manager of SFMS – Imobiliária, Sociedade Unipessoal, Lda. Manager of Transportadora Central do Infante, Lda.

António Borges

Manager of International Monetary Fund for Europe

Hans Eggerstedt

Member of the Supervisory Board of Unilever Deutschland Gmbh (Germany) Non-Executive Director of Colt Group, S.A. (Luxembourg) Member of the Advisory Board of Amsterdam Institute of Finance (The Netherlands)

Member of the Supervisory Board of Jeronimo Martins Duystrybucja, SA*

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 Heavy Transport Group, Inc.

Member of the Board of Directors of Heerema Engineering & Project Services, Inc.

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 N.V. 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 Marine Contractors Finance (Luxembourg) S.A. Member of the Board of Directors of Heerema Group Services S.A. Member of the Board of Directors of Asteck S.A. Member of the Board of Directors of Epcote 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 Power Ultrasonics, S.A.

Marcel Corstjens

Does not hold any post in other companies.

António Viana-Baptista

Member of the Board of Directors of Semapa, SGPS, S.A. Member of the Audit Committee of RIM - Research in Motion Member of the Board of Directors of TELESP Brasil Member of the Board of Directors of Telefónica Moviles México Member of the Board of Directors of O2 Plc Member of the Board of Directors of NH Hoteles

Stefan Kirsten

Partner at SCCO International FZ-LLC.

Section 3 Remuneration

2.18. Remuneration Policy of the Board of Directors and of the Supervisory Board

The Remuneration Committee, according to its powers, established the remuneration parameters of the Executive Directors 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 of accelerated growth to be established and achieved, and the adequate remuneration of Shareholders.

By proposal of the Chairman of the Board of Directors, the variable component is defined annually by the Remuneration Committee, considering the contribution of the Executive Directors to the evolution of the businesses from the shareholder's perspective (EVA) and the Company's share price during the preceding financial year, and furthermore, the degree of achievement of the projects forming part of the Group's Strategic Scorecard.

The variable remuneration is thus dependent on predetermined criteria that take into account the real growth of the Company, the wealth created for shareholders and long-term sustainability.

In its statement on the remunerations policy submitted to shareholders in 2010 and published on the website of the Group, the Remuneration Committee set the maximum thresholds for fixed and variable remuneration through the establishment of a maximum of 45% of total compensation for the variable part. That percentage was determined after analyzing the average of the variable components paid by the PSI20 companies and financial institutions of Euronext Lisbon, which were 45.6% and 61.6%, respectively, in 2009 vis-a-vis 2008.

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.

The statutory auditor is remunerated in accordance with the contract for the provision of audit services concluded with the Group, which covers almost all of its subsidiaries and providing a fee in line with the values practiced in the market.

This remuneration policy was subject to discussion at the Annual Shareholders' Meeting held last year.

The Company continues not to have any plan for the award of shares or options to acquire shares to the Directors, nor was any remuneration paid out in the form of profit sharing in 2010.

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.

2.19. 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 management 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 such is achieved by indicating the overall remuneration of the Executive Directors on the one hand, and the Non-Executive Directors 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 discloses the information within the terms imposed.

The remuneration of the members of the Board in 2010 totalled 3,832,246.34 euros (2,481,978.14 euros relative to the fixed component and 1,350,268.20 euros regarding the variable component). All these remunerations have been paid and no other remunerations are paid by other companies in the Group.

Individually, in 2010 Mr. Pedro Soares dos Santos earned a total of 769,578.38 euros (467,133.38 euros in relation to the fixed component and 302,445.00 euros in relation to the variable component), 433,528.36 euros of which (131,083.36 euros in relation to the fixed component and 302,445.00 euros in relation to the variable component) was paid in the capacity of member of the Executive Committee.

Mr. Luís Palha earned a total of 771,149.18 euros in 2010 (468,704.18 euros in relation to the fixed component and 302,445.00 euros in relation to the variable component), 434,051.96 euros of which (131,606.96 euros in relation to the fixed component and 302,445.00 euros in relation to the variable component) was paid in the capacity of member of the Executive Committee.

Mr. José Soares dos Santos earned a total of 769,578.38 euros in 2010 (467,133.38 euros in relation to the fixed component and 302,445.00 euros in relation to the variable component), 443,528.36 euros of which (131,083.36 euros in relation to the fixed component and 302,445.00 euros in relation to the variable component) was paid in the capacity of member of the Executive Committee.

The members of the Audit Committee earned a total remuneration of 225,000 euros, all as fixed remuneration.

Individually, the current members of the Audit Committee earned the following remuneration: Mr. Hans Eggerstedt received 57,500.00 euros, Mr. António Viana-Baptista received 48,750.00 euros, and Prof. Stefan Kirsten received 56,250.00 euros.

Prof. António Borges, member of the Audit Committee until April 2010 and member of the Board of Directors until 31 December 2010, received a remuneration of 53,750.00 euros and Mr. Rui Patrício, member of the Audit Committee and member of the Board of Directors until April 2010, received a remuneration of 8,750 euros.

The remaining members of the Board of Directors received the following, individually and as fixed remuneration: Mr. Artur Santos Silva received 60,000 euros, Mr. Nicolaas Pronk received 60,000.00 euros, and Prof. Marcel Corstjens received 45,000.00 euros.

The Chairman of the Board of Directors received a total of 1,131,940.40 euros, of which 689,007.20 euros refers to fixed remuneration and 442,933.20 euros refers to variable remuneration.

The criteria for attributing the variable part of remuneration to the members of the Board are those stated in the previous section of this Report. In concrete terms the Remuneration Committee, following the performance evaluation carried out by the procedure referred to in section 2.7. of this Report, decided to award the above amounts based on the results obtained, the profitability of the businesses from the shareholder's perspective (EVA), the relative share price performance, the work carried out during the year, the success of the projects undertaken bearing in mind the previously defined targets, and the criteria applied to the attribution of the variable remuneration to other senior managers.

In particular, the Remuneration Committee, in accordance with existing practice of the Company in recent terms, has sought to define a remuneration policy that rewards Executive Directors for the long-term performance of the Company and for satisfying the interests of the Company and of the Shareholders within this period. Therefore, the variable component that is approved on an annual basis by the Remuneration Committee considers their contribution to the development of business through: i. the achievement of 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 exceed, and the Executive Directors are accountable for each phase of fulfilment.

The thresholds for the fixed and variable components of remuneration, as mentioned in the preceding section, were fixed by the Remuneration Committee in 2010, by imposing a ceiling on the variable component equivalent to 45% of total compensation.

The Remuneration Committee has held that the manner in which the remuneration of the Executive Directors is structured ensures full alignment of their interests and the positive performance of the Company in the long term without the need to stipulate any period of deferral for the variable component. The absence of deferral makes it unnecessary to have mechanisms to prevent the execution of contracts by executive directors that subvert the rationale of variable remuneration.

No plan is in place to attribute shares, or provide options to purchase shares, to Directors and managers, for the purposes of Paragraph 3 of Article 248-B of the Portuguese Securities Code. In the same way, no remuneration was paid as profitsharing, nor was any compensation paid to former Directors, Executive Directors or otherwise, related to the cessation of duties, and the Company has no outstanding debt in this respect. The Executive Directors benefit from life and health insurances. They did not receive any other amount from any Company in a Group relationship or exercising control over 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 – the monthly percentage discounted for the Fund was increased in 2010,

from 12.5% to 17.5% – and with the value of the 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 invalidity if the Portuguese Social Security Authorities acknowledge this.

Pensionable salary is the gross monthly base salary multiplied by 14 and divided by 12. At the end of the calendar year, a variable amount made up of all variable payments received is added to this monthly amount. The cap on the annual amount of this variable value was removed in 2010 (it had previously been equivalent to 20% of the gross monthly base salary of the last month of that year, multiplied by 14). This amount is integrated into the above-stated sums indicated as the remuneration of the Directors. Plan Participants acquire the right to 100% of the total amount of the contributions of the Company for the Fund, provided that they complete two terms of office as 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 supplement was established in the Annual Shareholders' Meeting of 1996 and only those Directors that have not opted for the Retirement Pension Plan mentioned above may benefit from this supplement.

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.

The remuneration of Non-Executive Directors, except for the Chairman of the Board of Directors, only incorporates a fixed component.

2.20 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 officers who are recognised within the Company with information on possible irregularities occurring within the Group. They may also 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 entities, among other matters.

The Ethics Committee sent a message to all Jerónimo Martins employees to the effect that, if necessary, they could communicate with this body. This is possible by means of: i. letter via freepost; 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.

Section 4 Specialised Committees

2.21. Composition of Specialised Committees and Number of Meetings during Financial Year

2.21.1. Chief Executive Officer and Executive Board

In April, following the election of the members of the management body for this current term of office, the Board of Directors decided to change its organisational structure for the three-year period beginning in 2010, in order to meet the new needs and requirements of the Group without neglecting governance best practice.

Thus, the Board of Directors appointed a Chief Executive Officer, responsible for implementing the strategic decisions taken by the Board in accordance with the delegated powers, and an Executive Board, responsible for assisting the Chief Executive Officer in the duties delegated to that officer by the Board of Directors.

The role of Chief Executive Officer is performed by Mr. Pedro Soares dos Santos who has the following delegated powers:

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 the loaning entity up to 50 million euros, after consulting with the Financial Matters Committee, whenever such operation exceeds 10 million euros;
Make decisions regarding the Company providing technical and financial support, by means of 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 of subsidiaries of the Company;
Decide on the acquisition of any goods or real estate, and in general on making any investments up to the amount of 10 million euros, without prejudice to the provisions of the following paragraph;
After consulting the Chairman of the Board of Directors, designate the people to be proposed to the Shareholders' Meetings of the companies in which it holds, in whole or i part, shares, quotas or social shares, 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 approve the human resources policies to be followed by the Group, regarding the powers allocated to the Evaluation and Nomination Committee;
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;
To approve the organic structure of the Group's Companies.

For the purposes of the delegation of powers, investments whose value exceeds more than 10% of the value of each heading established in the Plan are regarded as not provided for in the Annual Plan.

The Board of Directors has also appointed a Managing Committee which has the primary goal of assisting the Chief Executive Officer in the duties delegated by the Board, in relation to the current management of the businesses that comprise the corporate object of the Company.

The Managing Committee of the Company, which has the same term of office as that of the Board of Directors that appointed it, is composed of the Chief Executive Officer, Mr. Pedro Soares dos Santos, who is the chair, Mr. Pedro Pereira da Silva, Ms. Marta Lopes Maia and Mr. Nuno Abrantes. In accordance with its regulations, the Managing Committee has the following duties:

Control of implementation by the companies in the Group of the strategic guidelines and policies defined by the Board of Directors;
Financial and accounting control of the Group and of the companies that are a part thereof;
Senior coordination of the operational activities of the different companies in the Group, whether integrated or not in business areas;
Launching of new business and monitoring them until they are implemented and integrated in the respective business areas;
Implementation of the management policy of human resources defined for the top-level management of the entire Group.

To carry out the listed functions, the Managing Committee has the following powers:

Approval of entering into financial contracts and financial operations of less than 50 million euros, including the start of a commercial relationship with a financial entity (after consultation with the CAMF, whenever the referenced operations exceed 10 million euros), the establishment of lines of credit, financing and operations of coverage and use of lines of credit already available;
Approval of the processes of reorganization of the company structure of participated entities, including increase and decrease of share capital, mergers, splits, liquidations, incorporation of companies and alterations of the Articles of

Association, as well as the purchase, sale or transfer of financial holdings, after consultation with CAMF; approval of transversal standards among the different companies of the Group, such as procedure manuals, regulations and internal instructions; Deciding on prosecution, waiver or negotiation of settlements in court proceedings with amounts exceeding 100,000 euros. Whenever these processes exceed 10 million euros, CAMF should be consulted;

Monitoring of negotiations and formalisation of group contracts for the acquisition goods and services involving appropriations over 500,000 euros and models of standard agreements entered into by Companies in the course of their activity;
Approval of investment proposals up to 10 million euros;
Purchase and sale of holdings in subsidiary companies, after consultation with CAMF;
Approval of operating and current expenses;
Entering into maintenance contracts. If they are over 5 million euros, they should be subject to consultation with CAMF;
Negotiating the terms of insurance policies, after consultation with CAMF;
Giving donations of over 100,000 euros, while always respecting the policy defined by the Company. Whenever amounts exceed 500,000 euros, CAMF must be consulted;
Enter into specialized service contracts (consulting, transport, auditing, litigation, etc.);
Approval of real estate market valuations, according to the policies adopted by the Jerónimo Martins, after consultation with CAMF;
Approval of impairment of assets, after consultation with CAMF;
Submitting the results appropriation proposal of the Company and approving those of the remaining companies of the Jerónimo Martins Group, after consulting CAMF.

The Managing Committee meets at least twice per month, at the Company headquarters or at any other location. . It is the responsibility of the Chairman to convene and direct the meetings, setting the respective date, time and agenda. In 2010, the Managing Committee met 13 times, drawing up minutes of the meetings, which were sent to the Chairman of the Board of Directors and the Chairman of the Audit Committee.

2.21.2. Audit Committee

The Audit Committee, which has three Non-Executive Directors as members - Mr. Hans Eggerstedt (Chairman), Mr. António Viana-Baptista and Prof. Stefan Kirsten, the last two being independent according to legal criteria – paid particular attention in 2010 to financial risk management and to the analysis of reports and control of the execution of the correction measures proposed by Internal Audit.

The Chairman of the Audit Committee, Mr. Hans Eggerstedt, is internationally recognised 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 he has the special skills to chair the Company's supervisory body.

Since the amendment of the Articles of Associations, approved in the 2007 Annual Shareholders' Meeting, the Audit Committee is a statutory body, as a result of changes to the Commercial Companies Code 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.

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:

Monitoring the preparation and disclosure of financial information;
Monitoring the effectiveness of internal control systems, internal auditing and risk management. For this purpose, they may work with the CCI, which shall report to them regularly on their work, pointing out situations that should be analysed by the Audit Committee;
Approving activity plans in the area of risk management and following up on their execution, proceeding with the assessment of the recommendations resulting from the auditing actions and the revisions of the procedures undertaken;
Looking after the existence of an adequate internal risk management system for the companies of which the Company is holder of shares or quotas, ensuring full compliance with its objectives;
Approving the activity programmes of internal auditing, which respective Department will be functionally reporting to it, as well as of external auditing;
Selecting, as proposed by the Managing Committee, the service provider for external auditing;
Monitoring the legal accounts audit services;
Assessing and monitoring the independence of the statutory auditor, especially when he performs additional services for the company.

The Audit Committee, for the adequate performance of its duties, requests and appraises all the management information deemed necessary. In addition it has unrestricted access to the documentation produced by the auditors of the Company, having the possibility to request any information from them it deems necessary and being the first recipient of the final reports prepared by the external auditors.

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 then 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 adequate for the interests of the Group, 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 information is presented in a timely manner with quality and transparency.

The Company did not promote the rotation of the external auditor. Its maintenance was discussed and weighed up during the selection process mentioned in the previous paragraph, as results from the annual report on the activities of the Audit Committee for the year 2009.

2.21.3. Financial Matters Committee

CAMF is composed of three members, none of which may be a Director to whom powers have been delegated, pursuant to paragraph 3 of Article Twelve of the Company's Articles of Association. The members of the Committee are appointed by the Board of Directors. The members of this Committee are Mr. Luís Palha da Silva, who chairs it, Mr. José Soares dos Santos and Prof. Stefan Kirsten, who is independent according to legal criteria.

The CAMF was created in April 2010 after the internal reorganization by the Board of Directors and its mission is to collaborate with the Chief Executive Officer and the Managing Committee, assessing and submitting to the Board of Directors the strategic orientation proposals of the Group in the financial areas, especially with respect to: i. strategic investments, ii. capital allocation and structure, iii. investor relations, and iv. communication with financial markets. The CAMF is further responsible for monitoring and supervising the financial policies adopted by the Group.

In addition to the duties specifically conferred by the Board of Directors, the CAMF is particularly responsible for performing the following:

Monitor, review and assess the adequacy of strategic investments and their consistency with the recommendations, standards and best practices of management, at the national and international level, directing to the Board of Directors and to the Chief Executive Officer the recommendations considered appropriate in this regard;
Analyse the relevant aspects of the outlook, considering the present situation and prospects for the future, especially with regard to factors that may influence and motivate the activity of the Group, assessing the alternatives for sustainable growth;
Assess and monitor the development and sustainability of the business strategies implemented by the Company, proceeding especially with monitoring the joint venture agreements and activities established or to be established by the Jerónimo Martins;
Propose the allocation, structure and the cost of capital of the Group;
Analyse and giving advice regarding any changes in accounting policies and practices;
Monitor compliance and correct application of the accounting-financial principles and standards in effect, in coordination with the activity developed by the Board of Directors, the Audit Committee, the Chief Executive Officer, the Statutory Auditor and the External Auditor, promoting and requesting the exchange of information needed for this purpose;
Assess the corporate structure of the Group and all reorganisation processes, including the monitoring of the processes of winding-up and liquidate companies; Assess the corporate structure of the Group and all reorganisation processes, including the monitoring of the processes of winding-up and liquidate companies;
Monitor and assess the corporate image of the Company among financial markets, investors and supervisory authorities;
Monitor and analyse the evolution of the main financial ratios and changes in formal and informal ratings of the Group, including reports from rating agencies;
Monitor and ensure compliance with the legal and regulatory standards of securities markets in which the Company is listed;
Monitor the activities of the services of companies that make up the Group in matters within their competence;
Issue opinions, advice and recommendations on matters within their competence.

The CAMF also issues its opinion, in advance, on the following matters;

Financial information and monthly accounts;
Financial statements and presentation of quarterly, semi-annual and annual results, to be published to the market, with a view to presenting its conclusions to the Board of Directors;
Proposal of the Strategic Plan;
Proposal of the Annual Budget;
Loans in an amount over 10 million euros;
Capital Expenditure Proposal in an amount below ten million euros;
Risk management policies.

The CAMF meets with the frequency needed to comply with its objective, but at least once every three months. In 2010, the CAMF met five times, drawing up minutes of the meetings, which were sent to the other members of the Board of Directors.

2.21.4. Committee on Corporate Responsibility

The CRC is composed of three members of the Board of Directors, appointed by the Board. The members of this Committee since its creation in April 2010, under the reorganisation of the structure of the Board of Directors, are Mr. Luís Palha da Silva (Chairman), Mr. José Soares dos Santos and Mr. António Viana-Baptista, who is independent according to applicable legal criteria.

In carrying out its mission, the CRC collaborates with the Board of Directors, assessing and submitting to it proposals for strategic orientation in the area of corporate responsibility, as well as monitoring and supervising in a permanent manner matters concerning: i. corporate governance, social responsibility, the environment and ethics; ii. the business sustainability of the Group; iii. internal codes of ethics and conduct; and iv. systems of assessment and resolution of conflicts of interest, especially regarding relations between the Company and its shareholders or other stakeholders.

In addition to the duties specifically conferred by the Board of Directors, the Committee on Corporate Responsibility is responsible for performing the following:

Submitting to the Board of Directors of the Company the policy of corporate governance to be adopted by the Company and by the Group;
Monitoring, reviewing and assessing the adequacy of the governance model of the Company and its consistency with the recommendations, standards and best practices of corporate governance, at national and international level, directing to the Board of Directors and the Chief Executive Officer the recommendations considered appropriate in this regard;
Proposing and submitting to the Board of Directors changes to the governance model of the Company, including the organizational structure, responsibilities and internal rules of the Board of Directors;
Monitoring the corporate articulation of the Company with the organizational structure of other companies of the Group;
Overseeing compliance and the correct application of the principles and legal, regulatory and statutory standards of corporate governance in effect, in connection with the activity developed by the Board of Directors, by the Chief Executive Officer, by the Managing Committee, the Statutory Accountant and the External Auditor, promoting and soliciting the exchange of information needed for this purpose;
Defining the parameters of the report on the corporate governance of the Company to be incorporated in the Company's Annual Report;
Monitoring the activities of the Ethics Committee and the services of companies that make up the Group in matters covered by their competence;
Monitoring in a permanent manner, assess and supervise the internal procedures relative to matters of conflict of interest, as well as the effectiveness of systems of assessment and resolution of conflicts of interests;
Giving advice regarding affairs between the Company and its Board Members, as well as between the Company and its shareholders, as long as it is materially relevant;
Whenever requested by the Board of Directors, rendering an opinion regarding the application of the system of incompatibilities and independence to the officeholders of the statutory bodies of the Company;
Promoting and enhancing the performance of the Company as a sustainable business, making it recognized as such internally and externally;
Seeking compliance by the members of the Board of Directors and others with the market standards of values governing their conduct;
Developing a transversal strategy of corporate sustainability, that is integrated and coherent with the strategy of the Company;
Promoting, developing and overseeing the creation of internal conditions necessary for the sustained growth of the Company, from a three-dimensional perspective, in the economic, environmental and social fields, according to international criteria.
Preparing and monitoring decision-making by the relevant statutory bodies and committees on matters subject to a prior opinion regarding corporate governance, sustainability or which give rise to conflicts of interest between the Company, shareholders and members of their statutory bodies;
Monitoring the inspection activities of CMVM in the area of corporate governance.

The CRC meets as often as necessary to comply with its objective, with a minimum of at least once every six months. In 2010, the CRC met one time, drawing up minutes of the meeting that was distributed to the other members of the Board of Directors.

2.21.5. Evaluation and Nominations Committee

The CAN is composed of the Chairman of the Board of Directors, Mr. Alexandre Soares dos Santos, who is also Chairman of the Committee, and three members of the Board of Directors - Mr. Luís Palha da Silva, Mr. José Soares dos Santos and Mr. Artur Santos Silva, who are all appointed by the Board of Directors.

The creation of the CAN also arose from the internal reorganization of the Board of Directors and its mission, as a support body, is to collaborate with the Board of Directors, by assessing and submitting to it proposals for strategic guidance in the area of policies of evaluation and nominations, as well as monitor and supervise matters relating to: i. the assessment of the performance of the members of the statutory bodies of the subsidiary companies of Jerónimo Martins, SGPS, S.A. that are

sub-holdings of it or that have a sales figure of more than 100 million euros (Relevant Subsidiary Companies); ii. the nomination and succession of members of the statutory bodies of the Relevant Subsidiary Companies; and iii. the policies of management development, including systems of assessment, career planning and salaries of the top level management of the Group.

In addition to the duties specifically conferred by the Board of Directors, the CAN is responsible for the following, with regard to the statutory bodies of Relevant Subsidiary Companies:

To assess the performance of the members of the board of directors;;
To monitor the definition of criteria and duties needed in the structures and statutory bodies;
To prepare and monitor compliance with the succession plans relative to the structures and statutory bodies;
To monitor, review and assess the adequacy of the methods of evaluation and the plans of succession and its consistency with the recommendations, standards and best practices in effect nationally and internationally;
To promote, along with the competent bodies the substitution or filling of vacancies in the statutory bodies, in a timely manner;
To analyse and present proposals and recommendations concerning the salaries of members of the statutory bodies, coordinating its activity with the Remuneration Committee and giving their opinion whenever requested by the Board of Directors.

It is the responsibility of the CAN in relation to management development policies:

To prepare and monitor the implementation of systems of evaluation of performance and career planning of the top level management of Jerónimo Martins;
Monitoring the management of talent in the Group, especially through follow-up of the processes of identifying the potential and validity of candidates for senior positions;
Analysing and approving proposals and recommendations relative to salaries and other compensation for the top level management of the Group, in light of the activity they perform.

The CAN meets as often as necessary to achieve its objective, and at least three times a year. In 2010, the CAN met two times, drawing up minutes of the meetings, which were sent to the other members of the Board of Directors.

2.21.6. Ethics Committee

The Ethics Committee of Jerónimo Martins is composed of three to five members appointed by the Board of Directors, on proposal by the Committee on Corporate Responsibility. It is currently comprised of Ms. Sara Miranda (Group Communications Manager), who chairs it, Ms. Inês Carvalho (Human Resources Manager of Recheio), Mr. Marian Jaskowiak (Management Development Manager of Jeronimo Martins Dystrybucja SA) and Ms. Katarzyna Strugalska (Labour Relations Manager of Jeronimo Martins Dystrybucja SA). The mission of the Ethics Committee is to provide independent supervision of the disclosure of and compliance with the Group's Code of Conduct in all the Companies of the Group.

Annual Report 10 Corporate Governance Managing and Supervisory Bodies of the Company

In performing its duties, the Ethics Committee: i. establishing the channels of communication with the addressees of the Jerónimo Martins Group Code of Conduct and with gathering such information as may be addressed to it in this connection; ii. ensuring the existence of an adequate system of internal control of compliance with the Jerónimo Martins Group Code of Conduct and with the appraisal of the recommendations stemming from such control; iii. appraising such issues as may be submitted to it by the Board of Directors, by the Audit Committee or by the CRC within the scope of compliance with Code of Conduct and with analysing in abstract those that may be raised by any employee, customer or business partner (stakeholders); iv. proposing to the CRC the adoption of such measures as it may deem fit in this connection, including a review of internal procedures and alterations to the Jerónimo Martins Group Code of Conduct; and lastly, v. drawing up an annual report on its activities to be presented to the Committee on Corporate Responsibility.

The Ethics Committee reports functionally to the CRC, which has taken over the duties of the Audit Committee in the field of corporate governance, namely the Company's relationship with shareholders and other stakeholders.

The Ethics Committee in 2010 examined various issues submitted to it by the CRC, by the Group's employees and by third parties. This year focused on the Committee's activity across all the Group's companies and geographic regions.

The Ethics Committee meets at least once a month or whenever convened by its Chairman or by the CRC. In 2010, the Ethics Committee met 11 times, drawing up minutes of the meetings, copies of which were sent to the CRC. The minutes were made available to other members of the Board of Directors for consultation.

2.21.7. Internal Control Committee

The CCI, appointed by the Board of Directors and reporting to the Audit Committee, is specifically responsible for evaluating the quality and reliability of the internal control system and the process of preparing financial statements, as well as evaluating the quality of the monitoring process in force in Jerónimo Martins' Companies, with a view to ensuring compliance with the laws and regulations to which they are subject. In performing this latter task, the CCI must obtain regular information on the legal and fiscal contingencies that affect the Companies of the Group.

The CCI meets monthly and is composed of a Chairman (Mr. David Duarte) and three members (Mr. José Gomes Miguel, Ms. Catarina Oliveira and Mr. Henrique Santos). None of the members is an Executive Director of the Company.

In 2010, the CCI continued its activities of supervision and evaluation of risks and critical processes, analysing 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.

2.21.8. Remuneration Committee

The Annual Shareholders' Meeting in 2010 elected the following shareholders to the Remuneration Committee for the three-year term in progress: Mr. António Sousa Gomes (Chairman), Mr. José Queirós Lopes Raimundo and Mr. Arlindo do Amaral. However, due to the resignation from the position of Mr. António Sousa Gomes on 6

September 2010, the alternate member, Ms. Soledade Carvalho Duarte, was called onto the Committee from 7 September 2010. The chairmanship of the Committee was taken up, also from that date, by Mr. Arlindo do Amaral.

None of the members of the Remuneration Committee is a member of the Board of Directors of the Company, or has a spouse, family member or relative in such a position, nor do they have relationships with the members of the Board of Directors that may affect their impartiality in the performance of their duties. Furthermore, the members of this Committee have extensive knowledge and experience in management and remuneration policy, which gives them the necessary skills to perform their duties adequately and effectively. This Committee, in accordance with legal requirements, determines the earnings of the Members of the Board of Directors. During 2010, the Remuneration Committee met two times, and the respective minutes were prepared.

Last year, this Committee submitted a statement to the Annual Shareholders' Meeting on the remuneration policy of the Company's Board of Directors and Supervisory board.

The Remuneration Committee did not consider it necessary to contract services to support it in the performance of its duties.

Chapter 3 Information and Auditing

3.1. The Company's Capital Structure

The Company's share capital is 629,293,220 euros. It is fully subscribed and paid in, and 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 holds 859,000 shares in its own portfolio, which were acquired in 1999 at an average price of 7.06 euros per share (price adjusted by the restatement of capital). These shares represent 0.14% of the Company's share capital. In 2010, 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 Portuguese Securities Code are identified in the note that refers the List of Qualified Shareholders as at 31 December 2010, included in the Annex to the Consolidated Management Report of this Report. Sociedade Francisco Manuel dos Santos SGPS, S.A., Asteck, S.A. and Carmignac Gestion 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 Amendment of the Company's Articles of Association

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

The Articles of Association do not set limits on exercising the right to vote. The Board of Directors knows of no Shareholder agreements.

The Articles of Association do not define any rules applicable to amendment of the Company's Articles of Association, 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 - PSI20 - decreased in value by 10.3% in 2010, equivalent to a loss of 6.8 billion euros, having the Portuguese Stock Market the second-worst performance in Europe, only exceeded by the Spanish stock market.

Despite significant growth of the Index in March (7.2%), the first half-year reflected as a whole a strongly negative trend in the domestic stock exchange, leading to a devaluation of 16.5%. This development primarily reflects significant market volatility and the risk associated with Portuguese sovereign debt, as S&P cut Portugal's rating in May and Moody's threatened to do it. The year's low of the PSI20 Index was recorded in May, registering close to 6,624 points on 7 May, which corresponds to a devaluation of 21.7% from the previous year.

The Index recovered positive growth in the third quarter of the year and in the month of October, though the gains were not sufficient to recover the losses that were registered. Despite that recovery, the Index still registered a cumulative loss of 4.5% at the end of October.

In November, the PSI20 devalued 9.4%, which was the second largest fall on European stock markets (only exceeded by the Spanish IBEX-35 index, which devalued -14.3%). November was the worst month since the bankruptcy of Lehman Brothers in October 2008.

The Portuguese Stock Market Index ended the year as the 10th worst performing in the world, devaluing by 10.3% in 2010, reflecting investors' lack of confidence in Portugal's ability to make its debt payments and the poor performance of the country's banking sector. Although the Index grew 3.6% in value in December, it was not enough to offset the losses registered in the first eleven months of 2010 (-13.5%).

This performance contrasts with that registered by other European stock market indices, such as the Stoxx600, which appreciated 8.7% in 2010, and the DAX, which

gained 16.1% in the year. However, in comparison to other peripheral European economies, the Lisbon Stock Exchange devalued the least: Athens lost 35%, Madrid depreciated by 17.4% and Milan fell 13.2%.

Without the positive growth effect of Jerónimo Martins, Galp and Portucel, the losses of the PSI20 would be greater than 20%. These were the three best performing securities in 2010: Jerónimo Martins gained 63.2%, Galp 18.7% and Portucel 14.9%.

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

Jerónimo Martins shares were the best performing of the Portuguese stock market Index (PSI20) in 2010, gaining 63.2% in value year-on-year, following a year which itself showed the fifth best ever performance (2009: 75.9%).

In terms of market capitalisation, Jerónimo Martins ended 2010 in fourth position in the PSI20 (market capitalisation of 7.2 billion euros), representing 12.0% of its total value. In 2009, Jerónimo Martins achieved sixth position: 4.4 billion euros market capitalisation and weight of 6.6% of the Index.

The share price of Jerónimo Martins in the first six months of 2010 followed a growth trend, albeit slight, ending the month of June 7.9% up on the start of the year. The shares appreciated most in the second-half of the year (51.2%). On 8 December, Jerónimo Martins recorded its highest ever share price with the shares closing at 12.58 euros.

The greatest rises in the share price occurred in July and October, coinciding with the release of the first half and the first nine months results of 2010, driven by the operational performance that largely exceeded market estimates.

The greatest fall occurred in May (-2.9%) and coincided with the 4.5% devaluation of the PSI20, reflecting the risk associated with Portuguese sovereign debt, the cut in S&P's rating for Portugal and Moody's threat to cut its rating.

Jerónimo Martins shares registered, in liquid terms, an average daily trading volume of 1,163,730 shares during 2010, around 14.4% down on the 2009 trading volume.

No shares or other securities were issued. The shares are not divided into different categories, therefore dividend payments were not affected.

JM SHARES DESCRIPTION

	2010	2009	2008	2007	2006

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	629,293,220	125,858,644
Own Shares	859,000	859,000	859,000	859,000	171,800
EPS (Eur)	0.45	0.32	0.26	0.21	0.92
Cash Flow per share (Eur)	0.82	0.69	0.55	0.42	2.05
Dividend per share (Eur)*	0.14	0.11	0.10	0.44	0.42

Stock market Performance **
High (Eur)	12.58	7.05	6.40	5.59	3.52
Low (Eur)	6.33	3.07	3.22	3.43	2.55
Average (Closing) (Eur)	8.63	4.97	4.92	4.37	2.85
Closing (End of year) (Eur)	11.40	6.99	3.97	5.40	3.40
Market Capitalisation (31/12) (Eur's 000,000)	7,174	4,396	2,498	3,398	2,140

Transactions
Volume (1.000 shares) **	300,343	347,603	468,826	275,512	189,430
Annual Growth
PSI20	-10.3%	33.5%	-51.3%	16.3%	29.9%
Jerónimo Martins	63.2%	75.9%	-26.5%	58.8%	33.9%

*2008 dividend per share, related to 2007, discloses the stock split of M ay 2007

** Data presented for the year 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 also released all relevant information on the performance of the Group's business areas, in order to keep analysts and investors informed as to the development of Jerónimo Martins' operational and financial activities.

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

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

14 January	Preliminary Sales 2009
3 March	FY 2009 Results
28 April	1st Quarter 2010 Results
28 July	1st Half 2010 Results
28 October	3rd Quarter 2010 Results

The following table shows the performance of Jerónimo Martins' shares, taking into account the announcement of results and material information during 2010.

Event	Date	Price	Price variations JM
			5 days before	1 day after	5 days after
Preliminary Sales 2009	14 January	7.20	3.7%	-3.6%	-3.1%
FY 2009 Results	3 March	7.42	-5.1%	-1.6%	-2.5%
1st Quarter 2010 Results	28 April	7.46	3.6%	-3.2%	-1.5%
1st Half 2010 Results	28 July	8.25	-0.6%	0.0%	6.8%
3rd Quarter 2010 Results	28 October	10.18	-2.4%	6.1%	7.8%

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 the 2007 fiscal year, the gross dividend paid to Shareholders was 0.096 euros per share, in 2008 it was 0.11 euros per share, and in 2009 it was 0.143 euros per share, always in accordance with the abovementioned directives.

As regards 2010, the Board of Directors decided at its meeting of 19 November to advance 50% of the financial year's individual profits, based on the results as at 31 October, amounting to 26,394,237.24 euros, equivalent to the gross value of 0.042 euros per share.

Also in 2010, the Extraordinary Shareholders' Meeting held on 15 December approved the distribution of free reserves to the amount of 105,576,948.96 euros, equivalent to the gross value of 0.168 euros per share.

Overall those distributions were equivalent to a gross dividend of 0.21 euros per share, which represents an increase of 46.9% over the dividend paid in the previous year, corresponding to dividend yield of 2.4% on the average share price in 2010, which was 8.63 euros.

In view of the above-mentioned, the net results of the fiscal year of 2010 and the established policy, at the Shareholders' Meeting the Board of Directors will propose the fiscal year's net profit to be applied entirely to the reinforcement of the Company's reserves, since the total amount of the advanced profits plus the distributed reserves, in the end of 2010, represented 46% of 2010's ordinary results.

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 the 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, Owners of Qualifying Holdings and Companies in a Parent-Subsidiary or Group Relationship

During 2010, no significant financial business or operations were carried out between the Company and members of its Management or Supervisory Bodies. 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.

Pursuant to the policy that has been followed by the Company in this area, no business was carried out by the Company with the owners of Qualifying Holdings or entities in any type of relationship with the owners of such holdings, outside of normal market conditions.

Likewise, no business was conducted with the holders of Qualifying Holdings which, by their very nature might, according to logical and rational criteria and for reasons of economic efficiency, require the prior approval of the supervisory board. For this reason, the Company has not yet felt the need to set the materiality criteria that determine the intervention of the supervisory body, though it does not exclude the possibility of doing so in the near future.

In this regard it should be noted that, in terms of procedure, the responsibilities of the Corporate Responsibility Committee, pursuant to its regulations, are to prepare and monitor the decision-making of the corporate bodies and relevant committees on matters that give rise to conflicts of interest between the Company and members of its corporate bodies or the shareholders, particularly those owning a Qualifying Holding. The Corporate Responsibility Committee is particularly empowered to comment on materially relevant business between the Company and owners of a Qualifying Holding.

The Corporate Responsibility Committee did not have to rule on any business between the Company and owners of Qualifying Holdings during 2010.

The Company was informed that the issue of commercial paper to the amount of 30 million euros at the end of the year, with placement by a financial intermediary by means of auction, was subscribed to by a shareholder with a Qualifying Holding. The nature of this business means that it could not be subject to the prior approval of the supervisory board.

3.11. Investor Relations Office

3.11.1. Investor Communication Policy of Jerónimo Martins

Jerónimo Martins' Communication Policy regarding the financial market is designed to ensure that material information - history, current performance and outlook for the future - is available to all its stakeholders, in order to provide clear and complete information about the Group.

The Communication strategy outlined for each year is based on the principles of transparency, rigour and consistency, which ensure that all relevant information is transmitted in a non-discriminatory, clear and complete manner to stakeholders.

3.11.2. Activities of the Investor Relations Office

As mentioned at the beginning of this chapter, 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 progress of activities during the year, by clarifying any doubts.

Throughout 2010, actions were carried out that allowed the financial markets to dialogue not only with the Investor Relations Office, promoting such initiatives, but also 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 created and updated by the Office;
Presentations to the financial community: presentation of results, roadshows, conferences, Annual and Extraordinary Shareholders' Meetings and the Investor Day.

Within the scope of information sent to the market, the following communications were published during the year:

Privileged Information
December 15, 2010	FinanciaCalendar Plan for 2011
December 15, 2010	Release - General Shareholders Meeting' decisions
November 19, 2010	Release - Shareholders' remuneration
November 10, 2010	Investor's Day Presentation
October 28, 2010	Release - 3rd Quarter 2010 Results
October 8, 2010	Release - Clarification requested by CMVM
July 28, 2010	Release - 1st Half 10 Results
April 28, 2010	Release - 1st Ouarter 2010 Results
April 09, 2010	Release - New Internal Organisation
March 03, 2010	Presentation FY 2009 Results
March 03, 2010	Release - FY 2009 Results

January 14, 2010	Release - Preliminary Sales 2009
Financial Information
November 25, 2010	First nine months 2010 Report
August 19, 2010	First Half 2010 Report
May 21, 2010	First Quarter 2010 Report
April 09, 2010	Approval of Annual Report 2009 in the Annual General Shareholders Meeting with the respective minute
March 12, 2010	Annual Report FY 2009 to be approved in the Shareholders Meeting - items 1, 2, 3 and 4 of the agenda
Corporate Governance
April 09, 2010	Corporate Governance Report - 2009

Dividends, Interests, Redemptions and Exercise of Other Rights
December 15, 2010	Dividend Payment
November 22, 2010	Dividends Payment November 30, 2010
April 09, 2010	Dividends Payment for 2009
Notice of Meetings
November 22, 2010	Extraordinary General Shareholders Meeting 2010
November 22, 2010	Item 1 of the agenda of the Extraordinary General Shareholders Meeting 2010
November 22, 2010	Item 2 of the agenda of the Extraordinary General Shareholders Meeting 2010
March 03, 2010	General Shareholders Meeting 2010
Qualifying Holdings and Shareholders Agreements
November 19, 2010	Qualified Participation - Carmignac Gestion
September 30, 2010	Qualified Participation - Blackrock Investment
July 12, 2010	Qualified Participation - Blackrock Investment
May 3, 2010	Reduction of Qualified Participation - Barclays Capital plc
Management Transactions

April 29, 2010	Management transactions
Board Members and Function
November 22, 2010	Board Member resignation
April 9, 2010	Board Members election 2010-2012
Annual Summary of Information Disclosed
February 19, 2010	Annual Summary of Information Disclosed on 2009

The Office may be contacted through the Market Relations representative and the Investor Relations Office Manager, Mrs. Cláudia Falcão - and via the e-mail address: [email protected].

In order to make information easily accessible to all interested parties the communications issued regularly by the Office are available in full on the Jerónimo Martins' institutional website at www.jeronimomartins.pt. The site not only provides mandatory information but also general information about the Group and the Companies that form it, in addition to other information considered relevant, namely:

Announcements to the market about privileged information;
Annual, six-month and quarterly reports of the Group, including the Annual Report on the activities of the Audit Committee;
Economic and financial indicators and statistical data, updated every six or twelve months, in accordance with 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, half-yearly and, if applicable, quarterly results;
Information regarding the Shareholders' Meeting;
Information about Corporate Governance;
Code of Conduct of Jerónimo Martins;
Company Articles of Association;
Current Internal Regulations;
Minutes of the Shareholders' Meetings, extracts of which are available within five days of the meeting's date;
Historical lists of attendees, agendas, and decisions taken at the Shareholders' Meetings held over the three previous years.

The website also has information in English and is a pioneer in its accessibility for the visually impaired, using 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.º 7, 14.º andar, 1600-404, Lisboa Telephone: +351 21 752 61 05 Fax: +351 21 752 61 65 E-mail: [email protected]

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. The quality of this document has been acknowledged by the market in recent years and the 2009 Annual Report was awarded the prize of Best Annual Report by a company of the non-financial sector, at the Investor Relations and Governance Awards 2010 promoted by Deloitte and the Diário Económico newspaper.

3.12. Yearly Remuneration Paid to the External Auditor

In 2010, the total remuneration paid to the External Auditor and other individuals or companies' belonging to the same network was 748,648.00 euros, excluding expenses related to travel and costs paid directly by the Group's Companies.

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

Legal accounts audit services: 98%;
Other services (not legal accounts audits or external audits): 2%.

The services not included in the legal account certification and external audits, totalling 14,886.00 euros, relate to access to a tax database and technical consulting on a project for conversion to accounting standards.

The access to a tax database is essential to the daily work of different departments of the Company, which need access to updated tax legislation and other documentation. These services are provided by a company belonging to the same network of the External Auditor; nevertheless, they are not capable, either by their amount or by their nature, of influencing the independency of the External Auditor.

The services of technical consulting on a project for conversion to accounting standards aim to assist teams of different departments of the Company on the way to present the information according to international accounting standards. Besides being carried out by employees who do not participate in any auditing work for the Group, these services are marginal to the work of the auditors and do not affect, either by their nature or by their amount, the independency of the External Auditor during the performance of its role.

The independency of the External Auditor was in both situations assessed by the Audit Committee. The Committee understands that other non-audit services, having the same characteristics of the ones abovementioned, need not be individually approved, as they fall in a category of services which, according to quantitative (amount) and qualitative (nature) criteria, do not affect the independency in fact and in appearance of the External Auditor.

3.13. Activity and Rotation Period of the External Auditor

During 2010 the external auditor monitored the efficiency and functioning of the internal control mechanisms, taking part in the meetings of the Internal Control Committee, reporting any deficiencies identified in the exercise of its activity, as well as making the necessary recommendations regarding the procedures and mechanisms that were analysed.

The external auditor was able to verify the implementation of the remuneration policies and systems by reviewing the minutes of the Remuneration Committee's meetings, the remuneration policy in force and other accounting and financial information that is essential to that purpose.

As regards the rotation of the external auditor, the Audit Committee is the competent body for assessing the conditions for maintaining the external auditor or, instead, establishing the need to change the external auditor, stating its position on this issue, as referred to in section 2.21.2. of this Report.

V - Corporate Responsibility in Value Creation

Corporate Responsibility in Value Creation	209
1. The Importance of Relations, Engagement and Communication with Key Stakeholders	210
2. The Five Pillars of Corporate Responsibility in Creating Value	215
2.1. Promote Good Health through Diet	217
2.1.1. Promoting Diet Quality and Diversity in Distribution in Portugal 2.1.2. Promoting Food Safety in Distribution in Portugal 2.1.3. Promoting Diet Quality and Diversity in Distribution in Poland 2.1.4. Promoting Food Safety in Distribution in Poland 2.1.5. Promoting Diet Quality and Diversity in Manufacturing (Portugal) 2.1.6 Promoting Food Safety in Manufacturing (Portugal) 2.2. Protecting the Environment	219 222 226 227 230 231 233
2.2.1. Environmental Policy 2.2.2. Main Environmental Impacts 2.2.3. Environmental Initiatives 2.2.4. Adoption of More Environmentally-Friendly Technology and Solutions 2.3. Responsible Shopping	234 234 235 246 249
2.4. Support Surrounding Communities	258
2.4.1. Institutional Support 2.4.2. Distribution in Portugal 2.4.3. Distribution in Poland 2.4.4. Manufacturing 2.5. Be an Employer of Reference	259 259 260 260 262
2.5.1. Job Creation in a Year of Growth	263
2.5.2. Building a Sustainable Future: from Attraction to Retention	264
2.5.2.1. Attract and Select	264
2.5.2.2. Performance, Assessment and Remuneration	265
2.5.2.3. Strengthening Investment in Development and Training	267
2.5.3. Strengthening Employee Engagement	270
2.5.3.1. Internal Communications	270
2.5.3.2. Social Responsibility	270
2.5.3.3. Labour Relations	272
2.5.3.4. Health and Safety in the Workplace	273
2.5.3.5. Health Services	275

Corporate Responsibility in Value Creation

Jerónimo Martins, with a history of more than two centuries of activity, believes sustainability concerns in relation to growth and value creation are an integral part of its heritage. Moreover, an organisation's longevity is an important preliminary indicator of its ability to meet present needs at any specific time without hampering the ability of future generations to meet theirs, which implies the commitment to value creation not only from a perspective of immediate return but also one of the medium and long terms.

The Group's long path of sustained growth is due to the vision of the leadership and professional management that has led, at different levels, Jerónimo Martins following a management philosophy based on continuous learning and continuous improvement and the exercise of corporate responsibility.

Hence, the Group Companies are committed to the voluntary integration of social and environmental concerns in their operations and interactions, as well as monitoring their performance and results delivery in three distinct but interdependent dimensions that comprise sustainability: Economic Prosperity, Social Development and Environmental Conservation.

Jerónimo Martins is aware, as a food distribution leader in the countries where it operates, of the impact it has on the lives of many millions of consumers and tens of thousands of employees, and on its business partners, communities and the environment. It thus recognises the importance of its role in addressing the demanding challenge of corporate responsibility in creating value and growth.

Accordingly, it seeks to continuously improve the incorporation of ethical, social and environmental concerns in its supply chains and the activities of its Companies, gradually and in a sustained manner to improve the impact - economic, environmental and social - arising therefrom.

Jerónimo Martins therefore adopts, as an integral part of the responsible manner in which it conducts its activities and achieves its business objectives and financial results (stated earlier in this Report), the obligation of also positively contributing to the sustainability of the ecosystems and local populations on which it directly or indirectly depends.

1. The Importance of Relations, Engagement and Communication with Key Stakeholders

The constant work of creating and sharing value is developed through a network of relationships with strategic audiences (stakeholders) - not only spread over the value chain but upstream and downstream as well and throughout the Company as a whole. Jerónimo Martins seeks to establish continuous partnerships and ongoing interactions of quality and trust with these stakeholders.

The profound knowledge that the Group has of society in general, as well as its business activity, value chains, markets, customers, consumption trends, the risks and opportunities in the sector in which it operates largely comes from the countless daily touchpoints with different audiences at diverse levels.

The relationships of trust are built on those daily touchpoints, which provide sustainability to healthy growth, innovation and business development, especially in the most demanding economic environments.

The following table is intended to translate in a simplified manner the key touchpoints and moments of contact, the intervening parties and the communication channels and media that Jerónimo Martins has with audiences and which it considers essential to the continuation and sustained growth of the business, in order to comply with its corporate mission.

Annual Report 10 Corporate Responsibility in Value Creation

Stakeholders	Main intervening parties in Jerónimo Martins	Communication channels, touchpoints and moments of contact
Customers and Consumers	Customer Support Service (SAC) Customer Ombudsman Ethics Committee	SAC - Freephone line Customer Ombudsman - e-mail, Corporate Website, Freephone Line, Mail
Shareholders and Potential Investors	Investor Relations Office	Corporate website E-mail Annual Report Financial statements Meetings Conferences Roadshows Investor's Day Shareholder's Meetings
Workers and Employees	Human Resources Departments Training School Ethics Committee	Among Us (telephone line) In-house magazine Intranet Operational and management meetings Collaboration & Relationship Building Annual performance assessment Training sessions Internal climate studies
Suppliers, Business Partners and Service Providers	Commercial Departments Marketing Departments Quality and Food Safety Departments Hygiene and Safety Departments and Environmental Departments Private Brand Development Departments Regional Operations' Departments Technical Departments Expansion Departments IT Departments Ethics Committee	JM Direct Portal Guided tours Quality, Safety and Environment Audits Businesses meetings Direct contacts
Official Bodies, Supervising Entities and Local Councils	Investor Relations Office Legal Departments Tax Departments Communication Departments	Corporate website E-mail Meetings
Journalists	Communication Departments	Website Press releases Press conference Meetings Annual Report
NGOs and Associations	Communication Departments	Guided tours Meetings Partnerships/Patronage

With the aim of organising the manner in which it develops its business and relations with some of its key stakeholders, the Group has established the principles governing its actions (listed in the Codes and Policy below) and it has also defined impartial and independent intervening entities with a modus operandi complying with established standards:

Code of Conduct (available at www.jeronimomartins.pt)
Procurement Sustainability Policy (approved in 2010 and available at www.jeronimomartins.pt)

• Corporate Nutritional Policy (reviewed in 2010 and available at www.jeronimomartins.pt)

• Ethics Committee

It is an intermediary available to the employees and other stakeholders to monitor and guarantee the dissemination and compliance with the Group's Code of Conduct, with independence and impartiality. Its activity is presented in the Corporate Governance chapter of this report.

• 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 entity protects the legitimate rights and expectations of customers and promotes development commitments that combine consumer interests and the Group's strategic priorities.

This institutional party is available to all customers of the Group's in Portugal. Its activity is governed by specific rules, available from www.jeronimomartins.pt, and the figure of the Ombudsman enjoys a status of impartiality and independence that is conferred by directly reporting to the Board of Directors and through the resources made available to implement the activity fully independent from the Companies.

In 2010, the Customer Ombudsman registered a significant increase in activity in 2010, with total contacts registered by the Service increasing 74%. However, only 30% of contacts were found to be effectively within the sphere of action of the Customer Ombudsman, which means that this entity is often used, for convenience purposes, to access other areas of the responsibility of Jerónimo Martins. Such contacts are promptly directed to the correct areas, informing the contact person accordingly.

The universe of occurrences handled by the Customer Ombudsman had an incident distribution by contact type with substantial changes compared to previous year. There was a significant decrease in requests for information, indicating that the client is addressing, in the first instance for this type of contact, the Customer Service.

Complaints continue to hold significant weight in the universe of occurrences. In absolute terms, they have increased 30% since 2007, mainly due to the growing awareness of the Ombudsman figure, in general, but also due to the high visibility of the Pingo Doce Banner, through its communication, especially in the last year.

The number of contacts by type of complaint remained, in 2010, in line with previous years. In other words, issues related to the quality of products continue to concentrate customers' attention, but issues related to the quality of service are also gaining attention.

The investment effort throughout the year was notable to provide the service with the resources and expertise that would ensure customer service standards according to best market practice and guarantee adequate support to the Client Ombudsman action. A specialised customer service management information

system was introduced and all service procedures were reviewed and formalised, following their evaluation by the Group's Internal Audit Department in a routine exercise. The team was also reorganised in order to strengthen its response capacity. This process is still ongoing. This reorganisation also included the provision of 174 specialised training hours in Customer Service to the Assistants and the Service Co-ordinators received 18 hours of training in information management.

Statement by the Customer Ombudsman

An appropriate management of priorities was achieved throughout the year despite the difficulties experienced with the restructuring and with significant increase in activity (+74%), sustaining the trust confidence and credibility that the Client Ombusman this party should inspire among customers. A commitment was made from the outset to ensure that all occurrences had the actions steps approved right from the beginning and that clients were informed accordingly. In the highest priority occurrences the final answer was sent to the customer as soon as possible. In all other cases the statutory time limit (15 working days after registration) was regularly exceeded but clients were informed about response times whenever was possible. According to the Internal Audit Department, 43% of all occurrences closed by the service were closed in the first month and 17% within the first three days of registration. In 2011, the Service must have create the necessary conditions to ensure customer response times within the desired standards.

The issues analysed processed by the Service refer to ever more complex issues even when presented in a simple way through examples experienced by the customer. It is also noteworthy that the trust placed in Jerónimo Martins and Pingo Doce raises the expectations of customers to a very high level. The answer to their issues has to be simple, complete and accurate with regard to the policies and best practices of the Group, the findings of the facts and the corrective action when necessary. Issues related to the retail price, policy fighting waste programs and the sale of domestic products are clearly in focus given the economic and social crisis the country is experiencing.

Several recommendations for improvement were issued throughout the year, which were generally implemented when the measures were within the scope of responsibility of the managers involved. At the start of 2011 a full diagnosis was performed, identifying the ten most significant priorities for structural action. This exercise is intended to give focus to the main issues related to operational improvement, the provision of information and consumer responsible communication and also with the development commitments. Some of these recommendations reflect the commitment made to customers whenever it was not possible to fully respond to their question.

I am confident that 2011 could be very motivating and I will put the utmost effort into implementing the commitments I have made to customers.

Margarida M. Ramalho Customer Ombudsman

2. The Five Pillars of Corporate Responsibility in Creating Value

Adopting sustainable development and corporate responsibility as the paradigm of its action and stance in the business world and in society, Jerónimo Martins seeks to integrate major guiding operating lines in the processes and culture of its Companies, across the board at various levels and among various stakeholders.

There are five major corporate responsibility commitments in the creation of value, which represent priority areas for attention and focus in the development of the activity:

Promote Good Health through Diet

The Companies of the Group would like to be recognised by their customers and consumers as trustworthy partners and facilitators in solving day-to-day food needs, as well as for their efforts to improve the quality of life through dietary means and the promotion of responsible consumption.

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

Make a balanced offering available at competitive prices, which is constantly renewed and incorporates more value for the consumer, particularly through the continued development and commitment to quality and innovation as regards private brands;
Promote Food Safety as a strategic condition, and in this particular area, to assure the best performance in all businesses;
Provide a trustworthy service that increasingly offers convenience to the consumer, without sacrificing the nutritional quality of food solutions;
Provide complete nutritional information on the products sold and develop awareness-raising initiatives among consumers that enable them to make more balanced and healthier shopping options.

Protecting the Environment

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

The first major priority of the Group in environmental matters is safety, without prejudice to the firm commitment to promote appropriate behaviour over the entire value chain, as well as the adoption of more environmentally-friendly technology and solutions.

Minimising environmental impact is ensured through actions that prioritise pollution prevention and the conservation of natural resources.

Responsible Procurement

Jerónimo Martins wishes to be a reference for suppliers, service providers and business partners through the manner in which it conducts business, believing that the sharing of values and promotion of mutual interests are key factors in the development of healthy commercial relationships.

The Procurement Sustainability Policy was established in 2010, which defines the following, inter alia, as priorities:

Ensure a supplier selection process based on strict and demanding criteria that allow lasting business relations to be built, in order to encourage adequate planning and investments in the businesses, and conduct demanding but fair negotiations that ensure the competitiveness of value propositions and improvements to productivity and efficiency in the supply chain to the consumer's benefit;
Preferentially select local/national suppliers, under equal conditions, minimising the carbon footprint of the products sold and enhancing social and economic welfare in the regions where the Group operates;
Know the real situation of its suppliers, in order to detect in good time any signs of possible abuse or non-compliance with the Code of Conduct.

Support Surrounding Communities

Jerónimo Martins wishes to contribute to the social development of the communities where it is present and to the fostering of a fairer and more balanced social structure, whether through its Banners or through institutional action.

This is a strategic option with well-defined lines that is governed by principles of Social Responsibility across the entire Group and by a policy that supports the fight against hunger and malnutrition, as one of the strongest manifestations of poverty.

Be an Employer of Reference

Jerónimo Martins wishes to remain an employer of reference in the sectors and geographical regions where it operates, particularly through its fair and balanced wage policies which reflect the Group's commitment to its employees and encourage and motivate the creation of value.

The solidity and cohesion of the organisational culture, the constant stimulus of employees for professional development and excellence, throughout the Organisation, and also the investment in knowing the needs and improving working conditions, occupational health and safety, are strategic vectors of the Group. The implementation of in-house social support programmes is another relevant vector.

2.1. Promoting Good Health through Diet

Jerónimo Martins' leadership position in the food world, in the distribution and manufacturing sectors, gives it the added responsibility of providing nutritional information, solutions and alternatives, through its products and brands that steer its millions of consumers and customers towards increasingly healthy and safe lifestyles and food choices.

This strategic orientation of promoting sustainable consumption in nutritional matters is an extension of the Group's core business and the extensive food expertise of its Companies, while also reflecting the attention paid by Jerónimo Martins to consumer trends that are already evident and growing, such as the adoption of healthier lifestyles, the demand for convenient food solutions with a balanced nutritional profile, or the growth of consumer groups with special dietary needs.

Promoting good health through diet is thus sub-divided into two strategic sub-axes covering all the geographical areas and food sectors in which the Group operates. Those sub-axes encompass the promotion of food quality and diversity on the one hand, and food safety on the other.

Being aware of this important role and this responsibility of promoting public health through the supply of quality food solutions at very competitive prices is taken on by the Group's brands as an integral part of their value proposition in Distribution and Manufacturing, in Portugal and Poland. It has inspired projects, initiatives and actions in 2010 that are detailed below.

It was decided, given the material differences between the Group's concepts, formats and types of food distribution operations in Portugal and Poland, to report the Distribution activity in Portugal and Poland separately, for each of the action sub-axes in relation to the promotion of good health through diet.

These differences derive directly from the fact that the Portugal operation comprises supermarkets, hypermarkets and cash & carry stores (multi-format strategy), with a strong focus on Perishables and a large number of references, which include Private Brand (more than 3,000 for Pingo Doce and Recheio combined versus more than 650 in Biedronka), while in Poland Biedronka is positioned as a chain of discount stores, with an assortment that is mainly composed of fast-mover products and total references not exceeding 1,000.

PROMOTING GOOD HEALTH THROUGH DIET IN DISTRIBUTION IN PORTUGAL

In relation to Jerónimo Martins' nutritional policy, revised in 2010 in line with the WHO Guidelines for Europe

2.1.1. Promoting Diet Quality and Diversity in Distribution in Portugal

In 2010, Jerónimo Martins registered growth in share of total sales of each of the Perishables categories in both Retail and Wholesale, owing to its recognised expertise in Perishable products operations, the consumption of which is essential for a healthy balanced diet. The evident strategic focus on the diversity and quality of Perishables, the suppliers of which in Pingo Doce account for more than 40% of all the Company's suppliers, as well as the availability to consumers at very competitive prices, make a very positive contribution to reinforcing good dietary habits among the population and thereby to promoting Public Health.

Through its Nutritional Policy covering all Group activities in Portugal and Poland, which was revised in 2010 in line with the World Health Organization Guidelines for Europe and in its capacity as a food specialist, Jerónimo Martins also wishes to contribute to the prevention of diet-related diseases such as obesity, diabetes, osteoporosis and cardiovascular diseases. It aims to operate as an active player in the global fight against serious Public Health problems.

Reduction of Salt in Bread

In this regard, the continuous improvement process of products' nutritional formula continued in 2010. The salt content of bread was reduced from 1.55g to 1.40g per kg of baked bread in all the recipes for bread sold in the stores, which is equivalent to a reduction of 10.5%.

Nutritional Reformulation of the Private Brand Products Marketed

Several nutritional reformulations of existing products were made during the year, and the impacts of these on the 2011 consumer market are estimated to be:

Reduction of sodium/salt: withdrawal of seven tonnes of salt (32% less than 2010);
Reduction of fats: withdrawal of three tonnes of fat (6% less than 2010);
Removal of hydrogenated fat: four references, replaced by non-hydrogenated fats, impacting on the decrease of total trans-fatty acids (non-natural fatty acids originating from industrially synthesised products, which are considered harmful to humans);
Removal of colourants: colourants with a negative effect on children were removed from all articles in which they were present (encompassing 30 references);
Raise the fibre content: an extra two tonnes of fibre (42% more than 2010);
Reduction of sugar: withdrawal of 10 tonnes of sugar. Ten projects are being finalised, scheduled to conclude in the first quarter of 2011, which are expected to reduce sugar by 600 tonnes (10% less than 2010);
Replacement/removal of additives: namely, by using sucralose (sweetener derived from common sugar, with a very similar taste to sugar, and which is very stable and devoid of calories) and the elimination of preservatives;
Addition of nutrients/ingredients: the addition to infant products of the vitamins recommended for that population group.

Some meat products were reformulated in 2010, nine of which were included in the demanding "A Healthy Choice" programme of the Portuguese Cardiology Foundation, such as the poultry and pork hams with reduced fat and salt levels. Thus, Pingo Doce became the first Private Brand in Portugal to achieve that milestone.

Roll-out of New "Pura Vida" Products

The "Pura Vida" range is strengthened to provide greater accessibility to products with a healthy nutritional profile and to develop products for people with special dietary requirements. This range is aimed at consumers looking for products with different characteristics, e.g. products without ingredients of animal origin (vegetarian), with no added sugar or low sugar content, with more fibre, or products that are closer to the origin, i.e. being little processed.

Several innovative projects were rolled out, which have already made available to consumers the range of no-added-sugar ice creams, vegetarian ready meals and savoury snacks. The roll-out of about 150 "Pura Vida" product references is planned for 2011, differentiated from a nutritional point of view, such as lactose-free dairy products, gluten-free products, products with no added sugar, hydrogenated fat-free products and products for specific age groups.

Keeping up New Products' Roll-out Rate

	2010	2009
Roll-out and relaunch of products	435	434

Development of Value-adding Products and Processes

The commitment to a philosophy of continuous improvement of the food quality supplied, whereby the Group seeks to involve all those related to it, leads to the development of value-added processes, always with the focus on improving and developing the products sold.

The melon is a good example. A protocol was signed with the Portuguese Agronomy University to test 12 varieties of this fruit in three different locations, in order to determine the best varieties in terms of organoleptic results. The conclusions of this evaluation will underpin Jerónimo Martins' approach to Farmers, proposing that they plant the identified varieties.

Another example is the ongoing testing on ship-transported mango, which usually has a ripeness that is not the most appropriate. The tests focus on ripening the mango in chambers in order to improve its properties in terms of sugar content and the texture of the flesh.

Development and Roll-out of Convenience Products

A range of ready-to-cook meat products was rolled-out during 2010, with the aim of strengthening the association between nutritional quality and convenience. These products totalled about six references of minced pork and beef rolls for baking, with cheese and ham, and basic and stuffed breaded beef and pork steaks.

Reinforce of Routine Sensory (organoleptic) Analyses of Marketed Products

	2010	2009	Δ 10/09
Routine sensory analyses	1475	1152	+28.0%

Introduction of Nutritional Information on Perishables

Nutritional values were provided for Perishables for the first time in 2010, namely on poultry, beef and pork products, potato, garlic, onions, packaged fruit and dried nuts.

Conclusion of Nutritional labelling on all Pingo Doce and Recheio Private Brand Products

Nutrition labelling on all Pingo Doce Private Brand products and the Amanhecer, Masterchef and Gourmês (Recheio) brands was concluded in 2010, following its commencement in 2009. This labelling provides group II nutritional information, indicated per portion on the front of the packaging and highlighting the parameters with the greatest health impact (energy value, fat, saturated fat, sugar, fibre and salt).

Improvement to Average Complaint Reply Times for Perishables and Private Brand Consumers

A major effort was made over the year to improve the levels of consumer and customer service for Private Brands and Perishables, in the belief that there is no real relationship with the consumer without the confidence that comes from consumers feeling that they are heard and answers are given to their questions and issues. This endeavour resulted in the significant decrease in the number of days between complaint and reply.

The average reply time for complaints concerning Private Brand products was reduced by 33.8%.

	2010	2009	Δ 10/09
Improvement to average reply time to Clients (in days)	17.8	26.9	- 33.8%

The average reply time for Perishables complaints was reduced by 39.1%.

	2010	2009	Δ 10/09
Improvement to average reply time to Clients (in days)	28	46	-39.1%

Participation in the International Horticulture Congress

In 2010, Pingo Doce took part in the International Horticulture Congress as the main sponsor and speaker. This Congress is a forum for the presentation of scientific research in horticulture, which was attended by about 3,500 delegates. In addition to hosting an information stand, Pingo Doce participated in the lecture on the benefits of the Mediterranean Diet and its Mediterranean Flavours Programme. It also organised a day for visits to related facilities, which involved about 80 people of various nationalities. The schedule included a visit to a melon supplier, a tour of the Azambuja warehouses and also visits to stores.

Collaboration with the Portuguese Celiac Sufferers Association

The highlight of the work with significant associations in 2010 was the programme developed with the Portuguese Celiac Sufferers Association, the publication of the list of gluten-free products of the Pingo Doce brand and sponsorship of the "National Celiac Sufferers Meeting", at which the meal served to 150 people, was exclusively made from Pingo Doce products.

2.1.2. Promoting Food Safety in Distribution in Portugal

IT Application for Quality and Food Safety Management and for the Development of Private Label Products

The development of an IT application began in 2010, and is due to be implemented in 2011.

Implementation of the Food Safety System in the Central Kitchens

The system has been implemented and the respective certification will be requested in 2011, after concluding the overall redefinition of the business, namely building new kitchens of a different size and layout.

Renewal of Existing Certifications

Existing certifications were renewed in 2010, including the HACCP certification of Recheio and J. Gomes Camacho stores and platforms, and the ISO 9001:2008 certification of the Pingo Doce and Recheio Companies relative to the Development of Private Brands and Product and Supplier Post Roll-out Monitoring.

Monitoring audits of the Integrated Environmental and HACCP Management System certification, implemented in the Azambuja, Vila do Conde and Guardeiras Distribution

Centres, were also carried out, according to the ISO 14001:2004 and Codex Alimentarius standards.

Association to the Portfir Network

Jerónimo Martins took part in PortFir Network (Food Information Portal), in line with the Group's philosophy to cooperate with relevant entities and authorities to develop nutritional initiatives and programmes which have an impact in countries. This network is a part of Eurofir (European Food Information Resource), which aims to set up Portuguese knowledge-sharing networks on Food Safety and Nutrition and to create a portal that will include sustainable databases of recognised quality by Instituto Ricardo Jorge, on Food Composition, Contamination and Consumption.

Obtaining the Veterinary Control Number for Fish Warehouses

A veterinary control number was awarded, which will allow fresh fish to be divided up and repackaged, and dried salted fish and packaged frozen items to be received at the Vila do Conde Fresh Fish warehouse, as well as the packaging and preservation of fish products at the Azambuja Fresh Fish warehouse.

Audits of Stores and Distribution Centres

The constant monitoring of the Companies by the Quality Control technicians in order to ensure the implementation of procedures, evaluate the effectiveness of training and the suitability of facilities and equipment, generated a result of 87% for the "HACCP Implementation" indicator at Pingo Doce. This self-assessment forms part of the philosophy of continuous improvement of the efficiency and effectiveness of processes, carried out by means of internal audits that verify the degree of compliance with specific food safety performance targets. The assessment standard is different for Recheio, as a result of the certification of the HACCP system. The performance indicator obtained was 74%.

Stores and Distribution Centres	Pingo Doce		Recheio		Distribution Centres
	2010	2009	2010	2009	2010	2009
Internal Audits	1,753	1,618	110	102	9	9
External Audits	1	-	1	1	1	1
Follow-up Audits	790	685	244	77	108	124

Monitoring Best Practice in Hygiene and Working Process by Means of Control Analyses

Best practice in hygiene and working process continued to be monitored, with analytical compliance for Pingo Doce of 95.3%, with 96.7% for Recheio.

Annual Report 10 Corporate Responsibility in Value Creation Promoting Good Health through Diet

Analytical Control (number of analyses)	2010	2009	Δ 10/09
Work Surfaces	47,937	30,195	+58.7%
Handlers	18,820	13,869	+35.7%
Perishables handled in stores	22,263	9,252	+140.6%

Consolidation of Routine Laboratory Analyses of the Private Brands Marketed

	2010	2009	Δ 10/09
Routine Analyses	7,082	5,571	+27.1

In Store Training In Quality and Food Safety Best Practices

Training in Perishables

In 2010, Quality technicians promoted, once again, training in Quality and Food Safety to store's employees who are mostly working in Perishable areas

	2010	2009	Δ 10/09
% FTE´s	12.5%	5.9%
Nº of Employees	5,425	2,617	+107.2%
Nº of Training Hours	6,805	4,467	+52.3%

2.1.3. Promoting Diet Quality and Diversity in Distribution in Poland

Nutritional Reformulation of the Private Brand Products Marketed

In 2010, Biedronka nutritionally reformulated many of its Private Brand products to make them healthier:

Reduction of fat in a selection of meat products;
Reduction of salt in a selection of meat products;
Removal of additives in a selection of meat products;
Removal of allergens in a selection of savoury snacks;
Removal of all azo colourants (E110, E104, E122, E129, E102, E124) from all Private Brand references, replacing them with natural colourants;
Replacement of artificial with natural flavouring in products such as soft drinks, biscuits, yoghurt, soft cheese, cereal bars, chocolates and sweets.

Roll-out and Relaunch of Products

	2010	2009	Δ 10/09
Roll-Out and Relaunch of products	472	631	-25.1%

Voluntary Inclusion of a Simple Information System on the Guideline Daily Amount in all Biedronka Brand Products

To help its customers make the right dietary choices, Biedronka decided to introduce an information system on the Guideline Daily Amount (GDA), which facilitates the selection process in all Private Brand references (more than 650 in 2010).

Routine Organoleptic Analyses of the Private Brand Products Marketed

	2010	2009	Δ 10/09
Routine organoleptic analyses	483	632	-23.6%

Shortening the Expiry Dates of Some Private Brand Meat, Meat Products and Fish Products

The expiry date of a selection of Biedronka meat, meat products and fish products was reduced in order to provide customers a better sensory experience of some Private Brand products, such as pork hamburgers, mackerel, chicken steaks, kebab chicken (a ready meal of chicken chunks in aromatic herbs) and pork and beef strips.

Strict Collaboration with the Polish National Health and Nutrition Institute

Close collaboration with the Polish Public Health and Nutrition Institute took place in 2010, to strengthen knowledge of nutritional needs in this country's society, as well as implementing communication campaigns on good dietary habits among consumers. In 2010, this institute held conferences on the decrease in salt intake in Poland, as part of the Pol-Health Programme integrated in the WHO European Action Plan for Food and Nutrition Policy 2007-2012. Biedronka participated in those conferences and contributed to the discussion, with the Ministry of Health, on the possibilities and problems of the nutritional reformulation of products in order to reduce their salt content.

51 dietary articles and recommendations by dieticians of the Institute of Public Health and Nutrition were published, in line with Jerónimo Martins' nutrition policy, which includes plans for information campaigns directed at consumers on the value of food and food safety, in order to encourage healthy dietary habits. Those articles included seven on the current dietary problems of the Polish population and recommendations on good nutrition habits were disclosed by Kropka TV (a weekly TV magazine distributed by Biedronka); 11 papers by experts on the nutritional value of selected product groups were published by Biedronka in themed brochures, and 33 "Weekly Inspiration" leaflets were published containing expert advice on the consumption of certain types of product.

2.1.4. Promoting Food Safety in Distribution in Poland

Completion of ISO 22000 Certification in the Private Brand Development, Logistics and Distribution Areas

Audits of Stores and Distribution Centres

The stores outsourced to Diversey were monitored constantly to ensure procedures were implemented, the effectiveness of training was evaluated and the facilities and equipment were suitable. The process achieved a "HACCP Implementation" performance rating of 76%. This self-assessment forms part of the philosophy of continuous improvement of the efficiency and effectiveness of processes that verify the degree of compliance with specific Food Safety performance targets. The fact that the 2010 indicator score did not increase from 2009, when performance was also 76%, was due to changes made to the evaluation questionnaire to make it more demanding and meticulous.

	2010	2009	Δ 10/09
Store Audits	2,427	2,086	+16.3%
Audits to Distribution Centres	18	26	-30.8%

Reinforced Control in Stores

Procedural changes to operations were defined in 2010, in order to strengthen the focus on quality in the Operations Department. These changes have been under implementation since the start of 2011.

Significant Consolidation of Routine Laboratory Analyses of Private Brand Products Marketed

	2010	2009	Δ 10/09
Routine Analyses	4,273	2,927	+46.0%

Continued Implementation of the Databar Project (traceability)

The work of the Databar project team continued in 2010, with the aim of guaranteeing consumer's safety in what concerns the product groups at greatest risk. It involves including information in the barcode about the supplier, the batch number and product expiry date and the country of origin, allowing to increase efficiency in collecting the products not complying with food safety standards, by blocking the sale of articles and also to reinforce prevention of sales of products past their expiry date. Tests on 12 meat references were carried out, and tests on new products are being prepared.

2.1.5. Promoting Diet Quality and Diversity in Manufacturing (Portugal)

Gallo Worldwide was incorporated in 2009 following a de-merger from Unilever Jerónimo Martins (ULJM) and continued its mission in 2010, of "introducing the Gallo olive oil into the dietary habits of all people," as a firm commitment to promoting an oil with significant health benefits due to its predominantly monounsaturated fat structure and its high vitamin E and antioxidant content.

ULJM also reinforced the contribution of its food brands to promoting the health of consumers, both through the nutritional reformulation of products and by rolling out healthier alternatives and providing information that assists more balanced choices in terms of dietary quality and diversity.

Nutritional Reformulation of Products of Various Brands in Order to Make them Healthier

ULJM seeks to continuously improve the composition of their products in line with internationally accepted nutritional recommendations. Hence, the following interventions took place into the nutritional profile of products, in order to make them healthier:

Reduction of the salt content of Planta At the start of last year, the salt content of Planta was reduced 18% to the current level of 1.4g per 100g, thus continuing to play a role in reducing the current average consumption of salt in Portugal from 12g per day to the recommended level of 5g per day;
Reformulation of the Spagheteria ranges, Knorr chilled soups and some Alsa brand products

The Spagheteria ranges and chilled soups of the Knorr brand had their recipes reformulated to remove flavour enhancers and artificial colourants. ULJM also reformulated the colourants used in Alsa brand jellies, rice pudding and pudding, using natural colourants such as beetroot, turmeric or paprika extract whenever technically possible and providing the organoleptic properties of the product are unchanged.

Roll-out of Healthier Alternatives

ULJM also offers alternatives to the most health-conscious consumers, in addition to the ongoing product reformulation. In 2010, for example, Olá produced two new flavours of Carte d'Or Sorbet (apple and passion fruit), with less than 100 kcal per portion.

The Knorr Natura stock was also rolled out, which is a gel without flavour enhancers, using a production process very similar to the method used to make stocks at home.

At the end of 2010, ULJM rolled out a butter-flavoured spread under the Planta brand, which aims to promote the replacement of the consumption of spreadable fats of animal origin (high in saturated fat) for fats of vegetable origin (high in unsaturated fats). This new Planta product has less total fat and less than half the saturated fat

compared to fat spread of animal origin. Accordingly, Planta is contributing to a reduction in the intake of saturated fats by consumers.

Providing Quality Nutritional Information and Taking Steps to Raise Awareness among Consumers

ULJM also continues to implement its commitment to provide quality nutrition information on its products whether on the packaging or through other means, such as brand websites and initiatives directly aimed at consumers. The highlights in this regard in 2010 were:

Continuing the voluntary inclusion of information on packaging about the Guideline Daily Amounts (GDA) for energy, fats, saturates, sugars and sodium;
The revamp of the Club Olá site Olá revamped its Club Olá site, which now provides more and better nutritional information on the ice creams;
The roll-out of the Planta site Planta created a site with complete information on the role of the essential fatty acids of vegetable cream spreads on the growth and development of children;
Direct communication by Knorr on the benefits of soup

The Knorr brand initiated a campaign to publicise the benefits of soup for children of the 1st phase of primary education, using a play called "Com peso e medida" ("No more, no less") as a form of communication. More than 20 schools participated in this activity in 2010, totalling almost 10,000 students;

Free cholesterol tests

The Becel brand continued to educate consumers on the risks to cardiovascular health of high cholesterol levels, which included offering free cholesterol tests. Becel carried out about 9,000 cholesterol tests on consumers during 2010;

Taking part in Congresses and Seminars

ULJM attended the 13th Congress of the Portuguese Cardiology Society, where the Becel Institute and Unilever FoodSolutions held a healthy cooking lesson at which a manual for cardiologists called "Convergence of Flavours" was presented. The Becel Institute also distributed educational material on nutrition and a healthy diet at the 25th High Blood Pressure Conference in Almada, the 14th National Patient Care Conference, the 10th Nursing Congress, the 4th National Congress on the Elderly and the Congress of the Portuguese Oncology Institute. The Becel Institute also held lectures in five secondary schools on promoting a healthy diet.

2.1.6 Promoting Food Safety in Manufacturing (Portugal)

Since health is inextricably linked to Food Safety, in 2010 the Group's manufacturing units remained committed to delivering products that consistently provide added value in quality and are safe for consumers. Accordingly, the use of tools such as Total

Production Maintenance (TPM) and the HACCP methodology (in relation to Food Safety) is essential to ensure that the established goals are achieved.

In addition, the following are key achievements of 2010:

Renewal of Fima's ISO 9001:2008 and BRC (for stock cube production) Certifications;
Olá keeps its ISO 9001:2008 Certification.

Audits by ULJM of the Olá and Fima Manufacturing Plants

The Olá and Fima plants were audited by ULJM, according to internal benchmarks for Food Quality and Safety. A high level of compliance with the benchmarks by the plants was confirmed.

Internal and External Audits of the Supply Chain

In parallel to the internal audits, the performance and consolidation of external audits of the supply chain was maintained. 236 audits of points of sale and business partners were carried out, with the aim of continuously improving products.

	2010	2009	Δ 10/09
Logistics operators	4	4	-
Dealers	40	40	-
Points of sale	192	277	-30.7%

Training and Raising Awareness Among Internal Staff on Food Quality and Safety

44 Food Quality and Safety sessions were held during the year, totalling 699 training hours, an increase of 50.6%.

2.2. Protecting the Environment

Jerónimo Martins believes that given its size 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 proactive 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 2010 and their results are set out below.

PROTECTING THE ENVIRONMENT IN DISTRIBUTION AND MANUFACTURING, IN PORTUGAL AND POLAND

MAIN INITIATIVES IN 2010

Environmental Certifications Maintained Water Consumption Rationalisation Energy Consumption Rationalisation Paper Consumption Rationalisation Waste Management Management of Wastewater Management of Air Emissions Noise Control Reinforcement of Environmental Criteria in the Construction and Refurbishment of Distribution Units Employee Adoption of Best Ppractices Reduction of Environmental Impact Associated with Logistics Processes Raising Environmental Awareness among Customers and Consumers Adoption of more Environmental-friendly Technologies and Solutions Support of Research and Development

2.2.1. 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 reviews 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 recognises the importance of Biodiversity for the sustainability of the communities where it develops its operations, contributing to their protection on a local, national and global scale.

In this regard it has undertaken a process of assessing the main threats and opportunities for improvement of its activities and its suppliers', following the Ecosystem Services Review (ESR) methodology of the World Research Institute (WRI). The operational implementation of Biodiversity in Jerónimo Martins includes the establishment of a sustainable procurement policy, while several other projects are being initiated and defined from a business perspective and in terms of company relations with society and the environment, in the areas considered a priority by the United Nations (UN): water scarcity; climate change; habitat change; biodiversity loss and invasive species; overexploitation of oceans; nutrient overloading.

2.2.2. Main Environmental Impacts

In the Distribution area in Portugal and Poland, the Group worked to reduce environmental impacts arising from the following: i. water consumption; ii. energy consumption used to preserve foodstuffs, and for lighting, air-conditioning and powering equipment; iii. production of organic solid waste and paper, cardboard and plastic packaging; and iv. atmospheric emissions and the consumption of fossil fuels for transporting goods and for the Group's own fleet.

Accordingly, several diagnoses of stores and Distribution Centres were carried out in 2010 to guarantee their compliance with legal requirements and with Jerónimo Martins' internal Environmental Management procedures. Additionally, a quick and

easy to use checklist was developed to help the operational areas of the stores of the distribution sector in Portugal to self-assess their environmental performance.

The Manufacturing Companies carry out an annual assessment and review of the environmental aspects that 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 were the main environmental impacts in 2010: 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.

2.2.3. Environmental Initiatives

Environmental Certifications Maintained

As far as Distribution in Portugal is concerned, the Azambuja, Vila do Conde and Guardeiras Distribution Centres maintained the certification of their Environmental Management System in accordance with the NP EN ISO 14001:2004 standard, in 2010. The Manufacturing Companies also kept their environmental certification in accordance with the NP EN ISO 14001:2004 standard.

Water Consumption Rationalisation

The management of water consumption is given maximum importance and so initiatives to minimise water loss and increase efficiency in the use of this natural resource are continually being developed. The following actions were taken in 2010:

Planning and roll-out of the "Water and Energy Consumption Management Teams" project in the Distribution companies in Portugal which sets monthly challenges that will allow teams to reinforce the adoption of good environmental practices aimed at eliminating wasted water. Water consumption in 2011 is expected to be reduced by 2%.

The water consumption indicators cover 79% of units in Portugal and 96% in Poland.

Environmental Indicators:

Stores – Water consumption per sales area (m3/m2)

Distribution	2010	2009	Δ 10/09
Portugal	2.60	2.69	-3.3%
Poland	0.65	0.70	-7.1%

**Distribution Centres – Water consumption per thousand boxes of throughput (m3/UMC'000*)**

Distribution	2010	2009	Δ 10/09
Portugal	0.82	0.71	+15.5%
Poland	0.07	0.10	-30.0%

(*) UMC –Purchasing Buying Units in thousand.

In the case of Distribution, the specific indicators for water consumption reflect the results of the investment made and good practices implemented. The distribution centres in Portugal are an exception, where the water consuming processes have been strengthened in order to respond to the growth in the number of stores and new projects in the perishables area.

Manufacturing	2010	2009	Δ 10/09
Global water consumption (thousand m3 )	326.3	317.5	+2.8%
Water consumption per unit of product produced (m3 /t)	2.25	2.08	+8.2%

The increase of water consumption in Manufacturing was due, above all, to the increased production of items that consume more water (Fima) and the increased use of water for cooling and reducing production volume (Lever).

Energy Consumption Rationalisation

In 2010, the Jerónimo Martins companies developed various initiatives aimed at putting into practice the commitment to the fight climate change and enhance the rationalisation of energy consumption. The following are highlighted:

Planning and roll-out of the "Water and Energy Consumption Management Teams" project in the Distribution companies in Portugal. Energy consumption in 2011 is expected to be reduced by 2%;
LED (Light Emitting Diode) technology has begun to be installed in the cabinets and chilled display cabinets in Pingo Doce stores, permitting an energy saving of approximately 55% of lighting consumption;
LED lighting technology has begun to be installed in car parks and inside Recheio and Pingo Doce stores. The energy saving in this area is estimated from 50% to 70% (outdoor) and at about 27% (indoor);
Installation of frozen food cabinets with a variable speed compressor, automatic defrost and LED lighting in Pingo Doce and Recheio stores, which can reduce the electricity consumption of this type of equipment by 30% to 40%;
Use of a centralised management system to optimise and control electricity consumption, currently encompassing six Recheio stores and 12 Pingo Doce stores, which represents 4.8% of the total stores in Portugal;
Exhaustive analysis of the operating parameters of the chilling system at the Azambuja Distribution Centre, after the construction of a new industrial chilling plant, completed in 2009. This analysis resulted in changes being made that reduced consumption by over 1,000 MWh/year;
Installation of about 300,000 fluorescent lamps in Biedronka stores, resulting in the reduction of energy consumption;
Installation of transformers in 200 Biedronka stores, resulting in the reduction of energy consumption for lighting;
Installation of a system that harnesses the heat of air that circulates in piping installed underground for the air conditioning equipment of Biedronka de Bydgoszcz and Óswięcim stores (similar to the project at the Lubin store);
Development of a new preventive maintenance process for the chiller equipment of Biedronka stores, increasing the cooling efficiency and reducing energy consumption;
Implementation of several projects in the energy area of Fima, related to the compressed air plant and ammonia plant, with the reduction in steam consumption;
Investment in technology to improve the control of Olá's higher energy consuming equipment, with the installation of smoother starters for the electric motors of the ammonia compressors standing out in terms of energy impact. A saving of 225 MWh/year is envisaged;
Escalation of the replacement and improvement of the thermal insulation of process fluids piping at Olá, with the greatest energy saving impact in the cooling circuit (201 MWh/year);
Improvement of the programme to eliminate compressed air leaks, also in Olá, which provided significant reductions in energy consumption (107 MWh/year) and associated CO2 emissions;
A programme to replace traditional lighting for LED technology was also commenced in Olá;
Vítor Guedes decided to follow the Management System for High Energy Consumption and signed agreements to rationalise energy consumption, which will allow the Company to achieve reductions of around 10% by 2015;
The continuation in 2010 of the lighting optimisation process in the headquarters of ULJM, through the purchase of LED-based light fixtures and autonomous emergency lighting, providing an estimated reduction in energy consumption of about 9 MWh/year;
The cooling tower in the headquarters of ULJM was also replaced, which permitted a reduction in energy consumption of more than 12 MWh/year.

The indicators shown cover 97% of the units in Portugal and 99.5% of the units in Poland.

Environmental Indicators:

Energy Consumption in the Stores

Distribution	2010	2009	Δ 10/09
Portugal
Electricity (kWh/m2)	726.9	700.9	+3.7%
Fuel (GJ*)	30,530	30,304	-0.7%
Poland
Electricity (kWh/m2)	474.9	414.9	+14,5%
Fuel (GJ*)	380,181	54,036	+604%

* GJ = gigajoule (energy measurement unit).

Energy Consumption in the Distribution Centres

Distribution	2010	2009	Δ 10/09
Portugal
Electricity (kWh/m2)	113.6	120.4	-5.6%
Fuel (GJ*)	843	1,864	-54.8%
Poland
Electricity (kWh/m2)	40.9	55.6	-26.4%
Fuel (GJ*)

* UMC = Purchasing Buying Unit in thousands.

** GJ = gigajoule (energy measurement unit).

In the Distribution companies, the increases in the specific indicators for the electricity consumption of stores are justified by the greater focus on perishables, frozen foods and others requiring refrigeration. In Portugal, the growing investment in restaurants is also a factor.

Manufacturing *	2010	2009	Δ 10/09
Global electricity consumption (MWh)	25,413	25,655	-0.9%
Global fuel consumption (GJ*)	55,711	** 56,347	-1.1%
Global steam consumption (GJ*)	139,898	138,911	+0.7%
Consumption of energy per unit of produced product (GJ*/t)	1.98	** 1.88	+5.3%

* GJ = gigajoule (energy measurement unit).

The increase in specific energy consumption is explained by the decrease recorded in the production volume of Lever.

Paper Consumption Rationalisation

In Jerónimo Martins, the consumption of office paper is considerable, which is why various projects aimed at reducing that consumption are being developed, resulting in important benefits for forest resource sustainability:

In distribution in Portugal, the management of electronic orders, invoices and freight bills already covered 74% of suppliers in 2010, which represents 90% of turnover (the estimated saving in 2010 was 2,215,000 sheets of paper, equivalent to 169 trees);
Electronic invoices in Poland already cover 28% of suppliers, which represents 59% of all documents (the estimated saving in 2010 was 820,000 sheets of paper, equivalent to 40 trees);
The Human Resources and Logistics areas of Distribution in Portugal have also been implementing new procedures and/or using new computer applications to minimise the volume of printed records;
The copy and printing equipment of ULJM are now set to print both sides of a sheet of paper by default. The generalised change in the office paper used was also undertaken, from 80 to 75 g/m2 ;
Electronic machine mapping was implemented in the Olá Production Room, thus removing the need for around 180 sheets of paper (printouts and copies) per production day;
Victor Guedes has been implementing new procedures and using new computer applications to minimise the volume of printed records.

Waste Management

Jerónimo Martins 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 2010 are notable:

Implementation of the "oil collectors" project, consisting of the collection of used cooking oils from customers, for the production of biodiesel, which was run in 245 Pingo Doce stores. 358 tonnes of waste were collected, which helped prevent the emission of 1,090 tons of CO2 from fossil fuel use;
Installation of recycling bins in Pingo Doce stores. This initiative led to the installation in 2010 of recycling bins specially designed for the Company, for the collection of small electrical and electronic appliances (175 stores), light bulbs (46 stores), printer cartridges (46 stores) and small batteries (175 stores);
Selective collection of organic waste for recycling (composting and anaerobic digestion) at 120 Pingo Doce and Recheio stores and also in all Biedronka stores, totalling 24,937 tonnes, which is 86% up on the total collected in 2009;
Co-operation with waste management entities to pursue national objectives, with 33 tonnes of used batteries (83% higher than in 2009) and 150 tonnes of electrical and electronic appliance waste (19% less than 2009) collected and sent for recycling;
In Biedronka, 15.5 tonnes of used batteries (50% higher than 2009) and 135 tonnes of electrical and electronic equipment waste (2000% higher than 2009) were collected and sent for recycling;
Start of selective collection and channelling for organic recycling of biodegradable kitchen and garden waste at Fima, totalling 80 tonnes/year;
Installation of hand dryers based on new technology at Olá, which eliminates the use of paper (3,000 kg/year) and associated waste and a lower power consumption compared to traditional dryers.

Environmental Indicators:

Total packaging waste (cardboard and plastic) sent for recycling (tonnes):

Distribution	2010	2009	∆ 10/09
Portugal	29,849	27,989	+6.6%
Poland	92,080	75,420	+22.1%
Total	122,929	103,409	+18.9%

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.

Annual Report 10 Corporate Responsibility in Value Creation Protecting the Environment

Manufacturing	2010	2009	∆ 10/09
Quantity of waste per unit of produced product (t/t)	0.0335	0.0281	+19.2%
Total residues forwarded for recycling (t)	3,664	3,720	-1.5%
Waste recycling rate	75.3%	86.6%	-11.3p.p

The changes in Manufacturing are mainly due to sporadic situations not related to the production process (e.g. construction and refurbishment work).

Management of Wastewater

The Jerónimo Martins companies work continuously to minimise the volume and pollution content of the wastewater generated by their activities.

In 2010, the wastewaters monitoring plan covered 21 distribution establishments in Portugal, in order to ensure compliance with municipal regulations and other legal requirements. 121 tonnes of cooking used oil from frying processes were collected in 2010 and 2,398 tonnes of grease were collected in nearly 600 interventions to clean grease separators.

Environmental Indicators:

Indústria	2010	2009	∆ 10/09
Total quantity of industrial wastewater per unit of product produced (thousand m3 /t)	0.84	0.74	+13.5%

The increase of this indicator is directly related to the increase in specific water consumption.

Management of Air Emissions

All action concerning the management of air emissions is carried out on the basis of minimising the release of polluting agents.

The preference of the Group, particularly in distribution, to purchase close-by and domestic production allows the shortening of transport cycles with a positive effect on reducing the carbon footprint of products. Hence, in the perishables area of Pingo Doce the number of Portuguese suppliers accounts for more than 77% of the total of perishables suppliers, with categories such as vegetables, poultry meat and pork, for example, where domestic suppliers account for more than 90%.

Also in 2010, Portuguese suppliers of Pingo Doce Private Brand accounted for over 58% of total sales of these products, followed by suppliers from neighbouring Spain, with about 21%.

In the area of Private Brand basic goods, namely olive oil, rice, sugar, flour, pasta and oil, virtually all products sold (99.9%) originated from Portugal.

In Poland, nearly all the food products sold by Biedronka (about 95%) came from Polish producers.

Furthermore, 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. Examples of this were:

In the Distribution sector in Portugal and 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;
Vítor Guedes increased its procurement of domestic olive oil in 2010, which is directly reflected in the reduction of the carbon footprint;
The carbon footprint of Jerónimo Martins' different activities was calculated: direct impact, indirect impact and the impact of third parties contracted by Jerónimo Martins. The carbon footprint of the Group is thus structured as follows:

Carbon Footprint - Indicators	Value in 2010 (t CO2 eq.)
Overall Carbon Footprint (scope 1 and 2)
• Distribution, Portugal	387,681
• Distribution, Poland	370,776
• Manufacturing	16,803
Carbon Footprint (scope 1- direct impacts)
• Leakage of refrigeration gases
• Fuels consumption	222,312
• Light vehicle fleet	36,825
	14,937
Carbon Footprint (scope 2 - indirect impacts)
• Electricity consumption	502,933
Carbon Footprint (scope 3 - other indirect impacts)
• Transport of goods to stores (Distribution)	125,273
• Waste to landfill	43,340
• Air travel by employees	8,854

Note: Calculation limitations - the emissions relating to the area of Marketing Services, Representations and Restaurants (estimated to account for less than 1% of total emissions) and those resulting from heating provided by external entities for the stores in Poland (it has not been possible to obtain this information from the suppliers) were not included.

Environmental Indicators:

Distribution Portugal	2010	2009	Δ 10/09
Stores	0.054	0.059	-8.53%
Equivalent CO2 emissions per volume of sales (t CO2 eq. / thousands €)
Distribution Centres	0.057	0.061	-6.6%
Equivalent CO2 emissions per thousand boxes of throughput (t CO2 eq. / UMC'000)
Transport by trucks (Distribution Centres - stores)	0.992	0.975	+1.7%
Equivalent CO2 emissions per kilometres covered (t CO2 eq. / thousand km) N.B. In 2010, this fleet assured 80% of the distances covered.
Light vehicle fleet	6,155	5,980	+2.9%
Equivalent CO2 emissions (t CO2 eq.)
Leakage of refrigeration gases	160,440	-	-
Equivalent CO2 emissions per unit of product produced (t CO2 eq. / t)
Reduction of Carbon emissions due to the use of renewable energies	90.5	85.0	+6.5%
Equivalent CO2 emissions avoided (t CO2 eq.)
Equivalent carbon emissions avoided due to "backhauling" Distribution project	4,336	4,075	+6.4%
Equivalent CO2 emissions avoided (t CO2eq.)

Manufacturing	2010	2009	Δ 10/09
Energy consumption	0.109	0.105	+3.8%
Equivalent CO2 emissions per volume of sales (t CO2 eq. / thousands €)
Leakage of refrigeration gases	218	-	-
Equivalent CO2 emissions per unit of product produced (t CO2 eq. / t)
Light vehicle fleet	3,191	-	-
Equivalent CO2 emissions (t CO2 eq.)

Annual Report 10 Corporate Responsibility in Value Creation Protecting the Environment

Distribution Poland	2010	2009	Δ 10/09
Stores	0.059	0.057	+3.52%
Equivalent CO2 emissions per volume of sales (t CO2 eq. / thousand €)
Distribution Centres	0.027	0.037	-27.0%
Equivalent CO2 emissions per thousand boxes of throughput (t CO2 eq. /UMC'000)
Transport by heavy vehicles (Distribution Centres - stores)	0.866	0.922	-6.1%
Equivalent CO2 emissions per kilometres covered (t CO2 eq / thous. km) N.B. In 2010, this fleet assured 100% of the distances covered.
Light vehicle fleet	5,991	5,947	-6.0%
Equivalent CO2 emissions (t CO2 eq.)
Leakage of refrigeration gases	61,654	-	-
Equivalent CO2 emissions per unit of product produced (t CO2 eq. / t)

Note: the figures presented took into account emission factors defined by the IPCC – Intergovernmental Panel on Climate Change (fuels, refrigeration gases and waste), by the International Energy Agency (electricity), and by the European Environmental Agency (air travel).

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. Moreover, significant investments are made every year to improve the soundproofing of Pingo Doce and Biedronka stores located in residential buildings.

In the headquarters of ULJM, a soundproof barrier has been installed to isolate air conditioning equipment aiming the reduction of noise emission that could cause discomfort to the neighbouring.

Reinforcement of Environmental Criteria in the Construction and Refurbishment of Distribution Units

All construction or refurbishment projects of the Distribution units in Portugal have to comply with environmental criteria, in order to minimise environmental impact during the building construction and usage stages. Those criteria are established through technical standards, which will be reviewed in early 2011.

It is noteworthy that in the past year, increased care has been taken in the Pingo Doce stores with the choice of thermal insulation of roofs and vertical faces, including the installation of shade systems and natural lighting (skylights), whenever possible. Furthermore, when Pingo Doce stores are refurbished, priority is given to options that

avoid the production of demolition waste, which was the case with the renovation of the storefront of the Régua store.

The refurbishment of 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. Of note in 2010 is the development of the technical standard for selecting and installing thermal insulation, which goes further than legal requirements.

Employee Adoption of Best Practices

Jerónimo Martins has invested more in employees' environmental training and awareness, with the aim of changing attitudes and behaviour and ensuring the appropriate management of natural resources, emissions and waste. In 2010, the following actions are highlighted:

Launch of a pocket manual on "Water", which includes best practice for the Distribution sector in Portugal to be taken on in everyday work in order to eliminate the waste of this natural resource;
Training sessions on internal environmental management practices for employees of the Distribution Companies in Portugal, totalling 380 training hours;
Publication of "Environment" features in the permanent section on Sustainable Development of the in-house magazine "A Nossa Gente". The issues addressed in 2010 were the environmental performance assessment of service providers, permanent environmental communication and collection of waste from the customers of Pingo Doce stores;
The publication in Biedronka of a brochure on best environmental practice, with 9,000 copies distributed to the office employees;
In ULJM, the different manufacturing plants have integrated the theme of "Sustainability" into the "2010 Safety and Environment Week", with the aim of reducing energy, water and waste and combating all waste in everyday life at home and at work.

Reduction of Environmental Impact Associated with Logistics Processes

It is the objective of the Group Companies to progressively reduce the environmental impact associated with the logistic processes over the value chains in which Jerónimo Martins' activities operate, by minimising the consumption of raw materials and energy resources and the reduction of the amount of emissions and waste.

Accordingly, the following actions carried out in 2010 are to be noted:

The Distribution sector in Portugal validated its Packaging Ecodesign Manual by carrying out demonstration projects with nine suppliers of Private Brand products. Thus, action plans were defined that improve the environmental profile of the packaging of each supplier, with improvement options bringing benefits to the different operators of the supply chain. The results will be published in 2011, when the Packaging Ecodesign Manual will be provided to all Private Brand suppliers, which will have the opportunity to participate in biannual workshops organised by Jerónimo Martins;

Biedronka improved a standard for display cardboard boxes and distributed it to suppliers, in order to optimise the dimensions of packages;
Lighter packaging was developed for Vítor Guedes products in order to reduce the consumption of material and energy resources;
Victor Guedes invested in larger containers (from a height of 6.1 to 12.2 m) for the export of finished products, in order to maximise the transport quantities, which is directly reflected in the reduction of the carbon footprint associated with the supply of the products;
Gallo increased the use of recycled cardboard in the manufacture of its primary sales unit by 56%;
In the Group's production units, more than 90% of packaging materials used and purchased in 2010 were recycled or contained recycled paper;
Environmental audits were conducted on all freight companies transporting goods from distribution centres to stores, in Portugal;
A training programme in defensive driving was implemented in the logistics field, which ensures more economic and responsible driving from an environmental point of view. This programme is called "Eco-driving" and it involved 71 drivers working for the Group. It is expected to encompass all these professionals by 2011;
Backhauling operations were increased. This service was provided to 62 regular suppliers, representing a total of 232,706 pallets collected. It is estimated that this fleet management measure has resulted in a saving of 4,370,849 km for suppliers and a decrease of 4,336 tonnes of CO2 emitted into the atmosphere;
The indicator of the number of reusable boxes shows the evolution and importance this technique has taken on in the logistics activity of the Group. The use of reusable plastic boxes in Portugal, which already covers the Meat, Dairy, Fish, Bakery and Fruit and Vegetable (this was the only area with a decrease in reusable boxes use) areas, is noteworthy. In Poland, reusable packages are used whenever logistic and operational conditions permit such.

Environmental Indicators:

Percentage of reusable boxes vs. total number of boxes transported

	2010	2009	Δ 10/09
Portugal	10.4%	18.1%	-7.7p.p

Raising Environmental Awareness of Customers and Consumers

In 2010, aware of the fact that companies should play an active role in raising the awareness of the general public to enhancing sustainable development, Jerónimo Martins conducted several environmental initiatives aimed at customers and 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 2010 were on the following topics: energy efficiency, waste management, air emissions and wastewater, ecotourism and carbon footprint;
Permanent environmental information and signs were posted in 175 Pingo Doce stores in order to engage customers in water and energy saving and foster sustainable consumption practices;
Pingo Doce supported the used cooking oil collection project of Sintra Municipal Council, by aiding in the dissemination of the project among the municipality's population, using aerial posters for that purpose in seven stores of this municipality (where there are oil recycling bins);
Campaigns to raise the environmental awareness of consumers in Pingo Doce stores, devoted to the themes of "Collecting used cooking oil" promoted by the Portuguese Association of Distribution Companies (APED), "Glass recycling" promoted by Sociedade Ponto Verde (SPV) and "Reuse of shopping bags," also promoted by APED;
Campaigns to raise the environmental awareness of customers of Biedronka stores, devoted to the themes of "collection of used batteries" and "glass recycling" (this campaign offered 15,000 plants to customers and collected 21 tonnes of glass);
Promoting public discussion on environmental issues, through participation in "The Environment and the New Challenges for Distribution" seminar, organised by APED, by means of the communication "Packaging Ecodesign: The case of Jerónimo Martins";
Continuation of collaboration in the field of environmental education of ULJM with the European Blue Flag Association (member of Foundation for Environmental Education) in two areas: as a sponsor of the Eco-Schools programme and involvement in the Ecopraias ('Ecobeaches') project through Olá. The Eco-Schools programme aims to promote environmental education in schools, with 1,041 schools awarded the green flag for environmental performance in 2010. The Ecopraias project aims to promote the collection of solid waste on beaches. In 2010, the placing of 142 recycling bins on 42 Portuguese beaches, including river beaches and marinas, was achieved;
The Skip and Comfort brands, in addition to rolling out more concentrated products (the best example of which is Skip Pequeno & Poderoso), launched the plan "For a Cleaner Planet" in 2010 (www.porumplanetamaislimpo.com), which aims to promote change in consumer habits in the daily washing of clothes in order to reduce the environmental footprint of the process without compromising the quality of each wash, by raising awareness to the fact that the defence of our planet is a duty of all.

2.2.4. Adoption of More Environmentally-Friendly Technology and Solutions

Jerónimo Martins aims to minimise the environmental impact of its activities, products and services by adopting more environmentally friendly solutions.

Sustainable Consumption

Pingo Doce and Biedronka stores maintained in 2010 the strategy of not providing free plastic bags. In actual fact, these stores sell several types of bags to meet the diverse needs of consumers, raising their awareness to the practice of reuse as a means of reducing the environmental impact on society.

On a broader level, various products have been made available which enable the consumer to opt for solutions more in harmony with the principles of Sustainable Development, with the following being notable in 2010:

The sale of Private Brand organic products chicken and vegetables, in Pingo Doce, and dairy products, in Biedronka;
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 15 references of concentrated UltraPro detergents and recycled toilet paper of the Pingo Doce brand, and tinned tuna with the dolphin safe label, also of the Pingo Doce brand;
The sale of the Neo Private Brand recycled toilet paper, in Biedronka.
Tests were conducted in Lever on new formulations of powder detergent, with the reduction of the environmental impact during production, including fewer atmospheric emissions and lower energy and water consumption per tonne produced;
The active development of concentrated liquid detergents for clothing of the Skip, Surf and Comfort brands was continued by Lever, increasing consumer choice through the availability of more varieties and sizes and significantly reducing the consumption of natural resources and the quantity of emissions and waste. It is estimated that Skip Pequeno & Poderoso since its launch in 2007 has reduced the quantity of packaging materials placed on the market by more than 200 tonnes;
In the area of powder detergents, ULJM has been proceeding with the compacting of its detergents, without compromising on their quality and efficiency, reducing the weight of the quantity of detergent per wash (10%), with the consequent changes to all packaging. The most notable cases in 2010 were:
The shrinkage of doses and reduction of one dose per package from the previous product "Skip Active Clean 25 doses" allowed the adoption a lower and less wide packet, which meant a reduction of 18 tonnes of card for the same number of doses, which allowed 55% more sales units to be transported per pallet;
"Skip Sabão Natural 50 doses" was also given less tall packaging, which permitted a 27-gram reduction of paper per package, equivalent to an estimated reduction of nine tonnes of card over 2010;
The former "Skip active Clean 110 doses" product had the number of doses increased by around 9% per package, maintaining the packaging size. It is estimated that this change reduced cardboard by about eight tonnes for the same number of doses sold.

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 nonrenewable energy sources and greenhouse gases. The technologies operating in 2010 were the following:

17.4 m2 solar collectors to heat water at one Pingo Doce store and two Recheio stores (savings: 1,440 kWh/month and 7.5 t CO2/year);
72 m2 of solar collectors installed for heating water at the Azambuja Distribution centre (savings: 5,950 kWh/month and 31 t CO2/year);
12 m2 of solar collectors installed for heating water at the Azambuja Fresh Dough Plant (savings: 850 kWh/month and 5 t CO2/year);
46 outdoor lamp posts powered by photovoltaic panels, installed at the Pingo Doce store in Quinta do Conde (savings: 5,000 kWh/month and 30 t CO2/year);

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).

As part of the commitments undertaken in the "Unilever Sustainable Living Plan", ULJM initiated a process of evaluating the potential for starting up renewable energy projects.

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:

Taking part in the second workshop of European experts on EMAS (Eco-Management and Audit Scheme) regulation, organised by the Institute for Technological Prospecting Studies which aims to draw up a support publication for the Distribution sector;
Support provided to the completion of the Master's thesis on "The Evaluation and Communication of Environmental Performance in Retail Units", of the Faculty of Sciences and Technology of the Lisbon Nova University.

Also during the year under review, as was the case the last three years, Pingo Doce continued to support the Lisbon Oceanarium, by contributing towards this organism's participation in various conservation, education and awareness initiatives directed at preserving the oceans and marine life.

In 2010, this support involved a total of 15 thousand euros that contributed specifically towards the development of various conservation projects, of which the following are highlighted:

MarGov (Co-operative Governance of Protected Marine Areas), which aims to alert society about the conservation of biodiversity, sustainable fishing management and the cultural preservation of coastal societies;
Reproductive Migration of the River Lamprey, directed at a strategy for river lamprey colonization;
Marine Prairie Adoption (Marine Science Centre of the University of Algarve), whose objective is to create platforms for making citizens and decision-makers aware of the deterioration of the eco-systems;
Creation of a Micro Reserve for Amphibians.

2.3 Responsible Shopping

RESPONSIBLE SHOPPING IN DISTRIBUTION AND MANUFACTURING, IN PORTUGAL AND POLAND

Promotion of Partnership Spirit

Jerónimo Martins believes Suppliers, Business Partners and Service Providers are an essential part in building the value propositions of its Brands and Banners, and so the various group companies are committed to developing lasting business relationships, based on the promotion of mutual interests and innovative approaches to opportunities, as well as the sharing of values and knowledge. This lies within a framework of high ethical principles and a communal sense of Corporate Responsibility, which is a determining factor for the sustainable continuity of the businesses.

The relationship between the distribution on the one hand, and producers and manufacturing, on the other, is increasingly characterized by an awareness of interdependence and the development of collaboration and strategic partnerships in the quest for efficiency, productivity and differentiation.

Systematisation of the Distribution Procurement Policy

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. Thus in 2010, Jerónimo Martins systematised a corporate procurement policy (available at www.jeronimomartins.pt), based on five pillars:

QUALITY AND FOOD SAFETY ensuring that current and future customers' needs and expectations are met with regard to the quality and food safety of the products sold;
FAIR PRICES encouraging an increasing number of people to have access to quality food products by practicing competitive and fair prices and by developing an investment and innovation policy for its Private Brands;
HEALTHY EATING promoting healthy eating in the communities where it operates by making the best fresh products available and by continuously improving the nutritional formulae of the products of its Private Brands;
SOCIAL WELL-BEING significantly encouraging the social and economic development of the regions where it operates;
SUSTAINABILITY contributing positively towards the sustainability of the ecosystems and of the populations on which Jerónimo Martins directly or indirectly depends.

This policy permits, among others, a supplier selection process based on strict and demanding criteria that allow lasting business relations to be built, both in terms of quality and food safety and in respect of issues related to sustainability practices, and conduct demanding but fair negotiations that ensure the competitiveness of value propositions and improvements to productivity and efficiency in the supply chain to the consumer's benefit.

This is the environment in which the companies of Jerónimo Martins are committed to ensuring they operate in accordance with a set of principles, including:

Preference for local/national suppliers, under equal conditions, minimising the carbon footprint of the products sold and enhancing social and economic wellbeing in the regions where the Group operates;
Only using suppliers that are specifically committed to practices and activities that wholly comply with the law and any applicable national and international agreements;
Immediately terminating commercial relationships with suppliers whenever there is knowledge that these and/or their suppliers have practices involving the abuse of Human Rights/Child Rights and/or those of its Workers and/or they do not incorporate ethical and environmental concerns when carrying out their operations;
Using its relationship with suppliers to have a positive influence so that their activities and processes contribute towards the preservation of water resources and progressively reduce their greenhouse gas emissions;
Encouraging research and development, training and awareness initiatives, in order to increase consciousness and competence regarding sustainability and to multiply the positive results in the supply chain.

Preference for More Sustainable Sources and Practices

In 2010, over 77% of all suppliers of perishables of Pingo Doce were national suppliers (fruit and vegetables, butchers, fish, bakery/cakes, flowers). By investing in direct procurement from domestic producers, and also functioning as a driver of local economies and social well-being, Jerónimo Martins also shows its concern for environmental management and sustainability, since many producers are covered by Integrated Production or Biological Schemes. In agro-livestock production, suppliers widely adhere to the Carbon Fixing Plan, through the implementation of permanent pasture.

In relation to vegetables, for example, only 30% are purchased outside of Portugal as a result of insufficient domestic production of products such as potatoes and onions, and the need to purchase products outside of production cycles, as is the case with tomato, aubergines, cucumber, peppers and courgettes.

In the area of fruit, where there are several domestic suppliers with a commercial relationship with Jerónimo Martins of more than 20 years, the weight of domestic products sold of the total is about 60%, with the remainder being composed essentially of exotic fruits and imports required as a result of production cycles in Portugal. In this category, and as a means of ensuring fair prices for producers too, Pingo Doce removed intermediaries from most purchases, working directly with producers.

In the Butchers segment, in categories such as poultry (100% domestic), pork (over 90% domestic) and beef and veal (78% domestically), all domestic suppliers that Pingo Doce works with are covered by commercial contracts with guaranteed ordering, price and payment. The purchase of beef and veal by Jerónimo Martins, under partnership contracts with suppliers, has contributed to the protection and development of indigenous species and species of demarcated regions with a strong impact on the livestock sector in the country, such as the Alentejano, Mertolenga and Barrosã breeds and organically produced meat. Also noteworthy is the National Veal Project, which involves more than 700 direct producers.

With regard to Fish, Pingo Doce started about three years ago to remove the intermediaries of national shipowners, relying in 2010 on 46 vessels covered by direct contracts, reflecting the negotiations of the purchase prices for certain periods of time, depending on the species and seasonality, with base values above the average usually paid in the auctions, thus ensuring the fishermen avoid fluctuations in their income.

On the other hand, in a partnership with a national producer, the Group has developed a project for tinning Portuguese fresh sardines.

In the olives area, the Group has partnerships with several Portuguese cooperatives for the Production of Pingo Doce olive oil, including Cooperativa de Olivicultores de Valpaços, Sociedade Agrícola do Monte Novo e Figueirinha, Cooperativa Agrícola Moura Barrancos and Olidal – Olivicultores do Alentejo. 3 million litres of olive oil were supplied in 2010, originated exclusively from national varieties, which constitutes a significant contribution to the preservation of the traditional Portuguese olive grove.

In the wine area, there are partnerships and agreements with 25 producers from all regions of the country, for specified amounts. These projects, which are designed both for the Pingo Doce brand and for exclusive brands are aimed at guaranteeing product

supply in the long term, with benefits for producers and for consumers, through increased competitiveness in prices.

Last year, Biedronka also continued its investment in long-term relationships with its suppliers. In line with the Company's historical performance, the supply chain was primarily based on purchases from Polish producers, who maintain their share of over 90% of the total number of suppliers in the Biedronka grocery area.

All the seed oil acquired by the ULJM Manufacturing units in 2010 was covered by GreenPalm certification for sustainable seed oil. GreenPalm is a commercial certification programme supported by the Roundtable on Sustainable Palm Oil (RSPO), an organisation created to address the environmental and social problems created by the production of seed oil. When selling the seed oil produced under this programme, farmers provide better conditions for their crops by promoting sustainable agriculture.

Also last year, all the bags of Lipton Yellow Label tea for sale in Portugal were certified by the Rainforest AllianceTM, a certification that guarantees to consumers that the tea they consume comes from sustainable plantations.

Similarly, all reformulations by Knorr took into account the origin of sustainable agricultural products used by the brand, under the "Farming for the Future" programme that seeks to ensure that the farmers involved receive a fair price for their raw materials and thereby improve their quality of life. This initiative is part of Unilever's global commitment to have all the supplies of the main vegetables and herbs used to come from sustainable sources by 2015.

At the end of 2010, the Ben&Jerry's ice cream range in Portugal contained six varieties with Fairtrade ingredients. Ben&Jerry's was the first brand of ice cream in the world to use Fairtrade certified ingredients and thus the first to combat poverty and promote sustainable agriculture. The overall commitment of Ben&Jerry's is to have all ingredients Fairtrade certified by 2013.

For Gallo, over 80% of its suppliers are located in Portugal, which not only stimulates local economic development but also reduces the carbon footprint of the supply business. Moreover, partnerships are established in the medium and long term with local suppliers, enabling them to invest and develop in order to constantly improve Quality and Food Safety.

The application of fair prices, for the quality required, encourages partners of Gallo Worldwide to adopt best practice in manufacturing excellence, particularly in relation to the olive groves and mills:

Use of integrated protection where the adoption of specific production methods and biodiversity maintenance minimize pesticide use and promote functional biodiversity;
The use of sustainable agricultural practices, through rigorous selection of varieties and definition of the optimal time for harvest;
The adoption of optimal extraction techniques that minimize both the consumption of energy and also water and resulting in oils of unique complexity.

Reorganisation of the Quality and Food Safety Team

In 2010, the new structure of the Quality and Food Safety Team was approved in the Distribution area, with an organisation that is better suited to the realities and needs of the market in a more logical orientation toward the product, looking for greater accountability, expertise and focus per business area.

In July 2010, the Nutrition Team was integrated into the Directorate of Private Brand Quality and Development, which very significantly facilitated the implementation of the planned nutritional reformulations, and which were carried out in 2010.

In April 2010, the Directorate of Private Brand Quality and Development separated from the Quality and Food Safety Team structure in Poland, in order to ensure individual attention and focus on the Private Brand products. The Private Brand Development team was strengthened with the addition of three experts.

In Poland, in addition to Perishables control carried out at the Distribution Centres, technicians were appointed in 2010 to continuously work with producers on their premises so as to strengthen the verification of compliance of work procedures and methods and also to provide support through technical advice, as part of a policy of sharing knowledge with a view to continuous improvement.

The allocation of resources dedicated to working in loco with producers on the spot was applied in 2010 for the meat, fruit and vegetable areas, resulting in a 10.3% increase in audits and monitoring visits in the case of meat, and 37.5% in relation to fruit and vegetables.

Its aim was mainly to motivate suppliers to improve the level of traceability, storage conditions and the preparation of products according to the needs and orders of Biedronka.

Audits of Suppliers

2010 was characterized by the continued strategy of close monitoring of suppliers and products of Distribution. To this end, there were significant increases in performance that resulted in the upholding and improvement of the high standards of product quality, even in adverse economic conditions.

Perishables Suppliers

The audits performed by the team of internal auditors on suppliers of perishables for Distribution in Portugal, totalled 503 in 2010. 40.9% of that total focused on the monitoring of preventive action, corrective action and the continuous improvement required of suppliers. The approval rate of suppliers as a result of the evaluation audits undertaken was 97%.

Perishables Suppliers Portugal	2010	2009	∆10/09
Evaluation Audits	297	205	44.8%
Follow-up Audits	206	248	-17.0%

A total of 635 audits were performed on Perishables suppliers in Poland during 2010 by the team of internal auditors. 29.4% of these were focused on monitoring preventive and corrective action, and continuous improvements requested of suppliers. The approval rate of suppliers as a result of the evaluation audits undertaken was 87.7 %.

Perishables Suppliers Poland	2010	2009	∆10/09
Evaluation Audits	187	159	+ 17.6%
Follow-up Audits	448	373	+ 20.1%

Also in Poland, the audit of regional bakeries (around 97) who directly deliver bread to Biedronka stores was assured. These audits were conducted at regional level by regional auditors who work on the basis of present and potential suppliers, with the aim of improving the hygiene conditions of production and food safety, providing free advice on the proper handling of raw materials and labelling in accordance with legal requirements.

During the audits the raw materials and recipes of the bakery products for direct store delivery were also controlled in relation to the potential risk of counterfeiting and/or misleading consumers. The specifications and labels of most products of this category on sale at Biedronka were collected and checked.

To strengthen the control of bakeries, suppliers' plants and possible production sites were also audited to ensure that all locations in the development of the product, currently 117 in number, are undergoing checks.

Private Brand Suppliers

Audits

	2010	2009	Δ 10/09
Portugal	194	147	+31.9%
Poland	280	255	+9.8%

The plants of Private Brand producers were also checked in Poland, in order to ensure that the production processes conform to the requirements of safety, quality consistency and efficiency in the supply of the country's largest retail chain.

Jerónimo Martins Dystribucja also offers free advice to its suppliers when needed, keeping a visit rate of every three weeks for each provider.

Non-Food Product Suppliers

A non-food control programme aimed at a set of categories imported from China was developed and implemented in Biedronka. All toys and electronics are controlled by TŰV Rheinland in Chinese laboratories before being shipped. Thus, the main points in 2010 were:

108 performance tests on Fitness products (safety, functionality, durability, handling);
18 inspections at the production stage (20% of the production volume);
22 inspections at the final stage (80% of the production volume).

Services Suppliers

The Companies of the Distribution sector acknowledge that co-operation with their suppliers is essential, in order to minimise environmental impact. Hence, 34 audits of maintenance service, waste operators and goods transport suppliers were carried out in 2010. 15% of these were found to have an excellent environmental performance and the same amount registered a high environmental performance.

Review of Perishables' Specifications

In Portugal, specifications of 63 fruit and vegetable products and 57 meat products were reviewed, in order to update and enhance the detail for each product.

In Poland, the Quality Control team prepared specifications for fruit and vegetables to be added to contracts with suppliers as part of the commercial conditions.

Laboratory Analyses

In Portugal, in addition to the selection of Perishable products, which is 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. A total of 1,251 samples of fruits and vegetables, meat and fish were tested with a conformity rate of 89%. 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 is deemed necessary.

Analytical Control* Perishables in Portugal	2010	2009	∆10/09
Fruit	306	178	+71.9%
Vegetables	332	163	+203.6%
Fish (fresh and frozen)	283	137	+206.5%
Meat (fresh and frozen)	301	253	+18.9%

*Number of samples

The laboratory control of product contamination with pesticides, nitrates and heavy metals began in 2010 in Poland. 100 production batches were analysed.

Pre-roll-out Analyses

	2010	2009	Δ 10/09
Portugal	275	191	+43.9%
Poland	522	670	-22.0%

*This reduction in Poland is mainly due to the adjustments resulting from the reorganisation of the Quality and Food Safety Team.

Training

Of Employees

The syllabus as well as the training scheme were reviewed in the Distribution area in Portugal in 2010, trying to better adapt to the needs and reality of the business.

In 2010 the employees of DQDMP attended a total of 132 training hours in the Quality area.

Quality and Food Safety technicians participated in 834 training hours during 2010.

In Poland, 108 Quality and Food Safety technicians participated in specific training sessions on products such as apples, potatoes and onions, and areas such as the production and inspection of flowers, specialisation in fruit and vegetables with assessment by public examination, standardisation of criteria for the evaluation and internal auditing.

The quality team performed 80 audits of suppliers that served as training for new internal auditors.

Of Suppliers

In 2010, technical support was given in Portugal to the development of 354 smallscale, local and regional suppliers of fruit and vegetables, Fish and Meat.

This type of support was also provided in Poland to 141 suppliers, focused on the fruit and vegetable and bakery areas. Furthermore, a visit by nine Polish suppliers of fruits and vegetables was organised in Portugal to present the operation in Portugal in the areas of production, manufacturing, distribution and stores as well as the quality procedures at each stage of the process.

JM Direct Project

Developed to support the exchange of information and business process management between suppliers and Jerónimo Martins in Portugal, JM Direct is an electronic platform which includes all the information inherent to these processes, such as prices, orders, returns, receipt of goods planning, receipt of goods, sales, stocks, promotions, current accounts and proof of payment.

Apart from enabling greater proximity between suppliers and the Group, this tool facilitates and ensures the effective control of processes and an increased response capacity in an area which is a determining factor for the business. In addition, apart from substantially lightening the administrative load, JM Direct has been decisively contributing towards the simplification and flexibility of the processes.

In 2010, in comparison with the previous year, the number of suppliers who joined this project continued to increase (80% versus 73%), as well as the number of suppliers with electronic invoicing (74% versus 59%). In total, 924 Jerónimo Martins suppliers have already chosen this channel.

Also during the year under review, there was a notable increase in the issue of electronic legal documents, when compared to the previous year (86% versus 82%). On the other hand, the number of purchase orders issued through the EDI System (Electronic Data Interchange) was consolidated, with the percentage remaining at 70%.

With regard to master-data workflow through the JM Direct portal, this application, which was implemented in 2009, makes it possible to maintain master-data on articles in an interactive way and in real time, and had a joining rate of around 13%.

2.4. Supporting the Surrounding Communities

By tradition and with a sense of mission, Jerónimo Martins is deeply involved with the communities in which it operates, endeavouring to have a positive impact on them from a social and economic point of view, through the products it provides, the employment it generates and the support it grants to causes and institutions that help the more fragile groups in society, such as children and young people, and the elderly.

The most significant support provided by the Group, either directly or indirectly, is generally in the form of donations in foodstuffs, in order to contribute towards the fight against hunger and malnutrition because, as the Food Distribution leader in the regions where it operates, Jerónimo Martins believes it has a responsibility to do so. However, support to other initiatives which are considered of a relevant importance to the surrounding communities are not excluded, namely those of a sports, cultural and scientific nature.

The next few pages are intended to provide a summary of the support and contributions assured by the Group and its Companies in 2010, in the areas of Distribution, in Portugal and Poland, and also Manufacturing.

2.4.1. Institutional Support

In Portugal, at an institutional level, last year Jerónimo Martins directly supported 39 institutions, almost all of them dedicated to supporting the more fragile and needy groups in society, 19 of which on an ongoing basis (some support goes back to 2002), to a total amount granted corresponding to 357,124 euros, in the form of shopping vouchers, financial aid and donations in kind.

2.4.2. Distribution in Portugal

Direct Support

Throughout 2010, within a recessive social and economic context, the Group's Distribution Companies reinforced their support to the communities they serve, by helping them above all with food donations.

Therefore, through financial donations and food, Pingo Doce supported 141 institutions with various missions to support the needy and to boost cultural and sports activities within the stores' areas of influence, which came to a total of 2,789,860 euros.

It should be noted that this amount includes one million euros that was donated to the Regional Government of Madeira, as a private contribution for the reconstruction of that part of Portugal, following the natural disaster that took place in February 2010, the damage of which a joint Committee comprised of members of both Governments (Central Government and Regional Government) estimated to be 1,080 million euros.

In addition, Lidosol, the Group Company that manages the Pingo Doce Banner in Madeira, supported 24 local entities, to a total value of 20,439 euros.

In line with the support policy undertaken by all the Group Companies, Recheio contributed with monetary donations and donations in kind, equivalent to a value of 228,760 euros, which will benefit a total of 120 institutions.

Indirect Support

The year was also marked by the Portuguese consumers strongly participating in the two campaigns for collecting food in favour of the Banco Alimentar Contra a Fome (Food Bank) that ran in all the stores in the Pingo Doce chain.

Adopting the role of charity facilitator and as a means of incentive, through volunteers in its store network, the Company was able to collect from its consumers 5,276 tonnes of food and 265,637 euros converted into food vouchers. Of note is that, as in previous years, on a national level, Pingo Doce was the company that most contributed towards this action, significantly helped by its national coverage and the chain's capillarity.

As an example of the work it has been doing over the last few years, Pingo Doce also organized a food voucher campaign in all its stores, and raised 27,209 euros for Portuguese Association of the Blind and Poorly Sighted (ACAPO). On the other hand, it freely granted space in its stores for various charitable activities, like collections and informative initiatives for certain causes, which in 2010 benefitted 24 institutions.

2.4.3. Distribution in Poland

Direct Support

Last year, in Poland, Biedronka pursued its support to the communities surrounding the stores and to Polish society in general, most especially for social causes, above all those involving children and young people.

The Company donated over 77,468 euros to institutions and private individuals, in the form of monetary support and donations in kind, which aimed to help the victims of the floods that hit some regions of the country this year.

Also on a social level, Biedronka continued to support the needy, especially through its co-operation with Caritas Polska, one of the largest and most prestigious charities in Poland. In 2010, the support granted to this work totalled 77,500 euros.

During the year in question, of note is the ongoing project "Partnership for Health", launched in 2006, through which Biedronka, together with Danone, Lubella and the Polish Mother and Child Institute, provides the product "Milk Start", aimed at combating infantile and juvenile malnutrition in that country. According to a study carried out by Millward Brown on 300 Polish primary schools, around half a million children are not properly fed, either due to an insufficient number of meals or insufficient quantity of food eaten. This is happening in a country in which around 24% of the population, according the data from the Home Panel of GFK Poland, have a maximum of 4 euros/day per capita.

In addition, also in 2010, the Banner granted 227,238 euros to the Foundation for the Development of Heart Surgery, with the aim of supporting the development of the first artificial paediatric ventricle, currently in the clinical trial stage, which is expected to be able to save the lives of many children with heart diseases.

Finally, Biedronka began co-operating with the Polish Foundation for Integration, an organism that provides assistance to disabled people, helping them overcome architectural and psychological obstacles in their daily lives. Last year, the Company donated 2,582 euros to support this cause.

Indirect Support

In strict co-operation with the Federation of Polish Food Banks, the Company carried out campaigns for food collection in the entire Biedronka store network, among which the Christmas-time fundraising initiative should be noted, which collected 620 tonnes of food.

2.4.4. Manufacturing

ULJM continued to favour health, the environment and education as priority areas for initiatives for the more vulnerable members of the population, like children, the disabled and the elderly.

In 2010, the Company contributed with products and money to support 30 institutions, totalling a donation of 368.597 euros. The Food Bank was the greatest beneficiary, receiving around 66% of this value.

At the same time, within the context of food support, the following initiatives deserve being mentioned:

For the fourth consecutive year, co-organization with TNT Express, of Walk the World, in support of the United Nations' World Food Programme. The event had a total of 1,620 registrations and with the support of suppliers that participated for the first time, it managed to collect 10,897 euros. This amount is the equivalent of around 55 thousand school meals for children in countries covered by the United Nations' World Food Programme;
For the second consecutive year, in partnership with the World Food Programme, the implementation of the marketing initiative "Planta Aid", to help one of the poorest communities in Africa, Northwest Ghana. The initiative raised funds for the preparation of 163 thousand school meals.

Within the scope of support to research, the competition carried out by ULJM deserves being highlighted, which aims to reward the best work in the areas of "Community Health and Consumption", and "Dermatology Clinic", within the scope of promoting technical and scientific research in the area of cosmetic sciences. The result of this initiative will be announced in 2011.

Also in 2010, the Vasenol Skin Fund was consolidated - a programme created in 2009 to combat the Portuguese people's lack of knowledge on the importance of the skin and consequent risks - by renewing its partnership with Portuguese Association of Psoriasis (PSO Portugal) and its co-operation with the Portuguese Society of Cosmetic Science (SPCC).

Another practice for involving and supporting the surrounding communities are study visits. Within the field of educational initiatives, in 2010, the ULJM plants were visited by 8,200 pupils from primary and secondary schools and universities. Of note was their learning about the brands and their respective manufacturing processes.

Gallo (and Victor Guedes S.A.) also regularly supports various institutions in the borough of Abrantes, the location where the Company and also its plant have their roots. In 2010, this Company, with 60 of its employees, gave 30 thousand Euros support and personally carried out improvement to the conditions of the Lar de Infância e Juventude da Santa Casa da Misericórdia de Abrantes (Abrantes Charitable Children's and Young People's Home), which houses girls from dysfunctional family environments.

2.5. Be an Employer of Reference

The Group is aware of its role in promoting quality of life in communities and driving the local economy, by concentrating a large volume of direct and indirect employment, especially due also to its significant impact on production activity in the countries where it operates.

2010 was undoubtedly another year of consolidation of best practice in Human Resources across all the Group Companies, which have translated into concrete measures aimed at strengthening the role of Jerónimo Martins as an employer of reference in Portugal and Poland.

Moreover, the Group has continued to generate new jobs in a year of economic recession and it has even reviewed minimum starting salaries in the Food Distribution Companies in Portugal and Poland, distancing them from the minimum wage in force in either country.

Also in 2010, remained the clear focus on training, career development, salary reviews and the awards of performance bonuses.

Lastly, the growing dynamism of activities promoted by the area of Internal Social Responsibility in the Health and Welfare, Education and Social Support fields, as well as the existence of an Employee Assistance Service are examples that clearly demonstrate the Group's investment in its employees, unequivocally contributing to Jerónimo Martins increasingly becoming, as mentioned, an employer of reference.

The following pages cover initiatives and actions developed and set out during 2010 within the scope of the Group's responsibility for its 61,061 employees of the Distribution sector in Portugal and of the Manufacturing and Services sectors in Poland.

BE AN EMPLOYER OF REFERENCE IN DISTRIBUTION IN PORTUGAL AND POLAND, AND IN MANUFACTURING AND SERVICES

MAIN INITIATIVES IN 2010

Job Creation in a Year of Growth
Recruitment and Selection
Promoting Internships
Performance Assessment and Talent Management
Continuous Optimisation of the Remuneration and Benefits Policy
Strengthening Investment in Development and Training
Social Responsibility
Labour Relations
Accident Figures
Health Services

2.5.1. Job Creation in a Year of Growth

2010 was noted for the strong growth and reinforcement of Jerónimo Martins' position in the markets where it operates. As a direct result, 7,264 jobs were created. At the end of the year the Group had a total of 61,061 employees, largely operational, which represents an increase of 13.5%.

Total number of employees as at 31 December 2010

2010	Holding	Distribution Portugal	Distribution Poland	Manufacturing and Services	TOTAL
Managers	41	480	376	236	1,133
Non Managers	31	27,561	31,155	1,181	59,928
TOTAL	72	28,041	31,531	1,417	61,061

Breakdown of Jerónimo Martins Human Resources, in 2010

2% are Management jobs;
75% are women;
59% have got twelfth years of schooling;
70% reach up to 5 years of service in the Group;
58% hold an open-ended contract;
69%, in Portugal, are effective*;
47%, in Poland, are effective*.

2.5.2. Building a Sustainable Future: from Attraction to Retention

The management of Human Resources in Jerónimo Martins continued to adopt a multidisciplinary, across the board approach in 2010, based on four strategic pillars:

Recruitment and Selection;
Performance;
Development;
Engagement.

2.5.2.1. Attract and Select

Recruitment is an excellent means for Jerónimo Martins to strengthen its position in the geographical areas where it operates, focusing on equal opportunities, skills assessment and the candidate's suitability for the work to be performed.

Recruitment and Selection

Although the Group principally favours the internal mobility of human resources among the various operational departments and Companies, it also relies on external recruitment to meet the strategic needs of the Banners, pursuant to their mediumand long-term business plans. For such recruitment it uses online methodologies, advertisements in the national and regional press, job offers in local job centres and Executive Search.

*Bearing in mind expansion and business maturity, Portugal and Poland perform differently, within this area.

In Poland, for example, the www.karierawjmd.pl site, rolled out in 2009, had around 700,000 visitors in the year in question. Moreover, for the first time in that country the Company ran a recruitment campaign through the media, which registered a large response.

The annual Trainees Programme is also to be noted, which is aimed at recruiting recent bachelor's and master's degree graduates. The goal of that Programme, which Jerónimo Martins considers to be strategic, is to guarantee the sustainability and medium and long-term future of the organisation, through the rejuvenation of its managers and strengthening of its position as an employer of reference and School for the business world.

Last year, 17 Trainees joined the Group under this Programme in Portugal, in the Distribution and Services areas, and 28 joined in Poland. Eight Trainees were recruited for the Manufacturing area.

Recruitment in 2010 was as follows:

Recruitment	No. of Employees Recruited	No. of Trainees
Managers	35	53
Non Managers	26,011	-
TOTAL	26,046	53

Promoting Internships

In 2010, Jerónimo Martins continued to focus on strengthening partnerships with universities and educational institutions in order to attract and recruit new talent. It gave students a first contact with the job market through vocational and university course internships, while benefiting from the ideas and enthusiasm of the young students or recent graduates, in a three-way win (internships/university/company).

Accordingly, 101 internships were provided, mostly in the Operations, Commercial, Marketing, Logistics, Financial, Human Resources, Quality and Food Safety and Health and Safety in the Workplace areas.

2.5.2.2. Performance, Assessment and Remuneration

Aware that success is directly dependent on how human resources are managed in companies, Jerónimo Martins has developed its assessment and merit culture guided by the following principles and objectives:

Contribute to the sustained improvement of the Organisation's performance and development of its employees;
Objectively identify the merits of each person;
Encourage self-assessment;
Promote dialogue between managers and teams, strengthening the culture of feedback and improvement;
Recognise and reward the performance of each employee with fairness, impartiality, transparency and in the most competitive manner;
Align the Organisation with best practice in human resources.

Performance Assessment and Talent Management

Improvements were made to the performance assessment systems of the Distribution and Services Companies in Portugal and Poland, in 2010, in order to simplify them, make them fairer and speed up processing times.

The Performance Management cycle, which involves the Board of Directors of the Group, the Managing Committees of the various business units and the Human Resources Department, keeps an attentive and committed eye on the professional development and careers of employees, in both Portugal and Poland.

The principal intention is to create and maintain competitive and motivated teams as an integral part of a business strategy designed for the long-term.

It is to be noted that in Poland the performance assessment process for all nonmanagers was implemented for the first time, except for store and warehouse assistant positions.

Thus, the processes of identification, management and retention of internal resources with potential were rethought over the past year, so that talent management may become uniform practice across all Group Companies present in the countries where it operates.

In 2010, three Polish employees with high potential were invited to take on new professional challenges in Portugal, under the Jerónimo Martins Expatriation Policy. The Group provided them with two months training to learn the language, history and culture of the country, to facilitate the adjustment period. Assistance to the integration of their families was also provided.

ULJM continued to implement the Performance Development Plan Online (PDP Online) during 2010. This is an electronic platform to support the performance assessment and career management process, which is aimed at the company's managers. For the first time, in 2010 the annual cycle for managers was implemented through an integrated computer system.

ULJM continued in 2010 to develop the process of continuous improvement in relation to talent management. Accordingly, the Talent Resourcing Meeting, which is held twice a year and which involves Senior Management, is one of the most important tools since it permits the foresight and management of the Company's needs in this area, providing employees with entry to an international career on a par with natural career progression.

In 2010, the following promotions took place within Jerónimo Martins:

Promotions	No. Promoted Employees
Managers	190
Non Managers	7,102
TOTAL	7,292

Continuous Optimisation of the Remuneration and Benefits Policy

The Distribution Companies have revised and optimised their compensation and benefits policies, in order to guarantee a salary policy that is fair, competitive, adequate and which motivates performance excellence.

Thus, average wages increased in Portugal in 2010 by 2.7%, while the update in Poland reached 4%. Moreover, the minimum salaries of new store employees were reviewed and remain above the national minimum wage: 7% in Portugal and 30% in Poland.

The review and/or implementation of variable remuneration systems occurred during the year. The guidelines of this process are fostering development, growth and the competitiveness of the teams and rewarding and acknowledging their efforts, which are considered a tool for communication and alignment of the Group's strategy.

The system in question is still oriented to promoting a culture of commitment and responsibility among employees towards the results and objectives defined for the short, medium and long term.

Jerónimo Martins also began in 2010 a study on Compensation Practices of Senior Executives in the Distribution market, in Portugal and Poland, in order to monitor its positioning in the market.

2.5.2.3. Strengthening Investment in Development and Training

Distribution and Services

The training and development of its employees are two critical factors of extreme importance to Jerónimo Martins. Hence, the creation of training structures aimed at the Distribution sector in all geographical areas where it operates and the start-up of specific training programmes for the business areas reflect that concern and represent a key role for the Organization.

In 2010, the Training indicators were as follows:

2010	Training Indicators
Total No. of Sessions	37,586 (of which 4% are external sessions)
Total No. of Training Hours *	2,352,359
No. of Training Hours per Employee Effective	66

*Total No. of training hours = No. training hours x No. employees in training

Jerónimo Martins Training School

In Portugal, the Jerónimo Martins Training School was established to provide employees of the Distribution and Services areas with the essential skills for the business. The School operates from a decentralized structure, consisting of a core team, six campuses and 12 operational structures integrated into the Human Resources Departments and Regional Human Resources Departments of the different

Companies. Apart from these, the school also has a further 80 classrooms located in stores all over the country.

In 2010, training sessions increased 269.5%, mainly targeted at Operations. The year was also marked by the focus on developing new formats that combine classroom and workplace training.

Recheio created its own Training brand: "MORE Recheio: Brand, Attitude, Initiative and Service", through which it intends to offer outstanding service quality and customer assistance: i. it is recognised as a quality brand by the customer; ii. it has a positive attitude at all times; iii. it promotes employee initiative; and iv. it translates into an excellent service. All training initiatives in the most diverse of business areas are being developed and implemented under this brand.

Perishables School

Aligned with the strategic differentiation pillars of the Group's Companies in the Perishables area, the Jerónimo Martins Perishables School is responsible for 32% of the training of employees of the Distribution sector in Portugal.

A new area of intervention was created in 2010, targeted at the Meal Solutions (ready meals) business. Furthermore, there was a focus on investing in broad-scale training activities, such as Take Away and Restaurant Workshops.

Management Academies

The training provided by the Management Academies in Poland, aimed at professionals with different qualifications and experiences, is intended to share best practice and further develop management concepts:

Management Academy: programme for middle management, of one and a half years' duration;
Biedronka Management Academy: programme lasting six months for store managers and assistant managers;
Advanced Management Academy: programme for senior management and directors lasting one year.

Store Assistants and Managers Training

Also in Poland, various training modules for managers and shop assistants were conducted outside of the academies, including the Minimization of Out of Stock Situations (24,174 participants) Customer Service (21,974 participants) and Store Layout (5,580 participants).

Executives' Training

In a clear demonstration of its commitment to the development of management and leadership skills among its managers, Jerónimo Martins also implements its training policy through the establishment of partnerships with some of the country's best

universities and the co-payment of Masters in Business Administration (MBAs) and postgraduate courses.

Importantly, two initiatives were rolled out during the previous year:

The Jerónimo Martins Conference Cycle, aimed at the middle management of Distribution in Portugal and Poland;
Senior Management meetings for senior executive managers.

The Group continued to promote, in 2010, the participation of its middle and senior management of Distribution and Services in the Executive Programmes of world-class universities as well as at seminars, congresses and conferences. The topics chosen naturally focus on new worldwide trends in the Distribution and Food Service areas.

Also in 2010, 30 Portuguese and Polish middle and senior managers travelled to the USA, in partnership with Daymon Worldwide, to learn about and explore new store concepts and current and future market trends.

Manufacturing

ULJM carried forward the qualification strategy, based on three pillars:

Skills training programmes for professionals of the sector, both locally (e.g. in the manufacturing units) or making use of international infrastructures (Marketing, Sales and Finance);
Continued investment in the New Opportunities Programme: 14 employees passed 12th grade in 2010. 9 employees concluded 9th grade in Gallo Worldwide;
Roll-out of an updated Management training programme which includes three initiatives:
The ULJM Leadership Series for senior managers, focused on the acquisition of management and leadership skills;
The ULJM Advanced Management Series, for most managers, which aims to develop general skills and personal skills;
The ULJM Future Leaders Modules for Management Trainees, serving as a supplement to the initial career path in the company.

These programmes offer a combined total of around 300 training opportunities, more than 6,500 hours in the classroom, and they involve seven external entities, including the Portuguese Catholic University, Nova University and Porto Management School.

2.5.3. Strengthening Employee Engagement

2.5.3.1. Internal Communications

Internally, Jerónimo Martins uses the following tools and media for communication with and among employees:

My.JM Portal (Intranet);
inside.unilever Portal (Intranet),in ULJM;
In-house Magazines: "Nossa Gente" (Our People); "Olhos da Lei" (In the Eyes of the Law); and "Nasza Biedronka";
Management Meetings and Operational Meetings;
Lunches with the Chairman of the Board of Directors;
Audio-visuals Production Internal Movies.

2.5.3.2. Social Responsibility

The creation of an Internal Social Responsibility area in 2009, called "Jerónimo Martins For Us", with the mission of contributing to the improvement of the quality of life of employees, was an example of natural progress that reflects the Group's focus on its human resources and their families.

The questionnaire completed that year by all employees of the Distribution and Services Companies in Portugal, resulted in the definition of three major pillars for action reflecting their needs and expectations, particularly in the areas of health and well-being, education and social support.

The following initiatives were carried out in 2010, in Portugal:

Health and Well-being

Well-being weeks, which were held at nine different sites in Portugal, all over the country and including Madeira. Over a nine-week period, 3,188 blood sugar level, cholesterol and hypertension, Chiropody, Stomatology, Dermatology and postural condition tests were performed;
Campaigns to Obtain Bone Marrow Donors: 200 people were registered nationwide during the two campaigns;
In conjunction with the Jerónimo Martins Health Services Department, an Internal Health programme was designed, which will be implemented during 2011.

Education

Internal "Learn and Develop" Programme, created under the New Opportunities initiative: 334 employees successfully concluded 6th, 9th and 12th grades in 2010, and 191 are still attending this programme. More than 2,500 employees remain interested in joining this initiative;
School Books Campaign: 823 families benefited from discounts and special delivery and payment conditions;
Holiday Camp: a residential holiday camp for the children of employees on low incomes, aged 6 to 14 years, was held for the first time. For a week, 103 children learned to sail and worked on important skills for the future, such as teamwork, leadership and communication.

Social Support

Agreement with ACAPO: a further three visually impaired people were employed by the Group's stores (raising the total to 29);
Agreement with Entrajuda: six young people aged from 16 to 20 years, from different social institutions, completed compulsory education through the New Opportunities internal scheme and were integrated into the Pingo Doce company;
Business partnerships, particularly with service providers in the areas of health, well-being and education: Jerónimo Martins employees and their families can benefit, through around 60 agreements covering all of Portugal, from special conditions in the acquisition of health, education, well-being and leisure, banking and insurance products and services, among others;
Christmas Vouchers: 13,180 vouchers were awarded to the children of all employees aged 12 years or less, except for Recheio which, according to its tradition, offered presents to the children of its employees;
Support to employees: 80 families received assistance with the payment of health costs, loans for unforeseen circumstances; Pingo Doce food stamps and even equipment for the home. Following the February 2010 disaster in Madeira, 20 employees whose goods and property were lost or damaged also benefited from various kinds of support.

In Poland, the following initiatives are highlighted in 2010:

Children's Day at Biedronka: two days of activities for employees' children aged up to 12 years, with 17,600 participating in 2010. Recreational activities were organised in eight regions and also visits to their parents' workplaces;

School Pack: 1,721 rucksacks with school materials were offered to 6- or 7 year-old children of employees who were starting school this year;
Holiday Camps: two holiday camps were held, with the participation of a total of 515 children;
Check-ups: a total of 21,002 women and 5,119 men benefited from the checkup policy in place at Biedronka;
Flu vaccination: 1,635 employees were involved in this initiative;
Maternity Kit: 1,900 kits were offered to newborn babies;
Sports: a football championship was organised for male employees and a volleyball championship for female employees;
Christmas Pack: packs were given to 30,500 employees, 28,500 to employees' children and Biedronka shopping vouchers to 29,250 employees;
Programme for Assistance to Handicapped Children: the Company supported 115 of its employees' children with special physical and mental needs;
Individual Social Support: after analysing the requests, the Company provided social support to various employees.

2.5.3.3. Labour Relations

The Labour Relations area of Jerónimo Martins launched the "Among Us - Employee Assistance Service" project, in September 2010, for the Distribution and Services areas in Portugal. The service ensures confidentiality, reliability and availability, and can be contacted via e-mail, surface mail or telephone.

By 31 December, 349 employees had contacted "Among Us", mostly concerned with labour doubts and requests for clarification (44%) and social support (15%). 52% of all occurrence were solved immediately. The preferred means of contact was by telephone (75%).

The Labour Relations area in Poland was a favoured means of communication between employees, the Human Resources Department and the Company's Managing Committee.

In actual fact, over 30 meetings were held during the year with unions, employee forums and social committees, to ensure a continued climate of social stability in the Company.

The Employee Assistance Service recorded a total of 1,360 contacts, the equivalent in one year to the totals for 2008 and 2009. It should be noted that 90% of the issues concerned labour matters.

In Manufacturing, ULJM and Gallo Worldwide conducted a "Global Survey of Employees". The response rate of around 90% was the highest ever and the results revealed that there is a high level of satisfaction among most of the important indicators, such as the Employee Commitment parameter (which is of strategic importance to the company, given its direct link with business performance), which posted the best result in Europe for Non Managers, and the second best result with Managers included.

Also during 2010, ULJM launched "We Are", an initiative that brings employees together to discuss the redefinition of the company's values. The following activities in this regard were carried out or initiated, inter alia:

Ambassadors Programme: with the possible participation of all the Company's employees as active elements in publicising major launches, two waves were held each with 200 ambassadors. Each ambassador was given four units of the product to distribute among their family and friends. Altogether, there were 400 ambassadors promoting products (1,600 units divided over four brands);
Agile Working: it involves all the employees of a particular team or functional area removing barriers (physical, technological or regulatory procedures, working habits and mentality) that add no value. The pilot project began in the Information Management & Technology Department and ran for a trial period of three months;
Point of Purchase Passport: to get a flavour of the point of purchase, employees were invited to choose "their store", and detect faults and promote improvements in the visibility of products. 66 events were held in 2010, and 77 points of purchase monitored;
Novideia: relaunched in September 2010, it is a programme that aims to obtain ideas from all company areas. The ideas that are added to the system receive points which will then be redeemed for prizes at the end of the first quarter of 2011;
Traffic Lights: created to adapt information to the language of the different areas of the Company with the aim that it can reach all and may be shared, primarily over the "Intranet".

The Company also launched the following initiatives last year, from a perspective of diversity and inclusion:

Mentoring: for promising female managers, in order to maximise their chances of progression in the company;
Agile Working Pilot: allows each employee to be responsible for managing their work process, including working hours, among other things;
Internships for disabled people.

In this framework, new initiatives are planned and envisaged for 2011 so that the diversity and inclusion policy is increasingly integrated onto the Human Resources agenda of ULJM.

2.5.3.4. Health and Safety in the Workplace

The Health and Safety in the Workplace area (OHS) implemented in 2010 a range of initiatives to strengthen the policies and best practice implemented. Common procedures were developed and systematised, results monitored and the relevant preventive and corrective action taken.

Hence, in the Distribution and Services area in Portugal an effort was made to ensure the implementation of OHS procedures across all Companies.

Of note is the investment in training, initiatives to raise awareness to the risks inherent to the professional activities of employees, and the rules to prevent accidents.

The following activities in this field are to be highlighted:

574 OHS audits conducted, 134 of which were monitoring audits to check on the implementation of corrective action;

414 emergency drills, including the evacuation of the headquarters building of the Group, in order to provide training to employees and entities of emergency situations;
2,698 hours of training (introductory OHS training; driving machines for handling and lifting loads; first aid; evacuation; fire fighting; and even specific training for the safety officers);
Preparation of work instructions for the operation of most machines and equipment;
Reformulation of risk assessment in stores and warehouses of Distribution;
Provision of an OHS computer application for registering work accidents and making audit reports, currently accessible to all Company departments;
Preparation, in the Services area, of Risk Letters and the Model OHS report and definition of Personal Protective Equipment plans.

In Poland, the safety management system was revised in 2010 and adapted to the PN-N-18001:2004 standards (Polish standard that certifies Occupational Health and Safety Management).

This process ran in parallel to the conducting of 1,020 internal audits, the training of 18 internal auditors and the holding of 1,805 training sessions for all employees. The east, north and southeast regions were audited by the certifying company DNV (Det Norske Veritas), and the award of safety certification to all establishments of the Company is expected in the short term.

Manufacturing consolidated the process of behavioural-based safety audits - Audits of Unsafe Acts and Conditions (Dupont) and Total Compliance Audits. It was able to rely on the participation of all employees.

Another "Safety and Environment Week" was organised in 2010. The following topics were covered: "Unsafe Acts, Dangerous Substances, Sustainability and Best Practice in Emergency Situations".

In the same year, the manufacturing units of Lever and Olá renewed their certification in accordance with the OSHAS 18001 standard (Occupational Health and Safety Assessment Specification).

In Manufacturing, the following initiatives were notable:

250 Dupont Auditsand 56 Total Compliance Audits;
94 training sessions, totalling 2,968 hours, focusing on: i. raising awareness among employees for the adoption of safe behaviour and actions; ii.training and cycling the first and second response teams and first aid team; and iii. training on collective and individual protection and driving forklifts. Service providers were also given training in safety, such as the OHS Passport - Health and Safety and Risks in Explosive Atmospheres - ATEX;
Meetings of the Occupational Health and Safety Committee, with the approval of a format for regular visits to workplaces, in the interest of a large-scale operational component and engagement of employees;
Protection of moving parts of work equipment, safe access to locations at height, more effective personal protective equipment and the replacement of fire alarm information systems for more updated systems, in relation to technical control measures;
Emergency drill at Gallo Worldwide to test the response capability of the emergency brigades, the crisis management group and the first aiders to an emergency situation, and identify gaps in the Internal Emergency Plan (IEP)

and training needs. The main improvements implemented in OHS: i. the identification of traffic routes in the finished products warehouse; ii. the replacement of the pavement of the service road at the manufacturing unit; iii. the protection of the moving parts of work equipment; and iv. the replacement of personal protective equipment.

Accident Figures

In 2010, the accident figures were calculated according to the organisational structures of the Group Companies and in harmony with internationally accepted formula, regardless of the location of the Banner. Despite the non-comparability of the rates, the values that gave rise to them permitted a comparison that demonstrated an improvement in the accident rate, with lower levels of severity.

	Frequency Figures	Severity Figures
Distribution Portugal	38.44	0.52
Distribution Poland	14.19	0.56
Services and Restaurants	26.60	0.34
Manufacturing ULJM	1.16	0.01
Manufacturing Gallo Worldwide	4.30	0.07

2.5.3.5. Health Services

The Restructuring Plan for the Jerónimo Martins Health Services in Portugal, which has been in progress since 2009, was the focus of heavy investment over the past year.

This comprised additional efforts to ensure compliance with legal requirements for conducting health examinations (on recruitment, regular and sporadic examinations), in the Distribution and Services areas.

In the field of Labour Gymnastics, the Programme for the Prevention of Work-Related Musculoskeletal Injuries (WRMI), launched in 2009 in a warehouse of the North Portugal Logistics area, has obtained very favourable results, with a reduction of the frequency of occupational accidents and obtaining high scores for comfort and professional satisfaction among employees.

This programme is to be copied in the South Portugal Logistics area during 2011, this being the year in which the Health Services are expecting two pilot projects to roll out in the Distribution area in Portugal:

Anxiety Management: a project to be developed in partnership with an academic institution of Psychology, which will take into account the experience gained in the Psychological Monitoring Programme of Psychiatric Disorders, in development in the South Portugal Logistics area;
"Labour Chiropody" screening programme: this programme is unprecedented in Portugal. It aims to identify the most appropriate usage criteria that allow the compulsory use of protective footwear in terms of comfort and safety, without prejudice to the health of each employee.

In Manufacturing, ULJM launched the "My Well Being" programme in 2010, which integrates the company's know-how in the nutrition field. Under this programme, open educational sessions on obesity were held, which were attended by 340 employees. The continuation of conferences is envisaged for 2011, where topics such as diabetes, blood pressure, cholesterol and work stress will be discussed.

Occupational Health Indicators in 2010:

Occupational Health	Recruitment Medical Exams	Periodic medical exams	Sporadic medical exams
Distribution Portugal	7,490	8,810	848
Distribution Poland	13,564	7,390	1,417
Manufacturing & Services	550	490	3,069
TOTAL	21,604	16,690	5,334

Observation: Estimate as at 31/12/2010.

Reputation and Public Recognition

Reputation and Public Recognition

Jerónimo Martins develops and runs its businesses based on the pillars of corporate responsibility (detailed on Corporate Responsibility in Value Creation chapter), which encompass a series of initiatives and actions with a multi-dimensional impact, and it is aware, in everything it does, of the critical importance of contributing towards preserving and increasing the value of its reputation and having at its disposal independent data from an external evaluation on this matter.

Thus, taking reputation to be the perception that the stakeholders have of the Group, Jerónimo Martins bases its analysis on the evaluation by the Reputation Institute, namely on its study entitled 2010 Global Reputation Pulse, which measured 23 companies in Portugal, on seven benchmark indicators considered to be reputation drivers: Financial Performance, Corporate Governance, Vision & Leadership, Products & Services, Corporate Social Responsibility, Innovation, and Workplace Environment.

The results of the study show that in 2010, Jerónimo Martins, with a score of 70.14 (the maximum score obtained in Portugal was by Google - 86.41), attained the highest evaluation on reputation of the five Portuguese companies in Portugal that are part of the Global 600. According to the Reputation Institute «the score reflects the highest level of consumer trust, respect and positive attitude towards the company, placing its reputation in the Strong/Robust class».

In 2010, the indicators that contributed the most towards the respondents' positive evaluation of Jerónimo Martins are those related to Financial Performance, Vision & Leadership and Products and Services.

Apart from the positive result of the Reputation Institute's study, the Group was honoured with various awards of different kinds, in various national and international forums.

On a Corporate level

"Most Family Friendly Company" Award, awarded by the AESE Business School and the consultants, Deloitte;
"Excellence in Human Resources" Award, awarded by the magazine Recursos Humanos Magazine;
"Best CEO in Investor Relations" Award (Luís Palha), awarded in the 24th edition of the "Investor Relations & Governance Awards", promoted by the consultants, Deloitte, in partnership with the Diário Económico newspaper;
"Best Annual Report Non-financial Sector" Award, awarded in the 24th edition of the "Investor Relations & Governance Awards", promoted by the consultants, Deloitte, in partnership with the Diário Económico newspaper.

Distribution Portugal

Pingo Doce

"Best Food Retailer" Award, awarded by the subscribers of the specialist newspaper Hipersuper, in the first edition of the "Hipersuper Awards'10";

"Best Perishables Operator" Award, awarded by the subscribers of the specialist newspaper Hipersuper, in the first edition of the "Hipersuper Awards'10";
"Best Marketing" Award, awarded by the subscribers of the specialist newspaper Hipersuper, in the first edition of the "Hipersuper Awards'10";
"Master of Food Retail Distribution" Award, in the 19th edition of the "Masters of Distribution" awards, attributed annually by the specialist magazine Distribuição Hoje;
Golden Award in the Distribution and Restaurant Services category, awarded in the 2010 edition of the "Awards for Effectiveness";
"Timeless Brand" Award, awarded in the 2010 edition of Exponor.

Recheio

"Master of Wholesale Distribution" Award, in the 19th edition of the "Masters of Distribution" awards, awarded annually by the specialist magazine Distribuição Hoje;
"Best Food Distribution Company in Portugal" Award, awarded by the magazine Exame and by the consultants, Deloitte, within the scope of the annual Study "500 Biggest & Best Companies".

Distribution Poland

Biedronka

"Trusted Brand 2010" Award in the Supermarket category, awarded in the 10th edition of the European Trusted Brand ranking;
"2010 Service Quality" Award, awarded within the scope of an online national study in which around two million consumers participated;
"Ubi Caritas" Award in the Donator category, awarded by Caritas Poland as part of its 20th anniversary;
"Heart to Heart" Award, awarded by the Cardiology Foundation of Professor Zbigniew Religa, within the scope of the support given to developing an artificial ventricle for children;
CSR Award to Biedronka and to Caritas Polska, awarded within the scope of the 5th edition of the CSR (Social Responsibility) ranking promoted by the weekly newspaper Gazeta Finansowa;
"2010 Product of the Year" Award, awarded within the scope of a study promoted to the readers of the magazine Reader's Digest;
6th place in the category "Polish Brand", published by the daily newspaper Rzeczpospolita;
1st place in the category "Most frequently chosen brand", published by the daily newspaper Rzeczpospolita;
1st place in the category "Most memorable Brand", published by the daily newspaper Rzeczpospolita;
"2010 Brand of the Year" Award, awarded by the Polish magazine Media & Marketing.

Manufacturing and Services

Gallo Worldwide

1st Prize in the "Mário Solinas" Award, awarded to Azeite Novo 2009-2010, within the scope of the Mário Salinas Quality Awards, promoted annually by the International Olive Council (IOC);
Honourable Mention in the "Mário Solinas" Award, awarded to Azeite Grande Escolha, within the scope of the Mario Salinas Quality Awards, promoted annually by the International Olive Council (IOC);
Silver Medal, awarded to Azeite Novo, in the Oil China Competition, which brings together products and brands from all over the world;
Honourable Mention, awarded to Azeite Grande Escolha, in the Oil China Competition, which brings together products and brands from all over the world;
Maximum 3 Star Award, granted to Azeite Novo, by the International Taste & Quality Institute;
Honourable Mention awarded to Azeite Grande Escolha, by the International Taste & Quality Institute;
The World Best Virgin Olive Oil, awarded by the German magazine Der Feinschmecker 2009/2010;
The World Best Extra Virgin Olive Oils, awarded to Gallo Colheita ao Luar, by the Italian guide Flos Olei;
Silver Medal, awarded to Azeite Grande Escolha and to Azeites Aromatizados com Manjericão e Orégãos (Olive Oil flavoured with Basil and Oregano), in the Olive Oil 2010, in Los Angeles, in the United States;
"Prestigio Oro" Award, awarded to Azeite Novo Edição Limitada, in the International Olive Oil Challenge in Latin America Olivinus 2010;
"Prestigio Oro" Award, awarded to Azeite Grande Escolha, in the International Olive Oil Challenge in Latin America Olivinus 2010;
"Top of Mind" Award, awarded to Gallo by the newspaper Folha de São Paulo, in Brazil, as the most memorable brand in the Olive Oil category;
Gold Prize "Display Outros Materiais" (Other Materials Display) category, awarded to Azeitona Gallo display, within the scope of the XXI Brazilian Festival of Promotion, Packaging and Design, promoted by the magazine About and by the Portal de Propaganda;
Bronze Prize "Case de Merchandising" category, awarded to Espaço Divino Sabor, within the scope of the XXI Brazilian Festival of Promotion, Packaging and Design, promoted by the magazine About and by the Portal de Propaganda;
Bronze Prize "Merchandising" category, awarded to Gallo for the package that was specially created to commemorate Father's Day in Brazil, within the scope of the XXI Brazilian Festival of Promotion, Packaging and Design, promoted by the magazine About and by the Portal de Propaganda.

Unilever Jerónimo Martins

"2010 Product of the Year" Award "Clothes Washing" category, awarded to Surf Óleos Essenciais;
"2010 Product of the Year" Award "Dish Washing" category, awarded to Cif Active Gel;
"2010 Product of the Year" Award, in the "Women's Deodorants" category, awarded to Dove Minimising;
"Distribution Master" Award, awarded to the Surf, Cif Active Gel and Calvé Chili brands, by the magazine Distribuição Hoje;
Eficácia da Comunicação (Communication Effectiveness) Silver Prize "Home Care" category, awarded to the "Surf – explosão de perfume" campaign, in the 2010 edition of the Eficácia (Effectiveness) awards;
Award "2010 Trusted Brand", awarded to the Becel, Comfort, Skip and Sun brands by the readers of the Reader's Digest;
"Best Manufacturer of Personal Care Products" Award, awarded to Unilever Jerónimo Martins, by the magazine Hipersuper.

Jerónimo Martins Distribuição de Produtos de Consumo

"Best Global 100 Brands" Award in the Fast-moving Consumer Goods category, Kellogg's was in the 2nd position of the Interbrand ranking;
"Best Global 100 Brands" Award in the Fast-moving Consumer Goods category, Heinz was in the 4th position of the Interbrand ranking.
"Marcas que Marcam" Award, awarded to Sunquick by QSP Consultoria de Marketing and Diário Económico.

Annual Report 10

VI - Individual Annual Report

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 2010

As a manager of equity holdings, Jerónimo Martins (JMH) has a portfolio of investments characterized by a strong presence in food retail in Portugal mainland (Pingo Doce and Recheio), Madeira Island (Pingo Doce and Recheio) and in Poland (Biedronka and Apteka Na Zdrowie), 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 (JMDPC).

As the Group's holding company, JMH co-ordinates and provides consultancy services to its subsidiaries. The functional areas of support to the Group range from Administration to Internal Audit, Legal Affairs, Corporate Communication, Consolidation and Accounting, Strategy and Planning, Fiscal Affairs, Financial Operations and Risk Management, Food Quality and Safety, Human Resources, Investor Relations, Security and Information Technologies. The turnover from these services, as well as management services for negotiation on behalf of the Group Companies, reached 19.6 million euros.

1. The Group's operational performance in Portugal

Pingo Doce

The like-for-like performance remained robust throughout the four quarters of the year and even in the last quarter of 2010. With the economic environment under pressure, the normal commercial aggressive trend that is typical of the Christmas season and also the more demanding comparative terms (like-forlike in the last quarter of 2009 had already shown a substantial acceleration compared to the previous quarters), Pingo Doce maintained a healthy like-for-like performance, reaching 6.4% in the supermarkets (fourth quarter 2010).

The Company's sales posted a growth of 9.9%, reaching a sales figure of 2,749 million euros in 2010.

In Pingo Doce, the EBITDA generated reached 186.5 million euros, a growth of 3.8% compared to last year, and the respective margin reaching 6.8% (7.2% in 2009).

Recheio

Recheio posted a 4.6% sales growth, as a result of its sound 3.2% like-for-like and the opening of three new stores which reinforced the Banner's national presence in critical locations for the HoReCa market. The Company's sales reached a total of 720,5 million euros in 2010.

Recheio achieved this sales increase in sectors with negative growth - Traditional Retail and HoReCa. Within this context, the Company focused on its commercial relationship with its customers, by implementing campaigns and innovative events, and continued developing its essential strategic pillars: Perishables and Private Brand.

Although this was another year of contraction for the Traditional Retail and HoReCa segments, Recheio's EBITDA reached 44.4 million euros, 7.2% up on the previous year, an increase of 20 b.p. in the respective margin to 6.2% of sales.

Madeira

In Madeira, sales grew 7.9%, with the Company having carried out remarkable reconstruction work on its two main Pingo Doce stores on the island, which had been closed between February and June, as a result of the storm that hit the region.

For Pingo Doce and Recheio, 2010 was a year for strengthening their leadership in Madeira.

Together, the Group's banners operating in Madeira posted a sales growth of 7.9%, reaching 141.9 million euros last year.

Like-for-like sales posted a growth of 19.2%, in a year in which it should be highlighted that there was a deflation in the Banner's average basket of -0.7%.

The EBITDA generated in Madeira reached 6.7 million euros, a margin of 4.7%, which proves the high level of resilience to the closure of its main stores between February and June.

Manufacturing

The EBITDA margin was 14.4% (15.3% in 2009), the EBITDA generated reaching 34.1 million euros. This evolution reflects two essential factors: the re-positioning of some key products as a strategic action to increase market share and the increased marketing support to key brands within the Company's portfolio.

Marketing, Representations and Restaurant Services

2. The Group's operational performance in Poland

In Poland, for the year under review, Biedronka posted a sales growth of 29.1% (+19.5% in Zloty), reaching 4,807 million euros. The double-digit like-for-like growth and the opening of new stores (197 new locations) contributed towards this remarkable performance.

The evolution of the EBITDA margin mainly reflects Biedronka's performance, strengthened by the growing scale of the operation. With a double-digit like-for-like growth and the capacity to implement, year after year, the most aggressive store opening plan in the Polish market, the Group's Banner is the cost leader in the food distribution sector in Poland.

This cost leadership enables Biedronka not only to maintain its price leadership in the market, but also to significantly increase its EBITDA margin. Thus, in 2010, the EBITDA generated by the Company reached 391.6 million euros, a growth of 44.4% in Euros (+33.7% in Zloty), representing 60.0% of the EBITDA generated by the Group.

3. Perspectives for 2011

For 2011, Pingo Doce will continue to develop direct partnerships with suppliers of perishables and Private Brand, which will allow greater control over product innovation and quality, but also the reduction of prices. At the same time, the Banner will continue to improve the nutritional formulae of its products, thereby contributing towards providing the Portuguese people with access to information that leads to an ever more balanced diet.

In 2011, Pingo Doce in Madeira will focus on the strengthening of its leadership position in the food retail market, by optimizing its offering in the chain's strategic pillars: Fresh Products, Private Brand, Meal Solutions and the most competitive prices in the region.

Recheio in Madeira intends to continue strengthening its leadership position in the wholesale market, sustaining its growth in Fresh Products and in the solidity of its pricing policy.

In 2011, Recheio will continue to focus on increasing its market share and for that the key categories such as Perishables and the Private Brand play an essential role.

The Amanhecer brand, especially designed for the Traditional Retail channel, has already reached a high level of notoriety and has gradually been adopted by the majority of Recheio's retail clients. It is hoped that this project gains even more notoriety with these clients, with the opening of two stores at February 3, 2011 under the banner Amanhecer, in the centre of Lisbon and in Viana do Castelo, and Recheio clients who want to base their value proposition on the Amanhecer assortment.

For 2011, expansion will continue to play a key role in Biedronka's strategy, with the expectation of increasing its store network by a minimum of 200 locations. Part of the expansion will be concentrated on reinforcing the Company's position in the main cities.

Focus on productivity as a means of supporting its price leadership will remain an essential strategic pillar.

In 2011, Manufacturing anticipates that the consumer goods market will face increased difficulties as a result of the macroeconomic environment. However, Unilever Jerónimo Martins starts the new year confident that the work undertaken during 2010 will be key to strengthening the leadership positions it holds in the domestic market. The Company will continue to invest in product and communication innovation, continuing to position its brands competitively in the segments in which they operate.

2011 is intended to be a year that sees the entrance of alternative growth channels/businesses for Jerónimo Martins Distribuição de Produtos de Consumo. A consumer slowdown in Portugal is expected, and so it is indispensable to find development alternatives in order to sustain the Company's future.

In the current international and national macroeconomic climate, which is marked by many uncertainties, 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.

The Group's business activities are analysed in further detail in the Consolidated Management Report that accompanies the 2010 Consolidated Financial Statements.

4. Company's performance as a Holding of investments

JMH, as the Holding and manager of company holdings, presented in 2010 operating results of 5.4 million euros, which represents an increase of 4.4 million euros towards 2009. This growth is due to the increase of the services rendered to group companies.

The financial debt was reduced in 9.5 million euros, to 131.0 million euros (140.5 million euros in 2009). This decrease was due to the reduction of loans to subsidiaries in the amount of 187,9 million euros, partially compensated by the increase in dividends paid to shareholders.

The net financial costs decreased 1.3 million euros towards 2009, totalling the amount of 5.4 million euros. This reduction was due to a lower debt level registered during the year, towards 2009, as well as a reduction in the interest rates paid in 2010 towards 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 in April 2009.

a) Market Risk

Foreign Exchange Risk

JMH main source of exposure to foreign exchange risk comes from a loan granted to a Polish subsidiary, in the amount of 10.7 million zlotys. At December 31st 2010, the impact on JMH results, of an adverse variation of the EUR/PLN exchange rate in the order of 10%, would be negative 244 thousand euros (negative 236 thousand at December 31st 2009).

Price Risk

Because of its investment in Banco Comercial Português, Jerónimo Martins is exposed to equity price risk. At December 31st, 2010, a negative 10% variation in the trading price of BCP shares would have a negative effect of 113 thousand euros in Other Reserves (negative 165 thousand euros at December 31st 2009, 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-" given by Standard & Poor's or equivalent.

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 2010, and 2009:

	(thousand euros)
	2010	2009
Rating	Balance	Balance

AA	20	-
A+	11	148
A	17,005	1,438
A-	25,252	-
Others	11	20
Total	42,299	1,606

The ratings shown correspond to the notations given by Standard and Poor's. The maximum exposure to credit risk, at December 31st 2010 and 2009, 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
2010	Less than 1 year	1 to 5 years More than 5	years
Borrowings
Loans	88,681	90,781	-
Derivative Financial Instruments	1,685	971	-
Creditors	535	-	-
Operational Lease Liabilities	296	300	-
2009	Less than 1 year	1 to 5 years More than 5	years
Borrowings
Loans	4,874	157,366	-
Derivative Financial Instruments	1,861	230	-
Creditors	431	-	-
Operational Lease Liabilities	275	175	-

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 2010, Jerónimo Martins, SGPS, S.A. declared consolidated profits of EUR 281,015,499 euros and a profit in the individual accounts of 89,360,329.60 euros.

Considering that a distribution was made as an advancement of profits for the year in the amount of 26,394,237.24 euros, approved in November 19th 2010 by the Board of Directors, the amount available to appropriation is 62,966,092.36 euros.

The Board of Directors proposes that the available amount be totally applied to reserves as follows:

Legal Reserve ……… 4,468,016.48 euros
Free Reserves ……… 58,498,075.88 euros

Given the distributions of reserves and the advancement of profits made at the end of 2010, which overall amounted to 131,971,186.20 euros, corresponding to 47% of the consolidated net profit, and bearing in mind the dividend distribution policy described in "Dividend Distribution Policy" included in the Corporate Governance chapter, the Board of Directors proposes to the Shareholders that, together with the results appropriation proposal present above, no additional dividend distribution should be carried out.

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 2010, 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 2010 was the same as on 31 December 2009: 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, 17th February 2011

The Board of Directors

INCOME STATEMENT BY FUNCTIONS

FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009

	Notes	2010	2009
Services rendered		19,638	11,533
Cost of the services rendered		(9,705)	(7,342)
Gross profit		9,933	4,191
Other operating revenues		203	182
Administrative costs		(2,632)	(2,623)
Other operating costs		(1,143)	(1,794)
Exceptional operating profits/losses	9	(1,010)	1,025
Operating profit		5,351	981
Net financial costs	4	(5,372)	(6,717)
Gains/Losses in subsidiaries and associated companies	7	89,113	42,477
Gains/Losses in other investments	8	97
Profit/loss before taxes		89,189	36,774
Income taxes	6	171	(278)
Net profit/loss		89,360	36,496
Basic earnings per share – Euros	21	0.142	0.058
Diluted earnings per share – Euros	21	0.142	0.058

To be read with the attached notes to the Individual Financial Statements

BALANCE SHEET AT 31 DECEMBER 2010 AND 2009

	Notes	2010	2009
Assets
Tangible assets	10	315	395
Intangible assets	11	10	29
Investment properties	12	2,470	2,470
Investments in subsidiaries	13.1	217,962	207,528
Investments in joint-ventures	13.2	6,663	6,349
Loans to subsidiaries	14.1	413,581	598,036
Loans to joint-ventures	14.2	188,727	188,643
Available-for-sale financial investments	15	1,135	1,648
Deferred tax assets	16	6,772	5,904
		837,635	1,011,002
Total non-current assets
Taxes receivable	16	159	227
Loans to subsidiaries	14.1	113,273	85,308
Trade debtors, accrued income and deferred costs	17	12,670	7,025
Cash and cash equivalents	18	42,308	1,614
Total current assets		168,410	94,174
Total assets		1,006,045	1,105,176
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)
Other reserves	20.3	(2,365)	(1,430)
Retained earnings	20.4	170,423	302,900
Total shareholders' equity		813,743	947,155
Borrowings	22	85,000	140,000
Derivative financial instruments	27	2,431	2,406
Employee benefits	28	13,868	12,732
Deferred tax liabilities	16	243	239
Total non-current liabilities		101,542	155,377

Trade creditors, accrued costs and deferred income	26	3,640	2,462
Borrowings	22	85,040	6
Derivative financial instruments	27	517	-
Taxes payable	16	1,563	176
Total current liabilities		90,760	2,644
Total Shareholders' equity and liabilities

To be read with the attached notes to the Individual Financial Statements

STATEMENT OF GAINS AND LOSSES RECOGNISED IN EQUITY

	2010	2009

Fair value of cash flow hedging	(422)	(1,009)
Fair value of available-for-sale financial investments	(513)	59

Gains/losses directly recognised in equity	(935)	(950)

Net profit	89,360	36,496

Total gains/losses recognised	88,425	35,546

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

	Notes	Share Capital	Share Premium	Own shares	Other reserves	Retained earnings	Shareholders' equity
Balance sheet at 1st January 2009		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				(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
Fair value of available-for-sale financial investments Fair value of cash flow hedgings	15				(513)		(513)
- Gross amount - Deferred tax	27 16.1				(574) 152		(574) 152
Gains/losses directly recognised in equity		-	-	-	(935)	-	(935)
Net profit in 2010						89,360	89,360
Total gains/losses recognised during the year		-	-	-	(935)	89,360	88,425
Dividend payment	20.5					(221,837)	(221,837)
Balance sheet at 31st December 2010		629,293	22,452	(6,060)	(2,365)	170,423	813,743

To be read with the attached notes to the Individual Financial Statements

Euro thousand

CASH FLOW STATEMENT

FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009

			Euro thousand
	Notes	2010	2009
Operating Activities
Cash received from customers and other debtors		18,284	12,671
Cash paid to suppliers and employees		(15,510)	(15,084)
Cash generated from operations	19	2,774	(2,413)
Interest and other similar costs paid	4	(5,120)	(10,600)
Income taxes paid		(306)	(204)
Cash Flow from operating activities		(2,652)	(13,217)
Investment activities
Disposals of tangible assets	10	25	-
Disposals of investments in subsidiaries	13	1,254	-
Reimbursement of loans and capital contributions from subsidiaries	14	187,868	61,026
Interest received	7	11,226	16,883
Dividends received	7	66,204	27,174
Acquisition and capital increase of subsidiaries	13	-	(995)
Acquisition and capital increase of joint-ventures	13.2	(314)	-
Loans and capital contributions given to subsidiaries	14	(31,378)	(53,270)
Acquisition of tangible assets	10	(41)	(36)
Cash flow from investment activities		234,844	50,782

Financing activities
Received from loans	22	50,034	40,006
Interest and similar income received	4	305	809
Reimbursement of loans	22	(20,000)	(55,000)
Dividends paid	20.5	(221,837)	(69,128)
Cash Flow from financing activities		(191,498)	(83,313)
Net changes in cash and cash equivalents		40,694	(45,748)
Cash and cash equivalents changes

Cash and cash equivalents at the beginning of the year		1,614	47,278
Net changes in cash and cash equivalents		40,694	(45,748)
Effect of held for trade financial assets revaluation	18	-	84
Cash and cash equivalents at the end of the year	18	42,308	1,614

To be read with the attached notes to the Individual Financial Statements

1. Activity 296
2. Accounting policies 296
3. Operating costs 307
4. Net financial costs 308
5. Operating leases 309
6. Income tax recognised in the income statement 309
7. Gains/Losses in subsidiaries and associated companies 310
8. Gains/Losses in other investments 310
9. Exceptional operating profits/losses 310
10. Tangible assets 311
11. Intangible assets 312
12. Investment property 312
13. Investments in subsidiaries and joint ventures 313
14. Loans 313
15. Available-for-sale financial investments 314
16. Taxes 314
17. Trade debtors, accrued income and deferred costs 315
18. Cash and cash equivalents 315
19. Cash generated from operations 315
20. Capital and reserves 315
21. Earnings per share 316
22. Borrowings 317
23. Financial debt 318
24. Financial risks 318
25. Provisions and adjustments to the net realisable value 318
26. Trade creditors, accrued costs and deferred income 319
27. Derivative financial instruments 319
28. Employee benefits 320
29. Guarantees 321
30. Contingencies 321
31. Subsidiaries, joint-ventures and available for sale investments 322
32. Group Companies and Joint-Ventures– Direct and indirect stakes 323
33. Related parties 324
34. Interests in joint ventures 326
35. Information on environmental matters 326
36. Additional information requested by law 326
37. Events after the balance sheet date 327

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 64 people (57 in 2009).

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 61,061 people (53,797 in 2009).

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 17th February 2011.

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, held for trade financial assets 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 2010 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 already endorsed by the European Union and mandatory for 2010. None of the standards detailed below have a material impact on consolidated financial statements of JMH.

i) Regulation No 254/2009 adopted the interpretation IFRIC 12 Service Concession Arrangements, that 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 is mandatory for accounting periods beginning after March 2009;
ii) Regulation No 460/2009 adopted 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 is mandatory for accounting periods beginning after 30 June 2009;
iii) Regulation No 494/2009 adopted the amendments to IAS 27 Consolidated and Separate Financial Statements, which requires 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;
iv) Regulation No 495/2009 adopted the amendments to IFRS 3 Business Combinations, was subject to significant changes, highlighting the fact that all payments to purchase a business are to be

recorded at fair value at acquisition date, contingent payments should be recognised as debt, being subsequently remeasured through the statement of comprehensive income. 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;

v) Regulation No 636/2009 adopted IFRIC 15 Agreements for Construction of Real Estates, that is an interpretation that provides guidance on when revenue from the construction of real estate should be recognised. It is mandatory for accounting periods beginning after 31 December 2009;
vi) 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;
vii) 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;
viii) Regulation No 1.136/2009 adopted amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, Which removes 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;
ix) Regulation No 1.142/2009 adopted IFRIC 17 Distribution of Non-cash Assets to Owners, this interpretation provides clarification and guidance on the accounting treatment of distribution of noncash assets, as dividends to its shareholders. It is mandatory for accounting periods beginning after 31 October 2009;
x) Regulation No 1.164/2009 adopted IFRIC 18 Transfers of Assets from Customers, that clarifies the accounting treatment of transfers of an item of property, plant and equipment from customers, and therefore the associated revenue. This interpretation is mandatory for accounting periods beginning after 31 October 2009;
xi) Regulation No 1.293/2009 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.

Also in 2010 the EU adopted a several changes to International Accounting Standards issued by the IASB and Interpretations issued by the IFRIC, that based on the assessment made by JMH, do not have a significant impact on the Financial Statements, and only those that were mandatory from 1 January 2010, were adopted.

i) Regulation no. 243/2010, which adopted some improvements 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;
ii) Regulation no. 244/2010 which adopted amendments to IFRS 2 Share-based Payment, 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 the entity has no obligation to settle the share-based payment transaction;
iii) Regulation no. 550/2010 which adopted amendments to IFRS 1 First time adoption of International Financial Reporting Standards, which deals with additional exemptions for first-time adopters resulting in an amendment on oil and gas assets;
iv) the Regulation no. 574/2010 which adopted amendments to IFRS 1 First time adoption of international financial reporting standards and IFRS 7 – Financial Instruments: Disclosures, which clarifies the limited exemption from comparative IFRS 7 Disclosures for first-time adopters;
v) the Regulation no. 632/2010 which adopted the revised IAS 24 Related Party Disclosures, with the aim of simplifying the definition of a related party while removing certain internal inconsistencies and providing some relief for government-related entities;
vi) the Regulation no. 633/2010 which adopted amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement, with the objective of removing an unintended consequence of IFRIC 14 where, under certain circumstances, an early payment of contributions was required to be recognised as an expense;
vii) the Regulation no. 662/2010 which adopted the IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, providing guidance on how a debtor should account for its equity instruments issued in full or partial settlement of a financial liability following renegotiation of the terms of the liability.

In addition, the IASB issued in 2009 and 2010, the following standards that are still waiting to be endorsed by the European Union:

i) In November 2009, IASB issued the new standard IFRS 9 Financial Instruments: Classification and Measurement, this standard partially replaces IAS 39. This new standard is mandatory for accounting periods beginning on or after 1 January 2013;
ii) In May 2010, IASB issued amendments to IFRS, with improvements made to IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13. The amendments are effective for annual periods beginning on or after 1 January 2011;
iii) In October 2010, IASB issued amendments to IFRS 7 Financial Instruments: Disclosures, those amendments improve the disclosure requirements in relation to transferred financial assets. It becomes effective for annual periods beginning on or after 1 July 2011;
iv) In December 2010, IASB issued amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, The amendments replace references to fixed transition date and sets the presentation requirements when an entity was unable to comply with IFRS because its functional currency was subject to severe hyperinflation. The amendments are effective from July 2011;
v) Also in December, IAS issued an amendment to IAS 12 Income Taxes, that provides a practical solution to the problem of determining whether assets measured using the fair value model in IAS 40 Investment Propoerty are recovered through use or through sale. It is effective for annual periods beginning on or after 1 July 2011.

2.2 Transactions in foreign currencies

Transactions in foreign currencies are translated into Euros at the exchange rate prevailing on the transaction date.

The main exchange rates applied on the balance sheet date are those listed below:

	Rate on 31 December 2010
Polish Zloty (PLN)	€ 0.2516

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.

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, among others. 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.

2.5 Tangible assets

Tangible assets are recognised 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 retains 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.

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 percentage):

	%
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

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 percentage):

	%
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.

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 measured at cost. When so justified, provisions for impairment losses are recognised.

2.9 Investment Property

The fair value is based on market values, being this the amount at which two independent willing parties would be interested in making a transaction of the asset.

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, bank deposits 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 non financial assets corresponds to the higher amount of net selling price and value in use.

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

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.

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 reate implicit in the original operation. For all other assets, the recoverable amount is the higher of net selling price and value in use.

Available-for-sale financial investments

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.

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, is recognised directly in equity.

2.14 Dividends

Dividends are recognised as liabilities when they are declared.

2.15 Loans

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 use of that 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 employees. 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 seniority 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 recognised in the balance sheet whenever JMH has a present obligation (legal or implicit) as a result of a past event and it is probable that a rationally estimated outflow of resources embodying economic benefits will be required to settle the obligation.

Restructuring provision

Provisions for restructuring costs are set up whenever a formal restructuring plan has been approved by JMH and the restructuring has started to be implemented or has been publicly announced.

2.18 Suppliers and other creditors

Suppliers and other creditors' balances are 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.

Rents

Rents received for the lease of investment property are recognised as gains/losses in other investments in the income statement in the period to which they relate.

Dividends

Dividends are recognised as revenues at the time they are declared.

2.20 Costs

Operational Leasing

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

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 carrying amount 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

Impairment of investments in associated companies

As a rule, an investment is recorded as impaired according to the IFRS when the carrying amount 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 carrying amount, 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 taxable income. Deferred tax assets and liabilities were determined based on tax legislation currently effective, 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

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, impairment losses and actual write-offs may be higher than expected.

Pensions and other long-term benefits granted to employees

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. 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, valuation techniques that are generally accepted, in the market, are used, based on market assumptions.

JMH applies valuation techniques for unlisted financial instruments, such as, derivatives, fair value financial instruments through profit and loss and assets that are available for sale. The valuation 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 2010, 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.

	2010	Level 1	Level 2	Level 3
Assets measured at fair value
Available-for-sale financial assets
Equity Investments	1,135	1,135	-	-
Liabilities measured at fair value
Derivatives used for hedging	2,948	-	2,948	-

2.25 Financial instruments by category

	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
2010
ASSETS
Cash and cash equivalents	-	-	42,308	-	-	42,308
Available-for-sale financial investments	-	-	-	1,135	-	1,135
Loans to subsidiaries		-	715,581	-	-	715,581
Debtors, accrued income and deferred costs	-	-	12,607	-	-	12,607
TOTAL ASSETS	-	-	770,496	1,135	-	771,631
LIABILITIES
Borrowings	-	-	-	-	170,040	170,040
Derivative financial instruments	2,948	-	-	-	-	2,948
Creditors, accrued costs and deferred income	-	-	-	-	1,416	1,416
TOTAL LIABILITIES	2,948	-	-	-	171,456	174,404
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, accrued costs and deferred income	-	-	-	-	958	958
TOTAL LIABILITIES	2,406	-	-	-	140,964	143,370

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 Operational costs by nature

JMH operational costs by nature, excluding the exceptional operating costs detailed in note 9, are as follows:

	2010	2009
Supplies and services	5,128	4,814
Rents	735	799
Staff costs	7,756	5,402
Depreciations and profit/loss with fixed assets	116	119
Other operational profit/loss	(458)	443
	13,277	11,577

3.2 Staff costs

	2010	2009
Wages and salaries	5,865	5,213
Social security	502	477
Employee benefits (note 28)	2,171	(846)
Other staff costs	334	558
	8,872	5,402

Other staff costs include namely labour accident insurance, social responsability costs, training costs and indemnities, among others. The number of employees at the end of 2010 was 64 (2009 was 57). The company's average number of employees during the year was 62 (57 in 2009).

The difference to staff costs stated in note 3.1, in the amount of EUR EUR 1,116 thousand, refers to exceptional operating costs with the actuarial assumptions change impact.

4. Net financial costs

	2010	2009
Interest expense	(4,499)	(6,059)
Interest received	257	59
Fair value of financial investments held for trade
- Derivative instruments (see note 27)	-	139
- Treasury bonds	-	84
Net foreign exchange	84	31
Other financial costs and gains	(1,214)	(971)
Net financial costs	(5,372)	(6,717)

Interest expense includes the interest related with loans measured at amortised cost as well as, interest on cash flow hedge derivatives (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 investments held for trade 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

-	139
-	139
	2010

5. Operating leases

The costs recognised in the income statement as operating leases are as follows:

	2010	2009
Buildings – Third parties	170	219
Buildings - Group	204	237
Vehicles – Third parties	330	305
IT equipment – Third parties	21	25
	725	786

Apart from the costs presented, there were occasional rentals throughout the year which amounted EUR 10 thousand (2009: EUR 13 thousand).

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:

	2010	2009
Payments in less that 1 year	296	275
Payments between 1 and 5 years	300	175
Payment in more that 5 years	-	-
Total future payments	596	450

As referred above, all the contracts may be cancelled upon the payment of a penalty clause. At the end of 2010, the liabilities arising from penalty clauses were EUR 82 thousand (2009: EUR 123 thousand).

6. Income tax recognised in the income statement

6.1 Income tax

	2010	2009
Current tax
Current tax of the year	(541)	(189)
Adjustment to prior year estimation	-	-
	(541)	(189)
Deferred tax
Temporary differences originated or reversed in the year	(3,002)	(2,811)
Change to the recoverable amount of tax losses and temporary differences from previous years	3,714	2,722
	712	(89)
Total income tax	171	(278)

6.2 Reconciliation of effective tax rate

	2010	2009
Profit/loss before taxes	89,189	36,774

Income tax using the Portuguese corporation tax rate – 26.5%	(23,635)	(9,745)
Non taxable or non recoverable results	20,663	7,240
Non-deductible expenses	(228)	(438)
Change to the recoverable amount of tax losses and temporary
differences from previous years	3,714	2,722
Adjustment to prior year estimation	-	-
Results subject to special taxation	(343)	(57)
Income tax for the year	171	(278)
Effective tax rate	(0.19%)	0.76%

7. Gains/Losses in subsidiaries and associated companies

	2010	2009
Dividends received	66,167	27,141
Interests in loans to subsidiaries and associated companies	11,258	15,901
Disposal of subsidiaries and associated companies	1,229	-
Adjustments of acquisition cost of financial investments (note 25)	10,459	(565)
	89,113	42,477

8. Gains/Losses in other investments

	2010	2009
Banco Comercial Português (BCP) dividends	37	33
Rents from investment properties	60	-
	97	33

9. Exceptional operating profits/losses

	2010	2009
Reimbursement of notary fees resulting from court decision Impact of actuarial assumptions changes	106 (1,116)	1,025 -
	(1,010)	1,025

The reimbursement occurred in 2010 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 1,117 thousand.

10. Tangible assets

10.1 Changes occurred during the year

Gross assets
	01/01/2010 Opening balance	Increases	Disposals	Transfers and write-offs	31/12/2010 Closing balance
Buildings and other constructions	243	5	-	-	248
Transport equipment	86	25	(32)	-	79
Tools and utensils	2	-	-	-	2
Office equipment	1,868	11	-	-	1,879
Other tangible assets	389	-	-	-	389
	2,588	41	(32)	-	2,597

Accumulated depreciation and impairment

	01/01/2010 Opening	Increases	Disposals	Transfers and	31/12/2010 Closing
	balance			write-offs	balance
Buildings and other constructions	120	26	-	-	146
Transport equipment	60	6	(9)	-	57
Tools and utensils	2	-	-	-	2
Office equipment	1,685	66	-	-	1,751
Other tangible assets	326	-	-	-	326
	2,193	98	(9)	-	2,282
Net book amount	395				315

10.2 Changes occurred in the previous year

Gross assets

	01/01/2009 Opening balance	Increases	Disposals	Transfers and write-offs	31/12/2009 Closing balance
Buildings and other constructions	243	-	-	-	243
Transport equipment	54	32	-	-	86
Tools and utensils	2	-	-	-	2
Office equipment	1,885	4	(1)	(20)	1,868
Other tangible assets	389	-	-	-	389
	2,573	36	(1)	(20)	2,588

Accumulated depreciation and impairment

Net book amount	459	-		- - -	395
	2,114	100	(1)	(20)	2,193
Other tangible assets	326	-	-	-	326
Office equipment	1,639	67	(1)	(20)	1,685
Tools and utensils	2	-	-	-	2
Transport equipment	54	6	-	-	60
Buildings and other constructions	93	27	-	-	120
	balance			write-offs	balance
	01/01/2009 Opening	Increases	Disposals	Transfers and	31/12/2009 Closing

10.3 Equipment under financial lease

At the end of 2010 and 2009, there is no equipment under financial lease.

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

	01/01/2010 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2010 Closing Balance
Research and development expenses	309	-		- -	309
	309	-	-	-	309
Accumulated depreciation and impairment
	01/01/2010 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2010 Closing Balance

Research and development expenses	280	19	-	-	299
	280	19	-	-	299
Net book amount	29	-	-	-	10

11.2 Changes occurred in the previous year

Gross Assets

	01/01/2009 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2009 Closing Balance
Research and development expenses	309	-		- -	309
	309	-		- -	309
Accumulated depreciation and impairment
	01/01/2009 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2009 Closing Balance
Research and development expenses	261	19		- -	280

	261	19		- -	280

12. Investment property

JMH owns a building in Vila Franca de Xira (land and building), which was partially rented to a Group company generating profits in the amount of EUR 60 thousand. This building is valuated at its market value, according to an independent entity valuation, and is recorded by EUR 2,470 thousand (2009: EUR 2,470 thousand).

In 2010, JMH incurred in expenses regarding this building in the amount of EUR 21 thousand (2009: EUR 39 thousand), recognised in results in other operating costs.

13. Investments in subsidiaries and joint ventures

13.1 In subsidiaries

	2010	2009
Net value at 1 January	207,528	207,098
Increases	-	995
Decreases	(25)	-
Increases/Decreases in provisions for impairment loss (note 25)	10,459	(565)
Net value at 31 December	217,962	207,528

13.2 In joint ventures

	2010	2009
Net value at 1 January	6,349	6,349
Increases	314	-
Decreases	-	-
Net value at 31 December	6,663	6,349

14. Loans

14.1 Loans to subsidiaries

Non-current loans	2010	2009
Net value at 1 January	598,036	589,722
Increases	10	50,000
Decreases	(184,465)	(41,686)
Net value at 31 December	413,581	598,036

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).

Current loans	2010	2009
Net value at 1 January	85,308	101,378
Increases	31,368	3,270
Decreases	(3,403)	(19,340)
Net value at 31 December	113,273	85,308

Current loans are liable to interest rates at normal market levels.

14.2 Loans to joint ventures

Non-current loans	2010	2009
Net value at 1 January	188,643	188,612
Increases	-	-
Decreases	-	-
Foreign currency loans translation differences	84	31
Net value at 31 December	188,727	188,643

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

	2010	2009
BCP shares	3,705	3,705
Fair value adjustment	(2,570)	(2,057)
	1,135	1,648

As of 31 December 2010, all BCP shares in the company's portfolio (1.95 million shares) were marked to market – price as of 31 December 2010 of Euro 0.582 – Euronext Lisbon. The changes in the fair value of these assets were recognised directly in equity negative EUR 513 thousand (2009: positive EUR 59 thousand recognised directly in equity).

16. Taxes

16.1 Deferred tax assets and liabilities

Deferred taxes are presented in balance sheet as follows:

	2010	2009
Deferred tax assets	6,772	5,904
Deferred tax liabilities	(243)	(239)
	6,529	5,665

Movement in deferred taxes during the year:

	01/01/2010	Impact on results	Impact on equity	31/12/2010
Deferred tax liabilities
Revaluation of assets	(239)	(4)	-	(243)
	(239)	(4)	-	(243)
Deferred tax assets
Employee benefits	3,374	301	-	3,675
Recoverable losses	1,993	415	-	2,408
Fair value in derivative financial instruments	537	-	152	689
	5,904	716	152	6,772
Net change in deferred tax	5,665	712	152	6,529

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:

	2010	2009
Tax losses	21,692	36,548
Tax rate	25%	25%
Deferred tax assets (Unrecognised)	5,423	9,137
16.3 Taxes receivable and payable
Taxes receivable	2010	2009
Income tax receivable	158	223
VAT receivable	1	4
	159	227
Taxes payable
VAT payable	1,235	11
Income tax payable	170	-
Income tax withheld	98	99
Social security	55	53
Municipal real estate tax	5	13
	1,563	176

17. Trade debtors, accrued income and deferred costs

	2010	2009
Subsidiaries and associated companies	8,345	1,165
Receivables from suppliers	38	34
Staff	5	4
Other debtors	31	1,091
Accrued income	3,874	4,015
Deferred costs	377	716
	12,670	7,025

Amounts recognised 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 3,580 thousand regarding the rendering of technical and administrative services to subsidiaries and EUR 270 thousand of interest receivable.

Deferred costs heading includes EUR 276 thousand of prepaid expenses with bonds, bank loans and commercial paper, EUR 38 thousand of commercial paper anticipated interests, and EUR 63 thousand of other costs relating to future periods, paid in 2010 or when not paid, already charged by the competent entities.

18. Cash and cash equivalents

	2010	2009
Bank deposits	59	206
Short-term investments	42,240	1,400
Cash and cash equivalents	9	8
	42,308	1,614

19. Cash generated from operations

	2010	2009
Net results	89,360	36,496
Adjustments for:
Income tax	(171)	278
Depreciations	117	119
Net financial costs	(72,144)	(36,276)
Profit / losses in subsidiaries	(11,688)	565
Profit / losses on tangible assets disposals	(1)	-
	5,473	1,182
Changes in working capital:
Trade debtors, accrued income and deferred costs	(5,939)	(1,911)
Trade creditors, accrued costs and deferred income	2,104	29
Provisions and employee benefits	1,136	(1,713)
	2,774	(2,413)

20. Capital and reserves

20.1 Share capital and share premium account

The authorised share capital is represented by 629,293,220 ordinary shares (2009: 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 one vote for each share owned. There are no preferential shares. Rights relating to own shares are suspended until they are placed on the market again.

During the year 2010, no changes occurred in the amount of EUR 22,452 thousand showed in share premium.

20.2 Own shares

The heading of own shares reflects the cost of shares held by the company in portfolio. As of 31 December 2010, the company held 859,000 own shares (2009: 859,000).

20.3 Other reserves

	Cash Flow Hedging	Available-for- -sale financial instruments	Total
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 1 January 2010	(1,489)	-	(1,430)
Fair value of cash flow hedging instruments:
- Gross value	(574)	-	(574)
- Deferred tax	152	-	152
Fair value adjustment of available-for-sale financial instruments	-	(513)	(513)
Balance as at 31 December 2010	(1,911)	(454)	(2,365)

These reserves are not able to be distributed to the shareholders.

20.4 Retained earnings

On 31st December 2010, the total amount of retained earnings was EUR 170,423 thousand, resulting from profit generated in the financial year, and previous years.

Of this amount, the following are not able to be distributed: EUR 42,297 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 2010, the total amount of EUR 221,837 thousand regarding dividends was paid to the shareholders, divided as follows: 2009 ordinary dividends, in the amount of EUR 89,866 thousand paid in May 2010; 2010 advancement of profits, in the amount of EUR 26,394 thousand, paid in November 2010; and distribution of reserves, in the amount of EUR 105.577, paid in December 2010.

Given the distributions of reserves and the advancement of profits made at the end of 2010, which overall amounted to EUR 131.971 thousand, corresponding to 47% of the consolidated net profit, and bearing in mind the dividend distribution policy described in "Dividend Distribution Policy" included in the Corporate Governance, the Board of Directors proposes to the Shareholders that, together with the results appropriation proposal present in paragraph 7 of the Management Report, no additional dividend distribution should be carried out.

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 89,360 thousand (2009: EUR 36,496 thousand) divided by the weighted average of outstanding ordinary shares, numbering 628,434,220 (2009: 628,434,220). The diluted earnings per share are equal to basic earnings per share as there are no dilution events.

	2010	2009
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 ordinary shares	89,360	36,496
Diluted net results of the year attributable to ordinary shares	89,360	36,496
Earnings per share – Euros	0.142	0.058
Diluted earnings per share – Euros	0.142	0.058

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

	2010	2009
Non-current loans
Bank loans – Commercial Paper	50,000	70,000
Non-convertible Bond loans	35,000	70,000
	85,000	140,000
Current loans
Bank loans – Commercial Paper	50,000	-
Non-convertible Bond loans	35,000	-
Bank overdrafts	40	6
	85,040	6

22.2 Loan terms and maturities

	Average rate	Total	Payable in less than 1	Payable between 1
			year	and 5 years
Bank loans – Commercial Paper	1.59%	100,000	50,000	50,000
Non-convertible Bond loan: JM2011 e JM2012	3.32%	70,000	35,000	35,000
Bank overdrafts	2.30%	40	40	-
		170,040	85,040	85,000

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

2010	2009
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 310,000 thousand, with variable interest rate. In the end of 2010, of the total amount subscribed, only EUR 100,000 thousand were in use, with the following maturity:

Maturity	Amount
2011	50,000
2012	20,000
2015	30,000

23. Financial debt

	2010	2009
Non-current loans	85,000	140,000
Current loans	85,040	6
Derivative financial instruments	2,948	2,406
Accruals and deferrals (financial headings only)	278	(342)
Bank deposits	(59)	(206)
Short-term investments	(42,240)	(1,400)
	130,967	140,464

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

2010	Opening	Provisions set	Provisions	Closing
Investments in subsidiaries	balance 270,204	up -	used (10,459)	balance 259,745

Available for sale financial investments	2,057	513	-	2,570
Total adjustments to the net realisable value	272,261	513	(10,459)	262,315

Employee benefits	12,732	1,790	(654)	13,868
Total provisions	12,732	1,790	(654)	13,868

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

The adjustment set up in 2010 on Investments in subsidiaries, in the amount of EUR 10,459 thousand (2009: EUR 565 thousand reduction in the fair value), is related to the increase in the fair value of a subsidiary. The adjustment on available-for-sale investments is detailed in note 15.

26. Trade creditors, accrued costs and deferred income

	2010	2009
Payables to subsidiaries	188	120
Other trade creditors	344	310
Other non-trade creditors	3	1
Accrued costs	3,090	2,031
Deferred income	15	-
	3,640	2,462

Accrued costs includes salaries and wages payable in the amount of EUR 2,209 thousand, and interest's payable in the amount of EUR 605 thousand. The remaining EUR 276 thousand respect to various costs (utilities, insurance, consultants, rents, among others), relating to 2010 and not invoiced by the respective entities prior to the end of the year.

27. Derivative financial instruments

				2010				2009
	Notional		Assets		Liabilities	Notional		Assets		Liabilities
		Current	Non Current	Current	Non Current		Current	Non Current	Current	Non Current
Cash flow hedge derivatives
Interest rate swap	103 million EUR	-	-	517	2,431	103 million EUR	-	-	-	2,406
Total assets/liabilities negotiation derivatives		-	-	-	-
Total assets/liabilities hedge derivatives		-	-	517	2,431		-	-	-	2,406
Total assets/liabilities derivatives		-	-	517	2,431		-	-	-	2,406

In 2010, the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 348 thousand (2009: EUR 380 thousand receivable).

Cash flow hedge

JMH enters into interest rate swaps to hedge interest rate risk, regarding future interest payments on the loans. At 31 December 2010, the bank and bond loans with derivative hedge instruments were EUR 120,000 thousand (2009: EUR 120,000 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 (2009: EUR 102,500 thousand), and the fair value of these instruments at 31 December 2010 was negative EUR 2,948 thousand (2009: negative EUR 2,406 thousand). The changes in fair value of these instruments were recognised in other reserves in the amount of negative EUR 574 thousand (2009: negative EUR 1,373 thousand).

27.1 Impacts on Financial Statements

	2010	2009
Fair value of the financial instruments at 1st January	(2,406)	(2,773)
(Receivings) / Payments made	2,166	2,796
Fair value of financial instruments held for trade (P&L)
- Interest rate and credit derivative instruments	-	-
- Treasury bonds derivative instruments	-	139
Fair value of financial instruments that qualify as hedge accounting (Reserves)	(574)	(1,373)
Interest expense from financial instruments that qualify as hedge accounting (P&L)	(2,134)	(1,195)
Fair value of the financial instruments at 31st December	(2,948)	(2,406)

28. Employee benefits

Amounts of employee benefits in the balance sheet:

2010	2009
	12,584
	148
	12,732

2010	2009
	216
	(1,089)
20	27
2,171	(846)
	13,710 158 13,868 381 1,770

28.1 Defined contribution plans for employees, with a fund managed by third party

The company has a defined contribution plan for all employees who have permanent contract status, with a fund managed by third party.

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.

Movement in the year:

	2010	2009
Liabilities at 1 January	-	-
Staff costs on the year	381	216
Contributions of the year	(381)	(216)
Liabilities at 31 December	-	-

28.2 Defined benefit plans for former employees managed by the Group

Independent actuaries evaluate this plan 6-monthly. According to the actuarial calculation reported on 31 December 2010 the liability is EUR 13,710 thousand, provisioned entirely in liabilities in the employee benefits heading.

Movement in the year:

	2010	2009
Balance at 1 January	12,584	14,316
Interest costs	674	840
Actuarial (gains)/ losses	1,096	(1,929)
Retirement pensions paid	(644)	(643)
Balance at 31 December	13,710	12,584

Actuarial assumptions used:

	2010	2009
Mortality table	TV 88/90	TV 88/90
Discount rate	4.5%	5.5%
Pensions growth rate	2.5%	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 seniority.

The program consists in the attribution of awards to 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 2010, the liabilities amount to EUR 158 thousand, and are provisioned entirely, in liabilities, in the employee benefits heading.

Movement in the year:

	2010	2009
Balance at 1 January	148	129
Current service costs	22	20
Actuarial (gains)/ losses	(2)	7
Bonus paid	(10)	(8)
Balance at 31 December	158	148

Actuarial assumptions used:

	2010	2009
Mortality table	TV 88/90	TV 88/90
Discount rate	4.5%	5.5%
Salaries growth rate	2.5%	3.0%

29. Guarantees

The bank guarantees are as follows:

	2,818	2,818
Other guarantees provided	1,483	1,483
Guarantees for D.G.C.I. (Portuguese tax authority)	1,335	1,335
	2010	2009

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. Subsidiaries, joint-ventures and available for sale investments

The direct investments owned by JMH, at 31 December 2010, 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	116,680	22,260	7,101
Recheio, SGPS, S.A.	a)	Lisbon	15.93%	23,888	585,598	344,647	125,540
Desimo – Desenvolvimento e Gestão Imobiliária, Lda.	a)	Lisbon	100.00%	50	487	75	24
JMR - Gestão de Empresas de Retalho, SGPS, SA	a)	Lisbon	51.00%	168,300	1,577,313	1,100,678	13,420
Jerónimo Martins Serviços, S.A.	a)	Lisbon	100.00%	50	3,398	216	(3)
Servicompra – Consultores de Aprovisionamento, Lda	a)	Lisbon	99.98%	1.000	169,914	169,912	78,976
Imocash – Imobiliário de Distribuição, S.A.	a)	Lisbon	1.00%	30	63,476	11,588	1,818
Larantigo – Sociedade de Construções, S.A.	a)	Lisbon	0.20%	1	829	829	0,3
Hermes - Soc. de Invest. Mobiliários e Imobiliários, Lda.	a) b)	Funchal	99.99%	999	36,491	33,711	12,810
Eva – Soc. de Investimentos Mobiliários e Imobiliários, Lda	a)	Funchal	5.60%	28	72,222	72,222	767
PSQ – Soc. de Investimentos Mobiliários e Imobiliários, Lda	a)	Funchal	11.00%	55	45,765	45,765	(4)
Friedman – Soc. de Investim. Mobiliários e Imobiliários, Lda	a)	Funchal	100.00%	5	31	30	(4)
INVESTMENTS IN JOINT-VENTURES
Unilever Jerónimo Martins, Lda.	d)	Lisbon	32.50%	8,546	900,080	164,343	39,527
Gallo Worldwide, Lda.	d)	Lisbon	32.50%	325	51,580	15,185	2,130
Bliska Sp. Z.o.o.	c)	Poland	50.00%	61	5,973	406	(1,070)
AVAILABLE-FOR-SALE FINANCIAL INVESTMENTS
BCP - Banco Comercial Português, S.A.	b)	Oporto	0.04%		1,950 100,009,739	7,247,476	301,612

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 fair value adjustment provision has been set up.

c) The amounts showed refer to the 2009 accounts. This company reports its accounts in polish Zloty (PLN). The amounts showed were converted

at December 31st, 2009 exchange rate (0.2436).

d) The amounts showed refer to the 2009 accounts.

32. 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 2010:

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
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
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

33. Related parties

33.1 Transactions with related parties (shareholders)

56.11% of JMH is owned by Sociedade Francisco Manuel dos Santos, no direct transactions occurred between this Company and any other Group company in 2010.

Apart from the effects of the transaction described above, as at December 31st, 2010, there are no amounts payable or receivable between them.

33.2 Transactions with other related parties

Note: transactions with related parties are always carried out at market prices.

33.2.1 Technical and administrative services provided

As the Group's holding company, JMH co-ordinates and provides consultancy services to its subsidiaries. The functional areas of support to the Group range from Administration to Internal Audit, Legal Affairs, Corporate Communication, Consolidation and Accounting, Strategy and Planning, Fiscal Affairs, Financial Operations and Risk Management, Food Quality and Safety, Human Resources, Investor Relations, Security and Information Technologies. In this sense, JMH is remunerated for those services, as well as management services for negotiation on behalf of the Group Companies.

Income from technical and administrative services provided to subsidiaries during 2010 was EUR 15,239 thousand (2009: EUR 7,125 thousand).

33.2.2 Financial services

The Financial Operations Department of the holding centralises 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, achieving in 2010 an amount of EUR 3,951 thousand (2009: EUR 4,006 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, achieving in 2010 an amount of EUR 448 thousand (2009: EUR 402 thousand).

33.2.3 Lease of property

JMH develops its activity in premises rented to a subsidiary, which represented costs of EUR 204 thousand (2009: EUR 237 thousand).

As referred in note 12, JMH owns a building which is partially rented to a Group company, and generated profits in 2010, in the amount of EUR 60 thousand.

33.2.4 Supplementary income

JMH charges annually a joint-venture company relating to a sales commission. In 2010, this amounted EUR 131 thousand (2009: EUR 132 thousand).

33.2.5 Loans to subsidiaries (current and non-current loans)

JMH granted loans to subsidiaries, which generated interest in the amount of EUR 11,258 thousand (2009: EUR 15,901 thousand).

Companies	2010	2009
Joint-ventures	3,128	4,842
Subsidiaries	8,130	11,059
Total	11,257	15,901

33.2.6 Costs 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 2010, total costs incurred with personnel from other companies amounted to EUR 2,595 thousand (2009: EUR 2,401 thousand).

33.2.7 Group companies disposals

In 2010, JMH sold its 51% shareholding in Comespa – Gestão de Espaços Comerciais, S.A., for the amount of EUR 1,254 thousand, to Imoretalho – Gestão de Imóveis, S.A., which also belongs to the Jerónimo Martins Group. This transaction was made at market values and generated a profit in the amount of EUR 1,229 thousand.

33.2.8 Open balances as of 31 December 2010

Companies	Current Loans	Non-current Loans	Accounts receivable	Accrued Income	Deferred Income	Account s Payable	Accrued costs
Group companies

Casal de São Pedro – Administração Bens, S.A.	-	-	-	5	-	-	-
Desimo – Desenv. Gestão Imobiliária, Lda.	-	401	3	5	-	-	-
Escola de Formação Jerónimo Martins, S.A.	-	-	-	-	-	65	-
Friedman – Soc. Inv. Mobiliários Imobiliários, Lda.	-	10	-	-	-	-	-
Hermes – Soc. Inv. Mobiliários Imobiliários, Lda.	-	21,945	-	-	-	-	-
Hussel Ibéria – Chocolates e Confeitaria, S.A.	-	-	-	2	-	-	-
Imocash – Imobiliário de Distribuição, S.A.	-	-	-	5	-	-	-
Imoretalho – Gestão de Imóveis, S.A.	-	-	-	23	-	23	-
João Gomes Camacho, S.A.	-	-	206	19	-	-	-
Jerónimo Martins – Dist. Prod. Consumo, Lda.	73,900	-	180	92	-	-	-
Jerónimo Martins Dystrybucja S.A.	-	-	-	1,051	-	-	-
Jerónimo Martins Serviços, S.A.	-	500	25	-	-	-	1,178
JMR – Gestão Empresas Retalho, SGPS, S.A.	-	-	-	511	-	-	-
JMR – Prest. de Serviços para a Distribuição, S.A.	-	-	43	39	-	90	-
Lidinvest – Gestão de Imóveis, S.A.	-	-	-	2	-	-	-
Lidosol II – Distrib. Produtos Alimentares, S.A.	-	-	309	49	-	-	-
Pingo Doce – Distribuição Alimentar, S.A.	-	-	3,338	1,336	-	10	-
Recheio – Cash & Carry, S.A.	-	-	3,311	213	15	-	-
Recheio, SGPS, S.A.	39,373	276,910	594	234	-	-	-
Servicompra – Cons. Aprovisionamento, Lda.	-	113,815	-	-	-	-	-
Subtotal	113,273	413,581	8,009	3,586	15	188	1,178
Joint-ventures
Bliska Sp. Z.o.o.	-	2,679	-	-	-	-	-
Unilever Jerónimo Martins, Lda.	-	186,048	336	252	-	-	-
Subtotal	-	188,727	336	252	-	-	-
TOTAL	113,273	602,308	8,345	3,838	15	188	1,178

33.3 Remuneration paid to directors

Salaries and cash awards Retirement benefits	2010 3,497 335	2009 3,095 180
	3,832	3,275

The Board of Directors of the company contains 11 members.

The remuneration of the Members of the Board of Directors and of the Supervisory Board are stated in the Consolidated Annual Report on the Corporate Governance.

The retirement benefits granted to the Directors correspond to post-employment benefits and are part of the defined contribution plan described in note 28.

None of the Directors received any additional remuneration from any other Group company.

34. 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 shareholding of 50% in Bliska, company located in Poland and its business area is retail sale of pharmaceutical, orthopaedic and health products.

35. 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.

36. 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 External Auditor and Chartered Accountant, was 92,374 euros, of which 77,488 euros correspond to legal accounting audit services, while the remaining 14,886, relate to access to a tax database, and technical consulting on a project for conversion to accounting standards;
c) Note 33 of the notes to the financial statements includes all the related parties disclosures, in accordance with the International Accounting Standards.

37. Events after the balance sheet date

Up to the conclusion of this Report there was no relevant event to highlight.

Lisbon, 17th February 2011

The Certified Accountant The Board of Directors

Report of the Auditors for Statutory and Stock Exchange Regulatory Purposes in respect of the Individual Financial Information

(Free translation from the original version in Portuguese)

Introduction

1 As required by law, we present the Report of the Statutory Auditors for Stock Exchange Regulatory Purposes in respect of the Financial Information included in the Directors' Report and the financial statements of Jerónimo Martins, SGPS, S.A., comprising the balance sheet as at December 31, 2010, (which shows total assets of Euros 1,006,045 thousand and a total of shareholder's equity of Euros 813,743 thousand, including a net profit of Euros 89,360 thousand), the statements of income by functions, the statement of gains and losses recognised in equity, the statement of changes in equity and the cash flow statement for the year then ended and the corresponding notes to the accounts.

Responsibilities

2 It is the responsibility of the Company's Board of Directors (i) to prepare the Board of Directors' Report and financial statements which present fairly, in all material respects, the financial position of the company, the results of its operations, the gains and losses recognised in equity, the changes in equity and cash flows; (ii) to prepare the historic financial information in accordance with International Financial Reporting Standards as adopted by the EU while also meeting the principles of completeness, truthfulness, accuracy, clarity, objectivity and lawfulness, as required by the Portuguese Securities Market Code; (iii) to adopt appropriate accounting policies and criteria; (iv) to maintain an adequate system of internal control; and (v) the disclosure of any relevant matters which have influenced the activity and the financial position or results of the company.

3 Our responsibility is to verify the financial information included in the documents referred to above, particularly as to whether it is complete, truthful, accurate, clear, objective and lawful, as required by the Portuguese Securities Code, for the purpose of expressing an independent and professional opinion on that financial information, based on our audit.

Scope

4 We conducted our audit in accordance with the Standards and Technical Recommendations approved by the Institute of Statutory Auditors which require that we plan and perform the examination to obtain reasonable assurance about whether the financial statements are free of material misstatement. Accordingly, our examination included: (i) verification, on a test basis, of the evidence supporting the amounts and disclosures in the financial statements, and assessing the reasonableness of the estimates, based on the judgements and criteria of Management used in the preparation of the financial statements; (ii) assessing the appropriateness and consistency of the accounting principles used and their disclosure, as applicable; (iii) assessing the applicability of the going concern basis of accounting; (iv) assessing the overall presentation of the financial statements; and (v) assessing the completeness, truthfulness, accuracy, clarity, objectivity and lawfulness of the financial information.

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. Sede: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal Tel +351 213 599 000, Fax +351 213 599 999, www.pwc.com/pt Matriculada na Conservatória do Registo Comercial sob o NUPC 506 628 752, Capital Social Euros 314.000 5 Our examination also covered the verification that the information included in the Directors' Report is in agreement with the other documents as well as the verification set forth in paragraphs 4 and 5 of Article 451 of the Companies Code.

6 We believe that our examination provides a reasonable basis for our opinion.

Opinion

7 In our opinion, the financial statements referred to above, present fairly in all material respects, the financial position of Jerónimo Martins, SGPS, SA. as at December 31, 2010, the results of their operations, the gains and losses recognised in equity, the changes in equity and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and the information included is complete, true, timely, clear, objective and licit.

Report on other legal requirements

8 It is also our opinion that the information included in the Directors' Report is consistent with the financial statements for the year and that the Corporate Governance Report includes the information required under Article 245-A of the Portuguese Securities Code.

March 2, 2011

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. represented by:

Abdul Nasser Abdul Sattar, R.O.C.

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 December 31st, 2010, as well as on the proposals presented by the Board of Directors.

Supervisory activity

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.

It regularly met with the External Auditor and those responsible for preparing the Annual Report, 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.

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 also verified that all other services provided by the firm of External Auditors to the Company, were carried out by employees that did not take part in the audits, and that these services, due to their type and amounts involved, 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.

The Audit Committee gave a favourable opinion to the proposal presented by the Managing Committee to advance 50% of the year's profits to the shareholders, having

for this purpose analysed the Company's financial situation, through an interim balance sheet as at October 31st, 2010, duly certified by the Statutory 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 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

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 position of the issuer, and contains a description of the main risks and uncertainties which they face.

Lisbon, March 2nd, 2011

Hans Eggerstedt (Chairman of the Audit Committee)

António Pedro Viana-Baptista (Member)

Artur Stefan Kirsten (Member)

AI assistant

Jeronimo Martins — Annual Report 2010

1906_10-k_2011-04-05_ec988f1b-e267-4947-9c90-9f8efbf846ba.pdf

Message from the Chairman

Message from the Chief Executive Officer

I – The Group Jerónimo Martins

1. Profile and Structure

1.1. Identity and Responsibilities

1.1.1. Asset Portfolio

1.1.2. Core Competencies

1.1.3. Innovative and Pioneering Culture

Annual Report 10 The Group Jerónimo Martins Profile and Structure

1.2. Operating and Financial Highlights

Annual Report 10 The Group Jerónimo Martins Profile and Structure

Number of Stores and Sales Area

Annual Report 10 The Group Jerónimo Martins Profile and Structure

1.3. Corporate Bodies and Structure

1.3.1. Corporate Bodies

Election Date: 9th April 2010

Composition of the Board of Directors elected for the term 2010-2012

Artur Eduardo Brochado dos Santos Silva

Hans Eggerstedt

Artur Stefan Kirsten

Statutory Auditor and External Auditor:

Corporate Secretary:

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

Ownership Structure

1.3.3. Management Structure

2. Strategic Positioning

2.1. Mission

2.2. Commitment to Value Creation and Growth

Strategic Management Guidelines

3. Financial Glossary

Like-For-Like Sales (LFL)

EBITDA Margin =

EBIT Margin =

Interest Cover Ratio

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

Invested Capital (for Pre-Tax ROIC purposes)

Gearing =

Net Debt =

Shareholders Funds =

Cash Flow =

4. Contacts

Cláudia Falcão (Head of Investor Relations and Market Relations Representative)

Communication Department – Media Relations

Communication Department Poland

Human Resources Department

Expansion Department

Suppliers Department

Ethics Committee

Client's Ombudsman

[email protected]

Jerónimo Martins Distribuição Customer Support

Pingo Doce Customer Support Service

Recheio Customer Support

Poland Customer Support

II. Consolidated Management Report - - Creating Value and Growth

1. Relevant Facts of the Year

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

2. Environment 2010

2.1. International Macroeconomic Environment

2.2. Sector and Market Environment

2.2.1. Relevant Facts in the Food Distribution Sector

2.2.2. Portugal

Macroeconomic Environment

Modern Food Retail Sector

Wholesale Market

2.2.3. Poland

Macroeconomic Environment

Modern Food Retail Sector

3. Group's Performance

3.1. Main Projects of 2010

3.1.1. Strengthening the Commercial Proposition

Jeronimo Martins Annual Report 2010